SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the fiscal year ended January 30, 1994 Commission file number: 1-724
PHILLIPS-VAN HEUSEN CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 13-1166910
(State of incorporation) (IRS Employer
Identification No.)
1290 Avenue of the Americas
New York, New York 10104
(Address of principal executive offices)
212-541-5200
(Registrant's telephone number)
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
Common Stock, $1.00 par value New York Stock Exchange
Preferred Stock Purchase Rights New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
NONE
Indicate by check mark whether registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months and (2) has been subject to such filing
requirements for at least 90 days.
Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. ( )
The aggregate market value of the voting stock of registrant held by
nonaffiliates of the registrant as of April 19, 1994 was approximately
$834,000,000.
Number of shares of Common Stock outstanding as of April 19, 1994:
26,545,480.
DOCUMENTS INCORPORATED BY REFERENCE
Location in Form 10-K
Document in which incorporated
Registrant's 1993 Annual Report to Stockholders Parts I and II
for the Fiscal Year Ended January 30, 1994
Registrant's Proxy Statement Part III
for the Annual Meeting of
Stockholders to be held on June 14, 1994
PART I
Item 1. Business
General Overview
Phillips-Van Heusen Corporation (the "Company") is a vertically
integrated manufacturer, marketer and retailer of men's and women's apparel
and men's, women's and children's footwear. The Company's products include
shirts, sweaters and shoes and, to a lesser extent, neckwear, furnishings,
bottoms, outerwear and leather and canvas accessories. The Company's
principal brand names are "Van Heusen", the best-selling dress shirt brand in
the United States; "Bass", the leading casual shoe brand in the United States;
and "Geoffrey Beene", the best-selling designer dress shirt label in the
United States. The Company is also a leading manufacturer and distributor of
private label shirts and sweaters.
The Company is primarily engaged in the manufacture and procurement (both
domestically and overseas) of its products and the marketing and distribution
of its products through four apparel divisions and one footwear division, each
of which has both a wholesale and retail component. The Company's goals are
to design, manufacture and source products which offer consumers "value", thus
satisfying the consumers' desire for fashion, quality and fair prices, and to
market those products to reach the broadest spectrum of consumers possible.
Wholesale distribution consists of the marketing and sale of the
Company's products to major department stores, specialty and independent
retailers, chain stores and catalog merchants, as well as its own retail
stores. The Company's wholesale customers for branded and designer apparel
include May Co., Federated, Dayton Hudson, JCPenney, Macy's, Younkers and
Mercantile. Wholesale customers for its private label shirts include
JCPenney, Bloomingdale's, Lord & Taylor, Lands' End, Sears and Target, while
the wholesale customers of the Company's private label sweater and golf
apparel division include Lands' End, JCPenney, May Co., L.L. Bean, Federated
and Sears. G.H. Bass & Co. ("Bass"), the Company's footwear division, counts
May Co., Dillard's, Federated, Macy's and Dayton Hudson as its principal
wholesale customers. In fiscal 1993, no one customer accounted for more than
10% of the Company's sales.
Through its retail operations, the Company sells its products directly to
consumers in 780 Company-owned stores operated in five different formats
located primarily in manufacturers' outlet malls. The Company plans to open
101 stores in fiscal 1994 (net of store closings).
The Company believes that its recent success has been due in large part
to its strategy of developing multiple channels of distribution for its
branded, designer and private label merchandise. These channels include an
increasing number of Company-owned outlet stores as well as the Company's
traditional wholesale customers. These diverse channels have enabled the
Company to strengthen the competitive position of its brands and to extend its
brands into new product lines. In addition, the Company's outlet stores have
created additional opportunities for the Company both to sell its products,
thereby providing the Company with the means to achieve full absorption of
factory overhead, which results in low-cost and efficient production, and to
control the distribution of any excess production. The Company also believes
that the continued development of its product design, manufacturing and
sourcing organizations, enhancement and expansion of the use of its inventory
management and electronic data interchange systems and refinement of its
promotional and advertising activities will result in further strengthening of
its brand images, decreased risks of excess production and more efficient
utilization of its production facilities and outside suppliers.
The Company has experienced substantial growth in sales and earnings per
share over the past seven years. The Company's growth has occurred despite a
difficult business environment in the apparel and footwear industries as well
as in the general economy. The Company's growth is attributable primarily to
the acquisition of Bass in 1987 and the growth in the number of the Company's
retail stores from 214 immediately after the acquisition of Bass to 780 at the
end of fiscal 1993. Over the same period, the Company's "Van Heusen" shirt
brand has increased its share of the United States men's dress shirt market
from 7.0% to 10.5% according to research conducted by MRCA Information
Services ("MRCA") based on unit sales. Including its branded, designer and
private label offerings, the Company believes its overall share of the United
States men's dress shirt market is the largest of any single company.
The Company was incorporated in the State of Delaware in 1976 as the
successor to a business begun in 1881, and, with respect to Bass, a business
begun in 1876. The Company's principal executive offices are located at 1290
Avenue of the Americas, New York, New York 10104; its telephone number is
(212) 541-5200.
Retail Development
The decision to develop and expand its own retail operations, concurrent
with the growth of the manufacturers' outlet retailing industry, has permitted
the Company to position itself as a major value-oriented retailer. The
Company's retail operations have enabled it to increase sales by offering its
products in geographic markets where they were not previously widely
available, selling to consumers who favor value-oriented retailers and selling
products bearing its brand names and designer labels that are not marketed to
its traditional wholesale customers. As a consequence of these increased
sales, the Company has improved its overall corporate profit margins and
improved cash flow. In addition, by providing direct contact with the
consumer, the Company's stores allow it better and more directly to monitor
consumer trends and sales of its products and showcase or test market new
products.
Critical to the Company's vertically integrated strategy was the choice
of manufacturers' ("factory") outlet centers as the venue to pursue its
retailing business. Manufacturers' outlet centers, usually located in
tourist/vacation areas or on major highways to these areas, provide a large
customer base with significant disposable income and a positive attitude
toward shopping and a base of business in locations that limit conflict with
the Company's traditional wholesale customers. The development of
manufacturers' outlet centers is a key component to the success of the
Company. The success of a new outlet mall is heavily dependent on its
location and the attraction of a well known group of tenants and, therefore,
the Company actively cooperates with developers in the site and tenant
selection processes. The Company believes that as a result of its strong
presence and success in manufacturers' outlet retailing, developers seek and
welcome the Company's input into such processes.
The increased demand for the Company's products as a result of sales
through Company-owned stores permits the Company to run its factories at
higher levels of productivity, thereby lowering overall production costs and
increasing the ability of the Company to provide continuous employment for its
employees. The Company's stores also provide the opportunity to liquidate
excess and out-of-date inventory and factory "seconds", thereby substantially
reducing the need to sell such merchandise to discounters or jobbers at
severely marked down prices. The ability to control the sale of such
merchandise also prevents the damage to the image of the Company's brands
which can result when they are sold by discounters with inferior presentation
and advertising.
The Company has developed a retail component for each marketing division,
which has enhanced the Company's ability to reach a broad array of consumers
for its branded, designer and private label products. At the same time, it
has allowed the Company to expand its brands to other compatible products not
carried in its regular wholesale lines. The Company's success in expanding
the types of products available under its brand names and designer labels has
led to an increase in the product lines available in its store formats and has
enabled the Company to offer in its stores additional products which are not
available in the Company's traditional wholesale product lines. For example,
the Company now offers men's and women's sportswear and accessories in 58 of
its Bass stores. Also, the Company opened 14 stores offering Geoffrey Beene
women's wear late in the summer of 1993. In addition, the Company plans to
expand on its initial offering of a line of Bass Kids apparel merchandise in
1994.
The Company's retail formats are managed to allow each to enjoy its own
focus without infringing on the other formats, thereby enabling all formats to
co-exist in one outlet center. Thus, even though Van Heusen, Windsor Shirt
and Geoffrey Beene stores each carry the same type of men's apparel products,
each targets and markets to a different consumer base: Van Heusen - the
American brand, moderate price and moderate fashion consumer; Windsor Shirt -
the better traditional consumer; and Geoffrey Beene - the better fashion
forward consumer. In addition, all aspects of each retail format - store
design, presentation, sales personnel, packaging, product and price -
reinforce the Company's focus on value-oriented retailing to that particular
store format's target consumer.
The Company's retail stores show a high level of profitability resulting
from low overhead and staffing costs, low rental and common area maintenance
charges, short-term leases enabling exit from poorly performing stores, the
elimination of accounts receivable carrying costs as all sales are for cash or
on third party credit cards, high inventory turnover rates and low fixturing
costs. Stores in each of the Company's formats are typically profitable
within the year of opening. This is in contrast to traditional mall stores
which typically undergo a significant start-up period before becoming
profitable. Immediate cash flow generation is an important advantage of
outlet mall stores over traditional mall stores, as is the ability to build
and open stores in a comparatively short period of time.
Acquisitions
The Company intends to pursue acquisitions which would enable it to offer
quality brand name products which are marketable through both traditional
retailers and outlet stores designed around the brand names. The Company
believes that opportunities exist to acquire companies which produce products
with distinctive images which, due to distribution or other problems, are not
gaining full access to the target consumer. The Company further believes that
it can improve the distribution of such products by marketing through a
multi-channel distribution operation. The ability of the Company to acquire
product lines which can be marketed through new outlet store formats and carry
a recognized brand name which can be readily expanded into additional product
lines would provide the Company with the opportunity to increase its presence
in and its share of sales from outlet malls. While no such acquisition is
immediately contemplated, the Company is continuously reviewing and
considering possible acquisitions.
Wholesale Operations
While much of the Company's focus has been on developing the retail
aspect of its business, it has also placed significant emphasis on
strengthening its wholesale distribution operations. The Company merged the
manufacturing, warehousing, distribution, administrative and finance functions
of its shirt divisions in 1985. In 1990, the Company merged the
administrative and finance functions of its knitwear division with those of
the shirt divisions. In 1992, the Company's Bass wholesale division was
merged into this group to take advantage of the synergies between these
businesses. The Company believes that this consolidation has achieved
economies of scale and resulted in stronger operational support for each of
the wholesale divisions, while allowing each division to retain its
distinctive marketing identity.
In order to provide its customers with products covering a full range of
price points and styles, the Company has designed new branded and designer
dress shirts. For example, the Company developed the "Editions" sub-brand
under the "Van Heusen" label to cover the price point just above typical
private label shirts and created its "Cezani" line of designer shirts to fill
the niche for an all-cotton, upper moderate priced, designer dress shirt. The
Company also markets Bass dress shirts which are designed as a traditionally
styled American line. In addition, the Company has strengthened its private
label operations by increasing its design staff, developing additional private
label offerings and focusing on high volume accounts. The Company believes
that by expanding its product offerings, it enables its wholesale customers to
market to consumers brand name, designer and private label dress shirts at
various price points.
In 1993, the Company continued to expand usage of the PVH Pulse System.
This quick response system uses an electronic data interchange system which
provides a computer link between the Company and its wholesale customers that
enables both the customer and the Company to track sales, inventory and
shipments. Use of the system also reduces the amount of time it takes a
customer to determine its inventory needs and order replenishment merchandise
and for the Company to respond to the customer's order.
The Company believes that these efforts have helped strengthen its
relationships with its traditional wholesale customers, at the same time as
the Company has enhanced the image and increased the exposure of its products.
Design, Manufacturing and Sourcing
Integral to the success of the Company's growth strategy was the
development of a dependable and flexible design, manufacturing and sourcing
program. The Company formed PVH International ("PVH-I") to develop, design
and administer the manufacture and distribution of its "retail only" apparel
products. PVH-I's design and product development personnel are divided into
groups, each group having responsibility for one of the Company's apparel
store formats. This enables the PVH-I designers, working with the retail
buyers, to develop products consistent with the image of their respective
store formats. Sourcing operations are consolidated to provide for efficient
use of the Company's resources and to achieve economies of scale. By bringing
these services "in-house", the Company is able to realize certain cost savings
and maintain control of the production of "retail only" products from
conception through in-store delivery.
Once product design is complete, PVH-I sources the product and tracks it
through state-of-the-art management information systems. These systems enable
the Company to quickly respond to its customers' needs and monitor all other
aspects of inventory management. In addition, PVH-I monitors production and
the quality and timely distribution of the Company's products manufactured by
outside suppliers.
Apparel Business
The marketing of the Company's apparel products is conducted through four
separate divisions: Van Heusen; Designer; Private Label Dress and Sport
Shirts; and Knitwear. Substantially all of the Company's apparel, including
traditional wholesale products and the additional products available only in
the Company's retail stores, is designed "in-house." Approximately 35% of the
wholesale apparel products are manufactured in the Company's facilities in the
United States, Puerto Rico and the Caribbean Basin. The remaining products
are sourced through contractors throughout the world, but primarily in the Far
East.
Van Heusen
The Van Heusen Company division markets branded apparel, consisting of
men's traditional dress shirts and men's woven and knit sport shirts, in the
moderate to better price range. Van Heusen markets its products at wholesale
to major department stores and men's specialty stores nationwide, including
May Co., Younkers, JCPenney and Mercantile.
"Van Heusen" is the best-selling men's dress shirt brand in the United
States, according to research conducted by MRCA based on unit sales. "Van
Heusen's" share of the dress shirt market has risen through the years and has
increased from 7.0% in 1987 to 10.5% in 1993. The growth in sales of "Van
Heusen" shirts is the result of continued sales to traditional customers, the
commencement of sales of "Van Heusen" branded shirts to JCPenney in June 1990
and the overall growth in the number of Van Heusen outlet stores. In addition
to the "Van Heusen" label, branded products are marketed under the sub-brands
"417", "Hennessy", "Players", "Over Easy", "Corporate Casuals", "Winter-
weights" and "Editions."
Van Heusen outlet stores offer a full collection of first quality men's
traditional, classic and contemporary dress furnishings (including dress
shirts, belts, hosiery and neckwear), men's sportswear (including sports
shirts, sweaters and bottoms) and ladies sportswear (including coordinates and
separates) and men's and women's activewear. Other than men's dress shirts,
sport shirts and sweaters, such apparel is not marketed or produced for sale
to the Van Heusen division's wholesale customers.
The product mix targeted for Van Heusen stores is intended to satisfy the
key apparel needs of men from dress furnishings to casual wear, and of women
for casual wear. Van Heusen stores' merchandising strategy is focused on
achieving a classic and/or updated traditional look in a range of primarily
moderate price points. Target customers represent the broadest spectrum of
the American consumer.
Designer
The Designer Group division markets at wholesale men's designer label
dress shirts in the upper moderate to better price range to major department
stores and men's specialty stores nationwide, including Dayton Hudson,
Federated, Macy's and May Co.
The Designer Group primarily manufactures its shirts under the "Geoffrey
Beene" label through a licensing agreement with that designer, but also
markets dress shirts under the "Etienne Aigner" label and dress shirts and
neckwear under the Company-owned "Cezani" label. During 1993, this division
began selling a line of "Bass" label dress shirts. "Geoffrey Beene" shirts
are the best-selling men's designer dress shirts in the United States,
according to MRCA research.
The Company opened its first Geoffrey Beene stores in November 1990 and
has continuously expanded this format nationwide since that time. Geoffrey
Beene stores offer a distinctive collection of men's "Geoffrey Beene" labelled
designer products, including dress and sport shirts, neckwear, furnishings,
outerwear, bottoms and sportswear. As with Van Heusen outlet stores, the
products sold in Geoffrey Beene stores, other than "Geoffrey Beene" dress
shirts, consist of products which are not also sold through the Company's
wholesale distribution channels.
Through their product mix, the Geoffrey Beene stores seek to meet the
full needs of men's wardrobes (excluding suits) from dress furnishings to
casual wear. The merchandising strategy is focused on an upscale, fashion
forward consumer in the upper moderate price range.
During 1993, the Company began offering Geoffrey Beene women's wear in 14
of its stores. Stores offering these products carry a full line of women's
casual apparel bearing the designer's name. The Company plans to continue
expanding this product offering in the future.
Private Label Dress and Sport Shirts
The Pickwick Company division markets at wholesale men's dress and sport
shirts under private labels to major national retail chains, department stores
and catalog merchants, including JCPenney, Bloomingdale's, Lord & Taylor,
Lands' End, Sears and Target. The Company believes that The Pickwick Company
is one of the largest marketers of private label shirts in the United States.
Career Apparel, a division of The Pickwick Company, markets shirts to
companies in service industries, including major airlines and food chains.
Private label programs offer the retailer the ability to create its own
line of exclusive merchandise and give the retailer control over distribution
of the product. Each of The Pickwick Company's customers work with the
Company's designers to develop shirts in the styles, sizes and cuts which the
customers desire to sell in their stores with their particular store names or
private labels. The dress shirts that The Pickwick Company designs with and
for its customers fall within both the traditional and designer dress shirt
categories. Private label programs offer the consumer quality product and
offer the retailer the opportunity to enjoy higher margins. Private label
products, however, do not have the same level of consumer recognition as
branded products and private label manufacturers do not generally provide
retailers with the same services and support as branded manufacturers.
In February 1990, the Company acquired Windsor Shirt Company, a private
label retail company. Prior thereto, Windsor Shirt had been a significant
customer of The Pickwick Company.
The Company believes that Windsor Shirt fills a niche currently missing
in outlet retailing. Prior to the acquisition, Windsor Shirt operated
traditional men's dress shirt stores, primarily in regional malls and strip
centers. Since the acquisition, the Company has closed the Windsor Shirt
stores in regional malls, strip centers and other unprofitable locations, and
has focused on developing this format in a manufacturers' outlet venue. In
addition, the Company has totally reconfigured the stores and upgraded the
quality and improved the presentation of the products sold in its stores.
Windsor Shirt stores now offer a full line of men's traditional and
fashionable apparel, including dress shirts, neckwear, bottoms, sportswear,
hosiery and accessories.
The Windsor Shirt target customer is a professional male who desires
updated traditional merchandise at value prices, although its products also
appeal to a broad spectrum of consumers. The Windsor Shirt merchandising
strategy focuses on offering an assortment of traditional and fashionable
styles of men's dress furnishings and sportswear. Through attention to design
and construction details, the Company seeks to ensure that the merchandise
offered will be consistent in fashion and quality. The stores offer
merchandise in the upper moderate price ranges.
Knitwear
The Company's Somerset division is a leading manufacturer and marketer of
primarily men's private label sweaters and golf apparel. Somerset markets its
products at wholesale to traditional department and specialty stores, national
retail chains and catalog merchants, including Lands' End, JCPenney, May Co.,
L.L. Bean, Federated and Sears.
In 1993, Somerset conducted highly-successful launches of Geoffrey Beene
sweaters and Van Heusen Players golf apparel. In the prior year, Somerset
successfully introduced Van Heusen branded sweaters. The marketing of these
branded products, combined with completing a 1992 restructuring which included
a transfer of its sweater production to lower cost facilities, has improved
Somerset's operating margins in 1993.
Somerset also markets its products through the Company's own sweater and
knitwear outlet stores called "Cape Isle Knitters." Cape Isle Knitters stores
offer a select line of men's and women's knitwear products, including sweaters
and knit tops, both being complemented with pants and shorts, and hosiery.
The merchandising strategy for Cape Isle Knitters stores is focused on
achieving an updated traditional look which emphasizes easy to understand
fashion and styling. Emphasis is also placed on natural
product and timeless appeal. Stores offer merchandise in the moderate to
upper moderate price range.
Competition in the Apparel Industry
The apparel industry is highly competitive due to its fashion
orientation, its mix of large and small producers, the flow of imported
merchandise and the wide diversity of retailing methods. Competition has been
exacerbated by the recent consolidations and closings of major department
store groups. Based on the variety of the apparel marketed by the Company and
the various channels of distribution it has developed, the Company believes it
is well-positioned in the industry, although the Company has many diverse
competitors in both manufacturing and retailing.
The Company's apparel wholesale divisions experience competition in
branded, designer and private label products. Some of the larger competitors
include: Bidermann Industries ("Arrow" brand); Salant Corporation ("Perry
Ellis" and "John Henry" brands); Warnaco ("Hathaway" and "Christian Dior"
brands); Smart Shirt (private label shirt division of Kellwood); Capital
Mercury (private label shirts); Oxford Industries (private label shirts); and
VF Corporation ("Jantzen" branded sweaters). While several apparel
manufacturers currently operate outlet stores, management believes that none
offers a similar selection of product in the variety of formats offered by the
Company.
Footwear Business
The Company's footwear business, conducted through its G.H. Bass & Co.
division, consists of the manufacture and marketing of a full line of
traditional men's, women's and children's casual shoes under the "Bass" brand
name in the moderate to better price range. Various sub-brands are utilized,
the most important ones being "Weejun", "Sunjun" and "Compass." "Bass" is the
leading brand of casual shoes in the United States, according to research
conducted by Footwear Market Insights ("FMI") based on pairs of shoes sold.
FMI's research shows Bass with a 6.0% share of the casual shoe market.
Bass' traditional wholesale customers are major department stores and
specialty shoe stores throughout the United States, including Federated, May
Co., Dillard's, Macy's and Dayton Hudson. In 1992, Bass began marketing its
footwear internationally and is now selling footwear to leading retailers in
Europe, Mexico, Canada, South America and the Far East.
All of the Company's footwear is designed "in-house." Approximately 33%
of the Bass wholesale footwear products are manufactured in the Company's
facilities in the United States, Puerto Rico and the Dominican Republic, with
the remainder being sourced through manufacturers primarily located in the Far
East and Brazil.
Bass Retail operates stores located primarily in manufacturers' outlet
malls; these stores typically carry an assortment of "Bass" shoes, in the
moderate to upper moderate price range, as well as complementary products not
sold by Bass to its traditional wholesale customers. In addition, the Company
has expanded many of its Bass retail stores to sell Bass apparel and
accessories consistent with the Bass "lifestyle." As these stores have
enjoyed a strong period of initial success, the Company plans to continue
expanding the offering of Bass apparel into stores which currently offer
footwear only. To a lesser extent, the Bass Retail division operates "image"
stores, located primarily in large upscale regional malls, typically offering
a narrower assortment of "Bass" shoes than that carried in Bass Retail outlet
stores.
Bass' merchandising strategy is focused on achieving an American classic
look which emphasizes classic and traditional footwear design. The stores
emphasize the design interpretation "The Look That Never Wears Out" in
creating an image for its products.
In 1994, the Company plans to expand on its initial offering of a line of
Bass Kids apparel merchandise.
Competition in the Shoe Industry
The shoe industry is characterized by fragmented competition.
Consequently, retailers and consumers have a wide variety of choices regarding
brands, style and price. However, over the years, Bass has maintained its
important position in the traditional casual footwear market. Bass does not
compete directly in fashion footwear or performance athletic footwear. In the
casual footwear market, the Company's primary competitors include Dexter,
Rockport, Timberland, Sperry and Sebago. The Company believes, however, that
it manufactures a more extensive line of footwear for both genders and in a
broader price range than any of its competitors.
Currently, Bass Retail outlet stores have few direct footwear
competitors. Dexter, and to an even lesser extent Timberland, are the most
prominent casual footwear companies that are competing in the outlet
environment. However, multi-branded outlet footwear retailers, such as
Bannister and Little Red Shoe Store, compete on price and assortment.
Merchandise Design, Manufacturing and Product Procurement
Approximately 35% of the Company's wholesale apparel products and 33% of
its wholesale footwear products are manufactured in Company-owned facilities
while the remainder is directly sourced by the Company through suppliers
located world-wide. All of the apparel and footwear merchandise manufactured
by the Company as well as the vast majority of its sourced products are
planned and designed through the efforts of its various merchandise/product
development groups. These groups consist of designers, product line builders
and merchants who consider consumer taste, fashion, history and the economic
environment when creating a product plan for a particular season. The
Company's growing retail presence has, in addition, provided a direct means to
gauge consumer preferences which enables the Company to forecast consumer
desires more accurately. The Company's apparel and footwear retail buying
groups work closely with their wholesale counterparts to be certain that each
product classification within the Company's retail stores provides an adequate
array of merchandise to satisfy consumer demand.
Apparel and footwear product lines are developed primarily for two major
selling seasons, spring and fall. However, certain of the Company's product
lines require more frequent introductions of new merchandise, and some of the
Company's more fashionable product lines have as many as two to four
supplemental offerings.
The process from initial design to finished product varies greatly, but
generally spans nine to 12 months prior to each selling season. Raw materials
and production commitments are generally made four to 12 months prior to
production and quantities are finalized at that time. In addition, sales are
monitored regularly at both the retail and wholesale levels and modifications
in production can be made both to increase or reduce availability. The
Company's substantial efforts in the area of quick response to sales trends
(through the development of the PVH Pulse System) maximize its inventory
flexibility and minimize production overruns.
Shirts and sweaters are manufactured in the Company's domestic apparel
manufacturing facilities in Alabama, Arkansas and Puerto Rico. The Company
also operates facilities in Costa Rica, Guatemala and Honduras. Additionally,
the Company contracts for apparel merchandise with vendors principally in the
Far East, Middle East and Caribbean areas which meet its quality and cost
requirements. Footwear is manufactured in the Company's factories located in
Maine, Puerto Rico and the Dominican Republic. In addition, the Company
contracts for footwear merchandise which meet its requirements from overseas
vendors, principally in Brazil and the Far East.
The Company's foreign offices, located principally in Hong Kong, Korea,
Taiwan, Singapore and Brazil, enable the Company to monitor the quality of the
goods manufactured by, and the delivery performance of, its suppliers. The
Company continually seeks additional suppliers throughout the world for its
sourcing needs and places its orders to limit the risk that a disruption of
production at any one facility could cause a serious inventory problem. The
Company has experienced no significant production delays or difficulties in
importing goods. However, from time to time the Company has incurred added
costs by shipping goods by air freight in order for it to meet certain
delivery commitments to its customers. The Company's purchases from its
suppliers are effected through individual purchase orders specifying the price
and quantity of the items to be produced. The Company does not have any
long-term, formal arrangements with any of the suppliers which manufacture its
products. The Company believes that it is the largest customer of many of its
manufacturing suppliers and considers its relations with its suppliers to be
satisfactory. No single supplier is critical to the Company's production
needs, and the Company believes that an ample number of alternative suppliers
exist should the Company need to secure additional or replacement production
capacity.
The Company purchases raw materials, including shirting fabric, buttons,
thread, labels, yarn, piece goods and leather, from domestic and foreign
sources based on quality, pricing (including quotas and duties) and
availability factors. The Company believes it is one of the largest procurers
of shirting fabric world-wide and purchases the majority of its shirting
fabric from overseas manufacturers, due, at least in part, to decreased
domestic production. The Company monitors factors affecting textile
production and imports and remains flexible in order to exploit advantages in
obtaining materials from different suppliers and different geographic regions.
Rawhide leather for Bass' footwear products is procured mainly from domestic
suppliers. The leather used in Bass shoes is a by-product of beef production
and its availability has remained stable over the past several years as a
result of the stability of the beef market. Bass monitors the leather market
and makes purchases on the spot market or through blanket contracts with
suppliers as price trends dictate. No single supplier of raw materials is
critical to the Company's production needs and the Company believes that an
ample number of alternative suppliers exist should the Company need to secure
additional or replacement raw materials.
The Company's PVH-I division serves as the apparel design and sourcing
center for all of the apparel retail operations. PVH-I has developed
merchandising organizations (both designers and administrators) dedicated to
each apparel store format to develop and plan the apparel products which are
sold in the Company's stores but which are not marketed by the wholesale arm
of that division.
Advertising and Promotion
The Company has used national advertising to communicate the Company's
marketing message since the 1920's. The Company believes that this effort has
helped create strong brand awareness and a high recognition factor among
American consumers and has contributed to the overall success of the Company.
The Company advertises primarily in national print media including fashion,
entertainment/human interest, business, men's, women's and sports magazines.
Brand awareness is further supplemented by the Company's co-op advertising
program through which the Company and individual retailers combine their
efforts and share the cost of store radio, television and newspaper
advertisements and in-store advertising and promotional events featuring the
Company's branded products.
The Company relies upon local outlet mall developers to promote traffic
for their centers. Outlet center developers employ multiple formats including
signage (highway billboards, off-highway directional signs, on-site signage
and on-site information centers), print advertising (brochures, newspapers and
travel magazines), direct marketing (to tour bus companies and travel agents),
radio and television, and special promotions.
Trademarks
The Company has the exclusive right to use the "Van Heusen" name in
North, Central and South America as well as the Philippines, and the exclusive
worldwide right to use "Bass" for footwear. The Company has registered or
applied for registration of a multitude of other trademarks for use on a
variety of items of apparel and footwear and apparel and footwear-related
products and owns many foreign trademark registrations. It presently has
pending a number of applications for additional trademark registrations. The
Company regards its trademarks and other proprietary rights as valuable assets
and believes that they have significant value in the marketing of its
products.
Licensing
The Company is licensing the "Van Heusen" name for apparel products in
Canada and in most of the South and Central American countries. In the United
States, the Company currently licenses the use of the "Van Heusen" name for
various products that it does not manufacture or procure, including boy's
apparel, sleepwear, eyeglasses, neckwear and other accessories and is
exploring the possibility of licensing the name for use on other products.
The Company also has a licensing and distribution agreement for "Bass"
footwear in Japan.
Retail Stores
As of January 30, 1994, the Company operated 780 stores in five different
formats: Van Heusen, Bass, Geoffrey Beene, Windsor Shirt and Cape Isle
Knitters. The Company's stores are located primarily in manufacturers' outlet
malls, except for the Bass Retail "image" stores. Store layouts and designs
differ among the five retail formats in order to maximize the effectiveness of
the product and pricing strategy directed toward each format's specific target
customer.
Historically, the geographic dispersement of the Company's retail stores
has been focused in the northeast and southeast regions of the United States.
As outlet mall retailing in these areas is maturing, it is the Company's
intent to focus on opening new stores throughout other regions of the United
States. Primary emphasis will be on the western part of the United States,
although the Company will continue to "back-fill" stores in outlet malls in
the northeastern and southeastern parts of the United States.
Manufacturers' outlet malls are a growing segment of the retail industry,
and the Company is a leading operator of outlet mall stores. Other branded
apparel manufacturers who have entered the outlet mall sector include Ralph
Lauren, Liz Claiborne, Bugle Boy, Gant, Izod, J. Crew, Jockey, Donna Karan,
Leslie Fay, Jones New York, Nautica, Tommy Hilfiger, Calvin Klein and Anne
Klein.
The following table sets forth the number of openings and closings of the
Company's retail stores by fiscal year since 1989 and the number of stores
operated at the end of each fiscal year:
Fiscal Fiscal Fiscal Fiscal Fiscal
1993 1992 1991 1990(1) 1989
Store openings:. . . . . . . . . . . . 126 116 126 166 93
Store closings:. . . . . . . . . . . . 51 47 40 40 33
Total stores operated at year end: . . 780 705 636 550 424
(1) Includes 46 Windsor Shirt stores acquired during fiscal 1990.
The Company plans to add an additional 101 stores in fiscal 1994 (net of
store closings). To meet this growth goal, the Company must be able to open
multiple stores in new malls, "back-fill" its store formats in a sufficient
number of existing outlet malls and/or develop new store formats. The primary
short-term source of the Company's retail expansion will be the opening of
multiple store formats in new malls. There are currently approximately 40 new
malls (including mall additions) scheduled to open in 1994 and the Company
intends to feature several store formats in almost all of them. A large
portion of the retail expansion will come from these new malls and existing
mall expansions. In addition, retail expansion will come from "back-filling",
which entails adding one or more of the Company's store formats to malls in
which the Company already operates stores in one or more other formats.
Future growth will also come from the development of new store formats, such
as the Geoffrey Beene stores offering casual apparel for women which opened
late in the summer of 1993. The addition of these, as well as any other new
formats will provide the Company with the opportunity to increase the number
of stores the Company operates in existing and new malls. Performance of all
stores is reviewed on a regular basis, and poorly performing stores are closed
when appropriate.
The Company maintains a real estate department which works with the store
planning and design department in opening new stores. The real estate
department locates appropriate sites based on information regarding area
demographics, model store size, available lease arrangements and projected
volume and operating returns. In preparation for opening, the store planning
and design department coordinates interior plans with landlords, division
heads, contractors and developers. As construction is completed, a project
manager supervises fixture installation as well as ensures the quality
workmanship demanded by the Company. Field management then begins the
merchandising process. All of these efforts culminate with the opening of
each new store.
The retail distribution strategy has evolved to allow the Company the
opportunity to market directly to consumers while limiting the disruption of
sales to the Company's traditional wholesale customers by locating primarily
in manufacturers' outlet malls in locations such as tourist destination areas.
As a leading outlet retailer, the Company has the ability to secure favorable
lease terms and locations for its stores.
The Company's plans with respect to expansion are frequently reviewed and
revised in light of changing conditions. It is possible that not all of the
plans described above will be completed and that other projects may be added.
Tariffs and Import Restrictions
A substantial portion of the Company's products are manufactured by
contractors located outside the United States. These products are imported
and are subject to United States Customs laws, which impose tariffs as well as
import quota restrictions established by the Department of Commerce. However,
a significant portion of the Company's apparel products are imported from its
Caribbean Basin manufacturing facilities and are therefore eligible for
certain duty-advantaged programs commonly known as "807 Programs." While
importation of goods from certain countries from which the Company obtains
goods may be subject to embargo by United States Customs authorities if
shipments exceed quota limits, the Company closely monitors import quotas and
can, in most cases, shift production to contractors located in countries with
available quotas or to domestic manufacturing facilities. The existence of
import quotas has, therefore, not had a material effect on the Company's
business.
Employees
The Company currently employs approximately 10,200 persons on a full-time
basis and approximately 2,900 persons on a part-time basis. Of the
approximately 13,100 persons employed by the Company, 66% are employed in the
apparel business, 32% are employed in the footwear business and 2% are
corporate employees. Approximately 4% of the Company's total employees are
represented for the purpose of collective bargaining with three different
unions. Additional persons, some represented by these three unions, are
employed from time to time based upon the Company's manufacturing schedules
and retailing seasonal needs. The Company believes that its relations with
its employees are satisfactory.
Item 2. Properties
The Company maintains its principal executive offices at 1290 Avenue of
the Americas, New York, New York, occupying approximately 80,000 square feet
under a sub-lease which expires on December 30, 1998. The Company also
maintains an administrative facility in Bridgewater, New Jersey, where the
Company occupies a building of approximately 153,000 square feet under a lease
which expires on July 30, 2007. The following tables summarize the other
manufacturing facilities, warehouses and distribution centers, administrative
offices and retail stores of the Company:
Apparel Business
Square Feet of
Floor Space (000's)
Owned Leased Total
Manufacturing Facilities . . . . . . . . . . . . . . 276 329 605
Warehouses and Distribution Centers. . . . . . . . . 815 568 1,383
Administrative . . . . . . . . . . . . . . . . . . . 0 65 65
Retail Stores. . . . . . . . . . . . . . . . . . . . 0 1,619 1,619
1,091 2,581 3,672
Footwear Business
Owned Leased Total
Manufacturing Facilities . . . . . . . . . . . . . . 274 115 389
Warehouses and Distribution Centers. . . . . . . . . 127 184 311
Administrative . . . . . . . . . . . . . . . . . . . 20 138 158
Retail Stores. . . . . . . . . . . . . . . . . . . . 9 1,138 1,147
430 1,575 2,005
Leases for these apparel and footwear facilities have expiration dates
through December 2003. Information with respect to minimum annual rental
commitments under leases in which the Company is a lessee is incorporated
herein by reference to the note entitled "Leases" in the Notes to Consolidated
Financial Statements incorporated by reference in Item 8 of this report.
Item 3. Legal Proceedings
The Company is a party to certain litigation which, in the Company's
judgment based on the opinion of legal counsel, will not have a material
adverse effect on the Company's financial position.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Executive Officers of the Registrant
The following table sets forth certain information concerning the
Company's Executive Officers:
Name Position Age
Lawrence S. Phillips Chairman of the Board of Directors 67
Bruce J. Klatsky President; Chief Executive Officer; Director 45
Irwin W. Winter Vice President, Finance; Chief Financial Officer;
Director 60
Walter T. Rossi Chairman, PVH Retail Group 51
Allen E. Sirkin Chairman, The PVH Apparel Group 51
Mark Weber Vice President; President of PVH International 45
Mr. Lawrence S. Phillips has been employed by the Company in various
capacities over the last 46 years, and has been Chairman of the Company for
more than the past five years. Mr. Phillips has served as a director of the
Company since 1951.
Mr. Bruce J. Klatsky has been employed by the Company in various
capacities over the last 22 years, and has been President of the Company since
1987. Mr. Klatsky has served as a director of the Company since 1985 and was
named Chief Executive Officer in June of 1993.
Mr. Irwin W. Winter joined the Company in July 1987 as Vice President,
Finance and Chief Financial Officer. Mr. Winter has served as a director of
the Company since 1987.
Mr. Walter T. Rossi joined the Company in November of 1992 as Chairman,
PVH Retail Group. For more than the last five years prior to joining the
Company, he served as Chairman and CEO of Mervyn's, a division of Dayton
Hudson.
Mr. Allen E. Sirkin has been employed by the Company since 1985. From
1988 to 1990, he was President of The Van Heusen Company and The Designer
Group. He has served as Chairman, The PVH Apparel Group since 1990.
Mr. Mark Weber has been employed by the Company in various capacities
over the last 22 years, and has been Vice President of the Company since 1988
and President of PVH International since 1989.
PART II
Item 5. Market for Registrant's Common Stock and Related Security Holder
Matters
Information with respect to the market for the Company's common stock and
related security holder matters which appears under the heading "Selected
Quarterly Financial Data" in the 1993 Annual Report to Stockholders, is
incorporated herein by reference.
Item 6. Selected Financial Data
Selected Financial Data which appears under the heading "Seven Year
Financial Summary" in the 1993 Annual Report to Stockholders, is incorporated
herein by reference.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Management's Discussion and Analysis of Financial Condition and Results
of Operations which appears under the heading "Financial Review" in the 1993
Annual Report to Stockholders, is incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data
The consolidated financial statements, which appear in the 1993 Annual
Report to Stockholders, are incorporated herein by reference.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
The information required by Item 10 is incorporated herein by reference
to the section entitled "Election of Directors" of the Company's proxy
statement for the Annual Meeting of Stockholders to be held on June 14, 1994.
Item 11. Executive Compensation
Information with respect to Executive Compensation is incorporated herein
by reference to the sections entitled "Executive Compensation", "Compensation
Committee Report on Executive Compensation" and "Performance Graph" of the
Company's proxy statement for the Annual Meeting of Stockholders to be held on
June 14, 1994.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Information with respect to the Security Ownership of Certain Beneficial
Owners and Management is incorporated herein by reference to the section
entitled "Security Ownership of Certain Beneficial Owners and Management" of
the Company's proxy statement for the Annual Meeting of Stockholders to be
held on June 14, 1994.
Item 13. Certain Relationships and Related Transactions
Information with respect to Certain Relationships and Related
Transactions is incorporated herein by reference to the sections entitled
"Election of Directors" and "Compensation of Directors" of the Company's proxy
statement for the Annual Meeting of Stockholders to be held on June 14, 1994.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a)(1) The following consolidated financial statements are incorporated by
reference in Item 8 of this report:
Consolidated Statements of Income--Years Ended January 30, 1994,
January 31, 1993 and February 2, 1992
Consolidated Balance Sheets--January 30, 1994 and January 31, 1993
Consolidated Statements of Cash Flows--Years Ended January 30, 1994,
January 31, 1993 and February 2, 1992
Consolidated Statements of Changes in Common Stockholders' Equity--
Years Ended January 30, 1994, January 31, 1993 and February 2, 1992
Notes to Consolidated Financial Statements
(a)(2) See page F-1 for a listing of financial statement schedules submitted
as part of this report.
(a)(3) The following exhibits are included in this report:
Exhibit
Number
3.1 Certificate of Incorporation (incorporated by reference to Exhibit
5 to the Company's Annual Report on Form 10-K for the fiscal year
ended January 29, 1977).
3.2 Amendment to Certificate of Incorporation, filed June 27, 1984
(incorporated by reference to Exhibit 3B to the Company's Annual
Report on Form 10-K for the fiscal year ended February 3, 1985).
3.3 Amendment to Certificate of Incorporation, filed June 2, 1987
(incorporated by reference to Exhibit 3(c) to the Company's Annual
Report on Form 10-K for the fiscal year ended January 31, 1988).
3.4 Amendment to Certificate of Incorporation, filed September 4, 1992.
3.5 Amendment to Certificate of Incorporation, filed June 1, 1993.
3.6 By-Laws of PVH (incorporated by reference to Exhibit 6 to the
Company's Annual Report on Form 10-K for the fiscal year ended
January 29, 1977).
3.7 Amendment to Section 4 of Article II of the By-Laws of PVH
(incorporated by reference to Exhibit 28.3 to the Company's Report
on Form 8-K filed on September 5, 1987).
4.1 Specimen of Common Stock certificate (incorporated by reference to
Exhibit 4 to the Company's Annual Report on Form 10-K for the
fiscal year ended January 31, 1981).
4.2 Preferred Stock Purchase Rights Agreement (the "Rights Agreement"),
dated June 10, 1986 between PVH and The Chase Manhattan Bank, N.A.
(incorporated by reference to Exhibit 3 to the Company's Quarterly
Report as filed on Form 10-Q for the period ended May 4, 1986).
4.3 Amendment to the Rights Agreement, dated March 31, 1987 between PVH
and The Chase Manhattan Bank, N.A. (incorporated by reference to
Exhibit 4(c) to the Company's Annual Report on Form 10-K for the
year ended February 2, 1987).
Exhibit
Number
4.4 Supplemental Rights Agreement and Second Amendment to the Rights
Agreement, dated as of July 30, 1987, between PVH and The Chase
Manhattan Bank, N.A. (incorporated by reference to Exhibit (c)(4)
to the Company's Schedule 13E-4, Issuer Tender Offer Statement,
dated July 31,1987).
4.5 Credit Agreement, dated as of December 16, 1993, among PVH, Bankers
Trust Company, The Chase Manhattan Bank, N.A., Citibank, N.A., The
Bank of New York, Chemical Bank and Philadelphia National Bank, and
Bankers Trust Company, as agent.
4.6 Note Agreement, dated October 1, 1992, among PVH, The Equitable
Life Assurance Society of the United States, Equitable Variable
Life Insurance Company, Unum Life Insurance Company of America,
Nationwide Life Insurance Company, Employers Life Insurance Company
of Wausau and Lutheran Brotherhood (incorporated by reference to
Exhibit 4.21 to the Company's Annual Report on Form 10-K for the
fiscal year ended January 31, 1993).
4.7 Indenture, dated as of November 1, 1993, between PVH and The Bank
of New York, as Trustee (incorporated by reference to Exhibit 4.01
to the company's Registration Statement on Form S-3 (Reg. No. 33-
50751) filed on October 26, 1993).
10.1 Sublease, dated as of August 5, 1987, between Telemundo Group, Inc.
and PVH (incorporated by reference to Exhibit 28.2 to the Company's
Report on Form 8-K filed on September 5, 1987).
* 10.2 1987 Stock Option Plan, including all amendments through March 30,
1993.
* 10.3 1973 Employees' Stock Option Plan (incorporated by reference to
Exhibit 1 to the Company's Registration Statement on Form S-8 (Reg.
No. 2-72959) filed on July 15, 1981).
* 10.4 Supplement to 1973 Employees' Stock Option Plan (incorporated by
reference to the Company's Prospectus filed pursuant to Rule 424(c)
to the Registration Statement on Form S-8 (Reg. No. 2-72959) filed
on March 31, 1982).
* 10.5 Phillips-Van Heusen Corporation Special Severance Benefit Plan
(incorporated by reference to the Company's Report on Form 8-K
filed on January 16, 1987).
* 10.6 Phillips-Van Heusen Corporation Capital Accumulation Plan
(incorporated by reference to the Company's Report on Form 8-K
filed on January 16, 1987).
* 10.7 Phillips-Van Heusen Corporation Amendment to Capital Accumulation
Plan (incorporated by reference to Exhibit 10(n) to the Company's
Annual Report on Form 10-K for the fiscal year ended February 2,
1987).
* 10.8 Form of Agreement amending Phillips-Van Heusen Corporation Capital
Accumulation Plan with respect to individual participants
(incorporated by reference to Exhibit 10(1) to the Company's
Annual Report on Form 10-K for the fiscal year ended January 31,
1988).
* 10.9 Phillips-Van Heusen Corporation Supplemental Defined Benefit Plan,
dated January 1, 1991, as amended and restated on June 2, 1992
(incorporated by reference to Exhibit 10.10 to the Company's Annual
Report on Form 10-K for the fiscal year ended January 31, 1993).
Exhibit
Number
* 10.10 Phillips-Van Heusen Corporation Supplemental Savings Plan, dated as
of January 1, 1991 and amended and restated as of January 1, 1992
(incorporated by reference to Exhibit 10.29 to the Company's Annual
Report on Form 10-K for the fiscal year ended February 2, 1992).
11. Statement re: Computation of Earnings Per Share.
13. Sections of the 1993 Annual Report to Stockholders for the fiscal
year ended January 30, 1994 which are included in Parts I and II of
this Form 10-K. These sections are Selected Quarterly Financial
Data, Seven Year Financial Summary, Financial Review and the
consolidated financial statements.
21. Subsidiaries of the Company.
24. Consent of Independent Auditors.
(b) The Company filed no reports on Form 8-K during the fourth quarter of the
fiscal year ended January 30, 1994.
(c) Exhibits: See (a)(3) above for a listing of the exhibits included as part
of this report.
(d) Financial Statement Schedules: See page F-1 for a listing of the
financial statement schedules submitted as part of this report.
(e) The Company agrees to furnish to the Commission upon request a copy of
each agreement with respect to long-term debt where the total amount of
securities authorized thereunder does not exceed 10% of the total
consolidated assets of the Company.
* Management contract or compensatory plan or arrangement required to be
filed as an exhibit to this form pursuant to Item 14(c) of this report.
FORM 10-K-ITEM 14(a)(2)
PHILLIPS-VAN HEUSEN CORPORATION
INDEX TO FINANCIAL STATEMENT SCHEDULES
The following consolidated financial statement schedules of Phillips-Van
Heusen Corporation and subsidiaries are included herein:
Schedule II - Amounts Receivable from Related Parties
and Underwriters, Promoters and Employees
Other Than Related Parties . . . . . . . . . . . F-2
Schedule VIII - Valuation and Qualifying Accounts. . . . . . . . F-3
Schedule IX - Short-Term Borrowings. . . . . . . . . . . . . . F-6
Schedule X - Supplementary Income Statement Information . . . F-7
All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are not
required under the related instructions or are inapplicable and therefore have
been omitted.
F-1
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
PHILLIPS-VAN HEUSEN CORPORATION
Bruce J. Klatsky
By:..................................
Bruce J. Klatsky
President, Chief Executive
Officer and Director
Date: April 19, 1994
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature Title Date
Lawrence S. Phillips Chairman of the Board of Directors April 19, 1994
Lawrence S. Phillips
Bruce J. Klatsky President, Chief Executive Officer April 19, 1994
Bruce J. Klatsky and Director (Principal Executive
Officer)
Irwin W. Winter Vice President, Finance and April 19, 1994
Irwin W. Winter Director (Principal Financial
Officer)
Emanuel Chirico Vice President and Controller April 19, 1994
Emanuel Chirico (Principal Accounting Officer)
Edward H. Cohen Director April 19, 1994
Edward H. Cohen
Estelle Ellis Director April 19, 1994
Estelle Ellis
Joseph B. Fuller Director April 19, 1994
Joseph B. Fuller
Maria Elena Lagomasino Director April 19, 1994
Maria Elena Lagomasino
Bruce Maggin Director April 19, 1994
Bruce Maggin
Ellis E. Meredith Director April 19, 1994
Ellis E. Meredith
Steven L. Osterweis Director April 19, 1994
Steven L. Osterweis
William S. Scolnick Director April 19, 1994
William S. Scolnick
Peter J. Solomon Director April 19, 1994
Peter J. Solomon
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
PHILLIPS-VAN HEUSEN CORPORATION
By:..................................
Bruce J. Klatsky
President, Chief Executive
Officer and Director
Date: April , 1994
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature Title Date
Chairman of the Board of Directors April , 1994
Lawrence S. Phillips
President, Chief Executive Officer April , 1994
Bruce J. Klatsky and Director (Principal Executive
Officer)
Vice President, Finance and April , 1994
Irwin W. Winter Director (Principal Financial
Officer)
Vice President and Controller April , 1994
Emanuel Chirico (Principal Accounting Officer)
Director April , 1994
Edward H. Cohen
Director April , 1994
Estelle Ellis
Director April , 1994
Joseph B. Fuller
Director April , 1994
Maria Elena Lagomasino
Director April , 1994
Bruce Maggin
Director April , 1994
Ellis E. Meredith
Director April , 1994
Steven L. Osterweis
Director April , 1994
William S. Scolnick
Director April , 1994
Peter J. Solomon
SCHEDULE II
PHILLIPS-VAN HEUSEN CORPORATION
AMOUNTS RECEIVABLE FROM RELATED PARTIES
AND UNDERWRITERS, PROMOTERS AND EMPLOYEES OTHER
THAN RELATED PARTIES
Column A Column B Column C Column D Column E
Balance at Deductions Balance at
Beginning Amounts Amounts End of Period
Name of Debtor of Period Additions Collected Written Off Current Non Current
Year ended January 30, 1994:
Note Receivable:
Paul A. Rubin (a) $236,965 $ - $236,965 $ - $ - $ -
Bruce J. Klatsky (b) $ - $278,351 $ - $ - $278,351 $ -
Year ended January 31, 1993:
Note Receivable:
Paul A. Rubin (a) $ - $240,000 $ 3,035 $ - $236,965 $ -
Year ended February 2, 1992: $ - $ - $ - $ - $ - $ -
(a) -- Promissory note with interest at 9.75%, which was repaid in full during 1993.
(b) -- Promissory note with interest at 7.50%, due July 31, 1994.
F-2
PHILLIPS-VAN HEUSEN CORPORATION
VALUATION AND QUALIFYING ACCOUNTS
Year Ended January 30, 1994
Column A Column B Column C Column D Column E
Additions
Balance at Charged to Charged to Balance
Beginning Costs and Other at End
Description of Period Expense Accounts Deductions of Period
Allowances deducted from
asset accounts:
Allowance for discounts . . . . . $ 19,000 $ - $ - $ 19,000(a)$ -
Allowance for doubtful
accounts. . . . . . . . . . . . 2,311,500 79,228(b) 224,594(c) 444,255(d) 2,171,067
$ 2,330,500 $ 79,228 $224,594 $463,255 $2,171,067
(a) Allowance reversed since no discounts were given to customers in 1993.
(b) Provisions for doubtful accounts.
(c) Recoveries of doubtful accounts previously written off.
(d) Primarily uncollectible accounts charged against the allowance provided therefor.
F-3
PHILLIPS-VAN HEUSEN CORPORATION
VALUATION AND QUALIFYING ACCOUNTS
Year Ended January 31, 1993
Column A Column B Column C Column D Column E
Additions
Balance at Charged to Charged to Balance
Beginning Costs and Other at End
Description of Period Expense Accounts Deductions of Period
Allowances deducted from
asset accounts:
Allowance for discounts . . . . . $ 7,500 $ 21,245(a) $ - $ 9,745(b) $ 19,000
Allowance for doubtful
accounts. . . . . . . . . . . . 2,269,500 859,385(c) 96,074(d) 913,459(e) 2,311,500
$ 2,277,000 $ 880,630 $ 96,074 $ 923,204 $2,330,500
(a) Provision for discounts, deducted from gross sales.
(b) Cash discounts allowed to customers.
(c) Provisions for doubtful accounts.
(d) Recoveries of doubtful accounts previously written off.
(e) Primarily uncollectible accounts charged against the allowance provided therefor.
F-4
PHILLIPS-VAN HEUSEN CORPORATION
VALUATION AND QUALIFYING ACCOUNTS
Year Ended February 2, 1992
Column A Column B Column C Column D Column E
Additions
Balance at Charged to Charged to Balance
Beginning Costs and Other at End
Description of Period Expense Accounts Deductions of Period
Allowances deducted from
asset accounts:
Allowance for discounts . . . . . $ 40,000 $ 19,390(a) $ - $ 51,890(b) $ 7,500
Allowance for doubtful
accounts. . . . . . . . . . . . 2,113,000 901,369(c) 9,886(d) 754,755(e) 2,269,500
$ 2,153,000 $ 920,759 $ 9,886 $ 806,645 $ 2,277,000
(a) Provision for discounts, deducted from gross sales.
(b) Cash discounts allowed to customers.
(c) Provisions for doubtful accounts.
(d) Recoveries of doubtful accounts previously written off.
(e) Primarily uncollectible accounts charged against the allowance provided therefor.
F-5
PHILLIPS-VAN HEUSEN CORPORATION
SHORT-TERM BORROWINGS
Column A Column B Column C Column D Column E Column F
Average
Maximum Amount Weighted
Weighted Amount Outstanding Average
Balance At Average Outstanding During Interest Rate
Category of Aggregate End Interest During the During
Short-Term Borrowing of Period Rate the Period Period(a) the Period(b)
Year ended January 30, 1994:
Revolving Credit Facility . . . .$ - - $41,600,000 $ 7,211,000 4.80%
Year ended January 31, 1993:
Revolving Credit Facility . . . .$ - - $80,100,000 $35,271,000 5.34%
Year ended February 2, 1992:
Revolving Credit Facility . . . . $ 2,200,000 6.19% $69,400,000 $33,336,000 7.46%
(a) The average amount outstanding during the period was computed on a daily basis.
(b) The weighted average interest rate during the period was computed by dividing the actual interest expense
by the average revolving credit balance outstanding.
F-6
PHILLIPS-VAN HEUSEN CORPORATION
SUPPLEMENTARY INCOME STATEMENT INFORMATION
Column A Column B
Charged to Costs and Expenses
Item (a) 1993 1992 1991
Advertising costs . . . . . . . . . . . . . . . . . . . . . . . . . $15,614,645 $13,791,282 $13,040,837
(a) Amounts for other items are not presented as such amounts are less than 1% of net sales.
F-7
EXHIBIT 11
PHILLIPS-VAN HEUSEN CORPORATION
COMPUTATION OF EARNINGS PER COMMON SHARE
(In thousands, except per share amounts)
1993 1992 1991
Primary:
Earnings before extraordinary loss. . . . . . . . . . . . . . . . . . . . . . . $ 43,252 $37,881 $31,137
Extraordinary loss, net of tax. . . . . . . . . . . . . . . . . . . . . . . . . (11,394) - -
Net Income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31,858 37,881 31,137
Preferred stock dividend. . . . . . . . . . . . . . . . . . . . . . . . . . . . - 2,138 8,190
Net income, common shares. . . . . . . . . . . . . . . . . . . . . . . . . . $ 31,858 $35,743 $22,947
Common shares and common share equivalents:
Weighted average number of shares outstanding. . . . . . . . . . . . . . . . 26,142 23,766 18,552
Shares issuable upon exercise of dilutive common stock options,
net of shares assumed to be repurchased (at the average
period market price) out of proceeds obtained therefrom . . . . . . . . . 964 1,487 1,345
Total common shares and common share equivalents . . . . . . . . . . . . . . 27,106 25,253 19,897
Income per common share and common share equivalents before
extraordinary loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1.60 $ 1.42 $ 1.15
Extraordinary loss per common share and common share equivalents. . . . . . . . (0.42) - -
Net income per common share and common share equivalents . . . . . . . . . .$ 1.18 $ 1.42 $ 1.15
Fully diluted:
Net Income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 31,858 $37,881 $31,137
Total common shares and common share equivalents (see above). . . . . . . . . . 27,106 25,253 19,897
Additional shares issuable upon conversion of redeemable
preferred stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 1,314 5,200
and the exercise of dilutive common stock options, net of shares
assumed to be repurchased (at the greater of average period or
period end market price) . . . . . . . . . . . . . . . . . . . . . . . . . . 18 26 214
Total common shares and common share equivalents assuming
full dilution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,124 26,593 25,311
Net income per common share and common share equivalents. . . . . . . . . (1) (1) (1)
(1) Amounts not shown since results are either not materially different from primary net income per
common share or are anti-dilutive.
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
The following table lists all of the subsidiaries of the Company and the
jurisdiction of incorporation of each subsidiary. Except as otherwise
indicated, each subsidiary does business under its corporate name indicated in
the table.
Name State or Other Jurisdiction of Incorporation
G. H. Bass Franchises Inc. Delaware
G. H. Bass Caribbean Inc. Delaware
Caribe M&I Ltd. Cayman Islands
GHB (Far East) Limited Hong Kong
Van Heusen Transportation
Corporation Delaware
Tejidos De Coamo, Inc. Delaware
Envoy Pacific Limited Hong Kong
Towell Import & Export Limited Hong Kong
Abese Limited Hong Kong
Confecciones Imperio, S.A. Costa Rica
Camisas Modernas, S.A. Guatemala
G. H. Bass Comercio
Exportacacao Ltda. Brazil
Windsor Shirt Company Pennsylvania
EXHIBIT 24
Consent of Independent Auditors
We consent to the incorporation by reference in this Annual Report on Form
10-K of Phillips-Van Heusen Corporation of our report dated March 17, 1994,
included in the Annual Report to Stockholders of Phillips-Van Heusen
Corporation.
Our audits also included the financial statement schedules of Phillips-Van
Heusen Corporation listed in Item 14(a). These schedules are the
responsibility of the Company's management. Our responsibility is to express
an opinion based on our audits. In our opinion, the financial statement
schedules referred to above, when considered in relation to the basic
financial statements taken as a whole, present fairly in all material respects
the information set forth herein.
We also consent to the incorporation by reference in the Registration
Statement (Form S-3 No. 33-46770), Registration Statement (From S-8
No. 33-59602), Registration Statement (Form S-8 No. 33-38698), Post-Effective
amendment No. 1 to the Registration Statement (Form S-8 No. 33-24057), Post-
Effective amendment No. 2 to the Registration Statement (Form S-8 No.
2-73803), Post-Effective amendment No. 4 to the Registration Statement (Form
S-8 No. 2-72959), Post-Effective amendment No. 6 to the Registration Statement
(Form S-8 No. 2-64564), and Post-Effective amendment No. 13 to the
Registration Statement (Form S-8 No. 2-47910), of Phillips-Van Heusen
Corporation and in the related Prospectuses of our report dated March 17,
1994, with respect to the consolidated financial statements and schedules of
Phillips-Van Heusen Corporation included in this Form 10-K for the year ended
January 30, 1994.
ERNST & YOUNG
New York, New York
April 26, 1994
CERTIFICATE ELIMINATING REFERENCE
TO
SERIES B CUMULATIVE CONVERTIBLE PREFERRED STOCK
FROM
CERTIFICATE OF INCORPORATION
OF
PHILLIPS-VAN HEUSEN CORPORATION
(Pursuant to Section 151(g) of the
General Corporation Law of the State of Delaware)
The undersigned, in order to eliminate reference to the
Series B Cumulative Convertible Preferred Stock from the
Certificate of Incorporation of Phillips-Van Heusen Corporation,
pursuant to Section 151(g) of the General Corporation Law of the
State of Delaware, do hereby certify as follows:
FIRST: The name of the corporation is Phillips-Van
Heusen Corporation (the "Corporation").
SECOND: This certificate relates to the "Certificate
of Designation of Series B Cumulative Convertible Preferred Stock
of Phillips-Van Heusen Corporation" filed with the Secretary of
State of Delaware on July 30, 1987, which sets forth a resolution
adopted by the Corporation's Board of Directors providing for the
designation, amount, voting powers, preferences and relative,
participating, optional and other special rights of the Series B
Cumulative Convertible Stock.
THIRD: The Board of Directors of the Corporation has
adopted the following resolutions:
RESOLVED, that none of the authorized shares of the
Series B Cumulative Convertible Preferred Stock of the
Corporation (the "Series B Preferred Stock"), designated
pursuant to the "Certificate of Designation of Series B
Cumulative Convertible Preferred Stock of Phillips-Van
Heusen Corporation" filed with the Secretary of State of
Delaware on July 30, 1987, are outstanding.
RESOLVED, that no additional shares of the Series B
Preferred Stock will be issued subject to the aforementioned
Certificate of Designation; and
RESOLVED, that each of the appropriate officers of the
Corporation be, and each of them hereby is, authorized,
directed and empowered to execute, deliver, certify and
file, on behalf and in the name of the Corporation, a
certificate stating forth these resolutions with the
Secretary of State of Delaware pursuant to Section 151(g) of
the General Corporation Law of the State of Delaware for the
purpose of eliminating from the Corporation's certificate of
incorporation all reference to the Series B Preferred Stock.
In WITNESS WHEREOF, the undersigned have executed this
Certificate and affirm, under penalties of perjury, that this
instrument is the act and deed of the Corporation, and the facts
stated herein are true.
Dated this 4th day of September, 1992.
Vice President
Attest:
Secretary
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
PHILLIPS-VAN HEUSEN CORPORATION
Under Section 242 of the
General Corporation Law of the State of Delaware
The undersigned, President and Secretary, respectively, of
PHILLIPS-VAN HEUSEN CORPORATION (the "Corporation"), a
corporation organized and existing under and by virtue of the
General Corporation Law of the State of Delaware, do hereby
certify as follows:
FIRST: Part A of Article FOURTH of the Certificate of
Incorporation of the Corporation shall be amended to read:
"The total number of shares of all classes of
stock which the Corporation shall have authority to
issue is 100,150,000. 150,000 of said shares shall be
of the par value of $100 each and shall be designated
Preferred Stock and 100,000,000 of said shares shall be
of the par value of $1 each and shall be designated
Common Stock."
SECOND: Such amendment has been duly approved in accordance
with the provisions of Section 242 of the General Corporation Law
by the Board of Directors of the Corporation and by a majority of
the outstanding common stock of the Corporation (the only
outstanding stock entitled to vote thereon).
IN WITNESS WHEREOF, the undersigned have executed this
Certificate and affirm, under penalties of perjury, that the
instrument is the act or deed of the undersigned and the facts
stated herein are true.
Dated this 1st day of June, 1993.
Bruce J. Klatsky, President
ATTEST:
Pamela N. Hootkin, Secretary
CONFORMED COPY
CREDIT AGREEMENT
among
PHILLIPS-VAN HEUSEN CORPORATION,
VARIOUS BANKS,
and
BANKERS TRUST COMPANY,
as AGENT
Dated as of December 16, 1993
$250,000,000
TABLE OF CONTENTS
Page
SECTION 1. Amount and Terms of Loans . . . . . . . . . 1
1.01 Commitments. . . . . . . . . . . . . . . . . 1
1.02 Minimum Amount of Each Borrowing . . . . . . 2
1.03 Notice of Borrowing of Revolving Loans . . . 2
1.04 Competitive Bid Borrowings . . . . . . . . . 3
1.05 Disbursement of Funds. . . . . . . . . . . . 5
1.06 Notes; Register. . . . . . . . . . . . . . . 6
1.07 Conversions. . . . . . . . . . . . . . . . . 7
1.08 Pro Rata Borrowings. . . . . . . . . . . . . 8
1.09 Interest . . . . . . . . . . . . . . . . . . 8
1.10 Interest Periods . . . . . . . . . . . . . . 9
1.11 Increased Costs, Illegality, etc.. . . . . . 11
1.12 Compensation . . . . . . . . . . . . . . . . 13
1.13 Change of Lending Office . . . . . . . . . . 14
1.14 Replacement of Banks . . . . . . . . . . . . 15
SECTION 2. Letters of Credit . . . . . . . . . . . . . 16
2.01 Letters of Credit. . . . . . . . . . . . . . 16
2.02 Letter of Credit Applications. . . . . . . . 16
2.03 Letter of Credit Participations. . . . . . . 17
2.04 Agreement to Repay Letter of Credit Draw-
ings . . . . . . . . . . . . . . . . . . . 20
2.05 Increased Costs. . . . . . . . . . . . . . . 21
2.06 Extension of Letter of Credit Expiry Date. . 22
2.07 Letter of Credit Issuer Reporting Require-
ments. . . . . . . . . . . . . . . . . . . 22
SECTION 3. Fees; Commitments . . . . . . . . . . . . . 23
3.01 Fees . . . . . . . . . . . . . . . . . . . . 23
3.02 Voluntary Reduction of Commitments . . . . . 25
3.03 Mandatory Reduction of Commitments . . . . . 25
SECTION 4. Payments. . . . . . . . . . . . . . . . . . 25
4.01 Voluntary Prepayments. . . . . . . . . . . . 25
4.02 Mandatory Prepayments. . . . . . . . . . . . 26
4.03 Method and Place of Payment. . . . . . . . . 27
4.04 Net Payments . . . . . . . . . . . . . . . . 27
4.05 Contingent Prepayments . . . . . . . . . . . 28
(i)
SECTION 5. Conditions Precedent. . . . . . . . . . . . 29
5.01 Conditions to Effectiveness. . . . . . . . . 29
5.02 Conditions Precedent to Each Credit Event. . 31
SECTION 6. Representations, Warranties and Agree-
ments. . . . . . . . . . . . . . . . . . . . . . . 32
6.01 Corporate Status . . . . . . . . . . . . . . 32
6.02 Corporate Power and Authority. . . . . . . . 32
6.03 No Violation . . . . . . . . . . . . . . . . 33
6.04 Governmental Approvals . . . . . . . . . . . 33
6.05 Financial Statements; Financial Condition. . 33
6.06 Litigation . . . . . . . . . . . . . . . . . 34
6.07 True and Complete Disclosure . . . . . . . . 34
6.08 Use of Proceeds; Margin Regulations. . . . . 34
6.09 Tax Returns and Payments . . . . . . . . . . 34
6.10 Compliance with ERISA. . . . . . . . . . . . 35
6.11 Subsidiaries . . . . . . . . . . . . . . . . 36
6.12 Compliance with Statutes, etc. . . . . . . . 36
6.13 Investment Company Act . . . . . . . . . . . 36
6.14 Public Utility Holding Company Act . . . . . 36
6.15 Labor Relations. . . . . . . . . . . . . . . 36
6.16 Patents, Licenses, Franchises and Formulas . 37
SECTION 7. Affirmative Covenants . . . . . . . . . . . 37
7.01 Information Covenants. . . . . . . . . . . . 37
7.02 Books, Records and Inspections . . . . . . . 40
7.03 Maintenance of Property; Insurance . . . . . 40
7.04 Corporate Franchises . . . . . . . . . . . . 41
7.05 Compliance with Statutes, etc. . . . . . . . 41
7.06 ERISA. . . . . . . . . . . . . . . . . . . . 41
7.07 Performance of Obligations . . . . . . . . . 42
7.08 Payment of Taxes and Claims. . . . . . . . . 42
SECTION 8. Negative Covenants. . . . . . . . . . . . . 42
8.01 Liens. . . . . . . . . . . . . . . . . . . . 43
8.02 Consolidation, Merger, Sale of Assets. . . . 44
8.03 Advances, Investments and Loans. . . . . . . 45
8.04 Transactions with Affiliates . . . . . . . . 46
8.05 Interest Coverage Ratio. . . . . . . . . . . 46
8.06 Minimum Consolidated Net Worth . . . . . . . 47
8.07 Leverage Ratio . . . . . . . . . . . . . . . 47
8.08 Limitation on Restrictions on Subsidiary
Dividends and Other Distributions. . . . . 47
8.09 Subsidiary Indebtedness . . . . . . . . . . 47
8.10 Restricted Payment Put. . . . . . . . . . . 48
(ii)
SECTION 9. Events of Default . . . . . . . . . . . . . 48
9.01 Payments . . . . . . . . . . . . . . . . . . 48
9.02 Representations, etc.. . . . . . . . . . . . 48
9.03 Covenants. . . . . . . . . . . . . . . . . . 48
9.04 Default Under Other Agreements . . . . . . . 48
9.05 Bankruptcy, etc. . . . . . . . . . . . . . . 49
9.06 ERISA. . . . . . . . . . . . . . . . . . . . 50
9.07 Judgments. . . . . . . . . . . . . . . . . . 50
SECTION 10. Definitions and Accounting Terms . . . . . 51
10.01 Defined Terms . . . . . . . . . . . . . . . 51
10.02 Principles of Construction. . . . . . . . . 74
SECTION 11. The Agent. . . . . . . . . . . . . . . . . 74
11.01 Appointment . . . . . . . . . . . . . . . . 74
11.02 Nature of Duties. . . . . . . . . . . . . . 74
11.03 Lack of Reliance on the Agent . . . . . . . 75
11.04 Certain Rights of the Agent . . . . . . . . 75
11.05 Reliance. . . . . . . . . . . . . . . . . . 76
11.06 Indemnification . . . . . . . . . . . . . . 76
11.07 The Agent in its Individual Capacity. . . . 76
11.08 Holders . . . . . . . . . . . . . . . . . . 76
11.09 Resignation by the Agent. . . . . . . . . . 77
SECTION 12. Miscellaneous. . . . . . . . . . . . . . . 77
12.01 Payment of Expenses, etc. . . . . . . . . . 77
12.02 Right of Setoff . . . . . . . . . . . . . . 78
12.03 Notices . . . . . . . . . . . . . . . . . . 79
12.04 Benefit of Agreement. . . . . . . . . . . . 79
12.05 No Waiver; Remedies Cumulative. . . . . . . 81
12.06 Payments Pro Rata . . . . . . . . . . . . . 81
12.07 Calculations; Computations. . . . . . . . . 82
12.08 Governing Law; Submission to Jurisdiction;
Venue. . . . . . . . . . . . . . . . . . . 83
12.09 Obligation to Make Payments in Dollars. . . 84
12.10 Counterparts. . . . . . . . . . . . . . . . 84
12.11 Headings Descriptive. . . . . . . . . . . . 84
12.12 Amendment or Waiver . . . . . . . . . . . . 85
12.13 Survival. . . . . . . . . . . . . . . . . . 85
12.14 Domicile of Loans . . . . . . . . . . . . . 86
12.15 Waiver of Jury Trial. . . . . . . . . . . . 86
(iii)
SCHEDULE I Commitments
SCHEDULE II Applicable Lending Offices; Issuing Bank
Payment Offices
SCHEDULE III Existing Letters of Credit
SCHEDULE IV Subsidiaries
SCHEDULE V Permitted Liens
SCHEDULE VI Guarantees
SCHEDULE VII Investments
SCHEDULE VIII ERISA
SCHEDULE IX Letter of Credit Issuers and Issuance
Amounts
EXHIBIT A-1 Notice of Borrowing
EXHIBIT A-2 Notice of Competitive Bid Borrowing
EXHIBIT B Form of Note
EXHIBIT C Form of Opinion of Counsel
EXHIBIT D Form of Officers' Certificate
EXHIBIT E Form of Assignment and Assumption
Agreement
(iv)
CREDIT AGREEMENT, dated as of December 16, 1993,
among PHILLIPS-VAN HEUSEN CORPORATION (the "Borrower"), a
Delaware corporation, the financial institutions listed from
time to time on Schedule I hereto (each a "Bank" and,
collectively, the "Banks") and BANKERS TRUST COMPANY, acting
in the manner and to the extent described in Section 11 (in
such capacity, the "Agent").
W I T N E S S E T H :
WHEREAS, subject to and upon the terms and con-
ditions herein set forth, the Banks are willing to make
available the credit facility provided for herein;
NOW, THEREFORE, IT IS AGREED:
SECTION 1. Amount and Terms of Loans.
1.01 Commitments. (a) Subject to and upon the
terms and conditions herein set forth, each Bank severally
agrees to make a loan or loans (each a "Revolving Loan" and,
collectively, the "Revolving Loans") to the Borrower, which
Revolving Loans (i) shall be made at any time and from time
to time on and after the Effective Date and prior to the
Maturity Date, (ii) may, at the option of the Borrower, be
incurred and maintained as, and/or converted into, Base Rate
Loans, CD Rate Loans or Eurodollar Loans, provided that all
Revolving Loans made by all Banks pursuant to the same
Borrowing shall, unless otherwise specifically provided
herein, consist entirely of Revolving Loans of the same Type,
(iii) may be repaid and reborrowed in accordance with the
provisions hereof and (iv) after giving effect to any
Borrowing and the use of the proceeds thereof, shall not
exceed for any Bank at any time outstanding the Revolving
Commitment of such Bank at such time. Notwithstanding the
foregoing, the sum of (x) the aggregate outstanding principal
amount of all Revolving Loans outstanding at any time, plus
(y) the aggregate outstanding principal amount of all
Competitive Bid Loans outstanding at such time, shall not
exceed the Available Total Revolving Commitment.
(b) Subject to and upon the terms and conditions
herein set forth, each Bank severally agrees that the Bor-
rower may incur a loan or loans (each a "Competitive Bid
Loan" and collectively, the "Competitive Bid Loans") pursuant
to a Competitive Bid Borrowing from time to time on and after
the Effective Date and prior to the date which is the third
Business Day preceding the date which is seven days prior to
the Maturity Date; provided that after giving effect to any
Competitive Bid Borrowing and the use of the proceeds there-
of, the aggregate outstanding principal amount of Competitive
Bid Loans will not exceed either (x) $50,000,000 or (y) when
combined with the aggregate outstanding principal amount of
all Revolving Loans then outstanding, the Available Total
Revolving Commitment at such time. Within the foregoing
limits and subject to the conditions set out in Section 1.04,
Competitive Bid Loans may be repaid and reborrowed in accor-
dance with the provisions hereof.
1.02 Minimum Amount of Each Borrowing. The aggre-
gate principal amount of each Borrowing of Revolving Loans
shall not be less than $3,000,000 for Fixed Rate Loans (and,
if greater, shall be in an integral multiple of $500,000) and
$1,000,000 for Base Rate Loans (and, if greater, shall be in
an integral multiple of $500,000). More than one Borrowing
may be incurred on any date.
1.03 Notice of Borrowing of Revolving Loans. (a)
Whenever the Borrower desires to incur Revolving Loans here-
under it shall give the Agent at its Notice Office (x) prior
to 12:00 Noon (New York time) at least three Business Days'
prior written notice (or telephonic notice promptly confirmed
in writing) of each Borrowing of Revolving Loans constituting
Eurodollar Loans, (y) prior to 12:00 Noon (New York time) at
least two Business Days' prior written notice (or telephonic
notice promptly confirmed in writing) of each Borrowing of
Revolving Loans constituting CD Rate Loans and (z) prior to
12:00 Noon (New York time) at least one Business Day's prior
written notice (or telephonic notice promptly confirmed in
writing) of each Borrowing of Revolving Loans constituting
Base Rate Loans; provided that in the case of a Borrowing of
Base Rate Loans the aggregate principal amount of which is
$2,000,000 or less, such notice shall be effective for a
Borrowing on the date of delivery thereof if given prior to
12:00 Noon (New York time) on such day. Each such notice
(each, a "Notice of Borrowing") shall be in the form of
Exhibit A-1, shall be irrevocable and shall specify (i) the
aggregate principal amount of the Revolving Loans to be made
pursuant to such Borrowing, (ii) the date of Borrowing (which
shall be a Business Day) and (iii) whether the respective
Borrowing shall consist of Base Rate Loans, CD Rate Loans or
Eurodollar Loans and, if CD Rate Loans or Eurodollar Loans,
the Interest Period to be initially applicable thereto. The
Agent shall promptly give each Bank written notice (or
-2-
telephonic notice promptly confirmed in writing) of each
proposed Borrowing of Revolving Loans, of such Bank's propor-
tionate share thereof and of the other matters covered by the
Notice of Borrowing.
(b) Without in any way limiting the obligation of
the Borrower to confirm in writing any notice it may give
hereunder by telephone, the Agent may act prior to receipt of
written confirmation without liability upon the basis of such
telephonic notice, believed by the Agent in good faith to be
from the Chairman, the Chief Financial Officer, the Treasurer
or an Assistant Treasurer of the Borrower, or from any other
person designated in writing to the Agent by the Chief
Financial Officer of the Borrower as a person entitled to
give telephonic notices under this Agreement on behalf of the
Borrower. In each such case the Borrower hereby waives the
right to dispute the Agent's record of the terms of any such
telephonic notice.
1.04 Competitive Bid Borrowings. (a) Whenever
the Borrower desires to incur a Competitive Bid Borrowing, it
shall deliver to the Bid Agent at the Bid Agent's Notice
Office (or, if the Bid Agent is the Borrower, the Agent at
its Notice Office, and to each of the Bidder Banks) prior to
11:00 A.M. (New York time) at least four Business Days prior
to the date of such proposed Competitive Bid Borrowing, a
written notice (a "Notice of Competitive Bid Borrowing"),
which notice shall be in the form of Exhibit A-2 and shall
specify in each case (i) the date (which shall be a Business
Day) and the aggregate amount of the proposed Competitive Bid
Borrowing, (ii) the maturity date for repayment of each Com-
petitive Bid Loan to be made as part of such Competitive Bid
Borrowing (which maturity date may not be earlier than one
day after the date of such Competitive Bid Borrowing or later
than the earlier to occur of (x) 360 days after the date of
such Competitive Bid Borrowing and (y) the third Business Day
preceding the Maturity Date), (iii) the interest payment date
or dates relating thereto, (iv) whether the proposed
Competitive Bid Borrowing is to be an Absolute Rate Borrowing
or a Spread Borrowing, and if a Spread Borrowing, the
Interest Rate Basis applicable thereto, and (v) any other
terms to be applicable to such Competitive Bid Borrowing.
The Bid Agent (if other than the Borrower) shall promptly
notify each Bidder Bank of each such request for a
Competitive Bid Borrowing received by it from the Borrower by
telecopying to each such Bidder Bank a copy of the related
Notice of Competitive Bid Borrowing.
-3-
(b) Each Bidder Bank shall, if, in its sole dis-
cretion, it elects to do so, irrevocably offer to make one or
more Competitive Bid Loans to the Borrower as part of such
proposed Competitive Bid Borrowing at a rate or rates of
interest specified by such Bidder Bank in its sole discretion
and determined by such Bidder Bank independently of each
other Bidder Bank, by notifying the Bid Agent (which, if
other than the Borrower, shall give prompt notice thereof to
the Borrower) before 10:00 A.M. (New York time) on the date
(the "Reply Date") which (x) in the case of an Absolute Rate
Borrowing, is one Business Day before and (y) in the case of
a Spread Borrowing, is three Business Days before the date of
such proposed Competitive Bid Borrowing, of the minimum
amount and maximum amount of each Competitive Bid Loan which
such Bidder Bank would be willing to make as part of such
proposed Competitive Bid Borrowing (which amounts may,
subject to the proviso to the first sentence of Section
1.01(b), exceed such Bank's Revolving Commitment), the rate
or rates of interest therefor and such Bidder Bank's lending
office with respect to such Competitive Bid Loan; provided,
that if the Bid Agent (if other than the Borrower) in its
capacity as a Bidder Bank shall, in its sole discretion,
elect to make any such offer, it shall notify the Borrower of
such offer before 9:30 A.M. (New York time) on the Reply
Date. Any Bidder Bank not giving the Bid Agent the notice
specified in the preceding sentence shall not be obligated
to, and shall not, make any Competitive Bid Loan as part of
such Competitive Bid Borrowing.
(c) The Borrower shall, in turn, before 11:00 A.M.
(New York time) on the Reply Date, either:
(i) cancel such Competitive Bid Borrowing by
giving the Bid Agent (or, if the Bid Agent is the
Borrower, the Agent and the Bidder Banks) notice to such
effect, or
(ii) accept one or more of the offers made by any
Bidder Bank or Bidder Banks by giving notice (in writing
or by telephone confirmed in writing) to the Bid Agent
(or, if the Bid Agent is the Borrower, to the Agent and
the Bidder Banks) of the amount of each Competitive Bid
Loan (which amount shall be equal to or greater than the
minimum amount, and equal to or less than the maximum
amount, notified to the Borrower by the Bid Agent (if
other than the Borrower) on behalf of such Bidder Banks
(or, if the Bid Agent is the Borrower, by each such
Bidder Bank) for such Competitive Bid Borrowing) to be
made by each Bidder Bank as part of such Competitive Bid
-4-
Borrowing, and reject any remaining offers made by
Bidder Banks by giving the Bid Agent (or, if the Bid
Agent is the Borrower, the Bidder Banks) notice to that
effect; provided that (x) acceptance of offers may only
be made on the basis of ascending Absolute Rates (in the
case of an Absolute Rate Borrowing) or Spreads (in the
case of a Spread Borrowing), in each case commencing
with the lowest rate so offered and (y) if offers are
made by two or more Bidder Banks at the same rate and
acceptance of all such equal offers would result in a
greater principal amount of Competitive Bid Loans being
accepted than the aggregate principal amount requested
by the Borrower, the Borrower shall accept such offers
pro rata from such Bidder Banks (on the basis of the
maximum amounts of such offers) unless any such Bidder
Bank's pro rata share would be less than the minimum
amount specified by such Bidder Bank in its offer, in
which case the Borrower shall have the right to accept
one or more such equal offers in their entirety and
reject the other equal offer or offers or to allocate
acceptance among all such equal offers (but giving
effect to the minimum and maximum amounts specified for
each such offer), as the Borrower may elect in its sole
discretion.
(d) If the Borrower notifies the Bid Agent (or, if
the Bid Agent is the Borrower, the Agent and the Bidder
Banks) that such Competitive Bid Borrowing is cancelled, or
if the Borrower fails to make any notification of
cancellation or acceptance by 11:00 A.M. (New York time) on
the Reply Date, such Competitive Bid Borrowing shall not be
made.
(e) If the Borrower accepts one or more of the
offers made by any Bidder Bank or Bidder Banks, the Bid Agent
shall promptly notify (x) each Bidder Bank that has made an
offer of the date and aggregate amount of such Competitive
Bid Borrowing and whether or not any offer or offers made by
such Bidder Bank have been accepted by the Borrower, (y) each
Bidder Bank that is to make a Competitive Bid Loan as part of
such Competitive Bid Borrowing, of the amount of each
Competitive Bid Loan to be made by such Bidder Bank as part
of such Competitive Bid Borrowing and (z) the Agent, of all
of the terms of each such Competitive Bid Borrowing.
1.05 Disbursement of Funds. (a) No later than
12:00 Noon (New York time) on the date of each Borrowing,
each Bank will make available its pro rata portion, if any,
-5-
of each Borrowing requested to be made on such date in the
manner provided below.
(b) Each Bank shall make available all amounts it
is to fund under any Borrowing in Dollars and immediately
available funds to the Agent at its Payment Office and the
Agent will make available to the Borrower by depositing to
its account at its Payment Office the aggregate of the
amounts so made available in Dollars and the type of funds
received. Unless the Agent shall have been notified by any
Bank prior to the date of any such Borrowing that such Bank
does not intend to make available to the Agent its portion of
the Borrowing or Borrowings to be made on such date, the
Agent may assume that such Bank has made such amount
available to the Agent on such date of Borrowing, and the
Agent, in reliance upon such assumption, may (in its sole
discretion and without any obligation to do so) make avail-
able to the Borrower a corresponding amount. If such corre-
sponding amount is not in fact made available to the Agent by
such Bank and the Agent has made available same to the Bor-
rower, the Agent shall be entitled to recover such corre-
sponding amount from such Bank. If such Bank does not pay
such corresponding amount forthwith upon the Agent's demand
therefor, the Agent shall promptly notify the Borrower, and
the Borrower shall immediately pay such corresponding amount
to the Agent. The Agent shall also be entitled to recover
from such Bank or the Borrower, as the case may be, interest
on such corresponding amount in respect of each day from the
date such corresponding amount was made available by the
Agent to the Borrower to the date such corresponding amount
is recovered by the Agent, at a rate per annum equal to (x)
if paid by such Bank, the overnight Federal Funds Rate or (y)
if paid by the Borrower, the then applicable rate of inter-
est, calculated in accordance with Section 1.09, for the
Loans involved.
(c) Nothing in this Section 1.05 shall be deemed
to relieve any Bank from its obligation to fulfill its com-
mitments hereunder or to prejudice any rights which the Bor-
rower may have against any Bank as a result of any default by
such Bank hereunder.
1.06 Notes; Register. (a) The Borrower's obli-
gation to pay the principal of, and interest on, the Revolv-
ing Loans made by each Bank shall, except as provided in Sec-
tions 1.14 and 12.04, be evidenced by a promissory note duly
executed and delivered by the Borrower substantially in the
form of Exhibit B with blanks appropriately completed in
-6-
conformity herewith (each a "Note" and collectively the
"Notes").
(b) The Note issued to each Bank shall (i) be pay-
able to the order of such Bank and be dated the Effective
Date, (ii) be in a stated principal amount equal to the
Revolving Commitment of such Bank and be payable in the prin-
cipal amount of the Revolving Loans evidenced thereby, (iii)
mature on the Maturity Date, (iv) bear interest as provided
in the appropriate clause of Section 1.09 in respect of the
Base Rate Loans, CD Rate Loans and Eurodollar Loans, as the
case may be, evidenced thereby and (v) be entitled to the
benefits of this Agreement and the other Credit Documents.
(c) Each Bank will note on its internal records
the amount of each Loan made by it and each payment in re-
spect thereof and will prior to any transfer of its Notes
endorse on the reverse side thereof the outstanding principal
amount of Revolving Loans evidenced thereby. Failure to make
any such notation or any error in any such notation shall not
affect the Borrower's obligations in respect of such
Revolving Loans.
(d) The Agent shall maintain at its Payment Office
a register for the recordation of the names and addresses of
the Banks, the Commitments of the Banks from time to time,
and the principal amount of the Revolving Loans and Competi-
tive Bid Loans owing to each Bank from time to time together
with the maturity and interest rates applicable to each such
Competitive Bid Loan, and other terms applicable thereto (the
"Register"). The entries in the Register shall be conclusive
and binding for all purposes, absent manifest error. The
Register shall be available for inspection by the Borrower or
any Bank at any reasonable time and from time to time upon
reasonable prior notice.
1.07 Conversions. The Borrower shall have the
option to convert on any Business Day all or a portion equal
to at least (x) in the case of a conversion into Base Rate
Loans, $1,000,000 (and, if greater, an integral multiple of
$500,000) and (y) in the case of a conversion into Fixed Rate
Loans, $3,000,000 (and, if greater, an integral multiple of
$500,000), of the outstanding principal amount of Revolving
Loans of one Type into a Borrowing or Borrowings of another
Type; provided that (i) except as otherwise provided in
Section 1.11(b), Fixed Rate Loans may be converted into Loans
of another Type only on the last day of an Interest Period
applicable thereto and no partial conversion of Revolving
Loans shall reduce the outstanding principal amount of Fixed
-7-
Rate Loans made pursuant to a single Borrowing to less than
$3,000,000 and (ii) Revolving Loans may only be converted
into Fixed Rate Loans if no Default or Event of Default is in
existence on the date of the conversion. Each such
conversion shall be effected by the Borrower by giving the
Agent at its Notice Office prior to 12:00 Noon (New York
time) at least three Business Days' prior written notice (or
telephonic notice promptly confirmed in writing) (each a
"Notice of Conversion") specifying the Revolving Loans to be
so converted, the Type of Revolving Loans to be converted
into and, if to be converted into Fixed Rate Loans, the
Interest Period to be initially applicable thereto. The Age-
nt shall give each Bank notice as promptly as practicable of
any such proposed conversion. Upon any such conversion the
proceeds thereof will be deemed to be applied directly on the
day of such conversion to prepay the outstanding principal
amount of the Revolving Loans being converted.
