-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, J5guezjVdJPRQil4d017bTtoDSVyyQDnrMVf9JOJoRDPwCKAIjQQMKtk2O4XDyB/ 5HrqyrvjHyhG+xkAjfrqmg== /in/edgar/work/0000950172-00-001733/0000950172-00-001733.txt : 20001012 0000950172-00-001733.hdr.sgml : 20001012 ACCESSION NUMBER: 0000950172-00-001733 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 20001006 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 20001011 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WARNACO GROUP INC /DE/ CENTRAL INDEX KEY: 0000801351 STANDARD INDUSTRIAL CLASSIFICATION: [2340 ] IRS NUMBER: 954032739 STATE OF INCORPORATION: DE FISCAL YEAR END: 0103 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 001-10857 FILM NUMBER: 738599 BUSINESS ADDRESS: STREET 1: 90 PARK AVE STREET 2: 26TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10016 BUSINESS PHONE: 2126611300 MAIL ADDRESS: STREET 1: 90 PARK AVENUE STREET 2: 26TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10016 FORMER COMPANY: FORMER CONFORMED NAME: W ACQUISITION CORP /DE/ DATE OF NAME CHANGE: 19861117 8-K 1 0001.txt SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 -------------------------- FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of report (Date of earliest event reported) October 6, 2000 ----------------------- THE WARNACO GROUP, INC. - ------------------------------------------------------------------------------- (Exact Name of Registrant as Specified in Charter) Delaware 1-10857 95-4032739 - ------------------------------------------------------------------------------- (State or Other Jurisdiction (Commission (IRS Employer of Incorporation) File Number) Identification No.) 90 Park Avenue, New York, New York 10016 - ------------------------------------------------------------------------------- (Address of Principal Executive Offices) (Zip Code) Registrant's telephone number, including area code (212) 661-1300 -------------------- N/A - ------------------------------------------------------------------------------- (Former Name or Former Address, if Changed Since Last Report) ITEM 5. OTHER EVENTS. On October 6, 2000, The Warnaco Group, Inc. and/or one or more of its subsidiaries completed certain financing transactions previously announced to amend and extend up to $2.56 billion of existing financing facilities on a secured basis through August 12, 2002. The principal agreements entered into on October 6, 2000 included (i) the Intercreditor Agreement, (ii) the Amendment, Modification, Restatement and General Provisions Agreement, (iii) the Amended and Restated Receivables Purchase Agreement and (iv) the Trade Credit Agreement. On September 19, 2000, Warnaco entered into (i) the Memorandum of Understanding with Scotia Capital (U.S.A.) Inc. which amended the equity forward purchase transaction dated December 10, 1999 and (ii) the Memorandum of Understanding with SunTrust Bank which amended the equity forward purchase transaction dated February 10, 2000. The Company also issued a press release on October 6, 2000 announcing the completion of the financing transactions previously announced on July 20, 2000 and September 29, 2000. All of the aforementioned documents are both attached hereto as exhibits and incorporated herein by reference. ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS. (c) Exhibits. 99.1 Intercreditor Agreement, dated as of October 6, 2000, among The Warnaco Group, Inc., Warnaco Inc., the other subsidiaries of The Warnaco Group, Inc. party thereto, The Bank of Nova Scotia, as Administrative Agent, The Bank of Nova Scotia and Salomon Smith Barney Inc., as Lead Arrangers, The Bank of Nova Scotia and Citibank, N.A., as Debt Coordinators, The Bank of Nova Scotia, Salomon Smith Barney Inc., Morgan Guaranty Trust Company of New York, Commerzbank A.G., New York Branch and Societe Generale, as Arrangers, Societe Generale, as Security Agent, the other financial institutions from time to time parties thereto and State Street Bank and Trust Company, as Collateral Trustee. 99.2 Amendment, Modification, Restatement and General Provisions Agreement, dated as of October 6, 2000, among The Warnaco Group, Inc., Warnaco Inc., the other subsidiaries of The Warnaco Group Inc., party thereto, The Bank of Nova Scotia and Citibank N.A., as Debt Coordinators, The Bank of Nova Scotia, as Administrative Agent and State Street Bank and Trust Company, as Collateral Trustee. 99.3 Amended and Restated Receivables Purchase Agreement, dated as of October 6, 2000 among Warnaco Operations Corporation, as Seller, Gregory Street, Inc., as Servicer, various financial institutions, as Purchasers, The Bank of Nova Scotia, as Agent and Citibank, N.A., as the Co-Agent. 99.4 Credit Agreement dated as of October 6, 2000 among Warnaco Inc., as the U.S. Borrower, Designer Holdings, Ltd., as the Sub Borrower, Authentic Fitness Products Inc. and the other wholly-owned subsidiaries of The Warnaco Group, Inc. designated from time to time, as the Warnaco Sub Borrowers, Warnaco (HK) Ltd., Warnaco B.V., Warnaco Netherlands B.V. and Warnaco Holland B.V., as the Foreign Borrowers, The Warnaco Group, Inc., as Guarantor, certain financial institutions, as the Lenders, The Bank of Nova Scotia and Bank of America, N.A., as the Fronting Bank and The Bank of Nova Scotia, as the Administrative Agent for the Lenders and The Bank of Nova Scotia and Salomon Smith Barney, Inc. as Co-Lead Arrangers and Co-Book Managers (the "Trade Credit Agreement"). 99.5 Memorandum of Understanding, dated September 19, 2000 between Scotia Capital (U.S.A.) Inc. and The Warnaco Group, Inc. 99.6 Equity Forward Purchase Transaction, dated December 10, 1999 between Scotia Capital (U.S.A.) Inc. and The Warnaco Group, Inc. 99.7 Memorandum of Understanding, dated September 19, 2000 between SunTrust Bank and The Warnaco Group, Inc. 99.8 Equity Forward Purchase Transaction, dated February 10, 2000 between SunTrust Bank and The Warnaco Group, Inc. 99.9 Press Release, dated October 6, 2000. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. THE WARNACO GROUP, INC. Dated: October 11, 2000 By: /s/ Stanley P. Silverstein --------------------------------------- Name: Stanley P. Silverstein Title: Vice President, General Counsel and Secretary EXHIBIT INDEX Exhibit No. Description - ----------- ----------- 99.1 Intercreditor Agreement, dated as of October 6, 2000, among The Warnaco Group, Inc., Warnaco Inc., the other subsidiaries of The Warnaco Group, Inc. party thereto, The Bank of Nova Scotia, as Administrative Agent, The Bank of Nova Scotia and Salomon Smith Barney Inc., as Lead Arrangers, The Bank of Nova Scotia and Citibank, N.A., as Debt Coordinators, The Bank of Nova Scotia, Salomon Smith Barney Inc., Morgan Guaranty Trust Company of New York, Commerzbank A.G., New York Branch and Societe Generale, as Arrangers, Societe Generale, as Security Agent, the other financial institutions from time to time parties thereto and State Street Bank and Trust Company, as Collateral Trustee. 99.2 Amendment, Modification, Restatement and General Provisions Agreement, dated as of October 6, 2000, among The Warnaco Group, Inc., Warnaco Inc., the other subsidiaries of The Warnaco Group Inc., party thereto, The Bank of Nova Scotia and Citibank N.A., as Debt Coordinators, The Bank of Nova Scotia, as Administrative Agent and State Street Bank and Trust Company, as Collateral Trustee. 99.3 Amended and Restated Receivables Purchase Agreement, dated as of October 6, 2000 among Warnaco Operations Corporation, as Seller, Gregory Street, Inc., as Servicer, various financial institutions, as Purchasers, The Bank of Nova Scotia, as Agent and Citibank, N.A., as the Co-Agent. 99.4 Credit Agreement dated as of October 6, 2000 among Warnaco Inc., as the U.S. Borrower, Designer Holdings, Ltd., as the Sub Borrower, Authentic Fitness Products Inc. and the other wholly-owned subsidiaries of The Warnaco Group, Inc. designated from time to time, as the Warnaco Sub Borrowers, Warnaco (HK) Ltd., Warnaco B.V., Warnaco Netherlands B.V. and Warnaco Holland B.V., as the Foreign Borrowers, The Warnaco Group, Inc., as Guarantor, certain financial institutions, as the Lenders, The Bank of Nova Scotia and Bank of America, N.A., as the Fronting Bank and The Bank of Nova Scotia, as the Administrative Agent for the Lenders and The Bank of Nova Scotia and Salomon Smith Barney, Inc. as Co-Lead Arrangers and Co-Book Managers (the "Trade Credit Agreement"). 99.5 Memorandum of Understanding, dated September 19, 2000 between Scotia Capital (U.S.A.) Inc. and The Warnaco Group, Inc. 99.6 Equity Forward Purchase Transaction, dated December 10, 1999 between Scotia Capital (U.S.A.) Inc. and The Warnaco Group, Inc. 99.7 Memorandum of Understanding, dated September 19, 2000 between SunTrust Bank and The Warnaco Group, Inc. 99.8 Equity Forward Purchase Transaction, dated February 10, 2000 between SunTrust Bank and The Warnaco Group, Inc. 99.9 Press Release, dated October 6, 2000. EX-99 2 0002.txt EXHIBIT 99.1 - INTERCREDITOR AGREEMENT EXHIBIT 99.1 INTERCREDITOR AGREEMENT dated as of October 6, 2000 among THE WARNACO GROUP, INC., WARNACO INC., THE OTHER SUBSIDIARIES OF THE WARNACO GROUP, INC. PARTY HERETO, THE BANK OF NOVA SCOTIA, as Administrative Agent, THE BANK OF NOVA SCOTIA and SALOMON SMITH BARNEY INC., as Lead Arrangers, THE BANK OF NOVA SCOTIA and CITIBANK, N.A., as Debt Coordinators, THE BANK OF NOVA SCOTIA, SALOMON SMITH BARNEY INC., MORGAN GUARANTY TRUST COMPANY OF NEW YORK, COMMERZBANK A.G., NEW YORK BRANCH, and SOCIETE GENERALE, as Arrangers, SOCIETE GENERALE, as Security Agent, THE OTHER FINANCIAL INSTITUTIONS FROM TIME TO TIME PARTIES HERETO, and STATE STREET BANK AND TRUST COMPANY, as COLLATERAL TRUSTEE TABLE OF CONTENTS SECTION PAGE Article I DEFINITIONS AND ACCOUNTING TERMS SECTION 1.1. Definitions......................................................1 SECTION 1.2. Accounting Terms.................................................1 Article II INTERCREDITOR ARRANGEMENTS SECTION 2.1. Application of Prepayments, Other Amounts and Commitment Reductions.......................................2 SECTION 2.2. Amendments of Loan Documents; CertainAmendments Under Covered Facilities.........................................4 SECTION 2.3. Defaults.........................................................6 SECTION 2.4. New Facilities; Designated Capital Markets Transactions..........7 SECTION 2.5. Other Actions....................................................7 Article III WAIVER SECTION 3.1. Waiver...........................................................8 Article IV CONDITIONS OF EFFECTIVENESs SECTION 4.1. Conditions of Effectiveness......................................8 Article V COLLATERAL TRUSTEE; SECURITY AGENT SECTION 5.1. Authorization and Action.........................................9 Article VI THE AGENTS SECTION 6.1. Authorization and Action........................................10 SECTION 6.2. Administrative Agent; Debt Coordinators; Collateral Trustee; Security Agent..............................11 SECTION 6.3. Agents' Reliance, Etc...........................................12 SECTION 6.4. Scotiabank, SSBI, Citibank, Commerzbank, Morgan, SG , State Street Bank and Trust Company and Affiliates..............12 SECTION 6.5. Lender Party Decision...........................................12 SECTION 6.6. Indemnification.................................................13 SECTION 6.7. Successor Agents................................................13 SECTION 6.8. No Knowledge of Defaults........................................13 Article VII SPECIAL PROVISIONS CONCERNING FOREIGN JURISDICTIONS SECTION 7.1. Joint Creditorship..............................................14 SECTION 7.2. Declaration of Trust (Treuhand) and Appointment as Administrator....................................14 SECTION 7.3. Quebec Security.................................................14 Article VIII MISCELLANEOUS SECTION 8.1. Notices, Etc....................................................16 SECTION 8.2. No Waiver; Remedies.............................................16 SECTION 8.3. Costs and Expenses..............................................16 SECTION 8.4. Register; Cash Management Register..............................17 SECTION 8.5. Execution in Counterparts.......................................18 SECTION 8.6. Binding Effect; Novation........................................18 SECTION 8.7. Jurisdiction, Process Agent, Judgment Currency, Waiver of Immunities, Etc.......................................19 SECTION 8.8. Governing Law...................................................20 SECTION 8.9. Waiver of Jury Trial............................................20 SCHEDULES Schedule I - Notice Addresses Schedule II - Existing Facilities Schedule 2.1(d) - Certain Payments EXHIBITS Exhibit A - Form of Facility Agreement INTERCREDITOR AGREEMENT (this "Agreement") dated as of October 6, 2000 among The Warnaco Group, Inc. ("Group"), Warnaco Inc. ("Warnaco"), the other Subsidiaries of Group from time to time parties hereto, The Bank of Nova Scotia ("Scotiabank"), as Administrative Agent (the "Administrative Agent"), Scotiabank and Salomon Smith Barney Inc. ("SSBI"), as Lead Arrangers (the "Lead Arrangers"), Scotiabank and Citibank, N.A. ("Citibank"), as Debt Coordinators (the "Debt Coordinators"), Scotiabank, SSBI, Morgan Guaranty Trust Company of New York ("Morgan"), Commerzbank A.G. ("Commerzbank") and Societe Generale ("SG"), as Arrangers (the "Arrangers"), SG as Security Agent ("Security Agent"), the other financial institutions under the Covered Facilities specified below from time to time parties hereto and State Street Bank and Trust Company, as Collateral Trustee (the "Collateral Trustee"). RECITALS In connection with the amendment, modification, restatement and, in certain cases, extension of the Existing Facilities of Group and various of its Subsidiaries pursuant to the Facility Agreement specified below, and the consummation of the transactions contemplated thereunder, the parties desire to enter into this Agreement to, among other things, provide for the (a) application of all optional and mandatory prepayments, commitment reductions and certain other payments made by the Loan Parties under the Covered Facilities, (b) manner in which certain voting and other actions, including the exercise of certain remedies, may be taken by the Lender Parties and the Agents under the Loan Documents and the Covered Facilities, (c) exercise of certain rights by the Administrative Agent and the Debt Coordinators on behalf of the Lender Parties and (d) appointment of a Collateral Trustee. NOW, THEREFORE, in consideration of the premises and for other valuable consideration, the receipt and sufficiency of which the parties acknowledge, the parties agree as follows: Article I DEFINITIONS AND ACCOUNTING TERMS SECTION 1.1. Definitions. As used in this Agreement, terms have the meanings as specified in Part I of Annex A to the Facility Agreement (as defined in Section 4.1(a)(ii) hereof), and the rules of interpretation and construction set forth in Part II of such Annex A shall apply. SECTION 1.2. Accounting Terms. All accounting terms not specifically defined herein shall be construed in accordance with generally accepted accounting principles as in effect on the Effective Date ("GAAP"). Article II INTERCREDITOR ARRANGEMENTS SECTION 2.1. Application of Prepayments, Other Amounts and Commitment Reductions. (a) On the date of any payment to the Administrative Agent pursuant to Section 2.9(a) of the Facility Agreement (i) the commitments under each Covered Facility shall be permanently reduced (other than as specified in Section 2.1(b)(iv)) in an amount equal to such facility's Pro-Rata portion of such prepayment, (ii) each Covered Facility will be prepaid (or in the case of letters of credit and acceptances, cash collateralized, if applicable, as specified in Section 2.1(b)) in an amount equal to the excess of the outstanding principal amount (or in the case of letters of credit and acceptances, stated amount and face amount, respectively) of the Obligations thereunder over the aggregate commitments thereunder (as so reduced), (iii) to the extent not otherwise reduced pursuant to clause (ii), each Covered Facility which is a term facility shall be prepaid in an amount equal to such facility's Pro-Rata portion of such prepayment, (iv) a payment shall be made in respect of each Derivative Agreement (other than the Equity Derivatives) in the manner set forth in clause (b)(ii) below in an amount equal to such facility's Pro-Rata portion of such prepayment and (v) a payment shall be made in respect of each Equity Derivative in the manner set forth in clause (b)(iii) below in an amount equal to such facility's Pro-Rata portion of such prepayment. (b) All commitment reductions and all amounts received by the Administrative Agent from the Loan Parties or the Collateral Trustee (A) pursuant to any Collateral Document or Section 2.9 of the Facility Agreement, (B) by optional prepayment or (C) under clause (c) or (d) below shall be allocated Pro Rata at the time of such prepayment or commitment reduction; provided that: (i) the prepayments and commitment reductions which would otherwise be made to a Long-Term Facility Lender Party who is also a party to one or more Short-Term Facilities will instead be applied to prepay credit extensions outstanding and reduce commitments, if any, of such Lender Parties under the Short-Term Facilities (on a ratable basis, if such Lender Party is a party to more than one such Short-Term Facility) in the direct order of maturity until such Short-Term Facilities are paid in full, and then to such Long-Term Facility Lender Parties otherwise as in accordance with this Section 2.1(b); (ii) allocations with respect to each Derivative Agreement (other than the Equity Derivatives) shall be (A) made based on the mark-to-market valuation thereof (calculated as specified in the definition of "Agreement Value") at the time of such prepayment or commitment reduction or other payment and (B) deposited in the Collateral Account as collateral security for the applicable Loan Party's obligations under such Derivative Agreement and paid, to the extent necessary, by the Collateral Trustee in satisfaction of obligations owed when due under such Derivative Agreement (as determined by the Debt Coordinators), and any amounts remaining in such Collateral Account with respect to any such Derivative Agreement after all amounts owing thereunder have been paid in full shall be paid by the Collateral Trustee to the Administrative Agent for allocation as otherwise specified in this Section 2.1(b); (iii) allocations with respect to each Equity Derivative shall be (A) made based on the total commitment thereunder (calculated as specified in the definition of "Agreement Value") at the time of such prepayment or commitment reduction or other payment and (B) (x) applied in repayment of the Equity Derivative Notes in such order or manner as the Lender Party which is the counterparty to such Equity Derivative elects or (y) after all such Equity Derivative Notes have been paid in full, shall be held by such counterparty as collateral security for the applicable Loan Party's obligations under such Equity Derivative, and after such Equity Derivative is terminated, all disposition of shares held thereunder has been completed and all amounts owing thereunder have been paid in full, shall be paid to the Administrative Agent for allocation as otherwise specified in this Section 2.1(b); and (iv) optional prepayments and other prepayments made by any Loan Party of any revolving loans under any Covered Facility to the extent such prepayments do not concurrently permanently reduce revolving commitments under such Covered Facility will not be allocated to any other Covered Facility. All amounts received by each Lender Party, or their agent or other representative, under any Covered Facility to which they are a party from the Administrative Agent as specified in this Section 2.1(b) shall then further be allocated first to reduce the then-remaining installments of any term loans outstanding under such facility in the direct order of maturity, and then, second, to permanently reduce any revolving loans outstanding (with corresponding commitment reductions) thereunder (or in the case of letters of credit and acceptances, deposited in the Collateral Account as collateral security for the applicable Loan Party's obligations under such letters of credit and acceptances and paid, to the extent necessary, by the Collateral Trustee in satisfaction of obligations owed when due thereunder), in all cases Pro Rata (except as provided in clause (i) above). For purposes of determining the amount and timing of allocations to be made pursuant to this Section 2.1, all calculations of the Debt Coordinators shall be conclusive and final, absent manifest error. (c) If any Lender Party party to any Foreign Facility shall obtain at any time any proceeds resulting from the sale of, or other enforcement action with respect to, any collateral securing such Foreign Facility as a result of the acceleration of the maturity of the Debt, or such Debt otherwise becoming due, under any such Foreign Facility, whether pursuant to Article V of the Facility Agreement or otherwise, then such Lender Party will pay over such proceeds to the Administrative Agent for allocation as specified in Section 2.1(b). (d) Other than (i) such payments to be made under the Covered Facilities as are specified on Schedule 2.1(d), (ii) all scheduled payments on account of Obligations (including fees and expenses) of the Loan Parties required to be made in accordance with the terms of the Covered Facilities (as amended or modified by the Loan Documents), (iii) delivery and realization on amounts received pursuant to the Equity Derivatives and reductions of the Equity Derivative Notes as provided in Section 4 of the Memoranda of Understanding as in effect on the Effective Date and referred to in items B.18 and B.19 of Schedule II to this Agreement and (iv) payments made to the Specified Facility Lender upon the occurrence and during the continuance of an Event of Default under either the Facility Agreement or the Specified Facility, all other payments (whether voluntary, involuntary, through the exercise of any right of set-off, or other rights and remedies in respect of any of the Collateral, or otherwise) made by any Loan Party on account of Obligations due and payable to the Lender Parties under any of the Covered Facilities which are paid to such Lender Parties shall be paid over to the Administrative Agent for allocation as specified in Section 2.1(b). (e) If any Lender Party shall obtain at any time any payment of the character described in this Section 2.1 (other than payments described in clause (d)(i), (ii) and (iii) above) in excess of its Pro Rata share (in the determination of the Debt Coordinators according to the allocation procedures specified in this Section 2.1), such Lender Party shall forthwith purchase from the other Lender Parties such interests or participating interests in the Obligations due and payable or owing to them, as the case may be, as shall be necessary to cause such purchasing Lender Party to share the excess payment Pro Rata with each of them; provided that if all or any portion of such excess payment is thereafter recovered from such purchasing Lender Party, such purchase from each other Lender Party shall be rescinded and such other Lender Party shall repay to the purchasing Lender Party the purchase price to the extent of such Lender Party's Pro Rata share of such recovery. The Loan Parties agree that any Lender Party so purchasing an interest or participating interest from another Lender Party pursuant to this Section 2.1(e) may, to the fullest extent permitted by law, exercise all its rights of payment (including, without limitation, the right of set-off) with respect to such interest or participating interest, as the case may be, as fully as if such Lender Party were the direct creditor of the respective Loan Parties in the amount of such interest or participating interest, as the case may be. SECTION 2.2. Amendments of Loan Documents; Certain Amendments Under Covered Facilities. (a) No amendment or waiver of any provision which is applicable to all Covered Facilities (as amended or modified by the Loan Documents), or of any provision of this Agreement or of any other Loan Document, nor consent to any departure therefrom by any party hereto, or any authorized agent or other representative of any party hereto, shall in any event be effective unless the same shall be in writing and signed (or, in the case of the Collateral Documents, consented to) by Group and the Required Lenders, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given (it being understood that, except as otherwise expressly provided herein, any amendment or waiver of any provision which is applicable to all Covered Facilities (as amended or modified by the Loan Documents) shall be (i) effected pursuant to the provisions of this Section 2.2 in lieu of the amendment provisions specified in each applicable Covered Facility and (ii) deemed approved for all Covered Facilities other than the Specified Facility); provided that (A) no amendment, waiver or consent shall, unless in writing and signed by all of the Lender Parties who have executed and delivered this Agreement (other than any Lender Party that is, at such time, a Defaulting Lender), do any of the following at any time: (i) release all or substantially all of the Collateral in any transaction or series of related transactions, (ii) release all or substantially all of the aggregate value of the benefits collectively available to the Lender Parties under the Parent Guaranty and the Subsidiary Guaranty, (iii) amend or waive the provisions of Section 2.1, (iv) amend this Section 2.2, (v) increase the commitments of the Lender Parties under any Covered Facility, (vi) reduce the principal (or in the case of letters of credit and acceptances, stated amount and face amount, respectively) of, or interest on, or any fees or other amounts payable with respect to any credit extension under any Covered Facility, (vii) postpone any date fixed for any payment of principal (or in the case of letters of credit and acceptances, stated amount and face amount, respectively) of, or interest on, or any fees or other amounts payable with respect to any credit extension under any Covered Facility, or (viii) limit the liability of any Loan Party under any of the Covered Facilities and provided further that no amendment, waiver or consent shall, unless in writing and signed by an Agent in addition to the Lender Parties required above to take such action, affect the rights or duties of such Agent under this Agreement or any of the other Loan Documents, (B) no amendment, waiver or consent with respect to the following Sections of the Facility Agreement: 2.6(a), 2.6(b), 2.7 and 2.9, shall be effective unless the same shall be in writing and signed (or consented to) by the Supermajority Lenders, (C) no amendment of the last sentence of the defined term "Required Lenders" shall be effective unless the same shall be in writing and signed (or consented to) by holders of at least a majority of the sum of the (i) aggregate capital outstanding under the Securitization Facility and (ii) aggregate unused purchase commitments under the Securitization Facility, (D) no amendment of the last sentence of the defined term "Supermajority Lenders" shall be effective unless the same shall be in writing and signed (or consented to) by holders of at least 66-2/3% of the sum of the (i) aggregate capital outstanding under the Securitization Facility and (ii) aggregate unused purchase commitments under the Securitization Facility, (E) no amendment of clause (D) of the last paragraph of Section 1 of the Security Agreement or clause (vii) of the defined term "Excluded Property" shall be effective unless the same shall be in writing and signed (or consented to) by holders of 100% of the sum of the (i) aggregate capital outstanding under the Securitization Facility and (ii) aggregate unused purchase commitments under the Securitization Facility, (F) the Specified Facility Lender may at any time agree to any amendment or modification of, or waiver under, the Specified Facility without the approval of the Required Lenders and (G) no amendment of any provisions of Section 2.6(f) of the Facility Agreement prohibiting issuances or sales of Equity Interests to satisfy obligations under the Equity Derivatives shall be effective unless the same shall be in writing and signed (or consented to) by the Required Lenders and the Lender Party which is the counterparty to the applicable Equity Derivative. (b) Each Lender Party agrees that (i) it will (or will instruct its representative or agent under each Covered Facility to which it is a party, as applicable, to) provide notice to the Debt Coordinators of any proposed amendment or waiver under any such Covered Facility and (ii) in addition to the requisite approvals required pursuant to the terms of any Covered Facility, no amendment or waiver of any provision of any Covered Facility (nor consent to any departure by any party therefrom) or any other action under any Covered Facility which does any of the following at any time shall in any event be effective unless the same shall be in writing and signed or consented to by the Required Lenders: (i) reduce, other than on a Pro Rata basis in accordance with Section 2.1, the commitments of the lenders, obligors or other credit extension providers thereunder, (ii) increase the rate of interest on, the loans or other credit extensions thereunder or any fees or other amounts payable thereunder, (iii) increase the amount of, or shorten any date fixed for any payment of principal of, or interest on, the loans or other credit extensions thereunder or any fees or other amounts payable thereunder, (iv) release or take other action with respect to the Collateral and (v) add additional or more restrictive covenants, defaults, required prepayment, required redemption or other similar terms more restrictive or onerous on, or less favorable to, Group and its Subsidiaries, or any of the Loan Parties, than those generally applicable to the Covered Facilities and the Existing Facilities. If the Debt Coordinators make a determination that any of the elements of the type specified in any of the foregoing clauses (i) through (v) are present in such proposed amendment or waiver, they will deliver such proposed amendment or waiver to all of the Lender Parties under all of the Covered Facilities, with approval of such proposed amendment or waiver in such case subject to approval of the Required Lenders. SECTION 2.3. Defaults. (a) If a default or event of default shall occur under any Covered Facility (a "Defaulted Facility"), (i) each Lender Party party thereto agrees that it will (or will instruct its representative or agent under such Defaulted Facility to which it is a party, as applicable, to) promptly notify the Administrative Agent, and the Administrative Agent will promptly notify all Lender Parties under all of the Covered Facilities and the Collateral Trustee and (ii) from the Effective Date until the earlier of (1) the Termination Date and (2) a Bankruptcy Event, (A) each Lender Party other than, upon the occurrence and during the continuance of an Event of Default under the Facility Agreement or the Specified Facility, the Specified Facility Lender, agrees that it will refrain from exercising any right, remedy or power available to it (including, without limitation, rights of set-off (whether or not a default or event of default shall have occurred) or acceleration and the right to reduce or terminate commitments), and (B) each Lender Party agrees that it will refrain from directing the Collateral Trustee, the Administrative Agent, the Debt Coordinators or any other Person from taking any such action (including making claims under any guaranty), under such Defaulted Facility or the Loan Documents or applicable law related thereto, in either case, unless authorized to do so by the Required Lenders, acting through the Debt Coordinators. Notwithstanding the foregoing and notwithstanding any other provision of this Agreement or the Facility Agreement to the contrary, (i) the counterparties to the Equity Derivatives may terminate the Equity Derivatives, may sell shares of Group's stock, may accept Equity Derivative Notes and may exercise other rights and remedies under the terms of the Equity Derivatives as in effect on the Effective Date, including, without limitation, upon the occurrence of an Event of Default or Termination Event (as such terms are defined in the applicable Equity Derivative) or upon the occurrence of an Event of Default under the Facility Agreement; provided, however, that except for the rights set forth in Section 2.1(d)(iii) hereof, such counterparties' respective collection and enforcement rights with respect to any net amount owing by any Loan Party as a result of termination and settlement of the Equity Derivatives shall be subject to the limitations otherwise specified in this clause (a) and (ii) upon the occurrence and during the continuance of an Event of Default under either the Facility Agreement or the Specified Facility, the Specified Facility Lender may retain all payments made to it by any Loan Party at such time in respect of any Obligations under the Specified Facility. EACH OF THE LENDER PARTIES ACKNOWLEDGES AND AGREES THAT, WITH RESPECT TO ANY COLLATERAL, IT SHALL HAVE NO RIGHT TO INDIVIDUALLY DIRECT THE COLLATERAL TRUSTEE, THE ADMINISTRATIVE AGENT, THE DEBT COORDINATORS OR ANY OTHER PERSON TO TAKE OR REFRAIN FROM TAKING ANY ACTION HEREUNDER OR UNDER ANY OTHER LOAN DOCUMENT OR UNDER ANY COVERED FACILITY OR UNDER APPLICABLE LAW, AND THAT ALL RIGHTS WITH RESPECT TO THE COLLATERAL SHALL BE VESTED SOLELY IN THE REQUIRED LENDERS ACTING THROUGH THE COLLATERAL TRUSTEE (AS INSTRUCTED BY THE DEBT COORDINATORS) AND OTHERWISE IN ACCORDANCE WITH THIS AGREEMENT. (b) In case the Administrative Agent, the Collateral Trustee or the Debt Coordinators shall have proceeded to enforce any right, remedy or power under this Agreement or the other Loan Documents and the proceeding for the enforcement thereof shall have been discontinued or abandoned for any reason or shall have been determined adversely to the Administrative Agent, the Collateral Trustee or the Debt Coordinators, then and in every such case each Secured Party shall, subject to any effect of or determination in such proceeding, severally and respectively be restored to their former positions and rights hereunder and under the other Loan Documents with respect to the Collateral and in all other respects. SECTION 2.4. New Facilities; Designated Capital Markets Transactions. As specified in Section 2.6(b)(i) of the Facility Agreement, all New Facilities require approval of the Debt Coordinators. Such approval will (i) automatically be given with respect to Designated Capital Markets Transactions which meet the Specified Parameters and (ii) otherwise be given by the Debt Coordinators, unless in their reasonable judgment they determine that any such New Facility (A) could impair the value of or have an adverse effect on the Existing Facilities or the Covered Facilities or the rights or interests of the Lender Parties thereunder or (B) contains terms or provisions (except for customary covenants applicable to single asset financings) that are materially more restrictive or onerous on Group or any of the Loan Parties than those contained in the Existing Facilities or the Covered Facilities. If the Debt Coordinators make a determination of the type specified in either of the foregoing clauses (A) or (B), or in the case where a proposed Designated Capital Markets Transaction does not, in the judgment of the Debt Coordinators, meet the Specified Parameters, the Debt Coordinators will deliver all material documentation with respect to such proposed New Facility or Designated Capital Markets Transaction to all of the Lender Parties, with such proposed New Facility or Designated Capital Markets Transaction in such case subject to approval of the Required Lenders. No fees will be required for approvals of New Facilities or Designated Capital Markets Transactions by the Debt Coordinators or the Required Lenders. SECTION 2.5. Other Actions. (a) At Group's cost, each Lender Party will make, execute, endorse, acknowledge, file and/or deliver to the Collateral Trustee from time to time such powers of attorney (in form satisfactory to such Lender Party), documents, and other assurances or instruments and take such further steps relating to the Collateral as the Debt Coordinators may reasonably require to preserve or protect the security interests in the Collateral granted pursuant to the Loan Documents. (b) Each of the Lender Parties, the Agents and the other financial institutions from time to time parties hereto agree that it shall not institute or join any Person or entity in instituting against Liberty Street Funding Corp. or any other conduit purchaser which is a party to the Securitization Facility, any bankruptcy, reorganization, insolvency or liquidation proceeding or other proceedings under any federal of state bankruptcy or similar law, for one year and a day after the date on which the last maturing, short-term promissory note issued, or to be issued, by Liberty Street Funding Corp. or such conduit purchaser to fund its investment in accounts receivable or other financial assets is paid in full. (c) Each Lender Party which is a party hereto hereby (i) irrevocably appoints the Debt Coordinators as its representative in connection with the entering into of the Facility Agreement, and agrees to be bound by the terms and provisions of the Facility Agreement as though it had been a signatory thereto and (ii) acknowledges that each of the Debt Coordinators will, concurrently with the execution and delivery of this Agreement, execute and deliver the Facility Agreement in its capacity as Debt Coordinator and as representative of each such Lender Party. Article III WAIVER SECTION 3.1. Waiver. Each Lender Party hereby waives (and instructs each of its authorized representatives or agents under each of the Covered Facilities to which it is a party, as applicable, to waive) any and all defaults or events of default known to it which may have occurred and be existing under the Covered Facilities to which it is a party as of the Effective Date; provided that such waiver shall not constitute a waiver of any default, event of default or other condition giving rise to a default or event of default separately arising after the Effective Date under any Loan Document or Covered Facility to which it is a party. Article IV CONDITIONS OF EFFECTIVENESS SECTION 4.1. Conditions of Effectiveness. Articles II and III of this Agreement shall become effective as of the date (the "Effective Date") when and only when all of the conditions set forth in this Article IV have been satisfied. (a) The Administrative Agent shall have received on or before the Effective Date the following, each dated such day (unless otherwise specified), in form and substance satisfactory to the Debt Coordinators (unless otherwise specified) and in sufficient copies for each Lender Party: (i) A counterpart of this Agreement executed by or on behalf of each Loan Party and each Lender Party or the requisite number of Lender Parties under each of the Covered Facilities constituting "required lenders" thereunder (or such similar term as denotes the necessary number of lenders or other financial institutions owed or holding the required percentage of loans or other credit extensions outstanding or commitments therefor as may be necessary to amend, modify, restate and, in certain cases, extend, any such Credit Facility as herein stated), as determined by the Debt Coordinators (with notice thereof to Group). (ii) The Amendment, Modification, Restatement and General Provisions Agreement in substantially the form of Exhibit A hereto (as the same may be amended, supplemented or otherwise modified from time to time, the "Facility Agreement"), duly executed by each Loan Party, the Debt Coordinators, the Administrative Agent and the Collateral Trustee. (iii) The valuation report for all trademarks, copyrights, patents, licenses and other general intangibles of the Loan Parties. (b) Before giving effect to the transactions contemplated by the Loan Documents, there shall have occurred no Material Adverse Change. (c) There shall exist no action, suit, investigation, litigation or proceeding pending or threatened in any court or before any arbitrator or governmental instrumentality that (i) could reasonably be expected to result in a Material Adverse Change or (ii) restrains, prevents or imposes or can reasonably be expected to impose materially adverse conditions upon the Covered Facilities or the transactions contemplated thereby. (d) Nothing contained in any public disclosure made by Group or any of its Subsidiaries after July 19, 2000, or in any information disclosed to the Arrangers or the Lender Parties by Group or any of its Subsidiaries after such date, shall lead any Arranger or any Lender Party to determine that, and none of the Arrangers or the Lender Parties shall have otherwise become aware of any fact or condition not disclosed to them prior to such date which shall lead any Arranger or Lender Party to determine that the condition (financial or otherwise), operations, performance, properties or prospects of Group and its Subsidiaries, taken as a whole, are different in any material adverse respect from that disclosed in writing to such Arranger or Lender Party by or on behalf of Group prior to such date, or derived by such Arranger or Lender Party from the public filings of Group or any of its Subsidiaries prior to such date. (e) All governmental and third party consents and approvals necessary in connection with the transactions contemplated by the Loan Documents shall have been obtained (without the imposition of any conditions that are not acceptable to the Lender Parties) and no law or regulation shall be applicable in the judgment of the Lender Parties, in each case that restrains, prevents or imposes materially adverse conditions upon the transactions contemplated by the Loan Documents or the rights of the Loan Parties or their Subsidiaries freely to transfer or otherwise dispose of, or to create any Lien on, any properties now owned or hereafter acquired by any of them. (f) Group shall have paid (i) the fees specified in Sections 7.2 and 7.3 of the Facility Agreement, and all accrued fees of the Agents and the Lender Parties, in each case to the Administrative Agent for deposit in the Administrative Agent's Account, and the Administrative Agent will distribute such funds to the Lender Parties not later than the next succeeding Business Day thereafter and (ii) all accrued expenses of the Agents and the Lender Parties (including the reasonable accrued fees and expenses of counsel to the Debt Coordinators and the Lender Parties, and all local counsel and foreign jurisdiction counsel to the Debt Coordinators) which have been invoiced prior to the Effective Date. Article V COLLATERAL TRUSTEE; SECURITY AGENT SECTION 5.1. Authorization and Action. (a) The Administrative Agent and each Lender Party appoints and authorizes State Street Bank and Trust Company to take action on its behalf as the Collateral Trustee and to exercise such powers and discretion under this Agreement and the other Loan Documents as are delegated to it by the terms hereof and thereof, together with such powers and discretion as are reasonably incidental thereto, subject at all times to the provisions of the Collateral Trust Agreement, which defines the rights, powers and duties of the Collateral Trustee. The Administrative Agent and each Lender Party appoints and authorizes SG to take action on its behalf as the Security Agent and to exercise such powers and discretion under this Agreement and the other Loan Documents as are delegated to it by the terms hereof and thereof, together with such powers and discretion as are reasonably incidental thereto. (b) State Street Bank and Trust Company, for itself and its successors, accepts its appointment as Collateral Trustee and the trusts created by the Collateral Trust Agreement upon the terms and conditions hereof and thereof. SG, for itself and its successors, accepts its appointment as Security Agent upon the terms and conditions specified therefor hereof and under the other Loan Documents. (c) Neither the Collateral Trustee nor the Security Agent shall be required to exercise any discretion or take any action, but shall be required to act or to refrain from acting (and shall be fully protected in so acting or refraining from acting) upon the instructions of the Debt Coordinators (acting upon the instruction of the Required Lenders), and such instructions shall be binding upon all Lender Parties; provided, however, that (i) neither the Collateral Trustee nor the Security Agent shall be required to take any action that exposes such Agent to personal liability or that is contrary to this Agreement, any other Loan Document or applicable law and (ii) in those circumstances where the Collateral Trustee or the Security Agent is required by any Foreign Collateral Document or applicable law to take action or refrain from taking action on their own discretion, the Debt Coordinators will still instruct the Collateral Trustee or the Security Agent, as applicable, to take or refrain from taking such action, as the case may be, but will act in accordance with the standards set forth in the applicable Foreign Collateral Document. Article VI THE AGENTS SECTION 6.1. Authorization and Action. Scotiabank and SSBI are hereby appointed Lead Arrangers hereunder. Scotiabank, SSBI, Morgan, Commerzbank and SG are hereby appointed Arrangers hereunder. Scotiabank and Citibank are hereby appointed Debt Coordinators hereunder and under the other Loan Documents. Scotiabank is hereby appointed Administrative Agent hereunder and under the other Loan Documents. Each Lender Party hereby appoints and authorizes each such Agent to take such action as agent on its behalf and to exercise such powers and discretion under this Agreement and the other Loan Documents as are delegated to such Agent by the terms hereof, together with such powers and discretion as are reasonably incidental thereto. As to any matters not expressly provided for by this Agreement and the other Loan Documents, each Agent shall not be required to exercise any discretion or take any action, but shall be required to act or to refrain from acting (and shall be fully protected in so acting or refraining from acting) upon the instructions of the Required Lenders (or in the case of the Collateral Trustee, acting upon the instructions of the Debt Coordinators), and such instructions shall be binding upon all Lender Parties; provided, however, that no Agent shall be required to take any action that exposes such Agent to personal liability or that is contrary to this Agreement or applicable law, and the Collateral Trustee shall be entitled to the benefits of the Collateral Trust Agreement. Each Agent agrees to give to each Lender Party prompt notice of each notice given to it by any Loan Party pursuant to the terms of this Agreement or any of the other Loan Documents; provided, however, that the Collateral Trustee shall only be obligated to provide notice to the Debt Coordinators, who, in turn, shall provide notice to the Lender Parties. As of the Effective Date, the respective obligations of (i) Scotiabank, SSBI, Morgan, Commerzbank and SG in their capacity as Arrangers shall terminate and (ii) Scotiabank and SSBI in their capacity as Lead Arrangers shall terminate. SECTION 6.2. Administrative Agent ; Debt Coordinators; Collateral Trustee; Security Agent. (a) The Administrative Agent will administer all matters related to voting, notices and communications with the Lender Parties, the Debt Coordinators and the Collateral Trustee under the Loan Documents, and will maintain a register of all Lender Parties in accordance with Section 8.4. Other than these functions and others reasonably incidental thereto, and except as otherwise expressly set forth herein, the Administrative Agent shall have no additional responsibilities or obligations. (b) Each Lender Party acknowledges and agrees that Scotiabank and Citibank, in their capacities as Debt Coordinators, will execute and deliver the Facility Agreement and will exercise on behalf of all Lender Parties such powers and discretion as are specified hereunder, under the Facility Agreement and under the other Loan Documents, including, without limitation, the power and discretion to (i) approve New Facilities without the consent of the Lender Parties or to make a determination that the consent of the Required Lenders is required, in each case, subject to and in accordance with Section 2.4 hereof, (ii) make calculations in respect of prepayment allocations, in accordance with Section 2.1 hereof, (iii) make determinations regarding levels of approval required with respect to certain amendments and waivers, in accordance with Section 2.2(b) hereof and (iv) make determinations regarding satisfaction of certain conditions precedent, in accordance with Section 4.1 hereof. Each Lender Party hereby specifically authorizes the Debt Coordinators to execute and deliver the Facility Agreement and to exercise such powers and discretion as aforesaid, and agrees that each of Scotiabank and Citibank, in their capacity as Debt Coordinators, shall have no other responsibilities or obligations except as otherwise expressly set forth herein and in the other Loan Documents, and others reasonably incidental thereto. (c) The Debt Coordinators, the Administrative Agent, the Security Agent and the Collateral Trustee (i) shall be entitled to rely on the advice of counsel concerning all matters pertaining to their respective powers and duties hereunder and under the other Loan Documents, (ii) shall not be responsible for the negligence or misconduct of any agents, nominees or attorneys-in-fact reasonably selected by them and (iii) may rely, and shall be fully protected in acting upon, any resolution, statement, certificate, instrument, opinion, report, notice, request, consent, order or other paper or document which it believes in good faith to be genuine and to have been signed or presented by the proper party or parties or, in the case of telecopies, to have been sent by the proper party or parties. The Collateral Trustee shall, in addition to the rights under Section 6.2 and 6.3, have all rights and protections afforded it under the Collateral Trust Agreement. SECTION 6.3. Agents' Reliance, Etc. None of the Agents nor any of their directors, officers, agents or employees shall be liable for any action taken or omitted to be taken by it or them under or in connection with this Agreement and the other Loan Documents, except for its or their own gross negligence or willful misconduct. Without limitation of the generality of the foregoing, each Agent: (i) may consult with legal counsel (including counsel for any Loan Party), independent public accountants and other experts reasonably selected by it and shall not be liable for any action taken or omitted to be taken in good faith by it in accordance with the advice of such counsel, accountants or experts; (ii) makes no warranty or representation to any Loan Party and shall not be responsible to any Loan Party for any statements, warranties or representations (whether written or oral) made in or in connection with this Agreement and the other Loan Documents; (iii) shall not have any duty to ascertain or to inquire as to the performance or observance of any of the terms, covenants or conditions of this Agreement and the other Loan Documents on the part of any Loan Party or to inspect the property (including, without limitation, the books and records) of any Loan Party; (iv) shall not be responsible to any Loan Party for the due execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or the other Loan Documents, the Collateral, the liens on or security interest in such Collateral or the perfection or priority thereof or any other instrument or document furnished pursuant hereto or thereto; and (v) shall incur no liability under or in respect of this Agreement or the other Loan Documents by acting upon any notice, consent, certificate or other instrument or writing (which may be by telecopier, telegram or telex) believed by it to be genuine and signed or sent by the proper party or parties. SECTION 6.4. Scotiabank, SSBI, Citibank, Commerzbank, Morgan, SG, State Street Bank and Trust Company and Affiliates. With respect to its commitments, the loans and other credit extensions made by it and any notes or other instruments issued to it under any of the Covered Facilities, each of Scotiabank, SSBI, Citibank, Commerzbank, Morgan, SG and State Street Bank and Trust Company shall have the same rights and powers under this Agreement and the other Loan Documents as any other Lender Party and may exercise the same as though it were not an Agent; and the term "Lender Party" or "Lender Parties" shall, unless otherwise expressly indicated, include Scotiabank, SSBI, Citibank, Commerzbank, Morgan and SG in their individual capacities. Each of Scotiabank, SSBI, Citibank, Commerzbank, Morgan, SG and State Street Bank and Trust Company and their Affiliates may accept deposits from, lend money to, act as trustee under indentures of, accept investment banking engagements from and generally engage in any kind of business with, any Loan Party, any of their Subsidiaries and any Person who may do business with or own securities of any Loan Party or any such Subsidiary, all as if Scotiabank, SSBI, Citibank, Commerzbank, Morgan, SG and State Street Bank and Trust Company were not Agents and, except as otherwise expressly provided for herein and in the other Loan Documents in respect of Covered Facilities to which such Persons are a party at any time, without any duty to account therefor to the Lender Parties. SECTION 6.5. Lender Party Decision. Each Lender Party acknowledges that it has, independently and without reliance upon any Agent or any other Lender Party and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender Party also acknowledges that it will, independently and without reliance upon any Agent or any other Lender Party 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 this Agreement. SECTION 6.6. Indemnification. Each Lender Party agrees to indemnify each Agent (to the extent not reimbursed by the Loan Parties), ratably according to the aggregate commitments, loans and other credit extensions made by it under the Covered Facilities, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses (including attorney's fees) or disbursements of any kind or nature whatsoever that may be imposed on, incurred by, or asserted against such Agent in any way relating to or arising out of this Agreement, the other Loan Documents or any of the Covered Facilities, or any action taken or omitted by such Agent under this Agreement, the other Loan Documents or any of the Covered Facilities (collectively, the "Indemnified Costs"), except to the extent such claim, damage, loss, liability or expense is found in a final, non-appealable judgment by a court of competent jurisdiction to have resulted from such Agent's gross negligence or willful misconduct. In the case of any claim, investigation, litigation or proceeding for which indemnity under this Section 6.6 applies, such indemnity shall apply whether or not such claim, investigation, litigation or proceeding is brought by any of the Agents, any of the Lender Parties or a third party. Without limitation of the foregoing, each Lender Party agrees to reimburse each Agent promptly upon demand for its ratable share of any out-of-pocket expenses (including counsel fees) incurred by such Agent in connection with the preparation, execution, delivery, administration, modification, amendment or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of rights or responsibilities under, this Agreement, the other Loan Documents or the Covered Facilities, to the extent that such Agent is not reimbursed for such expenses by the Loan Parties. For the avoidance of doubt, it is understood that the indemnification provisions in this Section 6.6 inure to the benefit of State Street Bank and Trust Company in its individual capacity, in its capacity as joint creditor and in any other capacity in which it acts under any and all Loan Documents. SECTION 6.7. Successor Agents. Any Agent may resign at any time by giving 30 days prior written notice thereof to the Administrative Agent and Group and may be removed at any time with or without cause by the Required Lenders. Upon any such resignation or removal, the Required Lenders shall have the right to appoint a successor Agent with the approval of the Debt Coordinators and, so long as no Event of Default shall have occurred and be continuing, Group. If no successor Agent shall have been so appointed by the Required Lenders, and shall have accepted such appointment, within 30 days after the retiring Agent's giving of notice of resignation or the Required Lenders' removal of the retiring Agent, then the Debt Coordinators and the retiring Agent may, on behalf of the Lenders, appoint a successor Agent, which shall be a Lender Party and a financial institution organized under the laws of the United States of America or of any State thereof and having a net worth of at least $500,000,000; provided; however, that if, such retiring Agent is unable to locate another Person which is willing to accept such appointment and which meets the qualifications set forth above, the retiring Agent's resignation shall nevertheless thereupon become effective. Upon the acceptance of any appointment as Agent hereunder by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the rights, powers, discretion, privileges and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations under this Agreement and the other Loan Documents. After any retiring Agent's resignation or removal hereunder as Agent, the provisions of this Article VI shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under this Agreement. SECTION 6.8. No Knowledge of Defaults. The Lender Parties agree that no Indemnified Party (as defined in Section 8.3 hereof) shall be deemed to have knowledge or notice of the occurrence of a Default or Event of Default unless such Indemnified Party has received a written notice from a Lender Party or a Loan Party specifying such Default or Event of Default and stating that such notice is a "Notice of Default". In the event that any Lender Party receives such a Notice of Default, then such Lender Party shall give prompt notice thereof to the Debt Coordinators. The Agents and the Lender Parties shall (subject to the terms of this Agreement and of the Facility Agreement) take such action with respect to such Default or Event of Default as required in accordance with the terms of this Agreement or the other Loan Documents. Article VII SPECIAL PROVISIONS CONCERNING FOREIGN JURISDICTIONS SECTION 7.1. Joint Creditorship. (a) Each of the Loan Parties and each of the Lender Parties and the Agents agree that the Collateral Trustee shall be agent (mandataire) of the Lender Parties and the Agents and the joint and several creditor (together with the relevant Lender Party and the Agents) of each and every obligation of any Loan Party towards each of the Lender Parties and Agents under the Loan Documents and the Covered Facilities (including a creancier solidaire as referred to in Articles 1197 et. seq. of the French Civil Code) and that accordingly the Collateral Trustee will have its own independent right to demand performance by the relevant Loan Party of those obligations whether owned jointly and severally to the Lender Parties and Agents or to each and any of them. Any discharge of any such obligation to one of the Collateral Trustee, the Debt Coordinators or any other Lender Party shall, to the same extent, discharge the corresponding obligation owing to the other pro tanto and a Lender Party, the Debt Coordinators or the Collateral Trustee shall not, by virtue of this Section 7.1(a), be entitled to pursue the Loan Party concurrently for the same obligation. (b) Without limiting or affecting the Collateral Trustee's rights against any Loan Party (whether under this Section 7.1 or any other provision of the Loan Documents), the Collateral Trustee agrees with the Debt Coordinators and each of the Lender Parties and Agents (on a several and divided basis) that, subject as set out in the following sentence, it will not exercise its rights as a joint creditor with a Lender Party or Agent except with the consent of the relevant Lender Party or Agent. For the avoidance of doubt, nothing in the previous sentence shall in any way limit the Collateral Trustee's right to act in the protection or preservation of rights under or to enforce any Collateral Document as contemplated by this Agreement, the other Loan Documents and/or the relevant Collateral Document (or to do any act reasonably incidental to any of the foregoing). SECTION 7.2. Declaration of Trust (Treuhand) and Appointment as Administrator . (a) The Collateral Trustee shall: (i) hold any Lien or security interest which is governed by German law and is assigned (Sicherungseigentum/Sicherungsabtretung) or otherwise transferred to it under a non-accessory security right (nicht akzessorische Sicherheit) pursuant to any of the Collateral Documents or otherwise for the purpose of securing any of the obligations secured thereunder as trustee (Treuhander) for the benefit of the Lender Parties and the Agents; and (ii) administer any Lien or security interest (if any) which is pledged (Verpfandung) or otherwise transferred under an accessory security right (akzessorische Sicherheit) to it and/or the Lender Parties and/or the Agents pursuant to any of the Collateral Documents or otherwise for the purpose of securing any of the Obligations secured thereunder and each Lender Party and Agent authorizes the Collateral Trustee to accept as its representative (Stellvertreter) any pledge or other creation of any other accessory right made to such Lender Party and Agent, and shall act in relation to the Lien and security interests in accordance with the terms and subject to the conditions of this Agreement and the other Loan Documents. Each Lender Party and Agent hereby ratifies and approves all acts done by the Collateral Trustee on such Lender Party's and Agent's behalf before execution thereof. (b) It is hereby agreed that, in relation to any jurisdiction the courts of which would not recognize or give effect to the trust (Treuhand) expressed to be created by this Section 7.2, the relationship of the Lender Party and the Agent to the Collateral Trustee shall be construed as one of principal and agent but, to the extent permissible under the laws of such jurisdiction, all the other provisions of this Section 7.2 shall have full force and effect between the parties hereto. (c) The Collateral Trustee is, and any sub-agent or successor shall be, exempt from any restrictions under ss. 181 of the German Civil Code (BGB). SECTION 7.3. Quebec Security. For greater certainty, and without limiting the powers of the Collateral Trustee hereunder or under any of the other Loan Documents, each of the Loan Parties hereby acknowledges that the Collateral Trustee shall, for purposes of holding any security granted by any Credit Party on property pursuant to the laws of the Province of Quebec to secure obligations of any other Credit Party under any debenture (the "Specified Obligations"), be the holder of an irrevocable power of attorney (fonde de pouvoir) (within the meaning of the Civil Code of Quebec) for all present and future Lender Parties and in particular for all present and future holders of any debenture. Each of the Lender Parties hereby irrevocably constitutes, to the extent necessary, the Collateral Trustee as the holder of an irrevocable power of attorney (fonde de pouvoir) (within the meaning of Article 2692 of the Civil Code of Quebec) in order to hold security granted by any Credit Party in the Province of Quebec to secure the Specified Obligations. Each assignee of a Lender Party shall be deemed to have confirmed and ratified the constitution of the Collateral Trustee as the holder of such irrevocable power of attorney (fonde de pouvoir) by execution of the relevant Joinder Agreement. Notwithstanding the provisions of Section 32 of the Special Corporate Powers Act (Quebec), the Collateral Trustee may acquire and be the holder of any debenture. The Loan Parties hereby acknowledge that such debenture constitutes a title of indebtedness, as such term is used in Article 2692 of the Civil Code of Quebec. Article VIII MISCELLANEOUS SECTION 8.1. Notices, Etc. All notices and other communications provided for hereunder shall be in writing (including telegraphic, telecopy or telex communication) and mailed, telegraphed, telecopied, telexed or delivered, to the address specified on Schedule I hereto or, as to any party, at such other address as shall be designated by such party in a written notice to the Administrative Agent. All such notices and communications shall, when mailed, telegraphed, telecopied or telexed, be effective when deposited in the mails, delivered to the telegraph company, transmitted by telecopier or confirmed by telex answerback, respectively, except that notices and communications to any Agent shall not be effective until received by such Agent. Delivery by telecopier of an executed counterpart of any amendment or waiver of any provision of this Agreement or of any Exhibit hereto to be executed and delivered hereunder shall be effective as delivery of an original executed counterpart thereof. SECTION 8.2. No Waiver; Remedies. No failure on the part of any Lender Party or any Agent to exercise, and no delay in exercising, any right hereunder or under any Loan Document shall operate as a waiver thereof; nor shall any single or partial exercise of any such right preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law. SECTION 8.3. Costs and Expenses. (a) The Loan Parties agree to pay on demand (i) all reasonable costs and expenses of the Debt Coordinators, the Lead Arrangers, the Administrative Agent and the Collateral Trustee in connection with the preparation, execution, delivery, administration, modification and amendment of the Loan Documents (including, without limitation, (A) all due diligence, collateral review, syndication, transportation, computer, duplication, appraisal, audit, insurance, consultant, search, filing and recording fees and expenses and (B) the reasonable fees and expenses of counsel for the Debt Coordinators, including all local counsel and foreign jurisdiction counsel, with respect to advising the Debt Coordinators, the Administrative Agent and the Collateral Trustee as to their rights and responsibilities, and the rights and responsibilities of the Lender Parties, or the perfection, protection or preservation of rights or interests, under the Loan Documents, with respect to negotiations with any Loan Party or with other creditors of any Loan Party or any of its Subsidiaries arising out of any Default or any events or circumstances that may give rise to a Default and with respect to presenting claims in or otherwise participating in or monitoring any bankruptcy, insolvency or other similar proceeding involving creditors' rights generally and any proceeding ancillary thereto) and (ii) all reasonable costs and expenses of each Agent and each Lender Party in connection with the enforcement of the Loan Documents, whether in any action, suit or litigation, or any bankruptcy, insolvency or other similar proceeding affecting creditors' rights generally (including, without limitation, the reasonable fees and expenses of counsel for the Debt Coordinators, the Collateral Trustee, the Administrative Agent and each Lender Party with respect thereto). (b) The Loan Parties agree to indemnify and hold harmless each Agent, each Lender Party and each of their Affiliates and their respective officers, directors, employees, agents and advisors (each, an "Indemnified Party") from and against any and all claims, damages, losses, liabilities and expenses (including, without limitation, reasonable fees and expenses of counsel) that may be incurred by or asserted or awarded against any Indemnified Party, in each case arising out of or in connection with or by reason of (including, without limitation, in connection with any investigation, litigation or proceeding or preparation of a defense in connection therewith) this Agreement and the other Loan Documents, or any of the transactions contemplated hereby or thereby, except to the extent such claim, damage, loss, liability or expense is found in a final, non-appealable judgment by a court of competent jurisdiction to have resulted from such Indemnified Party's gross negligence or willful misconduct. In the case of an investigation, litigation or other proceeding to which the indemnity in this Section 8.3(b) applies, such indemnity shall be effective whether or not such investigation, litigation or proceeding is brought by any Loan Party, its directors, shareholders or creditors or an Indemnified Party or any Indemnified Party is otherwise a party thereto and whether or not the transactions contemplated by the Loan Documents are consummated. Each of the Loan Parties also agrees not to assert any claim against any Agent, any Lender Party or any of their Affiliates, or any of their respective officers, directors, employees, attorneys and agents, on any theory of liability, for special, indirect, consequential or punitive damages arising out of or otherwise relating to the Loan Documents or any of the transactions contemplated thereunder or hereunder. (c) If any Loan Party fails to pay when due any costs, expenses or other amounts payable by it under any Loan Document, including, without limitation, fees and expenses of counsel and indemnities, such amount may be paid on behalf of such Loan Party by the Administrative Agent or any Lender Party, in its sole discretion (and subject to reimbursement, in case of payment by the Administrative Agent, under Section 6.6). (d) Without prejudice to the survival of any other agreement of any Loan Party hereunder or under any other Loan Document, the agreements and obligations of the Loan Parties contained in this Section 8.3 shall survive the payment in full of all amounts payable hereunder, under the Covered Facilities and under any of the other Loan Documents. SECTION 8.4. Register; Cash Management Register. (a) The Administrative Agent shall maintain at its address referred to in Section 8.1 a copy of each Joinder Agreement delivered to and accepted by it and a register for the recordation of the names and addresses of the Lender Parties and the commitment of the lenders and other financial institutions under each Covered Facility from time to time (the "Register"). The entries in the Register shall be conclusive and binding for all purposes, absent manifest error, and the Loan Parties, the Agents and the Lender Parties shall treat each Person whose name is recorded in the Register as a Lender Party hereunder for all purposes of this Agreement. The Register shall be available for inspection by the Loan Parties or any Agent or any Lender Party at any reasonable time and from time to time upon reasonable prior notice. (b) Upon its receipt of a Joinder Agreement executed by a new Lender Party, the Administrative Agent shall, if such Joinder Agreement has been completed and is in substantially the form of Exhibit G to the Facility Agreement, (i) accept such Joinder Agreement, (ii) record the information contained therein in the Register (and thereupon Schedule I hereto will be deemed amended without further action by any Person to reflect the notice information for such new Lender Party) and (iii) give prompt notice thereof to the Debt Coordinators. (c) The Collateral Trustee shall maintain at its address referred to in Schedule I hereof a copy of each notice delivered to it as specified in the definition of "Cash Management Services", and a register for the recordation of the information specified in each such notice (the "Cash Management Register"). The entries in the Cash Management Register shall be conclusive and binding for all purposes, absent manifest error, of determining each Cash Management Bank's share of the $20,000,000 aggregate amount specified in the definition of "Cash Management Services"; provided that in no event shall the aggregate amount of all such entries exceed $20,000,000. The Cash Management Register shall be available for inspection by Group or any Agent or any Lender Party (acting through the Debt Coordinators) at any reasonable time and from time to time upon reasonable prior notice. Upon its receipt of any notice in respect either of the creation of a daylight overdraft facility or cash management account, or the termination of any such facility or account, in each case as specified in the definition of "Cash Management Services", the Collateral Trustee will give prompt notice thereof to the Debt Coordinators. SECTION 8.5. Execution in Counterparts(a) . This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Manual delivery of an executed counterpart of a signature page to this Agreement by telecopier shall be effective as delivery of an original executed counterpart of this Agreement. SECTION 8.6. Binding Effect; Novation. (a) This Agreement shall become effective when it shall have been executed by the Loan Parties, the Debt Coordinators, the Administrative Agent, the Collateral Trustee and the Lender Parties and thereafter shall be binding upon and inure to the benefit of the Loan Parties, the Debt Coordinators, the Administrative Agent, the Collateral Trustee and the Lender Parties and their respective successors and assigns, except that no Loan Party shall have the right to assign its rights hereunder or any interest herein without the prior written consent of the Debt Coordinators. (b) To the extent any of the Covered Facilities have assignment, transfer or novation provisions which permit a Lender Party to assign its rights and obligations to an assignee with the consent of a Loan Party, the requirement that a Loan Party consent to any such assignment is hereby terminated; provided that any such assignment shall be to (i) a Lender Party; (ii) an Affiliate of a Lender Party; (iii) a commercial bank, savings and loan association or savings bank organized under the laws of the United States, or any State thereof, and having total assets in excess of $100,000,000, (iv) a commercial bank organized under the laws of any other country that is a member of the Organization for Economic Development and Cooperation (the "OECD") or has concluded special lending arrangements with the International Monetary Fund associated with its General Arrangements to Borrow, or a political subdivision of any such country, and having total assets in excess of $100,000,000; (v) the central bank of any country that is a member of the OECD or (vi) a finance company, insurance company or other financial institution or fund (whether a corporation, partnership, trust or other entity) having total assets in excess of $100,000,000 that is engaged in making, purchasing or otherwise investing in commercial loans in the ordinary course of its business. SECTION 8.7. Jurisdiction, Process Agent, Judgment Currency, Waiver of Immunities, Etc. (a) Each of the parties hereto hereby irrevocably and unconditionally submits, for itself and its property, to the exclusive jurisdiction of any New York State court or Federal court of the United States of America sitting in New York City, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or any of the other Loan Documents to which it is a party or any of the Covered Documents, or for recognition or enforcement of any judgment (other than, in any case, with respect to any foreclosure or other enforcement action with respect to or in any way related to the Collateral which is reasonably determined by the Debt Coordinators to be advisable to be brought in a court of local jurisdiction), and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in any such New York State court or, to the extent permitted by law, in such Federal court (or, in such local court, as aforesaid). Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. (b) Each of the parties hereto irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection that it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or any of the other Loan Documents to which it is a party in any New York State or Federal court. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court. (c) If for the purpose of obtaining judgment in any court it is necessary to convert a sum due hereunder to any party hereunder in one currency into another currency, the parties hereto agree, to the fullest extent permitted by law, that the rate of exchange used shall be that at which in accordance with normal banking procedures such party could purchase the first currency with such other currency in New York City on the day which is at least two Business Days prior to the day on which final judgment is rendered. (d) To the fullest extent permitted by law, the obligation of any party in respect of any sum payable hereunder by it to any other party hereunder shall, notwithstanding any judgment in a currency (the "Judgment Currency") other than Dollars (the "Agreement Currency"), be discharged only to the extent that on the Business Day following receipt by such other party of any sum adjudged to be so due in the Judgment Currency such other party may in accordance with normal banking procedures purchase the Agreement Currency with the Judgment Currency; if the amount of the Agreement Currency which could have been so purchased is less than the sum originally due to such other party in the Agreement Currency, such first party agrees, as a separate obligation and notwithstanding any such judgment, to indemnify such other party against such loss, and, if the amount of the Agreement Currency which could have been so purchased exceeds the sum originally due to such other party, such other party agrees to remit to such first party such excess. (e) To the extent that any of the parties hereto has or hereafter may acquire any immunity (sovereign or otherwise) from any legal action, suit or proceeding, from jurisdiction of any court or from set-off or any legal process (whether service or notice, attachment prior to judgment, attachment in aid of execution of judgment, execution or judgment or otherwise) with respect to itself or any of its property each of the parties hereto hereby irrevocably waives and agrees not to plead or claim such immunity in respect of its obligations under this Agreement and the other Loan Documents. Each of the parties hereto agrees that the waivers set forth above shall have the fullest extent permitted under the Foreign Sovereign Immunities Act of the United States of America and are intended to be irrevocable and not subject to withdrawal for purposes of such act. SECTION 8.8. Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York. SECTION 8.9. Waiver of Jury Trial. Each of the parties hereto irrevocably waives all right to trial by jury in any action, proceeding or counterclaim (whether based on contract, tort or otherwise) arising out of or relating to this Agreement or any of the Loan Documents or the actions of any Agent or any Lender Party in the negotiation, administration, performance or enforcement hereof or thereof. [remainder of this page intentionally left blank] IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written. THE WARNACO GROUP, INC. By: /s/ --------------------- Title: WARNACO INC. By: /s/ --------------------- Title: WARNER'S (UNITED KINGDOM) LTD. By: /s/ --------------------- Title WARNER'S (EIRE) TEORANTA By: /s/ --------------------- Title PENHALIGON'S LIMITED By: /s/ --------------------- Title PENHALIGON'S & JEAVONS INVESTMENT COMPANY LIMITED By: /s/ --------------------- Title AUTHENTIC FITNESS OF CANADA INC. By: /s/ --------------------- Title WARNACO OF CANADA COMPANY By: /s/ --------------------- Title WARNACO LAC ONE GmbH By: /s/ --------------------- Title WARNACO LAC TWO GmbH By: /s/ --------------------- Title ERATEX-WARNACO LAC TWO GmbH & CO. KG By: /s/ --------------------- Title WARNER'S AIGLON S.A. By: /s/ --------------------- Title CALVIN KLEIN FRANCE SNC By: /s/ --------------------- Title WARNACO FRANCE SARL By: /s/ --------------------- Title PMJ S.A. By: /s/ --------------------- Title IZKA S.C. By: /s/ --------------------- Title LEJABY S.A.S By: /s/ --------------------- Title EURALIS S.A.S. By: /s/ --------------------- Title WARNACO B.V. By: /s/ --------------------- Title WARNACO HOLLAND B.V. By: /s/ --------------------- Title WARNACO NETHERLANDS B.V. By: /s/ --------------------- Title WARNER'S COMPANY (BELGIUM) S.A. By: /s/ --------------------- Title DONATEX WARNACO S.A. By: /s/ --------------------- Title LINTEX-WARNACO S.A. By: /s/ --------------------- Title LENITEX-WARNACO GesmbH By: /s/ --------------------- Title WARNACO S.r.l. By: /s/ --------------------- Title WARNACO (HK) LTD. By: /s/ --------------------- Title THE BANK OF NOVA SCOTIA, as Administrative Agent, Arranger, Lead Arranger and Debt Coordinator By: /s/ --------------------- Title: SALOMON SMITH BARNEY INC., as Arranger and Lead Arranger By: /s/ --------------------- Title: CITIBANK, N.A., as Debt Coordinator By: /s/ --------------------- Title: MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Arranger By: /s/ --------------------- Title: COMMERZBANK A.G., NEW YORK BRANCH, as Arranger By: /s/ --------------------- Title: SOCIETE GENERALE, as Arranger By: /s/ --------------------- Title: STATE STREET BANK AND TRUST COMPANY, as Collateral Trustee By: /s/ --------------------- Title: IN WITNESS WHEREOF, the parties to the below-specified Credit Agreement have caused this Intercreditor Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written. THE BANK OF NOVA SCOTIA CITICORP USA, INC. By: /s/ By: /s/ ---------------------------- ----------------------------- Title: Title: MORGAN GUARANTY TRUST SOCIETE GENERALE COMPANY OF NEW YORK By: /s/ By: /s/ ---------------------------- ----------------------------- Title: Title: COMMERZBANK AG, NEW YORK THE SANWA BANK, LIMITED, NEW YORK BRANCH & GRAND CAYMAN BRANCHES By: /s/ By: /s/ ---------------------------- ----------------------------- Title: Title: By: /s/ ---------------------------- Title: UNION BANK OF CALIFORNIA, N.A. WACHOVIA BANK, N.A. By: /s/ By: /s/ ---------------------------- ----------------------------- Title: Title: THE BANK OF NEW YORK BANK OF TOKYO - MITSUBISHI TRUST COMPANY By: /s/ By: /s/ ---------------------------- ----------------------------- Title: Title: BANK OF AMERICA, N.A. FLEET NATIONAL BANK By: /s/ By: /s/ ---------------------------- ----------------------------- Title: Title: UNICREDITO ITALIANO THE DAI-ICHI KANGYO BANK, LIMITED By: /s/ By: /s/ ---------------------------- ----------------------------- Title: Title: FIRST UNION NATIONAL BANK THE INDUSTRIAL BANK OF JAPAN, LTD., NEW YORK BRANCH By: /s/ By: /s/ ---------------------------- ----------------------------- Title: Title: GENERAL ELECTRIC CAPITAL CORPORATION HSBC BANK USA By: /s/ By: /s/ ---------------------------- ----------------------------- Title: Title: MERITA BANK PLC KBC BANK NV By: /s/ By: /s/ ---------------------------- ----------------------------- Title: Title: U.S. $600,000,000 Amended and Restated Credit Agreement, dated as of November 17, 1999, among Warnaco Inc., as borrower, The Warnaco Group, Inc, the banks and other financial institutions from time to time party thereto as initial lenders, Scotiabank and SSBI, as co-lead arrangers and co-book managers, Citicorp USA, Inc., as syndication agent, Commerzbank AG (New York Branch), as documentation agent and Scotiabank, as administrative agent IN WITNESS WHEREOF, the parties to the below-specified Credit Agreement have caused this Intercreditor Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written. THE BANK OF NOVA SCOTIA CITICORP USA, INC. By: /s/ By: /s/ ---------------------------- ----------------------------- Title: Title: MORGAN GUARANTY TRUST SOCIETE GENERALE COMPANY OF NEW YORK By: /s/ By: /s/ ---------------------------- ----------------------------- Title: Title: COMMERZBANK AG, NEW YORK & THE BANK OF NEW YORK GRAND CAYMAN BRANCHES By: /s/ By: /s/ ---------------------------- ----------------------------- Title: Title: By: /s/ ---------------------------- Title: BANK OF TOKYO-MITSUBISHI THE DAI-ICHI KANGYO BANK, LIMITED TRUST COMPANY By: /s/ By: /s/ ---------------------------- ----------------------------- Title: Title: FLEET NATIONAL BANK GENERAL ELECTRIC CAPITAL CORPORATION By: /s/ By: /s/ ---------------------------- ----------------------------- Title: Title: SUN TRUST BANK BANK OF AMERICA, N.A. By: /s/ By: /s/ ---------------------------- ----------------------------- Title: Title: U.S.$450,000,000 Five-Year Credit Agreement, dated as of November 17, 1999, among Warnaco Inc., as borrower, The Warnaco Group, Inc., the banks and other financial institutions from time to time party thereto as initial lenders, Scotiabank and SSBI, as co-lead arrangers and co-book managers, Citicorp USA, Inc., as syndication agent, Societe Generale and Commerzbank AG, as documentation agents, Bank of America N.A. and the Dai-Ichi Kangyo Bank, Ltd., as co-agents, and Scotiabank, as administrative agent IN WITNESS WHEREOF, the parties to the below-specified Credit Agreement have caused this Intercreditor Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written. SOCIETE GENERALE CITICORP USA, INC. By: /s/ By: /s/ ---------------------------- ----------------------------- Title: Title: COMMERZBANK AG SCOTIABANK EUROPE PLC By: /s/ By: /s/ ---------------------------- ----------------------------- Title: Title: FLEET NATIONAL BANK KREDIETBANK (NEDERLAND) N.V. By: /s/ By: /s/ ---------------------------- ----------------------------- Title: Title: FRF 480,000,000 Revolving Credit, Guarantee and Overdraft Agreement, dated August 14, 1996, between the companies set forth in Schedule 1 thereto as borrowers, the companies set forth in Schedule 2 thereto as guarantors, Societe Generale, as arranging bank, managing agent, administrative agent and overdraft bank and the banks and other financial institutions from time to time party thereto as lenders, as amended by a Supplement Agreement dated April 17, 1998 IN WITNESS WHEREOF, the party to the below-specified Credit Agreement has caused this Intercreditor Agreement to be executed by its officers thereunto duly authorized, as of the date first above written. KBC BANK N.V. By: /s/ ------------------------------ Title: U.S. $21,500,000 Loan Agreement between Warnaco Inc., as borrower and KBC Bank N.V. dated as of July 31, 1998 IN WITNESS WHEREOF, the party to the below-specified Interest Rate Protection Agreements has caused this Intercreditor Agreement to be executed by its officers thereunto duly authorized, as of the date first above written. CITIBANK, N.A. By: /s/ ------------------------------ Title: Interest rate protection Agreements between The Warnaco Group, Inc. and Citibank, N.A. dated October 12, 1995 and May 29, 1997 IN WITNESS WHEREOF, the party to the below-specified Interest Rate Protection Agreement has caused this Intercreditor Agreement to be executed by its officers thereunto duly authorized, as of the date first above written. THE BANK OF NOVA SCOTIA By: /s/ ------------------------------ Title: Interest rate protection agreement between The Warnaco Group, Inc. and The Bank of Nova Scotia dated October 22, 1992 IN WITNESS WHEREOF, the party to the below-specified Interest Rate Protection Agreement has caused this Intercreditor Agreement to be executed by its officers thereunto duly authorized, as of the date first above written. MORGAN GUARANTY TRUST COMPANY OF NEW YORK By: /s/ ------------------------------ Title: Interest rate protection agreement between Warnaco Inc. and Morgan Guaranty Trust Company of New York dated May 4, 2000 IN WITNESS WHEREOF, the party to the below-specified swap agreements has caused this Intercreditor Agreement to be executed by its officers thereunto duly authorized, as of the date first above written. SOCIETE GENERALE By: /s/ ------------------------------ Title: ISDA Master Agreement between Societe Generale and Warnaco Inc. dated as of March 19, 1998 IN WITNESS WHEREOF, the parties to the below-specified Credit Agreement have caused this Intercreditor Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written. THE BANK OF NOVA SCOTIA CITICORP USA, INC. By: /s/ By: /s/ ---------------------------- ----------------------------- Title: Title: MORGAN GUARANTY TRUST SOCIETE GENERALE COMPANY OF NEW YORK By: /s/ By: /s/ ---------------------------- ----------------------------- Title: Title: COMMERZBANK AG, NEW YORK & FLEET NATIONAL BANK GRAND CAYMAN BRANCHES By: /s/ By: /s/ ---------------------------- ----------------------------- Title: Title: By: /s/ ---------------------------- Title: THE BANK OF NEW YORK THE DAI-ICHI KANGYO BANK, LIMITED By: /s/ By: /s/ ---------------------------- ----------------------------- Title: Title: BANK OF AMERICA, N.A. BANK OF TOKYO-MITSUBISHI TRUST COMPANY By: /s/ By: /s/ ---------------------------- ----------------------------- Title: Title: UNICREDITO ITALIANO THE INDUSTRIAL BANK OF JAPAN By: /s/ By: /s/ ---------------------------- ----------------------------- Title: Title: KBC BANK N.V. HSBC BANK USA By: /s/ By: /s/ ---------------------------- ----------------------------- Title: Title: MERITA BANK PLC DEN DANSKE BANK By: /s/ By: /s/ ---------------------------- ----------------------------- Title: Title: STANDARD CHARTERED BANK SUN TRUST BANK By: /s/ By: /s/ ---------------------------- ----------------------------- Title: Title: WACHOVIA BANK, N.A. BANK LEUMI USA By: /s/ By: /s/ ---------------------------- ----------------------------- Title: Title: U.S.$500,000,000 Sixth Amended and Restated Credit Agreement, dated as of November 17, 1999, among Warnaco Inc., Designer Holdings, Ltd., those wholly-owned domestic subsidiaries designated therein as Warnaco sub borrowers, Warnaco (HK) Ltd., Warnaco B.V., Warnaco Netherlands B.V. and Warnaco Holland B.V., The Warnaco Group, Inc., as guarantor, the banks and other financial institutions from time to time party thereto as lenders, Societe Generale, as documentation agent, Citicorp USA, Inc., as syndication agent, Scotiabank, as administrative agent, and Scotiabank and SSBI, as co-lead arrangers and co-book managers IN WITNESS WHEREOF, the parties to the below-specified Credit Agreement have caused this Intercreditor Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written. THE BANK OF NOVA SCOTIA CITICORP USA, INC. By: /s/ By: /s/ ---------------------------- ----------------------------- Title: Title: MORGAN GUARANTY TRUST SOCIETE GENERALE COMPANY OF NEW YORK By: /s/ By: /s/ ---------------------------- ----------------------------- Title: Title: COMMERZBANK AG, FLEET BANK, N.A. NEW YORK BRANCH By: /s/ By: /s/ ---------------------------- ----------------------------- Title: Title: SAKURA BANK SUMMIT BANK By: /s/ By: /s/ ---------------------------- ----------------------------- Title: Title: THE BANK OF HAWAII By: /s/ ---------------------------- Title: U.S. $600,000,000 364-Day Credit Agreement, dated as of November 17, 1999, among Warnaco Inc., as borrower, The Warnaco Group, Inc., the banks and other financial institutions from time to time party thereto as initial lenders, Scotiabank and SSBI as co-lead arrangers and co-book managers, Citicorp USA, Inc., as syndication agent, Morgan Guaranty Trust Company of New York, as documentation agent, Scotiabank, as administrative agent - IN WITNESS WHEREOF, the parties to the below-specified Credit Agreement have caused this Intercreditor Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written. SOCIETE GENERALE CITICORP USA, INC. By: /s/ By: /s/ ---------------------------- ----------------------------- Title: Title: THE BANK OF NOVA SCOTIA COMMERZBANK AG By: /s/ By: /s/ ---------------------------- ----------------------------- Title: Title: FRF $370,000,000 Credit Agreement, dated July 9, 1996, between Warnaco Inc. and the nominated subsidiaries (as defined therein) as borrowers, The Warnaco Group, Inc., as guarantor, Societe Generale, as managing and administrative Agent, and the banks and other financial institutions from time to time party thereto as lenders IN WITNESS WHEREOF, the parties to the below-specified Facility Agreement have caused this Intercreditor Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written. CITIBANK, N.A. By: /s/ ----------------------------- Title: CITICORP USA, INC. By: /s/ ----------------------------- Title: SCOTIABANK EUROPE plc By: /s/ ----------------------------- Title: (pound)9,000,000 Facility Agreement, dated as of May 15, 1995, among Warner's (United Kingdom) Limited, as borrower, Scotiabank Europe plc, as security agent, Citicorp USA, Inc., as administrative agent, Scotiabank Europe plc, as overdraft bank, Citibank, N.A. as issuing bank, the financial institutions named in the first schedule as banks, Warnaco Inc. and The Warnaco Group, Inc., as U.S. guarantors, and the companies named in the second schedule as European guarantors (Warnaco GmbH, Warner's Aiglon S.A., Warner's (Eire) Teoranta, Warner's Lenceria Femenina, S.A. and Warner's Belgium S.A.) IN WITNESS WHEREOF, the party to the below-specified Credit Agreement has caused this Intercreditor Agreement to be executed by its officers thereunto duly authorized, as of the date first above written. THE BANK OF NOVA SCOTIA By: /s/ ----------------------------- Title: Canadian Dollar 30,000,000 Amended and Restated Credit Agreement dated as of September 24, 1996 between Warnaco of Canada Limited - Warnaco du Canada Limitee, as borrower, and The Bank of Nova Scotia, as lender IN WITNESS WHEREOF, the party to the below-specified Line of Credit Letter has caused this Intercreditor Agreement to be executed by its officers thereunto duly authorized, as of the date first above written. THE DAI-ICHI KANGYO BANK, LTD. By: /s/ ----------------------------- Title: U.S. $35,000,000 uncommited short term line of credit letter between Warnaco Inc. and The Dai-Ichi Kangyo Bank, Ltd. IN WITNESS WHEREOF, the party to the below-specified Letter of Credit Facility Letter has caused this Intercreditor Agreement to be executed by its officers thereunto duly authorized, as of the date first above written. CITIBANK, N.A. By: /s/ ----------------------------- Title: U.S. $91,700,000 uncommitted letter of credit facility letter dated August 4, 1999 between Citibank and Warnaco (HK) Ltd IN WITNESS WHEREOF, the party to the below-specified Letter of Credit Facility Letter has caused this Intercreditor Agreement to be executed by its officers thereunto duly authorized, as of the date first above written. BANK OF AMERICA, N.A. By: /s/ ----------------------------- Title: U.S. $75,000,000 uncommitted letter of credit facility letter dated January 10, 2000 between Bank of America, N.A. and Warnaco (HK) Ltd IN WITNESS WHEREOF, the party to the below-specified Letter of Credit Facility Letter has caused this Intercreditor Agreement to be executed by its officers thereunto duly authorized, as of the date first above written. STANDARD CHARTERED BANK By: /s/ ----------------------------- Title: U.S. $27,000,000 uncommitted letter of credit facility letter dated December 29, 1999 between Standard Chartered Bank and Warnaco (HK) Ltd. IN WITNESS WHEREOF, the party to the below-specified Letter of Credit Facility Letter has caused this Intercreditor Agreement to be executed by its officers thereunto duly authorized, as of the date first above written. THE BANK OF EAST ASIA, LIMITED By: /s/ ----------------------------- Title: U.S. $10,000,000 uncommitted letter of credit facility letter dated September 13, 1996 between The Bank of East Asia, Limited and Warnaco (HK) Ltd IN WITNESS WHEREOF, the party to the below-specified Overdraft Facility Letter has caused this Intercreditor Agreement to be executed by its officers thereunto duly authorized, as of the date first above written. THE BANK OF NOVA SCOTIA By: /s/ ----------------------------- Title: U.S. $6,000,000 uncommitted overdraft facility letter dated August 24, 1999 between The Bank of Nova Scotia, Hong Kong Branch and Warnaco (HK) Ltd IN WITNESS WHEREOF, the party to the below-specified Overdraft Agreement has caused this Intercreditor Agreement to be executed by its officers thereunto duly authorized, as of the date first above written. SOCIETE GENERALE By: /s/ ----------------------------- Title: 20,000,000 Austrian shillings Societe Generale Austria overdraft agreement dated July 26, 1999 IN WITNESS WHEREOF, the party to the below-specified Overdraft Facility Letter has caused this Intercreditor Agreement to be executed by its officers thereunto duly authorized, as of the date first above written. KBC BANK NV By: /s/ ----------------------------- Title: 35,000,000 Belgian francs overdraft facility letter dated December 2, 1998 among Warner's Company Belgium S.A., Donatex - Warnaco S.A. and KBC Bank IN WITNESS WHEREOF, the party to the below-specified Overdraft Agreement has caused this Intercreditor Agreement to be executed by its officers thereunto duly authorized, as of the date first above written. SOCIETE GENERALE By: /s/ ----------------------------- Title: 4,000,000 Deutsche marks Societe Generale Germany overdraft agreement dated March 21, 2000 IN WITNESS WHEREOF, the party to the below-specified Credit Line Letter has caused this Intercreditor Agreement to be executed by its officers thereunto duly authorized, as of the date first above written. CREDITO ITALIANO By: /s/ ----------------------------- Title: 2,500,000,000 Italian Lire credit line letter dated July 9, 1998 between Warnaco S.r.l. Milano and Credito Italiano IN WITNESS WHEREOF, the party to the below-specified Credit Arrangement Letter has caused this Intercreditor Agreement to be executed by its officers thereunto duly authorized, as of the date first above written. SOCIETE GENERALE By: /s/ ----------------------------- Title: U.S. $6,000,000 short term multi purpose credit arrangement letter dated October 29, 1997 between Warnaco B.V. and Societe Generale IN WITNESS WHEREOF, the party to the below-specified Credit Agreement has caused this Intercreditor Agreement to be executed by its officers thereunto duly authorized, as of the date first above written. SOCIETE GENERALE, Madrid Branch By: /s/ ----------------------------- Title: FRF 7,500,000 Revolving Line of Credit Agreement dated October 31, 1996 between Warner's Lenceria Femenina, S.A., as borrower, and Societe Generale acting through its Madrid Branch, as lender, as amended by the Amendment Agreement dated July 31, 1998 between Warnaco Intimo S.A., the companies and corporations referred to therein as guarantors and Societe Generale acting through its Madrid Branch IN WITNESS WHEREOF, the party to the below-specified Credit Agreement has caused this Intercreditor Agreement to be executed by its officers thereunto duly authorized, as of the date first above written. SOCIETE GENERALE BANK AND TRUST By: /s/ ----------------------------- Title: FRF 7,500,000 Revolving Line Credit Agreement dated October 31, 1996 as amended by the Amendment Agreement dated July 31, 1998 between Lintex-Warnaco S.A., as borrower, the companies and corporations referred to therein as guarantors and Societe Generale Bank and Trust, as lender IN WITNESS WHEREOF, the party to the below-specified Equity Forward Purchase Agreement has caused this Intercreditor Agreement to be executed by its officers thereunto duly authorized, as of the date first above written. SCOTIA CAPITAL (USA) INC. By: /s/ ----------------------------- Title: Equity Forward Purchase Agreement dated December 10, 1999 between Scotia Capital (USA) Inc. and The Warnaco Group, Inc IN WITNESS WHEREOF, the party to the below-specified Equity Forward Purchase Agreement has caused this Intercreditor Agreement to be executed by its officers thereunto duly authorized, as of the date first above written. SUNTRUST BANK By: /s/ ----------------------------- Title: Equity Forward Purchase Agreement dated as of February 10, 2000 between Sun Trust Bank and The Warnaco Group, Inc SCHEDULE II EXISTING FACILITIES A. AMENDING FACILITIES 1. U.S. $600,000,000 Amended and Restated Credit Agreement, dated as of November 17, 1999, among Warnaco Inc., as Borrower, The Warnaco Group, Inc, the banks and other financial institutions from time to time party thereto as Initial Lenders, Scotiabank and SSBI, as co-lead arrangers and co-book managers, Citicorp USA, Inc., as Syndication Agent, Commerzbank AG (New York Branch), as Documentation Agent and Scotiabank, as Administrative Agent, Competitive Bid Agent, Swing Line Bank and Issuing Bank, as amended to the date hereof. 2. U.S.$450,000,000 Five-Year Credit Agreement, dated as of November 17, 1999, among Warnaco Inc., as Borrower, The Warnaco Group, Inc., the banks and other financial institutions from time to time party thereto as Initial Lenders, Scotiabank and SSBI, as co-lead arrangers and co-book managers, Citicorp USA, Inc., as Syndication Agent, Societe Generale and Commerzbank AG, as Documentation Agents, Bank of America N.A. and the Dai-Ichi Kangyo Bank, Ltd., as Co-Agents, and Scotiabank, as Administrative Agent, Competitive Bid Agent and Swing Line Bank, as amended to the date hereof. 3. FRF 480,000,000 Revolving Credit, Guarantee and Overdraft Agreement, dated August 14, 1996, between the companies set forth in Schedule 1 thereto as Borrowers, the companies set forth in Schedule 2 as Guarantors, Societe Generale, as Arranging Bank, Managing Agent, Administrative Agent and Overdraft Bank and the banks and other financial institutions from time to time party thereto as Lenders, as amended by a Supplement Agreement dated April 17, 1998 and further amended to the date hereof (the "FRENCH FRANC REVOLVING FACILITY"). 4. U.S. $21,500,000 Loan Agreement between Warnaco Inc., as Borrower and KBC Bank N.V. dated as of July 31, 1998 (the "KBC TERM FACILITY"). 5. Interest rate protection agreements with Citibank, N.A., The Bank of Nova Scotia and Morgan Guaranty Trust Company of New York (the "RATE PROTECTION FACILITIES"). 6. ISDA Master Agreements with Societe Generale relating to foreign exchange. 7. U.S.$500,000,000 Sixth Amended and Restated Credit Agreement, dated as of November 17, 1999, among Warnaco Inc., as U.S. Borrower, Designer Holdings, Ltd., as Sub Borrower, those wholly-owned domestic subsidiaries designated therein as Warnaco Sub Borrowers, Warnaco (HK) Ltd., Warnaco B.V., Warnaco Netherlands B.V. and Warnaco Holland B.V., as Foreign Borrowers, The Warnaco Group, Inc., as Guarantor, the banks and other financial institutions from time to time party thereto as Lenders, Societe Generale, as Documentation Agent, Citicorp USA, Inc., as Syndication Agent, Scotiabank, as Administrative Agent, and Scotiabank and SSBI, as co-lead arrangers and co-book managers, as amended to the date hereof (the "TRADE CREDIT FACILITY"). B. EXTENDING FACILITIES 1. U.S. $600,000,000 364-Day Credit Agreement, dated as of November 17, 1999, among Warnaco Inc., as Borrower, The Warnaco Group, Inc., the banks and other financial institutions from time to time party thereto as Initial Lenders, Scotiabank and SSBI as co-lead arrangers and co-book managers, Citicorp USA, Inc., as Syndication Agent, Morgan Guaranty Trust Company of New York, as Documentation Agent, Scotiabank, as Administrative Agent, as amended to the date hereof (the "BRIDGE FACILITY"). 2. FRF $370,000,000 Credit Agreement, dated July 9, 1996, between Warnaco Inc. and the Nominated Subsidiaries (as defined therein) as Borrowers, The Warnaco Group, Inc., as Guarantor, Societe Generale, as Managing and Administrative Agent, and the banks and other financial institutions from time to time party thereto as Lenders. Deed of Amendment, made November 4, 1996, to a FRF 370,000,000 Credit Agreement for Warnaco Inc., as amended to the date hereof (collectively, "FRENCH FRANC TERM FACILITY"). 3. (pound)9,000,000 Facility Agreement, dated as of May 15, 1995, among Warner's (United Kingdom) Limited, as Borrower, Scotiabank Europe plc, as Security Agent, Citicorp USA, Inc., as Administrative Agent, Scotiabank Europe plc, as Overdraft Bank, Citibank, N.A. as Issuing Bank, the financial institutions named in the First Schedule as Banks, Warnaco Inc. and The Warnaco Group, Inc., as U.S. Guarantors, and the Companies named in the Second Schedule as European Guarantors (Warnaco GmbH, Warner's Aiglon S.A., Warner's (Eire) Teoranta, Warner's Lenceria Femenina, S.A. and Warner's Belgium S.A.), as amended to the date hereof. 4. Canadian Dollar 30,000,000 Amended and Restated Credit Agreement dated as of September 24, 1996 between Warnaco of Canada Limited - Warnaco du Canada Limitee, as Borrower, and The Bank of Nova Scotia, as Lender (the "CANADIAN REVOLVING FACILITY"). 5. U.S. $15,000,000 Credit Agreement dated as of October 6, 2000 among The Warnaco Group, Inc., Warnaco Inc. and The Dai-Ichi Kangyo Bank, Ltd. (the "SPECIFIED FACILITY"). 6. U.S. $91,700,000 uncommitted Letter of Credit Facility letter dated August 4, 1999 between Citibank and Warnaco (HK) Ltd. 7. U.S. $75,000,000 uncommitted Letter of Credit Facility letter dated January 10, 2000 between Bank of America, N.A. and Warnaco (HK) Ltd. 8. U.S. $27,000,000 uncommitted Letter of Credit Facility letter dated December 29, 1999 between Standard Chartered Bank and Warnaco (HK) Ltd. 9. U.S. $10,000,000 uncommitted Letter of Credit Facility letter dated September 13, 1996 between The Bank of East Asia, Limited and Warnaco (HK) Ltd. 10. U.S. $6,000,000 uncommitted Overdraft Facility letter dated August 24, 1999 between The Bank of Nova Scotia, Hong Kong Branch and Warnaco (HK) Ltd. 11. 20,000,000 Austrian shillings Societe Generale Austria overdraft. 12. 35,000,000 Belgian francs Overdraft Facility letter dated December 2, 1998 among Warner's Company Belgium S.A., Donatex - Warnaco S.A. and KBC Bank. 13. 4,000,000 Deutsche marks Societe Generale Germany overdraft. 14. 2,500,000,000 Italian Lire Credit Line letter dated July 9, 1998 between Warnaco S.r.l. Milano and Credito Italiano. 15. U.S. $6,000,000 short term Multi Purpose Credit arrangement letter dated October 29, 1997 between Warnaco B.V. and Societe Generale. 16. FRF 7,500,000 Revolving Line of Credit Agreement dated October 31, 1996 between Warner's Lenceria Femenina, S.A., as Borrower, and Societe Generale acting through its Madrid Branch, as Lender, as amended by the Amendment Agreement dated July 31, 1998 between Warnaco Intimo S.A., the Companies and Corporations referred to therein as Guarantors and Societe Generale acting through its Madrid Branch. 17. FRF 7,500,000 Revolving Line Credit Agreement dated October 31, 1996 as amended by the Amendment Agreement dated July 31, 1998 between Lintex-Warnaco S.A., as Borrower, the Companies and Corporations referred to therein as Guarantors and Societe Generale Bank and Trust, as Lender. 18. Equity Forward Purchase Agreement dated December 10, 1999 between Scotia Capital (USA) Inc. and The Warnaco Group, Inc., as amended, modified or otherwise supplemented to the date hereof, including, without limitation, as amended pursuant to the Memorandum of Understanding dated September 19, 2000 and as in effect on the Effective Date, between Scotia Capital (USA) Inc. and The Warnaco Group, Inc., and together with the Modification Note and each Subsequent Note (each as defined in said Memorandum of Understanding). 19. Equity Forward Purchase Agreement dated as of February 10, 2000 between Sun Trust Bank and The Warnaco Group, Inc., as amended, modified or otherwise supplemented to the date hereof, including, without limitation, as amended pursuant to the Memorandum of Understanding dated September 19, 2000 and as in effect on the Effective Date, between SunTrust Bank and The Warnaco Group, Inc., and together with the Modification Note and each Subsequent Note (each as defined in said Memorandum of Understanding). EX-99 3 0003.txt EXHIBIT 99.2 - AMENDMENT AGREEMENT EXHIBIT 99.2 AMENDMENT, MODIFICATION, RESTATEMENT AND GENERAL PROVISIONS AGREEMENT dated as of October 6, 2000 among THE WARNACO GROUP, INC., WARNACO INC., THE OTHER SUBSIDIARIES OF THE WARNACO GROUP, INC. PARTY HERETO, THE BANK OF NOVA SCOTIA and CITIBANK, N.A., as Debt Coordinators, THE BANK OF NOVA SCOTIA, as Administrative Agent and STATE STREET BANK AND TRUST COMPANY, as Collateral Trustee TABLE OF CONTENTS SECTION PAGE Article I DEFINITIONS AND ACCOUNTING TERMS SECTION 1.1. Definitions in Intercreditor Agreement.........................1 SECTION 1.2. Accounting Terms ..............................................1 Article II AMENDMENTS AND MODIFICATIONS TO THE EXISTING FACILITIES; PROVISIONS APPLICABLE TO THE COVERED FACILITIES AND THE LOAN DOCUMENTS SECTION 2.1. Amendment, Modification and Restatement........................2 SECTION 2.2. Commitment Termination; Maturity Date..........................2 SECTION 2.3. Use of Proceeds................................................2 SECTION 2.4. Interest Rate; Commitment/Facility Fees........................2 SECTION 2.5. Affirmative Covenants........................................... SECTION 2.6. Negative Covenants............................................10 SECTION 2.7. Financial Covenants...........................................20 SECTION 2.8. Reporting Requirements........................................22 SECTION 2.9. Mandatory Payments............................................23 SECTION 2.10. Release of Collateral........................................24 SECTION 2.11. Increased Costs, Etc.........................................24 SECTION 2.12. Taxes 26 SECTION 2.13. Payments and Computations....................................26 SECTION 2.14. Certain Post-Closing Matters.................................26 SECTION 2.15. Successor Agent..............................................26 SECTION 2.16. Certain Amendments...........................................26 Article III CONDITIONS OF LENDING AND EXTENSIONS OF CREDIT SECTION 3.1. Conditions Precedent to Each Credit Extension.................32 Article IV REPRESENTATIONS AND WARRANTIES SECTION 4.1. Representations and Warranties of the Loan Parties............33 Article V EVENTS OF DEFAULT SECTION 5.1. Events of Default.............................................39 Article VI CONDITIONS OF EFFECTIVENESs SECTION 6.1. Conditions of Effectiveness...................................43 SECTION 6.2. Determinations Under Section 6.1..............................49 Article VII EFFECTIVE DATE PAYMENTS AND COMMITMENT REDUCTIONS SECTION 7.1. Effective Date Facility Reductions............................49 SECTION 7.2. Extension Fee.................................................49 SECTION 7.3. Approval Fee..................................................49 Article VIII THE DEBT COORDINATORS, ADMINISTRATIVE AGENT AND COLLATERAL TRUSTEE SECTION 8.1. Duties. 50 SECTION 8.2. Costs and Expenses............................................50 Article IX MISCELLANEOUS SECTION 9.1. Notices, Etc..................................................51 SECTION 9.2. Amendments....................................................51 SECTION 9.3. No Waiver; Remedies...........................................51 SECTION 9.4. Execution in Counterparts.....................................51 SECTION 9.5. Binding Effect................................................51 SECTION 9.6. Jurisdiction; Process Agent; Judgment Currency; Waiver of Immunities; Etc...................................52 SECTION 9.7. Governing Law.................................................53 SECTION 9.8. Waiver of Jury Trial..........................................53 SECTION 9.9. Appointment and Acknowledgment ...............................53 SECTION 9.10. Conflict with Other Agreements...............................53 SECTION 9.11. Foreign Subsidiary Collateral Limitation.....................53 ANNEXES Annex A - Definitions SCHEDULES Schedule I - Projected Capital Expenditures Schedule II - Projected Securitization Facility Amount Schedule III - Certain Restrictions Schedule IV - Certain Foreign Collateral Documents Schedule 2.6(b) - Certain Debt Schedule 2.6(d)(iii) - Certain Assets Schedule 2.6(d)(vi) - Excluded Property Schedule 2.6(e) - Certain Payments Schedule 2.14(e) - Certain Post-Closing Matters Schedule 4.1(b) - Subsidiaries Schedule 4.1(d) - Certain Actions Schedule 4.1(p) - ERISA Schedule 4.1(r) - Tax Schedule 4.1(t) - Liens Schedule 4.1(u) - Real Property Schedule 4.1(v) - Leases Schedule 4.1(w) - Investments Schedule 4.1(x) - Intellectual Property Schedule 7.1 - Facility Reductions EXHIBITS Exhibit A - Form of Security Agreement Exhibit B - Form of Domestic Subsidiary Guaranty Exhibit C - Form of Parent Guaranty Exhibit D - Form of Mortgage Exhibit E-1 - Form of Intellectual Property Security Agreement [U.S Parties] Exhibit E-2 - Form of Intellectual Property Security Agreement [Foreign Parties] Exhibit F - Form of Collateral Trust Agreement Exhibit G - Form of Joinder Agreement Exhibit H-1 - Form of Opinion of United Kingdom Counsel to the Loan Parties Exhibit H-2 - Form of Opinion of France Counsel to the Loan Parties Exhibit H-3 - Form of Opinion of Germany Counsel to the Loan Parties Exhibit H-4 - Form of Opinion of Netherlands Counsel to the Loan Parties Exhibit H-5 - Form of Opinion of Canada Counsel to the Loan Parties Exhibit H-6 - Form of Opinion of Tennessee Counsel to the Loan Parties Exhibit H-7 - Form of Opinion of Pennsylvania Counsel to the Loan Parties Exhibit H-8 - Form of Opinion of Connecticut Counsel to the Loan Parties Exhibit H-9 - Form of Opinion of Georgia Counsel to the Loan Parties Exhibit H-10 - Form of Opinion of New York Counsel to the Loan Parties Exhibit H-11 - Form of Opinion of General Counsel to the Loan Parties Exhibit H-12 - Form of Opinion of Intellectual Property Counsel to the Loan Parties AMENDMENT, MODIFICATION, RESTATEMENT AND GENERAL PROVISIONS AGREEMENT (this "Agreement") dated as of October 6, 2000 among The Warnaco Group, Inc. ("Group"), Warnaco Inc. ("Warnaco"), the other direct and indirect Subsidiaries of Group party hereto from time to time, The Bank of Nova Scotia ("Scotiabank"), as Administrative Agent (the "Administrative Agent"), Scotiabank and Citibank, N.A. ("Citibank"), as Debt Coordinators (the "Debt Coordinators"), for themselves and as representative of each of the Lender Parties, and STATE STREET BANK AND TRUST COMPANY, as Collateral Trustee (the "Collateral Trustee"). RECITALS A. Group and certain of its Subsidiaries have entered into that certain Intercreditor Agreement dated as of the date hereof (the "Intercreditor Agreement") with Scotiabank and Salomon Smith Barney Inc. ("SSBI"), as Lead Arrangers, Scotiabank, SSBI, Morgan Guaranty Trust Company of New York, Commerzbank A.G. and Societe Generale, as Arrangers and the other financial institutions from time to time parties thereto. B. The parties desire to enter into this Agreement to, among other things, (a) amend, modify, restate and, in certain cases, extend the Existing Facilities in accordance with the terms and conditions set forth in this Agreement, (b) provide for certain common terms to be applicable to both the Existing Facilities and the New Facilities and (c) provide for the giving of certain guarantees and the granting of security interests in certain collateral as security for the Obligations of the Loan Parties under the Covered Facilities. NOW, THEREFORE, in consideration of the premises and for other valuable consideration, the receipt and sufficiency of which the parties acknowledge, the parties agree as follows: ARTICLE I DEFINITIONS AND ACCOUNTING TERMS SECTION 1.1. Definitions. As used in this Agreement, terms have the meanings as specified in Part I of Annex A hereto, and the rules of interpretation and construction set forth in Part II of such Annex A shall apply. SECTION 1.2. Accounting Terms. All accounting terms not specifically defined herein shall be construed, and all covenants and other financial calculations shall be made (except to the extent explicitly provided herein), in accordance with generally accepted accounting principles as in effect on the Effective Date ("GAAP"); provided that all effects resulting from any change in GAAP relating to the Equity Derivatives enacted prior to the Effective Date shall be eliminated from all covenant and financial calculations. ARTICLE II AMENDMENTS AND MODIFICATIONS TO THE EXISTING FACILITIES; PROVISIONS APPLICABLE TO THE COVERED FACILITIES AND THE LOAN DOCUMENTS SECTION 2.1. Amendment, Modification and Restatement. On and as of the Effective Date, upon satisfaction of the conditions specified in Article VI hereof, each of the Existing Facilities is hereby amended and modified as provided in this Agreement, with the affirmative, negative and financial covenants and undertakings corresponding to affirmative, negative and financial covenants (including those covenants and undertakings in respect of the providing of guarantees or the pledge of collateral), reporting requirements, mandatory prepayment requirements, collateral release provisions, increased cost provisions, tax gross-up provisions, allocation of prepayment provisions, provisions related to market disruption and illegality events, representations and warranties, and event of default provisions (other than those relating to payment defaults) of each Covered Facility being replaced and superseded by the terms and provisions of this Agreement and the other Loan Documents (provided that those provisions in the Existing Facilities which require L/C Related Liens be created or incurred in applicable circumstances shall continue in full force and effect and provided, further, that the terms of the Equity Derivatives shall continue in full force and effect), and each such Existing Facility shall thereupon be deemed to be restated in its entirety as in effect immediately prior to the effectiveness of this Agreement and as amended and modified hereby. All existing guarantees by any Warnaco Entity under any Covered Facility are hereby amended and restated in their entirety by the Subsidiary Guaranty or the Parent Guaranty, as the case may be. SECTION 2.2. Commitment Termination; Committed Facilities; Maturity Date. The commitment termination date or, as applicable, maturity date for each loan and other credit extension under each of the Extending Facilities, shall be extended to the Termination Date; provided that the Loans, Acceptances and reimbursement obligations under (and as defined in) the Trade Credit Facility shall continue to be payable in accordance with the terms of the Trade Credit Facility. Uncommitted Facilities shall become committed facilities as of the Effective Date and shall mature on the Termination Date, subject to the limitations set forth on Schedule 7.1. The commitment termination date or, as applicable, maturity date for each loan and other credit extension under each of the other Existing Facilities shall remain unchanged. SECTION 2.3. Use of Proceeds. The proceeds of all loans, letters of credit, bankers' acceptances and other credit extensions under each Existing Facility shall be used solely as specified in such Existing Facility. SECTION 2.4. Interest Rate; Commitment/Facility Fees. (a) Notwithstanding anything in the Covered Facilities to the contrary, with respect to each of the Existing Facilities, (i) the "Applicable Margin" (or other designation for the percentage margin per annum over the applicable rate of interest in such Existing Facility) and (ii), the fees for issuing standby letters of credit, bankers' acceptances and bankers guarantees, shall in each case be amended to mean, for any date, a percentage per annum determined by the Debt Rating in effect on such date as set forth below:
Standby Letter of Credit Fees; Bankers' Guarantee/ Base Rate Acceptance Fees; or Eurodollar Rate Rating Prime Rate Advances; Equity Level Debt Rating Advances Derivative Notes Level 1 BBB+ or Baa1 or 0.25% 1.25% higher Level 2 BBB or Baa2 or 0.50% 1.50% higher Level 3 BBB- and Baa3 0.75% 1.75% or higher Level 4 BBB- or higher and 1.00% 2.00% Ba1, or Baa3 or higher and BB+ Level 5 BB+ and Ba1 1.50% 2.50% or higher Level 6 BB or Ba2 2.00% 3.00% or higher Level 7 Lower than 2.50% 3.50% BB or Ba2
provided that (i) until the date which is 6 months after the Effective Date, Level 4 pricing shall apply if the Debt Rating otherwise qualifies as Level 1, 2 or 3, (ii) each of the foregoing percentages applicable to Levels 5, 6 and 7 will increase by 0.50% starting on the date which is 12 months after the Effective Date, such increase to be effective for the period during which Designated Capital Markets Transactions yielding Net Cash Proceeds of $300,000,000 or more have not occurred and (iii) for the period of time following the occurrence and during the continuance of an Event of Default, each of the foregoing percentages (after giving effect to any other increase then in effect) will increase by an additional 2.00% per annum. (b) With respect to each of the Existing Facilities, the fees payable with respect to documentary letters of credit shall be amended to mean, for any date, a percentage per annum determined by the Debt Rating in effect on such date as set forth below: ------------------------- --------------------- ---------------------- Rating Applicable Percentage Level Debt Rating ------------------------- --------------------- ---------------------- Level 1 BBB+ or Baa1 or 0.375% higher ------------------------- --------------------- ---------------------- Level 2 BBB or Baa2 or 0.450% higher ------------------------- --------------------- ---------------------- Level 3 BBB- and Baa3 0.525% or higher ------------------------- --------------------- ---------------------- Level 4 BBB- or higher and 0.600% Ba1, or Baa3 or higher and BB+ ------------------------- --------------------- ---------------------- Level 5 BB+ and Ba1 0.750% or higher ------------------------- --------------------- ---------------------- Level 6 BB or Ba2 1.000% or higher ------------------------- --------------------- ---------------------- Level 7 Lower than 1.250% BB or Ba2 ------------------------- --------------------- ---------------------- provided that (i) until the date which is 6 months after the Effective Date, Level 4 pricing shall apply if the Debt Rating otherwise qualifies as Level 1, 2 or 3 and (ii) for the period of time following the occurrence and during the continuance of an Event of Default, each of the foregoing percentages (after giving effect to any other increase then in effect) will increase by an additional 2.00% per annum. (c) With respect to (i) each of the Revolving Facilities and (ii) the Trade Credit Facility, the "facility fee" or "commitment fee", as applicable, (or other designation for the fee paid based on the unused portion of the revolving or letter of credit commitments thereunder) shall be amended to mean a percentage per annum determined by the Debt Rating in effect on such date as set forth below: ------------------------- --------------------- ---------------------- Rating Applicable Percentage Level Debt Rating ------------------------- --------------------- ---------------------- Level 1 BBB+ or Baa1 or 0.25% higher ------------------------- --------------------- ---------------------- Level 2 BBB or Baa2 or 0.30% higher ------------------------- --------------------- ---------------------- Level 3 BBB- and Baa3 0.35% or higher ------------------------- --------------------- ---------------------- Level 4 BBB- or higher and 0.40% Ba1, or Baa3 or higher and BB+ ------------------------- --------------------- ---------------------- Level 5 BB+ and Ba1 0.50% or higher ------------------------- --------------------- ---------------------- Level 6 BB or Ba2 0.625% or higher ------------------------- --------------------- ---------------------- Level 7 Lower than 0.75% BB or Ba2 ------------------------- --------------------- ---------------------- provided that until the date which is 6 months after the Effective Date, Level 4 pricing shall apply if the Debt Rating otherwise qualifies as Level 1, 2 or 3. SECTION 2.5. Affirmative Covenants. Until the Debt Termination Date, each respective Loan Party agrees as follows: (a) Compliance with Laws, Etc. It will comply, and cause each of its Subsidiaries to comply, in all material respects, with all applicable laws, rules, regulations and orders, such compliance to include, without limitation, compliance with ERISA and Environmental Laws, except where the failure to so comply would not reasonably be expected to have a Material Adverse Effect. (b) Payment of Taxes, Etc. It will pay and discharge, and cause each of its Subsidiaries to pay and discharge, before the same shall become delinquent, (i) all taxes (excluding state and local taxes that are not material), assessments and governmental charges or levies imposed upon it or upon its property and (ii) all taxes and other lawful claims that, if unpaid, might by law become a Lien upon its property; provided, however, that neither Group nor any of its Subsidiaries shall be required to pay or discharge any such tax, assessment, charge or claim that is being contested in good faith and by proper proceedings and as to which appropriate reserves are being maintained in accordance with GAAP, unless and until any Liens resulting therefrom attach to its property and become enforceable against its other creditors so long as any such amount shall not exceed $10,000,000 in the aggregate. (c) Compliance with Environmental Laws. It will comply, and cause each of its Subsidiaries and all lessees and other Persons operating or occupying its properties to comply, in all material respects, with all applicable Environmental Laws and Environmental Permits; obtain and renew and cause each of its Subsidiaries to obtain and renew all material Environmental Permits necessary for its operations and properties; and conduct, and cause each of its Subsidiaries to conduct, any investigation, study, sampling and testing, and undertake any cleanup, removal, remedial or other action necessary to remove and clean up all Hazardous Materials from any of its properties, in accordance with and to the extent required by all applicable Environmental Laws; provided, however, that neither Group nor any of its Subsidiaries shall be required to undertake any such cleanup, removal, remedial or other action to the extent that its obligation to do so is being contested in good faith and by proper proceedings and appropriate reserves are being maintained with respect to such circumstances. (d) Maintenance of Insurance. It will maintain, and cause each of its Subsidiaries to maintain, insurance with responsible and reputable insurance companies or associations (i) in such amounts and covering such risks as is usually carried by companies engaged in similar businesses and owning properties in the same general areas in which Group or such Subsidiary operates and (ii) as otherwise specified in Section 11 of the Security Agreement and in Section 1.05 of each Mortgage. (e) Preservation of Corporate Existence, Etc. It will preserve and maintain, and cause each of its Subsidiaries to preserve and maintain, its existence, legal structure, legal name, rights (charter and statutory), permits, licenses, approvals, privileges and franchises (except for the failure to pay any franchise tax, which failure is promptly cured); provided, however, that Group and its Subsidiaries may consummate any merger or consolidation permitted under Section 2.6(c); and provided further that neither Group nor any of its Subsidiaries shall be required to preserve any right, permit, license, approval, privilege or franchise if the Board of Directors of Group or such Subsidiary shall determine that the preservation thereof is no longer desirable in the conduct of the business of Group or such Subsidiary, as the case may be, and that the loss thereof is not disadvantageous in any material respect to Group, such Subsidiary or the Lender Parties. (f) Visitation Rights. It will at any reasonable time and from time to time, permit any of the Agents or any of the Lender Parties, or any agents or representatives thereof, upon reasonable notice to Group, to examine and make copies of and abstracts from the records and books of account of, and visit the properties of, Group and any of its Subsidiaries, and to discuss the affairs, finances and accounts of Group and any of its Subsidiaries with any of their officers or directors and, in the presence of any officer or director of Group, with their independent certified public accountants. (g) Keeping of Books. It will keep, and cause each of its Subsidiaries to keep, proper books of record and account, in which full and correct entries shall be made of all financial transactions and the assets and business of Group and each such Subsidiary in accordance with GAAP. (h) Maintenance of Properties, Etc. It will maintain and preserve, and cause each of its Subsidiaries to maintain and preserve, all of its properties that are used or useful in the conduct of its business in good working order and condition, ordinary wear and tear excepted. (i) Compliance with Terms of Leaseholds. It will (i) make all payments and otherwise perform all obligations in respect of all leases of real property to which Group or any of its Subsidiaries is a party, (ii) keep such leases in full force and effect and not allow such leases to lapse or be terminated or any rights to renew such leases to be forfeited or cancelled, (iii) notify the Administrative Agent of any default by any party with respect to such leases and cooperate with the Debt Coordinators in all respects to cure any such default, and (iv) cause each of its Subsidiaries to do so, except, in any of the foregoing clauses (i) through (iv), where the failure to do so, either individually or in the aggregate, would not be reasonably likely to have a Material Adverse Effect. (j) Transactions with Affiliates. It will conduct, and cause each of its Subsidiaries to conduct, other than with respect to transactions among Group and/or any Subsidiaries, all transactions otherwise permitted under the Loan Documents with any of their Affiliates on terms that are no less favorable to it or such Subsidiary than it would obtain in a comparable arm's-length transaction with a Person not an Affiliate, provided, however, that the foregoing restriction shall not apply to transactions pursuant to any agreement referred to in Section 2.6(a)(iv), and provided further that no Loan Party shall engage in any transaction with any other Loan Party or any Subsidiary of a Loan Party that would render such Loan Party or Subsidiary insolvent or cause a default under, or a breach of, any material contract to which such Loan Party or Subsidiary is a party. (k) Covenant to Guarantee Obligations and Give Security. Upon the (v) formation or acquisition of any Domestic Subsidiaries by Group or any of its Domestic Subsidiaries after the Effective Date, (w) formation or acquisition of any Included Foreign Subsidiary by Group or any of its Subsidiaries after the Effective Date, (x) receipt of notice by the Administrative Agent pursuant to Section 2.8(i) to the effect that a Foreign Subsidiary has, during the period described in such notice, become an Included Foreign Subsidiary, (y) acquisition after the Effective Date of any property by any Credit Party (other than Excluded Property), and such property, in the judgment of the Debt Coordinators, shall not already be subject to a perfected first priority security interest in favor of the Collateral Trustee for the benefit of the Secured Parties or (z), with respect to clause (vii) below, upon the request of the Debt Coordinators after the occurrence and during the continuance of a Default, then Group will, or will cause its Subsidiaries to, in each case at such Credit Party's expense: (i) in connection with the formation or acquisition of a Subsidiary, or a Foreign Subsidiary becoming an Included Foreign Subsidiary, in each case as specified above, within 30 days after such formation or acquisition, or in the case of clause (x) above, within 30 days after the delivery of such notice, cause each such (A) Domestic Subsidiary to duly execute and deliver to the Collateral Trustee a Domestic Subsidiary Guaranty Supplement and (B) Included Foreign Subsidiary to duly execute and deliver to the Collateral Trustee a guaranty or guaranty supplement, in form and substance reasonably satisfactory to the Debt Coordinators, guaranteeing such of the other Foreign Subsidiaries' Obligations under those Loan Documents and Covered Facilities the result of which, in each case under this clause (B), is reasonably determined by the Debt Coordinators to not impose any material adverse tax consequences on Group and its Subsidiaries, taken as a whole; provided that the Debt Coordinators may extend the 30 day time periods specified in this subsection (i) by up to an additional 45 days if requested by Group, (ii) within 30 days after such formation or acquisition, or in the case of clause (x) above, within 30 days after the delivery of such notice, furnish to the Collateral Trustee a description of the real and personal properties of such Domestic Subsidiary or Included Foreign Subsidiary and their respective Subsidiaries in Included Foreign Jurisdictions in detail reasonably satisfactory to the Debt Coordinators, (iii) within 60 days after such formation or acquisition, or in the case of clause (x) above, within 60 days after the delivery of such notice, cause such Domestic Subsidiary or Included Foreign Subsidiary to duly execute and deliver, (A) and cause each such Domestic Subsidiary and (with respect to stock pledges) each direct and indirect parent of such Domestic Subsidiary and each Included Foreign Subsidiary (if it has not already done so) to duly execute and deliver, to the Collateral Trustee mortgages with respect to Material Real Property, lease assignments or mortgages with respect to Material Leased Property, pledges, security agreement supplements, intellectual property security agreement supplements and other security agreements, all as specified by and in form and substance reasonably satisfactory to the Debt Coordinators, securing payment of all the Obligations of the applicable Credit Party under the Loan Documents and the Covered Facilities (provided that none of such agreements shall cover Excluded Property) and (B) with respect to each first-tier Foreign Subsidiary of Group or such Domestic Subsidiary, to the Collateral Trustee a pledge of 66% of the shares of capital stock (or other Equity Interests) of such first-tier Foreign Subsidiary, securing payment of all the Obligations of Group or the applicable Domestic Subsidiary under the Loan Documents and the Covered Facilities; provided that the Debt Coordinators may extend the 60 day time periods specified in this subsection (iii) by up to an additional 45 days if requested by Group, (iv) within 60 days after such formation or acquisition, or in the case of clause (x) above, within 60 days after the delivery of such notice, take, and cause such Credit Party to take, whatever action (including, without limitation, the recording of mortgages, the filing of Uniform Commercial Code financing statements, the giving of notices and the endorsement of notices on title documents) may be necessary or advisable in the reasonable judgment of the Debt Coordinators to vest in the Collateral Trustee (or in any representative of the Collateral Trustee designated by it) valid and subsisting Liens on the properties purported to be subject to the mortgages, pledges, assignments, security agreement supplements, intellectual property security agreement supplements and security agreements delivered pursuant to this Section 2.5(k), enforceable against all third parties in accordance with their terms; provided that the Debt Coordinators may extend the 60 day time periods specified in this subsection (iv) by up to an additional 45 days if requested by Group, (v) within 60 days after such formation or acquisition, or in the case of clause (x) above, within 60 days after the delivery of such notice, deliver to the Collateral Trustee, upon the request of the Debt Coordinators in their sole discretion, a signed copy of a favorable opinion, addressed to the Collateral Trustee and the other Secured Parties, of counsel for the Credit Parties acceptable to the Debt Coordinators as to the matters contained in clauses (i) and (iii) above, as to such guaranties, guaranty supplements, mortgages, pledges, assignments, security agreement supplements, intellectual property security agreement supplements and security agreements being legal, valid and binding obligations of each Credit Party party thereto enforceable in accordance with their terms, as to the matters contained in clause (iv) above, as to such recordings, filings, notices, endorsements and other actions being sufficient to create valid perfected Liens on such properties, and as to such other matters as the Debt Coordinators may reasonably request; provided that the Debt Coordinators may extend the 60 day time periods specified in this subsection (v) by up to an additional 45 days if requested by Group, (vi) within 60 days after such formation or acquisition, or in the case of clause (x) above, within 60 days after the delivery of such notice, deliver, upon the reasonable request of the Debt Coordinators, to the Collateral Trustee with respect to each parcel of Material Real Property owned, or Material Leased Property held, by the entity that is the subject of such request, formation or acquisition, such documents and reports of the type specified in Section 6.1(a)(v) hereof and (if available) engineering, soils, environmental assessment and other reports, each in scope, form and substance reasonably satisfactory to the Debt Coordinators, provided however that to the extent that Group or any of its Subsidiaries shall have otherwise received any of the foregoing items with respect to such Material Real Property or Material Leased Property, such items shall, promptly after the receipt thereof, be delivered to the Debt Coordinators; provided further that the Debt Coordinators may extend the 60 day time periods specified in this subsection (vi) by up to an additional 45 days if requested by Group, (vii) upon request of the Debt Coordinators after the occurrence and during the continuance of a Default, (A) promptly cause to be deposited any and all cash dividends paid or payable to it or any of its Subsidiaries from any of its Subsidiaries from time to time into the Collateral Account, and (B) with respect to all other dividends paid or payable to it or any of its Subsidiaries from time to time, promptly execute and deliver, or cause such Subsidiary to promptly execute and deliver, as the case may be, any and all further instruments and take or cause such Subsidiary to take, as the case may be, all such other action as the Debt Coordinators may deem necessary or desirable in order to obtain and maintain from and after the time such dividend is paid or payable a perfected, first priority Lien on and security interest in such dividends, and (viii) at any time and from time to time, promptly execute and deliver any and all further instruments and documents (including, to the extent not previously delivered, a supplement to this Agreement, in form and substance reasonably acceptable to the Debt Coordinators) and take all such other action as the Debt Coordinators may deem reasonably necessary or desirable in obtaining the full benefits of, or in perfecting and preserving the Liens of, such guaranties, mortgages, pledges, assignments, security agreement supplements, intellectual property security agreement supplements and security agreements. (l) Further Assurances. Group will promptly upon request by any Lender Party through the Debt Coordinators (i) correct, and cause each of its Subsidiaries promptly to correct, any material defect or error that may be discovered in any Loan Document or in the execution, acknowledgment, filing or recordation thereof, and (ii) do, execute, acknowledge, deliver, record, re-record, file, re-file, register and re-register any and all such further acts, deeds, conveyances, pledge agreements, mortgages, deeds of trust, trust deeds, assignments, financing statements and continuations thereof, termination statements, notices of assignment, transfers, certificates, assurances and other instruments as any Lender Party through the Debt Coordinators, may reasonably require from time to time in order to (A) carry out more effectively the purposes of the Loan Documents, (B) to the fullest extent permitted by applicable law, subject any Credit Party's properties, assets, rights or interests (other than Excluded Property) to the Liens now or hereafter intended to be covered by any of the Collateral Documents, (C) perfect and maintain the validity, effectiveness and priority of any of the Collateral Documents and any of the Liens intended to be created thereunder and (D) assure, convey, grant, assign, transfer, preserve, protect and confirm more effectively unto the Secured Parties the rights granted or now or hereafter intended to be granted to the Secured Parties under any Loan Document or under any other instrument executed in connection with any Loan Document to which any Credit Party is or is to be a party, and cause each of its Subsidiaries which is a Credit Party to do so. (m) Preparation of Environmental Reports. At the request of the Debt Coordinators from time to time after receipt of a notice of the type specified in Section 2.8(j), Group will provide to the Lender Parties within 60 days after such request, at its own expense, an environmental assessment report for the applicable property described in such notice, prepared by an environmental consulting firm reasonably acceptable to the Debt Coordinators, indicating the presence of Hazardous Materials that could reasonably be expected to give rise to a material liability and the estimated cost of any compliance, removal or remedial action in connection with any Hazardous Materials that could reasonably be expected to give rise to a material liability on such properties; without limiting the generality of the foregoing, if the Debt Coordinators determine at any time that a material risk exists that any such report will not be provided within the time referred to above, the Debt Coordinators may retain an environmental consulting firm to prepare such report at the expense of Group, and Group hereby grants and agrees to cause any Subsidiary that owns any property described in such request to grant at the time of such request to the Debt Coordinators, such firm and any agents or representatives thereof an irrevocable non-exclusive license, subject to the rights of tenants, to enter onto their respective properties to undertake such an assessment, and to, or to cause its Subsidiaries to, cooperate in all reasonable respects with the preparation of such assessment. SECTION 2.6. Negative Covenants. Until the Debt Termination Date, each respective Loan Party agrees as follows: (a) Liens, Etc. Group will not create, incur, assume or suffer to exist, or permit any of its Subsidiaries to create, incur, assume or suffer to exist, any Lien on or with respect to any of its properties of any character (including, without limitation, accounts) whether now owned or hereafter acquired, or sign or file or suffer to exist, or permit any of its Subsidiaries to sign or file or suffer to exist, under the Uniform Commercial Code of any jurisdiction, a financing statement that names any Loan Party or any of its Subsidiaries as debtor, or sign or suffer to exist, or permit any of its Subsidiaries to sign or suffer to exist, any security agreement authorizing any secured party thereunder to file such financing statement, or assign, or permit any of its Subsidiaries to assign, any accounts or other right to receive income, except: (i) Liens created under the Loan Documents; (ii) Permitted Liens; (iii) Liens existing on the date hereof and described on Schedule 4.1(t) hereto, and the replacement or renewal of any such Lien upon or in the same property theretofore subject to such Lien, together with the replacement, extension or renewal (without increase in the amount or change in any direct or contingent obligor) of the Debt secured thereby; (iv) Liens on receivables of any kind (and in property securing or otherwise supporting such receivables) not in excess of $10,000,000 in the aggregate in connection with agreements for limited recourse sales or financings by Group or any of its Subsidiaries for cash of such receivables or interests therein, provided that (A) any such agreement is of a type and on terms customary for comparable transactions in the good faith judgment of the Board of Directors of Group and (B) such transaction does not create any interest in any asset other than receivables (and property securing or otherwise supporting such receivables), related general intangibles and proceeds of the foregoing, (v) purchase money Liens upon or in real property or equipment acquired or held by Group or any of its Subsidiaries in the ordinary course of business to secure the purchase price of such property or equipment or to secure Debt incurred solely for the purpose of financing the acquisition of any such property or equipment to be subject to such Liens or incurred in connection with a Specified Sale-Leaseback Transaction, or Liens existing on any such property or equipment at the time of acquisition (other than any such Liens created in contemplation of such acquisition that do not secure the purchase price), or extensions, renewals or replacements of any of the foregoing for the same or a lesser amount; provided, however, that no such Lien shall extend to or cover any property other than the property or equipment being acquired and the proceeds thereof, and no such extension, renewal or replacement shall extend to or cover any property not theretofore subject to the Lien being extended, renewed or replaced; and provided further that the aggregate principal amount of the Debt secured by Liens permitted by this clause (v) shall not exceed the amount permitted under Section 2.6(b)(iii) at any time outstanding; (vi) Liens securing Capitalized Leases; (vii) any interest or title of a lessor, and Liens arising from UCC financing statements (or equivalent filings, registrations or agreements in foreign jurisdictions) relating to leases permitted by the Loan Documents; (viii) Liens securing the Securitization Facility; (ix) L/C Related Liens; and (x) other Liens securing obligations in an amount not to exceed $10,000,000 in an aggregate amount outstanding at any time. (b) Debt. Group will not create, incur, assume or suffer to exist, or permit any of its Subsidiaries to create, incur, assume or suffer to exist, any Debt, except: (i) Debt under the Covered Facilities; provided that all New Facilities will be subject to the approval procedures specified in Section 2.4 of the Intercreditor Agreement, (ii) Designated Capital Markets Transactions, (iii) Debt secured by Liens permitted by Section 2.6(a)(v) not to exceed in the aggregate $5,000,000 at any time outstanding, (iv) Capitalized Leases not to exceed in the aggregate $15,000,000 at any time outstanding, (v) Debt in respect of Hedge Agreements designed to hedge against fluctuations in interest rates or foreign exchange rates incurred in the ordinary course of business and consistent with prudent business practice, (vi) Debt owing by any U.S. Credit Party to (or Contingent Obligations made in respect of the obligations of any U.S. Credit Party by) any other U.S. Credit Party, (x) which Debt shall constitute Pledged Debt and (y) any promissory notes evidencing such Pledged Debt shall be pledged as security for the Obligations of the holder thereof under the Loan Documents to which such holder is a party and delivered to the Collateral Trustee pursuant to the terms of the Security Agreement, (vii) Debt owing by any Foreign Subsidiary to (or Contingent Obligations made in respect of the obligations of any Foreign Subsidiary by) any U.S. Credit Party, not to exceed in the aggregate $10,000,000 at any time outstanding under this clause (vii), which Debt, in the case of any Foreign Credit Party, (x) shall constitute Pledged Debt and (y) any promissory notes relating to such Debt (which shall be prepared in certificated form if determined in the reasonable judgment of the Debt Coordinators to be necessary or advisable under applicable law to vest in the Collateral Trustee a valid and subsisting Lien on such Debt) shall be pledged as security for the Obligations of the holder thereof under the Loan Documents to which such holder is a party and delivered to the Collateral Trustee pursuant to the terms of the Collateral Documents; (viii) Debt owing by any U.S. Credit Party or any Foreign Subsidiary to (or Contingent Obligations made in respect of the obligations of any U.S. Credit Party or any Foreign Subsidiary by) any Excluded Foreign Subsidiary; (ix) Debt owing by any Foreign Credit Party to (or Contingent Obligations made in respect of the obligations of any Foreign Credit Party by) another Foreign Credit Party, provided that (A) no such Debt can be incurred after the occurrence and during the continuance of a Default, (B) such Debt is otherwise in compliance with Schedule III hereto, (C) such Debt shall constitute Pledged Debt and (D) any promissory notes relating to such Debt (which shall be prepared in certificated form if determined in the reasonable judgment of the Debt Coordinators to be necessary or advisable under applicable law to vest in the Collateral Trustee a valid and subsisting Lien on such Debt) shall be pledged as security for the Obligations of the holder thereof under the Loan Documents to which such holder is a party and delivered to the Collateral Trustee pursuant to the terms of the Collateral Documents; (x) Debt owing by any Excluded Foreign Subsidiary to (or Contingent Obligations made in respect of the obligations of any Excluded Foreign Subsidiary by) any Foreign Credit Party, not to exceed in the aggregate $10,000,000 at any time outstanding under this clause (x) and (A) which Debt shall constitute Pledged Debt and (B) any promissory notes relating to such Debt (which shall be prepared in certificated form if determined in the reasonable judgment of the Debt Coordinators to be necessary or advisable under applicable law to vest in the Collateral Trustee a valid and subsisting Lien on such Debt) shall be pledged as security for the Obligations of the holder thereof under the Loan Documents to which such holder is a party and delivered to the Collateral Trustee pursuant to the terms of the Collateral Documents; (xi) Debt consisting of Contingent Obligations pursuant to which a U.S. Credit Party guarantees operating lease obligations of Foreign Subsidiaries, not to exceed in the aggregate $5,000,000 during any Fiscal Year; (xii) Debt of any Person that becomes a Subsidiary of Group after the date hereof in accordance with the terms of Section 2.6(e)(x) which Debt is existing at the time such Person becomes a Subsidiary of Group (other than Debt incurred solely in contemplation of such Person becoming a Subsidiary of Group); provided that after giving effect to such Debt, the Leverage Ratio, calculated on a pro-forma basis (and using for this purpose "Total Bank Outstandings" rather than "Indebtedness for Borrowed Money" in such calculation) as if such Debt had been incurred immediately prior to the beginning of the most recent period of four consecutive Fiscal Quarters for which financial statements have been delivered hereunder, will not have increased; (xiii) Debt in respect of the Securitization Facility; (xiv) Debt existing on the date hereof and described on Schedule 2.6(b), and any Debt extending the maturity of, or refunding or refinancing, in whole or in part, such Debt (which, in the case of Debt consisting of guarantees of operating lease obligations, shall include guarantees of any replacement leases, provided that the Contingent Obligation under such guarantees may not increase as a result thereof), provided that the (A) terms of any such extending, refunding or refinancing Debt, and of any agreement entered into and of any instrument issued in connection therewith, are otherwise permitted by the Loan Documents, (B) principal amount of such Debt shall not be increased above the principal amount thereof outstanding immediately prior to such extension, refunding or refinancing, and the direct and contingent obligors therefor shall not be changed as a result of or in connection with such extension, refunding or refinancing and (C) terms relating to principal amount, amortization, maturity, collateral (if any), subordination (if any), and other material terms taken as a whole, of any such extending, refunding or refinancing Debt, and of any agreement entered into and of any instrument issued in connection therewith, are no less favorable in any material respect to the Loan Parties or the Lender Parties than the terms of any agreement or instrument governing the Debt being extended, refunded or refinanced and the interest rate applicable to any such extending, refunding or refinancing Debt does not exceed the then applicable market interest rate; and (xv) Specified Debt. (c) Mergers, Etc. Group will not merge into or consolidate with any Person or permit any Person to merge into it, or permit any of its Subsidiaries to do so, except that: (i) any Subsidiary of Group may merge into or consolidate with Group or any Domestic Subsidiary, provided that, in the case of any such merger or consolidation, the Person formed by such merger or consolidation shall be a U.S. Credit Party; (ii) any Excluded Foreign Subsidiary may merge into or consolidate with any Foreign Subsidiary, provided that, in the case of any such merger or consolidation, the Person formed by such merger or consolidation shall be a Wholly-Owned Subsidiary of Group; (iii) any Foreign Credit Party may merge into or consolidate with any other Foreign Credit Party, provided that (A) the Person formed by such merger or consolidation shall be a Foreign Credit Party and (B) such merger or consolidation is otherwise in compliance with Schedule III hereto; (iv) in connection with any acquisition permitted under Section 2.6(e), any (A) Subsidiary of Group may merge into or consolidate with any other Person or permit any other Person to merge into or consolidate with it if the Person surviving such merger shall be a U.S. Credit Party, (B) Excluded Foreign Subsidiary may merge into or consolidate with any other Person or permit any other Person to merge into or consolidate with it if the Person surviving such merger shall be a Wholly-Owned Subsidiary of Group and (C) Foreign Credit Party may merge into or consolidate with other Person or permit any other Person to merge into or consolidate with it if (1) the Person surviving such merger shall be a Foreign Credit Party and (2) such merger or consolidation is otherwise in compliance with Schedule III hereto; and (v) in connection with any sale or other disposition permitted under Section 2.6(d) (other than clause (ii) thereof), any Subsidiary of Group may merge into or consolidate with any other Person or permit any other Person to merge into or consolidate with it; provided, however, that in each case under this clause (c), both before and immediately after giving effect thereto, no event shall occur and be continuing that constitutes a Default. (d) Sales, Etc., of Assets. Group will not sell, lease, transfer or otherwise dispose of, or permit any of its Subsidiaries to sell, lease, transfer or otherwise dispose of, any assets, or grant any option or other right to purchase, lease or otherwise acquire any assets, except: (i) sales of Inventory in the ordinary course of its business; (ii) in a transaction permitted by Section 2.6(c) (other than clause (v) thereof); (iii) sales of assets set forth on Schedule 2.6(d)(iii) so long as (A) the purchase price paid to Group or any of its Subsidiaries for such asset shall be no less than the fair market value of such asset at the time of such sale and (B) no less than 85% of the purchase price for such asset shall be paid to Group or such Subsidiary in cash, and the Collateral Trustee (on behalf of the Secured Parties) shall receive a first priority perfected security interest in all consideration which is not in the form of cash (unless such consideration is not owned by a Credit Party); (iv) the sale of any asset or assets by Group or any of its Subsidiaries so long as (A) the purchase price paid to Group or such Subsidiary for such asset shall be no less than the fair market value of such asset at the time of such sale, (B) no less than 85% of the purchase price for such asset shall be paid to Group or such Subsidiary in cash, and the Collateral Trustee (on behalf of the Secured Parties) shall receive a first priority perfected security interest in all consideration which is not in the form of cash (unless such consideration is not owned by a Credit Party), (C) after giving effect to any such sale, the Leverage Ratio, calculated on a pro-forma basis (and using for this purpose "Total Bank Outstandings" rather than "Indebtedness for Borrowed Money" in such calculation) as if such sale had occurred immediately prior to the first day of the most recent period of four consecutive Fiscal Quarters for which financial statements have been delivered to the Lender Parties pursuant to Section 2.8 or 4.1, will not have increased, (D) after giving effect to such sale and any associated repayment of debt, Group shall be in pro forma compliance with the covenants contained in Section 2.7(a) and (b), calculated based on the financial statements most recently delivered to the Lender Parties pursuant to Section 2.8 or 4.1 and as though such sale had occurred at the beginning of the four-quarter period covered thereby, (E) such sale does not require consent under applicable corporate law, (F) the Net Cash Proceeds thereof are applied to the prepayment of the Covered Facilities in accordance with Section 2.9, (G) neither the seller of such assets nor any of its Affiliates shall have any subsequent payment obligations in respect of such sale, other than customary and standard indemnity obligations and (H) the aggregate purchase price paid to Group and all of its Subsidiaries for all assets sold pursuant to this clause (iv) shall not exceed $25,000,000 in the aggregate; (v) so long as no Default shall occur and be continuing, the grant of any option or other right to purchase any asset in a transaction that would be permitted under the provisions of this Section 2.6(d); (vi) transfers of assets from (A) any Foreign Subsidiary or any U.S. Credit Party to any U.S. Credit Party, (B) any Excluded Foreign Subsidiary to any Foreign Subsidiary, (C) any U.S. Credit Party to any Foreign Subsidiary, provided that the aggregate fair market value of assets sold, leased, transferred or otherwise disposed of to Foreign Subsidiaries by U.S. Credit Parties shall not exceed $25,000,000 in the aggregate, and provided further that no Excluded Intellectual Property may at any time be transferred to a Foreign Subsidiary, (D) any Foreign Credit Party to any Excluded Foreign Subsidiary, provided that the aggregate fair market value of assets sold, leased, transferred or otherwise disposed of to Excluded Foreign Subsidiaries by Foreign Credit Parties shall not exceed $5,000,000 in the aggregate and (E) any Foreign Credit Party to another Foreign Credit Party, provided that such sale is otherwise in compliance with Schedule III hereto; (vii) the sale or discount of accounts (A) in an aggregate amount not exceeding $10,000,000 in face amount per Fiscal Year or (B) that are past due by more than 90 days, provided that the sale or discount of such accounts is in the ordinary course of Group's business and consistent with prudent business practices; (viii) the licensing of trademarks and trade names by Group or any of its Subsidiaries in the ordinary course of its business, provided that such licensing takes place on an arm's-length basis in the ordinary course of business consistent with prior practice; (ix) the rental by Group and its Subsidiaries, as lessors or sub-lessors, in the ordinary course of their respective businesses, on an arm's-length basis, of real property and personal property, in each case under leases (other than Capitalized Leases); (x) the sale or disposition of machinery and equipment no longer used or useful in the business of the Warnaco Entities; (xi) sales of accounts receivable and related property under the Securitization Facility; and (xii) sales of equipment in connection with a Specified Sale-Leaseback Transaction in an aggregate amount not exceeding $40,000,000 in each Fiscal Year; provided that in the case of sales of assets pursuant to clause (iii), (iv), (vii), (viii), (ix) and (x) above, Group shall, on the date of receipt by it or any of its Subsidiaries of the Net Cash Proceeds from such sale, pay such Net Cash Proceeds to the Administrative Agent pursuant to Section 2.9 hereof for allocation as specified in Section 2.1 of the Intercreditor Agreement. (e) Investments in Other Persons. Group will not make or hold, or permit any of its Subsidiaries to make or hold, any Investment in any Person, except: (i) Investments by (A) Group and its Subsidiaries in their Subsidiaries outstanding on the date hereof and additional investments by (A) Group or any of its Subsidiaries in U.S. Credit Parties, (B) Excluded Foreign Subsidiaries in any Subsidiaries of Group, (C) U.S. Credit Parties in Foreign Subsidiaries in an aggregate amount invested from the date hereof under this clause (C) not to exceed $5,000,000, (D) Foreign Credit Parties in Excluded Foreign Subsidiaries in an aggregate amount invested from the date hereof under this clause (D) not to exceed $5,000,000, (E) U.S. Credit Parties in Foreign Subsidiaries, such Investments to be used solely to permit such Foreign Subsidiaries to comply with statutory capital requirements under applicable local law, in an aggregate amount invested from the date hereof under this clause (E) not to exceed $15,000,000; provided further that no more than an aggregate of $5,000,000 invested from the date hereof under this clause (E) may be invested in Excluded Foreign Subsidiaries and (F) Foreign Credit Parties in other Foreign Credit Parties, provided that such investment is otherwise in compliance with Schedule III hereto; (ii) Investments by Group and its Subsidiaries in Cash Equivalents; (iii) Investments existing on the date hereof and described on Schedule 4.1(w) hereto; (iv) Investments in joint ventures in an aggregate amount not to exceed $5,000,000; (v) Investments consisting of Equity Interests, obligations, securities or other property received in a bankruptcy proceeding or in settlement of claims arising in the ordinary course of business; (vi) (A) advances or loans to directors or employees of Group that do not exceed $1,000,000 in the aggregate at any one time outstanding and (B) advances for employee travel, relocation and other similar and customary expenses incurred in the ordinary course of business; (vii) notes received pursuant to an asset sale permitted by Section 2.6(d)(iv); (viii) Investments consisting of intercompany Debt and Contingent Obligations permitted under Sections 2.6(b)(vi), (vii), (viii), (ix), (x) and (xi); (ix) Investments by Group to the extent the consideration paid by Group consists of Group common stock; and (x) other Investments in an aggregate amount invested not to exceed $5,000,000 for the period from the Effective Date through December 31, 2001, and $10,000,000 for the period from the Effective Date through the Debt Termination Date; provided that with respect to Investments made under this clause (x): (A) any newly acquired or organized Subsidiary of Group shall be a Wholly-Owned Subsidiary of Warnaco, (B) immediately before and after giving effect thereto, no Default shall have occurred and be continuing or would result therefrom, (C) the business conducted by any company or business acquired or invested in pursuant to this clause (ix) shall be a line of business permitted under Section 2.6(o), (D) immediately after giving effect to the acquisition of a company or business pursuant to this clause (x), Group shall be in pro forma compliance with the covenants contained in Section 2.7, calculated based on the financial statements most recently delivered to the Lender Parties pursuant to Section 2.8 or 4.1 and as though such acquisition had occurred at the beginning of the four-quarter period covered thereby, as evidenced by a certificate of a Responsible Financial Officer of Group delivered to the Lender Parties demonstrating such compliance and (E) additional Investments consisting of contractual "earn-outs" or purchase price or similar adjustments specified on Schedule 2.6(e) and made after the Effective Date shall be permitted without giving effect to the $5,000,000 and $10,000,000 amount limits specified above. (f) Restricted Payments. Group will not declare or pay any dividends, purchase, redeem, retire, defease or otherwise acquire for value any of its Equity Interests now or hereafter outstanding, return any capital to its stockholders, partners or members (or the equivalent Persons thereof) as such, make any distribution of assets, Equity Interests, obligations or securities to its stockholders, partners or members (or the equivalent Persons thereof) as such or issue or sell any Equity Interests (other than Designated Capital Market Transactions, and, except with respect to issuances or sales of Equity Interests to satisfy obligations under the Equity Derivatives, common stock) or accept any capital contributions, or permit any of its Subsidiaries to do any of the foregoing, or permit any of its Subsidiaries to purchase, redeem, retire, defease or otherwise acquire for value any Equity Interests in Group or to issue or sell any Equity Interests therein, except that, so long as no Default shall have occurred and be continuing at the time of any action described in clause (i) or (ii) below or would result therefrom: (i) Group may (A) declare and pay dividends and distributions payable only in common stock of Group, (B) except to the extent the Net Cash Proceeds thereof are required to be paid to the Administrative Agent pursuant to Section 2.9, purchase, redeem, retire, defease or otherwise acquire shares of its capital stock with the proceeds received contemporaneously from the issue of new shares of its capital stock with equal or inferior voting powers, designations, preferences and rights and (C) declare and pay cash dividends to its stockholders on or about October 5, 2000 in an amount equal to or less than $5,000,000; (ii) (A) any Subsidiary of Group may declare and pay dividends to any U.S. Credit Party, (B) any Excluded Foreign Subsidiary may declare and pay dividends to any Foreign Subsidiary, (C) any Foreign Credit Party may declare and pay dividends to another Foreign Credit Party, provided that it is reasonably determined by the Debt Coordinators that the rights and remedies of the Administrative Agent, the Debt Coordinators and the Collateral Trustee under the applicable Collateral Documents shall not be materially adversely affected thereby and (D) Group may declare and pay dividends pursuant to an equity Designated Capital Markets Transaction; (iii) Group may satisfy its obligations under the Equity Derivatives in accordance with the terms thereof, other than through the issuance or sale of Equity Interests; and (iv) the Trust Stock may be converted into common stock of Designer Holdings Ltd. in accordance with the TOPRs Documents. (g) Amendments of Constitutive Documents. Group will not amend, or permit any of its Subsidiaries to amend, its certificate of incorporation or bylaws or other constitutive documents in any manner that could adversely affect the rights of the Administrative Agent, the Debt Coordinators, the Collateral Trustee or any Lender Party under the Loan Documents or any Covered Facility. (h) Accounting Changes. Group will not make or permit, or permit any of its Subsidiaries to make or permit, any change in (i) accounting policies or reporting practices, except as required or permitted by GAAP or the Financial Accounting Standards Board, or (ii) Fiscal Year. (i) Prepayments, Etc., of Debt. Group will not prepay, redeem, purchase, defease or otherwise satisfy prior to the scheduled maturity thereof in any manner, or make any payment in violation of any subordination terms of, any Debt, except the prepayment of the Covered Facilities in accordance with the terms of this Agreement and Debt permitted under Section 2.6(b)(vi), (vii), (viii), (ix), (x) and (xi). (j) Negative Pledge. Group will not enter into or suffer to exist, or permit any of its Subsidiaries to enter into or suffer to exist, any agreement prohibiting or conditioning the creation or assumption of any Lien upon any of its property or assets except (i) in favor of the Secured Parties, (ii) as provided in any other agreement as existing on the Effective Date, (iii) any Capitalized Lease permitted by Section 2.6(b)(iv) solely to the extent that such Capitalized Lease prohibits a Lien on the property subject thereto, (iv) as to any asset that is subject to a contract of sale permitted by Section 2.6(d), (v) restrictions under the Securitization Facility, (vi) restrictions consisting of customary non-assignment provisions that are entered into in the ordinary course of business consistent with prior practice to the extent that such provisions restrict the transfer or assignment of such contract, and (vii) restrictions under any purchase money financing permitted by Section 2.6(b)(iii) solely to the extent that such purchase money financing prohibits a Lien on the property subject thereto. (k) Partnerships, Etc. Group will not become a general partner in any general or limited partnership or permit any of its Subsidiaries to do so. (l) Speculative Transactions. Group will not engage, or permit any of its Subsidiaries to engage, in any transaction involving commodity options, futures contracts, speculative Hedge Agreements or any similar speculative transactions. (m) Capital Expenditures. Group will not make, or permit any of its Subsidiaries to make, any Capital Expenditures that would cause the aggregate of all such Capital Expenditures made by Group and its Subsidiaries in any period set forth below to exceed the amount set forth below for such period: -------------------------- -------------------- YEAR ENDING IN AMOUNT -------------------------- -------------------- 2000 $80,000,000 -------------------------- -------------------- 2001 $70,000,000 -------------------------- -------------------- 2002 $70,000,000 -------------------------- -------------------- 2003 $70,000,000 -------------------------- -------------------- 2004 $70,000,000 -------------------------- -------------------- provided however that if for any Fiscal Year set forth above, the amount specified above for such Fiscal Year exceeds the aggregate amount of Capital Expenditures made by Group and its Subsidiaries during such Fiscal Year (the amount of such excess being the "Excess Amount"), Group and its Subsidiaries shall be entitled to make additional Capital Expenditures in the immediately succeeding Fiscal Year in an amount equal to 50% of the Excess Amount. (n) Payment Restrictions Affecting Subsidiaries. Group will not directly or indirectly, enter into or suffer to exist, or permit any of its Subsidiaries to enter into or suffer to exist, any agreement or arrangement limiting the ability of any of its Subsidiaries to declare or pay dividends or other distributions in respect of its Equity Interests or repay or prepay any Debt owed to, make loans or advances to, or otherwise transfer assets to or invest in, Group or any of its Subsidiaries (whether through a covenant restricting dividends, loans, asset transfers or investments, a financial covenant or otherwise), except (i) the Loan Documents and the Covered Facilities, (ii) restrictions in existence on the Effective Date, (iii) contractual restrictions consisting of customary non-assignment provisions that are entered into in the ordinary course of business consistent with prior practice to the extent that such provisions restrict the transfer of such contract, (iv) any Capitalized Lease permitted by Section 2.6(b)(iv) solely to the extent that the transfer of the property that is subject to such Capitalized Lease is prohibited, (v) restrictions under any purchase money financing permitted by Section 2.6(b)(iii) solely to the extent that the transfer of the property that is subject to such financing is prohibited, (vi) restrictions on the transfer of any asset that is subject to a contract of sale permitted by Section 2.6(d) and (vii) restrictions on transfer and dividends in the Securitization Facility. (o) Change in Nature of Business. Group will not make, or permit any of its Subsidiaries to make, any material change in the nature of its business as carried on at the Effective Date. SECTION 2.7. Financial Covenants. Until the Debt Termination Date, Group will, on a Consolidated basis: (a) Leverage Ratio. Maintain at the end of each Fiscal Quarter, as tested on the date that Group's Annual Report on Form 10-K or Quarterly Report on Form 10-Q, as applicable, is required to be delivered to the SEC, a Leverage Ratio not more than the ratio set forth below for each period set forth below: --------------------------------------------------------- QUARTER ENDING RATIO --------------------------------------------------------- December 31, 2000 5.30 --------------------------------------------------------- March 31, 2001 5.80 --------------------------------------------------------- June 30, 2001 5.35 --------------------------------------------------------- September 30, 2001 5.35 --------------------------------------------------------- December 31, 2001 4.25 --------------------------------------------------------- March 31, 2002 4.25 --------------------------------------------------------- June 30, 2002 4.25 --------------------------------------------------------- September 30, 2002 4.25 --------------------------------------------------------- December 31, 2002 3.50 --------------------------------------------------------- March 31, 2003 3.50 --------------------------------------------------------- June 30, 2003 3.50 --------------------------------------------------------- September 30, 2003 3.50 --------------------------------------------------------- December 31, 2003 3.00 --------------------------------------------------------- March 31, 2004 3.00 --------------------------------------------------------- June 30, 2004 3.00 --------------------------------------------------------- September 30, 2004 3.00 --------------------------------------------------------- December 31, 2004 3.00 --------------------------------------------------------- (b) Fixed Charge Coverage Ratio. Maintain at the end of each Fiscal Quarter, as tested on the date that Group's Annual Report on Form 10-K or Quarterly Report on Form 10-Q, as applicable, is required to be delivered to the SEC, a Fixed Charge Coverage Ratio not less than the ratio set forth below for each period set forth below: --------------------------------------------------------- QUARTER ENDING RATIO --------------------------------------------------------- December 31, 2000 1.05 --------------------------------------------------------- March 31, 2001 1.05 --------------------------------------------------------- June 30, 2001 1.05 --------------------------------------------------------- September 30, 2001 1.10 --------------------------------------------------------- December 31, 2001 1.10 --------------------------------------------------------- March 31, 2002 1.10 --------------------------------------------------------- June 30, 2002 1.10 --------------------------------------------------------- September 30, 2002 1.20 --------------------------------------------------------- December 31, 2002 1.20 --------------------------------------------------------- March 31, 2003 1.30 --------------------------------------------------------- June 30, 2003 1.30 --------------------------------------------------------- September 30, 2003 1.30 --------------------------------------------------------- December 31, 2003 1.30 --------------------------------------------------------- March 31, 2004 1.40 --------------------------------------------------------- June 30, 2004 1.40 --------------------------------------------------------- September 30, 2004 1.40 --------------------------------------------------------- December 31, 2004 1.40 --------------------------------------------------------- (c) Net Worth. Maintain at the end of each Fiscal Quarter, as tested on the date that Group's Annual Report on Form 10-K or Quarterly Report on Form 10-Q, as applicable, is required to be delivered to the SEC, an excess of Consolidated total assets over Consolidated total liabilities, of not less than an amount equal to (i) $384,000,000 plus (ii) 50% of an amount (but not less than zero) equal to (a) the aggregate net income of Group computed on a Consolidated cumulative basis since the first day of the last Fiscal Quarter in 2000 less (b) the aggregate amount of cash dividends paid by Group computed on a cumulative basis since the Effective Date less (c) the aggregate amount paid by Group or any of its Subsidiaries in settlement of the Equity Derivatives in the third Fiscal Quarter of 2002 plus, without duplication, (d) any reduction in net income relating to the Equity Derivatives resulting from any change in GAAP enacted prior to the Effective Date. (d) Limitation on Debt. Not permit the Total Bank Outstandings as of the last Business Day of each Fiscal Year set forth below to exceed the corresponding amount for such year as set forth below; and in each case Group will certify the foregoing within 10 Business Days after each such date to the Administrative Agent in a certificate with supporting calculations in reasonable detail by a Responsible Financial Officer of Group in each case prepared, to the best knowledge of such officer, in accordance with GAAP: ---------------------- --------------------------- FISCAL YEAR AMOUNT ---------------------- --------------------------- 2000 $2,035,000,000 ---------------------- --------------------------- 2001 $1,950,000,000 ---------------------- --------------------------- 2002 $1,900,000,000 ---------------------- --------------------------- 2003 $1,800,000,000 ---------------------- --------------------------- 2004 $1,700,000,000 ---------------------- --------------------------- SECTION 2.8. Reporting Requirements. Until the Debt Termination Date, Group will furnish to the Administrative Agent and the Lender Parties: (a) as soon as available and in any event within 50 days after the end of each of the first three Fiscal Quarters of each Fiscal Year, Consolidated balance sheets of Group and its Subsidiaries as of the end of such Fiscal Quarter and Consolidated statements of income and Consolidated statements of cash flows of Group and its Subsidiaries for the period commencing at the end of the previous Fiscal Year and ending with the end of such Fiscal Quarter, and also setting forth a variance analysis of monthly results during such Fiscal Quarter as compared to monthly budgeted amounts specified in the forecast for such Fiscal Quarter previously delivered pursuant to clause (h) below (or, with respect to such financial statements for the Fiscal Quarter ended December 30, 2000, compared to the monthly financial statements delivered to the Lender Parties pursuant to Section 6.1(a)(xiv)), duly certified (subject to year-end audit adjustments) by a Responsible Financial Officer of Group as having been prepared in accordance with GAAP and certifying compliance with the terms of this Agreement and setting forth in reasonable detail the calculations necessary to demonstrate compliance with Section 2.7; (b) as soon as available and in any event within 95 days after the end of each Fiscal Year of Group, a copy of the annual audit report for such year for Group and its Subsidiaries, containing Consolidated balance sheet of Group and its Subsidiaries as of the end of such Fiscal Year and Consolidated statements of income and cash flows of Group and its Subsidiaries for such Fiscal Year, in each case accompanied by an opinion of any Approved Accounting Firm or by other independent public accountants acceptable to the Debt Coordinators without any going concern or similar qualification, and a certificate of a Responsible Financial Officer of Group as to compliance with the terms of this Agreement and setting forth in reasonable detail the calculations necessary to demonstrate compliance with Section 2.7; (c) as soon as available and in any event within 30 days after the end of each month, Consolidated balance sheets of Group and its Subsidiaries as of the end of such month and Consolidated statements of income of Group and its Subsidiaries for the period commencing at the end of the previous month and ending with the end of such month, duly certified (subject to year-end audit adjustments) by a Responsible Financial Officer of Group as having been prepared in accordance with GAAP; (d) as soon as possible and in any event within two Business Days after the occurrence of each Default continuing on the date of such statement, a statement of a Responsible Financial Officer of Group setting forth details of such Default and the action that the Loan Parties have taken and propose to take with respect thereto; (e) promptly after the sending or filing thereof, copies of all reports that the Loan Parties send to any of their security holders generally, and copies of all reports and registration statements that Group or any Subsidiary files with the Securities and Exchange Commission or any national securities exchange; (f) promptly after the commencement thereof, notice of all actions and proceedings before any court, governmental agency or arbitrator affecting the Loan Parties or any of their Subsidiaries of the type described in Section 4.1(f); (g) within one Business Day after receipt thereof by any Loan Party, copies of each notice from S&P or Moody's indicating any change in the Debt Rating; (h) as soon as available and in any event no later than 45 days after the end of each Fiscal Year, (A) forecasts of balance sheets, income statements and cash flow statements on a monthly basis for the Fiscal Year then beginning and (B) an annual business plan for the next succeeding Fiscal Year and forecast on an annual basis for each Fiscal Year thereafter for the balance of the term of the Covered Facilities; in each case prepared by management of Group and satisfactory in form to the Debt Coordinators; (i) concurrently with any delivery of financial statements under clause (a) or (b) above, a certificate of a Responsible Financial Officer of Group specifying which Foreign Subsidiaries, if any, that were not previously Credit Parties prior to the most recently ended Fiscal Quarter, are to be classified, as of the end of such Fiscal Quarter, as Included Foreign Subsidiaries; (j) promptly after the assertion or occurrence thereof, notice of any Environmental Action against or of any noncompliance by Group or any of its Subsidiaries with any Environmental Law or Environmental Permit that would reasonably be expected to (i) have a Material Adverse Effect or (ii) cause any Material Real Property or Material Leased Property to be subject to any material restrictions on ownership, occupancy, use or transferability under any Environmental Law; (k) as soon as available and in any event within 50 days after the end of the third Fiscal Quarter of 2000, monthly forecasts for the fourth Fiscal Quarter of 2000 and an annual business plan for the next succeeding four Fiscal Years; in each case prepared by management of Group and satisfactory in form to the Debt Coordinators; and (l) such other information respecting the Loan Parties or any of their Subsidiaries as any Loan Party through the Debt Coordinators may from time to time reasonably require. SECTION 2.9. Mandatory Payments. (a) Group shall, on the date of receipt of the Net Cash Proceeds by any Loan Party or any of its Subsidiaries from (A) the sale, lease, transfer or other disposition of any assets of any Loan Party or any of its Subsidiaries (other than (1) any sale, lease, transfer or other disposition of assets pursuant to clause (i), (ii), (v), (vi), (xi) or (xii) of Section 2.6(d) and (2) Net Cash Proceeds from the sale, lease, transfer or other disposition of assets under any other clause of Section 2.6(d) in an amount of up to $10,000,000 in the aggregate), (B) the incurrence or issuance by any Loan Party or any of its Subsidiaries of any Debt incurred or issued under or in connection with any New Facility (other than the New Trade Credit Facility) and any Designated Capital Markets Transaction, (C) the sale or issuance by any Loan Party or any of its Subsidiaries of any Equity Interests (including, without limitation, receipt of any capital contribution) and (D) any Extraordinary Receipt received by or paid to or for the account of any Loan Party or any of its Subsidiaries and not otherwise included in clause (A), (B) or (C) above, pay an amount equal to the amount of such Net Cash Proceeds to the Administrative Agent; provided that with respect to clause (C) above, during the period after all Obligations of the Loan Parties under the Bridge Facility shall have been repaid in full, Group shall be required to pay to the Administrative Agent 50% of the Net Cash Proceeds received by any Loan Party or any of its Subsidiaries from the sale or issuance by any Loan Party or any of its Subsidiaries of any Equity Interests (including, without limitation, receipt of any capital contribution). (b) All such payments made to the Administrative Agent pursuant to this Section 2.9 shall be (i) applied by the Administrative Agent as specified in Section 2.1 of the Intercreditor Agreement and (ii) made together with accrued interest to the date of such payment on the principal amount prepaid. (c) Notwithstanding anything to the contrary contained in paragraph (a) of this Section 2.9 or in Section 2.6(d), so long as no Default shall have occurred and be continuing, if, on any date on which a payment to the Administrative Agent would otherwise be required pursuant to this Section 2.9 or Section 2.6(d), the aggregate amount of Net Cash Proceeds or other amounts otherwise required by such Sections to be paid to the Administrative Agent on such date are less than or equal to $5,000,000, Group may defer such prepayment until the date on which the aggregate amount of Net Cash Proceeds or other amounts otherwise required by such Sections to be paid to the Administrative Agent exceeds $5,000,000, provided that during such deferral period such amounts, to the extent originally constituting Net Cash Proceeds, shall otherwise be deemed to retain their original character as Net Cash Proceeds for application as required by this Section 2.9. Upon the occurrence of a Default, Group shall immediately pay to the Administrative Agent the amount of all Net Cash Proceeds received by any Loan Party or any of its Subsidiaries and other amounts, as applicable, that are required to be paid to the Administrative Agent by this Section 2.9 (without giving effect to the first and second sentences of this paragraph (c)) but which have not previously been so paid. SECTION 2.10. Release of Collateral. Upon the sale, transfer or other disposition of any item of Collateral (including 100% of the capital stock of a Subsidiary) of any Loan Party to any third party which is not an Affiliate in accordance with the terms of the Loan Documents, and the payment by Group of the Net Cash Proceeds thereof to the Administrative Agent in accordance with the provisions of Section 2.9 hereof (if applicable), the Collateral Trustee will, at Group's expense, execute and deliver to such Loan Party such documents as such Loan Party may reasonably request (without representation or warranty) to evidence the release of such (i) Subsidiary from the Loan Documents to which it is a party and (ii) item of Collateral from the assignment and security interest granted under the Collateral Documents in accordance with the terms of the Loan Documents. SECTION 2.11. Increased Costs, Etc. (a) If, due to either (i) the introduction of or any change in or in the interpretation of any law or regulation or (ii) the compliance with any guideline or request from any central bank or other governmental authority (whether or not having the force of law), there shall be any increase in the cost to any Lender Party of agreeing to make or of making, funding or maintaining eurodollar rate credit extensions under any Covered Facility or of agreeing to issue or of issuing or maintaining or participating in letters of credit or bankers' acceptances or other credit extensions (excluding, for purposes of this Section 2.11, any such increased costs resulting from (x) Taxes or Other Taxes (as to which Section 2.12 shall govern) and (y) changes in the basis of taxation of overall net income or overall gross income by the United States or by the foreign jurisdiction or state under the laws of which such Lender Party is organized or has its applicable lending office or any political subdivision thereof), then Group shall from time to time, upon demand by such Lender Party (with a copy of such demand to the Debt Coordinators), pay to the Administrative Agent for the account of such Lender Party additional amounts sufficient to compensate such Lender Party for such increased cost; provided, however, that before making any such demand, a Lender Party claiming additional amounts under this Section 2.11(a) agrees to use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to designate a different applicable lending office if the making of such a designation would avoid the need for, or reduce the amount of, such increased cost that may thereafter accrue and would not, in the reasonable judgment of such Lender Party, be otherwise disadvantageous to such Lender Party. A certificate as to the amount of such increased cost, submitted to Group by such Lender Party, shall be conclusive and binding for all purposes, absent manifest error. (b) If any Lender Party determines that compliance with any law or regulation or any guideline or request from any central bank or other governmental authority (whether or not having the force of law) affects or would affect the amount of capital required or expected to be maintained by such Lender Party or any corporation controlling such Lender Party and that the amount of such capital is increased by or based upon the existence of such Lender Party's commitment to lend or provide other credit extensions under the Covered Facilities (or similar contingent obligations), then, upon demand by such Lender Party or such corporation (with a copy of such demand to the Debt Coordinators), Group shall pay to the Administrative Agent for the account of such Lender Party, from time to time as specified by such Lender Party, additional amounts sufficient to compensate such Lender Party in the light of such circumstances, to the extent that such Lender Party reasonably determines such increase in capital to be allocable to the existence of such Lender Party's commitment to provide credit extensions under the Covered Facilities. A certificate as to such amounts submitted to Group by such Lender Party shall be conclusive and binding for all purposes, absent manifest error. (c) If, with respect to any eurodollar rate credit extensions under the Covered Facilities, the Required Lenders notify the Debt Coordinators that the eurodollar rate for any applicable interest period for any credit extensions under any Covered Facility will not adequately reflect the cost to such Lender Parties of making, funding or maintaining their eurodollar rate credit extensions for such interest period, the Debt Coordinators shall forthwith so notify Group and the Lender Parties, whereupon (i) each such eurodollar rate credit extension under the Covered Facilities will automatically, on the last day of the then existing interest period therefor, convert into a base rate credit extension and (ii) the obligation of the Lender Parties to make, or to convert credit extensions under the Covered Facilities into, eurodollar rate credits shall be suspended until the Debt Coordinators shall notify Group that the Required Lenders have determined that the circumstances causing such suspension no longer exist; provided, that any Covered Facility that does not by its terms provided for base rate loans shall be deemed in the circumstances described in this clause (c) to provided for interest at the "Base Rate" (as defined in the Bridge Facility). (d) Notwithstanding any other provision of this Agreement, any other Loan Document or any Covered Facility, if the introduction of or any change in or in the interpretation of any law or regulation shall make it unlawful, or any central bank or other governmental authority shall assert that it is unlawful, for any Lender Party or its eurodollar rate lending office to perform its obligations under any Covered Facility to make eurodollar rate credit extensions or to continue to fund or maintain eurodollar rate credit extensions under the Covered Facilities, then, on notice thereof and demand therefor by such Lender Party to Group through the Debt Coordinators, (i) each eurodollar rate credit extension, and each commitment by such Lender Party to make eurodollar rate credit extensions, under the Covered Facilities will automatically, upon such demand, convert into a base rate credit extension or commitment and (ii) the obligation of the Lender Parties to make, or maintain or to convert credit extensions into, eurodollar rate credit extensions under the Covered Facilities shall be suspended until the Debt Coordinators shall notify Group that such Lender Party has determined that the circumstances causing such suspension no longer exist, provided, however, that, before making any such demand, such Lender Party agrees to use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to designate a different eurodollar lending office if the making of such a designation would allow such Lender Party or its eurodollar lending office to continue to perform its obligations to make eurodollar rate credit extensions or to continue to fund or maintain eurodollar rate credit extensions and would not, in the judgment of such Lender Party, be otherwise disadvantageous to such Lender Party. SECTION 2.12. Taxes. (a) Any and all payments by the Loan Parties under the Loan Documents and under the Covered Facilities, and by any Lender Party to any other Lender Party under the Loan Documents, shall be made free and clear of and without deduction for any and all present or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, excluding, in the case of each Lender Party and each Agent, taxes that are imposed on its overall net income by the United States and taxes that are imposed on its overall net income (and franchise taxes imposed in lieu thereof) by the state or foreign jurisdiction under the laws of which such Lender Party or such Agent, as the case may be, is organized or any political subdivision thereof and, in the case of each Lender Party, taxes that are imposed on its overall net income (and franchise taxes imposed in lieu thereof) by the state or foreign jurisdiction of such Lender Party's applicable lending office or any political subdivision thereof (all such non-excluded taxes, levies, imposts, deductions, charges, withholdings and liabilities in respect of payments under the Loan Documents or under the Covered Facilities being hereinafter referred to as "Taxes"). If any Loan Party or Lender Party shall be required by law to deduct any Taxes from or in respect of any sum payable under any Loan Documents or under any Covered Facility to any Lender Party or any Agent, (i) the sum payable by such Loan Party or Lender Party shall be increased as may be necessary so that after the Loan Party or Lender Party, as applicable, and the Debt Coordinators have made all required deductions (including deductions applicable to additional sums payable under this Section 2.12) such Lender Party or such Agent, as the case may be, receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Loan Party or Lender Party making such payment shall make all such deductions and (iii) Group shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law. (b) In addition, the Loan Parties shall pay any present or future stamp, documentary, excise, property or similar taxes, charges or levies that arise from any payment made by any Loan Party under the Loan Documents or under the Covered Facilities, or by any Lender Party under the Loan Documents, or from the execution, delivery or registration of, performance under, or otherwise with respect to, any of the Loan Documents or Covered Facilities (hereinafter referred to as "Other Taxes"). (c) The Loan Parties shall indemnify each Lender Party and each Agent for and hold them harmless against the full amount of Taxes and Other Taxes, and for the full amount of taxes of any kind imposed by any jurisdiction on amounts payable under this Section 2.12, imposed on or paid by such Lender Party or such Agent (as the case may be) and any liability (including penalties, additions to tax, interest and expenses) arising therefrom or with respect thereto. This indemnification shall be made within 30 days from the date such Lender Party or such Agent (as the case may be) makes written demand therefor. (d) Within 30 days after the date of any payment of Taxes, Group shall furnish to the Administrative Agent, at its address referred to in Section 8.1 of the Intercreditor Agreement, the original or a certified copy of a receipt evidencing such payment. In the case of any payment made under the Loan Documents or under the Covered Facilities by or on behalf of the Loan Parties through an account or branch outside the United States or by or on behalf of the Loan Parties by a payor that is not a United States person, if Group determines that no Taxes are payable in respect thereof, Group shall furnish, or shall cause such payor to furnish, to the Administrative Agent, at such address, an opinion of counsel acceptable to the Debt Coordinators stating that such payment is exempt from Taxes. For purposes of this Section 2.12, the terms "United States" and "United States person" shall have the meanings specified in Section 7701 of the Code. (e) Each Lender Party organized under the laws of a jurisdiction outside the United States, on or prior to the date that it becomes a party to this Agreement or any Covered Facility, and from time to time thereafter if requested in writing by Group or the agent under the applicable Covered Facility (but only so long as such Lender Party remains lawfully able to do so), shall provide Group and the agent under the applicable Covered Facility with two original Internal Revenue Service forms W-8 BEN or W-8 ECI, as appropriate, or any successor or other form prescribed by the Internal Revenue Service, certifying that such Lender Party is exempt from or entitled to a reduced rate of United States withholding tax on payments pursuant to any Loan Document or Covered Facility. If any Lender Party which is not a "United States person" determines that it is unable to submit to Group or the agent under the applicable Covered Facility any form or certificate that such Lender Party is otherwise required to submit pursuant to this Section 2.12, or that is required to withdraw or cancel any such form or certificate, or that any such form or certificate previously submitted has otherwise become ineffective or inaccurate, such Lender Party shall promptly notify Group and the agent under the applicable Covered Facility of such fact. In addition, if a Lender Party provides a form W-8 (or any successor form) to the agent under the applicable Covered Facility and Group pursuant to this Section 2.12, such Lender Party shall also provide a certificate stating that it is not a "bank" within the meaning of Section 881(c)(3)(A) of the Code, and shall promptly notify the agent under the applicable Covered Facility and Group if such Lender Party determines that it is no longer able to provide such certification. If the form provided by a Lender Party at the time such Lender Party first becomes a party to any Loan Document or Covered Facility indicates a United States interest withholding tax rate in excess of zero, withholding tax at such rate shall be considered excluded from Taxes unless and until such Lender Party provides the appropriate form certifying that a lesser rate applies, whereupon withholding tax at such lesser rate only shall be considered excluded from Taxes for periods governed by such form; provided, however, that, if at the date of the Joinder Agreement or relevant assignment and acceptance pursuant to which a Lender Party becomes a party to the Intercreditor Agreement or any Covered Facility, as applicable, the Lender Party or Lender Party assignor, as applicable, was entitled to payments under subsection (a) in respect of United States withholding tax with respect to interest paid at such date, then, to such extent, the term Taxes shall include (in addition to withholding taxes that may be imposed in the future or other amounts otherwise includable in Taxes) United States withholding tax, if any, applicable with respect to the Lender Party or Lender Party assignee, as applicable, on such date. Upon the reasonable request of Group or the agent under the applicable Covered Facility, each Lender Party that has not provided the forms or other documents, as provided above, on the basis of being a United States person shall submit to Group and the agent under the applicable Covered Facility a certificate to the effect that it is such a "United States person" (as defined in Section 7701(a)(30) of the Internal Revenue Code). (f) For any period with respect to which a Lender Party has failed to provide Group with the appropriate form described in Section 2.12(e) (other than if such failure is due to a change in law occurring subsequent to the date on which such Lender Party became a Lender Party, or if such form otherwise is not required under the first sentence of subsection (e) above because Group has not requested in writing such form subsequent to the date on which such Lender Party became a Lender Party), such Lender Party shall not be entitled to indemnification under Section 2.12(a) or (c) with respect to Taxes imposed by the United States; provided, however, that should a Lender Party become subject to Taxes because of its failure to deliver a form required hereunder, Group shall take such steps as the Lender Party or Debt Coordinators shall reasonably request to assist the Lender Party to recover such Taxes. (g) Any Lender Party claiming any additional amounts payable pursuant to this Section 2.12 shall use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to change the jurisdiction of its eurodollar lending office if the making of such a change would avoid the need for, or reduce the amount of, any such additional amounts that may thereafter accrue and would not, in the reasonable judgment of such Lender Party, be otherwise disadvantageous to such Lender Party. (h) Within 60 days after the written request of Group or the Administrative Agent, each Lender Party shall execute and deliver to Group such certificates or forms as are reasonably requested by Group in such request, which can be furnished consistent with the facts and which are reasonably necessary to assist the Loan Parties in applying for refunds of Taxes paid by the Loan Parties hereunder or any Covered Facility or making payment of Taxes hereunder or any Covered Facility; provided, however, that no Lender Party or Agent shall be required to furnish to Group any financial or other information which it considers confidential. The cost of preparing any materials referred to in the previous sentence shall be borne by Group. If a Lender Party or Agent determines in good faith that it has received a refund of any Taxes or Other Taxes with respect to which the Loan Parties have made a payment of additional amounts, such Lender Party or Agent shall pay to Group an amount that such Lender Party or Agent determines in good faith to be equal to the net benefit, after tax, that was obtained by such Lender Party or Agent (as the case may be) as a consequence of such refund. SECTION 2.13. Payments and Computations. (a) Each Lender Party and each Loan Party, as applicable, shall make each payment hereunder and under each other Loan Document, not later than 11:00 A.M. (New York City time) on the day when due in U.S. dollars to the Administrative Agent at the Administrative Agent's Account in same day funds, with payments being received by the Administrative Agent after such time being deemed to have been received on the next succeeding Business Day. The Administrative Agent will promptly thereafter cause like funds to be distributed in accordance with the terms of the Intercreditor Agreement. (b) All computations of amounts due under the Loan Documents shall be made by the Debt Coordinators on the basis of a year of 360 days, in each case for the actual number of days (including the first day but excluding the last day) occurring in the period for which such amounts are payable. Each determination by the Debt Coordinators of an amount due under the Loan Documents shall be conclusive and binding for all purposes, absent manifest error. (c) Whenever any payment under any of the Loan Documents shall be stated to be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of payment of interest or commitment fee, as the case may be. SECTION 2.14. Certain Post-Closing Matters. (a) With respect to those Subsidiaries of Group incorporated or organized under the laws of Belgium, Mexico, Hong Kong and Barbados, Group will cause to be furnished, within 60 days after the Effective Date, all documents and instruments, and cause to be performed, by such date, all actions, in each case of the type specified in Section 6.1(a) with respect to Foreign Credit Parties, including counterparts of this Agreement in form and substance reasonably satisfactory to the Debt Coordinators and the Subsidiary Guaranty executed and delivered by all Subsidiaries in such jurisdictions, and such other documents sufficient in the judgment of the Debt Coordinators to create in favor of the Collateral Trustee for the benefit of the Secured Parties a perfected first priority security interest in the property of all such Subsidiaries (other than Excluded Property), such documents to include evidence of corporate good standing, corporate authority and legal opinions, and all other related documentation; provided that the Debt Coordinators may extend the 60 day time period specified in this subsection (a) by up to an additional 45 days if requested by Group. (b) With respect to all material intellectual property license agreements to which Group or any of its Subsidiaries is a party (other than any such license agreements which are the subject of actual litigation between the licensor and licensee as of the Effective Date), Group will use all commercially reasonable efforts to cause, within 30 days after the Effective Date, all licensors party to such license agreements to consent to a grant of a security interest in such license (but not to the exercise by the Collateral Agent or any Secured Party of any remedies with respect thereto) to the Collateral Trustee for the benefit of the Secured Parties. (c) Group will within 6 months after the Effective Date either sell, transfer or otherwise dispose of the assets defined on Schedule 2.6(d)(iii) as the Costa Rica Assets, Paris Apartment, German Real Estate and NYC Apartment, with the Net Cash Proceeds therefrom applied as specified in Section 2.9, or by such date, (i) Costa Rica will be deemed to be an Included Foreign Jurisdiction for all purposes hereunder, and Group will, by such date, cause to be furnished all documents and instruments, and cause to be performed all actions, in each case of the type specified in Section 6.1(a) with respect to Foreign Credit Parties, including the execution and delivery of counterparts of this Agreement in form and substance reasonably satisfactory to the Debt Coordinators and of the Subsidiary Guaranty by all Subsidiaries in such jurisdictions, and such other documents sufficient in the judgment of the Debt Coordinators to create in favor of the Collateral Trustee for the benefit of the Secured Parties a perfected first priority security interest in the relevant property of such jurisdiction and (ii) with respect to all other assets specified above, Group will, by such date, cause to be furnished all documents and instruments, and cause to be performed all actions, in each case of the type specified in Section 6.1(a) with respect to such assets as are sufficient in the judgment of the Debt Coordinators to create in favor of the Collateral Trustee for the benefit of the Secured Parties a perfected first priority security interest in such assets. (d) With respect to all leasehold mortgages to be delivered pursuant to Section 6.1(a)(v), Group will use all commercially reasonable efforts to cause, within 30 days after the Effective Date, all landlords to consent to the granting of a leasehold mortgage in form and substance satisfactory to the Debt Coordinators. (e) With respect to the delivery of certain non-U.S. Collateral, Group will cause to be furnished all documents and instruments, and cause to be performed all actions, in each case of the type, and by the respective dates, specified therefor in Schedule 2.14(e). SECTION 2.15. Successor Agent. Citibank, N.A. hereby resigns in its capacity as agent under each Existing Facility to which it is a party as agent, and Citicorp USA, Inc. is hereby appointed as successor agent in each such respective capacity under each such facility. Citicorp USA, Inc. hereby accepts such appointment, and the "Required Lenders" and the "Borrower" (each as defined in each such respective facility) hereby approves such appointment. SECTION 2.16. Certain Amendments. (a) (a) Section 2.03(c) of the Old Five-Year Credit Agreement is amended by inserting the following after the fourth sentence thereof: "The obligation of each Revolving Credit Lender to purchase an assignment of its Pro Rata Share of the Letter of Credit Advance to refund and refinance the Letter of Credit Advances previously made by the Issuing Bank to the Borrower under this clause shall be absolute and unconditional and shall not be affected by any circumstance, including (i) any set-off, counterclaim, recoupment, defense or other right which any Lender may have against the Issuing Bank, the Administrative Agent, the Borrower or any other Person for any reason whatsoever; (ii) the occurrence or continuance of any Default or the inability of the Borrower to otherwise satisfy the conditions precedent set forth in Article III; (iii) any adverse change in the condition (financial or otherwise) of the Borrower; (iv) the acceleration or maturity of any Letter of Credit Advances or other Obligations or the termination of any Commitment after the making of any Letter of Credit Advance; (v) any breach of this Agreement or any other Loan Document by the Borrower, or any Lender; or (vi) any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing." (b) Section 2.03 of the Old Five-Year Credit Agreement is further amended by inserting at the end thereof the following new clause (e): "(e) Reimbursement of Issuing Bank for Amounts Returned or Disgorged. Each Letter of Credit issued and each Letter of Credit Advance made, shall, effective upon its issuance or creation, as the case may be, and without further action, be issued and/or created on behalf of all Lenders (including the Issuing Bank thereof) according to their respective Pro Rata Shares. Each Lender shall, to the extent of its Pro Rata Share, be deemed irrevocably to have participated in the issuance of such Letter of Credit and the creation of such Letter of Credit Advance and shall be responsible to promptly reimburse the Issuing Bank thereof for Letter of Credit Advances which have not been reimbursed by the Borrower or reimbursed by the Borrower but must be returned, restored or disgorged by the Issuing Bank for any reason, and each Lender shall, to the extent of its Pro Rata Share, be entitled to receive from the Administrative Agent a ratable portion of all fees and interest with respect to such Letter of Credit and/or such Acceptance (including the letter of credit fees received by the Administrative Agent, with respect to each Letter of Credit, but excluding any Issuing fees and other charges payable to the Issuing Bank qua Issuing Bank). In the event the Issuing Bank must for any reason return or disgorge such reimbursement, the Issuing Bank shall promptly notify each Lender of the unreimbursed amount of such drawing and of such Lender's respective participation therein. Each Lender shall make available to the Issuing Bank, whether or not any Default shall have occurred and be continuing, an amount equal to its respective participation in same day or immediately available funds in accordance with the procedures in Section 2.03(c). In the event that any Lender fails to make available to the Issuing Bank the amount of such Lender's participation in such Letter of Credit or such Letter of Credit Advance, as provided herein, the Issuing Bank shall be entitled to recover such amount on demand from such Lender together with interest at the Federal Funds Rate from the date such amount is due through (but excluding) the date such payment is made (together with such other compensatory amounts as may be required to be paid by such Lender to the Administrative Agent pursuant to the Rules for Interbank Compensation of the council on International Banking or the Clearinghouse Compensation Committee, as the case may be, as in effect from time to time). (c) Section 2.05(c)(ii) of the Old Five-Year Credit Agreement is amended by inserting after the word "Borrower" in the first line thereof the following: ", and each Lender's obligation to risk participate in Letters of Credit, in each case". (d) Section 2.05(c) of the Old Five-Year Credit Agreement is further amended by inserting at the end thereof the following new clause (iii): "(iii) The obligations of the Borrower and the Lenders hereunder shall remain in full force and effect and shall apply to any alteration to or extension of the expiration date of any Letter of Credit or any Letter of Credit issued to replace, extend or alter any Letter of Credit during the term of this Agreement. None of the foregoing shall affect, impair or prevent the vesting of any of the rights or powers granted to the Issuing Bank or any Lender hereunder. In furtherance and extension and not in limitation or derogation of any of the foregoing, any action taken or omitted to be taken by the Issuing Bank in good faith (and not constituting gross negligence or willful misconduct) shall be binding upon each Borrower, and each such Lender, and shall not put the Issuing Bank under any resulting liability to any Borrower or any such Lender, as the case may be." (e) Section 8.07(a) of the Old Five-Year Credit Agreement is amended by deleting the words "Administrative Agent and (so long as no Default has occurred and is continuing) the Borrower, such consent not to be unreasonably withheld or delayed" appearing starting in the 14th line thereof, and inserting in lieu thereof the following: "Administrative Agent, the Issuing Bank and Swing Line Bank". (f) Section 8.07(a) of the Old Five-Year Credit Agreement is further amended by deleting the amount "$1,000,000" appearing starting in the 22nd line thereof, and inserting in lieu thereof the amount "$500,000". Article III CONDITIONS OF LENDING AND EXTENSIONS OF CREDIT SECTION 3.1. Conditions Precedent to Each Credit Extension. The obligation of each Lender Party to make a loan, issue a letter of credit, bankers' acceptance or other credit extension pursuant to any Covered Facility and the right of any Loan Party to request a borrowing, the issuance of a letter of credit, bankers' acceptance or to request any other credit extension, shall be, in addition to the conditions precedent present in the applicable Covered Facility, subject to the further conditions precedent that on the date of such borrowing, issuance or other credit extension (a) the following statements shall be true (and the acceptance by such Loan Party of the proceeds of such borrowing, issuance or other credit extension shall constitute a representation and warranty by Group and such Loan Party that on the date of such borrowing, issuance or other credit extension such statements are true): (i) the representations and warranties contained in each Loan Document are correct in all material respects on and as of such date, before and after giving effect to such borrowing, issuance of letter of credit, bankers' acceptance or other credit extension and to the application of the proceeds therefrom, as though made on and as of such date, other than any such representations or warranties that, by their terms, refer to a specific date other than the date of such borrowing, issuance of letter of credit, bankers' acceptance or other credit extension, in which case such representations and warranties shall be correct in all material respects as of such specific date; and (ii) no Default has occurred and is continuing under the Loan Documents and no payment default has occurred and is continuing under any Covered Facility, or would result from such borrowing, issuance of letter of credit, bankers' acceptance or other credit extension or from the application of the proceeds therefrom; and (b) the Administrative Agent shall have received such other information as the Debt Coordinators may reasonably request in order to confirm the (i) accuracy of the representations and warranties of the Loan Parties in the Loan Documents and Covered Facilities, (ii) timely compliance by the Loan Parties with the terms, covenants and agreements set forth in the Loan Documents and the Covered Facilities and (iii) absence of any Default under the Loan Documents or the Covered Facilities. Article IV REPRESENTATIONS AND WARRANTIES SECTION 4.1. Representations and Warranties of the Loan Parties. Each Loan Party represents and warrants as follows: (a) Each Loan Party and each of its Subsidiaries (i) is a corporation or other entity duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization, (ii) is duly qualified and in good standing as a foreign corporation or otherwise in each other jurisdiction in which it owns or leases property or in which the conduct of its business requires it to so qualify or be licensed except where the failure to so qualify or be licensed would not be reasonably likely to have a Material Adverse Effect and (iii) has all requisite corporate (or other) power and authority (including, without limitation, all material governmental licenses, permits and other approvals) to own or lease and operate its properties and to carry on its business as now conducted and as proposed to be conducted. (b) Set forth on Schedule 4.1(b) hereto is a complete and accurate list of all Subsidiaries of Group on the date hereof, showing (as to each such Subsidiary) the jurisdiction of its incorporation or organization, the number of shares of each class of its Equity Interests authorized, and the number outstanding, on the date hereof and the percentage of each such class of its Equity Interests owned (directly or indirectly) by such Loan Party and the number of shares covered by all outstanding options, warrants, rights of conversion or purchase and similar rights at the date hereof. Schedule 4.1(b) also identifies all Foreign Subsidiaries of Group in the Included Foreign Jurisdictions which (i) are classified as inactive or dormant (or other similar designation) under the applicable laws of any Included Foreign Jurisdiction or (ii) have assets with an aggregate fair market value of less than $150,000. All of the outstanding Equity Interests in each Loan Party's Subsidiaries have been validly issued, are fully paid and non-assessable and are owned by such Loan Party or one or more of its Subsidiaries (except as described on Schedule 4.1(b)) free and clear of all Liens, except those created under the Collateral Documents. (c) The execution, delivery and performance by each Loan Party of each Loan Document and each Covered Document to which it is or is to be a party and the other transactions contemplated by the Loan Documents and the Covered Documents, are within such Loan Party's corporate or other powers, have been duly authorized by all necessary corporate or other action, and do not (i) contravene such Loan Party's charter or bylaws or other constitutive documents, (ii) violate any law, rule, regulation (including, without limitation, Regulation X of the Board of Governors of the Federal Reserve System), order, writ, judgment, injunction, decree, determination or award, (iii) conflict with or result in the breach of, or constitute a default under, any contract, loan agreement, indenture, mortgage, deed of trust, lease or other instrument binding on or affecting any Loan Party, any of its Subsidiaries or any of their properties or (iv) except for the Liens created under the Loan Documents and the Covered Documents, result in or require the creation or imposition of any Lien upon or with respect to any of the properties of any Loan Party or any of its Subsidiaries. No Loan Party or any of its Subsidiaries is in violation of any such law, rule, regulation, order, writ, judgment, injunction, decree, determination or award or in breach of any such contract, loan agreement, indenture, mortgage, deed of trust, lease or other instrument, the violation or breach of which would be reasonably likely to have a Material Adverse Effect. (d) Except as specified in Section 2.14, as set forth on Schedule 4.1(d) or for which provision has been duly made, no authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body or any other third party is required for (i) the due execution, delivery, recordation, filing or performance by any Loan Party of any Loan Document and any Covered Document to which it is or is to be a party, or the other transactions contemplated by the Loan Documents and the Covered Documents, (ii) the grant by any Loan Party of the Liens granted by it pursuant to the Collateral Documents and the Covered Documents, (iii) the perfection or maintenance of the Liens created under the Collateral Documents (including the first priority nature thereof) and the Covered Documents or (iv) the exercise by any Agent or any Lender Party of its rights under the Loan Documents and the Covered Documents or the remedies in respect of the Collateral pursuant to the Collateral Documents and the Covered Documents. (e) This Agreement and each Covered Document has been, and each other Loan Document when delivered will have been, duly executed and delivered by each Loan Party party thereto. This Agreement and each Covered Document is, and each other Loan Document when delivered will be, the legal, valid and binding obligation of each Loan Party party thereto, enforceable against such Loan Party in accordance with its terms, except as enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors' rights generally and by general principles of equity (regardless of whether enforcement is sought in equity or at law). (f) There is no action, suit, investigation, litigation or proceeding affecting any Loan Party or any of its Subsidiaries or any of its or their respective properties, including any Environmental Action, pending or threatened before any court, governmental agency or arbitrator that (i) would be reasonably likely to have a Material Adverse Effect or (ii) purports to affect the legality, validity or enforceability of any Loan Document or Covered Document or the transactions contemplated by the Loan Documents and the Covered Documents. (g) The Consolidated balance sheet of Group and its Subsidiaries as at January 1, 2000, and the related Consolidated statements of operations, stockholders' equity and cash flow of Group and its Subsidiaries for the Fiscal Year then ended, accompanied by an unqualified opinion of Deloitte & Touche LLP, and the Consolidated balance sheet of Group and its Subsidiaries as at July 1, 2000, and the related Consolidated statements of operations, stockholders' equity and cash flow of Group and its Subsidiaries for the six months then ended, duly certified by a Responsible Financial Officer of Group, copies of which have been furnished to each Lender Party, fairly present, subject, in the case of said balance sheet as at July 1, 2000, and said statements of operations, stockholders' equity and cash flow for the six months then ended, to year-end audit adjustments, the Consolidated financial condition of Group and its Subsidiaries as at such dates and the Consolidated results of operations of Group and its Subsidiaries for the periods ended on such dates, all in accordance with GAAP applied on a consistent basis. (h) The Consolidated forecasted balance sheet, statements of operations, stockholders' equity and cash flow of Group and its Subsidiaries delivered to the Lender Parties pursuant to Section 2.8 and 6.1(a)(xiv) were prepared in good faith on the basis of the assumptions stated therein, which assumptions were fair in light of the conditions existing at the time of delivery of such forecasts, and represented, at the time of delivery, Group's best estimate of its future financial performance. (i) There shall have occurred no material adverse change in (i) the business, condition (financial or otherwise), operations, performance, properties or prospects of Group and its Subsidiaries, taken as a whole, from that which was, in each case on and as of the Effective Date, either publicly disclosed, or otherwise furnished in writing to the Lender Parties, by or on behalf of Group, (ii) the ability of any Loan Party to perform its obligations under the Loan Documents or (iii) the ability of the Administrative Agent, the Collateral Trustee, the Debt Coordinators or the Lender Parties to enforce the Loan Documents. (j) The written information, exhibits and reports furnished by or on behalf of any Loan Party to any Agent or any Lender Party in connection with the negotiation of the Loan Documents or pursuant to the terms of the Loan Documents, taken as a whole, contained no untrue statement of a material fact and did not omit to state a material fact necessary to make the statements made therein not misleading. (k) Neither any Loan Party nor any of its Subsidiaries is engaged in the business of extending credit for the purpose of purchasing or carrying Margin Stock, and no proceeds of any loan or drawing under any letter of credit or bankers' acceptance or other credit extension under any Covered Facility will be used to purchase or carry any Margin Stock or to extend credit to others for the purpose of purchasing or carrying any Margin Stock (except for purchases of Group Equity Interests pursuant to the Equity Derivatives). (l) Neither any Loan Party nor any of its Subsidiaries is an "investment company", or an "affiliated person" of, or "promoter" or "principal underwriter" for, an "investment company", as such terms are defined in the Investment Company Act of 1940, as amended. Neither the making of any loan, nor the issuance of any letter of credit or bankers' acceptance or any other credit extension under any Covered Facility, nor the application of the proceeds or repayment thereof by any Loan Party or any of its Subsidiaries, nor the consummation of the other transactions contemplated by the Loan Documents, will violate any provision of such Act or any rule, regulation or order of the Securities and Exchange Commission thereunder. (m) Neither any Loan Party nor any of its Subsidiaries is a party to any indenture, loan or credit agreement or any lease or other agreement or instrument or subject to any charter or corporate restriction that would be reasonably likely to have a Material Adverse Effect. (n) The Collateral Documents create a valid and perfected first priority security interest (to the extent applicable) in the Collateral, securing the payment of the Secured Obligations, and all filings and other actions necessary or desirable to perfect and protect such security interest have been duly taken or provided for. The Loan Parties are the legal and beneficial owners of the Collateral free and clear of any Lien, except for the liens and security interests created or permitted under the Loan Documents, and where applicable, the Covered Facilities. (o) Each Loan Party is, individually and together with its Subsidiaries, Solvent. (p) Set forth on Schedule 4.1(p) hereto is a complete and accurate list of all Plans, Multiemployer Plans and Welfare Plans on the date hereof. Except as set forth on Schedule 4.1(p): (i) No ERISA Event has occurred or is reasonably expected to occur with respect to any Plan that has resulted in or is reasonably expected to result in a material liability of any Loan Party or any ERISA Affiliate. (ii) Schedule B (Actuarial Information) to the most recent annual report (Form 5500 Series) for each Plan, copies of which have been filed with the Internal Revenue Service and furnished to the Lender Parties, is complete and accurate and fairly presents the funding status of such Plan, and since the date of such Schedule B there has been no material adverse change in such funding status. (iii) Neither any Loan Party nor any ERISA Affiliate has incurred or is reasonably expected to incur any Withdrawal Liability exceeding $5,000,000 to any Multiemployer Plan. (iv) Neither any Loan Party nor any ERISA Affiliate has been notified by the sponsor of a Multiemployer Plan that such Multiemployer Plan is in reorganization or has been terminated, within the meaning of Title IV of ERISA, and no such Multiemployer Plan is reasonably expected to be in reorganization or to be terminated, within the meaning of Title IV of ERISA. (q) (i) The operations and properties of each Loan Party and each of its Subsidiaries comply in all material respects with all applicable Environmental Laws and Environmental Permits, all material past non-compliance with such Environmental Laws and Environmental Permits has been resolved without ongoing material obligations or costs, and no circumstances exist that would be reasonably likely to (A) form the basis of an Environmental Action against any Loan Party or any of its Subsidiaries or any of their properties that could be reasonably expected to have a Material Adverse Effect or (B) cause any such property to be subject to any material restrictions on ownership, occupancy, use or transferability under any Environmental Law. (ii) None of the properties currently or formerly owned or operated by any Loan Party or any of its Subsidiaries is, to the knowledge of any Loan Party with respect to formerly owned properties, listed or proposed for listing on the NPL or on the CERCLIS or any analogous foreign, state or local list or is adjacent to any such property, except where such listing would not reasonably be expected to have a Material Adverse Effect; there are no and never have been any underground or aboveground storage tanks or any surface impoundments, septic tanks, pits, sumps or lagoons in which Hazardous Materials are being or have been treated, stored or disposed on any property currently owned or operated by any Loan Party or any of its Subsidiaries or, to the best of its knowledge, on any property formerly owned or operated by any Loan Party or any of its Subsidiaries that in any case could reasonably be expected to have a Material Adverse Effect; there is no asbestos or asbestos-containing material on any property currently owned or operated by any Loan Party or any of its Subsidiaries that in any case could reasonably be expected to have a Material Adverse Effect; and Hazardous Materials have not been released, discharged or disposed of on any property currently or, to the best knowledge of the Loan Parties, formerly owned or operated by any Loan Party or any of its Subsidiaries that in any case could reasonably be expected to have a Material Adverse Effect. (iii) Neither any Loan Party nor any of its Subsidiaries is undertaking, and has not completed, either individually or together with other potentially responsible parties, any investigation or assessment or remedial or response action relating to any actual or threatened release, discharge or disposal of Hazardous Materials at any site, location or operation, either voluntarily or pursuant to the order of any governmental or regulatory authority or the requirements of any Environmental Law that in any case could reasonably be expected to have a Material Adverse Effect; and all Hazardous Materials generated, used, treated, handled or stored at, or transported to or from, any property currently or formerly owned or operated by any Loan Party or any of its Subsidiaries have been disposed of in a manner not reasonably expected to result in material liability to any Loan Party or any of its Subsidiaries. (r) (i) Each Loan Party and each of its Subsidiaries and Affiliates has filed, has caused to be filed or has been included in all tax returns (Federal, state, local and foreign) required to be filed and has paid all taxes shown thereon to be due, together with applicable interest and penalties. (ii) Set forth on Schedule 4.1(r) hereto is a complete and accurate list, as of the date hereof, of each taxable year of each Loan Party and each of its Subsidiaries and Affiliates for which Federal income tax returns have been filed and for which the expiration of the applicable statute of limitations for assessment or collection has not occurred by reason of extension or otherwise (an "Open Year"). (ii) The aggregate unpaid amount, as of the date hereof, of adjustments to the Federal income tax liability of each Loan Party and each of its Subsidiaries and Affiliates proposed by the Internal Revenue Service with respect to Open Years does not exceed $5,000,000. Set forth on Schedule 4.1(r) hereto is a complete and accurate description, as of the date hereof, of each such item that separately, for all such Open Years, together with applicable interest and penalties, exceeds $1,000,000. No issues have been raised by the Internal Revenue Service in respect of Open Years that, in the aggregate, would be reasonably likely to have a Material Adverse Effect. (iii) The aggregate unpaid amount, as of the date hereof, of adjustments to the state, local and foreign tax liability of each Loan Party and its Subsidiaries and Affiliates proposed by all state, local and foreign taxing authorities (other than amounts arising from adjustments to Federal income tax returns) does not exceed $5,000,000. No issues have been raised by such taxing authorities that, in the aggregate, would be reasonably likely to have a Material Adverse Effect. (s) Neither the business nor the properties of any Loan Party or any of its Subsidiaries are affected by any fire, explosion, accident, strike, lockout or other labor dispute, drought, storm, hail, earthquake, embargo, act of God or of the public enemy or other casualty (whether or not covered by insurance) that would be reasonably likely to have a Material Adverse Effect. (t) Set forth on Schedule 4.1(t) hereto is a complete and accurate list of all Liens on the property or assets of any Loan Party on the date hereof, showing the lienholder thereof and the property or assets of such Loan Party subject thereto. (u) Set forth on Schedule 4.1(u) hereto is a complete and accurate list of all Material Real Property owned by any Loan Party on the date hereof, showing the street address, county or other relevant jurisdiction, state and record owner thereof. Each Loan Party or such Subsidiary has good and marketable fee simple title to such real property, free and clear of all Liens, other than Liens created or permitted by the Loan Documents. (v) Set forth on Schedule 4.1(v) hereto is a complete and accurate list of all Material Leased Property under which any Loan Party or any of its Subsidiaries is the lessee on the date hereof, showing the street address, county or other relevant jurisdiction, state, lessor, lessee, expiration date and annual rental cost thereof. (w) Set forth on Schedule 4.1(w) hereto is a complete and accurate list of all Investments held by any Loan Party or any of its Subsidiaries on the date hereof, showing the amount, obligor or issuer and maturity, if any, thereof. (x) Set forth on Schedule 4.1(x) hereto is a complete and accurate list as of the date hereof of all United States and Included Foreign Jurisdiction patents, trademarks, trade names, service marks and registered copyrights, and all applications therefor, of each Credit Party, showing the United States and each Included Foreign Jurisdiction in which registered, the registration number and the date of registration. (y) Each Foreign Subsidiary owned directly or indirectly by Group is either a "controlled foreign corporation", as defined under Section 957 of the Code, or owned, directly or indirectly, by one or more "controlled foreign corporations". Article V EVENTS OF DEFAULT SECTION 5.1. Events of Default. If any of the following events ("Events of Default") shall occur hereunder, or under any other Loan Document, and be continuing: (a) any Loan Party shall fail to pay any amounts payable under any Loan Document after the same becomes due and payable; or (b) any representation or warranty made by any Loan Party (or any of its officers) under or in connection with any Loan Document shall prove to have been incorrect in any material respect when made; or (c) any Loan Party shall fail to perform or observe any term, covenant or agreement contained in Section 2.5(f), (j), (k), (m) or Section 2.6, 2.7, 2.8 or 2.9; or (d) any Loan Party shall fail to perform or observe any other term, covenant or agreement contained in any Loan Document or any Covered Document (to the extent not superseded and replaced pursuant to Section 2.1 hereof) on its part to be performed or observed if such failure shall remain unremedied for 10 Business Days (i) after written notice thereof shall have been given to such Loan Party by the Debt Coordinators or (ii) if earlier, after any Authorized Officer of Group or Warnaco obtains knowledge thereof; or (e) any Loan Party or any of its Subsidiaries shall fail to pay any principal of or premium or interest on or any other amount payable in respect of any Debt that is outstanding in a principal or reimbursement amount (or, in the case of any Hedge Agreement, its Agreement Value) of (i) with respect to any Covered Facility, at least $5,000,000 or (ii) with respect to any Debt, at least $20,000,000 in the aggregate; in any case either individually or in the aggregate of such Loan Party or such Subsidiary (as the case may be), when the same becomes due and payable whether by scheduled maturity, required prepayment, acceleration, demand or otherwise, and such failure shall continue after the applicable grace period, if any, specified in the agreement or instrument relating to such Debt; or any other event shall occur or condition shall exist under any agreement or instrument relating to any such Debt as specified in clause (ii) and shall continue after the applicable grace period, if any, specified in such agreement or instrument, if the effect of such event or condition is to accelerate, or to permit the acceleration of, the maturity of such Debt as specified in clause (ii) or otherwise to cause, or to permit the holder thereof to cause, such Debt as specified in clause (ii) to mature; or any such Debt as specified in clause (ii) shall be declared to be due and payable or is then required to be prepaid or redeemed (other than by a regularly scheduled required prepayment or redemption), purchased or defeased, or an offer to prepay, redeem, purchase or defease such Debt as specified in clause (ii) shall be then required to be made, in each case prior to the stated maturity thereof; or (f) any Loan Party or any of its Subsidiaries (other than any Immaterial Subsidiary) shall generally not pay its debts as such debts become due, or shall admit in writing its inability to pay its debts generally, or shall make a general assignment for the benefit of creditors; or any proceeding shall be instituted by or against any Loan Party or any of its Subsidiaries (other than any Immaterial Subsidiary) seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee, or other similar official for it or for any substantial part of its property and, in the case of any such proceeding instituted against it (but not instituted by it) that is being diligently contested by it in good faith, either such proceeding shall remain undismissed or unstayed for a period of 30 days or any of the actions sought in such proceeding (including, without limitation, the entry of an order for relief against, or the appointment of a receiver, trustee, custodian or other similar official for, it or any substantial part of its property) shall occur; or any Loan Party or any of its Subsidiaries (other than any Immaterial Subsidiary) shall take any corporate action to authorize any of the actions set forth above in this subsection (f); or (g) any judgment or order for the payment of money in excess of $20,000,000 shall be rendered against any Loan Party or any of its Subsidiaries and either (i) enforcement proceedings shall have been commenced by any creditor upon such judgment or order or (ii) there shall be any period of 10 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect, provided however that any judgment or order shall not give rise to an Event of Default if and for so long as (A) the amount of such judgment or order which remains unsatisfied is covered by a valid and binding insurance policy issued by an insurer rated at least "A" by A.M. Best and covering full payment thereof and (B) such insurer has been notified, and has not disputed the claim made for payment, of the amount of such judgment or order; or (h) any non-monetary judgment or order shall be rendered against any Loan Party or any of its Subsidiaries that could be reasonably likely to have a Material Adverse Effect, and there shall be any period of 10 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; or (i) any provision of any Loan Document, after delivery thereof pursuant to Section 2.5(k) or 6.1, shall for any reason cease to be valid and binding on or enforceable against any Loan Party party to it, or any such Loan Party shall so state in writing; or (j) any Collateral Document after delivery thereof pursuant to Section 2.5(k) or 6.1 shall for any reason (other than pursuant to the terms thereof) cease to create a valid and perfected first priority lien on and security interest in the Collateral purported to be covered thereby; or (k) (i) Group shall at any time cease to have legal and beneficial ownership of 100% of the capital stock of Warnaco, or, directly or indirectly, any other Loan Party (except (A) if such parties shall merge in accordance with Section 2.6(c) and (B) as described in the definition of Wholly-Owned Subsidiary); or (ii) any Person, or two or more Persons acting in concert (other than Excluded Persons), shall have acquired beneficial ownership (within the meaning of Rule 13d-3 of the Securities and Exchange Commission under the Securities Exchange Act of 1934), directly or indirectly, of Voting Stock of Group (or other securities convertible into such Voting Stock) representing 25% or more of the combined voting power of all Voting Stock of Group; or (iii) any Person, or two or more Persons acting in concert (other than Excluded Persons) shall have acquired by contract or otherwise, or shall have entered into a contract or arrangement that, upon consummation, will result in its or their acquisition of, the power to exercise, directly or indirectly, a controlling influence over the management or policies of Group, or control over Voting Stock of Group (or other securities convertible into such securities) representing 25% or more of combined voting power of all Voting Stock of Group; or (iv) Continuing Directors shall cease for any reason to constitute a majority of the board of directors of Group; or (v) Linda J. Wachner (or, in the case of her death or disability, another officer or officers of comparable experience and ability selected by Group within 180 days thereafter after consultation with the Debt Coordinators) shall cease to be Chairman and Chief Executive Officer of Group and Warnaco; or (l) any ERISA Event shall have occurred with respect to a Plan and the sum (determined as of the date of occurrence of such ERISA Event) of the Insufficiency of such Plan and the Insufficiency of any and all other Plans with respect to which an ERISA Event shall have occurred and then exist (or the liability of the Loan Parties and the ERISA Affiliates related to such ERISA Event) exceeds $5,000,000; or state in writing; or (m) any Loan Party or any ERISA Affiliate shall have been notified by the sponsor of a Multiemployer Plan that it has incurred Withdrawal Liability to such Multiemployer Plan in an amount that, when aggregated with all other amounts required to be paid to Multiemployer Plans by the Loan Parties and the ERISA Affiliates as Withdrawal Liability (determined as of the date of such notification), exceeds $5,000,000 or requires payments exceeding $5,000,000 per annum; or (n) any Loan Party or any ERISA Affiliate shall have been notified by the sponsor of a Multiemployer Plan that such Multiemployer Plan is in reorganization or is being terminated, within the meaning of Title IV of ERISA, and as a result of such reorganization or termination the aggregate annual contributions of the Loan Parties and the ERISA Affiliates to all Multiemployer Plans that are then in reorganization or being terminated have been or will be increased over the amounts contributed to such Multiemployer Plans for the plan years of such Multiemployer Plans immediately preceding the plan year in which such reorganization or termination occurs by an amount exceeding $5,000,000; then, and in any such event, the Debt Coordinators (i) shall at the request, or may with the consent, of the Required Lenders, by notice to Group, declare all commitments of each Lender Party and the obligation of each Lender Party under the Covered Facilities to make loans, issue letters of credit or bankers' acceptances or make other credit extensions (other than reimbursements to other Lender Parties in respect of loans and drawn letters of credit and bankers' acceptances) to be terminated, whereupon the same shall forthwith terminate, and (ii) shall at the request, or may with the consent, of the Required Lenders, (A) by notice to Group, declare all loans, all interest thereon and all other amounts payable under the Covered Facilities and the Loan Documents to be forthwith due and payable, whereupon the loans, all such interest and all such amounts shall become and be forthwith due and payable, without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by all of the Loan Parties, (B) by notice to each party required under the terms of any agreement in support of which a letter of credit or bankers' acceptance is issued, request that all Obligations under such agreement be declared to be due and payable and (C) by notice to each applicable letter of credit and bankers' acceptance issuing bank, direct such issuing bank to deliver a "default termination notice" (or similar notice) to the beneficiary of each letter of credit or bankers' acceptance issued by it, and such issuing bank shall deliver such default termination notices (or similar notices); provided that in the event of an actual or deemed entry of an order for relief with respect to Group or any of its Subsidiaries under the Federal Bankruptcy Code (a "Bankruptcy Event"), (x) the commitments of each Lender Party and the obligation of each Lender Party to make loans, issue letter of credit, bankers' acceptance or other credit extensions under the Covered Facilities (other than reimbursements to other Lender Parties in respect of drawn letters of credit and bankers' acceptances) shall automatically be terminated and (y) all loans under all Covered Facilities, all such interest and all such amounts shall automatically become and be due and payable, without presentment, demand, protest or any notice of any kind, all of which are hereby expressly waived by all Loan Parties. Article VI CONDITIONS OF EFFECTIVENESs SECTION 6.1. Conditions of Effectiveness. Articles II and III of this Agreement shall become effective as of the date first above written (the "Effective Date") when and only when all of the conditions set forth in this Article VI have been satisfied. (a) The Administrative Agent shall have received (except as otherwise specified in Section 2.14) on or before the Effective Date the following, each dated such day (unless otherwise specified), in form and substance satisfactory to, or waived by, the Debt Coordinators (unless otherwise specified) and in sufficient copies for each Lender Party: (i) A counterpart of this Agreement executed by each Loan Party, the Collateral Trustee, the Administrative Agent and the Debt Coordinators. (ii) A security agreement in substantially the form of Exhibit A hereto (together with (A) each other security agreement and security agreement supplement delivered pursuant to Section 2.5(k), and (B) with respect to each Included Foreign Subsidiary, one or more security agreements securing such Credit Parties' Obligations; in each of the foregoing cases as amended, collectively, the "Security Agreement"), duly executed by each Credit Party, together with the following instruments and documents: (1) certificates representing the Pledged Shares (other than where the Pledged Shares are uncertificated) referred to therein accompanied, where applicable, by undated stock powers executed in blank and instruments evidencing the Pledged Debt indorsed in blank (or other notations or actions as may be required under local law to perfect the pledge of the Pledged Shares), (2) proper financing statements in form for filing, under the Uniform Commercial Code of all jurisdictions that the Debt Coordinators may deem necessary or desirable in order to perfect and protect the first priority liens and security interests created under the Security Agreement, covering the Collateral described in the Security Agreement, (3) completed requests for information, dated on or before the Effective Date, listing all effective financing statements filed in the jurisdictions referred to in clause (2) above that name any U.S. Credit Party as debtor, together with copies of such other financing statements, (4) preparation and execution of all other recordings and filings of or with respect to the Security Agreement that the Debt Coordinators may reasonably deem necessary or desirable in order to create a valid first priority Lien against the applicable Collateral (subject to Permitted Liens and excluding all filings necessary to perfect security interests in Collateral consisting of fixtures located in third party retail locations and used to display finished goods in such locations), including, with respect to Foreign Credit Parties, such local law pledge agreements, deeds of trust, powers of attorney, notations in shareholders' registries, or such other documents or instruments as may be required under local law to create and perfect security interests in the applicable Collateral, in each case as determined by, and in form and substance satisfactory to, the Debt Coordinators, (5) evidence of the insurance required by the terms of the Security Agreement, and (6) evidence that all other action that the Debt Coordinators may deem necessary or desirable in order to perfect and protect the first priority liens and security interests created under the Security Agreement will be taken (including, without limitation, receipt of duly executed payoff letters and UCC-3 termination statements). (iii) A Domestic Subsidiary Guaranty, together with (A) each other Domestic Subsidiary Guaranty Supplement delivered pursuant to Section 2.5(k) and (B) with respect to each Included Foreign Subsidiary, a guaranty of such of the other Loan Parties' Obligations under those Existing Facilities as was guaranteed by such Subsidiary immediately prior to the Effective Date, in form and substance reasonably acceptable to the Debt Coordinators; in each of the foregoing cases as amended, (collectively, the "Subsidiary Guaranty"), duly executed by each Credit Party other than Group. (iv) A guaranty in substantially the form of Exhibit C hereto (as amended, the "Parent Guaranty"), duly executed by Group. (v) (A) Deeds of trust, trust deeds, mortgages, leasehold mortgages and leasehold deeds of trust in substantially the form of Exhibit D hereto and covering the properties listed on Schedule 4.1(u) and Part A of Schedule 4.1(v) (together with the Assignments of Leases and Rents referred to therein and each other mortgage delivered pursuant to Section 2.5(k)), in each case as amended, the "Mortgages") and (B) assignments of leases and rents to a special purpose Subsidiary of Group (other than Warnaco Operations Corporation), with respect to those leases described in Part A of Schedule 4.1(v) as to which the landlord has not consented to the granting of a leasehold mortgage or leasehold deed of trust in form and substance satisfactory to the Debt Coordinators (together with the assignments of leases and rents delivered pursuant to Section 2.5(k)), to the extent such assignment is permitted by the applicable lease, in each case as amended, the "Leasehold Assignments"); in each case duly executed by the appropriate Credit Party, together with the following instruments and documents: (1) evidence that counterparts of the Mortgages have been duly executed on or before the Effective Date and will be recorded on or after the Effective Date in all filing or recording offices that the Debt Coordinators may deem reasonably necessary or desirable in order to create a valid first and subsisting Lien on the property described therein in favor of the Collateral Trustee for the benefit of the Secured Parties and that all filing and recording taxes and fees have been paid, (2) fully paid American Land Title Association Lender's Extended Coverage title insurance policies or marked-up unconditional commitments to insure (the "Mortgage Policies") in form and substance, with endorsements and in amounts reasonably acceptable to the Debt Coordinators, issued, coinsured and reinsured by title insurers reasonably acceptable to the Debt Coordinators (but not to exceed the fair market value of such property), insuring the Mortgages to be valid first and subsisting Liens on the property described therein, free and clear of all defects (including, but not limited to, mechanics' and materialmen's Liens) and encumbrances, excepting only Permitted Liens, and providing for such other affirmative insurance (including endorsements for future advances under the Loan Documents and for mechanics' and materialmen's Liens) and such coinsurance and direct access reinsurance as the Debt Coordinators may deem necessary or desirable, (3) the Assignments of Leases and Rents in form attached to the Mortgages, duly executed by the appropriate Loan Party, (4) such consents and agreements of lessors and other third parties, and such estoppel letters and other confirmations, as the Debt Coordinators may reasonably deem necessary or desirable, (5) evidence of the insurance, if any, required by the terms of the Mortgages, and (6) evidence that all other action that the Debt Coordinators may deem reasonably necessary or desirable in order to create valid first and subsisting Liens on the property described in the Mortgages has been taken. Notwithstanding anything to the contrary contained in this Section 6.1(a)(v), in the event that the provisions of any lease for any Material Leased Property require that the tenant obtain the consent of the landlord prior to (i) mortgaging or encumbering such lease or (ii) assigning its interest in such lease, the applicable Credit Party shall use commercially reasonable efforts (which shall not include the payment of money to such landlord to satisfy any other condition in connection with the giving of such consent) to obtain such consent(s) from the landlord and, in the event the applicable Credit Party is unable to obtain such consent(s) after using commercially reasonable efforts, the applicable Credit Party shall deliver written notice thereof to the Debt Coordinators and shall have no further obligation to deliver the Mortgage or lease assignment to the Debt Coordinators with respect to such Material Leased Property. (vi) Intellectual property security agreements in substantially the form of Exhibit E-1 and E-2 hereto (together with each other intellectual property security agreement and intellectual property security agreement supplement delivered pursuant to Section 2.5(k), in each case as amended, collectively, the "Intellectual Property Security Agreement"), duly executed by each Credit Party, together with evidence that all action that the Debt Coordinators may reasonably deem necessary or desirable in order to perfect and protect the first priority liens and security interests required to be created under the Intellectual Property Security Agreement has been taken or provided for. (vii) A Collateral Trust Agreement in substantially the form of Exhibit F hereto (as amended, the "Collateral Trust Agreement"), duly executed by Group, the Collateral Trustee and the Debt Coordinators. (viii) Certified copies of the resolutions of the Board of Directors (or other equivalent body) of each Loan Party (and, where necessary, resolutions of the shareholders of the Loan Parties) approving the transactions contemplated by the Loan Documents and each Loan Document to which it is or is to be a party, and of all documents evidencing other necessary corporate action and governmental and other third party approvals and consents, if any, with respect to the other transactions contemplated by the Loan Documents and each Loan Document to which it is or is to be a party. (ix) A copy of a certificate of the Secretary of State (or equivalent agency) of the jurisdiction of incorporation or organization of each Loan Party, dated reasonably near the Effective Date, certifying (A) as to a true and correct copy of the charter (or other constitutive documents) of such Loan Party and each amendment thereto on file in such Secretary's (or equivalent) office and (B) that (1) such amendments are the only amendments to such Loan Party's charter (or other constitutive documents) on file in such Secretary's (or equivalent) office, (2) such Loan Party has paid all franchise taxes to the date of such certificate and (C) such Loan Party is duly incorporated or organized and in good standing or presently subsisting under the laws of the jurisdiction of its incorporation. (x) A certificate of each Loan Party, signed on behalf of such Loan Party by its President or a Vice President and its Secretary or any Assistant Secretary or a director (or other equivalent officer), dated the Effective Date (the statements made in which certificate shall be true on and as of the Effective Date), certifying as to (A) the absence of any amendments to the charter (or other constitutive documents) of such Loan Party since the date of the governmental certificate referred to in Section 6.1(a)(ix), (B) a true and correct copy of the bylaws (or other constitutive documents) of such Loan Party as in effect on the date on which the resolutions referred to in Section 6.1(a)(viii) were adopted and on the Effective Date, (C) the due incorporation and good standing or valid existence of such Loan Party as a corporation organized under the laws of the jurisdiction of its incorporation or organization, and the absence of any proceeding for the dissolution or liquidation of such Loan Party, (D) the truth of the representations and warranties contained in the Loan Documents as though made on and as of the Effective Date and (E) the absence of any event occurring and continuing under the Loan Documents that constitutes a Default, and such certificate otherwise being in such form as the Debt Coordinators shall approve. (xi) A certificate of the director or Secretary or an Assistant Secretary of each Loan Party certifying the names and true signatures of the officers of such Loan Party authorized to sign each Loan Document to which it is or is to be a party and the other documents to be delivered hereunder and thereunder. (xii) A certificate of a Responsible Financial Officer of Group, in form and substance satisfactory to the Debt Coordinators, attesting to the Solvency of each Loan Party. (xiii) Appraisals of intellectual property from Houlihan Lokey Howard & Zukin. (xiv) Such financial, business and other information regarding each Loan Party and its Subsidiaries as the Lender Parties shall have requested, including, without limitation, information as to possible contingent liabilities, tax matters, environmental matters, obligations under Plans, Multiemployer Plans and Welfare Plans, collective bargaining agreements and other arrangements with employees, interim financial statements dated July 1, 2000 and audited annual financial statements dated January 1, 2000, in form and substance satisfactory to the Debt Coordinators. (xv) Evidence, in form and substance satisfactory to the Debt Coordinators, that all applicable Environmental Laws shall have been complied with in all material respects. To the extent that any information that may become available to the Debt Coordinators or any Lender Parties shall disclose any hazards, costs or liabilities under Environmental Laws or otherwise that the Debt Coordinators deem material, the Debt Coordinators shall be satisfied that such hazards, costs or liabilities were adequately reflected in the financial reserves shown on the financial statements provided pursuant to Section 6.1(a)(xiv). (xvi) Evidence of insurance naming the Collateral Trustee as additional insured and loss payee with such responsible and reputable insurance companies or associations, and in such amounts and covering such risks, as is satisfactory to the Debt Coordinators, including, without limitation, business interruption insurance. (xvii) A favorable opinion of (i) S.J. Berwin & Co., local counsel to the Loan Parties in the United Kingdom, (ii) Stibbe Simont Monahan Durhot & Giroux, local counsel to the Loan Parties in France, (iii) Lovells Boesebeck Droste, local counsel to the Loan Parties in Germany, (iv) Loyens Loeff, local counsel to the Loan Parties in the Netherlands, (v) Sproule Castonguay Pollack, local counsel to the Loan Parties in Canada, (vi) Tuke, Yopp & Sweeney, PLC, local counsel to the Loan Parties in Tennessee, (vii) Obermeyer, Rebmann, local counsel to the Loan Parties in Pennsylvania, (viii) Shipman & Goodwin, local counsel to the Loan Parties in Connecticut, (ix) Womble, Carlisle, Sandridge & Rice, local counsel to the Loan Parties in Georgia, (x) Skadden, Arps, Slate, Meagher & Flom LLP, special New York counsel to the Loan Parties, (xi) General Counsel to the Loan Parties and (xii) Amster Rothstein & Ebenstein, special intellectual property counsel to the Loan Parties in substantially the form of Exhibit H-1 through H-12 hereto, and as to such other matters as any Lender Party through the Debt Coordinators may reasonably request in form and substance satisfactory to the Debt Coordinators. (xviii) Certified copies of the Existing Facilities. (b) Group shall have paid all (i) accrued fees of the Agents and the Lender Parties to the Administrative Agent for deposit in the Administrative Agent's Account, and the Administrative Agent will distribute such funds to the Lender Parties not later than the next succeeding Business Day thereafter and (ii) all accrued expenses of the Agents (including the accrued fees and expenses of counsel to the Debt Coordinators) invoiced prior to the Effective Date. (c) Each Loan Party which is a Foreign Subsidiary shall have appointed Corporation Service Company as its agent to receive service of process, in accordance with the provisions specified in Section 9.6(c) hereof. (d) The following statements shall be true and the Administrative Agent shall have received on behalf of each Lender Party a certificate signed by a duly authorized officer of Group, dated the Effective Date, stating that: (i) the representations and warranties contained in each Loan Document and in each Covered Facility are correct on and as of the Effective Date, other than any such representations or warranties that, by their terms, refer to a specific date other than the Effective Date, in which case as of such specific date; and (ii) no Default has occurred and is continuing, or would result from the transactions contemplated by this Agreement and the other Loan Documents; (e) Group shall have delivered the Modification Notes required to be delivered under the Memoranda of Understanding as in effect on the Effective Date and referred to in items B.18 and B.19 of Schedule II to the Intercreditor Agreement and shall have paid the amounts required to be paid under Section 2 of such Memoranda of Understanding; and (f) the Administrative Agent shall have received such other approvals, opinions or documents as the Debt Coordinators may reasonably request. SECTION 6.2. Determinations Under Section 6.1. For purposes of determining compliance with the conditions specified in Section 6.1, each Lender Party shall be deemed to have consented to, approved or accepted or to be satisfied with each document or other matter required thereunder to be consented to or approved by or acceptable or satisfactory to the Lender Parties unless an officer of the Debt Coordinators responsible for the transactions contemplated by the Loan Documents shall have received notice from such Lender Party prior to the Effective Date specifying its objection thereto. Article VII EFFECTIVE DATE PAYMENTS AND COMMITMENT REDUCTIONS SECTION 7.1. Facility Reductions. On the Effective Date, the committed amounts of the Covered Facilities shall be reduced and certain amounts reallocated as described in Schedule 7.1 (which Schedule will specify in detail the allocations to be made in respect of each Covered Facility). To the extent the aggregate outstanding credit extensions under any Covered Facility exceed the aggregate commitments thereunder (as so reduced), such credit extensions constituting loans shall be prepaid by depositing sufficient funds with the Administrative Agent in the Administrative Agent's Account on the Effective Date in the amount of such excess, and the Administrative Agent will distribute such funds to the Lender Parties not later than the next succeeding Business Day thereafter. SECTION 7.2. Extension Fee. On the Effective Date, Group shall pay to the Administrative Agent for deposit in the Administrative Agent's Account, for the pro rata benefit of the Lender Parties party to the Extending Facilities and the New Trade Credit Facility, an extension fee of 0.75% of the outstanding commitments, and, without duplication, loans and other credit extensions outstanding, under each of the Extending Facilities, and the Administrative Agent will distribute such funds to the Lender Parties not later than the next succeeding Business Day thereafter. SECTION 7.3. Approval Fee. On the Effective Date, Group shall pay to the Administrative Agent for deposit in the Administrative Agent's Account, for the pro rata benefit of the Lender Parties party to the Existing Facilities that are not Extending Facilities and who execute and deliver this Agreement, an amendment fee of 0.25% of the outstanding principal balance of the term loans and revolving credit commitments of such Lender Parties outstanding under such Existing Facilities, and the Administrative Agent will distribute such funds to the Lender Parties not later than the next succeeding Business Day thereafter. Article VIII THE DEBT COORDINATORS, ADMINISTRATIVE AGENT AND COLLATERAL TRUSTEE SECTION 8.1. Duties. The Debt Coordinators, the Administrative Agent and the Collateral Trustee (i) shall have no duties or responsibilities under this Agreement other than as specifically provided hereunder, together with such powers and discretion as are reasonably incidental thereto, (ii) shall be entitled to advice of counsel concerning all matters pertaining to their powers and duties hereunder, (iii) shall not be responsible for the negligence or misconduct of any agents, nominees or attorneys-in-fact reasonably selected by them, (iv) may rely, and shall be fully protected in acting, upon any resolution, statement, certificate, instrument, opinion, report, notice, request, consent, order or other paper or document which it believes in good faith to be genuine and to have been signed or presented by the proper party or parties or, in the case of telecopies, to have been sent by the proper party or parties to the Debt Coordinators, the Administrative Agent or the Collateral Trustee, as applicable, (v) shall not be required to exercise any discretion or take any action, but shall be required to act or to refrain from acting (and shall be fully protected in so acting or refraining from acting) upon the instructions of the Required Lenders or all of the Lender Parties, as applicable, and such instructions shall be binding upon all Lender Parties; provided that neither Debt Coordinator, the Administrative Agent nor the Collateral Trustee shall be required to take any action that exposes them to personal liability or that is contrary to this Agreement or the other Loan Documents or applicable law, and the Collateral Trustee shall be entitled to the rights and protections of the Collateral Trust Agreement.. SECTION 8.2. Costs and Expenses. (a) The Loan Parties agree to pay on demand (i) to the Debt Coordinators, the Administrative Agent, the Lead Arrangers and the Collateral Trustee all reasonable costs and expenses, including, without limitation, the reasonable costs and expenses of their counsel and of any experts and agents, that the Debt Coordinators, the Administrative Agent, the Lead Arrangers and the Collateral Trustee may incur in connection with (A) the administration of this Agreement and the other Loan Documents, (B) the exercise or enforcement of any rights of the Debt Coordinators, the Administrative Agent, the Collateral Trustee or the Lender Parties hereunder or under any of the other Loan Documents or (C) the failure of any Loan Party to perform or observe any of the provisions hereof and (ii) to the Debt Coordinators, the Administrative Agent, the Lead Arrangers, the Collateral Trustee and each Lender Party all costs and expenses, including, without limitation, the costs and expenses of their counsel and of any experts and agents, that the Debt Coordinators, the Administrative Agent, the Lead Arrangers, the Collateral Trustee and each Lender Party may incur after the commencement of any bankruptcy, insolvency or similar proceeding affecting creditors' rights generally in connection with the administration of this Agreement and the other Loan Documents or the exercise or enforcement of any rights. (b) The Loan Parties agree to indemnify and hold harmless each Debt Coordinator, the Administrative Agent, the Collateral Trustee, the Lender Parties and, in each case, each of their Affiliates and their respective officers, directors, employees, agents and advisors (each, an "Indemnified Party") from and against any and all claims, damages, losses, liabilities and expenses (including, without limitation, reasonable fees and expenses of counsel) that may be incurred by or asserted or awarded against any Indemnified Party, in each case arising out of or in connection with or by reason of (including, without limitation, in connection with any investigation, litigation or proceeding or preparation of a defense in connection therewith) this Agreement (including, without limitation, enforcement of this Agreement), except to the extent such claim, damage, loss, liability or expense is found in a final, non-appealable judgment by a court of competent jurisdiction to have resulted from such Indemnified Party's gross negligence or willful misconduct. Without prejudice to the survival of any other agreement of any Loan Party hereunder or under any other Loan Document, the agreements and obligations of the Loan Parties contained in this Section 8.2 shall survive the payment in full of all amounts payable under the Covered Facilities or any of the Loan Documents. Article IX MISCELLANEOUS SECTION 9.1. Notices, Etc. All notices and other communications provided for hereunder shall be in writing and sent as specified in Section 8.1 of the Intercreditor Agreement. SECTION 9.2. Amendments. No amendment or waiver of any provision of this Agreement, nor consent to any departure therefrom by any party hereto, shall in any event be effective unless the same shall be in writing and otherwise in compliance with the provisions specified in Section 2.2 of the Intercreditor Agreement. SECTION 9.3. No Waiver; Remedies. No failure on the part of the Debt Coordinators, the Administrative Agent or the Collateral Trustee to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any such right preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law. SECTION 9.4. Execution in Counterparts. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Manual delivery of an executed counterpart of a signature page to this Agreement by telecopier shall be effective as delivery of an original executed counterpart of this Agreement. SECTION 9.5. Binding Effect. This Agreement shall become effective when it shall have been executed by the Loan Parties, the Debt Coordinators, the Administrative Agent and the Collateral Trustee and thereafter shall be binding upon and inure to the benefit of the Loan Parties, the Debt Coordinators, the Administrative Agent and the Collateral Trustee and their respective successors and assigns, except that no Loan Party shall have the right to assign its rights hereunder or any interest herein without the prior written consent of the Debt Coordinators. SECTION 9.6. Jurisdiction; Process Agent; Judgment Currency; Waiver of Immunities; Etc. (a) Each of the parties hereto hereby irrevocably and unconditionally submits, for itself and its property, to the exclusive jurisdiction of any New York State court or Federal court of the United States of America sitting in New York City, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or any of the other Loan Documents to which it is a party or any of the Covered Documents, or for recognition or enforcement of any judgment (other than, in any case, with respect to any foreclosure or other enforcement action with respect to or in any way related to the Collateral which is reasonably determined by the Debt Coordinators to be advisable to be brought in a court of local jurisdiction), and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in any such New York State court or, to the extent permitted by law, in such Federal court (or, in such local court, as aforesaid). Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. (b) Each of the parties hereto irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection that it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or any of the other Loan Documents to which it is a party in any New York State or Federal court. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court. (c) Each Loan Party which is a Foreign Subsidiary hereby irrevocably and unconditionally appoints Corporation Service Company with an office on the date hereof at 2 World Trade Center, New York, New York, United States and its successors hereunder (the "Process Agent"), as its agent to receive on behalf of such Loan Party and its property service of copies of the summons and complaint and any other process which may be served in any such suit, action or proceeding brought in any New York State court or Federal court of the United States of America sitting in New York City, and any appellate court from any thereof. Such service may be made by mailing or delivering a copy of such process to Group in care of the Process Agent at the address specified above for the Process Agent, and each such Loan Party hereby irrevocably authorizes and directs the Process Agent to accept such service on its behalf. Each such Loan Party further consents to service of process which may be served in any action or suit brought in any New York State court or Federal court of the United States of America sitting in New York City, and any appellate court from any thereof, by mailing copies thereof by registered or certified mail, postage prepaid, to such Loan Party at its address for notice hereunder, such service to become effective 30 days after mailing. Failure of the Process Agent to give notice to any such Loan Party or failure of any such Loan Party to receive notice of such service of process shall not affect in any way the validity of such service on the Process Agent or such Loan Parties. Each Loan Party which is a Foreign Subsidiary covenants and agrees that it shall take any and all reasonable action, including the execution and filing of any and all documents, that may be necessary to continue the designation of the Process Agent above in full force and effect, and to cause the Process Agent to act as such. In the event that at any time such Process Agent shall for any reason cease to maintain an office in the Borough of Manhattan in New York City, or cease to act as Process Agent, then as an alternate method of service, each such Loan Party irrevocably consents to the service of any and all process in any such suit, action or proceeding in any New York State court or Federal court of the United States of America sitting in New York City, and any appellate court from any thereof, by mailing of copies of such process to such Loan Party at its address specified in Section 8.1 of the Intercreditor Agreement. Each such Loan Party acknowledges and agrees that nothing herein shall affect the right to effect service of process in any other manner permitted by law or shall limit the right to sue in any other jurisdiction. (d) If for the purpose of obtaining judgment in any court it is necessary to convert a sum due hereunder to any party hereunder in one currency into another currency, the parties hereto agree, to the fullest extent permitted by law, that the rate of exchange used shall be that at which in accordance with normal banking procedures such party could purchase the first currency with such other currency in New York City on the day which is at least two Business Days prior to the day on which final judgment is rendered. (e) To the fullest extent permitted by law, the obligation of any party in respect of any sum payable hereunder by it to any other party hereunder shall, notwithstanding any judgment in a currency (the "Judgment Currency") other than Dollars (the "Agreement Currency"), be discharged only to the extent that on the Business Day following receipt by such other party of any sum adjudged to be so due in the Judgment Currency such other party may in accordance with normal banking procedures purchase the Agreement Currency with the Judgment Currency; if the amount of the Agreement Currency which could have been so purchased is less than the sum originally due to such other party in the Agreement Currency, such first party agrees, as a separate obligation and notwithstanding any such judgment, to indemnify such other party against such loss, and, if the amount of the Agreement Currency which could have been so purchased exceeds the sum originally due to such other party, such other party agrees to remit to such first party such excess. (f) To the extent that any of the parties hereto has or hereafter may acquire any immunity (sovereign or otherwise) from any legal action, suit or proceeding, form jurisdiction of any court or from set-off or any legal process (whether service or notice, attachment prior to judgment, attachment in aid of execution of judgment, execution or judgment or otherwise) with respect to itself or any of its property each of the parties hereto hereby irrevocably waives and agrees not to plead or claim such immunity in respect of its obligations under this Agreement and the other Loan Documents. Each of the parties hereto agrees that the waivers set forth above shall have the fullest extent permitted under the Foreign Sovereign Immunities Act of the United States of America and are intended to be irrevocable and not subject to withdrawal for purposes of such act. SECTION 9.7. Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York. SECTION 9.8. Waiver of Jury Trial. Each of the parties hereto irrevocably waives all right to trial by jury in any action, proceeding or counterclaim (whether based on contract, tort or otherwise) arising out of or relating to this Agreement or any of the Loan Documents or the actions of the Debt Coordinators, the Administrative Agent or the Collateral Trustee or any Lender Party in the negotiation, administration, performance or enforcement hereof or thereof. SECTION 9.9. Appointment and Acknowledgment. Each Subsidiary of Group which is a party hereto hereby (i) irrevocably appoints Group as its representative in connection with the entering into of the Intercreditor Agreement, and agrees to be bound by the terms and provisions of the Intercreditor Agreement as though it had been a signatory thereto and (ii) acknowledges that Group will, concurrently with the execution and delivery of this Agreement, execute and deliver the Intercreditor Agreement in its individual capacity and as representative of each such Subsidiary. SECTION 9.10. Conflict with Other Agreements. In the event of any conflict between this Agreement (or any portion thereof) and any Collateral Document now existing or hereafter entered into (excluding the Collateral Trust Agreement), the terms of this Agreement shall prevail. In the event of any conflict between this Agreement (or any portion thereof) and the Collateral Trust Agreement, the terms of the Collateral Trust Agreement shall prevail. SECTION 9.11. Foreign Subsidiary Collateral Limitation. Notwithstanding any provision of any Loan Document to the contrary, (i) no more than 66% of the Equity Interests in or of any Foreign Subsidiary shall be pledged or similarly hypothecated to guaranty or support any Obligation of any U.S. Credit Party, (ii) no Foreign Subsidiary shall guaranty or otherwise support any Obligation of any U.S. Credit Party and (iii) no security or similar interest in the assets of any Foreign Subsidiary (other than not more than 66% of the Equity Interests in or of any Foreign Subsidiary) shall guarantee or support any Obligation of any U.S. Credit Party. The parties agree that any pledge, guaranty or security or similar interest made or granted in contravention of this Section 9.11 shall be void ab initio. [remainder of this page intentionally left blank] IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written. THE BANK OF NOVA SCOITIA, as Administrative Agent and Debt Coordinator By: /s/ ---------------------- Title: CITIBANK, N.A., as Debt Coordinator By: /s/ ---------------------- Title: STATE STREET BANK AND TRUST COMPANY, as Collateral Trustee By: /s/ ---------------------- Title: CITICORP USA, INC. By: /s/ ---------------------- Title: THE WARNACO GROUP, INC. By: /s/ ---------------------- Title: WARNACO INC. By: /s/ ---------------------- Title: DESIGNER HOLDINGS LTD. By: /s/ ---------------------- Title: OUTLET STORES, INC. By: /s/ ---------------------- Title: OUTLET HOLDINGS, INC. By: /s/ ---------------------- Title: RIO SPORTSWEAR, INC. By: /s/ ---------------------- Title: AEI MANAGEMENT CORPORATION By: /s/ ---------------------- Title: JEANSWEAR HOLDINGS, INC. By: /s/ ---------------------- Title: CALVIN KLEIN JEANSWEAR COMPANY By: /s/ ---------------------- Title: CKJ HOLDINGS, INC. By: /s/ ---------------------- Title: CKJ SOURCING ,INC. By: /s/ ---------------------- Title: ABBEVILLE MANUFACTURING COMPANY By: /s/ ---------------------- Title: KAI JAY MANUFACTURING COMPANY By: /s/ ---------------------- Title: NEW BEDFORD SHIPPERS CORP. By: /s/ ---------------------- Title: MYRTLE AVENUE, INC. By: /s/ ---------------------- Title: GREGORY STREET INC. By: /s/ ---------------------- Title: WARNACO U.S., INC. By: /s/ ---------------------- Title: WARNACO MEN'S SPORTSWEAR INC. By: /s/ ---------------------- Title: C.F. HATHAWAY COMPANY By: /s/ ---------------------- Title: PENHALIGON'S BY REQUEST, INC. By: /s/ ---------------------- Title: WARNACO VENTURES LTD. By: /s/ ---------------------- Title: VENTURES LTD. By: /s/ ---------------------- Title: A.B.S. CLOTHING COLLECTION, INC. By: /s/ ---------------------- Title: WARNACO INTERNATIONAL, L.L.C. By: /s/ ---------------------- Title: BLANCHE INC. By: /s/ ---------------------- Title: 184 BENTON STREET INC. By: /s/ ---------------------- Title: WARNACO INTERNATIONAL INC. By: /s/ ---------------------- Title: WARMANA LIMITED By: /s/ ---------------------- Title: WARNACO SOURCING INC. By: /s/ ---------------------- Title: WARNER'S DE COSTA RICA INC. By: /s/ ---------------------- Title: AUTHENTIC FITNESS CORPORATION By: /s/ ---------------------- Title: AUTHENTIC FITNESS PRODUCTS INC. By: /s/ ---------------------- Title: AUTHENTIC FITNESS RETAIL INC. By: /s/ ---------------------- Title: AUTHENTIC FITNESS ON-LINE INC. By: /s/ ---------------------- Title: CCC ACQUISITION CORP. By: /s/ ---------------------- Title: CCC ACQUISITION REALTY CORP. By: /s/ ---------------------- Title: UBERTECH PRODUCTS INC. By: /s/ ---------------------- Title: WARNACO PUERTO RICO, INC. By: /s/ ---------------------- Title: WARNER'S (UNITED KINGDOM) LTD. By: /s/ ---------------------- Title: WARNER'S (EIRE) TEORANTA By: /s/ ---------------------- Title: PENHALIGON'S LIMITED By: /s/ ---------------------- Title: PENHALIGON'S & JEAVONS INVESTMENT COMPANY LIMITED By: /s/ ---------------------- Title: AUTHENTIC FITNESS OF CANADA INC. By: /s/ ---------------------- Title: WARNACO OF CANADA COMPANY By: /s/ ---------------------- Title: WARNACO LAC ONE GmbH By: /s/ ---------------------- Title: WARNACO LAC TWO GmbH By: /s/ ---------------------- Title: ERATEX-WARNACO LAC TWO GmbH & CO. KG By: /s/ ---------------------- Title: WARNER'S AIGLON S.A. By: /s/ ---------------------- Title: CALVIN KLEIN FRANCE SA By: /s/ ---------------------- Title: WARNACO FRANCE SARL By: /s/ ---------------------- Title: PMJ S.A. By: /s/ ---------------------- Title: IZKA S.C. By: /s/ ---------------------- Title: LEJABY S.A.S By: /s/ ---------------------- Title: EURALIS S.A.S. By: /s/ ---------------------- Title: WARNACO B.V. By: /s/ ---------------------- Title: WARNACO HOLLAND B.V. By: /s/ ---------------------- Title: WARNACO NETHERLANDS B.V. By: /s/ ---------------------- Title: WARNER'S COMPANY (BELGIUM) S.A. By: /s/ ---------------------- Title: DONATEX WARNACO S.A. By: /s/ ---------------------- Title: LINTEX-WARNACO S.A. By: /s/ ---------------------- Title: LENITEX-WARNACO HANDELSGESELLSCHAST m.b.H. By: /s/ ---------------------- Title: WARNACO S.r.l. By: /s/ ---------------------- Title: WARNACO (HK) LTD. By: /s/ ---------------------- Title: ANNEX A COMMON TERMS AND RULES OF CONSTRUCTION FOR THE LOAN DOCUMENTS PART I. DEFINITIONS "Administrative Agent" has the meaning specified in the preamble to the Intercreditor Agreement. "Administrative Agent's Account" means the account of the Administrative Agent maintained by the Administrative Agent with The Bank of Nova Scotia at its office at One Liberty Plaza, New York, New York 10006, Account No. 6136-30, Reference: Warnaco Account, or such other account as the Administrative Agent shall specify in writing to the Debt Coordinators and Group. "Affiliate" means, as to any Person, any other Person that, directly or indirectly, is in control of, is controlled by, or is under common control with, such Person. For purposes of this definition, control of a Person shall include the power, direct or indirect, (a) to vote 10% or more of the securities or other interests having ordinary voting power for the election of directors or other managing Persons of such Person or (b) to direct or cause direction of the management and policies of such Person whether by contract or otherwise. "Agents" means each of the Lead Arrangers, the Arrangers, the Debt Coordinators, the Collateral Trustee, the Security Agent and the Administrative Agent, together, in each case, with any successor or successors of any thereof appointed pursuant to Article VI of the Intercreditor Agreement. "Agreement Value" means, (A) for each Hedge Agreement (other than the Equity Derivatives), on any date of determination, an amount determined by the Debt Coordinators equal to: (a) in the case of a Hedge Agreement documented pursuant to the Master Agreement (Multicurrency-Cross Border) published by the International Swap and Derivatives Association, Inc. (the "Master Agreement"), the amount, if any, that would be payable by any Loan Party or any of its Subsidiaries to its counterparty to such Hedge Agreement, as if (i) such Hedge Agreement was being terminated early on such date of determination, (ii) such Loan Party or Subsidiary was the sole "Affected Party", and (iii) the Debt Coordinators were the sole parties determining such payment amount (with the Debt Coordinators making such determination pursuant to the provisions of the form of Master Agreement); or (b) in the case of a Hedge Agreement traded on an exchange, the mark-to-market value of such Hedge Agreement, which will be the unrealized loss on such Hedge Agreement to the Loan Party or Subsidiary of a Loan Party party to such Hedge Agreement determined by the Debt Coordinators based on the settlement price of such Hedge Agreement on such date of determination, or (c) in all other cases, the mark-to-market value of such Hedge Agreement, which will be the unrealized loss on such Hedge Agreement to the Loan Party or Subsidiary of a Loan Party party to such Hedge Agreement reasonably determined by the Debt Coordinators as the amount, if any, by which (i) the present value of the future cash flows to be paid by such Loan Party or Subsidiary exceeds (ii) the present value of the future cash flows to be received by such Loan Party or Subsidiary pursuant to such Hedge Agreement; capitalized terms used and not otherwise defined in this definition shall have the respective meanings set forth in the above described Master Agreement and (B) with respect to each Equity Derivative, on any date of determination, an amount determined by the Debt Coordinators to be the total commitment under such Equity Derivative, which shall be equal to the sum of (a) the aggregate principal amount of each Equity Derivative Note on such date plus (b) the Forward Price (as defined in the Equity Forward Agreement for such Equity Derivative on the Effective Date) on such date multiplied by the number of shares of Group stock subject to such Equity Derivative. "Approved Accounting Firm" means Arthur Andersen LLP, Deloitte & Touche LLP, Ernst & Young LLP, PricewaterhouseCoopers LLP or KPMG Peat Marwick LLP, or any successor thereof. "Arrangers" has the meaning specified in the preamble to the Intercreditor Agreement. "Authorized Officer" means the Chairman of the Board, the Chief Financial Officer, the General Counsel, the Secretary or the Treasurer of a Person or any other officer designated as an "Authorized Officer" by the Board of Directors (or equivalent governing body) of such Person. "Bankruptcy Event" has the meaning specified in Section 5.1 of the Facility Agreement. "Bridge Facility" has the meaning specified on Schedule II to the Intercreditor Agreement. "Business Day" means a day of the year on which banks are not required or authorized by law to close in New York City and, if the applicable Business Day relates to any eurodollar rate credit extensions, on which dealings are carried on in the London interbank market. "Capital Expenditures" for any period means all capital expenditures made by Group and its Subsidiaries during such period in accordance with GAAP, excluding (i) capital expenditures funded directly or indirectly with the proceeds of insurance or condemnation proceeds (to the extent of such insurance or condemnation proceeds received) and made to replace or repair the assets which are the subject of such casualty or condemnation, (ii) capital expenditures funded directly or indirectly with the Net Cash Proceeds of asset sales as described in clause (iv) of the definition of Net Cash Proceeds, (iii) capital expenditures consisting of like-kind exchanges not exceeding $5,000,000 in the aggregate and made in the ordinary course of business consistent with prior practice, (iv) in the case where actual Capital Expenditures (including any Specified Sale Leaseback Transactions) in any period of four consecutive Fiscal Quarters are equal to or exceed the sum of $30,000,000 plus projected Capital Expenditures for such period as specified in Schedule I to the Facility Agreement ("Projected CapEx"), an amount equal to: $30,000,000 less the actual dollar amount of Specified Sale Leaseback Transactions in such period; provided that such amount in this clause (iv) shall at no time exceed $30,000,000 and (v) in the case where actual Capital Expenditures (including any Specified Sale Leaseback Transactions) in any period of four consecutive Fiscal Quarters are less than the sum of $30,000,000 plus Projected CapEx, an amount (but not less than zero) equal to: $30,000,000 less the actual dollar amount of Specified Sale Leaseback Transactions in such period less an amount equal to (i) Projected CapEx plus $30,000,000 less (ii) actual Capital Expenditures (including any Specified Sale Leaseback Transactions) in such period. "Capitalized Leases" has the meaning specified in clause (e) of the definition of "Debt". "Cash Equivalents" means any of the following, to the extent owned by Group or any of its Subsidiaries free and clear of all Liens other than Liens created under the Collateral Documents and having a maturity of not greater than 180 days from the date of issuance thereof: (a) readily marketable direct obligations of the Government of the United States or any agency (including, without limitation, the Federal Home Loan Mortgage Association, the Federal Home Loan Bank, the Federal National Mortgage Association and the Governmental National Mortgage Association) or instrumentality thereof or obligations unconditionally guaranteed by the full faith and credit of the Government of the United States, (b) insured certificates of deposit of or time deposits with any commercial bank that is a Lender Party or a member of the Federal Reserve System, which issues (or the parent of which issues) commercial paper rated at least "Prime-1" (or the then equivalent grade) by Moody's or "A-1" (or the then equivalent grade) by S&P, is organized under the laws of the United States or any State thereof and has combined capital and surplus of at least $1 billion, (c) repurchase agreements entered into by any Person with a bank or trust company (including any of the Lender Parties) or recognized securities dealer having capital and surplus in excess of $500,000,000 for direct obligations issued by or fully guaranteed by the United States in which such Person shall have a perfected first priority security interest (subject to no other Liens) and having, on the date of purchase thereof, a fair market value of at least 100% of the amount of the repurchase obligations or (d) Investments, classified in accordance with GAAP as current assets, in money market investment programs registered under the Investment Company Act of 1940, as amended, which are administered by reputable financial institutions having capital of at least $500,000,000 and the portfolios of which are limited only to Investments of the character described in the foregoing clauses (a) through (c). "Cash Management Bank" has the meaning specified in the definition of "Cash Management Services". "Cash Management Register" has the meaning specified in Section 8.4(c) of the Intercreditor Agreement. "Cash Management Services" means daylight overdraft facilities or similar cash management accounts entered into by any Warnaco Entity with any financial institution in the ordinary course of business in an amount not to exceed $20,000,000 in an aggregate amount outstanding at any time for all such financial institutions; provided that Group and each respective financial institution party to such facility or maintaining such account ( a "Cash Management Bank") shall provide written notice to the Collateral Trustee of the existence and maximum amount of such facility or account for recordation in the Cash Management Register as provided in Section 8.4(c) of the Intercreditor Agreement, and provided further that each such facility or account shall be deemed to remain in place for purposes of compliance with the $20,000,000 aggregate amount specified above until written notice of the termination of such facility or account is delivered to the Collateral Trustee by Group and such Cash Management Bank, at which time the Collateral Trustee will delete such facility or account from the Cash Management Register. "CERCLA" means the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended from time to time. "CERCLIS" means the Comprehensive Environmental Response, Compensation and Liability Information System maintained by the U.S. Environmental Protection Agency. "Citibank" has the meaning specified in the preamble to the Intercreditor Agreement. "Code" means the Internal Revenue Code of 1986, as amended from time to time. "Collateral" means all "Collateral" referred to in the Collateral Documents (and any Covered Facility, as applicable) and all other property that is or is intended to be subject to any Lien in favor of the Collateral Trustee for the benefit of the Secured Parties. "Collateral Account" has the meaning specified in the Security Agreement. "Collateral Documents" means, collectively, the Security Agreement, the Subsidiary Guaranty, the Parent Guaranty, each Mortgage, the Leasehold Assignments, the Intellectual Property Security Agreement, the Collateral Trust Agreement, the Foreign Collateral Documents, each of the collateral documents, instruments and agreements delivered pursuant to Section 2.5(k) and 2.14 of the Facility Agreement and each other agreement that creates or purports to create a Lien in favor of the Collateral Trustee for the benefit of the Secured Parties. "Collateral Trust Agreement" has the meaning specified in Section 6.1(a)(vii) hereto. "Collateral Trustee" has the meaning specified in the preamble to the Intercreditor Agreement. "Commerzbank" has the meaning specified in the preamble to the Intercreditor Agreement. "Consolidated" refers to the consolidation of accounts in accordance with GAAP. "Contingent Obligation" means, with respect to any Person, any Obligation or arrangement of such Person to guarantee or intended to guarantee any Debt, leases, dividends or other payment Obligations ("primary obligations") of any other Person (the "primary obligor") in any manner, whether directly or indirectly, including, without limitation, (a) the direct or indirect guarantee, endorsement (other than for collection or deposit in the ordinary course of business), co-making, discounting with recourse or sale with recourse by such Person of the Obligation of a primary obligor, (b) the Obligation to make take-or-pay or similar payments, if required, regardless of nonperformance by any other party or parties to an agreement or (c) 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 (A) for the purchase or payment of any such primary obligation or (B) 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 purchase property, assets, securities or services primarily for the purpose of assuring the owner of any such primary obligation 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. 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 less, the maximum amount of such primary obligation for which such Person may be liable pursuant to the terms of the instrument evidencing such Contingent Obligation) 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. "Continuing Directors" means, as of any date, collectively, all members of the Board of Directors of Group (i) on the Effective Date and (ii) whose appointment or nomination for election was approved by a vote of at least 50% of the Continuing Directors in office immediately prior to such appointment or nomination. "Covered Documents" means, collectively, all of the agreements, instruments and documents evidencing the terms of the Covered Facilities, in each case as in effect from time to time. "Covered Facilities" means the Existing Facilities and the New Facilities. "Credit Party" means any U.S. Credit Party and any Foreign Credit Party. "Debt" of any Person means, without duplication, the following: (a) all indebtedness for borrowed money, (b) all Obligations of such Person for the deferred purchase price of property or services (other than (1) Obligations of the type specified in Section 2.6(b)(vi), (vii), (viii), (ix), (x) and (xi) of the Facility Agreement, (2) trade payables not overdue by more than 90 days incurred in the ordinary course of such Person's business and (3) trade payables incurred in the ordinary course of such Person's business which are overdue by more than 90 days, (A) which are being contested in good faith and by proper proceedings and as to which appropriate reserves are being maintained in accordance with GAAP and (B) as to which there shall be any period of 10 consecutive days during which a stay of any enforcement, collection, execution, levy or foreclosure proceedings, if commenced, shall not be in effect), including, without limitation, the Trade Credit Facility, (c) all Obligations of such Person evidenced by notes, bonds, debentures or other similar instruments, (d) all Obligations of such Person created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property), (e) all Obligations of such Person as lessee under leases that have been or should be, in accordance with GAAP, recorded as capital leases ("Capitalized Leases"), (f) all Obligations, contingent or otherwise, of such Person under acceptance, letter of credit or similar facilities, (g) all Obligations of such Person to purchase, redeem, retire, defease or otherwise make any payment in respect of any Equity Interest in such Person or any other Person or any warrants, rights or options to acquire such Equity Interests, valued, in the case of Redeemable preferred stock, at the greater of its voluntary or involuntary liquidation preference plus accrued and unpaid dividends, (h) all Obligations of such Person in respect of Hedge Agreements, (i) all Contingent Obligations of such Person, and (j) all Debt referred to in clauses (a) through (i) above of another Person secured by (or for which the holder of such Debt has an existing right, contingent or otherwise, to be secured by) any Lien on property (including, without limitation, accounts and contract rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such Debt. "Debt Coordinators" has the meaning specified in the preamble to the Intercreditor Agreement "Debt Rating" means, as of any date, the ratings that have been most recently announced by S&P and Moody's for any class of non-credit enhanced long-term senior unsecured debt issued by Group in effect on such date, provided that if such ratings are (i) both "investment grade" (BBB- or Baa3 or higher) but shall fall within different levels, the higher of such ratings shall apply or (ii) either or both below "investment grade" but shall fall within different levels, the lower of such ratings shall apply (except that if the ratings specified in Level 4 of the pricing grids in Section 2.4 are in effect, the pricing specified for Level 4 in such grids shall apply); provided further that if neither S&P nor Moody's shall have in effect such a rating, the pricing specified in Level 7 of the pricing grids in Section 2.4 shall apply. For purposes of the foregoing, if (a) only one of S&P and Moody's shall have in effect a Debt Rating, the pricing specified in the pricing grids in Section 2.4 shall be determined by reference to the available rating; (b) any rating established by S&P or Moody's shall be changed, such change shall be effective as of the date on which such change is reported to Group; and (c) S&P or Moody's shall change the basis on which ratings are established, each reference above to the Debt Rating announced by S&P or Moody's, as the case may be, shall refer to the then equivalent rating by S&P or Moody's, as the case may be. "Debt Termination Date" means the date on which (i) all loans or other credit extensions and all outstanding reimbursement obligations in respect of letters of credit and bankers' acceptances under all Covered Facilities have been paid in full, (ii) all commitments to lend or issue any letter of credit or bankers' acceptance or provide any other credit extension under any Covered Facility have been terminated, and (iii) all letters of credit and bankers' acceptances under any Covered Facility shall have either been cancelled or cash collateralized or covered by a back-up letter of credit in a manner satisfactory to the issuing bank thereof. "Default" means any Event of Default or any event that would constitute an Event of Default but for the requirement that notice be given or time elapse or both. "Defaulted Advance" means, with respect to any Lender Party at any time under a Covered Facility, the portion of any loan, letter of credit, bankers' acceptance or other credit extension required to be made by such Lender Party to or for the account of a Loan Party under such Covered Facility at or prior to such time that has not been made by such Lender Party or by any agent or representative for the account of such Lender Party as of such time. "Defaulted Amount" means, with respect to any Lender Party at any time, any amount required to be paid by such Lender Party to any agent or other representative of such Lender Party or made available (including in respect of any letter of credit or bankers' acceptance) to or for the account of any Loan Party or to any other Lender Party hereunder or under any other Loan Document or Covered Facility at or prior to such time that has not been so paid as of such time. "Defaulted Facility" has the meaning specified in Section 2.3 of the Intercreditor Agreement. "Defaulting Lender" means, at any time, any Lender Party that, at such time, (a) owes a Defaulted Advance or a Defaulted Amount or (b) shall take any action or be the subject of any action or proceeding of a type described in Section 5.1(f) of the Facility Agreement. "Derivative Agreements" means, collectively, the Secured Hedge Agreements and the Equity Derivatives. "Designated Capital Markets Transaction" means the (a) incurrence or issuance by any Loan Party or any of its Subsidiaries of any Debt other than Debt which is secured on a pari passu basis with the Covered Facilities and/or (b) sale or issuance by any Loan Party or any of its Subsidiaries of any Equity Interests (other than the issuance by Group of options or stock to officers or employees of Group); in either case in a public or private transaction. "DHL Convertible Debentures" means the 6% Convertible Subordinated Debentures Due 2016 issued under the November 6, 1996 Indenture between Designer Holdings Ltd. and IBJ Schroeder Bank & Trust Company. "Dollars" and "$" means lawful money of the United States. "Domestic Subsidiary Guaranty" means a guaranty substantially in the form of Exhibit C hereto. "Domestic Subsidiary Guaranty Supplement" means the guaranty supplement in substantially the form attached to the Domestic Subsidiary Guaranty. "Domestic Subsidiary" means any direct or indirect Subsidiary of Group incorporated or formed under the laws of a state of the United States or any territory thereof. "EBITDA" means, for any period, net income (or net loss) from operations, determined (i) without giving effect to (A) non-cash extraordinary and non-recurring gains or losses, (B) gains or losses resulting from the sale of any asset for proceeds of $500,000 or more or (C) all cash extraordinary or non-recurring (1) employee severance and benefit costs, (2) costs arising from the permanent closing or realignment of any owned or leased real property locations, (3) costs arising from the early termination of any leases or other contracts and (4) legal and other administrative and other related costs incurred in connection with the foregoing clauses (1) through (3); provided that no more than an aggregate amount of $50,000,000 may be included in EBITDA until the Termination Date pursuant to this clause (C) and (ii) with giving effect to the non-recurring gain realized from the sale of equity interests of Interworld Corporation; plus, to the extent deducted in calculating such net income (loss), the sum of (a) Interest Expense, (b) income tax expense, (c) depreciation expense, (d) amortization expense and (e) restructuring charges taken through the Fiscal Quarter ended July 1, 2000; in each case determined in accordance with GAAP. "Effective Date" has the meaning specified in Section 4.1 of the Intercreditor Agreement. "Environmental Action" means any action, suit, demand, demand letter, claim, notice of non-compliance or violation, notice of liability or potential liability, investigation, proceeding, consent order or consent agreement relating in any way to any Environmental Law, any Environmental Permit or Hazardous Material or arising from alleged injury or threat to health, safety or the environment, including, without limitation, (a) by any governmental or regulatory authority for enforcement, cleanup, removal, response, remedial or other actions or damages and (b) by any governmental or regulatory authority or third party for damages, contribution, indemnification, cost recovery, compensation or injunctive relief. "Environmental Law" means any Federal, state, local or foreign statute, law, ordinance, rule, regulation, code, order, writ, judgment, injunction, decree or judicial or judicially enforceable agency interpretation, policy or guidance relating to pollution or protection of the environment, health, safety or natural resources, including, without limitation, those relating to the use, handling, transportation, treatment, storage, disposal, release or discharge of Hazardous Materials. "Environmental Permit" means any permit, approval, identification number, license or other authorization required under any Environmental Law. "Equity Derivative Note" means each Modification Note and each Subsequent Note referred to in items B.18 and B.19 on Schedule II of the Intercreditor Agreement. "Equity Derivatives" means, collectively, items B.18 and B.19 on Schedule II of the Intercreditor Agreement, in each case as amended, modified or otherwise supplemented to the date hereof. "Equity Interests" means, with respect to any Person, shares of capital stock of (or other ownership or profit interests in) such Person, warrants, options or other rights for the purchase or other acquisition from such Person of shares of capital stock of (or other ownership or profit interests in) such Person, securities convertible into or exchangeable for shares of capital stock of (or other ownership or profit interests in) such Person or warrants, rights or options for the purchase or other acquisition from such Person of such shares (or such other interests), and other ownership or profit interests in such Person (including, without limitation, partnership, member or trust interests therein), whether voting or nonvoting, and whether or not such shares, warrants, options, rights or other interests are authorized or otherwise existing on any date of determination. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated and rulings issued thereunder. "ERISA Affiliate" means any Person that for purposes of Title IV of ERISA is a member of the controlled group of any Loan Party, or under common control with any Loan Party, within the meaning of Section 414 of the Internal Revenue Code. "ERISA Event" means (a)(i) the occurrence of a reportable event, within the meaning of Section 4043 of ERISA, with respect to any Plan unless the 30-day notice requirement with respect to such event has been waived by the PBGC or (ii) the requirements of Section 4043(b) of ERISA apply with respect to a contributing sponsor, as defined in Section 4001(a)(13) of ERISA, of a Plan, and an event described in paragraph (9), (10), (11), (12) or (13) of Section 4043(c) of ERISA is reasonably expected to occur with respect to such Plan within the following 30 days; (b) the application for a minimum funding waiver with respect to a Plan; (c) the provision by the administrator of any Plan of a notice of intent to terminate such Plan, pursuant to Section 4041(a)(2) of ERISA (including any such notice with respect to a plan amendment referred to in Section 4041(e) of ERISA); (d) the cessation of operations at a facility of any Loan Party or any ERISA Affiliate in the circumstances described in Section 4062(e) of ERISA; (e) the withdrawal by any Loan Party or any ERISA Affiliate from a Multiple Employer Plan during a plan year for which it was a substantial employer, as defined in Section 4001(a)(2) of ERISA; (f) the conditions for imposition of a lien under Section 302(f) of ERISA shall have been met with respect to any Plan; (g) the adoption of an amendment to a Plan requiring the provision of security to such Plan pursuant to Section 307 of ERISA; or (h) the institution by the PBGC of proceedings to terminate a Plan pursuant to Section 4042 of ERISA, or the occurrence of any event or condition described in Section 4042 of ERISA that constitutes grounds for the termination of, or the appointment of a trustee to administer, such Plan. "Events of Default" has the meaning specified in Section 5.1 of the Facility Agreement. "Excluded Foreign Subsidiary" means a direct or indirect Foreign Subsidiary of Group which is not a Foreign Credit Party. "Excluded Intellectual Property" means those items of intellectual property specified on Schedule 2.6(d)(vi) of the Facility Agreement. "Excluded Person" means (i) Linda J. Wachner or (ii) any trust of which Linda J. Wachner is the sole trustee or is a trustee with effective control over the voting stock held by such trust or over the management or policies of Group (or, in case of her death or disability, another trustee of comparable experience and ability selected by Group within 180 days thereafter after consultation with the Debt Coordinators). "Excluded Property" means (i) any owned real property that is not Material Real Property, (ii) any leased real property that is not Material Leased Property, (iii) any registration of intellectual property in a jurisdiction other than the United States and Included Foreign Jurisdictions, (iv) general intangibles or other rights arising under contracts as to which the grant of a security interest therein would constitute a violation of a valid and enforceable restriction on such grant, unless and until any required consents shall have been obtained or such restrictions are rendered ineffective as a matter of law (at which time the Collateral will include such General Intangibles and other rights automatically and without any further action by any Grantor, the Collateral Trustee or any other Person), but all proceeds of any such contracts (and the right to receive future proceeds) shall not be "Excluded Property", (v) property subject to purchase money financing and Capitalized Leases permitted under Section 2.6(b)(iii), (iv) and (xiv) of the Facility Agreement, (vi) interests in the Trust Stock and any shares of Designer Holdings Ltd. into which such interests are converted pursuant to the TOPRs Documents and (vii) all accounts receivable and related property sold under the Securitization Facility. "Existing Facilities" means each of the credit facilities listed on Schedule II of the Intercreditor Agreement. "Extending Facilities" means the Existing Facilities identified in Schedule II to the Intercreditor Agreement under the heading "Extending Facilities". "Extraordinary Receipt" means any cash received by or paid to or for the account of any Person not in the ordinary course of business, including, without limitation, each tax refund in excess of $100,000 (provided that 10% of each tax refund in excess of $100,000 received at any time by Group shall not constitute "Extraordinary Receipts"), pension plan reversions, judgment and settlement awards (other than any amounts received as compensation for actual economic losses) in each case in excess of $100,000, proceeds of insurance (other than proceeds of business interruption insurance to the extent such proceeds constitute compensation for lost earnings), condemnation awards (and payments in lieu thereof), indemnity payments (other than any amounts received as compensation for actual economic losses) in each case in excess of $100,000 and any purchase price adjustment in excess of an aggregate of $1,000,000 per Fiscal Year received in connection with any purchase agreement; provided that an Extraordinary Receipt shall not include cash receipts received from proceeds of insurance or condemnation awards (or payments in lieu thereof) (i) of less than $1,000,000 in respect of any single casualty event, (ii) in respect of loss or damage to equipment, fixed assets, inventory or real property which are applied (or in respect of which expenditures were previously incurred) to replace or repair the equipment, fixed assets, inventory or real property in respect of which such proceeds were received, so long as such application, or a contractual commitment to apply such funds or replace such property, is made no later than 60 days after the receipt by such Person of such funds (provided that the Debt Coordinators may extend the 60 day time period specified in this clause (ii) by up to an additional 45 days if requested by Group) or (iii) received by any Person in respect of any third party claim against such Person and applied within a reasonable period of time to pay (or to reimburse such Person for its prior payment of) such claim. "Facility Agreement" has the meaning specified in Section 4.1(a)(ii) of the Intercreditor Agreement. "Fiscal Quarter" means a fiscal quarter of Group and its Consolidated Subsidiaries ending on or about March 31, June 30, September 30 and December 31 of each year. "Fiscal Year" means a fiscal year of Group and its Consolidated Subsidiaries ending on or about December 31 of each year. "Fixed Charge Coverage Ratio" means, for any period of four consecutive Fiscal Quarters, on a Consolidated basis, the ratio of (a) an amount equal to EBITDA of Group and its Subsidiaries for such period, less the aggregate of all Capital Expenditures made by Group and its Subsidiaries during such period to (b) the sum of (i) all cash Interest Expense of Group and its Subsidiaries paid or accrued during such period, (ii) all cash taxes paid by Group and its Subsidiaries for such period (net of tax refunds received in such period), (iii) all principal amortization payments made by Group and its Subsidiaries for such period and (iv) all cash dividends paid by Group for such period in respect of Designated Capital Markets Transactions. "Foreign Collateral Documents" means, collectively, all documents, instruments and agreements specified on Schedule IV to the Facility Agreement, each of the collateral documents, instruments and agreements delivered pursuant to Section 2.5(k) and 2.14 of the Facility Agreement and each other agreement that creates or purports to create a Lien on property or assets of the Foreign Credit Parties in favor of the Collateral Trustee for the benefit of the Secured Parties or grants or purports to grant a power of attorney to any Person for purposes of creating such a Lien. "Foreign Credit Party" means any Foreign Subsidiary organized under the laws of any Included Foreign Jurisdiction, or that is an Included Foreign Subsidiary. Unless otherwise expressly provided, a Subsidiary which either (i) is classified as inactive or dormant (or other similar designation) under the applicable laws of any Included Foreign Jurisdiction or (ii) has assets with an aggregate fair market value of less than $150,000 shall not be considered a "Foreign Credit Party" for purposes of this definition. "Foreign Facilities" means, collectively, items A.3, B.2 through B.4, B.9 and B.17 on Schedule II of the Intercreditor Agreement. "Foreign Subsidiary" means a direct or indirect Subsidiary of Group which is not a Domestic Subsidiary. "Fully Satisfied" means, with respect to the Payment Obligations as of any date, that, on or before such date, (a) the principal of (or, as applicable, stated or face amount of) and interest accrued to such date on all outstanding loans, reimbursement obligations in respect of letters of credit and bankers' acceptances and other credit extensions shall have been paid in full in cash, (b) all commitments to lend, issue any letter of credit, bankers' acceptance or other credit extension shall have been terminated in full, (c) all outstanding letters of credit and bankers' acceptances shall have been (i) terminated or (ii) cash collateralized by an amount sufficient in the reasonable judgment of the Debt Coordinators to secure any claims thereunder or (iii) supported by one or more letters of credit or other instruments on terms and conditions, and with one or more financial institutions, reasonably satisfactory to the Debt Coordinators and (d) all fees, expenses and other amounts then due and payable which constitute Payment Obligations shall have been paid in full in cash; provided, however, that on such date none of the Agents or any Lender Party shall have made any other claims in respect of Payment Obligations against any Loan Party under any provision of any of the Loan Documents or Covered Facilities that has not been cash collateralized by an amount sufficient in the reasonable judgment of the Debt Coordinators and any such Lender Party to secure such claim. "GAAP" has the meaning specified in Section 1.2 of the Intercreditor Agreement. "Group" has the meaning specified in the preamble of the Intercreditor Agreement. "Hazardous Materials" means (a) petroleum or petroleum products, by-products or breakdown products, radioactive materials, asbestos-containing materials, polychlorinated biphenyls and radon gas and (b) any other chemicals, materials or substances designated, classified or regulated as hazardous or toxic or as a pollutant or contaminant under any Environmental Law. "Hedge Agreements" means interest rate swap, cap or collar agreements, interest rate future or option contracts, currency swap agreements, currency forward or option contracts and other hedging agreements. "Hedge Bank" means any Lender Party or an Affiliate of a Lender Party in its capacity as a party to a Secured Hedge Agreement. "Immaterial Subsidiary" means, as of any date of determination, any direct or indirect Subsidiary of Group that (i) does not hold any material trademarks or other intellectual property and (ii) on a Consolidated basis with its Subsidiaries (A) has assets with an aggregate fair market value of less than $1,000,000 or (B) had revenues of less than $1,000,000 during the past 12-month period. "Included Foreign Jurisdictions" means Canada, Germany, France, the United Kingdom, the Netherlands, Belgium, Mexico, Hong Kong and Barbados, and each other jurisdiction of organization, if any, of the Included Foreign Subsidiaries. "Included Foreign Subsidiary" means any Foreign Subsidiary not otherwise an existing Foreign Credit Party, and which has, as of any date of determination on a Consolidated basis with its Subsidiaries, as calculated in accordance with GAAP, (i) EBITDA for the last four Fiscal Quarters of at least $5,000,000 or (ii) total assets as of the last day of the most recently ended Fiscal Quarter of at least $20,000,000. "Indebtedness for Borrowed Money" of any Person means all Debt of such Person for borrowed money or evidenced by notes, bonds, debentures or other similar instruments (other than Trust Stock and DHL Convertible Debentures, both as in effect on the Effective Date), all Obligations of such Person for the deferred purchase price of any property, service or business (other than trade accounts payable incurred in the ordinary course of business and constituting current liabilities, but including all loans in excess of $350,000,000 under the Trade Credit Facility and under the New Trade Credit Facility), and all Obligations of such Person under Capitalized Leases (limited in each case to the principal amount thereof); provided that Indebtedness for Borrowed Money (i) shall exclude (A) Specified Debt and (B) all amounts under any Securitization Facility that are classified, in accordance with GAAP, as credit extensions from the receivables servicer rather than purchases of accounts receivable, as resulting from any modification of the securitization structure in effect as of the Effective Date, as such modification is made and agreed to from time to time by the applicable servicer, Group and the Debt Coordinators and (ii) on any testing date shall be (A) decreased (increased) by the amount which "Total Outstanding Capital" (or similar term) under and as defined in the Securitization Facility is less (more) than the projected outstanding amount under the Securitization Facility for such time as specified in Schedule II to the Facility Agreement, provided that such amount in this clause (ii) shall not exceed $25,000,000 unless, and only to the extent, such increase (decrease) is due to a change in the structure of the Securitization Facility. "Intellectual Property Security Agreement" has the meaning specified in Section 6.1(a)(vi) of the Facility Agreement. "Interest Expense" means, with respect to any Person for any period of measurement, the excess, if any, of (a) interest expense (whether cash or accretion) of such Person during such period determined in accordance with GAAP (but excluding interest expense with respect to the Specified Debt), and shall include in any event, without limitation, interest expense with respect to all loans, bankers' acceptances and all letter of credit fees under the Trade Credit Facility, the Interim Trade Credit Facility and the New Trade Credit Facility, and, without duplication, interest expense with respect to Indebtedness for Borrowed Money, payments under interest rate Hedge Agreements (in the case of any interest rate cap, amortized over the life thereof) and cash interest payments made in respect of the Trust Stock over (b) interest income of such Person for such period, including, without limitation, payments received under interest rate Hedge Agreements. "Interim Trade Credit Facility" means the Letter of Credit Agreement dated as of July 27, 2000 among Warnaco, Group, certain of its Subsidiaries and The Bank of Nova Scotia. "Inventory" means all Inventory referred to in the Security Agreement. "Investment" in any Person means any loan or advance to such Person, any purchase or other acquisition of any Equity Interests or Debt or the assets comprising a division or business unit or a substantial part or all of the business of such Person, any capital contribution to such Person or any other direct or indirect investment in such Person, including, without limitation, any acquisition by way of a merger or consolidation and any arrangement pursuant to which the investor incurs Debt of the types referred to in clause (i) or (j) of the definition of "Debt" in respect of such Person. "Joinder Agreement" means a Joinder Agreement in substantially the form of Exhibit G of the Facility Agreement. "L/C Related Liens" means Liens on any bills of lading, airway bills, receipts and other applicable documents of title (and inventory and goods covered thereby) delivered with respect to letters of credit issued for the benefit of suppliers of inventory under the Foreign Facilities. "Lead Arrangers" has the meaning specified in the preamble of the Intercreditor Agreement. "Leasehold Assignments" has the meaning specified in Section 6.1(a)(v) of the Facility Agreement. "Lender Parties" means the lenders, counterparties and other providers of credit from time to time parties to the Covered Facilities. "Leverage Ratio" means, on the last day of any Fiscal Quarter on a Consolidated basis for Group and its Subsidiaries, the ratio of (i) Consolidated Indebtedness for Borrowed Money as of such date to (ii) Consolidated EBITDA for the four consecutive Fiscal Quarters ending on such date. "Lien" means any lien, security interest or other charge or encumbrance of any kind, or any other type of preferential arrangement, including, without limitation, the lien or retained security title of a conditional vendor and any easement, right of way or other encumbrance on title to real property. "Loan Documents" means, collectively, the Intercreditor Agreement, the Facility Agreement, the Collateral Documents, each Joinder Agreement and the Secured Hedge Agreements, in each case as the same may be amended, modified or supplemented from time to time. "Loan Parties" means, collectively, Group and each of its Subsidiaries who have executed and delivered this Agreement or any other Loan Document. "Long-Term Facilities" means, collectively, items A.2 and A.3 on Schedule II of the Intercreditor Agreement, and any New Facility that has a final maturity date after the Termination Date. "Margin Stock" has the meaning specified in Regulation U of the Board of Governors of the Federal Reserve System, as in effect from time to time. "Material Adverse Change" means any material adverse change in the (a) business, condition (financial or otherwise), operations, performance, properties or prospects of Group and its Subsidiaries, taken as a whole, since January 1, 2000, (b) ability of the Loan Parties to perform their respective obligations under the Loan Documents or (c) ability of the Administrative Agent, the Debt Coordinators, the Collateral Trustee or the Lender Parties to enforce the Loan Documents. "Material Adverse Effect" means a material adverse effect on (a) the business, condition (financial or otherwise), operations, performance, properties or prospects of Group and its Subsidiaries, taken as a whole, (b) the rights and remedies of the Administrative Agent, the Debt Coordinators, the Collateral Trustee or any Lender Party under any Loan Document or (c) the ability of any Loan Party to perform its Obligations under any Loan Document to which it is a party. "Material Real Property" means all fee-owned real property of any Loan Party (a) having a fair market value in excess of $1,000,000 as of the Effective Date, or if later, the date of acquisition thereof or (b) that the Debt Coordinators determine is material to the business, condition (financial or otherwise) operations, performance or properties of Group and its Subsidiaries, taken as a whole. "Material Leased Property" means all real estate leasehold properties of any Loan Party other than those (a) with respect to which the aggregate rental payments under the term of the lease in any year are less than $1,000,000 or (b) that relate to a site the loss of which would not otherwise have a material adverse effect on the production, distribution or sales of Group and its Subsidiaries, taken as a whole, or in any material geographic region where business is conducted at any time by Group and its Subsidiaries. "Moody's" means Moody's Investors Service, Inc. "Morgan" has the meaning specified in the preamble of the Intercreditor Agreement. "Mortgage" has the meaning specified in Section 6.1(a)(v). "Multiemployer Plan" means a multiemployer plan, as defined in Section 4001(a)(3) of ERISA, to which any Loan Party or any ERISA Affiliate is making or accruing an obligation to make contributions, or has within any of the preceding five plan years made or accrued an obligation to make contributions. "Multiple Employer Plan" means a single employer plan, as defined in Section 4001(a)(15) of ERISA, that (a) is maintained for employees of any Loan Party or any ERISA Affiliate and at least one Person other than the Loan Parties and the ERISA Affiliates or (b) was so maintained and in respect of which any Loan Party or any ERISA Affiliate could have liability under Section 4064 or 4069 of ERISA in the event such plan has been or were to be terminated. "Net Cash Proceeds" means, with respect to any sale, lease, transfer or other disposition of any asset (an "Asset Sale") or the incurrence or issuance of any Debt or the sale or issuance of any Equity Interests (including, without limitation, any capital contribution) by any Person, or any Extraordinary Receipt received by or paid to or for the account of any Person, the aggregate amount of cash received from time to time (whether as initial consideration or through payment or disposition of deferred consideration) by or on behalf of such Person in connection with such transaction (excluding any cash received by any Warnaco Entity as a result of the sale or issuance of Capital Stock to, or receipt of a capital contribution from, another Warnaco Entity) after deducting therefrom only (without duplication) (a) reasonable and customary brokerage commissions, underwriting or placement fees and discounts, legal fees and expenses, finder's fees and other similar fees, expenses and commissions, (b) the amount of taxes payable in connection with or as a result of such transaction, (c) the amount of any Debt secured by a Lien on such asset that, by the terms of the agreement or instrument governing such Debt, is required to be repaid upon such disposition, in each case to the extent, but only to the extent, that the amounts so deducted are, at the time of receipt of such cash, actually paid to a Person that is not an Affiliate of such Person or any Loan Party or any Affiliate of any Loan Party and are properly attributable to such transaction or to the asset that is the subject thereof (whether as principal, interest, prepayment premium or similar expense) and (d) in the case of subleased property, the amount due under the underlying lease; provided however, that (i) in the case of taxes that are deductible under clause (b) above but for the fact that, at the time of receipt of such cash, such taxes have not been actually paid or are not then payable, such Loan Party or such Subsidiary may deduct an amount (the "Reserved Amount") equal to the amount reserved in accordance with GAAP for such Loan Party's or such Subsidiary's reasonable estimate of such taxes, other than taxes for which such Loan Party or such Subsidiary is indemnified, (ii) at the time such taxes are paid, an amount equal to the amount, if any, by which the Reserved Amount for such taxes exceeds the amount of such taxes actually paid shall constitute "Net Cash Proceeds" for all purposes hereunder, (iii) the proceeds of any Asset Sale for an amount less than $500,000 shall not constitute Net Cash Proceeds and (iv) the proceeds of any Asset Sales of less than $20,000,000 in the aggregate that are reinvested (or contractually committed to be reinvested) in assets used or useful in the business of Group and its Subsidiaries within 90 days after the date of such Asset Sale shall not constitute Net Cash Proceeds (provided that the Debt Coordinators may extend the 90 day time period specified in this clause (iv) by up to an additional 45 days if requested by Group). "New Facilities" means those credit facilities entered into on or after the Effective Date (i) pursuant to Section 2.4 of the Intercreditor Agreement, (ii) pursuant to which the lenders and other financial institutions party thereto become a party to the Intercreditor Agreement by executing and delivering to the Administrative Agent a Joinder Agreement in accordance with Section 8.4 of the Intercreditor Agreement (except that, with respect to the New Trade Credit Facility, the execution and delivery of the Intercreditor Agreement by the Lender Parties party to the Trade Credit Facility shall be sufficient to classify the New Trade Credit Facility as a New Facility) and (iii) which will in no case, other than in the New Trade Credit Facility, provide for any scheduled payment of principal prior to the Termination Date. The Equity Derivative Notes shall be Existing Facilities and not New Facilities. The New Trade Credit Facility shall be a New Facility. "New Trade Credit Facility" means the Credit Agreement, dated as of the Effective Date, among Warnaco Inc., as U.S. Borrower, Designer Holdings, Ltd., as Sub Borrower, Authentic Fitness Products Inc. and those wholly-owned domestic subsidiaries designated therein as Warnaco Sub Borrowers, Warnaco (HK) Ltd., Warnaco B.V., Warnaco Netherlands B.V. and Warnaco Holland B.V., as Foreign Borrowers, The Warnaco Group, Inc., the financial institutions from time to time party thereto as Lenders, Societe Generale, as Documentation Agent, Citibank, N.A., as Syndication Agent and Scotiabank, as Administrative Agent, as the same may be amended from time to time. "NPL" means the National Priorities List under CERCLA. "Obligation" means, with respect to any Person, any obligation of such Person of any kind, including, without limitation, any liability of such Person on any claim, whether or not the right of any creditor to payment in respect of such claim is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, disputed, undisputed, legal, equitable, secured or unsecured, and whether or not such claim is discharged, stayed or otherwise affected by any proceeding referred to in Section 5.1(f) of the Facility Agreement. Without limiting the generality of the foregoing, the Obligations of the Loan Parties under the Loan Documents and Covered Facilities include (a) the obligation to pay principal, interest, charges, expenses, fees, attorneys' fees and disbursements, indemnities and other amounts payable by any Loan Party under any Loan Document or Covered Facility and (b) the obligation to reimburse any amount in respect of any of the foregoing that any Lender Party or Agent, in its sole discretion, may elect to pay or advance on behalf of such Loan Party. "Old Five-Year Credit Agreement" means item A.1 on Schedule II of the Intercreditor Agreement. "Other Taxes" has the meaning specified in Section 2.12(b) of the Facility Agreement. "Parent Guaranty" has the meaning specified in Section 6.1(a)(iv) of the Facility Agreement. "Payment Obligations" shall mean all principal, interest, fees, reimbursement obligations, letter of credit and bankers' acceptance commissions, charges, expenses, attorneys' fees and expenses, indemnities and any other amounts payable by the Loan Parties under the Loan Documents and the Covered Facilities. "PBGC" means the Pension Benefit Guaranty Corporation (or any successor). "Permitted Liens" means such of the following as to which no enforcement, collection, execution, levy or foreclosure proceeding shall have been commenced: (a) Liens, other than in favor of the PBGC, arising out of judgments or awards in respect of which Group or any of its Subsidiaries shall in good faith be prosecuting an appeal or proceedings for review and in respect of which it shall have secured a subsisting stay of execution pending such appeal or proceedings for review, provided it shall have set aside on its books adequate reserves, in accordance with GAAP, with respect to such judgment or award and provided further that the aggregate amount secured by such Liens does not exceed $5,000,000 in any one case or $10,000,000 in the aggregate; (b) Liens for taxes, assessments or governmental charges or levies, that are permitted under Section 2.5(b) of the Facility Agreement; (c) deposits, Liens or pledges to secure payments of workmen's compensation and other payments, unemployment and other insurance or social security obligations, or the performance of bids, tenders, leases, contracts (other than contracts for the payment of money), public or statutory obligations, surety, stay or appeal bonds, or other similar obligations arising in each case in the ordinary course of business; (d) mechanics', workmen's, repairmen's, warehousemen's, vendors' or carriers' Liens or other similar Liens arising in the ordinary course of business and securing sums which are not past due, or deposits or pledges to obtain the release of any such Liens; (e) statutory landlord's Liens under leases to which Group or any of its Subsidiaries is a party; (f) leases or subleases granted to other Persons not materially interfering with the conduct of the business of Group and its Subsidiaries, taken as a whole; (g) zoning restrictions, easements, rights of way, licenses and restrictions on the use of real property or minor irregularities in title thereto, which do not materially impair the use of such property in the normal operation of the business of Group or any of its Subsidiaries or the value of such property for the purpose of such business; (i) statutory or common law Liens (such as rights of set-off) on deposit accounts of Group and its Subsidiaries and other Liens under the Covered Facilities; and (j) amounts delivered pursuant to Section 4 of the Memoranda of Understanding as in effect on the Effective Date and referred to in items B.18 and B.19 of Schedule II to the Intercreditor Agreement. "Person" means an individual, partnership, corporation (including a business trust), joint stock company, trust, unincorporated association, joint venture, limited liability company or other entity, or a government or any political subdivision or agency thereof. "Plan" means a Single Employer Plan or a Multiple Employer Plan. "Pledged Debt" has the meaning specified in the Security Agreement. "Pro Rata" means on a ratable basis for each Covered Facility, taking into account (without double counting) the principal amount of all outstanding loans and reimbursement obligations, the undrawn amount of any letters of credit, the outstanding amount of all bankers' acceptances, the amount of all undrawn commitments and, in respect of any Derivative Agreement, the mark-to-market valuation thereof or total commitments thereunder, as applicable, calculated as specified in the definition of "Agreement Value". "Receivables" means all Receivables referred to in the Security Agreement. "Redeemable" means, with respect to any Equity Interest, any Debt or any other right or Obligation, any such Equity Interest, Debt, right or Obligation that (a) the issuer has undertaken to redeem at a fixed or determinable date or dates, whether by operation of a sinking fund or otherwise, or upon the occurrence of a condition not solely within the control of the issuer or (b) is redeemable at the option of the holder; provided, however, that an Equity Interest shall not be considered Redeemable solely because the holders thereof have the right to require the issuer to repurchase such Equity Interest upon the occurrence of a "change of control" or an "asset sale" if the terms of such Equity Interest provide that the issuer may not repurchase or redeem any such Equity Interest pursuant to such provisions unless such repurchase or redemption is subject to the condition that all Payment Obligations be Fully Satisfied or is otherwise permitted under this Agreement. "Regulation U" means Regulation U of the Board of Governors of the Federal Reserve System, as in effect from time to time. "Responsible Financial Officer" means the chief financial officer, the treasurer or the controller. "Required Lenders" means, at any time Lender Parties owed or holding at least a majority in interest of the sum of the (a) aggregate principal amount of all loans outstanding at such time under the Covered Facilities, (b) aggregate available amount of all letters of credit, bankers' acceptances and other credit extensions outstanding at such time under the Covered Facilities and (c) aggregate unused commitments at such time under the Covered Facilities; provided, however, that if any Lender Party shall be a Defaulting Lender at such time, there shall be excluded from the determination of Required Lenders at such time (A) the aggregate principal amount of the loans owing to such Lender Party (in its capacity as a Lender Party) and outstanding at such time, (B) such Lender Party's pro rata share of all letters of credit, bankers' acceptances and other credit extensions outstanding at such time under the Covered Facilities and (C) the aggregate unused commitments of such Lender Party at such time under the Covered Facilities. For purposes of the application of this definition in Section 2.2 of the Intercreditor Agreement, Obligations owing under Derivative Agreements shall not be counted in the determination of "Required Lenders", except to the extent of net obligations owing to any Lender Party under the Equity Derivatives, as calculated based on mark-to-market valuations thereof (calculated as specified in the definition of "Agreement Value") at the time of such vote or other action by the Required Lenders under Section 2.2 of the Intercreditor Agreement. For purposes of the application of this definition in respect of any amendment or waiver of any provision of Section 2.7 of the Facility Agreement, the sum of the (a) aggregate capital outstanding under the Securitization Facility and (b) aggregate unused purchase commitments under the Securitization Facility shall be counted in the determination of "Required Lenders". "Revolving Facilities" means those facilities numbered A.1 through A.3, B.3, B.4, and B.10 through B.15 on Schedule II to the Intercreditor Agreement, and any New Facilities that are revolving loan facilities. "S&P" means Standard & Poor's Ratings Group, currently a division of The McGraw-Hill Companies, Inc., or any successor thereto. "Scotiabank" has the meaning specified in the preamble of the Intercreditor Agreement. "Secured Hedge Agreements" means any Hedge Agreement permitted under Section 2.6(b)(v) of the Facility Agreement that is entered into by and between any Loan Party and any Hedge Bank. "Secured Obligations" has the meaning specified in the Security Agreement, provided that, notwithstanding anything else to the contrary contained herein or in any other Loan Document, all Obligations of any Warnaco Entity in respect of Cash Management Services shall constitute Obligations under the Loan Documents for purposes of the definition of "Secured Obligations" as used in the Loan Documents. "Secured Parties" means the Agents and the Lender Parties. "Securitization Facility" means, collectively, the Receivables Purchase Agreement dated as of the Effective Date among Warnaco Operations Corporation, as seller, Gregory Street, Inc., as servicer, Liberty Street Funding Corp. and Corporate Asset Funding Corp., as investors, The Bank of Nova Scotia, as agent, and Citicorp North America, Inc., as the co-agent; and any replacement or successor facility or facilities in a maximum amount at any time of up to $300,000,000 and the form and substance of which are reasonably acceptable to the Debt Coordinators. "Security Agent" has the meaning specified in the preamble to the Intercreditor Agreement. "Security Agreement" has the meaning specified in Section 6.1(a)(ii) of the Facility Agreement. "SG" has the meaning specified in the preamble of the Intercreditor Agreement. "Short-Term Facilities" means, collectively, items A.1, A.4, A.7 and B.1 through B.17 on Schedule II of the Intercreditor Agreement and any New Facility with a maturity date on the Termination Date. "Single Employer Plan" means a single employer plan, as defined in Section 4001(a)(15) of ERISA, that (a) is maintained for employees of any Loan Party or any ERISA Affiliate and no Person other than the Loan Parties and the ERISA Affiliates or (b) was so maintained and in respect of which any Loan Party or any ERISA Affiliate could have liability under Section 4069 of ERISA in the event such plan has been or were to be terminated. "Solvent" and "Solvency" mean, with respect to any Person on a particular date, that on such date (a) the fair value of the property of such Person is greater than the total amount of liabilities, including, without limitation, contingent liabilities, of such Person, (b) the present fair salable value of the assets of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured, (c) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person's ability to pay such debts and liabilities as they mature and (d) such Person is not engaged in business or a transaction, and is not about to engage in business or a transaction, for which such Person's property would constitute an unreasonably small capital. The amount of contingent liabilities at any time shall be computed as the amount that, in the light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability. "Specified Debt" means Debt of Group incurred pursuant to that certain (i) Memorandum of Understanding dated as of September 19, 2000 between Group and SunTrust Bank and (ii) Memorandum of Understanding dated as of September 19, 2000 between Group and Scotia Capital (U.S.A.) Inc. "Specified Facility" has the meaning specified on Schedule II to the Intercreditor Agreement. "Specified Facility Lender" means the Lender Party party to the Specified Facility. "Specified Parameters" means, with respect to (i) Debt, any such Debt (A) which is (1) unsecured or (2) secured by liens which are fully subordinated and junior in right of payment to the prior indefeasible payment in full in cash of all Obligations under the Existing Facilities, the New Trade Credit Facility and the Loan Documents, without rights of the secured party under such Debt to receive any payment or distribution of any kind or character or to vote or direct enforcement actions or remedies, or block enforcement actions of the Collateral Trustee, in each case with respect to the Collateral, until all Payment Obligations are Fully Satisfied, (B) which is at or below a market rate of interest for comparable instruments at such time, (C) with respect to which no principal payments may be made prior to May 17, 2005, (D) which could not impair the value of or have an adverse effect on the Existing Facilities or the Covered Facilities or the rights or interests of the Lender Parties thereunder and (E) which has no additional or more restrictive covenants, defaults, required prepayment, required redemption or other similar terms more restrictive or onerous on, or less favorable to, Group and its Subsidiaries, or any of the Loan Parties, than those contained in the Existing Facilities or the Covered Facilities and (ii) Equity Interests, any such Equity Interests (A) which could not impair the value of or have an adverse effect on the Existing Facilities or the Covered Facilities or the rights or interests of the Lender Parties thereunder, (B) the economic terms of which are at or below the market rate for comparable instruments at such time, (C) with respect to which no redemptions may be made or other premiums paid prior to May 17, 2005 and (D) which have no additional or more restrictive covenants, defaults or other similar terms more restrictive or onerous on, or less favorable to, Group and its Subsidiaries, or any of the Loan Parties, than comparable terms contained in the Existing Facilities or the Covered Facilities. Notwithstanding the foregoing, any Debt or Equity Interest that would not satisfy the Specified Parameter requirements solely because the holders thereof have the right to require Group or any of its Subsidiaries to repurchase such Debt or Equity Interest upon the occurrence of a "change of control" or an "asset sale" shall be deemed to satisfy the Specified Parameter requirements if the terms of such Debt or Equity Interest provide that Group or such Subsidiary may not repurchase or redeem any such Debt or Equity Interest pursuant to such provisions unless such repurchase or redemption is subject to all Payment Obligations being Fully Satisfied, or is otherwise permitted under the Facility Agreement. "Specified Sale-Leaseback Transaction" means a transaction pursuant to which a Warnaco Entity sells fixed assets to a third party in an amount at least equal to the book value therefor and simultaneously enters into an operating lease or a Capitalized Lease otherwise permitted under Section 2.6(b)(iv) of the Facility Agreement with respect thereto, in each case within 365 days of the date such assets were acquired. "SSBI" has the meaning specified in the preamble of the Intercreditor Agreement. "Subsidiary" of any Person means any corporation, partnership, joint venture, limited liability company, trust or estate of which (or in which) more than 50% of (a) the issued and outstanding capital stock having ordinary voting power to elect a majority of the Board of Directors of such corporation (irrespective of whether at the time capital stock of any other class or classes of such corporation shall or might have voting power upon the occurrence of any contingency), (b) the interest in the capital or profits of such partnership, joint venture or limited liability company or (c) the beneficial interest in such trust or estate is at the time directly or indirectly owned or controlled by such Person, by such Person and one or more of its other Subsidiaries or by one or more of such Person's other Subsidiaries. "Subsidiary Guaranty" has the meaning specified in Section 6.1(a)(iii). "Supermajority Lenders" means, at any time Lender Parties owed or holding at least 66-2/3% in interest of the sum of the (a) aggregate principal amount of all loans outstanding at such time under the Covered Facilities, (b) aggregate available amount of all letters of credit, bankers' acceptances and other credit extensions outstanding at such time under the Covered Facilities and (c) aggregate unused commitments at such time under the Covered Facilities; provided, however, that if any Lender Party shall be a Defaulting Lender at such time, there shall be excluded from the determination of Supermajority Lenders at such time (A) the aggregate principal amount of the loans owing to such Lender Party (in its capacity as a Lender Party) and outstanding at such time, (B) such Lender Party's pro rata share of all letters of credit, bankers' acceptances and other credit extensions outstanding at such time under the Covered Facilities and (C) the aggregate unused commitments of such Lender Party at such time under the Covered Facilities. For purposes of the application of this definition in Section 2.2 of the Intercreditor Agreement, Obligations owing under Derivative Agreements shall not be counted in the determination of "Supermajority Lenders", except to the extent of net obligations owing to any Lender Party under the Equity Derivatives, as calculated based on mark-to-market valuations thereof (calculated as specified in the definition of "Agreement Value") at the time of such vote or other action by the Supermajority Lenders under Section 2.2 of the Intercreditor Agreement. For purposes of the application of this definition in respect of any amendment or waiver of any provision of Section 2.7 of the Facility Agreement, the sum of the (a) aggregate capital outstanding under the Securitization Facility and (b) aggregate unused purchase commitments under the Securitization Facility shall be counted in the determination of " Supermajority Lenders". "Taxes" has the meaning specified in Section 2.12(a) of the Facility Agreement. "Termination Date" means August 12, 2002. "TOPRs Documents" means the Indenture dated as of November 6, 1996 between Designer Holdings Ltd. and IBJ Schroeder Bank & Trust Company, and all related documents relating to the Trust and Trust Stock. "Total Bank Outstandings" of Group and its Subsidiaries means, on a Consolidated basis and without duplication, the following: (a) all Indebtedness for Borrowed Money of such Persons, (b) all Obligations of such Persons under the Securitization Facility, (c) all loans under the Trade Credit Facility and New Trade Credit Facility not otherwise included as Indebtedness for Borrowed Money, and (d) all amounts outstanding under the Securitization Facility not otherwise included as Indebtedness for Borrowed Money. "Trade Credit Facility" has the meaning specified on Schedule II to the Intercreditor Agreement. "Trust" means Designer Finance Trust, a trust formed under the laws of Delaware. "Trust Stock" means the Trust Originated Preferred Securities issued by the Trust. "Uncommitted Facilities" means, collectively, items B.6 through B.15 on Schedule II of the Intercreditor Agreement. "U.S. Credit Party" means Group and any Domestic Subsidiary (other than Warnaco Operations Corporation). "Warnaco Entity" means Group and any of its Subsidiaries. "Welfare Plan" means a welfare plan, as defined in Section 3(1) of ERISA, that is maintained for employees of any Loan Party or in respect of which any Loan Party could have liability. "Wholly-Owned Subsidiary" means, with respect to any Person, any Subsidiary of such Person, all the outstanding shares of capital stock or other Equity Interests of which (other than directors or similar qualifying shares issued in compliance with requirements of local law) are at the time owned directly or indirectly by such Person. "Withdrawal Liability" has the meaning specified in Part I of Subtitle E of Title IV of ERISA. PART II. INTERPRETATION AND CONSTRUCTION The following shall constitute the rules of interpretation and construction applicable to the terms defined herein and in the Loan Documents. (a) With respect to any term that is defined by reference to any Loan Document (capitalized terms used in this Annex A are used as defined herein), for purposes hereof, such term shall continue to have the original definition notwithstanding any termination, expiration or modification of such document except to the extent the parties may otherwise agree in accordance with the terms of such document. (b) In each Loan Document in the computation of periods of time from a specified date to a later specified date, the word "from" means "from and including" and the words "to" and "until" each mean "to but excluding". References in the Loan Documents to any agreement or contract "as amended" shall mean and be a reference to such agreement or contract as amended, amended and restated, supplemented or otherwise modified (by waiver or otherwise) from time to time in accordance with its terms (c) The words "hereof," "herein" and "hereunder" and words of similar import, when used in any Loan Document, shall refer to such document as a whole and not to any particular provision of such document, and section, subsection, annex, appendix, schedule and exhibit references are to those contained in or attached to such document unless otherwise specified. (d) Each reference to "days" in any Loan Document shall mean calendar days, unless the term "Business Days" shall be used. Each reference to a time of day in any Loan Document shall mean such time in New York, New York, unless otherwise specified. (e) The meanings given to terms defined in this Annex or in any Loan Document shall apply to both the singular and plural forms of such terms. (f) Except as otherwise specified herein, each reference in this Annex or in any Loan Document to any agreement shall be deemed (i) to include all exhibits, annexes, schedules or other attachments thereto and (ii) to refer to such agreement as the same may be amended, supplemented or otherwise modified from time to time in accordance with the terms of such Loan Document (to the extent such terms are applicable to any amendment, supplement or modification of such agreement). (g) Except as otherwise specified in this Annex or in any Loan Document, each reference in this Annex or in any Loan Document to a law or requirement of law, shall be deemed to refer to such law or requirement of law, as the same may be amended, supplemented or otherwise modified from time to time. (h) Each reference in this Annex or in any Loan Document to a Person shall be deemed to include such Person's permitted successors and assigns. (i) Each reference in this Annex or in any Loan Document to accounting terms relating to the Loan Parties not defined in this Annex, to the extent not defined, shall have the respective meanings given to them under GAAP. EX-99 4 0004.txt EXHIBIT 99.3 - RECEIVABLES AGREEMENT EXHIBIT 99.3 - ------------------------------------------------------------------------------ AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT dated as of October 6, 2000 among WARNACO OPERATIONS CORPORATION, as Seller GREGORY STREET, INC., as Servicer VARIOUS FINANCIAL INSTITUTIONS, as Purchasers and THE BANK OF NOVA SCOTIA, as Agent and CITIBANK, N.A., as the Co-Agent - ------------------------------------------------------------------------------ TABLE OF CONTENTS ARTICLE I. AMOUNTS AND TERMS OF THE PURCHASES Section 1.1.Purchase Facility................................................2 Section 1.2.Purchase Procedure. ............................................2 Section 1.3.Continuation and Conversion Elections............................3 Section 1.4.Purchased Interest Computation...................................4 Section 1.5.Rates............................................................4 Section 1.6.Post Termination Event Rates.....................................4 Section 1.7.Settlement Procedures............................................5 Section 1.8.Fees.............................................................9 Section 1.9.Payments and Computations, Etc...................................9 Section 1.10.Sharing of Payments.............................................9 Section 1.11.Eurodollar Rate Lending Unlawful...............................10 Section 1.12.Increased Costs................................................10 Section 1.13.Requirements of Law............................................11 Section 1.14.Broken Funding.................................................12 ARTICLE II. REPRESENTATIONS AND WARRANTIES; COVENANTS; TERMINATION EVENTS Section 2.1.Representations and Warranties; Covenants.......................12 Section 2.2.Termination Events..............................................12 ARTICLE III. INDEMNIFICATION Section 3.1.Indemnities by the Seller.......................................13 Section 3.2.Indemnities by the Servicer.....................................14 ARTICLE IV. ADMINISTRATION AND COLLECTIONS Section 4.1.Appointment of the Servicer.....................................15 Section 4.2.Duties of the Servicer..........................................16 Section 4.3.Establishment and Use of Certain Accounts.......................17 Section 4.4.Enforcement Rights..............................................17 Section 4.5.Responsibilities of the Seller..................................18 Section 4.6.Servicing Fee...................................................18 ARTICLE V. THE AGENTS Section 5.1.Appointment and Authorization...................................18 Section 5.2.Delegation of Duties............................................19 Section 5.3.Exculpatory Provisions..........................................19 Section 5.4.Reliance by Agents..............................................19 Section 5.5.Notice of Termination Events....................................20 Section 5.6.Non-Reliance on Agent and Other Purchasers......................20 Section 5.7.Agents and Affiliates...........................................20 Section 5.8.Indemnification.................................................20 Section 5.9.Successor Agent.................................................21 Section 5.10.Certain Pool Assets and Other Matters..........................21 ARTICLE VI. MISCELLANEOUS Section 6.1.Amendments, Etc.................................................21 Section 6.2.Notices, Etc....................................................22 Section 6.3.Assignability...................................................22 Section 6.4.Participations..................................................24 Section 6.5.Certain Other Provisions........................................24 Section 6.6.Costs, Expenses and Taxes.......................................25 Section 6.7.No Proceedings; Limitation on Payments..........................25 Section 6.8.GOVERNING LAW AND JURISDICTION..................................26 Section 6.9.Execution in Counterparts.......................................26 Section 6.10.Survival of Termination........................................26 Section 6.11.WAIVER OF JURY TRIAL...........................................26 Section 6.12.Entire Agreement...............................................27 Section 6.13.Headings.......................................................27 Section 6.14.Conduit Purchaser's Liabilities................................27 EXHIBIT I Definitions EXHIBIT II Conditions Precedent EXHIBIT III Representations and Warranties EXHIBIT IV Covenants EXHIBIT V Termination Events SCHEDULE I Credit and Collection Policy SCHEDULE II Trade Names SCHEDULE III Fiscal Months ANNEX A Form of Monthly Report ANNEX B Form of Purchase Request ANNEX C Form of Continuation/Conversion Notice ANNEX D Form of Weekly Report ANNEX E Form of Purchaser Assignment Agreement This AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT (as amended, supplemented or otherwise modified and in effect from time to time, this "Agreement") is entered into as of October 6, 2000, among WARNACO OPERATIONS CORPORATION, a Delaware corporation, as seller (the "Seller"), GREGORY STREET, INC., a Delaware corporation ("Gregory"), as initial servicer (in such capacity, together with its successors and permitted assigns in such capacity, the "Servicer"), the various financial institutions as are or may become parties hereto as Purchasers (collectively, the "Purchasers"), THE BANK OF NOVA SCOTIA, a Canadian chartered bank acting through its New York branch ("BNS"), as agent for the Purchasers (in such capacity, together with its successors and assigns in such capacity, together with its successors and assigns in such capacity, the "Agent"), and CITIBANK, N. A., a national banking association ("Citibank"), as co-agent (in such capacity, together with its successors and assigns in such capacity, the "Co-Agent"). PRELIMINARY STATEMENTS. Certain terms that are capitalized and used throughout this Agreement are defined in Exhibit I. References in the Exhibits hereto to the "Agreement" refer to this Agreement, as amended, supplemented or otherwise modified and in effect from time to time. This Agreement amends and restates in its entirety the Receivables Purchase Agreement dated as of September 30, 1998 (the "Original Agreement"), among the Seller, the Servicer, Liberty Street Funding Corp., a Delaware corporation ("Liberty Street"), Corporate Asset Funding Company, Inc., a Delaware corporation ("CAFCO"), the Agent and Co-Agent. Upon the effectiveness of this Agreement, the terms and provisions of the Original Agreement shall, subject to this paragraph, be superseded hereby in their entirety. Notwithstanding the amendment and restatement of the Original Agreement by this Agreement, the Seller and the Servicer shall continue to be liable to Liberty Street, CAFCO, the Agent, Co-Agent or any other Indemnified Party or Affected Person (as such terms are defined in the Original Agreement) with respect to all unpaid fees and expenses accrued to the date hereof under the Original Agreement and all agreements to indemnify such parties in connection with events or conditions arising or existing prior to the effective date of this Agreement. Upon the effectiveness of this Agreement, each reference to the Original Agreement in any other document, instrument or agreement shall mean and be a reference to this Agreement. Nothing contained herein, unless expressly herein stated to the contrary, is intended to amend, modify or otherwise effect any other instrument, document or agreement executed and or delivered in connection with the Original Agreement. The Seller desires to sell, transfer and assign to the Purchasers undivided variable percentage ownership interests in a pool of receivables, and the Purchasers desire to acquire such undivided variable percentage ownership interests on the terms and subject to the conditions set forth herein. In consideration of the mutual agreements, provisions and covenants contained herein, the parties hereto agree as follows: ARTICLE I. AMOUNTS AND TERMS OF THE PURCHASES Section 1.1.Purchase Facility. (a) On the terms and conditions hereinafter set forth, the Purchasers shall purchase, ratably in accordance with their respective Percentages, and make reinvestments in, undivided percentage ownership interests with regard to the Purchased Interest from the Seller from time to time from the date hereof to the Facility Termination Date. Under no circumstances shall any Purchaser be obligated to make any such purchase or reinvestment if, after giving effect thereto, (i) the Aggregate Capital would exceed the Purchase Limit or (ii) the aggregate outstanding Capital of any Purchaser hereunder would exceed such Purchaser's "Percentage" of the Aggregate Capital. (b) The Seller may, upon at least 30 days' written notice to the Agent and Co-Agent, terminate in whole or reduce in part the unused portion of the Purchase Limit; provided, that each partial reduction shall be in the amount of at least $10,000,000, or an integral multiple of $5,000,000 in excess thereof, and that, unless terminated in whole, the Purchase Limit shall in no event be reduced below $100,000,000. Section 1.2.Purchase Procedure. (a) The Seller may from time to time request that a purchase of undivided percentage ownership interests with regard to the Purchased Interest be made by the Purchasers on any Business Day, by delivery to the Agent a Purchase Request on or before 10:00 a.m. (i) on the Business Day immediately preceding the date of such requested purchase (in the case of a purchase to be funded as a Base Rate Tranche) or (ii) three Business Days prior to the date of such requested purchase (in the case of a purchase to be funded as a Eurodollar Rate Tranche). Upon receipt of such Purchase Request, the Agent shall notify each Purchaser thereof within two hours of its receipt of such Purchase Request. All such Purchases shall be made in a minimum aggregate amount of $5,000,000 and an aggregate integral multiple of $1,000,000 or, if less, in the unused amount of the applicable Purchase Limit. (b) On the date of each purchase (but not reinvestment) each Purchaser, shall, upon satisfaction of the applicable conditions set forth in Exhibit II, make available to the Seller in same day funds, at Citibank, N.A., account number 4077-4094, ABA 021-00-0089, an amount equal to its Percentage of the amount of the purchase requested by Seller in such Purchaser Request relating to its Purchased Interest then being purchased. (c) The Aggregate Capital with respect to the Purchased Interest shall be allocated to one or more tranches (each, a "Tranche") each having such Interest Period and accruing Discount at the Rate Types specified in a Purchase Request or Continuation/Conversion Notice delivered pursuant to Section 1.3 and determined in accordance with Section 1.5. At any time, each Tranche shall have only one Interest Period and one Rate Type. At no time shall the number of Interest Periods for all Tranches exceed eight. (d) Effective on the date of each purchase pursuant to this Section and each reinvestment pursuant to Section 1.7, the Seller hereby sells and assigns to the Agent, for the benefit of each Purchaser, undivided percentage ownership interests in: (i) each Pool Receivable then existing, (ii) all Related Security with respect to such Pool Receivables, and (iii) all Collections with respect to, and other proceeds of, such Pool Receivables and Related Security. (e) To secure all of the Seller's obligations (monetary or otherwise) under this Agreement and the other Transaction Documents to which it is a party, whether now or hereafter existing or arising, due or to become due, direct or indirect, absolute or contingent, the Seller hereby grants to the Agent, for the benefit of the Purchasers, a security interest in all of the Seller's right, title and interest (including any undivided interest of the Seller) in, to and under all of the following, whether now or hereafter owned, existing or arising: (i) all Pool Receivables, (ii) all Related Security with respect to such Pool Receivables, (iii) all Collections with respect to such Pool Receivables, (iv) the Collection Account and all amounts on deposit therein, and all certificates and instruments, if any, from time to time evidencing the Collection Account and amounts on deposit therein, (v) all rights (but none of the obligations) of the Seller under the Gregory Sale Agreement, and (vi) all proceeds of, and all amounts received or receivable under any or all of, the foregoing (collectively, the "Pool Assets"). Upon the sale of a Defaulted Receivable by the Servicer permitted by Section 1(e) of Exhibit IV, the security interest of the Agent in such Defaulted Receivable shall automatically be released and the Agent shall take such actions as may be reasonably requested by the purchaser of such Defaulted Receivable to evidence such release. The Agent, for the benefit of the Purchasers, shall have, with respect to the Pool Assets, and in addition to all the other rights and remedies available to the Agent and the Purchasers hereunder, all the rights and remedies of a secured party under any applicable UCC. Section 1.3.Continuation and Conversion Elections. By delivering a Continuation/Conversion Notice in the form of Annex C to the Agent in accordance with Section 5.2 (which notice must be received by the Agent before 11:00 a.m., New York City time) on a Business Day, the Seller may from time to time irrevocably elect, on not less than one Business Day's notice in the case of conversions to Base Rate Tranches, or three Business Days' notice in the case of conversions to or continuations of Eurodollar Rate Tranches, and in either case not more than five Business Days, that all, or any portion in an aggregate minimum aggregate amount of $1,000,000 and an integral multiple of $200,000 be, in the case of Base Rate Tranches converted into Eurodollar Rate Tranches or be, in the case of Eurodollar Rate Tranches converted into Base Rate Tranches or continued as Eurodollar Rate Tranches (in the absence of delivery of a Continuation/Conversion Notice with respect to any Eurodollar Rate Tranche at least three Business Days (but not more than five Business Days) before the last day of the then current Interest Period with respect thereto, such Eurodollar Rate Tranche shall, on such last day, automatically convert to a Base Rate Tranche); provided, however, that (i) each such conversion or continuation shall be prorated among the applicable outstanding Tranches of all Purchasers and (ii) no Tranche may be continued as, or be converted into, Eurodollar Rate Tranches when any Termination Event or Unmatured Termination Event has occurred and is continuing (unless the Purchasers otherwise agree in writing). Section 1.4. Purchased Interest Computation. The Purchased Interest shall be initially computed on the date of its initial purchase hereunder. Thereafter, until the Facility Termination Date, the Purchased Interest shall be automatically recomputed (or deemed to be recomputed) on each Business Day other than a Termination Day. The Purchased Interest as computed (or deemed recomputed) as of the day before the Facility Termination Date shall thereafter remain constant. The Purchased Interest shall become zero on the Final Payout Date. Section 1.5. Rates. Subject to Section 1.2, 1.3 and 1.6, the Seller may elect, pursuant to an appropriately delivered Purchase Request or Continuation/Conversion Notice that each Tranche accrue interest at a rate per annum: (a) in the case of a Base Rate Tranche, during each Interest Period, equal to the sum of the Base Rate from time to time in effect during such Interest Period plus the Applicable Margin; and (b) in the case of a Eurodollar Rate Tranche, during each Interest Period applicable thereto, equal to the sum of the Eurodollar Rate for such Interest Rate plus the Applicable Margin. "Eurodollar Rate" means, for any Interest Period, an interest rate per annum (rounded upward to the nearest 1/16th of 1%) determined pursuant to the following formula: LIBOR _________________________________ 100% - Eurodollar Rate Reserve Percentage where "Eurodollar Rate Reserve Percentage" means, for any Interest Period, the maximum reserve percentage (expressed as a decimal, rounded upward to the nearest 1/100th of 1%) in effect on the date LIBOR for such Interest Period is determined under regulations issued from time to time by the Federal Reserve Board for determining the maximum reserve requirement (including any emergency, supplemental or other marginal reserve requirement) with respect to "Eurocurrency" funding (currently referred to as "Eurocurrency liabilities") having a term comparable to such Interest Period. "LIBOR" means, for any Interest Period, the rate of interest per annum equal to the rate per annum at which dollar deposits in the approximate amount of the Tranche to be funded at the Eurodollar Rate during such Interest Period would be offered by major banks in the London interbank market to The Bank of Nova Scotia at its request at or about 11:00 a.m. (London time) on the second Business Day before the commencement of such Interest Period. Section 1.6. Post Termination Event Rates. From and after the occurrence and during the continuance, of a Termination Event or a Default Event, the Seller shall pay, but only to the extent permitted by law, interest (after as well as before judgment) on each Tranche at a rate equal to 2.00% per annum above the Base Rate in effect from time to time plus the Applicable Margin. Section 1.7. Settlement Procedures. (a) The collection of the Pool Receivables shall be administered by the Servicer in accordance with this Agreement. The Seller shall provide to the Servicer on a timely basis all information needed for such administration, including notice of the occurrence of any Termination Day and current computations of the Purchased Interests. (b) The Servicer shall, on each day on which Collections of Pool Receivables are received (or deemed received in accordance with Section 1.7(e)) by the Seller or Servicer, transfer such Collections into the Collection Account. With respect to such Collections on such day, the Servicer shall: (i) set aside in the Collection Account for the benefit of the Purchasers, out of the percentage of such Collections represented by the Purchased Interest, first an amount equal to the Discount accrued through such day for each Tranche and not previously set aside, second, an amount equal to the Fees payable to the Purchasers and accrued through such day and not previously set aside, and third, an amount equal to such Purchasers' Share of the Servicing Fee accrued through such day and not previously set aside; and (ii) subject to Section 1.7(f), if such day is not a Termination Day, remit to the Seller, on behalf of the Purchasers, the remainder of the percentage of such Collections, represented by the Purchased Interest, to the extent representing a return on the Aggregate Capital; such Collections shall be automatically reinvested for the benefit of the Purchasers in Pool Receivables, and in the Related Security and Collections and other proceeds with respect thereto, and the Purchased Interest shall be automatically recomputed pursuant to Section 1.4; (iii) if such day is a Termination Day, (A) set aside and retain in the Collection Account for the benefit of the Purchasers, the entire remainder of the percentage of the Collections represented by the Purchased Interest; provided that, so long as the Facility Termination Date has not occurred, if any amounts are so set aside and retained in the Collection Account on any Termination Day and thereafter, the conditions set forth in Section 2 of Exhibit II are satisfied or are waived by the Required Purchasers, such previously set aside amounts shall, to the extent representing a return on the Aggregate Capital and not applied to the reduction of the Aggregate Capital pursuant to Section 1.7(g), be reinvested in accordance with the preceding paragraph (ii) on the day of such subsequent satisfaction or waiver of conditions, and (B) set aside and retain in the Collection Account the entire remainder of the Collections in the Collection Account represented by the Seller's Share of the Collections, if any; provided, that so long as the Facility Termination Date has not occurred, if any amounts are so set aside and retained in the Collection Account on any Termination Day and thereafter, the conditions set forth in Section 2 of Exhibit II are satisfied or are waived by the Required Purchasers, such previously set aside amounts shall, to the extent not applied to the reduction of the Aggregate Investment pursuant to Section 1.7(g), be distributed to the Seller on the day of such subsequent satisfaction or waiver of conditions; and (iv) during such times as amounts are required to be reinvested in accordance with the foregoing paragraph (ii) or the proviso to paragraph (iii), release to the Seller (subject to Section 1.7(f)) for its own account any Collections in excess of (x) such amounts, (y) the amounts that are required to be set aside and retained in the Collection Account pursuant to paragraph (i) above and (z) in the event Gregory (or any Affiliate of Group) is not the Servicer, all reasonable and appropriate out-of-pocket costs and expenses of such Servicer of servicing, collecting and administering the Pool Receivables. (c) The Servicer shall deposit into an account designated by the Agent for the benefit of the Purchasers, on each Settlement Date for each Tranche and for each Settlement Date for the payment of fees, as the case may be: (i) Collections held on deposit in the Collection Account for the benefit of the Purchasers pursuant to Section 1.7(b)(i) in respect of accrued Discount for such Tranche and accrued and unpaid Fees; (ii) Collections held on deposit in the Collection Account for the benefit of the Purchasers pursuant to Section 1.7(f); and (iii) If such Settlement Date occurs on a date that is a Termination Day, the lesser of (x) the sum of (i) the amount of Collections then held on deposit in the Collection Account for the benefit of the Purchasers pursuant to Section 1.7(b)(iii)(A) plus (ii) the amount of Collections then on deposit in the Collection Account in respect of the Seller's Share of Collections pursuant to Section 1.7(b)(iii)(B) and (y) the Tranche Amount of such Tranche. The Servicer shall deposit to its own account from Collections held on deposit in the Collection Account pursuant to Section 1.7(b)(i) in respect of the accrued Servicing Fee, an amount equal to such accrued Servicing Fee. (d) Upon receipt of funds deposited into the Agent's account pursuant to Section 1.7(c), the Agent shall distribute to the Purchasers ratably in accordance with each Purchaser's Pro Rata Share as follows: (i) if such distribution occurs on a day that is not a Termination Day, first to the Purchasers in payment in full of all accrued and unpaid Discount for such Tranche and accrued and unpaid Fees payable to the Purchasers, and second, if the Servicer has set aside amounts in respect of the Servicing Fee pursuant to Section 1.7(b)(i) and has not retained such amounts pursuant to Section 1.7(c), to the Servicer (payable in arrears on each Settlement Date) in payment in full of each Purchasers' Share of accrued Servicing Fees so set aside, and (ii) if such distribution occurs on a Termination Day or on a day when the Purchased Interest exceeds 100%, first to the Purchasers in payment in full of all accrued Discount and such accrued and unpaid Fees, second to the Purchasers in payment of the Capital of the Purchasers (or, if such day is not a Termination Day, the amount necessary to reduce the Purchased Interest to 100%), third, if Gregory or an Affiliate of Group is not the Servicer, to the Servicer in payment in full of all accrued Servicing Fees, fourth, if the Aggregate Capital and accrued Discount with respect to each Tranche has been reduced to zero, and all accrued Servicing Fees payable to the Servicer (if other than Gregory or an Affiliate of Group) have been paid in full, to such Purchaser, the Agent, the Co-Agent and any other Indemnified Party or Affected Person in payment in full of any other amounts owed thereto by the Seller hereunder and, fifth, unless such amount has been retained by the Servicer pursuant to Section 1.7(c), to the Servicer (if the Servicer is Gregory or an Affiliate of Group) in payment in full of such Purchasers' Share of all accrued Servicing Fees. After the Aggregate Capital, Discount with respect to all Tranches, Fees and Servicing Fees, and any other amounts payable by the Seller and the Servicer to the Purchasers, the Agent, the Co-Agent or any other Indemnified Party or Affected Person hereunder, have been paid in full, all additional Collections with respect to the Purchased Interests shall be paid to the Seller for its own account. (e) For the purposes of this Section 1.7: (i) if on any day the Outstanding Balance of any Pool Receivable is reduced or adjusted as a result of any defective, rejected, returned, repossessed or foreclosed goods or services, or any revision, cancellation, allowance, discount or other adjustment made by any Originator, the Servicer, the Seller or any Affiliate of the Seller, or any setoff or dispute between any Originator, the Seller or any Affiliate of the Seller and an Obligor, the Seller shall be deemed to have received on such day a Collection of such Pool Receivable in the amount of such reduction or adjustment; (ii) if on any day any of the representations or warranties in Section 1(g) or (m) of Exhibit III is not true with respect to any Pool Receivable, the Seller shall be deemed to have received on such day a Collection of such Pool Receivable in full; (iii) except as otherwise required by applicable law or the relevant Contract, all Collections received from an Obligor of any Receivable shall be applied to the Receivables of such Obligor in the order of the age of such Receivables, starting with the oldest such Receivable, unless such Obligor designates in writing its payment for application to specific Receivables; and (iv) if and to the extent the Agent, the Co-Agent or any Purchaser shall be required for any reason to pay over to an Obligor (or any trustee, receiver, custodian or similar official in any Insolvency Proceeding) any amount received by it hereunder, such amount shall be deemed not to have been so received by the Agent, the Co-Agent or such Purchaser, as the case may be, but rather to have been retained by the Seller and, accordingly, the Agent, the Co-Agent or such Purchaser, as the case may be, shall have a claim against the Seller for such amount, payable when and to the extent that any distribution from or on behalf of such Obligor is made in respect thereof. (f) If at any time the Seller shall wish to cause the reduction of the Aggregate Capital of the Purchased Interest, the Seller may do so as follows: (i) the Seller shall give the Agent, the Co-Agent and the Servicer at least five Business Days' prior written notice thereof (including the amount of such proposed reduction and the proposed date on which such reduction will commence); (ii) on the proposed date of commencement of such reduction and on each day thereafter, the Servicer shall cause Collections not to be reinvested until the amount thereof not so reinvested shall equal the desired amount of reduction; and (iii) the Servicer shall hold such Collections in the Collection Account for the benefit of the Purchasers, for payment to the Agent on behalf of each Purchaser in accordance with such Purchaser's Pro Rata Share on the first Settlement Date to occur with respect to any Tranche, and the Capital of each Purchaser shall be deemed reduced in the amount to be paid to the applicable Purchaser only when in fact finally so paid; provided, however, that if the amount of such proposed reduction exceeds the Tranche Amount for such Tranche, the amount of such excess shall be applied on the next Settlement Date to occur for the other outstanding Tranches until such excess amount has been applied to reduce the Tranche Amounts; provided, that: (A) the amount of any such reduction shall be not less than $2,000,000 and shall be an integral multiple of $1,000,000, and no Tranche Amount for any Tranche after giving effect to such reduction shall be less than $2,000,000 (unless such Tranche Amount shall have been reduced to zero); (B) the Seller shall choose a reduction amount, and the date of commencement thereof, so that to the extent practicable such reduction shall commence and conclude in the same Interest Period; and (C) The Capital of each Purchaser shall be reduced pro rata such that after giving effect to such reduction, the outstanding Capital of such Purchaser hereunder is equal to such Purchaser's Percentage of the Aggregate Capital. (g) Notwithstanding any term or provision to the contrary contained in this Agreement, if on any Weekly Report Date occurring prior to the Facility Termination Date, the sum of the Aggregate Capital and Total Reserves shall exceed the Net Receivable Pool Balance, the Seller shall not later than 2:00 p.m. New York City time on the Business Day immediately succeeding such Weekly Report Date, deposit into an account designated by Agent for the benefit of the Purchasers, in reduction of the Aggregate Capital, such amount as may be necessary to cause the sum of the Aggregate Capital and Total Reserves to not exceed the Net Receivable Pool Balance (after giving effect to the application of such payment to the reduction of such Aggregate Capital). Upon receipt of such funds deposited in the Agent's account, the Agent shall distribute such funds to the Purchasers ratably in accordance with each Purchaser's Pro Rata Share and the Capital of each Purchaser shall be reduced by the amount of such payment. Any payments required to be made by the Seller pursuant to this Section 1.7(g) shall be subject to any Breakage Amounts in accordance with Section 1.14. Section 1.8.Fees. The Seller shall pay to the Agent for the account of the Purchasers certain fees in the amounts and on the dates set forth in a letter, dated the date hereof, among the Seller, the Agent (as such letter agreement may be amended, supplemented or otherwise modified from time to time, the "Fee Letter"). Section 1.9. Payments and Computations, Etc. (a) All amounts to be paid or deposited by the Seller or the Servicer hereunder shall be made without reduction for offset or counterclaim and shall be paid or deposited no later than 12:00 noon (New York City time) on the day when due in same day funds to the account designated by the Agent. All amounts received after 12:00 noon (New York City time) will be deemed to have been received on the next Business Day. (b) The Seller or the Servicer, as the case may be, shall, to the extent permitted by law, pay interest on any amount not paid or deposited by the Seller or the Servicer for the account of the Agent, any Purchaser or any other Affected Person, as the case may be, within three Business Days of the date such payment or deposit is due, at an interest rate equal to 2.0% per annum above the Base Rate, payable on demand. (c) All computations of interest under Section 1.9(b) and all computations of Discount, fees and other amounts hereunder shall be made on the basis of a year of 360 (or 365 or 366, as applicable, with respect to Discount or other amounts calculated by reference to the Base Rate) days for the actual number of days elapsed. Whenever any payment or deposit to be made hereunder shall be due on a day other than a Business Day, such payment or deposit shall be made on the next Business Day and such extension of time shall be included in the computation of such payment or deposit. Section 1.10. Sharing of Payments. If any Purchaser shall obtain any payment or other recovery (whether voluntary, involuntary, by application of setoff or otherwise) on account of any Tranche (other than pursuant to the terms of Sections 1.12, and 1.13) in excess of its pro rata share of payments pursuant to Section 1.9, then or therewith obtained by all Purchasers, such Purchaser shall purchase from the other Purchasers such participations in purchases made by them (without recourse, representation or warranty) as shall be necessary to cause such purchasing Purchaser to share the excess payment or other recovery ratably with each of them; provided, however, that if all or any portion of the excess payment or other recovery is thereafter recovered from such purchasing Purchaser, the purchase shall be rescinded and each Purchaser which has sold a participation to the purchasing Purchaser shall repay to the purchasing Purchaser the purchase price to the ratable extent of such recovery together with an amount equal to such selling Purchaser's ratable share (according to the proportion of (a) the amount of such selling Purchaser's required repayment to the purchasing Purchaser to (b) the total amount so recovered from the purchasing Purchaser) of any interest or other amount paid or payable by the purchasing Purchaser in respect of the total amount so recovered. The Seller agrees that any Purchaser so purchasing a participation from another Purchaser pursuant to this Section may, to the fullest extent permitted by law, exercise all its rights of payment with respect to such participation as fully as if such Purchaser were the direct creditor of the Seller in the amount of such participation. If under any applicable bankruptcy, insolvency or other similar law, any Purchaser receives a secured claim in lieu of a setoff to which this Section applies, such Purchaser shall, to the extent practicable, exercise its rights in respect of such secured claim in a manner consistent with the rights of the Purchasers entitled under this Section to share in the benefits of any recovery on such secured claim. Section 1.11. Eurodollar Rate Lending Unlawful. If any Purchaser shall determine (which determination shall, upon notice thereof to the Seller and the Agent, be conclusive and binding on the Seller) that the introduction of or any change in or in the interpretation of any law makes it unlawful, or any central bank or other governmental authority asserts that it is unlawful, for such Purchaser to make, continue or maintain any Tranche as, or to convert any Tranche into, a Eurodollar Rate Tranche, the obligations of such Purchaser to make, continue, maintain or convert any such Eurodollar Rate Tranche shall, upon such determination, forthwith be suspended until such Purchaser shall notify the Agent that the circumstances causing such suspension no longer exist, and all outstanding Eurodollar Rate Tranches of such Purchaser shall automatically convert into Base Rate Tranches at the end of the then current Interest Periods with respect thereto or sooner, if required by such law or assertion; provided, however, that, before making any such determination such Purchaser agrees to use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to designate a different eurodollar lending office if the making of such a designation would allow Purchaser or its eurodollar lending office to continue to perform its obligations to make eurodollar rate credit extensions or to continue to fund or maintain eurodollar rate credit extensions and would not, in the judgment of such Purchaser, be otherwise disadvantageous to such Purchaser. Section 1.12. Increased Costs. (a) If any Affected Person determines that the existence of or compliance with: (i) any law or regulation or any change therein or in the interpretation or application thereof, in each case adopted, issued or occurring after the date hereof, or (ii) any request, guideline or directive from any central bank or other Governmental Authority (whether or not having the force of law) issued or occurring after the date of this Agreement, affects or would affect the amount of capital required or expected to be maintained by such Affected Person, and such Affected Person determines that the amount of such capital is increased by or based upon the existence of any commitment to make purchases of (or otherwise to maintain the investment in) Pool Receivables related to this Agreement or any related liquidity facility, credit enhancement facility and other commitments of the same type, then, upon demand by such Affected Person (with a copy to the Agent), the Seller shall pay to the Agent within 30 days of such demand, for the account of such Affected Person, additional amounts sufficient to compensate such Affected Person. A certificate submitted to the Seller and the Agent by such Affected Person, certifying, in reasonably specific detail, the basis for and calculation of such amounts, shall be conclusive and binding for all purposes, absent manifest error. (b) If, due to either: (i) the introduction of or any change in or in the interpretation of any law or regulation or (ii) compliance with any guideline or request from any central bank or other Governmental Authority (whether or not having the force of law), there shall be any increase in the cost to any Affected Person of agreeing to purchase or purchasing, or maintaining the ownership of, the Purchased Interest in respect of which Discount is computed by reference to the Eurodollar Rate, then, upon demand by such Affected Person, the Seller shall pay to such Affected Person within 30 days of such demand, additional amounts sufficient to compensate such Affected Person for such increased costs. A certificate submitted to the Seller and the Agent by such Affected Person, certifying, in reasonably specific detail, the basis for and calculation of such amounts, shall be conclusive and binding for all purposes, absent manifest error. Section 1.13. Requirements of Law. If any Affected Person reasonably determines that the existence of or compliance with: (a) any law or regulation or any change therein or in the interpretation or application thereof, in each case adopted, issued or occurring after the date hereof, or (b) any request, guideline or directive from any central bank or other Governmental Authority (whether or not having the force of law) issued or occurring after the date of this Agreement: (i) does or shall subject such Affected Person to any tax of any kind whatsoever with respect to this Agreement, any increase in any Purchased Interest or in the amount of Capital relating thereto, or does or shall change the basis of taxation of payments to such Affected Person on account of Collections, Discount or any other amounts payable hereunder (excluding taxes imposed on the overall pre-tax net income of such Affected Person, and franchise taxes imposed on such Affected Person, by the jurisdiction under the laws of which such Affected Person is organized or a political subdivision thereof), (ii) does or shall impose, modify or hold applicable any reserve, special deposit, compulsory loan or similar requirement against assets held by, or deposits or other liabilities in or for the account of, purchases, advances or loans by, or other credit extended by, or any other acquisition of funds by, any office of such Affected Person, or (iii) does or shall impose on such Affected Person any other condition, and the result of any of the foregoing is: (A) to increase the cost to such Affected Person of acting as Agent, or of agreeing to purchase or purchasing or maintaining the ownership of undivided percentage ownership interests with regard to any Purchased Interest (or interests therein) or any Tranche, or (B) to reduce any amount receivable hereunder (whether directly or indirectly), then, in any such case, upon demand by such Affected Person, the Seller shall pay to such Affected Person within 30 days of such demand additional amounts necessary to compensate such Affected Person for such additional cost or reduced amount receivable. All such amounts shall be payable as incurred. A certificate from such Affected Person to the Seller, certifying, in reasonably specific detail, the basis for and calculation of the amount of such additional costs or reduced amount receivable, shall be conclusive and binding for all purposes, absent manifest error. Section 1.14. Broken Funding. In the event of (i) the payment of any principal of any Tranche (other than a Base Rate Tranche) other than on the Settlement Date applicable thereto (including as a result of the occurrence of the Termination Date or payment in respect of a reduction of the Capital of a Tranche pursuant to Section 1.7(f) or (g)), or (ii) any failure to borrow, continue or reduce any Tranche (other than a Base Rate Tranche) on the date specified in any notice delivered pursuant hereto, then, in any such event, the Seller shall pay to the Purchasers for the loss, cost and expense attributable to such event. Such loss, cost or expense to any such Purchaser shall be deemed to include an amount (the "Breakage Amount") determined by such Purchaser to be the excess, if any, of (i) the amount of Discount which would have accrued on the Tranche Amount of such Tranche had such event not occurred, at the Tranche Rate that would have been applicable to such Tranche, for the period from the date of such event to the last day of the applicable Interest Period (or, in the case of a failure to borrow for the period that would have been the related Interest Period), over (ii) the amount of interest which would be obtainable upon redeployment or reinvestment of an amount of funds equal to such Tranche Amount for such period. A certificate of any Purchaser incurring any loss, cost or expense as a result of any of the events specified in this Section 1.14 and setting forth any amount or amounts that such Purchaser is entitled to receive pursuant to this Section 1.l4 and the reason(s) therefor shall be delivered to the Seller by the Agent and shall include reasonably detailed calculations and shall be conclusive absent manifest error. The Seller shall pay to the related Agent on behalf of each such Purchaser the amount shown as due on any such certificate within ten (10) days after receipt thereof. ARTICLE II. REPRESENTATIONS AND WARRANTIES; COVENANTS; TERMINATION EVENTS Section 2.1.Representations and Warranties; Covenants. Each of the Seller and the Servicer hereby makes the representations and warranties, and hereby agrees to perform and observe the covenants, applicable to it set forth in Exhibits III and IV, respectively. Section 2.2.Termination Events. (a) If any of the Termination Events set forth in Exhibit V shall occur, the Agent may, and if directed by the Required Purchasers, shall, by notice to the Seller, declare the Facility Termination Date to have occurred (in which case the Facility Termination Date shall be deemed to have occurred); provided, that automatically upon the occurrence of any event (without any requirement for the passage of time or the giving of notice) described in paragraph (f) of Exhibit V, the Facility Termination Date shall occur. Upon any occurrence of any Termination Event, the Agent and the Purchasers shall have, in addition to the rights and remedies that they may have under this Agreement, all other rights and remedies provided after default under the New York UCC and under other applicable law, which rights and remedies shall be cumulative. (b) Notwithstanding anything to the contrary contained in this Section 2.2 and Section 4.4, if a Termination Event described in paragraph (j) of Exhibit V shall have occurred, each of the Agent, the Co-Agent and the Purchasers agree that it will refrain from exercising any right, remedy or power available to it hereunder or pursuant to an applicable law (including, without limitation, the right to declare the Facility Termination Date to have occurred) solely as a result of the occurrence of such Termination Event) until such time as any Lender Party is permitted, in accordance with the terms of the Intercreditor Agreement (or any Purchaser is permitted by a vote or with the consent of the Required Lenders), to exercise any rights, remedies or power available to it by reason of the occurrence of any of the events or circumstances giving rise to the occurrence of such Termination Event; provided, however, that foregoing shall not prohibit the Agent, the Co- Agent or any Purchaser from exercising any right, power, or remedy available to it under Section 1.6 or 4.3(b) hereof as a result of the occurrence of a Termination Event or Default Event, as applicable. ARTICLE III. INDEMNIFICATION Section 3.1.Indemnities by the Seller. Without limiting any other rights that any Indemnified Party may have hereunder or under applicable law, the Seller hereby agrees to indemnify each Indemnified Party from and against any and all claims, damages, expenses, costs, losses and liabilities (including Attorney Costs) (all of the foregoing being collectively referred to as "Indemnified Amounts") arising out of or resulting from this Agreement (whether directly or indirectly), the use of proceeds of purchases or reinvestments, the ownership of the Purchased Interest, or any interest therein, or, in respect of any Receivable, Related Security or Contract, excluding, however: (a) Indemnified Amounts to the extent resulting from gross negligence or willful misconduct on the part of such Indemnified Party, (b) recourse (except as otherwise specifically provided in this Agreement) for uncollectible Receivables, or (c) any overall net income taxes or franchise taxes imposed on such Indemnified Party by the jurisdiction under the laws of which such Indemnified Party is organized or any political subdivision thereof. Without limiting or being limited by the foregoing, and subject to the exclusions set forth in the preceding sentence, the Seller shall pay on demand to each Indemnified Party any and all amounts necessary to indemnify such Indemnified Party from and against any and all Indemnified Amounts relating to or resulting from any of the following: (i) the failure of any Receivable included in the calculation of the Net Receivables Pool Balance as an Eligible Receivable to be an Eligible Receivable, the failure of any information contained in a Monthly Report or the Weekly Report to be true and correct, or the failure of any other information provided to any Purchaser, the Agent or the Co-Agent with respect to Receivables or this Agreement to be true and correct, (ii) the failure of any representation, warranty or statement made or deemed made by the Seller (or any of its officers) under or in connection with this Agreement to have been true and correct as of the date made or deemed made in all respects when made, (iii) the failure by the Seller to comply with any applicable law, rule or regulation with respect to any Pool Receivable or the related Contract, or the failure of any Pool Receivable or the related Contract to conform to any such applicable law, rule or regulation, (iv) the failure to vest in the Agent, for the benefit of each Purchaser, a valid and enforceable: (A) perfected undivided percentage ownership interest, to the extent of the Purchased Interest of such Purchaser, in the Receivables in, or purporting to be in, the Receivables Pool and the other Pool Assets, or (B) first priority perfected security interest in the Pool Assets, in each case, free and clear of any Adverse Claim, (v) the failure to have filed, or any delay in filing, financing statements or other similar instruments or documents under the UCC of any applicable jurisdiction or other applicable laws with respect to any Receivables in, or purporting to be in, the Receivables Pool and the other Pool Assets, whether at the time of any purchase or reinvestment or at any subsequent time, (vi) any dispute, claim, offset or defense (other than discharge in bankruptcy of the Obligor) of the Obligor to the payment of any Receivable in, or purporting to be in, the Receivables Pool (including a defense based on such Receivable or the related Contract not being a legal, valid and binding obligation of such Obligor enforceable against it in accordance with its terms), or any other claim resulting from the sale of the goods or services related to such Receivable or the furnishing or failure to furnish such goods or services or relating to collection activities with respect to such Receivable (if such collection activities were performed by the Seller or any of its Affiliates acting as Servicer or by any agent or independent contractor retained by the Seller or any of its Affiliates), (vii) any failure of the Seller (or any of its Affiliates acting as the Servicer) to perform its duties or obligations in accordance with the provisions hereof or under the Contracts, (viii)any products liability or other claim, investigation, litigation or proceeding arising out of or in connection with merchandise, insurance or services that are the subject of any Contract, (ix) the commingling of Collections at any time with other funds, (x) the use of proceeds by the Seller of purchases or reinvestments, or (xi) any reduction in Capital as a result of the distribution of Collections pursuant to Section 1.7(d), if all or a portion of such distributions shall thereafter be rescinded or otherwise must be returned for any reason. Section 3.2.Indemnities by the Servicer. Without limiting any other rights that the Agent, the Purchasers or any other Indemnified Party may have hereunder or under applicable law, the Servicer hereby agrees to indemnify each Indemnified Party from and against any and all Indemnified Amounts arising out of or resulting from (whether directly or indirectly): (a) the failure of any information contained in a Monthly Report or a Weekly Report to be true and correct, or the failure of any other information provided to any Purchaser, the Agent or the Co-Agent by, or on behalf of, the Servicer to be true and correct, (b) the failure of any representation, warranty or statement made or deemed made by the Servicer (or any of its officers) under or in connection with this Agreement to have been true and correct in all respects as of the date made or deemed made, (c) the failure by the Servicer to comply with any applicable law, rule or regulation with respect to any Pool Receivable or the related Contract, or (d) any failure of the Servicer to perform its covenants, duties or obligations in accordance with the provisions hereof. ARTICLE IV. ADMINISTRATION AND COLLECTIONS Section 4.1.Appointment of the Servicer. (a) The servicing, administering and collection of the Pool Receivables shall be conducted by the Person so designated from time to time as the Servicer in accordance with this Section. Until the Agent gives notice to Gregory (in accordance with this Section) of the designation of a new Servicer, Gregory is hereby designated as, and hereby agrees to perform the duties and obligations of, the Servicer pursuant to the terms hereof. Upon the occurrence of a Termination Event, the Agent (at the direction of the Required Purchasers) may designate as Servicer any Person (including itself) to succeed Gregory or any successor Servicer, on the condition in each case that any such Person so designated shall agree to perform the duties and obligations of the Servicer pursuant to the terms hereof. (b) Upon the designation of a successor Servicer as set forth in Section 4.1(a), Gregory agrees that it will terminate its activities as Servicer hereunder in a manner that the Agent reasonably determines will facilitate the transition of the performance of such activities to the new Servicer, and Gregory shall cooperate with and assist such new Servicer. Such cooperation shall include access to and transfer of related records and use by the new Servicer of all licenses, hardware or software necessary or desirable to collect the Pool Receivables and the Related Security. (c) Gregory acknowledges that, in making their decision to execute and deliver this Agreement, the Agent, the Co-Agent and the Purchasers have relied on Gregory's agreement to act as Servicer hereunder. Accordingly, Gregory agrees that it will not voluntarily resign as Servicer. (d) The Servicer may delegate its duties and obligations hereunder to any subservicer (each a "Sub-Servicer"); provided, that, in each such delegation: (i) such Sub-Servicer shall agree in writing to perform the duties and obligations of the Servicer pursuant to the terms hereof, (ii) the Servicer shall remain primarily liable for the performance of the duties and obligations so delegated, (iii) the Seller, the Agent, the Co-Agent and the Purchasers shall have the right to look solely to the Servicer for performance and (iv) the terms of any agreement with any Sub-Servicer shall provide that the Agent and the Co-Agent may terminate such agreement upon the termination of the Servicer hereunder by giving notice of its desire to terminate such agreement to the Servicer (and the Servicer shall provide appropriate notice to each such Sub-Servicer); provided, however, that if any such delegation is to any Person other than Group or an Affiliate of Group, the Agent and the Co-Agent shall have consented in writing in advance to such delegation. Section 4.2.Duties of the Servicer. (a) The Servicer shall take or cause to be taken all such action as may be necessary or advisable to administer and collect each Pool Receivable from time to time, all in accordance with this Agreement and all applicable laws, rules and regulations, with reasonable care and diligence, and in accordance with the Credit and Collection Policies. The Servicer shall set aside, for the accounts of the Seller and the Purchasers, the amount of the Collections to which each is entitled in accordance with Article I. The Servicer may, in accordance with the applicable Credit and Collection Policy, extend the maturity of any Pool Receivable, so long as no Termination Event or Unmatured Termination Event has occurred or would result from such extension, and extend the maturity or adjust the Outstanding Balance of any Defaulted Receivable as the Servicer may determine to be appropriate to maximize Collections thereof; provided, however, that: (i) such extension or adjustment shall not alter the status of such Pool Receivable as a Defaulted Receivable or limit the rights of the Purchasers or the Agent under this Agreement and (ii) if a Termination Event has occurred and is continuing and Gregory or an Affiliate of Group is serving as the Servicer, Gregory or such Affiliate may make such extension or adjustment only upon the prior approval of the Agent. The Seller shall deliver to the Servicer and the Servicer shall hold for the benefit of the Seller and the Agent (for the benefit of the Purchasers), in accordance with their respective interests, all records and documents (including computer tapes or disks) with respect to each Pool Receivable. Notwithstanding anything to the contrary contained herein, for so long as a Termination Event has occurred and is continuing, the Agent may direct the Servicer (whether the Servicer is Gregory or any other Person) to commence or settle any legal action to enforce collection of any Pool Receivable or to foreclose upon or repossess any Related Security. (b) The Servicer shall, as soon as practicable following actual receipt of collected funds, turn over to the Seller the collections of any indebtedness that is not a Pool Receivable, less, if Gregory or an Affiliate of Group is not the Servicer, all reasonable and appropriate out-of-pocket costs and expenses of such Servicer of servicing, collecting and administering such collections. The Servicer, if other than Gregory or an Affiliate of Group, shall, as soon as practicable upon demand, deliver to the Seller all records in its possession that evidence or relate to any indebtedness that is not a Pool Receivable, and copies of records in its possession that evidence or relate to any indebtedness that is a Pool Receivable. (c) The Servicer's obligations hereunder shall terminate on the later of: (i) the Facility Termination Date and (ii) the date on which all amounts required to be paid to the Purchasers, the Agent, the Co-Agent and any other Indemnified Party or Affected Person hereunder shall have been paid in full. After such termination, if Gregory or an Affiliate of Group was not the Servicer on the date of such termination, the Servicer shall promptly deliver to the Seller all books, records and related materials that the Seller previously provided to the Servicer, or that have been obtained by the Servicer, in connection with this Agreement. Section 4.3.Establishment and Use of Certain Accounts. (a) The Seller (or the Servicer on its behalf) agrees to establish the Collection Account on or before the date of the effectiveness of this Agreement. The Collection Account shall be used to accept the transfer of Collections of Pool Receivables pursuant to Section 1.7(b) and for such other purposes described in the Transaction Documents. (b) Upon the occurrence and during the continuation of a Termination Event or a Default Event, the Agent may, and if directed by the Required Purchasers, shall at any time thereafter give notice to the Collection Account Bank that the Agent is exercising its rights under the Collection Account Agreement to do any or all of the following: (i) to have the exclusive ownership and control of the Collection Account transferred to the Agent and to exercise exclusive dominion and control over the funds deposited therein, (ii) to have the proceeds that are sent to the Collection Account redirected pursuant to the Agent's instructions rather than deposited in the Collection Account, and (iii) to take any or all other actions permitted under the Collection Account Agreement. The Seller hereby agrees that if the Agent at any time takes any action set forth in the preceding sentence, the Agent shall have exclusive control of the proceeds (including Collections) of all Pool Receivables and the Seller hereby further agrees to take any other action that the Agent may reasonably request to transfer such control. Any proceeds of Pool Receivables received by the Seller or the Servicer thereafter shall be sent immediately to the Agent (or its designee). Section 4.4.Enforcement Rights. (a) At any time following the occurrence and during the continuance of a Termination Event (and in the case of a Termination Event described in paragraph (j) of Exhibit V subject to Section 2.2(b)): (i) the Agent may direct the Obligors that payment of all amounts payable under any Pool Receivable is to be made directly to the Agent or its designee, (ii) the Agent may give notice of the Agent's and the Purchasers' interests in Pool Receivables to each Obligor, which notice shall direct that payments be made directly to the Agent or its designee, and (iii) the Agent may request the Servicer to, and upon such request the Servicer shall: (A) assemble all of the records necessary or desirable to collect the Pool Receivables and the Related Security, and transfer or license to a successor Servicer the use of all software necessary or desirable to collect the Pool Receivables and the Related Security, and make the same available to the Agent or its designee at a place selected by the Agent, and (B) segregate all cash, checks and other instruments received by it from time to time constituting Collections in a manner acceptable to the Agent and, promptly upon receipt, remit all such cash, checks and instruments, duly endorsed or with duly executed instruments of transfer, to the Agent or its designee. (b) The Seller hereby authorizes the Agent, and irrevocably appoints the Agent as its attorney-in-fact with full power of substitution and with full authority in the place and stead of the Seller, which appointment is coupled with an interest, to take any and all steps in the name of the Seller and on behalf of the Seller necessary or desirable, in the determination of the Agent, after the occurrence of a Termination Event, to collect any and all amounts or portions thereof due under any and all Pool Assets, including endorsing the name of the Seller on checks and other instruments representing Collections and enforcing such Pool Assets. Notwithstanding anything to the contrary contained in this subsection, none of the powers conferred upon such attorney-in-fact pursuant to the preceding sentence shall subject such attorney-in-fact to any liability if any action taken by it shall prove to be inadequate or invalid, nor shall they confer any obligations upon such attorney-in- fact in any manner whatsoever. Section 4.5. Responsibilities of the Seller. Anything herein to the contrary notwithstanding, the Seller shall pay when due any taxes, including any sales taxes payable in connection with the Pool Receivables and their creation and satisfaction. None of the Agent, the Co- Agent or any Purchaser shall have any obligation or liability with respect to any Pool Asset, nor shall either of them be obligated to perform any of the obligations of the Seller or Gregory thereunder. Section 4.6. Servicing Fee. (a) Subject to Section 4.6(b), the Servicer shall be paid a fee equal to .75% per annum (the "Servicing Fee Rate") of the daily average aggregate Outstanding Balance of the Pool Receivables. The Purchasers' Share of such fee shall be paid solely from the distributions contemplated by Section 1.7(d), and the Seller's Share of such fee shall be paid by the Seller. If the Servicer ceases to be Gregory or an Affiliate of Group the servicing fee shall be the greater of: (i) the amount calculated pursuant to clause (a), and (ii) an alternative amount reasonably specified by the successor Servicer not to exceed 110% of the aggregate reasonable costs and expenses incurred by such successor Servicer in connection with the performance of its obligations as Servicer. ARTICLE V. THE AGENTS Section 5.1.Appointment and Authorization. (a) Each Purchaser and Purchaser Agent hereby irrevocably designates and appoints The Bank of Nova Scotia as the "Agent" hereunder and authorizes the Agent to take such actions and to exercise such powers as are delegated to the Agent hereby and to exercise such other powers as are reasonably incidental thereto. The Agent shall hold, in its name, for the benefit of each Purchaser, ratably, the Purchased Interest. The Agent shall not have any duties other than those expressly set forth herein or any fiduciary relationship with any Purchaser, and no implied obligations or liabilities shall be read into this Agreement, or otherwise exist, against the Agent. The Agent does not assume, nor shall it be deemed to have assumed, any obligation to, or relationship of trust or agency with, the Seller or Servicer. Notwithstanding any provision of this Agreement or any other Transaction Document to the contrary, in no event shall the Agent ever be required to take any action which exposes the Agent to personal liability or which is contrary to the provision of any Transaction Document or applicable law. (b) Except as otherwise specifically provided in this Agreement, the provisions of this Article V are solely for the benefit of the Agent and the Purchasers, and none of the Seller or Servicer shall have any rights as a third-party beneficiary or otherwise under any of the provisions of this Article V, except that this Article V shall not affect any obligations which any Purchaser Agent, the Agent or any Purchaser may have to the Seller or the Servicer under the other provisions of this Agreement. (c) In performing its functions and duties hereunder, the Agent shall act solely as the agent of the Purchasers and does not assume nor shall be deemed to have assumed any obligation or relationship of trust or agency with or for the Seller or Servicer or any of their successors and assigns. Section 5.2.Delegation of Duties. The Agent may execute any of its duties through agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. The Agent shall not be responsible for the negligence or misconduct of any agents or attorneys-in-fact selected by it with reasonable care. Section 5.3.Exculpatory Provisions. None of the Agent or any of its directors, officers, agents or employees shall be liable for any action taken or omitted (i) with the consent or at the direction of the Required Purchasers or (ii) in the absence of such Person's gross negligence or willful misconduct. The Agent shall not be responsible to any Purchaser or other Person for (i) any recitals, representations, warranties or other statements made by the Seller, Servicer, or any of their Affiliates, (ii) the value, validity, effectiveness, genuineness, enforceability or sufficiency of any Transaction Document, (iii) any failure of the Seller, any Originator or any of their Affiliates to perform any obligation or (iv) the satisfaction of any condition specified in Exhibit II. The Agent shall not have any obligation to any Purchaser to ascertain or inquire about the observance or performance of any agreement contained in any Transaction Document or to inspect the properties, books or records of the Seller, Servicer, any Originator or any of their Affiliates. Section 5.4.Reliance by Agents. (a) The Agent shall in all cases be entitled to rely, and shall be fully protected in relying, upon any document or other writing or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person and upon advice and statements of legal counsel (including counsel to the Seller), independent accountants and other experts selected by the Agent. The Agent shall in all cases be fully justified in failing or refusing to take any action under any Transaction Document unless it shall first receive such advice or concurrence of the Required Purchasers, and assurance of its indemnification, as it deems appropriate. (b) The Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement in accordance with a request of the Required Purchasers, and such request and any action taken or failure to act pursuant thereto shall be binding upon all Purchasers. Section 5.5.Notice of Termination Events. The Agent shall not be deemed to have knowledge or notice of the occurrence of any Termination Event or Unmatured Termination Event unless such Agent has received notice from any Purchaser, the Servicer or the Seller stating that a Termination Event or Unmatured Termination Event has occurred hereunder and describing such Termination Event or Unmatured Termination Event. The Agent shall take such action concerning a Termination Event or Unmatured Termination Event as may be directed by the Required Purchasers (unless such action otherwise requires the consent of all Purchasers), but until the Agent receives such directions, the Agent may (but shall not be obligated to) take such action, or refrain from taking such action, as the Agent deems advisable and in the best interests of the Purchasers. Section 5.6.Non-Reliance on Agent and Other Purchasers. Each Purchaser expressly acknowledges that neither the Agent nor any of its respective officers, directors, employees, agents, attorneys-in-fact or Affiliates has made any representations or warranties to it and that no act by the Agent hereafter taken, including any review of the affairs of the Seller, Gregory, Servicer or any Originator, shall be deemed to constitute any representation or warranty by the Agent. Each Purchaser represents and warrants to the Agent that, independently and without reliance upon the Agent or any other Purchaser and based on such documents and information as it has deemed appropriate, it has made and will continue to make its own appraisal of and investigation into the business, operations, property, prospects, financial and other conditions and creditworthiness of the Seller, Gregory, Servicer or any Originator, and the Receivables and its own decision to enter into this Agreement and to take, or omit, action under any Transaction Document. Except for items specifically required to be delivered hereunder, the Agent shall not have any duty or responsibility to provide any Purchaser with any information concerning the Seller, Gregory, Servicer or the Originator or any of their Affiliates that comes into the possession of the Agent or any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates. Section 5.7.Agents and Affiliates. Each of the Purchasers and the Agent and their Affiliates may extend credit to, accept deposits from and generally engage in any kind of banking, trust, debt, equity or other business with the Seller, Gregory, Servicer or any Originator or any of their Affiliates and The Bank of Nova Scotia may exercise or refrain from exercising its rights and powers as if it were not the Agent. Section 5.8.Indemnification. Each Purchaser shall indemnify and hold harmless the Agent and its officers, directors, employees, representatives and agents (to the extent not reimbursed by the Seller, Gregory or Servicer and without limiting the obligation of the Seller, Gregory or Servicer to do so), ratably in accordance with its Purchaser's Pro Rata Share from and against any and all liabilities, obligations, losses, damages, penalties, judgments, settlements, costs, expenses and disbursements of any kind whatsoever (including in connection with any investigative or threatened proceeding, whether or not the Agent or such Person shall be designated a party thereto) that may at any time be imposed on, incurred by or asserted against the Agent or such Person as a result of, or related to, any of the transactions contemplated by the Transaction Documents or the execution, delivery or performance of the Transaction Documents or any other document furnished in connection therewith (but excluding any such liabilities, obligations, losses, damages, penalties, judgments, settlements, costs, expenses or disbursements resulting solely from the gross negligence or willful misconduct of the Agent or such Person as finally determined by a court of competent jurisdiction); provided, that in the case of each Purchaser that is a commercial paper conduit, such indemnity shall be provided solely to the extent of amounts received by such Purchaser under this Agreement which exceed the amounts required to repay such Purchaser's outstanding Notes. Section 5.9.Successor Agent. The Agent may, upon at least five (5) days notice to the Seller and each Purchaser, resign as Agent. Such resignation shall not become effective until a successor agent is appointed by the Required Purchasers and has accepted such appointment. Upon such acceptance of its appointment as Agent hereunder by a successor Agent, such successor Agent shall succeed to and become vested with all the rights and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations under the Transaction Documents. After any retiring Agent's resignation hereunder, the provisions of Sections 3.1 and 3.2 and this Article V shall inure to its benefit as to any actions taken or omitted to be taken by it while it was the Agent. Section 5.10. Certain Pool Assets and Other Matters. (a) The Agent is authorized on behalf of all the Purchasers, without the necessity of any notice to or further consent from the Purchasers, from time to time to take any action with respect to any Pool Assets or the Transaction Documents which may be necessary to perfect and maintain perfected the security interest in and Liens upon the Pool Assets granted pursuant to the Transaction Documents. (b) The Purchasers irrevocably authorize the Agent, at its option and in its discretion, to release any security interest or Lien granted to or held by the Agent upon any Pool Assets (i) upon the Facility Termination Date and the reduction of the Purchased Interest to zero, all fees payable pursuant to Section 1.8, 3.1, 3.2 and 6.6 (including interest thereon) and all other fees, costs and expenses that are payable under this Agreement or under any other Transaction Document and have been invoiced (in which case the Purchasers hereby authorize the Agent to execute, and the Agent agrees to execute, reasonable releases in connection with this Agreement (other than, in any event, as to items stated to survive the termination of this Agreement)); (ii) constituting property sold or to be sold or disposed of as part of or in connection with any disposition permitted hereunder; or (iii) if approved, authorized or notified in writing by the Purchasers. ARTICLE VI. MISCELLANEOUS Section 6.1.Amendments, Etc. No amendment or waiver of any provision of this Agreement or any other Transaction Document, or consent to any departure by the Seller or the Servicer therefrom, shall be effective unless in a writing signed by the Required Purchasers, and, in the case of any amendment, by the other parties thereto (other than the Agent and Co-Agent); and then such amendment, waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, however that no such amendment or waiver shall, (a) without the consent of each Purchaser, (i) extend the date of any payment or deposit of Collections by the Seller or the Servicer, (ii) reduce the rate or extend the time of payment of Discount, (iii) reduce any fees payable to any Purchaser hereunder, (iv) change the amount of outstanding Capital of any Purchaser or any Purchaser's Percentage, (v) amend, modify or waive any provision of the definition of "Required Purchaser" or this Section 6.1, (vi) consent to or permit the assignment or transfer by the Seller of any of its rights and obligations under this Agreement, (vii) change the definition of "Eligible Receivable," "Loss Reserve," "Loss Reserve Percentage," "Dilution Reserve," "Dilution Reserve Percentage" or "Termination Event" or (viii) amend or modify any defined term (or any defined term used directly or indirectly in such defined term) used in clauses (i) through (viii) above in a manner that would circumvent the intention of the restrictions set forth in such clauses (b) without the consent of the Agent, affect the interests, rights or obligations of the Agent or (c) without the consent of the Co-Agent, affect the interest, rights or obligations of the Co-Agent; provided, further, however, that no material amendment shall be effective until both Moody's and Standard & Poor's have notified the Agent in writing that such action will not result in a reduction or withdrawal of the rating of any Notes issued by Liberty Street. No failure on the part of the Purchasers or the Agent to exercise, and no delay in exercising any right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right. Section 6.2.Notices, Etc. All notices and other communications hereunder shall, unless otherwise stated herein, be in writing (which shall include facsimile communication) and be sent or delivered to each party hereto at its address set forth under its name on the signature pages hereof or at such other address as shall be designated by such party in a written notice to the other parties hereto. Notices and communications by facsimile shall be effective when sent (and shall be followed by hard copy sent by first class mail), and notices and communications sent by other means shall be effective when received. Section 6.3.Assignability. (a) Each Purchaser, with the prior written consent of the Seller, (which consent shall not be unreasonably withheld or delayed), and the Agent (which consent shall not be unreasonably withheld or delayed), may assign and delegate all or a portion of its rights and obligations hereunder (including without limitation, all or a portion of its Capital and its interest in the Purchased Interest) to one or more commercial banks or other financial institutions in a minimum aggregate amount of $5,000,000 (or, if less, the total of such Purchaser's Capital; provided, however, that no consent of the Seller shall be required if such assignment and/or delegation is made to (i) an Eligible Assignee, (ii) any other Purchaser or an Affiliate of such Purchaser thereof or, (iii) if such Purchaser is a Conduit Purchaser, to a Program Support Provider for such Conduit Purchaser (each Person described in either of the foregoing clauses as the Person to whom such assignment and delegation is made being hereinafter referred to as an "Assignee Purchaser"); or if a Termination Event has occurred and is continuing; provided, further, that no such assignment and delegation shall be effective until (i) such Assignee Purchaser shall have executed and delivered to the Seller and the Agent a Purchaser Assignment Agreement, accepted by the Agent; and (ii)the processing fees described below shall have been paid. From and after the date that the Agent accepts such Purchaser Assignment Agreement, (x) the Assignee Purchaser thereunder shall be deemed automatically to have become a party hereto and to the extent that rights and obligations hereunder have been assigned and delegated to such Assignee Purchaser in connection with such Purchaser Assignment Agreement, shall have the rights and obligations of a Purchaser hereunder and under the other Transaction Documents, and (y) the assignor Purchaser, to the extent that rights and obligations hereunder have been assigned and delegated by it in connection with such Purchaser Assignment Agreement, shall be released from its obligations hereunder and under the other Transaction Documents. Accrued Discount on that portion of the Capital assigned, and accrued fees, shall be paid as provided in the Purchaser Assignment Agreement. Accrued Discount on that portion of Capital assigned or delegated prior to the assignment or delegation shall be paid to the assignor Purchaser. Accrued Discount and accrued fees shall be paid at the same time or times provided in this Agreement. Such assignor Purchaser or such Assignee Purchaser must also pay a processing fee to the Agent upon delivery of any Purchaser Assignment Agreement in the amount of $3,500. Any attempted assignment and delegation not made in accordance with this Section 5.3 shall be null and void. (b) Notwithstanding clause (a), any Purchaser may assign and pledge all or any portion of its interest in the Purchased Interest and other rights to a Federal Reserve Bank as collateral security; provided, however, that no such assignment under this clause (b) shall release the assignor Purchaser from any of its obligations hereunder. (c) Liberty Street may, without the consent of the Seller, at any time grant one or more Program Support Providers, participating interests in its interest in the Purchased Interest. In the event of any such grant by Liberty Street of a participating interest to a Program Support Provider, such Purchaser shall remain responsible for the performance of its obligations hereunder. The Seller agrees that each Program Support Provider shall be entitled to the benefits of Sections 1.12 and 1.13. (d) Each Conduit Purchaser agrees that it will not permit any Program Support Provider to assign, in whole or in part, its commitment under any liquidity agreement entered into in connection with this Agreement to any Person (other than an Affiliate of such Program Support Provider) unless such Person has been approved by the Seller; provided that such approval by the Seller may not be unreasonably withheld. (e) Except as provided in Section 4.1(d), neither the Seller nor the Servicer may assign its rights or delegate its obligations hereunder or any interest herein without the prior written consent of the Agent and all Purchasers. (f) Without limiting any other rights that may be available under applicable law, the rights of each Purchaser may be enforced through it or by its agents. Section 6.4.Participations (a) Any Purchaser may at any time without the consent of the Seller or the Agent (but with prior written notice to the Agent and the Seller) sell to one or more commercial banks or other Persons (each of such commercial banks and other Persons being herein called a "Participant") participating interests in any of all or portion of its rights and obligations hereunder (including without limitation, all or portion of its Percentage of the Purchase Limit and any undivided ownership interest of the Purchased Interest owned by it, or other interests of such Purchaser hereunder; provided, however, that (i) no participation contemplated in this Section 6.4 shall relieve such Purchaser from its obligations hereunder or under any other Transaction Document; (ii) such Purchaser shall remain solely responsible for the performance of its obligations; (iii) the Seller the Agent and Co-Agent shall continue to deal solely and directly with such Purchaser in connection with such Purchaser's rights and obligations under this Agreement and each of the other Transaction Documents; (iv) no Participant, unless such Participant is an Affiliate of such Purchaser, or is itself a Purchaser, shall be entitled to require such Purchaser to take or refrain from taking any action hereunder or under any other Transaction Document, except that such Purchaser may agree with any Participant that such Purchaser will not, without such Participant's consent, take any actions of the type described in Section 6.1(a); and (v) the Seller shall not be required to pay any amount under clause (b) of this Section that is greater than the amount which it would have been required to pay had no participating interest been sold; and (vi) such Purchaser shall record in books entries maintained by such Purchaser the name of its Participants and the amounts such Participants are entitled to receive in respect of any participating interests sold pursuant to this Section. (b) The Seller acknowledges and agrees that each Participant, for purposes of Sections 1.12, 1.13, 3.1, 3.2 and 6.6, shall be considered a Purchaser, subject to clause (v) above. Section 6.5.Certain Other Provisions. (a) The Seller, any Originator and the Servicer authorize each Purchaser to disclose to any participant or assignee (each, a "Transferee") and any prospective Transferee, subject to the agreement of such Transferee or prospective Transferee to keep confidential, any and all financial and other information in such Purchaser's possession concerning the Seller, any Originator, the Servicer or any of their respective Subsidiaries which has been delivered to such Purchaser by any such Person pursuant to or in connection with this Agreement or which has been delivered to such Purchaser by any such Person in connection with such Purchaser's credit evaluation of the Seller, any Originator, the Servicer or any of their respective Subsidiaries prior to entering into this Agreement. (b) If, pursuant to this Section, any interest in this Agreement or any portion of the Purchased Interest is transferred to any Transferee which is organized under the laws of any jurisdiction other than the United States or any State thereof, the transferor Purchaser shall cause such Transferee (other than any Participant), and may cause any Participant, concurrently with the effectiveness of such transfer, (i) to represent to the transferor Purchaser (for the benefit of the transferor Purchaser, the Agent, and the Seller) that under applicable law and treaties, no taxes will be required to be withheld by the Agent, the Co-Agent, the Seller or the transferor Purchaser with respect to any payments to be made to such Transferee in respect of its interest in the Purchased Interest, (ii) to furnish to the transferor Purchaser, the Agent, and the Seller either U.S. Internal Revenue Service Form 4224 or U.S. Internal Revenue Service Form 1001 (wherein such Transferee claims entitlement to whole or partial exemption from U.S. Federal withholding tax on all interest payments hereunder) and (iii) to agree (for the benefit of the transferor Purchaser, the Agent, and the Seller) to provide the transferor Purchaser, the Agent, and the Seller a new Form 4224 or Form 1001 upon the obsolescence of any previously delivered form and comparable statements in accordance with applicable U.S. laws and regulations and amendments duly executed and completed by such Transferee, and to comply from time to time with all applicable U.S. laws and regulations with regard to such withholding tax exemption. Section 6.6.Costs, Expenses and Taxes. (a) In addition to the rights of indemnification granted under Section 3.1, the Seller agrees to pay on demand all reasonable costs and expenses in connection with the preparation, execution, delivery and administration (including periodic internal audits by the Agent, the Co-Agent or their respective designees of Pool Receivables) of this Agreement, the other Transaction Documents and the other documents and agreements to be delivered hereunder (and all reasonable costs and expenses in connection with any amendment, waiver or modification of any thereof, including: (i) Attorney Costs for the Agent, the Co-Agent, the Purchasers and their respective Affiliates and agents with respect thereto and with respect to advising the Agent, the Co-Agent, the Purchasers and their respective Affiliates and agents as to their rights and remedies under this Agreement and the other Transaction Documents, and (ii) all reasonable costs and expenses (including Attorney Costs), if any, of the Agent, the Co-Agent, the Purchasers and their respective Affiliates and agents in connection with the enforcement of this Agreement and the other Transaction Documents. (b) In addition, the Seller shall pay on demand any and all stamp and other taxes and fees payable in connection with the execution, delivery, filing and recording of this Agreement or the other documents or agreements to be delivered hereunder, and agrees to save each Indemnified Party harmless from and against any liabilities with respect to or resulting from any delay in paying or omission to pay such taxes and fees. Section 6.7. No Proceedings; Limitation on Payments. Each of the Seller, Gregory, the Servicer, the Agent, the Co-Agent, and the Purchasers and each assignee of the Purchased Interest or any interest therein, hereby covenants and agrees that it will not institute against, or join any other Person in instituting against, any Conduit Purchaser any bankruptcy, reorganization, arrangement, insolvency or liquidation proceeding, or other proceeding under any federal or state bankruptcy or similar law, for one year and one day after the latest maturing Note issued by such Conduit Purchaser is paid in full. The provision of this Section 6.7 shall survive any termination of this Agreement. Section 6.8. GOVERNING LAW AND JURISDICTION. (a) THIS AGREEMENT SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING FOR SUCH PURPOSE SECTIONS 5-1401 AND 5-1402 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK) EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF A SECURITY INTEREST OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK. (b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT 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, EACH OF THE PARTIES HERETO CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES, TO THE MAXIMUM EXTENT PERMITTED BY LAW, ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, THAT IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS AGREEMENT OR ANY DOCUMENT RELATED HERETO. EACH OF THE PARTIES HERETO WAIVES PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH SERVICE MAY BE MADE BY ANY OTHER MEANS PERMITTED BY NEW YORK LAW. Section 6.9.Execution in Counterparts. This Agreement may be executed in any number of counterparts, each of which, when so executed, shall be deemed to be an original, and all of which, when taken together, shall constitute one and the same agreement. Section 6.10Survival of Termination. This Agreement shall create and constitute the continuing obligations of the parties hereto in accordance with its terms, and shall remain in full force and effect until the Final Payout Date. The provisions of Sections 1.12, 1.13, 3.1, 3.2, 6.6, 6.7, 6.8, 6.11 and 6.14 shall survive any termination of this Agreement. Section 6.11WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO WAIVES THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR PARTIES, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS OR OTHERWISE. EACH OF THE PARTIES HERETO AGREES THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, EACH OF THE PARTIES HERETO FURTHER AGREES THAT ITS RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING THAT SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT OR ANY PROVISION HEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT. Section 6.12. Entire Agreement. This Agreement and the other Transaction Documents embody the entire agreement and understanding between the parties hereto, and supersede all prior or contemporaneous agreements and understandings of such Persons, verbal or written, relating to the subject matter hereof and thereof. Section 6.13. Headings. The captions and headings of this Agreement and any Exhibit, Schedule or Annex hereto are for convenience of reference only and shall not affect the interpretation hereof or thereof. Section 6.14. Conduit Purchaser's Liabilities. The obligations of each Conduit Purchaser under the Transaction Documents are solely the corporate obligations of such Conduit Purchaser. No recourse shall be had for any obligation or claim arising out of or based upon any Transaction Document against any stockholder, employee, officer, director or incorporator of any Conduit Purchaser; provided, however, that this Section shall not relieve any such Person of any liability it might otherwise have for its own gross negligence or willful misconduct. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written. WARNACO OPERATIONS CORPORATION By: /S/ ------------------------------------------- Name: ------------------------------------------- Title: ------------------------------------------- Address: Attention: Telephone No.: Facsimile No.: GREGORY STREET, INC. By: /S/ ------------------------------------------- Name: ------------------------------------------- Title: ------------------------------------------- Address: Attention: Telephone No.: Facsimile No.: THE BANK OF NOVA SCOTIA, as Agent By: /S/ ------------------------------------- Name: ------------------------------------- Title: ------------------------------------- Address: One Liberty Plaza New York, New York 10006 Attention:Richard A. Josephs Telephone No.:(212) 225-5118 Facsimile No.:(212) 225-5090 CITIBANK N.A., as Co-Agent By: /S/ ------------------------------------- Name: ------------------------------------- Title: ------------------------------------- Address:399 Park Avenue New York, NY 10043 Attention:Brenda Cotsen Telephone No.:(212) 559-0681 Facsimile No.:(212) 793-1290 PURCHASERS CITIBANK N.A., as a Purchaser By: /S/ ------------------------------------- Name: ------------------------------------- Title: ------------------------------------- Percentage: ______ Address:399 Park Avenue New York, NY 10043 Attention:Brenda Cotsen Telephone No.:(212) 559-0681 Facsimile No.:(212) 793-1290 LIBERTY STREET FUNDING CORP., as a Purchaser By: /S/ ------------------------------------- Name: ------------------------------------- Title: ------------------------------------- Percentage: _______ Address:c/o Global Securitization Services, LLC 114 West 47th Street, Suite 1715 New York, New York 10036 Attention No.:Andrew L. Stidd Telephone No.:(212) 302-5151 Facsimile No.:(212) 302-8767 With a copy to: THE BANK OF NOVA SCOTIA One Liberty Plaza New York, New York 10006 Attention: Richard A. Josephs Telephone No(212) 225-5118 Facsimile No(212) 225-5090 EXHIBIT I DEFINITIONS As used in the Agreement (including its Exhibits, Schedules and Annexes), 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). Unless otherwise indicated, all Section, Annex, Exhibit and Schedule references in this Exhibit are to Sections of and Annexes, Exhibits and Schedules to the Agreement. "Adverse Claim" means a lien, security interest or other charge or encumbrance, or any other type of preferential arrangement; it being understood that any thereof in favor of any Purchaser or the Agent (for the benefit of any Purchaser) shall not constitute an Adverse Claim. "Affected Person" means the Agent, the Co-Agent, any Purchaser, any Program Support Provider or any of their respective Affiliates. "Affiliate" means, as to any Person, any other Person that, directly or indirectly, is in control of, is controlled by, or is under common control with, such Person. For purposes of this definition, control of a Person shall include the power, direct or indirect, (a) to vote 10% or more of the securities or other interests having ordinary voting power for the election of directors or other managing Persons of such Person or (b) to direct or cause direction of the management and policies of such Person whether by contract or otherwise. "Affiliated Obligor" means, (a) in relation to an Obligor that is a Governmental Authority, any other Obligor that is a Governmental Authority, and (b) in relation to an Obligor that is not a Governmental Authority, each Obligor that is an Affiliate of such Obligor. "Agent" has the meaning set forth in the preamble to the Agreement. "Agreement" has the meaning set forth in the preamble to the Agreement. "Agreement Value" has the meaning set forth in Annex A to the Facility Agreement, in effect on the date hereof. "Aggregate Capital" means the sum of the Capital of all Purchases. "Applicable Margin" has the meaning set forth in the Fee Letter. "Assignee Purchaser" has the meaning set forth in Section 5.3. "Attorney Costs" means and includes all reasonable fees and disbursements of any law firm or other external counsel, the reasonable allocated cost of internal legal services and all reasonable disbursements of internal counsel. "Authentic" means Authentic Fitness Products, Inc., a Delaware corporation. "Authentic Receivable" means a Receivable sold pursuant to the Authentic Sale Agreement. "Authentic Sale Agreement" means the Master Agreement of Sale, dated as of March 10, 2000 between Authentic and Gregory, as the same may be amended, amended and restated, supplemented or other wise modified from time to time. "Bankruptcy Code" means the United States Bankruptcy Reform Act of 1978 (11 U.S.C.ss. 101, et seq.), as amended from time to time. "Base Rate" means, for any day, a fluctuating interest rate per annum as shall be in effect from time to time, which rate shall be at all times equal to the higher of: (a) the rate of interest in effect for such day as publicly announced from time to time by BNS in New York, New York as its "base rate". Such "base rate" is based upon various factors, including their respective costs and desired return, general economic conditions and other factors, and is used as a reference point for pricing some loans, which may be priced at, above or below such announced rates, and (b) 0.50% per annum above the latest Federal Funds Rate. "Base Rate Tranche" means a Tranche funded by reference to the Base Rate. "Benefit Plan" means any employee benefit pension plan as defined in Section 3(2) of ERISA in respect of which the Seller, any Originator, Gregory or any ERISA Affiliate is, or at any time during the immediately preceding six years was, an "employer" as defined in Section 3(5) of ERISA. "BNS" has the meaning set forth in the preamble to the Agreement. "Breakage Amount" has the meaning set forth in Section 1.14. "Business Day" means any day (other than a Saturday or Sunday) on which: (a) banks are not authorized or required to close in New York City, New York and (b) if this definition of "Business Day" is utilized in connection with the Eurodollar Rate, dealings are carried out in the London interbank market. "Calvin Klein" means Calvin Klein Jeanswear Company, a Delaware corporation. "Calvin Klein Sale Agreement" means the Master Agreement of Sale, dated as of September 30, 1998 between Calvin Klein and Gregory, as the same may be amended, amended and restated, supplemented or otherwise modified from time to time. "Capital" means with respect to any Purchaser, the aggregate amounts paid to the Seller by such Purchaser in respect of purchases of interests in the Purchased Interest pursuant to Section 1.2 of the Agreement, as reduced from time to time by Collections distributed and applied on account of such Capital pursuant to Section 1.7(d) of the Agreement; provided, that if such Capital shall have been reduced by any distribution, and thereafter all or a portion of such distribution is rescinded or must otherwise be returned for any reason, such Capital shall be automatically increased by the amount of such rescinded or returned distribution as though it had not been made. "Change in Control" means that Group ceases to own, directly or indirectly, 100% of the capital stock of the Seller or Gregory free and clear of all Adverse Claims other than any pledge of stock of the Seller or Gregory to State Street Bank and Trust Company, as Collateral Trustee pursuant to the Security Agreement, dated as of October 6, 2000 among Group, Warnaco, the Persons listed on the signature pages thereto, Additional Grantors (as defined therein) and State Street Bank and Trust Company as the same may be amended, amended and restarted, supplemented or otherwise modified from time to time. "Citibank" means Citibank, N.A. "Co-Agent" has the meaning set forth in the preamble to the Agreement. "Collection Account" means that certain bank account numbered 4071-9191 maintained at Citibank, N.A. in New York, New York which is identified as the "Warnaco Operations Corporation and The Bank of Nova Scotia, as Agent: Collection Account". "Collection Account Agreement" means a letter agreement among the Seller, the Agent and Citibank, N.A., as the same may be amended, supplemented, amended and restated, or otherwise modified from time to time in accordance with the Agreement. "Collection Account Bank" means Citibank, N.A. "Collections" means, with respect to any Pool Receivable: (a) all funds that are received by any Originator, the Seller or the Servicer in payment of any amounts owed in respect of such Receivable (including purchase price, finance charges, interest and all other charges), or applied to amounts owed in respect of such Receivable (including insurance payments and net proceeds of the sale or other disposition of repossessed goods or other collateral or property of the related Obligor or any other Person directly or indirectly liable for the payment of such Pool Receivable and available to be applied thereon), (b) all Collections deemed to have been received pursuant to Section 1.12(e) of the Agreement and (c) all other proceeds of such Pool Receivable. "Conduit Purchaser" means each Purchaser that is a commercial paper conduit. "Contract" means, with respect to any Receivable, any and all contracts, purchase orders, instruments, agreements, leases, invoices, notes or other writings pursuant to which such Receivable arises or that evidence such Receivable or under which an Obligor becomes or is obligated to make payment in respect of such Receivable. "Contributed Value" has the meaning set forth in Section 3.4 of the Gregory Sale Agreement. "Covered Facility" has the meaning set forth in Annex A to the Facility Agreement, in effect on the date hereof. "Credit and Collection Policy" means, as the context may require, those receivables credit and collection policies and practices of Group in effect on the date of the Agreement and described in Schedule I to the Agreement, as modified in compliance with the Agreement. "Cut-off Date" has the meaning set forth in the Gregory Sale Agreement. "Days' Sales Outstanding" means, for any Fiscal Month, an amount computed as of the last day of such Fiscal Month equal to: (a) the average of the Outstanding Balance of all Eligible Receivables as of the last day of each of the three most recent Fiscal Months ended on the last day of such Fiscal Month divided by (b) Domestic Sales during the three Fiscal Months ended on or before the last day of such Fiscal Month multiplied by (c) 90. "Debt" has the meaning set forth in Annex A to the Facility Agreement, as in effect on the date hereof. "Default Event" any Loan Party or any of its Subsidiaries shall fail to pay any principal of or premium or interest on or any other amount payable in respect of any Debt that is outstanding in a principal or reimbursement amount (or, in the case of any Hedge Agreement, its Agreement Value) of (i) with respect to any Covered Facility, at least $5,000,000 or (ii) with respect to any other Debt, at least $20,000,000 in the aggregate; in any case either individually or in the aggregate of such Loan Party or such Subsidiary (as the case may be), when the same becomes due and payable whether by scheduled maturity, required prepayment, acceleration, demand or otherwise, and such failure shall have continued after the applicable grace period, if any, specified in the agreement or instrument relating to such Debt (but regardless of whether such failure is waived or the holder(s) of such Debt in any other manner otherwise excuse such failure); or any other event shall occur or condition shall exist under any agreement, or instrument relating to any such Debt as specified in clause (ii) and shall have continued after the applicable grace period, if any, specified in such agreement or instrument (but regardless of whether such other event is waived or the holder(s) of such Debt in any other manner otherwise excuse such event) if the effect of such event or condition is to accelerate, or to permit acceleration of, the maturity of such Debt as specified in clause (ii) or otherwise to cause, or to permit the holder thereof to cause, such Debt as specified in clause (ii) to mature; or any such Debt as specified in clause (ii) shall be declared to be due and payable or is then required to be prepaid or redeemed (other than by a regularly scheduled required prepayment or redemption), purchased or defeased, or an offer to prepay, redeem, purchase or defease such Debt as specified in clause (ii) shall be then required to be made, in each case prior to the stated maturity thereof. "Default Ratio" means the ratio (expressed as a percentage and rounded to the nearest 1/100 of 1%) computed as of the last day of each Fiscal Month by dividing (i) the aggregate Outstanding Balance of all Pool Receivables that are Defaulted Receivables as of such day by (ii) Outstanding Balance of all Pool Receivables. "Defaulted Receivable" means a Receivable: (a) in the case of a Receivable that is not an Extended Term Receivable, as to which any payment, or part thereof, remains unpaid for 91 days or more from the original due date for such payment, (b) in the case of a Receivable that is an Extended Term Receivable, as to which any payment, or part thereof, remains unpaid for 30 days or more from the original due date for such payment, or (c) (i) as to which an Event of Bankruptcy shall have occurred with respect to the Obligor thereof or any other Person obligated thereon or owning any Related Security with respect thereto, or (ii) which, has been, or, consistent with the Credit and Collection Policy would be, written off the Seller's books as uncollectible. "Delinquency Ratio" means the ratio (expressed as a percentage and rounded upwards to the nearest 1/100th of 1%) computed as of the last day of each Fiscal Month of (a) the Outstanding Balance of all Pool Receivables (other than Defaulted Receivables) as to which any payment, or part thereof, remains unpaid (i) with respect to such Pool Receivables other than Pool Receivables that are Extended Term Receivables for more than 60 days from the original stated maturity date for such payment and (ii) with respect to such Pool Receivables that are Extended Term Receivables for more than one day after the original due date for such payment, to (b) the Outstanding Balance of all Pool Receivables. "Dilution Ratio" means the ratio (expressed as a percentage and rounded upwards to the nearest 1/100th of 1%) computed as of the last day of each Fiscal Month of (a) the aggregate amount of payments required to be made by the Seller pursuant to Section 1.7(e)(i) of the Agreement for such Fiscal Month, to (b) Domestic Sales during the preceding Fiscal Month. "Dilution Reserve" for the Purchased Interest means, on any date, an amount equal to (a) the Aggregate Capital thereof at the close of business of the Servicer on such date multiplied by (b) the Dilution Reserve Percentage on such date. "Dilution Reserve Percentage" means, on any date 15.00%; provided however, that, upon at least 10 Business Days notice to the Seller, the Agent may increase such Dilution Reserve Percentage to such greater percentage as may be necessary based on portfolio performance in the Agent's sole discretion, to protect the Purchasers against increased dilution risk with respect to the Pool Receivables; provided, further, that such Dilution Reserve Percentage shall only be decreased upon unanimous consent of all Purchasers. "Discount" means: for any Tranche for any Interest Period: (TR x C x ED/Year) + TF where: TR = the Tranche Rate for such Tranche for such Interest Period, C = the Tranche Amount during such Interest Period, ED = the actual number of days during such Interest Period, Year = if such Tranche Rate is based upon: (i) the Eurodollar Rate, 360 days, and (ii) the Base Rate, 365 or 366 days, as applicable, and TF = the Termination Fee, if any, for such Tranche for such Interest Period; provided, however, that no provision of the Agreement shall require the payment or permit the collection of Discount in excess of the maximum permitted by applicable law; and provided further, that Discount for such Tranche shall not be considered paid by any distribution to the extent that at any time all or a portion of such distribution is rescinded or must otherwise be returned for any reason. "Discount Reserve" for the Purchased Interest means the sum of (i) the Termination Discount at such time for such Purchased Interest, and (ii) the then accrued and unpaid Discount for such Purchased Interest. "Dollars" means dollars in lawful money of the United States of America. "Domestic Pool Receivable" means a Pool Receivable, the Obligor of which is (a) organized under the laws of the United States or any state thereof and has its principal place of business located in the United States or (b) is an Eligible Foreign Obligor. "Domestic Sales" for any period, means the aggregate amount of new Domestic Pool Receivables generated by the Originators during such period. "Eligible Assignee" means (i) a Lender party; (ii) an Affiliate of a Lender Party; (iii) a commercial bank, savings and loan association or savings bank organized under the laws of the United States, or any State thereof, and having total assets in excess of $100,000,000, (iv) a commercial bank organized under the laws of any other country that is a member of the Organization of Economic Development and Cooperation (the "OECD") or has concluded special lending arrangement with the International Monetary Fund associated with its General Arrangements to Borrow, or a political subdicision of any such country, and having total assets in excess of $100,000,000; (v) the central bank of any country that is a member of the OECD or (vi) a finance company, insurance company or other financial institution or fund (whether a corporation, partnership, trust or other entity) having total assets in excess of $100,000,000 that is engaged in making, purchasing or otherwise investing in commercial loans in the ordinary course of its business. "Eligible Foreign Obligor" means an Obligor (i) who is organized under the laws of a county other than the United States or any state thereof (ii) whose Receivables are denominated and payable only in Dollars in the United States and (iii) the obligations of which are supported by a letter of credit which letter of credit names the Agent as beneficiary for the benefit of the Purchasers or is in the possession of the Agent. "Eligible Receivable" means, at any time, a Pool Receivable: (a) the Obligor of which (i) (A) is organized under the laws of the United States or any state thereof and has its principal place of business located in the United States or (B) is an Eligible Foreign Obligor and (ii) is not an Affiliate of the Seller or Group, (b) that does not have a stated maturity which is more than 90 days after the original invoice date of such Receivable unless such Pool Receivable is an Extended Term Receivable, in which case it does not have a stated maturity which is more than 180 days after the original invoice date of such Receivable, (c) that arises under a duly authorized Contract for the sale and delivery of goods and services in the ordinary course of any Originator's business, (d) that arises under a duly authorized Contract that is in full force and effect and that is a legal, valid and binding obligation of the related Obligor, enforceable against such Obligor in accordance with its terms, (e) that conforms in all material respects with all applicable laws, rulings and regulations in effect, (f) that is not the subject of any dispute, offset, hold back defense, Adverse Claim or other claim other than such adjustments in the ordinary course of the applicable Originator's business as such Originator's business is conducted on the date hereof, (g) that satisfies all applicable requirements of the applicable Credit and Collection Policy, (h) that has not been modified, waived or restructured since its creation, (i) in which the Seller owns good and marketable title, free and clear of any Adverse Claims, and that is freely assignable by the Seller (including without any consent of the related Obligor), (j) for which the Agent, for the benefit of the Purchasers, shall have a valid and enforceable undivided percentage ownership or security interest and a valid and enforceable first priority perfected security interest therein and in the Related Security and Collections with respect thereto, in each case free and clear of any Adverse Claim, (k) that constitutes an account as defined in the UCC, and that is not evidenced by instruments or chattel paper, (l) that is not a Defaulted Receivable, (m) that represents all or part of the sales price of merchandise, insurance or services within the meaning of Section 3(c)(5) of the Investment Company Act of 1940, (n) for which Defaulted Receivables of the related Obligor do not exceed 25% of the Outstanding Balance of all such Obligor's Receivables, (o) which is denominated and payable only in Dollars in the United States, (p) that represents amounts earned and payable by the Obligor that are not subject to the performance of additional services by the Originator of such Receivable, and (q) that has not been rewritten, canceled or rebilled or is not a Pool Receivable that has resulted from a rewritten, canceled or rebilled Receivable. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and any successor statute of similar import, together with the regulations thereunder, in each case as in effect from time to time. References to sections of ERISA also refer to any successor sections. "ERISA Affiliate" means: (a) any corporation that is a member of the same controlled group of corporations (within the meaning of Section 414(b) of the Internal Revenue Code) as the Seller or Group (b) a trade or business (whether or not incorporated) under common control (within the meaning of Section 414(c) of the Internal Revenue Code) with the Seller or Group, or (c) a member of the same affiliated service group (within the meaning of Section 414(m) of the Internal Revenue Code) as the Seller, Group, any corporation described in clause (a) or any trade or business described in clause (b). "Eurodollar Rate Tranche" means a Tranche funded by reference to the Eurodollar Rate. "Event of Bankruptcy" means (a) any case, action or proceeding before any court or other governmental authority relating to bankruptcy, reorganization, insolvency, liquidation, receivership, dissolution, winding-up or relief of debtors or (b) any general assignment for the benefit of creditors of a Person composition, marshaling of assets for creditors of a Person, or other similar arrangement in respect of its creditors generally or any substantial portion of its creditors; in each of cases (a) and (b) undertaken under U.S. Federal, state or foreign law, including the U.S. Bankruptcy Code. "Extended Term Receivable" means an Authentic Receivable that has an original stated maturity that is greater than 90 days after the original invoice date of such Receivable and less than or equal to 180 days after the original invoice date of such Receivable. "Facility Agreement" means the Amendment, Modification, Restatement and General Provisions Agreement, dated as October 6, 2000 among Group, Warnaco, the other direct or indirect subsidiaries of Group party thereto from time to time, BNS, as Administrative Agent, BNS and Citibank, as the Debt Coordinators and State Street Bank and Trust Company as the Collateral Trustee, as the same may be amended, amended and restated, supplemented or otherwise modified from time to time. "Facility Termination Date" means the earliest to occur of: (a) August 12, 2002, (b) the date determined pursuant to Section 2.2 of the Agreement following the occurrence of a Termination Event, and (c) the date the Purchase Limit reduces to zero pursuant to Section 1.1(b) of the Agreement. "Federal Funds Rate" means, for any day, the per annum rate set forth in the weekly statistical release designated as H.15(519), or any successor publication, published by the Federal Reserve Board (including any such successor, "H.15(519)") for such day opposite the caption "Federal Funds (Effective)." If on any relevant day such rate is not yet published in H.15(519), the rate for such day will be the rate set forth in the daily statistical release designated as the Composite 3:30 p.m. Quotations for U.S. Government Securities, or any successor publication, published by the Federal Reserve Bank of New York (including any such successor, the "Composite 3:30 p.m. Quotations") for such day under the caption "Federal Funds Effective Rate." If on any relevant day the appropriate rate is not yet published in either H.15(519) or the Composite 3:30 p.m. Quotations, the rate for such day will be the arithmetic mean as determined by the Agent of the rates for the last transaction in overnight Federal funds arranged before 9:00 a.m. (New York time) on that day by each of three leading brokers of Federal funds transactions in New York City selected by the Agent. "Federal Reserve Board" means the Board of Governors of the Federal Reserve System, or any entity succeeding to any of its principal functions. "Fee Letter" has the meaning set forth in Section 1.8 of the Agreement. "Fees" means the fees payable by the Seller to the Purchasers pursuant to the Fee Letter. "Final Payout Date" means the date following the Facility Termination Date on which the Aggregate Capital and Discount on all Tranches shall have been paid in full and all the amounts owed by the Seller and the Servicer under the Transaction Documents shall have been paid in full. "Fiscal Month" means, with respect to any date, the monthly period designated with respect to such date on Schedule III hereto, as such Schedule may be modified or replaced from time to time. "GAAP" means the generally accepted United States accounting principles promulgated or adopted by the Financial Accounting Standards Board and its predecessors and successors from time to time. "Governmental Authority" means any nation or government, any state or other political subdivision thereof, any central bank (or similar monetary or regulatory authority) thereof, any body or entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, including any court, and any Person owned or controlled, through stock or capital ownership or otherwise, by any of the foregoing. "Gregory" has the meaning set forth in the preamble to the Agreement. "Gregory Sale Agreement" means the Purchase and Sale Agreement, dated as of September 30, 1998, between the Seller and Gregory, as such agreement may be amended, amended and restated, supplemented or otherwise modified from time to time. "Group" means Warnaco Group, Inc., a Delaware corporation. "Hedge Agreements" has the meaning set forth in Annex A to the Facility Agreement, in effect on the date hereof. "Impermissible Qualification" means, relative to the opinion or certification of any independent public accountant as to any financial statement of Seller or Group any qualification or exception to such opinion or certification: (i) which is of a "going concern" or similar nature; or (ii) which relates to the limited scope of examination of matters relevant to such financial statement (other than any standard qualification of such nature). "Indemnified Amounts" has the meaning set forth in Section 3.1 of the Agreement. "Indemnified Party" means the Agent, the Co-Agent, the Purchasers, any Program Support Provider or any of their respective Affiliates, employees, officers, directors, agents, counsel, successors, transferees or assigns. "Independent Director" has the meaning set forth in paragraph 3(c) of Exhibit IV to the Agreement. "Insolvency Proceeding" means: (a) any case, action or proceeding before any court or other Governmental Authority relating to bankruptcy, reorganization, insolvency, liquidation, receivership, dissolution, winding-up or relief of debtors, or (b) any general assignment for the benefit of creditors, composition, marshaling of assets for creditors, or other, similar arrangement in respect of its creditors generally or any substantial portion of its creditors, in each case undertaken under U.S. Federal, state or foreign law, including the Bankruptcy Code. "Intercreditor Agreement" means the Agreement dated as of October 6, 2000 among Group, Warnaco, BNS, as Administrative Agent, BNS and Salomon Smith Barney Inc., as Lead Arrangers, BNS and Citibank, N.A., as Debt Coordinators, BNS, Salomon Smith Barney Inc., Morgan Guaranty Trust Company of New York, Commerzbank A.G., New York Branch and Societe Generale, as Arrangers, the other financial from time to time party thereto and State Street Bank and Trust Company, as Collateral Trustee, as amended, amended and restated, supplemented or otherwise modified from time to time. "Interest Period" means (a) with respect to a Eurodollar Rate Tranche, the period commencing on (and including) the date of the initial funding of, continuance of or conversion into a Eurodollar Rate Tranche pursuant to Section 1.2 or 1.3 and ending on (but excluding) the day which is one, two or three months thereafter (or, if such month has no numerically corresponding day, on the last Business Day of such month) as the Seller may select in its relevant notice pursuant to Section 1.2 or 1.3 and (b) with respect to a Base Rate Tranche (i) initially the period commencing on (and including) the date of the initial funding of, continuance of or conversion into a Base Rate Tranche pursuant to Section 1.2 or 1.3 and ending on (and including) the last day of the current calendar month, and (ii) thereafter, the period commencing on (and including) the first day after the last day of the immediately preceding Interest Period for such Base Rate Tranche and ending on (and including) the last day of the current calendar month; provided, that (A) any Interest Period (other than of one day) which would otherwise end on a day which is not a Business Day shall be extended to the next succeeding Business Day; provided, however, if Discount in respect of such Interest Period is computed by reference to the Eurodollar Rate, and such Interest Period would otherwise end on a day which is not a Business Day, and there is no subsequent Business Day in the same calendar month as such day, such Interest Period shall end on the next preceding Business Day; and (B) in the case of any Interest Period for any Tranche that commences before the Facility Termination Date and would otherwise end on a date occurring after the Facility Termination Date, such Interest Period shall end on such Facility Termination Date and the duration of each Interest Period which commences on or after the Facility Termination Date shall be of such duration as shall be selected by the Agent. "Internal Revenue Code" means the Internal Revenue Code of 1986, as amended from time to time, and any successor statute of similar import, together with the regulations thereunder, in each case as in effect from time to time. References to sections of the Internal Revenue Code also refer to any successor sections. "Lender Parties" has the meaning set forth in Annex A to the Facility Agreement, as in effect on the date hereof. "Lien" means any lien, security interest or other charge or encumbrance of any kind, or any other type of preferential arrangement, including, without limitation, the lien or retained security title of a conditional vendor and any easement, right of way or other encumbrance on title to real property. "Loan Parties" has the meaning set forth in Annex A to the Facility Agreement, as in effect on the date hereof. "Loss-to-Liquidation Ratio" means the ratio (expressed as a percentage and rounded upward to the nearest 1/100th of 1%) computed as of the last day of each Fiscal Month by dividing (a) the sum of (i) the aggregate Outstanding Balance of all Domestic Pool Receivables written off by the Seller or Servicer, or which should have been written off by the Seller or Servicer in accordance with the Credit and Collection Policy, during such Fiscal Month plus (ii) 50% of the aggregate Outstanding Balance of all Domestic Pool Receivables as to which any payment, or part thereof, remains unpaid for more than 120 days from the original due date for such payment by (b) the aggregate amount of Collections of Domestic Pool Receivables (other than deemed Collections) during such fiscal month. "Loss Reserve" for the Purchased Interest means, on any date, an amount equal to (a) the Aggregate Capital at the close of business of the Servicer on such date multiplied by (b) the Loss Reserve Percentage on such date. "Loss Reserve Percentage" means, on any date 10.00%; provided, however, that until such time as the Servicer or the Seller shall have delivered the initial Weekly Report the "Loss Reserve Percentage" means on any date 15.00%; provided however, that, upon at least 10 Business Days notice to the Seller, the Agent may increase such Loss Reserve Percentage to any such greater percentage as may be necessary based on portfolio performance in the Agent's sole discretion to protect the Purchasers against increased credit risk with respect to the Pool Receivables amount; provided, further, that such Loss Reserve Percentage shall only be decreased upon unanimous consent of all Purchasers. "Material Adverse Effect" means, relative to any Person with respect to any event or circumstance, a material adverse effect on: (a) the assets, operations, business or financial condition of such Person, (b) the ability of any such Person to perform its obligations under the Agreement or any other Transaction Document to which it is a party, (c) the validity or enforceability of any other Transaction Document, or the validity, enforceability or collectibility of a material portion of the Pool Receivables, or (d) the status, perfection, enforceability or priority of the Agent or any Purchaser's or the Seller's interest in the Pool Assets. "Monthly Net Charge Back Amount" means the amount shown as the "U.S. Domestic Net Charge Back Amount" on the most recent Monthly Report less advertising, allowances and returns. "Monthly Report" means a report, in substantially the form of Annex A to the Agreement, furnished to the Agent pursuant to the Agreement. "Monthly Report Date" means the seventeenth day of each calendar month (or if such day is not a Business Day, then the next following Business Day). "Moody's" means Moody's Investors Service, Inc., and its successors. "Net Receivables Pool Balance" means, at any time: (a) the Outstanding Balance of Eligible Receivables then in the Receivables Pool minus (b) the amount of Collections of such Receivables that have been received by the Servicer but not yet applied to such Receivable at such time, plus (c) the Permitted Dilution Amount. "Notes" means with respect to any Conduit Purchaser, the short-term promissory notes issued, or to be issued, by such Conduit Purchaser to fund its investments in accounts receivable or other financial assets. "Obligor" means, with respect to any Receivable, the Person obligated to make payments pursuant to the Contract relating to such Receivable. "Originator" means any of Warnaco, Authentic or Calvin Klein or their respective successors and permitted assigns. "Outstanding Balance" of any Receivable at any time means the then outstanding principal balance thereof. "Payment Date" has the meaning set forth in Section 1.4 of the Gregory Sale Agreement. "Percentage" means with respect to any Purchaser the percentage set forth below its signature to the Agreement or in the Purchaser Assignment Agreement pursuant to which it became a Purchaser, as such percentage may be modified in connection with any subsequent Purchaser Assignment Agreement to which such Purchaser is a party that is accepted by the Agent in accordance with Section 6.3. "Permitted Dilution Amount" means at any time 50% of the Monthly Net Charge Back Amount. "Person" means an individual, partnership, corporation (including a business trust), joint stock company, trust, unincorporated association, joint venture, limited liability company or other entity, or a government or any political subdivision or agency thereof. "Pool Assets" has the meaning set forth in Section 1.2(e) of the Agreement. "Pool Receivable" means a Receivable in the Receivables Pool. "Program Support Provider" means and includes any Person now or hereafter extending credit or having a commitment to extend credit to or for the account of, or to make purchases from, any Conduit Purchaser pursuant to any program support agreement for the purpose of providing liquidity or credit enhancement for the Notes issued by such Conduit Purchaser. "Purchase and Sale Indemnified Amounts" has the meaning set forth in Section 8.1 of the Gregory Sale Agreement. "Purchase and Sale Indemnified Party" has the meaning set forth in Section 8.1 of the Gregory Sale Agreement. "Purchase and Sale Termination Date" has the meaning set forth in Section 1.4 of the Gregory Sale Agreement. "Purchase and Sale Termination Event" has the meaning set forth in Section 7.1 of the Gregory Sale Agreement. "Purchase Facility" has the meaning set forth in Section 1.1 of the Gregory Sale Agreement. "Purchase Limit" means $300,000,000, as such amount may be (a) reduced pursuant to Section 1.1(b) or (b) increased upon the request of the Seller and with the consent of the Purchasers; it being understood that no Purchaser shall be under no obligation to consent to an increase in the Purchase Limit at any time and that such consent may be withheld by the Purchasers in their sole and absolute discretion without regard to whether such consent has been unreasonably withheld. References to the unused portion of the Purchase Limit shall mean, at any time, the excess of the Purchase Limit (as then reduced pursuant to Section 1.1(b) or as then increased pursuant to the preceding sentence), over the then outstanding Aggregate Capital. "Purchase Price" has the meaning set forth in Section 2.1 of the Gregory Sale Agreement. "Purchase Report" has the meaning set forth in Section 2.1 of the Gregory Sale Agreement. "Purchase Request" means a purchase request and certificate duly executed by an authorized officer of the Seller, substantially in the form of Annex B hereto. "Purchased Interest" means, at any time, an undivided percentage ownership interest in: (a) each and every Pool Receivable now existing or hereafter arising, (b) all Related Security with respect to such Pool Receivables and (c) all Collections with respect to, and other proceeds of, such Pool Receivables and Related Security. Such undivided percentage interest shall be computed as: Capital + Total Reserves _____________________________ Net Receivables Pool Balance The Purchased Interest shall be determined from time to time pursuant to Section 1.4 of the Agreement. "Purchaser Assignment Agreement" means a purchaser assignment agreement substantially in the form of Annex E to the Agreement. "Purchasers" has the meaning set forth in the preamble to the Agreement. "Purchaser's Pro Rata Share" means with respect to any Purchaser a fraction, expressed as a percentage, the numerator of which is the outstanding Capital of such Purchaser and the denominator of which is the Aggregate Capital. "Purchasers' Share" with respect to any amount means such amount multiplied by the Purchased Interest at the time of determination. "Rate Type" means the Eurodollar Rate or the Base Rate. "Rate Variance Factor" means the number, computed from time to time in good faith by the Agent, that reflects the largest potential variance (from minimum to maximum) in selected interest rates over a period of time selected by the Agent from time to time, as set forth in a written notice by the Agent to the Seller and the Servicer; provided that the Rate Variance Factor shall at no time exceed 1%. "Receivable" means any indebtedness and other obligations owed to the Seller as assignee of the Originators or any Originator by, or any right of the Seller or any Originator to payment from or on behalf of, an Obligor), whether constituting an account, chattel paper, instrument or general intangible arising in connection with the sale of goods or the rendering of services by the Originator, and includes the obligation to pay any finance charges, fees and other charges with respect thereto. "Receivables Pool" means, at any time, all of the then outstanding Receivables purchased or purported to be purchased by the Seller or contributed to the Seller pursuant to the Gregory Sale Agreement prior to the Facility Termination Date. "Related Rights" has the meaning set forth in Section 1.1 of the Gregory Sale Agreement. "Related Security" means, with respect to any Receivable: (a) all of the Seller's, Gregory's and each Originator's interest in any goods (including returned goods), and documentation of title evidencing the shipment or storage of any goods (including returned goods), relating to any sale giving rise to such Receivable, (b) all instruments and chattel paper that may evidence such Receivable, (c) all other security interests or liens and property subject thereto from time to time purporting to secure payment of such Receivable, whether pursuant to the Contract related to such Receivable or otherwise, together with all UCC financing statements or similar filings relating thereto, and (d) all of the Seller's, Gregory's and each Originator's rights, interests and claims under the Contracts and all guaranties, indemnities and other agreements (including the related Contract) or arrangements of whatever character from time to time supporting or securing payment of such Receivable or otherwise relating to such Receivable, whether pursuant to the Contract related to such Receivable or otherwise. "Replacement Purchaser" has the meaning set forth in Section 5.3(c) of the Agreement. "Required Lenders" has the meaning set forth in Annex A to the Facility Agreement, as in effect on the date hereof. "Required Purchasers" means, at any time, Purchasers whose Capital aggregates more than 51% of the Aggregate Capital. "Seller" has the meaning set forth in the preamble to the Agreement. "Seller's Share" of any amount means the greater of: (a) $0 and (b) the product of (i) such amount multiplied by (ii) a percentage equal to (A) 100% minus (B) the Purchased Interest (expressed as a percentage). "Servicer" has the meaning set forth in the preamble to the Agreement. "Servicing Fee" shall mean the fee referred to in Section 4.6 of the Agreement. "Servicing Fee Rate" shall mean the rate referred to in Section 4.6(a) of the Agreement. "Servicing Fee Reserve" with respect to the Purchased Interest at any time means the sum of (a) the then accrued and unpaid Servicing Fee relating to the Purchased Interest plus (b) the product of (i) Aggregate Capital at such time, times (ii) the product of (x) the Servicing Fee Rate divided by one minus the Servicing Fee Rate multiplied by (y) a fraction, the numerator of which is 1.5 times the Days' Sales Outstanding (calculated on the last day of the most recent preceding Fiscal Month) and the denominator of which is 360. "Settlement Date" means (a) prior to the Facility Termination Date (i) with respect to the payment of accrued and unpaid Discount with respect to any Tranche, the last day of each Interest Period for such Tranche and (ii) with respect to the payment of all other amounts hereunder, the fifth day of each calendar month (or if such day is not a Business Day, then the next following Business Day) as notified to the Seller by the Agent and (b) on or after the Facility Termination Date, with respect to the payment of accrued and unpaid Discount with respect to any Tranche or the payment of all other amounts hereunder as notified to the Seller by the Agent each day selected from time to time by the Agent (it being understood that the Agent may select such Settlement Date(s) to occur as frequently as daily), or, in the absence of any such selection, the day which would be the Settlement Date for such Tranche or other amounts pursuant to clause (a)(i) or (a)(ii), as applicable, of this definition. "Solvent" means, with respect to any Person at any time, a condition under which: (i) the fair value and present fair saleable value of such Person's total assets is, on the date of determination, greater than such Person's total liabilities (including contingent and unliquidated liabilities) at such time; (ii) the fair value and present fair saleable value of such Person's assets is greater than the amount that will be required to pay such Person's probable liability on its existing debts as they become absolute and matured ("debts," for this purpose, includes all legal liabilities, whether matured or unmatured, liquidated or unliquidated, absolute, fixed, or contingent); (iii) such Person is and shall continue to be able to pay all of its liabilities as such liabilities mature; and (iv) such Person does not have unreasonably small capital with which to engage in its current and in its anticipated business. For purposes of this definition: (A) the amount of a Person's contingent or unliquidated liabilities at any time shall be that amount which, in light of all the facts and circumstances then existing, represents the amount which can reasonably be expected to become an actual or matured liability; (B) the "fair value" of an asset shall be the amount which may be realized within a reasonable time either through collection or sale of such asset at its regular market value; (C) the "regular market value" of an asset shall be the amount which a capable and diligent business person could obtain for such asset from an interested buyer who is willing to Purchase such asset under ordinary selling conditions; and (D) the "present fair saleable value" of an asset means the amount which can be obtained if such asset is sold with reasonable promptness in an arm's-length transaction in an existing and not theoretical market. "Standard & Poor's" means Standard & Poor's, a division of The McGraw-Hill Companies, Inc., and its successors. "Subordinated Note" has the meaning set forth in Section 3.2 of the Gregory Sale Agreement. "Subsidiary" of any Person means any corporation, partnership, joint venture, limited liability company, trust or estate of which (or in which) more than 50% of (a) the issued and outstanding capital stock having ordinary voting power to elect a majority of the Board of Directors of such corporation (irrespective of whether at the time capital stock of any other class or classes of such corporation shall or might have voting power upon the occurrence of any contingency), (b) the interest in the capital or profits of such partnership, joint venture or limited liability company or (c) the beneficial interest in such trust or estate is at the time directly or indirectly owned or controlled by such Person, by such Person and one or more of its other Subsidiaries or by one or more of such Person's other Subsidiaries. "Termination Day" means: (a) each day on which the conditions set forth in Section 2 of Exhibit II to the Agreement are not satisfied or (b) each day that occurs on or after the Facility Termination Date. "Termination Discount" means, for the Purchased Interest on any date, an amount equal to the product of (i) the Aggregate Capital on such date and (ii) the product of (a) the Base Rate plus the Rate Variance Factor and (b) a fraction having as its numerator the Days' Sales Outstanding and 360 as its denominator. "Termination Event" has the meaning specified in Exhibit V to the Agreement. "Termination Fee" means, for any Tranche and the related Interest Period during which a Termination Day occurs, the amount, if any, by which: (a) the additional Discount (calculated without taking into account any Termination Fee or any shortened duration of such Interest Period pursuant to the definition thereof) that would have accrued during such Interest Period on the reductions of the Tranche Amount relating to such Interest Period had such reductions not been made, exceeds (b) the income, if any, received by the Purchasers from investing the proceeds of such reductions of the Tranche Amount, as determined by the Purchasers, which determination shall be binding and conclusive for all purposes, absent manifest error. "Total Reserves" means, at any time the sum of : (a) the Loss Reserve plus (b) the Dilution Reserve plus (c) the Discount Reserve plus (d) the Servicing Fee Reserve. "Tranche" has the meaning set forth in Section 1.2(c) of the Agreement. "Tranche Amount" means, at any time, with respect to any Tranche, the portion of the Aggregate Capital allocated to such Tranche. "Tranche Rate" for any Interest Period for any Tranche of any Purchased Interest means an interest rate per annum equal to the rate determined pursuant to Section 1.5. "Transaction Documents" means the Agreement, the Collection Account Agreement, the Fee Letter, the Warnaco Sale Agreement, the Authentic Sale Agreement, the Calvin Klein Sale Agreement, the Gregory Sale Agreement and all other certificates, instruments, UCC financing statements, reports, notices, agreements and documents executed or delivered under or in connection with the Agreement, in each case as the same may be amended, supplemented or otherwise modified from time to time in accordance with the Agreement. "Transferee" has the meaning set forth in Section 5.5. "UCC" means the Uniform Commercial Code as from time to time in effect in the applicable jurisdiction. "Unmatured Purchase and Sale Termination Event" means any event which, with the giving of notice or lapse of time, or both, would become a Purchase and Sale Termination Event. "Unmatured Termination Event" means an event that, with the giving of notice or lapse of time, or both, would constitute a Termination Event. "Warnaco" means Warnaco Inc., a Delaware corporation. "Warnaco Sale Agreement" means the Amended and Restated Master Agreement of Sale, dated as of September 30, 1998, between Warnaco and Gregory, as such agreement may be amended, amended and restated, supplemented or otherwise modified from time to time. "Weekly Report" means a report, together with an officer's certified certificate attached thereto, in substantially the form of Annex D to the Agreement. "Weekly Report Date" means the last Business Day of each week. Other Terms. All accounting terms not specifically defined herein shall be construed in accordance with generally accepted accounting principles. All terms used in Article 9 of the UCC in the State of New York, and not specifically defined herein, are used herein as defined in such Article 9. Unless the context otherwise requires, "or" means "and/or," and "including" (and with correlative meaning "include" and "includes") means including without limiting the generality of any description preceding such term. EXHIBIT II CONDITIONS PRECEDENT 1. Conditions Precedent to Effectiveness of Agreement. The effectiveness of this Agreement is subject to the following conditions precedent that the Agent shall have received on or before the date of such purchase, each in form and substance (including the date thereof) satisfactory to the Agent: (a) A counterpart of the Agreement and the other Transaction Documents executed by the parties thereto. (b) Certified copies of: (i) the resolutions of the Board of Directors of each of the Seller, the Originators and Gregory authorizing the execution, delivery and performance by the Seller, each Originator and Gregory, as the case may be, of the Agreement and the other Transaction Documents to which it is a party; (ii) all documents evidencing other necessary corporate action and governmental approvals, if any, with respect to the Agreement and the other Transaction Documents and (iii) the certificate of incorporation and by-laws of the Seller, each Originator and Gregory. (c) A certificate of the Secretary or Assistant Secretary of the Seller, each Originator and Gregory certifying the names and true signatures of its officers who are authorized to sign the Agreement and the other Transaction Documents. Until the Agent receives a subsequent incumbency certificate from the Seller, each Originator or Gregory, as the case may be, the Agent shall be entitled to rely on the last such certificate delivered to it by the Seller, such Originator or Gregory, as the case may be. (d) Copies of duly executed financing statements, in proper form for filing under the UCC of all jurisdictions that the Agent may deem necessary or desirable in order to perfect the interests of the Seller, the Agent and the Purchasers contemplated by the Transaction Documents. (e) Acknowledgment copies, or time-stamped receipt copies, of proper financing statements, if any, necessary to release all security interests and other rights of any Person in the Receivables, Contracts or Related Security previously granted by any Originator, Gregory or the Seller. (f) Completed UCC search reports, dated on or shortly before the date of this Agreement, listing the financing statements filed in all applicable jurisdictions referred to in subsection (e) above that name any Originator, Gregory or the Seller as debtor, together with copies of such other financing statements, and similar search reports with respect to judgment liens, federal tax liens and liens of the Pension Benefit Guaranty Corporation in such jurisdictions, as the Agent may request, showing no Adverse Claims on any Pool Assets. (g) an executed copy of the Collection Account Agreement. (h) Favorable opinions, including a true sale/non-substantive consolidation opinion, in form and substance reasonably satisfactory to the Agent, of: (i) special counsel for the Seller, the Originators and the Servicer, and (ii) Stanley P. Silverstein, counsel for Seller, the Originators and the Servicer. (i) [RESERVED] (j) A Monthly Report representing the performance of the Receivables Pool for the Fiscal Month ending August 31, 2000. (k) Evidence of payment by the Seller of all accrued and unpaid fees (including those contemplated by the Fee Letter), costs and expenses to the extent then due and payable and invoiced on the date thereof, including any such costs, fees and expenses arising under or referenced in Section 5.4 of the Agreement and the Fee Letter. (l) The Fee Letter duly executed by the Seller. (m) Good standing certificates with respect to each of the Seller, the Originators and Gregory issued by the Secretary of State (or similar official) of the state of each such Person's organization and principal place of business. (n) Letters from each of the rating agencies then rating the Notes of Liberty Street confirming the rating of such Notes after giving effect to the transaction contemplated by the Agreement. (o) The other Transaction Documents duly executed by the parties thereto. (p) Such other approvals, opinions or documents as the Agent may reasonably request. 2. Conditions Precedent to All Purchases and Reinvestments. Each purchase and each reinvestment under this Agreement shall be subject to the further conditions precedent that: (a) on the date of such purchase (including the initial purchase) or reinvestment the following statements shall be true (and acceptance of the proceeds of such purchase or reinvestment shall be deemed a representation and warranty by the Seller that such statements are then true): (i) the representations and warranties contained in Exhibit III to the Agreement are true and correct in all material respects on and as of the date of such purchase or reinvestment as though made on and as of such date; (ii) no event has occurred and is continuing, or would result from such purchase or reinvestment, that constitutes a Termination Event or an Unmatured Termination Event; provided, however, that it shall not be a condition precedent to any reinvestment that a Termination Event or Unmatured Termination Event described in paragraph (j) of Exhibit V shall not have occurred unless and until the Agent is permitted pursuant to Section 2.2(b), to exercise any right, remedy or power available to it hereunder (other than under the proviso to Section 2.2(b) of the Receivables Purchase Agreement) or pursuant to applicable law as a result of the occurrence of such Termination Event; (iii) solely in the case of any purchase (but not reinvestment), no Default Event shall have occurred and is continuing; and (iv) the sum of (a) the Aggregate Capital and (b) Total Reserves of the Purchased Interest would not exceed the Net Receivables Pool Balance. EXHIBIT III REPRESENTATIONS AND WARRANTIES 1. Representations and Warranties of the Seller. The Seller represents and warrants as follows: (a) The Seller is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware, and is duly qualified to do business and is in good standing as a foreign corporation in every jurisdiction where the nature of its business requires it to be so qualified, except where the failure to be so qualified would not have a Material Adverse Effect. (b) The execution, delivery and performance by the Seller of the Agreement and the other Transaction Documents to which it is a party, including its use of the proceeds of purchases and reinvestments: (i) are within its corporate powers; (ii) have been duly authorized by all necessary corporate action; (iii) do not contravene in any material respect or result in a default under or conflict with: (A) its charter or by-laws, (B) any law, rule or regulation applicable to it, (C) any indenture, loan agreement, mortgage, deed of trust or other agreement or instrument to which it is a party or by which it is bound, or (D) any order, writ, judgment, award, injunction or decree binding on or affecting it or any of its property; and (iv) do not result in or require the creation of any Adverse Claim upon or with respect to any of its properties. (c) No authorization, approval or other action by, and no notice to or filing with, any Governmental Authority or other Person is required for the due execution, delivery and performance by the Seller of the Agreement or any other Transaction Document to which it is a party, other than the Uniform Commercial Code filings referred to in Exhibit II to the Agreement, all of which shall have been filed on or before the date of the first purchase hereunder. (d) Each of the Agreement and the other Transaction Documents to which it is a party has been duly executed and delivered by the Seller and constitutes its legal, valid and binding obligation of the Seller enforceable against the Seller in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization or other similar laws from time to time in effect affecting the enforcement of creditors' rights generally and by general principles of equity, regardless of whether such enforceability is considered in a proceeding in equity or at law. (e) There is no pending or, to the Seller's best knowledge, threatened action or proceeding affecting the Seller or any of its properties before any Governmental Authority or arbitrator. (f) No proceeds of any purchase or reinvestment will be used by the Seller to acquire any equity security of a class that is registered pursuant to Section 12 of the Securities Exchange Act of 1934. (g) The Seller is the legal and beneficial owner of the Pool Receivables and Related Security, free and clear of any Adverse Claim. Upon each purchase or reinvestment, each Purchaser, through the Agent, shall acquire a valid and enforceable perfected undivided percentage ownership or security interest in each Pool Receivable then existing or thereafter arising and in the Related Security, Collections and other proceeds with respect thereto, free and clear of any Adverse Claim. The Agreement creates a security interest in favor of the Agent, for the benefit of the Purchasers, in the Pool Assets, and the Agent on behalf of the Purchasers, has a first priority perfected security interest in the Pool Assets, free and clear of any Adverse Claims. No effective financing statement or other instrument similar in effect covering any Pool Asset is on file in any recording office, except those filed in favor of (A) Gregory pursuant to the Warnaco Sale Agreement, the Authentic Sale Agreement and the Calvin Klein Sale Agreement, (B) the Seller pursuant to the Gregory Sale Agreement and (C) the Agent relating to the Agreement. (h) Each Monthly Report and each Weekly Report (if prepared by the Seller or one of its Affiliates, or to the extent that information contained therein is supplied by the Seller or an Affiliate), information, exhibit, financial statement, document, book, record or report furnished or to be furnished at any time by or on behalf of the Seller to the Agent, the Co-Agent and the Purchasers in connection with the Agreement or any other Transaction Document to which it is a party is or will be complete and accurate in all material respects as of its date or as of the date so furnished. (i) The Seller's principal place of business and chief executive office (as such terms are used in the UCC) and the office where it keeps its records concerning the Receivables are located at the address referred to in Sections 1(b) and 2(b) of Exhibit IV to the Agreement. (j) The Seller is not in violation of any order of any court, arbitrator or Governmental Authority, the violation of which would have a Material Adverse Effect on the Seller. (k) No proceeds of any purchase or reinvestment will be used for any purpose that violates any applicable law, rule or regulation, including Regulation U of the Federal Reserve Board. (l) Each Pool Receivable included as an Eligible Receivable in the calculation of the Net Receivables Pool Balance is an Eligible Receivable. (m) No event has occurred and is continuing, or would result from a purchase in respect of, or reinvestment in respect of, the Purchased Interests or from the application of the proceeds therefrom, that constitutes a Termination Event or an Unmatured Termination Event. (n) The Seller has complied in all material respects with the Credit and Collection Policy. (o) The Seller has complied in all material respects with all of the terms, covenants and agreements contained in the Agreement and the other Transaction Documents that are applicable to it. (p) The Seller's complete corporate name is set forth in the preamble to the Agreement, and it does not use and has not since its incorporation used any other corporate name, trade name, doing-business name or fictitious name, except as set forth on Schedule II to the Agreement and except for names first used after the date of the Agreement and set forth in a notice delivered to the Agent pursuant to Section 1(i)(iv) of Exhibit III to the Agreement. (q) The Seller is not an "investment company," or a company "controlled" by an "investment company" within the meaning of the Investment Company Act of 1940, as amended. In addition, the Seller is not a "holding company," 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. 2. Representations and Warranties of Gregory (including in its capacity as the Servicer). Gregory, individually and in its capacity as the Servicer, represents and warrants as follows: (a) Gregory is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware, and is duly qualified to do business and is in good standing as a foreign corporation in every jurisdiction where the nature of its business requires it to be so qualified, except where the failure to be so qualified would not have a Material Adverse Effect. (b) The execution, delivery and performance by Gregory of the Agreement and the other Transaction Documents to which it is a party, including the Servicer's use of the proceeds of purchases and reinvestments: (i) are within its corporate powers; (ii) have been duly authorized by all necessary corporate action; (iii) do not contravene in any material respect or result in a default under or conflict with: (A) its charter or by-laws, (B) any law, rule or regulation applicable to it, (C) any indenture, loan agreement, mortgage, deed of trust or other material agreement or instrument to which it is a party or by which it is bound, or (D) any order, writ, judgment, award, injunction or decree binding on or affecting it or any of its property; and (iv) do not result in or require the creation of any Adverse Claim upon or with respect to any of its properties. The Agreement and the other Transaction Documents to which Gregory is a party have been duly executed and delivered by Gregory. (c) No authorization, approval or other action by, and no notice to or filing with any Governmental Authority or other Person, is required for the due execution, delivery and performance by Gregory of the Agreement or any other Transaction Document to which it is a party. (d) Each of the Agreement and the other Transaction Documents to which Gregory is a party constitutes the legal, valid and binding obligation of Gregory enforceable against Gregory in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization or other similar laws from time to time in effect affecting the enforcement of creditors' rights generally and by general principles of equity, regardless of whether such enforceability is considered in a proceeding in equity or at law. (e) The balance sheets of Group and its consolidated Subsidiaries as at January 3, 2000, and the related income and retained earnings for the fiscal year then ended, copies of which have been furnished to the Agent and the Co-Agent, fairly present the financial condition of Group and its consolidated Subsidiaries as at such date and the results of the operations of Group and its Subsidiaries for the period ended on such date, all in accordance with generally accepted accounting principles consistently applied, and since January 3, 2000 there has been no event or circumstances which has had a Material Adverse Effect. (f) Except as disclosed in the most recent audited financial statements of Gregory furnished to the Agent, there is no pending or, to its best knowledge, threatened action or proceeding affecting it or any of its Subsidiaries before any Governmental Authority or arbitrator that would have a Material Adverse Effect. (g) Each Monthly Report and each Weekly Report (if prepared by Gregory or one of its Affiliates, or to the extent that information contained therein is supplied by Gregory or an Affiliate), information, exhibit, financial statement, document, book, record or report furnished or to be furnished at any time by or on behalf of the Servicer to the Agent in connection with the Agreement is or will be complete and accurate in all material respects as of its date or (except as otherwise disclosed to the Agent at such time) as of the date so furnished. (h) Gregory is not in violation of any order of any court, arbitrator or Governmental Authority, which could reasonably be expected to have a Material Adverse Effect. (i) Gregory has complied in all material respects with the Credit and Collection Policy. EXHIBIT IV COVENANTS 1. Covenants of the Seller. Until the Final Payout Date: (a) Compliance with Laws, Etc. The Seller shall comply in all material respects with all applicable laws, rules, regulations and orders, and preserve and maintain its corporate existence, rights, franchises, qualifications and privileges, except to the extent that the failure so to comply with such laws, rules and regulations or the failure so to preserve and maintain such rights, franchises, qualifications and privileges would not have a Material Adverse Effect. (b) Offices, Records and Books of Account, Etc. The Seller: (i) shall keep its principal place of business and chief executive office (as such terms or similar terms are used in the UCC) and the office where it keeps its records concerning the Receivables at the address of the Seller set forth under its name on the signature page to the Agreement or, pursuant to clause (j)(iv) below, at any other locations in jurisdictions where all actions reasonably requested by the Agent to protect and perfect the interest of the Agent, for the benefit of the Purchasers, in the Receivables and related items (including the Pool Assets) have been taken and completed and (ii) shall provide the Agent with at least 30 days' written notice before making any change in the Seller's name or making any other change in the Seller's identity or corporate structure (including a Change in Control) that could render any UCC financing statement filed in connection with this Agreement "seriously misleading" as such term (or similar term) is used in the UCC; each notice to the Agent pursuant to this sentence shall set forth the applicable change and the effective date thereof. The Seller also will maintain and implement (or cause the Servicer to maintain and implement) administrative and operating procedures (including an ability to recreate records evidencing Receivables and related Contracts in the event of the destruction of the originals thereof), and keep and maintain (or cause the Servicer to keep and maintain) all documents, books, records, computer tapes and disks and other information reasonably necessary or advisable for the collection of all Receivables (including records adequate to permit, as and when necessary, the daily identification of each Receivable and all Collections of and adjustments to each existing Receivable). (c) Performance and Compliance with Contracts and Credit and Collection Policy. The Seller shall (and shall cause the Servicer to) fully comply in all material respects with the Credit and Collection Policy. (d) Ownership Interest, Etc. The Seller shall (and shall cause the Servicer to), at its expense, take all action necessary or desirable to establish and maintain a valid and enforceable undivided percentage ownership or security interest, to the extent of the Purchased Interest, in the Pool Receivables, the Related Security and Collections with respect thereto, and a first priority perfected security interest in the Pool Assets, in each case free and clear of any Adverse Claim, in favor of the Agent, for the benefit of the Purchasers, including taking such action to perfect, protect or more fully evidence the interests of the Agent and Purchasers as the Agent may reasonably request. (e) Sales, Liens, Etc. The Seller shall not sell, assign (by operation of law or otherwise) or otherwise dispose of, or create or suffer to exist any Adverse Claim upon or with respect to, any or all of its right, title or interest in, to or under any Pool Assets (including the Seller's undivided interest in any Receivable, Related Security or Collections, or upon or with respect to any account to which any Collections of any Receivables are sent), or assign any right to receive income in respect of any items contemplated by this paragraph; it being understood that the Servicer may sell a Defaulted Receivable if the Servicer believes in good faith that such sale will maximize the amount of Collections with respect to such Receivable. (f) Change in Credit and Collection Policy. The Seller shall not make (or permit any Originator to make) any material change in the character of its business or the Credit and Collection Policy that would materially adversely affect the collectibility of the Receivables Pool or the enforceability of any related Contract or the ability of the Seller or Servicer to perform its obligations under the Agreement. (g) Audits. (i) The Seller shall (and shall cause each Originator to), from time to time during regular business hours as reasonably requested in advance (unless a Termination Event or Unmatured Termination Event exists) by the Agent or the Co-Agent, permit the Agent or the Co- Agent, or their agents or representatives: (A) to examine and make copies of and abstracts from all books, records and documents (including computer tapes and disks) in the possession or under the control of the Seller (or any Originator) relating to Receivables and the Related Security, including the related Contracts, and (B) to visit the offices and properties of the Seller, Gregory and each Originator for the purpose of examining such materials described in clause (i)(A) above, and to discuss matters relating to Receivables and the Related Security or the Seller's, Gregory's or such Originator's performance under the Transaction Documents or such Originator's performance under the Contracts with any of the officers, employees, agents or contractors of the Seller, Gregory or such Originator having knowledge of such matters; and (ii) without limiting the provisions of clause (i) next above, from time to time during regular business hours, upon five Business Days prior written notice from the Agent or the Co-Agent, permit certified public accountants or other auditors acceptable to the Agent or the Co-Agent to conduct a review of the Seller's or any Originator's books and records, at the Seller's or such Originator's expense (as the case may be), with respect to the Receivables. (h) Change in Payment Instructions to Obligors. The Seller shall not, and shall not permit the Servicer or any Originator to make any change in its instructions to Obligors regarding payments to be made to the Seller, such Originator, the Servicer or the Collection Account (or related post office box), unless the Agent shall have consented thereto in writing (which consent shall not be unreasonably withheld). (i) Deposits to Collection Account. The Seller shall (or shall cause the Servicer to): (i) instruct all Obligors to make payments of all Receivables to the Collection Account or to post office boxes to which only the Collection Account Bank has access (and shall instruct the Collection Account Bank to cause all items and amounts relating to such Receivables received in such post office boxes to be removed and deposited into the Collection Account on a daily basis), and (ii) deposit, or cause to be deposited, any Collections received by it, the Servicer or any Originator into the Collection Account not later than one Business Day after receipt thereof. The Collection Account shall at all times be subject to the Collection Account Agreement. The Seller will not (and will not permit the Servicer to) deposit or otherwise credit, or cause or permit to be so deposited or credited, to the Collection Account cash or cash proceeds other than Collections. (j) Reporting Requirements. The Seller shall provide to the Agent the following: (i) as soon as available and in any event within 95 days after the end of each fiscal year of the Seller, a copy of its unaudited balance sheet and income statement for such year certified as to accuracy by the chief financial officer or treasurer of the Seller; (ii) as soon as possible and in any event within five days after the occurrence of each Termination Event or Unmatured Termination Event, a statement of the chief financial officer of the Seller setting forth details of such Termination Event or Unmatured Termination Event and the action that the Seller has taken and proposes to take with respect thereto; (iii) promptly after the filing or receiving thereof, copies of all reports and notices that the Seller or any Affiliate files under ERISA with the Internal Revenue Service, the Pension Benefit Guaranty Corporation or the U.S. Department of Labor or that the Seller or any Affiliate receives from any of the foregoing or from any multiemployer plan (within the meaning of Section 4001(a)(3) of ERISA) to which the Seller or any of its Affiliates is or was, within the preceding five years, a contributing employer, in each case in respect of the assessment of withdrawal liability or an event or condition that could, in the aggregate, result in the imposition of liability on the Seller and/or any such Affiliate; (iv) at least 30 days before any change in the Seller's name or any other change requiring the amendment of UCC financing statements, a notice setting forth such changes and the effective date thereof; (v) promptly after the Seller obtains knowledge thereof, notice of any: (A) material litigation, investigation or proceeding that may exist at any time between the Seller and any Person or (B) material litigation or proceeding relating to any Transaction Document; (vi) promptly after the occurrence thereof, notice of a change in the business, operations, property or financial or other condition of the Seller, the Servicer or any Originator which would have a Material Adverse Effect; and (vii) such other information respecting the Receivables or the condition or operations, financial or otherwise, of the Seller or any of its Affiliates as the Agent or the Co-Agent may from time to time reasonably request upon reasonable notice. (k) Certain Agreements. Without the prior written consent of the Agent and the Co- Agent, the Seller will not (and will not permit any Originator to) amend, modify, waive, revoke or terminate any Transaction Document (other than this Agreement, which shall not be amended, modified, waived, revoked or terminated except in accordance with this Agreement) to which it is a party or any provision of Seller's certificate of incorporation or by-laws. (l) Restricted Payments. (i) Except pursuant to clause (ii) below, the Seller will not: (A) purchase or redeem any shares of its capital stock, (B) declare or pay any dividend or set aside any funds for any such purpose, (C) prepay, purchase or redeem any Debt, (D) lend or advance any funds or (E) repay any loans or advances to, for or from any of its Affiliates (the amounts described in clauses (A) through (E) being referred to as "Restricted Payments"). (ii) Subject to the limitations set forth in clause (iii) below, the Seller may make Restricted Payments so long as such Restricted Payments are made only in one or more of the following ways: (A) the Seller may make cash payments (including prepayments) on the Subordinated Note in accordance with its terms, and (B) if no amounts are then outstanding under the Subordinated Note, the Seller may declare and pay dividends. (iii) The Seller may make Restricted Payments only out of the funds it receives pursuant to Sections 1.7(b)(ii) and (iv) of the Agreement. Furthermore, the Seller shall not pay, make or declare: (A) any dividend if, after giving effect thereto, the Seller's tangible net worth would be less than $20,000,000, or (B) any Restricted Payment (including any dividend) if, after giving effect thereto, any Termination Event or Unmatured Termination Event shall have occurred and be continuing. (m) Other Business. The Seller will not: (i) engage in any business other than the transactions contemplated by the Transaction Documents and its Certificate of Incorporation and Bylaws; (ii) create, incur or permit to exist any Debt of any kind (or cause or permit to be issued for its account any letters of credit or bankers' acceptances) other than pursuant to this Agreement or the Subordinated Notes; or (iii) form any Subsidiary or make any investments in any other Person; provided, however, that the Seller shall be permitted to incur minimal obligations to the extent necessary for the day-to-day operations of the Seller (such as expenses for stationery, audits, maintenance of legal status, etc.); provided that such miscellaneous expenses shall not exceed an aggregate amount of $9,750 at any one time outstanding. (n) Use of Seller's Share of Collections. The Seller shall apply the Seller's Share of Collections to make payments in the following order of priority: (i) the payment of its expenses (including all obligations payable to the Purchasers under the Agreement and under the Fee Letter); (ii) the payment of accrued and unpaid interest on the Subordinated Notes; and (iii) Restricted Payments and other legal and valid corporate purposes. (o) Tangible Net Worth. The Seller will not permit its tangible net worth, at any time, to be less than $20,000,000. (p) Extension or Amendment of Receivables. Except as provided in Section 4.2 of the Agreement and the Credit and Collection Policy, the Seller shall not, and shall not permit the Servicer to, extend the maturity or adjust the Outstanding Balance or otherwise modify the terms of any Pool Receivable, or amend, modify or waive any term or condition of any related Contract. 2. Covenants of the Servicer and Gregory. Until the Final Payout Date: (a) Compliance with Laws, Etc. The Servicer and, to the extent that it ceases to be the Servicer, Gregory shall comply in all material respects with all applicable laws, rules, regulations and orders, and preserve and maintain its corporate existence, rights, franchises, qualifications and privileges, except to the extent that the failure so to comply with such laws, rules and regulations or the failure so to preserve and maintain such existence, rights, franchises, qualifications and privileges would not have a Material Adverse Effect. (b) Records and Books of Account, Etc. The Servicer shall maintain and implement administrative and operating procedures (including an ability to recreate records evidencing Receivables and related Contracts in the event of the destruction of the originals thereof), and keep and maintain all documents, books, records, computer tapes and disks and other information reasonably necessary or advisable for the collection of all Receivables (including records adequate to permit the daily identification of each Receivable and all Collections of and adjustments to each existing Receivable). (c) Change in Credit and Collection Policy. The Servicer shall not make any material change in the character of its business or in the Credit and Collection Policy that would materially adversely affect the collectibility of the Receivables Pool or the enforceability of any related Contract or its ability to perform its obligations under the Agreement. (d) Audits. (i) The Servicer shall from time to time during regular business hours as reasonably requested in advance (unless a Termination Event or Unmatured Termination Event exists) by the Agent or the Co-Agent, permit the Agent or the Co-Agent, or their agents or representatives: (A) to examine and make copies of and abstracts from all books, records and documents (including computer tapes and disks) in its possession or under its control relating to Receivables and the Related Security, including the related Contracts, and (B) to visit its offices and properties for the purpose of examining such materials described in clause (i)(A) above, and to discuss matters relating to Receivables and the Related Security or its performance hereunder or under the Contracts with any of its officers, employees, agents or contractors having knowledge of such matters; and (ii) without limiting the provisions of clause (i) next above, from time to time during regular business hours, upon five Business Days prior written notice from the Agent or the Co-Agent, permit certified public accountants or other auditors acceptable to the Agent to conduct, at Servicer's expense, a review of the Servicer's books and records with respect to the Receivables. (e) Deposits to Collection Account. The Servicer shall: (i) instruct all Obligors to make payments of all Receivables to the Collection Account or to post office boxes to which only the Collection Account Bank has access (and shall instruct the Collection Account Bank to cause all items and amounts relating to such Receivables received in such post office boxes to be removed and deposited into the Collection Account on a daily basis); and (ii) deposit, or cause to be deposited, any Collections received by it into the Collection Account not later than one Business Day after receipt thereof. The Collection Account shall at all times be subject to the Collection Account Agreement. The Servicer will not deposit or otherwise credit, or cause or permit to be so deposited or credited, to the Collection Account cash or cash proceeds other than Collections. (f) Reporting Requirements. Gregory shall provide to the Agent and the Co-Agent (with sufficient copies for the Purchasers) the following: (i) As soon as available and in any event within 50 days after the end of each of the first three quarters of each fiscal year of Group and Gregory, (a) copies of (A) the unaudited consolidated balance sheet of Group and its consolidated Subsidiaries and (B) the unaudited balance sheet of Gregory, in each case as at the end of such quarter, together with unaudited statements of earnings and stockholders' equity for such quarter and the portion of the fiscal year through such quarter, prepared in accordance with GAAP and certified by the chief financial officer, treasurer or chief accounting officer of Group and Gregory, as applicable, and (b) a letter from the chief financial officer, treasurer or chief accounting officer of Group or Gregory, as applicable, certifying to the best knowledge of such officer, that neither a Termination Event nor an Unmatured Termination Event has occurred and is continuing; (ii) As soon as available and in any event within 95 days after the end of each fiscal year of Group and Gregory, (a) a copy of (A) the consolidated balance sheet of Group and its consolidated Subsidiaries and (B) the unaudited balance sheet of Gregory, in each case as at the end of such fiscal year, together with the related statements of earnings and stockholders' equity for such fiscal year, each prepared in accordance with GAAP applied consistently throughout the periods reflected therein (Group's consolidated balance sheet and such related statements to be certified without any Impermissible Qualification by independent certified public accountants of nationally recognized standing), and (b) a letter from the chief financial officer, treasurer or chief accounting officer of Group or Gregory, as applicable, certifying to the best knowledge of such officer, that neither a Termination Event nor an Unmatured Termination Event has occurred and is continuing, in each case as at the end of each such fiscal year and the date of delivery of such letter; (iii) As to the Servicer only, as soon as available and in any event not later than (a) the Monthly Report Date for each month, a Monthly Report as of the last day of the most recently ended Fiscal Month or, within ten Business Days of a request by the Agent, a Monthly Report for such periods as is specified by the Agent and (b) not later than the Weekly Report Date commencing on November 3, 2000 and on each Weekly Report Date thereafter, for each week, a Weekly Report reflecting information as of the last day of the prior week; (iv) Promptly after the sending or filing thereof, copies of all reports that Group sends to any of its security holders, and copies of all reports and registration statements that Group or any Subsidiary files with the Securities and Exchange Commission or any national securities exchange; (v) Promptly after the filing or receiving thereof, copies of all reports and notices that Group or any of its Affiliate files under ERISA with the Internal Revenue Service, the Pension Benefit Guaranty Corporation or the U.S. Department of Labor or that such Person or any of its Affiliates receives from any of the foregoing or from any multiemployer plan (within the meaning of Section 4001(a)(3) of ERISA) to which such Person or any of its Affiliate is or was, within the preceding five years, a contributing employer, in each case in respect of the assessment of withdrawal liability or an event or condition that could, in the aggregate, result in the imposition of liability on Group and/or any such Affiliate; (vi) Promptly after Gregory obtains knowledge thereof, notice of any: (A) litigation, investigation or proceeding that may exist at any time between Gregory or any of its Affiliates and any Governmental Authority that, if not cured or if adversely determined, as the case may be, would have a Material Adverse Effect; (B) litigation or proceeding adversely affecting such Person or any of its Subsidiaries which would have a Material Adverse Effect; or (C) litigation or proceeding relating to any Transaction Document; (vii) As soon as available, a revised list of Fiscal Months as may be necessary to update Schedule III from time to time; (viii)Such other information respecting the Receivables or the condition or operations, financial or otherwise, of Gregory or any of its Affiliates as the Agent may from time to time reasonably request. 