[LOGO FOR SCOTIA CAPITAL]
SCOTIA CAPITAL (USA) INC.
XXX XXXXXXX XXXXX, 000 XXXXXXXX, 00XX XXXXX, XXX XXXX, XXX XXXX 00000
December 10, 1999
The Warnaco Group, Inc.
00 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xx. Xxxx Xxxxxxxxxxx
Dear Sirs:
RE: SCOTIA CAPITAL (U.S.A.) INC. ("PARTY A")
THE WARNACO GROUP, INC. ("PARTY B")
EQUITY FORWARD PURCHASE TRANSACTION
The purpose of this facsimile is to set forth the terms and
conditions of the Transaction entered into between Party A and Party B on the
Trade Date specified below (the "Transaction"). This facsimile constitutes a
"Confirmation" as referred to in the ISDA Master Agreement specified below.
This Confirmation is subject to and incorporates the definitions
contained in the 1991 ISDA Definitions, as supplemented by the 1998 Supplement
(the "1991 ISDA Definitions"), and the 1996 ISDA Equity Derivatives Definitions
(the "Equity Definitions") (each as published by the International Swaps and
Derivatives Association, Inc. ("ISDA")) (collectively, the "ISDA Definitions").
This Confirmation is also subject to, and incorporates, the definitions
contained in Section 14 of the form of the 1992 ISDA Master Agreement
(Multicurrency - Cross Border) (the "Section 14 Definitions"), but without any
Schedule or other modification thereto, as published by ISDA (the "ISDA
Agreement"). In the event of any inconsistency between the ISDA Definitions, the
Section 14 Definitions and this Confirmation, this Confirmation will govern. In
the event of any inconsistency between the ISDA Definitions and the Section 14
Definitions, the Section 14 Definitions will govern. Until such time as an ISDA
Agreement is entered into between you and us, this Confirmation evidences a
complete and binding agreement between you and us as to the terms of the
Transaction to which this Confirmation relates. Upon execution by you and us of
an ISDA Agreement, with such ISDA Agreement incorporating such modifications as
you and we shall in good faith agree, this Confirmation will supplement, form
part of, and be subject to, such ISDA Agreement. All provisions contained in the
ISDA Agreement shall, upon its execution, govern this Confirmation except as
expressly modified below.
The following provisions in paragraphs 1 through 5 will govern the
Transaction evidenced hereby until such time as an ISDA Agreement is entered
into between you and us where upon such provisions shall be replaced by the
terms of the ISDA Agreement:
1
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1. MANNER OF PAYMENTS
Each party will make each payment specified in this Confirmation as being
payable by it, not later than the due date for value on that date in the place
specified below, in freely transferable funds and in the manner customary for
such payments in the required currency. If on any date amounts would otherwise
be payable in the same currency by each party to the other, then, on such date,
each party's obligation to make payment of any such amount will be automatically
satisfied and discharged and, if the aggregate amount that would otherwise have
been payable by one party exceeds the aggregate amount that would otherwise have
been payable by the other party, replaced by an obligation upon the party by
whom the larger aggregate amount would have been payable to pay to the other
party the excess of the larger aggregate amount over the smaller aggregate
amount.
2. DEFAULT
(a) If, at any time, an Event of Default has occurred and is then
continuing with respect to a party hereto (such party being hereinafter referred
to as the "Defaulting Party"), then the other party (hereinafter referred to as
the "Non-defaulting Party"), shall have the right to early terminate and
liquidate the Transaction evidenced hereby, together with all other Specified
Transactions entered into between Party A and Party B (collectively the
"Terminated Transactions") and determine a net amount due in respect of the
Terminated Transactions in accordance with the early termination payment
calculation provisions of Section 6(e)(i)(3) of the ISDA Agreement based on a
payment measure of Market Quotation and a payment method of Second Method. For
purposes of giving effect to the foregoing, the Termination Currency shall be
United States Dollars. For purposes hereof, "Event of Default" means, in the
context of Party A, (i) the failure to make, when due, any payment required of
it under this Confirmation and such failure is not remedied within three
Business Days following written notice of such failure, or (ii) the occurrence
with respect to Party A of any of the Bankruptcy events set out in Section
5(a)(vii) of the ISDA Agreement. In the context of Party B, "Event of Default"
means (i) the failure to make, when due, any payment required of it under this
Confirmation and such failure is not remedied within three Business Days
following written notice of such failure, (ii) the occurrence with respect to
Party B of any of the Bankruptcy events set out in Section 5(a)(vii) of the ISDA
Agreement, (iii) the occurrence of an "Event of Default" as such term is defined
in a Credit Agreement, dated as of November 19, 1999, made by and among Warnaco
Inc., The Warnaco Group, Inc., certain banks and financial institutions, as the
"Initial Lenders", The Bank of Nova Scotia and Xxxxxxx Xxxxx Xxxxxx, Inc., as
"Co-Lead Arrangers" and "Co-Book Managers", Citibank, N.A., as "Syndication
Agent", Societe Generale and Commerzbank AG, as "Co-Documentation Agents" and
The Bank of Nova Scotia as "Administrative Agent", as amended and supplemented
from time to time (the "Credit Agreement"), (iv) Party B at any time during the
Term hereof effects with one or more counterparties (other than Party A),
forward equity purchase transactions pertaining to the purchase of Shares (as
defined below) on a forward basis having an aggregate forward purchase price
which, when combined with the product of the Number of Shares multiplied by the
Forward Price as on the Termination Date (each as defined below), exceeds USD
150,000,000 (the "Forward Price Limit"); provided, however, that an Event of
Default shall not be constituted pursuant to this Section 2(a)(iv) unless Party
B's breach of the Forward Price Limit is continuing as of the tenth Business Day
following the date on which such breach occurred; (v) the joint and several
guarantee, dated December 10, 1999, in the form appended hereto as Exhibit A
(the "Guarantee") made by the parties set out in the signature page thereof (the
"Guarantors") (x) fails or ceases to be in full force and effect prior to the
satisfaction by Party B of all of its obligations to Party A hereunder; or (z)
any of the Guarantors disaffirms, repudiates or rejects, in whole or in part, or
challenges the validity of the
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Guarantee; (vi) the occurrence of a default, event of default or other similar
condition or event (however described) in respect of Party B under any forward
equity purchase transaction pertaining to Shares which may now or hereafter be
entered into between Party B and any third party and such third party has
exercised any rights under such forward equity purchase transaction, which are
predicated upon the occurrence of such default, event of default or similar
condition or event, to terminate such transaction prior to its scheduled
termination date. Party B hereby covenants and agrees to notify Party A
immediately upon the occurrence of any such event and the exercise of such
termination rights.
(b) The Non-defaulting Party may exercise its right to early
termination and liquidate the Terminated Transactions by written notice to the
Defaulting Party, which notice shall set forth the amount of the termination
payment derived by the Non-defaulting Party as set forth above; provided that,
in the event the Defaulting Party becomes subject to a Bankruptcy in the nature
of any one of the events specified in Section 5(a)(vii) (1), (3), (4), (5), (6)
or, to the extent analogous thereto, (8), of the ISDA Agreement and any court,
tribunal or regulatory authority with competent jurisdiction acting pursuant to
any bankruptcy or insolvency law or other similar law affecting the Defaulting
Party makes an order which has or purports to have the effect of prohibiting the
Non-defaulting Party from terminating the Terminated Transactions at any time
after the occurrence of any such events, then the Terminated Transactions shall
be deemed to have been terminated immediately upon the occurrence of any of the
events specified in Section 5(a)(vii) (1), (3), (5), (6) or, to the extent
analogous thereto, (8) and as of the time immediately preceding the institution
of the relevant proceeding or the presentation of the relevant petition in
respect of Section 5(a)(vii) (4) or, to the extent analogous thereto, (8).
(c) In the event the termination payment derived in accordance with
the foregoing represents an amount owing by the Non-defaulting Party to the
Defaulting Party, the Non-defaulting Party shall have the right to set off such
termination payment against any amounts payable (whether at such time or in the
future or upon the occurrence of a contingency) by the Defaulting Party to the
Non-Defaulting Party (irrespective of the currency or the place of payment of
the obligation) under any other agreement between the Defaulting Party and the
Non-Defaulting Party (the "Other Agreement Amount"). For this purpose, the
termination payment or the Other Agreement Amount may be converted into the
currency in which the other is denominated by the Non-defaulting Party acting in
a commercially reasonable manner. If all or part of the Other Agreement Amount
is not then due, such Other Agreement Amount, or part thereof, may be
present-valued by the Non-defaulting Party acting in a commercially reasonable
manner. If all or part of the Other Agreement Amount is unascertained, the
Non-defaulting Party may in good faith estimate such amount and set-off in
respect of the estimate subject to accounting to the Defaulting Party when the
obligation is ascertained.
3. BASIC REPRESENTATIONS
Each of the parties hereto makes to the other each of the "Basic
Representations" contained in Section 3(a) and (c) of the ISDA Agreement.
4. TRANSFERABILITY
Neither this Confirmation nor any interest or obligation in or under
this Confirmation may be transferred (whether by way of security or otherwise)
by either party without the prior written consent of the other party and any
purported transfer in violation hereof shall be void.
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5. JURISDICTION
The Confirmation will be governed and construed in accordance with
the laws of the State of New York, without reference to the choice of law
doctrine. With respect to any suit, action or proceedings relating to this
Confirmation ("Proceedings"), each party irrevocably:
(i) submits to non-exclusive jurisdiction of the courts of the
State of New York; and
(ii) waives any objection which it may have at any time to the
laying of venue of any Proceedings brought in any such court,
waives any claim that such Proceedings have been brought in an
inconvenient forum and further waives the right to object,
with respect to such Proceedings, that such court does not
have any jurisdiction over such party. Nothing in this
Confirmation precludes either party from bringing Proceedings
in any other jurisdiction nor will the bringing of Proceedings
in any one or more jurisdictions preclude the bringing of
Proceedings in any other jurisdiction.
6. TERMS
The terms of the particular Transaction to which this Confirmation
relates are as follows:
I. General Terms
Trade Date: December 10, 1999
Effective Date: December 10, 1999
Termination Date: February 28, 2002
Optional Termination Date: Any Business Day during the Term hereof after
the Accumulation Period End Date, as selected
by Party B in accordance with the Notice
provision of the Settlement Terms set out
below, provided that Party B may designate no
more than four Optional Termination Dates per
Calculation Period; provided further, however,
that in the event Party B designates an
Optional Termination Date in respect of which
Party B has elected settlement in accordance
with the Net Share Settlement or Cash
Settlement provisions set out below, Party B
shall not designate any further Optional
Termination Dates in respect of which Party B
intends to elect settlement by way of Net Share
Settlement or Cash Settlement until such time
as the settlement process specified below
(including the Make-whole provisions) in
respect of the initial Optional Termination
Date has been completed.
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Forward Purchase Seller: Party A
Forward Purchase Buyer: Party B
Exchange: New York Stock Exchange
Shares: The Warnaco Group, Inc. common shares, par
value $0.01 (Exchange designation "WAC"), CUSIP
No. 934390105, quoted in USD on the Exchange.
Accumulation Period: The period commencing on and including the
Effective Date to and including the earlier of
(x) the date by which Party A, or any U.S.
subsidiary of The Bank of Nova Scotia acquiring
Shares in respect of this Transaction (the
"Hedge Subsidiary"), has, by means of one or
more purchase transactions effected on the
Exchange through such period, either (i)
accumulated 2,600,000 Shares, or (ii) incurred
an aggregate purchase price equal to USD
47,000,000; or (y) the third Business Day
following the date on which Party B's notice to
Party A, given in accordance with Section 12 of
the ISDA Agreement, requesting the termination
of the Accumulation Period becomes effective in
accordance with Section 12 (the date on which
such accumulation is achieved, such aggregate
purchase price is incurred, or the third
Business Day following the effective date of
such notice (whichever is sooner) being the
"Accumulation Period End Date").
Notwithstanding the foregoing, Party B shall
have no right to terminate the Accumulation
Period until Party A has accumulated at least
1,000,000 Shares.
Party A shall provide to Party B, no sooner
than the third and no later than the fifth
Business Day following the trade date of each
purchase transaction, notice setting out the
purchase transaction effected by Party A or the
Hedge Subsidiary on the relevant trade date.
Party A shall notify Party B of Party A's
calculation of the Initial Price on or before
the third Business Day following the
Accumulation Period End Date.
Number of Shares: In respect of any Business Day within the Term
hereof, the aggregate number of Shares yielded
pursuant to Party A's or the Hedge Subsidiary's
purchase program as referenced in the
"Accumulation Period" provision above, less the
aggregate of the Relevant Share Numbers for all
previous partial settlements (as contemplated
by the Settlement Terms) effected prior to the
relevant date of determination.
Business Days: London and New York
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Period End Dates: The Period End Dates shall be the last Business
Day of February, May, August and November,
beginning after the Accumulation Period End
Date, up to and including the Termination Date
or the Optional Termination Date.
Overnight Rate: "Fed Funds O/N" ASK (offer) rate as quoted on
Telerate Page 4833 as of 16:10 (New York time)
on the relevant day of determination.
Spread: Plus 137.5 basis points (1.375%); provided,
however, that if at any time during the Term
hereof Party B enters into a transaction with
any other counterparties having terms which are
substantially similar to the terms hereof, the
Spread applicable to this Transaction shall be
the higher of (i) the Spread set out above, or
(ii) the Spread provided for in such similar
transaction.
Daily Forward Amount: For each day of the Accumulation Period, the
Calculation Agent shall determine an amount
(the "Daily Forward Amount") in accordance with
the following formula:
[Daily Forward Amount i-1+ (Number of Settled
Shares i x WAP i)] x [1 + (Accumulation Period
Floating Rate i / 360)]
where, "Daily Forward Amount i-1" means the
Daily Forward Amount determined in respect of
the day preceding the relevant day of
determination, "Number of Settled Shares i"
means the number of Shares settled by Party A
or the Hedge Subsidiary on the relevant date of
determination; "WAP i" means the weighted
average of the respective purchase prices per
Share, each in USD, including a commission of
USD 0.045 per Share, of all Share purchase
transactions settled by Party A or the Hedge
Subsidiary on the relevant date of
determination, which weighted average shall be
determined by multiplying each purchase price
by the number of Shares to which such purchase
price is applicable, aggregating the products
thereof and dividing such sum by the total
number of purchased Shares; and "Accumulation
Period Floating Ratei" means the Overnight Rate
in effect as of the relevant date of
determination, plus the Spread noted above. For
purposes of giving effect to the foregoing,
Overnight Rate for any day that is a not
Business Day shall be the Overnight Rate in
effect on the first Business Day preceding such
day.
Initial Price: The Initial Price shall be the Daily Forward
Amount determined in respect of the
Accumulation Period End Date divided by the
Number of Shares.
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Forward Period: The period commencing on, but excluding, the
Accumulation Period End Date, to but excluding
the Termination Date.
Forward Rate: "Zero Coupon USD Swap Rate" quoted on the day
which is two London Banking Days prior to the
first Business Day of the Forward Period (the
"Determination Date"), for a Designated Maturity
equal to the actual number of days in Forward
Period, plus Spread.
Zero Coupon
USD Swap Rate: The fixed rate of interest (a) that would be
paid by the Fixed Rate Payer on a USD interest
rate swap in which (i) the Floating Rate Payer
makes quarterly payments, in arrears, on the
Period End Dates at the 3-month USD-LIBOR-BBA
rate (appropriately interpolated in the event
the first Calculation Period following the
Accumulation Period is less than three months);
(ii) the Fixed Rate Payer's payments are
compounded quarterly and paid on the Termination
Date only; (iii) the Day Count Fraction for both
Fixed and Floating Rate Payers is Actual / 360
and (b) which would impart to same swap a
mark-to-market value of zero at inception.
Forward Price: The Forward Price on each Optional Termination
Date or the Termination Date, shall be
calculated as follows:
[1 + (Forward Rate x Day Count / 360)] x
Initial Price
where "Day Count" is the number of days in the
period commencing on and including the
Accumulation Period End Date to but excluding
the Optional Termination Date or Termination
Date, as applicable.
II. Settlement Terms
Settlement: This Transaction may be settled, in whole or in
part, on any Optional Termination Date, and, in
the event of a partial settlement, the
unsettled portion shall remain, during the Term
hereof, a Transaction for purposes of the ISDA
Agreement. Otherwise, this Transaction shall
terminate, and the each party's obligations in
respect thereof shall be settled as provided
for herein following the occurrence of the
Termination Date. Settlement shall be effected
in accordance with the settlement mechanism
selected by Party B in its notice given in
accordance with the Notice provision set out
below. All partial settlements shall be
effected in a minimum amount of 100,000 Shares
and additional integral multiples of 1000
Shares.
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Relevant Share Number: The Number of Shares or, in the context of any
partial settlement to be effected on any
Optional Termination Date, the number of Shares
specified or deemed specified by Party B in its
notice given pursuant to the Notice provision
set out below.
Physical Settlement: Where Physical Settlement is applicable, on the
Optional Termination Date or Termination Date,
Party A or its Hedge Subsidiary shall deliver
to Party B Shares equal to the Relevant Share
Number, and Party B shall pay to Party A an
amount, in USD, equal to the product of the
Forward Price, as determined on the Optional
Termination Date or the Termination Date, as
applicable, multiplied by the Relevant Share
Number (the "Settlement Price"). Any delivery
made pursuant to this provision shall be on a
delivery versus payment basis and the due date
of such delivery shall be subject to adjustment
in accordance with Section 6.2 of the Equity
Definitions in the event of the occurrence of a
Settlement Disruption Event.
Disposition Period: Where Cash Settlement or Net Share Settlement
is elected or otherwise applies, on the
Optional Termination Date or Termination Date
(as applicable) (the "Commencement Date"),
Party A or the Hedge Subsidiary shall commence
selling the Shares acquired by Party A or the
Hedge Subsidiary during the Accumulation
Period. The following definitions will apply to
this sale program. (I) "Final Trading Date":
the earlier of (1) the date on which Party A,
or the Hedge Subsidiary, has effected
transactions on the Exchange by which it has
completed the sale of Shares equal to the
Relevant Share Number, (2) the 90th calendar
day following the Commencement Date, and, in
the case of Net Share Settlement only, (3) the
date on which Party A, or the Hedge Subsidiary,
has effected transactions on the exchange such
that the Daily Settlement Amount (as defined
below) is an amount less than or equal to zero
(a "Zero Settlement Amount"); provided,
however, that Party A and the Hedge Subsidiary
shall be deemed not to have effected
transactions such that the absolute value of a
negative Daily Settlement Amount is equal to or
greater than the closing price for one Exchange
Board Lot (100) of Shares, as reported by the
Exchange in respect of the Final Trading Date.
(II) "Final Settlement Date": the day on which
any sale transaction effected on the Exchange
on the Final Trading Date would settle. (III)
"Disposition Settlement Day": each day of the
period commencing on, and including, the
Commencement Date to, and including, the Final
Settlement Date. (IV) "Disposition Trading
Day": in respect of any Disposition Settlement
Day, the day on which any sale transaction
effected on the Exchange that settles on such
Disposition Settlement Day is effected. (V)
"Disposition
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Period": the period beginning with the
Commencement Day, and continuing up to and
including the Final Settlement Date.
Notwithstanding the foregoing, the Disposition
Period shall not be less than 15 days and Party
A shall, in effecting sales, observe the volume
constraints prescribed by Rule 10b-18 under the
Securities Exchange Act of 1934 as if those
constraints applied to sales of securities.
Daily Settlement Amount: Where Cash Settlement or Net Share Settlement
is applicable, for each day beginning with the
Commencement Day, Party A shall determine an
amount (the "Daily Settlement Amount"), in USD,
in accordance with the following formulae:
SA 0 = Forward Price x Relevant Share Number
SA i = SA i-1 x (1+ ON i-1/360) - Number of
Settled Shares i x VWAP i
where "Number of Settled Shares i" means the
number of Shares the sale of which is settled
by Party A or its Hedge Subsidiary, on the
relevant day of determination, "VWAP i" means
the modified volume-weighted average per-Share
price as determined by means of the Bloomberg
service, for trading in the Shares on the
Disposition Trading Day whose corresponding
Disposition Settlement Day is the relevant day
of determination, and adjusted by Party A to
(i) include a commissions of USD 0.045 per
Share (ii) exclude the first trade in the
Shares effected on the Exchange on such
Disposition Trading Day; and (iii) exclude all
trades in Shares effected on the Exchange on
such Disposition Trading Day within 60 minutes
of the close of trading on such day, "SA o"
means the Daily Settlement Amount determined in
respect of the Commencement Date, Forward Price
is as determined on the Optional Termination
Date or the Termination Date, as applicable,
"SA i" means the Daily Settlement Amount
determined in respect of the relevant day of
determination, "SA i-1" means the Daily
Settlement Amount determined for the day
preceding the relevant day of determination,
and ON i-1 means a rate of interest equal to
the Overnight Rate in effect as of the day
preceding the relevant day of determination,
plus the Spread.
The Daily Settlement Amount determined in
respect of the Final Settlement Date shall be
the Final Settlement Amount. For purposes of
giving effect to the foregoing, "Number of
Settled Shares i" and "VWAP i" shall be deemed
to be zero on any day in the Disposition Period
which is not an Exchange Business Day.
Notice of Sale Transactions: Party A shall provide to Party B, on or before
the first Business Day following the trade date
of each sale transaction, notice setting
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out the sale transactions effected by Party A
or the Hedge Subsidiary on the relevant trade
date and Party A's calculation of the Daily
Settlement Amount in respect of such trade
date.
Cash Settlement: Where Cash Settlement is applicable, if the
Final Settlement Amount as determined above is
negative, Party A shall pay to Party B the
absolute value of such amount on the Final
Settlement Date. If such amount is positive,
Party B shall pay to Party A such amount on the
later of (i) the Final Settlement Date or (ii)
the first Business Day following the date on
which Party A's notice to Party B that such
Final Settlement Amount is owing by Party B
becomes effective in accordance with Section 12
of the ISDA Agreement.
Net Share Settlement: Where Net Share Settlement is applicable, if
the Final Settlement Amount is a Zero
Settlement Amount, then Party A or its Hedge
Subsidiary shall deliver to Party B (1) Shares
equal in number to the number of unsold Hedge
Shares, and (2) the absolute value of the Final
Settlement Amount, in USD, on or before the Net
Share Settlement Date. If the Final Settlement
Amount is positive, Party A shall determine a
number of Shares (the "Initial Settlement
Number") in accordance with the following
formula:
Final Settlement Amount / Closing Price
where "Closing Price" is the closing price of
the Shares as reported by the Exchange on the
Final Settlement Date, and Party B shall, at
its option, either (i) deliver to Party A
Shares equal in number to such Initial
Settlement Number (such Shares being the
"Settlement Shares") or (ii) pay to Party A an
amount in USD equal to the Final Settlement
Amount, on or before the Net Share Settlement
Date.
If, pursuant to the preceding paragraph, Party
B has elected to deliver Settlement Shares, on
the Net Share Settlement Date, Party A or its
hedge subsidiary shall commence selling the
Settlement Shares and shall continue
calculating the Daily Settlement Amount as
specified above. On each day until the earlier
of 90 calendar days following the Net Share
Settlement Date or the day on which the Daily
Settlement Amount is a Zero Settlement Amount,
(such day being the "Make-Whole Period End
Date" and the period commencing on the Net
Share Settlement Date up to such day being the
"Make-Whole Period"), Party A shall calculate
(i) an amount (the "Daily Make-Whole Amount")
according to the formula:
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Daily Settlement Amount - Closing Price
x Remaining Number of Shares
and (ii) a number of shares (the "Daily
Make-Whole Number") according to the formula:
Daily Make-Whole Amount / Closing Price
where "Closing Price" is the closing price of
the Shares as reported by the Exchange on the
day of determination, and Remaining Number of
Settlement Shares is (i) the Initial Settlement
Number; (ii) minus the aggregate of all Shares
sold, on a settlement basis, pursuant to this
provision during the Make-Whole Period, (iii)
plus the aggregate of all Make-Whole Shares, as
defined below, delivered to Party A pursuant to
this provision (iv) minus the aggregate of all
Shares delivered by Party A to Party B as
required below in the event of a negative Daily
Make-Whole Amount. If, on (a) the tenth
Business Day following the Net Share Settlement
Date and any following tenth Business Day
during the Make-Whole Period, the Daily
Make-Whole Amount is greater than 1,000,000, or
(b) on any Business Day during the Make-Whole
Period the Daily Make-Whole Amount is greater
than 4,000,000, Party B shall either (i)
deliver to Party A, Shares equal in number to
the Daily Make-Whole Number (such Shares being
the "Make-Whole Shares") on or before the first
Business Day following the relevant day of
demand; or, at the option of Party B, (ii) pay
to Party A an amount in USD equal to the Daily
Make-Whole Amount to be paid on or before the
first Business Day following such day of
demand. In the event that Party B elects option
(ii), then the Daily Settlement Amount shall be
adjusted downwards by the Daily Make-Whole
Amount on the day Party A receives the full
payment. If (x) on any tenth Business Day
following the Net Share Settlement Date and any
following tenth Business Day during the
Make-Whole Period, the Daily Make-Whole Amount
is negative and its absolute value is greater
than 1,000,000, or (y) on any Business Day
during the Make-Whole Period, the Daily
Make-Whole Amount is negative and its absolute
value is greater than 4,000,000, Party A shall,
on or before the following Business Day,
deliver to Party B Shares equal in the number
to the absolute value of the Daily Make-Whole
Number.
On the first Business Day following the
Make-Whole Period End Date (the "Final
Make-Whole Settlement Day"), Party A will
deliver to Party B, shares equal in number to
the Remaining Number of Settlement Shares. If
the Daily Settlement Amount, on the Make-Whole
Period End Date (being the "Final Make-Whole
12
Amount") is positive, then Party B shall pay to
Party A on the Final Make-Whole Settlement Day
an amount in USD equal to the Final Make-Whole
Amount. If the Final Make-Whole Amount is
negative, then Party A shall pay to Party B an
amount in USD equal to the absolute value of
the Final Make-Whole Amount.
Break Funding Amount: On any Optional Termination Date, Party A shall
calculate the Break Funding Amount. If the
Break Funding Amount is positive, then, in
addition to any other amount then payable by
Party B, Party B shall also pay to Party A, on
such date, the Break Funding Amount. If the
Break Funding Amount is negative, then Party A
shall pay to Party B, on such date, the
absolute value of the Break Funding Amount. For
purposes, hereof, "Break Funding Amount" means
the amount, determined by Party A in a
commercially reasonable manner, equal to (1)
the mark-to-market value to Party A as of the
Optional Termination Date, of a swap
incorporating the terms set out in the
definition of Zero Coupon USD Swap Rate as if
(i) Party A were the Floating Rate Payer, (ii)
the Notional Amount were equal to the Initial
Price multiplied by the Relevant Share Number;
(iii) the original term of such swap were equal
to the Term hereof, and (iv) no amounts then
due under such swap remain unpaid, minus (2) an
amount equal to the Relevant Share Number
multiplied by the difference between the Zero
Spread Forward Price calculated as of the
relevant Optional Termination Date and the
Initial Price, where "Zero Spread Forward Price
" is calculated in the same manner as the
Forward Price but for a Spread of 0%.
Net Share Settlement Date: The second Clearance System Business Day
following the Final Settlement Date, subject to
adjustment in accordance with Section 6.2 of
the Equity Definitions in the event of the
occurrence of a Settlement Disruption Event.
Notice: In the event Party B intends to effect a
settlement on any Optional Termination Date,
Party B shall provide Party A with prior
written notice of its intention to exercise its
rights to settle this Transaction on such
Optional Termination Date and such notice must
become effective in accordance with Section 12
of the ISDA Agreement on or before the 3rd day
preceding the Optional Termination Date on
which Party B intends to effect a settlement.
If Party B's notice does not become effective
on or before such 3rd day, Party B shall be
deemed to have elected to effect a settlement
on the next following Optional Termination
Date; provided, however, that no such notice
may be given (i) on any day during the
Accumulation Period; or (ii) following the
occurrence of an Event of Default with respect
to Party B. Other than in the context of any
partial
13
settlement, Party B shall indicate in such
notice whether settlement will be by Physical
Settlement, Cash Settlement or Net Share
Settlement. In the context of any partial
settlement, Party B shall specify the number of
Shares in respect of which settlement will be
effected. If such notice does not so specify
the manner of settlement, Physical Settlement
shall apply and if such notice does not specify
the number of Shares in respect of which
settlement will be effected, Party B shall be
deemed to have elected to effect settlement in
respect of the full Number of Shares then in
effect. If Party B wishes, in the context of
the Termination Date, to effect settlement
otherwise than by Physical Settlement, Party B
shall so notify Party A and such notice must
become effective in accordance with Section 12
of the ISDA Agreement on or before the 3rd day
prior to the Termination Date failing which
Party B shall be deemed to have elected to
utilize Physical Settlement.