1.08 Pro Rata Borrowings. All Borrowings of
Revolving Loans under this Agreement shall be loaned by the
Banks pro rata on the basis of their Revolving Percentages.
It is understood that no Bank shall be responsible for any
default by any other Bank in its obligation to make Loans
hereunder and that each Bank shall be obligated to make the
Loans provided to be made by it hereunder, regardless of the
failure of any other Bank to fulfill its commitments
hereunder.
1.09 Interest. (a) The unpaid principal amount
of each Base Rate Loan shall bear interest from the date of
the Borrowing thereof until maturity (whether by acceleration
or otherwise) at a rate per annum which shall be the Applic-
able Base Rate Margin plus the Base Rate in effect from time
to time.
(b) The unpaid principal amount of each Eurodollar
Loan shall bear interest from the date of the Borrowing
thereof until maturity (whether by acceleration or otherwise)
at a rate per annum which shall at all times be the Applic-
able Eurodollar Margin plus the relevant Eurodollar Rate.
(c) The unpaid principal amount of each CD Rate
Loan shall bear interest from the date of the Borrowing
thereof until maturity (whether by acceleration or otherwise)
at a rate per annum which shall at all times be the Applic-
able CD Rate Margin plus the relevant Fixed CD Rate.
(d) The unpaid principal amount of each Competi-
tive Bid Loan shall bear interest from the date the proceeds
-8-
thereof are made available to the Borrower until maturity
(whether by acceleration or otherwise) at the rate or rates
per annum specified by the Bidder Bank or Bidder Banks, as
the case may be, pursuant to Section 1.04(b) and accepted by
the Borrower pursuant to Section 1.04(c).
(e) Overdue principal and, to the extent permitted
by law, overdue interest in respect of each Loan shall bear
interest at a rate per annum equal to the Base Rate in effect
from time to time plus the sum of (i) 2% and (ii) the Applic-
able Base Rate Margin; provided that no Loan shall bear
interest after maturity (whether by acceleration or other-
wise) at a rate per annum less than 2% in excess of the rate
of interest applicable thereto at maturity.
(f) Interest on each Loan shall accrue from and
including the date of any Borrowing to but excluding the date
of any repayment thereof and shall be payable (i) in respect
of each Base Rate Loan, quarterly in arrears on the last
Business Day of each January, April, July and October, (ii)
in respect of any Competitive Bid Loan, at such times as spec-
ified in the Notice of Competitive Bid Borrowing relating
thereto, (iii) in respect of each Fixed Rate Loan, on the
last day of each Interest Period applicable thereto and, in
the case of an Interest Period in excess of three months, on
each date occurring at three-month intervals after the first
day of such Interest Period and (iv) in respect of each Loan,
on any prepayment (on the amount prepaid), at maturity
(whether by acceleration or otherwise) and, after such
maturity, on demand.
(g) All computations of interest hereunder shall
be made in accordance with Section 12.07(b).
(h) The Agent, upon determining the interest rate
for any Borrowing of Fixed Rate Loans for any Interest
Period, shall promptly notify the Borrower and the Banks
thereof. Each such determination shall, absent manifest
error, be final and conclusive and binding on all parties
hereto.
1.10 Interest Periods. At the time the Borrower
gives a Notice of Competitive Bid Borrowing in respect of the
making of a Competitive Bid Borrowing or at the time it gives
a Notice of Borrowing or Notice of Conversion in respect of
the making of, or conversion into, a Borrowing of Fixed Rate
Loans (in the case of the initial Interest Period applicable
thereto) or prior to 12:00 Noon (New York time) on the third
Business Day prior to the expiration of an Interest Period
-9-
applicable to a Borrowing of Fixed Rate Loans, it shall have
the right to elect by giving the Agent written notice (or
telephonic notice promptly confirmed in writing) the Interest
Period applicable to such Borrowing, which Interest Period
shall, at the option of the Borrower, be (x) in the case of
Fixed Rate Loans constituting CD Rate Loans, a 30, 60, 90 or
180 day period, (y) in the case of Fixed Rate Loans consti-
tuting Eurodollar Loans, a one, two, three or six month
period and (z) in the case of a Competitive Bid Loan, subject
to availability, a period of one to 360 days as elected by
the Borrower in the related Notice of Competitive Bid Borrow-
ing. Notwithstanding anything to the contrary contained
above:
(i) the initial Interest Period for any Borrowing
of Fixed Rate Loans shall commence on the date of such
Borrowing (including the date of any conversion from a
Borrowing of another Type of Loan) and each Interest
Period occurring thereafter in respect of such Borrowing
shall commence on the day on which the next preceding
Interest Period expires;
(ii) if any Interest Period relating to a Borrowing
of Eurodollar Loans begins on a day for which there is
no numerically corresponding day in the calendar month
at the end of such Interest Period, such Interest Period
shall end on the last Business Day of such calendar
month;
(iii) if any Interest Period would otherwise expire
on a day which is not a Business Day, such Interest
Period shall expire on the next succeeding Business Day,
provided that if any Interest Period in respect of
Eurodollar Loans would otherwise expire on a day which
is not a Business Day but is a day of the month after
which no further Business Day occurs in such month, such
Interest Period shall expire on the next preceding
Business Day; and
(iv) no Interest Period shall extend beyond the
Maturity Date.
Notwithstanding the foregoing, if a Default or Event of
Default is in existence at the time any Interest Period in
respect of any Fixed Rate Loans is to expire, such Fixed Rate
Loans may not be continued as Fixed Rate Loans but instead
shall be automatically converted on the last day of such
Interest Period into Base Rate Loans. If upon the expiration
of any Interest Period in respect of Fixed Rate Loans, the
-10-
Borrower has failed to elect a new Interest Period to be
applicable thereto as provided above, the Borrower shall be
deemed to have elected to convert such Borrowing into a
Borrowing of Base Rate Loans effective as of the expiration
date of such current Interest Period.
1.11 Increased Costs, Illegality, etc. (a) In
the event that (x) in the case of clause (i) below, the Agent
or (y) in the case of clauses (ii) and (iii) below, any Bank
shall have determined (which determination shall, absent
manifest error, be final and conclusive and binding upon all
parties hereto):
(i) on any date for determining the Fixed CD Rate
or the Eurodollar Rate for any Interest Period that, by
reason of any changes arising on or after the date of
this Agreement affecting the secondary certificate of
deposit market or the interbank Eurodollar market, as
the case may be, adequate and fair means do not exist
for ascertaining the applicable interest rate on the
basis provided for in the definition of Fixed CD Rate or
Eurodollar Rate; or
(ii) at any time, that such Bank shall incur in-
creased costs or reductions in the amounts received or
receivable hereunder with respect to any Fixed Rate
Loans or Competitive Bid Loans because of (x) any change
since the date of this Agreement (or, in the case of any
such cost or reduction with respect to any Competitive
Bid Loan, since the date of the making of such
Competitive Bid Loan) in any applicable law, govern-
mental rule, regulation, guideline or order (or in the
interpretation or administration thereof and including
the introduction of any new law or governmental rule,
regulation, guideline or order) (such as, for example,
but not limited to, a change in official reserve
requirements, but, in all events, excluding reserves
required under Regulation D to the extent included in
the computation of the Fixed CD Rate or the Eurodollar
Rate) and/or (y) other circumstances affecting the
interbank Eurodollar market or the secondary certificate
of deposit market, as the case may be; or
(iii) at any time, that the making or continuance of
any Loan (other than Base Rate Loans) has become
unlawful by compliance by such Bank in good faith with
any law, governmental rule, regulation, guideline or
order (or would conflict with any such governmental
rule, regulation, guideline or order not having the
-11-
force of law even though the failure to comply therewith
would not be unlawful), or, in the case of a Fixed Rate
Loan, has become impracticable as a result of a
contingency occurring after the date of this Agreement
which materially and adversely affects the interbank
Eurodollar market or the secondary certificate of
deposit market, as the case may be;
then, and in any such event, such Bank (or the Agent, in the
case of clause (i) above) shall on such date give notice (if
by telephone confirmed in writing) to the Borrower and to the
Agent of such determination (which notice the Agent shall
promptly transmit to each of the other Banks). Thereafter
(x) in the case of clause (i) above, Eurodollar Loans or CD
Rate Loans, as the case may be, shall no longer be available
until such time as the Agent notifies the Borrower and the
Banks that the circumstances giving rise to such notice by
the Agent no longer exist, and any Notice of Borrowing or
Notice of Conversion given by the Borrower with respect to
Eurodollar Loans or CD Rate Loans, as the case may be, which
have not yet been incurred shall be deemed rescinded by the
Borrower, (y) in the case of clause (ii) above, the Borrower
shall pay to such Bank, upon written demand therefor, such
additional amounts (in the form of an increased rate of, or
a different method of calculating, interest or otherwise as
such Bank in its sole discretion shall determine) as shall be
required to compensate such Bank for such increased costs or
reductions in amounts receivable hereunder (a written notice
as to the additional amounts owed to such Bank, showing in
reasonable detail the basis for the calculation thereof,
submitted to the Borrower by such Bank shall, absent manifest
error, be final and conclusive and binding upon all parties
hereto) and (z) in the case of clause (iii) above, the
Borrower shall take one of the actions specified in Section
1.11(b) as promptly as possible and, in any event, within the
time period required by law.
(b) At any time that any Fixed Rate Loan or Com-
petitive Bid Loan is affected by the circumstances described
in Section 1.11(a)(ii) (for Fixed Rate Loans only) or (iii),
the Borrower may (and in the case of a Fixed Rate Loan or a
Competitive Bid Loan affected pursuant to Section
1.11(a)(iii) shall) either (i) if the affected Fixed Rate
Loan or Competitive Bid Loan is then being made pursuant to
a Borrowing, cancel said Borrowing by giving the Agent tele-
phonic notice (confirmed promptly in writing) thereof as
promptly as practicable after the Borrower was notified by a
Bank pursuant to Section 1.11(a)(ii) or (iii), (ii) if the
affected Fixed Rate Loan is then outstanding, upon at least
-12-
three Business Days' notice to the Agent, require the
affected Bank to convert each such Fixed Rate Loan into a
Base Rate Loan or (iii) if the affected Competitive Bid Loan
is then outstanding, prepay such Competitive Bid Loan in
full; provided that if more than one Bank is affected in a
similar manner at any time, then all such similarly affected
Banks must be treated the same pursuant to this Section
1.11(b).
(c) If after the date hereof, the adoption of any
applicable law, rule or regulation regarding capital
adequacy, or any change therein, or any change in the
interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by a
Bank or its parent with any request or directive made or
adopted after the date hereof regarding capital adequacy
(whether or not having the force of law) of any such author-
ity, central bank or comparable agency, has or would have the
effect of reducing the rate of return on such Bank's or its
parents' capital or assets as a consequence of such Bank's
commitments or obligations hereunder to a level below that
which such Bank or its parent could have achieved but for
such adoption, effectiveness, change or compliance (taking
into consideration such Bank's or its parent's policies with
respect to capital adequacy), then from time to time, within
15 days after demand by such Bank (with a copy to the Agent),
the Borrower shall pay to such Bank such additional amount or
amounts as will compensate such Bank or its parent for such
reduction. Each Bank, upon determining in good faith that
any additional amounts will be payable pursuant to this
Section 1.11(c), will give prompt written notice thereof to
the Borrower, which notice shall set forth in reasonable
detail the basis of the calculation of such additional
amounts, although the failure to give any such notice shall
not release or diminish any of the Borrower's obligations to
pay additional amounts pursuant to this Section 1.11(c) upon
receipt of such notice.
1.12 Compensation. The Borrower shall compensate
each Bank, upon its written request (which request shall set
forth in reasonable detail the basis for requesting such
compensation), for all reasonable losses, expenses and
liabilities (including, without limitation, any loss, expense
or liability incurred by reason of the liquidation or
reemployment of deposits or other funds required by such Bank
to fund its Fixed Rate Loans or Competitive Bid Loans but
excluding any loss of anticipated profit with respect to such
Loans) which such Bank may sustain: (i) if for any reason
-13-
(other than a default by such Bank or the Agent) a Borrowing
of Fixed Rate Loans or Competitive Bid Loans accepted by the
Borrower in accordance with Section 1.04(c)(ii) does not
occur on a date specified therefor in a Notice of Borrowing,
Notice of Competitive Bid Borrowing or Notice of Conversion
(whether or not withdrawn by the Borrower or deemed withdrawn
pursuant to Section 1.11); (ii) if any repayment or
conversion of any of its Fixed Rate Loans or any repayment of
Competitive Bid Loans occurs on a date which is not the last
day of an Interest Period applicable thereto; (iii) if any
prepayment of any of its Fixed Rate Loans is not made on any
date specified in a notice of prepayment given by the Bor-
rower; or (iv) as a consequence of (x) any other default by
the Borrower to repay its Fixed Rate Loans or Competitive Bid
Loans when required by the terms of this Agreement or (y) an
election made pursuant to Section 1.11(b). Calculation of
all amounts payable to a Bank under this Section 1.12 in
respect of Fixed Rate Loans shall be made as though that Bank
had actually funded its relevant Fixed Rate Loan (x) in the
case of a Eurodollar Loan, through the purchase of a
Eurodollar deposit bearing interest at the Eurodollar Rate in
an amount equal to the amount of that Loan, having a maturity
comparable to the relevant Interest Period and through the
transfer of such Eurodollar deposit from an offshore office
of that Bank to a domestic office of that Bank in the United
States of America, and (y) in the case of a CD Rate Loan,
through the purchase of a certificate of deposit bearing
interest at the Fixed CD Rate in an amount equal to the
amount of that Loan and having a maturity comparable to the
relevant Interest Period; provided, however, that each Bank
may fund each of its Fixed Rate Loans in any manner it sees
fit and the foregoing assumption shall be utilized only for
the calculation of amounts payable under this Section 1.12.
1.13 Change of Lending Office. Each Bank agrees
that, upon the occurrence of any event giving rise to the
operation of Section 1.11(a)(ii) or (iii) or 4.04 with
respect to such Bank, it will, if requested by the Borrower,
use reasonable efforts (subject to overall policy considera-
tions of such Bank) to designate another lending office for
any Loans affected by such event; provided that such desig-
nation is made on such terms that such Bank and its lending
office suffer no economic, legal or regulatory disadvantage,
with the object of avoiding the consequence of the event giv-
ing rise to the operation of any such Section. Nothing in
this Section 1.13 shall affect or postpone any of the obli-
gations of the Borrower or the right of any Bank provided in
Section 1.11 or 4.04.
-14-
1.14 Replacement of Banks. If any Bank is owed
increased costs under Section 1.11, Section 2.05 or Section
4.04 which in the judgment of the Borrower are material in
amount and which are not otherwise requested generally by
multinational commercial banks, the Borrower shall have the
right, if no Event of Default then exists and such Bank has
not withdrawn its request for such compensation or changed
its Applicable Lending Office with the effect of eliminating
or substantially decreasing (to a level which in the judgment
of the Borrower is not material) such increased cost, to
replace such Bank (the "Replaced Bank") with one or more
other Eligible Transferee or Transferees (collectively, the
"Replacement Bank") reasonably acceptable to the Agent, pro-
vided that (i) at the time of any replacement pursuant to
this Section 1.14, the Replacement Bank shall enter into one
or more assignment agreements pursuant to which the Replace-
ment Bank shall acquire all of the Commitment and outstanding
Loans of, and participations in Letters of Credit by, the
Replaced Bank and, in connection therewith, shall pay to (x)
the Replaced Bank in respect thereof an amount equal to the
sum of (a) an amount equal to the principal of, and all
accrued interest on, all outstanding Loans of the Replaced
Bank, (b) an amount equal to such Replaced Bank's Letter of
Credit Percentage of all Unpaid Drawings that have been
funded by such Replaced Bank, together with all then unpaid
interest with respect thereto at such time and (c) an amount
equal to all accrued, but theretofore unpaid, Fees owing to
the Replaced Bank pursuant to Section 3.01 hereof and (y) the
appropriate Letter of Credit Issuer an amount equal to such
Replaced Bank's Letter of Credit Percentage of any Unpaid
Drawing not funded by such Replaced Bank, and (ii) all
obligations of the Borrower owing to the Replaced Bank (other
than those specifically described in clause (i) above in
respect of which the assignment purchase price has been, or
is concurrently being, paid) shall be paid in full to such
Replaced Bank concurrently with such replacement. Upon the
execution of the respective assignment documentation, the
payment of amounts referred to in clauses (i) and (ii) above
and, if so requested by the Replacement Bank, delivery to the
Replacement Bank of the appropriate Note executed by the
Borrower, the Replacement Bank shall become a Bank hereunder
and the Replaced Bank shall cease to constitute a Bank
hereunder, except with respect to indemnification provisions
under this Agreement, which shall survive as to such Replaced
Bank.
-15-
SECTION 2. Letters of Credit.
2.01 Letters of Credit. (a) Subject to and upon
the terms and conditions herein set forth, the Borrower, at
any time and from time to time on or after the Effective Date
and prior to the Maturity Date, may request that a Letter of
Credit Issuer issue one or more Letters of Credit for the
account of the Borrower (or, subject to the terms and
conditions set forth in the definitions of Standby Letter of
Credit and Trade Letter of Credit, for the account of
Subsidiaries of the Borrower). Subject to and upon the terms
and conditions herein set forth (including, without
limitation, the terms and conditions set forth in the
definitions of Standby Letter of Credit and Trade Letter of
Credit), (i) each Standby Letter of Credit Bank agrees to
issue Standby Letters of Credit from time to time up to an
aggregate outstanding Stated Amount equal to the Maximum
Standby Issuance Amount of such Standby Letter of Credit Bank
from time to time and (ii) each Trade Letter of Credit Bank
agrees to issue Trade Letters of Credit from time to time up
to an aggregate outstanding Stated Amount equal to the
Maximum Trade Issuance Amount of such Trade Letter of Credit
Bank from time to time.
(b) Notwithstanding the foregoing (i) no Letter of
Credit shall be issued the Stated Amount of which, when added
to the Letter of Credit Outstandings at such time, would
exceed the Total Letter of Credit Commitment as in effect at
such time; (ii) no Standby Letter of Credit shall be issued
the Stated Amount of which, when added to the Standby Letter
of Credit Outstandings at such time, would exceed $5,000,000;
and (iii) each Letter of Credit shall be denominated in
Dollars or an Approved Alternate Currency, provided that no
Letter of Credit denominated in an Approved Alternate
Currency shall be issued by any Letter of Credit Issuer if
the Stated Amount of such Letter of Credit, when added to the
Letter of Credit Outstandings at such time in respect of
Letters of Credit denominated in Approved Alternative
Currencies, would exceed $5,000,000.
(c) Schedule III hereto contains a description of
all letters of credit issued pursuant to the Existing Credit
Agreement and outstanding on the Effective Date. Each such
letter of credit, including any extension or renewal thereof
(each, as amended from time to time in accordance with the
terms thereof and hereof, an "Existing Letter of Credit")
shall constitute a "Letter of Credit", and a "Standby Letter
of Credit" or a "Trade Letter of Credit", as the case may be,
-16-
for all purposes of this Agreement, issued, for purposes of
Section 2.03(a), on the Effective Date.
2.02 Letter of Credit Applications. Whenever the
Borrower desires that a Letter of Credit be issued for its
account, it shall deliver to the respective Letter of Credit
Issuer an application for such Letter of Credit in such form,
and at such time prior to the issuance of such Letter of
Credit, as may be agreed to by the respective Letter of
Credit Issuer, which application may be delivered in such
manner (including, without limitation, in writing or
electronically) as the respective Letter of Credit Issuer
shall agree. Each application shall be executed by the
Borrower and shall be in such form as shall be acceptable to
the respective Letter of Credit Issuer (each a "Letter of
Credit Application").
2.03 Letter of Credit Participations. (a) Im-
mediately upon the issuance by a Letter of Credit Issuer of
any Letter of Credit, such Letter of Credit Issuer shall be
deemed to have sold and transferred to each other Bank (each
such other Bank, in its capacity under this Section 2.03, a
"Participant"), and each such Participant shall be deemed
irrevocably and unconditionally to have purchased and re-
ceived from such Letter of Credit Issuer, without recourse or
warranty, an undivided interest and participation (each a
"participation"), to the extent of such Participant's Letter
of Credit Percentage, in such Letter of Credit, each substi-
tute letter of credit, each drawing made thereunder and the
obligations of the Borrower under this Agreement with respect
thereto, and any security therefor or guaranty pertaining
thereto (although Letter of Credit Fees will be paid directly
to the Agent for the ratable account of the Participants as
provided in Section 3.01(c)). Upon any change in the Letter
of Credit Commitments of the Banks pursuant to Section 12.04,
it is hereby agreed that, with respect to all outstanding
Letters of Credit and Unpaid Drawings, there shall be an
automatic adjustment to the participations pursuant to this
Section 2.03 to reflect the new Letter of Credit Percentages
of the assignor and assignee Bank.
(b) In determining whether to pay under any Letter
of Credit, the Letter of Credit Issuer issuing same shall
have no obligation relative to the Participants other than to
confirm that any documents required to be delivered under
such Letter of Credit have been delivered and that they
appear to comply on their face with the requirements of such
Letter of Credit. Any action taken or omitted to be taken by
a Letter of Credit Issuer under or in connection with any
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Letter of Credit issued by it, if taken or omitted in the
absence of gross negligence or willful misconduct, shall not
create for such Letter of Credit Issuer any resulting liabil-
ity.
(c) In the event that any Letter of Credit Issuer
makes any payment under any Letter of Credit issued by it and
the Borrower shall not have reimbursed such amount in full to
such Letter of Credit Issuer pursuant to Section 2.04(a) by
the opening of business on (i) the first Business Day, in the
case of Standby Letters of Credit, and (ii) the second
Business Day, in the case of Trade Letters of Credit, to
occur after demand by such Letter of Credit Issuer for
reimbursement in respect of such Drawing, such Letter of
Credit Issuer shall promptly notify the Agent and each
Participant of such failure, and each Participant shall
promptly and unconditionally pay to the Agent for the account
of such Letter of Credit Issuer, the amount of such Parti-
cipant's Letter of Credit Percentage of such unreimbursed
payment in Dollars and in same day funds; provided, however,
that no Participant shall be obligated to pay to the Agent
for the account of such Letter of Credit Issuer its Letter of
Credit Percentage of such unreimbursed amount for any
wrongful payment made by such Letter of Credit Issuer under
a Letter of Credit as a result of acts or omissions
constituting willful misconduct or gross negligence on the
part of such Letter of Credit Issuer. If such Letter of
Credit Issuer so notifies, prior to 11:00 A.M. (New York
time) on any Business Day, any Participant required to fund
a payment under a Letter of Credit, such Participant shall
make available to the Agent for the account of such Letter of
Credit Issuer such Participant's Letter of Credit Percentage
of the amount of such payment on the first Business Day after
such Bank receives such notification, in same day funds. If
and to the extent such Participant shall not have so made its
Letter of Credit Percentage of the amount of such payment
available to the Agent for the account of such Letter of
Credit Issuer, such Participant agrees to pay to the Agent
for the account of such Letter of Credit Issuer, forthwith on
demand such amount, together with interest thereon for each
day from such date until the date such amount is paid to the
Agent for the account of such Letter of Credit Issuer at the
overnight Federal Funds Rate. The failure of any Participant
to make available to the Agent for the account of the
applicable Letter of Credit Issuer its Letter of Credit
Percentage of any payment under any Letter of Credit shall
not relieve any other Participant of its obligation hereunder
to make available to the Agent for the account of such Letter
of Credit Issuer its Letter of Credit Percentage of any
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payment under any Letter of Credit on the date required, as
specified above, but no Participant shall be responsible for
the failure of any other Participant to make available to the
Agent such other Participant's Letter of Credit Percentage of
any such payment.
(d) Whenever any Letter of Credit Issuer receives
a payment in respect of an unpaid reimbursement obligation as
to which the Agent has received for the account of such
Letter of Credit Issuer any payments from the Participants
pursuant to the preceding clause (c), such Letter of Credit
Issuer shall pay to the Agent and the Agent shall promptly
pay to each Participant which has paid its Letter of Credit
Percentage of such reimbursement obligation, in Dollars and
in same day funds, an amount equal to such Participant's
share (based upon the proportionate aggregate amount ori-
ginally funded by such Participant to the aggregate amount
funded by all Participants) of the principal amount of such
reimbursement obligation and interest thereon accruing after
the purchase of the respective participations.
(e) The obligations of the Participants to make
payments to the Agent for the account of the Letter of Credit
Issuers with respect to Letters of Credit shall be irrevoc-
able and not subject to counterclaim, set-off or other
defense or any other qualification or exception whatsoever
(except as expressly provided in Section 2.03(c)) and shall
be made in accordance with the terms and conditions of this
Agreement under all circumstances, including, without limita-
tion, any of the following circumstances:
(i) any lack of validity or enforceability of this
Agreement or any of the other Credit Documents;
(ii) the existence of any claim, set-off, defense
or other right which the Borrower may have at any time
against a beneficiary named in a Letter of Credit, any
transferee of any Letter of Credit (or any Person for
whom any such transferee may be acting), the Agent, any
Letter of Credit Issuer, any Bank, or other Person,
whether in connection with this Agreement, any Letter of
Credit, the transactions contemplated herein or any
unrelated transactions (including any underlying trans-
action between the Borrower and the beneficiary named in
any such Letter of Credit);
(iii) any draft, certificate or any other document
presented under the Letter of Credit proving to be
forged, fraudulent, invalid or insufficient in any
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respect or any statement therein being untrue or in-
accurate in any respect;
(iv) the surrender or impairment of any security
for the performance or observance of any of the terms of
any of the Credit Documents;
(v) the occurrence of any Default or Event of
Default; or
(vi) the failure of any condition precedent set
forth in Section 5.02 hereof to have been satisfied at
the time of the issuance of any Letter of Credit unless
the applicable Letter of Credit Issuer shall have
received a notice in writing to such effect from the
Agent pursuant to the definition of "Standby Letter of
Credit" or "Trade Letter of Credit," as the case may be,
on or prior to the Business Day preceding the date of
issuance of such Letter of Credit.
2.04 Agreement to Repay Letter of Credit Drawings.
(a) The Borrower hereby agrees to reimburse the respective
Letter of Credit Issuer, by making payment to the Agent at
its Payment Office for the account of such Letter of Credit
Issuer, or directly to such Letter of Credit Issuer, in Dol-
lars and immediately available funds, for any payment or
disbursement made by such Letter of Credit Issuer under any
Letter of Credit issued by it (each such amount so paid until
reimbursed, an "Unpaid Drawing") immediately after, and in
any event on the date of, notice given by such Letter of
Credit Issuer to the Borrower of such payment (which notice
each Letter of Credit Issuer hereby agrees to give promptly
after the making of any payment or disbursement under a
Letter of Credit), with interest on the amount so paid or
disbursed by such Letter of Credit Issuer, to the extent not
reimbursed prior to 3:00 P.M. (New York time) on the date of
such payment or disbursement, from and including the date
paid or disbursed to but excluding the date such Letter of
Credit Issuer is reimbursed therefor, at a rate per annum
which shall be the Applicable Base Rate Margin plus the Base
Rate as in effect from time to time plus an additional 2% per
annum if not reimbursed by the second Business Day following
any such notice of payment or disbursement), such interest to
be payable on demand, provided that to the extent that the
respective Letter of Credit Issuer does not give the Borrower
notice of the payment made by it under a Letter of Credit
prior to 3:00 P.M. (New York time) on the date of such
payment, the Borrower shall not be required to pay interest
in respect of such Unpaid Drawing for such day.
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Notwithstanding the foregoing, to the extent that a Letter of
Credit Issuer of a Letter of Credit denominated in an
Approved Alternate Currency has agreed in writing to such
arrangement at the time of the issuance of such Letter of
Credit, the Borrower shall reimburse any drawing thereunder
in the currency in which such Letter of Credit is
denominated; provided, that (x) if any drawing is made at a
time when there exists an Event of Default or (y) if such
reimbursement is not made by the close of business two
Business Days after the Borrower has received notice of such
drawing, then, in either such case, such reimbursement shall
instead be made in Dollars and in immediately available
funds.
(b) The Borrower's obligations under this Section
2.04 to reimburse each Letter of Credit Issuer with respect
to Unpaid Drawings (including, in each case, interest there-
on) issued by it shall be absolute and unconditional under
any and all circumstances and irrespective of any setoff,
counterclaim or defense to payment which the Borrower or any
other Person may have or have had against any Bank (including
in its capacity as a Letter of Credit Issuer or as a Parti-
cipant), including, without limitation, any defense based
upon the failure of any drawing under a Letter of Credit
(each a "Drawing") to conform to the terms of the Letter of
Credit or any non-application or misapplication by the bene-
ficiary of the proceeds of such Drawing; provided that the
Borrower shall not be obligated to reimburse the respective
Letter of Credit Issuer for any wrongful payment made by such
Letter of Credit Issuer under a Letter of Credit as a result
of acts or omissions constituting willful misconduct or gross
negligence on the part of such Letter of Credit Issuer.
2.05 Increased Costs. If after the date hereof,
the adoption of any applicable law, rule or regulation, or
any change therein, or any change in the interpretation or
administration thereof by any governmental authority, central
bank or comparable agency charged with the interpretation or
administration thereof, or actual compliance by any Letter of
Credit Issuer or any Participant with any request or direc-
tive made or adopted after the date hereof (whether or not
having the force of law), by any such authority, central bank
or comparable agency shall either (i) impose, modify or make
applicable any reserve, deposit, capital adequacy or similar
requirement against letters of credit issued by such Letter
of Credit Issuer, or such Participant's participation there-
in, (ii) have the effect of increasing the amount of capital
required or expected to be maintained by such Letter of
Credit Issuer or Participant based on the existence of such
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Participant's Letter of Credit Commitment or against letters
of credit issued by such Letter of Credit Issuer or partici-
pated in by any Participant or (iii) impose on any Letter of
Credit Issuer or any Participant any other conditions affect-
ing its obligations under this Agreement in respect of
Letters of Credit or participations therein or any Letter of
Credit or such Participant's participation therein; and the
result of any of the foregoing is to increase the cost to
such Letter of Credit Issuer or such Participant of issuing,
maintaining or participating in any Letter of Credit, or to
reduce the amount of any sum received or receivable by such
Letter of Credit Issuer or such Participant hereunder in
respect of Letters of Credit or participations therein, then,
upon notice in writing to the Borrower by such Letter of
Credit Issuer or such Participant, as the case may be (a copy
of which notice shall be sent by such Letter of Credit Issuer
or such Participant to the Agent), the Borrower shall pay to
such Letter of Credit Issuer or such Participant such
additional amount or amounts as will compensate such Letter
of Credit Issuer or such Participant for such increased cost
or reduction. A certificate submitted to the Borrower by
such Letter of Credit Issuer or such Participant, as the case
may be (a copy of which certificate shall be sent by such
Letter of Credit Issuer or such Participant to the Agent),
setting forth in reasonable detail the basis for the deter-
mination of such additional amount or amounts necessary to
compensate such Letter of Credit Issuer or such Participant
as aforesaid shall be conclusive and binding on the Borrower
absent manifest error although the failure to deliver any
such certificate shall not release or diminish any of the
Borrower's obligations to pay additional amounts pursuant to
this Section 2.05 upon receipt of such certificate.
2.06 Extension of Letter of Credit Expiry Date.
No Letter of Credit Issuer shall extend the expiration date
of any Letter of Credit unless requested by the Borrower and
consented to by the Required Banks, provided that (x) Trade
Letters of Credit may be extended without the prior written
consent of any Bank so long as the expiration date as so
extended is not more than 270 days after the date such Letter
of Credit is first issued, (y) in the event a Standby Letter
of Credit provides that it shall be subject to automatic
annual renewal unless the relevant Letter of Credit Issuer
gives notice to the beneficiary thereof prior to a specified
annual expiration date that it will not extend such Letter of
Credit, such Letter of Credit Issuer shall give notice that
it will not extend such Letter of Credit in a timely manner
if it shall have received written instructions from the
Required Banks to give such notice no later than 30 days
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prior to the date on which the Letter of Credit Issuer is
required to give notice that it will not extend such Letter
of Credit and (z) no Letter of Credit may be extended beyond
the Maturity Date unless each Bank and the Borrower agree.
2.07 Letter of Credit Issuer Reporting Require-
ments. (a) Each Standby Letter of Credit Bank hereby agrees
to provide to the Agent such information required to be
provided or confirmed by Standby Letter of Credit Banks
pursuant to Section 7.01(f) and such other information
regarding Standby Letters of Credit issued by such Standby
Letter of Credit Bank as the Agent may reasonably request
from time to time.
(b) Each Trade Letter of Credit Bank hereby agrees
to provide to the Borrower and the Agent (i) such information
required to be provided or confirmed by Trade Letter of
Credit Banks pursuant to Section 7.01(f) and such other
information regarding Trade Letters of Credit as the Agent
may reasonably request from time to time and (ii) no later
than the end of business on the first Business Day of each
week, a written notice of the Trade Letter of Credit
Outstandings attributable to Trade Letters of Credit issued
by such Trade Letter of Credit Bank as of each day during the
previous week, which written notice shall also state (A) the
Trade Letter of Credit Outstandings in respect of Trade
Letters of Credit denominated in Dollars as of each such day
and the Trade Letter of Credit Outstandings in respect of
Trade Letters of Credit denominated in Approved Alternate
Currencies as of each such day (and, in the case of Approved
Alternate Currency denominated Trade Letters of Credit,
indicating (w) the Stated Amount of each such Trade Letter of
Credit, (x) the specific Approved Alternate Currency in which
such Trade Letter of Credit is denominated, (y) the daily
average spot rate of exchange of such Trade Letter of Credit
Bank for each such Approved Alternate Currency for such week
and (z) the Dollar equivalent Stated Amount of each such
Trade Letter of Credit for each such day during such week)
and (B) that no such Trade Letter of Credit has an expiry
date later than 270 days following the date of issuance
thereof.
SECTION 3. Fees; Commitments.
3.01 Fees. (a) The Borrower agrees to pay the
Agent a Commitment commission ("Commitment Commission") for
the account of each Bank for the period from and including
the Effective Date to and including the Maturity Date or, if
earlier, the date upon which the Total Revolving Commitment
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has been terminated, computed at a rate for each day equal to
the Applicable Commitment Commission Percentage for such day
on the daily average Unutilized Revolving Commitment of such
Bank. Such Commitment Commission shall be due and payable in
arrears on the last Business Day of each January, April, July
and October and on the date upon which the Total Revolving
Commitment is terminated.
(b) The Borrower agrees to pay to the Agent a
Letter of Credit Facility Fee (the "Letter of Credit Facility
Fee") for the account of each Bank for the period from and
including the Effective Date to and including the Maturity
Date (or such earlier date as the Total Letter of Credit
Commitment shall have been terminated) computed at a rate
equal to 1/16 of 1% per annum on such Bank's Letter of Credit
Commitment. The Letter of Credit Facility Fee shall be due
and payable in arrears on the last Business Day of each
January, April, July and October and on the date upon which
the Total Letter of Credit Commitment is terminated.
(c) The Borrower agrees to pay to the Agent for
the account of the Banks pro rata on the basis of their
respective Letter of Credit Percentages, (i) a fee in respect
of each Standby Letter of Credit (the "Standby Letter of
Credit Fee") for the period from and including the later of
the Effective Date or the date of issuance thereof to and
including the termination date thereof computed at a per
annum rate for each day equal to the Applicable Eurodollar
Margin in effect from time to time on the Stated Amount of
such Standby Letter of Credit and (ii) a fee in respect of
each Trade Letter of Credit (the "Trade Letter of Credit
Fee," and together with the Standby Letter of Credit Fee, the
"Letter of Credit Fees") for the period from and including
the later of the Effective Date or the date of issuance
thereof to and including the termination date thereof
computed at a per annum rate for each day equal to 3/16 of 1%
on the Stated Amount of such Trade Letter of Credit. Such
Letter of Credit Fees shall be due and payable quarterly in
arrears on the 10th Business Day of each February, May,
August and November of each year for the three-month period
(or portion thereof) ending on and including the 25th day of
the immediately preceding month (i.e., January, April, July
and October) and on the date upon which the Total Letter of
Credit Commitment is terminated.
(d) The Borrower hereby agrees to pay directly to
each Letter of Credit Issuer upon each issuance of, drawing
under, and/or amendment of, a Letter of Credit issued by such
Letter of Credit Issuer such amounts (if any) in respect of
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such events as the Borrower and such Letter of Credit Issuer
shall agree from time to time.
(e) The Borrower shall pay to the Agent, for its
own account, when and as due, such fees as may be agreed to
from time to time.
(f) All computations of Fees shall be made in
accordance with Section 12.07(b).
3.02 Voluntary Reduction of Commitments. (a) Upon
at least three Business Days' prior written notice (or tele-
phonic notice confirmed in writing) to the Agent at its
Notice Office (which notice the Agent shall promptly transmit
to each of the Banks), the Borrower shall have the right,
without premium or penalty, to terminate the Total Unutilized
Revolving Commitment, in part or in whole; provided that (x)
any such termination shall apply to proportionately and
permanently reduce the Revolving Commitment of each of the
Banks and (y) any partial reduction pursuant to this Section
3.02(a) shall be in integral multiples of $5,000,000.
(b) Upon at least three Business Days' prior writ-
ten notice (or telephonic notice confirmed in writing) to the
Agent at its Notice Office (which notice the Agent shall
promptly transmit to each of the Banks), the Borrower shall
have the right, without premium or penalty, to terminate the
Total Unutilized Letter of Credit Commitment, in part or in
whole; provided that (x) any such termination shall apply to
proportionately and permanently reduce the Letter of Credit
Commitment of each of the Banks and (y) any partial reduction
pursuant to this Section 3.02(b) shall be in integral
multiples of $5,000,000.
3.03 Mandatory Reduction of Commitments. (a) The
Total Revolving Commitment shall terminate on the Maturity
Date.
(b) The Total Letter of Credit Commitment shall
terminate on the Maturity Date.
SECTION 4. Payments.
4.01 Voluntary Prepayments. The Borrower shall
have the right to prepay Revolving Loans in whole or in part
from time to time on the following terms and conditions: (i)
the Borrower shall give the Agent at its Notice Office writ-
ten notice (or telephonic notice promptly confirmed in writ-
ing) of its intent to make such prepayment, the amount of
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such prepayment and (in the case of Fixed Rate Loans) the
specific Borrowing(s) pursuant to which made, which notice
shall be given by the Borrower no later than (x) in the case
of Base Rate Loans, 12:00 Noon (New York time) one Business
Day prior to the date of such prepayment, or (y) in the case
of Fixed Rate Loans, 12:00 Noon (New York time) three
Business Days prior to the date of such prepayment and shall
promptly be transmitted by the Agent to each of the Banks;
(ii) each partial prepayment of any Borrowing shall be in an
aggregate principal amount of at least $1,000,000 (and, if
greater, shall be in an integral multiple of $500,000),
provided that no partial prepayment of Fixed Rate Loans made
pursuant to a single Borrowing shall reduce the outstanding
Revolving Loans made pursuant to such Borrowing to an amount
less than $3,000,000; (iii) prepayments of Fixed Rate Loans
made pursuant to this Section 4.01 may only be made on the
last day of an Interest Period applicable thereto; and (iv)
each prepayment in respect of any Revolving Loans made
pursuant to a Borrowing shall be applied pro rata among such
Revolving Loans. The Borrower shall not have the right to
voluntarily prepay any Competitive Bid Loans without the
prior written consent of the Bank or Banks which made such
Competitive Bid Loans, provided that if the Notice of
Competitive Bid Borrowing delivered by the Borrower in
respect of such Competitive Bid Loans expressly stated that
such Competitive Bid Loans shall be prepayable, the Borrower
may prepay such Competitive Bid Loans subject to the payment
of breakage costs (if any) payable as a result of such
prepayment pursuant to Section 1.12.
4.02 Mandatory Prepayments. (a) If on any date
the sum of the outstanding principal amount of Revolving
Loans and Competitive Bid Loans (all the foregoing, collec-
tively, the "Aggregate Loan Outstandings") exceeds the Avail-
able Total Revolving Commitment as then in effect, the Bor-
rower shall repay on such date the principal of Revolving
Loans, in an amount equal to such excess. If, after giving
effect to the prepayment of all outstanding Revolving Loans
as set forth above, the remaining Aggregate Loan Outstandings
exceed the Available Total Revolving Commitment, the Borrower
shall repay on such date the principal of Competitive Bid
loans in an aggregate amount equal to such excess, provided
that no Competitive Bid Loan shall be prepaid pursuant to
this sentence unless the Bank that made same consents to such
prepayment.
(b) With respect to each prepayment of Loans re-
quired by this Section 4.02, the Borrower may designate the
Types of Loans which are to be prepaid and the specific
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Borrowing(s) pursuant to which made; provided that: (i) if
any prepayment of Fixed Rate Loans made pursuant to a single
Borrowing shall reduce the outstanding Revolving Loans made
pursuant to such Borrowing to an amount less than $3,000,000,
such Borrowing shall immediately be converted into Base Rate
Loans; and (ii) each prepayment of any Loans made pursuant to
a Borrowing shall be applied pro rata among such Loans. In
the absence of a designation by the Borrower as described in
the preceding sentence, the Agent shall, subject to the
above, make such designation in its sole discretion with a
view, but no obligation, to minimize breakage costs owing
under Section 1.12.
(c) If on any day and for so long as (x) the
aggregate amount of Letter of Credit Outstandings exceeds the
Total Letter of Credit Commitment and/or (y) the aggregate
amount of Letter of Credit Outstandings in respect of Letters
of Credit denominated in Approved Alternate Currencies
exceeds $5,000,000, then the Borrower shall pay to the Agent
an amount in cash and/or Cash Equivalents equal to such
excess (or, if the excess under clause (x) is different from
the excess under clause (y), an amount equal to the greater
of such excesses) and the Agent shall hold such payment as
security for the Obligations of the Borrower hereunder
pursuant to a cash collateral agreement to be entered into in
form and substance reasonably satisfactory to the Agent
(which shall permit certain investments in Cash Equivalents,
until the proceeds are either returned to the Borrower
pursuant to the immediately succeeding sentence or applied to
the Obligations). If on any Business Day the amount of cash
and Cash Equivalents held by the Agent pursuant to the
preceding sentence is greater than the amount required to be
held by the Agent as determined pursuant to such sentence,
the Agent shall on such day return to the Borrower an amount
of cash and/or Cash Equivalents equal to such excess
collateral.
4.03 Method and Place of Payment. Except as
otherwise specifically provided herein, all payments under
this Agreement shall be made to the Agent for the ratable
account of the Banks entitled thereto, not later than 12:00
Noon (New York time) on the date when due and shall be made
in immediately available funds and in Dollars at the Payment
Office. Any payments under this Agreement which are made
later than 12:00 Noon (New York time) shall be deemed to have
been made on the next succeeding Business Day. Whenever any
payment to be made hereunder shall be stated to be due on a
day which is not a Business Day, the due date thereof shall
be extended to the next succeeding Business Day and, with
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respect to payments of principal, interest shall be payable
during such extension at the applicable rate in effect
immediately prior to such extension.
4.04 Net Payments. All payments made by the Bor-
rower hereunder or under any Note will be made without set-
off, counterclaim or other defense. All such payments will
be made free and clear of, and without deduction or withhold-
ing for, any present or future taxes, levies, imposts,
duties, fees, assessments or other charges of whatever nature
now or hereafter imposed by any jurisdiction or by any poli-
tical subdivision or taxing authority thereof or therein (but
excluding, except as provided below, any tax imposed on or
measured by the net income of a Bank pursuant to the laws of
the jurisdiction in which the principal office or Applicable
Lending Office of such Bank is located or under the laws of
any political subdivision or taxing authority of any such
jurisdiction in which the principal office or Applicable
Lending Office of such Bank is located) and all interest,
penalties or similar liabilities with respect thereto (col-
lectively, "Taxes"). The Borrower shall also reimburse each
Bank, upon the written request of such Bank, for taxes im-
posed on or measured by the net income of such Bank pursuant
to the laws of the jurisdiction in which the principal office
or Applicable Lending Office of such Bank is located or under
the laws of any political subdivision or taxing authority of
any such jurisdiction in which the principal office or
Applicable Lending Office of such Bank is located as such
Bank shall determine are payable by such Bank in respect of
amounts paid to or on behalf of such Bank pursuant to the
preceding sentence. If any Taxes are so levied or imposed,
the Borrower agrees to pay the full amount of such Taxes, and
such additional amounts as may be necessary so that every
payment of all amounts due hereunder or under any Note, after
withholding or deduction for or on account of any Taxes, will
not be less than the amount provided for herein or in such
Note. The Borrower will furnish to the Agent within 45 days
after the date the payment of any Taxes is due pursuant to
applicable law certified copies of tax receipts evidencing
such payment by the Borrower. The Borrower will indemnify
and hold harmless each Bank, and reimburse such Bank upon its
written request, for the amount of any Taxes so levied or
imposed and paid by such Bank.
4.05 Contingent Prepayments. Upon the occurrence
of a Change of Control Event, the Borrower shall give prompt
written notice thereof to the Banks, which notice shall con-
tain (a) a description of the Change of Control Event, (b) a
written, irrevocable offer by the Borrower, on a date (the
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"Prepayment Date") specified in such notice (which date shall
be not less than 45 days and not more than 180 days after the
date of such notice), to prepay the Loans in full (and not in
part), to provide cash collateral for the Letters of Credit
and to terminate the Total Revolving Commitment and the Total
Letter of Credit Commitment and (c) the latest date by which
the Banks may require the Borrower to make such prepayment,
deposit and termination, which date shall be no earlier than
10 days after the date on which the offer referred to in
clause (b) above is received by the Banks. After the
occurrence of a Change of Control Event, the Borrower may not
select an Interest Period which extends beyond the Prepayment
Date unless the Borrower has received written notice from the
Required Banks that no prepayment, deposit or termination
will be required pursuant to this Section 4.05 by reason of
such Change of Control Event. Upon the occurrence of a
Change in Control Event, the Agent, if so directed by the
Required Banks, shall by written notice (the "Demand") to the
Borrower (x) demand prepayment in full of all principal and
accrued and unpaid interest on the Loans, (y) direct the
Borrower to pay to the Agent an amount equal to the then
Stated Amount of all outstanding Letters of Credit for
deposit in a cash collateral account maintained by the Agent
for the pro rata benefit of the Banks which amount shall be
applied by the Agent to satisfy the Borrower's obligations
under Section 2.04 in respect of such outstanding Letters of
Credit and (z) require that the Total Revolving Commitment
and the Total Letter of Credit Commitment be terminated. In
the event the Agent gives a Demand, on the Prepayment Date
the Borrower shall prepay the Loans in full and make such
deposit and the Total Revolving Commitment and the Total
Letter of Credit Commitment shall automatically terminate.
As used in this Section, a "Change of Control Event" shall
mean (a) the direct or indirect acquisition by any person or
related persons which would constitute a "group" within the
meaning of Rule 13d-5 under the Securities Exchange Act of
1934, as amended, (a "Group") of beneficial ownership of
issued and outstanding Voting Securities of the Borrower
possessing in excess of 50% of the combined voting power of
all issued and outstanding Voting Securities of the Borrower
entitled to vote generally in the election of the Borrower's
Board of Directors or (b) the direct or indirect transfer or
sale to any person or Group of all or substantially all of
the Borrower's assets; and "Voting Securities" shall mean the
shares of capital stock and any other securities of the
Borrower entitled to vote generally for the election of
directors or any other securities (including, without limita-
tion, rights and options), convertible into, exchangeable
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into or exercisable for, any of the foregoing (whether or not
presently exercisable, convertible or exchangeable).
SECTION 5. Conditions Precedent.
5.01 Conditions to Effectiveness. This Agreement
shall become effective, and the Letter of Credit Issuers
shall sell and the Participants shall purchase participating
interests in Existing Letters of Credit as provided in Sec-
tions 2.01(c) and 2.03(a), on the date (the "Effective Date")
on which each of the following conditions is satisfied:
(a) Execution of Agreement; Notes. On the Effec-
tive Date (i) the Borrower, the Agent and each Bank
shall have executed this Agreement and delivered an
executed counterpart hereof to the Agent and (ii) there
shall have been delivered to the Agent for the account
of each of the Banks the appropriate Notes executed by
the Borrower in the amount, maturity and as otherwise
provided herein.
(b) No Default; Representations and Warranties.
On the Effective Date and also after giving effect
thereto (i) there shall exist no Default or Event of
Default and (ii) all representations and warranties con-
tained herein or in the other Credit Documents shall be
true and correct in all material respects with the same
effect as though such representations and warranties had
been made on and as of such date.
(c) Opinion of Counsel. On the Effective Date,
the Agent shall have received from Rosenman & Colin,
counsel to the Borrower, an opinion addressed to each of
the Banks, dated the Effective Date and covering the
matters set forth in Exhibit C and such other matters
incident to the transactions contemplated herein as any
Bank may reasonably request.
(d) Corporate Documents; Proceedings. (i) On the
Effective Date, the Agent shall have received a certifi-
cate, dated the Effective Date, signed by the President
or any Vice President of the Borrower and attested to by
the Secretary or any Assistant Secretary of the Borrower
in the form of Exhibit D with appropriate insertions,
together with copies of the Certificate of Incorporation
and By-Laws of the Borrower and the resolutions of the
Borrower referred to in such certificate.
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(ii) All corporate and legal proceedings and all
instruments and agreements in connection with the trans-
actions contemplated in this Agreement and the other
Credit Documents shall be satisfactory in form and sub-
stance to the Banks, and the Agent shall have received
all information and copies of all documents and papers,
including records of corporate proceedings and govern-
mental approvals, if any, which any Bank reasonably may
have requested in connection therewith, such documents
and papers where appropriate to be certified by proper
corporate or governmental authorities.
(e) Fees. The Borrower shall have paid all Fees
(if any) which are required to be paid by it on or
before the Effective Date.
(f) Payment of Senior Notes. On or prior to the
Effective Date, the Borrower shall have paid in full all
principal, interest and premium (if any) in respect of
the 1987 Notes, the 1988 Notes and the 1990 Notes.
(g) Termination of Existing Credit Agreement. On
the Effective Date, the total commitments under the
Existing Credit Agreement shall have terminated and the
principal of all outstanding loans thereunder shall have
been paid in full, together with interest thereon and
all other amounts owing pursuant to the Existing Credit
Agreement (except to the extent that letters of credit
issued thereunder will remain outstanding hereunder as
Existing Letters of Credit); and the Existing Credit
Agreement shall have terminated and be of no further
force and effect (except as to indemnities contained
therein which survive the termination of the Existing
Credit Agreement in accordance with the terms thereof).
5.02 Conditions Precedent to Each Credit Event.
The obligation of each Bank to make Loans or to issue or
participate in Letters of Credit, as the case may be, on and
after the Effective Date is subject, at the time of each
Credit Event (except as hereinafter indicated), to the sa-
tisfaction of the following conditions:
(a) Effective Date. The Effective Date shall have
occurred.
(b) No Default; Representations and Warranties.
At the time of each Credit Event and also after giving
effect thereto (i) there shall exist no Default or Event
of Default and (ii) all representations and warranties
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contained herein or in the other Credit Documents shall
be true and correct in all material respects with the
same effect as though such representations and warran-
ties had been made on and as of the date of such Credit
Event.
(c) Notice of Borrowing. Prior to each Credit
Event, other than the issuance of a Letter of Credit,
the Agent shall have received a Notice of Borrowing or
a Notice of Competitive Bid Borrowing with respect
thereto meeting the requirements of Section 1.03 or
Section 1.04, as the case may be.
The acceptance of the benefits of each Credit Event shall
constitute a representation and warranty by the Borrower to
each of the Banks that all the conditions specified in Sec-
tion 5.02(b) exist as of that time. All of the Notes, cer-
tificates, legal opinions and other documents and papers re-
ferred to in this Section 5, unless otherwise specified,
shall be delivered to the Agent at the Agent's Notice Office
for the account of each of the Banks and, except for the
Notes, in sufficient counterparts for each of the Banks and
shall be satisfactory in form and substance to the Banks.
SECTION 6. Representations, Warranties and Agree-
ments. In order to induce the Banks to enter into this
Agreement and to make the Loans and issue or participate in
the Letters of Credit, the Borrower makes the following repre-
sentations, warranties and agreements as of the Effective
Date and the date of each Credit Event, which shall survive
the execution and delivery of this Agreement and the Notes
and the making of the Loans and the issuance and partici-
pation in the Letters of Credit.
6.01 Corporate Status. Each of the Borrower and
each of its Subsidiaries (i) is a duly organized and validly
existing corporation in good standing under the laws of the
jurisdiction of its incorporation, (ii) has the corporate
power and authority to own its property and assets and to
transact the business in which it is engaged or presently
proposes to engage and (iii) is duly qualified or licensed as
a foreign corporation and in good standing in each jurisdic-
tion where it transacts any material amount of its business
and in which the failure to so qualify or become licensed
would have a material adverse effect on the business, opera-
tions, property, assets, condition (financial or otherwise)
or prospects of the Borrower or the Borrower and its
Subsidiaries taken as a whole.
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6.02 Corporate Power and Authority. The Borrower
has the corporate power to execute, deliver and carry out the
terms and provisions of each of the Credit Documents and has
taken all necessary corporate action to authorize the
execution, delivery and performance by it of each of such
Credit Documents. As of the Effective Date, the Borrower
will have duly executed and delivered each of the Credit
Documents (except for the Letter of Credit Documents to be
executed by the Borrower after the Effective Date), and each
of such Credit Documents constitutes, and the Letter of
Credit Documents when executed and delivered will constitute,
its legal, valid and binding obligation enforceable in
accordance with its terms.
6.03 No Violation. Neither the execution, deliv-
ery or performance by the Borrower of the Credit Documents,
nor compliance by it with the terms and provisions thereof,
(i) will contravene any provision of any law, statute, rule
or regulation or any order, writ, injunction or decree of any
court or governmental instrumentality, (ii) will result in
any breach of any of the terms, covenants, conditions or
provisions of, or constitute a default under, or result in
the creation or imposition of (or the obligation to create or
impose) any Lien upon any of the property or assets of the
Borrower or any of its Subsidiaries pursuant to the terms of
any indenture, mortgage, deed of trust, credit agreement,
loan agreement or any other agreement, contract or instrument
to which the Borrower or any of its Subsidiaries is a party
or by which it or any of its property or assets is bound or
to which it may be subject or (iii) will violate any provi-
sion of the Certificate of Incorporation or By-Laws of the
Borrower or any of its Subsidiaries.
6.04 Governmental Approvals. No order, consent,
approval, license, authorization or validation of, or filing,
recording or registration with (except as have been obtained
or made), or exemption by, any governmental or public body or
authority, or any subdivision thereof, is required to author-
ize, or is required in connection with, (i) the execution,
delivery and performance of any Credit Document or (ii) the
legality, validity, binding effect or enforceability of any
Credit Document.
6.05 Financial Statements; Financial Condition.
(a) The consolidated statements of financial condition of
the Borrower and its Consolidated Subsidiaries at January 31,
1993 and August 1, 1993, and the related consolidated state-
ments of income and retained earnings and cash flows of the
Borrower and its Consolidated Subsidiaries for the fiscal
-33-
year or six-month period, as the case may be, ended on such
date and heretofore furnished to the Banks present fairly the
consolidated financial condition of the Borrower and its
Consolidated Subsidiaries at the date of such statements of
financial condition and the consolidated results of the
operations of the Borrower and its Consolidated Subsidiaries
for such fiscal year or six-month period, as the case may be,
in accordance with generally accepted accounting principles
consistently applied except for, with respect to the
financial statements for the six-month period ended on August
1, 1993, normal year-end audit adjustments.
(b) Since January 31, 1993, there has been no
material adverse change in the business, operations, prop-
erty, assets, condition (financial or otherwise) or prospects
of the Borrower or of the Borrower and its Subsidiaries taken
as a whole. As used in this Agreement, "prospects" shall
mean prospects only to the extent reasonably foreseeable.
6.06 Litigation. There are no actions, suits or
proceedings pending or, to the best of the knowledge of the
Borrower, threatened (i) with respect to any Credit Document
or (ii) that would materially and adversely affect the
business, operations, property, assets, condition (financial
or otherwise) or prospects of the Borrower or of the Borrower
and its Subsidiaries taken as a whole.
6.07 True and Complete Disclosure. All factual
information (taken as a whole) heretofore or contemporane-
ously furnished by or on behalf of the Borrower in writing to
any Bank (including without limitation all information con-
tained in the Credit Documents) for purposes of or in con-
nection with this Agreement or any transaction contemplated
herein is, and all other such factual information (taken as
a whole) hereafter furnished by or on behalf of the Borrower
in writing to any Bank will be, true and accurate in all
material respects on the date as of which such information is
dated or certified and not incomplete by omitting to state
any fact necessary to make such information (taken as a
whole) not misleading at such time in light of the circum-
stances under which such information was provided.
6.08 Use of Proceeds; Margin Regulations. All
proceeds of the Loans may be used for working capital and
other general corporate purposes (other than to purchase or
carry Margin Stock or to extend credit to others for the pur-
pose of purchasing or carrying any Margin Stock). Neither
the making of any Loan nor the use of the proceeds thereof
will violate or be inconsistent with the provisions of
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Regulations G, T, U or X of the Board of Governors of the
Federal Reserve System.
6.09 Tax Returns and Payments. Each of the Bor-
rower and each of its Subsidiaries has filed all tax returns
required to be filed by it and has paid all income taxes pay-
able by it which have become due pursuant to such tax returns
and all other taxes and assessments payable by it which have
become due, other than those not yet delinquent and except
for those contested in good faith. Each of the Borrower and
each of its Subsidiaries has paid, or has provided adequate
reserves (in the good faith judgment of the management of the
Borrower) for the payment of, all federal and state income
taxes applicable for all prior fiscal years and for the
current fiscal year to the date hereof.
6.10 Compliance with ERISA. All Plans are (or,
before the expiration of any applicable remedial amendment
period, will be amended to be) in substantial compliance with
ERISA and the Code; no Plan is insolvent or in
reorganization; no Plan has an accumulated or waived funding
deficiency or has applied for an extension of any
amortization period within the meaning of Section 412 of the
Code; neither the Borrower or any of its Subsidiaries nor any
ERISA Affiliate has incurred any liability which would be
material to the Borrower and its Subsidiaries, taken as a
whole, to or on account of a Plan which is a single-employer
plan as defined in Section 4001(a)(15) of ERISA pursuant to
Section 409, 502(i), 502(l), 4062, 4063, 4064 or 4069 of
ERISA or Section 4975 of the Code or a multiemployer plan
pursuant to Sections 515, 4201 or 4204 of ERISA; no proceed-
ings have been instituted to terminate any Plan pursuant to
Section 4042 of ERISA; and no condition exists which presents
a material risk to the Borrower or any of its Subsidiaries of
incurring a liability which would be material to the Borrower
and its Subsidiaries, taken as a whole, to or on account of
a Plan pursuant to any of the foregoing Sections of ERISA or
the Code. Any representation in the immediately preceding
sentence with respect to any Plan which is a multiemployer
plan (other than a representation with respect to liability
incurred under Section 515, 4201 or 4204 of ERISA) shall be
to the best knowledge of the Borrower. As of the most recent
valuation thereof prior to the Effective Date, and except as
set forth in Schedule VIII, the present value of accrued
benefits under each Plan which is a single-employer plan does
not exceed the current value of the assets of each such Plan
based upon the actuarial data and assumptions used by the
consulting actuaries of the Plans in preparing each such
Plan's most recent actuarial valuation report, and there is
-35-
no withdrawal liability (and would be no withdrawal
liability, assuming a complete withdrawal from all such
Plans) to any Plan which is a multiemployer plan, which would
result in a material liability to the Borrower and its
Subsidiaries, taken as a whole. Neither the Borrower nor any
of its Subsidiaries maintains any welfare plans as defined in
Section 3(1) of ERISA which provide retiree life or health
benefits (other than as required by Section 601 of ERISA)
which would have a material adverse effect on the ability of
the Borrower to perform its obligations under this Agreement.
6.11 Subsidiaries. On the Effective Date, the
corporations listed on Schedule IV are the only Subsidiaries
of the Borrower. Schedule IV correctly sets forth, as of the
Effective Date, the percentage ownership (direct and in-
direct) of the Borrower in each class of capital stock of
each of its Subsidiaries and also identifies the direct owner
thereof.
6.12 Compliance with Statutes, etc. The Borrower
and its Subsidiaries are in compliance with all applicable
statutes, regulations and orders of, and all applicable re-
strictions imposed by, all governmental bodies, domestic or
foreign, in respect of the conduct of their businesses and
the ownership of their properties (including applicable stat-
utes, regulations, orders and restrictions relating to en-
vironmental standards and controls) except such noncompli-
ances as would not, in the aggregate, have a material adverse
effect on the business, operations, property, assets, condi-
tion (financial or otherwise) or prospects of the Borrower or
of the Borrower and its Subsidiaries taken as a whole.
6.13 Investment Company Act. Neither the Borrower
nor any of its Subsidiaries is an "investment company" within
the meaning of the Investment Company Act of 1940, as
amended.
6.14 Public Utility Holding Company Act. Neither
the Borrower nor any of its Subsidiaries is a "holding com-
pany," or a "subsidiary company" of a "holding company," or
an "affiliate" of a "holding company" or of a "subsidiary
company" of a "holding company," within the meaning of the
Public Utility Holding Company Act of 1935, as amended.
6.15 Labor Relations. Neither the Borrower nor any
of its Subsidiaries is engaged in any unfair labor practice
that would have a material adverse effect on the Borrower or
on the Borrower and its Subsidiaries taken as a whole. There
is (i) no significant unfair labor practice complaint pending
-36-
against the Borrower or any of its Subsidiaries or, to the
best knowledge of the Borrower, threatened against any of
them, before the National Labor Relations Board, and no
significant grievance or significant arbitration proceeding
arising out of or under collective bargaining agreements is
so pending against the Borrower or any of its Subsidiaries
or, to the best knowledge of the Borrower, threatened against
any of them, (ii) no significant strike, labor dispute,
slowdown or stoppage pending against the Borrower or any of
its Subsidiaries or, to the best knowledge of the Borrower,
threatened against the Borrower or any of its Subsidiaries
and (iii) to the best knowledge of the Borrower, no union
representation question existing with respect to the
employees of the Borrower or any of its Subsidiaries and, to
the best knowledge of the Borrower, no union organizing
activities are taking place, except (with respect to any
matter specified in clause (i), (ii) or (iii) above, either
individually or in the aggregate) such as would not have a
material adverse effect on the business, operations,
property, assets, condition (financial or otherwise) or
prospects of the Borrower or of the Borrower and its
Subsidiaries taken as a whole.
6.16 Patents, Licenses, Franchises and Formulas.
The Borrower and its Subsidiaries own or have rights to use
under a license agreement all the patents, trademarks, per-
mits, service marks, trade names, copyrights, licenses, fran-
chises and formulas, or rights with respect to the foregoing,
and have obtained assignments of all leases and other rights
of whatever nature, necessary for the present conduct of
their businesses, without any known conflict with the rights
of others which, or the failure to obtain which, as the case
may be, would result in a material adverse effect on the
business, operations, property, assets, condition (financial
or otherwise) or prospects of the Borrower or of the Borrower
and its Subsidiaries taken as a whole.
SECTION 7. Affirmative Covenants. The Borrower
covenants and agrees that on and after the Effective Date and
until the Total Commitment and all outstanding Letters of
Credit have been terminated and the Loans and the Notes,
together with interest, Fees, Unpaid Drawings and all other
obligations incurred hereunder and thereunder, are paid in
full:
7.01 Information Covenants. The Borrower will
furnish to each Bank:
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(a) Quarterly Financial Statements. As soon as
practicable and in any event within 60 days after the
close of each quarterly accounting period (other than
the fourth quarterly period) in each fiscal year of the
Borrower, the consolidated balance sheets of the Bor-
rower and its Consolidated Subsidiaries as at the end of
such quarterly period and the related consolidated
statements of income and retained earnings and cash
flows for such quarterly period and for the elapsed por-
tion of the fiscal year ended with the last day of such
quarterly period, in each case setting forth comparative
figures for the related periods in the prior fiscal
year, all of which shall be certified by the Chairman,
the Chief Financial Officer, the Chief Accounting
Officer or the Treasurer of the Borrower, subject to
normal year-end audit adjustments.
(b) Annual Financial Statements. As soon as
practicable and in any event within 90 days after the
close of each fiscal year of the Borrower, the consoli-
dated balance sheets of the Borrower and its Consoli-
dated Subsidiaries as at the end of such fiscal year and
the related consolidated statements of income and re-
tained earnings and cash flows for such fiscal year, in
each case setting forth comparative figures for the pre-
ceding fiscal year and certified by independent certi-
fied public accountants of recognized national standing
reasonably acceptable to the Required Banks, together
with a report of such accounting firm stating that in
the course of its regular audit of the financial state-
ments of the Borrower, which audit was conducted in
accordance with generally accepted auditing standards,
such accounting firm obtained no knowledge of any De-
fault or Event of Default which has occurred and is con-
tinuing or, if in the opinion of such accounting firm
such a Default or Event of Default has occurred and is
continuing, a statement as to the nature thereof.
(c) Officer's Certificates. At the time of the
delivery of the financial statements provided for in
Section 7.01(a) and (b), a certificate of the Chairman,
the Chief Financial Officer, the Chief Accounting
Officer or the Treasurer of the Borrower to the effect
that, to the best of his knowledge, no Default or Event
of Default has occurred and is continuing or, if any De-
fault or Event of Default has occurred and is contin-
uing, specifying the nature and extent thereof, which
certificate shall set forth the calculations required to
establish whether the Borrower was in compliance with
-38-
the provisions of Sections 8.01, 8.05 through 8.07,
inclusive, and 8.09, at the end of such fiscal quarter
or year, as the case may be.
(d) Notice of Default or Litigation. Promptly,
and in any event within three Business Days after an
officer of the Borrower obtains knowledge thereof,
notice of (i) the occurrence of any event which consti-
tutes a Default or Event of Default, (ii) any litigation
or governmental proceeding pending (x) against the Bor-
rower or any of its Subsidiaries which would materially
and adversely affect the business, operations, property,
assets, condition (financial or otherwise) or prospects
of the Borrower or of the Borrower and its Subsidiaries,
taken as a whole, or (y) with respect to any Credit
Document and (iii) any other event which would materi-
ally and adversely affect the business, operations,
property, assets, condition (financial or otherwise) or
prospects of the Borrower or any of its Subsidiaries.
(e) Other Reports and Filings. Promptly, copies
of all financial information, proxy materials and other
information and reports, if any, which the Borrower
shall file with the Securities and Exchange Commission
or any governmental agencies substituted therefor (the
"SEC").
(f) Letters of Credit. (i) On the date three
Business Days prior to the last day of each January,
April, July and October, a summary statement setting
forth the daily average aggregate Stated Amount of all
Trade Letters of Credit and the daily average aggregate
Stated Amount of all Standby Letters of Credit outstand-
ing during the three-month period ending on and includ-
ing the 25th day of such month (in each case on an
aggregate basis, and on an individual basis for Dollar
denominated and Approved Alternate Currency denominated
Letters of Credit), each such statement to be certified
by the Chairman, the Chief Financial Officer, the Chief
Accounting Officer, the Treasurer or an Assistant
Treasurer of the Borrower. Each such summary statement
shall be countersigned by the relevant Letter of Credit
Issuer confirming the amounts set forth therein.
(ii) On the date ten Business Days after the last
day of each January, April, July and October, statements
setting forth for all Trade Letters of Credit outstand-
ing on the 25th day of such month the Stated Amounts of
such Trade Letters of Credit aggregated as to those
-39-
which will expire during each of the succeeding three
months and thereafter, each such statement to be certi-
fied by the Chairman, the Chief Financial Officer, the
Chief Accounting Officer, the Treasurer or an Assistant
Treasurer of the Borrower. Each such Letter of Credit
statement shall be countersigned by the relevant Trade
Letter of Credit Bank confirming the amounts set forth
therein.
(g) Senior Note Information. Promptly (i) copies
of all written materials relating to credit matters
which the Borrower shall provide to the holders of any
of the Senior Notes and (ii) copies of all amendments or
waivers to the Senior Note Documents (whether the
consent of the Banks to such amendment or waiver is
required hereunder or otherwise).
(h) Credit Rating Changes. Promptly after any
senior financial or legal officer of the Borrower
obtains knowledge thereof, notice of any change in the
Credit Rating assigned by either Rating Agency.
(i) Other Information. From time to time, such
other information or documents (financial or otherwise)
as any Bank may reasonably request.
7.02 Books, Records and Inspections. The Borrower
will, and will cause each of its Subsidiaries to, keep proper
books of record and account in which full, true and correct
entries in conformity with generally accepted accounting
principles and all requirements of law shall be made of all
dealings and transactions in relation to its business and
activities. The Borrower will, and will cause each of its
Subsidiaries to, permit officers and designated representa-
tives of the Agent or any Bank to visit and inspect, under
guidance of officers of the Borrower or such Subsidiary, any
of the properties of the Borrower or such Subsidiary, and to
examine the books of account of the Borrower or such Sub-
sidiary and discuss the affairs, finances and accounts of the
Borrower or such Subsidiary with, and be advised as to the
same by, its and their officers, all at such reasonable times
and intervals and to such reasonable extent as the Agent or
such Bank may request.
7.03 Maintenance of Property; Insurance. The Bor-
rower shall, and shall cause each of its Subsidiaries to (i)
keep all material property used and necessary in its business
in good working order and condition, (ii) maintain or cause
to be maintained with financially sound and reputable
-40-
insurers, insurance with respect to its properties and busi-
ness, and the properties and business of its Subsidiaries,
against loss or damage of the kinds customarily insured
against by reputable companies in the same or similar busi-
nesses, such insurance to be of such types, including without
limitation business interruption insurance, and in such
amounts (with such deductible amounts) as is customary for
such companies in similar circumstances and (iii) furnish to
each Bank, upon written request, full information as to the
insurance carried.
7.04 Corporate Franchises. The Borrower will, and
will cause each of its Subsidiaries to, do or cause to be
done, all things necessary to preserve and keep in full force
and effect its existence and its material rights, franchises,
licenses and patents; provided, however, that nothing in this
Section 7.04 shall prevent (i) the withdrawal by the Borrower
or any of its Subsidiaries of its qualification as a foreign
corporation in any jurisdiction where such withdrawal would
not have a material adverse effect on the business, opera-
tions, property, assets, condition (financial or otherwise)
or prospects of the Borrower and its Subsidiaries taken as
whole or (ii) the termination of the corporate existence of
a Subsidiary if, in the good faith judgment of the Borrower,
such termination is in the best interests of the Borrower and
is not disadvantageous to the Banks.
7.05 Compliance with Statutes, etc. The Borrower
will, and will cause each of its Subsidiaries to, comply with
all applicable statutes, regulations and orders of, and all
applicable restrictions imposed by, all governmental bodies,
domestic or foreign, in respect of the conduct of its busi-
ness and the ownership of its property (including applicable
statutes, regulations, orders and restrictions relating to
environmental standards and controls), except such noncompli-
ances as would not, in the aggregate, have a material adverse
effect on the business, operations, property, assets, condi-
tion (financial or otherwise) or prospects of the Borrower or
of the Borrower and its Subsidiaries taken as a whole.
7.06 ERISA. As soon as possible and, in any
event, within 10 days after the Borrower or any of its Sub-
sidiaries or any ERISA Affiliate knows, with respect to all
Plans or has reason to know, solely with respect to Plans
that are single-employer plans, that a Reportable Event has
occurred with respect to a Plan, that an accumulated funding
deficiency has been incurred with respect to a Plan, that an
application is to be or has been made to the Secretary of the
Treasury for a waiver of the minimum funding standard or the
-41-
extension of any amortization period under Section 412 of the
Code with respect to a Plan, that a Plan has been or may be
terminated, that proceedings are likely to be or have been
instituted to terminate a Plan, or that the Borrower, a Sub-
sidiary of the Borrower or an ERISA Affiliate will or may
incur any liability to or on account of a Plan which is a
single-employer plan under Section 409, 502(i), 502(l), 4062,
4063, 4064 or 4069 of ERISA or Section 4975 of the Code or
which is a multiemployer plan under Section 515, 4201 or 4204
of ERISA, the Borrower will deliver to the Agent a certif-
icate of a financial officer setting forth details as to such
occurrence and action, if any, which the Borrower or the re-
spective Subsidiary or ERISA Affiliate is required or pro-
poses to take, together with any notices required or proposed
to be filed with or by the Borrower, the respective Subsidi-
ary, the ERISA Affiliate, the Internal Revenue Service, the
PBGC or the plan administrator with respect thereto. Upon
the reasonable request of the Agent, the Borrower shall
deliver a true and complete copy of all or any portion of the
Internal Revenue Service Form 5500 (Annual Report) filed most
recently with respect to any Plan or Plans where a copy of
such Annual Report is reasonably available to the Borrower.
Copies of any notices required to be delivered to the Agent
hereunder shall be delivered no later than 10 days after the
later of the date such notice has been filed with the Inter-
nal Revenue Service or the PBGC or received by the Borrower
or any of its Subsidiaries.
7.07 Performance of Obligations. The Borrower
will, and will cause each of its Subsidiaries to, perform all
of its obligations under the terms of each mortgage, in-
denture, security agreement and other debt instrument by
which it is bound, except such non-performances as would not
in the aggregate have a material adverse effect on the busi-
ness, operations, property, assets, condition (financial or
otherwise) or prospects of the Borrower or of the Borrower
and its Subsidiaries taken as a whole.
7.08 Payment of Taxes and Claims. The Borrower
will, and will cause each of its Subsidiaries to, pay all
taxes, assessments and other governmental charges imposed
upon it or any of its properties or assets or in respect of
any of its franchises, business income or property before any
material penalty or significant interest accrues thereon, and
all claims (including, without limitation, claims for labor,
services, materials and supplies) for sums which have become
due and payable and which by law have or may become a Lien
upon any of its properties or assets, provided that no such
charge or claim need be paid if being contested in good faith
-42-
by appropriate proceedings promptly instituted and diligently
conducted and if such accrual or other appropriate provision,
if any, as shall be required by generally accepted accounting
principles shall have been made therefor.
SECTION 8. Negative Covenants. The Borrower cov-
enants and agrees that on and after the Effective Date and
until the Total Commitment and all outstanding Letters of
Credit have been terminated and the Loans and the Notes,
together with interest, Fees, Unpaid Drawings and all other
obligations incurred hereunder and thereunder, are paid in
full:
8.01 Liens. The Borrower will not, and will not
permit any of its Subsidiaries to, create, incur, assume or
suffer to exist any Lien upon or with respect to any property
or assets (real or personal, tangible or intangible) of the
Borrower or any of its Subsidiaries, whether now owned or
hereafter acquired, or sell any such property or assets sub-
ject to an understanding or agreement, contingent or other-
wise, to repurchase such property or assets (including sales
of accounts receivable with recourse to the Borrower or any
of its Subsidiaries), or assign any right to receive income
or permit the filing of any financing statement under the UCC
or any other similar notice of Lien under any similar record-
ing or notice statute, provided that the provisions of this
Section 8.01 shall not prevent the creation, incurrence,
assumption or existence of:
(i) Liens for taxes not yet due, or Liens for
taxes being contested in good faith by appropriate pro-
ceedings promptly instituted and diligently conducted
and for which such accrual or other appropriate pro-
vision, if any, as shall be required by generally ac-
cepted accounting principles have been made;
(ii) Liens in respect of property or assets of the
Borrower or any of its Subsidiaries incidental to the
conduct of the business of, or the ownership of property
and assets of, the Borrower or any of its Subsidiaries
which were not incurred in connection with the borrowing
of money or the obtaining of advances or credit, and (x)
which do not in the aggregate materially detract from
the value of its property or assets or materially impair
the use thereof in the operation of the business of the
Borrower or any of its Subsidiaries or (y) which are
being contested in good faith by appropriate proceed-
ings, which proceedings have the effect of preventing
-43-
the forfeiture or sale of the property or assets subject
to any such Lien;
(iii) Liens in existence on the Effective Date which
are listed, and the property subject thereto described,
in Schedule V securing Indebtedness not exceeding the
amount set forth in such Schedule V, and any renewals,
extensions or refundings of any such Liens, provided,
that the principal amount of the Indebtedness secured
thereby is not increased and the Lien is not extended to
other property (Liens described in this clause (iii),
"Permitted Liens");
(iv) Pledges or deposits in connection with
worker's compensation, unemployment insurance and other
social security legislation;
(v) Liens on goods and related documents securing
the Trade Letters of Credit;
(vi) Liens in respect of the property or assets of
a Subsidiary, securing obligations of such Subsidiary to
the Borrower or any wholly-owned Domestic Subsidiary;
(vii) Purchase money Liens or other Liens on
property acquired after the Effective Date by the
Borrower or any Subsidiary, to secure the purchase price
of such property (or to secure indebtedness incurred
solely for the purpose of financing the acquisition of
such property) or Liens on any such property at the time
of the acquisition of such property by the Borrower or
by such Subsidiary, whether or not assumed, provided
that (x) the Indebtedness secured by each such Lien
shall not exceed the cost of such property to the
Borrower or any such Subsidiary or the fair value
thereof at the time of the acquisition thereof, as the
case may be, whichever is less, and (y) each such Lien
shall apply and attach only to the property originally
subject thereto and fixed improvements thereon or
accessions thereto; and
(viii) Liens not otherwise permitted by the foregoing
clauses (i) through (vii) above, provided that the sum
of (x) the aggregate amount of all obligations
(including, without limitation, all Indebtedness)
secured by Liens pursuant to this clause (viii) and (y)
the aggregate principal amount of Indebtedness of
Subsidiaries of the Borrower outstanding pursuant to
-44-
Section 8.09(ii), shall not exceed an amount equal to
10% of the Borrower's Net Worth.
8.02 Consolidation, Merger, Sale of Assets. The
Borrower will not, and will not permit any of its Sub-
sidiaries to, wind up, liquidate or dissolve its affairs or
enter into any transaction of merger or consolidation, or
convey, sell, lease or otherwise dispose of (or agree to do
any of the foregoing at any future time) all or substantially
all of its properties or assets, except that:
(i) so long as no Default or Event of Default
exists, or would result therefrom, the Borrower may
merge or consolidate with any Person (provided the
Borrower shall be the continuing or surviving
corporation); and
(ii) so long as no Default or Event of Default
exists, or would result therefrom, any Subsidiary of the
Borrower may merge or consolidate with or into, or be
liquidated into, any Person, or wind up or dissolve its
affairs, and any such Subsidiary may convey, sell, lease
or dispose of all or substantially all of its assets to
any such Person.
8.03 Advances, Investments and Loans. The Bor-
rower will not, and will not permit any of its Subsidiaries
to, lend money or credit or make advances to, or guarantee
the obligations of, any Person or purchase or acquire any
stock, obligations or securities of, or any other interest
in, or make any capital contribution to, any Person (each of
the foregoing, an "Investment"), except:
(i) the Borrower and the Subsidiaries may acquire
and hold receivables owing to them if created or
acquired in the ordinary course of business and payable
or dischargeable in accordance with customary trade
terms, provided that the extended payment terms for any
such receivable shall not exceed 180 days;
(ii) the Borrower and the Subsidiaries may acquire
and hold cash and Cash Equivalents, provided that the
aggregate amount thereof for the Borrower and the Sub-
sidiaries (other than the amount thereof held by Exist-
ing Foreign Subsidiaries) at no time when any Loan is
outstanding exceeds $20,000,000, provided, further that
the amount of such cash and Cash Equivalents may exceed
$20,000,000 if the only Loans outstanding are Fixed Rate
Loans so long as the Borrower prepays such Fixed Rate
-45-
Loans on the last day of the Interest Period applicable
thereto until the amount of such cash and Cash
Equivalents is equal to or less than $20,000,000;
(iii) the Borrower and the Subsidiaries may make
loans and advances to officers, employees and agents in
the ordinary course of their business totalling in the
aggregate for the Borrower and the Subsidiaries no more
than $2,000,000 at any one time outstanding;
(iv) the Borrower and its Subsidiaries may make
Investments in Domestic Subsidiaries;
(v) the Borrower and its Subsidiaries may make
Investments in any Existing Foreign Subsidiaries limited
to the sum of (x) those existing on the Effective Date
or resulting from unremitted earnings and profits of
such Existing Foreign Subsidiaries and (y) $5,000,000
outstanding at any time;
(vi) those guarantees listed on Schedule VI;
(vii) those Investments listed on Schedule VII;
(viii) the Borrower and its Subsidiaries may purchase
or acquire the stock of any other Person so long as
after giving effect to such purchase or acquisition the
Borrower or such Subsidiary shall own 100% of the
capital stock of such Person; and
(ix) Investments not otherwise permitted by the
foregoing clauses (i) through (viii) above, provided
that the aggregate outstanding amount of Investments
made pursuant to this clause (ix) shall not exceed
$5,000,000 at any time.
An Investment of the Borrower or a Subsidiary in any other
Subsidiary existing at the time such "other Subsidiary" shall
cease to be a Subsidiary as defined herein shall be deemed to
have been made immediately after the time such "other Sub-
sidiary" ceases to be a Subsidiary for the purposes of this
Agreement.
8.04 Transactions with Affiliates. The Borrower
will not, and will not permit any of its Subsidiaries to,
enter into any transaction or series of related transactions,
whether or not in the ordinary course of business, with any
Affiliate of the Borrower, other than on terms and conditions
substantially as favorable to the Borrower or such Subsidiary
-46-
as would be obtainable by the Borrower or such Subsidiary at
the time in a comparable arm's-length transaction with a
Person other than an Affiliate.
8.05 Interest Coverage Ratio. The Borrower will
not permit the ratio of (i) EBIT to (ii) Interest Charges for
any period of four consecutive fiscal quarters of the Bor-
rower (taken as one accounting period) to be less than 2.8 to
1.
8.06 Minimum Consolidated Net Worth. The Borrower
will not permit its Net Worth at any time to be less than the
sum of (i) $175,000,000 plus (ii) 50% of the Borrower's
Consolidated Net Income for the period from and including the
first day of the Borrower's fiscal quarter commencing on May
4, 1993 to and including the last day of the then most
recently ended fiscal quarter (taken as one accounting
period), provided that this clause (ii) shall not result in
any decrease in the minimum required Net Worth to an amount
less than $175,000,000.
8.07 Leverage Ratio. The Borrower will not permit
the ratio of (i) Total Indebtedness to (ii) Total Capitaliza-
tion at any time to exceed 0.6 to 1.
8.08 Limitation on Restrictions on Subsidiary
Dividends and Other Distributions. The Borrower shall not,
and shall not permit any of its Subsidiaries to, directly or
indirectly, create or otherwise cause or suffer to exist or
become effective any encumbrance or restriction on the abil-
ity of any such Subsidiary to (a) pay dividends or make any
other distributions on its capital stock or any other inter-
est or participation in its profits, owned by the Borrower or
any Subsidiary of the Borrower, or pay any Indebtedness owed
to the Borrower or a Subsidiary of the Borrower, (b) make
loans or advances to the Borrower or (c) transfer any of its
properties or assets to the Borrower, except for such encum-
brances or restrictions existing under or by reasons of (i)
applicable law, (ii) this Agreement, and (iii) customary
provisions restricting subletting or assignment of any lease
governing a leasehold interest of the Borrower or a Subsid-
iary of the Borrower.
8.09 Subsidiary Indebtedness. The Borrower will
not permit any Subsidiary to create, assume or incur in any
manner or be or become liable in respect of any Indebtedness,
except the provisions of this Section 8.09 shall not prevent
the existence, creation, assumption or incurrence of (i)
Indebtedness attributable to Trade Letters of Credit
-47-
(excluding Unpaid Drawings in respect thereof existing for
more than two days) and (ii) any other such Indebtedness,
provided that the sum of (x) the aggregate outstanding
principal amount of Indebtedness of Subsidiaries (excluding
Indebtedness attributable to Trade Letters of Credit but
including Unpaid Drawings in respect thereof existing for
more than two days) and (y) the aggregate amount of all
obligations (including, without limitation, all Indebtedness)
secured by Liens permitted by Section 8.01(viii), shall not
exceed an amount equal to 10% of the Borrower's Net Worth.
8.10 Restricted Payment Put. The Borrower will
not make any payments pursuant to the Restricted Payment Put
unless (x) no Default or Event of Default exists, or would
result therefrom, and (y) the Borrower does not use any
proceeds of Loans to make any such payment.
