Investment And Deposit Agreement

Exhibit 10.2.5 Investment and Deposit Agreement


INVESTMENT
AND
DEPOSIT AGREEMENT


Dated as of September 30, 1999


between


Vestar Capital Partners III, L.P.


and


BANK OF AMERICA, N. A.,
in its capacity as Agent for the Lenders herein defined


TABLE OF CONTENTS


SECTION 1 DEFINITIONS..........................................................1
Section 1.1 Definitions..............................................1
Section 1.2 Terms Generally..........................................2
Section 1.3 Accounting Terms.........................................2


SECTION 2 MANDATORY INVESTMENTS................................................3
Section 2.1 Leverage Reduction in Connection with Covenant Defaults..3
Section 2.2 Leverage Reduction in Connection with Shirt Group Sale...3
Section 2.3 Leverage Reduction in Bankruptcy.........................3
Section 2.4 Limitation on Investment Obligations.....................4


SECTION 3 CONDITIONS...........................................................4
Section 3.1 Conditions to Effectiveness..............................4


SECTION 4 DEPOSIT OF CAPITAL CALL NOTICES WITH AGENT...........................5
Section 4.1 Deposit of Capital Call Notices..........................5


SECTION 5 REPRESENTATIONS AND WARRANTIES.......................................5
Section 5.1 Existence and Power......................................5
Section 5.2 Authorization............................................5
Section 5.3 No Conflicts.............................................6
Section 5.4 Consents.................................................6
Section 5.5 Enforceable Obligations..................................6
Section 5.6 Permitted Investment.....................................6
Section 5.7 Venture Capital Operating Company........................6
Section 5.8 Deposited Notices........................................6
Section 5.9 Limitations on Actions...................................6


SECTION 6 AFFIRMATIVE COVENANTS................................................7
Section 6.1 Outstanding Subscriptions................................7
Section 6.2 General Partner..........................................7
Section 6.3 Plan Assets, etc.........................................7
Section 6.4 Receipt of the Funds Pursuant to the Deposited Notices...7
Section 6.5 Partners and Pro Rata Shares.............................7


SECTION 7 NEGATIVE COVENANTS...................................................7
Section 7.1 Limitations on Actions...................................7


SECTION 8 EVENTS OF DEFAULT....................................................7
Section 8.1 Events of Default........................................7
Section 8.2 Remedies.................................................8
Section 8.3 Cash Collateral Account..................................8
Section 8.4 Nature of Payments after Event of Default................9
Section 8.5 Allocation of Payments after Event of Default............9
Section 8.6 Receipt of the Funds Pursuant to the Deposited Notices...9


SECTION 9 MISCELLANEOUS.......................................................10
Section 9.1 Notices.................................................10
Section 9.2 Payments................................................10
Section 9.3 Benefit of Agreement....................................10
Section 9.4 No Waiver; Remedies Cumulative..........................10
Section 9.5 Payment of Expenses, etc................................11
Section 9.6 Amendments, Waivers and Consents........................11
Section 9.7 Counterparts............................................11
Section 9.8 Headings................................................11
Section 9.9 Survival................................................11
Section 9.10 Governing Law; Submission to Jurisdiction; Venue.......11
Section 9.11 Severability...........................................12
Section 9.12 Entirety...............................................12
Section 9.13 Binding Effect; Termination............................12
Section 9.14 Limitation on Recourse.................................12
Section 9.15 Confidentiality........................................12


ANNEXES


Exhibit A Form of Capital Call Notice Exhibit B Terms of Subordination


INVESTMENT
AND
DEPOSIT AGREEMENT


THIS INVESTMENT AND DEPOSIT AGREEMENT, dated as of September 30, 1999 (the "Agreement"), is executed and entered into by and between Vestar Capital Partners III, L.P., a Delaware limited partnership (the "Fund"), and Bank of America, N.A. (formerly known as NationsBank, N.A.), in its capacity as Agent under the Credit Agreement hereinafter defined (in such capacity, the "Agent").


