EXHIBIT 99.6
[GRAPHIC OMITTED]
SCOTIA CAPITAL (USA) INC.
ONE LIBERTY PLAZA, 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. 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 Barney, 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 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.
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.
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. 000000000, 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
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 Rate(i)" 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.
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
xxxx-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.
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 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(0)"
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 Sharesi" and "VWAPi" 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 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:
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 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 xxxx-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 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).
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 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 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 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 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
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
Xxx Xxxxxxx Xxxxx, 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.
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: /S/
----------------------------------
Name:
Title:
Confirmed as of the date first above written:
THE WARNACO GROUP, INC.
By: /S/
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Name:
Title:
