Dated as of
February 10, 2000
The Warnaco Group, Inc.
▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
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
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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 ▇▇▇▇▇▇▇ ▇▇▇▇▇ 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.
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(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
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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.
934390105, quoted in USD on the
Exchange.
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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
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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 Entity 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 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 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
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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 ▇▇▇▇-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.
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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:
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 P i
where "Number of Settled Shares i"
means the number of Shares the sale
of which is settled by Party A or
its Hedge Entity, on the relevant
day of determination, "P i" means the
greater of (a) the weighted average
of the sale prices per Share,
including a
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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
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
"VWAP i" shall be deemed to be zero
on any day in the Disposition Period
which is not an Exchange Business
Day.
Notice of Sale Transactions: Party A shall provide to Party B, on
or before the first Business Day
following the trade date of each
sale transaction, notice setting out
the sale transactions 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
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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,
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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
▇▇▇▇-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
11
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
12
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
13
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 ▇▇▇▇▇▇-▇▇▇▇ Inc., reports a
rating below BBB-, or no longer assigns a rating, or ▇▇▇▇▇'▇ 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
14
(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
15
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.
16
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.
17
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#▇▇▇▇▇▇▇▇▇
Account No.: Bond Wire Clearance, 9088000095
Attention: Financial Risk Management, Operations
Party B:
ABA #▇▇▇▇▇▇▇▇▇
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
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇, Vice President
For Party B:
The Warnaco Group, Inc.
▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
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:____________________________
Name:
Title:
Confirmed as of the date first above written:
THE WARNACO GROUP, INC.
By:______________________________
Name:
Title:
19
EXHIBIT A
GUARANTY
GUARANTY (this "Guaranty"), dated as of February 10, 2000, made by certain
of the Persons listed on the signature pages hereof (each Person listed on the
signature pages hereof, a "Guarantor" and collectively, the "Guarantors"), in
favor of SunTrust Bank (the "Bank").
PRELIMINARY STATEMENT. The Warnaco Group, Inc., a Delaware corporation,
("Group") has heretofore entered into an Equity Forward Purchase Transaction
with the Bank as evidenced by way of a Confirmation, dated as of February 10,
2000, (as amended, modified or supplemented from time to time, the
"Transaction"). Group and the Bank may hereafter enter into a 1992 ISDA Master
Agreement (Multicurrency - Cross Border), as published by the International
Swaps and Derivatives Association, Inc., (such agreement, as it may be amended
or supplemented from time to time being the"Master Agreement"). Each Guarantor
has derived and will continue to derive substantial direct and indirect benefits
from the Transaction . It is a condition precedent to the Bank's obligations
under the Transaction that each Guarantor shall have executed and delivered this
Guaranty.
NOW THEREFORE, for good and valuable consideration the receipt of which is
hereby acknowledged, and in order to induce the Bank to enter into and perform
its obligations under the Transaction and, following completion of the Master
Agreement, the Master Agreement, each Guarantor agrees, for the benefit of the
Bank, as follows:
ARTICLE I
GUARANTY PROVISIONS
SECTION I.1 Guaranty. Each Guarantor hereby jointly and severally,
absolutely, unconditionally and irrevocably guarantees the full and punctual
payment when due, whether at stated maturity, by acceleration or otherwise, of
all obligations of Group under the Transaction and the Master Agreement which
Group has incurred or may incur to the Bank in connection with the Transaction
and the Master Agreement and whether for scheduled payments, early termination
payments, interest, fees, expenses or otherwise (collectively, the
"Obligations"); provided, however, that each Guarantor shall be liable under
this Guaranty for the maximum amount of such liability that can be hereby
incurred without rendering this Guaranty, as it relates to such Guarantor,
voidable under applicable law relating to fraudulent conveyance or fraudulent
transfer, and not for any greater amount. This Guaranty constitutes a guaranty
of payment when due and not of collection, and each Guarantor specifically
agrees that it shall not be necessary or required that the Bank exercise any
right, assert any claim or demand or enforce any remedy whatsoever against Group
or any other person before or as a condition to the obligations of such
Guarantor hereunder.
SECTION I.2 Acceleration of Guaranty. Each Guarantor agrees that, in the
event of the dissolution or insolvency of Group or the dissolution of such
Guarantor, or the inability or failure of Group or such Guarantor to pay debts
as they become due, or an assignment by Group or such Guarantor for the benefit
of creditors, or the commencement of any case or
1
proceeding in respect of Group or such Guarantor under any bankruptcy,
insolvency or similar laws, and with respect to any involuntary case or
proceeding, such case or proceeding remains undismissed for a period of 30 days,
and if any such event shall occur at a time when any of the Obligations may not
then be due and payable, such Guarantor will pay to the Bank forthwith the full
amount which would be payable hereunder by such Guarantor if all such
Obligations were then due and payable.
SECTION I.3 Guaranty Absolute, etc. This Guaranty shall in all respects be
a joint and several, continuing, absolute, unconditional and irrevocable
guaranty of payment, and shall remain in full force and effect until all
Obligations of Group have been paid in full and all obligations of each
Guarantor hereunder shall have been paid in full. Each Guarantor guarantees that
the Obligations of Group will be paid strictly in accordance with the terms of
the Transaction, regardless of any law, regulation or order now or hereafter in
effect in any jurisdiction affecting any of such terms or the rights of the
Bank. The liability of each Guarantor under this Guaranty shall be joint and
several and shall be absolute, unconditional and irrevocable irrespective of:
(a) any lack of validity, legality or enforceability of the
Transaction or the Master Agreement;
(b) the failure of the Bank
(i) to assert any claim or demand or to enforce any right or
remedy against Group or any other person (including any other
guarantor) under the provisions of the Transaction or the Master
Agreement or otherwise, or
(ii) to exercise any right or remedy against any other guarantor
of the Obligations;
(c) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Obligations, or any other extension,
compromise or renewal of any of the Obligations;
(d) any reduction, limitation, impairment or termination of the
Obligations for any reason, including any claim of waiver, release,
surrender, alteration or compromise, and shall not be subject to (and such
Guarantor hereby waives any right to or claim of) any defense or setoff,
counterclaim, recoupment or termination whatsoever by reason of the
invalidity, illegality, nongenuineness, irregularity, compromise,
unenforceability of, or any other event or occurrence affecting, the
Obligations;
(e) any amendment to, rescission, waiver, or other modification of, or
any consent to departure from, any of the terms of the Transaction or
Master Agreement;
(f) any amendment to or waiver or release or addition of, or consent
to departure from, any other guaranty, held by the Bank securing any of the
Obligations; or
(g) any other circumstance which might otherwise constitute a defense
available to, or a legal or equitable discharge of Group, any surety or any
guarantor.
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SECTION I.4 Reinstatement, etc. Each Guarantor agrees that this Guaranty
shall continue to be effective or be reinstated, as the case may be, if at any
time any payment (in whole or in part) of any of the Obligations is rescinded or
must otherwise be restored by the Bank, upon the insolvency, bankruptcy or
reorganization of Group, all as though such payment had not been made.
SECTION I.5 Waiver, etc. Each Guarantor hereby waives promptness,
diligence, notice of acceptance and any other notice with respect to any of the
Obligations and this Guaranty and any requirement that the Bank exhaust any
right or take any action against Group or any other person (including any other
guarantor) or entity or any collateral securing the Obligations, as the case may
be.
SECTION I.6 Postponement of Subrogation, etc. None of the Guarantors will
exercise any rights which it may acquire by way of rights of subrogation under
this Guaranty, by any payment made hereunder or otherwise, until the prior
payment, in full and in cash, of all Obligations. Any amount paid to any such
Guarantor on account of any such subrogation rights prior to the payment in full
of all Obligations shall be held in trust for the benefit of the Bank and shall
immediately be paid to the Bank and credited and applied against the
Obligations; provided, however, that if
(a) a Guarantor has made payment to the Bank of all or any part of the
Obligations, and
(b) all Obligations have been paid in full,
the Bank will execute and deliver to such Guarantor appropriate documents
(without recourse and without representation or warranty) necessary to evidence
the transfer by subrogation to such Guarantor of an interest in the Obligations
resulting from such payment by such Guarantor. In furtherance of the foregoing,
for so long as any Obligations remain outstanding, each Guarantor shall refrain
from taking any action or commencing any proceeding against Group (or its
successors or assigns, whether in connection with a bankruptcy proceeding or
otherwise) to recover any amounts in the respect of payments made under this
Guaranty to the Bank.
SECTION I.7 Successors, Transferees and Assigns; Transfers of Notes, etc.
This Guaranty shall:
(a) be binding upon each Guarantor, and its successors, transferees
and assigns; and
(b) inure to the benefit of and be enforceable by the Bank.
Without limiting the generality of clause (b), the Bank may, to the extent
permitted by the terms of the Transaction or the Master Agreement, assign or
otherwise transfer (in whole or in part) held by it to any other person or
entity, and such other person or entity shall thereupon become vested with all
rights and benefits in respect thereof granted to the Bank hereunder.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES
SECTION II.1 Representations and Warranties. Each Guarantor hereby
represents and warrants unto the Bank:
SECTION II.1.1 Authority. Each Guarantor has full power and authority to
enter into and perform its obligations under this Guaranty.
SECTION II.1.2 Due Authorization, Non-Contravention, etc. The execution,
delivery and performance by each Guarantor of this Guaranty have been duly
authorized by all necessary corporate action (including but not limited to any
consent of stockholders required by law or its organizational documents), and do
not
(a) contravene each Guarantor's organizational documents;
(b) contravene any contractual restriction, law or governmental
regulation or court decree or order binding on or affecting each Guarantor;
or
(c) result in, or require the creation or imposition of, any lien,
security interest, encumbrance, pledge or hypothecation on any of such
Guarantor's properties.