W I T N E S S E T H


WHEREAS, Cluett American Corp. (the "Borrower"), Cluett American Investment Corp. (the "Parent"), Cluett American Group, Inc. ("Interco"), the Subsidiary Guarantors parties thereto, the Lenders parties thereto and Gleacher NatWest Inc., as Documentation Agent, have entered into that certain Credit Agreement dated as of May 18, 1998 and amended as of May 27, 1998, December 18, 1998 and March 19, 1999 (as so previously amended, the "Existing Credit Agreement"); and


WHEREAS, the parties to the Existing Credit Agreement have agreed to further amend the Existing Credit Agreement by entering into that certain Fourth Amendment, dated as of the date hereof (such amendment herein referred to as the "Fourth Amendment" and, together with the Existing Credit Agreement and any further amendments entered into subsequent to the date hereof, the "Credit Agreement"); and


WHEREAS, as of the date hereof, the Fund is the indirect and beneficial owner of a majority of the issued and outstanding shares of capital stock of the Borrower; and


WHEREAS, as a condition to the effectiveness of the Fourth Amendment, the Lenders have required that the Fund enter into this Agreement with the Agent for the ratable benefit of the Lenders;


NOW, THEREFORE, for and in consideration of the mutual promises, covenants and representations and warranties contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound, the parties hereto agree as follows:


SECTION 1 DEFINITIONS


Section 1.1 Definitions.


All capitalized terms not defined in this Agreement shall have the meanings ascribed to such terms in the Credit Agreement. As used in this Agreement, the following terms shall have the meanings specified below unless the context otherwise requires:


"Amendment No. 4 Effective Date" shall have the meaning assigned to
such term in the Fourth Amendment.


"Capital Call Notice" means a capital call notice satisfying the
requirements of Section 3.1 of the Partnership Agreement and substantially
in the form of Exhibit A attached hereto.


"Cash Collateral Account" shall have the meaning assigned to such term
in Section 9.2(b).


"Credit Agreement Event of Default" means any "Event of Default" as
defined in the Credit Agreement.


"Deposited Notices" means a collective reference to the Capital Call
Notices delivered by the Fund to the Agent pursuant to Section 3.1(b) and
maintained on deposit with the Agent as contemplated by Section 4.1.


"Event of Default" means such term as defined in Section 8.1.


"General Partner" means Vestar Associates III, L.P., a Delaware
limited partnership, as general partner of the Fund.


"Investment Commitment" means, at any time, (i) $30,000,000 minus (ii)
the aggregate amount of prepayments made by the Borrower prior to such time
pursuant to Section 3.3(b)(v)(B) of the Credit Agreement minus (iii) the
aggregate amount of payments made by the Fund to purchase participation
interests in the Credit Party Obligations outstanding under the Credit
Documents pursuant to Section 2.3(d).


1
"Limited Partners" means the limited partners of the Fund.


"Mandatory Investment" means a capital contribution by the Fund to the
Parent in Dollars and in funds immediately available to the Parent made for
the purpose of enabling the Borrower to make a mandatory prepayment of the
Loans outstanding under the Credit Agreement pursuant to Section
3.3(b)(v)(B) thereof.


"Material Adverse Effect" means a material adverse effect on (i) the
condition (financial or otherwise), operations, business, assets,
liabilities or results of operations of the Fund, (ii) the ability of the
Fund to perform any material obligation under this Agreement or (iii) the
rights and remedies of the Agent under this Agreement.


"Obligations" means, with respect to the Fund, all Indebtedness, all
other obligations that would be reflected as liabilities on a balance sheet
of the Fund and the purchase price that the Fund (directly or indirectly,
including, but not limited to, through any Subsidiary of the Fund) or the
General Partner has agreed, pursuant to a binding contract, to pay for any
investment or acquisition that has not yet closed. The Obligations of the
Fund at any time shall include the obligations of the Fund to make
Mandatory Investments (and other payments to the Agent pursuant to Section
2.1, Section 2.2 or Section 2.3) in an amount up to the Investment
Commitment at such time and any and all other payment obligations of the
Fund to the Agent (on behalf of the Lenders) under this Agreement.


"Partners" means a collective reference to the General Partner and the
Limited Partners.


"Partnership Agreement" means that certain limited partnership
agreement, dated as of November 22, 1996, among the General Partner and the
individuals and entities party thereto, as limited partners.


"Plan Asset Regulations" means the plan asset regulations of the
Department of Labor, 29 CFR ss.2510.3-101 et seq., as amended, and the
advisory opinions and rulings issued thereunder.


"Pro Rata Share" means, with respect to any Partner, such Partner's
share, expressed as a percentage, of the aggregate obligations of all of
the Partners to make capital contributions to the Fund in accordance with
the terms of the Partnership Agreement. The Pro Rata Share of each Partner
shall be based on the proportion that such Partner's Total Capital
Commitment bears to the aggregate Total Capital Commitments of all of the
Partners. In determining the Pro Rata Shares of the Partners for purposes
of completing Deposited Notices as contemplated by Section 8.2, the Agent
shall (and shall be entitled to) rely on the information delivered to the
Agent pursuant to Section 3.1(f) unless the Fund shall have provided the
Agent with updated information regarding Pro Rata Shares pursuant to
Section 6.5, in which case the Agent shall (and shall be entitled to) rely
on such updated information.


"Subsidiary" means, at any time, (i) any corporation more than 50% of
whose Equity Interests of any class or classes having by the terms thereof
ordinary voting power to elect a majority of the directors of such
corporation (irrespective of whether or not at such time, any class or
classes of such corporation shall have or might have voting power by reason
of the happening of any contingency) is at such time owned by the Fund,
directly or indirectly through Subsidiaries, and (ii) any partnership,
association, joint venture or other entity of which the Fund, directly or
indirectly through Subsidiaries, owns at such time more than 50% of the
Equity Interests.


"Termination Date" means the date 30 Business Days after the later of
(i) the date that the Credit Parties deliver to the Agent the Required
Financial Information for the fiscal quarter ended December 31, 2000 and
(ii) the last day of any Leverage Grace Period that is in effect as of the
date described in the preceding clause (i).


"Total Capital Commitment" means, with respect to any Limited Partner,
an amount equal to the total amount of capital contributions that such
Limited Partner is obligated to make to the Fund pursuant to the terms of
the Partnership Agreement.


Section 1.2 Terms Generally.


All references herein to Articles, Sections, Exhibits and Schedules shall be deemed references to Articles and Sections of, and Exhibits and


2 Schedules to, this Agreement unless the context shall otherwise require. For purposes of computation of periods of time hereunder, the word "from" means "from and including" and the words "to" and "until" each mean "to but excluding."


Section 1.3 Accounting Terms.


Except as otherwise expressly provided herein, all accounting terms used herein shall be interpreted in accordance with GAAP.


SECTION 2 MANDATORY INVESTMENTS


Section 2.1 Leverage Reduction in Connection with Covenant Defaults.


(a) Prior to the expiration of each Leverage Grace Period
under the Credit Agreement relating to Credit Agreement Events of
Default resulting from the failure of the Credit Parties to comply with
Section 7.11(c) and/or Section 7.11(d) of the Credit Agreement as of
the end of any fiscal quarter occurring on or before December 31, 2000,
the Fund shall, subject to Section 2.1(d), make a Mandatory Investment
in the amount necessary (after giving effect to any concurrent
prepayment pursuant to Section 3.3(b)(iii) of the Credit Agreement made
with the proceeds of an Asset Disposition) to enable the Credit Parties
to cure such Credit Agreement Events of Default in the manner
contemplated by Section 7.11(f) of the Credit Agreement.


(b) In the event that, prior to the expiration of the Leverage
Grace Period for any fiscal quarter, either (i) the Fund shall fail to
make the Mandatory Investment required pursuant to Section 2.1(a) for
such fiscal quarter or (ii) the proceeds of the Mandatory Investment
required pursuant to Section 2.1(a) for such fiscal quarter are not
used, for any reason, to prepay the Loans outstanding under the Credit
Agreement in accordance with the terms of Section 3.3(b)(v)(B) thereof,
the Fund, subject to Section 2.1(d), hereby promises to pay on demand
to the Agent (for the ratable benefit of the Lenders) an amount equal
to the amount of such required Mandatory Investment.


(c) All amounts paid by the Fund to the Agent pursuant to this
Section 2.1 shall be applied by the Agent on behalf of the Lenders to
the prepayment of the Loans outstanding under the Credit Agreement in
accordance with the terms of Section 3.3(b)(v)(B) thereof.


(d) Notwithstanding any provision to contrary set forth in
this Section 2.1, the obligations of the Fund under this Section 2.1
automatically shall be terminated upon the making of a Mandatory
Investment (or a payment to the Agent) pursuant to, and satisfying the
requirements of, Section 2.2 or Section 2.3.


Section 2.2 Leverage Reduction in Connection with Shirt Group Sale.


(a) Concurrently with the consummation prior to the
Termination Date of any Asset Disposition involving all or
substantially all of the Shirt Group while a Sale Moratorium is in
effect, the Fund shall, subject to Section 2.2(d), make a Mandatory
Investment in the amount, if any, necessary to enable the Borrower to
prepay the Loans pursuant to Section 3.3(b)(iii) and/or Section
3.3(b)(v)(B) of the Credit Agreement by an amount sufficient to enable
the Credit Parties to comply with the financial ratio requirements set
forth in Section 8.5(c)(ii)(A) of the Credit Agreement in the manner
contemplated by Section 8.5(c)(ii)(B) of the Credit Agreement.


(b) In the event that either (i) the Fund shall fail to make
any Mandatory Investment when due as required pursuant to Section
2.2(a) or (ii) the proceeds of the Mandatory Investment required
pursuant to this Section 2.2(a) for such fiscal quarter are not used,
for any reason, to prepay the Loans outstanding under the Credit
Agreement in accordance with the terms of Section 3.3(b)(v)(B) thereof,
the Fund, subject to Section 2.2(d), hereby promises to pay on demand
to the Agent (for the ratable benefit of the Lenders) an amount equal
to the amount necessary (after giving effect to any concurrent
prepayment pursuant to Section 3.3(b)(iii) of the Credit Agreement made
with the proceeds of any Asset Disposition involving all or
substantially all of the Shirt Group) to enable the Credit Parties to
comply with the financial ratio requirements set forth in Section
8.5(c)(ii)(A) of the Credit Agreement in the manner contemplated by
Section 8.5(c)(ii)(B) of the Credit Agreement.


(c) All amounts paid by the Fund to the Agent pursuant to this


3
Section 2.2 shall be applied by the Agent on behalf of the Lenders to
the prepayment of the Loans outstanding under the Credit Agreement in
accordance with the terms of Section 3.3(b)(v)(B) thereof.


(d) Notwithstanding any provision to contrary set forth in
this Section 2.2, the obligations of the Fund under this Section 2.2
automatically shall be terminated upon the making of a Mandatory
Investment (or a payment to the Agent) pursuant to, and satisfying the
requirements of, Section 2.3.


Section 2.3 Leverage Reduction in Bankruptcy.


Notwithstanding any provision to contrary set forth in this Agreement:


(a) The obligations of the Fund under Section 2.1 and Section
2.2 shall not be satisfied by the making of a Mandatory Investment (or
any other capital contribution to or investment in the Parent or any of
the Consolidated Parties) at any time after the Business Day
immediately preceding the first day that a Bankruptcy Event with
respect to the Parent or the Borrower shall have occurred.


(b) If a Bankruptcy Event with respect to the Parent or the
Borrower shall have occurred and be continuing at a time when the Fund
is required to make a Mandatory Investment hereunder, the Fund, in lieu
of the obligations of the Fund under Section 2.1 and Section 2.2,
hereby promises to pay to the Agent (for the ratable benefit of the
Lenders), on the date that such Mandatory Investment otherwise would
have been required in accordance with the terms of Section 2.1 or
Section 2.2, as applicable, an amount equal to the amount of the
Mandatory Investment that otherwise would have been so required.


(c) In the event that, after the occurrence and during the
continuance of a Bankruptcy Event with respect to the Parent or the
Borrower, the Credit Parties shall fail to deliver the Required
Financial Information to the Agent for any fiscal quarter in compliance
with requirements of Section 7.1 of the Credit Agreement and such
default shall continue unremedied for a period of at least 45 days, the
Fund hereby promises to pay on demand to the Agent (for the ratable
benefit of the Lenders) an amount equal to the Investment Commitment at
such time.


(d) All amounts paid by the Fund to the Agent pursuant to this
Section 2.3 immediately shall be applied by the Agent (for the ratable
benefit of the Lenders) to pay for the purchase by the Fund of an
undivided, non-voting participation interest in the Credit Party
Obligations then outstanding under the Credit Documents on a basis
subordinated in right of payment to the Credit Party Obligations and
the Senior Subordinated Debt on substantially the terms and conditions
set forth on Exhibit B.


Section 2.4 Limitation on Investment Obligations.


Notwithstanding any provision to contrary set forth in this Agreement, the Fund shall not be obligated at any time to make Mandatory Investments (or any other payments to the Agent pursuant to Section 2.1, Section 2.2 or Section 2.3) in an amount in excess of the Investment Commitment at such time.


SECTION 3 CONDITIONS


Section 3.1 Conditions to Effectiveness.


This Agreement shall become effective on the Amendment No. 4 Effective Date provided the following conditions are satisfied in form and substance reasonably acceptable to the Agent:


(a) Execution of this Agreement. Receipt by the Agent of an
executed copy of this Agreement signed by a duly authorized officer of
the General Partner.


(b) Deposited Notices. Receipt by the Agent of an original
Capital Call Notice for each Limited Partner, in each case executed by
the General Partner and uncompleted in respect of the amount of the
total capital contribution to be made by all of the Limited Partners
pursuant to such Capital Call Notices and the applicable Limited
Partner's Pro Rata Share of such total capital contribution.


(c) Legal Opinion. Receipt of a legal opinion of Simpson
Thacher & Bartlett, counsel for the Fund, in form and s ...