As filed with the Securities and Exchange Commission on
Registration No.
_________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-4
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
DELTA MILLS, INC.
(Exact name of registrant as specified in its charter)
Delaware 2211 13-2677657
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number)Identification No.)
233 North Main Street, Suite No. 200
Greenville, South Carolina 29601
(864) 232-8301
(Address, Including Zip Code, and Telephone Number, Including Area
Code, of Registrant's Principal Executive Offices)
Bettis C. Rainsford, Executive Vice President, Treasurer, and Chief
Financial Officer
Delta Mills, Inc.
108-1/2 Courthouse Square
P. O. Box 388
Edgefield, South Carolina 29824
(803)637-5304
(Name, Address, Including Zip Code, and Telephone
Number, Including Area Code, of Agent for Service)
Copies to:
Eric B. Amstutz, Esq.
Jo Watson Hackl, Esq.
Wyche, Burgess, Freeman & Parham, P.A.
Post Office Box 728
Greenville, South Carolina 29602-0728
(864) 242-8200 (telephone)
(864) 235-8900 (facsimile)
Approximate date of commencement of proposed sale to the public:
As soon as practicable after this Registration Statement becomes
effective. If the securities being registered on this form are
being offered in connection with the formation of a holding company and
there is compliance with General Instruction G, check the following box.
<TABLE>
CALCULATION OF REGISTRATION FEE
<CAPTION>
Title of each class Proposed maximum
securities to be Offereing price Proposed Maximum
registered Amount to be per aggregate offering Amount of
registered note (1) price registration fee
<S> <C> <C> <C> <C>
9-5/8% Senior
Notes due $150,000,000 100% $150,000,000 $44,250
2007, Series B
</TABLE>
(1) Estimated solely for the purpose of calculating the
registration fee pursuant to Rule 457.
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until
the Registrant shall file a further amendment that specifically states
that this Registration Statement shall thereafter become effective
in accordance with Section 8(a) of the Securities Act of 1933 or until
the Registration Statement shall become effective on such date as
the Commission, acting pursuant to said Section 8(a), may determine.
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 NOT 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.
SUBJECT TO COMPLETION, DATED _________, 1997
PROSPECTUS [LOGO OF DELTA MILLS, INC. APPEARS HERE]
__________, 1997
DELTA MILLS, INC.
OFFER TO EXCHANGE ITS 9-5/8% SENIOR
NOTES DUE 2007, SERIES B
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 FOR ANY AND ALL OUTSTANDING
9-5/8% SENIOR NOTES DUE 2007, SERIES A
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., EASTERN TIME, ON
[25 business days after effective date] , 1997, UNLESS EXTENDED
BY THE COMPANY IN ITS SOLE DISCRETION (THE "EXPIRATION DATE").
Delta Mills, Inc., a Delaware corporation (the "Company"),
a wholly-owned indirect subsidiary of Delta Woodside Industries,
Inc., a South Carolina corporation ("Delta Woodside"), hereby
offers (the "Exchange Offer"), upon the terms and subject to the
conditions set forth in this Prospectus (the "Prospectus") and
the accompanying Letter of Transmittal (the "Letter of
Transmittal"), to exchange up to $150.0 million in aggregate
principal amount of its 9-5/8% Senior Notes due 2007, Series B
(the "Exchange Notes") for equal principal amounts of its
outstanding 9-5/8% Senior Notes due 2007, Series A (the "Senior
Notes"). The Exchange Notes are substantially identical
(including principal amount, interest rate, maturity and
redemption rights) to the Senior Notes for which they may be
exchanged pursuant to this offer, except that (i) the offering
and sale of the Exchange Notes will have been registered under the
Securities Act of 1933, as amended (the "Securities Act"), and
(ii) holders of Exchange Notes will not be entitled to certain
rights of holders of Senior Notes under a Registration Rights
Agreement (as defined herein) of the Company. The Senior Notes
have been, and the Exchange Notes will be, issued under an
Indenture dated as of August 25, 1997 (the "Indenture") by
and among the Company, Delta Mills Marketing, Inc., a Delaware
corporation and a wholly-owned subsidiary of the Company, as
guarantor (the "Guarantor"), and The Bank of New York, as trustee
(the "Trustee"). The Company will not receive any proceeds
from this Exchange Offer; however, pursuant to the
Registration Rights Agreement, the Company will bear certain
offering expenses. See "The Exchange Offer_ Senior Notes
Registration Rights." The Senior Notes together with the
Exchange Notes are referred to herein as the "Notes."
The Exchange Notes will bear interest at the same rate and on
the same terms as the Senior Notes. Consequently, interest on the
Exchange Notes will be payable semi-annually in arrears on
March 1 and September 1 of each year, commencing on March 1,
1998. The Exchange Notes will mature on September 1, 2007, and
may be redeemed at the option of the Company, in whole or in
part, on or after September 1,
2002, at the redemption prices set forth herein, plus accrued
and unpaid interest thereon and Liquidated Damages (as defined
herein), if any, to the applicable redemption date. Upon a Change
of Control (as defined herein), each holder of Exchange Notes will
have the right to require the Company to repurchase all or any part
(equal to $1,000 or an integral multiple thereof) of such holder's
Exchange Notes at an offer price in cash equal to 101% of the
principal amount thereof, plus accrued and unpaid interest thereon
and Liquidated Damages, if any, to the date of purchase. See "Description
of Exchange Notes_ Optional Redemption" and " _ Repurchase at the Option of
Holders _ Change of Control."
The Exchange Notes will be general unsecured obligations of
the Company and will rank senior to all existing and future
subordinated indebtedness of the Company and pari passu in right of
payment to all existing and future unsubordinated indebtedness
of the Company, including indebtedness under the Company's new
credit facility (the "New Credit Facility"). At August 25, 1997,
after the issuance of the Senior Notes and the initial borrowings
under the New Credit Facility and the application of the net
proceeds therefrom (the "Refinancing"), the Company had
approximately $208.0 million of indebtedness
outstanding (including approximately $58.0 million of
secured indebtedness outstanding under the New Credit Facility). In
addition, the Company was contingently liable with respect to
approximately $0.7 million under letters of credit and had
approximately an additional $41.3 million of secured indebtedness
available to be incurred under the New Credit Facility. The terms
of the Indenture will permit the Company to incur additional
indebtedness, including additional secured indebtedness, subject to
certain limitations. See "Use of Proceeds" and "Description of
Other Indebtedness." The Company's payment of
principal, premium, if any, interest and Liquidated Damages
(as defined herein), if any, on the Notes is fully and
unconditionally guaranteed on a senior unsecured basis (the
"Subsidiary Guarantees") by all existing and future
subsidiaries of the Company (the "Guarantors") other than Receivables
Subsidiaries (as defined herein). The Subsidiary Guarantees rank pari passu
in right of payment with all unsubordinated unsecured indebtedness of the
Guarantors. The obligations of the Company under the New Credit Facility,
however, are secured by the accounts receivable and inventory (and related
property) of the Company and its subsidiaries, as well as all of
the outstanding capital stock of the Company and its subsidiaries
and, accordingly, such indebtedness effectively ranks senior in
right of payment to the Exchange Notes to the extent of such assets.
The Company will accept for exchange any and all Senior
Notes validly tendered by eligible holders and not withdrawn prior
to 5:00 p.m. Eastern time on [25 business days after
effectiveness], 1997, unless extended by the Company in its sole
discretion (the "Expiration Date"). Tenders of Senior Notes may be
withdrawn at any time prior to the Expiration Date. The Exchange Offer is
subject to certain customary conditions. The Senior Notes may be tendered
only in integral multiples of $1,000. See "The Exchange Offer."
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.
Each broker-dealer that receives Exchange Notes for its
own account pursuant to the Exchange Offer must acknowledge that it
will deliver a prospectus in connection with any resale of such
Exchange Notes. The Letter of Transmittal provides that by so
acknowledging and by delivering a prospectus, a broker-dealer will
not be deemed to
admit that it is an "underwriter" within the meaning of the
Securities Act. This Prospectus, as it may be amended or
supplemented from time
to time, may be used by a broker-dealer in connection with resales
of the Exchange Notes received in exchange for Senior Notes where
such Senior Notes were acquired by such broker-dealer as a
result of market-making activities or other trading activities. The
Company has agreed that, beginning on the date of this Prospectus
and ending on the close of business no more than one year after
the date of this Prospectus, it will make this Prospectus
available to any broker-dealer for use in connection with any such
resale. See "Explanatory Note," "The Exchange Offer _ Terms of the Exchange
Offer" and "Plan of Distribution."
The Senior Notes are not listed on any securities exchange and
are not traded on the National Association of Securities Dealers
Automated Quotation System, Inc. ("Nasdaq"). The Senior Notes are
traded through the National Association of Securities Dealers,
Inc.'s ("NASD") PORTAL trading system under the symbol "DeltaM," and
it is expected that the Exchange Notes will be eligible for trading
through the PORTAL system. The Company does not intend to list the
Exchange Notes on any national securities exchange or to seek
admission thereof to trading on Nasdaq.
NationsBanc Capital Markets, Inc. has advised the Company that
it has made a market in the Senior Notes, and that it may make a
market in the Senior Notes and in the Exchange Notes; however, it
is not obligated to do so and any market-making activity may be
discontinued at any time. As a result, there is no assurance that
an active public market will develop or continue for the Exchange
Notes, or that the market, if any, that develops for the Exchange
Notes will be similar to the limited market that currently exists
for the Senior Notes. To the extent that a market for the
Exchange Notes does develop, the market value of the Exchange
Notes will depend on market conditions (such as yields on
alternative investments), general economic conditions, the
Company's financial condition and certain other factors. Such
conditions might cause the Notes, to the extent that they are
traded, to trade at a significant discount from face value. See
"Risk Factors _ Lack of Public Market."
Except as specifically requested by a holder on the Letter
of Transmittal, the Exchange Notes will be issued in the form of
Global Notes (as defined herein). Beneficial interests in the
Global Note representing the Exchange Note will be shown on, and
transfers thereof will be effected through, records maintained by
The Depository Trust Company and its participants. See "Explanatory
Note."
The Company will not receive any proceeds from, and has agreed
to bear the expenses of, the Exchange Offer. No underwriter is
being used in connection with this Exchange Offer. See "The
Exchange Offer."
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE
COMPANY ACCEPT SURRENDERS FOR EXCHANGE FROM, HOLDERS OF SENIOR
NOTES IN ANY JURISDICTION IN WHICH THE EXCHANGE OFFER OR THE
ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH THE SECURITIES
OR BLUE SKY LAWS OF SUCH JURISDICTION.
SEE "RISK FACTORS" BEGINNING ON PAGE 16 FOR A DISCUSSION
OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY INVESTORS WITH
RESPECT TO THE SENIOR NOTES AND THE EXCHANGE NOTES.
No person is authorized in connection with the Exchange Offer to
give any information or to make any representation not contained
in this Prospectus or the accompanying Letter of Transmittal,
and, if given or made, such information or representation must not
be relied upon as having been authorized by the Company. Neither
the delivery of this Prospectus or the accompanying Letter of
Transmittal, nor any exchange made hereunder shall under any
circumstances create any implication that the information
contained herein is correct as of any
date subsequent to the date hereof.
Until (date) dealers effecting transactions in
the Exchange Notes, whether or not participating in the Exchange
Offer, may be required to deliver a prospectus in connection
therewith. This is in addition to the obligation of dealers to
deliver a prospectus when acting as underwriters and with
respect to their unsold allotments or subscriptions.
----------------------------------
EXPLANATORY NOTE
This Registration Statement covers $150.0 million in
aggregate principal amount of 9-5/8% Senior Notes due 2007, Series
B of the Company (the "Exchange Notes") to be offered in
exchange for equal principal amounts of the Company's outstanding
9-5/8% Senior Notes due 2007, Series A (the "Senior Notes"). This
Registration Statement is being filed to satisfy certain
requirements of a Registration Rights Agreement (the "Registration
Rights Agreement") dated as of August 25, 1997, by and among the
Company, the Guarantor, and NationsBanc Capital Markets, Inc., as
the initial purchaser (the "Initial Purchaser") of the Senior
Notes.
Based on interpretations by the staff of the Securities
and Exchange Commission (the "SEC" or the "Commission") set
forth in no-action letters issued to unrelated third parties (see
e.g. Exxon Capital Holdings Corp., SEC No-Action Letter
(available April 13, 1989) and Morgan Stanley & Co. Inc., SEC No-
Action Letter (available June 5, 1991), collectively, the "No-
Action Letters"), holders of Senior Notes who tender their Senior
Notes in the Exchange Offer with the intention of participating in
a distribution of the Exchange Notes will not be able to rely on the
No-Action Letters or similar no-action letters. The Company
believes that the Exchange Notes issued pursuant to the Exchange
Offer in exchange for Senior Notes may be offered for resale,
resold and otherwise transferred by a holder thereof (other than
(i) a broker-dealer who purchases Notes directly from the Company to
resell pursuant to Rule 144A or any other available exemption under
the Securities Act or (ii) a person that is an affiliate of
the Company within the meaning of Rule 405 under the Securities
Act), without compliance with the registration and prospectus
delivery provisions of the Securities Act; provided that the
holder is acquiring the Exchange Notes in the ordinary course of
its business and is not participating, and had no arrangement or
understanding with any person to participate, in the distribution
of the Exchange Notes. Holders of Senior Notes wishing to accept
the Exchange Offer must represent to the Company, as required
by the Registration Rights Agreement, that such conditions have
been met. Each broker-dealer that receives Exchange Notes for
its own account in exchange for Senior Notes, where such Senior
Notes were acquired by such brokerdealer as a result of market-
making activities or other trading activities, must acknowledge
that it will deliver a prospectus in connection with any
resale of such Exchange Notes. The Company believes that none
of the registered holders of the Senior Notes is an affiliate (as
such term is defined in Rule 405 under the Securities Act) of the
Company.
The Company hereby notifies each holder of Senior Notes that
any broker-dealer that holds Senior Notes acquired for its own
account as a result of market-making activities or other trading activities
and who receives Exchange Notes pursuant to the Exchange Offer may be
a statutory underwriter, and must deliver a prospectus meeting
the requirements of the Securities Act in connection with any
resale of the Exchange Notes. Any broker-dealer that holds Senior
Notes acquired for its own account as a result of market-making
or other trading activities acknowledges and agrees, as a term of
the Exchange Offer, that it will deliver a prospectus meeting
the requirements of the Securities Act in connection with any
resale of Exchange Notes received pursuant to the Exchange
Offer. However, by so doing, the broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of
the Securities Act. Such broker-dealer will also be deemed to
represent and warrant to the Company that it is not participating
in, and has no intent to participate in, any
distribution of Exchange Notes, and has not entered into
any arrangement or understanding with any person to distribute
the Exchange Notes.
In the event that (i) any holder of Senior Notes is prohibited by
applicable law or Commission policy from participating in the
Exchange Offer, or (ii) any such holder may not resell the
Exchange Notes acquired by it in the Exchange Offer to the public
without delivering a
prospectus and the Prospectus contained in this Registration
Statement is not appropriate or available for such resales by
such holder or (iii) such holder is a broker-dealer and holds Senior
Notes acquired directly from the Company or one of its affiliates,
then the Company has agreed to file a shelf registration statement
pursuant to Rule 415 under the Securities Act for resales of
Senior Notes for holders meeting certain requirements, pursuant
to the Registration Rights Agreement. See "Summary _ The Exchange
Offer," "The Exchange Offer" and "Plan of Distribution."
Any Senior Notes not tendered and accepted in the Exchange
Offer will remain outstanding. To the extent any Senior Notes are
tendered and accepted in the Exchange Offer, a holder's
ability to sell untendered and unregistered Senior Notes could be
adversely affected. Following consummation of the Exchange Offer,
the holders of Senior Notes will continue to be subject to the
existing restrictions upon transfer thereof and the Company will
have fulfilled certain of its obligations under the Registration
Rights Agreement. Holders of Senior Notes who do not tender their
Senior Notes generally will not have any further registration rights
under the Registration Rights Agreement or otherwise. See "Risk
Factors _ Failure to Exchange Senior Notes" and "The Exchange
Offer."
The Company expects that, similar to the Senior Notes, and
except as specifically requested by a holder on the Letter of
Transmittal, the Exchange Notes will be issued in the form of a
Global Note (as defined herein), which will be deposited with, or
on behalf of, The Depository Trust Company (the "Depositary")
and registered in its name or in the name of the
Depositary's nominee, Cede & Co. Beneficial interests in the
Global Note representing the Exchange Notes will be shown on,
and transfers thereof will be effected through, records
maintained by the Depositary and its participants. After the
initial issuance of the Global Note, Exchange Notes in
certificated form may be issued in exchange for the Global Note on
the terms and conditions set forth in the Indenture. See
"Description of Exchange Notes _ Book-Entry, Delivery and Form."
The Company is not currently subject to the
informational requirements of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"). As a result of the offering of
the Exchange Notes, the Company will become subject to the
informational requirements of
the Exchange Act. So long as the Company is subject to the
periodic reporting requirements of the Exchange Act, it is required
to furnish the information required to be filed with the
Commission to the Trustee and the holders of the Senior Notes
and the Exchange Notes. The Company has agreed that, for so long
as any of the Notes remain outstanding, even if it is not
required under the Exchange Act to furnish such information to
the Commission, it will nonetheless continue to furnish
information that would be required to be furnished by the Company
by Section 13 of the Exchange Act to the Trustee and the holders
of the Notes as if it were subject to such periodic reporting
requirements. See "Available Information."
In addition, the Company has agreed that, for so long as any of
the Senior Notes are "restricted securities" within the meaning
of Rule 144(a)(3) under the Securities Act, it will make available
to any prospective purchaser of the Senior Notes or holder of
the Senior Notes upon the request of such prospective purchaser
or holder the information required by Rule 144A(d)(4) under the
Securities Act.
SPECIAL CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS
This Prospectus contains forward-looking statements within
the meaning of Section 27A of the Securities Act and 21E of the
Exchange Act. Such forward-looking statements are subject to known
and unknown risks, uncertainties and other factors that may
cause the actual results, performance or achievements of the
Company to be materially different from future results,
performance or achievements expressed or implied by such
forward-looking statements. Important factors ("Cautionary
Statements") that could cause the actual results, performance
or achievements of the Company to differ materially from the
Company's expectations are disclosed in this
Prospectus,
including, without limitation, those statements made in
conjunction with the forward-looking statements included under "Risk
Factors" and otherwise herein. All
written or oral forward-looking statements
attributable to the Company are expressly qualified in their
entirety by the Cautionary Statements.
REPORTS TO SECURITY HOLDERS
See "Description of Exchange Notes -- Certain Covenants
- - --Reports" for a description of reports that will be available
to Holders of the Exchange Notes.
TABLE OF CONTENTS
EXPLANATORY NOTE 3
SUMMARY 8
The Company 8
Industry Trends 8
Business Strategy 9
The Exchange Offer 11
Summary of Terms of Exchange Notes 14
Risk Factors 15
Summary Historical and Pro Forma Combined Financial Data 15
RISK FACTORS 16
Failure to Exchange Senior Notes 17
Significant Leverage and Debt Service 17
Competition; Risks Associated with Changing Industry and Regulation 18
Raw Materials 18
Environmental Laws and Regulations 19
Dependence on Key Personnel 19
Risk of Loss of Material Customers or Broker 19
Retail Industry and Cyclicality 19
Repurchase of Exchange Notes upon a Change of Control 19
Fraudulent Conveyance Statutes 20
Lack of Public Market 20
USE OF PROCEEDS 21
CAPITALIZATION 22
SELECTED HISTORICAL AND PRO FORMA COMBINED FINANCIAL DATA 23
MANAGEMENT'S DISCUSSION AND ANALYSIS 25
Overview of Results of Operations 25
Year Ended June 28, 1997 Compared to Year Ended June 29, 1996 25
Year Ended June 29, 1996 Compared to Year Ended July 1, 1995 26
Year Ended July 1, 1995 Compared to Year Ended July 2, 1994 26
Liquidity and Capital Resources 27
BUSINESS 29
General 29
Industry Trends 30
Business Strategy 31
Manufacturing 32
Products and Marketing 32
Raw Materials 33
Competition 33
Environmental and Regulatory Matters 34
Order Backlogs 35
Properties 35
Employees 36
Legal Proceedings 36
MANAGEMENT 37
Directors and Executive Officers 37
Management Compensation 38
STOCK OWNERSHIP 41
CERTAIN TRANSACTIONS 43
THE EXCHANGE OFFER 44
Purpose of the Exchange Offer 44
Resale of the Exchange Notes 44
Terms of the Exchange Offer 45
Expiration Date; Extensions; Amendments 45
Interest on the Exchange Notes 46
Procedures for Tendering 46
Return of Senior Notes 47
Book-Entry Transfer 47
Guaranteed Delivery Procedures 47
Withdrawal of Tenders 48
Conditions 48
Senior Notes Registration Rights 48
Termination of Certain Rights 49
Liquidated Damages 49
Exchange Agent 50
Fees and Expenses
Consequences of Failures to Exchange 51
Accounting Treatment 51
Appraisal Rights 51
DESCRIPTION OF EXCHANGE NOTES 52
General 52
Principal, Maturity and Interest 52
Guarantees 52
Optional Redemption 52
Selection and Notice 53
Mandatory Redemption 53
Repurchase at the Option of Holders 53
Certain Covenants 54
Events of Default and Remedies 58
No Personal Liability of Directors, Officers, Employees or
Stockholders 59
Legal Defeasance and Covenant Defeasance 59
Transfer and Exchange 60
Amendment, Supplement and Waiver 60
Concerning the Trustee 60
Additional Information 61
Book-Entry, Delivery and Form 61
Certain Definitions 62
DESCRIPTION OF OTHER INDEBTEDNESS 68
New Credit Facility 68
Description of Delta Woodside Indebtedness 68
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS 69
PLAN OF DISTRIBUTION 70
LEGAL MATTERS 71
EXPERTS 71
INDEMNIFICATION OF MANAGEMENT 71
AVAILABLE INFORMATION 71
INDEX TO COMBINED FINANCIAL STATEMENTS F-1
INDEPENDENT AUDITORS' REPORT F-2
COMBINED BALANCE SHEETS F-3
COMBINED STATEMENTS OF OPERATIONS F-5
COMBINED STATEMENTS OF SHAREHOLDER'S EQUITY (DEFICIT) F-6
COMBINED STATEMENTS OF CASH FLOWS F-7
NOTES TO COMBINED FINANCIAL STATEMENTS F-9
SUMMARY
The following summary is qualified in its entirety by the more
detailed information and combined financial statements, including the
notes thereto, appearing elsewhere in this Prospectus. This Prospectus
contains certain forward-looking statements. Actual results could
differ materially from those projected in the forward-looking
statements as a result of, among other things, theCautionary
Statements, including without limitation the factors set forth below
under "Risk Factors." The information set forth below under "Risk
Factors" should be considered carefully in evaluating the Exchange
Offer. References herein to fiscal year are to the Company's fiscal
year, which ends on the Saturday nearest June 30 of each year.
The Company
The Company is a leading manufacturer and marketer of woven and
knitted finished and unfinished (or greige) cotton, synthetic and
blended fabrics, which are sold for the ultimate production of
apparel, home furnishings and other products. The Company sells a
broad range of fabrics primarily to branded apparel manufacturers and
resellers, including Levi Strauss & Co. ("Levi Strauss"), Haggar
Corp., the Wranglerr and Leer divisions of V.F. Corporation, Farah
Incorporated, Kellwood Company and Liz Claiborne, Inc., and private
label apparel manufacturers for J.C. Penney Company, Inc., Sears,
Roebuck & Co. and other retailers. The Company believes that it is
a leading producer of cotton pants-weight woven fabric used in
the manufacture of casual slacks such as Levi Strauss' Dockersr and
Haggar Corp.'s Wrinkle-Freer. Other apparel items manufactured
with the Company's woven fabrics include women's chinos pants,
women's blazers, career apparel (uniforms) and battle dress
camouflage military uniforms. Apparel items manufactured with
the Company's knitted fabrics include polo-type or golf shirts,
career apparel, children's apparel, specialty athletic wear and
ladies' tops. For the 1997 fiscal year, the Company generated net
sales and EBITDA of $464.5 million and $60.8 million, respectively.
As a percentage of fiscal year 1997 net sales, sales by the
Delta Mills Marketing Company (woven fabrics) division represented
72.4% and sales by the Stevcoknit Fabrics Company (knitted fabrics)
division represented 27.6%.
The Company believes that its woven fabrics division is a
leading world-wide producer of cotton, cotton blend and spun
synthetic pants-weight fabric, and that it has a reputation for
reliability and high quality in the pants industry. The Company's
relationship with its customers has been strengthened by its
ability to develop new products that meet customer
requirements, including the following product innovations: (i)
a successful manufacturing process for "wrinkle-free" cotton
fabrics, (ii) "baby gabardine" fabric (an all-spun polyester-
rayon blend fabric that is a core product for certain pants,
skirts and jackets for women), (iii) "Suncatcher linen" (a
synthetic fabric made of polyester and rayon fibers spun to
resemble a natural linen product), and (iv) Operation Desert
Storm camouflage fabric. In addition, the division has repeatedly
responded to customer needs in a timely manner, such as in its
support of the growth of Levi Strauss' Dockersr pants line and
helping to launch Haggar Corp.'s Wrinkle-Freer pants, for each
of whom the Company continues to be a significant supplier.
Following Delta Woodside Industries, Inc.'s ("Delta
Woodside") acquisition of the Company in 1986, the Company has
upgraded its facilities through an extensive series of capital
expenditure programs that have modernized and consolidated
certain fabric manufacturing processes. In addition to making
significant improvements in the Company's already high
standards of quality, these modernization programs have
resulted in significant increases in
operating
efficiencies as measured by sales per square foot of
manufacturing space and sales per employee and have, in many
cases, resulted in substantial reductions in the cost per unit of
production. The Company is substantially vertically integrated and
currently operates eight production facilities in the woven
fabrics division and four production facilities in the knitted
fabrics division. Each division has its own management and
employees and operates independently of the other division under
the overall direction of the Company's executive officers.
The Company was incorporated in Delaware in 1971 under the
name Stevcoknit, Inc. Since 1986, the Company has operated the
woven fabrics and knitted fabrics businesses. The Company's
principal executive offices are located at 233 North Main Street,
Suite 200, Greenville, South Carolina 29601 and its telephone
number is (864) 232-8301. The Company is a wholly-owned indirect
subsidiary of Delta Woodside, a South Carolina corporation, the
common stock of which is listed on the New York Stock Exchange.
Unless the context otherwise requires, all references herein to
"Delta Mills" or the "Company" refer to Delta Mills, Inc.
and any of its existing and future subsidiaries. References to
the "Delta Woodside Group" refer to Delta Woodside and all of its
direct and indirect subsidiaries, including the Company.
Industry Trends
The Company competes with other producers of woven and
knitted fabrics to supply the United States apparel market. In
recent years, the fabric/apparel industry has been undergoing
significant changes both in the
geographic locations of production and in the type of
garments produced. Specifically, two trends have
significantly
impacted the industry: (i) the growth of a western
hemisphere
fabric/apparel production chain, and (ii) the increased
casualization of the workplace. The Company believes that it is
well-positioned to capitalize on both of these trends.
Growth of a Western Hemisphere Fabric/Apparel Production Chain
In recent years, the fabric/apparel industry has been marked by
fundamental changes in the sources of supply for apparel
products. Specifically, the Company believes that a western
hemisphere fabric/apparel production chain has been rapidly
developing to compete with the Far Eastern supply chain, with fabric
manufacturing remaining in the United States and apparel
manufacturing moving to Mexico, Central America and the Caribbean
islands ("MCACI"). The shift to this configuration, which began
several decades ago, has accelerated significantly in the past
several years with the passage of the North American Free
Trade Agreement ("NAFTA") and the General Agreement on
Tariffs and Trade ("GATT"). The western hemisphere
fabric/apparel production chain has also been strengthened by the
requirements of United
States retailers for shorter delivery times and faster
turnaround times, which can be more easily met by suppliers in
the western hemisphere.
Due to the relatively higher proportion of labor costs in
apparel manufacturing, much of the apparel production in the United
States is shifting to
MCACI countries where labor costs are competitive on a
world-wide basis. By contrast, fabric production for
apparel
manufactured in MCACI countries has largely remained in the
United States for a number of reasons. First, because the
modern fabric manufacturing process includes relatively little
manual labor, United States wage rates no longer put domestic
fabric manufacturers at a competitive disadvantage. In addition,
as fabric manufacturing today requires substantial capital
investment, the United States is a more attractive venue than
MCACI countries due to its political and economic stability and
developed infrastructure, including an abundant water supply and
reliable, low-cost electric power.
In addition, tariffs, quotas and other existing trade regulations
provide western hemisphere fabric/apparel production with
a
significant competitive advantage in the United States market.
Recent changes in trade regulation, including NAFTA, have not only
spurred growth among United States fabric manufacturers and
MCACI apparel manufacturers, but also have encouraged the further
development of a western hemisphere fabric/apparel production
chain. In the 1960s, Section 807 of the Tariff Schedules of
the United States ("Section 807") created a platform for this
growth. Section 807 provides for duty-free treatment of United
States origin components used in the assembly of
imported articles. The result is that duty is assessed
only on the value of any foreign components that may be present
and
the labor costs incurred offshore in the assembly of apparel
using United States origin fabric components. In addition, under a
related program referred to as "Section 807A," apparel articles
assembled in a Caribbean country, in which all fabric components
have been wholly formed and cut in the United States, are
subject to preferential quotas with respect to access into the
United States. A similar program,
enacted as a result of NAFTA and referred to as the Special
Regime Program, provides even greater benefits for such
apparel assembled in Mexico from fabric components formed and
cut in the United States. In contrast, apparel not meeting the
criteria of such programs is
subject to quotas and/or relatively higher tariffs. See
"Risk Factors -- Competition; Risks Associated with Changing
Industry
and Regulation" and "Business -- Competition."
The shift to this western hemisphere fabric/apparel production
chain has occurred largely at the expense of the growth of Far Eastern
fabric and apparel production. Apparel retailers, many of which have
in the past relied on Hong Kong, China and other Far Eastern countries
as their principal sources of completed apparel products, are
increasingly looking to the western hemisphere fabric/apparel
production chain. This is due in part to demands of United States
apparel retailers for shorter delivery times and quicker turnaround
times. Today, the working relationships between the fabric mills of
the United States and the apparel factories of MCACI countries are
becoming more efficient and well-developed, making western hemisphere
fabric/apparel products competitive with those imported from the Far
East. From 1995 to 1996, apparel imports from MCACI countries to the
United States grew 18.7% from $8.3 billion to $9.8 billion, versus
imports from all other countries of $28.5 billion in 1995 and $28.8
billion in 1996, an increase of only 1.1%. In the first quarter of
1997, imports from MCACI countries were $2.6 billion, an increase of
33.8% from $2.0 billion imported during the first quarter of 1996,
while imports from all other countries increased by 7.2% during the
same period. The Company believes that the majority of garments
imported to the United States from MCACI countries contain fabric from
United States producers such as Delta Mills.
The Company believes that its relationship with United States
apparel marketers, its modern manufacturing facilities and its
reputation for quality position it to compete effectively in this
evolving western hemisphere fabric/apparel production chain.
Increased Casual Workplace Environment
Trends in consumer preferences are also creating growth
opportunities for the Company. With the advent of "casual Fridays" and
increasingly casual dress workplaces in recent years, the demand for
casual wear has increased. The Company's principal product lines are
made into garments of the type being worn in this more casual
workplace environment, such as all-cotton pants and knit polo-type
shirts. The Company's recently completed modernization program has
increased its capacity for all-cotton finished fabrics used in casual
wear. As a result, the Company believes that it is in a position to
benefit from this casualization trend.
Business StrategyStrategy
Within the framework of an evolving fabric/apparel industry, the
Company has developed and is implementing the following business
strategy aimed at growing revenues and EBITDA:
Leverage Woven Fabrics Division Relationships with Key Apparel
Marketers. The woven fabrics division has focused its marketing
efforts on building close relationships with major apparel
companies that have broad distribution channels and that the
Company believes have positioned themselves for long-term growth.
The division has fostered relationships for over 30 years with,
and has become an integral part of the supply chain for certain
product lines of, several strong United States branded apparel
merchandisers, including Levi Strauss, Haggar Corp., the Wranglerr
and Leer divisions of V.F. Corporation and Farah Incorporated. In
addition, the division is a significant supplier to certain
product lines of Liz Claiborne, Inc. and Kellwood Company, with
each of whom it has had a relationship for more than five years.
Sales to these six core customers grew 46.6%
from fiscal year 1996 to fiscal year 1997.
In building these relationships, the Company seeks to be a
significant supplier for the major product lines of its customers
which the Company expects to provide a steady base of recurring
revenues. To manufacture goods for the United States apparel market,
these apparel producers create preferred supplier relationships with
a limited number of fabric manufacturers, like the division,
that satisfy on-time delivery, reliability, lead time consistency,
cost and quality criteria. The woven fabrics division also maintains
strong working relationships with major retailers, such as J.C.
Penney Company, Inc., Kmart Corporation, Sears, Roebuck & Co. and
Wal-Mart Stores, Inc., that specify or recommend the purchase of
fabric to contract manufacturers that produce their apparel product
lines.
These efforts have produced a substantial order backlog in the
woven fabrics division, which at June 28, 1997 stood at $119.9
million, a 60.0% increase over the prior fiscal year end.
Focus on the Growth Segments of the Knitted Fabrics Industry.
The knitted fabric division's marketing resources are focused on the
following segments: (i) major apparel companies that market casual
wear such as knit polo-type shirts, (ii) children's wear
manufacturers and (iii) career apparel.
As a result of the growth in knit polo-type shirts, many major
branded apparel companies, such as Levi Strauss, NIKE, Inc. and the
Leer and Wranglerr divisions of V.F. Corporation, as well as private
label companies, are expected to increase their demand for knitted
fabrics. The knitted fabrics division also plans to expand its
children's wear business by targeting large manufacturers of
children's wear, such as Garan, Incorporated and Gerber Products
Company, that have successfully maintained and expanded their market
shares in a segment which the Company believes has experienced
significant concentration in recent years.
In addition, although the career apparel segment has
traditionally been a blue collar, woven fabrics business where
durability of the garment was the chief criterion, delivery, fast
food and other service companies such as United Parcel Service of
America, Inc., Taco Bell North America and Kinko's, Inc. are
requiring uniforms that are not only durable, but fashionable and
comfortable as well. The Company believes that this trend is
providing a rapidly growing career apparel market for knit polo-type
shirts. This market is attractive to the Company because demand in
this market is generally more consistent and less price-sensitive
than the retail market generally, and the customer relationships
tend to be service-oriented and longstanding. The market for knit
career apparel shirts in 1995 was approximately 25 million pounds,
up from approximately 18 million pounds in 1990.
Capitalize on Improved Operating Efficiencies and Reduced Cost
Structure. The Company has recognized that a critical element of
being competitive in the global textile industry is the ability to
minimize manufacturing costs. In an effort to become a low-cost,
world competitive producer, the Company has invested approximately
$277.1 million during the last decade to modernize and maintain its
plants and equipment, including more than $143.8 million over the
past five fiscal years. As a result of its extensive capital
expenditure campaign in recent years, the Company believes that it
is in a position to return to substantially reduced levels of
capital expenditures, with an average of approximately $15.0 million
per year expected to be required for the next three fiscal years.
The woven fabrics division began a capital improvement program
during fiscal year 1992 that was designed to modernize certain fiber
opening, carding, spinning, weaving and fabric finishing processes
to focus on the production of heavier-weight, higher-margin goods.
By the end of fiscal year 1997, expenditures for this six-year
program totaled $112.8 million. As a result, the division has
reduced its
manufacturing square footage by approximately 18% and the number of
employees by 26%. In the modernization program, the woven fabrics
division reduced its capacity to produce lower price greige goods
but increased its capacity to finish fabrics. As a consequence, the
woven fabrics division has increased its outside purchases of greige
goods. The Company believes that these changes provide it
with the opportunity to increase its overall sales levels and to
expand its operating margins.
The knitted fabrics division began a consolidation and
modernization project in fiscal year 1992 to consolidate the number
of its manufacturing facilities from four spinning, two knitting and
two finishing plants to two spinning, one knitting and one
finishing plant. During the past five fiscal years, capital
expenditures for the program totaled $42.1 million.
Simultaneously, certain knitting, dyeing and finishing processes
were modernized. With the successful completion of this project,
manufacturing square footage was reduced by 37% and the number of
employees was reduced by 26%, with no material change in total
knitted fabric capacity.
These initiatives have resulted in a significant reduction in the
Company's manufacturing costs. Comparing the most recent fiscal year
with fiscal year 1992, sales generated per square foot of
manufacturing space have increased approximately 29.3%, and sales
generated per employee have increased approximately 29.4%.
Continue to Focus on Quality. Coupled with the modernization
projects described above, the Company's pursuit of quality
improvements has resulted in its reputation as a high quality
producer of textile fabrics. For example, the Company's Beattie
plant (spinning and weaving of pants-weight twill, located in
Fountain Inn, South Carolina) recently won the 1997 South Carolina
Governor's Quality Achiever Award which is modeled upon criteria
used for the Malcolm Baldridge Quality Award. Both divisions have
been qualified by the J.C. Penney Company, Inc. quality
laboratory with "outstanding" quality ratings. In addition, the
woven fabrics division is a certified supplier to Levi Strauss
and Liz Claiborne because of its consistently meeting their high
quality and delivery standards. Other apparel manufacturers are
following this trend toward certifying key suppliers. As a
consequence of the high quality of the woven fabrics produced by the
Company, some of the Company's largest customers, such as Levi
Strauss, do not find it necessary to inspect all of the Company's
goods upon receipt. As a result of the modernization program in the
woven fabrics division, including the Beattie plant project
completed earlier in fiscal year 1997, fabric defect points per 100
square yards in finished cotton woven fabrics shipped to customers
declined from an average of 13.6 points in fiscal year 1992 to an
average of 4.2 points in fiscal year 1997, significantly better than
the industry standard for "first quality." The Company believes that
its product quality is a significant competitive advantage in the
sale of its higher margin woven products.
The Exchange Offer
Securities Offered $150.0 million in aggregate principal
amount of 9-5/8% Senior Notes due September 1, 2007,
Series B.
The Exchange $1,000 principal amount of the Exchange
Offer Notes in exchange for each $1,000 principal
amount of Senior Notes. As of the date
hereof, all of the aggregate principal amount
of Senior Notes are outstanding. The Company
will issue the Exchange Notes to eligible
holders on or promptly after the Expiration
Date of the Exchange Offer.
Based on interpretations by the staff of
the Commission set forth in no-action letters
issued to unrelated third parties, the
Company believes that the Exchange Notes
issued pursuant to the Exchange Offer in
exchange for Senior Notes may be offered for
resale, resold and otherwise transferred by a
holder thereof (other than (i) a broker
dealer who purchases Notes directly from the
Company to resell pursuant to Rule 144A or
any other available exemption under the
Securities Act or (ii) a person that is an
affiliate of the Company within the meaning
of Rule 405 under the Securities Act),
without compliance with the registration and
prospectus delivery provisions of the
Securities Act; provided that the holder is
acquiring the Exchange Notes in the ordinary
course of its business and is not
participating, and had no arrangement or
understanding with any person to participate,
in the distribution of the Exchange Notes.
(See the No-Action Letters,). Holders of
Senior Notes who tender their Senior Notes in
the Exchange Offer with the intention of
participating in a distribution of the
Exchange Notes will not be able to rely on
the No-Action Letters or similar no-action
letters. Each broker-dealer that receives
Exchange Notes for its own account in
exchange for Senior Notes, where such Senior
Notes were acquired by such broker-dealer as
a result of market-making activities or other
trading activities, must acknowledge that it
will deliver a prospectus in connection with
any resale of such Exchange Notes.
Holders of Senior Notes will not have
dissenters' rights or appraisal rights in
connection with the Exchange Offer. See "The
Exchange Offer -- Appraisal Rights."
Expiration Date The Exchange Offer will expire at 5:00
p.m., Eastern time, on [25 business days
following effectiveness], 1997, unless the
Exchange Offer is extended by the Company in
its sole discretion, in which case the term
"Expiration Date" shall mean the latest date
and time to which the Exchange Offer is
extended. See "The Exchange Offer --
Expiration Date; Extensions; Amendments."
Conditions to The Exchange Offer is subject to certain
the Exchange customary conditions, which may be waived, to
Offer the extent permitted by law, by the Company.
See "The Exchange Offer _ Conditions."
Procedures for Each eligible holder of Senior Notes
Tendering wishing to accept the Exchange Offer must
Exchange Notes complete, sign and date the accompanying
Letter of Transmittal, or a facsimile
thereof, in accordance with the instructions
contained herein and therein, and mail or
otherwise deliver such Letter of Transmittal,
or such facsimile, together with the Senior
Notes and any other required documentation to
the Exchange Agent (as defined herein) at the
address set forth in the Letter of
Transmittal. By executing the Letter of
Transmittal, each holder will represent to
the Company that, among other things, (i) the
Exchange Notes to be acquired by such holder
of Senior Notes in connection with the
Exchange Offer are being acquired by such
holder in the ordinary course of its
business, (ii) such holder has no arrangement
or understanding with any person to
participate in a distribution of the Exchange
Notes, (iii) that if such holder is a broker
dealer registered under the Exchange Act or
is participating in the Exchange Offer for
the purposes of distributing Exchange Notes,
such holder will comply with the registration
and prospectus delivery requirements of the
Securities Act in connection with a secondary
resale transaction of the Exchange Notes
acquired by such person and cannot rely on
the position of the staff of the Commission
set forth in the No-Action Letters (see "The
Exchange Offer -- Resale of the Exchange
Notes"), (iv) such holder understands that a
secondary resale transaction described in
clause (iii) above and any resales of
Exchange Notes obtained by such holder
directly from the Company should be covered
by an effective registration statement
containing the selling security holder
information required by Item 507 or Item 508,
as applicable, of Regulation S-K of the
Commission and (v) such holder is not an
"affiliate" as defined in Rule 405 under the
Securities Act, of the Company. If the holder
is a broker-dealer that will receive Exchange
Notes for its own account in exchange for
Senior Notes that were acquired as a result
of market-making activities or other trading
activities, such holder will be required to
acknowledge in the Letter of Transmittal that
such holder will deliver a prospectus in
connection with any resale of such Exchange
Notes; however, by so acknowledging and by
delivering a prospectus, such holder will not
be deemed to admit that it is an
"underwriter" within the meaning of the
Securities Act. See "The Exchange Offer -
Procedures for Tendering."
Special Any beneficial owner whose Senior Notes
Procedures for are registered in the name of a broker,
Beneficial dealer, commercial bank, trust company or
Owners other nominee and who wishes to tender such
Senior Notes in the Exchange Offer should
contact such registered holder promptly and
instruct such registered holder to tender on
such beneficial owner's behalf. If such
beneficial owner wishes to tender on such
owner's own behalf, such owner must, prior to
completing and executing the Letter of
Transmittal and delivering such owner's
Senior Notes, either make appropriate
arrangements to register ownership of the
Senior Notes in such owner's name or obtain a
properly completed bond power from the
registered holder. The transfer of
registered ownership may take considerable
time and may not be able to be completed
prior to the Expiration Date. See "The
Exchange Offer _ Procedures for Tendering."
Guaranteed Holders of Senior Notes who wish to
Delivery tender their Senior Notes and whose Senior
Procedures Notes are not immediately available or who
cannot deliver their Senior Notes, the Letter
of Transmittal or any other documents
required by the Letter of Transmittal to the
Exchange Agent (or comply with the procedures
for book-entry transfer) prior to the
Expiration Date must tender their Senior
Notes according to the guaranteed delivery
procedures set forth in "The Exchange Offer _
Guaranteed Delivery Procedures."
Withdrawal Tenders may be withdrawn at any time
Rights prior to 5:00 p.m., Eastern time, on the
Expiration Date pursuant to the procedures
described under "The Exchange Offer _
Withdrawal of Tenders."
Acceptance of Subject to the satisfaction or waiver of
the Senior Notes and the conditions to the Exchange Offer, the
Delivery of the Company will accept for exchange any and all
Exchange Notes Senior Notes that are properly tendered in
the Exchange Offer, and not withdrawn, prior
to 5:00 p.m., Eastern time, on the Expiration
Date. The Exchange Notes issued pursuant to
the Exchange Offer will be delivered on the
earliest practicable date following the
Expiration Date. See "The Exchange Offer _
Terms of the Exchange Offer."
Certain Federal For a discussion of certain federal
Income Tax income tax considerations relating to the
Consequences exchange of the Exchange Notes for Senior
Notes, see "Certain Federal Income Tax
Considerations."
Registration The Senior Notes were sold by the
Rights Agreement Company on August 25, 1997 to the Initial
Purchaser pursuant to a purchase agreement
dated August 20, 1997 (the "Purchase
Agreement") by and among the Company, the
Guarantor and the Initial Purchaser ,in an
offering consisting in the aggregate of
$150,000,000 of the Senior Notes. Pursuant
to the Purchase Agreement, the Company, the
Guarantor and the Initial Purchaser entered
into the Registration Rights Agreement, which
grants the holders of the Senior Notes
certain exchange and registration rights.
This Exchange Offer is intended to satisfy
such rights, which generally will terminate
upon the consummation of the Exchange Offer.
The holders of the Exchange Notes will not be
entitled to any exchange or registration
rights with respect to the Exchange Notes.
See "The Exchange Offer -- Senior Notes
Registration Rights."
Effect on As a result of the making of this
Holders of the Exchange Offer, the Company will have
Senior Notes fulfilled certain of its obligations under
the Registration Rights Agreement, and
holders of Senior Notes who do not tender
their Senior Notes generally will not have
any further registration rights under the
Registration Rights Agreement or otherwise.
Such holders will continue to hold the
untendered Senior Notes and will be entitled
to all the rights and subject to all the
limitations, including, without limitation,
transfer restrictions, applicable thereto
under the Indenture, except to the extent
such rights or limitations, by their terms,
terminate or cease to have further
effectiveness as a result of the Exchange
Offer. Accordingly, if any Senior Notes are
tendered and accepted in the Exchange Offer,
the trading market, if any, for the
untendered Senior Notes could be adversely
affected.
Exchange Agent The Bank of New York is serving as
exchange agent (the "Exchange Agent") in
connection with the Exchange Offer.
Summary of Terms of Exchange Notesof Terms of Exchange Notes
The form and terms of the Exchange Notes are substantially identical t
o the form and terms of the Senior Notes which they replace except
that (i) the Exchange Offer will have been registered under the
Securities Act and, therefore, the Exchange Notes will not bear
legends restricting the transfer thereof and (ii) the holders of
Exchange Notes generally will not be entitled to further registration
rights under the Registration Rights Agreement, which rights generally
will have been satisfied when the Exchange Offer is consummated. The
Exchange Notes will evidence the same indebtedness as the Senior Notes
which they replace and will be issued under, and be entitled to the
benefits of, the Indenture. See "Description of Exchange Notes."
Maturity Date September 1, 2007.
Interest Payment March 1 and September 1,
Dates commencing March 1, 1998.
Optional On or after September 1, 2002,
Redemption the Company may redeem the Notes, in
whole or in part, at the redemption
prices set forth herein, plus accrued
and unpaid interest thereon and
Liquidated Damages, if any, to the
date of redemption. See "Description
of Exchange Notes -- Optional
Redemption."
Mandatory None.
Redemption
Ranking The Notes are general unsecured
obligations of the Company and rank
senior to all existing and future
subordinated indebtedness of the
Company and pari passu in right of
payment to all existing and future
unsubordinated indebtedness of the
Company, including indebtedness under
the New Credit Facility. However, the
obligations of the Company under the
New Credit Facility are secured by
the accounts receivable and inventory
(and related property) of the Company
and its subsidiaries, as well as all
of the outstanding capital stock of
the Company and its subsidiaries,
and, accordingly, such indebtedness
effectively ranks senior to the Notes
to the extent of such assets. As of
August 25, 1997, on an as adjusted
basis after giving effect to the
Refinancing, the Company had
approximately $208.0 million of
indebtedness outstanding (including
approximately $58.0 million of
secured indebtedness outstanding
under the New Credit Facility). In
addition, the Company was
contingently liable with respect to
approximately $0.7 million under
letters of credit and had
approximately an additional $41.3
million of secured indebtedness
available to be incurred under the
New Credit Facility. See "Use of
Proceeds" and "Description of Other
Indebtedness."
Guarantees The Notes are unconditionally
guaranteed by each of the existing
and future subsidiaries of the
Company other than Receivables
Subsidiaries (as defined herein)
(each a "Guarantor" and,
collectively, the "Guarantors"). The
Subsidiary Guarantees rank senior to
all existing and future subordinated
indebtedness of the Guarantors and
pari passu in right of payment with
all existing and future
unsubordinated unsecured indebtedness
of the Guarantors. The Guarantors'
obligations under the New Credit
Facility, however, are secured by a
lien on the accounts receivable and
inventory (and related property) of
the Guarantors and, accordingly, such
indebtedness ranks prior to the
Subsidiary Guarantees with respect to
such assets. See "Description of
Exchange Notes -- Guarantees."
Change of Control Upon a Change of Control (as
defined herein), the Company will be
required to make an offer to
repurchase all outstanding Notes at
101% of the principal amount thereof
plus accrued and unpaid interest
thereon and Liquidated Damages, if
any, to the date of repurchase. See
"Description of Exchange Notes -
Repurchase at the Option of Holders
-- Change of Control."
Covenants The Indenture restricts, among
other things, the ability of the
Company and its subsidiaries to incur
additional indebtedness and issue
preferred stock, enter into sale and
leaseback transactions, incur liens,
pay dividends or make certain other
restricted payments, apply net
proceeds from certain asset sales,
enter into certain transactions with
affiliates, merge or consolidate with
any other person, sell stock of
subsidiaries, and assign, transfer,
lease, convey or otherwise dispose of
substantially all of the assets of
the Company. See "Description of
Exchange Notes -- Certain Covenants."
Use of Proceeds The Company will not receive
proceeds from the Exchange Offer.
The net proceeds from the sale of the
Senior Notes, together with
approximately $58.0 million of
initial borrowings under the New
Credit Facility, were paid to Delta
Woodside in satisfaction of
outstanding intercompany
indebtedness, and Delta Woodside
utilized such payments to repay
outstanding indebtedness of Delta
Woodside (which was fully and
unconditionally guaranteed by the
Company). See "Use of Proceeds."
Risk Factors
See "Risk Factors" for a discussion of certain factors that should be
considered in evaluating an investment in the Exchange Notes.
Summary Historical and Pro Forma Combined Financial DataHistorical
and Pro Forma Combined Financial Data
The following table presents summary historical and pro forma combined
financial information of the Company for each of the six fiscal years in
the period ended June 28, 1997. The historical combined financial
information for the fiscal years ended July 2, 1994, July 1, 1995,
June 29, 1996 and June 28, 1997 has been derived from the combined
financial statements of the Company for such periods, which have been
audited by KPMG Peat Marwick LLP. The information for the fiscal years
ended June 27, 1992 and July 3, 1993 is unaudited and is derived from
unaudited combined financial statements not included in this
Prospectus. The summary historical combined financial information
should be read in conjunction with, and is qualified in its entirety by
reference to, the information set forth under the caption
"Management's Discussion and Analysis of Financial Condition and
Results of Operations" and the audited combined financial statements of
the Company as of June 29, 1996 and June 28, 1997, and for each of the
three fiscal years in the period ended June 28, 1997, and the notes
thereto, which appear elsewhere in this Prospectus.
Fiscal Year (1)
1992(2) 1993(2) 1994 1995 1996 1997
(Unaudited) (Unauited)
(in thousands, except ratios)
Statements of
Operations
Data (3):
Net sales $485,200 $457,249 $407,037 $413,927 $402,548 $464,548
Cost of goods
sold 409,256 400,187 361,531 369,785 389,977 399,378
Gross profit 75,944 57,062 45,506 44,142 12,484 65,170
Selling,
general and
administrative
expenses (4) 25,211 24,863 25,734 23,717 22,767 25,382
Impairment and
restructuring _ _ 3,066 (290) 13,291 _
charges (credits)
(5)
Other (income)
expense (60) (638) 122 272 921 (1,632)
Earnings
(loss) from 50,793 32,837 16,584 20,443 (24,495) 41,420
operations
Interest
expense 9,569 4,918 10,795 12,251 14,099 14,285
Interest
(income) (147) (259) (131) (39) (92) (73)
Income (loss)
before income taxes 41,371 28,178 5,920 8,231 (38,502) 27,208
Income taxes
(benefit) 15,800 6,009 2,500 3,180 (13,703) 10,655
Net income
(loss) $25,571 $22,169 $3,420 $5,051 $(24,799) $16,553
Other Data:
Depreciation
and amortization $10,414 $13,087 $16,712 $16,997 $18,923 $19,323
Capital
expenditures 37,753 34,446 18,334 35,182 42,128 13,719
EBITDA (6) 61,354 46,183 36,493 37,189 7,840 60,816
Ratio of
earnings to fixed 4.6x 4.7x 1.5x 1.6x _(8) 2.3x
charges (7)
Ratio of
EBITDA to interest 6.4x 9.4x 3.4x 3.0x _(8) 4.3x
expense (6)
Pro Forma
Financial Data
(Unaudited) (9)
Ratio of
earnings to fixed 2.3x
charges (7)
Cash interest
expense (10) $19,595
Ratio of
EBITDA to cash 3.1x
interest
expense (6)
Ratio of total
debt to EBITDA (6) 3.7x
Historical Pro Forma(9)
Fiscal Year Fiscal Year
1996 1997 1997
(Unaudited)
(in thousands)
Balance Sheet Data (3)
Working capital (deficit) $16,010 $(7,525) $141,133
Total assets 333,577 345,010 351,010
Total debt and other long-term
obligations (11) 289,587 268,658 225,000
Shareholder's equity (deficit) (8,709) 7,844 57,502
______________________
(1) The Company's operations are based on a fifty-two
or fifty-three week fiscal year ending on the Saturday nearest June
30. Fiscal year 1993 was fifty-three weeks.
(2) During fiscal year 1993, two indirect subsidiaries
of Delta Woodside merged into Delta Holding, Inc. which was then
renamed Delta Mills, Inc. Amounts presented for fiscal years 1992
and 1993 reflect the effect of this merger as if the merger had
occurred at the beginning of fiscal year 1992.
(3) The statements of operations data and balance
sheet data include the accounts of Delta Mills, Inc. and certain
marketing divisions of Delta Consolidated Corporation. These
divisions of Delta Consolidated Corporation were transferred in
August 1997 to Delta Mills Marketing, Inc., a wholly-owned
subsidiary of the Company.
(4) Delta Woodside provides various corporate services
to the Company, including payroll, accounting, internal audit,
employee benefits and corporate services. These services have been
charged to the Company on the basis of Delta Woodside's costs and
allocated to the Company based on employee head count, computer
time, projected sales and other criteria. During fiscal years 1992,
1993, 1994, 1995, 1996 and 1997, Delta Woodside charged the Company
$3,906, $3,280, $3,083, $2,950, $3,123 and $3,302, respectively,
for these services. See Note F to the Combined Financial
Statements.
(5) Impairment and restructuring charges (credits)
include principally writedowns of property, plant and equipment.
Also included are expenses incurred in connection with plant
closings.
(6) "EBITDA" is defined herein as income (loss) before
income taxes, plus depreciation and amortization expense and
interest expense, plus impairment and restructuring charges
(credits). While EBITDA should not be construed as an alternative
to operating earnings (loss) or net income (loss), or as an
indicator of operating performance or liquidity, the Company
believes that the ratio of EBITDA to interest expense is a measure
that is commonly used to evaluate a company's ability to service
debt.
(7) Earnings used in computing the ratio of earnings
to fixed charges consist of income (loss) before provision for
income taxes plus fixed charges. Fixed charges consist of interest
expense on all indebtedness (including amortization of deferred
debt issuance costs) plus capitalized interest, plus interest
expense on the indebtedness of Delta Woodside guaranteed by the
Company (less interest paid by the Company with respect to
intercompany indebtedness).
(8) Fixed charges exceeded earnings in fiscal year
1996 by $38,502. Interest expense exceeded EBITDA in fiscal year
1996 by $6,258.
(9) The pro forma financial data give effect to the
Refinancing as if it occurred on June 30, 1996. The pro forma
balance sheet data give effect to the Refinancing as if it occurred
on June 28, 1997.
(10) Pro forma cash interest expense excludes
amortization of deferred debt issuance costs.
(11) Total debt and other long-term obligations, on an
historical basis, consist of the long-term debt due to affiliate,
the current loan payable to affiliate and the noninterest-bearing
payable to affiliates. See Notes C and F to the Combined Financial
Statements.
RISK FACTORS
This Prospectus contains certain forward-looking statements within
the meaning of Section 27A of the Securities Act and Section 21E of
the Exchange Act. Such forward-looking statements are based on the
beliefs of the Company's management as well as on assumptions made by
and information currently available to the Company at the time such
statements were made. When used in this Prospectus, the words
"anticipate," "believe," "estimate," "expect," "intend" and similar
expressions, as they relate to the Company, are intended to identify
such forward-looking statements. Although the Company believes these
statements are reasonable, prospective purchasers should be aware that
actual results could differ materially from those projected by such
forward-looking statements as a result of the risk factors set forth
below or other factors. Prospective purchasers should consider
carefully the following factors, as well as the other information and
data included in this Prospectus. The Company cautions the reader,
however, that this list of factors may not be exhaustive and that
these or other factors, many of which are outside of the Company's
control, could have a material adverse effect on the Company and its
ability to service its indebtedness, including principal and interest
payments on and liquidated damages, if any, with respect to the Notes.
Furthermore, the Company may not update or revise the forward-looking
statements to reflect events or circumstances after the date hereof or
to reflect the occurrence of unanticipated events. Prospective
purchasers are cautioned not to place undue reliance on any of the
forward-looking statements included herein. All forward-looking
statements attributable to the Company or persons acting on its behalf
are expressly qualified in their entirety by the cautionary statements
set forth below.
Failure to Exchange Senior Notesto Exchange Senior Notes
Exchange Notes will be issued in exchange for Senior Notes only
after timely receipt by the Exchange Agent of such Senior Notes, a
properly completed and duly executed Letter of Transmittal and all
other required documentation. Therefore, holders of Senior Notes
desiring to tender such Senior Notes in exchange for Exchange Notes
should allow sufficient time to ensure timely delivery. Neither the
Exchange Agent nor the Company is under any duty to give notification
of defects or irregularities with respect to tenders of Senior Notes
for exchange. Senior Notes that are not tendered or are tendered but
not accepted will, following consummation of the Exchange Offer,
continue to be subject to the existing restrictions upon transfer
thereof. In addition, any holder of Senior Notes who tenders in the
Exchange Offer for the purpose of participating in a distribution of
the Exchange Notes will be required to comply with the registration
and prospectus delivery requirements of the Securities Act in
connection with any resale transaction. Each broker-dealer that
receives Exchange Notes for its own account in exchange for Senior
Notes, where such Senior Notes were acquired by such broker-dealer as a
result of market-making activities or any other trading activities,
must acknowledge that it will deliver a prospectus in connection with
any resale of such Exchange Notes. To the extent that Senior Notes
are tendered and accepted in the Exchange Offer, the trading market
for untendered and tendered but unaccepted Senior Notes could be
adversely affected due to the limited amount, or "float," of the
Senior Notes that is expected to remain outstanding following the
Exchange Offer. Generally, a lower "float" of a security could result
in less demand to purchase such security and could, therefore, result
in lower prices for such security. For the same reason, to the extent
that a large amount of Senior Notes is not tendered or is tendered and
not accepted in the Exchange Offer, the trading market for the
Exchange Notes could be adversely affected. See "Plan of
Distribution" and "The Exchange Offer."
Significant Leverage and Debt ServiceLeverage and Debt Service
The Company is highly leveraged. At August 25, 1997, after the
Refinancing, including the application of the net proceeds from the
offering of Senior Notes in the manner described in "Use of Proceeds,"
the Company had shareholder's equity of approximately $58.9 million
and total outstanding long-term debt of approximately $208.0 million,
of which approximately $58.0 million was secured by the Company's
accounts receivable and inventory (and related property), as well as
all of the outstanding capital stock of the Company and its
subsidiaries (and, accordingly, was effectively senior to the Notes
with respect to such assets). Also, after giving pro forma effect to
the Refinancing, the Company's earnings before taxes and interest
expense would have been insufficient to cover its fixed charges by
approximately $38.5 million for the 1996 fiscal year. In addition, as
of August 25, 1997, after the Refinancing, approximately $41.3 million
was available for additional borrowing under the New Credit Facility
and the Company was contingently liable with respect to approximately
$0.7 million under letters of credit issued under the New Credit
Facility. The Indenture permits the incurrence of substantial
additional secured and other indebtedness by the Company and its
subsidiaries. See "Description of Exchange Notes -- Certain
Covenants," "Description of Other Indebtedness" and "Use of Proceeds."
The Company also has substantial additional obligations under
operating leases. See Notes A and C to the Combined Financial
Statements.
Additionally, all of the indebtedness under the New Credit Facility
will mature prior to the Notes. Indebtedness under the New Credit
Facility is secured by a lien on accounts receivable and inventory
(and related property), as well as all of the outstanding capital
stock of the Company and its subsidiaries, while the Notes represent
unsecured obligations of the Company. Accordingly, the lenders under
the New Credit Facility (and any other indebtedness secured by assets
of the Company) will have a claim ranking effectively prior to that of
the holders of the Notes with respect to the proceeds of assets
securing such indebtedness. In the event of bankruptcy, liquidation or
reorganization of the Company, holders of the Notes will participate
ratably in the remaining assets of the Company with all holders of
unsecured indebtedness of the Company and with all other general
creditors of the Company based upon the respective amounts owed to
each holder or creditor. See "Description of Exchange Notes." In any
of the foregoing events, there can be no assurance that there would be
sufficient assets to pay amounts due on the Notes.
The Company's ability to make scheduled payments
of principal of and to pay interest or Liquidated Damages, if any, on
the Notes, to satisfy its other debt obligations and to fund planned
capital expenditures will depend upon its future operating
performance, which will be affected by, among other factors,
prevailing international and domestic economic conditions and
financial, business, regulatory, political and other factors,
including without limitation fluctuations in the rate of exchange of
currency and the continuation of favorable tariffs, quotas and other
trade regulations, certain of which are beyond its control, as well as
the availability of borrowings under the New Credit Facility or any
successor credit facilities. The Company will require substantial
amounts of cash to fund scheduled payments of principal and interest
on its outstanding indebtedness as well as future capital expenditures
and any increased working capital requirements. If the Company is
unable to meet its cash requirements out of cash flow from operations
and its available borrowings, there can be no assurance that it will
be able to obtain alternative financing or that it will be permitted
to do so under the terms of the Indenture or the New Credit Facility.
In the absence of such financing, the Company's ability to respond to
changing business, political and economic conditions, to absorb
adverse operating results, to fund capital expenditures or to make
future acquisitions may be adversely affected. In addition, actions
taken by the lending banks under the New Credit Facility are not
subject to approval by the holders of the Notes. Finally, it is
anticipated that, in order to pay the principal balance of the Notes
due at maturity, the Company will be required to obtain alternative
financing. There can be no assurance, however, that the Company will
be able to refinance the Notes at maturity at commercially reasonable
terms, or at all, and the inability to refinance the Notes would
likely have a material adverse effect on the Company and on the market
value and marketability of the Notes.
The degree to which the Company will be leveraged following the
Refinancing could have important consequences to holders of the Notes,
including, but not limited to: (i) making it more difficult for the
Company to satisfy its obligations with respect to the Notes and its
other indebtedness and contingent liabilities, (ii) increasing the
Company's vulnerability to general adverse economic and industry
conditions, (iii) limiting the Company's ability to obtain additional
financing to fund future working capital needs, capital expenditures,
research and development and other general corporate purpose
requirements, (iv) requiring the dedication of a substantial portion
of the Company's cash flow from operations to the payment of principal
of, and interest on, its indebtedness, thereby reducing the
availability of such cash flow to fund working capital needs, capital
expenditures, research and development or other general corporate
purposes, (v) limiting the Company's flexibility in planning for, or
reacting to, changes in its business and the industry, and (vi)
placing the Company at a competitive disadvantage vis-a-vis less
leveraged competitors. In addition, the Indenture and the New Credit
Facility contain financial and other restrictive covenants that limit
the ability of the Company to, among other things, borrow additional
funds. Failure by the Company to comply with such covenants could
result in an event of default which, if not cured or waived, could
have a material adverse effect on the Company. In addition, the degree
to which the Company is leveraged could prevent it from repurchasing
all of the Notes tendered to it upon the occurrence of a Change of
Control. See "Description of Exchange Notes -- Repurchase at the
Option of Holders -- Change of Control" and "Description of Other
Indebtedness -- New Credit Facility."
Borrowings under the New Credit Facility bear interest at floating
rates. Increases in interest rates on such borrowings could adversely
affect the Company. While interest rates are currently at relatively
low levels, increases in interest rates could negatively impact the
ability of the Company to meet its debt service obligations, including
its obligations under the Notes.
Competition; Risks Associated with Changing Industry and Regulation;
Risks Associated with Changing Industry and Regulation
The domestic textile and apparel industries are highly competitive.
The United States apparel market is served by a variety of producers,
many of which are located in rapidly growing, low-wage countries and
use fabrics produced in those regions. Many of these fabric producers
have substantially greater financial resources and lower cost of funds
than the Company. Historically, the Company has significantly
benefitted from quotas and tariffs imposed by the United States on the
importation of textiles and apparel, which have reduced competition
from foreign manufacturers. GATT, which became effective on January 1,
1995, requires a complete phase-out of existing quotas over a ten-year
period for World Trade Organization members, a group which includes
most countries in the world with a few exceptions, the most notable of
which is China (although there can be no assurance that China will
continue to be excluded). The phase-out of such quotas is scheduled to
take place in four stages as follows (expressed in a percentage of
total imports for 1994): 16% in 1995; 17% in 1998; 18% in 2002; and
49% in 2005. To date, no products manufactured by the Company, and, to
its knowledge, no apparel products manufactured by its United States
customers for the United States market, have been subject to quota
eliminations under GATT. The products that will be subject to quota
eliminations in 1998, however, include babywear made from natural and
synthetic fibers and in 2002 include dressing gowns, bathrobes, wool
products and woven two-piece track suits. Most of the Company's
products and the end-uses for such products are subject to quota
elimination in 2005. In addition to the phasing-out of quotas, GATT
also requires that the United States reduce tariffs on fabric and
apparel imports over the same ten-year period. To date, the United
States has not lowered such tariffs significantly. The elimination of
quotas or reduction of tariffs as contemplated by GATT, or other
changes in trade regulation that result in the lowering of barriers to
entry of foreign goods, may have a material adverse effect on the
Company.
In addition, the Company benefits from protections
afforded to apparel manufacturers based in certain Latin American and
Caribbean countries that ship finished garments into the United
States, the loss of which protections would have a material adverse
effect on the Company. NAFTA has effectively eliminated or
substantially reduced tariffs on goods imported from Mexico if such
goods are made from fabric originating in Canada, Mexico or the United
States. Section 807 provides for the duty-free treatment of United
States origin components used in the assembly of imported articles.
The result is that duty is assessed only on the value of any foreign
components that may be present and the labor costs incurred offshore in
the assembly of apparel using United States origin fabric
components. Because Section 807 creates an incentive to use fabric
manufactured in the United States, it is beneficial to the Company and
other domestic producers of apparel fabrics. In addition, pursuant to a
related section referred to as "Section 807A" or the Special Access
Program, apparel articles assembled in a Caribbean country, in which
all fabric components have been wholly formed and cut in the United
States, are subject to preferential quotas with respect to access into
the United States for such qualifying apparel, in addition to the
significant tariff reduction provided under Section 807. A similar
program, enacted as a result of NAFTA and referred to as the Special
Regime Program, provides even greater benefits (complete duty-free,
quota-free treatment) for apparel assembled in Mexico from fabric
components formed and cut in the United States. In contrast, apparel
not meeting the criteria of Section 807, Section 807A, or the Special
Regime Program is subject to quotas and/or relatively higher tariffs.
If Section 807, Section 807A or the Special Regime Program were
repealed or altered in whole or in part, the Company believes that it
could be at a serious competitive disadvantage relative to textile
manufacturers in other parts of the world seeking to enter the United
States market, which would have a material adverse effect on the
Company. See "Business -- Industry Trends" and "Business --
Competition."
Future technological advances in the textile industry may result in
the availability of new products or increase the efficiency of
existing manufacturing and distribution systems. If a new technology
becomes available that is more cost-effective or creates a competing
product, the Company may be unable to access such technology or its
use may involve substantial capital expenditure that the Company may
be unable to finance. There can be no assurance that existing,
proposed or yet undeveloped technologies will not render the Company's
technology less profitable or less viable, or that the Company will
have available the financial and other resources to compete
effectively against companies possessing such technologies. The
Company is unable to predict which of the many possible future
products and services will meet the evolving industry standards and
consumer demands. There can be no assurance that the Company will be
able to adapt to such technological changes or offer such products on a
timely basis or establish or maintain competitive positions.
Raw Materials
The principal raw materials used by the Company in the manufacture
of its products are cotton of various grades, synthetic fiber and
synthetic filament yarns. Any shortage in the world cotton supply by
reason of weather, crop disease or other factors, or a significant
increase in the price of cotton or synthetic fiber, could adversely
affect the Company.
The Company has contracted to purchase about 71% of its expected
cotton requirements for fiscal year 1998 and 14% of its expected
cotton requirements for fiscal year 1999. The percentage of the
Company's cotton requirements that the Company fixes each year varies
depending upon the Company's forecast of future cotton prices. The
Company believes that recent cotton prices have enabled it to contract
for cotton at prices that will permit it to be competitive with other
companies in the United States textile industry when the cotton
purchased for future use is put into production. To the extent that
cotton prices decrease before the Company uses these future purchases,
the Company could be materially and adversely affected. In addition,
to the extent that cotton prices increase, the Company may be
materially and adversely affected as there can be no assurance that it
would be able to pass along these increased costs to its customers.
For example, this factor contributed significantly to the Company's
operating losses during fiscal year 1996. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and
"Business -- Raw Materials."
Environmental Laws and Regulations
The Company is subject to various federal, state and local
environmental laws and regulations governing the discharge, emission,
storage, handling and disposal of a variety of substances and wastes
used in or resulting from the Company's operations. The Company
continues to incur capital and other expenditures in order to comply
with applicable regulatory standards and certain consent decrees that
have been entered into by the Company. There can be no assurance that
environmental regulations (or the interpretation of existing
regulations) will not become more stringent in the future, that the
Company will not incur substantial costs in the future to comply with
such requirements or that the Company will not discover currently
unknown environmental problems or conditions. Any such event could
have a material adverse effect on the Company. See "Business --
Environmental and Regulatory Matters."
Dependence on Key Personnel
The Company is dependent upon the continued services of certain
members of senior management, including, among others, its Chief
Executive Officer and Chief Financial Officer. The Company believes
that the loss of the services of key members of senior management
could have a material adverse effect on the Company. In addition, the
Company believes that its future success will depend in large part
upon its continued ability to attract, retain and motivate skilled
managers and other personnel. There can be no assurance that the
Company will be able to attract and retain sufficient qualified
personnel to meet its business needs. See "Management."
Risk of Loss of Material Customers or Broker
For fiscal year 1997, sales to Levi Strauss and sales to the
Company's top five non-affiliated customers accounted for 17.1% and
37.8%, respectively, of total sales. In fiscal year 1996, sales to
Levi Strauss and sales to the Company's top five non-affiliated
customers accounted for 12.9% and 30.7%, respectively, of the
Company's total sales. Consistent with industry practice, the Company
does not operate under a supply contract with Levi Strauss or any of
its other major customers. In addition, during fiscal years 1997, 1996
and 1995, sales of camouflage military fabrics accounted for 8.4%,
12.8% and 3.1%, respectively, of the Company's total sales. The loss of
Levi Strauss or other major customers could have a material adverse
effect upon the Company. See "Business -- Products and Marketing."
The knitted fabrics division sells its prepared for print fabrics to
converters and printers principally through a broker. During fiscal
year 1997, sales through this broker were approximately $44.0 million,
approximately 9.5% of the Company's total sales. The Company believes
that, because of the competitive brokerage environment, the loss of
this broker would not have a material adverse effect on the Company.
There can be no assurance, however, that this would be the case. See
"Business -- Products and Marketing."
Retail Industry and Cyclicality
The textile and retail apparel industries are highly cyclical and
characterized by rapid shifts in fashion, consumer demand and
competitive pressures, and price and demand volatility. The demand for
the Company's products is principally dependent upon the level of
United States demand for retail apparel. The demand for retail apparel is
in turn dependent on United States consumer spending, which may be
adversely affected by an economic downturn, changing retailer and
consumer demands, a decline in consumer confidence or spending, and
other factors beyond the Company's control. A reduction in the level of
demand for retail apparel could have a material adverse effect on
the Company.
The Company's success depends in part upon its ability to anticipate
and respond to changing consumer preferences and fashion trends in a
timely manner. Although the Company attempts to stay abreast of
emerging lifestyle and consumer preferences affecting its products,
any sustained failure by the Company to identify and be able to
respond to such trends could have a material adverse effect on the
Company.
Repurchase of Notes upon a Change of Controlof Notes upon a Change
of Control
Upon a Change of Control, the Company will be required to offer to
repurchase all outstanding Notes at 101% of the principal amount
thereof plus accrued and unpaid interest to the date of repurchase and
Liquidated Damages, if any. There can be no assurance, however, that
sufficient funds would be available at the time of any Change of
Control to make any required repurchases of Notes tendered or that
restrictions in the New Credit Facility or other agreements governing
outstanding indebtedness would allow the Company to make such required
purchases. Notwithstanding these provisions, the Company could enter
into certain transactions, including certain recapitalizations, that
would not constitute a Change of Control but would increase the amount
of debt outstanding at such time. See "Description of Exchange Notes
- - -- Repurchase at the Option of Holders."
Fraudulent Conveyance StatutesConveyance Statutes
Various fraudulent conveyance laws have been enacted for the
protection of creditors and may be utilized by a court of competent
jurisdiction to subordinate or avoid the Exchange Notes or any
Subsidiary Guarantee in favor of existing or future creditors of the
Company or a Guarantor.
The proceeds from the sale of the Senior Notes were used to
refinance outstanding intercompany indebtedness in order to allow the
Company's ultimate parent, Delta Woodside, to refinance outstanding
indebtedness owed to third parties. If a court in a lawsuit on behalf
of an unpaid creditor of the Company or a representative of the
Company's creditors, such as a trustee in bankruptcy of the Company as
a debtor-in-possession, were to conclude that, at the time the Company
paid the net proceeds of the Senior Notes to the Company's direct or
indirect parent, the Company (x) intended to hinder, delay or defraud
any present or future creditor or contemplated insolvency with a
design to prefer one or more creditors to the exclusion in whole or in
part of others or (y) did not receive fair consideration or reasonably
equivalent value for issuing the Notes (for example, because the
stockholders of the Company and not the Company received the benefits
of the issuance of the Notes) and the Company (i) was insolvent, (ii)
was rendered insolvent by reason of such distribution, (iii) was
engaged or about to engage in a business or transaction for which its
remaining assets constituted unreasonably small capital to carry on
its business or (iv) intended to incur, or believed that it would
incur, debts beyond its ability to pay such debts as they matured,
such court could void the Notes. Alternatively, in such event, claims
of the holders of the Notes could be subordinated to claims of the
other creditors of the Company. Because the existing indebtedness that
was refinanced was guaranteed by the Company, the benefit to the
Company of the issuance of the Notes may depend upon whether the
Company's guarantee of the existing indebtedness was itself a
fraudulent conveyance or was otherwise unenforceable.
The Company's obligations under the Notes are guaranteed by the
Guarantors. To the extent that a court were to conclude that (x) a
Subsidiary Guarantee was incurred by a Guarantor with intent to
hinder, delay or defraud any present or future creditor or the
Guarantor contemplated insolvency with a design to prefer one or more
creditors to the exclusion in whole or in part of others or (y) such
Guarantor did not receive fair consideration or reasonably equivalent
value for issuing its Subsidiary Guarantee and such Guarantor (i) was
insolvent, (ii) was rendered insolvent by reason of the issuance of
such Subsidiary Guarantee, (iii) was engaged or about to engage in a
business or transaction for which the remaining assets of such
Guarantor constituted unreasonably small capital to carry on its
business or (iv) intended to incur, or believed that it would incur,
debts beyond its ability to pay such debts as they matured, the court
could avoid or subordinate such Subsidiary Guarantee in favor of the
Guarantor's creditors. Among other things, a legal challenge of a
Subsidiary Guarantee on fraudulent conveyance grounds may focus on the
benefits, if any, realized by the Guarantor as a result of the
issuance by the Company of the Notes. The Guarantors did not receive
any direct benefit from the issuance of the Senior Notes and will not
receive any direct benefit from the issuance of the Exchange Notes. To
the extent any Subsidiary Guarantee was avoided as a fraudulent
conveyance or held unenforceable for any other reason, the holders of
the Notes would cease to have any claim in respect of such Guarantor
and would be creditors solely of the Company and any Guarantor whose
Subsidiary Guarantee was not avoided or held unenforceable. In such
event, the claims of the holders of the Notes against the issuer of an
invalid Subsidiary Guarantee would be subject to the prior payment of
all liabilities of such Guarantor. There can be no assurance that,
after providing for all prior claims, there would be sufficient assets
to satisfy the claims of the holders of the Notes relating to any
avoided portions of any of the Subsidiary Guarantees.
Based upon financial and other information currently available to
it, management of the Company and the Guarantor believe that the Notes
and the Subsidiary Guarantee were incurred for proper purposes and in
good faith and that the Company and each Subsidiary Guarantor are
solvent and continued to be solvent after issuing the Senior Notes, or
its Subsidiary Guarantee, as the case may be, will continue to be
solvent after issuing the Exchange Notes, have sufficient capital for
carrying on its business after such issuance and are able to pay its
debts as they mature.
Lack of Public Market
The Exchange Notes are a new issue of securities for which there is
currently no trading market. The Senior Notes are currently eligible
for trading in the PORTAL market, and it is expected that the Exchange
Notes will be eligible for trading through the PORTAL market. The
Company has been advised by the Initial Purchaser that it intends to
make a market in the Notes, as permitted by applicable laws and
regulations. However, it is not obligated to do so and any market
makingactivities with respect to the Notes may be discomtinued at any
time without notice. In addition, such market-making activities may
be limited during the Exchange Offer and the pendency of any Shelf
Registration Statement (as defined herein). Therefore, there can be
no assurance that an active trading market for the Exchange Notes will
develop, or, if such a market develops, as to the liquidity of such
market. If a market were to exist, the Exchange Notes could trade at
prices that may be lower than the initial offering price of the Senior
Notes depending on many factors, including prevailing interest rates
and the market for similar securities, general economic conditions and
the financial condition and performance of, and prospects for, the
Company. The Company does not intend to apply for listing or quotation
of the Exchange Notes on any securities exchange or automated
quotation system. See "Plan of Distribution".
USE OF PROCEEDS
The Company will not receive proceeds from the Exchange Offer. The
net proceeds received by the Company from the sale of the Senior Notes
was approximately $145,687,500 after deducting the underwriting
discounts and estimated offering expenses. The net proceeds from the
sale of the Senior Notes, together with approximately $58.0 million of
initial borrowings under the New Credit Facility, were paid to Delta
Woodside in satisfaction of certain intercompany indebtedness.
$49,658,000 of remaining intercompany indebtedness was recorded by the
Company as a capital contribution.
The following table sets forth the sources and uses of funds from
the Refinancing (in thousands):
Sources of Funds:
Net Proceeds from Senior Notes $145,688
Borrowing Under New Credit Facility 58,000
Total Sources $203,688
Uses of Funds:
Repayment of indebtedness (1) $202,093
Up Front New Credit Facility Fee 750
Increase in Cash 845
Total Uses $203,688
________________________
(1) $50.0 million of the net proceeds of the offering of Senior
Notes and initial borrowing under the New Credit Facility were
applied to the repayment in full of a term note dated November 11,
1993 in the principal amount of $50.0 million, which was due at the
end of fiscal year 1998 and bore interest at the rate of 6% per
annum. This term note evidenced amounts that had been advanced by
Delta Woodside to the Company for working capital and capital
expenditures. The remaining $152.1 million of the net proceeds of
the offering of Senior Notes and initial borrowing under the New
Credit Facility were applied to the repayment of all advances from
Delta Woodside to the Company that bore interest ($28.7 million
outstanding at June 28, 1997, bearing interest at 8.5%) and all
advances from Delta Woodside to the Company that did not bear
interest ($53.1 million outstanding at June 28, 1997), which amounts
were advanced for working capital and capital expenditures, and the
repayment of a portion of a term note dated August 27, 1993 in the
aggregate principal amount of $120.0 million, which was due on July
6, 1998 and bore interest at the rate
of 6% per annum. This $120.0 million note was issued by the Company
as a dividend that was declared effective August 27, 1993. See "Risk
Factors -- Fraudulent Conveyance Statutes." Simultaneously with the
closing of the Refinancing, Delta Woodside caused to be contributed
to the capital of the Company the principal amount of this term note
that remained outstanding after the application of the net proceeds
of the offering of the Senior Notes and initial borrowing under the
New Credit Facility.
Delta Woodside used the amounts paid to it by the Company from
the net proceeds from the issuance of the Senior Notes, together with
$58.0 million of initial borrowing under the New Credit Facility,
$18.0 million of initial borrowing under the Parent Credit Facility
(see "Description of Other Indebtedness") and certain available cash,
to repay approximately $222.0 million in aggregate principal amount of
indebtedness outstanding under an Amended and Restated Credit
Agreement between Delta Woodside, as the borrower, and certain
lenders, dated as of March 15, 1996, as amended (the "Prior Credit
Agreement").
The following table sets forth the sources and uses of funds
from or simultaneously with the Refinancing for Delta Woodside (in
thousands):
Sources of Funds:
Payoff of Indebtedness with
Proceeds from Delta Mills $202,093
Decrease in Cash 1,992
Borrowing Under Parent Credit Facility 18,000
Total Sources $222,085
Uses of Funds:
Payoff Amounts Due Under Prior
Credit Agreement 222,035
Up Front Parent Credit Facility Fee 50
Total Uses $222,085
For further information regarding the New Credit Facility, the
Parent Credit Facility and the Prior Credit Agreement, see
"Description of Other Indebtedness."
CAPITALIZATION
The following table sets forth the capitalization of the Company as
of June 28, 1997 (i) before the Refinancing and (ii) on a pro forma basis
after giving effect to the Refinancing and the application of the net
proceeds therefrom as described under "Use of Proceeds." The
information in this table should be read in conjunction with the
Combined Financial Statements and the accompanying notes thereto
included elsewhere in this Prospectus.
June 28, 1997
Actual Pro Forma
(unaudited)
(in thousands)
Total debt and payable to affiliates:
Long-term debt and $210,189 $ -
loan payable to affiliate (1)
New Credit Facility (2) - 58,000
Senior Notes _ 150,000
Payable to affiliates (1) 58,469 11,000
Total debt and payable to affiliates $268,658 $219,000
Shareholder's equity:
Common stock and
additional paid-in capital 2,134 51,792
Retained earnings 5,710 5,710
Total shareholder's equity 7,844 57,502
Total capitalization $276,502 $276,502
(1) The net proceeds received by the Company from the offering
of Senior Notes, together with approximately $58.0 million of
initial borrowings under the New Credit Facility, were used to repay
certain existing intercompany indebtedness and all intercompany
amounts payable owed by the Company. Simultaneously with the closing
of the Refinancing, Delta Woodside caused to be contributed to the
capital of the Company approximately $49.7 million, being the
portion of the intercompany indebtedness that remained outstanding
after application of the net proceeds of the offering of the
Senior Notes and approximately $58.0 million of initial borrowings
under the New Credit Facility. Accordingly, all intercompany
indebtedness and amounts payable were repaid or canceled
simultaneously with the consummation of the offering of the Senior
Notes. During the period June 28, 1997 to the date of the
Refinancing, August 25, 1997, the Company generated sufficient cash
to repay an aggregate of $11.0 million payable to affiliates and to
cover the underwriting discounts and estimated offering expenses of
the offering of the Senior Notes, the up front New Credit Facility
fee and the increase in cash shown above under the heading "Use of
Proceeds" with respect to the Company. As a result, after the
Refinancing on August 25, 1997, no payables to affiliates remained
outstanding. See "Use of Proceeds."
(2) In addition, at August 25, 1997 there were letters of credit
in the stated amount of approximately $0.7 million issued under
the New Credit Facility.
SELECTED HISTORICAL AND PRO FORMA COMBINED FINANCIAL
DATAHISTORICAL AND PRO FORMA COMBINED FINANCIAL DATA
The following table presents selected historical and pro forma
combined financial information of the Company for each of the six
fiscal years in the period ended June 28, 1997. The historical
combined financial information for the fiscal years ended July 2,
1994, July 1, 1995, June 29, 1996 and June 28, 1997 has been derived
from the combined financial statements of the Company for such
periods, which have been audited by KPMG Peat Marwick LLP. The
information for the fiscal years ended June 27, 1992 and July 3, 1993 is
unaudited and is derived from unaudited combined financial
statements not included in this Prospectus. The selected historical
combined financial information should be read in conjunction with, and is
qualified in its entirety by reference to, the information set forth
under the caption "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the audited combined
financial statements of the Company as of June 29, 1996 and June 28,
1997, and for each of the three fiscal years in the period ended June
28, 1997, and the notes thereto, which appear elsewhere in this
Prospectus.
Fiscal Year (1)
1992(2) 1993(2) 1994 1995 1996 1997
(unaudited) (unaudited)
(in thousands, except ratios)
Statements of
Operations
Data (3):
Net sales $485,200 $457,249 $407,037 $413,927 $402,461 $464,548
Cost of
goods sold 409,256 400,187 361,531 369,785 389,977 399,378
Gross profit 75,944 57,062 45,506 44,142 12,484 65,170
Selling,
general and
administrative
expenses (4) 25,211 24,863 25,734 23,717 22,767 25,382
Impairment and
restructuring
charges
(credits) (5) _ - 3,066 (290) 13,291 _
Other (income)
expense (60) (638) 122 272 921 (1,632)
Earnings (loss)
from operations
operations 50,793 32,837 16,584 20,443 (24,495) 41,420
Interest
expense 9,569 4,918 10,795 12,251 14,099 14,285
Interest (income) (147) (259) (131) (39) (92) (73)
Income (loss)
before
income taxes 41,371 28,178 5,920 8,231 (38,502) 27,208
Income taxes
(benefit) 15,800 6,009 2,500 3,180 (13,703) 10,655
Net Income
(loss) $25,571 $22,169 $3,420 $5,051 $(24,799) $16,553
Other Data:
Depreciation
and
amortization $10,414 $13,087 $16,712 $16,997 $18,952 $19,323
Capital
expenditures 37,753 34,446 18,334 35,182 42,128 13,719
EBITDA (6) 61,354 46,183 36,493 37,189 7,840 60,816
Ratio of
earnings to
fixed charges (7) 4.6x 4.7x 1.5x 1.6x _(8) 2.3x
Ratio of
EBITDA to
interest expense(6) 6.4x 9.4x 3.4x 3.0x _(8) 4.3x
Pro Forma
Financial Data
(unaudited)(9):
Ratio of
earnings to
fixed charges(7) 2.3x
Cash interest
expense (10) $19,595
Ratio of
EBITDA to
cash interest
expense(6) 3.1x
Ratio of
total debt to
EBITDA (6) 3.7x
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview of Results of Operations
The following table presents the Company's combined statements of
operations as a percentage of net sales for the periods shown.
See "Selected Historical and Pro Forma Combined Financial Data."
Fiscal Year Ended
July 2, 1994 July 1, 1995 June 29, 1996 June 28, 1997
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of goods sold 88.8 89.3 96.9 86.0
Gross profit 11.2 10.7 3.1 14.0
Selling, general and
administrative expenses 6.3 5.7 5.7 5.5
Impairment and
restructuring
charges (credits) 0.8 (0.0) 3.3 ---
Other (income) expense 0.0 0.1 0.2 (0.4)
Earnings (loss) from
operations 4.1 4.9 (6.1) 8.9
Interest expense 2.6 2.9 3.5 3.0
Income (loss) before
income taxes
(benefit) 1.5 2.0 (9.6) 5.9
Income taxes (benefit) 0.7 0.8 (3.4) 2.3
Net income (loss) 0.8% 1.2% (6.2)% 3.6%
Year Ended June 28, 1997 Compared to Year Ended June 29, 1996
Net Sales. Net sales for fiscal year 1997 totaled $464.5 million,
as compared to $402.5 million for fiscal year 1996, an increase of
15.4%. Sales of the woven fabrics division were $336.2 million in
fiscal year 1997 as compared to $294.1 million in fiscal year 1996, an
increase of 14.3%, resulting from an increase in unit sales and unit
prices. Sales of woven fabrics to commercial accounts increased due
both to increased demand and to additional finishing capacity resulting
from recent capital expenditures. This increase more than offset a
decrease in sales of woven government fabrics due to a slowdown in
procurement activity. Sales of the knitted fabrics division were $128.4
million in fiscal year 1997, up from $108.4 million in fiscal year
1996, an increase of 18.4%. Sales of the knitted fabrics division
increased principally as a result of an increase in units sold due to
improved demand for knitted products generally.
Gross Profit. Combined gross profit margin in fiscal year 1997
was 14.0%, as compared to 3.1% in fiscal year 1996, an increase of
351.6%. During fiscal year 1997, woven fabrics division gross profit
totaled $65.1 million, as compared to $33.7 million in fiscal year
1996, an increase of 93.2%. This gross profit improvement was due
principally to higher sales, lower raw material costs and improved
efficiencies resulting from the modernization project at the Beattie
spinning and weaving plant. Knitted fabrics division gross profit
increased from a loss of $21.2 million in fiscal year 1996 to a gross
profit of $0.1 million in fiscal year 1997. Increased margins on sales
of knitted fabrics were due principally to lower raw material costs and
improved absorption of fixed costs resulting from higher manufacturing
production levels.
Selling, General and Administrative Expenses. During fiscal year 1997,
selling, general and administrative expenses were $25.4 million, as
compared to $22.8 million during fiscal year 1996, an increase of
11.5%. Over the past several years the Company has been able to
effectively control its selling, general and administrative expenses as
a percentage of net sales as indicated in the table above. Although
expenses in this category increased on an absolute basis, selling,
general and administrative expenses for fiscal year 1997 decreased to
5.5% of net sales as compared to 5.7% of net sales for fiscal year
1996.
Operating Earnings. Operating earnings for fiscal year 1997 were $41.4
million, as compared to an operating loss of $24.5 million in
fiscal year 1996. Operating earnings in the woven fabrics division were
$50.6 million in fiscal year 1997, an improvement of $32.9 million as
compared to the division's operating earnings in fiscal year 1996. The
knitted fabrics division showed an operating loss in fiscal year 1997
of $9.2 million; however, this operating loss was a $33.0 million
improvement over fiscal year 1996. Expenses for fiscal year 1997
include certain unexpected costs associated with interruption of
knitted fabrics operations in Wallace, North Carolina, from Hurricane
Fran in September 1996.
Net Interest Expense. During fiscal year 1997, net interest
expense was $14.2 million, as compared to $14.0 million in fiscal year
1996, due principally to higher rates of interest.
Taxes. The estimated effective tax rate for fiscal year 1997 was
39.2%, as compared to an effective tax benefit rate of 35.6% for fiscal
year 1996. The lower tax rate in fiscal year 1996 is primarily the
result of the effect of nondeductible permanent differences on pretax
losses in fiscal year 1996 compared to pretax earnings in fiscal year
1997.
Net Income (Loss). During fiscal year 1997, net income was $16.6
million, as compared to a net loss in fiscal year 1996 of $24.8
million. This significant improvement is due to the factors described
above.
Year Ended June 29, 1996 Compared to Year Ended July 1, 1995
Net Sales. The Company's net sales for fiscal year 1996 were
$402.5 million, as compared to $413.9 million in fiscal year 1995, a
decrease of 2.8%. All of the decrease came in the knitted fabrics
division, while net sales of the woven fabrics division increased
slightly. Sales of woven fabrics in fiscal year 1996 were $294.1
million, up from $290.8 million in fiscal year 1995, an increase of
1.1%. Within the woven fabrics division, lower unit sales were more
than offset by higher prices in fiscal year 1996 as compared to fiscal
year 1995, due principally to higher sales of military fabrics and
proportionally lower greige goods sales in fiscal year 1996. Sales of
the knitted fabrics division in fiscal year 1996 were $108.4 million,
down from $123.1 million in fiscal year 1995, a decrease of 12.0%. In
the knitted fabrics division, unit volume and average selling prices
were lower in all product categories, due principally to a general
decline in demand for knitted fabrics during fiscal year 1996.
Gross Profit. The Company's gross profit margins in fiscal year
1996 were 3.1%, as compared to 10.7% in fiscal year 1995, a decline of
71.0%. The decrease was nearly all attributable to the knitted fabrics
division where lower sales prices, lower number of units sold and
reduced running schedules, in conjunction with higher raw material
prices, adversely affected margins in fiscal year 1996 as compared to
fiscal year 1995. During fiscal year 1996 the knitted fabrics division
gross loss was $21.2 million as compared to gross profits of $8.0
million in fiscal year 1995. During fiscal year 1996 the woven fabrics
division gross profits were $33.7 million as compared to $36.1 million
in fiscal year 1995, a decrease of 6.8%. Gross margins for woven
fabrics declined from 12.4% in fiscal year 1995 to 11.4% in fiscal year
1996, being adversely impacted by historically high raw material costs
and by continuing disruptions caused by the Company's plant
modernization program.
Selling, General and Administrative Expenses. Selling, general
and administrative expenses for fiscal year 1996 totaled $22.8 million,
as compared with $23.7 million in fiscal year 1995, a decrease of 4.0%.
As a percentage of net sales, these expenses were 5.7% in each of
fiscal year 1996 and fiscal year 1995.
Restructuring Charges. In fiscal year 1996, the Company incurred
a restructuring charge of $13.3 million. The history of operating
losses at the two plants that perform knitting and knit finishing
operations caused the Company to recognize a charge of $11.7 million to
reduce the book value of the fixed assets in this business to appraised
orderly liquidation value. The remaining $1.6 million charge related to
the closure of two weaving plants in the woven fabrics division.
Operating Earnings (Loss). Operating losses in fiscal year 1996
were $24.5 million, as compared to operating earnings of $20.4 million
in fiscal year 1995. Operating earnings in the woven fabrics division
in fiscal year 1996 were $17.7 million, down from $21.7 million in
fiscal year 1995, a decrease of 18.6%. In the knitted fabrics division,
the operating loss in fiscal year 1996 was $42.2 million, 32.8 times
that of the loss of $1.3 million in fiscal year 1995 as a result of the
factors discussed above, as well as the $11.7 million restructuring
charge.
Net Interest Expense. Net interest expense totaled $14.0 million
for fiscal year 1996, as compared to $12.2 million in fiscal year 1995,
an increase of 14.7%, due to the combination of higher interest rates
and higher average debt levels. Because Delta Woodside's consolidated
operating earnings to interest ratios declined, Delta Woodside's cost
of borrowings increased and the rate of interest paid by the Company on
its borrowings from Delta Woodside increased. At June 29, 1996 the
Company's interest rate on certain indebtedness was LIBOR plus 2.5%, as
compared to LIBOR plus .75% at July 1, 1995. The Company's outstanding
debt, including the loan payable to affiliate and current amounts
payable to affiliates, increased by $36.8 million during fiscal year
1996, primarily as a result of the plant modernization program in the
woven fabrics division.
Taxes. The effective income tax rates for fiscal years 1996 and
1995 were 35.6% and 38.6%, respectively. The lower tax rate for fiscal
year 1996 was primarily due to the effect of permanent nondeductible
differences on the pretax losses in fiscal year 1996, as compared to
the pretax income in fiscal year 1995.
Net Income (Loss). During fiscal year 1996, net loss was $24.8 million
as compared to a net income in fiscal year 1995 of $5.1 million, due to
the factors described above.
Year Ended July 1, 1995 Compared to Year Ended July 2, 1994
Net Sales. Net sales in fiscal year 1995 were $413.9 million, as
compared to $407.0 million in fiscal year 1994, an increase of 1.7%.
Sales by the woven fabrics division in fiscal year 1995 were $290.8
million, up from $288.7 million in fiscal year 1994, an increase of
0.7%. Sales by the knitted fabrics division were $123.1 million in
fiscal year 1995, up from $118.4 million in fiscal year 1994, an
increase of 4.0%, due principally to higher sales of yarn to an
affiliated company and to higher prevailing market prices than in
fiscal year 1995. In the woven fabrics division, lower sales of
unfinished fabrics were offset by higher sales of finished cotton and
blended fiber fabrics.
Gross Profit. Gross profit margins were 10.7% in fiscal year
1995, as compared to 11.2% in fiscal year 1994, a decrease of 0.5%.
Gross margins for knitted fabrics improved from a loss of 0.8% in
fiscal year 1994 to 6.5% in fiscal year 1995, despite a dramatic
slowdown beginning in March 1995 in demand for fabrics knitted and
prepared for
printing. Gross margins for woven fabrics declined from 16.1% in fiscal
year 1994 to 12.4% in fiscal year 1995, being adversely impacted by
poor prices obtained in sales of unfinished fabrics, higher raw
material costs and certain manufacturing disruptions caused by the
Company's plant modernization program.
Selling, General and Administrative Expenses. Selling, general
and administrative expenses for fiscal year 1995 totaled $23.7 million,
as compared with $25.7 million in fiscal year 1994, a decrease of 7.8%.
As a percentage of net sales, these costs were 5.7% in fiscal year 1995
as compared to 6.3% in fiscal year 1994. The decrease was principally
attributable to a decrease in the provision for bad debts accrued with
respect to fiscal year 1995 in the knitted fabrics division as compared
to fiscal year 1994.
Restructuring Charges. In fiscal year 1994 the Company charged
pretax income $3.1 million for expenses related to restructuring
decisions made during that year. The restructuring charge consisted
principally of expenses related to the closure of a ring spinning
plant in the knitted fabrics division.
Operating Earnings. Operating profits in fiscal year 1995 were
$20.4 million, as compared to $16.6 million in fiscal year 1994, an
increase of 23.3%. Operating earnings in the woven fabrics division
were $21.7 million in fiscal year 1995, a decrease of 33.2% from
operating earnings of $32.5 million in fiscal year 1994. The knitted
fabrics division's operating loss was $1.3 million in fiscal year 1995,
a $14.7 million improvement from an operating loss of $15.9 million
incurred in fiscal year 1994. Operating profits in fiscal year 1994
included a $3.1 million charge for restructuring, related principally
to a knit yarn spinning plant that was closed. From fiscal year 1994 to
fiscal year 1995, gross profit margins declined slightly as noted
above, and this decline was more than offset by reduced selling,
general and administrative costs.
Net Interest Expense. Net interest expense totaled $12.2 million
in fiscal year 1995, as compared to $10.7 million in fiscal year 1994,
due to the combination of higher interest rates and higher average debt
levels. Higher inventories and capital expenditures accounted for the
major part of the Company's need for additional borrowed funds during
fiscal year 1995.
Taxes. The effective income tax rates for fiscal years 1995 and
1994 were 38.6% and 42.2%, respectively. The higher tax rate for fiscal
year 1994 was primarily due to the different effects that permanent
nondeductible tax items had on the smaller pretax income in fiscal year
1994, as compared to the effect on the higher pretax income in fiscal
year 1995.
Net Income. Net income in fiscal year 1995 was $5.1 million, as
compared to a net income of $3.4 million in fiscal year 1994, an
increase of 47.7%, due principally to the reasons described above.
Liquidity and Capital Resources
During fiscal years 1997 and 1996, the Company financed its
operations and capital expenditures primarily through cash generated
from operations, especially reductions in inventory. During the past
three fiscal years, the Company also significantly increased its debt
to assist in financing the ongoing capital expenditure projects. During
fiscal years 1997 and 1996, the Company increased its accounts
receivable by $25.7 million and reduced its inventories by $19.4
million from levels at the end of fiscal year 1995. As of June 28,
1997, current assets were $187.5 million as compared to $169.6 million
at the end of fiscal year 1996, an increase of 10.5%. The increase in
current assets during fiscal year 1997 is primarily due to the increase
of accounts
receivable in the woven fabrics division. As of June 29, 1996, the
Company had reduced current assets by $10.9 million from the end of
fiscal year 1995 as a result of its reduction of inventory. The
Company generated operating cash flows of $34.8 million, $24.3
million, $19.2 million and $21.3 million for fiscal years 1997, 1996,
1995 and 1994, respectively.
During fiscal year 1997 the Company decreased its borrowings by
$20.9 million and in fiscal year 1996 increased its borrowings by
$36.8 million from levels at the end of the previous fiscal year.
Historically, the Company borrowed primarily from Delta Woodside
pursuant to intercompany loans and advances. The terms of these
borrowings are described under "Use of Proceeds." All of these
intercompany loans and advances were repaid or canceled in connection
with the Refinancing. See "Use of Proceeds." Funds advanced to the
Company by Delta Woodside were primarily borrowed by Delta Woodside
under the Prior Credit Agreement or predecessor credit facilities.
For a description of the Prior Credit Agreement, see "Description of
Other Indebtedness." The Company currently has a factoring arrangement
with a financial institution pursuant to which a substantial portion
of the accounts receivable of the woven fabrics division is assigned
without recourse. During fiscal year 1997 $338.9 million of accounts
receivable were assigned pursuant to this arrangement. See Note B to
the Combined Financial Statements.
In connection with the Refinancing, the Company entered into the
New Credit Facility. The New Credit Facility provides for revolving
credit borrowings in an aggregated principal amount of up to $100.0
million of which, as of August 25, 1997, approximately $58.0 million
was advanced, approximately $0.7 million was used for standby letters
of credit and up to approximately $41.3 million was available for
future borrowings. The New Credit Facility will terminate and all
amounts borrowed thereunder will be due August 25, 2002, five years
from the date of initial funding. Loans under the New Credit Facility
bear interest at rates based upon federal or Eurodollar rates plus an
applicable margin. Loans under the New Credit Facility are guaranteed
by all subsidiaries of the Company (other than a Receivables
Subsidiary) and are secured by liens on the accounts receivable and
inventory (and related property) of the Company and its subsidiaries
and the outstanding capital stock of the Company and its subsidiaries.
For a more complete description of the New Credit Facility, see
"Description of Other Indebtedness -- New Credit Facility."
The Company has recently completed a substantial modernization program,
spending over $277.1 million to modernize and maintain its plants and
equipment during the last decade. See "Business -- Business Strategy."
During fiscal year 1996, the Company spent approximately $42.1 million
for capital improvements, with most of the expenditures relating to the
long-term capital project for modernizing the Company's woven fabrics
production facilities. During fiscal year 1997, the Company spent $13.7
million for capital improvements with most of the expenditures relating
to completion of the modernization project in the woven fabrics
division. As a result of its modernization program, the Company
believes that its equipment and facilities are generally adequate to
allow it to remain competitive with its principal competitors. The
Company currently estimates that it will spend approximately $15.0
million for capital improvements in fiscal year 1998.
The Company attempts to diminish its exposure to fluctuations in
the price of cotton by entering into contracts fixing the price of a
portion of its anticipated needs. The Company has contracted to
purchase about 71% of its expected cotton requirements for fiscal year
1998 and about 14% of its expected cotton requirements for fiscal year
1999. The percentage of the Company's cotton requirements that the
Company fixes
each year varies depending upon the Company's forecast of future cotton
prices. The Company believes that recent cotton prices have enabled it
to contract for cotton at prices that will permit it to be competitive
with other companies in the United States textile industry when the
cotton purchased for future use is put into production. To the extent
that cotton prices decrease before the Company uses these future
purchases, the Company could be materially and adversely affected. In
addition, to the extent that cotton prices increase, the Company may be
materially and adversely affected as there can be no assurance that it
would be able to pass along these increased costs to its customers. See
"Risk Factors -- Raw Materials" and "Business -- Raw Materials."
The Company believes that cash flow generated by its operations
and funds available from the New Credit Facility will be sufficient to
service the Notes and its bank debt, to satisfy its day-to-day working
capital needs and to fund its planned capital expenditures. The
Company's ability to make scheduled payments of principal of and to pay
interest or Liquidated Damages, if any, on the Notes, and to satisfy
its other debt obligations and fund planned capital expenditures will
depend upon its future operating performance, which will be affected
by, among other factors, prevailing economic conditions and financial,
business, regulatory, political and other factors, certain of which are
beyond its control, as well as the availability of borrowings under the
New Credit Facility or any successor credit facilities. The Company
will require substantial amounts of cash to fund scheduled payments of
principal and interest on its outstanding indebtedness as well as
future capital expenditures and any increased working capital
requirements. If the Company is unable to meet its cash requirements
out of cash flow from operations and its available borrowings, there
can be no assurance that it will be able to obtain alternative
financing or that it will be permitted to do so under the terms of the
Indenture or the New Credit Facility. In the absence of such financing,
the Company's ability to respond to changing business and economic
conditions, to absorb adverse operating results, to fund capital
expenditures or to make future acquisitions may be adversely affected.
It is anticipated that in order to pay the principal balance of the
Notes due at maturity, the Company will be required to obtain
alternative financing. There can be no assurance, however, that the
Company will be able to refinance the Notes at maturity at commercially
reasonable terms, or at all, and the inability to refinance the Notes
would likely have a material adverse effect on the Company. See "Risk
Factors -- Significant Leverage and Debt Service."
BUSINESS
General
The Company is a leading manufacturer and marketer of woven and knitted
finished and unfinished (or greige) cotton, synthetic and blended
fabrics, which are sold for the ultimate production of apparel, home
furnishings and other products. The Company sells a broad range of
fabrics primarily to branded apparel manufacturers and resellers,
including Levi Strauss, Haggar Corp., the Wrangler and Lee divisions
of V.F. Corporation, Farah Incorporated, Kellwood Company and Liz
Claiborne, Inc., and private label apparel manufacturers for J.C.
Penney Company, Inc., Sears, Roebuck & Co. and other retailers. The
Company believes that it is a leading producer of cotton pants-weight
woven fabric used in the manufacture of casual slacks such as Levi
Strauss' Dockers and Haggar Corp.'s Wrinkle-Free. Other apparel items
manufactured with the Company's woven fabrics include women's chinos
pants, women's blazers, career apparel (uniforms) and battle dress
camouflage military uniforms. Apparel items manufactured with the
Company's knitted fabrics include polo-type or golf shirts, career
apparel, children's apparel, specialty athletic wear and ladies' tops.
For the 1997 fiscal year, the Company generated net sales and EBITDA of
$464.5 million and $60.8 million, respectively.
The following table sets forth for the periods indicated the
dollar amount and percentage of total net sales of the Company
attributable to external sales of woven fabrics, external sales
of knitted fabrics and sales to other divisions of the Delta
Woodside Group:
Fiscal Year 1994 1995 1996 1997
$ % $ % $ % $ %
External sales of woven 288.6 70.9 290.8 70.3 294.1 73.1 336.2
72.4 fabrics
External sales of
knitted fabrics 102.8 25.3 102.9 24.9 82.8 20.6 98.5
21.2
Sales to other
divisions of the Delta
Woodside Group(1) 15.6 3.8 20.2 4.8 25.6 6.3 29.8 6.4
Total 407.0 100.0 413.9 100.0 402.5 100.0 464.5
100.0
(1) Substantially all of these amounts consist of sales of yarn from the
knitted fabrics division.
The Company believes that its woven fabrics division is a leading
worldwide producer of cotton, cotton blend and spun synthetic
pants-weight fabric, and that it has a reputation for reliability and
high quality in the pants industry. The Company's relationship with its
customers has been strengthened by its ability to develop new products
that meet customer requirements, including the following product
innovations: (i) a successful manufacturing process for "wrinkle-free"
cotton fabrics, (ii) "baby gabardine" fabric (an all-spun polyester-
rayon blend fabric that is a core product for certain pants, skirts and
jackets for women), (iii) "Suncatcher linen" (a synthetic fabric made
of polyester and rayon fibers spun to resemble a natural linen
product), and (iv) Operation Desert Storm camouflage fabric. In
addition, the division has repeatedly responded to customer needs in a
timely manner, such as in its support of the growth of Levi Strauss'
Dockers pants line and helping to launch Haggar Corp.'s Wrinkle-Free
pants, for each of whom the Company continues to be a significant
supplier. In 1991, Operation Desert Storm provided the Company with an
opportunity to demonstrate its product innovation capabilities and
quick turnaround time. Within a period of less than ten weeks, the
woven fabrics division, in cooperation with the United States
government, helped to develop, tested and put into production a sand
camouflage pattern that provided superior protection to United States
troops. The woven fabric division ultimately supplied approximately 80%
of the camouflage fabric used in United States uniforms in Operation
Desert Storm and continues to be a significant supplier of a variety of
camouflage fabric to military uniform contractors.
Following Delta Woodside's acquisition of the Company in 1986, the
Company has upgraded its facilities through an extensive series of
capital expenditure programs that have modernized and consolidated
certain fabric manufacturing processes. In addition to making
significant improvements in the Company's already high standards of
quality, these modernization programs have resulted in significant
increases in operating efficiencies as measured by sales per square
foot of manufacturing space and sales per employee and have, in many
cases, resulted in substantial reductions in the cost per unit of
production.
The Company is substantially vertically integrated and currently
operates eight production facilities in the woven fabrics division and
four production facilities in the knitted fabrics division. Each
division has its own management and employees and operates
independently of the other division under the overall direction of the
Company's executive officers.
The Company was incorporated in Delaware in 1971 under the name
Stevcoknit, Inc. Since 1986, the Company has operated the woven
fabrics and knitted fabrics businesses. The Company's principal
executive offices are located at 233 North Main Street, Suite 200,
Greenville, South Carolina 29601 and its telephone number is (864) 232-
8301. The Company is a wholly-owned indirect subsidiary of Delta
Woodside, a South Carolina corporation, the common stock of which is
listed on the New York Stock Exchange. Unless the context otherwise
requires, all references herein to "Delta Mills" or the "Company" refer
to Delta Mills, Inc. and any of its existing and future subsidiaries.
References to the "Delta Woodside Group" refer to Delta Woodside and
all of its direct and indirect subsidiaries, including the Company.
Industry Trends
The Company competes with other producers of woven and knitted
fabrics to supply the United States apparel market. In recent years,
the fabric/apparel industry has been undergoing significant changes
both in the geographic locations of production and in the type of
garments produced. Specifically, two trends have significantly impacted
the industry: (i) the growth of a western hemisphere fabric/apparel
production chain, and (ii) the increased casualization of the
workplace. The Company believes that it is well-positioned to
capitalize on both of these trends.
Growth of a Western Hemisphere Fabric/Apparel Production Chain
In recent years, the fabric/apparel industry has been marked by
fundamental changes in the sources of supply for apparel products.
Specifically, the Company believes that a western hemisphere
fabric/apparel production chain has been rapidly developing to compete
with the Far Eastern supply chain, with fabric manufacturing remaining
in the United States and apparel manufacturing moving to MCACI
countries. The shift to this configuration, which began several decades
ago, has accelerated significantly in the past several years with the
passage of NAFTA and GATT. The western hemisphere fabric/apparel
production chain has also been strengthened by the requirements of
United States retailers for shorter delivery times and faster
turnaround times, which can be more easily met by suppliers in the
western hemisphere.
Due to the relatively higher proportion of labor costs in apparel
manufacturing, much of the apparel production in the United States is
shifting to MCACI countries where labor costs are competitive on a
world-wide basis. By contrast, fabric production for apparel
manufactured in MCACI countries has largely remained in the United
States for a number of reasons. First, because the modern fabric
manufacturing process includes relatively little manual labor, United
States wage rates no longer put domestic fabric manufacturers at a
competitive disadvantage. In addition, as fabric manufacturing today
requires substantial capital investment, the United States is a more
attractive venue than MCACI countries due to its political and economic
stability and developed infrastructure, including an abundant water
supply and reliable, low-cost electric power.
In addition, tariffs, quotas and other existing trade regulations
provide western hemisphere fabric/apparel production with a significant
competitive advantage in the United States market. Recent changes in
trade regulation, including NAFTA, have not only spurred growth among
United States fabric manufacturers and MCACI apparel manufacturers, but
also have encouraged the further development of a western hemisphere
fabric/apparel production chain. In the 1960s, Section 807 created a
platform for this growth. Section 807 provides for duty-free treatment
of United States origin components used in the assembly of imported
articles. The result is that duty is assessed only on the value of any
foreign components that may be present and the labor costs incurred
offshore in the assembly of apparel using United States origin fabric
components. In addition, under Section 807A, apparel articles assembled
in a Caribbean country, in which all fabric components have been wholly
formed and cut in the United States, are subject to preferential quotas
with respect to access into the United States. A similar program,
enacted as a result of NAFTA and referred to as the Special Regime
Program, provides even greater benefits for such apparel assembled in
Mexico from fabric components formed and cut in the United States. In
contrast, apparel not meeting the criteria of such programs is subject
to quotas and/or relatively higher tariffs. See "-- Competition" and
"Risk Factors -- Competition; Risks Associated with Changing Industry
and Regulation."
The shift to this western hemisphere fabric/apparel production
chain has occurred largely at the expense of the growth of Far Eastern
fabric and apparel production. Apparel retailers, many of which have in
the past relied on Hong Kong, China and other Far Eastern countries as
their principal sources of completed apparel products, are increasingly
looking to the western hemisphere fabric/apparel production chain. This
is due in part to demands of United States apparel retailers for
shorter delivery times and quicker turnaround times. Today, the working
relationships between the fabric mills of the United States and the
apparel factories of MCACI countries are becoming more efficient and
well-developed, making western hemisphere fabric/apparel products
competitive with those imported from the Far East. From 1995 to 1996,
apparel imports from MCACI countries to the United States grew 18.7%
from $8.3 billion to $9.8 billion, versus imports from all other
countries of $28.5 billion in 1995 and $28.8 billion in 1996, an
increase of only 1.1%. In the first quarter of 1997, imports from MCACI
countries were $2.6 billion, an increase of 33.8% from $2.0 billion
imported during the first quarter of 1996, while imports from all other
countries increased by 7.2% during the same period. The Company
believes that the majority of garments imported to the United States
from MCACI countries contain fabric from United States producers such
as Delta Mills.
The Company believes that its relationship with United States
apparel marketers, its modern manufacturing facilities and its
reputation for quality position it to compete effectively in this
evolving western hemisphere fabric/apparel production chain.
Increased Casual Workplace Environment
Trends in consumer preferences are also creating growth
opportunities for the Company. With the advent of "casual Fridays" and
increasingly casual dress workplaces in recent years, the demand for
casual wear has increased. The Company's principal product lines are
made into garments of the type being worn in this more casual
workplace environment, such as all-cotton pants and knit polo-type
shirts. The Company's recently completed modernization program has
increased its capacity for all-cotton finished fabrics used in casual
wear. As a result, the Company believes that it is in a position to
benefit from this casualization trend.
Business Strategy
Within the framework of an evolving fabric/apparel industry, the
Company has developed and is implementing the following business
strategy aimed at growing revenues and EBITDA:
Leverage Woven Fabrics Division Relationships with Key Apparel
Marketers. The woven fabrics division has focused its marketing
efforts on building close relationships with major apparel
companies that have broad distribution channels and that the
Company believes have positioned themselves for long-term growth.
The division has fostered relationships for over 30 years with,
and has become an integral part of the supply chain for certain
product lines of, several strong United States branded apparel
merchandisers, including Levi Strauss, Haggar Corp., the
Wrangler and Lee divisions of V.F. Corporation and Farah
Incorporated. In addition, the division is a significant supplier
to certain product lines of Liz Claiborne, Inc. and Kellwood
Company, with each of whom it has had a relationship for more
than five years. Sales to these six core customers grew 46.6%
from fiscal year 1996 to fiscal year 1997.
In building these relationships, the Company seeks to be a
significant supplier for the major product lines of its
customers which the Company expects to provide a steady base of
recurring revenues. To manufacture goods for the United States
apparel market, these apparel producers create preferred supplier
relationships with a limited number of fabric manufacturers,
like the division, that satisfy on-time delivery, reliability,
lead time consistency, cost and quality criteria. The woven
fabrics division also maintains strong working relationships with
major retailers, such as J.C. Penney Company, Inc., Kmart
Corporation, Sears, Roebuck & Co. and Wal-Mart Stores, Inc.,
that specify or recommend the purchase of fabric to contract
manufacturers that produce their apparel product lines.
These efforts have produced a substantial order backlog in
the woven fabrics division, which at June 28, 1997 stood at
$119.9 million, a 60.0% increase over the prior fiscal year end.
Focus on the Growth Segments of the Knitted Fabrics Industry.
The knitted fabric division's marketing resources are focused on
the following segments: (i) major apparel companies that market
casual wear such as knit polo-type shirts, (ii) children's wear
manufacturers and (iii) career apparel.
As a result of the growth in knit polo-type shirts, many
major branded apparel companies, such as Levi Strauss, NIKE, Inc.
and the Lee and Wrangler divisions of V.F. Corporation, as well
as private label companies, are expected to increase their demand
for knitted fabrics. The knitted fabrics division also plans to
expand its children's wear business by targeting large
manufacturers of children's wear, such as Garan, Incorporated and
Gerber Products Company, that have successfully maintained and
expanded their market shares in a segment which the Company
believes has experienced significant concentration in recent years.
In addition, although the career apparel segment has
traditionally been a blue collar, woven fabrics business where
durability of the garment was the chief criterion, delivery, fast food
and other service companies such as United Parcel Service of America,
Inc., Taco Bell North America and Kinko's, Inc. are requiring uniforms
that are not only durable, but fashionable and comfortable as well. The
Company believes that this trend is providing a rapidly growing career
apparel market for knit polo-type shirts. This market is attractive to
the Company because demand in this market is generally more consistent
and less price-sensitive than the retail market generally, and the
customer
relationships tend to be service-oriented and longstanding. The market
for knit career apparel shirts in 1995 was approximately 25 million
pounds, up from approximately 18 million pounds in 1990.
Capitalize on Improved Operating Efficiencies and Reduced Cost
Structure. The Company has recognized that a critical element of being
competitive in the global textile industry is the ability to minimize
manufacturing costs. In an effort to become a low-cost, world
competitive producer, the Company has invested approximately $277.1
million during the last decade to modernize and maintain its plants and
equipment, including more than $143.8 million over the past five fiscal
years. As a result of its extensive capital expenditure campaign in
recent years, the Company believes that it is in a position to return
to substantially reduced levels of capital expenditures, with an
average of approximately $15.0 million per year expected to be required
for the next three fiscal years.
The woven fabrics division began a capital improvement
program during fiscal year 1992 that was designed to modernize certain
fiber opening, carding, spinning, weaving and fabric finishing
processes to focus on the production of heavier-weight, higher-margin
goods. By the end of fiscal year 1997, expenditures for this six-year
program totaled $112.8 million. As a result, the division has reduced
its manufacturing square footage by approximately 18% and the number of
employees by 26%. In the modernization program, the woven fabrics
division reduced its capacity to produce lower price greige goods but
increased its capacity to finish fabrics. As a consequence, the woven
fabrics division has increased its outside purchases of greige goods.
The Company believes that these changes provide it with the opportunity
to increase its overall sales levels and to expand its operating
margins.
The knitted fabrics division began a consolidation and modernization
project in fiscal year 1992 to consolidate the number of its
manufacturing facilities from four spinning, two knitting and two
finishing plants to two spinning, one knitting and one finishing plant.
During the past five fiscal years, capital expenditures for the program
totaled $42.1 million. Simultaneously, certain knitting, dyeing and
finishing processes were modernized. With the successful completion of
this project, manufacturing square footage was reduced by 37% and the
number of employees was reduced by 26%, with no material change in
total knitted fabric capacity.
These initiatives have resulted in a significant reduction in the
Company's manufacturing costs. Comparing the most recent fiscal year
with fiscal year 1992, sales generated per square foot of manufacturing
space have increased approximately 29.3%, and sales generated per
employee have increased approximately 29.4%.
Continue to Focus on Quality. Coupled with the modernization
projects described above, the Company's pursuit of quality improvements
has resulted in its reputation as a high quality producer of textile
fabrics. For example, the Company's Beattie plant (spinning and weaving
of pants-weight twill, located in Fountain Inn, South Carolina)
recently won the 1997 South Carolina Governor's Quality Achiever Award
which is modeled upon criteria used for the Malcolm Baldridge Quality
Award. Both divisions have been qualified by the J.C. Penney Company,
Inc. quality laboratory with "outstanding" quality ratings. In
addition, the woven fabrics division is a certified supplier to Levi
Strauss and Liz Claiborne because of its consistently meeting their
high quality and delivery standards. Other apparel manufacturers are
following this
trend toward certifying key suppliers. As a consequence of the high
quality of the woven fabrics produced by the Company, some of the
Company's largest customers, such as Levi Strauss, do not find it
necessary to inspect all of the Company's goods upon receipt. As a
result of the modernization program in the woven fabrics division,
including the Beattie plant project completed earlier in fiscal year
1997, fabric defect points per 100 square yards in finished cotton
woven fabrics shipped to customers declined from an average of 13.6
points in fiscal year 1992 to an average of 4.2 points in fiscal year
1997, significantly better than the industry standard for "first
quality." The Company believes that its product quality is a
significant competitive advantage in the sale of its higher margin
woven products.
Manufacturing
Fabrics produced by the Company are either woven or knitted and
are manufactured from cotton, wool or synthetic fibers or from
synthetic filament yarns. Cotton and wool are purchased from numerous
suppliers. Synthetic fibers and synthetic filament yarns are purchased
from a smaller number of competitive suppliers. The Company spins the
major portion of the yarns used in its weaving and knitting operations.
In manufacturing these yarns, the cotton and synthetic fiber, either
separately or in blends, are carded (fibers straightened and oriented)
and then spun into yarn. The Company combs (removing short fibers) some
cotton fiber to make higher quality yarns. In other fabrics, filament
yarns are used. The spun or filament yarn is then woven into fabric on
looms or knitted into fabric on knitting machines. The unfinished
fabric at this stage is referred to as greige goods. Finished fabric
refers to fabric that has been treated by washing, bleaching, dyeing
and applying certain chemical finishes. Finished fabrics generally have
significantly higher margins than greige goods.
Woven Fabrics
Approximately 70% of the division's finished woven fabric sales
are of fabrics made from cotton or cotton/synthetic blends, while
approximately 30% of such sales are of fabrics made from spun
synthetics and other natural fibers, including various blends of rayon,
polyester and wool. During fiscal year 1997, the woven fabrics division
sold, at a cost of sales, $239.6 million of finished fabrics and $31.6
million of unfinished fabric. Woven fabrics are generally produced and
shipped pursuant to specific purchase orders, which minimizes the
Company's uncommitted inventory levels. The division's production of
cotton and cotton/synthetic blend finished woven fabrics is largely
vertically integrated, with the division performing most of its own
spinning, weaving and finishing. The production of spun synthetic
finished woven fabrics is fully vertically integrated, with various
plants in the division performing spinning, weaving and finishing
operations. In the production of military fabrics, the Company
purchases a portion of its greige goods needs and finishes this fabric
to specifications. The woven fabrics division is currently operating
its manufacturing facilities at near full capacity.
The division also produces a variety of unfinished light-weight
woven fabrics that are ultimately used in the manufacture of apparel
(including blouses, dresses and suit linings), home furnishings
(including shower curtains) and medical tape. Fabrics include filament
acetate, textured polyester and other "semi-fancy" fabrics of more
complicated construction.
Knitted Fabrics
The operations within the knitted fabrics division are largely
vertically integrated. Various plants are equipped to perform all
stages of the manufacturing process, from carding and spinning the raw
fiber
stock to knitting, dyeing and finishing the final fabric product. The
fabrics produced by this segment are manufactured primarily by using
100% cotton and polyester/cotton blends. Knitting and finishing of the
fabrics are performed to specific customer orders in the case of orders
representing the majority of the dollar volume of this division. The
knitted fabrics division is currently operating its manufacturing
facilities at near full capacity.
Products and Marketing
Woven Fabrics
The woven fabrics division produces finished and unfinished woven
fabrics used in the production of apparel, home furnishings and other
products. Finished apparel fabric is ready to be cut and sewn into
garments. Greige goods are typically sold to converters who enhance the
fabric through finishing techniques and sell it to manufacturers of
apparel, home furnishings and other products.
Finished woven fabrics produced by the division are primarily sold
directly to major apparel manufacturers. The division's marketing
efforts focus on four primary apparel manufacturing groups: women's
apparel, including fashion apparel; men's apparel; career apparel and
uniforms; and military and other government uniforms and apparel. The
woven fabrics division sells and distributes its fabrics through a
marketing office based in New York City (which serves the United
States, Canadian and Mexican markets), with sales agents also operating
from Atlanta, Chicago, Dallas, Los Angeles and San Francisco. The
division also has international sales agents in the United Kingdom and
Hong Kong.
For fiscal year 1997, sales to Levi Strauss and sales to the
Company's top five non-affiliated customers accounted for 17.1% and
37.8%, respectively, of total sales. In fiscal year 1996, sales to
Levi Strauss and sales to the Company's top five non-affiliated
customers accounted for 12.9% and 30.7%, respectively, of the
Company's total sales. Consistent with industry practice, the Company
does not operate under a supply contract with Levi Strauss or any of
its other major customers. In addition, during fiscal years 1997, 1996
and 1995, sales of camouflage military fabrics accounted for 8.4%,
12.8% and 3.1%, respectively, of the Company's total sales. The loss
of Levi Strauss or other major customers could have a material adverse
effect upon the Company. See "Risk Factors -- Risk of Loss of Material
Customers or Broker."
Knitted Fabrics
The knitted fabrics division spins yarn and knits and finishes a
wide range of circular knit fabrics for use in the manufacture of knit
apparel. The division also provides yarn to the Delta Woodside Group's
apparel segment. See "Certain Transactions."
The knitted fabric division's products are marketed to numerous
apparel manufacturers through marketing staffs employed by the Company
in New York City and Los Angeles, with sales personnel also located in
North Carolina, Georgia and Texas. To promote further the sales of the
knitted fabrics division's fabrics to apparel manufacturers, the
marketing staff of the division also contacts major retailers of
products manufactured from the division's knitted fabrics. Discussions
with these retailers provide information relating to fabric quality
and trends in style and color. In addition to its sales to apparel
manufacturers, the division also sells prepared for print fabrics to
converters and printers principally through a single broker. During
fiscal year 1997, sales through this broker were approximately $44.0
million, approximately 9.5% of the Company's total sales. The Company
believes that, because of the competitive brokerage environment, the
loss of this broker would not have a material adverse effect on the
Company. There can be no assurance, however, that this would be the
case. See "Risk Factors -- Risk of Loss of Material Customers or
Broker."
Raw Materials
The Company's principal raw material is cotton, although it also
spins polyester, wool, linen fiber, acrylic, nylon and rayon fibers and
weaves filament acetate and textured polyester. Polyester is obtained
primarily from three major suppliers, all of whom provide competitive
prices. Polyester and rayon are currently at the lowest prices the
Company has paid since fiscal year 1993. There can be no assurance,
however, that this trend will continue. During fiscal year 1997, the
Company's average delivered price per pound of cotton purchased and
consumed (including freight, carrying costs and costs for the
relatively high amount of premium cotton that the Company uses) was
$.833, as compared to $.944 in fiscal year 1996 and $.817 in fiscal
year 1995. In fiscal year 1998, the Company expects to use
approximately 92 million pounds of cotton (including approximately 17
million pounds of premium cotton) and 23 million pounds of polyester in
its manufacture of yarn for woven and knitted textiles. The Company has
contracted to purchase, at average delivered prices lower than in the
preceding fiscal year, about 71% of its expected cotton requirements
for fiscal year 1998 and 14% of its expected cotton requirements for
fiscal year 1999. The percentage of the Company's cotton requirements
that the Company fixes each year varies depending upon the Company's
forecast of future cotton prices. The Company believes that recent
cotton prices have enabled it to contract for cotton at prices that
will permit it to be competitive with other companies in the United
States textile industry when the cotton purchased for future use is put
into production. To the extent that cotton prices decrease before the
Company uses these future purchases, the Company could be materially
and adversely affected. In addition, to the extent that cotton prices
increase, the Company may be materially and adversely affected as there
can be no assurance that it would be able to pass along these increased
costs to its customers. For example, this factor contributed
significantly to the Company's operating losses during fiscal year
1996. See "Risk Factors -- Raw Materials" and "Management's Discussion
and Analysis of Financial Condition and Results of Operations."
Competition
The Company sells primarily to domestic apparel manufacturers,
many of which operate offshore sewing operations. The Company competes
with numerous domestic and foreign fabric manufacturers, including
companies larger in size and having greater financial resources than
the Company. The principal competitive factors in both the woven and
knitted fabrics markets are price, service, delivery time, quality and
flexibility, with the relative importance of each factor depending upon
the needs of particular customers and the specific product offering.
Management believes that the Company maintains its ability to compete
effectively by providing its customers with a broad array of high-
quality fabrics at competitive prices on a timely basis.
The woven fabrics division's competitive position varies by
product line. There are several major domestic competitors in the
finished cotton and cotton/polyester blend woven fabrics business, none
of which dominates the market. The Company believes, however, that it
has a strong competitive position in the all cotton pants-weight
fabrics business, as well as the spun synthetic slack-weight and skirt-
weight woven fabrics businesses. In addition, the Company is one of
several major domestic suppliers of acetate unfinished fabric used in
apparel linings and surgical tapes. Additional competitive strengths of
the woven fabrics division include: knowledge of its customers'
business
needs; its ability to produce special fabrics such as textured blends;
state-of-the-art spinning, weaving and fabric finishing equipment at
most of its facilities; substantial vertical integration; and its
ability to communicate electronically with its customers.
The United States knitted fabrics industry is highly decentralized and
is characterized by fierce competition among many companies. However,
Dyersburg Corporation and West Point-Stevens, Inc. recently announced
the proposed acquisition by Dyersburg Corporation of the Alamac
(knitted fabrics) division of West Point-Stevens, Inc. If this
acquisition were consummated, the Company believes that the combined
entity would be the largest circular knitted fabrics manufacturer in
the United States with substantially greater resources than the
Company's knitted fabrics division. This may have a material adverse
effect upon the Company. There can be no assurance that there will not
be further consolidation in this industry. The significant vertical
integration of the knitted fabrics division's manufacturing operations,
its modern production facilities and its experience in performing the
more complicated manufacturing techniques required in the production of
100% cotton fabrics enable the Company to compete in the knitted
fabrics market.
Foreign competition is a significant factor in the United States fabric
market. The Company believes that its relatively small manual labor
component, highly-automated manufacturing processes and domestic
manufacturing base allow the Company to compete on a price basis and to
respond more quickly than foreign producers to changing fashion trends
and to its domestic customers' delivery schedules. See "-- Industry
Trends -- Growth of a Western Hemisphere Fabric/Apparel Production
Chain." In addition, the Company benefits from protections afforded to
apparel manufacturers based in certain Latin American and Caribbean
countries that ship finished garments into the United States. NAFTA has
effectively eliminated or substantially reduced tariffs on goods
imported from Mexico if such goods are made from fabric originating in
Canada, Mexico or the United States. Section 807 provides for the duty-
free treatment of United States origin components used in the assembly
of imported articles. The result is that duty is assessed only on the
value of any foreign components that may be present and the labor costs
incurred offshore in the assembly of apparel using United States origin
fabric components. Because Section 807 creates an incentive to use
fabric manufactured in the United States, it is beneficial to the
Company and other domestic producers of apparel fabrics. In addition,
pursuant to Section 807A, apparel articles assembled in a Caribbean
country, in which all fabric components have been wholly formed and cut
in the United States, are subject to preferential quotas with respect
to access into the United States for such qualifying apparel, in
addition to the significant tariff reduction pursuant to Section 807. A
similar program, enacted as a result of NAFTA and referred to as the
Special Regime Program, provides even greater benefits (complete duty-
free, quota-free treatment) for apparel assembled in Mexico from fabric
components formed and cut in the United States. In contrast, apparel
not meeting the criteria of Section 807, Section 807A, or the Special
Regime Program is subject to quotas and/or relatively higher tariffs.
If Section 807, Section 807A or the Special Regime Program were
repealed or altered in whole or in part, the Company believes that it
could be at a serious competitive disadvantage relative to textile
manufacturers in other parts of the world seeking to enter the United
States market, which would have a material adverse effect on the
Company. Moreover, there can be no assurance that the current favorable
regulatory environment will continue or that other geographic areas
will not be afforded similar regulatory advantages. See "Risk Factors -
- - - Competition; Risks Associated with Changing Industry and Regulation."
Environmental and Regulatory Matters
The Company is subject to various federal, state and local
environmental laws and regulations concerning, among other things,
wastewater discharges, storm water flows, air emissions, ozone
depletion and solid waste disposal. The Company's plants generate very
small quantities of hazardous waste that are either recycled or
disposed of off-site. Most of its plants are required to possess one or
more discharge permits.
The Company is subject to a consent order that it entered into
with the South Carolina Department of Health and Environmental Control
on September 26, 1985 (the "Consent Order"), prior to Delta Woodside's
acquisition of the business. The Consent Order arose from a
determination that several private drinking wells in the area of two of
the Company's plants had been contaminated. Pursuant to the Consent
Order, the Company has discontinued the operation of a large spray
field near these plants into which waste water sludge had been disposed
and has placed into operation for such purpose a new and larger
adjacent spray field. The Company expects that any continuing
expenditures to comply with the Consent Order will be immaterial.
Some of the Company's plants have been unable to comply with the
acute toxicity and other permit-related limits contained in the
National Pollutant Discharge Elimination System ("NPDES") permits held
by the Company. With respect to certain such plants in North Carolina,
the Company signed a Special Order by Consent with the North Carolina
Department of Environmental Health and Natural Resources ("DEHNR")
which required the plants to achieve compliance with the acute toxicity
limits (the "Special Order by Consent"). The Special Order by Consent
has been amended to require the plants to achieve compliance by October
1, 1997. The Company is actively investigating several alternative
courses of action, including extending a discharge pipe one-half mile
to a larger stream, in an effort to achieve compliance with the Special
Order by Consent. The estimated cost of extending the discharge pipe is
$800,000. It is likely that the Company will incur penalties for
violations of the Special Order by Consent until such time as the
extended pipe or other acceptable alternative is in operation. The
Company is currently also investigating certain wastewater treatment
system basins to improve their condition and thus eliminate a likely
source of groundwater contamination. With respect to certain South
Carolina plants, the Company is working with the appropriate state
agency in developing a corrective action plan for addressing the
toxicity and other permit-related issues. The Company has implemented,
or plans to implement, several courses of action in an effort to
achieve compliance with its NPDES permits, including upgrades at the
Delta 2 and 3 plants ranging from $1.1 million to $2.5 million in cost.
Until these upgrades are completed, it is likely that the Company will
incur penalties for violations of its permits. Although there is no
assurance that the Company will be successful in this regard, it does
not currently believe that the matter will have a material adverse
impact on the Company.
Environmental regulation applicable to the Company's operations is
becoming increasingly stringent. The Company continues to incur capital
and other expenditures each year in order to comply with current and
future regulatory standards. The Company does not expect, however, that
the amount of such expenditures in the future will have a material
adverse effect on its financial condition, results of operations or
competitive position. There can be no assurance, however, that future
changes in federal, state or local regulations, interpretations of
existing regulations, or the discovery of currently unknown problems or
conditions will not require substantial additional expenditures.
Similarly, the extent of the Company's liability, if any, for past
failures to comply with laws, regulations and permits applicable to its
operations cannot be determined. See "Risk Factors -- Environmental
Laws and Regulations."
Order Backlogs
The Company's order backlog at June 28, 1997 was $143.1 million, a 60.2%
increase over the $89.3 million order backlog at June 28, 1996. Most of
this increase was attributable to the woven fabrics division. The
Company believes that backlog orders are generally indicative of future
sales.
Properties
The following table provides a description of the Company's principal
administrative, sales, production and warehouse facilities.
Approximate
Location Principal Use Square Footage Owned/Leased
Woven Fabrics Division
Greenville, SC Administrative 17400 Leased(1)
offices
New York, NY Sales offices 12,500 Leased(2)
Dallas, TX vicinity (4) Sales offices 350 Leased(2)
Los Angeles, CA vicinity Sales offices 2,200 Leased(2)
Beattie Plant, Fountain Inn,
SC Sales offices 12,500 Leased(2)
Furman Plant, Fountain Inn,
SC Sales offices 12,500 Leased(2)
Estes Plant, Piedmont, SC Spin/Weave 332,000 (3)
Delta 3 Plant, Wallace, SC Dye/Finish 555,000 (3)
Cypress Plant, Pamplico, SC Spin 144,000 (3)
Pamplico Plant, Pamplico, SC Spin/Weave 275,000 (3)
Delta 2 Plant, Wallace, SC Dye/Finish 347,000 (3)
Catawba Plant, Maiden, NC Spin 115,000 Owned
Knitted Fabrics Division
Greer, SC Administrative
offices 12,000 Owned
New York, NY Sales offices 6,300 Leased(2)
Dallas, TX vicinity (4) Sales offices 350 Leased(2)
Carter Plant, Wallace, NC Dye/Finish 485,000 Owned
Holly Plant, Wallace, NC Knit 224,000 Owned
Rainsford Plant, Edgefield,
SC Spin 296,000 Owned
Mickel Plant, Spartanburg, SC Spin 207,000 Owned
____________________
(1) Lease expires in 1998 with the right to renew for two additional
five-year periods.
(2) Leases expire on varying dates from September 1997 through
December 2004.
(3) Titles to these facilities and substantially all of the
equipment
located in such facilities are held by three South Carolina
counties under a fee-in-lieu-of-taxes arrangement, which has the effect
of substantially reducing the Company's property taxes in South
Carolina. Although the Company can reacquire such property at a nominal
price, this would currently cause a significant increase in the amount
of property taxes paid by the Company.
(4) This facility is shared by the woven fabrics and knitted
fabrics
divisions and the approximate square footage shown represents each
division's approximate usage.
Employees
As of June 28, 1997, the Company had approximately 3,750
employees, of which 85.1% were paid on an hourly basis. The Company's
employees are not represented by unions. The Company believes that its
relations with its employees are good.
Legal Proceedings
From time to time the Company is a defendant in legal actions involving
claims arising in the normal course of its business, including product
liability claims. The Company believes that, as a result of its legal
defenses, insurance arrangements and indemnification provisions with
financially capable parties, none of these actions is reasonably likely
to have a material adverse effect on the financial condition or results
of operations of the Company.
MANAGEMENT
Directors and Executive Officers
The following table sets forth certain information regarding the
directors and executive officers of the Company. Except as otherwise
noted below, the business address of each director and officer is Delta
Woodside Industries, Inc., 233 North Main Street, Hammond Square, Suite
200, Greenville, South Carolina 29601. Each such person is a citizen of
the United States. There are no family relationships among the
directors and the executive officers of the Company or Delta Woodside,
except that Buck Mickel (a director of Delta Woodside) is the father of
Buck A. Mickel (a director of the Company and Delta Woodside).
Name Age Position with the Company Director since(1)
E. Erwin Maddrey, II 56 Director, President and 1984
Chief Executive Officer of
the Company and Delta
Woodside
Bettis C. Rainsford 46 Director, Executive Vice
1984 President, Chief Financial
Officer and Treasurer of
the Company and Delta
Woodside
Jane H. Greer 59 Vice President and
Secretary of the Company
and Delta Woodside
Douglas J. Stevens 64 Controller and Assistant
Secretary of the Company and
Delta Woodside
Brenda L. Jones 51 Assistant Secretary of the
Company and Delta Woodside
C.C. Guy 64 Director 1984
Buck A. Mickel 41 Director 1984
_______________________
(1) Includes service as a director of Delta Woodside's predecessor
by merger, Delta Woodside Industries, Inc., a Delaware corporation
("Old Delta Woodside"), or any predecessor to Old Delta Woodside.
E. Erwin Maddrey, II was President and Chief Executive Officer of
Old Delta Woodside or its predecessors from the founding of Old Delta
Woodside's predecessors in 1984 until the November 15, 1989 merger of
Old Delta Woodside into RSI Corporation, a South Carolina corporation,
which changed its name to Delta Woodside Industries, Inc. and is now
Delta Woodside (the "RSI Merger"), and he has served in such positions
with Delta Woodside since the RSI Merger. He also serves as a director
of Kemet Corporation and Renfro Corporation.
Bettis C. Rainsford was Executive Vice President and Chief
Financial Officer of Old Delta Woodside or its predecessors from the
founding of Old Delta Woodside's predecessors in 1984 until the RSI
Merger and has served in such positions with Delta Woodside since the
RSI Merger. Mr. Rainsford has served as Treasurer of Old Delta Woodside
or its predecessors or Delta Woodside from 1984 to 1986, from August
1988 to November 1988 and from 1990 to the present. He is also
President of The Rainsford Development Corporation which is engaged in
general business development activities in Edgefield, South Carolina.
Mr. Rainsford also serves as a director of Martin Color-fi, Inc.
Jane H. Greer became associated with Old Delta Woodside's
predecessors in July 1986, and was elected a Vice President of Old
Delta Woodside in November 1986, in charge of human resources and other
related areas, Assistant Secretary of Old Delta Woodside in 1987 and
Secretary of Old Delta Woodside in August 1988. She became Vice
President and Secretary of Delta Woodside in 1989.
Douglas J. Stevens was elected Controller and Assistant Secretary
of Delta Woodside in 1992. From 1991 to 1992, Mr. Stevens was Vice
President of Finance and Administration for Duck Head Apparel Company,
Inc., a division of a subsidiary of Delta Woodside. From 1972 to 1986,
he was a Corporate Vice President of Riegel Textile Corporation
(engaged in the manufacture and sale of textiles). From 1987 to 1988,
he was Chairman of Eagle Mills, Inc. (a converter of textile fabrics).
From 1989 to 1991, Mr. Stevens was Operations Director of Blue Ridge
Care, Ltd. (engaged in the manufacture and sale of disposable diapers
in England).
Brenda L. Jones was elected Assistant Secretary of Old Delta
Woodside in 1988. She became Assistant Secretary of Delta Woodside in
1989. Since 1987, she has been Vice President and Chief Financial
Officer of The Rainsford Development Corporation, a corporation wholly-
owned by Bettis C. Rainsford which is engaged in general business
development activities.
C.C. Guy is a retired businessman. He served as Chairman of the
Board of Old Delta Woodside or its predecessors from the founding of
Old Delta Woodside's predecessors in 1984 until November 1989. Since
before the RSI Merger, he has been a director of RSI Holdings, Inc.,
and he also served as President of RSI Holdings, Inc. from before the
RSI Merger until January 1995. RSI Holdings, Inc. until 1992 was
engaged in the sale of outdoor power equipment, until 1994 was engaged
in the sale of turf care products and currently is engaged in the
consumer finance business. Prior to November 15, 1989, RSI Holdings,
Inc. was a subsidiary of RSI Corporation. Mr. Guy served from 1979
until November 1989 as President, Treasurer and a director of RSI
Corporation. Prior to the RSI Merger, RSI Corporation owned
approximately 40% of the outstanding shares of common stock of Old
Delta Woodside and, among other matters, was engaged in the office
supply business, as well as the businesses of selling outdoor power
equipment and turf care products.
Buck A. Mickel is Vice President of RSI Holdings, Inc. He served
as a Vice President of Old Delta Woodside or its predecessors from the
founding of Old Delta Woodside's predecessors until November 1989,
Secretary of Old Delta Woodside from November 1986 to March 1987, and
Assistant Secretary of Old Delta Woodside from March 1987 to November
1988. He served as Vice President and a director of RSI Holdings, Inc.
from before the RSI Merger until January 1995 and served as Vice
President of RSI Corporation from 1983 until November 1989. Mr. Mickel
was re-elected Vice President of RSI Holdings, Inc. in September 1996.
In addition, Mr. Mickel is a Vice President of Micco Corporation, a
family-owned company engaged in making investments.
The Company's directors hold office until the next annual meeting
of the Company's shareholder or until their successors are duly elected
and qualified. The Company's executive officers are appointed by the
Board of Directors and serve at the pleasure of the Board.
Management Compensation
Each of the executive officers of the Company serves in the same
position for Delta Woodside and various of Delta Woodside's direct and
indirect subsidiaries and is compensated by Delta Woodside. On an
ongoing basis the Company reimburses Delta Woodside for services
provided to it by its executive officers. This arrangement was
formalized in a management services agreement in August 1997. See
"Certain Transactions." The following provides information respecting
the compensation received by the Company's executive officers in all
capacities for Delta Woodside and its direct and indirect subsidiaries
(including the Company) in fiscal years 1994, 1995 and 1996. A portion
of these amounts was borne by the Company. See "Certain Transactions."
The Company does not expect fiscal year 1997 compensation to differ
materially from fiscal year 1996 levels.
Summary Compensation Table
The table below sets forth certain information respecting the
compensation earned during the fiscal years ended June 29, 1996, July
1, 1995 and July 2, 1994 by the Chief Executive Officer, the Chief
Financial Officer, and the other two executive officers who earned
salary and bonus in fiscal year 1996 in excess of $100,000 (the "Named
Executives").
<TABLE>
Summary Compensation Table
<CAPTION>
Long- Term
Compensation
Annual Compensation Awards
Securities
Name and Bonus Other Underlying All Other
Principal Salary(1) (1)(2) Annual Options Compensation
Position Year ($) ($) Compensation (4) (#) ($)
(3)
<S> <C> <C> <C> <C> <C> <C>
E. Erwin 1996 500,000 0 0 0 47,571(8)(12)(13)
Maddrey, II, 1995 492,311 0 0 0 34,678
President 1994 450,021 0 0 0 30,125
and Chief
Executive
Officer
Bettis C. 1996 450,000(5) 0 0 0 15,074(9)(12)(13)
Rainsford, 1995 442,308(5) 0 0 0 14,450
Executive 1994 400,000(5) 0 0 0 13,838
VP, CFO,
and
Treasurer
Jane H. 1996 138,769 18,000 7,567 25,000(6) 878(10)(13)
Greer, 1995 131,077 22,000 12,587 0 864
Vice 1994 126,000 17,250 17,315 10,000(6) 2,827
President
and
Secretary
Douglas J. 1996 126,923 18,000 6,229 7,500(7) 1,723(11)(13)
Stevens, 1995 106,539 20,000 9,350 0 837
Controller 1994 102,885 12,228 17,315 10,000(7) 1,991
and Asst.
Secretary
</TABLE>
______________________
(1) Includes sums the receipt of which have been deferred pursuant
to Delta Woodside's 401(k) plan or Delta Woodside's deferred
compensation plan.
(2) Cash bonuses paid to reward performance.
(3) Amounts paid by Delta Woodside in connection with the vesting of
awards under Delta Woodside's Incentive Stock Award Plan. These
amounts were in each case approximately sufficient, after the
payment of all applicable income taxes, to pay the participant's
federal and state income taxes attributable to the vesting of
the award. The amounts shown in the table above do not include
reimbursement by Delta Woodside or its subsidiaries for certain
automobile expenses, club memberships and other items. The non-
business personal benefit to any executive officer of these
amounts does not exceed 10% of the executive officer's total
salary and bonus.
(4) For purposes of this table, awards under Delta
Woodside's Incentive Stock Award Plan are treated as options.
(5) Of this amount $150,000 was paid in each fiscal year to The
Rainsford Development Corporation, a company wholly owned by Mr.
Rainsford.
(6) During fiscal year 1996, Ms. Greer was granted an option
covering 22,500 shares of Delta Woodside common stock under Delta
Woodside's Stock Option Plan. During fiscal year 1994, Ms. Greer was
granted an award covering 10,000 shares of Delta Woodside common stock
under Delta Woodside's Incentive Stock Award Plan.
(7) During fiscal year 1996, Mr. Stevens was granted an option
covering 7,500 shares of Delta Woodside common stock under Delta
Woodside's Stock Option Plan. During fiscal year 1994, Mr. Stevens was
granted an award covering 10,000 shares of Delta Woodside common stock
under Delta Woodside's Incentive Stock Award Plan.
(8) The fiscal year 1996 amount represents a $33,825 premium paid
by
Delta Woodside for $10 million of life insurance on the life of
Mr. Maddrey, $549 allocated to Mr. Maddrey's account under Delta
Woodside's Employee Retirement Plan (the "Retirement Plan"), $32
received for a safety award, and $13,165 contributed by Delta Woodside
to Delta Woodside's deferred compensation plan as payment for the
amount of Delta Woodside contributions to the Retirement Plan for
fiscal years 1992 through 1994 that were not made for Mr. Maddrey
because of Internal Revenue Code contribution limitations.
(9) The fiscal year 1996 amount represents a $14,525 premium paid
by
Delta Woodside for $10 million of life insurance on the life of
Mr. Rainsford and $549 allocated to Mr. Rainsford's account under
the Retirement Plan.
(10) The fiscal year 1996 amount represents $537 allocated to
Ms.
Greer's account under the Retirement Plan, $309 contributed by
Delta Woodside to Delta Woodside's deferred compensation plan to
equal the amount Delta Woodside would have contributed to Delta
Woodside's 401(k) plan for Ms. Greer with respect to her
compensation deferred under the deferred compensation plan, and $32
received for a safety award.
(11) The fiscal year 1996 amount represents $357 allocated to
Mr.
Stevens' account under the Retirement Plan, and $762 and $604
contributed by Delta Woodside to Delta Woodside's deferred
compensation plan to equal the amount Delta Woodside would have
contributed to Delta Woodside's 401(k) plan and Retirement Plan,
respectively, for Mr. Stevens with respect to his compensation
deferred under the deferred compensation plan.
(12) Delta Woodside pays the premiums due for life insurance
policies
that total $10 million on the life of each of Mr. Maddrey and Mr.
Rainsford. The proceeds of these policies are payable to the
beneficiary or beneficiaries chosen by Mr. Maddrey or Mr.
Rainsford, as the case may be.
(13) The Retirement Plan allocation shown for a fiscal year was
allocated to the participant's account during that fiscal year,
although the amount of the allocation may have been determined in
whole or in part on the basis of the participant's compensation
during the prior fiscal year. A participant may withdraw amounts or
shares from the Retirement Plan only upon retirement, death,
disability or other termination of employment. Amounts allocated to a
participant's account under the Retirement Plan generally do not vest
until expiration of a five-year service period at which time the
amounts become fully vested. Immediate vesting would occur upon a
participant's reaching normal retirement age, death or disability.
Mr. Maddrey, Ms. Greer and Mr. Stevens are vested in the amounts
allocated to their accounts, but Mr. Rainsford is not vested in the
amount allocated to his account, under the Retirement Plan.
Option Grants in Fiscal Year 1996
The following table provides certain information respecting the
grant to any Named Executive during fiscal year 1996 of awards under
Delta Woodside's Incentive Stock Award Plan or options under Delta
Woodside's Stock Option Plan. For purposes of this table, awards
under Delta Woodside's Incentive Stock Award Plan are treated as
options.
<TABLE>
Option Grants in Fiscal Year 1996
<CAPTION>
Individual Grants Potential
Realizable Value
at Assumed Annual
Rates of Stock
Price Appreciation
% of Market for Option Term(2)
Number Total Exercise Price on
Securities Granted or Date of
Underlying to Base Grant
Options Employees Price on ($/Sh) Expiration 0% 5% 10%
Granted in Fiscal ($/Sh) Date ($) ($) ($)
Name (#) Year
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Jane H. Greer 22,500(1) 8.73 3.375 6.75 1/20/01(1) 75,938 117,898 168,659
Douglas J. Stevens 7,500(1) 2.91 3.375 6.75 1/29/01(1) 25,313 39,299 56,220
______________________
(1) Represents shares covered by an option granted during fiscal year
1996 under Delta Woodside's Stock Option Plan, pursuant to which a
participant is granted the right to acquire shares of Delta
Woodside's common stock for an exercise price per share which will be
not less than one-half of the fair market value on the date of the
grant. The expiration date set forth in the table is the termination
date for the option. The option became exercisable with respect to
25% of the shares covered by the option on January 29, 1997, and will
become exercisable with respect to an additional 25% of the shares
covered by the option on each anniversary of January 29, 1997,
provided that the participant is an employee of Delta Woodside on the
relevant dates. Additional terms and conditions are set forth in the
agreement relating to the exercise of options if the participant's
employment terminates early by reason of death, retirement or
permanent disability.
(2) Based on annual compounding of assumed appreciation rate
until termination date.
</TABLE>
Aggregated Option Exercises in Fiscal Year 1996 and 1996 Fiscal
Year-End Option Values
The following table provides certain information respecting the
exercise by any Named Executive during fiscal year 1996 of awards
granted under Delta Woodside's Incentive Stock Award Plan and options
granted under Delta Woodside's Stock Option Plan. For purposes of
this table, awards under Delta Woodside's Incentive Stock Award Plan
are treated as options.
<TABLE>
Aggregated Option Exercises in Fiscal Year 1996 and 1996 FY-End
Option Values
<CAPTION>
Number of
Securities Value of In-the
Underlying Money Options at FY-End($)(1)
Unexercised
Options at
FYEnd
(#)
Shares
Acquired
on Value
Exercise Realized
Name (#) ($) Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C> <C> <C>
Jane H. Greer 9,500 32,605 0 22,500 0 42,188
Douglas J. Stevens 2,000 10,480 12,250 10,250 0 14,063
________________________
(1) Based on the closing sales price of $5.25 per share on July 1,
1996.
</TABLE>
Director Compensation
Delta Woodside pays each director of Delta Woodside (for that
director's service as a director of Delta Woodside or any of its
subsidiaries, including the Company) who is not an officer of Delta
Woodside a fee of $20,000 per year, plus provides approximately $10,000
annually for each such director with which shares of Delta Woodside's
common stock are purchased. These shares may be newly issued or
acquired in the open market for such purpose. Each director is also
reimbursed for his reasonable travel expenses in attending each
meeting.
Delta Woodside has established the Directors' Charitable Giving Program
covering each director of Delta Woodside (some of whom also serve as a
Director of the Company). Under the program, after the death of a
director, Delta Woodside will make an aggregate donation of $500,000,
to be paid in 10 annual installments commencing no later than six
months after the director's death, to one or more charitable
organizations selected by such director. With respect to E. Erwin
Maddrey, II and Bettis C. Rainsford, the program will be fully or
partly funded by life insurance policies owned and to be paid for by
Delta Woodside on the lives of such Directors.
Compensation Committee Interlocks and Insider Participation
C.C. Guy and Buck A. Mickel served on the Compensation Committee
of Delta Woodside's Board of Directors during fiscal year 1996. C.C.
Guy served as Chairman of the Board of Old Delta Woodside or its
predecessors from the founding of Old Delta Woodside's predecessors in
1984 until November 1989. Buck A. Mickel was a Vice President of Old
Delta Woodside or its predecessors from the founding of Old Delta
Woodside's predecessors until November 1989, Secretary of Old Delta
Woodside from November 1986 to March 1987, and Assistant Secretary of
Old Delta Woodside from March 1987 to November 1988.
STOCK OWNERSHIP
The following table sets forth certain information as of September
26, 1997, regarding the beneficial ownership of Delta Woodside's common
stock by (i) persons beneficially owning in any case more than five
percent of such common stock, (ii) the directors of the Company, (iii)
the executive officers of the Company, and (iv) all directors and
executive officers of the Company as a group. As discussed above, the
Company is a wholly-owned indirect subsidiary of Delta Woodside. Except
as otherwise indicated, the Company believes that the persons named in
the table have sole voting and investment power with respect to all
shares of common stock of Delta Woodside shown as beneficially owned
by them.
Shares
Beneficially
Name of Beneficial Owner Owned Percentage
E. Erwin Maddrey, II (1) 3,238,880 13.2%
233 North Main Street
Hammond Square, Suite 200
Greenville, SC 29601
Bettis C. Rainsford (2) 3,181,007 13.0%
108-1/2 Courthouse Square
Post Office Box 388
Edgefield, SC 29824
Buck A. Mickel (3)(4) 1,568,897 6.4%
Post Office Box 6721
Greenville, SC 29606
Micco Corporation (4) 1,240,634 5.1%
Post Office Box 795
Greenville, SC 29602
Buck Mickel and 1,563,521 6.4%
Minor H. Mickel (4)(5)
415 Crescent Avenue
Greenville, SC 29605
Minor M. Shaw (4)(6) 1,520,255 6.2%
Post Office Box 795
Greenville, SC 29602
Charles C. Mickel(4)(7) 1,496,434 6.1%
Post Office Box 6721
Greenville, SC 29606
C.C. Guy (8) 24,178 *
Jane H. Greer (9) 35,757 *
Douglas J. Stevens (10) 23,247 *
Brenda L. Jones (11) 688 *
Brenda L. Jones (11)
All directors and 8,618,217 35.1%
executive officers as
a group (7 Persons)(12)
* Less than 1%
(1) Mr. Maddrey is the President and Chief Executive Officer and
a director of the Company and Delta Woodside. The number of shares
shown as beneficially owned by Mr. Maddrey includes approximately
18,572 shares allocated to Mr. Maddrey's account in Delta
Woodside's Employee Stock Purchase Plan, 431,470 shares held by
the E. Erwin and Nancy B. Maddrey, II Foundation, a charitable
trust, as to which shares Mr. Maddrey holds sole voting and
investment power but disclaims beneficial ownership, and
approximately 983 shares allocated to the account of Mr. Maddrey
per the most recent report of Delta Woodside's Employee
Retirement Plan for fiscal year 1996. Mr. Maddrey is fully vested
in the shares allocated to his account in Delta Woodside's
Employee Retirement Plan.
(2) Mr. Rainsford is the Executive Vice President, Treasurer
and Chief Financial Officer and a director of the Company and
Delta
Woodside. The number of shares shown as beneficially owned by Mr.
Rainsford includes 47,945 shares held by The Edgefield County
Foundation, a charitable trust, as to which shares Mr. Rainsford
holds sole voting and investment power but disclaims beneficial
ownership, and approximately 76 shares allocated to the account
of Mr. Rainsford per the latest report of Delta Woodside's
Employee Retirement Plan for fiscal year 1996. Mr. Rainsford is
not vested in any shares allocated to his account in Delta
Woodside's Employee Retirement Plan.
(3) Buck A. Mickel is a director of the Company and Delta Woodside.
The number of shares shown as beneficially owned by Buck A. Mickel
includes 328,263 shares directly owned by him and all of the 1,240,634
shares owned by Micco Corporation. See Note (4) below.
(4) The shares of common stock of Micco Corporation are owned in
equal parts by Minor H. Mickel, the wife of Buck Mickel (a director of
Delta Woodside), Buck A. Mickel (a director of the Company and Delta
Woodside), Minor M. Shaw and Charles C. Mickel. Buck A. Mickel, Minor M.
Shaw and Charles C. Mickel are the children of Buck and Minor H. Mickel.
Minor H. Mickel, Buck A. Mickel, Minor M. Shaw and Charles C. Mickel are
officers and directors of Micco Corporation. Each of Minor H. Mickel,
Buck A. Mickel, Minor M. Shaw and Charles C. Mickel disclaims beneficial
ownership of three quarters of the shares of Delta Woodside's common
stock owned by Micco Corporation. Minor H. Mickel and Buck A. Mickel
directly own 116,854 shares and 328,263 shares, respectively, of Delta
Woodside's common stock. Charles C. Mickel, directly or as custodian for
his son, owns 255,700 shares of Delta Woodside's common stock. Minor M.
Shaw, directly or as custodian for her children, owns 264,978 shares of
Delta Woodside's common stock. In addition, Buck Mickel directly owns
206,033 shares of Delta Woodside's common stock, as to which shares
Minor H. Mickel may also be deemed a beneficial owner. Minor H. Mickel
disclaims beneficial ownership with respect to these shares. Buck Mickel
disclaims beneficial ownership of the shares directly owned by Minor H.
Mickel and the shares owned by Micco Corporation. Minor M. Shaw's
husband, through an individual retirement account and as custodian for
her children, beneficially owns approximately 14,643 shares of Delta
Woodside's common stock, as to which shares Minor M. Shaw may also be
deemed a beneficial owner. Minor M. Shaw disclaims beneficial ownership
with respect to these shares and with respect to the 2,748 shares of
Delta Woodside's common stock held by her as custodian for her children.
The spouse of Charles C. Mickel owns 100 shares of Delta Woodside's
common stock, as to which shares Charles C. Mickel may also be deemed a
beneficial owner. Charles C. Mickel disclaims beneficial ownership with
respect to these shares and with respect to the 3,000 shares of Delta
Woodside's common stock held by him as custodian for his son. Micco
Corporation owns 1,240,634 shares of Delta Woodside's common stock.
(5) Buck Mickel is a director of Delta Woodside. The number of
shares shown as beneficially owned by Buck Mickel and Minor H. Mickel
includes 206,033 shares directly owned by Buck Mickel, 116,854 shares
directly owned by Minor H. Mickel and all of the 1,240,634 shares owned
by Micco Corporation. See Note (4) above.
(6) The number of shares shown as beneficially owned by Minor M.
Shaw
includes 264,978 shares owned by her directly or as custodian for her
children, approximately 14,643 shares beneficially owned by her
husband through an individual retirement account or as custodian for
her children, and all of the 1,240,634 shares owned by Micco
Corporation. See Note (4) above.
(7) The number of shares shown as beneficially owned by Charles
C. Mickel includes 255,700 shares owned by him directly or as
custodian for his son, 100 shares owned by his wife and all of the
1,240,634 shares owned by Micco Corporation. See Note (4).
(8) C.C. Guy is a director of the Company and Delta Woodside.
The number of shares shown as beneficially owned by C.C. Guy
includes 18,968 shares owned by his wife, as to which shares Mr. Guy
disclaims beneficial ownership.
(9) Ms. Greer is Vice President and Secretary of the Company
and Delta Woodside. The number of shares shown as beneficially
owned by Ms.
Greer includes approximately 1,124 shares allocated to her
account per the latest report of Delta Woodside's Employee
Retirement Plan for fiscal year 1996. Ms. Greer is fully vested
in the shares allocated to her account in Delta Woodside's
Employee Retirement Plan. Also included are 5,625 unissued shares
which can be acquired by the exercise of options and incentive
awards exercisable within 60 days of September 26, 1997. Excluded
from the table are 28,875 unissued shares covered by stock
options and incentive awards which are not exercisable within 60
days after September 26, 1997.
(10) Mr. Stevens is Controller and Assistant Secretary of the
Company and Delta Woodside. The number of shares shown as
beneficially
owned by Mr. Stevens includes approximately 247 shares allocated
to his account per the latest report of Delta Woodside's Employee
Retirement Plan for fiscal year 1996. Mr. Stevens is fully vested
in the shares allocated to his account in Delta Woodside's
Employee Retirement Plan. Also included are 12,875 unissued
shares which can be acquired by the exercise of options and
incentive awards exercisable within 60 days of September 26,
1997, but excluded are 21,625 unissued shares covered by options
and incentive awards which are not exercisable within 60 days
after September 26, 1997.
(11) Ms. Jones is Assistant Secretary of the Company and Delta
Woodside. The number of shares shown as beneficially owned by Ms.
Jones includes approximately 163 shares allocated to her account
per the latest report of Delta Woodside's Employee Retirement
Plan for fiscal year 1996. Ms. Jones is fully vested in the
shares allocated to her account in Delta Woodside's Employee
Retirement Plan. Also included are 125 unissued shares which can
be acquired by the exercise of options and incentive awards
exercisable within 60 days of September 26, 1997. Excluded from
the table are 2,675 unissued shares covered by options and
incentive awards which are not exercisable within 60 days after
September 26, 1997.
(12) Includes all shares deemed to be beneficially owned by
any director or executive officer. Includes 548,156 shares of
Delta Woodside's common stock held by Delta Woodside's Employee
Retirement Plan. Each participant in the Employee Retirement Plan
has the right to direct the manner in which the trustee of the
Plan, Jane H. Greer (Vice President and Secretary of the Company
and Delta Woodside), votes the shares held by the Employee
Retirement Plan which are allocated to such participant's
account. Except for shares as to which such a direction is made,
the shares held by the Employee Retirement Plan are voted by the
trustee in the manner directed by the Plan's committee which
includes Jane H. Greer and Douglas J. Stevens (Controller and
Assistant Secretary of the Company and Delta Woodside) as
members. The number of shares shown in the table includes an
aggregate of 18,625 non-issued shares subject to employee stock
options and incentive awards held by executive officers that are
exercisable within 60 days or less, but excludes 53,175 non-
issued shares subject to employee stock options and incentive
awards held by executive
officers that are not exercisable within 60 days.
CERTAIN TRANSACTIONS
The knitted fabrics division of the Company sells yarn and fabric
to the subsidiary of Delta Woodside that manufactures and sells
apparel. During fiscal years 1994, 1995, 1996 and 1997, these sales of
yarn aggregated $14,568,000, $17,699,000, $23,363,000 and $22,015,000,
respectively, and these sales of fabric aggregated $1,066,000,
$2,493,000, $2,237,000 and $7,855,000, respectively. During these
periods until the end of March 1997, all such yarn sales were at a
price equal to cost plus $0.01 per pound. All such fabric sales, and
all yarn sales made since March 1997, were and have been made at prices
deemed by the Company and Delta Woodside to approximate market value.
In connection with the foregoing pricing policies on the yarn sales,
through March 1997 the apparel manufacturing subsidiary of Delta
Woodside also maintained with the knitted fabrics division a non-
interest bearing deposit, which aggregated $7.5 million and $11.2
million at June 29, 1996 and July 1, 1995, respectively. Effective May
7, 1997, Delta Woodside adopted a written policy statement governing
the pricing of intercompany transactions. Among other things, such
policy statement provides that all intercompany sales and purchases
will be settled at market value and terms.
Delta Woodside provides various services to the Company, including
payroll, accounting, internal audit, employee benefits and corporate
services. These services have been charged on the basis of Delta
Woodside's costs and allocated to the Company based on employee head
count, computer time, projected sales and other criteria. During fiscal
years 1994, 1995, 1996 and 1997, Delta Woodside charged the Company
$3,083,000, $2,950,000, $3,123,000 and $3,302,000, respectively, for
these services. Effective as of August 1, 1997, the Company and Delta
Woodside entered into a management services agreement that governs the
use by the Company of and the method of charging the Company for the
services to be provided by Delta Woodside to the Company on an ongoing
basis. Such management services agreement provides, among other things,
that the Company may request that Delta Woodside provide such
executive, administrative, accounting and similar services as may be
necessary and appropriate for the operation of the Company. The
management services agreement further provides that Delta Woodside
shall provide such services for a fee no greater than the lesser of:
(a) the cost to the Company of obtaining such services from an
unaffiliated third party in an arm's length transaction or (b) the
Company's pro rata share of Delta Woodside's actual cost or expense
incurred in connection with providing such services (including a
reasonable allocation of overhead and other unallocated corporate
costs) with such pro rata share to be determined reasonably and in good
faith by Delta Woodside in accordance with the following formulas: in
the case of benefits, administration and payroll costs and expenses
based upon the average number of employees of the Company during the
immediately preceding four full fiscal quarters for which internal
statements are available (the "Statement Period") as compared to the
average number of employees of the Delta Woodside Group during the
Statement Period; in the case of computer services based upon the
number of computer processing units attributable to the Company during
the Statement Period as compared to the total number of computer
processing units of the Delta Woodside Group during the Statement
Period; in the case of purchasing costs and expenses based upon the
number of purchase orders attributable to the Company during the
Statement Period as compared to the total number of purchase orders of
the Delta Woodside Group during the Statement Period; in the case of
expenses related to cotton buying services based upon the number of
cotton orders entered into by or on behalf of the Company for the
Statement Period as compared to the total number of cotton orders of
the Delta Woodside Group for the Statement Period; in the case of
accounting, tax and internal audit costs and expenses based upon the
amount of the bill of Delta Woodside's external auditors for the
Statement Period attributable to work related to the Company, as
compared to the total bill of Delta Woodside's external auditors for
the Statement Period; and in the case of costs and expenses for all
other services based upon the total of the Company's revenues for the
Statement Period as compared to revenues of the consolidated Delta
Woodside Group for the Statement Period. The management services
agreement further provides that letter of credit or surety bond issuer
fees and expenses incurred in connection with workers compensation
requirements will be borne by the Company in accordance with its pro
rata share of applicable payroll expenses. Such management services
agreement may be terminated at any time by any party thereto without
liability, except that the Company shall pay for all services provided
up to and including the date such agreement is terminated and all other
amounts attributable to the period prior to such termination.
Effective as of August 1, 1997 the Company and Delta Woodside
entered into an income tax sharing agreement. Such income tax sharing
agreement provides that Delta Woodside will file consolidated federal,
and may file consolidated state, local or foreign income tax returns
covering the Company and the other members of the Delta Woodside Group.
Such income tax sharing agreement further provides that the Company
will pay to Delta Woodside an amount on each tax due date equal to the
lesser of (a) the Company's income tax liability had the Company filed
a separate tax return for the affiliate group (the "Subsidiary Group")
consisting of the Company and the Company's subsidiaries or (b) the
Subsidiary Group's pro rata share of the Delta Woodside Group's
aggregate income tax liability, calculating such pro rata share as if
the members of the Delta Woodside Group had filed separate tax returns.
However, any reduction in amount payable by the Company resulting from
net operating losses ("NOL") generated by another subsidiary of Delta
Woodside shall be paid to Delta Woodside when such other subsidiary
would have otherwise benefitted from such NOL if it were filing
separate tax returns. The income tax sharing agreement also provides
that Delta Woodside will credit the Company for any net loss, tax
credit or refund of the Subsidiary Group that reduces the tax liability
of the Delta Woodside Group.
For a description of indebtedness owed by the Company to the Delta
Woodside Group prior to the Refinancing, see "Use of Proceeds."
Any transaction to be entered into between the Company, on the one
hand, and Delta Woodside or any of Delta Woodside's other subsidiaries,
on the other hand, will be on terms that the Company then believes
comparable to those that would be available to the Company at such time
from non-affiliated persons. In addition, pursuant to the terms of the
Indenture, certain affiliate transactions (excluding sales of goods and
manufacturing services in the ordinary course of business) in excess of
$1.0 million are subject to the approval at the time of the Company's
Board of Directors and certain affiliate transactions (excluding sales
of goods and manufacturing services in the ordinary course of business)
in excess of $5.0 million are subject to a fairness opinion by an
investment banking firm of national standing. See "Description of
Exchange Notes -- Certain Covenants -- Transactions with Affiliates."
THE EXCHANGE OFFER
Purpose of the Exchange Offer
The sole purpose of the Exchange Offer is to fulfill certain
obligations of the Company with respect to the Registration Rights
Agreement.
The Senior Notes were originally issued and sold on August 25,
1997 (the "Issue Date") to the Initial Purchaser pursuant to the
Purchase Agreement. Such sales were not registered under the Securities
Act in reliance upon the exemption provided by Section 4(2) of the
Securities Act and Rule 144A of the Securities Act. In connection with
the sale of the Senior Notes, the Company agreed to file with the
Commission a registration statement relating to an exchange offer (the
"Exchange Offer Registration Statement") pursuant to which another
series of notes of the Company covered by such registration statement
and containing the same terms as the Senior Notes, except as set forth
in this Prospectus, would be offered in exchange for Senior Notes
tendered at the option of the holders thereof. A copy of the
Registration Rights Agreement has been filed as an exhibit to the
Registration Statement.
The Company and the Initial Purchaser of the Senior Notes entered
into the Registration Rights Agreement dated August 25, 1997, pursuant
to which the Company agreed to (i) cause to be filed with the
Commission no later than October 9, 1997, a Registration Statement
under the Securities Act relating to the Exchange Notes and the
Exchange Offer (the "Exchange Offer Registration Statement," which is
this Registration Statement), (ii) use its best efforts to cause such
Registration Statement to become effective at the earliest possible
time, but in no event later than January 7, 1998, (iii) in connection
with the foregoing, file (A) all pre-effective amendments to such
Registration Statement as may be necessary in order to cause such
Registration Statement to become effective, (B) if applicable, a post-
effective amendment to such Registration Statement pursuant to Rule
430A under the Securities Act and (C) cause all necessary filings in
connection with the registration and qualification of the Exchange
Notes to be made under the Blue Sky laws of such jurisdictions as are
necessary to permit the Exchange Offer to be consummated, and (iv) upon
the effectiveness of such Registration Statement, commence the Exchange
Offer. The Company shall cause the Exchange Offer Registration
Statement to be effective continuously and shall keep the Exchange
Offer open for a period of not less than the minimum period required
under applicable federal and state securities laws to consummate the
Exchange Offer; provided, however, that in no event shall such period
be less than 20 business days. The Company has agrred to cause the
Exchange Offer to comply with all applicable federal and state
securities laws. No securities other than the Exchange Notes are to be
included in the Exchange Offer Registration Statement. The Company has
agreed to use its best efforts to cause the Exchange Offer to be
consummated on the earliest practicable date after the Exchange Offer
Registration Statement has become effective, but in no event later than
30 business days thereafter. The Company has agreed to use its best
efforts to keep the Exchange Offer Registration Statement continuously
effective, supplemented and amended as required by the provisions of
the Registration Rights Agreement to the extent necessary to ensure
that it is available for resales of Senior Notes acquired by broker-
dealers for their own accounts as a result of marketmaking activities
or other trading activities, and to ensure that it conforms with the
requirements of the Registration Rights Agreement, the Securities Act
and the policies, rules and regulations of the Commission as announced
from time to time, for a period of one year from the date on which the
Exchange Offer Registration Statement is declared effective. The
Company shall provide sufficient copies of the latest version of such
Prospectus to broker-dealers promptly upon request at any time during
such one-year period in order to facilitate such resales.
Resale of the Exchange Notes
With respect to the Exchange Notes, based upon an interpretation
by the staff of the Commission set forth in certain no-action letters
issued to third parties, the Company believes that a holder (other than
(i) a broker-dealer who purchases Notes directly from the Company to
resell pursuant to Rule 144A or any other available exemption under the
Securities Act or (ii) any such holder that is an "affiliate" of the
Company within the meaning of Rule 405 under the Securities Act) who
exchanges Senior Notes for Exchange Notes in the ordinary course of
business and who is not participating, does not intend to participate,
and has no arrangement with any person to participate, in a
distribution of the Exchange Notes, will be allowed to resell Exchange
Notes to the public without further registration under the Securities
Act and without delivering to the purchasers of the Exchange Notes a
prospectus that satisfies the requirements of Section 10 of the
Securities Act. See the No-Action Letters. However, if any holder
acquires Exchange Notes in the Exchange Offer for the purpose of
distributing or participating in the distribution of the Exchange Notes
or is a broker-dealer, such holder cannot rely on the position of the
staff of the Commission enumerated in the No-Action Letters and must
comply with the registration and prospectus delivery requirements of
the Securities Act in connection with any resale transaction, unless an
exemption from registration is otherwise available. Each broker-dealer
that receives Exchange Notes for its own account in exchange for Senior
Notes, where such Senior Notes were acquired by such broker-dealer as a
result of market making activities or other trading activities, must
acknowledge that it will deliver a prospectus in connection with any
resale of such Exchange Notes. The Letter of Transmittal states that
by so acknowledging and by delivering a prospectus, a broker-dealer
will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. This Prospectus, as it may be amended
or supplemented from time to time, may be used by a broker-dealer in
connection with resales of Exchange Notes received in exchange for
Senior Notes where such Senior Notes were acquired by such broker-
dealer as a result of market-making or other trading activities.
Pursuant to the Registration Rights Agreement, the Company has agreed
to make this Prospectus, as it may be amended or supplemented from time
to time, available to brokerdealers for use in connection with any
resale for a period of up to one year after the date of this
Prospectus. See "Plan of Distribution."
Terms of the Exchange Offer
Upon the terms and subject to the conditions set forth in this
Prospectus and in the Letter of Transmittal, the Company will accept
any and all Senior Notes validly tendered and not withdrawn prior
to the Expiration Date. The Company will issue $1,000 principal
amount of Exchange Notes in exchange for each $1,000 principal
amount of outstanding Senior Notes surrendered pursuant to the Exchange
Offer. Senior Notes may be tendered only in integral multiples of
$1,000.
The form and terms of the Exchange Notes are the same as the form
and terms of the Senior Notes except that (i) the Exchange Offer will
be registered under the Securities Act and, therefore, the Exchange
Notes will not bear legends restricting the transfer thereof and (ii)
holders of the Exchange Notes will not be entitled to any of the rights
of holders of Senior Notes under the Registration Rights Agreement,
which rights will generally terminate upon the consummation of the
Exchange Offer. The Exchange Notes will evidence the same indebtedness
as the Senior Notes (which they replace) and will be issued under, and
be entitled to the benefits of, the Indenture, which also authorized
the issuance of the Senior Notes, such that both series of Notes will
be treated as a single class of debt securities under the Indenture.
As of the date of this Prospectus, $150 million in aggregate
principal amount of the Senior Notes are outstanding and registered in
the name of Cede & Co., as nominee for the Depositary. Only a
registered holder of the Senior Notes (or such holder's legal
representative or attorney-in-fact) as reflected on the records of the
Trustee under the Indenture may participate in the Exchange Offer.
There will be no fixed record date for determining registered holders
of the Senior Notes entitled to participate in the Exchange Offer.
The Company intends to conduct the Exchange Offer in accordance
with the provisions of the Registration Rights Agreement and the
applicable requirements of the Securities Act, the Exchange Act and
the rules and regulations of the Commission thereunder.
The Company shall be deemed to have accepted validly tendered
Senior Notes when, as and if the Company has given oral or written
notice thereof to the Exchange Agent. The Exchange Agent will act as
agent for the tendering holders of Senior Notes for the purposes of
receiving the Exchange Notes from the Company.
Holders who tender Senior Notes in the Exchange Offer will not be
required to pay brokerage commissions or fees or, subject to the
instructions in the Letter of Transmittal, transfer taxes with respect
to the exchange of Senior Notes pursuant to the Exchange Offer. The
Company will pay all charges and expenses, other than certain
applicable taxes described below, in connection with the Exchange
Offer. See "Fees and Expenses."
Expiration Date; Extensions; Amendments
The Exchange Offer will expire on the Expiration Date. The
term "Expiration Date" shall mean 5:00 p.m., New York City time on [25
business days after effectiveness], 1997, unless the Company, in its
sole discretion, extends the Exchange Offer, in which case the term
"Expiration Date" shall mean the latest date and time to which the
Exchange Offer is extended.
In order to extend the Exchange Offer, the Company will (i) notify
the Exchange Agent of any extension by oral or written notice, (ii)
mail to the registered holders an announcement thereof and (iii) issue
a press release or other public announcement which shall include
disclosure of the approximate number of Senior Notes deposited to date,
each prior to 9:00 a.m., New York City time, on the next business day
after the previously scheduled Expiration Date. Without limiting the
manner in which the Company may choose to make a public announcement of
any delay, extension, amendment or termination of the Exchange Offer,
the Company shall have no obligation to publish, advertise, or
otherwise communicate any such public announcement, other than by
making a timely release to an appropriate news agency.
The Company reserves the right, in its sole discretion, (i) to
delay accepting any Senior Notes, (ii) to extend the Exchange Offer or
(iii) if any conditions set forth below under "--Conditions" shall not
have been satisfied, to terminate the Exchange Offer by giving oral or
written notice of such delay, extension or termination to the Exchange
Agent. Any such delay in acceptance, extension, termination or
amendment will be followed as promptly as practicable by oral or
written notice thereof to the registered holders. If the Exchange
Offer is amended in a manner determined by the Company to constitute a
material change, the Company will promptly disclose such amendment by
means of a prospectus supplement that will be distributed to the
registered holders, and the Company will extend the Exchange Offer for
a period of five to ten business days, depending upon the significance
of the amendment and the manner of disclosure to the registered
holders, if the Exchange Offer would otherwise expire during such five
to ten business day period.
Interest on the Exchange Notes
The Exchange Notes will bear interest at a rate equal to 9 5/8% per
annum. Interest on the Exchange Notes will be payable semi-annually in
arrears on each March 1 and September 1, commencing March 1, 1998.
Holders of Exchange Notes will receive interest on March 1, 1998 from
the date of initial issuance of the Exchange Notes, plus an amount
equal to the accrued interest on the Senior Notes from the date of
initial delivery to the date of exchange thereof for Exchange Notes.
Holders of Senior Notes that are accepted for exchange will be deemed
to have waived the right to receive any interest accrued on the Senior
Notes.
Procedures for Tendering
Only a registered holder of Senior Notes may tender such Senior
Notes in the Exchange Offer. To tender in the Exchange Offer, a holder
of Senior Notes must complete, sign and date the Letter of Transmittal,
or a facsimile thereof, have the signatures thereon guaranteed if
required by the Letter of Transmittal, and mail or otherwise deliver
such Letter of Transmittal or such facsimile to the Exchange Agent at
the address set forth below under "--Exchange Agent" for receipt prior
to the Expiration Date. In addition, either (i) certificates for such
Senior Notes must be received by the Exchange Agent along with the
Letter of Transmittal, (ii) a timely confirmation of a book-entry
transfer (a "Book-Entry Confirmation") of such Senior Notes, if such
procedure is available, into the Exchange Agent's account at the
Depositary pursuant to the procedure for book-entry transfer described
below, must be received by the Exchange Agent prior to the Expiration
Date or (iii) the holder must comply with the guaranteed delivery
procedures described below.
The tender by a holder that is not withdrawn prior to the
Expiration Date will constitute an agreement between such holder and
the Company in accordance with the terms and subject to the conditions
set forth herein and in the Letter of Transmittal.
THE METHOD OF DELIVERY OF SENIOR NOTES AND THE LETTER OF
TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS
AT THE ELECTION AND RISK OF THE HOLDER. INSTEAD OF DELIVERY BY MAIL,
IT IS RECOMMENDED THAT HOLDERS USE AN OVERNIGHT OR HAND DELIVERY
SERVICE, PROPERLY INSURED. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION
DATE. NO LETTER OF TRANSMITTAL OR SENIOR NOTES SHOULD BE SENT TO THE
COMPANY. HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS,
COMMERCIAL BANKS, TRUST COMPANIES OR NOMINEES TO EFFECT THE ABOVE
TRANSACTIONS FOR SUCH HOLDERS.
Any beneficial owner(s) of the Senior Notes whose Senior Notes are
registered in the name of a broker, dealer, commercial bank, trust
company or other nominee and who wishes to tender should contact the
registered holder promptly and instruct such registered holder to
tender on such beneficial owner's behalf. If such beneficial owner
wishes to tender on such owner's own behalf, such owner must, prior to
completing and executing the Letter of Transmittal and delivering such
owner's Senior Notes, either make appropriate arrangements to register
ownership of the Senior Notes in such owner's name or obtain a properly
completed bond power from the registered holder. The transfer of
registered ownership may take considerable time.
Signatures on a Letter of Transmittal or a notice of withdrawal
described below (see "--Withdrawal of Tenders"), as the case may be,
must be guaranteed by an Eligible Institution (as defined below) unless
the Senior Notes tendered pursuant thereto are tendered (i) by a
registered holder who has not completed the box titled "Special
Delivery Instructions" on the Letter of Transmittal or (ii) for the
account of an Eligible Institution. In the event that signatures on a
Letter of Transmittal or a notice of withdrawal, as the case may be,
are required
to be guaranteed, such guarantee must be made by a member firm of a
registered national securities exchange or of the National Association
of Securities Dealers, Inc., a commercial bank or trust company having
an office or correspondent in the United States or an "eligible
guarantor institution" within the meaning of Rule 17Ad-15 under the
Exchange Act which is a member of one of the recognized signature
guarantee programs identified in the Letter of Transmittal (an
"Eligible Institution").
If the Letter of Transmittal is signed by a person other than the
registered holder of any Senior Notes listed therein, such Senior Notes
must be endorsed or accompanied by a properly completed bond power,
signed by such registered holder as such registered holder's name
appears on such Senior Notes.
If the Letter of Transmittal or any Senior Notes or bond powers
are signed by trustees, executors, administrators, guardians, attorneys
in-fact, officers of corporations or others acting in a fiduciary or
representative capacity, such persons should so indicate when signing,
and unless waived by the Company, evidence satisfactory to the Company
of their authority to so act must be submitted with the Letter of
Transmittal.
The Exchange Agent and the Depositary have confirmed that any financial
institution that is a participant in the Depositary's system may
utilize the Depositary's Automated Tender Offer Program to tender
Senior Notes.
All questions as to the validity, form, eligibility (including
time of receipt), acceptance and withdrawal of tendered Senior Notes
will be determined by the Company in its sole discretion, which
determination will be final and binding. The Company reserves the
absolute right to reject any and all Senior Notes not properly tendered
or any Senior Notes the Company's acceptance of which would, in the
opinion of counsel for the Company, be unlawful. The Company also
reserves the right to waive any defects, irregularities or conditions
of tender as to particular Senior Notes. The Company's interpretation
of the terms and conditions of the Exchange Offer (including the
instructions in the Letter of Transmittal) will be final and binding on
all parties. Unless waived, any defects or irregularities in
connection with tenders of Senior Notes must be cured within such time
as the Company shall determine. Although the Company intends to notify
holders of defects or irregularities with respect to tenders of Senior
Notes, neither the Company, the Exchange Agent nor any other person
shall incur any liability for failure to give such notification.
Tenders of Senior Notes will not be deemed to have been made until such
defects or irregularities have been cured or waived.
While the Company has no present plan to acquire any Senior Notes
that are not tendered in the Exchange Offer or to file a registration
statement to permit resales of any Senior Notes that are not tendered
pursuant to the Exchange Offer, the Company reserves the right in its
sole discretion to purchase or make offers for any Senior Notes that
remain outstanding subsequent to the Expiration Date or, as set forth
below under "--Conditions," to terminate the Exchange Offer and, to the
extent permitted by applicable law, purchase Senior Notes in the open
market, in privately negotiated transactions or otherwise. The terms
of any such purchases or offers could differ from the terms of the
Exchange Offer.
By tendering, each holder of Senior Notes will represent to the Company
that, among other things, (i) Exchange Notes to be acquired by such
holder of Senior Notes in connection with the Exchange Offer are being
acquired by such holder in the ordinary course of business of such
holder, (ii) such holder has no arrangement or understanding with any
person to participate in the distribution of the Exchange Notes, (iii)
such holder acknowledges and agrees that any person who is a broker
dealer registered under the Exchange Act or is participating in the
Exchange Offer for the purposes of distributing the Exchange Notes must
comply with the registration and prospectus delivery requirements of
the Securities Act in connection with a secondary resale transaction of
the Exchange Notes acquired by such person and cannot rely on the
position of the staff of the Commission set forth in certain no-action
letters, (iv) such holder understands that a secondary resale
transaction described in clause (iii) above and any resales of Exchange
Notes obtained by such holder in exchange for Senior Notes acquired by
such holder directly from the Company should be covered by an effective
registration statement containing the selling security holder
information required by Item 507 or Item 508, as applicable, of
Regulation S-K of the Commission and (v) such holder is not an
"affiliate," as defined in Rule 405 under the Securities Act, of the
Company. If the holder is a broker-dealer that will receive Exchange
Notes for such holder's own account in exchange for Senior Notes that
were acquired as a result of market-making activities or other trading
activities, such holder will be required to acknowledge in the Letter
of Transmittal that such holder will deliver a prospectus in connection
with any resale of such Exchange Notes; however, by so acknowledging
and by delivering a prospectus, such holder will not be deemed to admit
that it is an "underwriter" within the meaning of the Securities Act.
Return of Senior Notes
If any tendered Senior Notes are not accepted for any reason set
forth in the terms and conditions of the Exchange Offer or if Senior
Notes are withdrawn or are submitted for a greater principal amount
than the holder desires to exchange, such unaccepted, withdrawn or non
exchanged Senior Notes will be returned without expense to the
tendering holder thereof (or, in the case of Senior Notes tendered by
book-entry transfer into the Exchange Agent's account at the Depositary
pursuant to the book-entry transfer procedures described below, such
Senior Notes will be credited to an account maintained with the
Depositary) as promptly as practicable.
Book-Entry Transfer
The Exchange Agent will make a request to establish an account
with respect to the Senior Notes at the Depositary for purposes of the
Exchange Offer within two business days after the date of this
Prospectus, and any financial institution that is a participant in the
Depositary's systems may make book-entry delivery of Senior Notes by
causing the Depositary to transfer such Senior Notes into the Exchange
Agent's account at the Depositary in accordance with the Depositary's
procedures for transfer. However, although delivery of Senior Notes
may be effected through book-entry transfer at the Depositary, the
Letter of Transmittal or facsimile thereof, with any required signature
guarantees and any other required documents, must, in any case, be
transmitted to and received by the Exchange Agent at the address set
forth below under "--Exchange Agent" on or prior to the Expiration Date
or pursuant to the guaranteed delivery procedures described below.
Guaranteed Delivery Procedures
Holders who wish to tender their Senior Notes and (i) whose Senior
Notes are not immediately available or (ii) who cannot deliver their
Senior Notes, the Letter of Transmittal or any other required documents
to the Exchange Agent prior to the Expiration Date, may effect a tender
if:
(a) The tender is made through an Eligible Institution;
(b) Prior to the Expiration Date, the Exchange Agent
receives from such Eligible Institution a properly completed and
duly executed Notice of Guaranteed Delivery substantially in the
form provided by the Company (by facsimile transmission, mail or
hand delivery) setting forth the name and address of the holder,
the certificate number(s) of such Senior Notes and
the principal amount of Senior Notes tendered, stating that the
tender is being made thereby and guaranteeing that, within five
New York Stock Exchange trading days after the Expiration Date,
the Letter of Transmittal (or a facsimile thereof), together with
the certificate(s) representing the Senior Notes in proper form
for transfer or a Book-Entry Confirmation, as the case may be,
and any other documents required by the Letter of Transmittal,
will be deposited by the Eligible Institution with the Exchange
Agent; and
(c) Such properly executed Letter of Transmittal (or
facsimile thereof), as well as the certificate(s) representing
all tendered Senior Notes in proper form for transfer and all
other documents required by the Letter of Transmittal are received by
the Exchange Agent within five New York Stock Exchange trading days
after the Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed
Delivery will be sent to holders who wish to tender their Senior Notes
according to the guaranteed delivery procedures set forth above.
Withdrawal of Tenders
Except as otherwise provided herein, tenders of Senior Notes may
be withdrawn at any time prior to the Expiration Date.
To withdraw a tender of Senior Notes in the Exchange Offer, a
written or facsimile transmission notice of withdrawal must be received
by the Exchange Agent at its address set forth herein prior to the
Expiration Date. Any such notice of withdrawal must (i) specify the
name of the person having deposited the Senior Notes to be withdrawn
(the "Depositor"), (ii) identify the Senior Notes to be withdrawn
(including the certificate number or numbers and principal amount of
such Senior Notes) and (iii) be signed by the holder in the same manner
as the original signature on the Letter of Transmittal by which such
Senior Notes were tendered (including any required signature
guarantees). All questions as to the validity, form and eligibility
(including time of receipt) of such notices will be determined by the
Company in its sole discretion, whose determination shall be final and
binding on all parties. Any Senior Notes so withdrawn will be deemed
not to have been validly tendered for purposes of the Exchange Offer
and no Exchange Notes will be issued with respect thereto unless the
Senior Notes so withdrawn are validly retendered. Properly withdrawn
Senior Notes may be retendered by following one of the procedures
described above under "The Exchange Offer--Procedures for Tendering" at
any time prior to the Expiration Date.
Conditions
Notwithstanding any other term of the Exchange Offer, the Company shall
not be required to accept for exchange, or exchange the Exchange Notes
for, any Senior Notes, and may terminate the Exchange Offer as provided
herein before the acceptance of such Senior Notes, if the Exchange
Offer violates applicable law, rules or regulations or an
applicable interpretation of the staff of the Commission.
If the Company determines in its sole discretion that any of these
conditions are not satisfied, the Company may (i) refuse to accept any
Senior Notes and return all tendered Senior Notes to the tendering
holders, (ii) extend the Exchange Offer and retain all Senior Notes
tendered prior to the expiration of the Exchange Offer, subject,
however, to the rights of holders to withdraw such Senior Notes (see "-
Withdrawal of Tenders") or (iii) waive such unsatisfied conditions with
respect to the Exchange Offer and accept all properly tendered Senior
Notes that have not been withdrawn. If such waiver constitutes a
material change to the Exchange Offer, the Company will promptly
disclose such waiver by means of a prospectus supplement that will be
distributed to the registered holders of the Senior Notes, and the
Company will extend the Exchange Offer for a period of five to ten
business days, depending upon the significance of the waiver and the
manner of disclosure to the registered holders, if the Exchange Offer
would otherwise expire during such five to ten business day period.
Senior Notes Registration Rights
The Company and the Initial Purchaser of the Senior Notes entered
into the Registration Rights Agreement dated August 25, 1997, pursuant
to which the Company agreed to (i) cause to be filed with the
Commission no later than October 9, 1997, a Registration Statement
under the Securities Act relating to the Exchange Notes and the
Exchange Offer, (ii) use its best efforts to cause such Registration
Statement to become effective at the earliest possible time, but in no
event later than January 7, 1998, (iii) in connection with the
foregoing, file (A) all pre-effective amendments to such Registration
Statement as may be necessary in order to cause such Registration
Statement to become effective, (B) if applicable, a post-effective
amendment to such Registration Statement pursuant to Rule 430A under
the Securities Act and (C) cause all necessary filings in connection
with the registration and qualification of the Exchange Notes to be
made under the Blue Sky laws of such jurisdictions as are necessary to
permit the Exchange Offer to be consummated, and (iv) upon the
effectiveness of such Registration Statement, commence the Exchange
Offer. The Company shall cause the Exchange Offer Registration
Statement to be effective continuously and shall keep the Exchange
Offer open for a period of not less than the minimum period required
under applicable federal and state securities laws to consummate the
Exchange Offer; provided, however, that in no event shall such period
be less than 20 business days. The Company has agrred to cause the
Exchange Offer to comply with all applicable federal and state
securities laws. No securities other than the Exchange Notes are to be
included in the Exchange Offer Registration Statement. The Company has
agreed to use its best efforts to cause the Exchange Offer to be
consummated on the earliest practicable date after the Exchange Offer
Registration Statement has become effective, but in no event later than
30 business days thereafter. The Company has agreed to use its best
efforts to keep the Exchange Offer Registration Statement continuously
effective, supplemented and amended as required by the provisions of
the Registration Rights Agreement to the extent necessary to ensure
that it is available for resales of Senior Notes acquired by broker-
dealers for their own accounts as a result of market-making activities
or other trading activities, and to ensure that it conforms with the
requirements of the Registration Rights Agreement, the Securities Act
and the policies, rules and regulations of the Commission as announced
from time to time, for a period of one year from the date on which the
Exchange Offer Registration Statement is declared effective. In the
Registration Rights Agreement, the Company has agreed to provide
sufficient copies of the latest version of such Prospectus to broker-
dealers promptly upon request at any time during such one-year period
in order to facilitate such resales.
If (i) the Company is not required to file an Exchange Offer
Registration Statement or to consummate the Exchange Offer because the
Exchange Offer is not permitted by applicable law or Commission policy
(after the procedures set forth in the Registration Rights Agreement
have been complied with) or (ii) if any holder of Transfer Restricted
Securities (as defined in the Registration Rights Agreement) shall
notify the Company within 20 business days after the Exchange Offer
shall have been consummated (A) that such holder is prohibited by
applicable law or Commission policy from participating in the Exchange
Offer, or (B) that such holder may not resell the Exchange Notes
acquired by it in the Exchange Offer to the public without delivering a
prospectus and that the Prospectus contained in the Exchange Offer
Registration Statement is not appropriate or available for such resales
by such holder, or (C) that such holder is a broker-dealer and holds
Senior Notes acquired directly from the Company or one of its
affiliates, then the Company shall (x) cause to be filed a Shelf
Registration Statement on or prior to the Shelf Filing Deadline, which
Shelf Registration Statement shall provide for resales of all Transfer
Restricted Securities the holders of which shall have provided certain
information required pursuant to the Registration Rights Agreement; and
(y) use its best efforts to cause such Shelf Registration Statement to
be declared effective by the Commission on or before the 135th day
after the obligation to file the Shelf Registration Statement arises.
The Company shall use its best efforts to keep such Shelf Registration
Statement continuously effective, supplemented and amended as required
by certain provisions of the Registration Rights Agreement to the
extent necessary to ensure that it is available for resales of Notes by
the holders of Transfer Restricted Securities entitled to the benefit
of the Shelf Registration, and to ensure that it conforms with the
requirements of the Registration Rights Agreement, the Securities Act
and the policies, rules and regulations of the Commission as announced
from time to time, for a period of at least two years after August 25,
1997.
The Registration Rights Agreement provides that a registration
default will occur if (i) any of the registration statements required
by the Registration Rights Agreement is not filed with the Commission
on or prior to the date specified for such filing in the Registration
Rights Agreement, (ii) any of such Registration Statements has not been
declared effective by the Commission on or prior to the date specified
for such effectiveness in the Registration Rights Agreement (the
"Effectiveness Target Date"), (iii) the Exchange Offer has not been
consummated within 30 business days after the Effectiveness Target Date
with respect to the Exchange Offer Registration Statement or (iv) any
registration statement required by the Registration Rights Agreement is
filed and declared effective but shall thereafter cease to be effective
or fail to be usable in connection with resales of Transfer Restricted
Securities during the time period specified by the Registration Rights
Agreement without being succeeded immediately by a post-effective
amendment to such Registration Statement that cures such failure and
that is itself immediately declared effective (each such event referred
to in clauses (i) through (iv), a "Registration Default").
The Registration Rights Agreement provides that in the event of a
Registration Default, the Company is required to pay as liquidated
damages ("Liquidated Damages") to each holder of Transfer Restricted
Securities (as defined in the Registration Rights Agreement), with
respect to the first 90-day period immediately following the occurrence
of such Registration Default, in an amount equal to $.05 per week per
$1,000 principal amount of Transfer Restricted Securities held by such
holder for each week or portion thereof that the Registration Default
continues. The amount of the liquidated damages shall increase by an
additional $.05 per week per $1,000 in principal amount of Transfer
Restricted Securities with respect to each subsequent 90-day period
until all Registration Defaults have been cured, up to a maximum amount
of Liquidated Damages of $.30 per week per $1,000 principal amount of
Transfer Restricted Securities. All accrued Liquidated Damages shall
be paid to record holders by the Company by wire transfer of
immediately available funds or by federal funds check on each damages
payment date, as provided in the Indenture. Following the cure of all
Registration Defaults relating to any particular Transfer Restricted
Securities, the accrual of Liquidated Damages with respect to such
Transfer Restricted Securities will cease. All obligations of the
Company set forth in this paragraph that are outstanding with respect
to any Transfer Restricted Security at the time such security ceases to
be a Transfer Restricted Security shall survive until such time as all
such obligations with respect to such security shall have been
satisfied in full. The filing and effectiveness of the Registration
Statement of which this Prospectus is a part and the consummation of
the Exchange Offer will eliminate all rights of the holders of Senior
Notes eligible to participate in the Exchange Offer to receive damages
that would have been payable if such actions had not occurred.
Termination of Certain Rights
All rights under the Registration Rights Agreement (including
registration rights) of holders of the Senior Notes eligible to
participate in the Exchange Offer will terminate upon consummation of
the Exchange Offer except with respect to the Company's continuing
obligations (i) to indemnify such holders (including any broker-
dealers) and certain parties related to such holders against certain
liabilities (including liabilities under the Securities Act), (ii) to
provide, upon the request of any holder of a transfer-restricted Senior
Note, the information required by Rule 144A(d)(4) under the Securities
Act in order to permit resales of such Senior Notes pursuant to Rule
144A, (iii) to use its best efforts to keep the Registration Statement
effective to the extent necessary to ensure that it is available for
resales of transfer-restricted Senior Notes by broker-dealers for a
period of up to one year from the date of this Prospectus, (iv) to
provide copies of the latest version of the Prospectus to broker-
dealers upon their request for a period of up to one year from the date
of this Prospectus and (v) to pay Liquidated Damages pursuant to the
Registration Rights Agreement accruing prior to the effectiveness of
the Exchange Offer Registration Statement.
Exchange Agent
The Bank of New York has been appointed as Exchange Agent of the
Exchange Offer. Questions and requests for assistance, requests for
additional copies of this Prospectus or of the Letter of Transmittal
and requests for Notice of Guaranteed Delivery should be directed to
the Exchange Agent addressed as follows:
By Registered or Certified Mail: By
Overnight Delivery:
Bank of New York Bank of New York
101 Barclay Street, 7th Floor 101 Barclay
Street
New York, New York 10286 Attn: 7th
Floor Attn: Reorganization Section
Corporate Trust & Agencies Service Window
New York, New York 10286
Attn: Reorganization
Section
By Hand Delivery: By
Facsimile:
Bank of New York (212) 815-6339
101 Barclay Street
Attn: 7th Floor Confirm by
Telephone: Corporate Trust & Agencies Service Window
New York, New York 10286 (212) 815-2742
Attn: Reorganization Section
Fees and Expenses
The expenses of soliciting tenders will be borne by the Company.
The principal solicitation is being made by mail; however, additional
solicitation may be made by telegraph, telephone or in person by
officers and regular employees of the Company and its affiliates.
The Company has not retained any dealer-manager in connection with
the Exchange Offer and will not make any payments to brokers, dealers
or others soliciting acceptances of the Exchange Offer. The Company,
however, will pay the Exchange Agent reasonable and customary fees for
its services and will reimburse it for its reasonable out-of-pocket
expenses in connection therewith.
The cash expenses to be incurred in connection with the Exchange
Offer will be paid by the Company and are estimated in the aggregate to
be approximately [$209,000]. Such expenses include registration
fees, fees and expenses of the Exchange Agent and the Trustee,
accounting and legal fees and printing costs, among others.
The Company will pay all transfer taxes, if any, applicable to the
exchange of Senior Notes pursuant to the Exchange Offer. If, however,
a transfer tax is imposed for any reason other than the exchange of the
Senior Notes pursuant to the Exchange Offer, then the amount of any
such transfer taxes (whether imposed on the registered holder or any
other persons) will be payable by the tendering holder. If
satisfactory evidence of payment of such taxes or exemption therefrom
is not submitted with the Letter of Transmittal, the amount of such
transfer taxes will be billed directly to such tendering holder.
Consequence of Failures to Exchange
Participation in the Exchange Offer is voluntary. Holders of the
Senior Notes are urged to consult their financial and tax advisors in
making their own decisions on what action to take.
The Senior Notes that are not exchanged for the Exchange Notes
pursuant to the Exchange Offer will remain restricted securities.
Accordingly, such Senior Notes may be resold only (i) to a person whom
the seller reasonably believes is a qualified institutional buyer as
defined in Rule 144A of the Securities Act in a transaction meeting the
requirements of Rule 144A of the Securities Act, (ii) in a transaction
meeting the requirements of Rule 144 under the Securities Act, (iii)
outside the United States to a foreign person in a transaction meeting
the requirements of Rule 904 under the Securities Act, (iv) in
accordance with another exemption from the registration requirements of
the Securities Act (and based upon an opinion of counsel if the Company
so requests), (v) to the Company or (vi) pursuant to an effective
registration statement and, in each case, in accordance with any
applicable securities laws of any state of the United States or any
other applicable jurisdiction.
Accounting Treatment
For accounting purposes, the Company will recognize no gain or
loss as a result of the Exchange Offer. The expenses of the Exchange
Offer will be amortized over the term of the Exchange Notes.
Appraisal Rights
HOLDERS OF NOTES WILL NOT HAVE DISSENTERS' RIGHTS OR APPRAISAL RIGHTS
IN CONNECTION WITH THE EXCHANGE OFFER.
DESCRIPTION OF EXCHANGE NOTES
General
The Exchange Notes, formally titled 9 5/8% Senior Notes due 2007, Series
B, will be issued pursuant to the Indenture by and among the
Company, the Guarantor and The Bank of New York, as Trustee. The terms
of the Exchange Notes are identical in all respects to the terms of the
Senior Notes for which they may be exchanged pursuant to this Exchange
Offer, except that (i) the Exchange Offer will have been registered
under the Securities Act, and, therefore, the Exchange Notes will not
bear legends restricting the transfer thereof and (ii) the holders of
the Exchange Notes will generally not be entitled to registration
rights under the Registration Rights Agreement. The Exchange Notes will
evidence the same debt as the Senior Notes. The terms of the Exchange
Notes include those stated in the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act of 1939 (the "Trust
Indenture Act"). The Exchange Notes are subject to all such terms,
and holders of Exchange Notes are referred to the Indenture and the
Trust Indenture Act for a statement thereof. The following summary of
certain provisions of the Indenture does not purport to be complete and
is qualified in its entirety by reference to the Indenture, including
the definitions therein of certain terms used below. A copy of the
Indenture is available as set forth above under "-- Additional
Information." The definitions of certain terms used in the following
Description of Exchange Notes are set forth below under "-- Certain
Definitions." For purposes of this Description of Exchange Notes, the
term "Company" refers only to Delta Mills, Inc. and not to any of its
Subsidiaries.
The Exchange Notes will be general unsecured obligations of the Company
and will rank pari passu in right of payment with all current and
future unsecured unsubordinated Indebtedness of the Company. However,
the Exchange Notes will be effectively subordinated to secured
Indebtedness of the Company and all of the Indebtedness of the
Company's Subsidiaries. The Company is a borrower and Delta Mills
Marketing, Inc., the Company's only existing Subsidiary, is a
guarantor, under the New Credit Facility and all borrowings under the
New Credit Facility are secured by a first priority Lien on the
accounts receivable and inventory (and related property) (together with
the proceeds thereof) of the Company and its Subsidiary and on the
capital stock of the Company and its subsidiaries. As of August 25,
1997, after the Refinancing, approximately $58.7 million (including
amounts under letters of credit) was outstanding under the New Credit
Facility and an additional amount of up to approximately $41.3 million
was available for borrowing thereunder. See "Description of Other
Indebtedness." The Indenture permits additional borrowings by the
Company and its Subsidiaries under the New Credit Facility and other
credit facilities in the future, subject to certain restrictions.
Principal, Maturity and Interest
The Notes are limited in aggregate principal amount to $150.0
million and will mature on September 1, 2007. Interest on the Notes
will accrue at the rate of 9 5/8% per annum and will be payable semi-
annually in arrears on March 1 and September 1, commencing on March 1,
1998, to holders of record on the immediately preceding February 15 and
August
15. Interest on the Notes will accrue from the most recent date to
which interest has been paid or, if no interest has been paid, from the
date of original issuance. Interest will be computed on the basis of a
360-day year comprised of twelve 30-day months. Principal of and
premium, if any, interest and Liquidated Damages, if any, on the Notes
will be payable at the office or agency of the Company maintained for
such purpose within the City and State of New York or, at the option of
the Company, payment of interest and Liquidated Damages, if any, may be
made by check mailed to the holders of the Notes at their respective
addresses set forth in the register of holders of Notes; provided that
all payments with respect to Notes the holders of which have given wire
transfer instructions to the Company will be required to be made by
wire transfer of immediately available funds to the accounts specified
by the holders thereof. Until otherwise designated by the Company, the
Company's office or agency in New York will be the office of the
Trustee maintained for such purpose. The Exchange Notes will be issued
in denominations of $1,000 and integral multiples thereof.
Guarantees
The Company's payment obligations under the Notes are jointly and
severally guaranteed (the "Subsidiary Guarantees") by the Guarantors on
a senior unsecured basis. The obligations of each Guarantor under its
Guarantee are limited so as not to constitute a fraudulent conveyance
under applicable law. See "Risk Factors -- Fraudulent Conveyance
Statutes."
The Indenture provides that no Guarantor may consolidate with or
merge with or into (whether or not such Guarantor is the surviving
Person) another corporation, Person or entity whether or not affiliated
with such Guarantor unless (i) subject to the provisions of the
following paragraph, the Person formed by or surviving any such
consolidation or merger (if other than such Guarantor) assumes all the
obligations of such Guarantor, pursuant to a supplemental indenture in
form and substance reasonably satisfactory to the Trustee, under the
Notes and the Indenture, and (ii) immediately after giving effect to
such transaction, no Default or Event of Default exists.
The Indenture provides that in the event of a sale or other disposition
of all of the assets of any Guarantor, by way of merger,
consolidation or otherwise, or a sale or other disposition of all of
the Capital Stock of any Guarantor, then such Guarantor (in the event
of a sale or other disposition, by way of such a merger, consolidation
or otherwise, of all of the Capital Stock of such Guarantor) or the
Person acquiring the property (in the event of a sale or other
disposition of all of the assets of such Guarantor) will be released
and relieved of any obligations under its Subsidiary Guarantee;
provided that the Net Proceeds of such sale or other disposition are
applied in accordance with the applicable provisions of the Indenture.
See "-- Repurchase at the Option of Holders -- Asset Sales."
Optional Redemption
The Notes are not redeemable at the Company's option prior to September
1, 2002. Thereafter, the Notes will be subject to redemption at the
option of the Company, in whole or in part, upon not less than 30 nor
more than 60 days' notice, at the redemption prices (expressed as
percentages of principal amount) set forth below, plus accrued and
unpaid interest and Liquidated Damages, if any, thereon to the
applicable redemption date, if redeemed during the twelve-month period
beginning on September 1 of the years indicated below:
Year Percentage
2002 104.8125%
2003 103.2083%
2004 101.6041%
2005 and thereafter 100.0000%
Selection and Notice
If less than all of the Notes are to be redeemed at any time, selection
of Notes for redemption will be made by the Trustee in compliance with
the requirements of the principal national securities exchange, if any,
on which the Notes are listed, or, if the Notes are not so listed, on a
pro rata basis, by lot or by such method as the Trustee shall deem fair
and appropriate; provided that no Notes of
$1,000 or less shall be redeemed in part. Notices of redemption shall
be mailed by first class mail at least 30 but not more than 60 days
before the redemption date to each holder of Notes to be redeemed at
its registered address. If any Note is to be redeemed in part only, the
notice of redemption that relates to such Note shall state the portion
of the principal amount thereof to be redeemed. A new Note in principal
amount equal to the unredeemed portion thereof will be issued in the
name of the holder thereof upon cancellation of the original Note. On
and after the redemption date, interest ceases to accrue on Notes or
portions thereof called for redemption.
Mandatory Redemption
Except as set forth below under "-- Repurchase at the Option of
Holders," the Company is not required to make mandatory redemption or
sinking fund payments with respect to the Notes.
Repurchase at the Option of Holders
Change of Control
Upon the occurrence of a Change of Control, each holder of Notes
will have the right to require the Company to repurchase all or any
part (equal to $1,000 or an integral multiple thereof) of such holder's
Notes pursuant to the offer described below (the "Change of Control
Offer") at an offer price in cash equal to 101% of the aggregate
principal amount thereof plus accrued and unpaid interest and
Liquidated Damages, if any, thereon to the date of purchase (the
"Change of Control Payment"). Within ten days following any Change of
Control, the Company will mail a notice to each holder describing the
transaction or transactions that constitute the Change of Control and
offering to repurchase Notes on the date specified in such notice,
which date shall be no earlier than 30 days and no later than 60 days
from the date such notice is mailed (the "Change of Control Payment
Date"), pursuant to the procedures required by the Indenture and
described in such notice. The Company will comply with the requirements
of Rule 14e-1 under the Exchange Act and any other securities laws and
regulations thereunder to the extent such laws and regulations are
applicable in connection with the repurchase of the Notes as a result
of a Change of Control.
On the Change of Control Payment Date, the Company will, to the
extent lawful, (i) accept for payment all Notes or portions thereof
properly tendered pursuant to the Change of Control Offer, (ii) deposit
with the Paying Agent an amount equal to the Change of Control Payment
in respect of all Notes or portions thereof so tendered and (iii)
deliver or cause to be delivered to the Trustee the Notes so accepted
together with an Officers' Certificate stating the aggregate principal
amount of Notes or portions thereof being purchased by the Company. The
Paying Agent will promptly mail to each holder of Notes so tendered the
Change of Control Payment for such Notes, and the Trustee will promptly
authenticate and mail (or cause to be transferred by book entry) to
each
holder a new Note equal in principal amount to any unpurchased portion
of the Notes surrendered, if any; provided that each such new Note will
be in a principal amount of $1,000 or an integral multiple thereof. The
Company will publicly announce the results of the Change of Control
Offer on or as soon as practicable after the Change of Control Payment
Date.
The Change of Control provisions described above will be
applicable whether or not any other provisions of the Indenture are
applicable. Except as described above with respect to a Change of
Control, the Indenture does not contain provisions that permit the
holders of the Notes to require that the Company repurchase or redeem
the Notes in the event of a takeover, recapitalization or similar
transaction.
The New Credit Facility provides that certain change of control events
with respect to the Company would constitute a default
thereunder. Any future credit agreements or other agreements relating
to Indebtedness to which the Company becomes a party may contain
similar restrictions and provisions. There can be no assurance that the
Company would be able to obtain the consent of its lenders to purchase
the Notes or have sufficient funds available to finance such purchase
of the Notes. In such case, the Company's failure to purchase tendered
Notes would constitute an Event of Default under the Indenture which
would, in turn, constitute a default under the New Credit Facility. See
"Risk Factors -- Repurchase of Notes upon a Change of Control."
The definition of Change of Control includes a phrase relating to
the sale, lease, transfer, conveyance or other disposition of "all or
substantially all" of the assets of the Company and its Subsidiaries
taken as a whole. Although there is a developing body of case law
interpreting the phrase "substantially all," there is no precise
established definition of the phrase under applicable law. Accordingly,
the ability of a holder of Notes to require the Company to repurchase
such Notes as a result of a sale, lease, transfer, conveyance or other
disposition of less than all of the assets of the Company and its
Subsidiaries taken as a whole to another Person or group may be
uncertain.
The Company will not be required to make a Change of Control Offer upon
a Change of Control if a third party makes the Change of Control Offer
in the manner, at the times and otherwise in compliance with the
requirements set forth in the Indenture applicable to a Change of
Control Offer made by the Company and purchases all Notes validly
tendered and not withdrawn under such Change of Control Offer.
Asset Sales
The Indenture provides that the Company will not, and will not
permit any of its Subsidiaries to, consummate an Asset Sale unless (i)
the Company (or the Subsidiary, as the case may be) receives
consideration at the time of such Asset Sale at least equal to the fair
market value (evidenced by a resolution of the Board of Directors set
forth in an Officers' Certificate delivered to the Trustee) of the
assets sold or otherwise disposed of and (ii) at least 75% (100% in the
case of lease payments) of the consideration therefor received by the
Company or such Subsidiary is in the form of cash or Cash Equivalents;
provided that the amount of (a) any liabilities (as shown on the
Company's, or such Subsidiary's, most recent balance sheet) of the
Company or any Subsidiary (other than contingent liabilities and
liabilities that are by their terms subordinated to the Notes or any
guarantee thereof) that are assumed by the transferee of any such
assets pursuant to a customary novation agreement that releases the
Company or such Subsidiary from further liability and (b) any notes or
other obligations received by the Company or any such Subsidiary from
such
transferee that are immediately converted by the Company or such
Subsidiary into cash (to the extent of the cash received), shall be
deemed to be cash for purposes of this provision.
Within 365 days after the receipt of any Net Proceeds from an
Asset Sale, the Company may apply such Net Proceeds, at its option, to
(i) permanently reduce Indebtedness under the New Credit Facility;
provided that such permanent reduction is accompanied by a
corresponding reduction in the lending commitments under the New Credit
Facility, (ii) acquire another business or other long-term assets, in
each case, in, or used or useful in, the same or a similar line of
business as the Company or any of its Subsidiaries was engaged in on
the date of the Indenture or any reasonable extension or expansion
thereof (including the Capital Stock of another Person engaged in such
business; provided such other Person is, or immediately after and
giving effect to such acquisition shall become, a Wholly-Owned
Subsidiary of the Company (other than a Receivables Subsidiary)), or
(iii) reimburse the Company or any of its Subsidiaries for expenditures
made, and costs incurred, to repair, rebuild, replace or restore
property subject to loss, damage or taking to the extent that the Net
Proceeds consist of insurance or condemnation or similar proceeds
received on account of such loss, damage or taking. Pending the final
application of any such Net Proceeds, the Company may temporarily
reduce revolving Indebtedness under the New Credit Facility or
otherwise invest such Net Proceeds in cash or Cash Equivalents. Any Net
Proceeds from Asset Sales that are not applied as provided in the first
sentence of this paragraph will be deemed to constitute "Excess
Proceeds." When the aggregate amount of Excess Proceeds exceeds $5.0
million, the Company will be required to make an offer to all holders
of Notes (an "Asset Sale Offer") to purchase the maximum principal
amount (that is an integral multiple of $1,000) of Notes that may be
purchased out of the Excess Proceeds, at an offer price in cash in an
amount equal to 100% of the principal amount thereof plus accrued and
unpaid interest and Liquidated Damages, if any, thereon to the date of
purchase, in accordance with the procedures set forth in the Indenture.
To the extent that the aggregate amount of Notes tendered pursuant to
an Asset Sale Offer is less than the Excess Proceeds, the Company or
such Subsidiary may use any remaining Excess Proceeds for general
corporate purposes. If the aggregate principal amount of Notes
surrendered by holders thereof exceeds the amount of Excess Proceeds,
the Trustee shall select the Notes to be purchased on a pro rata basis
(with such adjustments as may be deemed appropriate by the Company so
that only Notes in denominations of $1,000, or integral multiples
thereof, shall be purchased). Upon completion of such offer to
purchase, the amount of Excess Proceeds shall be reset at zero.
Notwithstanding the foregoing, the Company and its Subsidiaries
will be permitted to consummate one or more Asset Sales with respect to
assets or properties with an aggregate fair market value (evidenced by
a resolution of the Board of Directors set forth in an Officers'
Certificate delivered to the Trustee) not in excess of $5.0 million
with respect to all such Asset Sales made subsequent to the date of the
Indenture without complying with the provisions of the preceding
paragraphs.
Certain Covenants
Restricted Payments
The Indenture provides that the Company will not, and will not
permit any of its Subsidiaries to, directly or indirectly: (i) declare
or pay any dividend or make any other payment or distribution of any
kind or character on account of the Equity Interests of the Company or
any of its Subsidiaries (including, without limitation, any payment in
connection with any merger or consolidation involving the Company or
any of its Subsidiaries) or to the direct or indirect holders of the
Equity
Interests of the Company or any of its Subsidiaries in their capacity
as such, except (a) dividends or distributions payable solely in Equity
Interests (other than Disqualified Stock) of the Company or (b)
dividends or distributions payable to the Company or any Wholly-Owned
Subsidiary of the Company; (ii) purchase, redeem or otherwise acquire
or retire for value any Equity Interests of the Company, any Subsidiary
of the Company or any direct or indirect parent of the Company, except
any such Equity Interests owned by the Company or any Wholly-Owned
Subsidiary of the Company; (iii) make any principal payment on, or
purchase, redeem, defease or otherwise acquire or retire for value, any
Indebtedness that is subordinated to the Notes prior to the Stated
Maturity of such Indebtedness; or (iv) make any Restricted Investment
(all such payments and other actions set forth in clauses (i) through
(iv) above being collectively referred to as "Restricted Payments"),
unless, at the time of and after giving effect to such Restricted
Payment:
(a) no Default or Event of Default shall have occurred and
be continuing or would occur as a consequence thereof;
(b) the Company would, at the time of such Restricted
Payment and after giving pro forma effect thereto as if such Restricted
Payment had been made at the beginning of the applicable four-quarter
period, have been permitted to incur at least $1.00 of additional
Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth
in the first paragraph of the covenant described below under the
caption "-- Incurrence of Indebtedness and Issuance of Preferred
Stock;" and
(c) such Restricted Payment, together with the aggregate of
all other Restricted Payments declared or made by the Company and its
Subsidiaries after the date of the Indenture (excluding Restricted
Payments permitted by clauses (ii), (iii), (iv) and (v) of the next
succeeding paragraph), is less than the sum of (1) $12.5 million, plus
(2) 50% of the Consolidated Net Income of the Company for the period
(taken as one accounting period) from the beginning of the fiscal
quarter commencing June 29, 1997 to the end of the Company's most
recently ended fiscal quarter for which internal financial statements
are available at the time of such Restricted Payment (or, if such
Consolidated Net Income for such period is a deficit, less 100% of such
deficit), plus (3) 100% of the aggregate cash portion of the Net
Proceeds received by the Company from a contribution to its common
equity capital or the issue or sale since the date of the Indenture of
Equity Interests of the Company or of debt securities of the Company
that have been converted into such Equity Interests (other than Equity
Interests (or convertible debt securities) sold to a Subsidiary of the
Company and other than Disqualified Stock or debt securities that have
been converted into Disqualified Stock), plus (4) to the extent that
any Restricted Investment that was made after the date of the Indenture
is sold for cash or otherwise liquidated or repaid for cash, the lesser
of (A) the cash return of capital with respect to such Restricted
Investment (less the cost of disposition, if any) and (B) the initial
amount of such Restricted Investment.
The foregoing provisions will not prohibit (i) the payment of any
dividend within 60 days after the date of declaration thereof, if at
said date of declaration such payment would have complied with the
provisions of the Indenture; (ii) the making of any Restricted
Investment in exchange for, or out of the proceeds of, the
substantially concurrent sale (other than to a Subsidiary of the
Company) of Equity Interests of the Company (other than any
Disqualified Stock); provided that the amount of any such net cash
proceeds that are utilized for any such Restricted Investment,
redemption, repurchase, retirement or other acquisition shall be
excluded from clause (3) of the preceding paragraph
(c); (iii) the redemption, repurchase, retirement or other acquisition
of any Equity Interests of the Company in exchange for, or out of the
proceeds of, the substantially concurrent sale (other than to a
Subsidiary of the Company) of other Equity Interests of the Company
(other than Disqualified Stock); provided that any net cash proceeds
that are utilized for such redemption, repurchase, retirement or other
acquisition, and any Net Income resulting therefrom, shall be excluded
from clauses (3) and (2) of the preceding paragraph (c) respectively;
(iv) the defeasance, redemption, repayment or repurchase of
subordinated Indebtedness in exchange for, or out of the net cash
proceeds from, an incurrence of Permitted Refinancing Debt or the
substantially concurrent sale (other than to a Subsidiary of the
Company) of Equity Interests of the Company (other than Disqualified
Stock); provided that the amount of any such net cash proceeds that are
utilized for any such redemption, repayment, repurchase, retirement or
other acquisition shall be excluded from clause (3) of the preceding
paragraph (c); and (v) the repayment by the Company on the Issue Date
of up to $219.0 million in aggregate principal amount of Indebtedness
owed by the Company to Delta Woodside or any Subsidiary thereof;
provided, that upon such repayment, all remaining Indebtedness owed by
the Company to Delta Woodside or any Subsidiary thereof shall be
contributed to the Company's capital and thereby cancelled (for a
description of the transaction described in this clause, see "Use of
Proceeds").
The amount of all Restricted Payments (other than cash) shall be
the fair market value (evidenced by a resolution of the Board of
Directors set forth in an Officers' Certificate delivered to the
Trustee) on the date of the Restricted Payment of the asset(s) proposed
to be transferred by the Company or such Subsidiary, as the case may
be, pursuant to the Restricted Payment. Not later than the date of
making any Restricted Payment, the Company shall deliver to the Trustee
an Officers' Certificate stating that such Restricted Payment is
permitted and setting forth the basis upon which the calculations
required by this "-- Restricted Payments" covenant were computed, which
calculations may be based upon the Company's latest available financial
statements.
Incurrence of Indebtedness and Issuance of Preferred Stock
The Indenture provides that the Company will not, and will not
permit any of its Subsidiaries to, directly or indirectly, create,
incur, issue, assume, guarantee or otherwise become directly or
indirectly liable, contingently or otherwise, with respect to
(collectively, "incur") any Indebtedness (including Acquired Debt) and
that the Company will not issue any Disqualified Stock and will not
permit any of its Subsidiaries to issue any shares of preferred stock;
provided, however, that the Company may incur Indebtedness (including
Acquired Debt) or issue shares of Disqualified Stock and a Guarantor
may incur Acquired Debt, in each case if (i) the Fixed Charge Coverage
Ratio for the Company's most recently ended four full fiscal quarters
(taken as one accounting period) for which internal financial
statements are available immediately preceding the date on which such
additional Indebtedness is incurred or such Disqualified Stock is
issued would have been at least 2.0 to 1, determined on a pro forma
basis (including a pro forma application of the Net Proceeds
therefrom), as if the additional Indebtedness had been incurred, or the
Disqualified Stock had been issued, as the case may be, at the
beginning of such four-quarter period and (ii) no Default or Event of
Default has occurred and is continuing or would occur as a consequence
thereof;
The foregoing provisions will not apply to:
(i) the incurrence by the Company and/or its Subsidiaries of
Indebtedness under the New Credit Facility in an aggregate
principal amount at any time outstanding (with letters of credit
being deemed to have a principal amount equal to the maximum
potential liability of the Company and its Subsidiaries
thereunder) not to exceed the greater of (x) $100.0 million and
(y) the sum of 85% of Eligible Receivables and 60% of Eligible
Inventory, less in each case the aggregate amount of all Net
Proceeds of Asset Sales applied to permanently reduce the
outstanding amount of such Indebtedness and the lending
commitments with respect thereto pursuant to the covenant
described above under the caption "-- Repurchase at the Option
of Holders -- Asset Sales;"
(ii) the incurrence by the Company of Indebtedness
represented by the Notes and the incurrence by the Guarantors of
Indebtedness represented by the Subsidiary Guarantees;
(iii) the incurrence by the Company or any of its
Subsidiaries of Indebtedness represented by Capital Lease
Obligations (whether or not incurred pursuant to sale and
leaseback transactions), mortgage financing or purchase money
obligations, in each case incurred for the purpose of financing
all or any part of the purchase price or cost of construction or
improvement of property, plant or equipment used in the business
of the Company or such Subsidiary, in an aggregate principal
amount not to exceed $5.0 million at any time outstanding;
(iv) the incurrence by the Company or any of its
Subsidiaries of Permitted Refinancing Debt;
(v) the incurrence by the Company or any of its Wholly-Owned
Subsidiaries (other than a Receivables Subsidiary) of
intercompany Indebtedness between or among the Company and any of
its WhollyOwned Subsidiaries (other than a Receivables
Subsidiary) or between or among any of the Company's Wholly-Owned
Subsidiaries (other than a Receivables Subsidiary); provided,
however, that (a) if the Company is the obligor on such
Indebtedness, such Indebtedness is unsecured and expressly
subordinate to the payment in full of all Obligations with
respect to the Notes and (b)(1) any subsequent issuance or
transfer of Equity Interests that results in any such
Indebtedness being held by a Person other than the Company or a
Wholly-Owned Subsidiary (other than a Receivables Subsidiary) and
(2) any sale or other transfer of any such Indebtedness to a
Person that is not either the Company or a Wholly-Owned
Subsidiary (other than a Receivables Subsidiary) shall be deemed,
in each case, to constitute an incurrence of such Indebtedness by
the Company or such Subsidiary, as the case may be;
(vi) the incurrence by the Company of Hedging Obligations
that are incurred for the purpose of fixing or hedging interest
rate risk with respect to any floating rate Indebtedness that is
permitted by the terms of the Indenture to be incurred;
(vii) Indebtedness of a Receivables Subsidiary that is not
recourse to the Company or any other Subsidiary of the Company
(other than Standard Securitization Undertakings) incurred in
connection with a Qualified Receivables Transaction; and
(viii) the incurrence by the Company and its Subsidiaries of
Indebtedness (in addition to Indebtedness permitted by any other
clause of this paragraph) in an aggregate principal amount (or
accreted value, as applicable) at any time outstanding not to
exceed $10.0 million.
Liens
The Indenture provides that the Company will not, and will not
permit any of its Subsidiaries to, directly or indirectly,
create,
incur, assume or suffer to exist any Lien securing Indebtedness on any
asset (including Capital Stock of any Subsidiary of the Company) now
owned or hereafter acquired, or any income or profits therefrom, or
assign or convey any right to receive income therefrom, except
Permitted Liens unless all payments due under the Indenture and the
Notes are secured on an equal and ratable basis with the Indebtedness
so secured until such time as such is no longer secured by a Lien;
provided that if such Indebtedness is by its terms expressly
subordinated to the Notes or any Subsidiary Guarantee the Lien securing
such Indebtedness shall be subordinate and junior to the Lien securing
the Notes and the Subsidiary Guarantees with the same relative priority
as such subordinate or junior Indebtedness shall have with respect to
the Notes and the Subsidiary Guarantees.
Dividend and Other Payment Restrictions Affecting Subsidiaries
The Indenture provides 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 or become effective any encumbrance
or restriction of any kind on the ability of any Subsidiary to (i) pay
dividends or make any other distributions to the Company or any of its
Subsidiaries on its Capital Stock or with respect to any other interest
or participation in, or measured by, its profits; (ii) pay any
Indebtedness or other obligation owed to the Company or any of its
Subsidiaries; (iii) make loans or advances to the Company or any of its
Subsidiaries; (iv) sell, lease or transfer any of its properties or
assets to the Company or any of its Subsidiaries; or (v) guarantee the
obligations of the Company evidenced by the Notes or any renewals,
refinancings, exchanges, refundings or extensions thereof, except for
such encumbrances or restrictions existing under or by reason of (a)
applicable law, (b) any instrument governing Indebtedness or Capital
Stock of a Person or any property or other asset acquired by the
Company or any of its Subsidiaries as in effect at the time of such
acquisition (except to the extent such Indebtedness was incurred in
connection with or in contemplation of such acquisition), which
encumbrance or restriction is not applicable to any Person, or the
properties or assets of any Person, other than the Person, or the
property or assets of the Person, so acquired, (c) customary non-
assignment provisions in leases entered into in the ordinary course of
business and consistent with past practices, (d) purchase money
obligations for property acquired in the ordinary course of business
that impose restrictions of the nature described in clause (iv) above
on the property so acquired, (e) Permitted Refinancing Debt; provided
that the restrictions contained in the agreements governing such
Permitted Refinancing Debt are no more restrictive than those contained
in the agreements governing the Indebtedness being refinanced, or (f)
any Purchase Money Note, or other Indebtedness or contractual
requirements incurred with respect to a Qualified Receivables
Transaction relating to a Receivables Subsidiary.
Merger, Consolidation, or Sale of Assets
The Indenture provides that the Company will not, and will not
permit any of its Subsidiaries to, consolidate or merge with or into,
or sell, assign, transfer, lease, convey or otherwise dispose of all or
substantially all of the properties or assets of the Company and its
Subsidiaries (determined on a consolidated basis for the Company and
its Subsidiaries taken as a whole) in one or more related transactions,
to another Person unless: (i) either (a) the Company, in the case of a
transaction involving the Company, or a Subsidiary which is a party to
the transaction, in the case of a transaction involving a Subsidiary of
the Company, is the surviving corporation or (b) in the case of a
transaction involving the Company, the Person formed by or surviving
any such consolidation or merger (if other than the Company) or to
which such sale, assignment, transfer, lease, conveyance or other
disposition shall have been made is a corporation organized or existing
under the
laws of the United States, any state thereof or the District of
Columbia and expressly assumes all of the obligations of the Company
under the Notes and the Indenture pursuant to a supplemental indenture
in a form reasonably satisfactory to the Trustee; (ii) immediately
after such transaction no Default or Event of Default exists; (iii) in
the case of a transaction involving the Company (except in the case of
a merger of the Company with or into a Wholly-Owned Subsidiary of the
Company (other than a Receivables Subsidiary)), the Person formed by or
surviving any such consolidation or merger (if other than the Company),
or to which such sale, assignment, transfer, lease, conveyance or other
disposition shall have been made, (a) will have a Consolidated Net
Worth immediately after the transaction equal to or greater than the
Consolidated Net Worth of the Company immediately preceding the
transaction and (b) will, at the time of such transaction and after
giving pro forma effect thereto as if such transaction had occurred at
the beginning of the applicable four-quarter period, be permitted to
incur at least $1.00 of additional Indebtedness pursuant to the Fixed
Charge Coverage Ratio test set forth in the first paragraph of the
covenant described above under the caption "-- Incurrence of
Indebtedness and Issuance of Preferred Stock;" (iv) if, as a result of
any such transaction, property or assets of the Company or any
Subsidiary of the Company would become subject to a Lien securing
Indebtedness not excepted from the covenant described above under "--
Liens," the Company or its successor, as the case may be, shall have
otherwise complied with such covenant described above under "-- Liens;"
and (v) the Company shall have delivered to the Trustee an Officers'
Certificate and, except in the case of a merger of a Subsidiary of the
Company into the Company or into a Wholly-Owned Subsidiary of the
Company, an opinion of counsel, each stating that such consolidation,
merger, conveyance, lease or disposition and any supplemental indenture
with respect thereto, comply with all of the terms of this covenant and
that all conditions precedent provided for in this covenant relating to
such transaction, or series of transactions, have been complied with.
For the purposes of the foregoing, the transfer (by sale, lease,
assignment or otherwise, in a single transaction or series of
transactions) of all or substantially all of the properties or assets
of one or more Subsidiaries of the Company, the Capital Stock of which
constitutes all or substantially all of the properties or assets of the
Company, shall be deemed to be the transfer of all or substantially all
of the properties and assets of the Company.
Transactions with Affiliates
The Indenture provides that the Company will not, and will not
permit any of its Subsidiaries to, make any payment to, or sell, lease,
transfer or otherwise dispose of any of its properties or assets to, or
purchase any property or assets from, or enter into or make or amend
any contract, agreement, understanding, loan, advance or guarantee
with, or for the benefit of, any Affiliate (each of the foregoing, an
"Affiliate Transaction"), unless (i) such Affiliate Transaction is on
terms that are no less favorable to the Company or the relevant
Subsidiary than those that would have been obtained in a comparable
transaction by the Company or such Subsidiary with an unrelated Person
and (ii)(a) with respect to any Affiliate Transaction or series of
related Affiliate Transactions involving aggregate consideration in
excess of $1.0 million the Company delivers to the Trustee a resolution
of the Board of Directors (including a majority of the disinterested
directors, if any) set forth in an Officers' Certificate certifying
that such Affiliate Transaction complies with clause (i) above and that
such Affiliate Transaction has been approved by a majority of the
disinterested members, if any, of the Board of Directors or (b) with
respect to any Affiliate Transaction or series of related Affiliate
Transactions involving aggregate consideration in excess of $5.0
million the Company delivers to the Trustee an opinion as to the
fairness to the Note
holders of such Affiliate Transaction from a financial point of view
issued by an investment banking firm of national standing; provided
that (1) any employment agreement entered into by the Company or any of
its Subsidiaries in the ordinary course of business and consistent with
the past practice of the Company or such Subsidiary, (2) transactions
between or among the Company and/or its Wholly-Owned Subsidiaries
(other than a Receivables Subsidiary), (3) Restricted Payments (other
than Investments) that are permitted by the provisions of the Indenture
described above under the caption "-- Restricted Payments," (4) any
payment by the Company for management services pursuant to the
Management Services Agreement, dated as of August 1, 1997, by and among
Delta Woodside and the Company as such Management Services Agreement is
in effect on the Issue Date, (5) any payment by the Company pursuant to
the Tax Sharing Agreement, dated as of August 1, 1997, by and among
Delta Woodside and the Company as such Tax Sharing Agreement is in
effect on the Issue Date, (6) sales of goods and manufacturing services
in the ordinary course of business and otherwise in compliance with the
terms of the Indenture which are, in the reasonable determination of
the Board of Directors of the Company, for fair market value and on
terms at least as favorable to the Company and its Subsidiaries as
might have been obtained at such time from an unaffiliated party, and
(7) sales of accounts receivable and other related assets customarily
transferred in an asset securitization transaction involving accounts
receivable to a Receivables Subsidiary, and any agreement related
thereto, in a Qualified Receivables Transaction, in each case shall not
be deemed Affiliate Transactions.
Sale and Leaseback Transactions
The Indenture provides that the Company will not, and will not
permit any of its Subsidiaries to, enter into any sale and leaseback
transaction; provided that the Company or any Subsidiary may enter into
a sale and leaseback transaction if (i) the Company or such Subsidiary
could have (a) incurred Indebtedness in an amount equal to the
Attributable Debt relating to such sale and leaseback transaction
pursuant to the covenant described above under the caption "--
Incurrence of Indebtedness and Issuance of Preferred Stock" and (b)
incurred a Lien to secure such Indebtedness pursuant to the covenant
described above under the caption "-- Liens," (ii) the Net Proceeds of
such sale and leaseback transaction are at least equal to the fair
market value (as determined in good faith by the Board of Directors and
set forth in an Officers' Certificate delivered to the Trustee) of the
property that is the subject of such sale and leaseback transaction and
(iii) the transfer of assets in such sale and leaseback transaction is
permitted by, and the Company or the Subsidiary, as the case may be,
applies the proceeds of such transaction in compliance with, the
covenant described above under the caption "-- Repurchase at the Option
of Holders -- Asset Sales."
Limitation on Issuances and Sales of Capital Stock of Subsidiaries
The Indenture provides that the Company (i) will not, and will not
permit any Subsidiary of the Company to, transfer, convey, sell, lease
or otherwise dispose of any Capital Stock of any Subsidiary of the
Company to any Person (other than the Company or a Wholly-Owned
Subsidiary of the Company (other than a Receivables Subsidiary)),
unless (a) such transfer, conveyance, sale, lease or other disposition
is of all the Capital Stock of such Subsidiary and (b) the aggregate
cash portion of the Net Proceeds from such transfer, conveyance, sale,
lease or other disposition is applied in accordance with the covenant
described above under the caption "Repurchase at the Option of Holders
- - -- Asset Sales," and (ii) will not permit any Subsidiary of the Company
to issue any of its Equity Interests (other than (1), if necessary,
shares of its Capital Stock constituting directors' qualifying shares
or (2) shares of Capital Stock issued prior to the time such Person
became a Subsidiary of the Company; provided that such Capital Stock
was not
issued in anticipation of such transaction) to any Person other than
to the Company or a Wholly-Owned Subsidiary of the Company (other than
a Receivables Subsidiary).
Payments for Consent
The Indenture provides that neither the Company nor any of its
Subsidiaries will, directly or indirectly, pay or cause to be paid any
consideration, whether by way of interest, fee or otherwise, to any
holder of any Notes for or as an inducement to any consent, waiver or
amendment of any of the terms or provisions of the Indenture or the
Notes unless such consideration is offered to be paid or is paid to
all holders of the Notes that consent, waive or agree to amend in the
time frame set forth in the solicitation documents relating to such
consent, waiver or agreement.
Reports
The Indenture provides that, whether or not required by the rules
and regulations of the Securities and Exchange Commission (the
"Commission"), so long as any Notes are outstanding, the Company will
furnish to the holders of Notes (i) all quarterly and annual financial
information (excluding schedules) that would be required to be
contained in a filing with the Commission on Forms 10-Q and 10-K
(excluding exhibits) if the Company were required to file such forms,
including a "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and, with respect to the annual
information only, a report thereon by the Company's independent
certified public accountants, (ii) all current reports that would be
required to be filed with the Commission on Form 8-K if the Company
were required to file such reports (excluding exhibits) and (iii) any
other reports (excluding exhibits) that may by specified in Sections 13
and 15(d) of the Exchange Act that would be required to be filed with
the Commission, if the Company were required to file such reports. In
addition, whether or not required by the rules and regulations of the
Commission, the Company will file a copy of all such information
(including exhibits) and reports (including exhibits) with the
Commission for public availability (unless the Commission will not
accept such a filing) and make such information available to securities
analysts and prospective investors upon request. In addition, the
Company has agreed, for so long as any Notes remain outstanding, to
furnish to the Note holders and to securities analysts and prospective
investors, upon their request, the information required to be delivered
pursuant to Rule 144A(d)(4) under the Securities Act.
Additional Guarantees
The Indenture provides that if the Company or any of its
Subsidiaries shall acquire or create another Subsidiary after the date
of the Indenture (other than a Receivables Subsidiary that does not
guarantee or otherwise provide credit support (pursuant to a security
interest or otherwise) in respect of any Indebtedness of the Company or
any Subsidiary Guarantor), then such newly acquired or created
Subsidiary shall execute a Subsidiary Guarantee and deliver an opinion
of counsel, in accordance with the terms of the Indenture.
Events of Default and Remedies
The Indenture provides that each of the following constitutes an
Event of Default: (i) default for 30 days in the payment when due of
interest on, or Liquidated Damages with respect to, the Notes; (ii)
default in payment when due of the principal of or premium, if any, on
the Notes; (iii) failure by the Company to comply with the provisions
described under the captions "-- Repurchase at the Option of Holders --
Change of Control," "-- Repurchase at the Option of Holders -- Asset
Sales," "-- Certain Covenants -- Restricted Payments," "-- Certain
Covenants -- Incurrence of Indebtedness and Issuance of Preferred
Stock," "-- Certain Covenants -- Merger, Consolidation or Sale of
Assets," or "-- Certain Covenants -- Limitation on Issuances and Sales
of Capital Stock of Subsidiaries;" (iv) failure by the Company for 30
days after notice to comply with any of its other agreements in the
Indenture or the Notes; (v) default under any mortgage, indenture or
instrument under which there may be issued or by which there may be
secured or evidenced any Indebtedness for money borrowed by the Company
or any of its Subsidiaries (or the payment of which is guaranteed by
the Company or any of its Subsidiaries) whether such Indebtedness or
guarantee now exists, or is created after the date of the Indenture,
which default (a) is caused by a failure to pay principal of or
premium, if any, or interest on such Indebtedness at its final Stated
Maturity (a "Payment Default") or (b) results in the acceleration of
such Indebtedness prior to its express maturity and, in each case, the
principal amount of which Indebtedness, together with the principal
amount of any other unpaid Indebtedness under which there has been a
Payment Default or the express maturity of which has been so
accelerated, aggregates $5.0 million or more; (vi) failure by the
Company or any of its Subsidiaries to pay final judgments (other than
judgments fully covered by insurance) aggregating in excess of $5.0
million, which judgments are not paid, discharged or stayed for a
period of 45 days; (vii) certain events of bankruptcy or insolvency
with respect to the Company or any of its Subsidiaries; or (viii) the
Subsidiary Guarantee of any Guarantor is held in judicial proceedings
to be unenforceable or invalid or ceases for any reason to be in full
force and effect (other than in accordance with the terms of the
Indenture) or any Guarantor or any Person acting on behalf of any
Guarantor denies or disaffirms such Guarantor's obligations under its
Subsidiary Guarantee (other than by reason of a release of such
Guarantor from its Subsidiary Guarantee in accordance with the terms of
the Indenture).
If any Event of Default occurs and is continuing, the Trustee or
the holders of at least 25% in principal amount of the then outstanding
Notes may declare all the Notes to be due and payable immediately.
Notwithstanding the foregoing, in the case of an Event of Default
arising from certain events of bankruptcy or insolvency, with respect
to the Company or any Subsidiary, all outstanding Notes will become due
and payable without further action or notice. Holders of the Notes may
not enforce the Indenture or the Notes except as provided in the
Indenture. Subject to certain limitations, holders of a majority in
principal amount of the then outstanding Notes may direct the Trustee
in its exercise of any trust or power. The Trustee may withhold from
holders of the Notes notice of any continuing Default or Event of
Default (except a Default or Event of Default relating to the payment
of principal or premium, if any, or interest or Liquidated Damages, if
any) if it determines that withholding notice is in their interest.
In the case of any Event of Default occurring by reason of any
willful action (or inaction) taken (or not taken) by or on behalf of
the Company with the intention of avoiding payment of the premium that
the Company would have had to pay if the Company then had elected to
redeem the Notes pursuant to the optional redemption provisions of the
Indenture, an equivalent premium shall also become and be immediately
due and payable to the extent permitted by law upon the acceleration of
the Notes. If an Event of Default occurs prior to September 1, 2002, by
reason of any willful action (or inaction) taken (or not taken) by or
on behalf of the Company with the intention of avoiding the prohibition
on redemption of the Notes prior to September 1, 2002, then the premium
specified in the Indenture for such event shall also become immediately
due and payable to the extent permitted by law upon the acceleration of
the Notes.
The holders of a majority in aggregate principal amount of the
Notes then outstanding by notice to the Trustee may on behalf of the
holders of all of the Notes waive any existing Default or Event of
Default and its consequences under the Indenture except a continuing
Default or Event of Default in the payment of interest on, or the
principal of, the Notes.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Company is required,
upon becoming aware of any Default or Event of Default, to
deliver to the Trustee a statement specifying such Default or Event of
Default.
No Personal Liability of Directors, Officers, Employees or Stockholders
No director, officer, employee, incorporator or stockholder of the
Company or any Guarantor, as such, shall have any liability for any
obligations of the Company or any Guarantor under the Notes, the
Subsidiary Guarantees, the Indenture or for any claim based on, in
respect of, or by reason of, such obligations or their creation. Each
holder of Notes by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for
issuance of the Notes. Such waiver may not be effective to waive
liabilities under the federal securities laws and it is the view of the
Commission that such a waiver is against public policy.
Legal Defeasance and Covenant Defeasance
The Company may, at its option and at any time, elect to have all
of the obligations of the Company and the Guarantors discharged with
respect to the outstanding Notes ("Legal Defeasance") except for (i)
the rights of holders of outstanding Notes to receive payments in
respect of the principal of, premium, if any, and interest and
Liquidated Damages, if any, on such Notes when such payments are due
from the trust referred to below, (ii) the Company's 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 the Company's obligations in connection
therewith and (iv) the Legal Defeasance provisions of the Indenture. In
addition, the Company may, at its option and at any time, elect to have
the obligations of the Company released with respect to certain
covenants that are described in the Indenture ("Covenant Defeasance")
and thereafter any omission to comply with such obligations shall not
constitute a Default or Event of Default with respect to the Notes. In
the event Covenant Defeasance occurs, certain events (not including non-
payment, bankruptcy, receivership, rehabilitation and insolvency
events) described under "Events of Default" will no longer constitute
an Event of Default with respect to the Notes.
In order to exercise either Legal 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, non-callable Government Securities, 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 and premium, if any, and interest and Liquidated Damages, if any, on
the outstanding Notes on the stated maturity or on the applicable
redemption date, as the case may be, and the Company must specify
whether the Notes are being defeased to maturity or to a particular
redemption date; (ii) in the case of Legal Defeasance, the Company
shall have delivered to the Trustee an opinion of counsel in the United
States reasonably acceptable to the Trustee confirming 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 the 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 Notes will not recognize income,
gain or loss for federal income tax purposes as a result of such Legal
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 Legal 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 reasonably acceptable to the
Trustee confirming 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 (other than a Default or
Event of Default resulting from the borrowing of funds to be applied to
such deposit) or insofar as Events of Default from bankruptcy or
insolvency events are concerned, at any time in the period ending on
the 91st day after the date of deposit; (v) such Legal Defeasance or
Covenant Defeasance will not result in a breach or violation of, or
constitute a default under, any material agreement or instrument (other
than the Indenture) to which the Company or any of its Subsidiaries is
a party or by which the Company or any of its Subsidiaries is bound;
(vi) the Company must have delivered to the Trustee an opinion of
counsel to the effect that on the 91st day following the deposit, the
trust funds will not be subject to the effect of any applicable
bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally; (vii) the Company must deliver to the
Trustee an Officers' Certificate stating that the deposit was not made
by the Company with the intent of preferring the holders of Notes over
the other creditors of the Company or any Guarantor or with the intent
of defeating, hindering, delaying or defrauding creditors of any
Guarantor or the Company; and (viii) the Company must deliver to the
Trustee an Officers' Certificate and an opinion of counsel, each
stating that all conditions precedent provided for or relating to the
Legal Defeasance or the Covenant Defeasance have been complied with.
Transfer and Exchange
A holder may transfer or exchange Notes in accordance with the
Indenture. The Registrar and the Trustee may require a holder, among
other things, to furnish appropriate endorsements and transfer
documents and the Company may require a holder to pay any taxes and
fees required by law or permitted by the Indenture. The Company is not
required to transfer or exchange any Note selected for redemption.
Also, the Company is not required to transfer or exchange any Note for
a period of 15 days before a selection of Notes to be redeemed. The
registered holder of a Note will be treated as the owner of it for all
purposes.
Amendment, Supplement and Waiver
Except as provided in the next succeeding paragraphs, the
Indenture, the Guarantees or the Notes may be amended or supplemented
with the consent of the holders of at least a majority in principal
amount of the Notes then outstanding (including, without limitation,
consents obtained in connection with a purchase of, or tender offer or
exchange offer for, Notes), and, subject to certain provisions of the
Indenture, any existing Default or compliance with any provision of the
Indenture, the Guarantees or the Notes may be waived with the consent
of the holders of a majority in principal amount of the then
outstanding Notes (including consents obtained in connection with a
purchase of, or a tender offer or exchange offer for, Notes).
Without the consent of each holder affected, an amendment or
waiver may not (with respect to any Notes held by a non-consenting
holder): (i) reduce the principal amount of Notes whose holders must
consent to an amendment, supplement or waiver, (ii) reduce the
principal
of or change the fixed maturity of any Note or alter or waive the
provisions with respect to the redemption or repurchase of the Notes
(other than provisions relating to the covenant described above under
the caption "-- Repurchase at the Option of Holders"), (iii) reduce the
rate of or change the time for payment of premium, if any, or interest
(including default interest) on any Note, (iv) waive a Default or Event
of Default in the payment of principal of or premium, if any, or
interest on the Notes (except a rescission of acceleration of the Notes
by the holders of at least a majority in aggregate principal amount of
the then outstanding Notes and a waiver of the payment default that
resulted from such acceleration), (v) make any Note payable in money
other than that stated in the Notes, (vi) make any change in the
provisions of the Indenture relating to waivers of past Defaults or the
rights of holders of Notes to receive payments of principal of or
premium, if any, or interest on the Notes, (vii) waive a redemption
payment with respect to any Note (other than a payment required by one
of the covenants described above under the caption "-- Repurchase at
the Option of Holders"), (viii) release any Guarantor from any of its
obligations under its Subsidiary Guarantee or the Indenture, except in
accordance with the terms of the Indenture, or (ix) make any change in
the foregoing amendment and waiver provisions.
Notwithstanding the foregoing, without the consent of any holder
of Notes, the Company, the Guarantors and the Trustee may amend or
supplement the Indenture, the Guarantees or the Notes to cure any
ambiguity, defect or inconsistency, to provide for uncertificated Notes
in addition to or in place of certificated Notes, to provide for the
assumption of the Company's or a Guarantor's obligations to holders of
Notes in the case of a merger or consolidation, to make any change that
would provide any additional rights or benefits to the holders of Notes
or that does not adversely affect the legal rights under the Indenture
of any such holder, or to comply with requirements of the Commission in
order to effect or maintain the qualification of the Indenture under
the Trust Indenture Act.
Concerning the Trustee
The Indenture contains certain limitations on the rights of the
Trustee, should it become a creditor of the Company, to obtain payment
of claims in certain cases, or to realize on certain property received
in respect of any such claim as security or otherwise. The Trustee will
be permitted to engage in other transactions; however, if it acquires
any conflicting interest it must eliminate such conflict within 90
days, apply to the Commission for permission to continue or resign.
The holders of a majority in principal amount of the then
outstanding Notes will have the right to direct the time, method and
place of conducting any proceeding for exercising any remedy available
to the Trustee or exercising any trust or power conferred on it,
subject to certain exceptions. The Indenture provides that in case an
Event of Default shall occur (which shall not be cured), the Trustee
will be required, in the exercise of its power, to use the degree of
care and skill of a prudent person in the conduct of his own affairs.
Subject to such provisions, the Trustee will be under no obligation to
exercise any of its rights or powers under the Indenture at the request
of any holder of Notes, unless such holder shall have offered to the
Trustee security and indemnity satisfactory to it against any loss,
liability or expense.
An affiliate of the Trustee will serve as a Lender and as the
Collateral Agent under the New Credit Facility and as a factor for the
Company.
Additional Information
Anyone who receives this Prospectus may obtain a copy of the
Indenture and Registration Rights Agreement without charge by writing
to the Company., 233 North Main Street, Hammond Square, Suite 200,
Greenville, South Carolina 29601, Attention: Secretary.
Book-Entry, Delivery and Form
Except as set forth in the next paragraph, the Exchange Notes will
initially be issued in the form of one Global Note (the "Global Note").
The Global Note will be deposited on the date of the consummation of
the Exchange Offer (the "Closing Date") with, or on behalf of, The
Depository Trust Company (the "Depositary") and registered in the name
of Cede & Co., as nominee of the Depositary (such nominee being
referred to herein as the "Global Note Holder").
Exchange Notes that are issued as described below under "--
Certificated Securities" will be issued in the form of registered
definitive certificates (the "Certificated Securities"). Upon the
transfer of Certificated Securities, such Certificated Securities may,
unless the Global Note has previously been exchanged for Certificated
Securities, be exchanged for an interest in the Global Note
representing the principal amount of Notes being transferred.
The Depositary is a limited-purpose trust company that was created
to hold securities for its participating organizations (collectively,
the "Participants" or the "Depositary's Participants") and to
facilitate the clearance and settlement of transactions in such
securities between Participants through electronic book-entry changes
in accounts of its Participants. The Depositary's Participants include
securities brokers and dealers (including the Initial Purchaser), banks
and trust companies, clearing corporations and certain other
organizations. Access to the Depositary's system is also available to
other entities such as banks, brokers, dealers and trust companies
(collectively, the "Indirect Participants" or the "Depositary's
Indirect Participants") that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly. Persons
who are not Participants may beneficially own securities held by or on
behalf of the Depositary only through the Depositary's Participants or
the Depositary's Indirect Participants.
The Company expects that pursuant to procedures established by the
Depositary (i) upon deposit of the Global Note, the Depositary will
credit the accounts of Participants designated by the Initial Purchaser
with portions of the principal amount of the Global Note and (ii)
ownership of the Exchange Notes evidenced by the Global Note will be
shown on, and the transfer of ownership thereof will be effected only
through, records maintained by the Depositary (with respect to the
interests of the Depositary's Participants), the Depositary's
Participants and the Depositary's Indirect Participants. Prospective
purchasers are advised that the laws of some states require that
certain persons take physical delivery in definitive form of securities
that they own. Consequently, the ability to transfer Exchange Notes
evidenced by the Global Note will be limited to such extent.
So long as the Global Note Holder is the registered owner of any Notes,
the Global Note Holder will be considered the sole holder under the
Indenture of any Notes evidenced by the Global Note. Beneficial owners
of Notes evidenced by the Global Note will not be considered the owners
or holders thereof under the Indenture for any purpose, including with
respect to the giving of any directions, instructions or approvals to
the Trustee thereunder. Neither the Company nor the Trustee will have
any responsibility or liability for any aspect of the records of the
Depositary or for maintaining, supervising or reviewing any records of
the Depositary relating to the Notes.
Payments in respect of the principal of and premium, if any,
interest and Liquidated Damages, if any, on any Notes registered in the
name of the Global Note Holder on the applicable record date will be
payable by the Trustee to or at the direction of the Global Note Holder
in its capacity as the registered holder under the Indenture. Under the
terms of the Indenture, the Company and the Trustee may treat the
persons in whose names Notes, including the Global Note, are registered
as the owners thereof for the purpose of receiving such payments.
Consequently, neither the Company nor the Trustee has or will have any
responsibility or liability for the payment of such amounts to
beneficial owners of Notes. The Company believes, however, that it is
currently the policy of the Depositary to immediately credit the
accounts of the relevant Participants with such payments, in amounts
proportionate to their respective holdings of beneficial interests in
the relevant security as shown on the records of the Depositary.
Payments by the Depositary's Participants and the Depositary's Indirect
Participants to the beneficial owners of Notes will be governed by
standing instructions and customary practice and will be the
responsibility of the Depositary's Participants or the Depositary's
Indirect Participants.
Certificated Securities
Subject to certain conditions, any person having a beneficial
interest in the Global Note may, upon request to the Trustee, exchange
such beneficial interest for Notes in the form of Certificated
Securities. Upon any such issuance, the Trustee is required to register
such Certificated Securities in the name of, and cause the same to be
delivered to, such person or persons (or the nominee of any thereof).
All such certificated Notes would be subject to the legend requirements
described herein under "Notice to Investors." In addition, if (i) the
Company notifies the Trustee in writing that the Depositary is no
longer willing or able to act as a depositary and the Company has not
located a qualified successor within 90 days after delivery of notice
from the Depositary of such resignation or (ii) the Company, at its
option, notifies the Trustee in writing that it elects to cause the
issuance of Notes in the form of Certificated Securities under the
Indenture, then, upon surrender by the Global Note Holder of its Global
Note, Notes in such form will be issued to each person that the Global
Note Holder and the Depositary identify as being the beneficial owner
of the related Notes.
Neither the Company nor the Trustee will be liable for any delay
by the Global Note Holder or the Depositary in identifying the
beneficial owners of Notes and the Company and the Trustee may
conclusively rely on, and will be protected in relying on, instructions
from the Global Note Holder or the Depositary for all purposes.
Same-Day Settlement and Payment
The Indenture requires that payments in respect of the Notes
represented by the Global Note (including principal, premium, if any,
interest and Liquidated Damages, if any) be made by wire transfer of
immediately available funds to the accounts specified by the Global
Note Holder. With respect to Certificated Securities, the Company will
make all payments of principal, premium, if any, interest and
Liquidated Damages, if any, by wire transfer of immediately available
funds to the accounts specified by the holders thereof or, if no such
account is specified, by mailing a check to each such holder's
registered address. Secondary trading in long-term notes and debentures
of corporate issuers is generally settled in clearing-house or next-day
funds. In contrast, the Notes represented by the Global Note are
expected to be eligible to trade in the PORTAL market and to trade in
the Depositary's Same-Day Funds Settlement System, and any permitted
secondary market trading activity in such Notes will, therefore, be
required by the Depositary to be settled in immediately available
funds. The Company expects that secondary trading in the Certificated
Securities will also be settled in
immediately available funds.
Certain Definitions
Set forth below are certain defined terms used in the Indenture.
Reference is made to the Indenture for a full disclosure of all such
terms, as well as any other capitalized terms used herein for which no
definition is provided.
"Acquired Debt" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person
is merged with or into or became a Subsidiary of such specified Person
which was not incurred in connection with, or in contemplation of, such
other Person merging with or into or becoming a Subsidiary of such
specified Person, and (ii) Indebtedness secured by a Lien encumbering
any asset acquired by such specified Person.
"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 purposes of
this definition, "control" (including, with correlative meanings, the
terms "controlling," "controlled by" and "under common control with"),
as used with respect to any Person, shall mean the possession, directly
or indirectly, of the power to direct or cause the direction of the
management or policies of such Person, whether through the ownership of
voting securities, by agreement or otherwise; provided that, for
purposes of the covenant described above under "Certain Covenants --
Transactions with Affiliates," beneficial ownership of 10% or more of
the voting securities of a Person shall be deemed to be control.
"Approved Lender" means (i) any domestic commercial bank having capital
and surplus in excess of $100.0 million and a Keefe Bank Watch Rating
of "B" or better and (ii) any bank whose short-term commercial paper
rating by Standard & Poor's Ratings Services is A-1 or better or whose
short-term commercial paper rating by Moody's Investors Service is P-1
or better.
"Asset Sale" means the sale, lease, conveyance or other
disposition of any assets (including, without limitation, by way of a
sale and leaseback and the receipt of proceeds of insurance (excluding
business interruption insurance) paid on account of the loss of or
damage to any asset and awards of compensation for any asset taken by
condemnation, eminent domain or similar proceeding, but excluding the
granting of any Lien, in each case, in one or a series of related
transactions (a) that have a fair market value in excess of $1,000,000
or (b) yield Net Proceeds in excess of $1,000,000. Notwithstanding the
foregoing, the term "Asset Sale" shall not include (i) any sale, lease,
conveyance or other disposition that constitutes a Restricted Payment
or an Investment permitted to be made under the Indenture, (ii) any
transaction governed by the covenant described in "Certain Covenants --
Merger, Consolidation, or Sale of Assets," (iii) the sale or lease of
equipment, inventory, accounts receivable or other assets in the
ordinary course of business, (iv) the transfer of assets by the Company
to a Wholly-Owned Subsidiary of the Company (other than a Receivables
Subsidiary) or by a Wholly-Owned Subsidiary of the Company (other than
a Receivables Subsidiary) to the Company or another Wholly- Owned
Subsidiary of the Company (other than a Receivables Subsidiary), (v)
the sale or other disposition of cash or Cash Equivalents, or (vi) the
sale of accounts receivables and related assets customarily transferred
in an asset securitization transaction involving accounts receivable to
a Receivables Subsidiary or by a Receivables Subsidiary, in each case,
in connection with a Qualified Receivables Transaction.
"Attributable Debt" in respect of a sale and leaseback transaction
means, at the time of determination, the present value (discounted at
the rate of interest implicit in such transaction, determined in
accordance with GAAP) of the obligation of the lessee for net rental
payments during the remaining term of the lease included in such sale
and leaseback transaction (including any period for which such lease
has been extended or may, at the option of the lessor, be extended).
"Capital Lease Obligation" means, at the time any determination thereof
is to be made, the amount of the liability in respect of a capital
lease that would at such time be required to be capitalized on a
balance sheet in accordance with GAAP.
"Capital Stock" means (i) in the case of a corporation, corporate
stock, (ii) in the case of an association or business entity, any and
all shares, interests, participations, rights or other equivalents
(however designated) of corporate stock, (iii) in the case of a
partnership, partnership interests (whether general or limited) and
(iv) any other interest or participation that confers on a Person the
right to receive a share of the profits and losses of, or distributions
of assets of, the issuing Person.
"Cash Equivalents" means (i) United States dollars, (ii)
securities issued or directly and fully guaranteed or insured by the
United States government or any agency or instrumentality thereof
(provided, that the full faith and credit of the United States is
pledged in support thereof) having maturities of not more than twelve
months from the date of acquisition, (iii) time deposits and
certificates of deposit (United States dollars, Eurodollar or fully
hedged into United States dollars if denominated in a currency other
than United States dollars) with maturities of twelve months or less
from the date of acquisition, in each case with an Approved Lender, and
(iv) commercial paper issued by any Approved Lender (or by the
corporate parent of such Approved Lender) or any variable rate note
issued or guaranteed by a corporation organized under the laws of the
United States, any state thereof, the District of Columbia or any
territory thereof and rated A-2 or better by Standard & Poor's
Investors Services or P-2 or better by Moody's Investor Services, in
each case maturing within six months after the date of acquisition.
"Change of Control" means the occurrence of any of the following:
(i) the sale, lease, transfer, conveyance or other disposition (other
than by way of merger or consolidation), in one or a series of related
transactions, of all or substantially all of the assets of the Company
and its Subsidiaries taken as a whole to any "person" (as such term is
used in Section 13(d)(3) of the Exchange Act) other than the
Principals, (ii) the adoption of a plan relating to the liquidation or
dissolution of the Company or Delta Woodside Industries, Inc., (iii)
the consummation of any transaction (including, without limitation, any
merger or consolidation) the result of which is that any "person" (as
defined above), other than the Principals, becomes the "beneficial
owner" (as such term is defined in Rule 13d-3 and Rule 13d-5 under the
Exchange Act), directly or indirectly, of more than 50% of the voting
stock of Delta Woodside Industries, Inc., (iv) the first day on which a
majority of the members of the Board of Directors of the Company or
Delta Woodside Industries, Inc. are not Continuing Directors or (v) the
first day on which the Company ceases to be a Subsidiary of Delta
Woodside Industries, Inc. For purposes of this definition, any transfer
of an equity interest of an entity that was formed for the purpose of
acquiring Voting Stock of the Company will be deemed to be a transfer
of such portion of such Voting Stock as corresponds to the portion of
the equity of such entity that has been so transferred.
"Consolidated Cash Flow" means, with respect to any Person for any
period, the Consolidated Net Income of such Person for such period plus
(i) an amount equal to any extraordinary loss plus any net loss
realized in connection with an Asset Sale (to the extent such losses
were deducted in computing such Consolidated Net Income), plus (ii)
provision
for taxes based on income or profits of such Person and its
Subsidiaries for such period, to the extent that such provision for
taxes was included in computing such Consolidated Net Income, plus
(iii) consolidated interest expense of such Person and its Subsidiaries
for such period, whether paid or accrued and whether or not capitalized
(including, without limitation, amortization of original issue
discount, non-cash interest payments, the interest component of any
deferred payment obligations, the interest component of all payments
associated with Capital Lease Obligations, imputed interest with
respect to Attributable Debt, commissions, discounts and other fees and
charges incurred in respect of letter of credit or bankers' acceptance
financings, and net payments (if any) pursuant to Hedging Obligations),
to the extent that any such expense was deducted in computing such
Consolidated Net Income, plus (iv) depreciation, amortization
(including amortization of goodwill and other intangibles but excluding
amortization of prepaid cash expenses that were paid in a prior period)
and other non-cash charges (excluding any such non-cash charge to the
extent that it represents an accrual of or reserve for cash charges in
any future period or amortization of a prepaid cash expense that was
paid in a prior period) of such Person and its Subsidiaries for such
period to the extent that such depreciation, amortization and other non-
cash charges were deducted in computing such Consolidated Net Income
minus (v) non-cash items of such Person and its Subsidiaries increasing
Consolidated Net Income for such period, in each case, on a
consolidated basis and determined in accordance with GAAP.
Notwithstanding the foregoing, the provision for taxes on the income or
profits of, and the depreciation and amortization and other non-cash
charges of, a Subsidiary of the referent Person shall be added to
Consolidated Net Income to compute Consolidated Cash Flow only to the
extent (and in the same proportion) that the Net Income of such
Subsidiary was included in calculating the Consolidated Net Income of
such Person and only if a corresponding amount would be permitted at
the date of determination to be dividended to the Company by such
Subsidiary without prior governmental approval (that has not been
obtained), and without direct or indirect restriction pursuant to the
terms of its charter and all agreements, instruments, judgments,
decrees, orders, statutes, rules and governmental regulations
applicable to that Subsidiary or its stockholders.
"Consolidated Net Income" means, with respect to any Person for
any period, the aggregate of the Net Income of such Person and its
Subsidiaries for such period, on a consolidated basis, determined in
accordance with GAAP; provided that (i) the Net Income (but not loss)
of any Person that is not a Subsidiary or that is accounted for by the
equity method of accounting shall be included only to the extent of the
amount of dividends or distributions paid in cash to the referent
Person or a Wholly-Owned Subsidiary thereof that is a Guarantor, (ii)
the Net Income of any Subsidiary shall be excluded to the extent that
the declaration or payment of dividends or similar distributions by
that Subsidiary of that Net Income is not at the date of determination
permitted without any prior governmental approval (that has not been
obtained) or, directly or indirectly, by operation of the terms of its
charter or any agreement, instrument, judgment, decree, order, statute,
rule or governmental regulation applicable to that Subsidiary or its
stockholders, shall be excluded, (iii) the Net Income of any Person
acquired in a pooling of interests transaction for any period prior to
the date of such acquisition shall be excluded and (iv) the cumulative
effect of a change in accounting principles shall be excluded.
"Consolidated Net Worth" means, with respect to any Person as
of any date, the sum of (i) the consolidated equity of the common
stockholders of such Person and its consolidated Subsidiaries as of
such date plus (ii) the respective amounts reported on such Person's
balance sheet as of such date with respect to any series of preferred
stock (other than Disqualified Stock) that by its terms is not entitled
to the
payment of dividends unless such dividends may be declared and paid
only out of net earnings, but only to the extent of any cash received
by such Person upon issuance of such preferred stock, less (a) all
write-ups (other than write-ups resulting from foreign currency
translations and write-ups of tangible assets of a going concern
business made within 12 months after the acquisition of such business)
subsequent to the date of the Indenture in the book value of any asset
owned by such Person or a consolidated Subsidiary of such Person, (b)
all investments as of such date in unconsolidated Subsidiaries and in
Persons that are not Subsidiaries (except, in each case, Permitted
Investments), and (c) all unamortized debt discount and expense and
unamortized deferred charges as of such date, all of the foregoing
determined in accordance with GAAP.
"Continuing Directors" means, as of any date of determination, any
member of the Board of Directors who (i) was a member of such Board of
Directors on the date of the Indenture or (ii) was nominated for
election or elected to such Board of Directors with the approval of a
majority of the Continuing Directors who were members of such Board at
the time of such nomination or election.
"Default" means any event that is or with the passage of time or
the giving of notice or both would be an Event of Default.
"Disqualified Stock" means any Capital Stock that, 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 redeemable at the option of the holder thereof, in whole
or in part, on or prior to the date that is 91 days after the date on
which the Notes mature.
"Eligible Inventory" means, as of any date of determination, all
inventory of the Company and its Subsidiaries, wherever located,
valued in accordance with GAAP and reflected on the most recent
balance sheet of the Company prior to such date of determination for
which financial statements of the Company are available.
"Eligible Receivables" means, as of any date of determination, all
accounts receivable of the Company and its Subsidiaries (including
amounts denominated as due from factor) arising out of the sale of
inventory or manufacturing services in the ordinary course of
business, valued in accordance with GAAP and reflected on the most
recent balance sheet of the Company prior to such date of
determination for which financial statements of the Company are
available.
"Equity Interests" means Capital Stock and all warrants, options
or other rights to acquire Capital Stock (but excluding any debt
security that is convertible into, or exchangeable for, Capital Stock).
"Fixed Charges" means, with respect to any Person for any period,
the sum of (i) the consolidated interest expense of such Person and its
Subsidiaries for such period, whether paid or accrued (including,
without limitation, amortization of original issue discount, non-cash
interest payments, the interest component of any deferred payment
obligations, the interest component of all payments associated with
Capital Lease Obligations, imputed interest with respect to
Attributable Debt, commissions, discounts and other fees and charges
incurred in respect of letter of credit or bankers' acceptance
financings, and net payments (if any) pursuant to Hedging Obligations,
but excluding amortization of deferred financing charges incurred in
connection with the Refinancing) and (ii) the consolidated interest
expense of such Person and its Subsidiaries that was capitalized during
such period, and (iii) any interest expense on Indebtedness of another
Person that is guaranteed by such Person or one of its Subsidiaries or
secured by a Lien on assets of such Person or one of its Subsidiaries
(whether or not
such guarantee or Lien is called upon) and (iv) the product of (a) all
cash dividend payments (and non-cash dividend payments in the case of a
Person that is a Subsidiary), other than dividends paid to such Person
or a Wholly-Owned Subsidiary of such Person, on any series of preferred
stock of such Person, times (b) a fraction, the numerator of which is
one and the denominator of which is one minus the then current combined
federal, state and local statutory tax rate of such Person, expressed
as a decimal, in each case, on a consolidated basis and in accordance
with GAAP.
"Fixed Charge Coverage Ratio" means with respect to any Person for
any period, the ratio of the Consolidated Cash Flow of such Person for
such period to the Fixed Charges of such Person for such period. In the
event that the Company or any of its Subsidiaries incurs, assumes,
guarantees or redeems or otherwise repays any Indebtedness (other than
revolving credit borrowings) or issues or redeems preferred stock
subsequent to the commencement of the period for which the Fixed Charge
Coverage Ratio is being calculated but prior to the date on which the
event for which the calculation of the Fixed Charge Coverage Ratio is
made (the "Calculation Date"), then the Fixed Charge Coverage Ratio
shall be calculated giving pro forma effect to such incurrence,
assumption, guarantee, redemption or repayment of Indebtedness, or such
issuance or redemption of preferred stock, as if the same had occurred
at the beginning of the applicable four-quarter reference period. In
addition, for purposes of making the computation referred to above, (i)
acquisitions that have been made by the Company or any of its
Subsidiaries, including through mergers or consolidations and including
any related financing transactions, during the four-quarter reference
period or subsequent to such reference period and on or prior to the
Calculation Date shall be deemed to have occurred on the first day of
the four-quarter reference period, and Consolidated Cash Flow for such
reference period shall be calculated on such pro forma basis without
giving effect to clause (iii) of the proviso set forth in the
definition of Consolidated Net Income, and (ii) the Consolidated Cash
Flow attributable to discontinued operations, as determined in
accordance with GAAP, and operations or businesses disposed of prior to
the Calculation Date, shall be excluded, and (iii) the Fixed Charges
attributable to discontinued operations, as determined in accordance
with GAAP, and operations or businesses disposed of prior to the
Calculation Date, shall be excluded, but only to the extent that the
obligations giving rise to such Fixed Charges will not be obligations
of the referent Person or any of its Subsidiaries following the
Calculation Date.
"GAAP" means generally accepted accounting principles 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 have been approved by a
significant segment of the accounting profession which are in effect
on the date of the Indenture.
"guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct
or indirect, in any manner (including, without limitation, letters of
credit and reimbursement agreements in respect thereof), of all or any
part of any Indebtedness.
"Guarantor" means each of (i) Delta Mills Marketing, Inc. and (ii) any
other subsidiary that executes a Subsidiary Guarantee in accordance
with the provisions of the Indenture, and their respective successors
and assigns.
"Hedging Obligations" means, with respect to any Person, the
obligations of such Person under (i) interest rate swap agreements,
interest rate cap agreements and interest rate collar agreements and
(ii) other agreements or arrangements designed to protect such Person
against fluctuations in interest rates, the value of foreign currencies
and the value of commodities purchased by the Company or any of its
Subsidiaries in the ordinary course of business.
"Indebtedness" means, with respect to any Person, any indebtedness
of such Person, whether or not contingent, in respect of borrowed money
or evidenced by bonds, notes, debentures or similar instruments or
letters of credit (or reimbursement agreements in respect thereof) or
banker's acceptances or representing Capital Lease Obligations or the
balance deferred and unpaid of the purchase price of any property or
representing any Hedging Obligations, except any such balance that
constitutes an accrued expense or trade payable, if and to the extent
any of the foregoing indebtedness (other than letters of credit and
Hedging Obligations) would appear as a liability upon a balance sheet
of such Person prepared in accordance with GAAP, as well as all
indebtedness of others secured by a Lien on any asset of such Person
(whether or not such indebtedness is assumed by such Person) and, to
the extent not otherwise included, the guarantee by such Person of any
Indebtedness of any other Person and the Attributable Debt of such
Person relating to any sale and leaseback transaction.
"Investments" means, with respect to any Person, all investments
by such Person in other Persons (including Affiliates) in the forms of
direct or indirect loans (including guarantees of Indebtedness or other
obligations), advances or capital contributions (excluding commission,
travel and similar advances to officers and employees made in the
ordinary course of business), or purchases or other acquisitions for
consideration of Indebtedness, Equity Interests or other securities,
together with all items that are or would be classified as investments
on a balance sheet prepared in accordance with GAAP; provided that an
acquisition of assets, Equity Interests or other securities by the
Company or a Subsidiary of the Company for consideration consisting of
common equity securities or preferred stock (not constituting
Disqualified Stock) of the Company shall not be deemed to be an
Investment.
"Lien" means, with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect
of such asset, whether or not filed, recorded or otherwise perfected
under applicable law (including any conditional sale or other title
retention agreement, any capital lease and any other preferential
arrangement that has substantially the same practical effect as a
security interest in any asset).
"Net Income" means, with respect to any Person, the net income
(loss) of such Person, determined in accordance with GAAP and before
any reduction in respect of preferred stock dividends, excluding,
however, (i) any gain (but not loss), together with any related
provision for taxes on such gain (but not loss), realized in connection
with (a) any Asset Sale (including, without limitation, dispositions
pursuant to sale and leaseback transactions) or (b) the disposition of
any securities by such Person or any of its Subsidiaries or the
extinguishment of any Indebtedness of such Person or any of its
Subsidiaries and (ii) any extraordinary or nonrecurring gain (but not
loss), together with any related provision for taxes on such
extraordinary or nonrecurring gain (but not loss).
"Net Proceeds" means the aggregate cash proceeds received by the
Company or any of its Subsidiaries in respect of any Asset Sale
(including, without limitation, any cash received upon the sale or
other disposition of any non-cash consideration received in any Asset
Sale), net of the direct costs relating to such Asset Sale (including,
without limitation, legal, accounting and investment banking fees, and
sales commissions), any relocation expenses incurred as a result
thereof,
taxes paid or payable as a result thereof (after taking into account
any available tax credits or deductions and any tax sharing
arrangements), and any reserve for adjustment in respect of the sale
price of such asset or assets established in accordance with GAAP.
"New Credit Facility" means that certain Credit Agreement, dated
as of August 25, 1997, by and among the Company and NationsBank, N.A.,
as administrative agent, and BNY Financial Corporation, as collateral
agent, including any related notes, guarantees, collateral documents,
instruments and agreements executed in connection therewith, and in
each case as amended, modified, renewed, refunded, replaced or
refinanced from time to time.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable
under the documentation governing any Indebtedness.
"Permitted Investments" means any Investments (i) made in the
Company, a Wholly-Owned Subsidiary of the Company (other than a
Receivables Subsidiary) or any other entity that (a) is engaged in the
same or a similar line of business as the Company or any of its
Subsidiaries was engaged in as of the date of the Indenture or any
reasonable extensions or expansions thereof and (b) as a result of such
Investment becomes a Wholly-Owned Subsidiary of the Company (other than
a Receivables Subsidiary); (ii) made as a result of the receipt of non-
cash consideration from an Asset Sale that was made pursuant to and in
compliance with the covenant described above under the caption "--
Repurchase at the Option of Holders -- Asset Sales;" (iii) outstanding
as of the date of the Indenture; (iv) made in cash or Cash Equivalents;
or (v) by the Company or a Wholly-Owned Subsidiary of the Company in a
Receivables Subsidiary or any Investment by a Receivables Subsidiary in
any other Person or assets, in each case, in connection with a
Qualified Receivables Transaction; provided that any Investment in any
such Person is in the form of a Purchase Money Note, an equity interest
or interests in accounts receivable generated by the Company or a
Subsidiary of the Company and transferred to any Person in connection
with a Qualified Receivables Transaction or any such Person owning such
accounts receivable.
"Permitted Liens" means (i) Liens existing on the date of the
Indenture; (ii) Liens to secure the performance of the Notes and the
Subsidiary Guarantees; (iii) Liens in favor of the Company; (iv) Liens
to secure Indebtedness (including Capital Lease Obligations) permitted
by clause (iii) of the second paragraph of the covenant described under
the caption entitled "Incurrence of Indebtedness and Issuance of
Preferred Stock" covering only those assets acquired, constructed or
improved with such Indebtedness; provided that such Liens do not extend
to any assets of the Company or its Subsidiaries other than such
acquired, constructed or improved assets; (v) Liens on property
securing Acquired Debt existing at the time of acquisition of such
property by the Company or any Subsidiary of the Company, provided that
such Liens were in existence prior to the contemplation of such
acquisition and do not extend to any assets of the Company or its
Subsidiaries other than the acquired property; (vi) Liens on property
of a Person securing Acquired Debt existing at the time such Person is
merged into or consolidated with the Company or any Subsidiary of the
Company or otherwise becomes a Subsidiary of the Company; provided that
such Liens were in existence prior to the contemplation of such merger
or consolidation or acquisition and do not extend to any assets other
than those of the Person merged into, consolidated, or otherwise
acquired; (vii) Liens on the accounts receivable and inventory and
related property (and proceeds thereof) of the Company or any
Subsidiary of the Company and Capital Stock of the Company's
Subsidiaries, in each case, to secure Indebtedness incurred under the
New Credit Facility; (viii) Liens on assets of a Receivables Subsidiary
securing Indebtedness
incurred in connection with a Qualified Receivables Transaction,
provided that such Indebtedness was incurred in connection with such
Qualified Receivables Transaction; (ix) Liens to secure Permitted
Refinancing Debt incurred to refinance the Indebtedness referred to in
the preceding clauses (i), (iv), (v), (vi) and (vii); provided that
such Liens do not extend to any assets other than those specified in
clauses (i), (iv), (v), (vi) and (vii); (x) Liens to secure the
performance of statutory obligations, surety or appeal bonds,
performance bonds or other obligations of a like nature incurred in the
ordinary course of business; (xi) Liens for taxes, assessments or
governmental charges or claims that are not yet delinquent or that are
being contested in good faith by appropriate proceedings promptly
instituted and diligently concluded; provided, that any reserve or
other appropriate provision as shall be required in conformity with
GAAP shall have been made therefor; (xii) Liens incurred or deposits
made to secure the performance of tenders, bids, leases, statutory
obligations, surety and appeal bonds, government contracts, performance
and return of money bonds and other obligations of a like nature, in
each case incurred in the ordinary course of business (exclusive of
obligations for the payment of borrowed money); (xiii) Liens
encumbering customary initial deposits and margin deposits, and other
Liens incurred in the ordinary course of business that are within the
general parameters customary in the industry, in each case securing
Indebtedness under Hedging Obligations; and (xiv) easements, right-of-
ways, municipal and zoning ordinances and similar charges,
encumbrances, title defects or other irregularities that do not
materially interfere with the ordinary course of business of the
Company and its Subsidiaries.
"Permitted Refinancing Debt" means any Indebtedness of the Company
or any of its Subsidiaries issued in exchange for, or the Net Proceeds
of which are used to extend, refinance, renew, replace, defease or
refund, other Indebtedness of the Company or any of its Subsidiaries
(other than Indebtedness described in clauses (i), (v), (vi), (vii) and
(viii) of the second paragraph under the heading "Certain Covenants --
Incurrence of Indebtedness and Issuance of Preferred Stock"); provided
that: (i) the principal amount (or accreted value, if applicable) of
such Permitted Refinancing Debt does not exceed the principal amount
(or accreted value, if applicable) of the Indebtedness so extended,
refinanced, renewed, replaced, defeased or refunded (plus the amount of
reasonable expenses incurred in connection therewith); (ii) such
Permitted Refinancing Debt has a final maturity date not earlier than
the final maturity date of, and has a Weighted Average Life to Maturity
equal to or greater than the Weighted Average Life to Maturity of, the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded; (iii) if the Indebtedness being extended, refinanced,
renewed, replaced, defeased or refunded is subordinated in right of
payment to the Notes, such Permitted Refinancing Debt has a final
maturity date later than the final maturity date of, and is
subordinated in right of payment to, the Notes on terms at least as
favorable to the holders of Notes as those contained in the
documentation governing the Indebtedness being extended, refinanced,
renewed, replaced, defeased or refunded; and (iv) such Indebtedness is
incurred either by the Company or by the Subsidiary who is the obligor
on the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded.
"Person" means an individual, partnership, corporation, limited
liability company, limited liability partnership, unincorporated
organization, trust, joint venture, or a governmental agency or
political subdivision thereof.
"Principals" means E. Erwin Maddrey, II, Bettis C. Rainsford, any
spouse or lineal descendant of either of them, and any Related Party of
any such Person.
"Purchase Money Note" means a promissory note evidencing a line of
credit, which may be irrevocable, from, or evidencing other
Indebtedness owed to, the Company or any Subsidiary of the Company in
connection with a Qualified Receivables Transaction, which note shall
be repaid from cash available to the maker of such note, other than
amounts required to be established as reserves pursuant to agreements,
amounts paid to investors in respect of interest, principal and other
amounts owing to such investors and amounts paid in connection with the
purchase of newly generated receivables.
"Qualified Receivables Transaction" means any transaction or
series of transactions that may be entered into by the Company or any
Subsidiary of the Company pursuant to which the Company or any
Subsidiary of the Company may sell, convey or otherwise transfer to (a)
a Receivables Subsidiary (in the case of a transfer by the Company or
any Subsidiary of the Company) and (b) any other person (in the case of
a transfer by a Receivables Subsidiary), or may grant a security
interest in, any accounts receivable (whether now existing or arising
in the future) of the Company or any Subsidiary of the Company, and any
assets related thereto including, without limitation, all collateral
securing such accounts receivable, all contracts and all guarantees or
other obligations in respect of such accounts receivable, proceeds of
such accounts receivable and other assets which are customarily
transferred or in respect of which security interests are customarily
granted in connection with asset securitization transactions involving
accounts receivable.
"Receivables Subsidiary" means a Wholly-Owned Subsidiary of the Company
(other than a Subsidiary Guarantor), which engages in no activities
other than in connection with the financing of accounts receivable and
which is designated by the Board of Directors of the Company (as
provided below) as a Receivables Subsidiary (a) no portion of the
Indebtedness or any other Obligations (contingent or otherwise) of
which (i) is guaranteed by the Company or any other Subsidiary of the
Company (excluding guarantees of Obligations (other than the principal
of, and interest on, Indebtedness)) pursuant to Standard Securitization
Undertakings, (ii) is recourse to or obligates the Company or any other
Subsidiary of the Company in any way other than pursuant to Standard
Securitization Undertakings or (iii) subjects any property or asset of
the Company or any other Subsidiary of the Company, directly or
indirectly, contingently or otherwise, to the satisfaction thereof,
other than pursuant to Standard Securitization Undertakings, (b) with
which neither the Company nor any other Subsidiary of the Company has
any material contract, agreement, arrangement or understanding (except
in connection with a Purchase Money Note or Qualified Receivables
Transaction) other than on terms no less favorable to the Company or
such other Subsidiary of the Company than those that might be obtained
at the time from persons that are not Affiliates of the Company, other
than fees payable in the ordinary course of business in connection with
servicing accounts receivable, and (c) to which neither the Company nor
any other Subsidiary of the Company has any obligation to maintain or
preserve such entity's financial condition or cause such entity to
achieve certain levels of operating results. Any such designation by
the Board of Directors of the Company shall be evidenced to the Trustee
by filing with the Trustee a certified copy of the resolution of the
Board of Directors of the Company giving effect to such designation and
an Officers' Certificate certifying, to the best of such officer's
knowledge and belief after consulting with counsel, that such
designation complied with the foregoing conditions.
"Related Party" with respect to any Principal means (A) any controlling
stockholder or majority owned Subsidiary of such Principal or (B) any
trust, corporation, partnership or other entity, the beneficiaries,
stockholders, partners, owners or Persons beneficially holding a 51% or
more controlling interest of which consist of such Principal and/or
such other Persons referred to in the immediately preceding clause (A).
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Standard Securitization Undertakings" means representations,
warranties, covenants and indemnities entered into by the Company or
any Subsidiary of the Company which are reasonably customary in an
accounts receivable transaction.
"Subsidiary" means, with respect to any Person, (i) any
corporation, association or other business entity of which more than
50% of the total voting power of shares of Capital Stock entitled
(without regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees thereof is at the time
owned or controlled, directly or indirectly, by such Person and/or one
or more of the other Subsidiaries of that Person (or a combination
thereof) and (ii) any partnership (a) the sole general partner or the
managing general partner of which is such Person or a Subsidiary of
such Person or (b) the only general partners of which are such Person
and/or one or more Subsidiaries of such Person (or any combination
thereof).
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (i)
the sum of the products obtained by multiplying (a) the amount of each
then remaining installment, sinking fund, serial maturity or other
required payments of principal, including payment at final maturity, in
respect thereof, by (b) the number of years (calculated to the nearest
one-twelfth) that will elapse between such date and the making of such
payment, by (ii) the then outstanding principal amount of such
Indebtedness.
"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.
DESCRIPTION OF OTHER INDEBTEDNESS
New Credit Facility
The New Credit Facility has been provided by a group of banks and other
financial institutions syndicated by NationsBanc Capital Markets, Inc.,
as arranger and syndication agent. The New Credit Facility provides for
$100.0 million in revolving credit loans ("Revolving Credit Loans") and
commercial letters of credit. Availability of borrowings is subject to
a borrowing base equal to 85% of the Company's and its subsidiaries'
eligible accounts receivable and 60% of their eligible inventory.
Borrowings under the New Credit Facility are secured by a first
priority lien on the outstanding capital stock of the Company and its
subsidiaries and all present and future accounts receivable and
inventory (and related property) of the Company and its domestic
subsidiaries. The New Credit Facility terminates on August 25, 2002,
five years after the initial funding. On August 25, 1997, the Company
borrowed an aggregate of $58.0 million under the New Credit Facility.
All Revolving Credit Loans bear interest, at the Company's option
(subject to a performance based pricing grid), at either: (i) the
London Interbank Offered Rate ("LIBOR"), as adjusted, plus up to 1.75%
or (ii) a base rate (the higher of the NationsBank, N.A. prime rate or
the Federal Funds rate plus 0.50%) plus up to 1.00%.
The Company is obligated to pay a commitment fee of up to 0.50%
per annum of the unused commitment under the New Credit Facility. Such
fee is payable quarterly in arrears.
The Company is obligated to pay a letter of credit fee equal to
the interest rate spread on LIBOR loans on the outstanding amount of
all letters of credit and a fronting and negotiation fee of 0.125% per
annum of the outstanding amount of each letter of credit. Such fees are
payable quarterly in arrears. In addition, the Company will pay
customary transaction charges in connection with any letters of credit.
The New Credit Facility contains customary covenants and
restrictions on the Company's ability to engage in certain activities.
In addition, the New Credit Facility provides that the Company must
meet certain financial conditions including (i) a minimum consolidated
tangible net worth, (ii) a maximum leverage ratio, (iii) a minimum
consolidated current ratio and (iv) a minimum interest coverage ratio.
The New Credit Facility includes customary events of default.
Description of Delta Woodside Indebtedness
Prior Credit Facility. Delta Woodside used the amounts paid to it
by the Company from the net proceeds from the issuance of the Senior
Notes, together with approximately $58.0 million of initial borrowing
under the New Credit Facility and other sources including borrowings of
$18.0 million under the Parent Credit Facility described below, to
repay approximately $222.0 million in aggregate principal amount of
indebtedness outstanding under the Prior Credit Agreement. The Prior
Credit Agreement was scheduled to terminate September 30, 1997. See
"Use of Proceeds." Borrowings under the Prior Credit Facility were
guaranteed by the Company and various other subsidiaries of Delta
Woodside and bore interest at a variable rate which, for any day, was
equal to the higher of (i) the rate of interest announced from time to
time by NationsBank, N.A. as its "prime" rate as in effect at such time
or (ii) the weighted average of the rates on overnight Federal Funds
transactions, as published by the Federal Reserve Bank of New York.
Amounts borrowed under the Prior Credit Facility and its predecessor
credit facilities were used to acquire business, to make capital
expenditures and for general working capital purposes. Borrowings
under the Prior Credit Facility were fully secured by liens on
substantially all of the assets of the Delta Woodside Group and, prior
to the Refinancing, were guaranteed by the Company and most of the
other subsidiaries of Delta Woodside.
Parent Credit Facility. Concurrently with the closing of the
Offering of the Senior Notes, Delta Woodside entered into the Parent
Credit Facility which provided Delta Woodside with available borrowings
of up to $20.0 million (subject to borrowing base limitations). All
borrowings under the Parent Credit Facility are secured by the current
and intangible assets of the Delta Woodside Group (other than the
Company and its subsidiaries) and the stock of most subsidiaries of
Delta Woodside (other than the Company and its subsidiaries) and
guaranteed by most subsidiaries of Delta Woodside (other than the
Company and its subsidiaries). All borrowings under the Parent Credit
Facility will be due on October 31, 1998. On August 25, 1997, Delta
Woodside borrowed an aggregate of $18.0 million under the Parent Credit
Facility.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
In the opinion of Wyche, Burgess, Freeman & Parham, P.A., counsel
to the Company, the following discussion describes the material federal
income tax consequences expected to result to holders whose Senior
Notes are exchanged for Exchange Notes in the Exchange Offer. Such
opinion is based upon current provisions of the Internal Revenue Code
of 1986, as amended (the "Code"), applicable Treasury regulations,
judicial authority and administrative rulings and practice. There can
be no assurance that the Internal Revenue Service (the "Service") will
not
take a contrary view, and no ruling from the Service has been or will
be sought with respect to the Exchange Offer. Legislative, judicial or
administrative changes or interpretations may be forthcoming that could
alter or modify the statements and conclusions set forth herein. Any
such changes or interpretations may or may not be retroactive and could
affect the tax consequences to holders. Certain holders (including,
but not limited to, insurance companies, tax-exempt organizations,
financial institutions, broker-dealers, foreign corporations and
persons who are not citizens or residents of the United States) may be
subject to special rules not discussed below. EACH HOLDER OF SENIOR
NOTES SHOULD CONSULT ITS OWN TAX ADVISOR AS TO THE PARTICULAR TAX
CONSEQUENCES OF EXCHANGING SENIOR NOTES FOR EXCHANGE NOTES, INCLUDING
THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR FOREIGN LAWS.
The exchange of Senior Notes for Exchange Notes will be treated as
a "non-event" for federal income tax purposes because the Exchange
Notes will not be considered to differ materially in kind or extent
from the Senior Notes. As a result, no material federal income tax
consequences will result to holders exchanging Senior Notes for
Exchange Notes.
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Notes for its own
account pursuant to the Exchange Offer must acknowledge that it will
deliver a prospectus in connection with any resale of such Exchange
Notes. This Prospectus, as it may be amended or supplemented from time
to time, may be used by a broker-dealer in connection with the resales
of Exchange Notes received in exchange for Senior Notes where such
Senior Notes were acquired as a result of market-making activities or
other trading activities. The Company has agreed that for a period of
up to one year after the date of this Prospectus, it will make this
Prospectus, as amended or supplemented, available to any broker-dealer
that requests such document in the Letter of Transmittal for use in
connection with any such resale.
The Company will not receive any proceeds from any sale of
Exchange Notes by broker-dealers or any other persons. Exchange Notes
received by broker-dealers for their own account pursuant to the
Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated
transactions, through the writing of options on the Exchange Notes or a
combination of such methods of resale, at market prices prevailing at
the time of resale, at prices related to such prevailing market prices
or negotiated prices. Any such resale may be made directly to
purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such Exchange Notes. Any
broker-dealer that resells Exchange Notes that were received by it for
its own account pursuant to the Exchange Offer and any broker or dealer
that participates in a distribution of such Exchange Notes may be
deemed to be an "underwriter" within the meaning of the Securities Act
and any profit on any such resale of Exchange Notes and any commissions
or concessions received by any such persons may be deemed to be
underwriting compensation under the Securities Act. The Letter of
Transmittal states that by acknowledging that it will deliver and by
delivering a prospectus, a broker-dealer will not be deemed to admit
that it is an "underwriter" within the meaning of the Securities Act.
The Company has agreed to pay all expenses incident to the
Company's performance of, or compliance with, the Registration Rights
Agreement and will indemnify the holders of Senior Notes (including any
broker-dealers), and certain parties related to such holders, against
certain liabilities, including liabilities under the Securities Act.
The Company has agreed to reimburse the Initial Purchaser and holders
of Transfer Restricted Securities being tendered in the Exchange Offer
and or resold pursuant to this Plan of Distribution or registered
pursuant
to a Shelf Registration Statement, as applicable, for reasonable
attorneys' fees.
Each holder of the Senior Notes who wishes to exchange its Senior Notes
for Exchange Notes in the Exchange Offer will be required to make
certain representations to the Company as set forth in "The Exchange
Offer Terms of the Exchange Offer."
The Initial Purchaser and certain of its affiliates have engaged
in and may in the future engage in investment banking and commercial
banking transactions with the Company or Delta Woodside in the ordinary
course of business. The Initial Purchaser also was the arranger and
syndication agent under the New Credit Facility. NationsBank, N.A., an
affiliate of the Initial Purchaser, was a lender and administrative
agent under the New Credit Facility and the lender under the Parent
Credit Facility, in respect of which it receives customary fees.
NationsBank, N.A. was a lender and the agent under the Prior Credit
Agreement, for which it received customary fees.
No person has been authorized to give any information or to make
any representations in connection with the Exchange Offer other than
those contained in this Prospectus. If given or made, such information
or representations should not be relied upon as having been authorized
by the Company. Neither the delivery of this Prospectus nor any
exchange made hereunder shall, under any circumstances, create any
implication that there has been no change in the affairs of the Company
since the respective dates as of which information is given herein. The
Exchange Offer is not being made to (nor will tenders be accepted from
or on behalf of) holders of Senior Notes in any jurisdiction in which
the making of the Exchange Offer or the acceptance thereof would not be
in compliance with the laws of such jurisdiction. However, the Company
may at its discretion, take such action as it may deem necessary to
make the Exchange Offer in any such jurisdiction and extend the
Exchange Offer to holders of Senior Notes in such jurisdiction. In any
jurisdiction the securities laws or blue sky laws of which require the
Exchange Offer to be made by a licensed broker or dealer, the Exchange
Offer is being made on behalf of the Company by one or more registered
brokers or dealers which are licensed under the laws of such
jurisdiction.
LEGAL MATTERS
Certain legal matters in connection with the Exchange Offer will
be passed upon for the Company by Wyche, Burgess, Freeman & Parham,
P.A., Greenville, South Carolina. As of [September 26], 1997, members
of the law firm of Wyche, Burgess, Freeman & Parham, P.A. beneficially
owned in the aggregate [211,550] shares of common stock of Delta
Woodside.
EXPERTS
The combined financial statements of the Company as of June 29,
1996 and June 28, 1997, and for each of the years in the three-year
period ended June 28, 1997, have been included herein in reliance upon
the report of KPMG Peat Marwick LLP, independent certified public
accountants, appearing elsewhere herein, and upon authority of said
firm as experts in accounting and auditing. As discussed in Notes A
and H to the combined financial statements, in 1996 the Company adopted
the method of assessing impairment of long-lived assets as prescribed
by Statement of Financial Accounting Standards No. 121.
INDEMNIFICATION OF MANAGEMENT
The Company's restated and amended Certificate of Incorporation
requires the Company to indemnify to the fullest extent permitted by
Section 145 of the Delaware General Corporate Law ("DGCL") all persons
whom it may indemnify pursuant thereto. Section 145 of the DGCL is
set out in full as Exhibit 99.6 to the Registration Statement.
The Guarantor's by-laws require the Guarantor to indemnify its
officers, directors, employees and agents to the fullest extent
permitted by the DGCL.
The Registration Rights Agreement provides that each holder of
Senior Notes agrees severally and not jointly to indemnify and hold
harmless the Company and the Guarantor, and their respective directors,
officers, employees and agents (including, without limitation,
attorneys) and any person controlling (within the meaning of Section 15
of the Securities Act and Section 20 of the Exchange Act) the Company
and the Guarantor, and the respective officers, directors, partners,
employees, representatives and agents (including, without limitation,
attorneys) of each such person, with respect to claims and actions
based on information relating to each such holder furnished in writing
by or on behalf of such holder expressly for use in any registration
statement. The extent of holders' obligation to indemnify the Company
and the Guarantor is set out in full in Section 8 of the Registration
Rights Agreement filed as Exhibit 1.2 to the Registration Statement, to
which reference is hereby made.
The Registration Rights Agreement provides that the Company and
the Guarantor jointly and severally agree to indemnify and hold
harmless each holder of Senior Notes, each person, if any, who controls
(within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act) any holder, and the respective officers, directors,
partners, employees, representatives and agents (including without
limitation, attorneys) of any holder or any controlling person, to the
fullest extent lawful, from and against any and all losses, claims,
damages, liabilities, judgments, actions and reasonable expenses
directly or indirectly caused by, related to, based upon, arising out
of or in connection with any untrue statement or alleged untrue
statement of a material fact contained in any registration statement or
prospectus, or any omission or alleged omission to state therein
material fact required to be stated therein or necessary to make the
statements therein not misleading unless such untrue statement or
omission or alleged untrue statement or omission is made in reliance
upon and in conformity with information relating to any of the holders
furnished in writing to the Company by any of the holders expressly for
use therein. The extent of the obligation of the Company and the
Guarantor to indemnify holders is set out in full in Section 8 of the
Registration Rights Agreement filed as Exhibit 1.2 to the Registration
Statement, to which reference is hereby made.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended, may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing
provisions, or otherwise, the registrant has been informed that in the
opinion of the Commission such indemnification is against public policy
as expressed in the Securities Act and is, therefore, unenforceable.
AVAILABLE INFORMATION
The Company has filed with the Commission a registration statement
on Form S-4 (together with all amendments and exhibits thereto, the
"Registration Statement") under the Securities Act with respect to the
securities offered hereby. This Prospectus does not contain all of the
information set forth in the Registration Statement and the exhibits
and schedules thereto, as permitted by the rules and regulations of the
Commission. For further information with respect to the Company, the
Senior Notes and the Exchange Notes, reference is hereby made to the
Registration Statement, including the exhibits and schedules filed or
incorporated as a part thereof. Statements contained herein concerning
the provisions of any document are not necessarily complete and in each
instance reference is made to the copy of the document filed as an
exhibit or schedule to the Registration Statement. Each such statement
is qualified in its entirety by reference to the copy of the applicable
documents filed with the Commission. In addition, after effectiveness
of the Registration Statement, the Company will file periodic reports
and other information with the Commission under the Exchange Act. The
Registration Statement, including the exhibits and schedules thereto,
and the periodic reports and other information filed in connection
therewith, may be inspected and copied at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the following Regional Offices of the
Commission: Seven World Trade Center, Suite 1300, New York, New York
10048 and Northwest Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511. Copies of such material can be obtained
at prescribed rates from the Public Reference Section of the
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549. The
Commission maintains a Web site that contains reports, proxy and
information statements and other information regarding registrants that
file electronically with the Commission. Such reports, proxy and
information statements and other information may be found at the
Commission's site address, http://www.sec.gov. Copies of such material
also can be obtained from the Company upon request by writing to Delta
Mills, Inc., 233 North Main Street, Suite 200, Greenville, South
Carolina 29601, Attn: Secretary.
In addition, the Company has agreed that, whether or not it is required
to do so by the rules and regulations of the Commission, for so long as
any of the Senior Notes or Exchange Notes remain outstanding, it will
furnish (excluding exhibits and schedules) to the holders of the Senior
Notes and Exchange Notes and file with the Commission (unless the
Commission will not accept such a filing) as specified in the
Commission's rules and regulations: (i) all quarterly and annual
financial information that would be required to be contained in a
filing with the Commission on Forms 10-Q and 10-K if the Company were
required to file such forms, including a "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and, with
respect to the annual combined financial statements only, a report
thereon by the Company's independent certified public accountants and
(ii) all reports that would be required to be filed with the Commission
on Form 8-K if the Company were required to file such reports. In
addition, for so long as any of the Senior Notes or Exchange Notes
remain outstanding, the Company has agreed to make available to any
prospective purchaser of the Senior Notes or Exchange Notes or
beneficial owner of the Senior Notes or Exchange Notes in connection
with any sale thereof the information required by Rule 144A(d)(4) under
the Securities Act.
DELTA MILLS, INC.
INDEX TO COMBINED FINANCIAL STATEMENTS
Report of KPMG Peat Marwick LLP F-2
Combined Balance Sheets as of June 29, 1996 and June 28, 1997 F-3
Combined Statements of Operations for the fiscal years ended July
1, 1995, June 29, 1996 and June 28, 1997 F-5
Combined Statements of Shareholder's Equity (Deficit) for the fiscal
years ended July 1, 1995, June 29, 1996 and June 28, 1997 F-6
Combined Statements of Cash Flows for the fiscal years ended July 1,
1995, June 29, 1996 and June 28, 1997 F-7
Notes to Combined Financial Statements F-8
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Delta Mills, Inc.
We have audited the accompanying combined balance sheets of Delta
Mills, Inc. and certain divisions of Delta Consolidated Corporation as
of June 29, 1996 and June 28, 1997, and the related combined
statements of operations, shareholder's equity (deficit), and cash
flows for each of the years in the three-year period ended June 28,
1997. These combined financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion
on these combined financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the combined financial position of
Delta Mills, Inc. and certain divisions of Delta Consolidated
Corporation at June 29, 1996 and June 28, 1997, and the results of
their operations and their cash flows for each of the years in the
three-year period ended June 28, 1997, in conformity with generally
accepted accounting principles.
As discussed in notes A and H to the combined financial
statements, in 1996 the Company adopted the method of assessing
impairment of long-lived assets as prescribed by Statement of
Financial Accounting Standards No. 121.
/s/ KPMG Peat Marwick LLP
Greenville, South Carolina
August 15, 1997, except for Note C
as to which the date is
August 25, 1997
COMBINED BALANCE SHEETS
Delta Mills, Inc.
June 29, 1996 June 28,1997
(In thousands)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 44 1,095
Accounts receivable:
Factor 63,194 83,676
Customers 20,759 19,989
Affiliates 8,589 2,953
Less allowances for doubtful accounts
and returns 92,542 106,618
Accounts receivable, net 1,064 1,003
91,478 105,615
Inventories
Finished 19,313 13,160
Work in process 46,044 52,283
Raw materials and supplies 9,276 11,752
Total inventories 74,633 77,195
Deferred income taxes and other
current assets 3,426 3,553
TOTAL CURRENT ASSETS 169,581 187,458
PROPERTY, PLANT AND EQUIPMENT, at cost
Land and land improvements 3,656 3,647
Buildings 53,896 58,374
Machinery and equipment 194,366 207,548
Furniture and fixtures 4,020 3,944
Leasehold improvements 700 700
Construction in progress 9,655 1,980
266,293 276,193
Less accumulated depreciation 102,297 118,641
Property, plant and equipment, net 163,996 157,552
333,577 345,010
See notes to combined financial statements.
COMBINED BALANCE SHEETS
Delta Mills, Inc.
June 29, 1996 June 28,1997
LIABILITIES AND SHAREHOLDER'S EQUITY
CURRENT LIABILITIES
Trade accounts payable $22,022 $31,597
Accrued employee compensation 2,934 5,932
Accrued and sundry liabilities 9,028 8,796
Payable to affiliates 59,129 58,469
Loan payable to affiliate 60,458
TOTAL CURRENT LIABILITIES 153,571 104,794
LONG-TERM DEBT DUE TO AFFILIATE,
less current portion 170,000 210,189
DEFERRED INCOME TAXES 13,614 16,547
OTHER LIABILITIES AND DEFERRED CREDITS 5,101 5,636
SHAREHOLDERS' EQUITY (DEFICIT)
Common Stock -par value $.01 a share -- authorized
3,000 shares, issued and outstanding 100 shares -- --
Additional paid-in capital 2,134 2,134
Retained earnings (deficit) (10,843) 5,710
TOTAL SHAREHOLDER'S EQUITY (DEFICIT) 8,709 7,844
COMMITMENTS AND CONTINGENCIES
$333,577 $345,010
See notes to combined financial statements.
COMBINED STATEMENTS OF OPERATIONS
Delta Mills, Inc.
Year Ended
July 1, June 29, June 28,
1995 1996 1997
(In thousands, except shares and per share data)
Net sales to non-affiliates $393,735 $376,861 $434,678
Net sales to affiliated parties 20,192 25,600 29,870
Total net sales 413,927 402,461 464,548
Cost of goods sold 369,785 389,977 399,378
Gross profit 44,142 12,484 65,170
Selling, general and
administrative expenses 23,717 22,767 25,382
Impairment and restructuring
charge (credit) (290) 13,291
20,715 (23,574) 39,788
Other expense (income):
Interest expense 12,251 14,099 14,285
Interest (income) (39) (92) (73)
Other (income) 272 921 (1,632)
12,484 14,928 12,580
INCOME (LOSS) BEFORE
INCOME TAXES 8,231 (38,502) 27,208
Income tax expense (benefit) 3,180 (13,703) 10,655
NET INCOME (LOSS) $5,051 ($24,799) $16,553
Earnings (loss) per share of
Common Stock $50,510 ($247,990) $165,530
Number of shares outstanding 100 100 100
See notes to combined financial statements.
COMBINED STATEMENTS OF SHAREHOLDER'S EQUITY (DEFICIT)
Delta Mills, Inc.
Additional Total
Paid-In Shareholders'
Common Stock Capital Retained Equity
Shares Amount (Deficit) Earnings (DEFICIT)
Balances at July 2, 1994 100 $ 0 $ 2,217 $ 8,905 $ 11,122
Net Income 5,051 5,051
Other (83) (83)
Balances at July 1, 1995 100 0 2,134 13,956 16,090
Net (loss) (24,799) (24,799)
Balances at June 29, 1996 100 0 2,134 (10,843) (8,709)
Net income 16,553 16,553
BALANCES AT JUNE 28, 1997 100 $ 0 $ 2,134 $ 5,710 $ 7,844
See notes to combined financial statements.
COMBINED STATEMENTS OF CASH FLOWS
Delta Mills, Inc.
Year Ended
July 1, June 29, June 28,
1995 1996 1997
(In thousands)
OPERATING ACTIVITIES
Net income (loss) $ 5,051 $ (24,799) $ 16,553
Adjustments to reconcile net
income (loss) to net
cash provided by operating activities:
Depreciation 17,007 18,963 19,393
Amortization (10) (11) (70)
Writedown of property and equipment 12,554
Provision for losses on accounts receivable 746 490 388
Provision for deferred income taxes 1,119 (2,201) 3,152
Losses (gains) on disposition of property
and equipment 335 1,016 (1,504)
Deferred compensation 676 428 605
Changes in operating assets and liabilities:
Accounts receivable 3,502 (4,519) (14,525)
Inventories (3,130) 21,952 (2,562)
Prepaid expenses and other current
assets 2 403 (346)
Accounts payable and accrued expenses (6,117) (22) 13,680
NET CASH PROVIDED BY OPERATING
ACTIVITIES 19,181 24,254 34,764
INVESTING ACTIVITIES
Property, plant and equipment:
Purchases (27,195) (47,946) (15,718)
Proceeds from dispositions 1,826 2,274
NET CASH USED IN INVESTING ACTIVITIES (27,195) (46,120) (13,444)
FINANCING ACTIVITIES
Scheduled principal payments of long-term
debt (548)
Net proceeds from (repayments of)
loan from parent company 7,660 21,865 (20,269)
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES 7,112 21,865 (20,269)
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (902) (1) 1,051
Cash and cash equivalents at beginning
of year 947 45 44
CASH AND CASH EQUIVALENTS AT
END OF YEAR 45 44 1,095
See notes to combined financial statements.
NOTES TO COMBINED FINANCIAL STATEMENTS
Delta Mills, Inc.
NOTE DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Description of Business: The Company manufactures woven and knitted
textile fabrics which are sold through separate sales divisions. The
Company's operations, all within the textile industry, are considered a
single business segment.
Basis of Presentation: The combined financial statements include the
accounts of Delta Mills, Inc. and the Delta Mills, Inc. marketing divisions
of Delta Consolidated Corporation , (collectively, the Company.) All
significant intercompany balances and transactions have been eliminated.
Delta Mills, Inc. and Delta Consolidated Corporation are wholly-owned
subsidiaries of Alchem Capital Corporation, which is a wholly-owned
subsidiary of Delta Woodside Industries, Inc. (DWI).
Cash Equivalents: The Company considers all highly liquid investments
having maturities of three months or less when purchased to be cash
equivalents. Inventories: Inventories are stated at the lower of cost or
market determined using the first-in, first-out (FIFO) method.
Property, Plant and Equipment: Property, plant and equipment is stated on
the basis of cost. Depreciation is computed by the straight-line method for
financial reporting based on estimated useful lives of three to thirty-two
years, but predominantly over seven to ten years, and by accelerated
methods for income tax reporting.
Impairment of Long-Lived Assets: When required by circumstances, the
Company evaluates the recoverability of its long-lived assets by comparing
estimated future undiscounted cash flows with the asset's carrying amount
to determine if a write-down to market value or discounted cash flow is
required. This policy was formally adopted by the Company in fiscal year
1996.
Revenue Recognition: Sales are recorded upon shipment or designation of
specific goods for later shipment at customers' request with related risk
of ownership passing to such customers.
Income Taxes: Deferred income taxes are recognized for the tax consequences
of temporary differences by applying enacted statutory tax rates
applicable to future years to differences between the financial statement
carrying amounts and the tax bases of existing assets and liabilities. The
effect on deferred taxes of a change in tax rates is recognized in income
in the period that includes the enactment date.
Earnings Per Common Share: Per share data are computed based on the
weighted average number of shares of Common Stock outstanding during each
period. Environmental Costs: Environmental compliance costs including
ongoing maintenance, monitoring and similar costs, are expensed as
incurred. Environmental remediation costs are accrued, except to the
extent costs can be capitalized, when remedial efforts are probable, and
the cost can be reasonably estimated.
Cotton Procurement: The Company contracts to buy cotton with future
delivery dates at fixed prices in order to reduce the effects of
fluctuations in the prices of cotton used in the manufacture of its
products. These contracts permit settlement by delivery and are not used
for trading purposes. The Company commits to fixed prices on a percentage
of
its cotton requirements up to eighteen months in the future. If market
prices for cotton fall below the Company's committed fixed costs and are
not recoverable, the differential is charged to income at that time.
Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
Fiscal Year: The Company's operations are based on a fifty-two or fifty
three week fiscal year ending on the Saturday closest to June 30. Fiscal
years 1995, 1996 and 1997 each consist of 52 weeks.
NOTE ACCOUNTS RECEIVABLE
The woven fabrics operation assigns a substantial portion of its trade
accounts receivable to a bank under a factor agreement. The assignment of
these receivables is primarily without recourse, provided that customer
orders are approved by the bank prior to shipment of goods, up to a maximum
for each individual account.
The Company operates within the textile industry, and its operations are
affected by the relative strength or weakness of the textile markets. The
Company has a major customer who accounted for 15%, 13% and 17% of total
net sales for fiscal years 1995, 1996, and 1997, respectively.
The Company's accounts receivable are due from many companies that produce
apparel, home furnishings and other products located throughout the United
States. The many companies represented in the Company's accounts
receivable limits, to a certain extent, the concentration of credit risk.
The Company generally does not require collateral for its accounts
receivable.
NOTE LONG-TERM DEBT AND LEASES
Long-term debt consists of two 6% notes payable of $120,000,000 and
$50,000,000 to Alchem Capital Corporation, due July 6, 1998 and June 27,
1998, respectively. The debt is unsecured. Long-term debt also includes
$40,189,000 of amounts payable to affiliate at June 28, 1997, which were
subsequently refinanced as long-term debt as described in the following
paragraph.
On August 25, 1997 the Company issued $150 million of unsecured ten-year
senior notes at an interest rate of 9.625%, and obtained a secured five-
year $100 million revolving line of credit. The net proceeds of the
senior notes, the initial borrowings under the new revolving line of credit
and a capital contribution of the remainder of the intercompany debt were
used to repay the long-term debt and current amounts payable to affiliate.
At August 25, 1997, the interest rate on the $100 million revolving line
of credit was 7.1% based on LIBOR. At August 25, 1997, accounts receivable
and inventory (and related property) with a net book value of approximately
$192 million, served as collateral for the $100 million revolving line of
credit.
Immediately after the borrowing as described above, the Company had $42
million available under the revolving line of credit.
The new credit facility and the senior notes contain restrictive covenants,
which include restrictions on additional indebtedness, transactions with
affiliates, payment of dividends, minimum tangible net worth, and certain
other minimum financial ratios and maximum capital expenditures.
Total interest expense incurred and paid by the Company was $12,523,000,
$14,622,000 and $14,587,000 for fiscal years 1995, 1996 and 1997,
respectively, of which $272,000, $523,000 and $302,000 was capitalized
during fiscal years 1995, 1996 and 1997, respectively.
Rent expense relating to operating leases was approximately $1,593,000,
$1,309,000 and $2,759,000 for fiscal years 1995, 1996 and 1997,
respectively.
Aggregate principal maturities of all long-term debt and minimum payments
under operating leases are as follows:
Long-Term Operating
Leases
Fiscal Year
1998 $ 3,370,000
1999
3,362,000
2000
3,350,000
2001
3,347,000
Later Years $ 210,189,000
2,959,000
$ 210,189,000 $
16,388,000
At June 28, 1997, financial instruments with off balance sheet risk to the
Company include a loan guarantee whereby the Company is contingently liable
as guarantor of a loan facility for $234 million for Delta Woodside (which
loan facility was repaid in full on August 25, 1997). In April 1996, the
loan facility was amended to secure it with accounts receivable, inventory
and equipment. As of December 20, 1996, the loan facility was amended to
be secured with mortgage liens on substantially all of the real property of
the Company, Delta Woodside and the other subsidiaries of Delta Woodside.
At June 28, 1997 the Company's accounts receivable, inventory, property and
equipment pledged as collateral for this loan facility had a book value of
$340 million.
NOTE INCOME TAXES
The Company reports its federal income taxes in the consolidated federal
return of Delta Woodside Industries, Inc. (DWI) and subsidiaries and had
taxable income of $17.6 million in fiscal year 1997. The consolidated group
had a tax loss of $15 million for fiscal year 1997, of which $11 million of
alternative minimum tax (AMT) loss was carried back to fiscal years 1994
and 1995. The consolidated group received an AMT refund of $2.2 million.
The Federal income tax obligation or refund allocated to the Company is
determined as if the Company were filing a separate Federal income tax
return. The Company's Federal tax liability or receivable is paid to or
receivable from Delta Woodside.
The Company had a Federal net operating loss carryforward of $1.9 million
which expired unused at the end of fiscal year 1996. During fiscal year
1997, the Company utilized its state NOL carryovers of approximately $18
million.
The Company's gross deferred tax assets are reduced by a valuation
allowance to net deferred tax assets considered by management to be more
likely than not realizable. The ultimate realization of deferred tax assets
is dependent upon the generation of future taxable income during the
periods in which those temporary differences become deductible. The
valuation allowance decreased by $1 million from fiscal year 1996 to fiscal
year 1997 and increased by $0.3 million from fiscal year 1995 to fiscal
year 1996.
Significant components of the Company's deferred tax assets and liabilities
are as follows:
1996 1997
Deferred tax assets:
Impairment and restructuring reserves $4,517,000 $ 3,939,000
Accrued and sundry liabilities 2,360,000 2,315,000
Deferred compensation 1,725,000 1,958,000
Inventory 1,468,000 744,000
Net operating loss carryforwards 1,096,000 81,000
Allowance for doubtful accounts & sales returns 308,000 184,000
Other 169,000
Valuation allowance (1,022,000) (37,000)
Net deferred tax asse 10,621,000 9,184,000
Deferred tax liabilities:
Depreciation 19,970,000 22,488,000
Other 992,000 189,000
Deferred tax liabilities 20,962,000 22,677,000
Net deferred tax liabilities $10,341,000 $13,493,000
Significant components of the provision for income taxes (benefits) are as
follows:
1995 1996 1997
Current:
Federal income taxes (benefits) $1,628,000 $(11,583,000) 7,353,000
State income taxes 433,000 81,000 150,000
Total current 2,061,000 (11,502,000) 7,503,000
Deferred:
Federal income taxes (benefits) $1,099,000 ($1,886,000) $2,710,000
State income taxes (benefits) 20,000 (315,000) 442,000
Total deferred 1,119,000 (2,201,000) 3,152,000
Total provision (benefits) $3,180,000 ($13,703,000) $10,655,000
The reconciliation of income tax expense (benefit) computed at the Federal
statutory tax rate to the actual income tax expense (benefit) is as follows:
1995 1996 1997
Income tax expense (benefit) at
statutory rates $2,881,000 ($13,476,000) $9,523,000
State taxes (benefits) net of
federal benefit 294,000 (152,000) 385,000
Permanent differences 23,000 6,000 16,000
Other (18,000) (81,000) 731,000
Income tax expense (benefit) $3,180,000 $13,703,000) $10,655,000
The Company received tax refunds of $3,472,000 and $1,852,000 in fiscal
years 1995 and 1996, respectively. During fiscal year 1997, the Company
made tax payments of $6,261,000.
NOTE EMPLOYEE BENEFIT PLANS
The Company participates in the Delta Woodside Industries Employee
Retirement Plan. The Retirement Plan qualifies as an Employee Stock
Ownership Plan (ESOP) under the Internal Revenue Code as a defined
contribution plan. All employees of the Company who are at least 21 years
of age with one year of service are eligible to participate in the
Retirement Plan. Amounts allocated to participant accounts generally vest
over a five-year period. Each participant has the right to direct the
trustee as to the manner in which shares held are to be voted.
Contributions of approximately $247,000, $270,000 and $236,000 were
allocated to participants for fiscal years 1995, 1996, and 1997,
respectively.
The Company participates in the Delta Woodside Industries 401(k) Employee
Savings and Investment Plan. Employees meeting certain eligibility
requirements may join the plan. During fiscal years 1995, 1996 and 1997,
the Company contributed $141,000, $398,000 and $480,000, respectively, to
the Plan.
The Company also participates in a 501(c) (9) trust, the Delta Woodside
Employee Benefit Plan and Trust (Trust). The Trust collects both
employer and employee contributions from the Company and makes
disbursements for health claims and other qualified benefits.
The Company participates in a Deferred Compensation Plan, managed by DWI,
which permits certain management employees to defer a portion of their
compensation. Deferred compensation accounts are credited with interest and
are distributable after retirement, disability or employment termination.
As of June 29, 1996 and June 28, 1997, the Company's liability was
$4,481,000 and $5,086,000, respectively.
The Company also participates in the Delta Woodside Industries, Inc.
Incentive Stock Award Plan and Stock Option Plan. Including associated
tax assistance, under the Incentive Stock Award Plan, the Company
recognized
expense of $404,000, $325,000 and $245,000 for fiscal years 1995, 1996, and
1997, respectively. Under the Stock Option Plan, the Company recognized
expense of $63,000, $61,000 and $87,000 for fiscal years 1995, 1996, and
1997, respectively.
NOTE AFFILIATED PARTY TRANSACTIONS
The Company participated in a cash management system maintained by Delta
Woodside Industries, Inc. until August 25, 1997. Under this system excess
cash was forwarded to DWI each day, reducing the current loan payable to
affiliate. Likewise, cash requirements were funded daily by DWI,
increasing loan payable to affiliate. Interest was charged on loan payable
to affiliate balances based on the weighted average cost of DWI's
borrowings. The rate charged on these borrowings was approximately 8.5% at
June 28, 1997. In connection with the refinancing described in Note C,
current loan payable to affiliate was reclassified as long-term debt as of
June 28, 1997.
Accounts receivable due from affiliates include $8.4 million and $1.7
million at June 29, 1996 and June 28, 1997, respectively, for anticipated
refunds of income taxes from Delta Woodside Industries, Inc. Receivables
from affiliates also include $.1 million and $1.2 million at June 29, 1996
and June 28, 1997, respectively, resulting from sales to Duck Head Apparel
Company, Inc., an affiliate.
Current payable to affiliates bears no interest and includes (1) $40.5
million at June 29, 1996 and June 28, 1997, payable to DWI resulting from
previous mergers, (2) an advance from Duck Head Apparel Company, Inc. of
$7.5 million at June 29, 1996 in connection with certain affiliated sales
programs (see below), (3) interest payable of $10.2 million owed Alchem
Capital Corporation at June 29, 1996 and June 28, 1997 and (4) other
amounts payable to DWI for current activity as described in the following
paragraphs.
Affiliated party transactions included in the statements of operations
result from a variety of services provided and goods transferred as shown
in the following table:
1995 1996 1997
Textile and yarn sales $ 20,192,000 25,600,000 29,870,000
Corporate services expense 2,950,000 3,123,000 3,302,000
Income tax payments (refunds) (3,472,000) (1,852,000) 6,261,000
Payroll taxes, insurance and employee
related expenses 14,941,000 25,548,000 42,578,000
Printing services expense 460,000 407,000 505,000
Interest expense 11,760,000 13,627,000 13,679,000
Rental income 153,000 141,000 93,000
Beginning March 29, 1997, the Company sells textiles and yarn to an
affiliate at prices which approximate market. Prior to March 29, 1997, the
Company sold textiles and yarn to an affiliate at prices which approximate
cost. In connection with the prior pricing arrangement, the affiliate also
maintained a noninterest bearing deposit with the Company. The amount of
deposit was based on the volume of purchases. At June 29, 1996, the non
interest bearing deposit was $7,516,000 and is classified as payable to
affiliate. There was no such deposit at June 28,1997 based upon the changes
in the pricing agreement. Corporate services include management,
treasury, computer, purchasing, benefits, payroll, auditing, accounting and
tax services. For these services, DWI charges actual cost based on
relative usage and other factors. Actual cost is charged for payroll
taxes, insurance and employee related expenses which are managed by DWI as
a corporate service. During fiscal year 1996, DWI began making payments
for payroll taxes and receiving related reimbursements from the Company.
Printing services are charged at market prices. Interest is charged based
on fixed rates for long-term debt. Interest on loan payable to affiliate
is charged based on DWI's weighted average interest rate. The Company
charges affiliates for rent based on estimated cost and space utilized.
NOTE FAIR VALUE OF FINANCIAL INSTRUMENTS
At June 28, 1997, the Company's carrying value of long-term debt was
approximately $4.4 million higher than fair value. Fair value was
determined using market rates for debt of a similar maturity. For other
material financial instruments, carrying value approximates fair value.
NOTE RESTRUCTURING AND IMPAIRMENT CHARGES
The history of operating losses at the knitting and knit finishing
operations at two plants in the knitted fabrics division caused the Company
to recognize a charge of $11.7 million during fiscal year 1996 to reduce
the book value of the fixed assets in this business to the appraised
orderly liquidation value.
In fiscal year 1996, the Company also recognized restructuring charges of
$1.6 million for plant closings in the woven textile division. Of the $1.6
million, $1.0 million is for the write-down of property, plant and
equipment, and the remainder is for expenses which were incurred in
connection with the plant closings.
NOTE COMMITMENTS AND CONTINGENCIES
During fiscal year 1998, the Company plans to spend approximately $15
million for capital improvements and new equipment, primarily to complete
the modernization program for the woven fabrics division.
The Company has entered into agreements, and has fixed prices, to purchase
cotton for use in its manufacturing operations. At June 28, 1997 minimum
payments under these contracts with noncancelable contract terms were
$58,874,000 in fiscal year 1998 and $11,646,000 in fiscal year 1999.
From time to time the Company and its subsidiaries are defendants in legal
actions involving claims arising in the normal course of business,
including product liability claims. The Company believes that, as a result
of legal defenses, insurance arrangements and indemnification provisions
with parties believed to be financially capable, none of these actions
should have a material adverse effect on its results of operations or
financial condition.
NOTE QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The following is a summary of the unaudited quarterly results of operations
for the years ended June 29, 1996 and June 28, 1997.
September 30 December 30 March 30 June 29 1996
(In thousands except per share data)
Net sales.. $97,424 $106,254 $91,659 $107,124
Gross profit... 8,285 4,943 987 (1,731)
Net income (loss). (829) (2,945) (5,453) (15,572)
Earnings (loss) per share
Common Stock. (8,290) (29,450) (54,530) (155,720)
(in thousands except per share data)
September 28 December 28 March 27 June 28
1997
Net sales.. $99,939 $119,220 $115,078 $130,311
Gross profit... 13,188 15,695 16,489 19,798
Net income (loss). 1,881 3,497 3,435 7,740
Earnings (loss) per share
Common Stock. 18,810 34,970 34,350 77,400
During the fourth quarter of fiscal year 1996, the Company recognized
impairment and restructuring charges of $13.3 million, and also charged
cost of goods sold for $1.1 million attributable to cotton purchase
commitments at prices in excess of market value and in quantities in
excess of orders from customers.
DELTA MILLS, INC.
All tendered Senior Notes, executed Letters of Transmittal, and other
related documents should be directed to the Exchange Agent. Requests for
assistance and for additional copies of this Prospectus, the Letter of
Transmittal and other related documents should be directed to the Exchange
Agent.
The Exchange Agent for the Exchange Offer is
THE BANK OF NEW YORK
By Facsimile:
(212) 815-6339
Confirm by Telephone:
(212) 815-2742
By Overnight Delivery:
The Bank of New York
101 Barclay Street
Attention: 7th Floor
Corporate Trust & Agencies Service
Window New York, New York 10286
Attention: Reorganization Section
By Hand Delivery:
The Bank of New York
101 Barclay Street
Attention: 7th Floor
Corporate Trust & Agencies Service
Window New York, New York 10286
Attention: Reorganization Section
By Registered or Certified Mail:
The Bank of New York
101 Barclay Street, 7th Floor
New York, New York 10286
Attention: Reorganization Section
UNTIL [ ] , 1997 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS) ALL
DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS OR AS REQUIRED BY THE TERMS OF THE EXCHANGE OFFER.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article Sixth of the Company's Restated Certificate of Incorporation
provides that the Company shall, to the fullest extent permitted by Section 145
of the Delaware General Corporation Law ("DGCL"), indemnify all persons whom it
may indemnify pursuant thereto. A copy of Section 145 of the DGCL is
attached as Exhibit 99.6.
Article VII, Section 7 of the Guarantor's by-laws require the Guarantor to
indemnify its officers, directors, employees and agents to the fullest extent
permitted by the DGCL.
The Registration Rights Agreement provides that each holder of Senior Notes
agrees severally and not jointly to indemnify and hold harmless the Company and
the Guarantor, and their respective directors, officers, employees and agents
(including, without limitation, attorneys) and any person controlling (within
the meaning of Section 15 of the Securities Act and Section 20 of the Exchange
Act) the Company and the Guarantor, and the respective officers, directors,
partners,
employees, representatives and agents (including, without limitation, attorneys)
of each such person, with respect to claims and actions based on information
relating to each such holder furnished in writing by or on behalf of such holder
expressly for use in any registration statement. The extent of holders'
obligation to indemnify the Company and the Guarantor is set out in full in
Section 8 of the Registration Rights Agreement filed as Exhibit 1.2 to this
Registration Statement, to which reference is hereby made.
The Registration Rights Agreement provides that the Company and the
Guarantor jointly and severally agree to indemnify and hold harmless each holder
of Senior Notes, each person, if any, who controls (within the meaning of
Section
15 of the Act or Section 20 of the Exchange Act) any holder, and the respective
officers, directors, partners, employees, representatives and agents (including
without limitation, attorneys) of any holder or any controlling person, to the
fullest extent lawful, from and against any and all losses, claims, damages,
liabilities, judgments, actions and reasonable expenses directly or indirectly
caused by, related to, based upon, arising out of or in connection with any
untrue statement or alleged untrue statement of a material fact contained in any
registration statement or prospectus, or any omission or alleged omission to
state therein material fact required to be stated therein or necessary to make
the statements therein not misleading unless such untrue statement or
omission or
alleged untrue statement or omission is made in reliance upon and in conformity
with information relating to any of the holders furnished in writing to the
Company by any of the holders expressly for use therein. The extent of the
obligation of the Company and the Guarantor to indemnify holders is set out in
full in Section 8 of the Registration Rights Agreement filed as Exhibit 1.2 to
this Registration Statement, to which reference is hereby made.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
1.1 Purchase Agreement Relating to $150,000,000 9-5/8% Senior Notes due
2007, dated August 20, 1997, by and among Delta Mills, Inc., Delta Mills
Marketing, Inc. and NationsBanc Capital Markets, Inc.
1.2 Registration Rights Agreement, dated as of August 25, 1997, by and among
Delta Mills, Inc., Delta Mills Marketing, Inc. and NationsBanc Capital
Markets, Inc.
3.1 Restated and Amended Certificate of Incorporation of Delta Mills, Inc.
3.2 Bylaws of Delta Mills, Inc.
4.1 Indenture, dated as of August 25, 1997, by and among Delta Mills, Inc.,
Delta Mills Marketing, Inc. and NationsBanc Capital Markets, Inc.
5.1 Opinion of Wyche, Burgess, Freeman & Parham, P.A. re Legality.
8.1 Opinion of Wyche, Burgess, Freeman & Parham, P.A. re Tax
Matters.
10.1 See Exhibits 1.1, 1.2 and 4.1.
12.1 Statements re Computation of Ratios.
21.1 Listing of subsidiaries.
23.1 Consent of Wyche, Burgess, Freeman & Parham, P.A.: Contained in Exhibit
23.2 Consent of KPMG Peat Marwick LLP.
24.1 Power of Attorney: Included on Signature Page.
25.1 Statement of Eligibility of Trustee (bound separately from other
exhibits)
27.1 Financial Data Schedule (electronic filing only).
99.1 Form of Letter of Transmittal.
99.2 Form of Notice of Guaranteed Delivery.
99.3 Form of Letter to Clients.
99.4 Form of Letter to Registered Holders and DTC Participants.
99.5 Instructions to Registered Holders and DTC Participants.
99.6 Section 145 of the Delaware General Corporation Law.
(b) Certain Additional Financial Statement Schedules: Not applicable.
ITEM 22. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement;
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end of the
estimated
maximum offering range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume
and price represent no more than a 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table in the
effective registration statement.
(iii) To include any material
information with respect to the plan of distribution not previously disclosed in
the registration statement or any material change to such information in the
registration statement;
(2) That, for the purpose of determining any liability under the Securities
Act
of 1933, each such post-effective amendment 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.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of
the offering.
(b) The undersigned registrant hereby undertakes to respond to
requests for information that is incorporated by reference into the prospectus
pursuant to Item 4, 10(b), 11 or 13 of this form, within one business day of
receipt of such request, and to send the incorporated documents by first class
mail or other equally prompt means. This includes information contained in
documents filed subsequent to the effective date of the registration statement
through the date of responding to the request.
(c) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Registration Statement to be signed on its behalf by
the undersigned, thereunto duly authorized, in the city of Greenville, State
of South Carolina, on October 3, 1997.
DELTA MILLS, INC.
By: /s/ Bettis C. Rainsford
Bettis C. Rainsford
Executive Vice President, Treasurer,
and Chief Financial Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints E. Erwin Maddrey, II and Bettis C. Rainsford,
and each of them, as true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution for him or her and in his or her
name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this registration
statement, and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of
them, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, as fully
to all intents and purposes as he or she might or could do in person, hereby
ratifying and confirming all which said attorneys-in-fact and agents or any
of them, or their or his or her substitute or substitutes, may lawfully do,
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
Signature Title Date
/s/ E. Erwin Maddrey, II President,Chief Executive October 2, 1997
E. Erwin Maddrey, II Officer and Director
/s/ Bettis C. Rainsford Executive Vice President, October 3, 1997
Bettis C. Rainsford Treasurer, Chief Financial
Officer and Director
/s/ Dougals J. Stevens Controller and Assistant October 2, 1997
Douglas J. Stevens Secretary
/s/ C.C. Guy Director October 2, 1997
C. C. Guy
/s/ Buck A. Mickel Director October 2, 1997
Buck A. Mickel
EXHIBIT INDEX
1.1 Purchase Agreement Relating to $150,000,000 9-5/8% Senior Notes due
2007, dated August 20, 1997, by and among Delta Mills, Inc., Delta Mills
Marketing, Inc. and NationsBanc Capital Markets, Inc.
1.2 Registration Rights Agreement, dated as of August 25, 1997, by and
among Delta Mills, Inc., Delta Mills Marketing, Inc. and NationsBanc
Capital Markets, Inc.
3.1 Restated and Amended Certificate of Incorporation of Delta Mills, Inc.
3.2 Bylaws of Delta Mills, Inc.
4.1 Indenture, dated as of August 25, 1997, by and among Delta Mills, Inc.,
Delta Mills Marketing, Inc. and NationsBanc Capital Markets, Inc.
5.1 Opinion of Wyche, Burgess, Freeman & Parham, P.A. re Legality.
8.1 Opinion of Wyche, Burgess, Freeman & Parham, P.A. re Tax Matters.
10.1 See Exhibits 1.1, 1.2 and 4.1.
12.1 Statements re Computation of Ratios.
21.1 Listing of subsidiaries.
23.1 Consent of Wyche, Burgess, Freeman & Parham, P.A.: Contained in
Exhibit
23.2 Consent of KPMG Peat Marwick LLP.
24.1 Power of Attorney: Included in Signature Page.
25.1 Statement of Eligibility of Trustee (bound separately from other
exhibits).
27.1 Financial Data Schedule (electronic filing only).
99.1 Form of Letter of Transmittal.
99.2 Form of Notice of Guaranteed Delivery.
99.3 Form of Letter to Clients.
99.4 Form of Letter to Registered Holders and DTC Participants.
99.5 Instructions to Registered Holders and DTC
Participants.
99.6 Section 145 of the Delaware General Corporation Law.
EXHIBIT 1.1
DELTA MILLS, INC.
$150,000,000
9 5/8% SENIOR NOTES DUE 2007
PURCHASE AGREEMENT
August 20, 1997
NationsBanc Capital Markets, Inc.
100 North Tryon Street
Charlotte, North Carolina 28255
Ladies and Gentlemen:
Delta Mills, Inc., a Delaware corporation (the "Company"),
proposes to issue and sell to you (the "Initial Purchaser") $150,000,000
principal amount of its 9 5/8% Senior Notes due 2007 (the "Notes"). The Notes
will be fully and unconditionally guaranteed (the "Guarantees" and
collectively with the Notes, the "Securities") on a senior basis by each
subsidiary of the Company (the "Guarantors" and collectively with the
Company, the "Issuers"). The Notes are to be issued under an indenture
(the "Indenture") dated as of August 25, 1997 among the Issuer and The Bank
of New York, as trustee (the "Trustee").
The sale of the Securities to the Initial Purchaser will be made
without registration of the Securities under the Securities Act of 1933, as
amended (the "Securities Act"), in reliance upon exemptions from the
registration requirements of the Securities Act. You have advised the
Issuers that you will offer and sell the Securities purchased by you
hereunder in accordance with Section 3 hereof as soon as you deem
advisable.
In connection with the sale of the Securities, the Issuers have
prepared a preliminary offering memorandum, dated August 1, 1997 (the
"Preliminary Memorandum") and a final offering memorandum, dated August 20,
1997 (the "Final Memorandum"). Each of the Preliminary Memorandum and the
Final Memorandum sets forth certain information concerning the Issuers and
the Securities. The Issuers hereby confirm that they have authorized the
use of the Preliminary Memorandum and the Final Memorandum, and any
amendment or supplement thereto, in connection with the offer and sale of
the Securities by the Initial Purchaser. Unless stated to the contrary,
all references herein to the Final Memorandum are to the Final Memorandum
at the time of execution and delivery of this Agreement (the "Execution
Time") and are not meant to include any amendment or supplement, or any
information incorporated by reference therein, subsequent to the Execution
Time.
The Initial Purchaser and its direct and indirect
transferees will be entitled to the benefits of the Registration
Rights Agreement, substantially in the form attached hereto as
Exhibit A (the "Registration Rights Agreement"), pursuant to
which the Issuers will agree to use their best efforts to
commence an offer to exchange the Securities for Exchange
Securities (the "Exchange Securities") that have been registered
under the Securities Act, and that otherwise are identical in all
respects to the Securities, or to cause a shelf registration
statement to become effective under the Securities Act and to
remain effective for the period designated in such Registration
Rights Agreement.
1. Representations and Warranties. The Issuers jointly
and severally represent and warrant to the Initial Purchaser as
set forth below in this Section 1.
(a) The Preliminary Memorandum, at the date thereof,
did not contain any untrue statement of a material fact or
omit to state any material fact necessary to make the
statements therein, in the light of the circumstances under
which they were made, not misleading. The Final Memorandum,
at the date hereof, does not, and at the Closing Date (as
defined below) will not (and any amendment or supplement
thereto, at the date thereof and at the Closing Date, will
not), contain any untrue statement of a material fact or
omit to state any material fact necessary to make the
statements therein, in the light of the circumstances under
which they were made, not misleading; provided, however that
the Issuers make no representation or warranty as to the
information contained in or omitted from the Preliminary
Memorandum or the Final Memorandum, or any amendment or
supplement thereto, in reliance upon and in conformity with
information furnished in writing to the Issuers by or on
behalf of the Initial Purchaser specifically for inclusion
therein.
(b) Neither the Issuers, nor any of their "Affiliates"
(as defined in Rule 501(b) of Regulation D under the
Securities Act ("Regulation D")), nor any person acting on
their behalf has, directly or indirectly, made offers or
sales of any security, or solicited offers to buy any
security, under circumstances that would require the
registration of the Securities under the Securities Act.
Neither the Issuers, nor any of their Affiliates, nor any
person acting on their behalf has engaged in any form of
general solicitation or general advertising (within the
meaning of Regulation D) in connection with any offer or
sale of the Securities (provided, that the Issuers make no
representations regarding the Initial Purchaser). The
Securities satisfy the eligibility requirements of Rule
144A(d)(3) under the Securities Act. The Final Memorandum
and each amendment or supplement thereto, as of its date,
contains the information specified in Rule 144A(d)(4) under
the Act. The Issuers have been advised by the National
Association of Securities Dealers, Inc. Private Offerings,
Resales and Trading through the Automated Linkages Market
("PORTAL") that the Securities have been designated PORTAL
eligible securities in accordance with the rules and
regulations of the National Association of Securities
Dealers, Inc.
(c) Neither the Company nor any of its subsidiaries is
an "investment company" within the meaning of the Investment
Company Act of 1940, as amended (the "Investment Company
Act"), without taking account of any exemption arising out
of the number of holders of any Issuer's securities.
(d) Assuming (i) that the representations and
warranties and covenants of the Initial Purchaser contained
in Section 3 hereof are true, correct and complete and (ii)
that the Initial Purchaser complies with its covenants in
Section 3 hereof, (A) registration under the Securities Act
of the Securities or qualification of the Indenture under
the Trust Indenture Act of 1939, as amended (the "Trust
Indenture Act"), is not required in connection with the
offer and sale of the Securities to the Initial Purchaser in
the manner contemplated by the Final Memorandum or this
Agreement and (B) initial resales of the Securities by the
Initial Purchaser on the terms and in the manner set forth
in the Final Memorandum and Section 4 hereof are exempt from
the registration requirements of the Securities Act.
(e) Since the respective dates as of which information
is given in the Preliminary Memorandum and the Final
Memorandum, except as otherwise stated therein, (i) there
has been no material adverse change in the condition
(financial or otherwise), earnings, affairs or business
prospects of the Company and its subsidiaries considered as
a whole, whether or not arising in the ordinary course of
business and (ii) there have been no material transactions
entered into by the Company or any of its subsidiaries
(collectively, a "Material Adverse Change").
(f) The Company has been duly organized and is validly
existing as a corporation in good standing under the laws of
the State of Delaware with corporate power and authority to
own, lease and operate its properties and conduct its
business as described in the Preliminary Memorandum and the
Final Memorandum; and the Company is duly qualified as a
foreign corporation to transact business and is in good
standing in each jurisdiction in which the conduct of its
business requires such qualification, except to the extent
that the failure to be so qualified or be in good standing
would not, singly or in the aggregate, reasonably be
expected to have a material adverse effect on the condition
(financial or otherwise), earnings, affairs or business
prospects of the Company and its subsidiaries considered as
a whole (a "Material Adverse Effect").
(g) All of the issued and outstanding capital stock of
the Company is owned by Alchem Capital Corporation, a
Delaware corporation, and, at June 28, 1997, was as set
forth in the "Actual" column under the caption
"Capitalization" in the Preliminary Memorandum and the Final
Memorandum. All of the shares of capital stock of the
Company have been duly authorized and validly issued and are
fully paid and nonassessable. Attached as Schedule A hereto
is a complete and accurate list of each subsidiary of the
Company. Each of the subsidiaries of the Company has been
duly incorporated and is validly existing as a corporation
in good standing under the laws of the jurisdiction of its
incorporation, has corporate power and authority to own,
lease and operate its properties and conduct its business as
described in the Preliminary Memorandum and the Final
Memorandum and is duly qualified as a foreign corporation to
transact business and is in good standing in each
jurisdiction in which the conduct of its business requires
such qualification, except to the extent that the failure to
be so qualified or be in good standing would not, singly or
in the aggregate, reasonably be expected to have a Material
Adverse Effect. All of the issued and outstanding capital
stock of each subsidiary has been duly authorized and
validly issued and is fully paid and nonassessable, and,
except as described in the Preliminary Memorandum and the
Final Memorandum, all such capital stock of each subsidiary
is owned by the Company, directly or through subsidiaries,
free and clear of any mortgage, pledge, lien, encumbrance,
claim or equity.
(h) This Agreement has been duly authorized, executed
and delivered by the Issuers and constitutes the valid and
binding agreement of the Issuers, enforceable against the
Issuers in accordance with its terms, except that (i)
enforcement thereof may be subject to (A) bankruptcy,
insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws now or hereafter in effect
relating to or affecting creditors' rights generally and (B)
general principles of equity (regardless of whether
enforceability is considered in a proceeding in equity or at
law) and (ii) the enforceability of any indemnification or
contribution provisions thereof may be limited under
applicable securities laws or the public policies underlying
such laws.
(i) The Notes have been duly authorized by the
Company, and, when executed and authenticated in accordance
with the provisions of the Indenture and delivered to and
paid for by the Initial Purchaser in accordance with this
Agreement, will constitute the valid and binding obligations
of the Company enforceable against the Company in accordance
with the terms, and will be entitled to the benefits, of the
Indenture, except that enforcement thereof may be subject to
(A) bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws now or
hereafter in effect relating to or affecting creditors'
rights generally and (B) general principles of equity
(regardless of whether enforceability is considered in a
proceeding in equity or at law).
(j) The Guarantees endorsed on the Notes have been
duly authorized by each Guarantor and when the Notes are
executed and authenticated in accordance with the provisions
of the Indenture and delivered to and the Securities have
been paid for by the Initial Purchaser in accordance with
this Agreement, the Guarantees will constitute the valid and
binding obligation of the Guarantors enforceable against the
Guarantors in accordance with their terms and will be
entitled to the benefits of the Indenture except that
enforcement thereof may be subject to (A) bankruptcy,
insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws now or hereafter in effect
relating to or affecting creditors' rights generally and (B)
general principles of equity (regardless of whether
enforceability is considered in a proceeding in equity or at
law).
(k) The Indenture has been duly authorized, executed
and delivered by the Issuers and (assuming the due execution
and delivery thereof by the Trustee) is a legally valid and
binding agreement of the Issuers, enforceable against the
Issuers in accordance with its terms, except that
enforcement thereof may be subject to (A) bankruptcy,
insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws now or hereafter in effect
relating to or affecting creditors' rights generally and (B)
general principles of equity (regardless of whether
enforceability is considered in a proceeding in equity or at
law).
(l) The Exchange Securities have been duly authorized,
and, when duly executed, authenticated, issued and
delivered, will be validly issued and outstanding, and will
constitute the valid and binding obligations of the Issuers,
entitled to the benefits of the Indenture and enforceable
against the Issuers in accordance with their terms except
that enforcement thereof may be subject to (A) bankruptcy,
insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws now or hereafter in effect
relating to or affecting creditors' rights generally and (B)
general principles of equity (regardless of whether
enforceability is considered in a proceeding in equity or at
law).
(m) The Registration Rights Agreement has been duly
authorized by the Issuers, and when duly executed and
delivered by the Issuers (assuming the due execution and
delivery by the Initial Purchaser), will constitute a valid
and binding agreement of the Issuers, enforceable against
the Issuers in accordance with its terms except that (i)
enforcement thereof may be subject to (A) bankruptcy,
insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws now or hereafter in effect
relating to or affecting creditors' rights generally and (B)
general principles of equity (regardless of whether
enforceability is considered in a proceeding in equity or at
law) and (ii) the enforceability of any indemnification or
contribution provisions thereof may be limited under
applicable securities laws or the public policies underlying
such laws.
(n) On the Closing Date, the New Credit Agreement (as
defined in the Final Memorandum) and the guarantee of the
obligations thereunder by the Guarantor (a) shall have been
duly authorized, executed and delivered by the Company and
the Guarantor, respectively, and will constitute the valid
and binding agreement of the Company and the Guarantor,
respectively, enforceable against the Company and the
Guarantors, as applicable, in accordance with their terms
except that (i) enforcement thereof may be subject to (A)
bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws now or
hereafter in effect relating to or affecting creditors'
rights generally and (B) general principles of equity
(regardless of whether enforceability is considered in a
proceeding in equity or at law) and (ii) the enforceability
of any indemnification or contribution provisions thereof
may be limited under applicable securities laws or public
policies; and (b) shall be in full force and effect. On the
Closing Date, no event of default or event which, with the
giving of notice or passage of time or both, would
constitute an event of default shall have occurred under the
New Credit Agreement or guarantee thereof by the Guarantor
and all conditions to the extension of credit thereunder
still have been satisfied without waiver.
(o) On the Closing Date, the Parent Credit Agreement
(as defined in the Final Memorandum) and the guarantee of
the obligations thereunder by certain subsidiaries of Delta
Woodside Industries, Inc. other than the Issuers (a) shall
have been duly authorized, executed and delivered by Delta
Woodside Industries, Inc. and such subsidiaries,
respectively, and will constitute the valid and binding
agreements of Delta Woodside Industries, Inc. and such
subsidiaries, respectively, enforceable against Delta
Woodside Industries, Inc. and each such subsidiary in
accordance with their terms except that (i) enforcement
thereof may be subject to (A) bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other
similar laws now or hereafter in effect relating to or
affecting creditors' rights generally and (B) general
principles of equity (regardless of whether enforceability
is considered in a proceeding in equity or at law) and (ii)
the enforceability of any indemnification or contribution
provisions thereof may be limited under applicable
securities laws or public policies; and (b) shall be in full
force and effect. On the Closing Date, no event of default
or event which, with the giving of notice or passage of time
or both, would constitute an event of default shall have
occurred under the Parent Credit Agreement or guarantee
thereof and all conditions to the extension of credit
thereunder still have been satisfied without waiver.
(p) The execution, delivery and performance of this
Agreement, the Indenture, the Registration Rights Agreement,
and the New Credit Agreement by the Issuers (to the extent
each is a party thereto), and the consummation of the
transactions contemplated hereby and thereby and the
issuance and sale of the Securities and Exchange Securities
by the Issuers will not conflict with or result in a breach
or violation of any of the terms or provisions of, or
constitute a default under, any indenture, mortgage, deed of
trust, loan or credit agreement or other agreement or
instrument to which either the Company or any of its
subsidiaries is a party or by which the Company or any of
its subsidiaries is bound or to which any of the properties
or assets of the Company or any of its subsidiaries are
subject, nor will such actions result in any violation of
the provisions of the charter or by-laws of the Company or
any of its subsidiaries or any statute to which it may be
subject or any order, rule or regulation of any court or
governmental agency or body having jurisdiction over the
Company or any of its subsidiaries or any of their
properties or assets (except to the extent any such
conflict, breach, violation or default singly or in the
aggregate, would not reasonably expected to have a Material
Adverse Effect); and except for such consents, approvals,
authorizations, registrations or qualifications as may be
required under applicable state securities and Blue Sky laws
in connection with the purchase and distribution of the
Securities by the Initial Purchaser or as set forth in the
Registration Rights Agreement, no consent, approval,
authorization or order of, or filing or registration with,
any such court or governmental agency or body is required
for the execution, delivery and performance of this
Agreement, the Indenture, the Registration Rights Agreement
and, the New Credit Agreement by the Issuers, the
consummation of the transactions contemplated hereby and
thereby, and the issuance and sale of the Notes and Exchange
Securities by the Issuers.
(q) Neither the Company nor any of its subsidiaries is
in breach or violation of any of the terms or provisions of
any indenture, mortgage, deed of trust, loan agreement or
other agreement or instrument to which the Company or any of
its subsidiaries is a party or by which the Company or any
of its subsidiaries is bound or to which any of the
properties or assets of the Company or any of its
subsidiaries are subject, nor is the Company or any of its
subsidiaries in violation of the provisions of its
respective charter or by-laws or any statute or any
judgment, order, rule or regulation of any court or
governmental agency or body having jurisdiction over the
Company, any of its subsidiaries or any of their properties
or assets (except to the extent any such conflict, breach,
violation or default is cured at or prior to the Closing
Date and within the grace period applicable thereto or would
not, singly or in the aggregate, reasonably be expected to
have a Material Adverse Effect).
(r) The descriptions of the Securities, the Indenture
and the Registration Rights Agreement contained in the Final
Memorandum are accurate summaries in all material respects.
(s) Except as set forth in the Registration Rights
Agreement, there are no contracts, agreements or
understandings between the Company or any of its
subsidiaries and any person granting such person the right
to require the Company or any of its subsidiaries to file a
registration statement under the Securities Act with respect
to any securities owned or to be owned by such person or to
require the Company or any of its subsidiaries to include
such securities in any securities being registered pursuant
to any registration statement filed by the Company or any of
its subsidiaries under the Securities Act.
(t) Except as set forth in the Preliminary Memorandum
and the Final Memorandum, there is no action, suit or
proceeding before or by any court or governmental agency or
body, domestic or foreign, now pending or, to the knowledge
of the Issuers, threatened against or affecting the Company
or any of its subsidiaries, which would reasonably be
expected to result in a Material Adverse Change or singly or
in the aggregate, reasonably be expected to have a Material
Adverse Effect or materially and adversely affect the
offering of the Securities.
(u) Except as set forth in the Final Memorandum, the
Company and each of its subsidiaries has good and
indefeasible title in fee simple to all real property and
good and indefeasible title to all personal property owned
by it and necessary in the conduct of the business of the
Company or such subsidiary in each case free and clear of
all liens, encumbrances and defects except (i) such as are
referred to in the Final Memorandum or (ii) such as do not
materially and adversely affect the value of such property
to the Company or such subsidiary, and do not interfere with
the use made and proposed to be made of such property by the
Company or such subsidiary to an extent that such
interference would, singly or aggregate, reasonably be
expected to have a Material Adverse Effect. The Company and
its subsidiaries possess adequate certificates,
authorizations or permits issued by the appropriate state,
federal or foreign regulatory agencies or bodies necessary
to conduct the business now operated by them, and except as
set forth in the Final Memorandum, neither the Company nor
any of its subsidiaries has received any notice of
proceedings relating to the revocation or modification of
any such certificate, authority or permit which, singly or
in the aggregate, if the subject of an unfavorable decision,
ruling or finding, would, singly or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
(v) KPMG Peat Marwick LLP, who have certified certain
financial statements of the Company and its subsidiaries,
are independent public accountants within the meaning of the
Securities Act and the rules and regulations thereunder.
The combined financial statements included in the
Preliminary Memorandum and the Final Memorandum present
fairly in all material respects the combined financial
position of the Issuers, on a combined basis, as at the
dates indicated and the results of their operations and the
changes in their combined financial position for the periods
specified; said financial statements have been prepared in
conformity with generally accepted accounting principles
applied on a consistent basis during the periods involved,
except as indicated therein. The Company and each of its
subsidiaries maintain a system of internal accounting
controls sufficient to provide reasonable assurances that
(i) transactions are executed in accordance with
management's general or specific authorizations; (ii)
transactions are recorded as necessary to permit preparation
of financial statements in conformity with generally
accepted accounting principles and to maintain asset
accountability; (iii) access to assets is permitted only in
accordance with management's general or specific
authorization; and (iv) the recorded accountability for
assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to
any differences.
(w) Neither the Company nor any of its subsidiaries is
now or, after giving effect to the issuance of the
Securities, and the application of the proceeds thereof,
will be (i) insolvent, (ii) left with unreasonably small
capital with which to engage in its anticipated businesses
or (iii) incurring debts beyond its ability to pay such
debts as they become due.
(x) Except as would not reasonably be expected to have
a Material Adverse Effect, the Company and its subsidiaries
own or otherwise possess the right to use all patents,
trademarks, service marks, trade names and copyrights, all
applications and registrations for each of the foregoing,
and all other proprietary rights and confidential
information used in the conduct of their respective
businesses as currently conducted; and neither the Company
nor any of its subsidiaries has received any notice or is
otherwise aware, of any infringement of or conflict with the
rights of any third party with respect to any of the
foregoing which, singly or in the aggregate, if the subject
of an unfavorable decision, ruling or finding, would
reasonably be expected to have a Material Adverse Effect.
(y) The Company and its subsidiaries are (i) in
compliance with any and all applicable foreign, federal,
state and local laws and regulations relating to the
protection of human health and safety, the environment or
hazardous or toxic substances or wastes, pollutants or
contaminants ("Environmental Laws"), (ii) have received all
permits, licenses or other approvals required of them under
applicable Environmental Laws to conduct their respective
businesses and (iii) are in compliance with all terms and
conditions of any such permit, license or approval, except
where such noncompliance with Environmental Laws, failure to
receive required permits, licenses or other approvals or
failure to comply with the terms and conditions of such
permits, licenses or approvals would not, singly or in the
aggregate, reasonably be expected to have a Material Adverse
Effect. In the ordinary course of its business, the Company
conducts a periodic review of the effect of Environmental
Laws on the business, operations and properties of the
Company and its subsidiaries, in the course of which it
identifies and evaluates associated costs and liabilities
(including, without limitation, any capital or operating
expenditures required for clean-up, closure of properties or
compliance with Environmental Laws or any permit, license or
approval, any related constraints on operating activities
and any potential liabilities to third parties). On the
basis of such review, the Company has reasonably concluded
that such associated costs and liabilities would not, singly
or in the aggregate, reasonably be expected to have a
Material Adverse Effect.
(z) No labor problem or disturbance with the employees
of the Company or any of its subsidiaries exists or, to the
knowledge of the Issuers, is threatened which, singly or in
the aggregate, would reasonably be expected to have a
Material Adverse Effect.
(aa) Neither the Company nor any of its subsidiaries,
nor, to any Issuers' knowledge, any director, officer,
agent, employee, stockholder or other person, in any such
case, acting on behalf of the Company or any of its
subsidiaries, has used any corporate funds during the last
five years for any unlawful contribution, gift,
entertainment or other unlawful expense relating to
political activity; made any unlawful payment to any foreign
or domestic government official or employee from corporate
funds; violated or is in violation of any provision of the
Foreign Corrupt Practices Act of 1977, as amended; or made
any bribe, payoff, influence payment, kickback or other
payment that is unlawful.
(ab) Neither the Company nor any of its subsidiaries
has taken, and none of them will take, any action that would
cause this Agreement or the issuance or sale of the
Securities and Exchange Securities to violate Regulation G,
T, U or X of the Board of Governors of the Federal Reserve
System or analogous foreign laws and regulations.
(ac) The Issuers have complied with all provisions of
Section 517.075, Florida Statutes (Chapter 92-198, Laws of
Florida) relating to doing business with the Government of
Cuba or with persons or affiliates located in Cuba.
(ad) The Issuers do not own or otherwise possess the
right to use any patents, trademarks, service marks, trade
names and copyrights, the loss of which would result in a
Material Adverse Effect. Neither of the Issuers has
received any notice of any infringement of or conflict with
the rights of any third party with respect to any patents,
trademarks, service marks, trade names and copyrights which,
singly or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, would result in a Material
Adverse Effect.
2. Purchase and Sale. On the basis of the
representations and warranties contained in, and subject to the
terms and conditions of, this Agreement, the Issuers agree to
sell to the Initial Purchaser and the Initial Purchaser agrees to
purchase the Securities at a purchase price equal to 97.125% of
the principal amount thereof.
The Issuers shall not be obligated to deliver any of
the Securities to be delivered except upon payment for all the
Securities to be purchased as provided herein.
3. Sale and Resale of the Securities by the Initial
Purchaser. The Initial Purchaser represents and warrants to the
Issuers that it will offer the Securities to be purchased
hereunder for resale only upon the terms and conditions set forth
in this Agreement and in the Final Memorandum. The Initial
Purchaser hereby represents and warrants to, and agrees with, the
Issuers that the Initial Purchaser (i) will not solicit offers
for, or offer or sell, the Notes by means of any form of general
solicitation or general advertising within the meaning of
Regulation D or in any manner involving a public offering within
the meaning of Section 4(2) of the Securities Act, and (ii) will
solicit offers for the Notes only from, and will offer, sell or
deliver the Notes, as part of its initial offering, only to the
following persons (each an "Eligible Purchaser") (A) persons in
the United States whom the Initial Purchaser reasonably believes
to be qualified institutional buyers ("QIBs") as defined in Rule
144A under the Securities Act, as such rule may be amended from
time to time ("Rule 144A") or, if any such person is buying for
one or more institutional accounts for which such person is
acting as fiduciary or agent, only when such person has
represented to the Initial Purchaser that each such account is a
QIB, to whom notice has been given that such sale or delivery is
being made in reliance on Rule 144A, and (B) to a limited number
of institutional accredited investors as defined in Rule 501(a)
(1), (2), (3) or (7) under Regulation D ("Accredited Investors")
that, prior to their purchase of the Securities, executes and
delivers a letter containing certain representations and
agreements in the form attached as Annex A to the Final
Memorandum, and in each case, in transactions under Rule 144A or
Regulation D in private sales exempt from registration under the
Securities Act.
4. Delivery of and Payment for the Notes. Delivery
of and payment for the Securities shall be made at the office of
Moore & Van Allen, PLLC, 100 North Tryon Street, Charlotte, North
Carolina at 9:00 A.M., New York City time, on August 25, 1997, or
at such other date or place as shall be determined by agreement
between the Initial Purchaser and the Company. This date and
time are sometimes referred to as the "Closing Date." On the
Closing Date, the Issuers shall deliver or cause to be delivered
the Securities to the Initial Purchaser for the account of the
Initial Purchaser against payment to or upon the order of the
Company of the purchase price by wire transfer in federal (same-
day) funds. Time shall be of the essence, and delivery at the
time and place specified pursuant to this Agreement is a further
condition of the obligation of the Initial Purchaser hereunder.
Upon delivery, the Securities shall be in definitive fully
registered form and registered in the name of Cede & Co., as
nominee of the Depositary Trust Company ("DTC"), or such other
name or names and in such denominations as the Initial Purchaser
shall request in writing not less than one business day prior to
the Closing Date. For the purpose of expediting the checking and
packaging of the Securities, the Issuers shall make the
Securities available for inspection by the Initial Purchaser in
New York, New York, not later than 2:00 P.M., New York City time,
on the business day prior to the Closing Date.
5. Further Agreements of the Issuers. The Issuers
jointly and severally agree with the Initial Purchaser as set
forth below in this Section 5:
(a) The Issuers will furnish to the Initial
Purchaser, without charge, as many copies of the Final
Memorandum and any supplements and amendments thereto as it
may reasonably request.
(b) Prior to making any amendment or supplement
to the Preliminary Memorandum or the Final Memorandum, the
Issuers shall furnish a copy thereof to the Initial
Purchaser and counsel to the Initial Purchaser and will not
effect any such amendment or supplement to which the Initial
Purchaser shall reasonably object by notice to the Company
after a reasonable period to review.
(c) If, at any time prior to completion of the
distribution of the Securities by the Initial Purchaser, any
event shall occur or condition exist as a result of which it
is necessary, in the opinion of counsel for the Initial
Purchaser or counsel for the Issuers, to amend or supplement
the Final Memorandum in order that the Final Memorandum will
not include an untrue statement of a material fact or omit
to state a material fact necessary in order to make the
statements therein not misleading in light of the
circumstances existing at the time it is delivered to a
purchaser, or if it is necessary to amend or supplement the
Final Memorandum to comply with applicable law, the Issuers
will promptly prepare such amendment or supplement as may be
necessary to correct such untrue statement or omission or so
that the Final Memorandum, as so amended or supplemented,
will comply with applicable law and furnish to the Initial
Purchaser such number of copies of such amendment or
supplement as it may reasonably request.
(d) So long as any Securities are outstanding and
are "Restricted Securities" within the meaning of Rule
144(a)(3) under the Securities Act and during any period in
which the Issuers are not subject to Section 13 or 15(d) of
the Exchange Act of 1934, as amended (the "Exchange Act"),
the Issuers will furnish to holders of the Securities and
prospective purchasers of Securities designated by such
holders, upon request of such holders or such prospective
purchasers, the information, if any, required to be
delivered pursuant to Rule 144A(d)(4) under the Securities
Act.
(e) So long as the Securities and Exchange
Securities are outstanding, the Issuers will furnish to the
Initial Purchaser copies of any annual reports, quarterly
reports and current reports filed with the Securities and
Exchange Commission ("SEC") on Forms 10-K, 10-Q and 8-K, or
such other similar forms as may be designated by the SEC,
and such other documents, reports and information as shall
be furnished by the Issuers to the Trustee or to the holders
of the Securities and Exchange Securities pursuant to the
Indenture.
(f) The Issuers will use their best efforts to
qualify the Securities for sale under the securities or Blue
Sky laws of such jurisdictions as the Initial Purchaser
reasonably designates and to continue such qualifications in
effect so long as reasonably required for the distribution
of the Securities. The Issuers will also arrange for the
determination of the eligibility for investment of the
Securities under the laws of such jurisdictions as the
Initial Purchaser reasonably requests. Notwithstanding the
foregoing, neither of the Issuers shall be obligated to
qualify as a foreign corporation in any jurisdiction in
which it is not so qualified or to file a general consent to
service of process or to subject itself to taxation in
respect of doing business in any jurisdiction in which it is
not otherwise subject.
(g) The Issuers will use their best efforts to
permit the Securities to be designated PORTAL securities in
accordance with the rules and regulations adopted by the
National Association of Securities Dealers, Inc. relating to
trading in the PORTAL market and to permit the Securities to
be eligible for clearance and settlement through DTC.
(h) The Issuers will not, and will cause their
Affiliates not to, sell, offer for sale or solicit offers to
buy or otherwise negotiate in respect of any security (as
defined in the Securities Act) in a transaction that could
be integrated with the sale of the Securities in a manner
which would require the registration under the Securities
Act of the Securities.
(i) Except following the effectiveness of any
Registration Statement (as defined in the Registration
Rights Agreement) and except for such offers as may be made
as a result of, or subsequent to, filing such Registration
Statement or amendments thereto prior to the effectiveness
thereof, the Issuers will not, and will cause their
affiliates not to, solicit any offer to buy or offer to sell
the Securities by means of any form of general solicitation
or general advertising (as those terms are used in
Regulation D under the Securities Act) or in any manner
involving a public offering within the meaning of Section
4(2) of the Securities Act.
(j) The Company will apply the net proceeds from
the sale of the Securities as set forth in the Final
Memorandum.
(k) The Issuers will take such steps as shall be
necessary to ensure that neither the Company nor any of its
subsidiaries shall become an "investment company" within the
meaning of the Investment Company Act, or (ii) a "holding
company" or a "subsidiary company" or an "affiliate" of a
holding company within the meaning of the Public Utility
Holding Company Act of 1935, as amended.
(l) The Issuers will not, and will cause their
Affiliates not to, take any actions which would require the
registration under the Securities Act of the Securities
(other than pursuant to the Registration Rights Agreement).
(m) Prior to the consummation of the Exchange
Offer or the effectiveness of an applicable shelf
registration statement if, in the reasonable judgment of the
Initial Purchaser, the Initial Purchaser or any of its
Affiliates are required to deliver an offering memorandum in
connection with sales of, or market-making activities with
respect to, the Securities, (A) the Issuers will
periodically amend or supplement the Final Memorandum so
that the information contained in the Final Memorandum
complies with the requirements of Rule 144A of the
Securities Act, (B) the Issuers will amend or supplement the
Final Memorandum when necessary to reflect any material
changes in the information provided therein so that the
Final Memorandum will 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 existing as of the date the Final Memorandum
is so delivered, not misleading and (C) the Issuers will
provide the Initial Purchaser with copies of each such
amended or supplemented Final Memorandum, as the Initial
Purchaser may reasonably request.
The Issuers hereby expressly acknowledge that the
indemnification and contribution provisions of Section 8
hereof are specifically applicable and relate to each
offering memorandum, registration statement, prospectus,
amendment or supplement referred to in this Section 5(m).
(n) The Issuers will do all things reasonably
necessary to satisfy the closing conditions set forth in
Section 7 hereof.
6. Expenses. The Issuers jointly and severally,
agree to pay (a) the costs incident to the authorization,
issuance, sale and delivery of the Securities and Exchange
Securities and any issue or stamp taxes payable in that
connection; (b) the costs incident to the preparation and
printing of the Preliminary Memorandum, the Final Memorandum and
any amendments, supplements and exhibits thereto; (c) the costs
of distributing the Preliminary Memorandum, the Final Memorandum
and any amendment or supplement thereto; (d) the fees and
expenses of qualifying the Securities and Exchange Securities
under the securities laws of the several jurisdictions as
provided in Section 5(f) and of preparing, printing and
distributing a Blue Sky Memorandum (including reasonable related
fees and expenses of counsel to the Initial Purchaser); (e) the
cost of printing the Securities and the Exchange Securities; (f)
the fees and expenses of the Trustee and any agent of the Trustee
and the fees and disbursements of any counsel for the Trustee in
connection with the Indenture and the Securities and Exchange
Securities; (g) any fees paid to rating agencies in connection
with the rating of the Securities and Exchange Securities; (h)
the costs and expenses of DTC and its nominee, including its book-
entry system; (i) all expenses and listing fees incurred in
connection with the application for quotation of the Securities
on the PORTAL market; and (j) all other costs and expenses
incident to the performance of the obligations of the Issuers
under this Agreement.
7. Conditions of Initial Purchaser's Obligations.
The obligations of the Initial Purchaser to purchase the
Securities shall be subject to the accuracy of the
representations and warranties on the part of the Issuers
contained herein at the Execution Time and the Closing Date, to
the accuracy of the statements of the Issuers made in any
certificates pursuant to the provisions hereof, to the
performance by the Issuers of their obligations hereunder in all
material respects and to the following additional conditions:
(a) The Initial Purchaser shall not have
discovered and disclosed to the Company on or prior to the
Closing Date that the Final Memorandum or any amendment or
supplement thereto contains an untrue statement of a fact
which, in the opinion of Latham & Watkins, counsel for the
Initial Purchaser, is material or omits to state a fact
which, in the opinion of such counsel, is material and is
necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(b) The Final Memorandum shall have been printed
and copies distributed to the Initial Purchaser as soon as
practicable but in no event later than on the Business Day
following the date of this Agreement or at such later date
and time as to which the Initial Purchaser may agree, and no
stop order suspending the qualification or exemption from
qualification of the Securities in any jurisdiction referred
to in Section 5(f) shall have been issued and no proceeding
for that purpose shall have been commenced or shall be
pending or threatened.
(c) No action shall have been taken and no
statute, rule, regulation or order shall have been enacted,
adopted or issued by any governmental agency which would, as
of the Closing Date, singly or in the aggregate, reasonably
be expected to have a Material Adverse Effect; no action,
suit or proceeding shall have been commenced and be pending
against or affecting or, to the knowledge of the Company,
threatened against, the Company or any of its subsidiaries
before any court or arbitrator or any governmental body,
agency or official that, singly or in the aggregate, if
adversely determined, would reasonably be expected to result
in a Material Adverse Effect; and no stop order shall have
been issued by the SEC or any governmental agency of any
jurisdiction referred to in Section 5(f) preventing the use
of the Final Memorandum, or any amendment or supplement
thereto, or which would reasonably be expected to have a
Material Adverse Effect.
(d) Since the dates as of which information is
given in the Final Memorandum and other than as set forth in
the Final Memorandum, (i) there shall not have been any
Material Adverse Change, or any development that is
reasonably likely to result in a Material Adverse Change, or
any material change in the long-term debt, or material
increase in the short-term debt, from that set forth in the
Final Memorandum; (ii) no dividend or distribution of any
kind shall have been declared, paid or made by the Company
on any class of its capital stock; (iii) the Company and its
subsidiaries shall not have incurred any liabilities or
obligations, direct or contingent, that are material,
individually or in the aggregate, to the Company and its
subsidiaries, taken as a whole, and that are required to be
disclosed on a balance sheet or notes thereto in accordance
with generally accepted accounting principles and are not
disclosed on the latest balance sheet or notes thereto
included in the Final Memorandum.
(e) The Initial Purchaser shall have received a
certificate, dated the Closing Date, signed on behalf of the
Company by (i) E. Erwin Madrey, II, Chief Executive Officer
and (ii) Bettis C. Rainsford, Chief Financial Officer,
confirming that (A) such officers have participated in
conferences with other officers and representatives of the
Issuers, representatives of the independent public
accountants of the Issuers and representatives of counsel to
the Issuers at which the contents of the Final Memorandum
and related matters were discussed and (B) the matters set
forth in paragraphs (b), (c) and (d) of this Section 7 are
true and correct as of the Closing Date.
(f) All corporate proceedings and other legal
matters incident to the authorization, form and validity of
this Agreement, the Securities, the Exchange Securities, the
Indenture, the Registration Rights Agreement, the Final
Memorandum, the New Credit Agreement, the Parent Credit
Agreement and all other legal matters relating to this
Agreement and the transactions contemplated hereby and
thereby, shall be reasonably satisfactory in all material
respects to counsel for the Initial Purchaser, and the
Issuers shall have furnished to such counsel all documents
and information that they may reasonably request to enable
them to pass upon such matters.
(g) Wyche, Burgess, Freeman & Parham, P.A., a
Professional Association, counsel for the Issuers, shall
have furnished to the Initial Purchaser its written opinion
(containing customary limitations and approvals that shall
be reasonably satisfactory in all material respects to the
Initial Purchaser's counsel), addressed to the Initial
Purchaser and dated the Closing Date, in form and substance
reasonably satisfactory to the Initial Purchaser, to the
effect that:
(i) Each of the Issuers is validly existing
as a corporation and is in good standing under the laws
of its jurisdiction of incorporation. The Company is
duly qualified to do business as a foreign corporation
in the states of North Carolina and South Carolina.
The Guarantor is duly qualified to do business as a
foreign corporation in the state of New York.
(ii) Assuming, (i) the accuracy of and
compliance with the representations, warranties and
covenants of the Issuers set forth in Section 1 of this
Agreement, and (ii) the accuracy of and compliance with
the Initial Purchaser's representations, warranties and
covenants set forth in this Agreement, the offer,
issuance, sale and delivery of the Securities to the
Initial Purchaser, and the initial reoffer, resale and
delivery of the Securities by the Initial Purchaser, as
contemplated by this Agreement and the Final
Memorandum, do not require registration under the
Securities Act, or qualification of the Indenture under
the Trust Indenture Act, it being understood that no
opinion is expressed as to any subsequent resale of
Securities or any resale of Securities by any person
other than the Initial Purchaser.
(iii) Each of the Issuers has the
corporate power and authority to execute and deliver,
and to consummate the transactions contemplated by,
this Agreement; the Company has the corporate power and
authority to issue and deliver the Notes as
contemplated by this Agreement; and the Guarantor has
the corporate power and authority to issue and deliver
the Guarantee as contemplated by this Agreement;
(iv) The execution and delivery of this
Agreement have been duly authorized by all requisite
corporate action of each Issuer, and this Agreement has
been duly executed and delivered by each Issuer;
(v) The execution and delivery of the
Indenture have been duly authorized by all requisite
corporate action of each Issuer; and the Indenture has
been duly executed and delivered by each Issuer, and
assuming due authorization, execution and delivery by
the Trustee, is a valid and binding agreement of each
Issuer, enforceable against each Issuer in accordance
with its terms, except that enforcement thereof may be
subject to (A) bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other
similar laws now or hereafter in effect relating to or
affecting creditors' rights generally and (B) general
principles of equity (regardless of whether
enforceability is considered in a proceeding in equity
or at law) and the exercise of discretionary authority
of any court before which a proceeding may be brought;
(vi) The execution and delivery of the
Securities have been duly authorized by all requisite
corporate action of each of the Issuers; the Notes have
been duly executed and delivered by the Company and the
Guarantee has been duly executed and delivered by the
Guarantor and, assuming due authentication by the
Trustee, the Notes and the Guarantee are valid and
binding obligations of the Company and the Guarantor,
respectively, entitled to the benefits of the
Indenture, enforceable against the Company and the
Guarantor in accordance with their terms, except that
enforcement thereof may be subject to (A) bankruptcy,
insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws now or hereafter in
effect relating to or affecting creditors' rights
generally and (B) general principles of equity
(regardless of whether enforceability is considered in
a proceeding in equity or at law) and the exercise of
discretionary authority of any court before which a
proceeding may be brought;
(vii) The execution and delivery of the
Exchange Securities have been duly authorized by all
requisite corporate action of each of the Issuers; and,
when duly executed and delivered by the Company and the
Guarantors and duly authenticated by the Trustee, will
be valid and binding obligations of the Company and the
Guarantors, entitled to the benefits of the Indenture,
enforceable against the Company and the Guarantors in
accordance with their terms, except that enforcement
thereof may be subject to (A) bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and
other similar laws now or hereafter in effect relating
to or affecting creditors' rights generally and (B)
general principles of equity (regardless of whether
enforceability is considered in a proceeding in equity
or at law) and the exercise of discretionary authority
of any court before which a proceeding may be brought;
(viii) The execution and delivery of the
Registration Rights Agreement have been duly authorized
by all requisite corporate action of each of the
Issuers; the Registration Rights Agreement has been
duly executed and delivered by the Issuers and,
assuming due authorization, execution and delivery by
the Initial Purchaser, the Registration Rights
Agreement is a valid and binding agreement of each of
the Issuers, enforceable against each of the Issuers in
accordance with its terms, except that (i) enforcement
thereof may be subject to (A) bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and
other similar laws now or hereafter in effect relating
to or affecting creditors' rights generally and (B)
general principles of equity (regardless of whether
enforceability is considered in a proceeding in equity
or at law) and the exercise of discretionary authority
of any court before which a proceeding may be brought
and (ii) the validity and enforceability of any
indemnification or contribution provisions thereof may
be limited under applicable securities laws or public
policies;
(ix) All of the capital stock of the
Guarantor is owned of record by the Company. All
shares of capital stock of the Guarantor have been duly
authorized and validly issued, are fully paid and
nonassessable and except as disclosed in the Final
Memorandum, to the knowledge of such counsel, all such
shares are owned by the Company free and clear of any
security interests, liens, pledges or encumbrances.
(x) The execution and delivery by the
Issuers of this Agreement, the Indenture, the
Registration Rights Agreement and the New Credit
Agreement (or, in the case of the Guarantor, the
guarantee related thereto), the consummation by the
Issuers of the Offering, the Exchange Offer or the
Refinancing (each as defined in the Final Memorandum)
and the issuance and sale of the Securities and
Exchange Securities by the Issuers will not (A) to the
knowledge of such counsel, result in a breach or
violation of any of the terms or provisions of, or
constitute a default under, any material agreement or
instrument of the Company or any of its subsidiaries
that has been identified as such in a certificate to
such counsel by the Issuers or (B) result in any
violation of the provisions of the charter or bylaws of
the Company or any of its subsidiaries, or, to the
knowledge of such counsel, any applicable law, rule or
regulation (other than Securities Laws (as defined
below) as to which an opinion is given in paragraph
(ii) above) with respect to the Company or any of its
subsidiaries or, to the knowledge of such counsel, any
rule or regulation (other than Securities Laws (as
defined below) as to which an opinion is given in
paragraph (ii) above) or order of any court or
governmental agency having jurisdiction over the
Company or any of its subsidiaries, except for such
violations that would not, singly or in the aggregate,
reasonably be expected to have a Material Adverse
Effect; and, to the knowledge of such counsel, except
for such consents, approvals or authorizations of, or
filings, registrations or qualifications with,
governmental authorities as may be required under the
Securities Act and the rules and regulations
thereunder, the Trust Indenture Act and the rules and
regulations thereunder or applicable states securities
or Blue Sky laws, rules or regulations (all of such
laws, rules and regulations are collectively referred
to herein as "Securities Laws") in connection with the
purchase and distribution of the Notes by the Initial
Purchaser and as set forth in, and in order to
consummate the transactions contemplated by, the
Registration Rights Agreement, no consent, approval,
authorization or order of, or filing or registration
with, any such court or governmental agency or body is
required in connection with the execution and delivery
by the Issuers of this Agreement, the Indenture, the
Registration Rights Agreement or the New Credit
Agreement and the consummation by the Issuers of the
Refinancing (as defined in the Final Memorandum) and
the issuance and sale of the Securities and Exchange
Securities by the Issuers;
(xi) The descriptions in the Final
Memorandum of the Indenture, the Securities, the
Registration Rights Agreement and the New Credit
Agreement are accurate summaries of such documents in
all material respects;
(xii) To the knowledge of such counsel,
the statements made in the Final Memorandum under the
headings "Business _ Legal Proceedings" and "Business _
Environmental and Regulatory Matters" (such statements
may be specifically identified on a schedule to such
counsel's opinion, subject to reasonable approval by
the Initial Purchaser's counsel), to the extent they
constitute matters of law or legal conclusions, have
been reviewed by such counsel and fairly present in all
material respects the information disclosed therein.
(xiii) To such counsel's knowledge, no
legal or governmental proceedings are pending to which
any Issuer is a party that would be required under the
Securities Act to be described in a registration
statement or a prospectus delivered at the time of the
confirmation of the sale of an offering of securities
registered under the Securities Act and are not
described in the Final Memorandum, or, to such
counsel's knowledge, that seek to restrain, enjoin,
prevent the consummation of or otherwise challenge the
issuance or sale of the Securities to the Initial
Purchaser or the consummation of the transactions
described in the Final Memorandum under the caption
"Use of Proceeds;"
(xiv) To such counsel's knowledge,
neither of the Issuers nor any of their subsidiaries is
(i) subject to registration and regulation as an
"investment company" within the meaning of the
Investment Company Act, or (ii) a "holding company" or
a "subsidiary company" or an "affiliate" of a holding
company within the meaning of the Public Utility
Holding Company Act of 1935, as amended;
(xv) When the Securities are issued and
delivered pursuant to this Agreement, such Securities
will not be of the same class (within the meaning of
Rule 144A(d)(3) under the Securities Act) as securities
of any of the Issuers that are listed on a national
securities exchange registered under Section 6 of the
Exchange Act or quoted on an automated inter-dealer
quotation system; and
(xvi) Assuming the Initial Purchaser
purchases the Securities in accordance with Rule 144A
under the Securities Act, neither the issuance or sale
of the Securities nor the application by the Company of
the net proceeds thereof as set forth in the Final
Memorandum will violate Regulation G, T, U or X of the
Board of Governors of the Federal Reserve System.
In addition, such counsel shall also state that such
counsel has participated in conferences with officers and
representatives of the Issuers, representatives of the
independent public accountants for the Issuers and the
Initial Purchaser and its counsel at which the contents of
the Final Memorandum and related matters were discussed and,
although such counsel is not passing upon and does not
assume any responsibility for and has not verified the
accuracy, completeness or fairness of the statements
contained in the Final Memorandum, and has not made any
independent check or verification thereof, on the basis of
the foregoing (relying as to materiality to a large extent
upon facts provided by officers and other representatives of
the Issuers), no facts have come to the attention of such
counsel that lead such counsel to believe that the Final
Memorandum, as of its date or the Closing Date, contained an
untrue statement of a material fact or omitted to state any
material fact necessary to make the statements therein, in
light of the circumstances under which there were made, not
misleading (it being understood that such counsel need
express no belief or opinion with respect to the financial
statements and notes thereto and other financial and
statistical data included therein).
(h) You shall have received on the Closing Date
an opinion of Latham & Watkins, counsel for the Initial
Purchaser, dated the Closing Date and addressed to you, in
form and substance reasonably satisfactory to you.
(i) The Issuers and the Trustee shall have
entered into the Indenture and the Initial Purchaser shall
have received counterparts, conformed as executed, thereof.
(j) The Issuers and the Initial Purchaser shall
have entered into the Registration Rights Agreement and the
Initial Purchaser shall have received counterparts,
conformed as executed, thereof.
(k) The Issuers shall have entered into the New
Credit Agreement (the form and substance of which shall be
reasonably acceptable to the Initial Purchaser) and the
Initial Purchaser shall have received counterparts,
conformed as executed, thereof and of all other documents
and agreements entered into in connection therewith. There
shall exist at and as of the Closing Date no conditions that
would constitute a default (or an event that with notice or
the lapse of time, or both, would constitute a default)
under the New Credit Agreement. On the Closing Date, the
New Credit Agreement shall be in full force and effect and
shall not have been modified.
(l) At the Execution Time and at the Closing
Date, KPMG Peat Marwick LLP shall have furnished to the
Initial Purchaser a letter or letters, dated respectively as
of the Execution Time and as of the Closing Date, in form
and substance reasonably satisfactory to the Initial
Purchaser, confirming that they are independent accountants
within the meaning of the Securities Act and the Exchange
Act and the applicable rules and regulations thereunder and
Rule 101 of the Code of Professional Conduct of the American
Institute of Certified Public Accountants (the "AICPA") and
otherwise reasonably satisfactory in form and substance to
the Initial Purchaser and their counsel.
(m) (i) Neither of the Issuers nor any of their
subsidiaries shall have sustained since the date of the
latest financial statements included in the Final Memorandum
losses or interferences with their businesses, taken as a
whole, from fire, explosion, flood or other calamity,
whether or not covered by insurance, or from any labor
dispute or court or governmental action, order or decree,
otherwise than as set forth or contemplated in the Final
Memorandum or (ii) since such date there shall not have been
any change in the capital stock or long-term debt of the
Company or any of its subsidiaries or any change, or any
development involving a prospective change, in or affecting
the general affairs, management, financial position,
stockholders' equity or results of operations of the Company
or its subsidiaries, taken as a whole, otherwise than as set
forth or contemplated in the Final Memorandum, the effect of
which, in any such case described in clause (i) or (ii), is,
in the reasonable judgment of the Initial Purchaser, so
material and adverse as to make it impracticable or
inadvisable to proceed with the offering or the delivery of
the Securities being delivered on the Closing Date on the
terms and in the manner contemplated herein and in the Final
Memorandum.
(n) Subsequent to the execution and delivery of
this Agreement there shall not have occurred any of the
following: (i) trading in securities generally on the New
York Stock Exchange or The NASDAQ Stock Market's National
Market or in the over-the-counter market shall have been
suspended or materially limited, or minimum prices shall
have been established on such exchange by the SEC, or by
such exchange or by any other regulatory body or
governmental authority having jurisdiction, (ii) a banking
moratorium shall have been declared by Federal or state
authorities, (iii) the United States shall have become
engaged in hostilities, there shall have been an escalation
in hostilities involving the United States or there shall
have been a declaration of a national emergency or war by
the United States or (iv) there shall have occurred such a
material adverse change in general economic, political or
financial conditions (or the effect of international
conditions on the financial markets in the United States
shall be such) as to make it, in the reasonable judgment of
the Initial Purchaser, impracticable or inadvisable to
proceed with the offering or delivery of the Securities
being delivered on the Closing Date on the terms and in the
manner contemplated herein and in the Final Memorandum.
(o) Latham & Watkins shall have been furnished
with such documents, in addition to those set forth above,
as they may reasonably require for the purpose of enabling
them to review or pass upon the matters referred to in this
Section 7 and in order to evidence the accuracy,
completeness or satisfaction in all material respects of any
of the representations, warranties or conditions herein
contained.
(p) Prior to the Closing Date, the Issuers shall
have furnished to the Initial Purchaser such further
information, certificates and documents as the Initial
Purchaser may reasonably request.
All opinions, letters, evidence and certificates
mentioned above or elsewhere in this Agreement shall be deemed to
be in compliance with the provisions hereof only if they are in
form and substance reasonably satisfactory to counsel for the
Initial Purchaser.
8. Indemnification and Contribution. (a) The Issuers
jointly and severally agree to indemnify and hold harmless the
Initial Purchaser, the directors, officers, employees and agents
(including, without limitation, attorneys) of the Initial
Purchaser and each person who controls the Initial Purchaser
within the meaning of either the Securities Act or the Exchange
Act against any and all losses, claims, damages or liabilities,
joint or several, to which they or any of them may become subject
under the Securities Act, the Exchange Act or other Federal or
state statutory law or regulation, at common law or otherwise,
insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of a material fact
contained in the Preliminary Memorandum, the Final Memorandum or
any information provided by the Issuers to any holder or
prospective purchaser of Notes pursuant to Section 5(e), or in
any amendment thereof or supplement thereto, or arise out of or
are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances
under which they were made, not misleading, and agree to
reimburse each such indemnified party, as incurred, for any legal
or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage,
liability or action: provided, however, that the Issuers will not
be liable in any such case to any Initial Purchaser or to the
other indemnified parties listed above to the extent that any
such loss, claim, damage, liability or action arises out of or is
based upon any such untrue statement or alleged untrue statement
or omission or alleged omission made in the Preliminary
Memorandum or the Final Memorandum, or in any amendment thereof
or supplement thereto, in reliance upon and in conformity with
written information furnished to the Issuers by or on behalf of
the Initial Purchaser specifically for inclusion therein.
(b) The Initial Purchaser agrees to indemnify and hold
harmless the Issuers, their directors, officers, employees and
agents (including, without limitation, attorneys), and each
person who controls the Issuers within the meaning of either the
Securities Act or the Exchange Act, to the same extent as the
foregoing indemnity from the Issuers to the Initial Purchaser,
but only with reference to written information relating to the
Initial Purchaser furnished to the Issuers by or on behalf of the
Initial Purchaser specifically for inclusion in the Preliminary
Memorandum or the Final Memorandum (or in any amendment or
supplement thereto). This indemnity agreement will be in
addition to any liability which the Initial Purchaser may
otherwise have. The Issuers and the Initial Purchaser
acknowledge that the statements set forth in the last paragraph
of the cover page and under the heading "Plan of Distribution" in
the Preliminary Memorandum and the Final Memorandum constitute
the only information furnished in writing by or on behalf of the
Initial Purchaser for inclusion in the Preliminary Memorandum or
the Final Memorandum (or any amendment or supplement thereto).
(c) Promptly after receipt by an indemnified party
under this Section 8 of notice of the commencement of any action,
such indemnified party will, if a claim in respect thereof is to
be made against the indemnifying party under this Section 8,
notify the indemnifying party in writing of the commencement
thereof, but the failure so to notify the indemnifying party (i)
will not relieve it from liability under paragraph (a) or (b)
above unless and to the extent it did not otherwise learn of such
action and such failure results in the forfeiture by the
indemnifying party of substantial rights and defenses and (ii)
will not, in any event, relieve the indemnifying party from any
obligations to any indemnified party other than the
indemnification obligation provided in paragraph (a) or (b)
above. The indemnifying party shall be entitled to appoint
counsel of the indemnifying party's choice at the indemnifying
party's expense to represent the indemnified party in any action
for which indemnification is sought (in which case the
indemnifying party shall not thereafter be responsible for the
fees and expenses of any separate counsel retained by the
indemnified party or parties except as set forth below);
provided, however that such counsel shall be reasonably
satisfactory to the indemnified party. Notwithstanding the
indemnifying party's election to appoint counsel to represent the
indemnified party in an action, the indemnified party shall have
the right to employ separate counsel (including local counsel),
and the indemnifying party shall bear the reasonable fees, costs
and expenses of such separate counsel if (i) the use of counsel
chosen by the indemnifying party to represent the indemnified
party would, in the opinion of legal counsel to the indemnified
party, present such counsel with a conflict of interest, (ii) the
actual or potential defendants in, or targets of, any such action
include both the indemnified party and the indemnifying party and
the indemnified party shall have been informed in writing by
legal counsel that there may be legal defenses available to it
and/or other indemnified parties which are different from or
additional to those available to the indemnifying party, (iii)
the indemnifying party shall not have employed counsel reasonably
satisfactory to the indemnified party to represent the
indemnified party within a reasonable time after notice of the
institution of such action or (iv) the indemnifying party shall
authorize the indemnified party to employ separate counsel at the
expense of the indemnifying party. An indemnifying party will
not, without the prior written consent of the indemnified
parties, settle or compromise or consent to the entry of any
judgment with respect to any pending or threatened claim, action,
suit or proceeding in respect of which indemnification or
contribution may be sought hereunder (whether or not the
indemnified parties are actual or potential parties to such claim
or action) unless such settlement, compromise or consent includes
an unconditional release of each indemnified party from all
liability arising out of such claim, action, suit or proceeding.
(d) In the event that the indemnity provided in
paragraph (a) or (b) of this Section 8 is unavailable to or
insufficient to hold harmless an indemnified party for any
reason, the Issuers and the Initial Purchaser agree to contribute
to the aggregate losses, claims, damages and liabilities
(including legal or other expenses reasonably incurred in
connection with investigating or defending same) (collectively
"Losses") to which the Issuers and one or more of the Initial
Purchaser may be subject in such proportion as is appropriate to
reflect the relative benefits received by the Issuers and by the
Initial Purchaser from the offering of the Securities; provided,
however, that in no case shall the Initial Purchaser be
responsible for any amount in excess of the purchase discount or
commission applicable to the Securities purchased by the Initial
Purchaser hereunder. If the allocation provided by the
immediately preceding sentence is unavailable for any reason, the
Issuers and the Initial Purchaser shall contribute in such
proportion as is appropriate to reflect not only such relative
benefits but also the relative fault of the Issuers and of the
Initial Purchaser in connection with the statements or omissions
which resulted in such Losses as well as any other relevant
equitable considerations. Benefits received by the Issuers shall
be deemed to be equal to the total net proceeds from the offering
(before deducting expenses), and benefits received by the Initial
Purchaser shall be deemed to be equal to the total purchase
discounts and commissions received by the Initial Purchaser from
the Issuers in connection with the purchase of the Securities
hereunder. Relative fault shall be determined by reference to
whether any alleged untrue statement or omission relates to
information provided by the Issuers or the Initial Purchaser.
The Issuers and the Initial Purchaser agree that it would not be
just and equitable if contribution were determined by pro rata
allocation or any other method of allocation which does not take
account of the equitable considerations referred to above.
Notwithstanding the provisions of this paragraph (d), 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. For purposes of this Section 8,
each person who controls the Initial Purchaser within the meaning
of either the Securities Act or the Exchange Act and each
director, officer, employee and agent of the Initial Purchaser
shall have the same rights to contribution as the Initial
Purchaser, and each person who controls the Issuers within the
meaning of either the Securities Act or the Exchange Act and each
partner, officer, director, employee and agent of the Issuers
shall have the same rights to contribution as the Issuers,
subject in each case to the applicable terms and conditions of
this paragraph (d).
9. Termination. The obligations of the Initial
Purchaser hereunder may be terminated by the Initial Purchaser by
notice given to and received by the Company prior to delivery of
and payment for the Securities if, prior to that time, any of the
events described in Sections 7(m) or 7(n) shall have occurred or
if the Initial Purchaser shall decline to purchase the Securities
for any reason permitted under this Agreement.
10. Reimbursement of Initial Purchaser's Expenses. If
(a) the Issuers shall fail to tender the Securities for delivery
to the Initial Purchaser otherwise than for any reason permitted
under this Agreement or (b) the Initial Purchaser shall decline
to purchase the Securities for any reason permitted under this
Agreement, the Issuers shall reimburse the Initial Purchaser for
the reasonable fees and expenses of their counsel and for such
other reasonable out-of-pocket expenses as shall have been
incurred by them in connection with this Agreement and the
proposed purchase of the Securities, and upon demand the Issuers
shall pay the full amount thereof to the Initial Purchaser.
11. Notices, etc. All statements, requests, notices
and agreements hereunder shall be in writing, and:
(a) if to the Initial Purchaser, shall be
delivered or sent by mail, telex or facsimile transmission
to NationsBanc Capital Markets, Inc., 100 North Tryon
Street, 20th Floor, Charlotte, North Carolina 28255,
Attention: Gary Wolfe (Fax: 704-388-9941), with a copy to
Latham & Watkins, 885 Third Avenue, New York, New York
10022, Attention: Kirk Davenport (Fax: 212-751-4864);
(b) if to the Company, shall be delivered or sent
by mail, telex or facsimile transmission to the address of
the Company set forth in the Final Memorandum, Attention:
Bettis C. Rainsford (Fax: 803-637-6066), with a copy to
Wyche, Burgess, Freeman & Parham, P.A., Attention: Eric B.
Amstutz and Jo W. Hackl (Fax: 864-235-8900).
Any such statements, requests, notices or agreements
shall take effect at the time of receipt thereof. The Issuers
shall be entitled to act and rely upon any request, consent,
notice or agreement given or made on behalf of the Initial
Purchaser.
12. Persons Entitled to Benefit of Agreement. This
Agreement shall inure to the benefit of and be binding upon the
Initial Purchaser, the Issuers and their respective successors.
This Agreement and the terms and provisions hereof are for the
sole benefit of only those persons, except that (A) the
representations, warranties, indemnities and agreements of the
Issuers contained in this Agreement shall also be deemed to be
for the benefit of directors, officers, employees and agents
(including, without limitation, attorneys) of the Initial
Purchaser and the person or persons, if any, who control an
Initial Purchaser within the meaning of Section 15 of the
Securities Act and (B) the indemnity agreement of the Initial
Purchaser contained in Section 8(b) of this Agreement shall be
deemed to be for the benefit of directors of the Issuers,
officers, employees and agents (including, without limitation,
attorneys) of the Issuers and any person controlling any of the
Issuers within the meaning of Section 15 of the Securities Act.
Nothing in this Agreement is intended or shall be construed to
give any person, other than the persons referred to in this
Section 12, any legal or equitable right, remedy or claim under
or in respect of this Agreement or any provision contained
herein.
13. Survival. The respective indemnities,
representations, warranties and agreements of the Issuers and the
Initial Purchaser contained in this Agreement or made by or on
behalf on them, respectively, pursuant to this Agreement, shall
survive the delivery of and payment for the Securities and shall
remain in full force and effect, regardless of any investigation
made by or on behalf of any of them or any person controlling any
of them.
14. Definition of "Business Day." For purposes of
this Agreement, "business day" means each Monday, Tuesday,
Wednesday, Thursday and Friday that is not a day on which banking
institutions in The City of New York, New York are authorized or
obligated by law, executive order or regulation to close.
15. Governing Law. THIS AGREEMENT SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK, WITHOUT REGARD TO THE CONFLICT OF LAW RULES THEREOF.
16. Counterparts. This Agreement may be executed in
one or more counterparts and, if executed in more than one
counterpart, the executed counterparts shall each be deemed to be
an original but all such counterparts shall together constitute
one and the same instrument.
17. Headings. The headings herein are inserted for
convenience of reference only and are not intended to be part of,
or to affect the meaning or interpretation of, this Agreement.
[Signature page follows]
If the foregoing correctly sets forth the agreement
between the Issuers and the Initial Purchaser, please indicate
your acceptance in the space provided for that purpose below.
Very truly yours,
Delta Mills, Inc.
By:
Name: Bettis C. Rainsford
Title: Executive Vice
President, Chief
Financial Officer
and Treasurer
Delta Mills Marketing, Inc.
By:
Name: Bettis C. Rainsford
Title: Executive Vice
President, Chief
Financial Officer
and Treasurer
The foregoing Agreement is hereby
confirmed, accepted and agreed as
of the date first above written.
NationsBanc Capital Markets, Inc.
By:
Name: Gary R. Wolfe
Title: Director
EXHIBIT A
Registration Rights Agreement
SCHEDULE A
SUBSIDIARIES
Name Jurisdiction of Incorporation
1. Delta Mills Marketing, Inc. Delaware
EXHIBIT 1.2
REGISTRATION RIGHTS AGREEMENT
Dated as of August 25, 1997
by and among
Delta Mills, Inc.
and
Delta Mills Marketing, Inc.
and
NationsBanc Capital Markets, Inc.
This Registration Rights Agreement (this "Agreement") is
made and entered into as of August 25, 1997 by and among Delta
Mills, Inc., a Delaware corporation (the "Company"), Delta Mills
Marketing, Inc. (the "Guarantor" and, together with any future
subsidiary of the Company that executes a guarantee in accordance
with the provisions of the Indenture, the "Guarantors"), and
NationsBanc Capital Markets, Inc. (the "Initial Purchaser"),
which has agreed to purchase the Company's 9 5/8% Series A Senior
Notes due 2007 (together with the guarantee thereof by any
Guarantor, the "Series A Notes") pursuant to the Purchase
Agreement (as defined below).
This Agreement is made pursuant to the Purchase Agreement,
dated August 20, 1997 (the "Purchase Agreement"), by and among
the Company, the Guarantor and the Initial Purchaser. In order
to induce the Initial Purchaser to purchase the Series A Notes,
the Company and the Guarantor (collectively, the "Issuers") have
agreed to provide the registration rights set forth in this
Agreement. The execution and delivery of this Agreement is a
condition to the obligations of the Initial Purchaser set forth
in Section 7 of the Purchase Agreement.
The parties hereby agree as follows:
SECTION
1. DEFINITIONS
As used in this Agreement, the following capitalized terms
shall have the following meanings:
Act: The Securities Act of 1933, as amended.
Broker-Dealer: Any broker or dealer registered as such
under the Exchange Act.
Closing Date: The date of this Agreement.
Commission: The Securities and Exchange Commission.
Consummate: An Exchange Offer shall be deemed
"Consummated" for purposes of this Agreement upon the occurrence
of (i) the filing and effectiveness under the Act of the Exchange
Offer Registration Statement relating to the Series B Notes to be
issued in the Exchange Offer, (ii) the maintenance of such
Registration Statement continuously effective and the keeping of
the Exchange Offer open for a period not less than the minimum
period required pursuant to Section 3(b) hereof, and (iii) the
delivery by the Issuers to the Registrar under the Indenture of
Series B Notes in the same aggregate principal amount as the
aggregate principal amount of Series A Notes that were tendered
by Holders thereof pursuant to the Exchange Offer.
Damages Payment Date: With respect to the Notes, each
Interest Payment Date.
Effectiveness Target Date: As defined in Section 5.
Exchange Act: The Securities Exchange Act of 1934, as
amended.
Exchange Offer: The registration by the Issuers under the
Act of the Series B Notes pursuant to a Registration Statement
pursuant to which the Issuers offer the Holders of all
outstanding Transfer Restricted Securities the opportunity to
exchange all such outstanding Transfer Restricted Securities held
by such Holders for Series B Notes in an aggregate principal
amount equal to the aggregate principal amount of the Transfer
Restricted Securities tendered in such exchange offer by such
Holders.
Exchange Offer Registration Statement: The Registration
Statement relating to the Exchange Offer, including the related
Prospectus.
Holders: As defined in Section 2(b) hereof.
Indemnified Holder: As defined in Section 8(a) hereof.
Indenture: The Indenture, dated as of the date hereof,
among the Issuers and The Bank of New York, as trustee (the
"Trustee"), pursuant to which the Notes are to be issued, as such
Indenture is amended or supplemented from time to time in
accordance with the terms thereof.
Initial Purchaser: As defined in the preamble hereto.
Interest Payment Date: As defined in the Indenture and the
Notes.
NASD: National Association of Securities Dealers, Inc.
Notes: The Series A Notes and the Series B Notes.
Person: An individual, partnership, corporation, limited
liability company, limited liability partnership, trust or
unincorporated organization, or a government or agency or
political subdivision thereof.
Prospectus: The prospectus included in a Registration
Statement, as amended or supplemented by any prospectus
supplement and by all other amendments thereto, including post-
effective amendments, and all material incorporated by reference
into such Prospectus.
Record Holder: With respect to any Damages Payment Date
relating to the Notes, each Person who is a Holder of Notes on
the record date with respect to the Interest Payment Date on
which such Damages Payment Date shall occur.
Registration Default: As defined in Section 5 hereof.
Registration Statement: Any registration statement of the
Issuers relating to (a) an offering of Series B Notes pursuant to
an Exchange Offer or (b) the registration for resale of Transfer
Restricted Securities pursuant to the Shelf Registration
Statement, which is filed pursuant to the provisions of this
Agreement, in each case, including the Prospectus included
therein, all amendments and supplements thereto (including post-
effective amendments) and all exhibits and material incorporated
by reference therein.
Series B Notes: The Company's 9 5/8% Series B Senior Notes
due 2007 to be issued pursuant to the Indenture in the Exchange
Offer, together with the guarantee thereof by any Guarantor.
Shelf Filing Deadline: As defined in Section 4 hereof.
Shelf Registration Statement: As defined in Section 4
hereof.
TIA: The Trust Indenture Act of 1939 (15 U.S.C. Section
77aaa-77bbbb) as in effect on the date of the Indenture.
Transfer Restricted Securities: Each Note, until the
earliest to occur of (a) the date on which such Note is exchanged
in the Exchange Offer and the Note for which it is exchanged is
entitled to be resold to the public by the Holder thereof without
complying with the prospectus delivery requirements of the Act,
(b) the date on which such Note has been effectively registered
under the Act and disposed of in accordance with a Shelf
Registration Statement or (c) the date on which such Note is
permitted to be distributed to the public pursuant to Rule 144
under the Act or by a Broker-Dealer pursuant to the "Plan of
Distribution" contemplated by the Exchange Offer Registration
Statement (including delivery of the Prospectus contained
therein).
Underwritten Registration or Underwritten Offering: A
registration in which securities of the Company are sold to an
underwriter for reoffering to the public.
SECTION 2. SECURITIES SUBJECT TO THIS AGREEMENT
(a) Transfer Restricted Securities. The securities
entitled to the benefits of this Agreement are the Transfer
Restricted Securities.
(b) Holders of Transfer Restricted Securities. A Person
is deemed to be a holder of Transfer Restricted Securities (each,
a "Holder") whenever such Person owns Transfer Restricted
Securities.
SECTION 3. REGISTERED EXCHANGE OFFER
(ai Unless the Exchange Offer shall not be permissible
under applicable law or Commission policy (after the procedures
set forth in Section 6(a) below have been complied with), the
Issuers shall (i) cause to be filed with the Commission as soon
as practicable after the Closing Date, but in no event later than
45 days after the Closing Date, a Registration Statement under
the Act relating to the Series B Notes and the Exchange Offer,
(ii) use their best efforts to cause such Registration Statement
to become effective at the earliest possible time, but in no
event later than 135 days after the Closing Date, (iii) in
connection with the foregoing, file (A) all pre-effective
amendments to such Registration Statement as may be necessary in
order to cause such Registration Statement to become effective,
(B) if applicable, a post-effective amendment to such
Registration Statement pursuant to Rule 430A under the Act and
(C) cause all necessary filings in connection with the
registration and qualification of the Series B Notes to be made
under the Blue Sky laws of such jurisdictions as are necessary to
permit the Exchange Offer to be Consummated, and (iv) upon the
effectiveness of such Registration Statement, commence the
Exchange Offer. The Exchange Offer shall be on the appropriate
form permitting registration of the Series B Notes to be offered
in exchange for the Transfer Restricted Securities and to permit
resales of Notes held by Broker-Dealers as contemplated by
Section 3(c) below.
(bi The Company shall cause the Exchange Offer
Registration Statement to be effective continuously and shall
keep the Exchange Offer open for a period of not less than the
minimum period required under applicable federal and state
securities laws to Consummate the Exchange Offer; provided,
however, that in no event shall such period be less than 20
business days. The Company shall cause the Exchange Offer to
comply with all applicable federal and state securities laws. No
securities other than the Series B Notes shall be included in the
Exchange Offer Registration Statement. The Company shall use its
best efforts to cause the Exchange Offer to be Consummated on the
earliest practicable date after the Exchange Offer Registration
Statement has become effective, but in no event later than 30
business days thereafter.
(c) The Company shall indicate in a "Plan of
Distribution" section contained in the Prospectus contained in
the Exchange Offer Registration Statement that any Broker-Dealer
who holds Series A Notes that are Transfer Restricted Securities
and that were acquired for its own account as a result of market-
making activities or other trading activities (other than
Transfer Restricted Securities acquired directly from the
Company), may exchange such Series A Notes pursuant to the
Exchange Offer; however, such Broker-Dealer may be deemed to be
an "underwriter" within the meaning of the Act and must,
therefore, deliver a prospectus meeting the requirements of the
Act in connection with any resales of the Series B Notes received
by such Broker-Dealer in the Exchange Offer, which prospectus
delivery requirement may be satisfied by the delivery by such
Broker-Dealer of the Prospectus contained in the Exchange Offer
Registration Statement. Such "Plan of Distribution" section
shall also contain all other information with respect to such
resales by Broker-Dealers that the Commission may require in
order to permit such resales pursuant thereto, but such "Plan of
Distribution" shall not name any such Broker-Dealer or disclose
the amount of Notes held by any such Broker-Dealer except to the
extent required by the Commission as a result of a change in
policy after the date of this Agreement.
The Issuers shall use their best efforts to keep the
Exchange Offer Registration Statement continuously effective,
supplemented and amended as required by the provisions of Section
6(c) below to the extent necessary to ensure that it is available
for resales of Notes acquired by Broker-Dealers for their own
accounts as a result of market-making activities or other trading
activities, and to ensure that it conforms with the requirements
of this Agreement, the Act and the policies, rules and
regulations of the Commission as announced from time to time, for
a period of one year from the date on which the Exchange Offer
Registration Statement is declared effective.
The Issuers shall provide sufficient copies of the latest
version of such Prospectus to Broker-Dealers promptly upon
request at any time during such one-year period in order to
facilitate such resales.
SECTION 4. SHELF REGISTRATION
(ai Shelf Registration. If (i) the Issuers are not
required to file an Exchange Offer Registration Statement or to
consummate the Exchange Offer because the Exchange Offer is not
permitted by applicable law or Commission policy (after the
procedures set forth in Section 6(a) below have been complied
with) or (ii) if any Holder of Transfer Restricted Securities
shall notify the Company within 20 business days after the
Exchange Offer shall have been Consummated (A) that such Holder
is prohibited by applicable law or Commission policy from
participating in the Exchange Offer, or (B) that such Holder may
not resell the Series B Notes acquired by it in the Exchange
Offer to the public without delivering a prospectus and that the
Prospectus contained in the Exchange Offer Registration Statement
is not appropriate or available for such resales by such Holder,
or (C) that such Holder is a Broker-Dealer and holds Series A
Notes acquired directly from the Company or one of its
affiliates, then the Issuers shall
(x) cause to be filed a shelf registration statement
pursuant to Rule 415 under the Act, which may be an
amendment to the Exchange Offer Registration Statement (in
either event, the "Shelf Registration Statement") on or
prior to the earliest to occur of (1) the 60th day after
the date on which the Company determines that it is not
required to file the Exchange Offer Registration Statement,
(2) the 60th day after the date on which the Company
receives notice from a Holder of Transfer Restricted
Securities as contemplated by clause (ii) above, or (3) the
135th day after the Closing Date (such earliest date being
the "Shelf Filing Deadline"), which Shelf Registration
Statement shall provide for resales of all Transfer
Restricted Securities the Holders of which shall have
provided the information required pursuant to Section 4(b)
hereof; and
(y) use their best efforts to cause such Shelf
Registration Statement to be declared effective by the
Commission on or before the 135th day after the obligation
to file the Shelf Registration Statement arises.
The Issuers shall use their best efforts to keep such Shelf
Registration Statement continuously effective, supplemented and
amended as required by the provisions of Sections 6(b) and (c)
hereof to the extent necessary to ensure that it is available for
resales of Notes by the Holders of Transfer Restricted Securities
entitled to the benefit of this Section 4(a), and to ensure that
it conforms with the requirements of this Agreement, the Act and
the policies, rules and regulations of the Commission as
announced from time to time, for a period of at least two years
following the Closing Date.
(bi Provision by Holders of Certain Information in
Connection with the Shelf Registration Statement. No Holder of
Transfer Restricted Securities may include any of its Transfer
Restricted Securities in any Shelf Registration Statement
pursuant to this Agreement unless and until such Holder furnishes
to the Company in writing, within 15 business days after receipt
of a request therefor, such information as the Company may
reasonably request for use in connection with any Shelf
Registration Statement or Prospectus or preliminary Prospectus
included therein. No Holder of Transfer Restricted Securities
shall be entitled to Liquidated Damages pursuant to Section 5
hereof unless and until such Holder shall have used its best
efforts to provide all such reasonably requested information.
Each Holder as to which any Shelf Registration Statement is being
effected agrees to furnish promptly to the Company all
information required to be disclosed in order to make the
information previously furnished to the Company by such Holder
not materially misleading.
SECTION 5. LIQUIDATED DAMAGES
If (i) any of the Registration Statements required by this
Agreement is not filed with the Commission on or prior to the
date specified for such filing in this Agreement, (ii) any of
such Registration Statements has not been declared effective by
the Commission on or prior to the date specified for such
effectiveness in this Agreement (the "Effectiveness Target
Date"), (iii) the Exchange Offer has not been Consummated within
30 business days after the Effectiveness Target Date with respect
to the Exchange Offer Registration Statement or (iv) any
Registration Statement required by this Agreement is filed and
declared effective but shall thereafter cease to be effective or
fail to be usable for its intended purpose prior to the
expiration of the time period specified by this Agreement without
being succeeded immediately by a post-effective amendment to such
Registration Statement that cures such failure and that is itself
immediately declared effective (each such event referred to in
clauses (i) through (iv), a "Registration Default"), the Issuers
hereby jointly and severally agree to pay liquidated damages to
each Holder of Transfer Restricted Securities with respect to the
first 90-day period immediately following the occurrence of such
Registration Default, in an amount equal to $.05 per week per
$1,000 principal amount of Transfer Restricted Securities held by
such Holder for each week or portion thereof that the
Registration Default continues. The amount of the liquidated
damages shall increase by an additional $.05 per week per $1,000
in principal amount of Transfer Restricted Securities with
respect to each subsequent 90-day period until all Registration
Defaults have been cured, up to a maximum amount of liquidated
damages of $.30 per week per $1,000 principal amount of Transfer
Restricted Securities. All accrued liquidated damages shall be
paid to Record Holders by the Company by wire transfer of
immediately available funds or by federal funds check on each
Damages Payment Date, as provided in the Indenture. Following
the cure of all Registration Defaults relating to any particular
Transfer Restricted Securities, the accrual of liquidated damages
with respect to such Transfer Restricted Securities will cease.
All obligations of the Issuers set forth in the preceding
paragraph that are outstanding with respect to any Transfer
Restricted Security at the time such security ceases to be a
Transfer Restricted Security shall survive until such time as all
such obligations with respect to such Security shall have been
satisfied in full.
SECTION 6. REGISTRATION PROCEDURES
(a) Exchange Offer Registration Statement. In connection
with the Exchange Offer, the Issuers shall comply with all of the
provisions of Section 6(c) below, shall use their best efforts to
effect such exchange and shall comply with all of the following
provisions:
(i) If in the reasonable opinion of counsel to the
Company there is a question as to whether the Exchange Offer
is permitted by applicable law, the Issuers hereby agree to
seek a no-action letter or other favorable decision from the
Commission allowing the Issuers to Consummate an Exchange
Offer for such Series A Notes. The Issuers hereby agree to
pursue the issuance of such a decision to the Commission staff
level but shall not be required to take commercially
unreasonable action to effect a change of Commission policy.
The Issuers hereby agree, however, to (A) participate in
telephonic conferences with the Commission, (B) deliver to the
Commission staff an analysis prepared by counsel to the
Company setting forth the legal bases, if any, upon which such
counsel has concluded that such an Exchange Offer should be
permitted and (C) diligently pursue a resolution (which need
not be favorable) by the Commission staff of such submission.
(ii) As a condition to its participation in the
Exchange Offer pursuant to the terms of this Agreement, each
Holder of Transfer Restricted Securities shall furnish, upon
the request of the Company, prior to the time that it is
Consummated, a written representation to the Company (which
may be contained in the letter of transmittal contemplated by
the Exchange Offer Registration Statement) to the effect that
(A) it is not an affiliate of the Issuers, (B) it is not
engaged in, and does not intend to engage in, and has no
arrangement or understanding with any person to participate
in, a distribution of the Series B Notes to be issued in the
Exchange Offer and (C) it is acquiring the Series B Notes in
its ordinary course of business. In addition, all such
Holders of Transfer Restricted Securities shall otherwise
cooperate in the Issuers' preparations for the Exchange Offer.
Each Holder hereby acknowledges and agrees that any Broker-
Dealer and any such Holder using the Exchange Offer to
participate in a distribution of the securities to be acquired
in the Exchange Offer (1) could not under Commission policy as
in effect on the date of this Agreement rely on the position
of the Commission enunciated in Morgan Stanley and Co., Inc.
(available June 5, 1991) and Exxon Capital Holdings
Corporation (available May 13, 1988), as interpreted in the
Commission's letter to Shearman & Sterling dated July 2, 1993,
and similar no-action letters (including any no-action letter
obtained pursuant to clause (i) above), and (2) must comply
with the registration and prospectus delivery requirements of
the Act in connection with a secondary resale transaction and
that such a secondary resale transaction should be covered by
an effective registration statement containing the selling
security holder information required by Item 507 or 508, as
applicable, of Regulation S-K if the resales are of Series B
Notes obtained by such Holder in exchange for Series A Notes
acquired by such Holder directly from the Company.
(iii) Prior to effectiveness of the Exchange Offer
Registration Statement, the Issuers shall provide a
supplemental letter to the Commission (A) stating that the
Issuers are registering the Exchange Offer in reliance on the
position of the Commission enunciated in Exxon Capital
Holdings Corporation (available May 13, 1988), Morgan Stanley
and Co., Inc. (available June 5, 1991) and, if applicable, any
no-action letter obtained pursuant to clause (i) above and (B)
including a representation that neither the Company nor any
Guarantor has entered into any arrangement or understanding
with any Person to distribute the Series B Notes to be
received in the Exchange Offer and that, to the best of the
Company's information and belief, each Holder participating in
the Exchange Offer is acquiring the Series B Notes in its
ordinary course of business and has no arrangement or
understanding with any Person to participate in the
distribution of the Series B Notes received in the Exchange
Offer.
(b) Shelf Registration Statement. In connection with any
Shelf Registration Statement, the Issuers shall comply with all
the provisions of Section 6(c) below and shall use their best
efforts to effect such registration to permit the sale of the
Transfer Restricted Securities being sold in accordance with the
intended method or methods of distribution thereof, and pursuant
thereto the Issuers will as expeditiously as possible prepare and
file with the Commission a Registration Statement relating to the
registration on any appropriate form under the Act, which form
shall be available for the sale of the Transfer Restricted
Securities in accordance with the intended method or methods of
distribution thereof.
(c) General Provisions. In connection with any
Registration Statement and any Prospectus required by this
Agreement to permit the sale or resale of Transfer Restricted
Securities (including, without limitation, any Registration
Statement and the related Prospectus required to permit resales
of Notes by Broker-Dealers), the Issuers shall:
(i) use its best efforts to keep such Registration
Statement continuously effective and provide all requisite
financial statements (including, if required by the Act or any
regulation thereunder, financial statements of the Guarantors)
for the period specified in Section 3 or 4 of this Agreement,
as applicable; upon the occurrence of any event that would
cause any such Registration Statement or the Prospectus
contained therein (A) to contain a material misstatement or
omission or (B) not to be effective and usable for resale of
Transfer Restricted Securities during the period required by
this Agreement, the Issuers shall file promptly an appropriate
amendment to such Registration Statement, in the case of
clause (A), correcting any such misstatement or omission, and,
in the case of either clause (A) or (B), use its best efforts
to cause such amendment to be declared effective and such
Registration Statement and the related Prospectus to become
usable for their intended purpose(s) as soon as practicable
thereafter;
(ii) prepare and file with the Commission such
amendments and post-effective amendments to the Registration
Statement as may be necessary to keep the Registration
Statement effective for the applicable period set forth in
Section 3 or 4 hereof, as applicable, or such shorter period
as will terminate when all Transfer Restricted Securities
covered by such Registration Statement have been exchanged or
cease to be Transfer Restricted Securities; cause the
Prospectus to be supplemented by any required Prospectus
supplement, and as so supplemented to be filed pursuant to
Rule 424 under the Act, and to comply fully with the
applicable provisions of Rules 424 and 430A under the Act in a
timely manner; and comply with the provisions of the Act with
respect to the disposition of all securities covered by such
Registration Statement during the applicable period in
accordance with the intended method or methods of distribution
by the sellers thereof set forth in such Registration
Statement or supplement to the Prospectus;
(iii) advise the underwriter(s), if any, and selling
Holders promptly and, if requested by such Persons, to confirm
such advice in writing, (A) when the Prospectus or any
Prospectus supplement or post-effective amendment has been
filed, and, with respect to any Registration Statement or any
post-effective amendment thereto, when the same has become
effective, (B) of any request by the Commission for amendments
to the Registration Statement or amendments or supplements to
the Prospectus or for additional information relating thereto,
(C) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement
under the Act or of the suspension by any state securities
commission of the qualification of the Transfer Restricted
Securities for offering or sale in any jurisdiction, or the
initiation of any proceeding for any of the preceding
purposes, (D) of the existence of any fact or the happening of
any event that makes any statement of a material fact made in
the Registration Statement, the Prospectus, any amendment or
supplement thereto, or any document incorporated by reference
therein untrue, or that requires the making of any additions
to or changes in the Registration Statement or the Prospectus
in order to make the statements therein not misleading. If at
any time the Commission shall issue any stop order suspending
the effectiveness of the Registration Statement, or any state
securities commission or other regulatory authority shall
issue an order suspending the qualification or exemption from
qualification of the Transfer Restricted Securities under
state securities or Blue Sky laws, the Issuers shall use their
best efforts to obtain the withdrawal or lifting of such order
at the earliest possible time;
(iv) furnish to each of the selling Holders and each
of the underwriter(s), if any, before filing with the
Commission, copies of any Registration Statement or any
Prospectus included therein or any amendments or supplements
to any such Registration Statement or Prospectus (including
all documents incorporated by reference after the initial
filing of such Registration Statement), which documents will
be subject to the review of such Holders and underwriter(s),
if any, for a period of at least three business days, and the
Issuers will not file any such Registration Statement or
Prospectus or any amendment or supplement to any such
Registration Statement or Prospectus (including all such
documents incorporated by reference) to which a selling Holder
of Transfer Restricted Securities covered by such Registration
Statement or the underwriter(s), if any, shall reasonably
object within three business days after the receipt thereof;
(v) promptly prior to the filing of any document that
is to be incorporated by reference into a Registration
Statement or Prospectus, provide copies of such document to
the selling Holders and to the underwriter(s), if any, make
the Issuers representatives available for discussion of such
document and other customary due diligence matters, and
include such information in such document prior to the filing
thereof as such selling Holders or underwriter(s), if any,
reasonably may request;
(vi) make available at reasonable times for inspection
by the selling Holders, any underwriter participating in any
disposition pursuant to such Registration Statement, and any
attorney or accountant retained by such selling Holders or any
of the underwriter(s), all financial and other records,
pertinent corporate documents and properties of the Issuers
and cause the Issuers' officers, directors and employees to
supply all information reasonably requested by any such
Holder, underwriter, attorney or accountant in connection with
such Registration Statement subsequent to the filing thereof
and prior to its effectiveness;
(vii) if requested by any selling Holders or the
underwriter(s), if any, promptly incorporate in any
Registration Statement or Prospectus, pursuant to a supplement
or post-effective amendment if necessary, such information as
such selling Holders and underwriter(s), if any, may
reasonably request to have included therein, including,
without limitation, information relating to the "Plan of
Distribution" of the Transfer Restricted Securities,
information with respect to the principal amount of Transfer
Restricted Securities being sold to such underwriter(s), the
purchase price being paid therefor and any other terms of the
offering of the Transfer Restricted Securities to be sold in
such offering; and make all required filings of such
Prospectus supplement or post-effective amendment as soon as
practicable after the Issuers are notified of the matters to
be incorporated in such Prospectus supplement or
post-effective amendment;
(viii) cause the Transfer Restricted Securities covered
by the Registration Statement to be rated with the appropriate
rating agencies, if so requested by the Holders of a majority
in aggregate principal amount of Notes covered thereby or the
underwriter(s), if any;
(ix) furnish to each selling Holder and each of the
underwriter(s), if any, without charge, at least one copy of
the Registration Statement, as first filed with the
Commission, and of each amendment thereto, including all
documents incorporated by reference therein and all exhibits
(including exhibits incorporated therein by reference);
(x) deliver to each selling Holder and each of the
underwriter(s), if any, without charge, as many copies of the
Prospectus (including each preliminary prospectus) and any
amendment or supplement thereto as such Persons reasonably may
request; the Issuers hereby consent to the use of the
Prospectus and any amendment or supplement thereto by each of
the selling Holders and each of the underwriter(s), if any, in
connection with the offering and the sale of the Transfer
Restricted Securities covered by the Prospectus or any
amendment or supplement thereto;
(xi) enter into such agreements (including an
underwriting agreement), and make such representations and
warranties, and take all such other actions in connection
therewith as reasonably necessary in order to expedite or
facilitate the disposition of the Transfer Restricted
Securities pursuant to any Registration Statement contemplated
by this Agreement, all to such extent as may be reasonably
requested by any Initial Purchaser or by any Holder of
Transfer Restricted Securities or underwriter in connection
with any sale or resale pursuant to any Registration Statement
contemplated by this Agreement; and whether or not an
underwriting agreement is entered into and whether or not the
registration is an Underwritten Registration, the Issuers
shall:
(A) furnish to the Initial Purchaser, each selling
Holder and each underwriter, if any, in such substance and
scope as they may reasonably request and as are customarily
made by issuers to underwriters in primary underwritten
offerings, upon the date of the Consummation of the
Exchange Offer and, if applicable, the effectiveness of the
Shelf Registration Statement:
(1) a certificate, dated the date the Exchange Offer
is Consummated or the date of effectiveness of the Shelf
Registration Statement, as the case may be, signed by
(y) the President or any Vice President and (z) a
principal financial or accounting officer of the Company
confirming, as of the date thereof, the matters set
forth in paragraphs (b), (c) and (d) of Section 7 of the
Purchase Agreement and such other matters as such
parties may reasonably request;
(2) an opinion, dated the date of Consummation of
the Exchange Offer or the date of effectiveness of the
Shelf Registration Statement, as the case may be, of
counsel for the Issuers, covering the matters set forth
in paragraph (g) of Section 7 of the Purchase Agreement
and such other matter as such parties may reasonably
request, and in any event including a statement to the
effect that such counsel has participated in conferences
with officers and other representatives of the Issuers,
representatives of the independent public accountants
for the Issuers, the Initial Purchaser's representatives
and the Initial Purchaser's counsel in connection with
the preparation of such Registration Statement and the
related Prospectus, and although such counsel is not
passing upon and does not assume responsibility for and
has not independently verified the accuracy,
completeness or fairness of such statements and has not
made any independent check or verification thereof, on
the basis of the foregoing (relying as to materiality to
a large extent upon facts provided to such counsel by
officers and other representatives of the Issuers and
without independent check or verification), no facts
came to such counsel's attention that caused such coun
sel to believe that the applicable Registration
Statement, at the time such Registration Statement or
any post-effective amendment thereto became effective,
and, in the case of the Prospectus included in the
Exchange Offer Registration Statement, as of the date of
Consummation, contained an untrue statement of a
material fact or omitted to state a material fact re
quired to be stated therein or necessary to make the
statements therein not misleading, or that the
Prospectus contained in such Registration Statement as
of its date and, in the case of the opinion dated the
date of Consummation of the Exchange Offer, as of the
date of Consummation, contained an untrue statement of a
material fact or omitted to state a material fact
necessary in order to make the statements therein, in
light of the circumstances under which they were made,
not misleading. Without limiting the foregoing, such
counsel may state further that such counsel expresses no
belief or opinion with respect to, assumes no
responsibility for, and has not independently verified,
the accuracy, completeness or fairness of exhibits, the
financial statements, notes and schedules and other
financial and statistical data included in any
Registration Statement contemplated by this Agreement or
the related Prospectus; and
(3) a customary comfort letter, dated as of the date
of Consummation of the Exchange Offer or the date of
effectiveness of the Shelf Registration Statement, as
the case may be, from the Issuers' independent
accountants, in the customary form and covering matters
of the type customarily covered in comfort letters by
underwriters in connection with primary underwritten
offerings, and affirming the matters set forth in the
comfort letters delivered pursuant to Section 7(a) of
the Purchase Agreement, without exception;
(B) set forth in full or incorporate by reference in
the underwriting agreement, if any, the indemnification
provisions and procedures of Section 8 hereof with respect
to all parties to be indemnified pursuant to said Section;
and
(C) deliver such other documents and certificates as
may be reasonably requested by such parties to evidence
compliance with clause (A) above and with any customary
conditions contained in the underwriting agreement or other
agreement entered into by the Issuers pursuant to this
clause (xi), if any.
If at any time during which a Registration Statement is
required to be effective under this Agreement the Issuers
become aware that the representations and warranties of the
Issuers contemplated in clause (A)(1) above cease to be true
and correct, the Issuers shall so advise the Initial Purchaser
and the underwriter(s), if any, and each selling Holder
promptly and, if requested by such Persons, shall confirm such
advice in writing;
(xii) prior to any public offering of Transfer
Restricted Securities, cooperate with the selling Holders, the
underwriter(s), if any, and their respective counsel in
connection with the registration and qualification of the
Transfer Restricted Securities under the securities or Blue
Sky laws of such jurisdictions (within the United States,
Canada or the United Kingdom) as the selling Holders or
underwriter(s) may reasonably request and do any and all other
acts or things reasonably necessary or advisable to enable the
disposition in such jurisdictions of the Transfer Restricted
Securities covered by the Shelf Registration Statement;
provided, however, that neither the Company nor any Guarantor
shall be required to register or qualify as a foreign
corporation where it is not now so qualified or to take any
action that would subject it to the service of process in
suits or to taxation, other than as to matters and
transactions relating to the Registration Statement, in any
jurisdiction where it is not now so subject;
(xiii) shall issue, upon the request of any Holder of
Series A Notes covered by the Shelf Registration Statement,
Series B Notes, having an aggregate principal amount equal to
the aggregate principal amount of Series A Notes surrendered
to the Company by such Holder in exchange therefor or being
sold by such Holder; such Series B Notes to be registered in
the name of such Holder or in the name of the purchaser(s) of
such Notes, as the case may be; in return, the Series A Notes
held by such Holder shall be surrendered to the Company for
cancellation;
(xiv) cooperate with the selling Holders and the
underwriter(s), if any, to facilitate the timely preparation
and delivery of certificates representing Transfer Restricted
Securities to be sold and not bearing any restrictive legends;
and enable such Transfer Restricted Securities to be in such
denominations and registered in such names as the Holders or
the underwriter(s), if any, may request at least two business
days prior to any sale of Transfer Restricted Securities made
by such underwriter(s);
(xv) use its best efforts to cause the Transfer
Restricted Securities covered by the Registration Statement to
be registered with or approved by such other governmental
agencies or authorities (within the United States, Canada or
the United Kingdom) as may be reasonably necessary to enable
the seller or sellers thereof or the underwriter(s), if any,
to consummate the disposition of such Transfer Restricted
Securities, subject to the proviso contained in clause (xii)
above;
(xvi) if any fact or event contemplated by clause
(c)(iii)(D) above shall exist or have occurred, prepare a
supplement or post-effective amendment to the Registration
Statement or related Prospectus or any document incorporated
therein by reference or file any other required document so
that, as thereafter delivered to the purchasers of Transfer
Restricted Securities, the Prospectus will not contain an
untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein not
misleading;
(xvii) provide a CUSIP number for all Transfer
Restricted Securities not later than the effective date of the
Registration Statement and provide the Trustee under the
Indenture with printed certificates for the Transfer
Restricted Securities that are in a form eligible for deposit
with The Depository Trust Company;
(xviii) cooperate and assist in any filings required to
be made with the NASD and in the performance of any due
diligence investigation by any underwriter (including any
"qualified independent underwriter") that is required to be
retained in accordance with the rules and regulations of the
NASD, and use its reasonable best efforts to cause such
Registration Statement to become effective and approved by
such governmental agencies or authorities (within the United
States, Canada or the United Kingdom) as may be necessary to
enable the Holders selling Transfer Restricted Securities to
consummate the disposition of such Transfer Restricted
Securities;
(xix) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make
generally available to its security holders, as soon as
practicable, a consolidated earnings statement meeting the
requirements of Rule 158 (which need not be audited) for the
twelve-month period (A) commencing at the end of any fiscal
quarter in which Transfer Restricted Securities are sold to
underwriters in a firm or best efforts Underwritten Offering
or (B) if not sold to underwriters in such an offering,
beginning with the first month of the Company's first fiscal
quarter commencing after the effective date of the
Registration Statement;
(xx) if so required under the TIA, cause the Indenture
to be qualified under the TIA not later than the effective
date of the first Registration Statement required by this
Agreement, and, in connection therewith, cooperate with the
Trustee and the Holders of Notes to effect such changes to the
Indenture as may be required for such Indenture to be so
qualified in accordance with the terms of the TIA; and execute
and use their best efforts to cause the Trustee to execute,
all documents that may be required to effect such changes and
all other forms and documents required to be filed with the
Commission to enable such Indenture to be so qualified in a
timely manner;
(xxi) provide promptly to each Holder upon request
each document filed by the Company with the Commission
pursuant to the requirements of Section 13 and Section 15 of
the Exchange Act.
Each Holder agrees by acquisition of a Transfer Restricted
Security that, upon receipt of any notice from the Company of the
existence of any fact of the kind described in Section
6(c)(iii)(D) hereof, such Holder will forthwith discontinue
disposition of Transfer Restricted Securities pursuant to the
applicable Registration Statement until such Holder's receipt of
the copies of the supplemented or amended Prospectus contemplated
by Section 6(c)(xvi) hereof, or until it is advised in writing
(the "Advice") by the Company that the use of the Prospectus may
be resumed, and has received copies of any additional or
supplemental filings that are incorporated by reference in the
Prospectus. If so directed by the Company, each Holder will
deliver to the Company (at the Issuers' expense) all copies,
other than permanent file copies then in such Holder's
possession, of the Prospectus covering such Transfer Restricted
Securities that was current at the time of receipt of such
notice. In the event the Company shall give any such notice, the
time period regarding the effectiveness of such Registration
Statement set forth in Section 3 or 4 hereof, as applicable,
shall be extended by the number of days during the period from
and including the date of the giving of such notice pursuant to
Section 6(c)(iii)(D) hereof to and including the date when each
selling Holder covered by such Registration Statement shall have
received the copies of the supplemented or amended Prospectus
contemplated by Section 6(c)(xvi) hereof or shall have received
the Advice.
SECTION 7. REGISTRATION EXPENSES
(a) All expenses incident to the Issuers' performance of
or compliance with this Agreement will be borne by the Company or
the respective Guarantor, regardless of whether a Registration
Statement becomes effective, including without limitation:
(i) all registration and filing fees and expenses (including
filings made by any Initial Purchaser or Holder with the NASD
(and, if applicable, the reasonable fees and expenses of any
"qualified independent underwriter" and its counsel that may be
required by the rules and regulations of the NASD)); (ii) all
fees and expenses of compliance with federal securities and state
Blue Sky or securities laws; (iii) all expenses of printing
(including printing certificates for the Series B Notes to be
issued in the Exchange Offer and printing of Prospectuses),
messenger and delivery services and telephone; (iv) all fees and
disbursements of counsel for the Company and, subject to Section
7(b) below, the Holders of Transfer Restricted Securities; (v)
all application and filing fees in connection with listing Notes
on a national securities exchange or automated quotation system
pursuant to the requirements hereof; and (vi) all fees and
disbursements of independent certified public accountants of the
Issuers (including the expenses of any special audit and comfort
letters required by or incident to such performance).
The Issuers will bear their internal expenses (including,
without limitation, all salaries and expenses of its officers and
employees performing legal or accounting duties), the expenses of
any annual audit and the fees and expenses of any Person,
including special experts, retained by any Issuer.
(b) In connection with any Registration Statement
required by this Agreement (including, without limitation, the
Exchange Offer Registration Statement and the Shelf Registration
Statement), the Issuers will reimburse the Initial Purchaser and
the Holders of Transfer Restricted Securities being tendered in
the Exchange Offer and/or resold pursuant to the "Plan of
Distribution" contained in the Exchange Offer Registration
Statement or registered pursuant to the Shelf Registration
Statement, as applicable, for the reasonable fees and
disbursements of not more than one counsel, who shall be Latham &
Watkins or such other counsel as may be chosen by the Holders of
a majority in principal amount of the Transfer Restricted
Securities for whose benefit such Registration Statement is being
prepared.
SECTION 8. INDEMNIFICATION
(a) The Issuers jointly and severally, agree to indemnify
and hold harmless (i) each Holder and (ii) each person, if any,
who controls (within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act) any Holder (any of the persons
referred to in this clause (ii) being hereinafter referred to as
a "controlling person") and (iii) the respective officers,
directors, partners, employees, representatives and agents
(including, without limitation, attorneys) of any Holder or any
controlling person (any person referred to in clause (i), (ii) or
(iii) may hereinafter be referred to as an "Indemnified Holder"),
to the fullest extent lawful, from and against any and all
losses, claims, damages, liabilities, judgments, actions and
reasonable expenses (including without limitation and as soon as
reasonably practicable, reimbursement of all reasonable costs of
investigating, preparing, pursuing or defending any claim or
action, or any investigation or proceeding by any governmental
agency or body, commenced or threatened, including the reasonable
fees and expenses of counsel to any Indemnified Holder) directly
or indirectly caused by, related to, based upon, arising out of
or in connection with any untrue statement or alleged untrue
statement of a material fact contained in any Registration
Statement or Prospectus (or any amendment or supplement thereto),
or 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, liabilities, judgments, actions or expenses are
caused by an untrue statement or omission or alleged untrue state
ment or omission that is made in reliance upon and in conformity
with information relating to any of the Holders furnished in
writing to the Company by any of the Holders expressly for use
therein.
In case any action or proceeding (including any
governmental or regulatory investigation or proceeding) shall be
brought or asserted against any of the Indemnified Holders with
respect to which indemnity may be sought against the Issuers,
such Indemnified Holder (or the Indemnified Holder controlled by
such controlling person) shall promptly notify the Issuers in
writing (provided, that the failure to give such notice (i) will
not relieve the Issuers from liability under paragraph (a) above
unless and to the extent it did not otherwise learn of such
action and such failure results in the forfeiture by the
indemnifying party of substantial rights and defenses and (ii)
will not, in any event, relieve the indemnifying party from any
obligations to any indemnified party other than the
indemnification obligation provided in paragraph (a) above).
Such Indemnified Holder shall have the right to employ its own
counsel in any such action and the reasonable fees and expenses
of such counsel shall be paid, as soon as reasonably practicable
after they are incurred, by the Issuers (regardless of whether it
is ultimately determined that an Indemnified Holder is not
entitled to indemnification hereunder). The Issuers shall not,
in connection with any one such action or proceeding or separate
but substantially similar or related actions or proceedings in
the same jurisdiction arising out of the same general allegations
or circumstances, be liable for the reasonable fees and expenses
of more than one separate firm of attorneys (in addition to any
local counsel) at any time for such Indemnified Holders, which
firm shall be designated by the Holders. The Issuers shall be
liable for any settlement of any such action or proceeding
effected with the Issuers' prior written consent, which consent
shall not be withheld unreasonably, and the Issuers agree to
indemnify and hold harmless any Indemnified Holder from and
against any loss, claim, damage, liability or reasonable expense
by reason of any settlement of any action effected with the
written consent of the Issuers. The Issuers shall not, without
the prior written consent of each Indemnified Holder, settle or
compromise or consent to the entry of judgment in or otherwise
seek to terminate any pending or threatened action, claim,
litigation or proceeding in respect of which indemnification or
contribution may be sought hereunder (whether or not any
Indemnified Holder is a party thereto), unless such settlement,
compromise, consent or termination includes an unconditional
release of each Indemnified Holder from all liability arising out
of such action, claim, litigation or proceeding.
(b) Each Holder of Transfer Restricted Securities agrees,
severally and not jointly, to indemnify and hold harmless the
Issuers, and their respective directors, officers, employees and
agents (including, without limitation, attorneys) and any person
controlling (within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act) the Issuers, and the respective
officers, directors, partners, employees, representatives and
agents (including, without limitation, attorneys) of each such
person, to the same extent as the foregoing indemnity from the
Issuers to each of the Indemnified Holders, but only with respect
to claims and actions based on information relating to such
Holder furnished in writing by or on behalf of such Holder ex
pressly for use in any Registration Statement. In case any
action or proceeding shall be brought against any of the Issuers
or their directors, officers employees, agents (including,
without limitation, attorneys) or any such controlling person and
in respect of which indemnity may be sought against a Holder of
Transfer Restricted Securities, such Holder shall have the rights
and duties given the Issuers and the Issuers or their directors
or officers or such controlling person shall have the rights and
duties given to each Holder by the preceding paragraph. In no
event shall the liability of any selling Holder hereunder be
greater in amount than the dollar amount of the proceeds received
by such Holder upon the sale of the Registrable Securities giving
rise to such indemnification obligation.
(c) If the indemnification provided for in this Section 8
is unavailable to an indemnified party under Section 8(a) or
Section 8(b) hereof (other than by reason of exceptions provided
in those Sections) in respect of any losses, claims, damages,
liabilities or reasonable expenses referred to therein, then each
applicable indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable
by such indemnified party as a result of such losses, claims,
damages, liabilities or reasonable expenses in such proportion as
is appropriate to reflect the relative benefits received by the
Issuers on the one hand and the Holders on the other hand from
the sale by the Company of the Series A Notes or if such
allocation is not permitted by applicable law, the relative fault
of the Issuers on the one hand and of the Indemnified Holder on
the other in connection with the statements or omissions which
resulted in such losses, claims, damages, liabilities or
reasonable expenses, as well as any other relevant equitable
considerations. The relative fault of the Issuers on the one
hand and of the Indemnified Holder 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 Issuers or by the Indemnified Holder
and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement
or omission. The amount paid or payable by a party as a result
of the losses, claims, damages, liabilities and reasonable
expenses referred to above shall be deemed to include, subject to
the limitations set forth in the second paragraph of Section
8(a), any legal or other fees or expenses reasonably incurred by
such party in connection with investigating or defending any
action or claim.
The Issuers and each Holder of Transfer Restricted
Securities agree that it would not be just and equitable if
contribution pursuant to this Section 8(c) were determined by pro
rata allocation (even if the Holders were treated as one entity
for such purpose) or by any other method of allocation which does
not take account of the equitable considerations referred to in
the immediately preceding paragraph. Notwithstanding the
provisions of this Section 8, none of the Holders (and its
related Indemnified Holders) shall be required to contribute, in
the aggregate, any amount in excess of the amount by which the
total net proceeds received by such Holder with respect to the
Notes exceeds the amount of any damages which such Holder has
otherwise been required to pay 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 Act) shall be entitled to contribution
from any person who was not guilty of such fraudulent misrepresen
tation. The Holders' obligations to contribute pursuant to this
Section 8(c) are several in proportion to the respective
principal amount of Series A Notes held by each of the Holders
hereunder and not joint.
SECTION 9. RULE 144A
The Issuers hereby agree with each Holder, for so long as
any Transfer Restricted Securities remain outstanding, to make
available to any Holder or beneficial owner of Transfer
Restricted Securities in connection with any sale thereof and any
prospective purchaser of such Transfer Restricted Securities from
such Holder or beneficial owner, the information required by Rule
144A(d)(4) under the Act in order to permit resales of such
Transfer Restricted Securities pursuant to Rule 144A.
SECTION 10. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS
No Holder may participate in any Underwritten Registration
hereunder unless such Holder (a) agrees to sell such Holder's
Transfer Restricted Securities on the basis provided in any
underwriting arrangements approved by the Persons entitled
hereunder to approve such arrangements and (b) completes and
executes all reasonable questionnaires, powers of attorney,
indemnities, underwriting agreements, lock-up letters and other
documents required under the terms of such underwriting
arrangements.
SECTION 11. SELECTION OF UNDERWRITERS
The Holders of Transfer Restricted Securities covered by
the Shelf Registration Statement who desire to do so may sell
such Transfer Restricted Securities in an Underwritten Offering.
In any such Underwritten Offering, the investment banker or
investment bankers and manager or managers that will administer
the offering will be selected by the Holders of a majority in
aggregate principal amount of the Transfer Restricted Securities
included in such offering; provided, that such investment bankers
and managers must be reasonably satisfactory to the Company.
SECTION 12. MISCELLANEOUS
(a) Remedies. The Issuers agree that monetary damages
(including the liquidated damages contemplated hereby) would not
be adequate compensation for any loss incurred by reason of a
breach by it of the provisions of this Agreement and hereby agree
to waive the defense in any action for specific performance that
a remedy at law would be adequate.
(b) No Inconsistent Agreements. The Issuers will not, on
or after the date of this Agreement, enter into any agreement
with respect to its securities that is inconsistent with the
rights granted to the Holders in this Agreement or otherwise
conflicts with the provisions hereof. Neither the Company nor
the Guarantor have previously entered into any agreement granting
any registration rights with respect to its securities to any
Person. The rights granted to the Holders hereunder do not in
any way conflict with and are not inconsistent with the rights
granted to the holders of the Issuers' securities under any
agreement in effect on the date hereof.
(c) Adjustments Affecting the Notes. The Issuers will
not take any action, or permit any change to occur, with respect
to the Notes that would materially and adversely affect the
ability of the Holders to Consummate any Exchange Offer.
(d) Amendments and Waivers. The provisions of this
Agreement may not be amended, modified or supplemented, and
waivers or consents to or departures from the provisions hereof
may not be given unless the Issuers have obtained the written
consent of Holders of a majority of the outstanding principal
amount of Transfer Restricted Securities. Notwithstanding the
foregoing, a waiver or consent to departure from the provisions
hereof that relates exclusively to the rights of Holders whose
securities are being tendered pursuant to the Exchange Offer and
that does not affect directly or indirectly the rights of other
Holders whose securities are not being tendered pursuant to such
Exchange Offer may be given by the Holders of a majority of the
outstanding principal amount of Transfer Restricted Securities
being tendered or registered.
(e) Notices. All notices and other communications
provided for or permitted hereunder shall be made in writing by
hand-delivery, first-class mail (registered or certified, return
receipt requested), telex, telecopier, or air courier
guaranteeing overnight delivery:
(i) if to a Holder, at the address set forth on the
records of the Registrar under the Indenture, with a copy to
the Registrar under the Indenture; and
(ii) if to the Issuers:
Delta Mills, Inc.
108-1/2 Courthouse Square
Edgefield, South Carolina 29824
Telecopier No.: (864) 637-6066
Attention: Bettis C. Rainsford
with a copy to
Wyche, Burgess, Freeman & Parham, P.A.
44 East Camperdown Way
Greenville, South Carolina 29602-0728
Telecopier No.: (864) 235-8900
Attention: Eric B. Amstutz and Jo W. Hackl
All such notices and communications shall 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,
postage prepaid, if mailed; when answered back, if telexed; when
receipt acknowledged, if telecopied; and on the next business
day, if timely delivered to an air courier guaranteeing overnight
delivery.
Copies of all such notices, demands or other communications
shall be concurrently delivered by the Person giving the same to
the Trustee at the address specified in the Indenture.
(f) Successors and Assigns. This Agreement shall inure
to the benefit of and be binding upon the successors and assigns
of each of the parties, including without limitation and without
the need for an express assignment, subsequent Holders of
Transfer Restricted Securities; provided, however, that this
Agreement shall not inure to the benefit of or be binding upon a
successor or assign of a Holder unless and to the extent such
successor or assign acquired Transfer Restricted Securities from
such Holder.
(g) Counterparts. This Agreement may be executed in any
number of counterparts and by the parties hereto in separate
counterparts, each of which when so executed shall be deemed to
be an original and all of which taken together shall constitute
one and the same agreement.
(h) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise
affect the meaning hereof.
(i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK, WITHOUT REGARD TO THE CONFLICT OF LAW RULES THEREOF.
(j) Severability. In the event that any one or more of
the provisions contained herein, or the application thereof in
any circumstance, is held invalid, illegal or unenforceable, the
validity, legality and enforceability of any such provision in
every other respect and of the remaining provisions contained
herein shall not be affected or impaired thereby.
(k) Entire Agreement. This Agreement, together with the
Purchase Agreement, the Indenture, the Notes and the guarantee
thereof by the Guarantor, is intended by the parties as a final
expression of their agreement and intended to be a complete and
exclusive statement of the agreement and understanding of the
parties hereto in respect of the subject matter contained herein.
There are no restrictions, promises, warranties or undertakings,
other than those set forth or referred to herein with respect to
the registration rights granted by the Issuers with respect to
the Transfer Restricted Securities. This Agreement supersedes
all prior agreements and understandings between the parties with
respect to such subject matter.
[Signature page follows]
In Witness Whereof, the parties have executed this
Agreement as of the date first written above.
Delta Mills, Inc.
By:
Name: Bettis C. Rainsford
Title: Executive Vice
President, Chief Financial
Officer and Treasurer
Delta Mills Marketing, Inc.
BY:
Name: Bettis C. Rainsford
Title: Executive Vice
President, Chief Financial
Officer and Treasurer
NationsBanc Capital Markets, Inc.
By:
Name: Gary R. Wolfe
Title: Director
EXHIBIT 3.1
RESTATED CERTIFICATE OF INCORPORATION
OF
STEVCOKNIT, INC.
Stevcoknit, Inc. (the "Corporation"), a Delaware
corporation, whose original Certificate of
Incorporation was filed with the Secretary of State
of the State of Delaware on April 5, 1971 under the
same name does hereby amend and restate its
Certificate of Incorporation to read in its
entirety as set forth below:
FIRST: The name of the Corporation is
Stevcoknit, Inc. (hereinafter called the
"Corporation").
SECOND: The address of the registered office of
the Corporation in the State of Delaware is 229
South State Street, in the city of Dover, County of
Kent. The name of the Corporation's registered
agent at that address is the United States
Corporation Company.
THIRD: The purpose of the Corporation is to
engage in any lawful act or activity for which
corporations may be organized under the General
Corporation Law of Delaware (the "GCL").
FOURTH: The total number of shares of stock
which the Corporation shall have authority to issue
is 100,000 shares of common stock with a par value
of $.01 per share. The Corporation may not amend
the Certificate to change the capitalization
without the vote of ninety-five (95) percent of the
holders of the common stock.
FIFTH: The following provisions are inserted for
the management of the business and for the conduct
of the affairs of the Corporation, and for further
definition, limitation and regulation of the powers
of the Corporation and of its directors and
stockholders;
(a) The number of directors of the
Corporation shall be such as from time to time
shall be fixed by, or in the manner provided in
the By-laws. Election of directors need not be
by ballot unless the By-laws so provide.
(b) The Board of Directors shall have power
without the vote of the stockholders as follows:
(i) To make, alter, amend, change, add
to or repeal the By-laws of the Corporation;
to fix and vary the amount to be reserved for
any proper purpose; to authorize and cause to
be executed mortgages and liens upon all or
any part of the property of the Corporation;
to determine the use and dispensation of any
surplus or net profits; and to fix the times
for the declaration and payment of dividends.
(ii) To determine from time to time
whether, and to what extent, and at what
times and places, and under what conditions
and regulations, the accounts and books of
the Corporation (other than the stock ledger)
or any of them, shall be open to the
inspection of the stockholders.
(c) The directors in their discretion may
submit any contract or act for approval or
ratification at any annual meeting of the
stockholders or at any meeting of the
stockholders called for the purpose of
considering any such act or contract, and any
contract or act that shall be approved or be
ratified by the vote of the holders of a
majority of the stock of the Corporation which
is represented in person or by proxy at such
meeting and entitled to vote thereat (provided
that a lawful quorum of stockholders be there
represented in person or by proxy) shall be as
valid and as binding upon the Corporation and
upon all the stockholders as though it had been
approved or ratified by every stockholder of the
Corporation, whether or not the contract or act
would otherwise be open to legal attack because
of directors' interest, or for any other reason.
(d) In addition to the powers and
authorities hereinbefore or by statute expressly
conferred upon them, the directors are hereby
empowered to exercise all such powers and do all
such acts and things as may be exercised or done
by the Corporation; subject, nevertheless, to
the provisions of the statutes of Delaware, of
this certificate, and to any By-laws from time
to time made by the stockholders; provided,
however, that no By-laws so made shall
invalidate any prior act of the directors which
would have been valid if such By-law had not
been made.
SIXTH: The Corporation shall, to the full extent
permitted by Section 145 of the GCL, indemnify all
persons whom it may indemnify pursuant thereto.
SEVENTH: Whenever a compromise or arrangement is
proposed between the Corporation and its creditors
or any class of creditors and/or between the
Corporation and its stockholders or any class of
stockholders, any court of equitable jurisdiction
within the State of Delaware may, on the
application in a summary way of the Corporation or
of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed
for the Corporation under the provisions of Section
291 of the GCL or on the application of trustees in
dissolution or of any receiver or receivers
appointed for the Corporation under the provisions
of Section 179 of the GCL, order a meeting of the
creditors or class of creditors, and/or of the
stockholders or class of stockholders of the
Corporation, as the case may be, to be summoned in
such manner as the said court directs. If a
majority in number representing three-fourths in
value of the creditors or class of creditors,
and/or of the stockholders or class of stockholders
of the Corporation, as the case may be, agree to
any compromise or arrangement and to any
reorganization of the Corporation as a consequence
of such compromise or arrangement, such compromise
or arrangement and such reorganization shall, if
sanctioned by the court to which such application
has been made, be binding on all the creditors or
class of creditors, and/or on all the stockholders
or class of stockholders, of the Corporation, as
the case may be, and also on the Corporation.
EIGHTH: The Corporation reserves the right to
amend, alter, change or repeal any provision
contained in this Restated Certificate of
Incorporation, in the manner now or hereafter
prescribed by statute, and this Restated
Certificate of Incorporation, and all rights
conferred upon stockholders herein are granted
subject to this reservation.
This Restated Certificate of Incorporation was
duly adopted in accordance with the provisions of
Sections 245, 242, and 228 of the GCL.
IN WITNESS WHEREOF, Stevcoknit, Inc. has caused
this Restated Certificate of Incorporation to be
duly executed in its corporate name on this 20th
day of June, 1986.
STEVCOKNIT, INC.
By: /s/ Robert E. Mitchell
Title: Vice President
ATTEST
By: /s/ Margaret T. Hulz
Secretary
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
STEVCOKNIT, INC.
Stevcoknit, Inc., a corporation organized and existing under
and by virtue of the General Corporation Law of the State of
Delaware,
DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of said corporation, by
the unanimous written consent of its members, filed with the
minutes of the board, adopted a resolution proposing and
declaring advisable the following amendment to the Certificate of
Incorporation of said corporation:
RESOLVED, that the Certificate of Incorporation of
Stevcoknit, Inc. be amended by changing the First
Article thereof so that, as amended, said Article shall
be and read as follows:
"FIRST: The name of the corporation is Delta Holding,
Inc."
SECOND: That in lieu of a meeting and vote of stockholders,
the stockholders have given unanimous written consent to said
amendment in accordance with the provisions of section 228 of the
General Corporation Law of the State of Delaware.
THIRD: That the aforesaid amendment was duly adopted in
accordance with the applicable provisions of sections 242 and 228
of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, said Stevcoknit, Inc. has caused this
certificate to be signed by E. Erwin Maddrey, II, its President,
and attested by Bettis C. Rainsford, one of its Assistant
Secretaries, this 30th day of July, 1986.
STEVCOKNIT, INC.
By: /s/ E. Erwin Maddrey, II
E. Erwin Maddrey, II, President
ATTEST:
/s/ Bettis C. Rainsford
Bettis C. Rainsford,
Assistant Secretary
CERTIFICATE OF CHANGE OF REGISTERED AGENT
AND
REGISTERED OFFICE
* * * * *
DELTA HOLDING, INC., a corporation organized and existing
under and by virtue of the General Corporation Law of the State
of Delaware, DOES HEREBY CERTIFY:
The present registered agent of the corporation is United
States Corporation Company, 229 South Street, Dover, Delaware
19901 and the present registered office of the corporation is in
the county of Kent.
The Board of Directors of Delta Holding, Inc. adopted the
following resolution on the 22nd day of September, 1986.
Resolved, that the registered office of Delta Holding,
Inc. in the state of Delaware be and it hereby is changed
to Corporation Trust Center, 1209 Orange Street, in the
City of Wilmington, County of New Castle, and the
authorization of the present registered agent of this
corporation be and the same is hereby withdrawn, and THE
CORPORATION TRUST COMPANY, shall be and is hereby
constituted and appointed the registered agent of this
corporation at the address of its registered office.
IN WITNESS WHEREOF, has caused this
statement to be signed by E. Erwin Maddrey, II, its President and
attested by Carl F. Muller, its Assistant Secretary this 22nd day
of September, 1986.
By: /s/ E. Erwin Maddrey, II
E. Erwin Maddrey, II, President
ATTEST:
By: /s/ Carl F. Muller
Carl F. Muller
Assistant Secretary
Delaware
CERTIFICATE OF MERGER
Delta Mills, Inc., a New York corporation, and
Stevcoknit Acquisition Company, Inc., a Nevada corporation,
into
Delta Holding, Inc., a Delaware corporation
(UNDER SECTION 252 OF THE GENERAL
CORPORATION LAW OF THE STATE OF DELAWARE)
Delta Holding, Inc., a Delaware corporation, hereby certifies
that:
(1) The name and state of incorporation of each of the
constituent corporations are:
(a) Delta Mills, Inc., a New York corporation ("Delta
Mills"),
(b) Stevcoknit Acquisition Company, Inc., a Nevada
corporation ("Stevcoknit"), and
(c) Delta Holding, Inc., a Delaware corporation
("Delta Holding").
(2) An agreement of merger has been approved, adopted,
certified, executed and acknowledged by Delta Mills, by
Stevcoknit and by Delta Holding in accordance with the provisions
of subsection (c) of Section 252 of the General Corporation Law
of the State of Delaware. Pursuant to the agreement of merger,
Delta Mills and Stevcoknit shall be merged with and into Delta
Holding, effective as of 12:01 A.M., Eastern Daylight Savings
Time, on July 4, 1993 (the "Effective Time").
(3) The name of the surviving corporation is currently
Delta Holding, Inc. Effective as of the Effective Time, the name
of the Surviving Corporation shall be changed to Delta Mills,
Inc.
(4) Section FIRST of the Restated Certificate of
Incorporation of Delta Holding is amended, effective as of the
Effective Time, to read in full as follows: "The name of the
corporation is Delta Mills, Inc.". The first sentence of Section
FOURTH of the Restated Certificate of Incorporation is amended,
effective as of the Effective Time, to read in full as follows:
"The total number of shares of stock which the Corporation shall
have authority to issue is 3,000 shares of common stock with a
par value of $.01 per share." In all other respects, the
certificate of incorporation of Delta Holding shall be the
certificate of incorporation of the surviving corporation
immediately after the Merger.
(5) The surviving corporation is a corporation of the
State of Delaware.
(6) The executed agreement of merger is on file at
the principal place of business of Delta Holding at 99 Bobo
Street, P.O. Box 1500, Greer, SC 29652.
(7) A copy of the agreement of merger will be
furnished by Delta Holding, on request and without cost, to
any stockholder of Delta Mills, Stevcoknit or Delta Holding.
(8) The authorized capital stock of Delta Mills is
200 shares of Common Stock, no par value. The authorized
capital stock of Stevcoknit is 100,000 shares of Common
Stock, $1.00 par value, and 50,000,000 shares of Preferred
Stock, $1.00 par value.
IN WITNESS WHEREOF, Delta Holding, Inc., the surviving
Delaware corporation (to be renamed Delta Mills, Inc.
hereby), has caused this certificate to be signed by E.
Erwin Maddrey, II, its President, and attested by Jane H.
Greer, its Secretary, as of the 29th day of June, 1993.
DELTA HOLDING, INC.
By: /s/ E. Erwin Maddrey II
E. Erwin Maddrey II, President
ATTEST
By: /s/ Jane H. Greer
Jane H. Greer, Secretary
EXHIBIT 3.1
BY-LAWS
OF
STEVCOKNIT, INC.
ARTICLE I
OFFICES
SECTION 1. REGISTERED OFFICE.-- The registered office shall be
established and maintained at the office of the United States Corporation
Company, in the City of Dover, in the County of Kent, in the State of
Delaware, and said corporation shall be the registered agent of this
corporation in charge thereof.
SECTION 2. OTHER OFFICES.--The corporation may have other
offices, either within or without the State of Delaware, at such place or
places as the Board of Directors may from time to time appoint or the
business of the corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION 1. ANNUAL MEETINGS.--Annual meetings of stockholders for
the election of directors and for such other business as may be stated in
the notice of the meeting, shall be held at such place, either within or
without the State of Delaware, and at such time and date as the Board of
Directors, by resolution, shall determine and as set forth in the notice of
the meeting. In the event the Board of Directors fails to so determine the
time, date and place of meeting, the annual meeting of stockholders shall
be held at the registered office of the corporation in Delaware on the
third Wednesday during the month of May. If the date of the annual meeting
shall fall upon a legal holiday, the meeting shall be held on the next
succeeding business day. At each annual meeting, the stockholders entitled
to vote shall elect a Board of Directors and they may transact such other
corporate business as shall be stated in the notice of the meeting.
SECTION 2. OTHER MEETINGS.--Meetings of stockholders for any
purpose other than the election of directors may be held at such time and
place, within or without the State of Delaware, as shall be stated in the
notice of the meeting.
SECTION 3. VOTING.--Each stockholder entitled to
vote in accordance with the terms of the Certificate of
Incorporation and in accordance with the provisions of these
By-Laws shall be entitled to one vote, in person or by proxy,
for each share of stock entitled to vote, held by such stock
holder, but no proxy shall be voted after three years from
its date unless such proxy provides for a longer period.
Upon the demand of any stockholder, the vote for directors
and the vote upon any question before the meeting, shall be
by ballot. All elections for directors shall be decided by
plurality vote; all other questions shall be decided by
majority vote except as otherwise provided by the Certificate
of Incorporation or the laws of the State of Delaware.
A complete list of the stockholders entitled to
vote at the ensuing election, arranged in alphabetical order,
with the address of each, and the number of shares held by
each, shall be open to the examination of any stockholder,
for any purpose germane to the meeting, during ordinary
business hours, for a period of at least ten days prior to
the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the
notice of the meeting, or, if not so specified, at the place
where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during
the whole time thereof, and may be inspected by any
stockholder who is present.
SECTION 4. QUORUM.--Except as otherwise required by
Law, by the Certificate of Incorporation or by these By-Laws,
the presence, in person or by proxy, of stockholders holding a
majority of the stock of the corporation entitled to vote shall
constitute a quorum at all meetings of the stockholders. In
case a quorum shall not be present at any meeting, a majority in
interest of the stockholders entitled to vote thereat, present
in person or by proxy, shall have power to adjourn the meeting
from time to time, without notice other than announcement at the
meeting, until the requisite amount of stock entitled to vote
shall be present. At any such adjourned meeting at which the
requisite amount of stock entitled to vote shall be represented,
any business may be transacted which might have been transacted
at the meeting as originally noticed;
but only those stockholders entitled to vote at the meeting as
originally noticed shall be entitled to vote at any adjournment
or adjournments thereof.
SECTION 5. SPECIAL MEETINGS.--Special meetings of the
stockholders for any purpose or purposes may be called by the
President or Secretary, or by resolution of the directors.
SECTION 6. NOTICE OF MEETINGS.--Written notice,
stating the place, date and time of the meeting, and the general
nature of the business to be considered, shall be given to each
stockholder entitled to vote thereat at his address as it
appears on the records of the corporation, not less than ten nor
more than fifty days before the date of the meeting. No
business other than that stated in the notice shall be
transacted at any meeting without the unanimous consent of all
the stockholders entitled to vote thereat.
SECTION 7. ACTION WITHOUT MEETING.--Unless otherwise
provided by the Certificate of Incorporation, any action
required to be taken at any annual or special meeting of stock
holders, or any action which may be taken at any annual or
special meeting, may be taken without a meeting, without prior
notice and without a vote, if a consent in writing, setting
forth the action so taken, shall be signed by the holders of
outstanding stock having not less than the minimum number of
votes that would be necessary to authorize or take such action
at a meeting at which all shares entitled to vote thereon were
present and voted. Prompt notice of the taking of the corporate
action without a meeting by less than unanimous written consent
shall be given to those stockholders who have not consented in
writing.
ARTICLE III
DIRECTORS
SECTION 1. NUMBER OF DIRECTORS AND TERM.--The
number of directors shall be not less than three (3) nor more
than nine (9). The number of directors to be chosen within the
maximum and minimum limits herein set forth shall be determined
by the stockholders entitled to vote at the annual election of
directors, or, in the intervals between annual elections, by the
affirmative vote of a majority of the directors then in office.
Upon any increase in number of directors the additional
directors shall be elected by the stockholders entitled to vote
at an annual or special meeting, or by affirmative vote of a
majority of the directors then in office at a regular or special
meeting. If the number of directors shall be at any time
reduced below the number then in office, the directors whose
terms shall expire upon such reduction shall be determined by
the stockholders entitled to vote at an annual or special
meeting. Each director shall be elected to serve until his
successor shall be elected and shall qualify. Directors need
not be stockholders.
SECTION 2. RESIGNATIONS.--Any director, member of a
committee or other officer may resign at any time. Such
resignation shall be made in writing, and shall take effect at
the time specified therein, and if no time be specified, at the
time of its receipt by the President or Secretary. The
acceptance of a resignation shall not be necessary to make it
effective.
SECTION 3. VACANCIES.--If the office of any
director, member of a committee or other officer becomes vacant,
the remaining directors in office, though less than a quorum by
a majority vote, may appoint any qualified person to fill such
vacancy, who shall hold office for the unexpired term and until
his successor shall be duly chosen.
SECTION 4. REMOVAL.--Any director or directors may
be removed either for or without cause at any time by the
affirmative vote of the holders of a majority of all the shares
of stock outstanding and entitled to vote, at a special meeting
of the stockholders called for the purpose and the vacancies
thus created may be filled, at the meeting held for the purpose
of removal, by the affirmative vote of a majority in interest of
the stockholders entitled to vote.
SECTION 5. INCREASE OF NUMBER.--The number of
directors may be changed by amendment of these By-Laws by the
affirmative vote of a majority of the directors, though less
than a quorum, or, by the affirmative vote of a majority in
interest of the stockholders, at the annual meeting or at a
special meeting called for that purpose, and by like vote the
additional directors may be chosen at such meeting to hold
office until the next annual election and until their successors
are elected and qualify.
SECTION 6. POWERS.--The Board of Directors shall
exercise all of the powers of the corporation except such as are
by law, or by the Certificate of Incorporation of the
corporation or by these By-Laws conferred upon or reserved to
the stockholders.
SECTION 7. COMMITTEES.--The Board of-Directors may,
by resolution or resolutions passed by a majority of the whole
board, designate one or more committees, each committee to
consist of two or more of the directors of the corporation. The
board may designate one or more directors as alternate members
of any committee, who may replace any absent or disqualified
member at any meeting of such committee or committees, the
member or members thereof present at any meeting and not
disqualified from voting, whether or not he or they constitute a
quorum, may unanimously appoint another member of the Board of
Directors to act at the meeting in the place of any such absent
or disqualified member. Any such committee, to the extent pro
vided in the resolution of the Board of Directors, or in these
By-Laws, shall have and may exercise all the powers and
authority of the Board of Directors in the management of the
business and affairs of the corporation, and may authorize the
seal of the corporation to be affixed to all papers which may
require it.
SECTION 8. EXECUTIVE COMMITTEE.--There shall be
an Executive Committee of two or more Directors appointed by
the Board, who may meet at stated times, or on notice to all
by any of their own. During the intervals between the
meetings of the Board, they shall advise and aid the officers of
the corporation in all matters concerning its interests and
management of its business and generally perform such duties and
exercise such powers as may be directed or delegated by the
Board of Directors from time to time. The Executive Committee
may exercise all the powers and authority of the Board of
Directors in the management of the business and affairs of the
corporation. Vacancies in membership of the committee shall be
filled by the Board of Directors at a regular meeting or a
special meeting called for that purpose. The Executive
Committee may keep regular minutes of its proceedings and report
the same to the Board when required.
SECTION 9. MEETINGS.--The newly elected directors
may hold their first meeting for the purpose of organization and
the transaction of business, if a quorum be present, immediately
after the annual meeting of the stockholders; or the time and
place of such meeting may be fixed by consent in writing of all
the directors.
Regular meetings of the directors may be held without
notice at such places and times as shall be determined from time
to time by resolution of the directors.
Special meetings of the board may be called by the
President or by the Secretary on the written request of any two
directors on at least two day's notice to each director and
shall be held at such place or places as may be determined by
the directors, or as shall be stated in the call of the meeting.
SECTION 10. QUORUM.--A majority of the directors
shall constitute a quorum for the transaction of business. If
at any meeting of the board there shall be less than a quorum
present, a majority of those present may adjourn the meeting
from time to time until a quorum is obtained, and no further
notice thereof need be given other than by announcement at the
meeting which shall be so adjourned.
SECTION 11. COMPENSATION.--Directors shall not receive
any stated salary for their services as directors or as members
of committees, but by resolution of the board a fixed fee and
expenses of attendance may be allowed for attendance at each
meeting. Nothing herein contained shall be construed to
preclude any director from serving the corporation in any other
capacity as an officer, agent or otherwise, and receiving
compensation therefor.
SECTION 12. ACTION WITHOUT MEETING.-- Any action
required or permitted to be taken at any meeting of the Board of
Directors, or of any committee thereof, may be taken without a
meeting, if prior to such action a written consent thereto is
signed by all members of the board, or of such committee as the
case may be, and such written consent is filed with the minutes
of proceedings of the board or committee.
ARTICLE IV
OFFICERS
SECTION 1. OFFICERS.--The officers of the corpora
tion shall be a chairman, a President, a Treasurer, and a
Secretary, all of whom shall be elected by the Board of
Directors and who shall hold office until their successors are
elected and qualified. In addition, the Board of Directors may
elect one or more Vice-Presidents and such Assistant Secretaries
and Assistant Treasurers as they may deem proper. None of the
officers of the corporation need be directors. The officers
shall be elected at the first meeting of the Board of Directors
after each annual meeting or until their successors are duly
elected and qualified. More than two offices may be held by the
same person.
SECTION 2. OTHER OFFICERS AND AGENTS.--The Board of
Directors may appoint such other officers and agents as it may
deem advisable, 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.
SECTION 3. CHAIRMAN.--The chairman of the Board of
Directors, shall preside at all meetings of the Board of
Directors and he shall have and perform such other duties as
from time to time may be assigned to him by the Board of
Directors.
SECTION 4. PRESIDENT.--The President shall be the
chief executive officer of the corporation and shall have the
general powers and duties of supervision and management usually
vested in the office of President of a corporation. He shall
preside at all meetings of the stockholders if present thereat,
and in the absence of the Chairman of the Board of Directors, at
all meetings of the Board of Directors, and shall have general
supervision, direction and control of the business of the cor
poration. Except as the Board of Directors shall authorize the
execution thereof in some other manner, he shall execute bonds,
mortgages and other contracts in behalf of the corporation, and
shall cause the seal to be affixed to any instrument requiring
it and when so affixed the seal shall be attested by the
signature of the Secretary or the Treasurer or an Assistant
Secretary or an Assistant Treasurer.
SECTION 5. VICE PRESIDENT.--Each Vice President
shall have such powers and shall perform such duties as shall be
assigned to him by the directors.
SECTION 6. TREASURER.--The Treasurer shall have the
custody of the corporate funds and securities and shall keep
full and accurate account of receipts and disbursements in books
belonging to the corporation. He shall deposit all moneys and
other valuables in the name and to the credit of the corporation
in such depositories as may be designated by the Board of
Directors.
The Treasurer shall disburse the funds of the cor
poration as may be ordered by the Board of Directors, or the
President, taking proper vouchers for such disbursements. He
shall render to the President and Board of Directors at the
regular meetings of the Board of Directors, or whenever
they may request it, an account of all his transactions as
Treasurer and of the financial condition of the corporation. If
required by the Board of Directors, he shall give the
corporation a bond for the faithful discharge of his duties in
such amount and with such surety as the board shall prescribe.
SECTION 7. SECRETARY.--The Secretary shall give, or
cause to be given, notice of all meetings of stockholders and
directors, and all other notices required by law or by these By-
Laws, and in case of his absence or refusal or neglect so to do,
any such notice may be given by any person thereunto directed by
the President, or by the directors, or stockholders, upon whose
requisition the meeting is called as provided in these By-Laws.
He shall record all the proceedings of the meetings of the
corporation and of the directors in a book to be kept for that
purpose, and shall perform such other duties as may be assigned
to him by the directors or the President. He shall have the
custody of the seal of the corporation and shall affix the same
to all instruments requiring it, when authorized by the
directors or the President, and attest the same.
SECTION 8. ASSISTANT TREASURERS AND ASSISTANT
SECRETARIES.--Assistant Treasurers and Assistant Secretaries, if
any, shall be elected and shall have such powers and shall
perform such duties as shall be assigned to them, respectively,
by the directors.
ARTICLE V
MISCELLANEOUS
SECTION 1. CERTIFICATES OF STOCK.-- Certificate of
stock, signed by the Chairman or Vice Chairman of the Board of
Directors, if they be elected, President or Vice-President, and
the Treasurer or an Assistant Treasurer, or Secretary or an
Assistant Secretary, shall be issued to each stockholder
certifying the number of shares owned by him in the corporation.
When such certificates are countersigned (1) by a transfer agent
other than the corporation or its employee, or, (2) by a
registrar other than the corporation or its employee, the
signatures of such officers may be facsimiles.
SECTION 2. LOST CERTIFICATES.--A new certificate of
stock may be issued in the place of any certificate theretofore
issued by the corporation, alleged to have been lost or
destroyed, and the directors may, in their discretion, require
the owner of the lost or destroyed certificate, or his legal
representatives, to give the corporation a bond, in such sum as
they may direct, not exceeding double the value of the stock, to
indemnify the corporation against any claim that may be made
against it on account of the alleged loss of any such
certificate, or the issuance of any such new certificate.
SECTION 3. TRANSFER OF SHARES.--The shares of stock
of the corporation shall be transferable only upon its books by
the holders thereof in person or by their duly authorized
attorneys or legal representatives, and upon such transfer the
old certificates shall be surrendered to the corporation by the
delivery thereof to the person in charge of the stock and
transfer books and ledgers, or to such other person as the
directors may designate, by whom they shall be cancelled, and
new certificates shall thereupon be issued. A record shall be
made of each transfer and whenever a transfer shall be made for
collateral security, and not absolutely, it shall be so
expressed in the entry of the transfer.
SECTION 4. STOCKHOLDERS RECORD DATE.--In order that
the corporation may determine the stockholders entitled to
notice of or to vote at any meeting of stockholders or any
adjournment thereof, or to express consent to corporate action
in writing without a meeting, or entitled to receive payment of
any dividend or other distribution or allotment of any rights,
or entitled to exercise any rights in respect of any change,
conversion or exchange of stock or for the purpose of any other
lawful action, the Board of Directors may fix, in advance, a
record date, which shall not be more than sixty nor less than
ten days before the date of such meeting, nor more than sixty
days prior to any other action. A determination of stockholders
of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new
record date for the adjourned meeting.
SECTION 5. DIVIDENDS.--Subject to the provisions of
the Certificate of Incorporation, the Board of Directors may,
out of funds legally available therefor at any regular or
special meeting, declare dividends upon the capital stock of the
corporation as and when they deem expedient. Before declaring
any dividend there may be set apart out of any funds of the
corporation available for dividends, such sum or sums as the
directors from time to time in their discretion deem proper for
working capital or as a reserve fund to meet contingencies or
for equalizing dividends or for such other purposes as the
directors shall deem conducive to the interests of the
corporation.
SECTION 6. SEAL.--The corporate seal shall be
circular in form and shall contain the name of the corporation,
the year of its creation and the words "CORPORATE SEAL
DELAWARE". Said seal may be used by causing it or a facsimile
thereof to be impressed or affixed or reproduced or otherwise.
SECTION 7. FISCAL YEAR.--The fiscal year of the
corporation shall be January 31st unless otherwise determined by
resolution of the Board of Directors.
SECTION 8. CHECKS.--All checks, drafts or other orders
for the payment of money, notes or other evidences of indebted
ness issued in the name of the corporation shall be signed by
such officer or officers, agent or agents of the corporation,
and in such manner as shall be determined from time to time by
resolution of the Board of Directors.
SECTION 9. NOTICE AND WAIVER OF NOTICE.--Whenever
any notice is required by these By-Laws to be given, personal
notice is not meant unless expressly so stated, and any notice
so required shall be deemed to be sufficient if given by deposit
ing the same in the United States mail, postage prepaid, ad
dressed to the person entitled thereto at his address as it
appears on the records of the corporation, and such notice shall
be deemed to have been given on the day of such mailing.
Stockholders not entitled to vote shall not be entitled to
receive notice of any meetings except as otherwise provided by
Statute.
Whenever any notice whatever is required to be
given under the provisions of any law, or under the
provisions of the Certificate of Incorporation of the
corporation or these By-Laws, a waiver thereof in writing,
signed by the person or persons entitled to said notice,
whether before or after the time stated therein, shall be
deemed equivalent thereto.
ARTICLE VI
AMENDMENTS
These By-Laws may be altered or repealed and By-
Laws may be made at any annual meeting of the stockholders
or at any special meeting thereof if notice of the proposed
alteration or repeal or By-Law or By-Laws to be made be
contained in the notice of such special meeting, by the
affirmative vote of a majority of the stock issued and
outstanding and entitled to vote thereat, or by the
affirmative vote of a majority of the Board of Directors, at
any regular meeting of the Board of Directors, or at any
special meeting of the Board of Directors, if notice of the
proposed alteration or repeal, or By-Law or By-Laws to be
made, be contained in the notice of such special meeting.
EXHIBIT 4.1
DELTA MILLS, INC.
As Issuer
DELTA MILLS MARKETING, INC.,
As Guarantor
$150,000,000
SERIES A AND SERIES B
9 5/8% SENIOR NOTES DUE 2007
INDENTURE
Dated as of August 25, 1997
THE BANK OF NEW YORK
As Trustee
CROSS-REFERENCE TABLE*
Trust Indenture
Act Section Indenture Section
310 (a)(1) 7.10
(a)(2) 7.10
(a)(3) N.A.
(a)(4) N.A.
(a)(5) 7.10
(b) 7.10
(c) N.A.
311 (a) 7.11
(b) 7.11
(c) N.A.
312 (a) 2.05
(b) 11.03
(c) 11.03
313 (a) 7.06
(b)(2) 7.07
(c) 7.06;11.02
(d) 7.06
314 (a) 4.03;11.02
(c)(1) 11.04
(c)(2) 11.04
(c)(3) N.A.
(e) 11.05
(f) N.A.
315 (a) 7.01
(b) 7.05,11.02
(c) 7.01
(d) 7.01
(e) 6.11
316 (a)(last sentence) 2.09
(a)(1)(A) 6.05
(a)(1)(B) 6.04
(a)(2) N.A.
(b) 6.07
(c) 2.12
317 (a)(1) 6.08
(a)(2) 6.09
(b) 2.04
318 (a) 11.01
(b) N.A.
(c) 11.01
N.A. means not applicable.
*This Cross-Reference Table is not part of the
Indenture.
TABLE OF CONTENTS
Page
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
Section 1.01. Definitions 1
Section 1.02. Other Definitions 13
Section 1.03. Incorporation by Reference of Trust Indenture Act 13
Section 1.04. Rules of Construction 14
ARTICLE 2
THE NOTES
Section 2.01. Form and Dating 14
Section 2.02. Execution and Authentication 15
Section 2.03. Registrar and Paying Agent 15
Section 2.04. Paying Agent to Hold Money in Trust 16
Section 2.05. Holder Lists 16
Section 2.06. Transfer and Exchange 16
Section 2.07. Replacement Notes 21
Section 2.08. Outstanding Notes 22
Section 2.09. Treasury Notes 22
Section 2.10. Temporary Notes 22
Section 2.11. Cancellation 22
Section 2.12. Defaulted Interest 23
ARTICLE 3
REDEMPTION AND PREPAYMENT
Section 3.01. Notices to Trustee 23
Section 3.02. Selection of Notes to Be Redeemed 23
Section 3.03. Notice of Redemption 24
Section 3.04. Effect of Notice of Redemption 24
Section 3.05. Deposit of Redemption Price 25
Section 3.06. Notes Redeemed in Part 25
Section 3.07. Optional Redemption 25
Section 3.08. Mandatory Redemption 26
Section 3.09. Offer to Purchase by Application of Excess Proceeds 26
ARTICLE 4
COVENANTS
Section 4.01. Payment of Notes 27
Section 4.02. Maintenance of Office or Agency 28
Section 4.03. Reports 28
Section 4.04. Compliance Certificate 29
Section 4.05. Taxes 29
Section 4.06. Stay, Extension and Usury Laws 29
Section 4.07. Restricted Payments 30
Section 4.08. Dividend and Other Payment Restrictions Affecting
Subsidiaries 31
Section 4.09. Incurrence of Indebtedness and Issuance of
Preferred Stock 32
Section 4.10. Asset Sales 33
Section 4.11. Transactions with Affiliates 34
Section 4.12. Liens 35
Section 4.13. Sale and Leaseback Transactions 35
Section 4.14. Corporate Existence 36
Section 4.15. Offer to Repurchase Upon Change of Control 36
Section 4.16. Limitation on Issuances and Sales of Capital
Stock of Wholly-Owned Subsidiaries 37
Section 4.17. Payments for Consent 37
Section 4.18. Limitation on Investment Company Status 38
Section 4.19. Additional Subsidiary Guarantees 38
ARTICLE 5
SUCCESSORS
Section 5.01. Merger, Consolidation, or Sale of Assets 38
Section 5.02. Successor Corporation Substituted 39
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01. Events of Default 39
Section 6.02. Acceleration 41
Section 6.03. Other Remedies 41
Section 6.04. Waiver of Past Defaults 42
Section 6.05. Control by Majority 42
Section 6.06. Limitation on Suits 42
Section 6.07. Rights of Holders of Notes to Receive Payment 43
Section 6.08. Collection Suit by Trustee 43
Section 6.09. Trustee May File Proofs of Claim 43
Section 6.10. Priorities 43
Section 6.11. Undertaking for Costs 44
ARTICLE 7
TRUSTEE
Section 7.01. Duties of Trustee 44
Section 7.02. Rights of Trustee 45
Section 7.03. Individual Rights of Trustee 46
Section 7.04. Trustee's Disclaimer 46
Section 7.05. Notice of Defaults 47
Section 7.06. Reports by Trustee to Holders of the Notes 47
Section 7.07. Compensation and Indemnity 47
Section 7.08. Replacement of Trustee 48
Section 7.09. Successor Trustee by Merger, etc 49
Section 7.10. Eligibility; Disqualification 49
Section 7.11. Preferential Collection of Claims Against Company 49
ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Section 8.01. Option to Effect Legal Defeasance or Covenant
Defeasance 49
Section 8.02. Legal Defeasance and Discharge 50
Section 8.03. Covenant Defeasance 50
Section 8.04. Conditions to Legal or Covenant Defeasance 50
Section 8.05. Deposited Money and Government Securities to
be Held in Trust; Other Miscellaneous Provisions. 52
Section 8.06. Repayment to Company 52
Section 8.07. Reinstatement 53
ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER
Section 9.01. Without Consent of Holders of Notes 53
Section 9.02. With Consent of Holders of Notes 54
Section 9.03. Compliance with Trust Indenture Act 55
Section 9.04. Revocation and Effect of Consents 55
Section 9.05. Notation on or Exchange of Notes 55
Section 9.06. Trustee to Sign Amendments, etc 55
ARTICLE 10
SUBSIDIARY GUARANTEES
Section 10.01. Subsidiary Guarantees 56
Section 10.02. Execution and Delivery of Subsidiary
Guarantees 57
Section 10.03. Guarantors May Consolidate, etc., on
Certain Terms 57
Section 10.04. Releases Following Sale of Assets 58
Section 10.05. Limitation on Guarantor Liability 58
Section 10.06. "Trustee" to Include Paying Agent 59
ARTICLE 11
MISCELLANEOUS
Section 11.01. Trust Indenture Act Controls 59
Section 11.02. Notices 59
Section 11.03. Communication by Holders of Notes with Other
Holders of Notes 60
Section 11.04. Certificate and Opinion as to Conditions
Precedent 60
Section 11.05. Statements Required in Certificate or
Opinion 61
Section 11.06. Rules by Trustee and Agents 61
Section 11.07. No Personal Liability of Directors,
Officers, Employees or Stockholders 61
Section 11.08. Governing Law 61
Section 11.09. No Adverse Interpretation of Other Agreements 61
Section 11.10. Successors 61
Section 11.11. Severability 61
Section 11.12. Counterpart Originals 62
Section 11.13. Table of Contents, Headings, etc 62
EXHIBITS
Exhibit A FORM OF NOTE
Exhibit B FORM OF CERTIFICATE OF TRANSFER
Exhibit C FORM OF SUBSIDIARY GUARANTEE
INDENTURE dated as of August 25, 1997 among Delta Mills,Inc., a
Delaware corporation (the "Company"), Delta Mills
Marketing, Inc., a Delaware
corporation (together with all other Persons who execute a
Subsidiary Guarantee pursuant
to the terms of this Indenture, the "Guarantors") and The
Bank of New York, as trustee
(the "Trustee").
The Company, the Guarantors and the Trustee agree as follows for the
benefit of each other and for the equal and ratable
benefit of the Holders of the 9 5/8%
Series A Senior Notes due 2007 (the "Series A Notes") and
the 9 5/8% Series B Senior Notes
due 2007 (the "Series B Notes" and, together with the
Series A Notes, the "Notes"):
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
SECTION 1.01. DEFINITIONSSECTION 1.01.
DEFINITIONS.
"accreted value" means, with respect to discount
Indebtedness, as of any
date of determination prior to the end of the "discount"
or "zero coupon" period for such
discount Indebtedness, the sum of (a) the initial offering
price of such Indebtedness and (b)
that portion of the excess of the principal amount at
maturity of such Indebtedness over
such initial offering price as shall have been accreted
thereon from the date of issuance of
such discount Indebtedness through the date of
determination.
"Acquired Debt" means, with respect to any specified
Person, (i)
Indebtedness of any other Person existing at the time such
other Person is merged with or
into or became a Subsidiary of such specified Person which
was not incurred in
connection with, or in contemplation of, such other Person
merging with or into or
becoming a Subsidiary of such specified Person, and (ii)
Indebtedness secured by a Lien
encumbering any asset acquired by such specified Person.
"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 purposes of this definition,
"control" (including, with
correlative meanings, the terms "controlling," "controlled
by" and "under common
control with"), as used with respect to any Person, shall
mean the possession, directly or
indirectly, of the power to direct or cause the direction
of the management or policies of
such Person, whether through the ownership of voting
securities, by agreement or
otherwise; provided that, for purposes of Section 4.11,
beneficial ownership of 10% or
more of the voting securities of a Person shall be deemed
to be control.
"Agent" means any Registrar, Paying Agent or co-registrar.
"Applicable Procedures" means, with respect to any
transfer or exchange
of or for beneficial interests in any Global Note, the
rules and procedures of the
Depository that apply to such transfer or exchange.
"Approved Lender" means (i) any domestic commercial bank
having
capital and surplus in excess of $100.0 million and a
Keefe Bank Watch Rating of "B" or
better and (ii) any bank whose short term commercial paper
rating by Standard & Poor's
Ratings Services is A-1 or better or whose short term
commercial paper rating by
Moody's Investors Service is P-1 or better.
"Asset Sale" means the sale, lease, conveyance or other
disposition of any
assets (including, without limitation, by way of a sale
and
leaseback and the receipt of
proceeds of insurance (excluding business interruption
insurance)) paid on account of the
loss of or damage to any asset and awards of compensation
for any asset taken by
condemnation, eminent domain or similar proceeding, but
excluding the granting of any
Lien, in each case, in one or a series of related
transactions (a) that have a fair market
value in excess of $1,000,000 or (b) yield Net Proceeds in
excess of $1,000,000.
Notwithstanding the foregoing, the term "Asset Sale" shall
not include (i) any sale, lease,
conveyance or other disposition that constitutes a
Restricted Payment or an Investment
permitted to be made under the Indenture, (ii) any
transaction governed by Section 5.01,
(iii) the sale or lease of equipment, inventory, accounts
receivable or other assets in the
ordinary course of business, (iv) the transfer of assets
by the Company to a Wholly-
Owned Subsidiary of the Company (other than a Receivables
Subsidiary) or by a Wholly-
Owned Subsidiary of the Company (other than a Receivables
Subsidiary) to the Company
or another Wholly-Owned Subsidiary of the Company (other
than a Receivables
Subsidiary), (v) the sale or other disposition of cash or
Cash Equivalents, or (vi) the sale
of accounts receivables and related assets customarily
transferred in an asset securitization
transaction involving accounts receivable to a Receivables
Subsidiary or by a Receivables
Subsidiary, in each case, in connection with a Qualified
Receivables Transaction.
"Attributable Debt" in respect of a sale and leaseback
transaction means,
at the time of determination, the present value
(discounted at the rate of interest implicit in
such transaction, determined in accordance with GAAP) of
the obligation of the lessee for
net rental payments during the remaining term of the lease
included in such sale and
leaseback transaction (including any period for which such
lease has been extended or
may, at the option of the lessor, be extended).
"Bankruptcy Law" means Title 11, U.S. Code or any similar
or successor
federal or state law for the relief of debtors.
"Board of Directors" means the Board of Directors or other
governing
body charged with the ultimate management of any Person,
or any duly authorized
committee thereof.
"Business Day" means any day other than a Legal Holiday.
"Capital Lease Obligation" means, at the time any
determination thereof
is to be made, the amount of the liability in respect of
a capital lease that would at such
time be required to be capitalized on a balance sheet in
accordance with GAAP.
"Capital Stock" means (i) in the case of a corporation,
corporate stock,
(ii) in the case of an association or business entity,
any and all shares, interests,
participations, rights or other equivalents (however
designated) of corporate stock, (iii) in
the case of a partnership, partnership interests (whether
general or limited) and (iv) any
other interest or participation that confers on a Person
the right to receive a share of the
profits and losses of, or distributions of assets of, the
issuing Person.
"Cash Equivalents" means (i) United States dollars, (ii)
securities issued
or directly and fully guaranteed or insured by the United
States government or any agency
or instrumentality thereof (provided, that the full faith
and credit of the United States is
pledged in support thereof) having maturities of not more
than twelve months from the
date of acquisition, (iii) time deposits and certificates
of deposit (United States dollar,
eurodollar or fully hedged into United States Dollars if
denominated in a currency other
than United States Dollars) with maturities of twelve
months or less from the date of
acquisition, in each case with an Approved Lender, and
(iv) commercial paper issued by
any Approved Lender (or by the corporate parent of such
Approved Lender) or any
variable rate note issued or guaranteed by a corporation
organized under the laws of the
United States, any state thereof, the District of Columbia
or any territory thereof and rated
A-2 or better by Standard & Poor's Investors Services or P-
2 or better by Moody's
Investor Services, in each case maturing within six months
after the date of acquisition.
"Change of Control" means the occurrence of any of the
following:
(i) the sale, lease, transfer, conveyance or other
disposition (other than by way of merger
or consolidation), in one or a series of related
transactions, of all or substantially all of the
assets of the Company and its Subsidiaries taken as a
whole to any "person" (as such term
is used in Section 13(d)(3) of the Exchange Act) other
than the Principals, (ii) the adoption
of a plan relating to the liquidation or dissolution of
the Company or Delta Woodside
Industries, Inc., (iii) the consummation of any
transaction (including, without limitation,
any merger or consolidation) the result of which is that
any "person" (as defined above),
other than the Principals, becomes the "beneficial owner"
(as such term is defined in
Rule 13d-3 and Rule 13d-5 under the Exchange Act),
directly or indirectly, of more than
50% of the Voting Stock of Delta Woodside Industries,
Inc., (iv) the first day on which a
majority of the members of the Board of Directors of the
Company or Delta Woodside
Industries, Inc. are not Continuing Directors or (v) the
first day on which the Company
ceases to be a Subsidiary of Delta Woodside Industries,
Inc. For purposes of this
definition, any transfer of an equity interest of an
entity that was formed for the purpose
of acquiring Voting Stock of the Company shall be deemed
to be a transfer of such portion
of such Voting Stock as corresponds to the portion of the
equity of such entity that has
been so transferred.
"Consolidated Cash Flow" means, with respect to any Person
for any
period, the Consolidated Net Income of such Person for
such period plus (i) an amount
equal to any extraordinary loss plus any net loss realized
in connection with an Asset Sale
(to the extent such losses were deducted in computing such
Consolidated Net Income),
plus (ii) provision for taxes based on income or profits
of such Person and its Subsidiaries
for such period, to the extent that such provision for
taxes was included in computing such
Consolidated Net Income, plus (iii) consolidated interest
expense of such Person and its
Subsidiaries for such period, whether paid or accrued and
whether or not capitalized
(including, without limitation, amortization of original
issue discount, non-cash interest
payments, the interest component of any deferred payment
obligations, the interest
component of all payments associated with Capital Lease
Obligations, imputed interest
with respect to Attributable Debt, commissions, discounts
and other fees and charges
incurred in respect of letter of credit or bankers'
acceptance financings, and net payments
(if any) pursuant to Hedging Obligations), to the extent
that any such expense was
deducted in computing such Consolidated Net Income, plus
(iv) depreciation, amortization
(including amortization of goodwill and other intangibles
but excluding amortization of
prepaid cash expenses that were paid in a prior period)
and other non-cash charges
(excluding any such non-cash charge to the extent that it
represents an accrual of or
reserve for cash charges in any future period or
amortization of a prepaid cash expense
that was paid in a prior period) of such Person and its
Subsidiaries for such period to the
extent that such depreciation, amortization and other non
cash charges were deducted in
computing such Consolidated Net Income minus (v) non-cash
items of such Person and its
Subsidiaries increasing Consolidated Net Income for such
period, in each case, on a
consolidated basis and determined in accordance with GAAP.
Notwithstanding the
foregoing, the provision for taxes on the income or
profits of, and the depreciation and
amortization and other non-cash charges of, a Subsidiary
of the referent Person shall be
added to Consolidated Net Income to compute Consolidated
Cash Flow only to the extent
(and in same proportion) that the Net Income of such
Subsidiary was included in
calculating the Consolidated Net Income of such Person and
only if a corresponding
amount would be permitted at the date of determination to
be dividended to the Company
by such Subsidiary without prior governmental approval
(that has not been obtained), and
without direct or indirect restriction pursuant to the
terms of its charter and all
agreements, instruments, judgments, decrees, orders,
statutes, rules and governmental
regulations applicable to that Subsidiary or its
stockholders.
"Consolidated Net Income" means, with respect to any
Person for any
period, the aggregate of the Net Income of such Person and
its Subsidiaries for such
period, on a consolidated basis, determined in accordance
with GAAP; provided that (i)
the Net Income (but not loss) of any Person that is not a
Subsidiary or that is accounted
for by the equity method of accounting shall be included
only to the extent of the amount
of dividends or distributions paid in cash to the referent
Person or a Wholly-Owned
Subsidiary thereof that is a Guarantor, (ii) the Net
Income of any Subsidiary shall be
excluded to the extent that the declaration or payment of
dividends or similar distributions
by that Subsidiary of that Net Income is not at the date
of determination permitted without
any prior governmental approval (that has not been
obtained) or, directly or indirectly, by
operation of the terms of its charter or any agreement,
instrument, judgment, decree,
order, statute, rule or governmental regulation applicable
to that Subsidiary or its
stockholders, shall be excluded, (iii) the Net Income of
any Person acquired in a pooling
of interests transaction for any period prior to the date
of such acquisition shall be
excluded and (iv) the cumulative effect of a change in
accounting principles shall be
excluded.
"Consolidated Net Worth" means, with respect to any Person
as of any
date, the sum of (i) the consolidated equity of the common
stockholders of such Person
and its consolidated Subsidiaries as of such date plus
(ii) the respective amounts reported
on such Person's balance sheet as of such date with
respect to any series of preferred
stock (other than Disqualified Stock) that by its terms is
not entitled to the payment of
dividends unless such dividends may be declared and paid
only out of net earnings, but
only to the extent of any cash received by such Person
upon issuance of such preferred
stock, less (a) all write-ups (other than write-ups
resulting from foreign currency
translations and write-ups of tangible assets of a going
concern business made within 12
months after the acquisition of such business) subsequent
to the date of the Indenture in the
book value of any asset owned by such Person or a
consolidated Subsidiary of such
Person, (b) all investments as of such date in
unconsolidated Subsidiaries and in Persons
that are not Subsidiaries (except, in each case, Permitted
Investments), and (c) all
unamortized debt discount and expense and unamortized
deferred charges as of such date,
all of the foregoing determined in accordance with GAAP.
"Continuing Directors" means, as of any date of
determination, any
member of the Board of Directors who (i) was a member of
such Board of Directors on
the date of the Indenture or (ii) was nominated for
election or elected to such Board of
Directors with the approval of a majority of the
Continuing Directors who were members
of such Board at the time of such nomination or election.
"Corporate Trust Office of the Trustee" shall be at the
address of the
Trustee specified in Section 11.02 or such other address
as to which the Trustee may give
notice to the Company.
"Default" means any event that is or with the passage of
time or the
giving of notice or both would be an Event of Default.
"Definitive Note" means a certificated Note registered in
the name of the
Holder thereof and issued in accordance with this
Indenture, substantially in the form of
Exhibit A hereto, except that such Note shall not have the
information called for by
footnotes 1 and 2 thereof.
"Depository" means, with respect to the Notes issuable or
issued in whole
or in part in global form, the Person specified in Section
2.03 as the Depository with
respect to the Notes, until a successor shall have been
appointed and become such
pursuant to the applicable provision of this Indenture,
and, thereafter, "Depository" shall
mean or include such successor.
"Disqualified Stock" means any Capital Stock that, 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 redeemable at the option
of the Holder thereof, in whole
or in part, on or prior to the date that is 91 days after
the date on which the Notes mature.
"Eligible Inventory" means, as of any date of
determination, all inventory
of the Company and its Subsidiaries, wherever located,
valued in accordance with GAAP
and reflected on the most recent balance sheet of the
Company prior to such date of
determination for which financial statements of the
Company are available.
"Eligible Receivables" means, as of any date of
determination, all
accounts receivable of the Company and its Subsidiaries
(including amounts denominated
as due from factor) arising out of the sale of inventory
or manufacturing services in the
ordinary course of business, valued in accordance with
GAAP and reflected on the most
recent balance sheet of the Company prior to such date of
determination for which
financial statements of the Company are available.
"Equity Interests" means Capital Stock and all warrants,
options or other
rights to acquire Capital Stock (but excluding any debt
security that is convertible into, or
exchangeable for, Capital Stock).
"Exchange Act" means the Securities Exchange Act of 1934,
as amended.
"Exchange Offer" has the meaning set forth in the
Registration Rights
Agreement.
"Fixed Charges" means, with respect to any Person for any
period, the
sum of (i) the consolidated interest expense of such
Person and its Subsidiaries for such
period, whether paid or accrued (including, without
limitation, amortization of original
issue discount, non-cash interest payments, the interest
component of any deferred
payment obligations, the interest component of all
payments associated with Capital Lease
Obligations, imputed interest with respect to Attributable
Debt, commissions, discounts
and other fees and charges incurred in respect of letter
of credit or bankers' acceptance
financings, and net payments (if any) pursuant to Hedging
Obligations, but excluding
amortization of deferred financing charges incurred in
connection with the Refinancing)
and (ii) the consolidated interest expense of such Person
and its Subsidiaries that was
capitalized during such period, and (iii) any interest
expense on Indebtedness of another
Person that is guaranteed by such Person or one of its
Subsidiaries or secured by a Lien
on assets of such Person or one of its Subsidiaries
(whether or not such guarantee or Lien
is called upon) and (iv) the product of (a) all cash
dividend payments (and non-cash
dividend payments in the case of a Person that is a
Subsidiary), other than dividends paid
to such Person or a Wholly-Owned Subsidiary of such
Person, on any series of preferred
stock of such Person, times (b) a fraction, the numerator
of which is one and the
denominator of which is one minus the then current
combined
federal, state and local
statutory tax rate of such Person, expressed as a
decimal, in each case, on a consolidated
basis and in accordance with GAAP.
"Fixed Charge Coverage Ratio" means with respect to any
Person for any
period, the ratio of the Consolidated Cash Flow of such
Person for such period to the
Fixed Charges of such Person for such period. In the
event that the Company or any of
its Subsidiaries incurs, assumes, guarantees or redeems or
otherwise repays any
Indebtedness (other than revolving credit borrowings) or
issues or redeems preferred stock
subsequent to the commencement of the period for which the
Fixed Charge Coverage
Ratio is being calculated but prior to the date on which
the event for which the calculation
of the Fixed Charge Coverage Ratio is made (the
"Calculation Date"), then the Fixed
Charge Coverage Ratio shall be calculated giving pro forma
effect to such incurrence,
assumption, guarantee, redemption or repayment of
Indebtedness, or such issuance or
redemption of preferred stock, as if the same had occurred
at the beginning of the
applicable four-quarter reference period. In addition,
for purposes of making the
computation referred to above, (i) acquisitions that have
been made by the Company or
any of its Subsidiaries, including through mergers or
consolidations and including any
related financing transactions, during the four-quarter
reference period or subsequent to
such reference period and on or prior to the Calculation
Date shall be deemed to have
occurred on the first day of the four-quarter reference
period, and Consolidated Cash
Flow for such reference period shall be calculated on such
pro forma basis without giving
effect to clause (iii) of the proviso set forth in the
definition of Consolidated Net Income,
and (ii) the Consolidated Cash Flow attributable to
discontinued operations, as determined
in accordance with GAAP, and operations or businesses
disposed of prior to the
Calculation Date, shall be excluded, and (iii) the Fixed
Charges attributable to
discontinued operations, as determined in accordance with
GAAP, and operations or
businesses disposed of prior to the Calculation Date,
shall be excluded, but only to the
extent that the obligations giving rise to such Fixed
Charges shall not be obligations of the
referent Person or any of its Subsidiaries following the
Calculation Date.
"GAAP" means generally accepted accounting principles 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
have been approved by a significant segment of
the accounting profession which are in
effect on the date of the Indenture.
"Global Note" means the global note in the form of Exhibit
A hereto
bearing the Private Placement Legend and deposited with
and registered in the name of
the Depository or its nominee that will be issued in a
denomination equal to the
outstanding principal amount of the Notes sold in reliance
on Rule 144A.
"Government Securities" means direct obligations of, or
obligations
guaranteed by, the United States of America for the
payment of which guarantee or
obligations the full faith and credit of the United States
is pledged.
"guarantee" means a guarantee (other than by endorsement
of negotiable
instruments for collection in the ordinary course of
business), direct or indirect, in any
manner (including, without limitation, letters of credit
and reimbursement agreements in
respect thereof), of all or any part of any Indebtedness.
"Guarantor" means each of (i) Delta Mills Marketing, Inc.
and (ii) any
other subsidiary that executes a Subsidiary Guarantee in
accordance with the provisions of
the Indenture, and their respective successors and
assigns.
"Hedging Obligations" means, with respect to any Person,
the obligations
of such Person under (i) interest rate swap agreements,
interest rate cap agreements and
interest rate collar agreements and (ii) other agreements
or arrangements designed to
protect such Person against fluctuations in interest
rates, the value of foreign currencies
and the value of commodities purchased by the Company or
any of its Subsidiaries in the
ordinary course of business.
"Holder" means a Person in whose name a Note is
registered.
"Indebtedness" means, with respect to any Person, any
indebtedness of
such Person, whether or not contingent, in respect of
borrowed money or evidenced by
bonds, notes, debentures or similar instruments or letters
of credit (or reimbursement
agreements in respect thereof) or banker's acceptances or
representing Capital Lease
Obligations or the balance deferred and unpaid of the
purchase price of any property or
representing any Hedging Obligations, except any such
balance that constitutes an accrued
expense or trade payable, if and to the extent any of the
foregoing indebtedness (other than
letters of credit and Hedging Obligations) would appear as
a liability upon a balance sheet
of such Person prepared in accordance with GAAP, as well
as all indebtedness of others
secured by a Lien on any asset of such Person (whether or
not such indebtedness is
assumed by such Person) and, to the extent not otherwise
included, the guarantee by such
Person of any Indebtedness of any other Person and the
Attributable Debt of such Person
relating to any sale and leaseback transaction.
"Indenture" means this Indenture, as amended or
supplemented from time
to time.
"Indirect Participant" means a Person who holds a
beneficial interest in a
Global Note through a Participant.
"Investments" means, with respect to any Person, all
investments by such
Person in other Persons (including Affiliates) in the
forms of direct or indirect loans
(including guarantees of Indebtedness or other
obligations), advances or capital
contributions (excluding commission, travel and similar
advances to officers and
employees made in the ordinary course of business), or
purchases or other acquisitions for
consideration of Indebtedness, Equity Interests or other
securities, together with all items
that are or would be classified as investments on a
balance sheet prepared in accordance
with GAAP; provided that an acquisition of assets, Equity
Interests or other securities by
the Company or a Subsidiary of the Company for
consideration consisting of common
equity securities or preferred stock (not constituting
Disqualified Stock) of the Company
shall not be deemed to be an Investment.
"Legal Holiday" means a Saturday, a Sunday or a day on
which banking
institutions in the City of New York or at a place of
payment are authorized by law,
regulation or executive order to remain closed. If a
payment date is a Legal Holiday at a
place of payment, payment may be made at that place on the
next succeeding day that is
not a Legal Holiday, and no interest shall accrue for the
intervening period.
"Lien" means, with respect to any asset, any mortgage,
lien, pledge,
charge, security interest or encumbrance of any kind in
respect of such asset, whether or
not filed, recorded or otherwise perfected under
applicable law (including any conditional
sale or other title retention agreement, any capital lease
and any other preferential
arrangement that has substantially the same practical
effect as a security interest in any
asset).
"Liquidated Damages" means, at any time, all liquidated
damages then
owing pursuant to Section 5 of the Registration Rights
Agreement.
"Net Income" means, with respect to any Person, the net
income (loss) of
such Person, determined in accordance with GAAP and before
any reduction in respect of
preferred stock dividends, excluding, however, (i) any
gain (but not loss), together with
any related provision for taxes on such gain (but not
loss), realized in connection with
(a) any Asset Sale (including, without limitation,
dispositions pursuant to sale and
leaseback transactions) or (b) the disposition of any
securities by such Person or any of its
Subsidiaries or the extinguishment of any Indebtedness of
such Person or any of its
Subsidiaries and (ii) any extraordinary or nonrecurring
gain (but not loss), together with
any related provision for taxes on such extraordinary or
nonrecurring gain (but not loss).
"Net Proceeds" means the aggregate cash proceeds received
by the
Company or any of its Subsidiaries in respect of any Asset
Sale (including, without
limitation, any cash received upon the sale or other
disposition of any non-cash
consideration received in any Asset Sale), net of the
direct costs relating to such Asset
Sale (including, without limitation, legal, accounting and
investment banking fees, and
sales commissions), any relocation expenses incurred as a
result thereof, taxes paid or
payable as a result thereof (after taking into account any
available tax credits or deductions
and any tax sharing arrangements), and any reserve for
adjustment in respect of the sale
price of such asset or assets established in accordance
with GAAP.
"New Credit Facility" means that certain Credit Agreement,
dated as of
the date of the Indenture, by and among the Company and
NationsBank, N.A., as
administrative agent, and BNY Financial Corporation, as
collateral agent, including any
related notes, guarantees, collateral documents,
instruments and agreements executed in
connection therewith, and in each case as amended,
modified, renewed, refunded,
replaced or refinanced from time to time.
"Note Custodian" means the Trustee, as custodian with
respect to the
Notes in global form, or any successor entity thereto.
"Obligations" means any principal, interest, penalties,
fees,
indemnifications, reimbursements, damages and other
liabilities payable under the
documentation governing any Indebtedness.
"Offering" means the Offering of the Notes by the Company.
"Officer" means, with respect to any Person, the Chairman
of
the Board,
the Chief Executive Officer, the President, the Chief
Operating Officer, the Chief
Financial Officer, the Treasurer, any Assistant
Treasurer, the Controller, the Secretary or
any Vice-President of such Person.
"Officers' Certificate" means a certificate signed on
behalf of the
Company by two Officers of the Company, one of whom must
be the principal executive
officer, a vice chairman, the principal financial officer,
the treasurer or the principal
accounting officer of the Company, that meets the
requirements of Section 11.05.
"Opinion of Counsel" means an opinion from legal counsel
who is
reasonably acceptable to the Trustee, that meets the
requirements of Section 11.05. The
counsel may be an employee of or counsel to the Company or
any Subsidiary of the
Company.
"Participant" means, with respect to DTC, a Person who has
an account
with DTC.
"Permitted Investments" means any Investments (i) made in
the Company,
a Wholly-Owned Subsidiary of the Company (other than a
Receivables Subsidiary) or any
other entity that (a) is engaged in the same or a similar
line of business as the Company or
any of its Subsidiaries was engaged in as of the date of
the Indenture or any reasonable
extensions or expansions thereof and (b) as a result of
such Investment becomes a Wholly-
Owned Subsidiary of the Company (other than a Receivables
Subsidiary); (ii) made as a
result of the receipt of non-cash consideration from an
Asset Sale that was made pursuant
to and in compliance with Sections 3.09 and 4.10, (iii)
outstanding as of the date of the
Indenture; (iv) made in cash or Cash Equivalents; or (v)
by the Company or a Wholly-
Owned Subsidiary of the Company in a Receivables
Subsidiary or any Investment by a
Receivables Subsidiary in any other Person or assets, in
each case, in connection with a
Qualified Receivables Transaction; provided that any
Investment in any such Person is in
the form of a Purchase Money Note, any equity interest or
interests in accounts receivable
generated by the Company or a Subsidiary of the Company
and transferred to any Person
in connection with a Qualified Receivables Transaction or
any such Person owning such
accounts receivable.
"Permitted Liens" means (i) Liens existing on the date of
the Indenture;
(ii) Liens to secure the performance of the Notes and the
Subsidiary Guarantees; (iii)
Liens in favor of the Company; (iv) Liens to secure
Indebtedness (including Capital Lease
Obligations) permitted by clause (iii) of the second
paragraph of Section 4.09 covering
only those assets acquired, constructed or improved with
such Indebtedness; provided that
such Liens do not extend to any assets of the Company or
its Subsidiaries other than such
acquired, constructed or improved assets; (v) Liens on
property securing Acquired Debt
existing at the time of acquisition of such property by
the Company or any Subsidiary of
the Company, provided that such Liens were in existence
prior to the contemplation of
such acquisition and do not extend to any assets of the
Company or its Subsidiaries other
than the acquired property; (vi) Liens on property of a
Person securing Acquired Debt
existing at the time such Person is merged into or
consolidated with the Company or any
Subsidiary of the Company or otherwise becomes a
Subsidiary of the Company; provided
that such Liens were in existence prior to the
contemplation of such merger or
consolidation or acquisition and do not extend to any
assets other than those of the Person
merged into, consolidated or otherwise acquired; (vii)
Liens on (x) the accounts receivable
and inventory (and related property) (and proceeds
thereof) of the Company or any
Subsidiary of the Company and (y) Capital Stock of the
Company's Subsidiaries, in each
case, to secure Indebtedness incurred under the New Credit
Facility; (viii) Liens on assets
of a Receivables Subsidiary securing Indebtedness incurred
in connection with a Qualified
Receivables Transaction, provided that such Indebtedness
was incurred in connection with
such Qualified Receivables Transaction; (ix) Liens to
secure Permitted Refinancing Debt
incurred to refinance the Indebtedness referred to in the
preceding clauses (i), (iv), (v),
(vi) and (vii); provided that such Liens do not extend to
any assets other than those
specified in clauses (i), (iv), (v), (vi) and (vii); (x)
Liens to secure the performance of
statutory obligations, surety or appeal bonds, performance
bonds or other obligations of a
like nature incurred in the ordinary course of business;
(xi) Liens for taxes, assessments or
governmental charges or claims that are not yet delinquent
or that are being contested in
good faith by appropriate proceedings promptly instituted
and diligently concluded;
provided, that any reserve or other appropriate provision
as shall be required in
conformity with GAAP shall have been made therefor; (xii)
Liens incurred or deposits
made to secure the performance of tenders, bids, leases,
statutory obligations, surety and
appeal bonds, government contracts, performance and return
of money bonds and other
obligations of a like nature, in each case incurred in the
ordinary course of business
(exclusive of obligations for the payment of borrowed
money); (xiii) Liens encumbering
customary initial deposits and margin deposits, and other
Liens incurred in the ordinary
course of business that are within the general
parameters customary in the industry, in
each case securing Indebtedness under Hedging
Obligations; and (xiv) easements, right-of-
ways, municipal and zoning ordinances and similar
charges, encumbrances, title defects
or other irregularities that do not materially interfere
with the ordinary course of business
of the Company and its Subsidiaries.
"Permitted Refinancing Debt" means any Indebtedness of the
Company or
any of its Subsidiaries issued in exchange for, or the Net
Proceeds of which are used to
extend, refinance, renew, replace, defease or refund,
other Indebtedness of the Company
or any of its Subsidiaries (other than Indebtedness
described in clauses (i), (v), (vi), (vii)
and (viii) of the second paragraph of Section 4.09);
provided that: (i) the principal amount
(or accreted value, if applicable) of such Permitted
Refinancing Debt does not exceed the
principal amount (or accreted value, if applicable) of the
Indebtedness so extended,
refinanced, renewed, replaced, defeased or refunded (plus
the amount of reasonable
expenses incurred in connection therewith); (ii) such
Permitted Refinancing Debt has a
final maturity date not earlier than the final maturity
date of, and has a Weighted Average
Life to Maturity equal to or greater than the Weighted
Average Life to Maturity of, the
Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded; (iii) if
the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded is
subordinated in right of payment to the Notes, such
Permitted Refinancing Debt has a final
maturity date later than the final maturity date of, and
is subordinated in right of payment
to, the Notes on terms at least as favorable to the
Holders of Notes as those contained in
the documentation governing the Indebtedness being
extended, refinanced, renewed,
replaced, defeased or refunded; and (iv) such Indebtedness
is incurred either by the
Company or by the Subsidiary who is the obligor on the
Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded.
"Person" means an individual, partnership, corporation,
limited liability
company, limited liability partnership, unincorporated
organization, trust, joint venture, or
a governmental agency or political subdivision thereof.
"Principals" means E. Erwin Maddrey, II, Bettis C.
Rainsford, any
spouse or lineal descendant of either of them, and any
Related Party of any such Person.
"Private Placement Legend" means the legend set forth in
Section
2.06(g)(i) to be placed on all Notes issued under this
Indenture except as otherwise
permitted by the provisions of this Indenture.
"Purchase Money Note" means a promissory note evidencing a
line of
credit, which may be irrevocable, from, or evidencing
other Indebtedness owed to, the
Company or any Subsidiary of the Company in connection
with a Qualified Receivables
Transaction, which note shall be repaid from cash
available to the maker of such note,
other than amounts required to be established as reserves
pursuant to agreements, amounts
paid to investors in respect of interest, principal and
other amounts owing to such
investors and amounts paid in connection with the purchase
of newly generated
receivables.
"Qualified Receivables Transaction" means any transaction
or series of
transactions that may be entered into by the Company or
any Subsidiary of the Company
pursuant to which the Company or any Subsidiary of the
Company may sell, convey or
otherwise transfer to (a) a Receivables Subsidiary (in the
case of a transfer by the
Company or any Subsidiary of the Company) and (b) any
other Person (in the case of a
transfer by a Receivables Subsidiary), or may grant a
security interest in, any accounts
receivable (whether now existing or arising in the future)
of the Company or any
Subsidiary of the Company, and any asset related thereto
including, without limitation, all
collateral securing such accounts receivable, all
contracts and all guarantees or other
obligations in respect of such accounts receivable,
proceeds of such accounts receivable
and other assets which are customarily transferred or in
respect of which security interests
are customarily granted in connection with asset
securitization transactions involving
accounts receivable.
"Receivables Subsidiary" means a Wholly-Owned Subsidiary
of the
Company (other than a Subsidiary Guarantor) which engages
in no activities other than in
connection with the financing of accounts receivable and
which is designated by the Board
of Directors of the Company (as provided below) as a
Receivables Subsidiary (a) no
portion of the Indebtedness or any other Obligations
(contingent or otherwise) of which (i)
is guaranteed by the Company or any other Subsidiary of
the Company (excluding
guarantees of Obligations (other than the principal of,
and interest on, Indebtedness))
pursuant to Standard Securitization Undertakings, (ii) is
recourse to or obligates the
Company or any other Subsidiary of the Company in any way
other than pursuant to
Standard Securitization Undertakings or (iii) subjects any
property or asset of the
Company or any other Subsidiary of the Company, directly
or indirectly, contingently or
otherwise, to the satisfaction thereof, other than
pursuant to Standard Securitization
Undertakings, (b) with which neither the Company nor any
other Subsidiary of the
Company has any material contract, agreement, arrangement
or understanding (except in
connection with a Purchase Money Note or Qualified
Receivables Transaction) other than
on terms no less favorable to the Company or such other
Subsidiary of the Company than
those that might be obtained at the time from persons that
are not Affiliates of the
Company, other than fees payable in the ordinary course of
business in connection with
servicing accounts receivable, and (c) to which neither
the Company nor any other
Subsidiary of the Company has any obligation to maintain
or preserve such entity's
financial condition or cause such entity to achieve
certain levels of operating results. Any
such designation by the Board of Directors of the Company
shall be evidenced to the
Trustee by filing with the Trustee a certified copy of the
resolution of the Board of
Directors of the Company giving effect to such designation
and an Officers' Certificate
certifying, to the best of such officer's knowledge and
belief after consulting with counsel,
that such designation complied with the foregoing
conditions.
"Registration Rights Agreement" means the Registration
Rights
Agreement, dated as of the date of this Indenture, by and
among the Company, the
Guarantor and the other parties named on the signature
pages thereof, as such agreement
may be amended, modified or supplemented from time to
time.
"Related Party" with respect to any Principal means (A)
any controlling
stockholder or majority owned Subsidiary of such Principal
or (B) any trust, corporation,
partnership or other entity, the beneficiaries,
stockholders, partners, owners or Persons
beneficially holding a 51% or more controlling interest of
which consist of such Principal
and/or such other Persons referred to in the immediately
preceding clause (A).
"Responsible Officer," when used with respect to the
Trustee, means any
officer within the Corporate Trust Administration
department of the Trustee (or any
successor group of the Trustee) 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 Investment" means an Investment other than a
Permitted
Investment.
"Rule 144" means Rule 144 under the Securities Act.
"Rule 144A" means Rule 144A under the Securities
Act. "SEC" means the Securities and Exchange
Commission. "Securities Act" means the Securities
Act of 1933, as amended.
"Standard Securitization Undertakings" means
representations,
warranties, covenants and indemnities entered into by the
Company or any Subsidiary of
the Company which are reasonably customary in an accounts
receivable transaction.
"Stated Maturity" means, with respect to any installment
of interest or
principal on any series of Indebtedness, the date on which
such payment of interest or
principal was scheduled to be paid in the original
documentation governing such
Indebtedness, and shall not include any contingent
obligations to repay, redeem or
repurchase any such interest or principal prior to the
date originally scheduled for the
payment thereof.
"Subsidiary" means, with respect to any Person, (i) any
corporation,
association or other business entity of which more than
50% of the total voting power of
shares of Capital Stock entitled (without regard to the
occurrence of any contingency) to
vote in the election of directors, managers or trustees
thereof is at the time owned or
controlled, directly or indirectly, by such Person and/or
one or more of the other
Subsidiaries of that Person (or a combination thereof) and
(ii) any partnership (a) the sole
general partner or the managing general partner of which
is such Person or a Subsidiary
of such Person or (b) the only general partners of which
are such Person and/or one or
more Subsidiaries of such Person (or any combination
thereof).
"Subsidiary Guarantee" means the guarantee of the Notes by
each of the
Guarantors pursuant to Article 10 hereof and in the form
of Subsidiary Guarantee attached
hereto as Exhibit C and any additional guarantee of the
Notes to be executed by any
Subsidiary pursuant to Section 4.19.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C.
77aaa-
77bbbb) as in effect on the date on which this Indenture
is qualified under the TIA.
"Transfer Restricted Securities" means securities that
bear or are required
to bear the legend set forth in Section 2.06(g).
"Trustee" means the party named as such above until a
successor replaces
it in accordance with the applicable provisions of
this Indenture and thereafter means the
successor serving hereunder.
"Unrestricted Global Note" means one or more global Notes
that do not
and are not required to bear the Private Placement Legend
and are deposited with and
registered in the name of the Depository or its nominee.
"Unrestricted Definitive Note" means one or more
Definitive Notes that
do not and are not required to bear the Private Placement
Legend.
"Voting Stock" of any Person as of any date means the
Capital Stock of
such Person that is at the time entitled to vote in the
election of the Board of Directors of
such Person.
"Weighted Average Life to Maturity" means, when applied to
any
Indebtedness at any date, the number of years obtained by
dividing (i) the sum of the
products obtained by multiplying (a) the amount of each
then remaining installment,
sinking fund, serial maturity or other required payments
of principal, including payment at
final maturity, in respect thereof, by (b) the number of
years (calculated to the nearest
one-twelfth) that will elapse between such date and the
making of such payment, by (ii)
the then outstanding principal amount of such
Indebtedness.
"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.
SECTION 1.02. OTHER DEFINITIONSSECTION 1.02.
OTHER DEFINITIONS.
Defined in
Term Section
"Affiliate Transaction" 4.11
"Asset Sale Offer" 3.09
"Change of Control Offer" 4.15
"Change of Control Payment" 4.15
"Change of Control Payment Date" 4.15
"Covenant Defeasance" 8.03
"DTC" 2.03
"Event of Default" 6.01
"Excess Proceeds" 4.10
"incur" 4.09
"insolvent" 10.05
"Legal Defeasance" 8.02
"Offer Amount" 3.09
"Offer Period" 3.09
"Paying Agent" 2.03
"Payment Default" 6.01
"Permitted Debt" 4.09
"Purchase Date" 3.09
"Registrar" 2.03
"Restricted Payments" 4.07
SECTION 1.03. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT
Whenever this Indenture refers to a provision of the TIA,
the provision is incorporated by reference in and made a part of this
Indenture.
The following TIA terms used in this Indenture have the
following meanings:
"indenture securities" means the Notes;
"indenture security Holder" means a Holder of a Note;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the
Trustee;
"obligor" on the Notes means the Company and any successor
obligor upon the Notes.
All other terms used in this Indenture that are defined by
the TIA, defined by TIA
reference to another statute or defined by SEC rule under
the TIA have the meanings so
assigned to them.
SECTION 1.04. RULES OF CONSTRUCTIONSECTION 1.04. RULES OF
CONSTRUCTION.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the
meaning assigned to it in
accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the
plural include the singular;
(5) provisions apply to successive events and
transactions;
(6) references to sections of or rules under the
Securities Act shall be deemed to
include substitute, replacement of successor sections or
rules adopted by the SEC from
time to time; and
(7) masculine pronouns include the feminine and neutral
genders.
ARTICLE 2
THE NOTES ARTICLE 2 THE NOTES
SECTION 2.01. FORM AND DATINGSECTION 2.01. FORM AND
DATING.
The Notes and the Trustee's certificate of authentication
shall be substantially in the
form of Exhibit A hereto. The Notes may be issued in the
form of Definitive Notes or
Global Notes, as specified by the Company. The Notes may
have notations, legends or
endorsements required by law, stock exchange rule or
usage. Each Note shall be dated
the date of its authentication. The Notes shall be in
denominations of $1,000 and integral
multiples thereof.
The terms and provisions contained in the Notes shall
constitute, and are hereby
expressly made, a part of this Indenture and the Company
and the Trustee, by their
execution and delivery of this Indenture, expressly agree
to such terms and provisions and
to be bound thereby. However, to the extent any provision
of any Note conflicts with the
express provisions of this Indenture, the provisions of
this Indenture shall govern and be
controlling.
Notes issued in global form shall be substantially in the
form of Exhibit A attached
hereto (including the text referred to in footnote 1 and 2
thereto). Notes issued in
definitive form shall be substantially in the form of
Exhibit A attached hereto (but without
including the text referred to in footnote 1 and 2
thereto). Each Global Note shall
represent such of the outstanding Notes as shall be
specified therein and each shall provide
that it shall represent the aggregate principal amount of
outstanding Notes from time to
time endorsed thereon and that the aggregate principal
amount of outstanding Notes
represented thereby may from time to time be reduced or
increased, as appropriate, to
reflect exchanges and redemptions. Any endorsement of a
Global Note to reflect the
amount of any increase or decrease in the aggregate
principal amount of outstanding Notes
represented thereby shall be made by the Trustee or the
Note Custodian, at the direction
of the Trustee, in accordance with instructions given by
the Holder thereof as required by
Section 2.06.
SECTION 2.02. EXECUTION AND AUTHENTICATIONSECTION 2.02.
EXECUTION AND
AUTHENTICATION.
Two Officers shall sign the Notes for the Company by
manual
or facsimile
signature.
If an Officer whose signature is on a Note no longer holds
that office at the time a
Note is authenticated, the Note shall nevertheless be
valid.
A Note shall not be valid until authenticated by the
manual signature of the Trustee.
The signature shall be conclusive evidence that the Note
has been authenticated under this
Indenture.
The Trustee shall, upon a written order of the Company
signed by two Officers,
authenticate Notes for original issue up to the aggregate
principal amount stated in
paragraph 4 of the Notes. Notes to be so issued shall be
either Definitive Notes or Global
Notes, as specified by the Company in such order. The
aggregate principal amount of
Notes outstanding at any time may not exceed such amount
except as provided in Section
2.07.
The Trustee may appoint an authenticating agent acceptable
to the Company to
authenticate Notes. An authenticating agent may
authenticate Notes whenever the Trustee
may do so. Each reference in this Indenture to
authentication by the Trustee includes
authentication by such agent. An authenticating agent has
the same rights as an Agent to
deal with Holders or an Affiliate of the Company.
SECTION 2.03. REGISTRAR AND PAYING AGENTSECTION 2.03.
REGISTRAR AND PAYING
AGENT.
The Company shall maintain an office or agency where Notes
may be presented for
registration of transfer or for exchange ("Registrar") and
an office or agency where Notes
may be presented for payment ("Paying Agent"). The
Registrar shall keep a register of
the Notes and of their transfer and exchange. The Company
may appoint one or more
co-registrars and one or more additional paying agents.
The term "Registrar" includes
any co-registrar and the term "Paying Agent" includes any
additional paying agent. The
Company may change any Paying Agent or Registrar without
notice to any Holder. The
Company shall notify the Trustee in writing of the name
and address of any Agent not a
party to this Indenture. If the Company fails to appoint
or maintain another entity as
Registrar or Paying Agent, the Trustee shall act as such.
The Company or any of its
Subsidiaries may act as Paying Agent or Registrar.
The Company initially appoints The Depository Trust
Company ("DTC") to act as
Depository with respect to the Global Notes.
The Company initially appoints the Trustee to act as
the Registrar and Paying Agent
and to act as Note Custodian with respect to the Global
Notes.
SECTION 2.04. PAYING AGENT TO HOLD MONEY IN
TRUSTSECTION 2.04. PAYING AGENT
TO HOLD MONEY IN TRUST.
The Company shall require each Paying Agent other than the
Trustee to agree in
writing that the Paying Agent will hold in trust for the
benefit of Holders or the Trustee all
money held by the Paying Agent for the payment of
principal, premium or Liquidated
Damages, if any, or interest on the Notes, and will notify
the Trustee of any default by the
Company in making any such payment. While any such
default continues, the Trustee
may require a Paying Agent to pay all money held by it to
the Trustee. The Company at
any time may require a Paying Agent to pay all money held
by it to the Trustee. Upon
payment over to the Trustee, the Paying Agent (if other
than the Company or a
Subsidiary) shall have no further liability for the money.
If the Company or a Subsidiary
acts as Paying Agent, it shall segregate and hold in a
separate trust fund for the benefit of
the Holders all money held by it as Paying Agent. Upon
any bankruptcy or reorganization
proceedings relating to the Company, the Trustee shall
serve as Paying Agent for the
Notes.
SECTION 2.05. HOLDER LISTSSECTION 2.05. HOLDER LISTS.
The Trustee shall preserve in as current a form as is
reasonably practicable the
most recent list available to it of the names and
addresses of all Holders and shall
otherwise comply with TIA 312(a). If the Trustee is not
the Registrar, the Company
shall furnish to the Trustee at least seven Business Days
before each interest payment date
and at such other times as the Trustee may request in
writing, a list in such form and as of
such date as the Trustee may reasonably require of the
names and addresses of the
Holders of Notes and the Company shall otherwise comply
with TIA 312(a).
SECTION 2.06. TRANSFER AND EXCHANGESECTION 2.06. TRANSFER
AND EXCHANGE.
(a) Transfer and Exchange of Definitive Notes. When
Definitive Notes are
presented by a Holder to the Registrar with a request:
(x) to register the transfer of the Definitive Notes; or
(y) to exchange such Definitive Notes for an equal
principal amount of
Definitive Notes of other authorized denominations,
the Registrar shall register the transfer or make the
exchange as requested if its
requirements for such transactions are met; provided,
however, that the Definitive Notes
presented or surrendered for register of transfer or
exchange:
(i) shall be duly endorsed or accompanied by a written
instruction of
transfer in form satisfactory to the Registrar duly
executed by such
Holder or by his attorney, duly authorized in writing; and
(ii) in the case of a Definitive Note that is a Transfer
Restricted
Security, such request shall be accompanied by the
following additional information and documents, as
applicable:
(A) if such Transfer Restricted Security is being
delivered to the
Registrar by a Holder for registration in the name of such
Holder, without transfer, a certification to that effect
from such
Holder (in substantially the form of Exhibit B hereto); or
(B) if such Transfer Restricted Security is being
transferred to a
"qualified institutional buyer" (as defined in Rule 144A
under
the Securities Act) in accordance with Rule 144A under the
Securities Act or pursuant to an exemption from
registration in
accordance with Rule 144 or Rule 904 under the Securities
Act
or pursuant to an effective registration statement under
the Securities Act, a certification to that effect from
such Holder (in
substantially the form of Exhibit B hereto); or
(C) if such Transfer Restricted Security is being
transferred in
reliance on another exemption from the registration
requirements of the Securities Act, a certification to
that effect
from such Holder (in substantially the form of Exhibit B
hereto)
and an Opinion of Counsel from such Holder or the
transferee reasonably acceptable to the Company and to the
Registrar to the effect that such transfer is in
compliance with the Securities
Act and applicable state securities laws.
(b) Transfer of a Definitive Note for a Beneficial
Interest in a Global Note. A
Definitive Note may not be exchanged for a beneficial
interest in a Global Note except
upon satisfaction of the requirements set forth below.
Upon receipt by the Trustee of a
Definitive Note, duly endorsed or accompanied by
appropriate instruments of transfer, in
form satisfactory to the Trustee, together with:
(i) if such Definitive Note is a Transfer Restricted
Security, a certification from
the Holder thereof (in substantially the form of Exhibit B
hereto) to the effect
that such Definitive Note is being transferred by such
Holder to a "qualified
institutional buyer" (as defined in Rule 144A under the
Securities Act) in
accordance with Rule 144A under the Securities Act; and
(ii) whether or not such Definitive Note is a Transfer
Restricted Security, written
instructions from the Holder thereof directing the
Trustee to make, or to direct
the Note Custodian to make, an endorsement on the Global
Note to reflect an
increase in the aggregate principal amount of the Notes
represented by the
Global Note,
in which case the Trustee shall cancel such Definitive
Note in accordance with Section
2.11 and cause, or direct the Note Custodian to cause, in
accordance with the standing
instructions and procedures existing between the
Depository and the Note Custodian, the
aggregate principal amount of Notes represented by the
Global Note to be increased
accordingly. If no Global Notes are then outstanding, the
Company shall issue and, upon
receipt of an authentication order in accordance with
Section 2.02, the Trustee shall
authenticate a new Global Note in the appropriate
principal amount.
(c) Transfer and Exchange of Global Notes. The transfer
and exchange of Global
Notes or beneficial interests therein shall be effected
through the Depository, in
accordance with this Indenture and the procedures of the
Depository therefor, which shall
include restrictions on transfer comparable to those set
forth herein to the extent required
by the Securities Act.
(d) Transfer of a Beneficial Interest in a Global Note
for a Definitive Note.
(i) Any Person having a beneficial interest in a Global
Note may upon
request to the Trustee exchange such beneficial interest
for a Definitive
Note. Upon receipt by the Trustee of written instructions
or such other
form of instructions as is customary for the Depository,
from the
Depository or its nominee on behalf of any Person having a
beneficial
interest in a Global Note, and, in the case of a Transfer
Restricted
Security, the following additional information and
documents (all of
which may be submitted by facsimile):
(A) if such beneficial interest is being transferred to
the Person
designated by the Depository as being the beneficial
owner, a
certification to that effect from such Person (in
substantially the
form of Exhibit B hereto); or
(B) if such beneficial interest is being transferred to a
"qualified
institutional buyer" (as defined in Rule 144A under the
Securities Act) in accordance with Rule 144A under the
Securities Act or pursuant to an exemption from
registration in
accordance with Rule 144 or Rule 904 under the Securities
Act
or pursuant to an effective registration statement under
the Securities Act, a certification to that effect from
the transferor
(in substantially the form of Exhibit B hereto); or
(C) if such beneficial interest is being transferred in
reliance on
another exemption from the registration requirements of
the Securities Act, a certification to that effect from
the transferor
(in substantially the form of Exhibit B hereto) and an
Opinion of
Counsel from the transferee or transferor reasonably
acceptable
to the Company and to the Registrar to the effect that
such transfer is in compliance with the Securities Act and
applicable
state securities laws,
in which case the Trustee or the Note Custodian, at the
direction of the
Trustee, shall, in accordance with the standing
instructions and
procedures existing between the Depository and the Note
Custodian,
cause the aggregate principal amount of Global Notes to be
reduced
accordingly and, following such reduction, the Company
shall execute
and, upon receipt of an authentication order in accordance
with Section
2.02, the Trustee shall authenticate and deliver to the
transferee a
Definitive Note in the appropriate principal amount.
(ii) Definitive Notes issued in exchange for a beneficial
interest in a Global
Note pursuant to this Section 2.06(d) shall be registered
in such names
and in such authorized denominations as the Depository,
pursuant to
instructions from its direct or indirect Participants or
otherwise, shall
instruct the Trustee. The Trustee shall deliver such
Definitive Notes to
the Persons in whose names such Notes are so registered.
(e) Restrictions on Transfer and Exchange of Global
Notes. Notwithstanding any
other provision of this Indenture (other than the
provisions set forth in subsection (f) of
this Section 2.06), a Global Note may not be transferred
as a whole except by the
Depository to a nominee of the Depository or by a nominee
of
the Depository to the
Depository or another nominee of the Depository or by the
Depository or any such
nominee to a successor Depository or a nominee of such
successor Depository.
(f) Authentication of Definitive Notes in Absence of
Depository. If at any time:
(i) the Depository for the Notes notifies the Company
that the Depository is
unwilling or unable to continue as Depository for the
Global Notes and a
successor Depository for the Global Notes is not appointed
by the
Company within 90 days after delivery of such notice; or
(ii) the Company, at its sole discretion, notifies the
Trustee in writing that it
elects to cause the issuance of Definitive Notes under
this Indenture,
then the Company shall execute, and the Trustee shall,
upon receipt of an authentication
order in accordance with Section 2.02, authenticate and
deliver, Definitive Notes in an
aggregate principal amount equal to the principal amount
of the Global Notes in exchange
for such Global Notes.
(g) Legends. The following legend shall appear on the
face of all Global Notes
and Definitive Notes issued under this Indenture unless
specifically stated otherwise in the
applicable provisions of this Indenture.
(i) Private Placement Legend.
(A) Except as permitted by subparagraphs (ii) and (iii)
below, each
Global Note and each Definitive Note (and all Notes issued
in
exchange therefor or substitution thereof) shall bear the
legend in
substantially the following form:
"THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THIS
NOTE MAY
NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR
IN ACCORDANCE WITH AN APPLICABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (SUBJECT
TO DELIVERY OF SUCH EVIDENCE, IF ANY, REQUIRED UNDER THE
INDENTURE PURSUANT TO WHICH THIS NOTE IS ISSUED) AND IN
ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY
STATE OF THE UNITED STATES OR ANY OTHER JURISDICTION."
(ii) Upon any sale or transfer of a Transfer Restricted
Security (including any
Transfer Restricted Security represented by a Global Note)
pursuant to
Rule 144 under the Securities Act or pursuant to an
effective registration
statement under the Securities Act:
(A) in the case of any Transfer Restricted Security that
is a Definitive
Note, the Registrar shall permit the Holder thereof to
exchange such
Transfer Restricted Security for a Definitive Note that
does not bear
the legend set forth in (i) above and rescind any
restriction on the
transfer of such Transfer Restricted Security; and
(B) in the case of any Transfer Restricted Security
represented by a
Global Note, such Transfer Restricted Security shall not
be required
to bear the legend set forth in (i) above, but shall
continue to be
subject to the provisions of Section 2.06(c); provided,
however, that
with respect to any request for an exchange of a Transfer
Restricted
Security that is represented by a Global Note for a
Definitive Note
that does not bear the legend set forth in (i) above,
which request is
made in reliance upon Rule 144, the Holder thereof shall
certify in
writing to the Registrar that such request is being made
pursuant to
Rule 144 (such certification to be substantially in the
form of Exhibit
B hereto).
(iii) Notwithstanding the foregoing, upon consummation
of the Exchange
Offer, the Company shall issue and, upon receipt of an
authentication
order in accordance with Section 2.02, the Trustee shall
authenticate
Series B Notes in exchange for Series A Notes accepted for
exchange in
the Exchange Offer, which Series B Notes shall not bear
the legend set
forth in (i) above, and the Registrar shall rescind any
restriction on the
transfer of such Notes, in each case unless the Holder of
such Series A
Notes is either (A) a broker-dealer, (B) a Person
participating in the
distribution of the Series A Notes or (C) a Person who is
an affiliate (as
defined in Rule 144A) of the Company.
(h) Cancellation and/or Adjustment of Global Notes. At
such time as all beneficial
interests in Global Notes have been exchanged for
Definitive Notes, redeemed,
repurchased or cancelled, all Global Notes shall be
returned to or retained and cancelled
by the Trustee in accordance with Section 2.11. At any
time prior to such cancellation, if
any beneficial interest in a Global Note is exchanged for
Definitive Notes, redeemed,
repurchased or cancelled, the principal amount of Notes
represented by such Global Note
shall be reduced accordingly and an endorsement shall be
made on such Global Note, by
the Trustee or the Note Custodian, at the direction of the
Trustee, to reflect such
reduction.
(i) General Provisions Relating to Transfers and
Exchanges.
(i) To permit registrations of transfers and exchanges,
the Company
shall execute and the Trustee shall authenticate
Definitive Notes and
Global Notes at the Registrar's request.
(ii) No service charge shall be made to a Holder for any
registration of
transfer or exchange, but the Company may require payment
of a
sum sufficient to cover any transfer tax or similar
governmental
charge payable in connection therewith (other than any
such transfer
taxes or similar governmental charge payable upon exchange
or
transfer pursuant to Sections 3.07, 4.10, 4.15 and 9.05
hereto).
(iii) The Registrar shall not be required to register
the transfer of or
exchange any Note selected for redemption in whole or in
part,
except the unredeemed portion of any Note being redeemed
in part.
(iv) All Definitive Notes and Global Notes issued upon any
registration
of transfer or exchange of Definitive Notes or Global
Notes shall be
the valid obligations of the Company, evidencing the same
debt, and
entitled to the same benefits under this Indenture, as the
Definitive
Notes or Global Notes surrendered upon such registration
of transfer
or exchange.
(v) The Company shall not be required:
(A) to issue, to register the transfer of or to exchange
Notes during
a period beginning at the opening of business 15 days
before the
day of any selection of Notes for redemption under Section
3.02
and ending at the close of business on the day of
selection; or
(B) to register the transfer of or to exchange any Note
so selected
for redemption in whole or in part, except the unredeemed
portion of any Note being redeemed in part; or
(C) to register the transfer of or to exchange a Note
between a
record date and the next succeeding interest payment date.
(vi) Prior to due presentment for the registration of a
transfer of any
Note, the Trustee, any Agent and the Company may deem and
treat
the Person in whose name any Note is registered as the
absolute
owner of such Note for the purpose of receiving payment of
principal of and interest on such Notes, and neither the
Trustee, any
Agent nor the Company shall be affected by notice to the
contrary.
(vii) The Trustee shall authenticate Definitive Notes and
Global Notes in
accordance with the provisions of Section 2.02.
SECTION 2.07. REPLACEMENT NOTESSECTION 2.07.
REPLACEMENT NOTES.
If any mutilated Note is surrendered to the Trustee, or
the Company and the
Trustee receives evidence to its satisfaction of the
destruction, loss or theft of any Note,
the Company shall issue and the Trustee, upon the written
order of the Company signed
by two Officers of the Company, shall authenticate a
replacement Note and cancel the
Note with respect to which the replacement Note is issued
if the Trustee's requirements
are met. If required by the Trustee or the Company, an
indemnity bond must be supplied
by the Holder that is sufficient in the judgment of the
Trustee and the Company to protect
the Company, the Trustee, any Agent and any authenticating
agent from any loss that any
of them may suffer if a Note is replaced. The Company may
charge for its expenses in
replacing a Note.
Every replacement Note is an additional obligation of the
Company and shall be
entitled to all of the benefits of this Indenture equally
and proportionately with all other
Notes duly issued hereunder.
SECTION 2.08. OUTSTANDING NOTES.
The Notes outstanding at any time are all the Notes
authenticated by the Trustee
except for those cancelled by it, those delivered to it
for cancellation, those reductions in
the interest in a Global Note effected by the Trustee in
accordance with the provisions
hereof, and those described in this Section as not
outstanding. Except as set forth in
Section 2.09, a Note does not cease to be outstanding
because the Company or an Affiliate
of the Company holds the Note.
If a Note is replaced pursuant to Section 2.07, it ceases
to be outstanding unless the
Trustee receives proof satisfactory to it that the
replaced Note is held by a bona fide
purchaser.
If the principal amount of any Note is considered paid
under Section 4.01, it ceases
to be outstanding and interest on it ceases to accrue.
If the Paying Agent (other than the Company, a Subsidiary
or an Affiliate of any
thereof) holds, on a redemption date or maturity date,
money sufficient to pay Notes
payable on that date, then on and after that date such
Notes shall be deemed to be no
longer outstanding and shall cease to accrue interest.
SECTION 2.09. TREASURY NOTESSECTION 2.09. TREASURY
NOTES.
In determining whether the Holders of the required
principal amount of Notes have
concurred in any direction, waiver or consent, Notes owned
by the Company, or by any
Person directly or indirectly controlling or controlled by
or under direct or indirect
common control with the Company, shall be disregarded,
except that for the purposes of
determining whether the Trustee shall be protected in
relying on any such direction,
waiver or consent, only Notes that a Trustee knows are so
owned shall be so disregarded.
SECTION 2.10. TEMPORARY NOTESSECTION 2.10. TEMPORARY
NOTES.
Until definitive Notes are ready for delivery, the Company
may prepare and the
Trustee shall authenticate temporary Notes upon a written
order of the Company signed by
two Officers of the Company. Temporary Notes shall be
substantially in the form of
definitive Notes but may have variations that the Company
considers appropriate for
temporary Notes and as shall be reasonably acceptable to
the Trustee. Without
unreasonable delay, the Company shall prepare and the
Trustee shall authenticate
definitive Notes in exchange for temporary Notes.
Holders of temporary Notes shall be entitled to all of the
benefits of this Indenture.
SECTION 2.11. CANCELLATIONSECTION 2.11. CANCELLATION.
The Company at any time may deliver Notes to the Trustee
for cancellation. The
Registrar and Paying Agent shall forward to the Trustee
any Notes surrendered to them
for registration of transfer, exchange or payment. The
Trustee and no one else shall
cancel all Notes surrendered for registration of transfer,
exchange, payment, replacement
or cancellation and shall return such cancelled Notes to
the Company. Certification of the
destruction of all cancelled Notes shall be delivered to
the Company. The Company may
not issue new Notes to replace Notes that it has paid or
that have been delivered to the
Trustee for cancellation.
SECTION 2.12. DEFAULTED INTERESTSECTION 2.12.
DEFAULTED INTEREST.
If the Company defaults in a payment of interest on the
Notes, it shall pay the
defaulted interest in any lawful manner plus, to the
extent lawful, interest payable on the
defaulted interest, to the Persons who are Holders on a
subsequent special record date, in
each case at the rate provided in the Notes and in Section
4.01. The Company shall notify
the Trustee in writing of the amount of defaulted interest
proposed to be paid on each Note
and the date of the proposed payment. The Company shall
fix or cause to be fixed each
such special record date and payment date, provided that
no such special record date shall
be less than 10 days prior to the related payment date for
such defaulted interest. At least
15 days before the special record date, the Company (or,
upon the written request of the
Company, the Trustee in the name and at the expense of the
Company) shall mail or cause
to be mailed to Holders a notice that states the special
record date, the related payment
date and the amount of such interest to be paid.
ARTICLE 3
REDEMPTION AND PREPAYMENT ARTICLE 3
REDEMPTION AND PREPAYMENT
SECTION 3.01. NOTICES TO TRUSTEESECTION 3.01. NOTICES
TO TRUSTEE.
If the Company elects to redeem Notes pursuant to the
optional redemption
provisions of Section 3.07, it shall furnish to the
Trustee, at least 45 days but not more
than 60 days before a redemption date, an Officers'
Certificate setting forth (a) the clause
of this Indenture pursuant to which the redemption shall
occur, (b) the redemption date,
(c) the principal amount of Notes to be redeemed, (d) the
redemption price and (e) the
CUSIP numbers of the Notes to be redeemed.
SECTION 3.02. SELECTION OF NOTES TO BE REDEEMEDSECTION
3.02. SELECTION OF
NOTES TO BE REDEEMED.
If less than all of the Notes are to be redeemed at any
time, the Trustee shall select
the Notes to be redeemed among the Holders of the Notes in
compliance with the
requirements of the principal national securities
exchange, if any, on which the Notes are
listed or, if the Notes are not so listed, on a pro rata
basis, by lot or in accordance with
any other method the Trustee considers fair and
appropriate. In the event of partial
redemption by lot, the particular Notes to be redeemed
shall be selected, unless otherwise
provided herein, not less than 30 nor more than 60 days
prior to the redemption date by
the Trustee from the outstanding Notes not previously
called
for redemption.
The Trustee shall promptly notify the Company in writing
of the Notes selected for
redemption and, in the case of any Note selected for
partial redemption, the principal
amount thereof to be redeemed. Notes and portions of
Notes selected shall be in amounts
of $1,000 or whole multiples of $1,000; except that if all
of the Notes of a Holder are to
be redeemed, the entire outstanding amount of Notes held
by such Holder, even if not a
multiple of $1,000, shall be redeemed. Except as provided
in the preceding sentence,
provisions of this Indenture that apply to Notes called
for redemption also apply to
portions of Notes called for redemption.
SECTION 3.03. NOTICE OF REDEMPTIONSECTION 3.03. NOTICE
OF REDEMPTION.
Subject to the provisions of Section 3.09, at least 30
days but not more than 60 days
before a redemption date, the Company shall mail or cause
to be mailed, by first class
mail, a notice of redemption to each Holder whose Notes
are to be redeemed at its
registered address.
The notice shall identify the Notes to be redeemed,
including CUSIP numbers, and
shall state:
(a) the redemption date;
(b) the redemption price;
(c) if any Note is being redeemed in part, the portion of
the principal amount of
such Note to be redeemed and that, after the redemption
date upon surrender of such
Note, a new Note or Notes in principal amount equal to the
unredeemed portion shall be
issued upon cancellation of the original Note;
(d) the name and address of the Paying Agent;
(e) that Notes called for redemption must be surrendered
to the Paying Agent to
collect the redemption price;
(f) that, unless the Company defaults in making such
redemption payment,
interest on Notes called for redemption ceases to accrue
on and after the redemption
date;
(g) the paragraph of the Notes and/or Section of this
Indenture pursuant to which
the Notes called for redemption are being redeemed; and
(h) that no representation is made as to the correctness
or accuracy of the CUSIP
number, if any, listed in such notice or printed on the
Notes.
At the Company's request, the Trustee shall give the
notice of redemption in the
Company's name and at its expense; provided, however, that
the Company shall have
delivered to the Trustee, at least 45 days prior to the
redemption date, an Officers'
Certificate requesting that the Trustee give such notice
and setting forth the information to
be stated in such notice as provided in the preceding
paragraph (except information with
respect to the selection of Notes to be redeemed, which
information will be determined by
the Trustee under Section 3.02).
SECTION 3.04. EFFECT OF NOTICE OF REDEMPTIONSECTION
3.04. EFFECT OF NOTICE
OF REDEMPTION.
Once notice of redemption is mailed in accordance with
Section 3.03, Notes called
for redemption become irrevocably due and payable on the
redemption date at the
redemption price. A notice of redemption may not be
conditional.
SECTION 3.05. DEPOSIT OF REDEMPTION PRICESECTION 3.05.
DEPOSIT OF
REDEMPTION PRICE.
Before 10:00 a.m. (New York Time) on the redemption date,
the Company shall
deposit with the Trustee or with the Paying Agent money
sufficient to pay the redemption
price of and accrued interest on all Notes to be redeemed
on that date. The Trustee or the
Paying Agent shall promptly return to the Company any
money deposited with the Trustee
or the Paying Agent by the Company in excess of the
amounts necessary to pay the
redemption price of, and accrued interest on, all Notes to
be redeemed.
If the Company complies with the provisions of the
preceding paragraph, on and
after the redemption date, interest shall cease to accrue
on the Notes or the portions of
Notes called for redemption. If a Note is redeemed on or
after an interest record date but
on or prior to the related interest payment date, then on
such payment date any accrued
and unpaid interest shall be paid to the Person in whose
name such Note was registered at
the close of business on such record date. If any Note
called for redemption shall not be
so paid upon surrender for redemption because of the
failure of the Company to comply
with the preceding paragraph, interest shall be paid on
the unpaid principal, from the
redemption date until such principal is paid, and to the
extent lawful on any interest not
paid on such unpaid principal, in each case at the rate
provided in the Notes and in
Section 4.01.
SECTION 3.06. NOTES REDEEMED IN PARTSECTION 3.06.
NOTES
REDEEMED IN PART.
Upon surrender of a Note that is redeemed in part, the
Company shall issue and,
upon the Company's written request, the Trustee shall
authenticate for the Holder at the
expense of the Company a new Note equal in principal
amount to the unredeemed portion
of the Note surrendered.
SECTION 3.07. OPTIONAL REDEMPTIONSECTION 3.07. OPTIONAL
REDEMPTION.
(a) The Company shall not have the option to redeem the
Notes pursuant to this
Section 3.07 prior to September 1, 2002. Thereafter the
Notes shall be subject to
redemption at the option of the Company, in whole or in
part, upon not less than 30 nor
more than 60 days' notice, at the redemption prices
(expressed as percentages of principal
amount) set forth below plus accrued and unpaid interest
and Liquidated Damages, if any,
thereon to the applicable redemption date, if redeemed
during the twelve-month period
beginning on September 1 of the years indicated below:
Year
Percentage
2002
104.8125%
2003
103.2083%
2004
101.6041%
2005 and
thereafter 100.0000%
(b) Any redemption pursuant to this Section 3.07 shall be
made pursuant to the
provisions of Section 3.01 through 3.06.
SECTION 3.08. MANDATORY REDEMPTIONSECTION 3.08.
MANDATORY REDEMPTION.
Except as set forth under Sections 4.10 and 4.15, the
Company shall not be
required to make mandatory redemption or sinking fund
payments with respect to the
Notes.
SECTION 3.09. OFFER TO PURCHASE BY APPLICATION OF EXCESS
PROCEEDSSECTION
3.09. OFFER TO PURCHASE BY APPLICATION OF EXCESS
PROCEEDS.
In the event that, pursuant to Section 4.10, the Company
shall be required to
commence an offer to all Holders to purchase Notes (an
"Asset Sale Offer"), it shall
follow the procedures specified below.
The Asset Sale Offer shall remain open for a period of 20
Business Days following
its commencement and no longer, except to the extent that
a longer period is required by
applicable law (the "Offer Period"). No later than five
Business Days after the
termination of the Offer Period (the "Purchase Date"), the
Company shall purchase the
principal amount of Notes required to be purchased
pursuant to Section 4.10 (the "Offer
Amount") or, if less than the Offer Amount has been
tendered, all Notes tendered in
response to the Asset Sale Offer. Payment for any Notes
so purchased shall be made in
the same manner as interest payments are made.
If the Purchase Date is on or after an interest record
date and on or before the
related interest payment date, any accrued and unpaid
interest shall be paid to the Person
in whose name a Note is registered at the close of
business on such record date, and no
additional interest shall be payable to Holders who tender
Notes pursuant to the Asset Sale
Offer.
Upon the commencement of an Asset Sale Offer, the Company
shall send, by first
class mail, a notice to the Trustee and each of the
Holders, with a copy to the Trustee.
The notice shall contain all instructions and materials
necessary to enable such Holders to
tender Notes pursuant to the Asset Sale Offer. The Asset
Sale Offer shall be made to all
Holders. The notice, which shall govern the terms of the
Asset Sale Offer, shall state:
(a) that the Asset Sale Offer is being made pursuant to
this Section 3.09 and
Section 4.10 and the length of time the Asset Sale Offer
shall remain open;
(b) the Offer Amount, the purchase price and the Purchase
Date;
(c) that any Note not tendered or accepted for payment
shall continue to
accrue interest;
(d) that, unless the Company defaults in making such
payment, any Note
accepted for payment pursuant to the Asset Sale Offer
shall cease to accrue interest after
the Purchase Date;
(e) that Holders electing to have a Note purchased
pursuant to an Asset Sale
Offer may only elect to have all of such Note purchased
and may not elect to have only a
portion of such Note purchased;
(f) that Holders electing to have a Note purchased
pursuant to any Asset Sale
Offer shall be required to surrender the Note, with the
form entitled "Option of Holder
to Elect Purchase" on the reverse of the Note completed,
or
transfer by book-entry
transfer, to the Company, a depository, if appointed by
the Company, or a Paying Agent
at the address specified in the notice at least three days
before the Purchase Date;
(g) that Holders shall be entitled to withdraw their
election if the Company,
the depository or the Paying Agent, as the case may be,
receives, not later than the
expiration of the Offer Period, a telegram, telex,
facsimile transmission or letter setting
forth the name of the Holder, the principal amount of the
Note the Holder delivered for
purchase and a statement that such Holder is withdrawing
his election to have such Note
purchased;
(h) that, if the aggregate principal amount of Notes
surrendered by Holders
exceeds the Offer Amount, the Company shall select the
Notes to be purchased on a pro
rata basis (with such adjustments as may be deemed
appropriate by the Company so that
only Notes in denominations of $1,000, or integral
multiples thereof, shall be
purchased); and
(i) that Holders whose Notes were purchased only in
part shall be issued new
Notes equal in principal amount to the unpurchased
portion of the Notes surrendered (or
transferred by book-entry transfer).
On or before the Purchase Date, the Company shall, to the
extent lawful, accept for
payment, on a pro rata basis to the extent necessary, the
Offer Amount of Notes or
portions thereof tendered pursuant to the Asset Sale
Offer, or if less than the Offer
Amount has been tendered, all Notes tendered, and shall
deliver to the Trustee an
Officers' Certificate stating that such Notes or portions
thereof were accepted for payment
by the Company in accordance with the terms of this
Section 3.09. The Company, the
Depository or the Paying Agent, as the case may be, shall
promptly (but in any case not
later than five days after the Purchase Date) mail or
deliver to each tendering Holder an
amount equal to the purchase price of the Notes tendered
by such Holder and accepted by
the Company for purchase, and the Company shall promptly
issue a new Note, and the
Trustee, upon written request from the Company shall
authenticate and mail or deliver
such new Note to such Holder, in a principal amount equal
to any unpurchased portion of
the Note surrendered. Any Note not so accepted shall be
promptly mailed or delivered by
the Company to the Holder thereof. The Company shall
publicly announce the results of
the Asset Sale Offer on the Purchase Date.
Other than as specifically provided in this Section 3.09,
any purchase pursuant to
this Section 3.09 shall be made pursuant to the provisions
of Sections 3.01 through 3.06.
ARTICLE 4
COVENANTS ARTICLE 4 COVENANTS
SECTION 4.01. PAYMENT OF NOTESSECTION 4.01. PAYMENT OF
NOTES.
The Company shall pay or cause to be paid the principal
of, premium, if any, and
interest on the Notes on the dates and in the manner
provided in the Notes. Principal,
premium, if any, and interest shall be considered paid on
the date due if the Paying Agent,
if other than the Company or a Subsidiary thereof, holds
as of 10:00 a.m. Eastern Time
on the due date money deposited by the Company in
immediately available funds and
designated for and sufficient to pay all principal,
premium, if any, and interest then due.
The Company shall pay all Liquidated Damages, if any, in
the same manner on the dates
and in the amounts set forth in the Registration Rights
Agreement.
The Company shall pay interest (including post-petition
interest in any proceeding
under any Bankruptcy Law) on overdue principal at the rate
equal to 1% per annum in
excess of the then applicable interest rate on the Notes
to the extent lawful; it shall pay
interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on
overdue installments of interest and Liquidated Damages
(without regard to any applicable
grace period) at the same rate to the extent lawful.
SECTION 4.02. MAINTENANCE OF OFFICE OR AGENCYSECTION
4.02. MAINTENANCE OF
OFFICE OR AGENCY.
The Company shall maintain in the Borough of Manhattan,
the City of New York,
an office or agency (which may be an office of the Trustee
or an affiliate of the Trustee,
Registrar or co-registrar) where Notes may be surrendered
for registration of transfer or
for exchange and where notices and demands to or upon the
Company in respect of the
Notes and this Indenture may be served. The Company shall
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 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 Corporate Trust
Office of the Trustee.
The Company may also from time to time designate one or
more other offices or
agencies where the Notes 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 of its obligation to
maintain an office or agency in the Borough of Manhattan,
the City of New York for such
purposes. The Company shall give prompt written notice to
the Trustee of any such
designation or rescission and of any change in the
location of any such other office or
agency.
The Company hereby designates the Corporate Trust Office
of the Trustee as one
such office or agency of the Company in accordance with
Section 2.03.
SECTION 4.03. REPORTSSECTION 4.03. REPORTS.
(a) Whether or not required by the rules and regulations
of the SEC, so long as any
Notes are outstanding, the Company shall furnish to the
Holders of Notes (i) all quarterly
and annual financial information (excluding schedules)
that would be required to be
contained in a filing with the SEC on Forms 10-Q and 10-K
(excluding exhibits) if the
Company were required to file such Forms, including a
"Management's Discussion and
Analysis of Financial Condition and Results of Operations"
and, with respect to the annual
information only, a report thereon by the Company's
independent certified public
accountants, (ii) all current reports that would be
required to be filed with the SEC on
Form 8-K if the Company were required to file such reports
(excluding exhibits) and (iii)
any other reports (excluding exhibits) that may by
specified in Sections 13 and 15(d) of the
Exchange Act that would be required to be filed with the
SEC, if the Company were
required to file such reports. In addition, whether or
not required by the rules and
regulations of the SEC, the Company shall file a copy of
all such information (including
exhibits) and reports (including exhibits) with the SEC
for public availability (unless the
SEC will not accept such a filing) and make such
information available to securities
analysts and prospective investors upon request.
(b) For so long as any Notes remain outstanding, to
furnish to the Holders and to
securities analysts and prospective investors, upon their
request, the information required
to be delivered pursuant to Rule 144A(d)(4) under the
Securities Act.
SECTION 4.04. COMPLIANCE CERTIFICATESECTION 4.04.
COMPLIANCE CERTIFICATE.
(a) The Company shall deliver to the Trustee, within 90
days after the end of each
fiscal year, an Officers' Certificate stating that a
review
of the activities of the Company
and its Subsidiaries during the preceding fiscal year has
been made under the supervision
of the signing Officers with a view to determining whether
the Company 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 or her knowledge the
Company has kept, observed, performed and fulfilled each
and every covenant contained
in this Indenture and is not in default in the performance
or observance of any of the
terms, provisions and conditions of this Indenture (or, if
a Default or Event of Default
shall have occurred, describing all such Defaults or
Events of Default of which he or she
may have knowledge and what action the Company is taking
or proposes to take with
respect thereto) and that to the best of his or her
knowledge no event has occurred and
remains in existence by reason of which payments on
account of the principal of or
interest, if any, on the Notes is prohibited or if such
event has occurred, a description of
the event and what action the Company is taking or
proposes to take with respect thereto.
(b) So long as not contrary to the then current
recommendations of the American
Institute of Certified Public Accountants, the year-end
financial statements delivered
pursuant to Section 4.03(a) above shall be accompanied by
a written statement of the
Company's independent certified public accountants (who
shall be a firm of established
national reputation) that in making the examination
necessary for opining upon such
financial statements, nothing has come to their attention
that would lead them to believe
that the Company has violated any provisions of Article 4
or Article 5 hereof as it relates
to accounting matters or, if any such violation has
occurred, specifying the nature and
period of existence thereof, it being understood that such
accountants shall not be liable
directly or indirectly to any Person for any failure to
obtain knowledge of any such
violation.
(c) The Company shall, so long as any of the Notes are
outstanding, deliver to the
Trustee, forthwith upon any Officer becoming aware of any
Default or Event of Default,
an Officers' Certificate specifying such Default or Event
of Default and what action the
Company is taking or proposes to take with respect
thereto.
SECTION 4.05. TAXESSECTION 4.05. TAXES.
The Company shall pay, and shall cause each of its
Subsidiaries to pay, prior to
delinquency, all material taxes, assessments, and
governmental levies except such as are
contested in good faith and by appropriate proceedings or
where the failure to effect such
payment is not adverse in any material respect to the
Holders of the Notes.
SECTION 4.06. STAY, EXTENSION AND USURY LAWSSECTION 4.06.
STAY, EXTENSION
AND USURY LAWS.
The Company and each Guarantor covenants (to the extent
that it may lawfully do
so) that it shall not at any time insist upon, plead, or
in any manner whatsoever claim or
take the benefit or advantage of, any stay, extension or
usury law wherever enacted, now
or at any time hereafter in force, that may affect the
covenants or the performance of this
Indenture; and the Company and each Guarantor (to the
extent that it may lawfully do so)
hereby expressly waives all benefit or advantage of any
such law, and covenants that it
shall not, by resort to any such law, hinder, delay or
impede the execution of any power
herein granted to the Trustee, but shall suffer and permit
the execution of every such
power as though no such law has been enacted.
SECTION 4.07. RESTRICTED PAYMENTSSECTION 4.07.
RESTRICTED PAYMENTS.
The Company shall not, and shall not permit any of its
Subsidiaries to, directly or
indirectly: (i) declare or pay any dividend or make any
other payment or distribution of
any kind or character on account of the Equity Interests
of the Company or any of its
Subsidiaries (including, without limitation, any payment
in connection with any merger or
consolidation involving the Company or any of its
Subsidiaries) or to the direct or indirect
holders of the Equity Interests of the Company or any of
its Subsidiaries in their capacity
as such, except (a) dividends or distributions payable
solely in Equity Interests (other than
Disqualified Stock) of the Company or (b) dividends or
distributions payable to the
Company or any Wholly-Owned Subsidiary of the Company;
(ii) purchase, redeem or
otherwise acquire or retire for value any Equity Interests
of the Company, any Subsidiary
of the Company or any direct or indirect parent of the
Company, except any such Equity
Interests owned by the Company or any Wholly-Owned
Subsidiary of the Company; (iii)
make any principal payment on, or purchase, redeem,
defease or otherwise acquire or
retire for value, any Indebtedness that is subordinated to
the Notes prior to the Stated
Maturity of such Indebtedness; or (iv) make any Restricted
Investment (all such payments
and other actions set forth in clauses (i) through (iv)
above being collectively referred to as
"Restricted Payments"), unless, at the time of and after
giving effect to such Restricted
Payment:
(a) no Default or Event of Default shall have occurred
and be continuing or would
occur as a consequence thereof;
(b) the Company would, at the time of such Restricted
Payment and after giving
pro forma effect thereto as if such Restricted Payment
had been made at the beginning of
the applicable four-quarter period, have been permitted
to incur at least $1.00 of
additional Indebtedness pursuant to the Fixed Charge
Coverage Ratio test set forth in the
first paragraph of Section 4.09; and
(c) such Restricted Payment, together with the aggregate
of all other Restricted
Payments declared or made by the Company and its
Subsidiaries after the date of this
Indenture (excluding Restricted Payments permitted by
clauses (ii), (iii), (iv) and (v) of
the next succeeding paragraph), is less than the sum of
(1) $12.5 million, plus (2) 50%
of the Consolidated Net Income of the Company for the
period (taken as one accounting
period) from the beginning of the fiscal quarter
commencing June 29, 1997 to the end of
the Company's most recently ended fiscal quarter for which
internal financial statements
are available at the time of such Restricted Payment (or,
if such Consolidated Net
Income for such period is a deficit, less 100% of such
deficit), plus (3) 100% of the
aggregate cash portion of the Net Proceeds received by the
Company from a
contribution to its common equity capital or the issue or
sale since the date of this
Indenture of Equity Interests of the Company or of debt
securities of the Company that
have been converted into such Equity Interests (other than
Equity Interests (or
convertible debt securities) sold to a Subsidiary of the
Company and other than
Disqualified Stock or debt securities that have been
converted into Disqualified Stock),
plus (4) to the extent that any Restricted Investment that
was made after the date of this
Indenture is sold for cash or otherwise liquidated or
repaid for cash, the lesser of (A) the
cash return of capital with respect to such Restricted
Investment (less the cost of
disposition, if any) and (B) the initial amount of such
Restricted Investment.
