EXHIBIT 99.8
Dated as of
February 10, 2000
The Warnaco Group, Inc.
00 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xx. Xxxx Xxxxxxxxxxx
Dear Sirs:
RE: SUNTRUST BANK ("PARTY A")
THE WARNACO GROUP, INC. ("PARTY B")
EQUITY FORWARD PURCHASE TRANSACTION
The purpose of this facsimile is to amend and restate the terms
and conditions of the Transaction entered into between Party A and Party B
on the Trade Date specified below and amended by agreement of the parties
through February 25, 2000 (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 17, 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 February 10,
2000, 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 Party A 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 Party A makes an order which has or purports to have
the effect of prohibiting Party B 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: February 10, 2000
Effective Date: February 10, 2000
Termination Date: August 31, 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. If Party B elects an
Optional Termination Date
within 90 days after the
Accumulation Period End Date,
Party B shall pay Party A on
the settlement date for such
Optional Termination Date, an
amount equal to USD 50,000
times the Relevant Share Number
divided by the Number of Shares
as of the Accumulation Period
End Date.
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 party related to Party A
which has been designated by
Party A to acquire Shares in
respect of this Transaction
(the "Hedge Entity"), has, by
means of one or more purchase
transactions effected on the
Exchange through such period,
accumulated 2,600,000 Shares;
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 Entity 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 Entity'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 Amounti-1+
(Number of Settled Sharesi x
WAPi)] x [1 + (Accumulation
Period Floating Ratei / 360)]
where, "Daily Forward
Amounti-1" means the Daily
Forward Amount determined in
respect of the day preceding
the relevant day of
determination, "Number of
Settled Sharesi" means the
number of Shares settled by
Party A or the Hedge Entity on
the relevant date of
determination; "WAPi" 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 Entity 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.
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
Entity 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
Entity shall commence selling
the Shares acquired by Party A
or the Hedge Entity 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
Entity, 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 Entity,
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 Entity 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:
SA0= Forward Price x Relevant
Share Number SAi = SAi-1 x (1+
ONi-1/360) - Number of Settled
Sharesi x Pi
where "Number of Settled
Sharesi" means the number of
Shares the sale of which is
settled by Party A or its Hedge
Entity, on the relevant day of
determination, "Pi" means the
greater of (a) the weighted
average of the sale prices per
Share, including a commission
of USD 0.045 per Share, of all
Share sale transactions settled
by Party A or the Hedge Entity
on the relevant day of
determination and (b) 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 commission 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, "SA0"
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, "SAi" means the
Daily Settlement Amount
determined in respect of the
relevant day of determination,
"SAi-1" means the Daily
Settlement Amount determined
for the day preceding the
relevant day of determination,
and ONi-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 transaction effected
by Party A or the Hedge Entity
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 Entity 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
Entity 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 Entity, Party A or
the Hedge Entity 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 Entity (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 $5.00 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 Entity, 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 Entity 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 Entity and
covering the public resale of all Shares held by Party A or the Hedge
Entity 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 Entity 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 Entity 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
Entity, 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 Entity 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 Entity 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 Entity 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 (with the exception of item (i) of Section (6)(IV) hereunder, which
is specifically excluded from this Section 10), 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:
SunTrust Bank
ABA#000000000
Account No.: Bond Wire Clearance, 9088000095
Attention: Financial Risk Management,
Operations
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 Atlanta; and
(b) The Office of Party B for this Transaction is New York.
13. NOTICE ADDRESSES
Notices and communications under this Confirmation should be addressed to:
For Party A:
SunTrust Equitable Securities
000 Xxxxxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxx, Xxxxxxx 00000
Attn: Xxxx X. Xxxxx, Vice President
For Party B:
The Warnaco Group, Inc.
00 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxx Xxxxxxx
Telephone: (000) 000-0000
Please confirm that the foregoing correctly sets forth the terms
of our agreement, as amended, 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,
SUNTRUST BANK
By: /s/
--------------------------
Name:
Title:
Confirmed as of the date first
above written:
THE WARNACO GROUP, INC.
By: /s/
------------------------------
Name:
Title:
