As filed with the Securities and Exchange Commission on May 14, 1999
Registration Statement No. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
SUPREME INTERNATIONAL CORPORATION*
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Florida 2321 59-1162998
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Classification Identification No.)
incorporation or Code Number)
organization)
George Feldenkreis
Chairman of the Board and Chief Executive
Officer
3000 N.W. 107th Avenue
Miami, Florida 33172
(305) 592-2830
(Address, including zip code, and telephone number
including area code, of agent for service)
Copies to:
Rosemary Trudeau Dale S. Bergman, P.A.
Vice President of Finance Broad and Cassel
Supreme International Corporation 201 South Biscayne Boulevard
3000 N.W. 107th Avenue Miami Center, Suite 3000
Miami, Florida 33172 Miami, Florida 33131
Telephone: (305) 592-2830 Telephone: (305) 373-9400
Telecopier: (305) 406-0513 Telecopier: (305) 373-9443
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As
soon as practicable after this Registration Statement becomes effective.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction 6, check the following box: |_|
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration number of the earlier effective
registration statement for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to
Rule 434, please check the following box. |X|
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
TITLE OF EACH CLASS AMOUNT TO BE PROPOSED PROPOSED AMOUNT OF
OF SECURITIES TO BE REGISTERED MAXIMUM MAXIMUM AGGREGATE REGISTRATION FEE
REGISTERED OFFERING PRICE OFFERING PRICE(1)
PER NOTE
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<S> <C> <C> <C> <C>
12 1/4% Series B
Senior Subordinated
Notes Due 2006 $95,000,000 100% $95,000,000 $26,410
Guarantees of
Series B 12 1/4%
Senior Subordinated Notes
due 2006(2) -- -- -- None pursuant to Rule 457(a)
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457 under the Securities Act of 1933, as amended (the
"Securities Act").
(2) Guarantee of the 12 1/4% Series B Senior Subordinated Notes due 2006 by
the Guarantor as further described herein. See "Description of the Notes -
Subsidiary Guarantees."
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(A), MAY
DETERMINE.
* The subsidiaries of Supreme International Corporation will guarantee the
securities being registered hereby and therefore are also registrants.
Information about such additional registrants appears on the following
pages.
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<PAGE>
ADDITIONAL REGISTRANTS
SUPREME ACQUISITION CORPORATION
(Exact name of registrant as specified in its charter)
FLORIDA 5136 65-0780799
(State or other (Primary Standard Industrial (I.R.S. Employer
jurisdiction of Classification Code Number) Identification No.)
incorporation or
organization)
SUPREME INTERNATIONAL (N.Y.), INC.
(Exact name of registrant as specified in its charter)
NEW YORK 5136 13-3882409
(State or other (Primary Standard Industrial (I.R.S. Employer
jurisdiction of Classification Code Number) Identification No.)
incorporation or
organization)
SUPREME INTERNATIONAL (DELAWARE), INC.
(Exact name of registrant as specified in its charter)
DELAWARE 5136 65-0916514
(State or other (Primary Standard Industrial (I.R.S. Employer
jurisdiction of Classification Code Number) Identification No.)
incorporation or
organization)
SUPREME MUNSINGWEAR CANADA, INC.
(Exact name of registrant as specified in its charter)
CANADA 5136 89-1353534
(State or other (Primary Standard Industrial (I.R.S. Employer
jurisdiction of Classification Code Number) Identification No.)
incorporation or
organization)
SUPREME INTERNATIONAL CORPORATION DE MEXICO, S.A. DE C.V.
(Exact name of registrant as specified in its charter)
MEXICO 5136 N/A
(State or other (Primary Standard Industrial (I.R.S. Employer
jurisdiction of Classification Code Number) Identification No.)
incorporation or
organization)
PERRY ELLIS INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
NEW YORK 6794 13-2963077
(State or other (Primary Standard Industrial (I.R.S. Employer
jurisdiction of Classification Code Number) Identification No.)
incorporation or
organization)
<PAGE>
PROSPECTUS
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED MAY __, 1999
SUPREME INTERNATIONAL CORPORATION
OFFER TO EXCHANGE
$95,000,000 SERIES B SENIOR SUBORDINATED NOTES DUE 2006
FOR ANY AND ALL OUTSTANDING
12 1/4% SERIES A SENIOR SUBORDINATED NOTES DUE 2006
($95,000,000 IN PRINCIPAL AMOUNT)
---------------------
THE EXCHANGE OFFER
Expires 5:00 p.m., New York City time, __________________, 1999, unless
extended.
Subject to certain customary conditions, which we may waive, the exchange
offer is not conditioned upon a minimum aggregate principal amount of existing
notes being tendered.
All outstanding notes validly tendered and not withdrawn will be
exchanged.
Not subject to any condition other than that the exchange offer not
violate applicable law or any applicable interpretation of the Staff of the
Securities and Exchange Commission ("SEC" or "Commission").
THE EXCHANGE NOTES
The terms of the exchange notes to be issued in the exchange offer are
substantially identical to the existing notes, except that we have registered
the exchange notes with the SEC. In addition, the exchange notes will not be
subject to certain transfer restrictions, and certain provisions relating to an
increase in the stated interest rate on the existing notes will be eliminated.
Interest on the exchange notes will accrue from April 6, 1999 at the rate
of 121/4% per annum, payable semi-annually in arrears on each April 1 and
October 1, beginning October 1, 1999.
YOU SHOULD CAREFULLY CONSIDER THE RISK FACTORS BEGINNING ON PAGE 16 OF THIS
PROSPECTUS BEFORE PARTICIPATING IN THE EXCHANGE OFFER.
NEITHER THE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR
DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR
COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The information in this prospectus is not complete and may be changed. We
may not exchange these securities until the registration statement filed with
the SEC is effective. This prospectus is not an offer to exchange these
securities and it is not soliciting an offer to exchange these securities in any
state where the exchange is not permitted.
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The date of this prospectus is May __, 1999.
<PAGE>
TABLE OF CONTENTS
PAGE
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Summary......................................................................1
Risk Factors................................................................16
The Exchange Offer..........................................................27
Use of Proceeds.............................................................35
Capitalization..............................................................36
Unaudited Pro Forma Combined Financial Information..........................37
Selected Historical Financial Information...................................42
Management's Discussion and Analysis of Financial Condition And Results
Of Operations.........................................................44
Business....................................................................51
Management..................................................................64
Principal Shareholders......................................................70
Certain Relationships and Related Transactions..............................71
Description of Other Indebtedness...........................................72
Description of The Notes....................................................74
Registration Rights........................................................109
Plan of Distribution.......................................................110
Certain Federal Tax Considerations.........................................110
Legal Matters..............................................................113
Experts....................................................................113
Where You Can Find More Information........................................113
Index to Financial Statements..............................................F-1
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FORWARD-LOOKING STATEMENTS
This prospectus includes forward-looking statements. We have based these
forward-looking statements on our current expectations and projections about
future events. These forward-looking statements are subject to risks,
uncertainties and assumptions about us, including, among other things:
* our anticipated growth strategies;
* our expected internal growth;
* integration of our completed acquisitions and ability
to obtain additional financing;
* our ability to integrate acquired businesses,
trademarks, tradenames and licenses;
* the expected efficiencies from our new office and
warehouse facility;
* anticipated trends and conditions in our industry,
including future consolidation;
* our future capital needs;
* our ability to compete; and
* the continued economic health of our markets.
We undertake no obligation to update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
In light of these risks, uncertainties and assumptions, the forward-looking
events discussed in this prospectus might not occur.
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This prospectus contains trademarks and tradenames owned by or licensed to
us as well as trademarks owned by third parties.
---------------------
This prospectus is based on information provided by us and by other
sources that we believe are reliable. We cannot assure you that this information
is accurate or complete. This prospectus summarizes certain documents and other
information and we refer you to them for a more complete understanding of what
we discuss in this prospectus. In making an investment decision, you must rely
on your own examination of our company and the terms of the offering and the
notes, including the merits and risks involved.
You should rely only on the information contained in this prospectus. We
have not authorized any person to provide you with different information. If
anyone provides you with different or inconsistent information, you should not
rely on it. We are not making an offer to sell the securities in any
jurisdiction except where the offer or sale is permitted. You should assume that
the information appearing in this prospectus is accurate only as of the date on
the front cover of this prospectus. Our business, financial condition, results
of operations and prospects may have changed since that date.
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NOTICE TO NEW HAMPSHIRE RESIDENTS
NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A LICENSE
HAS BEEN FILED UNDER CHAPTER 421-B OF THE NEW HAMPSHIRE REVISED STATUTES
ANNOTATED 1955, AS AMENDED ("RSA"), WITH THE STATE OF NEW HAMPSHIRE NOR THE FACT
THAT A SECURITY IS EFFECTIVELY REGISTERED OR A PERSON IS LICENSED IN THE STATE
OF NEW HAMPSHIRE CONSTITUTES A FINDING BY THE SECRETARY OF STATE THAT ANY
DOCUMENT FILED UNDER RSA 421-B IS TRUE, COMPLETE AND NOT MISLEADING. NEITHER ANY
SUCH FACT NOR THE FACT THAT AN EXEMPTION OR EXCEPTION IS AVAILABLE FOR A
SECURITY OR A TRANSACTION MEANS THAT THE SECRETARY OF STATE HAS PASSED IN ANY
WAY UPON THE MERITS OR QUALIFICATIONS OF, OR RECOMMENDED OR GIVEN APPROVAL TO,
ANY PERSON, SECURITY OR TRANSACTION. IT IS UNLAWFUL TO MAKE OR CAUSE TO BE MADE
TO ANY PROSPECTIVE PURCHASER, CUSTOMER OR CLIENT ANY REPRESENTATION INCONSISTENT
WITH THE PROVISIONS OF THE PARAGRAPH.
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows us to "incorporate by reference" information into this
prospectus, which means that we can disclose important information to you by
referring you to another document filed separately with the SEC. The information
incorporated by reference is deemed to be part of this prospectus, except for
any information superseded by information contained directly in this prospectus.
This prospectus incorporates by reference the documents set forth below that we
have previously filed with the SEC. These documents contain important
information about Supreme and its financial condition.
We hereby incorporate by reference our (a) Annual Report on Form 10-K for
the year ended January 31, 1999 and as amended on April 9, 1999, (b) Current
Report on Form 8-K, as filed with the SEC on April 8, 1999 and as amended on
April 16, 1999, and (c) Current Report on Form 8-K, as filed with the SEC on
April 19, 1999.
Documents incorporated by reference are available from us without charge,
excluding all exhibits unless we have specifically incorporated by reference an
exhibit in this prospectus. You may obtain documents incorporated by reference
in this prospectus by requesting them in writing or by telephone from us at the
following address:
Supreme International Corporation
3000 N.W. 107th Avenue
Miami, Florida 33172
Attention: Corporate Secretary
(305) 592-2830
<PAGE>
SUMMARY
The following summary contains basic information about this exchange
offer. It may not contain all the information that is important to you. For a
more complete understanding of this exchange offer, we encourage you to read
this entire document and the documents we have referred to as well as consult
your own legal and tax advisors. The term "existing notes" refers to the 12 1/4%
Series A Senior Subordinated Notes due 2006 that were issued on April 6, 1999.
The term "exchange notes" refers to the 12 1/4% Series B Senior Subordinated
Notes due 2006 issuable in this exchange offer. Reference is made in this
exchange offer to the Perry Ellis International acquisition and the John
Henry/Manhattan acquisition. The Perry Ellis International acquisition closed
concurrently with the closing of the existing notes on April 6, 1999. The John
Henry/Manhattan acquisition was completed on March 29, 1999.
The term "Consolidated Financial Statements" means the consolidated
financial statements of Supreme International Corporation and its subsidiaries
and accompanying notes contained in this prospectus. Unless the context
otherwise requires, all references to "Supreme," the "Company," "we," "us" or
"our" include Supreme International Corporation and its subsidiaries and does
not include Perry Ellis International, Inc. References in this prospectus to
annual financial data for Supreme refer to fiscal years ending January 31.
THE COMPANY
We are a leading designer and marketer of a broad line of high quality
men's sportswear, including sport and dress shirts, golf sportswear, sweaters,
urban wear, casual and dress pants and shorts which we sell to all levels of
retail distribution. We have built a broad portfolio of brands through selective
acquisitions and the establishment of our own brands over our 32-year operating
history. Our distribution channels include regional, national and international
department stores, chain stores, mass merchandisers and specialty stores
throughout the United States, Puerto Rico and Canada. We are one of the top five
branded suppliers to department stores in the knit and woven shirt product
categories. Our largest customers include Dayton Hudson Corp., Federated
Department Stores, Inc., Sears Roebuck & Co., Kohl's Corporation, Wal-Mart
Stores, Inc. and J.C. Penney Company, Inc. We currently use over 70 independent
suppliers, located mostly in the Far East, other parts of Asia, Mexico and
Central America, to source our products.
Through consolidation of brands and internal growth, we have experienced
significant overall growth in recent years. Our total revenues have increased to
$224.4 million for fiscal 1999 from $90.6 million for fiscal 1995, representing
a compound annual growth rate of 25.5%. During that same period, our EBITDA (as
defined herein; see "Summary Historical Financial Information") grew to $18.7
million from $7.9 million, representing a compound annual growth rate of 24.0%.
On a pro forma basis, assuming that the Perry Ellis International acquisition
was completed on February 1, 1998, our EBITDA for fiscal 1999 would have been
$29.0 million. For the estimated effect of the John Henry/Manhattan acquisition,
see "Summary Pro Forma and Supplemental Financial Information."
We own or license from third parties the brands under which most of our
products are sold. These brands include Crossings(R) and Natural Issue(R) for
casual sportswear, John Henry(R) for dress casual wear, Andrew Fezza(R) for
dress sportswear, Ping(R) and Munsingwear(R) for golf sportswear and PNB
Nation(R) for urban wear. Through our "family of brands" marketing strategy, we
seek to develop and enhance a distinct brand name for each product category
within each distribution channel. We market our brands to a wide range of
demographic segments, targeting consumers in specific age, income and ethnic
groups. Currently, our products are predominantly produced for the men's segment
of the apparel industry, in which fashion trends tend to be less volatile than
in other segments. The percentage of our revenues from branded products
increased to 81.4% in fiscal 1999 from 71.5% in fiscal 1997.
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<PAGE>
We also license our proprietary brands to third parties for the
manufacture and marketing of various products which we do not sell, including
underwear, activewear and loungewear. In addition to generating additional
sources of revenue for us, these licensing arrangements raise the overall
awareness of our brands. In order to expand our licensing operations, we
recently acquired Perry Ellis International, Inc. which owns and licenses the
prestigious and well-known Perry Ellis(R) brand name. Perry Ellis International,
Inc. had royalty revenues of $16.2 million for the year ended December 31, 1998.
In March 1999, we also purchased the trademarks for John Henry, a leading brand
of men's dress casualwear sold at Sears Roebuck, for Manhattan(R), a popular
dress shirt brand sold at Wal-Mart and Kmart Corporation and for Lady
Manhattan(R).
We believe that our competitive strengths position us to capitalize on
several trends that have affected the apparel industry in recent years. These
include the consolidation of the department and chain store sectors into a
smaller number of stronger retailers, which represent some of our most important
customers; the increased reliance of retailers on reliable suppliers with design
expertise and advanced systems and technology; and the continued importance of a
brand as a source of product differentiation.
COMPETITIVE STRENGTHS
We believe that we have the following competitive advantages in our industry:
Portfolio of Strong Brands. We currently own four major brands
(Munsingwear, Crossings, Natural Issue and Grand Slam(R)) with a total of over
40 sub-brands (such as Penguin(R) and Career Club(R)). We also design, source
and market three other major brands (PNB Nation, Andrew Fezza, and Ping) which
we license under customary agreements with various expiration dates and renewal
options. These brands enjoy national recognition in their respective sectors of
the apparel industry and we believe that they have a loyal consumer and retailer
following. Brand recognition is critical in the apparel industry, where strong
brand names help define consumer preferences and drive department store floor
space allocation. We believe that each of the Perry Ellis International and John
Henry/Manhattan acquisitions will further enhance our established portfolio of
recognizable brands.
Strong Retailer Relationships. We believe our established relationships
with retailers at all distribution levels give us the opportunity to maximize
the selling space dedicated to our products, monitor our brand presentation and
merchandising selection, and introduce new brands and products. We have
long-standing relationships with our largest customers, including J.C. Penney
and Sears Roebuck (more than 20 years), Federated Department Stores (12 years),
Wal-Mart (10 years), Kohl's (6 years) and Dayton Hudson (5 years). We believe
that we have maintained these long relationships as a result of our quality
brand name products and our dedication to customer service. Management, in
conjunction with our 30 salespeople, meets with our major customers frequently
to review product offerings, establish and monitor sales plans, and design joint
advertising and promotional campaigns. We believe our reliable delivery times,
consistent product quality and quick response to design trends and inventory
demands allow us to meet our retailers' current requirements. In addition, our
global sourcing network, design expertise, advanced systems and technology, and
new warehousing facility enhance our ability to meet the changing and increasing
needs of our retailers.
Strong Licensing Capabilities and Relationships. By actively licensing the
brands we own, we have gained significant experience in identifying potential
licensing opportunities and have established relationships with many active
licensees. We believe that our broad portfolio of brands appeals to licensees
because it gives them the opportunity to sell their products in many different
retail distribution channels. For example, a manufacturer of men's accessories
might license the Crossings brand to sell to national department stores and the
Munsingwear brand to target mass merchandisers. We believe that our licensing
expertise, which is supported by a dedicated staff, will allow us to continue
marketing our brands to apparel producers effectively.
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<PAGE>
World-Wide Low-Cost Sourcing Capabilities. Our global network of suppliers
enables us to purchase apparel products at competitive cost without sacrificing
quality, while at the same time reacting quickly to our retailers' needs and
maximizing production flexibility. We developed this expertise through more than
32 years of experience in purchasing our products from suppliers around the
world. No individual supplier in fiscal 1999 accounted for more than 7.3% of our
total sourcing needs. We currently maintain a staff of experienced professionals
principally located in the United States, Korea, China and Mexico, and a global
network of ten sourcing and quality assurance offices, which closely monitor our
suppliers to maintain strict quality standards and identify new sourcing
opportunities. By sourcing our products, we manage our inventories more
effectively and do not incur the costs of maintaining and operating production
facilities.
Design Expertise and Advanced Technology. Our in-house staff consists of
five designers, who have an average of 18 years of experience, and are supported
by a staff of 14 other design professionals. Together, they design substantially
all of our products utilizing computer-aided design technology. The use of this
technology minimizes the time-consuming and costly production of actual sewn
samples prior to customer approval. It also allows us to create custom-designed
products meeting the specific needs of our customers and facilitates a quick
response to changing fashion trends. Our computer-aided design technology
produces approximately 800 designs per month and our library currently contains
approximately 52,000 designs.
Capacity for Growth. We will be able to leverage our recent investments in
infrastructure and our skilled personnel to accommodate future internal growth
and selected acquisitions. Our recent move to a new approximately 238,000 sq.
ft. office and warehouse facility in Miami, which includes 170,000 sq. ft. of
warehouse space, has positioned us to increase capacity with no significant
additional capital expenditure. This facility and our 15,000 sq. ft. of office
space in New York are sufficient to accommodate additional personnel. However,
we expect that our staffing levels will rise at a lower rate than our revenue
growth.
Proven Ability to Integrate Acquisitions. From 1993 to 1998, we acquired
and integrated four major brands, which currently have over 40 sub-brands. We
selectively target brands that we believe are under performing and can be
revitalized using our competitive strengths. Prior to the Perry Ellis
International and John Henry/Manhattan acquisitions, our most significant brand
purchase was the Munsingwear brand in 1996. As part of an extensive integration
process, we:
* repositioned the brand based on our "family of
brands" strategy;
* improved the responsiveness to market trends by
applying our design and sourcing expertise; and
* communicated the new positioning of the brand through
a wide ranging marketing program.
As a result, Munsingwear annual revenues increased by 55.7% to approximately
$66.0 million in fiscal 1999 from approximately $42.4 million in fiscal 1998,
the first full year of our ownership. We believe that we can successfully
integrate additional brands into the Supreme family of brands and further
develop and revitalize them. For example, we intend to license the Perry Ellis
brand for additional product categories such as women's wear and expand into
geographic areas where we believe the Perry Ellis brand has been historically
underrepresented, such as Europe and Asia.
Experienced Management Team. Our senior management team averages nearly 20
years of experience in the apparel industry. Our management team also has
significant experience in developing and revitalizing brand names, has an
established reputation with retailers, the trade and the financial community,
and possesses a diverse skill base, which incorporates brand marketing, sourcing
and management information systems.
3
<PAGE>
BUSINESS STRATEGY
Our "family of brands" marketing approach is designed to develop a
distinct brand for each product category within each distribution channel. For
example, we sell our golf sportswear under the Munsingwear brand to mass
merchants, under the Grand Slam brand to department stores and under the Ping
brand to higher-end retailers, golf shops and resorts. By differentiating our
brands in this manner, we can better satisfy the needs of each type of retailer
by offering brands tailored to its specific distribution channel. In addition,
we believe that this strategy helps insulate us from changing retail patterns,
allows us to maintain the integrity of each distribution channel and helps
prevent brand erosion.
Our objective is to develop and enhance our brands by:
* carefully maintaining distinct distribution channels
for each of our brands;
* consistently designing, sourcing and marketing
quality products;
* reinforcing the image of our brands and continuously
promoting them; and
* updating our styles to keep them current.
Controlling strong brands allows us to increase our retail base, license
these brands to third parties, develop sub-brands and grow internationally.
To achieve our objective, we have adopted a strategy based on the
following elements:
Increase Brand Name Recognition. We intend to enhance recognition of our
brand names by promoting our brands at both the retailer and consumer levels. We
conduct cooperative advertising in print and broadcast media in which various
retailers feature our products in their advertisements. We have also begun
direct consumer advertising in select markets by placing highly visible
billboards, sponsorships, special event advertisements and magazine
advertisements in periodicals such as Men's Health and Gentleman's Quarterly.
Licensing our brands to third parties also serves to enhance brand recognition
by providing increased consumer exposure. We also recently established Web sites
for each of our major brands to position us to take advantage of opportunities
created by the Internet.
Increase Distribution. We intend to increase the distribution of our
existing products by expanding the number of regional, national and
international retailers that carry our brands and increasing the number of
stores in which each of these retailers sells our products. This increased
exposure should broaden our established reputation at the retail and consumer
levels. We selectively pursue new channels of distribution for our products,
focusing on maintaining the integrity of our products and reinforcing our image
at existing retail stores, as well as introducing our products to geographic
areas and consumer sectors that are presently less familiar with our products.
Continue to Diversify Product Line. We intend to broaden the range of our
product lines, capitalizing on the name recognition, popularity and discrete
target customer segmentation of each major brand. For example, we introduced a
sweater line under the Crossings brand and expanded it to include several of our
other brands. We have also expanded into urban wear with the licensing of the
PNB Nation brand, dress sportswear with the licensing of the Andrew Fezza brand
and high-end golf sportswear with the licensing of the Ping brand.
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<PAGE>
Expand Licensing Activities. Since acquiring Munsingwear in 1996, we have
significantly expanded the licensing of our brands to third parties for various
product categories. Similar to the Munsingwear acquisition, we believe the Perry
Ellis International and John Henry/Manhattan acquisitions will provide
significant licensing opportunities. We intend to use these
nationally-recognized brands to expand our licensing activities, particularly
with respect to additional product categories, such as women's wear, and into
geographic areas where we believe these brands have been historically
underrepresented, such as Europe and Asia. We plan to work with our licensees to
strengthen their marketing efforts and thereby increase our revenues.
THE PERRY ELLIS INTERNATIONAL AND JOHN HENRY/MANHATTAN ACQUISITIONS
The apparel industry has followed the consolidation trend of the retail
industry as large retailers have continued to give preference to more dependable
and flexible wholesalers. We are frequently presented with and evaluate new
acquisition opportunities and intend to continue our strategy of making
selective acquisitions to add new product lines and expand our portfolio of
brands. Since 1993, we have acquired, or obtained licenses for, several brands,
including Munsingwear, John Henry, Andrew Fezza, Crossings, Ping and PNB Nation.
Perry Ellis International, Inc. In January 1999, we agreed to buy Perry
Ellis International, Inc. for approximately $74.6 million in cash, net of
purchase price adjustments. Perry Ellis International, Inc. was a privately held
company which owns and licenses the Perry Ellis brand, currently one of the top
selling brands in department stores in the United States. Perry Ellis
International, Inc. is currently the licensor under 34 license agreements,
primarily for various categories of men's wear, boys' wear and fragrances.
During the year ended December 31, 1998, Perry Ellis International, Inc. had
royalty revenues of $16.2 million and EBITDA of $7.8 million. Under our
management of the brand we expect to benefit from certain operating efficiencies
and to increase the licensing royalties the Perry Ellis brand generates. This
acquisition was financed from the net proceeds from the issuance of the existing
notes.
John Henry/Manhattan. In December 1998, we entered into an agreement to
buy certain assets of the John Henry and Manhattan dress shirt business from
Salant Corporation, which entered into a Chapter 11 bankruptcy proceeding. On
February 24, 1999, the bankruptcy court approved the purchase for $27.0 million
plus the value of the existing dress shirt inventory (which was subsequently
valued at approximately $17.2 million). The acquisition was completed on March
29, 1999. The assets purchased consist of the John Henry, Manhattan and Lady
Manhattan trademarks and trade names, license agreements, certain manufacturing
equipment and the existing dress shirt inventory. On March 29, 1999,
Phillips-Van Heusen Corporation purchased the existing dress shirt inventory at
our acquisition cost and licensed from us the John Henry and Manhattan brands
for men's dress shirts. In connection with the John Henry/Manhattan acquisition,
we assumed a lease for a shirt manufacturing facility located in Mexico which
expires in July 1999. Although no agreement has been reached, we intend to
either sublease the facility to one of our suppliers for use in the production
of our products or not renew the lease. The acquisition price, net of the $1.0
million deposit we have paid and proceeds from the sale of the existing dress
shirt inventory, was approximately $26.0 million and was financed with
borrowings under our Senior Credit Facility.
We believe that these acquisitions will greatly expand our licensing
revenues, add to our strong portfolio of brands, allow us to broaden our product
line into product categories, such as women's wear and provide opportunities to
expand into geographic areas where we believe these brands have been
historically underrepresented, such as Europe and Asia.
We were incorporated in Florida in April 1967. Our executive offices are
located at 3000 N.W. 107th Avenue, Miami, Florida 33172, and our telephone
number is (305) 592-2830.
5
<PAGE>
THE EXCHANGE OFFER
REGISTRATION RIGHTS
AGREEMENT................. We sold the existing notes on April 6,
1999 to the initial purchasers under a
purchase agreement dated March 31, 1999.
Pursuant to the purchase agreement,
Supreme, our subsidiaries who guaranteed
our obligations under the existing notes
and the initial purchasers entered into a
registration rights agreement which
granted the holders of the existing notes
certain exchange and registration rights.
This exchange offer is intended to satisfy
certain of our obligations under the
registration rights agreement.
Carfel, Inc., an affiliate of Supreme, purchased
$5,000,000 aggregate principal of the existing
notes. Carfel will not participate in the exchange
offer and has agreed not to sell the existing notes
except pursuant to a shelf registration statement
and not before September 13, 1999.
THE EXCHANGE OFFER....... We are offering to exchange up to
$95,000,000 aggregate principal of the
exchange notes for up to $95,000,000
aggregate principal of the existing notes.
Existing notes may be exchanged only in
$1,000 increments.
The terms of the exchange notes are identical in all
material respects to the existing notes except for
certain transfer restrictions and registration
rights relating to the existing notes and certain
provisions relating to an increase in the stated
interest rate on the existing notes.
RESALE................... We believe that you will be able to freely
transfer the exchange notes without
registration or any prospectus delivery
requirement; however, certain
broker-dealers and certain of our
affiliates may be required to deliver
copies of this prospectus if they resell
any exchange notes.
EXPIRATION DATE.......... 5:00 p.m., New York City time, on
_______________, 1999, unless the exchange
offer is extended. You may withdraw
existing notes you tender pursuant to the
exchange offer at any time prior to
____________, 1999. See "The Exchange
Offer--Expiration Date" and "--Extensions
and Amendments."
ACCRUED INTEREST ON THE
EXCHANGE NOTES AND THE
EXISTING NOTES........... The exchange notes will bear interest at a
rate of 12 1/4% per annum, payable
semi-annually on April 1 and August 1 of
each year, commencing October 1, 1999.
Holders of exchange notes of record at the
close of business on the March 15 and
September 15 immediately preceding such
interest payment date will receive
interest accruing from the most recent
date to which interest has been paid.
6
<PAGE>
TERMINATION OF THE EXCHANGE
OFFER..................... We may terminate the exchange offer if we
determine that our ability to proceed
could be materially impaired due to the
occurrence of certain conditions. We do
not expect any of the foregoing conditions
to occur, although there can be no
assurance that such conditions will not
occur. You will have certain rights
against us under the registration rights
agreement should we fail to consummate the
exchange offer. See "The Exchange
Offer--Termination."
PROCEDURES FOR TENDERING
EXISTING NOTES........... If you wish to accept the exchange offer,
sign and date the letter of transmittal in
accordance with the instructions, and
deliver the letter of transmittal, along
with the existing notes and any other
required documentation, to the exchange
agent. By executing the letter of
transmittal, you will represent to us
that, among other things:
- the exchange notes you receive
will be acquired in the ordinary
course of your business,
- you have no arrangement with any
person to participate in the
distribution of the exchange notes,
and
- you are not an affiliate of Supreme or, if you
are an affiliate, you will comply with the
registration and prospectus delivery
requirements of the Securities Act to the
extent applicable.
SPECIAL PROCEDURES FOR
BENEFICIAL OWNERS........ If you are a beneficial owner whose
existing notes are registered in the name
of a broker, dealer, commercial bank,
trust company or other nominee and wish to
tender such existing notes in the exchange
offer, please contact the registered
holder as soon as possible and instruct
them to tender on your behalf and comply
with our instructions set forth elsewhere
in this prospectus.
GUARANTEED DELIVERY
PROCEDURES................ If you wish to tender your existing notes,
you may, in certain instances, do so
according to the guaranteed delivery
procedures set forth elsewhere in this
prospectus under "The Exchange
Offer--Guaranteed Delivery Procedures."
WITHDRAWAL RIGHTS........ You may withdraw existing notes you tender
pursuant to the exchange offer by
furnishing a written or facsimile
transmission notice of withdrawal to the
exchange agent containing the information
set forth in "The Exchange
Offer--Withdrawal of Tenders."
7
<PAGE>
ACCEPTANCE OF EXISTING
NOTES AND DELIVERY OF
EXCHANGE NOTES............ Subject to certain conditions (as
summarized above in "Termination of the
Exchange Offer" and described more fully
in "The Exchange Offer--Termination"), we
will accept for exchange any and all
existing notes that are properly tendered
in the exchange offer prior to the
expiration date. See "The Exchange
Offer--Procedures for Tendering." The
exchange notes issued pursuant to the
exchange offer will be delivered promptly
following the expiration date.
EXCHANGE AGENT........... State Street Bank and Trust Company, the
trustee under the indenture, is serving as
exchange agent in connection with the
exchange offer. The mailing address of
the exchange agent is State Street Bank
and Trust Company, Corporate Trust
Department, P.O. Box 778, Boston,
Massachusetts 02102-0078, Attention:
Ralph Jones, and the address for hand or
overnight delivery is State Street Bank
and Trust Company, Corporate Trust
Company, Two International Place, Boston,
Massachusetts 02110, Attention: Ralph
Jones. Any deliveries in New York should
be sent to the exchange agent at State
Street Bank and Trust Company, 61
Broadway, New York, New York 10006,
Attention: Ralph Jones. For assistance
and requests for additional copies of this
Prospectus, the Letter of Transmittal or
the Notice of Guaranteed Delivery, the
telephone number for the exchange agent is
(617) 664-5249, and the facsimile number
for the exchange agent is (617) 664-5290,
Attention: Ralph Jones.
See "The Exchange Offer" for more detailed information concerning the terms of
the exchange offer.
SUMMARY OF TERMS OF EXCHANGE NOTES
ISSUER................... Supreme International Corporation
3000 N.W. 107th Avenue
Miami, Florida 33172
(305) 592-2830
GENERAL.................. The exchange notes will be freely tradable
and otherwise substantially identical to
the existing notes. The exchange notes
will not have registration rights or
provisions for additional interest. The
exchange notes will evidence the same debt
as the existing notes, and the existing
notes are and the exchange rates will be
governed by the same indenture. See "The
Exchange Offer--Purpose and Effect of the
Exchange Offer".
NOTES OFFERED............ $95,000,000 aggregate principal of 12 1/4%
Senior Subordinated Notes due 2006.
MATURITY DATE............ April 1, 2006.
INTEREST PAYMENT DATES... April 1 and October 1 of each year,
commencing October 1, 1999.
8
<PAGE>
GUARANTEES............... Each of our current subsidiaries will
fully and unconditionally guarantee the
exchange notes on a senior subordinated
basis. Future subsidiaries also may be
required to guarantee the exchange notes.
See "Description of the Notes--Subsidiary
Guarantees" and "--Certain
Covenants--Limitation on Guarantees of
Indebtedness by Restricted Subsidiaries."
RANKING.................. The exchange notes and the subsidiary
guarantees will be unsecured senior
subordinated indebtedness. The exchange
notes will rank behind all of our existing
and future senior indebtedness including
borrowings under our $90.0 million credit
agreement consisting of a revolving credit
facility of up to an aggregate amount of
$75.0 million and a term loan in the
aggregate amount of $15.0 million (the
"Senior Credit Facility") and three letter
of credit facilities totaling $60.0
million (the "Letter of Credit
Facilities") for the purchase of our
products from suppliers. The guarantees of
the exchange notes will rank behind all
existing and future guarantor senior
indebtedness, including guarantees of the
Senior Credit Facility. The terms "senior
indebtedness" and "guarantor senior
indebtedness" are defined in the
"Description of the Notes--Ranking" section
of this prospectus.
After giving effect to the issuance of the existing
notes, our use of the net proceeds, the John
Henry/Manhattan acquisition and related Phillips-Van
Heusen transactions and the Perry Ellis
International acquisition, at January 31, 1999, we
would have had $133.5 million of consolidated
indebtedness outstanding, including $34.6 million of
senior indebtedness (all of which would have been
secured and would have also been guarantor senior
indebtedness). In addition, we would have had
additional availability under the Senior Credit
Facility of approximately $30.6 million as of
January 31, 1999, all of which would have been
senior secured indebtedness. We also have
approximately $16.3 million in obligations, all of
which are secured, over the next four years under a
synthetic lease (the "Lease") which we entered into
to finance our new office and warehouse facility.
See "Description of Other Indebtedness."
Supreme and its subsidiaries may incur
additional indebtedness, subject to
certain limitations. See "Description of
the Notes-- Ranking" and "--Certain
Covenants--Limitation on Indebtedness."
OPTIONAL REDEMPTION...... We may redeem the exchange notes, in whole
or in part, at any time, on or after April
1, 2003, at the redemption prices
(expressed as percentages of principal
amount) set forth below, plus accrued and
unpaid interest, if any, to the redemption
date, if redeemed during the 12-month
period beginning on April 1 of the years
indicated below:
REDEMPTION
YEAR PRICE
2003.................... 106.125%
2004.................... 103.063%
2005 and thereafter..... 100.000%
9
<PAGE>
PUBLIC EQUITY OFFERING
OPTIONAL REDEMPTION...... On or before April 1, 2002, we may redeem
up to 35% of the aggregate principal
amount of the exchange notes with the net
proceeds of certain public sales of common
stock at 112.25% of the principal amount
thereof, plus accrued and unpaid interest,
if any, if at least 65% of the aggregate
principal amount of the exchange notes
originally issued remains outstanding
after such redemption. See "Description of
the Notes--Redemption."
CHANGE IN CONTROL........ Upon certain changes in control, we must
offer to repurchase all or a portion of
the exchange notes at a purchase price
equal to 101% of the principal amount of
the exchange notes, plus accrued and
unpaid interest, if any, to the purchase
date. See "Description of the
Notes--Certain Covenants--Purchase of
Exchange Notes upon a Change in Control."
CERTAIN COVENANTS........ The indenture governing the exchange notes
will contain covenants that, among other
things, restrict our ability and the
ability of our subsidiaries to:
* incur additional indebtedness;
* pay dividends on, redeem or
repurchase our capital stock;
* make certain investments;
* issue or sell capital stock of
restricted subsidiaries;
* create certain liens;
* create certain liens;
* sell assets;
* in the case of our restricted
subsidiaries, make dividends or other
payments;
* in the case of our restricted
subsidiaries, guarantee indebtedness;
* engage in transactions with
affiliates; and
* consolidate, merge or transfer
all or substantially all of our
assets and the assets of our
subsidiaries on a consolidated basis.
These covenants are subject to important exceptions
and qualifications, which are described under the
heading "Description of the Notes" in this
prospectus.
10
<PAGE>
RISK FACTORS............. You should carefully consider all of the
information contained in this prospectus
prior to investing in the notes. In
particular, we urge you to carefully
consider the factors set forth under "Risk
Factors" beginning on page 16 of this
prospectus.
See "Description of Notes" for more detailed information concerning the
terms of the exchange notes.
11
<PAGE>
SUMMARY PRO FORMA AND SUPPLEMENTAL FINANCIAL INFORMATION
The "Pro Forma Financial Information" set forth below gives effect to (i)
the Perry Ellis International acquisition and (ii) the offering of the existing
notes. The "Supplemental Financial Information" set forth below, in addition to
giving effect to the transactions included in the Pro Forma Financial
Information, gives effect to (i) the John Henry/Manhattan acquisition and the
related concurrent sale of the existing dress shirt inventory to Phillips-Van
Heusen and (ii) additional indebtedness incurred under the Senior Credit
Facility to finance the John Henry/Manhattan acquisition. The income statement
and operating information give effect to such transactions as if they had
occurred on February 1, 1998 and the balance sheet information gives effect to
such transactions as if they had occurred on January 31, 1999.
The information presented below has been derived from our audited
consolidated financial statements, the audited financial statements of Perry
Ellis International, Inc. and certain financial information received from Salant
Corporation with respect to the John Henry/Manhattan acquisition. This
information does not purport to represent what our operating results or
financial condition would actually have been had the Perry Ellis International
acquisition and/or the John Henry/Manhattan acquisition and related transactions
with Phillips-Van Heusen actually occurred as of the dates indicated above or to
project our financial condition for any future period. The information presented
below should be read in conjunction with our consolidated financial statements
and notes thereto, "Unaudited Pro Forma Combined Financial Information" and
notes thereto, "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and the financial statements and notes thereto of Perry
Ellis International, Inc. included elsewhere herein.
PRO FORMA FINANCIAL INFORMATION
PRO FORMA
FISCAL YEAR ENDED
JANUARY 31, 1999
----------------
(DOLLARS IN
MILLIONS)
STATEMENT OF INCOME DATA:
Total revenues...................................... $240.6
Depreciation and amortization....................... 5.9
Operating income.................................... 23.1
Interest expense.................................... 14.4
BALANCE SHEET DATA (AT YEAR END):
Working capital..................................... $66.5
Total assets........................................ 183.4
Total debt.......................................... 106.5
Total stockholders' equity.......................... 64.9
OTHER FINANCIAL DATA AND RATIOS:
Pro Forma EBITDA (a)................................ $29.0
Capital expenditures................................ 4.0
Ratio of Pro Forma EBITDA to interest expense....... 2.0x
Ratio of total debt to Pro Forma EBITDA............. 3.7x
12
<PAGE>
SUPPLEMENTAL FINANCIAL INFORMATION
The Pro Forma Financial Information set forth above does not give effect
to the John Henry/Manhattan acquisition because audited financial information
for the assets being acquired will not be available from Salant Corporation
prior to the commencement of the exchange offer. However, we have been provided
with certain unaudited financial information for the eleven months ended
November 30, 1998 that has been derived from Salant's internal financial
records. Based on this information, EBITDA related to the John Henry and
Manhattan brands for the 11 months ended November 30, 1998 was $3.8 million
("Estimated EBITDA") (see note (b) below). The sum of the $29.0 million Pro
Forma EBITDA (with respect to the Perry Ellis International acquisition) set
forth above plus Estimated EBITDA is $32.8 million ("Adjusted EBITDA"). The
information used to calculate the Estimated EBITDA and, correspondingly, the
Adjusted EBITDA may not be reliable because Estimated EBITDA (i) has been
obtained from the unaudited financial records of Salant Corporation, (ii)
reflects only eleven months of operations and (iii) does not include the impact
of any additional costs or expenses that may be recorded by Salant Corporation
in December, as a result of normal year-end adjustments or otherwise, that
relate to the 11 months ended November 30, 1998. Additionally, the Estimated
EBITDA and, correspondingly, the Adjusted EBITDA do not take into consideration
any expenses of assuming the lease for the dress shirt manufacturing facility
located in Mexico, operating that facility or disposing of that facility.
Although no agreement has been reached, we intend to either sublease the
facility or not renew the lease.
The following financial information supplements the Pro Forma Financial
Information set forth above to give effect to the John Henry/Manhattan
acquisition and related Phillips-Van Heusen transactions by adjusting (i) Pro
Forma EBITDA by Estimated EBITDA and (ii) Total Debt and interest expense by the
additional debt of $27.0 million and related interest expense of $2.1 million
incurred to finance the John Henry/Manhattan acquisition (after giving effect to
the Phillips-Van Heusen acquisition of the existing dress shirt inventory)
(dollars in millions):
Pro Forma EBITDA.......................................... $29.0
Estimated EBITDA(b)....................................... 3.8
-------
Adjusted EBITDA(a).................................. $32.8
=======
Interest expense.......................................... $16.5
Total Debt................................................ $133.5
Ratio of Adjusted EBITDA to interest expense.............. 2.0x
Ratio of Total Debt to Adjusted EBITDA.................... 4.1x
- -----------------
(a) EBITDA represents net income before taking into consideration
interest expense, income tax expense, depreciation expense, and
amortization expense. EBITDA is not a measurement of financial
performance under generally accepted accounting principles and
does not represent cash flow from operations. Accordingly, do
not regard this figure as an alternative to net income (loss) or
as an indicator of our operating performance or as an
alternative to cash flows as a measure of liquidity. We believe
that EBITDA is widely used by analysts, investors and other
interested parties in our industry but it is not necessarily
comparable with similarly titled measures for other companies.
See "Statements of Cash Flows" in our consolidated financial
statements and in the financial statements of Perry Ellis
International, Inc. contained elsewhere in this prospectus.
(b) Estimated EBITDA represents the sum of (i) royalty income
related to the John Henry and Manhattan brands less the related
direct expenses (which exclude any allocation of corporate
expense), in each case for the 11 months ended November 30, 1998
as determined from the financial information provided by Salant
Corporation referred to above and (ii) the minimum yearly
royalty required to be paid to us by Phillips-Van Heusen
pursuant to its license of the John Henry and Manhattan brands.
13
<PAGE>
SUMMARY HISTORICAL FINANCIAL INFORMATION
(DOLLARS IN THOUSANDS)
The following table presents summary historical financial data derived
from the audited consolidated financial statements of the Company and the
audited financial statements of Perry Ellis International, Inc. The historical
financial information should be read in conjunction with our consolidated
financial statements and notes thereto and the financial statements of Perry
Ellis International, Inc. and the notes thereto appearing elsewhere herein.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED JANUARY 31,
---------------------------------------------------------------------
1995 1996 1997 1998 1999
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
SUPREME HISTORICAL
STATEMENT OF INCOME DATA:
Net sales $ 90,564 $ 121,839 $ 157,373 $ 190,689 $ 221,347
Royalty income -- 759 1,654 4,032 3,057
--------- --------- --------- --------- ---------
Total revenues 90,564 122,598 159,027 194,721 224,404
Cost of sales 69,187 92,145 122,046 145,991 166,198
--------- --------- --------- --------- ---------
Gross profit 21,377 30,453 36,981 48,730 58,206
Selling, general and
administrative expenses 13,493 20,395 24,729 34,137 39,478
Depreciation and amortization 474 725 1,147 1,748 2,161
--------- --------- --------- --------- ---------
Operating income 7,410 9,333 11,105 12,845 16,567
Interest expense 1,219 2,224 1,664 2,782 3,494
--------- --------- --------- --------- ---------
Income before income taxes 6,191 7,109 9,441 10,063 13,073
Income taxes 2,319 2,685 3,597 2,885 4,491
--------- --------- --------- --------- ---------
Net income $ 3,872 $ 4,424 $ 5,844 $ 7,178 $ 8,582
========= ========= ========= ========= =========
OTHER FINANCIAL DATA AND RATIOS:
Net cash provided by (used
in) operating activities $ (20,015) $ 5,303 $ 1,874 $ (3,101) $ 14,341
Net cash provided by (used
in) investing activities (825) (1,492) (24,456) (4,555) (10,240)
Net cash provided by (used
in) financing activities 21,094 (3,894) 23,080 7,910 (4,938)
EBITDA (a) 7,884 10,058 12,252 14,593 18,728
Capital expenditures 747 1,309 1,058 3,828 4,005
Ratio of earnings to fixed
charges (b) 5.3x 3.8x 5.7x 4.1x 4.2x
BALANCE SHEET DATA (AT YEAR END):
Working capital $ 43,067 $ 47,760 $ 23,575 $ 66,166 $ 71,300
Total assets 55,512 53,735 88,158 101,650 108,958
Total debt (c) 28,256 6,968 31,949 39,658 33,511
Total stockholders' equity 22,016 43,833 47,775 55,155 64,946
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
FISCAL YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------------------
1994 1995 1996 1997 1998
---- ---- ---- ---- ----
PERRY ELLIS INTERNATIONAL, INC. HISTORICAL
<S> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Net royalty revenues $ 10,074 $ 11,685 $ 10,917 $ 15,660 $ 16,177
Selling, general and
administrative expenses 7,239 5,594 8,606 7,109 8,398
Depreciation and amortization 37 200 212 226 228
----------- ----------- ----------- ----------- -----------
Operating income 2,798 5,891 2,099 8,325 7,551
Interest income 43 82 144 136 32
----------- ----------- ----------- ----------- -----------
Income before income taxes 2,841 5,973 2,243 8,461 7,583
Income taxes 308 640 218 852 760
----------- ----------- ----------- ----------- -----------
Net income $ 2,533 5,333 $ 2,025 $ 7,609 $ 6,823
=========== =========== =========== =========== ===========
OTHER FINANCIAL DATA AND RATIOS:
Net cash provided by (used in)
operating activities $ 3,982 6,572 $ 2,311 $ 7,454 $ 5,624
Net cash provided by (used in)
investing activities (1,902) (355) (1,047) 913 (21)
Net cash provided by (used in)
financing activities (2,423) (4,763) (1,413) (9,679) (4,354)
EBITDA (a) 2,878 6,173 2,455 8,688 7,811
Capital expenditures 1,402 355 47 87 21
BALANCE SHEET DATA (AT YEAR END):
Working capital $ (204) $ 1,281 $ 1,995 $ (27) $ 2,665
Total assets 2,985 4,121 4,803 3,112 4,563
Total debt 700 -- -- -- --
Total stockholders' equity 1,557 2,827 3,439 1,369 3,839
</TABLE>
- -------------
(a) EBITDA represents net income before taking into consideration interest
expense, income tax expense, depreciation expense, and amortization
expense. EBITDA is not a measurement of financial performance under
generally accepted accounting principles and does not represent cash flow
from operations. Accordingly, do not regard this figure as an alternative
to net income or as an indicator of our operating performance or as an
alternative to cash flows as a measure of liquidity. We believe that EBITDA
is widely used by analysts, investors and other interested parties in our
industry but is not necessarily comparable with similarly titled measures
for other companies.
(b) For purpose of computing this ratio, earnings consist of earnings before
income taxes and fixed charges. Fixed charges consist of interest expense,
amortization of deferred debt issuance costs and the portion of rental
expense of the Lease deemed representative of the interest factor.
(c) Total debt includes balances outstanding under credit facilities, long-term
debt and the current portion of long-term debt.
15
<PAGE>
RISK FACTORS
Your investment in the notes involves certain risks. You should carefully
consider the following risk factors and the other information in this prospectus
before deciding to invest in the notes.
WE HAVE SUBSTANTIAL DEBT AND INTEREST PAYMENT OBLIGATIONS
We now have and after the exchange offer will continue to have a
significant amount of debt. The following chart, with dollar amounts in
thousands, shows certain important credit statistics and is presented assuming
we completed the offering of the existing notes and used the proceeds to finance
the Perry Ellis International acquisition and applied a portion of the proceeds
to repay indebtedness under the Senior Credit Facility and consummated the John
Henry/Manhattan acquisition and related Phillips-Van Heusen transactions as of
January 31, 1999:
Total debt.................................. $133,541
Stockholders' equity........................ $64,946
Ratio of earnings to fixed charges(a)....... 1.5x
- --------------------
(a) See "Summary Pro Forma and Supplemental Financial Information" for a
discussion of the amounts related to the John Henry/Manhattan acquisition
used in calculating the ratio of earnings to fixed charges.
Our substantial indebtedness could have important consequences to you,
including:
* making it more difficult for us to satisfy our
obligations with respect to the exchange notes;
* increasing our vulnerability to adverse general
economic and industry conditions;
* limiting our ability to obtain additional financing to fund future
working capital, capital expenditures, acquisitions and other general
corporate requirements;
* requiring us to dedicate a substantial portion of our cash flow from
operations to payments on our indebtedness, thereby reducing the
availability of our cash flow to fund working capital, capital
expenditures, acquisitions or other general corporate purposes;
* limiting our flexibility in planning for, or reacting
to, changes in our business and the industry in which we
operate; and
* placing us at a competitive disadvantage compared to
our less leveraged competitors.
Our ability to pay interest on the exchange notes and to satisfy our other
debt obligations will depend upon, among other things, our future operating
performance and our ability to refinance indebtedness when necessary. Each of
these factors is, to a large extent, dependent on economic, financial,
competitive and other factors beyond our control. If, in the future, we cannot
generate sufficient cash from operations to make scheduled payments on the
exchange notes or to meet our other obligations, we will need to refinance,
obtain additional financing or sell assets. We cannot assure you that our
business will generate cash flow or that we will be able to obtain funding
sufficient to satisfy our debt service requirements.
16
<PAGE>
A significant portion of our assets consists of trademarks, licenses,
goodwill and certain other intangibles. After giving effect to the (i) offering
of the existing notes and the use of the net proceeds to finance the Perry Ellis
International acquisition and to repay a portion of indebtedness under the
Senior Credit Facility and (ii) completion of the John Henry/Manhattan
acquisition, we would have had approximately $120.7 million of intangible assets
as of January 31, 1999. The value of these assets could be reduced materially in
the future due to changing consumer preferences, our failure to implement our
business strategy, competition and other future trends. As a result, our assets
may not be sufficient to repay all of our indebtedness (including the exchange
notes) if secured creditors foreclose on the assets pledged to them or if we are
forced to dispose of our assets to meet our obligations.
See "Description of the Notes--Redemption" and "--Certain
Covenants--Purchase of Notes upon a Change in Control" and "Description of Other
Indebtedness."
THE EXCHANGE NOTES AND GUARANTEES ARE SUBORDINATED TO OUR SENIOR
INDEBTEDNESS
The exchange notes will be subordinated to all our senior indebtedness.
The guarantees will be subordinated to all guarantor senior indebtedness. As of
January 31, 1999, after giving pro forma effect to the (i) offering of the
existing notes and the use of the net proceeds to finance the Perry Ellis
International acquisition and to repay a portion of our indebtedness under the
Senior Credit Facility and (ii) completion of the John Henry/Manhattan
acquisition, we would have had outstanding $34.6 million of senior indebtedness
(all of which would have also been guarantor senior indebtedness and all of
which would have been secured by substantially all our assets). Additionally, we
have approximately $16.3 million of obligations under the Lease over a four-year
period, all of which is secured by substantially all our assets. We also may
incur additional senior indebtedness under the terms of the Senior Credit
Facility and the indenture governing the exchange notes. The maximum
availability, subject to borrowing base requirements for the revolving credit
facility, under our Senior Credit Facility is $90.0 million consisting of a
revolving credit facility of up to an aggregate principal amount of $75.0
million and a term loan in the aggregate amount of $15.0 million which, if
borrowed, would be senior indebtedness and would be secured by substantially all
our assets.
In the event of our bankruptcy, liquidation or dissolution, our assets
would be available to pay obligations on the exchange notes only after all
payments have been made on our senior indebtedness. Similarly, in the event of a
bankruptcy, liquidation or dissolution of any subsidiary, its assets would be
available to pay obligations on the guarantee only after payments had been made
on its guarantor senior indebtedness. In addition, no cash payments may be made
with respect to the exchange notes during the continuance of a payment default
with respect to senior indebtedness. Furthermore, under certain circumstances,
no cash payments with respect to the exchange notes may be made for a period of
up to 179 days (during each period of 360 days) if a nonpayment default exists
with respect to designated senior indebtedness. We cannot assure you that
sufficient assets will remain to make any payments to you or other holders of
the exchange notes. In addition, certain events of default under the Senior
Credit Facility would prohibit us from making any payments on the exchange
notes. The terms "senior indebtedness," "guarantor senior indebtedness" and
"designated senior indebtedness" are defined in the "Description of the
Notes--Ranking" section of this prospectus. See "Description of Other
Indebtedness" and "Description of the Notes."
THE NOTES ARE NOT SECURED BY ANY OF OUR ASSETS
In addition to being subordinate to all of our senior indebtedness, the
exchange notes and the guarantees will not be secured by any of our assets or
the assets of our subsidiaries. Our obligations under the Senior Credit
Facility, however, are secured by all of our assets and those of our
subsidiaries. Our obligations under the Lease are also secured by a lien on all
of our assets and those of our subsidiaries. If
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we become insolvent or are liquidated, or if payment under the Senior Credit
Facility is accelerated, the lenders under the Senior Credit Facility and the
Lease would be entitled to exercise the remedies available to a secured lender
under applicable law. Under these circumstances, these lenders will have a claim
on substantially all of our assets and those of our subsidiaries. Because the
exchange notes are unsecured, there could be no assets remaining for the holders
of the exchange notes or any remaining assets could be insufficient to pay off
the exchange notes. See "Capitalization," "Management's Discussion and Analysis
of Financial Condition and Results of Operations--Liquidity and Capital
Resources," "Description of Other Indebtedness," "Description of the Notes,"
"Unaudited Pro Forma Combined Financial Information" and "Selected Historical
Financial Information."
A CHANGE IN FASHION TRENDS COULD HARM OUR BUSINESS
We believe that our success depends on our ability to anticipate, identify
and respond to changing fashion trends in a timely manner. To the extent that we
decide to increase our marketing of women's apparel, we may be more subject to
changes in fashion trends. If we misjudge consumer preferences or if a shift in
fashion trends turns away from our products, it could have a material adverse
effect on our business, financial condition, results of operations and
prospects. See "Business."
OUR BUSINESS COULD BE HARMED IF GENERAL ECONOMIC CONDITIONS
DETERIORATE OR SOME OF OUR CUSTOMERS EXPERIENCE FINANCIAL DIFFICULTIES
The retail industry has historically been subject to substantial cyclical
variations and is particularly affected by adverse trends in the general
economy, with consumer spending tending to decline during recessionary periods.
The success of our operations depends on consumer spending, which is impacted by
a number of factors including economic conditions (and perceptions of economic
conditions) affecting disposable consumer income (such as unemployment, wages
and salaries), business conditions, interest rates, availability of credit and
taxation, for the economy as a whole and in regional and local markets where our
products are sold. Any significant deterioration in general economic conditions
or increases in interest rates could reduce the level of consumer spending and
thereby have a material adverse effect on our business, financial condition,
results of operations and prospects by, among other things, inhibiting
consumers' use of credit.
In addition, during the past several years, various retailers, including
some of our customers, have experienced significant changes and difficulties
including consolidation of ownership, increased centralization of buying
decisions, restructurings, bankruptcies and liquidations. These and other
financial problems of some of our retailers increase the risk of extending
credit to these retailers. A significant adverse change in a customer or its
financial position could cause us to limit or discontinue business with that
customer, require us to assume more credit risk relating to that customer's
receivables or limit our ability to collect amounts related to previous
purchases by that customer, all of which could have a material adverse effect on
our business, financial condition, results of operation and prospects. See
"Business."
WE RELY ON OUR KEY CUSTOMERS FOR MUCH OF OUR BUSINESS
We derive a significant amount of our revenues from a few major customers.
Net sales to our five largest customers totaled approximately 48% of net sales
during fiscal 1999, 47% of net sales during fiscal 1998 and 54% of net sales
during fiscal 1997. Our largest customers include Dayton Hudson, Sears Roebuck,
Wal-Mart, Federated Department Stores, Kohl's, and J.C. Penney. Sales to Dayton
Hudson accounted for approximately 15% of net sales during fiscal 1999 and sales
to Sears Roebuck and Federated Department Stores each accounted for
approximately 10% of net sales during fiscal 1999. Sales to Dayton Hudson
accounted for approximately 12% of net sales during fiscal 1998 and sales to
Sears
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Roebuck accounted for approximately 13% of net sales during fiscal 1998. Sales
to Kmart Corporation accounted for approximately 15% of net sales during fiscal
1997 and sales to J.C. Penney and Sears Roebuck each accounted for approximately
12% of net sales during fiscal 1997. No other single customer accounted for more
than 10% of net sales during these fiscal years. Although we have
long-established relationships with many of our customers, we do not have
long-term contracts with any of them and purchases generally occur on an
order-by-order basis. A decrease in business from or loss of any of our major
customers could have a material adverse effect on our business, financial
condition, results of operations and prospects. See "Business--Marketing and
Distribution."
OUR BUSINESS MAY BE HARMED IF OUR CONTRACT MANUFACTURERS DO NOT PRODUCE OUR
GOODS EFFECTIVELY
We currently utilize independent contract manufacturers to produce
substantially all of our apparel products. We depend upon the ability of our
contract manufacturers to secure a sufficient supply of raw materials,
adequately finance the production of goods ordered and maintain sufficient
manufacturing and shipping capacity. The use of contract manufacturing and the
resulting lack of direct control could subject us to difficulty in obtaining
timely delivery of products of acceptable quality. We do not have long-term
contracts with any of our suppliers. We believe that the loss of any one or more
of our suppliers is not likely to have a long-term material adverse effect on
our business because either new or existing manufacturers would be available to
fulfill our requirements although in the short term it could have a material
adverse effect on our business, financial condition, results of operations and
prospects. Additionally, in the event of supply problems, key customers may turn
to other suppliers. See "Business--Sources of Supply."
OUR BUSINESS MAY BE HARMED IF OUR FOREIGN SUPPLIERS DO NOT ADEQUATELY
PROVIDE US WITH PRODUCT
During fiscal 1999, substantially all of our products were purchased from
independent contract manufacturers located in foreign countries. We currently
use approximately 48 suppliers in countries in the Far East and other parts of
Asia and approximately 24 suppliers in Mexico and countries in Central America.
Because most of our products are manufactured abroad, we are required to order
products further in advance than would be the case if products were manufactured
domestically. If we overestimate retailers' demand, we may be required to hold
goods in inventory which we may be unable to sell at historical margins; if we
underestimate retailers' demand, we may not be able to fill reorders on a timely
basis. Foreign manufacturing is subject to a number of other risks, including
work stoppages, transportation delays and interruptions, political instability,
economic disruptions, the imposition of tariffs and import and export controls,
changes in governmental policies and other events. If any of these events occur,
we could miss an upcoming retailing season, which could result in loss of
revenues, customer orders and customer goodwill and could have a material
adverse effect on our business, financial condition, results of operations and
prospects.
Although we have historically contracted to purchase substantially all of
our goods in U.S. dollars, reductions in the value of the U.S. dollar could
ultimately increase the prices that we pay for our products. See
"Business--Sources of Supply."
IT IS POSSIBLE THAT WE WILL NOT BE ABLE TO RENEW CERTAIN LICENSES
We currently license the Ping, Andrew Fezza and PNB Nation brands from
third parties. These licenses vary in length of term, renewal conditions and
royalty obligations. There can be no guarantee that, if we desire to renew or
extend any of these licenses, we would be able to do so on favorable terms, if
at all. See "Business--Brands."
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THE INDENTURE IMPOSES MANY RESTRICTIONS ON US
The indenture governing the exchange notes will contain covenants that,
among other things, restrict our ability and the ability of our subsidiaries to:
* incur additional indebtedness;
* pay dividends on, redeem or repurchase our capital
stock;
* make certain investments;
* issue or sell capital stock of restricted
subsidiaries;
* create certain liens;
* sell assets;
* in the case of our restricted subsidiaries, make
dividends or other payments;
* in the case of our restricted subsidiaries, guarantee
indebtedness;
* engage in transactions with affiliates; and
* consolidate, merge or transfer all or substantially
all of our assets and the assets of our subsidiaries on a
consolidated basis.
These covenants are subject to important exceptions and qualifications
which are described under the heading "Description of the Notes" in this
prospectus.
In addition, the Senior Credit Facility and, to a lesser extent, the Lease
contain many restrictive covenants similar to the indenture's covenants which,
among other things, impose certain limitations on us. The Senior Credit Facility
contains restrictive covenants which are generally more restrictive than those
contained in the indenture. The Senior Credit Facility requires us to maintain
specified consolidated financial ratios and satisfy certain consolidated
financial tests. Our ability to meet those financial ratios and financial tests
may be affected by events beyond our control, and we cannot assure you that we
will meet those tests. If we fail to meet those tests or breach any of the
covenants, the lenders under the Senior Credit Facility or the lessor under, and
the financial institutions which financed, the Lease could declare all amounts
outstanding thereunder, together with accrued interest, to be immediately due
and payable. If we are unable to repay those amounts, each of the lenders and
the financial institutions could proceed against our assets granted as
collateral to secure that indebtedness. We cannot assure you that our assets
would be sufficient to repay in full the indebtedness under the Senior Credit
Facility and/or the Lease.
In addition, if we default under the indenture, the Senior Credit Facility
or the Lease, that default could constitute a cross-default under the indenture,
the Senior Credit Facility or the Lease, as applicable. See "Description of the
Notes" and "Description of Other Indebtedness."
These operating and financial restrictions and covenants may adversely
affect, and in fact may limit or prohibit, our ability to finance future
acquisitions, our operations and our capital needs. See "Description of Other
Indebtedness" and "Description of the Notes."
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WE ARE REQUIRED TO FINANCE WORKING CAPITAL
We need significant working capital to purchase inventory and finance
accounts receivable and are generally required to post letters of credit when
placing an order with one of our foreign manufacturers. Currently, a substantial
portion of our working capital requirements are met through the Senior Credit
Facility. We also maintain the Letter of Credit Facilities to permit us to post
letters of credit. In the event we are unable to extend or renew either the
Senior Credit Facility or the Letter of Credit Facilities on satisfactory terms
or in the event borrowings thereunder were unavailable to us as a result of our
non-compliance with the financial and operating covenants contained therein, our
ability to purchase inventory and finance accounts receivable would be curtailed
or eliminated and our business, financial condition, results of operations and
prospects could be materially adversely affected. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources" and "Description of Other Indebtedness."
IMPORTS ARE SUBJECT TO IMPORT RESTRICTIONS
Due to our dependence on foreign suppliers, we are subject to risks
associated with importing products into the United States. Substantially all of
our import operations are subject to the terms of bilateral textile agreements
between the United States and a number of foreign countries. These agreements
allow the United States to impose at any time restraints on the importation of
categories of merchandise that, under the terms of the agreements, are not
subject to specified limits.
Our imported products are also subject to United States customs duties,
which are a material portion of our cost of sales. The United States and the
countries in which our products are manufactured may from time to time impose
new quotas, duties, tariffs or other restrictions or adversely adjust presently
prevailing quotas, duties or tariffs. For example, the United States has imposed
penalties on imported foreign products which are found to have been manufactured
by convict, forced or indentured labor and has, from time to time, threatened to
withdraw China's "most favored nation" status (from where less than 10% of our
products are currently purchased), which could result in the imposition of
reduced quotas and/or higher tariffs on products imported from that country. Any
new or increased quotas, duties, tariffs or other such restrictions could have a
material adverse effect on our business, financial condition, results of
operations and prospects. See "Business--Sources of Supply."
Any changes in these agreements that impose additional restraints on the
products we import could increase our costs, limit the products we have
available to sell and have a material adverse effect on our business, financial
condition, results of operations and prospects.
WE ARE SUBJECT TO CERTAIN RISKS RELATING TO OUR CURRENT AND FUTURE
ACQUISITIONS AND THEIR INTEGRATION
Our business strategy includes making selective acquisitions to add new
product lines and expand our portfolio of brand names, although we currently are
not contemplating any acquisitions. This strategy presents certain risks
inherent in (a) assessing the value, strengths and weaknesses of brand names,
(b) evaluating the costs and uncertain returns of expanding our operations, and
(c) integrating the brands acquired with existing operations. Our growth
strategy may affect short-term cash flow and net income as we increase our
indebtedness and incur expenses to promote newly acquired brands and expand our
inventory. As a result, revenue and operating results may fluctuate. We cannot
assure you that we will successfully expand our portfolio of brands, that any
acquired brand names will be successfully integrated into our operations or that
any expansion will result in profitability. The failure to successfully
implement our growth strategy may have a material adverse effect on our
business, financial condition, results of operations and prospects.
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Our anticipated growth may place significant demands on our management and
our operational, financial and marketing resources. In connection with the
acquisition of new brand names, we anticipate expanding the number of our
employees, the scope of our operating systems and the geographic area of our
operations. We believe this growth will increase the complexity of our
operations and the level of responsibility exercised by both existing and new
management personnel. To manage this expected growth, we intend to invest
further in our operating systems and to continue to expand, train and manage our
employee base, although we cannot assure you that our current operating and
financial systems and controls will continue to be adequate as we grow or that
any steps taken to improve such systems and controls will be sufficient. Our
failure to successfully integrate and manage our growth may have a material
adverse effect on our business, financial condition, results of operations and
prospects.
There may be liabilities that we failed or were unable to discover in the
course of performing due diligence investigations related to the Perry Ellis
International acquisition, the John Henry/Manhattan acquisition and any future
acquisitions. Such liabilities could include those arising from the trademarks,
employee benefits contribution obligations of a prior owner or non-compliance
with applicable federal, state or local environmental requirements by prior
owners for which we, as a successor owner, may be responsible. We try to
minimize these risks by conducting that due diligence, including trademark,
employee benefits and environmental reviews, we deem appropriate under the
circumstances. However, we cannot assure you that we have identified or, in the
case of future acquisitions, will identify, all existing or potential risks. We
also seek to require the sellers to indemnify us against undisclosed
liabilities. However, we cannot assure you that the indemnification, even if
obtained, will be enforceable, collectible or sufficient in amount, scope or
duration to fully offset the possible liabilities associated with the business
or property acquired. Any of these liabilities, individually or in the
aggregate, could have a material adverse effect on our business, financial
condition, results of operations and prospects.
AUDITED FINANCIAL STATEMENTS WERE NOT AVAILABLE FOR THE JOHN HENRY/MANHATTAN
ACQUISITION
Audited financial statements for the assets acquired pursuant to the John
Henry/Manhattan acquisition, which was completed on March 29, 1999, will not be
available from Salant Corporation prior to commencement of the exchange offer.
However, we have been provided with, and have included in this prospectus,
certain unaudited financial information for the 11 months ended November 30,
1998 that has been derived from Salant's internal financial records. This
unaudited financial information (and any financial data derived from it) may not
be reliable because it (1) has been obtained from the unaudited financial
records of Salant Corporation, (2) reflects only 11 months of operations and (3)
does not include the impact of any additional costs or expenses recorded by
Salant Corporation in December, as a result of normal year-end adjustments or
otherwise, that relate to the 11 months ended November 30, 1998. In addition,
the unaudited financial information does not take into account any expenses of
assuming the lease of the shirt manufacturing facility located in Mexico,
operating that facility or disposing of that facility. See "Summary Pro Forma
and Supplemental Financial Information."
WE HAVE NO EXPERIENCE IN MANAGING OR OPERATING THE MANUFACTURING FACILITY WE
ACQUIRED.
We have no experience in managing or operating the manufacturing facility
we acquired. In connection with the John Henry/Manhattan acquisition, we
acquired certain manufacturing equipment and assumed a lease for a shirt
manufacturing facility located in Mexico. Although we intend to sublease the
facility, there can be no guarantee that we will be able to do so. We have no
experience managing or operating a manufacturing facility either within or
outside the United States. We cannot assure you that we will successfully manage
or operate this facility. Furthermore, if we decide to cease operations at this
facility, we may incur additional costs. In the event that the operations of
this facility are disrupted or that we are unable to import the facility's
output of shirts into the United States, we may not be able to source our
requirements of shirts through other supply channels on a timely basis. Any
failure to successfully operate or manage this facility, disruption of the
facility's operation or inability to import the facility's output into the
United States could have a material adverse effect on our business, financial
condition, results of operations and prospects.
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WE FACE INTENSE COMPETITION IN THE RETAIL APPAREL INDUSTRY
The retail apparel industry is highly competitive and fragmented. Our
competitors include numerous apparel designers, manufacturers, importers and
licensors, many of which have greater financial and marketing resources than us.
To date, we have been able to compete successfully but there can be no guarantee
that we will continue to be able to do so in the future. See "Business--
Competition."
WE ARE SUBJECT TO SEASONALITY
Our products have historically been geared toward lighter-weight products
generally worn during the spring and summer months, which typically caused
disproportionately higher revenues to be realized during the first and third
quarters of each fiscal year. Although this seasonality has been somewhat
reduced with the introduction of fall, winter and holiday merchandise, our
business is still affected by seasonality. See "Business--Seasonality and
Backlog."
OUR BUSINESS COULD BE HARMED IF WE EXPANDED OUR BUSINESS WITHOUT THE
PROPER FINANCIAL AND PERSONNEL RESOURCES
During the past six years, we have experienced rapid growth in sales,
expansion of our product offerings, acquisitions and integration of additional
brands and an increase in our customer base. Part of our business strategy is to
expand our licensing activities. Any future growth will require increasing
amounts of working capital and financing and may place a significant strain on
our management and on our financial and information processing systems. The
failure to obtain additional financing, to maintain or upgrade these systems, to
recruit additional staff and key personnel or to respond effectively to other
difficulties associated with rapid expansion could have a material adverse
effect on our business, financial condition, results of operations and
prospects. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Business."
AN INCREASE IN THE PRICE OF COTTON FABRIC OR ITS REDUCED AVAILABILITY
MAY HARM OUR BUSINESS
Cotton fabric is the principal raw material used in our apparel. Although
we believe that our suppliers will continue to be able to procure a sufficient
supply of cotton fabric for our production needs, the price and availability of
cotton may fluctuate significantly. If the price of cotton fabric or other raw
materials used by us increases, there would be a material adverse effect on our
cost of sales. Additionally, if such raw materials become scarce or unavailable,
we would be unable to meet our customers' demands and there could be a material
adverse effect on our revenues and/or cost of sales. See "Business--Sources of
Supply."
THE LOSS OF GEORGE FELDENKREIS, OSCAR FELDENKREIS OR OTHER KEY
EMPLOYEE WOULD DAMAGE OUR BUSINESS
Our future success depends to a significant extent on retaining the
services of certain executive officers and directors, in particular George
Feldenkreis, our Chairman of the Board and Chief Executive Officer, and Oscar
Feldenkreis, our President and Chief Operating Officer. They are each party to
an employment agreement with us, expiring in May 2000. George Feldenkreis,
however, is only required to devote approximately 50% of his working time to us.
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We cannot guarantee that any key member of management will continue in his or
her capacity for any period of time. The loss of the services of either
individual, or any other key member of management, could have a material adverse
effect on our business, financial condition, results of operations and
prospects. Our continued success is also dependent upon our ability to attract
and retain qualified management, administrative and sales personnel to support
our future growth and our inability to do so may have a material adverse effect
on our business, financial condition, results of operations and prospects. See
"Management."
GEORGE FELDENKREIS, OSCAR FELDENKREIS AND THEIR AFFILIATES CONTROL SUPREME
As of the date of this prospectus, George Feldenkreis, our Chairman of the
Board and Chief Executive Officer, his children, Oscar Feldenkreis, our
President and Chief Operating Officer, and Fanny Hanono, our
Secretary-Treasurer, and their respective affiliates, beneficially owned
approximately 51.0% of our Common Stock. As a result, such persons will
effectively have the ability to significantly influence the election of our
directors and the outcome of all other issues submitted to our shareholders. See
"Principal Shareholders."
WE MAY NOT ABLE TO REPURCHASE THE EXCHANGE NOTES UPON A CHANGE IN CONTROL
Upon the occurrence of certain specific kinds of change in control events,
we will be required to offer to repurchase all outstanding exchange notes.
However, it is possible that we will not have sufficient funds at the time of
the change in control to make the required repurchase of exchange notes. In
addition, restrictions in our Senior Credit Facility will not allow such
repurchases. In addition, certain important corporate events, such as leveraged
recapitalizations, that would increase the level of our indebtedness, would not
constitute a "Change of Control" under the indenture. See "Description of the
Notes--Certain Covenants--Purchase of Notes Upon a Change in Control."
WE MAY FACE YEAR 2000 PROBLEMS
Many computer systems were designed using only two digits to designate
years. As such, these systems may not recognize "00" as being 2000 and may read
it as 1900. We undertook a study of our functional application systems to
determine their compliance with year 2000 issues and, to the extent of
noncompliance, required remediation. As a result of this study, we believe the
majority of our systems are year 2000 compliant, although there are less
significant hardware components which will only become year 2000 compliant
during 1999. However, we cannot assure you that all of the software products
currently used by us are in fact year 2000 compliant. To date, the expenses to
third parties incurred by us in order to become year 2000 compliant, including
computer software costs, have been $0.2 million and the current additional
estimated cost to third parties to complete such remediation is expected to be
$0.2 million. These costs, other than software, have been and will continue to
be expensed as incurred.
An assessment of year 2000 compliance of third party entities with which
we have relationships, such as our banking institutions, customers, payroll
processors, suppliers and others is ongoing. We have inquired, or are in the
process of inquiring, of the significant aforementioned third party entities as
to their readiness with respect to year 2000 compliance and to date have
received indications that many of them are either compliant or in the process of
attaining compliance. We will continue to monitor these third party entities to
determine the impact on our business and the actions we must take, if any, in
the event of non-compliance by any of these third parties. There can be no
assurance that the systems of these third parties with which our systems
interact will be compliant by the end of 1999 or that any failure by these third
parties would not have a material adverse affect on our business, financial
condition, results of operations and prospects. We have not developed any
contingency plan to mitigate the adverse affects that the year 2000 issue may
have on our operations. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Year 2000."
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THERE MAY BE FRAUDULENT CONVEYANCE MATTERS RELATING TO THE GUARANTEES
Various fraudulent conveyance laws have been enacted for the protection of
creditors. These laws may be utilized by a court to find that a guarantee could
be voided or claims in respect of a guarantee could be subordinated to all other
debts of that guarantor if, among other things, the guarantor, at the time it
incurred the debt evidenced by its guarantee received less than reasonably
equivalent value or fair consideration for the incurrence of such guarantee; and
* was insolvent or rendered insolvent by reason of the
issuance of the guarantee; or
* was engaged in a business or transaction for which
the guarantor's remaining assets constituted unreasonably
small capital; or
* intended to incur, or believed that it would incur, debts beyond its
ability to pay such debts as they mature.
In addition, any payment by that guarantor pursuant to its guarantee could
be voided and required to be returned to the guarantor or to a fund for the
benefit of the creditors of the guarantor.
The measures of insolvency for purposes of these fraudulent conveyance
laws will vary depending upon the law applied in any proceeding to determine
whether a fraudulent conveyance has occurred. Generally, however, a guarantor
would be considered insolvent if:
* the sum of its debts, including contingent
liabilities, was greater than the fair saleable value of
all of its assets; or
* the present fair saleable value of its assets was less than the
amount that would be required to pay its probable liability on its
existing debts, including contingent liabilities, as they become
absolute and mature; or
* it could not pay its debts as they become due.
On the basis of historical financial information, recent operating history
and other factors, we believe that each guarantor, after giving effect to the
debt incurred by that guarantor in connection with the exchange notes, will not
be insolvent, will not have unreasonably small capital for the business in which
it is engaged and will not have incurred debts beyond its ability to pay such
debts as they mature. However, we cannot assure you as to what standard a court
would apply in making such determinations or that a court would agree with our
conclusions in this regard.
THE TRADING MARKET FOR THE EXCHANGE NOTES MAY NOT DEVELOP
There has not been an established trading market for the existing notes.
Although each initial purchaser has informed us that it currently intends to
make a market in the exchange notes, it has no obligation to do so and may
discontinue making a market at any time without notice.
We do not intend to apply for listing of the exchange notes on any
securities exchange or for quotation through the National Association of
Securities Dealers Automated Quotation System.
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The liquidity of any market for the exchange notes will depend upon the
number of holders of the exchange notes, our performance, the market for similar
securities, the interest of securities dealers in making a market in the notes
and other factors. A liquid trading market may not develop for the exchange
notes.
FORWARD-LOOKING STATEMENTS
This prospectus contains certain forward-looking statements concerning our
existing and contemplated operations, economic performance and financial
condition. These statements are based upon a number of assumptions and estimates
which are inherently subject to uncertainties and contingencies, many of which
are beyond our control. They include the level of consumer spending for apparel
and other merchandise, competition among department and specialty stores,
management's ability to predict consumer preferences, the effectiveness of
planned advertising, marketing and promotional campaigns, realization of planned
synergies, private brand sales and effective cost containment. See
"Forward-Looking Statements."
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THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
The existing notes were sold by Supreme on April 6, 1999, to the initial
purchasers, Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated, BancBoston Robertson Stephens Inc., Wasserstein Perella
Securities, Inc. and Barington Capital Group, L.P., pursuant to a purchase
agreement. The initial purchasers subsequently placed the existing notes with
qualified institutional buyers in reliance on Rule 144A under the Securities Act
of 1933, as amended (the "Securities Act"). As a condition to the purchase of
the existing notes by the initial purchasers, Supreme and the guarantors entered
into a registration rights agreement with the initial purchasers, which
requires, among other things, that promptly following the issuance and sale of
the existing notes, Supreme and the guarantors file with the SEC the
registration statement with respect to the exchange notes, use their reasonable
best efforts to cause the registration statement to become effective under the
Securities Act and, upon the effectiveness of the registration statement, offer
to the holders of the existing notes the opportunity to exchange their existing
notes for a like principal amount of exchange notes, which will be issued
without a restrictive legend and may be reoffered and resold by the holder
without restrictions or limitations under the Securities Act. A copy of the
registration rights agreement has been filed as an exhibit to the registration
statement of which this prospectus is a part. The term "holder" with respect to
the exchange offer means any person in whose name existing notes are registered
on our books.
Based on existing interpretations of the Securities Act by the staff of
the SEC set forth in several no-action letters to third parties, and subject to
the immediately following sentence, Supreme believes that the exchange notes
issued pursuant to the exchange offer may be offered for resale, resold and
otherwise transferred by the holders thereof (other than holders who are
broker-dealers or a person that is an "affiliate" (within the meaning of Rule
405 of the Securities Act) of Supreme) without further compliance with the
registration and prospectus delivery provisions of the Securities Act. However,
any purchaser of notes who is an affiliate of Supreme or who intends to
participate in the exchange offer for the purpose of distributing the exchange
notes, or any broker-dealer who purchased the notes from Supreme to resell
pursuant to Rule 144A or any other available exemption under the Securities Act,
(i) will not be able to rely on the interpretations by the staff of the SEC set
forth in the above-mentioned no-action letters, (ii) will not be able to tender
its existing notes in the exchange offer; and (iii) must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any sale or transfer of the notes unless such sale or transfer
is made pursuant to an exemption from such requirements. The Company does not
intend to seek its own no-action letter, and there is no assurance that the
staff of the Commission would make a similar determination with respect to the
exchange notes as it has in such no-action letters to third parties.
See "Plan of Distribution."
As a result of the filing and effectiveness of the registration statement
of which this prospectus is a part, Supreme and the guarantors will not be
required to pay an increased interest rate on the existing notes. Following the
consummation of the exchange offer, holders of existing notes not tendered will
not have any further registration rights except in certain limited circumstances
requiring the filing of a shelf registration statement, and the existing notes
will continue to be subject to certain restrictions on transfer. Accordingly,
the liquidity of the market for the existing notes could be adversely affected.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this prospectus
and in the letter of transmittal, Supreme will accept all existing notes
properly tendered and not withdrawn prior to 5:00 p.m. New York City time, on
the expiration date. After authentication of the exchange notes by the trustee
or an authenticating agent, Supreme will issue $1,000 principal amount of
exchange notes in exchange for
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each $1,000 principal amount of outstanding existing notes accepted in the
exchange offer. Holders may tender some or all of their existing notes pursuant
to the exchange offer in denominations of $1,000 and integral multiples thereof.
Each holder of the existing notes (other than certain specified holders)
who wishes to exchange existing notes for exchange notes in the exchange offer
will be required to represent that (i) it is not an affiliate of Supreme or any
guarantor, (ii) any exchange notes to be received by it were acquired in the
ordinary course of its business and (iii) it has no arrangement with any person
to participate in the distribution (within the meaning of the Securities Act) of
the exchange notes.
Each broker-dealer that receives exchange notes for its own account
pursuant to the exchange offer must acknowledge that it will deliver a
prospectus in connection with any resale of such exchange notes. The letter of
transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. The staff of the SEC has taken the position that
participating broker-dealers may fulfill their prospectus delivery requirements
with respect to the exchange notes (other than a resale of an unsold allotment
from the original sale of the existing notes) with the prospectus contained in
the exchange offer registration statement. The Company will be required to allow
participating broker-dealers to use the prospectus contained in the exchange
offer registration statement (subject to certain "black out" periods) following
the exchange offer, in connection with the resale of exchange notes received in
exchange for existing notes acquired by such participating broker-dealers for
their own account as a result of market-making or other trading activities. See
"Plan of Distribution."
The form and terms of the exchange notes are identical in all material
respects to the form and terms of the existing notes except that (i) the
exchange notes will be issued in a transaction registered under the Securities
Act, (ii) the exchange notes will not be subject to transfer restrictions and
(iii) certain provisions relating to an increase in the stated interest rate on
the existing notes provided for in certain circumstances will be eliminated. The
exchange notes will evidence the same debt as the existing notes. The exchange
notes will be issued under and entitled to the benefits of the indenture.
As of the date of this prospectus, $100,000,000 aggregate principal amount
of the existing notes is outstanding. In connection with the issuance of the
existing notes, Supreme arranged for the existing notes, of which $95,000,000
aggregate principal amount was initially purchased by qualified institutional
buyers as defined pursuant to Rule 144A under the Securities Act, to be issued
and transferable in book-entry form through the facilities of the depositary,
acting as depositary. The exchange notes will also be issuable and transferable
in book-entry form through the depositary. The remaining $5,000,000 aggregate
principal amount was purchased by Carfel, an affiliate of Supreme, and an
institutional accredited investor as defined under "Description of the
Notes--Book Entry; Delivery and Form." Carfel will not participate in the
exchange offer.
This prospectus, together with the accompanying letter of transmittal, is
initially being sent to all registered holders as of the close of business on
________________, 1999. Supreme intends to conduct the exchange offer in
accordance with the applicable requirements of the Exchange Act, and the rules
and regulations of the Commission thereunder, including Rule 14e-1, to the
extent applicable. The exchange offer is not conditioned upon any minimum
aggregate principal amount of existing notes being tendered, and holders of the
existing notes do not have any appraisal or dissenters' rights under the
Business Corporation Act of the State of Florida or under the indenture in
connection with the exchange offer. Supreme shall be deemed to have accepted
validly tendered existing notes when, as and if Supreme has given oral or
written notice thereof to the exchange agent. See "-- Exchange Agent." The
exchange agent will act as agent for the tendering holders for the purpose of
receiving exchange notes from Supreme and delivering exchange notes to such
holders.
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If any tendered existing notes are not accepted for exchange because of an
invalid tender or the occurrence of certain other events set forth herein,
certificates for any such unaccepted existing notes will be returned, at
Supreme's cost, to the tendering holder thereof as promptly as practicable after
the expiration date.
Holders who tender existing notes in the exchange offer will not be
required to pay brokerage commissions or fees or, subject to the instructions in
the letter of transmittal, transfer taxes with respect to the exchange of
existing notes pursuant to the exchange offer. Supreme will pay all charges and
expenses, other than certain applicable taxes, in connection with the exchange
offer. See "-- Solicitation of Tenders; Fees and Expenses."
NEITHER THE BOARD OF DIRECTORS OF SUPREME NOR SUPREME MAKES ANY
RECOMMENDATION TO HOLDERS OF EXISTING NOTES AS TO WHETHER TO TENDER OR REFRAIN
FROM TENDERING ALL OR ANY PORTION OF THEIR EXISTING NOTES PURSUANT TO THE
EXCHANGE OFFER. MOREOVER, NO ONE HAS BEEN AUTHORIZED TO MAKE ANY SUCH
RECOMMENDATION. HOLDERS OF EXISTING NOTES MUST MAKE THEIR OWN DECISION WHETHER
TO TENDER PURSUANT TO THE EXCHANGE OFFER AND, IF SO, THE AGGREGATE AMOUNT OF
EXISTING NOTES TO TENDER AFTER READING THIS PROSPECTUS AND THE LETTER OF
TRANSMITTAL AND CONSULTING WITH THEIR ADVISORS, IF ANY, BASED ON THEIR OWN
FINANCIAL POSITION AND REQUIREMENTS.
EXPIRATION DATE
The term "expiration date" shall mean 5:00 p.m., New York City time, on
_________, 1999, unless Supreme, in its sole discretion, extends the exchange
offer, in which case the term "expiration date" shall mean the latest date to
which the exchange offer is extended.
EXTENSIONS AND AMENDMENTS
Supreme expressly reserves the right, in its sole discretion (i) to delay
acceptance of any existing notes, to extend the exchange offer or to terminate
the exchange offer and to refuse to accept existing notes not previously
accepted, if any of the conditions set forth herein under "-- Termination" shall
have occurred and shall not have been waived by Supreme (if permitted to be
waived by Supreme), by giving oral or written notice of such delay, extension or
termination to the exchange agent and (ii) to amend the terms of the exchange
offer in any manner. Any such delay in acceptance, extension, termination or
amendment will be followed as promptly as practicable by oral or written notice
thereof by Supreme to the registered holders of the existing notes. If the
exchange offer is amended in a manner determined by Supreme to constitute a
material change, Supreme will promptly disclose such amendment in a manner
reasonably calculated to inform the holders of such amendment.
Without limiting the manner in which Supreme may choose to make public
announcements of any delay in acceptance, extension, termination or amendment of
the exchange offer, Supreme shall have no obligation to publish, advise, or
otherwise communicate any such public announcement, other than by making a
timely release to the Dow Jones News Service.
INTEREST ON THE EXCHANGE NOTES
The exchange notes will bear interest from the date of issuance of the
existing notes that are tendered in exchange for the exchange notes (or the most
recent date on which interest was paid or duly provided for on the existing
notes surrendered in exchange for the exchange notes). Accordingly, holders of
existing notes that are accepted for exchange will not receive interest that is
accrued but unpaid on such existing notes at the time of tender. Interest on the
exchange notes will be payable semi-annually on each April 1 and October 1,
commencing on October 1, 1999.
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PROCEDURES FOR TENDERING
Only a holder may tender its existing notes in the exchange offer. To
tender in the exchange offer, a holder must complete, sign and date the letter
of transmittal or a facsimile thereof, have the signatures thereof guaranteed if
required by the letter of transmittal, and mail or otherwise deliver such letter
of transmittal or such facsimile, together with the existing notes (unless such
tender is being effected pursuant to the procedure for book-entry transfer
described below) and any other required documents, to the Exchange Agent, prior
to 5:00 p.m. New York City time, on the expiration date.
Any financial institution that is a participant in the depositary's
book-entry transfer facility system may make book-entry delivery of the existing
notes by causing the depositary to transfer such existing notes into the
exchange agent's account in accordance with the depositary's procedure for such
transfer. Although delivery of existing notes may be effected through book-entry
transfer into the exchange agent's account at the depositary, the letter of
transmittal (or facsimile thereof), with any required signature guarantees and
any other required documents, must, in any case, be transmitted to and received
by the exchange agent at its address set forth herein under "-- Exchange Agent"
prior to 5:00 p.m., New York City time, on the expiration date. DELIVERY OF
DOCUMENTS TO THE DEPOSITARY IN ACCORDANCE WITH ITS PROCEDURES DOES NOT
CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
The tender by a holder will constitute an agreement between such holder,
Supreme and the exchange agent in accordance with the terms and subject to the
conditions set forth herein and in the letter of transmittal.
THE LETTER OF TRANSMITTAL WILL INCLUDE REPRESENTATIONS TO SUPREME THAT,
AMONG OTHER THINGS, (1) THE EXCHANGE NOTES RECEIVED PURSUANT TO THE EXCHANGE
OFFER ARE BEING ACQUIRED IN THE ORDINARY COURSE OF BUSINESS OF THE PERSON
RECEIVING SUCH EXCHANGE NOTES (WHETHER OR NOT SUCH PERSON IS THE HOLDER), (2)
NEITHER THE HOLDER NOR ANY SUCH OTHER PERSON HAS AN ARRANGEMENT OR UNDERSTANDING
WITH ANY PERSON TO PARTICIPATE IN THE DISTRIBUTION OF SUCH EXCHANGE NOTES, (3)
NEITHER THE HOLDER NOR ANY SUCH OTHER PERSON IS AN "AFFILIATE," AS DEFINED IN
RULE 405 UNDER THE SECURITIES ACT, OF THE COMPANY OR ANY GUARANTOR, (4) THE
HOLDER IS NOT ENGAGED IN, AND DOES NOT INTEND TO ENGAGE IN, A DISTRIBUTION OF
THE EXCHANGE NOTES, AND (5) IF THE TENDERING HOLDER IS A BROKER OR DEALER (AS
DEFINED IN THE EXCHANGE ACT) (A) IT ACQUIRED THE EXISTING NOTES FOR ITS OWN
ACCOUNT AS A RESULT OF MARKET-MAKING ACTIVITIES OR OTHER TRADING ACTIVITIES AND
(B) IT HAS NOT ENTERED INTO ANY ARRANGEMENT OR UNDERSTANDING WITH SUPREME, ANY
GUARANTOR OR ANY "AFFILIATE" OF SUPREME OR ANY GUARANTOR (WITHIN THE MEANING OF
RULE 405 UNDER THE SECURITIES ACT) TO DISTRIBUTE THE EXCHANGE NOTES TO BE
RECEIVED IN THE EXCHANGE OFFER. In the case of a broker-dealer that receives
exchange notes for its own account in exchange for existing notes which were
acquired by it as a result of market-making or other trading activities, the
letter of transmittal will also include an acknowledgment that the broker-dealer
will deliver a copy of this prospectus in connection with the resale by it of
exchange notes received pursuant to the exchange offer. See "Plan of
Distribution."
THE METHOD OF DELIVERY OF EXISTING NOTES AND THE LETTER OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK
OF THE HOLDERS. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE
AN OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT PRIOR TO THE EXPIRATION DATE.
NO LETTER OF TRANSMITTAL OR EXISTING NOTES SHOULD BE SENT TO THE COMPANY.
HOLDERS MAY ALSO REQUEST THAT THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL
BANKS, TRUST COMPANIES OR NOMINEES EFFECT SUCH TENDER FOR HOLDERS IN EACH CASE
AS SET FORTH HEREIN AND IN THE LETTER OF TRANSMITTAL.
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Any beneficial owner whose existing notes are registered in the name of
his broker, dealer, commercial bank, trust company or other nominee and who
wishes to tender should contact such registered holder promptly and instruct
such registered holder to tender on his behalf. If such beneficial owner wishes
to tender on his own behalf, such beneficial owner must, prior to completing and
executing the letter of transmittal and delivering his existing notes, either
make appropriate arrangements to register ownership of the existing notes in
such owner's name or obtain a properly completed bond power from the registered
holder. The transfer of record ownership may take considerable time.
Signatures on a letter of transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by a member firm of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.
or a commercial bank or trust company having an office or correspondent in the
United States or an "eligible guarantor institution" within the meaning of Rule
17Ad-15 under the Exchange Act unless the existing notes tendered pursuant
thereto are tendered (i) by a registered holder who has not completed the box
entitled "Special Registration Instructions" or "Special Delivery Instructions"
of the letter of transmittal or (ii) for the account of an eligible institution.
If the letter of transmittal is signed by a person other than the registered
holder listed therein, such existing notes must be endorsed or accompanied by
appropriate bond powers which authorize such person to tender the existing notes
on behalf of the registered holder, in either case signed as the name of the
registered holder or holders appears on the existing notes. If the letter of
transmittal or any existing notes or bond powers are signed or endorsed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and unless waived by Supreme, evidence
satisfactory to Supreme of their authority to so act must be submitted with such
letter of transmittal.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of the tendered existing notes will be
determined by Supreme in its sole discretion, which determination will be final
and binding. Supreme reserves the absolute right to reject any and all existing
notes not properly tendered or any existing notes Supreme's acceptance of which
would, in the opinion of counsel for Supreme, be unlawful. Supreme also reserves
the absolute right to waive any irregularities or conditions of tender as to
particular existing notes. Supreme's interpretation of the terms and conditions
of the exchange offer (including the instructions in the letter of transmittal)
will be final and binding on all parties. Unless waived, any defects or
irregularities in connection with tenders of existing notes must be cured within
such time as Supreme shall determine. Although Supreme intends to notify holders
of defects or irregularities with respect to tenders of existing notes, neither
Supreme, the exchange agent nor any other person shall be under any duty to give
notification of defects or irregularities with respect to tenders of existing
notes nor shall any of them incur any liability for failure to give such
notification. Tenders of existing notes will not be deemed to have been made
until such irregularities have been cured or waived. Any existing notes received
by the exchange agent that Supreme determines are not properly tendered or the
tender of which is otherwise rejected by Supreme and as to which the defects or
irregularities have not been cured or waived by Supreme will be returned by the
exchange agent to the tendering holder unless otherwise provided in the letter
of transmittal, as soon as practicable following the expiration date.
In addition, Supreme reserves the right in its sole discretion to (a)
purchase or make offers for any existing notes that remain outstanding
subsequent to the expiration date, or, as set forth under "-- Termination," to
terminate the exchange offer and (b) to the extent permitted by applicable law,
purchase existing notes in the open market, in privately negotiated transactions
or otherwise. The terms of any such purchases or offers may differ from the
terms of the exchange offer.
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BOOK-ENTRY TRANSFER
Supreme understands that the exchange agent will make a request promptly
after the date of this prospectus to establish accounts with respect to the
existing notes at the DTC for the purpose of facilitating the exchange offer,
and subject to the establishment thereof, any financial institution that is a
participant in the book-entry transfer facility's system may make book-entry
delivery of existing notes by causing such book-entry transfer facility to
transfer such existing notes into the exchange agent's account with respect to
the existing notes in accordance with the book-entry transfer facility's
procedures for such transfer. Although delivery of existing notes may be
effected through book-entry transfer into the exchange agent's account at the
book-entry transfer facility, an appropriate letter of transmittal properly
completed and duly executed with any required signature guarantee and all other
required documents must in each case be transmitted to and received or confirmed
by the exchange agent at its address set forth below on or prior to the
expiration date, or, if the guaranteed delivery procedures described below are
complied with, with the time period provided under such procedures. Delivery of
documents to the book-entry transfer facility does not constitute delivery to
the exchange agent.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their existing notes and (i) whose existing
notes are not immediately available, or (ii) who cannot deliver their existing
notes, the letter of transmittal or any other required documents to the exchange
agent prior to the expiration date, or if such holder cannot complete the
procedure for book-entry transfer on a timely basis, may effect a tender if:
(a) the tender is made through an eligible institution;
(b) prior to the expiration date, the exchange agent receives from such
eligible institution a properly completed and duly executed notice of guaranteed
delivery (by facsimile transmittal, mail or hand delivery) setting forth the
name and address of the holder, the certificate number or numbers of such
holder's existing notes and the principal amount of such existing notes
tendered, stating that the tender is being made thereby, and guaranteeing that,
within five business days after the expiration date, the letter of transmittal
(or facsimile thereof), together with the certificate(s) representing the
existing notes to be tendered in proper form for transfer and any other
documents required by the letter of transmittal will be deposited by the
eligible institution with the exchange agent; and
(c) such properly completed and executed letter of transmittal (or
facsimile thereof), together with the certificate(s) representing all tendered
existing notes in proper form for transfer (or confirmation of a book-entry
transfer into the exchange agent's account at the depositary of existing notes
delivered electronically) and all other documents required by the letter of
transmittal are received by the exchange agent within five business days after
the expiration date.
Upon request to the exchange agent, a notice of guaranteed delivery will
be sent to holders who wish to tender their existing notes according to the
guaranteed delivery procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of existing notes may be
withdrawn at any time prior to 5:00 p.m., New York City time, on the expiration
date.
To withdraw a tender of existing notes in the exchange offer, a written or
facsimile transmission notice of withdrawal must be received by the exchange
agent at its address set forth herein prior to 5:00 p.m., New York City time, on
the expiration date. Any such notice of withdrawal must (i) specify the
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name of the person having deposited the existing notes to be withdrawn (the
"Depositor"), (ii) identify the existing notes to be withdrawn (including the
certificate number or numbers and principal amount of such existing notes or, in
the case of existing notes transferred by book-entry transfer, the name and
number of the account at the depositary to be credited), (iii) be signed by the
Depositor in the same manner as the original signature on the letter of
transmittal by which such existing notes were tendered (including any required
signature guarantee) or be accompanied by documents of transfer sufficient to
permit the trustee with respect to the existing notes to register the transfer
of such existing notes into the name of the Depositor withdrawing the tender and
(iv) specify the name in which any such existing notes are to be registered, if
different from that of the Depositor. All questions as to the validity, form and
eligibility (including time of receipt) of such withdrawal notices will be
determined by Supreme, whose determination shall be final and binding on all
parties. Any existing notes so withdrawn will be deemed not to have been validly
tendered for purposes of the exchange offer, and no exchange notes will be
issued with respect thereto unless the existing notes so withdrawn are validly
retendered. Any existing notes that have been tendered but are not accepted for
exchange will be returned to the holder thereof without cost to such holder as
soon as practicable after withdrawal, rejection of tender or termination of the
exchange offer. Properly withdrawn existing notes may be retendered by following
one of the procedures described above under "-- Procedures for Tendering" at any
time prior to the expiration date.
TERMINATION
Notwithstanding any other term of the exchange offer, Supreme will not be
required to accept for exchange, or to exchange notes for, any existing notes,
and may terminate or amend the exchange offer as provided herein before the
acceptance of such existing notes if, in Supreme's judgment, Supreme's ability
to proceed with the exchange offer can reasonably be expected to be impaired as
a result of certain events set forth in the registration rights agreement.
Accordingly, the exchange offer is subject to the following conditions: (i) that
the exchange offer, or the making of any exchange by a holder, does not violate
applicable law or any applicable interpretation of the staff of the Commission,
(ii) that no action or proceeding shall have been instituted or threatened in
any court or by or before any governmental agency or body with respect to the
exchange offer, (iii) that there shall not have been adopted or enacted any law,
statute, rule or regulation that can reasonably be expected to impair the
ability of Supreme to proceed with the exchange offer, (iv) that there shall not
have been declared by United States federal or Florida or New York state
authorities a banking moratorium, (v) that trading on the Nasdaq National Market
or generally in the United States over-the-counter market shall not have been
suspended by order of the Commission or any other governmental agency and (vi)
other conditions reasonably acceptable to the initial purchasers.
If Supreme determines that it may terminate the exchange offer for any of
the reasons set forth above, Supreme may (i) refuse to accept any existing notes
and return any existing notes that have been tendered to the holders thereof,
(ii) extend the exchange offer and retain all existing notes tendered prior to
the expiration date of the exchange offer, subject to the rights of such holders
of tendered existing notes to withdraw their tendered existing notes or (iii)
waive such termination event with respect to the exchange offer and accept all
properly tendered existing notes that have not been withdrawn. If such waiver
constitutes a material change in the exchange offer, Supreme will disclose such
change by means of a supplement to this prospectus that will be distributed to
each registered holder, and Supreme will extend the exchange offer for a period
of five to ten business days, depending upon the significance of the waiver and
the manner of disclosure to the registered holders, if the exchange offer would
otherwise expire during such period.
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EXCHANGE AGENT
State Street Bank and Trust Company, the trustee under the indenture, has
been appointed as exchange agent for the exchange offer. In such capacity, the
exchange agent has no fiduciary duties and will be acting solely on the basis of
directions of Supreme. Requests for assistance and requests for additional
copies of this prospectus or of the letter of transmittal should be directed to
the exchange agent addressed as follows:
By Mail: State Street Bank and Trust Company
Corporate Trust Department
P.O. Box 778
Boston, Massachusetts
02102-0078
Attention: Ralph Jones
By Hand or Overnight Delivery: State Street Bank and Trust Company
Corporate Trust Department
Two International Place
Boston, Massachusetts 02110
Attention: Ralph Jones
By Mail, Hand Delivery,
or Overnight Courier
in New York: State Street Bank and Trust Company
61 Broadway
New York, New York 10006
Attention: Ralph Jones
By Facsimile: State Street Bank and Trust
Attention: Ralph Jones
(617) 664-5290
To Confirm: (617) 644-5249
DELIVERY OF THE LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET
FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY OF SUCH LETTER OF TRANSMITTAL.
SOLICITATION OF TENDERS; FEES AND EXPENSES
The expenses of soliciting tenders pursuant to the exchange offer will be
borne by Supreme. The principal solicitation pursuant to the exchange offer is
being made by mail. Additional solicitations may be made by officers and regular
employees of Supreme and its affiliates in person, by telegraph, telephone or
telecopier.
Supreme has not retained any dealer-manager in connection with the
exchange offer and will not make any payments to brokers, dealers or other
persons soliciting acceptances of the exchange offer. Supreme, however, will pay
the exchange agent reasonable and customary fees for its services and will
reimburse the exchange agent for its reasonable out-of-pocket costs and expenses
in connection therewith and will indemnify the exchange agent for all losses and
claims incurred by it as a result of the exchange offer. Supreme may also pay
brokerage houses and other custodians, nominees and fiduciaries the reasonable
out-of-pocket expenses incurred by them in forwarding copies of this prospectus,
letters of transmittal and related documents to the beneficial owners of the
existing notes and in handling or forwarding tenders for exchange.
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The expenses to be incurred in connection with the exchange offer,
including fees and expenses of the exchange agent and trustee and accounting and
legal fees and printing costs, will be paid by Supreme.
Supreme will pay all transfer taxes, if any, applicable to the exchange of
existing notes pursuant to the exchange offer. If, however, certificates
representing exchange notes or existing notes for principal amounts not tendered
or accepted for exchange are to be delivered to, or are to be registered or
issued in the name of, any person other than the registered holder of the
existing notes tendered, or if tendered existing notes are registered in the
name of any person other than the person signing the letter of transmittal, or
if a transfer tax is imposed for any reason other than the exchange of existing
notes pursuant to the exchange offer, then the amount of any such transfer taxes
(whether imposed on the registered holder or any other persons) will be payable
by the tendering holder. If satisfactory evidence of payment of such taxes or
exemption therefrom is not submitted with the letter of transmittal, the amount
of such transfer taxes will be billed by Supreme directly to such tendering
holder.
ACCOUNTING TREATMENT
The exchange notes will be recorded at the same carrying value as the
existing notes, as reflected in Supreme's accounting records on the date of the
exchange. Accordingly, no gain or loss for accounting purposes will be
recognized by Supreme upon the consummation of the exchange offer. The expenses
of the exchange offer will be amortized by Supreme over the term of the exchange
notes.
FEDERAL INCOME TAX CONSEQUENCES
The exchange of exchange notes for existing notes pursuant to the exchange
offer should not be treated as an "exchange" for United States federal income
tax purposes because the exchange notes should not be considered to differ
materially in kind or extent from the existing notes. Rather, the exchange notes
received by a United States holder should be treated as a continuation of the
existing notes in the hands of such holder. As a result, there should be no
United States federal income tax consequences to United States holders
exchanging existing notes for exchange notes pursuant to the exchange offer.
OTHER
Participation in the exchange offer is voluntary. Holders of the existing
notes are urged to consult their financial and tax advisors in making their own
decisions on what action to take.
As a result of the making of, and upon acceptance for exchange of all
validly tendered existing notes pursuant to the terms of, this exchange offer,
Supreme will have fulfilled a covenant contained in the terms of the
registration rights agreement. Holders of the existing notes who do not tender
their certificates in the exchange offer will continue to hold such certificates
and will be entitled to all the rights, and subject to the limitations
applicable thereto, under the indenture, except for any such rights under the
registration rights agreement that by their term terminate or cease to have
further effect as a result of the making of this exchange offer. See
"Description of the Notes." All untendered existing notes will continue to be
subject to the restrictions on transfer set forth in the indenture. To the
extent that existing notes are tendered and accepted in the exchange offer, the
trading market for untendered existing notes could be adversely affected.
Supreme may in the future seek to acquire untendered existing notes in the
open market or through privately negotiated transactions, through subsequent
exchange offers or otherwise. Supreme
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intends to make any such acquisitions of existing notes in accordance with the
applicable requirements of the Exchange Act, and the rules and regulations of
the Commission thereunder, including Rule 14e-1, to the extent applicable.
Supreme has no present plan to acquire any existing notes that are not tendered
in the exchange offer or to file a registration statement to permit resales of
any existing notes that are not tendered pursuant to the exchange offer.
USE OF PROCEEDS
We will not receive any cash proceeds from the issuance of the exchange
notes. In consideration for issuing the exchange notes as contemplated in this
prospectus, we will receive existing notes in like principal amount which are
identical in all material respects to the exchange notes. That the exchange
notes, however, will be issued in a transaction registered under the Securities
Act and hence will not bear legends restricting the transfer thereof. In
addition, certain provisions relating to an increase in the stated interest rate
on the existing notes provided for under certain circumstances will be
eliminated. The existing notes surrendered in exchange for exchange notes will
be retired and canceled and cannot be reissued. Accordingly, issuance of the
exchange notes will not result in a change in our indebtedness.
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CAPITALIZATION
The following table sets forth the historical capitalization of Supreme as
of January 31, 1999 and on a pro forma basis to reflect the completion of the
offering of the existing notes and the consummation of the Perry Ellis
International acquisition. This table does not give effect to the consummation
of the John Henry/Manhattan acquisition and the related Phillips-Van Heusen
transactions, see "Summary Pro Forma and Supplemental Financial Information" and
footnote (a) below. This table should be read in conjunction with our
consolidated financial statements and notes thereto, and the Unaudited Pro Forma
Combined Financial Information and notes thereto included elsewhere in this
prospectus.
JANUARY 31, 1999
-------------------------
HISTORICAL PRO FORMA
---------- ---------
(IN THOUSANDS)
Total debt:
Senior Credit Facility(a) $ 33,511 $ 7,689
Notes offered hereby -- 98,852
-------- --------
Total debt(b) 33,511 106,541
-------- --------
Total stockholders' equity 64,946 64,946
-------- --------
Total capitalization $ 98,457 $171,487
======== ========
- ----------------------
(a) After giving effect to the John Henry/Manhattan acquisition and
the related Philips-Van Heusen transactions, Supreme would have
had outstanding indebtedness of $34.6 million under the Senior
Credit Facility and would have had additional availability under
the revolving credit portion of the Senior Credit Facility of
approximately $30.6 million as of January 31, 1999, all of which
would have been senior indebtedness. Total outstanding debt
would have been approximately $133.5 million. See "Description
of Other Indebtedness."
(b) As of January 31, 1999, we had $16.3 million of obligations
under the Lease which are not included in the amount shown in
the table above. See "Description of Other Indebtedness."
37
<PAGE>
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The following sets forth the Company's Unaudited Pro Forma Combined
Financial Information as of and for the fiscal year ended January 31, 1999,
giving effect to the Perry Ellis International acquisition under the "purchase"
method of accounting and the offering of the existing notes. The Company's
Unaudited Pro Forma Combined Income Statement Information presents the Perry
Ellis International acquisition and the offering of the existing notes as if
they had been consummated on February 1, 1998. The Company's Unaudited Pro Forma
Combined Balance Sheet Information presents the Perry Ellis International
acquisition and the offering of the existing notes as if they had been
consummated on January 31, 1999. The Unaudited Pro Forma Combined Financial
Information of the combined companies are presented for illustrative purposes
only, and therefore do not purport to present the financial position or results
of operations of the Company had the Perry Ellis International acquisition and
the offering of the existing notes occurred on the dates indicated, nor are they
necessarily indicative of the results of operations which may be expected to
occur in the future.
The historical financial information for Supreme and Perry Ellis
International, Inc. has been derived from the audited financial statements of
Supreme and Perry Ellis International, Inc., respectively, included in this
prospectus. The pro forma adjustments relating to the acquisition and
integration of Perry Ellis International, Inc. represent the Company's
preliminary determinations of these adjustments and are based upon available
information and certain assumptions the Company considers reasonable under the
circumstances. Final amounts could differ from those set forth herein.
The Unaudited Pro Forma Combined Financial Information does not
give effect to the John Henry/Manhattan acquisition and the related
Phillips-Van Heusen transactions. See "Summary Pro Forma and
Supplemental Financial Information."
38
<PAGE>
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
BALANCE SHEET
BALANCE SHEET JANUARY 31, 1999
<TABLE>
<CAPTION>
HISTORICAL(1) PRO FORMA
-------------------------- --------------------------
SUPREME PERRY ELLIS ADJUSTMENTS(2) COMBINED
------- ----------- -------------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash $ 174 $ 1,777 $ (1,777)(a) $ 174
Accounts receivable, net 38,970 945 -- 39,915
Inventories 32,966 -- -- 32,966
Deferred income taxes 1,091 -- -- 1,091
Deposits for acquisitions 6,000 -- (5,000)(b) 1,000
Other current assets 2,040 2,040 667 (75)(c) 2,632
-------- -------- -------- --------
Total Current Assets 81,241 3,389 (6,852) 77,778
Property and equipment, net 7,852 1,142 (900)(d) 8,094
Intangible assets, net 18,843 -- 74,104 (e) 92,947
Other assets 1,022 32 3,479 (f) 4,533
-------- -------- -------- --------
Total Assets $108,958 $ 4,563 $ 69,831 $183,352
======== ======== ======== ========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 4,596 $ 163 -- $ 4,759
Accrued expenses 4,931 561 -- 5,492
Other current liabilities 414 -- $ 640(g) 1,054
-------- -------- -------- --------
Total Current Liabilities 9,941 724 640 11,305
Deferred income taxes 560 -- -- 560
Senior Credit Facility 33,511 -- (25,822)(h) 7,689
Senior Subordinated Notes -- -- 98,852 (i) 98,852
-------- -------- -------- --------
Total Liabilities 44,012 724 73,670 118,406
Stockholders' equity 64,946 3,839 (3,839)(j) 64,946
-------- -------- -------- --------
Total Liabilities
and Stockholders' Equity $108,958 $ 4,563 $ 69,831 $183,352
======== ======== ======== ========
</TABLE>
See Notes to Unaudited Pro Forma Combined Financial Information.
39
<PAGE>
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
INCOME STATEMENT
YEAR ENDED JANUARY 31, 1999
HISTORICAL(1) PRO FORMA
------------------------- -------------------------
SUPREME PERRY ELLIS ADJUSTMENTS(3) COMBINED
------- ----------- -------------- --------
(DOLLARS IN THOUSANDS)
Net sales $221,347 $-- $-- $221,347
Royalty income 3,057 16,177 -- 19,234
-------- -------- -------- --------
Total revenues 224,404 16,177 -- 240,581
Cost of sales 166,198 -- -- 166,198
-------- -------- -------- --------
Gross profit 58,206 16,177 -- 74,383
Selling, general, and
administrative expenses 41,639 8,594 1,059(a) 51,292
-------- -------- -------- --------
Operating income 16,567 7,583 (1,059) 23,091
Interest expense 3,494 -- 10,896(b) 14,390
-------- -------- -------- --------
Income before provision
for income taxes 13,073 7,583 (11,955) 8,701
Provision for
income taxes 4,491 760 (1,504)(c) 3,747
-------- -------- -------- --------
Net income $ 8,582 $ 6,823 $(10,451) $ 4,954
======== ======== ======== ========
Other Operating Data:
Ratio of earnings to
fixed charges(4) 4.3x -- -- 1.6x
Depreciation
and amortization $ 2,161 $ 228 $ 3,525 $ 5,914
EBITDA(5) $ 18,728 $ 7,811 $ 2,466 $ 29,005
See Notes to Unaudited Pro Forma Combined Financial Information.
40
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
(DOLLARS IN THOUSANDS)
(1) The year ended January 31, 1999 is Supreme's historical
financial reporting period. For the pro forma year ended
January 31, 1999 Perry Ellis International, Inc. financial
information has been included as of and for the twelve months
ended December 31, 1998 because they have historically reported
on a calendar year end. The Company believes the effect of the
difference in these reporting periods is not significant and is
not reflected in the Unaudited Pro Forma Combined Financial
Information.
(2) The purchase price is $75,000, adjusted for working capital
less other agreed upon adjustments. Based upon the Perry Ellis
International, Inc. December 31, 1998 balance sheet, the
purchase price is calculated as follows:
PURCHASE PRICE DETERMINATION:
Gross purchase price $ 75,000
Net adjustments to purchase price (449)
--------
Net purchase price $ 74,551
========
PURCHASE PRICE ALLOCATION:
Current assets $ 1,537
Property, plant and equipment 242
Other assets 32
Trademarks 74,104
Accounts payable and accrued expenses (1,364)
--------
Net purchase price $ 74,551
========
For purposes of preparing the Unaudited Pro Forma Combined Balance Sheet, the
Perry Ellis International, Inc. assets acquired and liabilities assumed have
been recorded at their estimated fair values. A final determination of the
required purchase accounting adjustments and of the fair value of the assets and
liabilities of Perry Ellis International, Inc. acquired or assumed has not yet
been made. Accordingly, the purchase accounting adjustments made in connection
with the development of the unaudited pro forma financial information reflect
Supreme's best estimate based upon currently available information.
AS OF
JANUARY 31, 1999
----------------
(a) Cash balances of Perry Ellis
International, Inc. which are not
being acquired $(1,777)
(b) Deposit applied to Perry Ellis
International acquisition (5,000)
(c) Other current assets of Perry Ellis
International, Inc. which are not
being acquired (75)
(d) Property, plant and equipment have
been adjusted to their estimated fair value (900)
(e) Trademarks acquired 74,104
(f) Deferred financing costs related to
the issuance of the existing notes 3,479
(g) Liabilities assumed, including
severance and acquisition costs payable 640
(h) Pay down of Senior Credit Facility (25,822)
(i) Issuance of the existing notes 98,852
(j) Elimination of Perry Ellis
International, Inc.'s stockholders' equity (3,839)
41
<PAGE>
(3) The pro forma income statement data for the year ended January 31, 1999
present the effects of the Perry Ellis International acquisition and the
offering of the existing notes, in each case as if they occurred as of the
beginning of such period, including:
(a) Adjustments to selling, general and
administrative expenses:
Decrease in depreciation expense to reflect
the fair value and useful lives of the
acquired property, plant and equipment $(180)
Amortization expense of trademarks
(straight line--20 years) 3,705
Elimination of consulting fees, licensing
fees, severance costs, occupancy costs and
employment costs that will not be incurred
by the Company (2,466)
-------
Total adjustment to selling, general and
administrative expenses 1,059
-------
(b) The pro forma adjustments to interest expense
arising from the Perry Ellis International
acquisition and the offering of the existing
note are presented below:
Reduction of interest expense related to the:
Lower balance outstanding under the
credit facility (at 7.60%) (1,962)
(A 0.25% increase or decrease in the
interest rate used above would result in
an increase or decrease in annual
interest expense of $65)
Additional interest cost related to:
The existing notes 12,250
Amortization of deferred financing costs
and discounts 608
-------
Total adjustment to interest expense 10,896
-------
(c) Adjustment to the provision for income taxes at
an effective rate of 34.4% (1,504)
=========
Total adjustment to income statement $(10,451)
========
In addition to the above, Supreme believes additional cost savings will be
realized through the combination of the two companies.
(4) For purposes of computing this ratio, earnings consist of earnings before
income taxes and fixed charges. Fixed charges consist of interest expense,
amortization of deferred debt issuance costs and the portion of rental
expense of the Lease deemed representative of the interest factor.
(5) EBITDA represents net income before taking into consideration
interest expense, income tax expense, depreciation expense, and
amortization expense. EBITDA is not a measurement of financial
performance under generally accepted accounting principles and
does not represent cash flow from operations. Accordingly, do
not regard this figure as an alternative to net income or as an
indicator of our operating performance or as an alternative to
cash flows as a measure of liquidity. We believe that EBITDA is
widely used by analysts, investors and other interested parties
in our industry but is not necessarily comparable with similarly
titled measures for other companies. See "Statements of Cash
Flows" in our consolidated financial statements contained
elsewhere in this prospectus.
42
<PAGE>
SELECTED HISTORICAL FINANCIAL INFORMATION
(DOLLARS IN THOUSANDS)
The following table presents selected historical financial and operating
data derived from the audited consolidated financial statements of the Company
and the audited financial statements of Perry Ellis International, Inc. The
historical financial data should be read in conjunction with our consolidated
financial statements and the notes thereto appearing elsewhere herein and the
financial statements of Perry Ellis International, Inc. and the notes thereto
appearing elsewhere herein. "Management's Discussion and Analysis of Financial
Condition and Results of Operations," our consolidated financial statements and
the notes hereto and the financial statements and notes hereto of Perry Ellis
International, Inc.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED JANUARY 31,
-------------------------------------------------------------------------
1995 1996 1997 1998 1999
---- ---- ---- ---- ----
SUPREME HISTORICAL
<S> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Net sales $ 90,564 $ 121,839 $ 157,373 $ 190,689 $ 221,347
Royalty income -- 759 1,654 4,032 3,057
--------- --------- --------- --------- ---------
Total revenues 90,564 122,598 159,027 194,721 224,404
Cost of sales 69,187 92,145 122,046 145,991 166,198
--------- --------- --------- --------- ---------
Gross profit 21,377 30,453 36,981 48,730 58,206
Selling, general and
administrative expenses 13,493 20,395 24,729 34,137 39,478
Depreciation and
amortization 474 725 1,147 1,748 2,161
--------- --------- --------- --------- ---------
Operating income 7,410 9,333 11,105 12,845 16,567
Interest expense 1,219 2,224 1,664 2,782 3,494
--------- --------- --------- --------- ---------
Income before income taxes 6,191 7,109 9,441 10,063 13,073
Income taxes 2,319 2,685 3,597 2,885 4,491
--------- --------- --------- --------- ---------
Net income $ 3,872 $ 4,424 $ 5,844 $ 7,178 $ 8,582
========= ========= ========= ========= =========
OTHER FINANCIAL DATA AND RATIOS:
Net cash provided by (used
in) operating activities $ (20,015) $ 5,303 $ 1,874 $ (3,101) $ 14,341
Net cash provided by (used
in) investing activities (825) (1,492) (24,456) (4,555) (10,240)
Net cash provided by (used
in) financing activities 21,094 (3,894) 23,080 7,910 (4,938)
EBITDA (a) 7,884 10,058 12,252 14,593 18,728
Capital expenditures 747 1,309 1,058 3,828 4,005
Ratio of earnings to fixed
charges (b) 5.3x 3.8x 5.7x 4.1x 4.2x
BALANCE SHEET DATA (AT YEAR END):
Working capital $ 43,067 $ 47,760 $ 23,575 $ 66,166 $ 71,300
Total assets 55,512 53,735 88,158 101,650 108,958
Total debt (c) 28,256 6,968 31,949 39,658 33,511
Total stockholders' equity 22,016 43,833 47,775 55,155 64,946
</TABLE>
(continued on following page)
43
<PAGE>
<TABLE>
<CAPTION>
FISCAL YEAR ENDED JANUARY 31,
---------------------------------------------------------------
1994 1995 1996 1997 1998
---- ---- ---- ---- ----
PERRY ELLIS INTERNATIONAL, INC. HISTORICAL
STATEMENT OF INCOME DATA:
<S> <C> <C> <C> <C> <C>
Net royalty revenues $ 10,074 $ 11,685 $ 10,917 $ 15,660 $ 16,177
Selling, general and
administrative expenses 7,239 5,594 8,606 7,109 8,398
Depreciation and amortization 37 200 212 226 228
-------- -------- -------- -------- --------
Operating income 2,798 5,891 2,099 8,325 7,551
Interest income 43 82 144 136 32
-------- -------- -------- -------- --------
Income before income taxes 2,841 5,973 2,243 8,461 7,583
Income taxes 308 640 218 852 760
-------- -------- -------- -------- --------
Net income $ 2,533 $ 5,333 $ 2,025 $ 7,609 $ 6,823
======== ======== ======== ======== ========
OTHER FINANCIAL DATA AND RATIOS:
Net Cash provided by
(used in) operating activities $ 3,982 $ 6,572 $ 2,311 $ 7,454 $ 5,624
Net Cash provided by
(used in) investing activities (1,902) (355) (1,047) 913 (21)
Net Cash provided by
(used in) financing activities (2,423) (4,763) (1,413) (9,679) (4,354)
EBITDA (a) 2,878 6,173 2,455 8,688 7,811
Capital expenditures 1,402 355 47 87 21
BALANCE SHEET DATA
(AT YEAR END):
Working capital $ (204) $ 1,281 $ 1,995 $ (27) $ 2,665
Total assets 2,985 4,121 4,803 3,112 4,563
Total debt 700 -- -- -- --
Total stockholders' equity 1,557 2,827 3,439 1,369 3,839
</TABLE>
- -------------
(a) EBITDA represents net income before taking into consideration interest
expense, income tax expense, depreciation expense, and amortization
expense. EBITDA is not a measurement of financial performance under
generally accepted accounting principles and does not represent cash flow
from operations. Accordingly, do not regard this figure as an alternative
to net income or as an indicator of our operating performance or as an
alternative to cash flows as a measure of liquidity. We believe that EBITDA
is widely used by analysts, investors and other interested parties in our
industry but is not necessarily comparable with similarly titled measures
for other companies.
(b) For purpose of computing this ratio, earnings consist of earnings before
income taxes and fixed charges. Fixed charges consist of interest expense,
amortization of deferred debt issuance costs and the portion of rental
expense of the Lease deemed representative of the interest factor.
(c) Total debt includes balances outstanding under credit facilities, long-term
debt and the current portion of long-term debt.
44
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
We are a leading designer and marketer of a broad line of high quality
men's sportswear, including sport and dress shirts, golf sportswear, sweaters,
urban wear and casual and dress pants which we sell to all levels of retail
distribution. We have built a broad portfolio of brands through selective
acquisitions and the establishment of our own brands over our 32-year operating
history. We are currently one of the top five branded suppliers to department
stores in the knit and woven shirt product categories. We currently use over 70
independent suppliers, mostly located in the Far East, other parts of Asia,
Mexico and Central America.
We own or license from third parties the brand names under which most of
our products are sold. These brand names include Crossings and Natural Issue for
casual sportswear, John Henry for dress casual wear, Andrew Fezza for dress
sportswear, Ping and Munsingwear for golf sportswear and PNB Nation for urban
wear. We market our brands to a wide range of demographic segments, targeted at
consumers in specific age, income and ethnic groups. Currently, our products are
predominantly produced for the men's segment of the apparel industry, in which
fashion trends tend to be less volatile than in other segments. The percentage
of our revenues from branded products increased to 81.4% in fiscal 1999 from
71.5% in fiscal 1997.
We also license our proprietary brands to third parties for the
manufacture and marketing of various products which we do not sell, including
underwear, activewear and loungewear. In addition to generating additional
sources of revenue for us, these licensing arrangements raise overall awareness
of our brands.
RECENT DEVELOPMENTS
In order to expand our licensing operations, we recently acquired Perry
Ellis International, Inc. which owns and licenses the prestigious and well-known
Perry Ellis brand name. In March 1999, we also purchased the trademarks for John
Henry, a leading brand for men's dress casualwear at Sears Roebuck, for
Manhattan, a popular dress shirt brand sold at Wal-Mart and Kmart Corporation
and for Lady Manhattan.
Perry Ellis International Acquisition. In January 1999, we
agreed to buy Perry Ellis International, Inc. for approximately $74.6
million in cash, net of purchase price adjustments. Perry Ellis
International, Inc. was a privately held company which owns and
licenses the Perry Ellis brand name, currently one of the top selling
brands in department stores in the United States. Perry Ellis
International, Inc. is currently the licensor under 34 license
agreements, primarily for various men's wear, boys' wear and
fragrances. During the year ended December 31, 1998, Perry Ellis
International, Inc. had revenues of $16.2 million and EBITDA of $7.8
million. Under our management of the brand, we expect to benefit from
certain operating efficiencies and to enhance the licensing royalties
the Perry Ellis brand generates. Net royalty revenues at Perry Ellis
International, Inc. grew 48.2% from fiscal year end December 31, 1996
to December 31, 1998 while operating expenses grew at a rate of 55.6%
primarily as a result of increased advertising. This acquisition was
financed from the net proceeds from the issuance of the existing
notes.
John Henry/Manhattan Acquisition. In December 1998, we entered into an
agreement to buy certain assets of the John Henry and Manhattan dress shirt
business from Salant Corporation which is entered into a Chapter 11 bankruptcy
proceeding. On February 24, 1999, the bankruptcy court approved the purchase for
$27.0 million, plus the value of the existing dress shirt inventory (which was
45
<PAGE>
subsequently valued at approximately $17.2 million). The acquisition was
completed on March 29, 1999. The assets purchased consist of the John Henry,
Manhattan and Lady Manhattan trademarks, tradenames, license agreements, certain
manufacturing equipment and the existing dress shirt inventory. On March 29,
1999, Phillips-Van Heusen Corporation purchased the existing dress shirt
inventory at our acquisition cost and licensed from us the John Henry and
Manhattan brands for men's dress shirts. In connection with the John
Henry/Manhattan acquisition, we assumed a lease for a shirt manufacturing
facility in Mexico which expires in July 1999. Although no agreement has been
reached, we intend to either sublease the Mexican facility to one of our
suppliers for use in the production of our products or not renew the lease. The
acquisition price, net of the $1.0 million deposit we have paid and the proceeds
from sale of the existing dress shirt inventory, was approximately $26.0 million
and was financed with borrowings under our Senior Credit Facility.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, selected items
in our consolidated statements of income expressed as a percentage of total
revenues:
FISCAL YEAR ENDED JANUARY 31,
---------------------------------
1997 1998 1999
---- ---- ----
Net sales 99.0% 97.9% 98.6%
Royalty income 1.0 2.1 1.4
----- ----- -----
Total revenues 100.0 100.0 100.0
Cost of sales 76.7 75.0 74.1
----- ----- -----
Gross profit 23.3 25.0 25.9
Selling, general and administrative expenses 16.3 18.4 18.5
----- ----- -----
Operating income 7.0 6.6 7.4
Interest expense 1.0 1.4 1.6
----- ----- -----
Income before income taxes 6.0 5.2 5.8
Income tax provision 2.3 1.5 2.0
----- ----- -----
Net income 3.7% 3.7% 3.8%
===== ===== =====
Fiscal 1999 as Compared to Fiscal 1998
Total Revenues. Total revenues consist of net sales and royalty income.
Total revenues grew $29.7 million or 15.2% to $224.4 million in fiscal 1999 from
$194.7 million in fiscal 1998 as a result of internal growth.
Net Sales. Net sales increased $30.6 million or 16.1% to $221.3 million in
fiscal 1999 from $190.7 million in fiscal 1998 as branded products grew to
represent nearly 81.4% of net sales in fiscal 1999 compared to 75.4% of net
sales in fiscal 1998. Within branded products, the increase in net sales was
primarily the result of the sales growth in the Munsingwear brand where net
sales increased by $23.6 million to approximately $66.0 million in fiscal 1999.
In addition, net sales of the Natural Issue brand increased by approximately
$10.2 million to $76.2 million for fiscal 1999. In the portfolio of other
branded products, the John Henry brand also experienced an increase in net
sales. We first introduced the Andrew Fezza, PNB Nation and Ping brands during
fiscal 1999. They also contributed to the increase in net sales. The increases
in net sales in fiscal 1999 were slightly offset by declines in net sales of our
other branded and private label products.
46
<PAGE>
Royalty Income. We had royalty income of $3.1 million for fiscal 1999
compared to $4.0 million for fiscal 1998. The decline of $0.9 million was
primarily due to our relationship with one customer, which shifted from
primarily a licensee basis to primarily a sales basis. Net sales to this
customer increased by $7.0 million to $11.5 million in fiscal 1999.
Cost of Sales. Cost of sales for fiscal 1999 was $166.2 million or 74.1%
of total revenues as compared to $146.0 million or 75.0% of total revenues for
fiscal 1998. The decrease in the cost of sales as a percentage of total revenues
is a result of our increased sales in branded products, which typically generate
higher gross profit margin than private label products. Gross profit was $58.2
million or 25.9% of total revenues for fiscal 1999 as compared to $48.7 million
or 25.0% of total revenues in fiscal 1998.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses, including depreciation and amortization, for fiscal
1999 were $41.6 million or 18.5% of total revenues as compared to $35.9 million
or 18.4% of total revenues for fiscal 1998. The increase is primarily
attributable to costs associated with recent license acquisitions and the $0.7
million in costs associated with the increase in temporary personnel hired in
connection with our new inventory management system. The costs associated with
the recent license acquisitions are primarily related to payroll, advertising,
and samples. We will continue to incur expenses related to start up costs of
acquired licenses, including the completion and integration of the recently
completed Perry Ellis International acquisition and the John Henry/Manhattan
acquisition. We believe that we will achieve greater efficiencies in our new
corporate and warehouse facility during the coming fiscal year, somewhat
offsetting these increases.
Interest Expense. Interest expense for fiscal 1999 was $3.5 million as
compared to $2.8 million for fiscal 1998. The increase was the result of
additional indebtedness incurred to support the increase in working capital
requirements during the fiscal year particularly in the third quarter.
Income Taxes. During fiscal 1999, our effective tax rate was 34.4%
compared to 28.7% in fiscal 1998, which resulted in an increase in the income
tax provision by $1.6 million to $4.5 million. The prior year tax rate was lower
than normal as we adjusted our provision for overpayments in fiscal 1997.
Net Income. Net income for fiscal 1999 increased $1.4 million or 19.6% to
$8.6 million or 3.8% of total revenues from $7.2 million or 3.7% of total
revenues for fiscal 1998.
Fiscal 1998 as Compared to Fiscal 1997
Total Revenues. Total revenues grew 22.4% or $35.7 million to $194.7
million in fiscal 1998 from $159.0 million in fiscal 1997 primarily as a result
of the growth from our acquisition of the Munsingwear brand and the related
license income.
Net Sales. Net sales for fiscal 1998 increased 21.2% or $33.3 million to
$190.7 million from $157.4 million for fiscal 1997. The increase in net sales
was primarily attributable to the Munsingwear and Grand Slam brands which
increased approximately $33.0 million as well as an increase in the Crossings
brand. We acquired the Munsingwear brand during the final quarter of fiscal
1997. This increase was partially offset by a decrease in revenue from sales of
the Natural Issue brand and private label products.
Royalty Income. We had royalty income of $4.0 million for fiscal 1998
compared to $1.7 million for fiscal 1997. The increase of $2.3 million was
primarily due to the increase in royalties from the licensing of the Munsingwear
brand.
47
<PAGE>
Cost Of Sales. Cost of sales for fiscal 1998 was $146.0 million or 75.0%
of total revenues as compared to $122.0 million or 76.7% of total revenues for
fiscal 1997. The decrease in the cost of sales as a percentage of total revenues
reflects a continued shift to more sales of branded products which typically
generate higher gross profit margin than private label products. Gross profit
was $48.7 million or 25.0% of total revenues for fiscal 1998 as compared to
$37.0 million or 23.3% of total revenues in fiscal 1997.
Sales, General and Administrative Expenses. Sales, general and
administrative expenses, including depreciation and amortization, for fiscal
1998 were $35.9 million or 18.4% of total revenues as compared to $25.9 million
or 16.3% of sales for fiscal 1997. This increase was due to increased levels of
staffing required to service the Munsingwear brand and increased advertising
costs relating to the start of consumer advertising as a result of brand
imaging.
Interest Expense. Interest expense for fiscal 1998 was $2.8 million
compared to $1.7 million for fiscal 1997. This increase in interest expense was
the result of the additional indebtedness incurred by us in connection with the
acquisition of the Munsingwear and Jolem labels, as well as to support increased
levels of working capital requirements proportionate with the increased levels
of revenue.
Income Taxes. During fiscal 1998, our effective tax rate was 28.7%
compared to 38.1% in fiscal 1997. This decrease was the result of our adjustment
of our income tax provision because of tax overpayments for the prior two fiscal
years.
Net Income. Net income for fiscal 1998 was $7.2 million or 3.7% of total
revenues as compared to $5.8 million or 3.7% of total revenues for fiscal 1997.
LIQUIDITY AND CAPITAL RESOURCES
We rely primarily upon cash flow from operations and borrowings under our
Senior Credit Facility to finance operations and expansion. Cash provided by
operating activities was $14.3 million in fiscal 1999, compared to a usage of
cash of $3.1 million in fiscal 1998 and cash provided by operating activities of
$1.9 million in 1997. The $17.4 million increase in fiscal 1999 cash flow from
operations as compared to fiscal 1998 is due primarily to decreases in inventory
and accounts receivable levels from year-to-year in the amount of $6.4 million
and $3.2 million, respectively, as well as increases in accounts payable and
accrued expenses of $5.3 million.
Net cash used in investing activities was $10.2 million in fiscal 1999, of
which $5.0 million was for the deposit on the Perry Ellis International
acquisition and $1.0 million was related to the John Henry/Manhattan
acquisition. Net cash used in investing activities for fiscal 1998 totaled $4.6
million, of which $3.8 million related principally to the new distribution and
office facility.
Net cash used in financing activities for fiscal 1999 totaled $4.9 million
which was primarily due to a reduction of $6.1 million from borrowings on the
Letter of Credit Facilities and the Senior Credit Facility. Net cash provided by
financing activities for fiscal 1998 totaled $7.9 million, which was primarily
due to an increase in borrowings under the Senior Credit Facility.
Working capital (current assets minus current liabilities) was $71.3
million at the end of fiscal 1999 as compared to $66.2 million at the end of
fiscal 1998. The $5.1 million increase in working capital primarily resulted
from an increase in accounts receivable and other current assets due to the
sales growth and deposits made for pending acquisitions. The current ratio
(current assets divided by current liabilities) was 8.2:1 and 7.9:1 at the end
of fiscal 1999 and fiscal 1998, respectively.
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We have a $90.0 million credit facility with a group of banks consisting
of a revolving credit facility of up to an aggregate principal amount of $75.0
million and a term loan in the aggregate amount of $15.0 million (the "Senior
Credit Facility"). Borrowings pursuant to the revolving credit facility are
limited under its terms to a borrowing base calculation, which generally
restricts the outstanding balances to 85.0% of eligible receivables plus 90.0%
of eligible factored accounts receivable plus 60.0% of eligible inventories
minus all outstanding letters of credit issued pursuant to the Senior Credit
Facility that are not fully secured by cash collateral. The maximum amount of
borrowing under the Senior Credit Facility attributable to (i) eligible factored
accounts receivable is $20.0 million and (ii) eligible inventory is $30.0
million. Interest on revolving borrowings is variable based, at our option, upon
either LIBOR plus 2.50% or the agent bank's prime rate plus 0.50%. Interest on
the term loan is 25 basis points higher than on the revolving credit facility.
The Senior Credit Facility contains certain covenants, the most restrictive of
which requires us to maintain certain financial ratios and minimum net worth. In
addition, the Senior Credit Facility restricts the payment of dividends. The
Senior Credit Facility is secured by all of our assets and is guaranteed by our
subsidiaries. The outstanding balance under the Company's previous senior credit
facility was $33.5 million on January 31, 1999. The Senior Credit Facility
expires in October 2002.
Borrowings under the Senior Credit Facility were used to finance the John
Henry/Manhattan acquisition and amounted to approximately $27.0 million. We
financed the $74.6 million acquisition of Perry Ellis International, Inc. with
the net proceeds from the offering of the existing notes. The remaining net
proceeds from the offering of the existing notes were used to reduce the term
loan portion of the Senior Credit Facility from $25.0 million to $15.0 million
of the revolving credit portion of the Senior Credit Facility by approximately
$15.8 million.
We also maintain three letter of credit facilities which total $60.0
million. Each letter of credit is collateralized by the consignment of
merchandise in transit under that letter of credit. Indebtedness under these
letters of credit bears interest at variable rates approximately equal to the
lenders' specified base lending rates minus 1.0% per annum. As of January 31,
1999, there was $36.6 million available under these facilities. One of the
facilities expires in July 1999 and the other two facilities, aggregating $15.0
million, have perpetual terms.
Capital expenditures, principally associated with the new office and
warehouse facility, were $4.0 million, $3.8 million and $1.1 million for fiscal
1999, 1998 and 1997 respectively. Capital expenditures, including the
integration costs for the Perry Ellis International acquisition and the John
Henry/Manhattan acquisition, for fiscal 2000 and 2001 are expected to be
approximately $4.0 million and $4.5 million, respectively.
Our products have historically been geared toward lighter-weight products
generally worn during the spring and summer months, which typically caused a
disproportionately higher amount of revenues to be realized during the first
quarter of each fiscal year. The introduction of fall, winter and holiday
merchandise has also positively affected the third quarter. Our business is
currently more affected by the variations in retail buying patterns than the
seasons of the year.
Management believes that the combination of the borrowing availability
under the Senior Credit Facility, funds anticipated from changes in working
capital and funds anticipated to be generated from operating activities will be
sufficient to meet our operating and capital needs in the foreseeable future.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to the impact of interest rate changes. Our policy is to
manage interest rates through use of a combination of fixed and variable rate
debt. Currently, we do not use derivative
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financial instruments to manage our interest rate risk. We have no cash flow
exposure due to general interest rate changes for our fixed rate long-term debt
obligations. The impact of a 0.25% increase in the annual effective interest
rate on our variable rate long-term debt obligations based on the outstanding
balance at January 31, 1999 would result in an increase in annual interest
expense of approximately $84.
EFFECTS OF INFLATION AND FOREIGN CURRENCY FLUCTUATIONS
We do not believe that inflation has significantly affected our results of
operations.
We purchase from foreign suppliers in U.S. dollars. Accordingly,
the Company, to date, has not been materially adversely affected by
foreign currency fluctuations.
NEW ACCOUNTING PRONOUNCEMENTS
In March 1998, the American Institute of Certified Public Accountants
issued Statements of Position 98-1, Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use ("SOP 98-1"). SOP 98-1 provides
guidance for capitalizing and expensing the costs of computer software developed
or obtained for internal use. SOP 98-1 is effective for financial statements for
fiscal years beginning after December 15, 1998. Management has not determined
the effect, if any, of adopting SOP 98-1.
In April 1998, the American Institute of Certified Public Accountants
issued Statements of Position 98-5, Reporting on the Costs of Start-Up
Activities ("SOP 98-5"). SOP 98-5 establishes accounting standards for the
reporting of certain costs associated with the start-up of operations, lines of
business, etc. SOP 98-5 requires that costs of start-up activities, including
organizational costs, be expensed as incurred and that in the year of adoption,
start-up costs recorded should be expensed. SOP 98-5 is effective for fiscal
years beginning subsequent to December 15, 1998. Management has not determined
the effect, if any, of adopting SOP 98-5.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 Accounting for Derivative Instruments and
Hedging Activities ("SFAS No. 133"). Among other provisions, SFAS No. 133
establishes accounting and reporting standards for derivative instruments and
for hedging activities. It also requires that an entity recognize all
derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. SFAS No. 133 is effective
for financial statements for fiscal year beginning after June 15, 1999.
Management has not determined the effect, if any, of adopting SFAS No. 133.
YEAR 2000 READINESS DISCLOSURE
Background. The year 2000 issue refers to the inability of certain
data-sensitive computer chips, software and systems to recognize a two-digit
date field as belonging to the 21st century. Many computer software programs, as
well as certain hardware and equipment containing date-sensitive data, were
structured to utilize a two-digit date field. Accordingly, these programs may
not be able to properly recognize dates in the year 2000 and later, which could
result in significant system and equipment failures. This is a significant issue
for most if not all companies, with far reaching implications, some of which
cannot be anticipated or predicted with any degree of certainty. We recognize
that we must take action to ensure that our operations will not be adversely
impacted by year 2000 software failures.
We have undertaken a study of our functional application systems to
determine their compliance with year 2000 issues and, to the extent of
noncompliance, the required remediation. As a result of such study, we believe
the majority of our systems are year 2000 compliant. Our current distribution
software
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was modified by expanding the date to be century compliant, and all entry forms
were modified using a windowing algorithm. The financial systems Account
Receivables, Accounts Payables and General Ledger were replaced with Oracle
Financial release 11.01, under Oracle 8.0.5 database. This is year 2000
compliant, and enhances our business analysis capabilities.
Our EDI application is software purchased from NGC, a company in Miami
Lakes, Florida. While we do not own the source code to this software, NGC
provided written certification of year 2000 compliance. Furthermore, we passed
the EDI year 2000 compliance test from NRF (National Retail Federation). Results
of the test can be found at http://www.nrf/editest/web.com. We are ready to
change to the new EDI 4010 documents whenever our customers are ready. Some of
our larger customers are already doing 4010 transactions with us. Our EDI
software is also ready to convert any non-compliant year 2000 EDI documents to
an internal year 2000 compliant transaction.
All of our PBXs or telephone systems are year 2000 compliant and were
certified and tested by Lucent Technologies. The security system equipment year
2000 compliant certification could be found under http://www.napcosecurity.com.
The monitoring company, Security One, has provided us a year 2000 certification
of any Date Based System. We completed the required remediation noted above,
including testing, by December 31, 1998. However, there are also less
significant hardware options which will be remediated during 1999. To date, the
expense to outsiders incurred by us in order to become year 2000 compliant,
including computer software costs, have been $0.2 million and the current
additional estimated cost to outsiders to complete such remediation is expected
to be $0.2 million. Such costs, other than software, have been and will continue
to be expensed as incurred.
An assessment of the readiness of year 2000 compliance of third party
entities with which we have relationships, such as our banking institutions,
customers, payroll processors and others is ongoing. We have inquired, or are in
the process of inquiring, of the significant aforementioned third party entities
as to their readiness with respect to year 2000 compliance and to date have
received indications that many of them are either compliant or in the process of
remediation. We will continue to monitor these third party entities to determine
the impact on our business and the actions we must take, if any, in the event of
non-compliance by any of these third parties. Our initial assessment of
compliance by third party is that there is not a material business risk to us
posed by any such noncompliance and, as such, we have not yet developed any
related contingency plan.
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BUSINESS
THE COMPANY
We are a leading designer and marketer of a broad line of high quality
men's sportswear, including sport and dress shirts, golf sportswear, sweaters,
urban wear, casual and dress pants and shorts which we sell to all levels of
retail distribution. We have built a broad portfolio of brands through selective
acquisitions and the establishment of our own brands over our 32-year operating
history. Our distribution channels include regional, national and international
department stores, chain stores, mass merchandisers and specialty stores
throughout the United States, Puerto Rico and Canada. We are one of the top 5
branded suppliers to department stores in the knit and woven shirt product
categories. Our largest customers include Dayton Hudson Corp., Federated
Department Stores, Inc., Sears Roebuck & Co., Kohl's Corporation, Wal-Mart
Stores, Inc. and J.C. Penney Company, Inc. We currently use over 70 independent
suppliers to source our products, located mostly in the Far East, other parts of
Asia, Mexico and Central America.
Through consolidation of brands and internal growth, we have experienced
significant overall growth in recent years. Our total revenues have increased to
$224.4 million for fiscal 1999 from $90.6 million for fiscal 1995, representing
a compound annual growth rate of 25.5%. During that same period, our EBITDA (as
defined herein; see "Summary Historical Financial Information") grew to $18.7
million from $7.9 million, representing a compound annual growth rate of 24.0%.
On a pro forma basis assuming that the Perry Ellis International acquisition was
completed on February 1, 1998, our EBITDA for fiscal 1999, would have been $29.0
million. For the estimated effect of the John Henry/Manhattan acquisition, see
"Summary Pro Forma and Supplemental Financial Information."
We own or license from third parties the brands under which most of our
products are sold. These brands include Crossings and Natural Issue for casual
sportswear, John Henry for dress casual wear, Andrew Fezza for dress sportswear,
Ping and Munsingwear for golf sportswear and PNB Nation for urban wear. Through
our "family of brands" marketing strategy, we seek to develop and enhance a
distinct brand name for each product category within each distribution channel.
We market our brands to a wide range of demographic segments, targeting
consumers in specific age, income and ethnic groups. Currently, our products are
predominantly produced for the men's segment of the apparel industry, in which
fashion trends tend to be less volatile than in other segments. The percentage
of our revenues from branded products increased to 81.4% in fiscal 1999 from
71.5% in fiscal 1997.
We also license our proprietary brands to third parties for the
manufacture and marketing of various products which we do not sell, including
underwear, activewear and loungewear. In addition to generating additional
sources of revenue for us, these licensing arrangements raise the overall
awareness of our brands. In order to expand our licensing operations, we
recently acquired Perry Ellis International, Inc. which owns and licenses the
prestigious and well-known Perry Ellis brand name. Perry Ellis International,
Inc. had licensing revenues of $16.2 million for the year ended December 31,
1998. In March 1999, we also purchased the trademarks for John Henry, a leading
brand of men's dress casualwear sold at Sears Roebuck, for Manhattan, a popular
dress shirt brand sold at Wal-Mart and Kmart Corporation and Lady Manhattan.
We believe that our competitive strengths position us to capitalize on
several trends that have affected the apparel industry in recent years. These
include the consolidation of the department and chain store sectors into a
smaller number of stronger retailers, which represent some of our most important
customers; the increased reliance of retailers on reliable suppliers with design
expertise and advanced systems and technology; and the continued importance of a
brand as a source of product differentiation.
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COMPETITIVE STRENGTHS
We believe that we have the following competitive advantages in our
industry:
Portfolio of Strong Brands. We currently own four major brands
(Munsingwear, Crossings, Natural Issue and Grand Slam) with a total of over 40
sub-brands (such as Penguin and Career Club). We also design, source and market
three other major brands (PNB Nation, Andrew Fezza, and Ping) which we license
under existing agreements with various expiration dates and renewal options.
These brands enjoy national recognition in their respective sectors of the
apparel industry and have a loyal consumer and retailer following. Brand
recognition is critical in the apparel industry, where strong brand names help
define consumer preferences and drive department store floor space allocation.
We believe that each of the Perry Ellis International and John Henry/Manhattan
acquisitions will further enhance our established portfolio of recognizable
brands.
Strong Retailer Relationships. We believe our established relationships
with retailers at all distribution levels give us the opportunity to maximize
the selling space dedicated to our products, monitor our brand presentation and
merchandising selection, and introduce new brands and products. We have
long-standing relationships with our largest customers, including J.C. Penney
and Sears Roebuck (more than 20 years), Federated Department Stores (12 years),
Wal-Mart (10 years), Kohl's (6 years) and Dayton Hudson (5 years). We believe
that we have maintained these long relationships as a result of our quality
brand name products and our dedication to customer service. Management, in
conjunction with our 30 salespeople, meets with our major customers frequently
to review product offerings, establish and monitor sales plans, and design joint
advertising and promotional campaigns. We believe our reliable delivery times,
consistent product quality and quick response to design trends and inventory
demands allow us to meet our retailers' current requirements. In addition, our
global sourcing network, design expertise, advanced systems and technology, and
new warehousing facility enhance our ability to meet the changing and increasing
needs of our retailers.
Strong Licensing Capabilities and Relationships. By actively licensing the
brands we own, we have gained significant experience in identifying potential
licensing opportunities and have established relationships with many active
licensees. We believe that our broad portfolio of brands appeals to licensees
because it gives them the opportunity to sell their products in many different
retail distribution channels. For example, a manufacturer of men's accessories
might license the Crossings brand to sell to national department stores and the
Munsingwear brand to target mass merchandisers. We believe that our licensing
expertise, which is supported by a dedicated staff, will allow us to continue
marketing our brands to apparel producers effectively.
World-Wide Low-Cost Sourcing Capabilities. Our global network of suppliers
enables us to purchase apparel products at competitive cost without sacrificing
quality, while at the same time reacting quickly to our retailers' needs and
maximizing production flexibility. We developed this expertise through more than
32 years of experience in purchasing our products from suppliers around the
world. No individual supplier in fiscal 1999 accounted for more than 7.3% of our
total sourcing needs. We currently maintain a staff of experienced professionals
principally located in the United States, Korea, China and Mexico, and a global
network of ten sourcing and quality assurance offices, which closely monitor our
suppliers to maintain strict quality standards and identify new sourcing
opportunities. By sourcing our products, we manage our inventories more
effectively and do not incur the costs of maintaining and operating production
facilities.
Design Expertise and Advanced Technology. Our in-house staff consists of
five designers, who have an average of 18 years of experience, and are supported
by a staff of 14 other design professionals. Together, they design substantially
all of our products utilizing computer-aided design technology. The
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use of this technology minimizes the time-consuming and costly production of
actual sewn samples prior to customer approval. It also allows us to create
custom-designed products meeting the specific needs of our customers and
facilitates a quick response to changing fashion trends. Our computer-aided
design technology produces approximately 800 designs per month and our library
currently contains approximately 52,000 designs.
Capacity for Growth. We will be able to leverage our recent investments in
infrastructure and our skilled personnel to accommodate future internal growth
and selected acquisitions. Our recent move to a new approximately 238,000 sq.
ft. office and warehouse facility in Miami with 170,000 sq. ft. of warehouse
space has positioned us to increase capacity with no significant additional
capital expenditure. This facility and our 15,000 sq. ft. of office space in New
York are sufficient to accommodate additional personnel. However, we expect that
our staffing levels will rise at a lower rate than our revenue growth.
Proven Ability to Integrate Acquisitions. From 1993 to 1998, we have
acquired and integrated four major brands, which currently have over 40
sub-brands. We selectively target brands that we believe are underperforming and
can be revitalized using our competitive strengths. Prior to the Perry Ellis
Intentional and John Henry/Manhattan acquisitions our most significant brand
purchase was the Munsingwear brand in 1996. As part of an extensive integration
process, we:
* repositioned the brand based on our "family of
brands" strategy;
* improved the responsiveness to market trends by
applying our design and sourcing expertise; and
* communicated the new positioning of the brand through
a wide ranging marketing program.
As a result, Munsingwear annual revenues increased by 55.7% to
approximately $66.0 million in fiscal 1999 from approximately $42.4 million in
fiscal 1998, the first full year of our ownership. We believe that we can
successfully integrate additional brands into the Supreme family of brands and
revitalize them. For example, we intend to license the Perry Ellis brand for
additional product categories such as women's wear and expand into geographic
areas where we believe the Perry Ellis brand has been historically
underrepresented such as Europe and Asia.
Experienced Management Team. Our senior management team averages nearly 20
years of experience in the apparel industry. Our management team also has
significant experience in developing and revitalizing brand names, has an
established reputation with retailers, the trade and the financial community,
and possesses a diverse skill base, which incorporates brand marketing, sourcing
and management information systems.
BUSINESS STRATEGY
Our "family of brands" marketing approach is designed to develop a
distinct brand for each product category within each distribution channel. For
example, we sell our golf sportswear under the Munsingwear brand to mass
merchants, under the Grand Slam brand to department stores and under the Ping
brand to higher-end retailers, golf shops and resorts. By differentiating our
brands in this manner, we can better satisfy the needs of each type of retailer
by offering brands tailored to its specific distribution channel. In addition,
we believe that this strategy helps insulate us from changing retail patterns,
allows us to maintain the integrity of each distribution channel and helps
prevent brand erosion.
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Our objective is to develop and enhance our brands by:
* carefully maintaining distinct distribution channels
for each of our brands;
* consistently designing, sourcing and marketing
quality products;
* reinforcing the image of our brands and continuously
promoting them; and
* updating our styles to keep them current.
Controlling strong brands allows us to increase our retail base, license
these brands to third parties, develop sub-brands and grow internationally.
To achieve our objective, we have adopted a strategy based on the
following elements:
Increase Brand Name Recognition. We intend to enhance recognition of our
brand names by promoting our brands at both the retailer and consumer levels. We
conduct cooperative advertising in print and broadcast media in which various
retailers feature our products in their advertisements. We have also begun
direct consumer advertising in select markets by placing highly visible
billboards, sponsorships, special event advertisements and magazine
advertisements in periodicals such as Men's Health and Gentleman's Quarterly.
Licensing our brands to third parties also serves to enhance brand recognition
by providing increased consumer exposure. We also recently established Web sites
for each of our major brands to position us to take advantage of opportunities
created by the Internet.
Increase Distribution. We intend to increase the distribution of our
existing products by expanding the number of regional, national and
international retailers that carry our brands and increasing the number of
stores in which each of these retailers sells our products. This increased
exposure should broaden our established reputation at the retail and consumer
levels. We selectively pursue new channels of distribution for our products,
focusing on maintaining the integrity of our products and reinforcing our image
at existing retail stores, as well as introducing our products to geographic
areas and consumer sectors that are presently less familiar with our products.
Continue to Diversify Product Line. We intend to broaden the range of our
product lines, capitalizing on the name recognition, popularity and discrete
target customer segmentation of each major brand. For example, we introduced a
sweater line under the Crossings brand and expanded it to include several of our
other brands. We have also expanded into urban wear with the licensing of the
PNB Nation brand, dress sportswear with the licensing of the Andrew Fezza brand
and high-end golf sportswear with the licensing of the Ping brand.
Expand Licensing Activities. Since acquiring Munsingwear in 1996, we have
significantly expanded the licensing of our brands to third parties for various
product categories. Similar to the Munsingwear acquisition, we believe the Perry
Ellis International and John Henry/Manhattan acquisitions will provide
significant licensing opportunities. We intend to use these
nationally-recognized brands to expand our licensing activities, particularly
with respect to additional product categories, such as women's wear, and into
geographic areas which we believe have been historically underrepresented by
these brands, such as Europe and Asia. We plan to work with our licensees to
strengthen their marketing efforts and thereby increase our revenues.
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BRANDS
The key components of our brand strategy are (a) to provide consistent
quality products, (b) to distribute the brands in distinct channels of
distribution and (c) to reinforce and capitalize on the brand's image through
new product development and image advertising. This strategy has enabled us to
increase our customer base, license our brands to third parties and develop
sub-brands.
In fiscal 1999, over 81.4% of our total revenues resulted from sales of
brands we own or license. We currently own four nationally recognized brands,
which are the Natural Issue, Munsingwear, Grand Slam and Crossings brands. There
have been over 40 sub-brands developed from these four major brands. We also
have licenses to distribute other nationally recognized brands including the
Ping, Andrew Fezza and PNB Nation brands. Our depth of brand selection enables
us to target consumers across a wide range of ages, incomes and ethnic groups.
Natural Issue. We developed the Natural Issue brand in 1988 to appeal to
middle-income men who are 25-55 years old. The brand is now a well-established
brand which we have positioned to be associated with value and quality. Natural
Issue products include shirts, pants and shorts and are primarily sold in chain
stores, such as Sears Roebuck, Kohl's, J.C. Penney and Mervyn's at retail price
points ranging from $22.99 to $30.99.
Munsingwear and Grand Slam. We purchased the Munsingwear and Grand Slam
brands along with their associated sub-brands in 1996 to appeal to middle income
30-70 year-old men who are sports enthusiasts. These well-known brands are
identified by their signature penguin logo and have over 100 years of history.
We have positioned these brands to be associated with fashion at a moderate
price. Munsingwear and Grand Slam products include golf shirts, pants and
shorts. The Munsingwear brand is primarily sold in sporting goods stores such as
The Sports Authority and Foot Locker at retail price points ranging from $12.99
to $26.99. The Grand Slam brand is primarily sold in department stores such as
Dayton Hudson, Federated Department Stores and May's Department Stores at retail
price points ranging from $24.99 to $39.99.
Some of the successful sub-brands of the Munsingwear brand include the
Munsingwear Lifestyle(R) sub-brand for casual sportswear and the Munsingwear
Golf(R) and Slammer(R) sub-brands for golf sportswear. These sub-brands are sold
primarily to regional mass merchandisers such as Meijer and Uptons at retail
price points ranging from $18.99 to $24.99.
We also offer golf sportswear under the Grand Slam Tour sub-brand, which
is sold primarily in golf shops and top-tier stores, and the Penguin Sport(R)
sub-brand, which is sold primarily to the chain stores. The retail price points
of the Grand Slam Tour and Penguin Sport sub-brands are $24.99 to $39.99 and
$23.99 to $24.95, respectively.
Crossings. We purchased the well-known Crossings sweater brand in 1997 in
order to increase our product offerings to include sweaters appealing to
middle-income 25-55 year-old men. We positioned the brand to be associated with
value and quality and have expanded it to include shirts. The Crossings brand is
primarily sold to department stores such as Federated Department Stores, May's
Department Stores and Saks Fifth Avenue at retail price points ranging from
$22.99 to $30.99 for sweaters.
Ping. We obtained a license for the prestigious Ping golf brand in 1998 to
appeal to high-income 25-50 year-old men who are status-conscious. The license,
which covers the world other than Japan, has an initial term expiring in
December 2001 with the possibility of renewal depending on satisfactory
performance of our obligations under the licensing agreement. The brand is a
well-known and prestigious golf brand which we positioned to be associated with
the highest standard of quality in the golf business. Currently, we sell golf
shirts, sweaters, pants, outerwear and hats under this brand. The brand is sold
primarily in golf shops and top-tier stores at retail price points ranging from
$50.00 to $105.00. See "Risk Factors--Inability to Renew Licenses."
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Andrew Fezza. We obtained a license for the Andrew Fezza brand in 1998 to
appeal to high-income 25-50 year-old men who enjoy shopping for designer
clothes. The license covers the United States, its territories and possessions
and has an initial term expiring in June 2003. We have an option to renew for an
additional 5 years depending on satisfactory performance of our obligations
under the licensing agreement. Andrew Fezza is a recognized living American
designer who is actively involved with the design and marketing of the brand. We
have positioned the brand to be associated with a classic European style at a
moderate price. Andrew Fezza's products include shirts and pants. The Andrew
Fezza brand is primarily sold to department stores such as May's Department
Stores, Federated Department Stores and Saks Fifth Avenue at retail price points
ranging from $25.99 to $34.99 for shirts and $29.99 to $49.99 for pants. See
"Risk Factors--Inability to Renew Licenses."
PNB Nation. We obtained a license for the urban-oriented PNB Nation brand
in 1998 to appeal to 15-30 year-old men whose clothes are very important to
their identities and who enjoy the urban culture, music and night life. The
license covers the United States and has an initial term of at least two years,
and we have an option to purchase the brand. PNB Nation's products include
shirts, pants and outerwear. The brand is primarily sold in urban stores and
sporting goods stores such as The Buckle, Pacific Sunwear and Dr. Jays at retail
price points ranging from $14.99 to $34.99 for shirts and $39.99 to $79.00 for
pants. See "Risk Factors--Inability to Renew Licenses."
Private Label. In addition to our sales of branded products, we sell
products to retailers for marketing as private label, own-store lines. In fiscal
1999, we sold private label products to Wal-Mart, Kmart and Meijer. Private
label sales generally yield lower profit margins than comparable branded
products. Consequently, our strategy is to increase sales of branded products.
Private label sales accounted for approximately 18.6%, 24.6% and 28.5% of net
sales during fiscal 1999, 1998 and 1997.
PRODUCTS AND PRODUCT DESIGN
We offer a broad line of high quality men's sportswear, including sport
and dress shirts, golf sportswear, sweaters, urban wear and casual and dress
pants and shorts. Substantially all of our products are designed by our in-house
staff utilizing our advanced computer-aided design technology. This technology
enables us to produce computer-generated simulated samples that display how a
particular style will look in a given color and fabric. These samples can be
printed on paper or directly onto fabric to more accurately present the colors
and patterns to a potential retailer. In addition, we can quickly alter the
simulated sample in response to retailer comments, such as a request to change
the colors, print layout, collar style and trimming, pocket details and/or
placket treatments. The use of computer-aided design technology minimizes the
time-consuming and costly need to produce actual sewn samples prior to retailer
approval and allows us to create custom-designed products meeting the specific
needs of a retailer.
In designing our apparel, we seek to foster consumer appeal by combining
functional, colorful and high quality fabrics with creative designs and
graphics. Styles, color schemes and fabrics are also selected to encourage
consumers to coordinate outfits, thereby encouraging multiple purchases. Our
design staff seeks to stay abreast of the latest design trends by attending
trade shows and periodically conducting market research in Europe and the United
States. See "Risk Factors--Fashion Trends" and "--Price and Availability of
Cotton Fabric."
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Our products include:
Shirts. We offer a broad line of sport shirts, which include cotton and
cotton-blend printed and plain knit shirts, cotton woven shirts, silk, cotton
and rayon printed button front sport shirts, linen sport shirts, golf shirts,
and embroidered cotton shirts. Our shirt line also includes dress shirts,
brushed twill shirts, jacquard knits and yarn-dyed flannels. In addition, we are
a leading distributor in the United States of guayabera shirts. We market shirts
under a number of our own brands as well as the private labels of our retailers.
Sales under our brands and those licensed by us account for a significant
majority of shirt sales. Our shirts are produced in a wide range of men's sizes,
including sizes for the big and tall men's market. Sales of shirts accounted for
approximately 82%, 83% and 87% of net sales during fiscal 1999, 1998 and 1997,
respectively.
Pants. Our lines of pants include a variety of styles of wool, wool-blend,
linen and poly/rayon dress pants, casual pants in cotton and poly/cotton and
linen/cotton walking shorts. We offer our pants in a wide range of men's sizes
and generally market them as complements to our shirt lines. Sales of pants
accounted for approximately 11%, 11% and 7% of net sales during fiscal 1999,
1998 and 1997, respectively.
Other Products. We began to offer sweaters when we purchased the Crossings
brand in 1997 and recently introduced sweaters under our other brands. The
majority of the other products we sell is sweaters, which accounted for
approximately 4% of net sales during fiscal 1999. We also began to offer a line
of urban sportswear, tee-shirts and outerwear when we licensed the PNB Nation
brand. Sales of other products (including sweaters) accounted for approximately
7%, 6% and 6% of net sales during fiscal 1999, 1998 and 1997, respectively.
MARKETING AND DISTRIBUTION
We market our apparel products to retailers principally through the direct
efforts of an in-house sales staff and independent commissioned sales
representatives who work exclusively for us. These in-house employees and
commissioned sales representatives accounted for approximately 84% of net sales
for fiscal 1999. To supplement our sales efforts, we also use other
non-exclusive independent commissioned sales representatives, who generally
market other product lines as well as ours, and we attend major industry trade
shows and tele-market our products to specialty retailers. We also advertise to
retailers through print advertisements in a variety of trade magazines and
newspapers. In order to promote our men's sportswear at the consumer level, we
share the cost of conducting cooperative advertising in print and broadcast
media in which various retailers feature our products in their advertisements.
We also conduct various in-store marketing activities with our retailers, such
as placing displays of our product line with an emphasis on related and
coordinated clothing in highly visible locations and offering promotions geared
to holidays such as Christmas and Father's Day. In fiscal 1997, we started
direct consumer advertising in select markets featuring the Natural Issue, Grand
Slam and Munsingwear brands through the placement of highly visible billboards,
sponsorships, and special event advertising. We also established Web sites
featuring our brands.
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The following table sets forth the principal brand names for our product
categories at different levels of retail distribution.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
PRODUCT CATEGORY
- -----------------------------------------------------------------------------------------------
RETAIL CASUAL GOLF DRESS URBAN
DISTRIBUTION SPORTSWEAR SPORTSWEAR SPORTSWEAR SPORTSWEAR
LEVEL
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
High End -- Perry Perry --
Specialty Ellis(1) Ellis(1)
Retailer, Golf Ping
Shops, Resorts Grand Slam Tour
- -----------------------------------------------------------------------------------------------
National Crossings Grand Slam Andrew Fezza PNB Nation
Department Perry Ellis Perry Ellis(1)
Stores America(1)
- -----------------------------------------------------------------------------------------------
Chain Stores Natural Issue Penguin Sport John Henry Tipo's(R)
Alexander Martin(R)
- -----------------------------------------------------------------------------------------------
Regional Stores Munsingwear Munsingwear Golf(R) Corporate Gear(R) --
Lifestyle(R) Slammer(R) Career Club(R)
- -----------------------------------------------------------------------------------------------
Mass Munsingwear Munsingwear Golf etcetera(R) New Step(R)
Merchandisers Classics(R) Classics(R) Manhattan Monte Fino(R)
- -----------------------------------------------------------------------------------------------
Urban Stores -- -- -- PNB Nation
- -----------------------------------------------------------------------------------------------
Sporting Goods -- Munsingwear -- PNB Nation
Stores
- -----------------------------------------------------------------------------------------------
</TABLE>
(1) We are primarily a licensor for the Perry Ellis brand in the dress
sportswear category.
We believe that the Perry Ellis International acquisition and the John
Henry/Manhattan acquisition will provide us with additional nationally
recognized brands which we can similarly leverage into additional sub-brands,
geographic areas and distribution channels.
We believe that customer service is a key factor in successfully marketing
our apparel products and seek to provide retailers with a high level of customer
service. We coordinate efforts with retailers to develop products meeting their
specific needs using our design expertise and computer-aided design technology
to offer custom-designed products. We also use our sourcing capabilities to
produce and deliver products on a timely basis.
Our in-house sales staff is responsible for retailer follow-up and support
including monitoring prompt order fulfillment and timely delivery. We utilize an
Electronic Data Interchange ("EDI") system for certain retailers in order to
provide advance shipping notices, process orders and conduct billing operations.
In addition, certain retailers use the EDI system to communicate their weekly
inventory requirements per store to us electronically. We then fill those orders
either by shipping directly to the individual stores or by sending shipments,
individually packaged and bar-coded by store, to a retailer's centralized
distribution center.
SOURCES OF SUPPLY
We currently use independent contract foreign manufacturers to produce all
of our products. We have 48 suppliers from countries in the Far East and other
parts of Asia and 24 suppliers in Mexico and from countries in Central America.
We believe that the use of numerous independent suppliers allows us to maximize
production flexibility while avoiding significant capital expenditures and the
costs of maintaining and operating production facilities. In connection with the
John Henry/Manhattan acquisition, we assumed the lease for a shirt manufacturing
facility in Mexico that expires in July 1999. We intend to sell or sublease the
facility to one of our suppliers for use in the production of our products. See
"Risk Factors--Acquisition and Integration Risks; Undertaking Manufacturing
Activities," "--Dependence on Contract Manufacturing" and "--Dependence on
Foreign Suppliers."
We maintain offices in Beijing, Guangzhou, Seoul, Taipei and Mexico City.
We also operate through independent agents based in Thailand, Hong Kong,
Pakistan, Korea, Turkey, Indonesia, India and Sri Lanka to source our products
in Asia and monitor production at contract manufacturing facilities in
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<PAGE>
order to ensure quality control and timely delivery. Similar functions with
respect to our Central American suppliers are performed by our personnel based
in our Miami, Florida executive offices. We conduct periodic inspections of
samples of each product prior to cutting by contractors, during the
manufacturing process and prior to shipment. We also have full-time quality
assurance inspectors in the Dominican Republic, Honduras, El Salvador, Guatemala
and each of our overseas offices. Finished goods are generally shipped to our
Miami, Florida facilities for repackaging and distribution to customers. Our
return policy permits customers to return any defective products for credit.
These returns were not material in any of the last three fiscal years.
In order to assist with timely delivery of finished goods, we function as
our own customs broker enabling us to prepare our own customs documentation and
arrange for any inspections or other clearance procedures with the United States
Customs Service. We are also a member of the United States Customs Automated
Interface program, which permits us to clear our goods through United States
Customs electronically, generally reducing the necessary clearance time to a
matter of hours rather than days. See "Risk Factors--Imports and Import
Restrictions."
LICENSING OPERATIONS
For the past four years, we have been actively licensing the brands we own
to third parties for various product categories. Licensing our brands enhances
their image by increasing their distribution and visibility without requiring us
to make a significant capital investment or incur significant operating
expenses. As a result of this strategy, we have gained significant experience in
identifying potential licensing opportunities and have established relationships
with many active licensees.
We are currently the licensor under approximately 24 license agreements
for various products including outerwear, underwear, activewear and loungewear.
Sales of licensed products by our licensees were approximately $78.7 million,
$73.9 million and $67.7 million in fiscal 1999, 1998 and 1997, respectively. We
received royalties from these sales and sign-up fees from new licenses of
approximately $3.1 million, $4.0 million and $1.7 million in fiscal 1999, 1998
and 1997, respectively.
The John Henry/Manhattan acquisition and the Perry Ellis International
acquisition give us access to significant additional licensing operations of
nationally recognized brand names. As a result of these acquisitions and the
overall growth of our licensing operations, we hired a new President of
Licensing who is an experienced senior executive to oversee and manage these
operations. See "Management."
To maintain a brand's image, we closely monitor our licensees and
pre-approve all products licensed. In evaluating a potential licensee, we
consider the experience, financial stability, manufacturing performance and
marketing ability of the proposed licensee. We also evaluate the marketability
of the proposed products and their compatibility with products currently being
marketed under that brand. We regularly monitor product design, development,
merchandising and marketing and schedule meetings throughout the year with
licensees to ensure quality, uniformity and consistency with our overall
marketing, merchandising and design strategies. All of our licensees' products,
advertising, promotional and packaging materials must be approved in advance by
us.
As part of our licensing strategy, we work with our licensees to further
enhance the products, brand images and sales. We offer licensees marketing
support and use our relationship with retailers to help them become more
profitable.
Our license agreements generally extend for a period of 3 to 5 years with
options to renew prior to expiration for an additional multi-year period. A
typical agreement requires that the licensee pay us the greater of a royalty
based on a percentage of the licensee's net sales of the licensed products or a
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guaranteed minimum royalty that typically increases over the term of the
agreement. Generally, licensees are required to spend a percentage of the net
sales of licensed products on advertising and promotion of the licensed
products.
THE PERRY ELLIS INTERNATIONAL AND JOHN HENRY/MANHATTAN ACQUISITIONS
Perry Ellis International, Inc. In January 1999, we agreed to buy Perry
Ellis International, Inc. for approximately $74.6 million in cash, net of
purchase price adjustments. We consummated the Perry Ellis International
acquisition in April 1999, concurrently with the consummation of the offering of
the existing notes. Perry Ellis International, Inc. was a privately held
company, which owns and licenses the Perry Ellis brand, currently one of the top
selling brands in department stores in the United States. Perry Ellis
International, Inc. is currently the licensor under 34 license agreements,
primarily for various categories of men's wear, boys' wear and fragrances. The
purchase of the Perry Ellis brand gives us a widely recognized brand in the
market and will be our premier brand. On a pro forma basis, assuming that the
acquisition of Perry Ellis International, Inc. was completed on February 1,
1998, our total revenues for fiscal 1999 would have been $240.6 million
including approximately $5.8 million of net royalty revenue to Perry Ellis
International, Inc. from licenses to Salant Corporation, which was in a Chapter
11 bankruptcy proceeding.
Perry Ellis, who was an internationally-known designer, positioned his
brand to be associated with quality, value and innovative designs and to appeal
to high-income, status-conscious, 25-50 year-old men. His successors have
maintained the brand's premier image into the 1990's as annual retail sales by
the brand's 34 licensees in various product categories exceeded $900 million in
1998 (estimated based on Perry Ellis International, Inc.'s royalty revenues and
the average markup charged by retailers). Perry Ellis International, Inc. is
currently one of the largest selling brands in department stores such as
Dillards, Federated Department Stores, Saks Fifth Avenue and May's Department
Stores at retail price points ranging from $39.99 to $99.99 for dress shirts.
We intend to capitalize on Perry Ellis' image as a premier brand by
seeking licensing opportunities in the product categories in which we currently
do not have a large presence, such as women's wear and men's accessories, and
into geographic areas that we believe are historically underrepresented by this
brand, such as Europe and Asia. Currently, Perry Ellis branded products are
principally sold in the men's wear, boys' wear and fragrance product categories
and are sold mostly in the United States. We plan to apply the elements of our
brand strategy to the Perry Ellis brand in order to strengthen it. We believe
that our significant experience in identifying strong licensees and our current
relationship with experienced licensees will enable us to capitalize on the
various licensing opportunities for the Perry Ellis brand. We will also work
with Perry Ellis International, Inc.'s current licensees to further enhance the
brand's image and generate greater licensing revenue.
Although the Perry Ellis brand has international recognition, we perceive
the brand to be underperforming in international markets such as Europe and
Asia. We believe that our brand and licensing experience will enable us to
capitalize on these international opportunities.
John Henry/Manhattan. In December 1998, we entered into an agreement to
buy certain assets of the John Henry and Manhattan dress shirt business from
Salant Corporation, which was in a Chapter 11 bankruptcy proceeding. On February
24, 1999, the bankruptcy court approved the purchase for $27.0 million plus the
value of the existing dress shirt inventory (which was subsequently valued at
approximately $17.2 million). The acquisition was completed on March 29, 1999.
The assets purchased consist of the John Henry, Manhattan and Lady Manhattan
trademarks and trade names, license agreements, certain manufacturing equipment
and the existing dress shirt inventory. On March 29, 1999, Phillips-Van Heusen
Corporation purchased the existing dress shirt inventory at our acquisition cost
and
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<PAGE>
licensed from us the John Henry and Manhattan brands for men's dress shirts. In
connection with the acquisition, we assumed a lease for a shirt manufacturing
facility located in Mexico which expires in July 1999. Although no agreement has
been reached, we intend to either sublease the facility to one of our suppliers
for use in the production of our products or not renew the lease.
The acquisition price, net of the $1.0 million deposit we have paid and
the proceeds from sale of the existing dress shirt inventory, was approximately
$26.0 million and was financed with borrowings under our Senior Credit Facility.
The licenses to Phillips-Van Heusen have an initial term of three years
and Phillips-Van Heusen has options to renew the licenses for four additional
terms of three years each. The minimum royalty for the first three years will be
approximately $1.5 million for each of the John Henry and Manhattan licenses,
and will increase by varying percentages in the 12 subsequent years.
Phillips-Van Heusen is required to contribute $1.0 million to an overall $3.0
million advertising/marketing campaign for the first 18 months of the license
term.
In connection with the consummation of the John Henry/Manhattan
acquisition, we paid Icahn Associates Corp., an affiliate of Carl Icahn, or its
affiliates ("IAC"), a financial advisory fee consisting of $1.0 million in cash.
Prior to consummation of the John Henry/Manhattan Acquisition, we were a
licensee for the John Henry brand name and are thus very familiar with the brand
and its potential. The John Henry brand is highly recognizable, appealing to
25-55 year-old middle-income men and is a leading brand of men's dress
casualwear at Sears Roebuck, one of our existing customers. The John Henry brand
is one which consumers associate with quality and value.
The Manhattan brand has a history in excess of 50 years. The brand appeals
to 25-65 year-old low-income men and is a popular dress shirt at Wal-Mart and
Kmart Corporation. It also has a strong presence in Asia and in other mass
merchandisers such as Meijer. The brand has been positioned to be associated
with value at a moderate price.
CUSTOMERS
We sell merchandise to a broad spectrum of retailers, including chain
stores, department stores, mass merchandisers and specialty stores. Our largest
customers include Dayton Hudson, Sears Roebuck, Federated Department Stores,
Kohl's, Wal-Mart and J.C. Penney. Net sales to our five largest customers
aggregated approximately 48%, 47% and 54% of net sales in fiscal 1999, 1998 and
1997, respectively. For fiscal 1999, sales to Dayton Hudson, Sears Roebuck, and
Federated Department Stores each accounted for approximately 15%, 10% and 10%,
respectively, of net sales. For fiscal 1998, sales to Dayton Hudson and Sears
Roebuck each accounted for approximately 12% and 13% of net sales, respectively.
For fiscal 1997, sales to Kmart Corporation, J.C. Penney and Sears Roebuck each
accounted for approximately 15%, 12% and 12%, respectively, of net sales. No
other single customer accounted for more than 10% of net sales during such
fiscal years. See "Risk Factors--Reliance on Key Customers."
SEASONALITY AND BACKLOG
Our products were historically geared towards lighter weight products
generally worn during the spring and summer months. We believe that this
seasonality has been reduced with the introduction of fall, winter, and holiday
merchandise. Our higher priced products generally tend to be less sensitive to
economic conditions and the weather, as compared to our lower priced products.
While the variation in our sales on a quarterly basis has narrowed, seasonality
can be affected by a variety of factors, including
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the mix of advance and fill-in orders, the amounts of sales to different
distribution levels and overall product mix between traditional and fashion
merchandise. See "Risk Factors--Seasonality."
We generally receive orders from our retailers approximately five to seven
months prior to shipment. For approximately 80.0% of our sales, we have orders
from our retailers before we place orders with our suppliers. A summary of the
order and delivery cycle for our four primary selling seasons is illustrated
below:
MERCHANDISE SEASON ADVANCE ORDER PERIOD DELIVERY PERIOD TO RETAILERS
------------------ -------------------- ----------------------------
Spring June to August January to March
Summer August to October April and May
Fall November to January July to September
Holiday February and March October and November
Sales and receivables are recorded when inventory is shipped, with payment
terms generally 30 to 60 days from the date of shipment. At January 31, 1999,
our backlog of orders for our products, all of which are expected to be shipped
prior to September 1999, was approximately $99.6 million, compared to
approximately $104.4 million at January 31, 1998.
COMPETITION
The retail apparel industry is highly competitive and fragmented. Our
competitors include numerous apparel designers, manufacturers, importers and
licensors, many of which have greater financial and marketing resources than we
do. We believe that the principal competitive factors in the industry are (1)
timeliness, reliability and quality of services provided, (2) market share and
visibility, (3) price, and (4) the ability to anticipate consumer demands and
maintain appeal of products to customers.
The level of competition and the nature of our competitors varies by
product segment. We believe mass-market manufacturers are our main competitors
in the less expensive segment of the market, and American and foreign designers
and licensors are our main competitors in the more upscale segment of the
market. We believe that our continued dedication to customer service, product
assortment and quality control, as well as our selective pursuit of licensing
and acquisition opportunities, directly addresses the competitive factors listed
above in all market segments. To date, we have competed successfully, but there
can be no guarantee that we will continue to do so in the future. See "Risk
Factors--Competition."
TRADEMARKS
We hold or have applied for U.S. trademarks for our most significant brand
names. We may be subject to claims and suits against us, as well as the
initiator of claims and suits against others, in the ordinary course of our
business, including claims arising from the use of our trademarks. We do not
believe that the resolution of any pending claims will have a material adverse
affect on our business, financial condition, results of operations or cash
flows.
EMPLOYEES
We employed approximately 370 persons as of April 30, 1999. None of our
employees are subject to a collective bargaining agreement and we believe that
our employee relations are good.
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FACILITIES
Our administrative offices, warehouse and distribution facility are
located in a 238,000 square foot leased facility in Miami which was built to our
specifications and was completed in 1997. The facility is occupied pursuant to
the Lease, which has an initial term expiring in 2003 and a minimum annual
rental payment of approximately $1.1 million and a minimum contingent rental
payment of $12.3 million if we do not renew the lease after the initial 5-year
term. In March 1998, for purposes of potential future expansion, we purchased
certain land adjacent to our facility from a non-affiliated third party for $1.1
million.
We also lease 15,000 square feet of showrooms and offices in New York City
pursuant to a 9-year lease with a non-affiliated third party expiring in
December 2007.
In connection with the Perry Ellis International acquisition, we assumed a
lease expiring in April 2004 on Perry Ellis International, Inc.'s New York City
offices. We intend to integrate the New York operations of Perry Ellis
International, Inc. into our existing New York City facility. In connection with
the John Henry/Manhattan acquisition, we assumed the lease for a shirt
manufacturing facility located in Mexico expiring on July 31, 1999. We intend to
sell or sublease the facility to one of our suppliers for use in the production
of our products. This facility employs a work force of approximately 163 workers
that is subject to a collective bargaining agreement. See "Risk
Factors--Acquisition and Integration Risks; Undertaking Manufacturing
Activities; Unaudited John Henry/Manhattan Financial Information."
In order to monitor Far East production of our respective products, we
maintain an office in Guangzhou and also lease offices jointly with Carfel in
Beijing and Taipei.
LEGAL PROCEEDINGS
We are subject to claims and suits against us, as well as the initiator of
claims and suits against others, in the ordinary course of our business,
including claims arising from the use of our trademarks. We do not believe that
the resolution of any pending claims will have a material adverse affect on our
business, financial condition, results of operations or prospects.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
Our directors and executive officers are as follows:
NAME AGE Position
------------------------- ----- ------------------------------------
George Feldenkreis(1) 63 Chairman of the Board and Chief
Executive Officer
Oscar Feldenkreis 39 President, Chief Operating Officer
and Director
Joseph Roisman 53 Executive Vice President
Fanny Hanono 38 Secretary-Treasurer
Allan Zwerner 54 President of Licensing and Director
Ronald L. Buch 63 Director
Gary Dix(1) 51 Director
Salomon Hanono 49 Director
Richard W. McEwen(2) 78 Director
Leonard Miller(1)(2) 69 Director
- --------------
(1) Member of Audit Committee.
(2) Member of Compensation Committee.
GEORGE FELDENKREIS founded Supreme in 1967. He has been involved in all
aspects of its operations since that time and served as our President and a
Director until February 1993, at which time he was elected Chairman of the Board
and Chief Executive Officer. Mr. Feldenkreis is also a director, executive
officer and principal shareholder of Carfel, an importer and distributor of
automotive parts which he founded in 1961. He is Vice President of the Greater
Miami Jewish Federation and is a trustee of the University of Miami.
OSCAR FELDENKREIS was elected Vice President and a Director in 1979 and
joined Supreme on a full-time basis in 1980. Mr. Feldenkreis has been involved
in all aspects of its operations since that time and was elected President and
Chief Operating Officer in February 1993. Oscar Feldenkreis also serves as a
director of Carfel but does not devote any of his working time to its affairs.
He is also a board member of the Greater Miami Jewish Federation.
JOSEPH ROISMAN was appointed Executive Vice President in September 1995.
Previously, Mr. Roisman, who has been employed by Supreme since 1988, was Vice
President, Sales.
FANNY HANONO was elected Secretary-Treasurer in September 1990. Mrs. Hanono
has been employed by Carfel since 1988 in various administrative positions, most
recently as Vice President of Carfel. Since 1996, Mrs. Hanono has served as a
board member of the Michael-Ann Russell Jewish Community Center.
ALLAN ZWERNER was elected President of Licensing and a Director in April
1999. From September 1998 to present, Mr. Zwerner was Senior Vice
President-General Merchandising Manager, Menswear at J. Crew Group, Inc. From
March 12, 1982 to September 1998, Mr. Zwerner served in a number of executive
positions at Federated Department Stores, Inc., most recently serving as Senior
Vice President- General Merchandising Manager for Market and Product
Development, Men's and Children's Clothing.
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RONALD L. BUCH was elected to Supreme's Board of Directors in January 1996.
Prior to his retirement in 1995, Mr. Buch was employed by Kmart Corporation for
over 39 years, most recently as Vice President and General Merchandise Manager.
GARY DIX was elected to Supreme's Board of Directors in May 1993. Since
February 1994, Mr. Dix, a certified public accountant, has been a partner at
Mallah Furman & Company, P.A., an accounting firm in Miami, Florida. From 1979
to January 1994, Mr. Dix was a partner of Silver Dix & Hammer, P.A., another
Miami accounting firm.
SALOMON HANONO was elected to Supreme's Board of Directors in February
1993. Mr. Hanono has been employed by Carfel in various sales capacities since
1987 and currently is its Export Director, with overall responsibilities for
Carfel's export sales. Mr. Hanono devotes substantially all of his working time
to the affairs of Carfel.
RICHARD W. MCEWEN was elected to Supreme's Board of Directors in September
1994. Mr. McEwen serves as a director of Wometco Enterprises, Inc. Prior to his
retirement in 1985, Mr. McEwen was Chairman of the Board and Chief Executive
Officer of Burdines, a division of Federated Department Stores, Inc.
LEONARD MILLER was elected to Supreme's Board of Directors in May 1993.
Mr. Miller has been Vice President and Secretary of Pasadena Homes, Inc., a home
construction firm in Miami, Florida, since 1959.
George Feldenkreis is the father of Oscar Feldenkreis and Fanny Hanono and
the father-in-law of Salomon Hanono, Fanny Hanono's spouse. There are no other
family relationships among Supreme's directors and executive officers.
Supreme's executive officers are elected annually by the Board of
Directors and serve at the discretion of the Board of Directors.
Supreme's Articles of Incorporation were amended in 1998 to divide the
Board of Directors into three approximately equal classes with staggered terms.
Directors are elected for three-year terms and, in each case, until their
successors are duly elected and qualified or until their earlier death,
resignation or removal. Ronald L. Buch and Salomon Hanono hold office until the
1999 annual meeting of shareholders, Richard W. McEwen, Allan Zwerner and Oscar
Feldenkreis hold office until the 2000 annual meeting of shareholders, and Gary
Dix, Leonard Miller and George Feldenkreis hold office until the 2001 annual
meeting of shareholders.
COMPENSATION OF DIRECTORS
During fiscal 1999, non-employee directors, with the exception of Salomon
Hanono, were compensated at the rate of $1,500 per quarter and $500 for meetings
of the Board of Directors or any committee thereof attended during a quarter, up
to a maximum of $8,000 per annum. Effective April 23, 1999 the rate at which
non-employee directors are compensated has been increased to $5,000 per quarter,
and Mr. Hanono will receive cash compensation for his services as director.
Directors are reimbursed for travel and lodging expenses in connection with
their attendance at meetings. Directors are also entitled to receive options
under the 1993 Plan and Directors' Plan. During fiscal 1999, each employee
director was granted options to purchase 5,000 shares of Common Stock at an
exercise price of $15.75 per share. In April 1999, each of non-employee director
was granted options to purchase 10,000 shares of Common Stock at an exercise
price of $8.81 per share. As of the date of this prospectus, the following
options granted to non-employee directors were outstanding under the 1993 Plan
and the Directors' Plan:
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NAME OF OPTIONEE NUMBER OF SHARES EXERCISE PRICE($) EXPIRATION DATE
- ---------------- ---------------- ----------------- ---------------
Ronald L. Buch 10,000 8.81 April 22, 2009
5,000 15.75 May 7, 2008
Gary Dix 10,000 8.81 April 22, 2009
5,000 15.75 May 7, 2008
11,250 8.00 June 2, 2000
Richard W. McEwen 10,000 8.81 April 22, 2009
5,000 15.75 May 7, 2008
7,500 8.00 June 2, 2000
Leonard Miller 10,000 8.81 April 22, 2009
5,000 15.75 May 7, 2008
11,250 8.00 June 2, 2000
Salomon Hanono 10,000 8.81 April 22, 2009
5,000 15.75 May 7, 2008
11,250 8.00 June 2, 2000
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following compensation table sets forth for fiscal 1999, fiscal 1998 and
fiscal 1997, the cash and certain other compensation paid to the Chief Executive
Officer ("CEO") and such other executive officers whose annual salary and bonus
exceeded $100,000 during fiscal 1999 (together with the CEO, collectively, the
"Named Executive Officers"):
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation Awards
----------------------------------- ---------------------------------
Securities All Other
Name and Fiscal Year Salary Bonus Underlying Compensation
Principal ($) ($) Option/SAR's ($)(1)
Position (#)
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
George Feldenkreis 1999 270,833 55,000 150,000 9,615
Chairman and CEO 1998 125,000 100,000 -- 4,750
1997 120,000 50,000 -- 500
Oscar Feldenkreis 1999 373,000 470,000 55,000 19,542
President and Chief 1998 350,000 460,000 -- 4,750
Operating Officer 1997 350,000 450,000 -- 500
Joseph Roisman 1999 152,000 15,000 3,000 1,109
Executive Vice 1998 147,000 21,000 -- 4,750
President 1997 140,000 10,000 -- 500
</TABLE>
- -------------------
(1) The dollar amount represents Company contributions for the Named Executive
Officer under the Company's 401(k) plan and Company payments for leased
vehicles.
EMPLOYMENT AGREEMENTS
Supreme has an employment agreement with Oscar Feldenkreis, the President
and Chief Operating Officer, which was renewed in May 1998 for a two-year
period. In connection with the renewal of the employment agreement, Mr.
Feldenkreis was granted ten-year options under the 1993 Plan to
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purchase a total of 55,000 shares of Common Stock at an exercise price of $15.75
per share. The employment agreement provides for an annual salary of $350,000,
subject to annual cost-of-living increases, and an annual bonus as may be
determined by the Compensation Committee in its discretion, up to a maximum of
$500,000. In April 1999, the Compensation Committee increased Mr. Feldenkreis'
annual salary to $370,000 and adjusted his annual bonus to be based on the
greater of $470,000 or 4% of the Company's pre tax income. The Compensation
Committee also granted him ten-year options under the 1993 Plan to purchase a
total of 100,000 shares of Common Stock at an exercise price of $8.81 per share,
subject to the approval by the shareholders at the 1999 annual meeting of
shareholders. The employment agreement also prohibits Mr. Feldenkreis from
directly or indirectly competing with us for one year after termination of his
employment for any reason except our termination of Mr. Feldenkreis without
cause. Upon termination of the employment agreement by reason of his death or
disability, Mr. Feldenkreis or his estate will receive a lump sum payment equal
to one year's salary plus a bonus as may be determined by the Compensation
Committee in its discretion.
Supreme also has an employment agreement with George Feldenkreis, the
Chairman of the Board and CEO, which was renewed in May 1998 for a two-year
period. In connection with the renewal of the employment agreement, Mr.
Feldenkreis was granted options under the 1993 Plan to purchase a total of
150,000 shares of Common Stock at an exercise price of $15.75 per share, subject
to the approval by the shareholders at the 1999 annual meeting of shareholders.
The employment agreement provides for an annual salary of $375,000, subject to
annual cost-of-living increases, and an annual bonus as may be determined by the
Compensation Committee in its discretion, up to a maximum of $250,000. George
Feldenkreis' employment agreement contains termination and non-competition
provisions similar to those set forth in Oscar Feldenkreis' agreement. In April
1999, the Compensation Committee increased Mr. Feldenkreis' annual salary to
$400,000 and granted him ten-year options under the 1993 Plan to purchase a
total of 250,000 shares of Common Stock at an exercise price of $8.81 per share.
Supreme is also party to an employment agreement with Allan Zwerner, the
President of Licensing, effective April 1999 and expiring in April 2002.
Pursuant to the employment agreement, Mr. Zwerner was granted options under the
1993 Plan to purchase a total of 25,000 shares of Common Stock vesting over a
three year period and at an exercise price equal to $8.81 per share. The
employment agreement provides for an annual salary of $350,000, subject to
annual cost of living increases and an annual performance bonus up to a maximum
of $175,000. The employment agreement prohibits Mr. Zwerner from directly or
indirectly competing with Supreme for two years after termination of his
employment for any reason.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information concerning individual grants of
options made during fiscal 1999 to any of the Named Executive Officers.
<TABLE>
<CAPTION>
Potential Realizable
Value of Assumed
Annual Rates of
Stock Price
Appreciation For
Option Terms ($)(1)
% of Total -----------------------
Number of Options
Shares Granted to Exercise
Underlying Employees or Base Expiration
Options in Fiscal Price Date 5% 10%
Granted Year ($/Sh)
(#)(1)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
George Feldenkreis 150,000 38.8 15.75 5/07/08 1,485,764 3,765,217
Oscar Feldenkreis 55,000 14.2 15.75 5/07/08 544,780 1,380,579
Joseph Roisman 3,000 0.8 10.00 5/04/03 8,288 18,315
</TABLE>
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- -------------
(1) Based upon the exercise price, which was equal to the fair market on the
date of grant, and annual appreciation at the rate stated on such price
through the expiration date of the options. Amounts represented
hypothetical gains that could be achieved for the options if exercised at
the end of the term. The assumed 5% and 10% rates of stock price
appreciation are provided in accordance with the rules of the Securities
and Exchange Commission (the "Commission") and do not represent the
Company's estimate or projection of the future stock price. Actual gains,
if any, are contingent upon the continued employment of the Named Executive
Officer through the expiration date, as well as being dependent upon the
general performance of the Common Stock. The potential realizable values
have not taken into account amounts required to be paid for federal income
taxes.
STOCK OPTIONS HELD AT END OF FISCAL 1999
The following table indicates the total number and value of exercisable and
unexercisable stock options held by each of the Named Executive Officers as of
January 31, 1999. No options to purchase stock were exercised by any of the
Named Executive Officers in fiscal 1999.
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Options at Fiscal Year-End (#) Options at Fiscal Year-End ($)
------------------------------ ------------------------------
Name Exercisable Unexercisable Exercisable(1) Unexercisable
---- ----------- ------------- -------------- -------------
<S> <C> <C> <C> <C>
George Feldenkreis 150,000 0 37,500 0
Oscar Feldenkreis 100,000 0 354,400 0
Joseph Roisman 12,000 2,500 98,213 13,500
</TABLE>
- -------------
(1) Based on the Nasdaq National Market last sales price for the Company's
Common Stock on January 29, 1999 in the amount of $16.00 per share.
1993 STOCK OPTION PLAN
The purpose of the 1993 Plan is to advance our interests by providing an
additional incentive to attract and retain qualified persons as employees,
directors and consultants upon whose efforts and judgment our success is largely
dependent, through the encouragement of stock ownership in us by such persons.
The 1993 Plan provides for the issuance of incentive stock options
("Incentive Stock Options") and nonqualified stock options ("Nonqualified Stock
Options"). An Incentive Stock Option is an option to purchase Common Stock that
meets the definition of "incentive stock option" set forth in Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"). A Nonqualified Stock
Option is an option to purchase Common Stock that meets certain requirements in
the 1993 Plan but does not meet the definition of an "incentive stock option"
set forth in Section 422 of the Code. Nonqualified Stock Options and Incentive
Stock Options are sometimes referred to herein as "options."
The number of shares of Common Stock that may be issued pursuant to
options granted under the 1993 Plan is 900,000. Supreme's Board of Directors has
approved the amendment of the 1993 Plan, subject to shareholder approval at the
annual meeting of shareholders to be held on June 11, 1999, to increase the
number of shares of common stock that may be issued pursuant to options granted
under the 1993 Plan from 900,000 to 1,500,000. If any option granted pursuant to
the 1993 Plan terminates, expires, or is canceled or surrendered, in whole or in
part, shares subject to the unexercised portion may again be issued pursuant to
the exercise of options granted under the 1993 Plan. The shares acquired upon
exercise of options granted under the 1993 Plan are authorized and unissued
shares of Common Stock. Supreme's shareholders will not have any preemptive
rights to purchase or subscribe for the shares reserved for issuance under the
1993 Plan.
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The 1993 Plan is administered by the Compensation Committee. The
Compensation Committee has the right to determine, among other things, the
persons to whom options are granted, the number of shares of Common Stock
subject to options, the exercise price of options and the terms thereof.
As of April 30, 1999, options to purchase a total 1,141,500 shares of
Common Stock had been granted pursuant to the 1993 Plan, 147,875 of which have
been exercised and 997,000 of which are outstanding (of which 820,187 options
are exercisable). Outstanding options, which are held by approximately 53
persons, are exercisable through various expiration dates from 1999 to 2009.
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PRINCIPAL SHAREHOLDERS
The following table sets forth certain information regarding the
beneficial ownership of the Company's Common Stock as of the date of this
prospectus, by (i) each of the shareholders of the Company who is known by the
Company to own more than 5% of the outstanding shares of Common Stock, (ii) each
director of the Company, (iii) each Named Executive Officer and (iv) all
directors and executive officers of the Company as a group.
NUMBER OF % OF CLASS
NAME AND ADDRESS OF BENEFICIAL OWNER(1)(2) SHARES OUTSTANDING
- ------------------------------------------ ------ -----------
George Feldenkreis(3) 1,988,153 27.9
Oscar Feldenkreis(4) 1,408,188 20.3
Fanny Hanono(5) 399,858 6.0
Salomon Hanono(5)(6) 426,108 6.3
Carfel, Inc.(7) 361,525 5.4
Joseph Roisman(8) 13,500 *
Allan Zwerner(9) 0 *
Ronald Buch(10) 15,750 *
Gary Dix(11) 31,800 *
Richard W. McEwen(12) 24,750 *
Leonard Miller(13) 65,250 *
FMR Corporation
82 Devonshire Street
Boston, Massachusetts 02109(14) 872,500 13.0
The Kaufmann Funds, Inc.
140 East 45th Street, 43rd Floor
New York, New York 10017(15) 450,000 6.7
All directors and executive officers as
a group (10 persons)(16) 3,803,699 51.0
- --------------
Less than 1%.
(1) Except as otherwise indicated, the address of each beneficial owner is c/o
Supreme International Corporation, 3000 N.W. 107th Avenue, Miami, Florida
33172.
(2) Except as otherwise indicated, we believe that all beneficial owners named
in the table have sole voting and investment power with respect to all
shares of Common Stock beneficially owned by them.
(3) Represents (a) 1,141,728 shares of Common Stock held by George Feldenkreis,
(b) 400,000 shares of Common Stock issuable upon the exercise of stock
options held by George Feldenkreis, (c) 361,525 shares of Common Stock held
by Carfel, Inc. ("Carfel") of which company Mr. Feldenkreis is a director,
executive officer and principal shareholder and (d) 84,900 shares of Common
Stock held by a charitable foundation of which George Feldenkreis, Oscar
Feldenkreis and Fanny Hanono are each directors and officers (the
"Foundation").
(4) Represents (a) 1,122,288 shares of Common Stock held by a limited
partnership of which Oscar Feldenkreis is the sole shareholder of the
general partner and the sole limited partner, (b) 1,000 shares of Common
Stock held by Mr. Feldenkreis directly, (c) 200,000 shares of Common Stock
issuable upon the exercise of stock options held by Oscar Feldenkreis and
(d) 84,900 shares held by the Foundation.
(5) Represents (a) 314,958 shares of Common Stock held by a limited partnership
of which Fanny Hanono is the sole shareholder of the general partner and
the sole limited partner and (b) 84,900 shares held by the Foundation.
Fanny Hanono and Salomon Hanono are husband and wife.
(6) Also includes 26,250 shares of Common Stock issuable upon the exercise of
stock options held by Mr. Hanono.
(7) The shares of Common Stock held by Carfel are pledged to a bank to secure
Carfel's credit facility.
(8) Represents (a) 1,500 shares of Common Stock held by Mr. Roisman and (b)
12,000 shares of Common Stock issuable upon the exercise of stock options
held by Mr. Roisman.
(9) Does not include unvested stock options to acquire 25,000 shares of Common
Stock held by Mr. Zwerner. Mr. Zwerner joined the Company as President of
Licensing and a director in April 1999.
(10) Represents (a) 750 shares of Common Stock held by Mr. Buch and (b) 15,000
shares of Common Stock issuable upon the exercise of stock options held by
Mr. Buch.
(11) Represents (a) 3,000 shares of Common Stock held by Mr. Dix, (b) 1,800
shares of Common Stock held in trust for his children, (c) 750 shares held
in an individual retirement account and (d) 26,250 shares of Common Stock
issuable upon the exercise of stock options held by Mr. Dix.
(12) Represents (a) 2,250 shares of Common Stock held by Mr. McEwen and (b)
22,500 shares of Common Stock issuable upon the exercise of stock options
held by Mr. McEwen.
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(13) Represents (a) 39,000 shares of Common Stock held by Mr. Miller and (b)
26,250 shares of Common Stock issuable upon the exercise of stock options
held by Mr. Miller.
(14) Based solely on information contained in an amendment to Schedule 13G dated
December 30, 1998 filed with the Commission. 380,000 of these shares of
Common Stock are owned by Fidelity Capital Appreciation Fund, a
wholly-owned subsidiary of FMR Corporation.
(15) Based solely on information contained in Schedule 13G dated December 31,
1996 filed with the Commission.
(16) Includes the shares of Common Stock and options to purchase shares of
Common Stock described in notes (3) through (6), (8) and (10) through (13).
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
LEASE AGREEMENTS
See "Business--Facilities" with respect to certain facilities leased
jointly by Supreme and Carfel.
Prior to the consolidation of our administrative offices and warehouse and
distribution facilities, we occupied the following properties from affiliated
parties.
We lease an approximately 16,900 square foot building in Miami, Florida
which housed our executive offices. The space is leased from George Feldenkreis,
the Company's Chairman of the Board, pursuant to a lease which expires in
December 2000. The annual rental for the office facility is approximately
$128,000. Supreme will continue to pay rent on this facility until the
expiration of the lease or until the lease of the facility to another party.
We also leased an approximately 49,000 square foot warehouse/office
building adjacent to our former executive offices from George Feldenkreis
pursuant to a lease which expired in April 1998. Fiscal 1999 rental for this
facility was approximately $282,000. In January 1999, we vacated this building.
We also lease an approximately 32,000 square foot warehouse and
approximately 16,900 square feet of office space from a partnership of which Mr.
Feldenkreis is a general partner. This warehouse was leased pursuant to a lease
which expired in June 1998. Fiscal 1999 rental for this facility was
approximately $136,000. This facility is currently being leased on a
month-to-month basis for a monthly rental of $11,333.
LICENSING AGREEMENTS
In January 1995, we entered into a license agreement ("Isaco License
Agreement") with Isaco International, Inc. ("Isaco"), pursuant to which Isaco
was granted an exclusive license to use the Natural Issue brand in the United
States and its territories and possessions to market a line of men's underwear
and loungewear. In June 1998, Supreme and Isaco extended the Isaco License
Agreement for an additional year at a guaranteed minimum royalty of $137,500.
Royalty income earned from Isaco License Agreement amounted to approximately
$298,000, $296,000 and $243,000 for fiscal 1999, 1998 and 1997, respectively.
The principal shareholder of Isaco is Isaac Zelcer, who is Oscar Feldenkreis'
father-in-law.
In January 1998, we entered into two additional three-year license
agreements with Isaco for use of the Natural Issue brand in the United States
and its territories and possessions to market lines of hosiery and neckwear. The
license agreement for neckwear provides for a guaranteed minimum annual royalty
of $15,000 and the license agreement for hosiery provides for a guaranteed
minimum annual royalty of $25,000 during the first year, increasing by $5,000 in
each subsequent year.
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<PAGE>
PURCHASE OF EXISTING NOTES
In connection with the offering of the existing notes, Carfel purchased
$5,000,000 aggregate principal of existing notes. Carfel will not participate in
the exchange offer and has agreed not to sell the existing notes except pursuant
to a shelf registration statement and not before September 13, 1999.
The Company believes that its arrangements with George Feldenkreis, Carfel
and Isaco are on terms at least as favorable as the Company could secure from a
non-affiliated third party.
DESCRIPTION OF OTHER INDEBTEDNESS
SENIOR CREDIT FACILITY
Our Senior Credit Facility, as amended as of March 26, 1999, with
NationsBank, N.A. ("NationsBank"), as agent for a syndicate of lenders (the
"Senior Lenders"), provided us with (a) a revolving credit facility of up to an
aggregate amount of $75.0 million (the "Revolver") and (b) a term loan in the
aggregate amount of $25.0 million (the "Term Loan"). As required by the Senior
Credit Facility, we applied $10.0 million of the net proceeds from the offering
of the existing notes to reduce the principal amount of the Term Loan to $15.0
million. The amended agreement expires in October 2002 and the indebtedness will
rank ahead of the notes. The following is a description of the terms of the
amended agreement and does not purport to be complete and is subject to, and
qualified in its entirety by reference to, all of the provisions of the amended
Senior Credit Facility.
Borrowing Base. Borrowings under the Revolver will not be permitted to
exceed the sum of (a) 85.0% of Supreme's eligible accounts receivable plus (b)
90.0% of Supreme's eligible factored accounts receivables plus (c) 60.0% of
Supreme's eligible inventory minus (d) the full amount of all outstanding
letters of credit issued pursuant to the Senior Credit Facility which are not
fully secured by cash collateral.
The maximum amount of borrowing under the Senior Credit Facility
attributable to (i) eligible factored accounts receivable is $20.0 million, and
(ii) eligible inventory is $30.0 million.
Interest. Interest on the principal balance outstanding under the Revolver
shall accrue, at our option, at either (a) NationsBank's prime lending rate plus
0.50% with adjustments depending upon our ratio of indebtedness to EBITDA at the
time of borrowing or (b) 2.50% above the rate quoted by NationsBank as the
average London interbank offered rate for 1, 2, 3 and 6-month Eurodollar
deposits with adjustments depending upon Supreme's ratio of indebtedness to
EBITDA at the time of the borrowing. Interest on the Term Loan is 25 basis
points higher than that on the Revolver and the Term Loan provides for quarterly
payments of principal, each in the amount of $1,250,000 beginning in July 1999.
Security. As security for the indebtedness under the amended Senior Credit
Facility, we granted the Senior Lenders a first priority security interest in
substantially all of our existing and future assets, whether tangible or
intangible, including, without limitation, accounts receivable, inventory
deposit accounts, general intangibles, intellectual property and equipment.
Guarantees. All of our subsidiaries guaranteed the indebtedness
under the amended Senior Credit Facility.
Certain Covenants. In addition to customary covenants, the amended Senior
Credit Facility contains various restrictive financial and other covenants
including, without limitation, (a) prohibitions on the incurrence of additional
indebtedness or guarantees, (b) restrictions on the creation of additional
liens,
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<PAGE>
(c) certain limitations on dividends and distributions or capital expenditures
by Supreme, (d) restrictions on mergers or consolidations, sales of assets,
investments and transactions with affiliates, (e) a requirement that Supreme
hire a chief financial officer reasonably acceptable to the Senior Lenders prior
to December 21, 1999 and (f) certain financial maintenance tests. Such financial
maintenance tests, include, among others (i) a maximum funded indebtedness to
EBITDA ratio (measured for the prior four fiscal quarters) of (1) 5.5 to 1 as of
any fiscal quarter end on or prior to January 30, 2000, (2) 5.0 to 1 as of any
fiscal quarter end on or after January 31, 2000 but on or prior to January 30,
2001, (3) 4.5 to 1 as of any fiscal quarter end on or after January 31, 2001 but
on or prior to January 30, 2002, or (4) 3.5 to 1 as of any fiscal quarter end
thereafter; (ii) a minimum current ratio of 1.2 to 1 at the end of any fiscal
quarter; (iii) a minimum fixed charge coverage ratio (measured for the prior
four fiscal quarters) of 1.2 to 1 at the end of any fiscal quarter; and (iv) a
minimum net worth of $64.0 million and increasing annually by $5.0 million on
January 31 of each year.
Events of Default. The events of default under the amended Senior Credit
Facility are customary for facilities of such nature and will include payment
and non-payment defaults and certain events of bankruptcy or insolvency.
OTHER DEBT
The Lease. The Lease has an initial term expiring in August 2002, an
annual rental obligation of approximately $1.1 million and an obligation to pay
an additional $12.3 million at the termination of the initial term. The Lease
was entered into with a group of financial institutions to finance our new
office and warehouse facility. The financial institutions assumed our obligation
to purchase the facility and, in turn, leased the facility to us. The
obligations under the Lease are secured by a security interest in substantially
all our existing and future assets, whether tangible or intangible, including,
without limitation, accounts receivable, inventory deposit accounts, general
intangibles, intellectual property and equipment.
In addition to customary covenants the Lease contains various restrictive
financial and other covenants including, without limitation, (a) prohibitions on
the incurrence of additional indebtedness or guarantees, (b) restrictions on the
creation of additional liens, (c) certain limitations on dividends and
distributions or capital expenditures by Supreme, (d) restrictions on mergers or
consolidations, sales of assets, investments and transactions with affiliates,
(e) a requirement that Supreme hire a chief financial officer reasonably
acceptable to the Senior Lenders prior to December 21, 1999 and (f) certain
financial maintenance tests. Such financial maintenance tests, include, among
others (i) a maximum funded indebtedness to EBITDA ratio (measured for the prior
four fiscal quarters) of (1) 5.5 to 1 as of any fiscal quarter end on or prior
to January 30, 2000, (2) 5.0 to 1 as of any fiscal quarter end on or after
January 31, 2000 but on or prior to January 30, 2001, (3) 4.5 to 1 as of any
fiscal quarter end on or after January 31, 2001 but on or prior to January 30,
2002, or (4) 3.5 to 1 as of any fiscal quarter end thereafter; (ii) a minimum
current ratio of 1.2 to 1 at the end of any fiscal quarter; (iii) a minimum
fixed charge coverage ratio (measured for the prior four fiscal quarters) of 1.2
to 1 at the end of any fiscal quarter; and (iv) a minimum net worth of $64.0
million and increasing annually by $5.0 million on January 31 of each year, (v)
a maximum principal amount outstanding under the Senior Credit Facility (as
determined by the amount of eligible receivables and inventory).
Letter of Credit Facilities. We maintain three letter of credit facilities
totaling $60.0 million. Each letter of credit facility is secured by the
consignment of merchandise in transit under such letter of credit. Indebtedness
under these facilities bears interest at variable rates approximately equal to
the lenders' specified base lending rates less 1.0% annually. One letter of
credit facility expires in July 1999 and the other two facilities, aggregating
$15.0 million, have perpetual terms.
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DESCRIPTION OF THE NOTES
The exchange notes will be issued and the existing notes were issued under
an indenture (the "Indenture") among the Company, as issuer, each of the
Guarantors, as guarantors, and State Street Bank and Trust Company, as trustee
(the "Trustee"). Upon the issuance of the exchange notes, if any, or the
effectiveness of the shelf registration statement, the Indenture will be subject
to and governed by the Trust Indenture Act of 1939, as amended (the "Trust
Indenture Act"). References to the Notes include the exchange notes unless the
context otherwise requires.
The following summary of certain provisions of the Indenture and does not
purport to be complete and is subject to, and qualified in its entirety by
reference to, the provisions of the Indenture, including the definitions of
certain terms contained therein and those terms made part of the Indenture by
reference to the Trust Indenture Act. For definitions of certain capitalized
terms used in the following summary, see "--Certain Definitions."
GENERAL
The Notes will mature on April 1, 2006, will be initially limited to
$100,000,000 aggregate principal amount and will be unsecured senior
subordinated obligations of the Company.
Each Note will bear interest at the rate of 12 1/4 from April 6, 1999 or
from the most recent interest payment date to which interest has been paid or
duly provided for, payable in cash on October 1, 1999 and semiannually
thereafter on April 1 and October 1 in each year until the principal thereof is
paid or duly provided for to the Person in whose name the Note (or any
predecessor Note) is registered at the close of business on the March 15 or
September 15 next preceding such interest payment date. Interest will be
computed on the basis of a 360-day year comprised of twelve 30-day months.
Principal of, premium, if any, and interest on the Notes will be payable,
and the Notes will be exchangeable and transferable, at the office or agency of
the Company in The City of New York maintained for such purposes (which
initially will be the corporate trust office of the Trustee); provided, however,
that, at the option of the Company, interest may be paid by check mailed to the
address of the Person entitled thereto as such address shall appear on the
security register. See "--Book Entry; Delivery and Form."
The Notes will be issued only in fully registered form without coupons and
only in denominations of $1,000 and any integral multiple thereof. No service
charge will be made for any registration of transfer, exchange or redemption of
Notes, but the Company may require payment in certain circumstances of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection therewith.
Pursuant to a registration rights agreement entered into in connection
with the offering of the existing notes, the Company and the Guarantors agreed
for the benefit of the holders of the existing notes, at the Company's and the
Guarantors' cost, to effect a registered exchange offer under the Securities Act
to exchange the existing notes for exchange notes, which will have terms
identical in all material respects to the exchange notes (except that the
exchange notes will not contain terms with respect to transfer restrictions or
interest rate increases) and in certain circumstances to register the Notes for
resale under the Securities Act through the shelf registration statement. The
failure to consummate the exchange offer or to register the Notes for resale
under the shelf registration statement may result in the Company paying
additional interest on the Notes.
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Subject to the covenants described below under "--Certain
Covenants" and applicable law, the Company may issue additional Notes
(the "Additional Notes") under the Indenture, provided that the
aggregate principal amount of all Notes issued under the Indenture
does not exceed $125,000,000. The
Notes offered hereby and any Additional Notes subsequently issued would be
treated as a single class for all purposes under the Indenture.
REDEMPTION
Optional Redemption. The Notes will be redeemable at the option of the
Company, as a whole or from time to time in part, at any time on or after April
1, 2003 at the redemption prices (expressed as percentages of principal amount)
set forth below, together with accrued interest, if any, to the date of
redemption, if redeemed during the 12-month period beginning on April 1 of the
years indicated below (subject to the right of holders of record on relevant
record dates to receive interest due on an interest payment date):
YEAR REDEMPTION
PRICE
---------------
2003 106.125%
2004 103.063%
2005 and thereafter . 100.000%
In addition, at any time or from time to time before April 1, 2002, the
Company may redeem up to 35% of the aggregate principal amount of the Notes
(including the principal amount of any Additional Notes) within 60 days of one
or more Public Equity Offerings with the net proceeds of such offering at a
redemption price equal to 112.25% of the principal amount thereof, together with
accrued interest, if any, to the date of redemption (subject to the right of
holders of record on relevant record dates to receive interest due on relevant
interest payment dates); provided that, after giving effect to any such
redemption, at least 65% of the aggregate principal amount of the Notes
initially issued (including the principal amount of any Additional Notes)
remains outstanding.
Mandatory Redemption. Following the occurrence of a Change in Control, the
Company will be required to make an offer to purchase all outstanding Notes at a
price of 101% of the principal amount thereof (determined at the date of
purchase), plus accrued interest thereon, if any, to the date of purchase, and,
upon the occurrence of an Asset Sale, the Company may be obligated to make an
offer to purchase all or a portion of the outstanding Notes at a price of 100%
of the principal amount thereof (determined at the date of purchase), plus
accrued interest, if any, to the date of purchase. See "--Certain
Covenants--Purchase of Notes Upon a Change in Control" and "--Limitation on Sale
of Assets," respectively.
Selection; Effect of Redemption Notice. If less than all the Notes are to
be redeemed, the particular Notes to be redeemed will be selected by the Trustee
in compliance with the requirements of the principal national security exchange,
if any, on which the Notes are listed, or if the Notes are not so listed, by
such method as the Trustee will deem fair and appropriate; provided that no such
partial redemption will reduce the principal amount of a Note not redeemed to
less than $1,000; provided further that any such redemption pursuant to the
provisions relating to a Public Equity Offering shall be made on a pro rata
basis or on as nearly a pro rata basis as practicable (subject to the procedures
of DTC or any other depositary). Notice of redemption will be sent by
first-class mail at least 30 but not more than 60 days before the redemption
date to each holder of Notes to be redeemed at its registered address. On and
after the redemption date, interest will cease to accrue on Notes or portions
thereof called for redemption, unless the Company defaults in the payment of the
redemption price.
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SINKING FUND
The Notes will not be entitled to the benefit of any sinking fund.
RANKING
The payment of the principal of, premium, if any, and interest on the
Notes will be subordinated in right of payment, as set forth in the Indenture,
to the prior payment of all Senior Indebtedness whether outstanding on the date
of the Indenture or thereafter incurred.
In the event of any insolvency or bankruptcy case or proceeding, or any
receivership, liquidation, reorganization or other similar case or proceeding in
connection therewith, relating to the Company or to its assets, or any
liquidation, dissolution or other winding-up of the Company, whether voluntary
or involuntary and whether or not involving insolvency or bankruptcy, or any
assignment for the benefit of creditors or other marshalling of assets or
liabilities of the Company (except in connection with the consolidation or
merger of the Company or its liquidation or dissolution following the
conveyance, transfer or lease of its properties and assets substantially as an
entirety upon the terms and conditions described under "Consolidation, Merger
and Sale of Assets" below), the holders of Senior Indebtedness will be entitled
to receive payment in full in cash or cash equivalents or in any other form
acceptable to each holder of Senior Indebtedness, or provision shall be made for
such payment in full, before the holders of Notes will be entitled to receive
any payment or distribution of any kind or character (other than any payment or
distribution in the form of equity securities or subordinated securities of the
Company or any successor obligor that, in the case of any such subordinated
securities, are subordinated in right of payment to all Senior Indebtedness that
may at the time be outstanding to at least the same extent as the Notes are so
subordinated (such equity securities or subordinated securities hereinafter
being "Permitted Junior Securities") and any payment made pursuant to the
provisions described under "--Defeasance or Covenant Defeasance of Indenture"
from monies or U.S. Government Obligations previously deposited with the
Trustee) on account of principal of, or premium, if any, or interest on the
Notes or on account of the purchase or redemption or other acquisition of Notes.
No payment or distribution of any assets of the Company of any kind or
character, whether in cash, property or securities (other than Permitted Junior
Securities and payments made pursuant to the provisions described under
"--Defeasance or Covenant Defeasance of Indenture" from monies or U.S.
Government Obligations previously deposited with the Trustee), may be made by or
on behalf of the Company on account of principal of, premium, if any, or
interest on the Notes or on account of the purchase, redemption or other
acquisition of Notes upon the occurrence of any default in payment (whether at
stated maturity, upon scheduled installment, by acceleration or otherwise) of
principal of, premium, if any, or interest on Designated Senior Indebtedness (as
defined below) (a "Payment Default") until such Payment Default shall have been
cured or waived or shall have ceased to exist or such Designated Senior
Indebtedness shall have been discharged or paid in full, after which the Company
will resume making any and all required payments in respect of the Notes,
including any missed payments.
No payment or distribution of any assets of the Company of any kind or
character, whether in cash, property or securities (other than Permitted Junior
Securities and payments made pursuant to the provisions described under
"--Defeasance or Covenant Defeasance of Indenture" from monies or U.S.
Government Obligations previously deposited with the Trustee), may be made by or
on behalf of the Company on account of principal of, premium, if any, or
interest on the Notes or on account of the purchase, redemption or other
acquisition of Notes for the period specified below (a "Payment Blockage
Period") upon the occurrence of any default or event of default with respect to
any Designated Senior Indebtedness other than any Payment Default pursuant to
which the maturity thereof may be accelerated
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(a "Non-Payment Default") and receipt by the Trustee of written notice thereof
from the trustee or other representative of holders of Designated Senior
Indebtedness.
The Payment Blockage Period will commence upon the date of receipt by the
Trustee of written notice from the trustee or such other representative of the
holders of Designated Senior Indebtedness in respect of which the Non-Payment
Default exists and shall end on the earliest of (i) 179 days thereafter
(provided that any Designated Senior Indebtedness as to which notice was given
shall not theretofore have been accelerated), (ii) the date on which such
Non-Payment Default is cured, waived or ceases to exist or such Designated
Senior Indebtedness is discharged or paid in full or (iii) the date on which
such Payment Blockage Period shall have been terminated by written notice to the
Trustee or the Company from the trustee or such other representative initiating
such Payment Blockage Period, after which the Company will resume making any and
all required payments in respect of the Notes, including any missed payments. In
any event, not more than one Payment Blockage Period may be commenced during any
period of 360 consecutive days, and there must be a period of at least 181
consecutive days in each period of 360 consecutive days when no Payment Blockage
Period is in effect. No event of default that existed or was continuing on the
date of the commencement of any Payment Blockage Period will be, or can be made,
the basis for the commencement of a subsequent Payment Blockage Period, unless
such default has been cured or waived for a period of not less than 90
consecutive days subsequent to the commencement of such initial Payment Blockage
Period.
In the event that, notwithstanding the provisions of the preceding four
paragraphs, any payment shall be made to the Trustee (and not paid over to the
holders of the Notes) which is prohibited by such provisions, then and in such
event such payment shall be paid over and delivered by the Trustee to the
trustee and any other representative of holders of Designated Senior
Indebtedness, as their interests may appear, for application to Designated
Senior Indebtedness. After all Senior Indebtedness is paid in full and until the
Notes are paid in full, holders of the Notes shall be subrogated (equally and
ratably with all other Indebtedness pari passu with the Notes) to the rights of
holders of Senior Indebtedness to receive distributions applicable to Senior
Indebtedness to the extent that distributions otherwise payable to the holders
of the Notes have been applied to the payment of Senior Indebtedness.
Failure by the Company to make any required payment in respect of the
Notes when due or within any applicable grace period, whether or not occurring
during a Payment Blockage Period, will result in an Event of Default and,
thereafter, holders of the Notes will have the right to accelerate the maturity
thereof. See "--Events of Default."
By reason of such subordination, in the event of liquidation,
receivership, reorganization or insolvency of the Company, creditors of the
Company who are holders of Senior Indebtedness may recover more, ratably, than
the holders of the Notes, and assets which would otherwise be available to pay
obligations in respect of the Notes will be available only after all Senior
Indebtedness has been paid in full, and there may not be sufficient assets
remaining to pay amounts due on any or all of the Notes.
Each Subsidiary Guarantee will be an unsecured senior subordinated
obligation of the respective Guarantor issuing such Subsidiary Guarantee,
ranking pari passu with all other existing and future senior subordinated
indebtedness of such Guarantor, if any. The Indebtedness evidenced by each such
Subsidiary Guarantee will be subordinated on the same basis to the Guarantor
Senior Indebtedness as the Notes are subordinated to Senior Indebtedness.
"Senior Indebtedness" means (i) all obligations of the Company, now or
hereafter existing, under or in respect of the Senior Credit Facility and the
Letter of Credit Facilities, whether for principal, premium, if any, interest
(including interest accruing after the filing of, or which would have accrued
but for the filing of, a petition by or against the Company under Bankruptcy
Law, whether or not such interest
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is allowed as a claim after such filing in any proceeding under such law) and
other amounts due in connection therewith (including any fees, premiums,
expenses and indemnities) and (ii) the principal of, premium, if any, and
interest on all other Indebtedness of the Company (other than the Notes and any
Additional Notes), whether outstanding on the date of the Indenture or
thereafter created, incurred or assumed, unless, in the case of any particular
Indebtedness, the instrument creating or evidencing the same or pursuant to
which the same is outstanding expressly provides that such Indebtedness shall
not be senior in right of payment to the Notes. Notwithstanding the foregoing,
"Senior Indebtedness" shall not include (i) Indebtedness evidenced by the Notes
or any Additional Notes, (ii) Indebtedness of the Company that is expressly
subordinated in right of payment to any Senior Indebtedness of the Company or
the Notes, (iii) Indebtedness of the Company that by operation of law is
subordinate to any general unsecured obligations of the Company, (iv)
Indebtedness of the Company to the extent incurred in violation of any covenant
prohibiting the incurrence of Indebtedness under the Indenture, (v) any
liability for federal, state or local taxes or other taxes, owed or owing by the
Company, (vi) Indebtedness for goods, materials or services purchased in the
ordinary course of business or Indebtedness consisting of trade account payables
or other current liabilities (other than any current liabilities owing under the
Senior Credit Facility, or the current portion of long-term Indebtedness which
would constitute Senior Indebtedness but for the operation of this clause (vi)),
(vii) amounts owed by the Company for compensation to employees or for services
rendered to the Company, (viii) Indebtedness of the Company to any Subsidiary or
any other Affiliate of the Company or any of such Affiliate's Subsidiaries, (ix)
Redeemable Capital Stock of the Company, (x) amounts owing under leases and (xi)
Indebtedness which when incurred and without respect to any election under
Section 1111(b) of Title 11 of the United States Code is without recourse to the
Company or any Restricted Subsidiary.
"Designated Senior Indebtedness" means (i) all Senior Indebtedness under
the Senior Credit Facility and the Hamilton Bank Letter of Credit Facility, and
(ii) any other Senior Indebtedness which, at the time of determination, has an
aggregate principal amount outstanding of at least $25 million and that has been
specifically designated in the instrument evidencing such Senior Indebtedness as
"Designated Senior Indebtedness."
"Guarantor Senior Indebtedness" means, with respect to any Guarantor, (i)
all obligations of such Guarantor, now or hereafter existing, under or in
respect of the Senior Credit Facility and the Letter of Credit Facilities,
whether for principal, premium, if any, interest (including interest accruing
after the filing of, or which would have accrued but for the filing of, a
petition by or against such Guarantor under Bankruptcy Law, whether or not such
interest is allowed as a claim after such filing in any proceeding under such
law) and other amounts due in connection therewith (including any fees,
premiums, expenses and indemnities) and (ii) the principal of, premium, if any,
and interest on all other Indebtedness of such Guarantor (other than the
Subsidiary Guarantee issued by such Guarantor or any guarantee by such Guarantor
of Additional Notes), whether outstanding on the date of the Indenture or
thereafter created, incurred or assumed, unless, in the case of any particular
Indebtedness, the instrument creating or evidencing the same or pursuant to
which the same is outstanding expressly provides that such indebtedness shall
not be senior in right of payment to such Subsidiary Guarantee. Notwithstanding
the foregoing, "Guarantor Senior Indebtedness" of a Guarantor shall not include
(i) Indebtedness evidenced by the Subsidiary Guarantee of such Guarantor or any
guarantee by such Guarantor of Additional Notes, (ii) Indebtedness of such
Guarantor that is expressly subordinated in right of payment to any Guarantor
Senior Indebtedness of such Guarantor, (iii) Indebtedness of such Guarantor that
by operation of law is subordinate to any general unsecured obligations of such
Guarantor, (iv) Indebtedness of such Guarantor to the extent incurred in
violation of any covenant of the Indenture, (v) any liability for federal, state
or local taxes or other taxes, owed or owing by such Guarantor, (vi)
Indebtedness for goods, materials or services purchased in the ordinary course
of business or Indebtedness consisting of trade account payables or other
current liabilities (other than any current liabilities under the Senior Credit
Facility, or the current portion of long-term Indebtedness which would
constitute Guarantor Senior Indebtedness but for the
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operation of this clause (vi)) owed or owing by such Guarantor, (vii) amounts
owed by such Guarantor for compensation to employees or for services rendered to
such Guarantor, (viii) Indebtedness of such Guarantor to the Company or any
other Subsidiary or to any other Affiliate of the Company or any of such
Affiliate's Subsidiaries, (ix) Redeemable Capital Stock of such Guarantor, (x)
amounts owing under leases and (xi) Indebtedness which when incurred and without
respect to any election under Section 1111(b) of Title 11 of the United States
Code is without recourse to such Guarantor.
After giving effect to the issuance and sale of the existing Notes and the
use of the net proceeds therefrom, the John Henry/Manhattan acquisition and the
related Phillips-Van Heusen transactions and consummation of the Perry Ellis
International acquisition, at January 31, 1999, the Company would have had
$133.5 million of consolidated indebtedness outstanding, including $34.6 million
of senior indebtedness (all of which would have been secured and would also have
been Guarantor Senior Indebtedness). In addition, the Company would have had
additional availability under the Senior Credit Facility of approximately $37.6
million, all of which would have been Senior Indebtedness if borrowed. The
Company also would have had approximately $16.3 million in obligations over the
next four years, all of which would have been secured, under the Lease.
SUBSIDIARY GUARANTEES
Payment of the principal of, premium, if any, and interest on the Notes,
when and as the same become due and payable (whether at Stated Maturity or on a
redemption date, or pursuant to a Change in Control Purchase Offer or an Excess
Proceeds Offer, and whether by declaration of acceleration, call for redemption
or otherwise), are guaranteed, jointly and severally, on an unsecured senior
subordinated basis by the Guarantors. The Indenture provides that the
obligations of each Guarantor under its Subsidiary Guarantee will be limited so
as not to constitute a fraudulent conveyance under applicable laws. Each of the
Company's current Restricted Subsidiaries will be Guarantors. Future Restricted
Subsidiaries also may be required to guarantee the Notes. See "Certain
Covenants--Limitation on Guarantees of Indebtedness by Restricted Subsidiaries."
The Indenture provides further that, so long as no Default exists or would
exist, the Subsidiary Guarantee issued by any Guarantor shall be automatically
and unconditionally released and discharged upon any sale, exchange or transfer
to any Person that is not an Affiliate of the Company of all of the Company's
Capital Stock in, or all or substantially all the assets of, such Guarantor
(which transaction is otherwise in compliance with the Indenture, including,
without limitation, the provisions of "--Certain Covenants--Limitation on Sale
of Assets" and "--Limitation on Issuances and Sales of Restricted Stock by
Restricted Subsidiaries").
CERTAIN COVENANTS
The Indenture contains, among others, the following covenants:
Limitation on Indebtedness. The Company will not, and will not permit any
Restricted Subsidiary to, create, issue, assume, guarantee or in any manner
become directly or indirectly liable for the payment of, or otherwise incur
(collectively, "incur"), any Indebtedness (including any Acquired Indebtedness),
other than Permitted Indebtedness; provided, however, that (i) the Company and
any Guarantor may incur Indebtedness, other than Acquisition Indebtedness, if at
the time of such incurrence the Consolidated Fixed Charge Coverage Ratio for the
four full fiscal quarters immediately preceding the incurrence of such
Indebtedness, taken as one period, would have been at least equal to 2:1 and
(ii) the Company and any Guarantor may incur Acquisition Indebtedness if at the
time of such incurrence the Consolidated Fixed Charge Coverage Ratio for the
four full fiscal quarters immediately preceding the incurrence of such
Indebtedness, taken as one period, would have been at least equal to 2.5:1.
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Limitation On Restricted Payments. (a) The Company will not, and
will not permit any Restricted Subsidiary to, directly or indirectly,
take any of the following actions:
(i) declare or pay any dividend on, or make any distribution to
holders of, any shares of the Capital Stock of the Company or any
Restricted Subsidiary (other than dividends or distributions payable solely
in shares of Qualified Capital Stock of the Company or in options, warrants
or other rights to acquire such shares of Qualified Capital Stock) (other
than the declaration or payment of dividends or distributions to the extent
declared or paid to the Company or any Restricted Subsidiary);
(ii) purchase, redeem or otherwise acquire or retire for value,
directly or indirectly, any shares of Capital Stock of the Company or any
Affiliate of the Company (other than Capital Stock of any Wholly Owned
Restricted Subsidiary) or any options, warrants or other rights to acquire
such shares of Capital Stock;
(iii) make any principal payment on, or purchase, redeem, defease or
otherwise acquire or retire for value, prior to any scheduled principal
payment, sinking fund payment or maturity, any Subordinated Indebtedness of
the Company or any Restricted Subsidiary; or
(iv) make any Investment (other than any Permitted Investment) in any
Person (such payments or other actions described in (but not excluded from)
clauses (i) through (iv) are collectively referred to as "Restricted
Payments"), unless at the time of, and immediately after giving effect to,
the proposed Restricted Payment (the amount of any such Restricted Payment,
if other than cash, being the Fair Market Value of the assets to be
transferred), (1) no Default or Event of Default shall have occurred and be
continuing, (2) the Company could incur at least $1.00 of additional
Indebtedness (other than Permitted Indebtedness) pursuant to the
"Limitation on Indebtedness" covenant and (3) the aggregate amount of all
Restricted Payments declared or made after the date of the Indenture shall
not exceed the sum of:
(A) 50% of the Consolidated Adjusted Net Income of the Company
accrued on a cumulative basis during the period beginning on date of
the Indenture and ending on the last day of the Company's last fiscal
quarter ending prior to the date of such proposed Restricted Payment
(or, if such aggregate cumulative Consolidated Adjusted Net Income
shall be a loss, minus 100% of such loss), plus
(B) the aggregate net cash proceeds received after the date of
the Indenture by the Company from the issuance or sale (other than to
any Subsidiary) of shares of Qualified Capital Stock of the Company
(including upon the exercise of options, warrants or rights) or
warrants, options or rights to purchase shares of Qualified Capital
Stock of the Company, plus
(C) the aggregate net cash proceeds received after the date of
the Indenture by the Company from the issuance or sale (other than to
any Subsidiary) of debt securities or Redeemable Capital Stock that
have been converted into or exchanged for Qualified Capital Stock of
the Company, to the extent such securities were originally sold for
cash, together with the aggregate net cash proceeds received by the
Company (other than from a Subsidiary) in connection with such
conversion or exchange, plus
(D) to the extent that any Investment constituting a Restricted
Payment that was made after the date of the Indenture is sold or is
otherwise liquidated or repaid, an amount (to the extent not included
in Consolidated Adjusted Net Income) equal to the lesser of (x) the
cash proceeds
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with respect to such Investment (less the cost of the disposition of
such Investment and net of taxes) and (y) the initial amount of such
Investment, plus
(E) so long as the Designation thereof was treated as a
Restricted Payment that was made after the date of the Indenture, with
respect to any Unrestricted Subsidiary that has been redesignated as a
Restricted Subsidiary after the date of the Indenture in accordance
with the "Limitation on Unrestricted Subsidiaries" covenant, the Fair
Market Value of the Company's interest in such Subsidiary at the time
of such redesignation; provided that such amount shall not in any case
exceed the Designation Amount with respect to such Restricted
Subsidiary upon its Designation, minus the Designation Amount
(measured as of the date of Designation) with respect to any
Restricted Subsidiary which has been designated as an Unrestricted
Subsidiary after the date of the Indenture in accordance with the
"Limitation on Unrestricted Subsidiaries" covenant, plus
(F) $1.0 million.
(b) Notwithstanding paragraph (a) above, the Company and its
Restricted Subsidiaries may take the following actions so long as (with
respect to clauses (ii), (iii), (iv), (v) and (vi) below) at the time of
and after giving effect thereto no Default or Event of Default shall have
occurred and be continuing:
(i) the payment of any dividend within 60 days after the date of
declaration thereof, if at such date of declaration the payment of
such dividend would have complied with the provisions of paragraph (a)
above;
(ii) the purchase, redemption or other acquisition or retirement
for value of any shares of Capital Stock of the Company in exchange
for, or out of the net cash proceeds of a substantially concurrent
issuance and sale (other than to a Subsidiary) of, shares of Qualified
Capital Stock of the Company;
(iii) the purchase, redemption, defeasance or other acquisition
or retirement for value of any Subordinated Indebtedness in exchange
for, or out of the net cash proceeds of a substantially concurrent
issuance and sale (other than to a Subsidiary) of, shares of Qualified
Capital Stock of the Company;
(iv) the purchase of any Indebtedness that is expressly
subordinated in right of payment to the Notes at a purchase price not
greater than 101% of the principal amount thereof in the event of a
Change in Control in accordance with provisions similar to the
"Purchase of Notes upon a Change in Control" covenant; provided that
prior to such purchase the Company has made the Change in Control
Offer as provided in such covenant with respect to the Notes and has
purchased all Notes validly tendered for payment in connection with
such Change in Control Offer;
(v) the purchase, redemption, defeasance or other acquisition or
retirement for value of any Subordinated Indebtedness (other than
Redeemable Capital Stock) in exchange for, or out of the net cash
proceeds of a substantially concurrent incurrence (other than to a
Subsidiary) of, new Subordinated Indebtedness of the Company or the
Restricted Subsidiary whose Subordinated Indebtedness is being
purchased, redeemed, defeased, acquired or retired so long as (A) the
principal amount of such new Subordinated Indebtedness does not exceed
the principal amount (or, if such Subordinated Indebtedness being
refinanced provides for an amount less than the principal amount
thereof to be due and payable upon a declaration of acceleration
thereof, such lesser amount as of the date of determination) of the
Indebtedness being so purchased, redeemed,
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defeased, acquired or retired, plus either the amount of any premium
required to be paid in connection with such refinancing pursuant to
the terms of such Indebtedness being refinanced or the amount of any
premium reasonably determined by the Company as necessary to
accomplish such refinancing, plus, in either case, the amount of
reasonable expenses of the Company incurred in connection with such
refinancing, (B) such new Subordinated Indebtedness is subordinated to
the Notes to the same extent as such Indebtedness so purchased,
redeemed, defeased, acquired or retired and (C) such new Indebtedness
has an Average Life longer than the Average Life of the Notes and no
scheduled principal payment prior to the 91st day after the final
Stated Maturity of principal of the Notes; and
(vi) purchases or redemptions of Capital Stock (including cash
settlements of stock options) held by employees, officers or directors
of the Company or any of its subsidiaries upon their death, disability
or termination of employment with the Company or one of its
subsidiaries; provided that such payments shall not exceed $1.0
million in any fiscal year in the aggregate or $3.0 million in the
aggregate during the term of the Notes.
The actions described in clauses (i), (ii), (iii), (iv) and (vi) of this
paragraph (b) shall be Restricted Payments that shall be permitted to be taken
in accordance with this paragraph (b) but shall reduce the amount that would
otherwise be available for Restricted Payments under clause (3) of paragraph (a)
above and the actions described in clause (v) of this paragraph (b) shall be
Restricted Payments that shall be permitted to be taken in accordance with this
paragraph (b) and shall not reduce the amount that would otherwise be available
for Restricted Payments under clause (3) of paragraph (a).
Limitation on Issuances and Sales of Preferred Stock by Restricted
Subsidiaries. The Indenture provides that the Company (i) will not permit any
Restricted Subsidiary to issue any Preferred Stock (other than to the Company or
a Wholly Owned Restricted Subsidiary) and (ii) will not permit any person (other
than the Company or a Wholly Owned Restricted Subsidiary) to own any Preferred
Stock of any Restricted Subsidiary.
Limitation on Transactions with Affiliates. The Company will not, and will
not permit any Restricted Subsidiary to, directly or indirectly, enter into or
suffer to exist any transaction or series of related transactions (including,
without limitation, the sale, purchase, exchange or lease of assets, property or
services) with, or for the benefit of, any Affiliate of the Company or any
Restricted Subsidiary (other than the Company or a Wholly Owned Restricted
Subsidiary) (collectively, "Interested Persons"), unless (i) such transaction or
series of transactions are on terms that are no less favorable to the Company or
such Restricted Subsidiary, as the case may be, than would have been able to be
obtained in an arm's-length transaction with third parties that are not
Interested Persons, (ii) with respect to any transaction or series of related
transactions involving aggregate consideration equal to or greater than $1.0
million, the Company has delivered an officers' certificate to the Trustee
certifying that such transaction or series of transactions complies with clause
(i) above, (iii) with respect to any transaction or series of related
transactions involving aggregate consideration equal to or greater than $5.0
million, such transaction or series of related transactions (x) has been
approved by the Board of Directors of the Company (including a majority of the
Disinterested Directors of the Company) or (y) the Company has obtained a
written opinion from a nationally recognized investment banking or valuation
firm certifying that such transaction or series of related transactions is fair
to the Company or its Restricted Subsidiary, as the case may be, from a
financial point of view and (iv) with respect to any transaction or series of
related transactions involving aggregate consideration equal to or greater than
$10.0 million, the Company has obtained a written opinion from a nationally
recognized investment banking or valuation firm certifying that such transaction
or series of transactions is fair to the Company or its Restricted Subsidiaries,
as the case may be, from a financial point of view; provided, however, that this
covenant will not restrict (1) the Company from paying regular compensation and
fees to directors of the Company or any Restricted
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Subsidiary who are not employees of the Company or any Restricted Subsidiary
which are reasonable and customary for comparable companies in the same
industry, (2) loans and advances to officers, directors and employees of the
Company or any Restricted Subsidiary in the ordinary course of business in
accordance with the past practices of the Company or any Restricted Subsidiary
not to exceed $1.0 million in the aggregate outstanding at any time, (3) any
transactions made in compliance with the "Limitation on Restricted Payments"
covenant, (4) the performance of any written agreement as in effect on the date
of the Indenture, (5) the joint leasing of offices with Carfel, Inc. in Beijing,
the People's Republic of China, and Taipei, the Republic of China, under such
arrangements as are in effect on the date of the Indenture and as such
arrangements may be renewed on substantially similar terms and (6) the leasing
of approximately 32,000 square feet of warehouse space and 16,900 square feet of
office space from George Feldenkreis or his Affiliates, on a month-to-month
basis at monthly rents not to exceed $12,000 each.
Limitation on Liens. The Company will not, and will not permit any
Restricted Subsidiary to, directly or indirectly, create, incur, assume or
suffer to exist any Lien securing Pari Passu Indebtedness or Subordinated
Indebtedness on or with respect to any of its property or assets, including any
shares of stock or indebtedness of any Restricted Subsidiary, whether owned at
the date of the Indenture or thereafter acquired, or any income, profits or
proceeds therefrom, or assign or otherwise convey any right to receive income
thereon, unless (x) in the case of any Lien securing Pari Passu Indebtedness,
the Notes or the Subsidiary Guarantee of such Restricted Subsidiary, as the case
may be, are secured by a Lien on such property, assets or proceeds that is
senior in priority to or pari passu with such Lien and (y) in the case of any
Lien securing Subordinated Indebtedness, the Notes or the Subsidiary Guarantee
of such Restricted Subsidiary, as the case may be, are secured by a Lien on such
property, assets or proceeds that is senior in priority to such Lien; provided,
however, that this covenant shall not apply to Liens as in effect on the date of
the Indenture securing the Lease.
Purchase of Notes Upon a Change in Control. If a Change in Control shall
occur at any time, then each holder of Notes will have the right to require that
the Company purchase such holder's Notes, in whole or in part in integral
multiples of $1,000, at a purchase price (the "Change in Control Purchase
Price") in cash in an amount equal to 101% of the principal amount thereof, plus
accrued interest, if any, to the date of purchase (the "Change in Control
Purchase Date"), pursuant to the offer described below (the "Change in Control
Offer") and the other procedures set forth in the Indenture.
Within 30 days following any Change in Control, the Company shall notify
the Trustee thereof and give written notice of such Change in Control to each
holder of Notes by first-class mail, postage prepaid, at the address of such
holder appearing in the security register, stating, among other things, (i) the
Change in Control Purchase Price and the Change in Control Purchase Date, which
shall be a Business Day no earlier than 30 days nor later than 60 days from the
date such notice is mailed, or such later date as is necessary to comply with
requirements under the Exchange Act or any applicable securities laws or
regulations; (ii) that any Note not tendered will continue to accrue interest;
(iii) that, unless the Company defaults in the payment of the Change in Control
Purchase Price, any Notes accepted for payment pursuant to the Change in Control
Offer shall cease to accrue interest after the Change in Control Purchase Date;
and (iv) certain procedures that a holder of Notes must follow to accept a
Change in Control Offer or to withdraw such acceptance.
If a Change in Control Offer is made, there can be no assurance that the
Company will have available funds sufficient to pay the Change in Control
Purchase Price for all of the Notes that might be delivered by holders of the
Notes seeking to accept the Change in Control Offer. Additionally, restrictions
in the Senior Credit Facility do not allow the repurchase of the Notes in the
event of a Change in Control. The failure of the Company to make or consummate
the Change in Control Offer or pay the Change in Control Purchase Price when due
would result in an Event of Default and would give the Trustee and the holders
of the Notes the rights described under "--Events of Default."
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One of the events which constitutes a Change in Control under the
Indenture is the disposition of "all or substantially all" of the Company's
assets. This term has not been interpreted under New York law (which is the
governing law of the Indenture) to represent a specific quantitative test. As a
consequence, in the event holders of the Notes elect to require the Company to
purchase the Notes and the Company elects to contest such election, there can be
no assurance as to how a court interpreting New York law would interpret the
phrase.
The existence of a holder's right to require the Company to purchase such
holder's Notes upon a Change in Control may deter a third party from acquiring
the Company in a transaction that constitutes a Change in Control.
The Company will not, and will not permit any Restricted Subsidiary to,
create or permit to exist or become effective any restriction (other than
restrictions existing under the Senior Credit Facility or under Indebtedness as
in effect on the date of the Indenture) that would materially impair the ability
of the Company to make a Change in Control Offer to purchase the Notes or, if
such Change in Control Offer is made, to pay for the Notes tendered for
purchase.
The Company will comply with the applicable tender offer rules, including
Rule 14e-1 under the Exchange Act, and any other applicable securities laws and
regulations in connection with a Change in Control Offer.
Limitation on Sale of Assets.
(a) The Company will not, and will not permit any Restricted Subsidiary to,
engage in any Asset Sale unless (i) the consideration received by the Company or
such Restricted Subsidiary for such Asset Sale is not less than the fair market
value of the assets sold (as determined by the Board of Directors of the
Company, whose determination shall be conclusive and evidenced by a Board
Resolution) and (ii) at least 75% of such consideration consists of cash or Cash
Equivalents; provided, however, that (I) the amount of any Indebtedness of a
Restricted Subsidiary that is not a Guarantor or any Senior Indebtedness of the
Company or Guarantor Senior Indebtedness of any Guarantor that is assumed by the
transferee in such Asset Sale and from which the Company and the Restricted
Subsidiaries are fully released shall be deemed to be cash for purposes of
determining the percentage of cash consideration received by the Company and its
Restricted Subsidiaries (excluding any liabilities that are incurred in
connection with or in anticipation of such Asset Sale) and (II) any securities,
notes or other similar obligations received by the Company or such Restricted
Subsidiary from such transferee that are converted within 30 days of the related
Asset Sale into cash or Cash Equivalents (to the extent of the cash or Cash
Equivalents received) shall be deemed to be cash for purposes of determining the
percentage of cash consideration received by the Company or the Restricted
Subsidiaries.
(b) If the Company or any Restricted Subsidiary engages in an Asset Sale, the
Company may use the Net Cash Proceeds thereof, within 365 days after such Asset
Sale, to (i) permanently repay or prepay any then outstanding Indebtedness of
any Restricted Subsidiary that is not a Guarantor or Senior Indebtedness of the
Company or Senior Guarantor Indebtedness of any Restricted Subsidiary (and to
correspondingly reduce commitments with respect thereto) or (ii) invest (or
enter into a legally binding agreement to invest) in other properties or assets
to replace the properties or assets that were the subject of the Asset Sale or
in properties and assets that will be used in businesses of the Company or its
Restricted Subsidiaries, as the case may be, existing at the time such assets
are sold. If any such legally binding agreement to invest such Net Cash Proceeds
is terminated, then the Company may, within 90 days of such termination or
within 365 days of such Asset Sale, whichever is later, invest such Net Cash
Proceeds as provided in clause (i) or (ii) (without regard to the parenthetical
contained in such clause (ii)) above. The amount of such Net Cash Proceeds not
so used as set forth above in this paragraph (b) constitutes "Excess Proceeds."
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(c) When the aggregate amount of Excess Proceeds exceeds $10.0 million, the
Company shall, within 30 business days, make an offer to purchase (an "Excess
Proceeds Offer") from all holders of Notes, on a pro rata basis, that aggregate
principal amount of Notes as can be purchased with the Note Portion of Excess
Proceeds (defined below) at a price in cash equal to 100% of the aggregate
principal amount of the Notes plus accrued and unpaid interest, if any, to the
date such Excess Proceeds Offer is consummated. To the extent that the aggregate
principal amount of Notes validly tendered and not withdrawn pursuant to an
Excess Proceeds Offer is less than the Note Portion of Excess Proceeds, the
Company may use such surplus for general corporate purposes. If the aggregate
principal amount of Notes validly tendered and not withdrawn by Holders thereof
exceeds the amount of Notes that can be purchased with the Note Portion of
Excess Proceeds, Notes to be purchased will be selected PRO RATA based on the
aggregate principal amount of Notes tendered by each holder. Upon completion of
an Excess Proceeds Offer, the amount of Excess Proceeds shall be reset to zero.
In the event that any other Indebtedness of the Company that ranks pari
passu with the Notes (the "Other Debt") requires an offer to purchase to be made
to repurchase such Other Debt upon the consummation of an Asset Sale, the
Company may apply the Excess Proceeds otherwise required to be applied to an
Excess Proceeds Offer to offer to purchase such Other Debt and to an Excess
Proceeds Offer so long as the amount of such Excess Proceeds applied to purchase
the Notes is not less than the Note Portion of Excess Proceeds. With respect to
any Excess Proceeds, the Company shall make the Excess Proceeds Offer in respect
thereof at the same time as the analogous offer to purchase is made pursuant to
any Other Debt and the purchase date in respect thereof shall be the same as the
purchase date in respect of any Other Debt.
For purpose of this covenant, "Note Portion of Excess Proceeds" means (1)
if no Other Debt is being offered to be purchased, the amount of the Excess
Proceeds and (2) if Other Debt is being offered to be purchased, the amount of
the Excess Proceeds equal to the product of (z) the Excess Proceeds and (y) a
fraction the numerator of which is the aggregate principal amount of the
outstanding Notes (the "Note Amount") and the denominator of which is the sum of
the Note Amount and the aggregate principal amount (or accreted value in the
case of original issue discount Other Debt) as of the relevant purchase date of
all outstanding Other Debt for which an offer to purchase is being made in
compliance with this covenant.
In the event that the Company makes an Excess Proceeds Offer, the Company
shall comply with any applicable securities laws and regulations, including any
applicable requirements of Section 14(e) of, and Rule 14e-1 under, the Exchange
Act, and any other applicable Federal or state securities laws and regulations
and any applicable requirements of any securities exchange on which the Notes
are listed.
Limitation on Guarantees of Indebtedness by Restricted Subsidiaries. (a) The
Company will not permit any Restricted Subsidiary that is not a Guarantor,
directly or indirectly, to guarantee, assume or in any other manner become
liable with respect to any Indebtedness of the Company or any other Restricted
Subsidiary unless (i)(A) such Restricted Subsidiary simultaneously executes and
delivers a supplemental indenture, in form satisfactory to the Trustee,
providing for a guarantee on the same terms as the guarantee of such
Indebtedness of the obligations under the Notes and the Indenture by such
Restricted Subsidiary which Subsidiary Guarantee will be subordinated to the
Guarantor Senior Indebtedness of such Restricted Subsidiary to the same extent
that the Notes are subordinated to Senior Indebtedness and (B), with respect to
any guarantee of Subordinated Indebtedness, any such guarantee shall be
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subordinated to such Restricted Subsidiary's Subsidiary Guarantee at least to
the same extent as such Subordinated Indebtedness is subordinated to the Notes,
and (ii) such Restricted Subsidiary delivers to such Trustee an opinion of
counsel reasonably satisfactory to the Trustee to the effect that such
supplemental indenture has been duly executed and delivered by such Restricted
Subsidiary and is in compliance with the terms of the Indenture.
(b) Notwithstanding the foregoing, any guarantee of the Notes created
pursuant to the provisions described in the foregoing paragraph (a) will provide
by its terms that it will be automatically and unconditionally released and
discharged upon (i) any sale, exchange or transfer to any Person not an
Affiliate of the Company of all of the Company's Capital Stock in, or all or
substantially all the assets of, the applicable Guarantor (which sale, exchange
or transfer is otherwise in compliance with the Indenture) or (ii) the release
by the holders of the Indebtedness of the Company described in the preceding
paragraph of their guarantee by such Restricted Subsidiary (including any deemed
release upon payment in full of all obligations under such Indebtedness), at a
time when (A) no other Indebtedness of the Company has been guaranteed by such
Restricted Subsidiary or (B) the holders of all such other Indebtedness which is
guaranteed by such Restricted Subsidiary also release their guarantee by such
Restricted Subsidiary (including any deemed release upon payment in full of all
obligations under such Indebtedness).
Limitation on Dividends and Other Payment Restrictions Affecting
Restricted Subsidiaries. The Company will not, and will not permit any
Restricted Subsidiary to, directly or indirectly, create or otherwise cause or
suffer to exist or become effective any consensual encumbrance or restriction of
any kind on the ability of any Restricted Subsidiary to (a) pay dividends, in
cash or otherwise, or make any other distributions on or in respect of its
Capital Stock to the Company or any other Restricted Subsidiary, (b) pay any
Indebtedness owed to the Company or any other Restricted Subsidiary, (c) make
loans or advances to the Company or any other Restricted Subsidiary, (d)
transfer any of its properties or assets to the Company or any other Restricted
Subsidiary (other than customary restrictions on transfers of property subject
to a Lien permitted under the Indenture that would not materially adversely
affect the Company's ability to satisfy its obligations under the Notes and the
Indenture) or (e) guarantee any Indebtedness of the Company or any other
Restricted Subsidiary, except for such encumbrances or restrictions existing
under or by reason of (i) applicable law, (ii) customary provisions restricting
subletting or assignment of any lease or assignment of any other contract to
which the Company or any Restricted Subsidiary is a party or to which any of
their respective properties or assets are subject, (iii) any agreement or other
instrument of a Person acquired by the Company or any Restricted Subsidiary in
existence at the time of such acquisition (but not created in contemplation
thereof), which encumbrance or restriction is not applicable to any Person, or
the properties or assets of any Person, other than the Person, or the property
or assets of the Person, so acquired, (iv) encumbrances and restrictions in
effect on the Issue Date pursuant to the Senior Credit Facility and its related
documentation, (v) any encumbrance or restriction contained in contracts for
sales of assets permitted by the "Limitation on Sale of Assets" covenant with
respect to the assets to be sold pursuant to such contracts and (vi) any
encumbrance or restriction existing under any agreement that extends, renews,
refinances or replaces the agreements containing the encumbrances or
restrictions in the foregoing clauses (iii) and (iv); provided that the terms
and conditions of any such encumbrances or restrictions are not materially less
favorable to the holders of the Notes than those under or pursuant to the
agreement so extended, renewed, refinanced or replaced.
Limitation on Sale and Leaseback Transactions. The Company will not, and
will not permit any Restricted Subsidiary to, directly or indirectly, enter into
any Sale and Leaseback Transaction with respect to any property or assets
(whether now owned or hereafter acquired), unless (i) the sale or transfer of
such property or assets to be leased is treated as an Asset Sale and the Company
complies the "Limitation on Sale of Assets" covenant and (ii) the Company or
such Restricted Subsidiary would be permitted to incur Indebtedness under the
"Limitation on Indebtedness" covenant in the amount of the Capitalized Lease
Obligations incurred in respect of such Sale and Leaseback Transaction.
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Limitation on Other Senior Subordinated Indebtedness. Neither the Company
nor any Restricted Subsidiary will incur, create, assume, guarantee or in any
other manner become directly or indirectly liable with respect to or responsible
for, or permit to remain outstanding, any Indebtedness, other than the Notes,
that is subordinate or junior in right of payment to any Senior Indebtedness
unless such Indebtedness is also pari passu with, or subordinate in right of
payment to, the Notes pursuant to subordination provisions substantially similar
to those contained in the Indenture.
Limitation on Unrestricted Subsidiaries.
(d) The Board of Directors of the Company may designate any Subsidiary
(other than a Guarantor) to be an "Unrestricted Subsidiary" (a "Designation")
only if:
(i) no Default shall have occurred and be continuing at the time of or
after giving effect to such designation;
(ii) the Company would be permitted to make an Investment (other than
a Permitted Investment) at the time of Designation (assuming the
effectiveness of such designation) pursuant to the first paragraph of the
"Limitation on Restricted Payments" covenant in an amount (the "Designation
Amount") equal to the greater of (1) the net book value on such date of the
Company's interest in such Subsidiary calculated in accordance with GAAP or
(2) the Fair Market Value on such date of the Company's interest in such
Subsidiary as determined in good faith by the Company's Board of Directors;
(iii) the Company would be permitted under the Indenture to incur
$1.00 of additional Indebtedness (other than Permitted Indebtedness)
pursuant to the "Limitation on Indebtedness" covenant at the time of such
designation (assuming the effectiveness of such designation); and
(iv) such Unrestricted Subsidiary does not own any Capital Stock in
any Restricted Subsidiary of the Company which is not simultaneously being
designated an Unrestricted Subsidiary.
In the event of any such Designation, the Company shall be deemed to have
made an Investment constituting a Restricted Payment pursuant to the "Limitation
on Restricted Payments" covenant for all purposes of the Indenture in an amount
equal to the greater of (1) the net book value of the Company's interest in such
Subsidiary calculated in accordance with GAAP or (2) the Fair Market Value of
the Company's interest in such Subsidiary as determined in good faith by the
Board of Directors of the Company.
The Indenture will further provide that neither the Company nor any
Restricted Subsidiary shall at any time (x) provide a guarantee of, or similar
credit support to, any Indebtedness of any Unrestricted Subsidiary (including of
any undertaking, agreement or instrument evidencing such Indebtedness); provided
that the Company may pledge Capital Stock of any Unrestricted Subsidiary on a
nonrecourse basis such that the pledgee has no claim whatsoever against the
Company other than to obtain such pledged property, (y) be directly or
indirectly liable for any Indebtedness of any Unrestricted Subsidiary or (z) be
directly or indirectly liable for any other Indebtedness that provides that the
holder thereof may (upon notice, lapse of time or both) declare a default
thereon (or cause the payment thereof to be accelerated or payable prior to its
final scheduled maturity) upon the occurrence of a default with respect to any
other Indebtedness that is Indebtedness of an Unrestricted Subsidiary (including
any corresponding right to take enforcement action against such Unrestricted
Subsidiary).
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(e) The Board of Directors of the Company may designate any Unrestricted
Subsidiary as a Restricted Subsidiary if:
(i) no Default or Event of Default shall have occurred and be
continuing at the time of and after giving effect to such designation; and
(ii) all Liens and Indebtedness of such Unrestricted Subsidiary
outstanding immediately following such designation would, if incurred at
such time, have been permitted to be incurred for all purposes under the
Indenture.
Any such designation as an Unrestricted Subsidiary or Restricted Subsidiary
by the Board of Directors of the Company shall be evidenced to the Trustee by
filing a board resolution with the Trustee giving effect to such designation.
Reports. The Company will file on a timely basis with the Commission, to the
extent such filings are accepted by the Commission and whether or not the
Company has a class of securities registered under the Exchange Act, the annual
reports, quarterly reports and other documents that the Company would be
required to file if it were subject to Section 13 or 15 of the Exchange Act. The
Company will also be required (a) to file with the Trustee, and provide to each
holder of Notes, without cost to such holder, copies of such reports and
documents within 15 days after the date on which the Company files such reports
and documents with the Commission or the date on which the Company would be
required to file such reports and documents if the Company were so required, and
(b) if filing such reports and documents with the Commission is not accepted by
the Commission or is prohibited under the Exchange Act, to supply at the
Company's cost copies of such reports and documents to any prospective holder of
Notes promptly upon written request. If any Guarantor's financial statements
would be required to be included in the financial statements filed or delivered
pursuant to the Indenture if the Company were subject to Section 13 or 15(d) of
the Exchange Act, the Company shall include such Guarantor's financial
statements in any filing or delivery pursuant to the Indenture. The Indenture
also provides that, so long as any of the Notes remain outstanding, the Company
will make available to any prospective purchaser of Notes or beneficial owner of
Notes in connection with any sale thereof the information required by Rule
144A(d)(4) under the Securities Act, until such time as the Company has either
exchanged the Notes for securities identical in all material respects which have
been registered under the Securities Act or until such time as the holders
thereof have disposed of such Notes pursuant to an effective registration
statement under the Securities Act.
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Company will not, in a single transaction or through a series of
transactions, consolidate with or merge with or into any other Person or sell,
assign, convey, transfer, lease or otherwise dispose of all or substantially all
of its properties and assets as an entirety to any other Person or Persons or
permit any of its Restricted Subsidiaries to enter into any such transaction or
series of transactions if such transaction or series of transactions, in the
aggregate, would result in the sale, assignment, conveyance, transfer, lease or
other disposition of all or substantially all of the properties and assets of
the Company and its Restricted Subsidiaries on a consolidated basis to any other
Person or Persons, unless at the time and immediately after giving effect
thereto (i) either (a) the Company will be the continuing corporation or (b) the
Person (if other than the Company) formed by such consolidation or into which
the Company or such Restricted Subsidiary is merged or the Person that acquires
by sale, assignment, conveyance, transfer, lease or disposition all or
substantially all the properties and assets of the Company and its Restricted
Subsidiaries on a consolidated basis (the "Surviving Entity") (1) will be a
corporation duly organized and validly existing under the laws of the United
States of America, any state thereof or the District of Columbia and (2) will
expressly assume, by a supplemental indenture in form reasonably satisfactory to
the Trustee, the
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Company's obligation for the due and punctual payment of the principal of,
premium, if any, and interest on all the Notes and the performance and
observance of every covenant of the Indenture on the part of the Company to be
performed or observed; (ii) immediately before and immediately after giving
effect to such transaction or series of transactions on a pro forma basis (and
treating any obligation of the Company or any Restricted Subsidiary incurred in
connection with or as a result of such transaction or series of transactions as
having been incurred at the time of such transaction), no Default or Event of
Default will have occurred and be continuing; (iii) immediately after giving
effect to such transaction or series of transactions on a pro forma basis (on
the assumption that the transaction or series of transactions occurred on the
first day of the four-quarter period immediately prior to the consummation of
such transaction or series of transactions with the appropriate adjustments with
respect to the transaction or series of transactions being included in such pro
forma calculation), the Company (or the Surviving Entity if the Company is not
the continuing obligor under the Indenture) could incur at least $1.00 of
additional Indebtedness (other than Permitted Indebtedness) under the provisions
of the "Limitation on Indebtedness" covenant; (iv) each Guarantor, if any,
unless it is the other party to the transactions described above, shall have by
supplemental indenture confirmed that its Subsidiary Guarantee will apply to
such Person's obligations under the Indenture and the Notes; and (v) if any of
the property or assets of the Company or any of its Restricted Subsidiaries
would thereupon become subject to any Lien, the provisions of the "Limitation on
Liens" covenant are complied with.
In connection with any such consolidation, merger, sale, assignment,
conveyance, transfer, lease or other disposition, the Company or the Surviving
Entity shall have delivered to the Trustee, in form and substance reasonably
satisfactory to the Trustee, an officers' certificate and an opinion of counsel,
each stating that such consolidation, merger, sale, assignment, conveyance,
transfer, lease or other disposition, and if a supplemental indenture is
required in connection with such transaction, such supplemental indenture,
comply with the requirements of the Indenture and that all conditions precedent
therein provided for relating to such transaction have been complied with.
Each Guarantor, if any (other than any Subsidiary whose Subsidiary
Guarantee is being released pursuant to the provisions under "--Subsidiary
Guarantees" or "--Certain Covenants--Limitation on Issuance of Guarantees of
Indebtedness by Subsidiaries" as a result of such transaction), shall not, and
the Company will not permit a Guarantor to, in a single transaction or through a
series of related transactions, merge or consolidate with or into any other
corporation or other entity (other than the Company or any Guarantor), or sell,
assign, convey, transfer, lease or otherwise dispose of its properties and
assets on a consolidated basis substantially as an entirety to any entity (other
than the Company or any Guarantor) unless (i) either (a) such Guarantor shall be
the continuing corporation or (b) the Person (if other than such Guarantor)
formed by such consolidation or into which such Guarantor is merged or the
entity which acquires by sale, assignment, conveyance, transfer, lease or
disposition all or substantially all of the properties and assets of such
Guarantor, as the case may be, shall be a corporation organized and validly
existing under the laws of the United States, any state thereof or the District
of Columbia, and shall expressly assume by an indenture supplemental to the
Indenture, executed and delivered to the Trustee, in form satisfactory to the
Trustee, all the obligations of such Guarantor under the Notes and the
Indenture; (ii) immediately before and immediately after giving effect to such
transaction on a pro forma basis, no Default or Event of Default shall have
occurred and be continuing; and (iii) such Guarantor shall have delivered to the
Trustee an officers' certificate and an opinion of counsel, each stating that
such consolidation, merger, sale, assignment, conveyance, transfer, lease or
disposition and such supplemental indenture comply with the Indenture.
Upon any consolidation or merger, or any sale, assignment, conveyance,
transfer, lease or disposition of all or substantially all of the properties and
assets of the Company or any Guarantor in accordance with the immediately
preceding paragraphs, the successor Person formed by such consolidation or into
which the Company or such Guarantor, as the case may be, is merged or the
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successor Person to which such sale, assignment, conveyance, transfer, lease or
disposition is made shall succeed to, and be substituted for, and may exercise
every right and power of, the Company or such Guarantor, as the case may be,
under the Indenture and/or the Subsidiary Guarantees, as the case may be, with
the same effect as if such successor had been named as the Company or such
Guarantor, as the case may be, therein and/or in the Subsidiary Guarantees, as
the case may be. When a successor assumes all the obligations of its predecessor
under the Indenture, the Notes or a Subsidiary Guarantee, as the case may be,
the predecessor shall be released from those obligations; provided that in the
case of a transfer by lease, the predecessor shall not be released from the
payment of principal and interest on the Notes or a Subsidiary Guarantee, as the
case may be.
EVENTS OF DEFAULT
The following are "Events of Default" under the Indenture:
(iii) default in the payment of any interest on any Note when it
becomes due and payable and continuance of such default for a period of 30
days;
(iv) default in the payment of the principal of, or premium, if any,
on any Note at its Maturity (upon acceleration, optional redemption,
required purchase or otherwise);
(v) default in the performance, or breach, of the provisions described
in "Consolidation, Merger and Sale of Assets," the failure to make or
consummate a Change in Control Offer in accordance with the provisions of
the "Purchase of Notes Upon a Change in Control" covenant or the failure to
make or consummate an Excess Proceeds Offer in accordance with the
provisions of the "Limitation On Sale Of Assets" covenant;
(vi) default in the performance, or breach, of any covenant or
agreement of the Company or any Guarantor contained in the Indenture or any
Subsidiary Guarantee (other than a default in the performance, or breach,
of a covenant or warranty which is specifically dealt with in clauses (i),
(ii) or (iii) above) and continuance of such default or breach for a period
of 30 days after written notice shall have been given to the Company by the
Trustee or to the Company and the Trustee by the holders of at least 25% in
aggregate principal amount of the Notes then outstanding;
(vii) (A) one or more defaults in the payment of principal of or
premium, if any, on Indebtedness of the Company or any Restricted
Subsidiary aggregating $10.0 million or more, when the same becomes due and
payable at the Stated Maturity thereof, and such default or defaults shall
have continued after any applicable grace period and shall not have been
cured or waived or (B) Indebtedness of the Company or any Restricted
Subsidiary aggregating $10.0 million or more shall have been accelerated or
otherwise declared due and payable, or required to be prepaid or
repurchased (other than by regularly scheduled required prepayment) prior
to the Stated Maturity thereof;
(viii) one or more judgments or orders shall be rendered against the
Company or any Restricted Subsidiary for the payment of money, either
individually or in an aggregate amount, in excess of $10.0 million and
shall not be discharged and either (A) an enforcement proceeding shall have
been commenced by any creditor upon such judgment or order or (B) there
shall have been a period of 60 consecutive days during which a stay of
enforcement of such judgment or order, by reason of a pending appeal or
otherwise, was not in effect;
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(ix) any Subsidiary Guarantee of a Significant Subsidiary ceases to be
in full force and effect or is declared null and void or any of the
Subsidiary Guarantees of Significant Subsidiaries is found to be invalid or
any Guarantor which is a Significant Subsidiary denies that it has any
further liability under any Subsidiary Guarantee, or gives notice to such
effect (other than by reason of the termination of the Indenture or the
release of any such Subsidiary Guarantee in accordance with the Indenture);
or
(x) the occurrence of certain events of bankruptcy, insolvency or
reorganization with respect to the Company or any Significant Subsidiary.
If an Event of Default (other than as specified in clause (viii) above)
shall occur and be continuing, the Trustee or the holders of not less than 25%
in aggregate principal amount of the Notes then outstanding, by notice to the
Company, may, and the Trustee, upon the request of such holders, shall declare
the principal of, premium, if any, and accrued interest on all of the
outstanding Notes immediately due and payable. Upon any such declaration all
such amounts payable in respect of the Notes shall become immediately due and
payable. If an Event of Default specified in clause (viii) above occurs and is
continuing, then the principal of, premium, if any, and accrued interest on all
of the outstanding Notes shall ipso facto become and be immediately due and
payable without any declaration or other act on the part of the Trustee or any
holder of Notes.
At any time after a declaration of acceleration under the Indenture, but
before a judgment or decree for payment of the money due has been obtained by
the Trustee, the holders of a majority in aggregate principal amount of the
outstanding Notes, by written notice to the Company and the Trustee, may rescind
such declaration and its consequences if (a) the Company has paid or deposited
with the Trustee a sum sufficient to pay (i) all overdue interest on all
outstanding Notes, (ii) all unpaid principal of and premium, if any, on any
outstanding Notes that have become due otherwise than by such declaration of
acceleration and interest thereon at the rate borne by the Notes, (iii) to the
extent that payment of such interest is lawful, interest upon overdue interest
and overdue principal at the rate borne by the Notes, and (iv) all sums paid or
advanced by the Trustee under the Indenture and the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel; and
(b) all Events of Default, other than the non-payment of amounts of principal
of, premium, if any, or interest on the Notes that has become due solely by such
declaration of acceleration, have been cured or waived. No such rescission shall
affect any subsequent default or impair any right consequent thereon.
The holders of not less than a majority in aggregate principal amount of the
outstanding Notes may, on behalf of the holders of all the Notes, waive any past
defaults under the Indenture, except a default in the payment of the principal
of, premium, if any, or interest on any Note, or in respect of a covenant or
provision which under the Indenture cannot be modified or amended without the
consent of the holder of each Note outstanding.
If a Default or an Event of Default occurs and is continuing and is known to
the Trustee, the Trustee shall mail to each holder of the Notes notice of the
Default or Event of Default within 10 days after the occurrence thereof. Except
in the case of a Default or an Event of Default in payment of principal of,
premium, if any, or interest on any Notes, the Trustee may withhold the notice
to the holders of such Notes if a committee of its trust officers in good faith
determines that withholding the notice is in the interests of the holders of the
Notes.
The Company is required to furnish to the Trustee annual and quarterly
statements as to the performance by the Company and the Guarantors of their
respective obligations under the Indenture and as to any default in such
performance. The Company is also required to notify the Trustee within five
business days of the occurrence of any Default or Event of Default.
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DEFEASANCE OR COVENANT DEFEASANCE OF INDENTURE
The Company may, at its option and at any time, elect to have the
obligations of the Company and any Guarantor upon the outstanding Notes
discharged ("defeasance"). Such defeasance means that the Company will be deemed
to have paid and discharged the entire Indebtedness represented by the
outstanding Notes and to have satisfied all of its other obligations under such
Notes and the Indenture insofar as such Notes are concerned, except for (i) the
rights of holders of outstanding Notes to receive payments in respect of the
principal of, premium, if any, and interest on such Notes when such payments are
due, (ii) the Company's obligations to issue temporary Notes, register the
transfer or exchange of any Notes, replace mutilated, destroyed, lost or stolen
Notes, maintain an office or agency for payments in respect of the Notes and
segregate and hold such payments in trust, (iii) the rights, powers, trusts,
duties and immunities of the Trustee and (iv) the defeasance provisions of the
Indenture. In addition, the Company may, at its option and at any time, elect to
have the obligations of the Company and any Guarantor released with respect to
certain covenants set forth in the Indenture, and any omission to comply with
such obligations will not constitute a Default or an Event of Default with
respect to the Notes ("covenant defeasance").
In order to exercise either defeasance or covenant defeasance, (i) the
Company must irrevocably deposit or cause to be deposited with the Trustee, as
trust funds in trust, specifically pledged as security for, and dedicated solely
to, the benefit of the holders of the Notes, cash in United States dollars, U.S.
Government Obligations, or a combination thereof, which through the scheduled
payment of principal and interest thereon will provide money in an amount
sufficient, in the opinion of a nationally recognized firm of independent public
accountants, to pay and discharge the principal of, premium, if any, and
interest on the outstanding Notes to redemption or maturity; (ii) no Default or
Event of Default will have occurred and be continuing on the date of such
deposit or, insofar as an event of bankruptcy under clause (viii) of "Events of
Default" above is concerned, at any time during the period ending on the 91st
day after the date of such deposit; (iii) such defeasance or covenant defeasance
will not result in a breach or violation of, or constitute a default under, the
Indenture or any material agreement or instrument to which the Company or any
Guarantor is a party or by which it is bound; (iv) in the case of defeasance,
the Company shall have delivered to the Trustee an opinion of counsel stating
that the Company has received from, or there has been published by, the Internal
Revenue Service a ruling or, since the date of the final prospectus, there has
been a change in applicable federal income tax law, in either case to the effect
that, and based thereon such opinion shall confirm that the holders of the
outstanding Notes will not recognize income, gain or loss for federal income tax
purposes as a result of such defeasance and will be subject to federal income
tax on the same amounts, in the same manner and at the same times as would have
been the case if such defeasance had not occurred; (v) in the case of covenant
defeasance, the Company shall have delivered to the Trustee an opinion of
counsel to the effect that the holders of the Notes outstanding will not
recognize income, gain or loss for federal income tax purposes as a result of
such covenant defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the case if
such covenant defeasance had not occurred; (vi) in the case of defeasance or
covenant defeasance, the Company shall have delivered to the Trustee an opinion
of counsel to the effect that (A) the trust funds will not be subject to any
rights of holders of Senior Indebtedness under the subordination provisions of
the Indenture and (B) after the 91st day following the deposit or after the date
such opinion is delivered, the trust funds will not be subject to the effect of
any applicable bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally; (vii) the Company shall have delivered to the
Trustee an officers' certificate stating that the deposit was not made by the
Company with the intent of preferring the holders of the Notes or any Subsidiary
Guarantee over the other creditors of either the Company or any Guarantor with
the intent of hindering, delaying or defrauding creditors of either the Company
or any Guarantor; and (viii) the Company shall have delivered to the Trustee an
officers' certificate and an opinion of counsel, each stating that all
conditions precedent provided for relating to either the defeasance or the
covenant defeasance, as the case may be, have been complied with.
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SATISFACTION AND DISCHARGE
The Indenture will cease to be of further effect (except as to surviving
rights of registration of transfer or exchange of the Notes as expressly
provided for in the Indenture) and the Trustee, at the expense of the Company,
will execute proper instruments acknowledging satisfaction and discharge of the
Indenture when (a) either (i) all the Notes theretofore authenticated and
delivered (other than destroyed, lost or stolen Notes which have been replaced
or paid and Notes for whose payment money has been deposited in trust with the
Trustee or any paying agent or segregated and held in trust by the Company and
thereafter repaid to the Company or discharged from such trust as provided for
in the Indenture) have been delivered to the Trustee for cancellation or (ii)
all Notes not theretofore delivered to the Trustee for cancellation (x) have
become due and payable, (y) will become due and payable at Stated Maturity
within one year or (z) are to be called for redemption within one year under
arrangements satisfactory to the Trustee for the giving of notice of redemption
by the Trustee in the name, and at the expense, of the Company, and the Company
has irrevocably deposited or caused to be deposited with the Trustee as trust
funds in trust for such purpose an amount sufficient to pay and discharge the
entire Indebtedness on the Notes not theretofore delivered to the Trustee for
cancellation, for principal of, premium, if any, and interest on the Notes to
the date of such deposit (in the case of Notes which have become due and
payable) or to the Stated Maturity or redemption date, as the case may be; (b)
the Company has paid or caused to be paid all sums payable under the Indenture
by the Company; and (c) the Company has delivered to the Trustee an officers'
certificate and an opinion of counsel, each stating that all conditions
precedent provided in the Indenture relating to the satisfaction and discharge
of the Indenture have been complied with.
AMENDMENTS AND WAIVERS
With certain exceptions, modifications and amendments of the Indenture may
be made by a supplemental indenture entered into by the Company, the Guarantors
and the Trustee with the consent of the holders of a majority in aggregate
outstanding principal amount of the Notes then outstanding; provided, however,
that no such modification or amendment may, without the consent of the holder of
each outstanding Note affected thereby: (i) change the Stated Maturity of the
principal of, or any installment of interest on, any Note, or reduce the
principal amount thereof, or premium, if any, or the rate of interest thereon or
change the coin or currency in which the principal of any Note or any premium or
the interest thereon is payable, or impair the right to institute suit for the
enforcement of any such payment after the Stated Maturity thereof (or, in the
case of redemption, on or after the redemption date); (ii) amend, change or
modify the obligation of the Company to make and consummate an Excess Proceeds
Offer with respect to any Asset Sale in accordance with the "Limitation on Sale
of Assets" covenant or the obligation of the Company to make and consummate a
Change in Control Offer in the event of a Change in Control in accordance with
the "Purchase of Notes Upon a Change in Control" covenant, including, in each
case, amending, changing or modifying any definition relating thereto; (iii)
reduce the percentage in principal amount of outstanding Notes, the consent of
whose holders is required for any such supplemental indenture or the consent of
whose holders is required for any waiver of compliance with certain provisions
of the Indenture; (iv) modify any of the provisions relating to supplemental
indentures requiring the consent of holders or relating to the waiver of past
defaults or relating to the waiver of certain covenants, except to increase the
percentage of outstanding Notes required for such actions or to provide that
certain other provisions of the Indenture cannot be modified or waived without
the consent of the holder of each Note affected thereby; (v) except as otherwise
permitted under "Consolidation, Merger and Sale of Assets" consent to the
assignment or transfer by the Company or any Guarantor of any of their rights or
obligations under the Indenture; or (vi) amend or modify any of the provisions
of the Indenture or the related definitions affecting the subordination or
ranking of the Notes or any Subsidiary Guarantee in any manner which adversely
affects the holders of the Notes.
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Notwithstanding the foregoing, without the consent of any holder of the
Notes, the Company, any Guarantor and the Trustee may modify or amend the
Indenture: (a) to evidence the succession of another Person to the Company, a
Guarantor or any other obligor on the Notes, and the assumption by any such
successor of the covenants of the Company or such obligor or Guarantor in the
Indenture and in the Notes and in any Subsidiary Guarantee in accordance with
"--Consolidation, Merger and Sale of Assets;" (b) to add to the covenants of the
Company, any Guarantor or any other obligor upon the Notes for the benefit of
the holders of the Notes or to surrender any right or power conferred upon the
Company or any other obligor upon the Notes, as applicable, in the Indenture, in
the Notes or in any Subsidiary Guarantee; (c) to cure any ambiguity, or to
correct or supplement any provision in the Indenture, the Notes or any
Subsidiary Guarantee which may be defective or inconsistent with any other
provision in the Indenture, the Notes or any Subsidiary Guarantee or make any
other provisions with respect to matters or questions arising under the
Indenture, the Notes or any Subsidiary Guarantee; provided that, in each case,
such provisions shall not adversely affect the interest of the holders of the
Notes; (d) to comply with the requirements of the Commission in order to effect
or maintain the qualification of the Indenture under the Trust Indenture Act;
(e) to add a Guarantor under the Indenture; (f) to evidence and provide the
acceptance of the appointment of a successor Trustee under the Indenture; or (g)
to mortgage, pledge, hypothecate or grant a security interest in favor of the
Trustee for the benefit of the holders of the Notes as additional security for
the payment and performance of the Company's and any Guarantor's obligations
under the Indenture, in any property, or assets, including any of which are
required to be mortgaged, pledged or hypothecated, or in which a security
interest is required to be granted to the Trustee pursuant to the Indenture or
otherwise.
The holders of a majority in aggregate principal amount of the Notes
outstanding may waive compliance with certain restrictive covenants and
provisions of the Indenture.
THE TRUSTEE
The Indenture provides that, except during the continuance of an Event of
Default, the Trustee will perform only such duties as are specifically set forth
in the Indenture. If an Event of Default has occurred and is continuing, the
Trustee will exercise such rights and powers vested in it under the Indenture
and use the same degree of care and skill in its exercise as a prudent Person
would exercise under the circumstances in the conduct of such Person's own
affairs.
The Indenture and provisions of the Trust Indenture Act incorporated by
reference therein contain limitations on the rights of the Trustee thereunder,
should it become a creditor of the Company or any Guarantor, to obtain payment
of claims in certain cases or to realize on certain property received by it in
respect of any such claims, as security or otherwise. The Trustee is permitted
to engage in other transactions; provided, however, that if it acquires any
conflicting interest (as defined) it must eliminate such conflict or resign.
GOVERNING LAW
The Indenture, the Notes and the Subsidiary Guarantees will be governed
by, and construed in accordance with, the laws of the State of New York.
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CERTAIN DEFINITIONS
"Acquired Indebtedness" means Indebtedness of a Person (a) existing at the
time such Person becomes a Restricted Subsidiary or is merged into or
consolidated with the Company or any of its Restricted Subsidiaries or (b)
assumed in connection with the acquisition of assets from such Person. Acquired
Indebtedness shall be deemed to be incurred on the date of the related
acquisition of assets from any Person or the date the acquired Person becomes a
Restricted Subsidiary.
"Acquisition Indebtedness" means Indebtedness of a Person incurred in
connection with or in contemplation of (i) an investment by the Company or any
of its Restricted Subsidiaries in any other Person pursuant to which such Person
becomes a Restricted Subsidiary or shall be merged into or consolidated with the
Company or any of its Restricted Subsidiaries, (ii) an acquisition by the
Company or any of its Restricted Subsidiaries of the property and assets of any
Person other than the Company or any of its Restricted Subsidiaries that
constitute substantially all of a division or line of business of such Person or
(iii) the purchase by the Company or any of its Restricted Subsidiaries from a
third party of any licenses, trademarks, service marks, trade names or other
intellectual property rights of such third party; provided, however that
Indebtedness incurred in a transaction or series of related transactions having
a Fair Market Value of less than $5.0 million will not be considered to be
Acquisition Indebtedness.
"Affiliate" means, with respect to any specified Person, (a) any other
Person directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified Person or (b) any other Person that
owns, directly or indirectly, 5% or more of such specified Person's Capital
Stock or any executive officer or director of any such specified Person or other
Person or, with respect to any natural Person, any Person having a relationship
with such Person by blood, marriage or adoption not more remote than first
cousin. For the purposes of this definition, "control," when used with respect
to any specified Person, means the power to direct the management and policies
of such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Asset Sale" means any sale, issuance, conveyance, transfer, lease or
other disposition (including, without limitation, by way of merger,
consolidation or sale and leaseback transaction) (collectively, a "transfer"),
directly or indirectly, in one or a series of related transactions, of (a) any
Capital Stock of any Restricted Subsidiary; (b) all or substantially all of the
properties and assets of the Company or its Restricted Subsidiaries; (c) all or
substantially all of the properties and assets of any division or line of
business of the Company or any Restricted Subsidiary, other than in the ordinary
course of business or (d) any other properties or assets of the Company or any
Restricted Subsidiary outside of the ordinary course of business. For the
purposes of this definition, the term "Asset Sale" shall not include any
transfer of properties or assets (i) that is governed by the provisions of the
Indenture described under "--Consolidation, Merger and Sale of Assets," (ii)
between or among the Company and Wholly Owned Restricted Subsidiaries in
accordance with the terms of the Indenture, (iii) in compliance with the
"Limitation on Restricted Payments" covenant, (iv) that consists of grants by
the Company or its Restricted Subsidiaries in the ordinary course of business of
licenses or sub-licenses to use any of the intellectual property rights of the
Company or its Restricted Subsidiaries, (v) that consists of the dress shirt
inventory, manufacturing equipment and any facilities acquired from Salant
Corporation in connection with the Company's acquisition of the John Henry,
Manhattan and Lady Manhattan trademarks prior to the date of the Indenture or
(vi) having a Fair Market Value of less than $750,000 in any given fiscal year.
"Average Life" means, as of the date of determination with respect to any
Indebtedness, the quotient obtained by dividing (a) the sum of the products of
(i) the number of years from the date of determination to the date or dates of
each successive scheduled principal payment (including, without limitation, any
sinking fund requirements) of such Indebtedness multiplied by (ii) the amount of
each such principal payment by (b) the sum of all such principal payments.
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"Bankruptcy Law" means Title 11, United States Bankruptcy Code of 1978, as
amended, or any similar United States federal or state law relating to
bankruptcy, insolvency, receivership, winding-up, liquidation, reorganization or
relief of debtors or any amendment to, succession to or change in any such law.
"Board of Directors" means, with respect to any Person, the board of
directors of such Person or any duly authorized committee of such board.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, partnership interests (whether general or limited), participations,
rights in or other equivalents (however designated) of such Person's equity, and
any other interest or participation that confers the right to receive a share of
the profits and losses, or distributions of assets of, such Person and any
rights (other than debt securities convertible into Capital Stock), warrants or
options exchangeable for or convertible into such Capital Stock, whether now
outstanding or issued after the date of the Indenture.
"Capitalized Lease Obligation" means, with respect to any Person, any
obligation of such Person under a lease of (or other agreement conveying the
right to use) any property (whether real, personal or mixed) that is required to
be classified and accounted for as a capital lease obligation under GAAP, and,
for the purpose of the Indenture, the amount of such obligation at any date
shall be the capitalized amount thereof at such date, determined in accordance
with GAAP.
"Cash Equivalents" means (a) any evidence of Indebtedness with a maturity
of one year or less issued or directly and fully guaranteed or insured by the
United States of America or any agency or instrumentality thereof (provided that
the full faith and credit of the United States of America is pledged in support
thereof); (b) certificates of deposit or acceptances with a maturity of one year
or less of any financial institution that is a member of the Federal Reserve
System having combined capital and surplus and undivided profits of not less
than $500 million; and (c) commercial paper with a maturity of one year or less
issued by a corporation that is not an Affiliate of the Company and is organized
under the laws of any state of the United States or the District of Columbia and
rated at least A-1 by S&P or any successor rating agency or at least P-1 by
Moody's or any successor rating agency; (d) repurchase obligations with a term
of not more than seven days for underlying securities of the types described in
clauses (a) and (b) above; and (e) demand and time deposits with a domestic
commercial bank that is a member of the Federal Reserve System having combined
capital and surplus and undivided profits of not less than $500 million.
"Change in Control" means the occurrence of any of the following
events:
(a) any "person" or "group" (as such terms are used in Sections 13(d)
and 14(d) of the Exchange Act), other than Permitted Holders, is or becomes
the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the
Exchange Act, except that a Person shall be deemed to have "beneficial
ownership" of all securities that such Person has the right to acquire,
whether such right is exercisable immediately or only after the passage of
time), directly or indirectly, of more than 35% of the total voting power
of all outstanding Voting Stock of the Company, and either (x) the
Permitted Holders beneficially own, directly or indirectly, in the
aggregate Voting Stock of the Company that represents a lesser percentage
of the aggregate ordinary voting power of all classes of the Voting Stock
of the Company, voting together as a single class, than such other person
or group and are not entitled (by voting power, contract or otherwise) to
elect directors of the Company having a majority of the total voting power
of the Board of Directors, or (y) such other person or group is entitled to
elect directors of the Company having a majority of the total voting power
of the Board of Directors;
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(b) the Company consolidates with, or merges with or into, another
Person or conveys, transfers, leases or otherwise disposes of all or
substantially all of its assets to any Person, or any Person consolidates
with, or merges with or into, the Company, in any such event pursuant to a
transaction in which the outstanding Voting Stock of the Company is
converted into or exchanged for cash, securities or other property, other
than any such transaction (i) where the outstanding Voting Stock of the
Company is not converted or exchanged at all (except to the extent
necessary to reflect a change in the jurisdiction of incorporation of the
Company) or is converted into or exchanged for (A) Voting Stock (other than
Redeemable Capital Stock) of the surviving or transferee corporation or (B)
Voting Stock (other than Redeemable Capital Stock) of the surviving or
transferee corporation and cash, securities and other property (other than
Capital Stock of the surviving or transferee corporation) in an amount that
could be paid by the Company as a Restricted Payment as described under the
"Limitation on Restricted Payments" covenant and (ii) immediately after
such transaction, no "person" or "group" (as such terms are used in
Sections 13(d) and 14(d) of the Exchange Act), other than Permitted
Holders, is the "beneficial owner" (as defined in Rules 13d-3 and 13d-5
under the Exchange Act, except that a Person shall be deemed to have
"beneficial ownership" of all securities that such Person has the right to
acquire, whether such right is exercisable immediately or only after the
passage of time), directly or indirectly, of more than 35% of the total
voting power of all outstanding Voting Stock of the surviving or transferee
corporation, and either (x) the Permitted Holders beneficially own,
directly or indirectly, in the aggregate Voting Stock of the Company that
represents a lesser percentage of the aggregate ordinary voting power of
all classes of the Voting Stock of the Company, voting together as a single
class, than such other person or group and are not entitled (by voting
power, contract or otherwise) to elect directors of the Company having a
majority of the total voting power of the Board of Directors, or (y) such
other person or group is entitled to elect directors of the Company having
a majority of the total voting power of the Board of Directors;
(c) during any consecutive two-year period, individuals who at the
beginning of such period constituted the Board of Directors of the Company
(together with any new directors whose election to such Board of Directors,
or whose nomination for election by the stockholders of the Company, was
approved by a vote of 66 2/3% of the directors then still in office who
were either directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason to
constitute a majority of the Board of Directors of the Company then in
office; or
(d) the Company is liquidated or dissolved or adopts a plan of
liquidation or dissolution other than in a transaction which complies with
the provisions described under "Consolidation, Merger and Sale of Assets."
"Consolidated Adjusted Net Income" means, for any period, the consolidated
net income (or loss) of the Company and all Restricted Subsidiaries for such
period as determined in accordance with GAAP, adjusted, to the extent included
in calculating such net income, by excluding, without duplication, (a) all
extraordinary gains or losses (net of taxes, fees and expenses relating
thereto), (b) gains or losses (net of taxes, fees and expenses relating thereto)
attributable to asset dispositions other than in the ordinary course of
business, (c) the portion of net income of any Person (other than the Company or
a Restricted Subsidiary), including Unrestricted Subsidiaries, in which the
Company or any Restricted Subsidiary has an ownership interest, except to the
extent of the amount of dividends or other distributions actually paid to the
Company or any Restricted Subsidiary in cash dividends or cash distributions
during such period,
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(d) the net income (or loss) of any Person combined with the Company or any
Restricted Subsidiary on a "pooling of interests" basis attributable to any
period prior to the date of combination, (e) the net income of any Restricted
Subsidiary to the extent that the declaration or payment of dividends or similar
distributions by such Restricted Subsidiary is not at the date of determination
(regardless of any waiver) permitted, directly or indirectly, by operation of
the terms of its charter or any agreement, instrument, judgment, decree, order,
statute, rule or governmental regulation applicable to such Restricted
Subsidiary or its stockholders, and (f) for purposes of calculating Consolidated
Adjusted Net Income under the "Limitation On Restricted Payment" covenant any
net income (or loss) from any Restricted Subsidiary while it was an Unrestricted
Subsidiary at any time during such period other than any amounts actually
received from such Restricted Subsidiary during such period; provided that, if
any Restricted Subsidiary is not a Wholly Owned Restricted Subsidiary,
Consolidated Adjusted Net Income will be reduced (to the extent not otherwise
reduced in accordance with GAAP) by an amount equal to (A) the amount of the
Consolidated Adjusted Net Income otherwise attributable to such Restricted
Subsidiary multiplied by (B) the quotient of (1) the number of shares of
outstanding common stock of such Restricted Subsidiary not owned on the last day
of such period by the Company or any of its Restricted Subsidiaries divided by
(2) the total number of shares of outstanding common stock of such Restricted
Subsidiary on the last day of such period.
"Consolidated Fixed Charge Coverage Ratio" of the Company means, for any
period, the ratio of (a) the sum of Consolidated Adjusted Net Income and, to the
extent deducted in computing Consolidated Adjusted Net Income, Consolidated
Interest Expense, Consolidated Income Tax Expense and Consolidated Non-Cash
Charges, in each case, for such period to (b) the sum of (i) Consolidated
Interest Expense for such period and (ii) the aggregate amount of dividends and
other distributions paid, accrued or scheduled to be paid or accrued in respect
of Redeemable Capital Stock of the Company or any Restricted Subsidiary for such
period, in each case after giving pro forma effect to (A) the incurrence of the
Indebtedness giving rise to the need to make such calculation and (if
applicable) the application of the net proceeds therefrom, including to
refinance other Indebtedness, as if such Indebtedness was incurred, and the
application of the net proceeds occurred, on the first day of such period, (B)
the incurrence, repayment or retirement of any other Indebtedness by the Company
and its Restricted Subsidiaries since the first day of such period as if such
Indebtedness was incurred, repaid or retired on the first day of such period
(except that, in making such computation, the amount of Indebtedness under any
revolving credit facility shall be computed based upon the average daily balance
of such Indebtedness during such period) and (C) the acquisition (whether by
purchase, merger or otherwise) or disposition (whether by sale, merger or
otherwise) of any company, entity or business acquired or disposed of by the
Company or its Restricted Subsidiaries, as the case may be, since the first day
of such period, as if such acquisition or disposition occurred on the first day
of such period.
"Consolidated Income Tax Expense" means, for any period, the provision for
federal, state, local and foreign income taxes of the Company and all Restricted
Subsidiaries for such period as determined on a consolidated basis in accordance
with GAAP.
"Consolidated Interest Expense" means, for any period, without
duplication, (1) the sum of (a) the interest expense of the Company and its
Restricted Subsidiaries for such period, including, without limitation, (i)
amortization of debt discount, (ii) the net cost of Interest Rate Agreements
(including amortization of discounts), (iii) the interest portion of any
deferred payment obligation, (iv) all commissions, discounts and other fees and
charges owed with respect to the letter of credit, bankers' acceptance financing
or similar facilities and (v) amortization of debt issuance costs, plus (b) the
interest component of Capitalized Lease Obligations paid, accrued and/or
scheduled to be paid or accrued by the Company and its Restricted Subsidiaries
during such period, plus (c) one-third of lease rental payments in connection
with operating leases paid, accrued and/or scheduled to be paid or accrued
during such period, in each case as determined on a consolidated basis in
accordance with GAAP; PROVIDED that (x) the
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Consolidated Interest Expense attributable to interest on any Indebtedness
computed on a pro forma basis and (A) bearing a floating interest rate shall be
computed as if the rate in effect on the date of computation had been the
applicable rate for the entire period and (B) which was not outstanding during
the period for which the computation is being made but which bears, at the
option of the Company, a fixed or floating rate of interest, shall be computed
by applying, at the option of the Company, either the fixed or floating rate,
and (y) in making such computation, the Consolidated Interest Expense
attributable to interest on any Indebtedness under a revolving credit facility
computed on a pro forma basis shall be computed based upon the average daily
balance of such Indebtedness during the applicable period.
"Consolidated Non-Cash Charges" means, for any period, the aggregate
depreciation, amortization and other non-cash expenses of the Company and any
Restricted Subsidiary reducing Consolidated Adjusted Net Income for such period,
determined on a consolidated basis in accordance with GAAP (excluding any such
non-cash charge that requires an accrual of or reserve for cash charges for any
future period or constituting an extraordinary item or loss).
"Currency Agreements" means any spot or forward foreign exchange
agreements and currency swap, currency option or other similar financial
agreements or arrangements entered into by the Company or any of its Restricted
Subsidiaries designed to protect against or manage exposure to fluctuations in
foreign currency exchange rates.
"Default" means any event that is, or after notice or passage of time or
both would be, an Event of Default.
"Disinterested Director" means, with respect to any transaction or series
of transactions in respect of which the Board of Directors is required to
deliver a resolution of the Board of Directors under the Indenture, a member of
the Board of Directors who does not have any material direct or indirect
financial interest in or with respect to such transaction or series of
transactions.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Fair Market Value" means, with respect to any asset or property, the sale
value that would be obtained in an arm's-length transaction between an informed
and willing seller under no compulsion to sell and an informed and willing buyer
under no compulsion to buy.
"Generally Accepted Accounting Principles" or "GAAP" means generally
accepted accounting principles in the United States, consistently applied, that
are in effect on the date of the Indenture.
"Guarantee" means, as applied to any obligation, (a) a guarantee (other
than by endorsement of negotiable instruments for collection in the ordinary
course of business), direct or indirect, in any manner, of any part or all of
such obligation and (b) an agreement, direct or indirect, contingent or
otherwise, the practical effect of which is to assure in any way the payment or
performance (or payment of damages in the event of non-performance) of all or
any part of such obligation, including, without limiting the foregoing, the
payment of amounts drawn down by letters of credit. A guarantee shall include,
without limitation, any agreement to maintain or preserve any Person's financial
condition or to cause any other Person to achieve certain levels of operating
results; provided that no license or sub-license entered into in the ordinary
course of business between the Company or any Restricted Subsidiary (other than
with an Affiliate thereof) shall be deemed to be a guarantee as a result of any
minimum royalty or revenue provisions with which the Company or such Restricted
Subsidiary must comply.
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"Guarantor" means any Restricted Subsidiary that incurs a Subsidiary
Guarantee; provided that, upon the release and discharge of any Person from its
Subsidiary Guarantee in accordance with the Indenture, such Person shall cease
to be a Guarantor.
"Hamilton Bank Letter of Credit Facility" means the $45.0 million Line of
Credit Facility dated August 3, 1998 between Supreme International Corporation
and Hamilton Bank, N.A.
"Indebtedness" means, with respect to any Person, without duplication, (a)
all liabilities of such Person for borrowed money (including overdrafts) or for
the deferred purchase price of property or services, excluding any trade
payables and other accrued current liabilities incurred in the ordinary course
of business, but including, without limitation, all obligations, contingent or
otherwise, of such Person in connection with any letters of credit and
acceptances issued under letter of credit facilities, acceptance facilities or
other similar facilities, (b) all obligations of such Person evidenced by bonds,
notes, debentures or other similar instruments, (c) all indebtedness of such
Person created or arising under any conditional sale or other title retention
agreement with respect to property acquired by such Person (even if 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), but excluding
trade payables arising in the ordinary course of business, (d) all Capitalized
Lease Obligations of such Person, (e) all obligations of such Person under or in
respect of Interest Rate Agreements or Currency Agreements, (f) all Indebtedness
referred to in (but not excluded from) the preceding clauses of other Persons
and all dividends of other Persons, the payment of which is secured by (or for
which the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any Lien upon or with respect to 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 Indebtedness (the amount of such obligation being deemed to be the
lesser of the Fair Market Value of such property or asset or the amount of the
obligation so secured), (g) all guarantees by such Person of Indebtedness
referred to in this definition of any other Person, and (h) all Redeemable
Capital Stock of such Person valued at the greater of its voluntary or
involuntary maximum fixed repurchase price plus accrued and unpaid dividends.
For purposes hereof, the "maximum fixed repurchase price" of any Redeemable
Capital Stock which does not have a fixed repurchase price shall be calculated
in accordance with the terms of such Redeemable Capital Stock as if such
Redeemable Capital Stock were purchased on any date on which Indebtedness shall
be required to be determined pursuant to the Indenture, and if such price is
based upon, or measured by, the fair market value of such Redeemable Capital
Stock, such fair market value shall be determined in good faith by the board of
directors of the issuer of such Redeemable Capital Stock.
"Interest Rate Agreements" means any interest rate protection agreements
and other types of interest rate hedging agreements (including, without
limitation, interest rate swaps, caps, floors, collars and similar agreements)
designed to protect against or manage exposure to fluctuations in interest
rates.
"Investment" means, with respect to any Person, any direct or indirect
advance, loan, guarantee or other extension of credit or capital contribution to
(by means of any transfer of cash or other property to others or any payment for
property or services for the account or use of others), or any purchase,
acquisition or ownership by such Person of any Capital Stock, bonds, notes,
debentures or other securities or evidences of Indebtedness issued or owned by,
any other Person and all other items that would be classified as investments on
a balance sheet prepared in accordance with GAAP. "Investments" shall exclude
extensions of trade credit on commercially reasonable terms in accordance with
normal trade practices.
"Issue Date" means the date on which the Notes are originally issued under
the Indenture.
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"Lease" means the Master Agreement dated August 28, 1997 among the
Company, as lessee and guarantor, SUP Joint Venture, as lessor, Suntrust Bank,
Miami, N.A., as agent, Atlantic Financial Managers, Inc. and Atlantic Financial
Group, Ltd. and certain other financial institutions, as lenders, and the
related Lease Agreement (Land), Lease Agreement (Building), Loan Agreement,
Guaranty and Security Agreement and Financing Statement (all as defined in the
Master Agreement) dated as of August 28, 1997 and any renewal, replacement or
extension thereof on terms similar to those in effect on the date of the
Indenture; provided that any such renewal, replacement or extension will not
increase the amount of the guarantee by the Company of the obligations of the
lessor under the Lease or the rental obligations of the Company at the
expiration of the term of the Lease Agreement (Building) and Lease Agreement
(Land) as of the date of such renewal, replacement or extension.
"Letter of Credit Facilities" means the Hamilton Bank Letter of Credit
Facility, the Ocean Bank Letter of Credit Facility and The Bank of
Tokyo-Mitsubishi Letter of Credit Facility, as the same may be amended,
supplemented or otherwise modified including any refinancing, refunding,
replacement or extension thereof.
"Lien" means any mortgage, charge, pledge, lien (statutory or otherwise),
privilege, security interest, hypothecation, assignment for security, claim, or
preference or priority or other encumbrance upon or with respect to any property
of any kind, real or personal, movable or immovable, now owned or hereafter
acquired. A Person will be deemed to own subject to a Lien any property which
such Person has acquired or holds subject to the interest of a vendor or lessor
under any conditional sale agreement (other than a consignment), capital lease
or other title retention agreement.
"Maturity" means, with respect to any Note, the date on which any
principal of such Note becomes due and payable provided in such Note or in the
Indenture, whether at the Stated Maturity with respect to such principal or by
declaration of acceleration, call for redemption or purchase or otherwise.
"Moody's" means Moody's Investors Service, Inc. and its successors.
"Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds
thereof in the form of cash or Cash Equivalents including payments in respect of
deferred payment obligations when received in the form of cash or Cash
Equivalents (except to the extent that such obligations are financed or sold
with recourse to the Company or any Restricted Subsidiary), net of (i) brokerage
commissions and other fees and expenses (including fees and expenses of legal
counsel and investment banks) related to such Asset Sale, (ii) provisions for
all taxes payable as a result of such Asset Sale, (iii) payments made to retire
Indebtedness where payment of such Indebtedness is secured by the assets or
properties the subject of such Asset Sale, (iv) amounts required to be paid to
any Person (other than the Company or any Restricted Subsidiary) owning a
beneficial interest in the assets subject to the Asset Sale and (v) appropriate
amounts to be provided by the Company or any Restricted Subsidiary, as the case
may be, as a reserve required in accordance with GAAP against any liabilities
associated with such Asset Sale and retained by the Company or any Restricted
Subsidiary, as the case may be, after such Asset Sale, including, without
limitation, pension and other post- employment benefit liabilities, liabilities
related to environmental matters and liabilities under any indemnification
obligations associated with such Asset Sale, all as reflected in an officers'
certificate delivered to the Trustee.
"Ocean Bank Letter of Credit Facility" means the $7.0 million Line of
Credit Facility dated February 19, 1997 between Supreme International
Corporation and Ocean Bank.
"Pari Passu Indebtedness" means (a) with respect to the Notes,
Indebtedness that ranks pari passu in right of payment to the Notes and (b) with
respect to any Subsidiary Guarantee, Indebtedness that ranks pari passu in right
of payment to such Subsidiary Guarantee.
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"Permitted Holders" means, as of the date of determination, (a) Oscar
Feldenkreis, George Feldenkreis, their spouses, their respective lineal
descendants and the spouses of such lineal descendants, (b) any Person
controlled by any of the Persons included in the foregoing clause (a) (as the
term "controlled" is defined under the definition of "Affiliate"), (c) trusts
for the benefit of any of the Persons included in the foregoing clause (a), and
(d) any charitable foundation a majority of whose members, trustees or
directors, as the case may be, are Persons included in the foregoing clause (a).
"Permitted Indebtedness" means any of the following:
(a) Indebtedness of the Company and the Guarantors under the Senior
Credit Facility in an aggregate principal amount at any one time
outstanding not to exceed the sum of (i) $15.0 million (after giving effect
to the permanent reduction made from the proceeds of the issuance and sale
of the Notes on the Issue Date) less the amount of permanent reductions
made by the Company in respect of any term loans under the Senior Credit
Facility and (ii) the greater of (x) $75.0 million and (y) the sum of (1)
85% of Eligible Receivables (as defined in clauses (a) through (o) of the
definition thereof contained in the Senior Credit Facility on the date of
the Indenture), plus (2) the lesser of (i) 90% of Eligible Factoring Credit
Balances (as defined in clauses (a) through (c) of the definition thereof
contained in the Senior Credit Facility on the date of Indenture) and (ii)
$20.0 million, plus (3) the lesser of (i) 60% of Eligible Inventory (as
defined in clauses (a) through (e) and (g) through (i) of the definition
thereof contained in the Senior Credit Facility on the date of Indenture)
and (ii) $30.0 million, minus (d) the full amount of all outstanding
letters of credit issued pursuant to, or authorized under, the Senior
Credit Facility for the account of the Company or the Restricted
Subsidiaries which are not fully secured by cash collateral;
(b) Indebtedness of the Company with respect to any letters of credit
under the Letter of Credit Facilities in an aggregate principal amount at
any one time outstanding not to exceed $60 million;
(c) Indebtedness of the Company pursuant to the Notes (other than any
Additional Notes) or of any Restricted Subsidiary pursuant to a Subsidiary
Guarantee;
(d) Indebtedness of the Company or any Restricted Subsidiary
outstanding on the date of the Indenture (other than Indebtedness under the
Senior Credit Facility, the Letter of Credit Facilities and the Lease);
(e) Indebtedness of the Company owing to any Wholly Owned Restricted
Subsidiary; provided that any Indebtedness of the Company owing to any such
Restricted Subsidiary is unsecured and is subordinated in right of payment
from and after such time as the Notes shall become due and payable (whether
at Stated Maturity, acceleration or otherwise) to the payment and
performance of the Company's obligations under the Notes; provided further
that any disposition, pledge or transfer of any such Indebtedness to a
Person (other than a disposition, pledge or transfer to the Company or
another Wholly Owned Restricted Subsidiary) shall be deemed to be an
incurrence of such Indebtedness by the Company not permitted by this clause
(e);
(f) Indebtedness of a Restricted Subsidiary owing to the Company or to
another Wholly Owned Restricted Subsidiary; provided that any such
Indebtedness of any Guarantor is subordinated in right of payment to the
Subsidiary Guarantee of such Guarantor; provided further that any
disposition, pledge or transfer of any such Indebtedness to a Person (other
than a disposition, pledge or transfer to the Company or a Wholly Owned
Restricted Subsidiary) shall be deemed to be an incurrence of such
Indebtedness by such Restricted Subsidiary not permitted by this clause
(f);
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(g) guarantees of any Restricted Subsidiary made in accordance with
the provisions of the "Limitation on Guarantees of Indebtedness by
Restricted Subsidiaries" covenant;
(h) obligations of the Company or any Guarantor entered into in the
ordinary course of business (i) pursuant to Interest Rate Agreements
designed to protect the Company or any Restricted Subsidiary against
fluctuations in interest rates in respect of Indebtedness of the Company or
any Restricted Subsidiary, which obligations do not exceed the aggregate
principal amount of such Indebtedness and (ii) pursuant to Currency
Agreements entered into by the Company or any of its Restricted
Subsidiaries in respect of its (x) assets or (y) obligations, as the case
may be, denominated in a foreign currency;
(i) Indebtedness of the Company or any Guarantor in respect of
purchase money obligations, Capitalized Lease Obligations of the Company or
any Guarantor and Subordinated Indebtedness of the Company or any Guarantor
in an aggregate amount which does not exceed $5.0 million at any one time
outstanding;
(j) Indebtedness of the Company or any Guarantor consisting of
guarantees, indemnities or obligations in respect of purchase price
adjustments in connection with the acquisition or disposition of assets,
including, without limitation, shares of Capital Stock of Restricted
Subsidiaries;
(k) Indebtedness of the Company or any Guarantor represented by (x)
letters of credit for the account of the Company or any Restricted
Subsidiary or (y) other obligations to reimburse third parties pursuant to
any surety bond or other similar arrangements, which letters of credit or
other obligations, as the case may be, are intended to provide security for
workers' compensation claims, payment obligations in connection with
self-insurance or other similar requirements in the ordinary course of
business;
(l) the guarantee of the obligations of the lessor under the Lease;
and
(m) any renewals, extensions, substitutions, refinancings or
replacements (each, for purposes of this clause, a "refinancing") of any
Indebtedness, referred to in clause (c) or (d) of this definition,
including any successive refinancings, so long as (i) any such new
Indebtedness shall be in a principal amount that does not exceed the
principal amount (or, if such Indebtedness being refinanced provides for an
amount less than the principal amount thereof to be due and payable upon a
declaration of acceleration thereof, such lesser amount as of the date of
determination) so refinanced, plus the lesser of the amount of any premium
required to be paid in connection with such refinancing pursuant to the
terms of the Indebtedness refinanced or the amount of any premium
reasonably determined as necessary to accomplish such refinancing, (ii) in
the case of any refinancing by the Company of Pari Passu Indebtedness or
Subordinated Indebtedness, such new Indebtedness is made pari passu with or
subordinate to the Notes at least to the same extent as the Indebtedness
being refinanced, (iii) in the case of any refinancing by any Guarantor of
Pari Passu Indebtedness or Subordinated Indebtedness, such new Indebtedness
is made pari passu with or subordinate to the Subsidiary Guarantee of such
Guarantor at least to the same extent as the Indebtedness being refinanced,
(iv) such new Indebtedness has an Average Life longer than the Average Life
of the Notes and a final Stated Maturity later than the final Stated
Maturity of the Notes and (v) Indebtedness of the Company or a Guarantor
may only be refinanced with Indebtedness of the Company or a Guarantor and
Indebtedness of a Restricted Subsidiary that is not a Guarantor may only be
refinanced with Indebtedness of such Restricted Subsidiary.
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"Permitted Investments" means any of the following:
(n) Investments in Cash Equivalents;
(o) Investments in the Company or any Restricted Subsidiary;
(p) intercompany Indebtedness to the extent permitted under clause (e)
or (f) of the definition of "Permitted Indebtedness";
(q) Investments in an amount not to exceed $5.0 million at any one
time outstanding;
(r) Investments by the Company or any Restricted Subsidiary in another
Person, if as a result of such Investment (i) such other Person becomes a
Wholly Owned Restricted Subsidiary or (ii) such other Person is merged or
consolidated with or into, or transfers or conveys all or substantially all
of its assets to, the Company or a Wholly Owned Restricted Subsidiary;
(s) bonds, notes, debentures and other securities received as
consideration for Assets Sales to the extent permitted under the
"Limitation of Sale of Assets" covenant;
(t) any loans or other advances made pursuant to any employee benefit
plans (including plans for the benefit of directors) or employment
agreements or other compensation arrangements (including for the purchase
of Capital Stock of the Company by employees), in each case as approved by
the Board of Directors of the Company, in an aggregate amount at any one
time outstanding not to exceed $1.0 million; or
(u) negotiable instruments held for deposit or collection in the
ordinary course of business, except to the extent they would constitute
Investments in Affiliates.
"Person" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
"Preferred Stock" means, with respect to any Person, Capital Stock of any
class or classes (however designated) of such Person which is preferred as to
the payment of dividends or distributions, or as to the distribution of assets
upon any voluntary or involuntary liquidation or dissolution of such Person,
over the Capital Stock of any other class of such Person whether now
outstanding, or issued after the date of the Indenture, and including, without
limitation, all classes and series of preferred or preference stock of such
Person.
"Public Equity Offering" means an offer and sale of common stock (which is
Qualified Capital Stock) of the Company made on a primary basis by the Company
pursuant to a registration statement that has been declared effective by the
Commission pursuant to the Securities Act (other than a registration statement
on Form S-8 or otherwise relating to equity securities issuable under any
employee benefit plan of the Company).
"Qualified Capital Stock" of any Person means any and all Capital Stock of
such Person other than Redeemable Capital Stock.
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"Redeemable Capital Stock" means any class or series of Capital Stock
that, either by its terms, by the terms of any security into which it is
convertible or exchangeable or by contract or otherwise, is, or upon the
happening of an event or passage of time would be, required to be redeemed prior
to the final Stated Maturity of the Notes or is redeemable at the option of the
holder thereof at any time prior to such final Stated Maturity, or is
convertible into or exchangeable for debt securities at any time prior to such
final Stated Maturity.
"Restricted Subsidiary" means any Subsidiary other than an
Unrestricted Subsidiary.
"Sale and Leaseback Transaction" means any transaction or series of
related transactions pursuant to which the Company or a Restricted Subsidiary
sells or transfers any property or asset in connection with the leasing of such
property or asset to the seller or transferor.
"S&P" means Standard and Poor's Ratings Group, a division of
McGraw-Hill, Inc. and its successors.
"Senior Credit Facility" means the Amended and Restated Loan and Security
Agreement dated March 26, 1999 among the Company and certain of its
Subsidiaries, as borrowers, NationsBank N.A., as agent, and the banks party
thereto from time to time, together with the related documents thereto
(including, without limitation, any guarantee agreements permitted under the
Indenture and security documents), in each case as such agreements may be
amended (including any amendment and restatement thereof), supplemented or
otherwise modified from time to time, including any agreement extending the
maturity of, refinancing, replacing or otherwise restructuring (including,
subject to the covenants of the Indenture, adding Subsidiaries of the Company as
additional borrowers or guarantors thereunder) all or any portion of the
Indebtedness under such agreement or any successor or replacement agreement in
compliance with the Indenture.
"Significant Subsidiary" means any Restricted Subsidiary of the Company
that, together with its Subsidiaries, (i) for the most recent fiscal year of the
Company, accounted for more than 10% of the consolidated revenues of the Company
and its Restricted Subsidiaries, (ii) as of the end of such fiscal year, was the
owner of more than 10% of the consolidated assets of the Company and its
Restricted Subsidiaries, all as set forth on the most recently available
consolidated financial statements of the Company for such fiscal year or (iii)
was organized or acquired after the beginning of such fiscal year and would have
been a Significant Subsidiary if it had been owned during the entire fiscal
year.
"Stated Maturity" means, when used with respect to any Note or any
installment of interest thereon, the date specified in such Note as the fixed
date on which the principal of such Note or such installment of interest is due
and payable, and, when used with respect to any other Indebtedness, means the
date specified in the instrument governing such Indebtedness as the fixed date
on which the principal of such Indebtedness or any installment of interest
thereon, is due and payable.
"Subordinated Indebtedness" means Indebtedness of the Company or a
Guarantor that is expressly subordinated in right of payment to the Notes or the
Subsidiary Guarantee of such Guarantor, as the case may be.
"Subsidiary" means any Person a majority of the equity ownership or Voting
Stock of which is at the time owned, directly or indirectly, by the Company or
by one or more other Subsidiaries or by the Company and one or more other
Subsidiaries.
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"Subsidiary Guarantee" means any guarantee of the obligations of the
Company under the Indenture and the Notes by any Restricted Subsidiary in
accordance with the provisions of the Indenture.
"The Bank of Tokyo-Mitsubishi Letter of Credit Facility" means the $8.0
million Line of Credit Facility dated August 1, 1996 between Supreme
International Corporation and The Bank of Tokyo-Mitsubishi, Ltd.
"Unrestricted Subsidiary" means each Subsidiary of the Company designated
as such pursuant to and in compliance with the "Limitation on Unrestricted
Subsidiaries" covenant.
"U.S. Government Obligations" means securities that are (x) direct
obligations of the United States of America for the timely payment of which its
full faith and credit is pledged or (y) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States of
America the timely payment of which is unconditionally guaranteed as a full
faith and credit obligation by the United States of America, which, in either
case, are not callable or redeemable at the option of the issuer thereof, and
shall also include a depository receipt issued by a bank (as defined in Section
3(a)(2) of the Securities Act), as custodian with respect to any such U.S.
Government Obligation or a specific payment of principal of or interest on any
such U.S. Government Obligation held by such custodian for the account of the
holder of such depository receipt, provided that (except as required by law)
such custodian is not authorized to make any deduction from the amount payable
to the holder of such depository receipt from any amount received by the
custodian in respect of the U.S. Government Obligation or the specific payment
of principal of or interest on the U.S. Government Obligation evidenced by such
depository receipt.
"Voting Stock" means any class or classes of Capital Stock pursuant to
which the holders thereof have the general voting power under ordinary
circumstances to elect at least a majority of the board of directors, managers
or trustees of any Person (irrespective of whether or not, at the time, stock of
any other class or classes shall have, or might have, voting power by reason of
the happening of any contingency).
"Wholly Owned Restricted Subsidiary" means any Restricted Subsidiary, all
of the outstanding Capital Stock (other than directors' qualifying shares or
shares of foreign Restricted Subsidiaries required to be owned by foreign
nationals pursuant to applicable law) of which are owned by the Company or by
one or more other Wholly Owned Restricted Subsidiaries or by the Company and one
or more other Wholly Owned Restricted Subsidiaries.
BOOK-ENTRY; DELIVERY AND FORM
The exchange notes are expected to be represented by a single, permanent
global note in definitive, fully registered book-entry form (the "Global Notes")
which will be deposited with and registered in the name of a nominee of DTC and
deposited on behalf of the holders of the Notes represented thereby with a
custodian for DTC for credit to the respective accounts of the holders (or to
such other accounts as they may direct) at DTC.
Notes that are originally purchased by or transferred to institutional
"accredited investors" (as defined in Rule 501(a)(1), (2), (3) or (7) under the
Securities Act), who are not QIBs, or issued as described below under
"Certificated Securities," will be in registered form without interest coupons.
Upon the transfer to a QIB or Non-U.S. Person, such Certificated Securities
will, unless the Global Notes have been previously exchanged for Certificated
Securities, be exchanged for an interest in the Global Note representing the
principal amount of Notes being transferred.
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The Global Notes. We expect that, pursuant to procedures established by
DTC, ownership of the Global Notes will be shown on, and the transfer of
ownership thereof will be effected only through, records maintained by DTC or
its nominee (with respect to interests of Participants (as defined below)) and
the records of Participants (with respect to interests of persons other than
Participants). Such accounts initially will be designated by or on behalf of the
Initial Purchasers and ownership of beneficial interests in the Global Notes
will be limited to persons who have accounts with DTC ("Participants") or
persons who hold interests through Participants
So long as DTC or its nominee is the registered owner or holder of any of
the Notes, DTC or such nominee will be considered the sole owner or holder of
such Notes represented by the Global Notes for all purposes under the Indenture
and under the Notes represented thereby. No beneficial owner of an interest in
the Global Notes will be able to transfer such interest except in accordance
with the applicable procedures of DTC in addition to those provided for under
the Indenture. The laws of some states require that certain persons take
physical delivery in definitive form of securities that they own. Consequently,
the ability to transfer beneficial interest in a Global Note to such persons
will be impaired to that extent. Because DTC can act only on behalf of
Participants, which in turn act on behalf of Indirect Participants (as defined
herein) the ability of a person having beneficial interests in a Global Note to
pledge such interests to persons or entities that do not participate in the DTC
system, or otherwise take actions in respect of such interests, may be impaired
by the lack of a physical certificate evidencing such interests.
Payments of the principal of, premium, if any, and interest on the Notes
represented by the Global Notes will be made to DTC or its nominee, as the case
may be, as the registered owner thereof. Neither the Company, the Trustee, nor
any paying agent under the Indenture will have any responsibility or liability
for any aspect of the records relating to or payments made on account of
beneficial ownership interests in the Global Notes or for maintaining,
supervising or reviewing any records relating to such beneficial ownership
interests.
The Company expects that DTC or its nominee, upon receipt of any payment
of the principal of, premium, if any, and interest on the Notes represented by
the Global Notes, will credit Participants' accounts with payments in amounts
proportionate to their respective beneficial interests in the Global Notes as
shown on the records of DTC or its nominee. The Company also expects that
payments by Participants to owners of beneficial interests in the Global Notes
held through such Participants will be governed by standing instructions and
customary practice, as is now the case with securities held for the accounts of
customers registered in the names of nominees for such customers. Such payments
will be the responsibility of such Participants and not that of the Company or
the Trustee.
Transfers between participants in DTC will be effected in accordance with
DTC rules and will be settled in immediately available funds. If a holder
requires physical delivery of a certificated security for any reason, including
to sell notes to persons in states that require physical delivery of such
security or to pledge such securities, such holder must transfer its interest in
the Global Note in accordance with the normal procedures and the procedures in
the indenture.
DTC has advised us that DTC will take any action permitted to be taken by
a Holder of Notes (including the presentation of Notes for exchange as described
below) only at the direction of one or more Participants to whose account the
DTC interests in the Global Securities are credited and only in respect of the
aggregate principal amount as to which such Participant or Participants has or
have given such direction. However, if there is an Event of Default under the
Indenture, DTC will exchange the Global Securities for Certificated Securities,
which it will distribute to its Participants.
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DTC has advised the Company as follows: DTC is a limited purpose trust
company organized under the laws of the State of New York, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the
Uniform Commercial Code and a "Clearing Agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC was created to hold
securities for its Participants and facilitate the clearance and settlement of
securities transactions between Participants through electronic book-entry
changes in accounts of its Participants, thereby eliminating the need for
physical movement of certificates. Participants include securities brokers and
dealers, banks, trust companies and clearing corporations and certain other
organizations. Indirect access to the DTC system is available to others such as
banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a Participant, either directly or indirectly
("Indirect Participants"). The rules applicable to DTC and its participants are
on file with the SEC.
DTC has further advised us that management of DTC is aware that some
computer applications, systems, and the like for processing data that are
dependent upon calendar dates, including dates before, on, and after January 1,
2000, may encounter "Year 2000 problems." DTC has informed its participants and
other members of the financial community that it has developed and is
implementing a program so that its systems, as the same relate to the timely
payment of distributions (including principal and interest payments) to security
holders, book-entry deliveries, and settlement of trades within DTC, continue to
function appropriately. This program includes a technical assessment and a
remediation plan, each of which DTC reports is complete. Additionally, DTC's
plan includes a testing phase, which DTC expects to be completed within
appropriate time frames.
However, DTC's ability to perform properly its services is also dependent
upon other parties, including but not limited to issuers and their agents, as
well as the DTC's direct and indirect participants and third party vendors from
whom DTC licenses software and hardware, and third party vendors on whom DTC
relies for information or the provision of services, including telecommunication
and electrical utility service providers, among others. DTC has informed the
industry that it is contacting (and will continue to contact) third party
vendors from whom DTC acquires services to: (1) impress upon them the importance
of such services being Year 2000 compliant; and (2) determine the extent of
their efforts for Year 2000 remediation (and, as appropriate, testing) of their
services. In addition, DTC is in the process of developing such contingency
plans as it deems appropriate.
According to DTC, the foregoing information with respect to DTC has been
provided to the industry for informational purposes only and is not intended to
serve as a representation, warranty, or contract modification of any kind.
Although DTC, Euroclear and Cedel are expected to follow the foregoing
procedures in order to facilitate transfers of interests in the Global Notes
among Participants of DTC, Euroclear and Cedel, they are under no obligation to
perform such procedures, and such procedures may be discontinued at any time.
Neither we nor the Trustee will have any responsibility for the performance by
DTC, Euroclear or Cedel or their respective direct or indirect participants of
their respective obligations under the rules and procedures governing their
operations.
Certificated Securities. Interests in the Global Notes will be exchanged
for Certificated Securities if (i) DTC notifies the Company that it is unwilling
or unable to continue as depositary for the Global Notes, or DTC ceases to be a
"Clearing Agency" registered under the Exchange Act, and a successor depositary
is not appointed by the Company within 90 days, or (ii) an Event of Default has
occurred and is continuing with respect to the Notes. Upon the occurrence of any
of the events described in the preceding sentence, the Company will cause the
appropriate Certificated Securities to be delivered.
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REGISTRATION RIGHTS
The Company, the Guarantors and the initial purchasers entered into the
registration rights agreement on March 31, 1999, pursuant to which the Company
and the Guarantors agreed, for the benefit of the holders of the existing notes,
that they will, at their own expense, (i) file an exchange offer registration
statement with the Commission with respect to an offer to exchange the existing
notes for the exchange notes having substantially identical terms in all
material respects to the existing notes (except that the exchange notes will not
contain terms with respect to transfer restrictions or interest rate increases
as described herein) within 65 calendar days after the issue date of the
existing notes, (ii) use their best efforts to cause the exchange offer
registration statement to be declared effective by the Commission under the
Securities Act within 135 calendar days after the issue date and (iii) use their
best efforts to consummate the exchange offer within 160 calendar days after the
issue date. Upon the exchange offer registration statement being declared
effective, the Company will offer the exchange notes in exchange for surrender
of the existing notes. The Company and the Guarantors will keep the exchange
offer open for at least 30 days (or longer if required by applicable law) after
the date that notice of the exchange offer is mailed holders of the existing
notes.
In the event that (i) any changes in law or the applicable interpretations
of the staff of the Commission do not permit the Company to effect the exchange
offer, (ii) for any other reason the exchange offer is not consummated within
160 days after the issue date, (iii) under certain circumstances, if the initial
purchasers shall so request or (iv) any holder of existing Notes (other than the
Initial Purchasers) is not eligible to participate in the exchange offer, the
Company and the Guarantors will, at their expense, (a) as promptly as
practicable, file with the Commission a shelf registration statement covering
resales of the existing Notes, (b) use their best efforts to cause the shelf
registration statement to be declared effective under the Securities Act on or
prior to 150 days after the issue date and (c) use their best efforts to keep
effective the shelf registration statement until the earlier of two years after
its issue date or such shorter period ending when all Notes covered by the shelf
registration statement have been sold in the manner set forth and as
contemplated in the shelf registration statement or when the Notes become
eligible for resale pursuant to Rule 144 under the Securities Act without volume
restrictions, if any. The Company, will, in the event of the filing of the shelf
registration statement, provide to each holder of the Notes copies of the
prospectus which is a part of the shelf registration statement, notify each such
holder when the shelf registration statement has become effective and take
certain other actions as are required to permit unrestricted resales of the
Notes. A holder of Notes that sells its Notes pursuant to the shelf registration
statement generally will be required to be named as a selling securityholder in
the related prospectus and to deliver a prospectus to purchasers, will be
subject to certain of the civil liability provisions under the Securities Act in
connection with such sales and will be bound by the provisions of the
registration rights agreement that are applicable to such a holder (including
certain indemnification rights and obligations thereunder). In addition, each
holder of the Notes will be required to deliver information to be used in
connection with the shelf registration statement and to provide comments on the
shelf registration statement within the time periods set forth in the
registration rights agreement in order to have their Notes included in the shelf
registration statement and to benefit from the provisions regarding liquidated
damages set forth in the following paragraph.
In the event that either (a) the exchange offer registration statement has
not been declared effective on or prior to the 135th calendar day following the
issue date or (b) the exchange offer is not consummated or a shelf registration
statement is not declared effective on or prior to the 160th calendar day
following the issue date, the interest rate borne by the Notes shall be
increased by one-quarter of one percent per annum following such 65-day period
in the case of clause (a) above, following such 135-day period in the case of
clause (b) above or following such 160-day period in the case of clause (c)
above, which rate will be increased by an additional one-quarter of one percent
per annum for each 90-day period that any additional interest continues to
accrue; provided that the aggregate increase in such
110
<PAGE>
annual interest rate may in no event exceed one percent. Upon (x) the filing of
the exchange offer registration statement after the 65-day period described in
clause (a) above, (y) the effectiveness of the exchange offer registration
statement after the 135-day period described in clause (b) above or (z) the
consummation of the exchange offer or the effectiveness of a shelf registration
statement, as the case may be, after the 160-day period described in clause (c)
above, the interest rate borne by the Notes from the date of such filing,
effectiveness or consummation, as the case may be, will be reduced to the
original interest rate if the Company and the Guarantors are otherwise in
compliance with this paragraph; provided, however, that if, after any such
reduction in interest rate, a different event specified in clause (a), (b) or
(c) above occurs, the interest rate may again be increased pursuant to the
foregoing provisions. The registration rights agreement is also attached as an
exhibit to this registration statement. In addition, the information set forth
above concerning certain interpretations of and positions taken by the staff of
the SEC is not intended to constitute legal advice, and prospective investors
should consult their own advisors with respect to such matters.
PLAN OF DISTRIBUTION
Each broker-dealer that receives exchange notes for its own account
pursuant to the exchange offer must acknowledge that it will deliver a
prospectus in connection with any resale of such exchange notes. This
prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of exchange notes received in
exchange for existing notes where such existing notes were acquired as a result
of market-making activities or other trading activities. In addition, until
_______________, 1999 all dealers effecting transactions in the exchange notes
may be required to deliver a prospectus.
The Company will not receive any proceeds from any sale of exchange notes
by broker-dealers. Exchange notes received by broker-dealers for their own
account pursuant to the exchange offer may be sold from time to time in one or
more transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the exchange notes or a combination of such
methods of resale, at market prices prevailing at the time of resale, at prices
related to such prevailing market prices or at negotiated prices. Any such
resale may be made directly to purchasers or to or through brokers or dealers
who may receive compensation in the form of commissions or concessions from any
such broker-dealer or the purchasers of any such exchange notes. Any
broker-dealer that resells exchange notes that were received by it for its own
account pursuant to the exchange offer and any broker or dealer that
participates in a distribution of such exchange notes may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit on any
such resale of exchange notes and any commission or concessions received by any
such person may be deemed to be underwriting compensation under the Securities
Act. The letter of transmittal states that, by acknowledging that it will
deliver and by delivering a prospectus, a broker-dealer will not be deemed to
admit that it is an "underwriter", within the meaning of the Securities Act.
The Company has agreed to pay all expenses incident to the exchange offer
(including the expenses of one counsel for the holders of the notes), other than
commissions or concessions of any broker-dealers, and will indemnify the holders
of the notes (including any broker-dealers) against certain liabilities,
including liabilities under the Securities Act.
CERTAIN FEDERAL TAX CONSIDERATIONS
EFFECT OF EXCHANGE OF EXISTING NOTES FOR EXCHANGE NOTES
The following discussion is based on the current provisions of the
Internal Revenue Code of 1986, as amended (the "Code"), applicable Treasury
regulations, judicial authority and administrative
111
<PAGE>
rulings and practice. There can be no assurance that the Internal Revenue
Service (the "Service") will not take a contrary view, and no ruling from the
Service has been or will be sought. Legislative, judicial or administrative
changes or interpretations may be forthcoming that could alter or modify the
statements and conditions set forth herein. Any such changes or interpretations
may or may not be retroactive and could affect the tax consequences to holders.
Certain holders (including insurance companies, tax-exempt organizations,
financial institutions, broker-dealers, foreign corporations and persons who are
not citizens or residents of the United States) may be subject to special rules
not discussed below. Supreme recommends that each holder consult such holder's
own tax advisor as to the particular tax consequences of exchanging such
holder's existing notes for exchange notes, including the applicability and
effect of any state, local or foreign tax laws.
Supreme believes that the exchange of the existing notes for notes
pursuant to the exchange offer will not be treated as an "exchange" for federal
income tax purposes because the exchange notes will not be considered to differ
materially in kind or extent from the exchange notes. Rather, the exchange notes
received by a holder will be treated as a continuation of the existing notes in
the hands of such holder. As a result, there will be no federal income tax
consequences to holders exchanging outstanding notes for exchange notes pursuant
to the exchange offer.
EFFECTS ON NON-UNITED STATES HOLDERS
The following is a general discussion of certain United States federal
income and estate tax consequences of the acquisition, ownership and disposition
of notes by an initial beneficial owner of notes that, for United States federal
income tax purposes, is a Non-United States Holder. This discussion is based
upon the United States federal tax law now in effect, which is subject to
change, possibly retroactively. For purposes of this discussion, a "Non-United
States Holder" means a holder of a note that is, for United States federal
income tax purposes, (a) a nonresident alien individual, (b) a foreign
corporation, (c) a foreign estate, (d) a foreign trust, or (e) a foreign
partnership one or more of the members of which is, for United States federal
income tax purposes, a nonresident alien individual, a foreign corporation, a
foreign estate, or a foreign trust. (For United States federal income tax
purposes: (a) a corporation or partnership is foreign unless it is created or
organized under the laws of the United States or of a political subdivision of
the United States; (b) a foreign estate is an estate other than an estate whose
income is includable in gross income for federal income tax purposes regardless
of its source; and (c) a foreign trust is any trust other than a trust as to
which (i) a United States court is able to exercise primary supervision over the
administration of the trust, and (ii) one or more United States persons have the
authority to control all substantial decisions of the trust.) The tax treatment
of the holders of the notes may vary depending upon their particular situations.
United States persons acquiring the notes are subject to different rules than
those discussed below. In addition, certain other holders (including insurance
companies, tax-exempt organizations, financial institutions and broker-dealers)
may be subject to special rules not discussed below. Prospective investors are
urged to consult their tax advisors regarding the United States federal tax
consequences of acquiring, holding and disposing of notes, as well as any tax
consequences that may arise under the laws of any foreign, state, local, or
other taxing jurisdiction.
INTEREST
Interest paid by Supreme on the notes to a Non-United States Holder will
not be subject to United States federal income or withholding tax if such
interest is not effectively connected with the conduct of a trade or business
within the United States by such Non-United States Holder and such Non-United
States Holder (a) does not actually or constructively own 10% of the total
combined voting power of stock of all classes of stock of Supreme; (b) is not a
controlled foreign corporation with respect to which Supreme directly or
indirectly is a "related person" within the meaning of the United States
Internal Revenue Code of 1986, as amended (the "Code"); (c) is not a bank making
a loan in its ordinary course of business; and
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<PAGE>
(d) either (A) the beneficial owner of the note certifies to Supreme or its
agent, under penalties of perjury, that such owner is not a United States person
and provides its name and address (which certification can be made on IRS Form
W-8 or Form W-8BEN) or (B) a securities clearing organization, bank or other
financial institution that holds customers' securities in the ordinary course of
its trade or business (a "Financial Institution") certifies to Supreme or to its
agent, under penalties of perjury, that the certification described in clause
(A) hereof has been received from the beneficial owner or by another financial
institution acting for the beneficial owner. Recently issued final Treasury
Regulations (the "Final Regulations"), which apply to payments on a note after
December 31, 1999, also provide that the certification requirements set forth
above generally will be fulfilled if beneficial owners (including partners of
certain foreign partnerships), as well as certain foreign partnerships, meet the
two conditions set forth in the preceding sentence. However, certain beneficial
owners including foreign estates or trusts (or a fiduciary thereof) and foreign
partnerships that have entered into a withholding agreement with the IRS will be
required to provide their "taxpayer identification number" in addition to their
name and address on Form W-8. Foreign partnerships and their partners should
consult their tax advisors regarding possible additional reporting requirements.
GAIN ON DISPOSITION
A Non-United States Holder will generally not be subject to United States
federal income tax on a gain recognized on a sale, redemption or other
disposition of a note unless (a) the gain is effectively connected with the
conduct of a trade or business within the United States by the Non-United States
Holder or (b) in the case of a Non-United States Holder who is a nonresident
alien individual and holds the note as capital asset, such holder is present in
the United States for 183 or more days in the taxable year of disposition and
certain other requirements are met.
FEDERAL ESTATE TAXES
If interest on the notes is exempt from withholding of United States
federal income tax under the rules described above, the notes will not be
included in the estate of a deceased Non-United States Holder for United States
federal estate tax purposes.
INFORMATION REPORTING AND BACKUP WITHHOLDING
Supreme will, where required, report to the holders of notes and the
Internal Revenue Service the amount of any interest paid on the notes in each
calendar year and the amounts of tax withheld, if any, with respect to such
payments.
In the case of payments of interest to Non-United States Holders, Treasury
regulations provide that the 31% backup withholding tax and certain information
reporting will not apply to such payments with respect to which either the
requisite certification, as described above, has been received or an exemption
has otherwise been established; provided that neither Supreme nor its paying
agent has actual knowledge that the holder is a United States person or that the
conditions of any other exemption are not in fact satisfied. Under these
Treasury regulations, information reporting and backup withholding will apply,
however, to the gross proceeds paid to a Non-United States Holder on the
disposition of the notes by or through a United States office of a United States
or foreign broker, unless the holder certifies to the broker under penalties of
perjury as to its name, address and status as a foreign person or the holder
otherwise establishes an exemption. Information reporting requirements, but not
backup withholding, will also apply to a payment of the proceeds of a
disposition of the notes by or through a foreign office of a United States
broker or foreign brokers with certain types of relationships to the United
States unless such broker has documentary evidence in its file that the holder
of the notes is not a United States person, and such broker has no actual
knowledge to the contrary, or the holder establishes an exception. Neither
113
<PAGE>
information reporting nor backup withholding generally will apply to a payment
of the proceeds of a disposition of the notes by or through a foreign office of
a foreign broker not subject to the preceding sentence. The Final Regulations
modify the application of the information reporting and backup withholding tax
to Non-United States Holders for payments made after December 31, 1999. Among
other things, these regulations may require such holders to furnish new
certifications of their non-United States status. Prospective investors,
including foreign partnerships and their partners, should consult their tax
advisors regarding possible additional reporting requirements.
Backup withholding is not an additional tax. Any amounts withheld under
the backup withholding rules may be refunded or credited against the Non-United
States Holder's United States federal income tax liability provided that the
required information is furnished to the Internal Revenue Service.
The Treasury Department recently promulgated final regulations regarding
the withholding and information reporting rules discussed above. The final
regulations do not significantly alter the substantive withholding and
information reporting requirements but rather unify current certification
procedures and forms and clarify reliance standards. The final regulations are
generally effective for payments made after December 31, 1999, subject to
certain transition rules. NON-UNITED STATES HOLDERS SHOULD CONSULT THEIR OWN TAX
ADVISORS WITH RESPECT TO THE IMPACT, IF ANY, OF THE NEW FINAL REGULATIONS.
LEGAL MATTERS
The validity of the notes offered hereby will be passed upon for the
Company by Broad and Cassel, a partnership including professional associations,
Miami, Florida.
EXPERTS
The consolidated financial statements of Supreme International Corporation
as of January 31, 1998 and 1999 and for each of the three years in the period
ended January 31, 1999, included in this prospectus and elsewhere in the
registration statement, have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their report appearing herein and elsewhere in the
registration statement, and are included in reliance upon the report of such
firm given upon their authority as experts in accounting and auditing.
The financial statements of Perry Ellis International, Inc. as of December
31, 1997 and 1998 and for each of the three years in the period ended December
31, 1998, included in this prospectus and elsewhere in the registration
statement, have been audited by Saul L. Klaw & Co., P.C., independent auditors,
as stated in their report appearing herein and elsewhere in the registration
statement, and are included in reliance upon the report of such firm given upon
their authority as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
Supreme is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended, and in accordance therewith files reports,
proxy statements and other information with the Commission. Such reports, proxy
statements and other information may be inspected and copied, without charge, at
the public reference facilities of the Commission located at 450 Fifth Street,
N.W., Washington, D.C. 20549 and at the Commission's regional offices located at
Seven World Trade Center, New York, New York 10048 and Northwestern Atrium
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Such
materials can also be obtained on the Commission's site on the Internet at
http://www.sec.gov. Copies can also be obtained by mail at prescribed rates.
Requests for copies should be directed to the Commission's Public Reference
Section, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549.
Supreme's common stock is traded on the Nasdaq National Market(R) and, as a
result, the periodic reports, proxy statements and other information filed by
Supreme with the Commission can be inspected at the offices of the Nasdaq
National Market, 1735 K Street, N.W., Washington, D.C. 20006.
114
<PAGE>
INDEX TO FINANCIAL STATEMENTS
PAGE
SUPREME INTERNATIONAL CORPORATION
Independent Auditors' Report F-2
Consolidated Balance Sheets as of January 31, 1998 and 1999 F-3
Consolidated Statements of Income for each of the three years
in the period ended January 31, 1999 F-4
Consolidated Statements of Changes in Stockholders' Equity for each
of the three years in the period ended January 31, 1999 F-5
Consolidated Statements of Cash Flow for each of the three years
in the period ended January 31, 1999 F-6
Notes to Consolidated Financial Statements F-7
PERRY ELLIS INTERNATIONAL, INC.
Independent Auditors' Report F-22
Balance Sheets as of December 31, 1997 and 1998 F-23
Statements of Operations for the years ended
December 31, 1996, 1997 and 1998 F-24
Undistributed income for the years ended
December 31, 1996, 1997 and 1998 F-25
Statements of Cash Flow for the years ended
December 31, 1996, 1997 and 1998 F-26
Notes to Financial Statements F-27
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Supreme International Corporation and subsidiaries:
We have audited the consolidated balance sheets of Supreme International
Corporation and subsidiaries (the "Company") as of January 31, 1998 and 1999,
and the related consolidated statements of income, changes in stockholders'
equity and cash flows for each of the three years in the period ended January
31, 1999. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of the Company as of January 31,
1998 and 1999, and the results of its operations and its cash flows for each of
the three years in the period ended January 31, 1999 in conformity with
generally accepted accounting principles.
/s/ DELOITTE & TOUCHE LLP
Miami, Florida
March 12, 1999 (April 14, 1999 as to Note 17)
F-2
<PAGE>
SUPREME INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF JANUARY 31, 1998 AND 1999
1998 1999
------------- --------------
ASSETS
Current Assets:
Cash $ 1,010,256 $ 173,493
Accounts receivable, net 35,502,607 38,969,845
Inventories 35,799,388 32,965,655
Deferred income taxes 1,154,905 1,091,482
Deposits for acquisitions -- 6,000,000
Other current assets 2,253,328 2,040,200
------------ ------------
Total current assets 75,720,484 81,240,675
Property and equipment, net 4,899,656 7,851,592
Intangible assets, net 19,716,064 18,842,797
Other 1,313,747 1,022,467
------------ ------------
TOTAL $101,649,951 $108,957,531
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 4,048,325 $ 4,595,688
Accrued expenses 2,062,912 4,931,525
Borrowings under letter of credit
facilities 3,000,000 --
Other current liabilities 442,790 413,505
------------ ------------
Total current liabilities 9,554,027 9,940,718
Deferred income tax 282,905 559,728
Long term debt--senior credit agreement 36,658,174 33,511,157
------------ ------------
Total liabilities 46,495,106 44,011,603
============ ============
Commitments and Contingencies: (Note 16)
Stockholders' Equity:
Preferred stock--$.01 par value;
1,000,000 shares authorized; no
shares issued or outstanding -- --
Class A Common Stock--$.01 par value;
30,000,000 shares authorized; no -- --
shares issued or outstanding
Common stock--$.01 par value;
30,000,000 shares authorized;
6,555,681 and 6,712,374 shares
issued and outstanding as of
January 31, 1998 and 1999,
respectively 65,556 67,123
Additional paid-in-capital 27,598,618 28,806,455
Retained earnings 27,490,671 36,072,350
------------ ------------
Total stockholders' equity 55,154,845 64,945,928
------------ ------------
TOTAL $101,649,951 $108,957,531
============ ============
See Notes to consolidated financial statements.
F-3
<PAGE>
SUPREME INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED JANUARY 31, 1999
1997 1998 1999
---- ---- ----
Revenues
Net Sales $157,372,796 $190,689,212 $221,347,295
Royalty Income 1,654,262 4,031,878 3,057,357
------------ ------------ ------------
Total Revenues 159,027,058 194,721,090 224,404,652
Cost of Sales 122,045,614 145,991,132 166,198,450
------------ ------------ ------------
Gross Profit 36,981,444 48,729,958 58,206,202
Selling, General and
Administrative Expenses 25,876,115 35,885,443 41,639,672
------------ ------------ ------------
Operating Income 11,105,329 12,844,515 16,566,530
Interest Expense 1,664,392 2,781,509 3,493,985
------------ ------------ ------------
Income Before Income Tax
Provision 9,440,937 10,063,006 13,072,545
Income Tax Provision 3,596,918 2,884,844 4,490,866
------------ ------------ ------------
Net Income $ 5,844,019 $ 7,178,162 $ 8,581,679
============ ============ ============
Net Income Per Share
Basic $ 0.89 $ 1.10 $ 1.29
============ ============ ============
Diluted $ 0.89 $ 1.08 $ 1.27
============ ============ ============
Weighted Average Number
of Shares Outstanding
Basic 6,534,446 6,540,604 6,674,103
============ ============ ============
Diluted 6,595,147 6,665,635 6,769,810
============ ============ ============
See Notes to consolidated financial statements.
F-4
<PAGE>
SUPREME INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED JANUARY 31, 1999
<TABLE>
<CAPTION>
COMMON STOCK
---------------------------
ADDITIONAL
PAID-IN RETAINED
SHARES AMOUNT CAPITAL EARNINGS TOTAL
------ ------ ------- -------- -----
<S> <C> <C> <C> <C> <C>
BALANCE, JANUARY 31, 1996 6,800,000 $ 68,000 $ 29,296,594 $ 14,468,490 $ 43,833,084
Purchase of
treasury stock, at cost (278,069) (2,780) (1,947,599) -- (1,950,379)
Exercise of stock options 7,500 75 48,675 -- 48,750
Net Income -- -- -- 5,844,019 5,844,019
------------ ------------ ------------ ------------ ------------
BALANCE, JANUARY 31, 1997 6,529,431 65,295 27,397,670 20,312,509 47,775,474
Exercise of stock options 26,250 261 200,948 -- 201,209
Net Income -- -- -- 7,178,162 7,178,162
------------ ------------ ------------ ------------ ------------
BALANCE, JANUARY 31, 1998 6,555,681 65,556 27,598,618 27,490,671 55,154,845
Exercise of stock options 78,525 785 457,367 -- 458,152
Exercise of warrants 78,168 782 (782) -- --
Net Income -- -- -- 8,581,679 8,581,679
Tax benefit for
exercise of
non-qualified
stock options -- -- 751,252 -- 751,252
------------ ------------ ------------ ------------ ------------
BALANCE, JANUARY 31, 1999 6,712,374 $ 67,123 $ 28,806,455 $ 36,072,350 $ 64,945,928
============ ============ ============ ============ ============
</TABLE>
See Notes to consolidated financial statements.
F-5
<PAGE>
SUPREME INTERNATIONAL CORPORATIONS AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED JANUARY 31, 1999
<TABLE>
<CAPTION>
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 5,844,019 $ 7,178,162 $ 8,581,679
Adjustments to reconcile net
income to net cash (used in)
provided by operating activities:
Depreciation and amortization 1,147,091 1,748,006 2,161,398
Loss on sale and
abandonment of property 257,221 187,692 --
Decrease (increase) in
deferred taxes 159,655 (203,342) 340,246
Changes in operating assets
and liabilities:
(net of effects of acquisition)
Accounts receivable, net (8,951,318) (6,695,371) (3,467,238)
Inventories 293,527 (3,598,866) 2,833,733
Other current assets (359,942) (727,633) 213,128
Other assets (1,915,477) 889,854 291,280
Accounts payable and
accrued expenses 4,835,234 (1,907,414) 3,415,976
Other current liabilities 563,756 28,055 (29,285)
------------ ------------ ------------
Net cash provided by
(used in)
operating activities 1,873,766 (3,100,857) 14,340,917
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (1,058,061) (3,828,142) (4,004,588)
Proceeds from sale of property and equipment 164,545 32,102 --
Payment on purchase of
intangible assets (137,027) (758,598) (235,479)
Deposit for John Henry/Manhattan acquisition -- -- (1,000,000)
Deposit for Perry Ellis
International acquisition -- -- (5,000,000)
Payment for Jolem acquisition (3,657,435) -- --
Payment for Munsingwear acquisition (19,768,380) -- --
------------ ------------ ------------
Net cash used in
investing activities (24,456,358) (4,554,638) (10,240,067)
------------ ------------ ------------
CASH FLOW FROM FINANCING ACTIVITIES:
Net increase (decrease) in
borrowings under letter of
credit facilities 6,812,629 (3,812,629) (3,000,000)
Net proceeds from (repayments
of) long-term debt 18,168,857 11,521,373 (3,147,017)
Purchase of treasury stock (1,950,379) -- --
Tax benefit for exercise of
non-qualified stock options -- -- 751,252
Proceeds from exercise of stock options 48,750 201,209 458,152
------------ ------------ ------------
Net cash provided by
(used in) financing
activities 23,079,857 7,909,953 (4,937,613)
------------ ------------ ------------
NET INCREASE (DECREASE) IN CASH 497,265 254,458 (836,763)
CASH AT BEGINNING OF YEAR 258,533 755,798 1,010,256
------------ ------------ ------------
CASH AT END OF YEAR $ 755,798 $ 1,010,256 $ 173,493
============ ============ ============
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION
Cash paid during the year for:
Interest $ 1,433,403 $ 2,820,016 $ 3,293,877
============ ============ ============
Income taxes $ 3,394,466 $ 3,174,807 $ 1,762,479
============ ============ ============
</TABLE>
See Notes to consolidated financial statements.
F-6
<PAGE>
SUPREME INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED JANUARY 31, 1999
1. GENERAL
Supreme International Corporation and subsidiaries (the "Company") was
incorporated in the State of Florida and has been in business since 1967. The
Company is a leading designer and marketer of a broad line of high quality men's
sportswear, including sport and dress shirts, golf sportswear, sweaters, urban
wear, casual and dress pants and shorts to all levels of retail distribution.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of the Company's significant accounting
policies:
Principles of Consolidation--The consolidated financial statements include
the accounts of Supreme International Corporation and its wholly-owned
subsidiaries. All intercompany transactions and balances have been eliminated in
consolidation.
Use of Estimates--The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts in the consolidated financial
statements and the accompanying notes. Actual results could differ from those
estimates.
Fair Value of Financial Instruments--The carrying amounts of accounts
receivable and accounts payable approximates fair value due to their short-term
nature. The carrying amount of debt and credit facilities approximate fair value
due to their stated interest rate approximating a market rate. These estimated
fair value amounts have been determined using available market information or
other appropriate valuation methodologies.
Inventories--Inventories are stated at the lower of cost (first-in,
first-out basis) or market. Costs consist of the purchase price, customs,
duties, freight, insurance, and commissions to buying agents.
Property and Equipment--Property and equipment are stated at cost.
Depreciation is computed using the straight-line and accelerated methods over
the estimated useful lives of the assets. Amortization of leasehold improvements
is computed using the straight-line method over the shorter of the lease term or
estimated useful lives of the improvements. The useful lives range from five to
ten years.
Intangible Assets--Intangible assets primarily represent costs capitalized
in connection with the acquisition, registration and maintenance of brand names
and license rights. The amortization periods for the intangible assets range
from fifteen to twenty years, with a weighted average of nineteen and a half
years.
Long Lived-Assets--Management reviews long-lived assets, including
identifiable intangible assets, for possible impairment whenever events or
circumstances indicate that the carrying amount of an asset may not be
recoverable. If there is an indication of impairment, management prepares an
estimate of future cash flows (undiscounted and without interest charges)
expected to result from the use of the asset and its eventual
F-7
<PAGE>
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
disposition. If these cash flows are less than the carrying amount of the asset,
an impairment loss is recognized to reduce the asset to its estimated fair
value. Preparation of estimated expected future cash flows is inherently
subjective and is based on management's best estimate of assumptions concerning
future conditions. At January 31, 1999, management believes there was no
impairment to long-lived assets.
Revenue Recognition--Sales are recognized upon shipment, returns for
defective goods are netted against sales, and an allowance is provided for
estimated returns and other chargebacks. Royalty income is recognized when
earned on the basis of the terms specified in the underlying contractual
agreements.
Income Taxes--Deferred income taxes result primarily from timing
differences in the recognition of expenses for tax and financial reporting
purposes and are accounted for in accordance with Financial Accounting Standards
Board Statement No. 109 ("SFAS No. 109"), Accounting for Income Taxes, which
requires the asset and liability method of computing deferred income taxes.
Under the asset and liability method, deferred taxes are adjusted for tax rate
changes as they occur.
Net Income Per Share--Basic net income per share is computed by dividing
net income by the weighted average shares of outstanding common stock. The
calculation of diluted net income per share is similar to basic earnings per
share except that the denominator includes dilutive potential common stock. The
dilutive potential common stock included in the Company's computation of diluted
net income per share includes the effects of the stock options and warrants
described in Note 14, as determined using the treasury stock method. The
weighted average number of shares for stock options included in the dilutive
weighted average shares outstanding were 60,701, 125,031 and 95,707 in 1997,
1998 and 1999, respectively.
Stock Split--On July 21, 1997, the Company's Board of Directors declared a
3 for 2 stock split in the form of a stock dividend. The accompanying financial
statements reflect the stock split as if it had occurred as of the earliest
period being presented.
Accounting for Stock-Based Compensation--The Company has chosen to account
for stock-based compensation to employees and non-employee members of the Board
using the intrinsic value method prescribed by Accounting Principles Board
Opinion ("APB") No. 25, "Accounting for Stock Issued to Employees," and related
interpretations. As required by Statement of Financial Accounting Standards No.
123 ("SFAS No. 123"), Accounting for Stock-Based Compensation, the Company has
presented certain pro forma and other disclosures related to stock-based
compensation plans.
Reclassifications--Certain amounts in the 1998 and 1997 financial
statements have been reclassified to conform to the 1999 presentation.
New Accounting Pronouncements--In June 1997, the Financial
Accounting Standards Board issued Statement of Financial Accounting
Standards No. 130 ("SFAS No. 130"), Reporting Comprehensive Income. SFAS
No. 130 requires that all components of comprehensive income be reported
on one of the following: (1) the statement of income; (2) the statement
of changes in stockholders' equity, or (3) a separate statement of
comprehensive income. Comprehensive income is comprised of net income and
all changes to stockholders' equity, except those due to investments by
stockholders (changes in paid-in capital) and distributions to
stockholders (dividends). SFAS No. 130 is effective for fiscal years
beginning after December 15, 1997. The Company adopted SFAS No. 130 for
the fiscal year ended January 31, 1999. The components of
F-8
<PAGE>
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
comprehensive income which are excluded from net income are not significant,
individually or in the aggregate, and therefore no separate statement of
comprehensive income has been presented.
In June 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 131 ("SFAS No. 131"),
Disclosure About Segments of an Enterprise and Related Information. SFAS
No. 131 changes the way public companies report information about
segments of their business in their annual financial statements and
requires them to report selected segment information in their quarterly
reports issued to shareholders. SFAS No. 131 also requires entity-wide
disclosure about products and services an entity provides, the foreign
countries in which it holds assets and reports revenues and its major
customers. SFAS No. 131 is effective for fiscal years beginning after
December 15, 1997. The Company adopted SFAS No. 131 for the fiscal year
ended January 31, 1999 (see Note 15).
In March 1998, the American Institute of Certified Public Accountants
issued Statements of Position 98-1, Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use ("SOP 98-1"). SOP 98-1 provides
guidance for capitalizing and expensing the costs of computer software developed
or obtained for internal use. SOP 98-1 is effective for financial statements for
fiscal years beginning after December 15, 1998. Management has not determined
the effect, if any, of adopting SOP 98-1.
In April 1998, the American Institute of Certified Public Accountants
issued Statements of Position 98-5, Reporting on the Costs of Start-Up
Activities ("SOP 98-5"). SOP 98-5 establishes accounting standards for the
reporting of certain costs associated with the start-up of operations, lines of
business, etc. SOP 98-5 requires that costs of start-up activities, including
organizational costs, be expensed as incurred and that in the year of adoption,
start-up costs recorded should be expensed. SOP 98-5 is effective for fiscal
years beginning subsequent to December 15, 1998. Management has not determined
the effect, if any, of adopting SOP 98-5.
In June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 133 Accounting for
Derivative Instruments and Hedging Activities ("SFAS No. 133"). Among
other provisions, SFAS No. 133 establishes accounting and reporting
standards for derivative instruments and for hedging activities. It also
requires that an entity recognize all derivatives as either assets or
liabilities in the statement of financial position and measure those
instruments at fair value. SFAS No. 133 is effective for financial
statements for fiscal year beginning after June 15, 1999. Management has
not determined the effect, if any, of adopting SFAS No. 133.
3. ACQUISITIONS
Munsingwear Acquisition--On September 6, 1996, the Company acquired
certain assets of Munsingwear, Inc. ("Munsingwear"), a manufacturer of men's
casual apparel, for approximately $18,400,000. The assets acquired consisted of
brand names including Grand Slam(R), Grand Slam Tour(R), Penguin Sport(R), and
other intangible assets. The purchase price amounted to approximately
$19,800,000, which included $1,400,000 of transaction costs, and was primarily
allocated to working capital and intangible assets as follows: inventories
$300,000; accounts receivable $300,000; and brand names $19,200,000. The
acquisition was accounted for under the purchase method of accounting and was
financed with borrowings from the revolving credit agreement (see Note 10).
Jolem Acquisition--On May 6, 1996, the Company acquired all the
assets of Jolem Imports, Inc. ("Jolem"), a Miami based manufacturer of
men's and boy's casual apparel. The purchase price amounted to
F-9
<PAGE>
3. ACQUISITIONS--(CONTINUED)
approximately $3,700,000 and was primarily allocated to working capital and
intangible assets as follows: inventories $1,800,000; accounts receivable
$1,500,000; and brand names $400,000. The acquisition was accounted for under
the purchase method of accounting.
4. ACCOUNTS RECEIVABLE
Accounts receivable consisted of the following as of January 31:
1998 1999
---- ----
Trade accounts $ 37,499,297 $ 43,219,125
Royalties and other receivables 2,217,338 1,479,149
------------ ------------
Total 39,716,635 44,698,274
Less: Allowance for doubtful accounts (609,874) (609,874)
Allowance for sales returns and
other chargebacks (3,604,154) (5,118,555)
------------ ------------
Total $ 35,502,607 $ 38,969,845
============ ============
The activity for the allowance accounts are as follows:
1997 1998 1999
---- ---- ----
Allowance for doubtful accounts:
Beginning balance $ 242,792 $ 250,000 $ 609,874
Provision 135,854 799,129 167,659
Write-offs, net of recoveries (128,646) (439,255) (167,659)
------------ ------------ ------------
Ending balance $ 250,000 $ 609,874 $ 609,874
============ ============ ============
Allowance for sales returns and
other chargebacks:
Beginning balance $ 567,014 $ 1,670,565 $ 3,604,154
Provision 9,057,342 13,047,822 11,984,955
Actual returns and other
chargebacks (7,953,791) (11,114,233) (10,470,554)
------------ ------------ ------------
Ending balance $ 1,670,565 $ 3,604,154 $ 5,118,555
============ ============ ============
The Company carries accounts receivable at the amount it deems to be
collectible. Accordingly, the Company provides allowances for accounts
receivable it deems to be uncollectible based on management's best estimates.
Recoveries are recognized in the period they are received. The ultimate amount
of accounts receivable that become uncollectible could differ from those
estimated.
F-10
<PAGE>
5. INVENTORIES
Inventories consisted of the following as of January 31:
1998 1999
---- ----
Finished goods $31,972,723 $30,730,131
Raw materials and in process 1,204,841 255,085
Merchandise in transit 2,621,824 1,980,439
----------- -----------
Total $35,799,388 $32,965,655
=========== ===========
6. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following as of January 31:
1998 1999
---- ----
Land $ -- $ 1,125,000
Furniture, fixture and equipment 5,723,557 7,205,651
Vehicles 309,955 371,364
Leasehold improvements 1,617,288 2,299,704
---------- -----------
7,650,800 11,001,719
Less: accumulated depreciation (2,751,144) (3,150,127)
---------- -----------
Total $4,899,656 $ 7,851,592
========== ===========
Depreciation expense relating to property and equipment amounted to
approximately $800,000, $847,000, and $1,052,000 for the fiscal years ended
January 31, 1997, 1998 and 1999, respectively.
7. INTANGIBLE ASSETS
Intangible assets consisted of the following as of January 31:
1998 1999
---- ----
Trademarks & Licenses $21,306,788 $21,544,562
Goodwill 17,864 16,165
---------- -----------
21,324,652 21,560,727
Accumulated Amortization (1,608,588) (2,717,930)
---------- -----------
Balance, net $19,716,064 $18,842,797
=========== ===========
Amortization expense relating to the intangible assets amounted to
approximately $347,000, $901,000 and $1,109,000, for the fiscal years ended
January 31, 1997, 1998 and 1999, respectively.
F-11
<PAGE>
8. ACCRUED EXPENSES
Accrued expenses consisted of the following as of January 31:
1998 1999
---- ----
Income taxes $ 370,687 $2,107,457
Salaries and commissions 662,865 1,549,758
Buying commissions 597,280 818,188
Other 432,080 456,122
---------- ----------
Total $2,062,912 $4,931,525
========== ==========
9. BORROWINGS UNDER LETTER OF CREDIT FACILITIES
The Company has a $45 million facility which provides up to $35 million to
issue sight letters of credit including a sub-limit of $2 million to issue time
letters of credit up to 120 days. In addition, the facility has a $10 million
sub-limit for refinancing of sight letters of credit for a period of up to 120
days. The facility is collateralized by the consignment of merchandise in
transit under each letter of credit. Indebtedness under this facility bears
interest at variable rates substantially equal to the lenders' prime rate minus
1.0% per annum (6.75% as of January 31, 1999). Amounts outstanding under the $10
million sub-limit are collateralized by a secondary interest in the Company's
accounts receivable and inventories.
The Company has two additional letters of credit facilities which provide
for borrowings of up to $15 million to issue sight letters of credit. The
facilities are collateralized by the consignment of the merchandise in transit
under each letter of credit.
Borrowings available under letter of credit facilities consisted of the
following as of January 31:
1998 1999
---- ----
Total Letter of credit facilities $ 60,000,000 $ 60,000,000
Borrowings (3,000,000) --
Outstanding letters of credit (26,673,016) (23,420,765)
------------ ------------
Available $ 30,326,984 $ 36,579,235
============ ============
10. LONG-TERM DEBT--SENIOR CREDIT FACILITY
The Company amended its revolving credit facility (the "Senior Credit
Facility") on August 1, 1998 with a group of banks giving it the right to borrow
$60 million or a portion thereof for its general corporate purposes. The Senior
Credit Facility expires in April 2001 . Borrowings are limited under the terms
of a borrowing base calculation which generally restricts the outstanding
balance to 85% of eligible receivables plus 50% of eligible inventories, as
defined. Interest on borrowings is variable, based upon the Company's option of
selecting a LIBOR plus 1.25% or the bank's prime rate. The weighted average
interest rate was 6.69% as of January 31, 1999. The Senior Credit Facility
contains certain covenants, the most restrictive of which require the Company to
maintain certain financial and net worth ratios. In addition, the Senior Credit
Facility restricts the payment of dividends. The Senior Credit Facility is
secured by the Company's assets. The outstanding balance under the Senior Credit
Facility as of January 31, 1998 and 1999 amounted to $36,658,174 and
$33,511,157, respectively.
F-12
<PAGE>
10. LONG-TERM DEBT--SENIOR CREDIT FACILITY--(CONTINUED)
The Company amended the Senior Credit Facility in March, 1999. As amended,
the Senior Credit Facility will provide a revolving credit facility up to an
aggregate amount of $75 million and a term loan of $25 million. The amended
agreement expires in October 2002.
11. INCOME TAXES
The income tax provision consisted of the following for each of the years
ended January 31:
1997 1998 1999
---- ---- ----
Current income taxes:
Federal $ 2,910,509 $ 2,780,815 $ 3,057,838
State 526,754 307,371 1,002,692
Foreign -- -- 90,090
----------- ----------- -----------
Total $ 3,437,263 $ 3,088,186 $ 4,150,620
Deferred income taxes:
Federal and state 159,655 (203,342) 340,246
----------- ----------- -----------
Total $ 3,569,918 $ 2,884,844 $ 4,490,866
=========== =========== ===========
The following table reconciles the statutory federal income tax rate to
the Company's effective income tax rate for each of the years ended January 31:
1997 1998 1999
----------- ---------- ------------
Statutory federal income tax rate 35.0% 35.0% 35.0%
Increase (decrease) resulting from
State income taxes, net of
federal income tax
benefit....................... 3.9 2.1 2.9
Benefit of graduated rate...... (1.0) (1.0) (1.0)
Reversal of certain income (5.0)
tax reserves.................. -- --
Other............................ 0.2 (2.4) (2.5)
----------- ---------- ------------
Total............................ 38.1% 28.7% 34.4%
=========== ========== ============
F-13
<PAGE>
11. INCOME TAXES--(CONTINUED)
The tax effects of temporary differences that give rise to deferred tax
assets and liabilities are as follows as of January 31:
1998 1999
---- ----
Deferred income tax assets:
Inventories $ 642,944 $ 795,442
Accounts receivable 227,468 220,165
Accrued expenses 183,750 --
Other 100,743 75,875
----------- -----------
Deferred income tax assets 1,154,905 1,091,482
----------- -----------
Deferred income tax liabilities:
Fixed assets (61,742) (318,580)
Intangible (99,694) (241,148)
Other (121,469) --
----------- -----------
Deferred income tax liabilities (282,905) (559,728)
----------- -----------
Net deferred income tax assets $ 872,000 $ 531,754
=========== ===========
A valuation allowance for deferred income tax assets is not deemed
necessary as the assets are expected to be recovered.
12. RETIREMENT PLAN
The Company adopted a 401(K) Profit Sharing Plan (the "Plan") in which
eligible employees may participate. Employees are eligible to participate in the
Plan upon the attainment of age 21, and completion of one year of service.
Participants may elect to contribute up to 15% of their annual compensation, not
to exceed amounts prescribed by statutory guidelines. The Company is required to
contribute an amount equal to 50% of each participant's eligible contribution up
to 4% of the participant's annual compensation. The Company may elect to
contribute additional amounts at its discretion. The Company's contributions to
the plan were approximately $34,000, $74,000, and $115,000 for the fiscal years
ended January 31, 1997, 1998 and 1999 respectively.
13. RELATED PARTY TRANSACTIONS
The Company leases certain office and warehouse space owned by the
Company's Chairman of the Board of Directors and Chief Executive Officer under
non-cancelable operating lease arrangements. Rent expense, including taxes, for
these leases amounted to approximately $600,000, $625,000 and $546,000 for the
fiscal years ended January 31, 1997, 1998 and 1999, respectively.
The Company entered into a license agreement (the "License Agreement")
with Isaco International, Inc. ("Isaco"), pursuant to which Isaco was granted an
exclusive license to use the Natural Issues brand name in the United States and
Puerto Rico to market a line of men's underwear and loungewear. The License
Agreement provides for a guaranteed minimum royalty payment to the Company of
$137,500 and expires on May 31, 1999. The principal shareholder of Isaco is the
father-in-law of the Company's President and Chief
F-14
<PAGE>
13. RELATED PARTY TRANSACTIONS--(CONTINUED)
Operating Officer. Royalty income earned from the License Agreement amounted to
approximately $243,000, $296,000 and $298,000 for the fiscal years ended January
31, 1997, 1998 and 1999, respectively.
In January 1998, the Company entered into two additional three-year
license agreements with Isaco for use of the Natural Issue brand in the United
States and its territories and possessions to market lines of hosiery and
neckwear. The license agreement for neckwear provides for a guaranteed minimum
annual royalty of $15,000 and the license agreement for hosiery provides for a
guaranteed minimum annual royalty of $25,000 during the first year, increasing
by $5,000 in each subsequent year.
14. STOCK OPTIONS AND WARRANTS
Stock Options--The Company adopted a 1993 Stock Option Plan (the "1993
Plan") and a Directors Stock Option Plan (the "Directors Plan") (collectively,
the "Stock Option Plans"), under which shares of common stock are reserved for
issuance upon the exercise of the options. The number of shares issuable under
the Directors Plan is 150,000. The 1993 Plan was amended during fiscal 1999 to
increase the number of shares issuable from 450,000 shares to 900,000 shares.
The Stock Option Plans are designed to serve as an incentive for attracting and
retaining qualified and competent employees, directors, consultants, and
independent contractors of the Company. The 1993 Plan provides for the granting
of both incentive stock options and nonstatutory stock options. Incentive stock
options may only be granted to employees. Only non-employee directors are
eligible to receive options under the Directors Plan. All matters relating to
the Directors Plan are administered by a committee of the Board of Directors
consisting of two or more employee directors, including selection of
participants, allotment of shares, determination of price and other conditions
of purchase, except that the per share exercise price of options granted under
the Directors Plan may not be less than the fair market value of the common
stock on the date of grant.
Options can be granted under the 1993 Plan on such terms and at such
prices as determined by the Board of Directors, or a committee thereof, except
that the per share exercise price of incentive stock options granted under the
1993 Plan may not be less than the fair market value of the common stock on the
date of grant, and in the case of an incentive stock option granted to a 10%
shareholder, the per share exercise price will not be less than 110% of such
fair market value. The aggregate fair market value of the shares covered by
incentive stock options granted under the 1993 Plan that become exercisable by a
grantee in any calendar year is subject to a $100,000 limit.
On December 9, 1998, in order to provide an appropriate incentive to
certain members of management whose stock option exercise prices were higher
than the market price on that date, the Company allowed certain options to be
repriced. This repricing was at the consent of the option holders, and all other
terms of the options, including grant dates and exercise dates, remain intact
and in accordance with the 1993 Plan.
F-15
<PAGE>
14. STOCK OPTIONS AND WARRANTS--(CONTINUED)
A summary of the status of the option plans as of and for the changes
during each of the three years in the period ended January 31, 1999 is presented
below:
<TABLE>
<CAPTION>
OPTION PRICE PER SHARE OPERATIONS EXERCISABLE
--------------------------------- -------------------------------
NUMBER NUMBER WEIGHTED
OF LOW HIGH WEIGHTED OF SHARES AVERAGE
SHARES EXERCISE PRICE
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding January 31, 1996 218,250 $ 6.33 $ 10.75 $ 7.71 114,938 $ 8.06
Granted 1997 90,000 $ 6.67 $ 10.75 $ 8.87
Exercised 1997 (7,500) $ 6.50 $ 6.50 $ 6.50
Cancelled 1997 (7,500) $ 6.50 $ 6.50 $ 6.50
--------
Outstanding January 31, 1997 293,250 $ 6.33 $ 10.75 $ 8.01 192,938 $ 8.14
Granted 1998 24,000 $ 9.17 $ 10.17 $ 9.84
Exercised 1998 (26,250) $ 6.67 $ 10.75 $ 7.73
Cancelled 1998 --
--------
Outstanding January 31, 1998 291,000 $ 6.33 $ 10.75 $ 7.92 221,750 $ 7.90
Granted 1999 387,000 $ 9.75 $ 15.75 $ 13.18
Exercised 1999 (103,125) $ 6.33 $ 10.67 $ 7.36
Cancelled 1999 (8,875) $ 10.67 $ 15.25 $ 10.96
--------
Outstanding January 31, 1999 566,000 $ 6.67 $ 15.75 $ 11.95 410,375 $ 12.66
========
</TABLE>
The following table summarizes the information about options outstanding
at January 31, 1999:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
- ----------------------------------------------- -----------------------------------------------
WEIGHTED
AVERAGE
REMAINING WEIGHTED
RANGE OF NUMBER CONTRACTUAL AVERAGE NUMBER WEIGHTED
EXERCISE OUTSTANDING LIFE (IN EXERCISE EXERCISABLE AVERAGE
PRICES YEARS) PRICE EXERCISE PRICE
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$6.50 - $9.75 152,750 3.0 $ 8.20 135,625 $ 8.19
$10.00 - $15.00 175,250 4.7 $10.07 42,750 $10.12
$15.25 - $15.75 238,000 9.1 $15.73 232,000 $15.75
</TABLE>
F-16
<PAGE>
14. STOCK OPTIONS AND WARRANTS--(CONTINUED)
As described in Note 2, the Company accounts for stock-based compensation
using the provisions of APB No. 25 and related interpretations. No compensation
expense has been recognized in the years ended January 31, 1997, 1998 and 1999
as the exercise prices for stock options granted are equal to their fair market
value at the time of grant. Had compensation cost for options granted been
determined in accordance with the fair value provisions of SFAS 123, the
Company's net income and net income per share would have been as follows for the
years ended January 31:
1997 1998 1999
---- ---- ----
Net income:
As reported $5,844,019 $ 7,178,162 $ 8,581,679
========== =========== =============
Pro forma $5,710,383 $ 7,026,242 $ 8,145,789
========== =========== =============
Net income per share:
As reported
Basic $ 0.89 $ 1.10 $ 1.29
========== =========== =============
Diluted $ 0.89 $ 1.08 $ 1.27
========== =========== =============
Pro forma:
Basic $ 0.87 $ 1.07 $ 1.22
========== =========== =============
Diluted $ 0.87 $ 1.05 $ 1.20
========== =========== =============
The fair value for these options was estimated at the grant date using the
Black-Scholes Option Pricing Model with the following weighted-average
assumptions for 1997, 1998 and 1999:
1997 1998 1999
----------- ---------- ------------
Risk free interest rate.......... 6.5% 6.5% 6.5%
Dividend yield................... 0.0% 0.0% 0.0%
Volatility factors............... 58.0% 45.9% 67.3%
Weighted average life (years).... 5.0 5.0 5.0
Using the Black-Scholes Option Pricing Model, the estimated
weighted-average fair value per option granted in 1997, 1998 and 1999 were
$4.97, $5.99 and $9.22, respectively.
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because the Company's stock options have characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its stock options.
The pro forma amounts may not be representative of the future effects on
reported net income and net income per share that will result from the future
granting of stock options, since the pro forma compensation expense is allocated
over the periods in which options become exercisable and new option awards are
granted each year.
F-17
<PAGE>
14. STOCK OPTIONS AND WARRANTS--(CONTINUED)
Warrants --In conjunction with the Company's initial public offering in
May 1993, the Company granted 180,000 warrants entitling the holders of each
warrant to purchase one share of common stock at an exercise price of $9.35 per
share. The warrants became exercisable on May 21, 1995. All warrants were
exercised during fiscal 1999.
15. SEGMENT INFORMATION
The Company is engaged principally in one line of business, that being a
leading designer and marketer of a broad line of high quality men's sportswear,
including sport and dress shirts, golf sportswear, sweaters, urban wear, casual
and dress pants and shorts to all levels of retail distribution. We own or
license the brands under which most of our products are sold. The percentage of
our revenues from branded products amounted to 75% in fiscal 1998 and 81% in
fiscal 1999. Sales to any one customer exceeding ten percent amounted to 15%,
12% and 12% for the year ended January 31, 1997; 12% and 13% for the year ended
January 31, 1998; and 15%, 10% and 10% for the year ended January 31, 1999. The
Company does not believe that these concentrations of sales and credit risk
represent a material risk of loss with respect to its financial position as of
January 31, 1999.
16. COMMITMENTS AND CONTINGENCIES
The Company has licensing agreements, as licensee, for the use of certain
branded and designer labels. The license agreements expire on varying dates
through December 31, 2000. Total royalty payments under these license agreements
amounted to approximately $405,000, $330,000 and $573,000 for the years ended
January 31, 1997, 1998 and 1999, respectively, and were classified as selling,
general and administrative expenses.
The Company is party to an employment agreement with Oscar Feldenkreis,
the Company's President and Chief Operating Officer, which expires in May 2000,
and is subject to annual renewal. The employment agreement currently provides
for an annual salary of $350,000, subject to annual cost-of-living increases,
and an annual bonus as may be determined by the Compensation Committee in its
discretion, up to a maximum of $500,000. The employment agreement requires Mr.
Feldenkreis to devote his full-time to the affairs of the Company. Upon
termination of the employment agreement by reason of the employee's death or
disability, Mr. Feldenkreis or his estate will receive a lump sum payment equal
to one year's salary plus a bonus as may be determined by the Compensation
Committee in its discretion. The employment agreement also prohibits Mr.
Feldenkreis from directly or indirectly competing with the Company for one year
after termination of his employment for any reason except the Company's
termination of Mr. Feldenkreis without cause.
The Company is also party to an employment agreement with George
Feldenkreis, the Company's Chairman of the Board and Chief Executive Officer,
expiring in May 2000, and is subject to annual renewal. The employment agreement
currently provides for an annual salary of $375,000, subject to annual
cost-of-living increases, and an annual bonus as may be determined by the
Compensation Committee in its discretion, up to a maximum of $250,000. Pursuant
to his employment agreement, Mr. Feldenkreis devotes a majority of his working
time to the affairs of the Company. George Feldenkreis' employment agreement
contains termination and non-competition provisions similar to those set forth
in Oscar Feldenkreis' agreement.
F-18
<PAGE>
16. COMMITMENTS AND CONTINGENCIES--(CONTINUED)
The Company consolidated its administrative offices and warehouses and
distribution facilities into a 238,000 square foot facility in Miami. The lease
has a term of five years, minimum annual rental of approximately $1,000,000 and
requires a minimum contingent rental payment at the termination of the lease of
$12,325,000. The minimum contingent rental payment is not required if, at the
Company's option, the lease is renewed after the five year term.
Minimum aggregate annual commitments for all of the Company's
noncancelable operating lease commitments, including the related party leases
described in Note 13 and the minimum contingent rental payment described above,
are as follows.
YEAR ENDING JANUARY 31,
2000.................................................... $1,461,800
2001.................................................... 1,335,600
2002.................................................... 1,206,200
2003.................................................... 13,154,500
2004.................................................... 372,100
------------
Total............................................... $17,530,200
============
Rent expense for these leases, including the related party rent payments
discussed in Note 13, amounted to $1,078,000, $1,460,000, and $1,946,000 for the
fiscal years ended January 31, 1997, 1998 and 1999, respectively.
The Company guarantees up to $600,000 of letters of credit of an
unaffiliated entity.
The Company is subject to claims and suits against it, as well as the
initiator of claims and suits against others, in the ordinary course of its
business, including claims arising from the use of its trademarks. The Company
does not believe that the resolution of any pending claims will have a material
adverse affect on its financial position, results of operations or cash flows.
F-19
<PAGE>
17. SUBSEQUENT EVENTS
Perry Ellis International, Inc. In April 1999, the Company acquired Perry
Ellis International, Inc. for approximately $74.6 million in cash, net of
purchase price adjustments. Perry Ellis International, Inc. is a privately-held
company which owns and licenses the Perry Ellis brand, currently one of the top
selling brands in specialty chains and department stores in the United States.
Perry Ellis International, Inc. is currently the licensor under approximately 34
license agreements, primarily for various categories of men's wear, boys' wear
and fragrances. During the year ended December 31, 1998, Perry Ellis
International, Inc. had revenues of $16.2 million.
Senior Subordinated Notes. Concurrently with the Company's acquisition of
Perry Ellis International, Inc., the Company issued $100,000,000 in 12 1/4%
senior subordinated notes due 2006. The senior subordinated notes are jointly
and severally guaranteed by the Company and it's wholly-owned subsidiaries.
Separate financial statements for the Company's wholly-owned subsidiaries are
not included due to insignificant operations.
John Henry/Manhattan. In March 1999, the Company acquired certain assets
of the John Henry and Manhattan dress shirt business from Salant Corporation,
which is currently in a Chapter 11 bankruptcy proceeding. On February 24, 1999,
the bankruptcy court approved the purchase for approximately $44.2 million in
cash. The assets consist of the John Henry, Manhattan and Lady Manhattan
trademarks and trade names, license agreements, the existing dress shirt
inventory with a value of approximately $17.2 million and certain manufacturing
equipment. The Company assumed a lease for the dress shirt manufacturing
facility located in Mexico and other ordinary course of business liabilities.
The Company has entered into an agreement with Phillips-Van Heusen Corporation
to license the John Henry and Manhattan brands. Phillips-Van Heusen also bought
the existing dress shirt inventory from the Company at the Company's cost.
Upon consummation of the John Henry/Manhattan acquisition, the Company
paid Icahn Associates Corp. ("IAC") a financial advisory fee of $1.0 million. In
addition, IAC was also granted the right to acquire 1,320,000 shares of the
Company's common stock at $12 per share, which was not exercised and expired on
April 13, 1999.
F-20
<PAGE>
18. SUMMARIZED QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
1Q 2Q 3Q 4Q TOTAL
-------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
FISCAL YEAR ENDED JANUARY 31, 1999
<S> <C> <C> <C> <C> <C>
Net Sales $ 60,085 $ 49,709 $ 65,012 $ 46,541 $221,347
Royalty income 1,022 981 492 562 3,057
-------- -------- -------- -------- --------
Total revenues 61,107 50,690 65,504 47,103 224,404
Gross profit 15,648 13,166 16,085 13,307 58,206
Net Income 2,637 1,053 2,812 2,080 8,582
Net income per share:
Basic $ 0.40 $ 0.16 $ 0.42 $ 0.31 $ 1.29
Diluted $ 0.39 $ 0.15 $ 0.42 $ 0.31 $ 1.27
FISCAL YEAR ENDED JANUARY 31, 1998
Net Sales $ 48,841 $ 42,037 $ 54,550 $ 45,261 $190,689
Royalty income 1,123 1,051 887 971 4,032
-------- -------- -------- -------- --------
Total revenues 49,964 43,088 55,437 46,232 194,721
Gross profit 12,963 10,538 12,477 12,752 48,730
Net Income 2,149 826 2,411 1,792 7,178
Net income per share:
Basic $ 0.33 $ 0.13 $ 0.37 $ 0.27 $ 1.10
Diluted $ 0.33 $ 0.12 $ 0.36 $ 0.27 $ 1.08
FISCAL YEAR ENDED JANUARY 31, 1997
Net Sales $ 37,807 $ 31,159 $ 46,746 $ 41,661 $157,373
Royalty income 28 70 405 1,151 1,654
-------- -------- -------- -------- --------
Total revenues 37,835 31,229 47,151 42,812 159,027
Gross profit 8,672 6,824 11,116 10,369 36,981
Net income 1,615 689 1,974 1,566 5,844
Net income per share:
Basic(1) $ 0.25 $ 0.11 $ 0.30 $ 0.24 $ 0.89
Diluted $ 0.25 $ 0.10 $ 0.30 $ 0.24 $ 0.89
</TABLE>
- ---------------------
(1) Total does not equal sum of quarters due to effect of the weighted
averaging of shares outstanding.
F-21
<PAGE>
INDEPENDENT AUDITORS' REPORT
Perry Ellis International, Inc.:
We have audited the accompanying balance sheet of Perry Ellis
International, Inc. as of December 31, 1997 and December 31, 1998, and the
related statement of operations, undistributed income and cash flows for the
three years ended December 31, 1996, December 31, 1997 and December 31, 1998.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on the financial statements based
upon our audit.
We conducted our audit in accordance with generally accepted auditing
standards. These standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.
An audit includes examining on a test basis evidence supporting the
amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
Management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Perry Ellis International,
Inc. as of December 31, 1997 and December 31, 1998, and the results of its
operations and cash flows for the three years ended December 31, 1996, December
31, 1997, and December 31, 1998, in conformity with generally accepted
accounting principles.
/s/ Saul L. Klaw & Co., P.C.
Certified Public Accountants
Dated: March 12, 1999
(May 11, 1999 as to Note 10)
F-22
<PAGE>
PERRY ELLIS INTERNATIONAL, INC.
BALANCE SHEET
DECEMBER 31,
----------------------------
1997 1998
---- ----
ASSETS
Current Assets
Cash Balances $ 527,161 $ 1,776,722
Due from Licenses 389,281 944,885
Prepaid Expenses 758,171 543,383
Prepaid Franchise Taxes -0- 75,232
Unexpired Insurance 41,317 43,200
Employee Loan Receivable -0- 6,183
----------- -----------
Total Current Assets 1,715,930 3,389,605
Fixed Assets 1,995,817 2,016,958
Less: Accumulated Depreciation (647,380) (875,444)
Security Deposits 47,688 32,334
----------- -----------
Total Assets $ 3,112,055 $ 4,563,453
=========== ===========
LIABILITIES
Current Liabilities
Accounts Payable, Expenses $ 542,170 $ 163,443
Accrued Payroll 500,425 452,884
Employment Termination Payable, Current 90,000 108,296
Franchise Taxes Payable 610,058 -0-
----------- -----------
Total Current Liabilities 1,742,653 724,623
----------- -----------
CAPITAL
Capital Stock - no par value; 200 shares
authorized; 50 shares issued and outstanding 1,000 1,000
Undistributed Income 1,368,402 3,837,830
----------- -----------
Total Capital 1,369,402 3,838,830
----------- -----------
Total Liabilities and Capital $ 3,112,055 $ 4,563,453
=========== ===========
(See Notes to Financial Statements)
F-23
<PAGE>
PERRY ELLIS INTERNATIONAL, INC.
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31,
---------------------------------------------
1996 1997 1998
---- ---- ----
Royalty Revenues $12,191,490 $15,739,291 $16,210,696
Less Agent's Commission 1,273,879 78,750 33,750
----------- ----------- -----------
Net Royalty Revenues 10,917,611 15,660,541 16,176,946
Operating Expenses 5,544,425 7,334,551 8,625,713
Non-recurring Items 3,273,529 -0- -0-
----------- ----------- -----------
Operating Income 2,099,657 8,325,990 7,551,233
Interest Income 143,765 135,537 32,061
----------- ----------- -----------
Income Before Taxes 2,243,422 8,461,257 7,583,294
State and Local Taxes 218,631 852,072 760,346
----------- ----------- -----------
Net Income for the Year $ 2,024,791 $ 7,609,455 $ 6,822,948
=========== =========== ===========
(See Notes to Financial Statements)
F-24
<PAGE>
PERRY ELLIS INTERNATIONAL, INC.
UNDISTRIBUTED INCOME
YEAR ENDED DECEMBER 31,
---------------------------------------------
1996 1997 1998
---- ---- ----
Balance at Beginning $ 2,826,046 $ 3,437,637 $ 1,368,402
Net Income for the Year 2,024,791 7,609,455 6,822,948
----------- ----------- -----------
Total 4,850,837 11,047,092 8,191,350
----------- ----------- -----------
Less Distributions to
Stockholder during year:
Dividend Paid 1,390,000 9,625,000 4,325,000
Foreign Tax Credits 23,200 53,690 28,520
----------- ----------- -----------
Total 1,413,200 9,678,690 4,353,520
----------- ----------- -----------
Balance at End $ 3,437,637 $ 1,368,402 $ 3,837,830
=========== =========== ===========
(See Notes to Financial Statements)
F-25
<PAGE>
PERRY ELLIS INTERNATIONAL, INC.
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------
1996 1997 1998
---- ---- ----
<S> <C> <C> <C>
Cash Flow from Operating Activities:
Net Income $ 2,024,791 $ 7,609,455 $ 6,822,948
Depreciation 212,000 225,783 228,064
Loss on Investment in Limited Partnership 154,187 -0- -0-
Changes in Operating Assets and Liabilities:
Due from Licenses 167,120 (362,559) (555,604)
Prepaid Expenses (265,840) (396,439) 212,905
Other Current Assets -0- -0- (6,183)
Accounts Payable 486,503 (140,906) (378,727)
Accrued Payroll (24,814) 325,192 (47,541)
Corporate Taxes Payable (350,947) 610,058 (685,290)
Employment Termination (75,000) (126,000) 18,296
Commissions Payable 200,000 (200,000) -0-
Non-Current Assets (851) (846) 15,354
Non-Current Liabilities (216,000) (90,000) -0-
----------- ----------- -----------
Net Cash Provided by Operating Activities 2,311,149 7,453,738 5,624,222
----------- ----------- -----------
Cash Flow from Investing Activities:
(Credit) for Disposal of Service Agreement (1,000,001) 1,000,001 -0-
(Additions) to Fixed Assets (47,461) (87,160) (21,141)
----------- ----------- -----------
Net Cash (Used) Provided by
Investing Activities (1,047,462) 912,841 (21,141)
----------- ----------- -----------
Cash Flow from Financing Activities:
Distribution to Stockholders (1,413,200) (9,678,690) (4,353,520)
----------- ----------- -----------
Net (Decrease) Increase in Cash Flows (149,513) (1,312,111) ` 1,249,561
Cash at Beginning of Year 1,988,785 1,839,272 527,161
----------- ----------- -----------
Cash at End of Year $ 1,839,272 $ 527,161 $ 1,776,722
=========== =========== ===========
Supplemental Disclosure of
Cash Flow Information:
Taxes Paid $ 627,773 $ 192,652 $ 1,446,000
=========== =========== ===========
</TABLE>
(See Notes to Financial Statements)
F-26
<PAGE>
PERRY ELLIS INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1997, AND 1998
1. DESCRIPTION OF BUSINESS
The Company was incorporated on September 12, 1978 and operates as a
licensor. Its income consists primarily of royalties received from licensees
under licensing agreements. Revenues to a major customer accounted for
approximately 36% in 1997 and 1998.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires Management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
FINANCIAL INSTRUMENTS
The Company's financial instruments include cash, receivables and
payables, for which carrying amounts approximate fair value due to the
short-term nature of the instruments.
FIXED ASSETS
Fixed Assets consist of fixtures, equipment and improvements and are
stated at cost.
Depreciation is computed using the straight-line basis over the estimated
useful life of the assets. The useful lives range from five to ten years.
Maintenance and Repairs are expensed as incurred. Expenditures for major
renewals are capitalized. Upon the sale, replacement or retirement of assets,
the cost and accumulated depreciation or amortization thereon are removed from
the accounts.
INCOME TAXES
The Company has qualified as a small business ("S") corporation under the
Internal Revenue Code. The federal income tax effect of income and losses is
passed through to the stockholders. Consequently, there is no provision for
federal income taxes in the financial statements. However, the Company is
subject to state and local income taxes in certain taxing districts in which it
does business.
F-27
<PAGE>
PERRY ELLIS INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1997, AND 1998
3. CASH BALANCES
1997 1998
---- ----
Cash balances consist of the following:
Cash in Checking and Savings Accounts $ 519,972 $1,559,711
Cash in Pierpont Money Market Accounts 7,189 217,011
---------- ----------
Total $ 527,161 $1,776,722
========== ==========
4. DUE FROM LICENSEES
The balance due from licensees in the amount of $944,885 represents
charges of advertising and other expenses advanced for the account of the
individual licensees of the Company.
5. PREPAID EXPENSES
The prepaid expense balance consists of the following:
1997 1998
---- ----
The prepaid expense balance consist of the following:
Deposit for Advertising Campaign $197,785 $ 75,718
Deposit Paid for Photoshoots 424,441 444,365
Deposit for Outdoor Systems Billboard -0- 20,486
Deposit for Trade Shows 116,592 -0-
Other Expenses 19,353 2,814
-------- --------
Total $758,171 $543,383
======== ========
6. PROPERTY AND EQUIPMENT
1997 1998
---- ----
Property and equipment balances
consist of the following:
Furniture, fixtures and equipment $ 420,329 $ 437,763
Leasehold improvements 1,575,488 1,579,195
----------- -----------
1,995,817 2,016,958
Less: accumulated depreciation and amortization (647,380) (875,444)
----------- -----------
Total $ 1,348,437 $ 1,141,514
=========== ===========
7. ACCRUED PAYROLL
Accrued Payroll consists of incentive bonuses earned by executives during
the calendar year and payable in the following year.
8. PENSION PLAN
The Company has a Money Purchase and Profit Sharing Plan in effect. All
employees are eligible to participate in both plans upon the completion of one
year of service and reaching the age of 21. The Company is required to
contribute 10% of the compensation of all participants to the Money Purchase
Pension Plan on
F-28
<PAGE>
PERRY ELLIS INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1997, AND 1998
an annual basis. There is no contribution requirement for the Profit
Sharing Plan. Employees are not required to contribute to either plan.
The contributions for the calendar year 1997 aggregated $127,066 and for
1998, $66,265.
9. RENTS
The Company leases its executive and design offices. As at December 31,
1998, total minimum rentals are approximately as follows:
1999...................................................$215,000
2000................................................... 230,000
2001................................................... 246,000
Thereafter............................................. 478,000
Rent expense for this lease amounted to approximately $196,000, $197,000
and $219,000 for the years ended December 31, 1996, 1997 and 1998, respectively.
10. SUBSEQUENT EVENT
In January 1999, the Company's sole shareholder agreed to sell 100% of the
Company's outstanding common stock to Supreme International Corporation for
approximately $75 million in cash. The sale closed in April 1999.
F-29
<PAGE>
===========================================================================
SUPREME INTERNATIONAL CORPORATION
$95,000,000 SERIES B SUBORDINATED NOTES DUE 2006
FOR ANY AND ALL OUTSTANDING
12 1/4% SERIES SUBORDINATED NOTES DUE 2006
-------------
PROSPECTUS
-------------
____________, 1999
No dealer, salesperson or other person has been authorized to give any
information or to make any representations other than those contained in this
prospectus, and, if given or made, such information or misrepresentations must
not be relied upon as having been authorized by Supreme International
Corporation. This prospectus does not constitute an offer to sell or a
solicitation of an offer to buy any securities other than the securities to
which it relates or any offer to sell or the solicitation of an offer to buy
such securities in any circumstances in which such offer or solicitation is
unlawful. Neither the delivery of this prospectus nor any sale made hereunder
shall, under any circumstances, create any implication that there has been no
change in the affairs of Supreme International Corporation since the date hereof
or that the information contained herein is correct as of any time subsequent to
its date.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20: INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Registrant has authority under Section 607.0850 of the Florida Business
Corporation Act to indemnify its directors and officers to the extent provided
for in such statute. The Registrant's Second Amended and Restated Articles of
Incorporation and Bylaws provide that the Registrant may insure, shall indemnify
and shall advance expenses on behalf of its officers and directors to the
fullest extent not prohibited by law. The Registrant is also a party to
indemnification agreements with each of its directors and executive officers.
ITEM 21: EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(A) EXHIBITS
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ------------- ----------------------------------------------------------------
3.1 Registrant's Second Amended and Restated Articles of
Incorporation(1)
3.2 Registrant's Amended and Restated Bylaws(1)
4.1 Form of Common Stock Certificate(1)
4.2 Indenture, dated April 6, 1999 between the Company and State
Street Bank and Trust Company as amended(5)
4.3 Registration rights agreement dated March 31, 1999 by and
among the Company and Supreme Munsingwear Canada, Inc.,
Supreme International (Delaware), Inc., Supreme Acquisition
Corporation, Supreme International (N.Y.), Inc., Supreme
International Corporation de Mexico, SA de C.V. and Merrill
Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated, BancBoston Robertson Stephens Inc., Wasserstein
Perella Securities, Inc. and Barington Capital Group, L.P.
(the "Initial Purchasers")(5)
4.4 Purchase Agreement, dated March 31, 1999 by and among the
Company and the Initial Purchasers(5)
4.5 Specimen Forms of 12 1/4% Senior Subordinated Notes Due
2006(5)
5.1 Opinion of Broad and Cassel(5)
10.3 Form of Indemnification Agreement between the Registrant and
each of the registrant's Directors and Officers(1)
10.6 Business Lease dated October 4, 1990, between George
Feldenkreis and the Registrant relating to warehouse
facilities(1)
10.7 Business Lease dated May 1, 1990, between George Feldenkreis
and the Registrant relating to warehouse facilities(1)
10.9 1993 Stock Option Plan(1)(2)
10.10 Director Stock Option(1)(2)
10.15 Loan and Security Agreement dated as of October 5, 1994,
between the Registrant and NationsBank (1)
10.16 First Amendment to Loan and Security Agreement dated as of
August 19, 1995, between the Registrant and NationsBank of
Georgia, N.A.(1)
10.17 Amendment to Business Lease between George Feldenkreis and the
Registrant relating to office facilities(1)
10.18 Revocable Credit Facility Agreement dated May 26, 1995 between
the Registrant and Hamilton Bank, N.A.(1)
10.19 Revolving Line of Credit Agreement dated June 23, 1995 between
the Registrant and Ocean Bank(1)
10.20 Profit Sharing Plan(1)(2)
10.21 Amended and Restated Employment Agreement between the
Registrant and George Feldenkreis(1)(2)
10.22 Amended and Restated Employment Agreement between the
Registrant and Oscar Feldenkreis(1)(2)
II-1
<PAGE>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ------------- ----------------------------------------------------------------
10.23 Business Lease dated December 26, 1995 between George
Feldenkreis and the Registrant relating to office facilities(1)
10.24 Lease Agreement [Land] dated as of August 28, 1997 between SUP
Joint Venture, as Lessor and Registrant, as Lessee(1)
10.25 Lease Agreement [Building] dated as of August 28, 1997 between
SUP Joint Venture, as Lessor and Registrant, as Lessee(1)
10.26 Amended and Restated Loan and Security Agreement dated as of
March 31, 1998(1)
10.27 Amendment to Amended and Restated Loan and Security Agreement
dated as of August 1, 1998(3)
10.28 Purchase and Sale Agreement dated as of December 28, 1998
among Salant Corporation, Frost Bros. Enterprises, Inc.,
Maquiladora Sur, S.A. de C.V. and the Company (the "Salant
Purchase and Sale Agreement")(3)
10.29 First Amendment to the Salant Purchase and Sale Agreement
dated as of February 24, 1999(3)
10.30 Amended and Restated Loan and Security Agreement dated as of
March 26, 1999(3)
10.31 Inventory Purchase Agreement dated March 12, 1999 between the
Company and Phillips-Van Heusen Corporation(3)
10.32 Stock Purchase Agreement dated as of January 28, 1999 by and
among the Company and Christopher C. Angell, Barbara Gallagher
and Morgan Guaranty Trust Company of New York, as Trustees of
the PEI Trust created under Par. E. of Article 3 of the
Agreement dated November 19, 1985, as amended January 27, 1986
(the "Perry Ellis Purchase and Sale Agreement")(4)
10.33 First Amendment to the Perry Ellis Purchased and Sale
Agreement dated as of March 31, 1999(4)
10.34 Employment Agreement between Allan Zwerner and the
Company(2)(5)
12.1 Computation of Ratio of Earnings to Fixed Charges(5)
22.1 Subsidiaries of Registrant(5)
23.1 Consent of Broad and Cassel (included in its opinion filed as
Exhibit 5.1)(5)
23.2 Consent of Deloitte & Touche LLP(5)
23.3 Consent of Saul L. Klaw & Co. P.C.(5)
24.1 Reference is made to the Signatures section of this Registrant
Statement for the Powers of Attorney contained therein(5)
25.1 Form T-1 Statement of Eligibility and Qualification of Trustee
for Senior Subordinated Notes under the Trust Indenture Act of
1939(5)
99.1 Form of Letter of Transmittal(5)
99.2 Notice of Guaranteed Delivery(5)
- ---------------------
(1) Previously filed as an Exhibit of the same number to Registrant's Annual
Report on Form 10-K for the year ended January 31, 1999 and incorporated
herein by reference.
(2) Management Contract or Compensation Plan
(3) Previously filed as an Exhibit to Registrant's Current Report on Form 8-K
dated March 29, 1999, as amended and incorporated herein by reference.
(4) Previously filed as an Exhibit to Registrant's Current Report on Form 8-K
dated April 6, 1999, as amended and incorporated herein by reference.
(5) Filed herewith.
(B) FINANCIAL STATEMENT SCHEDULES
Schedules for which provision is made in the applicable accounting
regulations of the Commission are not required under the related instructions or
are not applicable, and therefore have been omitted.
II-2
<PAGE>
ITEM 22: UNDERTAKINGS
The Registrant undertakes:
(1) To file, during any period in which it offers or sells securities, a
post-effective amendment to this Registration Statement to:
(i) Include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) Reflect in the prospectus any facts or events which, individually or
together, represent a fundamental change in the information in the
Registration Statement. Notwithstanding the foregoing, any increase
or decrease in volume of securities offered (if the total dollar
value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with this Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volumes and price represent no more
than a 20% change in the maximum aggregate offering price set forth
in the "Calculation of Registration Fee" table in the effective
registration statement; and
(iii)Include any additional or changed material information on
the plan of distribution.
(2) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial
bona fide offering.
(3) To file a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering.
(4) To provide to the Underwriters at the closing specified in the Underwriting
Agreement certificates in such denominations and registered in such names
as required by the Underwriters to permit prompt delivery to each
purchaser.
(5) Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that, in the opinion of the Securities and
Exchange Commission, such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense
or any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
(6) For purposes of determining any liability under the Securities Act, the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(7) For the purpose of determining any liability under the Securities Act, each
post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereto duly authorized, in the City of Miami, State
of Florida, on May 12, 1999.
SUPREME INTERNATIONAL CORPORATION
By: /s/ GEORGE FELDENKREIS
-----------------------------------------
George Feldenkreis, Chairman of
the Board and
Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints George
Feldenkreis and Oscar Feldenkreis or any one of them, as his or her true and
lawful attorneys-in-fact and agents with full power of substitution and
resubstitution for him or her and in his or her name, place and stead in any and
all capacities to execute in the name of each such person who is then an officer
or director of the Registrant any and all amendments (including post-effective
amendments) to this Registration Statement, and any registration statement
relating to the offering hereunder pursuant to Rule 462 under the Securities Act
of 1933, as amended, and to file the same with all exhibits thereto and other
documents in connection therewith with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents and each of them full power and
authority to do and perform each and every act and thing required or necessary
to be done in and about the premises as fully as he or she might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or any of them, or their or his substitute or substitutes, may lawfully
do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ GEORGE FELDENKREIS Chairman of the Board and Chief May 12, 1999
- --------------------------- Executive Officer (Principal
George Feldenkreis Executive, Financial and Accounting
Officer)
/s/ OSCAR FELDENKREIS President, Chief Operations Officer May 12, 1999
- --------------------------- And Director
Oscar Feldenkreis
/s/ ALLAN ZWERNER
- -------------------------- Director May 12, 1999
Allan Zwerner
/s/ RONALD BUCH
- -------------------------- Director May 12, 1999
Ronald Buch
/s/ GARY DIX
- -------------------------- Director May 12, 1999
Gary Dix
II-4
<PAGE>
SIGNATURE TITLE DATE
--------- ----- ----
/s/ SALOMON HANONO Director May 12, 1999
- --------------------------
Salomon Hanono
/s/ RICHARD MCEWEN
- -------------------------- Director May 12, 1999
Richard Mcewen
/s/ LEONARD MILLER Director May 12, 1999
- --------------------------
Leonard Miller
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereto duly authorized, in the City of Miami, State
of Florida, on May 12, 1999.
SUPREME ACQUISITION CORPORATION
By: /s/ OSCAR FELDENKREIS
------------------------------
Oscar Feldenkreis, President and
Director
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints George
Feldenkreis and Oscar Feldenkreis or any one of them, as his or her true and
lawful attorneys-in-fact and agents with full power of substitution and
resubstitution for him or her and in his or her name, place and stead in any and
all capacities to execute in the name of each such person who is then an officer
or director of the Registrant any and all amendments (including post-effective
amendments) to this Registration Statement, and any registration statement
relating to the offering hereunder pursuant to Rule 462 under the Securities Act
of 1933, as amended, and to file the same with all exhibits thereto and other
documents in connection therewith with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents and each of them full power and
authority to do and perform each and every act and thing required or necessary
to be done in and about the premises as fully as he or she might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or any of them, or their or his substitute or substitutes, may lawfully
do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ OSCAR FELDENKREIS President and Director May 12, 1999
- ---------------------- (Principal Executive, Financial and
Oscar Feldenkreis Accounting Officer)
/s/ GEORGE FELDENKREIS Vice President and Director May 12, 1999
- ----------------------
George Feldenkreis
/s/ ROSEMARY TRUDEAU Secretary and Treasurer May 12, 1999
- ---------------------
Rosemary Trudeau
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereto duly authorized, in the City of Miami, State
of Florida, on May 12, 1999.
EACH OF THE GUARANTORS
NAMED ON SCHEDULE A-1 HERETO
By: /s/ GEORGE FELDENKREIS
--------------------------------
George Feldenkreis,
President and Director
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints George
Feldenkreis and Oscar Feldenkreis or any one of them, as his or her true and
lawful attorneys-in-fact and agents with full power of substitution and
resubstitution for him or her and in his or her name, place and stead in any and
all capacities to execute in the name of each such person who is then an officer
or director of the Registrant any and all amendments (including post-effective
amendments) to this Registration Statement, and any registration statement
relating to the offering hereunder pursuant to Rule 462 under the Securities Act
of 1933, as amended, and to file the same with all exhibits thereto and other
documents in connection therewith with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents and each of them full power and
authority to do and perform each and every act and thing required or necessary
to be done in and about the premises as fully as he or she might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or any of them, or their or his substitute or substitutes, may lawfully
do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
SIGNATURE TITLE DATE
/s/ GEORGE FELDENKREIS President and Director May 12, 1999
- ---------------------------- (Principal Executive, Financial
George Feldenkreis and Accounting Officer)
/s/ OSCAR FELDENKREIS Vice President and Director May 12, 1999
- ----------------------
Oscar Feldenkreis
/s/ ROSEMARY TRUDEAU Secretary and Treasurer May 12, 1999
- ----------------------
Rosemary Trudeau
II-6
<PAGE>
SCHEDULE A-1
Supreme International (N.Y.), Inc.
Supreme International (Delaware), Inc.
II-8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereto duly authorized, in the City of Miami, State
of Florida, on May 12, 1999.
SUPREME MUNSINGWEAR CANADA INC.
By: /s/ LEONARD BLACK
--------------------------------------
Leonard Black, President and Director
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints George
Feldenkreis and Oscar Feldenkreis or any one of them, as his or her true and
lawful attorneys-in-fact and agents with full power of substitution and
resubstitution for him or her and in his or her name, place and stead in any and
all capacities to execute in the name of each such person who is then an officer
or director of the Registrant any and all amendments (including post-effective
amendments) to this Registration Statement, and any registration statement
relating to the offering hereunder pursuant to Rule 462 under the Securities Act
of 1933, as amended, and to file the same with all exhibits thereto and other
documents in connection therewith with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents and each of them full power and
authority to do and perform each and every act and thing required or necessary
to be done in and about the premises as fully as he or she might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or any of them, or their or his substitute or substitutes, may lawfully
do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ LEONARD MILLER President (Principal Executive, May 12, 1999
- ---------------------- Financial and Accounting Officer)
Leonard Miller
/s/ GEORGE FELDENKREIS Vice President May 12, 1999
- ----------------------------
George Feldenkreis
/s/ OSCAR FELDENKREIS Vice President May 12, 1999
- ----------------------
Oscar Feldenkreis
/s/ FANNY HANONO Vice President May 12, 1999
- ----------------------
Fanny Hanono
/s/ ROSEMARY TRUDEAU Secretary and Treasurer May 12, 1999
- ----------------------
Rosemary Trudeau
II-9
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereto duly authorized, in the City of Miami, State
of Florida, on May 12, 1999.
SUPREME INTERNATIONAL CORPORATION DE
MEXICO, S.A. DE C.V.
By: /s/ ROSEMARY TRUDEAU
-------------------------------
Rosemary Trudeau,
President and Director
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints
Rosemary Trudeau and Randall Riccardo or any one of them, as his or her true and
lawful attorneys-in-fact and agents with full power of substitution and
resubstitution for him or her and in his or her name, place and stead in any and
all capacities to execute in the name of each such person who is then an officer
or director of the Registrant any and all amendments (including post-effective
amendments) to this Registration Statement, and any registration statement
relating to the offering hereunder pursuant to Rule 462 under the Securities Act
of 1933, as amended, and to file the same with all exhibits thereto and other
documents in connection therewith with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents and each of them full power and
authority to do and perform each and every act and thing required or necessary
to be done in and about the premises as fully as he or she might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or any of them, or their or his substitute or substitutes, may lawfully
do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ ROSEMARY TRUDEAU President and Director May 12, 1999
- ---------------------- (Principal Executive, Financial
Rosemary Trudeau and Accounting Officer)
/s/ JOSEPH ROISMAN Secretary and Director May 12, 1999
- ----------------------
Joseph Roisman
/s/ RANDALL RICCARDO Treasurer and Director May 12, 1999
- ----------------------
Randall Riccardo
II-10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereto duly authorized, in the City of Miami, State
of Florida, on May 12, 1999.
PERRY ELLIS INTERNATIONAL, INC.
By: /s/ ALLAN ZWERNER
---------------------------
Allan Zwerner, President
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints George
Feldenkreis and Oscar Feldenkreis or any one of them, as his or her true and
lawful attorneys-in-fact and agents with full power of substitution and
resubstitution for him or her and in his or her name, place and stead in any and
all capacities to execute in the name of each such person who is then an officer
or director of the Registrant any and all amendments (including post-effective
amendments) to this Registration Statement, and any registration statement
relating to the offering hereunder pursuant to Rule 462 under the Securities Act
of 1933, as amended, and to file the same with all exhibits thereto and other
documents in connection therewith with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents and each of them full power and
authority to do and perform each and every act and thing required or necessary
to be done in and about the premises as fully as he or she might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or any of them, or their or his substitute or substitutes, may lawfully
do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
SIGNATURE TITLE DATE
/s/ ALLAN ZWERNER President (Principal Executive, May 12, 1999
- ---------------------- Financial and Accounting Officer)
Allan Zwerner
/s/ OSCAR FELDENKREIS Vice President and Director May 12, 1999
- ----------------------
Oscar Feldenkreis
/s/ GEORGE FELDENKREIS Vice President and Director May 12, 1999
- ----------------------
George Feldenkreis
/s/ ROSEMARY TRUDEAU Secretary and Treasurer May 12, 1999
- ----------------------
Rosemary Trudeau
II-11
<PAGE>
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ------------- ----------------------------------------------------------------
4.2 Indenture, dated April 6, 1999 between the Company and State
Street Bank and Trust Company as amended
4.3 Registration rights agreement dated March 31, 1999 by and
among the Company and Supreme Munsingwear Canada, Inc.,
Supreme International (Delaware), Inc., Supreme Acquisition
Corporation, Supreme International (N.Y.), Inc., Supreme
International Corporation de Mexico, SA de C.V. and Merrill
Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated, BancBoston Robertson Stephens Inc., Wasserstein
Perella Securities, Inc. and Barington Capital Group, L.P.
(the "Initial Purchasers")
4.4 Purchase Agreement, dated March 31, 1999 by and among the
Company and the Initial Purchasers
4.5 Specimen Forms of 12 1/4% Senior Subordinated Notes Due 2006
5.1 Opinion of Broad and Cassel
10.34 Employment Agreement between Allan Zwerner and the Company
12.1 Computation of Ratio of Earnings to Fixed Charges
22.1 Subsidiaries of Registrant
23.1 Consent of Broad and Cassel (included in its opinion filed as
Exhibit 5.1)
23.2 Consent of Deloitte & Touche LLP
23.3 Consent of Saul L. Klaw & Co. P.C.
24.1 Reference is made to the Signatures section of this Registrant
Statement for the Powers of Attorney contained therein
25.1 Form T-1 Statement of Eligibility and Qualification of Trustee
for Senior Subordinated Notes under the Trust Indenture Act of
1939
99.1 Form of Letter of Transmittal
99.2 Notice of Guaranteed Delivery
EXHIBIT 4.2
EXECUTION
COPY
SUPREME INTERNATIONAL CORPORATION
Company
SUPREME MUNSINGWEAR CANADA, INC.
SUPREME INTERNATIONAL (DELAWARE), INC.
SUPREME INTERNATIONAL (N.Y.), INC.
SUPREME ACQUISITION CORPORATION
SUPREME INTERNATIONAL CORPORATION DE MEXICO, S.A. DE C.V.
Subsidiary Guarantors
and
STATE STREET BANK AND TRUST COMPANY
Trustee
--------------------
INDENTURE
Dated as of April 6, 1999
--------------------
12 1/4% Senior Subordinated Notes due 2006
12 1/4% Series B Senior Subordinated Notes due 2006
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE ONE - DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION..........2
SECTION 101. DEFINITIONS......................................................2
"ACQUIRED INDEBTEDNESS.........................................................2
"ACQUISITION INDEBTEDNESS......................................................2
"ACT"..........................................................................3
"ADDITIONAL NOTES".............................................................3
"AFFILIATE"....................................................................3
"AGENT BANK"...................................................................3
"AGENT MEMBERS"................................................................3
"ASSET SALE"...................................................................3
"AUTHENTICATING AGENT".........................................................3
"AVERAGE LIFE".................................................................3
"BANKRUPTCY LAW"...............................................................4
"BOARD OF DIRECTORS"...........................................................4
"BOARD RESOLUTION".............................................................4
"BUSINESS DAY".................................................................4
"CAPITAL STOCK"................................................................4
"CAPITALIZED LEASE OBLIGATION".................................................4
"CARFEL NOTE"..................................................................4
"CASH EQUIVALENTS".............................................................4
"CHANGE IN CONTROL"............................................................5
"COMMISSION"...................................................................6
"COMPANY"......................................................................6
"COMPANY REQUEST"..............................................................6
"CONSOLIDATED ADJUSTED NET INCOME".............................................6
"CONSOLIDATED FIXED CHARGE COVERAGE RATIO".....................................7
"CONSOLIDATED INCOME TAX EXPENSE"..............................................7
"CONSOLIDATED INTEREST EXPENSE"................................................7
-i-
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
Page
"CONSOLIDATED NON-CASH CHARGES"................................................8
"CORPORATE TRUST OFFICE".......................................................8
"CORPORATION"..................................................................8
"CURRENCY AGREEMENTS"..........................................................8
"CUSTODIAN"....................................................................8
"DEFAULT"......................................................................8
"DEFAULTED INTEREST"...........................................................8
"DEPOSITARY"...................................................................8
"DESIGNATED SENIOR INDEBTEDNESS"...............................................8
"DISINTERESTED DIRECTOR".......................................................9
"DOLLAR" OR "$"................................................................9
"EVENT OF DEFAULT".............................................................9
"EXCHANGE ACT".................................................................9
"EXCHANGE NOTES"...............................................................9
"EXCHANGE OFFER"...............................................................9
"EXCHANGE OFFER REGISTRATION STATEMENT"........................................9
"FAIR MARKET VALUE"............................................................9
"GENERALLY ACCEPTED ACCOUNTING PRINCIPLES".....................................9
"GLOBAL NOTES".................................................................9
"GUARANTEE"....................................................................9
"GUARANTOR SENIOR INDEBTEDNESS"...............................................10
"HAMILTON BANK LETTER OF CREDIT FACILITY".....................................10
"INDENTURE"...................................................................11
"INITIAL NOTES"...............................................................11
"INITIAL PURCHASERS"..........................................................11
"INTEREST PAYMENT DATE".......................................................12
"INTEREST RATE AGREEMENTS"....................................................12
"INVESTMENT"..................................................................12
"ISSUANCE DATE"...............................................................12
-ii-
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
Page
"LEASE".......................................................................12
"LETTER OF CREDIT FACILITIES".................................................12
"LIEN"........................................................................12
"MATURITY"....................................................................13
"MOODY'S".....................................................................13
"NET CASH PROCEEDS"...........................................................13
"NON-PAYMENT DEFAULT".........................................................13
"NON-U.S. PERSON".............................................................13
"NOTE GUARANTEE"..............................................................13
"NOTE REGISTER"...............................................................13
"NOTES".......................................................................13
"OCEAN BANK LETTER OF CREDIT FACILITY"........................................13
"OFFICERS' CERTIFICATE".......................................................14
OFFSHORE GLOBAL NOTE".........................................................14
"OFFSHORE NOTE EXCHANGE DATE".................................................14
"OFFSHORE PHYSICAL NOTE"......................................................14
"OPINION OF COUNSEL"..........................................................14
"OUTSTANDING".................................................................14
"PARI PASSU INDEBTEDNESS".....................................................15
"PAYING AGENT"................................................................15
"PAYMENT BLOCKAGE PERIOD".....................................................15
"PAYMENT DEFAULT".............................................................15
"PERMITTED HOLDERS"...........................................................15
"PERMITTED INDEBTEDNESS"......................................................15
"PERMITTED INVESTMENTS".......................................................17
"PERMITTED JUNIOR SECURITIES".................................................18
"PERSON"......................................................................18
"PHYSICAL NOTES"..............................................................18
"PLACE OF PAYMENT"............................................................18
-iii-
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
Page
"PREDECESSOR NOTE"............................................................18
"PREFERRED STOCK".............................................................19
"PRIVATE PLACEMENT LEGEND"....................................................19
"PUBLIC EQUITY OFFERING"......................................................19
"QIB".........................................................................19
"QUALIFIED CAPITAL STOCK".....................................................19
"REDEEMABLE CAPITAL STOCK"....................................................19
"REDEMPTION DATE".............................................................19
"REDEMPTION PRICE"............................................................19
"REGISTRATION RIGHTS AGREEMENT"...............................................19
"REGISTRATION STATEMENT"......................................................19
"REGULAR RECORD DATE".........................................................19
"REGULATION S"................................................................19
"REPRESENTATIVE"..............................................................20
"RESPONSIBLE OFFICER".........................................................20
"RESTRICTED SUBSIDIARY".......................................................20
"RULE 144A"...................................................................20
"S&P".........................................................................20
"SALE AND LEASEBACK TRANSACTION"..............................................20
"SECURITIES ACT"..............................................................20
"SENIOR CREDIT FACILITY"......................................................20
"SENIOR INDEBTEDNESS".........................................................20
"SHELF REGISTRATION STATEMENT"................................................21
"SIGNIFICANT SUBSIDIARY"......................................................21
"SPECIAL RECORD DATE".........................................................21
"STATED MATURITY".............................................................21
"SUBORDINATED INDEBTEDNESS"...................................................21
"SUBSIDIARY"..................................................................22
"SUBSIDIARY GUARANTOR"........................................................22
-iv-
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
Page
"THE BANK OF TOKYO-MITSUBISHI LETTER OF CREDIT FACILITY"......................22
"TRUST INDENTURE ACT".........................................................22
"TRUSTEE".....................................................................22
"UNITED STATES"...............................................................22
"UNRESTRICTED SUBSIDIARY".....................................................22
"U.S. GLOBAL NOTE"............................................................22
"U.S. GOVERNMENT OBLIGATIONS".................................................22
"U.S. PHYSICAL NOTE"..........................................................23
"VICE PRESIDENT"..............................................................23
"VOTING STOCK"................................................................23
"WHOLLY OWNED RESTRICTED SUBSIDIARY"..........................................23
SECTION 102. COMPLIANCE CERTIFICATES AND OPINIONS.............................23
SECTION 103. FORM OF DOCUMENTS DELIVERED TO TRUSTEE...........................24
SECTION 104. ACTS OF HOLDERS..................................................24
SECTION 105. NOTICES, ETC., TO TRUSTEE, COMPANY AND ANY
SUBSIDIARY GUARANTOR.............................................25
SECTION 106. NOTICE TO HOLDERS; WAIVER........................................26
SECTION 107. EFFECT OF HEADINGS AND TABLE OF CONTENTS.........................26
SECTION 108. SUCCESSORS AND ASSIGNS...........................................27
SECTION 109. SEPARABILITY CLAUSE..............................................27
SECTION 110. BENEFITS OF INDENTURE............................................27
SECTION 111. GOVERNING LAW....................................................27
SECTION 112. LEGAL HOLIDAYS...................................................27
SECTION 113. TRUST INDENTURE ACT CONTROLS.....................................27
SECTION 114. NO RECOURSE AGAINST OTHERS.......................................28
SECTION 115. COUNTERPARTS.....................................................28
SECTION 116. APPOINTMENT OF AGENT FOR SERVICE.................................28
ARTICLE TWO - NOTE FORMS......................................................29
SECTION 201. FORMS GENERALLY..................................................29
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<PAGE>
TABLE OF CONTENTS
(CONTINUED)
Page
SECTION 202. FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION..................30
SECTION 203. RESTRICTIVE LEGENDS..............................................30
SECTION 204. FORM OF CERTIFICATE TO BE DELIVERED AFTER THE
OFFSHORE NOTE EXCHANGE DATE......................................33
ARTICLE THREE - THE NOTES.....................................................34
SECTION 301. AMOUNT...........................................................34
SECTION 302. DENOMINATIONS....................................................35
SECTION 303. EXECUTION, AUTHENTICATION, DELIVERY AND DATING...................35
SECTION 304. TEMPORARY NOTES..................................................36
SECTION 305. REGISTRATION, REGISTRATION OF TRANSFER AND EXCHANGE..............37
SECTION 306. MUTILATED, DESTROYED, LOST AND STOLEN NOTES......................38
SECTION 307. PAYMENT OF INTEREST; INTEREST RIGHTS PRESERVED...................38
SECTION 308. PERSONS DEEMED OWNERS............................................40
SECTION 309. CANCELLATION.....................................................40
SECTION 310. COMPUTATION OF INTEREST..........................................40
SECTION 311. BOOK-ENTRY PROVISIONS FOR GLOBAL NOTES...........................40
SECTION 312. TRANSFER PROVISIONS..............................................42
SECTION 313. FORM OF ACCREDITED INVESTOR CERTIFICATE..........................50
SECTION 314. FORM OF REGULATION S CERTIFICATE.................................52
SECTION 315. FORM OF RULE 144A CERTIFICATE....................................54
SECTION 316. CUSIP NUMBERS....................................................55
SECTION 317. ISSUANCE OF ADDITIONAL NOTES.....................................55
ARTICLE FOUR - SATISFACTION AND DISCHARGE.....................................55
SECTION 401. SATISFACTION AND DISCHARGE OF INDENTURE..........................55
SECTION 402. APPLICATION OF TRUST MONEY.......................................57
ARTICLE FIVE - REMEDIES.......................................................57
SECTION 501. EVENTS OF DEFAULT................................................57
SECTION 502. ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT...............59
-vi-
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
Page
SECTION 503. COLLECTION OF INDEBTEDNESS AND SUITS FOR
ENFORCEMENT BY TRUSTEE...........................................60
SECTION 504. TRUSTEE MAY FILE PROOFS OF CLAIM.................................60
SECTION 505. TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF NOTES...........61
SECTION 506. APPLICATION OF MONEY COLLECTED...................................61
SECTION 507. LIMITATION ON SUITS..............................................62
SECTION 508. UNCONDITIONAL RIGHT OF HOLDERS TO RECEIVE
PRINCIPAL, PREMIUM AND INTEREST..................................63
SECTION 509. RESTORATION OF RIGHTS AND REMEDIES...............................63
SECTION 510. RIGHTS AND REMEDIES CUMULATIVE...................................63
SECTION 511. DELAY OR OMISSION NOT WAIVER.....................................63
SECTION 512. CONTROL BY HOLDERS...............................................64
SECTION 513. WAIVER OF PAST DEFAULTS..........................................64
SECTION 514. WAIVER OF STAY OR EXTENSION LAWS.................................64
ARTICLE SIX - THE TRUSTEE.....................................................65
SECTION 601. CERTAIN DUTIES AND RESPONSIBILITIES..............................65
SECTION 602. NOTICE OF DEFAULTS...............................................66
SECTION 603. CERTAIN RIGHTS OF TRUSTEE........................................66
SECTION 604. TRUSTEE NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF NOTES........68
SECTION 605. MAY HOLD NOTES...................................................68
SECTION 606. MONEY HELD IN TRUST..............................................68
SECTION 607. COMPENSATION AND REIMBURSEMENT...................................68
SECTION 608. CORPORATE TRUSTEE REQUIRED; ELIGIBILITY..........................69
SECTION 609. RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR................70
SECTION 610. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR...........................71
SECTION 611. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS......72
SECTION 612. APPOINTMENT OF AUTHENTICATING AGENT..............................72
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<PAGE>
TABLE OF CONTENTS
(CONTINUED)
Page
ARTICLE SEVEN - HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY.............74
SECTION 701. COMPANY TO FURNISH TRUSTEE NAMES AND ADDRESSES...................74
SECTION 702. DISCLOSURE OF NAMES AND ADDRESSES OF HOLDERS.....................74
SECTION 703. REPORTS BY TRUSTEE...............................................74
ARTICLE EIGHT - CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE..........74
SECTION 801. Company May Consolidate, Etc., Only on Certain Terms.............74
SECTION 802. SUBSIDIARY GUARANTORS MAY CONSOLIDATE, ETC.,
ONLY ON CERTAIN TERMS............................................76
SECTION 803. SUCCESSOR SUBSTITUTED............................................77
ARTICLE NINE - SUPPLEMENTAL INDENTURES........................................77
SECTION 901. SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF HOLDERS...............77
SECTION 902. SUPPLEMENTAL INDENTURES WITH CONSENT OF HOLDERS..................78
SECTION 903. EXECUTION OF SUPPLEMENTAL INDENTURES.............................79
SECTION 904. EFFECT OF SUPPLEMENTAL INDENTURES................................79
SECTION 905. CONFORMITY WITH TRUST INDENTURE ACT..............................79
SECTION 906. REFERENCE IN NOTES TO SUPPLEMENTAL INDENTURES....................79
SECTION 907. NOTICE OF SUPPLEMENTAL INDENTURES................................80
SECTION 908. EFFECT ON SENIOR INDEBTEDNESS....................................80
ARTICLE TEN - COVENANTS.......................................................80
SECTION 1001. PAYMENT OF PRINCIPAL, PREMIUM, IF ANY, AND INTEREST.............80
SECTION 1002. MAINTENANCE OF OFFICE OR AGENCY.................................80
SECTION 1003. MONEY FOR NOTES PAYMENTS TO BE HELD IN TRUST....................81
SECTION 1004. CORPORATE EXISTENCE.............................................82
SECTION 1005. PAYMENT OF TAXES AND OTHER CLAIMS...............................82
SECTION 1006. MAINTENANCE OF PROPERTIES.......................................83
SECTION 1007. STATEMENT BY OFFICERS AS TO DEFAULT.............................83
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SECTION 1008. LIMITATION ON INDEBTEDNESS......................................84
SECTION 1009. LIMITATION ON RESTRICTED PAYMENTS...............................84
SECTION 1010. LIMITATION ON ISSUANCES AND SALES OF PREFERRED
STOCK BY RESTRICTED SUBSIDIARIES................................87
SECTION 1011. LIMITATION ON TRANSACTIONS WITH AFFILIATES......................87
SECTION 1012. LIMITATION ON LIENS.............................................88
SECTION 1013. PURCHASE OF NOTES UPON CHANGE IN CONTROL........................88
SECTION 1014. LIMITATION ON SALE OF ASSETS....................................90
SECTION 1015. LIMITATIONS ON GUARANTEES OF INDEBTEDNESS BY
RESTRICTED SUBSIDIARIES.........................................92
SECTION 1016. LIMITATION ON DIVIDENDS AND OTHER PAYMENT
RESTRICTIONS AFFECTING RESTRICTED SUBSIDIARIES..................93
SECTION 1017. LIMITATION ON SALE AND LEASEBACK TRANSACTIONS...................94
SECTION 1018. LIMITATION ON OTHER SENIOR SUBORDINATED INDEBTEDNESS............94
SECTION 1019. LIMITATION ON UNRESTRICTED SUBSIDIARIES.........................94
SECTION 1020. REPORTS.........................................................95
SECTION 1021. WAIVER OF CERTAIN COVENANTS.....................................96
ARTICLE ELEVEN - REDEMPTION OF NOTES..........................................96
SECTION 1101. REDEMPTION......................................................96
SECTION 1102. APPLICABILITY OF ARTICLE........................................97
SECTION 1103. ELECTION TO REDEEM; NOTICE TO TRUSTEE...........................97
SECTION 1104. SELECTION BY TRUSTEE OF NOTES TO BE REDEEMED....................97
SECTION 1105. NOTICE OF REDEMPTION............................................98
SECTION 1106. DEPOSIT OF REDEMPTION PRICE.....................................99
SECTION 1107. NOTES PAYABLE ON REDEMPTION DATE................................99
SECTION 1108. NOTES REDEEMED IN PART..........................................99
ARTICLE TWELVE - SUBORDINATION OF NOTES......................................100
SECTION 1201. NOTES SUBORDINATE TO SENIOR INDEBTEDNESS.......................100
SECTION 1202. PAYMENT OVER OF PROCEEDS UPON DISSOLUTION, ETC.................100
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SECTION 1203. SUSPENSION OF PAYMENT WHEN DESIGNATED SENIOR
INDEBTEDNESS IN DEFAULT........................................101
SECTION 1204. PAYMENT PERMITTED IF NO DEFAULT................................102
SECTION 1205. SUBROGATION TO RIGHTS OF HOLDERS OF SENIOR INDEBTEDNESS........103
SECTION 1206. PROVISIONS SOLELY TO DEFINE RELATIVE RIGHTS....................103
SECTION 1207. TRUSTEE TO EFFECTUATE SUBORDINATION............................103
SECTION 1208. NO WAIVER OF SUBORDINATION PROVISIONS..........................104
SECTION 1209. DISTRIBUTION OR NOTICE TO REPRESENTATIVE.......................104
SECTION 1210. NOTICE TO TRUSTEE..............................................104
SECTION 1211. RELIANCE ON JUDICIAL ORDER OR CERTIFICATE OF
LIQUIDATING AGENT..............................................105
SECTION 1212. RIGHTS OF TRUSTEE AS A HOLDER OF SENIOR
INDEBTEDNESS; PRESERVATION OF TRUSTEE'S RIGHTS.................105
SECTION 1213. ARTICLE APPLICABLE TO PAYING AGENTS............................105
SECTION 1214. NO SUSPENSION OF REMEDIES......................................106
SECTION 1215. TRUST MONEYS NOT SUBORDINATED..................................106
SECTION 1216. TRUSTEE NOT FIDUCIARY FOR HOLDERS OF SENIOR INDEBTEDNESS.......106
ARTICLE THIRTEEN - GUARANTEES................................................106
SECTION 1301. NOTE GUARANTEES................................................106
SECTION 1302. SEVERABILITY...................................................108
SECTION 1303. RESTRICTED SUBSIDIARIES........................................108
SECTION 1304. SUBORDINATION OF NOTE GUARANTEES...............................109
SECTION 1305. LIMITATION OF SUBSIDIARY GUARANTORS' LIABILITY.................109
SECTION 1306. CONTRIBUTION...................................................109
SECTION 1307. SUBROGATION....................................................110
SECTION 1308. REINSTATEMENT..................................................110
SECTION 1309. RELEASE OF A SUBSIDIARY GUARANTOR..............................110
SECTION 1310. BENEFITS ACKNOWLEDGED..........................................110
ARTICLE FOURTEEN - DEFEASANCE AND COVENANT DEFEASANCE........................111
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SECTION 1401. COMPANY'S OPTION TO EFFECT DEFEASANCE OR
COVENANT DEFEASANCE............................................111
SECTION 1402. DEFEASANCE AND DISCHARGE.......................................111
SECTION 1403. COVENANT DEFEASANCE............................................111
SECTION 1404. CONDITIONS TO DEFEASANCE OR COVENANT DEFEASANCE................112
SECTION 1405. DEPOSITED MONEY AND GOVERNMENT OBLIGATIONS TO
BE HELD IN TRUST; OTHER MISCELLANEOUS PROVISIONS...............113
SECTION 14060. REINSTATEMENT.................................................114
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SUPREME INTERNATIONAL CORPORATION
Reconciliation and tie between Trust Indenture Act
OF 1939 AND INDENTURE, DATED AS OF APRIL 6, 1999
TRUST INDENTURE INDENTURE
ACT SECTION SECTION
- ---------------------------------- ------------------------------------------
/section/310(a)(1) 608
(a)(2) 608
(b) 608
/section/312(c) 701
/section/313(a) 703
/section/314(a)(4) 1007
(c)(1) 102
(c)(2) 102
(e) 102
/section/315(b) 601
/section/316(a)(last sentence) 101 ("Outstanding")
(a)(1)(A) 502, 512
(a)(1)(B) 513
(b) 508
(c) 104(d)
/section/317(a)(1) 503
(a)(2) 504
(b) 1003
/section/318(a) 111
- --------------------
Note: This reconciliation and tie shall not, for any purpose, be deemed to be a
part of the Indenture.
<PAGE>
INDENTURE, dated as of April 6, 1999, among SUPREME INTERNATIONAL
CORPORATION, a corporation duly organized and existing under the laws of the
State of Florida (herein called the "Company"), having its principal office at
3000 N.W. 107th Avenue, Miami, Florida 33172 and SUPREME MUNSINGWEAR CANADA,
INC., a corporation organized under the laws of Canada, SUPREME INTERNATIONAL
(DELAWARE), INC., a Delaware corporation, SUPREME INTERNATIONAL (N.Y.), INC., a
New York corporation, SUPREME ACQUISITION CORPORATION, a Florida corporation,
and SUPREME INTERNATIONAL CORPORATION DE MEXICO, S.A. DE C.V., a corporation
organized under the laws of Mexico,, and STATE STREET BANK AND TRUST COMPANY, a
Massachusetts trust company, as Trustee (herein called the "Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the creation of and issuance of its 12
1/4% Senior Subordinated Notes due 2006 (the "Initial Notes"), and its 12 1/4%
Series B Senior Subordinated Notes due 2006 (the "Exchange Notes" and, together
with the Initial Notes, the "Notes"), of substantially the tenor and amount
hereinafter set forth, and to provide therefor the Company has duly authorized
the execution and delivery of this Indenture.
Each Subsidiary Guarantor (as defined herein) has duly authorized the
execution and delivery of this Indenture.
Upon the issuance of the Exchange Notes, if any, or the effectiveness
of the Shelf Registration Statement (as defined herein), this Indenture will be
subject to, and shall be governed by the provisions of the Trust Indenture Act
of 1939, as amended, that are required to be part of or deemed to be part of and
to govern the indentures qualified thereunder.
All things necessary have been done to make the Notes, when duly
executed and duly issued by the Company and authenticated and delivered
hereunder by the Trustee or the Authenticating Agent, the valid obligations of
the Company and to make this Indenture a valid agreement of the Company, in
accordance with their and its terms.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the Notes
by the Holders thereof, it is mutually covenanted and agreed, for the equal and
proportionate benefit of all Holders of the Notes, as follows:
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ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
SECTION 101. DEFINITIONS.
For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires:
(1) the terms defined in this Article have the meanings assigned to
them in this Article and include the plural as well as the singular;
(2) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the
meanings assigned to them therein, and the terms "cash transaction" and
"self-liquidating paper", as used in TIA Section 311, shall have the
meanings assigned to them in the rules of the Commission adopted under
the Trust Indenture Act;
(3) all accounting terms not otherwise defined herein have the meanings
assigned to them in accordance with Generally Accepted Accounting
Principles; and
(4) the words "herein," "hereof" and "hereunder" and other words of
similar import refer to this Indenture as a whole and not to any
particular Article, Section or other subdivision.
"ACQUIRED INDEBTEDNESS" means Indebtedness of a Person (a) existing at
the time such Person becomes a Restricted Subsidiary or is merged into or
consolidated with the Company or any of its Restricted Subsidiaries or (b)
assumed in connection with the acquisition of assets from such Person. Acquired
Indebtedness shall be deemed to be incurred on the date of the related
acquisition of assets from any Person or the date the acquired Person becomes a
Restricted Subsidiary.
"ACQUISITION INDEBTEDNESS" means Indebtedness of a Person incurred in
connection with or in contemplation of (i) an investment by the Company or any
of its Restricted Subsidiaries in any other Person pursuant to which such Person
becomes a Restricted Subsidiary or shall be merged into or consolidated with the
Company or any of its Restricted Subsidiaries, (ii) an acquisition by the
Company or any of its Restricted Subsidiaries of the property and assets of any
Person other than the Company or any of its Restricted Subsidiaries that
constitute substantially all of a division or line of business of such Person or
(iii) the purchase by the Company or any of its Restricted Subsidiaries from a
third party of any licenses, trademarks, service marks, trade names or other
intellectual property rights of such third party; PROVIDED, HOWEVER, that
Indebtedness incurred in a transaction or series of related transactions, which
transactions have a Fair Market Value of less than $5.0 million will not be
considered to be Acquisition Indebtedness.
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"ACT" when used with respect to any Holder, has the meaning specified
in Section 104.
"ADDITIONAL NOTES" means any Notes issued by the Company pursuant to
Section 317
"AFFILIATE" means, with respect to any specified Person, (a) any other
Person directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified Person or (b) any other Person that
owns, directly or indirectly, 5% or more of such specified Person's Capital
Stock or any executive officer or director of any such specified Person or other
Person or, with respect to any natural Person, any Person having a relationship
with such Person by blood, marriage or adoption not more remote than first
cousin. For the purposes of this definition, "control," when used with respect
to any specified Person, means the power to direct the management and policies
of such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"AGENT BANK" means NationsBank, N.A. in its capacity as agent under the
Senior Credit Facility and any future or successor or replacement agent under
the Senior Credit Facility.
"AGENT MEMBERS" has the meaning specified in Section 311.
"ASSET SALE" means any sale, issuance, conveyance, transfer, lease or
other disposition (including, without limitation, by way of merger,
consolidation or sale and leaseback transaction) (collectively, a "transfer"),
directly or indirectly, in one or a series of related transactions, of (a) any
Capital Stock of any Restricted Subsidiary; (b) all or substantially all of the
properties and assets of the Company or its Restricted Subsidiaries; or (c) all
or substantially all of the properties and assets of any division or line of
business of the Company or any Restricted Subsidiary, other than in the ordinary
course of business or (d) any other properties or assets of the Company or any
Restricted Subsidiary outside of the ordinary course of business. For the
purposes of this definition, the term "Asset Sale" shall not include any
transfer of properties or assets (i) that is governed by the provisions of
Article Eight, (ii) between or among the Company and Wholly Owned Restricted
Subsidiaries in accordance with the terms of this Indenture, (iii) in compliance
with Section 1009, (iv) that consists of grants by the Company or its Restricted
Subsidiaries in the ordinary course of business of licenses or sub-licenses to
use any of the intellectual property rights of the Company or its Restricted
Subsidiaries, (v) that consists of the dress shirt inventory, manufacturing
equipment and any facilities acquired from Salant Corporation in connection with
the Company's acquisition of the John Henry, Manhattan and Lady Manhattan
trademarks prior to the Issuance Date or (vi) having a Fair Market Value of less
than $750,000 in any given fiscal year.
"AUTHENTICATING AGENT" means any Person authorized by the Trustee to
act on behalf of the Trustee to authenticate Notes.
"AVERAGE LIFE" means, as of the date of determination with respect to
any Indebtedness, the quotient obtained by dividing (a) the sum of the products
of (i) the number of years from the date of determination to the date or dates
of each successive scheduled principal
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payment (including, without limitation, any sinking fund requirements) of such
Indebtedness multiplied by (ii) the amount of each such principal payment by (b)
the sum of all such principal payments.
"BANKRUPTCY LAW" means Title 11, United States Bankruptcy Code of 1978,
as amended, or any similar United States federal or state law relating to
bankruptcy, insolvency, receivership, winding-up, liquidation, reorganization or
relief of debtors or any amendment to, succession to or change in any such law.
"BOARD OF DIRECTORS" means, with respect to any Person, the board of
directors of such Person or any duly authorized committee of such board.
"BOARD RESOLUTION" means, with respect to any Person, a copy of a
resolution certified by the Secretary or an Assistant Secretary of such Person
to have been duly adopted by the Board of Directors of such Person and to be in
full force and effect on the date of such certification, and delivered to the
Trustee.
"BUSINESS DAY," when used with respect to any Place of Payment or any
other particular location referred to in this Indenture or in the Notes, means
each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which
banking institutions in that Place of Payment or other location, as the case may
be, are authorized or obligated by law, regulation or executive order to close.
"CAPITAL STOCK" means, with respect to any Person, any and all shares,
interests, partnership interests (whether general or limited), participations,
rights in or other equivalents (however designated) of such Person's equity, and
any other interest or participation that confers the right to receive a share of
the profits and losses, or distributions of assets of, such Person and any
rights (other than debt securities convertible into Capital Stock), warrants or
options exchangeable for or convertible into such Capital Stock, whether now
outstanding or issued after the Issuance Date.
"CAPITALIZED LEASE OBLIGATION" means, with respect to any Person, any
obligation of such Person under a lease of (or other agreement conveying the
right to use) any property (whether real, personal or mixed) that is required to
be classified and accounted for as a capital lease obligation under GAAP, and,
for the purpose of this Indenture, the amount of such obligation at any date
shall be the capitalized amount thereof at such date, determined in accordance
with GAAP.
"CARFEL NOTE" means the Initial Note which is a U.S. Physical Note
issued to Carfel, Inc. on April 6, 1999.
"CASH EQUIVALENTS" means: (a) any evidence of Indebtedness with a
maturity of one year or less issued or directly and fully guaranteed or insured
by the United States of America or any agency or instrumentality thereof
(PROVIDED that the full faith and credit of the United States of America is
pledged in support thereof); (b) certificates of deposit or acceptances with a
maturity of one year or less of any financial institution that is a member of
the Federal Reserve System having combined capital and surplus and undivided
profits of not less than $500 million; (c) commercial paper with a maturity of
one year or less issued by a corporation that is not an Affiliate of the Company
and is organized under the laws of any state of the United States or the
District of Columbia and rated at least A-1 by S&P or any successor rating
agency or at least P-1 by Moody's or any successor rating agency; (d) repurchase
obligations with a term of not more than seven days for underlying securities of
the types described in clauses (a) and (b) above; and (e) demand and time
deposits with a domestic commercial bank that is a member of the Federal
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Reserve System having combined capital and surplus and undivided profits of not
less than $500 million.
"CHANGE IN CONTROL" means the occurrence of any of the following
events: (a) any "person" or "group" (as such terms are used in Sections 13(d)
and 14(d) of the Exchange Act), other than Permitted Holders, is or becomes the
"beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act,
except that a Person shall be deemed to have "beneficial ownership" of all
securities that such Person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time), directly or
indirectly, of more than 35% of the total voting power of all outstanding Voting
Stock of the Company and either (x) the Permitted Holders beneficially own,
directly or indirectly, in the aggregate Voting Stock of the Company that
represents a lesser percentage of the aggregate ordinary voting power of all
classes of the Voting Stock of the Company, voting together as a single class,
than such other person or group and are not entitled (by voting power, contract
or otherwise) to elect directors of the Company having a majority of the total
voting power of the Board of Directors, or (y) such other person or group is
entitled to elect directors of the Company having a majority of the total voting
power of the Board of Directors; (b) the Company consolidates with, or merges
with or into, another Person or conveys, transfers, leases or otherwise disposes
of all or substantially all of its assets to any Person, or any Person
consolidates with, or merges with or into, the Company, in any such event
pursuant to a transaction in which the outstanding Voting Stock of the Company
is converted into or exchanged for cash, securities or other property, other
than any such transaction (i) where the outstanding Voting Stock of the Company
is not converted or exchanged at all (except to the extent necessary to reflect
a change in the jurisdiction of incorporation of the Company) or is converted
into or exchanged for (A) Voting Stock (other than Redeemable Capital Stock) of
the surviving or transferee corporation or (B) Voting Stock (other than
Redeemable Capital Stock) of the surviving or transferee corporation and cash,
securities and other property (other than Capital Stock of the surviving or
transferee corporation) in an amount that could be paid by the Company as a
Restricted Payment as described under Section 1009 and (ii) immediately after
such transaction, no "person" or "group" (as such terms are used in Sections
13(d) and 14(d) of the Exchange Act), other than Permitted Holders, is the
"beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act,
except that a Person shall be deemed to have "beneficial ownership" of all
securities that such Person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time), directly or
indirectly, of more than 35% of the total voting power of all outstanding Voting
Stock of the surviving or transferee corporation and either (x) the Permitted
Holders beneficially own, directly or indirectly, in the aggregate Voting Stock
of the Company that represents a lesser percentage of the aggregate ordinary
voting power of all classes of the Voting Stock of the Company, voting together
as a single class, than such other person or group and are not entitled (by
voting power, contract or
5
<PAGE>
otherwise) to elect directors of the Company having a majority of the
total voting power of the Board of Directors, or (y) such other person or group
is entitled to elect directors of the Company having a majority of the total
voting power of the Board of Directors; (c) during any consecutive two year
period, individuals who at the beginning of such period constituted the Board of
Directors of the Company (together with any new directors whose election to such
Board of Directors, or whose nomination for election by the stockholders of the
Company, was approved by a vote of 66 2/3% of the directors then still in office
who were either directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason to
constitute a majority of the Board of Directors of the Company then in office;
or (d) the Company is liquidated or dissolved or adopts a plan of liquidation or
dissolution other than in a transaction which complies with Article Eight.
"COMMISSION" means the Securities and Exchange Commission, as from time
to time constituted, created under the Exchange Act, or, if at any time after
the execution of this Indenture such Commission is not existing and performing
the duties now assigned to it under the Trust Indenture Act, then the body
performing such duties at such time.
"COMPANY" means the Person named as the "Company" in the first
paragraph of this Indenture until a successor Person shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Company" shall mean such successor Person.
"COMPANY REQUEST" or "Company Order" means a written request or order
signed in the name of the Company by its Chairman of the Board, its Chief
Executive Officer, its President, its Chief Operating Officer, its Chief
Financial Officer, any Vice President, its Treasurer or an Assistant Treasurer,
and delivered to the Trustee.
"CONSOLIDATED ADJUSTED NET INCOME" means, for any period, the
consolidated net income (or loss) of the Company and all Restricted Subsidiaries
for such period as determined in accordance with GAAP, adjusted, to the extent
included in calculating such net income, by excluding, without duplication, (a)
all extraordinary gains or losses (net of taxes, fees and expenses relating
thereto), (b) all gains or losses (net of taxes, fees and expenses relating
thereto) attributable to asset dispositions other than in the ordinary course of
business, (c) the portion of net income of any Person (other than the Company or
a Restricted Subsidiary), including Unrestricted Subsidiaries, in which the
Company or any Restricted Subsidiary has an ownership interest, except to the
extent of the amount of dividends or other distributions actually paid to the
Company or any Restricted Subsidiary in cash dividends or cash distributions
during such period, (d) the net income (or loss) of any Person combined with the
Company or any Restricted Subsidiary on a "pooling of interests" basis
attributable to any period prior to the date of combination, (e) the net income
of any Restricted Subsidiary to the extent that the declaration or payment of
dividends or similar distributions by such Restricted Subsidiary is not at the
date of determination (regardless of any waiver) permitted, directly or
indirectly, by operation of the terms of its charter or any agreement,
instrument, judgment, decree, order, statute, rule or governmental regulation
applicable to such Restricted Subsidiary or its stockholders, and (f) for
purposes of calculating Consolidated Adjusted Net Income under Section 1009, any
net income (or loss) from any Restricted Subsidiary while it was an Unrestricted
Subsidiary at any time during such period other than any amounts actually
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received from such Restricted Subsidiary during such period; PROVIDED that, if
any Restricted Subsidiary is not a Wholly Owned Restricted Subsidiary,
Consolidated Adjusted Net Income will be reduced (to the extent not otherwise
reduced in accordance with GAAP) by an amount equal to (A) the amount of the
Consolidated Adjusted Net Income otherwise attributable to such Restricted
Subsidiary multiplied by (B) the quotient of (1) the number of shares of
outstanding common stock of such Restricted Subsidiary not owned on the last day
of such period by the Company or any of its Restricted Subsidiaries divided by
(2) the total number of shares of outstanding common stock of such Restricted
Subsidiary on the last day of such period.
"CONSOLIDATED FIXED CHARGE COVERAGE RATIO" of the Company means, for
any period, the ratio of (a) the sum of Consolidated Adjusted Net Income and, to
the extent deducted in computing Consolidated Adjusted Net Income, Consolidated
Interest Expense, Consolidated Income Tax Expense and Consolidated Non-Cash
Charges, in each case, for such period to (b) the sum of (i) Consolidated
Interest Expense for such period and (ii) the aggregate amount of dividends and
other distributions paid, accrued or scheduled to be paid or accrued in respect
of Redeemable Capital Stock of the Company or any Restricted Subsidiary for such
period, in each case after giving PRO FORMA effect to (A) the incurrence of the
Indebtedness giving rise to the need to make such calculation and (if
applicable) the application of the net proceeds therefrom, including to
refinance other Indebtedness, as if such Indebtedness was incurred, and the
application of the net proceeds occurred, on the first day of such period, (B)
the incurrence, repayment or retirement of any other Indebtedness by the Company
and its Restricted Subsidiaries since the first day of such period as if such
Indebtedness was incurred, repaid or retired on the first day of such period
(except that, in making such computation, the amount of Indebtedness under any
revolving credit facility shall be computed based upon the average daily balance
of such Indebtedness during such period) and (C) the acquisition (whether by
purchase, merger or otherwise) or disposition (whether by sale, merger or
otherwise) of any company, entity or business acquired or disposed of by the
Company or its Restricted Subsidiaries, as the case may be, since the first day
of such period, as if such acquisition or disposition occurred on the first day
of such period.
"CONSOLIDATED INCOME TAX EXPENSE" means, for any period, the provision
for federal, state, local and foreign income taxes of the Company and all
Restricted Subsidiaries for such period as determined on a consolidated basis in
accordance with GAAP.
"CONSOLIDATED INTEREST EXPENSE" means, for any period, without
duplication, (1) the sum of (a) the interest expense of the Company and its
Restricted Subsidiaries for such period, including, without limitation, (i)
amortization of debt discount, (ii) the net cost of Interest Rate Agreements
(including amortization of discounts), (iii) the interest portion of any
deferred payment obligation, (iv) all commissions, discounts and other fees and
charges owed with respect to the letter of credit, bankers' acceptance financing
or similar facilities and (v) amortization of debt issuance costs, plus (b) the
interest component of Capitalized Lease Obligations paid, accrued and/or
scheduled to be paid or accrued by the Company and its Restricted Subsidiaries
during such period, plus (c) one-third of lease rental payments in connection
with operating leases paid, accrued and/or scheduled to be paid or accrued
during such period, in each case as determined on a consolidated basis in
accordance with GAAP;
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PROVIDED that (x) the Consolidated Interest Expense attributable to interest on
any Indebtedness computed on a PRO FORMA basis and (A) bearing a floating
interest rate shall be computed as if the rate in effect on the date of
computation had been the applicable rate for the entire period and (B) which was
not outstanding during the period for which the computation is being made but
which bears, at the option of the Company, a fixed or floating rate of interest,
shall be computed by applying at the option of the Company, either the fixed or
floating rate, and (y) in making such computation, the Consolidated Interest
Expense attributable to interest on any Indebtedness under a revolving credit
facility computed on a PRO FORMA basis shall be computed based upon the average
daily balance of such Indebtedness during the applicable period.
"CONSOLIDATED NON-CASH CHARGES" means, for any period, the aggregate
depreciation, amortization and other non-cash expenses of the Company and any
Restricted Subsidiary reducing Consolidated Adjusted Net Income for such period,
determined on a consolidated basis in accordance with GAAP (excluding any such
non-cash charge that requires an accrual of or reserve for cash charges for any
future period or constituting an extraordinary item or loss).
"CORPORATE TRUST OFFICE" means the principal corporate trust office of
the Trustee, at which at any particular time its corporate trust business shall
be administered, which office on the date of execution of this Indenture is
located at 61 Broadway, 15th Floor, Corporate Trust Division, New York, NY
10006.
"CORPORATION" includes corporations, associations, companies and
business trusts.
"CURRENCY AGREEMENTS" means any spot or forward foreign exchange
agreements and currency swap, currency option or other similar financial
agreements or arrangements entered into by the Company or any of its Restricted
Subsidiaries designed to protect against or manage exposure to fluctuations in
foreign currency exchange rates.
"CUSTODIAN" means any receiver, trustee, assignee, liquidator,
sequestrator or similar official under any Bankruptcy Law.
"DEFAULT" means any event that is, or after notice or passage of time
or both would be, an Event of Default.
"DEFAULTED INTEREST" has the meaning specified in Section 307.
"DEPOSITARY" means The Depository Trust Company, its nominees and
successors.
"DESIGNATED SENIOR INDEBTEDNESS" means (i) all Senior Indebtedness
under the Senior Credit Facility and the Hamilton Bank Letter of Credit
Facility, and (ii) any other Senior Indebtedness which, at the time of
determination, has an aggregate principal amount outstanding of at least $25
million and that has been specifically designated in the instrument evidencing
such Senior Indebtedness as "Designated Senior Indebtedness."
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"DISINTERESTED DIRECTOR" means, with respect to any transaction or
series of transactions in respect of which the Board of Directors is required to
deliver a resolution of the Board of Directors under this Indenture, a member of
the Board of Directors who does not have any material direct or indirect
financial interest in or with respect to such transaction or series of
transactions.
"DOLLAR" OR "$" means a dollar or other equivalent unit in such coin or
currency of the United States of America as at the time shall be legal tender
for the payment of public and private debts.
"EVENT OF DEFAULT" has the meaning specified in Section 501.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"EXCHANGE NOTES" has the meaning stated in the first recital of this
Indenture and refers to any Exchange Notes containing terms substantially
identical to the Initial Notes (except that (i) such Exchange Notes shall not
contain terms with respect to transfer restrictions and shall be registered
under the Securities Act, and (ii) certain provisions relating to an increase in
the stated rate of interest thereon shall be eliminated) that are issued and
exchanged for the Initial Notes in accordance with the Exchange Offer, as
provided for in the Registration Rights Agreement and this Indenture.
"EXCHANGE OFFER" means the offer by the Company to the Holders of the
Initial Notes to exchange all of the Initial Notes (other than the Carfel Note)
for Exchange Notes, as provided for in the Registration Rights Agreement.
"EXCHANGE OFFER REGISTRATION STATEMENT" means the Exchange Offer
Registration Statement as defined in the Registration Rights Agreement.
"FAIR MARKET VALUE" means, with respect to any asset or property, the
sale value that would be obtained in an arm's-length transaction between an
informed and willing seller under no compulsion to sell and an informed and
willing buyer under no compulsion to buy.
"GENERALLY ACCEPTED ACCOUNTING PRINCIPLES" or "GAAP" means generally
accepted accounting principles in the United States, consistently applied, that
are in effect on the Issuance Date.
"GLOBAL NOTES" has the meaning set forth in Section 201.
"GUARANTEE" means, as applied to any obligation, (a) a guarantee (other
than by endorsement of negotiable instruments for collection in the ordinary
course of business), direct or indirect, in any manner, of any part or all of
such obligation and (b) an agreement, direct or indirect, contingent or
otherwise, the practical effect of which is to assure in any way the payment or
performance (or payment of damages in the event of nonperformance) of all or any
part of such obligation, including, without limiting the foregoing, the payment
of amounts drawn down by letters of credit. A guarantee shall include, without
limitation, any agreement
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to maintain or preserve any Person's financial condition or to cause any other
Person to achieve certain levels of operating results; PROVIDED that no license
or sub-license entered into in the ordinary course of business between the
Company or any Restricted Subsidiary (other than with an Affiliate thereof)
shall be deemed to be a guarantee as a result of any minimum royalty or revenue
provisions with which the Company or such Restricted Subsidiary must comply.
"GUARANTOR SENIOR INDEBTEDNESS" means, with respect to any Subsidiary
Guarantor, (i) all obligations of such Subsidiary Guarantor, now or hereafter
existing, under or in respect of the Senior Credit Facility and the Letter of
Credit Facilities, whether for principal, premium, if any, interest (including
interest accruing after the filing of, or which would have accrued but for the
filing of, a petition by or against such Subsidiary Guarantor under Bankruptcy
Law, whether or not such interest is allowed as a claim after such filing in any
proceeding under such law) and other amounts due in connection therewith
(including any fees, premiums, expenses and indemnities) and (ii) the principal
of, premium, if any, and interest on all other Indebtedness of such Subsidiary
Guarantor (other than the Note Guarantee issued by such Subsidiary Guarantor or
any guarantee by such Subsidiary Guarantor of Additional Notes), whether
outstanding on the Issuance Date or thereafter created, incurred or assumed,
unless, in the case of any particular Indebtedness, the instrument creating or
evidencing the same or pursuant to which the same is outstanding expressly
provides that such indebtedness shall not be senior in right of payment to such
Note Guarantee. Notwithstanding the foregoing, "Guarantor Senior Indebtedness"
of a Subsidiary Guarantor shall not include (i) Indebtedness evidenced by the
Note Guarantee of such Subsidiary Guarantor or any guarantee by such Subsidiary
Guarantor of Additional Notes, (ii) Indebtedness of such Subsidiary Guarantor
that is expressly subordinated in right of payment to any Guarantor Senior
Indebtedness of such Subsidiary Guarantor, (iii) Indebtedness of such Subsidiary
Guarantor that by operation of law is subordinate to any general unsecured
obligations of such Subsidiary Guarantor, (iv) Indebtedness of such Subsidiary
Guarantor to the extent incurred in violation of any covenant of this Indenture,
(v) any liability for federal, state or local taxes or other taxes, owed or
owing by such Subsidiary Guarantor, (vi) Indebtedness for goods, materials or
services purchased in the ordinary course of business or Indebtedness consisting
of trade account payables or other current liabilities (other than any current
liabilities under the Senior Credit Facility, or the current portion of
long-term Indebtedness which would constitute Guarantor Senior Indebtedness but
for the operation of this clause (vi)) owed or owing by such Subsidiary
Guarantor, (vii) amounts owed by such Subsidiary Guarantor for compensation to
employees or for services rendered to such Subsidiary Guarantor, (viii)
Indebtedness of such Subsidiary Guarantor to the Company or any other Subsidiary
or to any other Affiliate of the Company or any of such Affiliate's
Subsidiaries, (ix) Redeemable Capital Stock of such Subsidiary Guarantor, (x)
amounts owing under leases and (xi) Indebtedness which when incurred and without
respect to any election under Section 1111(b) of Title 11 of the United States
Code is without recourse to such Subsidiary Guarantor.
"HAMILTON BANK LETTER OF CREDIT FACILITY" means the $45 million Line of
Credit Facility dated August 3, 1998 between the Company and Hamilton Bank, N.A.
"Holder" means the Person in whose name a Note is registered in the
Note Register.
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"Indebtedness" means, with respect to any Person, without duplication,
(a) all liabilities of such Person for borrowed money (including overdrafts) or
for the deferred purchase price of property or services, excluding any trade
payables and other accrued current liabilities incurred in the ordinary course
of business, but including, without limitation, all obligations, contingent or
otherwise, of such Person in connection with any letters of credit and
acceptances issued under letter of credit facilities, acceptance facilities or
other similar facilities, (b) all obligations of such Person evidenced by bonds,
notes, debentures or other similar instruments, (c) all indebtedness of such
Person created or arising under any conditional sale or other title retention
agreement with respect to property acquired by such Person (even if 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), but excluding
trade payables arising in the ordinary course of business, (d) all Capitalized
Lease Obligations of such Person, (e) all obligations of such Person under or in
respect of Interest Rate Agreements or Currency Agreements, (f) all Indebtedness
referred to in (but not excluded from) the preceding clauses of other Persons
and all dividends of other Persons, the payment of which is secured by (or for
which the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any Lien upon or with respect to 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 Indebtedness (the amount of such obligation being deemed to be the
lesser of the Fair Market Value of such property or asset or the amount of the
obligation so secured), (g) all guarantees by such Person of Indebtedness
referred to in this definition of any other Person, and (h) all Redeemable
Capital Stock of such Person valued at the greater of its voluntary or
involuntary maximum fixed repurchase price plus accrued and unpaid dividends.
For purposes hereof, the "maximum fixed repurchase price" of any Redeemable
Capital Stock which does not have a fixed repurchase price shall be calculated
in accordance with the terms of such Redeemable Capital Stock as if such
Redeemable Capital Stock were purchased on any date on which Indebtedness shall
be required to be determined pursuant to this Indenture, and if such price is
based upon, or measured by, the fair market value of such Redeemable Capital
Stock, such fair market value shall be determined in good faith by the board of
directors of the issuer of such Redeemable Capital Stock.
"INDENTURE" means this instrument as originally executed and as it may
from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof.
"INITIAL NOTES" has the meaning specified in the first recital to this
Indenture.
"INITIAL PURCHASERS" means Merrill Lynch, Pierce, Fenner & Smith
Incorporated, BancBoston Robertson Stephens Inc., Wasserstein Perella
Securities, Inc. and Barington Capital Group, L.P.
"Institutional Accredited Investor" means an institution that is an
"accredited investor" as that term is defined in Rule 501(a)(1), (2), (3) or (7)
of Regulation D under the Securities Act.
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"INTEREST PAYMENT DATE," when used with respect to any Note, means the
Stated Maturity of an installment of interest on such Note.
"INTEREST RATE AGREEMENTS" means any interest rate protection
agreements and other types of interest rate hedging agreements (including,
without limitation, interest rate swaps, caps, floors, collars and similar
agreements) designed to protect against or manage exposure to fluctuations in
interest rates.
"INVESTMENT" means, with respect to any Person, any direct or indirect
advance, loan, guarantee or other extension of credit or capital contribution to
(by means of any transfer of cash or other property to others or any payment for
property or services for the account or use of others), or any purchase,
acquisition or ownership by such Person of any Capital Stock, bonds, notes,
debentures or other securities or evidences of Indebtedness issued or owned by,
any other Person and all other items that would be classified as investments on
a balance sheet prepared in accordance with GAAP. "Investments" shall exclude
extensions of trade credit on commercially reasonable terms in accordance with
normal trade practices.
"ISSUANCE DATE" means April 6, 1999, the date on which the Notes are
originally issued under the Indenture.
"LEASE" means the Master Agreement dated August 28, 1997, as amended as
of the Issuance Date, among the Company, as lessee and guarantor, SUP Joint
Venture, as lessor, Suntrust Bank, Miami, N.A., as agent, Atlantic Financial
Managers, Inc. and Atlantic Financial Group, Ltd. and certain other financial
institutions, as lenders, and the related Lease Agreement (Land), Lease
Agreement (Building), Loan Agreement, Guaranty and Security Agreement and
Financing Statement (all as defined in the Master Agreement) dated as of August
28, 1997, as amended as of the Issuance Date, and any renewal, replacement or
extension thereof on terms similar to those in effect on the Issuance Date;
PROVIDED that any such renewal, replacement or extension will not increase the
amount of the guarantee by the Company of the obligations of the lessor under
the Lease or the rental obligations of the Company at the expiration of the term
of the Lease Agreement (Building) and Lease Agreement (Land) as of the date of
such renewal, replacement or extension.
"LETTER OF CREDIT FACILITIES" means the Hamilton Bank Letter of Credit
Facility, the Ocean Bank Letter of Credit Facility and The Bank of
Tokyo-Mitsubishi Letter of Credit Facility, as the same may be amended,
supplemented or otherwise modified including any refinancing, refunding,
replacement or extension thereof.
"LIEN" means any mortgage, charge, pledge, lien (statutory or
otherwise), privilege, security interest, hypothecation, assignment for
security, claim, or preference or priority or other encumbrance upon or with
respect to any property of any kind, real or personal, movable or immovable, now
owned or hereafter acquired. A Person shall be deemed to own subject to a Lien
any property which such Person has acquired or holds subject to the interest of
a vendor or lessor under any conditional sale agreement (other than a
consignment), capital lease or other title retention agreement.
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"MATURITY" means, with respect to any Note, the date on which any
principal of such Note becomes due and payable as provided in such Note or in
this Indenture, whether at the Stated Maturity with respect to such principal or
by declaration of acceleration, call for redemption or purchase or otherwise.
"MOODY'S" means Moody's Investors Service, Inc. and its successors.
"NET CASH PROCEEDS" means, with respect to any Asset Sale, the proceeds
thereof in the form of cash or Cash Equivalents including payments in respect of
deferred payment obligations when received in the form of cash or Cash
Equivalents (except to the extent that such obligations are financed or sold
with recourse to the Company or any Restricted Subsidiary), net of (i) brokerage
commissions and other fees and expenses (including fees and expenses of legal
counsel and investment banks) related to such Asset Sale, (ii) provisions for
all taxes payable as a result of such Asset Sale, (iii) payments made to retire
Indebtedness where payment of such Indebtedness is secured by the assets or
properties the subject of such Asset Sale, (iv) amounts required to be paid to
any Person (other than the Company or any Restricted Subsidiary) owning a
beneficial interest in the assets subject to the Asset Sale and (v) appropriate
amounts to be provided by the Company or any Restricted Subsidiary, as the case
may be, as a reserve required in accordance with GAAP against any liabilities
associated with such Asset Sale and retained by the Company or any Restricted
Subsidiary, as the case may be, after such Asset Sale, including, without
limitation, pension and other post-employment benefit liabilities, liabilities
related to environmental matters and liabilities under any indemnification
obligations associated with such Asset Sale, all as reflected in an Officers'
Certificate delivered to the Trustee.
"NON-PAYMENT DEFAULT" means any event of default (other than a Payment
Default) the occurrence of which entitles one or more Persons to accelerate the
maturity of any Designated Senior Indebtedness.
"NON-U.S. PERSON" means a person who is not a U.S. person as defined in
Regulation S.
"NOTE GUARANTEE" means any guarantee of the obligations of the Company
under the Indenture and the Notes by any Restricted Subsidiary in accordance
with the provisions of the Indenture.
"NOTE REGISTER" and "Note Registrar" have the respective meanings
specified in Section 305.
"NOTES" has the meaning stated in the first recital of this Indenture
and more particularly means any Notes (including Additional Notes) authenticated
and delivered under this Indenture.
"OCEAN BANK LETTER OF CREDIT FACILITY" means the $7 million Line of
Credit Facility dated February 19, 1997 between the Company and Ocean Bank.
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"OFFICERS' CERTIFICATE" means a certificate signed by the Chairman of
the Board, the Chief Executive Officer, the President, the Chief Operating
Officer, the Chief Financial Officer or a Vice President, and by the Treasurer,
an Assistant Treasurer, the Secretary or an Assistant Secretary of the Company,
and delivered to the Trustee.
OFFSHORE GLOBAL NOTE" has the meaning set forth in Section 201.
"OFFSHORE NOTE EXCHANGE DATE" has the meaning set forth in Section 201.
"OFFSHORE PHYSICAL NOTE" has the meaning set forth in Section 201.
"OPINION OF COUNSEL" means a written opinion of outside legal counsel,
which and who may be outside counsel for the Company, and who shall be
reasonably acceptable to the Trustee.
"OUTSTANDING," when used with respect to Notes, means, as of the date
of determination, all Notes theretofore authenticated and delivered under this
Indenture, EXCEPT:
(i) Notes theretofore cancelled by the Trustee or delivered to the
Trustee for cancellation;
(i) Notes, or portions thereof, for whose payment or redemption or
repayment at the option of the Holder money in the necessary amount has
been theretofore deposited with the Trustee or any Payment Agent (other
than the Company) in trust or set aside and segregated in trust by the
Company (if the Company shall act as its own Paying Agent) for the
Holders of such Notes; PROVIDED that, if such Notes are to be redeemed,
notice of such redemption has been duly given pursuant to this
Indenture or provision therefor satisfactory to the Trustee has been
made;
(i) Notes, except to the extent provided in Sections 1402 and
1403, with respect to which the Company has effected defeasance and/or
covenant defeasance as provided in Article Fourteen; and
(i) Notes which have been paid pursuant to Section 306 or in
exchange for or in lieu of which other Notes have been authenticated
and delivered pursuant to this Indenture, other than any such Notes in
respect of which there shall have been presented to the Trustee proof
satisfactory to it that such Notes are held by a bona fide purchaser in
whose hands such Notes are valid obligations of the Company;
PROVIDED, HOWEVER, that in determining whether the Holders of the requisite
principal amount of the Outstanding Notes have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, and for the
purpose of making the calculations required by TIA Section 313, Notes owned by
the Company or any other obligor upon the Notes or any Affiliate of the Company
or of such other obligor shall be disregarded and deemed not to be Outstanding
(PROVIDED that in connection with any offer by the Company or any obligor to
purchase the Notes, Notes tendered for purchase will be deemed to be Outstanding
and held by the tendering Holder until the date of purchase), except that, in
determining whether the Trustee
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shall be protected in making such calculation or in relying upon any such
request, demand, authorization, direction, notice, consent or waiver, only Notes
which a Responsible Officer of the Trustee actually knows to be so owned shall
be so disregarded. Notes so owned which have been pledged in good faith may be
regarded as Outstanding if the pledgee establishes to the satisfaction of the
Trustee the pledgee's right to act with respect to such Notes and that the
pledgee is not the Company or any other obligor upon the Notes or any Affiliate
of the Company or such other obligor.
"PARI PASSU INDEBTEDNESS" means (a) with respect to the Notes,
Indebtedness that ranks PARI PASSU in right of payment to the Notes and (b) with
respect to any Note Guarantee, Indebtedness that ranks PARI PASSU in right of
payment to such Note Guarantee.
"PAYING AGENT" means any Person (including the Company acting as Paying
Agent) authorized by the Company to pay the principal of (or premium, if any,
on) or interest on any Notes on behalf of the Company.
"PAYMENT BLOCKAGE PERIOD" has the meaning specified in Section 1203.
"PAYMENT DEFAULT" means any default in the payment (whether at stated
maturity, upon scheduled installment, by acceleration or otherwise) of principal
of, or premium, if any, or interest on Designated Senior Indebtedness.
"PERMITTED HOLDERS" means, as of the date of determination, (a) Oscar
Feldenkreis, George Feldenkreis, their spouses, their respective lineal
descendants and the spouses of such lineal descendants, (b) any Person
controlled by any of the Persons included in the foregoing clause (a) (as the
term "controlled" is defined under the definition of "Affiliate"), (c) trusts
for the benefit of any of the Persons included in the foregoing clause (a), and
(d) any charitable foundation a majority of whose members, trustees or
directors, as the case may be, are Persons included in the foregoing clause (a).
"PERMITTED INDEBTEDNESS" means any of the following:
(a) Indebtedness of the Company and the Subsidiary Guarantors
under the Senior Credit Facility in an aggregate principal amount at
any one time outstanding not to exceed the sum of (i) $15 million
(after giving effect to the permanent reduction made from the proceeds
of the issuance and sale of the Notes on the Issuance Date) less the
amount of permanent reductions made by the Company in respect of any
term loans under the Senior Credit Facility and (ii) the greater of (x)
$75 million and (y) the sum of (1) 85% of Eligible Receivables (as
defined in clauses (a) through (o) of the definition thereof contained
in the Senior Credit Facility on the Issuance Date), PLUS (2) the
lesser of (i) 90% of Eligible Factoring Credit Balances (as defined in
clauses (a) through (c) of the definition thereof contained in the
Senior Credit Facility on the Issuance Date) and (ii) $20 million, PLUS
(3) the lesser of (i) 60% of Eligible Inventory (as defined in clauses
(a) through (e) and (g) through (i) of the definition thereof contained
in the Senior Credit Facility on the Issuance Date) and (ii) $30
million, MINUS (d) the full amount of all outstanding letters of credit
issued pursuant to, or authorized
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under, the Senior Credit Facility for the account of the Company or the
Restricted Subsidiaries which are not fully secured by cash collateral;
(b) Indebtedness of the Company with respect to any letters of
credit under the Letter of Credit Facilities in an aggregate principal
amount at any one time outstanding not to exceed $60 million;
(c) Indebtedness of the Company pursuant to the Notes (other than
Additional Notes) issued on the Issuance Date or of any Restricted
Subsidiary pursuant to a Note Guarantee (other than a guarantee of
Additional Notes);
(d) Indebtedness of the Company or any Restricted Subsidiary
outstanding on the Issuance Date (other than Indebtedness under the
Senior Credit Facility, the Letter of Credit Facilities and the Lease);
(e) Indebtedness of the Company owing to any Wholly Owned
Restricted Subsidiary; PROVIDED that any Indebtedness of the Company
owing to any such Restricted Subsidiary is unsecured and is
subordinated in right of payment from and after such time as the Notes
shall become due and payable (whether at Stated Maturity, acceleration
or otherwise) to the payment and performance of the Company's
obligations under the Notes; PROVIDED FURTHER that any disposition,
pledge or transfer of any such Indebtedness to a Person (other than a
disposition, pledge or transfer to the Company or another Wholly Owned
Restricted Subsidiary) shall be deemed to be an incurrence of such
Indebtedness by the Company not permitted by this clause (e);
(f) Indebtedness of a Restricted Subsidiary owing to the Company
or to another Wholly Owned Restricted Subsidiary; PROVIDED that any
such Indebtedness of any Subsidiary Guarantor is subordinated in right
of payment to the Note Guarantee of such Subsidiary Guarantor; PROVIDED
FURTHER that any disposition, pledge or transfer of any such
Indebtedness to a Person (other than a disposition, pledge or transfer
to the Company or a Wholly Owned Restricted Subsidiary) shall be deemed
to be an incurrence of such Indebtedness by such Restricted Subsidiary
not permitted by this clause (f);
(g) Guarantees of any Restricted Subsidiary made in accordance
with the provisions of Section 1015;
(h) Obligations of the Company or any Subsidiary Guarantor entered
into in the ordinary course of business (i) pursuant to Interest Rate
Agreements designed to protect the Company or any Restricted Subsidiary
against fluctuations in interest rates in respect of Indebtedness of
the Company or any Restricted Subsidiary, which obligations do not
exceed the aggregate principal amount of such Indebtedness and (ii)
pursuant to Currency Agreements entered into by the Company or any of
its Restricted Subsidiaries in respect of its (x) assets or (y)
obligations, as the case may be, denominated in a foreign currency;
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(i) Indebtedness of the Company or any Subsidiary Guarantor in
respect of purchase money obligations, Capitalized Lease Obligations of
the Company or any Subsidiary Guarantor and Subordinated Indebtedness
of the Company or any Subsidiary Guarantor in an aggregate amount which
does not exceed $5 million at any one time outstanding;
(j) Indebtedness of the Company or any Subsidiary Guarantor
consisting of guarantees, indemnities or obligations in respect of
purchase price adjustments in connection with the acquisition or
disposition of assets, including, without limitation, shares of Capital
Stock of Restricted Subsidiaries;
(k) Indebtedness of the Company or any Subsidiary Guarantor
represented by (x) letters of credit for the account of the Company or
any Restricted Subsidiary or (y) other obligations to reimburse third
parties pursuant to any surety bond or other similar arrangements,
which letters of credit or other obligations, as the case may be, are
intended to provide security for workers' compensation claims, payment
obligations in connection with self-insurance or other similar
requirements in the ordinary course of business;
(l) the guarantee of the obligations of the lessor under the
Lease; and
(m) any renewals, extensions, substitutions, refinancings or
replacements (each, for purposes of this clause, a "refinancing") of
any Indebtedness, referred to in clause (c) or (d) of this definition,
including any successive refinancings, so long as (i) any such new
Indebtedness shall be in a principal amount that does not exceed the
principal amount (or, if such Indebtedness being refinanced provides
for an amount less than the principal amount thereof to be due and
payable upon a declaration of acceleration thereof, such lesser amount
as of the date of determination) so refinanced, plus the lesser of the
amount of any premium required to be paid in connection with such
refinancing pursuant to the terms of the Indebtedness refinanced or the
amount of any premium reasonably determined as necessary to accomplish
such refinancing, (ii) in the case of any refinancing by the Company of
Pari Passu Indebtedness or Subordinated Indebtedness, such new
Indebtedness is made PARI PASSU with or subordinate to the Notes at
least to the same extent as the Indebtedness being refinanced, (iii) in
the case of any refinancing by any Subsidiary Guarantor of Pari Passu
Indebtedness or Subordinated Indebtedness, such new Indebtedness is
made PARI PASSU with or subordinate to the Note Guarantee of such
Subsidiary Guarantor at least to the same extent as the Indebtedness
being refinanced, (iv) such new Indebtedness has an Average Life longer
than the Average Life of the Notes and a final Stated Maturity later
than the final Stated Maturity of the Notes and (v) Indebtedness of the
Company or a Subsidiary Guarantor may only be refinanced with
Indebtedness of the Company or a Subsidiary Guarantor and Indebtedness
of a Restricted Subsidiary that is not a Subsidiary Guarantor may only
be refinanced with Indebtedness of such Restricted Subsidiary.
"PERMITTED INVESTMENTS" means any of the following:
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(a) Investments in Cash Equivalents;
(b) Investments in the Company or any Restricted Subsidiary;
(c) intercompany Indebtedness to the extent permitted under clause
(e) or (f) of the definition of "Permitted Indebtedness";
(d) Investments in an amount not to exceed an aggregate of $5
million at any one time outstanding;
(e) Investments by the Company or any Restricted Subsidiary in
another Person, if as a result of such Investment (i) such other Person
becomes a Wholly Owned Restricted Subsidiary or (ii) such other Person
is merged or consolidated with or into, or transfers or conveys all or
substantially all of its assets to, the Company or a Wholly Owned
Restricted Subsidiary;
(f) bonds, notes, debentures and other securities received as
consideration for Assets Sales to the extent permitted under Section
1014;
(g) any loans or other advances made pursuant to any employee
benefit plans (including plans for the benefit of directors) or
employment agreements or other compensation arrangements (including for
the purchase of Capital Stock of the Company by employees), in each
case as approved by the Board of Directors of the Company, in an
aggregate amount at any one time outstanding not to exceed $1 million;
or
(h) negotiable instruments held for deposit or collection in the
ordinary course of business, except to the extent they would constitute
Investments in Affiliates.
"PERMITTED JUNIOR SECURITIES" has the meaning specified in Section
1202.
"PERSON" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
"PHYSICAL NOTES" has the meaning set forth in Section 201.
"PLACE OF PAYMENT" means the office or agency maintained by the Company
where the principal of (and premium, if any, on) and interest on the Notes are
payable as specified in Section 1002.
"PREDECESSOR NOTE" of any particular Note, means every previous Note
evidencing all or a portion of the same debt as that evidenced by such
particular Note; and, for the purposes of this definition, any Note
authenticated and delivered under Section 306 in exchange for or in lieu of a
mutilated, destroyed, lost or stolen Note shall be deemed to evidence the same
debt as the mutilated, destroyed, lost or stolen Note.
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"PREFERRED STOCK" means, with respect to any Person, Capital Stock of
any class or classes (however designated) of such Person which is preferred as
to the payment of dividends or distributions, or as to the distribution of
assets upon any voluntary or involuntary liquidation or dissolution of such
Person, over the Capital Stock of any other class of such Person whether now
outstanding, or issued after the Issuance Date, and including, without
limitation, all classes and series of preferred or preference stock of such
Person.
"PRIVATE PLACEMENT LEGEND" has the meaning set forth in Section 203.
"PUBLIC EQUITY OFFERING" means an offer and sale of common stock (which
is Qualified Capital Stock) of the Company made on a primary basis by the
Company pursuant to a registration statement that has been declared effective by
the Commission pursuant to the Securities Act (other than a registration
statement on Form S-8 or otherwise relating to equity securities issuable under
any employee benefit plan of the Company).
"QIB" means a "Qualified Institutional Buyer" within the meaning of
Rule 144A under the Securities Act.
"QUALIFIED CAPITAL STOCK" of any Person means any and all Capital Stock
of such Person other than Redeemable Capital Stock.
"REDEEMABLE CAPITAL STOCK" means any class or series of Capital Stock
that, either by its terms, by the terms of any security into which it is
convertible or exchangeable or by contract or otherwise, is, or upon the
happening of an event or passage of time would be, required to be redeemed prior
to the final Stated Maturity of the Notes or is redeemable at the option of the
holder thereof at any time prior to such final Stated Maturity, or is
convertible into or exchangeable for debt securities at any time prior to such
final Stated Maturity.
"REDEMPTION DATE," when used with respect to any Note to be redeemed,
in whole or in part, means the date fixed for such redemption by or pursuant to
this Indenture.
"REDEMPTION PRICE," when used with respect to any Note to be redeemed,
means the price at which it is to be redeemed pursuant to this Indenture.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights Agreement
dated as of April 6, 1999, among the Company, the Subsidiary Guarantors and the
Initial Purchasers.
"REGISTRATION STATEMENT" means the Registration Statement as defined in
the Registration Rights Agreement.
"REGULAR RECORD DATE" has the meaning specified in Section 301.
"REGULATION S" means Regulation S under the Securities Act.
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"REPRESENTATIVE" means (i) with respect to the Senior Credit Facility,
the Agent Bank and (ii) with respect to any other Senior Indebtedness, the
indenture trustee or other trustee, agent or representative for the holders of
such Senior Indebtedness.
"RESPONSIBLE OFFICER," when used with respect to the Trustee, means any
vice president, any assistant secretary, any assistant treasurer, any trust
officer or assistant trust officer, or any other officer of the Trustee
customarily performing functions similar to those performed by any of the
above-designated officers, and also means, with respect to a particular
corporate trust matter, any other officer to whom such matter is referred
because of his or her knowledge of and familiarity with the particular subject.
"RESTRICTED SUBSIDIARY" means any Subsidiary other than an Unrestricted
Subsidiary.
"RULE 144A" means Rule 144A under the Securities Act.
"S&P" means Standard and Poor's Ratings Group, a division of
McGraw-Hill, Inc. and its successors.
"SALE AND LEASEBACK TRANSACTION" means any transaction or series of
related transactions pursuant to which the Company or a Restricted Subsidiary
sells or transfers any property or asset in connection with the leasing of such
property or asset to the seller or transferor.
"SECURITIES ACT" means Securities Act of 1933, as amended, and the
rules and regulations of the Commission promulgated thereunder.
"SENIOR CREDIT FACILITY" means the Amended and Restated Loan and
Security Agreement dated as of March 26, 1999 among the Company and certain of
its Subsidiaries, as borrowers, NationsBank, N.A., as agent, and the banks party
thereto from time to time, together with the related documents thereto
(including, without limitation, any guarantee agreements permitted under this
Indenture and security documents), in each case as such agreements may be
amended (including any amendment and restatement thereof), supplemented or
otherwise modified from time to time, including any agreement extending the
maturity of, refinancing, replacing or otherwise restructuring (including,
subject to the covenants of this Indenture, adding Subsidiaries of the Company
as additional borrowers or guarantors thereunder) all or any portion of the
Indebtedness under such agreement or any successor or replacement agreement in
compliance with this Indenture.
"SENIOR INDEBTEDNESS" means (i) all obligations of the Company, now or
hereafter existing, under or in respect of the Senior Credit Facility and the
Letter of Credit Facilities, whether for principal, premium, if any, interest
(including, interest accruing after the filing of, or which would have accrued
but for the filing of, a petition by or against the Company under Bankruptcy
Law, whether or not such interest is allowed as a claim after such filing in any
proceeding under such law) and other amounts due in connection therewith
(including any fees, premiums, expenses and indemnities) and (ii) the principal
of, premium, if any, and interest on all other Indebtedness of the Company
(other than the Notes), whether outstanding on the
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Issuance Date or thereafter created, incurred or assumed, unless, in the case of
any particular Indebtedness, the instrument creating or evidencing the same or
pursuant to which the same is outstanding expressly provides that such
Indebtedness shall not be senior in right of payment to the Notes.
Notwithstanding the foregoing, "Senior Indebtedness" shall not include (i)
Indebtedness evidenced by the Notes, (ii) Indebtedness of the Company that is
expressly subordinated in right of payment to any Senior Indebtedness of the
Company or the Notes, (iii) Indebtedness of the Company that by operation of law
is subordinate to any general unsecured obligations of the Company, (iv)
Indebtedness of the Company to the extent incurred in violation of any covenant
of this Indenture, (v) any liability for federal, state or local taxes or other
taxes, owed or owing by the Company, (vi) Indebtedness for goods, materials or
services purchased in the ordinary course of business or Indebtedness consisting
of trade account payables or other current liabilities (other than any current
liabilities owing under the Senior Credit Facility, or the current portion of
long-term Indebtedness which would constitute Senior Indebtedness but for the
operation of this clause (vi)), (vii) amounts owed by the Company for
compensation to employees or for services rendered to the Company, (viii)
Indebtedness of the Company to any Subsidiary or any other Affiliate of the
Company or any such Affiliate's Subsidiaries, (ix) Redeemable Capital Stock of
the Company, (x) amounts owing under leases and (xi) Indebtedness which when
incurred and without respect to any election under Section 1111(b) of Title 11
of the United States Code is without recourse to the Company or any Restricted
Subsidiary.
"SHELF REGISTRATION STATEMENT" means the Shelf Registration Statement
as defined in the Registration Rights Agreement.
"SIGNIFICANT SUBSIDIARY" means any Restricted Subsidiary of the Company
that, together with its Subsidiaries, (i) for the most recent fiscal year of the
Company, accounted for more than 10% of the consolidated revenues of the Company
and its Restricted Subsidiaries, (ii) as of the end of such fiscal year, was the
owner of more than 10% of the consolidated assets of the Company and its
Restricted Subsidiaries, all as set forth on the most recently available
consolidated financial statements of the Company for such fiscal year or (iii)
was organized or acquired after the beginning of such fiscal year and would have
been a Significant Subsidiary if it had been owned during the entire fiscal
year.
"SPECIAL RECORD DATE" for the payment of any Defaulted Interest on the
Notes means a date fixed by the Trustee pursuant to Section 307.
"STATED MATURITY" means, when used with respect to any Note or any
installment of interest thereon, the date specified in such Note as the fixed
date on which the principal of such Note or such installment of interest is due
and payable, and, when used with respect to any other Indebtedness, means the
date specified in the instrument governing such Indebtedness as the fixed date
on which the principal of such Indebtedness, or any installment of interest
thereon, is due and payable.
"SUBORDINATED INDEBTEDNESS" means Indebtedness of the Company or a
Subsidiary Guarantor that is expressly subordinated in right of payment to the
Notes or the Note Guarantee of such Subsidiary Guarantor, as the case may be.
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"SUBSIDIARY" means any Person a majority of the equity ownership or
Voting Stock of which is at the time owned, directly or indirectly, by the
Company or by one or more other Subsidiaries or by the Company and one or more
other Subsidiaries.
"SUBSIDIARY GUARANTOR" means each of Supreme Munsingwear, Inc., Supreme
International (Delaware), Inc., Supreme International (N.Y.), Inc., Supreme
Acquisition Corporation and Supreme International Corporation de Mexico, S.A. de
C.V. and any Restricted Subsidiary that incurs a Note Guarantee; PROVIDED that,
upon the release and discharge of any Person from its Note Guarantee in
accordance with the Indenture, such Person shall cease to be a Subsidiary
Guarantor.
"THE BANK OF TOKYO-MITSUBISHI LETTER OF CREDIT FACILITY" means the $8
million Line of Credit Facility dated August 1, 1996 between the Company and The
Bank of Tokyo-Mitsubishi, Ltd.
"TRUST INDENTURE ACT" or "TIA" means the Trust Indenture Act of 1939 as
in force at the date as of which this Indenture was executed, except as provided
in Section 905.
"TRUSTEE" means the Person named as the "Trustee" in the first
paragraph of this Indenture until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean or include each Person who is then a Trustee hereunder.
"UNITED STATES" means the United States of America (including the
states and the District of Columbia), its territories, its possessions and other
areas subject to its jurisdiction.
"UNRESTRICTED SUBSIDIARY" means each Subsidiary of the Company
designated as such pursuant to and in compliance with Section 1019.
"U.S. GLOBAL NOTE" has the meaning set forth in Section 201.
"U.S. GOVERNMENT OBLIGATIONS" means securities that are (x) direct
obligations of the United States of America for the timely payment of which its
full faith and credit is pledged or (y) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States of
America the timely payment of which is unconditionally guaranteed as a full
faith and credit obligation by the United States of America, which, in either
case, are not callable or redeemable at the option of the issuer thereof, and
shall also include a depository receipt issued by a bank (as defined in Section
3(a)(2) of the Securities Act), as custodian with respect to any such U.S.
Government Obligation or a specific payment of principal of or interest on any
such U.S. Government Obligation held by such custodian for the account of the
holder of such depository receipt; PROVIDED that (except as required by law)
such custodian is not authorized to make any deduction from the amount payable
to the holder of such depository receipt from any amount received by the
custodian in respect of the U.S. Government Obligation or the specific payment
of principal of or interest on the U.S. Government Obligation evidenced by such
depository receipt.
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"U.S. PHYSICAL NOTE" has the meaning set forth in Section 201.
"VICE PRESIDENT," when used with respect to the Company or the Trustee,
means any vice president, whether or not designated by a number or a word or
words added before or after the title "vice president."
"VOTING STOCK" means any class or classes of Capital Stock pursuant to
which the holders thereof have the general voting power under ordinary
circumstances to elect at least a majority of the board of directors, managers
or trustees of any Person (irrespective of whether or not, at the time, stock of
any other class or classes shall have, or might have, voting power by reason of
the happening of any contingency).
"WHOLLY OWNED RESTRICTED SUBSIDIARY" means any Restricted Subsidiary,
all of the outstanding Capital Stock (other than directors' qualifying shares or
shares of foreign Restricted Subsidiaries required to be owned by foreign
nationals pursuant to applicable law) of which are owned by the Company or by
one or more other Wholly Owned Restricted Subsidiaries or by the Company and one
or more other Wholly Owned Restricted Subsidiaries.
SECTION 102. COMPLIANCE CERTIFICATES AND OPINIONS.
Upon any application or request by the Company to the Trustee to take
any action under any provision of this Indenture, the Company, the Subsidiary
Guarantors and any other obligor on the Notes (if applicable) shall, at the
request of the Trustee, furnish to the Trustee an Officers' Certificate in form
and substance reasonably acceptable to the Trustee stating that all conditions
precedent, if any, provided for in this Indenture (including any covenant
compliance with which constitutes a condition precedent) relating to the
proposed action have been complied with and, at the request of the Trustee, an
Opinion of Counsel to the effect that in the opinion of such counsel all such
conditions precedent, if any, have been complied with, except that in the case
of any such application or request as to which the furnishing of any such
documents is specifically required by any provision of this Indenture relating
to such particular application or request, no additional certificate or opinion
need be furnished.
Each certificate or opinion with respect to compliance with a covenant
or condition provided for in this Indenture (other than pursuant to Section
1007) shall include:
(1) a statement that each individual or firm signing such
certificate or opinion has read such covenant or condition and the
definitions herein relating thereto;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of each such individual or
such firm, he or it has made such examination or investigation as is
necessary to enable him or it to express
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an informed opinion as to whether or not such covenant or condition has
been complied with; and
(4) a statement as to whether or not, in the opinion of each such
individual or such firm, such covenant or condition has been complied
with.
SECTION 103. FORM OF DOCUMENTS DELIVERED TO TRUSTEE.
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company, any Subsidiary
Guarantor or other obligor on the Notes may be based, insofar as it relates to
legal matters, upon a certificate or opinion of, or representations by, counsel,
unless such officer knows, or in the exercise of reasonable care should know,
that the certificate or opinion or representations with respect to the matters
upon which his or her certificate or opinion is based are erroneous. Any such
certificate or Opinion of Counsel may be based, insofar as it relates to factual
matters, upon a certificate or opinion of, or representations by, an officer or
officers of the Company, any Subsidiary Guarantor or other obligor on the Notes
stating that the information with respect to such factual matters is in the
possession of the Company, any Subsidiary Guarantor or other obligor on the
Notes, unless such counsel knows, or in the exercise of reasonable care should
know, that the certificate or opinion or representations with respect to such
matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
SECTION 104. ACTS OF HOLDERS.
(a) Any request, demand, authorization, direction, notice,
consent, waiver or other action provided by this Indenture to be given
or taken by Holders may be embodied in and evidenced by one or more
instruments of substantially similar tenor signed by such Holders in
person or by agents duly appointed in writing. Except as herein
otherwise expressly provided, such action shall become effective when
such instrument or instruments are delivered to the Trustee and, where
it is hereby expressly required, to the Company. Such instrument or
instruments (and the action embodied therein and evidenced thereby) are
herein sometimes referred to as the "Act" of the Holders signing such
instrument or instruments. Proof of execution of any such instrument or
of a writing appointing any such agent shall be sufficient for any
purpose of this Indenture and conclusive in favor of the Trustee and
the Company, if made in the manner provided in this Section.
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(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of
such execution or by a certificate of a notary public or other officer
authorized by law to take acknowledgments of deeds, certifying that the
individual signing such instrument or writing acknowledged to him the
execution thereof. Where such execution is by a signer acting in a
capacity other than his individual capacity, such certificate or
affidavit shall also constitute sufficient proof of authority. The fact
and date of the execution of any such instrument or writing, or the
authority of the Person executing the same, may also be proved in any
other manner which the Trustee deems sufficient.
(c) The principal amount and serial numbers of Notes held by any
Person, and the date of holding the same, shall be proved by the Note
Register.
(d) If the Company shall solicit from the Holders of Notes any
request, demand, authorization, direction, notice, consent, waiver or
other Act, the Company may, at its option, by or pursuant to Board
Resolution, fix in advance a record date for the determination of
Holders entitled to give such request, demand, authorization,
direction, notice, consent, waiver or other Act, but the Company shall
have no obligation to do so. Notwithstanding TIA Section 316(c), such
record date shall be the record date specified in or pursuant to such
Board Resolution, which shall be a date not earlier than the date 30
days prior to the first solicitation of Holders generally in connection
therewith and not later than the date such solicitation is completed.
If such a record date is fixed, such request, demand, authorization,
direction, notice, consent, waiver or other Act may be given before or
after such record date, but only the Holders of record at the close of
business on such record date shall be deemed to be Holders for the
purposes of determining whether Holders of the requisite proportion of
Outstanding Notes have authorized or agreed or consented to such
request, demand, authorization, direction, notice, consent, waiver or
other Act, and for that purpose the Outstanding Notes shall be computed
as of such record date; PROVIDED that no such authorization, agreement
or consent by the Holders on such record date shall be deemed effective
unless it shall become effective pursuant to the provisions of this
Indenture not later than eleven months after the record date.
(e) Any request, demand, authorization, direction, notice,
consent, waiver or other Act of the Holder of any Note shall bind every
future Holder of the same Note and the Holder of every Note issued upon
the registration of transfer thereof or in exchange therefor or in lieu
thereof in respect of anything done, omitted or suffered to be done by
the Trustee or the Company or any Subsidiary Guarantor in reliance
thereon, whether or not notation of such action is made upon such Note.
SECTION 105. NOTICES, ETC., TO TRUSTEE, COMPANY AND ANY SUBSIDIARY
GUARANTOR.
Any request, demand, authorization, direction, notice, consent, waiver
or Act of Holders or other documents provided or permitted by this Indenture to
be made upon, given or furnished to, or filed with,
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(1) the Trustee by any Holder or by the Company or any Subsidiary
Guarantor or any other obligor on the Notes shall be sufficient for
every purpose hereunder if made, given, furnished or delivered in
writing and mailed, first-class postage prepaid, or delivered by
recognized overnight courier, to or with the Trustee at its Corporate
Trust Office, Attention: Angelita Pena, or
(2) the Company or any Subsidiary Guarantor by the Trustee or by
any Holder shall be sufficient for every purpose hereunder (unless
otherwise herein expressly provided) if made, given, furnished or
delivered in writing, or mailed, first-class postage prepaid, or
delivered by recognized overnight courier, to the Company or such
Subsidiary Guarantor addressed to it at the address of its principal
office, for the attention of the Chief Financial Officer, specified in
the first paragraph of this Indenture or at any other address
previously furnished in writing to the Trustee by the Company or such
Subsidiary Guarantor.
SECTION 106. NOTICE TO HOLDERS; WAIVER.
Where this Indenture provides for notice of any event to Holders of
Notes by the Company or the Trustee, such notice shall be sufficiently given
(unless otherwise herein expressly provided) if in writing and mailed,
first-class postage prepaid, to each such Holder affected by such event, at its
address as it appears in the Note Register, not later than the latest date, and
not earlier than the earliest date, prescribed for the giving of such notice. In
any case where notice to Holders is given by mail, neither the failure to mail
such notice, nor any defect in any notice so mailed, to any particular Holder
shall affect the sufficiency of such notice with respect to other Holders. Any
notice mailed to a Holder in the manner herein prescribed shall be conclusively
deemed to have been received by such Holder, whether or not such Holder actually
receives such notice.
In case, by reason of the suspension of or irregularities in regular
mail service or by reason of any other cause, it shall be impractical to mail
notice of any event to Holders when such notice is required to be given pursuant
to any provision of this Indenture, then any manner of giving such notice as
shall be satisfactory to the Trustee shall be deemed to be sufficient giving of
such notice for every purpose hereunder.
Where this Indenture provides for notice in any manner, such notice may
be waived in writing by the Person entitled to receive such notice, either
before or after the event, and such waiver shall be the equivalent of such
notice. Waivers of notice by Holders shall be filed with the Trustee, but such
filing shall not be a condition precedent to the validity of any action taken in
reliance upon such waiver.
SECTION 107. EFFECT OF HEADINGS AND TABLE OF CONTENTS.
The Article and Section headings herein and the Table of Contents are
for convenience only and shall not affect the construction hereof.
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SECTION 108. SUCCESSORS AND ASSIGNS.
All covenants and agreements in this Indenture by the Company shall
bind its successors and assigns, whether so expressed or not.
SECTION 109. SEPARABILITY CLAUSE.
In case any provision in this Indenture or in any Note shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
SECTION 110. BENEFITS OF INDENTURE.
Nothing in this Indenture or in the Notes, express or implied, shall
give to any Person, other than the parties hereto, any Authenticating Agent, any
Paying Agent, any Notes Registrar and their successors hereunder and the Holders
and, with respect to any provisions hereof relating to the subordination of the
Notes or the rights of holders of Senior Indebtedness, the holders of Senior
Indebtedness, any benefit or any legal or equitable right, remedy or claim under
this Indenture.
SECTION 111. GOVERNING LAW.
This Indenture and the Notes shall be governed by and construed in
accordance with the law of the State of New York. Upon the effectiveness of the
Shelf Registration Statement or the consummation of the Exchange Offer, this
Indenture will be subject to the provisions of the Trust Indenture Act that are
required to be part of this Indenture and shall, to the extent applicable, be
governed by such provisions.
SECTION 112. LEGAL HOLIDAYS.
In any case where any Interest Payment Date, Redemption Date, or Stated
Maturity or Maturity of any Note shall not be a Business Day at any Place of
Payment, then (notwithstanding any other provision of this Indenture or of any
Note) payment of principal (and premium, if any) or interest need not be made at
such Place of Payment on such date, but may be made on the next succeeding
Business Day at such Place of Payment with the same force and effect as if made
on the Interest Payment Date or Redemption Date or at the Stated Maturity or
Maturity; PROVIDED that no interest shall accrue for the period from and after
such Interest Payment Date, Redemption Date, Stated Maturity or Maturity, as the
case may be.
SECTION 113. TRUST INDENTURE ACT CONTROLS.
If any provision of this Indenture limits, qualifies or conflicts with
another provision which is required to be included in this Indenture by the TIA,
the provision required by the TIA shall control. If any provision of this
Indenture modifies or excludes any provision of the TIA that may be so modified
or excluded, the latter provision shall be deemed to apply to this Indenture as
so modified or excluded, as the case may be.
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SECTION 114. NO RECOURSE AGAINST OTHERS.
A director, officer, employee or stockholder, as such, of the Company
or any Subsidiary Guarantor shall not have any liability for any obligations of
the Company or such Subsidiary Guarantor under the Notes, any Note Guarantee or
this Indenture, as applicable, or for any claim based on, in respect of or by
reason of such obligations or their creation. By accepting a Note and the
related Note Guarantee, each Holder shall waive and release all such liability.
The waiver and release shall be part of the consideration for the issue of the
Notes and the Note Guarantees.
SECTION 115. COUNTERPARTS.
This Indenture may be executed in any number of counterparts, each of
which shall be original; but such counterparts shall together constitute but one
and the same instrument.
SECTION 116. APPOINTMENT OF AGENT FOR SERVICE.
By the execution of this Indenture, each of Supreme Munsingwear Canada,
Inc. and Supreme International Corporation de Mexico, S.A. de C. V. hereby
designates the Company as its authorized agent upon which process may be served
in any legal action or proceeding, including with respect to any state or
federal securities laws, that may be instituted in any federal court of the
United States or the court of any state thereof and arising out of or relating
to this Indenture. Service of process upon such agent at 3000 N.W. 107th Avenue,
Miami, Florida 33172, attention: George Feldenkreis shall be deemed in every
respect effective service of process upon Supreme Munsingwear Canada, Inc. or
Supreme International Corporation de Mexico, S.A. de C.V., as applicable, in any
such legal action or proceeding and each of Supreme Munsingwear Canada, Inc. and
Supreme International Corporation de Mexico, S.A. de C.V. hereby submits to the
nonexclusive jurisdiction of any such court in which any such legal action or
proceeding is so instituted and waives, to the extent it may effectively do so,
any objection it may have now or hereafter to the laying of the venue of any
such legal action or proceeding. Such appointment shall be irrevocable so long
as the Holders or the Trustee shall have any rights pursuant to the terms of
this Indenture. Each of Supreme Munsingwear Canada, Inc. and Supreme
International Corporation de Mexico, S.A. de C.V., further agrees to take any
and all action, including the execution and filing of any and all such documents
and instruments, as may be necessary to continue such designation and
appointment of such agent.
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ARTICLE TWO
NOTE FORMS
SECTION 201. FORMS GENERALLY.
The Initial Notes shall be known as the "12 1/4% Senior Subordinated
Notes due 2006" and the Exchange Notes shall be known as the "12 1/4% Series B
Senior Subordinated Notes due 2006," in each case, of the Company. The Notes and
the Trustee's certificate of authentication shall be in substantially the forms
set forth in Exhibit A hereto and in this Article, respectively, with such
appropriate insertions, omissions, substitutions and other variations as are
required or permitted by this Indenture, and may have such letters, numbers or
other marks of identification and such legends or endorsements placed thereon as
may be required to comply with the rules of any securities exchange or as may,
consistently herewith, be determined by the officers of the Company executing
such Notes, as evidenced by their execution of the Notes. Any portion of the
text of any Note may be set forth on the reverse thereof, with an appropriate
reference thereto on the face of the Note. Each Note shall be dated the date of
its authentication.
The definitive Notes shall be printed, lithographed or engraved on
steel-engraved borders or may be produced in any other manner, all as determined
by the officers of the Company executing such Notes, as evidenced by their
execution of such Notes.
Initial Notes offered and sold in reliance on Rule 144A under the
Securities Act shall be issued initially in the form of a single permanent
global Note in substantially the form set forth in Exhibit A and contain each of
the legends set forth in Section 203 (the "U.S. Global Note"), registered in the
name of the nominee of the Depositary, deposited with the Trustee, as custodian
for the Depositary or its nominee, duly executed by the Company and
authenticated by the Trustee as hereinafter provided. The aggregate principal
amount of the U.S. Global Note may from time to time be increased or decreased
by adjustments made on the records of the Trustee, as custodian for the
Depositary or its nominee, as hereinafter provided.
Initial Notes offered and sold in offshore transactions in reliance on
Regulation S under the Securities Act shall be issued initially in the form of a
single temporary global Note in substantially the form set forth in Exhibit A
and contain the legends set forth in Section 203 (the "Temporary Offshore Global
Note"), registered in the name of the nominee of the Depositary, deposited with
the Trustee, as custodian for the Depositary or its nominee, duly executed by
the Company and authenticated by the Trustee as hereinafter provided. At any
time following 41 days after the date hereof (the "Offshore Note Exchange
Date"), upon receipt by the Trustee and the Company of a certificate
substantially in the form set forth in Section 204, a single permanent global
Note substantially in the form of Exhibit A hereto (the "Permanent Offshore
Global Note"; and together with the Temporary Offshore Global Note, the
"Offshore Global Note") duly executed by the Company and authenticated by the
Trustee as hereinafter provided shall be deposited with the Trustee, as
custodian for the Depositary, and the Note Registrar shall reflect on its books
and records the date and a decrease in the principal amount of the Temporary
Offshore Global Note in an amount equal to the principal amount of the
beneficial interest in the Temporary Offshore Global Note transferred. The
aggregate principal
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amount of the Offshore Global Note may from time to time be increased or
decreased by adjustments made in the records of the Trustee, as custodian for
the Depositary or its nominee, as herein provided. Initial Notes issued pursuant
to Section 305 in exchange for or upon transfer of beneficial interests in the
U.S. Global Note or the Offshore Global Note shall be in the form of U.S.
Physical Notes or in the form of permanent certificated Notes substantially in
the form set forth in Exhibit A (the "Offshore Physical Notes"), respectively,
as hereinafter provided.
Initial Notes which are offered and sold to Institutional Accredited
Investors which are not QIBs (excluding Non-U.S. Persons) or issued pursuant to
a change in the Depository's status as a "Clearing Agency" registered under the
Exchange Act or as a result of the occurrence and continuation of an Event of
Default with respect to the Notes shall be issued in the form of permanent
certificated Notes in substantially the form set forth in Exhibit A and contain
the Private Placement Legend as set forth in Section 203 (the "U.S. Physical
Notes").
The Offshore Physical Notes and U.S. Physical Notes are sometimes
collectively herein referred to as the "Physical Notes." The U.S. Global Note
and the Offshore Global Note are sometimes collectively referred to as the
"Global Notes."
Exchange Notes shall be issued substantially in the form set forth in
Exhibit A.
SECTION 202. FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION.
Subject to Section 611, the Trustee's certificate of authentication
shall be in substantially the following form:
This is one of the Notes referred to in the within-mentioned Indenture.
STATE STREET BANK AND TRUST
COMPANY, as Trustee
Dated: ________________ By:_______________________________________
Authorized Signatory
SECTION 203. RESTRICTIVE LEGENDS.
Unless and until (i) an Initial Note is sold pursuant to an effective
Shelf Registration Statement or (ii) an Initial Note is exchanged for an
Exchange Note in an Exchange Offer pursuant to an effective Exchange Offer
Registration Statement, in each case pursuant to the Registration Rights
Agreement, (A) each U.S. Global Note and U.S. Physical Note shall bear the
following legend set forth below (the "Private Placement Legend") on the face
thereof and (B) the Offshore Physical Notes and the Temporary Offshore Global
Note shall bear the Private Placement Legend on the face thereof until the
Offshore Note Exchange Date and receipt by the Company and the Trustee of a
certificate substantially in the form provided in Section 204:
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THE NOTES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS.
NEITHER THIS NOTE NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE
REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS
SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION AS SET
FORTH BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT
(A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A
UNDER THE SECURITIES ACT ("RULE 144A")), (B) IT IS AN INSTITUTIONAL
"ACCREDITED INVESTOR" WITHIN THE MEANING OF SUB-PARAGRAPH (a)(1),
(a)(2), (a)(3) OR (a)(7) OF RULE 501 UNDER THE SECURITIES ACT THAT IS
ACQUIRING THE NOTES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF SUCH AN
INSTITUTIONAL "ACCREDITED INVESTOR" FOR INVESTMENT PURPOSES AND NOT
WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY
DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT OR (C) IT IS NOT A U.S.
PERSON AND IS ACQUIRING THIS NOTE IN AN OFFSHORE TRANSACTION, (2)
AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH NOTE PRIOR TO THE DATE
WHICH IS TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF
AND THE LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY
WAS THE OWNER OF THIS NOTE (OR ANY PREDECESSOR OF THIS NOTE) ONLY (A)
TO THE COMPANY OR ANY OF ITS SUBSIDIARIES, (B) PURSUANT TO A
REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE
SECURITIES ACT, (C) FOR SO LONG AS THE NOTES ARE ELIGIBLE FOR RESALE
PURSUANT TO RULE 144A INSIDE THE UNITED STATES, TO A PERSON IT
REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN
RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A
QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER
IS BEING MADE IN RELIANCE ON RULE 144A, (D) OUTSIDE THE UNITED STATES
PURSUANT TO OFFERS AND SALES TO NON-U.S. PERSONS IN AN OFFSHORE
TRANSACTION WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES
ACT, (E) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING
OF SUB-PARAGRAPH (a)(1), (a)(2), (a)(3) OR (a)(7) OF RULE 501 UNDER THE
SECURITIES ACT THAT IS ACQUIRING THE NOTES FOR ITS OWN ACCOUNT OR FOR
THE ACCOUNT OF SUCH AN INSTITUTIONAL "ACCREDITED INVESTOR" FOR
INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN
CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT OR
(F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S AND THE
TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (I) PURSUANT
TO CLAUSE (D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF
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COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF
THEM, AND (II) IN EACH OF THE FOREGOING CASES, TO REQUIRE THAT A
CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF THIS
NOTE IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE TRUSTEE. AS
USED HEREIN, THE TERMS "UNITED STATES," "OFFSHORE TRANSACTION," AND
"U.S. PERSON" HAVE THE RESPECTIVE MEANINGS GIVEN TO THEM BY REGULATION
S UNDER THE SECURITIES ACT.
Unless and until the Carfel Note is sold pursuant to an effective Shelf
Registration Statement, such Note shall bear the following legend:
THIS CERTIFICATE MAY NOT BE TRANSFERRED PRIOR TO SEPTEMBER 13,
1999 AND THEREAFTER MAY ONLY BE TRANSFERRED PURSUANT TO A PROSPECTUS
FORMING PART OF AN EFFECTIVE SHELF REGISTRATION STATEMENT AS SET FORTH
IN SECTIONS 305 AND 312 OF THE INDENTURE.
Each Global Note, whether or not an Initial Note, shall also bear the
following legend on the face thereof:
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION
("DTC") TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE
NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO.
OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE
OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO
TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A
SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS
OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN
ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN SECTIONS 311 AND 312 OF
THE INDENTURE.
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SECTION 204. FORM OF CERTIFICATE TO BE DELIVERED AFTER THE OFFSHORE
NOTE EXCHANGE DATE.
On or after May 17, 1999
STATE STREET BANK AND TRUST COMPANY
61 Broadway
15th Floor, Corporate Trust Division
New York, NY 10006
Attention: Angelita Pena
Re: SUPREME INTERNATIONAL CORPORATION (the "Company")
12 1/4% SENIOR SUBORDINATED NOTES DUE 2006 (THE "NOTES")
Ladies and Gentlemen:
This letter relates to $_________________ principal amount of Notes
represented by the temporary offshore global note certificate (the "Temporary
Offshore Global Note"). Pursuant to Section [201] [203] of the Indenture dated
as of April 6, 1999 (the "Indenture") relating to the Notes, we hereby certify
that (1) we are the beneficial owner of such principal amount of Notes
represented by the Temporary Offshore Global Note and (2) we are a Non-U.S.
Person to whom the Notes could be transferred in accordance with Rule 904 of
Regulation S promulgated under the Securities Act of 1933, as amended (the
"Regulation S"). [Accordingly, you are hereby requested to exchange the
Temporary Offshore Global Note for an unlegended Permanent Offshore Global Note
representing the undersigned's interest in the principal amount of Notes
represented by the Temporary Offshore Global Note, all in the manner provided
for in the Indenture.] [Accordingly, you are hereby requested to issue an
Offshore Physical Note representing the undersigned's interest in the principal
amount of Notes represented by the Temporary Offshore Global Note, all in the
manner provided by the Indenture.]
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby. Terms used in this certificate have the
meanings set forth in Regulation S.
Very truly yours,
[Name of Holder]
By:_________________________________________
Authorized Signature
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ARTICLE THREE
THE NOTES
SECTION 301. AMOUNT.
The aggregate principal amount of Notes which may be authenticated and
delivered under this Indenture is limited to $125,000,000, except for Notes
authenticated and delivered upon registration of transfer of, or in exchange
for, or in lieu of, other Notes pursuant to Section 303, 304, 305, 306, 311,
312, 906, 1013, 1014 or 1108 or pursuant to an Exchange Offer.
The Initial Notes shall be known and designated as the 12 1/4% Senior
Subordinated Notes due 2006" and the Exchange Notes shall be known and
designated as the 12 1/4% Series B Senior Subordinated Notes due 2006," in each
case, of the Company. The Stated Maturity of the Notes shall be April 1, 2006,
and they shall bear interest at the rate of 12 1/4% per annum from April 6, 1999
or from the most recent Interest Payment Date to which interest has been paid or
duly provided for, payable on October 1, 1999 and semiannually thereafter on
April 1 and October 1 in each year, until the principal thereof is paid in full
and to the Person in whose name the Note (or any predecessor Note) is registered
at the close of business on the March 15 or September 15 immediately preceding
such Interest Payment Date (each, a "Regular Record Date"). Interest will be
computed on the Notes as specified in Section 310 hereof.
The principal of (and premium, if any) and interest on the Notes shall
be payable at the office or agency of the Company maintained for such purpose in
The City of New York, or at such other office or agency of the Company as may be
maintained for such purpose; PROVIDED, HOWEVER, that, at the option of the
Company, interest may be paid (a) by check mailed to addresses of the Persons
entitled thereto as such addresses shall appear on the Note Register or (b) by
wire transfer to an account located in the United States maintained by the
payee.
Holders shall have the right to require the Company to purchase their
Notes, in whole or in part, in the event of a Change in Control pursuant to
Section 1013. The Notes shall be subject to repurchase pursuant to an Excess
Proceeds Offer as provided in Section 1014.
The Notes shall be redeemable as provided in Article Eleven and in the
Notes. The Indebtedness evidenced by the Notes shall be subordinated in right of
payment to Senior Indebtedness as provided in Article Twelve. The due and
punctual payment of principal of, and premium, if any, and interest on the Notes
payable by the Company is irrevocably and unconditionally guaranteed, to the
extent set forth herein, by each of the Subsidiary Guarantors. The Note
Guarantee issued by any Subsidiary Guarantor will be subordinated to all
existing and future Guarantor Senior Indebtedness of such Subsidiary Guarantor
as provided in Article Twelve.
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SECTION 302. DENOMINATIONS.
The Notes shall be issuable only in registered form without coupons and
only in denominations of $1,000 and any integral multiple thereof.
SECTION 303. EXECUTION, AUTHENTICATION, DELIVERY AND DATING.
The Notes shall be executed on behalf of the Company by its Chairman of
the Board, its Chief Executive Officer, its President, its Chief Operating
Officer, its Chief Financial Officer or a Vice President. The signature of any
of these officers on the Notes may be the manual or facsimile signatures of the
present or any future such authorized officer and may be imprinted or otherwise
reproduced on the Notes.
Notes bearing the manual or facsimile signatures of individuals who
were at any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Notes or did not hold
such offices at the date of such Notes.
On the Issuance Date, the Company shall deliver the Initial Notes in
the aggregate principal amount of $100,000,000 executed by the Company to the
Trustee for authentication, together with a Company Order for the authentication
and delivery of such Notes, directing the Trustee to authenticate the Notes and
certifying that all conditions precedent to the issuance of Notes contained
herein have been fully complied with, and the Trustee in accordance with such
Company Order shall authenticate and deliver such Initial Notes. At any time and
from time to time after the Issuance Date, the Company may deliver Additional
Notes executed by the Company to the Trustee for authentication, together with a
Company Order for the authentication and delivery of such Additional Notes,
directing the Trustee to authenticate the Additional Notes and certifying that
the issuance of such Additional Notes is in compliance with Article Ten hereof
and that all other conditions precedent to the issuance of Notes contained
herein have been fully complied with, and the Trustee in accordance with such
Company Order shall authenticate and deliver such Additional Notes; PROVIDED
that the aggregate principal amount of the Initial Notes issued on the Issuance
Date and the aggregate principal amount of any Additional Notes shall not exceed
$125,000,000. On Company Order, the Trustee shall authenticate for original
issue Exchange Notes in an aggregate principal amount not to exceed $100,000,000
plus the aggregate principal amount of any Additional Notes issued; PROVIDED
that such Exchange Notes shall be issuable only upon the valid surrender for
cancellation of Initial Notes and any Additional Notes of a like aggregate
principal amount in accordance with an Exchange Offer or Shelf Registration
Statement pursuant to the Registration Rights Agreement and a Company Order for
the authentication and delivery of such Exchange Notes and certifying that all
conditions precedent to the issuance of such Exchange Notes have been complied
with (including the effectiveness of the Registration Statement related
thereto). In each case, the Trustee shall be entitled to receive an Officers'
Certificate and an Opinion of Counsel of the Company that it may reasonably
request in connection with such authentication of Notes. Such order shall
specify the amount of Notes to be authenticated and the date on which the
original issue of Notes is to be authenticated.
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Each Note shall be dated the date of its authentication.
No Note shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose unless there appears on such Note a
certificate of authentication substantially in the form provided for herein duly
executed by the Trustee by manual signature of an authorized signatory, and such
certificate upon any Note shall be conclusive evidence, and the only evidence,
that such Note has been duly authenticated and delivered hereunder and is
entitled to the benefits of this Indenture.
In case the Company or any Subsidiary Guarantor, pursuant to Article
Eight, shall be consolidated or merged with or into any other Person or shall
convey, transfer, lease or otherwise dispose of its properties and assets
substantially as an entirety to any Person, and the successor Person resulting
from such consolidation, or surviving such merger, or into which the Company or
such Subsidiary Guarantor shall have been merged, or the Person which shall have
received a conveyance, transfer, lease or other disposition as aforesaid, shall
have executed an indenture supplemental hereto with the Trustee pursuant to
Article Eight, any of the Notes authenticated or delivered prior to such
consolidation, merger, conveyance, transfer, lease or other disposition may,
from time to time, at the request of the successor Person, be exchanged for
other Notes executed in the name of the successor Person with such changes in
phraseology and form as may be appropriate, but otherwise in substance of like
tenor as the Notes surrendered for such exchange and of like principal amount;
and the Trustee, upon Company Request of the successor Person, shall
authenticate and deliver Notes as specified in such request for the purpose of
such exchange. If Notes shall at any time be authenticated and delivered in any
new name of a successor Person pursuant to this Section 303 in exchange or
substitution for or upon registration of transfer of any Notes, such successor
Person, at the option of the Holders but without expense to them, shall provide
for the exchange of all Notes at the time Outstanding for Notes authenticated
and delivered in such new name.
SECTION 304. TEMPORARY NOTES.
Pending the preparation of definitive Notes, the Company may execute,
and upon Company Order the Trustee shall authenticate and deliver, temporary
Notes which are printed, lithographed, typewritten, mimeographed or otherwise
produced, in any authorized denomination, substantially of the tenor of the
definitive Notes in lieu of which they are issued and with such appropriate
insertions, omissions, substitutions and other variations as the officers
executing such Notes may determine, as conclusively evidenced by their execution
of such Notes.
If temporary Notes are issued, the Company will cause definitive Notes
to be prepared without unreasonable delay. After the preparation of definitive
Notes, the temporary Notes shall be exchangeable for definitive Notes, upon
surrender of the temporary Notes at the office or agency of the Company in a
Place of Payment, without charge to the Holder. Upon surrender for cancellation
of any one or more temporary Notes, the Company shall execute and, upon Company
Order, the Trustee shall authenticate and deliver in exchange therefor a like
principal amount of definitive Notes of authorized denominations. Until so
exchanged the
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temporary Notes shall in all respects be entitled to the same benefits under
this Indenture as definitive Notes.
SECTION 305. REGISTRATION, REGISTRATION OF TRANSFER AND EXCHANGE.
The Company shall cause to be kept at the Corporate Trust Office of the
Trustee a register for the Notes (the register maintained in the Corporate Trust
Office of the Trustee and in any other office or agency of the Company in a
Place of Payment being herein sometimes collectively referred to as the "Note
Register") in which, subject to such reasonable regulations as it may prescribe,
the Company shall provide for the registration of Notes and of transfers of
Notes. The Note Register shall be in written form or any other form capable of
being converted into written form within a reasonable time. At all reasonable
times, the Note Register shall be open to inspection by the Trustee. The Trustee
is hereby initially appointed as note registrar (the Trustee in such capacity,
together with any successor of the Trustee in such capacity, the "Note
Registrar") for the purpose of registering Notes and transfers of Notes as
herein provided.
Upon surrender for registration of transfer of any Note at the office
or agency in a Place of Payment, the Company shall execute, and the Trustee
shall authenticate and deliver, in the name of the designated transferee or
transferees, one or more new Notes, of any authorized denomination or
denominations and of a like aggregate principal amount and tenor.
At the option of the Holder, Notes may be exchanged for other Notes, of
any authorized denomination and of a like aggregate principal amount, upon
surrender of the Notes to be exchanged at such office or agency. Whenever any
Notes are so surrendered for exchange (including an exchange of Initial Notes
for Exchange Notes), the Company shall execute, and the Trustee shall
authenticate and deliver, the Notes which the Holder making the exchange is
entitled to receive; PROVIDED that no exchange of Initial Notes for Exchange
Notes shall occur until a Registration Statement shall have been declared
effective by the Commission, the Trustee shall have received an Officers'
Certificate confirming that the Registration Statement has been declared
effective by the Commission and the Initial Notes to be exchanged for the
Exchange Notes shall be cancelled by the Trustee and PROVIDED FURTHER that no
exchange of the Carfel Note shall occur except pursuant to an effective Shelf
Registration Statement after September 13, 1999.
All Notes issued upon any registration of transfer or exchange of Notes
shall be the valid obligations of the Company, evidencing the same debt, and
entitled to the same benefits under this Indenture, as the Notes surrendered
upon such registration of transfer or exchange.
Every Note presented or surrendered for registration of transfer or for
exchange shall (if so required by the Company or the Note Registrar) be duly
endorsed, or be accompanied by a written instrument of transfer, in form
satisfactory to the Company and the Note Registrar, duly executed by the Holder
thereof or his attorney duly authorized in writing.
No service charge shall be made for any registration of transfer or
exchange or redemption of Notes, but the Company may require payment of a sum
sufficient to cover any
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tax or other governmental charge that may be imposed in connection with any
registration of transfer or exchange of Notes, other than exchanges pursuant to
Section 303, 304, 906, 1013, 1014 or 1108 not involving any transfer.
SECTION 306. MUTILATED, DESTROYED, LOST AND STOLEN NOTES.
If any mutilated Note is surrendered to the Trustee, the Company shall
execute and the Trustee shall authenticate and deliver in exchange therefor a
new Note of like tenor and principal amount and bearing a number not
contemporaneously outstanding, or, in case any such mutilated Note has become or
is about to become due and payable, the Company in its discretion may, instead
of issuing a new Note, pay such Note.
If there shall be delivered to the Company, any Subsidiary Guarantor
and to the Trustee (i) evidence to their satisfaction of the destruction, loss
or theft of any Note and (ii) such security or indemnity as may be required by
them to save each of them and any agent of either of them harmless, then, in the
absence of notice to the Company, any Subsidiary Guarantor or the Trustee that
such Note has been acquired by a BONA FIDE purchaser, the Company shall execute
and upon Company Order the Trustee shall authenticate and deliver, in lieu of
any such destroyed, lost or stolen Note, a new Note of like tenor and principal
amount and bearing a number not contemporaneously outstanding, or, in case any
such destroyed, lost or stolen Note has become or is about to become due and
payable, the Company in its discretion may, instead of issuing a new Note, pay
such Note.
Upon the issuance of any new Note under this Section, the Company may
require the payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in relation thereto and any other expenses (including
the fees and expenses of the Trustee) in connection therewith.
Every new Note issued pursuant to this Section in lieu of any
mutilated, destroyed, lost or stolen Note, shall constitute an original
additional contractual obligation of the Company, any Subsidiary Guarantor and
any other obligor upon the Notes, whether or not the mutilated, destroyed, lost
or stolen Note shall be at any time enforceable by anyone, and shall be entitled
to all the benefits of this Indenture equally and proportionately with any and
all other Notes duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Notes.
SECTION 307. PAYMENT OF INTEREST; INTEREST RIGHTS PRESERVED.
Interest on any Note which is payable, and is punctually paid or duly
provided for, on any Interest Payment Date shall be paid to the Person in whose
name such Note (or one or more Predecessor Notes) is registered at the close of
business on the Regular Record Date for such interest at the Place of Payment;
PROVIDED, HOWEVER, that each installment of interest on any Note may at the
Company's option be paid (i) by mailing a check for such interest,
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payable to or upon the written order of the Person entitled thereto pursuant to
Section 308, to the address of such Person as it appears on the Note Register or
(ii) by wire transfer to an account located in the United States maintained by
the payee.
Any interest on any Note which is payable, but is not punctually paid
or duly provided for, on any Interest Payment Date shall forthwith cease to be
payable to the Holder on the relevant Regular Record Date by virtue of having
been such Holder, and such defaulted interest and, if applicable, interest on
such defaulted interest (to the extent lawful) at the rate specified in the
Notes (such defaulted interest and, if applicable, interest thereon herein
collectively called "Defaulted Interest") may be paid by the Company, at its
election in each case, as provided in clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted Interest to
the Persons in whose names the Notes (or their respective Predecessor
Notes) are registered at the close of business on a Special Record Date
for the payment of such Defaulted Interest, which shall be fixed in the
following manner. The Company shall notify the Trustee in writing of
the amount of Defaulted Interest proposed to be paid on each Note and
the date of the proposed payment (the "Special Record Date"), and at
the same time the Company shall deposit with the Trustee an amount of
money equal to the aggregate amount proposed to be paid in respect of
such Defaulted Interest or shall make arrangements satisfactory to the
Trustee for such deposit on or prior to the date of the proposed
payment, such money when deposited to be held in trust for the benefit
of the Persons entitled to such Defaulted Interest as in this clause
provided. Thereupon the Trustee shall fix a Special Record Date for the
payment of such Defaulted Interest which shall be not more than 15 days
and not less than 10 days prior to the date of the proposed payment and
not less than 10 days after the receipt by the Trustee of the notice of
the proposed payment. The Trustee shall promptly notify the Company of
such Special Record Date and, in the name and at the expense of the
Company, shall cause notice of the proposed payment of such Defaulted
Interest and the Special Record Date therefor to be given in the manner
provided in Section 106, not less than 10 days prior to such Special
Record Date. Notice of the proposed payment of such Defaulted Interest
and the Special Record Date therefor having been so given, such
Defaulted Interest shall be paid to the Persons in whose name the
Registered Notes (or their respective Predecessor Notes) are registered
at the close of business on such Special Record Date and shall no
longer be payable pursuant to the following clause (2).
(2) The Company may make payment of any Defaulted Interest on the Notes
in any other lawful manner not inconsistent with the requirements of
any securities exchange on which such Notes may be listed, and upon
such notice as may be required by such exchange, if, after notice given
by the Company to the Trustee of the proposed payment pursuant to this
clause, such manner of payment shall be deemed practicable by the
Trustee.
Subject to the foregoing provisions of this Section and Section 305,
each Note delivered under this Indenture upon registration of transfer of or in
exchange for or in lieu of any other
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Note shall carry the rights to interest accrued and unpaid, and to accrue, which
were carried by such other Note.
SECTION 308. PERSONS DEEMED OWNERS.
Prior to due presentment of a Note for registration of transfer, the
Company, any Subsidiary Guarantor, the Trustee and any agent of the Company, any
Subsidiary Guarantor or the Trustee may treat the Person in whose name such Note
is registered as the owner of such Note for the purpose of receiving payment of
principal of (and premium, if any, on) and (subject to Sections 305 and 307)
interest on such Note and for all other purposes whatsoever, whether or not such
Note be overdue, and none of the Company, any Subsidiary Guarantor, the Trustee
or any agent of the Company, any Subsidiary Guarantor or the Trustee shall be
affected by notice to the contrary.
SECTION 309. CANCELLATION.
All Notes surrendered for payment, redemption, repayment at the option
of the Holder, registration of transfer or exchange shall, if surrendered to any
Person other than the Trustee, be delivered to the Trustee. All Notes so
delivered to the Trustee shall be promptly cancelled by it. The Company may at
any time deliver to the Trustee for cancellation any Notes previously
authenticated and delivered hereunder which the Company may have acquired in any
manner whatsoever, and may deliver to the Trustee (or to any other Person for
delivery to the Trustee) for cancellation any Notes previously authenticated
hereunder which the Company has not issued and sold, and all Notes so delivered
shall be promptly cancelled by the Trustee. If the Company shall so acquire any
of the Notes, however, such acquisition shall not operate as a redemption or
satisfaction of the indebtedness represented by such Notes unless and until the
same are surrendered to the Trustee for cancellation. No Notes shall be
authenticated in lieu of or in exchange for any Notes cancelled as provided in
this Section, except as expressly permitted by this Indenture. All cancelled
Notes held by the Trustee shall be disposed of by the Trustee in accordance with
its customary procedures unless by Company Order the Company shall direct that
cancelled Notes be returned to it.
SECTION 310. COMPUTATION OF INTEREST.
Interest on the Notes shall be computed on the basis of a 360-day year
of twelve 30-day months.
SECTION 311. BOOK-ENTRY PROVISIONS FOR GLOBAL NOTES.
(a) Each Global Note initially shall (i) be registered in the name of
the Depositary for such Global Notes or the nominee of such Depositary,
(ii) be delivered to the Trustee as custodian for such Depositary and
(iii) bear legends as set forth in Section 203.
Members of, or participants in, the Depositary ("Agent Members") shall
have no rights under this Indenture with respect to any Global Note, and the
Depositary may be treated by the
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Company, the Subsidiary Guarantors, the Trustee and any agent of the Company,
the Subsidiary Guarantors or the Trustee as the absolute owner of such Global
Note for all purposes whatsoever. Notwithstanding the foregoing, nothing herein
shall prevent the Company, the Subsidiary Guarantors, the Trustee or any agent
of the Company, the Subsidiary Guarantors or the Trustee from giving effect to
any written certification, proxy or other authorization furnished by the
Depositary or impair, as between the Depositary and its Agent Members, the
operation of customary practices governing the exercise of the rights of a
beneficial owner of any Note. The registered holder of a Global Note may grant
proxies and otherwise authorize any person, including Agent Members and persons
that may hold interests through Agent Members, to take any action which a Holder
is entitled to take under this Indenture or the Notes.
(b) Interests of beneficial owners in a Global Note may be transferred
in accordance with the applicable rules and procedures of the
Depositary and the provisions of Section 312. Transfers of a Global
Note shall be limited to transfers of such Global Note in whole, but
not in part, to the Depositary, its successors or their respective
nominees, except (i) as otherwise set forth in Section 312 and (ii)
U.S. Physical Notes or Offshore Physical Notes shall be transferred to
all beneficial owners in exchange for their beneficial interests in the
U.S. Global Note or the Offshore Global Note, respectively, in the
event that the Depositary notifies the Company that it is unwilling or
unable to continue as Depositary for the applicable Global Note or the
Depositary ceases to be a "Clearing Agency" registered under the
Exchange Act and a successor depositary is not appointed by the Company
within 90 days or an Event of Default has occurred and is continuing
and the Note Registrar has received a request from the Depositary. In
connection with a transfer of an entire Global Note to beneficial
owners pursuant to clause (ii) of this paragraph (b), the applicable
Global Note shall be deemed to be surrendered to the Trustee for
cancellation, and the Company shall execute, and the Trustee shall
authenticate and deliver, to each beneficial owner identified by the
Depositary in exchange for its beneficial interest in the applicable
Global Note, an equal aggregate principal amount at maturity of U.S.
Physical Notes (in the case of the U.S. Global Note) or Offshore
Physical Notes (in the case of the Offshore Global Note), as the case
may be, of authorized denominations.
(c) Any beneficial interest in one of the Global Notes that is
transferred to a Person who takes delivery in the form of an interest
in the other Global Note will, upon transfer, cease to be an interest
in such Global Note and become an interest in the other Global Note
and, accordingly, will thereafter be subject to all transfer
restrictions, if any, and other procedures applicable to beneficial
interests in such other Global Note for as long as it retains such an
interest.
(d) Any U.S. Physical Note delivered in exchange for an interest in the
U.S. Global Note pursuant to paragraph (b) of this Section shall,
unless such exchange is made on or after the Resale Restriction
Termination Date (as defined below) and except as otherwise provided in
Section 312, bear the Private Placement Legend.
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SECTION 312. TRANSFER PROVISIONS.
Unless and until (i) an Initial Note is sold pursuant to an effective
Registration Statement, or (ii) an Initial Note is exchanged for an Exchange
Note in the Exchange Offer pursuant to an effective Registration Statement, in
each case, pursuant to the Registration Rights Agreement, the following
provisions shall apply:
(a) GENERAL. The provisions of this Section 312 shall apply to all
transfers involving any Physical Note and any beneficial interest in
any Global Note.
(b) CERTAIN DEFINITIONS. As used in this Section 312 only, "delivery"
of a certificate by a transferee or transferor means the delivery to
the Note Registrar by such transferee or transferor of the applicable
certificate duly completed; "holding" includes both possession of a
Physical Note and ownership of a beneficial interest in a Global Note,
as the context requires; "transferring" a Global Note means
transferring that portion of the principal amount of the transferor's
beneficial interest therein that the transferor has notified the Note
Registrar that it has agreed to transfer; and "transferring" a Physical
Note means transferring that portion of the principal amount thereof
that the transferor has notified the Note Registrar that it has agreed
to transfer.
As used in this Indenture, "Accredited Investor Certificate" means a
certificate substantially in the form set forth in Section 313;
"Regulation S Certificate" means a certificate substantially in the
form set forth in Section 314; "Rule 144A Certificate" means a
certificate substantially in the form set forth in Section 315; and
"Non-Registration Opinion and Supporting Evidence" means a written
opinion of counsel reasonably acceptable to the Company to the effect
that, and such other certification or information as the Company may
reasonably require to confirm that, the proposed transfer is being made
pursuant to an exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act.
(c) [Intentionally Omitted]
(d) DEEMED DELIVERY OF A RULE 144A CERTIFICATE IN CERTAIN CIRCUMSTANCES. A
Rule 144A Certificate, if not actually delivered, will be deemed
delivered if (A) (i) the transferor advises the Company and the Trustee
in writing that the relevant offer and sale were made in accordance
with the provisions of Rule 144A (or, in the case of a transfer of a
Physical Note, the transferor checks the box provided on the Physical
Note to that effect) and (ii) the transferee advises the Company and
the Trustee in writing that (x) it and, if applicable, each account for
which it is acting in connection with the relevant transfer, is a
qualified institutional buyer within the meaning of Rule 144A, (y) it
is aware that the transfer of Notes to it is being made in reliance on
the exemption from the provisions of Section 5 of the Securities Act
provided by Rule 144A, and (z) prior to the proposed date of transfer
it has been given the opportunity to obtain from the Company the
information referred to in Rule 144A(d)(4), and has either declined
such opportunity or has received such information (or, in the case of a
transfer of a Physical Note, the transferee signs the certification
provided on the Physical Note to that effect);
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or (B) the transferor holds the U.S. Global Note and is transferring to
a transferee that will take delivery in the form of the U.S. Global
Note.
(e) PROCEDURES AND REQUIREMENTS.
1. If the proposed transfer occurs prior to the Offshore Note
Exchange Date, and the proposed transferor holds:
(A) a U.S. Physical Note, other than the Carfel Note,
which is surrendered to the Note Registrar, and the proposed
transferee or transferor, as applicable:
(i) delivers an Accredited Investor
Certificate and, if required by the Company, a
Non-Registration Opinion and Supporting Evidence, or
delivers (or is deemed to have delivered pursuant to
clause (d) above) a Rule 144A Certificate and the
proposed transferee requests delivery in the form of
a U.S. Physical Note, then the Note Registrar shall
(x) register such transfer in the name of such
transferee and record the date thereof in its books
and records, (y) cancel such surrendered U.S.
Physical Note and (z) deliver a new U.S. Physical
Note to such transferee duly registered in the name
of such transferee in principal amount equal to the
principal amount being transferred of such
surrendered U.S. Physical Note;
(ii) delivers (or is deemed to have
delivered pursuant to clause (d) above) a Rule 144A
Certificate and the proposed transferee is or is
acting through an Agent Member and requests that the
proposed transferee receive a beneficial interest in
the U.S. Global Note, then the Note Registrar shall
(x) cancel such surrendered U.S. Physical Note, (y)
record an increase in the principal amount of the
U.S. Global Note equal to the principal amount being
transferred of such surrendered U.S. Physical Note
and (z) notify the Depositary in accordance with the
procedures of the Depositary that it approves of such
transfer; or
(iii) delivers a Regulation S Certificate
and the proposed transferee is or is acting through
an Agent Member and requests that the proposed
transferee receive a beneficial interest in the
Temporary Offshore Global Note, then the Note
Registrar shall (x) cancel such surrendered U.S.
Physical Note, (y) record an increase in the
principal amount of the Temporary Offshore Global
Note equal to the principal amount being transferred
of such surrendered U.S. Physical Note and (z) notify
the Depositary in accordance with the procedures of
the Depositary that it approves of such transfer.
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In any of the cases described in this Section 312(e)(1)(A),
the Note Registrar shall deliver to the transferor a new U.S.
Physical Note in principal amount equal to the principal
amount not being transferred of such surrendered U.S. Physical
Note, as applicable.
(B) the U.S. Global Note, and the proposed transferee
or transferor, as applicable:
(i) delivers an Accredited Investor
Certificate and, if required by the Company, a
Non-Registration Opinion and Supporting Evidence, or
delivers (or is deemed to have delivered pursuant to
clause (d) above) a Rule 144A Certificate and the
proposed transferee requests delivery in the form of
a U.S. Physical Note, then the Note Registrar shall
(w) register such transfer in the name of such
transferee and record the date thereof in its books
and records, (x) record a decrease in the principal
amount of the U.S. Global Note in an amount equal to
the beneficial interest therein being transferred,
(y) deliver a new U.S. Physical Note to such
transferee duly registered in the name of such
transferee in principal amount equal to the amount of
such decrease and (z) notify the Depositary in
accordance with the procedures of the Depositary that
it approves of such transfer;
(ii) delivers (or is deemed to have
delivered pursuant to clause (d) above) a Rule 144A
Certificate and the proposed transferee is or is
acting through an Agent Member and requests that the
proposed transferee receive a beneficial interest in
the U.S. Global Note, then the transfer shall be
effected in accordance with the procedures of the
Depositary therefor; or
(iii) delivers a Regulation S Certificate
and the proposed transferee is or is acting through
an Agent Member and requests that the proposed
transferee receive a beneficial interest in the
Temporary Offshore Global Note, then the Note
Registrar shall (w) register such transfer in the
name of such transferee and record the date thereof
in its books and records, (x) record a decrease in
the principal amount of the U.S. Global Note in an
amount equal to the beneficial interest therein being
transferred, (y) record an increase in the principal
amount of the Temporary Offshore Global Note equal to
the amount of such decrease and (z) notify the
Depositary in accordance with the procedures of the
Depositary that it approves of such transfer.
(C) the Temporary Offshore Global Note, and the
proposed transferee or transferor, as applicable:
(i) delivers an Accredited Investor
Certificate and, if required by the Company, a
Non-Registration Opinion and Supporting Evidence,
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or delivers (or is deemed to have delivered pursuant
to clause (d) above) a Rule 144A Certificate and the
proposed transferee requests delivery in the form of
a U.S. Physical Note, then the Note Registrar shall
(w) register such transfer in the name of such
transferee and record the date thereof in its books
and records, (x) record a decrease in the principal
amount of the Offshore Global Note in an amount equal
to the beneficial interest therein being transferred,
(y) deliver a new U.S. Physical Note to such
transferee duly registered in the name of such
transferee in principal amount equal to the amount of
such decrease and (z) notify the Depositary in
accordance with the procedures of the Depositary that
it approves of such transfer;
(ii) delivers (or is deemed to have
delivered pursuant to clause (d) above) a Rule 144A
Certificate and the proposed transferee is or is
acting through an Agent Member and requests that the
proposed transferee receive a beneficial interest in
the U.S. Global Note, then the Note Registrar shall
(x) record a decrease in the principal amount of the
Offshore Global Note in an amount equal to the
beneficial interest therein being transferred, (y)
record an increase in the principal amount of the
U.S. Global Note equal to the amount of such decrease
and (z) notify the Depositary in accordance with the
procedures of the Depositary that it approves of such
transfer; or
(iii) delivers a Regulation S Certificate
and the proposed transferee is or is acting through
an Agent Member and requests that the proposed
transferee receive a beneficial interest in the
Temporary Offshore Global Note, then the transfer
shall be effected in accordance with the procedures
of the Depositary therefor; PROVIDED, HOWEVER, that
until the Offshore Note Exchange Date occurs,
beneficial interests in the Offshore Global Note may
be held only in or through accounts maintained at the
Depositary by Euroclear or Cedel (or by Agent Members
acting for the account thereof), and no person shall
be entitled to effect any transfer or exchange that
would result in any such interest being held
otherwise than in or through such an account.
2. If the proposed transfer occurs on or after the Offshore
Note Exchange Date and the proposed transferor holds:
(A) a U.S. Physical Note, other than the Carfel Note,
which is surrendered to the Note Registrar, and the proposed
transferee or transferor, as applicable:
(i) delivers an Accredited Investor
Certificate and, if required by the Company, a
Non-Registration Opinion and Supporting Evidence, or
delivers (or is deemed to have delivered pursuant to
clause (d) above) a Rule 144A Certificate and the
proposed transferee requests delivery in
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the form of a U.S. Physical Note, then the procedures
set forth in Section 312(e)(1)(A)(i) shall apply;
(ii) delivers (or is deemed to have
delivered pursuant to clause (d) above) a Rule 144A
Certificate and the proposed transferee is or is
acting through an Agent Member and requests that the
proposed transferee receive a beneficial interest in
the Offshore Global Note, then the procedures set
forth in Section 312(e)(1)(A)(ii) shall apply; or
(iii) delivers a Regulation S Certificate,
then the Note Registrar shall cancel such surrendered
U.S. Physical Note and at the direction of the
transferee, either:
(x) register such transfer in the
name of such transferee, record the date
thereof in its books and records and deliver
a new Offshore Physical Note to such
transferee in principal amount equal to the
principal amount being transferred of such
surrendered U.S. Physical Note, or
(y) if the proposed transferee is or
is acting through an Agent Member, record an
increase in the principal amount of the
Offshore Global Note equal to the principal
amount being transferred of such surrendered
U.S. Physical Note and notify the Depositary
in accordance with the procedures of the
Depositary that it approves of such
transfer.
In any of the cases described in this
Section 312(e)(2)(A)(i), (ii) or (iii)(x),
the Note Registrar shall deliver to the
transferor a new U.S. Physical Note in
principal amount equal to the principal
amount not being transferred of such
surrendered U.S. Physical Note, as
applicable.
(B) the U.S. Global Note, and the proposed transferee
or transferor, as applicable:
(i) delivers an Accredited Investor
Certificate and, if required by the Company, a
Non-Registration Opinion and Supporting Evidence, or
delivers (or is deemed to have delivered pursuant to
clause (d) above) a Rule 144A Certificate and the
proposed transferee requests delivery in the form of
a U.S. Physical Note, then the procedures set forth
in Section 312(e)(1)(B)(i) shall apply; or
(ii) delivers (or is deemed to have
delivered pursuant to clause (d) above) a Rule 144A
Certificate and the proposed transferee is or is
acting through an Agent Member and requests that the
proposed
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transferee receive a beneficial interest in the U.S.
Global Note, then the procedures set forth in Section
312(e)(1)(B)(ii) shall apply; or
(iii) delivers a Regulation S Certificate,
then the Note Registrar shall (x) record a decrease
in the principal amount of the U.S. Global Note in an
amount equal to the beneficial interest therein being
transferred, (y) notify the Depositary in accordance
with the procedures of the Depositary that it
approves of such transfer and (z) at the direction of
the transferee, either:
(x) register such transfer in the
name of such transferee, record the date
thereof in its books and records and deliver
a new Offshore Physical Note to such
transferee in principal amount equal to the
amount of such decrease, or
(y) if the proposed transferee is or
is acting through an Agent Member, record an
increase in the principal amount of the
Offshore Global Note equal to the amount of
such decrease.
(C) an Offshore Physical Note which is surrendered to
the Note Registrar, and the proposed transferee or transferor,
as applicable:
(i) delivers (or is deemed to have delivered
pursuant to clause (d) above) a Rule 144A Certificate
and the proposed transferee is or is acting through
an Agent Member and requests delivery in the form of
the U.S. Global Note, then the Note Registrar shall
(x) cancel such surrendered Offshore Physical Note,
(y) record an increase in the principal amount of the
U.S. Global Note equal to the principal amount being
transferred of such surrendered Offshore Physical
Note and (z) notify the Depositary in accordance with
the procedures of the Depositary that it approves of
such transfer;
(ii) where the proposed transferee is or is
acting through an Agent Member, requests that the
proposed transferee receive a beneficial interest in
the Offshore Global Note, then the Note Registrar
shall (x) cancel such surrendered Offshore Physical
Note, (y) record an increase in the principal amount
of the Offshore Global Note equal to the principal
amount being transferred of such surrendered Offshore
Physical Note and (z) notify the Depositary in
accordance with the procedures of the Depositary that
it approves of such transfer; or
(iii) does not make a request covered by
Section 312(e)(2)(C)(i) or Section 312(e)(2)(C)(ii),
then the Note Registrar shall (x) register such
transfer in the name of such transferee and record
the date thereof in its books and records, (y) cancel
such surrendered Offshore Physical Note and (z)
deliver a new Offshore Physical Note to
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such transferee duly registered in the name of such
transferee in principal amount equal to the principal
amount being transferred of such surrendered Offshore
Physical Note.
In any of the cases described in this Section
312(e)(2)(C), the Note Registrar shall deliver to the
transferor a new Offshore Physical Note in principal
amount equal to the principal amount not being
transferred of such surrendered Offshore Physical
Note, as applicable.
(D) the Offshore Global Note, and the proposed
transferee or transferor, as applicable:
(i) delivers (or is deemed to have delivered
pursuant to clause (d) above) a Rule 144A Certificate
and the proposed transferee is or is acting through
an Agent Member and requests delivery in the form of
the U.S. Global Note, then the Note Registrar shall
(x) record a decrease in the principal amount of the
Offshore Global Note in an amount equal to the
beneficial interest therein being transferred, (y)
record an increase in the principal amount of the
U.S. Global Note equal to the amount of such decrease
and (z) notify the Depositary in accordance with the
procedures of the Depositary that it approves of such
transfer;
(ii) where the proposed transferee is or is
acting through an Agent Member, requests that the
proposed transferee receive a beneficial interest in
the Offshore Global Note, then the transfer shall be
effected in accordance with the procedures of the
Depositary therefor; or
(iii) does not make a request covered by
Section 312(e)(2)(D)(i) or Section 312(e)(2)(D)(ii),
then the Note Registrar shall (w) register such
transfer in the name of such transferee and record
the date thereof in its books and records, (x) record
a decrease in the principal amount of the Offshore
Global Note in an amount equal to the beneficial
interest therein being transferred, (y) deliver a new
Offshore Physical Note to such transferee duly
registered in the name of such transferee in
principal amount equal to the amount of such decrease
and (z) notify the Depositary in accordance with the
procedures of the Depositary that it approves of such
transfer.
3 If the proposed transferor holds the Carfel Note, the Note
Registrar shall:
(A) refuse to register such transfer prior to
September 13, 1999; and
(B) after September 13, 1999, only register such
transfer if it is pursuant to an effective Shelf Registration
Statement, by recording an increase in the principal amount of
the applicable Global Note or issuing a Physical
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Note, in either case in the amount of the Carfel Note and
cancelling the Carfel Note.
(f) EXECUTION, AUTHENTICATION AND DELIVERY OF PHYSICAL NOTES. In any
case in which the Note Registrar is required to deliver a Physical Note
to a transferee or transferor, the Company shall execute, and the
Trustee shall authenticate and make available for delivery, such
Physical Note.
(g) CERTAIN ADDITIONAL TERMS APPLICABLE TO PHYSICAL NOTES. Any
transferee entitled to receive a Physical Note may request that the
principal amount thereof be evidenced by one or more Physical Notes in
any authorized denomination or denominations and the Note Registrar
shall comply with such request if all other transfer restrictions are
satisfied.
(h) TRANSFERS NOT COVERED BY SECTION 312(E). The Note Registrar shall
effect and record, upon receipt of a written request from the Company
so to do, a transfer not otherwise permitted by Section 312(e), such
recording to be done in accordance with the otherwise applicable
provisions of Section 312(e), upon the furnishing by the proposed
transferor or transferee of a Non-Registration Opinion and Supporting
Evidence.
(i) GENERAL. By its acceptance of any Note bearing the Private
Placement Legend, each Holder of such Note acknowledges the
restrictions on transfer of such Note set forth in this Indenture and
in the Private Placement Legend and agrees that it will transfer such
Note only as provided in the Indenture. The Note Registrar shall not
register a transfer of any Note unless such transfer complies with the
restrictions with respect thereto set forth in this Indenture. The Note
Registrar shall not be required to determine (but may rely upon a
determination made by the Company) the sufficiency or accuracy of any
such certifications, legal opinions, other information or document.
(j) PRIVATE PLACEMENT LEGEND. Upon the transfer, exchange or
replacement of Notes not bearing the Private Placement Legend, the Note
Registrar shall deliver Notes that do not bear the Private Placement
Legend. Upon the transfer, exchange or replacement of Notes bearing the
Private Placement Legend, the Note Registrar shall deliver only Notes
that bear the Private Placement Legend unless (i) the circumstances
exist contemplated by the fourth paragraph of Section 201 (with respect
to an Offshore Physical Note) or the requested transfer is at least two
years after the original issue date of the Initial Note (with respect
to any Physical Note), (ii) there is delivered to the Note Registrar an
Opinion of Counsel reasonably satisfactory to the Company and the
Trustee to the effect that neither such legend nor the related
restrictions on transfer are required in order to maintain compliance
with the provisions of the Securities Act or (iii) such Notes are
exchanged for Exchange Notes pursuant to an Exchange Offer.
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SECTION 313. FORM OF ACCREDITED INVESTOR CERTIFICATE.
TRANSFEREE LETTER OF REPRESENTATION
SUPREME INTERNATIONAL CORPORATION
c/o State Street Bank And Trust Company
as Trustee
61 Broadway
15th Floor, Corporate Trust Division
New York, NY 10006
Attention: Angelita Pena
Ladies and Gentlemen:
In connection with our proposed purchase of $_________ aggregate
principal amount of the 12 1/4% Senior Subordinated Notes due 2006 (the "Notes")
of Supreme International Corporation (the "Company"), we confirm that:
1. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act of 1933, as
amended (the "Securities Act")) purchasing for our own account or for the
account of such an institutional "accredited investor," and we are acquiring the
Notes for investment purposes and not with a view to, or for offer or sale in
connection with, any distribution in violation of the Securities Act or other
applicable securities law and we have such knowledge and experience in financial
and business matters as to be capable of evaluating the merits and risks of our
investment in the Notes, and we and any accounts for which we are acting are
each able to bear the economic risk of our or its investment.
2. We understand and acknowledge that the Notes have not been
registered under the Securities Act, or any other applicable securities law and
may not be offered, sold or otherwise transferred except in compliance with the
registration requirements of the Securities Act or any other applicable
securities law, or pursuant to an exemption therefrom, and in each case in
compliance with the conditions for transfer set forth below. We agree on our own
behalf and on behalf of any investor account for which we are purchasing Notes
to offer, sell or otherwise transfer such Notes prior to the date which is two
years after the later of the date of original issue and the last date on which
the Company or any affiliate of the Company was the owner of such Notes (or any
predecessor thereto) (the "Resale Restriction Termination Date") only (a) to the
Company or any subsidiary thereof, (b) pursuant to a registration statement
which has been declared effective under the Securities Act, (c) for so long as
the Notes are eligible for resale pursuant to Rule 144A under the Securities Act
("Rule 144A"), to a person we reasonably believe is a "Qualified Institutional
Buyer" within the meaning of Rule 144A (a "QIB") that purchases for its own
account or for the account of a QIB and to whom notice is given that the
transfer is being made in reliance on Rule 144A, (d) pursuant to offers and
sales to non-U.S. persons that occur outside the United States within the
meaning of Regulation S under the Securities Act, (e) to an institutional
"accredited investor" within the
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meaning of subparagraph (a)(1), (a)(2),(a)(3) or (a)(7) of Rule 501 under the
Securities Act that is acquiring the Notes for its own account or for the
account of such an institutional "accredited investor" for investment purposes
and not with a view to, or for offer or sale in connection with, any
distribution in violation of the Securities Act or (f) pursuant to any other
available exemption from the registration requirements of the Securities Act,
subject in each of the foregoing cases to any requirement of law that the
disposition of our property or the property of such investor account or accounts
be at all times within our or their control and to compliance with any
applicable state securities laws. The foregoing restrictions on resale will not
apply subsequent to the Resale Restriction Termination Date. If any resale or
other transfer of the Notes is proposed to be made pursuant to clause (f) above
prior to the Resale Restriction Termination Date, the transferor shall deliver
to the trustee (the "Trustee") under the Indenture pursuant to which the Notes
are issued a letter from the transferee substantially in the form of this
letter, which shall provide, among other things, that the transferee is a person
or entity as defined in paragraph 1 of this letter and that it is acquiring such
Notes for investment purposes and not for distribution in violation of the
Securities Act. We acknowledge that the Company and the Trustee reserve the
right prior to any offer, sale or other transfer of the Notes pursuant to
clauses (d), (e) or (f) above prior to the Resale Restriction Termination Date
to require the delivery of an opinion of counsel, certifications and/or other
information satisfactory to the Company and the Trustee.
3. We are acquiring the Notes purchased by us for our own account or
for one or more accounts as to each of which we exercise sole investment
discretion.
4. You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceeding or official inquiry with respect
to the matters covered hereby.
THIS LETTER SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
Very truly yours,
(Name of Purchaser)
By:_________________________________________
Date:
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Upon transfer, the Notes would be registered in the name of the new
beneficial owner as follows:
NAME ADDRESS TAXPAYER ID NUMBER
- ---- ------- ------------------
Date of this Certificate: _________ __, 199_
SECTION 314. FORM OF REGULATION S CERTIFICATE.
REGULATION S CERTIFICATE
To: State Street Bank and Trust Company,
as Trustee (the "Trustee")
61 Broadway
15th Floor, Corporate Trust Division
New York, NY 10006
Attention: Angelita Pena
Re: Supreme International Corporation (the "Company")
12 1/4% SENIOR SUBORDINATED NOTES DUE 2006 (THE "NOTES")
Ladies and Gentlemen:
In connection with our proposed sale of $_______ aggregate principal
amount of Notes, we confirm that such sale has been effected pursuant to and in
accordance with Regulation S ("Regulation S") under the Securities Act of 1933,
as amended (the "Securities Act"), and accordingly, we hereby certify as
follows:
1. The offer of the Notes was not made to a person in the United States
(unless such person or the account held by it for which it is acting is excluded
from the definition of "U.S. person" pursuant to Rule 902(o) of Regulation S
under the circumstances described in Rule 902(i)(3) of Regulation S) or
specifically targeted at an identifiable group of U.S. citizens abroad.
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2. Either (a) at the time the buy order was originated, the buyer was
outside the United States or we and any person acting on our behalf reasonably
believed that the buyer was outside the United States or (b) the transaction was
executed in, on or through the facilities of a designated offshore securities
market, and neither we nor any person acting on our behalf knows that the
transaction was pre-arranged with a buyer in the United States.
3. Neither we, any of our affiliates, nor any person acting on our or
their behalf has made any directed selling efforts in the United States in
contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S,
as applicable.
4. The proposed transfer of Notes is not part of a plan or scheme to
evade the registration requirements of the Securities Act.
5. If we are a dealer or a person receiving a selling concession or
other fee or remuneration in respect of the Notes, and the proposed transfer
takes place before the Offshore Note Exchange Date referred to in the Indenture,
dated as of April 6, 1999, among the Company, the guarantors thereunder and the
Trustee, or we are an officer or director of the Company or a distributor, we
certify that the proposed transfer is being made in accordance with the
provisions of Rules 903 and 904(c) of Regulation S.
You and the Company are entitled to rely upon this Certificate and are
irrevocably authorized to produce this Certificate or a copy hereof to any
interested party in any administrative or legal proceeding or official inquiry
with respect to the matters covered hereby. Terms used in this certificate have
the meanings set forth in Regulation S.
Very truly yours,
[NAME OF SELLER]
By:______________________________________
Name:
Title:
Address:
Date of this Certificate: __________ __, 199_
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SECTION 315. FORM OF RULE 144A CERTIFICATE.
RULE 144A CERTIFICATE
To: State Street Bank and Trust Company
as Trustee (the "Trustee")
61 Broadway
15th Floor, Corporate Trust Division
New York, NY 10006
Attention: Angelita Pena
Re: Supreme International Corporation (the "Company")
12 1/4% SENIOR SUBORDINATED NOTES DUE 2006 (THE "NOTES")
Ladies and Gentlemen:
In connection with our proposed sale of $______ aggregate principal
amount of Notes, we confirm that such sale has been effected pursuant to and in
accordance with Rule 144A ("Rule 144A") under the Securities Act of 1933, as
amended (the "Securities Act"). We are aware that the transfer of Notes to us is
being made in reliance on the exemption from the provisions of Section 5 of the
Securities Act provided by Rule 144A. Prior to the date of this Certificate we
have been given the opportunity to obtain from the Company the information
referred to in Rule 144A(d)(4), and have either declined such opportunity or
have received such information.
You and the Company are entitled to rely upon this Certificate and are
irrevocably authorized to produce this Certificate or a copy hereof to any
interested party in any administrative or legal proceeding or official inquiry
with respect to the matters covered hereby.
Very truly yours,
[NAME OF PURCHASER]
By:______________________________________
Name:
Title:
Address:
Date of this Certificate: __________ __, 199_
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SECTION 316. CUSIP NUMBERS.
The Company in issuing the Notes may use "CUSIP" numbers (if then
generally in use) in addition to serial numbers, and, if so, the Trustee shall
use such "CUSIP" numbers in addition to serial numbers in notices of redemption,
repurchase or other notices to Holders as a convenience to Holders; PROVIDED
that any such notice may state that no representation is made as to the
correctness of such CUSIP numbers either as printed on the Notes or as contained
in any notice of a redemption or repurchase and that reliance may be placed only
on the serial or other identification numbers printed on the Notes, and any such
redemption or repurchase shall not be affected by any defect in or omission of
such numbers. The Company will promptly notify the Trustee of any change in the
CUSIP numbers.
SECTION 317. ISSUANCE OF ADDITIONAL NOTES.
The Company may, subject to Article Ten of this Indenture, issue
additional Notes having identical terms and conditions to the Initial Notes
issued on the Issuance Date (the "Additional Notes"); provided that the
aggregate principal amount of Initial Notes issued on the Issuance Date and the
aggregate principal amount of Additional Notes issued under this Indenture shall
not exceed $125,000,000. The Initial Notes issued on the Issuance Date and any
Additional Notes subsequently issued shall be treated as a single class for all
purposes under this Indenture. Exchange Notes issued in exchange for Initial
Notes issued on the Issuance Date and Exchange Notes issued for any Additional
Notes subsequently issued shall be treated as a single class for all purposes
under this Indenture.
ARTICLE FOUR
SATISFACTION AND DISCHARGE
SECTION 401. SATISFACTION AND DISCHARGE OF INDENTURE.
This Indenture shall, upon Company Request, cease to be of further
effect with respect to Notes (except as to any surviving rights of registration
of transfer or exchange of Notes expressly provided for) and the Trustee, at the
expense of the Company, shall execute proper instruments acknowledging
satisfaction and discharge of this Indenture when
(1) either
(A) all Notes theretofore authenticated and delivered
(other than (i) Notes which have been destroyed, lost or
stolen and which have been replaced or paid as provided in
Section 306, and (ii) Notes for whose payment money has
theretofore been deposited in trust with the Trustee or any
Paying Agent or segregated and held in trust by the Company
and thereafter repaid to the Company or discharged from such
trust, as provided in Section 1003) have been delivered to the
Trustee for cancellation; or
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(B) all Notes and, in the case of (i) or (ii)
below, not theretofore delivered to the Trustee for
cancellation
(i) have become due and payable,
(ii) will become due and payable at
their Stated Maturity within one year, or
(iii) if redeemable at the option of the
Company, are to be called for redemption within one
year under arrangements satisfactory to the Trustee
for the giving of notice of redemption by the Trustee
in the name, and at the expense, of the Company,
and the Company or any Subsidiary Guarantor,
in the case of (i), (ii) or (iii) above, has
irrevocably deposited or caused to be deposited with
the Trustee as trust funds in trust for such purpose
an amount sufficient to pay and discharge the entire
indebtedness on such Notes not theretofore delivered
to the Trustee for cancellation, for principal (and
premium, if any) and interest on the Notes to the
date of such deposit (in the case of Notes which have
become due and payable) or to the Stated Maturity or
Redemption Date, as the case may be;
(2) no Default or Event of Default with respect to this
Indenture or the Notes shall have occurred and be continuing on the
date of such deposit or shall occur as a result of such deposit and
such deposit will not result in a breach or violation of, or constitute
a default under, any other instrument or agreement to which the Company
or any Subsidiary Guarantor is a party or by which it is bound;
(3) the Company or any Subsidiary Guarantor has paid or caused
to be paid all other sums payable hereunder by the Company or any
Subsidiary Guarantor;
(4) the Company has delivered irrevocable instructions to the
Trustee to apply the deposited money toward the payment of such Notes
at maturity or the Redemption Date, as the case may be; and
(5) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent herein provided for relating to the satisfaction and
discharge of this Indenture have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 607, the obligations of
the Company to any Authenticating Agent under Section 612 and, if money shall
have been deposited with the Trustee pursuant to subclause (B) of clause (1) of
this Section, the obligations of the Trustee under Section 402 and the last
paragraph of Section 1003 shall survive.
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SECTION 402. APPLICATION OF TRUST MONEY.
Subject to the provisions of the last paragraph of Section 1003, all
money deposited with the Trustee pursuant to Section 401 shall be held in trust
and applied by it, in accordance with the provisions of the Notes and this
Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Persons entitled thereto, of the principal (and premium, if
any) and interest for whose payment such money has been deposited with the
Trustee; but such money need not be segregated from other funds except to the
extent required by law.
If the Trustee or Paying Agent is unable to apply any money in
accordance with Section 401 by reason of any legal proceeding or by reason of
any order or judgment of any court or governmental authority enjoining,
restraining or otherwise prohibiting such application, the Company's and any
Subsidiary Guarantor's obligations under this Indenture and the Notes shall be
revived and reinstated as though no deposit had occurred pursuant to Section
401; PROVIDED that if the Company has made any payment of principal of, premium,
if any, or interest on any Notes because of the reinstatement of its
obligations, the Company shall be subrogated to the rights of the Holders of
such Notes to receive such payment from the money held by the Trustee or Paying
Agent.
ARTICLE FIVE
REMEDIES
SECTION 501. EVENTS OF DEFAULT.
"Event of Default", wherever used herein, means any one of the
following events (whatever the reason for such Event of Default and whether it
shall be occasioned by the provisions of Article Twelve or be voluntary or
involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(1) default in the payment of any interest on any Note when it
becomes due and payable and continuance of such default for a period of
30 days;
(2) default in the payment of the principal of, or premium, if
any, on any Note at its Maturity (upon acceleration, optional
redemption, required purchase or otherwise);
(3) default in the performance, or breach, of the provisions
of Article Eight, the failure to make or consummate a Change in Control
Offer in accordance with Section 1013 or the failure to make or
consummate an Excess Proceeds Offer in accordance with Section 1014;
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(4) default in the performance, or breach, of any covenant or
agreement of the Company or any Subsidiary Guarantor contained in this
Indenture or any Note Guarantee (other than a default in the
performance, or breach, of a covenant or warranty which is specifically
dealt with in clause (1), (2) or (3) of this Section 501) and
continuance of such default or breach for a period of 30 days after
written notice shall have been given to the Company by the Trustee or
to the Company and the Trustee by the Holders of at least 25% in
aggregate principal amount of all Outstanding Notes;
(5)(a) one or more defaults in the payment of principal of or
premium, if any, on Indebtedness of the Company or any Restricted
Subsidiary aggregating $10 million or more, when the same becomes due
and payable at the Stated Maturity thereof, and such default or
defaults shall have continued after any applicable grace period and
shall not have been cured or waived or (b) Indebtedness of the Company
or any Restricted Subsidiary aggregating $10 million or more shall have
been accelerated or otherwise declared due and payable, or required to
be prepaid or repurchased (other than by regularly scheduled required
prepayment) prior to the Stated Maturity thereof;
(6) one or more judgments or orders shall be rendered against
the Company or any Restricted Subsidiary for the payment of money,
either individually or in an aggregate amount, in excess of $10 million
and shall not be discharged and either (a) an enforcement proceeding
shall have been commenced by any creditor upon such judgment or order
or (b) there shall have been a period of 60 consecutive days during
which a stay of enforcement of such judgment or order, by reason of a
pending appeal or otherwise, was not in effect;
(7) any Note Guarantee of a Significant Subsidiary ceases to
be in full force and effect or is declared null and void or any Note
Guarantees of Significant Subsidiaries is found to be invalid or any
Subsidiary Guarantor which is a Significant Subsidiary denies that it
has any further liability under any Note Guarantee, or gives notice to
such effect (other than by reason of the termination of this Indenture
or the release of any such Note Guarantee in accordance with this
Indenture);
(8) the Company or any of its Significant Subsidiaries
pursuant to or within the meaning of Bankruptcy Law: (A) commences a
voluntary case; (B) consents to the entry of an order for relief
against it in an involuntary case; (C) consents to the appointment of a
Custodian of it or for all or substantially all of its property; (D)
makes a general assignment for the benefit of its creditors, or (E)
admits in writing that it is generally not paying its debts (other than
debts which are the subject of a bona fide dispute) as they become due;
or
(9) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that remains unstayed and in effect for
60 days and: (A) is for relief against the Company or any of its
Significant Subsidiaries in an involuntary case; (B) appoints a
Custodian of the Company or any of its Significant Subsidiaries
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or for all or substantially all of the property of the Company or any
of its Significant Subsidiaries; or (C) orders the liquidation of the
Company or any of its Significant Subsidiaries; provided that clauses
(A), (B) and (C) shall not apply to an Unrestricted Subsidiary, unless
such action or proceeding has a material adverse effect on the
interests of the Company or any Restricted Subsidiary.
SECTION 502. ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT.
If an Event of Default (other than an Event of Default specified in
clause (8) or (9) of Section 501) occurs and is continuing, then in every such
case the Trustee or the Holders of not less than 25% in aggregate principal
amount of the Outstanding Notes by written notice to the Company (and to the
Trustee if such notice is given by the Holders), may, and the Trustee, upon the
written request of such Holders, shall declare the principal of, premium, if
any, and accrued interest on all of the Outstanding Notes to be due and payable
immediately. Upon any such declaration all such amounts payable in respect of
the Notes shall become immediately due and payable. If an Event of Default
specified in clause (8) or (9) of Section 501 occurs and is continuing, then the
principal of, premium, if any, and accrued interest on all of the Outstanding
Notes shall IPSO FACTO become and be immediately due and payable without any
declaration or other act on the part of the Trustee or any Holder.
At any time after a declaration of acceleration has been made and
before a judgment or decree for payment of the money due has been obtained by
the Trustee as hereinafter provided in this Article, the Holders of a majority
in aggregate principal amount of the Outstanding Notes, by written notice to the
Company and the Trustee, may rescind and annul such declaration and its
consequences if:
(1) the Company has paid or deposited with the Trustee a sum
sufficient to pay
(A) all overdue interest on all Outstanding Notes,
(B) all unpaid principal of (and premium, if any, on) any
Outstanding Notes that has become due otherwise than by such
declaration of acceleration together with interest on such
unpaid principal at the rate borne by such Notes,
(C) to the extent that payment of such interest is lawful,
interest on overdue interest and overdue principal at the rate
borne by such Notes, and
(D) all sums paid or advanced by the Trustee hereunder and the
reasonable compensation, expenses, disbursements and advances
of the Trustee, its agents and counsel;
(2) all Events of Default, other than the non-payment of
amounts of principal (or premium, if any, on) or interest on Notes
which have become due solely by such declaration of acceleration, have
been cured or waived as provided in Section 513,
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No such rescission shall affect any subsequent default or impair any
right consequent thereon.
SECTION 503. COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY
TRUSTEE.
The Company covenants that if
(1) default is made in the payment of any installment of
interest on any Note when such interest becomes due and payable and
such default continues for a period of 30 days, or
(2) default is made in the payment of the principal of (or
premium, if any, on) any Note at the Maturity thereof,
then the Company will, upon demand of the Trustee, pay to the Trustee for the
benefit of the Holders of such Notes, the whole amount then due and payable on
such Notes for principal (and premium, if any) and interest, and interest on any
overdue principal (and premium, if any) and, to the extent that payment of such
interest shall be legally enforceable, upon any overdue installment of interest,
at the rate borne by such Notes, and, in addition thereto, such further amount
as shall be sufficient to cover the costs and expenses of collection, including
the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel.
If the Company fails to pay such amounts forthwith upon such demand,
the Trustee, in its own name as trustee of an express trust, may institute a
judicial proceeding for the collection of the sums so due and unpaid, may
prosecute such proceeding to judgment or final decree and may enforce the same
against the Company or any Subsidiary Guarantor (in accordance with the
applicable Note Guarantee) or any other obligor upon such Notes and collect the
moneys adjudged or decreed to be payable in the manner provided by law out of
the property of the Company, any Subsidiary Guarantor or any other obligor upon
such Notes, wherever situated.
If an Event of Default occurs and is continuing, the Trustee may in its
discretion proceed to protect and enforce its rights and the rights of the
Holders under this Indenture or the Note Guarantees by such appropriate judicial
proceedings as the Trustee shall deem most effectual to protect and enforce any
such rights, including seeking recourse against any Subsidiary Guarantor,
whether for the specific enforcement of any covenant or agreement in this
Indenture or in aid of the exercise of any power granted herein, or to enforce
any other proper remedy, including, without limitation, seeking recourse against
any Subsidiary Guarantor.
SECTION 504. TRUSTEE MAY FILE PROOFS OF CLAIM.
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
judicial proceeding relative to the Company or any other obligor, including any
Subsidiary Guarantor, upon the Notes or the
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property of the Company or of such other obligor or their creditors, the Trustee
(irrespective of whether the principal of the Notes shall then be due and
payable as therein expressed or by declaration or otherwise and irrespective of
whether the Trustee shall have made any demand on the Company for the payment of
overdue principal, premium, if any, or interest) shall be entitled and
empowered, by intervention in such proceeding or otherwise,
(i) to file and prove a claim for the whole amount of principal (and
premium, if any) and interest owing and unpaid in respect of the Notes,
to take such other actions (including participating as a member, voting
or otherwise, of any official committee of creditors appointed in such
matter) and to file such other papers or documents as may be necessary
or advisable in order to have the claims of the Trustee (including any
claim for the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel) and of the Holders
allowed in such judicial proceeding, and
(ii) to collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
other similar official in any such judicial proceeding is hereby authorized by
each Holder to make such payments to the Trustee and, in the event that the
Trustee shall consent to the making of such payments directly to the Holders, to
pay to the Trustee any amount due it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 607.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Notes or
the rights of any Holder thereof or to authorize the Trustee to vote in respect
of the claim of any Holder in any such proceeding; PROVIDED, HOWEVER, that the
Trustee may, on behalf of such Holders, vote for the election of a trustee in
bankruptcy or other similar official.
SECTION 505. TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF NOTES.
All rights of action and claims under this Indenture, the Notes or the
Note Guarantees may be prosecuted and enforced by the Trustee without the
possession of any of the Notes or the production thereof in any proceeding
relating thereto, and any such proceeding instituted by the Trustee shall be
brought in its own name as trustee of an express trust, and any recovery of
judgment shall, after provision for the payment of the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel, be
for the ratable benefit of the Holders of the Notes in respect of which such
judgment has been recovered.
SECTION 506. APPLICATION OF MONEY COLLECTED.
Subject to Article Twelve, any money collected by the Trustee pursuant
to this Article shall be applied in the following order, at the date or dates
fixed by the Trustee and, in case of
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the distribution of such money on account of principal (or premium, if any) or
interest, upon presentation of the Notes and the notation thereon of the payment
if only partially paid and upon surrender thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee under Section 607;
SECOND: To the payment of the amounts then due and unpaid for principal
of (and premium, if any, on) and interest on the Notes in respect of which or
for the benefit of which such money has been collected, ratably, without
preference or priority of any kind, according to the amounts due and payable on
such Notes for principal (and premium, if any) and interest, respectively; and
THIRD: The balance, if any, to the Person or Persons entitled thereto,
including the Company or any other obligor on the Notes, as their interests may
appear or as a court of competent jurisdiction may direct; PROVIDED that all
sums due and owing to the Holders and the Trustee have been paid in full as
required by this Indenture.
SECTION 507. LIMITATION ON SUITS.
No Holder of any Note shall have any right to institute any proceeding,
judicial or otherwise, with respect to this Indenture, or for the appointment of
a receiver or trustee, or for any other remedy hereunder, unless
(1) such Holder has previously given written notice to the Trustee of a
continuing Event of Default;
(2) the Holders of not less than 25% in aggregate principal amount of
the Outstanding Notes shall have made a written request to the Trustee
to institute proceedings in respect of such Event of Default in its own
name as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee reasonable
indemnity against the costs, expenses and liabilities to be incurred in
compliance with such request;
(4) the Trustee for 30 days after its receipt of such notice, request
and offer of indemnity has failed to institute any such proceeding; and
(5) no direction inconsistent with such written request has been given
to the Trustee during such 30-day period by the Holders of a majority
in principal amount of the Outstanding Notes;
it being understood and intended that no one or more of such Holders shall have
any right in any manner whatever by virtue of, or by availing of, any provision
of this Indenture, any Note or any Note Guarantee to affect, disturb or
prejudice the rights of any other Holders, or to obtain or to seek to obtain
priority or preference over any other of such Holders or to enforce any right
under this Indenture, any Note or any Note Guarantee, except in the manner
herein provided and for the equal and ratable benefit of all Holders.
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SECTION 508. UNCONDITIONAL RIGHT OF HOLDERS TO RECEIVE PRINCIPAL,
PREMIUM AND INTEREST.
Notwithstanding any other provision in this Indenture, the Holder of
any Note shall have the right, which is absolute and unconditional, to receive
payment, as provided herein (including, if applicable, Article Eleven) and in
such Note of the principal of (and premium, if any, on) and (subject to Section
307) interest on, such Note on the respective Stated Maturities expressed in
such Note (or, in the case of redemption, on the Redemption Date) and to
institute suit for the enforcement of any such payment, and such rights shall
not be impaired without the consent of such Holder.
SECTION 509. RESTORATION OF RIGHTS AND REMEDIES.
If the Trustee or any Holder has instituted any proceeding to enforce
any right or remedy under this Indenture or any Note Guarantee and such
proceeding has been discontinued or abandoned for any reason, or has been
determined adversely to the Trustee or to such Holder, then and in every such
case, subject to any determination in such proceeding, the Company, any
Subsidiary Guarantor, any other obligor on the Notes, the Trustee and the
Holders of Notes shall be restored severally and respectively to their former
positions hereunder and thereafter all rights and remedies of the Trustee and
the Holders shall continue as though no such proceeding had been instituted.
SECTION 510. RIGHTS AND REMEDIES CUMULATIVE.
Except as otherwise provided with respect to the replacement or payment
of mutilated, destroyed, lost or stolen Notes in the last paragraph of Section
306, no right or remedy herein conferred upon or reserved to the Trustee or to
the Holders of Notes is intended to be exclusive of any other right or remedy,
and every right and remedy shall, to the extent permitted by law, be cumulative
and in addition to every other right and remedy given hereunder or now or
hereafter existing at law or in equity or otherwise. The assertion or employment
of any right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.
SECTION 511. DELAY OR OMISSION NOT WAIVER.
No delay or omission of the Trustee or of any Holder of any Note to
exercise any right or remedy accruing upon any Event of Default shall impair any
such right or remedy or constitute a waiver of any such Event of Default or an
acquiescence therein. Every right and remedy given by this Article or by law to
the Trustee or to the Holders may be exercised from time to time, and as often
as may be deemed expedient, by the Trustee or by the Holders, as the case may
be.
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SECTION 512. CONTROL BY HOLDERS.
The Holders of not less than a majority in aggregate principal amount
of the Outstanding Notes shall have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred on the Trustee, PROVIDED that
(1) such direction shall not be in conflict with any rule of law or
with this Indenture,
(2) subject to Section 315 of the Trust Indenture Act, the Trustee may
take any other action deemed proper by the Trustee which is not
inconsistent with such direction, and
(3) the Trustee need not take any action which might involve it in
personal liability or that the Trustee determines in good faith is
unjustly prejudicial to the Holders of Notes not consenting, it being
understood that, subject to Section 601, the Trustee shall have no duty
to ascertain whether or not such actions or forbearances are unjustly
prejudicial to such holders.
SECTION 513. WAIVER OF PAST DEFAULTS.
Subject to Sections 508, 902 and the last paragraph of Section 502, the
Holders of not less than a majority in aggregate principal amount of the
Outstanding Notes (including consents obtained in connection with a tender offer
or exchange offer for the Notes) may on behalf of the Holders of all the Notes
waive any past default hereunder and its consequences under this Indenture or
any Note Guarantee, except a default
(1) in respect of the payment of the principal of (or premium, if any,
on) or interest on any Note, or
(2) in respect of a covenant or provision hereof which under Article
Nine cannot be modified or amended without the consent of the Holder of
each Outstanding Note affected.
Upon any such waiver, any such default shall cease to exist, and any
Event of Default arising therefrom shall be deemed to have been cured, for every
purpose of this Indenture and the Note Guarantees; but no such waiver shall
extend to any subsequent or other Default or Event of Default or impair any
right consequent thereon.
SECTION 514. WAIVER OF STAY OR EXTENSION LAWS.
Each of the Company, the Subsidiary Guarantors and any other obligor on
the Notes covenants (to the extent that it may lawfully do so) that it will not
at any time insist upon, or plead, or in any manner whatsoever claim or take the
benefit or advantage of, any stay or extension law wherever enacted, now or at
any time hereafter in force, which would prohibit
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or forgive the Company, any Subsidiary Guarantor or any such obligor from paying
all or any portion of the principal of, premium, if any, or interest on the
Notes contemplated herein or in the Notes or which may affect the covenants or
the performance of this Indenture; and each of the Company, the Subsidiary
Guarantors and any other obligor on the Notes (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such law
and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Trustee, but will suffer and permit the execution of
every such power as though no such law had been enacted.
ARTICLE SIX
THE TRUSTEE
SECTION 601. CERTAIN DUTIES AND RESPONSIBILITIES.
(a) Except during the continuance of a Default or an Event of Default,
(1) the Trustee undertakes to perform such duties and only
such duties as are specifically set forth in this Indenture, and no
implied covenants or obligations shall be read into this Indenture
against the Trustee; and
(2) in the absence of bad faith or willful misconduct on its
part, the Trustee may conclusively rely, as to the truth of the
statements and the correctness of the opinions expressed therein, upon
certificates or opinions furnished to the Trustee and conforming to the
requirements of this Indenture; but in the case of any such
certificates or opinions, the Trustee shall be under a duty to examine
the same to determine whether or not they conform to the requirements
of this Indenture, but not to verify the contents thereof.
(b) In case a Default or an Event of Default has occurred and is
continuing of which a Responsible Officer of the Trustee has actual
knowledge or of which written notice of such Default or Event of
Default shall have been given to the Trustee by the Company, any other
obligor of the Notes or by any Holder, the Trustee shall exercise such
of the rights and powers vested in it by this Indenture, and use the
same degree of care and skill in their exercise, as a prudent Person
would exercise or use under the circumstances in the conduct of such
Person's own affairs.
(c) No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent
failure to act, or its own willful misconduct, EXCEPT that
(1) this paragraph (c) shall not be construed to limit the
effect of paragraph (a) of this Section;
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(2) the Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Officer, unless it shall be proved
that the Trustee was negligent in ascertaining the pertinent facts;
(3) the Trustee shall not be liable with respect to any action
taken or omitted to be taken by it in good faith in accordance with the
direction of the Holders of a majority in aggregate principal amount of
the Outstanding Notes relating to the time, method and place of
conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred upon the Trustee, under this
Indenture; and
(4) no provision of this Indenture shall require the Trustee
to expend or risk its own funds or otherwise incur any financial
liability in the performance of any of its duties hereunder, or in the
exercise of any of its rights or powers, if it shall have reasonable
grounds for believing that repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to
it.
(d) Whether or not therein expressly so provided, every provision of
this Indenture relating to the conduct or affecting the liability of or
affording protection to the Trustee shall be subject to the provisions
of this Section.
SECTION 602. NOTICE OF DEFAULTS.
Within ten days after the earlier of receipt from the Company of notice
of the occurrence of any Default or Event of Default hereunder or the date when
such Default or Event of Default becomes known to the Trustee, the Trustee shall
transmit, in the manner and to the extent provided in TIA Section 313(c), notice
of such Default or Event of Default hereunder known to the Trustee, unless such
Default or Event of Default shall have been cured or waived; PROVIDED, HOWEVER,
that, except in the case of a Default or Event of Default in the payment of the
principal of (or premium, if any, on) or interest on any Note, the Trustee shall
be protected in withholding such notice if and so long as the board of
directors, the executive committee or a trust committee of directors and/or
Responsible Officers of the Trustee in good faith determine that the withholding
of such notice is in the interest of the Holders.
SECTION 603. CERTAIN RIGHTS OF TRUSTEE.
Subject to the provisions of TIA Sections 315(a) through 315(d)
(determined as if the TIA were applicable to this Indenture at all times):
(1) the Trustee may rely and shall be protected in acting or refraining
from acting upon any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond,
debenture, note, other evidence of indebtedness or other paper or
document believed by it to be genuine and to have been signed or
presented by the proper party or parties;
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(2) any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Company Request or Company Order and any
resolution of the Board of Directors may be sufficiently evidenced by a
Board Resolution;
(3) whenever in the administration of this Indenture the Trustee shall
deem it desirable that a matter be proved or established prior to
taking, suffering or omitting any action hereunder, the Trustee (unless
other evidence be herein specifically prescribed) may, in the absence
of bad faith on its part, request and rely upon an Officers'
Certificate;
(4) before the Trustee acts or refrains from acting, the Trustee may
consult with counsel of its selection and the written advice of such
counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken, suffered
or omitted by it hereunder in good faith and in reliance thereon;
(5) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or
direction of any of the Holders of Notes pursuant to this Indenture,
unless such Holders shall have offered to the Trustee reasonable
security or indemnity against the costs, expenses and liabilities which
might be incurred by it in compliance with such request or direction;
(6) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent,
order, bond, debenture, note, other evidence of indebtedness or other
paper or document, but the Trustee, in its discretion, may make such
further inquiry or investigation into such facts or matters as it may
see fit, and, if the Trustee shall determine to make such further
inquiry or investigation, it shall be entitled to examine the books,
records and premises of the Company, personally or by agent or
attorney;
(7) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct
or negligence on the part of any agent or attorney appointed with due
care by it hereunder;
(8) the Trustee shall not be liable for any action taken, suffered or
omitted by it in good faith and believed by it to be authorized or
within the discretion or rights or powers conferred upon it by this
Indenture;
(9) the Trustee shall not be required to give any bond or surety in
respect of the performance of its powers and duties hereunder;
(10) the permissive rights of the Trustee to do things enumerated in
this Indenture shall not be construed as a duty; and
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(11) except for a default under Sections 501(1) or (2) hereof, or any
other event of which the Trustee has "actual knowledge" and which
event, with the giving of notice or the passage of time or both, would
constitute an Event of Default under this Indenture, the Trustee shall
not be deemed to have notice of any default or Event of Default unless
specifically notified in writing of such event by the Company or the
Holders of not less than 25% in aggregate principal amount of the Notes
then outstanding; as used herein, the term "actual knowledge" means the
actual fact or statement of knowing, without any duty to make any
investigation with regard thereto.
The Trustee shall not be required to expend or risk its own funds or
otherwise incur any financial liability in the performance of any of its duties
hereunder, or in the exercise of any of its rights or powers if it shall have
reasonable grounds for believing that repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to it.
SECTION 604. TRUSTEE NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF NOTES.
The recitals contained herein and in the Notes, except for the
Trustee's certificates of authentication, shall be taken as the statements of
the Company, and neither the Trustee nor any Authenticating Agent assumes any
responsibility for their correctness. The Trustee makes no representations as to
the validity or sufficiency of this Indenture or of the Notes, except that the
Trustee represents that it is duly authorized to execute and deliver this
Indenture, authenticate the Notes and perform its obligations hereunder and that
the statements made by it in its Statement of Eligibility on Form T-1 supplied
to the Company are true and accurate, subject to the qualifications set forth
therein. Neither the Trustee nor any Authenticating Agent shall be accountable
for the use or application by the Company of Notes or the proceeds thereof.
SECTION 605. MAY HOLD NOTES.
The Trustee, any Authenticating Agent, any Paying Agent, any Note
Registrar or any other agent of the Company or of the Trustee, in its individual
or any other capacity, may become the owner or pledgee of Notes and, subject to
TIA Sections 310(b) and 311, may otherwise deal with the Company with the same
rights it would have if it were not Trustee, Authenticating Agent, Paying Agent,
Note Registrar or such other agent.
SECTION 606. MONEY HELD IN TRUST.
All money received by the Trustee shall, until used or applied as
herein provided, be held in trust hereunder for the purposes for which they were
received. Money held by the Trustee in trust hereunder need not be segregated
from other funds except to the extent required by law. The Trustee shall be
under no liability for interest on any money received by it hereunder except as
otherwise agreed in writing with the Company.
SECTION 607. COMPENSATION AND REIMBURSEMENT.
The Company agrees:
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(1) to pay to the Trustee from time to time such compensation as shall
be agreed in writing between the Company and the Trustee for all
services rendered by it hereunder (which compensation shall not be
limited by any provision of law in regard to the compensation of a
trustee of an express trust);
(2) except as otherwise expressly provided herein, to reimburse the
Trustee upon its request for all reasonable expenses, disbursements and
advances incurred or made by the Trustee in accordance with any
provision of this Indenture (including the reasonable compensation and
the expenses and disbursements of its agents and counsel and costs and
expenses of collection), except any such expense, disbursement or
advance as may be attributable to its negligence or bad faith; and
(3) to indemnify each of the Trustee or any predecessor Trustee and its
agents for, and to hold it harmless against, any and all loss,
liability, damage, claim or expense, including taxes (other than taxes
based on the income of the Trustee) incurred without negligence or bad
faith on its part, arising out of or in connection with the acceptance
or administration of the trust or trusts hereunder, including the costs
and expenses of defending itself against, or investigating, any claim
or liability in connection with the exercise or performance of any of
its powers or duties hereunder.
The obligations of the Company under this Section to compensate the
Trustee, to pay or reimburse the Trustee for expenses, disbursements and
advances and to indemnify and hold harmless the Trustee shall constitute
additional indebtedness hereunder and shall survive the satisfaction and
discharge of this Indenture. As security for the performance of such obligations
of the Company, the Trustee shall have a claim prior to the Notes upon all
property and funds held or collected by the Trustee as such, except funds held
in trust for the payment of principal of (and premium, if any, on) or interest
on particular Notes.
When the Trustee incurs expenses or renders services in connection with
an Event of Default specified in Section 501(8) or Section 501(9), the expenses
(including the reasonable charges and expenses of its counsel) of and the
compensation of the Trustee for the services are intended to constitute expenses
of administration under any applicable Federal or state bankruptcy, insolvency
or other similar law.
The provisions of this Section shall survive the termination of this
Indenture.
SECTION 608. CORPORATE TRUSTEE REQUIRED; ELIGIBILITY.
There shall at all times be a Trustee hereunder which shall be eligible
to act as Trustee under TIA Section 310(a)(1) and which shall have an office in
The City of New York, and shall have a combined capital and surplus of at least
$50,000,000. If the Trustee does not have an office in The City of New York, the
Trustee may appoint an agent in The City of New York reasonably acceptable to
the Company to conduct any activities which the Trustee may be required under
this Indenture to conduct in The City of New York. If such corporation publishes
reports of condition at least annually, pursuant to law or to the requirements
of
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federal, state, territorial or District of Columbia supervising or examining
authority, then for the purposes of this Section, the combined capital and
surplus of such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published. If at
any time the Trustee shall cease to be eligible in accordance with the
provisions of this Section, it shall resign immediately in the manner and with
the effect hereinafter specified in this Article.
SECTION 609. RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR.
(a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until
the acceptance of appointment by the successor Trustee in accordance
with the applicable requirements of Section 610.
(b) The Trustee may resign at any time with respect to the Notes by
giving written notice thereof to the Company. Upon receiving such
notice of resignation, the Company shall promptly appoint a successor
trustee by written instrument executed by authority of the Board of
Directors, a copy of which shall be delivered to the resigning Trustee
and a copy to the successor trustee. If the instrument of acceptance by
a successor Trustee required by Section 610 shall not have been
delivered to the Trustee within 30 days after the giving of such notice
of resignation, the resigning Trustee may petition any court of
competent jurisdiction for the appointment of a successor Trustee with
respect to the Notes.
(c) The Trustee may be removed at any time with respect to the Notes by
Act of the Holders of not less than a majority in principal amount of
the Outstanding Notes, delivered to the Trustee and to the Company. If
the instrument of acceptance by a successor Trustee required by Section
610 shall not have been delivered to the Trustee within 30 days after
the giving of such notice of removal, the Trustee being removed may
petition any court of competent jurisdiction for the appointment of a
successor Trustee with respect to the Notes.
(d) If at any time:
(1) the Trustee shall fail to comply with the provisions of
TIA Section 310(b) after written request therefor by the Company or by
any Holder who has been a bona fide Holder of a Note for at least six
months, or
(2) the Trustee shall cease to be eligible under Section 608 and shall
fail to resign after written request therefor by the Company or by any
Holder who has been a BONA FIDE Holder of a Note for at least six
months, or
(3) the Trustee shall become incapable of acting or shall be adjudged a
bankrupt or insolvent or a Custodian of the Trustee or of its property
shall be appointed or any public officer shall take charge or control
of the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation,
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then, in any such case, (i) the Company, by a Board Resolution, may remove the
Trustee with respect to all Notes, or (ii) subject to TIA Section 315(e), any
Holder who has been a BONA FIDE Holder of a Note for at least six months may, on
behalf of himself and all others similarly situated, petition any court of
competent jurisdiction for the removal of the Trustee with respect to all Notes
and the appointment of a successor Trustee or Trustees.
(e) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for any
cause, with respect to the Notes, the Company, by a Board Resolution,
shall promptly appoint a successor Trustee. If, within one year after
such resignation, removal or incapability, or the occurrence of such
vacancy, a successor Trustee with respect to the Notes shall be
appointed by Act of the Holders of a majority in aggregate principal
amount of the Outstanding Notes delivered to the Company and the
retiring Trustee, the successor Trustee so appointed shall, forthwith
upon its acceptance of such appointment, become the successor Trustee
with respect to the Notes and to that extent supersede the successor
Trustee appointed by the Company. If no successor Trustee with respect
to the Notes shall have been so appointed by the Company or the Holders
and accepted appointment in the manner hereinafter provided, any Holder
who has been a BONA FIDE Holder of a Note for at least six months may,
on behalf of himself and all others similarly situated, petition any
court of competent jurisdiction for the appointment of a successor
Trustee with respect to the Notes.
(f) The Company shall give notice of each resignation and each removal
of the Trustee with respect to the Notes and each appointment of a
successor Trustee with respect to the Notes to the Holders of Notes in
the manner provided for in Section 106. Each notice shall include the
name of the successor Trustee with respect to the Notes and the address
of its Corporate Trust Office.
SECTION 610. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR.
(a) Each successor Trustee appointed hereunder shall execute,
acknowledge and deliver to the Company and to the retiring Trustee an
instrument accepting such appointment, and thereupon the resignation or
removal of the retiring Trustee shall become effective and such
successor Trustee, without any further act, deed or conveyance, shall
become vested with all the rights, powers, trusts and duties of the
retiring Trustee; but, on the request of the Company or the successor
Trustee, such retiring Trustee shall, upon payment of its charges,
execute and deliver an instrument transferring to such successor
Trustee all the rights, powers and trusts of the retiring Trustee and
shall duly assign, transfer and deliver to such successor Trustee all
property and money held by such retiring Trustee hereunder.
(b) Upon request of any such successor Trustee, the Company shall
execute any and all instruments for more fully and certainly vesting in
and confirming to such successor Trustee all rights, powers and trusts
referred to in paragraph (a) of this Section.
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(c) No successor Trustee shall accept its appointment unless at the
time of such acceptance, such successor Trustee shall be qualified and
eligible under this Article.
SECTION 611. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO
BUSINESS.
Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all the corporate trust business
of the Trustee, shall be the successor of the Trustee hereunder, provided such
corporation shall be otherwise qualified and eligible under this Article,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto. In case any Notes shall have been authenticated, but
not delivered, by the Trustee then in office, any successor by merger,
conversion or consolidation to such authenticating Trustee may adopt such
authentication and deliver the Notes so authenticated with the same effect as if
such successor Trustee had itself authenticated such Notes. In case at that time
any of the Notes shall not have been authenticated, any successor Trustee may
authenticate such Notes either in the name of any predecessor hereunder or in
the name of the successor Trustee. In all such cases such certificates shall
have the full force and effect which this Indenture provides that the
certificate of authentication of the Trustee shall have; PROVIDED, HOWEVER, that
the right to adopt the certificate of authentication of any predecessor Trustee
or to authenticate Notes in the name of any predecessor Trustee shall apply only
to its successor or successors by merger, conversion or consolidation.
SECTION 612. APPOINTMENT OF AUTHENTICATING AGENT.
At any time when any of the Notes remain Outstanding, the Trustee may
appoint an Authenticating Agent or Agents with respect to the Notes which shall
be authorized to act on behalf of the Trustee to authenticate Notes and the
Trustee shall give written notice of such appointment to all Holders of Notes
with respect to which such Authenticating Agent will serve, in the manner
provided for in Section 106. Notes so authenticated shall be entitled to the
benefits of this Indenture and shall be valid and obligatory for all purposes as
if authenticated by the Trustee hereunder. Any such appointment shall be
evidenced by an instrument in writing signed by a Responsible Officer of the
Trustee, and a copy of such instrument shall be promptly furnished to the
Company. Wherever reference is made in this Indenture to the authentication and
delivery of Notes by the Trustee or the Trustee's certificate of authentication,
such reference shall be deemed to include authentication and delivery on behalf
of the Trustee by an Authenticating Agent and a certificate of authentication
executed on behalf of the Trustee by an Authenticating Agent. Each
Authenticating Agent shall be acceptable to the Company and shall at all times
be a corporation organized and doing business under the laws of the United
States of America, any state thereof or the District of Columbia, authorized
under such laws to act as Authenticating Agent, having a combined capital and
surplus of not less than $50,000,000 and subject to supervision or examination
by federal or state authority. If such corporation publishes reports of
condition at least annually, pursuant to law or to the requirements of said
supervising or examining authority, then for the purposes of this Section, the
combined capital and surplus of such corporation shall be deemed to be its
combined capital and surplus as set forth in its most recent report of condition
so published. If
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at any time an Authenticating Agent shall cease to be eligible in
accordance with the provisions of this Section, it shall resign immediately in
the manner and with the effect specified in this Section.
Any corporation into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which such Authenticating Agent
shall be a party, or any corporation succeeding to the corporate agency or
corporate trust business of an Authenticating Agent, shall continue to be an
Authenticating Agent, provided such corporation shall be otherwise eligible
under this Section, without the execution or filing of any paper or any further
act on the part of the Trustee or the Authenticating Agent.
An Authenticating Agent may resign at any time by giving written notice
thereof to the Trustee and to the Company. The Trustee may at any time terminate
the agency of an Authenticating Agent by giving written notice thereof to such
Authenticating Agent and to the Company. Upon receiving such a notice of
resignation or upon such a termination, or in case at any time such
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, the Trustee may appoint a successor Authenticating
Agent which shall be acceptable to the Company and shall give written notice of
such appointment to all Holders of Notes, in the manner provided for in Section
106. Any successor Authenticating Agent upon acceptance of its appointment
hereunder shall become vested with all the rights, powers and duties of its
predecessor hereunder, with like effect as if originally named as an
Authenticating Agent. No successor Authenticating Agent shall be appointed
unless eligible under the provisions of this Section.
The Company agrees to pay to each Authenticating Agent from time to
time such compensation for its services under this Section as shall be agreed in
writing between the Company and such Authenticating Agent.
If an appointment is made pursuant to this Section, the Notes may have
endorsed thereon, in addition to the Trustee's certificate of authentication, an
alternate certificate of authentication in the following form:
This is one of the Notes designated therein referred to in the
within-mentioned Indenture.
STATE STREET BANK AND TRUST COMPANY, as Trustee
By:______________________________________________
as Authenticating Agent
By:______________________________________________
Authorized Officer
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ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION 701. COMPANY TO FURNISH TRUSTEE NAMES AND ADDRESSES.
The Company will furnish or cause to be furnished to the Trustee
(a) semiannually, not more than 10 days after each Regular Record Date,
a list, in such form as the Trustee may reasonably require, of the
names and addresses of the Holders as of such Regular Record Date; and
(b) at such other times as the Trustee may reasonably request in
writing, within 30 days after receipt by the Company of any such
request, a list of similar form and content to that in Subsection (a)
hereof as of a date not more than 15 days prior to the time such list
is furnished;
PROVIDED, HOWEVER, that if and so long as the Trustee shall be the Note
Registrar, no such list need be furnished.
SECTION 702. DISCLOSURE OF NAMES AND ADDRESSES OF HOLDERS.
Every Holder of Notes, by receiving and holding the same, agrees with
the Company and the Trustee that none of the Company or the Trustee or any agent
of either of them shall be held accountable by reason of the disclosure of any
such information as to the names and addresses of the Holders in accordance with
TIA Section 312, regardless of the source from which such information was
derived, and that the Trustee shall not be held accountable by reason of mailing
any material pursuant to a request made under TIA Section 312(b).
SECTION 703. REPORTS BY TRUSTEE.
Within 60 days after May 15 of each year commencing with the first May
15 after the first issuance of Notes pursuant to this Indenture, the Trustee
shall transmit to the Holders of Notes (with a copy to the Company at the Place
of Payment), in the manner and to the extent provided in TIA Section 313(c), a
brief report dated as of such May 15 if required by TIA Section 313(a).
ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
SECTION 801. COMPANY MAY CONSOLIDATE, ETC., ONLY ON CERTAIN TERMS.
The Company will not, in a single transaction or through a series of
transactions, consolidate with or merge with or into any other Person or sell,
assign, convey, transfer, lease
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or otherwise dispose of all or substantially all of its properties and assets to
any other Person or Persons or permit any of its Restricted Subsidiaries to
enter into any such transaction or series of transactions if such transaction or
series of transactions, in the aggregate, would result in a sale, assignment,
conveyance, transfer, lease or other disposition of all or substantially all of
the properties and assets of the Company and its Restricted Subsidiaries on a
consolidated basis to any other Person or Persons, unless at the time and
immediately after giving effect thereto:
(a) either (1) the Company shall be the continuing corporation or (2)
the Person (if other than the Company) formed by such consolidation or
into which the Company or such Restricted Subsidiary is merged or the
Person that acquires by sale, assignment, conveyance, transfer, lease
or disposition all or substantially all of the properties and assets of
the Company and its Restricted Subsidiaries on a consolidated basis
(the "Surviving Entity") (i) will be a corporation duly organized and
validly existing under the laws of the United States of America, any
state thereof or the District of Columbia and (ii) will expressly
assume, by an indenture supplemental hereto, executed and delivered to
the Trustees, in form reasonably satisfactory to the Trustee, the
Company's obligation for the due and punctual payment of the principal
of (and premium, if any) and interest on all the Notes and the
performance and observance of every covenant of this Indenture on the
part of the Company to be performed or observed;
(b) immediately before and immediately after giving effect to such
transaction or series of transactions on a PRO FORMA basis (and
treating any obligation of the Company or any Restricted Subsidiary
incurred in connection with or as a result of such transaction or
series of transactions as having been incurred at the time of such
transaction), no Default or Event of Default shall have occurred and be
continuing;
(c) immediately after giving effect to such transaction or series of
transactions on a PRO FORMA basis (on the assumption that the
transaction or series of transactions occurred on the first day of the
four-quarter period immediately prior to the consummation of such
transaction or series of transactions with the appropriate adjustments
with respect to the transaction or series of transactions being
included in such PRO FORMA calculation), the Company (or the Surviving
Entity if the Company is not the continuing obligor under this
Indenture) could incur at least $1.00 of additional Indebtedness (other
than Permitted Indebtedness) pursuant to Section 1008;
(d) each Subsidiary Guarantor, if any, unless it is the other party to
the transactions described above, shall have by supplemental indenture
confirmed that its Note Guarantee will apply to such Person's
obligations hereunder and under the Notes;
(e) if any of the property or assets of the Company or any of its
Restricted Subsidiaries would thereupon become subject to any Lien, the
provisions of Section 1012 are complied with; and
(f) the Company or the Surviving Entity shall have delivered to the
Trustee, in form and substance reasonably satisfactory to the Trustee,
an Officers' Certificate and
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an Opinion of Counsel, each stating that such consolidation, merger,
sale, assignment, conveyance, transfer, lease or other disposition, and
if a supplemental indenture is required in connection with such
transaction, such supplemental indenture, comply with this Section 801
and that all conditions precedent herein provided for relating to such
transaction have been satisfied.
SECTION 802. SUBSIDIARY GUARANTORS MAY CONSOLIDATE, ETC., ONLY
ON CERTAIN TERMS.
Each Subsidiary Guarantor, if any (other than any Subsidiary
whose Note Guarantee is being released pursuant to the provisions of
Section 1309 as a result of such transaction), will not, and the
Company will not permit a Subsidiary Guarantor to, in a single
transaction or through a series of related transactions, merge or
consolidate with or into any other corporation or other entity (other
than the Company or any Subsidiary Guarantor), or sell, assign, convey,
transfer, lease or otherwise dispose of its properties and assets on a
consolidated basis substantially as an entirety to any entity (other
than the Company or any Subsidiary Guarantor) unless at the time and
after giving effect thereto:
(a) either (1) such Subsidiary Guarantor shall be the continuing
corporation or (2) the Person (if other than such Subsidiary Guarantor)
formed by such consolidation or into which such Subsidiary Guarantor is
merged or the entity which acquires by sale, assignment, conveyance,
transfer, lease or other disposition of all or substantially all of the
properties and assets of such Subsidiary Guarantor, as the case may be,
shall be a corporation organized and validly existing under the laws of
the United States, any state thereof or the District of Columbia, and
shall expressly assume by an indenture supplemental hereto, executed
and delivered to the Trustee, in form satisfactory to the Trustee, all
obligations of such Subsidiary Guarantor under the Notes and this
Indenture;
(b) immediately before and immediately after giving effect to such
transaction or series of transactions on a PRO FORMA basis (and
treating any obligation of the Company or such Subsidiary Guarantor
incurred in connection with or as a result of such transaction or
series of transactions as having been incurred at the time of such
transaction), no Default or Event of Default shall have occurred and be
continuing; and
(c) such Subsidiary Guarantor or such Person shall have delivered to
the Trustee an Officers' Certificate and an Opinion of Counsel, each
stating that such consolidation, merger, sale, assignment, conveyance,
transfer, lease or disposition and, if a supplemental indenture is
required in connection with such transaction, such supplemental
indenture comply with this Section 802 and that all conditions
precedent herein provided for relating to such transaction have been
satisfied.
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SECTION 803. SUCCESSOR SUBSTITUTED.
Upon any consolidation or merger, or any sale, assignment, conveyance,
transfer, lease or disposition of all or substantially all of the properties and
assets of the Company or any Subsidiary Guarantor in accordance with Sections
801 and 802, the successor Person formed by such consolidation or into which the
Company or such Subsidiary Guarantor, as the case may be, is merged or the
successor Person to which such sale, assignment, conveyance, transfer, lease or
disposition is made shall succeed to, and be substituted for, and may exercise
every right and power of, the Company or such Subsidiary Guarantor, as the case
may be, under this Indenture and/or the Note Guarantees, as the case may be,
with the same effect as if such successor had been named as the Company or such
Subsidiary Guarantor, as the case may be, herein and/or the Note Guarantees, as
the case may be. When a successor assumes all the obligations of its predecessor
hereunder, the Notes or a Note Guarantee, as the case may be, the predecessor
shall be released from all obligations; PROVIDED that in the case of a transfer
by lease, the predecessor shall not be released from the payment of principal
and interest or other obligations on the Notes or a Note Guarantee, as the case
may be.
ARTICLE NINE
SUPPLEMENTAL INDENTURES
SECTION 901. SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF HOLDERS.
Without the consent of any Holders, the Company or any Subsidiary
Guarantor, when authorized by or pursuant to a Board Resolution, and the
Trustee, at any time and from time to time, may enter into one or more
indentures supplemental hereto, in form satisfactory to the Trustee, for any of
the following purposes:
(1) to evidence the succession of another Person to the Company, a
Subsidiary Guarantor or any other obligor on the Notes, and the
assumption by any such successor of the covenants of the Company or
such obligor or Subsidiary Guarantor contained herein and in the Notes
and in any Note Guarantee in accordance with Article Eight;
(2) to add to the covenants of the Company, any Subsidiary Guarantor or
any other obligor upon the Notes for the benefit of the Holders or to
surrender any right or power conferred upon the Company, or any
Subsidiary Guarantor or any other obligor on the Notes, as applicable,
herein, in the Notes or in any Note Guarantee;
(3) to cure any ambiguity, or to correct or supplement any provision
herein, in the Notes or in any Note Guarantee which may be defective or
inconsistent with any other provision herein, in the Notes or in any
Note Guarantee or to make any other provisions with respect to matters
or questions arising under this Indenture, the Notes or any Note
Guarantee; PROVIDED that, in each case, such provisions shall not
adversely affect the interests of the Holders;
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(4) to comply with the requirements of the Commission in order to
effect or maintain the qualification of this Indenture under the Trust
Indenture Act;
(5) to add a Subsidiary Guarantor of the Notes under this Indenture;
(6) to evidence and provide for the acceptance of the appointment of a
successor Trustee under this Indenture; or
(7) to mortgage, pledge, hypothecate or grant a security interest in
favor of the Trustee for the benefit of the Holders as additional
security for the payment and performance of the Company's and any
Subsidiary Guarantor's obligations under this Indenture, in any
property, or assets, including any of which are required to be
mortgaged, pledged or hypothecated, or in which a security interest is
required to be granted to the Trustee pursuant to this Indenture or
otherwise.
SECTION 902. SUPPLEMENTAL INDENTURES WITH CONSENT OF HOLDERS.
With the consent of the Holders of not less than a majority in
principal amount of all Outstanding Notes that are affected thereby, by Act of
said Holders delivered to the Company, the Subsidiary Guarantors and the
Trustee, the Company and the Subsidiary Guarantors, when authorized by or
pursuant to their respective Board Resolutions, and the Trustee may enter into
an indenture or indentures supplemental hereto for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
this Indenture or of modifying in any manner the rights of the Holders of Notes
under this Indenture; PROVIDED, HOWEVER, that no such supplemental indenture
shall, without the consent of the Holder of each Outstanding Note affected
thereby (in the case of clause (8) below, Holders of all Notes other than
Exchange Notes),
(1) change the Stated Maturity of the principal of, or any installment
of interest on, any Note, or reduce the principal amount thereof or the
rate of interest thereon or any premium payable upon the redemption
thereof, or change the coin or currency in which the principal of any
Note or any premium or the interest thereon is payable, or impair the
right to institute suit for the enforcement of any such payment after
the Stated Maturity thereof (or, in the case of redemption, on or after
the Redemption Date);
(2) amend, change or modify any of the provisions of Section 1013 or
Section 1014 including any definitions relating thereto in any manner
materially adverse to the Holders;
(3) reduce the percentage in principal amount of Outstanding Notes, the
consent of whose Holders is required for any such supplemental
indenture or the consent of whose Holders is required for any waiver of
compliance with certain provisions of this Indenture or certain
defaults hereunder and their consequences provided for in this
Indenture;
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(4) modify any provisions of this Section, Section 1021 or Section 513,
except to increase the percentage in principal amount of the
Outstanding Notes required to take any of the actions described therein
or to provide that certain additional provisions of this Indenture
cannot be modified or waived without the consent of the Holder of each
Outstanding Note affected thereby;
(5) except as otherwise permitted under Article Eight, consent to the
assignment or transfer by the Company or any Subsidiary Guarantor of
any of their rights or obligations under this Indenture;
(6) amend or modify any of the provisions of Article Thirteen in any
manner adverse to the Holders;
(7) modify any of the provisions of this Indenture relating to the
subordination of the Notes in a manner adverse to the Holders; or
(8) modify any of the provisions of this Indenture relating to the
transfer or exchange of the Carfel Note.
SECTION 903. EXECUTION OF SUPPLEMENTAL INDENTURES.
In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article or the modifications thereby of
the trusts created by this Indenture, the Trustee shall be entitled to receive,
and shall be fully protected in relying upon, an Opinion of Counsel stating that
the execution of such supplemental indenture is authorized or permitted by this
Indenture. The Trustee may, but shall not be obligated to, enter into any such
supplemental indenture which affects the Trustee's own rights, duties or
immunities under this Indenture or otherwise.
SECTION 904. EFFECT OF SUPPLEMENTAL INDENTURES.
Upon the execution of any supplemental indenture under this Article,
this Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every Holder
of Notes theretofore or thereafter authenticated and delivered hereunder shall
be bound thereby.
SECTION 905. CONFORMITY WITH TRUST INDENTURE ACT.
Every supplemental indenture executed pursuant to this Article shall
conform to the requirements of the Trust Indenture Act as then in effect.
SECTION 906. REFERENCE IN NOTES TO SUPPLEMENTAL INDENTURES.
Notes authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and shall if required by
the Trustee, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the
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Company shall so determine, new Notes so modified as to conform, in the opinion
of the Trustee and the Company, to any such supplemental indenture may be
prepared and executed by the Company and authenticated and delivered by the
Trustee in exchange for Outstanding Notes.
SECTION 907. NOTICE OF SUPPLEMENTAL INDENTURES.
Promptly after the execution by the Company, any Subsidiary Guarantor
and the Trustee of any supplemental indenture pursuant to the provisions of
Section 902, the Company shall give notice thereof to the Holders of each
Outstanding Note affected, in the manner provided for in Section 106, setting
forth in general terms the substance of such supplemental indenture.
SECTION 908. EFFECT ON SENIOR INDEBTEDNESS.
No supplemental indenture shall adversely affect the rights of the
holders of Senior Indebtedness under Article Twelve of this Indenture without
the consent of such holders affected thereby.
ARTICLE TEN
COVENANTS
SECTION 1001. PAYMENT OF PRINCIPAL, PREMIUM, IF ANY, AND INTEREST.
The Company covenants and agrees for the benefit of the Holders of
Notes that it will duly and punctually pay the principal of (and premium, if
any, on) and interest on the Notes in accordance with the terms of the Notes and
this Indenture.
SECTION 1002. MAINTENANCE OF OFFICE OR AGENCY.
The Company will maintain in The City of New York an office or agency
where Notes may be presented or surrendered for payment (the "Place of
Payment"), where Notes may be surrendered for registration of transfer or
exchange and where notices and demands to or upon the Company in respect of the
Notes and this Indenture may be served. The Company hereby designates the
Corporate Trust Office as the Place of Payment.
The Company will give prompt written notice to the Trustee of the
location, and any change in the location, of the Place of Payment. If at any
time the Company shall fail to maintain any such required office or agency or
shall fail to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the Corporate Trust
Office of the Trustee, and the Company hereby appoints the Trustee as its agent
to receive such respective presentations, surrenders, notices and demands.
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The Company may also from time to time designate one or more other
offices or agencies where the Notes may be presented or surrendered for any or
all such purposes and may from time to time rescind any such designation;
PROVIDED, HOWEVER, that no such designation or rescission shall in any manner
relieve the Company of its obligation to maintain an office or agency in
accordance with the requirements set forth above for Notes for such purposes.
The Company will give prompt written notice to the Trustee of any such
designation or rescission and of any change in the location of any such other
office or agency.
SECTION 1003. MONEY FOR NOTES PAYMENTS TO BE HELD IN TRUST.
If the Company shall at any time act as its own Paying Agent with
respect to the Notes, it will, on or before each due date of the principal of
(and premium, if any) or interest on any of the Notes, segregate and hold in
trust for the benefit of the Persons entitled thereto a sum sufficient to pay
the principal (and premium, if any) or interest so becoming due until such sums
shall be paid to such Persons or otherwise disposed of as herein provided and
will promptly notify the Trustee of its action or failure so to act.
Whenever the Company shall have one or more Paying Agents for the
Notes, it will, prior to or on each due date of the principal of (and premium,
if any, on) or interest on any Notes, deposit with a Paying Agent a sum in same
day funds (or New York Clearing House funds if such deposit is made prior to the
date on which such deposit is required to be made) sufficient to pay the
principal (and premium, if any) or interest so becoming due, such sum to be held
in trust for the benefit of the Persons entitled to such principal, premium or
interest, and (unless such Paying Agent is the Trustee) the Company will
promptly notify the Trustee of its action or failure so to act.
The Company will cause each Paying Agent (other than the Trustee) to
execute and deliver to the Trustee an instrument in which such Paying Agent
shall agree with the Trustee, subject to the provisions of this Section, that
such Paying Agent will:
(1) hold all sums held by it for the payment of the principal of (and
premium, if any) and interest on the Notes in trust for the benefit of
the Persons entitled thereto until such sums shall be paid to such
Persons or otherwise disposed of as herein provided;
(2) give the Trustee notice of any default by the Company (or any other
obligor upon the Notes) in the making of any payment of principal of
(and premium, if any) or interest on the Notes; and
(3) at any time during the continuance of any such default, upon the
written request of the Trustee, forthwith pay to the Trustee all sums
so held in trust by such Paying Agent.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held in
trust by the Company or such Paying
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Agent, such sums to be held by the Trustee upon the same trusts as those upon
which sums were held by the Company or such Paying Agent; and, upon such payment
by any Paying Agent to the Trustee, such Paying Agent shall be released from all
further liability with respect to such sums.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of (and premium, if
any) or interest on any Note and remaining unclaimed for two years after such
principal (and premium, if any) or interest has become due and payable shall be
paid to the Company on Company Request, or (if then held by the Company) shall
be discharged from such trust; and the Holder of such Note shall thereafter, as
an unsecured general creditor, look only to the Company for payment thereof, and
all liability of the Trustee or such Paying Agent with respect to such trust
money, and all liability of the Company as trustee thereof, shall thereupon
cease; PROVIDED, HOWEVER, that the Trustee or such Paying Agent, before being
required to make any such repayment to the Company, may at the expense of the
Company cause to be published once, in a newspaper published in the English
language, customarily published on each Business Day and of general circulation
in the Borough of Manhattan, The City of New York, notice that such money
remains unclaimed and that, after a date specified therein, which shall not be
less than 30 days from the date of such notification or publication, any
unclaimed balance of such money then remaining will be repaid to the Company.
SECTION 1004. CORPORATE EXISTENCE.
Subject to Article Eight, the Company will do or cause to be done all
things necessary to preserve and keep in full force and effect its corporate
existence and that of each Subsidiary and the corporate rights (charter and
statutory), licenses and franchises of the Company and each Subsidiary;
PROVIDED, HOWEVER, that, subject to the other provisions of this Indenture, the
Company shall not be required to preserve any such existence (except the
Company), right, license or franchise if the Board of Directors shall determine
that the preservation thereof is no longer desirable in the conduct of the
business of the Company and its Subsidiaries as a whole and that the loss
thereof is not, and will not be, disadvantageous in any material respect to the
Holders.
SECTION 1005. PAYMENT OF TAXES AND OTHER CLAIMS.
The Company will pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (a) all taxes, assessments and
governmental charges levied or imposed upon the Company or any Subsidiary or
upon the income, profits or property of the Company or any Subsidiary and (b)
all lawful claims for labor, materials and supplies, which, if unpaid, would by
law become a material liability or lien upon the property of the Company or any
Subsidiary; PROVIDED, HOWEVER, that the Company shall not be required to pay or
discharge or cause to be paid or discharged any such tax, assessment, charge or
claim whose amount, applicability or validity is being contested in good faith
by appropriate proceedings and for which appropriate reserves, if necessary (in
the good faith judgment of management of the Company) are being maintained in
accordance with GAAP.
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SECTION 1006. MAINTENANCE OF PROPERTIES.
The Company will cause all material properties owned by the Company or
any Restricted Subsidiary or used or held for use in the conduct of its business
or the business of any Restricted Subsidiary to be maintained and kept in good
condition, repair and working order and supplied with all necessary equipment
and will cause to be made all necessary repairs, renewals, replacements,
betterments and improvements thereof, all as in the judgment of the Company may
be necessary so that the business carried on in connection therewith may be
properly and advantageously conducted at all times; PROVIDED, HOWEVER, that
nothing in this Section shall prevent the Company or any of its Restricted
Subsidiaries from discontinuing the maintenance of any of such properties if
such discontinuance is, in the judgment of the Company, desirable in the conduct
of its business or the business of any Restricted Subsidiary and not adverse in
any material respect to the Holders.
SECTION 1007. STATEMENT BY OFFICERS AS TO DEFAULT.
(a) The Company and each Subsidiary Guarantor will deliver to the
Trustee, within 45 days after the end of each fiscal quarter and within
120 days after the end of each fiscal year, an Officers' Certificate
stating that a review of the activities of the Company or the
Subsidiary Guarantor, as the case may be, during the preceding quarter
or the preceding fiscal year, as the case may be, has been made under
the supervision of the signing officers with a view to determining
whether it has kept, observed, performed and fulfilled, and has caused
each of its Restricted Subsidiaries to keep, observe, perform and
fulfill its obligations under this Indenture and further stating, as to
each such officer signing such certificate, that, to the best of his or
her knowledge, the Company during such preceding quarter or the
preceding fiscal year, as the case may be, has kept, observed,
performed and fulfilled, and has caused each of its Subsidiaries to
keep, observe, perform and fulfill each and every such covenant
contained in this Indenture and no Default or Event of Default occurred
during such quarter or year, as the case may be, and at the date of
such certificate there is no Default or Event of Default which has
occurred and is continuing or, if such signers do know of such Default
or Event of Default, the certificate shall describe its status, with
particularity and that, to the best of his or her knowledge, no event
has occurred and remains by reason of which payments on the account of
the principal of or interest, if any, on the Notes is prohibited or if
such event has occurred, a description of the event and what action
each is taking or proposes to take with respect thereto. The Officers'
Certificate shall also notify the Trustee should the Company elect to
change the manner in which it fixes its fiscal year-end. For purposes
of this Section 1007(a), such compliance shall be determined without
regard to any period of grace or requirement of notice under this
Indenture.
(b) When any Default or Event of Default has occurred and is continuing
under this Indenture, or if the trustee for or the holder of any other
evidence of Indebtedness of the Company or any Restricted Subsidiary
gives any notice or takes any other action with respect to a claimed
default (other than with respect to Indebtedness in the principal
amount of less than $10,000,000), the Company shall deliver to the
Trustee
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by registered or certified mail or by telegram, telex or facsimile
transmission an Officers' Certificate specifying such event, notice or
other action within five Business Days of its occurrence.
SECTION 1008. LIMITATION ON INDEBTEDNESS.
The Company will not, and will not permit any Restricted Subsidiary to,
create, issue, assume, guarantee or in any manner become directly or indirectly
liable for the payment of, or otherwise incur (collectively, "incur"), any
Indebtedness (including any Acquired Indebtedness), other than Permitted
Indebtedness; PROVIDED, HOWEVER, that (i) the Company and any Subsidiary
Guarantor may incur Indebtedness (other than Acquisition Indebtedness) if at the
time of such incurrence the Consolidated Fixed Charge Coverage Ratio for the
four full fiscal quarters immediately preceding the incurrence of such
Indebtedness, taken as one period, would have been at least equal to 2:1 and
(ii) the Company and any Guarantor may incur Acquisition Indebtedness if at the
time of such incurrence the Consolidated Fixed Charge Coverage Ratio for the
four full fiscal quarters immediately preceding the incurrence of such
Indebtedness, taken as one period, would have been at least equal to 2.5:1.
SECTION 1009. LIMITATION ON RESTRICTED PAYMENTS.
(a) The Company will not, and will not permit any Restricted Subsidiary
to, directly or indirectly:
(i) declare or pay any dividend on, or make any distribution
to holders of, any shares of the Capital Stock of the Company or any
Restricted Subsidiary (other than dividends or distributions payable
solely in shares of Qualified Capital Stock of the Company or in
options, warrants or other rights to acquire such shares of Qualified
Capital Stock) (other than the declaration or payment of dividends or
distributions to the extent declared or paid to the Company or any
Restricted Subsidiary);
(ii) purchase, redeem or otherwise acquire or retire for
value, directly or indirectly, any shares of Capital Stock of the
Company or any Affiliate of the Company (other than Capital Stock of
any Wholly Owned Restricted Subsidiary) or any options, warrants or
other rights to acquire such shares of Capital Stock;
(iii) make any principal payment on, or repurchase, redeem,
defease or otherwise acquire or retire for value, prior to any
scheduled principal payment, sinking fund payment or maturity, any
Subordinated Indebtedness of the Company or any Restricted Subsidiary;
or
(iv) make any Investment (other than any Permitted Investment)
in any Person
(such payments or other actions described in (but not excluded from) clauses (i)
through (iv) are collectively referred to as "Restricted Payments"), unless at
the time of, and immediately after giving effect to, the proposed Restricted
Payment (the amount of any such Restricted
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Payment, if other than cash, being the Fair Market Value of the assets to be
transferred) (1) no Default or Event of Default shall have occurred and be
continuing, (2) the Company could incur at least $1.00 of additional
Indebtedness (other than Permitted Indebtedness) pursuant to Section 1008 and
(3) the aggregate amount of all Restricted Payments declared or made after the
Issuance Date shall not exceed the sum of:
(A) 50% of the Consolidated Adjusted Net Income of the Company accrued
on a cumulative basis during the period beginning on the Issuance Date
and ending on the last day of the Company's last fiscal quarter ending
prior to the date of such proposed Restricted Payment (or, if such
aggregate cumulative Consolidated Adjusted Net Income shall be a loss,
minus 100% of such loss), PLUS
(B) the aggregate net cash proceeds received after the Issuance Date by
the Company from the issuance or sale (other than to any Subsidiary) of
shares of Qualified Capital Stock of the Company (including upon the
exercise of options, warrants or rights) or warrants, options or rights
to purchase shares of Qualified Capital Stock of the Company, PLUS
(C) the aggregate net cash proceeds received after the Issuance Date by
the Company from the issuance or sale (other than to any Subsidiary) of
debt securities or Redeemable Capital Stock that have been converted
into or exchanged for Qualified Capital Stock of the Company, to the
extent such securities were originally sold for cash, together with the
aggregate net cash proceeds received by the Company (other than from a
Subsidiary) in connection with such conversion or exchange, PLUS
(D) to the extent that any Investment constituting a Restricted Payment
that was made after the Issuance Date is sold or is otherwise
liquidated or repaid, an amount (to the extent not included in
Consolidated Adjusted Net Income) equal to the lesser of (x) the cash
proceeds with respect to such Investment (less the cost of the
disposition of such Investment and net of taxes) and (y) the initial
amount of such Investment, PLUS
(E) so long as the Designation thereof was treated as a Restricted
Payment that was made after the Issuance Date, with respect to any
Unrestricted Subsidiary that has been redesignated as a Restricted
Subsidiary after the Issuance Date in accordance with Section 1019, the
Fair Market Value of the Company's interest in such Subsidiary at the
time of such redesignation; PROVIDED that such amount shall not in any
case exceed the Designation Amount with respect to such Restricted
Subsidiary upon its Designation, MINUS the Designation Amount (measured
as of the date of Designation) with respect to any Restricted
Subsidiary which has been designated as an Unrestricted Subsidiary
after the date of the Indenture in accordance with Section 1013, PLUS
(F) $1 million.
(b) Notwithstanding paragraph (a) above, the Company and its
Restricted Subsidiaries may take the following actions so long as (with
respect to clauses (ii), (iii),
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(iv), (v) and (vi) below) at the time of and after giving effect
thereto no Default or Event of Default shall have occurred and be
continuing:
(i) the payment of any dividend within 60 days after
the date of declaration thereof, if at such date of
declaration the payment of such dividend would have complied
with the provisions of paragraph (a) above;
(ii) the purchase, redemption or other acquisition or
retirement for value of any shares of Capital Stock of the
Company in exchange for, or out of the net cash proceeds of a
substantially concurrent issuance and sale (other than to a
Subsidiary) of, shares of Qualified Capital Stock of the
Company;
(iii) the purchase, redemption, defeasance or other
acquisition or retirement for value of any Subordinated
Indebtedness in exchange for, or out of the net cash proceeds
of a substantially concurrent issuance and sale (other than to
a Subsidiary) of, shares of Qualified Capital Stock of the
Company;
(iv) the purchase of any Indebtedness that is
expressly subordinated in right of payment to the Notes at a
purchase price not greater than 101% of the principal amount
thereof in the event of a Change in Control in accordance with
provisions similar to those of Section 1013; PROVIDED that
prior to such purchase the Company has made the Change in
Control Offer as provided in Section 1013 and has purchased
all Notes validly tendered for payment in connection with such
Change in Control Offer;
(v) the purchase, redemption, defeasance or other
acquisition or retirement for value of any Subordinated
Indebtedness (other than Redeemable Capital Stock) in exchange
for, or out of the net cash proceeds of a substantially
concurrent incurrence (other than to a Subsidiary) of, new
Subordinated Indebtedness of the Company or the Restricted
Subsidiary whose Subordinated Indebtedness is being purchased,
redeemed, defeased, acquired or retired, so long as (A) the
principal amount of such new Subordinated Indebtedness does
not exceed the principal amount (or, if such Subordinated
Indebtedness being refinanced provides for an amount less than
the principal amount thereof to be due and payable upon a
declaration of acceleration thereof, such lesser amount as of
the date of determination) of the Indebtedness being so
purchased, redeemed, defeased, acquired or retired, PLUS
either the amount of any premium required to be paid in
connection with such refinancing pursuant to the terms of such
Indebtedness being refinanced or the amount of any premium
reasonably determined by the Company as necessary to
accomplish such refinancing, PLUS, in either case, the amount
of reasonable expenses of the Company incurred in connection
with such refinancing, (B) such new Subordinated Indebtedness
is subordinated to the Notes to the same extent as such
Indebtedness so purchased, redeemed, defeased, acquired or
retired and (C) such new Indebtedness has an Average Life
longer than the Average Life of the Notes and no scheduled
principal payment prior to the 91st day after the
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final Stated Maturity of principal later than the final Stated
Maturity of principal of the Notes; and
(vi) purchases or redemptions of Capital Stock
(including cash settlements of stock options) held by
employees, officers or directors of the Company or any of its
Subsidiaries upon their death, disability or termination of
employment with the Company or one of its Subsidiaries;
PROVIDED that such payments shall not exceed $1 million in any
fiscal year in the aggregate or $3 million in the aggregate
during the term of the Notes.
The actions described in clauses (i), (ii), (iii), (iv) and (vi) of
this paragraph (b) shall be Restricted Payments that shall be permitted to be
taken in accordance with this paragraph (b) but shall reduce the amount that
would otherwise be available for Restricted Payments under clause (3) of
paragraph (a) above and the actions described in clause (v) of this paragraph
(b) shall be Restricted Payments that shall be permitted to be taken in
accordance with this paragraph (b) and shall not reduce the amount that would
otherwise be available for Restricted Payments under clause (3) of paragraph
(a).
SECTION 1010. LIMITATION ON ISSUANCES AND SALES OF PREFERRED STOCK BY
RESTRICTED SUBSIDIARIES.
The Company (i) shall not permit any Restricted Subsidiary to issue any
Preferred Stock (other than to the Company or a Wholly Owned Restricted
Subsidiary) and (ii) shall not permit any Person (other than the Company or a
Wholly Owned Restricted Subsidiary) to own any Preferred Stock of any Restricted
Subsidiary.
SECTION 1011. LIMITATION ON TRANSACTIONS WITH AFFILIATES.
The Company shall not, and shall not permit any Restricted Subsidiary
to, directly or indirectly, enter into or suffer to exist any transaction or
series of related transactions (including, without limitation, the sale,
purchase, exchange or lease of assets, property or services) with, or for the
benefit of, any Affiliate of the Company or any Restricted Subsidiary (other
than the Company or a Wholly Owned Restricted Subsidiary) (collectively,
"Interested Persons"), unless (i) such transaction or series of transactions are
on terms that are no less favorable to the Company or such Restricted
Subsidiary, as the case may be, than would have been able to be obtained in an
arm's-length transaction with third parties that are not Interested Persons,
(ii) with respect to any transaction or series of related transactions involving
aggregate consideration equal to or greater than $1 million, the Company has
delivered an Officers' Certificate to the Trustee certifying that such
transaction or series of transactions complies with clause (i) above, (iii) with
respect to any transaction or series of related transactions involving aggregate
consideration equal to or greater than $5 million, such transaction or series of
related transactions (x) has been approved by the Board of Directors of the
Company (including a majority of the Disinterested Directors of the Company) or
(y) the Company has obtained a written opinion from a nationally recognized
investment banking or valuation firm certifying that such transaction or series
of related transactions is fair to the Company or its Restricted Subsidiary, as
the case may be, from a financial point of view and
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(iv) with respect to any transaction or series of related transactions involving
aggregate consideration equal to or greater than $10 million, the Company has
obtained a written opinion from a nationally recognized investment banking or
valuation firm certifying that such transaction or series of transactions is
fair to the Company or its Restricted Subsidiaries, as the case may be, from a
financial point of view; PROVIDED, HOWEVER, that this Section 1011 shall not
restrict (1) the Company from paying regular compensation and fees to directors
of the Company or any Restricted Subsidiary who are not employees of the Company
or any Restricted Subsidiary which are reasonable and customary for comparable
companies in the same industry, (2) loans and advances to officers, directors
and employees of the Company or any Restricted Subsidiary in the ordinary course
of business in accordance with the past practices of the Company or any
Restricted Subsidiary not to exceed $1 million in the aggregate outstanding at
any time, (3) any transactions made in compliance with Section 1009, (4) the
performance of any written agreement as in effect on the Issuance Date, (5) the
joint leasing of offices with Carfel, Inc. in Beijing, the People's Republic of
China, and Taipei, the Republic of China, under such arrangements as are in
effect on the Issuance Date and as such arrangements may be renewed on
substantially similar terms and (6) the leasing of approximately 32,000 square
feet of warehouse space and 16,900 square feet of office space from George
Feldenkreis or his Affiliates, on a month-to-month basis at monthly rents not to
exceed $12,000 each.
SECTION 1012. LIMITATION ON LIENS.
(a) The Company shall not, and shall not permit any Restricted
Subsidiary to, directly or indirectly, create, incur, assume or suffer
to exist any Lien securing Pari Passu Indebtedness or Subordinated
Indebtedness on or with respect to any of its property or assets,
including any shares of stock or indebtedness of any Restricted
Subsidiary, whether owned at the Issuance Date or thereafter acquired,
or any income, profits or proceeds therefrom, or assign or otherwise
convey any right to receive income thereon, unless (x) in the case of
any Lien securing Pari Passu Indebtedness, the Notes or the Note
Guarantee of such Restricted Subsidiary, as the case may be, are
secured by a Lien on such property, assets or proceeds that is senior
in priority to or PARI PASSU with such Lien and (y) in the case of any
Lien securing Subordinated Indebtedness, the Notes or the Subsidiary
Guarantee of such Restricted Subsidiary, as the case may be, are
secured by a Lien on such property, assets or proceeds that is senior
in priority to such Lien; PROVIDED, HOWEVER, that this covenant shall
not apply to Liens as in effect on the date of the Indenture securing
the Lease.
SECTION 1013. PURCHASE OF NOTES UPON CHANGE IN CONTROL.
(a) If a Change in Control shall occur at any time, then each Holder of
Notes will have the right to require that the Company purchase such
Holder's Notes, in whole or in part in integral multiples of $1,000, at
a purchase price (the "Change in Control Purchase Price") in cash in an
amount equal to 101% of the principal amount thereof, plus accrued
interest, if any, to the date of purchase (the "Change in Control
Purchase Date"), pursuant to the offer described below (the "Change in
Control Offer") and the other procedures set forth in this Indenture.
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(b) Within 30 days following any Change in Control, the Company shall
notify the Trustee thereof and give written notice of such Change in
Control to each Holder of Notes by first-class mail, postage prepaid,
at the address of such Holder appearing in the Note Register, stating,
among other things, (i) the Change in Control Purchase Price and the
Change in Control Purchase Date, which shall be a Business Day no
earlier than 30 days nor later than 60 days from the date such notice
is mailed, or such later date as is necessary to comply with
requirements under the Exchange Act or any applicable securities laws
or regulations; (ii) that any Note not tendered will continue to accrue
interest; (iii) that, unless the Company defaults in the payment of the
Change in Control Purchase Price, any Notes accepted for payment
pursuant to the Change in Control Offer shall cease to accrue interest
after the Change in Control Purchase Date; (iv) that Holders electing
to have any Notes purchased pursuant to a Change in Control Offer shall
be required to surrender the Notes, with the form entitled "Option of
Holder to Elect Purchase" on the reverse of the Notes completed, to the
Paying Agent at the address specified in the notice prior to the close
of business on the third Business Day preceding the Change in Control
Purchase Date; (v) that Holders shall be entitled to withdraw their
election if the Paying Agent receives, not later than the close of
business on the second Business Day preceding the Change in Control
Purchase Date, a telegram, telex, facsimile transmission or letter
setting forth the name of the Holder, the principal amount of Notes
delivered for purchase, and a statement that such Holder is withdrawing
its election to have such Notes purchased; (vi) that Holders whose
Notes are being purchased only in part shall be issued new Notes equal
in principal amount to the unpurchased portion of the Notes
surrendered, which unpurchased portion must be equal to $1,000 in
principal amount or an integral multiple thereof; (vii) the
instructions that the Holders of Notes must follow in order to tender
their Notes; and (viii) the circumstances and relevant facts regarding
such Change in Control.
(c) The Company shall comply with the requirements of the tender offer
rules, including Rule 14e-1 under the Exchange Act, and any other
applicable securities laws and regulations in connection with a Change
in Control Offer.
(d) The Company shall not, and shall not permit any Restricted
Subsidiary to, create or permit to exist or become effective any
restriction (other than restrictions existing under the Senior Credit
Facility or under Indebtedness as in effect on the Issuance Date) that
would materially impair the ability of the Company to make a Change in
Control Offer to purchase the Notes or, if such Change in Control Offer
is made, to pay for the Notes tendered for purchase.
(e) Prior to complying with the provisions of this Section 1013, but in
any event within 30 days following a Change in Control, the Company
shall either terminate all commitments and repay in full all
Indebtedness under the Senior Credit Facility and or obtain the
requisite consents, if any, under the Senior Credit Facility to permit
the purchase of the Notes as provided for under this Section 1013.
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SECTION 1014. LIMITATION ON SALE OF ASSETS.
(a) The Company shall not, and shall not permit any Restricted
Subsidiary to, directly or indirectly, consummate any Asset Sale unless
(i) the consideration received by the Company or such Restricted
Subsidiary for such Asset Sale is not less than the fair market value
of the assets sold (as determined by the Board of Directors of the
Company, whose determination shall be conclusive and evidenced by a
Board Resolution) and (ii) at least 75% of such consideration consists
of cash or Cash Equivalents; PROVIDED, HOWEVER, that (I) the amount of
any Indebtedness of a Restricted Subsidiary that is not a Subsidiary
Guarantor or any Senior Indebtedness of the Company or Guarantor Senior
Indebtedness of any Subsidiary Guarantor that is assumed by the
transferee in such Asset Sale and from which the Company and the
Restricted Subsidiaries are fully released shall be deemed to be cash
for purposes of determining the percentage of cash consideration
received by the Company and its Restricted Subsidiaries (excluding any
liabilities that are incurred in connection with or in anticipation of
such Asset Sale) and (II) any securities, notes or other similar
obligations received by the Company or such Restricted Subsidiary from
such transferee that are converted, sold or exchanged within 30 days of
the related Asset Sale into cash or Cash Equivalents (to the extent of
the cash or Cash Equivalents received) shall be deemed to be cash for
purposes of determining the percentage of cash consideration received
by the Company or the Restricted Subsidiaries.
(b) If the Company or any Restricted Subsidiary engages in an Asset
Sale, the Company may use the Net Cash Proceeds thereof, within 365
days after such Asset Sale, to (i) permanently repay or prepay any then
outstanding Indebtedness of any Restricted Subsidiary that is not a
Guarantor or Senior Indebtedness of the Company or Senior Guarantor
Indebtedness of any Restricted Subsidiary (and to correspondingly
reduce commitments with respect thereto) or (ii) invest (or enter into
a legally binding agreement to invest) in other properties or assets to
replace the properties or assets that were the subject of the Asset
Sale or in properties and assets that will be used in businesses of the
Company or its Restricted Subsidiaries, as the case may be, existing at
the time such assets are sold. If any such legally binding agreement to
invest such Net Cash Proceeds is terminated, then the Company may,
within 90 days of such termination or within 365 days of such Asset
Sale, whichever is later, invest such Net Cash Proceeds as provided in
clause (i) or (ii) (without regard to the parenthetical contained in
such clause (ii)) above. The amount of such Net Cash Proceeds not so
used as set forth above in this paragraph (b) shall constitute "Excess
Proceeds."
(c) When the aggregate amount of Excess Proceeds exceeds $10 million,
the Company shall, within 30 Business Days, make an offer to purchase
(an "Excess Proceeds Offer") from all holders of Notes, on a pro RATA
basis, the aggregate principal amount of Notes as can be purchased with
the Note Portion of Excess Proceeds (defined below) at a price in cash
equal to 100% of the aggregate principal amount of the Notes plus
accrued and unpaid interest, if any (the "Offered Price"), to the date
such Excess Proceeds Offer is consummated (the "Offer Date"). To the
extent that the aggregate principal amount of Notes validly tendered
and not withdrawn pursuant to an
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Excess Proceeds Offer is less than the Note Portion of Excess Proceeds,
the Company may use such surplus for general corporate purposes. If the
aggregate principal amount of Notes validly tendered and not withdrawn
by holders thereof exceeds the amount of Notes that can be purchased
with the Note Portion of Excess Proceeds, Notes to be purchased will be
selected PRO RATA based on the aggregate principal amount of Notes
tendered by each holder. Upon completion of an Excess Proceeds Offer,
the amount of Excess Proceeds shall be reset to zero.
In the event that any other Indebtedness of the Company that ranks PARI
PASSU with the Notes (the "Other Debt") requires an offer to purchase to be made
to repurchase such Other Debt upon the consummation of an Asset Sale, the
Company may apply the Excess Proceeds otherwise required to be applied to an
Excess Proceeds Offer to offer to purchase such Other Debt and to an Excess
Proceeds Offer so long as the amount of such Excess Proceeds applied to purchase
the Notes is not less than the Note Portion of Excess Proceeds. With respect to
any Excess Proceeds, the Company shall make the Excess Proceeds Offer in respect
thereof at the same time as the analogous offer to purchase is made pursuant to
any Other Debt and the purchase date in respect thereof shall be the same as the
purchase date in respect of any Other Debt.
For purpose of this Section 1014, "Note Portion of Excess Proceeds"
means (1) if no Other Debt is being offered to be purchased, the amount of the
Excess Proceeds and (2) if Other Debt is being offered to be purchased, the
amount of the Excess Proceeds equal to the product of (z) the Excess Proceeds
and (y) a fraction the numerator of which is the aggregate principal amount of
the outstanding Notes (the "Note Amount") and the denominator of which is the
sum of the Note Amount and the aggregate principal amount (or accreted value in
the case of original issue discount Other Debt) as of the relevant purchase date
of all outstanding Other Debt for which an offer to purchase is being made in
compliance with this Section 1014.
(d) Whenever the Excess Proceeds received by the Company exceed
$10,000,000, such Excess Proceeds shall be set aside by the Company in
a separate account pending (i) deposit with the Trustee or a Paying
Agent of the amount required to purchase the Notes tendered in an
Excess Proceeds Offer, (ii) delivery by the Company of the Offered
Price to the holders of the Notes tendered in an Excess Proceeds Offer
and (iii) application, as set forth above, of Excess Proceeds for any
lawful purposes. Such Excess Proceeds may be invested in Cash
Equivalents, PROVIDED that the maturity date of any investment shall
not be later than the Offer Date. The Company shall be entitled to any
interest or dividends accrued, earned or paid on such Cash Equivalents.
(e) If the Company becomes obligated to make an Excess Proceeds Offer
pursuant to clause (c) above, the Notes shall be purchased by the
Company, at the option of the Holders thereof, in whole or in part in
integral multiples of $1,000, on a date that is not earlier than 30
days and not later than 60 days from the date the notice is given to
holders, or such later date as may be necessary for the Company to
comply with the requirements under the Exchange Act, subject to
proration in the event the amount of Excess Proceeds is less than the
aggregate Offered Price of all Notes tendered.
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(f) Within 15 days after the obligation of the Company to make an
Excess Proceeds Offer arises, the Company shall notify the Trustee
thereof and give written notice of such Excess Proceeds Offer to each
Holder of Notes by first-class mail, postage prepaid, at the address of
such Holder appearing in the Note Register, stating, (i) the Offered
Price and the Offer Date, which shall be a Business Day no earlier than
30 days nor later than 60 days from the date such notice is mailed, or
such later date as is necessary to comply with requirements under the
Exchange Act or any applicable securities laws or regulations; (ii)
that any Note not tendered will continue to accrue interest; (iii)
that, unless the Company defaults in the payment of the Offered Price,
any Notes accepted for payment pursuant to the Excess Proceeds Offer
shall cease to accrue interest after the date of purchase; (iv) that
Holders electing to have any Notes purchased pursuant to an Excess
Proceeds Offer shall be required to surrender the Notes, with the form
entitled "Option of Holder to Elect Purchase" on the reverse of the
Notes completed, to the Paying Agent at the address specified in the
notice prior to the close of business on the third Business Day
preceding the Offer Date; (v) that Holders shall be entitled to
withdraw their election if the Paying Agent receives, not later than
the close of business on the second Business Day preceding the Offer
Date, a telegram, telex, facsimile transmission or letter setting forth
the name of the Holder, the principal amount of Notes delivered for
purchase, and a statement that such Holder is withdrawing its election
to have such Notes purchased; (vi) that Holders whose Notes are being
purchased only in part shall be issued new Notes equal in principal
amount to the unpurchased portion of the Notes surrendered, which
unpurchased portion must be equal to $1,000 in principal amount or an
integral multiple thereof; (vii) the instructions that the Holders of
Notes must follow in order to tender their Notes; and (viii) the
circumstances and relevant facts regarding such Excess Proceeds Offer.
(g) The Company shall comply with any applicable securities laws,
including Section 14(e) of, and Rule 14e-1 under, the Exchange Act, and
any other applicable Federal or state securities laws and regulations
and any applicable requirements of any securities exchange on which the
Notes are listed.
SECTION 1015. LIMITATIONS ON GUARANTEES OF INDEBTEDNESS BY RESTRICTED
SUBSIDIARIES.
(a) The Company will not permit any Restricted Subsidiary that is not a
Guarantor, directly or indirectly, to guarantee, assume or in any other
manner become liable with respect to any Indebtedness of the Company or
any other Restricted Subsidiary unless (i) (A) such Restricted
Subsidiary simultaneously executes and delivers a supplemental
indenture, in form satisfactory to the Trustee, providing for a
guarantee on the same terms as the guarantee of such Indebtedness of
the obligations under the Notes and this Indenture by such Restricted
Subsidiary, which Note Guarantee will be subordinated to the Guarantor
Senior Indebtedness to the same extent that the Notes are subordinated
to Senior Indebtedness, and delivers to such Trustee on Opinion of
Counsel reasonably satisfactory to such Trustee to the effect that such
supplemental indenture has been duly executed and delivered by such
Restricted Subsidiary and is in compliance with the terms of this
Indenture and (B) with respect to any guarantee of Subordinated
Indebtedness, any such guarantee shall be subordinated to such
Restricted Subsidiary's
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Note Guarantee at least to the same extent as such Subordinated
Indebtedness is subordinated to the Notes and (ii) such Restricted
Subsidiary waives and will not in any manner whatsoever claim or take
the benefit or advantage of, any rights of reimbursement, indemnity or
subrogation or any other rights against the Company or any other
Restricted Subsidiary as a result of any payment by such Restricted
Subsidiary under its Note Guarantee.
(b) Notwithstanding the foregoing, any guarantee of the Notes created
pursuant to the provisions described in the foregoing paragraph (a)
will provide by its terms that it will be automatically and
unconditionally released and discharged upon (i) any sale, exchange or
transfer to any Person not an Affiliate of the Company of all of the
Company's Capital Stock in, or all or substantially all the assets of,
the applicable Subsidiary Guarantor (which sale, exchange or transfer
is otherwise in compliance with this Indenture) or (ii) the release by
the holders of the Indebtedness of the Company described in the
preceding paragraph of their guarantee by such Restricted Subsidiary
(including any deemed release upon payment in full of all obligations
under such Indebtedness), at a time when (A) no other Indebtedness of
the Company has been guaranteed by such Restricted Subsidiary or (B)
the holders of all such other Indebtedness which is guaranteed by such
Restricted Subsidiary also release their guarantee by such Restricted
Subsidiary (including any deemed release upon payment in full of all
obligations under such Indebtedness).
SECTION 1016. LIMITATION ON DIVIDENDS AND OTHER PAYMENT RESTRICTIONS
AFFECTING RESTRICTED Subsidiaries.
The Company shall not, and shall not permit any Restricted Subsidiary
to, directly or indirectly, create or otherwise cause or suffer to exist or
become effective any consensual encumbrance or restriction of any kind on the
ability of any Restricted Subsidiary to (a) pay dividends, in cash or otherwise,
or make any other distributions on or in respect of its Capital Stock to the
Company or any other Restricted Subsidiary, (b) pay any Indebtedness owed to the
Company or any other Restricted Subsidiary, (c) make loans or advances to the
Company or any other Restricted Subsidiary, (d) transfer any of its properties
or assets to the Company or any other Restricted Subsidiary (other than
customary restrictions on transfers of property subject to a Lien permitted
under this Indenture that would not materially adversely affect the Company's
ability to satisfy its obligations under the Notes and this Indenture) or (e)
guarantee any Indebtedness of the Company or any other Restricted Subsidiary,
except for such encumbrances or restrictions existing under or by reason of (i)
applicable law, (ii) customary provisions restricting subletting or assignment
of any lease or assignment of any other contract to which the Company or any
Restricted Subsidiary is a party or to which any of their respective properties
or assets are subject, (iii) any agreement or other instrument of a Person
acquired by the Company or any Restricted Subsidiary in existence at the time of
such acquisition (but not created in contemplation thereof), which encumbrance
or restriction is not applicable to any Person, or the properties or assets of
any Person, other than the Person, or the property or assets of the Person, so
acquired, (iv) encumbrances and restrictions in effect on the Issuance Date
pursuant to the Senior Credit Facility and its related documentation, (v) any
encumbrance or restriction contained in contracts for sales of assets permitted
by Section
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1014 with respect to the assets to be sold pursuant to such contracts and (vi)
any encumbrance or restriction existing under any agreement that extends,
renews, refinances or replaces the agreements containing the encumbrances or
restrictions in the foregoing clauses (iii) and (iv); PROVIDED that the terms
and conditions of any such encumbrances or restrictions are not materially less
favorable to the Holders than those under or pursuant to the agreement so
extended, renewed, refinanced or replaced.
SECTION 1017. LIMITATION ON SALE AND LEASEBACK TRANSACTIONS.
The Company shall not, and shall not permit any Restricted Subsidiary
to, directly or indirectly, enter into any Sale and Leaseback Transaction with
respect to any property or assets (whether now owned or hereafter acquired),
unless (i) the sale or transfer of such property or assets to be leased is
treated as an Asset Sale and the Company complies with Section 1014 and (ii) the
Company or such Restricted Subsidiary would be permitted to incur Indebtedness
under Section 1008 in the amount of the Capitalized Lease Obligations incurred
in respect of such Sale and Leaseback Transaction.
SECTION 1018. LIMITATION ON OTHER SENIOR SUBORDINATED INDEBTEDNESS.
Neither the Company nor any Restricted Subsidiary shall incur, create,
assume, guarantee or in any other manner become directly or indirectly liable
with respect to or responsible for, or permit to remain outstanding, any
Indebtedness, other than the Notes, that is subordinate or junior in right of
payment to any Senior Indebtedness unless such Indebtedness is also PARI PASSU
with, or subordinate in right of payment to, the Notes pursuant to subordination
provisions substantially similar to those contained in this Indenture.
SECTION 1019. LIMITATION ON UNRESTRICTED SUBSIDIARIES.
(a) The Board of Directors of the Company may designate any Subsidiary
(other than a Subsidiary Guarantor) to be an "Unrestricted Subsidiary"
(a "Designation") only if:
(i) no Default shall have occurred and be continuing at the
time of or after giving effect to such designation;
(ii) the Company would be permitted to make an Investment
(other than a Permitted Investment) at the time of Designation
(assuming the effectiveness of such designation) pursuant to the first
paragraph of Section 1009 in an amount (the "Designation Amount") equal
to the greater of (1) the net book value on such date of the Company's
interest in such Subsidiary calculated in accordance with GAAP or (2)
the Fair Market Value on such date of the Company's interest in such
Subsidiary as determined in good faith by the Company's Board of
Directors;
(iii) the Company would be permitted under this Indenture to
incur $1.00 of additional Indebtedness (other than Permitted
Indebtedness) pursuant to Section 1008 at the time of such designation
(assuming the effectiveness of such designation); and
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(iv) such Unrestricted Subsidiary does not own any Capital
Stock in any Restricted Subsidiary of the Company which is not
simultaneously being designated an Unrestricted Subsidiary.
In the event of any such Designation, the Company shall be deemed to
have made an Investment constituting a Restricted Payment pursuant to Section
1009 for all purposes of this Indenture in an amount equal to the greater of (1)
the net book value of the Company's interest in such Subsidiary calculated in
accordance with GAAP or (2) the Fair Market Value of the Company's interest in
such Subsidiary as determined in good faith by the Board of Directors of the
Company.
Neither the Company nor any Restricted Subsidiary shall at any time (x)
provide a guarantee of, or similar credit support to, any Indebtedness of any
Unrestricted Subsidiary (including of any undertaking, agreement or instrument
evidencing such Indebtedness); PROVIDED that the Company may pledge Capital
Stock of any Unrestricted Subsidiary on a nonrecourse basis such that the
pledgee has no claim whatsoever against the Company other than to obtain such
pledged property, (y) be directly or indirectly liable for any Indebtedness of
any Unrestricted Subsidiary or (z) be directly or indirectly liable for any
Indebtedness that provides that the holder thereof may (upon notice, lapse of
time or both) declare a default thereon (or cause the payment thereof to be
accelerated or payable prior to its final scheduled maturity) upon the
occurrence of a default with respect to any other Indebtedness that is
Indebtedness of an Unrestricted Subsidiary (including any corresponding right to
take enforcement action against such Unrestricted Subsidiary).
(b) The Board of Directors of the Company may designate any
Unrestricted Subsidiary as a Restricted Subsidiary if:
(i) no Default or Event of Default shall have occurred and be
continuing at the time of and after giving effect to such designation;
and
(ii) all Liens and Indebtedness of such Unrestricted
Subsidiary outstanding immediately following such designation would, if
incurred at such time, have been permitted to be incurred for all
purposes under this Indenture.
Any such designation as an Unrestricted Subsidiary or Restricted
Subsidiary by the Board of Directors of the Company shall be evidenced to the
Trustee by filing a board resolution with the Trustee giving effect to such
designation.
SECTION 1020. REPORTS.
The Company shall file on a timely basis with the Commission, to the
extent such filings are accepted by the Commission and whether or not the
Company has a class of securities registered under the Exchange Act, the annual
reports, quarterly reports and other documents that the Company would be
required to file if it were subject to Section 13 or 15 of the Exchange Act. The
Company shall also (a) file with the Trustee, and provide to each
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Holder of Notes at their respective addresses set forth in the Note Register,
without cost to such Holder, copies of such reports and documents within 15 days
after the date on which the Company files such reports and documents with the
Commission or the date on which the Company would be required to file such
reports and documents if the Company were so required, and (b) if filing such
reports and documents with the Commission is not accepted by the Commission or
is prohibited under the Exchange Act, supply at the Company's cost copies of
such reports and documents to any prospective Holder of Notes promptly upon
written request. If any Subsidiary Guarantor's financial statements would be
required to be included in the financial statements filed or delivered pursuant
to this Indenture if the Company were subject to Section 13 or 15(d) of the
Exchange Act, the Company shall include such Subsidiary Guarantor's financial
statements in any filing or delivery pursuant to this Indenture. Delivery of
such reports, information and documents to the Trustee is for informational
purposes only and the Trustee's receipt of such shall not constitute
constructive notice of any information contained therein or determinable from
information contained therein, including the Company's compliance with any of
its covenants hereunder (as to which the Trustee is entitled to rely exclusively
on Officers' Certificates).
SECTION 1021. WAIVER OF CERTAIN COVENANTS.
The Company and the Restricted Subsidiaries may omit in any particular
instance to comply with any term, provision or condition set forth in Sections
1007 to 1012, inclusive, and Sections 1015 to 1019, inclusive, if before or
after the time for such compliance the Holders of at least a majority in
aggregate principal amount of all Outstanding Notes affected by such term,
provision or covenant, by Act of such Holders, waive such compliance in such
instance with such term, provision or condition, but no such waiver shall extend
to or affect such term, provision or condition except to the extent so expressly
waived, and, until such waiver shall become effective, the obligations of the
Company, the Restricted Subsidiaries and the duties of the Trustee, as
applicable, in respect of any such term, provision or condition shall remain in
full force and effect.
ARTICLE ELEVEN
REDEMPTION OF NOTES
SECTION 1101. REDEMPTION.
The Notes may or shall be, as the case may be, redeemed, as a whole or
from time to time in part, subject to the conditions and the Redemption Prices
specified in the form of Note, together with accrued and unpaid interest, if
any, to the Redemption Date (subject to the right of Holders of record on
relevant record dates to receive interest due on an Interest Payment Date), on
the Redemption Date.
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SECTION 1102. APPLICABILITY OF ARTICLE.
Redemption of Notes at the election of the Company or otherwise, as
permitted or required by any provision of this Indenture, shall be made in
accordance with the terms of such Notes and in accordance with this Article
Eleven.
SECTION 1103. ELECTION TO REDEEM; NOTICE TO TRUSTEE.
The election of the Company to redeem any Notes pursuant to Section
1101 shall be evidenced by a Board Resolution. In case of any redemption at the
election of the Company, the Company shall, at least 60 days prior to the
Redemption Date fixed by the Company (unless a shorter notice shall be
satisfactory to the Trustee), notify the Trustee of such Redemption Date and of
the principal amount of Notes to be redeemed and shall deliver to the Trustee
such documentation and records as shall enable the Trustee to select the Notes
to be redeemed pursuant to Section 1104.
SECTION 1104. SELECTION BY TRUSTEE OF NOTES TO BE REDEEMED.
If less than all the Notes are to be redeemed, the particular Notes to
be redeemed shall be selected by the Trustee, from the Outstanding Notes not
previously called for redemption, in compliance with the requirements of the
principal national securities exchange, if any, on which such Notes are listed,
or, if such Notes are not so listed, by such other method as the Trustee shall
deem fair and appropriate (and in such manner as complies with applicable legal
requirements) and which may provide for the selection for redemption of portions
of the principal of Notes; PROVIDED, HOWEVER, that no such partial redemption
shall reduce the portion of the principal amount of a Note not redeemed to less
than $1,000; PROVIDED FURTHER that any such redemption pursuant to the
provisions relating to a Public Equity Offering shall be made on a PRO RATA
basis or on as nearly a PRO RATA basis as practicable (subject to the procedures
of DTC or any other depositary). Notice of redemption shall be sent by
first-class mail at least 30 but not more than 60 days before the Redemption
Date to each Holder of Notes to be redeemed at its registered address. On and
after the Redemption Date, interest shall cease to accrue on Notes or portions
thereof called for redemption, unless the Company defaults in the payment of the
Redemption Price.
The Trustee shall promptly notify the Company in writing of the Notes
selected for redemption and, in the case of any Notes selected for partial
redemption, the principal amount thereof to be redeemed.
For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to redemption of Notes shall relate, in the
case of any Note redeemed or to be redeemed only in part, to the portion of the
principal amount of such Note which has been or is to be redeemed.
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SECTION 1105. NOTICE OF REDEMPTION.
Notice of redemption shall be given in the manner provided for in
Section 106 not less than 30 nor more than 60 days prior to the Redemption Date,
to each Holder of Notes to be redeemed. The Trustee shall give notice of
redemption in the Company's name and at the Company's expense; PROVIDED,
HOWEVER, that the Company shall deliver to the Trustee, at least 45 days prior
to the Redemption Date, an Officers' Certificate requesting that the Trustee
give such notice and setting forth the information to be stated in such notice
as provided in the following items.
All notices of redemption shall state:
(1) the Redemption Date,
(2) the Redemption Price and the amount of accrued interest, if any, to
the Redemption Date payable as provided in Section 1107,
(3) if less than all Outstanding Notes are to be redeemed, the
identification of the particular Notes to be redeemed, as well as the
aggregate principal amount of Notes to be redeemed and the aggregate
principal amount of Notes to be outstanding after such partial
redemption,
(4) in case any Note is to be redeemed in part only, the notice which
relates to such Note shall state that on and after the Redemption Date,
upon surrender of such Note, the holder will receive, without charge, a
new Note or Notes of authorized denominations for the principal amount
thereof remaining unredeemed,
(5) that on the Redemption Date the Redemption Price (and accrued
interest, if any, to the Redemption Date payable as provided in Section
1107) will become due and payable upon each such Note, or the portion
thereof, to be redeemed, and, unless the Company defaults in making the
redemption payment, that interest on Notes called for redemption (or
the portion thereof) will cease to accrue on and after said date,
(6) the place or places where such Notes are to be surrendered for
payment of the Redemption Price and accrued interest, if any,
(7) the name and address of the Paying Agent,
(8) that Notes called for redemption must be surrendered to the Paying
Agent to collect the Redemption Price,
(9) the CUSIP number, and that no representation is made as to the
accuracy or correctness of the CUSIP number, if any, listed in such
notice or printed on the Notes, and
(10) the paragraph of the Notes pursuant to which the Notes are to be
redeemed.
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SECTION 1106. DEPOSIT OF REDEMPTION PRICE.
Prior to 10:00 A.M. on any Redemption Date, the Company shall deposit
with the Trustee or with a Paying Agent (or, if the Company is acting as its own
Paying Agent, segregate and hold in trust as provided in Section 1003) an amount
of money sufficient to pay the Redemption Price of, and accrued interest on, all
the Notes which are to be redeemed on that date.
SECTION 1107. NOTES PAYABLE ON REDEMPTION DATE.
Notice of redemption having been given as aforesaid, the Notes so to be
redeemed shall, on the Redemption Date, become due and payable at the Redemption
Price therein specified (together with accrued interest, if any, to the
Redemption Date), and from and after such date (unless the Company shall default
in the payment of the Redemption Price and accrued interest) such Notes shall
cease to bear interest. Upon surrender of any such Note for redemption in
accordance with said notice, such Note shall be paid by the Company at the
Redemption Price, together with accrued interest, if any, to the Redemption
Date; PROVIDED, HOWEVER, that installments of interest whose Stated Maturity is
on or prior to the Redemption Date shall be payable to the Holders of such
Notes, or one or more Predecessor Notes, registered as such at the close of
business on the relevant Regular Record Date or Special Record Date, as the case
may be, according to their terms and the provisions of Section 307.
If any Note called for redemption shall not be so paid upon surrender
thereof for redemption, the principal (and premium, if any) shall, until paid,
bear interest from the Redemption Date at the rate of interest set forth in the
Note.
SECTION 1108. NOTES REDEEMED IN PART.
Any Note which is to be redeemed only in part (pursuant to the
provisions of this Article) shall be surrendered at a Place of Payment therefor
(with, if the Company or the Trustee so requires, due endorsement by, or a
written instrument of transfer in form satisfactory to the Company and the
Trustee duly executed by, the Holder thereof or such Holder's attorney duly
authorized in writing), and the Company shall execute, and the Trustee shall
authenticate and deliver to the Holder of such Note without service charge, a
new Note or Notes, of any authorized denomination as requested by such Holder,
in an aggregate principal amount equal to and in exchange for the unredeemed
portion of the principal of the Note so surrendered, PROVIDED that each such new
Note will be in a principal amount of $1,000 or integral multiple thereof.
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ARTICLE TWELVE
SUBORDINATION OF NOTES
SECTION 1201. NOTES SUBORDINATE TO SENIOR INDEBTEDNESS.
The Company covenants and agrees, and each Holder of a Note, by its
acceptance thereof, likewise covenants and agrees, for the benefit of the
holders, from time to time, of Senior Indebtedness that, to the extent and in
the manner hereinafter set forth in this Article, the Indebtedness represented
by the Notes and the payment of the principal of (and premium, if any) and
interest on each and all of the Notes are hereby expressly made subordinate and
subject in right of payment as provided in this Article to the prior payment in
full in cash or cash equivalents or in any other form acceptable to each holder
of Senior Indebtedness, of all Senior Indebtedness; PROVIDED, HOWEVER, that the
Notes, the Indebtedness represented thereby and the payment of the principal of
(and premium, if any) and interest on the Notes in all respects shall rank
equally with, or prior to, all existing and future senior subordinated
indebtedness (including, without limitation, Indebtedness) of the Company that
is subordinated to Senior Indebtedness.
SECTION 1202. PAYMENT OVER OF PROCEEDS UPON DISSOLUTION, ETC.
In the event of (a) any insolvency or bankruptcy case or proceeding, or
any receivership, liquidation, reorganization or other similar case or
proceeding in connection therewith, relating to the Company or to its assets, or
(b) any liquidation, dissolution or other winding-up of the Company, whether
voluntary or involuntary and whether or not involving insolvency or bankruptcy,
or (c) any assignment for the benefit of creditors or other marshalling of
assets or liabilities of the Company (except in connection with the
consolidation or merger of the Company or its liquidation or dissolution
following the conveyance, transfer or lease of its properties and assets
substantially as an entirety upon the terms and conditions described under
Article Eight), then and in any event:
(1) the holders of Senior Indebtedness shall be entitled to receive
payment in full in cash or cash equivalents or in any other form
acceptable to each holder of Senior Indebtedness, or provision shall be
made for such payment in full, before the Holders will be entitled to
receive any payment or distribution of any kind or character (other
than any payment or distribution in the form of equity securities or
subordinated securities of the Company or any successor obligor that,
in the case of any such subordinated securities, are subordinated in
right of payment to all Senior Indebtedness that may at the time be
outstanding to at least the same extent as the Notes are so
subordinated as provided in this Indenture (such equity securities or
subordinated securities hereinafter being "Permitted Junior
Securities") and any payment made pursuant to Article Fourteen from
monies or U.S. Government Obligations previously deposited with the
Trustee) on account of principal of (or premium, if any) or interest on
the Notes or on account of the purchase or redemption or other
acquisition of Notes; and
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(2) any payment or distribution of assets of the Company of any kind or
character, whether in cash, property or securities (other than a
payment or distribution in the form of Permitted Junior Securities and
any payment made pursuant to Article Fourteen from monies or U.S.
Government Obligations previously deposited with the Trustee), by
set-off or otherwise, to which the Holders or the Trustee would be
entitled but for the provisions of this Indenture shall be paid by the
liquidating trustee or agent or other Person making such payment or
distribution, whether a trustee in bankruptcy, a receiver or
liquidating trustee or otherwise, directly to the holders of Senior
Indebtedness or their representative ratably according to the aggregate
amounts remaining unpaid on account of the Senior Indebtedness to the
extent necessary to make payment in full of all Senior Indebtedness
remaining unpaid, after giving effect to any concurrent payment or
distribution to the holders of such Senior Indebtedness.
The consolidation of the Company with, or the merger of the Company
into, another Person or the liquidation or dissolution of the Company following
the conveyance, transfer or lease of its properties and assets substantially as
an entirety to another Person upon the terms and conditions set forth in Article
Eight shall not be deemed a dissolution, winding up, liquidation,
reorganization, assignment for the benefit of creditors or marshalling of assets
and liabilities of the Company for the purposes of this Section if the Person
formed by such consolidation or into which the Company is merged or the Person
which acquires by conveyance, transfer or lease such properties and assets
substantially as an entirety, as the case may be, shall, as a part of such
consolidation, merger, conveyance, transfer or lease, comply with the conditions
set forth in Article Eight.
SECTION 1203. SUSPENSION OF PAYMENT WHEN DESIGNATED SENIOR INDEBTEDNESS
IN DEFAULT.
(a) Unless Section 1202 shall be applicable, upon the occurrence of a
Payment Default, no payment or distribution of any assets of the
Company of any kind or character, whether in cash, property or
securities (other than Permitted Junior Securities and payments made
pursuant to Article Fourteen from monies or U.S. Government Obligations
previously deposited with the Trustee), shall be made by or on behalf
of the Company on account of principal of (or premium, if any) or
interest on the Notes or on account of the purchase or redemption or
other acquisition of Notes unless and until such Payment Default shall
have been cured or waived in writing from the Agent Bank or any other
representative of a holder of Designated Senior Indebtedness or shall
have ceased to exist or such Designated Senior Indebtedness shall have
been discharged or paid in full, after which the Company shall resume
making any and all required payments in respect of the Notes, including
any missed payments.
(b) Unless Section 1202 shall be applicable, upon (1) the occurrence of
a Non-Payment Default and (2) receipt by the Trustee of written notice
thereof from the Agent Bank or any other representative of a holder of
Designated Senior Indebtedness, then no payment or distribution of any
assets of the Company of any kind or character, whether in cash,
property or securities (other than Permitted Junior Securities and
payments made pursuant to Article Fourteen from monies or U.S.
Government Obligations
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previously deposited with the Trustee), shall be made by or on behalf
of the Company on account of any principal of (or premium, if any) or
interest on the Notes or on account of the purchase, redemption or
other acquisition of Notes for a period ("Payment Blockage Period")
commencing on the date of receipt by the Trustee of written notice from
the Agent Bank or such other representative and ending on the earliest
of (i) 179 days thereafter (PROVIDED that any Designated Senior
Indebtedness as to which notice was given shall not theretofore have
been accelerated, in which case the provisions of paragraph (a) shall
apply), (ii) the date on which such Non-Payment Default is cured,
waived or ceases to exist or such Designated Senior Indebtedness is
discharged or paid in full in cash or cash equivalents or (iii) the
date on which such Payment Blockage Period shall have been terminated
by written notice to the Trustee or the Company from the Agent Bank or
such other representative initiating such Payment Blockage Period,
after which the Company shall resume making any and all required
payments in respect of the Notes, including any missed payments. In any
event, not more than one Payment Blockage Period may be commenced
during any period of 360 consecutive days and there must be a period of
at least 181 consecutive days in each period of 360 consecutive days
when no Payment Blockage Period is in effect. No event of default that
existed or was continuing on the date of the commencement of any
Payment Blockage Period will be, or can be, made the basis for the
commencement of a subsequent Payment Blockage Period, unless such
default has been cured or waived for a period of not less than 90
consecutive days subsequent to the commencement of such initial Payment
Blockage Period. In no event will a Payment Blockage Period extend
beyond 179 days.
In the event that, notwithstanding the foregoing and the provisions of
Section 1202, any payments or distribution shall be made to the Trustee (and not
paid over to the Holders of the Notes) which is prohibited by the foregoing
provisions of this Section and the provisions of Section 1202, then and in such
event such payment shall be paid over and delivered forthwith by the Trustee to
the Agent Bank and any other representative of holders of Designated Senior
Indebtedness, as their interests may appear, to the extent necessary to pay in
full all Designated Senior Indebtedness.
SECTION 1204. PAYMENT PERMITTED IF NO DEFAULT.
Nothing contained in this Article or elsewhere in this Indenture or in
any of the Notes shall prevent the Company, at any time except during the
pendency of any case, proceeding, dissolution, liquidation or other winding up,
assignment for the benefit of creditors or other marshalling of assets and
liabilities of the Company referred to in Section 1202 or under the conditions
described in Section 1203, from making payments at any time of principal of, and
premium, if any, or interest on the Notes.
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SECTION 1205. SUBROGATION TO RIGHTS OF HOLDERS OF SENIOR INDEBTEDNESS.
Subject to the payment in full of all Senior Indebtedness, the Holders
of the Notes shall be subrogated (equally and ratably with the holders of all
Pari Passu Indebtedness of the Company) to the rights of the holders of such
Senior Indebtedness to receive payments and distributions of cash, property and
securities applicable to Senior Indebtedness. For purposes of such subrogation,
no payments or distributions to the holders of Senior Indebtedness of any cash,
property or securities to which the Holders of the Notes or the Trustee would be
entitled except for the provisions of this Article, and no payments over
pursuant to the provisions of this Article to the holders of Senior Indebtedness
by Holders of the Notes or on their behalf or by the Trustee, shall, as among
the Company, its creditors other than holders of Senior Indebtedness, and the
Holders of the Notes, be deemed to be a payment or distribution by the Company
to or on account of the Senior Indebtedness; it being understood that the
provisions of this Article are intended solely for the purpose of determining
the relative rights of the Holders of Notes, on the one hand, and the holders of
Senior Indebtedness, on the other hand.
SECTION 1206. PROVISIONS SOLELY TO DEFINE RELATIVE RIGHTS.
The provisions of this Article are and are intended solely for the
purpose of defining the relative rights of the Holders on the one hand and the
holders of Senior Indebtedness on the other hand. Nothing contained in this
Article or elsewhere in this Indenture or in the Notes is intended to or shall
(a) impair, as between the Company and the Holders, the obligation of the
Company, which is absolute and unconditional, to pay to the Holders the
principal of, and premium, if any, and interest on the Notes as and when the
same shall become due and payable in accordance with their terms; or (b) affect
the relative rights against the Company of the Holders and creditors of the
Company other than the holders of Senior Indebtedness; or (c) prevent the
Trustee or any Holder from exercising all remedies otherwise permitted by
applicable law upon default under this Indenture, subject to the rights, if any,
under this Article of the holders of Senior Indebtedness.
SECTION 1207. TRUSTEE TO EFFECTUATE SUBORDINATION.
Each Holder of a Note by its acceptance thereof authorizes and directs
the Trustee on its behalf to take such action as may be necessary or appropriate
to effectuate the subordination provided in this Article and appoints the
Trustee his attorney-in-fact for any and all such purposes. If the Trustee does
not file a proper proof of claim or proof of debt in the form required in any
proceeding referred to in Section 504 hereof at least 30 days before the
expiration of the time to file such claim, the Agent Bank (if the Senior Credit
Facility is still outstanding) is hereby authorized to file an appropriate claim
for and on behalf of the Holders of the Notes.
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SECTION 1208. NO WAIVER OF SUBORDINATION PROVISIONS.
No right of any present or future holder of any Senior Indebtedness to
enforce subordination as herein provided shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of the Company
or by any act or failure to act, in good faith, by any such holder, or by any
non-compliance by the Company with the terms, provisions and covenants of this
Indenture, regardless of any knowledge thereof any such holder may have or be
otherwise charged with.
SECTION 1209. DISTRIBUTION OR NOTICE TO REPRESENTATIVE.
Whenever a distribution is to be made or a notice given to holders of
Senior Indebtedness, the distribution may be made and the notice given to their
Representative.
Upon any payment or distribution of assets of the Company referred to
in this Article Twelve, the Trustee and the Holders shall be entitled to rely
upon any order or decree made by any court of competent jurisdiction or upon any
certificate of such Representative or of the liquidating trustee or agent or
other Person making any distribution to the Trustee or to the Holders for the
purpose of ascertaining the Persons entitled to participate in such
distribution, the holders of the Senior Indebtedness and other Indebtedness of
the Company, the amount thereof or payable thereon, the amount or amounts paid
or distributed thereon and all other acts pertinent thereto or to this Article
Twelve.
SECTION 1210. NOTICE TO TRUSTEE.
(a) The Company shall give prompt written notice to the Trustee of any
fact known to the Company which would prohibit the making of any
payment to or by the Trustee in respect of the Notes. Notwithstanding
the provisions of this Article or any other provision of this
Indenture, the Trustee shall not be charged with knowledge of the
existence of any facts which would prohibit the making of any payment
to or by the Trustee in respect of the Notes, unless and until the
Trustee shall have received written notice thereof from the Company,
the Agent Bank or a holder of Senior Indebtedness or from any trustee,
fiduciary or agent therefor; and, prior to the receipt of any such
written notice, the Trustee, subject to TIA Sections 315(a) through
315(d), shall be entitled in all respects to assume that no such facts
exist; PROVIDED, HOWEVER, that, if the Trustee shall not have received
the notice provided for in this Section not later than 9:00 a.m. New
York time on the day which is at least two Business Days prior to the
date upon which by the terms hereof any money may become payable for
any purpose (including, without limitation, the payment of the
principal of, and premium, if any, or interest on any Note), then,
anything herein contained to the contrary notwithstanding, the Trustee
shall have full power and authority to receive such money and to apply
the same to the purpose for which such money was received and shall not
be affected by any notice to the contrary which may be received by it
after 9:00 a.m. New York time on the day which is two Business Days
prior to such date.
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(b) Subject to TIA Sections 315(a) through 315(d), the Trustee shall be
entitled to rely on the delivery to it of a written notice by a Person
representing itself to be a holder of Senior Indebtedness (or a
trustee, fiduciary or agent therefor) to establish that such notice has
been given by a holder of Senior Indebtedness (or a trustee, fiduciary
or agent therefor). In the event that the Trustee determines in good
faith that further evidence is required with respect to the right of
any Person as a holder of Senior Indebtedness to participate in any
payment or distribution pursuant to this Article, the Trustee may
request such Person to furnish evidence to the reasonable satisfaction
of the Trustee as to the amount of Senior Indebtedness held by such
Person, the extent to which such Person is entitled to participate in
such payment or distribution and any other facts pertinent to the
rights of such Person under this Article and, if such evidence is not
furnished, the Trustee may defer any payment to such Person pending
judicial determination as to the right of such Person to receive such
payment.
SECTION 1211. RELIANCE ON JUDICIAL ORDER OR CERTIFICATE OF LIQUIDATING
AGENT.
Upon any payment or distribution of assets of the Company referred to
in this Article, the Trustee, subject to TIA Sections 315(a) through 315(d), and
the Holders of the Notes shall be entitled to rely upon any order or decree
entered by any court of competent jurisdiction in which such insolvency,
bankruptcy, receivership, liquidation, reorganization, dissolution, winding up
or similar case or proceeding is pending, or a certificate of the trustee in
bankruptcy, receiver, liquidating trustee, custodian, assignee for the benefit
of creditors, agent or other Person making such payment or distribution,
delivered to the Trustee or to the Holders of Notes, for the purpose of
ascertaining the Persons entitled to participate in such payment or
distribution, the holders of Senior Indebtedness and other indebtedness of the
Company, the amount thereof or payable thereon, the amount or amounts paid or
distributed thereon and all other facts pertinent thereto or to this Article;
PROVIDED that such court, trustee, receiver, custodian, assignee, agent or other
Person has been apprised of, or the order, decree or certificate makes reference
to, the provisions of this Article.
SECTION 1212. RIGHTS OF TRUSTEE AS A HOLDER OF SENIOR INDEBTEDNESS;
PRESERVATION OF TRUSTEE'S RIGHTS.
The Trustee in its individual capacity shall be entitled to all the
rights set forth in this Article with respect to any Senior Indebtedness which
may at any time be held by it, to the same extent as any other holder of Senior
Indebtedness, and nothing in this Indenture shall deprive the Trustee of any of
its rights as such holder. Nothing in this Article shall apply to claims of, or
payments to, the Trustee under or pursuant to Section 607.
SECTION 1213. ARTICLE APPLICABLE TO PAYING AGENTS.
In case at any time any Paying Agent other than the Trustee shall have
been appointed by the Company and be then acting hereunder, the term "Trustee"
as used in this Article shall in such case (unless the context otherwise
requires) be construed as extending to and including such Paying Agent within
its meaning as fully for all intents and purposes as if such Paying Agent were
named in this Article in addition to or in place of the Trustee; PROVIDED,
HOWEVER,
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that Section 1212 shall not apply to the Company or any Affiliate of the Company
if it or such Affiliate acts as Paying Agent.
SECTION 1214. NO SUSPENSION OF REMEDIES.
Nothing contained in this Article shall limit the right of the Trustee
or the Holders of Notes to take any action to accelerate the maturity of the
Notes pursuant to Article Five or to pursue any rights or remedies hereunder or
under applicable law, except as provided in Article Five.
SECTION 1215. TRUST MONEYS NOT SUBORDINATED.
Notwithstanding anything contained herein to the contrary, payments
from cash or the proceeds of U.S. Government Obligations held in trust under
Article Fourteen hereof by the Trustee (or other qualifying trustee) and which
were deposited in accordance with the terms of Article Fourteen hereof and not
in violation of Section 1203 hereof for the payment of principal of (and
premium, if any) and interest on the Notes shall not be subordinated to the
prior payment of any Senior Indebtedness or subject to the restrictions set
forth in this Article Twelve, and none of the Holders shall be obligated to pay
over any such amount to the Company or any holder of Senior Indebtedness or any
other creditor of the Company.
SECTION 1216. TRUSTEE NOT FIDUCIARY FOR HOLDERS OF SENIOR INDEBTEDNESS.
The Trustee shall not be deemed to owe any fiduciary duty to the
holders of Senior Indebtedness and shall not be liable to any such holders if
the Trustee shall mistakenly, in the absence of gross negligence or willful
misconduct, pay over or distribute to Holders of Notes or to the Company or to
any other person cash, property or securities to which any holders of Senior
Indebtedness shall be entitled by virtue of this Article or otherwise. With
respect to the holders of Senior Indebtedness, the Trustee undertakes to perform
or to observe only such of its covenants or obligations as are specifically set
forth in this Article and no implied covenants or obligations with respect to
holders of Senior Indebtedness shall be read into this Indenture against the
Trustee.
ARTICLE THIRTEEN
GUARANTEES
SECTION 1301. NOTE GUARANTEES.
Each Subsidiary Guarantor hereby jointly and severally, absolutely,
unconditionally and irrevocably guarantees the Notes and obligations of the
Company hereunder and thereunder, and guarantees to each Holder of a Note
authenticated and delivered by the Trustee, and to the Trustee on behalf of such
Holder, that: (a) the principal of (and premium, if any) and interest on the
Notes will be paid in full when due, whether at Stated Maturity, by acceleration
or otherwise (including, without limitation, the amount that would become due
but for the
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operation of the automatic stay under Section 362(a) of the Bankruptcy Law),
together with interest on the overdue principal, if any, and interest on any
overdue interest, to the extent lawful, and all other obligations of the Company
to the Holders or the Trustee hereunder or thereunder will be paid in full or
performed, all in accordance with the terms hereof and thereof; and (b) in case
of any extension of time of payment or renewal of any Notes or of any such other
obligations, the same will be paid in full when due or performed in accordance
with the terms of the extension or renewal, whether at Stated Maturity, by
acceleration or otherwise, subject, however, in the case of clauses (a) and (b)
above, to the limitations set forth in Section 1305 hereof.
Each Subsidiary Guarantor hereby agrees that its obligations hereunder
shall be unconditional, irrespective of the validity, regularity or
enforceability of the Notes or this Indenture, the absence of any action to
enforce the same, any waiver or consent by any Holder of the Notes with respect
to any provisions hereof or thereof, any release of any other Subsidiary
Guarantor, the recovery of any judgment against the Company, any action to
enforce the same or any other circumstance which might otherwise constitute a
legal or equitable discharge or defense of a guarantor.
Each Subsidiary Guarantor hereby waives (to the extent permitted by
law) the benefits of diligence, presentment, demand for payment, filing of
claims with a court in the event of insolvency or bankruptcy of the Company, any
right to require a proceeding first against the Company or any other Person,
protest, notice and all demands whatsoever and covenants that the Note Guarantee
of such Subsidiary Guarantor shall not be discharged as to any Note except by
complete performance of the obligations contained in such Note, this Indenture
and such Note Guarantee. Each Subsidiary Guarantor acknowledges that the Note
Guarantee is a guarantee of payment and not of collection. Each of the
Subsidiary Guarantors hereby agrees that, in the event of a default in payment
of principal (or premium, if any) or interest on such Note, whether at its
Stated Maturity, by acceleration, purchase or otherwise, legal proceedings may
be instituted by the Trustee on behalf of, or by, the Holder of such Note,
subject to the terms and conditions set forth in this Indenture, directly
against each of the Subsidiary Guarantors to enforce such Subsidiary Guarantor's
Note Guarantee without first proceeding against the Company or any other
Subsidiary Guarantor. Each Subsidiary Guarantor agrees that if, after the
occurrence and during the continuance of an Event of Default, the Trustee or any
of the Holders are prevented by applicable law from exercising their respective
rights to accelerate the maturity of the Notes, to collect interest on the
Notes, or to enforce or exercise any other right or remedy with respect to the
Notes, such Subsidiary Guarantor will pay to the Trustee for the account of the
Holders, upon demand therefor, the amount that would otherwise have been due and
payable had such rights and remedies been permitted to be exercised by the
Trustee or any of the Holders.
If any Holder or the Trustee is required by any court or otherwise to
return to the Company or any Subsidiary Guarantor, or any custodian, trustee,
liquidator or other similar official acting in relation to either the Company or
any Subsidiary Guarantor, any amount paid by any of them to the Trustee or such
Holder, the Note Guarantee of each of the Subsidiary Guarantors, to the extent
theretofore discharged, shall be reinstated in full force and effect. Each
Subsidiary Guarantor further agrees that, as between each Subsidiary Guarantor,
on the
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one hand, and the Holders and the Trustee, on the other hand, (x) subject to
this Article Thirteen, the maturity of the obligations guaranteed hereby may be
accelerated as provided in Article Five hereof for the purposes of the Note
Guarantee of such Subsidiary Guarantor, notwithstanding any stay, injunction or
other prohibition preventing such acceleration in respect of the obligations
guaranteed hereby, and (y) in the event of any acceleration of such obligations
as provided in Article Five hereof, such obligations (whether or not due and
payable) shall forthwith become due and payable by each Subsidiary Guarantor for
the purpose of the Note Guarantee of such Subsidiary Guarantor.
Each Note Guarantee shall remain in full force and effect and continue
to be effective should any petition be filed by or against the Company for
liquidation or reorganization, should the Company become insolvent or make an
assignment for the benefit of creditors or should a receiver or trustee be
appointed for all or any significant part of the Company's assets, and shall, to
the fullest extent permitted by law, continue to be effective or be reinstated,
as the case may be, if at any time payment and performance of the Notes are,
pursuant to applicable law, rescinded or reduced in amount, or must otherwise be
restored or returned by any obligee on the Notes, whether as a "voidable
preference", "fraudulent transfer" or otherwise, all as though such payment or
performance had not been made. In the event that any payment, or any part
thereof, is rescinded, reduced, restored or returned, the Notes shall, to the
fullest extent permitted by law, be reinstated and deemed reduced only by such
amount paid and not so rescinded, reduced, restored or returned.
SECTION 1302. SEVERABILITY.
In case any provision of any Note Guarantee shall be invalid, illegal
or unenforceable, the validity, legality, and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
SECTION 1303. RESTRICTED SUBSIDIARIES.
If the Company or any of its Restricted Subsidiaries acquires or forms
a Restricted Subsidiary, the Company may cause any such Restricted Subsidiary
(and any other Restricted Subsidiary as required pursuant to Section 1015 or any
other provision of this Indenture) to (i) execute and deliver to the Trustee a
supplemental indenture in accordance with the provisions of Article Nine of this
Indenture pursuant to which such Restricted Subsidiary shall guarantee all of
the obligations on the Notes, whether for principal, premium, if any, interest
(including interest accruing after the filing of, or which would have accrued
but for the filing of, a petition by or against the Company under Bankruptcy
Law, whether or not such interest is allowed as a claim after such filing in any
proceeding under such law) and other amounts due in connection therewith
(including any fees, expenses and indemnities), on a senior unsecured
subordinated basis, and (ii) deliver to such Trustee an Opinion of Counsel
reasonably satisfactory to such Trustee to the effect that such supplemental
indenture has been duly executed and delivered by such Restricted Subsidiary and
is in compliance with the terms of this Indenture. Upon the execution of any
such supplemental indenture, the obligations of the Subsidiary Guarantors and
any such Restricted Subsidiary under their respective Note Guarantees shall
become joint and several and each reference to the "Subsidiary Guarantor" in
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this Indenture shall, subject to Section 1308, be deemed to refer to all
Subsidiary Guarantors, including such Restricted Subsidiary.
SECTION 1304. SUBORDINATION OF NOTE GUARANTEES.
The Note Guarantee issued by any Subsidiary Guarantor will be unsecured
senior subordinated obligations of such Subsidiary Guarantor, ranking PARI PASSU
with all other existing and future senior subordinated indebtedness of such
Subsidiary Guarantor, if any. The Indebtedness evidenced by such Note Guarantee
will be subordinated on the same basis to Guarantor Senior Indebtedness of such
Subsidiary Guarantor as the Notes are subordinated to Senior Indebtedness under
Article Twelve.
SECTION 1305. LIMITATION OF SUBSIDIARY GUARANTORS' LIABILITY.
Each Subsidiary Guarantor and by its acceptance hereof each Holder
confirms that it is the intention of all such parties that the guarantee by each
such Subsidiary Guarantor pursuant to its Note Guarantee not constitute a
fraudulent transfer or conveyance for purposes of the Bankruptcy Law, the
Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any
similar federal or state law or the provisions of its local law relating to
fraudulent transfer or conveyance. To effectuate the foregoing intention, the
Holders and each such Subsidiary Guarantor hereby irrevocably agree that the
obligations of such Subsidiary Guarantor under its Note Guarantee shall be
limited to the maximum amount that will not, after giving effect to all other
contingent and fixed liabilities of such Subsidiary Guarantor and after giving
effect to any collections from or payments made by or on behalf of any other
Subsidiary Guarantor in respect of the obligations of such other Subsidiary
Guarantor under its Note Guarantee or pursuant to Section 1305 hereof, result in
the obligations of such Subsidiary Guarantor under its Note Guarantee
constituting such fraudulent transfer or conveyance.
SECTION 1306. CONTRIBUTION.
In order to provide for just and equitable contribution among the
Subsidiary Guarantors, the Subsidiary Guarantors agree, INTER SE, that in the
event any payment or distribution is made by any Subsidiary Guarantor (a
"Funding Guarantor") under a Note Guarantee, such Funding Guarantor shall be
entitled to a contribution from all other Subsidiary Guarantors in a PRO RATA
amount based on the Adjusted Net Assets (as defined below) of each Subsidiary
Guarantor (including the Funding Guarantor) for all payments, damages and
expenses incurred by that Funding Guarantor in discharging the Company's
obligations with respect to the Notes or any other Subsidiary Guarantor's
obligations with respect to the Note Guarantee of such Subsidiary Guarantor.
"Adjusted Net Assets" of such Subsidiary Guarantor at any date shall mean the
lesser of (x) the amount by which the fair value of the property of such
Subsidiary Guarantor exceeds the total amount of liabilities, including, without
limitation, contingent liabilities (after giving effect to all other fixed and
contingent liabilities incurred or assumed on such date), but excluding
liabilities under the Note Guarantee of such Subsidiary Guarantor at such date
and (y) the amount by which the present fair salable value of the assets of such
Subsidiary Guarantor at such date exceeds the amount that will be required to
pay the probable liability of such Subsidiary Guarantor on its debts (after
giving effect to all other
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fixed and contingent liabilities incurred or assumed on such date), excluding
debt in respect of the Note Guarantee of such Subsidiary Guarantor, as they
become absolute and matured.
SECTION 1307. SUBROGATION.
Each Subsidiary Guarantor shall be subrogated to all rights of Holders
against the Company in respect of any amounts paid by any Subsidiary Guarantor
pursuant to the provisions of Section 1301; PROVIDED, HOWEVER, that, if an Event
of Default has occurred and is continuing, no Subsidiary Guarantor shall be
entitled to enforce or receive any payments arising out of, or based upon, such
right of subrogation until all amounts then due and payable by the Company under
this Indenture or the Notes shall have been paid in full.
SECTION 1308. REINSTATEMENT.
Each Subsidiary Guarantor hereby agrees (and each Person who becomes a
Subsidiary Guarantor shall agree) that the Note Guarantee provided for in
Section 1301 shall continue to be effective or be reinstated, as the case may
be, if at any time, payment, or any part thereof, of any obligations or interest
thereon is rescinded or must otherwise be restored by a Holder to the Company
upon the bankruptcy or insolvency of the Company or any Subsidiary Guarantor.
SECTION 1309. RELEASE OF A SUBSIDIARY GUARANTOR.
(a) If no Default exists or would exist under this Indenture, the Note
Guarantee issued by any Subsidiary Guarantor under this Indenture shall
be automatically and unconditionally released and discharged (i) upon
any sale, exchange or transfer to any Person not an Affiliate of the
Company or a Restricted Subsidiary of all of the Company's Capital
Stock in, or all or substantially all the assets of, such Subsidiary
Guarantor (which sale, exchange or transfer is not prohibited by this
Indenture) and (ii) so long as such Subsidiary Guarantor is not
otherwise required to provide a Note Guarantee pursuant to Section 1015
or any other provision of this Indenture.
(b) Concurrently with the discharge of the Notes under Section 401, the
defeasance of the Notes under Section 1402 hereof, or the covenant
defeasance of the Notes under Section 1403 hereof, the Subsidiary
Guarantors shall be released from all their obligations under their
Note Guarantees under this Article Thirteen.
SECTION 1310. BENEFITS ACKNOWLEDGED.
Each Subsidiary Guarantor acknowledges that it will receive direct and
indirect benefits from the financing arrangements contemplated by this Indenture
and that its guarantee and waivers pursuant to its Note Guarantee are knowingly
made in contemplation of such benefits.
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ARTICLE FOURTEEN
DEFEASANCE AND COVENANT DEFEASANCE
SECTION 1401. COMPANY'S OPTION TO EFFECT DEFEASANCE OR COVENANT
DEFEASANCE.
The Company may, at its option and at any time, effect defeasance of
the Notes under Section 1402, or covenant defeasance of the Notes under Section
1403, in accordance with the terms of the Notes and in accordance with this
Article.
SECTION 1402. DEFEASANCE AND DISCHARGE.
Upon the Company's exercise under Section 1401 of the option applicable
to this Section 1402, the Company and the Subsidiary Guarantors shall be deemed
to have been discharged from their obligations with respect to the Outstanding
Notes and the Note Guarantees, respectively, on the date the conditions set
forth in Section 1404 are satisfied (hereinafter, "defeasance"). For this
purpose, such defeasance means that the Company and the Subsidiary Guarantors
shall be deemed to have paid and discharged the entire Indebtedness represented
by the Outstanding Notes, which shall thereafter be deemed to be "Outstanding"
only for the purposes of Section 1405 and the other Sections of this Indenture
referred to in (A) and (B) below, and to have satisfied all its other
obligations under the Notes and this Indenture insofar as the Notes are
concerned (and the Trustee, at the expense of the Company, shall execute proper
instruments acknowledging the same), except for the following which shall
survive until otherwise terminated or discharged hereunder: (A) the rights of
Holders of such Outstanding Notes to receive, solely from the trust fund
described in Section 1404 and as more fully set forth in such Section, payments
in respect of the principal of (and premium, if any) and interest on such Notes
when such payments are due, (B) the Company's obligations with respect to such
Notes under Sections 304, 305, 306, 1002 and 1003, (C) the rights, powers,
trusts, duties and immunities of the Trustee hereunder, and the Company's
obligations in connection therewith and (D) this Article Fourteen. Subject to
compliance with this Article Fourteen, the Company may exercise its option under
this Section 1402 notwithstanding the prior exercise of its option under Section
1403 with respect to such Notes.
SECTION 1403. COVENANT DEFEASANCE.
Upon the Company's exercise under Section 1401 of the option applicable
to this Section 1403, the Company and the Subsidiary Guarantors shall be
released from their obligations under Section 801, 802 and Sections 1008 through
1019 with respect to the Outstanding Notes on and after the date the conditions
set forth in Section 1404 are satisfied (hereinafter, "covenant defeasance"),
and such Notes shall thereafter be deemed not to be "Outstanding" for the
purposes of any direction, waiver, consent or declaration or Act of Holders (and
the consequences of any thereof) in connection with such covenants, but shall
continue to be deemed "Outstanding" for all other purposes hereunder. For this
purpose, such covenant defeasance means that, with respect to such Outstanding
Notes, the Company and any Subsidiary Guarantor, as applicable, may omit to
comply with and shall have no liability in respect of any term, condition or
limitation set forth in any such covenant, whether directly or
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indirectly, by reason of any reference elsewhere herein to any such covenant or
by reason of reference in any such covenant to any other provision herein or in
any other document and such omission to comply shall not constitute a Default or
an Event of Default under Section 501(3) or 501(4) or otherwise, as the case may
be, but, except as specified above, the remainder of this Indenture and such
Notes shall be unaffected thereby.
SECTION 1404. CONDITIONS TO DEFEASANCE OR COVENANT DEFEASANCE.
The following shall be the conditions to application of either Section
1402 or Section 1403 to the Outstanding Notes:
(1) The Company shall irrevocably have deposited or caused to be
deposited with the Trustee (or another trustee satisfying the
requirements of Section 608 who shall agree to comply with the
provisions of this Article Fourteen applicable to it) as trust funds in
trust for the purpose of making the following payments, specifically
pledged as security for, and dedicated solely to, the benefit of the
Holders of such Notes, (A) an amount in cash, or (B) U.S. Government
Obligations which through the scheduled payment of principal and
interest in respect thereof in accordance with their terms will
provide, not later than one day before the due date of any payment of
principal (including any premium) and interest, if any, on such Notes,
money in an amount, or (C) a combination thereof, in each case in such
amounts as will be sufficient, in the opinion of a nationally
recognized firm of independent public accountants expressed in a
written certification thereof delivered to the Trustee, to pay and
discharge, and which shall be applied by the Trustee (or other
qualifying trustee) to pay and discharge, the principal of (and
premium, if any, on) and interest on such Outstanding Notes on the
Stated Maturity of such principal (and premium, if any) or installment
of interest; PROVIDED that the Trustee (or such qualifying trustee)
shall have been irrevocably instructed to apply such money or the
proceeds of such U.S. Government Obligations to said payments with
respect to such Notes.
(2) No Default or Event of Default with respect to such Notes shall
have occurred and be continuing on the date of such deposit or, insofar
as paragraphs (8) and (9) of Section 501 are concerned, at any time
during the period ending on the 91st day after the date of such deposit
(it being understood that this condition shall not be deemed satisfied
until the expiration of such period).
(3) Such defeasance or covenant defeasance shall not result in a breach
or violation of, or constitute a default under, this Indenture or any
material agreement to which the Company or any Subsidiary Guarantor is
a party or by which it is bound.
(4) In the case of an election under Section 1402, the Company shall
have delivered to the Trustee an Opinion of Counsel stating that (x)
the Company has received from, or there has been published by, the
Internal Revenue Service a ruling, or (y) since March 31, 1999, there
has been a change in the applicable federal income tax law or
interpretation of such federal income tax law, in either case to the
effect that, and based thereon such Opinion of Counsel shall confirm
that, the Holders of the Outstanding
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Notes will not recognize income, gain or loss for federal income tax
purposes as a result of such defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at the same
times as would have been the case if such defeasance had not occurred.
(5) In the case of an election under Section 1403, the Company shall
have delivered to the Trustee an Opinion of Counsel to the effect that
the Holders of such Notes will not recognize income, gain or loss for
federal income tax purposes as a result of such covenant defeasance and
will be subject to federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such
covenant defeasance had not occurred.
(6) In the case of defeasance under Section 1402 or covenant defeasance
under Section 1403, the Company shall have delivered to the Trustee an
Opinion of Counsel to the effect that (A) the trust funds will not be
subject to any rights of holders of Senior Indebtedness under Article
Twelve hereof, and (B) after the 91st day following the deposit or
after the date such opinion is delivered, the trust funds will not be
subject to the effect of any applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally.
(7) The Company shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with
the intent of preferring the holders of the Notes or any Note Guarantee
over the other creditors of either the Company or any Subsidiary
Guarantor with the intent of hindering, delaying or defrauding
creditors of either the Company or any Subsidiary Guarantor.
(8) The Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for relating to either the defeasance under Section
1402 or the covenant defeasance under Section 1403, as the case may be,
have been complied with.
SECTION 1405. DEPOSITED MONEY AND GOVERNMENT OBLIGATIONS TO BE HELD IN
TRUST; OTHER MISCELLANEOUS PROVISIONS.
Subject to the provisions of the last paragraph of Section 1003, all
money and U.S. Government Obligations (including the proceeds thereof) deposited
with the Trustee (or other qualifying trustee, collectively for purposes of this
Section 1405, the "Trustee") pursuant to Sections 1404 and 1406 in respect of
such Outstanding Notes shall be held in trust and applied by the Trustee, in
accordance with the provisions of such Notes and this Indenture, to the payment,
either directly or through any Paying Agent (including the Company acting as its
own Paying Agent) as the Trustee may determine, to the Holders of such Notes of
all sums due and to become due thereon in respect of principal (and premium, if
any) and interest, but such money need not be segregated from other funds except
to the extent required by law. Money and U.S. Government Obligations so held in
trust are not subject to Article Twelve.
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The Company shall pay and indemnify the Trustee against any tax, fee or
other charge imposed on or assessed against the U.S. Government Obligations
deposited pursuant to Section 1404 or the principal and interest received in
respect thereof other than any such tax, fee or other charge which by law is for
the account of the Holders of such Outstanding Notes.
Anything in this Article Fourteen to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon Company
Request any money or U.S. Government Obligations (or other property and any
proceeds therefrom) held by it as provided in Section 1404 which, in the opinion
of a nationally recognized firm of independent public accountants expressed in a
written certification thereof delivered to the Trustee, are in excess of the
amount thereof which would then be required to be deposited to effect an
equivalent defeasance or covenant defeasance, as applicable, in accordance with
this Article.
SECTION 1406. REINSTATEMENT.
If the Trustee or any Paying Agent is unable to apply any money in
accordance with Section 1405 by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, then the Company's obligations under this Indenture and such Notes
shall be revived and reinstated as though no deposit had occurred pursuant to
Section 1402 or 1403, as the case may be, until such time as the Trustee or
Paying Agent is permitted to apply all such money in accordance with Section
1405; provided, HOWEVER, that if the Company makes any payment of principal of
(or premium, if any) or interest on any such Note following the reinstatement of
its obligations, the Company shall be subrogated to the rights of the Holders of
such Notes to receive such payment from the money held by the Trustee or Paying
Agent.
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed as of the day and year first above written.
SUPREME INTERNATIONAL CORPORATION
By /s/ Rosemary B. Trudeau
Name: Rosemary B. Trudeau
Title: Vice President of Finance
SUPREME MUNSINGWEAR CANADA, INC.
By /s/ Rosemary B. Trudeau
Name: Rosemary B. Trudeau
Title: Secretary/Treasurer
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SUPREME INTERNATIONAL (DELAWARE), INC.
By /s/ Rosemary B. Trudeau
Name: Rosemary B. Trudeau
Title: Secretary/Treasurer
SUPREME INTERNATIONAL (N.Y.), INC.
By /s/ Rosemary B. Trudeau
Name: Rosemary B. Trudeau
Title: Secretary/Treasurer
SUPREME ACQUISITION CORPORATION
By /s/ Rosemary B. Trudeau
Name: Rosemary B. Trudeau
Title: Secretary/Treasurer
SUPREME INTERNATIONAL CORPORATION DE MEXICO, S.A. DE C.V.
By /s/ Rosemary B. Trudeau
Name: Rosemary B. Trudeau
Title: President
STATE STREET BANK AND TRUST COMPANY, as Trustee
By /s/ Angelita L. Pena
Name: Angelita L. Pena
Title: Assistant Vice President
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EXHIBIT A
[FACE OF NOTE]
SUPREME INTERNATIONAL CORPORATION
12 1/4% [Series B]1 Senior Subordinated Note due 2006
No. CUSIP No. __________
$ __________
SUPREME INTERNATIONAL CORPORATION, a Florida corporation (the
"Company", which term includes any successor Person under the Indenture
hereinafter referred to), for value received, promises to pay to ___________, or
its registered assigns, the principal sum of
____________________________________ Dollars ($___________), on [______], 2006.
[Interest Rate: 12 1/4% per annum.](1)
Interest Payment Dates: April 1 and October 1 of each year
commencing October 1, 1999.
Regular Record Dates: March 15 and September 15 of each
year.
Reference is hereby made to the further provisions of this Note set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
IN WITNESS WHEREOF, the Company has caused this Note to be signed
manually or by facsimile by its duly authorized officers.
Date: SUPREME INTERNATIONAL CORPORATION
By____________________________________________
Name:_________________________________________
Title:________________________________________
- --------------------------
(1) Include only for Exchange Notes.
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(Form of Trustee's Certificate of Authentication)
This is one of the 12 1/4% [Series B]2 Senior Subordinated Notes due
2006 referred to in the within-mentioned Indenture.
STATE STREET BANK AND TRUST
COMPANY, as Trustee
Dated: __________ By:___________________________________
Authorized Signatory
- --------------------------
(1) Include only for Exchange Notes.
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[REVERSE SIDE OF NOTE]
SUPREME INTERNATIONAL CORPORATION
12 1/4% [Series B](1) Senior Subordinated Note due 2006
1. PRINCIPAL AND INTEREST; SUBORDINATION.
The Company will pay the principal of this Note on April 1, 2006.
The Company promises to pay interest on the principal amount of this
Note on each Interest Payment Date, as set forth below, at the rate of 12 1/4%
per annum [(subject to adjustment as provided below)](2) [except that interest
accrued on this Note pursuant to the fourth paragraph of this Section 1 for
periods prior to the applicable Exchange Offer or Shelf Registration Date (as
such terms are defined in the Registration Rights Agreement referred to below)
will accrue at the rate or rates borne by the Notes from time to time during
such periods].(1)
Interest will be payable semi-annually (to the Holders of record of the
Notes (or any Predecessor Notes)) at the close of business on the March 15 or
September 15 immediately preceding the Interest Payment Date) on each Interest
Payment Date, commencing October 1, 1999.
[The Holder of this Note is entitled to the benefits of the
Registration Rights Agreement, dated April 6, 1999, among the Company, the
Subsidiary Guarantors and the Initial Purchasers named therein (the
"Registration Rights Agreement"). In the event that either (a) the Exchange
Offer Registration Statement (as such term is defined in the Registration Rights
Agreement) is not filed with the Securities and Exchange Commission on or prior
to the 65th calendar day following the date of original issue of the Notes, (b)
the Exchange Offer Registration Statement (as such term is defined in the
Registration Rights Agreement) has not been declared effective on or prior to
the 135th calendar day following the date of original issue of the Notes or (c)
the Exchange Offer is not consummated or a Shelf Registration Statement (as such
terms are defined in the Registration Rights Agreement) is not declared
effective on or prior to the 160th calendar day following the date of original
issue of the Notes, the interest rate borne by this Note shall be increased by
one-quarter of one percent per annum following such 65-day period in the case of
(a) above, following such 135-day period in the case of (b) above or following
such 160-day period in the case of (c) above, which rate will be increased by an
additional one-quarter of one percent per annum for each 90-day period that any
additional interest continues to accrue; PROVIDED that the aggregate increase in
such annual interest rate shall in no event exceed one percent. Upon (x) the
filing of the Exchange Offer Registration Statement after the 65-day period
described in clause (a)
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(1) Include only for Exchange Note.
(2) Include only for Initial Note.
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above, (y) the effectiveness of the Exchange Offer Registration Statement after
the 135-day period described in clause (b) above or (z) the consummation of the
Exchange Offer or the effectiveness of a Shelf Registration Statement, as the
case may be, after the 160-day period described in clause (c) above, the
interest rate borne by this Note from the date of such filing, effectiveness or
consummation, as the case may be, will be reduced to the interest rate set forth
above; PROVIDED, HOWEVER, that, if after any such reduction in interest rate, a
different event specified in clause (a), (b) or (c) above occurs, the interest
rate may again be increased pursuant to the foregoing provisions.](1)
Interest on this Note will accrue from the most recent date to which
interest has been paid [on this Note or the Note surrendered in exchange
herefor](2) or, if no interest has been paid, from April 6, 1999; PROVIDED that,
if there is no existing default in the payment of interest and if this Note is
authenticated between a Regular Record Date referred to on the face hereof and
the next succeeding Interest Payment Date, interest shall accrue from such
Interest Payment Date. Interest will be computed on the basis of a 360-day year
of twelve 30-day months.
The Company shall pay interest on overdue principal and premium, if
any, and interest on overdue installments of interest, to the extent lawful, at
a rate per annum equal to the rate of interest applicable to the Notes.
The indebtedness evidenced by the Notes is, to the extent and in the
manner provided in the Indenture, subordinate and subject in right of payment to
the prior payment in full of all Senior Indebtedness, and this Note is issued
subject to such provisions. Each Holder of this Note, by accepting the same, (a)
agrees to and shall be bound by such provisions, (b) authorizes and directs the
Trustee on its behalf to take such action as may be necessary or appropriate to
effectuate the subordination as provided in the Indenture and (c) appoints the
Trustee its attorney-in-fact for such purpose.
2. METHOD OF PAYMENT.
The Company will pay interest (except defaulted interest) on the
principal amount of the Notes on each April 1 and October 1 to the Persons who
are Holders (as reflected in the Note Register at the close of business on the
March 15 and September 15 immediately preceding the Interest Payment Date), in
each case, even if the Note is cancelled on registration of transfer or
registration of exchange after such Regular Record Date; PROVIDED that, with
respect to the payment of principal, the Company will make payment to the Holder
that surrenders this Note to any Paying Agent on or after April 1, 2006.
The Company will pay principal (premium, if any) and interest in money
of the United States that at the time of payment is legal tender for payment of
public and private debts. However, the Company may pay principal (premium, if
any) and interest by its check payable
- --------------------------
(1) Include only for Initial Note.
(2) Include only for Exchange Note.
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in such money. The Company may pay interest on the Notes either (a) by mailing a
check for such interest to a Holder's registered address (as reflected in the
Note Register) or (b) by wire transfer to an account located in the United
States maintained by the payee. If a payment date is a date other than a
Business Day at a Place of Payment, payment may be made at that place on the
next succeeding day that is a Business Day and no interest shall accrue for the
intervening period.
3. PAYING AGENT AND REGISTRAR.
Initially, the Trustee will act as Paying Agent and Note Registrar. The
Company may change any Paying Agent or Note Registrar upon written notice
thereto. The Company, any Subsidiary or any Affiliate of any of them may act as
Paying Agent, Note Registrar or co-registrar.
4. INDENTURE; LIMITATIONS.
The Company issued the Notes under an Indenture dated as of April 6,
1999 (the "Indenture"), among the Company, the Subsidiary Guarantors and State
Street Bank And Trust Company, as trustee (the "Trustee"). Capitalized terms
herein are used as defined in the Indenture unless otherwise indicated. The
terms of the Notes include those stated in the Indenture and those made part of
the Indenture by reference to the Trust Indenture Act. The Notes are subject to
all such terms, and Holders are referred to the Indenture and the Trust
Indenture Act for a statement of all such terms. To the extent permitted by
applicable law, in the event of any inconsistency between the terms of this Note
and the terms of the Indenture, the terms of the Indenture shall control.
The Notes are unsecured senior subordinated obligations of the Company.
The Indenture limits the aggregate principal amount of the Notes to
$125,000,000.
5. REDEMPTION.
OPTIONAL REDEMPTION. The Notes may be redeemed at the option of the
Company, in whole or in part, at any time and from time to time on or after
April 1, 2003, at the following Redemption Prices (expressed in percentages of
principal amount), plus accrued and unpaid interest, if any, to the Redemption
Date (subject to the right of Holders of record on the relevant Regular Record
Date to receive interest due on an Interest Payment Date that is on or prior to
the Redemption Date), if redeemed during the 12-month period beginning April 1
of each of the years set forth below:
Redemption
Year Price
----------------------------- --------------------
2003 106.125%
2004 103.063%
2005 and thereafter 100.000%
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In addition to the optional redemption of the Notes in accordance with
the provisions of the preceding paragraph, at any time prior to April 1, 2002,
the Company may redeem up to 35% of the aggregate principal amount of the Notes
(including the principal amount of any Additional Notes), within 60 days of one
or more Public Equity Offerings with the net proceeds of such offerings, at
112.25% of the principal amount thereof, together with accrued and unpaid
interest, if any, to the Redemption Date (subject to the right of holders of
record on relevant Regular Record Dates to receive interest due on an Interest
Payment Date that is on or prior to the Redemption Date); PROVIDED, HOWEVER,
that at least 65% of the aggregate principal amount of the Notes originally
issued (including the principal amount of any Additional Notes) remains
outstanding thereafter.
If less than all the Notes are to be redeemed pursuant to the preceding
two paragraphs, the Trustee shall select the Notes or portions thereof to be
redeemed in compliance with the requirements of the principal national
securities exchange, if any, on which the Notes being redeemed are listed, or if
the Notes are not so listed, by such other method the Trustee shall deem fair
and appropriate; PROVIDED that no such partial redemption shall reduce the
portion of the principal amount of a Note not redeemed to less than $1,000;
provided further that any such redemption pursuant to the provisions relating to
a Public Equity Offering shall be made on a pro rata basis or on as nearly a pro
rata basis as practicable (subject to the procedures of DTC or any other
depositary).
Notice of a redemption will be mailed, first-class postage prepaid, at
least 30 days but not more than 60 days before the Redemption Date to each
Holder to be redeemed at such Holder's last address as it appears in the Note
Register. Notes in original denominations larger than $1,000 may be redeemed in
part in integral multiples of $1,000. On and after the Redemption Date, interest
ceases to accrue on Notes or portions of Notes called for redemption, unless the
Company defaults in the payment of the Redemption Price.
6. REPURCHASE UPON A CHANGE IN CONTROL AND ASSET SALES.
Upon the occurrence of (a) a Change in Control, the Holders of the
Notes will have the right to require that the Company purchase such Holder's
outstanding Notes, in whole or in part, at a purchase price of 101% of the
principal amount thereof, plus accrued and unpaid interest, if any, to the date
of purchase and (b) Asset Sales, the Company may be obligated to make offers to
purchase Notes with a portion of the Net Cash Proceeds of such Asset Sales at a
redemption price of 100% of the principal amount thereof plus accrued and unpaid
interest, if any, to the date of purchase.
7. DENOMINATIONS; TRANSFER; EXCHANGE.
The Notes are in registered form without coupons, in denominations of
$1,000 and multiples of $1,000 in excess thereof. A Holder may register the
transfer or exchange of Notes in accordance with the Indenture. The Note
Registrar may require a Holder, among other things, to furnish appropriate
endorsements and transfer documents and to pay any taxes and fees required by
law or permitted by the Indenture. The Note Registrar need not register
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the transfer or exchange of any Notes selected for redemption (except the
unredeemed portion of any Note being redeemed in part).
8. PERSONS DEEMED OWNERS.
A Holder may be treated as the owner of a Note for all purposes.
9. UNCLAIMED MONEY.
If money for the payment of principal (premium, if any) or interest
remains unclaimed for two years, the Trustee and the Paying Agent will pay the
money back to the Company at its request. After that, Holders entitled to the
money must look to the Company for payment, unless an abandoned property law
designates another Person, and all liability of the Trustee and such Paying
Agent with respect to such money shall cease.
10. DISCHARGE PRIOR TO REDEMPTION OR MATURITY.
If the Company irrevocably deposits, or causes to be deposited, with
the Trustee money or U.S. Government Obligations sufficient to pay the then
outstanding principal of (premium, if any) and accrued interest on the Notes (a)
to redemption or maturity, the Company will be discharged from the Indenture and
the Notes, except in certain circumstances for certain sections thereof, and (b)
to the Stated Maturity, the Company will be discharged from certain covenants
set forth in the Indenture.
11. AMENDMENT; SUPPLEMENT; WAIVER.
Subject to certain exceptions, the Indenture or the Notes may be
amended or supplemented with the consent of the Holders of at least a majority
in aggregate principal amount of the Notes then outstanding, and any existing
default or compliance with any provision may be waived with the consent of the
Holders of a majority in aggregate principal amount of the Notes then
outstanding. Without notice to or the consent of any Holder, the parties thereto
may amend or supplement the Indenture or the Notes to, among other things, cure
any ambiguity, defect or inconsistency and make any change that does not
adversely affect the rights of any Holder.
12. RESTRICTIVE COVENANTS.
The Indenture contains certain covenants, including, without
limitation, covenants with respect to the following matters: (i) Indebtedness;
(ii) Restricted Payments; (iii) issuances and sales of Capital Stock of
Restricted Subsidiaries; (iv) transactions with Affiliates; (v) Liens; (vi)
purchase of Notes upon a Change in Control; (vii) disposition of proceeds of
Asset Sales; (viii) guarantees of Indebtedness by Restricted Subsidiaries; (ix)
dividend and other payment restrictions affecting Restricted Subsidiaries; (x)
merger and certain transfers of assets; and (xi) limitation on Unrestricted
Subsidiaries. Within 120 days after the end of each fiscal year and within 45
days after each fiscal quarter, the Company must report to the Trustee on
compliance with such limitations.
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13. SUCCESSOR PERSONS.
When a successor person or other entity assumes all the obligations of
its predecessor under the Notes and the Indenture, the predecessor person will
be released from those obligations.
14. REMEDIES FOR EVENTS OF DEFAULT.
If an Event of Default, as defined in the Indenture, occurs and is
continuing, the Trustee or the Holders of not less than 25% in aggregate
principal amount of the Notes then outstanding may declare all the Notes to be
immediately due and payable. If a bankruptcy or insolvency default with respect
to the Company or any of its Significant Subsidiaries occurs and is continuing,
the Notes automatically become immediately due and payable. Holders may not
enforce the Indenture or the Notes except as provided in the Indenture. The
Trustee may require indemnity satisfactory to it before it enforces the
Indenture or the Notes. Subject to certain limitations, Holders of at least a
majority in aggregate principal amount of the Notes then outstanding may direct
the Trustee in its exercise of any trust or power.
15. NOTE GUARANTEES.
The Company's obligations under the Notes are fully, irrevocably and
unconditionally guaranteed on a senior unsecured basis, to the extent set forth
in the Indenture, by each of the Subsidiary Guarantors.
16. TRUSTEE DEALINGS WITH COMPANY.
The Trustee under the Indenture, in its individual or any other
capacity, may become the owner or pledgee of Notes and may make loans to, accept
deposits from, perform services for, and otherwise deal with, the Company and
its Affiliates as if it were not the Trustee.
17. AUTHENTICATION.
This Note shall not be valid until the Trustee signs the certificate of
authentication on the other side of this Note.
18. ABBREVIATIONS.
Customary abbreviations may be used in the name of a Holder or an
assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the
entireties), JT TEN (= joint tenants with right of survivorship and not as
tenants in common), CUST (= Custodian) and U/G/M/A (= Uniform Gifts to Minors
Act).
The Company will furnish to any Holder upon written request and without
charge a copy of the Indenture. Requests may be made to Supreme International
Corporation, 3000 NW 107th Avenue, Miami, Florida 33172, Attention: Chief
Financial Officer.
123
<PAGE>
[FORM OF TRANSFER NOTICE]
FOR VALUE RECEIVED the undersigned registered holder hereby sell(s),
assign(s) and transfer(s) unto
INSERT TAXPAYER IDENTIFICATION NO.
(Please print or typewrite name and address including zip code of assignee)
the within Note and all rights thereunder, hereby irrevocably constituting and
appointing
attorney to transfer such Note on the books of the Company with full power of
substitution in the premises.
[THE FOLLOWING PROVISION TO BE INCLUDED
ON ALL CERTIFICATES
EXCEPT PERMANENT OFFSHORE PHYSICAL
CERTIFICATES]
In connection with any transfer of this Note occurring prior to the
date which is the earlier of the date of an effective Registration Statement or
[______], 1999, the undersigned confirms that without utilizing any general
solicitation or general advertising that:
CHECK ONE
(a) this Note is being transferred in compliance with the
exemption from registration under the Securities Act of 1933,
as amended, provided by Rule 144A thereunder.
OR
(b) this Note is being transferred other than in accordance with
(a) above and documents are being furnished which comply with
the conditions of transfer set forth in this Note and the
Indenture.
124
<PAGE>
If none of the foregoing boxes is checked, the Trustee or other Note Registrar
shall not be obligated to register this Note in the name of any Person other
than the Holder hereof unless and until the conditions to any such transfer of
registration set forth herein and in Sections 311 and 312 of the Indenture shall
have been satisfied.
Date:
NOTICE: The signature to this assignment
must correspond with the name as written
upon the face of the within-mentioned
instrument in every particular, without
alteration or any change whatsoever.
Signature Guarantee:
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED.
Signatures must be guaranteed by an "eligible guarantor institution"
meeting the requirements of the Note Registrar, which requirements include
membership or participation in the Security Transfer Agent Medallion Program
("STAMP") or such other "signature guarantee program" as may be determined by
the Note Registrar in addition to, or in substitution for, STAMP, all in
accordance with the Securities Exchange Act of 1934, as amended.
The undersigned represents and warrants that it is purchasing this Note
for its own account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act of
1933, as amended, and is aware that the sale to it is being made in reliance on
Rule 144A and acknowledges that it has received such information regarding the
Company as the undersigned has requested pursuant to Rule 144A or has determined
not to request such information and that it is aware that the transferor is
relying upon the undersigned's foregoing representations in order to claim the
exemption from registration provided by Rule 144A.
Dated:
NOTICE: To be executed by an executive
officer
125
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Note purchased by the Company pursuant to
Section 1013 or Section 1014 of the Indenture, check the Box: ].
If you wish to have a portion of this Note purchased by the Company
pursuant to Section 1013 or Section 1014 of the Indenture, state the amount (in
original principal amount) below:
$______________________.
Date:
Your Signature:
(Sign exactly as your name appears on the other side of this Note)
Signature Guarantee:
Signatures must be guaranteed by an "eligible guarantor institution"
meeting the requirements of the Note Registrar, which requirements include
membership or participation in the Security Transfer Agent Medallion Program
("STAMP") or such other "signature guarantee program" as may be determined by
the Note Registrar in addition to, or in substitution for, STAMP, all in
accordance with the Securities Exchange Act of 1934, as amended.
126
<PAGE>
FIRST SUPPLEMENTAL INDENTURE
This FIRST SUPPLEMENTAL INDENTURE (this "Supplemental
Indenture") dated as of April 6, 1999 among SUPREME INTERNATIONAL CORPORATION, a
corporation duly organized and existing under the laws of the State of Florida
(herein called the "Company"), SUPREME MUNSINGWEAR CANADA, INC., a corporation
organized under the laws of Canada, SUPREME INTERNATIONAL (DELAWARE), INC., a
Delaware corporation, SUPREME INTERNATIONAL (N.Y.), INC., a New York
corporation, SUPREME ACQUISITION CORPORATION, a Florida corporation, and SUPREME
INTERNATIONAL CORPORATION DE MEXICO, S.A. DE C.V., a corporation organized under
the laws of Mexico (collectively, the "Subsidiary Guarantors"), PERRY ELLIS
INTERNATIONAL, INC., a New York corporation (APerry Ellis International), and
STATE STREET BANK AND TRUST COMPANY, a Massachusetts trust company, as Trustee
(herein called the "Trustee").
R E C I T A L S
WHEREAS, pursuant to Section 1303 of the Indenture dated April
6, 1999 among the Company, the Subsidiary Guarantors and the Trustee (the
AIndenture@), the Company has undertaken to cause any Restricted Subsidiary (as
defined in the Indenture) which the Company acquires to execute a supplemental
indenture pursuant to which such Restricted Subsidiary guarantees all of the
obligations on the Notes issued pursuant to the Indenture;
WHEREAS, the Company has on this date acquired all of the
capital stock of Perry Ellis International;
WHEREAS, Perry Ellis International by this Supplemental
Indenture, pursuant to and as contemplated by Section 1303 and Article Nine of
the Indenture, desires to expressly, irrevocably and unconditionally assume the
covenants, agreements, obligations and undertakings of a Subsidiary Guarantor
under the Indenture as set forth therein; and
WHEREAS, all conditions and requirements necessary to make
this Supplemental Indenture a valid and binding instrument in accordance with
its terms upon Perry Ellis International, and upon each of the Company and the
Subsidiary Guarantors, have been performed and fulfilled by the applicable
parties hereto and the execution and delivery thereof have been in all respects
duly authorized by the applicable parties hereto.
NOW, THEREFORE, in consideration of the foregoing and for
other good and valuable consideration, the receipt of which is hereby
acknowledged, each party agrees, for the benefit of the others and for the equal
and ratable benefit of the holders of the Notes as follows:
<PAGE>
ARTICLE ONE
DEFINITIONS
SECTION 1.01. DEFINITIONS. For all purposes of this
Supplemental Indenture, except as otherwise herein expressly provided or unless
the context otherwise requires: (i) the terms and expressions used herein shall
have the same meanings as corresponding terms and expressions used in the
Indenture; and (ii) the words "herein," "hereof" and "hereby" and other words of
similar import used in this Supplemental Indenture refer to this Supplemental
Indenture as a whole and not to any particular section hereof.
ARTICLE TWO
ASSUMPTION OF OBLIGATIONS AND AGREEMENT TO GUARANTEE
SECTION 2.01. ASSUMPTION OF OBLIGATIONS OF SUBSIDIARY
GUARANTOR. Perry Ellis International hereby expressly, irrevocably and
unconditionally assumes each and every covenant, agreement, obligation and
undertaking of a Subsidiary Guarantor in the Indenture as if Perry Ellis had
been named a Subsidiary Guarantor in the Indenture.
SECTION 2.02. ACCEPTANCE OF THE COMPANY AND THE INITIAL
GUARANTORS. Each of the Company and the Initial Guarantors hereby expressly
accepts the addition of Perry Ellis International as a Subsidiary Guarantor and
further agrees to be bound by all of the provisions of this Supplemental
Indenture.
ARTICLE THREE
MISCELLANEOUS PROVISIONS
SECTION 3.01. EFFECT OF SUPPLEMENTAL INDENTURE. Upon the
execution and delivery of this Supplemental Indenture by the Company, the
Subsidiary Guarantors, Perry Ellis International and the Trustee, the Indenture
shall be supplemented in accordance herewith, and this Supplemental Indenture
shall form a part of the Indenture for all purposes, and every Holder of a Note
heretofore or hereafter authenticated and delivered under the Indenture shall be
bound thereby.
SECTION 3.02. INDENTURE REMAINS IN FULL FORCE AND EFFECT.
Except as expressly amended and supplemented hereby, the Indenture is in all
respects ratified and confirmed and all terms, conditions and provisions of the
Indenture shall remain in full force and effect.
<PAGE>
SECTION 3.03. INDENTURE AND SUPPLEMENTAL INDENTURE CONSTRUED
TOGETHER. This Supplemental Indenture is an indenture supplemental to and in
implementation of the Indenture, and the Indenture and this Supplemental
Indenture shall henceforth be read and construed together.
SECTION 3.04. CONFLICT WITH TRUST INDENTURE ACT. If any
provision of this Supplemental Indenture limits, qualifies or conflicts with any
provision of the Trust Indenture Act that is required under such Act to be part
of and govern any provision of this Supplemental Indenture, the provision of
such Act shall control. If any provision of this Supplemental Indenture modifies
or excludes any provision of the Trust Indenture Act that may be so modified or
excluded, the provision of such Act shall be deemed to apply to the Indenture as
so modified or to be excluded by this Supplemental Indenture, as the case may
be.
SECTION 3.05. SEPARABILITY CLAUSE. In case any provision in
this Supplemental Indenture shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
SECTION 3.06. EFFECT OF HEADINGS. The Article and Section
headings herein are for convenience only and shall not affect the construction
hereof.
SECTION 3.07. BENEFITS OF SUPPLEMENTAL INDENTURE, ETC. Nothing
in this Supplemental Indenture, the Indenture or the Notes express or implied,
shall give to any Person, other than the parties hereto and thereto and their
successors hereunder and thereunder and the Holders, any benefit of any legal or
equitable right, remedy or claim under the Indenture, this Supplemental
Indenture or the Notes.
SECTION 3.08. SUCCESSORS AND ASSIGNS. All covenants and
agreements in this Supplemental Indenture by Perry Ellis International shall
bind its successors and assigns, whether so expressed or not.
SECTION 3.09. CERTAIN DUTIES AND RESPONSIBILITIES OF TRUSTEE.
In entering into this Supplemental Indenture, the Trustee shall be entitled to
the benefit of every provision of the Indenture relating to the conduct or
affecting the liability of or affording protection to the Trustee, whether or
not elsewhere herein so provided. The Trustee shall not be responsible in any
manner whatsoever for or in respect of the validity or sufficiency of this
Supplemental Indenture or for or in respect of the recitals contained herein,
all of which recitals are made solely by the Company, the Subsidiary Guarantors
and Perry Ellis International.
SECTION 3.10. GOVERNING LAW. This Supplemental Indenture shall
be governed by and construed in accordance with the laws of the State of New
York.
This Supplemental Indenture may be executed in counterparts,
each of which, when so executed, shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same instrument.
<PAGE>
PERRY ELLIS INTERNATIONAL INC.
By /s/ Karen Bingham
Name: Karen Bingham
Title: General Counsel
SUPREME INTERNATIONAL CORPORATION
By /s/ Karen Bingham
Name: Karen Bingham
Title: General Counsel
SUPREME MUNSINGWEAR CANADA, INC.
By /s/ Karen Bingham
Name: Karen Bingham
Title: Vice President
SUPREME INTERNATIONAL (DELAWARE), INC.
By /s/ Karen Bingham
Name: Karen Bingham
Title: Vice President
<PAGE>
SUPREME INTERNATIONAL (N.Y.), INC.
By /s/ Karen Bingham
Name: Karen Bingham
Title: Vice President
SUPREME ACQUISITION CORPORATION
By /s/ Karen Bingham
Name: Karen Bingham
Title: Vice President
SUPREME INTERNATIONAL
CORPORATION DE MEXICO, S.A.
DE C.V.
By /s/ Karen Bingham
Name: Karen Bingham
Title: Vice President
STATE STREET BANK AND TRUST COMPANY,
as Trustee
By /s/ Angelita L. Pena
Name: Angelita L. Pena
Title: Assistant Vice President
EXHIBIT 4.3
-------------------------------------------------------------------------------
REGISTRATION RIGHTS AGREEMENT
among
SUPREME INTERNATIONAL CORPORATION
COMPANY
SUPREME MUNSINGWEAR CANADA, INC.
SUPREME INTERNATIONAL (DELAWARE), INC.
SUPREME ACQUISITION CORPORATION
SUPREME INTERNATIONAL (N.Y.), INC.
SUPREME INTERNATIONAL CORPORATION DE MEXICO, SA DE C.V.
GUARANTORS
and
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith Incorporated,
BANCBOSTON ROBERTSON STEPHENS INC.
WASSERSTEIN PERELLA SECURITIES, INC.
BARINGTON CAPITAL GROUP, L.P.
INITIAL PURCHASERS
Dated: April 6, 1999
- --------------------------------------------------------------------------------
<PAGE>
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") dated as of April
6, 1999 is made and entered into among SUPREME INTERNATIONAL CORPORATION (the
"Company"), a Florida corporation, each of SUPREME MUNSINGWEAR CANADA, INC., a
corporation organized under the laws of Canada, SUPREME INTERNATIONAL
(DELAWARE), INC., a Delaware corporation, SUPREME INTERNATIONAL (N.Y.), INC., a
New York corporation, SUPREME ACQUISITION CORPORATION, a Florida corporation,
and SUPREME INTERNATIONAL CORPORATION DE MEXICO, S.A. DE C.V., a corporation
organized under the laws of Mexico (collectively, the AGuarantors@) and MERRILL
LYNCH, PIERCE, FENNER & SMITH INCORPORATED ("Merrill Lynch"), BANCBOSTON
ROBERTSON STEPHENS INC., WASSERSTEIN PERELLA SECURITIES, INC. and BARINGTON
CAPITAL GROUP, L.P. (collectively, the "Initial Purchasers").
This Agreement is made pursuant to the Purchase Agreement dated March
31, 1999 among the Company, the Guarantors and the Initial Purchasers (the
"Purchase Agreement"), which provides for the issue and sale by the Company to
the Initial Purchasers of $100,000,000 aggregate principal amount of the
Company=s 123% Senior Subordinated Notes due 2006 (the "Notes"). In order to
induce the Initial Purchasers to enter into the Purchase Agreement, the Company
and the Guarantors have agreed to provide to the Initial Purchasers and their
direct and indirect transferees the registration rights set forth in this
Agreement. The execution and delivery of this Agreement is a condition to the
closing under the Purchase Agreement.
In consideration of the foregoing, the parties hereto agree as follows:
1. DEFINITIONS. As used in this Agreement, the following capitalized
defined terms shall have the following meanings:
"1933 ACT" shall mean the Securities Act of 1933, as amended from time
to time, and the rules and regulations of the SEC promulgated thereunder.
"1934 ACT" shall mean the Securities Exchange Act of 1934, as amended
from time to time, and the rules and regulations of the SEC promulgated
thereunder.
"COMPANY" shall have the meaning set forth in the preamble of this
Agreement and also includes the Company's successors.
"DEPOSITARY" shall mean The Depository Trust Company, or any other
depositary appointed by the Company; PROVIDED, HOWEVER, that such depositary
must have an address in the Borough of Manhattan in the City of New York.
"EXCHANGE NOTES" shall mean 123% Series B Senior Subordinated Notes due
2009 of the Company, issued under the Indenture, containing terms identical to
the Notes (except that (a) interest thereon shall accrue from the last date on
which interest was paid on the Notes or, if no such interest has been paid, from
April 6, 1999, (b) the transfer restrictions thereon shall be eliminated and (c)
certain provisions relating to an increase in the stated rate of interest
thereon
<PAGE>
shall be eliminated), to be offered to Holders of Registrable Notes in exchange
for Notes pursuant to the Exchange Offer.
"EXCHANGE OFFER" shall mean the exchange offer by the Company of
Exchange Notes for Registrable Notes pursuant to Section 2(a) hereof.
"EXCHANGE OFFER REGISTRATION" shall mean a registration under the 1933
Act effected pursuant to Section 2(a) hereof.
"EXCHANGE OFFER REGISTRATION STATEMENT" shall mean an exchange offer
registration statement on Form S-4 (or, if applicable, on another appropriate
form), and all amendments and supplements to such registration statement, in
each case including the Prospectus contained therein, all exhibits thereto and
all material incorporated by reference therein.
AGUARANTORS@ shall have the meaning set forth in the preamble of this
Agreement.
"HOLDERS" shall mean the Initial Purchasers, for so long as they own
any Registrable Notes, and each of their successors, assigns and direct and
indirect transferees who become registered owners of Registrable Notes under the
Indenture.
"INDENTURE" shall mean the Indenture relating to the Notes dated as of
April 6, 1999, among the Company, the Guarantors and State Street Bank and Trust
Company as trustee (the "TRUSTEE"), as the same may be amended from time to time
in accordance with the terms thereof.
"INITIAL PURCHASERS" shall have the meaning set forth in the preamble
of this Agreement.
"ISSUE DATE" means April 6, 1999.
"MAJORITY HOLDERS" shall mean the Holders of a majority of the
aggregate principal amount of Registrable Notes outstanding; PROVIDED that
whenever the consent or approval of Holders of a specified percentage of
Registrable Notes is required hereunder, Registrable Notes held by the Company
or any of its affiliates (as such term is defined in Rule 405 under the 1933
Act) (other than the Initial Purchasers or subsequent holders of Registrable
Notes if such subsequent holders are deemed to be such affiliates solely by
reason of their holding of such Registrable Notes) shall be disregarded in
determining whether such consent or approval was given by the Holders of such
required percentage or amount.
"NOTES" shall have the meaning set forth in the preamble of this
Agreement.
"PARTICIPATING BROKER-DEALER" shall have the meaning set forth in
Section 3(f).
"PERSON" shall mean an individual, partnership, limited liability
company, corporation, trust or unincorporated organization, or a government or
agency or political subdivision thereof.
"PROSPECTUS" shall mean the prospectus included in a Registration
Statement, including any preliminary prospectus, and any such prospectus as
amended or supplemented by any
2
<PAGE>
prospectus supplement, including a prospectus supplement with respect to the
terms of the offering of any portion of the Registrable Notes covered by a Shelf
Registration Statement, and by all other amendments and supplements to a
prospectus, including post-effective amendments, and in each case including all
material incorporated by reference therein.
"PURCHASE AGREEMENT" shall have the meaning set forth in the preamble
of this Agreement.
"REGISTRABLE NOTES" shall mean the Notes; PROVIDED, HOWEVER, that any
Notes shall cease to be Registrable Notes when (i) a Registration Statement with
respect to such Notes shall have been declared effective under the 1933 Act and
such Notes shall have been disposed of pursuant to such Registration Statement,
(ii) such Notes shall have been sold to the public pursuant to Rule 144(k) (or
any similar provision then in force, but not Rule 144A) under the 1933 Act,
(iii) such Notes shall have ceased to be outstanding or (iv) such Notes have
been exchanged for Exchange Notes upon consummation of the Exchange Offer.
"REGISTRATION EXPENSES" shall mean any and all expenses incident to
performance of or compliance by the Company and the Guarantors with this
Agreement, including without limitation: (i) all SEC, stock exchange or National
Association of Securities Dealers, Inc. ("NASD") registration and filing fees,
(ii) all fees and expenses incurred in connection with compliance with state
securities or blue sky laws and compliance with the rules of the NASD (including
reasonable fees and disbursements of one counsel for any underwriters and
Holders in connection with state or blue sky qualification of any of the
Exchange Notes or Registrable Notes), (iii) all expenses of any Persons in
preparing or assisting in preparing, word processing, printing and distributing
any Registration Statement, any Prospectus, any amendments or supplements
thereto, any underwriting agreements, securities sales agreements, certificates
representing the Exchange Notes and other documents relating to the performance
of and compliance with this Agreement, (iv) all rating agency fees, (v) all fees
and expenses incurred in connection with the listing, if any, of any of the
Registrable Notes on any securities exchange or exchanges, (vi) the fees and
disbursements of counsel for the Company and its subsidiaries and, in the case
of a Shelf Registration Statement, the reasonable fees and disbursements
(including the expenses of preparing and distributing any underwriting or
securities sales agreements) of one counsel for the Holders (which counsel shall
be selected in writing by the Majority Holders), (vii) the fees and expenses of
the independent public accountants of the Company and the Guarantors, including
the expenses of any special audits or "cold comfort" letters required by or
incident to such performance and compliance, (viii) the fees and expenses of the
Trustee, and any escrow agent or custodian, (ix) all fees and disbursements
relating to the qualification of the Indenture under applicable securities laws,
(x) the fees and expenses of a "qualified independent underwriter" as defined by
Conduct Rule 2720 of the NASD, if required by the NASD rules, in connection with
the offering of the Registrable Notes; and (xi) in the case of any underwritten
offering, any fees and disbursements of the underwriters customarily required to
be paid by issuers or sellers of securities and the reasonable fees and expenses
of any experts retained by the Company and the Guarantors in connection with any
Registration Statement, but excluding underwriting discounts and commissions and
transfer taxes, if any, relating to the sale or disposition of Registrable Notes
by a Holder.
3
<PAGE>
"REGISTRATION STATEMENT" shall mean any registration statement of the
Company and the Guarantors which covers any of the Exchange Notes or Registrable
Notes pursuant to the provisions of this Agreement, and all amendments and
supplements to any such Registration Statement, including post-effective
amendments, in each case including the Prospectus contained therein, all
exhibits thereto and all material incorporated by reference therein.
"SEC" shall mean the Securities and Exchange Commission.
"SHELF REGISTRATION" shall mean a registration effected pursuant to
Section 2(b) hereof.
"SHELF REGISTRATION STATEMENT" shall mean a shelf registration
statement of the Company and the Guarantors pursuant to the provisions of
Section 2(b) of this Agreement which covers all of the then Registrable Notes on
an appropriate form under Rule 415 under the 1933 Act, or any similar rule that
may be adopted by the SEC, and all amendments and supplements to such
registration statement, including post-effective amendments, in each case
including the Prospectus contained therein, all exhibits thereto and all
material incorporated by reference therein.
"TRUSTEE" shall mean the trustee with respect to the Notes under the
Indenture.
2. REGISTRATION UNDER THE 1933 ACT.
(a) EXCHANGE OFFER REGISTRATION. The Company and the
Guarantors shall, at their own expense (i) file within 65 days after the Issue
Date an Exchange Offer Registration Statement covering the offer by the Company
to the Holders to exchange all of the Registrable Notes for Exchange Notes, (ii)
use their best efforts to cause such Exchange Offer Registration Statement to be
declared effective by the SEC within 135 days after the Issue Date, (iii) to
cause such Registration Statement to remain effective until the closing of the
Exchange Offer and (iv) to use their best efforts to consummate the Exchange
Offer within 160 days following the Issue Date. The Exchange Notes will be
issued under the Indenture. Upon the effectiveness of the Exchange Offer
Registration Statement, the Company shall promptly commence the Exchange Offer,
it being the objective of such Exchange Offer to enable each Holder (other than
Participating Broker-Dealers) eligible and electing to exchange Registrable
Notes for Exchange Notes (assuming that such Holder (i) is not an affiliate of
the Company within the meaning of Rule 405 under the 1933 Act, (ii) acquires the
Exchange Notes in the ordinary course of such Holder's business and (iii) has no
arrangements or understandings with any Person to participate in the Exchange
Offer for the purpose of distributing the Exchange Notes) to trade such Exchange
Notes from and after their receipt without any limitations or restrictions under
the 1933 Act and without material restrictions under the securities laws of a
substantial proportion of the several states of the United States.
In connection with the Exchange Offer, the Company and the
Guarantors shall:
(i) mail to each Holder a copy of the Prospectus forming part
of the Exchange Offer Registration Statement, together with an appropriate
letter of transmittal and related documents;
4
<PAGE>
(ii) keep the Exchange Offer open for not less than 30 days
after the date notice thereof is mailed to the Holders (or longer if required by
applicable law);
(iii) use the services of the Depositary for the Exchange
Offer with respect to Notes evidenced by global certificates;
(iv) permit Holders to withdraw tendered Registrable Notes at
any time prior to 5:00 P.M. New York City time, on the last business day on
which the Exchange Offer shall remain open, by sending to the institution
specified in the notice, a telegram, telex, facsimile transmission or letter
setting forth the name of such Holder, the principal amount of Registrable Notes
delivered for exchange, and a statement that such Holder is withdrawing its
election to have such Notes exchanged; and
(v) otherwise comply in all respects with all applicable laws
relating to the Exchange Offer.
As soon as practicable after the close of the Exchange Offer, the
Company shall:
(i) accept for exchange Registrable Notes duly tendered and
not validly withdrawn pursuant to the Exchange Offer in accordance with the
terms of the Exchange Offer Registration Statement and the letter of transmittal
which is an exhibit thereto;
(ii) deliver, or cause to be delivered, to the Trustee for
cancellation all Registrable Notes so accepted for exchange by the Company; and
(iii) cause the Trustee promptly to authenticate and deliver
Exchange Notes to each Holder of Registrable Notes equal in principal amount to
the principal amount of the Registrable Notes of such Holder so accepted for
exchange.
Interest will accrue on each Exchange Note exchanged for a Registrable
Note, from the last date on which interest was paid on the Notes surrendered in
exchange therefor. If no interest has been paid on the Notes, such interest will
accrue from April 6, 1999. The Exchange Offer shall not be subject to any
conditions, other than (i) that the Exchange Offer, or the making of any
exchange by a Holder, does not violate applicable law or any applicable
interpretation of the staff of the SEC, and (ii) the due tendering of
Registrable Notes in accordance with the Exchange Offer. Each Holder of
Registrable Notes (other than Participating Broker-Dealers) who wishes to
exchange such Registrable Notes for Exchange Notes in the Exchange Offer shall
represent that (i) it is not an affiliate (as defined in Rule 405 under the 1933
Act) of the Company or any Guarantor or, if it is such an affiliate, it will
comply with the registration and prospectus delivery requirements of the 1933
Act to the extent applicable, (ii) any Exchange Notes to be received by it will
be acquired in the ordinary course of business and (iii) at the time of the
commencement of the Exchange Offer it has no arrangement with any Person to
participate in the distribution (within the meaning of the 1933 Act) of the
Exchange Notes and shall have made such other representations as may be
reasonably necessary under applicable SEC rules, regulations or interpretations
to render the use of Form S-4 or another appropriate form under the 1933 Act
available. The Company shall inform the Initial Purchasers of the names and
addresses of the Holders to whom the Exchange Offer is made, and the Initial
Purchasers shall have the right to
5
<PAGE>
contact such Holders and otherwise facilitate the tender of Registrable Notes in
the Exchange Offer.
(b) SHELF REGISTRATION. In the event that (i) any changes in
law or the applicable interpretations of the staff of the SEC do not permit the
Company to effect the Exchange Offer as contemplated by Section 2(a) hereof;
(ii) if for any other reason the Exchange Offer is not consummated within 160
days following the Issue Date; (iii) if any Holder (other than an Initial
Purchaser) is not eligible to participate in the Exchange Offer or (iv) upon the
request of any Initial Purchaser (with respect to any Registrable Notes which it
acquired from the Company) following the consummation of the Exchange Offer if
any such Initial Purchaser shall hold Registrable Notes which it acquired
directly from the Company and if such Initial Purchaser is not permitted, in the
opinion of counsel to such Initial Purchaser, pursuant to applicable law or
applicable interpretation of the staff of the SEC to participate in the Exchange
Offer, the Company and the Guarantors shall, at their own cost:
(A) as promptly as practicable, file with the SEC a
Shelf Registration Statement relating to the offer and sale of the
Registrable Notes by the Holders from time to time in accordance with
the methods of distribution elected by the Majority Holders of
Registrable Notes and set forth in such Shelf Registration Statement,
and use their best efforts to cause such Shelf Registration Statement
to be declared effective by the SEC within 160 days after the Issue
Date (or promptly in the event of a request by an Initial Purchaser
pursuant to clauses (iv) above). In the event that the Company is
required to file a Shelf Registration Statement upon the request of any
Holder (other than an Initial Purchaser) not eligible to participate in
the Exchange Offer pursuant to clause (iii) above or upon the request
of any Initial Purchaser pursuant to clause (iv) above, the Company and
the Guarantors shall file and use their best efforts to have declared
effective by the SEC both an Exchange Offer Registration Statement
pursuant to Section 2(a) with respect to all Registrable Notes and a
Shelf Registration Statement (which may be a Registration Statement
combined with the Exchange Offer Registration Statement) with respect
to offers and sales of Registrable Notes held by such Holder or such
Initial Purchaser after completion of the Exchange Offer;
(B) use their best efforts to keep the Shelf
Registration Statement continuously effective in order to permit the
Prospectus forming part thereof to be usable by Holders for a period of
two years from the date the Shelf Registration Statement is declared
effective by the SEC (or one year from the date the Shelf Registration
Statement is declared effective if such Shelf Registration Statement is
filed upon the request of any Initial Purchaser pursuant to clause (iv)
above) or such shorter period which will terminate when all of the
Registrable Notes covered by the Shelf Registration Statement have been
sold pursuant to the Shelf Registration Statement; and
(C) notwithstanding any other provisions hereof, use
its best efforts to ensure that (x) any Shelf Registration Statement
and any amendment thereto and any Prospectus forming part thereof and
any supplement thereto comply in all material respects with the 1933
Act and the rules and regulations thereunder, (y) any Shelf
Registration Statement and any amendment thereto do not, upon
effectiveness, contain an untrue statement of a material fact or omit
to state a material fact required to be stated
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therein or necessary to make the statements therein not misleading and
(z) any Prospectus forming part of any Shelf Registration Statement,
and any supplement to such Prospectus (as amended or supplemented from
time to time), do not include an untrue statement of a material fact or
omit to state a material fact necessary in order to make the
statements, in light of the circumstances under which they were made,
not misleading.
The Company and the Guarantors further agree, if necessary, to
supplement or amend the Shelf Registration Statement if requested by the
Majority Holders of Notes that are Registrable Notes with respect to information
relating to the Holders and otherwise as required by Section 3(b) below, to use
all reasonable efforts to cause any such amendment to become effective and such
Shelf Registration to become usable as soon as thereafter practicable and to
furnish to the Holders of Registrable Notes copies of any such supplement or
amendment promptly after its being used or filed with the SEC.
(c) EXPENSES. The Company and the Guarantors shall pay all
Registration Expenses in connection with the registration pursuant to Section
2(a) and 2(b) and, in the case of an Exchange Offer Registration Statement, will
reimburse the Initial Purchasers, for the reasonable fees and disbursements of
one firm or counsel in connection therewith. Each Holder shall pay all expenses
of its counsel other than as set forth in the preceding sentence, underwriting
discounts and commissions and transfer taxes, if any, relating to the sale or
disposition of such Holder's Registrable Notes pursuant to the Shelf
Registration Statement.
(d) Effective Registration Statement. (i) The Company and the
Guarantors will be deemed not to have used their best efforts to cause a
Registration Statement to become, or to remain, effective during the requisite
periods set forth herein if they voluntarily take any action that would result
in any such Registration Statement not being declared effective or in the
Holders of Registrable Notes covered thereby not being able to exchange or offer
and sell such Registrable Notes during that period unless (A) such action is
required by applicable law or (B) such action is taken by the Company and the
Guarantors in good faith and for valid business reasons (not including avoidance
of the Company and the Guarantors' obligations hereunder), including a material
corporate transaction, so long as the Company promptly complies with the
requirements of Section 3(k) hereof, if applicable.
(ii) An Exchange Offer Registration Statement pursuant to
Section 2(a) hereof or a Shelf Registration Statement pursuant to Section 2(b)
hereof will not be deemed to have become effective unless it has been declared
effective by the SEC; PROVIDED, HOWEVER, that if, after it has been declared
effective, the offering of Registrable Notes pursuant to a Registration
Statement is interfered with by any stop order, injunction or other order or
requirement of the SEC or any other governmental agency or court, such
Registration Statement will be deemed not to have been effective during the
period of such interference, until the offering of Registrable Notes pursuant to
such Registration Statement may legally resume.
(e) INCREASE IN INTEREST RATE. In the event that (i) the
Exchange Offer Registration Statement is not filed with the SEC on or prior to
the 65th calendar day after the Issue Date, (ii) the Exchange Offer Registration
Statement is not declared effective on or prior to the 135th calendar day after
the Issue Date, (iii) the Exchange Offer is not consummated on or prior to the
160th calendar day after the Issue Date or, as the case may be, a Shelf
Registration
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Statement with respect to the Registrable Notes is not declared effective on or
prior to the 160th day after the Issue Date or (iv) the Exchange Offer
Registration Statement or the Shelf Registration Statement is declared effective
but thereafter ceases to be effective or usable within the applicable period as
provided in this Agreement (each such event referred to in clauses (i) through
(iv) above, a "Registration Default"), the Company shall be required to pay
additional interest in cash on each Interest Payment Date (as defined in the
Indenture) in an amount equal to one-quarter of one percent (0.25%) per annum of
the principal amount of the Notes, with respect to the first 90-day period
following such Registration Default. The amount of such additional interest will
increase by an additional one-quarter of one percent (0.25%) per annum for each
subsequent 90-day period until such Registration Default has been cured, up to a
maximum of one percent (1%) per annum. Upon (w) the filing of the Exchange Offer
Registration Statement after the 65-day period described in clause (i) above,
(x) the effectiveness of the Exchange Offer Registration Statement after the
135-day period described in clause (ii) above, (y) the consummation of the
Exchange Offer or the effectiveness of a Shelf Registration Statement after the
160-day period, as the case may be, described in clause (iii) above, or (z) the
cure of any Registration Default described in clause (iv) above, such additional
interest shall cease to accrue on the Notes from the date of such filing,
effectiveness, consummation or cure, as the case may be, if the Company is
otherwise in compliance with this paragraph; provided, however, that if, after
any such additional interest ceases to accrue, a different event specified in
clause (i), (ii), (iii) or (iv) above occurs, such additional interest shall
begin to accrue again pursuant to the foregoing provisions.
(f) SPECIFIC ENFORCEMENT. Without limiting the remedies
available to the Initial Purchasers and the Holders, the Company and the
Guarantors acknowledge that any failure by the Company and the Guarantors to
comply with their obligations under Section 2(a) and Section 2(b) hereof may
result in material irreparable injury to the Initial Purchasers or the Holders
for which there is no adequate remedy at law, that it will not be possible to
measure damages for such injuries precisely and that, in the event of any such
failure, the Initial Purchasers or any Holder may obtain such relief as may be
required to specifically enforce the Company and the Guarantors' obligations
under Section 2(a) and Section 2(b) hereof.
3. REGISTRATION PROCEDURES. In connection with the obligations of the
Company and the Guarantors with respect to the Registration Statements pursuant
to Sections 2(a) and 2(b) hereof, the Company and the Guarantors shall:
(a) prepare and file with the SEC a Registration Statement,
within the time period specified in Section 2, on the appropriate form under the
1933 Act, which form (i) shall be selected by the Company and the Guarantors,
(ii) shall, in the case of a Shelf Registration, be available for the sale of
the Registrable Notes by the selling Holders thereof and (iii) shall comply as
to form in all material respects with the requirements of the applicable form
required by the SEC and include or incorporate by reference all financial
statements required by the SEC to be filed therewith, and use their best efforts
to cause such Registration Statement to become effective and remain effective in
accordance with Section 2 hereof;
(b) prepare and file with the SEC such amendments and
post-effective amendments to each Registration Statement as may be necessary
under applicable law to keep such Registration Statement effective for the
applicable period; cause each Prospectus to be
8
<PAGE>
supplemented by any required prospectus supplement, and as so supplemented to be
filed pursuant to Rule 424 under the 1933 Act; and comply with the provisions of
the 1933 Act with respect to the disposition of all Notes covered by each
Registration Statement during the applicable period in accordance with the
intended method or methods of distribution by the selling Holders thereof;
(c) in the case of a Shelf Registration, (i) notify each
Holder of Registrable Notes, at least five days prior to filing, that a Shelf
Registration Statement with respect to the Registrable Notes is being filed and
advising such Holders that the distribution of Registrable Notes will be made in
accordance with the method elected by the Majority Holders of Notes that are
Registrable Notes; and (ii) furnish to each Holder of Registrable Notes, to
counsel for the Initial Purchasers, to counsel for the Holders and to each
underwriter of an underwritten offering of Registrable Notes, if any, without
charge, as many copies of each Prospectus, including each preliminary
Prospectus, and any amendment or supplement thereto and such other documents as
such Holder or underwriter may reasonably request, including financial
statements and schedules and, if the Holder so requests, all exhibits (including
those incorporated by reference) in order to facilitate the public sale or other
disposition of the Registrable Notes; and (iii) subject to the last paragraph of
this Section 3, hereby consent to the use of the Prospectus, including each
preliminary Prospectus, or any amendment or supplement thereto by each of the
selling Holders of Registrable Notes in connection with the offering and sale of
the Registrable Notes covered by the Prospectus or any amendment or supplement
thereto;
(d) use its best efforts to register or qualify the
Registrable Notes under all applicable state securities or "blue sky" laws of
such jurisdictions as any Holder of Registrable Notes covered by a Registration
Statement and each underwriter of an underwritten offering of Registrable Notes
shall reasonably request by the time the applicable Registration Statement is
declared effective by the SEC, cooperate with the Holders in connection with any
filings required to be made with the NASD, keep each such registration or
qualification effective during the period such Registration Statement is
required to be effective and do any and all other acts and things which may be
reasonably necessary or advisable to enable such Holder to consummate the
disposition in each such jurisdiction of such Registrable Notes owned by such
Holder; PROVIDED, HOWEVER, that the Company shall not be required to (i) qualify
as a foreign corporation or as a dealer in securities in any jurisdiction where
it would not otherwise be required to qualify but for this Section 3(d) or (ii)
take any action which would subject it to general service of process or taxation
in any such jurisdiction if it is not then so subject;
(e) in the case of a Shelf Registration, notify each Holder of
Registrable Notes and counsel for such Holders promptly and, if requested by
such Holder or counsel, confirm such advice in writing promptly (i) when a Shelf
Registration Statement has become effective and when any post-effective
amendments and supplements thereto become effective, (ii) of any request by the
SEC or any state securities authority for post-effective amendments and
supplements to a Shelf Registration Statement and Prospectus or for additional
information after the Shelf Registration Statement has become effective, (iii)
of the issuance by the SEC or any state securities authority of any stop order
suspending the effectiveness of a Registration Statement or the initiation of
any proceedings for that purpose, (iv) if, between the effective date of a
Registration Statement and the closing of any sale of Registrable Notes covered
thereby, the representations and warranties of the Company or any Guarantor
contained in any underwriting
9
<PAGE>
agreement, securities sales agreement or other similar agreement, if any,
relating to such offering cease to be true and correct in all material respects,
(v) of the receipt by the Company of any notification with respect to the
suspension of the qualification of the Registrable Notes for sale in any
jurisdiction or the initiation or threatening of any proceeding for such
purpose, (vi) of the happening of any event or the discovery of any facts during
the period a Shelf Registration Statement is effective which makes any statement
made in such Registration Statement or the related Prospectus untrue in any
material respect or which requires the making of any changes in such
Registration Statement or Prospectus in order to make the statements therein not
misleading and (vii) of any determination by the Company that a post-effective
amendment to a Registration Statement would be appropriate;
(f) (A) in the case of the Exchange Offer, (i) include in the
Exchange Offer Registration Statement a "Plan of Distribution" section covering
the use of the Prospectus included in the Exchange Offer Registration Statement
by broker-dealers who have exchanged their Registrable Notes for Exchange Notes
for the resale of such Exchange Notes, (ii) furnish to each broker-dealer who
desires to participate in the Exchange Offer, without charge, as many copies of
each Prospectus included in the Exchange Offer Registration Statement, including
any preliminary prospectus, and any amendment or supplement thereto, as such
broker-dealer may reasonably request, (iii) include in the Exchange Offer
Registration Statement a statement that any broker-dealer which holds
Registrable Notes acquired for its own account as a result of market-making
activities or other trading activities (a "Participating Broker-Dealer"), and
who receives Exchange Notes for Registrable Notes pursuant to the Exchange
Offer, may be a statutory underwriter and must deliver a Prospectus meeting the
requirements of the 1933 Act in connection with any resale of such Exchange
Notes, (iv) subject to the last paragraph of this Section 3, hereby consent to
the use of the Prospectus forming part of the Exchange Offer Registration
Statement or any amendment or supplement thereto, by any broker-dealer in
connection with the sale or transfer of the Exchange Notes covered by the
Prospectus or any amendment or supplement thereto, and (v) include in the
transmittal letter or similar documentation to be executed by an exchange
offeree in order to participate in the Exchange Offer (x) the following
provision:
"If the undersigned is not a broker-dealer, the undersigned
represents that it is not engaged in, and does not intend to
engage in, a distribution of Exchange Notes. If the
undersigned is a broker-dealer that will receive Exchange
Notes for its own account in exchange for Registrable Notes,
it represents that the Registrable Notes to be exchanged for
Exchange Notes were acquired by it as a result of
market-making activities or other trading activities and
acknowledges that it will deliver a prospectus meeting the
requirements of the 1933 Act in connection with any resale of
such Exchange Notes pursuant to the Exchange Offer; however,
by so acknowledging and by delivering a prospectus, the
undersigned will not be deemed to admit that it is an
"underwriter" within the meaning of the 1933 Act.";
and (y) a statement to the effect that by a broker-dealer making the
acknowledgment described in subclause (x) and by delivering a Prospectus in
connection with the exchange of Registrable Notes, the broker-dealer will not be
deemed to admit that it is an underwriter within the meaning of the 1933 Act;
and
10
<PAGE>
(B) to the extent any Participating Broker-Dealer
participates in the Exchange Offer, the Company and the Guarantors
shall use their best efforts to cause to be delivered at the request of
an entity representing the Participating Broker-Dealers (which entity
shall be one of the Initial Purchasers, unless it elects not to act as
such representative) only one, if any, "cold comfort" letter with
respect to the Prospectus in the form existing on the last date for
which exchanges are accepted pursuant to the Exchange Offer and with
respect to each subsequent amendment or supplement, if any, effected
during the period specified in clause (C) below; and
(C) to the extent any Participating Broker-Dealer
participates in the Exchange Offer, the Company and the Guarantors
shall use their best efforts to maintain the effectiveness of the
Exchange Offer Registration Statement for a period of one year
following the closing of the Exchange Offer; and
(D) the Company and the Guarantors shall not be
required to amend or supplement the Prospectus contained in the
Exchange Offer Registration Statement as would otherwise be
contemplated by Section 3(b) hereof, or take any other action as a
result of this Section 3(f), for a period exceeding 180 days after the
last date for which exchanges are accepted pursuant to the Exchange
Offer (as such period may be extended by the Company) and Participating
Broker-Dealers shall not be authorized by the Company to, and shall
not, deliver such Prospectus after such period in connection with
resales contemplated by this Section 3;
(g) (A) in the case of an Exchange Offer or Shelf Registration
Statement, furnish counsel for the Initial Purchasers and (B) in the case of a
Shelf Registration, furnish counsel for the Holders of Registrable Notes copies
of any request by the SEC or any state securities authority for amendments or
supplements to a Registration Statement and Prospectus or for additional
information;
(h) use their best efforts to obtain the withdrawal of any
order suspending the effectiveness of a Registration Statement at the earliest
possible moment and provide immediate notice to each Holder of the withdrawal of
any such order;
(i) in the case of a Shelf Registration, furnish to each
Holder of Registrable Notes, and each underwriter, if any, without charge, at
least one conformed copy of each Registration Statement and any post-effective
amendment thereto (without documents incorporated therein by reference or
exhibits thereto, unless requested);
(j) in the case of a Shelf Registration, cooperate with the
selling Holders of Registrable Notes to facilitate the timely preparation and
delivery of certificates representing Registrable Notes to be sold and not
bearing any restrictive legends; and cause such Registrable Notes to be in such
denominations (consistent with the provisions of the Indenture) in a form
eligible for deposit with the Depository and registered in such names as the
selling Holders or the underwriters, if any, may reasonably request at least one
business day prior to the closing of any sale of Registrable Notes;
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<PAGE>
(k) in the case of a Shelf Registration, promptly upon the
occurrence of any event or the discovery of any facts, each as contemplated by
Section 3(e)(vi) hereof, use their best efforts to prepare a supplement or
post-effective amendment to a Registration Statement or the related Prospectus
or any document incorporated therein by reference or file any other required
document so that, as thereafter delivered to the purchasers of the Registrable
Notes, such Prospectus will not contain at the time of such delivery any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading. The Company agrees to notify each Holder to suspend use of
the Prospectus as promptly as practicable after the occurrence of such an event,
and each Holder hereby agrees to suspend use of the Prospectus until the Company
has amended or supplemented the Prospectus to correct such misstatement or
omission. At such time as such public disclosure is otherwise made or the
Company determines that such disclosure is not necessary, in each case to
correct any misstatement of a material fact or to include any omitted material
fact, the Company agrees promptly to notify each Holder of such determination
and to furnish each Holder such numbers of copies of the Prospectus, as amended
or supplemented, as such Holder may reasonably request;
(l) obtain CUSIP numbers for all Exchange Notes, or
Registrable Notes, as the case may be, not later than the effective date of a
Registration Statement, and provide the Trustee with printed certificates for
the Exchange Notes or the Registrable Notes, as the case may be, in a form
eligible for deposit with the Depositary;
(m) (i) cause the Indenture to be qualified under the Trust
Indenture Act of 1939, as amended (the "TIA"), in connection with the
registration of the Exchange Notes, or Registrable Notes, as the case may be,
(ii) cooperate with the Trustee and the Holders to effect such changes to the
Indenture as may be required for the Indenture to be so qualified in accordance
with the terms of the TIA and (iii) execute, and use their best efforts to cause
the Trustee to execute, all documents as may be required to effect such changes,
and all other forms and documents required to be filed with the SEC to enable
the Indenture to be so qualified in a timely manner;
(n) in the case of a Shelf Registration, enter into agreements
(including underwriting agreements) and take all other customary and appropriate
actions (including those reasonably requested by the Majority Holders of
Registrable Notes) in order to expedite or facilitate the disposition of such
Registrable Notes and in such connection whether or not an underwriting
agreement is entered into and whether or not the registration is an underwritten
registration:
(i) make such representations and warranties to the Holders of
such Registrable Notes and the underwriters, if any, in form, substance and
scope as are customarily made by issuers to underwriters in similar underwritten
offerings as may be reasonably requested by them;
(ii) obtain opinions of counsel to the Company and its
subsidiaries and updates thereof (which counsel and opinions (in form, scope and
substance) shall be reasonably satisfactory to the managing underwriters, if
any, and the Holders of a majority in principal amount of the Registrable Notes
being sold) addressed to each selling Holder and the
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<PAGE>
underwriters, if any, covering the matters customarily covered in opinions
requested in sales of securities or underwritten offerings and such other
matters as may be reasonably requested by such Holders and underwriters;
(iii) obtain "cold comfort" letters and updates thereof from
the Company's and the Guarantors independent certified public accountants
addressed to the underwriters, if any, and will use best efforts to have such
letter addressed to the selling Holders of Registrable Notes, such letters to be
in customary form and covering matters of the type customarily covered in "cold
comfort" letters to underwriters in connection with similar underwritten
offerings;
(iv) enter into a securities sales agreement with the Holders
and an agent of the Holders providing for, among other things, the appointment
of such agent for the selling Holders for the purpose of soliciting purchases of
Registrable Notes, which agreement shall be in form, substance and scope
customary for similar offerings;
(v) if an underwriting agreement is entered into, cause the
same to set forth indemnification provisions and procedures substantially
equivalent to the indemnification provisions and procedures set forth in Section
5 hereof with respect to the underwriters and all other parties to be
indemnified pursuant to said Section; and
(vi) deliver such documents and certificates as may be
reasonably requested and as are customarily delivered in similar offerings.
The above shall be done at (i) the effectiveness of such Registration Statement
(and, if appropriate, each post-effective amendment thereto) and (ii) each
closing under any underwriting or similar agreement as and to the extent
required thereunder. In the case of any underwritten offering, the Company shall
provide written notice to the Holders of all Registrable Notes of such
underwritten offering at least 30 days prior to the filing of a prospectus
supplement for such underwritten offering. Such notice shall (x) offer each such
Holder the right to participate in such underwritten offering, (y) specify a
date, which shall be no earlier than 10 calendar days following the date of such
notice, by which such Holder must inform the Company of its intent to
participate in such underwritten offering and (z) include the instructions such
Holder must follow in order to participate in such underwritten offering;
(o) in the case of a Shelf Registration, make available for
inspection by representatives of the Holders of the Registrable Notes and any
underwriters participating in any disposition pursuant to a Shelf Registration
Statement and any counsel or accountant retained by such Holders or
underwriters, all financial and other records, pertinent corporate documents and
properties of the Company and the Guarantors reasonably requested by any such
persons, and cause the respective officers, directors, employees, and any other
agents of the Company and the Guarantors to supply all information reasonably
requested by any such representative, underwriter, special counsel or accountant
in connection with such Registration Statement;
(p) a reasonable time prior to the filing of any Exchange
Offer Registration Statement, any Prospectus forming a part thereof, any
amendment to an Exchange Offer Registration Statement or amendment or supplement
to a Prospectus, provide copies of such document to the Initial Purchasers, and
make such changes in any such document prior to the
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<PAGE>
filing thereof as any of the Initial Purchasers or their counsel may reasonably
request; (ii) in the case of a Shelf Registration, a reasonable time prior to
filing any Shelf Registration Statement, any Prospectus forming a part thereof,
any amendment to such Shelf Registration Statement or amendment or supplement to
such Prospectus, provide copies of such document to the Holders of Registrable
Notes, to the Initial Purchasers, to counsel on behalf of the Holders and to the
underwriter or underwriters of an underwritten offering of Registrable Notes, if
any, and make such changes in any such document prior to the filing thereof as
the Holders of Registrable Notes, the Initial Purchasers on behalf of such
Holders, their counsel and any underwriter may reasonably request; and (iii)
cause the representatives of the Company and its subsidiaries to be available
for discussion of such document as shall be reasonably requested by the Holders
of Registrable Notes, the Initial Purchasers on behalf of such Holders or any
underwriter and shall not at any time make any filing of any such document of
which such Holders, the Initial Purchasers on behalf of such Holders, their
counsel or any underwriter shall not have previously been advised and furnished
a copy or to which such Holders, the Initial Purchasers on behalf of such
Holders, their counsel or any underwriter shall reasonably object;
(q) in the case of a Shelf Registration, use their best
efforts to cause all Registrable Notes to be listed on any securities exchange
on which similar debt securities issued by the Company are then listed if
requested by the Majority Holders of Registrable Notes or by the underwriter or
underwriters of an underwritten offering of such Registrable Notes, if any;
(r) in the case of a Shelf Registration, use their best
efforts to cause the Registrable Notes to be rated with the appropriate rating
agencies, if so requested by the Majority Holders of Registrable Notes or by the
underwriter or underwriters of an underwritten offering of Registrable Notes, if
any, unless the Registrable Notes are already so rated;
(s) otherwise use their best efforts to comply with all
applicable rules and regulations of the SEC and make available to its security
holders, as soon as reasonably practicable, an earnings statement covering at
least 12 months which shall satisfy the provisions of Section 11(a) of the 1933
Act and Rule 158 thereunder; and
(t) cooperate and assist in any filings required to be made
with the NASD and in the performance of any due diligence investigation by any
underwriter and its counsel (including, any "qualified independent underwriter"
that is required to be retained in accordance with the rules and regulations of
the NASD).
In the case of a Shelf Registration Statement, the Company may
(as a condition to such Holder's participation in the Shelf Registration)
require each Holder of Registrable Notes to furnish to the Company such
information regarding such Holder and the proposed distribution by such Holder
of such Registrable Notes as the Company may from time to time reasonably
request in writing.
In the case of a Shelf Registration Statement, each Holder
agrees that, upon receipt of any notice from the Company of the happening of any
event or the discovery of any facts, each of the kind described in Section
3(e)(ii)-(vii) hereof, such Holder will forthwith discontinue disposition of
Registrable Notes pursuant to a Registration Statement until such Holder's
receipt of the copies of the supplemented or amended Prospectus contemplated by
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Section 3(k) hereof, and, if so directed by the Company, such Holder will
deliver to the Company (at its expense) all copies in its possession, other than
permanent file copies then in such Holder's possession, of the Prospectus
covering such Registrable Notes current at the time of receipt of such notice.
If the Company shall give any such notice to suspend the disposition of
Registrable Notes pursuant to a Shelf Registration Statement as a result of the
happening of any event or the discovery of any facts, each of the kind described
in Section 3(e)(vi) hereof, the Company and the Guarantors shall be deemed to
have used their best efforts to keep the Shelf Registration Statement effective
during such period of suspension provided that the Company and the Guarantors
shall use their best efforts to file and have declared effective (if an
amendment) as soon as practicable an amendment or supplement to the Shelf
Registration Statement and shall extend the period during which the Registration
Statement shall be maintained effective pursuant to this Agreement by the number
of days during the period from and including the date of the giving of such
notice to and including the date when the Holders shall have received copies of
the supplemented or amended Prospectus necessary to resume such dispositions.
4. UNDERWRITTEN REGISTRATIONS. If any of the Registrable Notes covered
by any Shelf Registration are to be sold in an underwritten offering, the
investment banker or investment bankers and manager or managers that will manage
the offering will be selected by the Majority Holders of such Registrable Notes
included in such offering and shall be reasonably acceptable to the Company.
No Holder of Registrable Notes may participate in any
underwritten registration hereunder unless such Holder (a) agrees to sell such
Holder's Registrable Notes on the basis provided in any underwriting
arrangements approved by the Persons entitled hereunder to approve such
arrangements and (b) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents required
under the terms of such underwriting arrangements.
5. INDEMNIFICATION AND CONTRIBUTION. The Company shall indemnify and
hold harmless each Initial Purchaser, each Holder, including Participating
Broker-Dealers, each underwriter who participates in an offering of Registrable
Notes, their respective affiliates, and the respective directors, officers,
employees, agents and each Person, if any, who controls any of such parties
within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act
as follows:
(i) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, arising out of any untrue statement or alleged
untrue statement of a material fact contained in any Registration Statement (or
any amendment thereto) pursuant to which Exchange Notes or Registrable Notes
were registered under the 1933 Act, including all documents incorporated therein
by reference, or the omission or alleged omission therefrom of a material fact
required to be stated therein or necessary to make the statements therein not
misleading or arising out of any untrue statement or alleged untrue statement of
a material fact contained in any Prospectus (or any amendment or supplement
thereto) or the omission or alleged omission therefrom of a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
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(ii) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, to the extent of the aggregate amount paid in
settlement of any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim whatsoever
based upon any such untrue statement or omission, or any such alleged untrue
statement or omission; PROVIDED that (subject to Section 5(d) below) any such
settlement is effected with the written consent of the Company; and
(iii) against any and all expense whatsoever, as incurred
(including the fees and disbursements of counsel chosen by any indemnified
party), reasonably incurred in investigating, preparing or defending against any
litigation, or investigation or proceeding by any court or governmental agency
or body, commenced or threatened in connection with, or any claim whatsoever
based upon, any such untrue statement or omission, or any such alleged untrue
statement or omission, to the extent that any such expense is not paid under
subparagraph (i) or (ii) of this Section 5(a);
PROVIDED, HOWEVER, that this indemnity does not apply to any loss, liability,
claim, damage or expense to the extent arising out of an untrue statement or
omission or alleged untrue statement or omission made in reliance upon and in
conformity with written information furnished to the Company by the Initial
Purchasers, any Holder, including Participating Broker-Dealers, or any
underwriter expressly for use in the Registration Statement (or any amendment
thereto) or the Prospectus (or any amendment or supplement thereto);
(b) In the case of a Shelf Registration, each Holder agrees,
severally and not jointly, to indemnify and hold harmless the Company, the
Guarantors, each Initial Purchaser, each underwriter who participates in an
offering of Registrable Notes and the other selling Holders and each of their
respective directors and officers (including each officer of the Company and the
Guarantors who signed the Shelf Registration Statement) and each Person, if any,
who controls the Company, any Guarantor, any Initial Purchaser, any underwriter
or any other selling Holder within the meaning of Section 15 of the 1933 Act or
Section 20 of the 1934 Act, against any and all loss, liability, claim, damage
and expense whatsoever described in the indemnity contained in Section 5(a)
hereof, as incurred, but only with respect to untrue statements or omissions, or
alleged untrue statements or omissions, made in the Shelf Registration Statement
(or any amendment thereto) or the Prospectus (or any amendment or supplement
thereto) in reliance upon and in conformity with written information furnished
to the Company and the Guarantors by such Holder, as the case may be, expressly
for use in the Shelf Registration Statement (or any amendment thereto), or the
Prospectus (or any amendment or supplement thereto); provided, however, that no
such Holder shall be liable for any claims hereunder in excess of the amount of
net proceeds received by such Holder from the sale of Registrable Notes pursuant
to such Shelf Registration Statement.
(c) In case any action shall be commenced involving any person
in respect of which indemnity may be sought pursuant to either paragraph (a) or
paragraph (b) above, such person (the "indemnified party") shall give notice as
promptly as reasonably practicable to each person against whom such indemnity
may be sought (the "indemnifying party"), but failure to so notify an
indemnifying party shall not relieve such indemnifying party from any liability
hereunder to the extent it is not materially prejudiced as a result thereof and
in any event shall not relieve it from any liability which it may have otherwise
than on account of this indemnity
16
<PAGE>
agreement. An indemnifying party may participate at its own expense in the
defense of any such action; PROVIDED, HOWEVER, that counsel to the indemnifying
party shall not (except with the consent of the indemnified party) also be
counsel to the indemnified party. In no event shall the indemnifying parties be
liable for fees and expenses of more than one counsel, in addition to any local
counsel, separate from their own counsel for all indemnified parties in
connection with any one action or separate but similar or related actions in the
same jurisdiction arising out of the same general allegations or circumstances.
No indemnifying party shall, without the prior written consent of the
indemnified parties, settle or compromise or consent to the entry of any
judgment with respect to any litigation, or any investigation or proceeding by
any governmental agency or body, commenced or threatened, or any claim
whatsoever in respect of which indemnification or contribution could be sought
under this Section 5 hereof (whether or not the indemnified parties are actual
or potential parties thereof), unless such settlement, compromise or consent (i)
includes an unconditional release of each indemnified party from all liability
arising out of such litigation, investigation, proceeding or claim and (ii) does
not include a statement as to or an admission of fault, culpability or a failure
to act by or on behalf of any indemnified party;
(d) If at any time an indemnified party shall have requested
an indemnifying party to reimburse the indemnified party for fees and expenses
of counsel for which they are entitled to indemnification hereunder, such
indemnifying party agrees that it shall be liable for any settlement of the
nature contemplated by Section 5(a)(ii) hereof effected without its written
consent if (i) such settlement is entered into more than 45 days after receipt
by such indemnifying party of the aforesaid request, (ii) such indemnifying
party shall have received notice of the terms of such settlement at least 30
days prior to such settlement being entered into and (iii) such indemnifying
party shall not have reimbursed such indemnified party for such fees and
expenses of counsel in accordance with such request prior to the date of such
settlement;
(e) If the indemnification provided for in any of the
indemnity provisions set forth in this Section 5 is for any reason unavailable
to or insufficient to hold harmless an indemnified party in respect of any
losses, liabilities, claims, damages or expenses referred to therein, then each
indemnifying party shall contribute to the aggregate amount of such losses,
liabilities, claims, damages and expenses incurred by such indemnified party, as
incurred, in such proportion as is appropriate to reflect the relative fault of
such indemnifying party or parties on the one hand, and such indemnified party
or parties on the other hand, in connection with the statements or omissions
which resulted in such losses, liabilities, claims, damages or expenses, as well
as any other relevant equitable considerations. The relative fault of such
indemnifying party or parties on the one hand, and such indemnified party or
parties on the other hand shall be determined by reference to, among other
things, whether any such untrue or alleged untrue statement of a material fact
or omission or alleged omission to state a material fact relates to information
supplied by such indemnifying party or parties or such indemnified party or
parties, and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The Company, the
Guarantors and the Initial Purchasers and the Holders of the Registrable Notes
agree that it would not be just and equitable if contribution pursuant to this
Section 5 were determined by pro rata allocation (even if the Holders were
treated as one entity, and the Initial Purchasers were treated as one entity,
for such purpose) or by another method of allocation which does not take account
of the equitable considerations referred to above in Section 5. The aggregate
amount of losses, liabilities, claims,
17
<PAGE>
damages and expenses incurred by an indemnified party and referred to above in
this Section 5 shall be deemed to include any legal or other expenses reasonably
incurred by such indemnified party in investigating, preparing or defending
against any litigation, or any investigation or proceeding by an governmental
agency or body, commenced or threatened, or any claim whatsoever based upon any
such untrue or alleged untrue statement or omission or alleged omission. No
Person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the 1933 Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation. For purposes of this Section 5,
each person, if any, who controls an Initial Purchaser or a Holder within the
meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall have
the same rights to contribution as such Initial Purchaser or Holder, and each
director of the Company or any Guarantor, each officer of the Company who signed
the Registration Statement, and each Person, if any, who controls the Company or
any Guarantor within the meaning of Section 15 of the 1933 Act or Section 20 of
the 1934 Act shall have the same rights to contribution as the Company and such
Guarantor.
6. MISCELLANEOUS. (a) RULE 144 AND RULE 144A. For so long as the
Company is subject to the reporting requirements of Section 13 or 15 of the 1934
Act, the Company covenants that it will file the reports required to be filed by
it under the 1933 Act and Section 13(a) or 15(d) of the 1934 Act and the rules
and regulations adopted by the SEC thereunder, that if it ceases to be so
required to file such reports, it will upon the request of any Holder of
Registrable Notes (i) make publicly available such information as is necessary
to permit sales pursuant to Rule 144 under the 1933 Act, (ii) deliver such
information to a prospective purchaser as is necessary to permit sales pursuant
to Rule 144A under the 1933 Act and it will take such further action as any
Holder of Registrable Notes may reasonably request, and (iii) take such further
action that is reasonable in the circumstances, in each case, to the extent
required from time to time to enable such Holder to sell its Registrable Notes
without registration under the 1933 Act within the limitation of the exemptions
provided by (x) Rule 144 under the 1933 Act, as such Rule may be amended from
time to time, (y) Rule 144A under the 1933 Act, as such Rule may be amended from
time to time, or (z) any similar rules or regulations hereafter adopted by the
SEC. Upon the written request of any Holder of Registrable Notes, the Company
will deliver to such Holder a written statement as to whether it has complied
with such requirements.
(b) NO INCONSISTENT AGREEMENTS. The Company and the Guarantors
have not entered into, and the Company and the Guarantors on or after the date
of this Agreement will not enter into, any agreement which is inconsistent with
the rights granted to the Holders of Registrable Notes in this Agreement or
otherwise conflicts with the provisions hereof. The rights granted to the
Holders hereunder do not in any way conflict with and are not inconsistent with
the rights granted to the holders of the Company's other issued and outstanding
securities under any such agreements.
(c) AMENDMENTS AND WAIVERS. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given unless the Company and the Guarantors have obtained the written
consent of Holders of at least a majority in aggregate principal amount of the
outstanding Registrable Notes affected by such amendment, modification,
supplement, waiver or departure; PROVIDED, HOWEVER, that no amendment,
18
<PAGE>
modification, supplement or waiver or consent to any departure from the
provisions of Section 5 hereof shall be effective as against any Holder of
Registrable Notes unless consented to in writing by such Holder.
(d) NOTICES. All notices and other communications provided for
or permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, telex, telecopier, or any courier guaranteeing overnight
delivery (i) if to a Holder (other than an Initial Purchaser), at the most
current address set forth on the records of the Registrar under the Indenture,
(ii) if to an Initial Purchaser, at the most current address given by such
Initial Purchaser to the Company by means of a notice given in accordance with
the provisions of this Section 6(d), which address initially is the address set
forth in the Purchase Agreement; and (iii) if to the Company or the Guarantors,
initially at the Company's address set forth in the Purchase Agreement and
thereafter at such other address, notice of which is given in accordance with
the provisions of this Section 6(d).
All such notices and communications shall be deemed to have
been duly given: at the time delivered by hand, if personally delivered; five
business days after being deposited in the mail, postage prepaid, if mailed; and
when receipt is acknowledged, by recipient's telecopy operator, if telecopied;
and on the next business day if delivered to a courier guaranteeing overnight
delivery.
Copies of all such notices, demands, or other communications
shall be concurrently delivered by the Person giving the same to the Trustee, at
the address specified in the Indenture.
(e) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of and be binding upon the successors, assigns and transferees of each
of the parties, including, without limitation and without the need for an
express assignment, subsequent Holders; PROVIDED that nothing herein shall be
deemed to permit any assignment, transfer or other disposition of Registrable
Notes in violation of the terms hereof or of the Purchase Agreement or the
Indenture. If any transferee of any Holder shall acquire Registrable Notes, in
any manner, whether by operation of law or otherwise, such Registrable Notes
shall be held subject to all of the terms of this Agreement, and by taking and
holding such Registrable Notes, such Person shall be conclusively deemed to have
agreed to be bound by and to perform all of the terms and provisions of this
Agreement, including the restrictions on resale set forth in this Agreement and,
if applicable, the Purchase Agreement, and such Person shall be entitled to
receive the benefits hereof.
(f) THIRD PARTY BENEFICIARY. The Holders shall be third party
beneficiaries to the agreements made hereunder between the Company and the
Guarantors, on the one hand, and the Initial Purchasers, on the other hand, and
shall have the right to enforce such agreements directly to the extent they deem
such enforcement necessary or advisable to protect their rights or the rights of
Holders hereunder.
(g) COUNTERPARTS. This Agreement may be executed in any number
of counterparts and by the parties hereto in separate counterparts, each of
which when so executed
19
<PAGE>
shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement.
(h) HEADINGS. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(i) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, UNITED STATES OF
AMERICA.
(j) APPOINTMENT OF AGENT FOR SERVICE. By the execution of this
Agreement, each of Supreme Munsingwear Canada, Inc. and Supreme International
Corporation de Mexico, S.A. de C. V. hereby designates the Company as its
authorized agent upon which process may be served in any legal action or
proceeding, including with respect to any state or federal securities laws, that
may be instituted in any federal court of the United States or the court of any
state thereof and arising out of or relating to this Agreement. Service of
process upon such agent at 3000 N.W. 107th Avenue, Miami, Florida 33172,
attention: George Feldenkreis shall be deemed in every respect effective service
of process upon Supreme Munsingwear Canada, Inc. or Supreme International
Corporation de Mexico, S.A. de C.V., as applicable, in any such legal action or
proceeding and each of Supreme Munsingwear Canada, Inc. and Supreme
International Corporation de Mexico, S.A. de C.V. hereby submits to the
nonexclusive jurisdiction of any such court in which any such legal action or
proceeding is so instituted and waives, to the extent it may effectively do so,
any objection it may have now or hereafter to the laying of the venue of any
such legal action or proceeding. Such appointment shall be irrevocable so long
as the Initial Purchasers or the Holders shall have any rights pursuant to the
terms of this Agreement. Each of Supreme Munsingwear Canada, Inc. and Supreme
International Corporation de Mexico, S.A. de C.V., further agrees to take any
and all action, including the execution and filing of any and all such documents
and instruments, as may be necessary to continue such designation and
appointment of such agent.
(k) SEVERABILITY. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be affected or impaired thereby.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
SUPREME INTERNATIONAL CORPORATION
By /s/ Rosemary B. Trudeau
Name: Rosemary B. Trudeau
Title: Vice President of Finance
20
<PAGE>
SUPREME MUNSINGWEAR CANADA, INC.
By /s/ Rosemary B. Trudeau
Name: Rosemary B. Trudeau
Title: Secretary/Treasurer
SUPREME INTERNATIONAL (DELAWARE), INC.
By /s/ Rosemary B. Trudeau
Name: Rosemary B. Trudeau
Title: Secretary/Treasurer
SUPREME ACQUISITION CORPORATION
By /s/ Rosemary B. Trudeau
Name: Rosemary B. Trudeau
Title: Secretary/Treasurer
SUPREME INTERNATIONAL (N.Y.), INC.
By /s/ Rosemary B. Trudeau
Name: Rosemary B. Trudeau
Title: Secretary/Treasurer
SUPREME INTERNATIONAL CORPORATION
DE MEXICO, S.A. de C.V.
By /s/ Rosemary B. Trudeau
Name: Rosemary B. Trudeau
Title: President
Confirmed and accepted as of
21
<PAGE>
the date first above written:
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
BANCBOSTON ROBERTSON STEPHENS INC.
WASSERSTEIN PERELLA SECURITIES, INC.
BARINGTON CAPITAL GROUP, L.P.
By: MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
By: /s/ Chantal D. Simon
Name: Chantal D. Simon
Title: Managing Director
22
EXHIBIT 4.4
SUPREME INTERNATIONAL CORPORATION
(a Florida corporation)
Senior Subordinated Notes due 2006
PURCHASE AGREEMENT
Dated: March 31, 1999
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
<S> <C>
SECTION 1. REPRESENTATIONS AND WARRANTIES.................................................................2
(a) Representations and Warranties by the Company and the Subsidiary Guarantors....................2
(i) Offering Memorandum...................................................................2
(ii) Independent Accountants...............................................................3
(iii) Financial Statements..................................................................3
(iv) No Material Adverse Change in Business................................................3
(v) Good Standing of the Company..........................................................4
(vi) Good Standing of Subsidiaries and of Perry Ellis......................................4
(vii) Capitalization........................................................................5
(viii) Authorization of Agreement............................................................5
(ix) Authorization of the Indenture........................................................5
(x) Authorization of the Securities.......................................................5
(xi) Authorization of the Registration Rights Agreement....................................6
(xii) Consummation of the Perry Ellis Acquisition...........................................6
(xiii) Description of the Securities, the Indenture and the Registration Rights
Agreement.............................................................................6
(xiv) Absence of Defaults and Conflicts.....................................................7
(xv) Absence of Default Under Senior Indebtedness..........................................7
(xvi) Absence of Labor Dispute..............................................................8
(xvii) Absence of Proceedings; No Change in Import Regulations...............................8
(xviii) Possession of Intellectual Property...................................................8
(xix) Absence of Further Requirements.......................................................9
(xx) Possession of Licenses and Permits....................................................9
(xxi) Title to Property.....................................................................9
(xxii) Tax Returns..........................................................................10
(xxiii) Registration Rights..................................................................10
(xxiv) Environmental Laws...................................................................10
(xxv) Investment Company Act...............................................................11
(xxvi) Similar Offerings....................................................................11
(xxvii) Rule 144A Eligibility................................................................11
-i-
<PAGE>
(xxviii) No General Solicitation..............................................................11
(xxix) No Registration Required.............................................................11
(xxx) Reporting Company....................................................................11
(xxxi) No Directed Selling Efforts..........................................................12
(xxxii) Solvency.............................................................................12
(xxxiii) Year 2000............................................................................12
(xxxiv) Internal Accounting Controls.........................................................12
(xxxv) Insurance............................................................................13
(xxxvi) No Stabilization or Manipulation.....................................................13
(xxxvii) No Undisclosed Relationships.........................................................13
(xxxviii) No Distribution of Unauthorized Materials...........................................13
(xxxix) No Cessation of Supply...............................................................13
(xl) No Additional Documents..............................................................13
(b) Officer's Certificates........................................................................14
SECTION 2. SALE AND DELIVERY TO INITIAL PURCHASERS; CLOSING..............................................14
(a) Securities....................................................................................14
(b) Payment.......................................................................................14
(c) Denominations; Registration...................................................................14
SECTION 3. COVENANTS OF THE COMPANY AND THE SUBSIDIARY GUARANTORS........................................14
(a) Offering Memorandum...........................................................................14
(b) Notice and Effect of Material Events..........................................................15
(c) Amendment to Offering Memorandum and Supplements..............................................15
(d) Qualification of Securities for Offer and Sale................................................15
(e) Rating of Securities..........................................................................15
(f) DTC...........................................................................................16
(g) Use of Proceeds...............................................................................16
(h) Restriction on Sale of Securities.............................................................16
(i) PORTAL Designation............................................................................16
(j) Reporting Requirements........................................................................16
-ii-
<PAGE>
(k) Perry Ellis Guarantee.........................................................................16
SECTION 4. PAYMENT OF EXPENSES...........................................................................16
(a) Expenses......................................................................................16
(b) Termination of Agreement......................................................................17
SECTION 5. CONDITIONS OF INITIAL PURCHASERS OBLIGATIONS..................................................17
(b) Opinion of Counsel for the Initial Purchasers.................................................17
(c) Officers Certificate..........................................................................17
(d) Accountants Comfort Letter....................................................................18
(e) Bring-down Comfort Letter.....................................................................18
(f) Maintenance of Rating.........................................................................18
(g) PORTAL........................................................................................18
(h) Registration Rights Agreement.................................................................18
(i) Additional Documents..........................................................................18
(j) Consummation of the Perry Ellis Acquisition...................................................19
(k) Consent under Senior Credit Agreement and Amendment of Lease..................................19
(l) Lockup........................................................................................19
(m) Termination of Agreement......................................................................19
SECTION 6. SUBSEQUENT OFFERS AND RESALES OF THE SECURITIES...............................................19
(a) Offer and Sale Procedures.....................................................................19
(i) Offers and Sales Only to Qualified Institutional Buyers..............................19
(ii) No General Solicitation..............................................................20
(iii) Purchases by Non-Bank Fiduciaries....................................................20
(iv) Subsequent Purchaser Notification....................................................20
(v) Minimum Principal Amount.............................................................20
(vi) Restrictions on Transfer.............................................................20
(vii) Delivery of Offering Memorandum......................................................20
(b) Covenants of the Company and the Subsidiary Guarantors........................................20
(i) Integration..........................................................................20
(ii) Rule 144A Information................................................................21
(iii) Restriction on Resales...............................................................21
-iii-
<PAGE>
(c) Qualified Institutional Buyer.................................................................21
(d) Resale Pursuant to Rule 903 of Regulation S or Rule 144A......................................21
(e) Additional Representations and Warranties of Initial Purchasers...............................22
SECTION 7. INDEMNIFICATION...............................................................................22
(a) Indemnification of Initial Purchasers.........................................................22
(b) Indemnification of the Company and the Subsidiary Guarantors..................................23
(c) Actions Against Parties; Notification.........................................................23
(d) Settlement Without Consent If Failure to Reimburse............................................23
SECTION 8. CONTRIBUTION..................................................................................24
SECTION 9. REPRESENTATIONS, WARRANTIES AND AGREEMENTS TO SURVIVE DELIVERY................................25
SECTION 10. TERMINATION OF AGREEMENT......................................................................25
(a) Termination; General..........................................................................25
(b) Liabilities...................................................................................26
SECTION 11. DEFAULT BY ONE OR MORE OF THE INITIAL PURCHASERS..............................................26
SECTION 12. NOTICES.......................................................................................26
SECTION 13. PARTIES.......................................................................................26
SECTION 14. APPOINTMENT OF AGENT FOR SERVICE..............................................................27
SECTION 15. GOVERNING LAW AND TIME........................................................................27
SECTION 16. EFFECT OF HEADINGS............................................................................27
SCHEDULES
SCHEDULE A - LIST OF INITIAL PURCHASERS...........................................................SCH A-1
SCHEDULE B - PRICING INFORMATION..................................................................SCH B-1
SCHEDULE C - LIST OF SUBSIDIARIES.................................................................SCH C-1
EXHIBITS
EXHIBIT A - FORM OF OPINION OF COMPANY'S COUNSEL......................................................A-1
</TABLE>
-iv-
<PAGE>
SUPREME INTERNATIONAL CORPORATION
(a Florida corporation)
$100,000,000
Senior Subordinated Notes due 2006
PURCHASE AGREEMENT
March 31, 1999
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
BancBoston Robertson Stephens, Inc.
Wasserstein Perella Securities, Inc.
Barington Capital Group, L.P.
as Representatives of the several Initial Purchasers
c/o Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
North Tower
World Financial Center
New York, New York 10281
Ladies and Gentlemen:
Supreme International Corporation, a Florida corporation (the
"Company"), and each of Supreme Munsingwear Canada, Inc., a corporation
organized under the laws of Canada, Supreme International (Delaware), Inc., a
Delaware corporation, Supreme International (N.Y.), Inc., a New York
corporation, Supreme Acquisition Corporation, a Florida corporation, and Supreme
International Corporation de Mexico, S.A. de C.V., a corporation organized under
the laws of Mexico (collectively, the "Subsidiary Guarantors"), confirm their
agreement with Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("Merrill Lynch") and each of the other Initial Purchasers named in
Schedule A hereto (collectively, the "Initial Purchasers", which term shall also
include any initial purchaser substituted as hereinafter provided in Section 11
hereof), for whom Merrill Lynch, BancBoston Robertson Stephens, Inc.,
Wasserstein Perella Securities, Inc. and Barington Capital Group, L.P. are
acting as Representatives (in such capacity, the "Representatives"), with
respect to the issue and sale by the Company and the purchase by the Initial
Purchasers, acting severally and not jointly, of the respective principal
amounts set forth in said Schedule A of $100,000,000 aggregate principal amount
of the Company's Senior Subordinated Notes due 2006 (the "Securities"). The
Securities are to be issued pursuant to an indenture dated as of April 6, 1999
(the "Indenture") among the Company, each Subsidiary Guarantor and State Street
Bank and Trust Company, as trustee (the "Trustee"). The obligations of the
Company under the Indenture and the Securities will be guaranteed (the
"Subsidiary Guarantees") by each of the Subsidiary Guarantors, pursuant to the
Indenture.
Securities issued in book-entry form will be issued to Cede & Co. as
nominee of The Depository Trust Company ("DTC") pursuant to a letter agreement,
to be dated as of the Closing
<PAGE>
Time (as defined in Section 2(b)) (the "DTC Agreement"), among the Company, the
Trustee and DTC.
The holders of Securities will be entitled to the benefits of a
Registration Rights Agreement, in form and substance reasonably satisfactory to
the Initial Purchasers (the "Registration Rights Agreement"), pursuant to which
the Company and the Subsidiary Guarantors will file a registration statement
with the Securities and Exchange Commission (the "Commission") registering the
Securities and/or Exchange Securities together with the related Subsidiary
Guarantees referred to in the Registration Rights Agreement under the Securities
Act of 1933, as amended (the "1933 Act").
The Company and each Subsidiary Guarantor understand that the Initial
Purchasers propose to make an offering of the Securities on the terms and in the
manner set forth herein and agree that the Initial Purchasers may resell,
subject to the conditions set forth herein, all or a portion of the Securities
to purchasers ("Subsequent Purchasers") at any time after this Agreement has
been executed and delivered. The Securities are to be offered and sold through
the Initial Purchasers without being registered under the 1933 Act, in reliance
upon exemptions therefrom. Pursuant to the terms of the Securities and the
Indenture, investors that acquire Securities may only resell or otherwise
transfer such Securities if such Securities are hereafter registered under the
1933 Act or if an exemption from the registration requirements of the 1933 Act
is available (including the exemption afforded by Rule 144A ("Rule 144A") or
Regulation S ("Regulation S") of the rules and regulations promulgated under the
1933 Act by the Commission).
The Company has prepared on behalf of itself and the Subsidiary
Guarantors and delivered to each Initial Purchaser copies of a preliminary
offering memorandum dated March 15, 1999 (the "Preliminary Offering Memorandum")
and has prepared and will deliver to each Initial Purchaser, on the date hereof
or the next succeeding day, copies of a final offering memorandum dated March
31, 1999 (the "Final Offering Memorandum"), each for use by such Initial
Purchaser in connection with its solicitation of purchases of, or offering of,
the Securities. "Offering Memorandum" means, with respect to any date or time
referred to in this Agreement, the most recent offering memorandum (whether the
Preliminary Offering Memorandum or the Final Offering Memorandum, or any
amendment or supplement to either such document), including exhibits thereto,
which has been prepared and delivered by the Company to the Initial Purchasers
in connection with their solicitation of purchases of, or offering of, the
Securities.
SECTION 1. REPRESENTATIONS AND WARRANTIES.
(a) REPRESENTATIONS AND WARRANTIES BY THE COMPANY AND THE SUBSIDIARY
GUARANTORS. The Company and each of the Subsidiary Guarantors, jointly and
severally, represent and warrant to each Initial Purchaser as of the date hereof
and as of the Closing Time referred to in Section 2(b) hereof, and agree with
each Initial Purchaser, as follows:
(i) OFFERING MEMORANDUM. The Offering Memorandum does not, and
at the Closing Time will not, include an untrue statement of a
material fact or omit to state a material fact necessary in order
to make the statements therein, in the light of the circumstances
under which they were made, not misleading; provided
2
<PAGE>
that this representation, warranty and agreement shall not apply to
statements in or omissions from the Offering Memorandum made in
reliance upon and in conformity with information furnished to the
Company in writing by any Initial Purchaser through Merrill Lynch
expressly for use in the Offering Memorandum.
(ii) INDEPENDENT ACCOUNTANTS. The accountants who certified
the financial statements and supporting schedules included in the
Offering Memorandum are independent public accountants with respect
to the Company and its subsidiaries within the meaning of
Regulation S-X under the 1933 Act.
(iii) FINANCIAL STATEMENTS. The financial statements, together
with the related schedules and notes, included in the Offering
Memorandum present fairly the financial position of the Company and
its consolidated subsidiaries, and of Perry Ellis International,
Inc. ("Perry Ellis") at the dates indicated and the statement of
operations, stockholders' equity and cash flows of the Company and
its consolidated subsidiaries, and of Perry Ellis for the periods
specified; said financial statements have been prepared in
conformity with generally accepted accounting principles ("GAAP")
applied on a consistent basis throughout the periods involved. The
supporting schedules, if any, included in the Offering Memorandum
present fairly in accordance with GAAP the information required to
be stated therein. The selected financial data and the summary
financial information included in the Offering Memorandum present
fairly the information shown therein and have been compiled on a
basis consistent with that of the audited financial statements
included in the Offering Memorandum. The pro forma financial
statements of the Company and its subsidiaries and the related
notes thereto included in the Offering Memorandum present fairly
the information shown therein, have been prepared in accordance
with the Commission's rules and guidelines with respect to pro
forma financial statements and have been properly compiled on the
bases described therein, and the assumptions used in the
preparation thereof are reasonable and the adjustments used therein
are appropriate to give effect to the transactions and
circumstances referred to therein.
(iv) NO MATERIAL ADVERSE CHANGE IN BUSINESS. Since the
respective dates as of which information is given in the Offering
Memorandum, except as otherwise stated therein, (A) there has been
no material adverse change in the condition, financial or
otherwise, or in the earnings, business affairs or business
prospects, whether or not arising in the ordinary course of
business, of the Company and its subsidiaries considered as one
enterprise or of Perry Ellis (a "Material Adverse Effect") and (B)
there have been no transactions entered into by the Company or any
of its subsidiaries or by Perry Ellis, other than those in the
ordinary course of business, which are material with respect to the
Company and its subsidiaries considered as one enterprise or with
respect to Perry Ellis, there has been no dividend or distribution
of any kind declared, paid or made by the Company or by Perry Ellis
on any class of their capital stock, except for the pre-acquisition
distribution of cash by Perry Ellis pursuant to the terms of the
Stock Purchase Agreement (as defined in (xii) below).
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(v) GOOD STANDING OF THE COMPANY. The Company has been duly
organized and is validly existing as a corporation in good standing
under the laws of the State of Florida and has corporate power and
authority to own, lease and operate its properties and to conduct
its business as described in the Offering Memorandum and to enter
into and perform its obligations under this Agreement; and the
Company is duly qualified as a foreign corporation to transact
business and is in good standing in each other jurisdiction in
which such qualification is required, whether by reason of the
ownership or leasing of property or the conduct of business, except
where the failure so to qualify or to be in good standing would not
result in a Material Adverse Effect.
(vi) GOOD STANDING OF SUBSIDIARIES AND OF PERRY ELLIS. Each of
the Company's subsidiaries and Perry Ellis has been duly organized
and is validly existing as a corporation in good standing under the
laws of the jurisdiction of its incorporation, has corporate power
and authority to own, lease and operate its properties and to
conduct its business as described in the Offering Memorandum and is
duly qualified as a foreign corporation to transact business and is
in good standing in each jurisdiction in which such qualification
is required, whether by reason of the ownership or leasing of
property or the conduct of business, except where the failure so to
qualify or to be in good standing would not result in a Material
Adverse Effect; except as otherwise disclosed in the Offering
Memorandum, all of the issued and outstanding capital stock of each
subsidiary of the Company has been duly authorized and validly
issued, is fully paid and non-assessable and is owned by the
Company, directly or through subsidiaries, free and clear of any
security interest, mortgage, pledge, lien, encumbrance, claim or
equity; none of the outstanding shares of capital stock of such
subsidiary was issued in violation of any preemptive or similar
rights of any securityholder of such subsidiary; all of the issued
and outstanding capital stock of Perry Ellis has been duly
authorized and validly issued, is fully paid and non-assessable and
will at the Closing Time be owned by the Company, free and clear of
any security interest, mortgage, pledge, lien, encumbrance, claim
or equity, except for any security interest, mortgage, pledge,
lien, encumbrance, claim or equity granted pursuant to the Amended
and Restated Loan and Security Agreement dated March 26, 1999 among
the Company and certain of its subsidiaries, as borrowers,
Nationsbank, N.A., as agent, and the banks party thereto from time
to time (the "Senior Credit Agreement") or the Master Agreement
dated August 28, 1997 among the Company, as lessee, SUP Joint
Venture, as lessor, Suntrust Bank, Miami, N.A., as agent, Atlantic
Financial Managers, Inc. and Atlantic Financial Group, Ltd. and
certain other financial institutions, as lenders, and the related
Lease Agreement (Land), Lease Agreement (Building), Loan Agreement,
Guaranty and Security Agreement and Financing Statement, as amended
(the "Lease"), and none of the outstanding shares of capital stock
of Perry Ellis was issued in violation of any preemptive or similar
rights of any security holder of Perry Ellis. The only subsidiaries
of the Company are the subsidiaries listed on Schedule C hereto.
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(vii) CAPITALIZATION. The authorized, issued and outstanding
capital stock of the Company is:
(i) Preferred Stock-$.01 par value; 1,000,000 shares
authorized; no shares issued or outstanding;
(ii) Class A Common Stock-$.01 par value; 30,000,000
shares authorized; no shares issued or outstanding;
and
(iii) Common Stock-$.01 par value; 30,000,000 shares
authorized; 6,712,374 shares issued and outstanding
as of January 31, 1999;
(except for subsequent issuances, if any, pursuant to this
Agreement, pursuant to reservations, agreements, employee benefit
plans referred to in the Offering Memorandum or pursuant to the
exercise of convertible securities or options referred to in the
Offering Memorandum). The shares of issued and outstanding capital
stock of the Company have been duly authorized and validly issued
and are fully paid and non-assessable; none of the outstanding
shares of capital stock of the Company was issued in violation of
the preemptive or other similar rights of any securityholder of the
Company.
(viii) AUTHORIZATION OF AGREEMENT. This Agreement has been
duly authorized, executed and delivered by the Company and each of
the Subsidiary Guarantors.
(ix) AUTHORIZATION OF THE INDENTURE. The Indenture has been
duly authorized by the Company and each Subsidiary Guarantor and,
when executed and delivered by the Company, each Subsidiary
Guarantor and the Trustee, will constitute a valid and binding
agreement of the Company and each Subsidiary Guarantor, enforceable
against the Company and each Subsidiary Guarantor in accordance
with its terms, except as the enforcement thereof may be limited by
bankruptcy, insolvency (including, without limitation, all laws
relating to fraudulent transfers), reorganization, moratorium or
similar laws affecting enforcement of creditors' rights generally
and except as enforcement thereof is subject to general principles
of equity (regardless of whether enforcement is considered in a
proceeding in equity or at law).
(x) AUTHORIZATION OF THE SECURITIES. The Securities have been
duly authorized and, at the Closing Time, will have been duly
executed by the Company and, when authenticated, issued and
delivered in the manner provided for in the Indenture and delivered
against payment of the purchase price therefor as provided in this
Agreement, will constitute valid and binding obligations of the
Company, enforceable against the Company in accordance with their
terms, except as the enforcement thereof may be limited by
bankruptcy, insolvency (including, without limitation, all laws
relating to fraudulent transfers) reorganization, moratorium or
similar laws affecting enforcement of creditors' rights generally
and except as enforcement thereof is subject to general principles
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of equity (regardless of whether enforcement is considered in a
proceeding in equity or at law), and will be in the form
contemplated by, and entitled to the benefits of, the Indenture and
the Registration Rights Agreement.
(xi) AUTHORIZATION OF THE REGISTRATION RIGHTS AGREEMENT. The
Registration Rights Agreement has been duly authorized by the
Company and each Subsidiary Guarantor and, when executed and
delivered by the Company, each Subsidiary Guarantor and the
Representatives will constitute a valid and binding agreement of
the Company and each Subsidiary Guarantor, enforceable against the
Company and each Subsidiary Guarantor in accordance with its terms
except as enforcement thereof may be limited by bankruptcy,
insolvency (including, without limitation, all laws relating to
fraudulent transfers), reorganization, moratorium or similar laws
relating to or affecting enforcement of creditors' rights
generally, and except as enforcement thereof is subject to general
principles of equity (regardless of whether enforcement is
considered in a proceeding in equity or at law).
(xii) CONSUMMATION OF THE PERRY ELLIS ACQUISITION. On January
28, 1999, the Company entered into a stock purchase agreement (the
"Stock Purchase Agreement") to buy all of the equity stock of Perry
Ellis for approximately $75.0 million in cash (the "Perry Ellis
Acquisition"). At the Closing Time, there shall not be any pending
or threatened legal or governmental proceedings with respect to the
Perry Ellis Acquisition or to any of the transactions contemplated
in the Offering Memorandum under the heading "Use of Proceeds." The
Company and the Subsidiary Guarantors will provide the
Representatives and counsel for the Initial Purchasers the
opportunity to review all closing documents to be delivered by the
parties in connection with the Perry Ellis Acquisition. The Stock
Purchase Agreement has been duly authorized, executed and delivered
by the Company and, to the best of the Company's and each of the
Subsidiary Guarantors' knowledge, by each of the other parties
thereto, and constitutes a valid and binding obligation of the
Company and, to the best of the Company's and each of the
Subsidiary Guarantors' knowledge, of each of the other parties
thereto, except as the enforcement thereof may be limited by
bankruptcy, insolvency (including, without limitation, all laws
relating to fraudulent transfers), reorganization, moratorium or
similar laws affecting enforcement of creditors' rights generally
and except as enforcement thereof is subject to general principles
of equity (regardless of whether enforcement is considered in a
proceeding in equity or at law). The Stock Purchase Agreement is in
full force and effect and, as of the Closing Time, the Company will
have performed all of its obligations thereunder required to be
performed in order to consummate the Perry Ellis Acquisition at or
prior to the Closing Time.
(xiii) DESCRIPTION OF THE SECURITIES, THE INDENTURE AND THE
REGISTRATION RIGHTS AGREEMENT. The Securities, the Indenture and
the Registration Rights Agreement will conform in all material
respects to the respective statements relating thereto contained in
the Offering Memorandum and will be in
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substantially the respective forms last delivered to the Initial
Purchasers prior to the date of this Agreement.
(xiv) ABSENCE OF DEFAULTS AND CONFLICTS. None of the Company,
any of its subsidiaries or Perry Ellis is in violation of its
charter or by-laws or in default in the performance or observance
of any obligation, agreement, covenant or condition contained in
any contract, indenture, mortgage, deed of trust, loan or credit
agreement, note, lease or other agreement or instrument to which
the Company or any of its subsidiaries or Perry Ellis, as the case
may be, is a party or by which or any of them may be bound, or to
which any of the property or assets of the Company or any of its
subsidiaries or Perry Ellis, as the case may be, is subject
(collectively, "Agreements and Instruments") except for such
defaults that would not result in a Material Adverse Effect; and
the execution, delivery and performance of this Agreement, the
Indenture, the Securities, the Registration Rights Agreement and
any other agreement or instrument entered into or issued or to be
entered into or issued by the Company or the Subsidiary Guarantors
in connection with the transactions contemplated hereby or thereby
or in the Offering Memorandum and the consummation of the
transactions contemplated herein and in the Offering Memorandum
(including the issuance and sale of the Securities, the
consummation of the Perry Ellis Acquisition and the use of the
proceeds from the sale of the Securities as described in the
Offering Memorandum under the caption "Use of Proceeds") and
compliance by the Company and the Subsidiary Guarantors with their
obligations hereunder and thereunder have been duly authorized by
all necessary corporate action and do not and will not, whether
with or without the giving of notice or passage of time or both,
conflict with or constitute a breach of, or default or a Repayment
Event (as defined below) under, or result in the creation or
imposition of any lien, charge or encumbrance upon any property or
assets of the Company or any of its subsidiaries pursuant to, the
Agreements and Instruments except for such conflicts, breaches or
defaults or liens, charges or encumbrances that, singly or in the
aggregate, would not result in a Material Adverse Effect, nor will
such action result in any violation of the provisions of the
charter or by-laws of the Company or any of its subsidiaries or any
applicable law, statute, rule, regulation, judgment, order, writ or
decree of any government, government instrumentality or court,
domestic or foreign, having jurisdiction over the Company or any of
its subsidiaries or any of their assets, properties or operations.
As used herein, a "Repayment Event" means any event or condition
which gives the holder of any note, debenture or other evidence of
indebtedness (or any person acting on such holder's behalf) the
right to require the repurchase, redemption or repayment of all or
a portion of such indebtedness by the Company or any of its
subsidiaries.
(xv) ABSENCE OF DEFAULT UNDER SENIOR INDEBTEDNESS. No event of
default exists under any contract, indenture, mortgage, loan,
agreement, note, lease, or other agreement or instrument
constituting Senior Indebtedness (as defined in the Indenture).
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(xvi) ABSENCE OF LABOR DISPUTE. No labor dispute with the
employees of the Company or any of its subsidiaries or of Perry
Ellis exists or, to the knowledge of the Company or any Subsidiary
Guarantor, is imminent, and neither the Company nor any Subsidiary
Guarantor is aware of any existing or imminent labor disturbance by
the employees of any of its or any of its subsidiaries' or of Perry
Ellis' principal suppliers, manufacturers, customers or
contractors, which, in any case, may reasonably be expected to
result in a Material Adverse Effect.
(xvii) ABSENCE OF PROCEEDINGS; NO CHANGE IN IMPORT
REGULATIONS. Except as disclosed in the Offering Memorandum, there
is no action, suit, proceeding, inquiry or investigation before or
brought by any court or governmental agency or body, domestic or
foreign, now pending, or, to the knowledge of the Company or any
Subsidiary Guarantor, threatened, against or affecting the Company,
any of its subsidiaries or Perry Ellis which would be required to
be disclosed in the Offering Memorandum if it were a prospectus
filed as part of a registration statement on Form S-1 under the
1933 Act or which might reasonably be expected to result in a
Material Adverse Effect, or which might reasonably be expected to
materially and adversely affect the properties or assets of the
Company or any of its subsidiaries or of Perry Ellis or the
consummation of the transactions contemplated by this Agreement, or
the performance by the Company or the Subsidiary Guarantors of
their respective obligations hereunder, or under the Perry Ellis
Acquisition. The aggregate of all pending legal or governmental
proceedings to which the Company or any of its subsidiaries, or to
which Perry Ellis, is a party or of which any of their respective
property or assets is the subject which are not described in the
Offering Memorandum, including ordinary routine litigation
incidental to the business, could not reasonably be expected to
result in a Material Adverse Effect. Since the respective dates as
of which information is given in the Offering Memorandum, there
have been no changes in the laws or regulations governing the
import of any products which the Company imports which would have a
Material Adverse Effect.
(xviii) POSSESSION OF INTELLECTUAL PROPERTY. The Company and
its subsidiaries own or possess, or can acquire on reasonable
terms, adequate patents, patent rights, licenses, inventions,
copyrights, know-how (including trade secrets and other unpatented
and/or unpatentable proprietary or confidential information,
systems or procedures), trademarks, service marks, trade names or
other intellectual property (collectively, "Intellectual Property")
necessary to carry on the business now operated by them, and
neither the Company nor any of its subsidiaries has received any
notice or is otherwise aware of any infringement of or conflict
with asserted rights of others with respect to any Intellectual
Property or of any facts or circumstances which would render any
Intellectual Property invalid or inadequate to protect the interest
of the Company or any of its subsidiaries therein, and which
infringement or conflict (if the subject of any unfavorable
decision, ruling or finding) or invalidity or inadequacy, singly or
in the aggregate, would result in a Material Adverse Effect. In
addition, upon consummation of the Perry Ellis Acquisition, the
Company will own all of the Intellectual Property of Perry Ellis,
including the Perry Ellis trademark, free and
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clear of any security, interest, mortgage, pledge, lien,
encumbrance, claim or equity other than any security interest,
mortgage, pledge, lien, encumbrance, claim or equity pursuant to
(A) the Senior Credit Agreement, (B) the Lease or (C) existing
licenses or sub-licenses disclosed in the Stock Purchase Agreement.
(xix) ABSENCE OF FURTHER REQUIREMENTS. No filing with, or
authorization, approval, consent, license, order, registration,
qualification or decree of, any court or governmental authority or
agency is necessary or required for the performance by the Company,
the Subsidiary Guarantors or Perry Ellis of their respective
obligations hereunder, in connection with the offering, issuance or
sale of the Securities hereunder or the consummation of the
transactions contemplated by this Agreement or under the Stock
Purchase Agreement, for the due execution, delivery or performance
of the Indenture and the Registration Rights Agreement by the
Company and the Subsidiary Guarantors or for the due execution,
delivery or performance of the Stock Purchase Agreement by the
parties thereto, except such as have been already obtained.
(xx) POSSESSION OF LICENSES AND PERMITS. The Company and its
subsidiaries and Perry Ellis possess such permits, licenses,
approvals, consents and other authorizations (collectively,
"Governmental Licenses") issued by the appropriate federal, state,
local or foreign regulatory agencies or bodies necessary to conduct
the business now operated by them, except where the failure so to
possess would not, singly or in the aggregate, have a Material
Adverse Effect; the Company and its subsidiaries and Perry Ellis
are in compliance with the terms and conditions of all such
Governmental Licenses, except where the failure so to comply would
not, singly or in the aggregate, have a Material Adverse Effect;
all of the Governmental Licenses are valid and in full force and
effect, except where the invalidity of such Governmental Licenses
or the failure of such Governmental Licenses to be in full force
and effect would not have a Material Adverse Effect; and none of
the Company, any of its subsidiaries or Perry Ellis has received
any notice of proceedings relating to the revocation or
modification of any such Governmental Licenses which, singly or in
the aggregate, if the subject of an unfavorable decision, ruling or
finding, would result in a Material Adverse Effect.
(xxi) TITLE TO PROPERTY. The Company and its subsidiaries have
good and marketable title to all real property owned by the Company
and its subsidiaries and good title to all other properties owned
by them, in each case, free and clear of all mortgages, pledges,
liens, security interests, claims, restrictions or encumbrances of
any kind except such as (a) are described in the Offering
Memorandum or (b) do not, singly or in the aggregate, materially
affect the value of such property and do not interfere with the use
made or proposed to be made of such property by the Company or any
of its subsidiaries; and all of the leases and subleases material
to the business of the Company and its subsidiaries, considered as
one enterprise, and under which the Company or any of its
subsidiaries hold properties described in the Offering Memorandum,
are in full force and effect, and neither the Company nor any of
its subsidiaries have any notice of any material claim of any sort
that has been asserted by anyone adverse to the rights
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of the Company or any of its subsidiaries under any of the leases
or subleases mentioned above, or affecting or questioning the
rights of the Company or any of its subsidiaries to the continued
possession of the leased or subleased premises under any such lease
or sublease.
(xxii) TAX RETURNS. All United States federal income tax
returns of the Company and its subsidiaries required by law to be
filed have been filed and all taxes shown by such returns or
otherwise assessed, which are due and payable, have been paid,
except assessments against which appeals have been or will be
promptly taken and as to which adequate reserves have been
provided. The Company and its subsidiaries have filed all other tax
returns that are required to have been filed by them pursuant to
applicable foreign, state, local or other law except insofar as the
failure to file such returns would not result in a Material Adverse
Effect, and has paid all taxes due pursuant to such returns or
pursuant to any assessment received by the Company and its
subsidiaries, except for such taxes, if any, as are being contested
in good faith and as to which adequate reserves have been provided.
The charges, accruals and reserves on the books of the Company in
respect of any income and corporation tax liability for any years
not finally determined are adequate to meet any assessments or
re-assessments for additional income tax for any years not finally
determined, except to the extent of any inadequacy that would not
result in a Material Adverse Effect.
(xxiii) REGISTRATION RIGHTS. Except as described in the
Offering Memorandum, there are no persons with registration rights
or other similar rights to have any debt securities or securities
convertible into, or exchangeable for, debt securities registered
by the Company or any Subsidiary Guarantor under the 1933 Act.
(xxiv) ENVIRONMENTAL LAWS. Except as described in the Offering
Memorandum and except such matters as would not, singly or in the
aggregate, result in a Material Adverse Effect, (A) none of the
Company, any of its subsidiaries or Perry Ellis is in violation of
any federal, state, local or foreign statute, law, rule,
regulation, ordinance, code, policy or rule of common law or any
judicial or administrative interpretation thereof, including any
judicial or administrative order, consent, decree or judgment,
relating to pollution or protection of human health, the
environment (including, without limitation, ambient air, surface
water, groundwater, land surface or subsurface strata) or wildlife,
including, without limitation, laws and regulations relating to the
release or threatened release of chemicals, pollutants,
contaminants, wastes, toxic substances, hazardous substances,
petroleum or petroleum products (collectively, "Hazardous
Materials") or to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of Hazardous
Materials (collectively, "Environmental Laws"), (B) the Company,
its subsidiaries and Perry Ellis have all permits, authorizations
and approvals required under any applicable Environmental Laws and
are each in compliance with their requirements, (C) there are no
pending or, to the knowledge of the Company or any of the
Subsidiary Guarantors, threatened administrative, regulatory or
judicial actions,
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suits, demands, demand letters, claims, liens, notices of
noncompliance or violation, investigation or proceedings relating
to any Environmental Law against the Company, any of its
subsidiaries or Perry Ellis and (D) there are no events or
circumstances that might reasonably be expected to form the basis
of an order for clean-up or remediation, or an action, suit or
proceeding by any private party or governmental body or agency,
against or affecting the Company, any of its subsidiaries or Perry
Ellis relating to Hazardous Materials or Environmental Laws.
(xxv) INVESTMENT COMPANY ACT. Neither the Company nor any
Subsidiary Guarantor is, and upon the issuance and sale of the
Securities as herein contemplated and the application of the net
proceeds therefrom as described in the Offering Memorandum will be,
an "investment company" or an entity "controlled" by an "investment
company" as such terms are defined in the Investment Company Act of
1940, as amended (the "1940 Act").
(xxvi) SIMILAR OFFERINGS. None of the Company, any Subsidiary
Guarantor or any of their affiliates, as such term is defined in
Rule 501(b) under the 1933 Act (each, an "Affiliate"), has,
directly or indirectly, solicited any offer to buy, sold or offered
to sell or otherwise negotiated in respect of, or will solicit any
offer to buy, sell or offer to sell or otherwise negotiate in
respect of, in the United States or to any United States citizen or
resident, any security which is or would be integrated with the
sale of the Securities in a manner that would require the
Securities to be registered under the 1933 Act.
(xxvii) RULE 144A ELIGIBILITY. The Securities are eligible for
resale pursuant to Rule 144A and will not be, at the Closing Time,
of the same class as securities listed on a national securities
exchange registered under Section 6 of the 1934 Act, or quoted in a
U.S. automated interdealer quotation system.
(xxviii) NO GENERAL SOLICITATION. None of the Company, any
Subsidiary Guarantor or any of their Affiliates or any person
acting on its or any of their behalf (other than the Initial
Purchasers, as to whom the Company and the Subsidiary Guarantors
make no representation) has engaged or will engage, in connection
with the offering of the Securities, in any form of general
solicitation or general advertising within the meaning of Rule
502(c) under the 1933 Act.
(xxix) NO REGISTRATION REQUIRED. Subject to compliance by the
Initial Purchasers with the representations and warranties set
forth in Section 2 and the procedures set forth in Section 6
hereof, it is not necessary in connection with the offer, sale and
delivery of the Securities to the Initial Purchasers and to each
Subsequent Purchaser in the manner contemplated by this Agreement
and the Offering Memorandum to register the Securities under the
1933 Act or to qualify the Indenture under the Trust Indenture Act
of 1939, as amended (the "1939 Act").
(xxx) REPORTING COMPANY. The Company is subject to the
reporting requirements of Section 13 or Section 15(d) of the 1934
Act.
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(xxxi) NO DIRECTED SELLING EFFORTS. With respect to those
Securities sold in reliance on Regulation S, (A) none of the
Company, any Subsidiary Guarantor or any of their Affiliates or any
person acting on its or their behalf (other than the Initial
Purchasers, as to whom the Company and the Subsidiary Guarantors
make no representation) has engaged or will engage in any directed
selling efforts within the meaning of Regulation S and (B) each of
the Company, the Subsidiary Guarantors and their Affiliates and any
person acting on its or their behalf (other than the Initial
Purchasers, as to whom the Company and the Subsidiary Guarantors
make no representation) has complied and will comply with the
offering restrictions requirement of Regulation S.
(xxxii) SOLVENCY. The Company and each of the Subsidiary
Guarantors are, and immediately after the Closing Time (after
giving effect to the Perry Ellis Acquisition) will be, Solvent. As
used herein, the term "Solvent" means, with respect to the Company
and each Subsidiary Guarantor, on a particular date, that on such
date (A) the fair market value of the assets of the Company or such
Subsidiary Guarantor, as the case may be, is greater than the total
amount of liabilities (including contingent liabilities) of the
Company or such Subsidiary Guarantor, as the case may be, (B) the
present fair salable value of the assets of the Company or such
Subsidiary Guarantor, as the case may be, is greater than the
amount that will be required to pay the probable liabilities of the
Company or such Subsidiary Guarantor, as the case may be, on its
debts as they become absolute and matured, (C) the Company and such
Subsidiary Guarantor, as the case may be, is able to realize upon
its assets and pay its debts and other liabilities, including
contingent obligations, as they mature and (D) the Company and such
Subsidiary Guarantor, as the case may be, does not have an
unreasonably small capital.
(xxxiii) YEAR 2000. All disclosure regarding year 2000
compliance that is required to be described in a registration
statement on Form S-1 under the 1933 Act (including disclosures
required by Staff Legal Bulletin No. 6 and SEC Release No. 33-7558
(July 29, 1998)) has been included in the Offering Memorandum.
Other than as disclosed in the Offering Memorandum, none of the
Company, its subsidiaries or Perry Ellis will incur operating
expenses or costs to ensure that their information systems will be
year 2000 compliant which would reasonably be expected to have a
Material Adverse Effect.
(xxxiv) INTERNAL ACCOUNTING CONTROLS. Each of the Company, the
Subsidiary Guarantors and Perry Ellis maintains a system of
internal accounting controls sufficient to provide reasonable
assurances that (A) transactions are executed in accordance with
management's general or specific authorization, (B) transactions
are recorded as necessary to permit preparation of financial
statements in conformity with GAAP and to maintain accountability
for assets, (C) access to assets is permitted only in accordance
with management's general or specific authorization and (D) the
recorded accountability for assets is compared with the existing
assets at reasonable intervals and appropriate action is taken with
respect to any differences.
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(xxxv) INSURANCE. Each of the Company, the Subsidiary
Guarantors and Perry Ellis carry or are entitled to the benefits
of, insurance with financially sound and reputable insurers, in
such amounts and covering such risks as is generally maintained by
companies of established repute engaged in the same or similar
business, and all such insurance is in full force and effect.
(xxxvi) NO STABILIZATION OR MANIPULATION. None of the Company,
the Subsidiary Guarantors or any of their respective officers,
directors or controlling persons has taken, directly or indirectly,
any action designed to cause or to result in, or that has
constituted or which might reasonably be expected to constitute,
the stabilization or manipulation of the price of any security of
the Company to facilitate the sale or resale of the Securities.
(xxxvii) NO UNDISCLOSED RELATIONSHIPS. No relationship, direct
or indirect, exists between or among any of the Company, any
Subsidiary Guarantor or any of their Affiliates, on the one hand,
and any director, officer, stockholder, customer or supplier of any
of them, on the other hand, which is required by the 1933 Act or by
the 1933 Act Regulations to be described in a registration
statement on Form S-1 which is not so described, or is not
described as required, in the Offering Memorandum.
(xxxviii) NO DISTRIBUTION OF UNAUTHORIZED MATERIALS. The
Company and the Subsidiary Guarantors have not distributed and,
prior to the later to occur of (i) the Closing Time and (ii)
completion of the distribution of the Securities, will not
distribute any offering material in connection with the offering
and sale of the Securities other than the Offering Memorandum or
other materials, if any, permitted by the 1933 Act and approved by
the Representatives.
(xxxix) NO CESSATION OF SUPPLY. No supplier of merchandise to
the Company or any of the Subsidiary Guarantors (or any of their
subsidiaries) or to Perry Ellis has ceased shipments of merchandise
to the Company, any of the Subsidiary Guarantors or Perry Ellis, as
the case may be, other than in the normal and ordinary course of
business consistent with past practices, which cessation would
result in a Material Adverse Effect.
(xl) NO ADDITIONAL DOCUMENTS. There are no contracts or
documents of a character that would be required to be described in
the Offering Memorandum if it were a prospectus filed as part of a
registration statement on Form S-1 under the 1933 Act that are not
described as would be so required. All such contracts to which the
Company or any of its subsidiaries is party have been duly
authorized, executed and delivered by the Company or such
subsidiaries, as the case may be, and constitute valid and binding
obligations of the Company or such subsidiaries, as the case may
be, except as the enforcement thereof may be limited by bankruptcy,
insolvency (including, without limitation, all laws relating to
fraudulent transfers), reorganization, moratorium or similar laws
affecting enforcement of creditors' rights generally and except as
enforcement thereof is subject to general principles of equity
(regardless of whether enforcement is considered in a proceeding in
equity or at law).
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(b) OFFICER'S CERTIFICATES. Any certificate signed by any officer of
the Company or any Subsidiary Guarantor delivered to the Representatives or to
counsel for the Initial Purchasers shall be deemed a representation and warranty
by the Company or such Subsidiary Guarantor to each Initial Purchaser as to the
matters covered thereby.
SECTION 2. SALE AND DELIVERY TO INITIAL PURCHASERS; CLOSING.
(a) SECURITIES. On the basis of the representations and warranties
herein contained and subject to the terms and conditions herein set forth, the
Company agrees to sell to each Initial Purchaser, severally and not jointly, and
each Initial Purchaser, severally and not jointly, agrees to purchase from the
Company, at the price set forth in Schedule B, the aggregate principal amount of
Securities set forth in Schedule A opposite the name of such Initial Purchaser,
plus any additional principal amount of Securities which such Initial Purchaser
may become obligated to purchase pursuant to the provisions of Section 11
hereof.
(b) PAYMENT. Payment of the purchase price for, and delivery of
certificates for, the Securities shall be made at the office of Shearman &
Sterling, 599 Lexington Avenue, New York, New York 10022, or at such other place
as shall be agreed upon by the Representatives and the Company, at 9:00 A.M.
(eastern time) on the third business day after the date hereof (unless postponed
in accordance with the provisions of Section 11), or such other time not later
than ten business days after such date as shall be agreed upon by the
Representatives and the Company (such time and date of payment and delivery
being herein called the "Closing Time").
Payment shall be made to the Company by wire transfer of immediately
available funds to a bank account designated by the Company, against delivery to
the Representatives for the respective accounts of the Initial Purchasers of
certificates for the Securities to be purchased by them. It is understood that
each Initial Purchaser has authorized the Representatives, for its account, to
accept delivery of, receipt for, and make payment of the purchase price for, the
Securities which it has agreed to purchase. Merrill Lynch, individually and not
as representative of the Initial Purchasers, may (but shall not be obligated to)
make payment of the purchase price for the Securities to be purchased by any
Initial Purchaser whose funds have not been received by the Closing Time, but
such payment shall not relieve such Initial Purchaser from its obligations
hereunder.
(c) DENOMINATIONS; REGISTRATION. Certificates for the Securities shall
be in such denominations ($100,000 or integral multiples of $1,000 in excess
thereof) and registered in such names as the Representatives may request in
writing at least one full business day before the Closing Time. The certificates
representing the Securities shall be made available for examination and
packaging by the Initial Purchasers in the City of New York not later than 10:00
A.M. on the last business day prior to the Closing Time.
SECTION 3. COVENANTS OF THE COMPANY AND THE SUBSIDIARY GUARANTORS. The
Company and each Subsidiary Guarantor, jointly and severally, covenant with each
Initial Purchaser as follows:
(a) OFFERING MEMORANDUM. The Company, as promptly as possible, will
furnish to each Initial Purchaser, without charge, such number of copies of the
Preliminary Offering
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Memorandum, the Final Offering Memorandum and any amendments and supplements
thereto as such Initial Purchaser may reasonably request.
(b) NOTICE AND EFFECT OF MATERIAL EVENTS. The Company will immediately
notify each Initial Purchaser, and confirm such notice in writing, of (x) any
filing made by the Company of information relating to the offering of the
Securities with any securities exchange or any other regulatory body in the
United States or any other jurisdiction, and (y) prior to the completion of the
placement of the Securities by the Initial Purchasers as evidenced by a notice
in writing from the Initial Purchasers to the Company, any material changes in
or affecting the condition, financial or otherwise, or the earnings, business
affairs or business prospects of the Company and its subsidiaries considered as
one enterprise which (i) make any statement in the Offering Memorandum false or
misleading or (ii) are not disclosed in the Offering Memorandum. In such event
or if during such time any event shall occur as a result of which it is
necessary, in the reasonable opinion of any of the Company, its counsel, the
Initial Purchasers or counsel for the Initial Purchasers, to amend or supplement
the Final Offering Memorandum in order that the Final Offering Memorandum not
include any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein not misleading in the light of
the circumstances then existing, the Company will forthwith amend or supplement
the Final Offering Memorandum by preparing and furnishing to each Initial
Purchaser an amendment or amendments of, or a supplement or supplements to, the
Final Offering Memorandum (in form and substance satisfactory in the reasonable
opinion of counsel for the Initial Purchasers) so that, as so amended or
supplemented, the Final Offering Memorandum will not include an untrue statement
of a material fact or omit to state a material fact necessary in order to make
the statements therein, in the light of the circumstances existing at the time
it is delivered to a Subsequent Purchaser, not misleading.
(c) AMENDMENT TO OFFERING MEMORANDUM AND SUPPLEMENTS. The Company will
advise each Initial Purchaser promptly of any proposal to amend or supplement
the Offering Memorandum and will not effect such amendment or supplement without
the consent of the Initial Purchasers. Neither the consent of the Initial
Purchasers, nor the Initial Purchaser's delivery of any such amendment or
supplement, shall constitute a waiver of any of the conditions set forth in
Section 5 hereof.
(d) QUALIFICATION OF SECURITIES FOR OFFER AND SALE. The Company will
use its best efforts, in cooperation with the Initial Purchasers, to qualify the
Securities for offering and sale under the applicable securities laws of such
states and other jurisdictions as the Representatives may designate and will
maintain such qualifications in effect as long as required for the sale of the
Securities; provided, however, that the Company shall not be obligated to file
any general consent to service of process or to qualify as a foreign corporation
or as a dealer in securities in any jurisdiction in which it is not so qualified
or to subject itself to taxation in respect of doing business in any
jurisdiction in which it is not otherwise so subject.
(e) RATING OF SECURITIES. The Company shall take all reasonable action
necessary to enable Standard & Poor's Ratings Services, a division of McGraw
Hill, Inc. ("S&P"), and Moody's Investors Service Inc. ("Moody's") to provide
their respective credit ratings of the Securities.
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(f) DTC. The Company will cooperate with the Representatives and use
its best efforts to permit the Securities to be eligible for clearance and
settlement through the facilities of DTC.
(g) USE OF PROCEEDS. The Company will use the net proceeds received by
it from the sale of the Securities in the manner specified in the Offering
Memorandum under "Use of Proceeds".
(h) RESTRICTION ON SALE OF SECURITIES. During a period of 180 days from
the date of the Offering Memorandum, the Company will not, without the prior
written consent of Merrill Lynch, directly or indirectly, issue, sell, offer or
agree to sell, grant any option for the sale of, or otherwise dispose of, any
other debt securities of the Company or securities of the Company that are
convertible into, or exchangeable for, the Securities or such other debt
securities (other than registered notes to be exchanged for the Securities).
(i) PORTAL DESIGNATION. The Company will use its best efforts to permit
the Securities to be designated PORTAL securities in accordance with the rules
and regulations adopted by the National Association of Securities Dealers, Inc.
("NASD") relating to trading in the PORTAL Market.
(j) REPORTING REQUIREMENTS. The Company, during the period when the
Offering Memorandum is required to be delivered pursuant to Section 6(a)(vii)
hereof, will file all documents required to be filed with the Commission
pursuant to the 1934 Act within the time periods required by the 1934 Act and
the 1934 Act Regulations.
(k) PERRY ELLIS GUARANTEE. Immediately following the consummation of
the Perry Ellis Acquisition, the Company shall cause Perry Ellis International,
Inc. to execute and deliver to the Trustee a supplemental indenture in
accordance with the terms of the Indenture pursuant to which Perry Ellis
International, Inc. shall assume the obligations of a Subsidiary Guarantor (as
defined in the Indenture).
SECTION 4. PAYMENT OF EXPENSES.
(a) EXPENSES. The Company will pay all expenses incident to the
performance of its obligations under this Agreement, the Securities, the
Registration Rights Agreement and the Indenture including (i) the preparation,
printing, delivery to the Initial Purchasers and any filing of the Offering
Memorandum (including financial statements and any schedules or exhibits and any
document incorporated therein by reference) and of each amendment or supplement
thereto, (ii) the preparation, printing and delivery to the Initial Purchasers
of this Agreement, any Agreement among Initial Purchasers, the Indenture, the
Registration Rights Agreement and such other documents as may be required in
connection with the offering, purchase, sale, issuance or delivery of the
Securities, (iii) the preparation, issuance and delivery of the certificates for
the Securities to the Initial Purchasers, including any transfer taxes, any
stamp or other duties payable upon the sale, issuance and delivery of the
Securities to the Initial Purchasers and any charges of DTC in connection
therewith, (iv) the fees and disbursements of the Company's counsel, accountants
and other advisors, (v) the qualification of the Securities under securities
laws in accordance with the provisions of Section 3(d) hereof, including filing
fees and the reasonable fees and disbursements of counsel for the Initial
Purchasers in connection therewith
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and in connection with the preparation of the Blue Sky Survey, and any
supplement thereto, (vi) the fees and expenses of the Trustee, including the
fees and disbursements of counsel for the Trustee in connection with the
Indenture and the Securities, (vii) any fees payable in connection with the
rating of the Securities, and (viii) any fees and expenses payable in connection
with the initial and continued designation of the Securities as PORTAL
securities under the PORTAL Market Rules pursuant to NASD Rule 5322.
(b) TERMINATION OF AGREEMENT. If this Agreement is terminated by the
Representatives in accordance with the provisions of Section 5 or Section
10(a)(i) hereof, the Company and the Subsidiary Guarantors, jointly and
severally, shall reimburse the Initial Purchasers for all of their out-of-pocket
expenses, including the reasonable fees and disbursements of counsel for the
Initial Purchasers.
SECTION 5. CONDITIONS OF INITIAL PURCHASERS' OBLIGATIONS. The
obligations of the several Initial Purchasers hereunder are subject to the
accuracy of the representations and warranties of the Company and the Subsidiary
Guarantors contained in Section 1 hereof or in certificates of any officer of
the Company or any of its subsidiaries delivered pursuant to the provisions
hereof, to the performance by each of the Company and the Subsidiary Guarantors
of its covenants and other obligations hereunder, and to the following further
conditions:
(a) OPINION OF COUNSEL FOR THE COMPANY AND THE SUBSIDIARY GUARANTORS.
At the Closing Time, the Representatives shall have received the favorable
opinion, dated as of the Closing Time, of Broad and Cassel, counsel for the
Company and the Subsidiary Guarantors, in form and substance satisfactory to
counsel for the Initial Purchasers, together with signed or reproduced copies of
such letter for each of the other Initial Purchasers to the effect set forth in
Exhibit A hereto and to such further effect as counsel for the Initial
Purchasers may reasonably request. Such opinion shall state that counsel for the
Initial Purchasers may rely on such opinion as to matters of Florida Law. Such
counsel may also state that, insofar as such opinion involves factual matters,
they have relied, to the extent they deem proper, upon certificates of officers
of the Company and its subsidiaries and of Perry Ellis and certificates of
public officials.
(b) OPINION OF COUNSEL FOR THE INITIAL PURCHASERS. At the Closing Time,
the Representatives shall have received the favorable opinion, dated as of the
Closing Time, of Shearman & Sterling, counsel for the Initial Purchasers,
together with signed or reproduced copies of such letter for each of the other
Initial Purchasers with respect to certain matters set forth in Exhibit A
hereto. In giving such opinion such counsel may rely, as to all matters governed
by the laws of jurisdictions other than the law of the State of New York and the
federal law of the United States, upon the opinions of counsel satisfactory to
the Representatives. Such counsel may also state that, insofar as such opinion
involves factual matters, they have relied, to the extent they deem proper, upon
certificates of officers of the Company and its subsidiaries and of Perry Ellis
and certificates of public officials.
(c) OFFICERS' CERTIFICATE. At the Closing Time, there shall not have
been, since the date hereof or since the respective dates as of which
information is given in the Offering Memorandum, any material adverse change in
the condition, financial or otherwise, or in the earnings, business affairs or
business prospects of the Company and its subsidiaries considered as one
enterprise, whether or not arising in the ordinary course of business, and the
Representatives shall have received certificates of the President or a Vice
President of the
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Company and each Subsidiary Guarantor and of the chief financial or chief
accounting officer of the Company and each Subsidiary Guarantor, dated as of the
Closing Time, to the effect that (i) there has been no such material adverse
change, (ii) the representations and warranties in Section 1 hereof are true and
correct with the same force and effect as though expressly made at and as of the
Closing Time, and (iii) the Company and each Subsidiary Guarantor have complied
with all agreements and satisfied all conditions on its part to be performed or
satisfied at or prior to the Closing Time.
(d) ACCOUNTANTS' COMFORT LETTER. At the time of the execution of this
Agreement, the Representatives shall have received from each of Deloitte &
Touche LLP and Saul L. Klaw & Co., P.C. a letter dated such date, in form and
substance satisfactory to the Representatives, together with signed or
reproduced copies of such letter for each of the other Initial Purchasers
containing statements and information of the type ordinarily included in
accountants' "comfort letters" to Initial Purchasers with respect to the
financial statements and certain financial information contained in the Offering
Memorandum.
(e) BRING-DOWN COMFORT LETTER. At the Closing Time, the Representatives
shall have received from each of Deloitte & Touche LLP and Saul L. Klaw & Co.,
P.C. a letter, dated as of the Closing Time, to the effect that they reaffirm
the statements made in the letter furnished pursuant to subsection (d) of this
Section, except that the specified date referred to shall be a date not more
than three business days prior to the Closing Time.
(f) MAINTENANCE OF RATING. At the Closing Time, the Securities shall be
rated at least B3 by Moody's and B- by S&P, and the Company shall have delivered
to the Representatives a letter dated the Closing Time, from each such rating
agency, or other evidence satisfactory to the Representatives, confirming that
the Securities have such ratings; and since the date of this Agreement, there
shall not have occurred a downgrading in the rating assigned to the Securities
or any of the Company's other debt securities by any "nationally recognized
statistical rating agency", as that term is defined by the Commission for
purposes of Rule 436(g)(2) under the 1933 Act, and no such securities rating
agency shall have publicly announced that it has under surveillance or review,
with possible negative implications, its rating of the Securities or any of the
Company's other debt securities.
(g) PORTAL. At the Closing Time, the Securities shall have been
designated for trading on PORTAL.
(h) REGISTRATION RIGHTS AGREEMENT. At the Closing Time, the
Registration Rights Agreement, in form and substance reasonably satisfactory to
the Initial Purchasers, shall have been duly executed and delivered and be in
full force and effect.
(i) ADDITIONAL DOCUMENTS. At the Closing Time, counsel for the Initial
Purchasers shall have been furnished with such documents and opinions as they
may require for the purpose of enabling them to pass upon the issuance and sale
of the Securities as herein contemplated, or in order to evidence the accuracy
of any of the representations or warranties, or the fulfillment of any of the
conditions, herein contained; and all proceedings taken by the Company in
connection with the issuance and sale of the Securities as herein contemplated
shall be satisfactory in form and substance to the Representatives and counsel
for the Initial Purchasers.
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(j) CONSUMMATION OF THE PERRY ELLIS ACQUISITION. At the Closing Time,
the Company shall have consummated the Perry Ellis Acquisition in accordance
with the terms of the Stock Purchase Agreement.
(k) CONSENT UNDER SENIOR CREDIT AGREEMENT AND AMENDMENT OF LEASE. At or
prior to the Closing Time, the Company shall have (i) provided satisfactory
evidence to the Initial Purchasers that the Securities constitute permitted
indebtedness under the Senior Credit Agreement and (ii) presented to the Initial
Purchasers an executed amendment to the Lease satisfactory to the Initial
Purchasers substantially upon the terms and conditions set forth in the letter
from Suntrust Bank to the Company dated the date hereof.
(l) LOCKUP. At the Closing Time, the Initial Purchasers shall have
received a letter from Carfel, Inc. ("Carfel") in form and substance
satisfactory to the Initial Purchasers whereby Carfel agrees not to dispose of
any Securities other than pursuant to transactions taking place not less than
160 days after the Issue Date in reliance on the Prospectus forming part of the
Shelf Registration Statement (as such terms are defined in the Registration
Rights Agreement).
(m) TERMINATION OF AGREEMENT. If any condition specified in this
Section shall not have been fulfilled when and as required to be fulfilled, this
Agreement may be terminated by the Representatives by notice to the Company at
any time at or prior to the Closing Time, and such termination shall be without
liability of any party to any other party except as provided in Section 4 and
except that Sections 1, 7, 8 and 9 shall survive any such termination and remain
in full force and effect.
SECTION 6. SUBSEQUENT OFFERS AND RESALES OF THE SECURITIES.
(a) OFFER AND SALE PROCEDURES. Each of the Initial Purchasers and the
Company hereby establish and agree to observe the following procedures in
connection with the offer and sale of the Securities:
(i) OFFERS AND SALES ONLY TO QUALIFIED INSTITUTIONAL BUYERS.
Offers and sales of the Securities shall only be made (A) to
persons whom the offeror or seller reasonably believes to be
qualified institutional buyers, as defined in Rule 144A under the
1933 Act ("Qualified Institutional Buyers"), (B) to a limited
number of persons who are institutional accredited investors, as
such term is defined in Rule 501(a)(1), (2), (3) and (7) under the
1933 Act, that the offeror reasonable believes to be and, with
respect to sales and deliveries, that are such institutional
accredited investors ("Institutional Accredited Investors") or (C)
non-U.S. persons outside the United States, as defined in
Regulation S under the 1933 Act, to whom the offeror or seller
reasonably believes offers and sales of the Securities may be made
in reliance upon Regulation S under the 1933 Act. Each Initial
Purchaser severally agrees that it will not offer, sell or deliver
any of the Securities in any jurisdiction outside the United States
except under circumstances that will result in compliance with the
applicable laws thereof, and that it will take at its own expense
whatever action is required to permit its purchase and resale of
the Securities in such jurisdictions.
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(ii) NO GENERAL SOLICITATION. No general solicitation or
general advertising (within the meaning of Rule 502(c) under the
1933 Act) will be used in the United States in connection with the
offering or sale of the Securities.
(iii) PURCHASES BY NON-BANK FIDUCIARIES. In the case of a
non-bank Subsequent Purchaser of a Security acting as a fiduciary
for one or more third parties, each third party shall, in the
judgment of the applicable Initial Purchaser, be an Institutional
Accredited Investor or a Qualified Institutional Buyer or a
non-U.S. person outside the United States.
(iv) SUBSEQUENT PURCHASER NOTIFICATION. Each Initial Purchaser
will take reasonable steps to inform, and cause each of its U.S.
Affiliates to take reasonable steps to inform, persons acquiring
Securities from such Initial Purchaser or affiliate, as the case
may be, in the United States that the Securities (A) have not been
and will not be registered under the 1933 Act, (B) are being sold
to them without registration under the 1933 Act in reliance on Rule
144A or in accordance with another exemption from registration
under the 1933 Act, as the case may be, and (C) may not be offered,
sold or otherwise transferred except (1) to the Company, (2)
outside the United States in accordance with Regulation S, or (3)
inside the United States in accordance with (x) Rule 144A to a
person whom the seller reasonably believes is a Qualified
Institutional Buyer that is purchasing such Securities for its own
account or for the account of a Qualified Institutional Buyer to
whom notice is given that the offer, sale or transfer is being made
in reliance on Rule 144A or (y) pursuant to another available
exemption from registration under the 1933 Act.
(v) MINIMUM PRINCIPAL AMOUNT. No sale of the Securities to any
one Subsequent Purchaser will be for less than U.S. $100,000
principal amount and no Security will be issued in a smaller
principal amount. If the Subsequent Purchaser is a non-bank
fiduciary acting on behalf of others, each person for whom it is
acting must purchase at least U.S. $100,000 principal amount of the
Securities.
(vi) RESTRICTIONS ON TRANSFER. The transfer restrictions and
the other provisions set forth in the Offering Memorandum under the
heading "Notice to Investors", including the legend required
thereby, shall apply to the Securities except as otherwise agreed
by the Company and the Initial Purchasers.
(vii) DELIVERY OF OFFERING MEMORANDUM. Each Initial Purchaser
will deliver to each purchaser of the Securities from such Initial
Purchaser, in connection with its original distribution of the
Securities, a copy of the Offering Memorandum, as amended and
supplemented at the date of such delivery.
(b) COVENANTS OF THE COMPANY AND THE SUBSIDIARY GUARANTORS. The Company
and each Subsidiary Guarantor, jointly and severally, covenant with each Initial
Purchaser as follows:
(i) INTEGRATION. The Company and each Subsidiary Guarantor
agree that they will not and will cause their Affiliates not to,
directly or indirectly, solicit any offer to buy, sell or make any
offer or sale of, or otherwise negotiate in
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respect of, securities of the Company or any Subsidiary Guarantor
of any class if, as a result of the doctrine of "integration"
referred to in Rule 502 under the 1933 Act, such offer or sale
would render invalid (for the purpose of (i) the sale of the
Securities by the Company and the Subsidiary Guarantors to the
Initial Purchasers, (ii) the resale of the Securities by the
Initial Purchasers to Subsequent Purchasers or (iii) the resale of
the Securities by such Subsequent Purchasers to others) the
exemption from the registration requirements of the 1933 Act
provided by Section 4(2) thereof or by Rule 144A or by Regulation S
thereunder or otherwise.
(ii) RULE 144A INFORMATION. The Company agrees that, in order
to render the Securities eligible for resale pursuant to Rule 144A
under the 1933 Act, while any of the Securities remain outstanding,
it will make available, upon request, to any holder of Securities
or prospective purchasers of Securities the information specified
in Rule 144A(d)(4), unless the Company furnishes information to the
Commission pursuant to Section 13 or 15(d) of the 1934 Act.
(iii) RESTRICTION ON RESALES. Until the expiration of two
years after the original issuance of the Securities, the Company
and the Subsidiary Guarantors will not, and each will cause their
Affiliates not to, resell any Securities which are "restricted
securities" (as such term is defined under Rule 144(a)(3) under the
1933 Act), whether as beneficial owner or otherwise (except as
agent acting as a securities broker on behalf of and for the
account of customers in the ordinary course of business in
unsolicited broker's transactions).
(c) QUALIFIED INSTITUTIONAL BUYER. Each Initial Purchaser severally and
not jointly represents and warrants to, and agrees with, the Company that it is
a "qualified institutional buyer" within the meaning of Rule 144A under the 1933
Act (a "Qualified Institutional Buyer") and an "accredited investor" within the
meaning of Rule 501(a) under the 1933 Act (an "Accredited Investor").
(d) RESALE PURSUANT TO RULE 903 OF REGULATION S OR RULE 144A. Each
Initial Purchaser understands that the Securities have not been and will not be
registered under the 1933 Act and may not be offered or sold within the United
States or to, or for the account or benefit of, U.S. persons except in
accordance with Regulation S under the 1933 Act or pursuant to an exemption from
the registration requirements of the 1933 Act. Each Initial Purchaser severally
represents and agrees, that, except as permitted by Section 6(a) above, it has
offered and sold Securities and will offer and sell Securities (i) as part of
their distribution at any time and (ii) otherwise until forty days after the
later of the date upon which the offering of the Securities commences and the
Closing Time, only in accordance with Rule 903 of Regulation S, Rule 144A under
the 1933 Act or another applicable exemption from the registration requirements
of the 1933 Act. Accordingly, neither the Initial Purchasers, their affiliates
nor any persons acting on their behalf have engaged or will engage in any
directed selling efforts with respect to Securities sold hereunder pursuant to
Regulation S, and the Initial Purchasers, their affiliates and any person acting
on their behalf have complied and will comply with the offering restriction
requirements of Regulation S. Each Initial Purchaser severally agrees that, at
or prior to confirmation of a sale of Securities pursuant to Regulation S it
will have sent to each distributor, dealer or person receiving a selling
concession, fee or other remuneration that purchases
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Securities from it or through it during the restricted period a confirmation or
notice to substantially the following effect:
"The Securities covered hereby have not been registered under
the United States Securities Act of 1933 (the "Securities Act") and may
not be offered or sold within the United States or to or for the
account or benefit of U.S. persons (i) as part of their distribution at
any time and (ii) otherwise until forty days after the later of the
date upon which the offering of the Securities commenced and the date
of closing, except in either case in accordance with Regulation S or
Rule 144A under the Securities Act. Terms used above have the meaning
given to them by Regulation S."
Terms used in the above paragraph have the meanings given to
them by Regulation S.
(e) ADDITIONAL REPRESENTATIONS AND WARRANTIES OF INITIAL PURCHASERS.
Each Initial Purchaser severally represents and agrees that it has not entered
and will not enter into any contractual arrangements with respect to the
distribution of the Securities, except with its affiliates or with the prior
written consent of the Company.
SECTION 7. INDEMNIFICATION.
(a) INDEMNIFICATION OF INITIAL PURCHASERS. The Company and each
Subsidiary Guarantor, jointly and severally, agree to indemnify and hold
harmless each Initial Purchaser and each person, if any, who controls any
Initial Purchaser within the meaning of Section 15 of the 1933 Act or Section 20
of the 1934 Act as follows:
(i) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, arising out of any untrue
statement or alleged untrue statement of a material fact contained
in any Preliminary Offering Memorandum or the Final Offering
Memorandum (or any amendment or supplement thereto), or the
omission or alleged omission therefrom of a material fact necessary
in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
(ii) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, to the extent of the aggregate
amount paid in settlement of any litigation, or any investigation
or proceeding by any governmental agency or body, commenced or
threatened, or of any claim whatsoever based upon any such untrue
statement or omission, or any such alleged untrue statement or
omission; provided that (subject to Section 7(d) below) any such
settlement is effected with the written consent of the Company and
the Subsidiary Guarantors; and
(iii) against any and all expense whatsoever, as incurred
(including the fees and disbursements of counsel chosen by Merrill
Lynch), reasonably incurred in investigating, preparing or
defending against any litigation, or any investigation or
proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any such untrue
statement or omission, or any
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such alleged untrue statement or omission, to the extent that any
such expense is not paid under (i) or (ii) above;
PROVIDED, HOWEVER, that this indemnity agreement shall not apply to any loss,
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Company by any
Initial Purchaser through Merrill Lynch expressly for use in the Offering
Memorandum (or any amendment thereto).
(b) INDEMNIFICATION OF THE COMPANY AND THE SUBSIDIARY GUARANTORS. Each
Initial Purchaser severally agrees to indemnify and hold harmless the Company
and the Subsidiary Guarantors and each person, if any, who controls the Company
and the Subsidiary Guarantor within the meaning of Section 15 of the 1933 Act or
Section 20 of the 1934 Act against any and all loss, liability, claim, damage
and expense described in the indemnity contained in subsection (a) of this
Section, as incurred, but only with respect to untrue statements or omissions,
or alleged untrue statements or omissions, made in the Offering Memorandum in
reliance upon and in conformity with written information furnished to the
Company by such Initial Purchaser through Merrill Lynch expressly for use in the
Offering Memorandum.
(c) ACTIONS AGAINST PARTIES; NOTIFICATION. Each indemnified party shall
give notice as promptly as reasonably practicable to each indemnifying party of
any action commenced against it in respect of which indemnity may be sought
hereunder, but failure to so notify an indemnifying party shall not relieve such
indemnifying party from any liability hereunder to the extent it is not
materially prejudiced as a result thereof and in any event shall not relieve it
from any liability which it may have otherwise than on account of this indemnity
agreement. In the case of parties indemnified pursuant to Section 7(a) above,
counsel to the indemnified parties shall be selected by Merrill Lynch, and, in
the case of parties indemnified pursuant to Section 7(b) above, counsel to the
indemnified parties shall be selected by the Company. An indemnifying party may
participate at its own expense in the defense of any such action; provided,
however, that counsel to the indemnifying party shall not (except with the
consent of the indemnified party) also be counsel to the indemnified party. In
no event shall the indemnifying parties be liable for fees and expenses of more
than one counsel (in addition to any local counsel) separate from their own
counsel for all indemnified parties in connection with any one action or
separate but similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances. No indemnifying party shall,
without the prior written consent of the indemnified parties, settle or
compromise or consent to the entry of any judgment with respect to any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever in respect of which
indemnification or contribution could be sought under this Section or Section 8
hereof (whether or not the indemnified parties are actual or potential parties
thereto), unless such settlement, compromise or consent (i) includes an
unconditional release of each indemnified party from all liability arising out
of such litigation, investigation, proceeding or claim and (ii) does not include
a statement as to or an admission of fault, culpability or a failure to act by
or on behalf of any indemnified party.
(d) SETTLEMENT WITHOUT CONSENT IF FAILURE TO REIMBURSE. If at any time
an indemnified party shall have requested an indemnifying party to reimburse the
indemnified party
23
<PAGE>
for fees and expenses of counsel, such indemnifying party agrees that it shall
be liable for any settlement of the nature contemplated by Section 7(a)(ii)
effected without its written consent if (i) such settlement is entered into more
than 45 days after receipt by such indemnifying party of the aforesaid request,
(ii) such indemnifying party shall have received notice of the terms of such
settlement at least 30 days prior to such settlement being entered into and
(iii) such indemnifying party shall not have reimbursed such indemnified party
in accordance with such request prior to the date of such settlement.
