AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 2, 1995
REGISTRATION NO. 33-57401
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
TULTEX CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
(LIST OF CO-REGISTRANTS APPEARS ON NEXT PAGE)
<TABLE>
<S> <C> <C>
VIRGINIA 228 54-0367896
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
101 COMMONWEALTH BOULEVARD
MARTINSVILLE, VIRGINIA 24112
(703) 632-2961
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER INCLUDING
AREA CODE, OF REGISTRANTS' PRINCIPAL EXECUTIVE OFFICES)
O. RANDOLPH ROLLINS
EXECUTIVE VICE PRESIDENT AND GENERAL COUNSEL
TULTEX CORPORATION
101 COMMONWEALTH BOULEVARD
MARTINSVILLE, VIRGINIA 24112
(703) 632-2961
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
<TABLE>
<S> <C>
LATHAN M. EWERS, JR. DANIEL J. ZUBKOFF
HUNTON & WILLIAMS CAHILL GORDON & REINDEL
951 EAST BYRD STREET 80 PINE STREET
RICHMOND, VIRGINIA 23219-4074 NEW YORK, NEW YORK 10005
(804) 788-8269 (212) 701-3466
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box.
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933, OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
<PAGE>
CO-REGISTRANTS
<TABLE>
<CAPTION>
State or Other
Exact Name of Co-Registrant Jurisdiction of Incorporation I.R.S. Employer
As Specified in its Charter or Organization Identification No.
<S> <C> <C>
AKOM, Ltd. Cayman Islands, BWI (foreign)
Dominion Stores, Inc. Virginia 54-1427013
Tultex International, Inc. Virginia 54-1513129
Logo 7, Inc. Virginia 54-1611615
Universal Industries, Inc. Massachusetts 04-3022142
Tultex Canada, Inc. Canada (foreign)
SweatJet, Inc. Virginia 54-1403227
</TABLE>
<PAGE>
TULTEX CORPORATION
CROSS REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF REGULATION S-K
<TABLE>
<CAPTION>
FORM S-1 ITEM NUMBER/HEADING REGISTRATION STATEMENT/PROSPECTUS LOCATION
<C> <S> <C>
1. Forepart of Registration Statement and Outside Registration statement facing page; Outside front cover
Front Cover Page of Prospectus page of Prospectus
2. Inside Front and Outside Back Cover Pages of Inside front cover page of Prospectus
Prospectus
3. Summary Information, Risk Factors and Prospectus Summary; Risk Factors
Ratio of Earnings to Fixed Charges
4. Use of Proceeds Use of Proceeds and Refinancing
5. Determination of Offering Price Not Applicable
6. Dilution Not Applicable
7. Selling Security Holders Not Applicable
8. Plan of Distribution Underwriting
9. Description of Securities to Be Registered Description of the Notes
10. Interests of Named Experts and Counsel Legal Matters
11. Information with Respect to the Registrant Prospectus Summary; Risk Factors; Selected Consolidated
Financial Data; Management's Discussion and Analysis of
Financial Condition and Results of Operations; Business;
Management; Certain Relationships and Related
Transactions; Principal Shareholders and Security
Ownership of Management; Consolidated Financial
Statements
12. Disclosure of Commission Position on Not Applicable
Indemnification for Securities Act Liabilities
</TABLE>
<PAGE>
(redherring appears with the following language: Information contained
herein is subject to completion or amendment. A registration statement relating
to these securities has been filed with the Securities and Exchange Commission.
These securities may not be sold nor may offers to buy be accepted prior to
the time the registration statement becomes effective. This prospectus
shall not constitute an offer to sell or the solicitation of an offer to buy
nor shall there be any sale of these securities in any state in which such
offer, solicitation or sale would be unlawful prior to registration or
qualification under the securities laws of any such state.)
PROSPECTUS SUBJECT TO COMPLETION
DATED MARCH 2, 1995
(Tultex logo appears here)
$110,000,000
% SENIOR NOTES DUE 2005
INTEREST PAYABLE JUNE 15 AND DECEMBER 15
ISSUE PRICE: %
The % Senior Notes due 2005 (the "Notes") are being offered (the
"Offering") by Tultex Corporation, a Virginia corporation ("Tultex" or the
"Company"). The Notes mature on , 2005, unless previously redeemed.
Interest on the Notes is payable semiannually on June 15 and December 15,
commencing June 15, 1995. The Notes are not redeemable prior to 2000,
except as set forth below. The Notes will be redeemable at the option of the
Company, in whole or in part, at any time on or after , 2000, at the
redemption prices set forth herein, together with accrued and unpaid interest to
the redemption date. In addition, prior to , 1998, the Company
may redeem up to approximately 32% of the principal amount of the Notes with the
cash proceeds received by the Company from one or more sales of capital stock of
the Company (other than Disqualified Stock (as defined)) at a redemption price
of % of the principal amount thereof, plus accrued and unpaid interest to the
redemption date; provided, however, that at least $75 million in aggregate
principal amount of the Notes remains outstanding immediately after any such
redemption.
Upon a Change of Control (as defined), the Company will be required to make an
offer to purchase all outstanding Notes at 101% of the principal amount thereof
plus accrued and unpaid interest to the purchase date.
The Notes will be general unsecured obligations of the Company and will rank
PARI PASSU in right of payment with all other unsubordinated indebtedness of the
Company. The Notes will be guaranteed on a joint and several basis (the
"Guarantees") by each subsidiary of the Company (the "Guarantors"). The
Guarantees will be general unsecured obligations of the Guarantors and will rank
PARI PASSU in right of payment with all other unsubordinated indebtedness of the
Guarantors. At December 31, 1994, as adjusted to give effect to the transactions
described herein under "Use of Proceeds and Refinancing," the total indebtedness
of the Company would have been approximately $223.7 million, none of which would
have been subordinated to the Notes.
SEE "RISK FACTORS" FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE
CONSIDERED BY PROSPECTIVE INVESTORS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC(1) COMPENSATION(2) COMPANY(1)(3)
<S> <C> <C> <C>
Per Note % % %
Total $ $ $
</TABLE>
(1) Plus accrued interest, if any, from the date of issuance.
(2) The Company and the Guarantors have agreed to indemnify the Underwriters
against certain liabilities, including liabilities under the Securities Act of
1933, as amended. See "Underwriting."
(3) Before deducting expenses payable by the Company estimated at
$412,000.
The Notes are being offered by the Underwriters, subject to prior sale, when, as
and if delivered to and accepted by the Underwriters, and subject to approval of
certain legal matters by Cahill Gordon & Reindel, counsel for the Underwriters,
and certain other conditions. The Underwriters withhold the right to withdraw,
cancel or modify such offer and to reject orders in whole or in part. It is
expected that delivery of the Notes will be made against payment therefor on or
about , 1995 at the offices of J.P. Morgan Securities Inc., 60
Wall Street, New York, New York.
J.P. MORGAN SECURITIES INC. NATIONSBANC CAPITAL MARKETS, INC.
March , 1995
<PAGE>
(Inside Front Cover contains the following Photographs:
1. Gymnast wearing Discus Athletic clothing.
2. Mountain climber wearing Discus Athletic clothing.
3. Two men playing touch football wearing Discus Athletic clothing.
4. Discus Athletic logo.
5. Troy Aikman wearing complete Logo Athletic outfit.
6. Chris Webber wearing complete Logo Athletic outfit.
7. Dan Marino on football wearing Logo Athletic hat.
8. Logo Athletic logo.)
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES OFFERED
HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET.
SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus and, if given or
made, such information or representation must not be relied upon as having been
authorized by the Company, any Guarantor or either of the Underwriters. This
Prospectus does not constitute an offer to sell or a solicitation of an offer to
buy any securities other than the securities to which it relates or an offer to
sell or the solicitation of an offer to buy such securities in any circumstances
in which such offer or solicitation is unlawful. Neither the delivery of this
Prospectus nor any sale made hereunder shall, under any circumstances, create
any implication that there has been no change in the affairs of the Company or
any Guarantor since the date hereof or that information contained herein is
correct as of any time subsequent to its date.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Available Information............................... 3
Prospectus Summary.................................. 4
Risk Factors........................................ 8
Use of Proceeds and Refinancing..................... 11
Capitalization...................................... 12
Selected Consolidated Financial Data................ 13
Management's Discussion and Analysis of
Financial Condition and Results of Operations..... 15
Business............................................ 18
<CAPTION>
PAGE
<S> <C>
Management.......................................... 27
Certain Relationships and Related Transactions...... 32
Principal Shareholders and Security Ownership
of Management..................................... 33
Description of the Notes............................ 35
Underwriting........................................ 51
Legal Matters....................................... 52
Experts............................................. 52
Index to Financial Statements....................... F-1
</TABLE>
AVAILABLE INFORMATION
Additional information regarding the Company, the Guarantors, the Notes and the
Guarantees is contained in the Registration Statement on Form S-1 (the
"Registration Statement") and the exhibits relating thereto, filed with the
Securities and Exchange Commission (the "Commission") under the Securities Act
of 1933, as amended (the "Securities Act"). For such information, reference is
made to the Registration Statement and the exhibits thereto.
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy and information statements and other information
with the Commission. Such reports, proxy statements and other information,
including the Registration Statement and the exhibits thereto, can be inspected
and copied at the public reference facilities maintained by the Commission at
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
following Regional Offices of the Commission: 500 West Madison Street, Suite
1400, Chicago, IL 60661 and 7 World Trade Center, Suite 1300, New York, NY
10048. Copies of such material can also be obtained from the Public Reference
Section of the Commission at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C., 20549, at prescribed rates. In addition, such material can be
inspected at the offices of the New York Stock Exchange, Inc., 20 Broad Street,
New York, New York 10005.
Trademarks and service marks of the Company are italicized where they appear in
this Prospectus. TULTEX(Register mark), DISCUS ATHLETIC(Register mark) and THE
SWEATSHIRT COMPANY(Register mark) are registered trademarks of the Company. LOGO
7(Register mark) and LOGO ATHLETIC(Register mark) are registered trademarks of
the Company's subsidiary, Logo 7, Inc. ("Logo 7"). The Company's principal
executive offices are located at 101 Commonwealth Boulevard, Martinsville,
Virginia 24112, telephone (703) 632-2961.
3
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND FINANCIAL STATEMENTS APPEARING ELSEWHERE IN THIS PROSPECTUS.
UNLESS THE CONTEXT REQUIRES OTHERWISE, "TULTEX" OR THE "COMPANY" REFERS TO
TULTEX CORPORATION AND ITS CONSOLIDATED SUBSIDIARIES. "GUARANTORS" REFERS TO ALL
OF THE COMPANY'S SUBSIDIARIES. CAPITALIZED TERMS USED IN THIS SUMMARY UNDER THE
CAPTION "THE OFFERING" AND NOT OTHERWISE DEFINED ARE DEFINED BELOW UNDER THE
CAPTION "DESCRIPTION OF THE NOTES -- CERTAIN DEFINITIONS." REFERENCES TO "YEAR
END" REFER TO THE COMPANY'S FISCAL YEAR END.
THE COMPANY
Tultex Corporation is one of the world's largest marketers and manufacturers
of activewear and licensed sports apparel for consumers and sports enthusiasts.
The Company's diverse product line includes fleeced sweats, jersey products
(outerwear T-shirts), and decorated jackets and caps. These products are sold
under the Company's own brands led by the DISCUS ATHLETIC and LOGO ATHLETIC
premium labels and under private labels, including Nike, Levi Strauss, Reebok
and Pro Spirit. In addition, the Company has numerous professional and college
sports licenses to manufacture and market embroidered and screen-printed
products with team logos and designs under its LOGO ATHLETIC and LOGO 7 brands.
The Company is a licensee of professional sports apparel, holding licenses from
the National Football League, Major League Baseball, the National Basketball
Association and the National Hockey League to manufacture a full range of sports
apparel for adults and children.
Historically a producer of quality fleecewear, in recent years Tultex has
initiated a strategy to enhance its competitiveness and to capitalize on growth
opportunities by becoming a consumer-oriented apparel maker able to compete in a
changing industry. This strategy includes the following elements:
(Bullet) INCREASING EMPHASIS ON HIGHER-MARGIN PRODUCTS. The Company is
strengthening its competitiveness in the activewear business
through the development of branded and private label,
higher-quality and higher-margin products to supplement its
traditionally strong position in the lower-priced segment of the
business. The Company is developing its own brands, promoting
DISCUS ATHLETIC for its premium products and using the TULTEX
label for the value-oriented segment of the market.
DISCUS ATHLETIC'S highly visible advertising during televised
broadcasts of college football and basketball on the ESPN and ABC
television networks and of Atlantic Coast Conference basketball has
contributed to significant annual increases in sales of this brand
since 1992. In addition, Tultex has partnering arrangements to
supply higher-quality, private label products to companies such as
Reebok, Levi Strauss and Nike, none of which accounted for more
than 10% of the Company's consolidated sales during 1994. To
complement its development of higher-margin products, the Company
began manufacturing jersey products in 1991.
(Bullet) EXPANDING INTO LICENSED APPAREL BUSINESS TO COMPLEMENT ACTIVEWEAR
BUSINESS. Tultex's 1992 acquisitions of Logo 7, a marketer of
licensed sports apparel, and Universal Industries, Inc.
("Universal"), a marketer of sports and entertainment licensed
headwear, enabled the Company to achieve the fourth largest market
share (13.7%) in the higher-margin licensed apparel business in
1993, and have created opportunities for significant manufacturing
and distribution synergies with the Company's activewear business.
The promotion of the LOGO ATHLETIC brand of licensed apparel through
television and print advertising, as well as promotional
arrangements featuring Dallas Cowboys' quarterback Troy Aikman, San
Francisco 49ers' quarterback Steve Young, Miami Dolphins'
quarterback Dan Marino, the Chicago Blackhawks' Chris Chelios and
the Washington Bullets' Chris Webber, among others, has helped to
increase the visibility and sales of LOGO ATHLETIC products.
(Bullet) INCREASING DISTRIBUTION CHANNELS AND STRENGTHENING CUSTOMER
RELATIONSHIPS. Tultex actively pursues strong relationships with
department, sporting goods and other specialty stores, such as
Sears, JC Penney, Modell's, Dillard's, Foot Locker, Champs and
Sports Authority, to distribute its higher-margin branded and
private label products. In addition, the Company continues to
strengthen its relationships with high volume retailers such as
Wal-Mart, Kmart and Target by supplying private label and TULTEX
products. Tultex provides customers with exceptional service and
support; as an example, its distribution capabilities are highly
responsive to customers' changing delivery and inventory management
requirements.
(Bullet) INVESTING IN MODERN DISTRIBUTION AND PRODUCTION FACILITIES. During
fiscal 1988 through fiscal 1994, Tultex invested approximately $191
million in capital expenditures, primarily in the construction of
its customer service center and in high-efficiency spinning,
knitting, dyeing, cutting and embroidering machinery. In 1991,
Tultex
4
<PAGE>
began operating the customer service center, which the Company
believes is the most highly automated in the industry. Having made
significant investments in its distribution and production
facilities, the Company's average capital expenditures are not
expected to exceed approximately $20 million annually through
1997.
The Company's strategy has improved its sales mix. While net sales increased
6.0% in fiscal 1994 over 1993, net sales of DISCUS ATHLETIC activewear and
premium private label sweats under the Nike, Levi Strauss and Reebok names
increased 49.8% to $77.6 million and net sales of LOGO ATHLETIC licensed apparel
increased 198.6% to $64.5 million. Sales of jersey products were $56.8 million
for the fiscal year ended December 31, 1994, representing 16.5% of the Company's
activewear sales during such period compared to 11.6% for fiscal 1993. Reduced
consumer demand for activewear and an oversupply of activewear in retail
inventories in the first half of 1994, the MLB strike, the NHL lockout and
higher raw material costs adversely affected Tultex's results of operations
during 1994.
THE REFINANCING
Net proceeds of this Offering, together with borrowings under the Senior
Credit Facility (as defined below), will be used to pay in full the Company's
variable rate note due July 31, 1996 (the "Term Loan"), the Company's 8 7/8%
Senior Notes due June 1, 1999 (the "8 7/8% Notes"), and related prepayment
expenses. See "Use of Proceeds and Refinancing." The Company believes that the
longer maturity and the increased covenant flexibility provided under the terms
of the Notes will allow the Company to continue to increase its long-term
investment in brand promotion and higher-margin products.
Contemporaneously with the completion of this Offering, the Company and
certain of its subsidiaries will enter into a $225 million, three-year revolving
credit facility with a group of commercial banks (the "Senior Credit Facility"
and, together with the Offering, the "Refinancing"). The Senior Credit Facility
will replace the Company's existing $225 million revolving credit facility which
expires on October 6, 1995. Scheduled amortization requirements prior to this
Offering (excluding the Senior Credit Facility) totaled $92.3 million from
January 1, 1995 through December 31, 1998. After giving effect to the
Refinancing, other than under the Senior Credit Facility, there will be no
material scheduled amortization requirements until the maturity of the
Notes.
Borrowings under the Senior Credit Facility will be general unsecured
obligations of the Company and will rank PARI PASSU in right of payment with the
Notes and all other unsubordinated indebtedness of the Company and will be
guaranteed by certain of the Company's subsidiaries. The closings of this
Offering and of the Senior Credit Facility are conditioned upon each other. See
"Use of Proceeds and Refinancing."
5
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
SECURITIES OFFERED................. $110 million aggregate principal amount of % Senior Notes due 2005.
MATURITY DATE.......................... , 2005.
INTEREST PAYMENT DATES................. June 15 and December 15, commencing June 15, 1995.
OPTIONAL REDEMPTION BY THE COMPANY..
The Notes are not redeemable prior to , 2000, except as set forth
below. The Notes will be redeemable at the option of the Company, in whole or in part,
at any time on or after , 2000, at the redemption prices set forth
herein, together with accrued and unpaid interest to the redemption date. In addition,
prior to , 1998, the Company may redeem up to approximately 32% of the
principal amount of the Notes with the cash proceeds received by the Company from one
or more sales of capital stock of the Company (other than Disqualified Stock) at a
redemption price of % of the principal amount thereof, plus accrued and unpaid
interest to the redemption date; PROVIDED, HOWEVER, that at least $75 million in
aggregate principal amount of the Notes remains outstanding immediately after any such
redemption.
SINKING FUND........................... None.
RANKING................................ The Notes will be general unsecured obligations of the Company and will rank PARI
PASSU in right of payment with all other unsubordinated Indebtedness (including the
Senior Credit Facility) of the Company.
GUARANTEES............................. The Notes will be guaranteed on a joint and several basis by each of the Guarantors.
The Guarantees will be general unsecured obligations of the Guarantors and will rank
PARI PASSU in right of payment with all other unsubordinated indebtedness of the
Guarantors. The Guarantors' liability under the Guarantees will be limited as
described herein and Guarantees will be released in connection with certain asset
sales and dispositions. See "Description of the Notes -- Guarantees."
CHANGE OF CONTROL OFFER................ Upon a Change of Control, the Company will be required to make an offer to purchase
all outstanding Notes at a purchase price of 101% of the principal amount thereof,
plus accrued and unpaid interest to the repurchase date.
CERTAIN COVENANTS...................... The Indenture will contain certain covenants that, among other things, limit the
ability of the Company or any of its Subsidiaries to incur additional Indebtedness,
make certain Restricted Payments, make certain Investments, create Liens, engage in
Sale and Leaseback Transactions, permit dividend or other payment restrictions to
apply to Subsidiaries, enter into certain transactions with Affiliates or Related
Persons or consummate certain merger, consolidation or similar transactions. In
addition, in certain circumstances, the Company will be required to offer to purchase
Notes at 100% of the principal amount thereof with the net proceeds of certain asset
sales. These covenants are subject to a number of significant exceptions and
qualifications. See "Description of the Notes."
SENIOR CREDIT FACILITY.............. Concurrently with this Offering, the Company and certain of its subsidiaries will
enter into the Senior Credit Facility, a $225 million, three-year revolving credit
facility, with a group of commercial banks. The Senior Credit Facility will replace
the Company's existing $225 million revolving credit facility, which expires on
October 6, 1995. See "Use of Proceeds and Refinancing."
</TABLE>
6
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
The following table sets forth summary consolidated financial data for the
Company for each of the five fiscal years in the period ended December 31, 1994.
The summary consolidated financial data should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Company's Consolidated Financial Statements, related notes,
and other financial data included elsewhere herein.
<TABLE>
<CAPTION>
YEAR ENDED
DEC. 31 JAN. 1 JAN. 2 DEC. 28 DEC. 29
1994 1994(1) 1993(1)(2)(3) 1991(1) 1990(1)
<S> <C> <C> <C> <C> <C>
IN THOUSANDS, EXCEPT RATIOS AND PER SHARE DATA
STATEMENT OF INCOME DATA:
Net sales and other income $565,433 $533,611 $503,946 $349,910 $390,336
Cost of products sold 419,769 395,727 368,027 271,243 283,907
Depreciation 23,973 23,364 20,831 17,369 14,775
Selling, general and administrative 93,510 88,433 81,297 45,481 52,546
Income from operations 28,181 26,087 33,791 15,817 39,108
Gain on sale of facilities 4,405 -- -- 4,014 --
Interest expense 18,151 16,996 13,540 9,064 8,838
Income before income taxes and cumulative effect
of accounting change 14,435 9,091 20,251 10,767 30,270
Income taxes 5,485 3,188 7,060 3,443 11,097
Income before cumulative effect of accounting
change 8,950 5,903 13,191 7,324 19,173
Cumulative effect of accounting change -- -- -- 2,848(4) --
Net income $8,950 $5,903 $13,191 $10,172 $19,173
PER COMMON SHARE DATA:
Income before cumulative effect of accounting
change $0.26 $0.16 $0.42 $0.25 $0.66
Net income 0.26 0.16 0.42 0.35 0.66
Dividends declared 0.05 0.20 0.20 0.32 0.36
PRO FORMA DATA(5) (UNAUDITED):
Pro forma income from continuing operations $6,596
Pro forma income per common share from continuing
operations $0.18
BALANCE SHEET DATA (END OF PERIOD):
Working capital $122,854 $243,553 $126,717 $ 85,011 $ 92,432
Total assets 456,809 474,965 435,818 314,957 328,643
Total debt 216,355 239,438 200,531 115,032 123,069
Total stockholders' equity 187,101 179,197 178,793 157,091 155,301
OTHER DATA:
EBITDA(6) $53,371 $50,668 $55,559 $32,321 $53,018
Capital expenditures 8,624 22,250 30,330 14,360 21,983
Ratio of EBITDA to interest expense(6) 2.94 2.98 4.10 3.57 6.00
Ratio of EBITDA minus capital expenditures to
interest expense(6) 2.47 1.67 1.86 1.98 3.51
Ratio of earnings to fixed charges(7) 1.59 1.41 2.11 1.54 2.27
</TABLE>
(1) During the fourth quarter of fiscal 1993, the Company changed its method of
determining the cost of inventories from the last-in, first-out (LIFO)
method to the first-in, first-out (FIFO) method. Under the current economic
environment of low inflation, the Company believes that the FIFO method will
result in a better measurement of operating results. The operating results
of all years prior to fiscal 1993 have been restated to apply the new method
retroactively. The effect of the accounting change on net income as
previously reported was to reduce net income by $4,001, $416 and $3,791 for
fiscal 1992, 1991 and 1990, respectively. In addition, earnings per common
share were reduced by $0.14, $0.02 and $0.13 for fiscal 1992, 1991 and 1990,
respectively. See Note 3 to the Company's Consolidated Financial Statements.
(2) See Note 2 to the Company's Consolidated Financial Statements for
information with respect to the acquisition of Logo 7 and Universal
Industries, Inc.
(3) Includes 53 weeks. All other years presented include 52 weeks.
(4) Reflects the Company's adoption of SFAS No. 96 "Accounting for Income Taxes"
as of the beginning of the fiscal year.
(5) Pro forma income from continuing operations and pro forma income per common
share from continuing operations have been calculated by adjusting
historical results of operations to give effect to the transactions
described in "Use of Proceeds and Refinancing" as if they had been
consummated at January 2, 1994. For purposes of preparing the pro forma
financial information, the Company assumed interest rates of 11.5% and 5.7%
on the Notes and the Senior Credit Facility, respectively. On a pro forma
basis, a 1/8% increase in the Company's weighted average variable interest
rate for the Senior Credit Facility would have resulted in pro forma income
from continuing operations and pro forma income per common share from
continuing operations of $6,458 and $0.18, respectively.
(6) EBITDA represents earnings before taking into consideration interest
expense, income taxes, depreciation and amortization and excludes gain on
sale of facilities. EBITDA is included herein to provide additional
information related to the Company's ability to service debt. EBITDA should
not be considered as an alternative measure of the Company's net income,
operating performance, cash flow or liquidity. After giving effect to the
Refinancing, for the year ended December 31, 1994, pro forma EBITDA would
have been $54,648, pro forma ratio of EBITDA to interest expense would have
been 2.35 and pro forma ratio of EBITDA minus capital expenditures to
interest expense would have been 1.98.
(7) For purposes of computing this ratio, earnings consist of earnings before
income taxes and fixed charges. Fixed charges consist of interest expense,
amortization of deferred debt issuance costs and one-third of rental expense
(the portion considered representative of the interest factor). After giving
effect to the Offering (but without giving effect to incremental interest
expense associated with borrowings under the Senior Credit Facility on a pro
forma basis), the pro forma ratio of earnings to fixed charges would have
been 1.41 for the year ended December 31, 1994.
7
<PAGE>
RISK FACTORS
Prospective investors should consider carefully all the information contained
in this Prospectus, including the following risk factors.
SUBSTANTIAL LEVERAGE
As of December 31, 1994, after giving effect to the Refinancing, the
Company's total indebtedness would have been approximately $223.7 million, all
of which was unsubordinated, and total shareholders' equity would have been
approximately $183.5 million, resulting in a pro forma total debt to total
capitalization ratio of 54.9%. In addition, at such date approximately $52.4
million of additional borrowing capacity would have been available (pursuant to
the borrowing base formula) under the Senior Credit Facility. The Indenture will
permit the Company and its subsidiaries to incur certain additional specified
indebtedness. See "Description of the Notes."
The Company's borrowing needs are seasonal. The maximum amount of
indebtedness outstanding at any fiscal month end in 1994 was approximately
$308.7 million at October 1, 1994. See " -- Seasonality and Cyclicality."
The Company currently has incurred, and after the consummation of the
Offering will continue to incur, significant annual cash interest expense. After
giving effect to the Refinancing, the pro forma ratio of EBITDA to interest
expense would have been 2.35 to 1 for the fiscal year ended December 31, 1994
compared to 2.94 to 1 before the Refinancing. After giving effect to the
Offering, the pro forma ratio of earnings to fixed charges for the fiscal year
ended December 31, 1994 would have been 1.41 to 1 compared to 1.59 to 1 before
the Offering. See "Use of Proceeds and Refinancing" and "Capitalization."
The level of the Company's indebtedness could have important consequences to
holders of the Notes, including: (i) the Company's ability to obtain additional
financing in the future for working capital, capital expenditures, acquisitions,
debt service requirements, general corporate purposes or other purposes may be
restricted, (ii) a substantial portion of the Company's cash flow from
operations must be dedicated to the payment of the Company's interest expense,
(iii) the Company is more highly leveraged than certain of its competitors,
which may place the Company at a competitive disadvantage and (iv) the Company's
borrowings under the Senior Credit Facility will accrue interest at variable
rates, which could result in increased interest expense in the event of higher
interest rates.
The Company's ability to make interest payments on the Notes will be dependent
on the Company's future operating performance, which itself is dependent on a
number of factors, many of which are beyond the Company's control. The Company's
ability to repay the Notes at maturity will depend upon these same factors and
the ability of the Company to raise additional funds. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Financial Condition, Liquidity and Capital Resources."
During 1993 and 1994, the Company sought and obtained waivers of violations of,
and amendments to, certain financial covenants contained in the instruments
relating to the 8 7/8% Notes, the Term Loan and the Company's existing revolving
credit facility. During the second quarter of 1994, the Company suspended the
payment of dividends on its preferred and common stock. Substantially
contemporaneously with the consummation of the Offering, the Company expects to
pay existing dividend arrearages on its preferred stock and thereafter to resume
paying quarterly dividends thereon. No decision with respect to renewal of
common stock dividends has been made.
RESTRICTIVE COVENANTS IN THE SENIOR CREDIT FACILITY
The Senior Credit Facility is expected to contain material restrictions on the
operation of the Company's business, including covenants restricting, among
other things, the ability of the Company and certain subsidiaries to incur
indebtedness, create liens on the Company's property, guarantee obligations,
alter the character of the Company's business, consolidate, merge or purchase or
sell the Company's assets, make investments or advance funds, prepay
indebtedness and transact business with affiliates. The Senior Credit Facility
is also expected to contain certain financial covenants, including covenants
that will require the Company to maintain a minimum tangible net worth, leverage
ratio and fixed charges coverage ratio, as well as customary representations and
warranties, funding conditions and events of default. A breach of one or more
covenants under such facility could result in an acceleration of the Company's
obligations thereunder, and the inability of the Company to borrow additional
8
<PAGE>
amounts under the Senior Credit Facility. In addition, a default under the Notes
will constitute an event of default under the Senior Credit Facility. See "Use
of Proceeds and Refinancing."
RESTRICTIVE COVENANTS IN THE INDENTURE
The Indenture contains material restrictions on the Company's operations,
including covenants that restrict or limit (i) indebtedness that may be incurred
by the Company and its subsidiaries, (ii) the ability of the Company and its
subsidiaries to pay dividends or make other distributions, purchase or redeem
stock and make other investments, (iii) the creation of liens, (iv) the
disposition of assets, (v) sale and leaseback transactions, (vi) the issuance
and sale of capital stock of the Company's subsidiaries, (vii) transactions with
affiliates, (viii) a change of control of the Company and (ix) mergers,
consolidations and certain sales of assets by the Company. A breach of one or
more covenants under the Indenture could result in an acceleration of the
Company's obligations thereunder. See "Description of the Notes."
DOMESTIC COMPETITION
The domestic activewear and licensed apparel industries are highly competitive.
Since the 1980s, the activewear industry, and in recent years the licensed
apparel industry, have been characterized by the acquisition of existing
competitors by larger companies with substantial financial resources and
manufacturing and distribution capabilities. Certain participants in these
industries have greater financial and other resources than the Company.
Increased competition from these and future competitors could reduce sales and
prices, adversely affecting the Company's results of operations. Because of the
Company's high leverage, it may be less able to respond effectively to such
competition than other participants. See "Business -- Industry."
FOREIGN COMPETITION
The Company's products are subject to foreign competition. The extent of
import protection afforded to domestic manufacturers has been, and is likely to
remain, subject to considerable political deliberation. Beginning in 1995, the
General Agreement on Tariffs and Trade ("GATT") will eliminate over a period of
10 years restrictions on imports of apparel. In addition, on January 1, 1994,
the North American Free Trade Agreement ("NAFTA") became effective. The
implementation of NAFTA could result in an increase in apparel imported from
Mexico that would compete against certain of the Company's products. See
"Business -- Industry."
LICENSES AND TRADEMARKS
Professional and collegiate athletic licensors have increased their royalty
percentages and minimum guaranteed payments in contracts with licensees, such as
the Company's subsidiaries. In addition, the Company's material licenses are
nonexclusive, and new or existing competitors may obtain similar licenses. If a
significant license or licenses were not renewed or replaced, the Company's
sales and results of operations likely would be materially and adversely
affected. See "Business -- Licenses."
Because of its growing emphasis on branded products, the Company increasingly
will rely on the strength of its trademarks. The Company has in the past and may
in the future be required to expend significant resources protecting these
trademarks, and the loss or limitation of the exclusive right to use them could
adversely affect the Company's sales and results of operations. See
"Business -- Industry" and " -- Trademarks."
MAJOR LEAGUE BASEBALL STRIKE AND NATIONAL HOCKEY LEAGUE LOCKOUT
Through its subsidiaries, the Company sells activewear and headwear bearing
professional and college sports licensed logos and designs, including Major
League Baseball ("MLB") and National Hockey League ("NHL") team logos and
designs. The MLB players' strike and NHL lockout, which was settled on January
13, 1995, have adversely affected sales of items bearing these marks, and the
MLB players' strike will continue to adversely affect sales of MLB products
until this dispute is resolved. The Company expects that consumer demand for NHL
products and, once play resumes, MLB products will rebound, but may recover
slowly. There can be no assurance that the MLB dispute will be resolved in the
near future or that sales of MLB and NHL products will increase or return to
prior levels. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Results of Operations -- Fiscal Year 1994 Compared
to Fiscal Year 1993."
9
<PAGE>
UNIONIZATION OF HOURLY WORKERS AT MARTINSVILLE FACILITIES
In August 1994, hourly employees at the Company's Martinsville, Virginia
facilities voted for representation by the Amalgamated Clothing and Textile
Workers Union. The Company currently is negotiating a labor agreement with the
union which would cover all hourly employees at the Martinsville facilities. As
of December 31, 1994, the Company's approximately 2,200 hourly employees in
Martinsville accounted for approximately 32% of the Company's total employees
and approximately 36% of the Company's hourly employees. Failure to reach
agreement with the union could materially adversely affect the Company's
operations at its Martinsville facilities. None of the Company's other employees
are represented by a union. See "Business -- Employees."
RAW MATERIALS
The principal raw materials used by the Company in the manufacture of its
products are cotton of various grades and staple lengths and polyester in staple
form. Any shortage in the cotton supply by reason of weather, crop disease or
other factors, or significant increase in the price of cotton or polyester,
could adversely affect the Company's results of operations. Tultex makes advance
purchases of raw cotton based on projected demand. The Company has contracted to
purchase substantially all of its raw cotton needs for 1995 and has fixed the
price on approximately 50% of its raw cotton needs. To the extent cotton prices
increase before the Company fixes the price for the remainder of its raw cotton
needs, the Company's results of operations could be adversely affected. See
"Business -- Raw Materials."
SEASONALITY AND CYCLICALITY
Historically, the fleecewear and licensed apparel industries have been
seasonal, with peak sales occurring in the third and fourth quarters of the
calendar year, coinciding with cooler weather and the playing seasons for some
of the most popular professional and college sports, notably football and
basketball. The licensed apparel industry also is cyclical, in substantial part
because of the changing allegiances of sports fans as their teams win or lose
and the fluctuating popularity of a particular sport. The Company's performance
may be negatively affected by the foregoing factors and by changing retailer and
consumer demands and downturns in consumer spending, such as the downturn that
began during the latter part of 1993 and that affected the Company's performance
into 1994. See "Business -- Industry" and " -- Seasonality."
ENVIRONMENTAL LAWS AND REGULATIONS
The Company is subject to various federal, state and local environmental laws
and regulations governing the discharge, storage, handling and disposal of a
variety of substances and waste used in the Company's operations. The Company
returns dyeing waste for treatment to the City of Martinsville, Virginia's
municipal wastewater treatment system operated under a permit issued by the
state. While the Company believes it is in material compliance with these laws
and regulations, there can be no assurance that environmental requirements will
not become more stringent in the future or that the Company will not incur
substantial costs in the future to comply with such requirements. See "Business
- -- Environmental Matters."
FRAUDULENT CONVEYANCE CONSIDERATIONS
Each Guarantor's Guarantee of the obligations of the Company under the Notes may
be subject to review under relevant federal and state fraudulent conveyance
statutes in a bankruptcy, reorganization or rehabilitation case or similar
proceeding or a lawsuit by or on behalf of unpaid creditors of such Guarantor.
If a court were to find under relevant fraudulent conveyance statutes that, at
the time the Notes were issued, (a) a Guarantor guaranteed the Notes with the
intent of hindering, delaying or defrauding current or future creditors or
(b)(i) a Guarantor received less than reasonably equivalent value or fair
consideration for guaranteeing the Notes and (ii)(A) was insolvent or was
rendered insolvent by reason of such Guarantee, (B) was engaged, or about to
engage, in a business or transaction for which its assets constituted
unreasonably small capital or (C) intended to incur, or believed that it would
incur, obligations beyond its ability to pay as such obligations matured (as all
of the foregoing terms are defined in or interpreted under such fraudulent
conveyance statutes), such court could avoid or subordinate such Guarantee to
presently existing and future indebtedness of such Guarantor and take other
action detrimental to the holders of the Notes, including, under certain
circumstances, invalidating such Guarantee. See "Description of the
Notes -- Guarantees."
10
<PAGE>
NO MARKET FOR NOTES
The Notes are new securities for which there is no trading market. The Company
does not intend to list the Notes on any securities exchange. The Company has
been advised by the Underwriters that the Underwriters currently intend to make
a market in the Notes; however, the Underwriters are not obligated to do so and
may discontinue any such market making at any time without notice. No assurance
can be given as to the development or liquidity of any trading market for the
Notes. See "Underwriting."
USE OF PROCEEDS AND REFINANCING
The net proceeds from this Offering are estimated to be approximately $106.7
million. The Company intends to use all of such net proceeds and borrowings of
approximately $8.3 million under the Senior Credit Facility to pay principal,
accrued interest and prepayment expenses relating to the 8 7/8% Notes and the
Term Loan. The Company intends to use additional borrowings under the Senior
Credit Facility to repay amounts outstanding under its existing credit facility,
which terminates on October 6, 1995. The closings of this Offering and the
Senior Credit Facility are conditioned upon each other. The Refinancing will
eliminate certain covenants and extend the maturities of the Company's
indebtedness. Upon consummation of the Refinancing, the Company expects to
record an extraordinary charge, representing the loss from early extinguishment
of debt (including expensing of unamortized issuance costs and prepayment
penalties). As of December 31, 1994, this charge, net of tax, would have been
approximately $3.6 million, including a prepayment penalty of $1.4 million
calculated as of February 16, 1995.
As of December 31, 1994, there was $95 million in aggregate principal amount of
8 7/8% Notes outstanding and $16 million outstanding under the Term Loan bearing
interest at the annual rate of 90-day LIBOR plus 0.75% (7.19% as of December 31,
1994). The 8 7/8% Notes mature on June 1, 1999 and the Term Loan matures on July
31, 1996.
Borrowings under the Senior Credit Facility will be general unsecured
obligations of the Company and will rank PARI PASSU in right of payment with the
Notes and all other unsubordinated indebtedness of the Company. As of December
31, 1994, all of the Company's outstanding indebtedness was unsubordinated.
Borrowings under the Senior Credit Facility will bear a floating rate of
interest equal to the prime rate of NationsBank, N.A. (Carolinas) or a reference
rate plus a margin ranging from 0.50% to 1.625% per annum, depending upon the
applicable reference rate and the Company's ratio of total debt to tangible
capitalization. The Senior Credit Facility will contain customary
representations and events of default, including default upon a change of
control of the Company. It will also contain covenants restricting, among other
things, the ability of the Company and certain subsidiaries to incur
indebtedness; create liens on the Company's property; guarantee obligations;
alter the character of the Company's business; consolidate, merge or purchase or
sell the Company's assets; make investments or advance funds; prepay
indebtedness; and transact business with affiliates. The Senior Credit Facility
will also contain certain financial covenants, including covenants that will
require the Company to maintain a minimum tangible net worth, leverage ratio and
fixed charges coverage ratio. Three of the Company's subsidiaries, Logo 7,
Universal and Dominion Stores, Inc., will guarantee on a joint and several basis
all of the Company's obligations under the Senior Credit Facility.
11
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company at December
31, 1994, and as adjusted to give effect to the consummation of the Refinancing
and the use of the net proceeds from the Offering as set forth in "Use of
Proceeds and Refinancing." See the Company's Consolidated Financial Statements
and the notes thereto included elsewhere herein.
<TABLE>
<CAPTION>
AT DECEMBER 31, 1994
(UNAUDITED)
ACTUAL AS ADJUSTED
<S> <C> <C>
IN THOUSANDS, EXCEPT SHARE AMOUNTS
SHORT-TERM INDEBTEDNESS:
Notes payable to bank $ 1,000 $ 1,000
Current maturities of long-term indebtedness 132,353(1) 212
Total short-term indebtedness 133,353 1,212
LONG-TERM INDEBTEDNESS, LESS CURRENT MATURITIES:
% Senior Notes due 2005 -- 110,000
Notes payable to banks (Senior Credit Facility) -- 112,298
8 7/8% Senior Notes Due June 1, 1999 (8 7/8% Notes) 76,000 --
Variable rate note due July 31, 1996 (Term Loan) 6,856 --
Other long-term indebtedness 146 146
Total long-term indebtedness 83,002 222,444
Total indebtedness 216,355 223,656
STOCKHOLDERS' EQUITY:
5% Cumulative Preferred Stock, $100 par value per share; 22,000 shares
authorized, 1,975 shares outstanding 198 198
Cumulative Convertible Preferred Stock, $7.50 Series B, no par value;
150,000 shares authorized and outstanding 15,000 15,000
Common Stock, par value $1 per share; 60,000,000 shares authorized;
29,806,793 shares issued and outstanding 29,807 29,807
Capital in excess of par value 5,279 5,279
Retained earnings 140,283 136,662(2)
Less notes receivable from stockholders (3) (3,466) (3,466)
Total stockholders' equity 187,101 183,480
Total capitalization $403,456 $407,136
</TABLE>
(1) Includes $104,000 outstanding under the Company's existing revolving credit
facility, which expires October 6, 1995.
(2) Gives effect, on an after-tax basis, to the charge associated with the early
extinguishment of indebtedness as a result of the Refinancing. The charge
includes a prepayment penalty of $1,400 calculated as of February 16, 1995.
(3) See Note 16 to the Company's Consolidated Financial Statements.
12
<PAGE>
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data set forth below for each of the five
fiscal years in the period ended December 31, 1994 is derived from the
Consolidated Financial Statements of the Company, as audited by Price Waterhouse
LLP, independent accountants, which are included herein for fiscal years 1994,
1993 and 1992. The Consolidated Financial Statements of the Company for fiscal
year 1991 and prior years are based, in part, upon the Financial Statements of
Universal which was acquired by the Company in 1992, as audited by Coopers &
Lybrand L.L.P., independent accountants. The data presented below should be read
in conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Company's Consolidated Financial Statements,
related notes, and other financial data included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED
DEC. 31 JAN. 1 JAN. 2 DEC. 28 DEC. 29
1994 1994(1) 1993(1)(2)(3) 1991(1) 1990(1)
<S> <C> <C> <C> <C> <C>
IN THOUSANDS, EXCEPT RATIOS AND PER SHARE DATA
STATEMENT OF INCOME DATA:
Net sales and other income $565,433 $533,611 $503,946 $349,910 $390,336
Cost of products sold 419,769 395,727 368,027 271,243 283,907
Depreciation 23,973 23,364 20,831 17,369 14,775
Selling, general and administrative 93,510 88,433 81,297 45,481 52,546
Income from operations 28,181 26,087 33,791 15,817 39,108
Gain on sale of facilities 4,405 -- -- 4,014 --
Interest expense 18,151 16,996 13,540 9,064 8,838
Income before income taxes and cumulative effect
of accounting change 14,435 9,091 20,251 10,767 30,270
Income taxes 5,485 3,188 7,060 3,443 11,097
Income before cumulative effect of accounting
change 8,950 5,903 13,191 7,324 19,173
Cumulative effect of accounting change -- -- -- 2,848(4) --
Net income $8,950 $5,903 $13,191 $10,172 $19,173
PER COMMON SHARE DATA:
Income before cumulative effect of accounting
change $0.26 $0.16 $0.42 $0.25 $0.66
Net income 0.26 0.16 0.42 0.35 0.66
Dividends declared 0.05 0.20 0.20 0.32 0.36
PRO FORMA DATA (5) (UNAUDITED):
Pro forma income from continuing operations $6,596
Pro forma income per common share from continuing
operations $0.18
BALANCE SHEET DATA (END OF PERIOD):
Working capital $122,854 $243,553 $126,717 $ 85,011 $ 92,432
Total assets 456,809 474,965 435,818 314,957 328,643
Total debt 216,355 239,438 200,531 115,032 123,069
Total stockholders' equity 187,101 179,197 178,793 157,091 155,301
OTHER DATA:
EBITDA (6) $53,371 $50,668 $55,559 $32,321 $53,018
Capital expenditures 8,624 22,250 30,330 14,360 21,983
Ratio of EBITDA to interest expense (6) 2.94 2.98 4.10 3.57 6.00
Ratio of EBITDA minus capital expenditures to
interest expense (6) 2.47 1.67 1.86 1.98 3.51
Ratio of earnings to fixed charges (7) 1.59 1.41 2.11 1.54 2.27
</TABLE>
FOOTNOTES ON FOLLOWING PAGE
13
<PAGE>
<PAGE>
(1) During the fourth quarter of fiscal 1993, the Company changed its method of
determining the cost of inventories from the last-in, first-out (LIFO)
method to the first-in, first-out (FIFO) method. Under the current economic
environment of low inflation, the Company believes that the FIFO method will
result in a better measurement of operating results. The operating results
of all years prior to fiscal 1993 have been restated to apply the new method
retroactively. The effect of the accounting change on net income as
previously reported was to reduce net income by $4,001, $416 and $3,791 for
fiscal 1992, 1991 and 1990, respectively. In addition, earnings per common
share were reduced by $0.14, $0.02 and $0.13 for fiscal 1992, 1991 and 1990,
respectively. See Note 3 to the Company's Consolidated Financial Statements.
(2) See Note 2 to the Company's Consolidated Financial Statements for
information with respect to the acquisition of Logo 7 and Universal
Industries, Inc.
(3) Includes 53 weeks. All other years presented include 52 weeks.
(4) Reflects the Company's adoption of SFAS No. 96 "Accounting for Income Taxes"
as of the beginning of the fiscal year.
(5) Pro forma income from continuing operations and pro forma income per common
share from continuing operations have been calculated by adjusting
historical results of operations to give effect to the transactions
described in "Use of Proceeds and Refinancing" as if they had been
consummated at January 2, 1994. For purposes of preparing the pro forma
financial information, the Company assumed interest rates of 11.5% and 5.7%
on the Notes and the Senior Credit Facility, respectively. On a pro forma
basis, a 1/8% increase in the Company's weighted average variable interest
rate for the Senior Credit Facility would have resulted in pro forma income
from continuing operations and pro forma income per common share from
continuing operations of $6,458 and $0.18, respectively.
(6) EBITDA represents earnings before taking into consideration interest
expense, income taxes, depreciation and amortization and excludes gain on
sale of facilities. EBITDA is included herein to provide additional
information related to the Company's ability to service debt. EBITDA should
not be considered as an alternative measure of the Company's net income,
operating performance, cash flow or liquidity. After giving effect to the
Refinancing, for the year ended December 31, 1994, pro forma EBITDA would
have been $54,648, pro forma ratio of EBITDA to interest expense would have
been 2.35 and pro forma ratio of EBITDA minus capital expenditures to
interest expense would have been 1.98.
(7) For purposes of computing this ratio, earnings consist of earnings before
income taxes and fixed charges. Fixed charges consist of interest expense,
amortization of deferred debt issuance costs and one-third of rental expense
(the portion considered representative of the interest factor). After giving
effect to the Offering (but without giving effect to incremental interest
expense associated with borrowings under the Senior Credit Facility on a pro
forma basis), the pro forma ratio of earnings to fixed charges would have
been 1.41 for the year ended December 31, 1994.
14
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Financial results for the first six months of fiscal 1992 have been restated
to include Universal, acquired by the Company in June 1992 through an exchange
of stock accounted for as a pooling of interests. In addition, the Company
changed its method of determining cost of inventories from the last-in,
first-out (LIFO) method to the first-in, first-out (FIFO) method during the
fourth quarter of fiscal 1993. This change has been applied retroactively by
restating all prior periods presented.
RESULTS OF OPERATIONS
The following table presents the Company's consolidated income statement
items as a percentage of net sales.
<TABLE>
<CAPTION>
YEAR ENDED
DEC. 31, 1994 JAN. 1, 1994 JAN. 2, 1993
(52 WEEKS) (52 WEEKS) (53 WEEKS)
<S> <C> <C> <C>
Net sales and other income 100.0% 100.0% 100.0%
Cost of products sold 74.2 74.1 73.0
Depreciation 4.2 4.4 4.2
Selling, general and administrative 16.5 16.6 16.1
Gain on sale of facilities (0.7) -- --
Interest 3.2 3.2 2.7
Total costs and expenses 97.4 98.3 96.0
Income before taxes 2.6 1.7 4.0
Provision for income tax 1.0 0.6 1.4
Net income 1.6% 1.1% 2.6%
</TABLE>
Note: Certain items have been rounded to cause the columns to add to 100%.
FISCAL YEAR 1994 COMPARED TO FISCAL YEAR 1993
Net Sales and Other Income for the year ended December 31, 1994 increased $31.8
million or 6.0% over the prior year, from $533.6 million to $565.4 million,
attributable primarily to increased sales volume in the activewear and licensed
headwear lines. These increases were partially offset by a decrease in other
licensed apparel sales due to the Major League Baseball strike and the National
Hockey League lockout, and to some general weakening in the licensed sports
apparel marketplace. Activewear sales in fiscal 1994 increased $24.3 million or
7.6% over fiscal 1993 from $320.1 million to $344.4 million, and licensed
apparel headwear sales increased $16.2 million or 31.0% over fiscal 1993 from
$52.2 million to $68.4 million. Sales of other licensed sports apparel decreased
$8.7 million or 5.4% in fiscal 1994 compared with 1993 from $161.3 million to
$152.6 million. Sales of DISCUS ATHLETIC activewear and premium private label
sweats under the Nike, Levi Strauss and Reebok names increased 49.8% to $77.6
million and sales of LOGO ATHLETIC licensed apparel increased 198.6% to $64.5
million. Sales of jersey products were $56.8 million for the fiscal year ended
December 31, 1994, representing 16.5% of the Company's activewear sales during
such period compared to 11.6% for fiscal 1993.
Cost of Products Sold as a percentage of sales in fiscal 1994 remained
relatively unchanged from 1993, increasing from 74.1% to 74.2%. Continuing
efficiency improvements and overhead reductions during 1994 helped contain total
costs. Costs were contained notwithstanding growth of jersey volume, which
typically produces lower margins, increased raw material costs and product
improvements. Utilization of the Company's manufacturing and distribution
facilities improved in the second half of 1994 as a result of the increased
demand for activewear. Raw material costs were higher in 1994 than in 1993 as a
result of the increased price of raw cotton. Cotton prices fluctuate based on
the relationship between supply and demand, with prices increasing as demand
increases and/or supply decreases. The supply of cotton can be adversely
affected by weather, crop disease or other factors. Although cotton and
polyester prices are expected to be higher and cotton supply may be limited in
1995, the Company has contracted to purchase substantially all of its raw cotton
needs for 1995 and fixed the price on
15
<PAGE>
approximately 50% of its raw cotton needs. To the extent cotton prices increase
before the Company fixes the price for the remainder of its raw cotton needs,
the Company's results of operations could be adversely affected.
Depreciation expense as a percentage of sales was 4.2% for fiscal 1994 and 4.4%
for fiscal 1993. Depreciation expense in 1994 increased by $0.6 million or 2.6%
over 1993 from $23.4 million to $24.0 million, due to fixed asset additions.
Selling, General and Administrative ("SG&A") expenses increased $5.1 million in
1994. As a percentage of net sales, SG&A expenses were 16.5% in 1994 and 16.6%
in 1993. Higher SG&A expenses in 1994 resulted from higher advertising costs and
sales commissions in activewear lines, especially relating to the Company's
DISCUS ATHLETIC brand, and higher royalties in the licensed apparel lines.
In December 1994, the Company sold its yarn spinning plant located in
Rockingham, North Carolina, which generated a pretax gain of $4.4 million. The
Company separately agreed to purchase from the buyer 20 million pounds of
cotton-polyester blended yarns over the next three years on market terms. The
Company's yarn purchase requirements are expected to exceed this amount.
Interest expense as a percentage of sales was 3.2% for both 1994 and 1993.
Interest expense increased $1.2 million or 7.1% in 1994 over 1993, from $17.0
million to $18.2 million, primarily as a result of higher average borrowings to
finance working capital requirements. The nature of the Company's business
requires extensive seasonal borrowings to support its working capital needs. As
of October 6, 1993, the Company entered into a $225 million revolving credit
facility, which replaced its short-term credit lines. During fiscal 1993,
working capital borrowings averaged $133.9 million at an average rate of 3.8%.
During fiscal 1994, under the revolving credit facility, average borrowings and
interest rate were $155.3 million and 5.2%, respectively.
Provision for Income Tax is a function of pretax earnings and the combined
effective rate of federal and state income taxes. The effective rate for
combined federal and state income taxes was 38% in 1994 and 35% in 1993. The
provision for income tax as a percentage of net sales increased to 1.0% in
fiscal 1994 from 0.6% in fiscal 1993, an increase of $2.3 million. The increase
in provision for income tax was due to higher pretax earnings and higher
effective federal and state income tax rates.
FISCAL YEAR 1993 COMPARED TO FISCAL YEAR 1992
Net Sales and Other Income for fiscal 1993 increased $29.7 million or 5.9% over
1992 from $503.9 million to $533.6 million. The 1993 sales growth was due to a
23.7% increase in licensed apparel sales partially offset by lower activewear
sales. Unit sales volume of activewear apparel in 1993 was relatively unchanged
from the prior year's level, while the average selling price of activewear
apparel decreased by approximately 2% from 1992. The 1993 average price decline
of activewear products was primarily due to proportionately higher shipping
volume of jersey products, which sell at lower prices than fleece garments.
Cost of Products Sold as a percentage of sales increased from 73.0% for 1992 to
74.1% for 1993. The increase was primarily due to heavier fabric weights,
greater sewing detail for activewear products, strong licensed apparel sales
growth with mass merchandisers which sales generally yield lower margins, and
expenses associated with streamlining operations. The increase in jersey sales,
which traditionally yield lower margins than fleece, also increased cost of
products sold as a percentage of sales. Apparel production for 1993 decreased
2.5% from 1992.
Depreciation expense as a percentage of sales increased to 4.4% for 1993 from
4.2% for 1992. Depreciation expense increased $2.6 million or 12.5% over 1992
from $20.8 million to $23.4 million. The 1993 increase was primarily due to
expenditures for machinery and equipment.
Selling, General and Administrative expenses increased as a percentage of sales
from 16.1% in 1992 to 16.6% in 1993. The primary reason for the SG&A expense
increase was an approximately $5 million increase in royalty expenses related to
higher sales of professional sports licensed apparel.
Interest expense was 3.2% of sales for 1993 compared to 2.7% for 1992. Interest
expense increased $3.5 million or 25.9% in 1993 compared to 1992 from $13.5
million to $17.0 million primarily due to higher indebtedness from increased
working capital needs and the acquisition of Logo 7. The Company experienced
increased working capital needs in 1993 due to higher inventory levels and
extended payment terms for some customers.
16
<PAGE>
<PAGE>
Provision for Income Tax reflects an effective rate for combined federal and
state income tax of 35% in 1993 and 1992.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
Net working capital at December 31, 1994 decreased $120.7 million or 49.5% to
$122.9 million from $243.6 million at January 1, 1994, primarily due to the
reclassification of $104.0 million of borrowings under the Company's existing
revolving credit facility from long-term debt to current maturities. Net
accounts receivable increased $23.4 million from January 1, 1994 to December 31,
1994 due to higher activewear sales in the fourth quarter of 1994 versus the
comparable period in 1993.
Inventories traditionally increase during the first half of the year to support
second-half shipments. In 1994, inventories peaked on July 2 at $206.5 million
and then dropped to $130.2 million at December 31. As of December 31, 1994,
inventories had decreased by approximately $27.1 million or 17.2% from January
1, 1994, while sales had increased 6.0% in fiscal 1994 versus fiscal 1993.
Borrowings under the Company's revolving credit facility, amounting to $104.0
million at December 31, 1994, were reclassified from long-term debt to current
maturities because the credit facility terminates in October 1995. The current
ratio (ratio of current assets to current liabilities) at December 31, 1994 was
1.7 compared to 6.4 at January 1, 1994. The decrease in the current ratio was
due mainly to higher current maturities of debt.
On October 6, 1993, the Company began operating with a two-year $225 million
revolving credit facility which replaced the Company's short-term credit lines.
Total indebtedness at December 31, 1994 consisted primarily of the 8 7/8% Notes
totalling $95 million, $104.0 million outstanding under the revolving credit
facility and $16 million due under the Term Loan. The Company's average credit
facility borrowings during fiscal 1994 were $155.3 million and its peak
borrowing was $192.0 million at October 1, 1994. Current maturities included $19
million of the 8 7/8% Notes, a total of $9 million, due in equal quarterly
payments of approximately $2 million each, under the Term Loan and $104.0
million of borrowings under the revolving credit facility. As of December 31,
1994, the Company was in compliance with, or had obtained waivers for violations
of, all debt covenants.
Net proceeds from this Offering and borrowings under the Senior Credit Facility
will be used to repay in full the 8 7/8% Notes and the Term Loan. The Company
believes that the longer maturities and the increased covenant flexibility
provided under the terms of the Notes will allow the Company to continue to
increase its long-term investment in brand promotion and higher-margin products.
See "Use of Proceeds and Refinancing."
In fiscal 1994, net cash provided by operations was $24.6 million compared to
cash used by operations of $5.9 million in fiscal 1993. The reduced need for
operating cash was due to reduced inventory partially offset by higher accounts
receivable. Cash used for capital expenditures decreased $13.7 million or 61.4%
for fiscal 1994 compared to 1993 from $22.3 million to $8.6 million. The Company
has budgeted approximately $15 million for capital expenditures in fiscal 1995.
Cash used by financing activities was $24.1 million for fiscal 1994 compared to
cash provided by financing activities of $33.4 million in fiscal 1993 as a
result of reduced borrowing requirements. The Company expects that its
short-term borrowing needs will be met through cash generated from operations
and borrowings under the new, three-year Senior Credit Facility. In addition,
the Notes will require no scheduled principal repayments until their maturity in
2005.
Stockholders' Equity increased $7.9 million during fiscal 1994 primarily due to
net income for the period of $9.0 million and $0.7 million net proceeds from a
new employee stock purchase plan. This increase was partially offset by cash
dividends of $1.8 million. On April 13, 1994, the Board of Directors suspended
further dividend payments. Substantially contemporaneously with the consummation
of the Offering, the Company expects to pay existing dividend arrearages on its
preferred stock and thereafter to resume paying quarterly dividends thereon. No
decision with respect to renewal of common stock dividends has been made.
Accumulated dividends on the Company's 5% Cumulative Preferred Stock and
Cumulative Convertible Preferred Stock, $7.50 Series B totalled $851,000 at
December 31, 1994.
17
<PAGE>
BUSINESS
GENERAL
Tultex Corporation is one of the world's largest marketers and manufacturers
of activewear and licensed sports apparel for consumers and sports enthusiasts.
The Company's diverse product line includes fleeced sweats, jersey products
(outerwear T-shirts), and decorated jackets and caps. These products are sold
under the Company's own brands led by the DISCUS ATHLETIC and LOGO ATHLETIC
premium labels and under private labels, including Nike, Levi Strauss, Reebok
and Pro Spirit. In addition, the Company has numerous professional and college
sports licenses to manufacture and market embroidered and screen-printed
products with team logos and designs under its LOGO ATHLETIC and LOGO 7 brands.
The Company is a licensee of professional sports apparel, holding licenses from
the National Football League ("NFL"), MLB, the National Basketball Association
("NBA") and the NHL to manufacture a full range of sports apparel for adults and
children.
Historically, Tultex has been a producer of quality fleece products for sale to
distributors and resale to consumers under private labels. However, in the
1980s, the activewear industry began to change. Increasing consumer demand
reflecting more active and casual lifestyles and the industry's historically
good long-term growth prospects and low fashion risk as compared to other
apparel products, attracted large, well-financed companies which acquired
competitors of the Company. Simultaneously, larger mass merchandise retailers
began to exert pressure on margins for lower-priced fleece products.
In recent years, Tultex has initiated a strategy to enhance its competitiveness
and to capitalize on growth opportunities by becoming a consumer-oriented
apparel maker able to compete in a changing industry. This strategy includes the
following elements:
(Bullet) INCREASING EMPHASIS ON HIGHER-MARGIN PRODUCTS. The Company is
strengthening its competitiveness in the activewear business through
the development of branded and private label, higher-quality and
higher-margin products to supplement its traditionally strong
position in the lower-priced segment of the business. The Company is
developing its own brands, promoting DISCUS ATHLETIC for its premium
products and using the TULTEX label for the value-oriented segment
of the market. DISCUS ATHLETIC'S highly visible advertising during
televised broadcasts of college football and basketball on the ESPN
and ABC television networks and of Atlantic Coast Conference
basketball has contributed to significant annual increases in sales
of this brand since 1992. In addition, Tultex has partnering
arrangements to supply higher-quality, private label products to
companies such as Reebok, Levi Strauss and Nike, none of which
accounted for more than 10% of the Company's consolidated sales
during 1994. To complement its development of higher-margin
products, the Company began manufacturing jersey products in 1991.
(Bullet) EXPANDING INTO LICENSED APPAREL BUSINESS TO COMPLEMENT ACTIVEWEAR
BUSINESS. Tultex's 1992 acquisitions of Logo 7, a marketer of
licensed sports apparel, and Universal, a marketer of sports and
entertainment licensed headwear, enabled the Company to achieve the
fourth largest market share (13.7%) in the higher-margin licensed
apparel business in 1993, and have created opportunities for
significant manufacturing and distribution synergies with the
Company's activewear business. The promotion of the LOGO ATHLETIC
brand of licensed apparel through television and print advertising,
as well as promotional arrangements featuring Dallas Cowboys'
quarterback Troy Aikman, San Francisco 49ers' quarterback Steve
Young, Miami Dolphins' quarterback Dan Marino, the Chicago
Blackhawks' Chris Chelios and the Washington Bullets' Chris Webber,
among others, has helped to increase the visibility and sales of
LOGO ATHLETIC products.
(Bullet) INCREASING DISTRIBUTION CHANNELS AND STRENGTHENING CUSTOMER
RELATIONSHIPS. Tultex actively pursues strong relationships with
department, sporting goods and other specialty stores, such as Sears,
JC Penney, Modell's, Dillard's, Foot Locker, Champs and Sports
Authority, to distribute its higher margin branded and private label
products. In addition, the Company continues to strengthen its
relationships with high volume retailers such as Wal-Mart, Kmart and
Target by supplying private label and TULTEX products. Tultex
provides customers with exceptional service and support; as an
example, its distribution capabilities are highly responsive to
customers' changing delivery and inventory management requirements.
(Bullet) INVESTING IN MODERN DISTRIBUTION AND PRODUCTION FACILITIES. During
fiscal 1988 through fiscal 1994, Tultex invested approximately $191
million in capital expenditures, primarily in the construction of its
customer service center and in high-efficiency spinning, knitting,
dyeing, cutting and embroidering machinery. In 1991, Tultex
18
<PAGE>
began operating the customer service center, which the Company
believes is the most highly automated in the industry. Having made
significant investments in its distribution and production
facilities, the Company's average capital expenditures are not
expected to exceed approximately $20 million annually through 1997.
The Company's strategy has improved its sales mix. While net sales increased
6.0% in fiscal 1994 over 1993, net sales of DISCUS ATHLETIC activewear and
premium private label sweats under the Nike, Levi Strauss and Reebok names
increased 49.8% to $77.6 million and net sales of LOGO ATHLETIC licensed apparel
increased 198.6% to $64.5 million. Sales of jersey products were $56.8 million
for the fiscal year ended December 31, 1994, representing 16.5% of the Company's
activewear sales during such period compared to 11.6% for fiscal 1993. Reduced
consumer demand for activewear and an oversupply of activewear in retail
inventories in the first half of 1994, the MLB strike, the NHL lockout and
higher raw material costs adversely affected Tultex's results of operations
during 1994.
The Company's activewear business is vertically integrated, spinning
approximately 80-85% of the yarn it requires in three yarn plants located in
North Carolina (the balance is purchased under yarn supply contracts) and
knitting, dyeing and cutting fabric and sewing finished goods in 11 plants in
Virginia and North Carolina and one plant in Jamaica. The Company's licensed
sports apparel operations are conducted from one plant in Indiana and one plant
in Massachusetts.
INDUSTRY
The Company produces activewear and licensed sports apparel and headwear for
sale at a broad range of price points through all major distribution channels.
ACTIVEWEAR
The Company's activewear business consists of its fleecewear and jersey
products. All activewear industry and market share data included herein has been
estimated by the Company based on data provided by Market Research Corporation
of America, a leading provider of market information on the textile industry.
FLEECEWEAR. The fleecewear industry, with retail sales of approximately $9.1
billion in 1993, has grown 12.8% in unit sales from 1989 to 1993 and has
experienced a 3.1% compound annual growth rate in unit sales during this period.
The predominant fleecewear products are sweatshirts and bottoms.
The basic fleecewear industry is characterized by:
(Bullet) LOW FASHION RISK -- although fashion detailing changes often, basic
garment styles are not driven by trends or fads;
(Bullet) LONG-TERM GROWTH -- industry sales volume is estimated to have grown
from 697.4 million units in 1989 to 786.9 million units in 1993, though
this growth has been punctuated with periodic downturns related to
external events such as reduced retailer commitment for activewear
during the Gulf War and the lower consumer demand prevailing in late
1993 to early 1994;
(Bullet) ENTRY BY WELL-FINANCED ACQUIRORS -- new entrants have been attracted by
the industry's long-term growth and have been able to make the large
initial capital investments for manufacturing;
(Bullet) BARRIERS TO ENTRY -- barriers include large required capital
investments, and growing importance of brand-name recognition and
established customer relationships; and
(Bullet) LOW THREAT OF IMPORTS -- the low labor portion of the cost of
manufacturing fleecewear and the short delivery times required for
inventory control by retail customers reduce the threat of competition
from imports.
Sales of fleeced apparel experienced significant growth during the late 1970s
and 1980s due to the increased pursuit of physical fitness and active lifestyles
and the related rise in popularity and acceptance of sweatshirts, jersey apparel
and other types of athletic clothing as "streetwear." Moreover, fleecewear
products have registered significant improvements in fabric weights, blends,
quality of construction, size, style, and color availability over the past few
years, which has contributed to this growth in demand. In particular, garments
are sized larger and typically use heavier, more shrink-resistant fabrics. In
addition, acrylic-dominant blends have been supplanted by polyester-dominant and
cotton-dominant blends. Despite these upgrades in product specifications, retail
prices
19
<PAGE>
have remained relatively flat in real terms due to improvements in manufacturing
technology and competitive pressures.
Fleecewear exhibits a marked seasonality. For example, over the past three
fiscal years, an average of 71.9% of the Company's fleecewear unit sales have
occurred in the third and fourth quarters.
JERSEY (OUTERWEAR T-SHIRTS). Unit retail sales of jersey products have grown
32.6% from 1989 to 1993 and in 1993 totaled $6.7 billion, or 66 million units.
Like fleecewear, the industry characteristics of jersey apparel include low
fashion risk and long-term growth. Imports are a greater threat as the
weight/labor ratio and the freight costs involved are lower for jersey products
than for fleecewear; however, the ability to produce large volumes with short
delivery times gives domestic manufacturers an advantage over import competition
in both fleecewear and jersey apparel.
INDUSTRY MAKEUP AND RETAIL CHANNELS. In 1993, the five largest fleece
manufacturers together accounted for an estimated 26.7% of the branded market in
the fleecewear industry, with Hanes Corporation, Russell Corporation, Tultex,
Fruit of the Loom and VF Corporation accounting for approximately 10.9%, 5.7%,
3.7%, 3.6% and 2.8% of wholesale industry sales, respectively. The retail jersey
industry also is fragmented. In 1993, the five largest jersey manufacturers
together accounted for an estimated 16.4% of the branded market in the jersey
industry, with Fruit of the Loom, Hanes Corporation, Russell Corporation, VF
Corporation and Tultex accounting for approximately 7.1%, 6.1%, 1.5%, 1.2% and
0.5% of wholesale industry sales, respectively. The activewear industry has been
characterized since the 1980s by the acquisition of existing competitors by
larger companies with substantial financial resources and manufacturing and
distribution capabilities. These factors and the resulting price reductions and
inventory build-ups have adversely affected participants in the activewear
industry, including Tultex, particularly with respect to the fleecewear
industry. In response, several competitors announced reductions in fleecewear
manufacturing capacity during 1993 and 1994. While fleeced apparel pricing has
improved and inventory levels recovered to more typical levels in the second
half of 1994, there can be no assurance that these market conditions will
continue. Fleecewear is distributed through department stores, chain stores and
sporting goods stores, although mass merchandisers, wholesale clubs, and other
discount retailers represent a dominant and growing percentage of the total
fleecewear market.
COMPETITIVE FACTORS. The Company believes that price and quality are the primary
factors in consumer purchasing decisions. Brand name is often a proxy for
quality; as a result, those companies with brand name recognition enjoy
increased sales from this competitive advantage, as mass merchandisers,
department store chains, and wholesale clubs are requiring more branded than
private label activewear. Management believes that the market share of foreign
competitors in the fleecewear and jersey industries is immaterial.
LICENSED APPAREL AND HEADWEAR
Estimated wholesale sales of professional sports licensed apparel (including
headwear) for 1993 were approximately $1.9 billion, according to SPORTS STYLE
MAGAZINE, an industry publication. In general, the Company believes that the
prospects for its continued growth in this market are good, although growth is
expected to be less rapid than in recent years due to increased competition. The
continually changing fortunes of existing teams, together with the introduction
of new franchises, has made the market extremely dynamic, as interest in each
team fluctuates with its performance. Manufacturers, such as the Company, with
the capacity to respond quickly to these changes with new products and designs,
enjoy a competitive advantage over smaller competitors. The MLB players' strike
and the NHL lockout, which was settled on January 13, 1995, have adversely
affected sales of items bearing these marks, and the MLB players' strike will
continue to adversely affect sales of MLB products until this dispute is
resolved. The Company expects that consumer demand for NHL products and, once
play resumes, MLB products will rebound, but may recover slowly. There can be no
assurance that the MLB dispute will be resolved in the near future or that sales
of MLB and NHL products will increase or return to prior levels.
INDUSTRY MAKEUP AND RETAIL CHANNELS. The industry has expanded rapidly over
the past three years, with the professional sports leagues granting large
numbers of licenses. With this proliferation of licenses, individual
competitor's sales growth slowed, though the top companies continued to gain
market share. After giving effect to industry consolidation, management
estimates that at the end of 1993, the top four companies would have accounted
for approximately 65% of the market, with Starter Corporation, VF Corporation
(Nutmeg Mills, Inc. and H.H. Cutler Sports Apparel), Fruit of the Loom (Artex,
Salem Sportswear, Inc. and Pro Player) and Tultex accounting for approximately
19.2%, 18.0%, 15.0% and 13.7% of wholesale industry sales in 1993, respectively,
20
<PAGE>
according to SPORTS STYLE MAGAZINE. No other company had more than 10% of the
market. Imports of finished goods purchased by retailers directly or through
import companies do not represent a significant factor in the industry as a
whole, since there are no foreign licensees. However, all of the larger domestic
companies competing in the market do use significant off-shore sourcing of
finished outerwear goods. Licensed sports apparel products are generally sold
through the same retail channels as activewear.
COMPETITIVE FACTORS. There are significant barriers to entering the licensed
sports apparel industry and expanding such a business to significant size. After
expanding the number of licensees rapidly in recent years, the licensing
associations have begun to consolidate their relationships with existing
manufacturers and appear less likely to enter into licensing agreements with new
entrants. New entrants would be required to devote considerable resources to
developing their product mix and sales and distribution capabilities to compete
effectively. Like the activewear industry, the licensed apparel industry has
been characterized in recent years by the acquisition of existing competitors by
larger companies with substantial financial resources and manufacturing and
distribution capabilities, such as VF Corporation's acquisition of Nutmeg Mills,
Inc. in 1994, Fruit of the Loom, Inc.'s acquisition of Salem Sportswear, Inc. in
1993, and Nike's acquisition of Sports Specialties, Inc. in 1993.
COMPANY PRODUCTS
ACTIVEWEAR
The principal activewear products of the Company are fleeced knitwear items such
as sweatshirts, jogging suits, hooded jackets, headwear and jersey apparel for
work and casual wear. The Company manufactures apparel products principally
under the DISCUS ATHLETIC and TULTEX brands. Products carrying the DISCUS
ATHLETIC name are marketed for sale to chains such as Foot Locker, department
stores such as Sears and sporting goods stores, while TULTEX products are
marketed for sale to mass merchandisers such as Wal-Mart and wholesale clubs
such as Sam's. The Company is licensed to manufacture and market adult
fleecewear under the Britannia trademark owned by Levi Strauss & Co. The Company
also manufactures private-label products for sale under many labels, including
Nike, Levi Strauss, Reebok and Pro Spirit.
LICENSED APPAREL AND HEADWEAR
The Company's licensed apparel products include jackets, sweats, T-shirts,
baseball-style caps and other headwear, embroidered or imprinted with
professional and college sports and entertainment-related licensed designs and
logos. These products are marketed under the LOGO ATHLETIC and LOGO 7 brands.
Under the LOGO ATHLETIC name, the Company offers premium-quality jackets, caps
and other activewear, including NFL "Pro-Line"authentic sideline gear and NBA
"Authentics" apparel. Tultex, through Logo 7, acquired Pro-Line status from the
NFL in 1993, a flagship program entitling the Company to sell products identical
to those worn on the sidelines by NFL players and coaches. Under the terms of
the nonexclusive four-year Pro-Line contract, the Company markets Pro-Line
products at retail for all 30 NFL teams. Under the terms of the nonexclusive
three-year NBA Authentics contract, the Company markets products that are
identical to those worn by NBA players, coaches and managers during competition.
The Company's NFL Pro-Line and NBA Authentics products prominently feature the
LOGO ATHLETIC name and trademark, which the Company believes are key elements in
developing the LOGO ATHLETIC brand. Under the LOGO 7 brand, the Company offers
moderately-priced outerwear, fleecewear, T-shirts and caps with licensed designs
and logos. The Company also sells popularly-priced licensed fleecewear, jersey
apparel and headwear.
CUSTOMERS; MARKETING AND SALES
CUSTOMERS
The Company offers a diverse product line for sale at a full range of price
points through all major distribution channels. Customers include chain stores
such as Foot Locker, department stores such as Sears and J.C. Penney, sporting
goods stores, and mass merchandisers such as Target, Wal-Mart and Kmart. The
Company's higher-quality fleecewear and jersey products, including the Company's
premium DISCUS ATHLETIC and LOGO ATHLETIC brands, are sold primarily through
department and specialty stores and mail-order distribution channels rather than
through mass merchandisers and wholesale clubs, thereby enabling Tultex to
enhance the image of these branded and private label products and achieve higher
margins. The TULTEX and LOGO 7 brands are marketed to a broader range of
channels, including mass merchandisers and wholesale clubs that compete more on
price than 21
<PAGE>
brand. During 1994, one customer of the Company accounted for approximately
10.4% of sales, and the Company's top four customers together accounted for
approximately 30.4% of sales. The following chart details the distribution
channels for the Company's branded products.
<TABLE>
<CAPTION>
BRANDS PRODUCTS DISTRIBUTION CHANNELS
<S> <C> <C>
DISCUS ATHLETIC Fleece and jersey activewear Sporting goods specialty stores and chain stores (Sports
Authority, Modell's), retail chains (Sears), international
distributors and sales agencies (Nissan Trading)
TULTEX Fleece and jersey activewear Mass merchants (Kmart, Wal-Mart), retail chains (Montgomery
Ward), regional discounters (Shopko, Hart's), distributors and
mass merchant screenprinters (California Shirt Sales, T-Shirt
City, PM Enterprises), wholesale clubs (Sam's)
LOGO ATHLETIC Licensed activewear, outerwear Retail chains (JC Penney, Sears), sporting goods specialty
and headwear stores (Champs, Foot Locker), department stores (Dillard's,
Mercantile)
LOGO 7 Licensed activewear, outerwear Mass merchants (Kmart, Target), distributors (West Coast
and headwear Novelties), wholesale clubs (Sam's)
</TABLE>
MARKETING AND SALES
The Company has shifted its marketing strategy in recent years to focus on the
development of its own brands and sales through distribution channels that
support higher margins. In particular, the Company has devoted significant
resources to the promotion of its DISCUS ATHLETIC and LOGO ATHLETIC brands.
In 1993, the Company began conducting advertising campaigns to promote its
DISCUS ATHLETIC and LOGO ATHLETIC brands. The DISCUS ATHLETIC advertising
campaign emphasizes quality and the usefulness of the product for many sports.
The Company believes that this positioning effectively differentiates the DISCUS
ATHLETIC line from competing specialized lines with powerful brand associations.
To reinforce the association of the brand with competitive athletics, DISCUS
ATHLETIC advertises on ESPN's college football and basketball programs, ABC's
college basketball program and televised Atlantic Coast Conference and Big 10
basketball games. Print advertising appears in SPORTS ILLUSTRATED, STREET &
SMITH'S, DETAILS, GENTLEMAN'S QUARTERLY and ROLLING STONE. The Company believes
these placements are particularly effective in reaching college sports fans, an
important part of the Company's target market.
The LOGO ATHLETIC campaign focuses on establishing the "authenticity" of LOGO
ATHLETIC products. The Company believes that licensed apparel sales benefit
substantially from the perception that products are the same as those worn by
professional sports stars. LOGO ATHLETIC acquired NFL Pro-Line status in 1993.
To provide visibility and reinforce this authenticity, the Company provided
sideline garments and caps prominently featuring the LOGO ATHLETIC trademark in
1994 for five NFL teams, the Green Bay Packers, Indianapolis Colts, Los Angeles
Rams, Phoenix Cardinals and Tampa Bay Buccaneers, and for several NFL All-Pro
players, such as San Francisco 49ers' quarterback Steve Young, Miami Dolphins'
quarterback Dan Marino and Green Bay Packers' defensive lineman Reggie White.
The "Get Real" series of television advertisements features Dallas Cowboys'
quarterback Troy Aikman, NBA star Chris Webber and NHL All-Star Chris Chelios,
all wearing LOGO ATHLETIC gear and encouraging consumers to "Get Real" with LOGO
ATHLETIC. The Company participates in the NBA Authentics program and provides
ball-boy garments featuring the LOGO ATHLETIC trademark to the Boston Celtics,
Denver Nuggets, Indiana Pacers and Minnesota Timberwolves for use during games.
The Company also has become recognized as a prominent designer and supplier of
distinctive "locker room" caps bearing championship team logos and carrying the
highly visible LOGO ATHLETIC trademark.
Advertising expenditures were $12.3 million and $17.1 million in 1993 and 1994,
respectively, of which $10.0 million and $14.7 million, respectively, were
expensed in those years. The advertising expense budget for 1995 is $21.8
million.
New product introductions are important to the Company's licensed apparel
business and are undertaken to generate consumer excitement and demand. Logo 7's
creative design team, in cooperation with key customers and
22
<PAGE>
licensors, continually develops and introduces new products and styles. For
example, the "shark's tooth" design featured on certain LOGO ATHLETIC caps and
jackets has been extremely successful and is in high demand. The Company is able
to react quickly to changing team fortunes, designing new products to capitalize
on shifts in popularity and delivering those products to the market rapidly,
sometimes in a matter of hours. During major professional and collegiate
sporting events, such as the Super Bowl, the Company produces on-site decorated
products with championship logos of the winning teams for immediate distribution
and sale at the event.
The Company's marketing methods for other products are typical of producers of
basic clothing products. Its merchandising department keeps abreast of current
fashionable styles and colors. After internal reviews by manufacturing
departments, selected customers preview and comment upon prototype garments
before the merchandising department determines those to be presented in sales
catalogs. Production is planned on orders received and anticipated customer
orders for these garments.
As of December 31, 1994, Tultex operated a sales office in each of New York,
Boston, Chicago, Seattle, Orlando and Los Angeles and a DISCUS ATHLETIC showroom
in New York City. These offices are the primary points of contact for customers
and coordinate sales, distribution of sales information, certain advertising,
point-of-sale displays and customer service. The Company also employs eight
independent sales representatives to market its DISCUS ATHLETIC line in the
fragmented sporting goods market. Logo 7's products are marketed through a sales
force of 50 people, including Logo 7 employees and independent sales
representatives. In 1992, the Company entered into an agreement with Nissan
Trading Co., Ltd., a subsidiary of Nissan Motor Co., to market and sell the
Company's products in Japan. International sales in 1993 and 1994 were
insignificant.
At December 31, 1994, Dominion Stores, Inc., a wholly-owned subsidiary, operated
14 outlet stores in North Carolina, Virginia and West Virginia, which sell
surplus Company apparel and apparel items of other manufacturers, and operated
32 THE SWEATSHIRT COMPANY retail stores in 19 states, which primarily sell
first-quality Company-made products and accessories. Dominion Stores' total
sales in fiscal 1994 were $18.7 million.
LICENSES
Most of the Company's licensed products are sold through Logo 7. The Company
is a licensee of professional sports apparel, maintaining a full complement of
licenses with all of the major North American professional sports leagues -- the
NFL, MLB, the NBA and the NHL -- and the Collegiate Licensing Company. The
Company also holds licenses for World Cup Soccer 1994, NASCAR, the 1996 Summer
Olympics in Atlanta and entertainment-related products. These licenses require
the payment of royalties ranging from 5% to 15% of sales with guaranteed
royalties of approximately $9 million in fiscal 1995. The Company's major
licenses with the NFL, NBA and NHL expire in 1997 and the MLB license expires in
1995. The Company is licensed to manufacture and market adult fleecewear under
the Britannia trademark owned by Levi Strauss & Co.
The Company's ability to compete is dependent on its ability to obtain and renew
licenses, particularly those from the major professional sports leagues. The
Company enjoys long-standing relationships with its major league licensees,
having been awarded its first licenses with the NFL in 1971, with the NBA in
1977, with MLB in 1980 and with the NHL in 1988. The Company has no reason to
believe that it will not be able to successfully renew these licenses. While the
Company has enjoyed long, successful and uninterrupted licensing relationships
with its professional and collegiate athletic licensors, if a significant
license or licenses were not renewed or replaced, the Company's sales would
likely be materially and adversely affected. In addition, the Company's material
licenses are nonexclusive and new or existing competitors may obtain similar
licenses.
MANUFACTURING
Because consumer value is a key competitive factor in the activewear industry,
Tultex has focused on being a low-cost producer of quality goods. The Company
pursues this goal through cost reduction measures, plant modernization and
improvement of garment characteristics, such as increasing the range of garment
sizes, cloth weight, durability, style and comfort to meet consumer demands.
Implementation of modern information systems and inventory cost control measures
have allowed the closing or sale of several costlier, less efficient plants,
including the Company's December 1994 sale of its yarn production plant in
Rockingham, North Carolina. Savings are achieved through lower average
production costs in the more modern facilities and higher capacity utilization
in the remaining plants.
23
<PAGE>
The Company's manufacturing process consists of: yarn production; fabric
construction including knitting, dyeing and finishing operations; apparel
manufacturing including cutting and sewing operations; and, for garments with
logos, screenprint and embroidery operations. As a result of its modernization
efforts, the Company believes that its manufacturing facilities are outfitted
with some of the most efficient and technologically-advanced equipment in the
industry.
During fiscal 1988 through fiscal 1994, the Company invested approximately
$191 million to open new facilities, including sewing facilities in Roanoke,
Virginia and Montego Bay, Jamaica (a leased facility), and the highly automated
customer service center in Martinsville, Virginia, and to modernize other
facilities. Open-end spinning frames were acquired to increase yarn production
and reduce costs, higher color quality and lower dyeing costs were achieved from
the installation of new jet dyeing equipment, new dryers were added in the
fabric finishing process, automated cutting machines were introduced, and new
information systems were implemented.
Tultex's highly-automated customer service center, opened in 1991, has greatly
expanded the Company's distribution capabilities. The customer service center
allows the Company to package and ship its products according to the more
detailed color, size and quantity specifications typically required by
high-margin retailers and department stores and has permitted consolidation of
the Company's warehouses. However, the customer service center currently is
underutilized during the first half of the year and has significantly
contributed to the Company's fixed costs. Management believes that its strategy
of increasing sales of higher-margin retail products, which require more
sophisticated packaging, will result in improved utilization of the customer
service center.
In spring 1992, Logo 7 moved its operations to a newly-constructed, leased
facility built to Logo 7's specifications. This 650,000 square foot building
allowed Logo 7 to centralize operations, increase inventory control, improve
material flow and will allow for future expansion.
Tultex manufactures yarn at three facilities located in North Carolina, which
have a combined production capacity of 1.3 million pounds per week, utilizing
modern, open-end spinning frames. For its knitting operations, Tultex operates
approximately 500 modern high-speed, latch-needle circular knitting machines,
which produce various types of fabrics. The Company believes its dyeing
operations are among the most modern and technologically efficient in the
industry; dyeing operations are computer-controlled, allowing precise
duplication of dyeing procedures to ensure "shade repeatability" and color-fast
properties. The finishing operations employ mechanical squeezing and steaming
equipment.
The Martinsville cutting facility uses advanced Bierrebi automatic continuous
cutting machines with computer-controlled hydraulic die-cutting heads and
"lay-up" machines and high-speed reciprocating knives. Sewing production at the
Company's nine sewing facilities is organized on an assembly-line basis.
The Company has incorporated sophisticated systems into several key areas of the
manufacturing process. The Company relies on a knitting ticket system to track
and report the manufacturing process from yarn inventory through the knitting of
individual rolls of fabric into greige cloth storage. From this point, the shop
floor control module of the Cullinet manufacturing system monitors and reports
the movement of each production lot through the operations of dyeing, finishing,
cutting and sewing. Each sewing plant then electronically transmits an advance
shipping notice to the automated customer service center so the distribution
planning module at the center can plan the arrival and storage/packing of the
sewn garments. Frontier knitting monitor systems, cutting production systems,
and sewing production systems use computer-based data collection on each
knitting, cutting, and sewing machine to monitor machine and operator
efficiency, data that is useful for quality control, incentive-based payroll
data, and production management information.
The Company decorates its unfinished licensed apparel products using
screenprinting or embroidery at Logo 7's facilities in Indianapolis and
Universal's facilities in Massachusetts. Automatic silkscreen machines and
dryers are used for longer runs, and hand-operated presses are used for shorter
or more complicated runs. Embroidery is applied using high-speed, computerized
stitching equipment.
The Company's order backlog at December 31, 1993 was approximately $67 million
and at December 31, 1994 was approximately $143 million. Backlogs are computed
from orders on hand at the last day of each fiscal period. The Company believes
that due to the seasonality of the Company's business and the just-in-time
nature of much of the Company's sales, order backlogs are not a reliable
indicator of future sales volume.
24
<PAGE>
RAW MATERIALS
The Company's principal raw materials for the production of activewear are
cotton and polyester. Cotton content in fleecewear typically is 50% and in
jersey apparel typically is 100%. The Company is producing increasing amounts of
fleecewear containing 90-100% cotton. Fleecewear and jersey manufacturers are
extremely sensitive to fluctuations in cotton and polyester prices as these
materials represent approximately 30% of the manufacturing cost of the product.
In addition, the Company is indirectly impacted by increasing costs of raw
materials in its licensed apparel business because the Company purchases
finished goods containing cotton and polyester and these higher raw materials
costs often are effectively passed on to the Company. Cotton prices increased
significantly in 1994 over 1993 levels. In 1994, the Company's average price per
pound of cotton was $0.72, compared with $0.60 in 1993, while the average price
per pound of polyester was $0.64 in 1994, compared with $0.67 in 1993. The
Company expects the average price paid for cotton and polyester to be higher in
1995. In 1995, Tultex expects to use approximately 50 million pounds of raw
cotton and 20 million pounds of polyester staple in its manufacture of
fleecewear and jersey apparel. Tultex makes advance purchases of raw cotton
based on projected demand. The Company has contracted to purchase substantially
all of its raw cotton needs for 1995 and has fixed the price on approximately
50% of its raw cotton needs. To the extent cotton prices increase before the
Company fixes the price for the remainder of its raw cotton needs, the Company's
results of operations could be adversely affected.
TRADEMARKS
The Company increasingly promotes and relies upon its trademarks, including
DISCUS ATHLETIC, LOGO ATHLETIC, TULTEX, and LOGO 7, which are registered in the
United States and many foreign countries.
SEASONALITY
The Company's business is seasonal. The majority of fleecewear sales occur in
the third and fourth quarters, coinciding with cooler weather and the playing
seasons of popular professional and college sports. Jersey sales peak in the
second and third quarters of the year, somewhat offsetting the seasonality of
fleecewear sales.
ENVIRONMENTAL MATTERS
The Company is subject to various federal, state and local environmental laws
and regulations governing, among other things, the discharge, storage, handling
and disposal of a variety of substances and wastes used in or resulting from its
operations, including, but not limited to, the Water Pollution Control Act, as
amended; the Clean Air Act, as amended; the Resource Conservation and Recovery
Act, as amended; the Toxic Substances Control Act, as amended; and the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended.
The Company returns dyeing wastes for treatment to the City of Martinsville,
Virginia's municipal wastewater treatment systems operated pursuant to a permit
issued by the state. The city has filed a timely application to renew its
permit. In 1989, the city adopted a plan for removing the coloration, caused by
the dye wastes, from the water by using polymer chemicals to combine with the
extremely small particles of the dye to create a sludge-like substance that can
be retrieved from the water at the city's wastewater treatment plant and
disposed of as a non-hazardous waste in the city's landfill. To cover the cost
to the city, the Company pays 50 to 80 cents per thousand gallons of water above
regular water costs. The expenditures required do not have a material effect on
the Company's earnings or competitive position.
The Company's operations also are governed by laws and regulations relating to
employee safety and health, principally the Occupational Safety and Health Act
and regulations thereunder, which, among other things, establish exposure
limitations for cotton dust, formaldehyde, asbestos and noise, and regulate
chemical and ergonomic hazards in the workplace.
The Company believes that it is in material compliance with the aforementioned
laws and regulations and does not expect that future compliance will have a
material adverse effect on its capital expenditures, earnings or competitive
position in the foreseeable future. However, there can be no assurances that
environmental and other legal requirements will not become more stringent in the
future or that the Company will not incur significant costs in the future to
comply with such requirements.
25
<PAGE>
LITIGATION
The Company is not currently a party to any legal proceedings the result of
which it believes could have a material adverse impact on its business or
financial condition.
EMPLOYEES
The Company had approximately 6,933 employees at December 31, 1994, of which
6,043 or 87% were paid hourly.
In August 1994, hourly employees at the Company's Martinsville, Virginia
facilities voted for representation by the Amalgamated Clothing and Textile
Workers Union. The Company currently is negotiating a labor contract with the
union, which would cover all hourly employees at the Martinsville facilities. As
of December 31, 1994, the Company's approximately 2,200 hourly employees in
Martinsville accounted for approximately 32% of the Company's total employees
and approximately 36% of the Company's hourly employees. See "Risk Factors --
Unionization of Hourly Workers at Martinsville Facilities." None of the
Company's other employees are represented by a union. The following table
summarizes the approximate number of employees in the Company's principal
divisions at December 31, 1994 and January 1, 1994.
<TABLE>
<CAPTION>
DECEMBER 31, 1994 JANUARY 1, 1994
DIVISION SALARY HOURLY TOTAL SALARY HOURLY TOTAL
<S> <C> <C> <C> <C> <C> <C>
Activewear 743 5,380 6,123 866 5,794 6,660
Licensed Apparel 104 503 607 94 541 635
Licensed Headwear 43 160 203 43 175 218
Total 890 6,043 6,933 1,003 6,510 7,513
</TABLE>
PROPERTIES
Most of the Company's principal physical facilities (other than those of Logo 7
and Universal) are located in Virginia and North Carolina, within a 150-mile
radius of the City of Martinsville. All buildings are well-maintained. The
Company and its subsidiaries also lease sales offices and retail outlets in
major cities from coast to coast. The location, approximate size and use of the
Company's principal owned properties are summarized in the following table:
<TABLE>
<CAPTION>
SQUARE
LOCATION FOOTAGE USE
<S> <C> <C>
Martinsville, VA 45,200 Administrative offices
Martinsville, VA 1,100,000 Manufacturing and distribution (apparel)
Koehler, VA 60,000 Warehousing
Martinsville, VA 70,000 Warehousing
South Boston, VA 130,000 Sewing (apparel)
Bastian, VA 53,500 Sewing (apparel)
Longhurst, NC 287,000 Manufacturing (yarn)
Roxboro, NC 110,000 Manufacturing (yarn)
Dobson, NC 38,000 Sewing (apparel)
Mayodan, NC 612,000 Manufacturing, warehousing and shipping
(yarn and apparel)
Vinton, VA 50,000 Sewing (apparel)
Martinsville, VA 502,200 Warehousing and shipping (apparel)
Mattapoisett, MA 116,250 Distribution (headwear)
</TABLE>
26
<PAGE>
<PAGE>
The following table presents certain information relating to the Company's
principal leased facilities:
<TABLE>
<CAPTION>
LEASE CURRENT
SQUARE EXPIRATION ANNUAL
LOCATION FOOTAGE DATE RENTAL USE
<S> <C> <C> <C> <C>
Chilhowie, VA 40,015 08/31/97 $ 46,200 Sewing
(apparel)
Montego Bay, Jamaica 66,000 Monthly 266,040 Sewing
(apparel)
Marion, NC 48,760 11/02/98 95,000 Sewing
(apparel)
Martinsville, VA 31,000 Monthly 18,700 Warehousing
(apparel)
Martinsville, VA 300,000 6/1/98 684,000 Warehousing
(apparel)
Martinsville, VA 500,000 6/1/98 978,000 Warehousing
(apparel)
Indianapolis, IN 650,000 04/30/97 1,404,000 Distribution
(licensed
apparel)
</TABLE>
Manufacturing equipment, substantially all of which is owned by the Company,
includes carding, spinning and knitting machines, jet-dye machinery, dryers,
cloth finishing machines, cutting and sewing equipment and automated
storage/retrieval equipment. This machinery is modern and kept in good repair.
The Company leases a fleet of trucks and tractor-trailers which are used for
transportation of raw materials and for interplant transportation of
semi-finished and finished products.
The Company's facilities and its manufacturing equipment are considered adequate
for its needs.
MANAGEMENT
BOARD OF DIRECTORS
The members of the Company's Board of Directors are listed below:
<TABLE>
<CAPTION>
NAME AGE DIRECTOR SINCE
<S> <C> <C>
Charles W. Davies, Jr. 46 1990
Lathan M. Ewers, Jr. 53 1993
John M. Franck 42 1984
William F. Franck 77 1950
J. Burness Frith 78 1978
Irving M. Groves, Jr. 65 1978
H. Richard Hunnicutt, Jr. 56 1981
F. Kenneth Iverson 69 1995
Bruce M. Jacobson 45 1992
Richard M. Simmons, Jr. 68 1973
John M. Tully 69 1964
</TABLE>
CHARLES W. DAVIES, JR., Chief Executive Officer of the Company since January
1995, was President and Chief Operating Officer of the Company from January 1991
to January 1995, and Executive Vice President from December 1989 to January
1991. From February 1988 through November 1989, he was President and Chief
Executive Officer of Signal Apparel Company in Chattanooga, Tennessee. From
March 1986 to February 1988, Mr. Davies was President of Little Cotton
Manufacturing Company in Wadesboro, North Carolina and from December 1984
through February 1986 was Senior Vice President of Fieldcrest-Cannon in
Kannapolis, North Carolina.
LATHAN M. EWERS, JR. has been a partner since 1976 with Hunton & Williams,
Richmond, Virginia, counsel to the Company.
27
<PAGE>
JOHN M. FRANCK, Chairman of the Board of Directors, was Chairman of the Board
and Chief Executive Officer of the Company from January 1991 to January 1995,
and served as President and Chief Operating Officer from November 1988 to
January 1991. Mr. Franck is a director of Piedmont Trust Bank, Martinsville,
Virginia. He is the son of William F. Franck.
WILLIAM F. FRANCK, Chairman Emeritus, retired December 31, 1993. He was Chairman
of the Board of Directors of the Company from 1984 to November 1988, and was its
Chief Executive Officer from 1952 to November 1988. Mr. Franck is a director of
Henry County Plywood Corporation, Martinsville, Virginia, a plywood
manufacturer. He is the father of John M. Franck.
J. BURNESS FRITH was Chairman of the Board of Directors of Frith Construction
Company, Inc., Martinsville, Virginia, from 1984 to 1993, when he retired.
IRVING M. GROVES, JR. retired as President, Chief Executive Officer and Chairman
of the Board of Piedmont BankGroup Incorporated, the parent of Piedmont Trust
Bank, Martinsville, Virginia in June 1994. Mr. Groves was President of Piedmont
Trust Bank, Martinsville, Virginia, from 1973 through December 1993, when he
retired from that position. Mr. Groves is a director of Hooker Furniture
Corporation, Martinsville, Virginia, a furniture manufacturing firm, and
Multitrade Group, Inc., a generator of steam energy.
H. RICHARD HUNNICUTT, JR. was Chairman of the Board and Chief Executive Officer
of the Company from November 1988 through December 1990, when he retired. He was
President and Chief Operating Officer from 1984 to 1988.
F. KENNETH IVERSON has been Chairman and Chief Executive Officer of Nucor
Corporation, a steel producer, since 1984. He is a director of Wal-Mart Stores
Inc. and Wachovia Corporation.
BRUCE M. JACOBSON has been a partner in Katz, Sapper & Miller, Indianapolis,
Indiana, certified public accountants, since 1977. In connection with the
Company's acquisition of Logo 7 on January 31, 1992 and the issuance of the
Series B Preferred Stock, the Company agreed that so long as the previous
shareholders of Logo 7 and their affiliates hold at least 3% of the voting
securities of the Company (on a fully-diluted basis), the Company will nominate
a designee of such shareholders for election to the Board. Mr. Jacobson is the
designee.
RICHARD M. SIMMONS, JR. is the retired Chairman of the Board of Virginia
Carolina Freight Lines, Inc., Martinsville, Virginia, a trucking firm. He served
as Chairman of that company from 1987 until 1992. He was a consultant to
American Furniture Company from 1987 to 1988, and was its President from 1961 to
1987 and its Chairman of the Board from 1974 to 1986. He is a director of
Piedmont BankGroup Incorporated, Piedmont Trust Bank and Dibrell Brothers, Inc.,
Danville, Virginia, leaf tobacco processors.
JOHN M. TULLY was Treasurer of the Company from 1975 until he retired in 1985.
EXECUTIVE OFFICERS OF THE COMPANY
The following information is furnished concerning the executive officers of the
Company.
<TABLE>
<CAPTION>
NAME AGE OFFICE
<S> <C> <C>
John M. Franck 42 Chairman of the Board
Charles W. Davies, Jr. 46 President and Chief Executive Officer
O. Randolph Rollins 52 Executive Vice President, General Counsel and Chief Financial Officer
Walter J. Caruba 47 Vice President -- Marketing and Sales
W. Jack Gardner, Jr. 51 Vice President -- Operations
B. Alvin Ratliff 49 Vice President and Service/Quality Coordinator
Don P. Shook 56 Vice President -- Administration
John J. Smith 52 Vice President -- Customer Service
Kevin W. Walsh 40 Vice President -- Finance and Treasurer
James M. Baker 64 Secretary
Suzanne H. Wood 35 Controller
</TABLE>
O. RANDOLPH ROLLINS became Executive Vice President and General Counsel in
October 1994 and became Chief Financial Officer in January 1995. Prior thereto,
Mr. Rollins was a partner with the law firm of McGuire, Woods, Battle & Boothe,
Richmond, Virginia, from 1973 to 1990 and from January 1994 to October 1994.
From 1990 to 28
<PAGE>
January 1994, Mr. Rollins served in the Cabinet of Virginia's Governor L.
Douglas Wilder, first as Deputy Secretary of Public Safety and from 1992 through
January 14, 1994 as Secretary of Public Safety of the Commonwealth of Virginia.
Mr. Rollins is the brother-in-law of John M. Franck and the son-in-law of
William F. Franck.
WALTER J. CARUBA became Vice President -- Marketing and Sales in September 1992.
He served as Vice President -- Distribution between October 1990 and September
1992. He served as General Manager -- Planning from November 1989 to October
1990 and was Director -- Production Control from December 1985 to November 1989.
W. JACK GARDNER, JR. became Vice President -- Operations in September 1994 and
served as General Manager -- Fabric Manufacturing from January 1988 until that
time.
B. ALVIN RATLIFF became Vice President and Service/Quality Coordinator in
February 1994 and served as Vice President -- Operations from December 1984
until that time.
DON P. SHOOK became Vice President -- Administration in January 1995 after
serving as Vice President -- Human and Financial Resources since January 1994.
He previously served as Vice President -- Finance and Administration from
December 1988 until January 1994. Prior thereto, he served as Vice President --
Finance from January 1987 to November 1988 and was Controller between December
1985 and January 1987.
JOHN J. SMITH became Vice President -- Customer Service in September 1992. Prior
thereto, he served as Vice President -- Sales and Marketing since December 1987
after serving as Director -- Corporate Planning since May 1987. He was
Manager -- Information Systems & Services between December 1985 and May 1987.
KEVIN W. WALSH was appointed Vice President -- Finance and Treasurer in
December 1994. In the six years prior to joining the Company, he was a vice
president and senior loan officer of Signet Bank.
JAMES M. BAKER became Secretary in January 1991. He also served as Treasurer
from January 1991 until January 1995 and as Director -- External Reporting from
August 1987 to January 1991. Between December 1985 and August 1987, he was
Director -- Budgets and Financial Reporting.
SUZANNE H. WOOD became Controller of the Company in October 1993 after joining
the Company in June 1993. In the ten years prior to joining the Company, she was
employed by Price Waterhouse LLP, most recently as Audit Senior Manager.
All terms of office expire concurrently with the meeting of directors
following the next annual meeting of stockholders at which the directors are
elected.
COMPENSATION OF DIRECTORS
Directors of the Company who are not full-time employees are paid a fee of
$2,500 for each fiscal quarter. In addition, they are paid $1,000 for each Board
meeting attended, $1,000 for each committee meeting attended that does not occur
on the same date as a Board meeting, and $500 for each committee meeting
attended that does occur on the same date as a Board meeting.
29
<PAGE>
EXECUTIVE COMPENSATION
The following table presents information relating to total compensation of the
Chief Executive Officer and the four next most highly compensated executive
officers of the Company during the fiscal year ended December 31, 1994.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
SECURITIES
ANNUAL COMPENSATION UNDERLYING
OTHER ANNUAL OPTIONS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1) (SHARES) COMPENSATION(2)
<S> <C> <C> <C> <C> <C> <C>
John M. Franck 1994 $240,000 $ -- $ -- 30,000 $ --
Chairman of the Board 1993 240,000 -- -- 15,000 --
1992 240,000 -- -- -- --
Charles W. Davies, Jr. 1994 246,541 -- -- 30,000 --
President and 1993 245,834 -- -- 165,000 --
Chief Executive Officer 1992 240,000 -- -- 15,000 --
B. Alvin Ratliff 1994 163,800 -- -- 10,000 --
Vice President and 1993 172,800 -- -- 23,000 --
Service/Quality Coordinator 1992 172,800 -- -- 15,000 --
John J. Smith 1994 146,400 5,636 -- 10,000 --
Vice President- 1993 146,400 -- 1,860 8,000 --
Customer Service 1992 146,400 -- 1,595 15,000 --
Don P. Shook 1994 144,000 5,543 -- 12,500 936
Vice President- 1993 144,000 -- -- 18,000 936
Administration 1992 144,000 -- -- 15,000 288
</TABLE>
(1) Country club dues and fees.
(2) Payment of excess life insurance premium.
The following tables present information concerning options to acquire Common
Stock of the Company granted to the Chief Executive Officer and the four next
most highly compensated executive officers of the Company and exercises of
options by such persons during the fiscal year ended December 31, 1994.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL
NUMBER OF % OF TOTAL REALIZABLE VALUE AT
SECURITIES OPTIONS ASSUMED ANNUAL
UNDERLYING GRANTED TO RATES OF STOCK PRICE
OPTIONS EMPLOYEES EXERCISE APPRECIATION
GRANTED IN FISCAL OR BASE EXPIRATION FOR OPTION TERM
NAME (SHARES) YEAR PRICE DATE 5% 10%
<S> <C> <C> <C> <C> <C> <C>
John M. Franck 30,000 7.5% $ 6.00 05/19/99 $ 49,731 $ 109,892
Charles W. Davies, Jr. 30,000 7.5 6.00 05/19/99 49,731 109,892
B. Alvin Ratliff 10,000 2.5 6.00 05/19/99 16,577 36,631
John J. Smith 10,000 2.5 6.00 05/19/99 16,577 36,631
Don P. Shook 12,500 3.1 6.00 05/19/99 20,721 45,788
</TABLE>
30
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION VALUE
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS AT FY-END IN-THE-MONEY OPTIONS AT
ACQUIRED VALUE (SHARES) FY-END
NAME ON EXCERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
<S> <C> <C> <C> <C> <C> <C>
John M. Franck -- -- 45,000 -- -- --
Charles W. Davies, Jr. -- -- 95,000 150,000 -- --
B. Alvin Ratliff -- -- 48,000 -- -- --
John J. Smith -- -- 33,000 -- -- --
Don P. Shook -- -- 45,500 -- -- --
</TABLE>
EMPLOYMENT CONTRACTS AND EMPLOYMENT CONTINUITY AGREEMENTS
The Company has entered into employment continuity agreements with John M.
Franck, Charles W. Davies, Jr., B. Alvin Ratliff, John J. Smith, and Don P.
Shook, which provide for their continued employment in the event of a change in
control of the Company and the payment of compensation and benefits if their
employment is terminated following a change in control. The Board of Directors
believes that these agreements will enable key employees to conduct the
Company's business with less concern for personal economic risk when faced with
a possible change in control. The Board believes the agreements also should
enhance the Company's ability to attract new key executives as needed.
The agreements define "change in control" as occurring when a person becomes the
owner of 20% or more of the Company's voting securities or when there is a
change in a majority of the members of the Board of Directors, direct or
indirect, as a result of a cash tender or exchange offer, a merger or other
business combination, a sale of assets, a contested election of directors or a
combination of such transactions. Upon a change in control, the Company agrees
to continue the employee's employment with responsibilities, compensation and
benefits identical to or greater than those prior to the change in control until
the earlier of the third anniversary following the change in control or the
employee's normal retirement date. If employment is terminated without cause by
the Company during this period, or if the employee voluntarily terminates
employment within six months after receiving lesser responsibilities,
compensation or benefits or after being relocated without his consent, and the
employee has made an offer to work that has been rejected by the Company, the
Company must pay the employee compensation as follows: (i) three times the
employee's annual base salary as of his termination date, (ii) three times the
employee's average incentive bonus payable for the two fiscal years prior to the
termination date, (iii) cash or property due as a result of exercise of stock
options, and (iv) amounts the employee is entitled to receive under the
Company's tax-qualified benefit plans and, at the employee's expense, health
care coverage under welfare plans. This compensation will be reduced, if
necessary, to assure that any payments would not be "excess parachute payments"
under the Internal Revenue Code, which imposes significant penalties on payments
under such severance agreements which equal or exceed 300% of an employee's
average annual compensation during the five most recent taxable years ending
prior to a change in control. The Company must pay all legal fees and expenses
incurred by the employee in seeking to obtain these benefits. All agreements
continue in effect from year to year unless the Company notifies the employee
before an anniversary date that the agreement will terminate. The Company has
entered into similar arrangements with other members of management.
31
<PAGE>
RETIREMENT PLAN
The Company maintains for the benefit of its eligible employees a defined
benefit pension plan qualified under section 401(a) of the Internal Revenue
Code. The following table illustrates annual retirement benefits payable under
the plan at the indicated final average compensation and credited service
levels, assuming retirement at age 65 in 1995.
<TABLE>
<CAPTION>
FINAL ANNUAL RETIREMENT BENEFITS PAYABLE FOR CONTINUOUS
AVERAGE SERVICE OF
COMPENSATION 10 YEARS 20 YEARS 30 YEARS 40 YEARS
<S> <C> <C> <C> <C>
$100,000 $ 10,380 $ 20,760 $ 31,140 $ 36,140
150,000 16,380 32,760 49,140 56,640
200,000 22,380 44,760 67,140 77,140
250,000 28,380 56,760 85,140 97,640
300,000 34,380 68,760 103,140 118,140
</TABLE>
Benefits are paid to plan participants based on their final average compensation
(as limited according to federal tax laws), years of credited service with the
Company, and the amount of covered compensation (as determined by Social
Security). Benefits under the Retirement Plan are not subject to any deduction
for Social Security or other offset amounts. Under current federal tax law, in
1995 compensation in excess of $150,000 may not be taken into account for
purposes of accruing benefits under the Retirement Plan.
Generally, on the occurrence of a "change in control," all plan participants
will immediately become fully vested (regardless of their credited service) in
any accrued benefits under the plan. All assets of the plan, including any
assets in excess of the present value of the plan's liabilities, will be
allocated among the plan participants as additional nonforfeitable benefits.
This plan defines a "change in control" as occurring when a person becomes the
owner of more than 20% of the Company's voting securities or when there is a
change in the majority of the Board of Directors, direct or indirect, as a
result of a cash tender offer or exchange offer, a merger other than a business
combination, a sale of assets, a contested election of directors or a
combination of such transactions.
The number of credited years of service as of December 31, 1994 for each person
named in the Summary Compensation Table are as follows: John M. Franck -- 18
years, Charles W. Davies, Jr. -- 18 years, B. Alvin Ratliff -- 26 years, John J.
Smith -- 10 years and Don P. Shook -- 19 years.
The Company maintains a supplemental benefit plan to provide key management
personnel who have satisfied the eligibility requirements with supplemental
retirement benefits, including a retirement benefit which, when aggregated with
the benefits available under the retirement plan, is equivalent to 50% of their
final average earnings for 30 years of service. The eligibility requirements
include being 100% vested under the retirement plan. The majority of this
benefit will be funded through the retirement plan, with the balance being
funded by the Company through a supplemental nonqualified program which is
funded through the purchase of life insurance policies on each covered
individual. Benefits under the supplemental benefit plan are fully vested after
five years of service. The estimated annual benefits under the supplemental
benefit plan for each officer named in the Summary Compensation Table as of
December 31, 1994 are as follows: John M. Franck -- $41,459, Charles W. Davies,
Jr. -- $41,729, B. Alvin Ratliff -- $52,332, John J. Smith -- $12,605 and Don P.
Shook -- $30,408.
EXECUTIVE COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
John M. Franck, Chairman of the Board, is a director of Piedmont Trust Bank and
serves on the Bank Board's Asset/Liability Management, Audit/Code of Conduct,
and Corporate Benefit and Compensation committees. Irving M. Groves, Jr., a
director of Tultex, was President, Chief Executive Officer and Chairman of the
Board of Piedmont BankGroup, Incorporated until he retired from these positions
in March 1994.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Frith Construction Company, Inc., of which J. Burness Frith, a director of
the Company, was Honorary Chairman, a director and a principal stockholder until
September 1994, performed construction work for the Company during fiscal 1994,
1993 and 1992. The aggregate amount paid to Frith Construction Company, Inc. by
the Company for such construction work (at cost plus a fixed percentage of cost)
during fiscal 1994, 1993 and 1992 was $131,749, $427,263 and $469,352,
respectively. Frith Construction Company, Inc. continues to perform routine
construction work for the Company.
32
<PAGE>
During fiscal 1994, Piedmont Trust Bank performed routine banking services for
the Company. John M. Franck and Richard M. Simmons, Jr. are two of the 13
current members of the Board of Directors of Piedmont. Piedmont Trust Bank is a
subsidiary of Piedmont BankGroup Incorporated. Mr. Simmons is one of the 12
current members of the Board of Directors of Piedmont BankGroup Incorporated.
Multitrade Group, Inc., of which Mr. Frith and Mr. Groves, are shareholders and
of which Mr. Groves is a director, provided the Company with steam energy in
fiscal 1994, 1993 and 1992 for which it was paid $4,039,895, $3,989,117 and
$4,299,061, respectively.
Virginia Carolina Freight Lines, Inc., of which Mr. Simmons was a principal
shareholder and Chairman of the Board, provided trucking services to the Company
in fiscal 1992 for which it was paid $114,946.
The Company believes that the terms of the transactions described above are
comparable to terms available for similar transactions with entities
unaffiliated with its officers and directors.
Lathan M. Ewers, Jr. is a partner with the law firm of Hunton & Williams,
Richmond, Virginia, counsel to the Company.
PRINCIPAL SHAREHOLDERS AND SECURITY OWNERSHIP OF MANAGEMENT
As of December 31, 1994, the Company had outstanding 29,806,793 shares of
Common Stock, par value $1.00 per share ("Common Stock"), 1,975 shares of 5%
Cumulative Preferred Stock, par value $100 per share ("5% Preferred Stock"), and
150,000 shares of Cumulative Convertible Preferred Stock, $7.50 Series B, no par
value ("Series B Preferred Stock"). The Common Stock and the Series B Preferred
Stock have one vote per share on all matters. The 5% Preferred Stock has no
voting rights.
The tables below present certain information as of February 27, 1995 regarding
beneficial ownership of the Common Stock and the Series B Preferred Stock by (i)
each of the named executive officers, (ii) each director, (iii) all directors
and executive officers as a group and (iv) 5% holders of such securities. None
of the 5% Preferred Stock is beneficially owned by the executive officers and
directors of the Company.
COMMON STOCK
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP OF SHARES
SOLE VOTING PERCENT
AND INVESTMENT OF CLASS
NAME OF BENEFICIAL OWNER(1) POWER(2) OTHER(3) OWNED
<S> <C> <C> <C>
Charles W. Davies, Jr. 135,106 142 *
Lathan M. Ewers, Jr. 5,025 2,425 *
John M. Franck 774,543 126,233 3.02
William F. Franck 923,902 175,231 3.69
J. Burness Frith 380,000 1,200 1.28
Irving M. Groves, Jr. 43,998 44,386 *
H. Richard Hunnicutt, Jr. 35,000 -- *
Kenneth F. Iverson -- -- --
Bruce M. Jacobson 2,000 -- *
Richard M. Simmons, Jr. 176,121 615 *
John M. Tully 243,524 81,696 1.09
B. Alvin Ratliff 74,267 -- *
John J. Smith 43,620 47 *
Don P. Shook 76,471 18,200 *
All executive officers and directors
as a group
(20 persons including those named
above) 3,108,475 1,025,200 13.88
Sound Shore Management, Inc. 1,772,600(4) -- 5.95(4)
8 Sound Shore Drive
Greenwich, Connecticut
</TABLE>
*Less than 1%
33
<PAGE>
<PAGE>
(1) Except as set forth in the table, no person or group is known by the Company
to own more than 5% of the Common Stock.
(2) Includes shares that may be acquired by certain of the Company's officers
within 60 days under the Company's stock option plans.
(3) Includes shares (a) owned by or with certain relatives; (b) held in various
fiduciary capacities; and (c) held by certain corporations.
(4) As reported in Schedule 13G filed by Sound Shore Management, Inc. dated
December 31, 1993.
SERIES B PREFERRED STOCK (1)
<TABLE>
<CAPTION>
BENEFICIAL PERCENT
OWNERSHIP OF CLASS
NAME OF BENEFICIAL OWNER (2) OF SHARES OWNED
<S> <C> <C>
Simon Trust Partnership No. 3 37,500 25
115 West Washington Street
Indianapolis, IN 46204
Herbert Simon Trust No. 3 37,500 25
115 West Washington Street
Indianapolis, IN 46204
LG Sale Corporation, Inc. 75,000 50
115 West Washington Street
Indianapolis, IN 46204
</TABLE>
(1) The 150,000 outstanding shares of Series B Preferred Stock are convertible
into 1,496,260 shares of Common Stock.
(2) No director, executive officer or other person beneficially owns any shares
of the Series B Preferred Stock. Mr. Bruce M. Jacobson is the designee of
the holders of the Series B Preferred Stock on the Company's Board of
Directors. Mr. Jacobson has no voting or investment power with respect to
the Series B Preferred Stock and disclaims beneficial ownership of such
shares.
34
<PAGE>
<PAGE>
DESCRIPTION OF THE NOTES
The Notes are to be issued under an Indenture, to be dated as of ,
1995 (the "Indenture"), among the Company, the Guarantors and First Union
National Bank of Virginia, as Trustee (the "Trustee"). The Indenture is subject
to and governed by the Trust Indenture Act of 1939, as amended (the "Trust
Indenture Act"). The statements under this caption relating to the Notes, the
Guarantees and the Indenture are summaries and do not purport to be complete,
and where reference is made to particular provisions of the Indenture, such
provisions, including the definitions of certain terms, are incorporated by
reference as a part of such summaries or terms, which are qualified in their
entirety by such reference. A copy of the proposed form of Indenture has been
filed with the Commission as an exhibit to the Registration Statement of which
this Prospectus is a part.
GENERAL
The Notes will be general unsecured obligations of the Company, will be
limited to $110 million aggregate principal amount and will rank PARI PASSU in
right of payment with all other indebtedness of the Company that is not, by its
terms, expressly subordinated in right of payment to the Notes. The Notes will
be guaranteed on a joint and several basis by each of the Guarantors pursuant to
the Guarantees described below. The Guarantees will be general unsecured
obligations of the Guarantors and will rank PARI PASSU in right of payment with
all other indebtedness of the Guarantors that is not, by its terms, expressly
subordinated in right of payment to the Guarantees. At December 31, 1994, as
adjusted to give effect to the transactions described under "Use of Proceeds and
Refinancing," the total indebtedness of the Company would have been
approximately $223.7 million, none of which would have been subordinated to the
Notes. Secured creditors of the Company or any Guarantor will have a claim on
the assets which secure the obligations of the Company or such Guarantor, as the
case may be, prior to claims of holders of the Notes against those assets. At
December 31, 1994, as adjusted to give effect to the transactions described
under "Use of Proceeds and Refinancing," the Company and the Guarantors had no
secured indebtedness.
The Notes will mature on , 2005 and will bear interest at the rate per
annum shown on the front cover of this Prospectus from , 1995 or from the
most recent interest payment date to which interest has been paid or provided
for. Interest will be payable semi-annually on June 15 and December 15 of each
year, commencing June 15, 1995, to the Person in whose name a Note is registered
at the close of business on the preceding June 1 or December 1 (each, a "Record
Date"), as the case may be. Interest on the Notes will be computed on the basis
of a 360-day year of twelve 30-day months. Holders must surrender the Notes to
the paying agent for the Notes to collect principal payments. The Company will
pay principal and interest by check and may mail interest checks to a Holder's
registered address.
The Notes will be issued only in fully registered form, without coupons, in
denominations of $1,000 and any integral multiple thereof. No service charge
will be made for any registration of transfer or exchange of Notes, but the
Company may require payment of a sum sufficient to cover any tax or other
governmental charge payable in connection therewith.
Initially, the Trustee will act as paying agent and registrar for the Notes. The
Notes may be presented for registration of transfer and exchange at the offices
of the registrar for the Notes.
REDEMPTION
The Notes will be subject to redemption, at the option of the Company, in whole
or in part, at any time on or after , 2000 and prior to maturity, upon not
less than 30 nor more than 60 days' notice mailed to each Holder of Notes to be
redeemed at his address appearing in the register for the Notes, in amounts of
$1,000 or an integral multiple of $1,000, at the following redemption prices
(expressed as percentages of principal amount) plus accrued interest to but
excluding the date fixed for redemption (subject to the right of Holders of
record on the relevant Record Date to receive interest due on an interest
payment date that is on or prior to the date fixed for redemption), if redeemed
during the 12-month period beginning of the years indicated:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
<S> <C>
%
</TABLE>
35
<PAGE>
<PAGE>
If less than all the Notes are to be redeemed, the Trustee shall select, in such
manner as it shall deem fair and appropriate, the particular Notes to be
redeemed or any portion thereof that is an integral multiple of $1,000.
In addition, prior to , 1998, the Company may redeem up to
approximately 32% of the principal amount of the Notes with the cash proceeds
received by the Company from a public offering of capital stock of the Company
(other than Disqualified Stock), at a redemption price (expressed as a
percentage of the principal amount) of % of the principal amount thereof,
plus accrued and unpaid interest to the date fixed for redemption; PROVIDED,
HOWEVER, that at least $75 million in aggregate principal amount of the Notes
remains outstanding immediately after any such redemption.
The Notes will not have the benefit of any sinking fund.
THE GUARANTEES
Each of the Guarantors will unconditionally guarantee on a joint and several
basis all of the Company's obligations under the Notes, including its
obligations to pay principal, premium, if any, and interest with respect to the
Notes. The obligations of each Guarantor are limited to the maximum amount
which, after giving effect to all other contingent and fixed liabilities of such
Guarantor and after giving effect to any collections from or payments made by or
on behalf of any other Guarantor in respect of the obligations of such other
Guarantor under its Guarantee or pursuant to its contribution obligations under
the Indenture, will result in the obligations of such Guarantor under the
Guarantee not constituting a fraudulent conveyance or fraudulent transfer under
federal or state law. Each Guarantor that makes a payment or distribution under
a Guarantee shall be entitled to a contribution from each other Guarantor in an
amount PRO RATA, based on the net assets of each Guarantor determined in
accordance with GAAP. Except as provided in "Covenants" below, the Company is
not restricted from selling or otherwise disposing of any of the Guarantors.
The Indenture will provide that each Subsidiary of the Company in existence
on the Issue Date and each Material Subsidiary whether formed or acquired after
the Issue Date will become a Guarantor, PROVIDED that, any Material Subsidiary
acquired after the Issue Date which is prohibited from entering into a Guarantee
pursuant to restrictions contained in any debt instrument or other agreement in
existence at the time such Material Subsidiary was so acquired and not entered
into in anticipation or contemplation of such acquisition shall not be required
to become a Guarantor so long as any such restriction is in existence and to the
extent of any such restriction.
The Indenture provides that if the Notes are defeased in accordance with the
terms of the Indenture, or if all or substantially all of the assets of any
Guarantor or all of the capital stock of any Guarantor is sold (including by
issuance or otherwise) by the Company or any of its Subsidiaries in a
transaction constituting an Asset Disposition, and if (x) the Net Available
Proceeds from such Asset Disposition are used in accordance with the covenant
" -- Limitation on Certain Asset Dispositions" or (y) the Company delivers to
the Trustee an Officers' Certificate to the effect that the Net Available
Proceeds from such Asset Disposition shall be used in accordance with the
covenant " -- Limitation on Certain Asset Dispositions" and within the time
limits specified by such covenant, then such Guarantor (in the event of a sale
or other disposition of all of the capital stock of such Guarantor) or the
corporation acquiring such assets (in the event of a sale or other disposition
of all or substantially all of the assets of such Guarantor) shall be released
and discharged of its Guarantee obligations.
Separate financial statements of the Guarantors are not included herein because
such Guarantors are jointly and severally liable with respect to the Company's
obligations pursuant to the Notes, and the aggregate net assets, earnings and
equity of the Guarantors and the Company are substantially equivalent to the net
assets, earnings and equity of the Company on a consolidated basis.
36
<PAGE>
<PAGE>
COVENANTS
The Indenture contains, among others, the following covenants:
LIMITATION ON INDEBTEDNESS
The Indenture will provide that the Company will not, and will not permit any
of its Subsidiaries to, Incur any Indebtedness except, subject to the provisions
set forth below under " -- Additional Limitation on Subsidiary Indebtedness":
(i) Indebtedness of the Company or its Subsidiaries, if immediately after giving
effect to the Incurrence of such Indebtedness and the receipt and application of
the net proceeds thereof, the Consolidated Cash Flow Ratio of the Company for
the four full fiscal quarters for which quarterly or annual financial statements
are available next preceding the Incurrence of such Indebtedness, calculated on
a pro forma basis as if such Indebtedness had been Incurred at the beginning of
such four full fiscal quarters, would be greater than 2.00 to 1 if such
Indebtedness is Incurred on or before December 31, 1997 and 2.25 to 1 if such
Indebtedness is Incurred after December 31, 1997; (ii) Indebtedness of the
Company, and guarantees of such Indebtedness by any Guarantor, Incurred under
the Senior Credit Facility in an aggregate principal amount at any one time not
to exceed the greater of (x) $225 million or (y) the sum of (A) 80% of Eligible
Accounts Receivable and (B) 65% of Eligible Inventory; (iii) Indebtedness owed
by the Company to any Wholly Owned Subsidiary of the Company (PROVIDED that such
Indebtedness is at all times held by a Person which is a Wholly Owned Subsidiary
of the Company) or Indebtedness owed by a Subsidiary of the Company to the
Company or a Wholly Owned Subsidiary of the Company (PROVIDED that such
Indebtedness is at all times held by the Company or a Person which is a Wholly
Owned Subsidiary of the Company); PROVIDED, HOWEVER, upon either (x) the
transfer or other disposition by such Wholly Owned Subsidiary or the Company of
any Indebtedness so permitted under this clause (iii) to a Person other than the
Company or another Wholly Owned Subsidiary of the Company or (y) the issuance
(other than directors' qualifying shares), sale, transfer or other disposition
of shares of Capital Stock or other ownership interests (including by
consolidation or merger) of such Wholly Owned Subsidiary to a Person other than
the Company or another such Wholly Owned Subsidiary of the Company, the
provisions of this clause (iii) shall no longer be applicable to such
Indebtedness and such Indebtedness shall be deemed to have been Incurred at the
time of any such issuance, sale, transfer or other disposition, as the case may
be; (iv) Indebtedness Incurred by a Person prior to the time (x) such Person
becomes a Subsidiary of the Company, (y) such Person merges into or consolidates
with a Subsidiary of the Company or (z) another Subsidiary of the Company merges
into or consolidates with such Person (in a transaction in which such Person
becomes a Subsidiary of the Company), which Indebtedness was not Incurred in
anticipation or contemplation of such transaction and was outstanding prior to
such transaction; (v) Indebtedness of the Company or its Subsidiaries under any
interest rate or currency swap agreement to the extent entered into to hedge any
other Indebtedness permitted under the Indenture; (vi) Capital Lease Obligations
of the Company or its Subsidiaries Incurred with respect to a Sale and Leaseback
Transaction which was made in accordance with the provisions of the Indenture
described under " -- Limitation on Sale and Leaseback Transactions"; (vii)
Indebtedness Incurred to renew, extend, refinance or refund (collectively for
purposes of this clause (vii) to "refund") any Indebtedness outstanding on the
Issue Date and Indebtedness Incurred under the prior clause (i) or the Notes;
PROVIDED, HOWEVER, that (x) such Indebtedness does not exceed the principal
amount of Indebtedness so refunded plus the amount of any premium required to be
paid in connection with such refunding pursuant to the terms of the Indebtedness
refunded or the amount of any premium reasonably determined by the Company as
necessary to accomplish such refunding by means of a tender offer, exchange
offer, or privately negotiated repurchase, plus the expenses of the Company or
such Subsidiary Incurred in connection therewith and (y)(A) in the case of any
refunding of Indebtedness which is PARI PASSU with the Notes, such refunding
Indebtedness is made PARI PASSU with or subordinate in right of payment to the
Notes, and, in the case of any refunding of Indebtedness which is subordinate in
right of payment to the Notes, such refunding Indebtedness is subordinate in
right of payment to the Notes on terms no less favorable to the Holders then
those contained in the Indebtedness being refunded and (B) in either case, the
refunding Indebtedness by its terms, or by the terms of any agreement or
instrument pursuant to which such Indebtedness is issued, does not have an
Average Life that is less than the remaining Average Life of the Indebtedness
being refunded and does not permit redemption or other retirement (including
pursuant to any required offer to purchase to be made by the Company or a
Subsidiary of the Company) of such Indebtedness at the option of the holder
thereof prior to the final stated maturity of the Indebtedness being refunded,
other than a redemption or other retirement at the option of the holder of such
Indebtedness (including pursuant to a required offer to purchase made by the
Company or a Subsidiary of the Company) which is conditioned upon a change of
control of the Company pursuant to provisions substantially 37 <PAGE>
<PAGE> similar
to those contained in the Indenture described under " -- Change of Control"
below; (viii) Indebtedness of the Company or its Subsidiaries Incurred for the
purpose of financing all or any part of the purchase price or the cost of
construction or improvement of any property PROVIDED that the aggregate
principal amount of such Indebtedness does not exceed 100% of such purchase
price or cost and any Lien associated with such Indebtedness complies with
clause (iv) of the " -- Limitation on Liens" covenant; (ix) Indebtedness of the
Company or its Subsidiaries, not otherwise permitted to be Incurred pursuant to
clauses (i) through (viii) above, which, together with any other outstanding
Indebtedness Incurred pursuant to this clause (ix), has an aggregate principal
amount not in excess of $10 million at any time outstanding; and (x)
Indebtedness of the Company and its Subsidiaries under the Notes and the
Guarantees.
ADDITIONAL LIMITATION ON SUBSIDIARY INDEBTEDNESS
The Indenture will provide that, notwithstanding the provisions of the
Indenture described under " -- Limitation on Indebtedness," the Company will not
permit any of its Subsidiaries to Incur any Indebtedness (other than the
guarantee of Indebtedness under the Senior Credit Facility) in an amount which,
when aggregated with (A) all Indebtedness (other than any Indebtedness included
in the following clause (B) or (C)) secured by Liens permitted by the provisions
of the Indenture described in clause (viii) under " -- Limitation on Liens" and
then outstanding, (B) all Capital Lease Obligations of the Company and its
Subsidiaries Incurred in compliance with the provisions of the Indenture
described in " -- Limitation on Indebtedness" and then outstanding, and (C) all
other Indebtedness of Subsidiaries of the Company (other than the guarantee of
Indebtedness under the Senior Credit Facility) Incurred in compliance with " --
Limitation on Indebtedness" and then outstanding, would exceed 10% of
Consolidated Net Tangible Assets. LIMITATION ON RESTRICTED PAYMENTS The
Indenture will provide that the Company will not, and will not permit any of its
Subsidiaries to, (i) directly or indirectly, declare or pay any dividend, or
make any distribution of any kind or character (whether in cash, property or
securities), in respect of any class of its Capital Stock or to the holders
thereof, excluding any (x) dividends or distributions payable solely in shares
of its Capital Stock (other than Disqualified Stock) or in options, warrants or
other rights to acquire its Capital Stock (other than Disqualified Stock), or
(y) in the case of any Subsidiary of the Company, dividends or distributions
payable to the Company or a Subsidiary of the Company, (ii) directly or
indirectly, purchase, redeem, or otherwise acquire or retire for value shares of
Capital Stock of the Company or any of its Subsidiaries, any options, warrants
or rights to purchase or acquire shares of Capital Stock of the Company or any
of its Subsidiaries or any securities convertible or exchangeable into shares of
Capital Stock of the Company or any of its Subsidiaries, excluding any such
shares of Capital Stock, options, warrants, rights or securities which are owned
by the Company or a Subsidiary of the Company, (iii) make any Investment in
(other than a Permitted Investment), or payment on a guarantee of any obligation
of, any Person, other than the Company or a Wholly Owned Subsidiary of the
Company, or (iv) redeem, defease, repurchase, retire or otherwise acquire or
retire for value, prior to any scheduled maturity, repayment or sinking fund
payment, Indebtedness which is subordinate in right of payment to the Notes
(each of clauses (i) through (iv) being a "Restricted Payment") if at the time
thereof: (1) an Event of Default, or an event that with the passing of time or
giving of notice, or both, would constitute an Event of Default, shall have
occurred and is continuing, or (2) upon giving effect to such Restricted
Payment, the Company could not incur at least $1.00 of additional Indebtedness
pursuant to the terms of the Indenture described in clause (i) of " --
Limitation on Indebtedness" above, or (3) upon giving effect to such Restricted
Payment, the aggregate of all Restricted Payments made on or after the Issue
Date exceeds the sum of: (a) 50% of cumulative Consolidated Net Income of the
Company (or, in the case Consolidated Net Income of the Company shall be
negative, less 100% of such deficit) since the end of the fiscal quarter in
which the Issue Date occurs through the last day of the fiscal quarter for which
financial statements are available; plus (b) 100% of the aggregate net proceeds
received after the Issue Date, including the fair market value of property other
than cash (determined in good faith by the Board of Directors of the Company as
evidenced by a resolution of such Board of Directors filed with the Trustee),
from the issuance of Capital Stock (other than Disqualified Stock) of the
Company and warrants, rights or options on Capital Stock (other than
Disqualified Stock) of the Company and the principal amount of Indebtedness that
has been converted into or exchanged for Capital Stock (other than Disqualified
Stock) of the Company which Indebtedness was incurred after the Issue Date; plus
(c) in the case of the disposition or repayment of any Investment constituting a
Restricted Payment made after the Issue Date (other than any Investment made
pursuant to clause (vi) of the 38
<PAGE>
following paragraph), an amount equal to the lesser of the return of capital
with respect to such Investment and the cost of such Investment, in either case,
less the cost of the disposition of such Investment, PROVIDED that at the time
any such Investment is made the Company delivers to the Trustee a resolution of
its Board of Directors to the effect that, for purposes of this " -- Limitation
on Restricted Payments" covenant, such Investment constitutes a Restricted
Payment made after the Issue Date (other than an Investment made pursuant to
clause (vi) of the following paragraph); plus (d) $4 million.
The foregoing provision will not be violated by (i) reason of any dividend on
any class of Capital Stock of the Company or any Subsidiary of the Company, paid
within 60 days after the declaration thereof if, on the date when the dividend
was declared, the Company or such Subsidiary, as the case may be, could have
paid such dividend in accordance with the provisions of the Indenture, (ii) the
renewal, extension, refunding or refinancing of any Indebtedness otherwise
permitted pursuant to the terms of the Indenture described in clause (vii) of "
- -- Limitation on Indebtedness," (iii) the exchange or conversion of any
Indebtedness of the Company or any Subsidiary of the Company for or into Capital
Stock of the Company (other than Disqualified Stock of the Company), (iv) any
payments, loans or other advances made pursuant to any employee benefit plans
(including plans for the benefit of directors) or employment agreements or other
compensation arrangements, in each case as approved by the Board of Directors of
the Company in its good faith judgment evidenced by a resolution of such Board
of Directors filed with the Trustee, (v) the redemption of the Company's rights
issued pursuant to the Rights Agreement dated as of March 20, 1990, between the
Company and Sovran Bank, N.A., as Rights Agent, as in existence on the Issue
Date or (vi) so long as no Default or Event of Default has occurred and is
continuing, additional Investments constituting Restricted Payments in an
aggregate outstanding amount (valued at the cost thereof) not to exceed at any
time 5% of Consolidated Net Tangible Assets. Each Restricted Payment described
in clauses (i), (iv) and (v) of the previous sentence shall be taken into
account for purposes of computing the aggregate amount of all Restricted
Payments pursuant to clause (3) above.
LIMITATIONS CONCERNING DISTRIBUTIONS AND TRANSFERS BY SUBSIDIARIES
The Indenture will provide that the Company will not, and will not permit any of
its Subsidiaries to, directly or indirectly, create or otherwise cause or suffer
to exist any consensual encumbrance or restriction on the ability of any
Subsidiary of the Company (i) to pay, directly or indirectly, dividends or make
any other distributions in respect of its Capital Stock or pay any Indebtedness
or other obligation owed to the Company or any Subsidiary of the Company, (ii)
to make loans or advances to the Company or any Subsidiary of the Company or
(iii) to transfer any of its property or assets to the Company or any Subsidiary
of the Company except for such encumbrances or restrictions existing under or by
reason of (a) any agreement in effect on the Issue Date, (b) an agreement
relating to any Indebtedness Incurred by such Subsidiary prior to the date on
which such Subsidiary was acquired by the Company and outstanding on such date
and not Incurred in anticipation or contemplation of becoming a Subsidiary and
provided such encumbrance or restriction shall not apply to any assets of the
Company or its Subsidiaries other than such Subsidiary, (c) customary provisions
contained in an agreement which has been entered into for the sale or
disposition of all or substantially all of the Capital Stock or assets of such
Subsidiary, or (d) an agreement effecting a renewal, exchange, refunding or
extension of Indebtedness incurred pursuant to an agreement referred to in
clause (a) or (b) above; PROVIDED, HOWEVER, that the provisions contained in
such renewal, exchange, refunding or extension agreement relating to such
encumbrance or restriction are no more restrictive in any material respect than
the provisions contained in the agreement the subject thereof in the reasonable
judgment of the Board of Directors of the Company as evidenced by a resolution
of such Board of Directors filed with the Trustee.
LIMITATION ON LIENS
The Indenture will provide that the Company will not, and will not permit any
of its Subsidiaries to, Incur any Lien on or with respect to any property or
assets of the Company or any Subsidiary of the Company owned on the Issue Date
or thereafter acquired to secure Indebtedness without making, or causing such
Subsidiary to make, effective provision for securing the Notes (and, if the
Company shall so determine, any other Indebtedness of the Company or such
Subsidiary, including Indebtedness which is subordinate in right of payment to
the Notes, PROVIDED, that Liens securing the Notes and any Indebtedness PARI
PASSU with the Notes are senior to such Liens securing such subordinated
Indebtedness) equally and ratably with such Indebtedness or, in the event such
Indebtedness is subordinate in right of payment to the Notes, prior to such
Indebtedness, as to such property or assets for so long as such Indebtedness
shall be so secured. The foregoing restrictions shall not apply to (i) Liens in
respect 39
<PAGE>
of Indebtedness existing on the Issue Date; (ii) Liens securing only the Notes;
(iii) Liens in favor of the Company; (iv) Liens to secure Indebtedness Incurred
for the purpose of financing all or any part of the purchase price or the cost
of construction or improvement of the property subject to such Liens; PROVIDED
that (a) the aggregate principal amount of any Indebtedness secured by such a
Lien does not exceed 100% of such purchase price or cost, (b) such Lien does not
extend to or cover any other property other than such item of property and any
improvements on such item, (c) the Indebtedness secured by such Lien is incurred
by the Company or its Subsidiary within 180 days of the acquisition,
construction or improvement of such property and (d) the incurrence of such
Indebtedness is permitted by the provisions of the Indenture described under
" -- Limitation on Indebtedness" and " -- Additional Limitation on Subsidiary
Indebtedness"; (v) Liens on property existing immediately prior to the time of
acquisition thereof (and not created in anticipation or contemplation of the
financing of such acquisition); (vi) Liens on property of a Person existing at
the time such Person is merged with or into or consolidated with the Company or
any Subsidiary of the Company (and not created in anticipation or contemplation
thereof); (vii) Liens on property of the Company or any Subsidiary of the
Company in favor of the United States of America, any state thereof, or any
instrumentality of either to secure payments pursuant to any contract or
statute; (viii) Liens securing an aggregate principal amount of Indebtedness at
any one time outstanding which, when taken together with (A) all Capital Lease
Obligations of the Company and its Subsidiaries Incurred in compliance with
" -- Limitation on Indebtedness" and " -- Additional Limitation on Subsidiary
Indebtedness" and then outstanding and (B) all other Indebtedness of
Subsidiaries of the Company (other than the guarantee of Indebtedness under the
Senior Credit Facility) Incurred in compliance with the provisions of the
Indenture described under " -- Limitation on Indebtedness" and " -- Additional
Limitation on Subsidiary Indebtedness" and then outstanding would not exceed 10%
of Consolidated Net Tangible Assets; and (ix) Liens to secure Indebtedness
Incurred to extend, renew, refinance or refund (or successive extensions,
renewals, refinancings or refundings), in whole or in part, any Indebtedness
secured by Liens referred to in the foregoing clause (i) so long as such Lien
does not extend to any other property and the principal amount of Indebtedness
so secured is not increased except for the amount of any premium required to be
paid in connection with such refinancing pursuant to the terms of the
Indebtedness refinanced or the amount of any premium reasonably determined by
the Company as necessary to accomplish such refinancing by means of a tender
offer, exchange offer or privately negotiated repurchase, plus the expenses of
the Company or such Subsidiary incurred in connection with such refinancing.
LIMITATION ON CERTAIN ASSET DISPOSITIONS
The Indenture will provide that the Company will not, and will not permit any
of its Subsidiaries to, make one or more Asset Dispositions for aggregate
consideration of, or in respect of assets having an aggregate fair market value
of, $5 million or more in any 12-month period, unless: (i) the Company or the
Subsidiary, as the case may be, receives consideration for such Asset
Disposition at least equal to the fair market value of the assets sold or
disposed of as determined by the Board of Directors of the Company in good faith
and evidenced by a resolution of such Board of Directors filed with the Trustee;
(ii) not less than 75% of the consideration for the disposition consists of cash
or readily marketable cash equivalents or the assumption of Indebtedness of the
Company or such Subsidiary or other obligations relating to such assets (and
release of the Company or such Subsidiary from all liability on the Indebtedness
or other obligations assumed); and (iii) all Net Available Proceeds, less any
amounts invested within 360 days of such Asset Disposition in assets related to
the business of the Company (including the Capital Stock of another Person
(other than the Company or any Person that is a Subsidiary of the Company
immediately prior to such investment), PROVIDED, that immediately after giving
effect to any such investment (and not prior thereto) such Person shall be a
Subsidiary of the Company), are applied either (A) to an Offer to Purchase
outstanding Notes at 100% of their principal amount plus accrued interest to the
Purchase Date or (B) to the permanent reduction and repayment of Indebtedness
then outstanding under the Senior Credit Facility, to the repayment of other
Indebtedness that is not subordinated in right of payment to the Notes and to
the purchase of Notes pursuant to an Offer to Purchase outstanding Notes at 100%
of their principal amount plus accrued interest to the date of purchase,
PROVIDED, that (x) any Net Available Proceeds not applied to the repayment of
Indebtedness under the Senior Credit Facility or other Indebtedness not
subordinated in right of payment to the Notes in accordance with subclause (B)
of this clause (iii) shall be added to the Net Available Proceeds to be used for
an Offer to Purchase outstanding Notes and (y) the Company may defer making any
Offer to Purchase outstanding Notes until there are aggregate unutilized Net
Available Proceeds equal to or in excess of $5 million resulting from one or
more Asset Dispositions (at which time, the entire unutilized Net Available
Proceeds, and not just the amount in excess of $5 million, shall be applied as
required pursuant to this paragraph). Any repayment of Indebtedness in
accordance with the previous sentence shall be made PRO RATA, based on the
principal amount 40
<PAGE>
(or, in the case of Indebtedness having unamortized discount, the accreted value
thereof) of such Indebtedness outstanding. Any remaining Net Available Proceeds
following the completion of the Offer to Purchase may be used by the Company for
any other purpose (subject to the other provisions of the Indenture) and the
amount of Net Available Proceeds then required to be otherwise applied in
accordance with this covenant shall be reset to zero, subject to any subsequent
Asset Disposition. These provisions will not apply to a transaction consummated
in compliance with the provisions of the Indenture described under " -- Mergers,
Consolidations and Certain Sales of Assets" and " -- Limitation on Sale and
Leaseback Transactions" below.
In the event that the Company makes an Offer to Purchase the Notes, the Company
intends to comply with any applicable securities laws and regulations, including
any applicable requirements of Section 14(e) of, and Rule 14e-1 under, the
Exchange Act and any violation of the provisions of the Indenture relating to
such Offer to Purchase occurring as a result of such compliance shall not be
deemed an Event of Default or an event that with the passing of time or giving
of notice, or both, would constitute an Event of Default.
LIMITATION ON SALE AND LEASEBACK TRANSACTIONS
The Indenture will provide that the Company will not, and will not permit any
of its Subsidiaries to, enter into any Sale and Leaseback Transaction (except
for a period not exceeding 30 months) unless the Company or such Subsidiary, as
the case may be, applies the net proceeds of the property sold pursuant to the
Sale and Leaseback Transaction as if such net proceeds were Net Available
Proceeds subject to disposition as provided above under " -- Limitation on
Certain Asset Dispositions."
LIMITATION ON ISSUANCE AND SALE OF CAPITAL STOCK OF SUBSIDIARIES
The Company (a) will not, and will not permit any Subsidiary of the Company
to, transfer, convey, sell or otherwise dispose of any shares of Capital Stock
of such Subsidiary or any other Subsidiary (other than to the Company or a
Wholly Owned Subsidiary of the Company) except that the Company and any
Subsidiary may, in any single transaction, sell all, but not less than all, of
the issued and outstanding Capital Stock of any Subsidiary to any Person,
subject to complying with the provisions of the conditions described above under
" -- Limitation on Certain Asset Dispositions" and (b) will not permit any
Subsidiary of the Company to issue shares of its Capital Stock (other than
directors' qualifying shares), or securities convertible into, or warrants,
rights or options to subscribe for or purchase shares of, its Capital Stock to
any Person other than to the Company or a Wholly Owned Subsidiary of the
Company.
TRANSACTIONS WITH AFFILIATES AND RELATED PERSONS
The Indenture will provide that the Company will not, and will not permit any of
its Subsidiaries to enter into any transaction with an Affiliate or Related
Person of the Company (other than the Company or a Subsidiary of the Company),
including, without limitation, the purchase, sale, lease or exchange of
property, the rendering of any service, or the making of any guarantee, loan,
advance or Investment, either directly or indirectly, involving aggregate
consideration in excess of $500,000 unless (i) a majority of the disinterested
directors of the Board of Directors of the Company determines, in its good faith
judgment evidenced by a resolution of such Board of Directors filed with the
Trustee, that such transaction is in the best interests of the Company or such
Subsidiary, as the case may be; and (ii) such transaction is, in the opinion of
a majority of the disinterested directors of the Board of Directors of the
Company evidenced by a resolution of such Board of Directors filed with the
Trustee, on terms no less favorable to the Company or such Subsidiary, as the
case may be, than those that could be obtained in a comparable arm's length
transaction with an entity that is not an Affiliate or a Related Person.
CHANGE OF CONTROL
Within 30 days following the date of the consummation of a transaction resulting
in a Change of Control, the Company will commence an Offer to Purchase all
outstanding Notes at a purchase price equal to 101% of their principal amount
plus accrued interest to the date of purchase. Such Offer to Purchase will be
consummated not earlier than 30 days and not later than 60 days after the
commencement thereof. A "Change of Control" will be deemed to have occurred in
the event that (whether or not otherwise permitted by the Indenture), after the
Issue Date (a) any Person or any Persons acting together that would constitute a
group (for purposes of Section 13(d) of the Exchange Act, or any successor
provision thereto) (a "Group"), together with any Affiliates or Related Persons
thereof, shall beneficially own (as defined in Rule 13d-3 under the Exchange
Act, or any successor provision thereto) at least 40% of the Voting Stock of the
Company; (b) any sale, lease or other transfer (in one
41
<PAGE>
transaction or a series of related transactions) by the Company or any of its
Subsidiaries of all or substantially all of the consolidated assets of the
Company to any Person (other than a Wholly Owned Subsidiary of the Company); (c)
Continuing Directors cease to constitute at least a majority of the Board of
Directors of the Company; or (d) the stockholders of the Company approve any
plan or proposal for the liquidation or dissolution of the Company.
In the event that the Company makes an Offer to Purchase the Notes, the Company
intends to comply with any applicable securities laws and regulations, including
any applicable requirements of Section 14(e) of, and Rule 14e-1 under, the
Exchange Act and any violation of the provisions of the Indenture relating to
such Offer to Purchase occurring as a result of such compliance shall not be
deemed an Event of Default or an event that with the passing of time or giving
of notice, or both, would constitute an Event of Default.
PROVISION OF FINANCIAL INFORMATION
Whether or not the Company is subject to Section 13(a) or 15(d) of the Exchange
Act, or any successor provision thereto, the Company shall file with the
Commission the annual reports, quarterly reports and other documents which the
Company would have been required to file with the Commission pursuant to such
Section 13(a) or 15(d) or any successor provision thereto if the Company were so
required, such documents to be filed with the Commission on or prior to the
respective dates (the "Required Filing Dates") by which the Company would have
been required so to file such documents if the Company were so required. The
Company shall also in any event (a) within 15 days of each Required Filing Date
(i) transmit by mail to all Holders, as their names and addresses appear in the
Note Register, without cost to such Holders, and (ii) file with the Trustee,
copies of the annual reports, quarterly reports and other documents which the
Company is required to file with the Commission pursuant to the preceding
sentence, and (b) if, notwithstanding the preceding sentence, filing such
documents by the Company with the Commission is not permitted under the Exchange
Act, promptly upon written request supply copies of such documents to any
prospective Holder.
MERGERS, CONSOLIDATIONS AND CERTAIN SALES OF ASSETS
Neither the Company nor any Subsidiary will consolidate or merge with or into
any Person, and the Company will not, and will not permit any of its
Subsidiaries to, sell, lease, convey or otherwise dispose of all or
substantially all of the Company's consolidated assets (as an entirety or
substantially an entirety in one transaction or a series of related
transactions, including by way of liquidation or dissolution) to, any Person
unless, in each such case: (i) the entity formed by or surviving any such
consolidation or merger (if other than the Company or such Subsidiary, as the
case may be), or to which such sale, lease, conveyance or other disposition
shall have been made (the "Surviving Entity"), is a corporation organized and
existing under the laws of the United States, any state thereof or the District
of Columbia; (ii) the Surviving Entity assumes by supplemental indenture all of
the obligations of the Company or such Subsidiary, as the case may be, on the
Notes or such Subsidiary's Guarantee, as the case may be, and under the
Indenture; (iii) immediately after giving effect to such transaction and the use
of any net proceeds therefrom on a pro forma basis, the Consolidated Net Worth
of the Company or the Surviving Entity (in the case of a transaction involving
the Company), as the case may be, would be at least equal to the Consolidated
Net Worth of the Company immediately prior to such transaction; (iv) immediately
after giving effect to such transaction and the use of any net proceeds
therefrom on a pro forma basis, the Company or the Surviving Entity (in the case
of a transaction involving the Company), as the case may be, could incur at
least $1.00 of Indebtedness pursuant to clause (i) of the "Limitation on
Indebtedness" covenant; (v) immediately before and after giving effect to such
transaction and treating any Indebtedness which becomes an obligation of the
Company or any of its Subsidiaries as a result of such transaction as having
been incurred by the Company or such Subsidiary, as the case may be, at the time
of the transaction, no Event of Default or event that with the passing of time
or the giving of notice, or both, would constitute an Event of Default shall
have occurred and be continuing; and (vi) if, as a result of any such
transaction, property or assets of the Company or a Subsidiary would become
subject to a Lien not excepted from the provisions of the Indenture described
under " -- Limitation on Liens" above, the Company, any such Subsidiary or the
Surviving Entity, as the case may be, shall have secured the Notes as required
by said covenant. The provisions of this paragraph shall not apply to any merger
of a Subsidiary of the Company with or into the Company or a Wholly Owned
Subsidiary of the Company or any transaction pursuant to which a Guarantor's
Guarantee is to be released in accordance with the terms of the Guarantee and
the Indenture in connection with any transaction complying with the provisions
of the Indenture described under
" -- Limitation on Certain Asset Dispositions."
42
<PAGE>
EVENTS OF DEFAULT
The following will be Events of Default under the Indenture: (a) failure to
pay principal of (or premium, if any, on) any Note when due; (b) failure to pay
any interest on any Note when due, continued for 30 days; (c) default in the
payment of principal of and interest on Notes required to be purchased pursuant
to an Offer to Purchase as described under " -- Change of Control" and " --
Limitation on Certain Asset Dispositions" when due and payable; (d) failure to
perform or comply with any of the provisions described under " -- Mergers,
Consolidations and Certain Sales of Assets"; (e) failure to perform any other
covenant or agreement of the Company under the Indenture or the Notes continued
for 30 days after written notice to the Company by the Trustee or Holders of at
least 25% in aggregate principal amount of outstanding Notes; (f) default under
the terms of one or more instruments evidencing or securing Indebtedness for
money borrowed by the Company or any Subsidiary of the Company having an
outstanding principal amount of $5 million or more individually or in the
aggregate which results in the acceleration of the payment of such Indebtedness
or which shall constitute the failure to pay principal when due at the stated
maturity of such Indebtedness; (g) the rendering of a final judgment or
judgments (not subject to appeal) against the Company or any Subsidiary of the
Company in an amount of $5 million or more which remains undischarged or
unstayed for a period of 60 days after the date on which the right to appeal has
expired; (h) certain events of bankruptcy, insolvency or reorganization
affecting the Company or any Material Subsidiary; and (i) the Guarantee of any
Guarantor which is a Material Subsidiary ceases to be in full force and effect
(other than in accordance with the terms of such Guarantee and the Indenture) or
is declared null and void and unenforceable or found to be invalid or any
Guarantor which is a Material Subsidiary denies its liability under its
Guarantee (other than by reason of a release of such Guarantor from its
Guarantee in accordance with the terms of the Indenture and the Guarantee).
Subject to the provisions of the Indenture relating to the duties of the
Trustee, in case an Event of Default (as defined) shall occur and be continuing,
the Trustee will be under no obligation to exercise any of its rights or powers
under the Indenture at the request or direction of any of the Holders, unless
such Holders shall have offered to the Trustee reasonable indemnity. Subject to
such provisions for the indemnification of the Trustee, the Holders of a
majority in aggregate principal amount of the outstanding Notes will have the
right to direct the time, method and place of conducting any proceeding for any
remedy available to the Trustee or exercising any trust or power conferred on
the Trustee.
If an Event of Default (other than an Event of Default with respect to the
Company described in clause (h)) shall occur and be continuing, either the
Trustee or the Holders of at least 25% in aggregate principal amount of the
outstanding Notes may accelerate the maturity of all Notes; PROVIDED, HOWEVER,
that after such acceleration, but before a judgment or decree based on
acceleration, the Holders of a majority in aggregate principal amount of
outstanding Notes may, under certain circumstances, rescind and annul such
acceleration if all Events of Default, other than the non-payment of accelerated
principal, have been cured or waived as provided in the Indenture. If an Event
of Default specified in clause (h) above with respect to the Company occurs, the
outstanding Notes will IPSO FACTO become immediately due and payable without any
declaration or other act on the part of the Trustee or any Holder. For
information as to waiver of defaults, see " -- Modification and Waiver."
No Holder of any Note will have any right to institute any proceeding with
respect to the Indenture or for any remedy thereunder, unless such Holder shall
have previously given to the Trustee written notice of a continuing Event of
Default and unless the Holders of at least 25% in aggregate principal amount of
the outstanding Notes shall have made written request, and offered reasonable
indemnity, to the Trustee to institute such proceeding as Trustee, and the
Trustee shall not have received from the Holders of a majority in aggregate
principal amount of the outstanding Notes a direction inconsistent with such
request and shall have failed to institute such proceeding within 60 days.
However, such limitations do not apply to a suit instituted by a Holder of a
Note for enforcement of payment of the principal of and premium, if any, or
interest on such Note on or after the respective due dates expressed in such
Note.
The Company will be required to furnish to the Trustee annually a statement as
to the performance by it of certain of its obligations under the Indenture and
as to any default in such performance.
DEFEASANCE OR COVENANT DEFEASANCE
The Company may, at its option and at any time, elect to have the obligations of
the Company and the Guarantors discharged in accordance with the provisions set
forth below with respect to the Notes then outstanding. Such defeasance means
that the Company shall be deemed to have paid and discharged the entire
indebtedness represented by such outstanding Notes and the Company and the
Guarantors shall be deemed to have satisfied all their respective other
obligations under the Notes, the Guarantees and the Indenture, except for (i)
the rights of holders
43
<PAGE>
<PAGE>
of such outstanding Notes to receive payments in respect of the principal of,
premium, if any, and interest on such Notes when such payments are due, (ii) the
Company's and the Guarantors' respective obligations with respect to the Notes
concerning issuing temporary Notes, registration of Notes, mutilated, destroyed,
lost or stolen Notes and the maintenance of an office or agency for payment and
money for security payments held in trust, (iii) the rights, powers, trusts,
duties and immunities of the Trustee, and (iv) the defeasance provisions of the
Indenture. In addition, the Company may, at its option and at any time, elect to
have the respective obligations of the Company and the Guarantors released with
respect to certain covenants in the Indenture, some of which are described above
("covenant defeasance"), and any omission to comply with such obligations shall
not constitute a Default or an Event of Default with respect to the Notes. In
the event covenant defeasance occurs, the events described in clause (e) under
" -- Events of Default" will no longer constitute an Event of Default with
respect to the Notes.
In order to exercise either defeasance or covenant defeasance, (i) the Company
must irrevocably deposit with the Trustee, in trust, for the benefit of the
holders of the Notes, cash in U.S. dollars, U.S. Government Obligations, or a
combination thereof, in such amounts as will be sufficient, in the opinion of a
nationally recognized firm of independent public accountants, to pay the
principal of, premium, if any, and interest on such outstanding Notes on the
stated maturity of such principal and each installment of interest; (ii) in the
case of defeasance, the Company shall have delivered to the Trustee an opinion
of counsel stating that (A) the Company has received from, or there has been
published by, the Internal Revenue Service a ruling or (B) since the Issue Date,
there has been a change in the applicable federal income tax law, in either case
to the effect that, and based thereon such opinion of counsel shall confirm
that, the holders of the outstanding Notes will not recognize income, gain or
loss for federal income tax purposes as a result of such defeasance and will be
subject to federal income tax on the same amounts, in the same manner and at the
same times as would have been the case if such defeasance had not occurred;
(iii) in the case of covenant defeasance, the Company shall have delivered to
the Trustee an opinion of counsel to the effect that the holders of the
outstanding Notes will not recognize income, gain or loss for federal income tax
purposes as a result of such covenant defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such covenant defeasance had not occurred; (iv) no
Default or Event of Default shall have occurred and be continuing on the date of
such deposit; (v) such defeasance or covenant defeasance shall not result in a
breach or violation of, or constitute a default under, the Indenture or any
other material agreement or instrument to which the Company is a party or by
which it is bound; (vi) in the case of defeasance or covenant defeasance, the
Company shall have delivered to the Trustee an opinion of counsel to the effect
that after the 91st day following the deposit, the trust funds will not be
subject to the effect of any applicable bankruptcy, insolvency, reorganization
or similar law affecting creditors' rights generally and that such defeasance or
covenant defeasance will not result in the Trustee or the trust arising from
such deposit constituting an Investment Company as defined in the Investment
Company Act of 1940, as amended; and (vii) the Company shall have delivered to
the Trustee an officers' certificate and an opinion of counsel each stating that
all conditions precedent provided for relating to either the defeasance or the
covenant defeasance, as the case may be, have been complied with.
GOVERNING LAW
The Indenture, the Notes and the Guarantees will be governed by the laws of
the State of New York without regard to principles of conflicts of laws.
MODIFICATION AND WAIVER
Modifications and amendments of the Indenture may be made by the Company and
the Trustee with the consent of the Holders of a majority in aggregate principal
amount of the outstanding Notes; PROVIDED, HOWEVER, that no such modification or
amendment may, without the consent of the Holder of each Note affected thereby,
(a) change the Stated Maturity of the principal of or any installment of
interest on any Note, (b) reduce the principal amount of (or the premium) or
interest on any Note, (c) change the place or currency of payment of principal
of (or premium) or interest on any Note, (d) impair the right to institute suit
for the enforcement of any payment on or with respect to any Note or any
Guarantee, (e) reduce the above-stated percentage of outstanding Notes necessary
to modify or amend the Indenture, (f) reduce the percentage of aggregate
principal amount of outstanding Notes necessary for waiver of compliance with
any provision of the Indenture or for waiver of any default, (g) modify any
provisions of the Indenture relating to the modification and amendment of the
Indenture or the waiver of past defaults or covenants, except as otherwise
specified, (h) modify the ranking or priority of the Notes or the Guarantee of
any Guarantor which is a Material Subsidiary, (i) release any Guarantor which is
a Material Subsidiary from any of its obligations under its Guarantee or the
Indenture otherwise than in accordance with the 44 <PAGE>
<PAGE> terms of the
Indenture, or (j) modify the provisions relating to any Offer to Purchase
required under the "Limitation on Certain Asset Dispositions" or "Change of
Control" covenants contained in the Indenture in a manner materially adverse to
the Holders thereof.
The Holders of a majority in aggregate principal amount of the outstanding
Notes, on behalf of all Holders of Notes, may waive compliance by the Company
with certain restrictive provisions of the Indenture. Subject to certain rights
of the Trustee, as provided in the Indenture, the Holders of a majority in
aggregate principal amount of the outstanding Notes, on behalf of all Holders of
Notes, may waive any past default under the Indenture, except a default in the
payment of principal, premium or interest or a default arising from failure to
purchase any Note tendered pursuant to an Offer to Purchase.
THE TRUSTEE
The Indenture provides that, except during the continuance of an Event of
Default, the Trustee will perform only such duties as are specifically set forth
in the Indenture. During the existence of an Event of Default, the Trustee will
exercise such rights and powers vested in it under the Indenture and use the
same degree of care and skill in their exercise as a prudent person would
exercise under the circumstances in the conduct of such person's own affairs.
The Indenture and provisions of the Trust Indenture Act incorporated by
reference therein contain limitations on the rights of the Trustee, should it
become a creditor of the Company, any Guarantor or any other obligor upon the
Notes, to obtain payment of claims in certain cases or to realize on certain
property received by it in respect of any such claim as security or otherwise.
The Trustee is permitted to engage in other transactions with the Company or an
Affiliate of the Company; PROVIDED, HOWEVER, that if it acquires any conflicting
interest (as defined in the Indenture or in the Trust Indenture Act), it must
eliminate such conflict or resign.
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
Indenture. Reference is made to the Indenture for the full definition of all
such terms, as well as any other terms used herein for which no definition is
provided.
"AFFILIATE" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with any specified Person. For purposes of this definition, "control"
when used with respect to any Person means the power to direct the management
and policies of such Person, directly or indirectly, whether through the
ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
"ASSET DISPOSITION" means any sale, transfer or other disposition of (i) shares
of Capital Stock of a Subsidiary of the Company (other than directors'
qualifying shares) or (ii) property or assets of the Company or any Subsidiary
of the Company; PROVIDED, HOWEVER, that an Asset Disposition shall not include
(a) any sale, transfer or other disposition of shares of Capital Stock, property
or assets by a Subsidiary of the Company to the Company or to another Subsidiary
of the Company, (b) any sale, transfer or other disposition of defaulted
receivables for collection or any sale, transfer or other disposition of
property or assets in the ordinary course of business or (c) any isolated sale,
transfer or other disposition that does not involve aggregate consideration in
excess of $250,000 individually.
"AVERAGE LIFE" means, as of the date of determination, with respect to any
Indebtedness for borrowed money or Preferred Stock, the quotient obtained by
dividing (i) the sum of the products of the number of years from the date of
determination to the dates of each successive scheduled principal or liquidation
value payments of such Indebtedness or Preferred Stock, respectively, and the
amount of such principal or liquidation value payments, by (ii) the sum of all
such principal or liquidation value payments.
"CAPITAL LEASE OBLIGATIONS" of any Person means the obligations to pay rent or
other amounts under a lease of (or other Indebtedness arrangements conveying the
right to use) real or personal property of such Person which are required to be
classified and accounted for as a capital lease or liability on the face of a
balance sheet of such Person in accordance with GAAP. The amount of such
obligations shall be the capitalized amount thereof in accordance with GAAP and
the stated maturity thereof shall be the date of the last payment of rent or any
other amount due under such lease prior to the first date upon which such lease
may be terminated by the lessee without payment of a penalty.
45
<PAGE>
"CAPITAL STOCK" of any Person means any and all shares, interests,
participations or other equivalents (however designated) of corporate stock of
such Person (including any Preferred Stock outstanding on the Issue Date).
"COMMON STOCK" of any Person means Capital Stock of such Person that does not
rank prior, as to the payment of dividends or as to the distribution of assets
upon any voluntary or involuntary liquidation, dissolution or winding up of such
Person, to shares of Capital Stock of any other class of such Person.
"CONSOLIDATED CASH FLOW AVAILABLE FOR FIXED CHARGES" of any Person means for any
period the Consolidated Net Income of such Person for such period increased by
the sum of (i) Consolidated Interest Expense of such Person for such period,
plus (ii) Consolidated Income Tax Expense of such Person for such period, plus
(iii) the consolidated depreciation and amortization expense included in the
income statement of such Person for such period, plus (iv) other non-cash
charges of such Person for such period deducted from consolidated revenues in
determining Consolidated Net Income for such period, minus (v) non-cash items
(including the partial or entire reversal of reserves taken in prior periods) of
such Person for such period increasing consolidated revenues in determining
Consolidated Net Income for such period.
"CONSOLIDATED CASH FLOW RATIO" of any Person means for any period the ratio of
(i) Consolidated Cash Flow Available for Fixed Charges of such Person for such
period to (ii) the sum of (A) Consolidated Interest Expense of such Person for
such period, plus (B) the annual interest expense with respect to any
Indebtedness proposed to be Incurred by such Person or its Subsidiaries, minus
(C) Consolidated Interest Expense of such Person to the extent included in
clause (ii)(A) with respect to any Indebtedness that will no longer be
outstanding as a result of the incurrence of the Indebtedness proposed to be
Incurred, plus (D) the annual interest expense with respect to any other
Indebtedness Incurred by such Person or its Subsidiaries since the end of such
period to the extent not included in clause (ii)(A), minus (E) Consolidated
Interest Expense of such Person to the extent included in clause (ii)(A) with
respect to any Indebtedness that no longer is outstanding as a result of the
Incurrence of the Indebtedness referred to in clause (ii)(D); PROVIDED, HOWEVER,
that in making such computation, the Consolidated Interest Expense of such
Person attributable to interest on any Indebtedness bearing a floating interest
rate shall be computed on a pro forma basis as if the rate in effect on the date
of computation (after giving effect to any hedge in respect of such Indebtedness
that will, by its terms, remain in effect until the earlier of the maturity of
such Indebtedness or the date one year after the date of such determination) had
been the applicable rate for the entire period; PROVIDED FURTHER that, in the
event such Person or any of its Subsidiaries has made any Asset Dispositions or
acquisitions of assets not in the ordinary course of business (including
acquisitions of other Persons by merger, consolidation or purchase of Capital
Stock) during or after such period, such computation shall be made on a pro
forma basis as if the Asset Dispositions or acquisitions had taken place on the
first day of such period. Calculations of pro forma amounts in accordance with
this definition shall be done in accordance with Rule 11-02 of Regulation S-X
under the Securities Act of 1933 or any successor provision.
"CONSOLIDATED INCOME TAX EXPENSE" of any Person means for any period the
consolidated provision for income taxes of such Person for such period
calculated on a consolidated basis in accordance with GAAP.
"CONSOLIDATED INTEREST EXPENSE" for any Person means for any period the
consolidated interest expense included in a consolidated income statement
(without deduction of interest income) of such Person for such period calculated
on a consolidated basis in accordance with GAAP, plus cash dividends declared on
any Preferred Stock (other than any Preferred Stock of the Company outstanding
on the Issue Date). For purposes of this definition, the amount of any cash
dividends declared will be deemed to be equal to the amount of such dividends
multiplied by a fraction, the numerator of which is one and the denominator of
which is one minus the maximum statutory combined Federal, state, local and
foreign income tax rate then applicable to such Person and its Subsidiaries
(expressed as a decimal between one and zero), on a consolidated basis.
"CONSOLIDATED NET INCOME" of any Person means for any period the consolidated
net income (or loss) of such Person for such period determined on a consolidated
basis in accordance with GAAP; PROVIDED that there shall be excluded therefrom
(a) the net income (or loss) of any Person acquired by such Person or a
Subsidiary of such Person in a pooling-of-interests transaction for any period
prior to the date of such transaction, (b) the net income (but not net loss) of
any Subsidiary of such Person which is subject to restrictions which prevent or
limit the payment of dividends or the making of distributions to such Person to
the extent of such restrictions, (c) the net income of any Person that is not a
Subsidiary of such Person except to the extent of the amount of dividends or
other distributions actually paid in cash to such Person by such other Person
during such period, (d) gains or losses on Asset Dispositions by such Person or
its Subsidiaries and (e) all extraordinary gains and extraordinary losses
determined in accordance with GAAP.
46
<PAGE>
<PAGE>
"CONSOLIDATED NET TANGIBLE ASSETS" means, at any date, the consolidated book
value as shown by the accounting books and records of the Company and its
Subsidiaries of all their property, both real and personal, less (i) the book
value of all their licenses, patents, patent applications, copyrights,
trademarks, trade names, goodwill, non-compete agreements or organizational
expenses and other intangibles, (ii) unamortized Indebtedness, discount and
expenses, (iii) all reserves for depreciation, obsolescence, depletion and
amortization of their properties and (iv) all other proper reserves which in
accordance with GAAP should be provided in connection with the business
conducted by the Company and its Subsidiaries.
"CONSOLIDATED NET WORTH" of any Person means the consolidated stockholders'
equity of such Person, determined on a consolidated basis in accordance with
GAAP, less (without duplication) amounts attributable to Disqualified Stock of
such Person.
"CONTINUING DIRECTOR" means a director who either was a member of the Board
of Directors of the Company on the Issue Date or who became a director of the
Company subsequent to the Issue Date and whose election, or nomination for
election by the Company's stockholders, was duly approved by a majority of the
Continuing Directors than on the Board of Directors of the Company, either by a
specific vote or by approval of the proxy statement issued by the Company on
behalf of the entire Board of Directors of the Company in which such individual
is named as nominee for director.
"DEFAULT" means any event that is, or after notice or lapse of time or both
would become, an Event of Default.
"DISQUALIFIED STOCK" of any Person means any Capital Stock of such Person which,
by its terms (or by the terms of any security into which it is convertible or
for which it is exchangeable), or upon the happening of any event, matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
is redeemable at the option of the holder thereof, in whole or in part, on or
prior to the final maturity of the Notes; PROVIDED, that any Preferred Stock of
the Company outstanding on the Issue Date shall not be deemed Disqualified
Stock.
"ELIGIBLE ACCOUNTS RECEIVABLE" means the face value of all "eligible
receivables" of the Company and its Subsidiaries party to any credit agreement
constituting the Senior Credit Facility (as such term is defined for purposes of
such credit agreement).
"ELIGIBLE INVENTORY" means the face value of all "eligible inventory" of the
Company and its Subsidiaries party to any credit agreement constituting the
Senior Credit Facility (as such term is defined for purposes of such credit
agreement).
"EXCHANGE ACT" means the Securities and Exchange Act of 1934, as amended.
"GAAP" means generally accepted accounting principles, consistently applied, as
in effect on the Issue Date in the United States of America, as set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as is approved by a significant segment of the accounting
profession.
"GUARANTEE" by any Person means any obligation, contingent or otherwise, of such
Person guaranteeing any Indebtedness of any other Person (the "primary obligor")
in any manner, whether directly or indirectly, and including, without
limitation, any obligation of such Person (i) to purchase or pay (or advance or
supply funds for the purchase or payment of) such Indebtedness or to purchase
(or to advance or supply funds for the purchase of) any security for the payment
of such Indebtedness, (ii) to purchase property, securities or services for the
purpose of assuring the holder of such Indebtedness of the payment of such
Indebtedness, or (iii) to maintain working capital, equity capital or other
financial statement condition or liquidity of the primary obligor so as to
enable the primary obligor to pay such Indebtedness (and "guaranteed,"
"guaranteeing" and "guarantor" shall have meanings correlative to the
foregoing); PROVIDED, HOWEVER, that the guarantee by any Person shall not
include endorsements by such Person for collection or deposit, in either case,
in the ordinary course of business.
"GUARANTEE" means the guarantee of the Notes by each Guarantor under the
Indenture.
"GUARANTORS" means (i) each of Dominion Stores, Inc., Tultex International,
Inc., Logo 7, Inc., Universal Industries, Inc., AKOM, Ltd., Tultex Canada Inc.
and SweatJet, Inc. and (ii) each Material Subsidiary, whether formed or acquired
after the Issue Date PROVIDED, that, any Material Subsidiary acquired after the
Issue Date which is prohibited from entering into a Guarantee pursuant to
restrictions contained in any debt instrument in existence at the time such
Material Subsidiary was so acquired and not entered into in anticipation or
contemplation of such
47
<PAGE>
<PAGE>
acquisition shall not be required to become a Guarantor so long as any such
restriction is in existence and to the extent of any such restriction.
"INCUR" means, with respect to any Indebtedness or other obligation of any
Person, to create, issue, incur (including by conversion, exchange or
otherwise), assume, guarantee or otherwise become liable in respect of such
Indebtedness or other obligation or the recording, as required pursuant to GAAP
or otherwise, of any such Indebtedness or other obligation on the balance sheet
of such Person (and "Incurrence," "Incurred," "Incurrable" and "Incurring" shall
have meanings correlative to the foregoing). Indebtedness of any Person or any
of its Subsidiaries existing at the time such Person becomes a Subsidiary of the
Company (or is merged into or consolidates with the Company or any of its
Subsidiaries), whether or not such Indebtedness was incurred in connection with,
or in contemplation of, such Person becoming a Subsidiary of the Company (or
being merged into or consolidated with the Company or any of its Subsidiaries)
shall be deemed Incurred at the time any such Person becomes a Subsidiary of the
Company or merges into or consolidates with the Company or any of its
Subsidiaries.
"INDEBTEDNESS" means (without duplication), with respect to any Person, whether
recourse is to all or a portion of the assets of such Person and whether or not
contingent, (i) every obligation of such Person for money borrowed, (ii) every
obligation of such Person evidenced by bonds, debentures, notes or other similar
instruments, including obligations incurred in connection with the acquisition
of property, assets or businesses, (iii) every reimbursement obligation of such
Person with respect to letters of credit, bankers' acceptances or similar
facilities issued for the account of such Person, (iv) every obligation of such
Person issued or assumed as the deferred purchase price of property or services
(but excluding trade accounts payable or accrued liabilities arising in the
ordinary course of business which are not overdue or which are being contested
in good faith), (v) every Capital Lease Obligation of such Person, (vi) every
net obligation under interest rate swap or similar agreements or foreign
currency hedge, exchange or similar agreements of such Person and (vii) every
obligation of the type referred to in clauses (i) through (vi) of another Person
and all dividends of another Person the payment of which, in either case, such
Person has guaranteed or is responsible or liable for, directly or indirectly,
as obligor, guarantor or otherwise. Indebtedness shall include the liquidation
preference and any mandatory redemption payment obligations in respect of any
Disqualified Stock of the Company, and any Preferred Stock of a Subsidiary of
the Company. Indebtedness shall never be calculated taking into account any cash
and cash equivalents held by such Person.
"INVESTMENT" by any Person means any direct or indirect loan, advance or other
extension of credit or capital contribution to (by means of transfers of cash or
other property to others or payments for property or services for the account or
use of others, or otherwise), or purchase or acquisition of Capital Stock,
bonds, notes, debentures or other securities or evidence of Indebtedness issued
by any other Person.
"ISSUE DATE" means the original issue date of the Notes.
"LIEN" means, with respect to any property or assets, any mortgage or deed of
trust, pledge, hypothecation, assignment, security interest, lien, charge,
easement (other than any easement not materially impairing usefulness or
marketability), encumbrance, preference, priority or other security agreement
with respect to such property or assets (including, without limitation, any
conditional sale or other title retention agreement having substantially the
same economic effect as any of the foregoing).
"MATERIAL SUBSIDIARY" means any Subsidiary of the Company which would
constitute a "significant subsidiary" of the Company as defined in Rule 1.02 of
Regulation S-X promulgated by the Commission except that for purposes of this
definition all reference therein to ten (10) percent shall be deemed to be
references to five (5) percent.
"NET AVAILABLE PROCEEDS" from any Asset Disposition by any Person means cash or
readily marketable cash equivalents received (including by way of sale or
discounting of a note, installment receivable or other receivable, but excluding
any other consideration received in the form of assumption by the acquiree of
Indebtedness or other obligations relating to such properties or assets or
received in any other noncash form) therefrom by such Person, net of (i) all
legal, title and recording tax expenses, commissions and other fees and expenses
Incurred and all federal, state, foreign and local taxes required to be accrued
as a liability as a consequence of such Asset Disposition, (ii) all payments
made by such Person or its Subsidiaries on any Indebtedness which is secured by
such assets in accordance with the terms of any Lien upon or with respect to
such assets or which must by the terms of such Lien, or in order to obtain a
necessary consent to such Asset Disposition or by applicable law, be repaid out
of the proceeds from such Asset Disposition, (iii) all payments made with
respect to liabilities associated with the assets which are the subject of the
Asset Disposition, including, without limitation, trade payables and other
accrued liabilities, (iv) appropriate amounts to be provided by such Person or
any Subsidiary thereof, as the case may be, as a reserve in accordance with GAAP
against any liabilities associated with such assets and retained by
48
<PAGE>
such Person or any Subsidiary thereof, as the case may be, after such Asset
Disposition, including, without limitation, liabilities under any
indemnification obligations and severance and other employee termination costs
associated with such Asset Disposition, until such time as such amounts are no
longer reserved or such reserve is no longer necessary (at which time any
remaining amounts will become Net Available Proceeds to be allocated in
accordance with the provisions of clause (iii) of " -- Limitation on Certain
Asset Dispositions") and (v) all distributions and other payments made to
minority interest holders in Subsidiaries of such Person or joint ventures as a
result of such Asset Disposition.
"OFFER TO PURCHASE" means a written offer (the "Offer") sent by the Company by
first class mail, postage prepaid, to each Holder at his address appearing in
the register for the Notes on the date of the Offer offering to purchase up to
the principal amount of Notes specified in such Offer at the purchase price
specified in such Offer (as determined pursuant to the Indenture). Unless
otherwise required by applicable law, the Offer shall specify an expiration date
(the "Expiration Date") of the Offer to Purchase which shall be, not less than
30 days or more than 60 days after the date of such Offer and a settlement date
(the "Purchase Date") for purchase of Notes within five Business Days after the
Expiration Date. The Company shall notify the Trustee at least 15 Business Days
(or such shorter period as is acceptable to the Trustee) prior to the mailing of
the Offer of the Company's obligation to make an Offer to Purchase, and the
Offer shall be mailed by the Company or, at the Company's request, by the
Trustee in the name and at the expense of the Company. The Offer shall contain
all the information required by applicable law to be included therein. The Offer
shall contain all instructions and materials necessary to enable such Holders to
tender Notes pursuant to the Offer to Purchase. The Offer shall also state:
(1) the Section of the Indenture pursuant to which the Offer to Purchase
is being made;
(2) the Expiration Date and the Purchase Date;
(3) the aggregate principal amount of the outstanding Notes offered to
be purchased by the Company pursuant to the Offer to Purchase
(including, if less than 100%, the manner by which such amount has
been determined pursuant to the Section of the Indenture requiring
the Offer to Purchase) (the "Purchase Amount");
(4) the purchase price to be paid by the Company for each $1,000
aggregate principal amount of Notes accepted for payment (as
specified pursuant to the Indenture) (the "Purchase Price");
(5) that the Holder may tender all or any portion of the Notes
registered in the name of such Holder and that any portion of a Note
tendered must be tendered in an integral multiple of $1,000
principal amount;
(6) the place or places where Notes are to be surrendered for tender
pursuant to the Offer to Purchase;
(7) that interest on any Note not tendered or tendered but not purchased
by the Company pursuant to the Offer to Purchase will continue to
accrue;
(8) that on the Purchase Date the Purchase Price will become due and
payable upon each Note being accepted for payment pursuant to the
Offer to Purchase and that interest thereon shall cease to accrue on
and after the Purchase Date;
(9) that each Holder electing to tender all or any portion of a Note
pursuant to the Offer to Purchase will be required to surrender such
Note at the place or places specified in the Offer prior to the
close of business on the Expiration Date (such Note being, if the
Company or the Trustee so requires, duly endorsed by, or accompanied
by a written instrument of transfer in form satisfactory to the
Company and the Trustee duly executed by, the Holder thereof or his
attorney duly authorized in writing);
(10) that Holders will be entitled to withdraw all or any portion of
Notes tendered if the Company (or its Paying Agent) receives, not
later than the close of business on the fifth Business Day next
preceding the Expiration Date, a telegram, telex, facsimile
transmission or letter setting forth the name of the Holder, the
principal amount of the Note the Holder tendered, the certificate
number of the Note the Holder tendered and a statement that such
Holder is withdrawing all or a portion of his tender;
(11) that (a) if Notes in an aggregate principal amount less than or
equal to the Purchase Amount are duly tendered and not withdrawn
pursuant to the Offer to Purchase, the Company shall purchase all
such Notes and (b) if Notes in an aggregate principal amount in
excess of the Purchase Amount are tendered and not withdrawn
pursuant to the Offer to Purchase, the Company shall purchase Notes
49
<PAGE>
having an aggregate principal amount equal to the Purchase Amount on
a PRO RATA basis (with such adjustments as may be deemed appropriate
so that only Notes in denominations of $1,000 or integral multiples
thereof shall be purchased); and
(12) that in the case of any Holder whose Note is purchased only in part,
the Company shall execute, the Guarantors shall execute the
Guarantee endorsed thereon and the Trustee shall authenticate and
deliver to the Holder of such Note without service charge, a new
Note or Notes, of any authorized denomination as requested by such
Holder, in an aggregate principal amount equal to and in exchange
for the unpurchased portion of the Note so tendered.
An Offer to Purchase shall be governed by and effected in accordance with the
provisions above pertaining to any Offer.
"PERMITTED INVESTMENTS" means (i) Investments in marketable, direct obligations
issued or guaranteed by the United States of America, or any governmental entity
or agency or political subdivision thereof (PROVIDED, that the good faith and
credit of the United States of America is pledged in support thereof), maturing
within one year of the date of purchase; (ii) Investments in commercial paper
issued by corporations, each of which shall have a consolidated net worth of at
least $500,000,000, maturing within 180 days from the date of the original issue
thereof, and rated "P-1" or better by Moody's Investors Service or "A-1" or
better by Standard & Poor's Corporation or an equivalent rating or better by any
other nationally recognized securities rating agency; (iii) Investments in
certificates of deposit issued or acceptances accepted by or guaranteed by any
bank or trust company organized under the laws of the United States of America
or any state thereof or the District of Columbia, in each case having capital,
surplus and undivided profits totalling more than $500,000,000, maturing within
one year of the date of purchase; (iv) Investments representing Capital Stock or
obligations issued to the Company or any of its Subsidiaries in the course of
the good faith settlement of claims against any other Person or by reason of a
composition or readjustment of debt or a reorganization of any debtor of the
Company or any of its Subsidiaries; (v) deposits, including interest-bearing
deposits, maintained in the ordinary course of business in banks; and (vi) any
acquisition of the Capital Stock of any Person provided that after giving effect
to any such acquisition such Person shall become a Subsidiary of the Company.
"PERSON" means any individual, corporation, limited or general partnership,
joint venture, association, joint stock company, trust, unincorporated
organization or government or any agency or political subdivision thereof.
"PREFERRED STOCK", as applied to the Capital Stock of any Person, means Capital
Stock of such Person of any class or classes (however designated) that ranks
prior, as to the payment of dividends or as to the distribution of assets upon
any voluntary or involuntary liquidation, dissolution or winding up of such
Person, to shares of Capital Stock of any other class of such Person.
"RELATED PERSON" of any Person means any other Person directly or indirectly
owning (a) 5% or more of the outstanding Common Stock of such Person (or, in the
case of a Person that is not a corporation, 5% or more of the equity interest in
such Person) or (b) 5% or more of the combined voting power of the Voting Stock
of such Person.
"SALE AND LEASEBACK TRANSACTION" of any Person means an arrangement with any
lender or investor or to which such lender or investor is a party providing for
the leasing by such Person of any property or asset of such Person which has
been or is being sold or transferred by such Person more than 270 days after the
acquisition thereof or the completion of construction or commencement of
operation thereof to such lender or investor or to any Person to whom funds have
been or are to be advanced by such lender or investor on the security of such
property or asset. The stated maturity of such arrangement shall be the date of
the last payment of rent or any other amount due under such arrangement prior to
the first date on which such arrangement may be terminated by the lessee without
payment of a penalty.
"SENIOR CREDIT FACILITY" means the Credit Agreement, dated as of ,
1995, among the Company as borrower thereunder, any Subsidiaries of the Company
as guarantors thereunder and NationsBank, N.A. (Carolinas), as agent on behalf
of itself and the other lenders named therein, including any deferrals,
renewals, extensions, replacements, refinancings or refundings thereof, or
amendments, modifications or supplements thereto and any agreement providing
therefor whether by or with the same or any other lender, creditors, group of
lenders or group of creditors.
"SUBSIDIARY" of any Person means (i) a corporation more than 50% of the
outstanding Voting Stock of which is owned, directly or indirectly, by such
Person or by one or more other Subsidiaries of such Person or by such
50
<PAGE>
Person and one or more other Subsidiaries thereof or (ii) any other Person
(other than a corporation) in which such Person, or one or more other
Subsidiaries of such Person or such Person and one or more other Subsidiaries
thereof, directly or indirectly, has at least a majority ownership and voting
power relating to the policies, management and affairs thereof.
"TRUST INDENTURE ACT" means the Trust Indenture Act of 1939, as amended.
"VOTING STOCK" of any Person means the Capital Stock of such Person which
ordinarily has voting power for the election of directors (or persons performing
similar functions) of such Person, whether at all times or only so long as no
senior class of securities has such voting power by reason of any
contingency.
"WHOLLY OWNED SUBSIDIARY" of any Person means a Subsidiary of such Person all of
the outstanding Capital Stock or other ownership interests of which (other than
directors' qualifying shares) shall at the time be owned by such Person or by
one or more Wholly Owned Subsidiaries of such Person or by such Person and one
or more Wholly Owned Subsidiaries of such Person.
UNDERWRITING
Under the terms and subject to the conditions contained in the Underwriting
Agreement dated , 1995 (the "Underwriting Agreement"), J.P. Morgan
Securities Inc. ("J.P. Morgan") and NationsBanc Capital Markets, Inc.
("NationsBanc" and collectively with J.P. Morgan, the "Underwriters"), have
severally agreed to purchase from the Company, and the Company has agreed to
sell to them, severally, the principal amount of Notes set forth opposite their
names below. Under the terms and conditions of the Underwriting Agreement, the
Underwriters are obligated to take and pay for the entire principal amount of
the Notes, if any Notes are purchased.
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
J.P. Morgan Securities Inc. $
<S> <C>
NationsBanc Capital Markets, Inc.
Total $110,000,000
</TABLE>
The Underwriters propose initially to offer the Notes directly to the public at
the price set forth on the cover page of this Prospectus and to certain dealers
at such price less a concession not in excess of % of the principal
amount of the Notes. The Underwriters may allow, and such dealers may reallow, a
concession not in excess of % of the principal amount of the Notes to
certain others dealers. After the initial public offering of the Notes, the
initial public offering price and such concessions may be changed.
The Company and the Guarantors in existence on the closing date of the Offering
have agreed, jointly and severally, to indemnify the Underwriters against
certain liabilities, including liabilities under the Securities Act.
There is currently no trading market for the Notes. The Company does not intend
to list the Notes on any securities exchange. The Company has been advised by
the Underwriters that the Underwriters currently intend to make a market in the
Notes; however, the Underwriters are not obligated to do so and may discontinue
any such market making at any time without notice. No assurance can be given as
to the development or liquidity of any trading market for the Notes.
J.P. Morgan has provided investment banking and other financial services for the
Company in the past. In addition, Morgan Guaranty Trust Company of New York, an
affiliate of J.P. Morgan, will act as a lender under the Senior Credit Facility.
NationsBank, N.A. (Carolinas), an affiliate of NationsBanc, acted as lender,
Co-Agent and Administrative Agent under the Company's existing revolving credit
facility and will act in the same capacities under the Senior Credit Facility.
NationsBanc acted as Structuring and Syndicating Agent under the Company's
existing revolving credit facility, for which it has received customary fees and
will act in the same capacity under the Senior Credit Facility, for which it
will receive customary fees. In addition, NationsBanc has provided investment
banking and other financial services for the Company in the past.
51
<PAGE>
LEGAL MATTERS
The validity of the Notes will be passed upon for the Company by Hunton &
Williams, Richmond, Virginia. Lathan M. Ewers, Jr., a partner of Hunton &
Williams, is a director of the Company. Certain legal matters in connection with
the Notes offered hereby will be passed upon for the Underwriters by Cahill
Gordon & Reindel (a partnership including a professional corporation), New York,
New York.
EXPERTS
The financial statements as of December 31, 1994 and January 1, 1994 and for
each of the three years in the period ended December 31, 1994 included in this
Prospectus have been so included in reliance on the report of Price Waterhouse
LLP, independent accountants, given on the authority of said firm as experts in
auditing and accounting.
52
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Report of Independent Accountants...................................................................................... F-2
Consolidated Balance Sheets of Tultex Corporation as of December 31, 1994 and January 1, 1994.......................... F-3
Consolidated Statements of Income of Tultex Corporation for Fiscal 1994, 1993 and 1992................................. F-4
Consolidated Statements of Changes in Stockholders' Equity of Tultex Corporation for Fiscal 1994, 1993
and 1992............................................................................................................. F-5
Consolidated Statements of Cash Flows of Tultex Corporation for Fiscal 1994, 1993
and 1992............................................................................................................. F-6
Notes to Financial Statements of Tultex Corporation.................................................................... F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors of Tultex Corporation
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of income, of cash flows and of changes in stockholders'
equity present fairly, in all material respects, the financial position of
Tultex Corporation and its subsidiaries (the company) at December 31, 1994 and
January 1, 1994, and the results of their operations and their cash flows for
each of the three years in the period ended December 31, 1994, in conformity
with generally accepted accounting principles. These financial statements are
the responsibility of the company's management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and significant estimates made by management, and evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
As discussed in Note 9 of Notes to Financial Statements, the company changed its
method of accounting for income taxes in 1992. In addition, in 1993, the company
changed its method of valuing inventory and accounting for postretirement
medical and life insurance benefits, as discussed in Notes 3 and 10 of Notes to
Financial Statements, respectively.
PRICE WATERHOUSE LLP
Winston-Salem, North Carolina
February 6, 1995
F-2
<PAGE>
TULTEX CORPORATION
BALANCE SHEET
<TABLE>
<CAPTION>
DEC. 31,
1994 JAN. 1, 1994
<S> <C> <C>
(IN THOUSAND OF DOLLARS
EXCEPT SHARE DATA)
ASSETS
Current assets:
Cash and equivalents (Note 5) $5,776 $6,754
Accounts receivable, less allowance for doubtful accounts
of $2,115 (1994) and $2,374 (1993) 139,743 116,383
Inventories (Note 3) 130,183 157,278
Prepaid expenses 14,205 8,276
Total current assets 289,907 288,691
Property, plant and equipment, net of depreciation (Note 4) 134,884 151,775
Intangible assets 26,766 27,983
Other assets 5,252 6,516
TOTAL ASSETS $456,809 $474,965
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable to banks (Note 5) $1,000 $ --
Current maturities of long-term debt (Notes 6 and 19) 132,353 8,524
Accounts payable -- trade 19,634 18,170
Accrued liabilities -- other 11,102 13,923
Dividends payable (Note 7) -- 1,736
Income taxes payable 2,964 2,785
Total current liabilities 167,053 45,138
Long-term debt, less current maturities (Notes 6 and 19) 83,002 230,914
Deferrals:
Deferred income taxes (Note 9) 14,893 14,014
Other 4,760 5,702
Total deferrals 19,653 19,716
Stockholders' equity (Notes 6, 8, 15 and 16):
5% cumulative preferred stock, $100 par value;
authorized -- 22,000 shares,
issued and outstanding -- 1,975 shares (1994 and 1993) 198 198
Series B, $7.50 cumulative convertible preferred stock;
authorized, issued and outstanding -- 150,000 shares (1994 and 1993) 15,000 15,000
Common stock, $1 par value; authorized -- 60,000,000 shares, issued and
outstanding -- 29,806,793 shares (1994) and 29,053,126 shares (1993) 29,807 29,053
Capital in excess of par value 5,279 1,889
Retained earnings 140,283 133,107
190,567 179,247
Less notes receivable from stockholders 3,466 50
Total stockholders' equity 187,101 179,197
Commitments and contingencies (Notes 12, 13, and 14)
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $456,809 $474,965
</TABLE>
The accompanying Notes to Financial Statements are an integral part of this
statement.
F-3
<PAGE>
TULTEX CORPORATION
STATEMENT OF INCOME
<TABLE>
<CAPTION>
FISCAL YEARS ENDED:
DEC. 31,
1994 JAN. 1, 1994 JAN. 2, 1993
(52 WEEKS) (52 WEEKS) (53 WEEKS)
<S> <C> <C> <C>
(IN THOUSANDS OF DOLLARS
EXCEPT PER SHARE DATA)
Net sales and other income $565,433 $533,611 $503,946
Costs and expenses:
Cost of products sold 419,769 395,727 368,027
Depreciation 23,973 23,364 20,831
Selling, general and administrative 93,510 88,433 81,297
Gain on sale of facilities (4,405) -- --
Interest 18,151 16,996 13,540
Total costs and expenses 550,998 524,520 483,695
Income before income taxes 14,435 9,091 20,251
Provision for income taxes (Note 9) 5,485 3,188 7,060
NET INCOME $8,950 $5,903 $13,191
NET INCOME PER COMMON SHARE $.26 $.16 $.42
DIVIDENDS PER COMMON SHARE (NOTE 7) $.05 $.20 $.20
</TABLE>
The accompanying Notes to Financial Statements are an integral part of this
statement.
F-4
<PAGE>
TULTEX CORPORATION
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
CAPITAL
5% SERIES B IN EXCESS NOTES TOTAL
PREFERRED PREFERRED COMMON OF PAR RETAINED RECEIVABLE- STOCKHOLDERS'
STOCK STOCK STOCK VALUE EARNINGS STOCKHOLDERS EQUITY
<S> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS OF DOLLARS EXCEPT SHARE DATA)
BALANCE AS OF DEC. 28, 1991, AS
PREVIOUSLY REPORTED $ 198 $28,862 $ 580 $121,876 $ (184) $ 151,332
Adjustment for the cumulative
effect on prior years of
applying retroactively the new
method of valuing inventories
(Note 3) 5,759 5,759
BALANCE AS OF DEC. 28, 1991, AS
ADJUSTED 198 28,862 580 127,635 (184) 157,091
Net income for the 53 weeks ended
Jan. 2, 1993 (Note 3) 13,191 13,191
Series B, preferred stock issued
(150,000 shares) $ 15,000 15,000
Employee stock purchases 16 101 (30) 87
Collections -- stockholders' notes
receivable 114 114
Cash dividends on common stock
($.20 per share) (Note 7) (5,649) (5,649)
Cash dividends on preferred stock
(Note 7) (1,041) (1,041)
BALANCE AS OF JAN. 2, 1993 198 15,000 28,878 681 134,136 (100) 178,793
Net income for the 52 weeks ended
Jan. 1, 1994 5,903 5,903
Employee stock purchases 175 1,208 (11) 1,372
Collections -- stockholders' notes
receivable 61 61
Cash dividends on common stock
($.20 per share) (Note 7) (5,797) (5,797)
Cash dividends on preferred stock
(Note 7) (1,135) (1,135)
BALANCE AS OF JAN. 1, 1994 198 15,000 29,053 1,889 133,107 (50) 179,197
Net income for the 52 weeks ended
Dec. 31, 1994 8,950 8,950
Employee stock purchases 754 3,390 (4,144) --
Collections -- stockholders' notes
receivable 728 728
Cash dividends on common stock
($.05 per share) (Note 7) (1,490) (1,490)
Cash dividends on preferred stock
(Note 7) (284) (284)
BALANCE AS OF DEC. 31, 1994 $ 198 $ 15,000 $29,807 $ 5,279 $140,283 $ (3,466) $ 187,101
</TABLE>
The accompanying Notes to Financial Statements are an integral part of this
statement.
F-5
<PAGE>
TULTEX CORPORATION
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
FISCAL YEARS ENDED:
DEC. 31,
1994 JAN. 1, 1994 JAN. 2, 1993
(52 WEEKS) (52 WEEKS) (53 WEEKS)
<S> <C> <C> <C>
(IN THOUSANDS OF DOLLARS)
OPERATING ACTIVITIES:
Net Income $ 8,950 $ 5,903 $ 13,191
Items not requiring (providing) cash:
Depreciation 23,973 23,364 20,831
Gain on sale of facilities (4,405) -- --
Deferred income taxes 879 1,880 (234)
Amortization of excess of fair value of assets acquired over cost -- -- (280)
Amortization of intangible assets 1,217 1,217 1,217
Other deferrals (942) 1,859 1,982
Changes in assets and liabilities:
Accounts receivable (23,360) (6,503) (17,685)
Inventories 27,095 (27,112) (25,461)
Prepaid expenses (5,929) (2,598) (2,227)
Accounts payable and accrued expenses (3,093) (790) 1,139
Income taxes payable 179 (3,113) 2,690
Cash provided (used) by operating activities (Notes 3, 6 and 9) 24,564 (5,893) (4,837)
INVESTING ACTIVITIES:
Additions to property, plant and equipment (8,624) (22,250) (30,330)
Change in other assets 1,264 (2,413) 113
Sales and retirements of property and equipment 5,947 299 182
Acquisition of assets and certain liabilities of Logo 7 -- -- (57,756)
Cash used by investing activities (1,413) (24,364) (87,791)
FINANCING ACTIVITIES:
Issuance (payment) of short-term borrowings 1,000 (79,825) 24,063
Issuance of long-term debt 2,054 121,000 140,000
Payments of long-term debt (26,137) (2,268) (79,156)
Preferred stock issued -- -- 15,000
Cash dividends (Note 7) (1,774) (6,932) (6,690)
Proceeds from stock plans 728 1,433 201
Cash provided (used) by financing activities (24,129) 33,408 93,418
Net increase (decrease) in cash and equivalents (978) 3,151 790
Cash and equivalents at beginning of year 6,754 3,603 2,813
CASH AND EQUIVALENTS AT END OF YEAR $ 5,776 $ 6,754 $ 3,603
</TABLE>
The accompanying Notes to Financial Statements are an integral part of this
statement.
F-6
<PAGE>
TULTEX CORPORATION
NOTES TO FINANCIAL STATEMENTS
Fiscal years ended December 31, 1994, January 1, 1994 and January 2, 1993.
NOTE 1 -- ACCOUNTING POLICIES
The significant accounting policies followed by Tultex Corporation and its
subsidiaries in preparing the accompanying consolidated financial statements are
as follows:
BASIS OF CONSOLIDATION: The consolidated financial statements include the
accounts of the company and its subsidiaries. All significant intercompany
balances and transactions are eliminated in consolidation.
CASH AND EQUIVALENTS: The company considers cash on hand, deposits in banks,
certificates of deposit and short-term marketable securities as cash and
equivalents for the purposes of the statement of cash flows. Such cash
equivalents have maturities of less than 90 days.
INVENTORIES: Inventories are recorded at the lower of cost or market, with cost
determined on the first-in, first-out (FIFO) method. See Note 3 for information
concerning the change in the method of valuing inventories from the last-in,
first-out (LIFO) method to the FIFO method during 1993.
PROPERTY, PLANT AND EQUIPMENT: Land, buildings and equipment are carried at
cost. Major renewals and betterments are charged to the property accounts while
replacements, maintenance and repairs which do not improve or extend the lives
of the respective assets are expensed currently. Gain or loss on retirement or
disposal of individual assets is recorded as income or expense.
Depreciation is provided on the straight-line method for all depreciable assets
over their estimated useful lives as follows:
<TABLE>
<CAPTION>
CLASSIFICATION ESTIMATED USEFUL LIVES
<S> <C>
Land and improvements.......................................................... 20 years
Buildings and improvements..................................................... 12-50 years
Machinery and equipment........................................................ 3-20 years
</TABLE>
CAPITALIZED INTEREST: Interest is capitalized on major capital expenditures
during the period of construction. There was no interest capitalized in the
three years ended December 31, 1994.
INTANGIBLE ASSETS: Goodwill and licenses are being amortized on a straight-line
basis over 25 years. The company continually evaluates the existence of goodwill
impairment on the basis of whether the goodwill is fully recoverable from
projected, undiscounted net cash flows of the related business unit. The gross
amount of goodwill was $3,909,000 at December 31, 1994 and January 1, 1994.
Accumulated amortization of goodwill was $469,000 and $313,000 at December 31,
1994 and January 1, 1994, respectively. The gross amount of licenses was
$26,507,000 at December 31, 1994 and January 1, 1994. Accumulated amortization
of licenses was $3,181,000 and $2,120,000 at December 31, 1994 and January 1,
1994, respectively.
PENSIONS: Pension expense includes charges for amounts not less than the
actuarially determined current service costs plus amortization of prior service
costs over 30 years. The company funds amounts accrued for pension expense not
in excess of the amount deductible for federal income tax purposes.
REVENUE RECOGNITION: The company recognizes the sale when the goods are shipped
or ownership is assumed by the customer.
INCOME TAXES: Income taxes are provided based upon income reported for financial
statement purposes. Deferred income taxes reflect the tax effect of temporary
differences between financial and taxable income.
NET INCOME PER SHARE: Net income per common share is computed using the weighted
average number of common shares outstanding during the period after giving
retroactive effect to stock splits and stock dividends and after deducting the
preferred dividend requirements which accrued during the period. The weighted
average number of common shares outstanding were 29,685,000, 28,961,000 and
28,872,000 for fiscal 1994, 1993 and 1992, respectively. Fully diluted net
income per common share is not materially different from primary net income per
common share for fiscal 1994, 1993 and 1992.
F-7
<PAGE>
TULTEX CORPORATION
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
NOTE 1 -- ACCOUNTING POLICIES -- CONTINUED
SEGMENT INFORMATION: The company is a vertically integrated manufacturer and
marketer of activewear and leisure-time apparel which is considered a single
business segment.
FISCAL YEAR: The company's fiscal year ends on the Saturday nearest to December
31, which periodically results in a fiscal year of 53 weeks. The Universal
Industries subsidiary historically observed a calendar year. The difference in
the year-ends was considered to be immaterial on the pooled financial results
contained in this report. Universal Industries, Inc. adopted the fiscal year-end
and quarterly reporting periods of Tultex as of the acquisition date.
OTHER POSTRETIREMENT BENEFITS: As further described in Note 10, the company
changed its method of accounting for the costs of certain life insurance and
medical benefits for eligible retirees and dependents in 1993.
FAIR VALUE OF FINANCIAL INSTRUMENTS: Statement of Financial Accounting Standards
No. 107, "Disclosures about Fair Value of Financial Instruments," requires
disclosure about the fair value of certain instruments. Cash, accounts
receivable, accounts payable, accrued liabilities and variable rate debt are
reflected in the financial statements at fair value because of the short-term
maturity of these instruments. The estimated fair value of the company's fixed
rate debt is disclosed in Note 6.
NOTE 2 -- MERGERS AND ACQUISITIONS
On January 31, 1992, effective as of January 1, 1992, the company acquired
assets, certain liabilities, contracts and licenses of Logo 7, Inc., a major
producer and marketer of licensed sports apparel, for a purchase price of
approximately $58 million, consisting of $15 million (stated value) of a new
series of Cumulative Convertible Preferred Stock, $7.50 Series B and $43 million
cash. The $43 million cash was obtained with a 17-month interim loan from two
banks which was prepaid without penalty. The company obtained permanent
financing on June 26, 1992. The results of Logo 7, Inc. are included in the
company's consolidated statement of income for 1992. The purchase price of $58
million has been allocated to the various acquired assets. Goodwill of
$3,909,000 was determined and is being amortized over 25 years on a
straight-line basis.
On June 30, 1992, the company completed the acquisition of Universal Industries,
Inc., a professional sports hatwear licensee located in Mattapoisett,
Massachusetts, through an all-stock deal valued at $11.1 million for nearly 1.3
million common shares. The valuation of common shares was based on the average
closing price per share on the New York Stock Exchange for the 20 days prior to
the closing of the transaction. The acquisition has been accounted for as a
pooling of interests, and accordingly, the financial statements have been
restated to include the results of operations for Universal for all periods
presented.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 1992
(UNAUDITED)
<S> <C>
(IN THOUSANDS OF DOLLARS)
Net sales and other income:
Tultex...................................................................... $ 138,588
Universal................................................................... 20,777
Combined...................................................................... $ 159,365
Net income:
Tultex...................................................................... $ (5,331)
Universal................................................................... 859
Combined...................................................................... $ (4,472)
</TABLE>
F-8
<PAGE>
TULTEX CORPORATION
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
NOTE 3 -- INVENTORIES
The components of inventories are as follows:
<TABLE>
<CAPTION>
DEC. 31, JAN. 1, JAN. 2,
1994 1994 1993
<S> <C> <C> <C>
(IN THOUSANDS OF DOLLARS)
Raw materials............................................................................ $ 25,704 $ 29,291 $ 23,664
Goods in process......................................................................... 13,453 11,956 13,641
Finished goods........................................................................... 87,436 112,296 88,549
Supplies................................................................................. 3,590 3,735 4,312
Total Inventory........................................................................ $ 130,183 $ 157,278 $ 130,166
</TABLE>
During the fourth quarter of 1993, the company changed its method of determining
the cost of inventories from the LIFO method to the FIFO method. Under the
current economic environment of low inflation, the company believes that the
FIFO method will result in a better measurement of operating results. This
change has been applied by retroactively restating the accompanying consolidated
financial statements. Although this change in method did not materially impact
net income for 1993, it decreased net income by $4,001,000 or 14 cents per share
in 1992. The balances of retained earnings for the years ended December 28, 1991
and January 2, 1993 have been adjusted for the effect (net of income taxes) of
applying retroactively the new method of valuing inventories.
NOTE 4 -- PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment, at cost, consist of the following:
<TABLE>
<CAPTION>
DEC. 31, JAN. 1,
1994 1994
<S> <C> <C>
(IN THOUSANDS OF
DOLLARS)
Land and improvements................................................................................. $ 3,760 $ 3,821
Buildings and improvements............................................................................ 68,262 68,204
Machinery and equipment............................................................................... 207,518 209,044
Construction in progress.............................................................................. 2,444 2,863
281,984 283,932
Less accumulated depreciation......................................................................... 147,100 132,157
Net property, plant and equipment..................................................................... $ 134,884 $ 151,775
</TABLE>
In 1994, the company sold one of its yarn manufacturing facilities. The net
proceeds and gain from the sale amounted to $5,500,000 and $4,405,000,
respectively.
NOTE 5 -- SHORT-TERM CREDIT AGREEMENTS
Until October 6, 1993, when the company entered into a two-year revolving credit
agreement with 12 banks (see Note 6), it had formal short-term lines of credit
with lending banks aggregating $57,000,000 with interest payable at or below the
prime rate. At January 2, 1993, the weighted average interest rate on borrowings
outstanding of $79,825,000 was 4.1%. The use of these lines was restricted to
the extent that the company was required to liquidate its indebtedness to
certain individual banks for a 30-day period each year. At times, the company
borrowed amounts in excess of the lines on a short-term negotiated basis.
The company currently has a short-term line of credit with one lending bank
totaling $3,000,000. Total borrowings outstanding under this line at December
31, 1994 were $1,000,000 with interest at 6.125%. There were no such borrowings
outstanding at January 1, 1994.
The company utilizes letters of credit for foreign sourcing of inventory. Trade
letters of credit outstanding were $2,026,000, $9,715,000 and $5,266,000 at
December 31, 1994, January 1, 1994 and January 2, 1993, respectively. After
October 6, 1993, all letters of credit issued were part of the revolving credit
agreement described in Note 6.
F-9
<PAGE>
TULTEX CORPORATION
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
NOTE 6 -- LONG-TERM DEBT
<TABLE>
<CAPTION>
DEC. 31, JAN. 1,
1994 1994
<S> <C> <C>
(IN THOUSANDS OF
DOLLARS)
Amount due under revolving credit agreement........................................................... $ 104,000 $ 121,000
8 7/8% senior notes due June 1, 1999.................................................................. 95,000 95,000
Term loan due July 31, 1996........................................................................... 15,997 22,917
Other indebtedness.................................................................................... 358 521
215,355 239,438
Less current maturities............................................................................... 132,353 8,524
Total long-term debt................................................................................ $ 83,002 $ 230,914
</TABLE>
On October 6, 1993, the company signed a two-year $225 million revolving credit
agreement with 12 banks with interest at or below prime plus 1/8%. Three of the
banks are co-agents, and one of the three is administrative agent. The facility
replaced the company's previous short-term credit lines used to support working
capital and future growth. The agreement expires in October, 1995.
On June 26, 1992, the company issued 8.875% unsecured, senior notes totaling
$95,000,000. Payments consist of interest only for the first two years and
installment payments of principal and interest for the remaining five years.
As of March 1, 1994, the company amended and restated its 8.94% term loan. Under
the terms of the restatement, interest is payable quarterly at the 90-day LIBOR
rate + .75%, and principal is due in seven remaining quarterly installments of
$2,285,000. In addition, the company also assumed the fixed cost to unwind an
interest rate credit exchange agreement that allowed the lender to provide fixed
rate financing to the company at the inception of the term loan in 1989.
The term loan agreement, senior notes and revolving credit agreement contain
provisions regarding maintenance of working capital and restrictions on payment
of cash dividends. At December 31, 1994, the company was in compliance or had
obtained waivers for any violations of the covenants. Consolidated retained
earnings, which were free of dividend restrictions, amounted to $3,952,000 at
December 31, 1994.
Interest paid by the company in 1994, 1993 and 1992 was $18,598,000, $16,830,000
and $13,180,000, respectively.
The approximate aggregate maturities of long-term debt for each of the next five
fiscal years are as follows:
<TABLE>
<CAPTION>
TOTAL
<S> <C>
(IN THOUSANDS OF DOLLARS)
1995.......................................................................... $ 132,353*
1996.......................................................................... 25,984
1997.......................................................................... 19,006
1998.......................................................................... 19,006
1999.......................................................................... 19,006
</TABLE>
* Includes maturity of $104,000 outstanding under revolving credit agreement.
(See Note 19.)
At December 31, 1994 and January 1, 1994, the carrying amount of the senior
notes exceeded the fair value by approximately $5,800,000 and $900,000,
respectively. The fair value of the company's senior notes was determined using
valuation techniques that considered cash flows discounted at current market
rates in effect as of December 31, 1994 and January 1, 1994.
NOTE 7 -- DIVIDENDS
At January 1, 1994, dividends payable represented amounts paid on January 3,
1994. During the second quarter of 1994, the company suspended the payment of
dividends on its preferred and common stock.
F-10
<PAGE>
TULTEX CORPORATION
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
NOTE 7 -- DIVIDENDS -- CONTINUED
Prior to second quarter 1994, all stated dividends on the five percent
cumulative preferred stock had been declared and paid. Cumulative dividends on
such stock that have not been declared or paid as of December 31, 1994 amounted
to $7,000. Prior to second quarter 1994, all stated dividends on the Series B
cumulative preferred stock had been declared and paid. Cumulative dividends on
such stock that have not been declared or paid as of December 31, 1994 amounted
to $844,000.
NOTE 8 -- STOCK OPTIONS
In 1988, the company's stockholders ratified the 1987 Stock Option Plan under
which 700,000 shares of common stock were reserved for stock option grants to
certain officers and employees. The plan provided that options may be granted at
prices not less than the fair market value on the date the option is granted,
which means the closing price of a share of common stock as reported on the New
York Stock Exchange composite tape on such day. At December 31, 1994, some
options remain unexercised from the 1987 Stock Option Plan, which expired
November 19, 1992.
On March 21, 1991, the company's stockholders ratified the 1990 Stock Option
Plan under which 700,000 shares of common stock were reserved for stock option
grants to certain officers and employees. Options granted under the 1990 Plan
may be incentive stock options ("ISOs") or non-qualified stock options. The
option price will be fixed by the Executive Compensation Committee of the Board
at the time the option is granted, but in the case of an ISO, the price cannot
be less than the share's fair market value on the date of grant. Grants must be
made before October 18, 2000 and expire within 10 years of the date of grant. In
exercising options, an employee may receive a loan from the company for up to
90% of the exercise price. Outstanding loans are shown as a reduction of
stockholders' equity on the balance sheet.
On May 19, 1994, the stockholders approved an increase of 500,000 shares in the
maximum number of shares to be issued pursuant to the exercise of options
granted under the Plan, extended the date that grants could be made to October
7, 2003, and provided that no participant may be granted options in any calendar
year for more than 50,000 shares of common stock.
A summary of the changes in the number of common shares under option for each of
the three previous years follows:
<TABLE>
<CAPTION>
YEAR ENDED NUMBER PER SHARE
DECEMBER 31, 1994 OF SHARES OPTION PRICE
<S> <C> <C>
Outstanding at beginning of year.......................................... 928,233 $6.88-$9.75
Granted................................................................... 397,500 $5.13-$6.00
Exercised................................................................. -- --
Expired................................................................... 20,000 $9.13
Cancelled................................................................. 80,333 $6.00-$9.75
Outstanding at end of year................................................ 1,225,400 $5.13-$9.75
Exercisable at end of year................................................ 1,025,400 $5.13-$9.75
Shares reserved for future grant:
Beginning of year......................................................... 39,900
End of year............................................................... 190,000
</TABLE>
F-11
<PAGE>
TULTEX CORPORATION
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
NOTE 8 -- STOCK OPTIONS -- CONTINUED
<TABLE>
<CAPTION>
YEAR ENDED NUMBER PER SHARE
JANUARY 1, 1994 OF SHARES OPTION PRICE
<S> <C> <C>
Outstanding at beginning of year 1,015,833 $7.50-$9.63
Granted.................................................................. 280,000 $6.88-$9.75
Exercised................................................................ 175,600 $7.63-$9.63
Expired.................................................................. 165,000 $7.88
Cancelled................................................................ 27,000 $7.63-$9.63
Outstanding at end of year............................................... 928,233 $6.88-$9.75
Exercisable at end of year............................................... 748,233 $6.88-$9.75
Shares reserved for future grant:
Beginning of year........................................................ 307,400
End of year.............................................................. 39,900
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED NUMBER PER SHARE
JANUARY 2, 1993 OF SHARES OPTION PRICE
<S> <C> <C>
Outstanding at beginning of year....................................... 545,196 $7.50-$11.92
Granted................................................................ 536,600 $8.38-$ 9.63
Exercised.............................................................. 14,734 $7.63-$ 9.63
Expired................................................................ 26,463 $11.92
Cancelled.............................................................. 24,766 $7.63-$ 9.63
Outstanding at end of year............................................. 1,015,833 $7.50-$ 9.63
Exercisable at end of year............................................. 945,833 $7.50-$ 9.63
Shares reserved for future grant:
Beginning of year...................................................... 836,350
End of year............................................................ 307,400
</TABLE>
NOTE 9 -- PROVISION FOR INCOME TAXES
The components of the provision for federal and state income taxes are
summarized as follows:
<TABLE>
<CAPTION>
JAN. JAN.
DEC. 31, 1, 2,
1994 1994 1993
<S> <C> <C> <C>
(IN THOUSANDS OF DOLLARS)
Currently payable:
Federal........................................................................................ $4,072 $1,192 $6,694
State.......................................................................................... 534 116 600
4,606 1,308 7,294
Deferred:
Federal........................................................................................ 590 1,723 (214)
State.......................................................................................... 289 157 (20)
879 1,880 (234)
Total provision.................................................................................. $5,485 $3,188 $7,060
</TABLE>
Deferred income taxes resulted from the following temporary differences:
F-12
<PAGE>
TULTEX CORPORATION
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
NOTE 9 -- PROVISION FOR INCOME TAXES -- CONTINUED
<TABLE>
<CAPTION>
DEC. JAN. JAN.
31, 1, 2,
1994 1994 1993
<S> <C> <C> <C>
(IN THOUSANDS OF DOLLARS)
Depreciation............................................................ $ 579 $2,095 $2,864
Inventory............................................................... 1,388 (24) (3,110)
Pension................................................................. 31 (486) (83)
Abandonment loss........................................................ -- 187 --
Intangible assets....................................................... 299 283 --
Postretirement benefits................................................. (58) (172) --
AMT credit carry-forward................................................ (1,617) -- --
Bad debt and other allowances........................................... 99 (2) 1
Other................................................................... 158 (1) 94
Total................................................................. $ 879 $1,880 $ (234)
</TABLE>
Significant components of the deferred tax liabilities and assets are as
follows:
<TABLE>
<CAPTION>
DEC. 31, JAN. 1,
1994 1994
<S> <C> <C>
(IN THOUSANDS OF
DOLLARS)
Deferred tax liabilities:
Tax over book depreciation.................................................... $ 16,569 $ 15,990
Spare parts inventory......................................................... 776 797
Intangible assets............................................................. 724 425
Inventory..................................................................... 177 --
Other......................................................................... 303 39
Gross deferred tax liabilities.................................................. 18,549 17,251
Deferred tax assets:
Bad debt and other allowances................................................. 466 565
Inventory reserves............................................................ -- 1,211
Postretirement benefits....................................................... 234 176
Pension obligations........................................................... 931 962
Worker's compensation......................................................... 225 182
AMT credit carryforward....................................................... 1,617 --
Other......................................................................... 183 141
Gross deferred tax assets....................................................... 3,656 3,237
Net deferred tax liabilities.................................................... $ 14,893 $ 14,014
</TABLE>
A reconciliation of the statutory federal income tax rates with the company's
effective income tax rates for 1994, 1993 and 1992 was as follows:
<TABLE>
<CAPTION>
DEC. 31, JAN. 1, JAN. 2,
1994 1994 1993
<S> <C> <C> <C>
Statutory federal rate..................................................... 35% 34 % 34 %
State rate, net............................................................ 3 2 2
Untaxed foreign income..................................................... -- -- (1)
Other...................................................................... -- (1) --
Effective income tax rate.................................................. 38% 35 % 35 %
</TABLE>
Income tax payments were $4,659,000, $4,512,000 and $4,404,000 for fiscal 1994,
1993 and 1992, respectively.
F-13
<PAGE>
TULTEX CORPORATION
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
NOTE 9 -- PROVISION FOR INCOME TAXES -- CONTINUED
In 1992, the company adopted the provisions of the Statement of Financial
Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes." The
company's adoption of SFAS No. 109 resulted in no material effect on 1992
earnings.
The company is currently undergoing an examination by the Internal Revenue
Service for the years ended 1991, 1992 and 1993. While the examination is not
complete, management does not expect the outcome to materially impact the
company's financial position or results of operations.
NOTE 10 -- EMPLOYEE BENEFITS
All qualified employees of the parent company and its Universal subsidiary are
covered by a noncontributory, defined benefit plan. The benefits are based on
years of service and the employee's highest five consecutive calendar years of
compensation paid during the 10 most recent years before retirement. Prior
service costs are amortized over 30 years. The status of the defined benefit
plan as of December 31, 1994, January 1, 1994 and January 2, 1993 was as
follows:
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
(IN THOUSANDS OF DOLLARS)
Fair value of plan assets, primarily listed stocks and corporate and government debt......... $34,594 $40,261 $40,006
Accumulated benefit obligation, including vested benefits of $26,733 and $29,294,
respectively............................................................................... 27,393 30,114 27,977
Additional benefits based on estimated future salary levels.................................. 6,002 6,851 9,592
Projected benefit obligation................................................................. 33,395 36,965 37,569
Plan assets in excess of projected benefit obligation........................................ 1,199 3,296 2,437
Unrecognized net gain........................................................................ (1,273) (2,910) (1,253)
Unrecognized net transitional assets......................................................... (1,838) (2,308) (2,777)
Unrecognized prior service cost.............................................................. 145 257 293
Accrued pension liability.................................................................... $(1,767) $(1,665) $(1,300)
</TABLE>
The following rate assumptions were made for the plan:
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Discount rate of return on projected benefit obligation..................................... 8.5% 7.75% 8.0%
Rate of return on plan assets............................................................... 10.0% 10.0% 10.0%
</TABLE>
The long-term rate of salary progression for 1994 reflected no rate increase for
the first year, followed by 3.5% for two years, 4.0% for six years with an
ultimate rate of increase of 5.0%. The long-term rate for 1993 reflected no
anticipated rate increase for the first two years, followed by 3.5% for two
years, 4% for six years and 5% thereafter. The comparable rate in 1992 was 5%
for all years. The effect of the change in assumed salary progression rates from
1992 to 1993 had no material impact on pension expense for 1993 and decreased
pension expense for 1994 by $383,000. The changes in rates and assumptions from
year to year were made to reflect what management considered to be a better
approximation of the rates to be realized.
F-14
<PAGE>
TULTEX CORPORATION
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
NOTE 10 -- EMPLOYEE BENEFITS -- CONTINUED
Pension expense in 1994, 1993 and 1992 included the following components:
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
(IN THOUSANDS OF DOLLARS)
Service cost-benefits earned during the period....................................... $1,707 $1,861 $1,697
Interest on projected benefit obligation............................................. 2,808 2,893 3,176
Actual (gain) loss on plan assets.................................................... 4,587 (2,362) (2,400)
Net deferral......................................................................... (9,000) (1,919) (1,370)
Curtailment loss..................................................................... -- -- 104
Settlement gain...................................................................... -- -- (151)
Net periodic pension cost............................................................ $ 102 $ 473 $1,056
</TABLE>
The company's policy has been to fund the minimum required contribution after
the end of the fiscal year plus interest on the contribution from the end of the
plan year until paid. The company's Universal Industries subsidiary historically
funded the maximum required contribution during the year.
At the end of 1992, Universal Industries, Inc. pension plan's future service
benefits were frozen and the plan assets were absorbed into the company's
pension plan, which resulted in a curtailment loss of $104,000.
The company has a nonqualified, unfunded supplementary retirement plan for which
it has puchased cost recovery life insurance on the lives of the participants.
The company is the sole owner and beneficiary of such policies. The amount of
coverage is designed to provide sufficient revenues to recover all costs of the
plan if assumptions made as to mortality experience, policy earnings and other
factors are realized. Expenses related to the plan were $536,000 in 1994,
$547,000 in 1993 and $395,000 in 1992. The actuarially determined liability
which has been included in other deferrals was $2,684,000 at December 31, 1994,
$3,190,000 at January 1, 1994 and $2,313,000 at January 2, 1993.
The following table sets forth the plan's status and amounts recognized in the
company's financial statements at December 31, 1994, January 1, 1994 and January
2, 1993:
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
(IN THOUSANDS OF DOLLARS)
Fair value of plan assets............................................. $ -- $ -- $ --
Accumulated benefit obligation, including vested benefits of $3,406
and $3,043, respectively............................................ 3,506 3,190 2,313
Additional benefits based on estimated future salary levels........... 433 (5) 1,341
Projected benefit obligation.......................................... 3,939 3,185 3,654
Projected benefit obligation in excess of plan assets................. (3,939) (3,185) (3,654)
Unrecognized net loss................................................. 1,271 667 1,213
Unrecognized prior service cost....................................... 280 -- --
Unrecognized transitional obligation.................................. 992 1,092 1,193
Adjustment required to recognize minimum liability.................... (2,110) (1,764) (1,065)
Unfunded accrued supplementary costs.................................. $(3,506) $(3,190) $(2,313)
</TABLE>
Net supplementary pension cost for the three years included the following
components:
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
(IN THOUSANDS OF
DOLLARS)
Service cost-benefits earned during the period............................................... $139 $110 $ 95
Interest on projected benefit obligation..................................................... 255 276 200
Net amortization............................................................................. 142 161 100
Net periodic supplementary pension cost...................................................... $536 $547 $395
</TABLE>
F-15
<PAGE>
TULTEX CORPORATION
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
NOTE 10 -- EMPLOYEE BENEFITS -- CONTINUED
Substantially all employees meeting certain service requirements are eligible to
participate in the company's employee savings (401k) plan. Employee
contributions are limited to a percentage of their compensation, as defined in
the plan. Although the plan did not provide for any company contributions in
1992, a matching provision became effective in April 1993, but was discontinued
on January 2, 1994.
Substantially all employees are eligible to receive certain bonuses or
profit-sharing amounts, the amounts of which are determined at management's
discretion. Such expenses amounted to $1,791,000 in 1994, $2,329,000 in 1993 and
$6,071,000 in 1992.
The company also provides certain postretirement medical and life insurance
benefits to substantially all employees who retire with a minimum of 20 years of
service for the period of time until the employee and any dependents reach age
65. The medical plan requires monthly contributions by retired participants
which are dependent on the participant's length of service, age at the date of
retirement and Medicare eligibility. The life insurance plan is noncontributory.
Prior to 1993, the company expensed the costs relating to these unfunded plans
as incurred. Such costs amounted to approximately $375,000 in 1992.
In 1993, the company adopted Statement of Financial Accounting Standards (SFAS)
No. 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions." The standard required companies to recognize the estimated costs of
providing postretirement benefits on an accrual basis. The company elected the
delayed recognition method of adoption which allows amortization of the initial
transitional obligation over a 20-year period. At January 3, 1993, the
actuarially determined accumulated postretirement benefit obligation was
$5,101,000.
The amounts recognized in the company's balance sheet at December 31, 1994 and
January 1, 1994 were as follows:
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
(IN THOUSANDS OF
DOLLARS)
Accumulated postretirement benefit obligation...................................................... $ 7,066 $ 5,323
Unrecognized transitional obligation............................................................... (4,590) (4,846)
Unrecognized loss.................................................................................. (1,847) --
Accrued liability.................................................................................. $ 629 $ 477
</TABLE>
Net periodic postretirement benefit cost for 1994 and 1993 included the
following components:
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
(IN THOUSANDS
OF DOLLARS)
Service cost-benefits earned during the period.......................................................... $198 $171
Interest on accumulated postretirement benefit obligation............................................... 398 402
Amortization of accumulated postretirement benefit obligation........................................... 256 256
Total periodic postretirement benefit cost............................................................ $852 $829
</TABLE>
The discount rate used in determining the accumulated postretirement benefit
obligation was 8.5% for 1994 and 8% for 1993. The assumed medical cost trend
rate was 12% in 1993, declining by 1% per year until an ultimate rate of 5% is
achieved. For 1994, the rate used was 11%, still declining by 1% per year until
reaching an ultimate goal of 5.5%. The medical cost rate assumption has a
significant effect on the amount of the obligation and net periodic cost
reported.
The adoption of Statement of Financial Accounting Standards (SFAS) No. 112,
"Employers' Accounting for Postemployment Benefits" in 1994 had no material
impact on the company's results of operations or financial position, as the
company does not have significant postemployment benefits.
F-16
<PAGE>
TULTEX CORPORATION
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
NOTE 11 -- QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
The following is a summary of the unaudited quarterly financial information for
the years ended December 31, 1994 and January 1, 1994.
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
(IN THOUSANDS OF
DOLLARS
EXCEPT PER SHARE DATA)
NET SALES AND OTHER INCOME
1st quarter................................................................................... $ 86,294 $ 91,022
2nd quarter................................................................................... 101,900 100,238
3rd quarter................................................................................... 208,931 187,109
4th quarter................................................................................... 168,308 155,242
Total...................................................................................... $565,433 $533,611
GROSS PROFIT
1st quarter................................................................................... $ 18,511 $ 21,957
2nd quarter................................................................................... 18,757 23,386
3rd quarter................................................................................... 44,136 38,742
4th quarter................................................................................... 42,049 31,985
Total...................................................................................... $123,453 $116,070
INCOME BEFORE INCOME TAXES
1st quarter................................................................................... $ (7,916) $ (2,295)
2nd quarter................................................................................... (4,892) 681
3rd quarter................................................................................... 11,924 7,437
4th quarter................................................................................... 15,319 3,268
Total...................................................................................... $ 14,435 $ 9,091
PROVISION FOR INCOME TAXES
1st quarter................................................................................... $ (3,008) $ (852)
2nd quarter................................................................................... (1,859) 246
3rd quarter................................................................................... 4,531 2,767
4th quarter................................................................................... 5,821 1,027
Total...................................................................................... $ 5,485 $ 3,188
NET INCOME
1st quarter................................................................................... $ (4,908) $ (1,443)
2nd quarter................................................................................... (3,033) 435
3rd quarter................................................................................... 7,393 4,670
4th quarter................................................................................... 9,498 2,241
Total...................................................................................... $ 8,950 $ 5,903
NET INCOME PER COMMON SHARE
1st quarter................................................................................... $ (.18) $ (.06)
2nd quarter................................................................................... (.11) .01
3rd quarter................................................................................... .24 .15
4th quarter................................................................................... .31 .06
Total...................................................................................... $ .26 $ .16
</TABLE>
F-17
<PAGE>
TULTEX CORPORATION
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
NOTE 12 -- COMMITMENTS
At December 31, 1994, the company was obligated under a number of
noncancellable, renewable operating leases as follows:
<TABLE>
<CAPTION>
MANUFACTURING
DATA FACILITIES
PROCESSING AND
EQUIPMENT OTHER TOTAL
<S> <C> <C> <C>
(IN THOUSANDS OF DOLLARS)
1995................................................................................... $ 2,890 $ 6,877 $ 9,767
1996................................................................................... 2,759 5,154 7,913
1997................................................................................... 2,303 4,086 6,389
1998................................................................................... 1,056 2,930 3,986
1999................................................................................... -- 2,080 2,080
2000 and after......................................................................... -- 14,054 14,054
$ 9,008 $35,181 $44,189
</TABLE>
Rental expense charged to income was $13,358,000 in 1994, $15,092,000 in 1993
and $13,696,000 in 1992.
The company has entered into various licensing agreements which permit it to
market apparel with copyrighted logos and characters from the sports and
entertainment industries. Under the terms of these agreements, the company is
required to pay minimum guaranteed fees to certain licensors. The remaining
minimum obligations under these agreements at December 31, 1994 were
approximately $9,100,000 in fiscal 1995, $8,200,000 in fiscal 1996 and
$8,400,000 in fiscal 1997.
NOTE 13 -- EMPLOYMENT AGREEMENTS
The company has entered into employment continuity agreements with certain of
its executives which provide for the payments to these executives of amounts up
to three times their annual compensation plus continuation of certain benefits
if there is a change in control in the company (as defined) and a termination of
their employment. The maximum contingent liability at December 31, 1994 under
these agreements was approximately $4,393,000.
Employment agreements with certain executives were executed as a result of the
Logo 7 acquisition. As of February 5, 1995, these agreements were renegotiated.
Under predefined events of termination, the company could incur a maximum
liability of $3,490,000.
NOTE 14 -- CONCENTRATION OF CREDIT RISK
The company's concentration of credit risk is limited due to the large number of
primarily domestic customers who are geographically dispersed. The company had
one customer which constituted 10.4% of net sales in 1994. There were no such
customers in 1993 or 1992. As disclosed on the balance sheet, the company
maintains an allowance for doubtful accounts to cover estimated credit losses.
NOTE 15 -- SHAREHOLDER RIGHTS PLAN
In March 1990, the Board of Directors of the company adopted a Shareholder
Rights Plan and declared a dividend of one right for each outstanding share of
common stock to shareholders of record on April 2, 1990. Each right entitles the
registered holder to purchase from the company, until the earlier of March 22,
2000 or the redemption of the rights, one one-thousandth of a share of newly
authorized Junior Participating Cumulative Preferred Stock, Series A, without
par value, at an exercise price of $40. The rights are not exercisable or
transferable apart from the common stock until the earlier of (i) 10 days
following the public announcement that a person or a group of affiliated persons
has acquired or obtained the right to acquire beneficial ownership of 10% or
more of the company's outstanding common stock or (ii) 10 business days
following the commencement of a tender offer or exchange offer that would result
in a person or group owning 10% or more of the company's outstanding common
stock. The company may redeem the rights at a price of
F-18
<PAGE>
TULTEX CORPORATION
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
NOTE 15 -- SHAREHOLDER RIGHTS PLAN -- CONTINUED
$.01 per right at any time prior to the acquisition of 10% or more of the
company's outstanding common stock or certain other triggering events.
NOTE 16 -- STOCK PURCHASE PLAN
In February 1994, the company initiated the Salaried Employee's Stock Purchase
Plan. Under the plan, employees could elect to purchase shares of the company's
common stock in amounts ranging from 20-30% of their annual salary. Employees
will pay for the stock through payroll deductions over a 60-month period.
Interest at 6% per annum will be charged until the stock is fully paid and the
shares will be held by the company until that time. Under the plan, 753,667
shares were issued at a price of $5.50. Of the $4,144,000 loans recorded for the
shares, $702,000 has been collected, leaving an outstanding balance at December
31, 1994 of $3,442,000. Interest realized during 1994 on the loans was $188,000.
In January 1995, the directors of the company approved an amendment to the plan
that allows an employee options for early payment of the loan.
NOTE 17 -- ADVERTISING COSTS
In fiscal 1995, the company will be required to adopt the provisions of the
Accounting Standards Executive Committee's Statement of Position on Reporting
Advertising Costs ("Statement"). The Statement effectively requires that certain
advertising costs which were previously deferred and amortized over an
anticipated benefit period be recognized currently in the statement of income.
If the company had adopted the Statement as of December 31, 1994, selling,
general and administrative expenses as reported on the statement of income would
have increased by approximately $4,900,000.
NOTE 18 -- UNIONIZATION OF FACILITIES
In August 1994, hourly employees at the company's Martinsville, Virginia
facilities voted for representation by the Amalgamated Clothing and Textile
Workers Union. The company is currently negotiating a labor contract with the
union which would cover those employees.
NOTE 19 -- REFINANCING
The company has filed a Registration Statement on Form S-1 with the Securities
and Exchange Commission to offer to the public an aggregate of $110,000,000
principal amount of Senior Notes due 2005 ("Senior Notes"). The company is
anticipating completion of the offering during the first quarter of 1995. The
company intends to use the net proceeds from the offering together with
borrowings under the senior credit facility referred to below to pay principal,
accrued interest and prepayment expenses related to the $95,000,000 aggregate
principal amount of senior notes due June 1, 1999 and the $15,997,000 aggregate
principal amount term loan due July 31, 1996. In connection with the
repayment of the senior notes and the term loan, the company will be required to
write-off unamortized debt issuance costs and will incur a prepayment penalty.
As of December 31, 1994, unamortized debt issuance costs related to the senior
notes and term loan were $2,913,000. If the repayment of the senior notes and
term loan had occurred at December 31, 1994 the prepayment penalty would have
been $1,278,000.
Concurrent with the Senior Note offering, the company expects to enter into a
senior credit facility with a number of banks. This facility will replace the
revolving credit agreement described in Note 6. The terms of the new facility
are expected to be substantially equivalent to those included in the existing
revolving credit agreement. Unamortized debt issuance costs related to the
revolving credit agreement at December 31, 1994 were $598,000.
All subsidiaries of the company ("Subsidiary Guarantors") will fully and
unconditionally guarantee the company's obligations under the Senior Notes on a
joint and several basis.
F-19
<PAGE>
TULTEX CORPORATION
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
NOTE 20 -- CONDENSED CONSOLIDATING FINANCIAL INFORMATION
The following financial information presents condensed consolidating financial
data which includes (i) the parent company only ("Parent"), (ii) the
wholly-owned subsidiaries on a combined basis ("Wholly-owned Subsidiaries"),
(iii) the majority-owned subsidiary ("Majority-owned Subsidiary") and (iv) the
company on a consolidated basis. All subsidiaries will guarantee the Senior
Notes as discussed in Note 19.
F-20
<PAGE>
TULTEX CORPORATION
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
NOTE 20 -- CONDENSED CONSOLIDATING FINANCIAL INFORMATION -- CONTINUED
<TABLE>
<CAPTION>
WHOLLY- MAJORITY-
OWNED OWNED
PARENT SUBSIDIARIES SUBSIDIARY ELIMINATIONS
<S> <C> <C> <C> <C>
(IN THOUSANDS OF DOLLARS)
As of and for the year ended December 31, 1994
Current assets $242,754 $110,927 $1,938 $ (65,712)
Noncurrent assets 185,383 41,894 -- (60,375)
Total assets $428,137 $152,821 $1,938 $ (126,087)
Current liabilities $153,163 $ 76,728 $1,698 $ (64,536)
Noncurrent liabilities 101,098 1,611 (56) 2
Total liabilities $254,261 $ 78,339 $1,642 $ (64,534)
Net sales $341,420 $240,239 $3,644 $ (19,870)
Cost and expenses 327,931 239,748 3,931 (20,612)
Pretax net income (loss) $ 13,489 $ 491 $ (287) $ 742
As of and for the year ended January 1, 1994
Current assets $237,088 $111,401 $2,906 $ (62,704)
Noncurrent assets 203,828 44,578 -- (62,132)
Total assets $440,916 $155,979 $2,906 $ (124,836)
Current liabilities $ 15,597 $ 80,895 $2,442 $ (53,796)
Noncurrent liabilities 257,459 486 (51) (7,264)
Total liabilities $273,056 $ 81,381 $2,391 $ (61,060)
Net sales $323,785 $234,278 $6,489 $ (30,941)
Cost and expenses 320,689 227,673 6,632 (30,474)
Pretax net income (loss) $ 3,096 $ 6,605 $ (143) $ (467)
As of and for the year ended January 2, 1993
Current assets $206,692 $ 82,901 $2,518 $ (42,784)
Noncurrent assets 205,689 45,624 -- (64,822)
Total assets $412,381 $128,525 $2,518 $ (107,606)
Current liabilities $105,406 $ 58,268 $1,999 $ (43,063)
Noncurrent liabilities 135,633 16 (48) (1,186)
Total liabilities $241,039 $ 58,284 $1,951 $ (44,249)
Net sales $338,856 $192,586 $3,725 $ (31,221)
Cost and expenses 327,889 181,922 3,489 (29,605)
Pretax net income (loss) $ 10,967 $ 10,664 $ 236 $ (1,616)
<CAPTION>
CONSOLIDATED
<S> <C>
As of and for the year ended December 31, 1994
Current assets $289,907
Noncurrent assets 166,902
Total assets $456,809
Current liabilities $167,053
Noncurrent liabilities 102,655
Total liabilities $269,708
Net sales $565,433
Cost and expenses 550,998
Pretax net income (loss) $ 14,435
As of and for the year ended January 1, 1994
Current assets $288,691
Noncurrent assets 186,274
Total assets $474,965
Current liabilities $ 45,138
Noncurrent liabilities 250,630
Total liabilities $295,768
Net sales $533,611
Cost and expenses 524,520
Pretax net income (loss) $ 9,091
As of and for the year ended January 2, 1993
Current assets $249,327
Noncurrent assets 186,491
Total assets $435,818
Current liabilities $122,610
Noncurrent liabilities 134,415
Total liabilities $257,025
Net sales $503,946
Cost and expenses 483,695
Pretax net income (loss) $ 20,251
</TABLE>
NOTE 21 -- PRO FORMA FINANCIAL INFORMATION (UNAUDITED)
Pro forma income from continuing operations and pro forma income per common
share from continuing operations have been calculated by adjusting historical
results of operations to give effect to the consummation of the refinancing
described in Note 19 as though the refinancing had been finalized at January 2,
1994. Pro forma income from continuing operations and pro forma income per
common share from continuing operations for the fiscal year ending December 31,
1994 would have been $6,596,000 and $0.18, respectively. For purposes of
preparing the proforma financial information, the company assumed rates of
interest of 11.5% and 5.7% on the Senior Notes and the senior credit facility,
respectively. On a proforma basis, a 1/8% increase in the company's weighted
average variable interest rate for the senior credit facility would have
resulted in pro forma income from continuing operations and pro forma income per
common share from continuing operations of $6,458,000 and $0.18, respectively.
F-21
<PAGE>
(on inside back cover photographs and captions appear as described:
1. Photo: Yarn spinning machinery.
Caption: High-efficiency yarn spinning facilities...
2. Photo: Dyeing machinery.
Caption: Computer controlled jet dyeing machinery...
3. Photo: Drying machinery.
Caption: Modern computerized drying technology...
4. Photo: Woman sewing garments.
Caption: Production sewing machine operators...
5. Photo: Inside view of distribution center.
Photo: Outside view of distribution center, with Tultex truck
in foreground.
Caption: State of the art distribution center, the most highly
automated in the industry...
<PAGE>
(Tultex logo appears on the Back Cover)
<PAGE>
PART II
Information Not Required in Prospectus
Item 13. Other Expenses of Issuance and Distribution
The estimated expenses in connection with the offering are as follows:
SEC Registration Fee. . . . . . . . . . . . . . . . . $ 39,656
NASD Fee. . . . . . . . . . . . . . . . . . . . . . . 12,000
Blue Sky Fees . . . . . . . . . . . . . . . . . . . . 25,000
Legal Fees. . . . . . . . . . . . . . . . . . . . . . 150,000
Accounting Fees . . . . . . . . . . . . . . . . . . . 70,000
Printing Expenses . . . . . . . . . . . . . . . . . . 30,000
Miscellaneous . . . . . . . . . . . . . . . . . . . . 85,344
Total . . . . . . . . . . . . . . . . . . . . . . . $ 412,000
Item 14. Indemnification of Officers and Directors
The Virginia Stock Corporation Act permits, and the Company's Articles of
Incorporation (the "Articles") require, indemnification of the Company's
directors and officers in a variety of circumstances that may include
liabilities under the Securities Act of 1933, as amended (the "Securities
Act"). Under sections 13.1-697 and 13.1-702 of the Virginia Stock
Corporation Act, a Virginia corporation is generally authorized to
indemnify its directors and officers in civil or criminal actions if they
acted in good faith and, in the case of criminal actions, had no reasonable
cause to believe that the conduct was unlawful. The Company's Articles
require indemnification of any person with respect to certain liabilities
incurred in connection with any proceeding to which that person is made a
party by reason of (i) his service to the Company as a director or officer,
or (ii) his service as director, officer, trustee or partner to some other
enterprise at the request of the Company, except in the case of willful
misconduct or a knowing violation of criminal law. In addition, the
Company carries insurance on behalf of directors, officers, employees and
agents that may cover liabilities under the Securities Act. As permitted
by the Virginia Stock Corporation Act, the Company's Articles provide that
in any proceeding brought by a shareholder of the Company in the right of
the Company or brought by or on behalf of shareholders of the Company, no
director or officer of the Company shall be liable to the Company or its
shareholders for monetary damages with respect to any transaction,
occurrence or course of conduct, whether prior or subsequent to the
effective date of such Articles, except for liability resulting from such
person having engaged in willful misconduct or a knowing violation of the
criminal law or any federal or state securities law.
Item 15. Recent Sales of Unregistered Securities
The Company has sold the following securities during the past three years
on the dates and for the consideration indicated:
Capital Stock
In January 1992, the Company issued an aggregate of 150,000 shares of
Cumulative Convertible Preferred Stock, $7.50 Series B, having a stated
value of $15 million to LG Sale Corporation, Inc. and Herbert and Melvin
Simon in connection with the acquisition of the business of Logo 7.
In June 1992, the Company issued 1,263,393 shares of Common Stock having a
market value of $11,086,268 in exchange for the capital stock of Universal.
Debt
In June 1992, the Company issued $95 million of the 8 7/8% Notes to various
institutional investors. J. P. Morgan Securities Inc. acted as placement
agent for the 8 7/8% Notes.
All of the above securities were offered and issued in private transactions
not involving any public offering and were accordingly exempt from the
registration provisions of the Securities Act pursuant to Section 4(2)
thereof.
Item 16.
(a) Exhibits
1 Form of Underwriting Agreement among Tultex Corporation, the
Guarantors and the Underwriters
3.1 Restated Articles of Incorporation of Tultex Corporation (filed
as Exhibit 3.1 to the Company's Form 10-K for the fiscal year
ended December 29, 1990 and incorporated herein by reference)
3.2 Articles of Amendment to the Restated Articles of Incorporation
of Tultex Corporation (filed as Exhibit 3 to the Company's
Current Report on Form 8-K dated January 31, 1992 and
incorporated herein by reference)
3.3 By-laws of Tultex Corporation
3.4 Articles of Incorporation of AKOM, Ltd.
3.5 Bylaws of AKOM, Ltd.
3.6 Articles of Incorporation of Dominion Stores, Inc.
3.7 Bylaws of Dominion Stores, Inc.
3.8 Articles of Incorporation of Tultex International, Inc.
3.9 Bylaws of Tultex International, Inc.
3.10 Articles of Incorporation of Logo 7, Inc.
3.11 Bylaws of Logo 7, Inc.
3.12 Articles of Incorporation of Universal Industries, Inc.
3.13 Bylaws of Universal Industries, Inc.
3.14 Articles of Incorporation of Tultex Canada, Inc.
3.15 Bylaws of Tultex Canada, Inc.
3.16 Articles of Incorporation of Sweatjet, Inc.
3.17 Bylaws of Sweatjet, Inc.
4.1 Form of Indenture among Tultex Corporation, the Guarantors and
First Union National Bank of Virginia, as Trustee, relating to
the Notes
4.2 Form of Senior Note (included in Exhibit 4.1)
4.3 Form of Subsidiary Guarantee (included in Exhibit 4.1)
5 Opinion of Hunton & Williams (including consent)
10.1 Tultex Corporation 1987 Stock Option Plan (filed as Exhibit B to
the Company's Definitive Proxy Statement dated January 15, 1988
and incorporated herein by reference)
10.2 Tultex Corporation 1990 Stock Option Plan (filed as Exhibit A to
the Company's Definitive Proxy Statement dated February 14, 1991
and incorporated herein by reference)
10.3 Tultex Corporation Supplemental Retirement Plan (filed as Exhibit
10.3 to the Company's Form 10-K for the fiscal year ended
December 30, 1989 and incorporated herein by reference)
10.4 Tultex Corporation Salaried Employees' Common Stock Purchase
Plan, dated February 11, 1994 (filed as Exhibit 4.5 to the
Company's Registration Statement Form S-8 dated February 11, 1994
and incorporated herein by reference)
10.5 Form of Employment Continuity Agreement (filed as Exhibit 10.6 to
the Company's Form 10-Q for the quarter ended April 1, 1989 and
the Company's Form 10-Q for the quarter ended March 31, 1990 and
incorporated herein by reference)
10.6 Standstill Agreement, dated as of January 31, 1992, among Tultex
Corporation, Logo 7, Inc. (Ind.), Melvin Simon and Herbert Simon
(filed as Exhibit 10(b) to the Company's Current Report on Form
8-K dated January 31, 1992 and incorporated herein by reference)
10.7 Credit Agreement, dated as of October 6, 1993, as amended by
First Amendment and Waiver to Credit Agreement dated as of March
4, 1994 for $225 million credit facility (filed as Exhibit 10.18
to the Company's Form 10-Q for the quarter ended October 2, 1993
(Credit Agreement) and Exhibit 10.22 to the Company's Form 10-Q
for the quarter ended April 2, 1994 (First Amendment and Waiver
to Credit Agreement) and incorporated herein by reference)
10.8 Agreement for Amended and Restated Term Loan Agreement, dated
March 1, 1994 between the Company and Wachovia Bank of North
Carolina, N.A. (filed as Exhibit 10.21 to the Company's Form 10-Q
for the quarter ended April 2, 1994 and incorporated herein by
reference)
10.9 Note Agreements, dated June 1, 1992, as amended by Amendment No.
1 to Note Agreements dated as of September 1, 1993 and Second
Amendment to Note Agreements dated as of March 1, 1994, between
the Company and each of the institutions named therein (filed as
Exhibit 4.1 to the Company's Form 10-Q for the quarter ended June
27, 1992 (Note Agreements), Exhibit 10.17 to the Company's Form
10-Q for the quarter ended October 2, 1993 (Amendment No. 1 to
Note Agreements), and Exhibit 10.20 to the Company's Form 10-Q
for the quarter ended April 2, 1994 (Second Amendment to Note
Agreements) and incorporated herein by reference)
11 The computation of earnings per share can be clearly determined
from the financial statements of the Company contained in the
Prospectus
12 Computation of ratios of earnings to fixed charges
21 Subsidiaries of the Company*
23.1 Consent of Price Waterhouse LLP
23.2 Consent of Hunton & Williams (included in Exhibit 5)
24.1 Powers of attorney*
24.2 Certified resolution adopted by the Boards of Directors of each
of the Company, AKOM, Ltd., Dominion Stores, Inc., Tultex
International, Inc., Logo 7, Inc., Universal Industries, Inc. and
Sweatjet, Inc. with respect to the authority of the officers of
such entities to execute the Registration Statement by power of
attorney
24.3 Certified resolution adopted by the Board of Directors of Tultex
Canada, Inc., with respect to the authority of the officers of
such entity to execute the Registration Statement by power of
attorney
25 Statement of Eligibility and Qualification on Form T-1 of First
Union National Bank of Virginia, as the Trustee under the Trust
Indenture Act of 1939*
27 Financial Data Schedule
___________________________
*Previously filed.
(b) Financial Statement Schedule
The following financial statement schedule is included as part of this
Registration Statement:
Schedule VIII Valuation and Qualifying Accounts and Reserves
Note: All other schedules for which provision is made in the
applicable accounting regulations of the Commission are not required
under the related instructions, are inapplicable or have been
disclosed in the Notes to Consolidated Financial Statements and,
therefore, have been omitted.
Item 17. Undertakings
(a) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing provisions,
or otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the registrant of expenses incurred or paid by a director,
officer, or controlling person of the registrant in the successful defense
of any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
(b) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the
Securities Act of 1933, the information omitted from the form of
prospectus filed as part of this registration statement in reliance
upon Rule 430A and contained in a form of prospectus filed by the
registrant pursuant to Rule 424(b)(1) or (4) under the Securities Act
shall be deemed to be part of this registration statement as of the
time it was declared effective.
(2) For the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a
form of prospectus shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
<PAGE>
Signatures
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this amendment to registration statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Martinsville,
State of Virginia, on this 1st day of March, 1995.
TULTEX CORPORATION
(Registrant)
By /s/ Charles W. Davies, Jr.
Charles W. Davies, Jr.
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this amendment
to registration statement has been signed by the following persons in the
capacities indicated on March 1, 1995.
Signature Title
/s/ John M. Franck*
John M. Franck Chairman of the Board
/s/ Charles W. Davies,Jr.*
Charles W. Davies, Jr. President and Chief
Executive Officer
(Principal Executive Officer)
/s/ O. Randolph Rollins
O. Randolph Rollins Executive Vice President,
General Counsel and
Chief Financial Officer
(Principal Financial Officer)
/s/ Suzanne H. Wood*
Suzanne H. Wood Controller
(Principal Accounting Officer)
/s/ Lathan M. Ewers, Jr.
Lathan M. Ewers, Jr. Director
/s/ William F. Franck*
William F. Franck Director
/s/ J. Burness Frith*
J. Burness Frith Director
/s/ Irving M. Groves, Jr.*
Irving M. Groves, Jr. Director
/s/ Bruce M. Jacobson*
Bruce M. Jacobson Director
/s/ Richard M. Simmons, Jr.*
Richard M. Simmons, Jr. Director
/s/ John M. Tully*
John M. Tully Director
*By: /s/ Lathan M. Ewers, Jr.
Lathan M. Ewers, Jr.
Attorney-in-fact
<PAGE>
Signatures
Pursuant to the requirements of the Securities Act, the Co-Registrant has
duly caused this amendment to registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of
Martinsville, State of Virginia, on this 1st of March, 1995.
AKOM, LTD.
(Co-Registrant)
By /s/ Charles W. Davies, Jr.
Charles W. Davies, Jr.
Vice President
Pursuant to the requirements of the Securities Act of 1933, this amendment to
registration statement has been signed by the following persons in the
capacities indicated on March 1, 1995.
Signature Title
/s/ John M. Franck* President and Director (Chief
John M. Franck Executive Officer)
/s/ James M. Baker* Treasurer (Chief Financial Officer
James M. Baker and Chief Accounting Officer)
/s/ Charles W. Davies, Jr.* Director
Charles W. Davies, Jr.
/s/ B. Alvin Ratliff* Director
B. Alvin Ratliff
/s/ Don P. Shook* Director
Don P. Shook
*By: /s/ Lathan M. Ewers, Jr.
Lathan M. Ewers, Jr.
Attorney-in-fact
<PAGE>
Signatures
Pursuant to the requirements of the Securities Act, the Co-Registrant has
duly caused this amendment to registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of
Martinsville, State of Virginia, on this 1st day of March, 1995.
DOMINION STORES, INC.
(Co-Registrant)
By /s/ Charles W. Davies, Jr.
Charles W. Davies, Jr.
Vice President
Pursuant to the requirements of the Securities Act of 1933, this amendment to
registration statement has been signed by the following persons in the
capacities indicated on March 1, 1995.
Signature Title
/s/ John J. Smith* President and Director (Chief
John J. Smith Executive Officer)
/s/ James M. Baker* Treasurer (Chief Financial Officer
James M. Baker and Chief Accounting Officer)
/s/ W.J. Caruba* Director
W. J. Caruba
/s/ Charles W. Davies, Jr.* Director
Charles W. Davies, Jr.
/s/ Don P. Shook* Director
Don P. Shook
/s/ John M. Franck* Director
John M. Franck
*By: /s/ Lathan M. Ewers, Jr.
Lathan M. Ewers, Jr.
Attorney-in-fact
<PAGE>
Signatures
Pursuant to the requirements of the Securities Act, the Co-Registrant has
duly caused this amendment to registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of
Martinsville, State of Virginia, on this 1st day of March, 1995.
TULTEX INTERNATIONAL, INC.
(Co-Registrant)
By /s/ Charles W. Davies, Jr.
Charles W. Davies, Jr.
Vice President
Pursuant to the requirements of the Securities Act of 1933, this amendment to
registration statement has been signed by the following persons in the
capacities indicated on March 1, 1995.
Signature Title
/s/ Walter J. Caruba* President and Director
Walter J. Caruba
/s/ James M. Baker* Treasurer (Chief Financial Officer
James M. Baker and Chief Accounting Officer)
/s/ Charles W. Davies, Jr.* Director
Charles W. Davies, Jr.
/s/ Barry W. Hanson* Director
Barry W. Hanson
/s/ John M. Franck* Director
John M. Franck
/s/ Don P. Shook* Director
Don P. Shook
*By: /s/ Lathan M. Ewers, Jr.
Lathan M. Ewers, Jr.
Attorney-in-fact
<PAGE>
Signatures
Pursuant to the requirements of the Securities Act, the Co-Registrant has
duly caused this amendment to registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of
Martinsville, State of Virginia, on this 1st day of March, 1995.
TULTEX CANADA INC.
(Co-Registrant)
By /s/ Walter J. Caruba
Walter J. Caruba
Chairman of the Board
and President
Pursuant to the requirements of the Securities Act of 1933, this amendment to
registration statement has been signed by the following persons in the
capacities indicated on March 1, 1995.
Signature Title
/s/ Walter J. Caruba* Chairman of the Board and President
Walter J. Caruba
/s/ Eric Delfs* Treasurer and Director (Chief Financial
Eric Delfs Officer and Chief Accounting Officer)
/s/ Jeffrey M. Boruvka* Director
Jeffrey M. Boruvka
/s/ Barry Keohan* Director
Barry Keohan
/s/ Laura Delfs* Director
Laura Delfs
*By: /s/ Lathan M. Ewers, Jr.
Lathan M. Ewers, Jr.
Attorney-in-fact
<PAGE>
Signatures
Pursuant to the requirements of the Securities Act, the Co-Registrant has
duly caused this amendment to registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of
Martinsville, State of Virginia, on this 1st day of March, 1995.
SWEATJET, INCORPORATED
(Co-Registrant)
By /s/ Charles W. Davies, Jr.
Charles W. Davies, Jr.
Vice President
Pursuant to the requirements of the Securities Act of 1933, this amendment to
registration statement has been signed by the following persons in the
capacities indicated on March 1, 1995.
Signature Title
/s/ John M. Franck* Chief Executive Officer and Director
John M. Franck
/s/ Don P. Shook* Vice President, Chief Financial
Don P. Shook and Accounting Officer
/s/ Charles W. Davies, Jr.* Vice President and Director
Charles W. Davies, Jr.
/s/ John J. Smith* Director
John J. Smith
/s/ B. Alvin Ratliff* Director
B. Alvin Ratliff
/s/ W. J. Caruba* Director
W.J. Caruba
*By: /s/ Lathan M. Ewers, Jr.
Lathan M. Ewers, Jr.
Attorney-in-fact
<PAGE>
Signatures
Pursuant to the requirements of the Securities Act, the Co-Registrant has
duly caused this amendment to registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of
Indianapolis, Indiana, on this 1st day of March, 1995.
LOGO 7, INC.
(Co-Registrant)
By /s/ Charles W. Davies, Jr.
Charles W. Davies, Jr.
Vice President
Pursuant to the requirements of the Securities Act of 1933, this amendment to
registration statement has been signed by the following persons in the
capacities indicated on March 1, 1995.
Signature Title
/s/ Thomas K. Shine* President, Chief Executive Officer
Thomas K. Shine and Director
/s/ Jeffrey M. Boruvka* Chief Financial Officer and Chief
Accounting Officer
Jeffrey M. Boruvka
/s/ Charles W. Davies, Jr.* Director
Charles W. Davies, Jr.