3. Separate Existence. Each of the Seller and Gregory hereby acknowledges that the Purchasers and the Agent and the Co-Agent are entering into the transactions contemplated by this Agreement and the other Transaction Documents in reliance upon the Seller's identity as a legal entity separate from Gregory and its Affiliates. Therefore, from and after the date hereof, each of the Seller and Gregory shall take all steps specifically required by the Agreement or reasonably required by the Agent to continue the Seller's identity as a separate legal entity and to make it apparent to third Persons that the Seller is an entity with assets and liabilities distinct from those of Gregory and any other Person, and is not a division of Gregory, its Affiliates or any other Person. Without limiting the generality of the foregoing and in addition to and consistent with the other covenants set forth herein, each of the Seller and Gregory shall take such actions as shall be required in order that: (a) The Seller will be a limited purpose corporation whose primary activities are restricted in its certificate of incorporation to: (i) purchasing or otherwise acquiring from the Originators, owning, holding, granting security interests or selling interests in, Pool Assets, (ii) entering into agreements for the selling and servicing of the Receivables Pool, and (iii) conducting such other activities as it deems necessary or appropriate to carry out its primary activities; (b) The Seller shall not engage in any business or activity, or incur any indebtedness or liability, other than as expressly permitted by the Transaction Documents; (c) Not less than one member of the Seller's Board of Directors (the "Independent Director") shall be an individual who is not and has not been at any time during the preceding five years a direct, indirect or beneficial stockholder, officer, director, employee, creditor, affiliate, associate or supplier of Gregory or any of its Affiliates. The certificate of incorporation of the Seller shall provide that: (i) the Seller's Board of Directors shall not approve, or take any other action to cause the filing of, a voluntary bankruptcy petition with respect to the Seller unless the Independent Director shall approve the taking of such action in writing before the taking of such action, and (ii) such provision cannot be amended without the prior written consent of the Independent Director; (d) The Independent Director shall not at any time serve as a trustee in bankruptcy for the Seller, Gregory or any Affiliate thereof; (e) Any employee, consultant or agent of the Seller will be compensated from the Seller's funds for services provided to the Seller. The Seller will not engage any agents other than its attorneys, auditors and other professionals, and a servicer and any other agent contemplated by the Transaction Documents for the Receivables Pool, which servicer will be fully compensated for its services by payment of the Servicing Fee, and a manager, which manager will be fully compensated from the Seller's funds; (f) The Seller will contract with the Servicer to perform for the Seller all operations required on a daily basis to service the Receivables Pool. The Seller will pay the Servicer the Servicing Fee pursuant to the Agreement. The Seller will not incur any material indirect or overhead expenses for items shared with Gregory (or any other Affiliate of Group) that are not reflected in the Servicing Fee. To the extent, if any, that the Seller (or any Affiliate thereof) shares items of expenses not reflected in the Servicing Fee or the manager's fee, such as legal, auditing and other professional services, such expenses will be allocated to the extent practical on the basis of actual use or the value of services rendered, and otherwise on a basis reasonably related to the actual use or the value of services rendered; it being understood that Group shall pay all expenses relating to the preparation, negotiation, execution and delivery of the Transaction Documents, including legal, agency and other fees; (g) The Seller's operating expenses will not be paid by Gregory or any other Affiliate thereof; (h) All of the Seller's business correspondence and other communications shall be conducted in the Seller's own name and on its own separate stationery; (i) The Seller's books and records will be maintained separately from those of Gregory and any other Affiliate thereof; (j) All financial statements of Gregory or any Affiliate thereof that are consolidated to include Seller will contain detailed notes clearly stating that: (i) a special purpose corporation exists as a Subsidiary of Warnaco, and (ii) Gregory has sold receivables and other related assets to such special purpose Subsidiary that, in turn, has sold undivided interests therein to certain financial institutions and other entities; (k) The Seller's assets will be maintained in a manner that facilitates their identification and segregation from those of Gregory or any Affiliate thereof; (l) The Seller will strictly observe corporate formalities in its dealings with Gregory or any Affiliate thereof, and funds or other assets of the Seller will not be commingled with those of Gregory or any Affiliate thereof. The Seller shall not maintain joint bank accounts or other depository accounts to which Gregory or any Affiliate thereof (other than Gregory in its capacity as the Servicer) has independent access. The Seller will not guarantee the obligations of any Person, and no Person will guarantee the obligations of the Seller. The Seller will pay to the appropriate Affiliate the marginal increase or, in the absence of such increase, the market amount of its portion of the premium payable with respect to any insurance policy that covers the Seller and such Affiliate; and (m) The Seller will maintain arm's-length relationships with Gregory (and any Affiliate thereof). Any Person that renders or otherwise furnishes services to the Seller will be compensated by the Seller at market rates for such services it renders or otherwise furnishes to the Seller. Neither the Seller nor Gregory will be or will hold itself out to be responsible for the debts of the other or the decisions or actions respecting the daily business and affairs of the other. The Seller and Gregory will immediately correct any known misrepresentation with respect to the foregoing, and they will not operate or purport to operate as an integrated single economic unit with respect to each other or in their dealing with any other entity. (n) Gregory shall not pay the salaries of Seller's employees, if any. EXHIBIT V TERMINATION EVENTS Each of the following shall be a "Termination Event": (a) (i) the Seller shall fail to make the payment or deposit required to be made pursuant to Section 1.7(g), (ii) the Seller, Gregory, any Originator or the Servicer shall fail to make when due any other payment or deposit to be made by it under the Agreement or any other Transaction Document within three Business Days of the date on which such other payment or deposit is due, or (iii) the Seller, Gregory, any Originator or the Servicer (if Gregory or any Affiliate of Group) shall fail to perform or observe in any material respect any other term, covenant or agreement under the Agreement or any other Transaction Document and such failure shall continue for 10 Business Days after the Seller, such Originator or the Servicer shall have obtained actual knowledge or notice thereof; (b) Gregory (or any Affiliate of Group) shall fail to transfer to any successor Servicer when required any rights pursuant to the Agreement that Gregory (or such Affiliate) then has as Servicer; (c) any representation or warranty made or deemed made by the Seller, any Originator or Gregory (or any of their respective officers) under or in connection with the Agreement or any other Transaction Document, or any information or report (including any Monthly Report and Weekly Report) delivered by the Seller or any Originator or the Servicer pursuant to the Agreement or any other Transaction Document, shall prove to have been incorrect or untrue in any material respect when made or deemed made or delivered which in the sole judgment of the Agent and the Co-Agent, acting together, has had or is reasonably likely to have a Material Adverse Effect; (d) the Servicer shall fail to deliver any Monthly Report on the related Monthly Report Date, and such failure shall remain unremedied for five Business Days, or the Servicer shall fail to deliver any Weekly Report on the related Weekly Report Date. (e) the Agreement or any purchase or reinvestment pursuant to the Agreement shall for any reason: (i) cease to create, or the Purchased Interest shall for any reason cease to be, a valid and enforceable perfected undivided percentage ownership or security interest to the extent of such Purchased Interest in each Pool Receivable, the Related Security and Collections with respect thereto, free and clear of any Adverse Claim, or (ii) cease to create with respect to the Pool Assets, or the interests of the Purchasers with respect to such Pool Assets shall cease to be, a valid and enforceable first priority perfected security interest, free and clear of any Adverse Claim, (f) the Seller, Gregory or any Originator shall generally not pay its debts as such debts become due, or shall admit in writing its inability to pay its debts generally, or shall make a general assignment for the benefit of creditors; or any proceeding shall be instituted by or against the Seller, Gregory or any Originator seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee, custodian or other similar official for it or for any substantial part of its property and, in the case of any such proceeding instituted against it (but not instituted by it), either such proceeding shall remain undismissed or unstayed for a period of 60 days, or any of the actions sought in such proceeding (including the entry of an order for relief against, or the appointment of a receiver, trustee, custodian or other similar official for, it or for any substantial part of its property) shall occur; or the Seller, Gregory or any Originator shall take any corporate action to authorize any of the actions set forth above in this paragraph; (g) (i) the average of the Default Ratios for any three consecutive Fiscal Months shall exceed 9.0% or (ii) the average of the Dilution Ratios for any three consecutive Fiscal Months shall exceed 35.0%, (iii) the average of the Loss-to-Liquidation Ratios for any three consecutive Fiscal Months shall exceed 11.0% or (iv) the greatest average of the Delinquency Ratios for any three consecutive Fiscal Months during the twelve most recent Fiscal Months shall exceed 9.0%; (h) a Change in Control shall occur; (i) at any time, the sum of (a) the Aggregate Capital and Total Reserves under this Agreement exceeds the sum of (x) the Net Receivables Pool Balance and (y) the aggregate Purchasers' Share of Collections then on deposit in the Collection Account (other than amounts set aside therein in respect of Discount, Fees and Servicing Fee), and such condition shall continue unremedied for one Business Day; (j) any Loan Party or any of its Subsidiaries shall fail to pay any principal of or premium or interest on or any other amount payable in respect of any Debt that is outstanding in a principal or reimbursement amount (or, in the case of any Hedge Agreement, its Agreement Value) of (i) with respect to any Covered Facility, at least $5,000,000 or (ii) with respect to any other Debt, at least $20,000,000 in the aggregate; in any case either individually or in the aggregate of such Loan Party or such Subsidiary (as the case may be), when the same becomes due and payable whether by scheduled maturity, required prepayment, acceleration, demand or otherwise, and such failure shall continue after the applicable grace period, if any, specified in the agreement or instrument relating to such Debt; or any other event shall occur or condition shall exist under any agreement or instrument relating to any such Debt as specified in clause (ii) and shall continue after the applicable grace period, if any, specified in such agreement or instrument, if the effect of such event or condition is to accelerate, or to permit the acceleration of, the maturity of such Debt as specified in clause (ii) or otherwise to cause, or to permit the holder thereof to cause, such Debt as specified in clause (ii) to mature; or any such Debt as specified in clause (ii) shall be declared to be due and payable or is then required to be prepaid or redeemed (other than by a regularly scheduled required prepayment or redemption), purchased or defeased, or an offer to prepay, redeem, purchase or defease such Debt as specified in clause (ii) shall be then required to be made, in each case prior to the stated maturity thereof; or (k) either: (i) a contribution failure shall occur with respect to any Benefit Plan sufficient to give rise to a lien under Section 302(f) of ERISA, (ii) the Internal Revenue Service shall file a notice of lien asserting a claim pursuant to the Internal Revenue Code with regard to any of the assets of Seller or Gregory or any ERISA Affiliate, or (iii) the Pension Benefit Guaranty Corporation shall file a notice of lien asserting a claim pursuant to ERISA with regard to any assets of Seller, Gregory or any ERISA Affiliate. EX-99 5 0005.txt EXHIBIT 99.4 - TRADE CREDIT AGREEMENT EXHIBIT 99.4 [EXECUTION COPY] CREDIT AGREEMENT, dated as of October 6, 2000 among WARNACO INC., as the U.S. Borrower, DESIGNER HOLDINGS, LTD., as the Sub Borrower, AUTHENTIC FITNESS PRODUCTS INC. AND THOSE OTHER WHOLLY-OWNED DOMESTIC SUBSIDIARIES DESIGNATED FROM TIME TO TIME, as the Warnaco Sub Borrowers, WARNACO (HK) LTD., WARNACO B.V., WARNACO NETHERLANDS B.V. and WARNACO HOLLAND B.V., as the Foreign Borrowers, THE WARNACO GROUP, INC., CERTAIN FINANCIAL INSTITUTIONS, as the Lenders, SOCIETE GENERALE, as the Documentation Agent for the Lenders CITIBANK, N.A., as the Syndication Agent for the Lenders THE BANK OF NOVA SCOTIA and BANK OF AMERICA, N.A. as the Fronting Banks and THE BANK OF NOVA SCOTIA, as the Administrative Agent for the Lenders. Co-Lead Arrangers and Co-Book Managers: THE BANK OF NOVA SCOTIA and SALOMON SMITH BARNEY, INC. CREDIT AGREEMENT THIS CREDIT AGREEMENT, dated as of October 6, 2000 (which shall be a "Covered Facility" under (and as defined in) the Loan Documents referred to below), is among WARNACO INC., a Delaware corporation (the "U.S. Borrower"), DESIGNER HOLDINGS, LTD., a Delaware corporation (the "Sub Borrower"), AUTHENTIC FITNESS PRODUCTS INC., a Delaware corporation ("Authentic Fitness Products") and the other wholly-owned Domestic Subsidiaries of (and designated by) THE WARNACO GROUP, INC., a Delaware corporation ("Group") from time to time in accordance with Section 11.18 and set forth from time to time on Schedule I annexed hereto (the "Warnaco Sub Borrowers"), WARNACO (HK) LTD., a company organized under the laws of Barbados ("Warnaco (HK)"), WARNACO B.V., a company organized under the laws of The Netherlands ("Warnaco B.V."), WARNACO NETHERLANDS B.V., a company organized under the laws of The Netherlands ("Warnaco Netherlands"), WARNACO HOLLAND B.V., a company organized under the laws of The Netherlands ("Warnaco Holland"; together with Warnaco (HK), Warnaco B.V. and Warnaco Netherlands, the "Foreign Borrowers"), the various financial institutions as are or may become parties hereto (collectively, the "Lenders"), SOCIETE GENERALE ("SG"), as documentation agent (in such capacity, the "Documentation Agent") for the Lenders, CITIBANK, N.A. ("Citibank"), as syndication agent (in such capacity, the "Syndication Agent") for the Lenders, THE BANK OF NOVA SCOTIA ("Scotiabank"), as administrative agent (in such capacity, the "Administrative Agent") for the Lenders, Scotiabank and Bank of America, N.A., as the Fronting Banks, Scotiabank and Citibank, as the managing agents (in such capacity, the "Managing Agents") for the Lenders and Scotiabank and Salomon Smith Barney, Inc. ("SSBI") as co-lead arrangers and co-book managers (the "Arrangers"). W I T N E S S E T H: ------------------- WHEREAS, the Borrowers, Group and Scotiabank are parties to the Credit Agreement, dated as of July 27, 2000 (as amended, supplemented, amended and restated or otherwise modified prior to the date hereof, the "Interim Credit Agreement"), pursuant to which, Scotiabank has issued letters of credit for the account of the Borrowers and certain Subsidiaries of Group (the "Interim Letters of Credit"); WHEREAS, under the Amended Trade Credit Agreement (as defined below), Scotiabank has issued letters of credit (the "Existing Letters of Credit"), created acceptances (the "Existing Acceptances") and made loans (the "Existing Loans") to or for the account of one or more Borrowers and certain Subsidiaries of certain Borrowers (including, in some cases, their respective divisions); WHEREAS, pursuant to this Agreement the Borrowers desire to obtain Commitments from the Lenders and the Fronting Banks pursuant to which (a) the Interim Letters of Credit will for all purposes be deemed to be "Letters of Credit" issued under the terms of this Agreement and, furthermore, additional Letters of Credit will from time to time be issued by the Fronting Banks for the account of certain Obligors for the purposes set forth in Section 8.1.2 and, under the several obligations hereunder, each of the Lenders will participate in such Letters of Credit (including all Interim Letters of Credit); (b) Acceptances will be created by the Fronting Banks for the account of certain Obligors for the purposes set forth in Section 8.1.2 and each of the Lenders will participate in such Acceptances; and (c) Loans will be made by the Fronting Banks to the Borrowers for the purposes set forth in Section 8.1.2 and each of the Lenders will participate in or make such Loans; and WHEREAS, the Fronting Banks and the Lenders are willing, on the terms and subject to the conditions hereinafter set forth (including Article VI), to extend such Commitments hereunder, make and participate in such Loans, issue and participate in such Letters of Credit and create and participate in such Acceptances; NOW, THEREFORE, the parties hereto agree as follows: ARTICLE I DEFINITIONS AND ACCOUNTING TERMS SECTION 1.1. Defined Terms. The following terms (whether or not underscored) when used in this Agreement, including its preamble and recitals, shall, except where the context otherwise requires, have the following meanings (such meanings to be equally applicable to the singular and plural forms thereof): "Acceptance" means, collectively, all acceptances created by either Fronting Bank under this Agreement. "Acceptance Availability" means, at any time, the then existing Commitment Amount minus the sum of (i) the outstanding principal amount of all Loans plus (ii) the amount of all Acceptance Obligations plus (iii) all Letter of Credit Outstandings. "Acceptance Commitment" means each Fronting Bank's obligation to create Acceptances pursuant to Section 2.1.2. "Acceptance Obligations" means the sum of (a) the aggregate face amount of all unmatured Acceptances plus (b) the aggregate face amount of all unpaid and outstanding Acceptance Reimbursement Obligations. "Acceptance Reimbursement Obligation" is defined in Section 4.6. "Administrative Agent" is defined in the preamble and includes each other Person as shall have subsequently been appointed as the successor Administrative Agent pursuant to Section 10.4. "Agent" means, as the context may require, the Administrative Agent, the Documentation Agent and/or the Managing Agents. "Agreement" means, on any date, this Credit Agreement as originally in effect on the Effective Date and as thereafter from time to time amended, supplemented, amended and restated, or otherwise modified and in effect on such date. "Aggregate Amount" of any Lender means, as of the Effective Date, the amount set forth on Schedule V attached hereto (which assumes that all extensions of credit under the Amended Trade Credit Agreement and the Bilateral Agreements have been repaid in full), as modified from time to time after the Effective Date as a result of assignments under the Amended Trade Credit Agreement or in accordance with Section 11.11.1. "Alternate Base Rate" means, on any date and with respect to all Base Rate Loans, a fluctuating rate of interest per annum equal to the higher of (a) the rate of interest most recently established by Scotiabank at its Domestic Office as its base rate for Dollar loans; and (b) the Federal Funds Rate most recently determined by the Administrative Agent plus 1/2 of 1%. The Alternate Base Rate is not necessarily intended to be the lowest rate of interest determined by Scotiabank in connection with extensions of credit. Changes in the rate of interest on that portion of any Loans maintained as Base Rate Loans will take effect simultaneously with each change in the Alternate Base Rate. The Administrative Agent will give notice promptly to the U.S. Borrower of changes in the Alternate Base Rate. "Amended Trade Credit Agreement" means the Sixth Amended and Restated Credit Agreement, dated as of November 17, 1999 (as further amended, supplemented, waived or otherwise modified from time to time), among the Borrowers, Group, certain financial institutions, SG, as the documentation agent, Citibank, as the syndication agent and Scotiabank as the administrative agent and the fronting bank. "Amended Trade Termination Date" means the date on which all Obligations under (and as defined in) the Amended Trade Credit Agreement are paid in cash in full and all Existing Letters of Credit and Existing Acceptances have terminated or expired. "Applicable Exchange Rate" shall mean, on any day, with respect to any Qualified Foreign Currency, the foreign exchange rate reflected in The Wall Street Journal at which Dollars were offered on the preceding Business Day for such Qualified Foreign Currency; provided, however, that if for any reason, no such rate is provided, the Administrative Agent may use any reasonable method it deems appropriate for leading commercial banks to determine such rate, and such determination shall be conclusive absent manifest error. "Applicable Location" means (i) except as provided in clauses (ii) and (iii), New York, (ii) except as provided in clause (iii), in the case of Non-U.S. Letters of Credit issued for the account of the Foreign Borrowers, London, and (iii) in the case of Non-U.S. Letters of Credit issued for the account of Warnaco (HK), Hong Kong. "Applicable Margin" means, on any date, a percentage per annum determined by reference to the Debt Rating in effect on such date as determined by reference to clause (a) of Section 2.4 of the Modification Agreement, with all other terms of the Modification Agreement to which reference is made in such Section, together with all related definitions and ancillary provisions, being hereby incorporated into this Agreement by this reference as though specifically set forth in this definition) less the Applicable Percentage in effect from time to time in accordance with clause (c) of Section 2.4 of the Modification Agreement. "Applicable Time" shall mean (i) except as provided in clauses (ii) and (iii), New York time, (ii) except as provided in clause (iii), in the case of actions or notices by or relating to the Foreign Borrowers, London time, and (iii) in the case of any actions or notices by or relating to Warnaco (HK), Hong Kong time. "Arrangers" is defined in the preamble. "Assignee Lender" is defined in Section 11.11.1. "Authentic Fitness Products" is defined in the preamble. "Authorized Officer" means, relative to any Borrower or any other Obligor, those of its officers whose signatures and incumbency shall have been certified to the Managing Agents and the Lenders pursuant to Section 6.1.1. "BofA" means Bank of America, N.A.. "Base Rate Loan" means a Loan bearing interest at a fluctuating rate determined by reference to the Alternate Base Rate. "Bilateral Agreements" means the agreements identified in items B.6 and B.8 of Schedule II of the Intercreditor Agreement. "Borrowers" means, collectively, the U.S. Borrower, the Foreign Borrowers, the Warnaco Sub Borrowers and the Sub Borrower. "Borrowing" means the making of Loans of the same type and, in the case of LIBO Rate Loans, having the same Interest Period by a Fronting Bank (on the Effective Date or otherwise) following a Disbursement or the maturity of an Acceptance and the funding of a Lender's Percentage of such Loans, in each case in accordance with the terms of this Agreement; provided, that each Fronting Bank will be obligated only to make Loans in respect of Disbursements under Letters of Credit and upon the maturity of Acceptances, in each case issued or created by such Fronting Bank. "Borrowing Request" means a loan request and certificate duly executed by an Authorized Officer of a Borrower, substantially in the form of Exhibit C hereto. "Business Day" means (a) any day which is neither a Saturday or Sunday nor a legal holiday on which banks are authorized or required to be closed (i) in, except as provided in clauses (ii) and (iii), New York or, (ii) except as provided in clause (iii), in the case of actions relating to the Foreign Borrowers, in London, or (iii) in the case of actions relating to Warnaco (HK), in Hong Kong; and (b) relative to the making, continuing, prepaying or repaying of any LIBO Rate Loans, any day on which dealings in Dollars are carried on in the London interbank market. "Calculation Date" shall mean (a) the last Business Day of each calendar month and (b) at any time when the sum of the outstanding principal amount of all Loans plus the amount of all Acceptance Obligations plus all Letter of Credit Outstandings exceeds 95% of the then-existing Commitment Amount, the last Business Day of each calendar week (or at the option of the Administrative Agent any longer period). "Citibank" is defined in the preamble. "Commitment" means, as the context may require, the Loan Commitment, Letter of Credit Commitment or Acceptance Commitment. "Commitment Amount" means $400,000,000, as the Commitment Amount may be permanently reduced pursuant to Section 2.2; provided, that such amount is inclusive of the aggregate Stated Amount of the Interim Letters of Credit deemed to be issued on the Effective Date under this Agreement, and, further, the availability under the Commitment Amount on any day shall (for purposes of other than calculating the Facility Fee) be decreased by the Existing Amount on such day, after giving effect to any Credit Extensions made to refinance Disbursements under Existing Letters of Credit or Existing Acceptances. "Commitment Termination Date" means the earliest of (a) August 12, 2002; (b) the date on which the Commitment Amount is terminated in full or reduced to zero pursuant to Section 2.2; and (c) the date on which any Commitment Termination Event occurs. Upon the occurrence of any event described in clause (b) or (c), the Commitments to make further Credit Extensions to the Obligors shall terminate automatically and without any further action. "Commitment Termination Event" means (a) the occurrence of a Bankruptcy Event; or (b) the occurrence and continuance of any other Event of Default and either (i) the declaration by the Majority Lenders (or, if the Termination Date has not yet occurred, then the Required Lenders) of the Obligations to be due and payable pursuant to Section 9.3, or (ii) in the absence of such declaration, the giving of notice by the Administrative Agent, acting at the direction of the Majority Lenders (or, if the Termination Date has not yet occurred, then the Required Lenders pursuant to Section 5.1 of the Modification Agreement), to the U.S. Borrower that the Commitments have been terminated. "Continuation/Conversion Notice" means a notice of continuation or conversion and certificate duly executed by an Authorized Officer of a Borrower, substantially in the form of Exhibit D hereto. "Credit Extension" means and includes (a) the advancing of any Loans by the Lenders in connection with a Borrowing (including the making of a Loan by either Fronting Bank to a Borrower on a Disbursement Date or the Maturity Date of an Acceptance, in each case issued or created by such Fronting Bank and the refunding and refinancing of such Loans by the Lenders); and (b) any (i) issuance or extension by either Fronting Bank of a Letter of Credit or (ii) creation by either Fronting Bank of an Acceptance. "Default" means any Event of Default or any condition, occurrence or event which, after notice or lapse of time or both, would constitute an Event of Default. "Designation and Release Certificate" means the Designation and Release Certificate, substantially in the form of Exhibit G attached hereto, executed and delivered by Group pursuant to Section 11.18. "Disbursement" means any payment by a Fronting Bank made under a Letter of Credit issued by such Fronting Bank to the applicable Letter of Credit Beneficiary. "Disbursement Date" is defined in Section 4.5. "Documents" means all bills of lading, air waybills, ocean bills, warehouse (and other) receipts and other documents, instruments or other evidence of title issued in connection with the Letters of Credit. "Documentation Agent" is defined in the preamble and includes each other Person as shall have subsequently been appointed as the successor Documentation Agent pursuant to Section 10.4. "Domestic Office" means, relative to any Lender, the office of such Lender designated as such below its signature hereto or designated in the Lender Assignment Agreement or such other office of a Lender (or any successor or assign of such Lender) within the United States as may be designated from time to time by notice from such Lender, as the case may be, to each other Person party hereto. "Domestic Subsidiary" means any Subsidiary of Group (other than the U.S. Borrower) organized under the laws of the United States or any state thereof. "Draft" means and includes any draft, bill, cable or written demand for payment or receipt drawn or issued under a Letter of Credit. "Drawer" is defined in Section 4.1.3. "Effective Date" means the date this Agreement becomes effective pursuant to Section 11.8. "Effective Date Loans" is defined in clause (b) of Section 2.1.1. "Event of Default" is defined in Section 9.1. "Excess" is defined in Section 11.16. "Existing Acceptances" is defined in the second recital. "Existing Amount" means (without duplication), the sum of (i) the outstanding extensions of credit under the Bilateral Agreements and (ii) the aggregate stated amount of all undrawn Existing Letters of Credit outstanding, the aggregate face amount of outstanding unmatured Existing Acceptances, the aggregate amount of unpaid obligations of the Borrowers to reimburse Scotiabank for disbursements under Existing Letters of Credit and under Existing Acceptances and the outstanding principal amount of Existing Loans, in each case from time to time under the Amended Trade Credit Agreement. "Existing Letters of Credit" is defined in the second recital. "Existing Loans" is defined in the second recital. "Facility Fee" is defined in Section 3.3.4. "Federal Funds Rate" means, for any period, a fluctuating interest rate per annum equal for each day during such period to (a) the weighted average of the rates on overnight federal funds transactions with members of the Federal 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 in New York) by the Federal Reserve Bank of New York; or (b) if such rate is not so published for any day which is a Business Day in New York, the average of the quotations for such day on such transactions received by the Administrative Agent from three federal funds brokers of recognized standing selected by it. If for any reason the Administrative Agent shall have determined (which determination shall be conclusive, absent manifest error) that it is unable to ascertain the Federal Funds Rate for any reason, including the inability or failure of the Administrative Agent to obtain sufficient bids or publications in accordance with the terms hereof, the rate announced by the Administrative Agent at its New York Agency as its "Base Rate New York" shall be the Alternate Base Rate until the circumstances giving rise to such inability no longer exists. "Fee Letter" means, collectively, the confidential fee letter, dated as of the date hereof between the U.S. Borrower and the Administrative Agent and the confidential fee letter, dated as of the date hereof, between the U.S. Borrower and BofA, in each case as the same may have been amended, supplemented or otherwise modified from time to time. "for the account of", "for its account" and similar phrases used in this Agreement with reference to Acceptances mean Acceptances created for the account of such Person, on the behalf of such Person or at the direction of such Person. "Foreign Borrowers" is defined in the preamble. "Fronting Bank" means, collectively, Fronting Bank(BNS) and Fronting Bank(BofA), in each case in their capacity as an issuer of Letters of Credit and creator of Acceptances (in each case, regardless of which office, branch or agency of Scotiabank or BofA issues a Letter of Credit or creates an Acceptance) and in their capacity as a Lender of Loans made prior to a Funding Date pursuant to the terms of this Agreement. "Fronting Bank(BNS)" means Scotiabank, in its capacity as a Fronting Bank. "Fronting Bank(BofA)" means Bank of America, N.A., in its capacity as a Fronting Bank. "F.R.S. Board" means the Board of Governors of the Federal Reserve System or any successor thereto. "Funding Date" is defined in clause (c) of Section 2.3. "Goods" means, collectively, all goods (including all inventory), wares, merchandise and other commodities purchased by or shipped to or to the order of a Borrower under or by virtue of or in connection with the issuance of a Letter of Credit. "Group" is defined in the preamble. "Guaranty" means, collectively, the Parent Guaranty and the Domestic Subsidiary Guaranty, in each case as amended, supplemented, amended and restated or otherwise modified from time to time. "herein", "hereof", "hereto", "hereunder" and similar terms contained in this Agreement or any other Trade Document refer to this Agreement or such other Trade Document, as the case may be, as a whole and not to any particular Section, paragraph or provision of this Agreement or such other Trade Document. "including" means including without limiting the generality of any description preceding such term. "Indemnified Liabilities" is defined in Section 11.4. "Indemnified Parties" is defined in Section 11.4. "Intercreditor Agreement" means the Intercreditor Agreement, dated as of the date hereof (as amended, supplemented, amended and restated or otherwise modified from time to time in accordance with Section 2.2 of the Intercreditor Agreement) among Group, certain of its Subsidiaries, the U.S. Borrower, Scotiabank, as administrative agent, Scotiabank and SSBI as lead arrangers, Scotiabank and Citibank, as debt coordinators, Scotiabank, SSBI, Morgan, Commerzbank and SG, as arrangers, certain other financial institutions from time to time parties thereto and the Collateral Trustee, in the form of Exhibit H attached hereto. "Interest Period" means, relative to any LIBO Rate Loans, the period beginning on (and including) the date on which such LIBO Rate Loan is made as a LIBO Rate Loan pursuant to Section 2.3 or 2.4 and ending on (but excluding) the day which numerically corresponds to such date three or six months thereafter (or, if such month has no numerically corresponding day, on the last Business Day of such month); provided, however, that (a) Interest Periods commencing on the same date for Loans comprising part of the same Borrowing shall be of the same duration; (b) if such Interest Period would otherwise end on a day which is not a Business Day, such Interest Period shall end on the next following Business Day (unless such next following Business Day is the first Business Day of a calendar month, in which case such Interest Period shall end on the Business Day next preceding such numerically corresponding day); and (c) no Interest Period may end later than the Stated Maturity Date for such Loan, and in furtherance thereof (notwithstanding any provision of any Trade Document to the contrary), if any Loan is made (or continued) as a LIBO Rate Loan on or subsequent to May 12, 2002, the last day of the Interest Period for such Loan shall be August 12, 2002. "Interim Credit Agreement" is defined in the first recital. "Interim Loans" means, collectively, all loans made to Group or any Subsidiary of Group from (and including) July 27, 2000 through the Effective Date, the proceeds of which were applied (directly or indirectly) to reimburse disbursements under letters of credit issued for the benefit of Group or any of its Subsidiaries, as certified by Group pursuant to Section 6.1.3 and further set forth in Schedule III hereto. "Issuance Request" means either (i) a request delivered by a Borrower to Fronting Bank(BNS) in accordance with the provisions of the Tradexpress Agreement or to Fronting Bank(BofA) in accordance with the provisions of the MicroTrade Agreement or (ii) a request and certificate duly executed by an Authorized Officer of a Borrower and delivered to either Fronting Bank, in substantially the form of Exhibit B attached hereto (with such changes thereto as may be agreed upon from time to time by the Administrative Agent and the U.S. Borrower). "Joinder Agreement" means the Joinder Agreement, substantially in the form of Exhibit F attached hereto, executed and delivered by each Warnaco Sub Borrower in accordance with Section 11.18 and in effect until such Warnaco Sub Borrower shall become a Released Borrower. "Lender Assignment Agreement" means a Lender Assignment Agreement substantially in the form of Exhibit E hereto. "Lenders" is defined in the preamble. "Letter of Credit" means, collectively, the Interim Letters of Credit and the other letters of credit issued from time to time on and after the Effective Date under the terms of this Agreement. "Letter of Credit Availability" means, at any time, the then existing Commitment Amount minus the sum of (i) the aggregate outstanding principal amount of all Loans, plus (ii) the aggregate amount of all Letter of Credit Outstandings plus (iii) Acceptance Obligations. "Letter of Credit Beneficiary" means a beneficiary of a Letter of Credit. "Letter of Credit Commitment" means, as to a particular Fronting Bank, such Fronting Bank's obligation to issue Letters of Credit pursuant to Section 2.1.2. "Letter of Credit Outstandings" means, at any time, an amount equal to the sum of (a) the aggregate Stated Amount at such time of all Letters of Credit then outstanding and undrawn (as such aggregate Stated Amount shall be adjusted, from time to time, as a result of drawings, the issuance of Letters of Credit, or otherwise), plus (b) the then aggregate amount of all unpaid and outstanding Reimbursement Obligations. "LIBO Rate" is defined in Section 3.2.1. "LIBO Rate Loan" means a Loan bearing interest, at all times during an Interest Period applicable to such Loan, at a fixed rate of interest determined by reference to the LIBO Rate (Reserve Adjusted). "LIBO Rate (Reserve Adjusted)" is defined in Section 3.2.1. "LIBOR Office" means, relative to any Lender, the office of such Lender designated as such below its signature hereto or designated in the Lender Assignment Agreement or such other office of any Lender as designated from time to time by notice from such Lender to the U.S. Borrower and the Administrative Agent, whether or not outside the United States, which shall be making or maintaining LIBO Rate Loans hereunder. "LIBOR Reserve Percentage" is defined in Section 3.2.1. "Loan Commitment" means, as to a particular Fronting Bank, such Fronting Bank's (in such capacity) obligation to make Loans to the Borrowers on (a) a Disbursement Date and (b) an Acceptance maturity date, in each case only as to Letters of Credit and Acceptances issued or created by such Fronting Bank. "Loans" is defined in Section 2.1.1. "L/C Reimbursement Obligation" is defined in Section 4.6. "Majority Lenders" means, at any time (and without duplication), Lenders holding more than 50% of the then aggregate outstanding principal amount of the Loans, face amount of Letters of Credit and stated amount of Acceptances or, if no Loans, Letters of Credit and/or Acceptances are then outstanding, Lenders obligated to make (or risk participate in) more than 50% of Loans, Letters of Credit and Acceptances (or, if Commitments have been terminated, then as in effect immediately prior to such termination); provided, that so long as either Fronting Bank (in such capacity) has any Loans, Letters of Credit or Acceptances outstanding and owing to it from any Borrower, each Lender will be deemed to have outstanding and owing to it a principal amount equal to such Lender's Percentage multiplied by the aggregate outstanding principal amount of Loans, face amount of Letters of Credit and stated amount of Acceptances owing to each Fronting Bank. "Managing Agents" is defined in the preamble. "Material Adverse Effect" means a material adverse effect on (a) the rights and remedies of any Managing Agent or Lender under any Trade Document or (b) the validity or enforceability of any Trade Document. "Maturity Date" means, relative to any Acceptance, the date of maturity therefor. "Maximum Rate" is defined in Section 11.16. "MicroTrade Agreement" means the Electronic Services Agreement for Letters of Credit and Related Services, dated as of the date hereof and executed and delivered by the U.S. Borrower, certain Obligors and BofA, as amended, supplemented and amended and restated or otherwise modified from time to time. "Modification Agreement" means the Amendment, Modification, Restatement and General Provisions Agreement, dated as of the date hereof (as amended, supplemented, amended and restated or otherwise modified from time to time in accordance with Section 9.2 of the Modification Agreement), among Group, certain of its Subsidiaries, the U.S. Borrower, certain Subsidiaries of Group, Scotiabank and Citibank, as debt coordinators, Scotiabank, as administrative agent and the Collateral Trustee, in the form of Exhibit I attached hereto. "Non-U.S. Letter of Credit" means any Letter of Credit which provides for the payment of drawings in a Qualified Foreign Currency. "Note" means any promissory note of any Borrower payable to the order of any Lender (including each Fronting Bank), in the form of Exhibit A (as any such promissory note may be amended, endorsed or otherwise modified from time to time), evidencing the aggregate Debt of such Borrower to such Lender resulting from outstanding Loans made by such Lender, and also means all other promissory notes accepted from time to time in substitution therefor or renewal thereof. "Obligations" has the meaning set forth in the Modification Agreement, as such definition is applicable to Obligations of Group, the Borrowers and each other Obligor arising under or in connection with this Agreement, the Notes, any Letter of Credit, any Acceptance and each other Trade Document. "Obligor" means Group, the Borrowers and each other Person (other than the Agents, the Fronting Banks and the Lenders) obligated under any Loan Document. "Order" is defined in clause (b) of Section 4.6. "Organic Document" means, relative to any Obligor, as applicable, its certificate of incorporation, by-laws, certificate of formation or limited liability company agreement, and all shareholder agreements, voting trusts and similar arrangements applicable to any of the authorized shares of Equity Interests or other ownership interest of such Obligor. "Participant" is defined in Section 11.11.2. "Percentage" means, relative to any Lender, the percentage set forth opposite its name on Schedule II hereto as its percentage of the Commitment Amount on the Effective Date (including as reduced due to such Lender's obligations under the Amended Trade Credit Agreement and, in the case of Citibank and Standard Chartered, under their Bilateral Agreements) or set forth in a Lender Assignment Agreement, as such percentage may be adjusted from time to time pursuant to the terms hereof or a Lender Assignment Agreement executed by such Lender and its Assignee Lender and delivered pursuant to Section 11.11.1. At all times prior to the Amended Trade Termination Date and the termination of obligations under the Bilateral Agreements, the Percentage of a Lender will be calculated from time to time on any given date by the Administrative Agent, reflecting the aggregate outstanding amount, prior to the termination of the Bilateral Agreements and the Amended Trade Credit Agreement, of a Lender's commitment less amounts outstanding under the Bilateral Agreements (in the case of Citibank and Standard Chartered) and amounts outstanding under the Amended Trade Credit Agreement (in the case of all Lenders) and, as a result, a Lender's Percentage may increase or decrease at times prior to the Amended Trade Termination Date and the termination of obligations under the Bilateral Agreements, with the Administrative Agent's calculation being conclusive absent manifest error. "Qualified Foreign Currency" means any currency other than Dollars which is approved by the Administrative Agent in its sole discretion and, in any event, for which both an Applicable Exchange Rate and a Spot Exchange Rate may be calculated. "Quarterly Payment Date" means the first day of each April, July, October and January or, if any such day is not a Business Day in New York, the next succeeding Business Day in New York. "Received Amount" is defined in clause (c) of Section 4.6. "Reimbursement Obligation" is defined in clause (a) of Section 4.6. "Released Borrower" is defined in clause (b) of Section 11.18. "Reset Date" is defined in Section 5.7. "SG" is defined in the preamble. "Scotiabank" is defined in the preamble. "Spot Exchange Rate" shall mean, on any date of determination with respect to any Qualified Foreign Currency, the spot rate at which Dollars are offered on such day by Scotiabank in the Applicable Location for such Qualified Foreign Currency at approximately 11:00 a.m. (Applicable Time); provided, however, that if for any reason, no such spot rate is being quoted, the Administrative Agent shall use the Applicable Exchange Rate for such Qualified Foreign Currency. "SSBI" is defined in the preamble. "Standard Chartered" means Standard Chartered Bank. "Stated Amount" of each Letter of Credit means the maximum amount of such Letter of Credit that may then be drawn under such Letter of Credit whether or not the conditions for drawing thereunder have been met. "Stated Expiry Date" is defined in clause (c) of Section 4.1.1. "Stated Maturity Date" means, in the case of any Loan, the date which is six months following the date of the making of such Loan (in the case of a Loan initially made as a LIBO Rate Loan) or (in the case of a Loan initially made as a Base Rate Loan), the date that is 180 days after the making of such Loan or, in all cases (if earlier), August 12, 2002. "Stated Rate" is defined in Section 11.16. "Sub Borrower" is defined in the preamble. "Syndication Agent" is defined in the preamble. "Trade Document" means this Agreement, each Note, the Tradexpress Agreement, the MicroTrade Agreement, each Joinder Agreement, each Fee Letter and each other agreement, document or instrument delivered in connection with this Agreement, whether or not specifically mentioned herein, together with any amendments, supplements or modifications hereof or thereof. "Trade Termination Date"means the date on which all Commitments have terminated, all Letters of Credit have expired, all Acceptances have matured and all Obligations have been paid and performed in full. "Tradexpress Agreement" means the Tradexpress Agreement executed and delivered by the U.S. Borrower, certain Obligors and Scotiabank (including any Tradexpress Teletransmission Agreement executed and delivered by any Warnaco Sub Borrower in connection with any Joinder Agreement), as amended, supplemented, amended and restated or otherwise modified from time to time. "type" means relative to any Loan, the portion thereof, if any, being maintained as a Base Rate Loan or a LIBO Rate Loan. "UCP" is defined in Section 11.15. "United States" or "U.S." means the United States of America, its fifty States and the District of Columbia. "U.S. Borrower" is defined in the preamble. "U.S. Dollar Equivalent" means, with respect to any Non-U.S. Letter of Credit, the amount determined as provided in Section 4.1.2. "U.S. Letter of Credit" means any Letter of Credit which provides for the payment of drawings in Dollars. "Usury Restraint" is defined in Section 11.16. "Warnaco Sub Borrower" is defined in the preamble. SECTION 1.2. Use of Defined Terms. Unless otherwise defined or the context otherwise requires, (i) terms for which meanings are provided in this Agreement shall have such meanings when used in each Note, Borrowing Request, Continuation/Conversion Notice, Trade Document, notice and other communication delivered from time to time in connection with this Agreement or any other Trade Document and (ii) furthermore, unless otherwise defined herein or the context otherwise requires, terms defined in the Modification Agreement and the Intercreditor Agreement, when used in this Agreement and each other Trade Document, shall have the meanings set forth in the Modification Agreement or Intercreditor Agreement, as applicable. SECTION 1.3. Cross-References. Unless otherwise specified, references in this Agreement and in each other Trade Document to any Article or Section are references to such Article or Section of this Agreement or such other Trade Document, as the case may be, and, unless otherwise specified, references in any Article, Section or definition to any clause are references to such clause of such Article, Section or definition. SECTION 1.4. Accounting and Financial Determinations. Unless otherwise specified, all accounting terms used herein shall be interpreted, all accounting determinations and computations hereunder shall be made, and all financial statements required to be delivered hereunder or thereunder shall be prepared in accordance with, GAAP. ARTICLE II COMMITMENTS, BORROWING PROCEDURES AND NOTES SECTION 2.1. Commitments. On the terms and subject to the conditions of this Agreement (including Article VI), each Lender severally agrees as follows: SECTION 2.1.1. Loan Commitment. Subject to the terms of this Agreement (including Article VI) (a) each Fronting Bank severally agrees that it will from time to time on any Business Day occurring prior to the Commitment Termination Date, make loans (the "Loans") to (i) the U.S. Borrower (in the case of each Letter of Credit issued by (and only by) such Fronting Bank and each Acceptance created by (and only by) such Fronting Bank for the account of the U.S. Borrower or a Subsidiary thereof), (ii) the Foreign Borrowers (in the case of each U.S. Letter of Credit and each Non-U.S. Letter of Credit issued by (and only by) such Fronting Bank for the account of such Foreign Borrower), (iii) each Warnaco Sub Borrower (in the case of each Letter of Credit issued by (and only by) such Fronting Bank and each Acceptance created by (and only by) such Fronting Bank for the account of such Warnaco Sub Borrower or its Subsidiary) and (iv) the Sub Borrower (in the case of each Letter of Credit issued by (and only by) such Fronting Bank and each Acceptance created by (and only by) such Fronting Bank for the account of the Sub Borrower or a Subsidiary thereof), in each case, as applicable, on (A) the Disbursement Date of each Letter of Credit issued by that Fronting Bank and (B) the Maturity Date of each Acceptance created by that Fronting Bank, (in each case) for a period not to exceed the Stated Maturity Date for such Loan in a principal amount equal to the aggregate amount of (x) Disbursements made under one or more Letters of Credit issued by that Fronting Bank on such Disbursement Date and (y) matured and unreimbursed Acceptances created by that Fronting Bank; (b) on or within one Business Day following the Effective Date, Fronting Bank(BNS) will make LIBO Rate Loans (with the last day of the applicable Interest Period as set forth on Schedule III hereto) to the Borrowers in the aggregate amount for each Borrower of its Interim Loans (in accordance with Section 2.3) and to repay Citibank and Standard Chartered in an amount necessary to reduce Citibank's outstanding extensions of credit under its Bilateral Agreement to $84,364,000 and to reduce Standard Chartered's outstanding extensions of credit under its Bilateral Agreement to $18,700,000 (with such amounts being referred to as "Effective Date Loans"); and (c) each Lender (other than a particular Fronting Bank in its capacity as Fronting Bank) severally agrees that such Lender will participate in the Loans made by each Fronting Bank (other than such Fronting Bank) pursuant to this Agreement and, if required pursuant to the terms of this Agreement, such Lender will refinance and reimburse each Fronting Bank for the outstanding principal amount of Loans previously made by such Fronting Bank in an amount equal to its Percentage of the aggregate amount of all (or, if elected by such Fronting Bank, less than all) Loans (determined, in the sole discretion of such Fronting Bank, as between Loans made to the U.S. Borrower, the Foreign Borrowers, the Warnaco Sub Borrowers and the Sub Borrower) then outstanding and owing to such Fronting Bank (in its capacity as a Fronting Bank), and upon the receipt by a Fronting Bank of immediately available funds from a Lender in respect of the reimbursement or refinancing of a Loan previously made by and owing to such Fronting Bank, the amount so received by such Fronting Bank will thereafter be a Loan to the applicable Borrower owing to such Lender (and no longer owing to such Fronting Bank). No Lender's obligation to make any Loan shall be affected by any other Lender's failure to make any Loan, and each Fronting Bank shall have the independent and absolute right to determine when, if and how much of the Loans made by that Fronting Bank will be required to be reimbursed by the Lenders, even if the other Fronting Bank is not at that time requiring Lenders to reimburse it for Loans. On the terms and subject to the conditions hereof, the Borrowers may from time to time borrow Loans and continue or convert such Loans as Base Rate Loans or LIBO Rate Loans pursuant to the terms hereof, but once a particular Loan is repaid or prepaid by a Borrower, it cannot be reborrowed. Notwithstanding anything contained herein to the contrary, so long as any Lender shall be in default in its obligation to fund its pro rata share of any Loans (as notified to such Lender by either Fronting Bank, with each Fronting Bank agreeing to use good faith efforts to give such notification promptly following the occurrence of such default) or shall have rejected its obligations under the Trade Documents, the Loan Documents (or any one of them), then (without in any way excusing a Lender from its obligation under the Trade Documents), (x) such Lender shall not be entitled to receive any payments of principal of or interest on its pro rata share of the Loans or its share of any fees payable hereunder (including fees payable pursuant to Section 3.3) unless and until (i) the Loans of all the other Lenders and all interest thereon have been paid in full, (ii) such failure to fulfill its obligation to fund is cured or (iii) the Obligations under this Agreement shall have been declared or shall have become immediately due and payable; (y) for purposes of voting or consenting to matters with respect to the Trade Documents or the Loan Documents, such Lender shall be deemed not to be a "Lender" hereunder and such Lender's Percentage shall each be deemed to be zero (0) (with each other Lender's Percentage being increased proportionately for purposes of the definition of "Required Lenders" so that all such non-defaulting Lenders' Percentages shall collectively equal 100%); and (z) each Fronting Bank's and the Borrower's rights against such Lender shall remain in full force and effect and shall not in any manner be adversely affected; No Commitment of any Lender shall be increased or otherwise affected by any such failure or rejections by any other Lender. Any payments of principal of or interest on Obligations which would, but for this Section, be paid to any Lender, shall be paid to the Lenders who shall not be in default under their respective obligations under the Trade Documents, the Loan Documents (or any one of them) and who shall not have rejected any obligations under the Trade Documents, the Loan Documents (or any one of them), for application to the Obligations or cash collateral in respect of Letters of Credit or Acceptances in such manner and order (pro rata among such Lenders) as shall be determined by the Administrative Agent. The parties hereto acknowledge and agree that a Lender's failure to make a Loan based on any Borrower's failure to satisfy one or more of the conditions precedent to the making of Loans set forth in Article VI shall not be construed as such Lender being in default of its obligations to fund its pro rata share of Loans or a rejection of such Lender's obligations under the Trade Documents, the Loan Documents (or any one of them). SECTION 2.1.2. Commitment to Issue Letters of Credit and Create Acceptances. From time to time on any Business Day prior to the Commitment Termination Date, each Fronting Bank severally agrees that it will issue and create the Letters of Credit and the Acceptances, in accordance with Article IV, and each Lender will participate in those Letters of Credit and Acceptances in accordance with the terms of this Agreement. SECTION 2.1.3. Lenders Not Required to Make Loans and Fronting Banks Not Required to Issue Letters of Credit or Create Acceptances Under Certain Circumstances. In addition to the other terms of this Agreement (including Article VI): (a) No Lender (other than, in the case of clause (a)(ii), a Fronting Bank acting in such capacity) shall be required to make any Loan if, after giving effect thereto (and the payment of any Reimbursement Obligations with the proceeds of such Loans or the refunding and refinancing of Loans made by a Fronting Bank with the proceeds of the Loans made by the Lenders hereunder), the aggregate outstanding principal amount of all Loans (i) together with the aggregate amount of all Letter of Credit Outstandings and all Acceptance Obligations, would exceed the Commitment Amount, or (ii) of such Lender, (A) together with such Lender's Percentage of the aggregate amount of all Letter of Credit Outstandings and all Acceptance Obligations would exceed the amount of such Lender's Percentage multiplied by the Commitment Amount or (B) together with loans, letters of credit and acceptances made (or risk participated in) by such Lender under the Amended Trade Credit Agreement, plus Loans, Letters of Credit and Acceptances made (or risk participated in) by such Lender hereunder, would exceed such Lender's Aggregate Amount; (b) Neither Fronting Bank shall be required to issue any Letter of Credit or extend for an additional period of time the Stated Expiry Date of a previously issued Letter of Credit if, after giving effect thereto the aggregate amount of all Letter of Credit Outstandings, together with all Acceptance Obligations and the aggregate outstanding principal amount of all Loans would exceed the Commitment Amount or if such extension of credit would, in the reasonable judgment of the applicable Fronting Bank after consultation with the U.S. Borrower, after giving effect to each Lender's obligation to risk participate in such Credit Extension under the terms of this Agreement, and such Lender's obligations (including risk participation obligations) under the Amended Trade Credit Agreement and (in the case of Citibank and Standard Chartered) under the Bilateral Agreements, result in such Lender's obligations exceeding its Aggregate Amount; (c) Neither Fronting Bank shall be required to create any Acceptance if, (i) after giving effect thereto the aggregate amount of all Acceptance Obligations, together with all Letter of Credit Outstandings and the aggregate outstanding principal amount of all Loans would exceed the Commitment Amount or if such extension of credit would, in the reasonable judgment of the applicable Fronting Bank after consultation with the U.S. Borrower, after giving effect to each Lender's obligation to risk participate in such Credit Extension under the terms of this Agreement, and such Lender's obligations (including risk participation obligations) under the Amended Trade Credit Agreement and (in the case of Citibank and Standard Chartered) under the Bilateral Agreements, result in such Lender's obligations exceeding its Aggregate Amount; (ii) any requested Acceptance is not in form and substance reasonably acceptable to the Fronting Bank that will issue such Acceptance or (iii) an Acceptance is not in lieu of such Fronting Bank's Disbursement obligation and the originally executed Letter of Credit in respect of which such Acceptance is to be created has not been received by such Fronting Bank for cancellation; and (d) Neither Fronting Bank shall be required to make any Loan on any Disbursement Date or Maturity Date if such Loan is requested in respect of a Letter of Credit or Acceptance issued by the other Fronting Bank or, after giving effect thereto (and the payment of any Reimbursement Obligations with the proceeds of such Loans), the aggregate outstanding principal amount of all Loans, together with the aggregate amount of all Letter of Credit Outstandings and all Acceptance Obligations, would exceed the Commitment Amount or if such extension of credit would, in the reasonable judgment of the applicable Fronting Bank after consultation with the U.S. Borrower, after giving effect to each Lender's obligation to risk participate in such Credit Extension under the terms of this Agreement, and such Lender's obligations (including risk participation obligations) under the Amended Trade Credit Agreement and (in the case of Citibank and Standard Chartered) under the Bilateral Agreements, result in such Lender's obligations exceeding its Aggregate Amount. SECTION 2.2. Reduction of the Commitment Amount. The U.S. Borrower may, from time to time on any Business Day, (subject to the terms of the Loan Documents) voluntarily and shall, as required pursuant to the terms of the Loan Documents, mandatorily reduce the amount of the Commitment Amount; provided, however, that all such voluntary reductions shall not (prior to the Trade Termination Date), adversely affect the rights of either Fronting Bank, be binding on each Obligor, require at least three Business Days' prior notice to the Administrative Agent and be permanent. SECTION 2.3. Borrowing Procedure; Interim Loans Refinanced With Loans Hereunder. (a) Upon (i) any Disbursements being made in respect of one or more Letters of Credit, (ii) the occurrence of any Maturity Date for any Acceptance, (iii) any disbursement being made in respect of one or more Existing Letters of Credit or (iv) the occurrence of any maturity date for any Existing Acceptance (whether or not, in the case of Letters of Credit or Existing Letter of Credit, such Letters of Credit or Existing Letters of Credit were issued to support the obligations of any Borrower or any of their Subsidiaries (or any of their respective divisions) and in the case of Acceptances or Existing Acceptances, whether or not such Acceptances or Existing Acceptances were created to support the obligations of the Warnaco Sub Borrowers, the Sub Borrower, the U.S. Borrower or any of their Subsidiaries (or any of their respective divisions)), the applicable Borrower shall (unless it shall have given notice to the Administrative Agent to the contrary prior to 3:00 p.m., Applicable Time, at least three Business Days prior to the date of such Disbursement or disbursement or occurrence of such Maturity Date or maturity date that no Loan is to be made) be deemed to have delivered to the applicable Fronting Bank a Borrowing Request pursuant to which such Borrower shall have been deemed to irrevocably request that the applicable Fronting Bank (which originally issued the Letter of Credit or Acceptance for which a Loan is being made) make a LIBO Rate Loan to such Borrower with (subject to the terms of the definition of "Interest Period") a six month Interest Period in a principal amount equal to the aggregate amount of (A) in the case of U.S. Letters of Credit (including Existing Letters of Credit), the Disbursements or disbursements, and in the case of Non-U.S. Letters of Credit (including Existing Letters of Credit), the U.S. Dollar Equivalent of the Disbursements or disbursements made on such date or (B) in the case of the U.S. Borrower, the Warnaco Sub Borrowers or the Sub Borrower, the aggregate face amount of those Acceptances or Existing Acceptances having Maturity Dates or maturity dates on such date, as applicable. Fronting Bank(BNS) shall (solely) be obligated to make all of the Loans in respect of all Existing Letters of Credit and Existing Acceptances. LIBO Rate Loans may also be made on the date of a Disbursement upon the request of a Borrower having a three month Interest Period which will, upon its maturity and subject to the terms of Section 2.4, automatically be continued as a LIBO Rate Loan in the same principal amount for one more three month Interest Period (or, if less, the number of days remaining until August 12, 2002). Each Borrower, as applicable, hereby acknowledges and agrees that each Borrowing Request deemed to be delivered hereunder, the making of a Loan by either Fronting Bank (including on or following the Effective Date or to reimburse such Fronting Bank for Disbursements made under the Letters of Credit issued by it, to reimburse Fronting Bank(BNS) under the Amended Trade Credit Agreement for disbursements under Existing Letters of Credit, to reimburse either Fronting Bank for payment made on the Maturity Date of any Acceptance or to reimburse Fronting Bank(BNS) on the maturity date of any Existing Acceptance), and the acceptance by any Borrower of the proceeds of the Borrowing shall constitute a representation and warranty by the Borrowers that on the date of such Borrowing (both immediately before and after giving effect to such Borrowing and the application of the proceeds thereof) the statements made in Section 6.2.1 are in each case true and correct. (b) Each of the parties hereto acknowledge and agree that upon the satisfaction of the conditions precedent set forth in Article VI, the Effective Date Loans and the Interim Loans shall be refinanced by and replaced with Loans made by Fronting Bank(BNS) on or within one Business Day following the Effective Date under the terms of this Agreement (and, consequently, be Loans hereunder), and shall thereafter accrue interest and fees pursuant to the terms hereof (with the Stated Maturity Date (and corresponding last day of such Loan's Interest Period) for particular Interim Loans and Effective Date Loans being the date set forth on Schedule III hereto), and each Lender shall participate in such Loans in an amount equal to such Lender's Percentage. (c) Each Fronting Bank may, at any time (whether or not a Default has occurred and is then continuing, and whether or not the other Fronting Bank has made a similar demand), in its sole and absolute discretion, demand that each other Lender make a Loan in an amount equal to such Lender's Percentage on such date of the aggregate principal amount of all or a portion of the Loans outstanding on the date such demand is made, and may (in its sole discretion) elect which Loans made by it (as among the Borrowers) are to be chosen as the Loans to be refunded by the Lenders, with each Fronting Bank being able to require each Lender to make additional Loans if such Lender's Percentage increases as a result of a reduction in such Lender's exposure under the Amended Trade Credit Agreement or, in the case of Citibank and Standard Chartered, such Lender's exposure under its Bilateral Agreement. Each Lender (other than the applicable Fronting Bank) irrevocably agrees that it shall (whether or not the conditions to the making of a Credit Extension contained in Article VI have been (or can be) satisfied) make such Loan by depositing the amount so demanded in same day funds in an account specified by the applicable Fronting Bank on or before 11:00 a.m. New York time on the first Business Day following receipt of such a demand. Each Fronting Bank agrees to apply all such funds received by it under this clause to refund and refinance the Loans previously made by it to any Borrower, as identified in the demand that it delivers to the Lenders pursuant to this clause. On the date (a "Funding Date") that the Lenders (other than the applicable Fronting Bank) advance funds to such Fronting Bank pursuant to this clause, the principal amount so refunded and refinanced shall become a Loan to the Borrower identified by such Fronting Bank outstanding under such Lender's Note (if a Note was delivered, otherwise simply owing to such Lender) to that particular Borrower and shall no longer be a Loan owed to such Fronting Bank under such Fronting Bank's Note to that particular Borrower. All interest payable with respect to any Loans made pursuant to this clause shall be appropriately adjusted to reflect the period of time during which such Loans were owing to the applicable Fronting Bank and, on and subsequent to a Funding Date, such Loans were owing to the Lenders. The obligation of each Lender to make Loans by way of advancing immediately available funds to either Fronting Bank on a Funding Date to be applied to refund and refinance the Loans previously made by such Fronting Bank to the Borrowers (or any one of them) under this clause shall be absolute and unconditional and shall not be affected by any circumstance, happening or event, including (i) any set-off, counterclaim, recoupment, defense or other right which any Lender may have against either Fronting Bank, the Borrowers or any other Person for any reason whatsoever; (ii) the occurrence or continuance of any Default (including any event described in clause (f) of Section 5.1 of the Modification Agreement) or the inability of the Borrowers to otherwise satisfy the conditions precedent set forth in Article VI; (iii) any adverse change in the condition (financial or otherwise) of any Borrower or any other Obligor; (iv) the acceleration or maturity of any Loans or other Obligations or the termination of any Commitment after the making of any Loan; (v) any breach of this Agreement or any other Trade Document by any Borrower, any other Obligor or any Lender; or (vi) any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing. THE PARTIES HERETO ACKNOWLEDGE AND AGREE THAT THE TERMS OF THIS CLAUSE AND SECTIONS 4.4, 4.5 AND 4.6 ARE A MATERIAL INDUCEMENT TO EACH FRONTING BANK AGREEING TO ITS OBLIGATIONS UNDER THIS AGREEMENT AND THE OTHER TRADE DOCUMENTS. SECTION 2.4. Continuation and Conversion Elections. By delivering a Continuation/Conversion Notice to the applicable Fronting Bank on or before 10:00 a.m., Applicable Time, on a Business Day, any Borrower may from time to time irrevocably elect, on not less than three nor more than five Business Days' notice that all, or any portion of any Loans made to it by such Fronting Bank be, in the case of a LIBO Rate Loan, converted into a Base Rate Loan or, if such Fronting Bank has made the applicable Loan as one with a three month Interest Period, continued as a LIBO Rate Loan with an Interest Period of three months (or, from and after May 12, 2002, the number of days remaining through (but excluding) August 12, 2002), unless such Loan is otherwise required to be paid pursuant to the terms of this Agreement (including the first sentence of Section 3.1)); provided, however, that (i) no portion of the outstanding principal amount of any Loans may be continued as, or be converted into, LIBO Rate Loans when any Default has occurred and is continuing and (ii) the maximum length of any Interest Period or combination of Interest Periods for any particular Loan shall not exceed six months or, if less, the number of days remaining until August 12, 2002. SECTION 2.5. Funding. Each Lender may, if it so elects, fulfill its obligation to participate in, and to make, continue or convert LIBO Rate Loans hereunder by causing one of its foreign branches or affiliates (or an international banking facility all of the Equity Interests or other ownership interests of which are wholly-owned by such Lender) to make or maintain such LIBO Rate Loan; provided, however, that such LIBO Rate Loan shall nonetheless be deemed to have been made and to be held by such Lender, and the obligation of the Lender to refund and refinance such LIBO Rate Loan on the Funding Date and the obligation of the Borrowers to repay such LIBO Rate Loan shall nevertheless be of or to such Lender for the account of such foreign branch, affiliate or international banking facility; provided, further that the Borrowers shall not be required to pay any amount under this Section or Section 5.3 that is greater than the amount which it would have been required to pay had such Lender not caused such branch, affiliate or facility to make or maintain such LIBO Rate Loan. In addition, each of the Borrowers hereby consents and agrees that, for purposes of any determination to be made for purposes of Section 5.1 and 5.2, it shall be conclusively assumed that such Lender elected to fund all LIBO Rate Loans by purchasing Dollar deposits in its LIBOR Office's interbank eurodollar market. SECTION 2.6. Notes. The Loans of each Fronting Bank under the Loan Commitment shall be evidenced by Notes payable to the order of such Fronting Bank from each Borrower in an aggregate maximum principal amount equal to the original Commitment Amount, and the Loans of each Lender (other than a Fronting Bank) under the Loan Commitment shall (if requested by a Lender) be evidenced by Notes payable from each Borrower to the order of such Lender in a maximum principal amount equal to the amount set forth opposite such Lender's name on Schedule IV hereto. Each Borrower hereby irrevocably authorizes each Lender to make (or cause to be made) appropriate notations on the grid attached to such Lender's Notes (or on any continuation of such grid), which notations, if made, shall evidence, inter alia, the date of, the outstanding principal of, and the interest rate and Interest Period applicable to the Loans evidenced thereby and the principal amount of Loans that have been repaid (including, in the case of either Fronting Bank, Loans that have been refunded and refinanced by the Lenders on a Funding Date). Such notations shall be conclusive and binding on the Borrowers absent manifest error; provided, however, that the failure of any Lender to make any such notations shall not limit or otherwise affect any Obligations of any Obligor. ARTICLE III REPAYMENTS, PREPAYMENTS, INTEREST AND FEES SECTION 3.1. Repayments and Prepayments. The Borrowers shall repay in full to the appropriate Fronting Bank (or, if applicable, Lender) the entire unpaid principal amount of each Loan made by such Fronting Bank (or, if applicable, Lender) upon the Stated Maturity Date therefor; provided, that notwithstanding anything contained in this Agreement or any Trade Document to the contrary, each Foreign Borrower shall only be obligated to repay the principal amount of the Loans made to it and Reimbursement Obligations in respect of Letters of Credit issued for its account. Prior thereto (and subject to Section 2.1.1), each Borrower (a) may, from time to time on any Business Day, make a voluntary prepayment, in whole or in part, of the outstanding principal amount of any Loans; provided, however, that all such voluntary prepayments shall require at least one Business Day's prior written notice to the Administrative Agent; (b) shall, on each date when any reduction in the Commitment Amount (including pursuant to the terms of the Loan Documents) shall become effective (which reduction shall be subject to Section 2.2), make a mandatory prepayment (which shall be applied (or held as cash collateral for application to the aggregate amount of all Letter of Credit Outstandings or, as applicable, Acceptance Obligations, in each case not consisting of unpaid and outstanding Reimbursement Obligations) by the Administrative Agent to the payment of the Loans and unpaid and outstanding Reimbursement Obligations of the then Letter of Credit Outstandings and, as applicable, Acceptance Obligations) equal to the excess, if any, of the aggregate outstanding principal amount of all Loans, together with the aggregate amount of all Letter of Credit Outstandings and, as applicable, Acceptance Obligations over the Commitment Amount as so reduced; (c) shall, if upon any Reset Date, the sum of the outstanding principal amount of all Loans plus the amount of all Acceptance Obligations plus all Letter of Credit Outstandings exceeds the then existing Commitment Amount, make a mandatory prepayment (which shall be applied (or held as cash collateral for application to the aggregate amount of all Letter of Credit Outstandings or, as applicable, Acceptance Obligations, in each case not consisting of unpaid and outstanding Reimbursement Obligations) by the Administrative Agent to the payment of the Loans and unpaid and outstanding Reimbursement Obligations of the then Letter of Credit Outstandings and, as applicable, Acceptance Obligations) in an amount equal to such excess; (d) shall, on the dates set forth in the Intercreditor Agreement, make the mandatory and optional prepayments of Obligations under the Loan Documents in the amounts required by the terms of the Intercreditor Agreement; and (e) shall, immediately upon any acceleration of the Stated Maturity Date of any Obligations pursuant to Section 9.2 or Section 9.3, repay all Obligations, unless, pursuant to Section 9.3, only a portion of all Obligations is so accelerated. Each prepayment of any Loans made pursuant to this Section shall be without premium or penalty, except as may be required by Section 5.2. No voluntary prepayment of principal of any Loans shall cause a reduction in the Commitment Amount. SECTION 3.2. Interest Provisions. Interest on the outstanding principal amount of Loans shall accrue and be payable in accordance with the terms set forth below. SECTION 3.2.1. Rates. Loans comprising a Borrowing shall accrue interest at a rate per annum: (a) on that portion maintained from time to time as a Base Rate Loan, equal to the sum of the Alternate Base Rate from time to time in effect plus the Applicable Margin in effect from time to time; or (b) on that portion maintained as a LIBO Rate Loan, during each Interest Period applicable thereto, equal to the sum of the LIBO Rate (Reserve Adjusted) for such Interest Period plus the Applicable Margin in effect from time to time. The "LIBO Rate (Reserve Adjusted)" means, relative to any Loan to be made, continued or maintained as, or converted into, a LIBO Rate Loan for any Interest Period, a rate per annum (rounded upwards, if necessary, to the nearest 1/16 of 1%) determined pursuant to the following formula: LIBO Rate = LIBO Rate ------------------------------------ (Reserve Adjusted) 1.00 - LIBOR Reserve Percentage The LIBO Rate (Reserve Adjusted) for any Interest Period for LIBO Rate Loans made by a Fronting Bank will be determined by such Fronting Bank or, if made by a Lender following the exercise of a Fronting Bank's rights under Section 4.4, by the Administrative Agent, in each case, on the basis of the LIBOR Reserve Percentage and LIBO Rate in effect on the Business Day corresponding to the first day of such Interest Period. "LIBO Rate" means, relative to any Interest Period for LIBO Rate Loans (i) made by a Fronting Bank, the rate of interest per annum (rounded upwards, if necessary, to the nearest 1/16 of 1%) (determined by such Fronting Bank) at which Dollar deposits in the approximate amount of such Fronting Bank's LIBO Rate Loan for such Interest Period would be offered by such Fronting Bank's Grand Cayman Branch, Grand Cayman, B.W.I. (in the case of Fronting Bank (BofA)) or its New York Agency (in the case of Fronting Bank (BNS)) or, in each case, such other office as may be designated for such purpose by such Fronting Bank, to major banks in the offshore dollar interbank market at their request at approximately 11:00 a.m. (New York time) on the date of the Borrowing and (ii) made by a Lender after a Fronting Bank has exercised its right under Section 4.4, the rate of interest per annum (rounded upwards, if necessary, to the nearest 1/16 of 1%) reported, on the first day of such Interest Period as of 11:00 a.m. London time, on Telerate Access Service Page 3750 (British Bankers Association Settlement Rate) (or, if a rate for the applicable Interest Period is not available on such page, then as determined by the applicable Fronting Bank in its reasonable judgment) as the London Interbank Offered Rate for Dollar deposits having a term comparable to such Interest Period and in an amount of $1,000,000 or more (or, if said page shall cease to be publicly available, as reported by any publicly available source of similar market data selected by the Administrative Agent that, in the Administrative Agent's reasonable judgment, accurately reflects such London Interbank Offered Rate). "LIBOR Reserve Percentage" means, relative to any Interest Period for LIBO Rate Loans, the reserve percentage, if any (expressed as a decimal) equal to the maximum aggregate reserve requirements (including all basic, emergency, supplemental, marginal and other reserves and taking into account any transitional adjustments or other scheduled changes in reserve requirements) specified under regulations issued from time to time by the F.R.S. Board and then applicable to assets or liabilities consisting of and including "Eurocurrency Liabilities", as currently defined in Regulation D of the F.R.S. Board, having a term approximately equal or comparable to such Interest Period. All LIBO Rate Loans shall bear interest from and including the first day of the applicable Interest Period to (but not including) the last day of such Interest Period at the interest rate determined as applicable to such LIBO Rate Loan. SECTION 3.2.2. Default Rates. After and during the continuance of an Event of Default, the Borrowers shall pay interest (after as well as before judgment) on (a) the unpaid principal amount of each outstanding Loan and on the fees payable on Letters of Credit and on Acceptances at a rate per annum as set forth in Section 2.4 of the Modification Agreement, and (b) to the fullest extent permitted by law, any other amount payable hereunder at a rate per annum equal at all times to 2% per annum above the Alternate Base Rate then in effect. SECTION 3.2.3. Payment Dates. Interest accrued on each Loan shall be payable, without duplication: (a) on the Stated Maturity Date therefor; (b) with respect to Base Rate Loans, on each Quarterly Payment Date occurring after the Effective Date; (c) with respect to LIBO Rate Loans, (i) in the case of the LIBO Rate component of such interest, on the last day of each applicable Interest Period (and, if such Interest Period shall exceed three months, at the end of each three month period occurring during such Interest Period) and (ii) on the Applicable Margin component of interest accruing on LIBO Rate Loans, on each applicable Quarterly Payment Date occurring after the date such LIBO Rate Loan is made; (d) on the date of any optional or required payment or prepayment, in whole or in part, of principal outstanding on such Loan; (e) with respect to any Base Rate Loans converted into LIBO Rate Loans on a day when interest would not otherwise have been payable pursuant to the terms hereof, on the date of such conversion; and (f) on that portion of any Loans the Stated Maturity Date of which is accelerated pursuant to Section 9.2 or Section 9.3, immediately upon such acceleration. Interest accrued on Loans or other monetary Obligations arising under this Agreement or any other Trade Document after the date such amount is due and payable (whether on the Stated Maturity Date, upon acceleration or otherwise) shall be payable upon demand. SECTION 3.2.4. Allocation of Interest Payments. Accrued and unpaid interest on the outstanding principal amount of the Loans shall be allocated and payable to the Lenders as set forth in this Section: (a) Interest shall be payable by a Borrower to either Fronting Bank (for such Fronting Bank's account in respect of Loans made by such Fronting Bank which have not been reimbursed by Lenders) on the outstanding principal amount of its Loans from the date such Loans are made to (but excluding) the Funding Date in an amount equal to the difference between (i) (x) in the case of LIBO Rate Loans, the LIBO Rate (Reserve Adjusted) or, in the case of Base Rate Loans, the Alternate Base Rate, plus the Applicable Margin then in effect for LIBO Rate Loans or Base Rate Loans (as applicable) multiplied by (y) the outstanding principal amount of the LIBO Rate Loans or Base Rate Loans, as the case may be, minus (ii) the Interest Amount (as defined below). Prior to the Funding Date of a Loan made by a particular Fronting Bank each Lender (other than such Fronting Bank) shall be paid interest in an aggregate amount (referred to as the "Interest Amount") equal to such Lender's Percentage of (x) the principal amount of the Loans outstanding prior to a Funding Date multiplied by (y) the Applicable Margin then in effect for LIBO Rate Loans (in the case of the outstanding principal amount of LIBO Rate Loans) or Base Rate Loans (in the case of the outstanding principal amount of Base Rate Loans). (b) On and subsequent to a Funding Date of a Loan made by a particular Fronting Bank, interest shall be payable by a Borrower for the account of each Lender (including such Fronting Bank, in its capacity as a Lender) in accordance with its Percentage on the principal amount of its Loans actually funded by such Lender in an amount equal to (in the case of the outstanding principal amount of LIBO Rate Loans) the LIBO Rate (Reserve Adjusted) plus the Applicable Margin for such LIBO Rate Loans or, if applicable (in the case of the outstanding principal amount of Base Rate Loans), the Alternate Base Rate plus the Applicable Margin for Base Rate Loans. SECTION 3.3. Fees. Each Borrower agrees to pay the fees payable by it set forth below. All such fees shall be non-refundable. SECTION 3.3.1. Letter of Credit and Acceptance Fees Payable to the Lenders. The Borrowers agree to pay to the applicable Fronting Bank, for the pro rata account of the Lenders determined in accordance with each Lender's Percentage (and each Fronting Bank agrees to promptly forward to each Lender) a fee for each Letter of Credit and each Acceptance issued or created by such Fronting Bank for the period from and including the date of the issuance of such Letter of Credit or creation of the Acceptance to (but not including) (a) in the case of a Letter of Credit, the earlier of (i) the date upon which such Letter of Credit expires and (ii) the date upon which the Stated Amount of such Letter of Credit is irrevocably reduced to zero (by the making of a Disbursement by a Fronting Bank or otherwise), and (b) in the case of an Acceptance, the Maturity Date therefor, in each case at the rates per annum determined by reference to the Debt Rating in effect on such date as determined by reference to clause (b) of Section 2.4 (in the case of Letters of Credit) less the Applicable Percentage set forth for such Debt Rating in clause (c) of Section 2.4 of the Modification Agreement and (in the case of Acceptances), clause (a) of Section 2.4 less the Applicable Percentage set forth for such Debt Rating in clause (c) of Section 2.4 of the Modification Agreement, calculated on the average daily sum of (x) the maximum amount available to be drawn under outstanding Letters of Credit (in the case of Letters of Credit) and (y) the aggregate face amount of outstanding unmatured Acceptances (in the case of Acceptances), in each case with all other terms of the Modification Agreement to which reference is made in such Section, together with all related definitions and ancillary provisions, being hereby incorporated into this Agreement by this reference as though specifically set forth in this Section 3.3.1. Notwithstanding anything in this Agreement to the contrary, each Foreign Borrower shall only be liable for the fee that has accrued on those Letters of Credit issued for its own account. Such fee shall be payable to the applicable Fronting Bank by the applicable Borrower in arrears on each Quarterly Payment Date (commencing on the first such date after the issuance of such Letter of Credit or the creation of such Acceptance) and on the Commitment Termination Date, in each case, for any period then ending for which such fee shall not theretofore have been paid; provided that, notwithstanding the foregoing, such fees shall be payable not less often than every 90 days. SECTION 3.3.2. Letter of Credit and Acceptance Fees Payable to the Fronting Banks. The Borrowers agree to pay to each Fronting Bank the fees relating to Letters of Credit and Acceptances issued by such Fronting Bank in accordance with that Fronting Bank's Fee Letter and such customary fees currently paid by the Borrowers on the Effective Date for each Letter of Credit issued and each Acceptance created for the period from and including the date of issuance of such Letter of Credit or creation of such Acceptance to (but not including) the date upon which such Letter of Credit expires or such Acceptance matures; provided, that each Foreign Borrower shall be obligated to pay such fees only on those Letters of Credit issued for its account. SECTION 3.3.3. Fee Letters. The U.S. Borrower agrees to pay to Scotiabank and to BofA, for their respective accounts, such fees in the amounts and on the dates set forth in the applicable Fee Letter. SECTION 3.3.4. Facility Fee. The U.S. Borrower agrees to pay to the Administrative Agent, for the pro rata account of each Lender determined in accordance with each Lender's Percentage (as if the Existing Amount was zero), for the period commencing on the Effective Date and continuing through the Commitment Termination Date, a facility fee (the "Facility Fee") on the average daily Commitment Amount (whether or not then available, including as a result of the Amended Trade Credit Agreement or the Bilateral Agreements still being in effect) at the rates per annum determined by reference to the Debt Rating in effect on such date as determined by reference to clause (c) of Section 2.4 of the Modification Agreement, with all other terms of the Modification Agreement to which reference is made in such Section, together with all related definitions and ancillary provisions, being hereby incorporated into this Agreement by this reference as though specifically set forth in this Section 3.3.4. ARTICLE IV LETTERS OF CREDIT AND ACCEPTANCES SECTION 4.1. Issuance of Letters of Credit and Creation of Acceptances. Each party hereto acknowledges and agrees that upon the satisfaction of the conditions precedent set forth in Section 6.1, the Interim Letters of Credit shall be (and be deemed to be) Letters of Credit issued by Fronting Bank(BNS) on the Effective Date under the terms of this Agreement and shall thereafter accrue interest and fees pursuant to the terms hereof, and each Lender shall participate in Interim Letters of Credit in an amount equal to such Lender's Percentage of the aggregate Stated Amount of the Interim Letters of Credit. Furthermore, Letters of Credit shall be issued on and after the Effective Date and Acceptances shall be created on the terms set forth below. SECTION 4.1.1. Letters of Credit. Any Borrower or any wholly-owned Domestic Subsidiary of the U.S. Borrower, the Warnaco Sub Borrowers or the Sub Borrower (or any of their respective divisions) may request, from time to time prior to the Commitment Termination Date, by delivering to the Administrative Agent and either Fronting Bank (as selected by such Obligor) an Issuance Request (such request being, in any Borrower's sole discretion, either delivered (by telex, teletransmission or otherwise) in the form attached hereto as Exhibit B or in accordance with the terms of the Tradexpress Agreement (for Fronting Bank(BNS) or the MicroTrade Agreement for Fronting Bank(BofA)) on or before 3:00 p.m., Applicable Time on the Business Day on which a Letter of Credit is to be issued that such Fronting Bank issue a documentary Letter of Credit in such form as may be requested by such Borrower or such Subsidiary and approved by such Fronting Bank. Each Letter of Credit shall by its terms: (a) be issued in a Stated Amount which does not exceed (or would not exceed), either alone or in the aggregate with the other Letters of Credit, the then existing Letter of Credit Availability; (b) except as provided in Section 4.1.2, be denominated in, and all payments in respect thereof shall be made in, Dollars; (c) be stated to expire on a date (its "Stated Expiry Date") no later than 120 days from its date of issuance or, if earlier, August 12, 2002; and (d) on or prior to its Stated Expiry Date (i) terminate immediately upon notice to the Fronting Bank which issued such Letter of Credit from the applicable Letter of Credit Beneficiary that all obligations covered thereby have been terminated, paid, or otherwise satisfied in full, and (ii) reduce in part immediately and to the extent the applicable Letter of Credit Beneficiary has notified the Fronting Bank which issued such Letter of Credit that the obligations covered thereby have been paid or otherwise satisfied in part. So long as no Default has occurred and is continuing, by delivery to either Fronting Bank (as selected by an Obligor) and the Administrative Agent of an Issuance Request (such request being, in any Borrower's sole discretion, either delivered (by telex, teletransmission or otherwise) in accordance with the terms of the Tradexpress Agreement or the MicroTrade Agreement (in the case of Letters of Credit issued by Fronting Bank(BNS) or Fronting Bank(BofA), respectively) or in the form attached hereto as Exhibit B) on or before 3:00 p.m., Applicable Time, on the Stated Expiry Date of any Letters of Credit, any Borrower may prior to the then existing Commitment Termination Date request either Fronting Bank to extend the Stated Expiry Date of such Letter of Credit previously issued by that Fronting Bank for an additional period not to exceed the earlier of (x) 60 days from the date of extension of such Letter of Credit and (y) August 12, 2002. Notwithstanding any other provision in this Agreement to the contrary, each Fronting Bank may in its discretion refuse to issue, or extend the Stated Expiry Date of, any Letter of Credit or create any Acceptance if such issuance or creation would, in such Fronting Bank's reasonable determination, contravene any sanctions, laws or regulations of any State of the United States or any Federal body or authority of the United States (including but not limited to the regulations of the Federal Reserve Bank) or the laws, regulations or sanctions of any other applicable jurisdiction or authority or if, in either Fronting Bank's reasonable determination, any of the above-mentioned laws, regulations or sanctions would affect such Fronting Bank's ability to perform its obligations with respect to any such Letter of Credit if issued or Acceptance if created. SECTION 4.1.2. Non-U.S. Letters of Credit. Any Borrower may request the issuance of a Non-U.S. Letter of Credit subject to the terms and conditions of this Section 4.1.2, in addition to the other conditions applicable to the issuance of Letters of Credit generally. The issuance of any Non-U.S. Letter of Credit shall be subject to the approval of the Fronting Bank which is being requested to issue the Non-U.S. Letter of Credit. If any Non-U.S. Letter of Credit is issued, the following provisions shall apply: (a) For purposes of determining the Letter of Credit Outstandings and for purposes of calculating fees payable under Sections 3.3.1 and 3.3.2, the Stated Amount of any Non-U.S. Letter of Credit and of any L/C Reimbursement Obligations in respect thereof shall be deemed to be, as of any date of determination, the U.S. Dollar Equivalent thereof at such date. The initial U.S. Dollar Equivalent of any Non-U.S. Letter of Credit shall be determined by the applicable Fronting Bank on the date of issuance thereof based upon the Applicable Exchange Rate determined on the most recent Reset Date in accordance with clause (a) of Section 5.7 and adjusted from time to time thereafter as provided below. Each Fronting Bank shall provide the Administrative Agent and the U.S. Borrower with written notice (together with back-up calculations therefor) of adjustments to the U.S. Dollar Equivalent of each outstanding Non-U.S. Letter of Credit on each Reset Date in accordance with clause (b) of Section 5.7. If a Disbursement is made by either Fronting Bank under any Non-U.S. Letter of Credit, the U.S. Dollar Equivalent of such Disbursement shall be determined by such Fronting Bank on the Disbursement Date related thereto. The applicable Fronting Bank shall make such determination by calculating the amount in Dollars that would be required in order for such Fronting Bank to purchase an amount of the applicable Qualified Foreign Currency equal to the amount of the relevant L/C Reimbursement Obligation on the Disbursement Date at the Spot Exchange Rate, with respect to such Qualified Foreign Currency on such Disbursement Date. Each Fronting Bank shall notify the Administrative Agent and the applicable Borrower promptly of such U.S. Dollar Equivalent determined by it, on the date that such determination is required to be made; (b) The obligation of the applicable Borrower to reimburse any Fronting Bank for any Disbursement under any Non-U.S. Letter of Credit, and to pay interest thereon, shall be payable only in Dollars (calculated pursuant to clause (a) above), and shall not be discharged by paying an amount in any Qualified Foreign Currency or any other currency; and (c) The obligations of each Lender under Section 4.4 to pay its Percentage of any L/C Reimbursement Obligation under any Non-U.S. Letter of Credit shall be payable only in Dollars and shall be in an amount equal to such Percentage of the U.S. Dollar Equivalent of such L/C Reimbursement Obligation determined as provided in clause (a) above. Under no circumstances shall the provisions hereof permitting the issuance of Letters of Credit in a Qualified Foreign Currency be construed, by implication or otherwise, as imposing any obligation upon any Lender to make any Loan or other payment under any Trade Document, or to accept any payment from any Borrower in respect of any L/C Reimbursement Obligation, in any currency other than Dollars, it being understood that the parties intend all Obligations to be denominated and payable only in Dollars. SECTION 4.1.3. Acceptances. In lieu of a Fronting Bank honoring its Disbursement obligation under a Letter of Credit issued by that Fronting Bank, the U.S. Borrower, the Warnaco Sub Borrowers and the Sub Borrower hereby irrevocably authorize and direct each Fronting Bank to create Acceptances upon the presentation of drafts to such Fronting Bank for acceptance by such Fronting Bank as Acceptances pursuant to this Agreement, provided that such Acceptances shall, in the opinion of such Fronting Bank, be properly executed and drawn by the U.S. Borrower, any Warnaco Sub Borrower or the Sub Borrower, as applicable (each such party referred to as a "Drawer"). To facilitate the acceptance of Acceptances drawn by the U.S. Borrower, the Warnaco Sub Borrowers or the Sub Borrower, each of the U.S. Borrower, the Warnaco Sub Borrowers and the Sub Borrower shall from time to time as required by either Fronting Bank provide to such Fronting Bank an appropriate number of executed drafts drawn in blank by such Borrower in the form prescribed by such Fronting Bank. The U.S. Borrower, the Warnaco Sub Borrowers or the Sub Borrower may, at their option, execute any draft so presented by the facsimile signature or signatures of any one or more designated signing officers of such Borrower. In any event, each Fronting Bank is hereby authorized to accept or pay, as the case may be, any draft of a Drawer which purports to bear its facsimile signature or signatures notwithstanding that any such individual has ceased to be a designated signing officer of such Drawer and any such draft or Acceptance shall be as valid as if such individual were a designated signing officer of such Drawer at the date of issue of such Acceptance. Each draft or Acceptance not originally executed by a Drawer (but instead executed by facsimile, stamp or otherwise) may be dealt with by a Fronting Bank for all intents and purposes and shall bind each Borrower as if duly originally executed by the applicable Drawer's authorized officer (or other person with authority to bind such Drawer) and issued by such Borrower. Without limiting the effect of the indemnity provided under Section 11.4 but in addition to such provision, each of the U.S. Borrower, the Sub Borrower and each Warnaco Sub Borrower will and hereby does undertake to hold each Fronting Bank harmless against, and to indemnify, and each such Borrower hereby does agree to indemnify, each Fronting Bank from, all losses, costs, damages and expenses arising out of the payment or negotiation of any such draft or Acceptance on which a facsimile signature of any Drawer has been wrongly affixed, except to the extent caused by the gross negligence or willful misconduct of such Fronting Bank. Neither Fronting Bank shall be liable for its failure to accept an Acceptance as required hereunder if the cause of such failure is, in whole or in part, due to the failure of any Drawer to provide executed drafts to such Fronting Bank on a timely basis. Without creating any obligation to effect such a purchase, Acceptances may be purchased by each Fronting Bank and may be held by it for its own account until maturity or sold by it at any time prior thereto in any relevant market therefor in the United States or elsewhere, in such Fronting Bank's sole discretion. Each Acceptance shall by its terms: (a) be created with a face amount which does not exceed (or would not exceed), alone or in the aggregate with other Acceptances, the then existing Acceptance Availability, and (b) have a Maturity Date occurring no later than 90 days from its date of creation or, if earlier, August 12, 2002. Notwithstanding anything to the contrary contained in this Agreement, (i) no Acceptance shall be created after August 12, 2002 or in respect of a Non-U.S. Letter of Credit, (ii) Acceptances shall only be created in respect of Letters of Credit for which the account party is the U.S. Borrower, a Warnaco Sub Borrower, the Sub Borrower or a wholly-owned Subsidiary of any such Borrower, (iii) the face amount of any Acceptance shall be in an amount equal to the amount of the Disbursement under the Letter of Credit with reference to which such Acceptance was created, and (iv) this Agreement shall control in the event of any conflict with any Acceptance-related document (other than any Acceptance). SECTION 4.2. Issuances, Extensions and Creations. On the terms and subject to the conditions of this Agreement (including Sections 4.1.1, 4.1.2, 4.1.3 and Article VI), each Fronting Bank shall issue Letters of Credit, extend the Stated Expiry Dates of outstanding Letters of Credit issued by it and create Acceptances in connection with Letters of Credit issued by it, all in accordance with the terms of this Agreement. Each Fronting Bank will make available the original of each Letter of Credit which it issues and each Acceptance which it creates in connection with Letters of Credit issued by it to the beneficiary or payee, as applicable, thereof (and, at the request of a Lender, will provide such Lender on a monthly basis with a schedule of the outstanding Letters of Credit and Acceptances issued by that Fronting Bank as of the last day of the prior month) and will notify the applicable Letter of Credit Beneficiary of any extension of the Stated Expiry Date thereof. In addition, Citibank and Standard Chartered agree to provide on a daily basis to each Fronting Bank the amount of letters of credit, acceptances and loans outstanding under their respective Bilateral Agreement, on which amounts each Fronting Bank can conclusively rely without any investigation. SECTION 4.3. Destruction of Goods, etc. Neither Fronting Bank nor its agents or correspondents shall be responsible for the negligence or fraudulence of any Letter of Credit Beneficiary or payee of Acceptance, for the existence, nature, condition, description, value, quality or quantity of the Goods, for the packing, shipment, export, import, handling, storage or delivery thereof, or for the safety or preservation thereof at any time, and neither Fronting Bank nor its agents or correspondents shall be liable for any loss resulting from the total or partial destruction of or damage to or deterioration or fall in value of the Goods, or from the delay in arrival or failure to arrive of either the Goods or of any of the documents relating thereto, or from the inadequacy or invalidity of any document or insurance, or from the default or insolvency of any insurer, carrier or other Person issuing any document with respect to the Goods, or from failure to give or delay in giving notice of arrival of the Goods or any other notice, or from any error in or misinterpretation of or default or delay in the sending, transmission, arrival or delivery of any message, whether in writing or not, by post, telegraph, cable, wireless or otherwise, and the obligations hereunder of each Borrower to each Fronting Bank shall not be in any way lessened or affected if any Draft or document accepted, paid or acted upon by either Fronting Bank or its agents or correspondents does not bear a reference or sufficient reference to a Letter of Credit or if no note thereof is made on a Letter of Credit. SECTION 4.4. Other Lenders' Participation. Each Letter of Credit issued and each Acceptance created pursuant to Section 4.1 and Section 4.2 shall, effective upon its issuance or creation, as the case may be, and without further action, be issued and/or created on behalf of all Lenders (including the Fronting Bank thereof) according to their respective Percentages. Each Lender shall, to the extent of its Percentage, be deemed irrevocably to have participated in the issuance of such Letter of Credit and the creation of such Acceptance and shall be responsible to reimburse promptly the applicable Fronting Bank thereof for Reimbursement Obligations which have not been converted into a Loan on the Disbursement Date or Maturity Date related thereto pursuant to the terms of this Agreement or reimbursed by the Borrowers in accordance with Section 4.5, or which have been converted into a Loan on the Disbursement Date or Maturity Date related thereto pursuant to the terms of this Agreement or reimbursed by the Borrowers but must be returned, restored or disgorged by a Fronting Bank for any reason, and each Lender shall, to the extent of its Percentage, be entitled to receive from the applicable Fronting Bank a ratable portion of all fees and interest with respect to such Letter of Credit and/or such Acceptance (including the letter of credit fees received by such Fronting Bank pursuant to Section 3.3.1, with respect to each Letter of Credit issued by that Fronting Bank, but excluding any fronting fees and other charges payable to the applicable Fronting Bank in its capacity as the Fronting Bank). In the event that any Borrower shall fail to reimburse either Fronting Bank, or if for any reason Loans shall not be made to fund any Reimbursement Obligation, in each case as provided in this Agreement and in an amount equal to the Disbursement amount or the face amount of any matured Acceptance, as applicable, or in the event either Fronting Bank must for any reason return or disgorge such reimbursement, such Fronting Bank shall promptly notify each Lender and the Administrative Agent of the unreimbursed amount of such drawing or face amount of such matured Acceptance and of such Lender's respective participation therein. Each Lender shall make available to the applicable Fronting Bank, whether or not any Default shall have occurred and be continuing, an amount equal to its respective participation in same day or immediately available funds at the office of such Fronting Bank specified in such notice not later than 11:00 a.m., New York time, on the Business Day after the date notified by such Fronting Bank. In the event that any Lender fails to make available to either Fronting Bank the amount of such Lender's participation in such Letter of Credit or such Acceptance as provided herein, such Fronting Bank shall be entitled to recover such amount on demand from such Lender together with interest at the Federal Funds Rate from the date such amount is due through (but excluding) the date such payment is made (together with such other compensatory amounts as may be required to be paid by such Lender to the Administrative Agent pursuant to the Rules for Interbank Compensation of the council on International Banking or the Clearinghouse Compensation Committee, as the case may be, as in effect from time to time). Nothing in this Section shall be deemed to prejudice the right of any Lender to recover from either Fronting Bank any amounts made available by such Lender to such Fronting Bank pursuant to this Section in the event that it is determined by a court of competent jurisdiction in a final nonappealable judgment that the payment with respect to a Letter of Credit or an Acceptance by such Fronting Bank in respect of which payment was made by such Lender constituted gross negligence or wilful misconduct on the part of such Fronting Bank. Each Fronting Bank shall distribute to each other Lender which has paid all amounts payable by it under this Section with respect to any Letter of Credit issued or Acceptance created by such Fronting Bank, such other Lender's Percentage of all payments received by such Fronting Bank from the applicable Borrower in reimbursement of the face amount of such matured Acceptance or drawings honored by such Fronting Bank under such Letter of Credit when such payments are received. SECTION 4.5. Disbursements and Maturities. Each Fronting Bank will notify the applicable Borrower and the Administrative Agent promptly of the presentment for payment of (a) any Letter of Credit issued by that Fronting Bank, together with notice of the date (a "Disbursement Date") such payment shall be made and (b) any matured Acceptance issued by that Fronting Bank. Subject to the terms and provisions of such Letter of Credit and Acceptance (or, if instructed by any Obligor, the waiver of any discrepancies of the terms of payment under a Letter of Credit or Acceptance including the failure to deliver to such Fronting Bank all drafts, certificates, documents and/or instruments required as a condition to making a Disbursement under such Letter of Credit or payment on such matured Acceptance), the applicable Fronting Bank shall make such payment to such Letter of Credit Beneficiary (or its designee) or the payee (or its designee) of such Acceptance. If and to the extent that Loans are not made to fund a Reimbursement Obligation pursuant to Section 2.3, then the Borrowers will reimburse the applicable Fronting Bank within one Business Day following (i) the Disbursement Date for all amounts which such Fronting Bank has disbursed under the Letter of Credit issued by it and (ii) the payment date on such matured Acceptance (whether or not such Acceptance was drawn by the U.S. Borrower, a Warnaco Sub Borrower, the Sub Borrower or any Letter of Credit Beneficiary); provided, that each Foreign Borrower shall only be obligated to reimburse a Fronting Bank for disbursements under Letters of Credit issued for its account. SECTION 4.6. Reimbursement; Outstanding Letters, etc. (a) Each Borrower's obligation under Section 4.5 to reimburse a Fronting Bank with respect to each Disbursement made by that Fronting Bank (a "L/C Reimbursement Obligation") or, as applicable, each payment made by a Fronting Bank upon the maturity of an Acceptance created by that Fronting Bank (an "Acceptance Reimbursement Obligation"; together with a L/C Reimbursement Obligation, a "Reimbursement Obligation") (including fees and interest thereon payable pursuant to Section 3.2 and Section 3.3), and each Lender's obligation to make participation payments pursuant to Section 4.4 in each Disbursement and each payment in respect of a matured Acceptance, shall be absolute, unconditional and irrevocable and shall not be reduced by any event or occurrence including (i) the form, validity, sufficiency, accuracy, genuineness or legal effect of any Letter of Credit or Acceptance or any document submitted by any party in connection with the application for and issuance of a Letter of Credit or creation of an Acceptance, even if it should in fact prove to be in any or all respects invalid, insufficient, inaccurate, fraudulent or forged; (ii) the form, validity, sufficiency, accuracy, genuineness or legal effect of any instrument transferring or assigning or purporting to transfer or assign a Letter of Credit or Acceptance or the rights or benefits thereunder or the proceeds thereof in whole or in part, which may prove to be invalid or ineffective for any reason; (iii) failure of the beneficiary to comply fully with conditions required in order to demand payment under a Letter of Credit or an Acceptance; (iv) errors, omissions, interruptions or delays in transmission or delivery of any messages, by mail, cable, telegraph, telex or otherwise; (v) any loss or delay in the transmission or otherwise of any document or draft required in order to make a Disbursement under a Letter of Credit or payment in respect of a matured Acceptance; (vi) any change in the time, manner or place of payment of, or in any other term of, all or any of the Obligations in respect of any Letter of Credit or Acceptance or any other amendment or waiver of or any consent to departure from any Letter of Credit or an Acceptance; (vii) the existence of any claim, set-off, defense or other right that any Borrower may have at any time against any beneficiary or any transferee of a Letter of Credit or an Acceptance (or any Persons for whom any such beneficiary or any such transferee may be acting), any Fronting Bank or any other Person, whether in connection with the transactions contemplated by the applicable Letter of Credit or Acceptance or any unrelated transaction; (viii) payment by any Fronting Bank under a Letter of Credit or an Acceptance against presentation of a draft, certificate, document and/or instrument that does not strictly comply with the terms of such Letter of Credit or Acceptance; (ix) any release or amendment or waiver of or consent to departure from any guaranty, for all or any of the Obligations in respect of the applicable Letter of Credit or Acceptance; (x) the release to an Obligor or its designee of goods, inventory or other merchandise (whether or not consigned to a Fronting Bank or its designee) which have been provided by a supplier (including where such supplier is also a beneficiary of a Letter of Credit) of an Obligor, even if such release occurs prior to the Fronting Bank inspecting the documents, air waybills, bills of lading or other certificates or instruments which are required under the terms of a Letter of Credit to be presented to the Fronting Bank prior to the Disbursement being made under the relevant Letter of Credit; or (xi) any other circumstance or happening whatsoever, whether or not similar to any of the foregoing, including any other circumstance that might otherwise constitute a defense available to, or a discharge of, any Borrower or a guarantor. The obligations of each Borrower and the Lenders hereunder shall remain in full force and effect and shall apply to any alteration to or extension of the expiration date of any Letter of Credit or any Letter of Credit issued to replace, extend or alter any Letter of Credit during the term of this Agreement. None of the foregoing shall affect, impair or prevent the vesting of any of the rights or powers granted to either Fronting Bank or any Lender hereunder. In furtherance and extension and not in limitation or derogation of any of the foregoing, any action taken or omitted to be taken by either Fronting Bank in good faith (and not constituting gross negligence or willful misconduct) shall be binding upon each Borrower, each Obligor and each such Lender, and shall not put such Fronting Bank under any resulting liability to any Borrower, any Obligor or any such Lender, as the case may be. (b) The applicable Borrower shall pay (without duplication) to the Fronting Banks an amount equal to (i) the then Stated Amount and (ii) the aggregate face amount of all unmatured Acceptances then outstanding in respect of Letters of Credit and Acceptances issued by such Fronting Bank and all unpaid fees in respect of (x) any Letter of Credit or Acceptance outstanding under this Agreement in respect of Letters of Credit and Acceptances issued by such Fronting Bank upon any termination of this Agreement and (y) any Letter of Credit or Acceptance which is affected by, or becomes the subject matter of, any order, judgment, injunction or other such determination (an "Order") or any petition or other application for any Order by any Borrower or any other party, restricting payment by either Fronting Bank under and in accordance with such Letter of Credit or Acceptance or extending either Fronting Bank's or any Lender's liability under such Letter of Credit beyond the expiration date stated therein, or if not stated therein, which would otherwise apply to such Letter of Credit. Payment in respect of each such Letter of Credit or Acceptance described in (x) and (y) in this clause shall be due forthwith upon demand and in Dollars. (c) Each Fronting Bank hereby agrees that it will, with respect to each Letter of Credit and each Acceptance issued by such Fronting Bank that is subjected to any such demand for payment under the preceding clause (b), upon the later of: (i) the date on which any final and non-appealable order, judgment or other such determination has been rendered or issued either terminating any applicable Order or permanently enjoining such Fronting Bank from paying under such Letter of Credit and/or Acceptance; and (ii) (x) in the case of a Letter of Credit, the earlier of (A) the date on which either the original counterpart of such Letter of Credit is returned to such Fronting Bank for cancellation or such Fronting Bank is released by the beneficiary thereof from any further obligations in respect of such Letter of Credit, and (B) the expiry of such Letter of Credit and (y) in the case of an Acceptance, on the date on which either the original Acceptance is returned to such Fronting Bank for cancellation or such Fronting Bank is released by the payee thereto from any further obligations in respect of such Acceptance; pay to the applicable Borrower an amount in Dollars equal to any excess of the amount received by such Fronting Bank pursuant to clause (b) above in respect of such Letter of Credit or such Acceptance (the "Received Amount") over the equivalent in Dollars of the total of amounts applied to reimburse such Fronting Bank for amounts paid by it under such Letter of Credit or such Acceptance, if any (with such Fronting Bank having the right to so appropriate such funds), together with an additional amount in Dollars computed by applying to the amount of such excess from time to time a per annum rate equal to 3% less than the Alternate Base Rate. Such additional amount shall be calculated daily on the basis of a 360 day year for the actual number of days elapsed from and including the date of payment to the applicable Fronting Bank of the Received Amount to (but not including) the date of return to the applicable Borrower of the excess. SECTION 4.7. Deemed Disbursements. Upon (a) the occurrence and during the continuation of any Bankruptcy Event, or (b) the occurrence and during the continuance of any other Event of Default, but, in the case of this clause (b), only following the direction of the Majority Lenders (or, if the Termination Date has not yet occurred, the Required Lenders, and then only to the extent it has been authorized in accordance with Article V of the Modification Agreement by the Required Lenders), (i) an amount equal to that portion of (x) Letter of Credit Outstandings attributable to outstanding and undrawn Letters of Credit and (y) Acceptance Obligations attributable to outstanding and unmatured Acceptances shall, without demand upon or notice to any Borrower, be deemed to have been paid or disbursed by the Fronting Banks under such Letters of Credit or Acceptances, as the case may be, (notwithstanding that such amount may not in fact have been so paid or disbursed); and (ii) upon notification by either Fronting Bank to the Administrative Agent and the U.S. Borrower of its obligations under this Section, the Borrowers shall be immediately obligated to reimburse such Fronting Bank the amount deemed to have been so paid or disbursed by such Fronting Bank; provided, that each Foreign Borrower shall only be obligated to reimburse a Fronting Bank for amounts deemed to have been disbursed under Letters of Credit issued for its account. Any amounts so received by either Fronting Bank from the Borrowers pursuant to this Section shall be held as collateral security for the repayment of such Borrower's Obligations, subject to the terms of the Intercreditor Agreement, in connection with the Letters of Credit issued and the Acceptances created by the Fronting Banks. At any time when such Letters of Credit shall terminate, such Acceptances mature and are paid and all Obligations of the Fronting Banks are either terminated or paid or reimbursed to the applicable Fronting Bank in full, the Obligations of the Borrowers under this Section shall be reduced accordingly (subject, however, to reinstatement in the event any payment in respect of such Letters of Credit or Acceptances is recovered in any manner from either Fronting Bank), and subject to the terms of the Loan Documents, the applicable Fronting Bank will return to the applicable Borrower the excess, if any, of (x) the aggregate amount deposited by the Borrowers with such Fronting Bank and not theretofore applied by such Fronting Bank to any Reimbursement Obligation over (y) the aggregate amount of all Reimbursement Obligations to such Fronting Bank pursuant to this Section, as so adjusted. At such time when all Events of Default shall have been cured or waived, the applicable Fronting Bank shall, subject to the terms of the Loan Documents, return to the applicable Borrower all amounts then on deposit with such Fronting Bank pursuant to this Section. SECTION 4.8. Nature of Reimbursement Obligations. The Borrowers, as applicable, shall assume all risks of the acts, omissions, or misuse of any (a) Letter of Credit by the beneficiary thereof and (b) Acceptance by the payee thereof. Any action, inaction or omission taken or suffered by either Fronting Bank or any Fronting Bank's correspondents under or in connection with a Letter of Credit, any Draft made under any Letter of Credit or any Acceptance or any document relating thereto, if in good faith and in conformity with foreign or domestic laws, regulations or customs applicable thereto shall be binding upon the applicable Borrowers and shall not place either Fronting Bank or any of its correspondents under any resulting liability to such Borrowers. Without limiting the generality of the foregoing, each Fronting Bank and its correspondents may receive, accept or pay as complying with the terms of a Letter of Credit, any Draft under any Letter of Credit, an Acceptance, otherwise in order which may be signed by, or issued to, the administrator or any executor of, or the trustee in bankruptcy of, or the receiver for any property of, or other Person or entity acting as the representative or in the place of, such beneficiary or its successors and assigns. The Borrowers covenant that they will not take any steps, issue any instructions to either Fronting Bank or any of its correspondents or institute any proceedings intended to derogate from the right or ability of either Fronting Bank or its correspondents to honor and pay any Draft or Drafts. Without in any way limiting the provisions of Section 4.6, and notwithstanding anything to the contrary contained in this Agreement or in any other Trade Document, each Borrower irrevocably acknowledges and agrees that it is unconditionally liable for all Reimbursement Obligations with respect to each Disbursement under each Letter of Credit issued or paid, as the case may be, for its account and each payment made on a matured Acceptance created for its account, as applicable (including fees and interest thereon), in each case, regardless (in the case of each of the U.S. Borrower, each Warnaco Sub Borrower and the Sub Borrower) whether such Letter of Credit was issued or such Advance created in respect of the sourcing or other corporate requirements or needs of the U.S. Borrower, the Sub Borrower or any Subsidiary of the U.S. Borrower or Sub Borrower, or otherwise. ARTICLE V CERTAIN LIBO RATE AND OTHER PROVISIONS SECTION 5.1. Incorporation by Reference of Certain LIBO Rate, Increased Capital Costs, Other Provisions. Each of the parties hereto acknowledge and agree that the terms of Section 2.11 of the Modification Agreement, and all other terms of the Modification Agreement to which reference is made therein, together with all related definitions and ancillary provisions, are hereby incorporated into this Agreement by this reference as though specifically set forth in this Article. SECTION 5.2. Funding Losses. In the event any Lender shall incur any loss or expense (including any loss or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Lender to make, continue or maintain any portion of the principal amount of any Loan as, or to convert any portion of the principal amount of any Loan into, a LIBO Rate Loan, but excluding the loss of any anticipated or expected profits in respect of such LIBO Rate Loan) as a result of (a) any conversion or repayment or prepayment of the principal amount of any LIBO Rate Loans on a date other than the scheduled last day of the Interest Period applicable thereto, whether pursuant to Section 3.1 or otherwise; (b) any Loans not being made as LIBO Rate Loans in accordance with the Borrowing Request therefor; or (c) any Loans not being continued as, or converted into, LIBO Rate Loans in accordance with the Continuation/ Conversion Notice therefor, then, upon the written notice of such Lender to the U.S. Borrower and the Administrative Agent, the U.S. Borrower shall, within five Business Days of its receipt thereof, pay directly to such Lender such amount as will (in the reasonable determination of such Lender) reimburse such Lender for such loss or expense. Such written notice (which shall include calculations in reasonable detail) shall, in the absence of manifest error, be conclusive and binding on the U.S. Borrower. SECTION 5.3. Taxes. Each payment made by each Borrower under this Agreement shall be made free and clear of, and without deduction for, any present or future withholding or other taxes imposed on such payments by or on behalf of any government or any political subdivision or agency thereof or therein, in accordance with (and the parties hereto agree to comply with the terms of) Section 2.12 of the Modification Agreement, in each case with all other terms of the Modification Agreement to which reference is made in such Section, together with all related definitions and ancillary provisions, being hereby incorporated into this Agreement by this reference as though specifically set forth in this Section 5.3. SECTION 5.4. Payments, Computations, etc. Unless otherwise expressly provided herein (including as set forth in Section 2.3 and Section 4.5), all payments by the Borrowers pursuant to this Agreement, the Notes or any other Trade Document shall be made by the Borrowers to the Administrative Agent for the account of the Lenders entitled to receive such payment. All such payments required to be made to the Administrative Agent shall be made, without setoff, deduction or counterclaim, not later than 11:00 a.m., Applicable Time, on the date due, in same day or immediately available funds, to such account as the Administrative Agent shall specify from time to time by notice to the U.S. Borrower. To the extent the Administrative Agent receives such funds prior to 12:00 noon, Applicable Time, the Administrative Agent shall promptly remit in same day funds to each Lender its share, if any, of such payments received by the Administrative Agent for the account of such Lender. All interest and fees shall be computed on the basis of the actual number of days (including the first day but excluding the last day) occurring during the period for which such interest or fee is payable over a year comprised of 360 days. Whenever any payment to be made shall otherwise be due on a day which is not a Business Day in New York, such payment shall (except as otherwise required by clause (b) of the definition of the term "Interest Period") be made on the next succeeding Business Day and such extension of time shall be included in computing interest and fees, if any, in connection with such payment. SECTION 5.5. Sharing of Payments. If any Lender shall obtain any payment or other recovery (whether voluntary, involuntary, by application of setoff or otherwise) on account of any Letter of Credit, Acceptance or Loan in excess of payments then or therewith obtained by all Lender Parties, such Lender shall purchase from the other Lender Parties such participations in Obligations (as defined in the Intercreditor Agreement) in accordance with the terms of clause (e) of Section 2.1 of the Intercreditor Agreement. Each Borrower agrees that any Lender Party so purchasing a participation from another Lender Party pursuant to Section 2.1 of the Intercreditor Agreement may, to the fullest extent permitted by law, exercise all its rights of payment (including pursuant to Section 5.6) with respect to such participation as fully as if such Lender Party were the direct creditor of such Borrower in the amount of such participation. If under any applicable bankruptcy, insolvency or other similar law, any Lender Party receives a secured claim in lieu of a setoff to which such Section 2.1 applies, such Lender Party shall, to the extent practicable, exercise its rights in respect of such secured claim in a manner consistent with the rights of the Lender Parties entitled under Section 2.1 of the Intercreditor Agreement to share in the benefits of any recovery on such secured claim. SECTION 5.6. Setoff. Each Lender shall, upon the occurrence of any Bankruptcy Event or, with the consent of the Required Lenders, upon the occurrence of any other Event of Default (and, in each case, only to the extent authorized in accordance with the terms of the Modification Agreement by the Required Lenders and subject in all respects to the terms of the Intercreditor Agreement), have the right to appropriate and apply to the payment of the Obligations (as defined in the Intercreditor Agreement) (whether or not then due) any and all balances, credits, deposits, accounts or moneys of the applicable Borrower then or thereafter maintained with or otherwise held by such Lender; provided, however, that any such appropriation and application shall be subject to the terms of the Intercreditor Agreement. Each Lender agrees promptly to notify the U.S. Borrower and the Administrative Agent after any such setoff and application made by such Lender; provided, however, that the failure to give such notice shall not affect the validity of such setoff and application. The rights of each Lender under this Section are in addition to other rights and remedies (including other rights of setoff under applicable law or otherwise) which such Lender may have. SECTION 5.7. Currency Fluctuations, etc. (a) Not later than 1:00 p.m., New York City time, on each Calculation Date, each Fronting Bank shall (i) determine the Applicable Exchange Rate as of such Calculation Date with respect to each Qualified Foreign Currency for which there are at such time outstanding Non-U.S. Letters of Credit issued by that Fronting Bank and (ii) give notice thereof to the Administrative Agent. The Applicable Exchange Rates so determined shall become effective on the first Business Day immediately following the relevant Calculation Date (a "Reset Date") and shall remain effective until the next succeeding Reset Date. (b) Not later than 3:00 p.m., New York City time, on each Reset Date, each Fronting Bank shall (i) determine the U.S. Dollar Equivalent of the Non-U.S. Letters of Credit issued by that Fronting Bank in each Qualified Foreign Currency then outstanding (after giving effect to any Loans to be made or repaid on such date) and (ii) notify the U.S. Borrower and the Administrative Agent of the results of such determination. SECTION 5.8. European Monetary Union. If, as a result of the implementation of European Monetary Union ("EMU"), (a) any currency that is a Qualified Foreign Currency ceases to be lawful currency of the nation issuing the same and is replaced by a European common currency (the "Euro"), then any amount payable hereunder in such replaced Qualified Foreign Currency by either Fronting Bank in respect of a Disbursement shall instead be payable in Euros and the amount so payable shall be determined by translating the amount payable in such Qualified Foreign Currency to Euros at the exchange rate recognized by the European Central Bank for the purpose of implementing EMU; and (b) any nation issuing a currency that is a Qualified Foreign Currency also issues or recognizes the Euro through the central bank or other comparable authority of such nation, then so long as such nation issues or recognizes both the Qualified Foreign Currency and the Euro as the national currency, any amounts payable hereunder by either Fronting Bank in respect of a Disbursement in such Qualified Foreign Currency shall be payable either in such Qualified Foreign Currency or the Euro (determined in accordance with the method described in the foregoing clause (a)), as may be requested by the applicable Letter of Credit Beneficiary upon notice delivered to the applicable Fronting Bank. Prior to the applicability of clause (a) or (b) of the preceding sentence, each amount payable hereunder in any Qualified Foreign Currency will continue to be payable only in such Qualified Foreign Currency. Each of the Borrowers and each Fronting Bank agrees, at the request of any such party at the time of, or at any time following, the implementation of European Monetary Union, to enter into good faith negotiations concerning an agreement to amend this Agreement in such manner as any such party shall reasonably request in order to reflect the implementation of European Monetary Union and to place the parties hereto in the position they would have been in had European Monetary Union not been implemented. Notwithstanding anything to the contrary in Section 11.1, in the event that the Borrowers and either Fronting Bank are able to agree to an amendment of this Agreement, which amendment solely addresses issues raised by European Monetary Union, this Agreement, as of such amendment's effective date, shall be deemed to be amended by such amendment without the requirement of any further action hereunder by the Lenders or the Majority Lenders, as the case may be. ARTICLE VI CONDITIONS PRECEDENT SECTION 6.1. Initial Credit Extension. The obligations of the Lenders to make any Credit Extension and each Fronting Bank to issue any Letters of Credit or Acceptances shall be subject to the delivery to the Managing Agents of this Agreement duly executed and delivered by the Lenders, each Agent, each Borrower and Group, and the prior or concurrent satisfaction of each of the conditions precedent set forth below in this Section 6.1. SECTION 6.1.1. Resolutions, etc. The Administrative Agent shall have received from each Borrower originally executed copies of a certificate, each dated the date of the Effective Date, of its Secretary or Assistant Secretary as to (a) resolutions of its Board of Directors then in full force and effect authorizing the execution, delivery and performance of this Agreement, the Notes and each other Trade Document to be executed by it; and (b) the incumbency and signatures of those of its officers authorized to act with respect to this Agreement, the Notes and each other Trade Document executed by it, upon which certificate each Lender may conclusively rely until it shall have received a further certificate of the Secretary of such Obligor canceling or amending such prior certificate. SECTION 6.1.2. Delivery of Notes. Each Lender shall have received its Note duly executed and delivered by each Borrower. SECTION 6.1.3. Closing Date Certificate. The Administrative Agent shall have received, with counterparts for each Lender, a closing date certificate, dated the Effective Date and duly executed and delivered by an Authorized Officer of Group, in which certificate Group shall agree and acknowledge that the statements made therein shall be deemed to be true and correct representations and warranties of Group and the Borrowers as of such date, and, at the time such certificate is delivered, such statements shall in fact be true and correct, and such certificate shall include the aggregate principal amount of Interim Loans made in July, August and September. All documents and agreements required to be appended to the closing date certificate shall be in form and substance satisfactory to the Administrative Agent. SECTION 6.1.4. Effectiveness of Modification Agreement, Intercreditor Agreement. The Administrative Agent shall have received evidence satisfactory to it that all conditions to the effectiveness of the Intercreditor Agreement (as set forth in Article III thereof) and the Modification Agreement (as set forth in Article VI thereof) shall have been satisfied in accordance with their terms, without amendment or waiver of any material provision thereof. SECTION 6.1.5. Tradexpress Agreement; MicroTrade Agreement. The Administrative Agent shall have received an originally executed (i) Tradexpress Agreement, dated as of the Effective Date, duly executed and delivered by an Authorized Officer of each applicable Obligor and Scotiabank, and (ii) MicroTrade Agreement, dated as of the Effective Date, duly executed and delivered by an Authorized Officer of each applicable Obligor and BofA. SECTION 6.1.6. Opinions of Counsel. The Administrative Agent shall have received opinions, dated the Effective Date and addressed to the Agents and all Lenders, in each case satisfactory to the Administrative Agent, from (a) Skadden, Arps, Slate, Meagher & Flom LLP, New York counsel to the Obligors, (b) Stanley P. Silverstein, General Counsel for the U.S. Borrower, (c) Garth Patterson, Barbados counsel to Warnaco (HK), and (d) Allen & Overy, Dutch counsel to Warnaco B.V., Warnaco Netherlands and Warnaco Holland. SECTION 6.1.7. Fee Letters. The Administrative Agent shall have received a copy of each Fee Letter, duly executed and delivered by the Administrative Agent or BofA (as applicable) and (in each case) the U.S. Borrower. SECTION 6.2. All Credit Extensions. The obligation of each Lender or each Fronting Bank to make any Credit Extension on any date other than a Funding Date shall be subject to the satisfaction of each of the conditions precedent set forth in this Section 6.2. SECTION 6.2.1. Compliance with Warranties, No Default, etc. Both before and after giving effect to any Credit Extension the following statements shall be true and correct: (a) no event or circumstances has occurred and is continuing, or would result from the making of such Credit Extension, which when considered by itself or together with other past or then existing events or circumstances, could reasonably be expected to have a Material Adverse Effect or constitute or would constitute a Material Adverse Change; (b) the representations and warranties set forth in Article VII, and in each other Trade Document shall, in each case, be true and correct with the same effect as if then made (unless stated to relate solely to an earlier date, in which case such representations and warranties shall have been true and correct as of such earlier date); and (c) the conditions set forth in Section 3.1 of the Modification Agreement shall have been satisfied. SECTION 6.2.2. Credit Request. To the extent that Loans are made as Base Rate Loans or a LIBO Rate Loan with a three month Interest Period, any Drawer requests that the Fronting Bank create an Acceptance, or any Borrower requests that the Fronting Bank issue a Letter of Credit other than by means of notification in accordance with the terms of the Tradexpress Agreement or the MicroTrade Agreement, the Fronting Bank making such Loan, issuing such Letter of Credit or creating an Acceptance shall have been presented with a draft by any Drawer or shall have received a Borrowing Request or Issuance Request, as the case may be, for such Credit Extension, executed and delivered (as applicable) by the applicable Borrower. Each of the delivery (or deemed delivery pursuant to the terms of this Agreement) of a draft by any Drawer, a Borrowing Request or an Issuance Request and the creation of the Acceptance, the acceptance by any Borrower of the proceeds of the Borrowing, the issuance of the Letter of Credit, or the making of a Loan upon a Disbursement or the maturity of an unreimbursed Acceptance, as applicable, shall constitute a representation and warranty by such Borrowers that on the date of such Credit Extension (both immediately before and after giving effect to such Credit Extension and the application of the proceeds thereof) or the creation of an Acceptance or the issuance of the Letter of Credit, as applicable, the statements made in Section 6.2.1 are in each case true and correct. SECTION 6.2.3. Satisfactory Legal Form. All documents executed or submitted pursuant hereto by or on behalf of Group or any of its Subsidiaries shall be satisfactory in form and substance to the Managing Agents; the Managing Agents shall have received all information, approvals, opinions, documents or instruments as the Managing Agents may reasonably request. ARTICLE VII REPRESENTATIONS AND WARRANTIES In order to induce the Fronting Banks, the Lenders and the Agents to enter into this Agreement and to make Loans, create Acceptances and issue Letters of Credit hereunder, each Borrower and Group represents and warrants unto each Agent, each Lender and each Fronting Bank, as set forth in this Article VII. SECTION 7.1. Incorporation by Reference of Representations. Group and each Borrower represents and warrants that the representations and warranties contained in Article IV of the Modification Agreement are true and correct in all material respects, each such representation and warranty set forth in such Article and all other terms of the Modification Agreement to which reference is made therein, together with all related definitions and ancillary provisions, being hereby incorporated into this Agreement by this reference as though specifically set forth in this Article. ARTICLE VIII COVENANTS SECTION 8.1. Affirmative Covenants. Group and each Borrower covenants and agrees with each Agent, each Lender and each Fronting Bank that, until the Trade Termination Date has occurred, they will(and will cause their Subsidiaries to) perform the obligations set forth in this Section 8.1. SECTION 8.1.1. Incorporation by Reference of Affirmative and Reporting Covenants. Group and each Borrower covenants and agrees that they will (and cause their Subsidiaries to) perform, comply with and be bound by all of the agreements, covenants and obligations contained in Section 2.5 and Section 2.8 of the Modification Agreement, each such agreement, covenant and obligation contained in such Section 2.5 and Section 2.8 and all other terms of the Modification Agreement to which reference is made therein, together with all related definitions and ancillary provisions, being hereby incorporated into this Agreement by this reference as though specifically set forth in this Article. SECTION 8.1.2. Use of Proceeds. Group and each Borrower covenants and agrees that the Credit Extensions shall be used solely for the following purposes: (a) Letters of Credit shall be issued for the account of (i) the U.S. Borrower to support obligations of the U.S. Borrower and its wholly-owned Subsidiaries (and their respective divisions), (ii) each Foreign Borrower to support obligations of such Foreign Borrower, (iii) the Sub Borrower to support obligations of the Sub Borrower and its wholly-owned Subsidiaries (and their respective divisions) and (iv) each Warnaco Sub Borrower to support obligations of such Warnaco Sub Borrower and its wholly-owned Subsidiaries (and their respective divisions), in each case to facilitate such Borrower's (and, if applicable, Subsidiaries' and divisions') worldwide sourcing from suppliers of merchandise; (b) in lieu of a Fronting Bank honoring its Disbursement obligation under (in the case of Fronting Bank(BNS)) Existing Letters of Credit or (in the case of each Fronting Bank) Letters of Credit issued by such Fronting Bank for the account of such Persons, Acceptances will be created for the account of (i) the U.S. Borrower to support obligations of the U.S. Borrower and its wholly-owned Subsidiaries (and their respective divisions), (ii) the Sub Borrower to support obligations of the Sub Borrower and its wholly-owned Subsidiaries (and their respective divisions) and (iii) each Warnaco Sub Borrower to support obligations of such Warnaco Sub Borrower and its wholly-owned Subsidiaries (and their respective divisions); and (c) proceeds of Loans shall be made to one or more Borrowers (i) by Fronting Bank(BNS) to fund the Reimbursement Obligations in respect of Existing Letters of Credit and by the applicable Fronting Bank to fund Reimbursement Obligations in respect of Letters of Credit issued by it, in each case, under which Disbursements are made, (ii) by Fronting Bank(BNS) in respect of Existing Acceptances and by each Fronting Bank to fund Reimbursement Obligations in respect of Acceptances created by such Fronting Bank, in each case which have Maturity Dates occurring on (or about) the date of the Loan and (iii) by Fronting Bank(BNS) to refinance on or within one Business Day following the Effective Date the principal amount of all Interim Loans. SECTION 8.1.3. Possession, etc. Until payment by the Borrowers to the applicable Fronting Bank of all Obligations with respect to a particular Letter of Credit (including by way of the making of a Loan or creation of an Acceptance in respect of a Disbursement under such Letter of Credit), the Administrative Agent, on behalf of the Lender Parties, shall have the absolute right and title to and the unqualified right to the possession and disposal of, the Goods covered by such Letter of Credit, to the extent not theretofore released to a Borrower (or its designee) on trust or bailee receipt or otherwise, and all Documents issued in respect of the Goods relating to such Letter of Credit, all contracts, contract rights and policies or certificates of insurance specifically relating to such Goods under such Letter of Credit (all of the foregoing shall be referred to herein as the "Subject Property" under such Letter of Credit) and shall be entitled to exercise all rights as an unpaid seller of such Subject Property, in each case subject to the terms of the Intercreditor Agreement. SECTION 8.2. Financial and Negative Covenants. Group and each Borrower covenants and agrees that, at all times prior to the Trade Termination Date, they will perform, comply with and be bound by all of the agreements, covenants and obligations contained in Section 2.6 and Section 2.7 of the Modification Agreement, each such agreement, covenant and obligation contained in such Section 2.6 and Section 2.7 and all other terms of the Modification Agreement to which reference is made therein, together with all related definitions and ancillary provisions, being hereby incorporated into this Agreement by this reference as though specifically set forth in this Article. ARTICLE IX EVENTS OF DEFAULT SECTION 9.1. Listing of Events of Default. Each of the following events or occurrences described in this Section 9.1 shall constitute an "Event of Default". SECTION 9.1.1. Non-Payment of Obligations. Any Borrower shall default in the payment or prepayment when due of (a) any principal of or interest on any Loan, (b) any Reimbursement Obligation, or (c) any fee or of any other Obligation, or prepayment and in each case such default in payment or prepayment shall continue unremedied for more than three Business Days from the date such payment or prepayment was due. SECTION 9.1.2. Breach of Warranty. Any representation or warranty of any Borrower or any other Obligor (or any of their officers) made or deemed to be made hereunder or in any other Trade Document executed by it (including any certificates delivered pursuant to Article VI) shall prove to have been incorrect in any material respect when made or deemed made. SECTION 9.1.3. Non-Performance of Certain Covenants and Obligations. Any Obligor shall default in the due performance and observance of any of its obligations under (i) Section 8.1.2 or (ii) any other agreements contained in this Agreement or in the Tradexpress Agreement if such failure shall remain unremedied for 30 days after written notice thereof shall have been given to the U.S. Borrower by Fronting Bank(BNS) or (if earlier) after any officer of the U.S. Borrower obtains knowledge thereof. SECTION 9.1.4. Termination, etc., of Trade Documents. Any Trade Document shall (except in accordance with its terms), in whole or in part, terminate, cease to be effective or cease to be the legally valid, binding and enforceable obligation of the Obligor that is a party thereto; or any Borrower or any other Obligor shall, directly or indirectly, contest in any manner such effectiveness, validity, binding nature or enforceability (except as aforesaid). SECTION 9.1.5. Event of Default Under Modification Agreement. Any Event of Default under (and as defined in) the Modification Agreement shall occur and be continuing. SECTION 9.2. Action Upon Bankruptcy Event. If any Bankruptcy Event shall occur, the Commitments (if not theretofore terminated) shall automatically terminate and the outstanding principal amount of all outstanding Loans and all other Obligations shall automatically be and become immediately due and payable, without notice or demand. SECTION 9.3. Action Upon Other Event of Default. If any Event of Default (other than any Bankruptcy Event) shall occur for any reason, whether voluntary or involuntary, and be continuing, (a) the Administrative Agent, upon the direction of the Majority Lenders (or, if the Termination Date has not occurred, upon the direction of the Required Lenders, in accordance with Section 5.1 of the Modification Agreement), shall by notice to the U.S. Borrower declare the Commitments (if not theretofore terminated) to be terminated, whereupon the Commitments shall terminate and/or (b) the Administrative Agent, upon the direction of the Majority Lenders (or, if the Termination Date has not occurred, upon the direction of the Required Lenders in accordance with Section 5.1 of the Modification Agreement), shall by notice to the U.S. Borrower declare an amount equal to the sum of the aggregate face amount of all unmatured Acceptances, the principal amount of all Loans and the maximum aggregate amount that is or at any time thereafter may become available for drawing under any outstanding Letters of Credit (whether or not any beneficiary shall have presented, or shall be entitled at such time to present, the drafts or other documents required to draw under such Letters of Credit) to be immediately due and payable, the applicable Borrowers being obligated to cash collateralize all such obligations immediately (in accordance with Section 4.7), whereupon the full unpaid amount of such Loans and other Obligations which shall be so declared due and payable shall be and become immediately due and payable, without further notice, demand or presentment. ARTICLE X THE AGENTS, THE FRONTING BANKS SECTION 10.1. Actions. Each Lender (i) hereby appoints Scotiabank as its Administrative Agent and Scotiabank and Citibank as the Managing Agents under and for purposes of this Agreement, the Notes and each other Trade Document and (ii) hereby appoints Scotiabank as administrative agent and each Managing Agent as Debt Coordinator for purposes of the Loan Documents. Each Lender authorizes each Agent to act on behalf of such Lender under this Agreement, the Notes, each other Trade Document and the Loan Documents and, in the absence of other written instructions from the Majority Lenders or, if applicable, the Required Lenders received from time to time by such Agent (with respect to which the such Agent agrees that it will comply, except as otherwise provided in this Section, or (if applicable), the Loan Documents or as otherwise advised by counsel), to exercise such powers hereunder and thereunder as are specifically delegated to or required of such Agent by the terms hereof and thereof, together with such powers as may be reasonably incidental thereto. Each Lender hereby indemnifies (which indemnity shall survive any termination of this Agreement, the other Trade Documents and the Loan Documents) each Agent and each Fronting Bank, pro rata according to such Lender's Percentage, from and against any and all liabilities, obligations, losses, damages, claims, costs or expenses of any kind or nature whatsoever which may at any time be imposed on, incurred by, or asserted against, such Agent in any way relating to or arising out of this Agreement, the Notes, any other Trade Document and any Loan Documents, including reasonable attorneys' fees, and as to which such Agent is not reimbursed by the Borrowers; provided, however, that no Lender shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, claims, costs or expenses which are determined by a court of competent jurisdiction in a final proceeding to have resulted from such Agent's gross negligence or wilful misconduct. Each Agent shall not be required to take any action hereunder, under the Notes, under any other Trade Document or under any Loan Documents, or to prosecute or defend any suit in respect of this Agreement, the Notes, any other Trade Document or under any Loan Documents, unless it is indemnified hereunder to its satisfaction. If any indemnity in favor of any Agent shall be or become, in such Agent's determination, inadequate, such Agent may call for additional indemnification from the Lenders and cease to do the acts indemnified against hereunder until such additional indemnity is given. SECTION 10.2. Copies, etc. Each Agent shall give prompt notice to each Lender of each notice or request required or permitted to be given to such Agent by the Borrowers pursuant to the terms of this Agreement (unless concurrently delivered to the Lenders by a Borrower). Each Agent will distribute to each Lender each document or instrument received for its account and copies of all other communications received by such Agent from the Borrowers for distribution to the Lenders by such Agent in accordance with the terms of this Agreement. SECTION 10.3. Exculpation. Neither any Agent nor any of its affiliates, directors, officers, employees or agents shall be liable to any Lender for any action taken or omitted to be taken by it under this Agreement, any other Trade Document or any Loan Document, or in connection herewith or therewith, except for its own wilful misconduct or gross negligence, nor responsible for any recitals or warranties herein or therein, nor for the effectiveness, enforceability, validity or due execution of this Agreement, any other Trade Document or any Loan Document, nor for the creation, perfection or priority of any Liens (if any) purported to be created by any of the Trade Documents or any Loan Documents, or the validity, genuineness, enforceability, existence, value or sufficiency of collateral security (if any), nor to make any inquiry respecting the performance by any Borrower of its obligations hereunder, under any other Trade Document or any Loan Document. Any such inquiry which may be made by any Agent shall not obligate it to make any further inquiry or to take any action. Each Agent shall be entitled to rely upon advice of counsel concerning legal matters and upon any notice, consent, certificate, statement or writing which such Agent believes to be genuine and to have been presented by a proper Person. SECTION 10.4. Successor. Each Agent may resign as such at any time upon at least 30 days' prior notice to the U.S. Borrower and all Lenders. If such Agent at any time shall resign, the Majority Lenders may appoint another Lender as a successor Agent which shall thereupon become an Agent in the capacity of the resigning Agent hereunder. If no successor Agent shall have been so appointed by the Majority Lenders, and shall have accepted such appointment, within 30 days after the retiring Agent's giving notice of resignation, then the retiring Agent may, on behalf of the Lenders, appoint a successor Agent, which shall be one of the Lenders or a commercial banking institution organized under the laws of the U.S. (or any State thereof) or a U.S. branch or agency of a commercial banking institution, and having a combined capital and surplus of at least $500,000,000; provided, however, that if, any retiring Agent is unable to find a commercial banking institution which is willing to accept such appointment and which meets the qualifications set forth above, the retiring Agent's resignation shall nevertheless thereupon become effective, the retiring Agent shall be discharged from its duties and obligations under the Trade Documents and the Loan Documents and the Lenders shall (subject to any contrary terms in any Loan Document) assume and perform all of the duties of Agent hereunder or under the Loan Documents until such time, if any, as the Majority Lenders appoint a successor as provided above. Upon the acceptance of any appointment as an Agent hereunder by a successor Agent, such successor Agent shall be entitled to receive from the retiring Agent such documents of transfer and assignment as such successor Agent may reasonably request, and shall thereupon succeed to and become vested with all rights, powers, privileges and duties of the retiring Agent. After any retiring Agent's resignation hereunder as an Agent, the provisions of (a) this Article X shall inure to its benefit as to any actions taken or omitted to be taken by it while it was an Agent under this Agreement, the Trade Documents and the Loan Documents; and (b) Section 11.3 and Section 11.4 shall continue to inure to its benefit. SECTION 10.5. Loans Made, Letters of Credit Issued or Acceptances Created by Scotiabank and BofA. Scotiabank and BofA shall each have the same rights and powers with respect to (x) the Loans made by it or any of its affiliates, (y) the Notes held by it or any of its affiliates, and (z) its participating interests in the Letters of Credit and Acceptances as any other Lender and may exercise the same as if it were not an Agent, an Issuer or a Fronting Bank. Each of Scotiabank and BofA and their affiliates may accept deposits from, lend money to, and generally engage in any kind of business with the U.S. Borrower or any Subsidiary or Affiliate of the U.S. Borrower as if Scotiabank and BofA was not an Agent, Issuer or Fronting Bank hereunder. SECTION 10.6. Credit Decisions. Each Lender acknowledges that it has, independently of each Agent and each other Lender, and based on such Lender's review of the financial information of the Borrowers, this Agreement, the other Trade Documents and the Loan Documents (in all cases the terms and provisions of which being satisfactory to such Lender) and such other documents, information and investigations as such Lender has deemed appropriate, made its own credit decision to extend its Commitment. Each Lender also acknowledges that it will, independently of each Agent and each other Lender, and based on such other documents, information and investigations as it shall deem appropriate at any time, continue to make its own credit decisions as to exercising or not exercising from time to time any rights and privileges available to it under this Agreement or any other Trade Document. SECTION 10.7. Defaults. The Administrative Agent shall not be deemed to have knowledge or notice of the occurrence of a Default unless the Administrative Agent has received a written notice from a Lender or the U.S. Borrower specifying such Default and stating that such notice is a "Notice of Default". In the event that the Administrative Agent receives such a notice of the occurrence of a Default, the Administrative Agent shall give prompt notice thereof to the Lenders. The Administrative Agent shall (subject to Section 10.1) take such action with respect to such Default as shall be directed by the Majority Lenders or, if applicable pursuant to the terms of the Loan Documents, the Required Lenders; provided, that unless and until the Administrative Agent shall have received such directions, the Administrative Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default as it shall deem advisable in the best interest of the Lenders except to the extent that this Agreement or the Loan Documents expressly requires that such action be taken, or not be taken, only with the consent or upon the authorization of the Majority Lenders or, if applicable, pursuant to the terms of the Loan Documents the Required Lenders, or all Lenders. Each Lender acknowledges and agrees that if a Loan Document requires actions be taken or not taken upon the consent or direction of the Required Lenders or all Lender Parties, then, notwithstanding anything to the contrary contained in any Trade Document, the Agents shall only be required to take or omit to take such action upon the direction of the Required Lenders or the Lender Parties, and the Majority Lenders and Lenders under the Trade Documents shall not direct the Agents to act in a manner contrary to the Loan Documents. SECTION 10.8. Authorization of Administrative Agent Relating to the Loan Documents. In addition to the other provisions of this Article, each Lender hereby authorizes and directs the Administrative Agent, on behalf of such Lender, from time to time (including on the Effective Date) to execute and deliver all documents and instruments related to the Loan Documents that are required to be delivered on behalf of the Lenders in connection with the Loan Documents, subject, where applicable, to the receipt of any requisite vote of the Lenders. ARTICLE XI MISCELLANEOUS PROVISIONS SECTION 11.1. Waivers, Amendments, etc. (a) The provisions of this Agreement and of each other Trade Document may from time to time be amended, modified or waived, if such amendment, modification or waiver is in writing and consented to by the Borrowers and the Majority Lenders and, if applicable, the Required Lenders and (in all cases) subject to the terms of the Intercreditor Agreement, if applicable to the particular amendment, modification or waiver; provided, however, that no such amendment, modification or waiver which would: (i) modify any requirement hereunder that any particular action be taken by all the Lenders shall be effective unless consented to by each Lender; (ii) modify this Section 11.1, reduce the percentage specified in the definition of "Majority Lenders", reduce any fees described in Article III, or extend the Commitment Termination Date shall be made without the consent of each Lender; (iii) increase the Commitment Amount or (except as otherwise contemplated by this Agreement, including the definition "Aggregate Amount") the Percentage of any Lender without the consent of each Lender adversely affected thereby; (iv) extend the due date for, or reduce the amount of, (A) any scheduled repayment or prepayment of principal of or interest on or fees payable in respect of any Loan (or reduce the principal amount of or rate of interest on or fees payable in respect of any Loan) shall be made without the consent of each Lender adversely affected thereby, or (B) any Reimbursement Obligation shall be made without the consent of the Lender to whom such Reimbursement Obligation is owed; (v) affect adversely the interests, rights or obligations of either Fronting Bank in its capacity as a Fronting Bank shall be made without the consent of such Fronting Bank; (vi) affect adversely the interests, rights or obligations of the Managing Agents in their capacity as the Managing Agents shall be made without the consent of each Managing Agent; or (vii) affect adversely the interests, rights or obligations of the Administrative Agent in its capacity as the Administrative Agent shall be made without consent of the Administrative Agent. No failure or delay on the part of any Agent or any Lender in exercising any power or right under this Agreement or any other Trade Document shall operate as a waiver thereof, nor shall any single or partial exercise of any such power or right preclude any other or further exercise thereof or the exercise of any other power or right. No notice to or demand on any Borrower in any case shall entitle it to any notice or demand in similar or other circumstances. No waiver or approval by any Agent or any Lender under this Agreement or any other Trade Document shall, except as may be otherwise stated in such waiver or approval, be applicable to subsequent transactions. No waiver or approval hereunder shall require any similar or dissimilar waiver or approval thereafter to be granted hereunder. SECTION 11.2. Notices. All notices and other communications provided to any party hereto under this Agreement or any other Trade Document shall be in writing or by facsimile and addressed, delivered or transmitted to such party at its address, or facsimile number set forth, in the case of any Borrower, Group or any Agent, below its signature hereto or, in the case of any Lender, set forth in Schedule II or in the Lender Assignment Agreement or at such other address or facsimile number as may be designated by such party in a notice to the other parties. Any notice, if mailed and properly addressed with postage prepaid or if properly addressed and sent by pre-paid courier service, shall be deemed given when received; any notice, if transmitted by facsimile, shall be deemed given when transmitted. SECTION 11.3. Payment of Costs and Expenses. The U.S. Borrower agrees to pay on demand all reasonable expenses of the Agents (including the reasonable fees and out-of-pocket expenses of counsel to the Agents and of local counsel, if any, who may be retained by counsel to the Agents) in connection with (a) the negotiation, preparation, execution and delivery of this Agreement and of each other Trade Document, including schedules and exhibits, and any amendments, waivers, consents, supplements or other modifications to this Agreement or any other Trade Document as may from time to time hereafter be required, whether or not the transactions contemplated hereby are consummated; and (b) the preparation and review of the form of any document or instrument relevant to this Agreement or any other Trade Document. Each Borrower covenants to pay on demand all reasonable costs and expenses of the Agents, the Fronting Banks and the Lenders incurred in the enforcement of any Agent's, each Fronting Bank's or any Lender's rights under this Agreement and any Trade Document (including the reasonable fees and expenses of counsel for such Agent, each Fronting Bank and such Lender with respect thereto) and, further, covenants that it will indemnify the Agents, each Fronting Bank and the Lenders on demand against all loss or damage to such Persons arising out of the issuance of or other action taken by such Persons in connection with any Letter of Credit or Loan including the costs relating to any legal process instituted by any party restraining or seeking to restrain either Fronting Bank from accepting or paying any Acceptance, Letter of Credit or Draft. Each Borrower also agrees that neither any Agent, either Fronting Bank nor any Lender shall have any liability to it for any reason in respect of the creation of any Acceptance, the issuance of any Letter of Credit or Loan other than on account of such Agent's, Fronting Bank's or Lender's gross negligence or wilful misconduct. All payments to be made to such Agent, either Fronting Bank and such Lender hereunder shall, subject to Section 5.3, be made for value on the date due and free of any withholding tax or levy, other than taxes imposed on the net income of such Agent, such Fronting Bank or such Lender, and each Borrower covenants that such taxes or levies, other than as excepted, shall be paid by such Borrower. The provisions of this paragraph will survive payment in full hereunder. SECTION 11.4. Indemnification. In consideration of the execution and delivery of this Agreement by each Lender and the extension of the Commitments, each Borrower hereby indemnifies, exonerates and holds each Agent, each Fronting Bank and each Lender and each of their respective affiliates, officers, directors, employees and agents (collectively, the "Indemnified Parties") free and harmless from and against any and all actions, causes of action, suits, losses, costs, liabilities and damages, and expenses incurred in connection therewith (irrespective of whether any such Indemnified Party is a party to the action for which indemnification hereunder is sought), including the reasonable fees and expenses of counsel for such Agent, such Fronting Bank and such Lender with respect thereto (collectively, the "Indemnified Liabilities"), incurred by the Indemnified Parties or any of them as a result of, or arising out of, or relating to (a) any transaction financed or to be financed in whole or in part, directly or indirectly, with the proceeds of any Loan or the use of any Letter of Credit or Acceptance; or (b) the entering into and performance of this Agreement and any other Trade Document by any of the Indemnified Parties (including any action brought by or on behalf of any Borrower as the result of any determination by the Majority Lenders pursuant to Article VI not to make any Credit Extension); except for any such Indemnified Liabilities arising for the account of a particular Indemnified Party by reason of the relevant Indemnified Party's gross negligence or wilful misconduct. SECTION 11.5. Survival. The obligations of each Borrower under Sections 5.1, 5.2, 5.3, 11.3 and 11.4, and the obligations of the Lenders under Section 10.1, shall in each case survive any termination of this Agreement, the payment in full of all Obligations and the termination of all Commitments. Furthermore, the Obligors acknowledge and agree that the obligations under Sections 5.3, 5.4, 5.5, 5.6, 11.3 and 11.4 of the Interim Credit Agreement are continuing obligations and have, notwithstanding the termination of the Interim Credit Agreement, survived such termination. The representations and warranties made by the Borrowers in this Agreement and in each other Trade Document shall survive the execution and delivery of this Agreement and each such other Trade Document. SECTION 11.6. Severability. Any provision of this Agreement or any other Trade Document which is prohibited or unenforceable in any jurisdiction shall, as to such provision and such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions of this Agreement or such Trade Document or affecting the validity or enforceability of such provision in any other jurisdiction. SECTION 11.7. Headings. The various headings of this Agreement and of each other Trade Document are inserted for convenience only and shall not affect the meaning or interpretation of this Agreement or such other Trade Document or any provisions hereof or thereof. SECTION 11.8. Execution in Counterparts, Effectiveness, etc. This Agreement may be executed by the parties hereto in several counterparts, each of which shall be executed by each Borrower and each Agent and be deemed to be an original and all of which shall constitute together but one and the same agreement. This Agreement shall become effective when counterparts hereof executed on behalf of each Borrower and the Lenders (or notice thereof satisfactory to the Agents) shall have been received by the Agents and notice thereof shall have been given by the Agents to the U.S. Borrower and each Lender. SECTION 11.9. Governing Law; Entire Agreement. THIS AGREEMENT, THE NOTES AND EACH OTHER TRADE DOCUMENT SHALL EACH BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK. This Agreement, the Notes and the other Trade Documents constitute the entire understanding among the parties hereto with respect to the subject matter hereof and (subject to Section 11.5) supersede any prior agreements, written or oral, with respect thereto. SECTION 11.10. Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns; provided, however, that: (a) No Borrower may assign or transfer its rights or obligations hereunder without the prior written consent of the Agents and all Lenders; and (b) the rights of sale, assignment and transfer of the Lenders are subject to Section 11.11. SECTION 11.11. Sale and Transfer of Loans and Notes; Participations in Loans and Notes. Each Lender may assign, or sell participations in, its Loans and obligations to risk participate in Credit Extensions to one or more other Persons in accordance with this Section 11.11. SECTION 11.11.1. Assignments. Any Lender, (a) with the written consent of the U.S. Borrower (which consent shall not be unreasonably delayed or withheld and which consent shall not be required during the occurrence and continuance of a Default or if the assignment is to a Person described in clause (b) of Section 8.6 of the Intercreditor Agreement), each Fronting Bank (in its sole discretion) and the Administrative Agent, may at any time assign and delegate to one or more commercial banks, or to other financial institutions, or to Persons of the type described in Section 8.6(b) of the Intercreditor Agreement; and (b) with the consent of each Fronting Bank, and notice to the U.S. Borrower and the Administrative Agent, but without the consent of the U.S. Borrower or the Administrative Agent, may assign and delegate to any other Lender, (each Person described in either of the foregoing clauses as being the Person to whom such assignment and delegation is to be made, being hereinafter referred to as an "Assignee Lender"), all or a fraction of such Lender's total Loans and obligations to risk participate in Credit Extensions in a minimum amount of $10,000,000 of Loans and obligations to risk participate in Credit Extensions (other than in the case of an assignment to any other Lender or (with the requisite consents described above) any Affiliate of a Lender or an assignment of the remaining Loans and obligations to risk participate in Credit Extensions of such assignor Lender). No Borrower shall be required to pay an amount under Section 5.3 that is greater than the amount which it would have been required to pay had no assignment been made. The Borrowers and the Administrative Agent shall be entitled to continue to deal solely and directly with such Lender in connection with the interests so assigned and delegated to an Assignee Lender until (i) written notice of such assignment and delegation, together with payment instructions, addresses and related information with respect to such Assignee Lender, shall have been given to the U.S. Borrower (for the purposes hereof, also acting on behalf of the Foreign Borrowers) and the Administrative Agent by such Lender and such Assignee Lender, (ii) such Assignee Lender shall have executed and delivered to the U.S. Borrower (for the purposes hereof, also acting on behalf of the Foreign Borrowers) and the Administrative Agent a Lender Assignment Agreement, accepted by the Administrative Agent, and shall have become a party to the Intercreditor Agreement and the Modification Agreement in accordance with the terms thereof; and (iii) the processing fees described below shall have been paid. From and after the date that the Administrative Agent accepts such Lender Assignment Agreement, (x) the Assignee Lender thereunder shall be deemed automatically to have become a party hereto and to the extent that rights and obligations hereunder have been assigned and delegated to such Assignee Lender in connection with such Lender Assignment Agreement, shall have the rights and obligations of a Lender hereunder and under the other Trade Documents, and (y) the assignor Lender, to the extent that rights and obligations hereunder have been assigned and delegated by it in connection with such Lender Assignment Agreement, shall be released from its obligations hereunder and under the other Trade Documents. Within five Business Days after its receipt of notice that the Administrative Agent has received an executed Lender Assignment Agreement with respect to the assignment of Loans, the Borrowers shall execute and deliver to the Administrative Agent (for delivery to the relevant Assignee Lender) new Notes evidencing such Assignee Lender's assigned Loans and obligations to risk participate in Credit Extensions and, if the assignor Lender has Loans and obligations to risk participate in Credit Extensions hereunder, replacement Notes in the principal amount of the Loans and obligations to risk participate in Credit Extensions retained by the assignor Lender hereunder (such Notes to be in exchange for, but not in payment of, those Notes then held by such assignor Lender). Each such Note shall be dated the date of the predecessor Notes. The assignor Lender shall mark the predecessor Notes "exchanged" and deliver them to the U.S. Borrower. Accrued interest on that part of the predecessor Notes evidenced by the new Notes, and accrued fees, shall be paid as provided in the Lender Assignment Agreement. Accrued interest on that part of the predecessor Notes evidenced by the replacement Notes shall be paid to the assignor Lender. Accrued interest and accrued fees shall be paid at the same time or times provided in the predecessor Notes and in this Agreement. Such assignor Lender or such Assignee Lender must also pay a processing fee to the Administrative Agent upon delivery of any Lender Assignment Agreement in the amount of $3,500. Any attempted assignment and delegation not made in accordance with this Section 11.11.1 shall be null and void. Nothing in this Section shall prevent or prohibit any Lender from pledging its rights (but not its obligations to make Loans, to issue or participate in Letters of Credit and to create or participate in Acceptances) under this Agreement and/or its Loans and/or Notes hereunder to a Federal Reserve Bank in support of borrowing made by such Lender from such Federal Reserve Bank. SECTION 11.11.2. Participations. Any Lender may at any time sell to one or more commercial banks or other Persons (each of such commercial banks and other Persons being herein called a "Participant") participating interests (or a sub-participating interest, in the case of a Lender's participating interest in a Letter of Credit or Acceptance) in any of the Loans, obligations to risk participate in Credit Extensions or other interests of such Lender hereunder; provided, however, that (a) no participation or sub-participation contemplated in this Section 11.11.2 shall relieve such Lender from its obligations to risk participate in Credit Extensions or its other obligations hereunder or under any other Trade Document, (b) such Lender shall remain solely responsible for the performance of its obligations to risk participate in Credit Extensions and such other obligations, (c) the Borrowers and the Administrative Agent shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement and each of the other Trade Documents, (d) no Participant, unless such Participant is an affiliate of such Lender, or is itself a Lender, shall be entitled to require such Lender to take or refrain from taking any action hereunder or under any other Trade Document, except that such Lender may agree with any Participant that such Lender will not, without such Participant's consent, take any actions of the type described in clause (ii) (iii) or (iv) of Section 11.1, and (e) no Borrower shall be required to pay any amount under Section 5.3 that is greater than the amount which it would have been required to pay had no participating interest been sold. SECTION 11.11.3. Fronting Bank Assignments. In the event that S&P, Moody's or Thompson's BankWatch (or InsuranceWatch Ratings Service, in the case of Lenders that are insurance companies (or Best's Insurance Reports, if such insurance company is not rated by InsuranceWatch Ratings Service)) shall, after the date that any Lender becomes a Lender, downgrade the long-term certificate of deposit ratings of such Lender, and the resulting ratings shall be below BBB-, Baa3 and B (or BB, in the case of Lender that is an insurance company (or B, in the case of an insurance company not rated by InsuranceWatch Ratings Service)), then each Fronting Bank and the U.S. Borrower shall have the individual right, but not the obligation, upon notice to such Lender, to replace (or, in the case of a request by either Fronting Bank, to request the U.S. Borrower to use its reasonable efforts to replace) such Lender with an Assignee Lender (in accordance with and subject to the restrictions contained in Section 11.11.1), and such affected Lender hereby agrees to transfer and assign without recourse (in accordance with and subject to the restrictions contained in Section 11.11.1) all of its interests, rights and obligations in respect of its Commitment, Loans and other Obligations owing to it, together with the obligations of such affected Lender hereunder, to such Assignee Lender; provided, however, that (i) no such assignment shall conflict with any law, rule and regulation or order of any governmental authority and (ii) such Assignee Lender shall pay to such affected Lender in immediately available funds on the date of such assignment the principal of and interest accrued to the date of payment on the Loans made by such Lender hereunder and all other amounts accrued for such Lender's account or owed to it hereunder. SECTION 11.12. Other Transactions. Nothing contained herein shall preclude any Agent, the Fronting Lender or any other Lender from engaging in any transaction, in addition to those contemplated by this Agreement or any other Trade Document, with the Borrowers or any of their affiliates in which such Borrower or such affiliate is not restricted hereby from engaging with any other Person. SECTION 11.13. Forum Selection and Consent to Jurisdiction. ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY OTHER TRADE DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE AGENTS, THE LENDERS, GROUP OR THE BORROWERS SHALL BE BROUGHT AND MAINTAINED EXCLUSIVELY IN THE COURTS OF THE STATE OF NEW YORK, LOCATED IN NEW YORK COUNTY, OR IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK. THE PARTIES HERETO HEREBY EXPRESSLY AND IRREVOCABLY SUBMIT TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK, LOCATED IN NEW YORK COUNTY, AND OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK FOR THE PURPOSE OF ANY SUCH LITIGATION AS SET FORTH ABOVE AND IRREVOCABLY AGREE TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH SUCH LITIGATION. EACH FOREIGN BORROWER HEREBY IRREVOCABLY APPOINTS THE U.S. BORROWER (IN SUCH CAPACITY, THE "PROCESS AGENT"), WITH AN OFFICE ON THE DATE HEREOF AT 90 PARK AVENUE, NEW YORK, NEW YORK 10016, UNITED STATES, AS ITS AGENT TO RECEIVE, ON SUCH FOREIGN BORROWER'S BEHALF AND ON BEHALF OF SUCH FOREIGN BORROWER'S PROPERTY, SERVICE OF COPIES OF THE SUMMONS AND COMPLAINT AND ANY OTHER PROCESS WHICH MAY BE SERVED IN ANY SUCH ACTION OR PROCEEDING. SUCH SERVICE MAY BE MADE BY MAILING OR DELIVERING A COPY OF SUCH PROCESS TO SUCH FOREIGN BORROWER IN CARE OF THE PROCESS AGENT AT THE PROCESS AGENT'S ABOVE ADDRESS, AND SUCH FOREIGN BORROWER HEREBY IRREVOCABLY AUTHORIZES AND DIRECTS THE PROCESS AGENT TO ACCEPT SUCH SERVICE ON ITS BEHALF. AS AN ALTERNATIVE METHOD OF SERVICE, EACH BORROWER FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF NEW YORK. EACH BORROWER HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY HAVE OR HEREAFTER MAY HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. TO THE EXTENT THAT ANY BORROWER HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, SUCH BORROWER HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS AGREEMENT AND THE OTHER TRADE DOCUMENTS. SECTION 11.14. Waiver of Jury Trial. THE PARTIES HERETO HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY OTHER TRADE DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE AGENTS, THE LENDERS, THE FRONTING BANKS, GROUP OR THE BORROWERS. THE PARTIES HERETO ACKNOWLEDGE AND AGREE THAT THEY HAVE RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION (AND EACH OTHER PROVISION OF EACH OTHER TRADE DOCUMENT TO WHICH IT IS A PARTY) AND GROUP AND EACH BORROWER ACKNOWLEDGES THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE AGENTS, THE FRONTING BANKS AND THE LENDERS ENTERING INTO THIS AGREEMENT AND EACH SUCH OTHER TRADE DOCUMENT. SECTION 11.15. UCP; etc. (a) The Uniform Customs and Practice for Documentary Credits as most recently published by the International Chamber of Commerce (the "UCP") shall in all respects apply to each Letter of Credit issued hereunder and shall be deemed for such purpose to be a part hereof as if fully incorporated herein. In the event of any conflict between the UCP and the governing law of the Agreement, the UCP shall prevail to the extent necessary to remove the conflict. (b) In the event of any issuance of a Letter of Credit for which any Borrower may apply from time to time hereafter, or, of any extension of the maturity or time for presentation of any Draft, or, of any renewal, extension or increase in the amount of a Letter of Credit or any other modifications of its terms, in each case with the consent or at the request of the U.S. Borrower, the terms of the Agreement shall continue in force and apply to the Letter of Credit so issued, or, to a Letter of Credit so renewed, extended, increased or otherwise modified, or, to any, Draft, document or property covered thereby and to any action taken by either Fronting Bank or its agents or correspondents in accordance with such issuance, renewal, extension, increase or other modification. SECTION 11.16. Usury Restraint. The provisions of this Agreement shall be subject to any applicable law, regulation, order, rule or direction (a "Usury Restraint") which prohibits or restricts the charging, receipt or retention of interest or other amounts at the rates and amounts set forth herein (the "Stated Rate") in excess (the "Excess") of the maximum rates or amount (the "Maximum Rate") stipulated in the Usury Restraint. The provisions of this Agreement shall not require the payment or permit the collection of interest in excess of the Maximum Rate from time to time. If the Lenders comply (whether or not required to do so at law) with such Usury Restraint then, to the extent permitted by law, a subsequent reduction in the Stated Rate below the Maximum Rate shall be deemed not to reduce the Stated Rate below the Maximum Rate until the total amount of interest and other amounts earned and retained, measured by a dollar amount, equals the amount of interest and other amounts which would have been earned and retained hereunder, inclusive of the Excess, measured by a dollar amount, if the Stated Rate had not been held at the Maximum Rate or any amount had not been refunded to the applicable Borrower. SECTION 11.17. Judgment Currency. The Obligations of the Borrowers, Group and each other Obligor in respect of any sum due to any Lender, each Fronting Bank or the Administrative Agent hereunder, under the Notes or under or in respect of any other Trade Document shall, notwithstanding any judgment in a currency (the "Judgment Currency") other than Dollars, be discharged only to the extent that on the Business Day following receipt by such Lender, the applicable Fronting Bank or the Administrative Agent of any sum adjudged to be so due in the Judgment Currency, such Lender, the applicable Fronting Bank or the Administrative Agent, in accordance with normal banking procedures, purchases Dollars with the Judgment Currency. If the amount of Dollars so purchased is less than the sum originally due to such Lender, either Fronting Bank or the Administrative Agent, each Borrower and Group agrees as a separate obligation and notwithstanding any such judgment, to indemnify each Lender, such Fronting Bank and the Administrative Agent, as the case may be, against such loss. SECTION 11.18. Future Wholly-Owned Domestic Subsidiaries Designated as Warnaco Sub Borrowers. Upon no less than 30 days', and no more than 60 days' (or such lesser or greater periods of time as may be approved by the Administrative Agent), written notice to the Administrative Agent, Group may from time to time designate certain of its wholly-owned Domestic Subsidiaries to be Warnaco Sub Borrowers hereunder and Schedule I shall be deemed revised to reflect such designation; provided that, (a) (i) at no time shall there be more than fifteen (15) Borrowers under this Agreement and (ii) prior to becoming a Warnaco Sub Borrower hereunder, each such designated wholly-owned Domestic Subsidiary shall have executed and delivered a Joinder Agreement and shall have executed and delivered to the Administrative Agent (or otherwise become a party to) a Domestic Subsidiary Guaranty. Upon compliance with this clause (a), each designated Warnaco Sub Borrower shall become, for all purposes, a Borrower under this Agreement, and shall have all the rights, powers and obligations of a Borrower hereunder; and (b) from time to time Group may, or if necessary to comply with clause (a)(i) of this Section 11.18 shall, execute and deliver to the Administrative Agent a Designation and Release Certificate which shall designate one or more of the Sub Borrower, the Foreign Borrowers or the Warnaco Sub Borrowers (each such designated Borrower, a "Released Borrower") which, immediately prior to the date of such Designation and Release Certificate, was a Borrower under this Agreement and which shall, upon delivery of such Designation and Release Certificate, no longer be a "Borrower" (or Sub Borrower, Foreign Borrower or Warnaco Sub Borrower, as the case may be) for purposes of this Agreement; and such Released Borrower shall (i) repay in full the entire unpaid principal amount of its outstanding Loans, if any, (ii) cash collateralize any and all Letters of Credit issued and/or Acceptances created, as the case may be, in respect of which it has a Reimbursement Obligation, (iii) pay in full any and all reasonable costs and expenses (including attorneys' fees as well as those costs and expenses set forth in Section 5.2) incurred in connection with its release hereunder, (iv) pursuant to Section 11.5, acknowledge and confirm that certain of the provisions of this Agreement shall, notwithstanding the Released Borrower's release hereunder, be continuing obligations and shall survive such release, and (v) execute and deliver a certificate, in form and substance satisfactory to the Administrative Agent, certifying that all of the events set forth in clauses (b)(i) through (b)(iv) above shall have occurred. Upon delivery of the certificate described in clause (b)(v) above, such Released Borrower shall automatically be released from all obligations of a Borrower hereunder (except such obligations which survive pursuant to Section 11.5) without requiring any further action by any party, including any written release by any of the Lender Parties. SECTION 11.19. Assumption of Certain Loans by U.S. Borrower. (a) The U.S. Borrower may, from time to time, provide both the Administrative Agent and each Fronting Bank with no less than five (5) Business Days' written notice that it intends to assume those LIBO Rate Loans made by the Fronting Banks to Warnaco (HK) (each such notice, an "Assumption Notice"), and upon the date which is five (5) Business Days following the date of such Assumption Notice (each such date, an "Assumption Date"), each Loan so identified shall be deemed to be assumed in toto by the U.S. Borrower, without any further action by the U.S. Borrower, either Fronting Bank or any other Person, and all obligations in respect of each such Loan, from and after such Assumption Date, shall be deemed to be the sole and direct obligation of the U.S. Borrower for all purposes of this Agreement and Warnaco (HK) shall, concurrently with such assumption, be released of its obligations to repay each such Loan for all purposes of this Agreement. (b) In furtherance of the foregoing, on any Assumption Date, the U.S. Borrower: (i) agrees to be bound by and perform each duty and obligation with respect to the applicable Loan as if it were the original "Borrower" of such Loan; (ii) accepts and assumes all liabilities related to any representation or warranty made by, as applicable, Warnaco (HK) in connection with the applicable Loan and confirms and restates all such representations and warranties as of such Assumption Date as if it were the original "Borrower" of such Loan; and (iii) confirms and acknowledges that it is the "Borrower" referred to in this Agreement with respect to the applicable Loan as if it had been the "Borrower" thereof under this Agreement from the original making of such Loan. SECTION 11.20. Joinder to Loan Documents. By its signature below, each Lender hereby: (a) confirms that it has received a copy of the Intercreditor Agreement, the Collateral Documents and all of the other Loan Documents; and (b) agrees that it will (i) be bound by the provisions of the Intercreditor Agreement, each Collateral Document and each other Loan Document, in each case, applicable to it as a Lender Party and (ii) perform all obligations which are required to be performed by it as a Lender Party pursuant to the Intercreditor Agreement, each Collateral Document and each other Loan Document. From and after the date hereof, each Lender shall be a "Lender Party" for all purposes under the Loan Documents, have the rights and obligations of a Lender Party under the Intercreditor Agreement, the Facility Agreement, and under the other Loan Documents and be bound by the provisions of the Loan Documents. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized as of the day and year first above written. WARNACO INC. By: /s/ -------------------------------- Title: Address: 90 Park Avenue New York, New York 10016 Facsimile No.:212-687-0480 Attention: Chief Financial Officer General Counsel WARNACO (HK) LTD. By: /s/ -------------------------------- Title: Address: 2A, Jing Hin Industrial Bldg. 5 Wang Kee Street Kowloon Bay, Kowloon Hong Kong Facsimile No.:852-2755-2265 Attention: Director of Finance DESIGNER HOLDINGS, LTD. By: /s/ -------------------------------- Title: Address: 90 Park Avenue New York, New York 10016 Facsimile No.:212-687-0480 Attention: Chief Financial Officer General Counsel AUTHENTIC FITNESS PRODUCTS, INC. By: /s/ -------------------------------- Title: Address: 90 Park Avenue New York, New York 10016 Facsimile No.:212-687-0480 Attention: Chief Financial Officer General Counsel WARNACO B.V. By: /s/ -------------------------------- Title: By: /s/ -------------------------------- Title: Address: c/o Warnaco Inc. 90 Park Avenue New York, New York 10016 Facsimile No.:212-687-0480 Attention: Chief Financial Officer General Counsel WARNACO NETHERLANDS B.V. By: /s/ -------------------------------- Title: By: /s/ -------------------------------- Title: Address: c/o Warnaco Inc. 90 Park Avenue New York, New York 10016 Facsimile No.:212-687-0480 Attention: Chief Financial Officer General Counsel WARNACO HOLLAND B.V. By: /s/ -------------------------------- Title: By: /s/ -------------------------------- Title: Address: c/o Warnaco Inc. 90 Park Avenue New York, New York 10016 Facsimile No.:212-687-0480 Attention: Chief Financial Officer General Counsel THE WARNACO GROUP, INC. By: /s/ -------------------------------- Title: Address: 90 Park Avenue New York, New York 10016 Facsimile No.:212-687-0480 Attention: Chief Financial Officer General Counsel THE BANK OF NOVA SCOTIA, as Administrative Agent By: /s/ -------------------------------- Title: BANK OF AMERICA, N.A. By: /s/ -------------------------------- Title: SOCIETE GENERALE By: /s/ -------------------------------- Title: CITIBANK, N.A. By: /s/ -------------------------------- Title: THE BANK OF NOVA SCOTIA By: /s/ -------------------------------- Title: CITIBANK, N.A. By: /s/ -------------------------------- Title: THE BANK OF NEW YORK By: /s/ -------------------------------- Title: COMMERZBANK AG, NEW YORK BRANCH By: /s/ -------------------------------- Title: By: /s/ -------------------------------- Title: THE DAI-ICHI KANGYO BANK, LIMITED By: /s/ -------------------------------- Title: FLEET NATIONAL BANK By: /s/ -------------------------------- Title: SOCIETE GENERALE By: /s/ -------------------------------- Title: BANK OF AMERICA, N.A. By: /s/ -------------------------------- Title: BANK OF TOKYO-MITSUBISHI TRUST COMPANY By: /s/ -------------------------------- Title: BANKBOSTON, N.A. By: /s/ -------------------------------- Title: UNICREDIT ITALIANO By: /s/ -------------------------------- Title: By: /s/ -------------------------------- Title: THE FUJI BANK, LIMITED, NEW YORK BRANCH By: /s/ -------------------------------- Title: THE INDUSTRIAL BANK OF JAPAN By: /s/ -------------------------------- Title: KBC BANK N.V. By: /s/ -------------------------------- Title: HSBC BANK USA By: /s/ -------------------------------- Title: MERITA BANK PLC - NEW YORK BRANCH By: /s/ -------------------------------- Title: By: /s/ -------------------------------- Title: MORGAN GUARANTY TRUST COMPANY OF NEW YORK By: /s/ -------------------------------- Title: THE SANWA BANK, LIMITED, NEW YORK BRANCH By: /s/ -------------------------------- Title: DEN DANSKE BANK By: /s/ -------------------------------- Title: REPUBLIC NATIONAL BANK By: /s/ -------------------------------- Title: STANDARD CHARTERED BANK By: /s/ -------------------------------- Title: SUN TRUST BANK By: /s/ -------------------------------- Title: By: /s/ -------------------------------- Title: WACHOVIA BANK, N.A. By: /s/ -------------------------------- Title: BANK LEUMI USA By: /s/ -------------------------------- Title: TABLE OF CONTENTS Section Page ARTICLE I DEFINITIONS AND ACCOUNTING TERMS 1.1. Defined Terms......................................................2 1.2. Use of Defined Terms..............................................16 1.3. Cross-References..................................................16 1.4. Accounting and Financial Determinations...........................16 ARTICLE II COMMITMENTS, BORROWING PROCEDURES AND NOTES 2.1. Commitments.......................................................16 2.1.1. Loan Commitment...................................................16 2.1.2. Commitment to Issue Letters of Credit and Create Acceptances......18 2.1.3. Lenders Not Required to Make Loans and Fronting Banks Not Required to Issue Letters of Credit or Create Acceptances Under Certain Circumstances.......................................19 2.2. Reduction of the Commitment Amount................................20 2.3. Borrowing Procedure; Interim Loans Refinanced With Loans Hereunder.........................................................20 2.4. Continuation and Conversion Elections.............................23 2.5. Funding...........................................................23 2.6. Notes.............................................................23 ARTICLE III REPAYMENTS, PREPAYMENTS, INTEREST AND FEES 3.1. Repayments and Prepayments........................................24 3.2. Interest Provisions...............................................25 3.2.1. Rates.............................................................25 3.2.2. Default Rates.....................................................26 3.2.3. Payment Dates.....................................................26 3.2.4. Allocation of Interest Payments...................................27 3.3. Fees..............................................................28 3.3.1. Letter of Credit and Acceptance Fees Payable to the Lenders...........................................................28 3.3.2. Letter of Credit and Acceptance Fees Payable to the Fronting Banks....................................................28 3.3.3. Fee Letters.......................................................29 3.3.4. Facility Fee......................................................29 ARTICLE IV LETTERS OF CREDIT AND ACCEPTANCES 4.1. Issuance of Letters of Credit and Creation of Acceptances.........29 4.1.1. Letters of Credit.................................................29 4.1.2. Non-U.S. Letters of Credit........................................31 4.1.3. Acceptances.......................................................32 4.2. Issuances, Extensions and Creations...............................33 4.3. Destruction of Goods, etc.........................................34 4.4. Other Lenders' Participation......................................34 4.5. Disbursements and Maturities......................................35 4.6. Reimbursement; Outstanding Letters, etc...........................36 4.7. Deemed Disbursements..............................................38 4.8. Nature of Reimbursement Obligations...............................39 ARTICLE V CERTAIN LIBO RATE AND OTHER PROVISIONS 5.1. Incorporation by Reference of Certain LIBO Rate, Increased Capital Costs, Other Provisions...................................40 5.2. Funding Losses....................................................40 5.3. Taxes.............................................................41 5.4. Payments, Computations, etc.......................................41 5.5. Sharing of Payments...............................................41 5.6. Setoff............................................................42 5.7. Currency Fluctuations, etc........................................42 5.8. European Monetary Union...........................................43 ARTICLE VI CONDITIONS PRECEDENT 6.1. Initial Credit Extension..........................................43 6.1.1. Resolutions, etc..................................................43 6.1.2. Delivery of Notes.................................................44 6.1.3. Closing Date Certificate..........................................44 6.1.4. Effectiveness of Modification Agreement, Intercreditor Agreement.........................................................44 6.1.5. Tradexpress Agreement; MicroTrade Agreement.......................44 6.1.6. Opinions of Counsel...............................................44 6.1.7. Fee Letters.......................................................45 6.2. All Credit Extensions.............................................45 6.2.1. Compliance with Warranties, No Default, etc.......................45 6.2.2. Credit Request....................................................45 6.2.3. Satisfactory Legal Form...........................................46 ARTICLE VII REPRESENTATIONS AND WARRANTIES 7.1. Incorporation by Reference of Representations.....................46 ARTICLE VIII COVENANTS 8.1. Affirmative Covenants.............................................46 8.1.1. Incorporation by Reference of Affirmative and Reporting Covenants.........................................................46 8.1.2. Use of Proceeds...................................................46 8.1.3. Possession, etc...................................................47 8.2. Financial and Negative Covenants..................................48 ARTICLE IX EVENTS OF DEFAULT 9.1. Listing of Events of Default......................................48 9.1.1. Non-Payment of Obligations........................................48 9.1.2. Breach of Warranty................................................48 9.1.3. Non-Performance of Certain Covenants and Obligations..............48 9.1.4. Termination, etc., of Trade Documents.............................48 9.1.5. Event of Default Under Modification Agreement.....................48 9.2. Action Upon Bankruptcy Event......................................49 9.3. Action Upon Other Event of Default................................49 ARTICLE X THE AGENTS, THE FRONTING BANKS 10.1. Actions...........................................................49 10.2. Copies, etc.......................................................50 10.3. Exculpation.......................................................50 10.4. Successor.........................................................50 10.5. Loans Made, Letters of Credit Issued or Acceptances Created by Scotiabank and BofA............................................51 10.6. Credit Decisions..................................................51 10.7. Defaults..........................................................52 10.8. Authorization of Administrative Agent Relating to the Loan Documents.........................................................52 ARTICLE XI MISCELLANEOUS PROVISIONS 11.1. Waivers, Amendments, etc..........................................52 11.2. Notices...........................................................53 11.3. Payment of Costs and Expenses.....................................54 11.4. Indemnification...................................................54 11.5. Survival..........................................................55 11.6. Severability......................................................55 11.7. Headings..........................................................55 11.8. Execution in Counterparts, Effectiveness, etc.....................55 11.9. Governing Law; Entire Agreement...................................56 11.10. Successors and Assigns............................................56 11.11. Sale and Transfer of Loans and Notes; Participations in Loans and Notes...................................................56 11.11.1. Assignments.......................................................56 11.11.2. Participations....................................................58 11.11.3. Fronting Bank Assignments.........................................58 11.12. Other Transactions................................................59 11.13. Forum Selection and Consent to Jurisdiction.......................59 11.14. Waiver of Jury Trial..............................................60 11.15. UCP; etc..........................................................60 11.16. Usury Restraint...................................................61 11.17. Judgment Currency.................................................61 11.18. Future Wholly-Owned Domestic Subsidiaries Designated as Warnaco Sub Borrowers..........................................61 11.19. Assumption of Certain Loans by U.S. Borrower......................62 11.20. Joinder to Loan Documents.........................................63 SCHEDULE I - List of Warnaco Sub Borrowers SCHEDULE II - Percentages; LIBOR Office: Domestic Office SCHEDULE III - List of Interim [Loans] SCHEDULE IV - Amount of Lender's Note SCHEDULE V - Aggregate Amount EXHIBIT A - Form of Note EXHIBIT B - Form of Issuance Request EXHIBIT C - Form of Borrowing Request EXHIBIT D - Form of Continuation/Conversion Notice EXHIBIT E - Form of Lender Assignment Agreement EXHIBIT F - Form of Joinder Agreement EXHIBIT G - Form of Designation and Release Certificate EXHIBIT H - Form of Intercreditor Agreement EXHIBIT I - Form of Modification Agreement EX-99 6 0006.txt EXHIBIT 99.5 - MEMORANDUM OF UNDERSTANDING EXHIBIT 99.5 MEMORANDUM OF UNDERSTANDING Scotia Capital (U.S.A.) Inc. ("Party A") and The Warnaco Group, Inc. ("Party B") are parties to the Equity Forward Purchase Transaction dated as of December 10, 1999 (the "Agreement"). Party A and Party B agree that the Agreement shall be amended and supplemented as follows, effective immediately: 1. On the earlier of (a) the date (the "Debt Amendment Date") that the terms of Party B's credit agreements are amended (as contemplated by the September 16, 2000 draft of the Amendment, Modification, Restatement and General Provisions Agreement (the "Facility Agreement")) and (b) October 31, 2000, Party B will execute and deliver to Party A a promissory note (the "Modification Note"). The Modification Note shall (i) be in a principal amount equal to the sum of (x) an amount representing the Number of Shares times the difference between the Forward Price (computed as if today were the Optional Termination Date) and today's closing price for the Shares as reported by the Exchange (the "Initial Share Reset Price"), which is $4.50 and (y) an amount to be determined by Party A and Party B as equal to the accretion in Forward Price calculated on the Initial Share Reset Price from now to April 15, 2001 times the Number of Shares, discounted to the date hereof at the interest rate effective today under the Facility Agreement, adjusted by (z) the breakage costs (positive or negative) incurred by Party A in connection with this modification on swaps entered into by it to hedge the Transaction, (ii) bear interest commencing today at 3-month LIBOR plus the applicable margin in effect from time to time under Section 2.4(a) of the Facility Agreement (the "Note Rate"), payable quarterly in arrears, and (iii) mature on August 12, 2002. 2. On the Debt Amendment Date, Party B shall repay $2,533,935 (this amount assumes that the banks' commitment reduction under the Facility Agreement will be 8%, and will be adjusted to reflect the actual commitment reduction) of principal of the Modification Note. In addition, on the Debt Amendment Date Party B shall pay to Party A a fee in the amount of $ 237,556. 3. If on any date on or after April 15, 2001 the closing price reported by the Exchange for the Shares is less than the Initial Share Reset Price, Party A may at any time thereafter sell Shares accumulated by it during the Accumulation Period ("Subject Shares"); provided, however, that in any 30-day period Party A may sell no more than 16.7% of the Number of Shares as of the date hereof; and provided, further, that Party A shall coordinate with Sun Trust Bank to sell their Shares in an orderly fashion. 4. Following the end of each calendar month, within three Business Days' notice to Party B of the relevant amounts, (a) with respect to each sale of Subject Shares during such calendar month at a price greater than the Forward Price at the time of such sale, at Party B's option either (i) Party A shall make a cash payment to Party B in an amount equal to the aggregate amount of such excess for the Shares sold during such calendar month (including interest from the date of settlement of each sale at the Note Rate then applicable), which shall immediately be applied by Party B as cash collateral in such amount to secure the Modification Note or (ii) Party B shall reduce the principal amount of the Modification Note by such aggregate excess; and (b) with respect to each sale of Subject Shares during such calendar month at a price less than the Forward Price at the time of such sale, Party B shall at its option either (i) execute and deliver a promissory note to Party A which shall be in the form of the Modification Note except that the principal amount thereof shall be equal to the aggregate amount of such shortfall for the Shares sold during such calendar month (including interest from the date of settlement of each sale at the Note Rate then applicable) (each such note, a "Subsequent Note") or (ii) deliver to Party A Shares with an aggregate value (determined according to the sale price of such accumulated Shares) equal to such aggregate shortfall. Each sale of Subject Shares shall reduce the Number of Shares under the Transaction. 5. From the date the Modification Note is issued, the Forward Price shall be calculated as follows: Until April 15, 2001, the Forward Price shall be equal to the Initial Share Reset Price Following April 15, 2001, the Forward Price shall be equal to [1 + (Note Rate x Day Count/(365)] x the Initial Share Reset Price) where: "Day Count" is the number of days in the period commencing on and including April 15, 2001 to but excluding the Termination Date. 6. The Decline in Share Price and Decline in Credit Rating provisions (clauses (i) and (ii) of the first sentence of Section 6.IV) and related provisions of the Agreement which effect such provisions are hereby deleted. The Termination Date is hereby amended to August 12, 2002 7. On the Debt Amendment Date, all of Party B's obligations under the Modification Note, each Subsequent Note and the Agreement shall be secured by liens on the assets of Party B and its subsidiaries on a pari passu basis with Party B's indebtedness. If the Debt Amendment Date has not occurred by November 1, 2000 (or such earlier or later date that the bank waivers in respect of Party B's second- quarter 2000 financial covenants shall not be in effect), Party A may by written notice terminate the Transaction, which will be settled (at Party B's option) by Cash Settlement or Net Share Settlement according to the provisions of the Agreement, and the Disposition Period shall commence on the Exchange Business Day on which such notice becomes effective. 8. All capitalized terms not otherwise defined herein shall have the meanings set forth in the Agreement. 9. The parties hereto agree that this Memorandum of Understanding constitutes an unconditional obligation, enforceable in accordance with its terms. The parties further agree to execute such additional agreements and documents as may be necessary to give further effect to the agreements hereunder. 10. This Memorandum of Understanding shall be governed by the laws of the State of New York, without references to principles of conflict of laws. SCOTIA CAPITAL (U.S.A.) INC. By: /S/ -------------------------------------- THE WARNACO GROUP, INC. By: /S/ -------------------------------------- Dated: September 19, 2000 Acknowledgment and Consent Each of the undersigned are Guarantors under and as defined in the Guaranty dated as of December 10, 1999, issued in connection with the Equity Forward Purchase Transaction between Scotia Capital (U.S.A.) Inc. ("Party A"), and The Warnaco Group, Inc. ("Party B"), dated December 10, 1999. Each of the undersigned hereby acknowledges and consents to the foregoing Memorandum of Understanding dated September 19, 2000 between Party A and Party B. WARNACO INC. WARNACO INTERNATIONAL INC. WARNACO U.S. INC. MYRTLE AVENUE, INC. GREGORY STREET, INC. DESIGNER HOLDINGS, LTD. OUTLET STORES, INC. JEANSWEAR HOLDINGS, INC. CALVIN KLEIN JEANSWEAR COMPANY CKJ HOLDINGS INC. By /S/ ---------------------------------------- Title: Dated: September 19, 2000 EX-99 7 0007.txt EXHIBIT 99.6 - EQUITY FORWARD PURCHASE TRANSACTION EXHIBIT 99.6 [GRAPHIC OMITTED] SCOTIA CAPITAL (USA) INC. ONE LIBERTY PLAZA, 165 BROADWAY, 26TH FLOOR, NEW YORK, NEW YORK 10006 December 10, 1999 The Warnaco Group, Inc. 90 Park Avenue New York, New York 10016 Attention: Mr. Bill Finkelstein Dear Sirs: RE: SCOTIA CAPITAL (U.S.A.) INC. ("PARTY A") THE WARNACO GROUP, INC. ("PARTY B") EQUITY FORWARD PURCHASE TRANSACTION The purpose of this facsimile is to set forth the terms and conditions of the Transaction entered into between Party A and Party B on the Trade Date specified below (the "Transaction"). This facsimile constitutes a "Confirmation" as referred to in the ISDA Master Agreement specified below. This Confirmation is subject to and incorporates the definitions contained in the 1991 ISDA Definitions, as supplemented by the 1998 Supplement (the "1991 ISDA Definitions"), and the 1996 ISDA Equity Derivatives Definitions (the "Equity Definitions") (each as published by the International Swaps and Derivatives Association, Inc. ("ISDA")) (collectively, the "ISDA Definitions"). This Confirmation is also subject to, and incorporates, the definitions contained in Section 14 of the form of the 1992 ISDA Master Agreement (Multicurrency - Cross Border) (the "Section 14 Definitions"), but without any Schedule or other modification thereto, as published by ISDA (the "ISDA Agreement"). In the event of any inconsistency between the ISDA Definitions, the Section 14 Definitions and this Confirmation, this Confirmation will govern. In the event of any inconsistency between the ISDA Definitions and the Section 14 Definitions, the Section 14 Definitions will govern. Until such time as an ISDA Agreement is entered into between you and us, this Confirmation evidences a complete and binding agreement between you and us as to the terms of the Transaction to which this Confirmation relates. Upon execution by you and us of an ISDA Agreement, with such ISDA Agreement incorporating such modifications as you and we shall in good faith agree, this Confirmation will supplement, form part of, and be subject to, such ISDA Agreement. All provisions contained in the ISDA Agreement shall, upon its execution, govern this Confirmation except as expressly modified below. The following provisions in paragraphs 1 through 5 will govern the Transaction evidenced hereby until such time as an ISDA Agreement is entered into between you and us where upon such provisions shall be replaced by the terms of the ISDA Agreement: 1. MANNER OF PAYMENTS Each party will make each payment specified in this Confirmation as being payable by it, not later than the due date for value on that date in the place specified below, in freely transferable funds and in the manner customary for such payments in the required currency. If on any date amounts would otherwise be payable in the same currency by each party to the other, then, on such date, each party's obligation to make payment of any such amount will be automatically satisfied and discharged and, if the aggregate amount that would otherwise have been payable by one party exceeds the aggregate amount that would otherwise have been payable by the other party, replaced by an obligation upon the party by whom the larger aggregate amount would have been payable to pay to the other party the excess of the larger aggregate amount over the smaller aggregate amount. 2. DEFAULT (a) If, at any time, an Event of Default has occurred and is then continuing with respect to a party hereto (such party being hereinafter referred to as the "Defaulting Party"), then the other party (hereinafter referred to as the "Non-defaulting Party"), shall have the right to early terminate and liquidate the Transaction evidenced hereby, together with all other Specified Transactions entered into between Party A and Party B (collectively the "Terminated Transactions") and determine a net amount due in respect of the Terminated Transactions in accordance with the early termination payment calculation provisions of Section 6(e)(i)(3) of the ISDA Agreement based on a payment measure of Market Quotation and a payment method of Second Method. For purposes of giving effect to the foregoing, the Termination Currency shall be United States Dollars. For purposes hereof, "Event of Default" means, in the context of Party A, (i) the failure to make, when due, any payment required of it under this Confirmation and such failure is not remedied within three Business Days following written notice of such failure, or (ii) the occurrence with respect to Party A of any of the Bankruptcy events set out in Section 5(a)(vii) of the ISDA Agreement. In the context of Party B, "Event of Default" means (i) the failure to make, when due, any payment required of it under this Confirmation and such failure is not remedied within three Business Days following written notice of such failure, (ii) the occurrence with respect to Party B of any of the Bankruptcy events set out in Section 5(a)(vii) of the ISDA Agreement, (iii) the occurrence of an "Event of Default" as such term is defined in a Credit Agreement, dated as of November 19, 1999, made by and among Warnaco Inc., The Warnaco Group, Inc., certain banks and financial institutions, as the "Initial Lenders", The Bank of Nova Scotia and Salomon Smith Barney, Inc., as "Co-Lead Arrangers" and "Co-Book Managers", Citibank, N.A., as "Syndication Agent", Societe Generale and Commerzbank AG, as "Co-Documentation Agents" and The Bank of Nova Scotia as "Administrative Agent", as amended and supplemented from time to time (the "Credit Agreement"), (iv) Party B at any time during the Term hereof effects with one or more counterparties (other than Party A), forward equity purchase transactions pertaining to the purchase of Shares (as defined below) on a forward basis having an aggregate forward purchase price which, when combined with the product of the Number of Shares multiplied by the Forward Price as on the Termination Date (each as defined below), exceeds USD 150,000,000 (the "Forward Price Limit"); provided, however, that an Event of Default shall not be constituted pursuant to this Section 2(a)(iv) unless Party B's breach of the Forward Price Limit is continuing as of the tenth Business Day following the date on which such breach occurred; (v) the joint and several guarantee, dated December 10, 1999, in the form appended hereto as Exhibit A (the "Guarantee") made by the parties set out in the signature page thereof (the "Guarantors") (x) fails or ceases to be in full force and effect prior to the satisfaction by Party B of all of its obligations to Party A hereunder; or (z) any of the Guarantors disaffirms, repudiates or rejects, in whole or in part, or challenges the validity of the Guarantee; (vi) the occurrence of a default, event of default or other similar condition or event (however described) in respect of Party B under any forward equity purchase transaction pertaining to Shares which may now or hereafter be entered into between Party B and any third party and such third party has exercised any rights under such forward equity purchase transaction, which are predicated upon the occurrence of such default, event of default or similar condition or event, to terminate such transaction prior to its scheduled termination date. Party B hereby covenants and agrees to notify Party A immediately upon the occurrence of any such event and the exercise of such termination rights. (b) The Non-defaulting Party may exercise its right to early termination and liquidate the Terminated Transactions by written notice to the Defaulting Party, which notice shall set forth the amount of the termination payment derived by the Non-defaulting Party as set forth above; provided that, in the event the Defaulting Party becomes subject to a Bankruptcy in the nature of any one of the events specified in Section 5(a)(vii) (1), (3), (4), (5), (6) or, to the extent analogous thereto, (8), of the ISDA Agreement and any court, tribunal or regulatory authority with competent jurisdiction acting pursuant to any bankruptcy or insolvency law or other similar law affecting the Defaulting Party makes an order which has or purports to have the effect of prohibiting the Non-defaulting Party from terminating the Terminated Transactions at any time after the occurrence of any such events, then the Terminated Transactions shall be deemed to have been terminated immediately upon the occurrence of any of the events specified in Section 5(a)(vii) (1), (3), (5), (6) or, to the extent analogous thereto, (8) and as of the time immediately preceding the institution of the relevant proceeding or the presentation of the relevant petition in respect of Section 5(a)(vii) (4) or, to the extent analogous thereto, (8). (c) In the event the termination payment derived in accordance with the foregoing represents an amount owing by the Non-defaulting Party to the Defaulting Party, the Non-defaulting Party shall have the right to set off such termination payment against any amounts payable (whether at such time or in the future or upon the occurrence of a contingency) by the Defaulting Party to the Non-Defaulting Party (irrespective of the currency or the place of payment of the obligation) under any other agreement between the Defaulting Party and the Non-Defaulting Party (the "Other Agreement Amount"). For this purpose, the termination payment or the Other Agreement Amount may be converted into the currency in which the other is denominated by the Non-defaulting Party acting in a commercially reasonable manner. If all or part of the Other Agreement Amount is not then due, such Other Agreement Amount, or part thereof, may be present-valued by the Non-defaulting Party acting in a commercially reasonable manner. If all or part of the Other Agreement Amount is unascertained, the Non-defaulting Party may in good faith estimate such amount and set-off in respect of the estimate subject to accounting to the Defaulting Party when the obligation is ascertained. 3. BASIC REPRESENTATIONS Each of the parties hereto makes to the other each of the "Basic Representations" contained in Section 3(a) and (c) of the ISDA Agreement. 4. TRANSFERABILITY Neither this Confirmation nor any interest or obligation in or under this Confirmation may be transferred (whether by way of security or otherwise) by either party without the prior written consent of the other party and any purported transfer in violation hereof shall be void. 5. JURISDICTION The Confirmation will be governed and construed in accordance with the laws of the State of New York, without reference to the choice of law doctrine. With respect to any suit, action or proceedings relating to this Confirmation ("Proceedings"), each party irrevocably: (i) submits to non-exclusive jurisdiction of the courts of the State of New York; and (ii) waives any objection which it may have at any time to the laying of venue of any Proceedings brought in any such court, waives any claim that such Proceedings have been brought in an inconvenient forum and further waives the right to object, with respect to such Proceedings, that such court does not have any jurisdiction over such party. Nothing in this Confirmation precludes either party from bringing Proceedings in any other jurisdiction nor will the bringing of Proceedings in any one or more jurisdictions preclude the bringing of Proceedings in any other jurisdiction. 6. TERMS The terms of the particular Transaction to which this Confirmation relates are as follows: I. General Terms Trade Date: December 10, 1999 Effective Date: December 10, 1999 Termination Date: February 28, 2002 Optional Termination Date: Any Business Day during the Term hereof after the Accumulation Period End Date, as selected by Party B in accordance with the Notice provision of the Settlement Terms set out below, provided that Party B may designate no more than four Optional Termination Dates per Calculation Period; provided further, however, that in the event Party B designates an Optional Termination Date in respect of which Party B has elected settlement in accordance with the Net Share Settlement or Cash Settlement provisions set out below, Party B shall not designate any further Optional Termination Dates in respect of which Party B intends to elect settlement by way of Net Share Settlement or Cash Settlement until such time as the settlement process specified below (including the Make-whole provisions) in respect of the initial Optional Termination Date has been completed. Forward Purchase Seller: Party A Forward Purchase Buyer: Party B Exchange: New York Stock Exchange Shares: The Warnaco Group, Inc. common shares, par value $0.01 (Exchange designation "WAC"), CUSIP No. 934390105, quoted in USD on the Exchange. Accumulation Period: The period commencing on and including the Effective Date to and including the earlier of (x) the date by which Party A, or any U.S. subsidiary of The Bank of Nova Scotia acquiring Shares in respect of this Transaction (the "Hedge Subsidiary"), has, by means of one or more purchase transactions effected on the Exchange through such period, either (i) accumulated 2,600,000 Shares, or (ii) incurred an aggregate purchase price equal to USD 47,000,000; or (y) the third Business Day following the date on which Party B's notice to Party A, given in accordance with Section 12 of the ISDA Agreement, requesting the termination of the Accumulation Period becomes effective in accordance with Section 12 (the date on which such accumulation is achieved, such aggregate purchase price is incurred, or the third Business Day following the effective date of such notice (whichever is sooner) being the "Accumulation Period End Date"). Notwithstanding the foregoing, Party B shall have no right to terminate the Accumulation Period until Party A has accumulated at least 1,000,000 Shares. Party A shall provide to Party B, no sooner than the third and no later than the fifth Business Day following the trade date of each purchase transaction, notice setting out the purchase transaction effected by Party A or the Hedge Subsidiary on the relevant trade date. Party A shall notify Party B of Party A's calculation of the Initial Price on or before the third Business Day following the Accumulation Period End Date. Number of Shares: In respect of any Business Day within the Term hereof, the aggregate number of Shares yielded pursuant to Party A's or the Hedge Subsidiary's purchase program as referenced in the "Accumulation Period" provision above, less the aggregate of the Relevant Share Numbers for all previous partial settlements (as contemplated by the Settlement Terms) effected prior to the relevant date of determination. Business Days: London and New York Period End Dates: The Period End Dates shall be the last Business Day of February, May, August and November, beginning after the Accumulation Period End Date, up to and including the Termination Date or the Optional Termination Date. Overnight Rate: "Fed Funds O/N" ASK (offer) rate as quoted on Telerate Page 4833 as of 16:10 (New York time) on the relevant day of determination. Spread: Plus 137.5 basis points (1.375%); provided, however, that if at any time during the Term hereof Party B enters into a transaction with any other counterparties having terms which are substantially similar to the terms hereof, the Spread applicable to this Transaction shall be the higher of (i) the Spread set out above, or (ii) the Spread provided for in such similar transaction. Daily Forward Amount: For each day of the Accumulation Period, the Calculation Agent shall determine an amount (the "Daily Forward Amount") in accordance with the following formula: [Daily Forward Amount(i-1)+ (Number of Settled Shares(i) x WAP(i))] x [1 + (Accumulation Period Floating Rate(i) / 360)] where, "Daily Forward Amount(i-1)" means the Daily Forward Amount determined in respect of the day preceding the relevant day of determination, "Number of Settled Shares(i)" means the number of Shares settled by Party A or the Hedge Subsidiary on the relevant date of determination; "WAP(i)" means the weighted average of the respective purchase prices per Share, each in USD, including a commission of USD 0.045 per Share, of all Share purchase transactions settled by Party A or the Hedge Subsidiary on the relevant date of determination, which weighted average shall be determined by multiplying each purchase price by the number of Shares to which such purchase price is applicable, aggregating the products thereof and dividing such sum by the total number of purchased Shares; and "Accumulation Period Floating Rate(i)" means the Overnight Rate in effect as of the relevant date of determination, plus the Spread noted above. For purposes of giving effect to the foregoing, Overnight Rate for any day that is a not Business Day shall be the Overnight Rate in effect on the first Business Day preceding such day. Initial Price: The Initial Price shall be the Daily Forward Amount determined in respect of the Accumulation Period End Date divided by the Number of Shares. Forward Period: The period commencing on, but excluding, the Accumulation Period End Date, to but excluding the Termination Date. Forward Rate: "Zero Coupon USD Swap Rate" quoted on the day which is two London Banking Days prior to the first Business Day of the Forward Period (the "Determination Date"), for a Designated Maturity equal to the actual number of days in Forward Period, plus Spread. Zero Coupon USD Swap Rate: The fixed rate of interest (a) that would be paid by the Fixed Rate Payer on a USD interest rate swap in which (i) the Floating Rate Payer makes quarterly payments, in arrears, on the Period End Dates at the 3-month USD-LIBOR-BBA rate (appropriately interpolated in the event the first Calculation Period following the Accumulation Period is less than three months); (ii) the Fixed Rate Payer's payments are compounded quarterly and paid on the Termination Date only; (iii) the Day Count Fraction for both Fixed and Floating Rate Payers is Actual / 360 and (b) which would impart to same swap a mark-to-market value of zero at inception. Forward Price: The Forward Price on each Optional Termination Date or the Termination Date, shall be calculated as follows: [1 + (Forward Rate x Day Count /360 )] x Initial Price where "Day Count" is the number of days in the period commencing on and including the Accumulation Period End Date to but excluding the Optional Termination Date or Termination Date, as applicable. II. Settlement Terms Settlement: This Transaction may be settled, in whole or in part, on any Optional Termination Date, and, in the event of a partial settlement, the unsettled portion shall remain, during the Term hereof, a Transaction for purposes of the ISDA Agreement. Otherwise, this Transaction shall terminate, and the each party's obligations in respect thereof shall be settled as provided for herein following the occurrence of the Termination Date. Settlement shall be effected in accordance with the settlement mechanism selected by Party B in its notice given in accordance with the Notice provision set out below. All partial settlements shall be effected in a minimum amount of 100,000 Shares and additional integral multiples of 1000 Shares. Relevant Share Number: The Number of Shares or, in the context of any partial settlement to be effected on any Optional Termination Date, the number of Shares specified or deemed specified by Party B in its notice given pursuant to the Notice provision set out below. Physical Settlement: Where Physical Settlement is applicable, on the Optional Termination Date or Termination Date, Party A or its Hedge Subsidiary shall deliver to Party B Shares equal to the Relevant Share Number, and Party B shall pay to Party A an amount, in USD, equal to the product of the Forward Price, as determined on the Optional Termination Date or the Termination Date, as applicable, multiplied by the Relevant Share Number (the "Settlement Price"). Any delivery made pursuant to this provision shall be on a delivery versus payment basis and the due date of such delivery shall be subject to adjustment in accordance with Section 6.2 of the Equity Definitions in the event of the occurrence of a Settlement Disruption Event. Disposition Period: Where Cash Settlement or Net Share Settlement is elected or otherwise applies, on the Optional Termination Date or Termination Date (as applicable) (the "Commencement Date"), Party A or the Hedge Subsidiary shall commence selling the Shares acquired by Party A or the Hedge Subsidiary during the Accumulation Period. The following definitions will apply to this sale program. (I) "Final Trading Date": the earlier of (1) the date on which Party A, or the Hedge Subsidiary, has effected transactions on the Exchange by which it has completed the sale of Shares equal to the Relevant Share Number, (2) the 90th calendar day following the Commencement Date, and, in the case of Net Share Settlement only, (3) the date on which Party A, or the Hedge Subsidiary, has effected transactions on the exchange such that the Daily Settlement Amount (as defined below) is an amount less than or equal to zero (a "Zero Settlement Amount"); provided, however, that Party A and the Hedge Subsidiary shall be deemed not to have effected transactions such that the absolute value of a negative Daily Settlement Amount is equal to or greater than the closing price for one Exchange Board Lot (100) of Shares, as reported by the Exchange in respect of the Final Trading Date. (II) "Final Settlement Date": the day on which any sale transaction effected on the Exchange on the Final Trading Date would settle. (III) "Disposition Settlement Day": each day of the period commencing on, and including, the Commencement Date to, and including, the Final Settlement Date. (IV) "Disposition Trading Day": in respect of any Disposition Settlement Day, the day on which any sale transaction effected on the Exchange that settles on such Disposition Settlement Day is effected. (V) "Disposition Period": the period beginning with the Commencement Day, and continuing up to and including the Final Settlement Date. Notwithstanding the foregoing, the Disposition Period shall not be less than 15 days and Party A shall, in effecting sales, observe the volume constraints prescribed by Rule 10b-18 under the Securities Exchange Act of 1934 as if those constraints applied to sales of securities. Daily Settlement Amount: Where Cash Settlement or Net Share Settlement is applicable, for each day beginning with the Commencement Day, Party A shall determine an amount (the "Daily Settlement Amount"), in USD, in accordance with the following formulae: SA(0)= Forward Price x Relevant Share Number SA(i) = SA(i-1) x (1+ ON(i-1)/360) - Number of Settled Shares(i) x VWAP(i) where "Number of Settled Shares(i)" means the number of Shares the sale of which is settled by Party A or its Hedge Subsidiary, on the relevant day of determination, "VWAP(i)" means the modified volume-weighted average per-Share price as determined by means of the Bloomberg service, for trading in the Shares on the Disposition Trading Day whose corresponding Disposition Settlement Day is the relevant day of determination, and adjusted by Party A to (i) include a commissions of USD 0.045 per Share (ii) exclude the first trade in the Shares effected on the Exchange on such Disposition Trading Day; and (iii) exclude all trades in Shares effected on the Exchange on such Disposition Trading Day within 60 minutes of the close of trading on such day, "SA(0)" means the Daily Settlement Amount determined in respect of the Commencement Date, Forward Price is as determined on the Optional Termination Date or the Termination Date, as applicable, "SA(i)" means the Daily Settlement Amount determined in respect of the relevant day of determination, "SA(i-1)" means the Daily Settlement Amount determined for the day preceding the relevant day of determination, and ON(i-1) means a rate of interest equal to the Overnight Rate in effect as of the day preceding the relevant day of determination, plus the Spread. The Daily Settlement Amount determined in respect of the Final Settlement Date shall be the Final Settlement Amount. For purposes of giving effect to the foregoing, "Number of Settled Sharesi" and "VWAPi" shall be deemed to be zero on any day in the Disposition Period which is not an Exchange Business Day. Notice of Sale Transactions: Party A shall provide to Party B, on or before the first Business Day following the trade date of each sale transaction, notice setting out the sale transactions effected by Party A or the Hedge Subsidiary on the relevant trade date and Party A's calculation of the Daily Settlement Amount in respect of such trade date. Cash Settlement: Where Cash Settlement is applicable, if the Final Settlement Amount as determined above is negative, Party A shall pay to Party B the absolute value of such amount on the Final Settlement Date. If such amount is positive, Party B shall pay to Party A such amount on the later of (i) the Final Settlement Date or (ii) the first Business Day following the date on which Party A's notice to Party B that such Final Settlement Amount is owing by Party B becomes effective in accordance with Section 12 of the ISDA Agreement. Net Share Settlement: Where Net Share Settlement is applicable, if the Final Settlement Amount is a Zero Settlement Amount, then Party A or its Hedge Subsidiary shall deliver to Party B (1) Shares equal in number to the number of unsold Hedge Shares, and (2) the absolute value of the Final Settlement Amount, in USD, on or before the Net Share Settlement Date. If the Final Settlement Amount is positive, Party A shall determine a number of Shares (the "Initial Settlement Number") in accordance with the following formula: Final Settlement Amount / Closing Price where "Closing Price" is the closing price of the Shares as reported by the Exchange on the Final Settlement Date, and Party B shall, at its option, either (i) deliver to Party A Shares equal in number to such Initial Settlement Number (such Shares being the "Settlement Shares") or (ii) pay to Party A an amount in USD equal to the Final Settlement Amount, on or before the Net Share Settlement Date. If, pursuant to the preceding paragraph, Party B has elected to deliver Settlement Shares, on the Net Share Settlement Date, Party A or its hedge subsidiary shall commence selling the Settlement Shares and shall continue calculating the Daily Settlement Amount as specified above. On each day until the earlier of 90 calendar days following the Net Share Settlement Date or the day on which the Daily Settlement Amount is a Zero Settlement Amount, (such day being the "Make-Whole Period End Date" and the period commencing on the Net Share Settlement Date up to such day being the "Make-Whole Period"), Party A shall calculate (i) an amount (the "Daily Make-Whole Amount") according to the formula: Daily Settlement Amount - Closing Price x Remaining Number of Shares and (ii) a number of shares (the "Daily Make-Whole Number") according to the formula: Daily Make-Whole Amount / Closing Price where "Closing Price" is the closing price of the Shares as reported by the Exchange on the day of determination, and Remaining Number of Settlement Shares is (i) the Initial Settlement Number; (ii) minus the aggregate of all Shares sold, on a settlement basis, pursuant to this provision during the Make-Whole Period, (iii) plus the aggregate of all Make-Whole Shares, as defined below, delivered to Party A pursuant to this provision (iv) minus the aggregate of all Shares delivered by Party A to Party B as required below in the event of a negative Daily Make-Whole Amount. If, on (a) the tenth Business Day following the Net Share Settlement Date and any following tenth Business Day during the Make-Whole Period, the Daily Make-Whole Amount is greater than 1,000,000, or (b) on any Business Day during the Make-Whole Period the Daily Make-Whole Amount is greater than 4,000,000, Party B shall either (i) deliver to Party A, Shares equal in number to the Daily Make-Whole Number (such Shares being the "Make-Whole Shares") on or before the first Business Day following the relevant day of demand; or, at the option of Party B, (ii) pay to Party A an amount in USD equal to the Daily Make-Whole Amount to be paid on or before the first Business Day following such day of demand. In the event that Party B elects option (ii), then the Daily Settlement Amount shall be adjusted downwards by the Daily Make-Whole Amount on the day Party A receives the full payment. If (x) on any tenth Business Day following the Net Share Settlement Date and any following tenth Business Day during the Make-Whole Period, the Daily Make-Whole Amount is negative and its absolute value is greater than 1,000,000, or (y) on any Business Day during the Make-Whole Period, the Daily Make- Whole Amount is negative and its absolute value is greater than 4,000,000, Party A shall, on or before the following Business Day, deliver to Party B Shares equal in the number to the absolute value of the Daily Make-Whole Number. On the first Business Day following the Make-Whole Period End Date (the "Final Make-Whole Settlement Day"), Party A will deliver to Party B, shares equal in number to the Remaining Number of Settlement Shares. If the Daily Settlement Amount, on the Make-Whole Period End Date (being the "Final Make-Whole Amount") is positive, then Party B shall pay to Party A on the Final Make-Whole Settlement Day an amount in USD equal to the Final Make-Whole Amount. If the Final Make-Whole Amount is negative, then Party A shall pay to Party B an amount in USD equal to the absolute value of the Final Make-Whole Amount. Break Funding Amount: On any Optional Termination Date, Party A shall calculate the Break Funding Amount. If the Break Funding Amount is positive, then, in addition to any other amount then payable by Party B, Party B shall also pay to Party A, on such date, the Break Funding Amount. If the Break Funding Amount is negative, then Party A shall pay to Party B, on such date, the absolute value of the Break Funding Amount. For purposes, hereof, "Break Funding Amount" means the amount, determined by Party A in a commercially reasonable manner, equal to (1) the mark-to-market value to Party A as of the Optional Termination Date, of a swap incorporating the terms set out in the definition of Zero Coupon USD Swap Rate as if (i) Party A were the Floating Rate Payer, (ii) the Notional Amount were equal to the Initial Price multiplied by the Relevant Share Number; (iii) the original term of such swap were equal to the Term hereof, and (iv) no amounts then due under such swap remain unpaid, minus (2) an amount equal to the Relevant Share Number multiplied by the difference between the Zero Spread Forward Price calculated as of the relevant Optional Termination Date and the Initial Price, where "Zero Spread Forward Price " is calculated in the same manner as the Forward Price but for a Spread of 0%. Net Share Settlement Date: The second Clearance System Business Day following the Final Settlement Date, subject to adjustment in accordance with Section 6.2 of the Equity Definitions in the event of the occurrence of a Settlement Disruption Event. Notice: In the event Party B intends to effect a settlement on any Optional Termination Date, Party B shall provide Party A with prior written notice of its intention to exercise its rights to settle this Transaction on such Optional Termination Date and such notice must become effective in accordance with Section 12 of the ISDA Agreement on or before the 3rd day preceding the Optional Termination Date on which Party B intends to effect a settlement. If Party B's notice does not become effective on or before such 3rd day, Party B shall be deemed to have elected to effect a settlement on the next following Optional Termination Date; provided, however, that no such notice may be given (i) on any day during the Accumulation Period; or (ii) following the occurrence of an Event of Default with respect to Party B. Other than in the context of any partial settlement, Party B shall indicate in such notice whether settlement will be by Physical Settlement, Cash Settlement or Net Share Settlement. In the context of any partial settlement, Party B shall specify the number of Shares in respect of which settlement will be effected. If such notice does not so specify the manner of settlement, Physical Settlement shall apply and if such notice does not specify the number of Shares in respect of which settlement will be effected, Party B shall be deemed to have elected to effect settlement in respect of the full Number of Shares then in effect. If Party B wishes, in the context of the Termination Date, to effect settlement otherwise than by Physical Settlement, Party B shall so notify Party A and such notice must become effective in accordance with Section 12 of the ISDA Agreement on or before the 3rd day prior to the Termination Date failing which Party B shall be deemed to have elected to utilize Physical Settlement. Inability to Sell/ Purchase Shares: If, in the context of Net Share Settlement, Cash Settlement, or any other provision hereof which, in order to give effect thereto, requires Party A to sell Shares (other than to Party B), (1) Party A is unable to effect a sale by any reasonably economic, viable or practicable means, including a private placement transaction, of the requisite number of Shares on or before the Final Trading Day for purposes of determining the Final Settlement Amount for any reason including, without limitation, because such Shares have a prospectus delivery requirement and Party B is unable to provide Party A with a current prospectus, or (2) the Disposition Period otherwise expires prior to Party A being able to effect the necessary sales, then, Party B shall be deemed to have elected Physical Settlement with respect to the unsold portion of such requisite number of Shares, and Party B shall, within one Business Day of the date it is advised by Party A that a sale of all such Shares was not effected, repurchase the unsold Shares, for USD, in an amount per Share that, when combined with all amounts received by Party A for all effected sales of Shares, results in Party A receiving an amount equal to the amount Party A would have received had Physical Settlement been elected. If, in the context of Physical Settlement or the application of the Registration of Shares provision or any other provision of this Confirmation which, in order to give effect thereto, requires delivery of Shares to Party B by Party A, Party B is unable, due to the application of applicable law, at the relevant time to take delivery of such Shares, a Termination Event shall be deemed to have occurred for purposes of the ISDA Agreement and in respect of which (i) Party B shall be the Affected Party, (ii) this Transaction shall be the only Affected Transaction, (iii) and the payment measure shall be Loss (as such terms are defined in the ISDA Agreement). Good Delivery: Any party required to deliver Shares hereunder (the Delivering Party") shall transfer good title to such Shares, and such Shares shall be freely transferable (together with any prospectus required by applicable law) and free and clear of any liens, charges, claims and encumbrances. Delivery shall be effected by book-entry transfer of the Shares to an account with The Depository Trust Company (the "Clearance System") in the name of the recipient (or, where escrow settlement is applicable, the name of the escrow agent) as is designated by the recipient. III. Dividends If on any day during the Term hereof a cash dividend paid by Party B in respect of the Shares the record date of which precedes the Termination Date, is received by Party A or the Hedge Subsidiary, Party A or the Hedge Subsidiary shall pay to Party B an amount equal to such dividend on or before the second Business Day immediately following the date of receipt of such dividend by Party A or the Hedge Subsidiary (such second Business Day being the "Dividend Payment Date"). Upon the request by Party B (which must be recieved by Party A on or before 10:00 a.m. (New York time) on the relevant Dividend Payment Date), Party A shall deliver to Party B the equivalent of such amount in Shares (less a commission of not more than USD 0.045 per Share) which equivalent shall be based upon the price at which Party A is then able (acting reasonably) to purchase Shares plus an amount, in USD, equal to any residual cash in the event that the foregoing amount cannot be fully converted into whole Shares. IV. Decline in Share Price/Decline in Credit Rating/Termination of Credit Agreement In the event that on any Business Day during the Term of this Transaction (other than the Accumulation Period) or on any of the five Business Days preceding such Business Day (i) the closing price per Share as quoted by the Exchange on such day is USD $7.50 or less, (ii) Standard & Poor's Rating Service, a division of McGraw-Hill Inc., reports a rating below BBB-, or no longer assigns a rating, or Moody's Investor Services Inc. reports a rating below Baa3, or no longer assigns a rating, with respect to Party B's Long-Term Debt, or (iii) Party B prepays all amounts outstanding under, and terminates, the Credit Agreement, or provides notice of an intention to prepay all amounts outstanding under, and terminate, the Credit Agreement or all commitments of the Lenders thereunder have terminated or expired, Party A may upon notice to Party B, given in accordance with Section 12 of the ISDA Agreement, and provided an Event of Default or Termination Event has not occurred with respect to Party A or is then continuing (and which, in the context of a Termination Event, renders this Transaction an Affected Transaction) and provided an Early Termination Date has not been designated in respect of this Transaction, elect to terminate this Transaction in its entirety. Party B shall, on or before the first Business Day following the date on which Party A's termination notice becomes effective, notify Party A of the manner in which this Transaction shall be settled (and, failing such notification, Party B shall be deemed to have elected Cash Settlement). If Party B elects Cash Settlement or Net Share Settlement, for purposes of giving effect to such provisions, the commencement of the Disposition Period shall be the first Exchange Business Day following the date on which Party B's election notice became effective. If Party B elects Physical Settlement, settlement shall be effected on the third Business Day following the Election Date in accordance with, and subject to, the Physical Settlement provision set out above. Party B shall provide written notice to Party A of the occurrence of event (ii) above and, in the event Party A is, at the relevant time, no longer Administration Agent under the Credit Agreement, event (iii) above and, for purposes of applying the five-Business Day period referred to above, the date on which Party B's notice becomes effective in accordance with Section 12 of the ISDA Agreement shall be deemed to be the Business Day on which the relevant event occurred; provided, however, that the failure of Party B to so notify Party A of the occurrence of the relevant event shall in no way preclude Party A from invoking termination pursuant to this provision in the event Party A becomes aware of such occurrence by independent means. The parties hereto agree that the occurrence of the events (i), (ii) or (iii) referred to in the preceding paragraph shall in no way be construed as the occurrence of an Event of Default as contemplated by the ISDA Agreement. For purposes hereof, "Long-Term Debt" means the then current senior unsecured, non-credit- enhanced, long-term indebtedness issued by Party B. V. Adjustments For purposes of Article 9 of the Equity Definitions, any reference to the term "Share Swap Transaction" shall be deemed to mean "Forward Purchase Transaction"; provided, however, that "Potential Adjustment Event" shall exclude the declaration or payment of any cash dividends in respect of the Shares. Method of Adjustment: Calculation Agent Adjustment Calculation Agent: Party A VI. Extraordinary Events Consequences of Merger Events: (a) Share-for-Share: Alternative Obligation (b) Share-for-Other: Cancellation and Payment (c) Share-for-Combined: Alternative Obligation Nationalization or Insolvency: Cancellation and Payment VII.Regulatory Event If during the Term of this Transaction, The Warnaco Group, Inc. effects any action, including any action with respect to its capital structure, the result of which is that Party A, or the Hedge Subsidiary, then owns more of any class of outstanding voting shares of Party B pursuant to this transaction than is permitted by the Bank Holding Company Act of 1956, as amended, or other federal legislation (the "Regulatory Limit"), then, Party A shall so notify Party B and Party B shall be deemed to have elected to partially settle this Transaction but only to the extent to which the Number of Shares exceeds the Regulatory Limit (which excess shall be the Relevant Share Number for purposes of the Settlement terms set out above). If Party B elects Physical Settlement, the relevant portion of this Transaction shall be settled on the first Business Day following the Election Date subject to adjustment in accordance with Section 6.2 of the Equity Definitions in the event of the occurrence of a Settlement Disruption Event (such Business Day being the Physical Settlement Date). Party B shall specify the mode of settlement on or before the first Business Day (the "Election Date") following the date on which Party A's notice to Party B became effective failing which Party B shall be deemed to have elected Physical Settlement. If Party B elects Net Share Settlement or Cash-Settlement, for purposes of giving effect thereto, the number of Shares to be sold shall be the Relevant Share Number and the Commencement Date of the Disposition Period shall be deemed to be the first Exchange Business Day following the Election Date. In addition to any other amount then payable by Party B, Party B shall also pay to Party A, on (i) the Physical Settlement Date, in the context of a Physical Settlement election; or (ii) on the Net Share Settlement Date, in the context of a Net Share or Cash Settlement election, the Break Funding Amount as defined above except that the reference therein to "Optional Termination Date" shall mean the Election Date. VIII. Registration of Shares Notwithstanding any other provision hereof (including, without limitation, any election of Net Share Settlement or Cash Settlement by Party B but excluding any election by Party B of Net Share Settlement or Cash Settlement under "Decline in Share Price/Decline in Credit Rating" above), unless both parties hereto conclude that a public sale of the Shares acquired by it or the Hedge Subsidiary in connection with this Transaction does not require registration under the Securities Act of 1933 (the "Securities Act"), which conclusion shall be communicated by each party to the other, by means of any of the methods specified in Section 12 of the ISDA Agreement, as promptly as is reasonable practicable, and in any event by the first Business Day following a Termination Date or Optional Termination Date, as applicable, Physical Settlement shall apply with respect to such Termination Date or Optional Termination Date unless the following conditions have been satisfied: (i) on the Optional Termination Date or Termination Date (or, in the context of a Regulatory Event, the Election Date), as the case may be, a registration statement (a "Registration Statement") naming as selling shareholders Party A and the Hedge Subsidiary and covering the public resale of all Shares held by Party A or the Hedge Subsidiary to hedge this Transaction and all Shares deliverable by Party B to Party A pursuant to the Net Share Settlement provisions hereof (collectively, the "Registrable Shares") shall have been filed with, and declared effective by, the Securities and Exchange Commission under the Securities Act, and no stop order shall be in effect with respect to such Registration Statement; (ii) a printed prospectus relating to the Registrable Shares (including any prospectus supplement thereto and amendments thereof, a "Prospectus") shall have been delivered to Party A and the Hedge Subsidiary in such quantities as Party A shall have requested no later than the Optional Termination Date, Termination Date or Election Date; (iii) the Registration Statement and the Prospectus shall be in form and substance reasonably satisfactory to Party A; (iv) no later than the Exchange Business Day before the Optional Termination Date, Termination Date or Election Date, Party A and Party B shall have entered into an agreement (a "Transfer Agreement") in connection with the public resale of the Registrable Shares by Party A and the Hedge Subsidiary substantially similar to underwriting agreements customary for underwritten offerings of equity securities, in form and substance reasonably satisfactory to Party A and Party B, providing for (without limitation): indemnification of, and continuation in connection with the liability of, Party A and the Hedge Subsidiary, the delivery of customary opinions of counsel and accountants "comfort letters", the continuous effectiveness of the Registration Statement until the fortieth day after the Optional Termination Date, Termination Date or Election Date, or if earlier, such time as all Registrable Shares have been resold pursuant thereto and all expenses in connection with such resale, including all registration costs and all fees and expenses of counsel for each of Party A and Party B, have been paid by Party B; (v) Party A and the Hedge Subsidiary shall have been afforded a reasonable opportunity to conduct a due diligence investigation with respect to The Warnaco Group, Inc. customary in scope for underwritten offerings of equity securities, and acceptance of the results of such investigation by Party A and the Hedge Subsidiary cannot be unreasonably withheld; (vi) all conditions to the obligations of each party under the Transfer Agreement shall have been satisfied or waived no later than the Optional Termination Date, Termination Date or Election Date, and (vii) the representations and warranties of Party B set forth herein and in the Transfer Agreement shall be true and correct on the date of delivery of Registrable Shares to purchasers of such Shares as though made at such time, and Party B shall have performed all its obligations set forth herein and in such Transfer Agreement to be performed by such time. If, in the context of the Decline in Share Price/Decline in Credit Rating /Termination of Credit Agreement provision, Party B has elected Cash Settlement or in the event Party B has elected Net Share Settlement and Party B is required to deliver Shares to Party A and any condition specified in items (i) - (vii) of the previous paragraph shall not have been satisfied in the manner and at the times specified therein, Party A may determine to (a) have some or all Registrable Shares sold in one or more transactions exempt from the registration requirements of the Securities Act, or (b) extend this Transaction in order to give Party B more time to satisfy such conditions. If Party A chooses the action set forth in clause (a) above, Party B shall pay all costs of such sales by Party A, including, without limitation, any applicable sales or purchase taxes, transfer taxes and commissions. If Party A chooses the action set forth in clause (b) above, the Calculation Agent will in its reasonable discretion adjust the terms hereof to take into account any additional costs to Party A and the Hedge Subsidiary of such extension. 7. ADDITIONAL REPRESENTATIONS Each party will be deemed to represent to the other on the date of this Confirmation that, with respect to this Transaction (1) It is entering into this Transaction for its own account and not with a view to transfer, resale or distribution, (2) it is an "accredited investor" within the meaning of Rule 510(a) of Regulation D under the Securities Act and has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of this Transaction, and (3) it understands and acknowledges that this Transaction may involve the purchase or sale of a "security" as defined in the Securities Act and the securities laws of certain states, and that any such security has not been registered under the Securities Act or the securities laws of any state and, therefore, may not be sold, pledged, hypothecated, transferred or otherwise disposed of unless such security is registered under the Securities Act and any applicable state securities law, or an exemption from registration is available. 8. ADDITIONAL REPRESENTATIONS AND COVENANTS (a) Party B Representations Party B represents to Party A that (1) as of the Trade Date hereof, it is not in possession of any material non-public information with respect to itself; (2) as of the Trade Date hereof, it is not entering into this Transaction for the purpose of manipulating the market price or value of the Shares; (3) as of the Trade Date hereof, no "restricted period" for purposes of Rule 102 of Regulation M under the Securities Exchange Act of 1934 (respectively, "Regulation M" and the "Exchange Act") and no tender offer for Shares (whether by Party B or any other third party) is in effect or (or in the case of a tender offer by Party B) has been in effect within the preceding ten Business Days; and (4) it is entering into this Transaction in connection with its Share repurchase program which was most recently approved by its board of directors on March 1, 1999 and most recently publicly announced on March 2, 1999, solely for the purposes stated in such board resolution and public disclosure. (b) Party B Covenants Party B covenants to Party A that (1) Party B shall not commence a "distribution" (as defined in Regulation M) of Shares or a tender offer for Shares during the Accumulation Period; (2) no "restricted period" for purposes of Rule 102 of Regulation M will be in effect on any day on which Party A is required, pursuant to the terms hereof, to deliver Shares to Party B (any such day being, for purposes of this paragraph, a "Settlement Date", and no tender offer for Shares by Party B will be in effect on any Settlement Date or within the preceding ten Business Days of any day thereof; (3) Party B shall not, and shall cause its affiliated purchasers (as defined in Rule 10b-18 under the Exchange Act) not to, purchase Shares during the Accumulation Period; (4) Party B shall not disclose any material non-public information with respect to itself to Party A without Party A's consent; (5) if at any time during the Disposition Period Party B comes to have possession of material non-public information with respect to itself, Party B will notify Party A that a blackout period is in effect, and when Party B ceases to be in possession of material non-public information, Party B will notify Party A that the blackout period has ended. (c) Party A Covenants Party A covenants to Party B that Party A shall not sell, nor make any offers to sell during any blackout period or any restricted period in respect of either of which Party A is in receipt of notice from Party B or Group given in accordance with Section 12 of the ISDA Agreement. 9. ADDITIONAL AGREEMENT Each party agrees that it will comply, in connection with this Transaction and all related or contemporaneous sales and purchases of Shares, with the applicable provisions of the Securities Act, the Exchange Act, and the rules and regulations thereunder, including, without limitation, Rules 10b-5 under the Exchange Act, provided that each party shall be entitled to rely conclusively on any information communicated by the other party concerning such other party's market activities. Party A represents to Party B and agrees that, in effecting the purchase transactions referred to opposite "Accumulation Period", above, Party A shall make bids for and purchases of the Shares only in accordance with the price, volume, timing, and method of bidding and purchasing constraints set forth in Rule 10b-18 under the Exchange Act, as if Party A were the issuer of the Shares and wished to avail itself of the protections afforded by that rule. 10. THIRD PARTY TERMINATION RIGHTS Party B hereby covenants and agrees with Party A that in the event that Party B is now or hereafter becomes party to a forward equity purchase transaction pertaining to Shares with any other party and such transaction grants to such other party termination rights which are not included herein or, if included, which may be invoked prior to the time or point at which such termination rights may be invoked by Party A pursuant to the terms hereof, Party B shall immediately notify Party A of the existence of such termination right and this Confirmation shall be deemed to be automatically amended in order to incorporate such termination right (together with all attendant definitions and ancillary provisions contained in such other transaction which may be necessary to give meaning or effect to such termination right) for the benefit of Party A hereunder, mutatis mutandis. 11. MISCELLANEOUS Wire Instructions: Party A: The Bank of Nova Scotia, New York Agency One Liberty Plaza, 165 Broadway, 26th Floor New York, New York SWIFT Code: NOSCUS33 ABA# 0260-02532 Account No.: 6027-36 Attention: IBD Derivative Products Party B: ABA #021000089 Citibank N.A. New York, NY for credit to: Warnaco Inc. Account # 3846-9277 12. OFFICES (a) The Office of Party A for this Transaction is New York; and (b) The Office of Party B for this Transaction is New York. Please confirm that the foregoing correctly sets forth the terms of our agreement by executing the copy of this Confirmation enclosed for that purpose and returning it to us or by sending to us a letter or facsimile substantially similar to this letter, which letter or facsimile sets forth the material terms of the Transaction to which this Confirmation relates and indicates agreement to those terms. Yours truly, SCOTIA CAPITAL (U.S.A.) INC. By: /S/ ---------------------------------- Name: Title: Confirmed as of the date first above written: THE WARNACO GROUP, INC. By: /S/ ------------------------------- Name: Title: EX-99 8 0008.txt EXHIBIT 99.7 - MEMORANDUM OF UNDERSTANDING EXHIBIT 99.7 MEMORANDUM OF UNDERSTANDING SunTrust Bank ("Party A") and The Warnaco Group, Inc. ("Party B") are parties to the Equity Forward Purchase Transaction dated as of February 10, 2000 (the "Agreement"). Party A and Party B agree that the Agreement shall be amended and supplemented as follows, effective immediately: 1. On the earlier of (a) the date (the "Debt Amendment Date") that the terms of Party B's credit agreements are amended (as contemplated by the September 16, 2000 draft of the Amendment, Modification, Restatement and General Provisions Agreement (the "Facility Agreement")) and (b) October 31, 2000, Party B will execute and deliver to Party A a promissory note (the "Modification Note"). The Modification Note shall (i) be in a principal amount equal to the sum of (x) an amount representing the Number of Shares times the difference between the Forward Price (computed as if today were the Optional Termination Date) and today's closing price for the Shares as reported by the Exchange (the "Initial Share Reset Price"), which is $4.50 and (y) an amount to be determined by Party A and Party B as equal to the accretion in Forward Price calculated on the Initial Share Reset Price from now to April 15, 2001 times the Number of Shares, discounted to the date hereof at the interest rate effective today under the Facility Agreement, adjusted by (z) the breakage costs (positive or negative) incurred by Party A in connection with this modification on swaps entered into by it to hedge the Transaction, (ii) bear interest commencing today at 3-month LIBOR plus the applicable margin in effect from time to time under Section 2.4(a) of the Facility Agreement (the "Note Rate"), payable quarterly in arrears, and (iii) mature on August 12, 2002. 2. On the Debt Amendment Date, Party B shall repay $2,267,200 (this amount assumes that the banks' commitment reduction under the Facility Agreement will be 8%, and will be adjusted to reflect the actual commitment reduction) of principal of the Modification Note. In addition, on the Debt Amendment Date Party B shall pay to Party A a fee in the amount of $ 212,550. 3. If on any date on or after April 15, 2001 the closing price reported by the Exchange for the Shares is less than the Initial Share Reset Price, Party A may at any time thereafter sell Shares accumulated by it during the Accumulation Period ("Subject Shares"); provided, however, that in any 30-day period Party A may sell no more than 16.7% of the Number of Shares as of the date hereof; and provided, further, that Party A shall coordinate with Scotia Capital (U.S.A.) Inc. to sell their Shares in an orderly fashion. 4. Following the end of each calendar month, within three Business Days' notice to Party B of the relevant amounts, (a) with respect to each sale of Subject Shares during such calendar month at a price greater than the Forward Price at the time of such sale, at Party B's option either (i) Party A shall make a cash payment to Party B in an amount equal to the aggregate amount of such excess for the Shares sold during such calendar month (including interest from the date of settlement of each sale at the Note Rate then applicable), which shall immediately be applied by Party B as cash collateral in such amount to secure the Modification Note or (ii) Party B shall reduce the principal amount of the Modification Note by such aggregate excess; and (b) with respect to each sale of Subject Shares during such calendar month at a price less than the Forward Price at the time of such sale, Party B shall at its option either (i) execute and deliver a promissory note to Party A which shall be in the form of the Modification Note except that the principal amount thereof shall be equal to the aggregate amount of such shortfall for the Shares sold during such calendar month (including interest from the date of settlement of each sale at the Note Rate then applicable) (each such note, a "Subsequent Note") or (ii) deliver to Party A Shares with an aggregate value (determined according to the sale price of such accumulated Shares) equal to such aggregate shortfall. Each sale of Subject Shares shall reduce the Number of Shares under the Transaction. 5. From the date the Modification Note is issued, the Forward Price shall be calculated as follows: Until April 15, 2001, the Forward Price shall be equal to the Initial Share Reset Price Following April 15, 2001, the Forward Price shall be equal to [1 + (Note Rate x Day Count/(365)] x the Initial Share Reset Price) where: "Day Count" is the number of days in the period commencing on and including April 15, 2001 to but excluding the Termination Date. 6. The Decline in Share Price and Decline in Credit Rating provisions (clauses (i) and (ii) of the first sentence of Section 6.IV) and related provisions of the Agreement which effect such provisions are hereby deleted. The Termination Date is hereby amended to August 12, 2002 7. On the Debt Amendment Date, all of Party B's obligations under the Modification Note, each Subsequent Note and the Agreement shall be secured by liens on the assets of Party B and its subsidiaries on a pari passu basis with Party B's indebtedness. If the Debt Amendment Date has not occurred by November 1, 2000 (or such earlier or later date that the bank waivers in respect of Party B's second- quarter 2000 financial covenants shall not be in effect), Party A may by written notice terminate the Transaction, which will be settled (at Party B's option) by Cash Settlement or Net Share Settlement according to the provisions of the Agreement, and the Disposition Period shall commence on the Exchange Business Day on which such notice becomes effective. 8. In consideration of the entering into of this Memorandum of Understanding, Party A hereby withdraws its termination of the Transaction on September 11, 2000. 9. All capitalized terms not otherwise defined herein shall have the meanings set forth in the Agreement. 10. The parties hereto agree that this Memorandum of Understanding constitutes an unconditional obligation, enforceable in accordance with its terms. The parties further agree to execute such additional agreements and documents as may be necessary to give further effect to the agreements hereunder. 11. This Memorandum of Understanding shall be governed by the laws of the State of New York, without references to principles of conflict of laws. SUNTRUST BANK By: /S/ ------------------------------------- THE WARNACO GROUP, INC. By: /S/ ------------------------------------- Dated: September 19, 2000 Acknowledgment and Consent Each of the undersigned are Guarantors under and as defined in the Guaranty dated as of February 10, 2000, issued in connection with the Equity Forward Purchase Transaction between SunTrust Bank ("Party A"), and The Warnaco Group, Inc. ("Party B"), dated February 10, 2000. Each of the undersigned hereby acknowledges and consents to the foregoing Memorandum of Understanding dated September 19, 2000 between Party A and Party B. WARNACO INC. WARNACO INTERNATIONAL INC. WARNACO U.S. INC. MYRTLE AVENUE, INC. GREGORY STREET, INC. DESIGNER HOLDINGS, LTD. OUTLET STORES, INC. JEANSWEAR HOLDINGS, INC. CALVIN KLEIN JEANSWEAR COMPANY CKJ HOLDINGS INC. By /S/ --------------------------------------- Title: Dated: September 19, 2000 EX-99 9 0009.txt EXHIBIT 99.8 - EQUITY FORWARD PURCHASE TRANSACTION EXHIBIT 99.8 Dated as of February 10, 2000 The Warnaco Group, Inc. 90 Park Avenue New York, New York 10016 Attention: Mr. Bill Finkelstein Dear Sirs: RE: SUNTRUST BANK ("PARTY A") THE WARNACO GROUP, INC. ("PARTY B") EQUITY FORWARD PURCHASE TRANSACTION The purpose of this facsimile is to amend and restate the terms and conditions of the Transaction entered into between Party A and Party B on the Trade Date specified below and amended by agreement of the parties through February 25, 2000 (the "Transaction"). This facsimile constitutes a "Confirmation" as referred to in the ISDA Master Agreement specified below. This Confirmation is subject to and incorporates the definitions contained in the 1991 ISDA Definitions, as supplemented by the 1998 Supplement (the "1991 ISDA Definitions"), and the 1996 ISDA Equity Derivatives Definitions (the "Equity Definitions") (each as published by the International Swaps and Derivatives Association, Inc. ("ISDA")) (collectively, the "ISDA Definitions"). This Confirmation is also subject to, and incorporates, the definitions contained in Section 14 of the form of the 1992 ISDA Master Agreement (Multicurrency - Cross Border) (the "Section 14 Definitions"), but without any Schedule or other modification thereto, as published by ISDA (the "ISDA Agreement"). In the event of any inconsistency between the ISDA Definitions, the Section 14 Definitions and this Confirmation, this Confirmation will govern. In the event of any inconsistency between the ISDA Definitions and the Section 14 Definitions, the Section 14 Definitions will govern. Until such time as an ISDA Agreement is entered into between you and us, this Confirmation evidences a complete and binding agreement between you and us as to the terms of the Transaction to which this Confirmation relates. Upon execution by you and us of an ISDA Agreement, with such ISDA Agreement incorporating such modifications as you and we shall in good faith agree, this Confirmation will supplement, form part of, and be subject to, such ISDA Agreement. All provisions contained in the ISDA Agreement shall, upon its execution, govern this Confirmation except as expressly modified below. The following provisions in paragraphs 1 through 5 will govern the Transaction evidenced hereby until such time as an ISDA Agreement is entered into between you and us where upon such provisions shall be replaced by the terms of the ISDA Agreement: 1. MANNER OF PAYMENTS Each party will make each payment specified in this Confirmation as being payable by it, not later than the due date for value on that date in the place specified below, in freely transferable funds and in the manner customary for such payments in the required currency. If on any date amounts would otherwise be payable in the same currency by each party to the other, then, on such date, each party's obligation to make payment of any such amount will be automatically satisfied and discharged and, if the aggregate amount that would otherwise have been payable by one party exceeds the aggregate amount that would otherwise have been payable by the other party, replaced by an obligation upon the party by whom the larger aggregate amount would have been payable to pay to the other party the excess of the larger aggregate amount over the smaller aggregate amount. 2. DEFAULT (a) If, at any time, an Event of Default has occurred and is then continuing with respect to a party hereto (such party being hereinafter referred to as the "Defaulting Party"), then the other party (hereinafter referred to as the "Non-defaulting Party"), shall have the right to early terminate and liquidate the Transaction evidenced hereby, together with all other Specified Transactions entered into between Party A and Party B (collectively the "Terminated Transactions") and determine a net amount due in respect of the Terminated Transactions in accordance with the early termination payment calculation provisions of Section 6(e)(i)(3) of the ISDA Agreement based on a payment measure of Market Quotation and a payment method of Second Method. For purposes of giving effect to the foregoing, the Termination Currency shall be United States Dollars. For purposes hereof, "Event of Default" means, in the context of Party A, (i) the failure to make, when due, any payment required of it under this Confirmation and such failure is not remedied within three Business Days following written notice of such failure, or (ii) the occurrence with respect to Party A of any of the Bankruptcy events set out in Section 5(a)(vii) of the ISDA Agreement. In the context of Party B, "Event of Default" means (i) the failure to make, when due, any payment required of it under this Confirmation and such failure is not remedied within three Business Days following written notice of such failure, (ii) the occurrence with respect to Party B of any of the Bankruptcy events set out in Section 5(a)(vii) of the ISDA Agreement, (iii) the occurrence of an "Event of Default" as such term is defined in a Credit Agreement, dated as of November 17, 1999, made by and among Warnaco Inc., The Warnaco Group, Inc., certain banks and financial institutions, as the "Initial Lenders", The Bank of Nova Scotia and Salomon Smith Barney, Inc., as "Co-Lead Arrangers" and "Co-Book Managers", Citibank, N.A., as "Syndication Agent", Societe Generale and Commerzbank AG, as "Co-Documentation Agents" and The Bank of Nova Scotia as "Administrative Agent", as amended and supplemented from time to time (the "Credit Agreement"), (iv) Party B at any time during the Term hereof effects with one or more counterparties (other than Party A), forward equity purchase transactions pertaining to the purchase of Shares (as defined below) on a forward basis having an aggregate forward purchase price which, when combined with the product of the Number of Shares multiplied by the Forward Price as on the Termination Date (each as defined below), exceeds USD 150,000,000 (the "Forward Price Limit"); provided, however, that an Event of Default shall not be constituted pursuant to this Section 2(a)(iv) unless Party B's breach of the Forward Price Limit is continuing as of the tenth Business Day following the date on which such breach occurred; (v) the joint and several guarantee, dated February 10, 2000, in the form appended hereto as Exhibit A (the "Guarantee") made by the parties set out in the signature page thereof (the "Guarantors") (x) fails or ceases to be in full force and effect prior to the satisfaction by Party B of all of its obligations to Party A hereunder; or (z) any of the Guarantors disaffirms, repudiates or rejects, in whole or in part, or challenges the validity of the Guarantee; (vi) the occurrence of a default, event of default or other similar condition or event (however described) in respect of Party B under any forward equity purchase transaction pertaining to Shares which may now or hereafter be entered into between Party B and any third party and such third party has exercised any rights under such forward equity purchase transaction, which are predicated upon the occurrence of such default, event of default or similar condition or event, to terminate such transaction prior to its scheduled termination date. Party B hereby covenants and agrees to notify Party A immediately upon the occurrence of any such event and the exercise of such termination rights. (b) The Non-defaulting Party may exercise its right to early termination and liquidate the Terminated Transactions by written notice to the Defaulting Party, which notice shall set forth the amount of the termination payment derived by the Non-defaulting Party as set forth above; provided that, in the event Party A becomes subject to a Bankruptcy in the nature of any one of the events specified in Section 5(a)(vii) (1), (3), (4), (5), (6) or, to the extent analogous thereto, (8), of the ISDA Agreement and any court, tribunal or regulatory authority with competent jurisdiction acting pursuant to any bankruptcy or insolvency law or other similar law affecting Party A makes an order which has or purports to have the effect of prohibiting Party B from terminating the Terminated Transactions at any time after the occurrence of any such events, then the Terminated Transactions shall be deemed to have been terminated immediately upon the occurrence of any of the events specified in Section 5(a)(vii) (1), (3), (5), (6) or, to the extent analogous thereto, (8) and as of the time immediately preceding the institution of the relevant proceeding or the presentation of the relevant petition in respect of Section 5(a)(vii) (4) or, to the extent analogous thereto, (8). (c) In the event the termination payment derived in accordance with the foregoing represents an amount owing by the Non-defaulting Party to the Defaulting Party, the Non-defaulting Party shall have the right to set off such termination payment against any amounts payable (whether at such time or in the future or upon the occurrence of a contingency) by the Defaulting Party to the Non-Defaulting Party (irrespective of the currency or the place of payment of the obligation) under any other agreement between the Defaulting Party and the Non-Defaulting Party (the "Other Agreement Amount"). For this purpose, the termination payment or the Other Agreement Amount may be converted into the currency in which the other is denominated by the Non-defaulting Party acting in a commercially reasonable manner. If all or part of the Other Agreement Amount is not then due, such Other Agreement Amount, or part thereof, may be present-valued by the Non-defaulting Party acting in a commercially reasonable manner. If all or part of the Other Agreement Amount is unascertained, the Non-defaulting Party may in good faith estimate such amount and set-off in respect of the estimate subject to accounting to the Defaulting Party when the obligation is ascertained. 3. BASIC REPRESENTATIONS Each of the parties hereto makes to the other each of the "Basic Representations" contained in Section 3(a) and (c) of the ISDA Agreement. 4. TRANSFERABILITY Neither this Confirmation nor any interest or obligation in or under this Confirmation may be transferred (whether by way of security or otherwise) by either party without the prior written consent of the other party and any purported transfer in violation hereof shall be void. 5. JURISDICTION The Confirmation will be governed and construed in accordance with the laws of the State of New York, without reference to the choice of law doctrine. With respect to any suit, action or proceedings relating to this Confirmation ("Proceedings"), each party irrevocably: (i) submits to non-exclusive jurisdiction of the courts of the State of New York; and (ii) waives any objection which it may have at any time to the laying of venue of any Proceedings brought in any such court, waives any claim that such Proceedings have been brought in an inconvenient forum and further waives the right to object, with respect to such Proceedings, that such court does not have any jurisdiction over such party. Nothing in this Confirmation precludes either party from bringing Proceedings in any other jurisdiction nor will the bringing of Proceedings in any one or more jurisdictions preclude the bringing of Proceedings in any other jurisdiction. 6. TERMS The terms of the particular Transaction to which this Confirmation relates are as follows: I. General Terms Trade Date: February 10, 2000 Effective Date: February 10, 2000 Termination Date: August 31, 2002 Optional Termination Date: Any Business Day during the Term hereof after the Accumulation Period End Date, as selected by Party B in accordance with the Notice provision of the Settlement Terms set out below, provided that Party B may designate no more than four Optional Termination Dates per Calculation Period; provided further, however, that in the event Party B designates an Optional Termination Date in respect of which Party B has elected settlement in accordance with the Net Share Settlement or Cash Settlement provisions set out below, Party B shall not designate any further Optional Termination Dates in respect of which Party B intends to elect settlement by way of Net Share Settlement or Cash Settlement until such time as the settlement process specified below (including the Make-whole provisions) in respect of the initial Optional Termination Date has been completed. If Party B elects an Optional Termination Date within 90 days after the Accumulation Period End Date, Party B shall pay Party A on the settlement date for such Optional Termination Date, an amount equal to USD 50,000 times the Relevant Share Number divided by the Number of Shares as of the Accumulation Period End Date. Forward Purchase Seller: Party A Forward Purchase Buyer: Party B Exchange: New York Stock Exchange Shares: The Warnaco Group, Inc. common shares, par value $0.01 (Exchange designation "WAC"), CUSIP No. 934390105, quoted in USD on the Exchange. Accumulation Period: The period commencing on and including the Effective Date to and including the earlier of (x) the date by which Party A, or any party related to Party A which has been designated by Party A to acquire Shares in respect of this Transaction (the "Hedge Entity"), has, by means of one or more purchase transactions effected on the Exchange through such period, accumulated 2,600,000 Shares; or (y) the third Business Day following the date on which Party B's notice to Party A, given in accordance with Section 12 of the ISDA Agreement, requesting the termination of the Accumulation Period becomes effective in accordance with Section 12 (the date on which such accumulation is achieved, such aggregate purchase price is incurred, or the third Business Day following the effective date of such notice (whichever is sooner) being the "Accumulation Period End Date"). Notwithstanding the foregoing, Party B shall have no right to terminate the Accumulation Period until Party A has accumulated at least 1,000,000 Shares. Party A shall provide to Party B, no sooner than the third and no later than the fifth Business Day following the trade date of each purchase transaction, notice setting out the purchase transaction effected by Party A or the Hedge Entity on the relevant trade date. Party A shall notify Party B of Party A's calculation of the Initial Price on or before the third Business Day following the Accumulation Period End Date. Number of Shares: In respect of any Business Day within the Term hereof, the aggregate number of Shares yielded pursuant to Party A's or the Hedge Entity's purchase program as referenced in the "Accumulation Period" provision above, less the aggregate of the Relevant Share Numbers for all previous partial settlements (as contemplated by the Settlement Terms) effected prior to the relevant date of determination. Business Days: London and New York Period End Dates: The Period End Dates shall be the last Business Day of February, May, August and November, beginning after the Accumulation Period End Date, up to and including the Termination Date or the Optional Termination Date. Overnight Rate: "Fed Funds O/N" ASK (offer) rate as quoted on Telerate Page 4833 as of 16:10 (New York time) on the relevant day of determination. Spread: Plus 137.5 basis points (1.375%); provided, however, that if at any time during the Term hereof Party B enters into a transaction with any other counterparties having terms which are substantially similar to the terms hereof, the Spread applicable to this Transaction shall be the higher of (i) the Spread set out above, or (ii) the Spread provided for in such similar transaction. Daily Forward Amount: For each day of the Accumulation Period, the Calculation Agent shall determine an amount (the "Daily Forward Amount") in accordance with the following formula: [Daily Forward Amounti-1+ (Number of Settled Sharesi x WAPi)] x [1 + (Accumulation Period Floating Ratei / 360)] where, "Daily Forward Amounti-1" means the Daily Forward Amount determined in respect of the day preceding the relevant day of determination, "Number of Settled Sharesi" means the number of Shares settled by Party A or the Hedge Entity on the relevant date of determination; "WAPi" means the weighted average of the respective purchase prices per Share, each in USD, including a commission of USD 0.045 per Share, of all Share purchase transactions settled by Party A or the Hedge Entity on the relevant date of determination, which weighted average shall be determined by multiplying each purchase price by the number of Shares to which such purchase price is applicable, aggregating the products thereof and dividing such sum by the total number of purchased Shares; and "Accumulation Period Floating Ratei" means the Overnight Rate in effect as of the relevant date of determination, plus the Spread noted above. For purposes of giving effect to the foregoing, Overnight Rate for any day that is a not Business Day shall be the Overnight Rate in effect on the first Business Day preceding such day. Initial Price: The Initial Price shall be the Daily Forward Amount determined in respect of the Accumulation Period End Date divided by the Number of Shares. Forward Period: The period commencing on, but excluding, the Accumulation Period End Date, to but excluding the Termination Date. Forward Rate: "Zero Coupon USD Swap Rate" quoted on the day which is two London Banking Days prior to the first Business Day of the Forward Period (the "Determination Date"), for a Designated Maturity equal to the actual number of days in Forward Period, plus Spread. Zero Coupon USD Swap Rate: The fixed rate of interest (a) that would be paid by the Fixed Rate Payer on a USD interest rate swap in which (i) the Floating Rate Payer makes quarterly payments, in arrears, on the Period End Dates at the 3-month USD-LIBOR-BBA rate (appropriately interpolated in the event the first Calculation Period following the Accumulation Period is less than three months); (ii) the Fixed Rate Payer's payments are compounded quarterly and paid on the Termination Date only; (iii) the Day Count Fraction for both Fixed and Floating Rate Payers is Actual / 360 and (b) which would impart to same swap a mark-to-market value of zero at inception. Forward Price : The Forward Price on each Optional Termination Date or the Termination Date, shall be calculated as follows: [1 + (Forward Rate x Day Count /360 )] x Initial Price where "Day Count" is the number of days in the period commencing on and including the Accumulation Period End Date to but excluding the Optional Termination Date or Termination Date, as applicable. II. Settlement Terms Settlement: This Transaction may be settled, in whole or in part, on any Optional Termination Date, and, in the event of a partial settlement, the unsettled portion shall remain, during the Term hereof, a Transaction for purposes of the ISDA Agreement. Otherwise, this Transaction shall terminate, and the each party's obligations in respect thereof shall be settled as provided for herein following the occurrence of the Termination Date. Settlement shall be effected in accordance with the settlement mechanism selected by Party B in its notice given in accordance with the Notice provision set out below. All partial settlements shall be effected in a minimum amount of 100,000 Shares and additional integral multiples of 1000 Shares. Relevant Share Number: The Number of Shares or, in the context of any partial settlement to be effected on any Optional Termination Date, the number of Shares specified or deemed specified by Party B in its notice given pursuant to the Notice provision set out below. Physical Settlement: Where Physical Settlement is applicable, on the Optional Termination Date or Termination Date, Party A or its Hedge Entity shall deliver to Party B Shares equal to the Relevant Share Number, and Party B shall pay to Party A an amount, in USD, equal to the product of the Forward Price, as determined on the Optional Termination Date or the Termination Date, as applicable, multiplied by the Relevant Share Number (the "Settlement Price"). Any delivery made pursuant to this provision shall be on a delivery versus payment basis and the due date of such delivery shall be subject to adjustment in accordance with Section 6.2 of the Equity Definitions in the event of the occurrence of a Settlement Disruption Event. Disposition Period: Where Cash Settlement or Net Share Settlement is elected or otherwise applies, on the Optional Termination Date or Termination Date (as applicable) (the "Commencement Date"), Party A or the Hedge Entity shall commence selling the Shares acquired by Party A or the Hedge Entity during the Accumulation Period. The following definitions will apply to this sale program. (I) "Final Trading Date": the earlier of (1) the date on which Party A, or the Hedge Entity, has effected transactions on the Exchange by which it has completed the sale of Shares equal to the Relevant Share Number, (2) the 90th calendar day following the Commencement Date, and, in the case of Net Share Settlement only, (3) the date on which Party A, or the Hedge Entity, has effected transactions on the exchange such that the Daily Settlement Amount (as defined below) is an amount less than or equal to zero (a "Zero Settlement Amount"); provided, however, that Party A and the Hedge Entity shall be deemed not to have effected transactions such that the absolute value of a negative Daily Settlement Amount is equal to or greater than the closing price for one Exchange Board Lot (100) of Shares, as reported by the Exchange in respect of the Final Trading Date. (II) "Final Settlement Date": the day on which any sale transaction effected on the Exchange on the Final Trading Date would settle. (III) "Disposition Settlement Day": each day of the period commencing on, and including, the Commencement Date to, and including, the Final Settlement Date. (IV) "Disposition Trading Day": in respect of any Disposition Settlement Day, the day on which any sale transaction effected on the Exchange that settles on such Disposition Settlement Day is effected. (V) "Disposition Period": the period beginning with the Commencement Day, and continuing up to and including the Final Settlement Date. Notwithstanding the foregoing, the Disposition Period shall not be less than 15 days and Party A shall, in effecting sales, observe the volume constraints prescribed by Rule 10b-18 under the Securities Exchange Act of 1934 as if those constraints applied to sales of securities. Daily Settlement Amount: Where Cash Settlement or Net Share Settlement is applicable, for each day beginning with the Commencement Day, Party A shall determine an amount (the "Daily Settlement Amount"), in USD, in accordance with the following formulae: SA0= Forward Price x Relevant Share Number SAi = SAi-1 x (1+ ONi-1/360) - Number of Settled Sharesi x Pi where "Number of Settled Sharesi" means the number of Shares the sale of which is settled by Party A or its Hedge Entity, on the relevant day of determination, "Pi" means the greater of (a) the weighted average of the sale prices per Share, including a commission of USD 0.045 per Share, of all Share sale transactions settled by Party A or the Hedge Entity on the relevant day of determination and (b) the modified volume-weighted average per-Share price as determined by means of the Bloomberg service, for trading in the Shares on the Disposition Trading Day whose corresponding Disposition Settlement Day is the relevant day of determination, and adjusted by Party A to (i) include a commission of USD 0.045 per Share (ii) exclude the first trade in the Shares effected on the Exchange on such Disposition Trading Day; and (iii) exclude all trades in Shares effected on the Exchange on such Disposition Trading Day within 60 minutes of the close of trading on such day, "SA0" means the Daily Settlement Amount determined in respect of the Commencement Date, Forward Price is as determined on the Optional Termination Date or the Termination Date, as applicable, "SAi" means the Daily Settlement Amount determined in respect of the relevant day of determination, "SAi-1" means the Daily Settlement Amount determined for the day preceding the relevant day of determination, and ONi-1 means a rate of interest equal to the Overnight Rate in effect as of the day preceding the relevant day of determination, plus the Spread. The Daily Settlement Amount determined in respect of the Final Settlement Date shall be the Final Settlement Amount. For purposes of giving effect to the foregoing, "Number of Settled Sharesi" and "VWAPi" shall be deemed to be zero on any day in the Disposition Period which is not an Exchange Business Day. Notice of Sale Transactions: Party A shall provide to Party B, on or before the first Business Day following the trade date of each sale transaction, notice setting out the sale transaction effected by Party A or the Hedge Entity on the relevant trade date and Party A's calculation of the Daily Settlement Amount in respect of such trade date. Cash Settlement: Where Cash Settlement is applicable, if the Final Settlement Amount as determined above is negative, Party A shall pay to Party B the absolute value of such amount on the Final Settlement Date. If such amount is positive, Party B shall pay to Party A such amount on the later of (i) the Final Settlement Date or (ii) the first Business Day following the date on which Party A's notice to Party B that such Final Settlement Amount is owing by Party B becomes effective in accordance with Section 12 of the ISDA Agreement. Net Share Settlement: Where Net Share Settlement is applicable, if the Final Settlement Amount is a Zero Settlement Amount, then Party A or its Hedge Entity shall deliver to Party B (1) Shares equal in number to the number of unsold Hedge Shares, and (2) the absolute value of the Final Settlement Amount, in USD, on or before the Net Share Settlement Date. If the Final Settlement Amount is positive, Party A shall determine a number of Shares (the "Initial Settlement Number") in accordance with the following formula: Final Settlement Amount / Closing Price where "Closing Price" is the closing price of the Shares as reported by the Exchange on the Final Settlement Date, and Party B shall, at its option, either (i) deliver to Party A Shares equal in number to such Initial Settlement Number (such Shares being the "Settlement Shares") or (ii) pay to Party A an amount in USD equal to the Final Settlement Amount, on or before the Net Share Settlement Date. If, pursuant to the preceding paragraph, Party B has elected to deliver Settlement Shares, on the Net Share Settlement Date, Party A or its Hedge Entity shall commence selling the Settlement Shares and shall continue calculating the Daily Settlement Amount as specified above. On each day until the earlier of 90 calendar days following the Net Share Settlement Date or the day on which the Daily Settlement Amount is a Zero Settlement Amount, (such day being the "Make-Whole Period End Date" and the period commencing on the Net Share Settlement Date up to such day being the "Make-Whole Period"), Party A shall calculate (i) an amount (the "Daily Make-Whole Amount") according to the formula: Daily Settlement Amount - Closing Price x Remaining Number of Shares and (ii) a number of shares (the "Daily Make-Whole Number") according to the formula: Daily Make-Whole Amount / Closing Price where "Closing Price" is the closing price of the Shares as reported by the Exchange on the day of determination, and Remaining Number of Settlement Shares is (i) the Initial Settlement Number; (ii) minus the aggregate of all Shares sold, on a settlement basis, pursuant to this provision during the Make-Whole Period, (iii) plus the aggregate of all Make-Whole Shares, as defined below, delivered to Party A pursuant to this provision (iv) minus the aggregate of all Shares delivered by Party A to Party B as required below in the event of a negative Daily Make-Whole Amount. If, on (a) the tenth Business Day following the Net Share Settlement Date and any following tenth Business Day during the Make-Whole Period, the Daily Make-Whole Amount is greater than 1,000,000, or (b) on any Business Day during the Make-Whole Period the Daily Make-Whole Amount is greater than 4,000,000, Party B shall either (i) deliver to Party A, Shares equal in number to the Daily Make-Whole Number (such Shares being the "Make-Whole Shares") on or before the first Business Day following the relevant day of demand; or, at the option of Party B, (ii) pay to Party A an amount in USD equal to the Daily Make-Whole Amount to be paid on or before the first Business Day following such day of demand. In the event that Party B elects option (ii), then the Daily Settlement Amount shall be adjusted downwards by the Daily Make-Whole Amount on the day Party A receives the full payment. If (x) on any tenth Business Day following the Net Share Settlement Date and any following tenth Business Day during the Make-Whole Period, the Daily Make-Whole Amount is negative and its absolute value is greater than 1,000,000, or (y) on any Business Day during the Make-Whole Period, the Daily Make-Whole Amount is negative and its absolute value is greater than 4,000,000, Party A shall, on or before the following Business Day, deliver to Party B Shares equal in the number to the absolute value of the Daily Make-Whole Number. On the first Business Day following the Make-Whole Period End Date (the "Final Make-Whole Settlement Day"), Party A will deliver to Party B, shares equal in number to the Remaining Number of Settlement Shares. If the Daily Settlement Amount, on the Make-Whole Period End Date (being the "Final Make-Whole Amount") is positive, then Party B shall pay to Party A on the Final Make-Whole Settlement Day an amount in USD equal to the Final Make-Whole Amount. If the Final Make-Whole Amount is negative, then Party A shall pay to Party B an amount in USD equal to the absolute value of the Final Make-Whole Amount. Break Funding Amount: On any Optional Termination Date, Party A shall calculate the Break Funding Amount. If the Break Funding Amount is positive, then, in addition to any other amount then payable by Party B, Party B shall also pay to Party A, on such date, the Break Funding Amount. If the Break Funding Amount is negative, then Party A shall pay to Party B, on such date, the absolute value of the Break Funding Amount. For purposes, hereof, "Break Funding Amount" means the amount, determined by Party A in a commercially reasonable manner, equal to (1) the mark-to-market value to Party A as of the Optional Termination Date, of a swap incorporating the terms set out in the definition of Zero Coupon USD Swap Rate as if (i) Party A were the Floating Rate Payer, (ii) the Notional Amount were equal to the Initial Price multiplied by the Relevant Share Number; (iii) the original term of such swap were equal to the Term hereof, and (iv) no amounts then due under such swap remain unpaid, minus (2) an amount equal to the Relevant Share Number multiplied by the difference between the Zero Spread Forward Price calculated as of the relevant Optional Termination Date and the Initial Price, where "Zero Spread Forward Price " is calculated in the same manner as the Forward Price but for a Spread of 0%. Net Share Settlement Date: The second Clearance System Business Day following the Final Settlement Date, subject to adjustment in accordance with Section 6.2 of the Equity Definitions in the event of the occurrence of a Settlement Disruption Event. Notice: In the event Party B intends to effect a settlement on any Optional Termination Date, Party B shall provide Party A with prior written notice of its intention to exercise its rights to settle this Transaction on such Optional Termination Date and such notice must become effective in accordance with Section 12 of the ISDA Agreement on or before the 3rd day preceding the Optional Termination Date on which Party B intends to effect a settlement. If Party B's notice does not become effective on or before such 3rd day, Party B shall be deemed to have elected to effect a settlement on the next following Optional Termination Date; provided, however, that no such notice may be given (i) on any day during the Accumulation Period; or (ii) following the occurrence of an Event of Default with respect to Party B. Other than in the context of any partial settlement, Party B shall indicate in such notice whether settlement will be by Physical Settlement, Cash Settlement or Net Share Settlement. In the context of any partial settlement, Party B shall specify the number of Shares in respect of which settlement will be effected. If such notice does not so specify the manner of settlement, Physical Settlement shall apply and if such notice does not specify the number of Shares in respect of which settlement will be effected, Party B shall be deemed to have elected to effect settlement in respect of the full Number of Shares then in effect. If Party B wishes, in the context of the Termination Date, to effect settlement otherwise than by Physical Settlement, Party B shall so notify Party A and such notice must become effective in accordance with Section 12 of the ISDA Agreement on or before the 3rd day prior to the Termination Date failing which Party B shall be deemed to have elected to utilize Physical Settlement. Inability to Sell/Purchase Shares: If, in the context of Net Share Settlement, Cash Settlement, or any other provision hereof which, in order to give effect thereto, requires Party A to sell Shares (other than to Party B), (1) Party A is unable to effect a sale by any reasonably economic, viable or practicable means, including a private placement transaction, of the requisite number of Shares on or before the Final Trading Day for purposes of determining the Final Settlement Amount for any reason including, without limitation, because such Shares have a prospectus delivery requirement and Party B is unable to provide Party A with a current prospectus, or (2) the Disposition Period otherwise expires prior to Party A being able to effect the necessary sales, then, Party B shall be deemed to have elected Physical Settlement with respect to the unsold portion of such requisite number of Shares, and Party B shall, within one Business Day of the date it is advised by Party A that a sale of all such Shares was not effected, repurchase the unsold Shares, for USD, in an amount per Share that, when combined with all amounts received by Party A for all effected sales of Shares, results in Party A receiving an amount equal to the amount Party A would have received had Physical Settlement been elected. If, in the context of Physical Settlement or the application of the Registration of Shares provision or any other provision of this Confirmation which, in order to give effect thereto, requires delivery of Shares to Party B by Party A, Party B is unable, due to the application of applicable law, at the relevant time to take delivery of such Shares, a Termination Event shall be deemed to have occurred for purposes of the ISDA Agreement and in respect of which (i) Party B shall be the Affected Party, (ii) this Transaction shall be the only Affected Transaction, (iii) and the payment measure shall be Loss (as such terms are defined in the ISDA Agreement). Good Delivery: Any party required to deliver Shares hereunder (the Delivering Party") shall transfer good title to such Shares, and such Shares shall be freely transferable (together with any prospectus required by applicable law) and free and clear of any liens, charges, claims and encumbrances. Delivery shall be effected by book-entry transfer of the Shares to an account with The Depository Trust Company (the "Clearance System") in the name of the recipient (or, where escrow settlement is applicable, the name of the escrow agent) as is designated by the recipient. III. Dividends If on any day during the Term hereof a cash dividend paid by Party B in respect of the Shares the record date of which precedes the Termination Date, is received by Party A or the Hedge Entity, Party A or the Hedge Entity shall pay to Party B an amount equal to such dividend on or before the second Business Day immediately following the date of receipt of such dividend by Party A or the Hedge Entity (such second Business Day being the "Dividend Payment Date"). Upon the request by Party B (which must be recieved by Party A on or before 10:00 a.m. (New York time) on the relevant Dividend Payment Date), Party A shall deliver to Party B the equivalent of such amount in Shares (less a commission of not more than USD 0.045 per Share) which equivalent shall be based upon the price at which Party A is then able (acting reasonably) to purchase Shares plus an amount, in USD, equal to any residual cash in the event that the foregoing amount cannot be fully converted into whole Shares. IV. Decline in Share Price/Decline in Credit Rating/Termination of Credit Agreement In the event that on any Business Day during the Term of this Transaction (other than the Accumulation Period) or on any of the five Business Days preceding such Business Day (i) the closing price per Share as quoted by the Exchange on such day is USD $5.00 or less, (ii) Standard & Poor's Rating Service, a division of McGraw-Hill Inc., reports a rating below BBB-, or no longer assigns a rating, or Moody's Investor Services Inc. reports a rating below Baa3, or no longer assigns a rating, with respect to Party B's Long-Term Debt, or (iii) Party B prepays all amounts outstanding under, and terminates, the Credit Agreement, or provides notice of an intention to prepay all amounts outstanding under, and terminate, the Credit Agreement or all commitments of the Lenders thereunder have terminated or expired, Party A may upon notice to Party B, given in accordance with Section 12 of the ISDA Agreement, and provided an Event of Default or Termination Event has not occurred with respect to Party A or is then continuing (and which, in the context of a Termination Event, renders this Transaction an Affected Transaction) and provided an Early Termination Date has not been designated in respect of this Transaction, elect to terminate this Transaction in its entirety. Party B shall, on or before the first Business Day following the date on which Party A's termination notice becomes effective, notify Party A of the manner in which this Transaction shall be settled (and, failing such notification, Party B shall be deemed to have elected Cash Settlement). If Party B elects Cash Settlement or Net Share Settlement, for purposes of giving effect to such provisions, the commencement of the Disposition Period shall be the first Exchange Business Day following the date on which Party B's election notice became effective. If Party B elects Physical Settlement, settlement shall be effected on the third Business Day following the Election Date in accordance with, and subject to, the Physical Settlement provision set out above. Party B shall provide written notice to Party A of the occurrence of event (ii) above and, in the event Party A is, at the relevant time, no longer Administration Agent under the Credit Agreement, event (iii) above and, for purposes of applying the five-Business Day period referred to above, the date on which Party B's notice becomes effective in accordance with Section 12 of the ISDA Agreement shall be deemed to be the Business Day on which the relevant event occurred; provided, however, that the failure of Party B to so notify Party A of the occurrence of the relevant event shall in no way preclude Party A from invoking termination pursuant to this provision in the event Party A becomes aware of such occurrence by independent means. The parties hereto agree that the occurrence of the events (i), (ii) or (iii) referred to in the preceding paragraph shall in no way be construed as the occurrence of an Event of Default as contemplated by the ISDA Agreement. For purposes hereof, "Long-Term Debt" means the then current senior unsecured, non-credit-enhanced, long-term indebtedness issued by Party B. V. Adjustments For purposes of Article 9 of the Equity Definitions, any reference to the term "Share Swap Transaction" shall be deemed to mean "Forward Purchase Transaction"; provided, however, that "Potential Adjustment Event" shall exclude the declaration or payment of any cash dividends in respect of the Shares. Method of Adjustment: Calculation Agent Adjustment Calculation Agent: Party A VI. Extraordinary Events Consequences of Merger Events: (a) Share-for-Share: Alternative Obligation (b) Share-for-Other: Cancellation and Payment (c) Share-for-Combined: Alternative Obligation Nationalization or Insolvency: Cancellation and Payment VII. Regulatory Event If during the Term of this Transaction, The Warnaco Group, Inc. effects any action, including any action with respect to its capital structure, the result of which is that Party A, or the Hedge Entity, then owns more of any class of outstanding voting shares of Party B pursuant to this transaction than is permitted by the Bank Holding Company Act of 1956, as amended, or other federal legislation (the "Regulatory Limit"), then, Party A shall so notify Party B and Party B shall be deemed to have elected to partially settle this Transaction but only to the extent to which the Number of Shares exceeds the Regulatory Limit (which excess shall be the Relevant Share Number for purposes of the Settlement terms set out above). If Party B elects Physical Settlement, the relevant portion of this Transaction shall be settled on the first Business Day following the Election Date subject to adjustment in accordance with Section 6.2 of the Equity Definitions in the event of the occurrence of a Settlement Disruption Event (such Business Day being the Physical Settlement Date). Party B shall specify the mode of settlement on or before the first Business Day (the "Election Date") following the date on which Party A's notice to Party B became effective failing which Party B shall be deemed to have elected Physical Settlement. If Party B elects Net Share Settlement or Cash-Settlement, for purposes of giving effect thereto, the number of Shares to be sold shall be the Relevant Share Number and the Commencement Date of the Disposition Period shall be deemed to be the first Exchange Business Day following the Election Date. In addition to any other amount then payable by Party B, Party B shall also pay to Party A, on (i) the Physical Settlement Date, in the context of a Physical Settlement election; or (ii) on the Net Share Settlement Date, in the context of a Net Share or Cash Settlement election, the Break Funding Amount as defined above except that the reference therein to "Optional Termination Date" shall mean the Election Date. VIII. Registration of Shares Notwithstanding any other provision hereof (including, without limitation, any election of Net Share Settlement or Cash Settlement by Party B but excluding any election by Party B of Net Share Settlement or Cash Settlement under "Decline in Share Price/Decline in Credit Rating" above), unless both parties hereto conclude that a public sale of the Shares acquired by it or the Hedge Entity in connection with this Transaction does not require registration under the Securities Act of 1933 (the "Securities Act"), which conclusion shall be communicated by each party to the other, by means of any of the methods specified in Section 12 of the ISDA Agreement, as promptly as is reasonable practicable, and in any event by the first Business Day following a Termination Date or Optional Termination Date, as applicable, Physical Settlement shall apply with respect to such Termination Date or Optional Termination Date unless the following conditions have been satisfied: (i) on the Optional Termination Date or Termination Date (or, in the context of a Regulatory Event, the Election Date), as the case may be, a registration statement (a "Registration Statement") naming as selling shareholders Party A and the Hedge Entity and covering the public resale of all Shares held by Party A or the Hedge Entity to hedge this Transaction and all Shares deliverable by Party B to Party A pursuant to the Net Share Settlement provisions hereof (collectively, the "Registrable Shares") shall have been filed with, and declared effective by, the Securities and Exchange Commission under the Securities Act, and no stop order shall be in effect with respect to such Registration Statement; (ii) a printed prospectus relating to the Registrable Shares (including any prospectus supplement thereto and amendments thereof, a "Prospectus") shall have been delivered to Party A and the Hedge Entity in such quantities as Party A shall have requested no later than the Optional Termination Date, Termination Date or Election Date; (iii) the Registration Statement and the Prospectus shall be in form and substance reasonably satisfactory to Party A; (iv) no later than the Exchange Business Day before the Optional Termination Date, Termination Date or Election Date, Party A and Party B shall have entered into an agreement (a "Transfer Agreement") in connection with the public resale of the Registrable Shares by Party A and the Hedge Entity substantially similar to underwriting agreements customary for underwritten offerings of equity securities, in form and substance reasonably satisfactory to Party A and Party B, providing for (without limitation): indemnification of, and continuation in connection with the liability of, Party A and the Hedge Entity, the delivery of customary opinions of counsel and accountants "comfort letters", the continuous effectiveness of the Registration Statement until the fortieth day after the Optional Termination Date, Termination Date or Election Date, or if earlier, such time as all Registrable Shares have been resold pursuant thereto and all expenses in connection with such resale, including all registration costs and all fees and expenses of counsel for each of Party A and Party B, have been paid by Party B; (v) Party A and the Hedge Entity shall have been afforded a reasonable opportunity to conduct a due diligence investigation with respect to The Warnaco Group, Inc. customary in scope for underwritten offerings of equity securities, and acceptance of the results of such investigation by Party A and the Hedge Entity cannot be unreasonably withheld; (vi) all conditions to the obligations of each party under the Transfer Agreement shall have been satisfied or waived no later than the Optional Termination Date, Termination Date or Election Date, and (vii) the representations and warranties of Party B set forth herein and in the Transfer Agreement shall be true and correct on the date of delivery of Registrable Shares to purchasers of such Shares as though made at such time, and Party B shall have performed all its obligations set forth herein and in such Transfer Agreement to be performed by such time. If, in the context of the Decline in Share Price/Decline in Credit Rating /Termination of Credit Agreement provision, Party B has elected Cash Settlement or in the event Party B has elected Net Share Settlement and Party B is required to deliver Shares to Party A and any condition specified in items (i) - (vii) of the previous paragraph shall not have been satisfied in the manner and at the times specified therein, Party A may determine to (a) have some or all Registrable Shares sold in one or more transactions exempt from the registration requirements of the Securities Act, or (b) extend this Transaction in order to give Party B more time to satisfy such conditions. If Party A chooses the action set forth in clause (a) above, Party B shall pay all costs of such sales by Party A, including, without limitation, any applicable sales or purchase taxes, transfer taxes and commissions. If Party A chooses the action set forth in clause (b) above, the Calculation Agent will in its reasonable discretion adjust the terms hereof to take into account any additional costs to Party A and the Hedge Entity of such extension. 7. ADDITIONAL REPRESENTATIONS Each party will be deemed to represent to the other on the date of this Confirmation that, with respect to this Transaction (1) It is entering into this Transaction for its own account and not with a view to transfer, resale or distribution, (2) it is an "accredited investor" within the meaning of Rule 510(a) of Regulation D under the Securities Act and has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of this Transaction, and (3) it understands and acknowledges that this Transaction may involve the purchase or sale of a "security" as defined in the Securities Act and the securities laws of certain states, and that any such security has not been registered under the Securities Act or the securities laws of any state and, therefore, may not be sold, pledged, hypothecated, transferred or otherwise disposed of unless such security is registered under the Securities Act and any applicable state securities law, or an exemption from registration is available. 8. ADDITIONAL REPRESENTATIONS AND COVENANTS (a) Party B Representations Party B represents to Party A that (1) as of the Trade Date hereof, it is not in possession of any material non-public information with respect to itself; (2) as of the Trade Date hereof, it is not entering into this Transaction for the purpose of manipulating the market price or value of the Shares; (3) as of the Trade Date hereof, no "restricted period" for purposes of Rule 102 of Regulation M under the Securities Exchange Act of 1934 (respectively, "Regulation M" and the "Exchange Act") and no tender offer for Shares (whether by Party B or any other third party) is in effect or (or in the case of a tender offer by Party B) has been in effect within the preceding ten Business Days; and (4) it is entering into this Transaction in connection with its Share repurchase program which was most recently approved by its board of directors on March 1, 1999 and most recently publicly announced on March 2, 1999, solely for the purposes stated in such board resolution and public disclosure. (b) Party B Covenants Party B covenants to Party A that (1) Party B shall not commence a "distribution" (as defined in Regulation M) of Shares or a tender offer for Shares during the Accumulation Period; (2) no "restricted period" for purposes of Rule 102 of Regulation M will be in effect on any day on which Party A is required, pursuant to the terms hereof, to deliver Shares to Party B (any such day being, for purposes of this paragraph, a "Settlement Date", and no tender offer for Shares by Party B will be in effect on any Settlement Date or within the preceding ten Business Days of any day thereof; (3) Party B shall not, and shall cause its affiliated purchasers (as defined in Rule 10b-18 under the Exchange Act) not to, purchase Shares during the Accumulation Period; (4) Party B shall not disclose any material non-public information with respect to itself to Party A without Party A's consent; (5) if at any time during the Disposition Period Party B comes to have possession of material non-public information with respect to itself, Party B will notify Party A that a blackout period is in effect, and when Party B ceases to be in possession of material non-public information, Party B will notify Party A that the blackout period has ended. (c) Party A Covenants Party A covenants to Party B that Party A shall not sell, nor make any offers to sell during any blackout period or any restricted period in respect of either of which Party A is in receipt of notice from Party B or Group given in accordance with Section 12 of the ISDA Agreement. 9. ADDITIONAL AGREEMENT Each party agrees that it will comply, in connection with this Transaction and all related or contemporaneous sales and purchases of Shares, with the applicable provisions of the Securities Act, the Exchange Act, and the rules and regulations thereunder, including, without limitation, Rules 10b-5 under the Exchange Act, provided that each party shall be entitled to rely conclusively on any information communicated by the other party concerning such other party's market activities. Party A represents to Party B and agrees that, in effecting the purchase transactions referred to opposite "Accumulation Period", above, Party A shall make bids for and purchases of the Shares only in accordance with the price, volume, timing, and method of bidding and purchasing constraints set forth in Rule 10b-18 under the Exchange Act, as if Party A were the issuer of the Shares and wished to avail itself of the protections afforded by that rule. 10. THIRD PARTY TERMINATION RIGHTS Party B hereby covenants and agrees with Party A that in the event that Party B is now or hereafter becomes party to a forward equity purchase transaction pertaining to Shares with any other party and such transaction grants to such other party termination rights which are not included herein or, if included, which may be invoked prior to the time or point at which such termination rights may be invoked by Party A pursuant to the terms hereof (with the exception of item (i) of Section (6)(IV) hereunder, which is specifically excluded from this Section 10), Party B shall immediately notify Party A of the existence of such termination right and this Confirmation shall be deemed to be automatically amended in order to incorporate such termination right (together with all attendant definitions and ancillary provisions contained in such other transaction which may be necessary to give meaning or effect to such termination right) for the benefit of Party A hereunder, mutatis mutandis. 11. MISCELLANEOUS Wire Instructions: Party A: SunTrust Bank ABA#061000104 Account No.: Bond Wire Clearance, 9088000095 Attention: Financial Risk Management, Operations Party B: ABA #021000089 Citibank N.A. New York, NY for credit to: Warnaco Inc. Account #3846-9277 12. OFFICES (a) The Office of Party A for this Transaction is Atlanta; and (b) The Office of Party B for this Transaction is New York. 13. NOTICE ADDRESSES Notices and communications under this Confirmation should be addressed to: For Party A: SunTrust Equitable Securities 303 Peachtree Street, 23rd Floor Atlanta, Georgia 30308 Attn: Fred D. Woolf, Vice President For Party B: The Warnaco Group, Inc. 90 Park Avenue New York, New York 10016 Attn: Carl Deddens Telephone: (212) 287-8281 Please confirm that the foregoing correctly sets forth the terms of our agreement, as amended, by executing the copy of this Confirmation enclosed for that purpose and returning it to us or by sending to us a letter or facsimile substantially similar to this letter, which letter or facsimile sets forth the material terms of the Transaction to which this Confirmation relates and indicates agreement to those terms. Yours truly, SUNTRUST BANK By: /s/ -------------------------- Name: Title: Confirmed as of the date first above written: THE WARNACO GROUP, INC. By: /s/ ------------------------------ Name: Title: EX-99 10 0010.txt EXHIBIT 99.9 - PRESS RELEASE EXHIBIT 99.9 CONTACT: Linda J. Wachner Robert D. Siegfried (212) 370-8205 Kekst and Company (212) 521-4832 William S. Finkelstein (212) 370-8287 FOR IMMEDIATE RELEASE WARNACO COMPLETES $2.56 BILLION FINANCING NEW YORK, NEW YORK, OCTOBER 6, 2000 --The Warnaco Group, Inc. (NYSE:WAC) today announced that it has completed the transactions previously announced to amend and extend up to $2.56 billion of existing financing facilities on a secured basis through August 12, 2002. The refinancing transactions, which became effective earlier today, are led by The Bank of Nova Scotia, Salomon Smith Barney, Inc., Citibank, N.A., Morgan Guaranty Trust Company of New York, Commerzbank, A.G. and Societe Generale. Warnaco said that the principal loan agreements will be filed on Form 8-K with the Securities and Exchange Commission. The Warnaco Group, Inc., headquartered in New York, is a leading manufacturer of intimate apparel, menswear, jeanswear, swimwear, men's and women's sportswear, better dresses, fragrances and accessories sold under such brands as Warner's(R), Olga(R), Fruit of the Loom(R) bras, Van Raalte(R), Lejaby(R), Weight Watchers(R), Bodyslimmers(R), Izka(R), Chaps by Ralph Lauren(R), Calvin Klein(R) men's, women's, and children's underwear, men's accessories, and men's, women's, junior women's and children's jeans, Speedo(R)/Authentic Fitness(R) men's, women's and children's swimwear, sportswear and swimwear accessories, Polo by Ralph Lauren(R) women's and girls' swimwear, Oscar de la Renta(R), Anne Cole Collection(R), Cole of California(R) and Catalina(R) swimwear, A.B.S.(R) Women's sportswear and better dresses and Penhaligon's(R) fragrances and accessories. -----END PRIVACY-ENHANCED MESSAGE-----