SECTION 9. Events of Default. Upon the occurrence
of any of the following specified events (each an "Event of
Default"):
9.01 Payments. The Borrower shall (i) default in
the payment when due of any principal of the Loans, the Un-
paid Drawings or the Notes or (ii) default, and such default
shall continue unremedied for five or more days, in the pay-
ment when due of any interest on the Loans, the Unpaid Draw-
ings or the Notes or of any Fees or any other amounts owing
hereunder or thereunder; or
9.02 Representations, etc. Any representation,
warranty or statement made by the Borrower herein or in any
other Credit Document or in any certificate delivered pur-
suant hereto or thereto shall prove to be untrue in any
material respect on the date as of which made or deemed made;
or
9.03 Covenants. The Borrower shall (i) default in
the due performance or observance by it of any term, covenant
or agreement contained in Section 7.01(d) or in Section 8
(other than Sections 8.05, 8.06 and 8.07 thereof), (ii)
default in the due performance or observance by it of any
term, covenant or agreement contained in Sections 8.05, 8.06
or 8.07 and such default shall continue unremedied for a
period of 10 days after the occurrence thereof or (iii)
default in the due performance or observance by it of any
term, covenant or agreement (other than those referred to in
Sections 9.01 and 9.02 and clauses (i) and (ii) of this
Section 9.03) contained in this Agreement and such default
shall continue unremedied for a period of 30 days after
-48-
written notice to the Borrower by either the Agent or any
Bank; or
9.04 Default Under Other Agreements. The Borrower
or any of its Subsidiaries shall (i) default in any payment
of any Indebtedness (other than the Obligations) exceeding
$5,000,000 in the aggregate beyond the period of grace (not
to exceed 30 days), if any, provided in the instrument or
agreement under which such Indebtedness was created, (ii)
default in the observance or performance of any agreement or
condition relating to any Indebtedness (other than the
Obligations) exceeding $5,000,000 in the aggregate or con-
tained in any instrument or agreement evidencing, securing or
relating thereto, or any other event shall occur or condition
exist, the effect of which default or other event or
condition is to cause, or to permit the holder or holders of
such Indebtedness (or a trustee or agent on behalf of such
holder or holders) to cause (determined without regard to
whether any notice is required), any such Indebtedness to
become due prior to its stated maturity or (iii) any Indebt-
edness of the Borrower or any of its Subsidiaries exceeding
$5,000,000 in the aggregate shall be declared to be due and
payable, or required to be prepaid other than by a regularly
scheduled required prepayment, prior to the stated maturity
thereof; provided, that the requirement that the Borrower
redeem 1993 Debentures pursuant to the Restricted Payment Put
shall not constitute an Event of Default under clause (ii) or
(iii) above to the extent that the Borrower is permitted to
make payments pursuant to the Restricted Payment Put at such
time pursuant to Section 8.10; or
9.05 Bankruptcy, etc. The Borrower or any of its
Subsidiaries shall commence a voluntary case concerning it-
self under Title 11 of the United States Code entitled "Bank-
ruptcy," as now or hereafter in effect, or any successor
thereto (the "Bankruptcy Code"); or an involuntary case is
commenced against the Borrower or any of its Subsidiaries,
and the petition is not controverted within 10 days, or is
not dismissed within 60 days, after commencement of the case;
or a custodian (as defined in the Bankruptcy Code) is
appointed for, or takes charge of, all or substantially all
of the property of the Borrower or any of its Subsidiaries,
or the Borrower or any of its Subsidiaries commences any
other proceeding under any reorganization, arrangement, ad-
justment of debt, relief of debtors, dissolution, insolvency
or liquidation or similar law of any jurisdiction whether now
or hereafter in effect relating to the Borrower or any of its
Subsidiaries, or there is commenced against the Borrower or
any of its Subsidiaries any such proceeding which remains
-49-
undismissed for a period of 60 days, or the Borrower or any
of its Subsidiaries is adjudicated insolvent or bankrupt; or
any order of relief or other order approving any such case or
proceeding is entered; or the Borrower or any of its Subsidi-
aries suffers any appointment of any custodian or the like
for it or any substantial part of its property to continue
undischarged or unstayed for a period of 60 days; or the Bor-
rower or any of its Subsidiaries makes a general assignment
for the benefit of creditors; or any corporate action is
taken by the Borrower or any of its Subsidiaries for the pur-
pose of effecting any of the foregoing; or
9.06 ERISA. (a) A Plan shall fail to maintain
the minimum funding standard required by Section 412 of the
Code for any plan year or a waiver of such standard or the
extension of any amortization period is sought or granted
under Section 412(d) or (e) of the Code, (b) a Plan is or
shall have been terminated or the subject of termination pro-
ceedings under ERISA, or an event has occurred entitling the
PBGC to terminate a Plan under Section 4042(a) of ERISA or
(c) the Borrower, any of its Subsidiaries or an ERISA Affil-
iate has incurred or is likely to incur a material liability
to or on account of a Plan under Section 409, 502(i), 502(l),
515, 4062, 4063, 4064, 4069, 4201 or 4204 of ERISA or under
Section 4975 of the Code; and there shall result from any
such event or events either (i) the provision of security to
induce the issuance of a waiver or extension of any funding
requirement under Section 412, (ii) the imposition of a lien
under ERISA or the Code or (iii) liability or a material risk
of incurring liability to the Internal Revenue Service, the
PBGC, a Plan or a trustee appointed under ERISA which in the
case of (i), (ii) or (iii) above would have a material
adverse effect upon the business, operations, property,
assets, condition (financial or otherwise) of the Borrower or
of the Borrower and its Subsidiaries taken as a whole; or
9.07 Judgments. One or more judgments or decrees
shall be entered against the Borrower or any of its Subsidi-
aries involving in the aggregate for the Borrower and its
Subsidiaries a liability (not paid or fully covered by in-
surance) of $5,000,000 or more, and all such judgments or
decrees shall not have been vacated, discharged or stayed or
bonded pending appeal within 60 days from the entry thereof;
then, and in any such event, and at any time thereafter, if
any Event of Default shall then be continuing, the Agent,
upon the written request of the Required Banks, shall by
written notice to the Borrower, take any or all of the fol-
lowing actions, without prejudice to the rights of the Agent,
-50-
any Bank or the holder of any Note to enforce its claims
against the Borrower (provided, that, if an Event of Default
specified in Section 9.05 shall occur with respect to the
Borrower, the result which would occur upon the giving of
written notice by the Agent to the Borrower as specified in
clauses (i), (ii) and (iii) below shall occur automatically
without the giving of any such notice): (i) declare the
Total Commitment terminated, whereupon the Commitment of each
Bank shall forthwith terminate immediately and any Fees shall
forthwith become due and payable without any other notice of
any kind; (ii) declare the principal of and any accrued
interest in respect of all Loans, all Unpaid Drawings and the
Notes and all obligations owing hereunder and thereunder to
be, whereupon the same shall become, forthwith due and paya-
ble without presentment, demand, protest or other notice of
any kind, all of which are hereby waived by the Borrower; and
(iii) direct the Borrower to pay to the Agent an amount equal
to the then Stated Amount of all outstanding Letters of
Credit for deposit in a cash collateral account maintained by
the Agent for the pro rata benefit of the Banks which amount
shall be applied by the Agent to satisfy the Borrower's obli-
gations under Section 2.04 in respect of such outstanding
Letters of Credit.
SECTION 10. Definitions and Accounting Terms.
10.01 Defined Terms. As used in this Agreement,
the following terms shall have the following meanings (such
meanings to be equally applicable to both the singular and
plural forms of the terms defined):
"Absolute Rate" shall mean an interest rate
(rounded to the nearest .0001) expressed as a decimal.
"Absolute Rate Borrowing" shall mean a proposed
Competitive Bid Borrowing with respect to which the Borrower
has requested that the Bidder Banks offer to make Competitive
Bid Loans at Absolute Rates.
"Adjusted Certificate of Deposit Rate" shall mean,
on any day, 1/2 of 1% in excess of the sum (rounded to the
nearest 1/100 of 1%) of (i) the rate obtained by dividing (x)
the most recent weekly average dealer offering rate per annum
for negotiable certificates of deposit with a three-month
maturity in the secondary market as published in the most
recent Federal Reserve Statistical Release on Form H.15 en-
titled "Selected Interest Rates," or, if such publication or
a substitute containing the foregoing rate information shall
not be published by the Federal Reserve System for any week,
-51-
the weekly average offering rate determined in good faith by
the Agent on the basis of quotations for such certificates
received by it from two or more certificate of deposit
dealers in New York of recognized standing or, if such quo-
tations are unavailable, then on the basis of other sources
reasonably selected by the Agent, by (y) a percentage equal
to 100% minus the then stated maximum rate (expressed as a
percentage) of all reserve requirements as specified in
Regulation D (including, without limitation, any marginal,
emergency, supplemental, special or other reserves) applic-
able on such day to a negotiable certificate of deposit in
excess of $100,000 with a maturity of three months of any
member bank of the Federal Reserve System, plus (ii) the then
daily net annual assessment rate as estimated by the Agent
for determining the current annual assessment payable by the
Agent to the Federal Deposit Insurance Corporation for insur-
ing three-month certificates of deposit.
"Affiliate" shall mean, with respect to any Person,
any other Person (i) directly or indirectly controlling,
controlled by, or under direct or indirect common control
with, such Person or (ii) that directly or indirectly owns
more than 5% of the voting securities of such Person. A
Person shall be deemed to control a corporation if such
Person possesses, directly or indirectly, the power to direct
or cause the direction of the management and policies of such
corporation, whether through the ownership of voting
securities, by contract or otherwise.
"Agent" shall have the meaning provided in the
first paragraph of this Agreement.
"Aggregate Loan Outstandings" shall have the
meaning provided in Section 4.02(a).
"Agreement" shall mean this Credit Agreement, as
modified, supplemented or amended from time to time.
"Applicable Base Rate Margin" shall mean zero.
"Applicable CD Rate Margin" shall mean, at any time
when the Credit Rating is at any level set forth below, a
percentage equal to the number of basis points set forth
below opposite such Credit Rating (with 100 basis points
equalling 1.0%):
Applicable CD
Credit Rating Rate Margin
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A-/A3 52.5
BBB+/Baa1 57.5
BBB/Baa2 62.5
BBB-/Baa3 72.5
BB+/Ba1 or lower 87.5
"Applicable Commitment Commission Percentage" shall
mean, at any time when the Credit Rating is at any level set
forth below, a percentage equal to the number of basis points
set forth below opposite such Credit Rating (with 100 basis
points equalling 1.0%):
Applicable Commitment
Credit Rating Commission Percentage
A-/A3 15
BBB+/Baa1 20
BBB/Baa2 25
BBB-/Baa3 25
BB+/Ba1 or lower 30
"Applicable Eurodollar Margin" shall mean, at any
time when the Credit Rating of the Borrower is at any level
set forth below, a percentage equal to the number of basis
points set forth below opposite such Credit Rating (with 100
basis points equalling 1.0%):
Applicable
Eurodollar
Credit Rating Margin
A-/A3 40
BBB+/Baa1 45
BBB/Baa2 50
BBB-/Baa3 60
BB+/Ba1 or lower 75
-53-
"Applicable Lending Office" shall mean, with res-
pect to each Bank, (i) such Bank's Base Rate Lending Office
in the case of a Base Rate Loan, (ii) such Bank's Eurodollar
Lending Office in the case of a Eurodollar Rate Loan and
(iii) such Bank's CD Rate Lending Office in the case of a CD
Rate Loan.
"Approved Alternate Currency" shall mean, with
respect to any Letter of Credit, Canadian Dollars, British
Pounds Sterling, Italian Lira, German Deutsche Marks, Swiss
Francs, French Francs, Belgian Francs, Dutch Guilders,
Spanish Pesetas and Japanese Yen, and any other currency
other than Dollars which is approved by the Letter of Credit
Issuer in respect of such Letter of Credit, the Agent and the
Required Banks prior to the issuance of such Letter of
Credit.
"Available Total Revolving Commitment" shall mean
(i) for the period from and including October 16 to and
including July 14 of each year, the lesser of (x) the Total
Revolving Commitment and (y) $85,000,000, and (ii) for the
period from and including July 15 to and including October 15
of each year, the Total Revolving Commitment.
"Bank" shall have the meaning provided in the first
paragraph of this Agreement.
"Bank Affiliate" shall mean, with respect to any
Bank, any Person directly or indirectly controlling,
controlled by, or under direct or indirect common control
with, such Bank.
"Bankruptcy Code" shall have the meaning provided
in Section 9.05.
"Base Rate" shall mean on any day the highest of
(i) the Prime Lending Rate, (ii) the rate which is 1/2 of 1%
in excess of the Federal Funds Rate, or (iii) the Adjusted
Certificate of Deposit Rate.
"Base Rate Lending Office" shall mean, with respect
to each Bank, the office of such Bank specified as its "Base
Rate Lending Office" opposite its name on Schedule II or such
other office or affiliate of such Bank as such Bank may from
time to time specify as such to the Borrower and the Agent.
"Base Rate Loan" shall mean any Revolving Loan
designated as such by the Borrower at the time of its incur-
rence thereof or conversion thereto.
-54-
"Bid Agent" shall mean the Borrower, or any one of
the Banks designated by the Borrower which agrees to act as
the Bid Agent hereunder in respect of Competitive Bid
Borrowings.
"Bid Agent's Notice Office" shall mean the notice
office of the Borrower or the Bank acting as the Bid Agent
hereunder, as the case may be, as specified in or pursuant to
Section 12.03.
"Bidder Bank" shall mean each Bank that has
notified in writing (and has not withdrawn such notice) the
Agent that it desires to participate generally in the bidding
arrangements relating to Competitive Bid Borrowings.
"Borrower" shall have the meaning provided in the
first paragraph of this Agreement.
"Borrowing" shall mean and include (i) the incur-
rence of one Type of Loan from all the Banks on a given date
(or resulting from conversions on a given date), having in
the case of Fixed Rate Loans the same Interest Period, pro-
vided that Loans of another Type incurred pursuant to Section
1.11(b) shall be considered part of the related Borrowing of
Fixed Rate Loans and (ii) a Competitive Bid Borrowing.
"Business Day" shall mean (i) for all purposes
other than as covered by clause (ii) below, any day except
Saturday, Sunday and any day which shall be in New York City
a legal holiday or a day on which banking institutions are
authorized by law or other government action to close and
(ii) with respect to all notices and determinations in con-
nection with, and payments of principal and interest on,
Eurodollar Rate Loans, any day which is a Business Day de-
scribed in clause (i) above and which is also a day for
trading by and between banks in the New York interbank Euro-
dollar market.
"Cash Equivalents" shall mean, as to any Person,
(i) securities issued or directly and fully guaranteed or
insured by the United States or any agency or instrumentality
thereof (provided that the full faith and credit of the
United States is pledged in support thereof) having maturi-
ties of not more than six months from the date of acquisi-
tion, (ii) time deposits and certificates of deposit of any
commercial bank incorporated in the United States of recog-
nized standing having capital and surplus in excess of
$100,000,000 with maturities of not more than six months from
the date of acquisition by such Person, (iii) repurchase
-55-
obligations with a term of not more than seven days for
underlying securities of the types described in clause (i)
above entered into with any bank meeting the qualifications
specified in clause (ii) above, (iv) commercial paper issued
by the parent corporation of any commercial bank of
recognized standing having capital and surplus in excess of
$500,000,000, and commercial paper issued by any Person
incorporated in the United States, in each case rated at
least A-1 or the equivalent thereof by Standard & Poor's
Corporation or at least P-1 or the equivalent thereof by
Moody's Investors Service, Inc. and in each case maturing not
more than six months after the date of acquisition by such
Person and (v) investments in money market funds
substantially all of whose assets are comprised of securities
of the types described in clauses (i) through (iv) above.
"CD Rate Lending Office" shall mean, with respect
to each Bank, the office of such Bank specified as its "CD
Rate Lending Office" opposite its name on Schedule II or such
other office of such Bank as such Bank may from time to time
specify as such to the Borrower and the Agent.
"CD Rate Loan" shall mean any Revolving Loan des-
ignated as such by the Borrower at the time of its incurrence
thereof or conversion thereto.
"Certificate of Deposit Rate" shall mean, with
respect to each Interest Period for a CD Rate Loan, the con-
sensus bid rate determined by the Agent as the bid rates per
annum, at approximately 10:00 A.M. (New York time) on the
first day of the Interest Period for which such Certificate
of Deposit Rate is to be applicable, of two or more New York
certificate of deposit dealers of recognized standing
selected by the Agent for the purchase at face value from the
Agent in New York of certificates of deposit in an aggregate
amount approximately comparable to the CD Rate Loan of the
Agent to which such Certificate of Deposit Rate is to be
applicable and with a maturity equal to the Interest Period
for such CD Rate Loan.
"Change of Control Event" shall have the meaning
provided in Section 4.05.
"Code" shall mean the Internal Revenue Code of
1986, or any successor U.S. federal tax code, and any
reference to any statutory provision shall be deemed to be a
reference to any successor provision or provisions.
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"Commitment" shall mean for each Bank, at any time,
the sum of such Bank's Revolving Commitment and such Bank's
Letter of Credit Commitment.
"Commitment Commission" shall have the meaning
provided in Section 3.01(a).
"Competitive Bid Borrowing" shall mean a Borrowing
of Competitive Bid Loans pursuant to Section 1.04.
"Competitive Bid Loans" shall have the meaning
provided in Section 1.01(b).
"Consolidated Net Income" shall mean for any period
(a) the consolidated gross revenues of the Borrower and its
Subsidiaries for such period less (b) all operating and non-
operating expenses of the Borrower and its Subsidiaries in-
cluding all charges of a proper character (including, without
limitation, the cash prepayment premium paid upon the
redemption of the 1987 Notes and the 1990 Notes, current and
deferred taxes on income, provision for taxes on unremitted
foreign earnings which are included in gross revenues, and
current additions to reserves, but excluding non-cash charges
taken in connection with FASB 106), but not including in
gross revenues (i) any gains (net of expenses and taxes
applicable thereto) in excess of losses resulting from the
sale, conversion or other disposition of capital assets
(i.e., assets other than current assets), (ii) any gains
resulting from the write-up of assets (other than the write-
up of current assets as a result of revaluations or
realignment of currencies), (iii) any equity of the Borrower
or any Subsidiary in the unremitted earnings of any
corporation which is not a Subsidiary, (iv) any earnings of
any Person acquired by the Borrower or any Subsidiary through
purchase, merger or consolidation or otherwise for any period
prior to the time of such acquisition, or (v) the
amortization of any negative goodwill which results after the
application of purchase accounting adjustments to the excess
of equity in any Subsidiary at the date of acquisition over
the cost of the investment in such Subsidiary; all determined
in accordance with generally accepted accounting principles
consistently applied and, with respect to Existing Foreign
Subsidiaries, calculated in accordance with the last sentence
of the definition of Existing Foreign Subsidiaries.
"Consolidated Subsidiaries" shall mean all Subsi-
diaries of the Borrower which are consolidated with the Bor-
rower for financial reporting purposes in accordance with
-57-
generally accepted accounting principles in the United
States.
"Contingent Obligation" shall mean, as to any Per-
son, any obligation of such Person guaranteeing or intended
to guarantee any Indebtedness, leases, dividends or other
obligations ("primary obligations") of any other Person (the
"primary obligor") in any manner, whether directly or indi-
rectly, including, without limitation, any obligation of such
Person, whether or not contingent, (i) to purchase any such
primary obligation or any property constituting direct or
indirect security therefor, (ii) to advance or supply funds
(x) for the purchase or payment of any such primary
obligation or (y) to maintain working capital or equity
capital of the primary obligor or otherwise to maintain the
net worth or solvency of the primary obligor, (iii) to pur-
chase or lease property, securities or services primarily for
the purpose of assuring the owner of any such primary obli-
gation of the ability of the primary obligor to make payment
of such primary obligation or (iv) otherwise to assure or
hold harmless the holder of such primary obligation against
loss in respect thereof; provided that the term "Contingent
Obligation" shall not include endorsements of instruments for
deposit or collection in the ordinary course of business.
The amount of any Contingent Obligation shall be deemed to be
an amount equal to the stated or determinable amount of the
primary obligation in respect of which such Contingent
Obligation is made or, if not stated or determinable, the
maximum reasonably anticipated liability in respect thereof
(assuming such Person is required to perform thereunder) as
determined by such Person in good faith.
"Credit Documents" shall mean this Agreement, each
Note and each Letter of Credit Document.
"Credit Event" shall mean the making of any Loan or
the issuance of any Letter of Credit.
"Credit Rating" shall mean (i) the rating assigned
by each Rating Agency, if such ratings are the same or (ii)
if the ratings assigned by the Rating Agencies differ, the
higher of the ratings assigned by the Rating Agencies, in
each case to the Borrower's long-term senior debt. If any
such rating shall be changed by either Rating Agency, such
change shall be effective for all purposes of this Agreement
on the Business Day following such change.
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"Default" shall mean any event, act or condition
which with notice or lapse of time, or both, would constitute
an Event of Default.
"Demand" shall have the meaning provided in Section
4.05.
"Dollars" and the sign "$" shall each mean freely
transferable lawful money of the United States.
"Domestic Subsidiary" shall mean any Subsidiary
incorporated under the laws of the United States of America,
any State thereof or the District of Columbia, and which has
its primary business located in the United States (including
Puerto Rico).
"Drawing" shall have the meaning provided in Sec-
tion 2.04(b).
"EBIT" shall mean, for any period, the sum of (i)
Consolidated Net Income of the Borrower for such period, (ii)
provisions for taxes based on income or profits to the extent
such income or profits were included in computing Consolida-
ted Net Income and (iii) consolidated interest expense (in-
cluding amortization of original issue discount and non-cash
interest payments or accruals and the interest component of
capitalized lease obligations), net of interest income there-
tofore deducted from earnings in computing Consolidated Net
Income for such period.
"Effective Date" shall have the meaning provided in
Section 5.01.
"Eligible Transferee" shall mean and include a
commercial bank, financial institution or other "Accredited
Investor" (as defined in Regulation D).
"ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended from time to time. Section
references to ERISA are to ERISA, as in effect on the
Effective Date, and to any subsequent provisions of ERISA,
amendatory thereof, supplemental thereto or substituted
therefor.
"ERISA Affiliate" shall mean any person (as defined
in Section 3(9) of ERISA) (including each trade or business
(whether or not incorporated)) which together with the
Borrower or any of its Subsidiaries would be deemed to be a
single employer or a member of the same "controlled group" of
-59-
"contributing sponsors" within the meaning of Section 4001 of
ERISA.
"Eurodollar Lending Office" shall mean, with re-
spect to each Bank, the office of such Bank specified as its
"Eurodollar Lending Office" opposite its name on Schedule II
or such other office of such Bank as such Bank may from time
to time specify as such to the Borrower and the Agent.
"Eurodollar Loan" shall mean any Revolving Loan
designated as such by the Borrower at the time of its incur-
rence thereof or conversion thereto.
"Eurodollar Rate" shall mean, with respect to each
Interest Period, the rate obtained by dividing (i) the
offered quotation to first-class banks in the New York
interbank Eurodollar market by the Agent for Dollar deposits
of amounts in same day funds comparable to the outstanding
principal amount of the Eurodollar Loan of the Agent for
which an interest rate is then being determined (or in the
case of a Competitive Bid Loan that is a Spread Borrowing
based on the Eurodollar Rate, an amount determined by each
Bidder Bank (in its sole discretion) offering to make one or
more Competitive Bid Loans at the Eurodollar rate of interest
for the maximum principal amount of such Competitive Bid Loan
or Loans which such Bank would be willing to make as part of
such proposed Competitive Bid Borrowing) with maturities
comparable to such Interest Period, determined as of
10:00 A.M. (New York time) on the date which is two Business
Days prior to the commencement of such Interest Period, by
(ii) a percentage equal to 100% minus the then stated maximum
rate (expressed as a percentage) of all reserve requirements
(including without limitation any marginal, emergency, sup-
plemental, special or other reserves) applicable to any mem-
ber bank of the Federal Reserve System in respect of Euro-
currency liabilities as defined in Regulation D (or any
successor category of liabilities under Regulation D).
"Event of Default" shall have the meaning provided
in Section 9.
"Existing Credit Agreement" shall mean the Credit
Agreement dated as of August 1, 1987 and amended and restated
as of October 26, 1990, among the Borrower, the financial
institutions party thereto and the Agent, as amended,
modified or supplemented prior to the Effective Date.
"Existing Foreign Subsidiaries" shall mean Envoy
Pacific Limited, a Hong Kong corporation, Towell Import &
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Export Limited, a Hong Kong corporation, Abese Limited, a
Hong Kong corporation, Confectiones Imperio, S.A., a Costa
Rican corporation, GHB (Far East) Limited, a Hong Kong cor-
poration, Caribe M&I Limited, a Cayman Island corporation,
G.H. Bass Comercio Exportacao, Ltda., a Brazilian cor-
poration, and Camisas Modernas, a Guatemalan corporation,
provided that all of the capital stock of every class of such
Person, except director's qualifying shares and except
minority interests existing as of February 3, 1991 shall, at
the time as of which any determination is being made, be
owned by the Borrower either directly or through
Subsidiaries. In computing the assets of the Borrower and
the Subsidiaries, or the Consolidated Net Income of the Bor-
rower, no amount shall be included in respect of assets or
earnings attributable to Existing Foreign Subsidiaries not
remitted to the Borrower or a Domestic Subsidiary in excess
of $15,000,000 in either case.
"Existing Letter of Credit" shall have the meaning
provided in 2.01(c).
"Federal Funds Rate" shall mean, for any period, a
fluctuating interest rate per annum equal for each day during
such period to the weighted average of the rates for
overnight Federal funds transactions with members of the Fed-
eral Reserve System arranged by Federal funds brokers, as
published for such day (or, if such day is not a Business
Day, for the next preceding Business Day) by the Federal Re-
serve Bank of New York or, if such rate is not so published
for any day which is a Business Day, the average of the
quotations for such day on such transactions received by the
Agent from three Federal funds brokers of recognized standing
selected by it.
"Fees" shall mean all amounts payable pursuant to
or referred to in Section 3.01.
"Fixed CD Rate" shall mean, with respect to each
Interest Period for a CD Rate Loan, the sum (rounded upward
to the next whole multiple of 1/100 of 1%) of (i) the rate
obtained by dividing (x) the Certificate of Deposit Rate for
such Interest Period by (y) a percentage equal to 100% minus
the stated maximum rate (expressed as a percentage) of all
reserve requirements as specified in Regulation D (including,
without limitation, any marginal, emergency, supplemental,
special or other reserves) applicable on the first day of
such Interest Period to a negotiable certificate of deposit
in excess of $100,000 with a maturity equal to such Interest
Period of any member bank of the Federal Reserve System plus
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(ii) the daily net annual assessment rate as estimated by the
Agent on the first day of such Interest Period for determin-
ing the current annual assessment payable by the Agent to the
Federal Deposit Insurance Corporation for insuring such cer-
tificates of deposit.
"Fixed Rate Loan" shall mean any CD Rate Loan and
any Eurodollar Loan.
"Indebtedness" shall mean, as to any Person, with-
out duplication, (i) all indebtedness (including principal,
interest, fees and charges) of such Person for borrowed money
or for the deferred purchase price of property or services or
evidenced by debt securities, (ii) the stated amount of all
letters of credit issued for the account of such Person and
all unreimbursed drawings in respect thereof, (iii) all
liabilities secured by any Lien on any property owned by such
Person, whether or not such liabilities have been assumed by
such Person, (iv) the aggregate amount required to be
capitalized under leases under which such Person is the
lessee and (v) all Contingent Obligations of such Person.
"Interest Charges" for any period shall mean the
total consolidated interest expense of the Borrower and its
Subsidiaries for such period (calculated without regard to
any limitations on the payment thereof and including amor-
tization of original issue discount and non-cash interest
payments or accruals and the interest component of capi-
talized lease obligations) less any interest income of the
Borrower and any of its Subsidiaries during such period.
"Interest Period" shall mean, with respect to any
Loan, the interest period applicable thereto, as determined
pursuant to Section 1.10.
"Interest Rate Basis" shall mean the Eurodollar
Rate and/or such other basis for determining an interest rate
as the Borrower may designate from time to time in writing to
the Bidder Banks.
"Investments" shall have the meaning provided in
Section 8.03.
"Letter of Credit" shall mean any Standby Letter of
Credit and any Trade Letter of Credit.
"Letter of Credit Application" shall have the
meaning provided in Section 2.02.
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"Letter of Credit Commitment" shall mean for any
Bank, at any time, the amount set forth opposite such Bank's
name in Schedule I under the heading "Letter of Credit
Commitment" as the same may be reduced from time to time
pursuant to Sections 3.02, 4.05 and 9.
"Letter of Credit Documents" shall mean all docu-
ments executed and delivered by the Borrower and its Subsid-
iaries in connection with the Letters of Credit (including,
without limitation, guarantees of the Borrower in connection
therewith).
"Letter of Credit Facility Fee" shall have the
meaning provided in Section 3.01(b).
"Letter of Credit Fees" shall have the meaning
provided in Section 3.01(c).
"Letter of Credit Issuer" shall mean and include
each Trade Letter of Credit Bank and each Standby Letter of
Credit Bank.
"Letter of Credit Outstandings" shall mean, at any
time, the sum of, without duplication, (i) the aggregate
Stated Amount of all outstanding Letters of Credit and (ii)
the aggregate amount of all Unpaid Drawings in respect of all
Letters of Credit.
"Letter of Credit Percentage" shall mean at any
time for each Bank, the percentage obtained by dividing such
Bank's Letter of Credit Commitment by the Total Letter of
Credit Commitment, provided that at any time when the Total
Letter of Credit Commitment shall have been terminated, each
Bank's Letter of Credit Percentage shall be determined as
aforesaid based on such Bank's Letter of Credit Commitment
and the Total Letter of Credit Commitment as in effect
immediately prior to such termination.
"Lien" shall mean any mortgage, pledge, hypothe-
cation, assignment, deposit arrangement, encumbrance, lien
(statutory or other), preference, priority or other security
agreement of any kind or nature whatsoever (including, with-
out limitation, any conditional sale or other title retention
agreement and any lease having substantially the same effect
as any of the foregoing).
"Loan" means any Revolving Loan and any Competitive
Bid Loan.
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"Margin Stock" shall have the meaning provided in
Regulation U of the Board of Governors of the Federal Reserve
System.
"Maturity Date" shall mean February 3, 1997.
"Maximum Standby Issuance Amount" shall mean, for
any Standby Letter of Credit Bank at any time, the amount set
forth opposite such Standby Letter of Credit Bank's name on
Part A of Schedule IX, as such Schedule IX may be modified
from time to time in accordance with the terms and conditions
set forth in the definition of Standby Letter of Credit Bank.
"Maximum Trade Issuance Amount" shall mean, for any
Trade Letter of Credit Bank at any time, the amount set forth
opposite such Trade Letter of Credit Bank's name on Part B of
Schedule IX, as such Schedule IX may be modified from time to
time in accordance with the terms and conditions set forth in
the definition of Trade Letter of Credit Bank.
"Moody's" shall mean Moody's Investors Service,
Inc., or any successor corporation thereto.
"Net Worth" shall mean, as to any Person, the sum
of its consolidated capital stock, capital in excess of par
or stated value of shares of its capital stock, retained
earnings and any other account which, in accordance with gen-
erally accepted accounting principles on a consolidated
basis, constitutes stockholder's equity, excluding any trea-
sury stock, provided that no amounts attributable to any
preferred stock which is mandatorily redeemable, or which is
redeemable or puttable in any respect at the option of the
holder thereof, shall be included in any computation of the
Net Worth of the Borrower.
"1987 Note Purchase Agreement" shall mean the Note
Purchase Agreement dated July 29, 1987 between the Borrower
and The Prudential Insurance Company of America, as amended
by the letter agreement dated August 27, 1987, the letter
agreement dated August 28, 1987, the letter agreement dated
May 5, 1988, two letter agreements dated July 21, 1988, the
Waiver Agreement dated as of April 20, 1989, the Amendment
and Waiver Agreement dated as of February 9, 1990, the
Amendment and Waiver Agreement dated as of August 1, 1990,
the Amendment and Waiver Agreement dated as of September 6,
1990, the Amendment Agreement and Consent, dated as of
October 25, 1990 and the Amendment and Waiver Agreement,
dated as of September 29, 1993.
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"1987 Notes" shall mean the Senior Notes due 2002
in the original principal amount of $77,200,000 issued by the
Borrower pursuant to the 1987 Note Purchase Agreement.
"1988 Note Purchase Agreements" shall mean those
certain Note Purchase Agreements dated as of December 15,
1988, between the Borrower and the purchasers named therein,
as amended by the letter agreement dated April 14, 1989, the
letter agreement dated February 9, 1990, the Amendment and
Waiver Agreement dated as of August 1, 1990, the Amendment
and Waiver Agreement dated as of September 7, 1990 and the
Amendment Agreement and Consent, dated as of October 25, 1990
and as the same may be further amended or modified from time
to time in accordance with the terms thereof and hereof.
"1988 Notes" shall mean the of 10.05% Senior Notes
Due 1993 in the aggregate principal amount of $40,000,000
issued by the Borrower pursuant to the 1988 Note Purchase
Agreements.
"1990 Note Purchase Agreement" shall mean that
certain Note Purchase Agreement dated September 7, 1990,
between the Borrower and the purchaser named therein, as
amended by the Amendment Agreement and Consent, dated as of
October 25, 1990.
"1990 Notes" shall mean the 9.93% Senior Notes Due
1997 in the aggregate principal amount of $30,000,000 issued
by the Borrower pursuant to the 1990 Note Purchase Agreement.
"1992 Note Purchase Agreements" shall mean the Note
Purchase Agreements dated as of October 1, 1992 between the
Borrower and the purchasers named therein, as the same may be
amended or modified from time to time in accordance with the
terms thereof and hereof.
"1992 Notes" shall mean the 7.85% Series A Senior
Notes Due November 1, 2002, the 7.02% Series B Senior Notes
Due November 1, 1999 and the 7.75% Series C Senior Notes Due
November 1, 2002, in the aggregate principal amount of
$69,000,000 and issued by the Borrower pursuant to the 1992
Note Purchase Agreements.
"1993 Debentures" shall mean the 7-3/4% Debentures
Due 2023 in the aggregate principal amount of $100,000,000
issued by the Borrower pursuant to the 1993 Indenture.
"1993 Indenture" shall mean the Indenture dated as
of November 1, 1993, between the Borrower and The Bank of New
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York, as trustee, as the same may be amended or modified from
time to time in accordance with the terms thereof and hereof.
"Note" shall have the meaning provided in Section
1.06.
"Notice of Borrowing" shall have the meaning pro-
vided in Section 1.03.
"Notice of Competitive Bid Borrowing" shall have
the meaning provided in Section 1.04(a).
"Notice of Conversion" shall have the meaning pro-
vided in Section 1.07.
"Notice Office" shall mean the office of the Agent
located at 280 Park Avenue, New York, New York 10017, or such
other office as the Agent may hereafter designate in writing
as such to the other parties hereto.
"Obligations" shall mean all amounts owing to the
Agent or any Bank pursuant to the terms of this Agreement or
any other Credit Document.
"Participant" shall have the meaning provided in
Section 2.03(a).
"Payment Office" shall mean the office of the Agent
located at One Bankers Trust Plaza, New York, New York 10006,
or such other office as the Agent may hereafter designate in
writing as such to the other parties hereto.
"PBGC" shall mean the Pension Benefit Guaranty Cor-
poration established under ERISA, or any successor thereto.
"Permitted Liens" shall have the meaning provided
in Section 8.01.
"Person" shall mean any individual, partnership,
joint venture, firm, corporation, association, trust or other
enterprise or any government or political subdivision or any
agency, department or instrumentality thereof.
"Plan" shall mean any multiemployer plan or single-
employer plan, as defined in Section 4001 and subject to
Title IV of ERISA, which is maintained or contributed to by
(or to which there is an obligation to contribute of), or at
any time during the five calendar years preceding the
Effective Date was maintained or contributed to by (or to
-66-
which there was an obligation to contribute of), the
Borrower, a Subsidiary of the Borrower or an ERISA Affiliate,
other than The Phillips - Van Heusen Corporation Salaried
Employees' and Salesmen's Retirement Plan, The Phillips - Van
Heusen Retail Employees' Retirement Plan, The PVH - Van
Heusen Employees' Retirement and Severance Plan, and The
Amended Retirement Plan for Salaried Employees of the Joseph
& Feiss Company which plans were terminated as of December
31, 1985 with no liability as of the Effective Date to the
Borrower, any Subsidiary of the Borrower or an ERISA
Affiliate.
"Prepayment Date" shall have the meaning provided
in Section 4.05.
"Prime Lending Rate" shall mean the rate which
Bankers Trust Company announces from time to time as its
prime lending rate, the "Prime Lending Rate" to change when
and as such prime lending rate changes. The "Prime Lending
Rate" is a reference rate and does not necessarily represent
the lowest or best rate actually charged to any customer.
Bankers Trust Company may make commercial loans or other
loans at rates of interest at, above or below the Prime
Lending Rate.
"Rating Agency" shall mean each of Moody's and S&P.
"Register" shall have the meaning provided in
Section 1.06(d).
"Regulation D" shall mean Regulation D of the Board
of Governors of the Federal Reserve System as from time to
time in effect and any successor to all or a portion thereof
establishing reserve requirements.
"Replaced Bank" shall have the meaning provided in
Section 1.14.
"Replacement Bank" shall have the meaning provided
in Section 1.14.
"Reply Date" shall have the meaning provided in
Section 1.04(b).
"Reportable Event" shall mean an event described in
Section 4043(b) of ERISA (with respect to which the 30 day
notice requirement has not been waived by the PBGC).
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"Required Banks" shall mean, at any time, Banks
whose Revolving Commitments and Letter of Credit Commitments
equal or exceed 51% of the Total Revolving Commitment plus
the Total Letter of Credit Commitment at such time, provided
that if at any time of determination thereof the Total
Revolving Loan Commitment or the Total Letter of Credit
Commitment shall have been terminated, the "Required Banks"
shall be determined as aforesaid based on the Revolving
Commitments, Letter of Credit Commitments, Total Revolving
Credit Commitment and Total Letter of Credit Commitment as in
effect immediately prior to such termination.
"Restricted Payment Put" shall mean any payments
made by the Borrower pursuant to Section 1010 of the 1993
Indenture to redeem the 1993 Debentures in whole or in part
at the request of the holders of the 1993 Debentures pursuant
to such Section 1010.
"Revolving Commitment" shall mean for each Bank, at
any time, the amount set forth opposite such Bank's name in
Schedule I under the heading "Revolving Commitment" as the
same may be reduced from time to time pursuant to Sections
3.02, 4.05 and 9.
"Revolving Loan" shall have the meaning provided in
Section 1.01(a).
"Revolving Percentage" shall mean at any time for
each Bank, the percentage obtained by dividing such Bank's
Revolving Commitment by the Total Revolving Commitment,
provided that at any time when the Total Revolving Commitment
shall have been terminated, each Bank's Revolving Percentage
shall be the percentage obtained by dividing such Bank's
outstanding Revolving Loans by the aggregate outstanding
Revolving Loans.
"S&P" shall mean Standard & Poor's Corporation, or
any successor corporation thereto.
"SEC" shall have the meaning provided in Section
7.01(f).
"Senior Note Documents" shall mean the 1987 Note
Purchase Agreement, the 1988 Note Purchase Agreements, the
1990 Note Purchase Agreement, the 1992 Note Purchase
Agreements and the 1993 Indenture; in each case to the extent
that any such agreement or document is in effect at such
time.
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"Senior Notes" shall mean, at any time, the 1987
Notes, the 1988 Notes, the 1990 Notes, the 1992 Notes and the
1993 Debentures; in each case to the extent that such Notes
are outstanding at such time.
"Spread" shall mean a percentage per annum in
excess of, or less than, an Interest Rate Basis.
"Spread Borrowing" shall mean a proposed
Competitive Bid Borrowing with respect to which the Borrower
has requested that the Bidder Banks offer to make Competitive
Bid Loans at a Spread over or under a specified Interest Rate
Basis.
"Standby Letter of Credit" shall mean each Existing
Letter of Credit identified on Schedule III as a "Standby
Letter of Credit," and any letter of credit issued on or
after the Effective Date in support of such obligations of
the Borrower or any of its Subsidiaries as are reasonably
acceptable to the Agent pursuant to documentation satis-
factory in form and substance to the respective Standby
Letter of Credit Bank, provided that (i) a letter of credit
shall not be a Standby Letter of Credit if at the time of
issuance of such letter of credit the Stated Amount of such
letter of credit, when added to the Standby Letter of Credit
Outstandings, would exceed either (x) $5,000,000 or (y) when
added to the Trade Letter of Credit Outstandings at such
time, the Total Letter of Credit Commitment (the request by
the Borrower for a Standby Letter of Credit to constitute a
representation and warranty by the Borrower that such limits
would not be exceeded after giving effect to the issuance of
such Standby Letter of Credit), (ii) a letter of credit shall
not be a Standby Letter of Credit if the Standby Letter of
Credit Bank issuing same has received written notice from the
Agent by no later than the Business Day prior to its issuance
of such letter of credit that one or more of the conditions
in Section 5.02 is not then satisfied and such notice has not
been rescinded by the Agent, (iii) a letter of credit shall
cease to be a Standby Letter of Credit upon the expiration
date thereof to the extent undrawn on or prior to the
expiration date thereof, (iv) a letter of credit shall not be
a Standby Letter of Credit if the expiration date thereof is
later than the Maturity Date, (v) a letter of credit issued
for the account of a Subsidiary of the Borrower shall not be
a Standby Letter of Credit, unless the obligations of such
Subsidiary in respect thereof are guaranteed by the Borrower
pursuant to documentation satisfactory in form and substance
to the Agent and (vi) a letter of credit issued by a Standby
Letter of Credit Bank shall not be a Standby Letter of Credit
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if, after giving effect to the issuance thereof, the Standby
Letter of Credit Outstandings in respect of Standby Letters
of Credit issued by such Standby Letter of Credit Bank would
exceed the Maximum Standby Issuance Amount of such Standby
Letter of Credit Bank as in effect at such time.
"Standby Letter of Credit Bank" shall mean each of
the Banks listed in Part A of Schedule IX, it being
understood and agreed that Schedule IX may be modified from
time to time by the Borrower (including, without limitation,
by adding new Standby Letter of Credit Banks thereto and/or
by increasing, reducing or terminating the Maximum Standby
Issuance Amounts of the Standby Letter of Credit Banks) by
delivering a new Schedule IX to the Agent (with such new
Schedule IX to become effective on the Business Day following
such delivery or such later date as shall be specified
therein by the Borrower); provided that (a) no Bank may be
added to Schedule IX as a Standby Letter of Credit Bank
without the prior written consent of such Bank, (b) no
Standby Letter of Credit Bank's Maximum Standby Issuance
Amount may be increased without the prior written consent of
such Standby Letter of Credit Bank unless concurrent with
such increase such Standby Letter of Credit Bank's Maximum
Trade Issuance Amount is reduced by an amount equal to or
greater than the amount of such increase, and (c) no Standby
Letter of Credit Bank's Maximum Standby Issuance Amount may
be reduced to an amount that is less than the Standby Letter
of Credit Outstandings at such time in respect of Standby
Letters of Credit issued by such Standby Letter of Credit
Bank. By agreeing to become a Standby Letter of Credit Bank,
each such Bank will be deemed to have agreed to (i) issue
Standby Letters of Credit in accordance with, and on the
terms set forth in, Section 2 and (ii) provide the informa-
tion required to be provided by Standby Letter of Credit
Banks pursuant to Section 2.07.
"Standby Letter of Credit Fee" shall have the
meaning provided in Section 3.01(c).
"Standby Letter of Credit Outstandings" shall mean,
at any time, the sum of, without duplication, (x) the aggre-
gate Stated Amount of all outstanding Standby Letters of
Credit and (y) the aggregate amount of all Unpaid Drawings in
respect of Standby Letters of Credit.
"Stated Amount" of each Letter of Credit shall
mean, at the time of any determination, the maximum amount
then available to be drawn thereunder (without regard to
whether any conditions to drawing could then be met).
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"Subsidiary" shall mean, as to any Person, (i) any
corporation more than 50% of whose stock of any class or
classes having by the terms thereof ordinary voting power to
elect a majority of the directors of such corporation (ir-
respective of whether or not at the time stock of any class
or classes of such corporation shall have or might have vot-
ing power by reason of the happening of any contingency) is
at the time owned by such Person and/or one or more Subsid-
iaries of such Person and (ii) any partnership, association,
joint venture or other entity in which such Person and/or one
or more Subsidiaries of such Person has more than a 50%
equity interest at the time. Unless the context indicates
otherwise, all references herein to Subsidiaries are refer-
ences to Subsidiaries of the Borrower.
"Taxes" shall have the meaning provided in Section
4.04.
"Total Capitalization" shall mean, at any time, the
sum of (i) Total Indebtedness at such time, plus (ii) the
Borrower's Net Worth at such time, plus (iii) all amounts
that would be included in Net Worth of the Borrower but for
the proviso contained in the definition of "Net Worth."
"Total Commitment" shall mean, at any time, the sum
of the Commitments of each of the Banks.
"Total Indebtedness" shall mean, at any time, the
sum of all Indebtedness of the Borrower and its Consolidated
Subsidiaries determined on a consolidated basis (including
without limitation long-term Indebtedness and working capital
Indebtedness); provided, that no Indebtedness attributable to
Trade Letters of Credit shall be included in any computation
of Total Indebtedness of the Borrower, except in the case of
Unpaid Drawings existing for more than two Business Days.
"Total Letter of Credit Commitment" shall mean, at
any time, the sum of the Letter of Credit Commitments of each
of the Banks.
"Total Revolving Commitment" shall mean, at any
time, the sum of the Revolving Commitments of each of the
Banks.
"Total Unutilized Letter of Credit Commitment"
shall mean at any time for the determination thereof an
amount equal to (x) the Total Letter of Credit Commitment at
such time less (y) all Letter of Credit Outstandings at such
time.
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"Total Unutilized Revolving Commitment" shall mean
at any time for the determination thereof an amount equal to
(x) the Total Revolving Commitment at such time less (y) the
sum of (i) the aggregate outstanding principal amount of
Revolving Loans and (ii) the aggregate outstanding principal
amount of Competitive Bid Loans.
"Trade Letter of Credit" shall mean each Existing
Letter of Credit identified on Schedule III as a "Trade
Letter of Credit," and any trade letter of credit issued on
or after the Effective Date in support of trade obligations
of the Borrower or any of its Subsidiaries incurred in the
ordinary course of business by a Trade Letter of Credit Bank
pursuant to standard trade letter of credit documentation of
such Trade Letter of Credit Bank, which documentation shall
provide that the Trade Letter of Credit Bank issuing such
letter of credit shall have a security interest in the
documents presented under, and the goods supported by, such
letter of credit, provided that (i) a letter of credit shall
not be a Trade Letter of Credit if at the time of the
issuance of such letter of credit the Stated Amount of such
letter of credit, when added to (x) the Trade Letter of
Credit Outstandings at such time and (y) the Standby Letter
of Credit Outstandings at such time, would exceed the Total
Letter of Credit Commitment at such time (the request by the
Borrower for a Trade Letter of Credit to constitute a
representation and warranty by the Borrower that such limits
would not be exceeded after giving effect to the issuance of
such Trade Letter of Credit), (ii) a letter of credit shall
not be a Trade Letter of Credit if the Trade Letter of Credit
Bank issuing same has received written notice from the Agent
by no later than the Business Day prior to its issuance of
such letter of credit that one or more of the conditions in
Section 5.02 is not then satisfied and such notice has not
been rescinded by the Agent, (iii) a letter of credit shall
cease to be a Trade Letter of Credit 30 days after the
expiration date thereof to the extent undrawn on or prior to
such date, (iv) a letter of credit shall not be a Trade
Letter of Credit if the expiration date thereof is later than
the earlier of (x) the date 270 days after the date such
letter of credit is issued and (y) the Maturity Date, (v) a
letter of credit issued for the account of a Subsidiary of
the Borrower shall not be a Trade Letter of Credit unless the
obligations of such Subsidiary in respect thereof are
guaranteed by the Borrower pursuant to documentation satis-
factory in form and substance to the Agent and (vi) a letter
of credit issued by a Trade Letter of Credit Bank shall not
be a Trade Letter of Credit if, after giving effect to the
issuance thereof, the Trade Letter of Credit Outstandings in
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respect of Trade Letters of Credit issued by such Trade
Letter of Credit Bank would exceed the Maximum Trade Issuance
Amount of such Trade Letter of Credit Bank as in effect at
such time.
"Trade Letter of Credit Bank" shall mean each of
the Banks listed in Part B of Schedule IX, it being
understood and agreed that Schedule IX may be modified from
time to time by the Borrower (including, without limitation,
by adding new Trade Letter of Credit Banks thereto and/or by
increasing, reducing or terminating the Maximum Trade
Issuance Amounts of the Trade Letter of Credit Banks) by
delivering a new Schedule IX to the Agent (with such new
Schedule IX to become effective on the Business Day following
such delivery or such later date as shall be specified
therein by the Borrower); provided that (a) no Bank may be
added to Schedule IX as a Trade Letter of Credit Bank without
the prior written consent of such Bank, (b) no Trade Letter
of Credit Bank's Maximum Trade Issuance Amount may be
increased without the prior written consent of such Trade
Letter of Credit Bank unless concurrent with such increase
such Trade Letter of Credit Bank's Maximum Standby Issuance
Amount is reduced by an amount equal to or greater than the
amount of such increase, and (c) no Trade Letter of Credit
Bank's Maximum Trade Issuance Amount may be reduced to an
amount that is less than the Trade Letter of Credit
Outstandings at such time in respect of Trade Letters of
Credit issued by such Trade Letter of Credit Bank. By
agreeing to become a Trade Letter of Credit Bank, each such
Bank will be deemed to have agreed to (i) issue Trade Letters
of Credit in accordance with, and on the terms set forth in,
Section 2 and (ii) provide the information required to be
provided by Trade Letter of Credit Banks pursuant to Section
2.07.
"Trade Letter of Credit Fee" shall have the meaning
provided in Section 3.01(c).
"Trade Letter of Credit Outstandings" shall mean,
at any time, the sum of, without duplication, (x) the aggre-
gate Stated Amount of all outstanding Trade Letters of Credit
and (y) the aggregate amount of all Unpaid Drawings in
respect of Trade Letters of Credit.
"Type" shall mean any type of Revolving Loan
determined with respect to the interest option applicable
thereto, i.e., a Base Rate Loan, a CD Rate Loan or a Euro-
dollar Loan.
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"UCC" shall mean the Uniform Commercial Code as
from time to time in effect in the relevant jurisdiction.
"United States" and "U.S." shall each mean the
United States of America.
"Unpaid Drawings" shall have the meaning provided
in Section 2.04(a).
"Unutilized Revolving Commitment" shall mean, for
any Bank, at any time, an amount equal to (i) such Bank's
Revolving Percentage multiplied by the Available Total
Revolving Commitment at such time less (ii) the aggregate
principal amount of all Revolving Loans made by such Bank and
then outstanding.
"Wholly-Owned Subsidiary" shall mean, as to any
Person, (i) any corporation 100% of whose capital stock is at
the time owned by such Person and/or one or more Wholly-Owned
Subsidiaries of such Person and (ii) any partnership,
association, joint venture or other entity in which such
Person and/or one or more Wholly-Owned Subsidiaries of such
Person has a 100% equity interest at such time.
10.02 Principles of Construction. (a) All refer-
ences to sections, schedules and exhibits are to sections,
schedules and exhibits in or to this Agreement unless other-
wise specified.
(b) All accounting terms not specifically defined
herein shall be construed in accordance with generally ac-
cepted accounting principles in the United States in con-
formity with those used in the preparation of the financial
statements referred to in Section 6.05(a).
SECTION 11. The Agent.
11.01 Appointment. The Banks hereby designate
Bankers Trust Company as Agent to act as specified herein and
in the other Credit Documents. Each Bank hereby irrevocably
authorizes, and each holder of any Note by the acceptance of
such Note shall be deemed irrevocably to authorize, the Agent
to take such action on its behalf under the provisions of
this Agreement, the other Credit Documents and any other
instruments and agreements referred to herein or therein and
to exercise such powers and to perform such duties hereunder
and thereunder as are specifically delegated to or required
of the Agent by the terms hereof and thereof and such other
powers as are reasonably incidental thereto. The Agent may
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perform any of its duties hereunder by or through its
officers, directors, agents or employees.
11.02 Nature of Duties. The Agent shall have no
duties or responsibilities except those expressly set forth
in this Agreement. Neither the Agent nor any of its offi-
cers, directors, agents or employees shall be liable for any
action taken or omitted by it or them hereunder or under any
other Credit Document or in connection herewith or therewith,
unless caused by its or their gross negligence or willful
misconduct. The duties of the Agent shall be mechanical and
administrative in nature; the Agent shall not have by reason
of this Agreement or any other Credit Document a fiduciary
relationship in respect of any Bank; and nothing in this
Agreement or any other Credit Document, expressed or implied,
is intended to or shall be so construed as to impose upon the
Agent any obligations in respect of this Agreement or any
other Credit Document except as expressly set forth herein.
11.03 Lack of Reliance on the Agent. Indepen-
dently and without reliance upon the Agent, each Bank, to the
extent it deems appropriate, has made and shall continue to
make (i) its own independent investigation of the financial
condition and affairs of the Borrower in connection with the
making and the continuance of the Loans and the taking or not
taking of any action in connection herewith and (ii) its own
appraisal of the creditworthiness of the Borrower and, except
as expressly provided in this Agreement, the Agent shall have
no duty or responsibility, either initially or on a continu-
ing basis, to provide any Bank with any credit or other
information with respect thereto, whether coming into its
possession before the making of the Loans, or at any time or
times thereafter. The Agent shall not be responsible to any
Bank for any recitals, statements, information, representa-
tions or warranties herein or in any document, certificate or
other writing delivered in connection herewith or for the
execution, effectiveness, genuineness, validity, enforce-
ability, perfection, collectibility, priority or sufficiency
of this Agreement or any other Credit Document or the finan-
cial condition of the Borrower or be required to make any
inquiry concerning either the performance or observance of
any of the terms, provisions or conditions of this Agreement
or any other Credit Document, or the financial condition of
the Borrower or the existence or possible existence of any
Default or Event of Default.
11.04 Certain Rights of the Agent. If the Agent
shall request instructions from the Required Banks with re-
spect to any act or action (including failure to act) in
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connection with this Agreement or any other Credit Document,
the Agent shall be entitled to refrain from such act or tak-
ing such action unless and until the Agent shall have re-
ceived instructions from the Required Banks; and the Agent
shall not incur liability to any Person by reason of so re-
fraining. Without limiting the foregoing, no Bank shall have
any right of action whatsoever against the Agent as a result
of the Agent acting or refraining from acting hereunder or
under any other Credit Document in accordance with the
instructions of the Required Banks.
11.05 Reliance. The Agent shall be entitled to
rely, and shall be fully protected in relying, upon any note,
writing, resolution, notice, statement, certificate, telex,
teletype or telecopier message, cablegram, radiogram, order
or other document or telephone message signed, sent or made
by any Person that the Agent believed to be the proper
Person, and, with respect to all legal matters pertaining to
this Agreement and any other Credit Document and its duties
hereunder and thereunder, upon advice of counsel selected by
it.
11.06 Indemnification. To the extent the Agent is
not reimbursed and indemnified by the Borrower, the Banks
will reimburse and indemnify the Agent, in proportion to
their respective initial Commitments, for and against any and
all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements
of any kind or nature whatsoever which may be imposed on,
incurred by or asserted against the Agent in performing its
duties hereunder or under any other Credit Document, in any
way relating to or arising out of this Agreement or any other
Credit Document, provided that no Bank shall be liable for
any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting from the Agent's gross
negligence or willful misconduct.
11.07 The Agent in its Individual Capacity. With
respect to its obligation to make Loans under this Agreement,
the Agent shall have the rights and powers specified herein
for a "Bank" and may exercise the same rights and powers as
though it were not performing the duties specified herein;
and the term "Banks," "Required Banks," "holders of Notes,"
or any similar terms shall, unless the context clearly
otherwise indicates, include the Agent in its individual
capacity. The Agent may accept deposits from, lend money to,
and generally engage in any kind of banking, trust or other
business with the Borrower or any Affiliate of the Borrower
-76-
as if it were not performing the duties specified herein, and
may accept fees and other consideration from the Borrower for
services in connection with this Agreement and otherwise
without having to account for the same to the Banks.
11.08 Holders. The Agent may deem and treat the
payee of any Note as the owner thereof for all purposes
hereof unless and until a written notice of the assignment,
transfer or endorsement thereof, as the case may be, shall
have been filed with the Agent. Any request, authority or
consent of any person or entity who, at the time of making
such request or giving such authority or consent, is the
holder of any Note shall be conclusive and binding on any
subsequent holder, transferee, assignee or indorsee, as the
case may be, of such Note or of any Note or Notes issued in
exchange therefor.
11.09 Resignation by the Agent. (a) The Agent
may resign from the performance of all its functions and
duties hereunder and under the other Credit Documents at any
time by giving 15 Business Days' prior written notice to the
Borrower and the Banks. Such resignation shall take effect
upon the appointment of a successor Agent pursuant to clauses
(b) and (c) below or as otherwise provided below.
(b) Upon any such notice of resignation, the
Required Banks shall appoint a successor Agent hereunder and
thereunder who shall be a Bank reasonably acceptable to the
Borrower.
(c) If a successor Agent shall not have been so
appointed within such 15 Business Day period, the Agent, with
the consent of the Borrower, shall then appoint another Bank
as successor Agent who shall serve as Agent hereunder or
thereunder until such time, if any, as the Required Banks
appoint a successor Agent as provided above.
(d) If no successor Agent has been appointed pur-
suant to clause (b) or (c) above by the 20th Business Day
after the date such notice of resignation was given by the
Agent, the Agent's resignation shall become effective and the
Banks shall thereafter perform all the duties of the Agent
hereunder and/or under any other Credit Document until such
time, if any, as the Required Banks appoint a successor agent
as provided above.
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SECTION 12. Miscellaneous.
12.01 Payment of Expenses, etc. The Borrower
shall: (i) whether or not the transactions herein contem-
plated are consummated, pay all reasonable out-of-pocket
costs and expenses of the Agent in connection with the prep-
aration, execution and delivery of the Credit Documents and
the documents and instruments referred to therein and any
actual or proposed amendment, waiver or consent relating
thereto (including, without limitation, the reasonable fees
and disbursements of counsel for the Agent) and shall pay all
reasonable out-of-pocket costs and expenses of the Agent and
each Bank in connection with the enforcement of the Credit
Documents and the documents and instruments referred to
therein (including, without limitation, the reasonable fees
and disbursements of counsel for the Agent and for each of
the Banks); (ii) pay and hold each of the Banks harmless from
and against any and all present and future stamp and other
similar taxes with respect to the foregoing matters and save
each of the Banks harmless from and against any and all
liabilities with respect to or resulting from any delay or
omission (other than to the extent attributable to such Bank)
to pay such taxes; and (iii) indemnify the Agent and each
Bank, its officers, directors, employees, representatives and
agents from and hold each of them harmless against any and
all losses, liabilities, claims, damages or expenses of any
kind or nature whatsoever which may be incurred by or
asserted against or involve any of them as a result of, or
arising out of, or in any way related to, or by reason of,
any investigation, litigation or other proceeding (whether or
not the Agent or any Bank is a party thereto) related to the
entering into and/or performance of any Credit Document or
the use of the proceeds of any Loans hereunder or the
consummation of any transactions contemplated in any Credit
Document, including, without limitation, the reasonable fees
and disbursements of counsel incurred in connection with any
such investigation, litigation or other proceeding (but ex-
cluding any such losses, liabilities, claims, damages or
expenses to the extent incurred by reason of the gross ne-
gligence or willful misconduct of the Person to be indem-
nified).
12.02 Right of Setoff. In addition to any rights
now or hereafter granted under applicable law or otherwise,
and not by way of limitation of any such rights, upon the
occurrence of an Event of Default, each Bank is hereby au-
thorized at any time or from time to time, without present-
ment, demand, protest or other notice of any kind to the
Borrower or to any other Person, any such notice being hereby
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expressly waived, to set off and to appropriate and apply any
and all deposits (general or special) and any other Indebt-
edness at any time held or owing by such Bank (including
without limitation by branches and agencies of such Bank
wherever located) to or for the credit or the account of the
Borrower against and on account of the Obligations and lia-
bilities of the Borrower to such Bank under this Agreement or
under any of the other Credit Documents, including, without
limitation, all interests in Obligations purchased by such
Bank pursuant to Section 12.06(b), and all other claims of
any nature or description arising out of or connected with
this Agreement or any other Credit Document, irrespective of
whether or not such Bank shall have made any demand hereunder
and although said Obligations, liabilities or claims, or any
of them, shall be contingent or unmatured.
12.03 Notices. Except as otherwise expressly pro-
vided herein, all notices and other communications provided
for hereunder shall be in writing (including telegraphic,
telex, telecopier or cable communication) and mailed,
telegraphed, telexed, telecopied, cabled or delivered, if to
the Borrower, at its address specified opposite its signature
below; if to any Bank, at its Base Rate Lending Office spe-
cified opposite its name on Schedule II; and if to the Agent,
at its Notice Office; or, as to the Borrower or the Agent, at
such other address as shall be designated by such party in a
written notice to the other parties hereto and, as to each
other party, at such other address as shall be designated by
such party in a written notice to the Borrower and the Agent.
All such notices and communications shall, when mailed,
telegraphed, telexed, telecopied, or cabled or sent by over-
night courier, be effective two days after being deposited in
the mails, on the day after being delivered to the telegraph
company, cable company or overnight courier, as the case may
be, or when sent by telex or telecopier or delivered, except
that notices and communications to the Agent shall not be
effective until received by the Agent.
12.04 Benefit of Agreement. (a) This Agreement
shall be binding upon and inure to the benefit of and be
enforceable by the respective successors and assigns of the
parties hereto; provided, however, that the Borrower may not
assign or transfer any of its rights and obligations here-
under without the prior written consent of the Banks.
Notwithstanding the foregoing, nothing in this Section 12.04
shall prevent or prohibit any Bank from pledging its rights
under this Agreement and/or its Loans and/or Note hereunder
to a Federal Reserve Bank in support of borrowings made by
such Bank from such Federal Reserve Bank.
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(b) Each Bank may transfer, assign or grant
participations in its rights hereunder and under the Notes,
provided, that any participation granted in any part of a
Bank's Commitment must consist of a pro rata participation in
a portion of such Bank's Revolving Commitment and Letter of
Credit Commitment and, provided further, that such Bank shall
remain a "Bank" for all purposes hereunder (and may not
transfer or assign its Commitment hereunder except pursuant
to clause (c) below) and the participant shall not constitute
a "Bank" hereunder and no Bank shall transfer, grant or as-
sign any participation under which the participant shall have
rights to approve any amendment to or waiver of this
Agreement except to the extent such amendment or waiver would
(i) extend the final scheduled maturity of any Loan or Note
in which such participant is participating, (ii) reduce the
rate of interest thereon (except in connection with a waiver
of the applicability of any post-default increase in interest
rates) or Fees, or reduce the principal amount thereof or
(iii) increase the Commitment in which such participant is
participating over the amount thereof then in effect (it
being understood that a waiver of any Default or Event of
Default or of a mandatory reduction in the Total Revolving
Commitment or the Total Letter of Credit Commitment or of a
mandatory prepayment shall not constitute a change in the
terms of any Commitment and that an increase in any
Commitment shall be permitted without the consent of any
participant if such participant's participation is not
increased as a result thereof). In the case of any such
participation, the participant shall not have any rights
under this Agreement or any of the other Credit Documents
(the participant's rights against such Bank in respect of
such participation to be those set forth in the agreement
executed by such Bank in favor of the participant relating
thereto) and all amounts payable by the Borrower hereunder
shall be determined as if such Bank had not sold such
participation, except that the participant shall be entitled
to the benefits of Sections 1.11, 1.12, 2.05 and 4.04 of this
Agreement to the extent that such Bank would be entitled to
such benefits if the participation had not been entered into
or sold.
(c) Notwithstanding anything to the contrary in
Section 12.04(a) or (b), any Bank may assign a portion of its
Commitment and its rights and obligations hereunder or under
its Notes; provided, however, that (i) no Bank may effect
such an assignment without the prior written consent of the
Borrower and the Agent, neither of which consents shall be
unreasonably withheld, provided that no consent of the
Borrower or the Agent shall be required in connection with an
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assignment by a Bank to a Bank Affiliate of such Bank, (ii)
any such assignment shall be in the aggregate of at least
$10,000,000, (iii) any assignment of any part of a Bank's
Commitment must consist of a pro rata assignment of a portion
of such Bank's Revolving Commitment and Letter of Credit Loan
Commitment and (iv) any assignment pursuant to this clause
(c) will not become effective until the payment to the Agent
by either the assigning or the assignee Bank of a
nonrefundable assignment fee of $2,500. If any Bank so sells
or assigns all or a part of its rights hereunder or under its
Notes, any reference in this Agreement or such Notes shall
thereafter refer to such Bank and to the respective assignee
to the extent of their respective interests and the
respective assignee shall have, to the extent of such
assignment (unless otherwise provided therein), the same
rights and benefits as it would if it were such assigning
Bank. Each assignment pursuant to this Section 12.04(c)
shall be effected by the assigning Bank and the assignee Bank
executing an Assignment and Assumption Agreement
substantially in the form of Exhibit E (appropriately
completed.) At the same time of any assignment pursuant to
this Section 12.04(c), (i) Schedules I and II shall be deemed
to be amended to reflect the Commitment of the respective
assignee (which shall result in a direct reduction of the
Commitment of the assigning Bank) and of the other Banks and
to reflect the Applicable Lending Offices of such assignee
and (ii) if requested by the assignee or the assigning Bank,
the Borrower will issue new Notes to the respective assignee
and to the assigning Bank in conformity with the requirements
of Section 1.06. Each Bank and the Borrower agree to execute
such documents (including, without limitation, amendments to
this Agreement and the other Credit Documents) as shall be
necessary to effect the foregoing.
12.05 No Waiver; Remedies Cumulative. No failure
or delay on the part of the Agent or any Bank or any holder
of a Note in exercising any right, power or privilege here-
under or under any other Credit Document and no course of
dealing between the Borrower and the Agent or any Bank or the
holder of any Note shall operate as a waiver thereof; nor
shall any single or partial exercise of any right, power or
privilege hereunder or under any other Credit Document pre-
clude any other or further exercise thereof or the exercise
of any other right, power or privilege hereunder or there-
under. The rights and remedies herein expressly provided are
cumulative and not exclusive of any rights or remedies which
the Agent or any Bank or the holder of any Note would
otherwise have. No notice to or demand on the Borrower in
any case shall entitle the Borrower to any other or further
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notice or demand in similar or other circumstances or con-
stitute a waiver of the rights of the Agent, the Banks or the
holder of any Note to any other or further action in any
circumstances without notice or demand.
12.06 Payments Pro Rata. (a) The Agent agrees
that promptly after its receipt of each payment from or on
behalf of the Borrower in respect of any Obligations of the
Borrower hereunder, it shall distribute such payment to the
Banks pro rata based upon their respective shares, if any, of
the Obligations with respect to which such payment was
received.
(b) Each of the Banks agrees that, if it should
receive any amount hereunder (whether by voluntary payment,
by realization upon security, by the exercise of the right of
setoff or banker's lien, by counterclaim or cross action, by
the enforcement of any right under the Credit Documents, or
otherwise), which is applicable to the payment of the prin-
cipal of, or interest on, the Loans or Fees, of a sum which
with respect to the related sum or sums received by other
Banks is in a greater proportion than the total of such
Obligation then owed and due to such Bank bears to the total
of such Obligation then owed and due to all of the Banks
immediately prior to such receipt, then such Bank receiving
such excess payment shall purchase for cash without recourse
or warranty from the other Banks an interest in the Obliga-
tions of the Borrower to such Banks in such amount as shall
result in a proportional participation by all of the Banks in
such amount; provided that if all or any portion of such ex-
cess amount is thereafter recovered from such Bank, such
purchase shall be rescinded and the purchase price restored
to the extent of such recovery, but without interest.
12.07 Calculations; Computations. (a) The finan-
cial statements to be furnished to the Banks pursuant hereto
shall be made and prepared in accordance with generally ac-
cepted accounting principles consistently applied throughout
the periods involved (except as set forth in the notes there-
to or as otherwise disclosed in writing by the Borrower to
the Banks), provided that, except as otherwise specifically
provided herein, all computations determining compliance with
Section 8 shall utilize accounting principles and policies in
conformity with those used to prepare the historical finan-
cial statements delivered to the Banks pursuant to Section
6.05(a).
(b) All computations of interest in respect of
Fixed Rate Loans hereunder shall be made on the actual number
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of days elapsed over a year of 360 days, and all computations
of interest in respect of Base Rate Loans and Fees shall be
made on the actual number of days elapsed over a year of
365/366 days.
(c) For the purpose of computing the Trade Letter
of Credit Fee payable pursuant to Section 3.01, all Trade
Letters of Credit issued or drawn upon on a day which is not
a Business Day shall be deemed to have been issued or drawn,
as the case may be, on the immediately succeeding Business
Day.
(d) All determinations of the Stated Amount of
Letters of Credit and of the principal amount of Unpaid
Drawings, in each case to the extent denominated in a
currency other than Dollars, shall be made by converting same
into Dollars at (x) in the case of a determination of the
Borrower's obligation to reimburse in Dollars a drawing under
a Letter of Credit denominated in a currency other than
Dollars, the spot exchange rate for the currency in question
of the respective Letter of Credit Issuer on the date of such
drawing or (y) if the provisions of the foregoing clause (x)
are not applicable, the daily average spot exchange rate for
the currency in question of the respective Letter of Credit
Issuer for the week preceding the week in which any such
determination is being made.
12.08 Governing Law; Submission to Jurisdiction;
Venue. (a) THIS AGREEMENT AND THE OTHER CREDIT DOCUMENTS
AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND
THEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOV-
ERNED BY THE LAW OF THE STATE OF NEW YORK. Any legal action
or proceeding with respect to this Agreement or any other
Credit Document may be brought in the courts of the State of
New York or of the United States for the Southern District of
New York, and, by execution and delivery of this Agreement,
the Borrower hereby irrevocably accepts for itself and in
respect of its property, generally and unconditionally, the
jurisdiction of the aforesaid courts. If for any reason the
Borrower does not maintain an office in New York City, the
Borrower agrees to appoint a designee, appointee and agent in
New York City to receive, accept and acknowledge for and on
its behalf, and in respect of its property, service of any
and all legal process, summons, notices and documents which
may be served in any such action or proceeding on the terms
and for the purposes of this provision satisfactory to the
Agent. The Borrower further irrevocably consents to the ser-
vice of process out of any of the aforementioned courts in
any such action or proceeding by the mailing of copies
-83-
thereof by registered or certified mail, postage prepaid, to
the Borrower at its address set forth opposite its signature
below, such service to become effective 30 days after such
mailing. Nothing herein shall affect the right of the Agent,
any Bank or the holder of any Note to serve process in any
other manner permitted by law or to commence legal pro-
ceedings or otherwise proceed against the Borrower in any
other jurisdiction.
(b) The Borrower hereby irrevocably waives any
objection which it may now or hereafter have to the laying of
venue of any of the aforesaid actions or proceedings arising
out of or in connection with this Agreement or any other
Credit Document brought in the courts referred to in clause
(a) above and hereby further irrevocably waives and agrees
not to plead or claim in any such court that any such action
or proceeding brought in any such court has been brought in
an inconvenient forum.
12.09 Obligation to Make Payments in Dollars. The
obligations of the Borrower to make payment in Dollars of the
principal of and interest on the Notes and any other amounts
due hereunder or under any other Credit Document to the
Payment Office of the Agent shall not be discharged or
satisfied by any tender, or any recovery pursuant to any
judgment, which is expressed in or converted into any
currency other than Dollars, except to the extent such tender
or recovery shall result in the actual receipt by the Agent
at its Payment Office on behalf of the Banks or holders of
the Notes or by such Issuing Bank at such offices, as the
case may be, of the full amount of Dollars expressed to be
payable in respect of the principal of and interest on the
Notes and all other amounts due hereunder or under any other
Credit Document. The obligations of the Borrower to make
payments in Dollars as aforesaid shall be enforceable as an
alternative or additional cause of action for the purpose of
recovery in Dollars of the amount, if any, by which such
actual receipt shall fall short of the full amount of Dollars
expressed to be payable in respect of the principal of and
interest on the Notes and any other amounts due under any
other Credit Document, and shall not be affected by judgment
being obtained for any other sums due under this Agreement or
under any other Credit Document.
12.10 Counterparts. This Agreement may be execu-
ted in any number of counterparts and by the different par-
ties hereto on separate counterparts, each of which when so
executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument. A set
-84-
of counterparts executed by all the parties hereto shall be
lodged with the Borrower and the Agent.
12.11 Headings Descriptive. The headings of the
several sections and subsections of this Agreement are in-
serted for convenience only and shall not in any way affect
the meaning or construction of any provision of this Agree-
ment.
12.12 Amendment or Waiver. Neither this Agreement
nor any other Credit Document nor any terms hereof or thereof
may be changed, waived, discharged or terminated unless such
change, waiver, discharge or termination is in writing signed
by the Required Banks (and, in the case of terms affecting
the Agent, as Agent for the Banks, the Agent); provided, how-
ever, that no such change, waiver, discharge or termination
shall, without the consent of each Bank affected thereby, (i)
extend the final maturity of any Loan, Unpaid Drawing or
Note, or extend the expiry date of any Letter of Credit
beyond the Maturity Date, or reduce the rate or extend the
time of payment of interest or Fees thereon, or reduce the
principal amount thereof, or increase the Commitment of any
Bank over the amount thereof then in effect (it being
understood that a waiver of any Default or Event of Default
shall not constitute a change in the terms of any Commitment
of any Bank), (ii) amend, modify or waive any provision of
this Section, or Sections 12.01, 12.02, 12.04, 12.06, or
12.07(b), (iii) reduce the percentage specified in the
definition of Required Banks or (iv) consent to the
assignment or transfer by the Borrower of any of its rights
and obligations under this Agreement, except pursuant to a
merger or consolidation in accordance with Section 8.02, as
the same may be amended from time to time.
12.13 Survival. All indemnities set forth herein
including, without limitation, in Sections 1.11, 1.12, 2.05,
4.04, 11.06 and 12.01 shall survive the execution and deli-
very of this Agreement and the Notes and the making and re-
payment of the Loans.
-85-
12.14 Domicile of Loans. Each Bank may transfer
and carry its Loans at, to or for the account of any branch
office, subsidiary or affiliate of such Bank.
12.15 Waiver of Jury Trial. EACH OF THE PARTIES
TO THIS AGREEMENT HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A
TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM
ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE OTHER
CREDIT DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR
THEREBY.
-86-
IN WITNESS WHEREOF, the parties hereto have caused
their duly authorized officers to execute and deliver this
Agreement as of the date first above written.
Address:
1290 Avenue of the Americas PHILLIPS-VAN HEUSEN
New York, New York 10019 CORPORATION
Telephone: (212) 541-5200
Telecopy: (212) 468-7398
Attn: Irwin Winter By/s/ Pamela N. Hootkin
with a copy to: Title: Vice President
Pamela N. Hootkin
BANKERS TRUST COMPANY,
Individually and as
Agent
By/s/ Priscilla Newbury
Title: Vice President
THE BANK OF NEW YORK
By/s/ Russell A. Burr
Title: Senior Vice
President
THE CHASE MANHATTAN
BANK, N.A.
By/s/ Edward F. McNulty
Title: Managing Director
CHEMICAL BANK
By/s/ Hans von Nolde
Title: Vice President
-87-
CITIBANK, N.A.
By/s/ Theodore J. Beck
Title: Vice President
CORESTATES BANK, N.A.
By/s/ Donna J. Emhart
Title: Commercial Officer
-88-
SCHEDULE I
COMMITMENTS
Revolving Letter of Credit
Bank Commitment Commitment
BANKERS TRUST COMPANY $ 16,666,666.65 $ 25,000,000.00
THE BANK OF NEW YORK $ 16,666,666.67 $ 25,000,000.00
THE CHASE MANHATTAN
BANK, N.A. $ 16,666,666.67 $ 25,000,000.00
CHEMICAL BANK $ 16,666,666.67 $ 25,000,000.00
CITIBANK, N.A. $ 16,666,666.67 $ 25,000,000.00
CORESTATES BANK, N.A. $ 16,666,666.67 $ 25,000,000.00
Total $100,000,000.00 $150,000,000.00
SCHEDULE IX
LETTER OF CREDIT ISSUERS AND ISSUANCE AMOUNTS
Part A: Standby Letters of Credit
Standby Letter of Maximum Standby Issuance
Credit Bank Amount
Part B: Trade Letters of Credit
Trade Letter of Maximum Trade Issuance
Credit Banks Amount
EXHIBIT A-1
FORM OF NOTICE OF BORROWING
[Date]
Bankers Trust Company,
As Agent for the Banks
280 Park Avenue
New York, New York 10017
Attention:____________________
Ladies and Gentlemen:
The undersigned, Phillips-Van Heusen Corporation,
refers to the Credit Agreement, dated as of December 16, 1993
(as amended from time to time, the "Credit Agreement", the
terms defined therein being used herein as therein defined),
among the undersigned, the Banks named therein and you, and
hereby gives you notice, irrevocably, pursuant to Section
1.03 of the Credit Agreement, that the undersigned hereby
requests a Borrowing under the Credit Agreement, and in that
connection sets forth below the information relating to such
Borrowing (the "Proposed Borrowing") as required by Section
1.03 of the Credit Agreement:
(i) The aggregate principal amount of the Proposed
Borrowing is $_____________________.
(ii) The Business Day of the Proposed Borrowing is
___________, 199_.
(iii) The Proposed Borrowing is to consist of
_____________________________________________.1/
(iv) The initial Interest Period for the Proposed
Borrowing is [____ days] [____ months].2/
1/ Specify whether Proposed Borrowing shall be initially
maintained as Base Rate Loans, CD Rate Loans or Eurodollar
Loans.
2/ Include only if Proposed Borrowing is for Fixed Rate
Loans.
EXHIBIT A-1
Page 2
The undersigned hereby certifies that the following
statements are true on the date hereof, and will be true on
the date of the Proposed Borrowing:
(A) all representations and warranties contained
in the Credit Agreement or in the other Credit Documents are
true and correct in all material respects, before and after
giving effect to the Proposed Borrowing and to the
application of the proceeds therefrom, as though made on and
as of such date; and
(B) no Default or Event of Default has occurred
and is continuing, or would result from such Proposed
Borrowing or from the application of the proceeds therefrom.
Very truly yours,
PHILLIPS-VAN HEUSEN CORPORATION
By___________________________
Title:
EXHIBIT A-2
FORM OF NOTICE OF COMPETITIVE BID BORROWING
To [the Bid Agent] [each of the Bidder Banks
under and as defined in the
Credit Agreement referred to
below, and to Bankers Trust
Company as Agent for such Banks]
Ladies and Gentlemen:
The undersigned, Phillips-Van Heusen Corporation,
refers to the Credit Agreement, dated as of December 16, 1993
(as amended from time to time, the "Credit Agreement", the
terms defined therein being used herein as therein defined),
among the undersigned, the Banks named therein and Bankers
Trust Company, as Agent, and hereby gives you notice pursuant
to Section 1.04 of the Credit Agreement, that the undersigned
hereby requests a Competitive Bid Borrowing under the Credit
Agreement, and in connection therewith sets forth below the
information relating to such Competitive Bid Borrowing (the
"Proposed Competitive Bid Borrowing") as required by Section
1.04 of the Credit Agreement:
(i) The aggregate principal amount of the Proposed
Competitive Bid Borrowing is $_____________________.
(ii) The Business Day of the Proposed Competitive
Bid Borrowing is ___________, 199_.
(iii) The maturity date with respect to the
Proposed Competitive Bid Borrowing is ______________,
19__.1/
1/ Such maturity date may not be earlier than one month, in
the case of a Spread Borrowing, and one day, in the case of
an Absolute Rate Borrowing, after the date of the Proposed
Competitive Bid Borrowing listed in (ii) above, or later than
the earlier to occur of (x) 360 days after the date of such
Proposed Competitive Bid Borrowing and (y) three Business
Days prior to the Maturity Date.
EXHIBIT A-2
Page 2
(iv) The interest payment date(s) relating to the
Proposed Competitive Bid Borrowing is (are)__________
__, 19__.
(v) The basis to be used by the Bidder Banks in
determining the rate or rates of interest to be offered
by the Bidder Banks with respect to the Proposed
Competitive Bid Borrowing is:_________________________
___________________________________________________.2/
(vi) Additional terms, if any, applicable to the
Proposed Competitive Bid Borrowing are as follows:
The undersigned hereby certifies that the following
statements are true on the date hereof, and will be true on
the date of the Proposed Competitive Bid Borrowing:
(A) all representations and warranties contained
in the Credit Agreement and in the other Credit Documents are
true and correct in all material respects, before and after
giving effect to the Proposed Competitive Bid Borrowing and
to the application of the proceeds therefrom, as though made
on and as of such date; and
(B) no Default or Event of Default has occurred
and is continuing, or would result from such Proposed
Competitive Bid Borrowing or from the application of the
proceeds therefrom.
Very truly yours,
PHILLIPS-VAN HEUSEN CORPORATION
By___________________________
Title:
2/ Specify whether Proposed Competitive Bid Borrowing shall
be an Absolute Rate Borrowing or a Spread Borrowing.
EXHIBIT B
FORM OF NOTE
$________________________ New York, New York
_______ __, 1993
FOR VALUE RECEIVED, PHILLIPS-VAN HEUSEN
CORPORATION, a Delaware corporation (the "Company"), hereby
promises to pay to the order of ______________________ (the
"Bank"), in lawful money of the United states of America in
immediately available funds, at the office of Bankers Trust
Company (the "Agent") located at One Bankers Trust Plaza, New
York, New York 10006, the principal sum of $_____
(____________________________________ DOLLARS) or, if less,
the unpaid principal amount of all Revolving Loans (as
defined in the Credit Agreement referred to below) made by
the Bank pursuant to the Credit Agreement, such principal
amount to be payable on the Maturity Date (as defined in the
Credit Agreement).
The Company promises also to pay interest on the
unpaid principal amount hereof in like money at said office
from the date hereof until paid at the rates and at the times
provided in the Credit Agreement.
This Note is one of the Notes referred to in the
Credit Agreement, dated as of December 16, 1993, among the
Company, the Agent, the Bank and the other lending
institutions party thereto (as from time to time in effect,
the "Credit Agreement"), and is entitled to the benefits
thereof and shall be subject to the provisions thereof. As
provided in the Credit Agreement, this Note is subject to
prepayment, in whole or in part.
In case an Event of Default (as defined in the
Credit Agreement) shall occur and be continuing, the
principal of and accrued interest on this Note may be
declared to be due and payable in the manner and with the
effect provided in the Credit Agreement.
The Company hereby waives presentment, demand,
protest or notice of any kind in connection with this Note.
This Note shall be construed in accordance with and
be governed by the law of the State of New York.
PHILLIPS-VAN HEUSEN CORPORATION
By________________________
Title:
EXHIBIT C
[Form of Rosenman & Colin Opinion]
December __, 1993
The Banks Party to the
Credit Agreement referred to below:
Re: Phillips-Van Heusen Corporation
Ladies and Gentlemen:
We have acted as counsel to Phillips-Van Heusen
Corporation, a Delaware corporation (the "Borrower"), in
connection with the negotiation and execution of the Credit
Agreement, dated as of December 16, 1993 (the "Credit
Agreement"), among the Borrower, Bankers Trust Company, as
Agent (the "Agent"), and the Banks named therein (the
"Banks"). This opinion is furnished to you at the request of
the Borrower pursuant to Section 5.01(c) of the Credit
Agreement. Unless otherwise defined herein, all capitalized
terms used herein and defined in the Credit Agreement are
used herein as so defined.
We have examined originals or copies, certified or
otherwise identified to our satisfaction, of the Credit
Agreement, the Notes, the 1992 Note Purchase Agreements, the
1993 Indenture and such other documents, certificates,
records and instruments as we have deemed appropriate in
order to enable us to express the opinions hereinafter set
forth. In our examination we have assumed without
independent investigation or verification of any kind the
genuineness of all signatures, the authenticity of all
documents submitted to us as originals and the conformity
with the original documents of all documents submitted to us
as copies. In addition, as to any facts material to such
opinions, we have relied upon certificates, affidavits, oaths
and declarations of public officials and officers or other
representatives of the Borrower and the corporate records of
the Borrower and have made no other independent investigation
of such facts.
The Banks Party to the
Credit Agreement referred to below EXHIBIT C
December 16, 1993 Page 2
Based upon and subject to the foregoing, we are of
the opinion that:
1. The Borrower is a duly incorporated and validly
existing corporation in good standing under the laws of the
State of Delaware and has the corporate power to own its
property and assets and to transact the business in which it
is engaged.
2. The Borrower has the corporate power to
execute, deliver and carry out the terms and provisions of
each of the Credit Documents and has taken all necessary
corporate action to authorize the execution, delivery and
performance by it of each of the Credit Documents. The
Borrower has duly executed and delivered each of the Credit
Documents (except for Letter of Credit Documents to be
executed after the date hereof) and each such Credit Document
(except for Letter of Credit Documents to be executed after
the date hereof) constitutes its legal, valid and binding
obligation enforceable in accordance with its terms (subject
to bankruptcy, insolvency, moratorium, reorganization or
similar laws in effect from time to time affecting creditors'
rights generally and subject to general equitable principles,
whether considered in a proceeding at law or in equity).
3. Neither the execution, delivery or performance
by the Borrower of the Credit Documents, nor compliance by it
with the terms and provisions thereof, (i) will in any
material respect violate any provision of any applicable law,
statute, rule or regulation or, to the extent of our
knowledge, no independent inquiry having been made, any
order, writ, injunction or decree of any court or
governmental instrumentality, (ii) will result in any breach
of any of the terms, covenants, conditions or provisions of,
or constitute a default under, or result in the creation or
imposition of (or the obligation to create or impose) any
Lien upon any of the property or assets of the Borrower or
any of its Subsidiaries pursuant to the terms of the 1992
Note Purchase Agreements, the 1993 Indenture or any other
indenture, mortgage, deed of trust, credit agreement, loan
agreement or any other agreement, contract or instrument
known to us, no independent inquiry having been made, to
which the Borrower is a party or by which it or any of its
property or assets is bound or to which it may be subject or
The Banks Party to the
Credit Agreement referred to below EXHIBIT C
December 16, 1993 Page 3
(iii) will violate any provisions of the Certificate of
Incorporation or By-Laws of the Borrower.
4. No order, consent, approval, license,
authorization or validation of, or filing, recording or
registration with (except as have been obtained or made), or
exemption by, any governmental or public body or authority,
or any subdivision thereof, is required to authorize, or is
required in connection with (i) the execution, delivery and
performance of any Credit Documents or (ii) the legality,
validity, binding effect or enforceability of any Credit
Documents.
5. Neither the making of any Loan nor the use of
the proceeds thereof will violate the provisions of
Regulations G, T, U or X of the Board of Governors of the
Federal Reserve System.
6. The Borrower is not an "investment company"
within the meaning of the Investment Company Act of 1940, as
amended.
7. The Borrower is not a "holding company" or a
"subsidiary company" of a "holding company", or an
"affiliate" of a "holding company" or of a "subsidiary
company" of a "holding company" within the meaning of the
Public Utility Holding Company Act of 1935, as amended.
We hereby confirm to you that, to our knowledge,
except as disclosed in the Credit Agreement or an exhibit,
annex or schedule thereto, there are no actions, suits or
proceedings pending or overtly threatened in writing against
the Borrower or any of its Subsidiaries (i) with respect to
any Credit Document or (ii) that would materially and
adversely affect the business, operations, property, assets
or condition (financial or otherwise) of the Borrower or of
the Borrower and its Subsidiaries taken as a whole.
As used in this opinion, the term "to our
knowledge" means actual knowledge of information by the
attorney who has signed this opinion or any attorney who has
had active involvement in the preparation of this opinion or
has given substantive legal attention to representation of
the Borrower in connection with the transactions contemplated
by the Credit Agreement.
The Banks Party to the
Credit Agreement referred to below EXHIBIT C
December 16, 1993 Page 4
We express no opinion herein except with respect to
the laws of the State of New York, the corporate laws of the
State of Delaware and the federal laws of the United States
of America.
Very truly yours,
ROSENMAN & COLIN
By_________________________
EXHIBIT D
[Form of Officers' Certificate]
PHILLIPS-VAN HEUSEN CORPORATION
I, the undersigned, __________________ of Phillips-Van
Heusen Corporation, a Delaware corporation (the "Company"), DO
HEREBY CERTIFY that:
1. This Certificate is furnished pursuant to Section
5.01(d) of that certain Credit Agreement, dated as of December 16,
1993, among the Company, the Banks party thereto, and Bankers Trust
Company, as Agent (such Credit Agreement, as in effect on the date
of this Certificate, being herein called the "Credit Agreement").