/s/ Michael R. Kistler* Director
Michael R. Kistler
/s/ Brian D. Edington* Director
Brian D. Edington
/s/ John M. Franck* Director
John M. Franck
*By: /s/ Lathan M. Ewers, Jr.
Lathan M. Ewers, Jr.
Attorney-in-fact
<PAGE>
Signatures
Pursuant to the requirements of the Securities Act, the Co-Registrant has
duly caused this amendment to registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of
Mattapoisett, Commonwealth of Massachusetts, on this 1st day of March, 1995.
UNIVERSAL INDUSTRIES, INC.
(Co-Registrant)
By /s/ Charles W. Davies, Jr.
Charles W. Davies, Jr.
Vice President
Pursuant to the requirements of the Securities Act of 1933, this amendment to
registration statement has been signed by the following persons in the
capacities indicated on March 1, 1995.
Signature Title
/s/ Gregg Browne* President (Chief Executive Officer)
Gregg Browne
/s/ Don P. Shook* Vice President (Chief Financial
Don P. Shook Officer Chief Accounting Officer)
/s/ Charles W. Davies, Jr.* Director
Charles W. Davies, Jr.
/s/ Thomas K. Shine* Director
Thomas K. Shine
/s/ Michael R. Kistler* Director
Michael R. Kistler
/s/ Brian D. Edington* Director
Brian D. Edington
/s/ John M. Franck* Director
John M. Franck
*By: /s/ Lathan M. Ewers, Jr.
Lathan M. Ewers, Jr.
Attorney-in-fact
<PAGE>
SCHEDULE VIII
CONSOLIDATED
TULTEX CORPORATION
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
BALANCE
BALANCE AT ADDITIONS AT END
BEGINNING CHARGED TO OF
RESERVE FOR DOUBTFUL ACCOUNTS OF PERIOD OPERATIONS REDUCTIONS PERIOD
<S> <C> <C> <C> <C>
For the fifty-three weeks ended January 2, 1993 $1,722 $4,703 $(4,065)(1) $2,360
For the fifty-two weeks ended January 1, 1994 $2,360 $3,241 $(3,227)(1) $2,374
For the fifty-two weeks ended December 31, 1994 $2,374 $3,935 $(4,194)(1) $2,115
</TABLE>
(1) Amounts represent write-off of uncollectible receivable balances.
Exhibit 1
(Proof of February 28, 1995)
UNDERWRITING AGREEMENT
Tultex Corporation
$110,000,000
% Senior Notes due 2005
March , 1995
J.P. MORGAN SECURITIES INC.
NATIONSBANC CAPITAL MARKETS, INC.
c/o J.P. Morgan Securities Inc.
60 Wall Street
New York, New York 10260
Ladies and Gentlemen:
Tultex Corporation, a Virginia corporation (the "Company"),
proposes to issue and sell to the underwriters listed in Schedule I hereto
(collectively, the "Underwriters") $110,000,000 aggregate principal amount
of its % Senior Notes due 2005 (the "Senior Notes"). The Senior Notes
will be issued pursuant to the provisions of an Indenture to be dated as of
March , 1995 (the "Indenture") among the Company, the Guarantors (as
hereinafter defined) and First Union National Bank of Virginia, as Trustee
(the "Trustee"). The Senior Notes will be unconditionally guaranteed,
jointly and severally, on a senior unsecured basis by each of AKOM, Ltd., a
Cayman Islands, B.W.I. corporation, Dominion Stores, Inc., a Virginia
corporation, Logo 7, Inc., a Virginia corporation, SweatJet, Incorporated,
a Virginia corporation, Tultex Canada, Inc., a Canadian corporation, Tultex
International, Inc., a Virginia corporation, and Universal Industries,
Inc., a Massachusetts corporation (each a "Subsidiary Guarantor" and
collectively the "Guarantors"). Such guarantees are hereinafter referred
to as the "Guarantees," and the Senior Notes and the Guarantees are
hereinafter referred to as the "Securities." The Company and the
Guarantors are collectively referred to herein as the "Registrants."
The Registrants have prepared and filed with the Securities and
Exchange Commission (the "Commission") in accordance with the provisions of
the Securities Act of 1933, as amended, and the rules and regulations of
the Commission thereunder (collectively, the "Securities Act"), a
registration statement on Form S-1 (File No. 33-57401), including a
prospectus, relating to the Securities. The registration statement as
amended at the time when it shall become effective, or, if post-effective
amendments are filed with respect thereto, as amended by such
post-effective amendments at the time of their effectiveness, including in
each case information (if any) deemed to be part of the registration
statement at the time of effectiveness pursuant to Rule 430A under the
Securities Act, is hereinafter referred to as the "Registration Statement,"
and the prospectus in the form first used to confirm sales of Securities is
hereinafter referred to as the "Prospectus."
The Company hereby agrees with each Underwriter as follows:
1. The Company hereby agrees to issue and sell the Securities
to the several Underwriters as hereinafter provided, and each Underwriter,
upon the basis of the representations and warranties herein contained, but
subject to the conditions hereinafter stated, agrees to purchase, severally
and not jointly, from the Company the respective principal amount of
Securities set forth opposite such Underwriter's name in Schedule I hereto
at a price equal to % of their principal amount plus accrued interest,
if any, from , 1995 to the date of payment and delivery.
2. The Company understands that the Underwriters intend (i) to
make a public offering of the Securities as soon as they deem advisable
after the Registration Statement and this Agreement have become effective
and the Indenture has been qualified under the Trust Indenture Act of 1939,
as amended, and the rules and regulations of the Commission thereunder
(collectively, the "Trust Indenture Act") and (ii) initially to offer the
Securities upon the terms set forth in the Prospectus.
3. Payment for the Securities shall be made to the Company or
to its order by certified or official bank check or checks payable in New
York Clearing House or other next day funds at the office of Cahill
Gordon & Reindel, 80 Pine Street, New York, New York at 10:00 A.M., New
York City time, on March , 1995, or at such other time on the same or
such other date, not later than the fifth Business Day thereafter, as the
Underwriters and the Company may agree upon in writing. The time and date
of such payment for the Securities are referred to herein as the "Closing
Date." As used herein, the term "Business Day" means any day other than a
day on which banks are permitted or required to be closed in New York City.
Payment for the Securities to be purchased on the Closing Date
shall be made against delivery to the Underwriters of the certificates for
the Securities to be purchased on such date registered in such names and in
such denominations as the Underwriters shall request in writing not later
than two full Business Days prior to the Closing Date, with any transfer
taxes payable in connection with the transfer to the Underwriters of the
Securities duly paid by the Company. The certificates for the Securities
will be made available for inspection and packaging by the Underwriters in
New York, New York not later than 1:00 P.M., New York City time, on the
Business Day prior to the Closing Date.
4. Each of the Registrants, jointly and severally, represents
and warrants to each of the Underwriters that:
(a) no order preventing or suspending the use of any preliminary
prospectus filed as part of the Registration Statement has been issued
by the Commission, and each preliminary prospectus filed as part of
the Registration Statement, as originally filed or as part of any
amendment thereto, or filed pursuant to Rule 424 under the Securities
Act, complied when so filed in all material respects with the
Securities Act, and did not contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, provided
that this representation and warranty shall not apply to any
statements or omissions made in reliance upon and in conformity with
information relating to any Underwriter furnished to any Registrant in
writing by such Underwriter expressly for use therein;
(b) no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceeding for that
purpose has been instituted or, to the knowledge of any Registrant,
threatened by the Commission; and the Registration Statement and the
Prospectus (as amended or supplemented if the Registrants shall have
furnished any amendments or supplements thereto) comply, or will
comply, as the case may be, in all material respects with the
Securities Act and the Trust Indenture Act and do not, and will not,
as of the applicable effective date as to the Registration Statement
and any amendment thereto and as of the date of the Prospectus and any
amendment or supplement thereto, contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading,
and the Prospectus, as amended or supplemented at the Closing Date,
will not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; except that
the foregoing representations and warranties shall not apply to
statements or omissions in the Registration Statement or the
Prospectus made in reliance upon and in conformity with information
relating to any Underwriter furnished to any Registrant in writing by
such Underwriter expressly for use therein or to the Statement of
Eligibility on Form T-1 of the Trustee under the Trust Indenture Act
filed as an exhibit to the Registration Statement;
(c) the audited financial statements, and the related notes
thereto, included in the Registration Statement and the Prospectus
present fairly the consolidated financial position of the Company and
its subsidiaries and the results of their operations and the changes
in their consolidated cash flows as of the dates and for the periods
indicated, and said financial statements have been prepared in
conformity with generally accepted accounting principles applied on a
consistent basis throughout the periods involved, and the financial
statement schedules included in the Registration Statement include all
the information required to be stated therein; the summary and
selected financial and statistical data included in the Registration
Statement and the Prospectus present fairly the information shown
therein and have been prepared and compiled on a basis consistent with
the audited financial statements included therein, except as otherwise
stated therein; and Price Waterhouse, whose report on the audited
financial statements included in the Registration Statement and the
Prospectus appears in the Prospectus, are independent accountants as
required by the Securities Act;
(d) the Company has no subsidiaries other than those
subsidiaries (the "Subsidiaries") listed on Exhibit 21 to the
Registration Statement and all the Subsidiaries are Guarantors; the
Company owns, directly or indirectly, free and clear of any mortgage,
pledge, security interest, lien, claim or other encumbrance, all of
the outstanding capital stock of the Subsidiaries, except that the
Company's ownership interest in Tultex Canada, Inc. is a 78% ownership
interest which otherwise complies with this clause (d); all of the
outstanding capital stock of the Subsidiaries has been duly authorized
and validly issued and is fully paid and nonassessable;
(e) since the respective dates as of which information is given
in the Registration Statement and the Prospectus, there has not been
(A) any change in the Company's issued capital stock, warrants or
options except pursuant to the terms of the instruments governing the
same or pursuant to the exercise of such options or warrants, or the
issuance of certain options or (B) any material adverse change, or any
development involving a prospective material adverse change, in or
affecting the general affairs, management, business, prospects,
financial position, stockholder's equity or results of operations of
the Company and the Subsidiaries, taken as a whole (a "Material
Adverse Change"), otherwise than as set forth or contemplated in the
Prospectus;
(f) since the respective dates as of which information is given
in the Registration Statement and the Prospectus, and except as
disclosed therein, (i) there have been no transactions entered into by
the Company or by any of the Subsidiaries, including those entered
into in the ordinary course of business, which are material to the
Company and the Subsidiaries taken as a whole; and (ii) there has been
no dividend or distribution of any kind declared, paid or made by the
Company on any class of its capital stock;
(g) each of the Company and the Subsidiaries has been duly
incorporated under the laws of its jurisdiction of incorporation; each
of the Company and the Subsidiaries is a validly existing corporation
in good standing under the laws of its jurisdiction of incorporation,
with full power and corporate authority to own, lease and operate its
properties and conduct its business as described in the Registration
Statement and the Prospectus and is duly qualified as a foreign
corporation for the transaction of business and is in good standing
under the laws of each other jurisdiction in which it owns or leases
properties, or conducts any business, so as to require such
qualification, except where the failure to be so qualified or in good
standing would not, individually or in the aggregate, have a material
adverse effect on the general affairs, management, business,
prospects, financial position, stockholders' equity or results of
operations of the Company and the Subsidiaries, taken as a whole (a
"Material Adverse Effect");
(h) this Agreement has been duly authorized, executed and
delivered by each of the Registrants;
(i) the execution and delivery of the Indenture has been duly
and validly authorized by the Company and each of the Guarantors and
the Indenture has been qualified under the Trust Indenture Act and,
when executed and delivered by the Company and each of the Guarantors
(assuming due authorization, execution and delivery thereof by the
Trustee), the Indenture will constitute a legal, valid and binding
agreement of the Company and each of the Guarantors enforceable
against the Company and each of the Guarantors in accordance with its
terms except that the enforcement thereof may be subject to (i)
bankruptcy, insolvency, reorganization, moratorium or other similar
laws now or hereafter in effect relating to creditors' rights
generally and (ii) general principles of equity and the discretion of
the court before which any proceeding therefor may be brought; and the
Securities (including the Guarantees) and the Indenture conform in all
material respects to the descriptions thereof in the Prospectus;
(j) the Senior Notes have been duly authorized by the Company
and the Guarantees have been duly authorized by each of the Guarantors
and, when executed and authenticated in accordance with the terms of
the Indenture and delivered to and paid for by the Underwriters, the
Senior Notes will constitute legal, valid and binding obligations of
the Company and the Guarantees will constitute legal, valid and
binding obligations of each Guarantor, in each case enforceable in
accordance with their terms, except that the enforcement thereof may
be subject to (i) bankruptcy, insolvency, reorganization, moratorium
or other similar laws now or hereafter in effect relating to
creditors' rights generally and (ii) general principles of equity and
the discretion of the court before which any proceeding therefor may
be brought;
(k) the execution and delivery of the Senior Credit Facility (as
defined in the Prospectus) has been duly and validly authorized by the
Company and each of the Guarantors a party thereto and, when executed
and delivered by the Company and each of the Guarantors a party
thereto (assuming due authorization, execution and delivery by the
other parties thereto), the Replacement Credit Facility will
constitute a legal, valid and binding agreement of the Company and
each of the Guarantors a party thereto enforceable against the Company
and each of such Guarantors in accordance with its terms except that
the enforcement thereof may be subject to (i) bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in
effect relating to creditors' rights generally and (ii) general
principles of equity and the discretion of the court before which any
proceeding therefor may be brought;
(l) the execution and delivery by the Company and each of the
Guarantors of, and the performance by the Company and each of the
Guarantors of all of the provisions of their respective obligations
under, this Agreement, the Indenture, the Securities (including the
Guarantees) and the Replacement Credit Facility (as defined in the
Prospectus) and the consummation by the Company and each of the
Guarantors of the transactions herein and therein contemplated and as
set forth under "Use of Proceeds" in the Prospectus (i) have been duly
authorized by all necessary corporate action on the part of the
Company and each of the Guarantors, (ii) do not and will not result in
any violation of the Certificate of Incorporation or the By-laws of
the Company or any Subsidiary and (iii) do not and will not conflict
with, or result in a breach or violation of any of the terms or
provisions of, or constitute a default (or an event which, with notice
or lapse of time, or both, would constitute a default) under, or give
rise to any right to accelerate the maturity or require the prepayment
of any indebtedness or the purchase of any capital stock under, or
result in the creation or imposition of any lien, charge or
encumbrance upon any properties or assets of the Company or of any
Subsidiary under, (A) any contract, indenture, mortgage, deed of
trust, loan agreement, note, lease, partnership agreement or other
agreement or instrument to which the Company or any such Subsidiary is
a party or by which any of them may be bound or to which any of their
respective properties or assets may be subject, (B) any applicable law
or statute, rule or regulation (other than the securities or Blue Sky
laws of the various states of the United States of America) or (C) any
judgment, order or decree of any government, governmental
instrumentality, agency, body or court, domestic or foreign, having
jurisdiction over the Company or any such Subsidiary or any of their
respective properties or assets;
(m) none of the Registrants nor any agent acting on any of their
behalf has taken or will take any action that will cause this
Agreement or the sale, issuance, execution or delivery of the
Securities (including the Guarantees) to violate Regulation G, T, U or
X of the Board of Governors of the Federal Reserve System, in each
case as in effect, or as the same may hereafter be in effect, on the
Closing Date;
(n) the Company and each of the Subsidiaries have good and
marketable title in fee simple to all items of real property and good
and marketable title to all personal property owned by them, in each
case free and clear of all liens, encumbrances and defects except such
as are described in the Prospectus or such as do not materially affect
the value of such property and do not interfere with the use made or
proposed to be made of such property by the Company and the
Subsidiaries; and any real property and buildings held under lease by
the Company and the Subsidiaries are held by them under valid,
existing and enforceable leases with such exceptions as are not
material and do not interfere with the use made or proposed to be made
of such property and buildings by the Company or the Subsidiaries;
(o) no authorization, approval, consent, order, registration,
qualification or license of, or filing with, any government,
governmental instrumentality, agency, body or court, domestic or
foreign, or third party (other than as have been or, if the
Registration Statement has not been declared effective, will be prior
to the Closing Date obtained under the Securities Act or the Trust
Indenture Act or as may be required under the securities or Blue Sky
laws of the various states of the United States of America) is
required for the valid authorization, issuance, sale and delivery of
the Securities (including the Guarantees), or the performance by the
Company or any Guarantor of all of its obligations under this
Agreement, the Indenture, the Securities (including the Guarantees) or
the Replacement Credit Facility, or the consummation by the Company of
the transactions contemplated by this Agreement, the Indenture or the
"Use of Proceeds" section of the Prospectus;
(p) neither the Company nor any of the Subsidiaries (i) is in
violation of its Articles of Incorporation (or other applicable
charter document) or By-Laws or (ii) is in breach or violation of any
of the terms or provisions of, or with the giving of notice or lapse
of time, or both, would be in default under, any contract, indenture,
mortgage, deed of trust, loan agreement, note, lease, partnership
agreement, or other agreement or instrument to which the Company or
any Subsidiary is a party or by which any of them may be bound or to
which any of their properties or assets may be subject, except for
such violations or defaults that would not, individually or in the
aggregate, have a Material Adverse Effect;
(q) other than as set forth in the Prospectus, there are no
legal or governmental proceedings pending or, to the knowledge of any
Registrant, threatened to which the Company or any of the Subsidiaries
is or may be a party or to which any property of the Company or any of
the Subsidiaries is or may be the subject which, if determined
adversely to the Company or any of the Subsidiaries, could
individually or in the aggregate be expected to have a Material
Adverse Effect and, to the best of the Company's knowledge, no such
proceedings are threatened or contemplated by governmental authorities
or threatened by others;
(r) there are no contracts or documents of a character required
to be described or referred to in the Registration Statement or the
Prospectus, or to be filed as exhibits to the Registration Statement,
that are not described, referred to or filed as required;
(s) each of the Company and the Subsidiaries owns, possesses or
has obtained all material licenses, permits, certificates, consents,
orders, approvals and other authorizations from, and has made all
declarations and filings with, all federal, state, local and other
governmental authorities (including foreign regulatory agencies) and
all courts and other tribunals, domestic or foreign, necessary to own
or lease, as the case may be, and to operate its properties and to
carry on its business as conducted as of the date hereof and each of
them is in full force and effect, except in each case where the
failure to obtain licenses, permits, certificates, consents, orders,
approvals and other authorizations, or to make all declarations and
filings, would not, individually or in the aggregate, have a Material
Adverse Effect, and neither the Company nor any of the Subsidiaries
has received any notice relating to revocation or modification of any
such license, permit, certificate, consent, order, approval or other
authorization, except as described in the Registration Statement and
the Prospectus and except, in each case, where such revocation or
modification would not, individually or in the aggregate, have a
Material Adverse Effect; and the Company and each of the Subsidiaries
are in compliance with all laws and regulations relating to the
conduct of their respective businesses as conducted as of the date
hereof, except where noncompliance with such laws or regulations would
not, individually or in the aggregate, have a Material Adverse Effect;
(t) no relationship, direct or indirect, exists between or among
the Company or any of the Subsidiaries on the one hand, and the
directors, officers, stockholders, customers or suppliers of the
Company or any of the Subsidiaries on the other hand, which is
required by the Securities Act to be described in the Registration
Statement and the Prospectus which is not so described;
(u) no person has the right to require the Company to register
any securities for offering and sale under the Securities Act by
reason of the filing of the Registration Statement with the Commission
or the issue and sale of the Securities;
(v) all of the outstanding shares of capital stock of the
Company have been duly authorized and validly issued and are fully
paid and nonassessable; and, except as described in the Prospectus,
there are no outstanding rights (including, without limitation,
preemptive rights), warrants or options to acquire, or instruments
convertible into or exchangeable for, any shares of capital stock or
other equity interest in the Company or in any of the Subsidiaries,
or any contract, commitment, agreement, understanding or arrangement
of any kind relating to the issuance of any capital stock of the
Company or any such Subsidiary, any such convertible or exchangeable
securities or any such rights, warrants or options;
(w) except as disclosed in the Prospectus, there are no labor
disputes or negotiations with employees of the Company or any of the
Subsidiaries which could have, individually or in the aggregate, a
Material Adverse Effect;
(x) the Company and the Subsidiaries are in compliance with, and
not subject to any liability under, the common law and all applicable
federal, state, local and foreign laws, regulations, rules, codes,
ordinances, directives, and orders relating to pollution or to
protection of public or employee health or safety or to the
environment, including, without limitation, those that relate to any
Hazardous Material (as hereinafter defined) ("Environmental Laws"),
except, in each case, where noncompliance or liability, individually
or in the aggregate, would not be reasonably likely to have a Material
Adverse Effect. The term "Hazardous Material" means any pollutant,
contaminant or waste, or any hazardous, dangerous, or toxic chemical,
material, waste, substance or constituent subject to regulation under
any Environmental Law;
(y) the fair salable value of the assets of each of the Company,
Dominion Stores, Inc., Logo 7, Inc., Tultex Canada, Inc. and Universal
Industries, Inc. (collectively the "Material Registrants") exceeds the
amount that will be required to be paid on or in respect of its existing
debts and other liabilities (including contingent liabilities) as they
mature; the assets of each of the Material Registrants do not constitute
unreasonably small capital to carry out its business as conducted or as
proposed to be conducted; each Registrant does not intend to, and does
not believe that it will, incur debts beyond its ability to pay such
debts as they mature; upon the issuance of the Securities, the fair
salable value of the assets of each of the Material Registrants will
exceed the amount that will be required to be paid on or in respect of
its existing debts and other liabilities (including contingent
liabilities) as they mature; and upon the issuance of the Securities,
the assets of each of the Material Registrants will not constitute
unreasonably small capital to carry out its business as now conducted or
as proposed to be conducted;
(z) each of the Company and the Subsidiaries owns or possesses
the patents, patent licenses, trademarks, service marks, trade names,
copyrights and know-how (including trade secrets and other unpatented
and/or unpatentable proprietary or confidential information, systems
or procedures) (collectively, the "Intellectual Property") employed by
it in connection with the business conducted by it as of the date
hereof, except to the extent that the failure to own or possess, any
such Intellectual Property would not have, individually or in the
aggregate, a Material Adverse Effect, and neither the Company nor any
Subsidiary has received any notice of infringement of or conflict with
asserted rights of others with respect to any Intellectual Property;
and
(aa) the Company and the Subsidiaries have filed all federal,
state, local and foreign tax returns which have been required to be
filed and have paid all taxes shown thereon and all assessments
received by them or any of them to the extent that such taxes have
become due and are not being contested in good faith; and, except as
disclosed in the Registration Statement and the Prospectus, there is
no tax deficiency which has been or might reasonably be expected to be
asserted or threatened against the Company or any Subsidiary which,
individually or in the aggregate, could have a Material Adverse
Effect.
5. The Registrants, jointly and severally, covenant and agree
with each Underwriter as follows:
(a) to use their respective best efforts to cause the
Registration Statement to become effective (if the Registration
Statement shall not have been declared effective prior to the
execution hereof) at the earliest possible time and, if required, to
file the Prospectus with the Commission in the manner and within the
time periods specified by Rule 424(b) and Rule 430A under the
Securities Act;
(b) to deliver, at the expense of the Registrants, (i) three
signed copies of the Registration Statement (as originally filed) and
each amendment thereto, including exhibits, to the Underwriters, and
(ii) during the period mentioned in paragraph (e) below, to each of
the Underwriters as many copies of the Prospectus (including all
amendments and supplements thereto) as the Underwriters may reasonably
request;
(c) before filing any amendment or supplement to the
Registration Statement or the Prospectus, whether before or after the
time the Registration Statement becomes effective, to furnish to the
Underwriters and their counsel a copy of the proposed amendment or
supplement for review within a reasonable time prior to the proposed
filing thereof and not to file any such proposed amendment or
supplement to which the Underwriters or their counsel reasonably
object;
(d) to advise the Underwriters promptly, and to confirm such
advice in writing, (i) when the Registration Statement shall become
effective, (ii) when any amendment to the Registration Statement shall
have become effective, (iii) of any request by the Commission for any
amendment to the Registration Statement or any amendment or supplement
to the Prospectus or for any additional information, (iv) of the
issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or the initiation or
threatening of any proceeding for that purpose and (v) of the receipt
by any Registrant of any notification with respect to any suspension
of the qualification of the Securities (including any Guarantee) for
offer and sale in any jurisdiction or the initiation or threatening of
any proceeding for such purpose; and to use their respective best
efforts to prevent the issuance of any such stop order or notification
and, if issued, to obtain promptly the withdrawal thereof;
(e) if, during such period of time after the first date of the
public offering of the Securities as in the opinion of counsel for the
Underwriters a prospectus relating to the Securities is required by
law to be delivered in connection with sales by an Underwriter or any
dealer, any event shall occur which is known to any of the Registrants
or information shall become known to any of the Registrants as a
result of which it is necessary to amend or supplement the Prospectus
in order to make the statements therein, in the light of the
circumstances at the time the Prospectus is delivered to a purchaser,
not misleading, or if it is necessary to amend or supplement the
Prospectus to comply with law, forthwith to, at the sole expense of
the Registrants, prepare and, subject to Section 5(c) above, file with
the Commission, and furnish to the Underwriters and to the dealers
(whose names and addresses the Underwriters will furnish to the
Registrants) to which Securities may have been sold by the
Underwriters and to any other dealers upon request such amendments or
supplements to the Prospectus as may be necessary so that the
statements in the Prospectus as so amended or supplemented will not,
in the light of the circumstances at the time the Prospectus is
delivered to a purchaser, be misleading or so that the Prospectus will
comply with law; provided that all expenses with respect to any
amendment of or supplement to the Prospectus required to correct a
misleading statement made therein in reliance upon and in conformity
with information relating to an Underwriter furnished to any
Registrant in writing by such Underwriter expressly for use therein
shall be borne by such Underwriter;
(f) (i) to endeavor to qualify the Securities for offer and sale
under the securities or Blue Sky laws of such jurisdictions as the
Underwriters shall reasonably request and to continue such
qualification in effect so long as reasonably required for
distribution of the Securities and (ii) to pay all fees and expenses
(including fees and disbursements of counsel for the Underwriters)
incurred in connection with such qualification and in connection with
the determination of the eligibility of the Securities for investment
under the laws of such jurisdictions as the Underwriters may
designate; provided that no Registrant shall be required to file a
general consent to service of process in any jurisdiction in which it
would not otherwise be required to do so;
(g) to make generally available to the Registrants' security
holders, and to the Underwriters as soon as practicable an earnings
statement covering a period of at least twelve months beginning with
the first fiscal quarter of the Registrants occurring after the
effective date of the Registration Statement which shall satisfy the
provisions of Section 11(a) of the Securities Act and Rule 158 of the
Commission promulgated thereunder;
(h) so long as the Securities are outstanding, to furnish to the
Underwriters copies of all reports or other communications (financial
or other) required to be furnished to holders of the Securities, and
copies of any reports and financial statements required to be
furnished to or filed with the Commission or any national securities
exchange;
(i) to pay all costs and expenses incident to the performance of
its obligations hereunder, including without limiting the generality
of the foregoing, all costs and expenses (i) incident to the
preparation, issuance, execution, authentication and delivery of the
Securities (including any expenses of the Trustee and the Trustee's
counsel), (ii) incident to the preparation, printing and filing under
the Securities Act of the Registration Statement, the Prospectus and
any preliminary prospectus (including in each case all exhibits,
amendments and supplements thereto), (iii) incurred in connection with
the registration or qualification of the Securities and Guarantees
under the laws of such jurisdictions as the Underwriters may designate
(including fees and disbursements of Cahill Gordon & Reindel, counsel
for the Underwriters, in connection with such registration or
qualification), (iv) relating to any filing with, and determination of
the fairness of the underwriting terms and arrangements by, the
National Association of Securities Dealers, Inc. in connection with
the offering of the Securities and Guarantees, (v) in connection with
the printing (including word processing and duplication costs) and
delivery of this Agreement, the Indenture, all other agreements
relating to underwriting arrangements, the Preliminary and
Supplemental Blue Sky Memorandum and the furnishing to the
Underwriters and dealers of copies of the Registration Statement and
the Prospectus, including mailing and shipping, as herein provided,
and (vi) payable to rating agencies in connection with the rating of
the Securities;
(j) to use the net proceeds of the offering of Securities as set
forth in the Registration Statement and the Prospectus under the
caption "Use of Proceeds"; and
(k) to take all actions necessary to call for redemption, on or
prior to , the Company's 8 7/8% Senior Notes due
July 1, 1999 and 8.94% Term Loan due July 31, 1996.
6. The several obligations of the Underwriters hereunder to
purchase the Securities are subject to the performance by the Registrants
of their obligations hereunder and to the following additional conditions:
(a) if the Registration Statement has not been declared
effective prior to the execution and delivery hereof, the Registration
Statement shall have become effective (or if a post-effective
amendment is required to be filed under the Securities Act, such
post-effective amendment shall have become effective) not later than
5:00 P.M., New York City time, on the date hereof; and no stop order
suspending the effectiveness of the Registration Statement shall be in
effect, and no proceedings for such purpose shall be pending before or
threatened by the Commission; and any requests for additional
information shall have been complied with to the satisfaction of the
Underwriters;
(b) each of the representations and warranties of the
Registrants contained herein shall be true and correct on and as of
the Closing Date as if made on and as of the Closing Date, and the
Registrants shall have complied with all agreements and all conditions
on their part to be performed or satisfied hereunder at or prior to
the Closing Date;
(c) subsequent to the execution and delivery of this Agreement
and prior to the Closing Date, there shall not have occurred any
downgrading, nor shall any notice have been given of (i) any intended
or potential downgrading or (ii) any review or possible change that
does not indicate an improvement in the rating accorded any securities
of or guaranteed by any of the Registrants by any "nationally
recognized statistical rating organization," as such term is defined
for purposes of Rule 436(g)(2) under the Securities Act;
(d) since the respective dates as of which information is given
in the Prospectus, there shall not have been any Material Adverse
Change, otherwise than as set forth in the Prospectus, the effect of
which in the sole judgment of the Underwriters makes it impracticable
or inadvisable to proceed with the public offering or the delivery of
the Securities on the terms and in the manner contemplated in the
Prospectus;
(e) the Underwriters shall have received on and as of the
Closing Date a certificate, addressed to the Underwriters and dated
the Closing Date, of an executive officer of the Company satisfactory
to the Underwriters to the effect set forth in subsections (a) through
(c) of this Section 6 and to the further effect that since the
respective dates as of which information is given in the Prospectus
there has not occurred any Material Adverse Change, otherwise than as
set forth in the Prospectus;
(f) the Underwriters shall have received on the Closing Date a
signed opinion of Hunton & Williams, counsel for the Company in form
and substance satisfactory to Cahill Gordon & Reindel, counsel to the
Underwriters, dated the Closing Date and addressed to the
Underwriters, to the effect that:
(i) the Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the
State of Virginia with full power and authority (corporate and
other) to own, lease and operate its properties and to conduct
its business as described in the Registration Statement and the
Prospectus;
(ii) the Company has been duly qualified as a foreign
corporation for the transaction of business and is in good
standing in each jurisdiction in which it owns or leases
properties or conducts any business so as to require such
qualification other than where the failure to be so qualified or
in good standing would not have a Material Adverse Effect;
(iii) each Subsidiary has been duly incorporated and is
validly existing as a corporation under the laws of its
jurisdiction of incorporation with full power and authority
(corporate and other) to own, lease and operate its properties
and to conduct its business as described in the Registration
Statement and the Prospectus, and has been duly qualified as a
foreign corporation for the transaction of business and is in
good standing in each jurisdiction in which it owns or leases
properties or conducts any business so as to require such
qualification other than where the failure to be so qualified or
in good standing would not have a Material Adverse Effect;
(iv) the authorized capital stock of the Company is as set
forth in the Registration Statement and the Prospectus;
(v) all the outstanding shares of capital stock of each
Subsidiary have been duly authorized and validly issued and are
fully paid and nonassessable, and, except as otherwise set forth
in the Prospectus, are directly or indirectly owned by the
Company free and clear of any mortgage, pledge, security
interest, lien, claim or other encumbrance;
(vi) other than as set forth in the Prospectus, there are no
legal or governmental proceedings pending or, to such counsel's
knowledge, threatened to which the Company or any of the
Subsidiaries is or may be a party or to which any property of the
Company or the Subsidiaries is or may be the subject which, if
determined adversely to the Company or any such Subsidiary, could
individually or in the aggregate be expected to have a Material
Adverse Effect; and such counsel does not know of any contracts
or other documents of a character required to be filed as an
exhibit to the Registration Statement or required to be described
or referred to in the Registration Statement or the Prospectus
which are not filed, referred to or described as required;
(vii) neither the Company nor any of the Subsidiaries (A) is
in violation of its Certificate of Incorporation or By-Laws or
(B) is in breach or violation of any of the terms or provisions
of, or with the giving of notice or lapse of time, or both, would
be in default under, any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument known to such counsel
to which the Company or any of the Subsidiaries is a party or by
which it or any of them or any of their respective properties is
bound, or any applicable law or statute or any order, rule or
regulation of any court or governmental agency or body having
jurisdiction over the Company, the Subsidiaries or any of their
respective properties, except for violations and defaults which
individually or in the aggregate would not have a Material
Adverse Effect;
(viii) the execution and delivery by the Company and each of
the Guarantors of, and the performance by the Company and each of
the Guarantors of all of the provisions of their respective
obligations under, this Agreement, the Indenture, the Securities
(including the Guarantees) and the Replacement Credit Facility
(as defined in the Prospectus) and the consummation by the
Company and each of the Guarantors of the transactions herein and
therein contemplated and as set forth under "Use of Proceeds" in
the Prospectus (i) have been duly authorized by all necessary
corporate action on the part of the Company and each of the
Guarantors, (ii) do not and will not result in any violation of
the Certificate of Incorporation or the By-laws of the Company or
any Subsidiary and (iii) do not and will not conflict with, or
result in a breach or violation of any of the terms or provisions
of, or constitute a default (or an event which, with notice or
lapse of time, or both, would constitute a default) under, or
give rise to any right to accelerate the maturity or require the
prepayment of any indebtedness or the purchase of any capital
stock under, or result in the creation or imposition of any lien,
charge or encumbrance upon any properties or assets of the
Company or of any Subsidiary under, (A) any contract, indenture,
mortgage, deed of trust, loan agreement, note, lease, partnership
agreement or other agreement or instrument known to such counsel
to which the Company or any such Subsidiary is a party or by
which any of them may be bound or to which any of their
respective properties or assets may be subject, (B) any
applicable law or statute, rule or regulation (other than the
securities or Blue Sky laws of the various states of the United
States of America) or (C) any judgment, order or decree of any
government, governmental instrumentality, agency, body or court,
domestic or foreign, having jurisdiction over the Company or any
such Subsidiary or any of their respective properties or assets;
faul the execution and delivery of the Indenture has been
duly and validly authorized by the Company and each of the
Guarantors, and the Indenture has been duly executed and
delivered by the Company and each of the Guarantors and qualified
under the Trust Indenture Act and, assuming due authorization,
execution and delivery thereof by the Trustee, is a legal, valid
and binding agreement of the Company and each of the Guarantors,
enforceable against the Company and each of the Guarantors in
accordance with its terms, except that the enforcement thereof
may be subject to (1) bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer or similar laws now or hereafter
in effect relating to creditors' rights generally and (2) general
principles of equity and the discretion of the court before which
any proceeding therefor may be brought;
(x) the Senior Notes have been duly authorized by the
Company and the Guarantees have been duly authorized by each of
the Guarantors and, when executed and authenticated in accordance
with the terms of the Indenture and delivered to and paid for by
the Underwriters, the Senior Notes will constitute legal, valid
and binding obligations of the Company and the Guarantees will
constitute legal, valid and binding obligations of each
Guarantor, in each case enforceable in accordance with their
terms, except that the enforcement thereof may be subject to
(1) bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer or similar laws now or hereafter in effect
relating to creditors' rights generally and (2) general
principles of equity and the discretion of the court before which
any proceeding therefor may be brought;
(xi) the execution and delivery of the Replacement Credit
Facility has been duly and validly authorized by the Company and
each of the Guarantors a party thereto, and the Replacement
Credit Facility has been duly executed and delivered by the
Company and each of the Guarantors a party thereto and, assuming
due authorization, execution and delivery thereof by the other
parties thereto, is a legal, valid and binding agreement of the
Company and each of the Guarantors a party thereto, enforceable
against the Company and each of such Guarantors in accordance
with its terms, except that the enforcement thereof may be
subject to (1) bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer or similar laws now or hereafter
in effect relating to creditors' rights generally and (2) general
principles of equity and the discretion of the court before
which any proceeding therefor may be brought;
(xii) the Securities (including the Guarantees) and the
Indenture conform in all material respects to the descriptions
thereof in the Prospectus; and the matters in the Prospectus set
forth under "Business - Environmental Matters" do not contain any
untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading;
(xiii) this Agreement has been duly authorized, executed and
delivered by the Company and the Guarantors;
(xiv) no authorization, approval, consent, order,
registration, qualification or license of, or filing with, any
government, governmental instrumentality, agency, body or court,
domestic or foreign, or third party (other than as have been
obtained under the Securities Act or the Trust Indenture Act or
as may be required under the securities or Blue Sky laws of the
various states of the United States of America) is required for
the valid authorization, issuance, sale and delivery of the
Securities (including the Guarantees), or the performance by the
Company and each of the Guarantors of all of their obligations
under this Agreement, the Indenture, the Securities (including
the Guarantees) or the Replacement Credit Facility, or the
consummation by the Company and each of the Guarantors of the
transactions contemplated by this Agreement, the Indenture or the
"Use of Proceeds" section of the Prospectus;
(xv) the Registration Statement has been declared effective
under the Securities Act and no stop order suspending the
effectiveness of the Registration Statement or any post-effective
amendment thereto has been issued and, to such counsel's
knowledge, no proceeding for that purpose has been instituted or
threatened by the Commission; the Indenture has been duly
qualified under the Trust Indenture Act; any required filing of
the Prospectus and any supplements thereto pursuant to Rule
424(b) has been made in a manner and within the time period
required by Rule 424(b);
(xvi) the Registration Statement and the Prospectus and any
amendments and supplements thereto (except for the financial
statements and other statistical data included therein as to
which such counsel need express no opinion) comply as to form in
all material respects with the requirements of the Securities Act
and the Trust Indenture Act; and
(xvii) the Registration Statement and the Prospectus included
therein at the time the Registration Statement became effective
did not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, and the
Prospectus as of its date and as of the Closing Date, as amended
or supplemented, if applicable, did not and does not contain any
untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not
misleading (it being understood that such counsel need not
express an opinion as to the financial statements and other
statistical data included therein or that part of the
Registration Statement which constitutes the Statement of
Eligibility on Form T-1 of the Trustee under the Trust Indenture
Act or any statements or omissions made in reliance upon and in
conformity with information relating to any Underwriter furnished
to any Registrant in writing by such Underwriter expressly for
use in the Registration Statement);
(g) on the effective date of the Registration Statement and the
effective date of the most recently filed post-effective amendment, if
any, to the Registration Statement and also on the Closing Date, Price
Waterhouse LLP shall have furnished to the Underwriters letters, dated
the respective dates of delivery thereof, in form and substance
satisfactory to the Underwriters, containing statements and
information of the type customarily included in accountants' "comfort
letters" to underwriters with respect to the financial statements and
certain financial information contained in the Registration Statement
and the Prospectus;
(h) the Underwriters shall have received on and as of the
Closing Date an opinion dated the Closing Date of Cahill Gordon &
Reindel, counsel to the Underwriters, addressed to the Underwriters
and in form and substance satisfactory to the Underwriters with
respect to the validity of the Securities, the Indenture, the
Registration Statement, the Prospectus and other related matters as
the Underwriters may reasonably request, and such counsel shall have
received such papers and information as they may reasonably request to
enable them to pass upon such matters;
(i) on or prior to the Closing Date the Company shall have
furnished to the Underwriters such further certificates and documents
as the Underwriters or their counsel, Cahill Gordon & Reindel, shall
reasonably request; and
(j) the Replacement Credit Facility shall have been executed and
delivered by each of the parties thereto and all conditions precedent
to the initial funding under the Replacement Credit Facility shall
have been satisfied or waived; and the existing revolving credit
facility (which expires on October 6, 1995) shall have been fully paid
and terminated.
In rendering the opinion referred to in the foregoing clause (f),
Hunton & Williams may rely as to matters of fact, to the extent such
counsel deems proper, on certificates of responsible officers of the
Company, the Subsidiaries and public officials and, as to matters involving
the application of laws of any jurisdiction other than the State of
Virginia, the corporate laws of the State of Delaware, and the federal laws
of the United States, to the extent such counsel deems proper and specifies
in such opinion and to the extent such opinion is satisfactory in form and
scope to counsel for the Underwriters, upon the opinion of other counsel
qualified in such jurisdictions who they believe are reliable and who are
satisfactory to counsel for the Underwriters. Copies of any such opinion
shall be delivered to the Underwriters and counsel for the Underwriters.
7. The Registrants, jointly and severally, agree to indemnify
and hold harmless each Underwriter, its officers and directors, and each
person, if any, who controls any Underwriter within the meaning of either
Section 15 of the Securities Act or Section 20 of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), from and against any and all
losses, claims, damages and liabilities (including, without limitation, the
legal fees and other expenses incurred in connection with any suit, action
or proceeding or any claim asserted) caused by any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement or the Prospectus (as amended or supplemented if the Company
shall have furnished any amendments or supplements thereto) or any
preliminary prospectus, or caused by any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, except insofar as such losses,
claims, damages or liabilities are caused by any untrue statement or
omission or alleged untrue statement or omission made in reliance upon and
in conformity with information relating to any Underwriter furnished to any
Registrant in writing by such Underwriter expressly for use therein.
Each Underwriter agrees, severally and not jointly, to indemnify
and hold harmless each of the Registrants, each of their directors, each of
their officers who signed the Registration Statement and each person who
controls any of the Registrants within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act to the same extent as the
foregoing indemnity from the Registrants to each Underwriter, but only with
reference to information relating to such Underwriter furnished to any
Registrant in writing by such Underwriter expressly for use in the
Registration Statement, the Prospectus, any amendment or supplement
thereto, or any preliminary prospectus. For purposes of this Section 7 and
paragraphs (a) and (b) of Section 4 hereof, the only written information
furnished by the Underwriters to any Registrant expressly for use in the
Registration Statement and the Prospectus is the information in the last
paragraph on the cover page of the Prospectus, and the first paragraph and
the third sentence of the third paragraph under the table in the
"Underwriting" section of the Prospectus.
If any suit, action, proceeding (including any governmental or
regulatory investigation), claim or demand shall be brought or asserted
against any person in respect of which indemnity may be sought pursuant to
either of the two preceding paragraphs, such person (the "Indemnified
Person") shall promptly notify the person against whom such indemnity may
be sought (the "Indemnifying Person") in writing, and the Indemnifying
Person, upon request of the Indemnified Person, shall retain counsel
satisfactory to the Indemnified Person to represent the Indemnified Person
and any others the Indemnifying Person may designate in such proceeding and
shall pay the fees and expenses of such counsel related to such proceeding.
In any such proceeding, any Indemnified Person shall have the right to
retain its own counsel, but the fees and expenses of such counsel shall be
at the expense of such Indemnified Person unless (i) the Indemnifying
Person and the Indemnified Person shall have mutually agreed to the
contrary, (ii) the Indemnifying Person has failed within a reasonable time
to retain counsel satisfactory to the Indemnified Person or (iii) the named
parties in any such proceeding (including any impleaded parties) include
both the Indemnifying Person and the Indemnified Person and representation
of both parties by the same counsel would be inappropriate due to actual or
potential differing interests between them. It is understood that the
Indemnifying Person shall not, in connection with any proceeding or related
proceeding in the same jurisdiction, be liable for the fees and expenses of
more than one separate firm (in addition to any local counsel) for all
Indemnified Persons, and that all such fees and expenses shall be
reimbursed as they are incurred. Any such separate firm for the
Underwriters and such control persons of Underwriters shall be designated
in writing by J.P. Morgan Securities Inc. and any such separate firm for
any of the Registrants, each director of the Registrants, each officer of
the Registrants who signed the Registration Statement and such control
persons of the Registrants shall be designated in writing by the Company.
The Indemnifying Person shall not be liable for any settlement of any
proceeding effected without its written consent, but if settled with such
consent or if there be a final judgment for the plaintiff, the Indemnifying
Person agrees to indemnify any Indemnified Person from and against any loss
or liability by reason of such settlement or judgment. Notwithstanding the
foregoing sentence, if at any time an Indemnified Person shall have
requested an Indemnifying Person to reimburse the Indemnified Person for
fees and expenses of counsel as contemplated by the third sentence of this
paragraph, the Indemnifying Person agrees that it shall be liable for any
settlement of any proceeding effected without its written consent if
(i) such settlement is entered into more than 30 days after receipt by such
Indemnifying Person of the aforesaid request and (ii) such Indemnifying
Person shall not have reimbursed the Indemnified Person in accordance with
such request prior to the date of such settlement. No Indemnifying Person
shall, without the prior written consent of the Indemnified Person, effect
any settlement of any pending or threatened proceeding in respect of which
any Indemnified Person is or could have been a party and indemnity could
have been sought hereunder by such Indemnified Person, unless such
settlement includes an unconditional written release, in form and substance
satisfactory to the Indemnified Person, of such Indemnified Person from all
liability on claims that are the subject matter of such proceeding.
If the indemnification provided for in the first and second
paragraphs of this Section 7 is for any reason unavailable to, or
insufficient to hold harmless, an Indemnified Person in respect of any
losses, claims, damages or liabilities referred to therein, then each
Indemnifying Person under such paragraph, in lieu of indemnifying such
Indemnified Person thereunder, shall contribute to the amount paid or
payable by such Indemnified Person as a result of such losses, claims,
damages or liabilities (i) in such proportion as is appropriate to reflect
the relative benefits received by the Registrants on the one hand and the
Underwriters on the other hand from the offering of the Securities or
(ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only
the relative benefits referred to in clause (i) above but also the relative
fault of the Registrants on the one hand and the Underwriters on the other
in connection with the statements or omissions that resulted in such
losses, claims, damages or liabilities, as well as any other relevant
equitable considerations. The relative benefits received by the
Registrants on the one hand and the Underwriters on the other shall be
deemed to be in the same respective proportions as the net proceeds from
the offering (before deducting expenses) received by the Company and the
total underwriting discounts and the commissions actually received by the
Underwriters, in each case as set forth in the table on the cover of the
Prospectus, bear to the aggregate public offering price of the Securities.
The relative fault of the Registrants on the one hand and the Underwriters
on the other shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to
information supplied by the Registrants or by the Underwriters and the
parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission.
The Registrants and the Underwriters agree that it would not be
just and equitable if contribution pursuant to this Section 7 were
determined by pro rata allocation (even if the Underwriters were treated as
one entity for such purpose) or by any other method of allocation that does
not take account of the equitable considerations referred to in the
immediately preceding paragraph. The amount paid or payable by an
Indemnified Person as a result of the losses, claims, damages and
liabilities referred to in the immediately preceding paragraph shall be
deemed to include, subject to the limitations set forth above, any legal or
other expenses incurred by such Indemnified Person in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 7, in no event shall an Underwriter be required
to contribute any amount in excess of the amount by which the total price
at which the Securities underwritten by it and distributed to the public
were offered to the public exceeds the amount of any damages that such
Underwriter has otherwise been required to pay or has paid by reason of
such untrue or alleged untrue statement or omission or alleged omission.
No person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. The
Underwriters' obligations to contribute pursuant to this Section 7 are
several in proportion to the respective principal amounts of Securities set
forth opposite their names in Schedule I hereto, and not joint.
The indemnity and contribution agreements contained in this
Section 7 are in addition to any liability which the Indemnifying Persons
may otherwise have to the Indemnified Persons referred to above.
The indemnity and contribution agreements contained in this
Section 7 and the representations and warranties of the Registrants as set
forth in this Agreement shall remain operative and in full force and effect
regardless of (i) any termination of this Agreement, (ii) any investigation
made by or on behalf of any Underwriter or any person controlling any
Underwriter or by or on behalf of any Registrant, officer or director of
any Registrant or any other person controlling any Registrant and
(iii) acceptance of and payment for any of the Securities.
8. Notwithstanding anything herein contained, this Agreement
may be terminated in the absolute discretion of the Underwriters, by
notice given to the Company, if after the execution and delivery of this
Agreement and prior to the Closing Date (i) trading generally shall have
been suspended or materially limited on or by, as the case may be, any of
the New York Stock Exchange, the American Stock Exchange, the National
Association of Securities Dealers, Inc., the Chicago Board Options
Exchange, the Chicago Mercantile Exchange or the Chicago Board of Trade,
(ii) trading of any securities of or guaranteed by any of the Registrants
shall have been suspended on any exchange or in any over-the-counter
market, (iii) a general moratorium on commercial banking activities in New
York shall have been declared by either Federal or New York State authori-
ties, or (iv) there shall have occurred any outbreak or escalation of
hostilities or any change in financial markets or any calamity or crisis
that, in the judgment of the Underwriters, is material and adverse and
which, in the judgment of the Underwriters, makes it impracticable to
market the Securities on the terms and in the manner contemplated in the
Prospectus.
9. If this Agreement shall be terminated by the Underwriters
because of any failure or refusal on the part of any of the Registrants to
comply with the terms or to fulfill any of the conditions of this
Agreement, or if for any reason any Registrant shall be unable to perform
its obligations under this Agreement or any condition to the Underwriters'
obligations cannot be fulfilled, the Registrants agree jointly and
severally to reimburse the Underwriters for all out-of-pocket expenses
(including the fees and expenses of their counsel) reasonably incurred by
the Underwriters in connection with this Agreement or the offering
contemplated hereunder.
10. Any action by the Underwriters hereunder may be taken by the
Underwriters jointly or by J.P. Morgan Securities Inc. alone on behalf of
the Underwriters, and any such action taken by J.P. Morgan Securities Inc.
alone shall be binding upon the Underwriters. All notices and other
communications hereunder shall be in writing and shall be deemed to have
been duly given if mailed or telecopied. Notices to the Underwriters shall
be given to the Underwriters, c/o J.P. Morgan Securities Inc., 60 Wall
Street, New York, New York 10260 (facsimile number (212) );
Attention: Syndicate Department. Notices to any Registrant shall be given
to the Company at 101 Commonwealth Boulevard, Martinsville, VA 24112
(facsimile number (703) 632-8751); Attention: Executive Vice President and
General Counsel.
11. This Agreement shall inure to the benefit of and be binding
upon the Underwriters and the Registrants and any controlling person
referred to herein and their respective successors, heirs and legal
representatives. Nothing expressed or mentioned in this Agreement is
intended or shall be construed to give any person, firm or corporation,
other than the Underwriters and the Registrants and their respective
successors, heirs and legal representatives and the controlling persons and
officers and directors referred to in Section 7 and their heirs and legal
representatives, any legal or equitable right, remedy or claim under or in
respect of this Agreement or any provision herein contained. No purchaser
of Securities from any Underwriter shall be deemed to be a successor merely
by reason of such purchase.
12. This Agreement may be signed in counterparts, each of which
shall be an original and all of which together shall constitute one and the
same instrument.
13. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO
THE CONFLICTS OF LAWS PROVISIONS THEREOF.
If the foregoing is in accordance with your understanding, please
sign and return four counterparts hereof.
Very truly yours,
TULTEX CORPORATION
By:________________________
Name:
Title:
AKOM, LTD.
By:________________________
Name:
Title:
DOMINION STORES, INC.
By:________________________
Name:
Title:
LOGO 7, INC.
By:________________________
Name:
Title:
SWEATJET, INC.
By:________________________
Name:
Title:
TULTEX CANADA, INC.
By:________________________
Name:
Title:
TULTEX INTERNATIONAL, INC.
By:________________________
Name:
Title:
UNIVERSAL INDUSTRIES, INC.
By:________________________
Name:
Title:
Accepted: ____________, 1995
J.P. MORGAN SECURITIES INC.
NATIONSBANC CAPITAL MARKETS, INC.
By: J.P. MORGAN SECURITIES INC.
By:_____________________________
Name:
Title:
<PAGE>
SCHEDULE I
Principal Amounts
of Securities
Underwriter to be Purchased
J.P. Morgan Securities Inc. . . . . . . . . . . $
NationsBanc Capital Markets, Inc. . . . . . . .
Total. . . . . . . . . . . . . . $110,000,000
TULTEX CORPORATION
Bylaws
March 25, 1993
ARTICLE I - OFFICES
Principal office of the Corporation shall be in the City of
Martinsville, Henry County, Virginia. The Corporation may also have
offices at such places within or without the State of Virginia as the
Board may, from time to time, determine or the business of the
Corporation may require.
ARTICLE II - SHAREHOLDERS
1. Place of Meeting
Meetings of shareholders shall be held at the principal office of the
Corporation or at any such place within or without the State of
Virginia as the Board shall authorize.
2. Annual Meetings
The annual meeting of the shareholders entitled to vote shall be held
for the election of directors and the transaction of such other
business as may properly come before the meeting, in March of each
year, normally on the third Thursday, or on any other day (except
Saturday, Sunday, or holiday), in that month as determined by the
Board of Directors, at the principal office of the Corporation or at
such other place, within or without the State of Virginia, as may be
fixed by the Board of Directors.
3. Special Meetings
Special meetings of the shareholders may be called by the Chairman of
the Board, the President, or by a majority of the Board of Directors.
Such request shall state the purpose or purposes of the proposed
meeting. Business transacted at a special meeting shall be confined
to the purposes stated in the notice.
4. Fixing Record Date
For the purpose of determining the shareholders entitled to notice of
or to vote at any meeting of shareholders or any adjournment thereof,
or to express consent to or dissent from any proposal without a
meeting, or for the purpose of determining shareholders entitled to
receive payment of any dividend, or the allotment of any rights, or
for the purpose of any other action, the Board shall fix, in advance,
a date as the record date for any such determination of shareholders.
Such date shall not be more than seventy nor less than twenty days
before the date of such meeting, nor more than seventy days prior to
any other action. If no record date is fixed, it shall be determined
in accordance with the provisions of law.
5. Notice of Meetings of Shareholders
Written notice of each meeting of shareholders shall state the
purpose or purposes for which the meeting is called, the place, date
and hour of the meeting and unless it is the annual meeting, shall
indicate that it is being issued by or at the direction of the person
or persons calling the meeting.
Notice shall be given either personally or by mail to each
shareholder entitled to vote at such meeting, not less than twenty
nor more than fifty days before the date of the meeting unless some
different period shall be specified by law. If action is proposed to
be taken that might entitle shareholders to payment for their shares,
the notice shall include a statement of that purpose and to that
effect. If mailed, the notice is given when deposited in the United
States mail, with postage thereon prepaid, directed to shareholders
at their addresses as they appear on the record of shareholders, or,
if they shall have filed with the Secretary a written request that
notices to them be mailed to some other address, then directed to
them at such other address.
6. Waiver
Notice of meeting need not be given to any shareholders who sign a
waiver of notice, in person or by proxy, whether before or after the
meeting. Any shareholder who attends a meeting, in person or by
proxy, shall be deemed to have had timely and proper notice of the
meeting unless he attends for the express purpose of objecting to
transaction of business because the meeting is not lawfully called or
convened.
7. Quorum of Shareholders
The holders of a majority of the shares entitled to vote thereat
shall constitute a quorum at a meeting of shareholders for the
transaction of any business, provided that when a specified item of
business is required to be voted on by a class or classes, the
holders of a majority of the shares of such class or classes shall
constitute a quorum for the transaction of such specified item of
business. When a quorum is once present to organize a meeting, it is
not broken by the subsequent withdrawal of any shareholders.
The shareholders present may adjourn the meeting despite the absence
of a quorum.
8. Voting
At any meeting of the shareholders, each shareholder of a class
entitled to vote on any matter coming before the meeting shall, as to
such matter, have one vote, in person or by proxy, for each share of
capital stock of such class standing in his name on the books of the
Corporation on the date, not more than seventy days prior to such
meeting, fixed by the Board of Directors as the record date for the
purpose of determining shareholders entitled to vote. Every proxy
shall be in writing, dated and signed by the shareholder entitled to
vote or his duly authorized attorney-in-fact.
9. Inspectors
An appropriate number of inspectors for any meeting of shareholders
may be appointed by the Chairman of such meeting. Inspectors so
appointed will open and close the polls, will receive and take charge
of proxies and ballots, and will decide all questions as to the
qualifications of voters, validity of proxies and ballots, and the
number of votes cast.
ARTICLE III - DIRECTORS
1. Board of Directors
The business of the Corporation shall be managed by its Board of
Directors, each of whom shall be at least 21 years of age and need
not be a shareholder.
2. Number of Directors
The number of directors which shall constitute the entire Board of
Directors shall be 10. This number may be increased or decreased by
amendment of the Bylaws; provided that in no event shall such number
be less than three; and provided further that any such resolution
effecting a change in the number of directors shall be approved by
the vote of the majority of the entire Board; and provided further
that no decrease in the number of directors shall shorten the term of
any incumbent director.
3. Election and Term of Directors
At each annual meeting of shareholders, the shareholders shall elect
directors to hold office until the next annual meeting. Each
director shall hold office until the expiration of the term for which
he is elected and until his successor has been elected and qualified,
or until his prior resignation or removal.
4. Newly Created Directorships and Vacancies
Newly created directorships resulting from an increase by not more
than two in the number of directors and vacancies occurring in the
Board for any reason may be filled by a vote of a majority of the
directors then in office, although less than a quorum exists. A
director elected to fill a vacancy caused by resignation, death or
removal shall be elected to hold office for the unexpired term of his
predecessor.
5. Age of Directors
If at any annual meeting of shareholders at which a director would
stand for reelection such director shall have attained the age of 72,
he shall be ineligible for reelection.
6. Removal of Directors
At a meeting expressly called for that purpose, any or all of the
directors may be removed with or without cause by vote of the
shareholders.
7. Resignation
A director may resign at any time by giving written notice to the
Chairman of the Board, the President or the Secretary of the
Corporation. Unless otherwise specified in the notice, the
resignation shall take effect upon receipt thereof by the Board or
such officer, and the acceptance of the resignation shall not be
necessary to make it effective.
8. Quorum of Directors
A majority of the entire Board shall constitute a quorum for the
transaction of business or of any specified item of business.
9. Action of the Board
The vote of a majority of the directors present at the time of the
vote, if a quorum is present at such time, shall determine and
constitute the action of the Board. Each Director shall have one
vote regardless of the number of shares, if any, which he may hold.
10. Place and Time of Board Meetings
The Board may hold its meetings at the office of the Corporation or
any such other places, either within or without the State of
Virginia, as it may, from time to time, determine.
11. Regular Annual Meeting
A regular annual meeting of the Board shall be held immediately
following the annual meeting of shareholders.
12. Notice of Meetings of the Board - Adjournment
(a) Regular meetings of the Board may be held without notice at such
time and place as it shall, from time to time, determine. Special
meetings of the Board shall be held upon notice to the directors and
may be called by the Chairman of the Board upon at least five days'
notice to each Director either personally or by mail or by wire;
special meetings shall be called by the Chairman of the Board or by
the Secretary in a like manner on written request of four directors.
Notice of a meeting need not be given to any director who submits a
waiver of notice whether before or after the meeting or who attends
the meeting without protesting, prior thereto or at its commencement,
the lack of notice to him.
(b) A majority of the directors present, whether or not a quorum is
present, may adjourn any meeting to another time and place. Notice
of the adjournment shall be given all Directors who were absent at
the time of the adjournment, and, unless such time and place are
announced at the meeting, to the other directors.
13. Chairman
The Chairman and Chief Executive Officer shall preside at all
meetings of the Board where he is present. In his absence the
President shall preside. At any Board meeting, the Board shall have
the right to select any director as presiding officer.
14. Executive and Other Committees
The Board, by resolution adopted by a majority of the entire Board,
may designate from among its members an executive committee and other
committees, each consisting of two or more directors. Each such
committee shall have the powers and authority conferred in the
resolution creating it, and the members of such committee shall serve
at the pleasure of the Board.
15. Compensation
Directors may be compensated for services as determined by the Board
and shall be reimbursed for reasonable expenses incurred in attending
meetings of the Board or committees thereof. Directors who are
officers or employees of the Corporation or any of its subsidiaries
shall not be entitled to such compensation. Nothing herein contained
shall be construed to preclude any director from serving the
Corporation in any other capacity and receiving compensation
therefore.
ARTICLE IV - OFFICERS
1. Offices, Election, Term
(a) The Board may elect a Chairman of the Board, a President, one or
more Vice Presidents, a Secretary, a Treasurer, a Controller, and
such other officers as it may determine, who shall have duties,
powers and functions as hereinafter provided.
(b) All officers shall hold office at the pleasure of the Board.
2. Removal, Resignation, Salary, etc.
(a) Any officer elected or appointed by the Board may be removed by
the Board with or without cause.
(b) In the event of the death, resignation or removal of an officer,
the Board in its discretion may elect or appoint a successor to fill
the unexpired term.
(c) Any two or more offices may be held by the same person, except
the offices of the Chairman of the Board, or President, and
Secretary.
(d) The salaries of the Chief Executive Officer and the Chief
Operating Officer shall be fixed by the Board upon recommendation of
the Executive Compensation Committee. All other salaries shall be
the responsibility of the Chief Executive Officer and the Chief
Operating Officer.
(e) The directors may require any officer to give security for the
faithful performance of his duties.
3. Chairman of the Board
The Chairman of the Board shall be the Chief Executive Officer of the
Company. He shall be responsible for the leadership and direction of
the Corporation.
4. President
The President shall be the chief operating officer of the
Corporation. He shall be responsible for the effective
administration of the operations of the Corporation and for the
interpretation, application and implementation of the policies and
decisions of the Board.
5. Vice President
During the absence or disability of the Chairman and the President,
the Vice President, or if there are more than one, the Executive Vice
President, shall have all the powers and functions of the Chairman
and the President. Each Vice President shall perform such other
duties as the Board shall prescribe.
6. Vice President-Finance
The Vice President-Finance shall be the chief financial officer of
the Corporation. He shall develop and recommend to the Board
financial policies for the Corporation. He shall also supervise and
direct the Treasurer and Controller. He shall render a full
financial report at the annual meeting of shareholders as so
requested.
The Vice President-Finance may sign and execute in the name of the
Corporation deeds, mortgages, bonds, contracts or other instruments,
except in cases where the signing and execution thereof shall be
expressly delegated by the Board of Directors or by these Bylaws to
some other officer or agent of the Corporation or shall be required
by law or otherwise to be signed or executed.
7. Secretary
The Secretary shall:
(a) Attend all meetings of the Board and of the shareholders;
(b) Record all votes and minutes of all proceedings in a book to be
kept for that purpose;
(c) Give or cause to be given notice of all meetings of shareholders
and special meetings of the Board;
(d) Keep in safe custody the seal of the Corporation and affix it to
any instrument when authorized by the Board;
(e) When required, prepare or cause to be prepared and available at
each meeting of shareholders, a certified list in alphabetical order
of the names of shareholders entitled to vote thereat, indicating the
number of shares of each respective class held by each.
(f) Keep all the documents and records of the Corporation as
required by law or otherwise in a proper and safe manner; and
(g) Perform such other duties as may be prescribed by the Board.
8. Assistant Secretaries
During the absence or disability of the Secretary, the Assistant
Secretary, or if there are more than one, the one so designated by
the Secretary or by the Board, shall have all the powers and functions
of the Secretary.
9. Treasurer
The Treasurer shall: subject to the supervision and direction of the
Vice President-Finance.
(a) Have the custody of the corporate funds and securities;
(b) Keep full and accurate accounts of bank receipts and
disbursements;
(c) Deposit all money and other valuables in the name and to the
credit of the Corporation and such depositories as may be designated
by the Board;
(d) Disburse the funds of the Corporation as may be ordered or
authorized by the Board and preserve proper vouchers for such
disbursement;
(e) Perform such other duties as are given to him by these Bylaws or
as, from time to time are assigned to him by the Chairman of the
Board, the President, or the Vice President-Finance.
10. Assistant Treasurer
During the absence or disability of the Treasurer, the Assistant
Treasurer, or if there are more than one, the one so designated by
the Board shall have all the powers and functions of the Treasurer.
11. Controller
The Controller shall be the chief accounting officer of the
Corporation. The Controller shall:
(a) Maintain adequate accounts and records of all assets,
liabilities and transactions of the Corporation in accordance with
generally accepted accounting practices;
(b) Exhibit his accounts and records to any of the directors, the
President and the Vice President-Finance at any time upon request at
the office of the Corporation;
(c) Render such statements and reports of his accounts and records
and of the financial condition of the Corporation to the Board, the
President and the Vice President-Finance as often and in such manner
as they may require;
(d) Be furnished by all corporate officers and agents, at his
request, with such reports and statements as he may require as to all
financial transactions of the Corporation;
(e) Make and file (or supervise the making and filing of) all tax
returns required by law; and
(f) Perform such other duties as are given to him by the Board, the
President, or the Vice President-Finance.
ARTICLE V - CERTIFICATES FOR SHARES
1. Certificates
The seal of the Corporation on certificates for shares of its capital
stock may be facsimile. The signatures of the officers upon a
certificate may be facsimiles if the certificate is countersigned by
a transfer agent or registered by a registrar other than the
Corporation itself or its employee. In case any officer who has
signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer before such
certificate is issued, it may be issued by the Corporation with the
same effect as if he were such officer at the date of issue.
2. Lost or Destroyed Certificates
The Chairman of the Board or Secretary may cause a new certificate or
certificates to be issued in place of any certificate or certificates
theretofore issued by the Corporation, alleged to have been lost or
destroyed upon the making of an affidavit of that fact by the person
claiming the certificate or certificates to be lost or destroyed.
When authorizing the issuance of a new certificate or certificates,
the Chairman of the Board or Secretary shall have discretionary
authority to require, as a condition precedent to the issuance
thereof, that the claimant of such allegedly lost or destroyed
certificate or certificates give the Corporation and/or its transfer
agent or registrar, if any, a bond in such sum, on such terms and
with such surety or sureties as may be satisfactory to the Chairman
of the Board or the Secretary as indemnity against any claim that may
be made against the Corporation and/or its transfer agent or
registrar, if any, with respect to the certificate or certificates
alleged to have been lost or destroyed.
3. Transfers of Shares
(a) Upon surrender to the Corporation or the transfer agent of the
Corporation, of a certificate for shares duly endorsed or accompanied
by proper evidence of succession, assignment or authority to
transfer, it shall be the duty of the Corporation to issue a new
certificate to the person entitled thereto, and cancel the old
certificate; every such transfer shall be entered on the transfer
book of the Corporation which shall be kept at the office of its
transfer agent.
(b) The Corporation shall be entitled to treat the holder of record
of any share as the holder in fact thereof and, accordingly, shall
not be found to recognize any equitable or other claim to or interest
in such share on the part of any other persons whether or not it
shall have express or other notice thereof, except as expressly
provided by the laws of Virginia.
(c) To the extent that any provision of the Rights Agreement between
the Corporation and Sovran Bank, N.A., as Rights Agent, dated as of
March 22, 1990, is deemed to constitute a restriction on the transfer
to any securities of the Corporation, including, without limitation,
the Rights, as defined therein, such restriction is hereby authorized
by the Bylaws of the Corporation.
ARTICLE VI - DIVIDENDS
Subject to the provisions of the Articles of Incorporation and to
applicable law, dividends on the outstanding shares of the
Corporation may be declared in such amounts and at such time or times
as the Board may determine consistently with the provisions of the
Articles of Incorporation governing the payment of dividends on
preferred stock. Before payment of any dividend, there may be set
aside out of the net profits of the Corporation available for
dividends such sum or sums as the Board from time to time in its
absolute discretion deems proper as a reserve fund to meet
contingencies, or for repairing or maintaining any property of the
Corporation, or for such other purposes as the Board shall think
conducive to the interests of the Corporation, and the Board may
modify or abolish any such reserve.
ARTICLE VII - CORPORATE SEAL
The seal of the Corporation shall be circular in form and bear the
name of the Corporation, the year of its organization and the word
"Virginia." The seal may be used by causing it to be impressed
directly on the instrument or writing to be sealed or upon adhesive
substance affixed thereto. The seal on the certificates for shares
or on any corporate obligation for the payment of money may be a
facsimile, engraved or printed.
ARTICLE VIII - EXECUTION OF INSTRUMENTS
All corporate instruments and documents shall be signed or
countersigned, executed, verified or acknowledged by such officer or
officers or other person or persons as the Board may from time to
time designate.
ARTICLE IX - FISCAL YEAR
The fiscal year shall end on the Saturday nearest to the 31st day of
December in each year.
ARTICLE X - REFERENCES TO ARTICLES OF INCORPORATION
Reference to the Articles of Incorporation in these Bylaws shall
include all amendments thereto or changes thereof unless specifically
excepted.
ARTICLE XI - BYLAW CHANGES, AMENDMENT, REPEAL, ADOPTION, ELECTION OF
DIRECTORS
(a) The Bylaws may be amended, repealed or adopted by vote in person
or by proxy of the holders of a majority of the shares of capital
stock at the time entitled to vote in the election of any directors.
The Bylaws may also be amended, repealed, or adopted by the Board but
any bylaw adopted by the Board may be amended by the shareholders
entitled to vote thereon as herein provided.
(b) If any bylaw is adopted, amended or repealed by the Board, there
shall be set forth in the notice of the next meeting of shareholders
for the election of directors the bylaw so adopted, amended or
repealed together with a concise statement of the changes made.
ARTICLE XII - EMERGENCY BYLAWS
The Emergency Bylaws provided in this Article XII shall be operative
during any emergency, notwithstanding any different provision in the
preceding Articles of these Bylaws or in the Articles of
Incorporation of the Corporation or in the Virginia Stock Corporation
Act (other than those provisions relating to emergency Bylaws). An
emergency exists if a quorum of the Corporation's Board of Directors
cannot readily be assembled because of some catastrophic event. To
the extent not inconsistent with these Emergency Bylaws, the Bylaws
provided in the preceding Articles shall remain in effect during such
emergency and upon the termination of such emergency the Emergency
Bylaws shall cease to be operative unless and until another such
emergency shall occur.
During any such emergency:
(a) Any meeting of the Board of Directors may be called by any
officer of the Corporation or by any director. The notice thereof
shall specify the time and place of the meeting. To the extent
feasible, notice shall be given in accord with Section II 3 above,
but notice may be given only to such of the directors as it may be
feasible to reach at the time, by such means as may be feasible at
the time, including publication or radio, and at a time less than
twenty-four hours before the meeting if deemed necessary by the
person giving notice. Notice shall be similarly given, to the extent
feasible, to the other persons referred to in (b) below.
(b) At any meeting of the Board of Directors, a quorum shall consist
of a majority of the number of directors fixed at the time by Article
III of the Bylaws. If the directors present at any particular
meeting shall be fewer than the number required for such quorum,
other persons present as referred to below, to the number necessary
to make up such quorum, shall be deemed directors for such particular
meeting as determined by the following provisions and in the
following order of priority referred to below, to the number
necessary to make up such quorum, shall be deemed directors for such
particular meeting as determined by the following provisions and in
the following order of priority:
(i) Vice Presidents not already serving as directors, in the
order of their seniority of first election to such offices, or if two
or more shall have been first elected to such offices on the same
day, in the order of their seniority in age;
(ii) All other officers of the Corporation in the order of
their seniority of first election to such offices, or if two or more
shall have been first elected to such offices on the same day, in the
order of their seniority in age; and
(iii) Any other persons that are designated on a list that
shall have been approved by the Board of Directors before the
emergency, such persons to be taken in such order of priority and
subject to such conditions as may be provided in the resolution
approving the list.
(c) The Board of Directors, during as well as before any such
emergency, may provide, and from time to time modify, lines of
succession in the event that during such an emergency any or all
officers or agents of the Corporation shall for any reason be
rendered incapable of discharging their duties.
(d) The Board of Directors, during as well as before any such
emergency, may, effective in the emergency, change the principal
office, or designate several alternative offices, or authorize the
officers so to do.
No officer, director or employee shall be liable for action taken in
good faith in accordance with these Emergency Bylaws.
These Emergency Bylaws shall be subject to repeal or change by
further action of the Board of Directors or by action of the
shareholders, except that no such repeal or change shall modify the
provisions of the next preceding paragraph with regard to action or
inaction prior to the time of such repeal or change. Any such
amendment of these Emergency Bylaws may make any further or different
provision that may be practical and necessary for the circumstances
of the emergency.
THE COMPANIES LAW
COMPANY LIMITED BY SHARES
ARTICLES OF INCORPORATION
OF
AKOM, Ltd.
1. In these Articles Table A in the Schedule to the Statute does not
apply and, unless there be something in the subject or context inconsistent
therewith,
"Articles" means these Articles as originally framed or as from
time to time altered by Special Resolution.
"The Auditors" means the persons for the time being performing
the duties of auditors of the Company.
"The Company" means the above named Company.
"Debenture" means debenture stock, mortgages, bonds and any other
such securities of the Company whether constituting a charge on
the assets of the Company or not.
"The Directors" means the directors for the time being of the
Company.
"Dividend" includes bonus.
"Extraordinary Resolution" has the same meaning as in the
Statute.
"Month" means calendar month.
"The Registered Office" means the registered office for the time
being of the Company.
"Paid-up" means paid-up and/or credited as paid-up.
"Seal" means the common seal of the Company and includes every
official seal.
"Secretary" includes an Assistant Secretary and any person
appointed to perform the duties of Secretary of the Company.
"Member" shall bear the meaning ascribed to it in Section 35 of
the Statute.
"Special Resolution" has the same meaning as in the Statute.
"Statute" means the Companies Law of the Cayman Islands as
amended and every statutory modification or re-enactment thereof
for the time being in force.
"Written" and "In Writing" include all modes of representing or
reproducing words in visible form.
Words importing the singular number only include the plural
number and vice-versa.
Words importing the masculine gender only include the feminine
gender.
Words importing persons only include corporations.
2. The business of the Company may be commenced as soon after
incorporation as the Directors shall see fit, notwithstanding that part
only of the shares may have been allotted.
3. The Directors may pay, out of the capital or any other monies of
the Company, all expenses incurred in or about the formation and
establishment of the Company including the expenses of registration.
CERTIFICATES FOR SHARES
4. Certificates representing shares of the Company shall be in such
form as shall be determined by the Directors. Such certificates shall be
under seal signed by a Director and countersigned by the Secretary or
another Director or other authorised person. All certificates for shares
shall be consecutively numbered or otherwise identified and shall specify
the shares to which they relate. The name and address of the person to
whom the shares represented thereby are issued, with the number of shares
and date of issue, shall be entered in the register of members of the
Company. All certificates surrendered to the Company for transfer shall be
cancelled and no new certificate shall be issued until the former
certificate for a like number of shares shall have been surrendered and
cancelled. The Directors may authorise certificates to be issued with the
seal and authorised signatures affixed by some method or system of
mechanical process.
5. Notwithstanding Article 4 of these Articles, if a share
certificate be defaced, lost or destroyed, it may be
renewed on payment of a fee of one dollar (US$1.00) or such less sum and on
such terms (if any) as to evidence and indemnity and the payment of the
expenses incurred by the Company in investigating evidence, as the
Directors may prescribe.
ISSUE OF SHARES
6. Subject to the provisions, if any, in that behalf in the
Memorandum of Association and to any direction that may be given by the
Company in general meeting and without prejudice to any special rights
previously conferred on the holders of existing shares, the Directors may
allot, issue, grant options over or otherwise dispose of shares of the
Company with or without preferred, deferred or other special rights or
restrictions, whether in regard to dividend, voting, return or capital or
otherwise and to such persons, at such times and on such other terms as
they think proper.
7. The Company shall maintain a register of its members and every
person whose name is entered as a member in the register of members shall
be entitled without payment to receive within two months after allotment or
lodgement of transfer (or within such other period as the conditions of
issue shall provide) one certificate for all his shares or several
certificates each for one or more of his shares upon payment of fifty cents
(US$0.50) for every certificate after the first or such less sum as the
Directors shall from time to time determine provided that in respect of a
share or shares held jointly by several persons the Company shall not be
bound to issue more than one certificate and delivery of a Certificate for
a share to one of the several joint holders shall be sufficient delivery to
all such holders.
TRANSFER OF SHARES
8. The instrument of transfer of any share shall be in writing and
shall be executed by or on behalf of the Transferor and the Transferor
shall be deemed to remain the holder of a share until the name of the
Transferee is entered in the register in respect thereof.
9. The Directors may in their absolute discretion decline to
register any transfer of shares without assigning any reason therefor. If
the Directors refuse to register a transfer shall notify the Transferee
within two months of such refusal.
10. The registration of transfers may be suspended at such time and
for such periods as the Directors may from time to time determine, provided
always that such registration shall not be suspended for more than forty-
five days in any year.
REDEEMABLE SHARES
11. Subject to the provisions of the Statute and the Memorandum of
Association, shares may be issued on the terms that they may, or at the
option of the Company may, be redeemed on such terms and in such manner as
the Company, before the issue of the shares, may by special resolution
determine.
VARIATION OF RIGHTS OF SHARES
12. If at any time the share capital of the Company is divided into
different classes of shares, the rights attached to any class (unless
otherwise provided by the terms of issue of the shares of that class) may,
whether or not the Company is being woundup, be varied with the consent in
writing of the holders of three-fourths of the issued shares of that class,
or with the sanction of an extraordinary resolution passed at a general
meeting of the holders of the shares of that class.
The provisions of these Articles relating to general meetings
shall apply to every such general meeting of the holders of one class of
shares except that the necessary quorum shall be one (1) person holding or
representing by proxy at least one-third of the issued shares of the class
and that any holder of shares of the class present in person or by proxy
may demand a poll.
13. The rights conferred upon the holders of the shares of any class
issued with preferred or other rights shall not, unless otherwise expressly
provided by the terms of issue of the shares of that class, be deemed to be
varied by the creation or issue of further shares ranking pari passu
therewith.
COMMISSION ON SALE OF SHARES
14. The Company may in so far as the Statute from time to time
permits pay a commission to any person in consideration of his subscribing
or agreeing to subscribe whether absolutely or conditionally for any shares
of the Company. Such commissions may be satisfied by the payment of cash
or the lodgement of fully or partly paid-up shares or partly in one way and
partly in the other. The Company may also on any issue of shares pay such
brokerage as may be lawful.
NON-RECOGNITION OF TRUSTS
15. No person shall be recognised by the Company as holding any share
upon any trust and the Company shall not be bound by or be compelled in any
way to recognise (even when having notice thereof) any equitable,
contingent, future, or partial interest in any share, or any interest in
any fractional part of a share, or (except only as is otherwise provided by
these Articles or the Statute) any other rights in respect of any share
except an absolute right to the entirety thereof in the registered holder.
LIEN ON SHARES
16. The Company shall have a first and paramount lien and charge on
all shares (whether fully paid-up or not) registered in the name of a
member (whether solely or jointly with others) for all debts, liabilities
or engagements to or with the Company (whether presently payable or not) by
such member or his estate, either alone or jointly with any other person,
whether a member or not, but the Directors may at any time declare any
share to be wholly or in part exempt from the provisions of this Article.
The registration of a transfer of any such share shall operate as a waiver
of the Company's lien (if any) thereon. The Company's lien (if any) on a
share shall extend to all dividends or other monies payable in respect
thereof.
17. The Company may sell, in such manner as the Directors think fit,
any shares on which the Company has a lien, but no sale shall be made
unless a sum in respect of which the lien exists is presently payable, nor
until the expiration of fourteen days after a notice in writing stating and
demanding payment of such part of the amount in respect of which the lien
exists as is presently payable, has been given to the registered holder or
holders for the time being of the share, or the person, of which the
Company has notice, entitled thereto by reason of his death or bankruptcy.
18. To give effect to any such sale the Directors may authorise some
person to transfer the shares sold to the purchaser thereof. The purchaser
shall be registered as the holder of the shares comprised in any such
transfer, and he shall not be bound to see to the application of the
purchase money, nor shall his title to the shares be affected by any
irregularity or invalidity in the proceedings in reference to the sale.
19. The proceeds of such sale shall be received by the Company and
applied in payment of such part of the amount in respect of which the lien
exists as is presently payable and the residue, if any, shall (subject to a
like lien for sums not presently payable as existed upon the shares before
the sale) be paid to the person entitled to the shares at the date of the
sale.
CALL ON SHARES
20. (a) The Directors may from time to time make calls upon the
members in respect of any monies unpaid on their shares (whether on account
of the nominal value of the shares or by way of premium or otherwise) and
not by the conditions of allotment thereof made payable at fixed terms,
provided that no call shall exceed one-fourth of the nominal value of the
share or be payable at less than one month from the date fixed for the
payment of the last preceding call, and each member shall (subject to
receiving at least fourteen days notice specifying the time or times of
payment) pay to the Company at the time or times so specified the amount
called on the shares. A call may be revoked or postponed as the Directors
may determine. A call may be made payable by instalments.
(b) A call shall be deemed to have been made at the time when
the resolution of the Directors authorising such call was passed.
(c) The joint holders of a share shall be jointly and severally
liable to pay all calls in respect thereof.
21. If a sum called in respect of a share is not paid before or on a
day appointed for payment thereof, the persons from whom the sum is due
shall pay interest on the sum from the day appointed for payment thereof to
the time of actual payment at such rate not exceeding ten per cent per
annum as the Director may determine, but the Directors shall be at liberty
to waive payment of such interest either wholly or in part.
22. Any sum which by the terms of issue of a share becomes payable on
allotment or at any fixed date, whether on account of the nominal value of
the share or by way of premium or otherwise, shall for the purposes of
these Articles be deemed to be a call duly made, notified and payable on
the date which by the terms of issue the same becomes payable, and in the
case of non-payment all the relevant provisions of these Articles as to
payment of interest forfeiture or otherwise shall apply as if such sum had
become payable by virtue of a call duly made and notified.
23. The Directors may, on the issue of shares, differentiate between
the holders as to the amount of calls or interest to be paid and the times
of payment.
24. (a) The Directors may, if they think fit, receive from any member
willing to advance the same, all or any part of the monies uncalled and
unpaid upon any shares held by him, and upon all or any of the monies so
advanced may (until the same would but for such advances, become payable)
pay interest at such rate not exceeding (unless the Company in general
meeting shall otherwise direct) seven per cent (7%) per annum, as may be
agreed upon between the Directors and the member paying such sum in
advance.
(b) No such sum paid in advance of calls shall entitle the member
paying such sum to any portion of a dividend declared in respect of any
period prior to the date upon which such sum would, but for such payment,
become presently payable.
FORFEITURE OF SHARES
25. (a) If a member fails to pay any call or instalment of a call or
to make any payment required by the terms of issue on the day appointed for
payment thereof, the Directors may, at any time thereafter during such time
as any part of the call, instalment or payment remains unpaid, give notice
requiring payment of so much of the call, instalment or payment as is
unpaid, together with any interest which may have accrued and all expenses
that have been incurred by the Company by reason of such non-payment. Such
notice shall name a day (not earlier than the expiration of fourteen days
from the date of giving of the notice) on or before which the payment
required by the notice is to be made, and shall state that, in the event of
non-payment at or before the time appointed the shares in respect of which
such notice was given will be liable to be forfeited.
(b) If the requirements of any such notice as aforesaid are not
complied with, any share in respect of which the notice has been given may
at any time thereafter, before the payment required by the notice has been
made, be forfeited by a resolution of the Directors to that effect. Such
forfeiture shall include all dividends declared in respect of the forfeited
share and not actually paid before the forfeiture.
(c) A forfeited share may be sold or otherwise disposed of on such
terms and in such manner as the Directors think fit and at any time before
a sale or disposition the forfeiture may be cancelled on such terms as the
Directors think fit.
26. A person whose shares have been forfeited shall cease to be a
member in respect of the forfeited shares, but shall, notwithstanding,
remain liable to pay to the Company all monies which, at the date of
forfeiture were payable by him to the Company in respect of the shares
together with interest thereon, but his liability shall cease if and when
the Company shall have received payment in full of all monies whenever
payable in respect of the shares.
27. A certificate in writing under the hand of one Director and the
Secretary of the Company that a share in the Company has been duly
forfeited on a date stated in the declaration shall be conclusive evidence
of the fact therein stated as against all persons claiming to be entitled
to the share. The Company may receive the consideration given for the
share on any sale or disposition thereof and may execute a transfer of the
share in favor of the person to whom the share is sold or disposed of and
he shall thereupon be registered as the holder of the share and shall not
be bound to see to the application of the purchase money, if any, nor shall
his title to the share be affected by any irregularity or invalidity in the
proceedings in reference to the forfeiture, sale or disposal of the share.
28. The provisions of these Articles as to forfeiture shall apply in
the case of non-payment of any sum which, by the terms of issue of a share,
becomes payable at a fixed time, whether on account of the nominal value of
the share or by way of premium as if the same had been payable by virtue of
a call duly made and notified.
REGISTRATION OF EMPOWERING INSTRUMENTS
29. The Company shall be entitled to charge a fee not exceeding one
dollar (US$1.00) on the registration of every probate, letters of
administration, certificate of death or marriage, power of attorney, notice
in lieu of distringas, or other instrument.
TRANSMISSION OF SHARES
30. In case of the death of a member, the survivor or survivors where
the deceased was a joint holder, and the legal personal representatives of
the deceased where he was a sole holder, shall be the only persons
recognised by the Company as having any title to his interest in the
shares, but nothing herein contained shall release the estate of any such
deceased holder from any liability in respect of any shares which had been
held by him solely or jointly with other persons.
31. (a) Any person becoming entitled to a share in consequence of the
death or bankruptcy of a member (or in any other way than by transfer) may,
upon such evidence being produced as may from time to time be required by
the Directors and subject as hereinafter provided, elect either to be
registered himself as holder of the share or to make such transfer of the
share to such other person nominated by him as the deceased or bankrupt
person could have made and to have such person registered as the transferee
thereof, but the Directors shall, in either case, have the same right to
decline or suspend registration as they would have had in the case of a
transfer of the share by that member before his death or bankruptcy as the
case may be.
(b) If the person so becoming entitled shall elect to be registered
himself as holder he shall deliver or send to the Company a notice in
writing signed by him stating that he so elects.
32. A person becoming entitled to a share by reason of the death or
bankruptcy of the holder (or in any other case than by transfer) shall be
entitled to the same dividends and other advantages to which he would be
entitled if he were the registered holder of the share, except that he
shall not, before being registered as a member in respect of the share, be
entitled in respect of it to exercise any right conferred by membership in
relation to meetings of the Company PROVIDED HOWEVER that the Directors may
at any time give notice requiring any such person to elect either to be
registered himself or to transfer the share and if the notice is not
complied with within ninety days the Directors may thereafter withhold
payment of all dividends, bonuses or other monies payable in respect of the
share until the requirements of the notice have been complied with.
CONVERSION OF SHARES AND STOCK
33. (a) The Company may by ordinary resolution convert any paid-up
shares into stock and re-convert any stock into paid-up shares of any
denomination.
(b) The holders of stock may transfer the same, or any part thereof,
in the same manner, and subject to the same regulations as and subject to
which, the shares from which the stock arose might previously to conversion
have been transferred, or as near thereto as circumstances admit; the
Directors may from time to time fix the minimum amount of stock
transferable, but so that such minimum shall not exceed the nominal amount
of the shares from which the stock arose.
(c) The holders of stock shall, according to the amount of stock
held by them, have the same rights, privileges and advantages as regards
dividends, voting at meetings of the Company and other matters as if they
held the shares from which the stock arose, but no such privileges or
advantages (except participation in the dividends and profits of the
Company and in the assets on winding up) shall be conferred by an amount of
stock which would not if existing in shares have conferred that privilege
or advantage.
34. Such of these Articles as are applicable to paid-up shares shall apply
to stock and the words "share" and "shareholder" herein shall include
"stock" and "stockholder".
AMENDMENT OF MEMORANDUM OF ASSOCIATION, CHANGE OF
LOCATION OF REGISTERED OFFICE & ALTERATION OF CAPITAL
35. (a) Subject to and in so far as permitted by the provisions of the
Statute, the Company may from time to time by ordinary resolution alter or
amend its Memorandum of Association otherwise than with respect to its name
and objects and may, without restricting the generality of the foregoing:
(i) increase the share capital by such sum to be divided into
shares of such amount or without nominal or par value as the
resolution shall prescribe and with such rights, priorities
and privileges annexed thereto, as the Company in general
meeting may determine.
(ii) consolidate and divide all or any of its share capital into
shares of larger amount than its existing shares;
(iii) by subdivision of its existing shares or any of them divide
the whole or any part of its share capital into shares of
smaller amount than is fixed by the Memorandum of Association
or into shares without nominal or par value;
(iv) cancel any shares which at the date of the passing of the
resolution have not been taken or agreed to be taken by any
person.
(b) All new shares created hereunder shall be subject to the same
provisions with reference to the payment of calls liens, transfer,
transmission, forfeiture and otherwise as the shares in the original share
capital.
(c) Subject to the provisions of the Statute the Company may by
special resolution change its name or alter its objects.
(d) Subject to the provisions of the Statute the Company may by
special resolution reduce its share capital, any capital redemption reserve
fund, or any share premium account.
(e) Subject to the provisions of the Statute the Company may by
resolution of the Directors change the location of its registered office.
CLOSING REGISTER OF MEMBERS OR FIXING RECORD DATE
36. For the purpose of determining members entitled to notice of or
to vote at any meeting of members or any adjournment thereof, or members
entitled to receive payment of any dividend, or in order to make a
determination of members for any other proper purpose, the Directors of the
Company may provide that the register of members shall be closed for
transfers for a stated period but not to exceed in any case forty (40)
days. If the register of members shall be so closed for the purpose of
determining members entitled to notice of or to vote at a meeting of
members such register shall be so closed for at least ten (10) days
immediately preceding such meeting and the record date for such
determination shall be the date of the closure of the register of members.
37. In lieu of or apart from closing the register of members, the
Directors may fix in advance a date as the record date for any such
determination of members entitled to notice of or to vote at a meeting of
the members and for the purpose of determining the members entitled to
receive payment of any dividend the Directors may, at or within 90 days
prior to the date of declaration of such dividend fix a subsequent date no
later than the date of declaration as the record date for such
determination.
38. If the register of members is not so closed and no record date is
fixed for the determination of members entitled to notice of or to vote at
a meeting of members or members entitled to receive payment of a dividend,
the date on which notice of the meeting is mailed or the date on which the
resolution of the Directors declaring such dividend is adopted, as the case
may be, shall be the record date for such determination of members. When a
determination of members entitled to vote at any meeting of members has
been made
as provided in this section, such determination shall apply to any
adjournment thereof.
GENERAL MEETING
39. (a) Subject to paragraph (c) hereof, the Company shall within one
year of its incorporation and in each year of its existence thereafter hold
a general meeting as its Annual General Meeting and shall specify the
meeting as such in the notices calling it. The Annual General Meeting
shall be held at such time and place as the Directors shall appoint and if
no other time and place is prescribed by them, it shall be held at the
registered office of the Company on the second Wednesday in December of
each year at ten o'clock in the morning.
(b) At these meetings the report of the Directors (if any) shall
be presented.
(c) If the Company is exempted as defined in the Statute it may
but shall not be obliged to hold an Annual General Meeting.
40. (a) The Directors may whenever they think fit, and they shall on the
requisition of members of the Company holding at the date of the deposit of
the requisition not less than one-tenth of such of the paid-up capital of
the Company as at the date of the deposit carries the right of voting at
general meetings of the Company, proceed to convene a general meeting of
the Company.
(b) The requisition must state the objects of the meeting and
must be signed by the requisitionists and deposited at the Registered
Office of the Company and may consist of several documents, in like form
each signed by one or more requisitionists.
(c) If the Directors do not within twenty-one days from the date
of the deposit of the requisition duly proceed to convene a general
meeting, the requisitionists, or any of them representing more than one-
half of the total voting rights of all of them, may themselves convene a
general meeting, but any meeting so convened shall not be held after the
expiration of three months after the expiration of the said twenty-one
days.
(d) A general meeting convened as aforesaid by requisitionists
shall be convened in the same manner as nearly as possible as that in which
general meetings are to be convened by Directors.
(e) If at any such general meeting a resolution requiring
confirmation at another meeting is passed, the Directors shall forthwith
convene a further general meeting to be held not less than ten days nor
later than one month after the passing of the first resolution for the
purpose of considering the resolution and if the Directors do not give
notice of so convening such further general meeting within seven days from
the date of the passing of the first resolution the requisitionists or any
of them representing more than one-half of the total voting rights of all
the requisitionists may themselves give notice and convene the general
meeting.
NOTICE OF GENERAL MEETINGS
41. At least five days' notice shall be given of an Annual General
Meeting or any other general meeting and a general meeting at which
consideration is to be given to confirmation of any special resolution
passed at a previous general meeting shall be held only at an interval of
not less than ten days nor more than one month from the date of the meeting
at which the special resolution was first passed. Every notice shall be
exclusive of the day on which it is given or deemed to be given and of the
day for which it is given and shall specify the place, the day and the hour
of the meeting and the general nature of the business and shall be given in
manner hereinafter mentioned or in such other manner if any as may be
prescribed by the Company PROVIDED that a general meeting of the Company
shall, whether or not the notice specified in this regulation has been
given be deemed to have been duly called if it is so agreed:
(a) in the case of a general meeting called as an Annual General
Meeting by all the members entitled to attend and vote
thereat or their proxies; and
(b) in the case of any other general meeting by a majority in
number of the members having a right to attend and vote at
the meeting, being a majority together holding not less than
seventy-five per cent (75%) in nominal value or in the case
of shares without nominal or par value seventy-five per cent
(75%) of the shares in issue, or their proxies.
42. The accidental omission to give notice of a general meeting to, or
the non-receipt of notice of a meeting by any person entitled to receive
notice shall not invalidate the proceedings of that meeting.
PROCEEDINGS AT GENERAL MEETINGS
43. No business shall be transacted at any general meeting unless a
quorum of members is present at the time when the meeting proceeds to
business; two (2) members present in person or by proxy shall be a quorum
provided always that if the Company is exempted and has one shareholder of
record the quorum shall be that one (1) member present in person or by
proxy.
44. Subject and without prejudice to any provisions of the Statute, a
resolution in writing (in one or more counterparts) signed by all members
for the time being entitled to receive notice of and to attend and vote at
general meetings (or being corporations by their duly authorised
representatives) shall be as valid and effective as if the same had been
passed at a general meeting of the Company duly convened and held.
45. If within half an hour from the time appointed for the meeting a
quorum is not present, the meeting, if convened upon the requisition of
members, shall be dissolved and in any other case it shall stand adjourned
to the same day in the next week at the same time and place or to such
other time or such other place as the directors may determine and if at the
adjourned meeting a quorum is not present within half an hour from the time
appointed for the meeting the members present shall be a quorum.
46. The Chairman, if any, of the Board of Directors shall preside as
Chairman at every general meeting of the Company, or if there is no such
Chairman, or if he shall not be present within fifteen minutes after the
time appointed for the holding of the meeting, or is unwilling to act, the
Directors present shall elect one of their number to be Chairman of the
meeting.
47. If at any general meeting no Director is willing to act as
Chairman or if no Director is present within fifteen minutes after the time
appointed for holding the meeting, the members present shall choose one of
their number to be Chairman of the meeting.
48. The Chairman may, with the consent of any general
meeting duly constituted hereunder, and shall if so directed by
the meeting, adjourn the meeting from time to time and from
place to place, but no business shall be transacted at any
adjourned meeting other than the business left unfinished at the meeting
from which the adjournment took place. When a general meeting is adjourned
for thirty days or more, notice of the adjourned meeting shall be given as
in the case of an original meeting; save as aforesaid it shall not be
necessary to give any notice of an adjournment or of the business to be
transacted at an adjourned general meeting.
49. At any general meeting a resolution put to the vote of the
meeting shall be decided on a show of hands unless a poll is, before or on
the declaration of the result of the show of hands, demanded by the
Chairman or any other member present in person or by proxy.
50. Unless a poll be so demanded a declaration by the Chairman that a
resolution has on a show of hands been carried, or carried unanimously, or
by a particular majority, or lost, and an entry to that effect in the
Company's Minute Book containing the Minutes of the proceedings of the
meeting shall be conclusive evidence of that fact without proof of the
number or proportion of the votes recorded in favor of or against such
resolution.
51. The demand for a poll may be withdrawn.
52. Except as provided in Article 54, if a poll is duly demanded it
shall be taken in such manner as the Chairman directs and the result of the
poll shall be deemed to be the resolution of the general meeting at which
the poll was demanded.
53. In the case of an equality of votes, whether on a show of hands
or on a poll, the Chairman of the general meeting at which the show of
hands takes place or at which the poll is demanded, shall be entitled to a
second or casting vote.
54. A poll demanded on the election of a Chairman or on a question of
adjournment shall be taken forthwith. A poll demanded on any other
question shall be taken at such time as the Chairman of the general meeting
directs and any business other than that upon which a poll has been
demanded or is contingent thereon may be proceeded with pending the taking
of the poll.
VOTES OF MEMBERS
55. Subject to any rights or restrictions for the time being attached
to any class or classes of shares, on a show of hands every member of
record present in person or by proxy at a general meeting shall have one
vote and on a poll every member of record present in person or by proxy
shall have one vote for each share registered in his name in the register.
56. In the case of joint holders of record the vote of the senior who
tenders a vote, whether in person or by proxy shall be accepted to the
exclusion of the votes of the other joint holders, and for this purpose
seniority shall be determined by the order in which the names stand in the
register of members.
57. A member of unsound mind, or in respect of whom an order has been
made by any court, having jurisdiction in lunacy, may vote, whether on a
show of hands or on a poll, by his committee, receiver, curator bonis, or
other person in the nature of a committee, receiver or curator bonis
appointed by that court, and any such committee, receiver, curator bonis or
other persons may vote by proxy.
58. No member shall be entitled to vote at any general meeting unless
he is registered as a shareholder of the Company on the record date for
such meeting nor unless all calls for other sums presently payable by him
in respect of shares in the Company have been paid.
59. No objection shall be raised to the qualification of any voter
except at the general meeting or adjourned general meeting at which the
vote objected to is given or tendered and every vote not disallowed at such
general meeting shall be valid for all purposes. Any such objection made
in due time shall be referred to the Chairman of the general meeting whose
decision shall be final and conclusive.
60. On a poll or on a show of hands votes may be given either
personally or by proxy.
PROXIES
61. The instrument appointing a proxy shall be in writing and shall
be executed under the hand of the appointor or of his attorney duly
authorised in writing, or, if the appointor is a corporation under the hand
of an officer or attorney duly authorised in that behalf. A proxy need not
be a member of the Company.
62. The instrument appointing a proxy shall be deposited at the
Registered Office of the Company or at such other place as is specified for
that purpose in the notice convening the meeting no later than the time for
holding the meeting, or adjourned meeting provided that the Chairman of the
Meeting may at his discretion direct that an instrument of proxy shall be
deemed to have been duly deposited upon receipt of telex or cable
confirmation from the appointor that the instrument of proxy duly signed is
in the course of transmission to the Company.
63. The instrument appointing a proxy may be in any usual or common
form and may be expressed to be for a particular meeting or any adjournment
thereof or generally until revoked. An instrument appointing a proxy shall
be deemed to include the power to demand or join or concur in demanding a
poll.
64. A vote given in accordance with the terms of an instrument of
proxy shall be valid notwithstanding the previous death or insanity of the
principal or revocation of the proxy or of the authority under which the
proxy was executed, or the transfer of the share in respect of which the
proxy is given provided that no intimation in writing of such death,
insanity, revocation or transfer as aforesaid shall have been received by
the Company at the office before the commencement of the general meeting,
or adjourned meeting at which it is sought to use the proxy.
65. Any corporation which is a member of record of the Company may in
accordance with its Articles or in the absence of such provision by
resolution of its Directors or other governing body authorise such person
as it thinks fit to act as its representative at any meeting of the Company
or of any class of members of the Company, and the person so authorised
shall be entitled to exercise the same powers on behalf of the corporation
which he represents as the corporation could exercise if it were an
individual member of record of the Company.
66. Shares of its own stock belonging to the Company or held by it in
a fiduciary capacity shall not be voted, directly or indirectly, at any
meeting and shall not be counted in determining the total number of
outstanding shares at any given time.
DIRECTORS
67. There shall be a Board of Directors consisting of not less than
one or more than ten persons (exclusive of Alternate Directors) PROVIDED
HOWEVER that the Company may from time to time by ordinary resolution
increase or reduce the limits in the number of Directors. The first
Directors of the Company shall be determined in writing by the subscribers
of the Memorandum of Association or a majority of them.
68. The remuneration to be paid to the Directors shall be such
remuneration as the Directors shall determine. Such
remuneration shall be deemed to accrue from day to day. The Directors
shall also be entitled to be paid their travelling, hotel and other
expenses properly incurred by them in going to, attending and returning
from meetings of the Directors, or any committee of the Directors, or
general meetings of the Company, or otherwise in connection with the
business of the Company, to receive a fixed allowance in respect thereof as
may be determined by the Directors from time to time, or a combination
partly of one such method and partly the other.
69. The Directors may by resolution award special remuneration to any
Director of the Company undertaking any special work or services for, or
undertaking any special mission on behalf of, the Company other than his
ordinary routine work as a Director. Any fees paid to a Director who is
also counsel or solicitor to the Company, or otherwise serves it in a
professional capacity shall be in addition to his remuneration as a
Director.
70. A Director or Alternate Director may hold any other office or
place of profit under the Company (other than the office of Auditor) in
conjunction with his office of Director for such period and on such terms
as to remuneration and otherwise as the Directors may determine.
71. A Director or Alternate Director may act by himself or his firm
in a professional capacity for the Company and he or his firm shall be
entitled to remuneration for professional services as if he were not a
Director or Alternate Director.
72. A shareholding qualification for Directors may be fixed by the
Company in general meeting, but unless and until so fixed no qualification
shall be required.
73. A Director or Alternate Director of the Company may be or become
a Director or other Officer of or otherwise interested in any company
promoted by the Company or in which the Company may be interested as
shareholder or otherwise and no such Director or Alternate Director shall
be accountable to the Company for any remuneration or other benefits
received by him as a Director or Officer of, or from his interest in, such
other company.
74. No person shall be disqualified from the office of Director or
Alternate Director or prevented by such office from contracting with the
Company, either as vendor, purchaser or otherwise, nor shall any such
contract or any contract or transaction entered into by or on behalf of the
Company in which any Director or Alternate Director shall be in any way
interested be or be liable to be avoided, nor shall any Director or
Alternate Director so contracting or being so interested be liable to
account to the Company for any profit realised by any such contract or
transaction by reason of such Director holding office or of the fiduciary
relation thereby established. A Director (or his Alternate Director in his
absence) shall be at liberty to vote in respect of any contract or
transaction in which he is so interested as aforesaid PROVIDED HOWEVER that
the nature of the interest of any Director or Alternate Director in any
such contract or transaction shall be disclosed by him or the Alternate
Director appointed by him at or prior to its consideration and any vote
thereon.
75. A general notice that a Director or Alternate Director is a
shareholder of any specified firm or company and is to be regarded as
interested in any transaction with such firm or company shall be sufficient
disclosure under Article 74 and after such general notice it shall not be
necessary to give special notice relating to any particular transaction.
ALTERNATE DIRECTORS
76. Subject to the exception contained in Article 84, a Director who
expects to be unable to attend Directors' Meetings because of absence,
illness or otherwise may appoint any person to be an Alternate Director to
act in his stead and such appointee whilst he holds office as an Alternate
Director shall, in the event of absence therefrom of his appointor, be
entitled to attend meetings of the Directors and to vote thereat and to do,
in the place and stead of his appointor, any other act or thing which his
appointor is permitted or required to do by virtue of his being a Director
as if the Alternate Director were the appointor, other than appointment of
an Alternate to himself, and he shall ipso facto vacate office if and when
his appointor ceases to be a Director or removes the appointee from office.
Any appointment or removal under this Article shall be effected by notice
in writing under the hand of the Director making the same.
POWERS AND DUTIES OF DIRECTORS
77. The business of the Company shall be managed by the Directors (or
a sole Director if only one is appointed) who may pay all expenses incurred
in promoting, registering and setting up the Company, and may exercise all
such powers of the Company as are not, from time to time by the Statute, or
by these Articles, or such regulations, being not inconsistent with the
aforesaid, as may be prescribed by the Company in general meeting required
to be exercised by the Company in general meeting PROVIDED HOWEVER that no
regulations made by the Company in general meeting shall invalidate any
prior act of the Directors which would have been valid if that regulation
had not been made.
78. The Directors may from time to time and at any time by powers of
attorney appoint any company, firm, person or body of persons, whether
nominated directly or indirectly by the Directors, to be the attorney or
attorneys of the Company for such purpose and with such powers, authorities
and discretions (not exceeding those vested in or exercisable by the
Directors under these Articles) and for such period and subject to such
conditions as they may think fit, and any such powers of attorney may
contain such provisions for the protection and convenience of persons
dealing with any such attorneys as the Directors may think fit and may also
authorise any such attorney to delegate all or any of the powers,
authorities and discretions vested in him.
79. All cheques, promissory notes, drafts, bills of exchange and
other negotiable instruments and all receipts for monies paid to the
Company shall be signed, drawn, accepted, endorsed or otherwise executed as
the case may be in such manner as the Directors shall from time to time by
resolution determine.
80. The Directors shall cause Minutes to be made in books provided
for the purpose:
(a) of all appointments of Officers made by the Directors;
(b) of the names of the Directors (including those represented
thereat by an Alternate or by proxy) present at each meeting
of the Directors and of any committee of the Directors;
(c) of all resolutions and proceedings at all meetings of the
Company and of the Directors and of Committees of Directors.
81. The Directors on behalf of the Company may pay a gratuity or
pension or allowance on retirement to any Director who has held any other
salaried office or place of profit with the Company or to his widow or
dependents and may make Contributions to any fund and pay premiums for the
purchase or provision of any such gratuity, pension or allowance.
82. The Directors may exercise all the powers of the Company to
borrow money and to mortgage or charge its undertaking, property and
uncalled capital or any part thereof and to issue debentures, debenture
stock and other securities whether outright or as security for any debt,
liability or obligation of the Company or of any third party.
MANAGEMENT
83. (a) The Directors may from time to time provide for the management
of the affairs of the Company in such manner as they shall think fit and
the provisions contained in the three next following paragraphs shall be
without prejudice to the general powers conferred by this paragraph.
(b) The Directors from time to time and at any time may establish
any committees, local boards or agencies for managing any of the affairs of
the Company and may appoint any persons to be members of such committees or
local boards or any managers or agents and may fix their remuneration.
(c) The Directors from time to time and at any time may delegate to
any such committee, local board, manager or agent any of the powers,
authorities and discretions for the time being vested in the Directors and
may authorise the members for the time being of any such local board, or
any of them to fill up any vacancies therein and to act notwithstanding
vacancies and any such appointment or delegation may be made on such terms
and subject to such conditions as the Directors may think fit and the
Directors may at any time remove any person so appointed and may annul or
vary any such delegation, but no person dealing in good faith and without
notice of any such annulment or variation shall be affected thereby.
(d) Any such delegates as aforesaid may be authorised by the
Directors to subdelegate all or any of the powers, authorities, and
discretions for the time being vested in them.
MANAGING DIRECTORS
84. The Directors may, from time to time, appoint one or more of
their body (but not an Alternate Director) to the office of Managing
Director for such term and at such remuneration (whether by way of salary,
or commission, or participation in profits, or partly in one way and partly
in another) as they may think fit but his appointment shall be subject to
determination ipso facto if he ceases from any cause to be a Director and
no Alternate Director appointed by him can act in his stead as a Director
or Managing Director.
85. The Directors may entrust to and confer upon a Managing Director
any of the powers exercisable by them upon such terms and conditions and
with such restrictions as they may think fit and either collaterally with
or to the exclusion of their own powers and may from time to time revoke,
withdraw, alter or vary all or any of such powers.
PROCEEDINGS OF DIRECTORS
86. Except as otherwise provided by these Articles, the Directors
shall meet together for the despatch of business, convening, adjourning and
otherwise regulating their meetings as they think fit. Questions arising
at any meeting shall be decided by a majority of votes of the Directors and
Alternate Directors present at a meeting at which there is a quorum, the
vote of an Alternate Director not being counted if his appointer be present
at such meeting. In case of an equality of votes, the Chairman shall have
a second or casting vote.
87. A Director or Alternate Director may, and the Secretary on the
requisition of a Director or Alternate Director shall, at any time summon a
meeting of the Directors by at least five days' notice in writing to every
Director and Alternate Director which notice shall set forth the general
nature of the business to be considered unless notice is waived by all the
Directors (or their Alternates) either at, before or after the meeting is
held and PROVIDED FURTHER if notice is given in person, by telegram, telex,
cablegram or wireless the same shall be deemed to have been given on the
day it is delivered to the Directors or transmitting organisation as the
case may be. The provisions of Article 42 shall apply mutatis mutandis
with respect to notices of meetings of Directors.
88. The quorum necessary for the transaction of the business of the
Directors may be fixed by the Directors and unless so fixed shall be two, a
Director and his appointed Alternate Director being considered only one
person for this purpose, PROVIDED ALWAYS that if there shall at any time be
only a sole Director the quorum shall be one. For the purposes of this
Article an Alternate Director or proxy appointed by a Director shall be
counted in a quorum at a meeting at which the Director appointing him is
not present.
89. The continuing Directors may act notwithstanding any vacancy in
their body, but if and so long as their number is reduced below the number
fixed by or pursuant to these Articles as the necessary quorum of Directors
the continuing Directors or Director may act for the purpose of increasing
the number of Directors to that number, or of summoning a general meeting
of the Company, but for no other purpose.
90. The Directors may elect a Chairman of their Board and determine
the period for which he is to hold office; but if no such Chairman is
elected, or if at any meeting the Chairman is not present within five
minutes after the time appointed for holding the same, the Directors
present may choose one of their number to be Chairman of the meeting.
91. The Directors may delegate any of their powers to committees
consisting of such member or members of the Board of Directors (including
Alternate Directors in the absence of their appointors) as they think fit;
any committee so formed shall in the exercise of the powers so delegated
conform to any regulations that may be imposed on it by the Directors.
92. A committee may meet and adjourn as it thinks proper. Questions
arising at any meeting shall be determined by a majority of votes of the
members present, and in the case of an equality of votes the Chairman shall
have a second or casting vote.
93. All acts done by any meeting of the Directors or of a committee
of Directors (including any person acting as an Alternate Director) shall,
notwithstanding that it be afterwards discovered that there was some defect
in the appointment of any Director or Alternate Director, or that they or
any of them were disqualified, be as valid as if every such person had been
duly appointed and qualified to be a Director or Alternate Director as the
case may be.
94. Members of the Board of Directors or of any committee thereof
may participate in a meeting of the Board or of such committee by means of
conference telephone or similar communications equipment by means of which
all persons participating in the meeting can hear each other and
participation in a meeting pursuant to this provision shall constitute
presence in person at such meeting. A resolution in writing (in one or
more counterparts), signed by all the Directors for the time being or all
the members of a committee of Directors (an Alternate Director being
entitled to sign such resolution on behalf of his appointor) shall be as
valid and effectual as if it had been passed at a meeting of the Directors
or committee as the case may be duly convened and held.
95. (a) A Director may be represented at any meetings of the Board of
Directors by a proxy appointed by him in which event the presence or vote
of the proxy shall for all purposes be deemed to be that of the Director.
(b) The provisions of Articles 61-64 shall mutatis mutandis apply to
the appointment of proxies by Directors.
VACATION OF OFFICE OF DIRECTOR
96. The office of a Director shall be vacated:
(a) If he gives notice in writing to the Company that he resigns the
office of Director;
(b) If he absents himself (without being represented by proxy or an
Alternate Director appointed by him) from three consecutive
meetings of the Board of Directors without special leave of
absence from the Directors, and they pass a resolution that he
has by reason of such absence vacated office;
(c) If he dies, becomes bankrupt or makes any arrangement or
composition with his creditors generally;
(d) If he is found a lunatic or becomes of unsound mind.
APPOINTMENT AND REMOVAL OF DIRECTORS
97. The Company may by ordinary resolution appoint any person to be
a Director and may in like manner remove any Director and may in like
manner appoint another person in his stead.
98. The Directors shall have power at any time and from time to time
to appoint any person to be a Director, either to fill a casual vacancy or
as an addition to the existing Directors but so that the total amount of
Directors (exclusive of Alternate Directors) shall not at any time exceed
the number fixed in accordance with these Articles.
PRESUMPTION OF ASSENT
99. A Director of the Company who is present at a meeting of the
Board of Directors at which action on any Company matter is taken shall be
presumed to have assented to the action taken unless his dissent shall be
entered in the Minutes of the meeting or unless he shall file his written
dissent from such action with the person acting as the Secretary of the
meeting before the adjournment thereof or shall forward such dissent by
registered mail to the Secretary of the Company immediately after the
adjournment of the meeting. Such right to dissent shall not apply to a
Director who voted in favor of such action.
SEAL
100. Subject to the provisions of Article 4 hereof, the Seal shall
only be used by the authority of the Directors or of a committee of the
Directors authorised by the Directors in that behalf and every instrument
to which the Seal has been affixed shall be signed by one person who shall
be either a Director or the Secretary or Secretary-Treasurer or some person
appointed by the Directors for the purpose.
PROVIDED THAT the Company may have for use in any territory district or
place not situate in the Cayman Islands, an official seal which shall be a
facsimile of the Common Seal of the Company with the addition on its face
of the name of every territory district or place where it is to be used.
PROVIDED FURTHER THAT a Director, Secretary or other officer or
representative or attorney may without further authority of the Directors
affix the Seal of the Company over his signature alone to any document of
the Company required to be authenticated by him under Seal or to be filed
with the Registrar of Companies in the Cayman Islands or elsewhere
wheresoever.
OFFICERS
101. The Company may have a President and shall have a Secretary or
Secretary-Treasurer appointed by the Directors who may also from time to
time appoint such other Officers as they consider necessary, all for such
terms, at such remuneration and to perform such duties, and subject to such
provisions as to disqualification and removal as the Directors from time to
time prescribe.
102. A provision of the Statute or these Articles requiring or
authorising a thing to be done by a Director and an Officer shall not be
satisfied by its being done by the one person acting in the dual capacity
of Director and Officer.
DIVIDENDS AND RESERVE
103. Subject to the Statute, the Directors may from time to time
declare dividends on shares of the Company outstanding and authorise
payment of the same out of the funds of the Company and may from time to
time pay to the members such interim dividends as appear to the Directors
to be justified by the profits of the Company.
104. The Directors may, before declaring any dividends, set aside
such sums as they think proper as a reserve or reserves which shall at the
discretion of the Directors, be applicable for any purpose of the Company
and pending such application may, at the like discretion, be employed in
the business of the Company
105. No dividend shall be payable except out of the profits of the
Company, realised or unrealised.
106. Subject to the rights of persons, if any, entitled to shares
with special rights as to dividends, if dividends are to be declared on a
class of shares they shall be declared and paid according to the amounts
paid or credited as paid on the shares of such class outstanding on the
record date for such dividend as determined in accordance with these
Articles but no amount paid or credited as paid on a share in advance of
calls shall be treated for the purpose of this Article as paid on the
share.
107. The Directors may deduct from any dividend payable to any member
all sums of money (if any) presently payable by him to the Company on
account of calls or otherwise.
108. The Directors may declare that any dividend be paid wholly or
partly by the distribution Of specific assets and in particular of paid up
shares, debentures, or debenture stock of any other company or in any one
or more of such ways and where any difficulty arises in regard to such
distribution, the Directors may settle the same as they think expedient and
in particular may issue fractional certificates and fix the value for
distribution of such specific assets or any part thereof and may determine
that cash payments shall be made to any members upon the footing of the
value so fixed in order to adjust the rights of all members and may vest
any such specific assets in trustees as may seem expedient to the
Directors.
109. Any dividend, interest or other monies payable in cash in
respect of shares may be paid by cheque or warrant sent through the post
directed to the registered address of the holder or, in the case of joint
holders, to the holder who is first named on the register of members or to
such person and to such address as such holder or joint holders may in
writing direct. Every such cheque or warrant shall be made payable to the
order of the person to whom it is sent. Any one of two or more joint
holders may give effectual receipts for any dividends, bonuses, or other
monies payable in respect of the share held by them as joint holders.
110. No dividend shall bear interest against the Company.
CAPITALISATION
111. The Company may upon the recommendation of the Directors by
ordinary resolution authorise the Directors to capitalise any sum standing
to the credit of any of the Company's reserve accounts (including share
premium account and capital redemption reserve fund) or any sum standing to
the credit of profit and loss account or otherwise available for
distribution and to appropriate such sum to members in the proportions in
which such sum would have been divisible amongst them had the same been a
distribution of profits by way of dividend and to apply such sum on their
behalf in paying up in full unissued shares (not being redeemable shares)
for allotment and distribution credited as fully paid up to and amongst
them in the proportion aforesaid. In such event the Directors shall do all
acts and things required to give effect to such capitalisation with full
power to the Directors to make such provisions as they think fit for the
case of shares becoming distributable in fractions (including provisions
whereby the benefit of fractional entitlements accrue to the Company rather
than to the members concerned). The Directors may authorise any person to
enter on behalf of all of the members interested into an agreement with the
Company providing for such capitalisation and matters incidental thereto
and any agreement made under such authority shall be effective and binding
on all concerned.
BOOKS OF ACCOUNT
112. The Directors shall cause proper books of account to be kept with
respect to:
(a) all sums of money received and expended by the Company and
the matters in respect of which the receipt or expenditure
takes place;
(b) all sales and purchases of goods by the Company;
(c) the assets and liabilities of the Company.
Proper books shall not be deemed to be kept if there are not kept such
books of-account as are necessary to give a true and fair view of the state
of the Company's affairs and to explain its transactions.
113. The Directors shall from time to time determine whether and to
what extent and at what times and places and under what conditions or
regulations the accounts and books of the Company or any of them shall be
open to the inspection of members not being Directors and no member (not
being a Director) shall have any right of inspecting any account or book or
document of the Company except as conferred by Statute or authorised by the
Directors or by the Company in general meeting.
114. The Directors shall from time to time cause to be prepared and to
be laid before the Company in general meeting profit and loss accounts,
balance sheets, group accounts (if any) and such other reports and accounts
as may be required by law.
AUDIT
115. The Company may at any Annual General Meeting appoint an Auditor
or Auditors of the Company who shall hold office until the next Annual
General Meeting and may fix his or their remuneration.
116. The Directors may before the first Annual General Meeting appoint
an Auditor or Auditors of the Company who shall hold office until the first
Annual General Meeting unless previously removed by an ordinary resolution
of the members in general meeting in which case the members at that meeting
may appoint Auditors. The Directors may fill any casual vacancy in the
office of Auditor but while any such vacancy continues the surviving or
continuing Auditor or Auditors, if any, may act. The remuneration of any
Auditor appointed by the Directors under this Article may be fixed by the
Directors.
117. Every Auditor of the Company shall have a right of access at all
times to the books and accounts and vouchers of the Company and shall be
entitled to require from the Directors and Officers of the Company such
information and explanation as may be necessary for the performance of the
duties of the auditors.
118. Auditors shall at the next Annual General Meeting following their
appointment and at any other time during their term of office, upon request
of the Directors or any general meeting of the members, make a report on
the accounts of the Company in general meeting during their tenure of
office.
NOTICES
119. Notices shall be in writing and may be given by the Company to any
member either personally or by sending it by post, cable or telex to him or
to his address as shown in the register of members, such notice, if mailed,
to be forwarded airmail if the address be outside the Cayman Islands.
120. (a) Where a notice is sent by post, service of the notice shall be
deemed to be effected by properly addressing, pre-paying and posting a
letter containing the notice, and to have been effected at the expiration
of sixty hours after the letter containing the same is posted as aforesaid.
(b) Where a notice is sent by cable or telex, service of the notice
shall be deemed to be effected by properly addressing pre-paying and
sending through a transmitting organisation the notice, and to have been
effected at the expiration of forty-eight hours after the same is sent as
aforesaid.
121. A notice may be given by the Company to the joint holders of
record of a share by giving the notice to the joint holder first named on
the register of members in respect of the share.
122. A notice may be given by the Company to the person or persons
which the Company has been advised are entitled to a share or shares in
consequence of the death or bankruptcy of a member by sending it through
the post as aforesaid in a pre-paid letter addressed to them by name, or by
the title of representatives of the deceased, or trustee of the bankruptcy,
or by any like description at the address supplied for that purpose by the
persons claiming to be so entitled, or at the option of the Company by
giving the notice in any manner in which the same might have been given if
the death or bankruptcy had not occurred.
123. Notice of every general meeting shall be given in any manner
hereinbefore authorised to :
(a) every person shown as a member in the register of members as of
the record date for such meeting except that in the case of joint
holders the notice shall be sufficient if given to the joint
holder first named in the register of members.
(b) every person upon whom the ownership of a share devolves by
reason of his being a legal personal representative or a trustee
in bankruptcy of a member of record where the member of record
but for his death or bankruptcy would be entitled to receive
notice of the meeting; and
No other person shall be entitled to receive notices of general meetings.
WINDING UP
124. If the Company shall be wound up the Liquidator may, with the
sanction of a special resolution of the Company and any other sanction
required by the Statute, divide amongst the members in specie or kind the
whole or any part of the assets of the Company (whether they shall consist
of property of the same kind or not) and may for such purpose set such
value as he deems fair upon any property to be divided as aforesaid and may
determine how such division shall be carried out as between the members or
different classes of members. The Liquidator may with the like sanction,
vest the whole or any part of such assets in trustees upon such trusts for
the benefit of the contributories as the Liquidator, with the like
sanction, shall think fit, but so that no member shall be compelled to
accept any shares or other securities whereon there is any liability.
125. If the Company shall be wound up, and the assets available for
distribution amongst the members as such shall be insufficient to repay the
whole of the paid-up capital, such assets shall be distributed so that, as
nearly as may be, the losses shall be borne by the members in proportion to
the capital paid up, or which ought to have been paid up, at the
commencement of the winding up on the shares held by them respectively.
And if in a winding up the assets available for distribution amongst the
members shall be more than sufficient to repay the whole of the capital
paid up at the commencement of the winding up, the excess shall be
distributed amongst the members in proportion to the capital paid up at the
commencement of the winding up on the shares held by them respectively.
This Article is to be without prejudice to the rights of the holders of
shares issued upon Special terms and conditions.
INDEMNITY
126. The Directors, Auditors and Officers for the time being of the
Company and any trustee for the time being acting in relation to any of the
affairs of the Company and their heirs, executors, administrators and
personal representatives respectively shall be indemnified out of the
assets of the Company from and against all actions, proceedings, costs,
charges, losses, damages and expenses which they or any of them shall or
may incur or sustain by reason of any act done or omitted in or about the
execution of their duty in their respective offices or trusts, except such
(if any) as they shall incur or sustain by or through their own wilful
neglect or default respectively and no such Director, Auditor, Officer or
trustee shall be answerable for the acts, receipts, neglects or defaults of
any other Director, Auditor, Officer or trustee or for joining in any
receipt for the sake of conformity or for the solvency or honesty of any
banker or other persons with whom any monies or effects belonging to the
Company may be lodged or deposited for safe custody or for any
insufficiency of any security upon which any monies of the Company may be
invested or for any other loss or damage due to any such cause as aforesaid
or which may happen in or about the execution of his office or trust unless
the same shall happen through the wilful neglect or default of such
Director, Auditor, Officer or trustee.
FISCAL YEAR
127. The Fiscal Year of the Company shall begin on the date of
incorporation of the Company and the anniversary date thereof in each year
ending the day prior to the anniversary date in each year unless the
Directors prescribe some other period therefor.
AMENDMENTS OF ARTICLES
128. Subject to the Statute, the Company may at any time and from time
to time by special resolution alter or amend these Articles in whole or in
part.
DATED the 12th day of June 1984
/s/ Antony Duckworth
Antony Duckworth, Solicitor
PO Box 309, Grand Cayman
/s/ Colin Shaw
Colin Shaw, Solicitor
PO Box 309, Grand Cayman
/s/ John Dyke
John Dyke, Solicitor
PO Box 309, Grand Cayman
[Illegible Signature]
_______________________________
Witness to the above Signatures
I, DeLano O. Solomon, Dep. Registrar of Companies in and for the Cayman
Islands DO HEREBY CERTIFY that this is a true and correct copy of the
Articles of Association of this Company duly incorporated on the 13th day
of June, 1984.
___/s/ DeLano O. Solomon_________
Dep. Registrar of Companies
THE COMPANIES LAW
COMPANY LIMITED BY SHARES
MEMORANDUM OF ASSOCIATION
OF
AKOM, Ltd.
1. The name of the Company is AKOM, Ltd.
2. The Registered Office of the Company shall be at the offices of
Maples and Calder, PO Box 309, George Town, Grand Cayman, Cayman Islands,
British West Indies or at such other place as the Directors may from time
to time decide.
3. The objects for which the Company is established are as follows:
(i) (a) To carry on the business of designing, producing, manufacturing
and dealing in apparel including men's and women's activewear and to engage
in the sale and export of such apparel or other manufactured products made
from yarn or similar materials, natural or manmade; to establish factories
and other premises and facilities within the Island of Jamaica and
elsewhere for carrying on the business referred to above and to train
personnel to be employed in such factories and other premises and
facilities; to take grant or enter into licenses, leases and other
commercial arrangements necessary and ancillary to the foregoing
activities.
(b) To carry on the business of an investment company and to act
as promoters and entrepreneurs and to carry on business as financiers,
capitalists, concessionaires, merchants, brokers, traders, dealers, agents,
importers and exporters and to undertake and carry on and execute all kinds
of investment, financial, commercial, mercantile, trading and other
operations.
(c) To carry on whether as principals, agents or otherwise
howsoever the business of realtors, developers, consultants, estate agents
or managers, builders, contractors, engineers, manufacturers, dealers in or
vendors of all types of property including services.
(ii) To exercise and enforce all rights and powers conferred by
or incidental to the ownership of any shares, stock, obligations, or other
securities including without prejudice to the generality of the foregoing
all such powers of veto or control as may be conferred by virtue of the
holding by the Company of some special proportion of the issued or nominal
amount thereof, to provide managerial and other executive, supervisory and
consultant services for or in relation to any company in which the Company
is interested upon such terms as may be thought fit.
(iii) To purchase or otherwise acquire, to sell, exchange,
surrender, lease, mortgage, charge, convert, turn to account, dispose of
and deal with real and personal property and rights of all kinds and, in
particular, mortgages, debentures, produce, concessions, options,
contracts, patents, annuities, licenses, stocks, shares, bonds, policies,
book debts, business concerns, undertakings, claims, privileges and choses
in action of all kinds.
(iv) To subscribe for, conditionally or unconditionally, to
underwrite, issue on commission or otherwise, take, hold, deal in and
convert stocks, shares and securities of all kinds and to enter into
partnership or into any arrangement for sharing profits, reciprocal
concessions or cooperation with any person or company and to promote and
aid in promoting, to constitute, form or organize any company, syndicate or
partnership of any kind, for the purpose of acquiring and undertaking any
property and liabilities of the Company or of advancing, directly or
indirectly, the objects of the Company or for any other purpose which the
Company may think expedient.
(v) To stand surety for or to guarantee, support or secure the performance
of all or any of the obligations of any person, firm or company whether or
not related or affiliated to the Company in any manner and whether by
personal covenant or by mortgage, charge or lien upon the whole or any part
of the undertaking, property and assets of the Company, both present and
future, including its uncalled capital or by any such method and whether or
not the Company shall receive valuable consideration therefor. (vi) To
engage in or carry on any other lawful trade, business or enterprise which
may at any time appear to the Directors of the Company capable of being
conveniently carried on in conjunction with any of the aforementioned
businesses or activities or which may appear to the Directors or the
Company likely to be profitable to the Company. In the interpretation of
this Memorandum of Association in general and of this Clause 3 in
particular no object, business or power specified or mentioned shall be
limited or restricted by reference to or mentioned shall be limited or
restricted by reference to or inference from any other object, business or
power, or the name of the Company, or by the juxtaposition of two or more
objects, businesses or powers and that, in the event of any ambiguity in
this clause or elsewhere in this Memorandum of Association, the same shall
be resolved by such interpretation and construction as will widen and
enlarge and not restrict the objects, businesses and powers of exercisable
by the Company.
4. Except as prohibited or limited by the Companies Law (Cap.
22), the Company shall have and be capable of from time to time and at all
times exercising any and all of the powers at any time or from time to time
exercisable by a natural person or body corporate in doing in any part of
the world whether as principal, agent, contractor or otherwise whatever may
be considered by it necessary for the attainment of its objects and
whatever else may be considered by it as incidental or conducive thereto or
consequential thereon, including, but without in any way restricting the
generality of the foregoing, the power to make any alterations or
amendments to this Memorandum of Association and the Articles of
Association of the Company considered necessary or convenient in the manner
set out in the Articles of Association of the Company, and the power to do
any of the following acts or things, viz:
to pay all expenses of and incidental to the promotion, formation and
incorporation of the Company; to register the Company to do business in any
jurisdiction; to sell, lease or dispose of any property of the Company; to
draw, make, accept, endorse, discount, execute and issue promissory notes,
debentures, bills of exchange, bills of lading, warrants and other
negotiable or transferable instruments; to lend money or other assets and
to act as guarantors; to borrow or raise money on the security of the
undertaking or on all or any of the assets of the Company including
uncalled capital or without security; to invest monies of the Company for
cash or any other consideration; to distribute assets in specie to members
of the Company; to make charitable or benevolent donations; to pay pensions
or gratuities or provide other benefits in cash or kind to Directors,
officers, employees, past or present and their families; to carry on any
trade or business and generally to do all acts and things which, in the
opinion of the Company or the Directors, may be conveniently or profitably
or usefully acquired and dealt with, carried on, executed or done by the
Company in connection with the business aforesaid PROVIDED THAT the Company
shall only carry on the businesses for which a license is required under
the laws of the Cayman Islands when so licensed under the terms of such
laws.
5. The liability of each member is limited to the amount from
time to time unpaid on such member's shares.
6. The share capital of the Company is US$900,000.00 divided
into 9,000 shares of a nominal or par value of US$100.00 each with power
for the Company insofar as is permitted by law, to redeem any of its shares
and to increase or reduce the said capital subject to the provisions of the
Companies Law (Cap. 22) and the Articles of Association and to issue any
part of its capital, whether original, redeemed or increased with or
without any preference, priority or special privilege or subject to any
postponement of rights or to any conditions or restrictions and so that
unless the conditions of issue shall otherwise expressly declare every
issue of shares whether declared to be preference or otherwise shall be
subject to the powers hereinbefore contained.
7. If the Company is registered as exempted, its operations will
be carried on subject to the provisions of Section 190 of the Companies Law
Cap. 22.
WE the several persons whose names and addresses are subscribed are
desirous of being formed into a company in pursuance of this Memorandum of
Association and we respectively agree to take the number of shares in the
capital of the Company set opposite our respective names.
DATED the 12th day of June A.D. 1984
SIGNATURE, ADDRESSES and NUMBER OF SHARES
DESCRIPTION OF SUBSCRIBER TAKEN BY EACH
one
/s/ Antony Duckworth
Antony Duckworth, Solicitor
PO Box 309, Grand Cayman
one
/s/ John Dyke
John Dyke, Solicitor,
PO Box 309, Grand Cayman
one
/s/ Colin Shaw
Colin Shaw, Solicitor,
PO Box 309, Grand Cayman
[Illegible Signature]
Witness to the above signatures
I, DeLano O. Solomon, Dep. Registrar of Companies in and for the Cayman
Islands DO HEREBY CERTIFY that this is a true and correct copy of the
Memorandum of Association of this Company duly incorporated on the 13th day
of June, 1984.
__/s/ DeLano O. Solomon_______
DEP. REGISTRAR OF COMPANIES
ARTICLES OF INCORPORATION
OF
DOMINION STORES, INC.
I.
The name of the Corporation is Dominion Stores, Inc.
II.
The number of shares which the Corporation shall have authority to issue
shall be 1,000 shares, without par value. No holder of shares of any class
of the Corporation shall have any preemptive or preferential right to
purchase or subscribe to (i) any shares of any class of the Corporation,
whether now or hereafter authorized; (ii) any warrants, rights, or options to
purchase any such shares; or (iii) any securities or obligations convertible
into any such shares or into warrants, rights or options to purchase any such
shares.
III.
The initial registered office shall be located at 22 East Church Street
in the City of Martinsville, Virginia, and the initial registered agent shall
be William F. Franck, who is a resident of Virginia and a director of the
Corporation, and whose business address is the same as the address of the
initial registered office.
IV.
The number of Directors constituting the initial Board of Directors
shall be five (5), and the names and addresses of the persons who are to
serve as the initial Directors are as follows:
William F. Franck, 1105 Plantation Road, Martinsville, Virginia 24112
H. R. Hunnicutt, Jr., 2915 Old Stage Road, Gastonia, North Carolina 28052
John S. Hairfield, 1319 Valleyview Drive, Martinsville, Virginia 24112
John O. Avinger, 920 Mulberry Road, Martinsville, Virginia 24112
Richard V. Lawhon, 1114 Plantation Road, Martinsville, Virginia 24112
V.
1. To the full extent that the Virginia Stock Corporation Act, as it
exists on the date hereof or may hereafter be amended, permits the limitation
or elimination of the liability of directors or officers, a Director or
officer of the Corporation shall not be liable to the Corporation or its
stockholders for monetary damages.
2. To the full extent permitted and in the manner prescribed by the
Virginia Stock Corporation Act as it exists on the date hereof or may
hereafter be amended, and any other applicable law, the Corporation shall
indemnify a Director or officer of the Corporation who is or was a party to
any proceeding by reason of the fact that he is or was such a Director or
officer or is or was serving at the request of the Corporation as a director,
officer, employee or agent of another corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise. The Board of
Directors is empowered, by majority vote of a quorum of disinterested
Directors, to contract in advance to indemnify any Director or officer.
3. The Board of Directors is hereby empowered, by majority vote of a
quorum of disinterested Directors, to cause the Corporation to indemnify or
contract in advance to indemnify any person not specified in Section 2 of
this Article who was or is a party to any proceeding, by reason of the fact
that he is or was an employee or agent of the Corporation, or is or was
serving at the request of the Corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise, to the same extent as if such person were
specified as one to whom indemnification is granted in Section 2.
4. The Corporation may purchase and maintain insurance to indemnify it
against the whole or any portion of the liability assumed by it in accordance
with this Article and may also procure insurance, in such amounts as the
Board of Directors may determine, on behalf of any person who is or was a
Director, officer, employee or agent of the Corporation, or is or was serving
at the request of the Corporation as a director, officer, employee or agent
of another corporation, partnership, joint venture, trust, employee benefit
plan or other enterprise, against any liability asserted against or incurred
by such person in any such capacity or arising from his status as such,
whether or not the Corporation would have power to indemnify him against such
liability under the provisions of this Article.
5. In the event there has been a change in the composition of a
majority of the Board of Directors after the date of the alleged act or
omission with respect to which indemnification is claimed, any determination
as to indemnification and advancement of expenses with respect to any claim
for indemnification made pursuant to Section 1 of this Article shall be made
by special legal counsel agreed upon by the Board of Directors and the
proposed indemnitee. If the Board of Directors and the proposed indemnitee
are unable to agree upon such special legal counsel, the Board of Directors
and the proposed indemnitee each shall select a nominee, and the nominees
shall select such special legal counsel.
6. The provisions of this Article shall be applicable to all actions,
claims, suits or proceedings commenced after the adoption hereof by
shareholders, whether arising from any action taken or failure to act before
or after such adoption. No amendment, modification or repeal of this Article
shall diminish the rights provided hereby or diminish the right to
indemnification with respect to any claim, issue or matter in any then
pending or subsequent proceeding that is based in any material respect on any
alleged action or failure to act prior to such amendment, modification or
repeal.
7. Reference herein to Directors, officers, employees or agents shall
include former Directors, officers, employees and agents and their respective
heirs, executors and administrators.
Dated: July 31, 1987 /s/ David M. Carter
David M. Carter
Incorporator
By-Laws
Dominion Stores, Inc.
Article I - Meeting of Shareholders
1. Place of Meetings
All meetings of the shareholders shall be held at such place, either within
or without the State of Virginia, as from time to time may be fixed by the
Board of Directors.
2. Annual Meeting
The annual meeting of the shareholders, for the election of Directors and
transaction of such other business as may come before the meeting, shall be
held in each year on the third Thursday in March, or such other day each year
that the Board of Directors may specify.
3. Special Meetings
A special meeting of the shareholders for any purpose may be called at any
time by the Chairman of the Board or the President, or by a majority of the
Board of Directors. At a special meeting no business shall be transacted and
no corporate action shall be taken other than that stated in the notice of
the meeting.
4. Notice of the Meetings
Written or printed notice stating the place, day and hour of every meeting of
the shareholders and, in case of a special meeting, the purpose or purposes
for which the meeting is called, shall be mailed not less than 10 or more
than 60 days before the date of the meeting to each shareholder of record
entitled to vote at such meeting, at his address which appears in the share
transfer books of the Corporation. Such further notice shall be given as may
be required by law, but meetings may be held without notice if all the
shareholders entitled to vote at the meeting are present in person or by
proxy or if notice is waived in writing by those not present, either before
or after the meeting.
5. Quorum
Any number of shareholders together holding at least a majority of the
outstanding shares of capital stock entitled to vote with respect to the
business to be transacted, who shall be present in person or represented by
proxy at any meeting duly called, shall constitute a quorum for the
transaction of business.
6. Voting
At any meeting of the shareholders each shareholder of a class entitled to
vote on any matter coming before the meeting shall, as to such matter, have
one vote, in person or by proxy, for each share of capital stock of each
class standing in his name on the books of the Corporation.
Article II - Directors
1. General Powers
The property, affairs and business of the Corporation shall be managed by the
Board of Directors, and, except as otherwise expressly provided by law, the
Articles of Incorporation of these By-laws, all of the powers of the
Corporation shall be vested in such Board.
2. Number of Directors
The number of Directors constituting the Board of Directors shall be five.
3. Election and Removal of Directors; Quorum
(a) Directors shall be elected at each annual meeting of shareholders to
succeed those Directors whose terms have expired and to fill any vacancies
then existing. (b) Directors shall hold their offices for terms of one year
and until their successors are elected. Any Director may be removed from
office at a meeting called expressly for that purpose by the vote at an
election of Directors. (c) Any vacancy occurring in the Board of Directors
may be filled by the affirmative vote of the majority of the remaining
Directors though less than a quorum of the Board, and the term of office on
any Director so elected shall expire on the date fixed for the expiration of
the term of office of the Director to which such director was so elected.
(d) A majority of the number of Directors elected and serving at the time of
any meeting shall constitute a quorum for the transaction of business. The
act of a majority of Directors present at a meeting at which a quorum is
present shall be the act of the Board of Directors. Less than a quorum may
adjourn any meeting.
4. Meetings of Directors
An annual meeting of the Board of Directors shall be held as soon as
practicable after the adjournment of the annual meeting of shareholders at
such place as the Board may designate. Other meetings of the Board of
Directors shall be held at places within or without the State of Virginia and
at times fixed by resolution of the Board, or upon call of the Chairman of
the Board, the President or any two of the Directors. The secretary or
officer performing the Secretary's duties shall give not less than 24 hours'
notice by letter, telegraph or telephone (or in person) of all meetings of
the Board of Directors, provided that notice need not be given of the annual
meeting or of regular meetings held at times and places fixed by resolution
of the Board. Meetings may be held at any time without notice if all of the
Directors are present, or if those not present waive notice in writing either
before or after the meeting. The notice of meetings of the Board need not
state the purpose of the meeting.
Article III - Officers
1. Election of Officers; Terms
The officers of the Corporation shall consist of a President, a Vice
President, a Secretary and a Treasurer. Other officers, including a Chairman
of the Board, and assistant and subordinate officers, may from time to time
be elected by the Board of Directors. All officers shall hold office until
the next annual meeting of the Board of Directors and until their successors
are elected. Any two officers may be combined in the same person as the
Board of Directors may determine.
2. Removal of Officers; Vacancies
Any officer of the Corporation may be removed summarily without cause, at any
time, by the Board of Directors. Vacancies may be filled by the Board of
Directors.
3. Duties
The officers of the Corporation shall have such duties as generally pertain
to their offices, respectively, as well as such powers and duties as are
prescribed by law or as from time to time shall be conferred by the Board of
Directors.
Article IV - Capital Stock
1. Certificates
The shares of capital stock of the Corporation shall be evidenced by
certificates in forms prescribed by the Board of Directors and executed in
any manner permitted by law and stating thereon the information required by
law.
Article V - Miscellaneous Provisions
1. Seal
The seal of the Corporation shall consist of a flat-faced circular die, of
which there may be any number of counterparts, on which there shall be
engraved the word "Seal" and the name of the Corporation.
2. Fiscal Year
The fiscal year of the Corporation shall be the same as the parent Company.
3. Amendment of By-Laws
Unless proscribed by the Article of Incorporation, these By-laws may be
amended or altered at any meeting of the Board of Directors by affirmative
vote of a majority of the number of Directors fixed by these By-laws.
ARTICLES OF INCORPORATION
OF
TULTEX INTERNATIONAL, INC.
I.
The name of the Corporation is Tultex International, Inc.
II.
The number of shares which the Corporation shall have authority to
issue shall be 1,000 shares, with a par value of $1.00. No holder of
shares of any class of the Corporation shall have any preemptive or
preferential right to purchase or subscribe to (i) any shares of any class
of the Corporation, whether now or hereafter authorized; (ii) any warrants,
rights or options to purchase any such shares; or (iii) any securities or
obligations convertible into any such shares or into warrants, rights or
options to purchase any such shares.
III.
The initial registered office shall be located at 22 East Church
Street in the City of Martinsville, Virginia, and the initial registered
agent shall be John M. Franck, who is a resident of Virginia and a director
of the Corporation, and whose business address is the same as the address
of the initial registered office.
IV.
The number of Directors constituting the initial Board of Directors
shall be four (4), and the names and addresses of the persons who are to
serve as the initial Directors are as follows:
John J. Smith, 1119 Jeb Stuart Road, Martinsville, Virginia 24112
John M. Franck, 1200 Jefferson David Road, Martinsville, Virginia 24112
Vincent M. Galbo, 69 Slabey Avenue, Malvern, New York 11565
Don F. Shook, 1114 Mulberry Road, Martinsville, Virginia 24112
V.
1. To the full extent that the Virginia Stock Corporation Act, as it
exists on the date hereof or may hereafter be amended, permits the
limitation or elimination of the liability of directors or officers, a
Director or officer of the Corporation shall not be liable to the
Corporation or its stockholders for monetary damages.
2. To the full extent permitted and in the manner prescribed by the
Virginia Stock Corporation Act as it exists on the date hereof or may
hereafter be amended, and any other applicable law, the Corporation shall
indemnify a Director or officer of the Corporation who is or was a party to
any proceeding by reason of the fact that he is or was such a Director or
officer or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise. The Board
of Directors is hereby empowered, by majority vote of a quorum of
disinterested Directors, to contract in advance to indemnify any Director
or officer.
3. The Board of Directors is hereby empowered, by majority vote of a
quorum of disinterested Directors, to cause the Corporation to indemnify or
contract in advance to indemnify any person not specified in Section 2 of
this Article who was or is a party to any proceeding, by reason of the fact
that he is or was an employee or agent of the Corporation, or is or was
serving at the request of the Corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise, to the same extent as if such
person were specified as one to whom indemnification is granted in Section
2.
4. The Corporation may purchase and maintain insurance to indemnify
it against the whole or any portion of the liability assumed by it in
accordance with this Article and may also procure insurance, in such
amounts as the Board of Directors may determine, on behalf of any person
who is or was a Director, officer, employee or agent of the Corporation, or
is or was serving at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise, against any liability
asserted against or incurred by such person in any such capacity or arising
from his status as such, whether or not the Corporation would have power to
indemnify him against such liability under the provisions of this Article.
5. In the event there has been a change in the composition of a
majority of the Board of Directors after the date of the alleged act or
omission with respect to which indemnification is claimed, any
determination as to indemnification and advancement of expenses with
respect to any claim for indemnification made pursuant to Section 1 of this
Article shall be made by special legal counsel agreed upon by the Board of
Directors and the proposed indemnitee. If the Board of Directors and the
proposed indemnitee are unable to agree upon such special legal counsel,
the Board of Directors and the proposed indemnitee each shall select a
nominee, and the nominees shall select such special legal counsel.
6. The provisions of this Article shall be applicable to all
actions, claims, suits or proceedings commenced after the adoption hereof
by shareholders, whether arising from any action taken or failure to act
before or after such adoption. No amendment, modification or repeal of
this Article shall diminish the rights provided hereby or diminish the
right to indemnification with respect to any claim, issue or matter in any
then pending or subsequent proceeding that is based in any material respect
on any alleged action or failure to act prior to such amendment,
modification or repeal.
7. Reference herein to Directors, officers, employees or agents
shall include former Directors, officers, employees and agents and their
respective heirs, executors and administrators.
Dated: August 25, 1989 /s/ David M. Carter
David M. Carter
Incorporator
TULTEX INTERNATIONAL, INC.
BYLAWS
ARTICLE I.
MEETINGS OF SHAREHOLDERS.
1.1 PLACES OF MEETINGS. All meetings of the shareholders shall be
held at such place, either within or without the State of Virginia, as from
time to time may be fixed by the Board of Directors.
1.2 ANNUAL MEETING. The annual meeting of the shareholders, for the
election of Directors and transaction of such other business as may come
before the meeting, shall be held in each year on the third Thursday in
March, or such other day each year that the Board of Directors may specify.
1.3 SPECIAL MEETINGS. A special meeting of the shareholders for any
purpose may be called at any time by the Chairman of the Board or the
President, or by a majority of the Board of Directors. At a special
meeting, not business shall be transacted and no corporate action shall be
taken other than that stated in the notice of the meeting.
1.4 NOTICE OF MEETINGS. Written or printed notice stating the place,
day and hour of every meeting of the shareholders and, in case of a special
meeting, the purposes for which the meeting is called, shall be mailed not
less than 10 nor more than 60 days before the date of the meeting to each
shareholder of record entitled to vote at such meeting, at his address
which appears in the share transfer books of the Corporation. Such further
notice shall be given as may be required by law, but meetings may be held
without notice if all the shareholders entitled to vote at the meeting are
present in person or by proxy or if notice is waived in writing by those
not present, either before or after the meeting.
1.5 QUORUM. Any number of shareholders together holding at least a
majority of the outstanding shares of capital stock entitled to vote with
respect to the business to be transacted, who shall be present in person or
represented by proxy at any meeting duly called, shall constitute a quorum
for the transaction of business.
1.6 VOTING. At any meeting of the shareholders each shareholder of a
class entitled to vote on any matter coming before the meeting shall, as to
such matter, have one vote, in person or by proxy, for each share of
capital stock of such class standing in his name of the books of the
Corporation.
ARTICLE II
DIRECTORS.
2.1 GENERAL POWERS. The property, affairs and business of the
Corporation shall be managed by the Board of Directors, and, except as
otherwise expressly provided by law, the Articles of Incorporation or these
Bylaws, all of the powers of the Corporation shall be vested in such Board.
2.2 NUMBER OF DIRECTORS. The number of Directors constituting the
Board of Directors shall be four.
2.3 ELECTION AND REMOVAL OF DIRECTORS: QUORUM.
(a) Directors shall be elected at each annual meeting of
shareholders to succeed those Directors whose terms have expired and to
fill any vacancies then existing.
(b) Directors shall hold their offices for terms of one
year and until their successors are elected. Any Director may be removed
from office at a meeting called expressly for that purpose by the vote of
shareholders holding a majority of the shares entitled to vote at an
election of Directors.
(c) Any vacancy occurring in the Board of Directors may be
filled by the affirmative vote of the majority of the remaining Directors
though less than a quorum of the Board, and the term of office of any
Director so elected shall expire on the date fixed for the expiration of
the term of office of the Directors to which such Director was so elected.
(d) A majority of the number of Directors elected and
serving at the time of any meeting shall constitute a quorum for the
transaction of business. v The act of a majority of Directors present at a
meeting at which a quorum is present shall be the act of the Board of
Directors. Less than a quorum may adjourn any meeting.
2.4 MEETINGS OF DIRECTORS. An annual meeting of the Board of
Directors shall be held as soon as practicable after the adjournment of the
annual meeting of shareholders at such place as the Board may designate.
Other meetings of the Board of Directors shall be held at places within or
without the State of Virginia and at times fixed by resolution of the
Board, or upon call of the Chairman of the Board, the President or any two
of the Directors. The Secretary or officer performing the Secretary's
duties shall give not less than 24 hours' notice by letter, telegraph or
telephone (or in person) of all meetings of the Board of Directors,
provided that notice need not be given of the annual meeting or of regular
meetings held at times and places fixed by resolution of the Board.
Meetings may be held at any time without notice if all of the Directors are
present, or if those not present waive notice in writing either before or
after the meeting. The notice of meetings of the Board need not state the
purpose of the meeting.
ARTICLE III
OFFICERS
3.1 ELECTION OF OFFICERS: TERMS. The officers of the Corporation
shall consist of a President, a Vice President, a Secretary and a
Treasurer. Other officers, including a Chairman of the Board, and
assistant and subordinate officers, may from time to time be elected by the
Board of Directors. All officers shall hold office until the next annual
meeting of the Board of Directors and until their successors are elected.
Any two officers may be combined in the same person as the Board of
Directors may determine.
3.2 REMOVAL OF OFFICERS: VACANCIES. Any officer of the Corporation
may be removed summarily with or without cause, at any time, by the Board
of Directors. Vacancies may be filled by the Board of Directors.
3.3 DUTIES. The officers of the Corporation shall have such duties
as generally pertain to their offices, respectively, as well as such powers
and duties as are prescribed by law or as from time to time shall be
conferred by the Board of Directors.
ARTICLE IV
CAPITAL STOCK.
4.1 CERTIFICATES. The shares of capital stock of the Corporation
shall be evidenced by certificates in forms prescribed by the Board of
Directors and executed in any manner permitted by law and stating thereon
the information required by law.
ARTICLE V
MISCELLANEOUS PROVISIONS.
5.1 SEAL. The seal of the Corporation shall consist of a flat-faced
circular die, of which there may be any number of counterparts, on which
there shall be engraved the word "Seal" and the name of the Corporation.
5.2 FISCAL YEAR. The fiscal year of the Corporation shall end on the
Saturday nearest December 31.
5.3 AMENDMENT OF BYLAWS. Unless prescribed by the Articles of
Incorporation, these Bylaws may be amended or altered at any meeting of the
Board of Directors by affirmative vote of a majority of the number of
Directors fixed by these Bylaws.
ARTICLES OF INCORPORATION
OF
LOGO 7, INC.
I.
The name of the Corporation is Logo 7, Inc.
II.
The number of shares which the Corporation shall have authority to
issue shall be 1,000 shares, without par value. No holder of shares of any
class of the Corporation shall have any preemptive or preferential right to
purchase or subscribe to (i) any shares of any class of the Corporation,
whether now or hereafter authorized; (ii) any warrants, rights, or options
to purchase any such shares; or (iii) any securities or obligations
convertible into any such shares or into warrants, rights, or options to
purchase any such shares.
III.
The initial registered office shall be located at Riverfront Plaza,
951 East Byrd Street in the City of Richmond, Virginia, and the initial
registered agent shall be David M. Carter, Esq., who is a resident of
Virginia and a member of the Virginia State Bar, and whose business address
is the same as the address of the initial registered office.
IV.
1. To the full extent that the Virginia Stock Corporation Act, as it
exists on the date hereof or may hereafter be amended, permits the
limitation or elimination of the liability of directors or officers, a
Director or officer of the Corporation shall not be liable to the
Corporation or its stockholders for monetary damages.
2. To the full extent permitted and in the manner prescribed by the
Virginia Stock Corporation Act as it exists on the date hereof or may
hereafter be amended, and any other applicable law, the Corporation shall
indemnify a Director or officer of the Corporation who is or was a party to
any proceeding, by reason of the fact that he is or was a Director or
officer, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise. The Board
of Directors is hereby empowered, by a majority vote of a quorum of
disinterested Directors, to contract in advance to indemnify any Director
or officer.
3. The Board of Directors is hereby empowered, by majority vote of a
quorum of disinterested Directors, to cause the Corporation to indemnify or
contract in advance to indemnify any person not specified in Section 2 of
this Article who was or is a party to any proceeding, by reason of the fact
that he is or was an employee or agent of the Corporation, or is or was
serving at the request of the Corporation as director, officer, employee or
agent of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise, to the same extent as if such person were
specified as one to whom indemnification is granted in Section 2.
4. The Corporation may purchase and maintain insurance to indemnify
it against the whole or any portion of the liability assumed by it in
accordance with this Article and may also procure insurance, in such
amounts as the Board of Directors may determine, on behalf of any person
who is or was a Director, officer, employee or agent of the Corporation, or
is or was serving at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise, against any liability
asserted against or incurred by such person in any such capacity or arising
from his status as such, whether or not the Corporation would have power to
indemnify him against such liability under the provisions of this Article.
5. In the event there has been a change in the composition of a
majority of the Board of Directors after the date of the alleged act or
omission with respect to which indemnification is claimed, any
determination as to indemnification and advancement of expenses with
respect to any claim for indemnification made pursuant to Section 1 of this
Article shall be made by special legal counsel agreed upon by the Board of
Directors and the proposed indemnitee. If the Board of Directors and the
proposed indemnitee are unable to agree upon such special legal counsel,
the Board of Directors and the proposed indemnitee each shall select a
nominee, and the nominees shall select such special legal counsel.
6. The provisions of this Article shall be applicable to all
actions, claims, suits or proceedings commenced after the adoption hereof
by the shareholders, whether arising from any action taken or failure to
act before or after such adoption. No amendment, modification or repeal of
this Article shall diminish the rights provided hereby or diminish the
right to indemnification with respect to any claim, issue or matter in any
then pending or subsequent proceeding that is based in any material respect
on any alleged action or failure to act prior to such amendment,
modification or repeal.
7. Reference herein to Directors, officers, employees or agents
shall include former Directors, officers, employees and agents and their
respective heirs, executors and administrators.
Dated: November 13, 1991
/s/ David M. Carter
Incorporator
Logo 7, Inc.
By-Laws
Article I - Meetings of Shareholders
1. Places of Meetings
All meetings of the shareholders shall be held at such place, either within
or without the State of Virginia, as from time to time may be fixed by the
Board of Directors.
2. Annual Meeting
The annual meeting of the shareholders, for the election of Directors and
transaction of such other business as may come before the meeting, shall be
held in each year on the third Thursday in March, or such other day each
year that the Board of Directors may specify.
3. Special Meetings
A special meeting of the shareholders for any purpose may be called at any
time by the Chairman of the Board or the President, or by a majority of the
Board of Directors. At a special meeting no business shall be transacted
and no corporate action shall be taken other than that stated in the notice
of the meeting.
4. Notice of Meetings
Written or printed notice stating the place, day and hour of every meeting
of the shareholders and, in case of a special meeting, the purpose or
purposes for which the meeting is called, shall be mailed not less than 10
nor more than 60 days before the date of the meeting to each shareholder of
record entitled to vote at such meeting, at his address which appears in
the share transfer books of the Corporation. Such further notice shall be
given as may be required by law, but meetings may be held without notice if
all the shareholders entitled to vote at the meeting are present in person
or by proxy or if notice is waived in writing by those not present, either
before or after the meeting.
5. Quorum
Any number of shareholders together holding at least a majority of the
outstanding shares of capital stock entitled to vote with respect to the
business to be transacted, who shall be present in person or represented by
proxy at any meeting duly called, shall constitute a quorum for the
transaction of business.
6. Voting
At any meeting of the shareholders each shareholder of a class entitled to
vote on any matter coming before the meeting shall, as to such matter, have
one vote, in person or by proxy, for each share of capital stock of such
class standing in his name on the books of the Corporation.
Article II - Directors
1. General Powers
The property, affairs and business of the Corporation shall be managed by
the Board of Directors, and, except as otherwise expressly provided by law,
the Articles of Incorporation or these By-laws, all of the powers of the
Corporation shall be vested in such Board.
2. Number of Directors
The number of Directors constituting the Board of Directors shall be five.
3. Election and Removal of Directors; Quorum
(a) Directors shall be elected at each annual meeting of shareholders to
succeed those Directors whose terms have expired and to fill any vacancies
then existing.
(b) Directors shall hold their offices for terms of one year and until
their successors are elected. Any Director may be removed from office at a
meeting called expressly for that purpose by the vote of shareholders
holding a majority of the shares entitled to vote at an election of
Directors.
(c) Any vacancy occurring in the Board of Directors may be filled by the
affirmative vote of the majority of the remaining Directors though less
than a quorum of the Board, and the term of office of any Director so
elected shall expire on the date fixed for the expiration of the term of
office of the Director to which such Director was so elected.
(d) A majority of the number of Directors elected and serving at the time
of any meeting shall constitute a quorum for the transaction of business.
The act of a majority of Directors present at a meeting at which a quorum
is present shall be the act of the Board of Directors. Less than a quorum
may adjourn any meeting.
4. Meetings of Directors
An annual meeting of the Board of Directors shall be held as soon as
practicable after the adjournment of the annual meeting of shareholders at
such place as the Board may designate. Other meetings of the Board of
Directors shall be held at places within or without the State of Virginia
and at times fixed by resolution of the Board, or upon call of the Chairman
of the Board, the President or any two of the Directors. The Secretary or
officer performing the Secretary's duties shall give not less than 24
hours' notice by letter, telegraph or telephone (or in person) of all
meetings of the Board of Directors, provided that notice need not be given
of the annual meeting or of regular meetings held at times and places fixed
by resolution of the Board. Meetings may be held at any time without
notice if all of the Directors are present, or if those not present waive
notice in writing either before or after the meeting. The notice of
meetings of the Board need not state the purpose of the meeting.
Article III - Officers
1. Election of Officer; Terms
The officers of the Corporation shall consist of a President, a Vice
President, a Secretary and a Treasurer. Other officers, including a
Chairman of the Board, and assistant and subordinate officers, may from
time to time be elected by the Board of Directors. All officers shall hold
office until the next annual meeting of the Board of Directors and until
their successors are elected. Any two officers may be combined in the same
person as the Board of Directors may determine.
2. Removal of Officers; Vacancies
Any officer of the Corporation may be removed summarily with or without
cause, at any time, by the Board of Directors. Vacancies may be filled by
the Board of Directors.
3. Duties
The officers of the Corporation shall have such duties as generally pertain
to their offices, respectively, as well as such powers and duties as are
prescribed by law or as from time to time shall be conferred by the Board
of Directors.
Article IV - Capital Stock
1. Certificates
The shares of capital stock of the Corporation shall be evidenced by
certificates in forms prescribed by the Board of Directors and executed in
any manner permitted by law and stating thereon the information required by
law.
Article V - Miscellaneous Provisions
1. Seal
The seal of the Corporation shall consist of a flat-faced circular die, of
which there may be any number of counterparts, on which there shall be
engraved the word "Seal" and the name of the Corporation.
2. Fiscal Year
The fiscal year of the Corporation shall be the calendar year.
3. Amendment of By-laws
Unless proscribed by the Articles of Incorporation, those By-laws may be
amended or altered at any meeting of the Board of Directors by affirmative
vote of a majority of the number of Directors fixed by these By-laws.
The Commonwealth of Massachusetts
Office of the Massachusetts Secretary of State
Michael J. Connolly, Secretary
One Ashburton Place, Boston, Massachusetts 02108
ARTICLES OF ORGANIZATION
(Under G.L. Ch. 156B)
Article I
The name of the corporation is:
Universal Industries, Inc.
Article II
The purpose of the corporation is to engage in the following business
activities:
To engage in the importing and distribution of caps,
gloves and other apparel items as well as any other
lawful purpose for which a corporation may be organized
under Massachusetts General Laws Chapter 156B
ARTICLE III
Kind of Stock: Common (See following).
Preferred (See following).
The total number of shares of all classes of stock which the Company
shall have authority to issue is 3,940, consisting solely of:
1,400 shares of preferred stock, $.01 par value per share (the
"Preferred Stock");
1,100 shares of Class A voting common stock, $.01 par value per share
(the "Class A Common Stock");
1,000 shares of Class B non-voting common stock, $.01 par value per
share (the "Class B Common Stock")
340 shares of Class C voting common stock, $.01 par value per share
(the "Class C Common Stock"); and
100 shares of Class D non-voting common stock, $.01 par value per
share (the "Class D Common Stock").
ARTICLE IV
The following is a statement of the designations, powers, privileges
and rights, and the qualifications, limitations and restrictions, in
respect of each class of capital stock of the Company.
As used in this Article IV:
"Common Stock" means, collectively, the Class A Common Stock, Class B
Common Stock, Class C Common Stock and Class D Common Stock.
"Default Period" means that period commencing on delivery to the
Company at its principal office of a Special Rights Notice, and ending on
the first to occur of (a) the last day of the first full fiscal quarter of
the Company thereafter during which no event of Default exists, or (b) the
seventh anniversary of delivery of a Special Rights Notice.
"Event of Default" means any one or more of the following events: (a)
the Company shall have failed to pay the full quarterly dividend with
respect to each share of Preferred Stock provided in part A, Section 1.1(a)
of this Article IV; (b) the Company shall have failed to redeem any shares
of Preferred Stock within 90 days of the mandatory redemption date therefor
set forth in Part A, Section 1.5(a) of this Article IV; (c) the Company
shall have failed to pay when due the Repurchase Price for any Common
Shares (as such terms are defined in the Securities Purchase Agreement),
pursuant to Section 10 of the Securities Purchase Agreement; (d) the
Company shall have failed to comply with any of the financial covenants
contained in Sections 6.15, 6.16 or 6.17 of the Securities Purchase
Agreement; or (e) there shall have occurred an Event of Default (as defined
in the Securities Purchase Agreement) under any of Sections 9.1(f) or
9.1(h) of the Securities Purchase Agreement.
"Liquidation Value" of the Preferred Stock will be $1,000 per share,
subject to adjustment pursuant to Part A, Section 1.2 of this Article IV
and to appropriate adjustment in the event of any stock dividend, stock
split, combination or other similar recapitalization affecting the
Preferred Stock.
"Person" means an individual, partnership, corporation, association,
trust, joint venture, unincorporated organization, and any government,
governmental department or agency or political subdivision thereof.
"Preferred Dividend Rate" means with respect to and during any period
specified in the table below, the percentage set forth such opposite the
period in such table:
Period Percentage
October 1, 1991 through and
including September 30, 1993 6%
October 1, 1993 through and
including September 30, 1996 10%
October 1, 1996 and at all
times thereafter 12%
"Qualified Public Offering" shall mean, in relation to the Company,
the first underwritten public offering pursuant to an effective
registration statement under the Securities Act of 1933, as amended,
covering the offer and sale of shares of Class A Common Stock in which (a)
not less than $15,000,000 of gross proceeds from such public offering shall
be received by the Company for the account of the Company; and (b) each of
the underwriters participating in such public offering shall be obligated
to buy on a "firm commitment" basis all shares of Class A Common Stock
which such underwriters shall have agreed to distribute.
"Redemption Date" as to any share of Preferred Stock, means the date
specified in the notice of any redemption at the Company's option or the
applicable date specified herein in the case of any mandatory redemption.
"SBIC Plan" means a written plan prepared for the purpose of complying
with the requirements of 13 CFR 107.801(d) (or any successor rule or
regulation promulgated by the Small Business Administration pursuant to the
Small Business Investment Act of 1958, as amended) to be filed with the
Small Business Administration and with the records of the Company, as
provided in such regulation or any successor thereto.
"Securities Purchase Agreement" means the Securities Purchase
Agreement, dated as of October 13, 1988, between the Company and BancBoston
Ventures Inc., as the same shall be amended and in effect from time to
time.
"Special Rights Notice" means a written notice delivered to the
Company at its principal office by holders of not less than 51% of the then
outstanding Class C Common Stock stating that an Event of Default has
occurred and is continuing and specifying the nature of such default.
"Subsidiary" means any person of which the Company or other specified
person now or hereafter shall at the time own directly or indirectly
through a Subsidiary at least a majority of the outstanding capital stock
(or other shares of beneficial interest) entitled to vote generally.
A. PREFERRED STOCK.
1. Terms Applicable to Preferred Stock.
a. Dividends.
(1) When and as declared by the Company's Board of Directors and to
the extent permitted under the General Corporation Law of Massachusetts,
the Company will pay preferential dividends to the holders of the Preferred
Stock as provided in this Section 1.1. From and after September 30, 1991
dividends on each share of Preferred Stock will accrue cumulatively on a
daily basis at the Preferred Dividend Rate in effect from time to time on
the Liquidation Value thereof, and from and after the end of any calendar
quarter at the rate of an additional 2% per annum on all dividends accrued
during such quarter but not paid at the end of such quarter, from and
including the later to occur of September 30, 1991 or the date of issuance
of such share, to and including the date on which the Liquidation Value
(plus all accrued but unpaid dividends thereon) of such share is paid.
Dividends will be payable in equal quarterly installments in arrears on the
last business day of each March, June, September and December of each year,
commencing December 1991. Such dividends will accrue whether or not they
have been declared and whether or not there are profits, surplus or other
funds of the Company legally available for the payment of dividends. The
date on which the Company initially issues any shares of Preferred Stock
will be deemed to be its "date of issuance", regardless of the number of
times transfer of such share is made on the stock records maintained by or
for the Company and regardless of the number of certificates which may be
issued to evidence such share no dividends or other distributions will be
paid, declared or set apart with respect to the Common Stock or any other
shares of capital stock of the Company ranking on liquidation junior to the
Preferred Stock (together with the Common Stock, "Junior Stock") unless all
accrued but unpaid dividends on the Preferred Stock shall have been paid.
(2) If at any time the Company pays less than the total amount of
dividends then accrued with respect to the Preferred Stock, such payment
will be distributed ratably among the holders of the Preferred Stock based
upon the aggregate accrued but unpaid dividends on the shares of Preferred
Stock held by each such holder.
b. Liquidation Value. On each day during the period from October 1,
1988 through September 30, 1991 the Liquidation Value shall be increased at
the rate of 6% per annum, compounded daily.
c. Liquidation.
(1) Upon any voluntary or involuntary liquidation, dissolution or
winding up of the Company (each such event being hereafter referred to as a
"Liquidation"), the holders of Preferred Stock will be entitled to be paid,
before any payment shall be made to the holders of Junior Stock, an amount
in cash equal to the aggregate Liquidation Value (plus all accrued but
unpaid dividends) of all shares of Preferred Stock outstanding, and the
holders of Preferred Stock will not be entitled to any further payment.
If, upon any Liquidation, the Company's assets to be distributed among the
holders of the Preferred Stock are insufficient to permit payment to such
holders of the full amount to which they are entitled hereunder, then the
entire assets to be distributed will be distributed ratably among such
holders based upon the aggregate Liquidation Value (plus all accrued but
unpaid dividends) of the preferred Stock held by each such holder. The
Company will mail written notice of any Liquidation not less than 30 days
prior to the payment date stated therein to each record holder of Preferred
Stock. The following will be deemed to be Liquidations for the purposes of
this Section 1.3: (a) the consolidation or merger of the Company into any
other corporation or corporations, (b) the sale or transfer by the Company
of all or any substantial portion of its assets, (c) the exercise by any
holder of Common Stock of such holder's put rights pursuant to Section 10.6
of the Securities Purchase Agreement.
(2) After the payment of all preferential amounts required to be paid
to the holders of Preferred Stock and any other class or series of stock of
the Company ranking on liquidation on a parity with the Preferred Stock,
the holders of Junior Stock then outstanding shall be entitled to receive
the remaining assets of the Company available for distribution to its
stockholders.
d. Voting Rights.
(1) Except as otherwise required by law or as set forth below in
Section 1.4(b), the Preferred Stock will have no right to vote on any
matter submitted to stockholders of the Company for vote, consent or
approval.
(2) The Company will not amend, alter or repeal the preferences,
special rights or other powers of the Preferred Stock so as to affect
adversely the Preferred Stock without the written consent or affirmative
vote of the holders of at least two thirds of the then outstanding shares
of Preferred Stock, given in writing or by vote at a meeting, consenting or
voting (as the case may be) separately as a class. For this purpose,
without limiting the generality of the foregoing, the increase in the
number of authorized shares of Preferred Stock or the authorization or
issuance of any series of Preferred Stock with preference or priority over
the Preferred Stock as to the right to receive either dividends or amounts
distributable upon a Liquidation of the Company shall be deemed to affect
adversely the Preferred Stock.
e. Redemptions.
(1) The Company will redeem all outstanding shares of Preferred
Stock, at a price per share equal to the Liquidation Value thereof (plus
all accrued but unpaid dividends), on September 30, 2000. The Company will
mail written notice of a redemption pursuant to this Section 1.5(a) to each
record holder of Preferred Stock not more than 60 nor less than 30 days
prior to the date on which such redemption is to occur. Notwithstanding the
foregoing, if any share of Preferred Stock is not redeemed on the date on
which redemption of such share is to occur, the price at which such share
of Preferred Stock will be redeemed shall be increased by an amount of
interest equal to 12% per annum, compounded daily, accruing from the date
on which such redemption was to occur to the date on which such share
actually shall be redeemed.
(2) The Company may, subject to the terms of its credit agreements,
at any time redeem all or any portion of the Preferred Stock then
outstanding at a price per share equal to the Liquidation Value thereof
(plus all accrued but unpaid dividends thereon). No redemption pursuant to
this paragraph may be made for less than an aggregate of 100 shares (or
such lesser number of shares of Preferred Stock then outstanding). The
Company will mail written notice of a redemption pursuant to this Section
1.5(b) to each record holder of Preferred Stock not more than 60 nor less
than 30 days prior to the date on which such redemption is to occur. In
case fewer then the total number of shares of Preferred Stock represented
by any certificate are redeemed, a new certificate representing the number
of unredeemed shares will be issued to the holder thereof without cost to
such holder within three business days after surrender of the certificate
representing the redeemed shares of Preferred Stock.
(3) For each share of Preferred Stock which is to be redeemed, the
Company will be obligated on the Redemption Date to pay to the holder
thereof (upon surrender by such holder at the Company's principal office of
the certificate representing such share of Preferred Stock endorsed to the
Company), in immediately available funds, an amount equal to the
Liquidation Value thereof (plus all accrued but unpaid dividends thereon).