SECTION II.1.3 Validity, etc. This Guaranty constitutes the legal, valid
and binding obligations of each Guarantor enforceable in accordance with its
terms, subject to the effect of any applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws affecting creditors'
rights generally and general principles of equity.
SECTION II.1.4 Authorization, Approval, etc. No authorization, consent,
approval, or other action by, and no notice to, filing with, or license from,
any governmental authority, regulatory body or any other person is required for
due execution, delivery or performance by each Guarantor of this Guaranty.
ARTICLE III
MISCELLANEOUS PROVISIONS
SECTION III.1 Credit Support Document. This Guaranty shall constitute a
Credit Support Document as contemplated by the Master Agreement.
SECTION III.2 Binding on Successors, Transferees and Assigns; Assignment.
In addition to, and not in limitation of, Section 1.7, this Guaranty shall be
binding upon each Guarantor and its successors, transferees and assigns and
shall inure to the benefit of and be enforceable by the Bank and its successors,
transferees and assigns (to the full extent provided pursuant to Section 1.7);
provided, however, that such Guarantor may not assign any of its obligations
hereunder without the prior written consent of the Bank.
SECTION III.3 Amendments, etc. No amendment to or waiver of any provision
of this
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Guaranty, nor consent to any departure by any Guarantor herefrom, shall in any
event be effective unless the same shall be in writing and signed by the Bank,
and then such waiver or consent shall be effective only in the specific instance
and for the specific purpose for which given.
SECTION III.4 Notices. All notices and other communications provided to any
Guarantor under this Guaranty shall be in writing or by facsimile and addressed,
delivered or transmitted to such Guarantor at ▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
▇▇▇▇▇, Telecopier No.: ▇▇▇-▇▇▇-▇▇▇▇, or at such other address or facsimile
number as may be designated by such Guarantor in a notice to the other parties.
Any notice, if mailed and properly addressed with postage prepaid or if properly
addressed and sent by pre-paid courier service, shall be deemed given when
received; any notice, if transmitted by facsimile, shall be deemed given when
transmitted.
SECTION III.5 No Waiver; Remedies. In addition to, and not in limitation
of, and other provision hereof, no failure on the part of the Bank to exercise,
and no delay in exercising, any right hereunder shall operate as a waiver
thereof; nor shall any single or partial exercise of any right hereunder
preclude any other or further exercise thereof or the exercise of any other
right. The remedies herein provided are cumulative and not exclusive of any
remedies provided by law.
SECTION III.6 Captions. Section captions used in this Guaranty are for
convenience of reference only, and shall not affect the construction of this
Guaranty.
SECTION III.7 Setoff. The Bank shall, upon the occurrence of an Event of
Default as defined in the Transaction or the Master Agreement, have the right to
appropriate and apply to the payment of the Obligations owing to it (whether or
not then due) any and all balances, credits, deposits, accounts or moneys of any
of the Guarantors then or thereafter maintained with or otherwise held by the
Bank. The rights of the Bank under this Section are in addition to other rights
and remedies (including other rights of setoff under applicable law or
otherwise) which the Bank may have.
SECTION III.8 Severability. Wherever possible each provision of this
Guaranty shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Guaranty shall be prohibited by or
invalid under such law, such provision shall be ineffective to the extent of
such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Guaranty.
SECTION III.9 Governing Law. THIS GUARANTY SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK. FOR
PURPOSES OF ANY ACTION OR PROCEEDING INVOLVING THIS GUARANTY, EACH GUARANTOR
HEREBY EXPRESSLY SUBMITS TO THE JURISDICTION OF ALL FEDERAL AND STATE COURTS
LOCATED IN THE STATE OF NEW YORK AND CONSENTS THAT IT MAY BE SERVED WITH ANY
PROCESS OR PAPER BY REGISTERED MAIL OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE
STATE OF NEW YORK.
SECTION III.10 Waiver of Jury Trial. EACH GUARANTOR HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHTS IT MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN
CONNECTION WITH, THIS GUARANTY. EACH GUARANTOR ACKNOWLEDGES AND AGREES THAT IT
HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS
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PROVISION AND THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE BANK
ENTERING INTO THE TRANSACTION AND THE MASTER AGREEMENT.
IN WITNESS WHEREOF, each Guarantor has caused this Guaranty to be duly
executed and delivered by its officer thereunto duly authorized as of the date
first above written.
WARNACO INC.
WARNACO INTERNATIONAL INC.
WARNACO U.S. INC.
MYRTLE AVENUE, INC.
▇▇▇▇▇▇▇ STREET, INC.
DESIGNER HOLDINGS, LTD.
OUTLET STORES, INC.
JEANSWEAR HOLDINGS, INC.
▇▇▇▇▇▇ ▇▇▇▇▇ JEANSWEAR COMPANY
CKJ HOLDINGS INC.
By
Title:
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