Unless otherwise defined herein capitalized terms used in this
certificate have the meanings assigned to those terms in the Credit
Agreement.
2. The below-named persons have been duly elected, have
been duly qualified as and at all time since _______________ (to
and including and date hereof) officers of the Company, holding the
respective offices below set opposite their names, and the
signatures below set opposite their names are their genuine
signatures.
Name Office Signature
3. Attached hereto as Exhibit A is a copy of the
Certificate of Incorporation of the Company as filed in the Office
of the Secretary of State of the State of Delaware on
_____________, together with all amendments thereto adopted through
the date hereof.
4. Attached hereto as Exhibit B is a true and correct
copy of the By-Laws of the Company as in effect on _____________,
together with all amendments thereto adopted through the date
hereof.
5. Attached hereto as Exhibit C is a true and correct
copy of resolutions duly adopted by the Board of Directors of the
Company at a meeting duly called and held on ________________,
1993, at which a quorum was present and acting throughout, which
resolutions have not been revoked, modified, amended or rescinded
and are still in full force and effect. Except as attached hereto
as Exhibit C, no resolutions have been adopted by the Board of
EXHIBIT D
Page 2
Directors of the Company or any committee thereof which deal with
the execution, delivery or performance of any of the Credit
Documents.
6. On the date hereof, all representations and
warranties contained in the Credit Agreement or in the other Credit
Documents are true and correct, both before and after giving effect
to each Borrowing to be incurred on the date hereof and the
application of the proceeds therefrom.
7. On the date hereof, no Default or Event of Default
has occurred and is continuing, or would result from the Borrowing
to be incurred on the date hereof or from the application of the
proceeds therefrom.
8. I know of no proceeding for the dissolution or
liquidation of the Company or threatening its existence.
IN WITNESS WHEREOF, I have hereunto set my hand this __th
day of December, 1993.
By___________________________
Name:
Title:
EXHIBIT D
Page 3
I, the undersigned, Assistant Secretary of the Company, DO HEREBY
CERTIFY that:
1. ______________ is the duly elected and qualified
______________________________ of the Company and the signature
above is his genuine signature.
2. The certifications made by _____________ in items 2,
3, 4 and 5 above are true and correct.
3. I know of no proceeding for the dissolution or
liquidation of the Company or threatening its existence.
IN WITNESS WHEREOF, I have hereunto set my hand this
_____ day of December, 1993.
_____________________________
Name:
Title:
EXHIBIT E
FORM OF ASSIGNMENT AND ASSUMPTION AGREEMENT
DATE: ________, 19__
Reference is made to the Credit Agreement described
in Item 2 of Annex I annexed hereto (as such agreement may
hereafter be amended, modified or supplemented from time to
time, the "Credit Agreement"). Unless defined in Annex I
attached hereto, terms defined in the Credit Agreement are
used herein as therein defined. _____________ (the
"Assignor") and ______________ (the "Assignee") hereby agree
as follows:
1. The Assignor hereby sells and assigns to the
Assignee without recourse and without representation or
warranty (other than as expressly provided herein), and the
Assignee hereby purchases and assumes from the Assignor, that
interest in and to all of the Assignor's rights and obliga-
tions under the Credit Agreement as of the date hereof which
represents the percentage interest specified in Item 4 of
Annex I (the "Assigned Share") of (x) Assignor's Revolving
Commitment, together with all rights and obligations with
respect to the Assigned Share of Assignor's outstanding
Revolving Loans and (y) Assignor's Letter of Credit
Commitment, together with all rights and obligations with
respect to the Assigned Share of all outstanding Letters of
Credit. After giving effect to such sale and assignment, the
Assignee's Revolving Commitment and Letter of Credit
Commitment, and the amount of the outstanding Revolving Loans
owing to the Assignee, will be as set forth in Item 4 of
Annex I.
2. The Assignor (i) represents and warrants that
it is the legal and beneficial owner of the interest being
assigned by it hereunder and that such interest is free and
clear of any liens or security interests; (ii) makes no
representation or warranty and assumes no responsibility with
respect to any statements, warranties or representations made
in or in connection with the Credit Agreement or the other
Credit Documents or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of the
Credit Agreement or the other Credit Documents or any other
instrument or document furnished pursuant thereto; and (iii)
makes no representation or warranty and assumes no respon-
sibility with respect to the financial condition of the
EXHIBIT E
Page 2
Borrower or the performance or observance by the Borrower of
any of its obligations under the Credit Agreement or the
other Credit Documents or any other instrument or document
furnished pursuant thereto.
3. The Assignee (i) confirms that it has received
a copy of the Credit Agreement and the other Credit
Documents, together with copies of the financial statements
referred to therein and such other documents and information
as it has deemed appropriate to make its own credit analysis
and decision to enter into this Assignment and Assumption
Agreement; (ii) agrees that it will, independently and
without reliance upon the Agent, the Assignor or any other
Bank and based on such documents and information as it shall
deem appropriate at the time, continue to make its own credit
decisions in taking or not taking action under the Credit
Agreement; (iii) appoints and authorizes the Agent to take
such action as agent on its behalf and to exercise such
powers under the Credit Agreement and the other Credit
Documents as are delegated to the Agent by the terms thereof,
together with such powers as are reasonably incidental
thereto; [and] (iv) agrees that it will perform in accordance
with their terms all of the obligations which by the terms of
the Credit Agreement are required to be performed by it as a
Bank[; and (v) attaches the forms prescribed by the Internal
Revenue Service of the United States certifying as to the
Assignee's status for purposes of determining exemption from
United States withholding taxes with respect to all payments
to be made to the Assignee under the Credit Agreement or such
other documents as are necessary to indicate that all such
payments are subject to such rates at a rate reduced by an
applicable tax treaty].1/
4. Following the execution of this Assignment and
Assumption Agreement by the Assignor and the Assignee, an
executed original hereof (together with all attachments) will
be delivered to the Agent. The effective date of this
Assignment and Assumption Agreement shall be the date of
execution hereof by the Assignor and the Assignee and the
consent hereof by the Borrower and the Agent and receipt by
the Agent of the administrative fee referred to in Section
1/ If the Assignee is organized under the laws of a
jurisdiction outside the United States.
EXHIBIT E
Page 3
12.04(c) of the Credit Agreement, unless otherwise specified
in Item 5 of Annex I hereto (the "Settlement Date").
5. Upon the delivery of a fully executed original
hereof to the Agent, as of the Settlement Date, (i) the
Assignee shall be a party to the Credit Agreement and, to the
extent provided in this Assignment and Assumption Agreement,
have the rights and obligations of a Bank thereunder and
under the other Credit Documents and (ii) the Assignor shall,
to the extent provided in this Assignment and Assumption
Agreement, relinquish its rights (other than rights to
indemnification which shall survive) and be released from its
obligations under the Credit Agreement and the other Credit
Documents.
6. It is agreed that the Assignee shall be en-
titled to (i) all interest on the Assigned Share of the
Revolving Loans at the rates specified in Item 6 of Annex I;
(ii) all Commitment Commissions on the Assigned Share of the
Revolving Commitment at the rate specified in Item 7 of Annex
I; (iii) all Letter of Credit Facility Fees on the Assigned
Share of the Letter of Credit Commitment at the rate
specified in Item 8 of Annex I; and (iv) all Letter of Credit
Fees on the Assignee's participation in all Letters of Credit
at the rate specified in Item 9 of Annex I hereto, which, in
each case, accrue on and after the Settlement Date, such
interest, Commitment Commissions, Letter of Credit Facility
Fees and Letter of Credit Fees, to be paid by the Agent
directly to the Assignee. It is further agreed that all
payments of principal made on the Assigned Share of the
Revolving Loans which occur on and after the Settlement Date
will be paid directly by the Agent to the Assignee. Upon the
Settlement Date, the Assignee shall pay to the Assignor an
amount specified by the Assignor in writing which represents
the Assigned Share of the principal amount of the Revolving
Loans made by the Assignor pursuant to the Credit Agreement
which are outstanding on the Settlement Date, net of any
closing costs, and which are being assigned hereunder. The
Assignor and the Assignee shall make all appropriate
adjustments in payments under the Credit Agreement for
periods prior to the Settlement Date directly between
themselves on the Settlement Date.
EXHIBIT E
Page 4
7. THIS ASSIGNMENT AND ASSUMPTION AGREEMENT SHALL
BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF NEW YORK.
IN WITNESS WHEREOF, the parties hereto have caused
this Assignment and Assumption Agreement to be executed by
their respective officers thereunto duly authorized, as of
the date first above written, such execution also being made
on Annex I hereto.
[NAME OF ASSIGNOR],
as Assignor
By____________________________
Title:
[NAME OF ASSIGNEE],
as Assignee
By____________________________
Title:
Acknowledged and Agreed:
PHILLIPS-VAN HEUSEN
CORPORATION,
By____________________________
Title:
BANKERS TRUST COMPANY,
as Agent
By____________________________
Title:
ANNEX I
ANNEX FOR ASSIGNMENT AND ASSUMPTION AGREEMENT
ANNEX I
1. The Borrower: Phillips-Van Heusen Corporation
2. Name and Date of Credit Agreement:
Credit Agreement, dated as of December 16, 1993, among
the Banks from time to time party thereto, and Bankers
Trust Company, as Agent.
3. Date of Assignment Agreement:
4. Amounts (as of date of item #3 above):2/
Outstanding
Principal of Letter
Revolving Revolving of Credit
Commitment Loans Commitment
a. Aggregate Amount
for all Banks $________ $_________ $________
b. Assigned Share _________% __________% _________%
c. Amount of Assigned
Share $________ $_________ $________
5. Settlement Date:
2/ Assignments of all or any portion of the Revolving
Commitment must be accompanied by a pro rata assignment of
the Assignor's Letter of Credit Commitment.
ANNEX I
Page 2
6. Rate of Interest As set forth in Section 1.09 of the
to the Assignee: Credit Agreement (unless otherwise
agreed to by the Assignor and the
Assignee)3/
7. Commitment As set forth in Section 3.01(a) of
Commission: the Credit Agreement (unless
otherwise agreed to by the Assignor
and the Assignee)4/
8. Letter of Credit As set forth in Section 3.01(b) of
Facility Fees: the Credit Agreement (unless
otherwise agreed to by the Assignor
and the Assignee)5/
9. Letter of Credit As set forth in Section 3.01(c) of
Fees: the Credit Agreement (unless
otherwise agreed to by the Assignor
and the Assignee)6/
3/ The Borrower and the Agent shall direct the entire amount
of the interest to the Assignee at the rate set forth in
Section 1.09 of the Credit Agreement, with the Assignor and
Assignee effecting any agreed upon sharing of interest
through payments by the Assignee to the Assignor.
4/ The Borrower and the Agent shall direct the entire amount
of the commitment Commission to the Assignee at the rate set
forth in Section 3.01(a) of the Credit Agreement, with the
Assignor and the Assignee effecting any agreed upon sharing
of Commitment Fees through payment by the Assignee to the
Assignor.
5/ The Borrower and the Agent shall direct the entire amount
of the Letter of Credit Facility Fees to the Assignee at the
rate set forth in Section 3.01(b) of the effecting any agreed
upon sharing of Letter of Credit Facility Fees through
payment by the Assignee to the Assignor.
6/ The Borrower and the Agent shall direct the entire amount
of the Letter of Credit Fees to the Assignee at the rate set
forth in Section 3.01(c) of the Credit Agreement,
ANNEX I
Page 3
10. Notice:
ASSIGNEE:
___________________
___________________
___________________
___________________
Attention:
Telephone:
Telecopier:
Reference:
Payment Instructions:
ASSIGNEE:
___________________
___________________
___________________
___________________
Attention:
Reference:
Accepted and Agreed:
[NAME OF ASSIGNEE] [NAME OF ASSIGNOR]
By________________________ By__________________________
________________________ __________________________
(Print Name and Title) (Print Name and Title)
with the Assignor and the Assignee effecting any agreed upon
sharing of Letter of Credit Fees through payment by the
Assignee to the Assignor.
PHILLIPS-VAN HEUSEN CORPORATION
1987 STOCK OPTION PLAN
(Including all amendments
through March 30, 1993)
1. Purpose.
The purposes of the 1987 Stock Option Plan (the "Plan") are
to induce certain individuals to remain in the employ, or to
continue to serve as directors, of Phillips-Van Heusen
Corporation (the "Company") and its present and future subsi-
diary corporations (each a "Subsidiary"), as defined in Section
425(f) of the Internal Revenue Code of 1986, as amended (the
"Code"), to attract new individuals to enter into such employment
and service and to encourage such individuals to secure or
increase on reasonable terms their stock ownership in the
Company. The Board of Directors of the Company (the "Board")
believes that the granting of stock options (the "Options") under
the Plan will promote continuity of management and increased
incentive and personal interest in the welfare of the Company by
those who are or may become primarily responsible for shaping and
carrying out the long range plans of the Company and securing its
continued growth and financial success. Options granted
hereunder are intended to be either (a) "incentive stock options"
(which term, when used herein, shall have the meaning ascribed
thereto by the provisions of Section 422A(b) of the Code) or (b)
options which are not incentive stock options ("non-incentive
stock options") or (c) a combination thereof, as determined by
the Committee (the "Committee") referred to in Section 5 hereof
at the time of the grant thereof.
2. Effective Date of the Plan.
The Plan became effective on April 2, 1987. The Plan was
amended and restated effective as of January 3, 1991, and amended
further as of April 4, 1991, February 4, 1993 and March 30, 1993.
3. Stock Subject to Plan.
2,500,000 (which number reflects all changes in the
capitalization of the Company and amendments to the Plan prior to
March 30, 1993) of the authorized but unissued shares of the
common stock, $1.00 par value, of the Company (the "Common
Stock") are hereby reserved for issue upon the exercise of
Options granted under the Plan; provided, however, that the
number of shares so reserved may from time to time be reduced to
the extent that a corresponding number of issued and outstanding
shares of the Common Stock are purchased by the Company and set
aside for issue upon the exercise of Options. If any Options
expire or terminate for any reason without having been exercised
in full, the unpurchased shares subject thereto shall again be
available for the purposes of the Plan.
4. Administration.
The Plan shall be administered by the Committee referred to
in Section 5 hereof. Subject to the express provisions of the
Plan, the Committee shall have complete authority, in its
discretion, to interpret the Plan, to prescribe, amend and
rescind rules and regulations relating to it, to determine the
terms and provisions of the respective option agreements or
certificates (which need not be identical), to determine the
individuals (each a "Participant") to whom and the times and the
prices at which Options shall be granted, the periods during
which each Option shall be exercisable, the number of shares of
the Common Stock to be subject to each Option and whether such
Option shall be an incentive stock option or a non-incentive
stock option and to make all other determinations necessary or
advisable for the administration of the Plan. In making such
determinations, the Committee may take into account the nature of
the services rendered by the respective employees, their present
and potential contributions to the success of the Company and the
Subsidiaries and such other factors as the Committee in its
discretion shall deem relevant. The Committee's determination on
the matters referred to in this Section 4 shall be conclusive.
Any dispute or disagreement which may arise under or as a result
of or with respect to any Option shall be determined by the
Committee, in its sole discretion, and any interpretations by the
Committee of the terms of any Option shall be final, binding and
conclusive.
5. Committee.
The Committee shall consist of two or more members of the
Board both or all of whom shall be "disinterested persons" within
the meaning of Rule 16b-3(c)(2)(i) promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act").
The President of the Company shall also be a member of the
Committee, ex-officio, whether or not he is otherwise eligible to
be a member of the Committee. The Committee shall be appointed
annually by the Board, which may at any time and from time to
time remove any members of the Committee, with or without cause,
appoint additional members to the Committee and fill vacancies,
however caused, in the Committee. A majority of the members of
the Committee shall constitute a quorum. All determinations of
the Committee shall be made by a majority of its members present
at a meeting duly called and held except that the Committee may
delegate to any one of its members the authority of the Committee
with respect to the grant of Options to persons who shall not be
officers and/or directors of the Company. Any decision or
determination of the Committee reduced to writing and signed by
all of the members of the Committee (or by the member of the
Committee to whom authority has been delegated) shall be fully as
effective as if it had been made at a meeting duly called and
held.
6. Eligibility.
An Option may be granted only to a key employee of the
Company or a Subsidiary. A director of the Company or a
Subsidiary who is not an employee of the Company or a Subsidiary
shall be eligible to receive an Option, but only as provided in
Section 21 hereof.
7. Option Prices.
A. The initial per share option price of any Option which
is an incentive stock option shall be the price determined by the
Committee, but not less than the fair market value of a share of
the Common Stock on the date of grant; provided, however, that,
in the case of a Participant who owns more than 10% of the total
combined voting power of the Common Stock at the time an Option
which is an incentive stock option is granted to him, the initial
per share option price shall not be less than 110% of the fair
market value of a share of the Common Stock on the date of grant.
B. The initial per share option price of any Option which
is a non-incentive stock option shall be the price determined by
the Committee, but not less than 85% of the fair market value of
a share of the Common Stock on the date of grant.
C. For all purposes of the Plan, the fair market value of a
share of the Common Stock on any date shall be equal to (i) the
closing sale price of the Common Stock on the New York Stock
Exchange on the business day preceding such date or (ii) if there
is no sale of the Common Stock on such Exchange on such business
day, the average of the bid and asked prices on such Exchange at
the close of the market on such business day.
8. Option Term.
Participants shall be granted Options for such term as the
Committee shall determine, not in excess of ten years from the
date of the granting thereof; provided, however, that, in the
case of a Participant who owns more than 10% of the total
combined voting power of the Common Stock at the time an Option
which is an incentive stock option is granted to him, the term
with respect to such Option shall not be in excess of five years
from the date of the granting thereof.
9. Limitation on Amount of Incentive Stock Options Granted.
The aggregate fair market value of the shares of the Common
Stock for which any Participant may be granted incentive stock
options which are exercisable for the first time in any calendar
year (whether under the terms of the Plan or any other stock
option plan of the Company) shall not exceed $100,000.
10. Exercise of Options.
A. A Participant may not exercise an Option during the
period commencing on the date of the granting of such Option to
him and ending on the day next preceding the third anniversary of
such date. A Participant may (i) during the period commencing on
the third anniversary of the date of the granting of an Option to
him and ending on the day next preceding the fourth anniversary
of such date, exercise such Option with respect to one-third of
the shares granted thereby, (ii) during the period commencing on
such fourth anniversary and ending on the day next preceding the
fifth anniversary of the date of the granting of such Option,
exercise such Option with respect to two-thirds of the shares
granted thereby, and (iii) during the period commencing on such
fifth anniversary, exercise such Option with respect to all of
the shares granted thereby.
B. Except as hereinbefore otherwise set forth, an Option
may be exercised either in whole at any time or in part from time
to time.
C. An Option may be exercised only by a written notice of
intent to exercise such Option with respect to a specific number
of shares of the Common Stock and payment to the Company of the
amount of the option price for the number of shares of the Common
Stock so specified; provided, however, that, if the Committee
shall in its sole discretion so determine at the time of the
grant of any Option, all or any portion of such payment may be
made in kind by the delivery of shares of the Common Stock having
a fair market value equal to the portion of the option price so
paid; provided, further, however, that, subject to the require-
ments of Regulation T (as in effect from time to time)
promulgated under the Exchange Act, the Committee may implement
procedures to allow a broker chosen by a Participant to make
payment of all or any portion of the option price payable upon
the exercise of an Option and receive, on behalf of such
Participant, all or any portion of the shares of the Common Stock
issuable upon such exercise.
D. The Board may, in its discretion, permit any Option to
be exercised, in whole or in part, prior to the time when it
would otherwise be exercisable.
E. I. Notwithstanding the provisions of paragraph A of
this Section 10, in the event that a Severance Event shall occur,
then, each Option theretofore granted to any Participant which
shall not have theretofore expired or otherwise been cancelled or
become unexercisable shall become immediately exercisable in
full. For the purposes of this paragraph E,
(a) The term "Severance Event" shall mean the
simultaneous or contemporaneous occurrence of a Change in
Control and a Change in Chief Executive Officer or the
occurrence of a Change in Chief Executive Officer at any
time subsequent to a Change in Control.
(b) A "Change in Chief Executive Officer" shall be
deemed to occur if the individual who shall have the powers,
duties, responsibilities and title of the Chief Executive
Officer of the Company (or the consolidated, surviving or
transferee Person (as defined in clause (c) of this division
I) in the event of a consolidation, merger or sale of
assets) immediately prior to the time of a Change in Control
shall no longer have the same for any reason whatsoever,
including his death.
(c) A "Change in Control" shall be deemed to occur
upon (i) the election of one or more individuals to the
Board which election results in one-third of the directors
of the Company consisting of individuals who have not been
directors of the Company for at least two years, unless such
individuals have been elected as directors by three-fourths
of the directors of the Company who have been directors of
the Company for at least two years; (ii) the sale by the
Company of all or substantially all of its assets to any
Person, the consolidation of the Company with any Person,
the merger of the Company with any Person as a result of
which merger the Company is not the surviving entity as a
publicly held corporation; (iii) the sale or transfer of
shares of the Company by the Company and/or any one or more
of its stockholders, in one or more transactions, related or
unrelated, to one or more Persons under circumstances
whereby any Person and its Affiliates shall own, after such
sales and transfers, at least one-fourth, but less than one-
half, of the shares of the Company having voting power for
the election of directors, unless such sale or transfer has
been approved in advance by three-fourths of the directors
of the Company who have been directors of the Company for at
least two years; or (iv) the sale or transfer of shares of
the Company by the Company and/or any one or more of its
stockholders, in one or more transactions, related or
unrelated, to one or more Persons under circumstances
whereby any Person and its Affiliates shall own, after such
sales and transfers, at least one-half of the shares of the
Company having voting power for the election of directors;
provided, however, that, if the Phillips Family shall
together own (or be considered as owning after the appli-
cation of the provisions of section 318 of the Code) at
least one-half of the shares of the Company (or the
consolidated, surviving or transferee Person in the event of
a consolidation, merger or sale of assets) having voting
power for the election of directors, no Change in Control
shall be deemed to have occurred. For the purposes of this
clause (c), (1) the term "Affiliate" shall mean any Person
that directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under
common control with, any other Person, (2) the term "Person"
shall mean any individual, partnership, firm, trust,
corporation or other similar entity, (3) the term "Phillips
Family" shall mean the descendants of Seymour Phillips, the
spouses of any of them, the estates of them and of such
spouses, and any trusts created for the primary benefit of
any of them and/or such spouses, and (4) when two or more
Persons act as a partnership, limited partnership, syndicate
or other group for the purpose of acquiring, holding or
disposing of securities of the Company, such partnership,
limited partnership, syndicate or group shall be deemed a
"Person".
II. In the event that a Change of Control shall occur,
then, from and after the time of such event, neither the
provisions of this paragraph E nor any of the rights of any
Participant thereunder shall he modified or amended in any way.
11. Transferability.
No Option shall be assignable or transferable except by will
and/or by the laws of descent and distribution and, during the
life of any Participant, each Option granted to him may be
exercised only by him.
12. Termination of Employment.
In the event a Participant leaves the employ of the Company
and the Subsidiaries, whether voluntarily or otherwise but other
than by reason of his death or retirement, each Option thereto-
fore granted to him which shall not have theretofore expired or
otherwise been cancelled shall, to the extent not theretofore
exercised, terminate upon the earlier to occur of the expiration
of 30 days after the date of such Participant's termination of
employment and the date of termination specified in such Option.
Notwithstanding the foregoing, if a Participant is terminated for
cause (as defined herein), each Option theretofore granted to him
which shall not have theretofore expired or otherwise been
cancelled shall, to the extent not theretofore exercised,
terminate forthwith. For purposes of the foregoing, the term
"cause" shall mean: (i) the commission by the Participant of any
act or omission that would constitute a crime under federal,
state or equivalent foreign law, (ii) the commission by the
Participant of any act of moral turpitude, (iii) fraud,
dishonesty or other acts or omissions that result in a breach of
any fiduciary or other material duty to the Company and/or the
Subsidiaries, or (iv) continued alcohol or other substance abuse
that renders the Participant incapable of performing his material
duties to the satisfaction of the Company and/or the
Subsidiaries. In the event a Participant leaves the employ of
the Company and the Subsidiaries by reason of his retirement,
each Option theretofore granted to him which shall not have
theretofore expired or otherwise been cancelled shall become
immediately exercisable in full and shall, to the extent not
theretofore exercised, terminate upon the earlier to occur of the
expiration of three months after the date of such retirement and
the date of termination specified in such Option. In the event a
Participant's employment with the Company and the Subsidiaries
terminates by reason of his death, each Option theretofore
granted to him which shall not have theretofore expired or
otherwise been cancelled shall become immediately exercisable in
full and shall, to the extent not theretofore exercised,
terminate upon the earlier to occur of the expiration of three
months after the date of the qualification of a representative of
his estate and the date of termination specified in such Option.
13. Adjustment of Number of Shares.
In the event that a dividend shall be declared upon the
Common Stock payable in shares of the Common Stock, the number of
shares of the Common Stock then subject to any Option and the
number of shares of the Common Stock reserved for issuance in
accordance with the provisions of the Plan but not yet covered by
an Option shall be adjusted by adding to each share the number of
shares which would be distributable thereon if such shares had
been outstanding on the date fixed for determining the
stockholders entitled to receive such stock dividend. In the
event that the outstanding shares of the Common Stock shall be
changed into or exchanged for a different number or kind of
shares of stock or other securities of the Company or of another
corporation, whether through reorganization, recapitalization,
stock split-up, combination of shares, sale of assets, merger or
consolidation in which the Company is the surviving corporation,
then, there shall be substituted for each share of the Common
Stock then subject to any Option and for each share of the Common
Stock reserved for issuance in accordance with the provisions of
the Plan but not yet covered by an Option, the number and kind of
shares of stock or other securities into which each outstanding
share of the Common Stock shall be so changed or for which each
such share shall be exchanged. In the event that there shall be
any change, other than as specified in this Section 13, in the
number or kind of outstanding shares of the Common Stock, or of
any stock or other securities into which the Common Stock shall
have been changed, or for which it shall have been exchanged,
then, if the Committee shall, in its sole discretion, determine
that such change equitably requires an adjustment in the number
or kind of shares then subject to any Option and the number or
kind of shares reserved for issuance in accordance with the
provisions of the Plan but not yet covered by an Option, such
adjustment shall be made by the Committee and shall be effective
and binding for all purposes of the Plan and of each stock option
agreement or certificate entered into in accordance with the
provisions of the Plan. In the case of any substitution or
adjustment in accordance with the provisions of this Section 13,
the option price in each stock option agreement or certificate
for each share covered thereby prior to such substitution or
adjustment shall be the option price for all shares of stock or
other securities which shall have been substituted for such share
or to which such share shall have been adjusted in accordance
with the provisions of this Section 13. No adjustment or
substitution provided for in this Section 13 shall require the
Company to sell a fractional share under any stock option
agreement or certificate. In the event of the dissolution or li-
quidation of the Company, or a merger, reorganization or
consolidation in which the Company is not the surviving
corporation, then, except as otherwise provided in the second
sentence of this Section 13, each Option, to the extent not
theretofore exercised, shall terminate forthwith.
14. Purchase for Investment, Withholding and Waivers.
Unless the shares to be issued upon the exercise of an
Option by a Participant shall be registered prior to the issuance
thereof under the Securities Act of 1933, as amended, such Par-
ticipant will, as a condition of the Company's obligation to
issue such shares, be required to give a representation in
writing that he is acquiring such shares for his own account as
an investment and not with a view to, or for sale in connection
with, the distribution of any thereof. In the event of the death
of a Participant, a condition of exercising any Option shall be
the delivery to the Company of such tax waivers and other
documents as the Committee shall determine. In the case of each
non-incentive stock option, a condition of exercising the same
shall be the entry by the person exercising the same into such
arrangements with the Company with respect to withholding as the
Committee may determine.
15. No Stockholder Status.
Neither any Participant nor his legal representatives,
legatees or distributees shall be or be deemed to be the holder
of any share of the Common Stock covered by an Option unless and
until a certificate for such share has been issued. Upon payment
of the purchase price thereof, a share issued upon exercise of an
Option shall be fully paid and non-assessable.
16. No Restrictions on Corporate Acts.
Neither the existence of the Plan nor any Option shall in
any way affect the right or power of the Company or its
stockholders to make or authorize any or all adjustments,
recapitalizations, reorganizations or other changes in the
Company's capital structure or its business, or any merger or
consolidation of the Company, or any issue of bonds, debentures,
preferred or prior preference stock ahead of or affecting the
Common Stock or the rights thereof, or dissolution or liquidation
of the Company, or any sale or transfer of all or any part of its
assets or business, or any other corporate act or proceeding
whether of a similar character or otherwise.
17. Declining Market Price.
In the event the fair market value of the Common Stock
declines below the option price set forth in any Option, the
Committee may, at any time, adjust, reduce, cancel and re-grant
any unexercised Option or take any similar action it deems to be
for the benefit of the Participant in light of the declining fair
market value of the Common Stock; provided, however, that none of
the foregoing actions may be taken without the prior approval of
the Board.
18. No Employment Right.
Neither the existence of the Plan nor the grant of any
Option shall require the Company or any Subsidiary to continue
any Participant in the employ of the Company or such Subsidiary.
19. Termination and Amendment of the Plan.
The Board may at any time terminate the Plan or make such
modifications of the Plan as it shall deem advisable; provided,
however, that the Board may not without further approval of the
holders of a majority of the shares of the Common Stock present
in person or by proxy at any special or annual meeting of the
stockholders, increase the number of shares as to which Options
may be granted under the Plan (as adjusted in accordance with the
provisions of Section 13 hereof), or change the manner of
determining the option prices, or extend the period during which
an Option may be granted or exercised. Except as otherwise
provided in Section 13 hereof, no termination or amendment of the
Plan may, without the consent of the Participant to whom any
Option shall theretofore have been granted, adversely affect the
rights of such Participant under such Option.
20. Expiration and Termination of the Plan.
The Plan shall terminate on April 1, 1997 or at such earlier
time as the Board may determine. Options may be granted under
the Plan at any time and from time to time prior to its
termination. Any Option outstanding under the Plan at the time
of the termination of the Plan shall remain in effect until such
Option shall have been exercised or shall have expired in
accordance with its terms.
21. Options for Outside Directors.
A. A director of the Company who is not an employee of the
Company or a Subsidiary (an "Outside Director") shall be eligible
to receive an Option. Except as otherwise provided in this
Section 21, each such Option shall be subject to all of the terms
and conditions of the Plan.
B. I. At the first meeting of the Board immediately
following each Annual Meeting of the Stockholders of the Company,
each Outside Director shall be granted an Option, which shall be
a non-incentive stock option, to purchase the number (calculated
to the nearest l00 shares) of shares of the Common Stock derived
by dividing $50,000 by the fair market value (as defined in
Section 7C hereof) of a share of the Common Stock on the date of
grant.
II. The initial per share option price of each Option
granted to an Outside Director shall be equal to the fair market
value of a share of the Common Stock on the date of grant.
III. The term of each Option granted to an Outside Director
shall be ten years from the date of the granting thereof.
IV. All or any portion of the payment required upon the
exercise of an Option granted to an Outside Director may be made
in kind by the delivery of shares of the Common Stock having a
fair market value equal to the portion of the option price so
paid.
C. I. The provisions of Section 12 hereof shall not be
applicable to any Option granted to an Outside Director.
II. In the event an Outside Director ceases to be an
Outside Director prior to his 65th birthday, whether voluntarily
or otherwise but other than by reason of his death, each Option
theretofore granted to him which shall not have theretofore
expired or otherwise been cancelled shall, to the extent not
theretofore exercised, terminate forthwith.
III. In the event an Outside Director ceases to be an
Outside Director after his 65th birthday other than by reason of
his death, each Option theretofore granted to him which shall not
have theretofore expired or otherwise been cancelled shall become
immediately exercisable in full and shall, to the extent not
theretofore exercised, terminate upon the earlier to occur of the
expiration of three months after the date on which he shall cease
to be an Outside Director and the date of termination specified
in such Option.
IV. In the event of the death of an Outside Director, each
Option theretofore granted to him which shall not have
theretofore expired or otherwise been cancelled shall become
immediately exercisable in full and shall, to the extent not
theretofore exercised, terminate upon the earlier to occur of the
expiration of three months after the date of the qualification of
a representative of his estate and the date of termination
specified in such Option.
D. The provisions of this Section 21 may not be amended
except by the vote of a majority of the members of the Board and
by the vote of a majority of the members of the Board who are not
Outside Directors and the provisions of this Section 21 shall not
be amended more than once every six months, other than to comport
with changes in the Code, the Employee Retirement Income Security
Act of 1974 or the regulations or rules thereunder.
PHILLIPS-VAN HEUSEN CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
1993 1992 1991
Net sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,152,394 $1,042,565 $904,100
Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . 739,768 657,040 583,379
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 412,626 385,525 320,721
Selling, general and administrative expenses . . . . . . . . . . . . . 332,315 315,317 259,988
Income before interest and taxes . . . . . . . . . . . . . . . . . . . 80,311 70,208 60,733
Interest expense, net. . . . . . . . . . . . . . . . . . . . . . . . . 16,679 15,727 16,686
Income before taxes. . . . . . . . . . . . . . . . . . . . . . . . . . 63,632 54,481 44,047
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,380 16,600 12,910
Income before extraordinary loss . . . . . . . . . . . . . . . . . . . 43,252 37,881 31,137
Extraordinary loss on debt retirement. . . . . . . . . . . . . . . . . (11,394) - -
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 31,858 $ 37,881 $ 31,137
Net income per common share:
Before extraordinary loss. . . . . . . . . . . . . . . . . . . . . . . $ 1.60 $ 1.42 $ 1.15
Extraordinary loss . . . . . . . . . . . . . . . . . . . . . . . . . . (0.42) - -
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1.18 $ 1.42 $ 1.15
See notes to consolidated financial statements.
PHILLIPS-VAN HEUSEN CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
January 30, January 31,
1994 1993
ASSETS
Current Assets:
Cash, including cash equivalents of $66,064 and $75,862 . . . . . . . . . . $ 68,070 $ 77,063
Trade receivables, less allowances of $2,171 and $2,331 . . . . . . . . . . 61,986 58,818
Other receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,847 2,756
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 269,871 258,761
Other, including deferred taxes of $5,727 and $6,806. . . . . . . . . . . . 14,928 13,124
Total Current Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . 418,702 410,522
Property, Plant and Equipment. . . . . . . . . . . . . . . . . . . . . . . . . 109,506 83,546
Intangibles applicable to businesses acquired. . . . . . . . . . . . . . . . . 18,189 18,644
Other Assets, including deferred taxes of $4,608 and $1,334. . . . . . . . . . 8,374 4,650
$554,771 $517,362
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 42,188 $ 32,923
Accrued expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60,696 63,944
Accrued income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,027 2,394
Current portion of long-term debt . . . . . . . . . . . . . . . . . . . . . 245 15,947
Total Current Liabilities . . . . . . . . . . . . . . . . . . . . . . . 109,156 115,208
Long-Term Debt, less current portion . . . . . . . . . . . . . . . . . . . . . 169,934 170,235
Other Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28,882 20,506
Stockholders' Equity:
Preferred stock, par value $100 per share; 150,000 shares
authorized; no shares outstanding . . . . . . . . . . . . . . . . . . . .
Common stock, par value $1 per share; 100,000,000 and 50,000,000
shares authorized; shares issued 33,190,750 and 32,704,168. . . . . . . . 33,191 32,704
Additional capital. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118,360 111,422
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 269,055 241,117
420,606 385,243
Less: 6,728,576 and 6,728,726 shares of common stock held in
treasury-at cost. . . . . . . . . . . . . . . . . . . . . . . . . . . (173,807) (173,830)
Total Stockholders' Equity. . . . . . . . . . . . . . . . . . . . . . . 246,799 211,413
$554,771 $517,362
See notes to consolidated financial statements.
PHILLIPS-VAN HEUSEN CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
1993 1992 1991
Operating activities:
Net Income before extraordinary loss . . . . . . . . . . . . . . . . . . . $ 43,252 $ 37,881 $ 31,137
Adjustments to reconcile to cash provided by operating
activities:
Depreciation and amortization. . . . . . . . . . . . . . . . . . . . . . 19,126 15,020 12,116
Deferred income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . (2,195) (518) 346
Gain on sale of investment . . . . . . . . . . . . . . . . . . . . . . . - - (5,885)
Other-net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (469) (421) (1,021)
59,714 51,962 36,693
Changes in operating assets and liabilities:
Receivables. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,259) (6,663) (3,284)
Inventories. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (11,110) (32,367) (9,578)
Accounts payable and accrued expenses. . . . . . . . . . . . . . . . . . 11,321 8,412 14,168
Other-net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,206) 170 (2,167)
Net Cash Provided By Operating Activities. . . . . . . . . . . . . . . 53,460 21,514 35,832
Investing activities:
Plant and equipment acquired . . . . . . . . . . . . . . . . . . . . . . . (47,866) (36,771) (21,108)
Contributions from landlords . . . . . . . . . . . . . . . . . . . . . . . 9,983 4,737 4,637
Collection of note receivable. . . . . . . . . . . . . . . . . . . . . . . - 5,100 -
Sale of property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 5,964 -
Sale of investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . - - 7,085
Other-net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (678) 2,003 2,279
Net Cash Used By Investing Activities. . . . . . . . . . . . . . . . . . (38,561) (18,967) (7,107)
Financing activities:
Issuance of common stock . . . . . . . . . . . . . . . . . . . . . . . . . - 133,949 -
Repurchase of preferred stock. . . . . . . . . . . . . . . . . . . . . . . - (121,148) -
Proceeds from revolving line of credit and long-term borrowings. . . . . . 141,023 146,900 67,200
Payments on revolving line of credit and long-term borrowings. . . . . . . (157,026) (95,166) (86,239)
Extraordinary loss on debt retirement. . . . . . . . . . . . . . . . . . . (11,394) - -
Exercise of stock options. . . . . . . . . . . . . . . . . . . . . . . . . 7,425 8,722 2,270
Cash dividends on common stock . . . . . . . . . . . . . . . . . . . . . . (3,920) (3,556) (2,638)
Cash dividends on preferred stock. . . . . . . . . . . . . . . . . . . . . - (2,138) (8,190)
Net Cash (Used) Provided By Financing Activities . . . . . . . . . . . . (23,892) 67,563 (27,597)
(Decrease) increase in cash. . . . . . . . . . . . . . . . . . . . . . . . . (8,993) 70,110 1,128
Cash at beginning of period. . . . . . . . . . . . . . . . . . . . . . . . . 77,063 6,953 5,825
Cash at end of period. . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 68,070 $ 77,063 $ 6,953
See notes to consolidated financial statements.
PHILLIPS-VAN HEUSEN CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN COMMON STOCKHOLDERS' EQUITY
(In thousands, except share data)
Common Stock Common
$1 par Additional Retained Treasury Stockholders'
Shares Value Capital Earnings Stock Equity
February 3, 1991 . . . . . . . . . 25,157,220 $25,157 $ 22,376 $188,621 $(173,830) $62,324
Stock options exercised. . . . . 382,120 382 2,316 2,698
Net income . . . . . . . . . . . 31,137 31,137
Cash dividends:
Common stock . . . . . . . . . (2,638) (2,638)
Preferred stock. . . . . . . . (8,190) (8,190)
Stock repurchased and cancelled (20,996) (21) (407) (428)
February 2, 1992 . . . . . . . . . 25,518,344 25,518 24,285 208,930 (173,830) 84,903
Issuance of common stock and
repurchase of preferred stock. 6,440,000 6,440 79,161 85,601
Stock options exercised. . . . . 786,047 786 9,036 9,822
Net income . . . . . . . . . . . 37,881 37,881
Cash dividends:
Common stock . . . . . . . . . (3,556) (3,556)
Preferred stock. . . . . . . . (2,138) (2,138)
Stock repurchased and cancelled (40,223) (40) (1,060) (1,100)
January 31, 1993 . . . . . . . . . 32,704,168 32,704 111,422 241,117 (173,830) 211,413
Stock options exercised. . . . . 486,647 487 6,940 7,427
Net income . . . . . . . . . . . 31,858 31,858
Cash dividends on common stock (3,920) (3,920)
Issue 150 shares from treasury . 23 23
Stock repurchased and cancelled (65) (2) (2)
January 30, 1994 . . . . . . . . . 33,190,750 $33,191 $118,360 $269,055 $(173,807) $246,799
See notes to consolidated financial statements.
PHILLIPS-VAN HEUSEN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)
Summary of Significant Accounting Policies
Principles of Consolidation - The consolidated financial statements
include the accounts of the Company and its subsidiaries. Significant
intercompany accounts and transactions have been eliminated in consolidation.
Fiscal Year - Fiscal years are designated in the financial statements and
notes by the calendar year in which the fiscal year commences. Accordingly,
results for fiscal years 1993, 1992 and 1991 represent the 52 weeks ended
January 30, 1994, January 31, 1993 and February 2, 1992.
Cash and Cash Equivalents - The Company considers all highly liquid
investments with a maturity of three months or less when purchased to be cash
equivalents.
Inventories - Inventories are stated at the lower of cost or market. Cost
for the apparel segment is determined principally using the last-in, first-out
method (LIFO). Cost for the footwear segment is determined using the first-in,
first-out method (FIFO).
Property, Plant and Equipment - Depreciation is computed principally by
the straight line method over the estimated useful lives of the various
classes of property.
Intangibles Applicable to Businesses Acquired - The intangibles, net of
accumulated amortization of $1,949 and $1,494 in 1993 and 1992, respectively,
are being amortized principally by the straight line method over 40 years.
Contributions from Landlords - The Company receives contributions from
landlords for fixturing new retail stores which the Company leases. Such
amounts are amortized as a reduction of rent expense over the life of the
related lease. Unamortized contributions are included in accrued expenses and
other liabilities and amounted to $14,568 and $7,611 at January 30, 1994 and
January 31, 1993, respectively.
Fair Value of Financial Instruments - The Company estimates that the fair
value of all financial instruments approximates their carrying value.
Net Income Per Common Share - Primary net income per common share has been
computed by dividing net income, adjusted for the Series B Convertible
Redeemable Preferred Stock ("preferred stock") dividend requirements of $2,138
in 1992 and $8,190 in 1991, by the weighted average number of common shares
outstanding during the year and common share equivalents applicable to
dilutive stock options; the number of shares used in such computation was
27,105,888 (1993), 25,253,170 (1992) and 19,896,734 (1991).
Fully diluted net income per common share has been computed by dividing
net income by the sum of the shares used in the primary earnings per share
calculation and the additional 5,200,000 shares issuable upon the conversion
of the preferred stock. The preferred stock was outstanding until May 4,
1992, at which time it was repurchased. The number of shares used in such
computation was 27,123,614 (1993), 26,593,196 (1992) and 25,310,685 (1991).
Fully diluted net income per common share has not been presented since the
results are either not materially different from primary net income per common
share or are anti-dilutive.
PHILLIPS-VAN HEUSEN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands, except share data)
Income Taxes
Income taxes from continuing operations consist of:
1993 1992 1991
Federal:
Current. . . . . . . . . . . . . . . . . . . . . . . . . $16,628 $11,945 $ 8,764
Deferred . . . . . . . . . . . . . . . . . . . . . . . . (1,088) (518) 346
State, foreign and local:
Current. . . . . . . . . . . . . . . . . . . . . . . . . 4,945 5,173 3,800
Deferred . . . . . . . . . . . . . . . . . . . . . . . . (105) - -
$20,380 $16,600 $12,910
Taxes paid were $9,936 (1993), $14,858 (1992) and $10,660 (1991).