Inability to Sell/Purchase
Shares: If, in the context of Net Share Settlement,
Cash Settlement, or any other provision hereof
which, in order to give effect thereto,
requires Party A to sell Shares (other than to
Party B), (1) Party A is unable to effect a
sale by any reasonably economic, viable or
practicable means, including a private
placement transaction, of the requisite number
of Shares on or before the Final Trading Day
for purposes of determining the Final
Settlement Amount for any reason including,
without limitation, because such Shares have a
prospectus delivery requirement and Party B is
unable to provide Party A with a current
prospectus, or (2) the Disposition Period
otherwise expires prior to Party A being able
to effect the necessary sales, then, Party B
shall be deemed to have elected Physical
Settlement with respect to the unsold portion
of such requisite number of Shares, and Party B
shall, within one Business Day of the date it
is advised by Party A that a sale of all such
Shares was not effected, repurchase the unsold
Shares, for USD, in an amount per Share that,
when combined with all amounts received by
Party A for all effected sales of Shares,
results in Party A receiving an amount equal to
the amount Party A would have received had
Physical Settlement been elected. If, in the
context of Physical Settlement or the
application of the Registration of Shares
provision or any other provision of this
Confirmation which, in order to give effect
thereto, requires delivery of Shares to Party B
by Party A, Party B is unable, due to the
application of applicable law, at the relevant
time to take delivery of such Shares, a
Termination Event shall be deemed to have
occurred for purposes of the ISDA Agreement and
in respect of which (i) Party B shall be the
Affected Party, (ii) this Transaction shall be
the only Affected Transaction, (iii) and the
payment measure shall be Loss (as such terms
are defined in the ISDA Agreement).
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Good Delivery: Any party required to deliver Shares hereunder
(the Delivering Party") shall transfer good
title to such Shares, and such Shares shall be
freely transferable (together with any
prospectus required by applicable law) and free
and clear of any liens, charges, claims and
encumbrances. Delivery shall be effected by
book-entry transfer of the Shares to an account
with The Depository Trust Company (the
"Clearance System") in the name of the
recipient (or, where escrow settlement is
applicable, the name of the escrow agent) as is
designated by the recipient.
III. Dividends
If on any day during the Term hereof a cash dividend paid by Party B in
respect of the Shares the record date of which precedes the Termination Date, is
received by Party A or the Hedge Subsidiary, Party A or the Hedge Subsidiary
shall pay to Party B an amount equal to such dividend on or before the second
Business Day immediately following the date of receipt of such dividend by Party
A or the Hedge Subsidiary (such second Business Day being the "Dividend Payment
Date"). Upon the request by Party B (which must be recieved by Party A on or
before 10:00 a.m. (New York time) on the relevant Dividend Payment Date), Party
A shall deliver to Party B the equivalent of such amount in Shares (less a
commission of not more than USD 0.045 per Share) which equivalent shall be based
upon the price at which Party A is then able (acting reasonably) to purchase
Shares plus an amount, in USD, equal to any residual cash in the event that the
foregoing amount cannot be fully converted into whole Shares.
IV. Decline in Share Price/Decline in Credit Rating/Termination of Credit
Agreement
In the event that on any Business Day during the Term of this
Transaction (other than the Accumulation Period) or on any of the five Business
Days preceding such Business Day (i) the closing price per Share as quoted by
the Exchange on such day is USD $7.50 or less, (ii) Standard & Poor's Rating
Service, a division of XxXxxx-Xxxx Inc., reports a rating below BBB-, or no
longer assigns a rating, or Xxxxx'x Investor Services Inc. reports a rating
below Baa3, or no longer assigns a rating, with respect to Party B's Long-Term
Debt, or (iii) Party B prepays all amounts outstanding under, and terminates,
the Credit Agreement, or provides notice of an intention to prepay all amounts
outstanding under, and terminate, the Credit Agreement or all commitments of the
Lenders thereunder have terminated or expired, Party A may upon notice to Party
B, given in accordance with Section 12 of the ISDA Agreement, and provided an
Event of Default or Termination Event has not occurred with respect to Party A
or is then continuing (and which, in the context of a Termination Event, renders
this Transaction an Affected Transaction) and provided an Early Termination Date
has not been designated in respect of this Transaction, elect to terminate this
Transaction in its entirety. Party B shall, on or before the first Business Day
following the date on which Party A's termination notice becomes effective,
notify Party A of the manner in which this Transaction shall be settled (and,
failing such notification, Party B shall be deemed to have elected Cash
Settlement). If Party B elects Cash Settlement or Net Share Settlement, for
purposes of giving effect to such provisions, the commencement of the
Disposition Period shall be the first Exchange Business Day following the date
on which Party B's election notice became effective. If Party B elects Physical
Settlement, settlement shall be effected on the third Business Day following the
Election Date in accordance with, and subject to, the
15
Physical Settlement provision set out above. Party B shall provide written
notice to Party A of the occurrence of event (ii) above and, in the event Party
A is, at the relevant time, no longer Administration Agent under the Credit
Agreement, event (iii) above and, for purposes of applying the five-Business Day
period referred to above, the date on which Party B's notice becomes effective
in accordance with Section 12 of the ISDA Agreement shall be deemed to be the
Business Day on which the relevant event occurred; provided, however, that the
failure of Party B to so notify Party A of the occurrence of the relevant event
shall in no way preclude Party A from invoking termination pursuant to this
provision in the event Party A becomes aware of such occurrence by independent
means.
The parties hereto agree that the occurrence of the events (i), (ii) or
(iii) referred to in the preceding paragraph shall in no way be construed as the
occurrence of an Event of Default as contemplated by the ISDA Agreement.
For purposes hereof, "Long-Term Debt" means the then current senior
unsecured, non-credit-enhanced, long-term indebtedness issued by Party B.
V. Adjustments
For purposes of Article 9 of the Equity Definitions, any reference to
the term "Share Swap Transaction" shall be deemed to mean "Forward Purchase
Transaction"; provided, however, that "Potential Adjustment Event" shall exclude
the declaration or payment of any cash dividends in respect of the Shares.
Method of Adjustment: Calculation Agent Adjustment
Calculation Agent: Party A
VI. Extraordinary Events
Consequences of Merger Events:
(a) Share-for-Share: Alternative Obligation
(b) Share-for-Other: Cancellation and Payment
(c) Share-for-Combined: Alternative Obligation
Nationalization or Insolvency: Cancellation and Payment
VII. Regulatory Event
If during the Term of this Transaction, The Warnaco Group, Inc. effects any
action, including any action with respect to its capital structure, the result
of which is that Party A, or the Hedge Subsidiary, then owns more of any class
of outstanding voting shares of Party B pursuant to this transaction than is
permitted by the Bank Holding Company Act of 1956, as amended, or other federal
legislation (the "Regulatory Limit"), then, Party A shall so notify Party B and
Party B shall be deemed to have elected to partially settle this Transaction but
only to the extent to which the Number of Shares exceeds the Regulatory Limit
(which excess shall be the Relevant Share Number for purposes of the Settlement
terms set out above). If Party B elects Physical Settlement, the relevant
portion of this Transaction shall be settled on the first Business Day following
the Election Date subject to adjustment in accordance with Section 6.2 of the
Equity Definitions in the event of
16
the occurrence of a Settlement Disruption Event (such Business Day being the
Physical Settlement Date). Party B shall specify the mode of settlement on or
before the first Business Day (the "Election Date") following the date on which
Party A's notice to Party B became effective failing which Party B shall be
deemed to have elected Physical Settlement. If Party B elects Net Share
Settlement or Cash-Settlement, for purposes of giving effect thereto, the number
of Shares to be sold shall be the Relevant Share Number and the Commencement
Date of the Disposition Period shall be deemed to be the first Exchange Business
Day following the Election Date. In addition to any other amount then payable by
Party B, Party B shall also pay to Party A, on (i) the Physical Settlement Date,
in the context of a Physical Settlement election; or (ii) on the Net Share
Settlement Date, in the context of a Net Share or Cash Settlement election, the
Break Funding Amount as defined above except that the reference therein to
"Optional Termination Date" shall mean the Election Date.
VIII. Registration of Shares
Notwithstanding any other provision hereof (including, without limitation, any
election of Net Share Settlement or Cash Settlement by Party B but excluding any
election by Party B of Net Share Settlement or Cash Settlement under "Decline in
Share Price/Decline in Credit Rating" above), unless both parties hereto
conclude that a public sale of the Shares acquired by it or the Hedge Subsidiary
in connection with this Transaction does not require registration under the
Securities Act of 1933 (the "Securities Act"), which conclusion shall be
communicated by each party to the other, by means of any of the methods
specified in Section 12 of the ISDA Agreement, as promptly as is reasonable
practicable, and in any event by the first Business Day following a Termination
Date or Optional Termination Date, as applicable, Physical Settlement shall
apply with respect to such Termination Date or Optional Termination Date unless
the following conditions have been satisfied: (i) on the Optional Termination
Date or Termination Date (or, in the context of a Regulatory Event, the Election
Date), as the case may be, a registration statement (a "Registration Statement")
naming as selling shareholders Party A and the Hedge Subsidiary and covering the
public resale of all Shares held by Party A or the Hedge Subsidiary to hedge
this Transaction and all Shares deliverable by Party B to Party A pursuant to
the Net Share Settlement provisions hereof (collectively, the "Registrable
Shares") shall have been filed with, and declared effective by, the Securities
and Exchange Commission under the Securities Act, and no stop order shall be in
effect with respect to such Registration Statement; (ii) a printed prospectus
relating to the Registrable Shares (including any prospectus supplement thereto
and amendments thereof, a "Prospectus") shall have been delivered to Party A and
the Hedge Subsidiary in such quantities as Party A shall have requested no later
than the Optional Termination Date, Termination Date or Election Date; (iii) the
Registration Statement and the Prospectus shall be in form and substance
reasonably satisfactory to Party A; (iv) no later than the Exchange Business Day
before the Optional Termination Date, Termination Date or Election Date, Party A
and Party B shall have entered into an agreement (a "Transfer Agreement") in
connection with the public resale of the Registrable Shares by Party A and the
Hedge Subsidiary substantially similar to underwriting agreements customary for
underwritten offerings of equity securities, in form and substance reasonably
satisfactory to Party A and Party B, providing for (without limitation):
indemnification of, and continuation in connection with the liability of, Party
A and the Hedge Subsidiary, the delivery of customary opinions of counsel and
accountants "comfort letters", the continuous effectiveness of the Registration
Statement until the fortieth day after the Optional Termination Date,
Termination Date or Election Date, or if earlier, such time as all Registrable
Shares have been resold pursuant thereto and all expenses in connection with
such resale, including all registration costs and all fees and expenses of
counsel for each of Party A and Party B, have been paid by Party B; (v) Party A
and the Hedge Subsidiary shall have been afforded a reasonable opportunity to
conduct
17
a due diligence investigation with respect to The Warnaco Group, Inc. customary
in scope for underwritten offerings of equity securities, and acceptance of the
results of such investigation by Party A and the Hedge Subsidiary cannot be
unreasonably withheld; (vi) all conditions to the obligations of each party
under the Transfer Agreement shall have been satisfied or waived no later than
the Optional Termination Date, Termination Date or Election Date, and (vii) the
representations and warranties of Party B set forth herein and in the Transfer
Agreement shall be true and correct on the date of delivery of Registrable
Shares to purchasers of such Shares as though made at such time, and Party B
shall have performed all its obligations set forth herein and in such Transfer
Agreement to be performed by such time.
If, in the context of the Decline in Share Price/Decline in Credit Rating/
Termination of Credit Agreement provision, Party B has elected Cash Settlement
or in the event Party B has elected Net Share Settlement and Party B is required
to deliver Shares to Party A and any condition specified in items (i)-(vii) of
the previous paragraph shall not have been satisfied in the manner and at the
times specified therein, Party A may determine to (a) have some or all
Registrable Shares sold in one or more transactions exempt from the registration
requirements of the Securities Act, or (b) extend this Transaction in order to
give Party B more time to satisfy such conditions. If Party A chooses the action
set forth in clause (a) above, Party B shall pay all costs of such sales by
Party A, including, without limitation, any applicable sales or purchase taxes,
transfer taxes and commissions. If Party A chooses the action set forth in
clause (b) above, the Calculation Agent will in its reasonable discretion adjust
the terms hereof to take into account any additional costs to Party A and the
Hedge Subsidiary of such extension.
7. ADDITIONAL REPRESENTATIONS
Each party will be deemed to represent to the other on the date of this
Confirmation that, with respect to this Transaction (1) It is entering into this
Transaction for its own account and not with a view to transfer, resale or
distribution, (2) it is an "accredited investor" within the meaning of Rule
510(a) of Regulation D under the Securities Act and has such knowledge and
experience in financial and business matters that it is capable of evaluating
the merits and risks of this Transaction, and (3) it understands and
acknowledges that this Transaction may involve the purchase or sale of a
"security" as defined in the Securities Act and the securities laws of certain
states, and that any such security has not been registered under the Securities
Act or the securities laws of any state and, therefore, may not be sold,
pledged, hypothecated, transferred or otherwise disposed of unless such security
is registered under the Securities Act and any applicable state securities law,
or an exemption from registration is available.
8. ADDITIONAL REPRESENTATIONS AND COVENANTS
(a) Party B Representations
Party B represents to Party A that (1) as of the Trade Date hereof, it
is not in possession of any material non-public information with respect to
itself; (2) as of the Trade Date hereof, it is not entering into this
Transaction for the purpose of manipulating the market price or value of the
Shares; (3) as of the Trade Date hereof, no "restricted period" for purposes of
Rule 102 of Regulation M under the Securities Exchange Act of 1934
(respectively, "Regulation M" and the "Exchange Act") and no tender offer for
Shares (whether by Party B or any other third party) is in effect or (or in the
case of a tender offer by Party B) has been in effect within the preceding ten
Business Days; and (4) it is entering into this Transaction in connection with
its Share repurchase program which was most recently approved by its board of
directors on March 1, 1999
18
and most recently publicly announced on March 2, 1999, solely for the purposes
stated in such board resolution and public disclosure.
(b) Party B Covenants
Party B covenants to Party A that (1) Party B shall not commence a
"distribution" (as defined in Regulation M) of Shares or a tender offer for
Shares during the Accumulation Period; (2) no "restricted period" for purposes
of Rule 102 of Regulation M will be in effect on any day on which Party A is
required, pursuant to the terms hereof, to deliver Shares to Party B (any such
day being, for purposes of this paragraph, a "Settlement Date", and no tender
offer for Shares by Party B will be in effect on any Settlement Date or within
the preceding ten Business Days of any day thereof; (3) Party B shall not, and
shall cause its affiliated purchasers (as defined in Rule 10b-18 under the
Exchange Act) not to, purchase Shares during the Accumulation Period; (4) Party
B shall not disclose any material non-public information with respect to itself
to Party A without Party A's consent; (5) if at any time during the Disposition
Period Party B comes to have possession of material non-public information with
respect to itself, Party B will notify Party A that a blackout period is in
effect, and when Party B ceases to be in possession of material non-public
information, Party B will notify Party A that the blackout period has ended.
(c) Party A Covenants
Party A covenants to Party B that Party A shall not sell, nor make any
offers to sell during any blackout period or any restricted period in respect of
either of which Party A is in receipt of notice from Party B or Group given in
accordance with Section 12 of the ISDA Agreement.
9. ADDITIONAL AGREEMENT
Each party agrees that it will comply, in connection with this
Transaction and all related or contemporaneous sales and purchases of Shares,
with the applicable provisions of the Securities Act, the Exchange Act, and the
rules and regulations thereunder, including, without limitation, Rules 10b-5
under the Exchange Act, provided that each party shall be entitled to rely
conclusively on any information communicated by the other party concerning such
other party's market activities. Party A represents to Party B and agrees that,
in effecting the purchase transactions referred to opposite "Accumulation
Period", above, Party A shall make bids for and purchases of the Shares only in
accordance with the price, volume, timing, and method of bidding and purchasing
constraints set forth in Rule 10b-18 under the Exchange Act, as if Party A were
the issuer of the Shares and wished to avail itself of the protections afforded
by that rule.
10. THIRD PARTY TERMINATION RIGHTS
Party B hereby covenants and agrees with Party A that in the event that
Party B is now or hereafter becomes party to a forward equity purchase
transaction pertaining to Shares with any other party and such transaction
grants to such other party termination rights which are not included herein or,
if included, which may be invoked prior to the time or point at which such
termination rights may be invoked by Party A pursuant to the terms hereof, Party
B shall immediately notify Party A of the existence of such termination right
and this Confirmation shall be deemed to be automatically amended in order to
incorporate such termination right (together with all attendant definitions and
ancillary provisions contained in such other
19
transaction which may be necessary to give meaning or effect to such termination
right) for the benefit of Party A hereunder, mutatis mutandis.
11. MISCELLANEOUS
Wire Instructions: Party A:
The Bank of Nova Scotia, New York Agency
One Liberty Plaza, 000 Xxxxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx
SWIFT Code: XXXXXX00
ABA# 0260-02532
Account No.: 6027-36
Attention: IBD Derivative Products
Party B:
ABA #000000000
Citibank N.A.
New York, NY
for credit to: Warnaco Inc. Account # 3846-9277
12. OFFICES
(a) The Office of Party A for this Transaction is New York; and
(b) The Office of Party B for this Transaction is New York.
20
Please confirm that the foregoing correctly sets forth the terms of our
agreement by executing the copy of this Confirmation enclosed for that purpose
and returning it to us or by sending to us a letter or facsimile substantially
similar to this letter, which letter or facsimile sets forth the material terms
of the Transaction to which this Confirmation relates and indicates agreement to
those terms.
Yours truly,
SCOTIA CAPITAL (U.S.A.) INC.
By:____________________________
Name:
Title:
Confirmed as of the date first above written:
THE WARNACO GROUP, INC.
By:______________________________
Name:
Title:
1
EXHIBIT A
GUARANTY
GUARANTY (this "Guaranty"), dated as of December 10, 1999, made by certain
of the Persons listed on the signature pages hereof (each Person listed on the
signature pages hereof, a "Guarantor" and collectively, the "Guarantors"), in
favor of THE BANK OF NOVA SCOTIA (the "Bank").
PRELIMINARY STATEMENT. The Warnaco Group, Inc., a Delaware corporation,
("Group") has heretofore entered into an Equity Forward Purchase Transaction
with the Bank as evidenced by way of a Confirmation, dated as of December 10,
1999, (as amended, modified or supplemented from time to time, the
"Transaction"). Group and the Bank may hereafter enter into a 1992 ISDA Master
Agreement (Multicurrency - Cross Border), as published by the International
Swaps and Derivatives Association, Inc., (such agreement, as it may be amended
or supplemented from time to time being the"Master Agreement"). Each Guarantor
has derived and will continue to derive substantial direct and indirect benefits
from the Transaction . It is a condition precedent to the Bank's obligations
under the Transaction that each Guarantor shall have executed and delivered this
Guaranty.
NOW THEREFORE, for good and valuable consideration the receipt of which is
hereby acknowledged, and in order to induce the Bank to enter into and perform
its obligations under the Transaction and, following completion of the Master
Agreement, the Master Agreement, each Guarantor agrees, for the benefit of the
Bank, as follows:
ARTICLE I
GUARANTY PROVISIONS
SECTION I.1 Guaranty. Each Guarantor hereby jointly and severally,
absolutely, unconditionally and irrevocably guarantees the full and punctual
payment when due, whether at stated maturity, by acceleration or otherwise, of
all obligations of Group under the Transaction and the Master Agreement which
Group has incurred or may incur to the Bank in connection with the Transaction
and the Master Agreement and whether for scheduled payments, early termination
payments, interest, fees, expenses or otherwise (collectively, the
"Obligations"); provided, however, that each Guarantor shall be liable under
this Guaranty for the maximum amount of such liability that can be hereby
incurred without rendering this Guaranty, as it relates to such Guarantor,
voidable under applicable law relating to fraudulent conveyance or fraudulent
transfer, and not for any greater amount. This Guaranty constitutes a guaranty
of payment when due and not of collection, and each Guarantor specifically
agrees that it shall not be necessary or required that the Bank exercise any
right, assert any claim or demand or enforce any remedy whatsoever against Group
or any other person before or as a condition to the obligations of such
Guarantor hereunder.
1
2
SECTION I.2 Acceleration of Guaranty. Each Guarantor agrees that, in the
event of the dissolution or insolvency of Group or the dissolution of such
Guarantor, or the inability or failure of Group or such Guarantor to pay debts
as they become due, or an assignment by Group or such Guarantor for the benefit
of creditors, or the commencement of any case or proceeding in respect of Group
or such Guarantor under any bankruptcy, insolvency or similar laws, and with
respect to any involuntary case or proceeding, such case or proceeding remains
undismissed for a period of 30 days, and if any such event shall occur at a time
when any of the Obligations may not then be due and payable, such Guarantor will
pay to the Bank forthwith the full amount which would be payable hereunder by
such Guarantor if all such Obligations were then due and payable.
SECTION I.3 Guaranty Absolute, etc. This Guaranty shall in all respects be
a joint and several, continuing, absolute, unconditional and irrevocable
guaranty of payment, and shall remain in full force and effect until all
Obligations of Group have been paid in full and all obligations of each
Guarantor hereunder shall have been paid in full. Each Guarantor guarantees that
the Obligations of Group will be paid strictly in accordance with the terms of
the Transaction, regardless of any law, regulation or order now or hereafter in
effect in any jurisdiction affecting any of such terms or the rights of the
Bank. The liability of each Guarantor under this Guaranty shall be joint and
several and shall be absolute, unconditional and irrevocable irrespective of:
(a) any lack of validity, legality or enforceability of the
Transaction or the Master Agreement;
(b) the failure of the Bank
(i) to assert any claim or demand or to enforce any right or
remedy against Group or any other person (including any other
guarantor) under the provisions of the Transaction or the Master
Agreement or otherwise, or
(ii) to exercise any right or remedy against any other guarantor
of the Obligations;
(c) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Obligations, or any other extension,
compromise or renewal of any of the Obligations;
(d) any reduction, limitation, impairment or termination of the
Obligations for any reason, including any claim of waiver, release,
surrender, alteration or compromise, and shall not be subject to (and such
Guarantor hereby waives any right to or claim of) any defense or setoff,
counterclaim, recoupment or termination whatsoever by reason of the
invalidity, illegality, nongenuineness, irregularity, compromise,
unenforceability of, or any other event or occurrence affecting, the
Obligations;
(e) any amendment to, rescission, waiver, or other modification of, or
any consent to departure from, any of the terms of the Transaction or
Master Agreement;
3
(f) any amendment to or waiver or release or addition of, or consent
to departure from, any other guaranty, held by the Bank securing any of the
Obligations; or
(g) any other circumstance which might otherwise constitute a defense
available to, or a legal or equitable discharge of Group, any surety or any
guarantor.
SECTION I.4 Reinstatement, etc. Each Guarantor agrees that this Guaranty
shall continue to be effective or be reinstated, as the case may be, if at any
time any payment (in whole or in part) of any of the Obligations is rescinded or
must otherwise be restored by the Bank, upon the insolvency, bankruptcy or
reorganization of Group, all as though such payment had not been made.