The foregoing provisions shall not prohibit (i) the
payment of any dividend within
60 days after the date of declaration thereof, if at said
date of declaration such payment
would have complied with the provisions of this Indenture;
(ii) the making of any
Restricted Investment in exchange for, or out of the
proceeds of, the substantially
concurrent sale (other than to a Subsidiary of the
Company) of Equity Interests of the
Company (other than any Disqualified Stock); provided that
the amount of any such net
cash proceeds that are utilized for any such Restricted
Investment, redemption,
repurchase, retirement or other acquisition shall be
excluded from clause (3) of the
preceding paragraph (c); (iii) the redemption, repurchase,
retirement or other acquisition
of any Equity Interests of the Company in exchange for, or
out of the proceeds of, the
substantially concurrent sale (other than to a Subsidiary
of the Company) of other Equity
Interests of the Company (other than Disqualified Stock);
provided that any net cash
proceeds that are utilized for such redemption,
repurchase, retirement or other
acquisition, and any Net Income resulting therefrom, shall
be excluded from clauses (3)
and (2) of the preceding paragraph (c) respectively; (iv)
the defeasance, redemption,
repayment or repurchase of subordinated Indebtedness in
exchange for, or out of the net
cash proceeds from, an incurrence of Permitted Refinancing
Debt or the substantially
concurrent sale (other than to a Subsidiary of the
Company) of Equity Interests of the
Company (other than Disqualified Stock); provided that the
amount of any such net cash
proceeds that are utilized for any such redemption,
repayment, repurchase, retirement or
other acquisition shall be excluded from clause (3) of the
preceding paragraph (c); and (v)
the repayment by the Company on the date of this Indenture
of up to $219.0 million in
aggregate principal amount of Indebtedness owed by the
Company to Delta Woodside
Industries, Inc. or any Subsidiary thereof; provided, that
upon such repayment, all
remaining Indebtedness owed by the Company to Delta
Woodside Industries, Inc. or any
Subsidiary thereof shall be contributed to the Company's
capital and thereby cancelled.
The amount of all Restricted Payments (other than cash)
shall be the fair market
value (evidenced by a resolution of the Board of Directors
set forth in an Officers'
Certificate delivered to the Trustee) on the date of the
Restricted Payment of the asset(s)
proposed to be transferred by the Company or such
Subsidiary, as the case may be,
pursuant to the Restricted Payment. Not later than the
date of making any Restricted
Payment, the Company shall deliver to the Trustee an
Officers' Certificate stating that
such Restricted Payment is permitted and setting forth the
basis upon which the
calculations required by this Section 4.07 were computed,
which calculations may be
based upon the Company's latest available financial
statements.
SECTION 4.08. DIVIDEND AND OTHER PAYMENT RESTRICTIONS
AFFECTING
SUBSIDIARIESSECTION 4.08. DIVIDEND AND OTHER PAYMENT
RESTRICTIONS AFFECTING SUBSIDIARIES.
The Company shall not, and shall not permit any of its
Subsidiaries to, directly or
indirectly, create or otherwise cause or suffer to exist
or become effective any
encumbrance or restriction of any kind on the ability of
any Subsidiary to (i) pay dividends
or make any other distributions to the Company or any of
its Subsidiaries on its Capital
Stock or with respect to any other interest or
participation in, or measured by, its profits;
(ii) pay any Indebtedness or other obligation owed to the
Company or any of its
Subsidiaries; (iii) make loans or advances to the Company
or any of its Subsidiaries; (iv)
sell, lease or transfer any of its properties or assets to
the Company or any of its
Subsidiaries; or (v) guarantee the obligations of the
Company evidenced by the Notes or
any renewals, refinancings, exchanges, refundings or
extensions thereof, except for such
encumbrances or restrictions existing under or by reason
of (a) applicable law, (b) any
instrument governing Indebtedness or Capital Stock of a
Person or any property or other
asset acquired by the Company or any of its Subsidiaries
as in effect at the time of such
acquisition (except to the extent such Indebtedness was
incurred in connection with or in
contemplation of such acquisition), which encumbrance or
restriction is not applicable to
any Person, or the properties or assets of any Person,
other than the Person, or the
property or assets of the Person, so acquired, (c)
customary non-assignment provisions in
leases entered into in the ordinary course of business and
consistent with past practices,
(d) purchase money obligations for property acquired in
the ordinary course of business
that impose restrictions of the nature described in clause
(iv) above on the property so
acquired, (e) Permitted Refinancing Debt; provided that
the restrictions contained in the
agreements governing such Permitted Refinancing Debt are
no more restrictive than those
contained in the agreements governing the Indebtedness
being refinanced, or (f) any
Purchase Money Note, or other Indebtedness or contractual
requirements incurred with
respect to a Qualified Receivables Transaction relating to
a Receivables Subsidiary.
SECTION 4.09. INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF
PREFERRED
STOCKSECTION 4.09. INCURRENCE OF INDEBTEDNESS AND
ISSUANCE OF PREFERRED STOCK.
The Company shall not, and shall not permit any of its
Subsidiaries to, directly or
indirectly, create, incur, issue, assume, guarantee or
otherwise become directly or
indirectly liable, contingently or otherwise, with respect
to (collectively, "incur") any
Indebtedness (including Acquired Debt) and the Company
shall not issue any Disqualified
Stock and shall not permit any of its Subsidiaries to
issue any shares of preferred stock;
provided, however, that the Company may incur Indebtedness
(including Acquired Debt)
or issue shares of Disqualified Stock and a Guarantor may
incur Acquired Debt, in each
case if (i) the Fixed Charge Coverage Ratio for the
Company's most recently ended four
full fiscal quarters (taken as one accounting period) for
which internal financial statements
are available immediately preceding the date on which such
additional Indebtedness is
incurred or such Disqualified Stock is issued would have
been at least 2.0 to 1, determined
on a pro forma basis (including a pro forma application of
the Net Proceeds therefrom),
as if the additional Indebtedness had been incurred, or
the Disqualified Stock had been
issued, as the case may be, at the beginning of such four
quarter period and (ii) no Default
or Event of Default has occurred and is continuing or
would occur as a consequence
thereof;
The foregoing provisions shall not apply to the incurrence
of any of the following
items of Indebtedness (collectively, "Permitted Debt"):
(i) the incurrence by the Company and/or its Subsidiaries
of Indebtedness under the
New Credit Facility in an aggregate principal amount at
any time outstanding (with letters
of credit being deemed to have a principal amount equal to
the maximum potential liability
of the Company and its Subsidiaries thereunder) not to
exceed the greater of (x) $100.0
million and (y) the sum of 85% of Eligible Receivables and
60% of Eligible Inventory,
less in each case the aggregate amount of all Net Proceeds
of Asset Sales applied to
permanently reduce the outstanding amount of such
Indebtedness and the lending
commitments with respect thereto pursuant to Section 4.10;
(ii) the incurrence by the Company of Indebtedness
represented by the Notes and
the incurrence by the Guarantors of Indebtedness
represented by the Subsidiary
Guarantees;
(iii) the incurrence by the Company or any of its
Subsidiaries of Indebtedness
represented by Capital Lease Obligations (whether or not
incurred pursuant to sale and
leaseback transactions), mortgage financing or purchase
money obligations, in each case
incurred for the purpose of financing all or any part of
the purchase price or cost of
construction or improvement of property, plant or
equipment used in the business of the
Company or such Subsidiary, in an aggregate principal
amount not to exceed $5.0 million
at any time outstanding;
(iv) the incurrence by the Company or any of
its Subsidiaries of Permitted
Refinancing Debt;
(v) the incurrence by the Company or any of its Wholly-
Owned Subsidiaries (other
than a Receivables Subsidiary) of intercompany
Indebtedness between or among the
Company and any of its Wholly-Owned Subsidiaries (other
than a Receivables Subsidiary)
or between or among any of the Company's Wholly-Owned
Subsidiaries (other than a
Receivables Subsidiary); provided, however, that (a) if
the Company is the obligor on such
Indebtedness, such Indebtedness is unsecured and expressly
subordinate to the payment in
full of all Obligations with respect to the Notes and
(b)(1) any subsequent issuance or
transfer of Equity Interests that results in any such
Indebtedness being held by a Person
other than the Company or a Wholly-Owned Subsidiary (other
than a Receivables
Subsidiary) and (2) any sale or other transfer of any such
Indebtedness to a Person that is
not either the Company or a Wholly-Owned Subsidiary (other
than a Receivables
Subsidiary) shall be deemed, in each case, to constitute
an incurrence of such Indebtedness
by the Company or such Subsidiary, as the case may be;
(vi) the incurrence by the Company of Hedging Obligations
that are incurred for the
purpose of fixing or hedging interest rate risk with
respect to any floating rate
Indebtedness that is permitted by the terms of this
Indenture to be incurred;
(vii) Indebtedness of a Receivables Subsidiary that is not
recourse to the Company
or any other Subsidiary of the Company (other than
Standard Securitization Undertakings)
incurred in connection with a Qualified Receivables
Transaction; and
(viii) the incurrence by the Company and its Subsidiaries
of Indebtedness (in
addition to Indebtedness permitted by any other clause of
this paragraph) in an aggregate
principal amount (or accreted value, as applicable) at any
time outstanding not to exceed
$10.0 million.
SECTION 4.10. ASSET SALESSECTION 4.10. ASSET SALES.
The Company shall not, and shall not permit any of its
Subsidiaries to, consummate
an Asset Sale unless (i) the Company (or the Subsidiary,
as the case may be) receives
consideration at the time of such Asset Sale at least
equal to the fair market value
(evidenced by a resolution of the Board of Directors set
forth in an Officers' Certificate
delivered to the Trustee) of the assets sold or otherwise
disposed of and (ii) at least 75%
(100% in the case of lease payments) of the consideration
therefor received by the
Company or such Subsidiary is in the form of cash or Cash
Equivalents; provided that the
amount of (a) any liabilities (as shown on the Company's,
or such Subsidiary's, most
recent balance sheet) of the Company or any Subsidiary
(other than contingent liabilities
and liabilities that are by their terms subordinated to the
Notes or any guarantee thereof)
that are assumed by the transferee of any such assets
pursuant to a customary novation
agreement that releases the Company or such Subsidiary from
further liability and (b) any
notes or other obligations received by the Company or any
such Subsidiary from such
transferee that are immediately converted by the Company or
such Subsidiary into cash (to
the extent of the cash received), shall be deemed to be
cash for purposes of this provision.
Within 365 days after the receipt of any Net Proceeds from
an Asset Sale, the
Company may apply such Net Proceeds, at its option, to (i)
permanently reduce
Indebtedness under the New Credit Facility; provided that
such permanent reduction is
accompanied by a corresponding reduction in the lending
commitments under the New
Credit Facility, (ii) acquire another business or other
longterm assets, in each case, in, or
used or useful in, the same or a similar line of business
as the Company or any of its
Subsidiaries was engaged in on the date of this Indenture
or any reasonable extension or
expansion thereof (including the Capital Stock of another
Person engaged in such business;
provided such other Person is, or immediately after and
giving effect to such acquisition
shall become, a Wholly-Owned Subsidiary of the Company
(other than a Receivables
Subsidiary)), or (iii) reimburse the Company or any of its
Subsidiaries for expenditures
made, and costs incurred, to repair, rebuild, replace or
restore property subject to loss,
damage or taking to the extent that the Net Proceeds
consist of insurance or condemnation
or similar proceeds received on account of such loss,
damage or taking. Pending the final
application of any such Net Proceeds, the Company may
temporarily reduce revolving
Indebtedness under the New Credit Facility or otherwise
invest such Net Proceeds in cash
or Cash Equivalents. Any Net Proceeds from Asset Sales
that are not applied as provided
in the first sentence of this paragraph shall be deemed to
constitute "Excess Proceeds."
When the aggregate amount of Excess Proceeds exceeds $5.0
million, the Company shall
be required to make an Asset Sale Offer to purchase the
maximum principal amount (that
is an integral multiple of $1,000) of Notes that may be
purchased out of the Excess
Proceeds, at an offer price in cash in an amount equal to
100% of the principal amount
thereof plus accrued and unpaid interest and Liquidated
Damages, if any, thereon to the
date of purchase, in accordance with the procedures set
forth in Article 3 hereof. To the
extent that the aggregate amount of Notes tendered pursuant
to an Asset Sale Offer is less
than the Excess Proceeds, the Company (or such Subsidiary)
may use any remaining
Excess Proceeds for general corporate purposes. If the
aggregate principal amount of
Notes surrendered by Holders thereof exceeds the amount of
Excess Proceeds, the Trustee
shall select the Notes to be purchased on a pro rata basis
(with such adjustments as may be
deemed appropriate by the Company so that only Notes in
denominations of $1,000, or
integral multiples thereof, shall be purchased). Upon
completion of such offer to
purchase, the amount of Excess Proceeds shall be reset at
zero.
Notwithstanding the foregoing, the Company and its
Subsidiaries shall be permitted
to consummate one or more Asset Sales with respect to
assets or properties with an
aggregate fair market value (evidenced by a resolution of
the Board of Directors set forth
in an Officers' Certificate delivered to the Trustee) not
in excess of $5.0 million with
respect to all such Asset Sales made subsequent to the
date of this Indenture without
complying with the provisions of the preceding paragraphs.
SECTION 4.11. TRANSACTIONS WITH AFFILIATESSECTION 4.11.
TRANSACTIONS WITH
AFFILIATES.
The Company shall not, and shall not permit any of its
Subsidiaries to, make any
payment to, or sell, lease, transfer or otherwise dispose
of any of its properties or assets
to, or purchase any property or assets from, or enter into
or make or amend any contract,
agreement, understanding, loan, advance or guarantee with,
or for the benefit of, any
Affiliate (each of the foregoing, an "Affiliate
Transaction"), unless (i) such Affiliate
Transaction is on terms that are no less favorable to the
Company or the relevant
Subsidiary than those that would have been obtained in a
comparable transaction by the
Company or such Subsidiary with an unrelated Person and
(ii) (a) with respect to any
Affiliate Transaction or series of related Affiliate
Transactions involving aggregate
consideration in excess of $1.0 million the Company
delivers to the Trustee a resolution of
the Board of Directors (including a majority of the
disinterested directors, if any) set forth
in an Officers' Certificate certifying that such Affiliate
Transaction complies with clause
(i) above and that such Affiliate Transaction has been
approved by a majority of the
disinterested members, if any, of the Board of Directors
or (b) with respect to any
Affiliate Transaction or series of related Affiliate
Transactions involving aggregate
consideration in excess of $5.0 million the Company
delivers to the Trustee an opinion as
to the fairness to the Holders of such Affiliate
Transaction
from a financial point of view
issued by an investment banking firm of national standing;
provided that (1) any
employment agreement entered into by the Company or any of
its Subsidiaries in the
ordinary course of business and consistent with the past
practice of the Company or such
Subsidiary, (2) transactions between or among the Company
and/or its Wholly-Owned
Subsidiaries (other than a Receivables Subsidiary), (3)
Restricted Payments (other than
Investments) that are permitted by Section 4.07, (4) any
payment by the Company for
management services pursuant to the Management Services
Agreement, dated as of
August 1, 1997, by and among Delta Woodside Industries,
Inc. and the Company as such
Management Services Agreement is in effect on the date of
this Indenture, (5) any
payment by the Company pursuant to the Tax Sharing
Agreement, dated as of August 1,
1997, by and among Delta Woodside Industries, Inc. and the
Company as such Tax
Sharing Agreement is in effect on the date of this
Indenture, (6) sales of goods and
manufacturing services in the ordinary course of business
and otherwise in compliance
with the terms of this Indenture which are, in the
reasonable determination of the Board of
Directors of the Company, for fair market value and on
terms at least as favorable to the
Company and its Subsidiaries as might have been obtained
at such time from an
unaffiliated party and (7) sales of accounts receivable
and other related assets customarily
transferred in an asset securitization transaction
involving accounts receivable to a
Receivables Subsidiary, and any agreement related thereto,
in a Qualified Receivables
Transaction, in each case shall not be deemed Affiliate
Transactions.
SECTION 4.12. LIENSSECTION 4.12. LIENS.
The Company shall not, and shall not permit any of its
Subsidiaries to, directly or
indirectly, create, incur, assume or suffer to exist any
Lien securing Indebtedness on any
asset (including Capital Stock of any Subsidiary of the
Company) now owned or hereafter
acquired, or any income or profits therefrom, or assign or
convey any right to receive
income therefrom, except Permitted Liens unless all
payments due under this Indenture
and the Notes are secured on an equal and ratable basis
with the Indebtedness so secured
until such time as such is no longer secured by a Lien;
provided that if such Indebtedness
is by its terms expressly subordinated to the Notes or any
Subsidiary Guarantee the Lien
securing such Indebtedness shall be subordinate and junior
to the Lien securing the Notes
and the Subsidiary Guarantees with the same relative
priority as such subordinate or junior
Indebtedness shall have with respect to the Notes and the
Subsidiary Guarantees.
SECTION 4.13. SALE AND LEASEBACK TRANSACTIONSSECTION
4.13. SALE AND
LEASEBACK TRANSACTIONS.
The Company shall not, and shall not permit any of its
Subsidiaries to, enter into
any sale and leaseback transaction; provided that the
Company or any Subsidiary may
enter into a sale and leaseback transaction if (i) the
Company or such Subsidiary could
have (a) incurred Indebtedness in an amount equal to the
Attributable Debt relating to such
sale and leaseback transaction pursuant to Section 4.09
and (b) incurred a Lien to secure
such Indebtedness pursuant to Section 4.12, (ii) the Net
Proceeds of such sale and
leaseback transaction are at least equal to the fair
market value (as determined in good
faith by the Board of Directors and set forth in an
Officers' Certificate delivered to the
Trustee) of the property that is the subject of such sale
and leaseback transaction and
(iii) the transfer of assets in such sale and leaseback
transaction is permitted by, and the
Company or the Subsidiary, as the case may be, applies the
proceeds of such transaction
in compliance with Sections 3.09 and 4.10.
SECTION 4.14. CORPORATE EXISTENCESECTION 4.14.
CORPORATE EXISTENCE.
Subject to Article 5 hereof, the Company shall do or cause
to be done all things
necessary to preserve and keep in full force and effect
(i) its corporate existence, and the
corporate, partnership or other existence of each of its
Subsidiaries, in accordance with
the respective organizational documents (as the same may
be amended from time to time)
of the Company or any such Subsidiary and (ii) the rights
(charter and statutory), licenses
and franchises of the Company and its Subsidiaries;
provided, however, that the Company
shall not be required to preserve any such right, license
or franchise, or the corporate,
partnership or other existence of any of its Subsidiaries,
if the Board of Directors shall
determine that the preservation thereof is no longer
desirable in the conduct of the
business of the Company and its Subsidiaries, taken as a
whole, and that the loss thereof is
not adverse in any material respect to the Holders of the
Notes.
SECTION 4.15. OFFER TO REPURCHASE UPON CHANGE OF
CONTROLSECTION 4.15.
OFFER TO REPURCHASE UPON CHANGE OF CONTROL.
(a) Upon the occurrence of a Change of Control, each
Holder of Notes shall have
the right to require the Company to repurchase all or any
part (equal to $1,000 or an
integral multiple thereof) of such Holder's Notes pursuant
to the offer described below
(the "Change of Control Offer") at an offer price in cash
equal to 101% of the aggregate
principal amount thereof plus accrued and unpaid interest
and Liquidated Damages, if any,
thereon to the date of purchase (the "Change of Control
Payment"). Within ten days
following any Change of Control, the Company shall mail a
notice to each Holder
describing the transaction or transactions that constitute
the Change of Control and
offering to repurchase Notes on the date specified in such
notice, which date shall be no
earlier than 30 days and no later than 60 days from the
date such notice is mailed (the
"Change of Control Payment Date"). Such notice, which
shall govern the terms of the
Change of Control offer, shall state: (i) that the Change
of Control Offer is being made
pursuant to this Section 4.15 and that all Notes tendered
will be accepted for payment; (ii)
the purchase price and the purchase date; (iii) that any
Note not tendered will continue to
accrue interest; (iv) that, unless the Company defaults in
the payment of the Change of
Control Payment, all Notes accepted for payment pursuant
to the Change of Control Offer
shall cease to accrue interest after the Change of Control
Payment Date; (v) that Holders
electing to have any Notes purchased pursuant to a Change
of Control Offer will be
required to surrender the Notes, with the form entitled
"Option of Holder to Elect
Purchase" on the reverse of the Notes completed, to the
Paying Agent at the address
specified in the notice prior to the close of business on
the third Business Day preceding
the Change of Control Payment Date; (vi) that Holders will
be entitled to withdraw their
election if the Paying Agent receives, not later than the
close of business on the second
Business Day preceding the Change of Control Payment Date,
a telegram, telex, facsimile
transmission or letter setting forth the name of the
Holder, the principal amount of Notes
delivered for purchase, and a statement that such Holder
is withdrawing his election to
have the Notes purchased; and (vii) that Holders whose
Notes are being purchased only in
part will be issued new Notes equal in principal amount to
the unpurchased portion of the
Notes surrendered, which unpurchased portion must be equal
to $1,000 in principal
amount or an integral multiple thereof. The Company shall
comply with the requirements
of Rule 14e-1 under the Exchange Act and any other
securities laws and regulations
thereunder to the extent such laws and regulations are
applicable in connection with the
repurchase of the Notes as a result of a Change of
Control.
(b) On the Change of Control Payment Date, the Company
will, to the extent
lawful, (i) accept for payment all Notes or portions
thereof properly tendered pursuant to
the Change of Control Offer, (ii) deposit with the Paying
Agent an amount equal to the
Change of Control Payment in respect of all Notes or
portions thereof so tendered and
(iii) deliver or cause to be delivered to the Trustee the
Notes so accepted together with an
Officers' Certificate stating the aggregate principal
amount of Notes or portions thereof
being purchased by the Company. The Paying Agent shall
promptly mail to each Holder
of Notes so tendered the Change of Control Payment for
such Notes, and the Trustee shall
promptly authenticate and mail (or cause to be transferred
by book entry) to each Holder a
new Note equal in principal amount to any unpurchased
portion of the Notes surrendered,
if any; provided that each such new Note shall be in a
principal amount of $1,000 or an
integral multiple thereof. The Company shall publicly
announce the results of the Change
of Control Offer on or as soon as practicable after the
Change of Control Payment Date.
(c) The Company shall not be required to make a Change of
Control Offer upon a
Change of Control if a third party makes the Change of
Control Offer in the manner, at
the times and otherwise in compliance with the
requirements set forth in this Indenture
applicable to a Change of Control Offer made by the
Company and purchases all Notes
validly tendered and not withdrawn under such Change of
Control Offer.
SECTION 4.16. LIMITATION ON ISSUANCES AND SALES OF
CAPITAL STOCK OF WHOLLY-
OWNED SUBSIDIARIESSECTION 4.16. LIMITATION ON ISSUANCES
AND
SALES OF CAPITAL STOCK OF WHOLLY-OWNED SUBSIDIARIES.
The Company (i) shall not, and shall not permit any
Subsidiary of the Company to,
transfer, convey, sell, lease or otherwise dispose of any
Capital Stock of any Subsidiary of
the Company to any Person (other than the Company or a
Wholly-Owned Subsidiary of
the Company (other than a Receivables Subsidiary)), unless
(a) such transfer, conveyance,
sale, lease or other disposition is of all the Capital
Stock of such Subsidiary and (b) the
aggregate cash portion of the Net Proceeds from such
transfer, conveyance, sale, lease or
other disposition is applied in accordance with Sections
3.09 and 4.10, and (ii) shall not
permit any Subsidiary of the Company to issue any of its
Equity Interests (other than (1),
if necessary, shares of its Capital Stock constituting
directors' qualifying shares or (2)
shares of Capital Stock issued prior to the time such
Person became a Subsidiary of the
Company; provided that such Capital Stock was not issued
in anticipation of such
transaction) to any Person other than to the Company or a
Wholly-Owned Subsidiary of
the Company (other than a Receivables Subsidiary).
SECTION 4.17. PAYMENTS FOR CONSENTSECTION 4.17. PAYMENTS
FOR CONSENT.
Neither the Company nor any of its Subsidiaries shall,
directly or indirectly, pay or
cause to be paid any consideration, whether by way of
interest, fee or otherwise, to any
Holder of any Notes for or as an inducement to any
consent, waiver or amendment of any
of the terms or provisions of this Indenture or the Notes
unless such consideration is
offered to be paid or is paid to all Holders of the Notes
that consent, waive or agree to
amend in the time frame set forth in the solicitation
documents relating to such consent,
waiver or agreement.
SECTION 4.18. LIMITATION ON INVESTMENT COMPANY
STATUSSECTION 4.18.
LIMITATION ON INVESTMENT COMPANY STATUS.
The Company and its Subsidiaries shall not take any
action, or otherwise permit to
exist any circumstance, that would require the Company to
register as an "investment
company" under the Investment Company Act of 1940, as
amended.
SECTION 4.19. ADDITIONAL SUBSIDIARY GUARANTEESSECTION
4.19. ADDITIONAL
SUBSIDIARY GUARANTEES.
If the Company or any of its Subsidiaries shall acquire or
create another Subsidiary
after the date of this Indenture (other than a Receivables
Subsidiary that does not
guarantee or otherwise provide credit support (pursuant to
a security interest or otherwise)
in respect of any Indebtedness of the Company or any
Subsidiary Guarantor), then such
newly acquired or created Subsidiary shall execute a
Subsidiary Guarantee and deliver an
opinion of counsel, in accordance with the terms of this
Indenture.
ARTICLE 5
SUCCESSORS ARTICLE 5 SUCCESSORS
SECTION 5.01. MERGER, CONSOLIDATION, OR SALE OF ASSETS
The Company shall not, and shall not permit any of its
Subsidiaries to, consolidate
or merge with or into, or sell, assign, transfer, lease,
convey or otherwise dispose of all
or substantially all of the properties or assets of the
Company and its Subsidiaries
(determined on a consolidated basis for the Company and
its Subsidiaries taken as a
whole) in one or more related transactions, to another
Person unless: (i) either (a) the
Company, in the case of a transaction involving the
Company, or a Subsidiary which is a
party to the transaction, in the case of a transaction
involving a Subsidiary of the
Company, is the surviving corporation or (b) in the case
of a transaction involving the
Company, the Person formed by or surviving any such
consolidation or merger (if other
than the Company) or to which such sale, assignment,
transfer, lease, conveyance or other
disposition shall have been made is a corporation
organized or existing under the laws of
the United States, any state thereof or the District of
Columbia and expressly assumes all
of the obligations of the Company under the Notes and this
Indenture pursuant to a
supplemental indenture in a form reasonably satisfactory
to the Trustee; (ii) immediately
after such transaction no Default or Event of Default
exists; (iii) in the case of a
transaction involving the Company (except in the case of a
merger of the Company with
or into a Wholly-Owned Subsidiary of the Company (other
than a Receivables
Subsidiary)), the Person formed by or surviving any such
consolidation or merger (if
other than the Company), or to which such sale,
assignment, transfer, lease, conveyance
or other disposition shall have been made, (a) shall have
a Consolidated Net Worth
immediately after the transaction equal to or greater than
the Consolidated Net Worth of
the Company immediately preceding the transaction and (b)
will, at the time of such
transaction and after giving pro forma effect thereto as
if such transaction had occurred at
the beginning of the applicable four-quarter period, be
permitted to incur at least $1.00 of
additional Indebtedness pursuant to the Fixed Charge
Coverage Ratio test set forth in the
first paragraph of Section 4.09; (iv) if, as a result of
any such transaction, property or
assets of the Company or any Subsidiary of the Company
would become subject to a Lien
securing Indebtedness not excepted from Section 4.12, the
Company or its successor, as
the case may be, shall have otherwise complied with such
Section 4.12; and (v) the
Company shall have delivered to the Trustee an Officers'
Certificate and, except in the
case of a merger of a Subsidiary of the Company into the
Company or into a Wholly-
Owned Subsidiary of the Company, an opinion of counsel,
each stating that such
consolidation, merger, conveyance, lease or disposition
and any supplemental indenture
with respect thereto, comply with all of the terms of this
Section 5.01 and that all
conditions precedent provided for in this Section 5.01
relating to such transaction, or
series of transactions, have been complied with.
For the purposes of the foregoing, the transfer (by sale,
lease, assignment or
otherwise, in a single transaction or series of
transactions) of all or substantially all of the
properties or assets of one or more Subsidiaries of the
Company, the Capital Stock of
which constitutes all or substantially all of the
properties or assets of the Company, shall
be deemed to be the transfer of all or substantially all
of the properties and assets of the
Company.
SECTION 5.02. SUCCESSOR CORPORATION SUBSTITUTED
Upon any consolidation or merger, or any sale, assignment,
transfer, lease,
conveyance or other disposition of all or substantially
all of the assets of the Company in
accordance with Section 5.01, the successor corporation
formed by such consolidation or
into or with which the Company is merged or to which such
sale, assignment, transfer,
lease, conveyance or other disposition is made shall
succeed to, and be substituted for (so
that from and after the date of such consolidation,
merger, sale, lease, conveyance or
other disposition, the provisions of this Indenture
referring to the "Company" shall refer
instead to the successor corporation and not to the
Company), and may exercise every
right and power of the Company under this Indenture with
the same effect as if such
successor Person had been named as the Company herein;
provided, however, that the
predecessor Company shall not be relieved from the
obligation to pay the principal of and
interest on the Notes except in the case of a sale of all
or substantially all of the
Company's assets that meets the requirements of Section
5.01.
ARTICLE 6 DEFAULTS AND REMEDIES
SECTION 6.01. EVENTS OF DEFAULTSECTION 6.01. EVENTS
OF DEFAULT.
Each of the following constitutes an "Event of Default:"
(i) default for 30 days in the payment when due of
interest on, or Liquidated
Damages with respect to, the Notes;
(ii) default in payment when due of the principal of or
premium, if any, on the
Notes;
(iii) failure by the Company to comply with the provisions
of Sections 3.09, 4.07,
4.09, 4.10, 4.15, 4.16 and 5.01;
(iv) failure by the Company for 30 days after notice from
the Trustee or the
Holders of at least 25% in aggregate principal amount of
the Notes then outstanding
to comply with any of its other agreements in this
Indenture or the Notes;
(v) default under any mortgage, indenture or instrument
under which there may be
issued or by which there may be secured or evidenced any
Indebtedness for money
borrowed by the Company or any of its Subsidiaries (or
the payment of which is
guaranteed by the Company or any of its Subsidiaries)
whether such Indebtedness
or guarantee now exists, or is created after the date of
this Indenture, which
default:
(a) is caused by a failure to pay principal of or
premium, if any, or interest on
such Indebtedness at its final Stated Maturity (a
"Payment Default"), or
(b) results in the acceleration of such Indebtedness
prior to its express maturity
and, in each case, the principal amount of which
Indebtedness, together with
the principal amount of any other unpaid Indebtedness
under which there has
been a Payment Default or the express maturity of which
has been so
accelerated, aggregates $5.0 million or more;
(vi) failure by the Company or any of its Subsidiaries to
pay final judgments (other
than judgments fully covered by insurance) aggregating in
excess of $5.0 million,
which judgments are not paid, discharged or stayed for a
period of 45 days;
(vii) the Company or any of its Subsidiaries pursuant to
or within the meaning of
Bankruptcy Law:
(a) commences a voluntary case,
(b) consents to the entry of an order for relief against
it in an involuntary
case,
(c) consents to the appointment of a custodian of it or
for all or substantially
all of its property,
(d) makes a general assignment for the benefit of its
creditors, or
(e) generally is not paying its debts as they become
due; or
(viii) a court of competent jurisdiction enters an order
or decree under any
Bankruptcy Law that:
(a) is for relief against the Company or any of
its Subsidiaries in an
involuntary case;
(b) appoints a custodian of the Company or any of its
Subsidiaries or for all
or substantially all of the property of the Company or
any
of its Subsidiaries;
or
(c) orders the liquidation of the Company or any of its
Subsidiaries;
and the order or decree remains unstayed and in effect for
60 consecutive days; or
(ix) the Subsidiary Guarantee of any Guarantor is held in
judicial proceedings to be
unenforceable or invalid or ceases for any reason to be in
full force and effect
(other than in accordance with the terms of this
Indenture) or any Guarantor or any
Person acting on behalf of any Guarantor denies or
disaffirms such Guarantor's
obligations under its Subsidiary Guarantee (other than by
reason of a release of such
Guarantor from its Subsidiary Guarantee in accordance with
the terms of this
Indenture).
The Holders of a majority in aggregate principal amount of
the Notes then
outstanding by notice to the Trustee may on behalf of the
Holders of all of the Notes waive
any existing Default or Event of Default and its
consequences under this Indenture except
a continuing Default or Event of Default in the payment of
interest on, or the principal of,
the Notes.
SECTION 6.02. ACCELERATION
If any Event of Default occurs and is continuing, the
Trustee or the Holders of at
least 25% in principal amount of the then outstanding
Notes may declare all the Notes to
be due and payable immediately. Notwithstanding the
foregoing, in the case of an Event
of Default arising under clauses (vii) and (viii) of
Section 6.01, with respect to the
Company or any Subsidiary, all outstanding Notes shall
become due and payable without
further action or notice. Holders of the Notes may not
enforce this Indenture or the Notes
except as provided in this Indenture. Subject to certain
limitations, Holders of a majority
in principal amount of the then outstanding Notes may
direct the Trustee in its exercise of
any trust or power. The Trustee may withhold from Holders
of the Notes notice of any
continuing Default or Event of Default (except a Default
or Event of Default relating to
the payment of principal or premium, if any, or interest
or Liquidated Damages, if any) if
it determines that withholding notice is in their
interest.
In the case of any Event of Default occurring by reason of
any willful action (or
inaction) taken (or not taken) by or on behalf of the
Company with the intention of
avoiding payment of the premium that the Company would
have had to pay if the
Company then had elected to redeem the Notes pursuant to
the optional redemption
provisions of this Indenture, an equivalent premium shall
also become and be immediately
due and payable to the extent permitted by law upon the
acceleration of the Notes. If an
Event of Default occurs prior to September 1, 2002 by
reason of any willful action (or
inaction) taken (or not taken) by or on behalf of the
Company with the intention of
avoiding the prohibition on redemption of the Notes prior
to September 1, 2002, then the
premium specified below shall also become immediately due
and payable to the extent
permitted by law upon the acceleration of the Notes during
the twelve-month period
ending immediately prior to September 1 of the years
indicated below.
Year
Percentage
1997
114.4377%
1998
112.8335%
1999
111.2293%
2000
109.6251%
2001
108.0209%
2002
106.4167%
SECTION 6.03. OTHER REMEDIES.
If an Event of Default occurs and is continuing, the
Trustee may pursue any
available remedy to collect the payment of principal,
premium, if any, and interest on the
Notes or to enforce the performance of any provision of
the Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not
possess any of the Notes
or does not produce any of them in the proceeding. A
delay or omission by the Trustee or
any Holder of a Note in exercising any right or remedy
accruing upon an Event of Default
shall not impair the right or remedy or constitute a
waiver of or acquiescence in the Event
of Default. All remedies are cumulative to the extent
permitted by law.
SECTION 6.04. WAIVER OF PAST DEFAULTSSECTION 6.04.
WAIVER OF PAST DEFAULTS.
Holders of not less than a majority in aggregate principal
amount of the then
outstanding Notes by notice to the Trustee may on behalf
of the Holders of all of the Notes
waive an existing Default or Event of Default and its
consequences hereunder, except a
continuing Default or Event of Default in the payment of
the
principal of, or interest on,
the Notes (including in connection with an offer to
purchase) (provided, however, that the
Holders of a majority in aggregate principal amount of the
then outstanding Notes may
rescind an acceleration and its consequences, including
any related payment default that
resulted from such acceleration). 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 6.05. CONTROL BY MAJORITY
Holders of a majority in principal amount of the then
outstanding Notes may direct
the time, method and place of conducting any proceeding
for exercising any remedy avail-
able to the Trustee or exercising any trust or power
conferred on it. However, the
Trustee may refuse to follow any direction that conflicts
with law or this Indenture that the
Trustee determines may be unduly prejudicial to the rights
of other Holders of Notes or
that may involve the Trustee in personal liability.
SECTION 6.06. LIMITATION ON SUITSSECTION 6.06.
LIMITATION ON SUITS.
A Holder of a Note may pursue a remedy with respect to
this Indenture or the
Notes only if:
(a) the Holder of a Note gives to the Trustee written
notice of a continuing Event
of Default;
(b) the Holders of at least 25% in principal amount of
the then outstanding Notes
make a written request to the Trustee to pursue the
remedy;
(c) such Holder of a Note or Holders of Notes offer and,
if requested, provide to
the Trustee indemnity satisfactory to the Trustee against
any loss, liability or expense;
(d) the Trustee does not comply with the request within
60 days after receipt of the
request and the offer and, if requested, the provision of
indemnity; and
(e) during such 60-day period the Holders of a majority
in principal amount of the
then outstanding Notes do not give the Trustee a direction
inconsistent with the request.
A Holder of a Note may not use this Indenture to prejudice
the rights of another Holder of
a Note or to obtain a preference or priority over another
Holder of a Note.
SECTION 6.07. RIGHTS OF HOLDERS OF NOTES TO RECEIVE
PAYMENT
Notwithstanding any other provision of this Indenture,
the right of any Holder of a
Note to receive payment of principal, premium, if any,
and Liquidated Damages, if any,
and interest on the Note, on or after the respective due
dates expressed in the Note
(including in connection with an offer to purchase), or
to bring suit for the enforcement of
any such payment on or after such respective dates,
shall not be impaired or affected
without the consent of such Holder.
SECTION 6.08. COLLECTION SUIT BY TRUSTEE
If an Event of Default specified in Section 6.01(i) or (ii)
occurs and is continuing,
the Trustee is authorized to recover judgment in its own
name and as trustee of an express
trust against the Company for the whole amount of principal of,
premium, if any, and
Liquidated Damages, if any, and interest remaining unpaid on
the Notes and interest on
overdue principal and, to the extent lawful, interest and
such further amount as shall be
sufficient to cover the reasonable costs and expenses of
collection, including the
reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents
and counsel.
SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM.
The Trustee is authorized to file such proofs of claim
and other papers or
documents as may be necessary or advisable in order to
have the claims of the Trustee
(including any claim for the reasonable compensation,
expenses, disbursements and
advances of the Trustee, its agents and counsel) and the
Holders of the Notes allowed in
any judicial proceedings relative to the Company (or any
other obligor upon the Notes), its
creditors or its property and shall be entitled and
empowered to collect, receive and
distribute any money or other property payable or
deliverable on any such claims and any
custodian 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 to 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 7.07. To the
extent that the payment of any such compensation,
expenses,
disbursements and advances
of the Trustee, its agents and counsel, and any other
amounts due the Trustee under
Section 7.07 out of the estate in any such proceeding,
shall be denied for any reason,
payment of the same shall be secured by a Lien on, and
shall be paid out of, any and all
distributions, dividends, money, securities and other
properties that the Holders may be
entitled to receive in such proceeding whether in
liquidation or under any plan of reorgan-
ization or arrangement or otherwise. Nothing herein
contained 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 Notes or
the rights of any Holder, or to authorize the Trustee to
vote in respect of the claim of any
Holder in any such proceeding.
SECTION 6.10. PRIORITIES
If the Trustee collects any money pursuant to this
Article, it shall pay out the money
in the following order:
First: to the Trustee, its agents and attorneys for
amounts due under Section 7.07,
including payment of all compensation, expense and
liabilities reasonably incurred, and all
advances made, by the Trustee and, the reasonable costs
and expenses of collection;
Second: to Holders of Notes for amounts due and unpaid on
the Notes for
principal, premium, if any, and Liquidated Damages, if
any, and interest, ratably, without
preference or priority of any kind, according to the
amounts due and payable on the Notes
for principal, premium, if any, and Liquidated Damages, if
any, and interest,
respectively; and
Third: to the Company or to such party as a court of
competent jurisdiction shall
direct.
The Trustee may fix a record date and payment date for any
payment to Holders of
Notes pursuant to this Section 6.10.
SECTION 6.11. 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 or
omitted by it as a Trustee, a court in its
discretion may require the filing by any party litigant in
the suit of an undertaking to pay
the costs of the suit, and the court in its discretion may
assess reasonable costs, including
reasonable attorneys' fees, against any party litigant in
the suit, having due regard to the
merits and good faith of the claims or defenses made by
the
party litigant. This Section
does not apply to a suit by the Trustee, a suit by a
Holder of a Note pursuant to Section
6.07, or a suit by Holders of more than 10% in principal
amount of the then outstanding
Notes.
ARTICLE 7
TRUSTEE
SECTION 7.01. DUTIES OF TRUSTEE
(a) If an Event of Default has occurred and is
continuing, the Trustee shall
exercise such of the rights and powers vested in it by
this Indenture, and use the same
degree of care and skill in its exercise, as a prudent man
would exercise or use under the
circumstances in the conduct of his own affairs.
(b) Except during the continuance of an Event of Default:
(i) the duties of the Trustee shall be determined solely
by the express
provisions of this Indenture and the Trustee need perform
only those duties that are
specifically set forth in this Indenture and no others,
and no implied covenants or
obligations shall be read into this Indenture against the
Trustee; and
(ii) in the absence of bad faith on its part, the Trustee
may conclusively rely,
as to the truth of the statements and the correctness of
the opinions expressed
therein, upon certificates or opinions furnished to the
Trustee and conforming to the
requirements of this Indenture. However, the Trustee
shall examine the certificates
and opinions to determine whether or not they conform to
the requirements of this
Indenture.
(c) The Trustee may not be relieved from liabilities for
its own negligent action,
its own negligent failure to act, or its own willful
misconduct, except that:
(i) this paragraph does not limit the effect of paragraph
(b) of this Section;
(ii) the Trustee shall not be liable for any error of
judgment made in good
faith by a Responsible Officer, unless it is proved that
the Trustee was negligent in
ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to
any action it takes or omits
to take in good faith in accordance with a direction
received by it pursuant to
Section 6.05.
(d) Whether or not therein expressly so provided, every
provision of this Inden-
ture that in any way relates to the Trustee is subject to
paragraphs (a), (b), and (c) of this
Section 7.01.
(e) No provision of this Indenture shall require the
Trustee to expend or risk its
own funds or incur any liability. The Trustee shall be
under no obligation to exercise any
of its rights and powers under this Indenture at the
request of any Holders, unless such
Holders shall have offered to the Trustee security and
indemnity satisfactory to it against
any loss, liability or expense.
(f) The Trustee shall not be liable for interest on any
money received by it except
as the Trustee may agree in writing with the Company.
Money held in trust by the
Trustee need not be segregated from other funds except to
the extent required by law.
SECTION 7.02. RIGHTS OF TRUSTEE
(a) The Trustee may conclusively rely upon any document
reasonably believed by
it to be genuine and to have been signed or presented by
the proper Person. The Trustee
need not investigate any fact or matter stated in the
document.
(b) Before the Trustee acts or refrains from acting, it
may require an Officers'
Certificate or an Opinion of Counsel or both. The Trustee
shall not be liable for any
action it takes or omits to take in good faith in reliance
on such Officers' Certificate or
Opinion of Counsel. 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
from liability in respect of any action taken, suffered or
omitted by it hereunder in good
faith and in reliance thereon.
(c) The Trustee may act through its attorneys and agents
and shall not be
responsible for the misconduct or negligence of any agent
appointed with due care.
(d) The Trustee shall not be liable for any action it
takes or omits to take in good
faith that it believes to be authorized or within the
rights or powers conferred upon it by
this Indenture.
(e) Unless otherwise specifically provided in this
Indenture, any demand, request,
direction or notice from the Company shall be sufficient
if signed by an Officer of the
Company.
(f) 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
unless such Holders shall have offered to the Trustee
security and indemnity satisfactory to
it against any loss, liability or expenses that might
be incurred by it in compliance with
such request or direction.
(g) 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 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, personally or
by agent at the sole cost of
the Company and shall incur no liability or additional
liability of any kind by reason of
such inquiry or investigation.
(h) 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.
(i) The Trustee shall not be liable for any action taken,
suffered, or omitted to be
taken by it in good faith and reasonably believed by it to
be authorized or within the
discretion or rights or powers conferred upon it by this
Indenture.
(j) The Trustee shall not be deemed to have notice of any
Default or Event of
Default unless a Responsible Officer of the Trustee has
actual knowledge thereof unless
written notice of any event which is in fact such a
default is received by the Trustee at the
Corporate Trust Office of this Trustee and such notice
references the Notes and this
Indenture.
SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE
The Trustee in its individual or any other capacity may
become the owner or
pledgee of Notes and may otherwise deal with the Company
or any Affiliate of the
Company with the same rights it would have if it were not
Trustee. However, in the
event that the Trustee acquires any conflicting interest
it must eliminate such conflict
within 90 days, apply to the SEC for permission to
continue
as trustee or resign. Any
Agent may do the same with like rights and duties. The
Trustee is also subject to Sections
7.10 and 7.11.
SECTION 7.04. TRUSTEE'S DISCLAIMER.
The Trustee shall not be responsible for and makes no
representation as to the
validity or adequacy of this Indenture or the Notes, it
shall not be accountable for the
Company's use of the proceeds from the Notes or any money
paid to the Company or
upon the Company's direction under any provision of this
Indenture, it shall not be
responsible for the use or application of any money
received by any Paying Agent other
than the Trustee, and it shall not be responsible for any
statement or recital herein or any
statement in the Notes or any other document in connection
with the sale of the Notes or
pursuant to this Indenture other than its certificate of
authentication.
SECTION 7.05. NOTICE OF DEFAULTS.
If a Default or Event of Default occurs and is continuing
and if it is known to the
Trustee, the Trustee shall mail to Holders of Notes a
notice of the Default or Event of
Default within 90 days after it occurs. Except in the
case of a Default or Event of Default
in payment of principal of, premium, if any, or interest
on, any Note, 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 interests
of the Holders of the Notes.
SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS OF THE NOTES.
Within 60 days after each May 15 beginning with the May 15
following the date of
this Indenture, and for so long as Notes remain
outstanding, the Trustee shall mail to the
Holders of the Notes a brief report dated as of such
reporting date that complies with TIA
313(a) (but if no event described in TIA 313(a) has
occurred within the twelve months
preceding the reporting date, no report need be
transmitted). The Trustee also shall
comply with TIA 313(b)(2). The Trustee shall also
transmit by mail all reports as
required by TIA 313(c).
A copy of each report at the time of its mailing to the
Holders of Notes shall be
mailed to the Company and filed with the SEC and each
stock exchange on which the
Notes are listed in accordance with TIA 313(d). The
Company shall promptly notify the
Trustee when the Notes are listed on any stock exchange.
SECTION 7.07. COMPENSATION AND INDEMNITY
The Company shall pay to the Trustee from time to time
such compensation for its
acceptance of this Indenture and services hereunder as the
parties shall agree from time to
time. The Trustee's compensation shall not be limited by
any law on compensation of a
trustee of an express trust. The Company shall reimburse
the Trustee promptly upon
request for all reasonable disbursements, advances and
expenses incurred or made by it in
addition to the compensation for its services. Such
expenses shall include the reasonable
compensation, disbursements and expenses of the Trustee's
agents and counsel.
The Company shall indemnify the Trustee against any and
all losses, liabilities or
expenses incurred by it arising out of or in connection
with the acceptance or
administration of its duties under this Indenture,
including the reasonable costs and
expenses of enforcing this Indenture against the Company
(including this Section 7.07) and
defending itself against any claim (whether asserted by
the Company or any Holder or any
other person) or liability in connection with the exercise
or performance of any of its
powers or duties hereunder, except to the extent any such
loss, liability or expense may be
attributable to its negligence or bad faith. The Trustee
shall notify the Company promptly
of any claim for which it may seek indemnity. Failure by
the Trustee to so notify the
Company shall not relieve the Company of its obligations
hereunder; provided, that the
Company's obligations under this Section 7.07 shall be
relieved to the extent, and only to
the extent, that such failure to notify promptly has
materially prejudiced the Company.
The Company shall defend the claim and the Trustee shall
cooperate in the defense. The
Trustee may have separate counsel and the Company shall
pay the reasonable fees and
expenses of such counsel. The Company shall not, in
connection with any one suit or
proceeding or separate but substantially similar or
related actions or proceedings in the
same jurisdiction arising out of the same general
allegations or circumstances, be liable for
the reasonable fees and expenses of more than one separate
firm of attorneys (in addition
to one local counsel) at any one time for the Trustee.
The Company need not pay for any
settlement made without its consent, which consent shall
not be unreasonably withheld.
The obligations of the Company under this Section 7.07
shall survive the
satisfaction and discharge of this Indenture.
To secure the Company's payment obligations in this
Section, the Trustee shall
have a Lien prior to the Notes on all money or property
held or collected by the Trustee,
except that held in trust to pay principal and interest on
particular Notes. Such Lien shall
survive the satisfaction and discharge of this Indenture.
When the Trustee incurs expenses or renders services after
an Event of Default
specified in Sections 6.01(viii) or 6.01(ix) occurs, the
reasonable expenses and the
compensation for the services (including the reasonable
fees and expenses of its agents and
counsel) are intended to constitute expenses of
administration under any Bankruptcy Law.
The Trustee shall comply with the provisions of TIA
313(b)(2) to the extent
applicable.
SECTION 7.08. REPLACEMENT OF TRUSTEE.
A resignation or removal of the Trustee and appointment of
a successor Trustee
shall become effective only upon the successor Trustee's
acceptance of appointment as
provided in this Section 7.08.
The Trustee may resign in writing at any time and be
discharged from the trust
hereby created by so notifying the Company. The Holders
of Notes of a majority in
principal amount of the then outstanding Notes may remove
the Trustee by so notifying
the Trustee and the Company in writing. The Company may
remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10;
(b) the Trustee is adjudged a bankrupt or an insolvent or
an order for relief is
entered with respect to the Trustee under any Bankruptcy
Law;
(c) a custodian or public officer takes charge of the
Trustee or its property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy
exists in the office of Trustee
for any reason, the Company shall promptly appoint a
successor Trustee. Within one year
after the successor Trustee takes office, the Holders of a
majority in principal amount of
the then outstanding Notes may appoint a successor Trustee
to replace the successor
Trustee appointed by the Company.
If a successor Trustee does not take office within 60 days
after the retiring Trustee
resigns or is removed, the retiring Trustee, the Company,
or the Holders of Notes of at
least 10% in principal amount of the then outstanding
Notes may petition any court of
competent jurisdiction for the appointment of a successor
Trustee.
If the Trustee, after written request by any Holder of a
Note who has been a Holder
of a Note for at least six months, fails to comply with
Section 7.10, such Holder of a Note
may petition any court of competent jurisdiction for the
removal of the Trustee and the
appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of
its appointment to the
retiring Trustee and to the Company. Thereupon, the
resignation or removal of the
retiring Trustee shall become effective, and the successor
Trustee shall have all the rights,
powers and duties of the Trustee under this Indenture.
The successor Trustee shall mail a
notice of its succession to Holders of the Notes. The
retiring Trustee shall promptly
transfer all property held by it as Trustee to the
successor Trustee, provided all sums
owing to the Trustee hereunder have been paid and subject
to the Lien provided for in
Section 7.07. Notwithstanding replacement of the Trustee
pursuant to this Section 7.08,
the Company's obligations under Section 7.07 shall
continue for the benefit of the retiring
Trustee.
SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee consolidates, merges or converts into, or
transfers all or substantially
all of its corporate trust business to, another
corporation, the successor corporation
without any further act shall be the successor Trustee.
SECTION 7.10. ELIGIBILITY; DISQUALIFICATION.
There shall at all times be a Trustee hereunder that is a
corporation organized and
doing business under the laws of the United States of
America or of any state thereof that
is authorized under such laws to exercise corporate
trustee power, that is subject to
supervision or examination by federal or state authorities
and that has a combined capital
and surplus of at least $100.0 million as set forth in its
most recent published annual report
of condition.
This Indenture shall always have a Trustee who satisfies
the requirements of TIA
310(a)(1), (2) and (5). The Trustee is subject to TIA
310(b).
SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.
The Trustee is subject to TIA 311(a), excluding any
creditor relationship listed in
TIA 311(b). A Trustee who has resigned or been removed
shall be subject to TIA
311(a) to the extent indicated therein.
ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
SECTION 8.01. OPTION TO EFFECT LEGAL DEFEASANCE OR
COVENANT DEFEASANCEE.
The Company may, at the option of its Board of Directors
evidenced by a
resolution set forth in an Officers' Certificate, at any
time, elect to have either Section
8.02 or 8.03 be applied to all outstanding Notes upon
compliance with the conditions set
forth below in this Article 8.
SECTION 8.02. LEGAL DEFEASANCE AND DISCHARGE.
Upon the Company's exercise under Section 8.01 of the
option applicable to this
Section 8.02, the Company shall, subject to the
satisfaction of the conditions set forth in
Section 8.04, be deemed to have been discharged from its
obligations with respect to all
outstanding Notes on the date the conditions set forth
below are satisfied (hereinafter,
"Legal Defeasance"). For this purpose, Legal Defeasance
means that the Company shall
be deemed to have paid and discharged the entire
Indebtedness represented by the
outstanding Notes, which shall thereafter be deemed to be
"outstanding" only for the
purposes of Section 8.05 and the other Sections of this
Indenture referred to in (a) and (b)
below, and to have satisfied all its other obligations
under such Notes and this Indenture
(and the Trustee, on demand of and at the expense of the
Company, shall execute proper
instruments acknowledging the same), except for the
following provisions which shall
survive until otherwise terminated or discharged
hereunder: (a) the rights of Holders of
outstanding Notes to receive solely from the trust fund
described in Section 8.04, and as
more fully set forth in such Section, payments in respect
of the principal of, premium, if
any, and interest on such Notes when such payments are
due, (b) the Company's
obligations with respect to such Notes under Article 2 and
Section 4.02, (c) the rights,
powers, trusts, duties and immunities of the Trustee
hereunder and the Company's
obligations in connection therewith and (d) this Article
8. Subject to compliance with this
Article 8, the Company may exercise its option under this
Section 8.02 notwithstanding
the prior exercise of its option under Section 8.03.
SECTION 8.03. COVENANT DEFEASANCE.
Upon the Company's exercise under Section 8.01 of the
option applicable to this
Section 8.03, the Company shall, subject to the
satisfaction
of the conditions set forth in
Section 8.04, be released from its obligations under the
covenants contained in
Sections 4.07, 4.08, 4.09, 4.10, 4.11, 4.12, 4.13, 4.15,
4.16 and 5.01 with respect to the
outstanding Notes on and after the date the conditions set
forth below are satisfied
(hereinafter, "Covenant Defeasance"), and the Notes shall
thereafter be deemed not
"outstanding" for the purposes of any direction, waiver,
consent or declaration or act of
Holders (and the consequences of any thereof) in
connection with such covenants, but
shall continue to be deemed "outstanding" for all other
purposes hereunder (it being
understood that such Notes shall not be deemed outstanding
for accounting purposes). For
this purpose, Covenant Defeasance means that, with respect
to the outstanding Notes, the
Company may omit to comply with and shall have no
liability in respect of any term,
condition or limitation set forth in any such covenant,
whether directly or indirectly, by
reason of any reference elsewhere herein to any such
covenant or by reason of any
reference in any such covenant to any other provision
herein or in any other document and
such omission to comply shall not constitute a Default or
an Event of Default under
Section 6.01, but, except as specified above, the
remainder
of this Indenture and such
Notes shall be unaffected thereby. In addition, upon the
Company's exercise under
Section 8.01 of the option applicable to this Section
8.03,
subject to the satisfaction of the
conditions set forth in Section 8.04, Sections 6.01(iii)
through 6.01(vii) shall not constitute
Events of Default.
SECTION 8.04. CONDITIONS TO LEGAL OR COVENANT DEFEASANCE.
The following shall be the conditions to the application
of either Section 8.02 or 8.03 to
the outstanding Notes:
(a) the Company must irrevocably deposit with the Trustee,
in trust, for
the benefit of the Holders, cash in United States dollars,
non-callable Government
Securities, or a combination thereof, in such amounts as
shall be sufficient, in the
opinion of a nationally recognized firm of independent
public accountants, to pay
the principal of, premium, if any, and Liquidated Damages,
if any, and interest on
the outstanding Notes on the stated date for payment
thereof or on the applicable
redemption date, as the case may be and shall specify
whether the Notes are being
defeased to maturity or to a particular redemption date;
(b) in the case of an election under Section 8.02, the
Company shall have
delivered to the Trustee an Opinion of Counsel in the
United States reasonably
acceptable to the Trustee confirming 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 Notes
shall not recognize income,
gain or loss for federal income tax purposes as a result
of such Legal Defeasance
and shall 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
Legal Defeasance had not
occurred;
(c) in the case of an election under Section 8.03, the
Company shall have
delivered to the Trustee an Opinion of Counsel in the
United States reasonably
acceptable to the Trustee confirming that the Holders of
the outstanding Notes shall
not recognize income, gain or loss for federal income tax
purposes as a result of
such Covenant Defeasance and shall 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;
(d) no Default or Event of Default shall have occurred and
be continuing
on the date of such deposit (other than a Default or Event
of Default resulting from
the incurrence of Indebtedness all or a portion of the
proceeds of which shall be
used to defease the Notes pursuant to this Article 8
concurrently with such
incurrence) or insofar as Sections 6.01(vii) or 6.01(viii)
is concerned, at any time in
the period ending on the 91st day after the date of
deposit;
(e) such Legal Defeasance or Covenant Defeasance shall not
result in a
breach or violation of, or constitute a default under, any
material agreement or
instrument (other than this Indenture) to which the
Company or any of its
Subsidiaries is a party or by which the Company or any of
its Subsidiaries is bound;
(f) the Company shall have delivered to the Trustee an
Opinion of
Counsel to the effect that on the 91st day following the
deposit, the trust funds shall
not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization
or similar laws affecting creditors' rights generally;
(g) the Company shall have delivered to the Trustee an
Officers'
Certificate stating that the deposit was not made by the
Company with the intent of
preferring the Holders over any other creditors of the
Company or any Guarantor
or with the intent of defeating, hindering, delaying or
defrauding any other
creditors of the Company or any Guarantor; and
(h) the Company shall have delivered to the Trustee an
Officers'
Certificate and an Opinion of Counsel, each stating that
all conditions precedent
provided for or relating to the Legal Defeasance or the
Covenant Defeasance have
been complied with.
SECTION 8.05. DEPOSITED MONEY AND GOVERNMENT SECURITIES
TO BE HELD IN TRUST;
OTHER MISCELLANEOUS PROVISIONS.SECTION 8.05. DEPOSITED
MONEY AND GOVERNMENT SECURITIES TO BE HELD IN TRUST; OTHER
MISCELLANEOUS PROVISIONS.
Subject to Section 8.06, all money and non-callable
Government Securities
(including the proceeds thereof) deposited with the
Trustee (or other qualifying trustee,
collectively for purposes of this Section 8.05, the
"Trustee") pursuant to Section 8.04 in
respect of the outstanding Notes shall be held in trust
and applied by the Trustee, in
accordance with the provisions of such Notes and this
Indenture, to the payment, either
directly or through any Paying Agent (including the
Company acting as Paying Agent) as
the Trustee may determine, to the Holders of such Notes of
all sums due and to become
due thereon in respect of principal, premium, if any,
Liquidated Damages, if any, and
interest, but such money need not be segregated from other
funds except to the extent
required by law.
The Company shall pay and indemnify the Trustee against
any tax, fee or other
charge imposed on or assessed against the cash or non
callable Government Securities
deposited pursuant to Section 8.04 or the principal and
interest received in respect thereof
other than any such tax, fee or other charge which by law
is for the account of the Holders
of the outstanding Notes.
Anything in this Article 8 to the contrary
notwithstanding,
the Trustee shall deliver
or pay to the Company from time to time upon the request
of the Company any money or
non-callable Government Securities held by it as provided
in Section 8.04 which, in the
opinion of a nationally recognized firm of independent
public accountants expressed in a
written certification thereof delivered to the Trustee
(which may be the opinion delivered
under Section 8.04(a)), are in excess of the amount
thereof that would then be required to
be deposited to effect an equivalent Legal Defeasance or
Covenant Defeasance.
SECTION 8.06. REPAYMENT TO COMPANY.
Any money deposited with the Trustee or any Paying Agent,
or then held by the
Company, in trust for the payment of the principal of,
premium, if any, Liquidated
Damages, if any, or interest on any Note and remaining
unclaimed for two years after
such principal, and premium, if any, Liquidated Damages,
if any, or interest has become
due and payable shall be paid to the Company on its
request or (if then held by the
Company) shall be discharged from such trust; and the
Holder of such Note shall
thereafter, as an unsecured creditor, look only to the
Company 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,
may at the reasonable expense of the Company cause to be
published once, in the New
York Times and The Wall Street Journal (national edition),
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 notification or publication,
any unclaimed balance of such
money then remaining shall be repaid to the Company.
SECTION 8.07. REINSTATEMENTSECTION.
If the Trustee or Paying Agent is unable to apply any
United States dollars or non-
callable Government Securities in accordance with Section
8.02 or 8.03, as the case may
be, by reason of any order or judgment of any court or
governmental authority enjoining,
restraining or otherwise prohibiting such application,
then the Company's obligations
under this Indenture and the Notes shall be revived and
reinstated as though no deposit had
occurred pursuant to Section 8.02 or 8.03 until such time
as the Trustee or Paying Agent
is permitted to apply all such money in accordance with
Section 8.02 or 8.03, as the case
may be; provided, however, that, if the Company makes any
payment of principal of,
premium, if any, Liquidated Damages, if any, or interest
on any Note following the
reinstatement of its obligations, the Company shall be
subrogated to the rights of the
Holders of such Notes to receive such payment from the
money held by the Trustee or
Paying Agent.
ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER
SECTION 9.01. WITHOUT CONSENT OF HOLDERS OF NOTES.
Notwithstanding Section 9.02 of this Indenture, the
Company, the Guarantors and
the Trustee may amend or supplement this Indenture, the
Notes or the Subsidiary
Guarantees without the consent of any Holder of a Note:
(a) to cure any ambiguity, defect or inconsistency;
(b) to provide for uncertificated Notes in addition to or
in place of certificated
Notes;
(c) to provide for the assumption of the Company's or a
Guarantor's obligations to
the Holders of the Notes in the case of a merger or
consolidation pursuant to Article 5
hereof;
(d) to make any change that would provide any additional
rights or benefits to the
Holders of the Notes or that does not adversely affect the
legal rights hereunder of any
Holder of the Notes; or
(e) to comply with requirements of the SEC in order to
effect or maintain the
qualification of this Indenture under the TIA.
Upon the request of the Company accompanied by a
resolution of its Board of
Directors authorizing the execution of any such amended or
supplemental Indenture, and
upon receipt by the Trustee of the documents described in
Section 7.02, the Trustee shall
join with the Company in the execution of any amended or
supplemental Indenture
authorized or permitted by the terms of this Indenture and
to make any further appropriate
agreements and stipulations that may be therein contained,
but the Trustee shall not be
obligated to enter into such amended or supplemental
Indenture that affects its own rights,
duties or immunities under this Indenture or otherwise.
SECTION 9.02. WITH CONSENT OF HOLDERS OF NOTES.
Except as provided below in this Section 9.02, the Company
and the Trustee may
amend or supplement this Indenture (including Section
3.09, 4.10 and 4.15), the
Subsidiary Guarantees and the Notes may be amended or
supplemented with the consent
of the Holders of at least a majority in principal amount
of the Notes then outstanding
(including, without limitation, consents obtained in
connection with a purchase of, or
tender offer or exchange offer for the Notes), and,
subject to Sections 6.04 and 6.07, any
existing Default or Event of Default (other than a Default
or Event of Default in the
payment of the principal of, premium, if any, or interest
on the Notes, except a payment
default resulting from an acceleration that has been
rescinded) or compliance with any
provision of this Indenture, the Subsidiary Guarantees or
the Notes may be waived with
the consent of the Holders of a majority in principal
amount of the then outstanding Notes
(including consents obtained in connection with a purchase
of, or tender offer or exchange
offer for the Notes).
Upon the request of the Company accompanied by a
resolution of its Board of
Directors authorizing the execution of any such amended or
supplemental Indenture, and
upon the filing with the Trustee of evidence reasonably
satisfactory to the Trustee of the
consent of the Holders of Notes as aforesaid, and upon
receipt by the Trustee of the
documents described in Section 7.02, the Trustee shall
join with the Company in the
execution of such amended or supplemental Indenture unless
such amended or
supplemental Indenture affects the Trustee's own rights,
duties or immunities under this
Indenture or otherwise, in which case the Trustee may in
its discretion, but shall not be
obligated to, enter into such amended or supplemental
Indenture.
It shall not be necessary for the consent of the Holders
of Notes under this Section
9.02 to approve the particular form of any proposed
amendment or waiver, but it shall be
sufficient if such consent approves the substance thereof.
After an amendment, supplement or waiver under this
Section becomes effective,
the Company shall mail to the Holders of Notes affected
thereby a notice briefly
describing the amendment, supplement or waiver. Any
failure of the Company to mail
such notice, or any defect therein, shall not, however, in
any way impair or affect the
validity of any such amended or supplemental Indenture or
waiver. Subject to Sections
6.04 and 6.07, the Holders of a majority in aggregate
principal amount of the Notes then
outstanding may waive compliance in a particular instance
by the Company with any
provision of this Indenture or the Notes. However,
without the consent of each Holder
affected, an amendment or waiver may not (with respect to
any Notes held by a non-
consenting Holder):
(a) reduce the principal amount of Notes whose Holders
must consent to an
amendment, supplement or waiver;
(b) reduce the principal of or change the fixed maturity
of any Note or alter or
waive any of the provisions with respect to the
redemption or repurchase of the
Notes except as provided above with respect to Sections
3.09, 4.10 and 4.15;
(c) reduce the rate of or change the time for payment of
premium, if any, or
interest, including default interest, on any Note;
(d) waive a Default or Event of Default in the payment of
principal of or
premium, if any, or interest on the Notes (except a
rescission of acceleration of the
Notes by the Holders of at least a majority in aggregate
principal amount of the then
outstanding Notes and a waiver of the payment default
that resulted from such
acceleration);
(e) make any Note payable in money other than that stated
in the Notes;
(f) make any change in the provisions of this Indenture
relating to waivers of
past Defaults or the rights of Holders of Notes to receive
payments of principal of
or premium, if any, or interest on the Notes;
(g) waive a redemption payment with respect to any Note
other than a payment
required by Sections 3.09, 4.10 and 4.15;
(h) release any Guarantor from any of its obligations
under its Subsidiary
Guarantee or this Indenture except in accordance with
Article 10 hereof; or
(i) make any change in the foregoing amendment and waiver
provisions.
SECTION 9.03. COMPLIANCE WITH TRUST INDENTURE ACTSECTION
9.03. COMPLIANCE
WITH TRUST INDENTURE ACT.
Every amendment or supplement to this Indenture, the
Subsidiary Guarantees or the
Notes shall be set forth in an amended or supplemental
Indenture that complies with the
TIA as then in effect.
SECTION 9.04. REVOCATION AND EFFECT OF CONSENTS.
Until an amendment, supplement or waiver becomes
effective, a consent to it by a
Holder of a Note is a continuing consent by the Holder of
a Note and every subsequent
Holder of a Note or portion of a Note that evidences the
same debt as the consenting
Holder's Note, even if notation of the consent is not made
on any Note. However, any
such Holder of a Note or subsequent Holder of a Note may
revoke the consent as to its
Note if the Trustee receives written notice of revocation
before the date the waiver,
supplement or amendment becomes effective. An amendment,
supplement or waiver
becomes effective in accordance with its terms and
thereafter binds every Holder.
SECTION 9.05. NOTATION ON OR EXCHANGE OF NOTES.
The Trustee may place an appropriate notation about an
amendment, supplement or
waiver on any Note thereafter authenticated. The Company
in exchange for all Notes
may issue and the Trustee shall authenticate new Notes
that reflect the amendment,
supplement or waiver.
Failure to make the appropriate notation or issue a new
Note shall not affect the
validity and effect of such amendment, supplement or
waiver.
SECTION 9.06. TRUSTEE TO SIGN AMENDMENTS, ETC.
The Trustee shall sign any amended or supplemental
Indenture authorized pursuant
to this Article 9 if the amendment or supplement does not
adversely affect the rights,
duties, liabilities or immunities of the Trustee. The
Company may not sign an amendment
or supplemental Indenture until the Board of Directors
approves it. In executing any
amended or supplemental indenture, the Trustee shall be
entitled to receive and (subject to
Section 7.01) shall be fully protected in relying upon, an
Officers' Certificate and an
Opinion of Counsel stating that the execution of such
amended or supplemental indenture
is authorized or permitted by this Indenture.
ARTICLE 10
SUBSIDIARY GUARANTEES
SECTION 10.01. SUBSIDIARY GUARANTEES.
Each of the Guarantors hereby, jointly and severally,
unconditionally guarantees to
each Holder of a Note authenticated and delivered by the
Trustee and to the Trustee and
its successors and assigns, irrespective of the validity
and enforceability of this Indenture,
the Notes or the Obligations of the Company hereunder or
thereunder, that: (a) the
principal of and interest, premium, if any, and Liquidated
Damages, if any, on the Notes
shall be promptly paid in full when due, whether at
maturity, by acceleration, redemption,
repurchase or otherwise, and interest on the overdue
principal of and interest, premium, if
any, and Liquidated Damages, if any, on the Notes, if
lawful, and all other Obligations of
the Company to the Holders or the Trustee hereunder or
thereunder shall be promptly paid
in full or performed, all in accordance with the terms
hereof and thereof; and (b) in case
of any extension of time of payment or renewal of any
Notes or any of such other
Obligations, that same shall be promptly paid in full when
due or performed in accordance
with the terms of the extension or renewal, whether at
Stated Maturity, by acceleration,
redemption, repurchase or otherwise. Failing payment when
due of any amount so
guaranteed or any performance so guaranteed for whatever
reason, the Guarantors shall
be jointly and severally obligated to pay the same
immediately. The Guarantors hereby
agree that their Obligations hereunder shall be
unconditional, irrespective of the validity,
regularity or enforceability of the Notes or this
Indenture, the absence of any action to
enforce the same, any waiver or consent by any Holder of
the Notes 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 covenant that this
Subsidiary Guarantee shall not be discharged except by
complete performance of the
Obligations contained in the Notes and this Indenture. If
any Holder of Notes or the
Trustee is required by any court or otherwise to return to
the Company or Guarantors, or
any custodian, Trustee, liquidator or other similar
official acting in relation to either the
Company or Guarantors, any amount paid either to the
Trustee or such Holder, this
Subsidiary Guarantee, to the extent theretofore
discharged, shall be reinstated in full force
and effect. Each Guarantor agrees that it shall not be
entitled to any right of subrogation
in relation to the Holders of Notes in respect of any
Obligations guaranteed hereby until
payment in full of all Obligations guaranteed hereby.
Each Guarantor further agrees that,
as between the Guarantors, 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 6 hereof for the purposes of this
Subsidiary 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 declaration of
acceleration of such Obligations as provided in Article 6
hereof, such Obligations (whether
or not due and payable) shall forthwith become due and
payable by the Guarantors for the
purpose of this Subsidiary Guarantee. The Guarantors
shall have the right to seek
contribution from any non-paying Guarantor so long as the
exercise of such right does not
impair the rights of the Holders under the Subsidiary
Guarantees.
SECTION 10.02. EXECUTION AND DELIVERY OF SUBSIDIARY
GUARANTEES.
To evidence its Subsidiary Guarantee set forth in Section
10.01, each Guarantor
hereby agrees that a notation of such Subsidiary
Guarantee substantially in the form of
Exhibit C (executed by the manual or facsimile signature
of one of its Officers) shall be
endorsed by an Officer of such Guarantor on each Note
authenticated and delivered by the
Trustee and that this Indenture shall be executed on
behalf of such Guarantor by an
Officer of such Guarantor.
Each Guarantor hereby agrees that its Subsidiary Guarantee
set forth in
Section 10.01 shall remain in full force and effect
notwithstanding any failure to endorse
on each Note a notation of such Subsidiary Guarantee.
If an Officer whose signature is on this Indenture or on
the Subsidiary Guarantee no
longer holds that office at the time the Trustee
authenticates the Note on which a
Subsidiary Guarantee is endorsed, the Subsidiary Guarantee
shall be valid nevertheless.
The delivery of any Note by the Trustee, after the
authentication thereof hereunder,
shall constitute due delivery of the Subsidiary Guarantee
set forth in this Indenture on
behalf of the Guarantors.
SECTION 10.03. GUARANTORS MAY CONSOLIDATE, ETC., ON CERTAIN TERMS.
(a) Except as set forth in Articles 4 and 5 hereof,
nothing contained in this
Indenture or in any of the Notes shall prevent any
consolidation or merger of a Guarantor
with or into the Company or another Guarantor or shall
prevent any sale or conveyance of
the property of a Guarantor, as an entirety or
substantially as an entirety, to the Company
or to another Guarantor.
(b) Except as provided in Section 10.03(a) or in a
transaction referred to in
Section 10.04, no Guarantor may consolidate with or merge
with or into (whether or not
such Guarantor is the surviving Person) another
corporation, Person or entity whether or
not affiliated with such Guarantor, or sell, assign,
transfer, lease, convey or otherwise
dispose of all or substantially all of its assets to,
another corporation, Person or entity
unless: (i) subject to the provisions of Section 10.04,
the Person formed by or surviving
any such consolidation or merger (if other than such
Guarantor) shall assume all the
Obligations of such Guarantor pursuant to a supplemental
indenture in form and substance
reasonably satisfactory to the Trustee, under the Notes
and this Indenture; and
(ii) immediately after giving effect to such transaction,
no Default or Event of Default
exists. Subject to Section 10.04, in case of any such
consolidation, merger, sale or
conveyance and upon the assumption by the successor
corporation, by supplemental
indenture, executed and delivered to the Trustee and
reasonably satisfactory in form to the
Trustee, of the Subsidiary Guarantee endorsed upon the
Notes and the due and punctual
performance of all of the covenants and conditions of this
Indenture to be performed by
the Guarantor, such successor corporation shall succeed to
and be substituted for the
Guarantor with the same effect as if it had been named
herein as a Guarantor. Such
successor corporation thereupon may cause to be signed any
or all of the Subsidiary
Guarantees to be endorsed upon all of the Notes issuable
hereunder which theretofore shall
not have been signed by the Company and delivered to the
Trustee. All the Subsidiary
Guarantees so issued shall in all respects have the same
legal rank and benefit under this
Indenture as the Subsidiary Guarantees theretofore and
thereafter issued in accordance
with the terms of this Indenture as though all of such
Subsidiary Guarantees had been
issued at the date of the execution hereof.
SECTION 10.04. RELEASES FOLLOWING SALE OF ASSETS.
Concurrently with any sale or other disposition of assets
of any Guarantor
(including, if applicable, all of the Capital Stock of any
Guarantor), any Liens in favor of
the Trustee in the assets sold thereby shall be released;
provided that in the event of an
Asset Sale, the Net Proceeds from such sale or other
disposition are treated in accordance
with the provisions of Section 4.10. In the event of a
sale or other disposition of all of the
assets of any Guarantor, by way of merger, consolidation
or otherwise, or a sale or other
disposition of all of the Capital Stock of any Guarantor,
then such Guarantor (in the event
of a sale or other disposition, by way of such a merger,
consolidation or otherwise, of all
of the Capital Stock of such Guarantor in accordance with
the provisions of this Indenture)
or the Person acquiring the property (in the event of a
sale or other disposition of all of the
assets of such Guarantor), shall be released and relieved
of its Obligations under its
Subsidiary Guarantee and Section 10.03; provided that in
the event of an Asset Sale, the
Net Proceeds from such sale or other disposition are
treated in accordance with the
provisions of Section 4.10. Upon delivery by the Company
to the Trustee of an Officers'
Certificate and an Opinion of Counsel to the effect that
such sale or other disposition was
made by the Company in accordance with the provisions of
this Indenture, including,
without limitation, Section 4.10, the Trustee shall
execute any documents reasonably
required in order to evidence the release of any Guarantor
from its Obligations under its
Subsidiary Guarantee. Any Guarantor not released from its
Obligations under its
Subsidiary Guarantee shall remain liable for the full
amount of principal of and interest
and Liquidated Damages, if any, on the Notes and for the
other Obligations of any
Guarantor under this Indenture as provided in this Article
10. The release of any
Guarantor pursuant to this Section 10.04 shall be
effective whether or not such release
shall be noted on any Note then outstanding or thereafter
authenticated and delivered.
SECTION 10.05. LIMITATION ON GUARANTOR LIABILITY.
For purposes hereof, each Guarantor's liability shall be
that amount from time to
time equal to the aggregate liability of such Guarantor
thereunder, but shall be limited to
the lesser of (i) the aggregate amount of the Obligations
of the Company under the Notes
and this Indenture and (ii) the amount, if any, which
would not have (A) rendered such
Guarantor "insolvent" (as such term is defined in the
federal Bankruptcy Law and in the
debtor and creditor law of the State of New York) or (B)
left it with unreasonably small
capital at the time its Subsidiary Guarantee was entered
into, after giving effect to the
incurrence of existing Indebtedness immediately prior to
such time; provided, that it shall
be a presumption in any lawsuit or other proceeding in
which such Guarantor is a party
that the amount guaranteed pursuant to its Subsidiary
Guarantee is the amount set forth in
clause (i) above unless any creditor, or representative of
creditors of such Guarantor, or
debtor in possession or trustee in bankruptcy of such
Guarantor, otherwise proves in such
a lawsuit that the aggregate liability of such Guarantor
is limited to the amount set forth in
clause (ii). In making any determination as to the
solvency or sufficiency of capital of a
Guarantor in accordance with the previous sentence, the
right of such Guarantor to
contribution from other Guarantors and any other rights
such Guarantor may have,
contractual or otherwise, shall be taken into account.
SECTION 10.06. "TRUSTEE" TO INCLUDE PAYING AGENT.
In case at any time any Paying Agent other than the
Trustee shall have been
appointed by the Company and be then acting hereunder, the
term "Trustee" as used in
this Article 10 shall in such case (unless the context
shall otherwise require) be construed
as extending to and including such Paying Agent within its
meaning as fully and for all
intents and purposes as if such Paying Agent were named in
this Article 10 in place of the
Trustee.
ARTICLE 11
MISCELLANEOUS
SECTION 11.01. TRUST INDENTURE ACT CONTROLS.
If any provision of this Indenture limits, qualifies or
conflicts with the duties
imposed by TIA 318(c), the imposed duties shall control.
SECTION 11.02. NOTICES.
Any notice or communication by the Company or the Trustee
to the others is duly
given if in writing and delivered in person or mailed by
first class mail (registered or
certified, return receipt requested), telecopier or
overnight air courier guaranteeing next
day delivery, to the others' address:
If to the Company or any Guarantor:
Delta Mills, Inc.
108 1/2 Courthouse Square
Edgefield, South Carolina
Telecopier No.: (864) 637-6066
Attention: Chief Financial Officer
With a copy to:
Wyche, Burgess, Freeman & Parham, P.A.
44 East Camperdown Way
Greenville, South Carolina
Telecopier No.: (864) 235-8900
Attention: Eric Amstutz
If to the Trustee:
The Bank of New York
101 Barclay Street, Floor 21 West
New York, New York 10286
Telecopier No.: (212) 815-5915
Attention: Corporate Trust Administration
The Company or the Trustee, by notice to the others may
designate additional or
different addresses for subsequent notices or
communications.
All notices and communications (other than those sent to
Holders) shall 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, postage
prepaid, if mailed; when
answered back, if telecopied; and the next Business Day
after timely delivery to the
courier, if sent by overnight air courier guaranteeing
next day delivery.
Any notice or communication to a Holder shall be mailed
by first class mail,
certified or registered, return receipt requested, or by
overnight air courier guaranteeing
next day delivery to its address shown on the register
kept by the Registrar. Any notice or
communication shall also be so mailed to any Person
described in TIA 313(c), to the
extent required by the TIA. Failure to mail a notice or
communication to a Holder or any
defect in it shall not affect its sufficiency with
respect to other Holders or as to any Holder
who actually received such communication.
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.
If the Company mails a notice or communication to
Holders, it shall mail a
representative copy to the Trustee and each Agent at the
same time.
SECTION 11.03. COMMUNICATION BY HOLDERS OF NOTES WITH
OTHER HOLDERS OF NOTES.
Holders may communicate pursuant to TIA 312(b) with
other Holders with
respect to their rights under this Indenture or the
Notes. The Company, the Trustee, the
Registrar and anyone else shall have the protection of
TIA 312(c).
SECTION 11.04. CERTIFICATE AND OPINION AS TO CONDITIONS
PRECEDENT.
Upon any request or application by the Company to the
Trustee to take any action
under this Indenture, the Company shall furnish to the
Trustee:
(a) an Officers' Certificate in form and substance
reasonably satisfactory to the
Trustee (which shall include the statements set forth in
Section 11.05) stating that, in the
opinion of the signers, all conditions precedent and
covenants, if any, provided for in
this Indenture relating to the proposed action have been
satisfied; and
(b) an Opinion of Counsel in form and substance
reasonably satisfactory to the
Trustee (which shall include the statements set forth in
Section 11.05) stating that, in the
opinion of such counsel, all such conditions precedent
and covenants have been satisfied.
SECTION 11.05. STATEMENTS REQUIRED IN CERTIFICATE OR
OPINION.
Each certificate or opinion with respect to compliance
with a condition or covenant
provided for in this Indenture (other than a certificate
provided pursuant to TIA
314(a)(4)) shall comply with the provisions of TIA
314(e)
and shall include:
(a) a statement that the Person making such certificate
or opinion has read such
covenant or condition;
(b) 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;
(c) a statement that, in the opinion of such Person, he
or she 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 satisfied; and
(d) a statement as to whether or not, in the opinion of
such Person, such condition
or covenant has been satisfied.
SECTION 11.06. RULES BY TRUSTEE AND AGENTS.
The Trustee may make reasonable rules for action by or at
a meeting of Holders.
The Registrar or Paying Agent may make reasonable rules
and set reasonable
requirements for its functions.
SECTION 11.07. NO PERSONAL LIABILITY OF DIRECTORS,
OFFICERS, EMPLOYEES OR STOCKHOLDERS.
No director, officer, employee, incorporator or
stockholder of the Company or any
Guarantor, as such, shall have any liability for any
obligations of the Company or any
Guarantor under the Notes, the Subsidiary Guarantees,
this Indenture or for any claim
based on, in respect of, or by reason of, such
obligations or their creation. Each Holder
of Notes by accepting a Note waives and releases all such
liability. The waiver and
release are part of the consideration for issuance of the
Notes. Such waiver may not be
effective to waive liabilities under the federal
securities laws and it is the view of the SEC
that such a waiver is against public policy.
SECTION 11.08. GOVERNING LAWSECTION 11.08.
THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN
AND BE USED TO CONSTRUE THIS INDENTURE, THE NOTES AND THE
SUBSIDIARY GUARANTEES.
SECTION 11.09. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Indenture may not be used to interpret any other
indenture, loan or debt
agreement of the Company or its Subsidiaries or of any
other Person. Any such
indenture, loan or debt agreement may not be used to
interpret this Indenture.
SECTION 11.10. SUCCESSORSSECTION 11.10. SUCCESSORS.
All agreements of the Company and each Guarantor in this
Indenture and the Notes
shall bind their respective successors, except as
expressly provided otherwise herein. All
agreements of the Trustee in this Indenture shall bind its
successors.
SECTION 11.11. SEVERABILITY.
In case any provision in this Indenture or in the Notes
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 11.12. COUNTERPART ORIGINALSSECTION 11.12.
COUNTERPART ORIGINALS.
The parties may sign any number of copies of this
Indenture. Each signed copy
shall be an original, but all of them together represent
the same agreement.
SECTION 11.13. TABLE OF CONTENTS, HEADINGS, ETC.
The Table of Contents, Cross-Reference Table and Headings
of the Articles and Sections of this Indenture have been inserted
for convenience of reference only, are not to
be considered a part of this Indenture and shall in no way
modify or restrict any of the terms or provisions hereof.
[signature page follows]
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the date first written above.
DELTA MILLS, INC.
By
Bettis C. Rainsford
Executive Vice President, Chief Financial Officer
and Treasurer
DELTA MILLS MARKETING, INC.
By
Bettis C. Rainsford
Executive Vice President, Chief Financial Officer
and Treasurer
THE BANK OF NEW YORK,
as Trustee
By
[Name]
[Title]
EXHIBIT A
(Face of Note)
CUSIP/CINS ____________
9 5/8% [Series A] [Series B] Senior Notes due 2007
No. ___ $__________
Delta Mills, Inc.
promises to pay to
or registered assigns,
the principal sum of
______________________________________________
__
Dollars on September 1, 2007.
Interest Payment Dates: March 1 and September
1
Record Dates: February 15, and August 15
Delta Mills, Inc.
By:_________________
_____________
Name:
Title:
By:_________________
_____________
Name:
Title:
This is one of the [Global]
Notes referred to in the
within-mentioned Indenture:
THE BANK OF NEW YORK,
as Trustee
Dated:
_______________, 199__
By:__________________________________
Name:
Title:
(Back of Note)
9 5/8% [Series A] [Series B] Senior Notes due 2007
[Unless and until it is exchanged in whole or in part for
Notes in definitive form,
this Note may not be transferred except as a whole by the
Depository to a nominee of the
Depository or by a nominee of the Depository to the
Depository or another nominee of the
Depository or by the Depository or any such nominee to a
successor Depository or a
nominee of such successor Depository. Unless this
certificate is presented by an
authorized representative of The Depository Trust Company
(55 Water Street, New York,
New York) ("DTC"), to the issuer or its agent for
registration of transfer, exchange or
payment, and any certificate issued is registered in the
name of Cede & Co. or such other
name as may be requested by an authorized representative
of DTC (and any payment is
made to Cede & Co. or such other entity as may be
requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL
inasmuch as the
registered owner hereof, Cede & Co., has an interest
herein.]<F1>
[Insert the Private Placement Legend, if applicable
pursuant to the provisions of the
Indenture]
Capitalized terms used herein shall have the meanings
assigned to them in the Indenture referred to below unless otherwise indicated.
<F1> This paragragh should be included only if the Note is issued in global
form.
1. INTEREST. Delta Mills, Inc., a Delaware corporation
(the "Company"),
promises to pay interest on the principal amount of this
Note at 9 5/8% per annum from and
including August 25, 1997 until maturity and shall pay the
Liquidated Damages, if any,
payable pursuant to Section 5 of the Registration Rights
Agreement referred to below.
The Company shall pay interest and Liquidated Damages, if
any, semi-annually on March
1 and September 1 of each year, or if any such day is not
a Business Day, on the next
succeeding Business Day (each an "Interest Payment Date").
Interest on the Notes shall
accrue from the most recent date to which interest has
been paid or, if no interest has been
paid, from the date of issuance; provided that if there is
no existing Default in the payment
of interest, and if this Note is authenticated between a
record date referred to on the face
hereof and the next succeeding Interest Payment Date,
interest shall accrue from such next
succeeding Interest Payment Date; provided, further, that
the first Interest Payment Date
shall be March 1, 1998. The Company shall pay interest
(including post-petition interest
in any proceeding under any Bankruptcy Law) on overdue
principal and premium, if any,
from time to time on demand at a rate that is 1% per annum
in excess of the rate then in
effect; it shall pay interest (including post-petition
interest in any proceeding under any
Bankruptcy Law) on overdue installments of interest and
Liquidated Damages, if any,
(without regard to any applicable grace periods) from time
to time on demand at the same
rate to the extent lawful. Interest shall be computed on
the basis of a 360-day year of
twelve 30-day months.
2. METHOD OF PAYMENT. The Company shall pay interest on
the Notes (except
defaulted interest) and Liquidated Damages, if any, to the
Persons who are registered
Holders of Notes at the close of business on the February
15 or August 15 next preceding
the Interest Payment Date, even if such Notes are
cancelled after such record date and on
or before such Interest Payment Date, except as provided
in Section 2.12 of the Indenture
with respect to defaulted interest. The Notes shall be
payable as to principal, premium, if
any, and Liquidated Damages, if any, and interest at the
office or agency of the Company
maintained for such purpose within or without the City and
State of New York, or, at the
option of the Company, payment of interest and Liquidated
Damages, if any, may be
made by check mailed to the Holders at their addresses set
forth in the register of Holders,
and provided that payment by wire transfer of immediately
available funds shall be
required with respect to principal of and interest,
premium, if any, and Liquidated
Damages, if any, on, all Global Notes and all other Notes
the Holders of which shall have
provided wire transfer instructions to the Company or the
Paying Agent. Such payment
shall be 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
3. PAYING AGENT AND REGISTRAR. Initially, The Bank of
New York, the Trustee
under the Indenture, shall act as Paying Agent and
Registrar. The Company may change
any Paying Agent or Registrar without notice to any
Holder. The Company or any of its
Subsidiaries may act in any such capacity.
4. INDENTURE. The Company issued the Notes under an
Indenture dated as of
August 25, 1997 ("Indenture") between the Company, the
Guarantors named therein and
the Trustee. The terms of the Notes include those stated
in the Indenture and those made
part of the Indenture by reference to the Trust Indenture
Act of 1939, as amended (15
U.S. Code 77aaa-77bbbb). The Notes are subject to all
such terms, and Holders are
referred to the Indenture and such Act for a statement of
such terms. To the extent any
provision of this Note conflicts with the express
provisions of the Indenture, the provisions
of the Indenture shall govern and be controlling. The
Notes are general unsecured
obligations of the Company limited to $150.0 million in
aggregate principal amount, plus
amounts, if any, sufficient to pay interest, premium, if
any, and Liquidated Damages, if
any, on outstanding Notes as set forth in Paragraph 2
hereof.
5. OPTIONAL REDEMPTION.
The Company shall not have the option to redeem the Notes
pursuant to Section
3.07 of the Indenture prior to September 1, 2002.
Thereafter the Notes shall be subject to
redemption at the option of the Company, in whole or in
part, upon not less than 30 nor
more than 60 days' notice, at the redemption prices
(expressed as percentages of principal
amount) set forth below plus accrued and unpaid interest
and
Liquidated Damages, if any,
thereon to the applicable redemption date, if redeemed
during the twelve-month period
beginning on September 1 of the years indicated below:
Year
Percentage
2002
104.8125%
2003
103.2083%
2004
101.6041%
2005 and
thereafter 100.0000%
6. MANDATORY REDEMPTION.
Except as set forth in paragraph 7 below, the Company
shall not be required to
make mandatory redemption or sinking fund payments with
respect to the Notes.
7. REPURCHASE AT OPTION OF HOLDER.
(a) If there is a Change of Control, the Company shall be
required to make an
offer (a "Change of Control Offer") to repurchase all or
any part (equal to $1,000 or an
integral multiple thereof) of each Holder's Notes at a
purchase price equal to 101% of the
aggregate principal amount thereof plus accrued and unpaid
interest and Liquidated
Damages, if any, to the date of purchase. Within 10 days
following any Change of
Control, the Company shall mail a notice to each Holder as
required by the Indenture.
(b) If the Company or a Subsidiary consummates any Asset
Sales and the
aggregate amount of Excess Proceeds exceeds $5.0 million,
the Company shall commence
an offer to all Holders of Notes (an "Asset Sale Offer")
pursuant to Section 3.09 of the
Indenture to purchase the maximum principal amount of
Notes that may be purchased out
of the Excess Proceeds at an offer price in cash in an
amount equal to 100% of the
principal amount thereof plus accrued and unpaid interest
and Liquidated Damages, if any,
to the date of purchase, in accordance with the procedures
set forth in the Indenture. To
the extent that the aggregate amount of Notes tendered
pursuant to an Asset Sale Offer is
less than the Excess Proceeds, the Company (or such
Subsidiary) may use any remaining
Excess Proceeds for general corporate purposes. If the
aggregate principal amount of
Notes surrendered by Holders thereof exceeds the amount of
Excess Proceeds, the Trustee
shall select the Notes to be purchased on a pro rata
basis. Holders of Notes that are the
subject of an offer to purchase shall receive an Asset
Sale Offer from the Company prior
to any related purchase date and may elect to have such
Notes purchased by completing
the form entitled "Option of Holder to Elect Purchase" on
the reverse of the Notes.
(c) The Company shall not be required to make a Change of
Control Offer upon
a Change of Control if a third party makes the Change of
Control Offer in the manner, at
the times and otherwise in compliance with the
requirements set forth in the Indenture
applicable to a Change of Control Offer made by the
Company and purchases all Notes
validly tendered and not withdrawn under such Change of
Control Offer.
8. NOTICE OF REDEMPTION. Notice of redemption shall be
mailed at least 30
days but not more than 60 days before the redemption date
to each Holder whose Notes
are to be redeemed at its registered address. Notes in
denominations larger than $1,000
may be redeemed in part but only in whole multiples of
$1,000, unless all of the Notes
held by a Holder are to be redeemed. On and after the
redemption date interest ceases to
accrue on Notes or portions thereof called for redemption.
9. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in
registered form
without coupons in denominations of $1,000 and integral
multiples of $1,000. The
transfer of Notes may be registered and Notes may be
exchanged as provided in the
Indenture. The Registrar and the Trustee may require a
Holder, among other things, to
furnish appropriate endorsements and transfer documents
and the Company may require a
Holder to pay any taxes and fees required by law or
permitted by the Indenture. The
Company need not exchange or register the transfer of any
Note or portion of a Note
selected for redemption, except for the unredeemed portion
of any Note being redeemed
in part. Also, it need not exchange or register the
transfer of any Notes for a period of 15
days before a selection of Notes to be redeemed or during
the period between a record
date and the corresponding Interest Payment Date.
10. PERSONS DEEMED OWNERS. The registered Holder of a
Note may be treated
as its owner for all purposes.
11. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain
exceptions, the
Indenture or the Notes may be amended or supplemented by
the Company, the Guarantor
and the Trustee with the consent of the Holders of at
least a majority in principal amount
of the then outstanding Notes, and any existing default or
compliance with any provision
of the Indenture or the Notes may be waived with the
consent of the Holders of a majority
in principal amount of the then outstanding Notes.
Without
the consent of any Holder of a
Note, the Subsidiary Guarantees, the Indenture or the
Notes may be amended or
supplemented to cure any ambiguity, defect or
inconsistency, to provide for uncertificated
Notes in addition to or in place of certificated Notes, to
provide for the assumption of the
Company's or a Guarantor's obligations to Holders of the
Notes in case of a merger or
consolidation, to make any change that would provide any
additional rights or benefits to
the Holders of the Notes or that does not adversely affect
the legal rights under the
Indenture of any such Holder, or to comply with the
requirements of the SEC in order to
effect or maintain the qualification of the Indenture
under the Trust Indenture Act.
12. DEFAULTS AND REMEDIES. Each of the following
constitutes an Event of
Default: (i) default for 30 days in the payment when due
of interest on, or Liquidated
Damages with respect to, the Notes; (ii) default in
payment when due of the principal of
or premium, if any, on the Notes; (iii) failure by the
Company to comply with its
obligations under covenants and agreements set forth in
Sections 3.09, 4.07, 4.09, 4.10,
4.15, 4.16 or 5.01 of the Indenture; (iv) failure by the
Company for 30 days after notice
from the Trustee or the Holders of at least 25% in
aggregate principal amount of the
Notes then outstanding to comply with any of the other
covenants or agreements in the
Indenture; (v) default under any mortgage, indenture or
instrument under which there may
be issued or by which there may be secured or evidenced
any Indebtedness for money
borrowed by the Company or any of its Subsidiaries (or the
payment of which is
guaranteed by the Company or any of its Subsidiaries)
whether such Indebtedness or
guarantee now exists, or is created after the date of the
Indenture, which default (a) is
caused by a failure to pay principal of or premium, if
any, or interest on such
Indebtedness at its final Stated Maturity (a "Payment
Default") or (b) results in the
acceleration of such Indebtedness prior to its express
maturity and, in each case, the
principal amount of any such Indebtedness, together with
the principal amount of any
other such Indebtedness under which there has been a
Payment Default or the express
maturity of which has been so accelerated, aggregates $5.0
million or more; (vi) failure
by the Company or any of its Subsidiaries to pay final
judgments (other than judgements
fully covered by insurance) aggregating in excess of $5.0
million, which judgments are
not paid, discharged or stayed for a period of 45 days;
(vii) certain events of bankruptcy
or insolvency with respect to the Company or any of its
Subsidiaries; and (viii) any
Subsidiary Guarantee shall be held in an judicial
proceeding
to be unenforceable or invalid
or shall cease for any reason to be in full force and
effect (other than in accordance with
the terms of the Indenture) or any Guarantor, or any
Person acting in behalf of any
Guarantor, shall deny or disaffirm its obligations under
its Subsidiary Guarantee (other, in
either case, than by reason of a release of such Guarantor
from its Subsidiary Guarantee
in accordance with the terms of the Indenture). If any
Event of Default occurs and is
continuing, the Trustee or the Holders of at least 25% in
principal amount of the then
outstanding Notes may declare all the Notes to be due and
payable immediately.
Notwithstanding the foregoing, in the case of an Event of
Default arising from certain
events of bankruptcy or insolvency, with respect to the
Company or any Subsidiary, all
outstanding Notes shall become due and payable without
further action or notice. Holders
of the Notes may not enforce the Indenture or the Notes
except as provided in the
Indenture. Subject to certain limitations, Holders of a
majority in principal amount of the
then outstanding Notes may direct the Trustee in its
exercise of any trust or power. The
Trustee may withhold from Holders of the Notes notice of
any continuing Default or
Event of Default (except a Default or Event of Default
relating to the payment of principal
or interest, or premium, if any, or Liquidated Damages, if
any) if it determines that
withholding notice is in their interest. The Holders of a
majority in aggregate principal
amount of the Notes then outstanding by notice to the
Trustee may on behalf of the
Holders of all of the Notes waive any existing Default or
Event of Default and its
consequences under the Indenture except a continuing
Default or Event of Default in the
payment of interest on, or the principal of, the Notes.
The Company is required to deliver
to the Trustee annually a statement regarding compliance
with the Indenture, and the
Company is required, upon becoming aware of any Default or
Event of Default, to deliver
to the Trustee a statement specifying such Default or
Event of Default.
13. TRUSTEE DEALINGS WITH COMPANY. Subject to certain
conditions set forth in
the Indenture, the Trustee, in its individual or any other
capacity, may make loans to,
accept deposits from, and perform services for the Company
or its Affiliates, and may
otherwise deal with the Company or its Affiliates, as if
it were not the Trustee.
14. NO RECOURSE AGAINST OTHERS. A director, officer,
employee, incorporator
or stockholder, of the Company or any Guarantor, as such,
shall not have any liability for
any obligations of the Company or any Guarantor under the
Notes, the Subsidiary
Guarantees or the Indenture or for any claim based on, in
respect of, or by reason of,
such obligations or their creation. Each Holder by
accepting a Note waives and releases
all such liability. The waiver and release are part of
the consideration for the issuance of
the Notes.
15. AUTHENTICATION. This Note shall not be valid until
authenticated by the
manual signature of the Trustee or an authenticating
agent.
16. ABBREVIATIONS. 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).
17. ADDITIONAL RIGHTS OF HOLDERS OF TRANSFER RESTRICTED
SECURITIES. In
addition to the rights provided to Holders of Notes under
the Indenture, Holders of
Transferred Restricted Securities shall have all the
rights set forth in the Registration
Rights Agreement dated as of the date of this Indenture,
between the Company, the
Guarantors and the other parties named on the signature
pages thereof (the "Registration
Rights Agreement").
18. CUSIP NUMBERS. Pursuant to a recommendation
promulgated by the
Committee on Uniform Security Identification Procedures,
the Company has caused
CUSIP numbers to be printed on the Notes and the Trustee
may 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 Notes or
as contained in any notice of
redemption and reliance may be placed only on the other
identification numbers placed
thereon.
The Company shall furnish to any Holder upon written
request and without charge
a copy of the Indenture and/or the Registration Rights
Agreement. Requests may be made
to:
Delta Mills,Inc.
108 1/2 Courthouse Square
Edgefield, South Carolina 29824
Attention: Chief Financial Officer
ASSIGNMENT FORM
To assign this Note, fill in the form below: (I) or (we)
assign and transfer this
Note to
(Insert assignee's soc. sec. or tax I.D. no.)
(Print or type assignee's name, address and zip code)
and irrevocably appoint
to transfer this Note on the books of the Company. The
agent may substitute another to
act for him.
Date:
Your Signature:
(Sign exactly as your name appears on the face of
this Note)
Signature Guarantee.
Signatures must be guaranteed by an "eligible guarantor
institution" meeting the
requirements of the [Registrar], which requirements
include membership or participation
in the Security Transfer Agent Medallion Program ("Stamp")
or such other "signature
guarantee program" as may be determined by the [Registrar]
in addition to, or in
substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as
amended.
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the
Company pursuant to Section 4.10 or 4.15 of the Indenture, check the box
below:
Section 4.10 Section 4.15
If you want to elect to have only part of the Note
purchased by the Company pursuant to Section 4.15 of the Indenture, state the
amount you elect to have purchased:
$
Date: Your Signature:
(Sign exactly as your name appears on the Note)
Tax Identification No.:
Signature Guarantee.
Signatures must be guaranteed by an "eligible guarantor
institution" meeting the
requirements of the [Registrar], which requirements
include membership or participation
in the Security Transfer Agent Medallion Program ("Stamp")
or such other "signature
guarantee program" as may be determined by the [Registrar]
in addition to, or in
substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as
amended.
<TABLE>
SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE<F2>
The following exchanges of a part of this Global Note for
an interest in another Global Note or for a Definitive Note, or exchanges of a
part of another Global Note or Definitive Note for an interest in this Global
Note, have been made:
<CAPTION>
Principal Amount of Signature of
Amount of decrease in Amount of increase in this Global Note authorized officer of
Principal Amount of Principal Amount of following such decrease Trustee of Note
Date of Exchange this Global Note this Global Note (or increase) Custodian
<S> <C> <C> <C> <C>
<FN>
<F1>
This scedule should be included only if the Note is issued in global form.
</FN>
</TABLE>
EXHIBIT B
CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION
OF TRANSFER OF NOTES
Re: 9 5/8% Senior Notes due 2007 of Delta Mills, Inc.
This Certificate relates to $ principal amount of
Notes held in *
book-entry or * definitive form by
(the "Transferor").
The Transferor*:
has requested the Trustee by written order to deliver
in exchange for its beneficial
interest in the Global Note held by the Depository a Note
or Notes in definitive, registered
form of authorized denominations in an aggregate principal
amount equal to its beneficial
interest in such Global Note (or the portion thereof
indicated above); or
has requested the Trustee by written order to
exchange or register the transfer of a
Note or Notes.
In connection with such request and in respect of each
such Note, the Transferor
does hereby certify that Transferor is familiar with the
Indenture relating to the above
captioned Notes and as provided in Section 2.06 of such
Indenture, the transfer of this
Note does not require registration under the Securities
Act (as defined below) because:*
Such Note is being acquired for the Transferor's own
account, without transfer (in
satisfaction of Section 2.06(a)(ii)(A) or Section
2.06(d)(i)(A) of the Indenture).
Such Note is being transferred to a "qualified
institutional buyer" (as defined in
Rule 144A under the Securities Act of 1933, as amended
(the "Securities Act")) in
reliance on Rule 144A (in satisfaction of Section
2.06(a)(ii)(B), Section 2.06(b)(i) or
Section 2.06(d)(i) (B) of the Indenture) or pursuant to an
exemption from registration in
accordance with Rule 904 under the Securities Act (in
satisfaction of Section 2.06(a)(ii)(B)
or Section 2.06(d)(i)(B) of the Indenture.)
*Check applicable box.
Such Note is being transferred in accordance with
Rule 144 under the Securities
Act, or pursuant to an effective registration statement
under the Securities Act (in
satisfaction of Section 2.06(a)(ii)(B) or Section
2.06(d)(i)(B) of the Indenture).
Such Note is being transferred in reliance on and in
compliance with an exemption
from the registration requirements of the Securities Act,
other than Rule 144A, 144 or
Rule 904 under the Securities Act. An Opinion of Counsel
to the effect that such transfer
does not require registration under the Securities Act or
applicable state securities laws
accompanies this Certificate (in satisfaction of Section
2.06(a)(ii)(C) or Section
2.06(d)(i)(C) of the Indenture).
[INSERT NAME OF TRANSFEROR]
By:
Date:
*Check applicable box.
EXHIBIT C
SUBSIDIARY GUARANTEE
Each Guarantor hereby, jointly and severally,
unconditionally guarantees to each Holder of
Notes authenticated and delivered by the Trustee and to
the Trustee and its successors and assigns,
irrespective of the validity and enforceability of the
Indenture, the Notes or the Obligations of the
Company to the Holders or the Trustee under the Notes or
under the Indenture, that: (a) the
principal of, and premium, if any, and Liquidated
Damages, if any, and interest on the Notes shall
be promptly paid in full when due, whether at maturity,
by acceleration, redemption, repurchase
or otherwise, and interest on overdue principal of and
interest and Liquidated Damages if any, on
any Note, if any, if lawful and all other Obligations of
the Company to the Holders or the Trustee
under the Indenture or under the Notes shall be promptly
paid in full or performed, all in
accordance with the terms thereof; and (b) in case of any
extension of time of payment or renewal
of any Notes or any of such other Obligations, the same
shall be promptly paid in full when due or
performed in accordance with the terms of the extension
or renewal, whether at Stated Maturity,
by acceleration, redemption, repurchase or otherwise.
Failing payment when due of any amount
so guaranteed, or any performance so guaranteed for
whatever reason, the Guarantors shall be
jointly and severally obligated to pay the same
immediately.
The Obligations of the Guarantors to the Holders of Notes
and to the Trustee pursuant to this
Subsidiary Guarantee and the Indenture are expressly set
forth in Article 10 of the Indenture, and
reference is hereby made to such Indenture for the
precise terms of this Subsidiary Guarantee.
The terms of Article 10 of the Indenture are incorporated
herein by reference.
No director, officer, employee, incorporator or
stockholder, as such, past, present or future,
of each of the Guarantors shall have any personal
liability under this Subsidiary Guarantee by
reason of its status as such director, officer, employee,
incorporator or stockholder.
This is a continuing Subsidiary Guarantee and shall
remain in full force and effect and shall
be binding upon each Guarantor and its respective
successors and assigns to the extent set forth in
the Indenture until full and final payment of all of the
Company's Obligations under the Notes and
the Indenture and shall inure to the benefit of the
successors and assigns of the Trustee and the
Holders of Notes and, in the event of any transfer or
assignment of rights by any Holder of Notes
or the Trustee, the rights and privileges herein
conferred upon that party shall automatically extend
to and be vested in such transferee or assignee, all
subject to the terms and conditions hereof.
In certain circumstances more fully described in the
Indenture, any Guarantor may be
released from its liability under this Subsidiary
Guarantee, and any such release shall be effective
whether or not noted hereon.
This Subsidiary Guarantee shall not be valid or
obligatory for any purpose until the certificate
of authentication on the Note upon which this Subsidiary
Guarantee is noted shall have been
executed by the Trustee under the Indenture by the manual
signature of one of its authorized
officers.
For purposes hereof, each Guarantor's liability shall be
that amount from time to time equal
to the aggregate liability of such Guarantor hereunder,
but shall be limited to the lesser of (i) the
aggregate amount of the Obligations of the Company under
the Notes and the Indenture and (ii) the
amount, if any, which would not have (A) rendered such
Guarantor "insolvent" (as such term is
defined in the federal Bankruptcy Law and in the debtor
and creditor law of the State of New
York) or (B) left it with unreasonably small capital at
the time its Subsidiary Guarantee of the
Notes was entered into, after giving effect to the
incurrence of existing Indebtedness immediately
prior to such time; provided, that it shall be a
presumption in any lawsuit or other proceeding in
which such Guarantor is a party that the amount
guaranteed pursuant to its Subsidiary Guarantee is
the amount set forth in clause (i) above unless any
creditor, or representative of creditors of such
Guarantor, or debtor in possession or trustee in
bankruptcy of such Guarantor, otherwise proves in
such a lawsuit that the aggregate liability of such
Guarantor is limited to the amount set forth in
clause (ii). The Indenture provides that, in making any
determination as to the solvency or
sufficiency of capital of a Guarantor in accordance with
the previous sentence, the right of such
Guarantor to contribution from other Guarantors and any
other rights such Guarantor may have,
contractual or otherwise, shall be taken into account.
Capitalized terms used herein have the same meanings given
in the Indenture unless otherwise
indicated.
[GUARANTOR]
By
[Name]
[Title]
EXHIBIT 5.1
[LETTERHEAD OF WYCHE, BURGESS, FREEMAN & PARHAM, P.A.]
FORM OF OPINION REGARDING LEGALITY
[Date]
Delta Mills, Inc.
Delta Mills Marketing, Inc.
233 North Main Street
Greenville, South Carolina 29601
RE: Registration Statement on Form S-1 (No. ___-_____)
Ladies and Gentlemen:
We have served as counsel to Delta Mills, Inc, a
Delaware corporation (the "Company"), and Delta Mills
Marketing, Inc., a Delaware corporation (the "Guarantor"),
in connection with the filing of the above referenced
Registration Statement (the "Registration Statement") with
the Securities and Exchange Commission (the "Commission") to
register under the Securities Act of 1933, as amended (the
"Act"), $150,000,000 in aggregate principal amount of 9 5/8%
Senior Notes due 2007, Series B (the "Exchange Notes") to be
issued under an Indenture dated as of August 25, 1997 (the
"Indenture") between the Company, the Guarantor and the Bank
of New York, as Trustee (the "Trustee"). The Company
intends, following effectiveness of the Registration
Statement, to offer to exchange the Exchange Notes for the
Company's 9 5/8% Senior Notes due 2007, Series A (the "Senior
Notes").
In this connection, we have examined the Indenture, the
form of the Exchange Notes and the Registration Statement.
We have also examined originals or copies of such corporate
documents and records of the Company and the Guarantor,
certificates of public officials, certificates of the
Company, the Guarantor or any officer thereof and such other
documents as we have deemed relevant and necessary as the
basis for this opinion and statement.
With respect to matters of fact, we have relied upon
certificates of public officials and certificates of the
Company, the Guarantor or any officer thereof and have
assumed, without independent investigation, the accuracy of
the factual statements made and the information contained in
such certificates.
We have assumed, without investigation, the genuineness
of all signatures, the authenticity of all documents
submitted to us as originals, the conformity to authentic
original documents of all documents submitted to us as
copies, and the accuracy and completeness of all documents
made available to us by the Company or the Guarantor. We
have assumed, without investigation, the legal capacity of
all persons. We have assumed, without investigation, that
there has not been any mutual mistake of fact or
misunderstanding. With respect to agreements, instruments
and other documents executed by entities or individuals
other than or in addition to the Company or the Guarantor,
we have assumed, without investigation, the power and
authority of any such other entity or individual to enter
into and perform all of its or his obligations under such
agreements, instruments and other documents, the due
execution and delivery by each such entity or individual of
such agreements, instruments and other documents and that
such agreements, instruments and other documents are the
valid, binding and enforceable obligations of each such
other entity or individual.
Based upon and subject to the foregoing, and subject to
the comments, limitations and qualifications set forth
below, it is our opinion that the execution and delivery of
the Exchange Notes have been duly authorized by all
requisite corporate action of each of the Company and the
Guarantor, and, when duly executed and delivered by the
Company and the Guarantor and duly authenticated by the
Trustee, and assuming that the Exchange Notes are governed
by South Carolina law, the Exchange Notes will be legally
issued and valid and binding obligations of the Company and
the Guarantor, except that enforcement thereof may be
subject to (a) bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar
laws now or hereafter in effect relating to or affecting
creditors' rights generally, and (b) general principles of
equity (regardless of whether enforceability is considered
in a proceeding in equity or at law) and the exercise of
discretionary authority of any court before which a
proceeding may be brought.
No opinion is given as to:
(A) any provision of the Indenture or the
Exchange Notes (collectively, the "Documents")
requiring or in effect requiring that any waiver or
amendment of any provision of any of the Documents or
any other agreement, instrument or other document may
be effected only in writing or in a particular form;
(B) any appointment of any person or entity as
agent or attorney-in-fact;
(C) any requirement to pay any amount, after a
default or event of default or other failure to perform
an act or satisfy a condition, in the nature of a
higher rate of interest or post-default interest or
other amount that a court determines is a "penalty";
(D) any provision releasing, exculpating or
exempting any person or entity from, or requiring
indemnification or legal defense of any person or
entity for, liability for action or inaction, to the
extent the action or inaction involves negligence,
willful misconduct or unlawful conduct or does not
satisfy a standard required by law;
(E) Section 11.11 of the Indenture;
(F) any provision of any guaranty providing that
the guaranty is enforceable, notwithstanding the
unenforceability of the obligations guaranteed, to the
extent that the obligations guaranteed are held to be
void or invalid under applicable law or barred by the
applicable statute of limitations;
(G) any choice-of-law provision;
(H) any provision that creates a presumption or
an evidentiary standard or other standard by which an
agreement, instrument or other document or an action or
inaction is to be construed or a fact is to be
established or that prohibits the use of an agreement
to interpret another agreement;
(I) the effect of section "SEVENTH" (respecting
compromises or arrangements with creditors or
stockholders) of the Company's certificate of
incorporation;
(J) any matter governed by or arising under any
law requiring or in effect requiring accurate and/or
complete disclosure or prohibiting or in effect
prohibiting inaccurate and/or incomplete disclosure;
(K) the second sentence of section 7.07 of the
Indenture; or
(L) the Securities Act of 1933, as amended, the
Securities Exchange Act of 1934, as amended, the Trust
Indenture Act of 1939, as amended, the South Carolina
Uniform Securities Act, any other state's securities
laws, or any rule or regulation promulgated under any
of the foregoing laws.
Any waiver of any right or defense is legal, valid,
binding and enforceable only to the extent such waiver is
not contrary to law.
Any inspection right provided by any of the Documents
may be limited by confidentiality or privilege rules
established by law.
Whenever in this letter the phrase "to our knowledge",
the phrase "come to our attention" or any similar phrase is
used, we are referring to the current awareness of
information of the attorneys of this law firm, after such
inquiry of such attorneys as we believe to be reasonable in
the circumstances, who are included in either of the
following descriptions: (i) lawyers primarily involved in
the preparation of an opinion or statement set forth herein,
and (ii) lawyers whose relationship with the Company and the
Guarantor, or with the subject matter of any such opinion or
statement, is of such significance that the lawyer
principally responsible for the Registration Statement
reasonably believes those lawyers should be consulted with
respect to such opinion or statement.
Provisions of any of the Documents that permit any
party to take or omit to take action or to make any
determination, or to benefit from any indemnity or
compensation for costs (including without limitation taxes)
or similar undertaking, may be subject to a requirement that
such action be taken, such omission be made or such
determination be made, and that any action or inaction by
the party that may give rise to a request for payment under
such an undertaking be taken or not taken, on a reasonable
basis and in good faith and that the amount of such
requested payment be reasonable.
We do not herein intend to express any opinion,
statement or belief as to any matter governed by (or which
purports to be governed by) any law other than, and our
opinions, statements and beliefs are limited solely to, the
existing laws of the State of South Carolina, the existing
Federal laws of the United States of America, and the
General Corporation Law of the State of Delaware. We
express no opinion with regard to any matter that is or may
be (or that purports to be) governed by the law of any other
state or jurisdiction or the law of the State of Delaware
other than the Delaware General Corporation Law. The law
covered by the opinions expressed herein does not include
any statute, ordinance, decision, rule or regulation of any
political subdivision of any State.
This letter is rendered as of the date hereof and
applies only to matters specifically covered by this letter,
and we disclaim any continuing responsibility for matters
occurring after the date of this letter or any obligation to
update this letter. This opinion is limited to the matters
expressly set forth herein, and no opinion is implied or may
be inferred beyond the matters expressly stated herein.
We consent to the filing of this opinion letter as an
exhibit to the Registration Statement and to the use of our
name under the heading "Legal Matters" in the Prospectus
constituting a part thereof. In giving such consent, we do
not thereby admit that we are within the category of persons
whose consent is required under Section 7 of the Act or the
rules and regulations of the Commission thereunder.
Subject to the immediately preceding paragraph, this
opinion letter is being provided to you in connection with
the Registration Statement and is not to be used,
circulated, quoted or otherwise relied upon by any other
person or entity, or for any other purpose, without our
express written consent. No opinion may be implied or
inferred beyond the opinion expressly stated.
Very truly yours,
WYCHE, BURGESS, FREEMAN & PARHAM, P.A.
By:______________________________________
Eric B. Amstutz, Esq.
EXHIBIT 8.1
[LETTERHEAD OF WYCHE, BURGESS, FREEMAN & PARHAM, P.A.]
FORM OF OPINION REGARDING TAX CONSEQUENCES
, 1997
Delta Mills, Inc.
233 North Main Street
Greenville, South Carolina 29601
Re: Proposed Exchange of 9 5/8% Senior Notes Due 2007, Series B, of Delta
Mills, Inc. for all outstanding 9 5/8% Senior Notes Due 2007 of
Delta Mills, Inc.
Ladies and Gentlemen:
We have acted as counsel to Delta Mills, Inc., a Delaware corporation
(the "Company"), a wholly owned subsidiary of Delta Woodside industries,
Inc., a Delaware corporation ("Delta Woodside"), in offering (the "Exchange
Offer"), upon the terms and subject to the conditions set forth in the
Prospectus (the "Prospectus") and the Letter of Transmittal accompanying
the Prospectus (the "Letter of Transmittal"), to exchange up to
$150,000,000 aggregate principal amount of its 9 5/8% Senior Notes Due 2007,
Series B, (the "Exchange Notes") for equal principal amounts of its
outstanding 9 5/8% Senior Notes Due 2007 (the "Senior Notes").
The Exchange Notes are substantially identical (including principal
amount, interest rate, maturity and redemption rights) to the Senior Notes
for which they may be exchanged pursuant to this offer, except that (i) the
offering and sale of the Exchange Notes will have been registered under the
Securities Act of 1933, as amended (the "Securities Act"), and (ii) holders
of Exchange Notes will not be entitled to certain rights of holders under a
Registration Rights Agreement of the Company dated as of August 25, 1997.
The Senior Notes have been, and the Exchange Notes will be, issued under an
Indenture dated as of August 25, 1997 (the "Indenture"), between the
Company, Delta Mills Marketing, Inc., the Company's wholly-owned subsidiary
(the "Guarantor"), and the Bank of New York, as Trustee (the "Trustee").
The Company will not receive any proceeds from this Exchange Offer;
however, pursuant to the Registration Rights Agreement, the Company will
bear certain offering expenses. See "The Exchange Offer -- Solicitation of
Tenders; Expenses."
In rendering this opinion, we have examined (i) the Internal Revenue
Code of 1986, as amended (the "Code") and Treasury Regulations and (ii)
appropriate Internal Revenue Service and court decisional authority. In
addition, we have relied upon certain information made known to us as more
fully described below. All capitalized terms used herein without
definition shall have the respective meanings specified in the Prospectus,
and unless otherwise specified, all section references herein are to the
Code.
INFORMATION RELIED UPON
In rendering the opinions expressed herein, we have examined such
documents as we have deemed appropriate, including:
(1) the Prospectus; and
(2) such additional documents as we have considered relevant.
In our examination of such documents, we have assumed, with your
consent, that all documents submitted to us as photocopies faithfully
reproduce the originals thereof, that such originals are authentic, that
all such documents have been or will be duly executed to the extent
required, and that all statements set forth in such documents are accurate.
We have also obtained such additional information and representations
as we have deemed relevant and necessary through consultation with and
certificates provided by the management of the Company and the Guarantor.
With your consent, we have also assumed that the following statements
are true on the date hereof and will be true on the date the proposed
transaction is consummated:
(1) Except the Registration Rights Agreement of the Company dated as
of August 25, 1997, the Company has not entered into any agreement (whether
written, oral, by conduct or otherwise) with respect to the Senior Notes or
the Exchange Notes.
(2) The Exchange Offer is being made for a substantial
business purpose.
OPINIONS
Based solely on the information submitted and the
representations set forth above and assuming that the
Exchange Offer takes place as described in the Prospectus
and that the representations made by the Company and the
Guarantor are true and correct at the time of the exchange,
we are of the opinion that the exchange of Senior Notes for
Exchange Notes pursuant to the Exchange Offer will not be
considered a taxable exchange for U.S. federal income tax
purposes because the Exchange Notes will not be considered
to differ materially in kind or extend from the Senior
Notes. Exchange Notes received by a holder of Senior Notes
will be treated as a continuation of the Senior Notes in the
hands of such holder. Accordingly, there will not be any
U.S. federal income tax consequences to holders exchanging
Senior Notes for Exchange Notes in the Exchange Offer.
The opinions expressed herein are based upon existing
statutory, regulatory, and judicial authority, any of which
may be changed at any time with retroactive effect. In
addition, our opinions are based solely on the documents
that we have examined, the additional information that we
have obtained, and the statements set out herein, which we
have assumed and you have confirmed to be true on the date
hereof and will be true on the date on which the proposed
transaction is consummated. Our opinions cannot be relied
upon if any of the facts contained in such documents or if
such additional information is, or later becomes,
inaccurate. This opinion deals only with holders that will
holder Exchange Notes as "capital assets" (within the
meaning of Section 1221 of the Code) and that are (i)
citizens or residents of the United States, (ii) domestic
corporations, or (iii) otherwise subject to United States
federal income taxation on a net income basis in respect of
an Exchange Note. The opinions expressed herein do not
address tax considerations applicable to investors that may
be subject to special tax rules, such as banks, tax-exempt
organizations, insurance companies, dealers in securities or
currencies, or persons that will hold Notes as a position in
a hedging transaction, "straddle" or "conversion
transaction" for tax purposes. The opinion addresses the
material U.S. federal income tax consequences of the
exchange of Senior Notes for Exchange Notes pursuant to the
Exchange Offer. Finally, our opinions are limited to the
tax matters specifically covered thereby, and we have not
been asked to address, nor have we addressed, any other tax
consequences of the Exchange Offer.
This opinion is being provided solely for the benefit of
the Company and the holders of Senior Notes that receive
Exchange Notes pursuant to the Exchange Offer. No other
person or party shall be entitled to rely on this opinion.
We consent to the use of this opinion and to the
references made to the firm under the caption "Certain
Federal Income Considerations" in the Prospectus.
Sincerely,
WYCHE, BURGESS, FREEMAN & PARHAM, P.A.
By: Eric B. Amstutz
EXHIBIT 12.1
STATEMENT REGARDING COMPUTATION OF RATIOS
General
The Company's operations are based on a fifty-two or
fifty-three week fiscal year ending on the Saturday nearest
June 30. Fiscal year 1993 was fifty-three weeks. During
fiscal year 1993, two indirect subsidiaries of Delta
Woodside merged into Delta Holding, Inc. which was then
renamed Delta Mills, Inc. Amounts presented for fiscal years
1992 and 1993 reflect the effect of this merger as if the
merger had occurred at the beginning of fiscal year 1992.
The statements of operations data and balance sheet data
include the accounts of Delta Mills, Inc. and certain
marketing divisions of Delta Consolidated Corporation. These
divisions of Delta Consolidated Corporation were transferred
in August 1997 to Delta Mills Marketing, Inc., a
wholly-owned subsidiary of the Company.
Ratio of EBITDA to interest expense and cash interest
expense and Ratio of total debt to EBITDA
"EBITDA" is defined herein as income (loss) before
income taxes, plus depreciation and amortization expense and
interest expense, plus impairment and restructuring charges
(credits). While EBITDA should not be construed as an
alternative to operating earnings (loss) or net income
(loss), or as an indicator of operating performance or
liquidity, the Company believes that the ratio of EBITDA to
interest expense is a measure that is commonly used to
evaluate a company's ability to service debt.
Ratio of Earnings to Fixed Charges
Earnings used in computing the ratio of earnings to
fixed charges consist of income (loss) before provision for
income taxes plus fixed charges. Fixed charges consist of
interest expense on all indebtedness (including amortization
of deferred debt issuance costs) plus capitalized interest,
plus interest expense on the indebtedness of Delta Woodside
guaranteed by the Company (less interest paid by the Company
with respect to intercompany indebtedness).
EXHIBIT 21.1
SUBSIDIARIES OF DELTA MILLS, INC.
Subsidiary State of IncorporationPrincipal Place of Business
Delta Mills Marketing, Inc. Delaware New York, NY
EXHIBIT 23.2
[FIRM LETTERHEAD]
FORM OF CONSENT OF INDEPENDENT AUDITOR
The Boards of Directors
Delta Mills, Inc. and
Delta Mills Marketing, Inc.
We consent to the use of our report dated , 1997
included in Delta Mills, Inc.'s Registration Statement on Form S-4 for the
registration of $150.0 million in aggregate principal amount of its 9 5/8%
Senior Notes due 2007, Series B to be exchanged for equal principal amounts
of its 9 5/8% Senior Notes due 2007 and in any amendment thereof. We also
consent to the use of our name under the heading "Independent Certified
Public Accountants" in the Prospectus contained in the Registration
Statement described above and any amendment thereof.
Greenville, South Carolina KPMG PEAT MARWICK, L.L.P.
_______________, 1997
EXHIBIT 25.1
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS
TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) |__|
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(State of incorporation I.R.S. employer
if not a U.S. national bank) identification no.)
48 Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)
DELTA MILLS, INC.
(Exact name of obligor as specified in its charter)
Delaware 13-2677657
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
233 North Main Street, Suite No. 200
Greenville, South Carolina 29601
(Address of principal executive offices) (Zip code)
______________________
9-5/8% Senior Notes due 2007
(Title of the indenture
securities)
=========================================================================
== ======
1. General information. Furnish the following information as to the
Trustee:
(a) Name and address of each examining or supervising
authority to which it is subject.
Name Address
Superintendent of Banks of the State of 2 Rector Street,
New York, New York N.Y. 10006,
and Albany, N.Y. 12203
Federal Reserve Bank of New York 33 Liberty Plaza,
New York, N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York 10005
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
2. Affiliations with Obligor.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None.
16. List of Exhibits.
Exhibits identified in parentheses below, on file with the
Commission, are incorporated herein by reference as an exhibit
hereto, pursuant to Rule 7a-29 under the Trust Indenture Act of 1939
(the "Act") and 17 C.F.R. 229.10(d).
1. A copy of the Organization Certificate of The Bank of
New York (formerly Irving Trust Company) as now in effect,
which contains the authority to commence business and a grant
of powers to exercise corporate trust powers. (Exhibit 1 to
Amendment No. 1 to Form T-1 filed with Registration Statement
No. 33-6215, Exhibits 1a and 1b to Form T-1 filed with
Registration Statement No. 33-21672 and Exhibit 1 to Form T-1
filed with Registration Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee.(Exhibit
4 to Form T-1 filed with Registration Statement No. 33-31019.)
6. The consent of the Trustee required by Section 321(b)of
the Act. (Exhibit 6 to Form T-1 filed with Registration
Statement No. 33-44051.)
7. A copy of the latest report of condition of the
Trustee published pursuant to law or to the requirements of its
supervising or examining authority.
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of
New York, a corporation organized and existing under the laws of the
State of New York, has duly caused this statement of eligibility to be
signed on its behalf by the undersigned, thereunto duly authorized, all
in The City of New York, and State of New York, on the 1st day of
October, 1997.
THE BANK OF NEW YORK
By: /s/THOMAS E. TABOR
Name:
THOMAS E. TABOR
Title: ASSISTANT TREASURER
Consolidated Report of Condition of
THE BANK OF NEW YORK
of 48 Wall Street, New York, N.Y.
10286 And Foreign and Domestic
Subsidiaries,
a member of the Federal Reserve System, at the close of business June
30, 1997, published in accordance with a call made by the Federal Reserve
Bank of this District pursuant to the provisions of the Federal Reserve
Act.
Dollar Amounts
ASSETS in Thousands
Cash and balances due from depos-
itory institutions:
Noninterest-bearing balances and
currency and coin .................. $ 7,769,502
Interest-bearing balances .......... 1,472,524
Securities:
Held-to-maturity securities ........ 1,080,234
Available-for-sale securities ...... 3,046,199
Federal funds sold and Securities pur-
chased under agreements to resell...... 3,193,800
Loans and lease financing
receivables:
Loans and leases, net of unearned
income ................. 35,352,045
LESS: Allowance for loan and
lease losses .............. 625,042
LESS: Allocated transfer risk
reserve........................ 429
Loans and leases, net of unearned
income, allowance, and reserve 34,726,574
Assets held in trading accounts ...... 1,611,096
Premises and fixed assets (including
capitalized leases) ................ 676,729
Other real estate owned .............. 22,460
Investments in unconsolidated
subsidiaries and associated
companies .......................... 209,959
Customers' liability to this bank on
acceptances outstanding ............ 1,357,731
Intangible assets .................... 720,883
Other assets ......................... 1,627,267
Total assets ......................... $57,514,958
LIABILITIES
Deposits:
In domestic offices ................ $26,875,596
Noninterest-bearing ...... 11,213,657
Interest-bearing ......... 15,661,939
In foreign offices, Edge and
Agreement subsidiaries, and IBFs ... 16,334,270
Noninterest-bearing ......... 596,369
Interest-bearing ......... 15,737,901
Federal funds purchased and Securities
sold under agreements to repurchase. 1,583,157
Demand notes issued to the U.S.
Treasury ........................... 303,000
Trading liabilities .................. 1,308,173
Other borrowed money:
With remaining maturity of one year
or less .......................... 2,383,570
With remaining maturity of more than
one year through three years.......... 0
With remaining maturity of more than
three years ......................... 20,679
Bank's liability on acceptances exe-
cuted and outstanding .............. 1,377,244
Subordinated notes and debentures .... 1,018,940
Other liabilities .................... 1,732,792
Total liabilities .................... 52,937,421
EQUITY CAPITAL
Common stock ........................ 1,135,284
Surplus ............................. 731,319
Undivided profits and capital
reserves .......................... 2,721,258
Net unrealized holding gains
(losses) on available-for-sale
securities ........................ 1,948
Cumulative foreign currency transla-
tion Adjustments .................. (12,272)
Total equity capital ................ 4,577,537
Total liabilities and equity
capital ........................... $57,514,958
I, Robert E. Keilman, Senior Vice President and Comptroller of
the above-named bank do hereby declare that this Report of Condition has
been prepared in conformance with the instructions issued by the
Board of Governors of the Federal Reserve System and is true to the
best of my knowledge and belief.
Robert E. Keilman
We, the undersigned directors, attest to the correctness of this
Report of Condition and declare that it
has been examined by us and to the best of
our knowledge and belief has been prepared in conformance with
the instructions issued by the Board of Governors of the Federal Reserve
System and is true and correct.
Alan R. Griffith
J. Carter Bacot
Thomas A. Renyi Directors
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedue contains summary financial information extracted from the
registrant's consolidated financial statements for the fiscal year ended June
28, 1997 and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-28-1997
<PERIOD-END> JUN-28-1997
<CASH> 1098
<SECURITIES> 0
<RECEIVABLES> 105615
<ALLOWANCES> 1003
<INVENTORY> 77195
<CURRENT-ASSETS> 187458
<PP&E> 276193
<DEPRECIATION> 118641
<TOTAL-ASSETS> 345010
<CURRENT-LIABILITIES> 104794
<BONDS> 210189
0
0
<COMMON> 0
<OTHER-SE> 7844
<TOTAL-LIABILITY-AND-EQUITY> 345010
<SALES> 464548
<TOTAL-REVENUES> 464548
<CGS> 399378
<TOTAL-COSTS> 399378
<OTHER-EXPENSES> 23750
<LOSS-PROVISION> 388
<INTEREST-EXPENSE> 14285
<INCOME-PRETAX> 27208
<INCOME-TAX> 10655
<INCOME-CONTINUING> 16553
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 16553
<EPS-PRIMARY> 165530.00
<EPS-DILUTED> 165530.00
</TABLE>
FORM OF LETTER OF TRANSMITTAL Exhibit 99.1
Delta Mills, Inc.
Offer to Exchange
$150,000,000 9 5/8% Senior Notes due 2007, Series B
Which have been registered under the Securities Act of 1933, as amended
for any and all outstanding
$150,000,000 9 5/8% Senior Notes due 2007, Series A
Pursuant to the Prospectus, dated [________], 1997
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY
TIME, ON [25 business days following effectiveness], 1997
(AS SUCH DATE AND TIME MAY BE EXTENDED BY THE COMPANY IN ITS SOLE DISCRETION,
THE "EXPIRATION DATE").
PLEASE READ CAREFULLY THE ATTACHED INSTRUCTIONS
If you desire to accept the Exchange Offer, this Letter of
Transmittal should be
completed, signed and submitted to:
By Registered or Certified Mail:
The Bank of New York
101 Barclay Street
Seventh Floor
New York, N.Y. 10286
Attention: Reorganization Section
By Overnight or Hand Delivery:
The Bank of New York
101 Barclay Street
Attention: Seventh Floor
Corporate Trust & Agencies Service
Window New York, N.Y. 10286
Attention: Reorganization Section
By Facsimile:
The Bank of New York
Attention: Reorganization Section
(212) 815-6339
Confirm by Telephone:
(212) 815-2742
Delivery of this Letter of Transmittal to an address
other than as set forth above or
transmission of instructions via a facsimile number
other than that set forth above will not
constitute a valid delivery.
The Registration Statement on Form S-4 (File No. [___
_____]) of which this
Prospectus is a part was declared effective by the
Securities and Exchange Commission on
[_________], 1997.
The undersigned hereby acknowledges receipt of the
Prospectus dated [________], 1997
(the "Prospectus") of Delta Mills, Inc., a corporation
incorporated under the laws of the state of
Delaware (the "Company"), and this Letter of Transmittal
(the "Letter of Transmittal"), that
together constitute the Company's offer (the "Exchange
Offer") to exchange $1,000 principal
amount (or fraction thereof) of 9 5/8% Senior Notes due
2007, Series B (the "Exchange Notes")
for each $1,000 principal amount (or fraction thereof) of
its outstanding 9 5/8% Senior Notes due
2007, Series A (the "Senior Notes"). The Exchange Notes
and the Senior Notes are collectively
referred to as the "Notes." Capitalized terms used but
not defined herein have the meanings
ascribed to them in the Prospectus.
Either this Letter of Transmittal or an Agent's Message
(as defined herein) is to be
completed by a holder of Senior Notes (which term, for
purposes of the Exchange Offer, includes
any participant in the DTC system whose name appears on a
security position listing as the holder
of such Senior Notes) in order to tender Senior Notes.
All deliveries of Senior Notes must be
made either by (i) endorsement and delivery of
certificated Senior Notes registered in the name of
the Holder thereof and issued in accordance with the
Indenture ("Definitive Registered Notes") or
(ii) by book-entry transfer of book-entry interests of
participants ("Book-Entry Interests") of the
Depository Trust Company ("DTC") to the account maintained
by the Exchange Agent at DTC
pursuant to the procedures set forth in the Prospectus
under "The Exchange Offer - Book-Entry
Transfer". Holders of Senior Notes who are unable to
deliver (i) endorsed Definitive Registered
Notes, (ii) confirmation of the book-entry tender of their
Senior Notes into the Exchange Agent's
account at DTC (a "Book-Entry Confirmation") or (iii) in
either case all other documents required
by or pursuant to this Letter of Transmittal to the
Exchange Agent on or prior to the Expiration
Date must tender their Senior Notes according to the
guaranteed delivery procedures set forth in
the Prospectus under "The Exchange Offer -- Guaranteed
Delivery Procedures". See Instruction
1. Delivery of documents to DTC or any other party does
not constitute delivery to the Exchange
Agent.
The undersigned has completed the appropriate boxes below
and signed this Letter pf
Transmittal to indicate the action the undersigned desires
to take with respect to the Exchange
Offer.
List below the Senior Notes to which this Letter relates.
If the space provided is
inadequate, the principal amount of Senior Notes should be
listed on a separate signed schedule
affixed hereto.
BOX 1
DESCRIPTION OF SENIOR NOTES TENDERED
Name(s) and addresses of
Holder(s) of Senior Notes Aggregate Principal Principal Amount of
Please fill in, if blank) Amount of Senior Notes Senior Notes Tendered*
Total
* Unless otherwise indicated in this column, ALL of the
Senior Notes indicated in the
preceding column of this Box 1 or delivered to the
Exchange Agent herewith shall be
deemed tendered. See Instruction 4.
CHECK HERE IF DEFINITIVE REGISTERED NOTES ARE BEING DELIVERED
WITH THIS LETTER OF TRANSMITTAL AND COMPLETE THE FOLLOWING:
Name(s) of
Holder(s)
Certificate
Number(s)
CHECK HERE IF TENDERED SENIOR NOTES ARE BEING DELIVERED BY
BOOK-ENTRY TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE
EXCHANGE AGENT WITH DTC AND COMPLETE THE FOLLOWING:
Name of Tendering
Institution_
The Depository Trust Company Account Number______ Transaction Code Number____
By crediting the Senior Notes to the Exchange Agent's
account at DTC in accordance
with DTC's Automated Tender Offer Program ("ATOP") and by
complying with applicable
ATOP procedures with respect to the Exchange Offer,
including transmitting a computer-
generated message (an "Agent's Message") to the Exchange
Agent in which the holder of the
Senior Notes acknowledges and agrees to be bound by the
terms of this Letter of Transmittal and
the Prospectus, the DTC participant confirms on behalf of
itself and the beneficial owners of such
Senior Notes all provisions of this Letter of Transmittal
applicable to it and such beneficial owners
as fully as if it had completed the information required
herein and executed and transmitted this
Letter of Transmittal to the Exchange Agent.
CHECK HERE IF TENDERED SENIOR NOTES ARE BEING
DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY
PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE THE
FOLLOWING:
Name(s) of
Holder(s)
Name of Institution that guaranteed
delivery
If Definitive Registered Notes are being tendered:
Name of
Holder(s)
Certificate
number
If Book-Entry Interests are being tendered:
The Depository Trust Company: Account Number
______________________
Transactions Code Number______________
CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10
ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY
AMENDMENTS OR SUPPLEMENTS THERETO:
Name
Address
You are entitled to as many copies as you may reasonably request and if
you need more than 10 copies, please so indicate by a notation below.
Total number of copies
needed
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Delta Mills, Inc.
233 North Main Street, Suite 200
Greenville, South Carolina 29601
Attention: Secretary
The Bank of New York
101 Barclay Street
Floor 21 West
New York, New York 10286
Attention: Corporate Trust Administration
Re: Tender of Senior Notes for Exchange Notes
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the
Exchange Offer described in the
Prospectus and this Letter of Transmittal, the undersigned
hereby tenders to Delta Mills, Inc. the
principal amount of Senior Notes indicated in Box 1 above
(the "Tendered Notes"). Subject to,
and effective upon, the acceptance for exchange of the
Tendered Notes, the undersigned hereby
exchanges, assigns, and transfers to, or upon the order
of, Delta Mills, Inc., all right, title, and
interest in, to and under the Tendered Notes and agrees to
be bound by the terms and conditions
of the Exchange Offer as set forth in the Prospectus and
this Letter of Transmittal. Each DTC
participant transmitting by means of DTC a computer
generated message forming part of a Book-
Entry Confirmation, on behalf of itself and the beneficial
owner of the Senior Notes tendered
thereby, acknowledges receipt of the Prospectus and this
Letter of Transmittal and agrees to be
bound by the terms and conditions of the Exchange Offer as
set forth in the Prospectus and this
Letter of Transmittal.
The undersigned hereby represents and warrants that the
undersigned has full power and
authority to tender, exchange, assign, and transfer the
Tendered Notes and that the Company will
acquire good and unencumbered title thereto, free and
clear of all liens, restrictions, charges,
encumbrances, and adverse claims when the Tendered Notes
are acquired by the Company as
contemplated herein. The undersigned and each beneficial
owner of Senior Notes tendered by the
undersigned will, upon request, execute and deliver any
additional documents reasonably
requested by the Company as necessary or desirable to
complete and give effect to the transactions contemplated
hereby.
The undersigned hereby irrevocably constitutes and
appoints the Exchange Agent as the
true and lawful agent and attorney in fact of the
undersigned with respect to the Tendered Notes,
with full power of substitution (such power of attorney
being deemed to be an irrevocable power
coupled with an interest), to (i) deliver the Tendered
Notes to the Company or cause ownership
of the Tendered Notes to be transferred to, or upon the
order of, the Company, and deliver all
accompanying evidences of transfer and authenticity to, or
upon the order of, the Company upon
receipt by the Exchange Agent, as the undersigned's agent,
of the Exchange Notes to which the
undersigned is entitled upon the acceptance by the Company
of the Tendered Notes pursuant to
the Exchange Offer, and (ii) receive all benefits and
otherwise exercise all rights of beneficial
ownership of the Tendered Notes, all in accordance with
the terms of the Exchange Offer.
The undersigned also acknowledges that this Exchange Offer
is being made by the
Company in reliance on an interpretation by the staff of
the Securities and Exchange Commission
(the "Commission"), as set forth in certain no-action
letters to third parties, that the Exchange
Notes issued in exchange for the Senior Notes pursuant to
the Exchange Offer may be offered for
resale, resold and otherwise transferred by holders
thereof (other than a broker-dealer, as set
forth below, or any such holder that is an "affiliate" of
the Company within the meaning of Rule
405 under the Securities Act of 1933, as amended (the
"Securities Act")), without compliance
with the registration and prospectus delivery provisions
of the Securities Act, provided that such
Exchange Notes are acquired in the ordinary course of such
holder's business and such holders
have no arrangement with any person to participate in the
distribution (within the meaning of the
Securities Act) of such Exchange Notes. By tendering,
each holder of Senior Notes represents to
the Company that (i) the Exchange Notes or Book-Entry
Interests therein to be acquired by such
holder and any beneficial owner(s) of such Senior Notes
or interests therein ("Beneficial
Owner(s)") in connection with the Exchange Offer are being
acquired by such holder and any
Beneficial Owner(s) in the ordinary course of business of
any Beneficial Owner(s), (ii) the holder
and each Beneficial Owner are not participating, do not
intend to participate, and have no
arrangement or understanding with any person to
participate, in the distribution of the Exchange
Notes, (iii) if the holder is a resident of the State of
California, it falls under the self-executing
institutional investor exemption set forth under Section
25102(i) of the Corporate Securities
Law of 1968 and Rules 260.102.10 and 260.105.14 of the
California Blue Sky Regulations, (iv)
if the undersigned is a resident of the Commonwealth of
Pennsylvania, it falls under the self-
executing institutional investor exemption set forth under
Section 203(c), 102(d) and (k) of the
Pennsylvania Securities Act of 1972, Section 102.111 of
the Pennsylvania Blue Sky Regulations
and an interpretive opinion dated November 16, 1985, (v)
the holder and each Beneficial Owner
acknowledge and agree that any person who is a broker-
dealer registered under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), or
is participating in the Exchange
Offer for the purpose of distributing the Exchange Notes
must comply with the registration and
prospectus delivery requirements of the Securities Act in
connection with a secondary resale
transaction of the Exchange Notes or interests therein
acquired by such person and cannot rely on
the position of the staff of the Commission set forth in
certain no-action letters, (vi) the holder and
each Beneficial Owner understands that a secondary resale
transaction described in clause (v)
above and any resales of Exchange Notes or interests
therein obtained by such holder in exchange
for Senior Notes or interests therein originally acquired
by such holder directly from the Company
should be covered by an effective registration statement
containing the selling security holder
information required by Item 507 or Item 508, as
applicable, of Regulation S-K of the
Commission and (vii) neither the holder nor any Beneficial
Owner(s) is an "affiliate," as defined in
Rule 405 under the Securities Act, of the Company. Upon a
request by the Company, a holder or
Beneficial Owner will deliver to the Company a legal
opinion confirming its representation made
in clause (vii) above. By tendering, each holder of
Senior Notes that is a broker-dealer (whether
or not it is also an "affiliate") that will receive
Exchange Notes for its own account pursuant to the
Exchange Offer, represents that the Senior Notes to be
exchanged for the Exchange Notes were
acquired by it as a result of market-making activities or
other trading activities, and acknowledges
that it will deliver a prospectus meeting the requirements
of the Securities Act in connection with
any resale of such Exchange Notes; however, by so
acknowledging and by delivering a
prospectus, the holder will not be deemed to admit that it
is an "underwriter" within the meaning
of the Securities Act.
The undersigned understands that tending the Senior Notes
pursuant to the procedures
described under the captions "The Exchange Offer -
Procedures for Tendering" in the Prospectus
and in the instructions hereto will constitute a binding
agreement between the undersigned and the
Company upon the terms and subject to the conditions of
the Exchange Offer, subject only to
withdrawal of such tenders on the terms set forth in the
Prospectus under the caption "The
Exchange Offer--Withdrawal of Tenders." All authority
herein conferred or agreed to be
conferred shall survive the death or incapacity of the
undersigned and any Beneficial Owner(s),
and every obligation of the undersigned or any Beneficial
Owners hereunder shall be binding upon
the heirs, representatives, successors, and assigns of the
undersigned and such Beneficial
Owner(s).
The undersigned acknowledges and understands that Exchange
Notes will be issued in
exchange for Tendered Notes (i) as Definitive Registered
Notes registered in the name(s) of the
undersigned and sent to the address(es) shown above in Box
1 or, if applicable, Box 2 if
Definitive Registered Notes were tendered or (ii) as Book
Entry Interests delivered by book-entry
transfer to the account of the undersigned shown above
under Box 1 or, if applicable, Box 2 if
Book-Entry Interests were tendered.
Unless otherwise indicated in Box 2 below, please deliver
Exchange Notes as specified in
Box 1.
The undersigned, by completing Box 1 above and signing
this letter, will be deemed to
have tendered the Senior Notes as set forth in such Box
above.
BOX 2
SPECIAL DELIVERY INSTRUCTIONS
(See Instructions 5, 6 and 7)
To be completed ONLY if the Exchange Notes exchanged for Senior Notes and/or if
untendered Senior Notes or Senior Notes that are not accepted for exchange
are to be delivered to someone other than the undersigned, or to the
undersigned at an address or an account maintained at DTC other than that
shown above under Box 1.
Please issue Exchange Notes and/or any unexchanged or unaccepted Senior
Notes to:
Name(s):
(please type or print)
Address:
(include Zip Code)
Tax Identification or
Social Security No.:
Credit Book-Entry Interests in Exchange Notes and/or
unexchanged or unaccepted Senior Notes to the DTC account set forth below:
BOX 3
USE OF GUARANTEED DELIVERY
CHECK HERE ONLY IF SENIOR NOTES ARE BEING TENDERED BY MEANS OF
A NOTICE OF GUARANTEED DELIVERY.
See Instruction 2. If this box is checked, please provide
the following information:
Name(s) of
Holder(s):
Date of Execution of Notice of Guaranteed
Delivery:
Name of Institution which Guaranteed
Delivery:_
IMPORTANT: THIS LETTER OR A FACSIMILE HEREOF OR AN
AGENT'S MESSAGE (TOGETHER WITH A BOOK-ENTRY CONFIRMATION
AND ANY OTHER REQUIRED DOCUMENTS OR THE NOTICE OF
GUARANTEED DELIVERY, AS APPLICABLE) MUST BE RECEIVED BY
THE EXCHANGE AGENT
PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON OR PRIOR TO THE
EXPIRATION DATE.
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL
CAREFULLY BEFORE COMPLETING ANY BOX ABOVE.
BOX 4
TENDERING HOLDER SIGNATURE
(See Instructions 1 and 5)
X ___________________________________
X ___________________________________
(Signature of Owner(s))
The above lines must be signed by the person in
whose name such Senior Notes are (i) registered in
the case of Definitive Registered Notes being
tendered or (ii) registered on the security position
listing maintained by DTC or, in each case, by an
person(s) authorized to become holder(s) by
documents transmitted herewith.
If signature is by a trustee, executor,
administrator,
guardian, attorney-in-fact, officer, or other person
acting in a fiduciary or representative capacity,
such person must set forth is or her full title
below. See Instruction 5.
Name(s):
Capacity:
Title:
Street Address:
(include Zip Code)
Area Code and Telephone Number:
Tax Identification or Social Security Number:
Signature Guarantee
(If required by Instruction 5)
Authorized Signature
X ___________________________________
Name:
_______________________________
(please print)
Title: ________________________________
Name of Firm: ________________________
(Must be an Eligible
Institution as defined in
Instruction 2)
Address:
__________________________
_________________________
_________________________
(include Zip Code)
Area Code and Telephone Number:
_________________________
Date: ________________________________
INSTRUCTIONS TO LETTER OF TRANSMITTAL
Forming Part of the Terms and Conditions
of the Exchange Offer
1. Delivery of the Senior Notes and this Letter of
Transmittal.
(A) If the holder is tendering Definitive Registered
Notes, such holder must
deliver (i) the certificate(s) representing the Senior
Notes tendered, (ii) a properly completed and
duly executed copy of this Letter of Transmittal and (iii)
any other documents required by or
pursuant to this Letter of Transmittal, all of which must
be received by the Exchange Agent at its
address set forth herein prior to the Expiration Date.
(B) If the holder is tendering Book-Entry Interests, such
holder must (i) utilize
DTC's ATOP system to tender such holder's Book-Entry
Interests to an account established at
DTC by the Exchange Agent, (ii) make the Agent's Message
and cause a Book-Entry
Confirmation to be issued to the Exchange Agent or deliver
a properly completed and duly
executed copy of this Letter of Transmittal and (iii)
deliver any other documents required by this
Letter of Transmittal, all of which must be received by
the Exchange Agent at its DTC account
or address set forth herein prior to the Expiration Date.
The method of delivery of certificates for Senior Notes
and all other required documents is
at the election and risk of the tendering holder and
delivery will be deemed made only when
actually received by the Exchange Agent. If delivery is
by mail, registered mail with return receipt
requested, properly insured, is recommended. Instead of
delivery by mail, it is recommended that
the holder use an overnight or hand delivery service. In
all cases, sufficient time should be
allowed to assure timely delivery. In no event should any
Senior Notes or related documentation
be sent to the Company. Neither the Company nor the
Registrar is under any obligation to notify
any tendering holder of the Company's acceptance of
Tendered Notes prior to the Expiration
Date.
2. Guaranteed Delivery Procedures. Holders who wish to
tender their Senior Notes
but who cannot deliver their Senior Notes, Letter of
Transmittal or any other documents required
by the Letter of Transmittal to the Exchange Agent prior
to the Expiration Date must tender their
Senior Notes according to the guaranteed delivery
procedures set forth below, including
completion of Box 3 (if this Letter of Transmittal is
being delivered). Pursuant to such
procedures: (i) such tender must be made by or through a
firm that is a member of a registered
national securities exchange or of the National
Association of Securities Dealers, Inc., or is a
commercial bank or trust company having an office or
correspondent in the United States, or is
otherwise an "eligible guarantor institution" within the
meaning of Rule 17Ad-15 under the
Securities Exchange Act of 1934, as amended (an "Eligible
Institution"), and the Notice of
Guaranteed Delivery must be signed by the holder; (ii)
prior to the Expiration Date, the Exchange
Agent must have received from the holder and the Eligible
Institution a properly completed and
duly executed Notice of Guaranteed Delivery (by facsimile
transmission, mail or hand delivery)
setting forth the name and address of the holder, in the
case of Definitive Registered Notes, the
certificate number or numbers of the Tendered Notes, and,
in each case, the principal amount of
Tendered Notes, stating that the tender is being made
thereby and guaranteeing that, within five
New York Stock Exchange ("NYSE") trading days after the
Expiration Date, either a properly
completed and duly executed Letter of Transmittal (or a
facsimile thereof) or a properly
transmitted Agent's Message, together with the Tendered
Notes and any other required
documents will be deposited by the Eligible Institution
with the Exchange Agent; and (iii) such
Agent's Message or Letter of Transmittal, such properly
completed and executed documents
required by this Letter of Transmittal and such Tendered
Notes in proper form for transfer must
be received by the Exchange Agent within five NYSE trading
days after the Expiration Date.
Failure to complete the guaranteed delivery procedures
outlined above will not, of itself, affect the
validity or effect a revocation of any Letter of
Transmittal form properly completed and executed
by an Eligible Holder who attempted to use the guaranteed
delivery process.
3. Beneficial Owner Instructions to Registered Holders.
Only a holder in whose
name Definitive Registered Notes are registered on the
books of the Registrar (or the legal
representative or attorney-in-fact of such registered
holder) or who is a DTC participant who
owns a Book-Entry Interest in the Senior Notes through a
security position maintained by DTC
may execute and deliver this Letter of Transmittal. Any
Beneficial Owner of Senior Notes who is
not the registered holder or who is not a DTC participant
who has a security position in the
Senior Notes maintained by DTC in its name must arrange
promptly with the registered holder or
a DTC participant, as the case may be, to execute and
deliver this Letter of Transmittal or an
Agent's Message on his or her behalf through the
execution and delivery to the registered holder
or DTC participant of the "Instruction to Registered
Holder or DTC Participant from Beneficial
Owner" form accompanying this Letter of Transmittal.
4. Partial Tenders. If less than the entire number of
Senior Notes are tendered, the
tendering holder should fill in the number of Senior
Notes tendered in the column labeled
"Principal Amount of Senior Notes Tendered" of Box 1
above.
The entire number of Senior
Notes delivered to the Exchange Agent will be deemed to
have been tendered unless otherwise
indicated. If the entire number of all Senior Notes
indicated in Box 1 above is not tendered,
Senior Notes in a principal amount equal to Senior Notes
not tendered as well as Exchange Notes
exchanged for any Senior Notes tendered will be delivered
to the address or account, as
applicable, indicated in Box 1, unless a different address
or account, as applicable, is provided in
Box 2 of this Letter of Transmittal.
5. Signatures on the Letter of Transmittal;
Endorsements; Guarantee of Signatures.
If this Letter of Transmittal is signed by the registered
holder(s) of the Tendered Notes (in the
case of Definitive Registered Notes), the signature must
correspond with the name(s) as written
on the face of the Tendered Notes without alteration,
enlargement, or any change whatsoever. If
this Letter of Transmittal is signed by the DTC
participant whose name appears on a security
position maintained by DTC (in the case of Book-Entry
Interests), the signature must correspond
exactly with such participant's name as it appears on a
security position maintained by DTC listing
such participant as the owner of the Senior Notes, without
any change whatsoever.
If any of the Tendered Notes are owned of record by two or
more joint owners, all such
owners must sign this Letter of Transmittal. If any
Tendered Notes are held in different names on
several Senior Notes, it will be necessary to complete,
sign, and submit as many separate copies of
the Letter of Transmittal documents as there are names in
which Tendered Notes are held.
When this Letter of Transmittal is signed by the holders
of the Senior Notes specified
herein and tendered hereby, no separate bond powers are
required. If, however, the Exchange
Notes are to be issued, or any untendered or unaccepted
Senior Notes are to be reissued, to a
person other than the holder, then separate bond powers
are required. Signatures on such bond
powers must be guaranteed by an Eligible Institution.
If this Letter of Transmittal or any Senior Notes are
signed by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of
corporations, or others acting in a
fiduciary or representative capacity, such persons should
so indicate when signing and, unless
waived by the Company, evidence satisfactory to the
Company of their authority to so act must be
submitted with this Letter of Transmittal.
Signatures on bond powers required by this Instruction 5
must be guaranteed by an
Eligible Institution. Signatures on this Letter of
Transmittal need not be guaranteed by an Eligible
Institution if: (i) this Letter of Transmittal is signed
by the registered holder of Definitive
Registered Notes tendered hereby, (ii) this Letter of
Transmittal is signed by any participant in
DTC whose name appears on a security position listing
maintained by DTC as the owner of the
Senior Notes tendered and such person has not completed
Box 2 of this Letter of Transmittal or
(iii) the Senior Notes are tendered for the account of an
Eligible Institution.
6. Special Delivery Instructions. Tendering holders of
Senior Notes should indicate
in Box 2 (i) the name and address to which Definitive
Registered Notes representing Exchange
Notes and/or substitute Definitive Registered Notes
representing Senior Notes in a principal
amount equal to the Senior Notes not tendered or not
accepted for exchange are to be sent or (ii)
the DTC account to which Book-Entry Interests in the
Exchange Notes issued pursuant to the
Exchange Offer and/or substitute Book-Entry Interests in
the Senior Notes not tendered or not
accepted for exchange are to be issued, in each case only
if the recipient of such Exchange Notes
or substitute Senior Notes is different from the person
signing this Letter of Transmittal. The
employer identification number or social security number
of the person named must also be
indicated. If no such instructions are given, such
Exchange Notes and/or Senior Notes not
tendered or not accepted for exchange will be credited to
the registered holder or DTC account of
the person(s) signing this Letter of Transmittal.
7. Transfer Taxes. The Company will pay all transfer
taxes, if any, applicable to the
transfer of Senior Notes to it or its order and the
issuance of Exchange Notes to the holder
thereof pursuant to the Exchange Offer. If, however, a
transfer tax is imposed for any reason
other than the transfer of Senior Notes to the Company or
its order and the issuance of Exchange
Notes to the holder thereof pursuant to the Exchange
Offer, then the amount of any such transfer
taxes (whether imposed on the registered holder or on any
other person) will be payable by the
tendering holder. If satisfactory evidence of payment of
such taxes or exemption from taxes
therefrom is not submitted with this Letter of
Transmittal, the amount of transfer taxes will be
billed directly to such tendering holder.
8. Validity of Tenders. All questions as to the
validity, form, eligibility (including
time of receipt), and acceptance of Tendered Notes will be
determined by the Company in its sole
discretion, which determination will be final and binding.
The Company reserves the right to
reject any and all Senior Notes not validly tendered or
any Senior Notes the Company's
acceptance of which would, in the opinion of the Company
or its counsel, be unlawful. The
Company also reserves the right to waive any conditions of
the Exchange Offer or defects or
irregularities in tenders of Senior Notes as to any
ineligibility of any holder who seeks to tender
Senior Notes in the Exchange Offer. The interpretation of
the terms and conditions of the
Exchange Offer (including this Letter of Transmittal and
the instructions hereto) by the Company
shall be final and binding on all parties. Unless waived,
any defects or irregularities in connection
with tenders of Senior Notes must be cured within such
time as the Company shall determine.
The Company will use reasonable efforts to give
notification of defects or irregularities with
respect to tenders of Senior Notes, but shall not incur
any liability for failure to give such
notification.
9. Waiver of Conditions. The Company reserves the
absolute right to amend, waive,
or modify specified conditions of the Exchange Offer as
enumerated in the Prospectus or this
Letter of Transmittal in the case of any Tendered Notes.
10. No Conditional Tender. No alternative, conditional,
irregular, or contingent
tender of Senior Notes or transmittal of this Letter of
Transmittal will be accepted.
11. Mutilated, Lost, Stolen or Destroyed Senior Notes.
Any tendering holder whose
Senior Notes have been mutilated, lost, stolen, or
destroyed should contact the Exchange Agent
as soon as possible at the address indicated above for
further instruction.
12. Requests for Assistance or Additional Copies.
Questions and requests for
assistance and requests for additional copies of the
Prospectus may be directed to the Exchange
Agent at the address specified in the Prospectus. Holders
may also contact their broker, dealer,
commercial bank, trust company, or other nominee for
assistance concerning the Exchange Offer.
13. Acceptance of Tendered Notes and Issuance of Exchange
Notes; Return of Senior
Notes. Subject to the terms and conditions of the
Exchange Offer, the Company will accept for
exchange all validly tendered Senior Notes as soon as
practicable after the Expiration Date and
will issue Exchange Notes therefor as soon as practicable
thereafter. For purposes of the
Exchange Offer, the Company shall be deemed to have
accepted tendered Senior Notes when, as
and if the Company has given written or oral notice
thereof (such oral notice being promptly
confirmed in writing) to the Exchange Agent. If any
Tendered Notes are not exchanged pursuant
to the Exchange Offer for any reason, such unexchanged
Senior Notes will be returned, without
expense, to the signatory of Box 4 at the address or DTC
account shown above or at a different
address or DTC account as may be indicated herein under
Box 2.
14. Withdrawal. Tenders may be withdrawn only pursuant
to the limited withdrawal
rights set forth in the Prospectus under the caption "The
Exchange Offer--Withdrawal of
Tenders".
15. Incorporation of Letter of Transmittal. This Letter
of Transmittal shall be deemed
to be incorporated in and acknowledged and accepted by any
tender through DTC's ATOP
procedures by any DTC participant on behalf of itself and
the beneficial owners of any Book-
Entry Interests representing Senior Notes so tendered.
15
FORM OF NOTICE OF GUARANTEED DELIVERY
Exhibit 99.2 for
9 5/8% Senior Notes due 2007
of
Delta Mills, Inc.
As set forth in the Prospectus dated [_________], 1997
(the "Prospectus") of Delta Mills, Inc. (the "Company')
and in the accompanying Letter of Transmittal and
instructions thereto (the "Letter of
Transmittal"), this form or one substantially
equivalent hereto must be used to accept the Company's
Exchange Offer (the "Exchange Offer") to exchange new 9
5/8% Senior Notes due 2007, Series B (the "Exchange
Notes") that have been
registered under the Securities Act of 1933, as amended
(the "Securities Act"), for all of its outstanding 9 5/8 %
Senior Notes due 2007, Series A (the "Senior Notes")
IF the Letter of Transmittal or any other documents
required thereby cannot be delivered to the Exchange
Agent, or Definitive Registered Notes (as defined in the
Letter of Transmittal) cannot be delivered or the
procedure for book-entry transfer cannot be completed,
prior to 5:00 p.m., New York City Time, on the
Expiration Date (as defined in the Prospectus). This
form may be delivered by an Eligible Institution (as
defined in the Letter of Transmittal) by hand or
transmitted by facsimile transmission, overnight courier or
mail to the Exchange Agent as set forth below.
Capitalized terms not defined herein have the meanings
ascribed to them in the Prospectus or the Letter of
Transmittal.
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00
P.M., NEW YORK CITY TIME, ON [25 business days after
effectiveness], 1997 (AS SUCH DATE AND TIME MAY BE EXTENDED
BY THE COMPANY IN ITS SOLE DISCRETION, THE "EXPIRATION
DATE").
PLEASE READ CAREFULLY THE ATTACHED INSTRUCTIONS
To: The Bank of New York, as Exchange Agent
By Registered or Certified Mail By Overnight or Hand
Delivery: :
The Bank of New York
The Bank of New York 101 Barclay Street
101 Barclay Street Attention: Seventh Floor
Seventh Floor Corporate Trust &
Agencies
New York, N.Y. 10286 Service Window
Attention: Reorganization New York, N.Y. 10286
Section Attention:
Reorganization
Section
By Facsimile:
The Bank of New York
Attention: Reorganization
Section (212) 815-
6339
Confirm by Telephone:
(212) 815-2742
Delivery of this Notice of Guaranteed Delivery to an
address other than as set forth above or transmission of
instructions via
a facsimile number other than that set forth above will
not constitute a valid delivery.
This form is not to be used to guarantee signatures. If
a signature on the Letter of Transmittal to be used to tender
Senior Notes is required to be guaranteed by an "Eligible
Institution" under the instructions thereto, such signature
guarantee must appear in the applicable space provided in
the Letter
of
Transmittal.
Ladies and Gentlemen:
The undersigned hereby tenders to the Company, upon the
terms and subject to the conditions set forth in the Prospectus
and the related Letter of Transmittal (which together
constitute the "Exchange Offer"), receipt of which is hereby
acknowledged, the principal amount of Senior Notes specified
below pursuant to the guaranteed delivery procedures set forth
in the Prospectus and in Instruction 2 of the Letter of
Transmittal.
The undersigned understands that tenders of Senior
Notes pursuant to the Exchange Offer may not be withdrawn
after 5:00 p.m., New York City time, on the Expiration Date.
Tenders of Senior Notes may also be withdrawn if the
Exchange Offer is terminated without any such Senior
Notes being purchased thereunder or as otherwise provided in
the Prospectus.
All authority thereto conferred or agreed to be conferred
by this Notice of Guaranteed Delivery shall survive the
death, incapacity or dissolution of the undersigned and every
obligation of the undersigned under this Notice of Guaranteed
Delivery shall be binding upon the heirs, personal
representatives, executors, administrators, successors,
assigns, trustees in bankruptcy and other legal
representatives of the undersigned.
The undersigned hereby tenders the Senior Notes listed
below:
Aggregate Principal Amount Principal Amount of Senior
of Senior Notes Notes Tendered
NOTE: SIGNATURES MUST BE PROVIDED WHERE INDICATED BELOW
SIGN HERE
Name(s) of Holder(s):
Address(es):
Telephone Number:
Signature(s):
Date:
DTC Account Number (if applicable):
This Notice of Guaranteed Delivery must be signed by (i) the holder(s)
of Senior Notes exactly as its/their name(s) appear on Definitive Registered
Notes , (ii) the holder(s) of Senior Notes exactly as its/their name(s)
appear on a security position listing maintained by DTC as the owner of
Senior Notes or (iii) by person(s) authorized to become holder(s) by documents
transmitted with this Notice of Guaranteed Delivery. If signature is by a
trustee, executor, administrator, guardian, attorney-in-fact, officer or other
person acting in a fiduciary or representative capacity, such person must
provide the following information and, unless waived by the Company, submit
evidence satisfactory to the Company of thier authority to act:
Please print name(s) and addresses of person signing above
Name(s):
Capacity:
Address(es):
GUARANTEE
(Not to be used for signature guarantee)
The udnersinged, a firm that is a member of a registered national
securities exchange of of the national association of Securities Dealers, Inc.,
or is a commerical bank or trust company having an office or correspondent
in the United States, or is otherwise an "eligible guarantor institution"
within the meaning of Rule 17Ad-15 under the Securities Exchange Act of 1934,
as amended (the "Exchange Act") hereby (a) represents that the above named
person(s) "own(s)" the Senior Notes tendered hereby within the meaning of
Rule 14e-4 under the Exchange Act, (b( represents that such tender of Senior
Notes complies with Rule 14e-4 under the Exchange Act (c) guarantees that
delivery to the Exchange Agent of the Letter of Transmittal (or facsimile
thereof(, either Definitive Registered Notes in proper form for transfer or a
confirmation of the book-entry transfer of Book-Entry Interests representing
such Senior Notes into the Exchange Agent's account at DTC, pursuant to the
procedures for book-entry transfer set forth in the Prospectus, and delivery
of either a properly completed and duly executed Letter of Transmittal (or
manually signed facsimile thereof) with any required signatures and any other
documents required by the Letter of Transmittal or an Agent's Message, will
be received by the Exchange Agent by 5.00 p.m., New York City time, on the
fifth New York Stock Exchange trading day after the Expiration Date.
The undersigned acknowledges that it must deliver the Letter of
Transmittal of Agent's Message and Senior Notes tendered hereby to the
Exchange Agent within the time period set forth therein and that failure
to do so could result in financial loss to the undersigned.
SIGN HERE
Name of firm:
Authorized Signature:
Name (please print):
Address:
Telephone Number:
Date:
DO NOT SEND ANY DEFINITIVE REGISTERED NOTES WITH THIS FORM. ACTUAL SURRENDER
OF DEFINITIVE REGISTERED NOTES MUST BE MADE PURSUANT TO, AND BE ACCOMPANIED
BY, AN EXECUTED LETTER OF TRANSMITTAL.
INSTRUCTIONS FOR NOTICE OF GUARANTEED DELIVERY
1. Delivery of this notice of Guaranteed Delivery. A properly completed
and duly executed copy of this Notice of Guaranteed Delivery and any other
documents required by this Notice of Guaranteed Delivery must be received
by the Exchange Agent at its address set forth herein prior to the
Expiration Date. The method of delivery of this Notice of Guaranteed
Delivery and any other required documents to the Exchange Agent is at the
election and risk of the holder, and the delivery will be deemed made only
when actually received by the Exchange Agent. If delivery is by mail,
registered mail with return receipt requested, properly insured, is
recommended. Instead of delivery by mail, it is recommended that the holder
use an overnight or hand delivery service. In all cases sufficient time should
be allowed to assure timely delivery. For a description of the guaranteed
delivery procedure, see Instruction 2 of the Letter of Transmittal.
2. Signatures on this Notice of Guaranteed Delivery. If this Notice
of Guaranteed Delivery is signed by the registered holder(s) of the Senior
Notes to be tendered (in the case of Definitive Registered Notes), the
Senior Notes without alteration, enlargement, or any change whatsoever.
If this Notice of Guaranteed Delivery is signed by the DTC participant whose
name appears on a security position maintained by DTC (in the case of
Book-Entry Interests), the signature must correspond exactly with such
participant's name as it appears on a security position maintained by DTC
listing such participant as the owner of the Senior Notes, without any change
whatsoever.
If any of the Senior Notes to be tnedered are owned of record by two or
more joint owners, all such owners must sign this Notice of Guaranteed Delivery.
If any Senior Notes to be tnedered are held in different names on
several Senior Notes, it will be necessary to complete, sign, and submit as
many separate copies of the Notice of Guaranteed Delivery documents as there
are names in which Senior Notes to be tendered are held.
If this Notice of Guaranteed Delivery or any Senior Notes are signed
by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations, or others acting in a fuduciary or representative
capacity, such persons should so indicate when signing and, unless waived by
the Company, evidence satisfactory to the Company of their authority to so act
must be submitted with this Notice of Guaranteed Delivery.
3. Requests for Assistance of Additional Copies. Questions and requests
for assistance and requests for additional copies of the prospectus my be
directed to the Exchange Agent at the address specified in the Prospectus.
Holders also may contact their broker, dealer, commercial bank, trust
company, or other nominee for assistance concerning the Exchange Offer.
3
FORM OF LETTER TO CLIENTS Exhibit 99.3
regarding the Offer to Exchange
$150,000,000 principal amount of 9 5/8% Senior Notes due 2007, Series B
for any and all outstanding
$150,000,000 principal amount of 9 5/8% Senior Notes due 2007, Series A
of
Delta Mills, Inc.
To Our Clients:
We are enclosing herewith a Prospectus, dated
[_______], 1997, of Delta Mills, Inc. (the "Company") and a
related Letter of Transmittal (which together constitute
the "Exchange Offer") relating to the offer by the Company
to exchange its new 9 5/8 % Senior Notes due 2007, Series
B (the "Exchange Notes"), pursuant to an offering
registered under the Securities Act of 1933, as amended
(the "Securities Act"), for a like principal amount of its
issued and outstanding 9 5/8% Senior Notes due 2007, Series
A (the "Senior Notes") upon the terms and subject to the
conditions set forth in the Prospectus and the Letter of
Transmittal.
Please note that the Exchange Offer will expire at 5:00
p.m., New York City time, on [25 days after effectiveness],
1997, unless extended.
The Exchange Offer is not conditioned upon any minimum
number of Senior Notes being tendered.
We are the Registered Holder or DTC participant through
which you hold an interest in the Senior Notes. A tender of
such Senior Notes can be made only by us pursuant to your
instructions. The Letter of Transmittal is furnished to
you for your information only and cannot be used by you to
tender your beneficial ownership of Senior Notes held by us
for your account.
We request instructions as to whether you wish to
tender any or all of your Senior Notes held by us for your
account pursuant to the terms and subject to the conditions
of the Exchange Offer. We also request that you confirm
that we may on your behalf make the representations
contained in the Letter of Transmittal that are to be made
with respect to you as beneficial owner.
Pursuant to the Letter of Transmittal, each holder of
Senior Notes must make certain representations and
warranties that are set forth in the Letter of
Transmittal and in the attached form that we have provided
to you for your instructions regarding what action we
should take in the Exchange Offer with respect to your
interest in the Senior Notes.
Exhibit 99.4
FORM OF LETTER TO REGISTERED HOLDERS AND DTC PARTICIPANTS
regarding the Offer to Exchange
$150,000,000 principal amount of 9 5/8% Senior Notes due 2007, Series B
for any and all outstanding
$150,000,000 principal amount of 9 5/8% Senior Notes due 2007, Series A
of
Delta Mills, Inc.
To Registered Holders and The Depository Trust Company Participants:
We are enclosing herewith the materials listed below
relating to the offer by Delta Mills, Inc. (the "Company")
to exchange its new 9 5/8 % Senior Notes due 2007,
Series B (the "Exchange Notes"), pursuant to an offering
registered under the Securities Act of 1933, as amended
(the "Securities Act"), for a like principal amount of
its issued and outstanding 9 5/8% Senior Notes due 2007,
Series A (the "Senior Notes") upon the terms and subject to
the conditions set forth in the Company's Prospectus,
dated [___________], 1997, and the related Letter of
Transmittal (which together constitute the "Exchange
Offer").
Enclosed herewith are copies of the following documents:
1. Prospectus dated [________], 1997;
2. Letter of Transmittal;
3. Notice of Guaranteed Delivery;
4. Instruction to Registered Holder or DTC
Participant from Beneficial Owner; and
5. Letter which may be sent to your clients for whose
account you hold Definitive Registered Notes (as
defined in the Letter of Transmittal) or Book-
Entry Interests(as defined in the Letter of
Transmittal) representing Senior Notes in your
name or in the name of your nominee, to accompany
the instruction form referred to above, for
obtaining such client's instruction with regard to
the Exchange Offer.
We urge you to contact your clients promptly. Please note
that the Exchange Offer will expire at
5:00 p.m., New York City time, on [25 business days after
effectiveness], 1997, unless extended.
The Exchange Offer is not conditioned upon any minimum
number of Senior Notes being tendered.
To participate in the Exchange Offer, a beneficial
holder must either (i) cause to be delivered to The Bank of
New York (the "Exchange Agent") at the address set forth
in the Letter of Transmittal Definitive Registered Notes
(as defined in the Letter of Transmittal) in proper form
for transfer together with a properly executed Letter
of Transmittal or (ii) cause a DTC Participant to
tender such holder's Senior Notes to the Exchange Agent's
account maintained at the Depository Trust Company ("DTC")
for the benefit of the Exchange Agent through DTC's
Automated Tender Offer Program ("ATOP"), including
transmission of a computer-generated message that
acknowledges and agrees to be bound by the terms of
the Letter of Transmittal. By complying with DTC's ATOP
procedures with respect to the Exchange Offer, the DTC
Participant confirms on behalf of itself and the
beneficial owners of tendered Senior Notes all provisions
of the Letter of Transmittal applicable to it and such
beneficial owners as fully as
if it completed, executed and returned the Letter
of Transmittal to the Exchange Agent.
Pursuant to the Letter of Transmittal, each holder of
Senior Notes will represent to the Company that: (i) the
Exchange Notes or Book-Entry Interests therein to be
acquired by such holder and any beneficial owner(s) of such
Senior Notes or interests therein ("Beneficial Owner(s)") in
connection with the Exchange Offer are being acquired by
such holder and any Beneficial Owner(s) in the ordinary
course of business of the holder and any Beneficial
Owner(s), (ii) the holder and each Beneficial Owner
are not participating, do not intend to participate,
and have no arrangement or understanding with any person to
participate, in the distribution of the Exchange Notes,
(iii) the holder and each Beneficial Owner acknowledge and
agree that any person who is a broker-dealer registered
under the Securities Exchange Act of 1934, as amended
(the "Exchange Act") or is participating in the Exchange
Offer for the purpose of distributing the Exchange Notes
must comply with the registration and prospectus
delivery requirements of the Securities Act in connection
with a secondary resale transaction of the Exchange Notes
or interests therein acquired by such person and cannot
rely on the position of the staff of the Commission set
forth in certain no-action letters, (iv) the holder and
each Beneficial Owner understands that a secondary
resale transaction described in clause (iii) above and any
resales of Exchange Notes or interests therein obtained
by such holder in exchange for Senior Notes or interests
therein originally acquired by such holder directly from
the Company should be covered by an effective
registration statement containing the selling security holder information
required by Item 507 or Item 508, as applicable, of
Regulation S-K of the Commission and (v) neither the
holder nor any Beneficial Owner(s) is an "affiliate," as
defined in Rule 405 under the Securities Act, of the
Company. Upon a request by the Company, a holder or
beneficial owner will deliver to the Company a legal
opinion confirming its representation made in clause (v)
above. If the tendering holder of Senior Notes is a
broker-dealer (whether or not it is also an
"affiliate") or any Beneficial Owner(s) that will receive
Exchange Notes for its own or their account pursuant to the
Exchange Offer, the tendering holder will represent on
behalf of itself and the Beneficial Owner(s) that the Senior
Notes to be exchanged for the Exchange Notes were acquired
as a result of market-making activities or other trading
activities, and acknowledge on its own behalf and on the
behalf of such Beneficial Owner(s) that it or they will
deliver a prospectus meeting the requirements of the
Securities Act in connection with any resale of such
Exchange Notes; however, by so acknowledging and by
delivering a prospectus, such tendering holder will not be
deemed to admit that it or any Beneficial Owner is an
"underwriter" within the meaning of the Securities Act.
The enclosed "Instruction to Registered Holder
or DTC Participant from Beneficial Owner" form contains an
authorization by the beneficial owners of Senior Notes for
you to make the foregoing representations.
The Company will not pay any fee or commission to any
broker or dealer or to any other persons (other than the Exchange
Agent) in connection with the solicitation of tenders of
Senior Notes pursuant to the Exchange Offer. The Company
will pay or cause to be paid any transfer taxes payable on
the transfer of Senior Notes to it, except as otherwise
provided in Instruction 7 of the enclosed Letter of
Transmittal.
Additional copies of the enclosed material may be
obtained from The Bank of New York, 101 Barclay Street,
Seventh Floor, New York, NY 10286, Attention: Corporate
Trust Department.
Very truly yours,
Delta Mills, Inc.
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS
SHALL CONSTITUTE YOU THE AGENT OF DELTA MILLS, INC. OR THE
BANK OF NEW YORK OR AUTHORIZE YOU TO USE ANY DOCUMENT OR
MAKE ANY STATEMENT ON THEIR BEHALF IN CONNECTION WITH THE
EXCHANGE OFFER OTHER THAN THE DOCUMENTS ENCLOSED HEREWITH
AND THE STATEMENTS CONTAINED THEREIN.
Exhibit 99.5
FORM OF INSTRUCTION TO REGISTERED HOLDER OR DTC
PARTICIPANT FROM BENEFICIAL OWNER
for
9 5/8% Senior Notes due 2007, Series A
of
Delta Mills, Inc.
The undersigned hereby acknowledges receipt of the
Prospectus dated [________], 1997 (the "Prospectus"), of Delta
Mills, Inc., a company incorporated under the laws of Delaware
(the "Company"), and the accompanying Letter of
Transmittal (the "Letter of Transmittal") that together
constitute the Company's offer (the "Exchange Offer").
Capitalized terms used but not defined herein have the
meanings assigned to them in the Prospectus and the Letter
of Transmittal.
This will instruct you as to the action to be taken by
you relating to the Exchange Offer with respect to the 9 5/8%
Senior Notes due 2007, Series A (the "Senior Notes") held by you
for the account of the undersigned.
The principal amount of the Senior Notes held by you for
the account of the undersigned is (fill in amount):
$_____________________ principal amount of Senior Notes.
With respect to the Exchange Offer, the undersigned
hereby instructs you (check appropriate box):
To TENDER the following principal amount of Senior
Notes held by you for the account of the undersigned
(insert amount of Senior Notes to be tendered, if
any): $_______________ principal amount of Senior
Notes.
NOT to TENDER any Senior Notes held by you for
the account of the undersigned.
If the undersigned instructs you to tender the
Senior Notes held by you for the account of the
undersigned, it is understood that you are authorized:
(a) to make, on behalf of the undersigned (and
the undersigned, by its signature below, hereby makes to
you), the representations and warranties contained in the
Letter of Transmittal that are to
be made with respect to the
undersigned as a beneficial owner, including but not
limited to the representations that (i) the Exchange Notes
or BookEntry Interests therein to be acquired by the
undersigned (the "Beneficial Owner(s)") in connection with
the Exchange Offer are being acquired by the undersigned
in the ordinary course of business of the undersigned,
(ii) the undersigned is not participating, does not intend
to participate, and has no arrangement or understanding
with any person to
participate, in the distribution of the Exchange Notes,
(iii) the undersigned acknowledges and agrees that any
person who is a broker-dealer registered under the
Securities Exchange Act of 1934, as amended (the
"Exchange Act"), or is participating in the Exchange
Offer for the purpose of distributing the Exchange
Notes must comply with the
registration and prospectus delivery requirements of
the Securities Act in connection with a secondary
resale
transaction of the Exchange Notes or interests
therein acquired by such person and cannot rely on the
position of the staff of the Commission set forth in
certain no-action letters, (iv) the undersigned
understands that a secondary resale transaction
described in clause (iii) above and any resales of
Exchange Notes or interests therein obtained by such
holder in exchange for Senior Notes or interests therein
originally acquired by such holder directly from the
Company should be covered by an effective registration
statement containing the selling security holder
information required by Item 507 or Item 508, as
applicable, of Regulation S-K of the Commission and (v) the
undersigned is not an "affiliate," as defined in Rule
405 under the Securities Act, of the Company. Upon a
request by the Company, a holder or beneficial owner
will deliver to the Company a legal opinion confirming its
representation made in clause (v) above. If the
undersigned is a broker-dealer (whether or not it is also
an "affiliate") that will receive Exchange Notes for its
own account pursuant to the Exchange Offer, the
undersigned represents that the Senior Notes to be
exchanged for the Exchange Notes were acquired by it as
a result of marketmaking activities or other
trading activities, and
acknowledges that it will deliver a prospectus meeting
the requirements of the Securities Act in connection
with any resale of such Exchange Notes; however, by so
acknowledging and by delivering a prospectus, the
undersigned does not and will not be deemed to admit
that it is an "underwriter" within the meaning of the
Securities Act;
(b) to agree, on behalf of the undersigned, as
set forth in the Letter of Transmittal; and
(c) to take such other action as necessary under
the Prospectus or the Letter of Transmittal to
effect the valid tender of such Senior Notes.
SIGN HERE
Name of Beneficial
Owner(s):
Signature(s):
Name(s) (please
print):
Address:
Telephone
Number:
Taxpayer Identification or Social Security
number:
Date:
EXHIBIT 99.6
Delaware General Corporation Code 145
Indemnification of officers, directors, employees and
agents; in surance
(a) A corporation shall have power to indemnify 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 the person 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 or other enterprise, against
expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably
incurred by the person in connection with such action,
suit or proceeding if the person acted in good faith and in
a manner the person reasonably believed to be in or not
opposed to the best interests of the corporation, and,
with respect to any criminal action or proceeding, had no
reasonable cause to believe the person's conduct was
unlawful. The termination of any action, suit or
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 person did
not act in good faith and in a manner which the person
reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any
criminal action or proceeding, had reasonable cause to
believe that the
person's conduct was unlawful.
(b) A corporation shall have power to indemnify any
person who was or is a party or is threatened to be made
a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure
a judgment in its favor by reason of the fact that the
person 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 or
other enterprise against expenses (including attorneys'
fees) actually and reasonably incurred by the person in
connection with the defense or settlement of such action or
suit
if the person acted in good faith and in a manner the
person reasonably believed to be in or not opposed to the
best interests of the corporation and except that no
indemnification shall be made in respect of any claim,
issue or matter as to which such person shall have been
adjudged to be liable to the corporation unless and only
to the extent that the Court of Chancery or the court in
which
such action or suit was brought shall determine upon
application that, despite the adjudication of liability but
in view of all the circumstances of the case, such
person is fairly and reasonably entitled to indemnity
for such expenses which the Court of Chancery or such
other court shall deem proper.
(c) To the extent that a present or former
director or director of a corporation has been successful
on the merits or otherwise in defense of any action, suit
or proceeding referred to in subsections (a) and (b) of
this section, or in defense of any claim, issue or
matter therein, such person shall be indemnified
against expenses (including attorneys' fees) actually and
reasonably incurred by such person in connection therewith.
(d) Any indemnification under subsections (a) and (b) of
this section (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 present or former director, officer, employee
or agent is proper in the
circumstances because the person has met the applicable
standard of conduct set forth in subsections (a) and (b) of
this section. Such determination shall be made with respect
to a person who is a director or officer at the time of
such determination (1) by a majority vote of the
directors who are not parties to such action, suit or
proceeding, even though less than a quorum, or (2) by a
committee of such directors designated by majority vote of
such directors, even though less than a quorum, or (3)
if there are no such directors, or if such directors so
direct, by independent legal counsel in a written opinion,
or (4) by the stockholders.
(e) Expenses (including attorneys' fees) incurred
by an officer or
director in defending any civil, criminal,
administrative or investigative action, suit or proceeding
may be paid by the corporation in advance of the final
disposition of such action, suit or proceeding upon receipt
of an undertaking by or on behalf of such director or
officer to repay such amount if it shall ultimately be
determined that such person is not entitled to be
indemnified by the corporation as authorized in this
section. Such expenses (including attorneys' fees) incurred
by former officers and directors or other employees and
agents may be so paid upon such terms and conditions, if
any, as the corporation deems appropriate.
(f) The indemnification and advancement of expenses
provided by, or granted pursuant to, the other subsections
of this section shall not be deemed exclusive of any other
rights to which those seeking indemnification or
advancement of expenses may be
entitled under any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, both
as to action in such person's official capacity and as to
action in another capacity while holding such office.
(g) A corporation shall have power to purchase and
maintain insurance 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 or
other enterprise against any liability asserted against him
and incurred by s uch person in any such capacity, or
arising out of such person's status as such, whether or not
the corporation would have the power to indemnify such
person against such liability under this section.
(h) For purposes of this section, references to
"the corporation" shall include, in addition to the
resulting corporation, any constituent corporation
(including any
constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence
had continued, would have had power and authority to
indemnify its directors, officers, and employees or agents,
so that any person who is or was a director, officer,
employee or agent of such constituent corporation, or is or
was serving at the request of such constituent corporation
as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other
enterprise, shall stand in the same
position under this section with respect to the
resulting or surviving corporation as such person would
have with respect to such constituent corporation if
its separate existence had
continued.
(i) For purposes of this section, references to
"other enterprises" shall include employee benefit plans;
references to "fines" shall include any excise taxes
assessed on a person with respect to any employee benefit
plan; and references to "serving at the request of the
corporation" shall include any
service as a director, officer, employee or agent of
the corporation which imposes duties on, or involves
services by, such director, officer, employee or agent
with respect to an employee benefit plan, its
participants or beneficiaries; and a person who acted
in good faith and in a manner he reasonably believed to
be in the interest of the participants and
beneficiaries of an employee benefit plan shall be deemed to
have acted in a manner "not opposed to the best
interests of the corporation" as referred to in this
section.
(j) The indemnification and advancement of expenses
provided by, or granted pursuant to, this section shall,
unless otherwise provided when authorized or ratified,
continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit
of the heirs, executors and administrators of such a person.
(k) The Court of Chancery is hereby vested with
exclusive jurisdiction to hear and determine all actions for
advancement of expenses or indemnification brought under
this section or under any bylaw, agreement, vote of
stockholders or disinterested directors, or otherwise.
The Court of Chancery may summarily determine a
corporation's obligation to advance expenses (including
attorneys' fees).