The approximate tax effect of items giving rise to deferred income taxes is
as follows:
1993 1992 1991
Depreciation. . . . . . . . . . . . . . . . . . . . . . . $ 991 $ 221 $ 1,433
Landlord contributions. . . . . . . . . . . . . . . . . . (1,681) (1,223) (1,247)
Restructuring costs . . . . . . . . . . . . . . . . . . . 380 1,963 1,067
Employee compensation and benefits. . . . . . . . . . . . (233) (840) (1,096)
Other-net . . . . . . . . . . . . . . . . . . . . . . . . (650) (639) 189
$(1,193) (518) $ 346
A reconciliation of the statutory Federal income tax rate to the effective
income tax rate is as follows:
1993 1992 1991
Statutory Federal tax rate. . . . . . . . . . . . . . . . . . 35.0% 34.0% 34.0%
State, foreign and local income taxes,
net of Federal income tax benefit. . . . . . . . . . . . . . 4.3 4.9 4.7
Income of Puerto Rico subsidiaries(1) . . . . . . . . . . . . (4.8) (7.3) (6.5)
Other-net . . . . . . . . . . . . . . . . . . . . . . . . . . (2.5) (1.1) (2.9)
Effective income tax rate . . . . . . . . . . . . . . . . . . 32.0% 30.5% 29.3%
(1)Exemption from Puerto Rico income tax expires in 1998.
During 1993 and 1992, the Company recognized a tax benefit of $1,972 and
$5,317 related to the exercise of stock options. These benefits were
credited to additional capital.
PHILLIPS-VAN HEUSEN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands, except share data)
Inventories
Inventories are summarized as follows:
1993 1992
Raw materials. . . . . . . . . . . . . . . . . . . . . . . . . . . $ 16,710 $ 23,237
Work in process. . . . . . . . . . . . . . . . . . . . . . . . . . 13,941 19,821
Finished goods . . . . . . . . . . . . . . . . . . . . . . . . . . 239,220 215,703
$269,871 $258,761
Inventories would have been $11,500 and $11,350 higher than reported at
January 30, 1994 and January 31, 1993, respectively, if the FIFO method of
inventory accounting had been used for the apparel segment. During 1992,
certain inventories were reduced, resulting in the liquidation of LIFO
inventory layers carried at lower costs prevailing in prior years as compared
with current costs. The effect of these inventory liquidations was to
increase net income by $2,294 in 1992.
Property, Plant and Equipment
Property, plant and equipment, at cost, are summarized as follows:
1993 1992
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,716 $ 596
Buildings and building improvements. . . . . . . . . . . . . . . . 27,996 20,581
Machinery and equipment, furniture and
fixtures and leasehold improvements. . . . . . . . . . . . . . . 169,527 139,146
199,239 160,323
Less: Accumulated depreciation and
amortization . . . . . . . . . . . . . . . . . . . . . . . 89,733 76,777
$109,506 $ 83,546
PHILLIPS-VAN HEUSEN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands, except share data)
Long-Term Debt and Extraordinary Loss
Long-term debt, exclusive of current portion,
is as follows:
1993 1992
7.75% Debentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 99,424 $ -
11.2% Senior Note. . . . . . . . . . . . . . . . . . . . . . . . . . . . - 69,480
7.75% Senior Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . 69,000 69,000
9.93% Senior Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . - 30,000
Other debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,510 1,755
$169,934 $170,235
The Company issued $100,000 of 7.75% Debentures due 2023 on November 15,
1993 with a yield to maturity of 7.80%. Interest is payable semi-annually.
The net proceeds from the sale of these debentures, together with cash from
the Company's working capital, were used to redeem the Company's outstanding
11.2% Senior Note and its outstanding 9.93% Senior Notes. Due to certain
prepayment provisions associated with the redeemed Notes, the Company
recognized a one-time extraordinary loss of $11,394, net of a $7,025 tax
benefit, in the fourth quarter of 1993.
The Company issued a series of Senior Notes due 1996-2002 with an average
interest rate of 7.75% to a group of investors on October 29, 1992. The notes
are payable in seven equal annual installments commencing November 1, 1996.
Interest is payable semi-annually.
PHILLIPS-VAN HEUSEN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands, except share data)
Long-Term Debt - (Continued)
The Company has a revolving credit agreement under which the Company may,
at its option, borrow and repay amounts up to a maximum of $85,000, except
that for the Company's third quarter, during which period its borrowings peak,
the maximum amount available to the Company was $115,000 in 1993 and will be
$100,000 in 1994, 1995 and 1996. All outstanding borrowings under this
agreement are due February 3, 1997. Interest on amounts borrowed under the
revolving credit agreement is payable quarterly at the prime rate or at LIBOR
plus .50%. A commitment fee of .25% is payable quarterly on the unutilized
portion of the facility.
Interest paid was $18,007 (1993), $15,357 (1992) and $15,587 (1991).
Scheduled maturities of long-term debt, including current portion, for the
next five years are as follows: 1994-$245, 1995-$260, 1996-$10,137,
1997-$10,157 and 1998-$10,182.
Issuance of Common Stock and Repurchase of Series B Convertible Redeemable
Preferred Stock
On May 4, 1992, the Company completed the sale of 6,440,000 shares of its
common stock with net proceeds of $133,949. On the same day, the Company used
$121,148 of these proceeds to repurchase its preferred stock (with a
liquidation value of $72,800) from The Prudential Insurance Company of
America. The price paid for the preferred stock reflects both a reduction in
interest rates since the time of the original issue of the preferred stock as
well as the value of its conversion feature. The net effect of these two
transactions was to increase the Company's common stockholders' equity by
$85,601.
While it was outstanding, the preferred stock was entitled to receive
cumulative cash dividends at the annual rate of 11.25% per $100 of liquidation
value (equivalent to an annual dividend of $675 per share).
If the issuance of the common stock and repurchase of the preferred stock
had been completed on February 3, 1992, instead of May 4, 1992, the Company's
net income per common share for 1992 of $1.42 would have been unchanged.
PHILLIPS-VAN HEUSEN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands, except share data)
Common Stockholders' Equity
Preferred Stock Rights - On June 10, 1986, the Board of Directors declared
a distribution of one Right (the "Rights") to purchase Series A Cumulative
Participating Preferred Stock, par value $100 per share, for each outstanding
share of common stock. As a result of subsequent stock splits, each
outstanding share of common stock now carries with it one-fifth of one Right.
Under certain circumstances, each Right will entitle the registered holder
to acquire from the Company one one-hundredth (1/100) of a share of said
Series A Preferred Stock at an exercise price of $100. The Rights will be
exercisable, except in certain circumstances, commencing ten days following a
public announcement that (i) a person or group has acquired or obtained the
right to acquire 20% or more of the common stock, in a transaction not
approved by the Board of Directors or (ii) a person or group has commenced or
intends to commence a tender offer for 30% or more of the common stock (the
"Distribution Date").
If the Company is the surviving corporation in a merger or other business
combination then, under certain circumstances, each holder of a Right will
have the right to receive upon exercise the number of shares of common stock
having a market value equal to two times the exercise price of the Right.
In the event the Company is not the surviving corporation in a merger or
other business combination, or more than 50% of the Company's assets or
earning power is sold or transferred, each holder of a Right will have the
right to receive upon exercise the number of shares of common stock of the
acquiring company having a market value equal to two times the exercise price
of the Right.
At any time prior to the close of business on the Distribution Date, the
Company may redeem the Rights in whole, but not in part, at a price of $.05
per Right. The Rights will expire June 16, 1996, unless such date is extended
or the Rights are earlier redeemed by the Company.
Stock Options - Under the Company's stock option plans, non-qualified and
incentive stock options ("ISOs") may be granted. Options are granted at fair
market value at the date of grant. ISOs and non-qualified options granted have
a ten year duration. All options are cumulatively exercisable in three
installments commencing two years after the date of grant for grants issued
prior to March 30, 1993, and commencing three years after the date of grants
for grants issued after that date.
PHILLIPS-VAN HEUSEN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands, except share data)
Common Stockholders' Equity - (Continued)
Other data with respect to stock options follows:
Option Price
Shares Per Share
Outstanding at February 3, 1991. . . . . . . . . . . . . . . . . . . 2,599,810 $1.42- $11.69
Granted. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95,400 9.56- 20.00
Exercised. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 382,120 1.42- 10.56
Cancelled. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33,306 4.75- 8.88
Outstanding at February 2, 1992. . . . . . . . . . . . . . . . . . . 2,279,784 3.55- 20.00
Granted. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 235,370 22.15- 27.00
Exercised. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 786,047 3.55- 11.00
Cancelled. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65,006 4.75- 22.38
Outstanding at January 31, 1993. . . . . . . . . . . . . . . . . . . 1,664,101 3.80- 27.00
Granted. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 479,029 28.00- 36.00
Exercised. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 486,647 3.80- 28.00
Cancelled. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98,023 4.75- 31.63
Outstanding at January 30, 1994. . . . . . . . . . . . . . . . . . . 1,558,460 $3.80- $36.00
Of the outstanding options at January 30, 1994, options covering 778,362
shares are currently exercisable. Stock options available for grant at January
30, 1994 and January 31, 1993 amounted to 364,208 and 246,014 shares,
respectively.
Leases
The Company leases retail stores, manufacturing facilities, office space
and equipment. The leases generally are renewable and provide for the payment
of real estate taxes and certain other occupancy expenses. Retail store leases
generally provide for the payment of percentage rentals based on store sales,
and other costs associated with the leased property.
At January 30, 1994, minimum annual rental commitments under
non-cancellable operating leases, including leases for new retail stores which
had not begun operating at January 30, 1994, are as follows:
1994. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 51,106
1995. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46,826
1996. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39,142
1997. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32,146
1998. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,401
Thereafter. . . . . . . . . . . . . . . . . . . . . . . . . . . 56,178
Total minimum lease payments. . . . . . . . . . . . . . . . . . $245,799
PHILLIPS-VAN HEUSEN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands, except share data)
Leases - (Continued)
Rent expense, principally for real estate, is as follows:
1993 1992 1991
Minimum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $46,275 $39,809 $33,869
Percentage and other. . . . . . . . . . . . . . . . . . . . . . . 12,232 9,067 7,795
$58,507 $48,876 $41,664
Retirement and Benefit Plans
Defined Benefit Plans - The Company has noncontributory, defined benefit
pension plans covering substantially all U.S. employees meeting certain age
and service requirements. For those vested (after five years of service), the
plans provide monthly benefits upon retirement based on career compensation
and years of credited service. It is the Company's policy to fund pension cost
annually in an amount consistent with Federal law and regulations. The assets
of the plans are principally invested in a mix of fixed income and equity
investments. In addition, the Company also participates in multi-employer
plans, which provide defined benefits to their union employees.
A summary of the components of net pension cost for the defined benefit
plans and the total contributions charged to pension expense for the
multi-employer plans follows:
1993 1992 1991
Defined Benefit Plans:
Service cost - benefits earned during the period . . . . . . . . . $1,828 $1,453 $ 1,142
Interest cost on projected benefit obligation. . . . . . . . . . . 2,429 2,039 1,769
Actual return on plan assets . . . . . . . . . . . . . . . . . . . (2,074) (2,255) (3,150)
Net amortization and deferral of actuarial gains . . . . . . . . . 612 771 2,065
Net pension cost of defined benefit plans. . . . . . . . . . . . . 2,795 2,008 1,826
Multi-employer plans. . . . . . . . . . . . . . . . . . . . . . . . 215 222 426
Total pension expense . . . . . . . . . . . . . . . . . . . . . . . $3,010 $2,230 $ 2,252
Significant rate assumptions used in determining pension cost and related
obligations were as follows:
1993 1992 1991
Discount rate used in determining projected benefit obligation. . . . 7.5% 8.0% 8.0%
Rate of increase in compensation levels . . . . . . . . . . . . . . . 5.0% 5.5% 5.5%
Long-term rate of return on assets. . . . . . . . . . . . . . . . . . 7.5% 7.5% 7.5%
PHILLIPS-VAN HEUSEN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands, except share data)
Retirement and Benefit Plans - (Continued)
The following table sets forth the plans' funded status and amounts
recognized on the Company's balance sheet at January 30, 1994 and January 31,
1993 for defined benefit plans:
1993 1992
Actuarial present value of benefit obligations:
Vested benefit obligation . . . . . . . . . . . . . . . . . . . . . . $30,884 $ 21,485
Accumulated benefit obligation. . . . . . . . . . . . . . . . . . . . $32,171 $ 22,780
Projected benefit obligation for services rendered to date. . . . . . . $39,318 $ 28,304
Less: plan assets at fair value . . . . . . . . . . . . . . . . . . . . (26,011) (23,571)
Projected benefit obligation in excess of plan assets . . . . . . . . . 13,307 4,733
Unrecognized prior service cost . . . . . . . . . . . . . . . . . . . . (4,771) (612)
Unrecognized net actuarial loss . . . . . . . . . . . . . . . . . . . . (5,435) (1,983)
Unrecognized net asset at adoption date of FAS Statement No. 87 . . . . 509 558
Net pension liability recognized on the balance sheet . . . . . . . . . $ 3,610 $ 2,696
The increase in the projected benefit obligation to $39,318 in 1993 from
$28,304 in 1992 is due principally to the introduction of pension plans in
Puerto Rico, an upgrading of United States pension plans and a reduction in
the 1993 discount rate used to value future pension liabilities.
The net pension liability is included in accrued expenses and other
liabilities.
The Company has an unfunded supplemental defined benefit plan covering 28
current and retired executives under which the participants will receive a
predetermined amount during the 10 years following the attainment of age 65,
provided that prior to the termination of employment with the Company, the
participant has been in the plan for at least 10 years and has attained age
55. The Company does not intend to admit new participants in the future. At
January 30, 1994, $5,343 is included in other liabilities as the accrued cost
of this plan.
Savings and Retirement Plans - The Company has a savings and retirement
plan (the "Associates Investment Plan") and a supplemental savings plan for
the benefit of its eligible employees who elect to participate. Participants
may elect to contribute up to 6% of their annual compensation, as defined, to
the plans. Company contributions to the plans are equal to 50% of the amounts
contributed by participating employees and were $2,303 in 1993, $2,206 in 1992
and $1,649 in 1991. In accordance with the terms of the Associates
Investment Plan, a portion of its assets are invested in the Company's common
stock.
Post-retirement Benefits - The Company and its domestic subsidiaries
provide certain health care and life insurance benefits to retired employees.
Employees become eligible for these benefits if they reach retirement age
while working for the Company. Retirees contribute to the cost of this plan,
which is unfunded.
On February 1, 1993, the Company adopted FAS Statement
No. 106 which requires
that the cost of this plan be recognized as an expense as employees render
service instead of when the benefits are paid. Post-retirement benefit cost
for 1992, which was recorded on a cash basis and totalled $459 in that year,
has not been restated.
Net post-retirement benefit cost in 1993 includes the following components:
Service cost $ 275
Interest cost 739
Amortization of transition obligation 273
$1,287
The following reconciles the plan's accumulated post-retirement benefit with
amounts recognized in the Company's balance sheet:
Accumulated post-retirement benefit obligation:
Retirees receiving benefits $7,481
Fully eligible active plan participants 1,092
Active plan participants not eligible for benefits 2,053
10,626
Unrecognized transition obligation (5,189)
Unrecognized net loss (1,011)
Post-retirement liability recognized on the
balance sheet $4,4
The weighted average annual assumed rate of increase in the cost of covered
benefits (i.e., health care cost trend rate) is 9.0% for 1994 and is assumed
to decrease gradually to 5.0% by 2040 and remain at that level thereafter.
Increasing the assumed health care cost trend rate by one percentage point
would increase the accumulated post-retirement benefit obligation as of
January 30, 1994 by $1,133, and the aggregate of the service and interest cost
components of net post-retirement benefit cost for 1993 by $136. The discount
rate used in determining the accumulated post-retirement benefit obligation
was 7.5%.
PHILLIPS-VAN HEUSEN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands, except share data)
Segment Data
The Company operates in two industry segments: (i) apparel - the
manufacture, procurement for sale and marketing of a broad range of men's and
women's apparel to traditional wholesale accounts as well as through
Company-owned retail stores, and (ii) footwear - the manufacture, procurement
for sale and marketing of a broad range of men's, women's and children's shoes
to traditional wholesale accounts as well as through Company-owned retail
stores.
Operating income represents net sales less operating expenses. Excluded
from operating results of the segments are interest expense, net, corporate
expenses and income taxes.
1993 1992 1991
Net Sales - Apparel . . . . . . . . . . . . . . . . . . . . . $ 757,452 $ 709,361 $596,383
- Footwear . . . . . . . . . . . . . . . . . . . . 394,942 333,204 307,717
Total Net Sales. . . . . . . . . . . . . . . . . . . . . $1,152,394 $1,042,565 $904,100
Operating Income - Apparel. . . . . . . . . . . . . . . . . . $ 54,060 $ 49,931 $ 30,080
- Footwear. . . . . . . . . . . . . . . 39,638 35,786 34,031
Total Operating Income . . . . . . . . . . . . . . . . . 93,698 85,717 64,111
Corporate Expenses. . . . . . . . . . . . . . . . . . . . . . (13,387) (15,509) (3,378)
Interest Expense, net . . . . . . . . . . . . . . . . . . . . (16,679) (15,727) (16,686)
Income Before Taxes. . . . . . . . . . . . . . . . . . . $ 63,632 $ 54,481 $ 44,047
Identifiable Assets - Apparel . . . . . . . . . . . . . . . . $ 305,132 $ 283,256 $240,348
- Footwear . . . . . . . . . . . . . . 164,197 140,091 136,573
469,329 423,347 376,921
Corporate Assets. . . . . . . . . . . . . . . . . . . . . . . 85,442 94,015 22,048
$ 554,771 $ 517,362 $398,969
Depreciation and Amortization - Apparel . . . . . . . . . . . $ 12,843 $ 10,700 $ 8,678
- Footwear. . . . . . . 4,405 3,066 2,664
17,248 13,766 11,342
Corporate Depreciation and Amortization . . . . . . . . . . . 1,878 1,254 774
$ 19,126 $ 15,020 $ 12,116
Identifiable Capital Expenditures - Apparel . . . . . . . . . $ 29,449 $ 23,488 $ 15,777
- Footwear. . . . . . 16,038 6,453 4,381
45,487 29,941 20,158
Corporate Capital Expenditures. . . . . . . . . . . . . . . . 2,379 6,830 950
$ 47,866 $ 36,771 $ 21,108
Operating income of the apparel segment includes charges for restructuring
of $2,000 (1992) and $6,000 (1991).
In 1992, reserves of $1,600 for closing the Company's footwear catalog
business were charged to operating income of the footwear segment.
In 1992, corporate expenses include $2,400 for relocating the Company's
administrative offices to Bridgewater, New Jersey and South Portland, Maine.
PHILLIPS-VAN HEUSEN
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands, except share data)
Segment Data - (Continued)
In 1991, corporate expenses include a gain on the sale of an investment in
a privately held specialty retailer of $5,885 and a loss of $1,240 incurred in
connection with the bankruptcy of Shoe Box, a former subsidiary of Bass sold
by the Company in 1989.
Apparel inventories as of January 30, 1994 and January 31, 1993 of
$150,857 and $148,053, respectively, were determined using the LIFO method.
Other Comments
The Company has available a letter of credit facility from its lending
banks totaling $150,000 of which $67,574 was utilized at January 30, 1994.
The Company is a party to certain litigation which, in management's
judgment based on the opinion of legal counsel, will not have a material
adverse effect on the Company's financial position.
MANAGEMENT'S REPORT ON RESPONSIBILITY FOR FINANCIAL REPORTING
Management of the Company has the responsibility for preparing the
accompanying financial statements and for their integrity and objectivity.
The statements have been prepared by management in conformity with generally
accepted accounting principles. The financial statements include some amounts
that are based on management's best estimates and judgements. Management also
prepared the other information in the annual report and is responsible for its
accuracy and consistency with the financial statements.
The Company maintains a system of internal accounting controls designed to
provide management with reasonable assurance that transactions are executed in
accordance with management's authorization and recorded properly. The concept
of reasonable assurance is based on the recognition that the cost of a system
of internal control should not exceed the benefits derived and that the
evaluation of those factors requires estimates and judgements by management.
Further, because of inherent limitations in any system of internal accounting
control, errors or irregularities may occur and not be detected.
Nevertheless, management believes that a high level of internal control is
maintained by the Company through the selection and training of qualified
personnel, the establishment and communication of accounting and business
policies, and its internal audit program.
The Audit Committee of the Board of Directors, composed solely of outside
directors, meets periodically with management and the Company's internal
auditors and independent auditors to review matters relating to the quality of
financial reporting and internal accounting control and the nature, extent and
results of their audits. The Company's internal auditors and independent
auditors have complete access to the Audit Committee.
SIGNATURE STAMP SIGNATURE STAMP
BRUCE J. KLATSKY IRWIN W. WINTER
President and Vice President and
Chief Executive Officer Chief Financial Officer
REPORT OF ERNST & YOUNG, INDEPENDENT AUDITORS
To the Stockholders and the Board of Directors
Phillips-Van Heusen Corporation
We have audited the accompanying consolidated balance sheets of Phillips-
Van Heusen Corporation and subsidiaries as of January 30, 1994 and January 31,
1993, and the related consolidated statements of income, changes in common
stockholders' equity, and cash flows for each of the three years in the period
ended January 30, 1994. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Phillips-Van
Heusen Corporation and subsidiaries at January 30, 1994 and January 31, 1993,
and the consolidated results of their operations and their cash flows for each
of the three years in the period ended January 30, 1994 in conformity with
generally accepted accounting principles.
E&Y SIGNATURE STAMP
787 Seventh Avenue
New York, New York 10019
March 17, 1994
PHILLIPS-VAN HEUSEN CORPORATION
SELECTED QUARTERLY FINANCIAL DATA - UNAUDITED
(In thousands, except per share data)
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
1993 1992(1) 1993(2) 1992 1993 1992 1993(3) 1992(4)
Net sales. . . . . . . . . $221,924 $208,272 $264,016 $239,491 $357,389 $322,329 $309,065 $272,473
Gross profit . . . . . . . 78,124 76,290 97,000 88,858 126,379 117,164 111,123 103,213
Income (loss) before
extraordinary loss . . . (2,208) (123) 7,757 6,458 24,520 21,885 13,183 9,661
Net income . . . . . . . . (2,208) (123) 7,757 6,458 24,520 21,885 1,789 9,661
Net income (loss) per
common share:
Before extraordinary
loss. . . . . . . . . . . (.08) (.12) .29 .24 .91 .81 .48 .36
Extraordinary loss (5) . . - - - - - - (.42) -
Net income (6). . . . . . (.08) (.12) .29 .24 .91 .81 .06 .36
Cash dividends per
common share. . . . . . .0375 .0375 .0375 .0375 .0375 .0375 .0375 .0375
Price range of common
stock
High. . . . . . . . . . 32 3/4 25 3/4 33 3/8 23 3/4 34 1/2 27 3/8 37 5/8 29 1/4
Low . . . . . . . . . . 26 5/8 21 25 3/4 20 25 7/8 22 1/4 32 1/4 25 3/4
(1) Net loss for the first quarter of 1992 includes a pre-tax charge of
$1,600 for closing the Company's footwear catalog business.
(2) Net income for the second quarter of 1993 includes a pre-tax credit of
$1,700 for the adjustment of certain fringe benefit accruals.
(3) Net income for the fourth quarter of 1993 includes a pre-tax LIFO credit
of $1,699.
(4) Net income for the fourth quarter of 1992 includes a pre-tax charge of
$2,000 to establish certain reserves for the Company's ongoing efforts to
strengthen its domestic manufacturing base. It also includes a pre-tax
charge of $1,700 for the relocation of the Company's administrative
offices, a pre-tax LIFO credit of $4,683 and a credit of $1,027 which
resulted from an adjustment to the estimated tax rate used in the first
three quarters.
(5) Net income for the fourth quarter of 1993 includes an extraordinary loss,
net of tax, of $11,394 related to the prepayment of certain debt.
(6) Fully diluted net income per common share has not been presented since
the results are either not materially different from primary net income
per common share or are anti-dilutive.
PHILLIPS-VAN HEUSEN CORPORATION
SEVEN YEAR FINANCIAL SUMMARY
(In thousands, except per share data, percents and ratios)
The Company's financial summary is presented from 1987, the year in which the Company recapitalized its balance sheet
and acquired G.H. Bass & Co.
1993 1992 1991 1990(1) 1989 1988 1987(2)
Summary of Operations
Net sales
Apparel . . . . . . . . . . . . . . . . . . $ 757,452 $ 709,361 $596,383 $536,352 $493,395 $460,342 $416,407
Footwear. . . . . . . . . . . . . . . . . . 394,942 333,204 307,717 269,963 239,541 180,696 83,618
1,152,394 1,042,565 904,100 806,315 732,936 641,038 500,025
Cost of goods sold and expenses . . . . . . . 1,072,083 972,357 843,367 752,252 682,687 597,543 457,842
Interest expense, net . . . . . . . . . . . . 16,679 15,727 16,686 18,884 17,555 16,109 6,210
1,088,762 988,084 860,053 771,136 700,242 613,652 464,052
Income before taxes . . . . . . . . . . . . . 63,632 54,481 44,047 35,179 32,694 27,386 35,973
Income taxes. . . . . . . . . . . . . . . . . 20,380 16,600 12,910 8,795 8,502 6,565 14,655
Income from continuing operations
before extraordinary loss . . . . . . . . . 43,252 37,881 31,137 26,384 24,192 20,821 21,318
(Loss) income from discontinued
operations. . . . . . . . . . . . . . . . . - - - - - (152) 8,691
Extraordinary loss, net of tax. . . . . . . . (11,394) - - - - - -
Net income . . . . . . . . . . . . . . . $ 31,858 $ 37,881 $ 31,137 $ 26,384 $ 24,192 $ 20,669 $ 30,009
Per Common Share Statistics(3)
Income from continuing operations
before extraordinary loss . . . . . . . . .$ 1.60 $ 1.42 $ 1.15 $ 0.95 $ 0.84 $ 0.68 $ 0.66
Discontinued operations . . . . . . . . . . . - - - - - (0.01) 0.33
Extraordinary loss. . . . . . . . . . . . . . (0.42) - - - - - -
Net income. . . . . . . . . . . . . . . . . .$ 1.18 $ 1.42 $ 1.15 $ 0.95 $ 0.84 $ 0.67 $ 0.99
Common dividends paid per share . . . . . . . 0.15 0.15 0.1425 0.14 0.14 $ 0.14 $ 0.125
Common stockholders' equity per share.. . . . 9.33 8.14 4.52 3.38 2.53 1.79 1.24
Financial Position
Invested cash . . . . . . . . . . . . . . . . $ 66,064 $ 75,862 $ 5,326 $ 5,796 $ 3,551 $ 7,191 $ 8,979
Current assets. . . . . . . . . . . . . . . . 418,702 410,522 303,143 285,315 266,867 265,039 258,135
Current liabilities . . . . . . . . . . . . . 109,156 115,208 102,976 90,748 84,190 88,191 86,741
Working capital . . . . . . . . . . . . . . . 309,546 295,314 200,167 194,567 182,677 176,848 171,394
Total assets. . . . . . . . . . . . . . . . . 554,771 517,362 398,969 376,790 333,108 323,133 317,773
Long-term debt. . . . . . . . . . . . . . . . 169,934 170,235 121,455 140,259 118,776 116,400 120,848
Series B convertible redeemable
preferred stock . . . . . . . . . . . . . . - - 72,800 72,800 72,800 72,800 72,800
Common stockholders' equity . . . . . . . . . 246,799 211,413 84,903 62,324 46,085 32,476 22,456
Other Statistics
Total debt to total capital (4) . . . . . . . 40.8% 46.8% 46.0% 53.2% 52.6% 55.1% 56.9%
Net debt to net capital (5) . . . . . . . . . 29.7% 34.3% 45.0% 52.2% 51.9% 53.7% 55.1%
Market value of common
stockholders' equity. . . . . . . . . . . . $ 949,000 $ 753,000 $392,000 $173,000 $132,000 $127,000 $ 86,000
Current ratio . . . . . . . . . . . . . . . . 3.8 3.6 2.9 3.1 3.2 3.0 3.0
Average common shares and
equivalents outstanding . . . . . . . . . . 27,106 25,253 19,897 19,094 19,140 18,572 26,258
(1) 1990 includes 53 weeks of operations.
(2) 1987 includes the operations of G.H. Bass & Co. from date of acquisition, August 21, 1987,
and includes a gain on settlement of pension plans of $3,415, or $0.13 per share.
(3) Fully diluted net income per common share has not been presented since the results are
either not materially different from primary net income per common share or are
anti-dilutive.
(4) Total capital equals interest-bearing debt, preferred stock and common stockholders'
equity.
(5) Net debt and net capital are total debt and total capital reduced by invested cash.
FINANCIAL REVIEW
The past year continued Phillips-Van Heusen's progress toward its goal of
establishing a strong, investment-grade financial position while maintaining
its well above-average growth in sales and earnings. The Company believes
that the most appropriate basis for measuring that progress is the change
since the leveraged financial position it was forced to adopt in 1987 when it
became the target of a hostile takeover attempt. The following table compares
the current financial position of the Company with that at the end of 1987:
(Dollars in thousands)
January 30, 1994 January 31, 1988
Capitalization
Short-Term Debt $ 245 $ 4,840
Long-Term Debt 169,934 120,848
Total Debt 170,179 40.8% 125,688 56.9%
Preferred Stock 72,800 32.9%
Common
Stockholders' Equity 246,799 59.2% 22,456 10.2%
Total Capitalization $416,978 100.0% $220,944 100.0%
Invested Cash $ 66,064 $ 8,979
Market Value of
Common Stockholders' Equity $949,000 $ 86,000
After-Tax Cost of
Year-End Debt
and Preferred Stock $ 8,000 $ 16,000
Improvement has been both steady and continuous. However, the two financial
events referred to in the President's letter and described more fully below
have particular long-term significance. The 1992 sale of common stock and the
1993 issuance of 7.75% debentures allowed the Company to eliminate all of the
high cost debt incurred during its 1987 leveraged recapitalization. At the
same time, total debt was reduced from 46.0% of total capital at year-end 1991
to 40.8% at the end of 1993. Net of invested cash, the 1993 percentage is
29.7% - well on the way to the Company's target of 25%.
Of course, the achievement of ambitious financial goals is first and foremost
a function of operating performance. The Company's compound growth of sales
and earnings per share since 1987 has been 14.9% and 20.2%, respectively.
While sales and earnings growth in 1993 slowed somewhat to 10.5% and 12.7%,
respectively, the development and funding of the strategies discussed in this
report were paramount in setting the stage for future growth.
The Company's strategy is to maximize stockholder value by maximizing the
value of its brands through strong wholesale distribution coupled with an
ability to reach consumers directly through its retail stores. As the
Company's store base expanded, retail sales grew from $481.9 million in 1991,
to $571.8 million in 1992, to $679.6 million in 1993. This strategy has also
allowed the Company to extend its brands to appropriately related products and
offer them for sale in its own retail stores. Brand extension has been and
continues to be a key feature of the Company's strategic goals. Nowhere is
that more evident than at the Bass and Geoffrey Beene retail stores. At Bass,
the expansion of a highly profitable accessory business, together with the
addition of adult and (in 1994) kids apparel, is transforming footwear stores
into lifestyle stores. At Geoffrey Beene, the 1993 addition of a women's
business is doubling their product offering.
In addition, the Company believes that further opportunity for expanding its
retail operations will result from the 1993 addition of over $1 billion of new
capital into the manufacturers' outlet industry via a series of public
offerings by real estate development companies.
Results of Operations
The Company analyzes its results of operations by its vertically integrated
apparel and footwear segments. Reference should be made to the Segment Data
footnote in the consolidated financial statements.
Apparel
Net sales of the Company's apparel segment were $757.5 million in 1993, $709.4
million in 1992 and $596.4 million in 1991, representing increases of 6.8% and
18.9%, respectively.
In 1993, the wholesale shirt group was negatively impacted by a cyclically
weak period of demand for dress shirts following a strong but short-lived
fashion surge in 1992. In spite of this negative market trend, both of the
Company's principal shirt brands, Van Heusen and Geoffrey Beene, improved
their market share leadership positions. In addition, the Designer Group had
great success in its introduction of a new line of 100% cotton dress shirts
under the Bass brand. This offering filled a vacant niche in the
traditionally styled dress shirt market at upper-moderate price points similar
to the Geoffrey Beene brand and above the Van Heusen brand.
Late in the year, the Company announced it would begin shipping its new
Wrinkle-Free Van Heusen and Geoffrey Beene dress shirts to department stores
in time for Father's Day. These shirts, produced by the Company under an
exclusive license for North America, utilize a unique vapor phase technology
which transforms garments made from lightweight fabrics into those that remain
wrinkle-free after as many as 50 washings. These shirts, which include a
cotton content of as much as 60%, attain a softness of hand and have increased
fabric breathability and absorbency, giving them superior comfort qualities.
The Company believes this major product innovation should reverse the year-
long downward trend in dress shirts and further enhance the Company's
leadership position in the industry.
Somerset, the Company's knitwear division, was successful in building its new
branded sweater business under the Van Heusen and Geoffrey Beene labels.
These sweaters, both fashion and basic, are sold nationwide to traditional
department and specialty stores. Offsetting these gains was a reduction in
chain store sweater sales and in knit shirts sold to professional golf shops.
Looking ahead, Somerset's principal focus will be in pursuing its very
positive prospects for continued growth in branded and designer sweaters.
Retail sales growth came principally from three areas: the opening of new
stores in each apparel format, expansion of the Geoffrey Beene stores to
include women's wear, and the remodeling of 95 Van Heusen stores during 1993
and 1992 to a new and more productive store format. Offsetting these positive
factors, in part, was the negative impact of exceptionally bad weather in both
the winters of 1994 and 1993.
Operating income of the apparel segment was $54.1 million in 1993, up from
$49.9 million during 1992 and $30.1 million in 1991. In 1993, operating
margins of both wholesale and retail were negatively impacted by the weak
dress shirt environment while sportswear results were very positive. This
condition, together with a generally weak sweater market, prevented any major
improvement in wholesale margins.
While retail gross margins were negatively impacted by bad weather and a
highly promotional environment, substantial progress was made in reducing in-
store and central office expenses through a major expense management program.
The closing of non-productive stores in the Windsor division at the end of
1992 also favorably impacted 1993. In 1991, the Company reserved $6.0 million
to restructure its Somerset division; the improvement in apparel margins in
1992 is due principally to the non-recurring nature of that charge.
Impacting apparel margins was a LIFO charge of $.2 million in 1993, a credit
of $1.7 million in 1992 and a charge of $1.2 million in 1991.
The Company believes it is well-positioned for strong growth in 1994 and
beyond. The current trend toward "corporate casual" dressing for men opens up
new opportunities to extend the Company's traditional dress shirt offerings.
With the successful introduction of the Bass dress shirt and Geoffrey Beene
casual wear for women, these brand extensions should become increasingly
important in 1994 and beyond. At the same time, introduction of the Wrinkle-
Free dress shirt should enhance the Company's growing leadership position in
this market. While the Wrinkle-Free introduction will have minimal impact on
1994 net income due to a variety of one-time costs plus substantial media
spending to support the introduction, the long-term prospects of brand
enhancement, price positioning and market share should be considerable.
Footwear
Net sales of the Company's footwear segment, conducted through its Bass
division, were $394.9 million in 1993 compared to $333.2 million and $307.7
million in 1992 and 1991, representing increases of 18.5% and 8.3%,
respectively.
Sales at wholesale were very strong in 1993 due, in part, to expansion into
international markets, particularly Asia and South America, and the
introduction of a Bass dress shoe line. Telemarketing efforts and stronger
in-store promotional programs for independent retailers also contributed to
sales improvement. This performance followed a particularly difficult 1992
which was hampered by a weak market for men's casual footwear. Also favorably
impacting 1993 were new styles in the outdoor category, including hiking shoes
and "rugged outdoor wear", as well as sandals, which had excellent sell-thru
as consumers sought alternatives to traditional athletic footwear. Early 1994
sales indicate that these trends are continuing.
At Bass retail, growth came principally from the addition of new stores
offering both footwear and casual apparel. Line extensions in accessories
also resulted in very significant increases. Offsetting this were weaker
sales in footwear, coming in part, from a generally poor product mix which was
identified early in the year; subsequent heavy promotions drove footwear sales
so that inventory at the beginning of 1994 was substantially better
positioned. Also impacting sales growth was the exceptionally bad weather
experienced in both the winters of 1994 and 1993. Going forward, retail
should capitalize on the trends noted for wholesale, particularly the
increased demand for outdoor shoes and sandals. Shoe stores will continue to
be converted into larger "Bass Lifestyle" stores offering both footwear and
apparel, and additional growth will come from a Bass Kids line of apparel to
be introduced in 34 stores in 1994.
Operating income of the footwear segment was $39.6 million in 1993, compared
to $35.8 million in 1992 and $34.0 million in 1991. In 1992, a $1.6 million
charge was recorded to cover the cost of closing the Company's footwear
catalog business. Excluding this charge, footwear margins were 10.0% in 1993,
compared to 11.2% and 11.1% in 1992 and 1991, respectively. The decline in
the current year resulted from extremely heavy markdowns at retail driven by
the footwear product mix issue and the poor winter weather. The product mix
issue is not expected to recur. Strong improvement in inventory turn achieved
in 1993 is anticipated to continue as Bass enhances its just-in-time inventory
management systems.
Corporate Expenses
Corporate expenses were $13.4 million in 1993, compared to $15.5 million and
$3.4 million in 1992 and 1991, respectively. In 1992, relocation costs of
$2.4 million were recorded to cover the costs to move to new facilities in
Bridgewater, New Jersey and South Portland, Maine. In 1991, the Company
recognized a one-time gain of $5.9 million on the sale of an investment in a
privately held specialty retailer. Excluding these one-time items, corporate
expenses were $13.4 million in 1993 and $13.1 million and $9.3 million in 1992
and 1991, respectively. The principal reason for the increases in 1993 and
1992 were expenses incurred in connection with the Company's long-term
program, adopted in 1992, to achieve a "best practices" standard in its
management systems and procedures. Central to this effort is instilling in
the corporate culture the concepts of empowerment and continuous improvement
in the creation of quality and value.
Interest Expense
Interest expense increased in 1993 due mainly to an increase in the Company's
average debt from the issuance, in late 1992, of $69 million of Senior Notes
due 1996-2002 to secure long-term capital at favorable rates. Partially
offsetting the interest expense on these notes was the Company's investment of
the unused proceeds in money market instruments. The decrease in interest
expense in 1992 was due entirely to reductions in the Company's effective
borrowing rate resulting from both lower bank lending spreads as well as
reductions in short-term interest rates.
Income Taxes
The Company's effective tax rate was 32.0% in 1993 compared to 30.5% in 1992
and 29.3% in 1991. An increase in the statutory rate and a higher proportion
of income taxed at normal rates versus tax exempt income from operations in
Puerto Rico are the principal reasons for the higher rate in 1993.
Extraordinary Loss -
Early Retirement of Debt
In 1993, the Company incurred a loss, net of tax, of $11.4 million, or $.42
per share, in connection with the early retirement of long-term debt. See
"Liquidity and Capital Resources" below for further discussion of this
transaction.
Seasonality
The Company's business is seasonal, with higher sales and income during its
third and fourth quarters, which coincide with the Company's two peak retail
selling seasons: the first running from the start of summer vacation in late
May and continuing through September; the second being the Christmas selling
season beginning with the weekend following Thanksgiving and continuing
through the week after Christmas.
Also contributing to the strength of the third quarter is the high volume of
fall shipments to wholesale customers which are more profitable than spring
shipments. The slower spring selling season at wholesale combined with the
retail seasonality makes the first quarter particularly weak. As the Company
continues to expand its retail business, these seasonal differences are
expected to become more significant.
Liquidity and Capital Resources
The following table shows key cash flow elements over the last three years:
(In thousands)
1993 1992 1991
Income from operations adjusted
for non-cash items $59,714 $ 51,962 $ 36,693
Used for working capital (6,254) (30,448) (861)
Capital spending, net (37,883) (32,034) (16,471)
Cash dividends on common stock (3,920) (3,556) (2,638)
Cash dividends on preferred stock - (2,138) (8,190)
Issuance of common stock - 133,949 -
Repurchase of preferred stock - (121,148) -
Exercise of stock options 7,425 8,722 2,270
Early retirement of debt (11,394) - -
Other changes (1,483) 13,493 7,766
Decrease in borrowing,
net of invested cash $ 6,205 $ 18,802 $ 18,569
A major highlight for 1993 was the reduction in funds used for working capital
to $6.3 million in 1993 from $30.4 million in 1992. This reduction is
principally due to a constant focus on inventory management; inventories in
1993 increased only 4.3% from the prior year, significantly less than the
corresponding sales increase. The Company expects this favorable trend in
inventory turnover to continue.
Capital expenditures increased during the past two years, principally due to
the cost of opening new stores and refurbishing existing stores. In addition,
in 1993 the Company began construction of a 500,000 square foot state-of-the-
art distribution facility in Jonesville, North Carolina which will become
fully operational in early 1995. The Company's move to new facilities in
South Portland, Maine and Bridgewater, New Jersey in 1993 and 1992,
respectively, resulted in investment in furniture, fixtures and leasehold
improvements. Capital expenditures in 1994 are expected to be somewhat higher
than 1993 levels as the Company completes the new distribution facility and
upgrades its information systems to support current and anticipated business
growth.
During the last two years, the Company has taken a number of steps to
strengthen its financial position. On May 4, 1992, the Company completed the
sale of 6.4 million shares of its common stock. Approximately $121.1 million
of the net proceeds were used to repurchase the Company's preferred stock,
with the remaining $12.8 million used to reduce debt. This transaction
improved cash flow on an annual basis by approximately $8.0 million by
eliminating the non-tax deductible 11.25% dividend on the preferred stock plus
interest savings on the debt reduction (offset in part by the dividends on the
common stock issued in connection with the sale). On October 29, 1992, the
Company issued $69 million of Senior Notes due 1996-2002 at a blended rate of
7.75%. The proceeds were used to repay all the outstanding borrowings under
the Company's revolving credit facility, with the remaining proceeds invested
in short-term instruments.
Concurrent with the Company achieving an investment grade rating from both
Standard & Poor's and Moody's, on November 15, 1993 the Company issued $100
million of 7.75% Debentures due 2023 with a yield to maturity of 7.80%. The
net proceeds were used to redeem the outstanding 11.2% Senior Note due 2002
and the outstanding 9.93% Senior Notes due 1997. Due to prepayment provisions
associated with the redeemed notes, the Company incurred the extraordinary
loss noted above. The Company believes that securing this long-term capital
at favorable rates provides a solid base for financing future growth.
Also in 1993, the Company entered into a new revolving credit agreement with
its existing bank group; the interest rate on this facility was reduced from
LIBOR plus .75% to LIBOR plus .50%.
Total debt (net of invested cash) as a percentage of total capital was reduced
to 29.7% at year-end 1993 compared to 34.3% and 45.0% at year-end 1992 and
1991, respectively.
Overall, the Company has significantly reduced the future cost and extended
the maturity of its debt, eliminated its preferred stock and increased common
stockholders' equity from $84.9 million in 1991 to $246.8 million in 1993,
thus substantially improving its financial position.