SECTION 8. CONTRIBUTION. If the indemnification provided for in Section
7 hereof is for any reason unavailable to or insufficient to hold harmless an
indemnified party in respect of any losses, liabilities, claims, damages or
expenses referred to therein, then each indemnifying party shall contribute to
the aggregate amount of such losses, liabilities, claims, damages and expenses
incurred by such indemnified party, as incurred, (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company and the
Subsidiary Guarantors on the one hand and the Initial Purchasers on the other
hand from the offering of the Securities pursuant to this Agreement or (ii) if
the allocation provided by clause (i) is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Company and
the Subsidiary Guarantors on the one hand and of the Initial Purchasers on the
other hand in connection with the statements or omissions which resulted in such
losses, liabilities, claims, damages or expenses, as well as any other relevant
equitable considerations.
The relative benefits received by the Company and the Subsidiary
Guarantors on the one hand and the Initial Purchasers on the other hand in
connection with the offering of the Securities pursuant to this Agreement shall
be deemed to be in the same respective proportions as the total net proceeds
from the offering of the Securities pursuant to this Agreement (before deducting
expenses) received by the Company and the total underwriting discount received
by the Initial Purchasers, bear to the aggregate initial offering price of the
Securities.
The relative fault of the Company and the Subsidiary Guarantors on the
one hand and the Initial Purchasers on the other hand shall be determined by
reference to, among other things, whether any such untrue or alleged untrue
statement of a material fact or omission or alleged omission to state a material
fact relates to information supplied by the Company or any Subsidiary Guarantor
or by the Initial Purchasers and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such statement or omission.
The Company, the Subsidiary Guarantors and the Initial Purchasers agree
that it would not be just and equitable if contribution pursuant to this Section
were determined by pro rata allocation (even if the Initial Purchasers were
treated as one entity for such purpose) or by any other method of allocation
which does not take account of the equitable considerations referred to above in
this Section. The aggregate amount of losses, liabilities, claims, damages and
expenses incurred by an indemnified party and referred to above in this Section
shall be deemed to include any legal or other expenses reasonably incurred by
such indemnified party in investigating, preparing or defending against any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever based upon any such
untrue or alleged untrue statement or omission or alleged omission.
24
<PAGE>
Notwithstanding the provisions of this Section, no Initial Purchaser
shall be required to contribute any amount in excess of the amount by which the
total price at which the Securities purchased and sold by it hereunder exceeds
the amount of any damages which such Initial Purchaser has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission.
No person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the 1933 Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
For purposes of this Section, each person, if any, who controls an
Initial Purchaser within the meaning of Section 15 of the 1933 Act or Section 20
of the 1934 Act shall have the same rights to contribution as such Initial
Purchaser, and each person, if any, who controls the Company or any Subsidiary
Guarantor within the meaning of Section 15 of the 1933 Act or Section 20 of the
1934 Act shall have the same rights to contribution as the Company or the
Subsidiary Guarantors, as the case may be. The Initial Purchasers' respective
obligations to contribute pursuant to this Section are several in proportion to
the principal amount of Securities set forth opposite their respective names in
Schedule A hereto and not joint.
SECTION 9. Representations, Warranties and Agreements to Survive
Delivery. All representations, warranties and agreements contained in this
Agreement or in certificates of officers of the Company or any of its
subsidiaries submitted pursuant hereto shall remain operative and in full force
and effect, regardless of any investigation made by or on behalf of any Initial
Purchaser or controlling person, or by or on behalf of the Company or any
Subsidiary Guarantor, and shall survive delivery of the Securities to the
Initial Purchasers.
SECTION 10. Termination of Agreement.
(a) TERMINATION; GENERAL. The Representatives may terminate this
Agreement, by notice to the Company, at any time at or prior to the Closing Time
(i) if there has been, since the time of execution of this Agreement or since
the respective dates as of which information is given in the Offering
Memorandum, any material adverse change in the condition, financial or
otherwise, or in the earnings, business affairs or business prospects of the
Company and its subsidiaries considered as one enterprise, whether or not
arising in the ordinary course of business, or (ii) if there has occurred any
material adverse change in the financial markets in the United States or the
international financial markets, any outbreak of hostilities or escalation
thereof or other calamity or crisis or any change or development involving a
prospective change in national or international political, financial or economic
conditions, in each case the effect of which is such as to make it, in the
judgment of the Representatives, impracticable to market the Securities or to
enforce contracts for the sale of the Securities, or (iii) if trading in any
securities of the Company has been suspended or materially limited by the
Commission or the NASDAQ System, or if trading generally on the American Stock
Exchange or the New York Stock Exchange or in the NASDAQ System has been
suspended or materially limited, or minimum or maximum prices for trading have
been fixed, or maximum ranges for prices have been required, by any of said
exchanges or by such system or by order of the Commission, the National
Association of Securities Dealers, Inc. or any other governmental authority, or
(iv) if a banking moratorium has been declared by either Federal, New York or
Florida authorities.
25
<PAGE>
(b) LIABILITIES. If this Agreement is terminated pursuant to this
Section, such termination shall be without liability of any party to any other
party except as provided in Section 4 hereof, and provided further that Sections
1, 7, 8 and 9 shall survive such termination and remain in full force and
effect.
SECTION 1. DEFAULT BY ONE OR MORE OF THE INITIAL PURCHASERS. If one or
more of the Initial Purchasers shall fail at the Closing Time to purchase the
Securities which it or they are obligated to purchase under this Agreement (the
"Defaulted Securities"), the Representatives shall have the right, within 24
hours thereafter, to make arrangements for one or more of the non-defaulting
Initial Purchasers, or any other initial purchasers, to purchase all, but not
less than all, of the Defaulted Securities in such amounts as may be agreed upon
and upon the terms herein set forth; if, however, the Representatives shall not
have completed such arrangements within such 24-hour period, then:
(a) if the number of Defaulted Securities does not exceed 10% of the
aggregate principal amount of the Securities to be purchased hereunder, each of
the non-defaulting Initial Purchasers shall be obligated, severally and not
jointly, to purchase the full amount thereof in the proportions that their
respective underwriting obligations hereunder bear to the underwriting
obligations of all non-defaulting Initial Purchasers, or
(b) if the number of Defaulted Securities exceeds 10% of the aggregate
principal amount of the Securities to be purchased hereunder, this Agreement
shall terminate without liability on the part of any non-defaulting Initial
Purchaser.
No action taken pursuant to this Section shall relieve any defaulting
Initial Purchaser from liability in respect of its default.
In the event of any such default which does not result in a termination
of this Agreement, either the Representatives or the Company shall have the
right to postpone the Closing Time for a period not exceeding seven days in
order to effect any required changes in the Offering Memorandum or in any other
documents or arrangements. As used herein, the term "Initial Purchaser" includes
any person substituted for an Initial Purchaser under this Section.
SECTION 12. NOTICES. All notices and other communications hereunder
shall be in writing and shall be deemed to have been duly given if mailed or
transmitted by any standard form of telecommunication. Notices to the Initial
Purchasers shall be directed to the Representatives at North Tower, World
Financial Center, New York, New York 10281, attention of Bertram Michel, Vice
President, notices to the Company shall be directed to it at 3000 N.W. 107th
Avenue, Miami, Florida 33172, attention of George Feldenkreis, Chairman.
SECTION 13. PARTIES. This Agreement shall inure to the benefit of and
be binding upon the Initial Purchasers, the Company, the Subsidiary Guarantors
and their respective successors. Nothing expressed or mentioned in this
Agreement is intended or shall be construed to give any person, firm or
corporation, other than the Initial Purchasers, the Company, the Subsidiary
Guarantors and their respective successors and the controlling persons and
officers and directors referred to in Sections 7 and 8 and their heirs and legal
representatives, any legal or equitable right, remedy or claim under or in
respect of this Agreement or any provision herein contained. This Agreement and
all conditions and provisions hereof are intended to be for the
26
<PAGE>
sole and exclusive benefit of the Initial Purchasers, the Company, the
Subsidiary Guarantors and their respective successors, and said controlling
persons and officers and directors and their heirs and legal representatives,
and for the benefit of no other person, firm or corporation. No purchaser of
Securities from any Initial Purchaser shall be deemed to be a successor by
reason merely of such purchase.
SECTION 14. APPOINTMENT OF AGENT FOR SERVICE. By the execution of this
Agreement, each of Supreme Munsingwear Canada, Inc. and Supreme International
Corporation de Mexico, S.A. de C. V. hereby designates the Company as its
authorized agent upon which process may be served in any legal action or
proceeding, including with respect to any state or federal securities laws, that
may be instituted in any federal court of the United States or the court of any
state thereof and arising out of or relating to this Agreement. Service of
process upon such agent at 3000 N.W. 107th Avenue, Miami, Florida 33172,
attention: George Feldenkreis shall be deemed in every respect effective service
of process upon Supreme Munsingwear Canada, Inc. or Supreme International
Corporation de Mexico, S.A. de C.V., as applicable, in any such legal action or
proceeding and each of Supreme Munsingwear Canada, Inc. and Supreme
International Corporation de Mexico, S.A. de C.V. hereby submits to the
nonexclusive jurisdiction of any such court in which any such legal action or
proceeding is so instituted and waives, to the extent it may effectively do so,
any objection it may have now or hereafter to the laying of the venue of any
such legal action or proceeding. Such appointment shall be irrevocable so long
as the Initial Purchasers shall have any rights pursuant to the terms of this
Agreement. Each of Supreme Munsingwear Canada, Inc. and Supreme International
Corporation de Mexico, S.A. de C.V., further agrees to take any and all action,
including the execution and filing of any and all such documents and
instruments, as may be necessary to continue such designation and appointment of
such agent.
SECTION 15. GOVERNING LAW AND TIME. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. SPECIFIED
TIMES OF DAY REFER TO NEW YORK CITY TIME.
SECTION 16. EFFECT OF HEADINGS. The Article and Section headings herein
and the Table of Contents are for convenience only and shall not affect the
construction hereof.
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company a counterpart hereof, whereupon
this instrument, along with all counterparts, will become a binding agreement
among the Initial Purchasers, the Company and the Subsidiary Guarantors in
accordance with its terms.
Very truly yours,
SUPREME INTERNATIONAL CORPORATION
By /s/ Rosemary B. Trudeau
Name: Rosemary B. Trudeau
Title: Vice President of Finance
27
<PAGE>
SUPREME MUNSINGWEAR CANADA INC.
By /s/ Rosemary B. Trudeau
Name: Rosemary B. Trudeau
Title: Secretary/Treasurer
SUPREME INTERNATIONAL
(DELAWARE), INC.
By /s/ Rosemary B. Trudeau
Name: Rosemary B. Trudeau
Title: Secretary/Treasurer
SUPREME ACQUISITION CORPORATION
By /s/ Rosemary B. Trudeau
Name: Rosemary B. Trudeau
Title: Secretary/Treasurer
SUPREME INTERNATIONAL (N.Y.), INC.
By /s/ Rosemary B. Trudeau
Name: Rosemary B. Trudeau
Title: Secretary/Treasurer
SUPREME INTERNATIONAL CORPORATION
DE MEXICO, S.A. de C.V.
By /s/ Rosemary B. Trudeau
Name: Rosemary B. Trudeau
Title: President
28
<PAGE>
CONFIRMED AND ACCEPTED,
as of the date first above written:
MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
BANCBOSTON ROBERTSON STEPHENS INC.
WASSERSTEIN PERELLA SECURITIES, INC.
BARINGTON CAPITAL GROUP, L.P.
By: MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By: /s/ Chantal D. Simon
Authorized Signatory
For itself and as Representative of the other Initial Purchasers named
in Schedule A hereto.
29
<PAGE>
SCHEDULE A
Principal
Amount of
NAMES OF INITIAL PURCHASERS SECURITIES
--------------------------- ----------
Merrill Lynch, Pierce, Fenner & Smith Incorporated $ 60,000,000
BancBoston Robertson Stephens Inc. $ 30,000,000
Wasserstein Perella Securities, Inc. $ 5,000,000
Barington Capital Group, L.P $ 5,000,000
------------
Total $100,000,000
============
SCH A-1
<PAGE>
SCHEDULE B
SUPREME INTERNATIONAL CORPORATION
$100,000,000 Senior Subordinated Notes due 2006
1. The initial public offering price of the Securities shall be 98.852%
of the principal amount thereof, plus accrued interest, if any, from the date of
issuance.
2. The purchase price to be paid by the Initial Purchasers for the
Securities shall be 95.852% of the principal amount thereof.
3. The interest rate on the Securities shall be 12.25% per annum.
SCH B-1
<PAGE>
SCHEDULE C
List of Subsidiaries of Supreme International Corporation
Supreme Munsingwear Canada, Inc.
Supreme International (Delaware), Inc.
Supreme International (N.Y.), Inc.
Supreme Acquisition Corporation
Supreme International Corporation de Mexico, S.A. de C.V.
SCH C-1
<PAGE>
Exhibit A
FORM OF OPINION OF COMPANY'S AND
SUBSIDIARY GUARANTORS' COUNSEL
TO BE DELIVERED PURSUANT TO
SECTION 5(a)
(i) The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Florida.
(ii) The Company has corporate power and authority to own, lease and
operate its properties and to conduct its business as described in the Offering
Memorandum and to enter into and perform its obligations under the Purchase
Agreement.
(iii) The Company is duly qualified as a foreign corporation to
transact business and is in good standing in each jurisdiction in which such
qualification is required, whether by reason of the ownership or leasing of
property or the conduct of business, except where the failure so to qualify or
to be in good standing would not result in a Material Adverse Effect.
(iv) The authorized, issued and outstanding capital stock of the
Company is:
1. Preferred Stock-$.01 par value; 1,000,000 shares authorized; no
shares issued or outstanding;
2. Class A Common Stock-$.01 par value; 30,000,000 shares
authorized; no shares issued or outstanding; and
3. Common Stock-$.01 par value; 30,000,000 shares authorized;
6,712,374 shares issued and outstanding as of January 31, 1999;
(except for subsequent issuances, if any, pursuant to the Purchase Agreement or
pursuant to reservations, agreements, employee benefit plans or the exercise of
convertible securities or options referred to in the Offering Memorandum); the
shares of issued and outstanding capital stock of the Company have been duly
authorized and validly issued and are fully paid and non-assessable; and none of
the outstanding shares of capital stock of the Company was issued in violation
of the preemptive or other similar rights of any securityholder of the Company.
(v) Each Subsidiary Guarantor, other than Supreme International
Corporation de Mexico, S.A. de C.V., as to which we express no opinion, has been
duly incorporated and is validly existing as a corporation in good standing
under the laws of the jurisdiction of its incorporation, has corporate power and
authority to own, lease and operate its properties and to conduct its business
as described in the Offering Memorandum and is duly qualified as a foreign
corporation to transact business and is in good standing in each jurisdiction in
which such qualification is required, whether by reason of the ownership or
leasing of property or the conduct of business, except where the failure so to
qualify or to be in good standing would not result in a Material Adverse Effect;
all of the issued and outstanding capital stock of each Subsidiary Guarantor,
other than Supreme International Corporation de Mexico, S.A. de C.V., as to
which we express no opinion, has been duly authorized and validly issued, is
fully paid and non-assessable and, to the best of our knowledge and information,
is owned by the Company, directly or through subsidiaries, free and clear of any
security interest, mortgage, pledge, lien, encumbrance, claim or equity, except
for any security interest, mortgage, pledge, lien,
A-1
<PAGE>
encumbrance, claim or equity pursuant to the Senior Credit Agreement or the
Lease.
(vi) Perry Ellis has been duly incorporated and is validly existing as
a corporation in good standing under the laws of the jurisdiction of its
incorporation, has corporate power and authority to own, lease and operate its
properties and to conduct its business as described in the Offering Memorandum
and is duly qualified as a foreign corporation to transact business and is in
good standing in each jurisdiction in which such qualification is required,
whether by reason of the ownership or leasing of property or the conduct of
business, except where the failure so to qualify or to be in good standing would
not result in a Material Adverse Effect; all of the issued and outstanding
capital stock of Perry Ellis has been duly authorized and validly issued, is
fully paid and non-assessable and will, at the Closing Time, be owned by the
Company, directly or through subsidiaries, free and clear of any security
interest, mortgage, pledge, lien, encumbrance, claim or equity, except for any
security interest, mortgage, pledge, lien, encumbrance, claim or equity pursuant
to the Senior Credit Agreement or the Lease.
(vii) The Stock Purchase Agreement has been duly authorized, executed
and delivered by the Company and, to the best of our knowledge, each of the
other parties thereto, and constitutes a valid and binding obligation of the
Company and, to the best of our knowledge, of each of the parties thereto,
except as the enforcement thereof may be limited by bankruptcy, insolvency
(including, without limitation, all laws relating to fraudulent transfers),
reorganization, moratorium or other similar laws relating to or affecting
enforcement of creditors' rights generally, or by general principles of equity
(regardless of whether enforcement is considered in a proceeding in equity or at
law).
(viii) The Purchase Agreement has been duly authorized, executed and
delivered by the Company and the Subsidiary Guarantors.
(ix) The Indenture has been duly authorized, executed and delivered by
the Company and the Subsidiary Guarantors and (assuming the due authorization,
execution and delivery thereof by the Trustee) constitutes a valid and binding
agreement of the Company and the Subsidiary Guarantors, enforceable against the
Company and the Subsidiary Guarantors in accordance with its terms, except as
the enforcement thereof may be limited by bankruptcy, insolvency (including,
without limitation, all laws relating to fraudulent transfers), reorganization,
moratorium or other similar laws relating to or affecting enforcement of
creditors' rights generally, or by general principles of equity (regardless of
whether enforcement is considered in a proceeding in equity or at law).
(x) The Registration Rights Agreement has been duly authorized,
executed and delivered by the Company and the Subsidiary Guarantors and
(assuming the due authorization, execution and delivery thereof by the Initial
Purchasers) constitutes a valid and binding agreement of the Company and the
Subsidiary Guarantors, enforceable against the Company and the Subsidiary
Guarantors in accordance with its terms, except as the enforcement thereof may
be limited by bankruptcy, insolvency (including, without limitation, all laws
relating to fraudulent transfers), reorganization, moratorium or other similar
laws relating to or affecting enforcement of creditors' rights generally, or by
general principles of equity (regardless of whether enforcement is considered in
a proceeding in equity or at law).
A-2
<PAGE>
(xi) The Securities are in the form contemplated by the Indenture, have
been duly authorized by the Company and, when executed by the Company and
authenticated by the Trustee in the manner provided in the Indenture (assuming
the due authorization, execution and delivery of the Indenture by the Trustee)
and issued and delivered against payment of the purchase price therefor will
constitute valid and binding obligations of the Company, enforceable against the
Company in accordance with their terms, except as the enforcement thereof may be
limited by bankruptcy, insolvency, reorganization, moratorium (including,
without limitation, all laws relating to fraudulent transfers), or other similar
laws relating to or affecting enforcement of creditor's rights generally, or by
general principles of equity (regardless of whether enforcement is considered in
a proceeding in equity or at law), and will be entitled to the benefits of the
Indenture.
(xii) The Securities, the Indenture and the Registration Rights
Agreement conform in all material respects to the descriptions thereof contained
in the Offering Memorandum.
(xiii) There is not pending or, to the best of our knowledge,
threatened any action, suit, proceeding, inquiry or investigation, to which the
Company or any subsidiary is a party, or to which the property of the Company or
any subsidiary thereof is subject, before or brought by any court or
governmental agency or body, which might reasonably be expected to result in a
Material Adverse Effect, or which might reasonably be expected to materially and
adversely affect the properties or assets thereof or the consummation of the
transactions contemplated in the Purchase Agreement or by the Perry Ellis
Acquisition, or the performance by the Company or the Subsidiary Guarantors of
their obligations thereunder or the transactions contemplated by the Offering
Memorandum.
(xiv) The information in the Offering Memorandum under "Risk
Factors-Imports and Import Restrictions", "Business-Pending Acquisitions",
"Business-Facilities", "Business-Legal Proceedings", "Description of Other
Indebtedness", "Description of the Notes", "Exchange Offer; Registration
Rights", "Certain United States Federal Tax Considerations for Non-United States
Holders" and "Notice to Investors", to the extent that it constitutes matters of
law, summaries of legal matters, the Company's or the Subsidiary Guarantors'
charter and bylaws or legal proceedings, or legal conclusions, has been reviewed
by us and is correct in all material respects.
(xv) All descriptions in the Offering Memorandum of contracts and other
documents to which the Company or any of its subsidiaries or to which Perry
Ellis are a party are accurate in all material respects; to the best of our
knowledge, there are no franchises, contracts, indentures, mortgages, loan
agreements, notes, leases or other instruments that would be required to be
described in the Offering Memorandum if the Offering Memorandum were a
prospectus filed as part of a registration statement on Form S-1 under the 1933
Act that are not described or referred to in the Offering Memorandum other than
those described or referred to therein, and the descriptions thereof or
references thereto are correct in all material respects.
(xvi) To the best of our knowledge, none of the Company, any of its
subsidiaries or Perry Ellis is in violation of its charter or by-laws and no
default by the Company, any of its subsidiaries or Perry Ellis exists in the due
performance or observance of any material obligation, agreement, covenant or
condition contained in any contract, indenture, mortgage, loan agreement, note,
lease or other agreement or instrument that is described or referred to in the
Offering Memorandum.
A-3
<PAGE>
(xvii) No filing with, or authorization, approval, consent, license,
order, registration, qualification or decree of, any court or governmental
authority or agency, domestic or foreign (other than such as may be required
under the applicable securities laws of the various jurisdictions in which the
Securities will be offered or sold, as to which we need express no opinion) is
necessary or required in connection with (i) the due authorization, execution
and delivery of the Purchase Agreement or the due execution, delivery or
performance of the Indenture by the Company and the Subsidiary Guarantors or
(ii) the due authorization, execution and delivery of the Stock Purchase
Agreement by the parties thereto, or for the offering, issuance, sale or
delivery of the Securities to the Initial Purchasers or the resale by the
Initial Purchasers in accordance with the terms of the Purchase Agreement.
(xviii) It is not necessary in connection with the offer, sale and
delivery of the Securities to the Initial Purchasers and to each Subsequent
Purchaser in the manner contemplated by the Purchase Agreement and the Offering
Memorandum to register the Securities under the 1933 Act or to qualify the
Indenture under the Trust Indenture Act.
(xix) The execution, delivery and performance of the Purchase
Agreement, the DTC Agreement, the Indenture, the Registration Rights Agreement,
the Securities and the Stock Purchase Agreement and the consummation of the
transactions contemplated in the Purchase Agreement and in the Offering
Memorandum (including the consummation of the Perry Ellis Acquisition and the
use of the proceeds from the sale of the Securities as described in the Offering
Memorandum under the caption "Use Of Proceeds") and compliance by the Company
and the Subsidiary Guarantors with their obligations under the Purchase
Agreement, the Indenture, the Registration Rights Agreement and, in the case of
the Company, the Securities and compliance by the parties to the Stock Purchase
Agreement of their obligations thereunder do not and will not, whether with or
without the giving of notice or lapse of time or both, conflict with or
constitute a breach of, or default or Repayment Event (as defined in Section
1(a)(xiv) of the Purchase Agreement) under or result in the creation or
imposition of any lien, charge or encumbrance upon any property or assets of the
Company or any subsidiary thereof or of Perry Ellis pursuant to any contract,
indenture, mortgage, deed of trust, loan or credit agreement, note, lease or any
other agreement or instrument, known to us, to which the Company or any of its
subsidiaries or to which Perry Ellis is a party or by which it or any of them
may be bound, or to which any of the property or assets of the Company or any
subsidiary thereof is subject (except for such conflicts, breaches or defaults
or liens, charges or encumbrances that would not have a Material Adverse
Effect), nor will such action result in any violation of the provisions of the
charter or by-laws of the Company or any of its subsidiaries or of Perry Ellis,
or any applicable law, statute, rule, regulation, judgment, order, writ or
decree, known to us, of any government, government instrumentality or court,
domestic or foreign, having jurisdiction over the Company or any of its
subsidiaries or any of their respective properties, assets or operations.
(xx) Neither the Company nor any of the Subsidiary Guarantors is an
"investment company" or an entity "controlled" by an "investment company," as
such terms are defined in the 1940 Act.
Nothing has come to our attention that would lead us to believe that
the Offering Memorandum or any amendment or supplement thereto (except for
financial statements and schedules and other financial data included or
incorporated by reference therein or omitted therefrom as to which we need make
no statement), at the time the Offering Memorandum was
A-4
<PAGE>
issued, at the time any such amended or supplemented Offering Memorandum was
issued or at the Closing Time, included or includes an untrue statement of a
material fact or omitted or omits to state a material fact necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading.
In rendering such opinion, such counsel may rely as to matters of fact
(but not as to legal conclusions), to the extent they deem proper, on
certificates of responsible officers of the Company, Perry Ellis and public
officials. Such opinion shall not state that it is to be governed or qualified
by, or that it is otherwise subject to, any treatise, written policy or other
document relating to legal opinions, including, without limitation, the Legal
Opinion Accord of the ABA Section of Business Law (1991).
A-5
EXHIBIT 4.5
[FACE OF NOTE]
SUPREME INTERNATIONAL CORPORATION
123% Series B Senior Subordinated Note due 2006
No. CUSIP No. __________
$ ----------
SUPREME INTERNATIONAL CORPORATION, a Florida corporation (the "Company",
which term includes any successor Person under the Indenture hereinafter
referred to), for value received, promises to pay to ___________, or its
registered assigns, the principal sum of ____________________________________
Dollars ($___________), on [______], 2006.
Interest Rate: 123% per annum.
Interest Payment Dates: April 1 and October 1 of each year
commencing October 1, 1999.
Regular Record Dates: March 15 and September 15 of each year.
Reference is hereby made to the further provisions of this Note set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
IN WITNESS WHEREOF, the Company has caused this Note to be signed
manually or by facsimile by its duly authorized officers.
Date: SUPREME INTERNATIONAL CORPORATION
By:
Name:
Title:
<PAGE>
(Form of Trustee's Certificate of Authentication)
This is one of the 123% Series B Senior Subordinated Notes due 2006
referred to in the within-mentioned Indenture.
STATE STREET BANK AND TRUST
COMPANY, as Trustee
Dated: __________________ By:__________________________
Authorized Signatory
<PAGE>
[REVERSE SIDE OF NOTE]
SUPREME INTERNATIONAL CORPORATION
123% Series B Senior Subordinated Note due 2006
1. PRINCIPAL AND INTEREST; SUBORDINATION.
The Company will pay the principal of this Note on April 1, 2006.
The Company promises to pay interest on the principal amount of this
Note on each Interest Payment Date, as set forth below, at the rate of 123% per
annum.
Interest will be payable semi-annually (to the Holders of record of the
Notes (or any Predecessor Notes)) at the close of business on the March 15 or
September 15 immediately preceding the Interest Payment Date) on each Interest
Payment Date, commencing October 1, 1999.
Interest on this Note will accrue from the most recent date to which
interest has been paid on this Note or the Note surrendered in exchange herefor
or, if no interest has been paid, from April 6, 1999; provided that, if there is
no existing default in the payment of interest and if this Note is authenticated
between a Regular Record Date referred to on the face hereof and the next
succeeding Interest Payment Date, interest shall accrue from such Interest
Payment Date. Interest will be computed on the basis of a 360-day year of twelve
30-day months.
The Company shall pay interest on overdue principal and premium, if any,
and interest on overdue installments of interest, to the extent lawful, at a
rate per annum equal to the rate of interest applicable to the Notes.
The indebtedness evidenced by the Notes is, to the extent and in the
manner provided in the Indenture, subordinate and subject in right of payment to
the prior payment in full of all Senior Indebtedness, and this Note is issued
subject to such provisions. Each Holder of this Note, by accepting the same, (a)
agrees to and shall be bound by such provisions, (b) authorizes and directs the
Trustee on its behalf to take such action as may be necessary or appropriate to
effectuate the subordination as provided in the Indenture and (c) appoints the
Trustee its attorney-in-fact for such purpose.
2. METHOD OF PAYMENT.
The Company will pay interest (except defaulted interest) on the
principal amount of the Notes on each April 1 and October 1 to the Persons who
are Holders (as reflected in the Note Register at the close of business on the
March 15 and September 15 immediately preceding the Interest Payment Date), in
each case, even if the Note is cancelled on registration of transfer or
registration of exchange after such Regular Record Date; provided that, with
respect to the payment of principal, the Company will make payment to the Holder
that surrenders this Note to any Paying Agent on or after April 1, 2006.
<PAGE>
The Company will pay principal (premium, if any) and interest in money
of the United States that at the time of payment is legal tender for payment of
public and private debts. However, the Company may pay principal (premium, if
any) and interest by its check payable in such money. The Company may pay
interest on the Notes either (a) by mailing a check for such interest to a
Holder's registered address (as reflected in the Note Register) or (b) by wire
transfer to an account located in the United States maintained by the payee. If
a payment date is a date other than a Business Day at a Place of Payment,
payment may be made at that place on the next succeeding day that is a Business
Day and no interest shall accrue for the intervening period.
3. PAYING AGENT AND REGISTRAR.
Initially, the Trustee will act as Paying Agent and Note Registrar. The
Company may change any Paying Agent or Note Registrar upon written notice
thereto. The Company, any Subsidiary or any Affiliate of any of them may act as
Paying Agent, Note Registrar or co-registrar.
4. INDENTURE; LIMITATIONS.
The Company issued the Notes under an Indenture dated as of April 6,
1999 (the "Indenture"), among the Company, the Subsidiary Guarantors and State
Street Bank And Trust Company, as trustee (the "Trustee"). Capitalized terms
herein are used as defined in the Indenture unless otherwise indicated. The
terms of the Notes include those stated in the Indenture and those made part of
the Indenture by reference to the Trust Indenture Act. The Notes are subject to
all such terms, and Holders are referred to the Indenture and the Trust
Indenture Act for a statement of all such terms. To the extent permitted by
applicable law, in the event of any inconsistency between the terms of this Note
and the terms of the Indenture, the terms of the Indenture shall control.
The Notes are unsecured senior subordinated obligations of the Company.
The Indenture limits the aggregate principal amount of the Notes to
$125,000,000.
5. REDEMPTION.
OPTIONAL REDEMPTION. The Notes may be redeemed at the option of the
Company, in whole or in part, at any time and from time to time on or after
April 1, 2003, at the following Redemption Prices (expressed in percentages of
principal amount), plus accrued and unpaid interest, if any, to the Redemption
Date (subject to the right of Holders of record on the relevant Regular Record
Date to receive interest due on an Interest Payment Date that is on or prior to
the Redemption Date), if redeemed during the 12-month period beginning April 1
of each of the years set forth below:
<PAGE>
Redemption
Year Price
----------------------- -----------------
2003 106.125%
2004 103.063%
2005 and thereafter 100.000%
In addition to the optional redemption of the Notes in accordance with
the provisions of the preceding paragraph, at any time prior to April 1, 2002,
the Company may redeem up to 35% of the aggregate principal amount of the Notes
(including the principal amount of any Additional Notes), within 60 days of one
or more Public Equity Offerings with the net proceeds of such offerings, at
112.25% of the principal amount thereof, together with accrued and unpaid
interest, if any, to the Redemption Date (subject to the right of holders of
record on relevant Regular Record Dates to receive interest due on an Interest
Payment Date that is on or prior to the Redemption Date); provided, however,
that at least 65% of the aggregate principal amount of the Notes originally
issued (including the principal amount of any Additional Notes) remains
outstanding thereafter.
If less than all the Notes are to be redeemed pursuant to the preceding
two paragraphs, the Trustee shall select the Notes or portions thereof to be
redeemed in compliance with the requirements of the principal national
securities exchange, if any, on which the Notes being redeemed are listed, or if
the Notes are not so listed, by such other method the Trustee shall deem fair
and appropriate; provided that no such partial redemption shall reduce the
portion of the principal amount of a Note not redeemed to less than $1,000;
provided further that any such redemption pursuant to the provisions relating to
a Public Equity Offering shall be made on a pro rata basis or on as nearly a pro
rata basis as practicable (subject to the procedures of DTC or any other
depositary).
Notice of a redemption will be mailed, first-class postage prepaid, at
least 30 days but not more than 60 days before the Redemption Date to each
Holder to be redeemed at such Holder's last address as it appears in the Note
Register. Notes in original denominations larger than $1,000 may be redeemed in
part in integral multiples of $1,000. On and after the Redemption Date, interest
ceases to accrue on Notes or portions of Notes called for redemption, unless the
Company defaults in the payment of the Redemption Price.
6. REPURCHASE UPON A CHANGE IN CONTROL AND ASSET SALES.
Upon the occurrence of (a) a Change in Control, the Holders of the Notes
will have the right to require that the Company purchase such Holder's
outstanding Notes, in whole or in part, at a purchase price of 101% of the
principal amount thereof, plus accrued and unpaid interest, if any, to the date
of purchase and (b) Asset Sales, the Company may be obligated to make offers to
purchase Notes with a portion of the Net Cash Proceeds of such Asset Sales at a
redemption price of 100% of the principal amount thereof plus accrued and unpaid
interest, if any, to the date of purchase.
<PAGE>
7. DENOMINATIONS; TRANSFER; EXCHANGE.
The Notes are in registered form without coupons, in denominations of
$1,000 and multiples of $1,000 in excess thereof. A Holder may register the
transfer or exchange of Notes in accordance with the Indenture. The Note
Registrar may require a Holder, among other things, to furnish appropriate
endorsements and transfer documents and to pay any taxes and fees required by
law or permitted by the Indenture. The Note Registrar need not register the
transfer or exchange of any Notes selected for redemption (except the unredeemed
portion of any Note being redeemed in part).
8. PERSONS DEEMED OWNERS.
A Holder may be treated as the owner of a Note for all purposes.
9. UNCLAIMED MONEY.
If money for the payment of principal (premium, if any) or interest
remains unclaimed for two years, the Trustee and the Paying Agent will pay the
money back to the Company at its request. After that, Holders entitled to the
money must look to the Company for payment, unless an abandoned property law
designates another Person, and all liability of the Trustee and such Paying
Agent with respect to such money shall cease.
10. DISCHARGE PRIOR TO REDEMPTION OR MATURITY.
If the Company irrevocably deposits, or causes to be deposited, with the
Trustee money or U.S. Government Obligations sufficient to pay the then
outstanding principal of (premium, if any) and accrued interest on the Notes (a)
to redemption or maturity, the Company will be discharged from the Indenture and
the Notes, except in certain circumstances for certain sections thereof, and (b)
to the Stated Maturity, the Company will be discharged from certain covenants
set forth in the Indenture.
11. AMENDMENT; SUPPLEMENT; WAIVER.
Subject to certain exceptions, the Indenture or the Notes may be amended
or supplemented with the consent of the Holders of at least a majority in
aggregate principal amount of the Notes then outstanding, and any existing
default or compliance with any provision may be waived with the consent of the
Holders of a majority in aggregate principal amount of the Notes then
outstanding. Without notice to or the consent of any Holder, the parties thereto
may amend or supplement the Indenture or the Notes to, among other things, cure
any ambiguity, defect or inconsistency and make any change that does not
adversely affect the rights of any Holder.
<PAGE>
12. RESTRICTIVE COVENANTS.
The Indenture contains certain covenants, including, without limitation,
covenants with respect to the following matters: (i) Indebtedness; (ii)
Restricted Payments; (iii) issuances and sales of Capital Stock of Restricted
Subsidiaries; (iv) transactions with Affiliates; (v) Liens; (vi) purchase of
Notes upon a Change in Control; (vii) disposition of proceeds of Asset Sales;
(viii) guarantees of Indebtedness by Restricted Subsidiaries; (ix) dividend and
other payment restrictions affecting Restricted Subsidiaries; (x) merger and
certain transfers of assets; and (xi) limitation on Unrestricted Subsidiaries.
Within 120 days after the end of each fiscal year and within 45 days after each
fiscal quarter, the Company must report to the Trustee on compliance with such
limitations.
13. SUCCESSOR PERSONS.
When a successor person or other entity assumes all the obligations of
its predecessor under the Notes and the Indenture, the predecessor person will
be released from those obligations.
14. REMEDIES FOR EVENTS OF DEFAULT.
If an Event of Default, as defined in the Indenture, occurs and is
continuing, the Trustee or the Holders of not less than 25% in aggregate
principal amount of the Notes then outstanding may declare all the Notes to be
immediately due and payable. If a bankruptcy or insolvency default with respect
to the Company or any of its Significant Subsidiaries occurs and is continuing,
the Notes automatically become immediately due and payable. Holders may not
enforce the Indenture or the Notes except as provided in the Indenture. The
Trustee may require indemnity satisfactory to it before it enforces the
Indenture or the Notes. Subject to certain limitations, Holders of at least a
majority in aggregate principal amount of the Notes then outstanding may direct
the Trustee in its exercise of any trust or power.
15. NOTE GUARANTEES.
The Company's obligations under the Notes are fully, irrevocably and
unconditionally guaranteed on a senior unsecured basis, to the extent set forth
in the Indenture, by each of the Subsidiary Guarantors.
16. TRUSTEE DEALINGS WITH COMPANY.
The Trustee under the Indenture, in its individual or any other
capacity, may become the owner or pledgee of Notes and may make loans to, accept
deposits from, perform services for, and otherwise deal with, the Company and
its Affiliates as if it were not the Trustee.
17. AUTHENTICATION.
This Note shall not be valid until the Trustee signs the certificate of
authentication on the other side of this Note.
<PAGE>
18. ABBREVIATIONS.
Customary abbreviations may be used in the name of a Holder or an
assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the
entireties), JT TEN (= joint tenants with right of survivorship and not as
tenants in common), CUST (= Custodian) and U/G/M/A (= Uniform Gifts to Minors
Act).
The Company will furnish to any Holder upon written request and without
charge a copy of the Indenture. Requests may be made to Supreme International
Corporation, 3000 NW 107th Avenue, Miami, Florida 33172, Attention: Vice
President of Finance.
<PAGE>
[FORM OF TRANSFER NOTICE]
FOR VALUE RECEIVED the undersigned registered holder hereby sell(s),
assign(s) and transfer(s) unto
INSERT TAXPAYER IDENTIFICATION NO.
(Please print or typewrite name and address including zip code of assignee)
the within Note and all rights thereunder, hereby irrevocably constituting and
appointing
attorney to transfer such Note on the books of the Company with full power of
substitution in the premises.
[THE FOLLOWING PROVISION TO BE INCLUDED
ON ALL CERTIFICATES
EXCEPT PERMANENT OFFSHORE PHYSICAL
CERTIFICATES]
In connection with any transfer of this Note occurring prior to the date
which is the earlier of the date of an effective Registration Statement or
[______], 1999, the undersigned confirms that without utilizing any general
solicitation or general advertising that:
CHECK ONE
(a) this Note is being transferred in compliance with the
exemption from registration under the Securities Act of 1933, as
amended, provided by Rule 144A thereunder.
OR
(b) this Note is being transferred other than in accordance with
(a) above and documents are being furnished which comply with the
conditions of transfer set forth in this Note and the Indenture.
If none of the foregoing boxes is checked, the Trustee or other Note Registrar
shall not be obligated to register this Note in the name of any Person other
than the Holder hereof unless and until the conditions to any such transfer of
registration set forth herein and in Sections 311 and 312 of the Indenture shall
have been satisfied.
Date:
NOTICE: The signature to
this assignment must
correspond with the name as
written upon the face of the
within-mentioned instrument
in every particular, without
alteration or any change
whatsoever.
Signature Guarantee:
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED.
Signatures must be guaranteed by an "eligible guarantor institution"
meeting the requirements of the Note Registrar, which requirements include
membership or participation in the Security Transfer Agent Medallion Program
("STAMP") or such other "signature guarantee program" as may be determined by
the Note Registrar in addition to, or in substitution for, STAMP, all in
accordance with the Securities Exchange Act of 1934, as amended.
The undersigned represents and warrants that it is purchasing this Note
for its own account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act of
1933, as amended, and is aware that the sale to it is being made in reliance on
Rule 144A and acknowledges that it has received such information regarding the
Company as the undersigned has requested pursuant to Rule 144A or has determined
not to request such information and that it is aware that the transferor is
relying upon the undersigned's foregoing representations in order to claim the
exemption from registration provided by Rule 144A.
Dated:
NOTICE: To be executed by an executive officer
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Note purchased by the Company pursuant to
Section 1013 or Section 1014 of the Indenture, check the Box: ].
If you wish to have a portion of this Note purchased by the Company
pursuant to Section 1013 or Section 1014 of the Indenture, state the amount (in
original principal amount) below:
$---------------------.
Date:
Your Signature:
(Sign exactly as your name appears on the other side of this Note)
Signature Guarantee:
Signatures must be guaranteed by an "eligible guarantor institution"
meeting the requirements of the Note Registrar, which requirements include
membership or participation in the Security Transfer Agent Medallion Program
("STAMP") or such other "signature guarantee program" as may be determined by
the Note Registrar in addition to, or in substitution for, STAMP, all in
accordance with the Securities Exchange Act of 1934, as amended.
EXHIBIT 5.1
BROAD AND CASSEL
ATTORNEYS AT LAW
BOCA RATON o FT. LAUDERDALE o MIAMI o ORLANDO
o TALLAHASSEE o TAMPA o WEST PALM BEACH
SUITE 3000
MIAMI CENTER
201 SOUTH BISCAYNE BOULEVARD
MIAMI, FLORIDA 33131
(305) 373-9400
FAX (305) 373-9443
May 13, 1999
Supreme International Corporation
3000 N.W. 107th Avenue
Miami, Florida 33172
Re: REGISTERED EXCHANGE OFFER FOR 12 1/4% SENIOR
SUBORDINATED NOTES DUE 2006
Ladies and Gentlemen:
Reference is made to that certain Registration Statement on Form S-4
(the "Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), filed by Supreme International Corporation, a Florida
corporation (the "Company"), on the date hereof with the Securities and Exchange
Commission. The Registration Statement relates to the Company's offer to
exchange its Series B 12 1/4% Senior Subordinated Notes due 2006 (the "Exchange
Notes") for any and all of the Company's outstanding Series A 12 1/4% Senior
Subordinated Notes due 2006 (the "Existing Notes"). We have acted as special
counsel to the Company in connection with the preparation and filing of the
Registration Statement.
For purposes of this opinion letter, we have examined and relied upon
copies of: (i) the Company's Amended and Restated Articles of Incorporation and
Bylaws; (ii) resolutions of the Company's Board of Directors authorizing the
exchange of the Existing Notes for the Exchange Notes and related matters; (iii)
the Registration Statement and exhibits thereto; and (iv) such other documents
and instruments as we have deemed necessary for the expression of opinions
herein contained. In making the foregoing examination, we have assumed the
genuineness of all signatures and authenticity while documents admitted to us as
originals, and the conformity to original documents of all documents submitted
to us as certified photostatic copies. As to various questions of material fact
to this opinion, we have relied, to the extent we deem reasonably appropriate,
upon representations or certificates of officers or directors of the Company and
upon documents, records and instruments furnished to us by the Company, without
independently checking or verifying the accuracy of such documents, records and
instruments. Based on the foregoing examination, we are in opinion that the
Exchange Notes have been duly and validly authorized and, when issued and
delivered in accordance with the terms of the "Exchange Offer" (as defined in
the Registration Statement), will be validly issued, fully paid and binding
obligations of the Company, subject to no further assessments.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our name under the caption "Legal
Matters" in the Prospectus comprising a part of the Registration Statement. In
giving such consent, we do not thereby admit that we are included within the
category of persons whose consent is required under Section 7 of the Securities
Act or the rules and regulations promulgated thereunder.
Sincerely,
/s/ BROAD AND CASSEL
BROAD AND CASSEL
EXHIBIT 10.34
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is entered into by and between
Supreme International Corporation ("Supreme" or "Company") and Alan Zwerner
("Zwerner" or "Employee").
1. Term of Employment:
This Agreement is effective for a three year period commencing on April
23, 1999 and terminating without further notice at 5:00 p.m. on April 30, 2002,
unless terminated earlier in accordance with the provisions set forth in
paragraphs 5, 6, 7, 8 and 9 below.
2. Duties and Responsibilities:
Supreme agrees to employ Zwerner as President of Licensing with such
powers and duties in that capacity as may be established from time to time by
Supreme in its discretion. Zwerner will devote his entire time, attention and
energies to Supreme's business and shall perform the duties of an executive
commensurate with such position, shall diligently perform all services as may be
assigned to him by the Board of Directors (the "Board") and shall exercise such
power and authority as may from time to time be delegated to him by the Board.
Zwerner shall devote all his working time and attention to the business and
affairs of Supreme. During his employment, Zwerner will not engage in any other
business activities, regardless of whether such activity is pursued for profits,
gains, or other pecuniary advantage.
The Company agrees to nominate and use its best efforts to cause
Zwerner to be elected to the Board throughout the term of employment. If Zwerner
is so elected, he agrees to serve on the Board without additional compensation;
provided, however, that Zwerner shall resign immediately from the Board at such
time as he is no longer employed by the Company.
<PAGE>
In connection with his employment by the Company, Zwerner shall be
based at the Company's principal, executive offices in Florida except for
required travel on the Company's business to an extent substantially consistent
with his present travel obligations.
3. Compensation:
(A) Base Salary: Supreme will pay a base salary of three hundred
fifty thousand dollars ($350,000.00) per annum to Zwerner,
payable in installments according to the Company's normal
payroll practices subject to applicable withholding and other
taxes. Said salary is effective April 23, 1999.
(B) SALARY INCREASES: Zwerner's base salary will be adjusted
upward on May 1 of each subsequent year by the twelve month
average of the Consumer Price Index ("CPI") for the preceding
year. The minimum CPI adjustment will be three percent (3%)
per year and the maximum CPI adjustment will be six percent
(6%) per year.
(C) Stock Options: On the commencement date of April 23, 1999, the
Company shall grant to Zwerner non-qualified stock options
under the Company's 1993 Stock Option Plan, as amended (the
"Plan") to purchase an aggregate of 25,000 shares of Common
Stock at an exercise price equal to the fair market value on
the commencement date of employment as set forth in the
schedule below. The options shall vest over a three year
period as described in the schedule set forth below, assuming
that Zwerner remains employed by Supreme on the dates that the
options are to be deemed vested. In the event that Zwerner is
not employed by Supreme on dates that the options are to be
deemed vested, regardless of the reason for his separation
from Supreme, the options that are not vested shall
immediately terminate and expire. There will be no "pro-rated"
vesting of
<PAGE>
any options for the period in which Zwerner ceases to be
employed by Supreme.
On April 30, 2000, 50% of the 25,000 options will be
deemed vested (I.E., 12,500 options) and may be exercised at
the price equal to the closing price reported by NASDAQ on the
commencement date of employment. On April 30, 2001, another
6,250 options will be deemed vested and may be exercised at
the price equal to the closing price as reported by NASDAQ on
the commencement day of employment. On April 30, 2002, the
final 6,250 options will be deemed vested and may be exercised
at the price equal to the closing price as reported by NASDAQ
on the commencement day of employment. Zwerner will have five
(5) years to exercise each segment of the vested options as
they mature. The stock options shall otherwise be subject to
and governed by the other terms of the 1993 Stock Option Plan,
as amended.
(D) Performance Bonuses: After the end of Zwerner's first, second
and third year of employment, Supreme will pay Zwerner a
performance bonus for each respective year to be calculated in
accordance with the following schedule, subject to the limits
set forth below:
(1) If the year-end audited license income of Perry Ellis
International, Inc. ("PEI") (excluding advertising
and all other billable expenses of PEI, and excluding
the gross revenues and income of Salant or any of the
licenses held by Salant) exceeds $10,000,000.00, then
Zwerner will be entitled to receive an amount equal
to five percent (5%) of only the INCREASE in the
license income above $10,000,000.00 until the license
income reaches $11,000,000.00. The maximum amount
that Zwerner will be paid as a performance bonus at
this license income range is $50,000.00 (I.E., .05 x
$1,000,000.00 increase in license income).
<PAGE>
(2) If the year-end audited license income of PEI (excluding
advertising and all other billable expenses of PEI, and
excluding the gross revenues and income of Salant or any of
the licenses held by Salant) exceeds $11,000,000.00, then in
addition to the foregoing performance bonus in
subparagraph(d)(i) above, Zwerner will be entitled to receive
an amount equal to four percent (4%) of only the INCREASE in
the license income above $11,000,000.00 until the license
income reaches $12,000,000.00. The maximum amount that Zwerner
will be paid as a performance bonus at this license income
range is $40,000.00 (I.E., .04 x $1,000,000.00 increase in
license income). Any bonus paid at this license range will be
in addition to the amount paid under subparagraph (d)(i).
(3) If the year-end audited license income of PEI (excluding
advertising and all other billable expenses of PEI, and
excluding the gross revenues and income of Salant or any of
the licenses held by Salant) exceeds $12,000,000.00, then in
addition to the foregoing performance bonuses in subparagraphs
(d)(i) and (d) (ii) above, Zwerner will be entitled to receive
an amount equal to three percent (3%) of only the INCREASE in
the license income above $12,000,000.00 until the license
income reaches $14,000,000.00. The maximum amount that Zwerner
will be paid as a performance bonus at this license income
range is $60,000.00 (I.E., .03 x $2,000,000.00 increase in
license income). Any bonus paid at this license income range
will be in addition to the amounts paid under subparagraphs
(d)(i) and (d)(ii) above.
(4) If the year-end audited license income of PEI (excluding
advertising and all other billable expenses of PEI, and
excluding the gross revenues and income of Salant or any of
the licenses held by Salant) exceeds $14,000,000.00, then in
addition to the foregoing performance bonuses in subparagraph
(d)(i), (d)(ii) and (d)(iii) above, Zwerner will be entitled
to receive an amount equal to two percent (2%) of only the
INCREASE in license income above $14,000,000.00 until the
license income reaches $15,750,000.00, subject to the
following limitation. The maximum amount that Zwerner will
receive as a performance bonus at this license income range is
$35,000.00 (I.E., .02 x $1,750,000.00 increase in license
income), or a lesser amount if the bonus under this subsection
(iv) causes Zwerner's total bonus compensation under
subparagraphs (d)(i), (d)(ii), (d)(iii) and (d)(iv) to exceed
fifty percent (50%) of his base salary for any given year. Any
bonus paid at this license
<PAGE>
income range will be in addition to the amounts paid under
subparagraph (d)(i), (d)(ii), and (d)(iii) above, provided
that the bonus under this subsection (iv) does not cause
Zwerner's total bonus compensation under subparagraphs (d)(i),
(d)(ii), (d)(iii) and (d)(iv) to exceed fifty percent (50%) of
his base salary for any given year. In the event that the sum
total of the performance bonuses for any given year exceed the
fifty percent (50%) limit of Zwerner's then base salary,
Zwerner shall only be entitled to a bonus in the amount of
fifty percent (50%) of his then base salary, regardless of the
level of license income of PEI for that year. In any event,
Zwerner will NOT be entitled to any performance --- bonus on
any license income increases of PEI above $15,750,000.00
(excluding advertising and all other billable expenses of PEI,
and excluding the gross revenues and income of Salant or any
of the licenses held by Salant).
If Zwerner fails to receive a performance bonus of at
least $70,000.00 dollars for his first year of employment with
Supreme under the foregoing bonus computation methodology set
forth in subparagraphs(d)(i), (d)(ii), and (d)(iii) and
(d)(iv), Supreme will pay Zwerner the difference between
$70,000.00 dollars and the sum amount of the performance bonus
he actually received for the first year, assuming that Zwerner
remains employed with Supreme on April 30, 2000. If Zwerner
fails to receive a performance bonus of $52,500.00 for his
second year of employment with Supreme under the foregoing
bonus computation methodology set forth in subparagraphs
(d)(i), (d)(ii), (d)(iii) and (d)(iv), Supreme will pay
Zwerner the difference between $52,500.00 and the sum amount
of the performance bonus he actually received for his second
year of employment, assuming that Zwerner remains employed
with Supreme on April 30, 2001. Zwerner is NOT guaranteed any
minimum bonus for his third year of employment (I.E., May 1,
2001 to April 30, 2002). In the event that Zwerner is not
employed with Supreme on either of the annual anniversary
dates set forth above because Supreme has terminated the
contract without cause, he will be entitled a pro rata payment
of the performance bonuses through date of
<PAGE>
employment. There will be no proration of these performance
bonuses if Zwerner terminates this contract, or if Supreme
terminates this Agreement for cause.
(4) Car Allowance: Supreme will pay to Zwerner a car allowance of
nine hundred dollars ($900.00) per month. Such sums will be
treated as income to Zwerner.
(5) Relocation Costs: Supreme will reimburse Zwerner for all
reasonable moving expenses incurred in relocating to Miami,
Florida, not to exceed $100,000.00. Payment of such expenses
will be made by Supreme by May 10, 2000. Supreme will
reimburse Zwerner only upon submission of appropriate
documentation of payment of such expenses by Zwerner.
During Zwerner's period of transition from New York
to Miami, Florida, Zwerner shall be reimbursed $200.00 per
night, Sunday through Thursday, in lieu of staying at a hotel
in New York City. This transition period shall not exceed one
year.
(6) Other Benefits: Zwerner will be entitled to participate in any
group health, dental, life or disability plan and is entitled
to any other benefits that the Company may maintain from time
to time for all employees, provided that Zwerner meets the
respective eligibility requirements. In addition, Supreme
agrees to reimburse Zwerner for any health insurance premiums
paid by Zwerner that are related to Zwerner only (excluding
family coverage) until he becomes eligible to participate in
Supreme's health insurance plan. Zwerner shall submit
appropriate documentation to Supreme reflecting his payment of
such premiums. Such sums will be treated as income to Zwerner.
<PAGE>
(7) Vacation, Personal and Sick Leave: Zwerner shall be entitled
to take three weeks of paid vacation during each year of
employment. Zwerner will automatically be entitled to his
first three weeks of vacation upon commencing employment with
Supreme. Zwerner shall be entitled to three (3) days of paid
sick leave and three (3) days of paid personal leave. Unused
vacation time, sick leave and/or personal leave may not be
carried over to subsequent years and will not be paid-out if
not taken for any reason.
(1) Expense Reimbursement: During the term of employment, the
Company, upon the submission of supporting documentation by
Zwerner, and in accordance with Company policies for its
executives, shall reimburse Zwerner for all expenses actually
paid or incurred by Zwerner in the course of and pursuant to
the business of the Company, including expenses for travel and
entertainment.
4. Performance Review:
Zwerner shall provide the Company with an interim review and evaluation
of his performance at the beginning of the each calendar year of this Agreement.
It is contemplated that this review will normally occur in January of each year,
but said review may be postponed or delayed in appropriate circumstances.
Zwerner shall be responsible for taking action to initiate the performance
review.
5. Zwerner's Death or Inability to Perform:
(1) In the event of Zwerner's death, this Agreement and Supreme's
obligation to pay Zwerner's salary and compensation shall
automatically end.
(b) If Zwerner becomes unable to perform his
employment duties during the term of this Agreement, his base
salary under this Agreement
<PAGE>
shall be continued for the first 90 days of any inability to
perform. Thereafter for the next 90 days he shall receive 50%
of his base salary. All such salary payments for the 180 day
period are to be reduced by any available disability
insurance. In the event that Zwerner is still unable to
perform his employment duties after the 180 day period, the
Company has the right to terminate this Agreement. In the
event that the company elects to terminate this Agreement,
Zwerner's salary and compensation shall automatically end as
of the date of termination; however, Zwerner shall be entitled
to a pro rated performance bonus as set forth in paragraph
3(d) as well as reimbursement of expenses incurred to date of
termination.
6. TERMINATION BY COMPANY FOR CAUSE:
The Company may terminate this Agreement and Zwerner's employment "for
cause" at any time with or without notice. As used herein, "for cause" shall
mean material breach of this agreement, theft, embezzlement, material
dereliction of the performance of his duties, insubordination, and conviction of
a crime other than traffic violations or minor misdemeanors and insobriety or
drug use while performing duties (provided that cause shall not include the
failure to achieve performance objectives).
7. Termination of Agreement by the Company without Cause:
The Company may terminate this Agreement and Zwerner's employment
without cause. In such case, Zwerner shall be entitled to receive his base
salary for a period of one year or the remainder of the term of this Agreement,
whichever is less, to be paid in accordance with paragraph 3(a) and (b) plus the
pro rata performance bonus as set forth in paragraph 3(d) as well as
reimbursement of expenses incurred to date of termination. To obtain these
payments, Zwerner will be required to execute a full waiver and release of all
claims in favor of Supreme and any successor entities.
<PAGE>
8. Termination of Agreement By Zwerner
Zwerner may terminate this Agreement and his employment with the
Company without cause upon sixty (60) days prior written notice to the Company.
In such case, Zwerner may be required to perform his business duties and will be
paid his regular salary up to the date of the termination. At the option of the
Company, the Company may require Zwerner to depart from the Company upon
receiving said sixty (60) days' notice from Zwerner of the termination of this
Agreement. If Zwerner is asked to depart prior to the expiration of the sixty
day period, the Company will pay to Zwerner an amount equal to sixty (60)
calendar days of his base salary, excluding any other benefits or compensation
set forth in paragraph 3(b)-3(i) above. If Zwerner terminates this Agreement,
Zwerner will not be entitled to receive any further benefits or other
compensation under this Agreement, and the provisions of paragraph 9 below shall
apply.
9. Effect of Termination:
In the event of Zwerner's termination under paragraphs 5, 6, 7, or 8
above, and except as may be otherwise provided in paragraphs 3(f), 3(i), 5, 7
and 8, Zwerner's compensation and benefits to be provided under this Agreement
will immediately cease and terminate upon date of termination. Except as may be
otherwise provided in paragraphs 3(f), 3(i), 5, 7 and 8, Supreme shall not be
liable to Zwerner for any further or additional compensation or benefits from
the date of termination forward. Except as may be otherwise provided in
paragraphs 3(f), 3(i), 5, 7 and 8, compensation that would otherwise be payable
for the remainder of the Agreement (and for prior years and for subsequent
years) shall automatically terminate and forfeit immediately. Except as may be
otherwise provided in paragraphs 3(f), 3(i), 5, 7 and 8, the Company shall have
no further liability hereunder (other than for reimbursement for reasonable
business expenses incurred prior to the date of termination). All options that
are not vested shall immediately terminate and expire. Unless otherwise provided
for in Paragraph 5 and 7, there will be no proration of bonuses and no proration
of vesting of stock options.
<PAGE>
10. Notice Regarding Continuation of Employment:
No later than 180 days prior to the expiration of this Agreement, the
Company and Zwerner will each notify the other of their intentions concerning
continuing Zwerner's employment with Supreme. If Zwerner and the Company agreed
to enter into a new employment contract, the parties will utilize their best
efforts to execute the new contract no later than 120 days prior to the
expiration of this Agreement. If no new agreement is entered into within a 120
days of the expiration of this Agreement, Zwerner shall have the right to seek
employment elsewhere to commence upon expiration of this Agreement and in
accordance with the terms of this Agreement.
11. COOPERATION:
Upon the termination of this Agreement for any reason, Zwerner agrees
to cooperate with the Company in effecting a smooth transition of the management
of the Company with respect to the duties and responsibilities which Zwerner
performed for the Company. Further, after termination of this Agreement, Zwerner
will upon reasonable notice, furnish such information and proper assistance to
the Company as it may reasonably require in connection with any litigation to
which the Company is or may become a party.
12. COVENANT NOT TO COMPETE:
During the term of his employment (whether under this Agreement or
otherwise) and for a period of one year following the voluntary termination by
Zwerner of his employment. Zwerner shall not, directly or indirectly engage in
or have any interest in, directly or indirectly, any sole proprietorship,
partnership, corporation, business or any other person or entity (whether as an
employee, officer, director, partner, agent, security holder, creditor,
consultant or otherwise) that, directly or indirectly, engages primarily in the
development, manufacturing, distribution, or supply of products and services
<PAGE>
competitive with the Company's and/or any subsidiary's products and services in
any and all states in which the Company and/or any subsidiary conducts its
business at the time that Zwerner's employment with the Company is terminated
(the "Territory"); provided that Zwerner can obtain employment with a retailer
that designs, produces and manufactures its product, for example, J. Crew or
Federated Department Store; further it is provided, that Zwerner may hold
Company securities and/or acquire, solely as an investment, shares of capital
stock or other equity securities of any such company, so long as Zwerner does
not control, acquire a controlling interest in, or become a member of a group
which exercises direct or indirect control of, more than five percent of any
class of capital stock of such corporation. This restrictive covenant may be
assigned to any successor entities. This paragraph shall not apply if Zwerner is
not contractually retained by Supreme after expiration of this Agreement.
13. AGREEMENT NOT TO DISCLOSE TRADE SECRETS OR CONFIDENTIAL INFORMATION:
During the term of his employment (whether under this Agreement or
otherwise), and for five (5) years after Zwerner's termination of employment
(for any reason by Zwerner or Supreme) with Supreme or any successor
organization, Zwerner promises and agrees that he will not disclose or utilize
any trade secrets, confidential information, or other proprietary information
acquired during the course of his service with the Company and/or its related
business entities. As used herein, "trade secret" means the whole or any portion
or phase of any formula, pattern, device, combination of devices, or compilation
of information which is for use, or is used, in the operation of the Company's
business and which provides the Company an advantage, or an opportunity to
obtain an advantage, over those who do not know or use it. "Trade secret" also
includes any scientific, technical, or commercial information, including any
design, list of suppliers, list of customers, or improvement thereof, as well as
pricing information or methodology, contractual arrangements with vendors or
suppliers, business development plans or
<PAGE>
activities, or Company financial information. This restrictive covenant may be
assigned to any successor entities.
During the term of his employment (whether under this Agreement or
otherwise), and for five (5) years after Zwerner's termination of employment
(for any reason by Zwerner or Supreme) with Supreme or any successor
organization, Zwerner shall not divulge, communicate, use to the detriment of
the Company or for the benefit of any other person or persons, or misuse in any
way, any Confidential Information pertaining to the business of the Company. Any
Confidential Information or data now or hereafter acquired by Zwerner with
respect to the business of the Company (which shall include, but not be limited
to, information concerning the Company's financial condition, prospects,
technology, customers, suppliers, methods of doing business and promotion of the
Company's products and services) shall be deemed a valuable, special and unique
asset of the Company that is received by Zwerner in confidence and as a
fiduciary. For purposes of this Agreement "Confidential Information" means
information disclosed to Zwerner as a consequence of or through his employment
by the Company (including information conceived, originated, discovered or
developed by Zwerner) prior to or after the date hereof and not generally known
in the public domain, about the Company or its business.
As previously stated, Zwerner's obligations under this Section shall
survive the termination of this Agreement. This restrictive covenant may be
assigned to any successor entities.
14. AGREEMENT NOT TO SOLICIT OR HIRE COMPANY EMPLOYEES:
If Zwerner leaves the employ of the Company for whatever reason,
Zwerner promises and agrees that, during the two (2) years following his
departure from the Company, he will not, without the express written permission
of the Company, directly or indirectly employ as a consultant or employee any
person who is employed as a
<PAGE>
consultant or employee of the Company at the time of Zwerner's departure, or any
person who was an employee or consultant of the Company during the six months
preceding Zwerner's departure. This restrictive covenant may be assigned to any
successor entities.
15. INJUNCTIVE RELIEF:
In recognition of the unique services to be performed by Zwerner and
the possibility that any violation by Zwerner of paragraphs 12, 13 or 14 of this
Agreement may cause irreparable or indeterminate damage or injury to Company,
Zwerner expressly stipulates and agrees that the Company shall be entitled, upon
ten (10) days written notice to Zwerner, to obtain an injunction from any court
of competent jurisdiction restraining any violation or threatened violation of
his Agreement. Such right to an injunction shall be in addition to, and not in
limitation of, any other rights or remedies the Company may have for damages or
liquidated damages.
16. JUDICIAL MODIFICATION OF AGREEMENT:
The Company and Zwerner specifically agree that a court of competent
jurisdiction may modify or amend paragraphs 12, 13 or 14 of this Agreement if
necessary to conform with relevant law or binding judicial decisions in effect
at the time the Company seeks to enforce any or all of said provisions.
17. RESOLUTION OF DISPUTE BY ARBITRATION:
Any claim or controversy that arises out of or relates to this
Agreement or the breach of it, will be resolved by arbitration in the Miami-Dade
County, Florida utilizing the American Arbitration Association. Judgment upon
the award rendered may be entered in any court possessing jurisdiction over
arbitration awards. This Section shall not limit or restrict the Company's right
to obtain injunctive relief for violations of paragraphs 12, 13, or 14 of this
Agreement directly from a court under paragraph 15 of this Agreement.
<PAGE>
18. ADEQUATE CONSIDERATION:
Zwerner expressly agrees that the Company has provided adequate,
reasonable consideration for the obligations imposed upon him in this Agreement.
19. EFFECT OF PRIOR AGREEMENTS:
This Agreement supersedes any prior verbal or written agreement or
understanding between the Company and Zwerner.
20. LIMITED EFFECT OF WAIVER BY COMPANY:
If the Company waives a breach of any provision of this Agreement by
Zwerner, that waiver will not operate or be construed as a waiver of later
breaches by Zwerner.
21. SEVERABILITY:
If any provision of this Agreement is held invalid for any reason, the
other provisions of this Agreement will remain in effect, insofar as is
consistent with law.
22. ASSUMPTION OF AGREEMENT BY COMPANY'S SUCCESSORS AND ASSIGNS:
At the Company's sole option, the Company's rights and obligations
under this Agreement will inure to the benefit and be binding upon the Company's
successors and assigns. In the event any successor or assigns desires Zwerner to
relocate out of Miami-Dade, Broward or Palm Beach County, Florida, Zwerner has
the right to terminate this Agreement pursuant to paragraph 8. Zwerner may not
assign his rights and obligations under this Agreement.
<PAGE>
23. APPLICABLE LAW:
Zwerner and the Company agree that this Agreement shall be subject to,
and enforceable under, the laws of the State of Florida.
24. ENTIRE AGREEMENT; ORAL MODIFICATIONS NOT BINDING:
This instrument is the entire Agreement of the Company and Zwerner.
Zwerner agrees that no other promises or commitments have been made to Zwerner.
This Agreement may be altered by the parties only by a written Agreement signed
by the party against whom enforcement of any waiver, change, modifications,
extension, or discharge is sought.
IN WITNESS WHEREOF, the parties have executed this Employment Agreement
on May 23, 1999.
SUPREME INTERNATIONAL CORPORATION ALAN ZWERNER
By: /s/ GEORGE FELDENKREIS By: /s/ ALLAN ZWERNER
Witness:__________________________ Witness:_________________________________
Witness:__________________________ Witness:_________________________________
<PAGE>
EXHIBIT 12.1
RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
1995 1996 1997 1998 1999
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net income $ 3,872 $ 4,424 $ 5,844 $ 7,178 $ 8,582
Add provision for income taxes 2,319 2,685 3,597 2,885 4,491
------- ------- ------- ------- -------
$ 6,191 $ 7,109 $ 9,441 $10,063 $13,073
Fixed Charges:
Interest $ 1,219 $ 2,224 $ 1,664 $ 2,782 $ 3,494
Interest factor
portion of rentals 204 307 339 486 649
------- ------- ------- ------- -------
Total Fixed Charges $ 1,423 $ 2,531 $ 2,003 $ 3,268 $ 4,143
Earnings before income
taxes and fixed charges $ 7,614 $ 9,640 $11,444 $13,331 $17,216
======= ======= ======= ======= =======
Ratio of earnings to
fixed charges 5.35 3.81 5.71 4.08 4.16
======= ======= ======= ======= =======
</TABLE>
Exhibit 22.1
LIST OF SUBSIDIARIES
Supreme Acquisition Corporation
Supreme International (N.Y.), Inc.
Supreme International (Delaware), Inc.
Supreme Munsingwear Canada, Inc.
Supreme International Corporation de Mexico, S.A. de C.V.
Perry Ellis International, Inc.
Exhibit 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Supreme International
Corporation on Form S-4 of our report dated March 12, 1999 (April 14, 1999 as to
Note 17) appearing in the Prospectus, which is part of this Registration
Statement, and to the reference to us under the heading "Experts" in such
Prospectus.
/s/ DELOITTE & TOUCHE LLP
Miami, Florida
May 12, 1999
Exhibit 23.3
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Supreme
International Corporation on Form S-4 of our report dated March 12, 1999 (May
11, 1999 as to Note 10) appearing in the Prospectus, which is part of this
Registration Statement, and to the reference to us under the heading "Experts"
in such Prospectus.
/s/ Saul L. Klaw & Co., P.C.
Certified Public Accountants
May 11, 1999
EXHIBIT 25.1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM T-1
----------
STATEMENT OF ELIGIBILITY UNDER THE
TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
Check if an Application to Determine Eligibility
of a Trustee Pursuant to Section 305(b)(2)
STATE STREET BANK AND TRUST COMPANY
(Exact name of trustee as specified in its charter)
Massachusetts 04-1867445
(Jurisdiction of incorporation or (I.R.S. Employer
organization if not a U.S. national bank) Identification No.)
225 Franklin Street, Boston, Massachusetts 02110
(Address of principal executive offices) (Zip Code)
Maureen Scannell Bateman, Esq. Executive Vice President and General Counsel
225 Franklin Street, Boston, Massachusetts 02110
(617) 654-3253
(Name, address and telephone number of agent for service)
SUPREME INTERNATIONAL CORPORATION
(Exact name of obligor as specified in its charter)
FLORIDA 59-1162998
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3000 N.W. 107th Avenue
Miami, Florida 33172
12 1/4% Senior Subordinated Notes due 2006
<PAGE>
(Title of indenture securities)
GENERAL
ITEM 1. GENERAL INFORMATION.
FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(A) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISORY AUTHORITY TO WHICH IT IS
SUBJECT.
Department of Banking and Insurance of The Commonwealth of Massachusetts,
100 Cambridge Street, Boston, Massachusetts.
Board of Governors of the Federal Reserve System, Washington, D.C., Federal
Deposit Insurance Corporation, Washington, D.C.
(B) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
The obligor is not an affiliate of the trustee or of its parent, State
Street Corporation.
(See note on page 2.)
ITEM 3. THROUGH ITEM 15. NOT APPLICABLE.
ITEM 16. LIST OF EXHIBITS.
LIST BELOW ALL EXHIBITS FILED AS PART OF THIS STATEMENT OF ELIGIBILITY.
1. A COPY OF THE ARTICLES OF ASSOCIATION OF THE TRUSTEE AS NOW IN EFFECT.
A copy of the Articles of Association of the trustee, as now in effect, is
on file with the Securities and Exchange Commission as Exhibit 1 to Amendment
No. 1 to the Statement of Eligibility and Qualification of Trustee (Form T-1)
filed with the Registration Statement of Morse Shoe, Inc. (File No. 22-17940)
and is incorporated herein by reference thereto.
<PAGE>
2. A COPY OF THE CERTIFICATE OF AUTHORITY OF THE TRUSTEE TO COMMENCE
BUSINESS, IF NOT CONTAINED IN THE ARTICLES OF ASSOCIATION.
A copy of a Statement from the Commissioner of Banks of Massachusetts that
no certificate of authority for the trustee to commence business was necessary
or issued is on file with the Securities and Exchange Commission as Exhibit 2 to
Amendment No. 1 to the Statement of Eligibility and Qualification of Trustee
(Form T-1) filed with the Registration Statement of Morse Shoe, Inc. (File No.
22-17940) and is incorporated herein by reference thereto.
3. A COPY OF THE AUTHORIZATION OF THE TRUSTEE TO EXERCISE CORPORATE TRUST
POWERS, IF SUCH AUTHORIZATION IS NOT CONTAINED IN THE DOCUMENTS SPECIFIED IN
PARAGRAPH (1) OR (2), ABOVE.
A copy of the authorization of the trustee to exercise corporate trust
powers is on file with the Securities and Exchange Commission as Exhibit 3 to
Amendment No. 1 to the Statement of Eligibility and Qualification of Trustee
(Form T-1) filed with the Registration Statement of Morse Shoe, Inc. (File No.
22-17940) and is incorporated herein by reference thereto.
4. A COPY OF THE EXISTING BY-LAWS OF THE TRUSTEE, OR INSTRUMENTS
CORRESPONDING THERETO.
A copy of the by-laws of the trustee, as now in effect, is on file with the
Securities and Exchange Commission as Exhibit 4 to the Statement of Eligibility
and Qualification of Trustee (Form T-1) filed with the Registration Statement of
Eastern Edison Company (File No. 33-37823) and is incorporated herein by
reference thereto.
5. A COPY OF EACH INDENTURE REFERRED TO IN ITEM 4. IF THE OBLIGOR IS IN
DEFAULT.
Not applicable.
6. THE CONSENTS OF UNITED STATES INSTITUTIONAL TRUSTEES REQUIRED BY SECTION
321(B) OF THE ACT.
The consent of the trustee required by Section 321(b) of the Act is annexed
hereto as Exhibit 6 and made a part hereof.
7. A COPY OF THE LATEST REPORT OF CONDITION OF THE TRUSTEE PUBLISHED
PURSUANT TO LAW OR THE REQUIREMENTS OF ITS SUPERVISING OR EXAMINING AUTHORITY.
A copy of the latest report of condition of the trustee published pursuant
to law or the requirements of its supervising or examining authority is annexed
hereto as Exhibit 7 and made a part hereof.
<PAGE>
NOTES
In answering any item of this Statement of Eligibility which relates to
matters peculiarly within the knowledge of the obligor or any underwriter for
the obligor, the trustee has relied upon information furnished to it by the
obligor and the underwriters, and the trustee disclaims responsibility for the
accuracy or completeness of such information.
The answer furnished to Item 2. of this statement will be amended, if
necessary, to reflect any facts which differ from those stated and which would
have been required to be stated if known at the date hereof.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, State Street Bank and Trust Company, a corporation
organized and existing under the laws of The Commonwealth of Massachusetts, has
duly caused this statement of eligibility to be signed on its behalf by the
undersigned, thereunto duly authorized, all in the City of Boston and The
Commonwealth of Massachusetts, on the 11th day of May 1999.
STATE STREET BANK AND TRUST COMPANY
By: //S// ANGELITA L. PENA
Name: Angelita L. Pena
Title: Assistant Vice President
<PAGE>
7
EXHIBIT 6
CONSENT OF THE TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture Act
of 1939, as amended, in connection with the proposed issuance by SUPREME
INTERNATIONAL CORPORATION of its $100,000,000 12 1/4% SENIOR SUBORDINATED NOTES
DUE 2006, we hereby consent that reports of examination by Federal, State,
Territorial or District authorities may be furnished by such authorities to the
Securities and Exchange Commission upon request therefor.
STATE STREET BANK AND TRUST COMPANY
By: //S// ANGELITA L. PENA
Name: Angelita L. Pena
Title: Assistant Vice President
Dated: May 11, 1999
<PAGE>
EXHIBIT 7
Consolidated Report of Condition of State Street Bank and Trust Company,
Massachusetts and foreign and domestic subsidiaries, a state banking institution
organized and operating under the banking laws of this commonwealth and a member
of the Federal Reserve System, at the close of business DECEMBER 31, 1998,
published in accordance with a call made by the Federal Reserve Bank of this
District pursuant to the provisions of the Federal Reserve Act and in accordance
with a call made by the Commissioner of Banks under General Laws, Chapter 172,
Section 22(a).
<TABLE>
THOUSANDS
OF DOLLARS
-----------
ASSETS
<S> <C>
Cash and balances due from depository institutions:
Non-interest bearing balances and currency and coin.........................1,209,293
Interest-bearing balances................................................. 12,007,895
Securities..................................................................9,705,731
Federal funds sold and securities purchased under agreements
to resell in domestic offices of the bank and its Edge subsidiary.......... 9,734,476
Loans and lease financing receivables:
Loans and leases, net of unearned income....................................6,973,125
Allowance for loan and lease losses......................................... 84,308
Allocated transfer risk reserve............................................. 0
Loans and leases, net of unearned income and allowances.....................6,888,817
Assets held in trading accounts.............................................1,574,999
Premises and fixed assets................................................... 523,514
Other real estate owned..................................................... 0
Investments in unconsolidated subsidiaries.................................. 612
Customers' liability to this bank on acceptances outstanding................ 47,334
Intangible assets........................................................... 212,743
Other assets................................................................1,279,224
----------
Total assets...............................................................43,184,638
==========
LIABILITIES
Deposits:
In domestic offices........................................................10,852,862
Non-interest bearing.....................................................8,331,830
Interest-bearing.........................................................2,521,032
In foreign offices and Edge subsidiary.....................................16,761,573
Non-interest bearing..................................................... 83,010
Interest-bearing........................................................16,678,563
Federal funds purchased and securities sold under agreements to repurchase
in domestic offices of the bank and of its Edge subsidiary.................. 10,041,324
Demand notes issued to the U.S. Treasury.................................... 108,420
Trading liabilities.........................................................1,240,938
Other borrowed money........................................................ 322,331
Subordinated notes and debentures........................................... 0
Bank's liability on acceptances executed and outstanding.................... 47,334
Other liabilities.......................................................... 1,126,058
----------
Total liabilities..........................................................40,500,840
==========
EQUITY CAPITAL
Perpetual preferred stock and related surplus................................... 0
Common stock................................................................ 29,931
Surplus..................................................................... 468,511
Undivided profits and capital reserves/Net unrealized holding gains (losses)....2,164,055
Net unrealized holding gains (losses) on available-for-sale securities.... 21,638
Cumulative foreign currency translation adjustments......................... (337)
Total equity capital .......................................................2,683,798
----------
Total liabilities and equity capital.......................................43,184,638
==========
</TABLE>
<PAGE>
I, Rex S. Schuette, Senior Vice President and Comptroller of the above
named bank do hereby declare that this Report of Condition has been prepared in
conformance with the instructions issued by the Board of Governors of the
Federal Reserve System and is true to the best of my knowledge and belief.
Rex S. Schuette
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
David A. Spina
Marshall N. Carter
Truman S. Casner
5. A COPY OF EACH INDENTURE REFERRED TO IN ITEM 4. IF THE OBLIGOR IS IN
DEFAULT.
Not applicable.
6. THE CONSENTS OF UNITED STATES INSTITUTIONAL TRUSTEES REQUIRED BY
SECTION 321(B) OF THE ACT.
The consent of the trustee required by Section 321(b) of the Act is annexed
hereto as Exhibit 6 and made a part hereof.
7. A COPY OF THE LATEST REPORT OF CONDITION OF THE TRUSTEE PUBLISHED
PURSUANT TO LAW OR THE REQUIREMENTS OF ITS SUPERVISING OR EXAMINING AUTHORITY.
A copy of the latest report of condition of the trustee published pursuant
to law or the requirements of its supervising or examining authority is annexed
hereto as Exhibit 7 and made a part hereof.
<PAGE>
NOTES
In answering any item of this Statement of Eligibility which relates to
matters peculiarly within the knowledge of the obligor or any underwriter of the
obligor, the trustee has relied upon the information furnished to it by the
obligor and the underwriters, and the trustee disclaims responsibility for the
accuracy or completeness of such information.
The answer to Item 2. of this statement will be amended, if necessary, to
reflect any facts which differ from those stated and which would have been
required to be stated if known at the date hereof.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, State Street Bank and Trust Company, a corporation duly
organized and existing under the laws of The Commonwealth of Massachusetts, has
duly caused this statement of eligibility to be signed on its behalf by the
undersigned, thereunto duly authorized, all in the City of Boston and The
Commonwealth of Massachusetts, on the 11th day of May, 1999.
STATE STREET BANK AND TRUST COMPANY
By: //S// ANGELITA L. PENA
Name: Angelita L. Pena
Title: Assistant Vice President
<PAGE>
EXHIBIT 6
CONSENT OF THE TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture Act
of 1939, as amended, in connection with the proposed issuance by SUPREME
INTERNATIONAL CORPORATION OF ITS $100,000,000 12 1/4% SENIOR SUBORDINATED NOTES
DUE 2006, we hereby consent that reports of examination by Federal, State,
Territorial or District authorities may be furnished by such authorities to the
Securities and Exchange Commission upon request therefor.
STATE STREET BANK AND TRUST COMPANY
By: //S// ANGELITA L. PENA
Name: Angelita L. Pena
Title: Assistant Vice President
Dated: May 11, 1999
EXHIBIT 99.1
SUPREME INTERNATIONAL CORPORATION
LETTER OF TRANSMITTAL
FOR
TENDER OF ALL OUTSTANDING
12 1/4% SENIOR SUBORDINATED NOTES DUE 2006, SERIES A
IN EXCHANGE FOR
12 1/4% SENIOR SUBORDINATED NOTES DUE 2006, SERIES B
- -------------------------------------------------------------------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
____________, 1999, UNLESS EXTENDED (THE "EXPIRATION DATE"). EXISTING
NOTES TENDERED IN THE EXCHANGE OFFER MAY BE WITHDRAWN AT ANY
TIME PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE.
- ------------------------------------------------------------------------------
DELIVER TO THE EXCHANGE AGENT:
STATE STREET BANK AND TRUST COMPANY
<TABLE>
BY MAIL: BY OVERNIGHT OR HAND DELIVERY BY MAIL OR HAND IN NEW YORK
-------- ----------------------------- ---------------------------
<S> <C> <C>
State Street Bank and Trust Company State Street Bank and Trust Company State Street Bank and Trust Company
Corporate Trust Department Corporate Trust Departme Corporate Trust Department
P.O. Box 778 Two International Place 61 Broadway, 15th Floor
Boston, MA 02102-0078 4th Floor New York, NY 10006
Attn: Ralph Jones Boston, MA 02110
Attn: Ralph Jones
BY FACSIMILE: FOR INFORMATION TELEPHONE:
State Street Bank and Trust Company (617) 664-5249
Attn: Ralph Jones Attn: Ralph Jones
(617) 664-5290
To Confirm Receipt:
(617) 664-5249
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR
TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN THE ONE LISTED
ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS ACCOMPANYING THIS
LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL
IS COMPLETED.
The undersigned hereby acknowledges receipt and review of the Prospectus
dated _________, 1999 (the "Prospectus") of Supreme International Corporation, a
Florida corporation (the "Company"), and this Letter of Transmittal (the "Letter
of Transmittal"), which together describe the Company's offer (the "Exchange
Offer") to exchange its 12 1/4% Senior Subordinated Notes due 2006, Series B
(the "Exchange Notes"), which have been registered under the Securities Act of
1933, as amended (the "Securities Act"), pursuant to a Registration Statement of
which the Prospectus is a part, for a like principal amount of its issued and
outstanding 12 1/4% Senior Subordinated Notes due 2006, Series A (the "Existing
Notes"). Capitalized terms used but not defined herein have the respective
meaning given to them in the Prospectus.
<PAGE>
The Company reserves the right, at any time or from time to time, to extend
the Exchange Offer at its discretion, in which event the term "Expiration Date"
shall mean the latest date to which the Exchange Offer is extended. The Company
shall notify the Exchange Agent of any extension by oral or written notice and
will make a public announcement thereof, each prior to 9:00 a.m., New York City
time, on the next business day after the previously scheduled Expiration Date.
This Letter of Transmittal is to be used by a holder of Existing Notes (i)
if certificates of Existing Notes are to be forwarded herewith or (ii) if
delivery of Existing Notes is to be made by book-entry transfer to the account
maintained by the Exchange Agent at The Depository Trust Company (the "DTC")
pursuant to the procedures set forth in the Prospectus under the caption "The
Exchange Offer--Book-Entry Transfer." Holders of Existing Notes whose Existing
Notes are not immediately available, or who are unable to deliver their Existing
Notes and all other documents required by this Letter of Transmittal to the
Exchange Agent on or prior to the Expiration Date, or who are unable to complete
the procedure for book-entry transfer on a timely basis, must tender their
Existing Notes according to the guaranteed delivery procedures set forth in the
Prospectus under the caption "The Exchange Offer--Guaranteed Delivery
Procedures." See Instruction 2. Delivery of documents to the DTC does not
constitute delivery to the Exchange Agent.
The term "holder" with respect to the Exchange Offer means any person in
whose name Existing Notes are registered on the books of the Company or any
other person who has obtained a properly completed bond power from the
registered holder. The undersigned has completed, executed and delivered this
Letter of Transmittal to indicate the action the undersigned desires to take
with respect to the Exchange Offer. Holders who wish to tender their Existing
Notes must complete this Letter of Transmittal in its entirety.
PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL AND THE PROSPECTUS CAREFULLY
BEFORE CHECKING ANY BOX BELOW.
THE INSTRUCTIONS INCLUDED WITH THIS LETTER OF TRANSMITTAL MUST BE FOLLOWED.
QUESTIONS AND REQUESTS FOR ASSISTANCE OR FOR ADDITIONAL COPIES OF THE PROSPECTUS
AND THIS LETTER OF TRANSMITTAL MAY BE DIRECTED TO THE EXCHANGE AGENT.
List below the Existing Notes to which this Letter of Transmittal relates.
If the space below is inadequate, list the registered numbers and principal
amounts on a separate signed schedule and affix the list to this Letter of
Transmittal.
<PAGE>
- --------------------------------------------------------------------------------
DESCRIPTION OF EXISTING NOTES TENDERED
- --------------------------------------------------------------------------------
EXISTING NOTE(S) TENDERED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C>
NAME(S) AND ADDRESS(ES) REGISTERED AGGREGATE PRINCIPAL PRINCIPAL
OF REGISTERED HOLDER(S) NUMBER(S)(1) AMOUNT REPRESENTED AMOUNT
EXACTLY AS NAME(S) APPEAR(S) BY NOTE(S) TENDERED(2)
ON EXISTING NOTES
(PLEASE FILL IN, IF BLANK)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
(1) Need not be completed by book-entry holders.
(2) Unless otherwise indicated, any tendering holder of Existing Notes will be
deemed to have tendered the entire aggregate principal amount represented
by such Existing Notes. All tenders must be in integral multiples of
$1,000.
[ ] CHECK HERE IF TENDERED EXISTING NOTES ARE ENCLOSED HEREWITH.
[ ] CHECK HERE AND COMPLETE THE FOLLOWING IF TENDERED EXISTING NOTES ARE
BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO THE ACCOUNT MAINTAINED BY
THE EXCHANGE AGENT WITH THE DTC (FOR USE BY ELIGIBLE INSTITUTIONS ONLY):
Name of Tendering Institution:_____________________________________________
Account Number:____________________________________________________________
Transaction Code Number:___________________________________________________
[ ] CHECK HERE AND COMPLETE THE FOLLOWING IF TENDERED EXISTING NOTES ARE
BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY ENCLOSED
HEREWITH (FOR USE BY ELIGIBLE INSTITUTIONS ONLY):
Name(s) of Registered holder(s) of Existing Notes:___________________________
Date of Execution of Notice of Guaranteed Delivery:__________________________
Window Ticket Number (if available):_________________________________________
Name of Eligible Institution that Guaranteed Delivery:_______________________
Account Number (if delivered by book-entry transfer):________________________
[ ] CHECK HERE AND COMPLETE THE FOLLOWING IF YOU ARE A BROKER-DEALER AND WISH
TO RECEIVE ADDITIONAL COPIES OF THE PROSPECTUS AND COPIES OF ANY AMENDMENTS
OR SUPPLEMENTS THERETO:
<PAGE>
Name:________________________________________________________________________
Address:_____________________________________________________________________
_____________________________________________________________________
Number of Additional Copies: ________________________________________________
If the undersigned is not a broker-dealer, the undersigned represents that
it is not engaged in, and does not intend to engage in, a distribution of
Exchange Notes. If the undersigned is a broker-dealer that will receive Exchange
Notes for its own account in exchange for Existing Notes, it acknowledges that
the Existing Notes were acquired as a result of market-making activities or
other trading activities and that it will deliver a prospectus in connection
with any resale of such Exchange Notes; however, by so acknowledging and by
delivering a prospectus, the undersigned will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act.
SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Subject to the terms and conditions of the Exchange Offer, the undersigned
hereby tenders to the Company for exchange the principal amount of Existing
Notes indicated above. Subject to and effective upon the acceptance for exchange
of the principal amount of Existing Notes tendered in accordance with this
Letter of Transmittal, the undersigned hereby exchanges, assigns and transfers
to the Company all right, title and interest in and to the Existing Notes
tendered for exchange hereby. The undersigned hereby irrevocably constitutes and
appoints the Exchange Agent the true and lawful agent and attorney-in-fact for
the undersigned (with full knowledge that said Exchange Agent also acts as the
agent for the Company in connection with the Exchange Offer) with respect to the
tendered Existing Notes with full power of substitution to (i) deliver such
Existing Notes, or transfer ownership of such Existing Notes on the account
books maintained by the DTC, to the Company and deliver all accompanying
evidences of transfer and authenticity, and (ii) present such Existing Notes for
transfer on the books of the Company and receive all benefits and otherwise
exercise all rights of beneficial ownership of such Existing Notes, all in
accordance with the terms of the Exchange Offer. The power of attorney granted
in this paragraph shall be deemed to be irrevocable and coupled with an
interest.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, exchange, assign and transfer the Existing
Notes tendered hereby and to acquire the Exchange Notes issuable upon the
exchange of such tendered Existing Notes, and that the Company will acquire good
and unencumbered title thereto, free and clear of all liens, restrictions,
charges and encumbrances and not subject to any adverse claim, when the same are
accepted for exchange by the Company.
<PAGE>
The undersigned acknowledge(s) that this Exchange Offer is being made in
reliance upon interpretations contained in no-action letters issued to third
parties by the staff of the Securities and Exchange Commission (the "SEC"),
including Exxon Capital Holdings Corporation, SEC No-Action Letter (available
April 13, 1989), Morgan Stanley Co. Inc., SEC No-Action Letter (available June
5, 1991) (the "Morgan Stanley Letter") and Mary Kay Cosmetics, Inc., SEC
No-Action Letter (available June 5, 1991), that the Exchange Notes issued in
exchange for the Existing Notes pursuant to the Exchange Offer may be offered
for resale, resold and otherwise transferred by holders thereof (other than any
such holder that is an "affiliate" of the Company within the meaning of Rule 405
under the Securities Act), without compliance with the registration and
prospectus delivery provisions of the Securities Act, provided that such
Exchange Notes are acquired in the ordinary course of such holders' business and
such holders are not engaging in and have no arrangement or understanding with
any person to participate in a distribution of such Exchange Notes. The
undersigned hereby further represent(s) to the Company that (i) any Exchange
Notes acquired in exchange for Existing Notes tendered hereby are being acquired
in the ordinary course of business of the person receiving such Exchange Notes,
whether or not the undersigned, (ii) neither the undersigned nor any such other
person is engaging in or intends to engage in a distribution of the Exchange
Notes, (iii) neither the undersigned nor any such other person has an
arrangement or understanding with any person to participate in the distribution
of such Exchange Notes, (iv) neither the holder nor any such other person is an
"affiliate," as defined in Rule 405 under the Securities Act, of the Company or,
if it is an affiliate, it will comply with the registration and prospectus
delivery requirements of the Securities Act to the extent applicable, and (v) if
the undersigned is a broker-dealer, such person has acquired the Existing Notes
as a result of market-making activities or other trading activities.
If the undersigned or the person receiving the Exchange Notes is a
broker-dealer that is receiving Exchange Notes for its own account in exchange
for Existing Notes that were acquired as a result of market-making activities or
other trading activities, the undersigned acknowledges that it or such other
person will deliver a prospectus in connection with any resale of such Exchange
Notes; however, by so acknowledging and by delivering a prospectus, the
undersigned will not be deemed to admit that the undersigned or such other
person is an "underwriter" within the meaning of the Securities Act. The
undersigned acknowledges that if the undersigned is participating in the
Exchange Offer for the purpose of distributing the Exchange Notes (i) the
undersigned cannot rely on the position of the staff of the SEC in certain
no-action letters and, in the absence of an exemption therefrom, must comply
with the registration and prospectus delivery requirements of the Securities Act
in connection with a secondary resale transaction of the Exchange Notes, in
which case the registration statement must contain the selling security holder
information required by Item 507 or Item 508, as applicable, of Regulation S-K
of the SEC, and (ii) failure to comply with such requirements in such instance
could result in the undersigned incurring liability under the Securities Act for
which the undersigned is not indemnified by the Company.
The undersigned will, upon request, execute and deliver any additional
documents deemed by the Exchange Agent or the Company to be necessary or
desirable to complete the exchange, assignment and transfer of the Existing
Notes tendered hereby, including the transfer of such Existing Notes on the
account books maintained by the DTC.
For purposes of the Exchange Offer, the Company shall be deemed to have
accepted for exchange validly tendered Existing Notes when, as and if the
Company gives oral or written notice thereof to the Exchange Agent. Any tendered
Existing Notes that are not accepted for exchange pursuant to the Exchange Offer
for any reason will be returned, without expense, to the undersigned at the
address shown below or at a different address as may be indicated herein under
"Special Delivery Instructions" as promptly as practicable after the Expiration
Date.
<PAGE>
All authority conferred or agreed to be conferred by this Letter of
Transmittal shall survive the death, incapacity or dissolution of the
undersigned, and every obligation of the undersigned under this Letter of
Transmittal shall be binding upon the undersigned's heirs, personal
representatives, successors and assigns.
The undersigned acknowledges that the Company's acceptance of properly
tendered Existing Notes pursuant to the procedures described under the caption
"The Exchange Offer--Procedures for Tendering" in the Prospectus and in the
instructions hereto will constitute a binding agreement between the undersigned
and the Company upon the terms and subject to the conditions of the Exchange
Offer.
Unless otherwise indicated under "Special Issuance Instructions," please
issue the Exchange Notes issued in exchange for the Existing Notes accepted for
exchange and return any Existing Notes not tendered or not exchanged, in the
name(s) of the undersigned. Similarly, unless otherwise indicated under "Special
Delivery Instructions," please mail or deliver the Exchange Notes issued in
exchange for the Existing Notes accepted for exchange and any Existing Notes not
tendered or not exchanged (and accompanying documents, as appropriate) to the
undersigned at the address shown below the undersigned's signatures). In the
event that both "Special Issuance Instructions" and "Special Delivery
Instructions" are completed, please issue the Exchange Notes issued in exchange
for the Existing Notes accepted for exchange in the name(s) of, and return any
Existing Notes not tendered or not exchanged to, the person(s) so indicated. The
undersigned recognizes that the Company has no obligation pursuant to the
"Special Issuance Instructions" and "Special Delivery Instructions" to transfer
any Existing Notes from the name of the registered holder(s) thereof if the
Company does not accept for exchange any of the Existing Notes so tendered for
exchange.
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 5 AND 6)
To be completed ONLY if Existing Notes in a principal amount not tendered,
or Exchange Notes Issued, in exchange for Existing Notes accepted for exchange,
are to be mailed or delivered to someone other than the undersigned, or the
undersigned at an address other than that shown below the undersigned's
signature.
Mail or deliver Exchange Notes and/or Existing Notes to:
Name:_______________________________________________________________________
Address:____________________________________________________________________
(include Zip Code)
____________________________________________________________________________
(Tax Identification or Social Security Number)
(Please Type or Print)
[ ] Credit unexchanged Existing Notes delivered by book-entry transfer to the
DTC Book Entry Transfer Facility account set forth below:
DTC Account Number:_________________________________________________________
<PAGE>
SPECIAL ISSUANCE INSTRUCTIONS
(SEE INSTRUCTIONS 5 AND 6)
To be completed ONLY (i) if Existing Notes in a principal amount not
tendered, or Exchange Notes issued in exchange for Existing Notes accepted for
exchange, are to be issued in the name of someone other than the other than the
undersigned, or (ii) if Existing Notes tendered by book-entry transfer which are
not exchanged are to be returned by credit to an account maintained at the DTC.
Issue Exchange Notes and/or Existing Notes to:
Name:_______________________________________________________________________
Address:____________________________________________________________________
(include Zip Code)
____________________________________________________________________________
(Tax Identification or Social Security Number)
(Please Type or Print)
IMPORTANT
PLEASE SIGN HERE WHETHER OR NOT
EXISTING NOTES ARE BEING PHYSICALLY TENDERED HEREBY
(Complete Accompanying Substitute Form W-9 Below)
(The above lines must be signed by the registered holder(s) of Existing
Notes as your name(s) appear(s) on the Existing Notes or on a security position
listing, or by person(s) authorized to become registered holder(s) by a properly
completed bond power from the registered holder(s), a copy of which must be
transmitted with this Letter of Transmittal. If Existing Notes to which this
Letter of Transmittal relate are held of record by two or more joint holders,
then all such holders must sign this Letter of Transmittal. If signature is by a
trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation or other person acting in a fiduciary or representative capacity,
then such person must (i) set forth his or her full title below and (ii) unless
waived by the Company, submit evidence satisfactory to the Company of such
person's authority so to act. See Instruction 5 regarding the completion of this
Letter of Transmittal, printed below.)
Name(s): ____________________________________________ Date:_______________
(Please Type or Print)
Capacity:
Address:____________________________________________________________________
(Include Zip Code)
Area Code and Telephone Number: ____________________________________________
<PAGE>
MEDALLION SIGNATURE GUARANTEE (If Required by Instruction 5)
Certain signatures must be Guaranteed by an Eligible Institution.
Signature(s) Guaranteed by an
Eligible Institution:
- --------------------------------------------------------------------------------
(Authorized Signature)
- --------------------------------------------------------------------------------
(Title)
- --------------------------------------------------------------------------------
(Name of Firm)
- --------------------------------------------------------------------------------
(Address, Include Zip Code)
- --------------------------------------------------------------------------------
(Area Code and Telephone Number)
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND EXISTING NOTES OR BOOK-ENTRY
CONFIRMATIONS. All physically delivered Existing Notes or any confirmation of a
book-entry transfer to the Exchange Agent's account at the DTC of Existing Notes
tendered by book-entry transfer (a "Book-Entry Confirmation"), as well as a
properly completed and duly executed copy of this Letter of Transmittal or
facsimile hereof, and any other documents required by this Letter of
Transmittal, must be received by the Exchange Agent at its address set forth
herein prior to 5:00 p.m., New York City time, on the Expiration Date. THE
METHOD OF DELIVERY OF THE TENDERED EXISTING NOTES, THIS LETTER OF TRANSMITTAL
AND ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND
RISK OF THE HOLDER AND, EXCEPT AS OTHERWISE PROVIDED BELOW, THE DELIVERY WILL BE
DEEMED MADE ONLY WHEN ACTUALLY RECEIVED OR CONFIRMED BY THE EXCHANGE AGENT.
INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT THE HOLDER USE AN OVERNIGHT
OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO
ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE. NO LETTER OF
TRANSMITTAL OR EXISTING NOTES SHOULD BE SENT TO THE COMPANY.
<PAGE>
2. GUARANTEED DELIVERY PROCEDURES. Holders who wish to tender their
Existing Notes and (a) whose Existing Notes are not immediately available, or
(b) who cannot deliver their Existing Notes, this Letter of Transmittal or any
other documents required hereby to the Exchange Agent prior to the Expiration
Date or (c) who are unable to comply with the applicable procedures under DTC's
Automated Tender Offer Program on a timely basis, must tender their Existing
Notes according to the guaranteed delivery procedures set forth in the
Prospectus. Pursuant to such procedures: (i) such tender must be made by or
through a firm which is a member of a registered national securities exchange or
of the National Association of Securities Dealers, Inc., a commercial bank or a
trust company having an office or correspondent in the United States or an
"eligible guarantor institution" within the meaning of Rule 17Ad-15 under the
Exchange Act (an "Eligible Institution"); (ii) prior to the Expiration Date, the
Exchange Agent must have received from the Eligible Institution a properly
completed and duly executed Notice of Guaranteed Delivery (by facsimile
transmission, mail or hand delivery) or a properly transmitted agent's message
and Notice of Guaranteed Delivery setting forth the name and address of the
holder of the Existing Notes, the registration number(s) of such Existing Notes
and the total principal amount of Existing Notes tendered, stating that the
tender is being made thereby and guaranteeing that, within five business days
after the Expiration Date, this Letter of Transmittal (or facsimile hereof)
together with the Existing Notes in proper form for transfer (or a Book-Entry
Confirmation) and any other documents required hereby, will be deposited by the
Eligible Institution with the Exchange Agent; and (iii) the certificates for all
physically tendered shares of Existing Notes, in proper form for transfer (or
Book-Entry Confirmation, as the case may be) and all other documents required
hereby are received by the Exchange Agent within five business days after the
Expiration Date.
Any holder of Existing Notes who wishes to tender Existing Notes pursuant
to the guaranteed delivery procedures described above must ensure that the
Exchange Agent receives the Notice of Guaranteed Delivery prior to 5:00 p.m.,
New York City time, on the Expiration Date. Upon request of the Exchange Agent,
a Notice of Guaranteed Delivery will be sent to holders who wish to tender their
Existing Notes according to the guaranteed delivery procedures set forth above.
See "The Exchange Offer -- Guaranteed Delivery Procedures" section of the
Prospectus.
3. TENDER BY HOLDER. Only a holder of Existing Notes may tender such
Existing Notes in the Exchange Offer. Any beneficial holder of Existing Notes
who is not the registered holder and who wishes to tender should arrange with
the registered holder to execute and deliver this Letter of Transmittal on his
behalf or must, prior to completing and executing this Letter of Transmittal and
delivering his Existing Notes, either make appropriate arrangements to register
ownership of the Existing Notes in such holder's name or obtain a properly
completed bond power from the registered holder.
4. PARTIAL TENDERS. Tenders of Existing Notes will be accepted only in
integral multiples of $1,000. If less than the entire principal amount of any
Existing Notes is tendered, the tendering holder should fill in the principal
amount tendered in the fourth column of the box entitled "Description of
Existing Notes Tendered" above. The entire principal amount of Existing Notes
delivered to the Exchange Agent will be deemed to have been tendered unless
otherwise indicated. If the entire principal amount of all Existing Notes is not
tendered, then Existing Notes for the principal amount of Existing Notes not
tendered and Exchange Notes issued in exchange for any Existing Notes accepted
will be sent to the holder at his or her registered address, unless a different
address is provided in the appropriate box on this Letter of Transmittal,
promptly after the Existing Notes are accepted for exchange.
5. SIGNATURES ON THIS LETTER OF TRANSMITTAL; BOND POWERS AND ENDORSEMENTS;
MEDALLION GUARANTEE OF SIGNATURES. If this Letter of Transmittal (or facsimile
hereof) is signed by the record holder(s) of the Existing Notes tendered hereby,
the signature must correspond with the name(s) as written on the face of the
Existing Notes without alteration, enlargement or any change whatsoever. If this
Letter of Transmittal (or facsimile hereof) is signed by a participant in the
DTC, the signature must correspond with the name as it appears on the security
position listing as the holder of the Existing Notes.
If this Letter of Transmittal (or facsimile hereof) is signed by the
registered holder or holders of Existing Notes listed and tendered hereby and
the Exchange Notes issued in exchange therefor are to be issued (or any
untendered principal amount of Existing Notes is to be reissued) to the
registered holder, the said holder need not and should not endorse any tendered
Existing Notes, nor provide a separate bond power. In any other case, such
holder must either properly endorse the Existing Notes tendered or transmit a
properly completed separate bond power with this Letter of Transmittal, with the
signatures on the endorsement or bond power guaranteed by an Eligible
Institution.
<PAGE>
If this Letter of Transmittal (or facsimile hereof) is signed by a person
other than the registered holder or holders of any Existing Notes listed, such
Existing Notes must be endorsed or accompanied by appropriate bond powers, in
each case signed as the name of the registered holder or holders appears on the
Existing Notes.
If this Letter of Transmittal (or facsimile hereof) or any Existing Notes
or bond powers are signed by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or others acting in a fiduciary or
representative capacity, such persons should so indicate when signing, and,
unless waived by the Company, evidence satisfactory to the Company of their
authority to act must be submitted with this Letter of Transmittal.
Endorsements on Existing Notes or signatures on bond powers required by
this Instruction 5 must be guaranteed by an Eligible Institution.
NO SIGNATURE GUARANTEE IS REQUIRED IF (I) THIS LETTER OF TRANSMITTAL (OR
FACSIMILE HEREOF) IS SIGNED BY THE REGISTERED HOLDER(S) OF THE EXISTING NOTES
TENDERED HEREIN (OR BY A PARTICIPANT IN THE DTC WHOSE NAME APPEARS ON A SECURITY
POSITION LISTING AS THE OWNER OF THE TENDERED EXISTING NOTES) AND THE EXCHANGE
NOTES ARE TO BE ISSUED DIRECTLY TO SUCH REGISTERED HOLDER(S) (OR, IF SIGNED BY A
PARTICIPANT IN THE DTC, DEPOSITED TO SUCH PARTICIPANT'S ACCOUNT AT DTC) AND
NEITHER THE BOX ENTITLED "SPECIAL DELIVERY INSTRUCTIONS" NOR THE BOX ENTITLED
"SPECIAL ISSUANCE INSTRUCTIONS" HAS BEEN COMPLETED, OR (II) SUCH EXISTING NOTES
ARE TENDERED FOR THE ACCOUNT OF AN ELIGIBLE INSTITUTION. IN ALL OTHER CASES, ALL
SIGNATURES ON THIS LETTER OF TRANSMITTAL (OR FACSIMILE HEREOF) MUST BE
GUARANTEED BY AN ELIGIBLE INSTITUTION.
6. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. Tendering holders should
indicate, in the applicable box or boxes, the name and address (or account at
the DTC) to which Exchange Notes or substitute Existing Notes for principal
amounts not tendered or not accepted for exchange are to be issued or sent, if
different from the name and address of the person signing this Letter of
Transmittal. In the case of issuance in a different name, the taxpayer
identification or social security number of the person named must also be
indicated.
7. TRANSFER TAXES. The Company will pay all transfer taxes, if any,
applicable to the exchange of Existing Notes pursuant to the Exchange Offer. If,
however, Exchange Notes or Existing Notes for principal amounts not tendered or
accepted for exchange are to be delivered to, or are to be registered or issued
in the name of, any person other than the registered holder of the Existing
Notes tendered hereby, or if tendered Existing Notes are registered in the name
of any person other than the person signing this Letter of Transmittal, or if a
transfer tax is imposed for any reason other than the exchange of Existing Notes
pursuant to the Exchange Offer, then the amount of any such transfer taxes
(whether imposed on the registered holder or any other persons) will be payable
by the tendering holder. If satisfactory evidence of payment of such taxes or
exemption therefrom is not submitted with this Letter of Transmittal, the amount
of such transfer taxes will be billed directly to such tendering holder.
<PAGE>
8. TAX IDENTIFICATION NUMBER. Federal income tax law requires that a holder
of any Existing Notes or Exchange Notes must provide the Company (as payer) with
its correct taxpayer identification number ("TIN"), which, in the case of a
holder who is an individual is his or her social security number. If the Company
is not provided with the correct TIN, the holder may be subject to a $50 penalty
imposed by the Internal Revenue Service and backup withholding of 31% on
interest payments on the Exchange Notes.
To prevent backup withholding, each tendering holder must provide such
holder's correct TIN by completing the Substitute Form W-9 set forth herein,
certifying that the TIN provided is correct (or that such holder is awaiting a
TIN), and that (i) the holder has not been notified by the Internal Revenue
Service that such holder is subject to backup withholding as a result of failure
to report all interest or dividends or (ii) the Internal Revenue Service has
notified the holder that such holder is no longer subject to backup withholding.
If the Exchange Notes will be registered in more than one name or will not be in
the name of the actual owner, consult the instructions on Internal Revenue
Service Form W-9, which may be obtained from the Exchange Agent, for information
on which TIN to report.
Certain foreign individuals and entities will not be subject to backup
withholding or information reporting if they submit a Form W-8, signed under
penalties of perjury, attesting to their foreign status. A Form W-8 can be
obtained from the Exchange Agent.
The Company reserves the right in its sole discretion to take whatever
steps are necessary to comply with the Company's obligations regarding backup
withholding.
9. VALIDITY OF TENDERS. All questions as to the validity, form, eligibility
(including time of receipt), acceptance and withdrawal of tendered Existing
Notes will be determined by the Company in its sole discretion, which
determination will be final and binding. The Company reserves the absolute right
to reject any and all Existing Notes not properly tendered or any Existing Notes
the Company's acceptance of which would, in the opinion of the Company or its
counsel, be unlawful. The Company also reserves the absolute right to waive any
conditions of the Exchange Offer or defects or irregularities of tenders as to
particular Existing Notes. The Company's interpretation of the terms and
conditions of the Exchange Offer (including this Letter of Transmittal and the
instructions hereto) shall be final and binding on all parties. Unless waived,
any defects or irregularities in connection with tenders of Existing Notes must
be cured within such time as the Company shall determine. Neither the Company,
the Exchange Agent nor any person shall be under any duty to give notification
of defects or irregularities with regard to tenders of Existing Notes nor shall
any of them incur any liability for failure to give such notification.
10. WAIVER OF CONDITIONS. The Company reserves the absolute right to waive,
in whole or part, any of the conditions to the Exchange Offer set forth in the
Prospectus.
11. NO CONDITIONAL TENDER. No alternative, conditional, irregular or
contingent tender of Existing Notes on transmittal of this Letter of Transmittal
will be accepted.
12. MUTILATED, LOST, STOLEN OR DESTROYED EXISTING NOTES. Any holder whose
Existing Notes have been mutilated, lost, stolen or destroyed should contact the
Exchange Agent at the address indicated on the cover page of this Letter of
Transmittal for further instructions.
13. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Requests for assistance
or for additional copies of the Prospectus or this Letter of Transmittal may be
directed to the Exchange Agent at the address or telephone number set forth on
the cover page of this Letter of Transmittal. Holders may also contact their
broker, dealer, commercial bank, trust company or other nominee for assistance
concerning the Exchange Offer.
<PAGE>
14. ACCEPTANCE OF TENDERED EXISTING NOTES AND ISSUANCE OF EXCHANGE NOTES;
RETURN OF EXISTING NOTES. Subject to the terms and conditions of the Exchange
Offer, the Company will accept for exchange all validly tendered Existing Notes
as soon as practicable after the Expiration Date and will issue Exchange Notes
therefor as soon as practicable thereafter. For purposes of the Exchange Offer,
the Company shall be deemed to have accepted tendered Existing Notes when the
Company has given written or oral notice thereof to the Exchange Agent and
complied with the applicable provisions of the Registration Rights Agreement. If
any tendered Existing Notes are not exchanged pursuant to the Exchange Offer for
any reason, such unexchanged Existing Notes will be returned, without expense,
to the undersigned at the address shown above (or credited to the undersigned's
account at DTC designated above) or at a different address as may be indicated
under the box entitled "Special Delivery Instructions."
15. WITHDRAWAL. Tenders may be withdrawn only pursuant to the limited
withdrawal rights set forth in the Prospectus under the caption "The Exchange
Offer -- Withdrawal of Tenders." IMPORTANT: THIS LETTER OF TRANSMITTAL OR A
MANUALLY SIGNED FACSIMILE HEREOF (TOGETHER WITH THE EXISTING NOTES DELIVERED BY
BOOK-ENTRY TRANSFER OR IN ORIGINAL HARD COPY FORM) MUST BE RECEIVED BY THE
EXCHANGE AGENT, OR THE NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE
EXCHANGE AGENT, PRIOR TO THE EXPIRATION DATE.
- --------------------------------------------------------------------------------
PAYER'S NAME
- --------------------------------------------------------------------------------
SUBSTITUTE Part I - PLEASE PROVIDE YOUR TIN Part III - Social
IN THE BOX AT RIGHT BY SIGNING Security Number or
FORM W-9 AND DATING BELOW. Employer
DEPARTMENT OF Identification
THE TREASURY Number
INTERNAL
REVENUE --------------------
SERVICE (If awaiting TIN
write "Applied For")
PAYER'S REQUEST
FOR TAXPAYER'S
IDENTIFICATION NUMBER
("TIN") ------------------------------------------------------
Part II - For Payee Exempt Backup
Withholding see the enclosed Guidelines for
Certification of Taxpayer Identification
Number on Substitute Form W-9 and complete
as instructed therein.
- -------------------------------------------------------------------------------
Certification - Under penalties of perjury, I certify that:
(1) The Number shown on this form is my correct Taxpayer Identification Number
(or I am waiting for a number to be issued to me); and
(2) I am not subject to backup withholding either because I have not been
notified by the Internal Revenue Service (the "IRS") that I am subject to
backup withholding as a result of a failure to report all interest or
dividends, or the IRS has notified me that I am no longer subject to
withholding.
Name __________________________________________________________________________
Signature _________________________________________________ Date ______________
- -------------------------------------------------------------------------------
<PAGE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU WITH RESPECT TO THE EXCHANGE NOTES.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN
PART 3 OF THE SUBSTITUTE FORM W-9
- -------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I CERTIFY UNDER PENALTIES OF PERJURY THAT A TAXPAYER IDENTIFICATION NUMBER
HAS NOT BEEN ISSUED TO ME, AND EITHER (A) I HAVE MAILED OR DELIVERED AN
APPLICATION TO RECEIVE A TAXPAYER IDENTIFICATION NUMBER TO THE APPROPRIATE
INTERNAL REVENUE SERVICE CENTER OR SOCIAL SECURITY ADMINISTRATION OFFICE OR (B)
I INTEND TO MAIL OR DELIVER AN APPLICATION IN THE NEAR FUTURE. I UNDERSTAND
THAT, WITH CERTAIN LIMITED EXCEPTIONS FOR PAYMENTS MADE WITHIN 60 DAYS HEREOF,
31% OF ALL REPORTABLE PAYMENTS MADE TO ME BEFORE I PROVIDE A NUMBER THEREAFTER
WILL BE WITHHELD.
Signature _________________________________________________ Date ______________
- -------------------------------------------------------------------------------
EXHIBIT 99.2
SUPREME INTERNATIONAL CORPORATION
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF ALL EXISTING
12 1/4% SENIOR SUBORDINATED NOTES DUE 2006, SERIES A
IN EXCHANGE FOR
12 1/4% SENIOR SUBORDINATED NOTES DUE 2006, SERIES B
This form, or one substantially equivalent hereto, must be used by a holder
to accept the Exchange Offer of Supreme International Corporation, a Florida
corporation (the "Company"), and to tender 12 1/4% Senior Subordinated Notes due
2006, Series A (the "Existing Notes") to the Exchange Agent pursuant to the
guaranteed delivery procedures described in "The Exchange Offer--Guaranteed
Delivery Procedures" of the Company's Prospectus, dated _____________ ___, 1999
(the "Prospectus") and in Instruction 2 to the related Letter of Transmittal.
Any holder who wishes to tender Existing Notes pursuant to such guaranteed
delivery procedures must ensure that the Exchange Agent receives this Notice of
Guaranteed Delivery prior to the Expiration Date (as defined below) of the
Exchange Offer. Capitalized terms used but not defined herein have the meanings
ascribed to them in the Prospectus or the Letter of Transmittal.
- -------------------------------------------------------------------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
____________, 1999, UNLESS EXTENDED (THE "EXPIRATION DATE"). EXISTING NOTES
TENDERED IN THE EXCHANGE OFFER MAY BE WITHDRAWN AT ANY TIME PRIOR TO 5:00 P.M.,
NEW YORK CITY TIME, ON THE EXPIRATION DATE.
- -------------------------------------------------------------------------------
THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS:
STATE STREET BANK AND TRUST COMPANY
<TABLE>
<CAPTION>
BY MAIL: BY OVERNIGHT OR HAND DELIVERY BY MAIL OR HAND IN NEW YORK
-------- ----------------------------- ---------------------------
<S> <C> <C>
State Street Bank and Trust Company State Street Bank and Trust Company State Street Bank and Trust Company
Corporate Trust Department Corporate Trust Department Corporate Trust Department
P.O. Box 778 Two International Place 61 Broadway, 15th Floor
Boston, MA 02102-0078 4th Floor New York, NY 10006
Attn: Ralph Jones Boston, MA 02110
Attn: Ralph Jones
BY FACSIMILE: FOR INFORMATION TELEPHONE:
State Street Bank and Trust Company (617) 664-5249
Attn: Ralph Jones Attn: Ralph Jones
(617) 664-5290
To Confirm Receipt:
(617) 664-5249
</TABLE>
<PAGE>
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER
THAN TO THE ONE LISTED ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
THIS NOTICE OF GUARANTEED DELIVERY IS NOT TO BE USED GUARANTEE SIGNATURES.
IF A SIGNATURE ON A LETTER OF TRANSMITTAL IS REQUIRED TO BE GUARANTEED BY AN
"ELIGIBLE INSTITUTION" UNDER THE INSTRUCTIONS THERETO, SUCH SIGNATURE GUARANTEE
MUST APPEAR IN THE APPLICABLE SPACE IN THE BOX PROVIDED ON THE LETTER OF
TRANSMITTAL FOR GUARANTEE OF SIGNATURES.
Ladies and Gentlemen:
The undersigned hereby tenders to the Company, upon the terms and subject
to the conditions set forth in the Prospectus and the related Letter of
Transmittal, receipt of which is hereby acknowledged, the principal amount of
Existing Notes set forth below pursuant to the guaranteed delivery procedures
set forth in the Prospectus and in Instruction 2 of the Letter of Transmittal.
The undersigned hereby tenders the Existing Notes listed below:
- -------------------------------------------------------------------------------
Certificate Number(s) Aggregate
(if known) of Principal Amount Principal
Existing Notes or Represented Amount
Account Number at the DTC by Note(s) Tendered
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Name of Record Holder(s):____________________________________________________
Account No.(s) ______________________________________________________________
______________________________________________________________
Signature(s)_________________________________________________________________
Address:_____________________________________________________________________
_____________________________________________________________________
Area Code and Telephone Number(s):___________________________________________
Dated:_______________________________________________________________________
THIS NOTICE OF GUARANTEED DELIVERY MUST BE SIGNED BY THE HOLDER(S) EXACTLY
AS THEIR NAME(S) APPEAR ON CERTIFICATES FOR EXISTING NOTES OR ON A SECURITY
POSITION LISTING AS THE OWNER OF EXISTING NOTES, OR BY PERSON(S) AUTHORIZED TO
BECOME HOLDER(S) BY ENDORSEMENTS AND DOCUMENTS TRANSMITTED WITH THIS NOTICE OF
GUARANTEED DELIVERY. IF SIGNATURE IS BY A TRUSTEE, EXECUTOR, ADMINISTRATOR,
GUARDIAN, ATTORNEY-IN-FACT, OFFICER OR OTHER PERSON ACTING IN A FIDUCIARY OR
REPRESENTATIVE CAPACITY, SUCH PERSON MUST PROVIDE THE FOLLOWING INFORMATION.
PLEASE PRINT NAME(S) AND ADDRESS(ES)
<PAGE>
Name(s): _____________________________________________________________________
_____________________________________________________________________________
Capacity: ____________________________________________________________________
_____________________________________________________________________________
Address(es): _________________________________________________________________
_____________________________________________________________________________
- -------------------------------------------------------------------------------
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm which is a member firm of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.,
or is a commercial bank or trust company having an office or correspondent in
the United States, or is otherwise an "eligible guarantor institution" within
the meaning of Rule 17Ad-15 under the Securities Exchange Act of 1934,
guarantees deposit with the Exchange Agent of the Letter of Transmittal (or
facsimile thereof), together with the Existing Notes tendered hereby in proper
form for transfer (or confirmation of the book-entry transfer of such Existing
Notes into the Exchange Agent's account at the DTC described in the Prospectus
under the caption "The Exchange Offer--Guaranteed Delivery Procedures" and in
the Letter of Transmittal) and any other required documents, all by 5:00 p.m.,
New York City time, within five business days following the Expiration Date.
Name of Firm: ________________________________________________________________
Authorized Signature: ________________________________________________________
Name: ________________________________________________________________________
Address: _____________________________________________________________________
_____________________________________________________________________________
City State Zip Code
_____________________________________________________________________________
Area Code and Telephone Number
Date: _______________________________ , 1999
(PLEASE TYPE OR PRINT)
- -------------------------------------------------------------------------------
<PAGE>
DO NOT SEND EXISTING NOTES WITH THIS FORM. ACTUAL SURRENDER OF EXISTING
NOTES MUST BE MADE PURSUANT TO, AND BE ACCOMPANIED BY, A PROPERLY COMPLETED AND
DULY EXECUTED LETTER OF TRANSMITTAL AND ANY OTHER REQUIRED DOCUMENTS.
INSTRUCTIONS FOR NOTICE OF GUARANTEED DELIVERY
1. DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY. A properly completed and
duly executed copy of this Notice of Guaranteed Delivery and any other documents
required by this Notice of Guaranteed Delivery must be received by the Exchange
Agent at its address set forth herein prior to the Expiration Date. The method
of delivery of this Notice of Guaranteed Delivery and any other required
documents to the Exchange Agent is at the election and sole risk of the holder,
and the delivery will be deemed made only when actually received by the Exchange
Agent. If delivery is by mail, registered mail with return receipt requested,
properly insured, is recommended. As an alternative to delivery by mail, the
holders may wish to consider using an overnight or hand delivery service. In all
cases, sufficient time should be allowed to assure timely delivery. For a
description of the guaranteed delivery procedures, see Instruction 2 of the
Letter of Transmittal.
2. SIGNATURES ON THIS NOTICE OF GUARANTEED DELIVERY. If this Notice of
Guaranteed Delivery is signed by the registered holder(s) of the Existing Notes
referred to herein, the signature(s) must correspond with the name(s) written on
the face of the Existing Notes without alteration, enlargement, or any change
whatsoever. If this Notice of Guaranteed Delivery is signed by a participant of
the DTC whose name appears on a security position listing as the owner of the
Existing Notes, the signature must correspond with the name shown on the
security position listing as the owner of the Existing Notes.
If this Notice of Guaranteed Delivery is signed by a person other than the
registered holder(s) of any Existing Notes listed or a participant of the DTC,
this Notice of Guaranteed Delivery must be accompanied by appropriate bond
powers, signed as the name of the registered holder(s) appears on the Existing
Notes or signed as the name of the participant shown on the DTC's security
position listing.
If this Notice of Guaranteed Delivery is signed by a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation, or other
person acting in a fiduciary or representative capacity, such person should so
indicate when signing and submit with the Letter of Transmittal evidence
satisfactory to the Exchange Agent of such person's authority to so act.
3. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests for
assistance and requests for additional copies of the Prospectus may be directed
to the Exchange Agent at the address specified in the Prospectus. Holders may
also contact their broker, dealer, commercial bank, trust company, or other
nominee for assistance concerning the Exchange Offer.