If the funds of the Company legally available for redemption of shares of
Preferred Stock on any Redemption Date are insufficient to redeem the total
number of shares of Preferred Stock to be redeemed on such date, those
funds which are legally available will be used to redeem the maximum
possible number of shares of Preferred Stock ratably among the holders of
such shares to be redeemed based upon the aggregate Liquidation Value of
such shares (plus all accrued but unpaid dividends thereon) held by each
such holder. At any time thereafter when additional funds of the Company
are legally available for the redemption of Preferred Stock, such funds
will immediately be used to redeem the balance of the shares which the
Company has become obligated to redeem on any Redemption Date, but which it
has not redeemed.
(4) Except as otherwise provided herein, the number of shares of
Preferred Stock to be redeemed from each holder thereof in redemptions
hereunder will be the number of shares of Preferred Stock determined by
multiplying the total number of shares of Preferred Stock to be redeemed by
a fraction, the numerator of which will be the total number of shares of
Preferred Stock then held by such holder and the denominator of which will
be the total number of shares of Preferred Stock then outstanding.
(5) No share of Preferred Stock is entitled to any dividends accruing
after the earlier to occur of (i) the date on which the Liquidation Value
(plus all accrued but unpaid dividends thereon) of such share is paid or
(ii) the date on which any share of Preferred Stock is to be redeemed and
the Company has failed to redeem such share and as a result the redemption
price begins to increase pursuant to the provisions of Section 1.5(a)
hereof.
(6) Any shares of Preferred Stock which are redeemed or otherwise
acquired by the Company will be cancelled, and will not be reissued, sold
or transferred.
(7) Neither the Company nor any of its Subsidiaries will redeem or
otherwise acquire any Preferred Stock except as expressly authorized herein
or pursuant to a purchase offer made pro rata to all holders of Preferred
Stock on the basis of the number of shares of Preferred Stock owned by each
such holder.
B. COMMON STOCK.
1. Terms Applicable to Common Stock.
a. Dividend and Other Rights of Common Stock.
(1) Except as specifically otherwise provided herein, all shares of
Common Stock shall be identical and shall entitle the holders thereof to
the same rights and privileges. The Company shall not subdivide or combine
any shares of Common Stock, or pay any dividend or retire any share or make
any other distribution on any share of Common Stock, or accord any other
payment, benefit or preference to any share of Common Stock, except by
extending such subdivision, combination, distribution, payment, benefit or
preference equally to all shares of Common Stock. If dividends are
declared which are payable in shares of Common Stock. If dividends are
declared which are payable in shares of Common Stock, such dividends shall
be payable in shares of Class A Common Stock to holders of Class A Common
Stock, in shares of Class B Common Stock to holders of Class B Common
Stock, in shares of Class C Common Stock to holders of Class C Common Stock
and in shares of Class D Common Stock to holders of Class D Common Stock.
(2) The holders of Common Stock shall be entitled to dividends out of
funds legally available therefor, when declared by the Board of Directors
in respect of Common Stock, and upon a liquidation of the Company, to share
ratably in the assets of the Company available for distribution to the
holders of Common Stock.
b. Voting Rights of Common Stock.
(1) Except as otherwise provided by law, the holders of Class A
Common Stock shall have full voting rights and powers to vote on all
matters submitted to stockholders of the Company for vote, consent or
approval, and each holder of Class A Common Stock shall be entitled to one
vote for each share of Class A Common Stock held of record by such holder.
Except as otherwise provided by law, the holders of Class C Common Stock
shall have full voting rights and powers to vote on all matters submitted
to stockholders of the Company for vote, consent or approval. Except as
provided in Section 1.2(c) below, each holder of Class C Common Stock shall
be entitled to one vote for each share of Class C Common Stock held of
record by such holder, and holders of Class A Common Stock and Class C
Common Stock shall vote together as a single class.
(2) Except as otherwise provided by law, the holders of Class B
Common Stock and the holders of Class D Common Stock shall have no right to
vote on any matter submitted to stockholders of the Company for vote,
consent or approval, and the Class B Common Stock and Class D Common Stock
shall not be included in determining the number of shares voting or
entitled to vote on such matters.
(3) (i) So long as any Event of Default shall be continuing, the
holders of not less than 51% of the then outstanding shares of Class C
Common Stock shall be entitled to commence a Default Period by delivering
to the Company, at its principal office, a Special Rights Notice. Upon
delivery of a Special Rights Notice and during the resulting Default
Period, each holder of Class C Common Stock shall be entitled to have 1000
votes for each share of Class C Common Stock held of record by such holder.
During a Default Period, the holders of Class C Common Stock shall be
entitled to the rights with respect to the election of directors set forth
in Section 1.2(c)(ii) below and shall be entitled to vote as a single class
with the holders of Class A Common Stock on all matters, other than the
election or removal of directors, submitted to stockholders of the Company
for vote, consent or approval. Within ten days after any delivery of a
Special Rights Notice, the Board of Directors shall call a special meeting
of stockholders for the election of directors and the approval of the SBIC
Plan to be held upon not less than 15 nor more than 30 days notice to such
holders. If such notice of meeting is not given within the ten days
required above, those holders of Class C Common Stock delivering the
Special Rights Notice may also call such meeting and shall be given access
to the stock books and records of the Company for such purpose. At any
meeting so called or at any other meeting held (or consent action taken)
during a Default Period, holders of Class C Common Stock shall be entitled
to the number of votes per share provided in this Section 1.2(c)(i) and the
holders of a majority of the aggregate number of the then outstanding
shares of Class C Common Stock present in person or by proxy, shall be
sufficient to constitute a quorum.
(ii) At any meeting of the stockholders for the purpose of
election of directors called as provided in Section 1.2(c)(i) above,
holders of Class C Common Stock, voting together as a separate class, shall
be entitled to elect the smallest number of directors to the Board of
Directors of the Company that shall constitute a majority of the authorized
number of directors on the Board of Directors of the Company. In each such
election, holders of Class C Common Stock shall vote together as a separate
class and not with holders of Class A Common Stock; and holders of Class A
Common Stock, voting as a separate class, shall be entitled to elect the
remaining members of the Board of Directors. Upon the election by holders
of Class C Common Stock of the directors they are entitled to elect as
provided above, the terms of office of all persons who were previously
directors of the Company shall immediately terminate.
(iii) In case of any vacancy in the office of any director
occurring among the directors elected by holders of Class C Common Stock
pursuant to the provisions of the foregoing subsection (ii), the remaining
directors elected by holders of Class C Common Stock, by affirmative vote
of a majority thereof, or the remaining director so elected if there be but
one, may, if permitted by law and subject to the provisions of subsection
(ii) above, elect a successor or successors to hold office for the
unexpired terms of the director or directors whose place or places shall be
vacant. Any director who shall have been elected by holders of Class C
Common Stock (or by any directors so elected by directors elected by the
holders of Class C Common Stock as provided in this section (iii)) may be
removed during his term of office, either with or without cause, by, and
only by, the affirmative vote of holders of Class C Common Stock given at a
special meeting of such stockholders duly called for that purpose.
(iv) In case of any vacancy in the office of any director
occurring among the directors elected by holders of Class A Common Stock
pursuant to the provisions of the foregoing subsection (ii), the remaining
directors elected by holders of Class A Common Stock, by affirmative vote
of a majority thereof, or the remaining director so elected if there be but
one, may, if permitted by law and subject to the provisions of subsection
(ii) above, elect a successor or successors to hold office for the
unexpired terms of the director or directors whose place or places shall be
vacant. Any director who shall have been elected by holders of Class A
Common Stock (or by any directors so elected by directors elected by the
holders of Class A Common Stock as provided in this section (iii)) may be
removed during his term of office, either with or without cause, by, and
only by, the affirmative vote of holders of Class A Common Stock given at a
special meeting of such stockholders duly called for that purpose.
(v) The provisions of this Section 1.2(c) shall not be amended,
modified or waived without the written consent or affirmative vote of the
holders of at least two-thirds of the then outstanding shares of Class C
Common Stock, given in writing or by vote at a meeting, consenting or
voting (as the case may be) separately as a class.
2. Conversion.
(1) Conversion of Class B Common Stock. Subject to and upon
compliance with the provisions of this Section, each record holder of Class
B Common Stock is entitled at any time and from time to time to convert any
and all of the shares of Class B Common Stock held by it into the same
number of shares of Class A Common Stock.
(2) Conversion of Class A Common Stock. Subject to and upon
compliance with the provisions of this Section, each record holder of Class
A Common Stock is entitled at any time and from time to time to convert any
or all of the shares of Class A Common Stock held by it into the same
number of shares of Class B Common Stock.
(3) Conversion of Class C Common Stock. Subject to and upon
compliance with the provisions of this Section, each record holder of Class
C Common Stock is entitled at any time and from time to time to convert any
or all of the shares of Class C Common Stock held by it into the same
number of shares of Class B Common Stock.
(4) Automatic Conversion. Upon the closing of a Qualified Public
Offering, all shares of Class C Common Stock then issued and outstanding
and all shares of Class D Common Stock then issued and outstanding shall be
converted, without any further action by the holders thereof, into shares
of Class A Common Stock.
(5) Conversion Procedure.
(i) Each conversion of shares of Class B Common Stock,
shares of Class C Common Stock, shares of Class A Common Stock or
shares of Class D Common Stock will be effected by the surrender to
the Company of the certificate or certificates representing the shares
to be converted, duly endorsed or assigned in blank, with signatures
guaranteed if reasonably requested by the Company, at the principal
office of the Company (or such other office or agency of the Company
as the Company may designate in writing to the holder or holders of
the Common Stock) at any time during its usual business hours, and by
the giving of written notice (except in the case of an automatic
conversion upon the occurrence of a Qualified Public Offering) by the
holder of such Class A Common Stock, Class B Common Stock or Class C
Common Stock stating that such holder desires to convert all or a
stated number of the shares of Class B Common Stock represented by
such certificate or certificates into Class A Common Stock or to
convert all or a stated number of the shares of Class A Common Stock
or Class C Common Stock represented by such certificate or
certificates into Class B Common Stock, which notice will also state
the name or names (with addresses) and denominations in which the
certificate or certificates for the Class A Common Stock or Class B
Common Stock, as the case may be, will be issued and will include
instructions for delivery thereof.
(ii) Promptly after such surrender and the receipt of such
written notice and statement, the Company will issue and deliver in
accordance with such instructions the certificate or certificates for
the Class A Common Stock or Class B Common Stock issuable upon such
conversion. In addition, the Company will deliver to the converting
holder a certificate representing any portion of the shares of Class B
Common Stock, Class C Common Stock or Class A Common Stock which had
been represented by the certificate or certificates delivered to the
Company in connection with such conversion but which were not
converted. Such conversion, to the extent permitted by law, will be
deemed to have been effected as of the close of business on the date
on which such certificate or certificates have been surrendered and
such notice has been received, and at such time the rights of the
holder of such Class B Common Stock, Class C Common Stock or Class A
Common Stock, as the case may be (or specified portion thereof), as
such holder will cease and the person or persons in whose name or
names the certificate or certificates for shares of Class A Common
Stock or Class B Common Stock are to be issued upon such conversion
will be deemed to have become the holder or holders of record of the
shares of Class A Common Stock or Class B Common Stock represented
thereby.
(iii) The Company will at all times (A) reserve and keep
available out of its authorized but unissued shares of Class A Common
Stock or its treasury shares of Class A Common Stock, solely for the
purpose of issuance upon the conversion of the Class B Common Stock as
provided in this Section, such number of shares of Class A Common
Stock as are then issuable upon the conversion of all then outstanding
shares of Class B Common Stock into shares of Class A Common Stock
hereunder, and (B) reserve and keep available out of its authorized
but unissued shares of Class B Common Stock or its treasury shares of
Class B Common Stock, solely for the purpose of issuance upon
conversion of the Class A Common Stock and Class C Common Stock as
provided in this Section, such number of shares of Class B Common
Stock as are then issuable upon conversion of all then outstanding
shares of Class A Common Stock and Class C Common Stock into shares of
Class B Common Stock hereunder. Notwithstanding the foregoing, if, at
any time, there shall be an insufficient number of authorized or
treasury shares of Class A Common Stock available for issuance upon
conversion of Class B Common Stock, or an insufficient number of
authorized or treasury shares of Class B Common Stock available for
issuance upon conversion of Class A Common Stock or Class C Common
Stock, the Company will take all action necessary to propose and
recommend to the shareholders of the Company that these Articles of
Incorporation be amended to authorize additional shares in an amount
sufficient to provide adequate reserves of shares for issuance upon
such conversion, including that diligent solicitation of votes and
proxies to vote in favor of such an amendment. All shares of Class A
Common Stock and Class B Common Stock which are issuable upon
conversion hereunder will, when issued, be duly and validly issued,
fully paid and nonassessable.
(iv) The issuance of certificates for shares of Class A
Common Stock upon conversion of shares of Class B Common Stock (and
Class A Common Stock upon automatic conversion of Class C Common Stock
or Class D Common Stock) and for shares of Class B Common Stock upon
conversion of shares of Class A Common Stock and Class C Common Stock
will be made without charge to any original holder of any shares of
Common Stock for any issuance tax in respect thereof, or other cost
incurred by the Company in connection with such conversion and the
related issuance of Class A Common Stock or Class B Common Stock;
provided that the Company will not be required to pay any such taxes
or costs which may be payable in respect of any such conversion by any
other person or in respect of any transfer involved in the issuance
and delivery of any certificate in a name other than that of the
registered holder of the shares converted. Subject to applicable
securities laws, the Company will not close its books against the
transfer of any shares of Class A Common Stock, Class B Common Stock
or Class C Common Stock.
C. PROVISIONS OF COMMON APPLICATION.
1.1. Registration of Transfer. The Company will keep at its principal
office a register for the registration of Preferred Stock and Common Stock.
Upon the surrender of any certificate representing Preferred Stock or
Common Stock at such place, the Company will, at the request of the record
holder of such certificate, execute and deliver a new certificate or
certificates in exchange therefor representing in the aggregate the number
of shares of Preferred Stock or Common Stock represented by the surrendered
certificate. Each such new certificate will be registered in such name and
will represent such number of shares of Preferred Stock or Common Stock as
is requested by the holder of the surrendered certificate and will be
substantially identical in form to the surrendered certificate, and, with
respect to Preferred Stock, dividends will accrue on the Preferred Stock
represented by such new certificate from the date to which dividends have
been fully paid on such Preferred Stock represented by the surrendered
certificate. The issuance of new certificates will be made without charge
to the holders of the surrendered certificates for any issuance tax in
respect thereof or other cost incurred by the Company in connection with
such issuance, unless such issuance is made in connection with a transfer
of Preferred Stock or Common Stock, in which case the transferring holder
will pay all taxes arising from such transfer.
1.2 Replacement. Upon receipt of evidence reasonably satisfactory to
the Company (an affidavit of the registered holder will be satisfactory) of
the ownership and the loss, theft, destruction or mutilation of any
certificate evidencing shares of Preferred Stock or Common Stock, and in
the case of any such loss, theft or destruction upon receipt of indemnity
bond in such reasonable amount as the Company may determine (or, in the
case of shares of Preferred Stock, or Common stock held by an institutional
holder, of an unsecured indemnity satisfactory to the Company), or, in the
case of any such mutilation upon surrender of such certificate, the Company
will (at its expense) execute and deliver in lieu of such certificate a new
certificate of like kind representing the number of shares of Preferred
Stock or Common Stock represented by such lost, stolen, destroyed or
mutilated certificate and dated the date of such lost, stolen, destroyed or
mutilated certificate, and, with respect to Preferred Stock, dividends will
accrue on the Preferred Stock represented by such new certificate from the
date to which dividends have been fully paid on such lost, stolen,
destroyed or mutilated certificate.
1.3. Notices. Except as otherwise expressly provided, all notices
referred to herein will be in writing and will be delivered by registered
or certified mail, return receipt requested, postage prepaid, and will be
deemed to have been given when so mailed (a) to the Company, at its
principal office, and (b) to any stockholder, at such holder's address as
it appears in the stock records of the Company (unless otherwise indicated
by any such holder).
ARTICLE V
The restrictions, if any, imposed by the Articles of Organization upon
the transfer of shares of stock of any class are as follows:
None
ARTICLE VI
Other lawful provisions, if any, for the conduct and regulation of
business and affairs of the corporation, for its voluntary dissolution, or
for limiting, defining, or regulating the powers of the corporation, or of
its directors or stockholders, or of any class of stockholders. (If there
are no provisions state "None".)
See Exhibit A attached hereto
Note: The preceding six (6) articles are considered to be permanent and may
ONLY be changed by filing appropriate Articles of Amendment.
<PAGE>
Exhibit A
6A: No director shall be personally liable to the Corporation or any
of its stockholders for monetary damages for any breach of
fiduciary duty by such director as a director notwithstanding any
provision of law imposing such liability; provided, however,
that, to the extent required from time to time by applicable law,
this provision shall not eliminate the liability of a director,
to the extent such liability is provided by applicable law, (a)
for any breach of the director's duty of loyalty to the
Corporation or its stockholders, (b) for acts or omissions not in
good faith which involve intentional misconduct or a knowing
violation of law, (c) under Section 61 or Section 62 of Business
Corporation Law of the Commonwealth of Massachusetts, (d) for any
transaction for which the director derived an improper personal
benefit. No amendment to or repeal of this Article 6A shall
apply to or have any effect on the liability or alleged liability
of any director for or with respect to any acts or omissions of
such director occurring prior to the effective date of such
amendment or repeal.
ARTICLE VII
The effective date of organization of the corporation shall be the date
approved and filed by the Secretary of the Commonwealth. If a later
effective date is desired, specify such date which shall be no more than
thirty days after the date of filing.
The information contained in ARTICLE VII is NOT a PERMANENT part of the
Articles of Organization and may be changed ONLY by filing the appropriate
form provided therefor.
ARTICLE VIII
a. The post office address of the corporation IN MASSACHUSETTS is:
5 Industrial Drive
Mattapoisett, MA 02739
b. The name, residence and post office address (if different) of the
directors and officers of the corporation are as follows:
NAME RESIDENCE POST OFFICE ADDRESS
President: 49 Mattapoisett Neck Rd. 5 Industrial Drive
Kenneth A. Shwartz Mattapoisett, MA 02739 Mattapoisett, MA 02739
Treasurer: 39 Beverly Street 5 Industrial Drive
Merrill D. Shwartz No. Dartmouth, MA 02747 Mattapoisett, MA 02739
Clerk: 43 Washington Street 2700 Hospital Trust Tower
John R. Higham No. Kingstown, RI 02852 Providence, RI 02903
Director: 49 Mattapoisett Neck Rd. 5 Industrial Drive
Kenneth A. Shwartz Mattapoisett, MA 02739 Mattapoisett, MA 02739
Director: 39 Beverly Street 5 Industrial Drive
Merrill Shwartz No. Dartmouth, MA 02747 Mattapoisett, MA 02739
c. The fiscal year (i.e., tax year) of the corporation shall end on the
last day of the month of: December
d. The name and BUSINESS address of the RESIDENT AGENT of the
corporation, if any, is:
Kenneth A. Shwartz
5 Industrial Drive
Mattapoisett, MA 02739
ARTICLE IX
By-laws of the corporation have been duly adopted and the president,
treasurer, clerk and directors whose names are set forth above, have been duly
elected.
IN WITNESS WHEREOF and under the pains and penalties of perjury, I/WE, whose
signature(s) appear below as incorporator(s) and whose names and business or
residential address(es) ARE CLEARLY TYPED OR PRINTED beneath each signature do
hereby associate with the intention of forming this corporation under the
provisions of General Laws Chapter 156B and do hereby sign these Articles of
Organization as incorporator(s) this 13th day of June, 1988.
/s/ John A. Soares, Jr.
John A. Soares, Jr.
________________________________________________________________
________________________________________________________________
Universal Industries, Inc.
By-Laws
Article I - Offices
1. The principal office shall be located in Mattapoisett, Massachusetts.
2. The Corporation may also have offices at such other places both within
and without the Commonwealth of Massachusetts as the Board of Directors
may from time to time determine or the business of the Corporation may
require.
Article II - Annual Meetings of Stockholders
1. All meetings of stockholders for the election of directors shall be held
in Mattapoisett, Massachusetts or at such place within or, to the extent
permitted by law and the Articles of Organization, without the
Commonwealth of Massachusetts as may be fixed from time to time by the
Board of Directors.
2. Annual meetings of stockholders, commencing with the year 1989, shall be
held on the third Tuesday in April if not a legal holiday, and if a legal
holiday, then on the next secular day following, at eleven o'clock in the
forenoon, unless a different hour and/or place is fixed by the Board of
Directors or by the President and stated in the notice of meeting.
Purposes for which an annual meeting is to be held, in addition to those
prescribed by law, by the Corporation's Articles of Organization or by
these by-laws, shall be specified by the Board of Directors or by a
notice in writing signed by the President and filed with the Clerk.
In the event that an annual meeting has not been held on the date fixed
in these by-laws, a special meeting in lieu of annual meeting may be held
with all the force and effect of an annual meeting.
3. Written or printed notice of the annual meeting stating the place, day
and hour of the meeting shall be given to each stockholder entitled to
vote thereat not less than seven days before the date of the meeting.
The notice shall also set forth the purpose or purposes for which the
meeting is called.
Article III - Special Meetings of Stockholders
1. Special meeting of stockholders may be held at such time and place within
or, to the extent permitted by law and the Articles of Organization,
without the Commonwealth of Massachusetts as shall be stated in the
notice of the meeting or in a duly executed waiver of notice thereof.
2. Special meetings of stockholders may be called at any time, for any
purpose or purposes, by the President or by the Directors, and shall be
called by the Clerk, or in the case of death, absence, incapacity or
refusal of the Clerk, by any other Officer, upon written application of
one or more stockholders who hold at least one-tenth part in interest of
the capital stock entitled to vote thereat. Such call shall state the
date, hour, place and purposes of the meeting.
3. Written or printed notice of a special meeting of stockholders, stating
the date, hour, place and purpose or purposes thereof, shall be given by
the Clerk or an Assistant Clerk or, in the case of death, absence,
incapacity, unavailability or refusal of both the Clerk and the Assistant
Clerk, by any other Officer or by a person designated either by the
Clerk, or by the Assistant Clerk, or by the person or persons calling the
meeting, or by the Board of Directors, or by any other person empowered
by law to do so, to each stockholder entitled to vote thereat, and to
each stockholder who, under the Articles of Organization or under the
by-laws is entitled to such notice, at least seven days before the date
fixed for the meeting, or such greater period as may be required by law,
by leaving such notice with him or her, or at his or her residence or
usual place of business, or by mailing it, postage prepaid, and addressed
to such stockholder at his or her address as it appears in the records of
the Corporation.
Article IV - Quorum and Voting of Stock
1. The holders of a majority of the shares of stock issued and outstanding
and entitled to vote, represented in person or by proxy, shall constitute
a quorum at all meetings of the stockholders for the transaction of
business except as otherwise provided by law or by the Articles of
Organization. If, however, such quorum shall not be present or
represented at any meeting of the stockholders, the stockholders present
in person or represented by proxy shall have power to adjourn the meeting
from time to time, without notice other than announcement at the meeting,
until a quorum shall be present or represented. At such adjourned
meeting at which a quorum shall be present or represented any business
may be transacted which might have been transacted at the meeting as
originally notified.
2. If a quorum is present, the affirmative vote of a majority of the shares
of stock represented at the meeting shall be the act of the stockholders
unless the vote of a greater number of shares of stock is required by law
or the Articles of Organization, or by these by-laws.
3. Except as otherwise provided in the Corporation's Articles of
Organization, each outstanding share of stock, having voting power, shall
be entitled to one vote on each matter submitted to a vote at a meeting
of stockholders, and a proportionate vote for a fractional share. A
stockholder may vote either in person or by proxy executed in writing by
the stockholder or by his duly authorized attorney-in-fact.
4. Any action required to be taken at a meeting of the stockholders may be
taken without a meeting if a consent in writing, setting forth the action
so taken, shall be signed by all of the stockholders entitled to vote
with respect to the subject matter thereof, and the written consents are
filed with the records of the meetings of stockholders. Such consents
shall be treated for all purposes as a vote at a meeting.
Article V - Directors
1. The number of directors shall be not more than ten (10) nor less than
three (3), except that whenever there shall be only two (2) stockholders,
there shall not be less than two (2), and whenever there shall be only
one (1) stockholder, or prior to the issuance of any stock, there shall
be at least one (1) director. The directors, other than the first Board
of Directors, shall be elected at the annual meeting of the stockholders,
or the special meeting in lieu of said annual meeting by such
stockholders as have the right to vote on election of directors. Subject
to law, to the Corporation's Articles of Organization and these By-Laws,
each director elected shall serve until the next succeeding annual
meeting and until his successor shall have been elected and qualified.
Subject to the provisions of Article V, Section 7 of these By- Laws, the
first Board of Directors shall hold office until the first annual meeting
of stockholders. Directors need not be residents of the Commonwealth of
Massachusetts nor stockholders of the Corporation.
2. If the office of any Director becomes vacant for any reason, a successor
or successors may be elected by the stockholders or, except in the case
of a vacancy resulting from enlargement of the Board of Directors, by the
Board of Directors. Only the stockholders may elect a director to fill a
vacancy in the office of Director resulting from enlargement of the Board
of Directors. Each such successor shall hold office for the unexpired
term of his or her predecessor, subject to the provisions of Article V,
Section 7, of these By-Laws.
3. The business affairs of the Corporation shall be managed by its Board of
Directors which may exercise all such powers of the Corporation and do
all such lawful acts and things as are not by law or by the Articles of
Organization or by these By-Laws conferred upon or reserved to the
stockholders.
4. The Directors may keep the books of the Corporation, except such as are
required by law to be kept within the state, outside of the Commonwealth
of Massachusetts, at such place or places as they may from time to time
determine.
5. The Board of Directors, by the affirmative vote of a majority of the
Directors then in office, and irrespective of any personal interest of
any of its members, shall have authority to establish reasonable
compensation of all directors for services to the Corporation as
Directors, Officers or otherwise.
6. The stockholders may remove any Director from office with or without
cause. The Board of Directors may remove any Director from office for
cause. A Director may be removed for cause only after a reasonable
notice and opportunity to be heard before the body proposing to remove
him or her.
Article VI - Meetings of the Board of Directors
1. Meetings of the Board of Directors, regular or special, may be held
either within or without the Commonwealth of Massachusetts.
2. Regular meetings of the Board of Directors, including the first meeting
of the Board following the annual meeting of stockholders, may be held
upon such notice, or without notice, and at such time and at such place
as shall from time to time be determined by the Board.
3. Special meetings of the board of Directors may be held at any time and at
any place when and as called by the President, the Treasurer, or one or
more Directors.
4. The Clerk or an Assistant Clerk or the Officer or Directors calling the
meeting shall give to each Director notice of the place, date and hour of
all special meetings of the Board of Directors by telephone or by mail,
telegram, telex, facsimile transmission or any similar form of
communication, addressed to such director at his or her usual or last
known business or residence address, or at such other address as said
director may from time to time designate in writing, or by leaving such
notice with the Director or at the Director's usual or last known
business, or residence address, or at such other address as said director
may from time to time designate to the Corporation in writing. Notice
sent by telegram, telex, facsimile transmission or any similar form of
communication or given by telephone, or by leaving such notice as
aforesaid, shall be sent or given, as the case may be, at least
twenty-four hours before the meeting. Notwithstanding any of the
foregoing to the contrary, notice given by any method shall be deemed
sufficient if actually received at least twenty-four hours before the
meeting. Notice sent by mail shall be mailed at least forty-eight hours
before the meeting. Notice of a meeting need not be given to any director
if a waiver of notice, executed by him or her before or after the
meeting, is filed with the records of the meeting, or to any director who
attends the meeting without protesting prior thereto or at its
commencement the lack of notice to him or her.
5. Neither the business to be transacted at, nor the propose of, any regular
or special meeting of the Board of Directors need be specified in the
notice or waiver of notice of such meeting.
6. A majority of the Directors constituting the full Board of Directors
shall constitute a quorum for the transaction of business. The act of a
majority of the Directors present at any meeting at which a quorum is
present shall be the act of the Board of Directors, unless the act of a
greater number is required by law or by the Articles of Organization of
these By-laws. If a quorum shall not be present at any meeting of
Directors, the Directors present thereat may adjourn the meeting from
time to time, without notice other than announcement at the meeting,
until a quorum shall be present.
7. Any action required or permitted to be taken at a meeting of the
Directors may be taken without a meeting if a consent in writing, setting
forth the action so taken, shall be signed by all of the directors and
the written consents are filed with the records of the meetings of the
Board of Directors. Such consents shall be treated for all purposes as a
vote at a meeting.
8. Directors may participate in a meeting by means of a conference telephone
call or use of similar communications equipment, provided that all
directors participating in a meeting can hear each other at the same
time. Such participation shall constitute presence in person at a
meeting.
Article VII - Executive Committee
1. The Board of Directors, by resolution adopted by a majority of the number
of Directors fixed by the By-laws or otherwise, may designate two or more
Directors to constitute an Executive committee, which committee, to the
extent provided in such resolution, shall have and exercise all of the
authority of the Board of Directors in the management of the Corporation,
except as otherwise required by law. Vacancies in the membership of the
Committee shall be filled by the Board of Directors at a regular or
special meeting of the Board of Directors. The Executive Committee shall
keep regular minutes of its proceedings and report the same to the Board
when required.
Article VIII - Officers
1. The Officers of the Corporation shall be chosen by the Board of Directors
and shall be a President, a Treasurer and a clerk. The Board of
Directors may also choose a Chairman of the Board, one or more
Vice-Presidents, one or more Assistant Treasurers and one or more
Assistant Clerks. The President may, but need not be, a Director. The
Clerk shall be a resident of the Commonwealth of Massachusetts unless the
Corporation has a resident agent appointed for the purpose of service of
process. To the extent permitted by law, any two or more offices may be
held by the same person. No officer need be a stockholder or need work
for the Corporation on a full-time basis.
2. The Board of Directors at its first meeting after each annual meeting of
stockholders shall choose the Officers for the ensuing year.
3. The Board of Directors may appoint such other Officers and Agents as it
shall deem necessary who shall hold their offices for such terms and
shall exercise such powers and perform such duties as shall be determined
from time to time by the Board of Directors. The Board of Directors may
terminate the authority of any agent.
4. The salaries of all Officers and Agents of the Corporation shall be fixed
by the Board of Directors.
5. The Officers of the Corporation shall hold office until the first annual
meeting of the Board of Directors after each annual meeting of
stockholders and thereafter until their successors are chosen and
qualify. Any officer elected or appointed by the Board of Directors may
be removed at any time by the affirmative vote of a majority of the Board
of Directors. An officer may be removed for cause only after a
reasonable notice and opportunity to be heard before the body proposing
to remove him or her. Any vacancy occurring in any office of the
Corporation shall be filled by the Board of Directors.
President
6. Except as the Board of Directors may from time to time otherwise
determine, the President shall be the Chief Executive Officer of the
Corporation, shall preside at all meetings of the Stockholders and the
Board of Directors, shall (subject to the direction of the Board of
Directors) have general and active supervision and management of the
business of the Corporation shall see that all orders and resolutions of
the Board of Directors are carried into effect. The President shall have
custody of the Treasurer's bond if such bond is required by the Board of
Directors.
7. He shall execute bonds, mortgages and other contracts requiring a seal,
under the seal of the Corporation, except where required or permitted by
law to be otherwise signed and executed and except where the signing and
execution thereof shall be expressly delegated by the Board of Directors
to some other Officer or agent of the Corporation.
The Vice-Presidents
8. The Vice-President, or if there shall be more than one, the
Vice-Presidents in the order determined by the Board of Directors, shall,
in the absence or disability of the President, perform the duties and
exercise the powers of the President and shall perform such other duties
and have such other powers as the Board of Directors may from time to
time prescribe.
The Clerk and Assistant Clerks
9. The Clerk shall attend all meetings of the Board of Directors and all
meetings of the Stockholders and record all the proceedings of the
meetings of the corporation and of the Board of Directors, and shall
perform like duties for the standing committees when required. The Clerk
shall keep the original or attested copies of the Corporation's Articles
of Organization, by-laws, records of all meetings (and consents in lieu
of meetings) of incorporators, and stockholders and the Board od
Directors and, unless a transfer agent is appointed, the stock and
transfer records, which shall contain the names of all stockholders and
the record address of, and amount of stock held by, each stockholder.
Such copies and records shall be kept in the Commonwealth of
Massachusetts and shall, at all reasonable times, be made available for
inspection for a proper purpose by the stockholders of the Corporation at
the principal office of the Corporation or an office of its transfer
agent, clerk or resident agent. All of said copies and records need not
be kept in the same office. Except as otherwise provided in these
by-laws, he shall give, or cause to be given, notice of all meetings of
the stockholders and special meetings of the Board of Directors, and
shall perform such other duties as may be prescribed by the Board of
Directors or President, under whose supervision he shall be. He shall
have custody of the record books and of the Corporate Seal of the
Corporation and he, or an Assistant Clerk, shall have authority to affix
the seal to any instrument requiring it and when so affixed, it may be
attested by his signature or by the signature of such Assistant Clerk.
The Board of Directors may give general authority to any other Officer to
affix the Seal of the Corporation and to attest the affixing by his
signature. The office of the clerk shall be deemed to be the office of
the Secretary of the Corporation whenever such Officer is required for
any purpose, and whenever the signature of the Secretary of the
Corporation is required on any instrument, or document, by the laws of
the United States, or of any other state, or in any other manner
whatsoever, the Clerk shall have authority to affix his signature in such
capacity.
10. The Assistant Clerk, or if there be more than one, the Assistant Clerks
in the order determined by the Board of Directors, shall, in the absence
or disability of the Clerk, perform such other duties and have such other
powers as the Board of Directors may from time to time prescribe. In the
absence of the Clerk and the Assistant Clerk(s) from any meeting of
stockholders or from any meeting of the Board of Directors, a temporary
clerk who shall perform the duties of the Clerk shall be chosen at such
meeting.
The Treasurer and Assistant Treasurers
11. The Treasurer shall, subject to the direction of the Board of Directors,
have general charge of the financial affairs of the Corporation. The
Treasurer shall have the custody of the Corporate funds and securities
and shall keep full and accurate accounts of receipts and disbursements
in books belonging to the Corporation and shall deposit all moneys and
other valuable effects in the name and to the credit of the Corporation
in such depositories as may be designated by the Board of Directors.
12. He shall disburse the funds of the Corporation as may be ordered by the
Board of Directors, taking proper vouchers for such disbursements, and
shall render to the President and the Board of Directors, at its regular
meetings, or when the Board od Directors so requires, an account of all
his transactions as Treasurer and of the financial condition of the
Corporation.
13. If required by the Board of Directors, he shall give the Corporation a
bond in such sum and with such surety or sureties as shall be
satisfactory to the Board of Directors for the faithful performance of
the duties of his office and for the restoration to the Corporation, in
case of his death, resignation, retirement or removal from office, of all
books, papers, vouchers, money and other property of whatever kind in his
possession or under his control belonging to the Corporation.
14. The Assistant Treasurer, or, if there shall be more than one, the
Assistant Treasurers in the order determined by the Board of Directors,
shall, in the absence or disability of the Treasurer, perform the duties
and exercise the powers of the Treasurer and shall perform such other
duties and have such other powers as the Board of Directors may from time
to time prescribe.
Article IX - Certificates for Shares
1. The shares of the Corporation shall be represented by certificates in
such form as shall, in conformity to law and these by-laws, be prescribed
from time to time by the Board of Directors. Such certificates shall be
signed by the President or a Vice-President and the Treasurer or an
Assistant Treasurer of the Corporation, and may be sealed with the seal
of the Corporation or a facsimile thereof.
When the Corporation is authorized to issue shares of more than one class
or series of stock, there shall be set forth upon the face or back of the
certificate, either: (a) the full test of the designations, preferences,
voting powers, qualifications and special and relative rights of the
shares of each class and series, if any authorized to be issued, as set
forth in the Articles of Organization, or (b) a statement of the
existence of such preferences, powers, qualifications and rights, and a
statement that the Corporation will furnish a copy thereof to the holder
of such certificate upon written request and without charge.
Any shares subject to any restriction on transfer pursuant to the
Articles of Organization, these by-laws or any agreement to which the
Corporation is a party shall have the restriction noted conspicuously on
the certificate and shall also set forth on the face or back of the
certificate either the full text of the restriction, or a statement of
the existence of such restriction and a statement that the Corporation
will furnish a copy thereof to the holder of such certificate upon
written request and without charge.
2. The signatures of the officers upon a certificate may be facsimiles if
the certificate is countersigned by a transfer agent, or registered by a
registrar, other than the Corporation itself or a Director, Officer or an
employee of the Corporation. In case any Officer who has signed or whose
facsimile signature has been placed upon such certificate shall have
ceased to be such Officer before such certificate is issued, it may be
issued by the Corporation with the same effect as if he were such officer
at the date of its issue.
Lost Certificates
3. The Board of Directors may, subject to law, direct a new certificate to
be issued in place of any certificate theretofore issued by the
Corporation alleged to have been lost, mutilated or destroyed. When
authorizing such issue of a new certificate, the Board of Directors, in
its discretion and as a condition precedent to the issuance thereof, may
prescribe such terms and conditions as it deems expedient, and may
require such indemnities or sureties as it deems adequate, to protect the
Corporation from any claim that may be made against it with respect to
any such certificate alleged to have been lost or destroyed.
Transfers of Shares
4. Upon surrender to the Corporation or the transfer agent of the
Corporation of a certificate representing shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, a new certificate shall be issued to the person entitled
thereto, and the old certificate canceled and the transaction recorded
upon the books of the Corporation.
Fixing of Record Date
5. The Board of Directors may fix in advance a time which shall be not more
than sixty days before the date of any meeting of stockholders or the
date for the payment of any dividend or the making of any distribution to
stockholders or the last day on which the consent or dissent of
stockholders may be effectively expressed for any purpose, as the record
date for determining the stockholders having the right to notice of and
to vote at such meeting and any adjournment thereof or the right to
receive such dividend or distribution or the right to give such consent
or dissent, and in such case only stockholders of record on such record
date shall have such right, notwithstanding any transfer of stock on the
books of the Corporation after the record date. Without fixing such
record date, the Board of Directors may for any of such purposes close
the transfer books for all or any part of such period. If no record date
is fixed and the transfer books are not closed, the record date for
determining stockholders having the right to notice of or to vote at a
meeting of stockholders shall be at the close business on the day next
preceding the day on which notice is given, and the record date for
determining stockholders for any other purpose shall be at the close of
business on the day on which the Board of Directors acts with respect
thereto.
Registered Stockholders
6. The Corporation shall be entitled to recognize the exclusive right of a
person registered on its books as the owner of shares to receive
dividends, and to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the owner of shares, and
shall not be bound to recognize any equitable or other claim to or
interest in such share or shares on the part of any other person, whether
or not it shall have express or other notice thereof, except as otherwise
provided by law.
Article X - Indemnification of Directors and Officers
The Corporation shall indemnify against all liabilities and expenses,
including reasonable fees of counsel, any person threatened with or made
a party to any action, suit or other proceeding by reason of the fact
that he, she, his or her testator or intestate, is or was a director or
officer of the Corporation, or is or was a Director or Officer of the
Corporation who serves or served, at the request of the Corporation, as a
Director, Officer, Employee or other agent of another organization or
who, at the request of the Corporation, serves or served in any capacity
with respect to an employee benefit plan, except that no indemnification
shall be provided for any person with respect to any matter as to which
such person shall have been adjudicated in any proceeding to have acted
in breach of his fiduciary duty to the participants of any employee
benefit plan or not to have acted in good faith in the reasonable belief
that his or her action was in the best interests of the Corporation or
the participants of the employee benefit plan; provided, however, as to
matters disposed of by a compromise payment, pursuant to a consent decree
or otherwise, no reimbursement, either for said payment or for any other
expenses in connection with the matter so disposed of, shall be provided
unless such compromise shall be approved:
(a) by a disinterested majority of the directors then in office; or
(b) if a majority of such directors are interested, by a majority of the
disinterested directors then in office, provided that there has been
obtained an opinion in writing of Independent Legal Counsel to the effect
that such director or officer does not appear not to have acted in good
faith in the reasonable belief that his action was in the best interests
of the Corporation or to the extent that such matter relates to service
in the best interests of the participants of an employee benefit plan; or
(c) by the holders of a majority of the outstanding stock at the time
entitled to vote for directors, not counting as outstanding any stock
owned by any interested person.
The Board of Directors may from time to time authorize payment by the
Corporation of expenses incurred by any such person in defending any such
action, suit or other proceeding in advance of final disposition upon
receipt of an undertaking from such person to repay such payment if such
person shall have been adjudicated to be not entitled to indemnification
under this ARTICLE X or if the matter involved shall be disposed of by a
compromise payment with respect to which such person shall not be
entitled to indemnification under this ARTICLE X. Such undertaking may
be accepted without reference to the financial ability of such person to
make repayment.
If, in an action, suit or proceeding brought by or in the right of the
Corporation, a Director of the Corporation is held not liable for
monetary damages, whether because that director is relieved of personal
liability under the provisions of the Articles of Organization of the
Corporation or otherwise, that Director shall be entitled to
indemnification for expenses reasonably incurred in the defense of such
action, suit or proceeding.
In addition, the Corporation shall have the power to indemnify any of its
employees or other agents who are not directors or Officers on any terms
not prohibited by law, the Articles of Organization of the Corporation or
these By-laws, that the Corporation deems appropriate.
The right of indemnification provided in these by-laws shall not be
exclusive of or affect any other rights of indemnification existing
independently of this ARTICLE X.
Article XI - General Provisions
1. Subject to the provisions of the Articles of Organization relating
thereto, if any, dividends may be declared by the Board of Directors at
any regular or special meeting, pursuant to law. Dividends may be paid in
cash, in property or in shares of the capital stock, subject to any
provisions of the Articles of Organization.
2. Before payment of any dividend, there may be set aside out of any funds
of the Corporation available for dividends such sum or sums as the
Directors from time to time, in their absolute discretion think proper as
a reserve fund to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the Corporation, or for such
other purpose as the Directors shall think conducive to the interest of
the Corporation, and the directors may modify or abolish any such reserve
in the manner in which it was created.
Checks
3. All checks or demands for money and notes of the Corporation shall be
signed by such Officer or Officers or such other person or persons as the
Board of Directors may from time to time designate.
Fiscal Year
4. The fiscal year of the Corporation shall end on the last day of December
in each year, except as otherwise provided for from time to time by the
Board of Directors.
Seal
5. The Corporate seal shall have inscribed thereon the name of the
Corporation, the year of its organization and the words "Corporate Seal,
Massachusetts". The seal may be used by causing it or a facsimile
thereof to be impressed or affixed or in any manner reproduced.
Execution of Instruments
6. Except as the Board of Directors may generally or in particular cases
otherwise determine, all deeds, leases, transfers, contracts, bonds,
notes, checks, drafts, and other obligations made, accepted or endorsed
by the Corporation, shall be signed by the President or the Treasurer.
Voting of Securities
7. Except as the Board of Directors may generally or in particular cases
otherwise designate, the President or the Treasurer may act in the name
and on behalf of the Corporation as it is a stockholder in another
corporation, except that such officers may not transfer shares owned by
the Corporation unless authorized by the Board of Directors. Without
limiting the generality of the foregoing, such officers may waive notice
of, and attend and vote at, any meeting of stockholders or shareholders
of any Corporation or Organization in which this Corporation holds stock
or shares and may consent in writing to any action of the stockholder or
shareholders of any such Corporation or Organization, and may appoint any
person or persons to act as proxy or attorney-in-fact for this
Corporation, with or without power or substitution, to do any of such
acts.
Article XII - Amendments
1. These by-laws may be altered, amended or repealed or new by-laws may be
adopted: (a) at any regular or special meeting of stockholders at which
a quorum is present or represented, by the affirmative vote of a majority
of the stock entitled to vote, provided notice of the proposed
alteration, amendment or repeal be contained in the notice of such
meeting, or (b), if so authorized by the Corporation's Articles of
Organization by the Board of Directors at any regular or special meeting
of the board, except that the Board of Directors may not make any
amendment that alters the provisions of these by-laws with respect to
removal of Directors or election of committees by the Board of Directors
and delegation or powers to any committee, or with respect to amendment
of these by-laws, or with respect to any provision which by law, the
Articles of Organization or the by-laws requires action by the
stockholders, and provided further that any by-law adopted by the
directors may be amended or repealed by the stockholders.
CANADA BUSINESS
CORPORATIONS ACT
FORM 1
ARTICLES OF INCORPORATION
(SECTION 6)
Name of Corporation
TULTEX CANADA INC.
The place in Canada where the registered office is to be situated
Edmonton, Alberta
The classes and any maximum number of shares that the corporation
is authorized to issue
See Schedule I attached hereto:
Restrictions if any on share transfers
No shares of the Corporation shall be transferred without the
approval of the directors of the Corporation either by a resolution passed
at a Board of directors meeting or by an instrument or instruments in
writing signed by all of the directors.
Number (or minimum and maximum number) of directors
Minimum number of directors one (1) maximum number of directors
six (6)
Restrictions if any on business the corporation may carry on
None
Other provisions if any
See Schedule II attached hereto:
Incorporators
Names Address (include postal code) Signature
Eric Delfs 18211-61 Avenue /s/ Eric Delfs
Edmonton, Alberta T6M 1T6
<PAGE>
SCHEDULE I attached to the Articles of Incorporation of TULTEX CANADA INC.
3. The classes and any maximum number of shares that the Corporation
is authorized to issue:
The Corporation is authorized to issue:
(a) An unlimited number of Class "A" shares, and
(b) An unlimited number of Class "B" shares.
VOTING
The holders of the Class "A" shares shall be entitled to vote at all
meetings of the shareholders of the Corporation except meetings at which
only holders of a specified class of shares are, by the provisions of The
Business Corporations Act (Alberta) (the "Act"), entitled to vote.
The Class "B" shares shall be non-voting subject always to the
provisions of the Act.
DIVIDENDS
The holders of each share of either class of shares shall be entitled
to receive dividends as and when declared by the directors, acting in their
sole discretion which dividends may be declared on one class of shares
wholly or partially to the exclusion of the other class of shares.
<PAGE>
SCHEDULE II attached to the Articles of Incorporation of:
TULTEX CANADA INC.
7. Other provisions if any:
i. The number of shareholders of the Corporation, exclusive of:
(a) persons who are in its employment or that of an affiliate, and
(b) persons, who having been formerly in its employment or that
of an affiliate were, while in that employment, shareholders of the
Corporation and have continued to be shareholders of that Corporation after
termination of that employment.
is limited to not more than fifty (50) persons, two or more persons who are
joint registered owners of one or more shares being counted as one
shareholder.
ii. Any invitation to the public to subscribe for securities of the
Corporation is prohibited.
BY-LAW NO. 1
A By-law relating generally
to the transaction of the
business and affairs of
Tultex Canada Inc.
<PAGE>
BY-LAW NUMBER ONE
OF
Tultex Canada Inc.
SECTION I - INTERPRETATION
1.01 DEFINITIONS. In these and other By-laws of the Corporation,
unless the context otherwise requires:
(a) "Act" means the Canada Business Corporations Act and any statute
that may be substituted therefor, as amended from time to time;
(b) "appoint" includes "elect" and vice versa;
(c) "Board" means the Board of directors of the Corporation;
(d) "By-laws" means this By-law and all other By-laws of the
Corporation from time to time in force and effect;
(e) "Corporation" means the corporation which has adopted these By-
laws and to which the same apply.
1.02 INTERPRETATION. Words and expressions defined in the Act have
the same meanings when used in the By-laws. Words importing the singular
number include the plural and vice versa and words importing gender include
masculine, feminine and neuter genders as required by the context. Without
limiting the generality of the foregoing, a reference to the directors
shall include a sole director when the Corporation has only a sole
director.
1.03 CONFLICT WITH ACT. The By-laws are subject to the provisions of
the Act, unless the Act otherwise specifically provides.
1.04 CONFLICT WITH DOCUMENTS. The By-laws are subject to the
provisions of the articles and any unanimous shareholders agreement and in
the event of conflict between the provisions of any By-laws and the
provisions of the articles or a unanimous shareholders agreement, the
provisions of the articles or the unanimous shareholders agreement shall
prevail over the By-laws.
1.05 HEADINGS. The headings and indices used in the By-laws are
inserted for convenience of reference only and do not affect the
interpretation of the By-laws or any part thereof.
SECTION TWO - DIRECTORS AND BOARD
2.01 CALLING OF MEETING. The Secretary, upon request of a director,
shall summon a meeting of the Board.
2.02 NOTICE OF MEETINGS. Notice of the time and place of Board
meetings shall be given to each director not less than seventy two (72)
hours before the time of the meeting. A notice of a Board meeting need not
specify the purpose or the business to be transacted at the meeting, except
where the Act requires otherwise.
2.03 TELECOMMUNICATION. A director may participate in a meeting of
the Board or of a committee of directors by means of telephone or other
communication facilities that permit all directors participating in the
meeting to hear each other and a director participating in a meeting by
those means is deemed to be present at the meeting.
2.04 CASTING VOTE. At all Board meetings, every question shall be
decided by a majority of votes cast on each question. In the case of an
equality of votes, the chairman of the meeting shall not be entitled to a
second or casting vote in addition to the vote or votes to which he may be
entitled as a director.
2.05 COMMITTEES OF DIRECTORS. Unless otherwise ordered by the Board
each committee of directors shall have power to fix its quorum at not less
than a majority of its members, to elect its chairman and to regulate its
procedure.
2.06 CORPORATE SEAL. The Board may adopt and change a corporate seal
which shall contain the name of the Corporation and the Board may cause to
be created as many duplicates thereof as the Board shall determine.
2.07 EXECUTION OF INSTRUMENTS. The Board from time to time may direct
the manner in which, and the person or persons by whom, any particular
instrument or class of instruments may or shall be signed and delivered.
In the absence of a directors' resolution, any particular instrument or
class of instruments may be signed and delivered on behalf of the
Corporation by any person holding the office of Chairman of the Board,
President, Vice-President, Secretary, Treasurer or Managing director or any
other office created by By-law or by the directors, or if the Corporation
is authorized to have and has only one director by any such person acting
alone. Any signing officer may affix the corporate seal to any instrument
requiring the same.
2.08 BORROWING. The Board without authorization of the shareholders
may:
(a) borrow money upon the credit of the Corporation;
(b) issue, reissue, sell or pledge debt obligations of the
Corporation;
(c) subject to the Act, give a guarantee on behalf of the Corporation
to secure performance of an obligation of any person; and
(d) mortgage, hypothecate, pledge or otherwise create a security
interest in all or any property of the Corporation, owned or subsequently
acquired, to secure any obligation of the Corporation.
SECTION THREE - OFFICERS
3.01 APPOINTMENT. The Board from time to time may appoint a Chairman
of the Board, a President, one or more Vice-Presidents (to which title may
be added words indicating seniority or function), a Secretary, a Treasurer,
a Managing director, and such other officers as the Board may determine,
including one or more assistants to any of the officers so appointed.
Subject to those powers and authority which by law may only be exercised by
the directors, the officers of the Corporation may exercise respectively
such powers and authority and shall perform such duties, in addition to
those specified in the By-laws, as may from time to time be prescribed by
the Board. Except for the Chairman of the Board, if appointed, and the
Managing director, if appointed, an officer may, but need not, be a
director. One person may hold more than one office of the Corporation
except that the offices of President and Secretary must be held by
different persons unless the Board consists of a sole director. The Board
from time to time may also appoint other agents, attorneys, officers and
employees of the Corporation within or without Canada, who may be given
such titles and who may exercise such powers and authority (including the
power of subdelegation) and shall perform such duties of management or
otherwise, as the Board from time to time may prescribe. In case of the
absence of any officer or employee of the Corporation or for any other
reason that the Board may deem sufficient, the Board may delegate for the
time being the powers and authority of such officer or employee to any
other officer or employee or to any director of the Corporation.
3.02 CHAIRMAN OF THE BOARD. The Chairman of the Board, if appointed,
shall preside at all meetings of the Board and may exercise such other
powers and authority and shall perform the duties which the Board may
prescribe from time to time.
3.03 PRESIDENT. The President shall be the chief operating officer of
the Corporation and, subject to the authority of the Board shall have
general supervision of the business and affairs of the Corporation and
shall have such other powers and duties as the Board may specify. In the
event no Chairman of the Board has been appointed or during the absence of
the Chairman of the Board or inability or failure of the Chairman of the
Board to act, the President also shall have the powers and duties of the
office of Chairman of the Board.
3.04 VICE-PRESIDENT. The Vice-President, or if more than one Vice-
President has been appointed, the Vice-Presidents, may exercise such powers
and authority and shall perform such duties as may be prescribed from time
to time by the Board. During the absence of the President or the inability
or failure of the President to act, the Vice-President, or if more than one
Vice-President has been appointed, the Vice-President first appointed, also
shall have the powers and duties of the office of President.
3.05 MANAGING DIRECTOR. The Managing director, if appointed, shall
manage the operations of the Corporation generally, and may exercise such
other powers and authority and shall perform such other duties as may be
prescribed from time to time by the Board.
3.06 SECRETARY. The Secretary, if appointed, shall attend and be the
secretary to all meetings of the Board, shareholders and committees of the
Board and shall enter or cause to be entered in records kept for that
purpose minutes of all proceedings at such meetings. The Secretary shall
give or cause to be given as and when instructed all notices to
shareholders, directors, officers, auditors and members of committees of
the Board. The Secretary shall be the custodian of the corporate seal, if
any, of the Corporation and shall have charge of all books, papers,
reports, certificates, records, documents, registers and instruments
belonging to the Corporation. The Secretary shall be responsible for
registering or filing all reports, certificates and all other documents
required by law to be registered or filed by the Corporation. The
Secretary shall certify any documents of the Corporation except when some
other officer or agent has been appointed for any such purpose and may
exercise such other powers and authority and shall perform such other
duties as may be prescribed from time to time by the Board or the
President.
3.07 TREASURER. The Treasurer, if appointed, shall be responsible for
the keeping of proper accounting records in compliance with the Act and
shall be responsible for the deposit of monies and other valuable effects
of the Corporation in the name and to the credit of the Corporation in such
banks or other depositories as the Board may designate from time to time
and he shall be responsible for the disbursement of the funds of the
Corporation. The Treasurer shall render to the President and the Board
whenever so directed an account of all financial transactions and of the
financial position of the Corporation. The Treasurer shall be subject to
the control of the President and may exercise such other powers and
authority and shall perform such other duties as may be prescribed from
time to time by the Board or by the President. Whenever the Secretary is
also the Treasurer the office may be designated Secretary-treasurer.
3.08 OTHER OFFICERS. The powers and duties of all other officers
shall be such as are prescribed by the Board. Any of the powers and duties
of an officer to whom an assistant has been appointed may be exercised and
performed by such assistant, unless the Board otherwise directs.
3.09 VARIATION OF POWERS AND DUTIES. The Board from time to time may
vary, add to or limit the powers, authority and duties of any officer.
3.10 REMOVAL AND DISCHARGE. The Board may remove any officer of the
Corporation, with or without cause, at any time, unless the resolution or
contract providing for the appointment of such officer stipulates
otherwise.
3.11 TERM OF OFFICE. Each officer appointed by the Board shall hold
office until a successor is appointed, or until his earlier resignation or
removal by the Board.
SECTION FOUR - SHAREHOLDERS AND SHARES
4.01 PERSONS ENTITLED TO BE PRESENT. The only persons entitled to be
present at a meeting of the shareholders shall be those persons entitled to
vote thereat, the directors and auditor (if any) of the Corporation and
others who, although not entitled to vote, are entitled or required to be
present at the meeting, under any provision of the Act or the articles or
By-laws. Any other persons may be admitted only on the invitation of the
chairman of the meeting or with the consent of the meeting.
4.02 QUORUM. A quorum for the transaction of business at any meeting
of shareholders shall be two (2) persons present in person, each being a
shreholder (other than a joint shareholder) entitled to vote thereat or a
duly appointed proxy holder or representative for a shareholder so entitled
to vote and holding in the aggregate ten (10%) per cent of the shares
entitled to vote at the meeting.
4.03 CHAIRMAN. The chairman of any meeting of the shareholders shall
be the first mentioned of such of the following officers as has been
appointed and who is present at the meeting:
(a) The Chairman of the Board;
(b) The President;
(c) Any Vice-President (and where more than one Vice-President is
present at the meeting, then the priority to act as chairman as between
them shall be in order of their appointment to the office of Vice-
President).
If no such officer is present within fifteen minutes of the time fixed for
the holding of the meeting of the shareholders, the persons present and
entitled to vote shall choose one of their number then present to be
chairman of that meeting.
4.04 SECRETARY OF MEETING. If the Secretary of the Corporation is
absent, the chairman of a meeting of shareholders shall appoint some
person, who need not be a shareholder, to act as secretary of the meeting.
4.05 CHAIRMAN'S DECLARATION. At any meeting of shareholders, unless a
ballot is demanded, a declaration by the chairman of the meeting that a
resolution has been carried or carried unanimously or by a particular
majority or lost or not carried by a particular majority shall be
conclusive evidence of the fact without any or further proof of the number
or proportion of votes recorded in favour of or against the motion.
4.06 VOTING BY BALLOT. If a ballot is demanded by a shareholder or
proxy holder entitled to vote at a shareholder's meeting and the demand is
not withdrawn, the ballot upon the motion shall be taken in such manner as
the chairman of the meeting shall direct. Upon a ballot each shareholder
who is present in person or represented by proxy shall be entitled, in
respect of the shares which he is entitled to vote at the meeting upon the
question, to that number of votes provided by the Act or the articles. The
declaration by the chairman of the meeting that the vote upon the question
has been carried, or carried unanimously or by a particular majority, or
lost or not carried by a particular majority and an entry in the minutes of
the meeting shall be prima facie evidence of the fact without any or
further proof of the number or proportion of votes recorded in favour of or
against any resolution or question.
4.07 SCRUTINEERS. The chairman or the secretary at any meeting of the
shareholders or the shareholders then present may appoint one or more
scrutineers, who need not be shareholders, to count and report upon the
results of the voting which is done by ballot.
4.08 JOINT SHAREHOLDERS. Where any share entitled to be voted at a
meeting of shareholders is held by two or more persons jointly, those
persons or such of them that attend the meeting of the shareholders shall
only constitute one shareholder for purposes of determining whether a
quorum of shareholders is present.
4.09 PROXY. The form of proxy by which a proxy holder may be
appointed for any meeting of the shareholders shall be in the following
form or in any other appropriate form accepted by the chairman of the
meeting:
"PROXY
I/WE the undersigned, being (a) shareholder(s) of , hereby
nominate, constitute and appoint ,
or in the absence of , , as
my/our attorney, representative and/or proxy holder with full power and
authority to attend, vote and otherwise act for me/our in my/our name and
on my/our behalf at the annual (or special) meeting of shareholders of the
Corporation, to be held at , on the
day of , 19 , and at any and all adjournments thereof, with
full power of substitution, and I/WE, the undersigned, hereby revoke all
other proxies given by me/us, the undersigned, which might be used in
respect of such meeting and any and all adjournments thereof.
Given this day of , 19 .
"
SECTION FIVE - INDEMNIFICATION
5.01 INDEMNIFICATION OF DIRECTORS AND OFFICERS.
(a) Except in respect of an action by or on behalf of the Corporation
or body corporate to procure a judgment in its favour, the Corporation
shall indemnify a director or officer of the Corporation, a former director
or officer of the Corporation or a person who acts or acted at the
Corporation's request as a director or officer of a body corporate of which
the Corporation is or was a shareholder or creditor, and his heirs and
legal representatives, against all costs, charges and expenses, including
an amount paid to settle an action or satisfy a judgment, reasonably
incurred by him in respect of any civil, criminal or administrative action
or proceeding to which he is made a party by reason of being or having been
a director or officer of that Corporation or body corporate, if:
(i) he acted honestly and in good faith with a view to the best
interests of the Corporation; and
(ii) in the case of a criminal or administrative action or proceeding
that is enforced by monetary penalty, he had reasonable grounds for
believing that his conduct was lawful.
(b) The Corporation may with the approval of a Court indemnify a
person referred to in subparagraph (a) in respect of an action by or on
behalf of the Corporation or body corporate to procure a judgment in its
favour, to which he is made a party by reason of being or having been a
director or an officer of the Corporation or body corporate, against all
costs, charges and expenses reasonably incurred by him in connection with
such action if he fulfills the conditions set out in subparagraphs (a) (i)
and (ii).
5.02 INDEMNIFICATION OF OTHERS. Subject to subparagraph 5.01(a), the
Corporation may from time to time indemnify and save harmless any person
who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, (other than an action by or in
the right of the Corporation) by reason of the fact that he is or was an
employee or agent of the Corporation, or is or was serving at the request
of the Corporation as a director or officer, employee, agent of or
participant in another corporation, partnership, joint venture, trust or
other enterprise, against expenses (including legal fees), judgments, fines
in any amount actually and reasonably incurred by him in connection with
such action, suit or proceeding if the Board determines that:
(a) he acted honestly and in good faith with a view to the best
interests of the Corporation; and
(b) in the case of a criminal or administrative action or proceeding
that is enforced by a monetary penalty, had reasonable grounds for
believing that his conduct was lawful.
5.03 RIGHT OF INDEMNITY NOT EXCLUSIVE. The provisions for
indemnification contained in the By-laws shall not be deemed exclusive of
any other rights to which a person seeking indemnification may be entitled
under any By-laws, agreement, vote of shareholders or disinterested
directors or otherwise both as to an action in his official capacity and as
to action in any other capacity while holding such office and shall
continue as to a person who has ceased to be a director or officer and
shall enure to the benefit of the heirs and legal representatives of such
person.
SECTION SIX - GENERAL
6.01 NOTICES. In addition to any other method of service permitted by
the Act any notice or document required by the Act, the regulations, the
articles or the By-laws may be sent to any person entitled to receive same
in the manner set out in the Act for service upon a shareholder or director
and by any means of telecommunication with respect to which a written
record is made. A notice sent by means of telecommunication shall be
deemed to have been given on the first business day after the date upon
which the written record is made.
6.02 WAIVER OF NOTICE. Any shareholder (or his duly appointed proxy
holder), director, officer, auditor or member of a committee may at any
time waive any notice, or waive or abridge the time for any notice required
to be given to him under any provision of the Act, the regulations
thereunder, the articles, the By-laws or otherwise, and such waiver or
abreidgment, whether given before or after the meeting or other event of
which the notice is required to be given, shall cure any defect in the
giving or in the time of such notice as the case may be.
6.03 NOTICE TO JOINT SHAREHOLDERS. If two or more persons hold shares
jointly, notice may be given to one of such persons and such notice shall
be sufficient notice to all of them.
6.04 SIGNATURE ON NOTICE. The signature to any notice to be given by
the Corporation may be lithographed, written, printed or otherwise
mechanically reproduced.
ARTICLES OF INCORPORATION
OF
SWEATJET INCORPORATED
I.
The name of the Corporation is SweatJet Incorporated.
II.
The number of shares which the Corporation shall have authority to
issue shall be 10,000 shares of the par value of $1.00 each. No holder of
shares of any class of the Corporation shall have any preemptive or
preferential right to purchase or subscribe to (i) any shares of any class
of the Corporation, whether now or hereafter authorized; (ii) any warrants,
rights, or options to purchase any such shares; or (iii) any securities or
obligations convertible into any such shares or into warrants, rights, or
options to purchase any such shares.
III.
The initial registered office shall be located at 22 East Church
Street in the City of Martinsville, and the initial registered agent shall
be William F. Franck, who is a resident of Virginia and a director of the
Corporation, and whose business address is the same as the address of the
initial registered office.
The number of Directors constituting the initial Board of Directors
shall be four (4), and the names and addresses of the persons who are to
serve as the initial Directors are as follows:
John M. Franck, 1200 Jefferson Davis Road, Martinsville, Virginia 24112
William F. Franck, 1105 Plantation Road, Martinsville, Virginia 24112
H. R. Hunnicutt, Jr., 2915 Old Stage Road, Gastonia, North Carolina 28052
Donald P. Shook, 1114 Mulberry Road, Martinsville, Virginia 24112
V.
(1) In this Article:
"Applicant" means the person seeking indemnification pursuant to
this Article.
"Expenses" includes counsel fees.
"Liability" means the obligation to pay a judgment, settlement,
penalty, fine, including any excise tax assessed with respect to an
employee benefit plan, or reasonable expenses incurred with respect to a
proceeding.
"Official capacity" means (i) when used with respect to a
director, the office of director in the Corporation; or (ii) when used with
respect to an individual other than a director, the office in the
Corporation held by the officer or the employment or agency relationship
undertaken by the employee or agent on behalf of the Corporation.
"Official capacity" does not include service for any other foreign or
domestic corporation or any partnership, joint venture, trust, employee
benefit plan, or other enterprise.
"Party" includes an individual who was, is, or is threatened to
be made a named defendant or respondent in a proceeding.
"Proceeding" means any threatened, pending, or completed action,
suit, or proceeding, whether civil, criminal, administrative or
investigative and whether formal or informal.
(2) The Corporation shall indemnify any person who was or is a party
to any proceeding, including a proceeding by or in the right of the
Corporation to procure a judgment in its favor, by reason of the fact that
he is or was a director, or officer, employee or agent of the Corporation,
or is or was serving at the request of the Corporation as a director,
trustee, partner or officer of another corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise, against any
liability incurred by him in connection with such proceeding if (i) he
believed, in the case of conduct in his official capacity, that his conduct
was in the best interests of the Corporation, and in all other cases that
his conduct was at least not opposed to its best interests, and, in the
case of any criminal proceeding, had no reasonable cause to believe his
conduct was unlawful, and (ii) he was not guilty of gross negligence or
willful misconduct. A person is considered to be serving an employee
benefit plan at the Corporation's request if his duties to the Corporation
also impose duties on, or otherwise involve services by, him to the plan or
to participants in or beneficiaries of the plan. A person's conduct with
respect to an employee benefit plan for a purpose he believed to be in the
interests of the participants and beneficiaries of the plan is conduct that
satisfies the requirements of this section.
(3) The termination of any proceeding by judgment, order, settlement,
conviction, or upon a plea of NOLO CONTENDERE or its equivalent, shall not
of itself create a presumption that the applicant did not meet the standard
of conduct described in Section (2) of this Article.
(4) Notwithstanding the provisions of section (2) of this Article:
no indemnification shall be made in connection with any proceeding charging
the applicant with improper benefit to himself, whether or not involving
action in his official capacity, in which he was adjudged liable on the
basis that personal benefit was improperly received by him.
(5) To the extent that the applicant has been successful on the
merits or otherwise in defense of any proceeding referred to in section (2)
of this Article, or in defense of any claim, issue or matter therein, he
shall be indemnified against expenses actually and reasonably incurred by
him in connection therewith.
(6) Any indemnification under section (2) of this Article (unless
ordered by a court) shall be made by the Corporation only as authorized in
the specific case upon a determination that indemnification of the
applicant is proper in the circumstances because he has met the applicable
standard of conduct set forth in sections (2) and (4).
The determination shall be made:
(a) By the Board of Directors by a majority vote of a quorum
consisting of Directors not at the time parties to the proceeding;
(b) If a quorum cannot be obtained under subsection (a) of this
section, by majority vote of a committee duly designated by the Board of
Directors (in which designation Directors who are parties may participate),
consisting solely of two or more Directors not at the time parties to the
proceeding;
(c) By special legal counsel:
(i) Selected by the Board of Directors or its committee in
the manner prescribed in subsection (a) or (b) of this section; or
(ii) If a quorum of the Board of Directors cannot be
obtained under subsection (a) of this section and a committee cannot be
designated under subsection (b) of this section, selected by majority vote
of the full Board of Directors, in which selection Directors who are
parties may participate; or
(d) By the shareholders, but shares owned by or voted under the
control of Directors who are at the time parties to the proceeding may not
be voted on the determination.
Authorization of indemnification and evaluation as to
reasonableness of expenses shall be made in the same manner as the
determination that indemnification is permissible, except that if the
determination is made by special legal counsel, authorization of
indemnification and evaluation as to reasonableness of expenses shall be
made by those entitled under subsection (c) of this section to select
counsel.
(7) (a) The Corporation may pay for or reimburse the reasonable
expenses incurred by any applicant who is a party to a proceeding in
advance of final disposition of the proceeding if:
(i) The applicant furnishes the Corporation a written
statement of his good faith belief that he has met the standard of conduct
described in sections (2) and (4);
(ii) The applicant furnishes the Corporation a written
undertaking, executed personally or on his behalf, to repay the advance if
it is ultimately determined that he did not meet the standard of conduct;
and
(iii) A determination if made that the facts then known to
those making the determination would not preclude indemnification under
this Article.
(b) The undertaking required by paragraph (ii) of subsection (a)
of this section shall be an unlimited general obligation of the applicant
but need not be secured and may be accepted without reference to financial
ability to make repayment.
(c) Determinations and authorizations of payments under this
section shall be made in the manner specified in section (6).
(8) The Board of Directors is hereby empowered, by majority vote of a
quorum of disinterested Directors, to cause the Corporation to indemnify or
contract in advance to indemnify any person not specified in section (2) of
this Article who was or is a party to any proceeding, by reason of the fact
that he is or was an employee or agent of the Corporation, or is or was
serving at the request of the Corporation as an employee or agent of
another corporation, partnership, joint venture, trust, employee benefit
plan or other enterprise, to the same extent as if such person were
specified as one to whom indemnification is granted in section (2). The
provisions of sections (3) through (7) of this Article shall be applicable
to any indemnification provided hereafter pursuant to this section (8).
(9) The Corporation may purchase and maintain insurance to indemnify
it against the whole or any portion of the liability assumed by it in
accordance with this Article and may also procure insurance, in such
amounts as the Board of Directors may determine, on behalf of any person
who is or was a director, officer, employee or agent of the Corporation, or
is or was serving at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise, against any liability
asserted against or incurred by him in any such capacity or arising from
his status as such, whether or not the Corporation would have power to
indemnify him against such liability under the provisions of this Article.
(10) Every reference herein to directors, officers, employees or
agents shall include former directors, officers, employees and agents and
their respective heirs, executors and administrators. The indemnification
hereby provided and provided hereafter pursuant to the power hereby
conferred on the Board of Directors shall not be exclusive of any other
rights to which any person may be entitled, including any right under
policies of insurance that may be purchased and maintained by the
Corporation or others, with respect to claims, issues or matters in
relation to which the Corporation would not have the power to indemnify
such person under the provisions of this Article.
Dated: December 17, 1986
/s/ David M. Carter
David M. Carter, Incorporator
BY-LAWS
OF
SWEATJET INCORPORATED
ARTICLE I.
MEETINGS OF SHAREHOLDERS.
1.1 PLACES OF MEETINGS. All meetings of the shareholders shall be held at such
place, either within or without the State of Virginia, as from time to time may
be fixed by the Board of Directors.
1.2 ANNUAL MEETING. The annual meeting of the shareholders, for the election
of Directors and transaction of such other business as may come before the
meeting, shall be held in each year on the 4th Wednesday in February, or such
other day each year that the Board of Directors may specify.
1.3 SPECIAL MEETINGS. A special meeting of the shareholders for any purpose
may be called at any time by the Chairman of the Board or the President, or by a
majority of the Board of Directors. At a special meeting no business shall be
transacted and no corporate action shall be taken other than that stated in the
notice of the meeting.
1.4 NOTICE OF MEETINGS. Written or printed notice stating the place, day and
hour of every meeting of the shareholders and, in case of a special meeting, the
purpose or purposes for which the meeting is called, shall be mailed not less
than 10 nor more than 60 days before the date of the meeting to each shareholder
of record entitled to vote at such meeting, at his address which appears in the
share transfer books of the Corporation. Such further notice shall be given as
may be required by law, but meetings may be held without notice if all the
shareholders entitled to vote at the meeting are present in person or by proxy
or if notice is waived in writing by those not present, either before or after
the meeting.
1.5 QUORUM. Any number of shareholders together holding at least a majority of
the outstanding shares of capital stock entitled to vote with respect to the
business to be transacted, who shall be present in person or represented by
proxy at any meeting duly called, shall constitute a quorum for the transaction
of business.
1.6 VOTING. At any meeting of the shareholders each shareholder of a class
entitled to vote on any matter coming before the meeting shall, as to such
matter, have one vote, in person or by proxy, for each share of capital stock of
such class standing in his name on the books of the Corporation.
ARTICLE II.
DIRECTORS.
2.1 GENERAL POWERS. The property, affairs and business of the Corporation
shall be managed by the Board of Directors, and, except as otherwise expressly
provided by law, the Articles of Incorporation or these By-laws, all of the
powers of the Corporation shall be vested in such Board.
2.2 NUMBER OF DIRECTORS. The number of Directors constituting the Board of
Directors shall be four.
2.3 ELECTION AND REMOVAL OF DIRECTORS: QUORUM.
(a) Directors shall be elected at each annual meeting of shareholders to
succeed those Directors whose terms have expired and to fill any vacancies then
existing.
(b) Directors shall hold their offices for terms of one year and until their
successors are elected. Any Director may be removed from office at a meeting
called expressly for that purpose by the vote of shareholders holding a majority
of the shares entitled to vote at an election of Directors.
(c) Any vacancy occurring in the Board of Directors may be filled by the
affirmative vote of the majority of the remaining Directors though less than a
quorum of the Board, and the term of office of any Director so elected shall
expire on the date fixed for the expiration of the term of office of the
Director to which such Director was so elected. (d) A majority of the number of
Directors elected and serving at the time of any meeting shall constitute a
quorum for the transaction of business. The act of a majority of Directors
present at a meeting at which a quorum is present shall be the act of the Board
of Directors. Less than a quorum may adjourn any meeting.
2.4 MEETINGS OF DIRECTORS. An annual meeting of the Board of Directors shall
be held as soon as practicable after the adjournment of the annual meeting of
shareholders at such place as the Board may designate. Other meetings of the
Board of Directors shall be held at places within or without the State of
Virginia and at times fixed by resolution of the Board, or upon call of the
Chairman of the Board, the President or any two of the Directors. The Secretary
or officer performing the Secretary's duties shall give not less than 24 hours'
notice by letter, telegraph, or telephone (or in person) of all meetings of the
Board of Directors, provided that notice need not be given of the annual meeting
or of regular meetings held at times and places fixed by resolution of the
Board. Meetings may be held at any time without notice if all of the Directors
are present, or if those not present waive notice in writing either before or
after the meeting. The notice of meetings of the Board need not state the
purpose of the meeting.
ARTICLE III.
OFFICERS.
3.1 ELECTION OF OFFICERS: TERMS. The officers of the Corporation shall
consist of a President, a Vice President, a Secretary and a Treasurer. Other
officers, including a Chairman of the Board, and assistant and subordinate
officers, may from time to time be elected by the Board of Directors. All
officers shall hold office until the next annual meeting of the Board of
Directors and until their successors are elected. Any two officers may be
combined in the same person as the Board of Directors may determine.
3.2 REMOVAL OF OFFICERS: VACANCIES. Any officer of the Corporation may be
removed summarily with or without cause, at any time, by the Board of Directors.
Vacancies may be filled by the Board of Directors.
3.3 DUTIES. The officers of the Corporation shall have such duties as
generally pertain to their offices, respectively, as well as such powers and
duties as are prescribed by law or as from time to time shall be conferred by
the Board of Directors.
ARTICLE IV.
CAPITAL STOCK.
4.1 CERTIFICATES. The shares of capital stock of the Corporation shall be
evidenced by certificates in forms prescribed by the Board of Directors and
executed in any manner permitted by law and stating thereon the information
required by law.
ARTICLE V.
MISCELLANEOUS PROVISIONS.
5.1 SEAL. The seal of the Corporation shall consist of a flat-faced circular
die, of which there may be any number of counterparts, on which there shall be
engraved the word "Seal" and the name of the Corporation.
5.2 FISCAL YEAR. The fiscal year of the Corporation shall be the calendar
year.
5.3 AMENDMENT OF BY-LAWS. Unless prescribed by the Articles of Incorporation,
these By-laws may be amended or altered at any meeting of the Board of Directors
by affirmative vote of a majority of the number of Directors fixed by these
By-laws.
Indenture
Dated as of , 1995
among
TULTEX CORPORATION,
as Issuer
AKOM, LTD.,
DOMINION STORES, INC.,
TULTEX INTERNATIONAL, INC.,
LOGO 7, INC.,
UNIVERSAL INDUSTRIES, INC.,
TULTEX CANADA, INC. and
SWEATJET, INC.,
as Guarantors
and
FIRST UNION NATIONAL BANK OF VIRGINIA,
as Trustee
______________
$110,000,000
___% Senior Notes due 2005
Cross-Reference Table
Trust Indenture Indenture
Act Section Section
(Section mark) 310(a)(1) . . . . . . . . . . . . 609
(a)(2) . . . . . . . . . . . . 609
(a)(3) . . . . . . . . . . . . Not Applicable
(a)(4) . . . . . . . . . . . . Not Applicable
(a)(5) . . . . . . . . . . . . Not Applicable
(b) . . . . . . . . . . . . . . 608, 610
(c) . . . . . . . . . . . . . . Not Applicable
(Section mark) 311(a) . . . . . . . . . . . . . . 613
(b) . . . . . . . . . . . . . . 613
(c) . . . . . . . . . . . . . . Not Applicable
(Section mark) 312(a) . . . . . . . . . . . . . . 701, 702(a)
(b) . . . . . . . . . . . . . . 702(b)
(c) . . . . . . . . . . . . . . 702(c)
(Section mark) 313(a) . . . . . . . . . . . . . . 703(a)
(Section mark) 313(b) . . . . . . . . . . . . . . 703(a)
(Section mark) 313(c) . . . . . . . . . . . . . . 703(a)
(d) . . . . . . . . . . . . . . 703(b)
(Section mark) 314(a) . . . . . . . . . . . . . . 704
(b) . . . . . . . . . . . . . . Not Applicable
(c)(1) . . . . . . . . . . . . 102
(c)(2) . . . . . . . . . . . . 102
(c)(3) . . . . . . . . . . . . Not Applicable
(d) . . . . . . . . . . . . . . Not Applicable
(e) . . . . . . . . . . . . . . 102
(Section mark) 315(a) . . . . . . . . . . . . . . 601
(b) . . . . . . . . . . . . . . 602
(c) . . . . . . . . . . . . . . 601
(d) . . . . . . . . . . . . . . 601
(d)(1) . . . . . . . . . . . . 601
(d)(2) . . . . . . . . . . . . 601
(d)(3) . . . . . . . . . . . . 601
(e) . . . . . . . . . . . . . . 514
(Section mark) 316(a) . . . . . . . . . . . . . . 101
(a)(1)(A) . . . . . . . . . . . 512
(a)(1)(B) . . . . . . . . . . . 513
(a)(2) . . . . . . . . . . . . Not Applicable
(b) . . . . . . . . . . . . . . 508
(Section mark) 317(a)(1) . . . . . . . . . . . . 503
(a)(2) . . . . . . . . . . . . 504
(b) . . . . . . . . . . . . . . 1003
(Section mark) 318(a) . . . . . . . . . . . . . . 105
________________
Note: This Cross-Reference Table shall not, for any
purpose, be deemed to be a part of the Indenture.
-i-
TABLE OF CONTENTS
Page
ARTICLE ONE
Definitions and Other Provisions of General Application
SECTION 101. Definitions . . . . . . . . . . . . . . . .
SECTION 102. Compliance Certificates and Opinions . . .
SECTION 103. Form of Documents Delivered to Trustee . .
SECTION 104. Notices . . . . . . . . . . . . . . . . . .
SECTION 105. Conflict with Trust Indenture Act . . . . .
SECTION 106. Effect of Headings and Table of
Contents . . . . . . . . . . . . . . . .
SECTION 107. Successors and Assigns . . . . . . . . . .
SECTION 108. Separability Clause . . . . . . . . . . . .
SECTION 109. Benefits of Indenture . . . . . . . . . . .
SECTION 110. Governing Law . . . . . . . . . . . . . . .
SECTION 111. Legal Holidays . . . . . . . . . . . . . .
SECTION 112. Agent for Service; Submission to
Jurisdiction; Waiver of Immunities . . .
SECTION 113. No Recourse Against Others . . . . . . . .
SECTION 114. Rules by Trustee and Agents . . . . . . . .
SECTION 115. No Adverse Interpretation of
Other Agreements . . . . . . . . . . . .
SECTION 116. Trustee as Paying Agent and
Security Registrar . . . . . . . . . . .
SECTION 117. Acceptance of Trust . . . . . . . . . . . .
ARTICLE TWO
Security and Guarantee Forms
SECTION 201. Forms Generally . . . . . . . . . . . . . .
SECTION 202. Form of Face of Security . . . . . . . . .
SECTION 203. Form of Reverse of Security . . . . . . . .
SECTION 204. Form of Trustee's Certificate of
Authentication . . . . . . . . . . . . .
SECTION 205. Form of Guarantee . . . . . . . . . . . . .
____________________
Note: This table of contents shall not, for any purpose, be
deemed to be a part of the Indenture.
-ii-
Page
ARTICLE THREE
The Securities
SECTION 301. Title and Terms . . . . . . . . . . . . . .
SECTION 302. Denominations . . . . . . . . . . . . . . .
SECTION 303. Execution, Authentication, Delivery
and Dating . . . . . . . . . . . . . . .
SECTION 304. Temporary Securities . . . . . . . . . . .
SECTION 305. Registration, Registration of
Transfer and Exchange . . . . . . . . . .
SECTION 306. Mutilated, Destroyed, Lost and
Stolen Securities . . . . . . . . . . . .
SECTION 307. Payment of Interest; Interest
Rights Preserved . . . . . . . . . . . .
SECTION 308. Persons Deemed Owners . . . . . . . . . . .
SECTION 309. Cancellation . . . . . . . . . . . . . . .
SECTION 310. Computation of Interest . . . . . . . . . .
ARTICLE FOUR
Satisfaction and Discharge
SECTION 401. Satisfaction and Discharge of
Indenture . . . . . . . . . . . . . . . .
SECTION 402. Application of Trust Money . . . . . . . .
ARTICLE FIVE
Remedies
SECTION 501. Events of Default . . . . . . . . . . . . .
SECTION 502. Acceleration of Maturity; Rescission
and Annulment . . . . . . . . . . . . . .
SECTION 503. Collection of Indebtedness and Suits
for Enforcement by Trustee . . . . . . .
SECTION 504. Trustee May File Proofs of Claim . . . . .
SECTION 505. Trustee May Enforce Claims Without
Possession of Securities . . . . . . . .
SECTION 506. Application of Money Collected . . . . . .
SECTION 507. Limitation on Suits . . . . . . . . . . . .
SECTION 508. Unconditional Right of Holders
To Receive Principal, Premium
and Interest . . . . . . . . . . . . . .
SECTION 509. Restoration of Rights and Remedies . . . .
SECTION 510. Rights and Remedies Cumulative . . . . . .
SECTION 511. Delay or Omission Not Waiver . . . . . . .
SECTION 512. Control by Holders . . . . . . . . . . . .
SECTION 513. Waiver of Past Defaults . . . . . . . . . .
-iii-
Page
SECTION 514. Undertaking for Costs . . . . . . . . . . .
SECTION 515. Waiver of Stay or Extension Laws . . . . .
ARTICLE SIX
The Trustee
SECTION 601. Certain Duties and Responsibilities . . . .
SECTION 602. Notice of Defaults . . . . . . . . . . . .
SECTION 603. Certain Rights of Trustee . . . . . . . . .
SECTION 604. Not Responsible for Issuance of
Securities . . . . . . . . . . . . . . .
SECTION 605. May Hold Securities . . . . . . . . . . . .
SECTION 606. Money Held in Trust . . . . . . . . . . . .
SECTION 607. Compensation and Reimbursement . . . . . .
SECTION 608. Disqualification; Conflicting
Interests . . . . . . . . . . . . . . . .
SECTION 609. Corporate Trustee Required;
Eligibility . . . . . . . . . . . . . . .
SECTION 610. Resignation and Removal; Appointment
of Successor . . . . . . . . . . . . . .
SECTION 611. Acceptance of Appointment by
Successor . . . . . . . . . . . . . . . .
SECTION 612. Merger, Conversion, Consolidation
or Succession to Business . . . . . . . .
SECTION 613. Preferential Collection of Claims
Against the Company and Any
Guarantor . . . . . . . . . . . . . . . .
ARTICLE SEVEN
Holders' Lists and Reports by Trustee and the Company
SECTION 701. Company To Furnish Trustee Names and
Addresses of Holders . . . . . . . . . .
SECTION 702. Preservation of Information;
Communications to Holders . . . . . . . .
SECTION 703. Reports by Trustee . . . . . . . . . . . .
SECTION 704. Reports by Company . . . . . . . . . . . .
ARTICLE EIGHT
Consolidation and Merger
SECTION 801. Mergers, Consolidations and Certain
Sales of Assets . . . . . . . . . . . . .
SECTION 802. Successor Substituted . . . . . . . . . . .
-iv-
Page
ARTICLE NINE
Supplemental Indentures
SECTION 901. Supplemental Indentures Without
Consent of Holders . . . . . . . . . . .
SECTION 902. Supplemental Indentures with
Consent of Holders . . . . . . . . . . .
SECTION 903. Execution of Supplemental
Indentures . . . . . . . . . . . . . . .
SECTION 904. Effect of Supplemental Indentures . . . . .
SECTION 905. Conformity with Trust Indenture Act . . . .
SECTION 906. Reference in Securities to
Supplemental Indentures . . . . . . . . .
SECTION 907. Revocation and Effect of Consents . . . . .
ARTICLE TEN
Covenants
SECTION 1001. Payment of Principal, Premium
and Interest . . . . . . . . . . . . . .
SECTION 1002. Maintenance of Office or Agency . . . . . .
SECTION 1003. Money for Security Payments To
Be Held in Trust . . . . . . . . . . . .
SECTION 1004. Existence . . . . . . . . . . . . . . . . .
SECTION 1005. Maintenance of Properties . . . . . . . . .
SECTION 1006. Payment of Taxes and Other Claims . . . . .
SECTION 1007. Maintenance of Insurance . . . . . . . . .
SECTION 1008. Limitation on Indebtedness . . . . . . . .
SECTION 1009. Limitation on Subsidiary
Indebtedness . . . . . . . . . . . . . .
SECTION 1010. Limitation on Restricted Payments . . . . .
SECTION 1011. Limitations Concerning Distributions
by Subsidiaries . . . . . . . . . . . . .
SECTION 1012. Limitation on Liens . . . . . . . . . . . .
SECTION 1013. Limitation on Sale and Leaseback
Transactions . . . . . . . . . . . . . .
SECTION 1014. Limitation on Issuance and Sale of
Capital Stock of Subsidiaries . . . . . .
SECTION 1015. Transactions with Affiliates and
Related Persons . . . . . . . . . . . . .
SECTION 1016. Limitation on Certain Asset
Dispositions . . . . . . . . . . . . . .
SECTION 1017. Change of Control . . . . . . . . . . . . .
SECTION 1018. Provision of Financial Information . . . .
SECTION 1019. Statement by Officers as to
Default; Compliance Certificates . . . .
SECTION 1020. Special Covenants of the Guarantors . . . .
-v-
Page
ARTICLE ELEVEN
Redemption of Securities
SECTION 1101. Right of Redemption . . . . . . . . . . . .
SECTION 1102. Applicability of Article . . . . . . . . .
SECTION 1103. Election To Redeem; Notice
to Trustee . . . . . . . . . . . . . . .
SECTION 1104. Selection by Trustee of Securities
To Be Redeemed . . . . . . . . . . . . .
SECTION 1105. Notice of Redemption . . . . . . . . . . .
SECTION 1106. Deposit of Redemption Price . . . . . . . .
SECTION 1107. Securities Payable on Redemption
Date . . . . . . . . . . . . . . . . . .
SECTION 1108. Securities Redeemed in Part . . . . . . . .
ARTICLE TWELVE
Guarantee
SECTION 1201. Unconditional Guarantee . . . . . . . . . .
SECTION 1202. Severability . . . . . . . . . . . . . . .
SECTION 1203. Release of a Guarantor . . . . . . . . . .
SECTION 1204. Limitation of Guarantor's Liability . . . .
SECTION 1205. Contribution . . . . . . . . . . . . . . .
SECTION 1206. Execution of Guarantee . . . . . . . . . .
SECTION 1207. Additional Guarantors . . . . . . . . . . .
SECTION 1208. Subordination of Subrogation
and Other Rights . . . . . . . . . . . .
ARTICLE THIRTEEN
Defeasance and Covenant Defeasance
SECTION 1301. Defeasance and Covenant Defeasance . . . .
SECTION 1302. Application of Trust Money . . . . . . . .
SECTION 1303. Reinstatement . . . . . . . . . . . . . . .
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . .
-vi-
INDENTURE, dated as of , 1995, among TULTEX
CORPORATION, a Virginia corporation, AKOM, LTD., a Cayman Islands, British
West Indies corporation, DOMINION STORES, INC., a Virginia corporation,
TULTEX INTERNATIONAL, INC., a Virginia corporation, LOGO 7, INC., a
Virginia corporation, UNIVERSAL INDUSTRIES, INC., a Massachusetts
corporation, TULTEX CANADA, INC., a Canadian corporation, SWEATJET, INC., a
Virginia corporation, and FIRST UNION NATIONAL BANK OF VIRGINIA, as
trustee.
Each party hereto agrees as follows for the benefit of each other
party and for the equal and ratable benefit of the Holders of the Company's
% Senior Notes due 2005:
ARTICLE ONE
Definitions and Other Provisions
of General Application
SECTION 101. Definitions.
For purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires:
(1) the terms defined in this Article have the meanings assigned
to them in this Article and include plural as well as the singular;
(2) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the
meanings assigned to them therein;
(3) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with GAAP;
(4) all references to dollars or "$" are to U.S. dollars;
(5) the words "herein", "hereof" and "hereunder" and other words
of similar import refer to this Indenture as a whole and not to any
particular Article, Section or other subdivision; and
(6) provisions apply to successive events and transactions.
"Affiliate" of any specified Person means any other Person
directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified Person. For the purposes of
this definition, "control" when used with respect to any Person means the
power to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by contract
-2-
or otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"Asset Disposition" means any sale, transfer or other disposition
of (i) shares of Capital Stock of a Subsidiary of the Company (other than
directors' qualifying shares) or (ii) property or assets of the Company or
any Subsidiary of the Company; provided, however, that an Asset Disposition
shall not include (a) any sale, transfer or other disposition of shares of
Capital Stock, property or assets by a Subsidiary of the Company to the
Company or to another Subsidiary of the Company, (b) any sale, transfer or
other disposition of defaulted receivables for collection or any sale,
transfer or other disposition of property or assets in the ordinary course
of business or (c) any isolated sale, transfer or other disposition that
does not involve aggregate consideration in excess of $250,000
individually.
"Average Life" means, as of the date of determination, with
respect to any Indebtedness for borrowed money or Preferred Stock, the
quotient obtained by dividing (i) the sum of the products of the number of
years from the date of determination to the dates of each successive
scheduled principal or liquidation value payment of such Indebtedness or
Preferred Stock, respectively, and the amount of such principal or
liquidation value payments, by (ii) the sum of all such principal or
liquidation value payments.
"Board of Directors" of any Person means either the board of
directors of such Person or any duly authorized committee of that board.
"Board Resolution" of any Person means a copy of a resolution
certified by the Secretary or an Assistant Secretary of such Person to have
been duly adopted by the Board of Directors of such Person and to be in
full force and effect on the date of such certification, and delivered to
the Trustee.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday
and Friday which is not a day on which banking institutions in The City of
New York, New York or the Commonwealth of Virginia, are authorized or obligated
by law or executive order to close.
"Capital Lease Obligations" of any Person means the obligations
to pay rent or other amounts under a lease of (or other Indebtedness
arrangements conveying the right to use) real or personal property of such
Person which are required to be classified and accounted for as a capital
lease or liability on the face of a balance sheet of such Person in
accordance with GAAP. The amount of such obligations shall be the
capitalized amount thereof in accordance with GAAP and the stated maturity
thereof shall be the date of the last payment of rent or any other amount
-3-
due under such lease prior to the first date upon which such lease may be
terminated by the lessee without payment of a penalty.
"Capital Stock" of any Person means any and all shares,
interests, participations or other equivalents (however designated) of
corporate stock of such Person (including any Preferred Stock outstanding
on the Issue Date).
"Change of Control" has the meaning specified in Section 1017.
"Commission" means the Securities and Exchange Commission, as
from time to time constituted, created under the Exchange Act, or, if at
any time after the execution of this instrument such Commission is not
existing and performing the duties now assigned to it under the Trust
Indenture Act, then the body performing such duties at such time.
"Common Stock" of any Person means Capital Stock of such Person
that does not rank prior, as to the payment of dividends or as to the
distribution of assets upon any voluntary or involuntary liquidation,
dissolution or winding up of such Person, to shares of Capital Stock of any
other class of such Person.
"Company" means Tultex Corporation, a Virginia corporation, and
any successor thereof.
"Company Request" or "Company Order" means a written request or
order signed in the name of the Company by its Chairman of the Board, its
President or a Vice President, and by its Treasurer, an Assistant
Treasurer, its Secretary or an Assistant Secretary, and delivered to the
Trustee.
"Consolidated Cash Flow Available for Fixed Charges" of any
Person means for any period the Consolidated Net Income of such Person for
such period increased by the sum of (i) Consolidated Interest Expense of
such Person for such period, plus (ii) Consolidated Income Tax Expense of
such Person for such period, plus (iii) the consolidated depreciation and
amortization expense included in the income statement of such Person for
such period, plus (iv) other non-cash charges of such Person for such
period deducted from consolidated revenues in determining Consolidated Net
Income for such period, minus (v) non-cash items (including the partial or
entire reversal of reserves taken in prior periods) of such Person for such
period increasing consolidated revenues in determining Consolidated Net
Income for such period.
"Consolidated Cash Flow Ratio" of any Person means for any period
the ratio of (i) Consolidated Cash Flow Available for Fixed Charges of such
Person for such period to (ii) the sum of (A) Consolidated Interest Expense
of such Person for such period, plus (B) the annual interest expense with
-4-
respect to any Indebtedness proposed to be Incurred by such Person or its
Subsidiaries, minus (C) Consolidated Interest Expense of such Person to the
extent included in clause (ii)(A) with respect to any Indebtedness that
will no longer be outstanding as a result of the Incurrence of the
Indebtedness proposed to be Incurred, plus (D) the annual interest expense
with respect to any other Indebtedness Incurred by such Person or its
Subsidiaries since the end of such period to the extent not included in
clause (ii)(A), minus (E) Consolidated Interest Expense of such Person to
the extent included in clause (ii)(A) with respect to any Indebtedness that
no longer is outstanding as a result of the Incurrence of the Indebtedness
referred to in clause (ii)(D); provided, however, that in making such
computation, the Consolidated Interest Expense of such Person attributable
to interest on any Indebtedness bearing a floating interest rate shall be
computed on a pro forma basis as if the rate in effect on the date of
computation (after giving effect to any hedge in respect of such
Indebtedness that will, by its terms, remain in effect until the earlier of
the maturity of such Indebtedness or the date one year after the date of
such determination) had been the applicable rate for the entire period;
provided further that, in the event such Person or its Subsidiaries has
made Asset Dispositions or acquisitions of assets not in the ordinary
course of business (including acquisitions of other Persons by merger,
consolidation or purchase of Capital Stock) during or after such period,
such computation shall be made on a pro forma basis as if the Asset
Dispositions or acquisitions had taken place on the first day of such
period. Calculations of pro forma amounts in accordance with this
definition shall be done in accordance with Rule 11-02 of Regulation S-X
under the Securities Act or any successor provision.
"Consolidated Income Tax Expense" of any Person means for any
period the consolidated provision for income taxes of such Person for such
period calculated on a consolidated basis in accordance with GAAP.
"Consolidated Interest Expense" for any Person means for any
period the consolidated interest expense included in a consolidated income
statement (without deduction of interest income) of such Person for such
period calculated on a consolidated basis in accordance with GAAP, plus
cash dividends declared on any Preferred Stock (other than any Preferred
Stock of the Company outstanding on the Issue Date). For purposes of this
definition, the amount of any cash dividends declared will be deemed to be
equal to the amount of such dividends multiplied by a fraction, the
numerator of which is one and the denominator of which is one minus the
maximum statutory combined Federal, state, local and foreign income tax
rate then applicable to such Person and its Subsidiaries (expressed as a
decimal between one and zero), on a consolidated basis.
"Consolidated Net Income" of any Person means for any period the
consolidated net income (or loss) of such Person for such period determined
on a consolidated basis in accordance with GAAP; provided that there shall
-5-
be excluded therefrom (a) the net income (or loss) of any Person acquired
by such Person or a Subsidiary of such Person in a pooling-of-interests
transaction for any period prior to the date of such transaction, (b) the
net income (but not net loss) of any Subsidiary of such Person which is
subject to restrictions which prevent or limit the payment of dividends or
the making of distributions to such Person to the extent of such
restrictions, (c) the net income of any Person that is not a Subsidiary of
such Person except to the extent of the amount of dividends or other
distributions actually paid in cash to such Person by such other Person
during such period, (d) gains or losses on Asset Dispositions by such
Person or its Subsidiaries and (e) all extraordinary gains and
extraordinary losses determined in accordance with GAAP.
"Consolidated Net Tangible Assets" means, at any date, the
consolidated book value as shown by the accounting books and records of the
Company and its Subsidiaries of all their property, both real and personal,
less (i) the book value of all their licenses, patents, patent
applications, copyrights, trademarks, trade names, goodwill, non-compete
agreements or organizational expenses and other intangibles,
(ii) unamortized Indebtedness discount and expenses, (iii) all reserves for
depreciation, obsolescence, depletion and amortization of their properties
and (iv) all other proper reserves which in accordance with GAAP should be
provided in connection with the business conducted by the Company and its
Subsidiaries.
"Consolidated Net Worth" of any Person means the consolidated
stockholders' equity of such Person, determined on a consolidated basis in
accordance with GAAP, less (without duplication) amounts attributable to
Disqualified Stock of such Person.
"Continuing Director" means a director who either was a member of
the Board of Directors of the Company on the Issue Date or who became a
director of the Company subsequent to the Issue Date and whose election, or
nomination for election by the Company's stockholders, was duly approved by
a majority of the Continuing Directors then on the Board of Directors of
the Company, either by a specific vote or by approval of the proxy
statement issued by the Company on behalf of the entire Board of Directors
of the Company in which such individual is named as nominee for director.
"Corporate Trust Office" means the principal office of the
Trustee in Richmond, Virginia at which at any particular time its corporate
trust business shall be administered.
"corporation" means a corporation, association, company,
joint-stock company, partnership or business trust.
"Default" means any event which is, or after notice or lapse of
time or both would become, an Event of Default.
-6-
"Defaulted Interest" has the meaning specified in Section 307.
"Disqualified Stock" of any Person means any Capital Stock of
such Person which, by its terms (or by the terms of any security into which
it is convertible or for which it is exchangeable), or upon the happening
of any event, matures or is mandatorily redeemable, pursuant to a sinking
fund obligation or otherwise, or is redeemable at the option of the holder
thereof, in whole or in part, on or prior to the final Stated Maturity of
the Securities; provided that any Preferred Stock of the Company
outstanding on the Issue Date shall not be deemed Disqualified Stock.
"Eligible Accounts Receivable" means the face value of all
"eligible receivables" of the Company and its Subsidiaries party to any
credit agreement constituting the Senior Credit Facility (as such term is
defined for purposes of such credit agreement).
"Eligible Inventory" means the face value of all "eligible
inventory" of the Company and its Subsidiaries party to any credit
agreement constituting the Senior Credit Facility (as such term is defined
for purposes of such credit agreement).
"Event of Default" has the meaning specified in Section 501.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Expiration Date" has the meaning specified in the definition of
"Offer to Purchase".
"GAAP" means generally accepted accounting principles,
consistently applied, as in effect on the Issue Date in the United States
of America, as set forth in the opinions and pronouncements of the
Accounting Principles Board of the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial Accounting
Standards Board or in such other statements by such other entity as is
approved by a significant segment of the accounting profession.
"guarantee" by any Person means any obligation, contingent or
otherwise, of such Person guaranteeing any Indebtedness of any other Person
(the "primary obligor") in any manner, whether directly or indirectly, and
including, without limitation, any obligation of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of)
such Indebtedness or to purchase (or to advance or supply funds for the
purchase of) any security for the payment of such Indebtedness, (ii) to
purchase property, securities or services for the purpose of assuring the
holder of such Indebtedness of the payment of such Indebtedness, or
(iii) to maintain working capital, equity capital or other financial
statement condition or the liquidity of the primary obligor so as to enable
-7-
the primary obligor to pay such Indebtedness (and "guaranteed",
"guaranteeing" and "guarantor" shall have meanings correlative to the
foregoing); provided, however, that the guarantee by any Person shall not
include endorsements by such Person for collection or deposit, in either
case, in the ordinary course of business.
"Guarantee" means (i) the guarantee of each Guarantor set forth
in the Securities and Article Twelve and (ii) any additional guarantee of
the Securities executed by any Material Subsidiary.
"Guarantors" means (i) each of Dominion Stores, Inc., Tultex
International, Inc., Logo 7, Inc., Universal Industries, Inc., AKOM, Ltd.,
Tultex Canada, Inc. and Sweatjet, Inc. and (ii) each Material Subsidiary
formed or acquired after the Issue Date that becomes a Guarantor of the
Securities pursuant to Section 1207.
"Holder" means a Person in whose name a Security is registered in
the Security Register.
"Incur" means, with respect to any Indebtedness or other
obligation of any Person, to create, issue, incur (by conversion, exchange
or otherwise), assume, guarantee or otherwise become liable in respect of
such Indebtedness or other obligation or the recording, as required
pursuant to GAAP or otherwise, of any such Indebtedness or other obligation
on the balance sheet of such Person (and "Incurrence", "Incurred",
"Incurrable" and "Incurring" shall have meanings correlative to the
foregoing). Indebtedness of any Person or any of its Subsidiaries existing
at the time such Person becomes a Subsidiary of the Company (or is merged
into or consolidates with the Company or any of its Subsidiaries), whether
or not such Indebtedness was incurred in connection with, or in
contemplation of, such Person becoming a Subsidiary of the Company (or
being merged into or consolidated with the Company or any of its
Subsidiaries), shall be deemed Incurred at the time any such Person becomes
a Subsidiary of the Company or merges into or consolidates with the Company
or any of its Subsidiaries.
"Indebtedness" means (without duplication), with respect to any
Person, whether recourse is to all or a portion of the assets of such
Person and whether or not contingent, (i) every obligation of such Person
for money borrowed, (ii) every obligation of such Person evidenced by
bonds, debentures, notes or other similar instruments, including
obligations Incurred in connection with the acquisition of property,
assets or businesses, (iii) every reimbursement obligation of such Person
with respect to letters of credit, bankers' acceptances or similar
facilities issued for the account of such Person, (iv) every obligation of
such Person issued or assumed as the deferred purchase price of property or
services (but excluding trade accounts payable or accrued liabilities
arising in the ordinary course of business which are not overdue or which
-8-
are being contested in good faith), (v) every Capital Lease Obligation of
such Person, (vi) every net obligation under interest rate swap or similar
agreements or foreign currency hedge, exchange or similar agreements of
such Person, and (vii) every obligation of the type referred to in
clauses (i) through (vi) of another Person and all dividends of another
Person the payment of which, in either case, such Person has guaranteed or
for which such Person is responsible or liable, directly or indirectly, as
obligor, guarantor or otherwise. Indebtedness shall include the
liquidation preference and any mandatory redemption payment obligations in
respect of any Disqualified Stock of the Company and any Preferred Stock of
a Subsidiary of the Company. Indebtedness shall never be calculated taking
into account any cash and cash equivalents held by such Person.
"Indenture" means this instrument as originally executed or as it
may from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions
hereof.
"Interest Payment Date" means the Stated Maturity of an
installment of interest on the Securities.
"Investment" by any Person means any direct or indirect loan,
advance or other extension of credit or capital contribution to (by means
of transfers of cash or other property to others or payments for property
or services for the account or use of others, or otherwise), or purchase or
acquisition of Capital Stock, bonds, notes, debentures or other securities
or evidence of Indebtedness issued by any other Person.
"Issue Date" means the original issue date of the Securities.
"Lien" means, with respect to any property or assets, any
mortgage or deed of trust, pledge, hypothecation, assignment, security
interest, lien, charge, easement (other than any easement not materially
impairing usefulness or marketability), encumbrance, preference, priority
or other security agreement with respect to such property or assets
(including, without limitation, any conditional sale or other title
retention agreement having substantially the same economic effect as any of
the foregoing).
"Material Subsidiary" means any Subsidiary of the Company which
would constitute a "significant subsidiary" of the Company as defined in
Rule 1-02 of Regulation S-X promulgated by the Commission except that for
purposes of this definition all references therein to ten (10) percent
shall be deemed to be references to five (5) percent.
"Maturity", when used with respect to any Security, means the
date on which the principal of such Security becomes due and payable as
-9-
therein or herein provided, whether at the Stated Maturity or by
declaration of acceleration, call for redemption or otherwise.
"Net Available Proceeds" from any Asset Disposition by any Person
means cash or readily marketable cash equivalents received (including by
way of sale or discounting of a note, installment receivable or other
receivable, but excluding any other consideration received in the form of
assumption by the acquiree of Indebtedness or other obligations relating to
such properties or assets or received in any other noncash form) therefrom
by such Person, net of (i) all legal, title and recording tax expenses,
commissions and other fees and expenses Incurred and all federal, state,
foreign and local taxes required to be accrued as a liability as a
consequence of such Asset Disposition, (ii) all payments made by such
Person or its Subsidiaries on any Indebtedness which is secured by such
assets in accordance with the terms of any Lien upon or with respect to
such assets or which must by the terms of such Lien, or in order to obtain
a necessary consent to such Asset Disposition or by applicable law, be
repaid out of the proceeds from such Asset Disposition, (iii) all payments
made with respect to liabilities associated with the assets which are the
subject of the Asset Disposition, including, without limitation, trade
payables and other accrued liabilities, (iv) appropriate amounts to be
provided by such Person or any Subsidiary thereof, as the case may be, as a
reserve in accordance with GAAP against any liabilities associated with
such assets and retained by such Person or any Subsidiary thereof, as the
case may be, after such Asset Disposition, including, without limitation,
liabilities under any indemnification obligations and severance and other
employee termination costs associated with such Asset Disposition, until
such time as such amounts are no longer reserved or such reserve is no
longer necessary (at which time any remaining amounts will become Net
Available Proceeds to be allocated in accordance with the provisions of
clause (iii) of Section 1016(a)), and (v) all distributions and other
payments made to minority interest holders in Subsidiaries of such Person
or joint ventures as a result of such Asset Disposition.
"Offer" has the meaning specified in the definition of Offer to
Purchase.
"Offer to Purchase" means a written offer (the "Offer") sent by
the Company by first class mail, postage prepaid, to each Holder at his
address appearing in the Security Register on the date of the Offer
offering to purchase up to the principal amount of Securities specified in
such Offer at the purchase price specified in such Offer (as determined
pursuant to this Indenture). Unless otherwise required by applicable law,
the Offer shall specify an expiration date (the "Expiration Date") of the
Offer to Purchase which shall be not less than 30 days or more than 60 days
after the date of such Offer and a settlement date (the "Purchase Date")
for purchase of Securities within five Business Days after the Expiration
Date. The Company shall notify the Trustee at least 15 Business Days (or
-10-
such shorter period as is acceptable to the Trustee) prior to the mailing
of the Offer of the Company's obligation to make an Offer to Purchase, and
the Offer shall be mailed by the Company or, at the Company's request, by
the Trustee in the name and at the expense of the Company. The Offer shall
contain all information required by applicable law to be included therein.
The Offer shall contain all instructions and materials necessary to enable
such Holders to tender Securities pursuant to the Offer to Purchase. The
Offer shall also state:
(1) the Section of this Indenture pursuant to which the Offer to
Purchase is being made;
(2) the Expiration Date and the Purchase Date;
(3) the aggregate principal amount of outstanding Securities
offered to be purchased by the Company pursuant to the Offer to
Purchase (including, if less than 100%, the manner by which such has
been determined pursuant to the Section hereof requiring the Offer to
Purchase) (the "Purchase Amount");
(4) the purchase price to be paid by the Company for each $1,000
aggregate principal amount of Securities accepted for payment (as
specified pursuant to this Indenture) (the "Purchase Price");
(5) that the Holder may tender all or any portion of the
Securities registered in the name of such Holder and that any portion
of a Security tendered must be tendered in an integral multiple of
$1,000 principal amount;
(6) the place or places where Securities are to be surrendered
for tender pursuant to the Offer to Purchase;
(7) that interest on any Security not tendered or tendered but
not purchased by the Company pursuant to the Offer to Purchase will
continue to accrue;
(8) that on the Purchase Date the Purchase Price will become due
and payable upon each Security being accepted for payment pursuant to
the Offer to Purchase and that interest thereon shall cease to accrue
on and after the Purchase Date;
(9) that each Holder electing to tender a Security pursuant to
the Offer to Purchase will be required to surrender such Security at
the place or places specified in the Offer prior to the close of
business on the Expiration Date (such Security being, if the Company
or the Trustee so requires, duly endorsed by, or accompanied by a
written instrument of transfer in form satisfactory to the Company and
-11-
the Trustee duly executed by, the Holder thereof or his attorney duly
authorized in writing);
(10) that Holders will be entitled to withdraw all or any portion
of Securities tendered if the Company (or its Paying Agent) receives,
not later than the close of business on the fifth Business Day next
preceding the Expiration Date, a telegram, telex, facsimile
transmission or letter setting forth the name of the Holder, the
principal amount of the Security the Holder tendered, the certificate
number of the Security the Holder tendered and a statement that such
Holder is withdrawing all or a portion of his tender;
(11) that (a) if Securities in an aggregate principal amount less
than or equal to the Purchase Amount are duly tendered and not
withdrawn pursuant to the Offer to Purchase, the Company shall
purchase all such Securities and (b) if Securities in an aggregate
principal amount in excess of the Purchase Amount are tendered and
not withdrawn pursuant to the Offer to Purchase, the Company shall
purchase Securities having an aggregate principal amount equal to the
Purchase Amount on a pro rata basis (with such adjustments as may be
deemed appropriate so that only Securities in denominations of $1,000
or integral multiples thereof shall be purchased) among tendering Holders;
and
(12) that in the case of any Holder whose Security is purchased
only in part, the Company shall execute, the Guarantors shall execute
the Guarantee endorsed thereon and the Trustee shall authenticate and
deliver to the Holder of such Security without service charge, a new
Security or Securities of any authorized denomination as requested by
such Holder, in an aggregate principal amount equal to and in exchange
for the unpurchased portion of the Security so tendered.
Any Offer to Purchase shall be governed by and effected in accordance with
the Offer for such Offer to Purchase.
"Officers' Certificate" means a certificate signed by the
Chairman of the Board, the President or a Vice President, and by the
Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary,
of the Company, and delivered to the Trustee.
"Opinion of Counsel" means a written opinion of counsel, who may
be counsel for the Company, and who shall be reasonably acceptable to the
Trustee.
"outstanding", when used with respect to Securities, means, as of
the date of determination, all Securities theretofore authenticated and
delivered under this Indenture, except:
-12-
(i) Securities theretofore cancelled by the Trustee or delivered
to the Trustee for cancellation;
(ii) Securities with respect to which the Company has effected
defeasance and/or covenant defeasance as provided in Article Thirteen,
except to the extent provided in Article Thirteen;
(iii) Securities in lieu of which other Securities have been
authenticated and delivered pursuant to Section 306, other than any
such Securities in respect of which there shall have been presented
to the Trustee proof satisfactory to it that such Securities are held
by a bona fide purchaser in whose hands such Securities are valid
obligations of the Company;
provided, however, that in determining whether the Holders of the requisite
principal amount of outstanding Securities have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, Securities
owned by the Company, any Guarantor or any other obligor upon the
Securities or any Affiliate of the Company, any Guarantor or of such other
obligor shall be disregarded and deemed not to be outstanding, except that,
in determining whether the Trustee shall be protected in relying upon any
such request, demand, authorization, direction, notice, consent or waiver,
only Securities which the Trustee knows to be so owned shall be so
disregarded.
"Paying Agent" means any Person authorized by the Company to pay
the principal of (and premium, if any) or interest on any Securities on
behalf of the Company.
"Permitted Investments" means (i) Investments in marketable
direct obligations issued or guaranteed by the United States of America, or
any governmental entity or agency or political subdivision thereof
(provided that the full faith and credit of the United States of America is
pledged in support thereof), maturing within one year of the date of
purchase; (ii) investments in commercial paper issued by corporations, each
of which shall have a consolidated net worth of at least $500,000,000,
maturing within 180 days from the date of the original issue thereof, and
rated "P-1" or better by Moody's Investors Service or "A-1" or better by
Standard & Poor's Corporation or an equivalent rating or better by any
other nationally recognized securities rating agency; (iii) Investments in
certificates of deposit issued or acceptances accepted by or guaranteed by
any bank or trust company organized under the laws of the United States of
America or any state thereof or the District of Columbia, in each case
having capital, surplus and undivided profits totalling more than
$500,000,000, maturing within one year of the date of purchase;
(iv) Investments representing Capital Stock or obligations issued to the
Company or any of its Subsidiaries in the course of the good faith
settlement of claims against any other Person or by reason of a composition
-13-
or readjustment of debt or a reorganization of any debtor of the Company or
any of its Subsidiaries; (v) deposits, including interest-bearing deposits,
maintained in the ordinary course of business in banks; and (vi) any
acquisition of the Capital Stock of any Person provided that after giving
effect to any such acquisition such Person shall become a Subsidiary of the
Company.
"Person" means any individual, corporation, limited or general
partnership, joint venture, association, joint stock company, trust,
unincorporated organization or government or any agency or political
subdivision thereof.
"Predecessor Security" of any particular Security means every
previous Security evidencing all or a portion of the same debt as that
evidenced by such particular Security; and, for the purposes of this
definition, any Security authenticated and delivered under Section 306 in
exchange for or in lieu of a mutilated, destroyed, lost or stolen Security
shall be deemed to evidence the same debt as the mutilated, destroyed, lost
or stolen Security.
"Preferred Stock", as applied to the Capital Stock of any Person,
means Capital Stock of such Person of any class or classes (however
designated) that ranks prior, as to the payment of dividends or as to the
distribution of assets upon any voluntary or involuntary liquidation,
dissolution or winding up of such Person, to shares of Capital Stock of any
other class of such Person.
"Purchase Amount" has the meaning specified in the definition of
Offer to Purchase.
"Purchase Date" has the meaning specified in the definition of
Offer to Purchase.
"Purchase Price" has the meaning specified in the definition of
Offer to Purchase.
"Redemption Date", when used with respect to any Security to be
redeemed, means the date fixed for such redemption by or pursuant to this
Indenture and such Security.
"Redemption Price", when used with respect to any Security to be
redeemed, means the price at which it is to be redeemed pursuant to this
Indenture and such Security.
"Regular Record Date" for the interest payable on any Interest
Payment Date means the June 1 or December 1 (whether or not a Business
Day), as the case may be, next preceding such Interest Payment Date.
-14-
"Related Person" of any Person means any other Person directly or
indirectly owning (a) 5% or more of the outstanding Common Stock of such
Person (or, in the case of a Person that is not a corporation, 5% or more
of the equity interest in such Person) or (b) 5% or more of the combined
voting power of the Voting Stock of such Person.
"Required Filing Dates" has the meaning specified in
Section 1018.
"Responsible Officer", when used with respect to the Trustee,
means any officer of the Trustee including without limitation any vice
president, any assistant vice president, any trust officer, any assistant
secretary or any other officer of the Trustee customarily performing
functions similar to those performed by any of the above designated
officers and also means, with respect to a particular corporate trust
matter, any other officer to whom such matter is referred because of his
knowledge of and familiarity with the particular subject.
"Restricted Payments" has the meaning specified in Section 1010.
"Sale and Leaseback Transaction" of any Person means an
arrangement with any lender or investor or to which such lender or investor
is a party providing for the leasing by such Person of any property or
asset of such Person which has been or is being sold or transferred by such
Person more than 270 days after the acquisition thereof or the completion
of construction or commencement of operation thereof to such lender or
investor or to any Person to whom funds have been or are to be advanced by
such lender or investor on the security of such property or asset. The
stated maturity of such arrangement shall be the date of the last payment
of rent or any other amount due under such arrangement prior to the first
date on which such arrangement may be terminated by the lessee without
payment of a penalty.
"Securities" means the Company's ___% Senior Notes due 2005
issued under this Indenture.
"Securities Act" means the Securities Act of 1933, as amended.
"Security Register" and "Security Registrar" have the respective
meanings specified in Section 305.
"Senior Credit Facility" means the Credit Agreement, dated as of
__________________, 1995, among the Company as borrower thereunder, any
Subsidiaries of the Company as guarantors thereunder and NationsBank, N.A.
(Carolinas) as agent on behalf of itself and the other lenders named
therein, including any deferrals, renewals, extensions, replacements,
refinancings or refundings thereof, or amendments, modifications or
supplements thereto and any agreement providing therefor whether by or with
-15-
the same or any other lenders, creditors, group of lenders or group of
creditors.
"Special Record Date" for the payment of any Defaulted Interest
means a date fixed by the Trustee pursuant to Section 307.
"Stated Maturity", when used with respect to any Security or any
installment of interest thereon, means the date specified in such Security
as the fixed date on which the principal of such Security or such
installment of interest is due and payable, respectively.
"Subsidiary" of any Person means (i) a corporation more than 50%
of the outstanding Voting Stock of which is owned, directly or indirectly,
by such Person or by one or more other Subsidiaries of such Person or by
such Person and one or more Subsidiaries thereof or (ii) any other Person
(other than a corporation) in which such Person, or one or more other
Subsidiaries of such Person or such Person and one or more other
Subsidiaries thereof, directly or indirectly, has at least a majority
ownership and voting power relating to the policies, management and affairs
thereof.
"Surviving Entity" has the meaning set forth in Section 801.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as
amended.
"Trustee" means the Person named as such in this Indenture until
a successor Trustee shall have become such pursuant to the applicable
provisions of this Indenture, and thereafter "Trustee" shall mean such
successor Trustee.
"United States Government Obligations" means direct obligations
of the United States for the payment of which the full faith and credit of
the United States is pledged.
"Vice President", when used with respect to the Company or the
Trustee, means any vice president, whether or not designated by a number or
a word or words added before or after the title "vice president".
"Voting Stock" of any Person means Capital Stock of such Person
which ordinarily has voting power for the election of directors (or persons
performing similar functions) of such Person, whether at all times or only
so long as no senior class of securities has such voting power by reason of
any contingency.
"Wholly Owned Subsidiary" of any Person means a Subsidiary of
such Person all of the outstanding Capital Stock or other ownership
interests of which (other than directors' qualifying shares) shall at the
-16-
time be owned by such Person or by one or more Wholly Owned Subsidiaries of
such Person or by such Person and one or more Wholly Owned Subsidiaries of
such Person.
SECTION 102. Compliance Certificates and Opinions.
Upon any application or request by the Company to the Trustee to
take any action under any provision of this Indenture, the Company shall
furnish to the Trustee such certificates and opinions as may be required
under the Trust Indenture Act. Each such certificate or opinion shall be
given in the form of an Officers' Certificate, if to be given by an officer
of the Company, or an Opinion of Counsel, if to be given by counsel, and
shall comply with the requirements of the Trust Indenture Act and any other
requirement set forth in this Indenture.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include
(1) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein
relating thereto;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of each such individual, he
has made such examination or investigation as is necessary to enable
him to express an informed opinion as to whether or not such covenant
or condition has been complied with; and
(4) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
SECTION 103. Form of Documents Delivered to Trustee.
In any case where several matters are required to be certified
by, or covered by an opinion of, any specified Person, it is not necessary
that all such matters be certified by, or covered by the opinion of, only
one such Person, or that they be so certified or covered by only one
document, but one such Person may certify or give an opinion with respect
to some matters and one or more other such Persons as to other matters, and
any such Person may certify or give an opinion as to such matters in one or
several documents.
Any certificate of an officer of the Company may be based,
insofar as it relates to legal matters, upon an opinion of counsel, unless
such officer knows, or in the exercise of reasonable care should know, that
-17-
the opinion with respect to the matters upon which his certificate is based
is erroneous. Any such opinion of counsel may be based, insofar as it
relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company stating the
information with respect to such factual matters, unless such counsel
knows, or in the exercise of reasonable care should know, that the
certificate or opinion or representations with respect to such matters are
erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or
other instruments under this Indenture, they may, but need not, be
consolidated and form one instrument.
SECTION 104. Notices.
(a) Any notice or communication by the Company or any Guarantor
or by the Trustee to any party hereto shall be duly given if in writing and
delivered in person or mailed by first class mail (registered or certified,
return receipt requested), facsimile or overnight air courier guaranteeing
next day delivery, to such other party's address.
If to the Company or to any Guarantor:
Tultex Corporation
101 Commonwealth Boulevard
Martinsville, Virginia 24112
Facsimile No.: ( )
Attention:
If to the Trustee:
First Union National Bank Of Virginia,
901 East Cary Street
Richmond, Virginia 23219
Facsimile No.: (804) 788-9661
Attention: Corporate Trust Department
(b) The Company, any Guarantor or the Trustee, by notice to the
other parties hereto, may designate additional or different addresses for
subsequent notices or communications.
(c) All notices and communications will be deemed to have been
duly given: at the time delivered by hand, if personally delivered; five
Business Days after being deposited in the mail, if mailed; when receipt
acknowledged, if sent by facsimile; and the next Business Day after timely
delivery to the courier, if sent by overnight air courier guaranteeing next
day delivery.
-18-
(d) Any notice or communication to a Holder will be mailed by
first-class, postage-prepaid mail, return receipt requested, to the
Holder's address shown on the Security Register. Failure to mail a notice
or communication to a Holder or any defect in it will not affect its
sufficiency with respect to other Holders.
(e) If a notice or communication is mailed in the manner
provided above within the time prescribed, it is duly given, whether or not
the addressee receives it.
(f) If the Company mails a notice or communication to Holders,
it will mail a copy to the Trustee at the same time.
SECTION 105. Conflict with Trust Indenture Act.
If any provision hereof limits, qualifies or conflicts with a
provision of the Trust Indenture Act that is required thereunder to be part
of and govern this Indenture, the latter provision shall control. If any
provision of this Indenture modifies or excludes any provision of the Trust
Indenture Act that may be so modified or excluded, the latter provision
shall be deemed to apply to this Indenture as so modified or to be
excluded, as the case may be.
SECTION 106. Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of Contents
are for convenience only and shall not affect the construction hereof.
SECTION 107. Successors and Assigns.
All covenants and agreements in this Indenture by the Company or
any Guarantor shall bind its respective successors and assigns, whether so
expressed or not.
SECTION 108. Separability Clause.
In case any provision in this Indenture or in the Securities or
Guarantees shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any
way be affected or impaired thereby.
SECTION 109. Benefits of Indenture.
Nothing in this Indenture or in the Securities or Guarantees,
express or implied, shall give to any Person, other than the parties hereto
and their successors hereunder and the Holders of Securities, any benefit
or any legal or equitable right, remedy or claim under this Indenture.
-19-
SECTION 110. Governing Law.
This Indenture, the Securities and the Guarantees endorsed
thereon shall be governed by and construed in accordance with the laws of
the State of New York without regard to principles of conflicts of law.
SECTION 111. Legal Holidays.
In any case where any Interest Payment Date, Redemption Date,
Purchase Date or Stated Maturity of any Security shall not be a Business
Day, then (notwithstanding any other provision of this Indenture or of the
Securities) payment of interest or principal (and premium, if any) need not
be made on such date, but may be made on the next succeeding Business Day
with the same force and effect as if made on the Interest Payment Date,
Redemption Date or Purchase Date, or at the Stated Maturity, as the case
may be, provided that no interest shall accrue for the period from and
after such Interest Payment Date, Redemption Date or Purchase Date or
Stated Maturity, as the case may be.
SECTION 112. Agent for Service; Submission to
Jurisdiction; Waiver of Immunities.
By the execution and delivery of this Indenture, each Guarantor
(i) hereby irrevocably designates and appoints the Company as its
authorized agent upon which process may be served in any suit or proceeding
arising out of or relating to the Securities, the Guarantees or this
Indenture that may be instituted in any Federal or State court in the
Borough of Manhattan, The City of New York or brought under Federal or
State securities laws or brought by the Trustee (whether in its individual
capacity or in its capacity as a trustee hereunder), and the Company, by
execution and delivery of this Indenture, hereby accepts such designation,
(ii) submits to the jurisdiction of any such court in any such suit or
proceeding, and (iii) agrees that service of process upon the Company and
written notice of said service to such Guarantor (mailed or delivered to it
at the address specified in Section 104) shall be deemed in every respect
effective service of process upon such Guarantor in any such suit or
proceeding. The Company further agrees to take any and all action,
including the filing of this Indenture and the execution and filing of any
and all other documents and instruments, as may be necessary to continue
such designation and appointment of the Company in full force and effect so
long as this Indenture shall be in full force and effect and so long as any
of the Securities shall be outstanding.
To the extent that any Guarantor has or hereafter may acquire any
immunity from jurisdiction of any court or from any legal process (whether
through service of notice, attachment prior to judgment, attachment in aid
of execution, execution or otherwise) with respect to itself or its
property, such Guarantor hereby irrevocably waives such immunity in
-20-
respect of its respective obligations under this Indenture, the Securities
and the Guarantees to the fullest extent permitted by law.
SECTION 113. No Recourse Against Others.
A director, officer, employee or shareholder, as such, of the
Company or any Guarantor shall not have liability for any obligations of
the Company or any Guarantor under the Securities, the Guarantees or this
Indenture or for any claim based on, in respect of or by reason of such
obligations or their creation. By accepting a Security, each Holder shall
waive and release all such liability. The waiver and release shall be part
of the consideration for the issue of the Securities.
SECTION 114. Rules by Trustee and Agents.
The Trustee may make reasonable rules for action by or at a
meeting of Holders. The Security Registrar or Paying Agent may make
reasonable rules and set reasonable requirements for its functions.
SECTION 115. No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret another indenture,
loan or debt agreement of the Company or any Guarantor. Any such
indenture, loan or debt agreement may not be used to interpret this
Indenture. This writing constitutes the entire agreement of the parties
with respect to the subject matter hereof. Unless expressly otherwise
indicated herein, an action or transaction permitted by one provision
hereof must nonetheless comply with all other applicable provisions hereof;
and any action or transaction not permitted by any provision of this
Indenture will not be permitted regardless of whether any other provision
hereof might permit such action or transaction.
SECTION 116. Trustee as Paying Agent and Security Registrar.
The Company initially appoints the Trustee as Paying Agent and
Security Registrar.
SECTION 117. Acceptance of Trust.
First Union National Bank of Virginia, the Trustee named herein,
hereby accepts the trusts in this Indenture declared and provided, upon the
terms and conditions hereinabove set forth.
-21-
ARTICLE TWO
Security and Guarantee Forms
SECTION 201. Forms Generally.
The Securities, the Guarantees to be endorsed thereon and the
Trustee's certificate of authentication shall be in substantially the forms
set forth in this Article, with such appropriate insertions, omissions,
substitutions and other variations as are required or permitted by this
Indenture, and may have such letters, numbers or other marks of
identification and such legends or endorsements placed thereon as may be
required to comply with the rules of any securities exchange on which such
Securities may be listed or as may, consistently herewith, be determined by
the officers executing such Securities or Guarantees, as evidenced by their
execution of the Securities or Guarantees, as the case may be.
The definitive Securities and Guarantees to be endorsed thereon
shall be printed, lithographed or engraved or produced by any combination
of these methods or may be produced in any other manner permitted by the
rules of any securities exchange on which the Securities may be listed, all
as determined by the officers executing such Securities or Guarantees, as
evidenced by their execution of such Securities or Guarantees, as the case
may be.
SECTION 202. Form of Face of Security.
___% Senior Notes due 2005
No. _____________ $________
CUSIP NO.
Tultex Corporation, a corporation duly organized and existing
under the laws of Virginia (herein called the "Company", which term
includes any successor Person under the Indenture hereinafter referred to),
for value received, hereby promises to pay to _______________________, or
registered assigns, the principal sum of ___________________ Dollars on
______________, 2005, and to pay interest thereon from
_____________________ or from the most recent Interest Payment Date to
which interest has been paid or duly provided for, semi-annually on June 15
and December 15 in each year, commencing June 15, 1995, at the rate of ___%
per annum, until the principal hereof is paid or made available for
payment, and at the same rate per annum on any overdue principal and
premium and on any overdue installment of interest until paid. The
interest so payable, and punctually paid or duly provided for, on any
Interest Payment Date will, as provided in such Indenture, be paid to the
Person in whose name this Security (or one or more Predecessor Securities)
-22-
is registered at the close of business on the Regular Record Date for such
interest, which shall be the June 1 or December 1 (whether or not a
Business Day), as the case may be, next preceding such Interest Payment
Date. Any such interest not so punctually paid or duly provided for will
forthwith cease to be payable to the Holder on such Regular Record Date and
may either be paid to the Person in whose name this Security (or one or
more Predecessor Securities) is registered at the close of business on a
Special Record Date for the payment of such Defaulted Interested to be
fixed by the Trustee, notice whereof shall be given to Holders of
Securities not less than five Business Days prior to such Special Record
Date, or be paid at any time in any other lawful manner not inconsistent
with the requirements of any securities exchange on which the Securities
may be listed, and upon such notice as may be required by such exchange,
all as more fully provided in said Indenture.
Payment of the principal of (and premium, if any) and any such
interest on this Security will be made at the office or agency of the
Company maintained for that purpose in the Borough of Manhattan, The City
of New York, in such coin or currency of the United States of America as at
the time of payment is legal tender for payment of public and private
debts; provided, however, that at the option of the Company payment of
interest may be made by check mailed to the address of the Person entitled
thereto as such address shall appear in the Security Register.
Reference is hereby made to the further provisions of this
Security set forth on the reverse hereof, which further provisions shall
for all purposes have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed
by the Trustee referred to on the reverse hereof by manual signature, this
Security shall not be entitled to any benefit under the Indenture or be
valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be
duly executed.
Dated:
TULTEX CORPORATION
By _________________________
Title:
Attest:
__________________________
Title:
-23-
SECTION 203. Form of Reverse of Security.
This Security is one of a duly authorized issue of Securities of
the Company designated as its ___% Senior Notes due 2005 (herein called the
"Securities"), limited in aggregate principal amount to $110,000,000,
issued and to be issued under an Indenture, dated as of _________, 1995
(herein called the "Indenture"), among the Company, the Guarantors listed
on the signature pages thereto (herein collectively called the
"Guarantors", which term includes any successor Person, or additional
Guarantor, under the Indenture) and First Union National Bank of Virginia,
as Trustee (herein called the "Trustee", which term includes any successor
trustee under the Indenture), to which Indenture and all indentures
supplemental thereto reference is hereby made for a statement of the
respective rights, limitations of rights, duties and immunities thereunder
of the Company, the Guarantors, the Trustee and the Holders of the
Securities and of the terms upon which the Securities are and the
Guarantees endorsed thereon are, and are to be, authenticated and
delivered.
The Securities are subject to redemption upon not less than 30
nor more than 60 days' notice by mail, at any time on or after
______________, 2000, as a whole or in part, at the election of the
Company, at the following Redemption Prices (expressed as percentages of
the principal amount): If redeemed during the 12-month period beginning
___________ of the years indicated,
Redemption
Year Price
__________%
__________%
and thereafter at a Redemption Price equal to 100% of the principal amount,
together in the case of any such redemption with accrued interest to the
Redemption Date.
In addition, prior to ____, 1998, the Company may redeem up to
$35,000,000 principal amount of the outstanding Securities with the cash
proceeds received by the Company from a public offering of Capital Stock of
the Company (other than Disqualified Stock), at a Redemption Price
(expressed as a percentage of the principal amount) equal to % of the
principal amount, together in the case of any such redemption with accrued
interest to the Redemption Date; provided, however, that at least $75
million in aggregate principal amount of the Securities remains outstanding
immediately after any such redemption.
The Securities do not have the benefit of any sinking fund
obligations.
-24-
In the event of redemption or purchase pursuant to an Offer to
Purchase of this Security in part only, a new Security or Securities for
the unredeemed or unpurchased portion hereof will be issued in the name of
the Holder hereof upon the cancellation hereof.
If an Event of Default shall occur and be continuing, the
principal of all the Securities may be declared due and payable in the
manner and with the effect provided in the Indenture.
The Indenture provides that, subject to certain conditions, if
(i) certain Net Available Proceeds are available from an Asset Disposition
or (ii) a Change of Control occurs, the Company shall be required to make
an Offer to Purchase all or a specified portion of the Securities.
The Indenture permits, with certain exceptions as therein
provided, the amendment thereof and the modification of the rights and
obligations of the Company and the Guarantors and the rights of the Holders
of the Securities under the Indenture at any time by the Company, the
Guarantors and the Trustee with the consent of the Holders of a majority in
aggregate principal amount of the Securities at the time outstanding. The
Indenture also contains provisions permitting the Holders of specified
percentages in aggregate principal amount of the Securities at the time
outstanding, on behalf of the Holders of all the Securities, to waive
compliance by the Company and the Guarantors with certain provisions of the
Indenture and certain past Defaults under the Indenture and their
consequences. Any such consent or waiver by the Holder of this Security
shall be conclusive and binding upon such Holder and upon all future
Holders of this Security and of any Security issued upon the registration
of transfer hereof or in exchange herefor or in lieu hereof, whether or not
notation of such consent or waiver is made upon this Security.
No reference herein to the Indenture and no provision of this
Security or of the Indenture shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal of (and
premium, if any) and interest on this Security at the times, place and
rate, and in the coin or currency, herein prescribed.
As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this Security is registrable in the
Security Register, upon surrender of this Security for registration of
transfer at the office or agency of the Company in the Borough of
Manhattan, The City of New York, duly endorsed by, or accompanied by a
written instrument of transfer in form satisfactory to the Company and the
Security Registrar duly executed by, the Holder hereof or his attorney duly
authorized in writing, and thereupon one or more new Securities, of
authorized denominations and for the same aggregate principal amount, will
be issued to the designated transferee or transferees.
-25-
The Securities are issuable only in registered form without
coupons in denominations of $1,000 and any integral multiple thereof. As
provided in the Indenture and subject to certain limitations therein set
forth, Securities are exchangeable for a like aggregate principal amount of
Securities of a different authorized denomination, as requested by the
Holder surrendering the same.
No service charge shall be made for any such registration of
transfer or exchange, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge payable in
connection therewith.
Prior to due presentment of this Security for registration of
transfer, the Company, the Guarantors, the Trustee and any agent of the
Company, the Guarantors or the Trustee may treat the Person in whose name
this Security is registered as the owner hereof for all purposes, whether
or not this Security be overdue, and none of the Company, any Guarantor,
the Trustee or any such agent shall be affected by notice to the contrary.
Interest on this Security shall be computed on the basis of a
360-day year of twelve 30-day months. Holders of record on a Regular
Record Date immediately prior to an Interest Payment Date shall be entitled
to receive the interest payable on the Securities on such Interest Payment
Date notwithstanding any call for redemption of such Securities on a
Redemption Date which is to occur on or subsequent to such Interest Payment
Date.
Customary abbreviations may be used in the name of a Holder or an
assignee, such as TEN COM (= tenants in common), TEN ENT (= tenants by the
entireties), JT TEN (= joint tenants with right of survivorship and not as
tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to
Minors Act).
Pursuant to a recommendation promulgated by the Committee on
Uniform Security Identification Procedures, the Company has caused CUSIP
numbers to be printed on the Securities and has directed the Trustee to use
CUSIP numbers in notices of redemption as a convenience to Holders. No
representation is made as to the accuracy of such numbers either as printed
on the Securities or as contained in any notice of redemption and reliance
may be placed only on the other identification numbers placed thereon.
The Company will furnish to any Holder of record of Securities
upon written request and without charge a copy of the Indenture.
All terms used in this Security which are defined in the
Indenture shall have the meanings assigned to them in the Indenture.
-26-
The Indenture, this Security and the Guarantees endorsed hereon
shall be governed by and construed in accordance with the laws of the State
of New York without regard to principles of conflicts of law.
-27-
ASSIGNMENT FORM
If you the Holder want to assign this Security, fill in the form
below and have your signature guaranteed:
I or we assign and transfer this Security to:
(Print or type name, address and zip code and
social security or tax ID number of assignee)
and irrevocably appoint _______________________________________ agent to
transfer this Security on the books of the Company. The agent may
substitute another to act for him.
Date: ____________________ Signed: _____________________
(Sign exactly as
name appears on the
other side of this
Security)
Signature Guarantee:
(Signature must be guaranteed by a member
firm of the New York Stock Exchange or a
commercial bank or trust company)
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased in its
entirety by the Company pursuant to Section 1016 or 1017 of the Indenture,
check the box:
[ ]
If you want to elect to have only a part of this Security
purchased by the Company pursuant to Section 1016 or 1017 of the Indenture,
state the amount: $
Date: Your Signature:_______________________
(Sign exactly as name appears
on the other side of this Security)
Signature Guarantee:___________________________________________
(Signature must be guaranteed by a member
firm of the New York Stock Exchange or a
commercial bank or trust company)
-28-
SECTION 204. Form of Trustee's Certificate
of Authentication.
This is one of the Securities referred to in the within-mentioned
Indenture.
First Union National Bank of
Virginia, as Trustee
By __________________________
Authorized Signatory
SECTION 205. Form of Guarantee.
GUARANTEE
The Guarantors (as defined in the Indenture referred to in the
Security upon which this notation is endorsed) hereby, jointly and
severally, unconditionally guarantee (such guarantee by each Guarantor
being referred to herein as the "Guarantee") the due and punctual payment
of the principal of, premium, if any, and interest on the Securities,
whether at maturity, by acceleration or otherwise, the due and punctual
payment of interest on the overdue principal, premium and interest, if any,
on the Securities, and the due and punctual performance of all other
obligations of the Company to the Holders or the Trustee, all in accordance
with the terms set forth in Article Twelve of the Indenture.
The Guarantee shall not be valid or obligatory for any purpose
until the certificate of authentication on the Securities upon which the
Guarantee is noted shall have been executed by the Trustee under the
Indenture by the manual signature of one of its authorized officers.
This Guarantee shall be governed by and construed in accordance
with the laws of the State of New York without regard to principles of
conflicts of law.
-29-
This Guarantee is subject to release upon the terms set forth in
the Indenture.
AKOM, LTD.
DOMINION STORES, INC.
TULTEX INTERNATIONAL, INC.
LOGO 7, INC.
UNIVERSAL INDUSTRIES, INC.
TULTEX CANADA, INC.
SWEATJET, INC.
By:
Name:
Title: An Authorized
Officer of Each of
the Above-Listed
Guarantors
ARTICLE THREE
The Securities
SECTION 301. Title and Terms.
The aggregate principal amount of Securities which may be
authenticated and delivered under this Indenture is limited to
$110,000,000, except as provided in Section 306.
The Securities shall be known and designated as the "___% Senior
Notes due 2005" of the Company. Their Stated Maturity shall be
____________, 2005 and the Securities shall bear interest at the rate of
____% per annum, from ______________ or from the most recent Interest
Payment Date to which interest has been paid or duly provided for, as the
case may be, payable semiannually on June 15 and December 15, commencing
June 15, 1995, until the principal thereof is paid or made available for
payment.
The principal of (and premium, if any) and interest on the
Securities shall be payable at the office or agency of the Company in the
Borough of Manhattan, The City of New York, New York, maintained for such
purpose and at any other office or agency maintained by the Company for
such purpose; provided, however, that at the option of the Company payment
of interest may be made by check mailed to the address of the Person
entitled thereto as such address shall appear in the Security Register.
The Securities shall be subject to repurchase by the Company
pursuant to an Offer to Purchase as provided in Sections 1016 and 1017.
-30-
The Securities shall be redeemable as provided in Article Eleven.
The Securities shall be subject to defeasance and covenant
defeasance at the option of the Company as provided in Article Thirteen.
SECTION 302. Denominations.
The Securities shall be issuable only in registered form without
coupons and only in denominations of $1,000 and any integral multiple
thereof.
SECTION 303. Execution, Authentication,
Delivery and Dating.
The Securities shall be executed on behalf of the Company by its
Chairman of the Board, its President or one of its Vice Presidents, and
attested by its Secretary or one of its Assistant Secretaries. An authorized
officer of each of the Guarantors will execute, on behalf of each such
Guarantor, each Guarantee. The signature of any of these officers on the
Securities and the Guarantees may be manual or facsimile.
If an Officer whose signature is on a Security or a Guarantee no
longer holds that office at the time the Security is authenticated, the
Security and the Guarantee will nevertheless be valid.
At any time and from time to time after the execution and
delivery of this Indenture, the Company may deliver Securities executed by
the Company and having endorsed thereon a Guarantee executed by each of the
Guarantors to the Trustee for authentication, together with a Company Order
for the authentication and delivery of such Securities; and the Trustee in
accordance with such Company Order shall authenticate and deliver such
Securities as in this Indenture provided and not otherwise.
Each Security shall be dated the date of its authentication.
No Security or Guarantee endorsed thereon shall be entitled to
any benefit under this Indenture or be valid or obligatory for any purpose
unless there appears on such Security a certificate of authentication
substantially in the form provided for herein executed by the Trustee by
manual signature, and such certificate upon any Security shall be
conclusive evidence, and the only evidence, that such Security and the
Guarantee endorsed thereon have been duly authenticated and delivered
hereunder.
SECTION 304. Temporary Securities
Pending the preparation of definitive Securities, the Company may
execute and, upon Company Order, the Trustee shall authenticate and
-31-
deliver, temporary Securities which are printed, lithographed typewritten,
mimeographed or otherwise produced, in any authorized denomination,
substantially of the tenor of the definitive Securities in lieu of which
they are issued and having endorsed thereon the Guarantees substantially of
the tenor of the definitive Guarantees in lieu of which they are issued,
duly executed by the Guarantors, and with such appropriate insertions,
omissions, substitutions and other variations as the officers executing
such Securities and the Guarantees may determine, as evidenced by their
execution of such Securities and Guarantees.
If temporary Securities are issued, the Company will cause
definitive Securities to be prepared without unreasonable delay. After the
preparation of definitive Securities, the temporary Securities shall be
exchangeable for definitive Securities upon surrender of the temporary
Securities at any office or agency of the Company designated pursuant to
Section 1002, without charge to the Holder. Upon surrender for
cancellation of any one or more temporary Securities the Company shall
execute and the Trustee shall authenticate and deliver in exchange therefor
a like principal amount of definitive Securities of authorized
denominations and like tenor having endorsed thereon Guarantees executed by
the Guarantors. Until so exchanged the temporary Securities shall in all
respects be entitled to the same benefits under this Indenture as
definitive Securities.
SECTION 305. Registration, Registration of
Transfer and Exchange.
The Company shall cause to be kept at the Corporate Trust Office
of the Trustee a register (the register maintained in such office and in
any other office or agency designated pursuant to Section 1002 being herein
sometimes collectively referred to as the "Security Register") in which,
subject to such reasonable regulations as it may prescribe, the Company
shall provide for the registration of Securities and of transfers or
exchanges of Securities.
Upon surrender for registration of transfer of any Security at an
office or agency of the Company designated pursuant to Section 1002 for
such purpose, the Company shall execute, and the Trustee shall authenticate
and deliver, in the name of the designated transferee or transferees, one
or more new Securities of any authorized denominations and of a like
aggregate principal amount and tenor, each such Security having endorsed
thereon the Guarantee of the Guarantors duly executed by the Guarantors.
At the option of the Holder, Securities may be exchanged for
other Securities of any authorized denominations and of a like aggregate
principal amount, and having the Guarantee of the Guarantors endorsed
thereon executed by the Guarantors, upon surrender of the Securities to be
exchanged at such office or agency. Whenever any Securities are so
-32-
surrendered for exchange, the Company shall execute, the Guarantors shall
execute the Guarantees endorsed thereon and the Trustee shall authenticate
and deliver the Securities which the Holder making the exchange is entitled
to receive.
All Securities and the Guarantees endorsed thereon issued upon
any registration of transfer or exchange of Securities shall be the valid
obligations of the Company and the Guarantors evidencing the same debt, and
entitled to the same benefits under this Indenture, as the Securities and
Guarantees endorsed thereon surrendered upon such registration of transfer
or exchange.
Every Security presented or surrendered for registration of
transfer or for exchange shall (if so required by the Company or the
Security Registrar) be duly endorsed, or be accompanied by a written
instrument of transfer in form satisfactory to the Company and the Security
Registrar duly executed, by the Holder thereof or his attorney duly
authorized in writing.
No service charge shall be made for any registration of transfer
or exchange of Securities, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge that may be
imposed in connection with any registration of transfer or exchange of
Securities, other than exchanges pursuant to Section 304, 906 or 1108 or in
accordance with any Offer to Purchase pursuant to Section 1016 or 1017 not
involving any transfer.
The Company shall not be required (i) to issue, register the
transfer of or exchange any Security during a period beginning at the
opening of business 15 days before the day of the mailing of a notice of
redemption of Securities selected for redemption under Section 1104 and
ending at the close of business on the day of such mailing, or (ii) to
register the transfer of or exchange any Security so selected for
redemption in whole or in part, except the unredeemed portion of any
Security being redeemed in part.
SECTION 306. Mutilated, Destroyed, Lost
and Stolen Securities.
If any mutilated Security is surrendered to the Trustee, the
Company shall execute, the Guarantors shall execute their Guarantee
endorsed thereon and the Trustee shall authenticate and deliver in exchange
therefor a new Security of like tenor and principal amount and bearing a
number not contemporaneously outstanding.
If there shall be delivered to the Company and the Trustee
(i) evidence to their satisfaction of the destruction, loss or theft of any
Security and (ii) such security or indemnity as may be reasonably required
-33-
by them to save each of them, the Guarantors and any agent of any of them
harmless, then, in the absence of notice to the Company or the Trustee that
such Security has been acquired by a bona fide purchaser, the Company shall
execute and upon its request the Trustee shall authenticate and deliver, in
lieu of any such destroyed, lost or stolen Security, a new Security of like
tenor and principal amount, having endorsed thereon the Guarantee of the
Guarantors, duly executed by the Guarantors, and bearing a number not
contemporaneously outstanding.
Upon the issuance of any new Security under this Section, the
Company may require the payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed in relation thereto and any
other expenses (including the fees and expenses of the Trustee) connected
therewith.
Every new Security issued pursuant to this Section in lieu of any
destroyed, lost or stolen Security, and the Guarantee endorsed thereon,
shall constitute an original additional contractual obligation of the
Company and the Guarantors whether or not the destroyed, lost or stolen
Security shall be at any time enforceable by anyone, and shall be entitled
to all the benefits of this Indenture equally and proportionately with any
and all other Securities duly issued hereunder.
The provisions of this Section are exclusive and shall preclude
(to the extent lawful) all other rights and remedies with respect to the
replacement or payment of mutilated, destroyed, lost or stolen Securities.
SECTION 307. Payment of Interest; Interest
Rights Preserved.
Interest on any Security which is payable, and is punctually paid
or duly provided for, on any Interest Payment Date shall be paid to the
Person in whose name that Security (or one or more Predecessor Securities)
is registered at the close of business on the Regular Record Date for such
interest.
Any interest on any Security which is payable, but is not
punctually paid or duly provided for, on any Interest Payment Date (herein
called "Defaulted Interest") shall forthwith cease to be payable to the
Holder on the relevant Regular Record Date by virtue of having been such
Holder, and such Defaulted Interest may be paid by the Company, at its
election in each case, as provided in clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted
Interest to the Persons in whose names the Securities (or their
respective Predecessor Securities) are registered at the close of
business on a Special Record Date for the payment of such Defaulted
Interest, which shall be fixed in the following manner. The Company
-34-
shall notify the Trustee in writing of the amount of Defaulted
Interest proposed to be paid on each Security and the date of the
proposed payment, and at the same time the Company shall deposit with
the Trustee an amount of money equal to the aggregate amount proposed
to be paid in respect of such Defaulted Interest or shall make
arrangements satisfactory to the Trustee for such deposit prior to the
date of the proposed payment, such money when deposited to be held in
trust for the benefit of the Persons entitled to such Defaulted
Interest as in this clause provided. Thereupon the Trustee shall fix
a Special Record Date for the payment of such Defaulted Interest
which shall be not more than 15 days prior to the date of the proposed
payment. The Trustee shall promptly notify the Company of such
Special Record Date and, in the name and at the expense of the
Company, shall cause notice of the proposed payment of such Defaulted
Interest and the Special Record Date therefor to be mailed,
first-class postage prepaid, to each Holder at his address as it
appears in the Security Register, not less than five Business Days
prior to such Special Record Date. Notice of the proposed payment of
such Defaulted Interest and the Special Record Date therefor having
been so mailed, such Defaulted Interest shall be paid not later than
the fifteenth day after such Special Record Date to the Persons in
whose names the Securities (or their respective Predecessor
Securities) are registered at the close of business on such Special
Record Date.
(2) The Company may make payment of any Defaulted Interest in
any other lawful manner not inconsistent with the requirements of any
securities exchange on which the Securities may be listed, and upon
such notice as may be required by such exchange, if, after notice
given by the Company to the Trustee of the proposed payment pursuant
to this clause, such manner of payments shall be deemed practicable by
the Trustee.
Subject to the foregoing provisions of this Section, each
Security delivered under this Indenture upon registration of transfer of or
in exchange for or in lieu of any other Security shall carry the rights to
interest accrued and unpaid, and to accrue, which were carried by such
other Security.
SECTION 308. Persons Deemed Owners.
Prior to due presentment of a Security for registration of
transfer, the Company, any Guarantor, the Trustee and any agent of the
Company, any Guarantor or the Trustee may treat the Person in whose name
such Security is registered as the owner of such Security for the purpose
of receiving payment of principal of (and premium, if any) and (subject to
Section 307) interest on such Security and for all other purposes
whatsoever.
-35-
SECTION 309. Cancellation.
All Securities surrendered for payment, redemption or
registration of transfer or exchange shall, if surrendered to any Person
other than the Trustee, be delivered to the Trustee and shall be promptly
cancelled by it. The Company may at any time deliver to the Trustee for
cancellation any Securities previously authenticated and delivered
hereunder which the Company may have acquired in any manner whatsoever, and
all Securities so delivered shall be promptly cancelled by the Trustee. No
Securities shall be authenticated in lieu of or in exchange for any
Securities cancelled as provided in this Section, except as expressly
permitted by this Indenture. All cancelled Securities held by the Trustee
shall be destroyed by the Trustee and upon the Company's written request,
the Trustee shall deliver a certificate of destruction to the Company.
SECTION 310. Computation of Interest.
Interest on the Securities shall be computed on the basis of a
year of twelve 30-day months.
ARTICLE FOUR
Satisfaction and Discharge
SECTION 401. Satisfaction and Discharge of Indenture.
This Indenture shall cease to be of further effect (except as to
any surviving rights of registration of transfer or exchange of Securities
herein expressly provided for), and the Trustee, on demand of and at the
expense of the Company, shall execute proper instruments acknowledging
satisfaction and discharge of this Indenture, when
(1) either
(A) all Securities theretofore authenticated and delivered
(other than (i) Securities which have been destroyed, lost or
stolen and which have been replaced or paid as provided in
Section 306 and (ii) Securities for whose payment money has
theretofore been deposited in trust or segregated and held in
trust by the Company and thereafter repaid to the Company or
discharged from such trust, as provided in Section 1003) have
been delivered to the Trustee for cancellation; or
(B) all such Securities not theretofore delivered to the
Trustee for cancellation
(i) have become due and payable, or
-36-
(ii) will become due and payable at their Stated
Maturity within one year, or
(iii) are to be called for redemption within one year
under arrangements satisfactory to the Trustee for the
giving of notice of redemption by the Trustee in the name,
and at the expense, of the Company,
and the Company in the case of (i), (ii) or (iii) above has
irrevocably deposited or caused to be irrevocably deposited with
the Trustee as trust funds in trust for the purpose an amount in
cash sufficient to pay and discharge the entire indebtedness on
such Securities not theretofore delivered to the Trustee for
cancellation, for principal (and premium, if any) and interest to
the date of such deposit (in the case of Securities which have
become due and payable) or to the Stated Maturity or Redemption
Date, as the case may be;
(2) the Company has paid or caused to be paid all other sums
payable hereunder by the Company; and
(3) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all
conditions precedent herein provided for relating to the satisfaction
and discharge of this Indenture have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture pursuant
to this Article Four, the obligations of the Company to the Trustee under
Section 607, and, if money shall have been deposited with the Trustee
pursuant to subclause (B) of clause (1) of this Section, the obligations of
the Trustee under Section 402 and the last paragraph of Section 1003 shall
survive.
SECTION 402. Application of Trust Money.
Subject to the provisions of the last paragraph of Section 1003,
all money deposited with the Trustee pursuant to Section 401 shall be held
in trust and applied by it, in accordance with the provisions of the
Securities and this Indenture, to the payment, either directly or through
any Paying Agent (including the Company acting as its own Paying Agent) as
the Trustee may determine, to the Persons entitled thereto, of the
principal (and premium, if any) and interest for whose payment such money
has been deposited with the Trustee.
ARTICLE FIVE
Remedies
-37-
SECTION 501. Events of Default.
"Event of Default", whenever used herein, means any one of the
following events (whatever the reason for such Event of Default and whether
it shall be voluntary or involuntary or be effected by operation of law or
pursuant to any judgment, decree or order of any court or any order, rule
or regulation of any administrative or governmental body):
(1) failure to pay the principal of (or premium, if any, on) any
Security when due; or
(2) failure to pay any interest on any Security when due, and
such failure continues for a period of 30 days; or
(3) default, on the applicable Purchase Date, in the purchase of
Securities required to be purchased by the Company pursuant to an
Offer to Purchase; or
(4) failure to perform or to comply with any of the provisions
of Section 801; or
(5) failure to perform any covenant or agreement of the Company
in this Indenture or the Securities (other than a covenant or
agreement referred to in the foregoing clause (1), (2), (3) or (4))
and such failure continues for the period and after the notice
specified below; or
(6) default under the terms of one or more instruments
evidencing or securing Indebtedness for money borrowed by the Company
or any Subsidiary of the Company having an outstanding principal
amount of $5 million or more individually or in the aggregate, which
results in the acceleration of the payment of such Indebtedness or
which shall constitute the failure to pay principal when due at the
stated maturity of such Indebtedness; or
(7) the rendering of a final judgment or judgments (not subject
to appeal) against the Company or any Subsidiary of the Company in an
aggregate amount of $5 million or more which remains undischarged or
unstayed for a period of 60 days after the date on which the right to
appeal has expired; or
(8) the entry by a court having jurisdiction in the premises of
(A) a decree or order for relief in respect of the Company or any
Material Subsidiary in an involuntary case or proceeding under any
applicable U.S. Federal or State or other bankruptcy, insolvency,
reorganization or other similar law or (B) a decree or order adjudging
the Company or any Material Subsidiary a bankrupt or insolvent, or
approving as properly filed a petition seeking reorganization,
-38-
arrangement, adjustment or composition of or in respect of the Company
or any Material Subsidiary under any applicable U.S. Federal or State
or other law, or appointing a custodian, receiver, liquidator,
assignee, trustee, sequestrator or other similar official of the
Company or any Material Subsidiary or of any substantial part of the
property of the Company or any Material Subsidiary, or ordering the
winding up or liquidation of the affairs of the Company or any
Material Subsidiary, and the continuance of any such decree or order
for relief or any such other decree or order unstayed and in effect
for a period of 30 consecutive days; or
(9) the commencement by the Company or any Material Subsidiary
of a voluntary case or proceeding under any applicable U.S. Federal or
State or other bankruptcy, insolvency, reorganization or other
similar law or of any other case or proceeding to be adjudicated a
bankrupt or insolvent, or the consent by the Company or any Material
Subsidiary to the entry of a decree or order for relief in respect of
the Company or any Material Subsidiary in an involuntary case or
proceeding under any applicable U.S. Federal or State or other
bankruptcy, insolvency, reorganization or other similar law or to the
commencement of any bankruptcy or insolvency case or proceeding
against the Company or any Material Subsidiary, or the filing by the
Company or any Material Subsidiary of a petition or answer or consent
seeking reorganization or relief under any applicable U.S. Federal or
State, Canadian federal or provincial or other applicable law, or the
consent by the Company or any Material Subsidiary to the filing of
such petition or to the appointment of or taking possession by a
custodian, receiver, liquidator, assignee, trustee, sequestrator or
similar official of the Company or any Material Subsidiary or of any
substantial part of the property of the Company or any Material
Subsidiary, or the making by the Company or any Material Subsidiary of
an assignment for the benefit of creditors, or the admission by the
Company or any Material Subsidiary in writing of its inability to pay
its debts generally as they become due; or
(10) the Guarantee of any Guarantor which is a Material
Subsidiary ceases to be in full force and effect (other than in
accordance with the terms of such Guarantee and this Indenture) or is
declared null and void and unenforceable or found to be invalid or any
Guarantor which is a Material Subsidiary denies its liability under
its Guarantee (other than by reason of a release of such Guarantor
from its Guarantee in accordance with the terms of such Guarantee and
this Indenture).
A Default under Section 501(5) hereof is not an Event of Default
until the Trustee notifies the Company, or the Holders of at least 25% in
aggregate principal amount of the outstanding Securities notify the Company
and the Trustee, of the Default and the Company does not cure the Default
-39-
within 30 days after receipt of the notice. The notice must specify the
Default, demand that it be remedied and state that the notice is a "Notice
of Default." If such Default is cured within such time period, it ceases.
SECTION 502. Acceleration of Maturity; Rescission
and Annulment.
If an Event of Default (other than an Event of Default with
respect to the Company specified in Section 501(8) or (9)) occurs and is
continuing, then and in every such case the Trustee or the Holders of not
less than 25% in aggregate principal amount of the outstanding Securities
may declare the principal of all the Securities to be due and payable
immediately, by a notice in writing to the Company (and to the Trustee if
given by Holders), and upon any such declaration such principal and any
accrued interest shall become immediately due and payable. If an Event of
Default with respect to the Company specified in Section 501(8) or (9)
occurs, the principal of and any accrued interest on the Securities then
outstanding shall ipso facto become immediately due and payable without any
declaration or other act on the part of the Trustee or any Holder.
At any time after such a declaration of acceleration has been
made and before a judgment or decree for payment of the money due has been
obtained by the Trustee as hereinafter in this Article provided, the
Holders of a majority in aggregate principal amount of the outstanding
Securities, by written notice to the Company and the Trustee, may rescind
and annul such declaration and its consequences if
(1) the Company has paid or deposited or caused to be paid or
deposited with the Trustee a sum sufficient to pay
(A) all overdue interest on all Securities,
(B) the principal of (and premium, if any, on) any
Securities which have become due otherwise than by such
declaration of acceleration (including any Securities required to
have been purchased on the Purchase Date pursuant to an Offer to
Purchase made by the Company) and interest thereon at the rate
provided by the Securities,
(C) interest upon overdue interest at the rate provided by
the Securities, and
(D) all sums paid or advanced by the Trustee hereunder and
the reasonable compensation, expenses, disbursements and advances
of the Trustee, its agents and counsel;
and
-40-
(2) all Events of Default, other than the nonpayment of the
principal of Securities which have become due solely by such
declaration of acceleration, have been cured or waived as provided in
Section 513.
No such rescission shall affect any subsequent Default or impair any right
consequent thereon.
SECTION 503. Collection of Indebtedness and
Suits for Enforcement by Trustee.
The Company covenants that if
(1) Default is made in the payment of any interest on any
Security when such interest becomes due and payable and such Default
continues for a period of 30 days, or
(2) Default is made in the payment of the principal of (or
premium, if any, on) any Security at the Maturity thereof or, with
respect to any Security required to have been purchased pursuant to an
Offer to Purchase made by the Company, at the Purchase Date thereof,
the Company will, upon demand of the Trustee, pay to it, for the benefit of
the Holders of such Securities, the whole amount then due and payable on
such Securities for principal (and premium, if any) and interest, and
interest on any overdue principal (and premium, if any) and on any overdue
interest, at the rate provided by the Securities, and, in addition thereto,
such further amount as shall be sufficient to cover the costs and expenses
of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel.
If the Company fails to pay such amounts forthwith upon such
demand, the Trustee, in its own name and as trustee of an express trust,
may institute a judicial proceeding for the collection of the sums so due
and unpaid, may prosecute such proceeding to judgment or final decree and
may enforce the same against the Company, any Guarantor or any other
obligor upon the Securities and collect the moneys adjudged or decreed to
be payable in the manner provided by law out of the property of the
Company, any Guarantor or any other obligor upon the Securities, wherever
situated.
If an Event of Default occurs and is continuing, the Trustee may
in its discretion proceed to protect and enforce its rights and the rights
of the Holders by such appropriate judicial proceedings as the Trustee
shall deem most effectual to protect and enforce any such rights, whether
for the specific enforcement of any covenant or agreement in this Indenture
or in aid of the exercise of any power granted herein, or to enforce any
other proper remedy.
-41-
SECTION 504. Trustee May File Proofs of Claim.
In case of any judicial proceeding relative to the Company, any
Guarantor or any other obligor upon the Securities, its property or its
creditors, the Trustee shall be entitled and empowered, by intervention in
such proceeding or otherwise, to take any and all actions authorized under
the Trust Indenture Act in order to have claims of the Holders and the
Trustee allowed in any such proceeding. In particular, the Trustee shall
be authorized to collect and receive any moneys or other property payable
or deliverable on any such claims and to distribute the same, and any
custodian, receiver, assignee, trustee, liquidator, sequestrator or other
similar official in any such judicial proceeding is hereby authorized by
each Holder to make such payments to the Trustee and, in the event that the
Trustee shall consent to the making of such payments directly to the
Holders, to pay to the Trustee any amount due it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its
agents and counsel, and any other amounts due the Trustee under Section
607.
No provision of this Indenture shall be deemed to authorize the
Trustee to authorize or consent to or accept or adopt on behalf of any
Holder any plan of reorganization, arrangement, adjustment or composition
affecting the Securities or the rights of any Holder thereof or to
authorize the Trustee in vote in respect of the claim of any Holder in any
such proceeding.
SECTION 505. Trustee May Enforce Claims
Without Possession of Securities.
All rights of action and claims under this Indenture or the
Securities may be prosecuted and enforced by the Trustee without the
possession of any of the Securities or the production thereof in any
proceeding relating thereto, and any such proceeding instituted by the
Trustee shall be brought in its own name as trustee of an express trust,
and any recovery of judgment shall, after provision for the payment of the
reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, be for the ratable benefit of the Holders
of the Securities in respect of which such judgment has been recovered.
SECTION 506. Application of Money Collected.
Any money collected by the Trustee pursuant to this Article shall
be applied in the following order, at the date or dates fixed by the
Trustee and, in case of the distribution of such money on account of
principal (or premium, if any) or interest, upon presentation of the
Securities and the notation thereon of the payment if only partially paid
and upon surrender thereof if fully paid;
-42-
FIRST: To the payment of all amounts due the Trustee under
Section 607; and
SECOND: To the payment of the amounts then due and unpaid for
principal of (and premium, if any) and interest on the Securities in
respect of which or for the benefit of which such money has been
collected, ratably, without preference or priority of any kind,
according to the amounts due and payable on such Securities for
principal (and premium, if any) and interest, respectively.
SECTION 507. Limitation on Suits.
Subject to Section 508, no Holder of any Security shall have any
right to institute any proceeding, judicial or otherwise, with respect to
this Indenture, the Guarantees or the Securities or for any other remedy
hereunder, unless
(1) such Holder has previously given written notice to the
Trustee of a continuing Event of Default;
(2) the Holders of not less than 25% in aggregate principal
amount of the outstanding Securities shall have made written request
to the Trustee to institute proceedings in respect of such Event of
Default in its own name as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee
reasonable indemnity against the costs, expenses and liabilities to be
incurred in compliance with such request;
(4) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such
proceeding; and
(5) no direction inconsistent with such written request has been
given to the Trustee during such 60-day period by the Holders of a
majority in aggregate principal amount of the outstanding Securities;
it being understood and intended that no one or more Holders shall have any
right in any manner whatever by virtue of, or by availing of, any provision
of this Indenture to affect, disturb or prejudice the rights of any other
Holders, or to obtain or to seek to obtain priority or preference over any
other Holders or to enforce any right under this Indenture, except in the
manner herein provided and for the equal and ratable benefit of all the
Holders.
-43-
SECTION 508. Unconditional Right of Holders To
Receive Principal, Premium and Interest.
Notwithstanding any other provision in this Indenture, the Holder
of any Security shall have the right, which is absolute and unconditional,
to receive payment of the principal of (and premium, if any) and (subject
to Section 307) interest on such Security on the respective Stated
Maturities expressed in such Security (or, in the case of redemption, on
the Redemption Date or in the case of an Offer to Purchase made by the
Company and required to be accepted as to such Security, on the Purchase
Date) and to institute suit for the enforcement of any such payment, and
such rights shall not be impaired without the consent of such Holder.
SECTION 509. Restoration of Rights and Remedies.
If the Trustee or any Holder has instituted any proceeding to
enforce any right or remedy under this Indenture and such proceeding has
been determined adversely to the Trustee or to such Holder, then and in
every such case, subject to any determination in such proceeding, the
Company, the Guarantors, the Trustee and the Holders shall be restored
severally and respectively to their former positions hereunder and
thereafter all rights and remedies of the Trustee and the Holders shall
continue as though no such proceeding had been instituted.
SECTION 510. Rights and Remedies Cumulative.
Except as otherwise provided with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities in the last
paragraph of Section 306, no right or remedy herein conferred upon or
reserved to the Trustee or to the Holders is intended to be exclusive of
any other right or remedy, and every right and remedy shall, to the extent
permitted by law, be cumulative and in addition to every other right and
remedy given hereunder or now or hereafter existing at law or in equity or
otherwise. The assertion or employment of any right or remedy hereunder,
or otherwise, shall not prevent the concurrent assertion or employment of
any other appropriate right or remedy.
SECTION 511. Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any Holder to exercise
any right or remedy accruing upon any Event of Default shall impair any
such right or remedy or constitute a waiver of any such Event of Default or
an acquiescence therein. Every right and remedy given by this Article or
by law to the Trustee or to the Holders may be exercised from time to time,
and as often as may be deemed expedient, by the Trustee or by the Holders,
as the case may be.
SECTION 512. Control by Holders.
-44-
The Holders of a majority in aggregate principal amount of the
outstanding Securities shall have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee
or exercising any trust or power conferred on the Trustee, provided that
(1) such direction shall not be in conflict with any rule of law
or with this Indenture,
(2) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction, and
(3) the Trustee may refuse to follow any direction that the
Trustee determines in good faith is unduly prejudicial to the rights
of other Holders or would involve the Trustee in personal liability.
The Trustee shall be entitled to indemnification reasonably satisfactory to
it against losses or expenses caused by the taking of such action.
SECTION 513. Waiver of Past Defaults.
The Holders of not less than a majority in aggregate principal
amount of the outstanding Securities may on behalf of the Holders of all
the Securities waive any past Default hereunder and its consequences,
except a Default
(1) in the payment of the principal of (or premium, if any) or
interest on any Security (including any Security which is required to
have been purchased pursuant to an Offer to Purchase which has been
made by the Company), or
(2) in respect of a covenant or provision hereof which under
Article Nine cannot be modified or amended without the consent of the
Holder of each outstanding Security affected.
Upon any such waiver, such Default shall cease to exist, and any
Event of Default arising therefrom shall be deemed to have been cured, for
every purpose of this Indenture; but no such waiver shall extend to any
subsequent or other Default or impair any right consequent thereon.
SECTION 514. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this
Indenture, or in any suit against the Trustee for any action taken,
suffered or omitted by it as Trustee, a court may require any party
litigant in such suit to file an undertaking to pay the costs of such suit,
and may assess costs against any such party litigant, in the manner and to
the extent provided in the Trust Indenture Act. This Section 514 shall
not apply to a suit by the Trustee, a suit by a Holder or Holders of more
-45-
than 10% in aggregate principal amount of the outstanding Securities or any
suit instituted by any Holder to receive the payment of the principal of
(and premium, if any) or interest on any Security on or after the
respective Stated Maturities expressed in such Security (or, in the case of
redemption, on the Redemption Date or, in the case of an Offer to Purchase
made by the Company and required to be accepted as to such Security, on the
Purchase Date).
SECTION 515. Waiver of Stay or Extension Laws.
Each of the Company and the Guarantors covenants (to the extent
that it may lawfully do so) that it will not at any time insist upon, or
plead, or in any manner whatsoever claim or take the benefit or advantage
of, any stay or extension law wherever enacted, now or at any time
hereafter in force, which may affect the covenants or the performance of
this Indenture; and each of the Company and the Guarantors (to the extent
that it may lawfully do so) hereby expressly waives all benefit or
advantages of any such law and covenants that it will not hinder, delay or
impede the execution of any power herein granted to the Trustee, but will
suffer and permit the execution of every such power as though no such law
had been enacted.
ARTICLE SIX
The Trustee
SECTION 601. Certain Duties and Responsibilities.
The duties and responsibilities of the Trustee shall be as
provided by Section 315 of the Trust Indenture Act (or any successor
section of the Trust Indenture Act which sets forth the duties and
responsibilities of trustees under the Trust Indenture Act).
Notwithstanding the foregoing, no provision of this Indenture shall require
the Trustee to expend or risk its own funds or otherwise incur any
financial liability in the performance of any of its duties hereunder, or
in the exercise of any of its rights or powers, if it shall have reasonable
grounds for believing that repayment of such funds or adequate indemnity
against such risk or liability is not assured to it. Whether or not therein
expressly so provided, every provision of this Indenture relating to the
conduct or affecting the liability of or affording protection to the
Trustee shall be subject to the provisions of this Section.
-46-
SECTION 602. Notice of Default.
If a Default occurs and is known to the Trustee, the Trustee
shall, subject to the provisions of the next sentence, give the Holders
notice of such Default. Except in the case of a Default described in
Section 501(1), (2) or (3), the Trustee may withhold the notice if and so
long as a committee of its Responsible Officers in good faith determines
that withholding the notice is in the interest of the Holders.
SECTION 603. Certain Rights of Trustee.
Subject to the provisions of Section 601:
(a) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent,
order, bond, debenture, note, other evidence of indebtedness or other
paper or document believed by it to be genuine and to have been signed
or presented by the proper party or parties;
(b) any request or direction of the Company mentioned herein
shall be sufficiently evidenced by a Company Request or Company Order
and any resolution of the Board of Directors of the Company may be
sufficiently evidenced by a Board Resolution of the Company;
(c) whenever in the administration of this Indenture the Trustee
shall deem it desirable that a matter be proved or established prior
to taking, suffering or omitting any action hereunder, the Trustee
(unless other evidence be herein specifically prescribed) may, in the
absence of bad faith on its part, rely upon an Officers' Certificate;
(d) the Trustee may consult with counsel and the written advice
of such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken, suffered
or omitted by it hereunder in good faith and in reliance thereon;
(e) the Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Indenture at the request or
direction of any of the Holders pursuant to this Indenture, unless
such Holders shall have offered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities which might be
incurred by it in compliance with such request or direction;
(f) the Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture, note, other evidence of indebtedness
or other paper or document, but the Trustee, in its discretion, may
-47-
make such further inquiry or investigation into such facts or matters
as it may see fit, and, if the Trustee shall determine to make such
further inquiry or investigation, it shall be entitled to examine the
books, records and premises of the Company or any Guarantor,
personally or by agent or attorney during normal business hours; and
(g) the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or
through agents or attorneys and the Trustee shall not be responsible
for any misconduct or negligence on the part of any agent or attorney
appointed with due care by it hereunder.
SECTION 604. Not Responsible for
Issuance of Securities.
The Trustee makes no representations as to the validity or
sufficiency of this Indenture or of the Securities or of the Guarantees
endorsed thereon (except for the Trustee's certificate of authentication) or
the ability of the Company or the Guarantors to discharge their respective
obligations hereunder, including payment when due of the principal of, premium
if any, and interest on the Securities. The Trustee shall not be accountable
for the use or application by the Company of the proceeds thereof.
SECTION 605. May Hold Securities.
The Trustee, any Paying Agent or any Security Registrar or any
other agent for the Company or any Guarantor, in its individual or any
other capacity, may become the owner or pledgee of Securities and, subject
to Sections 608 and 613, may otherwise deal with the Company or any
Guarantor with the same rights it would have if it were not Trustee, Paying
Agent, Security Registrar or such other agent, as the case may be.
SECTION 606. Money Held in Trust.
Money held by the Trustee in trust hereunder need not be
segregated from other funds except to the extent required by law. The
Trustee shall be under no liability for interest on any money received by
it hereunder except as otherwise agreed with the Company or any Guarantor.
SECTION 607. Compensation and Reimbursement.
Each of the Company and the Guarantors agrees, jointly and
severally,
(1) to pay to the Trustee from time to time reasonable
compensation for all services rendered by it hereunder (which
compensation shall not be limited by any provision of law in regard to
the compensation of a trustee of an express trust);
-48-
(2) except as otherwise expressly provided herein, to reimburse
the Trustee upon its request for all reasonable expenses,
disbursements and advances incurred or made by the Trustee in
accordance with any provision of this Indenture (including the
reasonable compensation and the expenses and disbursements of its
agents and counsel), except any such expense, disbursement or advance
as may be attributable to its gross negligence or bad faith; and
(3) to indemnify the Trustee for, and to hold it harmless
against, any loss, liability or expense (including reasonable
attorneys' fees) incurred without gross negligence or bad faith on its
part, arising out of or in connection with the acceptance or
administration of this trust, including the costs and expenses of
defending itself against any claim or liability in connection with the
exercise or performance of any of its powers or duties hereunder.
To secure the Company's and the Guarantors' payment obligations
in this Section 607, the Trustee shall have a lien prior to the Securities
or the Holders on all money or property held or collected by the Trustee, except
that held in trust to pay the principal of or premium, if any, or interest on
particular Securities.
Both the Company's and the Guarantors' payment obligations
pursuant to this Section 607 shall survive the discharge of this Indenture.
When the Trustee incurs expenses after the occurrence of an Event of
Default specified in Section 501(8) or (9), the expenses are intended to
constitute expenses of administration under any bankruptcy law.
SECTION 608. Disqualification; Conflicting Interests.
If the Trustee has or shall acquire a conflicting interest within
the meaning of the Trust Indenture Act, the Trustee shall either eliminate
such interest or resign, to the extent and in the manner provided by, and
subject to the provisions of, the Trust Indenture Act and this Indenture.
SECTION 609. Corporate Trustee Required; Eligibility.
There shall at all times be a Trustee hereunder which shall be a
Person that is eligible pursuant to the Trust Indenture Act to act as such
and has a combined capital and surplus of at least $150,000,000. If such
Person publishes reports of condition at least annually, pursuant to law or
to the requirements of any supervising or examining authority, then for the
purposes of this Section, the combined capital and surplus of such Person
shall be deemed to be its combined capital and surplus as set forth in its
most recent report of condition so published. If at any time the Trustee
shall cease to be eligible in accordance with the provisions of this
Section, it shall resign immediately in the manner and with the effect
hereinafter specified in this Article.
-49-
SECTION 610. Resignation and Removal;
Appointment of Successor.
(a) No resignation or removal of the Trustee and no appointment
of a successor Trustee pursuant to this Article shall become effective
until the acceptance of appointment by the successor Trustee under Section
611.
(b) The Trustee may resign at any time by giving written notice
thereof to the Company and the Guarantors. If an instrument of acceptance
by a successor Trustee shall not have been delivered to the Trustee within
30 days after the giving of such notice of resignation, the resigning
Trustee may petition any court of competent jurisdiction for the
appointment of a successor Trustee.
(c) The Trustee may be removed at any time by Holders of a
majority in aggregate principal amount of the outstanding Securities.
(d) If at any time:
(1) the Trustee shall fail to comply with Section 608 after
written request therefor by the Company or by any Holder, or
(2) the Trustee shall cease to be eligible under Section 609 and
shall fail to resign after written request therefor by the Company or
by any Holder, or
(3) the Trustee shall become incapable of acting or shall be
adjudged a bankrupt or insolvent or a receiver of the Trustee or of
its property shall be appointed or any public officer shall take
charge or control of the Trustee or of its property or affairs for the
purpose of rehabilitation, conservation or liquidation,
then, in any such case, (i) the Company by a Board Resolution may remove
the Trustee, or (ii) subject to Section 514, any Holder may, on behalf of
himself and all other Holders, petition any court of competent jurisdiction
for the removal of the Trustee and the appointment of a successor Trustee.
(e) If the Trustee shall resign, be removed or become incapable
of acting, or if a vacancy shall occur in the office of Trustee for any
cause, the Company, by a Board Resolution, shall promptly appoint a
successor Trustee. Within one year after the successor Trustee takes
office the Holders of a majority in aggregate principal amount of the
outstanding Securities may appoint a successor Trustee to replace the
successor Trustee appointed by the Company.
(f) The Company shall give notice of each resignation and each
removal of the Trustee and each appointment of a successor Trustee to all
-50-
Holders in the manner provided in Section 104. Each notice shall include
the name of the successor Trustee and the address of its Corporate Trust
Office.
SECTION 611. Acceptance of Appointment by Successor.
Every successor Trustee appointed hereunder shall execute,
acknowledge and deliver to the Company and the Guarantors and to the
retiring Trustee an instrument accepting such appointment, and thereupon
the resignation or removal of the retiring Trustee shall become effective
and such successor Trustee, without any further act, deed or conveyance,
shall become vested with all the rights, powers, trusts and duties of the
retiring Trustee; but, on request of the Company or any Guarantor or the
successor Trustee, such retiring Trustee shall, upon payment of its
charges, execute and deliver an instrument transferring to such successor
Trustee all the rights, powers and trusts of the retiring Trustee and shall
duly assign, transfer and deliver to such successor Trustee all property
and money held by such retiring Trustee hereunder subject to the lien
provided in Section 607. Upon request of any such successor Trustee, the
Company and the Guarantors shall execute any and all instruments for more
fully and certainly vesting in and confirming to such successor Trustee all
such rights, powers and trusts.
No successor Trustee shall accept its appointment unless at the
time of such acceptance such successor Trustee shall be qualified and
eligible under this Article.
SECTION 612. Merger, Conversion, Consolidation
or Succession to Business.
Any corporation into which the Trustee may be merged or converted
or with which it may be consolidated, or any corporation resulting from any
merger, conversion or consolidation to which the Trustee shall be a party,
or any corporation succeeding to all or substantially all the corporate
trust business of the Trustee, shall be the successor of the Trustee
hereunder, provided such corporation shall be otherwise qualified and
eligible under this Article, without the execution or filing of any paper
or any further act on the part of any of the parties hereto. In case any
Securities shall have been authenticated, but not delivered, by the Trustee
then in office, any successor by merger, conversion or consolidation to
such authenticating Trustee may adopt such authentication and deliver the
Securities so authenticated with the same effect as if such successor
Trustee had itself authenticated such Securities.
SECTION 613. Preferential Collection of Claims
Against the Company and Any Guarantor.
-51-
If and when the Trustee shall be or become a creditor of the
Company, any Guarantor or any other obligor upon the Securities, the
Trustee shall be subject to the provisions of the Trust Indenture Act
regarding the collection of claims against the Company, such Guarantor or
any such other obligor.
ARTICLE SEVEN
Holders' Lists and Reports by Trustee and the Company
SECTION 701. Company To Furnish Trustee
Names and Addresses of Holders.
The Company will furnish or cause to be furnished to the Trustee
(a) semiannually, not more than 15 days prior to each Interest
Payment Date, a list, in such form as the Trustee may reasonably
require, of the names and addresses of the Holders as of such Regular
Record Date; and
(b) at such other times as the Trustee may request in writing,
within 30 days after the receipt by the Company of any such request, a
list of similar form and content as of a date not more than 15 days
prior to the time such list is furnished;
excluding from any such list, names and addresses received by the Trustee
in its capacity as Security Registrar.
SECTION 702. Preservation of Information;
Communication to Holders.
(a) The Trustee shall preserve, in as current a form as is
reasonably practicable, the names and addresses of Holders contained in the
most recent list furnished to the Trustee as provided in Section 701 and
the names and addresses of Holders received by the Trustee in its capacity
as Security Registrar. The Trustee may destroy any list furnished to it as
provided in Section 701 upon receipt of a new list so furnished.
(b) The rights of Holders to communicate with other Holders with
respect to their rights under this Indenture or under the Securities and
the corresponding rights and duties of the Trustee shall be provided by the
Trust Indenture Act.
(c) Every Holder of Securities, by receiving and holding the
same, agrees with the Company, the Guarantors and the Trustee that none of
the Company, any Guarantor, the Trustee nor any agent of any of them shall
-52-
be held accountable by reason of any disclosure of information as to the
names and addresses of Holders made pursuant to the Trust Indenture Act.
SECTION 703. Reports by Trustee.
(a) The Trustee shall transmit to Holders such reports
concerning the Trustee and its actions under this Indenture as may be
required pursuant to the Trust Indenture Act at the times and in the manner
provided pursuant thereto.
(b) A copy of each such report shall, at the time of such
transmission to Holders, be filed by the Trustee with each stock exchange
upon which the Securities are listed, with the Commission, with the Company
and each Guarantor. The Company will notify the Trustee when the
Securities are listed on any stock exchange and of any delisting thereof.
SECTION 704. Reports by Company.
The Company and the Guarantors shall file with the Trustee and
the Commission, and transmit to Holders, such information, documents and
other reports, and such summaries thereof, as may be required pursuant to
the Trust Indenture Act at the times and in the manner provided pursuant to
the Trust Indenture Act; provided that any such information, documents or
reports required to be filed with Commission pursuant to Section 13 or
15(d) of the Exchange Act shall be filed with the Trustee within 15 days
after the same is so required to be filed with the Commission.
ARTICLE EIGHT
Consolidation and Merger
SECTION 801. Mergers, Consolidations and
Certain Sales of Assets.
Neither the Company nor any Subsidiary will consolidate or merge
with or into any Person, and the Company will not, and will not permit any
of its Subsidiaries to, sell, lease, convey or otherwise dispose of all or
substantially all of the Company's consolidated assets (as an entirety or
substantially an entirety in one transaction or a series of related
transactions, including by way of liquidation or dissolution) to, any
Person unless, in each such case:
(i) the entity formed by or surviving any such consolidation or
merger (if other than the Company or such Subsidiary, as the case may
be), or to which such sale, lease, conveyance or other disposition
shall have been made (the "Surviving Entity"), is a corporation
-53-
organized and existing under the laws of the United States, any state
thereof or the District of Columbia;
(ii) the Surviving Entity assumes by supplemental indenture all
of the obligations of the Company or such Subsidiary, as the case may
be, on the Securities or such Subsidiary's Guarantee, as the case may
be, and under this Indenture;
(iii) immediately after giving effect to such transaction and the
use of any net proceeds therefrom on a pro forma basis, the
Consolidated Net Worth of the Company or the Surviving Entity (in the
case of a transaction involving the Company), as the case may be,
would be at least equal to the Consolidated Net Worth of the Company
immediately prior to such transaction;
(iv) immediately after giving effect to such transaction and the
use of any net proceeds therefrom on a pro forma basis, the Company or
the Surviving Entity (in the case of a transaction involving the
Company), as the case may be, could incur at least $1.00 of
Indebtedness pursuant to clause (a)(i) of Section 1008;
(v) immediately before and after giving effect to such
transaction and treating any Indebtedness which becomes an obligation
of the Company or any of its Subsidiaries as a result of such
transaction as having been Incurred by the Company or such Subsidiary,
as the case may be, at the time of the transaction, no Default or
Event of Default shall have occurred and be continuing; and
(vi) if, as a result of any such transaction, property or assets
of the Company or a Subsidiary of the Company would become subject to
a Lien not excepted from the provisions described under Section 1012,
the Company, any such Subsidiary or the Surviving Entity, as the case
may be, shall have secured the Securities as required by said Section
1012.
The provisions of this Section 801 shall not apply to any
consolidation or merger of a Subsidiary of the Company with or into the
Company or a Wholly Owned Subsidiary of the Company or any transaction
pursuant to which a Guarantor's Guarantee is to be released in accordance
with the terms of Section 1203 in connection with any transaction complying
with the provisions of Section 1016.
The Company or any Guarantor, as the case may be, will deliver to
the Trustee prior to consummation of the proposed transaction an Officers'
Certificate that the transaction upon consummation thereof would comply
with all of the requirements of this Section.
SECTION 802. Successor Substituted.
-54-
Upon any consolidation of the Company or any Subsidiary of the
Company with, or merger of the Company or any such Subsidiary into, any
other Person or any sale, lease, conveyance or other disposition of all or
substantially all of the Company's consolidated assets (as an entirety or
substantially as an entirety in one transaction or a series of related
transactions, including by way of liquidation or dissolution) in accordance
with Section 801, upon the execution of a supplemental indenture by the
Surviving Entity in form and substance satisfactory to the Trustee (as
evidenced by the Trustee's execution thereof), the Surviving Entity shall
succeed to, and be substituted for, and may exercise every right and power
of and shall assume all obligations of, the Company or such Subsidiary, as
the case may be, under this Indenture and the Securities or the Guarantees,
as the case may be, with the same effect as if such Surviving Entity had
been named as the Company or such Subsidiary, as the case may be, herein,
and thereafter, except in the case of a lease, the predecessor Person shall
be relieved of all obligations and covenants under this Indenture and the
Securities or the Guarantees, as the case may be.
ARTICLE NINE
Supplemental Indentures
SECTION 901. Supplemental Indentures
Without Consent of Holders.
Without the consent of any Holders, the Company and the
Guarantors, when authorized by respective Board Resolutions, and the
Trustee, at any time and from time to time, may enter into one or more
indentures supplemental hereto, in form satisfactory to the Trustee, for
any of the following purposes:
(1) to evidence the succession of another Person to the Company
and the assumption by any such successor of the covenants of the
Company herein and in the Securities; or
(2) to evidence the succession of another Person to any
Guarantor and the assumption by any such successor of the covenants of
such Guarantor herein and in the Guarantees; or
(3) to add to the covenants of the Company or the Guarantors for
the benefit of the Holders, or to surrender any right or power herein
conferred upon the Company or any Guarantor; or
(4) to secure the Securities pursuant to the requirements of
Section 1012 or otherwise; or
-55-
(5) to comply with any requirements of the Commission in order
to effect and maintain the qualification of this Indenture under the
Trust Indenture Act; or
(6) to cure any ambiguity; or
(7) to make any other change that does not adversely affect the
rights of any Holder; or
(8) to reflect the release of a Guarantor from its obligations
with respect to its Guarantee in accordance with the provisions of
Section 1203 and to add a Guarantor pursuant to the requirements of
Section 1207.
After an amendment by supplemental indenture under this Section,
the Company will mail to the Holders a notice describing the amendment;
provided, that, the failure to mail such notice will not affect the
validity of any such supplemental indenture.
SECTION 902. Supplemental Indentures
with Consent of Holders.
With the consent of the Holders of not less than a majority in
aggregate principal amount of the outstanding Securities, the Company and
the Guarantors, when authorized by respective Board Resolutions, and the
Trustee may enter into an indenture or indentures supplemental hereto for
the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of this Indenture or of modifying in any
manner the rights of the Holders under this Indenture; provided, however,
that no such supplemental indenture shall, without the consent of the
Holder of each outstanding Security affected thereby,
(1) change the Stated Maturity of the principal of, or any
installment of interest on, any Security, or reduce the principal
amount thereof or the rate of interest thereon or any premium payable
thereon, or change the place of payment where, or the coin or currency
in which, any Security or any principal, premium or interest thereon
is payable, or impair the right to institute suit for the enforcement
of any such payment on or after the Stated Maturity thereof (or, in
the case of redemption, on or after the Redemption Date or, in the
case of an Offer to Purchase, on or after the applicable Purchase
Date), or
(2) reduce the percentage in principal amount of the outstanding
Securities, the consent of whose Holders is required for any such
supplemental indenture, or the consent of whose Holders is required
for any waiver provided for in this Indenture, or
-56-
(3) modify any of the provisions of this Section or Section 513,
except to increase any such percentage or to provide that certain
other provisions of this Indenture cannot be modified or waived
without the consent of the Holder of each outstanding Security
affected thereby, or
(4) modify the ranking or priority of the Securities or the
Guarantee of any Guarantor which is a Material Subsidiary, or release
any Guarantor which is a Material Subsidiary from any of its
obligations under its Guarantee or this Indenture otherwise than in
accordance with the terms of this Indenture, or
(5) modify the provisions relating to any Offer to Purchase
(including any related definitions) required under Section 1016 or
Section 1017 in a manner materially adverse to the Holders thereof.
It shall not be necessary for the consent of the Holders under
this Section to approve the particular form of any proposed supplemental
indenture, but it shall be sufficient if such consent approves the
substance thereof.
SECTION 903. Execution of Supplemental Indentures.
In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article or the modifications
thereby of the trusts created by this Indenture, the Trustee shall be
entitled to receive, and (subject to Section 601) shall be fully protected
in relying upon, an Opinion of Counsel stating that the execution of such
supplemental indenture is authorized or permitted by this Indenture, that
such supplemental indenture complies with the terms of this Indenture and
that such supplemental indenture is enforceable against the Company, the
Guarantors or their respective successors as applicable, in accordance with
its terms. The Trustee may, but shall not be obligated to, enter into any
such supplemental indenture which affects the Trustee's own rights, duties
or immunities under this Indenture or otherwise.
SECTION 904. Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this
Article, this Indenture shall be modified in accordance therewith, and such
supplemental indenture shall form a part of this Indenture for all purpose;
and every Holder of Securities theretofore or thereafter authenticated and
delivered hereunder shall be bound thereby.
SECTION 905. Conformity with Trust Indenture Act.
Every supplemental indenture executed pursuant to this Article
shall conform to the requirements of the Trust Indenture Act.
-57-
SECTION 906. Reference in Securities
to Supplemental Indentures.
Securities authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and shall if required
by the Trustee, bear a notation in form approved by the Trustee as to any
matter provided for in such supplemental indenture. If the Company and the
Guarantors shall so determine, new Securities and the Guarantees endorsed
thereon so modified as to conform, in the opinion of the
Company and the Guarantors, to any such supplemental indenture may be
prepared and executed by the Company and the Guarantors and authenticated
and delivered by the Trustee in exchange for outstanding Securities.
SECTION 907. Revocation and Effect of Consents.
(a) Until a supplemental indenture becomes effective, a consent
to it by a Holder of a Security is a continuing consent by the Holder and
every subsequent Holder of a Security or portion of a Security that
evidences the same debt as the consenting Holder's Security, even if
notation of the consent is not made on any Security. However, any such
Holder or subsequent Holder may revoke the consent as to such Holder's
Security or portion of a Security if the Trustee receives written notice of
revocation before the date the supplemental indenture becomes effective. A
supplemental indenture becomes effective in accordance with its terms and
thereafter binds every Holder.
(b) The Company may, but will not be obligated to, fix a record
date for the purpose of determining the Holders entitled to consent to any
supplemental indenture. If a record date is fixed, then notwithstanding
the provisions of clause (a) of this Section, those Persons who were
Holders at such record date (or their duly designated proxies), and only
those Persons, will be entitled to consent to such supplemental indenture
or to revoke any consent previously given, whether or not such Persons
continue to be Holders after such record date. No consent will be valid or
effective for more than 90 days after such record date unless consents from
Holders of the principal amount of Securities required hereunder for such
supplemental indenture to be effective have also been given and not revoked
within such 90-day period.
-58-
ARTICLE TEN
Covenants
SECTION 1001. Payment of Principal, Premium and Interest.
The Company will duly and punctually pay the principal of (and
premium, if any) and interest on the Securities in accordance with and at
the interest rates specified by the terms of the Securities and this
Indenture. In the event the Company is not the Paying Agent, principal,
premium, if any, and interest will be considered paid on the date due if
the Trustee or Paying Agent holds on that date money deposited by the
Company designated for and sufficient to pay all principal, premium, if
any, and interest then due. In the event the Company, any of its
Subsidiaries or any Affiliate of the Company or any of its Subsidiaries is
the Paying Agent, principal and interest will be considered paid on the
date actual payment is mailed or delivered to the Holders entitled to such
payments.
SECTION 1002. Maintenance of Office or Agency.
The Company and the Guarantors will maintain in the Borough of
Manhattan, The City of New York, an office or agency where Securities may
be presented or surrendered for payment, where Securities may be
surrendered for registration of transfer or exchange and where notices and
demands to or upon the Company and the Guarantors in respect of the
Securities, any Guarantee endorsed on the Securities and this Indenture may
be served. The Company and the Guarantors will give prompt written notice
to the Trustee of the location, and any change in the location, of such
office or agency. If at any time the Company or any Guarantor shall fail
to maintain any such required office or agency or shall fail to furnish the
Trustee with the address thereof, such presentations, surrenders, notices
and demands may be made or served at the address of the Trustee set forth
in Section 104. The Company and the Guarantors hereby initially designate
the office of , located at ,
New York, New York as their office or agency in the Borough of
Manhattan, The City of New York, to receive all such presentations,
surrenders, notices or demands until changed as permitted in this
Indenture.
The Company may also from time to time designate one or more
other offices or agencies (in or outside the Borough of Manhattan, The City
of New York) where the Securities may be presented or surrendered for any
or all such purposes and may from time to time rescind such designations;
provided, however, that no such designation or rescission shall in any
manner relieve the Company or any Guarantor of their obligation to maintain
an office or agency in the Borough of Manhattan, The City of New York, for
such purposes. The Company will give prompt written notice to the Trustee
-59-
of any such designation or rescission and of any change in the location of
any such other office or agency.
SECTION 1003. Money for Security Payments
To Be Held in Trust.
If the Company shall at any time act as its own Paying Agent, it
will, on or before each due date of the principal of (and premium, if any)
or interest on any of the Securities, segregate and hold in trust for the
benefit of the Persons entitled thereto a sum sufficient to pay the
principal (and premium, if any) or interest so becoming due until such sums
shall be paid to such Persons or otherwise disposed of as herein provided
and will promptly notify the Trustee of its action or failure so to act.
Whenever the Company shall have one or more Paying Agents, it
will, on or before each due date of the principal of (and premium, if any)
or interest on any Securities, deposit with a Paying Agent a sum sufficient
to pay the principal (and premium, if any) or interest so becoming due,
such sum to be held in trust for the benefit of the Persons entitled to
such principal, premium or interest, and (unless such Paying Agent is the
Trustee) the Company will promptly notify the Trustee of its action or
failure so to act.
The Company will cause each Paying Agent other than the Trustee
to execute and deliver to the Trustee an instrument in which such Paying
Agent shall agree with the Trustee, subject to the provisions of this
Section, that such Paying Agent will:
(1) hold all sums held by it for the payment of the principal of
(and premium, if any) or interest on Securities in trust for the
benefit of the Persons entitled thereto until such sums shall be paid
to such Persons or otherwise disposed of as herein provided;
(2) give the Trustee notice of any Default by the Company (or
any other obligor upon the Securities) in the making of any payment of
principal (and premium, if any) or interest; and
(3) at any time during the continuance of any such Default, upon
the written request of the Trustee, forthwith pay to the Trustee all
sums so held in trust by such Paying Agent.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay,
or by Company Order direct any Paying Agent to pay, to the Trustee all sums
held in trust by the Company or such Paying Agent, such sums to be held by
the Trustee upon the same trusts as those upon which such sums were held by
the Company or such Paying Agent, as the case may be; and, upon such
-60-
payment by any Paying Agent to the Trustee, such Paying Agent shall be
released from all further liability with respect to such money.
Any money or United States Government Obligations deposited with
the Trustee or any Paying Agent, or then held by the Company, in trust for
the payment of the principal of (and premium, if any) or interest on any
Security and remaining unclaimed for two years after such principal (and
premium, if any) or interest has become due and payable shall be paid to
the Company on Company Request, or (if then held by the Company) shall be
discharged from such trust; and the Holder of such Security shall
thereafter, as an unsecured general creditor, look only to the Company and
the Guarantors for payment thereof, and all liability of the Trustee or
such Paying Agent with respect to such trust money, and all liability of
the Company as trustee thereof, shall thereupon cease; provided, however,
that the Trustee or such Paying Agent, before being required to make any
such repayment in excess of $50,000, may at the expense of the Company
cause to be published once, in a newspaper published in the English
language, customarily published on each Business Day and of general
circulation in The City of New York, notice that such money remains
unclaimed and that, after a date specified therein, which shall not be less
than 30 days from the date of such publication, any unclaimed balance of
such money then remaining will be repaid to the Company.
SECTION 1004. Existence.
Subject to Article Eight and Section 1016, the Company will do or
cause to be done all things necessary to, and will cause each of its
Subsidiaries to, preserve and keep in full force and effect its respective
existence, rights (charter and statutory) and franchises; provided,
however, that neither the Company nor any of its Subsidiaries shall be
required to preserve any such right or franchise if the Board of Directors
of the Company in good faith shall determine that the preservation thereof
is no longer desirable in the conduct of the business of the Company or
such Subsidiary, as the case may be, and that the loss thereof is not
disadvantageous in any material respect to the Holders.
SECTION 1005. Maintenance of Properties.
The Company will cause all material properties used or useful in
the conduct of its business or the business of any Subsidiary of the
Company to be maintained and kept in good condition, repair and working
order and supplied with all necessary equipment and will cause to be made
all necessary repairs, renewals, replacements, betterments and improvements
thereof, all as in the judgment of the Company may be necessary so that the
business carried on in connection therewith may be properly and
advantageously conducted at all times; provided, however, that nothing in
this Section shall prevent the Company from discontinuing the operation or
maintenance of any of such properties if such discontinuance is, as
-61-
determined by the Company in good faith, desirable in the conduct of its
business or the business of any Subsidiary and not disadvantageous in any
material respect to the Holders.
SECTION 1006. Payment of Taxes and Other Claims.
The Company will pay or discharge or cause to be paid or
discharged, before the same shall become delinquent, all (i) taxes,
assessments and governmental charges levied or imposed upon the Company or
any of its Subsidiaries or upon the income, profits or property of the
Company or any of its Subsidiaries and (ii) lawful claims for labor,
materials and supplies which, in each case, if unpaid, might by law become
a material liability or Lien upon any property of the Company or any of its
Subsidiaries; provided, however, that the Company shall not be required to
pay or discharge or cause to be paid or discharged any such tax,
assessment, charge or claim whose amount, applicability or validity is
being contested in good faith by appropriate proceedings promptly
instituted and diligently conducted and for which an adequate reserve has
been established to the extent required by GAAP.
SECTION 1007. Maintenance of Insurance.
The Company shall, and shall cause each of its Subsidiaries to,
keep at all times all of their properties which are of an insurable nature
insured against loss or damage with insurers believed by the Company to be
responsible to the extent that property of similar character is usually so
insured by corporations similarly situated and owning like properties in
accordance with good business practice. The Company shall, and shall cause
each of its Subsidiaries to, use the proceeds from any such insurance
policy to invest in the business of the Company or such Subsidiary, as the
case may be, or otherwise as the Board of Directors of the Company shall
determine in its good faith judgment.
SECTION 1008. Limitation on Indebtedness.
(a) The Company will not, and will not permit any of its
Subsidiaries to, Incur any Indebtedness except, subject to the provisions
set forth in Section 1009: (i) Indebtedness of the Company or its
Subsidiaries, if immediately after giving effect to the Incurrence of such
Indebtedness and the receipt and application of the net proceeds thereof,
the Consolidated Cash Flow Ratio of the Company for the four full fiscal
quarters for which quarterly or annual financial statements are available
next preceding the Incurrence of such Indebtedness, calculated on a pro
forma basis as if such Indebtedness had been incurred at the beginning of
such four full fiscal quarters, would be greater than 2.00 to 1 if such
Indebtedness is Incurred on or before December 31, 1997 and 2.25 to 1 if
such Indebtedness is Incurred after December 31, 1997; (ii) Indebtedness of
the Company, and guarantees of such Indebtedness by any Guarantor, Incurred
-62-
under the Senior Credit Facility in an aggregate principal amount at any
one time not to exceed the greater of (x) $225 million or (y) the sum of
(A) 80% of Eligible Accounts Receivable and (B) 65% of Eligible Inventory;
(iii) Indebtedness owed by the Company to any Wholly Owned Subsidiary of
the Company (provided that such Indebtedness is at all times held by a
Person which is a Wholly Owned Subsidiary of the Company) or Indebtedness
owed by a Subsidiary of the Company to the Company or a Wholly Owned
Subsidiary of the Company (provided that such Indebtedness is at all times
held by the Company or a Person which is a Wholly Owned Subsidiary of the
Company); provided, however, upon either (x) the transfer or other
disposition by such Wholly Owned Subsidiary or the Company of any
Indebtedness so permitted under this clause (iii) to a Person other than
the Company or another Wholly Owned Subsidiary of the Company or (y) the
issuance (other than directors' qualifying shares), sale, transfer or other
disposition of shares of Capital Stock or other ownership interests
(including by consolidation or merger) of such Wholly Owned Subsidiary to a
Person other than the Company or another such Wholly Owned Subsidiary of
the Company, the provisions of this clause (iii) shall no longer be
applicable to such Indebtedness and such Indebtedness shall be deemed to
have been Incurred at the time of any such issuance, sale, transfer or
other disposition, as the case may be; (iv) Indebtedness Incurred by a
Person prior to the time (x) such Person becomes a Subsidiary of the
Company, (y) such Person merges into or consolidates with a Subsidiary of
the Company or (z) another Subsidiary of the Company merges into or
consolidates with such Person (in a transaction in which such Person
becomes a Subsidiary of the Company), which Indebtedness was not Incurred
in anticipation or contemplation of such transaction and was outstanding
prior to such transaction; (v) Indebtedness of the Company or its
Subsidiaries under any interest rate or currency swap agreement to the
extent entered into to hedge any other Indebtedness permitted under this
Indenture; (vi) Capital Lease Obligations of the Company or its
Subsidiaries Incurred with respect to a Sale and Leaseback Transaction
which was made in accordance with the provisions of Section 1013;
(vii) Indebtedness Incurred to renew, extend, refinance or refund
(collectively for purposes of this clause (vii), to "refund") any
Indebtedness outstanding on the Issue Date and Indebtedness Incurred under
the prior clause (i) or the Securities; provided, however, that (x) such
Indebtedness does not exceed the principal amount of Indebtedness so
refunded plus the amount of any premium required to be paid in connection
with such refunding pursuant to the terms of the Indebtedness refunded or
the amount of any premium reasonably determined by the Company as necessary
to accomplish such refunding by means of a tender offer, exchange offer or
privately negotiated repurchase, plus the expenses of the Company or such
Subsidiary Incurred in connection therewith and (y)(A) in the case of any
refunding of Indebtedness which is pari passu with the Securities, such
refunding Indebtedness is made pari passu with or subordinate in right of
payment to the Securities, and, in the case of any refunding of
Indebtedness which is subordinate in right of payment to the Securities,
-63-
such refunding Indebtedness is subordinate in right of payment to the
Securities on terms no less favorable to the Holders than those contained
in the Indebtedness being refunded and (B) in either case, the refunding
Indebtedness by its terms, or by the terms of any agreement or instrument
pursuant to which such Indebtedness is issued, does not have an Average
Life that is less than the remaining Average Life of the Indebtedness being
refunded and does not permit redemption or other retirement (including
pursuant to any required offer to purchase to be made by the Company or a
Subsidiary of the Company) of such Indebtedness at the option of the holder
thereof prior to the final stated maturity of the Indebtedness being
refunded, other than a redemption or other retirement at the option of the
holder of such Indebtedness (including pursuant to a required offer to
purchase made by the Company or a Subsidiary of the Company) which is
conditioned upon a change of control of the Company pursuant to provisions
substantially similar to those contained in Section 1017;
(viii) Indebtedness of the Company or its Subsidiaries Incurred for the
purpose of financing all or any part of the purchase price or the cost of
construction or improvement of any property, provided that the aggregate
principal amount of such Indebtedness does not exceed 100% of such purchase
price or cost and any Lien associated with such Indebtedness complies with
clause (iv) of Section 1012; (ix) Indebtedness of the Company or its
Subsidiaries not otherwise permitted to be Incurred pursuant to clauses (i)
through (viii) above which, together with any other outstanding
Indebtedness Incurred pursuant to this clause (ix), has an aggregate
principal amount not in excess of $10 million at any time outstanding; and
(x) Indebtedness of the Company and its Subsidiaries under the Securities
and the Guarantees.
(b) The Company will not, and the Company will not cause or
permit any Guarantor to, directly or indirectly, Incur any Indebtedness
that purports to be by its terms (or by the terms of any agreement
governing such Indebtedness) subordinated in right of payment to any other
Indebtedness of the Company or of such Guarantor, as the case may be,
unless such Indebtedness is also by its terms (or by the terms of any
agreement governing such Indebtedness) made expressly subordinated in right
of payment to the Securities or the Guarantee of such Guarantor, as the
case may be, to the same extent and in the same manner as such Indebtedness
is subordinated to such other Indebtedness of the Company or such
Guarantor, as the case may be.
SECTION 1009. Additional Limitation on
Subsidiary Indebtedness.
In addition to the restrictions on the Incurrence of Indebtedness
set forth in Section 1008, the Company will not permit any of its
Subsidiaries to Incur any Indebtedness (other than the guarantee of
Indebtedness under the Senior Credit Facility) in an amount which, when
aggregated with (A) all Indebtedness (other than any Indebtedness included
-64-
in the following clause (B) or (C)) secured by Liens permitted by the
provisions of clause (viii) of Section 1012 and then outstanding, (B) all
Capital Lease Obligations of the Company and its Subsidiaries Incurred in
compliance with the provisions of Section 1008 and then outstanding and (C)
all other Indebtedness of Subsidiaries of the Company (other than the
guarantee of Indebtedness under the Senior Credit Facility) Incurred in
compliance with Section 1008 and then outstanding, would exceed 10% of
Consolidated Net Tangible Assets.
SECTION 1010. Limitation on Restricted Payments.
The Company will not, and will not permit any of its Subsidiaries
to, (i) directly or indirectly, declare or pay any dividend, or make any
distribution of any kind or character (whether in cash, property or
securities), in respect of any class of its Capital Stock or to the holders
thereof, excluding any (x) dividends or distributions payable solely in
shares of its Capital Stock (other than Disqualified Stock) or in options,
warrants or other rights to acquire its Capital Stock (other than
Disqualified Stock), or (y) in the case of any Subsidiary of the Company,
dividends or distributions payable to the Company or a Subsidiary of the
Company, (ii) directly or indirectly, purchase, redeem or otherwise acquire
or retire for value shares of Capital Stock of the Company or any of its
Subsidiaries, any options, warrants or rights to purchase or acquire shares
of Capital Stock of the Company or any of its Subsidiaries or any
securities convertible or exchangeable into shares of Capital Stock of the
Company or any of its Subsidiaries, excluding any such shares of Capital
Stock, options, warrants, rights or securities which are owned by the
Company or a Subsidiary of the Company, (iii) make any Investment in (other
than a Permitted Investment), or payment on a guarantee of any obligation
of, any Person, other than the Company or a Wholly Owned Subsidiary of the
Company, or (iv) redeem, defease, repurchase, retire or otherwise acquire
or retire for value, prior to any scheduled maturity, repayment or sinking
fund payment, Indebtedness which is subordinate in right of payment to the
Securities (each of clauses (i) through (iv) being a "Restricted Payment")
if at the time thereof:
(1) an Event of Default, or a Default, shall have occurred and
be continuing, or
(2) upon giving effect to such Restricted Payment, the Company
could not Incur at least $1.00 of additional Indebtedness pursuant to
clause (i) of Section 1008, or
(3) upon giving effect to such Restricted Payment, the aggregate
of all Restricted Payments declared or made after the Issue Date
exceeds the sum of:
-65-
(a) 50% of cumulative Consolidated Net Income of the
Company (or, in the case Consolidated Net Income of the Company
shall be negative, less 100% of such deficit) since the end of
the fiscal quarter in which the Issue Date occurs through the
last day of the fiscal quarter for which financial statements are
available; plus
(b) 100% of the aggregate net proceeds received after the
Issue Date, including the fair market value of property other
than cash (determined in good faith by the Board of Directors of
the Company as evidenced by a resolution of such Board of
Directors filed with the Trustee), from the issuance of Capital
Stock (other than Disqualified Stock) of the Company and
warrants, rights or options on Capital Stock (other than
Disqualified Stock) of the Company and the principal amount of
Indebtedness that has been converted into or exchanged for
Capital Stock (other than Disqualified Stock) of the Company
which Indebtedness was Incurred after the Issue Date; plus
(c) in the case of the disposition or repayment of any
Investment constituting a Restricted Payment made after the Issue
Date (other than any Investment made pursuant to clause (vi) of
the following paragraph), an amount equal to the lesser of the
return of capital with respect to such Investment and the cost
of such Investment, in either case, less the cost of the
disposition of such Investment, provided that at the time any
such Investment is made the Company delivers to the Trustee a
resolution of its Board of Directors to the effect that, for
purposes of this Section, such Investment constitutes a
Restricted Payment made after the Issue Date (other than an
Investment made pursuant to clause (vi) of the following
paragraph); plus
(d) $4 million.
The foregoing provision will not be violated by (i) reason of any
dividend on any class of the Capital Stock of the Company or any Subsidiary
of the Company paid within 60 days after the declaration thereof if, on the
date when the dividend was declared, the Company or such Subsidiary, as the
case may be, could have paid such dividend in accordance with the
provisions of this Indenture, (ii) the renewal, extension, refunding or
refinancing of any Indebtedness otherwise permitted pursuant to clause
(vii) of Section 1008, (iii) the exchange or conversion of any Indebtedness
of the Company or any Subsidiary of the Company for or into Capital Stock
of the Company (other than Disqualified Stock of the Company), (iv) any
payments, loans or other advances made pursuant to any employee benefit
plans (including plans for the benefit of directors) or employment
agreements or other compensation arrangements, in each case as approved by
-66-
the Board of Directors of the Company in its good faith judgment evidenced
by a resolution of such Board of Directors filed with the Trustee, (v) the
redemption of the Company's rights issued pursuant to the Rights Agreement
dated as of March 20, 1990, between the Company and Sovran Bank, N.A. (now
NationsBank of Virginia, N.A.), as
Rights Agent, as in existence on the Issue Date or (vi) so long as no
Default or Event of Default has occurred and is continuing, additional
Investments constituting Restricted Payments in an aggregate outstanding
amount (valued at the cost thereof) not to exceed at any time 5% of
Consolidated Net Tangible Assets. Each Restricted Payment described in
clauses (i), (iv) and (v) of the previous sentence shall be taken into
account for purposes of computing the aggregate amount of all Restricted
Payments pursuant to clause (3) of the first paragraph of this Section
above.
SECTION 1011. Limitations Concerning Distributions
and Transfers by Subsidiaries.
The Company will not, and will not permit any of its Subsidiaries
to, directly or indirectly, create or otherwise cause or suffer to exist
any consensual encumbrance or restriction on the ability of any Subsidiary
of the Company (i) to pay, directly or indirectly, dividends or make any
other distributions in respect of its Capital Stock or pay any Indebtedness
or other obligation owed to the Company or any Subsidiary of the Company,
(ii) to make loans or advances to the Company or any Subsidiary of the
Company or (iii) to transfer any of its property or assets to the Company
or any Subsidiary of the Company except for such encumbrances or
restrictions existing under or by reason of (a) any agreement in effect on
the Issue Date, (b) an agreement relating to any Indebtedness Incurred by
such Subsidiary prior to the date on which such Subsidiary was acquired by
the Company and outstanding on such date and not Incurred in anticipation
or contemplation of becoming a Subsidiary and provided such encumbrance or
restriction shall not apply to any assets of the Company or its
Subsidiaries other than such Subsidiary, (c) customary provisions contained
in an agreement which has been entered into for the sale or disposition of
all or substantially all of the Capital Stock or assets of such Subsidiary
or (d) an agreement effecting a renewal, exchange, refunding or extension
of Indebtedness Incurred pursuant to an agreement referred to in clause (a)
or (b) above; provided, however, that the provisions contained in such
renewal, exchange, refunding or extension agreement relating to such
encumbrance or restriction are no more restrictive in any material respect
than the provisions contained in the agreement the subject thereof in the
reasonable judgment of the Board of Directors of the Company as evidenced
by a resolution of such Board of Directors filed with the Trustee.
SECTION 1012. Limitation on Liens.
The Company will not, and will not permit any of its Subsidiaries
to, Incur any Lien on or with respect to any property or assets of the
-67-
Company or any Subsidiary of the Company owned on the Issue Date or
thereafter acquired to secure Indebtedness without making, or causing such
Subsidiary to make, effective provision for securing the Securities (and,
if the Company shall so determine, any other Indebtedness of the Company or
such Subsidiary, including Indebtedness which is subordinate in right of
payment to the Securities, provided that Liens securing the Securities and
any Indebtedness pari passu with the Securities are senior to such Liens
securing such subordinated Indebtedness) equally and ratably with such
Indebtedness or, in the event such Indebtedness is subordinate in right of
payment to the Securities, prior to such Indebtedness, as to such property
or assets for so long as such Indebtedness shall be so secured.
The foregoing restrictions shall not apply to (i) Liens in
respect of Indebtedness existing on the Issue Date; (ii) Liens securing
only the Securities; (iii) Liens in favor of the Company; (iv) Liens to
secure Indebtedness Incurred for the purpose of financing all or any part
of the purchase price or the cost of construction or improvement of the
property subject to such Liens; provided that (a) the aggregate principal
amount of any Indebtedness secured by such a Lien does not exceed 100% of
such purchase price or cost, (b) such Lien does not extend to or cover any
other property other than such item of property and any improvements on
such item, (c) the Indebtedness secured by such Lien is Incurred by the
Company or its Subsidiary within 180 days of the acquisition, construction
or improvement of such property and (d) the Incurrence of such Indebtedness
is permitted by Sections 1008 and 1009; (v) Liens on property existing
immediately prior to the time of acquisition thereof (and not created in
anticipation or contemplation of the financing of such acquisition);
(vi) Liens on property of a Person existing at the time such Person is
merged with or into or consolidated with the Company or any Subsidiary of
the Company (and not created in anticipation or contemplation thereof);
(vii) Liens on property of the Company or any Subsidiary of the Company in
favor of the United States of America, any state thereof or any
instrumentality of either to secure payments pursuant to any contract or
statute; (viii) Liens securing an aggregate principal amount of
Indebtedness at any one time outstanding which, when taken together with
(A) all Capital Lease Obligations of the Company and its Subsidiaries
Incurred in compliance with Sections 1008 and 1009 and then outstanding and
(B) all other Indebtedness of Subsidiaries of the Company Incurred in
compliance with Sections 1008 and 1009 and then outstanding, would not
exceed 10% of Consolidated Net Tangible Assets; and (ix) Liens to secure
Indebtedness incurred to extend, renew, refinance or refund (or successive
extensions, renewals, refinancings or refundings), in whole or in part, any
Indebtedness secured by Liens referred to in the foregoing clause (i) so
long as such Lien does not extend to any other property and the principal
amount of Indebtedness so secured is not increased except for the amount of
any premium required to be paid in connection with such refinancing
pursuant to the terms of the Indebtedness refinanced or the amount of any
premium reasonably determined by the Company as necessary to accomplish
-68-
such refinancing by means of a tender offer, exchange offer or privately
negotiated repurchase, plus the expenses of the Company or such Subsidiary
Incurred in connection with such refinancing.
SECTION 1013. Limitations on Sale and
Leaseback Transactions.
The Company will not, and will not permit any of its Subsidiaries
to, enter into any Sale and Leaseback Transaction (except for a period not
exceeding 30 months) unless the Company or such Subsidiary applies the net
proceeds of the property sold pursuant to the Sale and Leaseback
Transaction as if such net proceeds were Net Available Proceeds subject to
disposition as provided in Section 1016.
SECTION 1014. Limitation on Issuance and Sale
of Capital Stock of Subsidiaries.
The Company (a) will not, and will not permit any Subsidiary of
the Company to, transfer, convey, sell or otherwise dispose of any shares
of Capital Stock of such Subsidiary or any other Subsidiary (other than to
the Company or a Wholly Owned Subsidiary of the Company) except that the
Company and any Subsidiary may, in any single transaction, sell all, but
not less than all, of the issued and outstanding Capital Stock of any
Subsidiary to any Person, subject to complying with the provisions of
Section 1016, and (b) will not permit any Subsidiary of the Company to
issue shares of its Capital Stock (other than directors' qualifying
shares), or securities convertible into, or warrants, rights or options to
subscribe for or purchase shares of, its Capital Stock to any Person other
than to the Company or a Wholly Owned Subsidiary of the Company.
SECTION 1015. Transactions with Affiliates and
Related Persons.
The Company will not, and will not permit any of its Subsidiaries
to, enter into any transaction with an Affiliate or Related Person of the
Company (other than the Company or a Subsidiary of the Company), including,
without limitation, the purchase, sale, lease or exchange of property, the
rendering of any service, or the making of any guarantee, loan, advance or
Investment, either directly or indirectly, involving aggregate
consideration in excess of $500,000, unless (i) a majority of the
disinterested directors of the Board of Directors of the Company
determines, in its good faith judgment evidenced by a resolution of such
Board of Directors filed with the Trustee, that such transaction is in the
best interests of the Company or such Subsidiary, as the case may be; and
(ii) such transaction is, in the opinion of a majority of the disinterested
directors of the Board of Directors of the Company evidenced by a
resolution of such Board of Directors filed with the Trustee, on terms no
less favorable to the Company or such Subsidiary, as the case may be, than
-69-
those that could be obtained in a comparable arm's length transaction with
an entity that is not an Affiliate or a Related Person.
SECTION 1016. Limitation on Certain Asset Dispositions.
(a) The Company will not, and will not permit any of its
Subsidiaries to, make one or more Asset Dispositions for aggregate
consideration of, or in respect of assets having an aggregate fair market
value of, $5 million or more in any 12-month period, unless:
(i) the Company or the Subsidiary, as the case may be, receives
consideration for such Asset Disposition at least equal to the fair
market value of the assets sold or disposed of as determined by the
Board of Directors of the Company in good faith and evidenced by a
resolution of such Board of Directors filed with the Trustee;
(ii) not less than 75% of the consideration for the disposition
consists of cash or readily marketable cash equivalents or the
assumption of Indebtedness of the Company or such Subsidiary or other
obligations relating to such assets (and release of the Company or
such Subsidiary from all liability on the Indebtedness or other
obligations assumed); and
(iii) all Net Available Proceeds, less any amounts invested within
360 days of such Asset Disposition in assets related to the business
of the Company (including the Capital Stock of another Person (other
than the Company or any Person that is a Subsidiary of the Company
immediately prior to such investment), provided that immediately after
giving effect to any such investment (and not prior thereto) such
Person shall be a Subsidiary of the Company), are applied either
(A) to an Offer to Purchase outstanding Securities at 100% of their
principal amount plus accrued interest to the Purchase Date or (B) to
the permanent reduction and repayment of Indebtedness then outstanding
under the Senior Credit Facility, to the repayment of other
Indebtedness that is not subordinated in right of payment to the
Securities and to the purchase of Securities pursuant to an Offer to
Purchase outstanding Securities at 100% of their principal amount plus
accrued interest to the Purchase Date, provided that (x) any Net
Available Proceeds not applied to the repayment of Indebtedness under
the Senior Credit Facility or other Indebtedness not subordinated in
right of payment to the Securities in accordance with subclause (B) of
this clause (iii) shall be added to the Net Available Proceeds to be
used for an Offer to Purchase outstanding Securities and (y) the
Company may defer making any Offer to Purchase outstanding Securities
until there are aggregate unutilized Net Available Proceeds equal to
or in excess of $5 million resulting from one or more Asset
Dispositions (at which time, the entire unutilized Net Available
-70-
Proceeds, and not just the amount in excess of $5 million, shall be
applied as required pursuant to this paragraph).
Any repayment of Indebtedness in accordance with the foregoing
subclause (B) of clause (iii) shall be made pro rata, based on the
principal amount (or, in the case of Indebtedness having unamortized
discount, the accreted value thereof) of such Indebtedness outstanding.
Any remaining Net Available Proceeds following the completion of the Offer
to Purchase may be used by the Company for any other purpose (subject to
the other provisions of this Indenture) and the amount of Net Available
Proceeds then required to be otherwise applied in accordance with this
Section shall be reset to zero, subject to any subsequent Asset
Disposition.
In the event that the Company makes an Offer to Purchase the
Securities, the Company intends to comply with any applicable securities
laws and regulations, including any applicable requirements of Section
14(e) of, and Rule 14e-1 under, the Exchange Act, and any violation of the
provisions of this Indenture relating to such Offer to Purchase occurring
as a result of such compliance shall not be deemed an Event of Default or
a Default.
(b) The Company will mail the Offer for an Offer to Purchase
required pursuant to Section 1015(a) not more than 365 days after
consummation of the Asset Disposition resulting in the Offer to Purchase.
Each Holder shall be entitled to tender all or any portion of the
Securities owned by such Holder pursuant to the Offer to Purchase, subject
to the requirement that any portion of a Security tendered must be tendered
in an integral multiple of $1,000 principal amount and subject to any
proration of the Offer among tendering Holders if the aggregate amount of
Securities tendered exceeds the Net Available Proceeds.
(c) Not later than the date of the Offer with respect to an
Offer to Purchase pursuant to this Section 1015, the Company shall deliver
to the Trustee an Officers' Certificate as to the Purchase Amount.
On or prior to the Purchase Date specified in the Offer to
Purchase, the Company shall (i) accept for payment (on a pro rata basis, if
necessary) Securities or portions thereof validly tendered pursuant to the
Offer, (ii) deposit with the Paying Agent (or, if the Company is acting as
its own Paying Agent, segregate and hold in trust as provided in Section
1003) money sufficient to pay the Purchase Price of all Securities or
portions thereof so accepted and (iii) deliver or cause to be delivered to
the Trustee for cancellation all Securities so accepted together with
an Officers' Certificate stating the Securities or portions thereof accepted
for payment by the Company. The Paying Agent (or the Company, if so
acting) shall promptly mail or deliver to Holders of Securities so accepted
payment in an amount equal to the Purchase Price for such Securities, and
the Trustee
-71-
shall promptly authenticate and mail or deliver to each Holder a new
Security or Securities equal in principal amount to any unpurchased portion
of the Security surrendered as requested by the Holder. Any Security not
accepted for payment shall be promptly mailed or delivered by the Company
to the Holder thereof. The Company shall publicly announce the results of
the Offer on or as soon as practicable after the Purchase Date.
(d) Notwithstanding the foregoing, this Section 1016 shall not
apply to any Asset Disposition consummated in compliance with the
provisions of Section 801 or 1013 (with respect to an asset leased for a
period not exceeding 30 months pursuant to a Sale and Leaseback
Transaction).
SECTION 1017. Change of Control.
(a) The Company shall, within 30 days following the date of the
consummation of a transaction resulting in a Change of Control, mail an
Offer with respect to an Offer to Purchase all outstanding Securities at a
purchase price equal to 101% of their aggregate principal amount plus
accrued interest to the Purchase Date. Each Holder shall be entitled to
tender all or any portion of the Securities owned by such Holder pursuant
to the Offer to Purchase, subject to the requirement that any portion of a
Security tendered must be tendered in an integral multiple of $1,000
principal amount.
(b) On or prior to the Purchase Date specified in the Offer to
Purchase, the Company shall (i) accept for payment all Securities or
portions thereof validly tendered pursuant to the Offer, (ii) deposit with
the Paying Agent (or, if the Company is acting as its own Paying Agent,
segregate and hold in trust as provided in Section 1003) money sufficient
to pay the Purchase Price of all Securities or portions thereof so accepted
and (iii) deliver or cause to be delivered to the Trustee for cancellation
all Securities so accepted together with an Officers' Certificate stating
the Securities or portions thereof accepted for payment by the Company. The
Paying Agent (or the Company, if so acting) shall promptly mail or deliver
to Holders of Securities so accepted payment in an amount equal to the Purchase
Price for such Securities, and the Trustee shall promptly authenticate and
mail or deliver to each Holder a new Security or Securities equal in principal
amount to any unpurchased portion of the Security surrendered as requested
by the Holder. Any Security not accepted for payment shall be promptly
mailed or delivered by the Company to the Holder thereof. The Company
shall publicly announce the results of the Offer on or as soon as
practicable after the Purchase Date.
(c) A "Change of Control" will be deemed to have occurred in the
event that (whether or not otherwise permitted by this Indenture) after the
Issue Date (a) any Person or any Persons acting together that would
constitute a "group" (for purposes of Section 13(d) of the Exchange Act, or
-72-
any successor provision thereto) (a "Group"), together with any Affiliates
or Related Persons thereof, shall beneficially own (as defined in Rule 13d-
3 under the Exchange Act, or any successor provision thereto) at least 40%
of the Voting Stock of the Company (as a result of open market purchases,
tender offer, merger, consolidation or otherwise); (b) any sale, lease or
other transfer (in one transaction or a series of related transactions) by
the Company or any of its Subsidiaries of all or substantially all of the
consolidated assets of the Company to any Person (other than a Wholly Owned
Subsidiary of the Company); (c) Continuing Directors cease to constitute at
least a majority of the Board of Directors of the Company; or (d) the
stockholders of the Company approve any plan or proposal for the
liquidation or dissolution of the Company.
In the event that the Company makes an Offer to Purchase the
Securities, the Company intends to comply with any applicable securities
laws and regulations, including any applicable requirements of Section
14(e) of, and Rule 14e-1 under, the Exchange Act and any violation of the
provisions of this Indenture relating to such Offer to Purchase occurring
as a result of such compliance shall not be deemed a Default or an Event of
Default.
SECTION 1018. Provision of Financial Information.
Whether or not the Company is subject to Section 13(a) or 15(d)
of the Exchange Act, or any successor provision thereto, the Company will
file with the Commission the annual reports, quarterly reports and other
documents which the Company would have been required to file with the
Commission pursuant to such Section 13(a) or 15(d) or any successor
provision thereto if the Company were so required, such documents to be
filed with the Commission on or prior to the respective dates (the
"Required Filing Dates") by which the Company would have been required so
to file such documents if the Company were so required. The Company will
also in any event (a) within 15 days of each Required Filing Date (i)
transmit by mail to all Holders, as their names and addresses appear in the
Security Register, without cost to such Holders, and (ii) file with the
Trustee, copies of the annual reports, quarterly reports and other
documents which the Company is required to file with the Commission
pursuant to the preceding sentence, and (b) if, notwithstanding the
preceding sentence, the filing of such documents by the Company with the
Commission is not permitted under the Exchange Act, promptly upon written
request supply copies of such documents to any prospective Holder. The
Company will also comply with Section 314(a) of the Trust Indenture Act.
SECTION 1019. Statement by Officers as to Default;
Compliance Certificates.
(a) The Company will deliver to the Trustee, within 90 days
after the end of each fiscal year of the Company ending after the Issue
-73-
Date, an Officers' Certificate stating that a review of the activities of
the Company and its Subsidiaries has been made under the supervision of the
signing officers with a view to determining whether the Company and each of
the Guarantors has kept, observed, performed and fulfilled its obligations
under this Indenture, and further stating, as to each such officer signing
such certificate, that, to the best of his knowledge, the Company and each
of the Guarantors have kept, observed, performed and fulfilled each and
every covenant contained in this Indenture and there is not existing any
Default or Event of Default (or, if a Default or Event of Default shall
have occurred, describing all such Defaults or Events of Default of which
he may have knowledge and what action the Company and each of the
Guarantors are taking or propose to take with respect thereto). For
purposes of this paragraph, such compliance shall be determined without
regard to any period of grace or requirement of notice. The first
certificate to be delivered by the Company pursuant to this Section 1019
shall be for the fiscal year ending on or about the end of December 1995.
(b) The Company shall deliver to the Trustee, as soon as
possible after the Company becomes aware of the occurrence of a Default or
Event of Default, an Officers' Certificate setting forth the details of
such Default or Event of Default, and the action which the Company and the
Guarantors propose to take with respect thereto.
(c) So long as (and to the extent) not contrary to the then
current recommendations of the American Institute of Certified Public
Accountants, the Company shall deliver to the Trustee within 90 days after
the end of each fiscal year a written statement by the Company's
independent public accountants stating (A) that their audit examination has
included a review of the terms of this Indenture, the Securities and the
Guarantees as they relate to accounting matters, and (B) whether, in
connection with their audit examination, any Default or Event of Default
has come to their attention and, if such a Default or Event of Default has
come to their attention, specifying the nature and period of the existence
thereof.
SECTION 1020. Special Covenants of the Guarantors.
Each Guarantor of the Securities issued under this Indenture will
comply with each of the covenants contained in this Indenture that impose
restrictions or obligations on such Guarantor (by virtue of being a
Guarantor or otherwise) notwithstanding that the text of such covenant is
worded as a restriction on or obligation of the Company.
ARTICLE ELEVEN
Redemption of Securities
-74-
SECTION 1101. Right of Redemption.
The Securities may be redeemed at the election of the Company, as
a whole or from time to time in part, at the times and at the Redemption
Prices specified in the form of Security set forth in Section 203 together
with any applicable accrued interest to the Redemption Date.
SECTION 1102. Applicability of Article.
Redemption of Securities at the election of the Company, as
permitted by any provision of this Indenture, shall be made in accordance
with such provision and this Article.
SECTION 1103. Election To Redeem; Notice to Trustee.
The election of the Company to redeem any Securities pursuant to
Section 1101 shall be evidenced by a Board Resolution of the Company
delivered to the Trustee. In case of any redemption at the election of the
Company of less than all the Securities, the Company shall, at least 60
days prior to the Redemption Date fixed by the Company (unless a shorter
notice shall be satisfactory to the Trustee), notify the Trustee of such
Redemption Date and of the principal amount of Securities to be redeemed.
SECTION 1104. Selection by Trustee of
Securities To Be Redeemed.
If less than all the Securities are to be redeemed, the
particular Securities to be redeemed shall be selected not more than 60
days prior to the Redemption Date by the Trustee, from all outstanding
Securities not previously called for redemption, by such method as the
Trustee shall deem fair and appropriate and which may provide for the
selection for redemption of portions (equal to $1,000 or any integral
multiple thereof) of the principal amount of Securities of a denomination
larger than $1,000.
The Trustee shall promptly notify the Company and the Security
Registrar in writing of the Securities selected for redemption and, in the
case of any Securities selected for partial redemption, the principal
amount thereof to be redeemed.
For all purposes of this Indenture, all provisions relating to
the redemption of Securities shall relate, in the case of any Securities
redeemed or to be redeemed only in part, to the portion of the principal
amount of such Securities which has been or is to be redeemed.
SECTION 1105. Notice of Redemption.
-75-
Notice of redemption shall be given by first-class mail, postage
prepaid, mailed not less than 30 nor more than 60 days prior to the
Redemption Date, to each Holder of Securities to be redeemed, at his
address appearing in the Security Register.
All notices of redemption shall state:
(1) the Redemption Date,
(2) the Redemption Price,
(3) if less than all the outstanding Securities are to be
redeemed, the identification (and, in the case of partial redemption,
the principal amounts) of the particular Securities to be redeemed,
(4) that on the Redemption Date the Redemption Price will become
due and payable upon each such Security to be redeemed and that,
unless the Company shall default in the payment of the Redemption
Price and any applicable accrued interest, interest thereon will cease
to accrue on and after said date, and
(5) the place or places where such Securities are to be
surrendered for payment of the Redemption Price.
Notice of redemption of Securities to be redeemed at the election
of the Company shall be given by the Company or, at the Company's request,
by the Trustee in the name and at the expense of the Company.
SECTION 1106. Deposit of Redemption Price.
On or prior to any Redemption Date, the Company shall deposit
with the Trustee or with a Paying Agent (or, if the Company is acting as
its own Paying Agent, segregate and hold in trust as provided in Section
1003) an amount of money sufficient to pay the Redemption Price of and
accrued interest on all the Securities which are to be redeemed on that
date.
SECTION 1107. Securities Payable on Redemption Date.
Notice of redemption having been given as aforesaid, the
Securities so to be redeemed shall, on the Redemption Date, become due and
payable at the Redemption Price therein specified, and from and after such
date (unless the Company shall default in the payment of the Redemption
Price and any applicable accrued interest) such Securities shall cease to
bear interest. Upon surrender of any such Security for redemption in
accordance with said notice, such Security shall be paid by the Paying
Agent at the Redemption Price, together with any applicable accrued
interest to the Redemption Date.
-76-
If any Security called for redemption shall not be so paid upon
surrender thereof for redemption, the principal (and premium, if any) and
accrued interest on such unpaid principal shall, until paid, bear interest
from the Redemption Date at the rate provided by the Security.
SECTION 1108. Securities Redeemed in Part.
Upon surrender of a Security that is redeemed in part (with, if
the Company or the Trustee so requires, due endorsement by, or a written
instrument of transfer in form satisfactory to the Company and the Trustee
duly executed by, the Holder thereof or his attorney duly authorized in
writing), the Company shall execute, the Guarantors shall execute the
Guarantee endorsed upon, and the Trustee shall authenticate and deliver to
the Holder of such Security without service charge, a new Security or
Securities, of any authorized denomination as requested by such Holder, in
aggregate principal amount equal to and in exchange for the unredeemed
portion of the principal of the Security so surrendered.
ARTICLE TWELVE
Guarantee
SECTION 1201. Unconditional Guarantee.
Each Guarantor hereby unconditionally, jointly and severally,
guarantees (such guarantee to be referred to herein as the "Guarantee") to
each Holder of a Security authenticated and delivered by the Trustee and to
the Trustee and its successors and assigns that: the principal of,
premium, if any, and interest on the Securities will be promptly paid in
full when due, subject to any applicable grace period, whether at maturity,
by acceleration or otherwise, and interest on the overdue principal and
premium, if any, and interest on any overdue interest of the Securities and
all other obligations of the Company to the Holders or the Trustee
hereunder or under the Securities will be promptly paid in full or
performed, all in accordance with the terms hereof and thereof; subject,
however, to the limitations set forth in Section 1204. Each Guarantor
hereby agrees that its obligations hereunder shall be unconditional,
irrespective of the validity, regularity or enforceability of the
Securities or this Indenture, the absence of any action to enforce the
same, any waiver or consent by any Holder of the Securities with respect to
any provisions hereof or thereof, the recovery of any judgment against the
Company, any action to enforce the same or any other circumstance which
might otherwise constitute a legal or equitable discharge or defense of a
guarantor. Each Guarantor hereby waives diligence, presentment, demand of
payment, filing of claims with a court in the event of insolvency or
bankruptcy of the Company, any right to require a proceeding first against
the Company, protest, notice and all demands whatsoever and covenants that
-77-
the Guarantee will not be discharged except by complete performance of the
obligations contained in the Securities, this Indenture, and this
Guarantee. If any Holder or the Trustee is required by any court or
otherwise to return to the Company, any Guarantor, or any custodian,
trustee, liquidator or other similar official acting in relation to the
Company or any Guarantor, any amount paid by the Company or any Guarantor
to the Trustee or such Holder, this Guarantee, to the extent theretofore
discharged, shall be reinstated in full force and effect. Each Guarantor
further agrees that, as between each Guarantor, on the one hand, and the
Holders and the Trustee, on the other hand, (x) the maturity of the
obligations guaranteed hereby may be accelerated as provided in Article
Five for the purpose of this Guarantee, notwithstanding any stay,
injunction or other prohibition preventing such acceleration in respect of
the obligations guaranteed hereby, and (y) in the event of any acceleration
of such obligations as provided in Article Five, such obligations (whether
or not due and payable) shall forthwith become due and payable by each
Guarantor for the purpose of this Guarantee.
SECTION 1202. Severability.
In case any provision of this Guarantee shall be invalid, illegal
or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
SECTION 1203. Release of a Guarantor.
If the Securities are defeased in accordance with the terms of
this Indenture, or if all or substantially all of the assets of any
Guarantor or all of the capital stock of any Guarantor is sold (including
by issuance or otherwise) by the Company or any of its Subsidiaries in a
transaction constituting an Asset Disposition and if (x) the Net Available
Proceeds from such Asset Disposition are used in accordance with Section
1016 or (y) the Company delivers to the Trustee an Officers' Certificate
covenanting that the Net Available Proceeds from such Asset Disposition
shall be used in accordance with Section 1016 and within the time limits
specified by such Section 1016, then such Guarantor (in the event of a sale
or other disposition of all of the capital stock of such Guarantor) or the
corporation acquiring such assets (in the event of a sale or other
disposition of all or substantially all of the assets of such Guarantor),
shall be deemed released from all obligations under this Article Twelve
without any further action required on the part of the Trustee or any
Holder. The Trustee shall, at the sole cost and expense of the Company,
and upon receipt at the reasonable request of the Trustee of an Opinion of
Counsel that the provisions of this Section 1203 have been complied with,
deliver an appropriate instrument evidencing such release upon receipt of a
request by the Company accompanied by an Officers' Certificate certifying
as to the compliance with this Section. Any Guarantor not so released
remains liable for the full amount of principal of, premium, if any, and
interest on the Securities and the other obligations of the Company
hereunder as provided in this Article Twelve.
-78-
SECTION 1204. Limitation of Guarantor's Liability.
Each Guarantor, and by its acceptance hereof each Holder and the
Trustee, hereby confirms that it is the intention of all such parties that
the guarantee by such Guarantor pursuant to its Guarantee not constitute a
fraudulent transfer or conveyance for purposes of title 11 of the United
States Code, as amended, the Uniform Fraudulent Conveyance Act, the Uniform
Fraudulent Transfer Act or any similar U.S. Federal or state or other
applicable law. To effectuate the foregoing intention, the Holders and
such Guarantor hereby irrevocably agree that the obligations of such
Guarantor under the Guarantee shall be limited to the maximum amount as
will, after giving effect to all other contingent and fixed liabilities of
such Guarantor and after giving effect to any collections from or payments
made by or on behalf of any other Guarantor in respect of the obligations
of such other Guarantor under its Guarantee or pursuant to Section 1205,
result in the obligations of such Guarantor under the Guarantee not
constituting such fraudulent transfer or conveyance.
SECTION 1205. Contribution.
In order to provide for just and equitable contribution among the
Guarantors, the Guarantors agree, inter se, that in the event any payment
or distribution is made by any Guarantor (a "Funding Guarantor") under the
Guarantee, such Funding Guarantor shall be entitled to a contribution from
all other Guarantors in a pro rata amount, based on the net assets of each
Guarantor (including the Funding Guarantor), determined in accordance with
GAAP, subject to Section 1204, for all payments, damages and expenses
incurred by that Funding Guarantor in discharging the Company's obligations
with respect to the Securities or any other Guarantor's obligations with
respect to the Guarantee.
SECTION 1206. Execution of Guarantee
To further evidence their Guarantee to the Holders, the
Guarantors hereby agree to execute the Guarantee in substantially the form
set forth in Section 205 to be endorsed on each Security ordered to be
authenticated and delivered by the Trustee. Each Guarantor hereby agrees
that its Guarantee set forth in Section 1201 shall remain in full force and
effect notwithstanding any failure to endorse on each Security a notation
of such Guarantee. Each such Guarantee shall be signed on behalf of each
Guarantor by its Chairman of the Board, its President or one of its Vice
Presidents prior to the authentication of the Security on which it is
endorsed, and the delivery of such Security by the Trustee, after the
authentication thereof hereunder, shall constitute due delivery of such
Guarantee on behalf of such Guarantor. Such signature upon the Guarantee
may be manual or facsimile signature of such officer and may be imprinted
or otherwise reproduced on the Guarantee, and in case such officer who
shall have signed the Guarantee shall cease to be such officer before the
-79-
Security on which such Guarantee is endorsed shall have been authenticated
and delivered by the Trustee or disposed of by the Company, such Security
nevertheless may be authenticated and delivered or disposed of as though
the Person who signed the Guarantee had not ceased to be such officer of
the Guarantor.
SECTION 1207. Additional Guarantors.
The Company shall cause each Material Subsidiary, whether formed
or acquired after the Issue Date, to execute and deliver to the Trustee,
promptly upon any such formation or acquisition (a) a supplemental
indenture in form and substance satisfactory to the Trustee which subjects
such Material Subsidiary to the provisions of this Indenture as a
Guarantor, and (b) an Opinion of Counsel to the effect that such
supplemental indenture has been duly authorized and executed by such
Material Subsidiary and constitutes the legal, valid, binding and
enforceable obligation of such Material Subsidiary (subject to such
customary exceptions concerning fraudulent conveyance laws, creditors'
rights and equitable principles as may be acceptable to the Trustee in its
discretion), provided that any Material Subsidiary acquired after the Issue
Date which is prohibited from entering into a Guarantee pursuant to
restrictions contained in any debt instrument or other agreement in
existence at the time such Material Subsidiary was so acquired and not
entered into in anticipation or contemplation of such acquisition shall not
be required to comply with the foregoing provisions of this Section so long
as any such restriction is in existence and to the extent of any such
restriction.
SECTION 1208. Subordination of Subrogation and Other Rights.
Each Guarantor hereby agrees that any claim against the Company
that arises from the payment, performance or enforcement of such
Guarantor's obligations under its Guarantee or this Indenture, including,
without limitation, any right of subrogation, shall be subject and
subordinate to, and no payment with respect to any such claim of such
Guarantor shall be made before, the payment in full of all outstanding
Securities in accordance with the provisions provided therefor in this
Indenture.
ARTICLE THIRTEEN
Defeasance and Covenant Defeasance
SECTION 1301. Defeasance and Covenant Defeasance.
(a) The Company may, at its option and at any time, elect to
have the respective obligations of the Company and the Guarantors
-80-
discharged with respect to the outstanding Securities and the Guarantees (a
"defeasance") by fulfilling the applicable conditions of Section 1301(b).
Such defeasance means that the Company shall be deemed to have paid and
discharged the entire Indebtedness represented by the outstanding
Securities, and the Company and the Guarantors shall be deemed to have
satisfied all their respective other obligations under the Securities, the
Guarantees and this Indenture (and the Trustee, at the expense of the
Company, shall execute proper instruments acknowledging the same), except
for the following, which shall survive unless otherwise terminated or
discharged hereunder: (i) the rights of Holders of outstanding Securities
to receive, solely from the trust fund described in Sections 1301(b) and
1302, payments in respect of the principal of, premium, if any, and
interest on such Securities when such payments are due, (ii) the Company's
and the Guarantors' respective obligations with respect to the Securities
concerning issuing temporary Securities (Section 304), registration of
transfer or exchange of Securities (Section 305), mutilated, destroyed,
lost or stolen Securities (Section 306) and the maintenance of an office or
agency for payment (Section 1002) and money for security payments held in
trust (Section 1003), (iii) the rights, powers, trusts, duties and
immunities of the Trustee set forth in Articles Six and Seven and (iv) the
defeasance provisions of this Article Thirteen. In addition, the Company
may, at its option and at any time, elect to have the obligations of the
Company and the Guarantors released with respect to any covenants contained
in Sections 801, 1004, 1005, 1006, 1007, 1008, 1009, 1010, 1011, 1012,
1013, 1014, 1015, 1016, 1017 and 1018 (a "covenant defeasance") by
fulfilling the applicable provisions of Section 1301(b) and such Securities
shall thereafter be deemed not to be outstanding for the purposes of any
direction, waiver, consent, declaration or any other act or action of the
Holders (and the consequences of any thereof) taken or to be taken in
connection with any of such covenants, but shall continue to be deemed
outstanding for all other purposes hereunder. For this purpose such
covenant defeasance means with respect to such outstanding Securities that
the Company and the Guarantors may omit to comply with and shall have no
liability in respect of any term, condition or limitation set forth in any
such Section or by reason of reference in any such Section to any other
provision herein or in any other document, and such omission to comply with
any such term, condition or limitation shall not constitute a Default or an
Event of Default with respect to the Securities. In the event covenant
defeasance occurs, the events described in clauses (4) and (5) (as it
applies to the covenants listed in the foregoing sentence) of Section 501
shall no longer constitute Events of Default with respect to the
Securities. Except as specified above, the remainder of this Indenture,
the Securities and the Guarantees shall be unaffected by such covenant
defeasance.
(b) The following shall be the conditions to application of this
Section 1301:
-81-
(i) the Company shall have deposited or caused to be deposited
irrevocably with the Trustee as trust funds, in trust for the benefit
of the Holders of the Securities, cash in U.S. dollars, non-callable
United States Government Obligations, or a combination thereof, in an
amount sufficient without reinvestment of any interest received on
such funds, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification
thereof delivered to the Trustee, to pay the principal of (premium, if
any) and each installment of interest on the outstanding Securities on
the Stated Maturity (including upon redemption) of such principal or
installment of interest;
(ii) in the case of defeasance, the Company shall have delivered
to the Trustee an Opinion of Counsel in the United States stating that
(A) the Company has received from, or there has been published by, the
Internal Revenue Service a ruling or (B) since the date of this
Indenture, there has been a change in the applicable federal income
tax law, in either case to the effect that, and based thereon such
Opinion of Counsel shall confirm that, the Holders of the outstanding
Securities will not recognize income, gain or loss for federal income
tax purposes as a result of such defeasance and will be subject to
federal income tax on the same amounts, in the same manner and at the
same times as would have been the case if such defeasance had not
occurred;
(iii) in the case of covenant defeasance, the Company shall have
delivered to the Trustee an Opinion of Counsel in the United States to
the effect that the Holders of the outstanding Securities will not
recognize income, gain or loss for federal income tax purposes as a
result of such covenant defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at the same
times as would have been the case if such covenant defeasance had not
occurred;
(iv) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit;
(v) such defeasance or covenant defeasance shall not result in a
breach or violation of, or constitute a default under, this Indenture
or any other agreement or instrument to which the Company or any
Guarantor is a party or by which it is bound; and
(vi) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all
conditions precedent provided for relating to either the defeasance or
the covenant defeasance, as the case may be, have been complied with.
-82-
(c) Notwithstanding defeasance or covenant defeasance in
accordance with this Section 1301, the obligations of the Trustee under
Section 1302 shall survive.
SECTION 1302. Application of Trust Money.
Subject to Section 1003, the Trustee shall hold in trust all
money or United States Government Obligations deposited with it pursuant to
Section 1301, and shall apply the deposited money and the money from United
States Government Obligations in accordance with this Indenture to the
payment of principal of, premium, if any, and interest on the Securities.
SECTION 1303. Reinstatement.
If the Trustee is unable to apply any money or United States
Government Obligations in accordance with Section 1301 by reason of any
legal proceeding or by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, the Company's and the Guarantors' respective obligations under
this Indenture, the Securities and the Guarantees shall be revived and
reinstated as though no deposit had occurred pursuant to Section 1301 until
such time as the Trustee is permitted to apply all such money or United
States Government Obligations in accordance with Section 1301; provided
that if the Company has made any payment of interest or premium on or
principal of any Securities because of the reinstatement of its
obligations, the Company shall be subrogated to the rights of the Holders
of such Securities to receive such payment from the money or United States
Government Obligations held by the Trustee.
_______________
This instrument may be executed in any number of counterparts,
each of which so executed shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same instrument.
-83-
IN WITNESS WHEREOF, the parties hereto have caused this Indenture
to be duly executed as of the day and year first above written.
TULTEX CORPORATION
By: ____________________________
Name:
Title:
AKOM, LTD.
By: ____________________________
Name:
Title:
DOMINION STORES, INC.
By: ____________________________
Name:
Title:
TULTEX INTERNATIONAL, INC.
By: ____________________________
Name:
Title:
LOGO 7, INC.
By: ____________________________
Name:
Title:
UNIVERSAL INDUSTRIES, INC.
By: ____________________________
Name:
Title:
TULTEX CANADA, INC.
By: ____________________________
Name:
Title:
SWEATJET, INC.
By: ____________________________
Name:
Title:
FIRST UNION NATIONAL BANK OF VIRGINIA,
as Trustee
By: ____________________________
Name:
Title:
Exhibit 5
Hunton & Williams
Riverfront Plaza - East Tower
951 East Byrd Street
Richmond, Virginia 23219-4074
March 2, 1995
Tultex Corporation
101 Commonwealth Boulevard
Martinsville, Virginia 24112
Tultex Corporation --
Registration Statement on Form S-1 (File No. 33-57401)
Ladies and Gentlemen:
We have acted as counsel to Tultex Corporation, a Virginia
corporation (the "Company"), and its subsidiaries, AKOM, Ltd., Dominion
Stores, Inc., Tultex International, Inc., Logo 7, Inc., Universal
Industries, Inc., Tultex Canada Inc. and SweatJet Incorporated (the
"Guarantors"), in connection with the registration of (a) an aggregate of
$110,000,000 of the Company's Senior Notes due 2005 (the "Notes") and (b)
guarantees of the Notes (the "Guarantees") by each of the Guarantors, as
set forth in Amendment No. 1 to the Registration Statement on Form S-1,
file no. 33-57401 (the "Registration Statement"), that is being filed on
the date hereof with the Securities and Exchange Commission (the
"Commission") pursuant to the Securities Act of 1933, as amended. The
Notes are to be sold as set forth in the Registration Statement, the
Prospectus contained therein (the "Prospectus") and any amendments or
supplements thereto.
In rendering this opinion, we have relied upon, among other things,
our examination of such records of the Company and the Guarantors and
certificates of their respective officers and of public officials as we
have deemed necessary.
Based upon the foregoing and subject to the further qualifications
stated below, we are of the opinion that:
1. The Company is duly incorporated, validly existing and in good
standing under the laws of the Commonwealth of Virginia;
2. Each of the Guarantors is duly incorporated, validly existing and
in good standing under the laws of its respective jurisdiction of
incorporation; and
3. When the Notes and Guarantees have been issued and sold upon the
terms and conditions set forth in the Registration Statement and the
Prospectus and have been duly executed, authenticated and delivered in
accordance with the Indenture among the Company, the Guarantors and First
Union National Bank of Virginia, the form of which Indenture is filed as an
exhibit to the Registration Statement, then (x) the Notes will be validly
authorized and issued and binding obligations of the Company and (y) the
Guarantees will be validly authorized and issued and binding obligations of
the Guarantors.
We hereby consent to the filing of this opinion with the Commission as
an exhibit to the Registration Statement and to the statement made in
reference to this firm under the caption "Legal Matters" in the
Registration Statement.
Very truly yours,
HUNTON & WILLIAMS
TULTEX CORPORATION EXHIBIT 12
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Amounts in thousands)
<TABLE>
Year Ended
Dec. 29 Dec.28 Jan. 2 Jan. 1 Dec. 31
1990 1991 1993 1994 1994
<S> <C> <C> <C> <C> <C>
Income before income taxes
and cumulative effect of accounting change $30,270 $10,767 $20,251 $9,091 $14,435
Interest on indebtedness (B) 15,162 11,414 13,540 16,996 18,151
Amortization of deferred debt issue costs 0 0 106 268 1,774
Portion of rental expense representative of the
interest factor (33%) 3,724 4,103 4,565 5,031 4,453
Total fixed charges 18,886 15,517 18,211 22,295 24,378
Income before income taxes and
cumulative effect of accounting change
and fixed charges (B) $42,832 $23,934 $38,462 $31,386 $38,813
Ratio of earnings to fixed charges 2.27 1.54(A) 2.11 1.41 1.59
COMPUTATION OF PRO FORMA
RATIO OF EARNINGS TO FIXED
CHARGES AFTER ADJUSTMENT
FOR DEBT ISSUANCE
Income before income taxes and
cumulative effect of accounting change and fixed
charges, as above (B) $38,813
Fixed charges, as above 24,378
Adjustments:
Estimated net increase in interest
expense from refinancing 3,724
Estimated net increase (decrease)
in amortization of deferred debt
issue costs (628)
Total pro forma fixed charges 27,474
Pro forma ratio of earnings to fixed charges 1.41
</TABLE>
(A) Included in earnings for the year ended December 28, 1991 was a nonrecurring
gain of $4,014 before income taxes related to the sale of facilities. If
such sale had not occurred, the ratio of earnings to fixed charges would
have been 1.28.
(B) Interest on indebtedness includes capitalized interest of $6,324 and $2,350
for the years ended Dec. 29, 1990 and Dec. 28, 1991, respectively. This
capitalized interest has been excluded from "income before taxes and
cumulative effect of accounting change and fixed charges".
CONSENT OF INDEPENDENT ACCOUNTANTS EXHIBIT 23.1
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-1 of our report dated February 6, 1995 relating
to the financial statements of Tultex Corporation, which appears in such
Prospectus. We also consent to the application of such report to the Financial
Statement Schedules for the three years ended December 31, 1994 listed under
Item 16(b) of this Registration Statement when such schedules are read in
conjunction with the financial statements referred to in our report. The audits
referred to in such report also included these schedules. We also consent to
the references to us under the headings "Experts" and "Selected Consolidated
Financial Data" in such Prospectus. However, it should be noted that Price
Waterhouse LLP has not prepared or certified such "Selected Consolidated
Financial Data".
PRICE WATERHOUSE LLP
Winston-Salem, North Carolina
March 1, 1995
EXHIBIT 24.2
CERTIFICATE
I, James M. Baker, Secretary or Assistant Secretary of
Tultex Corporation, AKOM, Ltd., Dominion Stores, Inc., Tultex
International, Inc., Logo 7, Inc., Universal Industries, Inc. and
Sweatjet, Inc., certify that the Boards of Directors of each of
the foregoing corporations has adopted the following resolution
prior to the date hereof in connection with the Registration
Statement on Form S-1 (file no. 33-57401):
RESOLVED, that the officers of the Company are
authorized to execute all amendments to the
Registration Statement, including post-effective
amendments, as they may deem necessary, either in
person or by a duly authorized attorney, and to file
such amendments with the Securities and Exchange
Commission (the "Commission"), any such amendments to
the Registration Statement to be in such form as the
officers may approve, with the execution thereof to be
conclusive evidence of such approval, and to execute
and file all such instruments, make all such payments
and do such other acts and things as in their opinion
may be necessary to cause the Registration Statement to
become effective, and to take all actions required of
the Company to maintain the Registration Statement in
effect for as long as they deem it to be in the best
interests of the Company.
IN WITNESS WHEREOF, I have set my hand as of this 28th day
of February, 1995.
/s/ James M. Baker
James M. Baker
EXHIBIT 24.3
CERTIFICATE
I, Charles W. Davies, Jr., Vice President of Tultex
Canada, Inc., certify that the Board of Directors of Tultex
Canada, Inc. has adopted the following resolution prior to the
date hereof in connection with the Registration Statement on Form
S-1 (file no. 33-57401):
RESOLVED, that the officers of the Company are
authorized to execute all amendments to the
Registration Statement, including post-effective
amendments, as they may deem necessary, either in
person or by a duly authorized attorney, and to file
such amendments with the Securities and Exchange
Commission (the "Commission"), any such amendments to
the Registration Statement to be in such form as the
officers may approve, with the execution thereof to be
conclusive evidence of such approval, and to execute
and file all such instruments, make all such payments
and do such other acts and things as in their opinion
may be necessary to cause the Registration Statement to
become effective, and to take all actions required of
the Company to maintain the Registration Statement in
effect for as long as they deem it to be in the best
interests of the Company.
IN WITNESS WHEREOF, I have set my hand as of this 28th day
of February, 1995.
/s/ Charles W. Davies, Jr.
Charles W. Davies, Jr.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 5,776
<SECURITIES> 0
<RECEIVABLES> 141,858
<ALLOWANCES> 2,115
<INVENTORY> 130,183
<CURRENT-ASSETS> 289,907
<PP&E> 281,984
<DEPRECIATION> 147,100
<TOTAL-ASSETS> 456,809
<CURRENT-LIABILITIES> 167,053
<BONDS> 0
<COMMON> 29,807
0
15,198
<OTHER-SE> 142,096
<TOTAL-LIABILITY-AND-EQUITY> 456,809
<SALES> 565,433
<TOTAL-REVENUES> 565,433
<CGS> 419,769
<TOTAL-COSTS> 443,742
<OTHER-EXPENSES> 84,911
<LOSS-PROVISION> 4,194
<INTEREST-EXPENSE> 18,151
<INCOME-PRETAX> 14,435
<INCOME-TAX> 5,485
<INCOME-CONTINUING> 8,950
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,950
<EPS-PRIMARY> 0.26
<EPS-DILUTED> 0.26
</TABLE>