SECTION I.5 Waiver, etc. Each Guarantor hereby waives promptness,
diligence, notice of acceptance and any other notice with respect to any of the
Obligations and this Guaranty and any requirement that the Bank exhaust any
right or take any action against Group or any other person (including any other
guarantor) or entity or any collateral securing the Obligations, as the case may
be.
SECTION I.6 Postponement of Subrogation, etc. None of the Guarantors will
exercise any rights which it may acquire by way of rights of subrogation under
this Guaranty, by any payment made hereunder or otherwise, until the prior
payment, in full and in cash, of all Obligations. Any amount paid to any such
Guarantor on account of any such subrogation rights prior to the payment in full
of all Obligations shall be held in trust for the benefit of the Bank and shall
immediately be paid to the Bank and credited and applied against the
Obligations; provided, however, that if
(a) a Guarantor has made payment to the Bank of all or any part of the
Obligations, and
(b) all Obligations have been paid in full,
the Bank will execute and deliver to such Guarantor appropriate documents
(without recourse and without representation or warranty) necessary to evidence
the transfer by subrogation to such Guarantor of an interest in the Obligations
resulting from such payment by such Guarantor. In furtherance of the foregoing,
for so long as any Obligations remain outstanding, each Guarantor shall refrain
from taking any action or commencing any proceeding against Group (or its
successors or assigns, whether in connection with a bankruptcy proceeding or
otherwise) to recover any amounts in the respect of payments made under this
Guaranty to the Bank.
SECTION I.7 Successors, Transferees and Assigns; Transfers of Notes, etc.
This Guaranty shall:
4
(a) be binding upon each Guarantor, and its successors, transferees
and assigns; and
(b) inure to the benefit of and be enforceable by the Bank.
Without limiting the generality of clause (b), the Bank may, to the extent
permitted by the terms of the Transaction or the Master Agreement, assign or
otherwise transfer (in whole or in part) held by it to any other person or
entity, and such other person or entity shall thereupon become vested with all
rights and benefits in respect thereof granted to the Bank hereunder.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
SECTION II.1 Representations and Warranties. Each Guarantor hereby
represents and warrants unto the Bank:
SECTION II.1.1 Authority. Each Guarantor has full power and authority to
enter into and perform its obligations under this Guaranty.
SECTION II.1.2 Due Authorization, Non-Contravention, etc. The execution,
delivery and performance by each Guarantor of this Guaranty have been duly
authorized by all necessary corporate action (including but not limited to any
consent of stockholders required by law or its organizational documents), and do
not
(a) contravene each Guarantor's organizational documents;
(b) contravene any contractual restriction, law or governmental
regulation or court decree or order binding on or affecting each Guarantor;
or
(c) result in, or require the creation or imposition of, any lien,
security interest, encumbrance, pledge or hypothecation on any of such
Guarantor's properties.
SECTION II.1.3 Validity, etc. This Guaranty constitutes the legal, valid
and binding obligations of each Guarantor enforceable in accordance with its
terms, subject to the effect of any applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws affecting creditors'
rights generally and general principles of equity.
SECTION II.1.4 Authorization, Approval, etc. No authorization, consent,
approval, or other action by, and no notice to, filing with, or license from,
any governmental authority, regulatory body or any other person is required for
due execution, delivery or performance by each Guarantor of this Guaranty.
ARTICLE III
MISCELLANEOUS PROVISIONS
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SECTION III.1 Credit Support Document. This Guaranty shall constitute a
Credit Support Document as contemplated by the Master Agreement.
SECTION III.2 Binding on Successors, Transferees and Assigns; Assignment.
In addition to, and not in limitation of, Section 1.7, this Guaranty shall be
binding upon each Guarantor and its successors, transferees and assigns and
shall inure to the benefit of and be enforceable by the Bank and its successors,
transferees and assigns (to the full extent provided pursuant to Section 1.7);
provided, however, that such Guarantor may not assign any of its obligations
hereunder without the prior written consent of the Bank.
SECTION III.3 Amendments, etc. No amendment to or waiver of any provision
of this Guaranty, nor consent to any departure by any Guarantor herefrom, shall
in any event be effective unless the same shall be in writing and signed by the
Bank, and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.
SECTION III.4 Notices. All notices and other communications provided to any
Guarantor under this Guaranty shall be in writing or by facsimile and addressed,
delivered or transmitted to such Guarantor at 00 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx
00000, Telecopier No.: 000-000-0000, or at such other address or facsimile
number as may be designated by such Guarantor in a notice to the other parties.
Any notice, if mailed and properly addressed with postage prepaid or if properly
addressed and sent by pre-paid courier service, shall be deemed given when
received; any notice, if transmitted by facsimile, shall be deemed given when
transmitted.
SECTION III.5 No Waiver; Remedies. In addition to, and not in limitation
of, and other provision hereof, no failure on the part of the Bank to exercise,
and no delay in exercising, any right hereunder shall operate as a waiver
thereof; nor shall any single or partial exercise of any right hereunder
preclude any other or further exercise thereof or the exercise of any other
right. The remedies herein provided are cumulative and not exclusive of any
remedies provided by law.
SECTION III.6 Captions. Section captions used in this Guaranty are for
convenience of reference only, and shall not affect the construction of this
Guaranty.
SECTION III.7 Setoff. The Bank shall, upon the occurrence of an Event of
Default as defined in the Transaction or the Master Agreement, have the right to
appropriate and apply to the payment of the Obligations owing to it (whether or
not then due) any and all balances, credits, deposits, accounts or moneys of any
of the Guarantors then or thereafter maintained with or otherwise held by the
Bank. The rights of the Bank under this Section are in addition to other rights
and remedies (including other rights of setoff under applicable law or
otherwise) which the Bank may have.
SECTION III.8 Severability. Wherever possible each provision of this
Guaranty shall be interpreted in such manner as to be effective and valid under
applicable law, but if any
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provision of this Guaranty shall be prohibited by or invalid under such law,
such provision shall be ineffective to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Guaranty.
SECTION III.9 Governing Law. THIS GUARANTY SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK. FOR
PURPOSES OF ANY ACTION OR PROCEEDING INVOLVING THIS GUARANTY, EACH GUARANTOR
HEREBY EXPRESSLY SUBMITS TO THE JURISDICTION OF ALL FEDERAL AND STATE COURTS
LOCATED IN THE STATE OF NEW YORK AND CONSENTS THAT IT MAY BE SERVED WITH ANY
PROCESS OR PAPER BY REGISTERED MAIL OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE
STATE OF NEW YORK.
SECTION III.10 Waiver of Jury Trial. EACH GUARANTOR HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHTS IT MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN
CONNECTION WITH, THIS GUARANTY. EACH GUARANTOR ACKNOWLEDGES AND AGREES THAT IT
HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION AND THAT THIS
PROVISION IS A MATERIAL INDUCEMENT FOR THE BANK ENTERING INTO THE TRANSACTION
AND THE MASTER AGREEMENT.
IN WITNESS WHEREOF, each Guarantor has caused this Guaranty to be duly
executed and delivered by its officer thereunto duly authorized as of the date
first above written.
WARNACO INC.
WARNACO INTERNATIONAL INC.
WARNACO U.S. INC.
MYRTLE AVENUE, INC.
XXXXXXX STREET, INC.
DESIGNER HOLDINGS, LTD.
OUTLET STORES, INC.
JEANSWEAR HOLDINGS, INC.
XXXXXX XXXXX JEANSWEAR COMPANY
CKJ HOLDINGS INC.
By
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Title:
