<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 17, 1998.
REGISTRATION NO. 333-46209
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
AMENDMENT NO. 1
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
PILLOWTEX CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
<TABLE>
<S> <C> <C>
TEXAS 2392 75-2147728
(State or Other Jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Incorporation or Classification Control Identification No.)
Organization) Number)
</TABLE>
4111 MINT WAY
DALLAS, TEXAS 75237
(214) 333-3225
(Address, Including Zip Code, and Telephone
Number, Including Area Code,
of Registrant's Principal Executive Offices)
---------------------
JEFFREY D. CORDES
PRESIDENT AND CHIEF OPERATING OFFICER
PILLOWTEX CORPORATION
4111 MINT WAY
DALLAS, TEXAS 75237
(214) 333-3225
(Name, Address, Including Zip Code,
and Telephone Number, Including
Area Code, of Agent For Service)
SEE TABLE OF ADDITIONAL REGISTRANTS ON THE FOLLOWING PAGE FOR INFORMATION
RELATING TO THE GUARANTORS OF THE SECURITIES REGISTERED HEREBY.
---------------------
Copies to:
KATHLEEN R. MCLAURIN, ESQ.
JONES, DAY, REAVIS & POGUE
2300 TRAMMELL CROW CENTER
2001 ROSS AVENUE
DALLAS, TEXAS 75201
(214) 220-3939
---------------------
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. [ ]
---------------------
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON
SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(A), MAY DETERMINE.
================================================================================
<PAGE> 2
TABLE OF ADDITIONAL REGISTRANTS
The address of the principal executive offices of each of the additional
registrants listed below, and the name and address of the agent for service
therefor, is the same as is set forth for Pillowtex Corporation on the facing
page of this Registration Statement.
<TABLE>
<CAPTION>
JURISDICTION OF PRIMARY STANDARD I.R.S.
EXACT NAME INCORPORATION INDUSTRIAL EMPLOYER
AS SPECIFIED OR CLASSIFICATION IDENTIFICATION
IN THEIR CHARTERS ORGANIZATION NUMBER NUMBER
----------------- --------------- ---------------- --------------
<S> <C> <C> <C>
Amoskeag Company Delaware 6744 04-1032485
Amoskeag Management Corporation Delaware 8980 04-2846718
Bangor Investment Company Maine 6748 01-0200600
Beacon Manufacturing Company North Carolina 2281 75-2568775
Crestfield Cotton Company Tennessee 2298 62-0909424
Downeast Securities Corporation Delaware 6749 13-3105881
Encee, Inc. Delaware 5700 56-1675214
FCC Canada, Inc. Delaware 2298 56-1813430
Fieldcrest Cannon Financing, Inc. Delaware 8980 56-1899877
Fieldcrest Cannon, Inc. Delaware 2390 56-0586036
Fieldcrest Cannon International, Inc. Delaware 6749 56-0844275
Fieldcrest Cannon Licensing, Inc. Delaware 8980 56-1899876
Fieldcrest Cannon Sure Fit, Inc. Delaware 2390 56-1903913
Fieldcrest Cannon Transportation, Inc. Delaware 4200 56-1899875
Manetta Home Fashions, Inc. North Carolina 2211, 2297 56-1835854
Moore's Falls Corporation Delaware 6748 04-2485069
Pillowtex, Inc. Delaware 2392 13-3876864
Pillowtex Management Services Company Delaware 2211, 2221 75-2639144
PTEX Holding Company Delaware 6719 51-0373367
St. Mary's, Inc. Delaware 6749 56-1968253
Tennessee Woolen Mills, Inc. Tennessee 2231, 2297 62-1202303
</TABLE>
<PAGE> 3
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED FEBRUARY 17, 1998
PILLOWTEX CORP. LOGO
PROSPECTUS
OFFER TO EXCHANGE
9% SENIOR SUBORDINATED NOTES DUE 2007,
FOR ANY AND ALL OUTSTANDING
9% SENIOR SUBORDINATED NOTES DUE 2007
---------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY
TIME, ON MARCH 25, 1998, UNLESS EXTENDED.
---------------------
Pillowtex Corporation, a Texas corporation (the "Company"), hereby offers,
upon the terms and subject to the conditions set forth in this Prospectus and
the accompanying Letter of Transmittal (the "Letter of Transmittal"), to
exchange (the "Exchange Offer") its outstanding 9% Senior Subordinated Notes Due
2007 (the "Series A Notes"), of which $185,000,000 aggregate principal amount is
outstanding as of the date hereof, for an equal aggregate principal amount of
its newly issued 9% Senior Subordinated Notes Due 2007 (the "Series B Notes")
which have been registered under the Securities Act of 1933, as amended (the
"Securities Act"). The Series B Notes are being offered hereby in order to
satisfy certain obligations of the Company and the Guarantors (as defined
herein) under the Registration Rights Agreement, dated December 18, 1997, among
the Company and certain other signatories thereto (the "Registration Rights
Agreement"). The form and terms of the Series B Notes will be the same as those
of the Series A Notes except that the Series B Notes will have been registered
under the Securities Act, and consequently will not be subject to certain
transfer restrictions, registration rights and related liquidated damages
provisions applicable to the Series A Notes. The Series B Notes will evidence
the same debt as the Series A Notes and will be entitled to the benefits of an
indenture (the "Indenture"), dated as of December 18, 1997, by and among the
Company, the Guarantors and Norwest Bank Minnesota, National Association, as
trustee (the "Trustee"). The Indenture provides for the issuance of both the
Series A Notes and the Series B Notes. The Series A Notes and the Series B Notes
are referred to herein collectively as the "Notes" and holders of the Notes are
sometimes referred to herein as the "Holders."
The Series A Notes were issued on December 18, 1997 pursuant to an offering
(the "Offering") that was exempt from registration under the Securities Act. The
Series A Notes were issued in connection with the merger (the "Merger") on
December 19, 1997 of Fieldcrest Cannon, Inc. ("Fieldcrest") with and into a
wholly owned subsidiary of the Company pursuant to the Merger Agreement (as
defined herein).
The Notes mature on December 15, 2007, unless previously redeemed. Interest
on the Notes will be payable semiannually in arrears on June 15 and December 15
of each year commencing June 15, 1998. The Notes will be redeemable at the
option of the Company, in whole or in part, on or after December 15, 2002, at
the redemption prices set forth herein, plus accrued and unpaid interest
thereon, and Liquidated Damages (as defined herein), if any, to the redemption
date. 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 aggregate
principal amount thereof plus accrued and unpaid interest thereon, and
Liquidated Damages, if any, to the date of repurchase.
The Series A Notes are, and the Series B Notes will be, general unsecured
obligations of the Company, ranking senior in right of payment to all existing
and future subordinated indebtedness of the Company, pari passu in right of
payment with the Company's existing 10% Senior Subordinated Notes due 2006 (the
"10% Senior Subordinated Notes"), and subordinated in right of payment to all
existing and future Senior Indebtedness (as defined herein) of the Company,
including indebtedness under the New Senior Credit
(continued on next page)
SEE "RISK FACTORS" BEGINNING ON PAGE 16 FOR A DISCUSSION OF CERTAIN
FACTORS THAT
SHOULD BE CONSIDERED BY HOLDERS PRIOR TO TENDERING THEIR SERIES A NOTES IN 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.
---------------------
This Prospectus is dated , 1998.
<PAGE> 4
(continued from cover page)
Facilities (as defined herein). The Series A Notes are, and the Series B Notes
will be, fully and unconditionally guaranteed on a senior basis (the "Subsidiary
Guarantees") by each of the Company's current and future domestic Subsidiaries
(as defined herein) (the "Guarantors"), including Fieldcrest. The Subsidiary
Guarantees are senior unsecured obligations, ranking senior in right of payment
to all existing and future subordinated indebtedness of the Guarantors, pari
passu in right of payment to the Guarantor's guarantees of the 10% Senior
Subordinated Notes, and subordinated in right of payment to all existing and
future senior indebtedness of the Guarantors, including the guarantees of
indebtedness under the New Senior Credit Facilities. As of September 27, 1997,
on a pro forma basis after giving effect to the consummation of the Merger and
the related Financing Transactions (as defined herein), including the Offering,
and the application of the proceeds from the Financing Transactions as described
under "Use of Proceeds," the Company and its subsidiaries on a consolidated
basis would have had $420.0 million of indebtedness (excluding $37.8 million in
letters of credit) effectively ranking senior to the Notes. See "Description of
Notes."
The Company will accept for exchange any and all Series A Notes that are
properly tendered in the Exchange Offer and not withdrawn prior to 5:00 p.m.,
New York City time, on March 25, 1998 (such date if and as it may be extended,
the "Expiration Date"). Tenders of Series A Notes may be withdrawn at any time
prior to 5:00 p.m., New York City time, on the Expiration Date. In the event the
Exchange Offer is terminated, the Series A Notes not accepted for exchange will
be returned without expense to the tendering holders as promptly as practicable.
See "The Exchange Offer."
Based on interpretations by the staff of the Securities and Exchange
Commission (the "Commission") as set forth in no action letters issued to third
parties, the Company believes that Series B Notes issued pursuant to the
Exchange Offer in exchange for Series A Notes may be offered for resale, resold
and otherwise transferred by Holders thereof (other than any such Holder which
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 such Series B Notes are acquired
in the ordinary course of such Holder's business and such Holder has no
arrangement with any person to participate in the distribution of such Series B
Notes. The Company does not intend to request the Commission to consider, and
the Commission has not considered, the Exchange Offer in the context of a
no-action letter and there can be no assurance that the staff of the Commission
would make a similar determination with respect to the Exchange Offer as in such
other circumstances. Each Holder, other than a broker-dealer, must acknowledge
that it is not engaged in, and does not intend to engage in, a distribution of
such Series B Notes and has no arrangement or understanding to participate in a
distribution of Series B Notes. Each broker-dealer that receives Series B 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 Series B 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 Series B Notes received in exchange for Series A
Notes where such Series A Notes were acquired by such broker-dealer as a result
of market-making activities or other trading activities. The Company has agreed
that, for a period of one year after the Registration Statement has been
declared effective, it will make this Prospectus available to any broker-dealer
for use in connection with any such resale. See "The Exchange Offer" and "Plan
of Distribution."
There is no existing trading market for the Notes, and there can be no
assurance regarding the future development of a market for the Notes, or the
ability of Holders of the Notes to sell their Notes or the price at which such
Holders may be able to sell their Notes. The Company does not intend to list the
Notes on any securities exchange nor has the Company entered into any
arrangement or understanding with any person to distribute the Notes to be
received in the Exchange Offer.
Holders of Series A Notes whose Series A Notes are not tendered and
accepted in the Exchange Offer will continue to hold such Series A Notes and
will be entitled to all the rights and preferences and subject to the
limitations applicable thereto under the Indenture. Following consummation of
the Exchange Offer, the Holders of Series A Notes will continue to be subject to
the existing restrictions upon transfer thereof, and the Company will have no
further obligation to such Holders to provide for the registration under the
Securities Act of the Series A Notes.
The Company will not receive any proceeds from, and has agreed to bear all
registration expenses of, the Exchange Offer. No underwriter is being used in
connection with the Exchange Offer. See "The Exchange Offer -- Fees and
Expenses."
<PAGE> 5
AVAILABLE INFORMATION
The Company is subject to the information and reporting requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files periodic reports, proxy statements, and other
information with the Commission. Such reports, proxy statements, and other
information may be inspected and copied at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Room 1024, Washington,
D.C. 20549; 7 World Trade Center, Suite 1300, New York, New York 10048; and
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
The Commission also maintains a Website, located at http://www.sec.gov, that
contains reports, proxy statements, and other information regarding registrants
that file electronically with the Commission. Copies of such reports, proxy
statements, and other information also may be obtained by mail from the Public
Reference Section of the Commission, 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates. Such reports, proxy statements, and other
information relating to Pillowtex may also be inspected at the offices of the
New York Stock Exchange ("NYSE") at 20 Broad Street, New York, New York 10005.
The Common Stock, par value $0.01 per share, of the Company (the "Pillowtex
Common Stock") is listed and traded on the NYSE under the symbol "PTX."
The Company and the Guarantors have filed with the Commission a
registration statement on Form S-4 (including the exhibits and amendments
thereto, the "Registration Statement") under the Securities Act with respect to
the Series B Notes offered hereby. As permitted under the Securities Act and the
Exchange Act, this Prospectus does not contain all the information set forth in
the Registration Statement. Such additional information can be inspected and
copied or obtained from the Commission in the manner described above. Statements
contained in this Prospectus as to the contents of any other document referred
to herein are not necessarily complete, and each such statement is qualified in
all respects by reference to the copy of such other document filed as an exhibit
to the Registration Statement.
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 Notes remain
outstanding, it will furnish to the holders of the Notes and file with the
Commission (unless the Commission will not accept such filing) (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 pursuant to the Exchange Act including a "Management's
Discussion and Analysis of Results of Operations and Financial Condition" and,
with respect to the annual financial statements only, a report thereon by the
Company's independent 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.
NO PERSONS HAVE BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL,
OR A SOLICITATION OF AN OFFER TO BUY, ANY SECURITIES IN ANY JURISDICTION TO OR
FROM ANY PERSON TO WHOM IT IS NOT LAWFUL TO MAKE ANY SUCH OFFER OR SOLICITATION
IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
DISTRIBUTION OF SECURITIES MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE
AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE FACTS SET FORTH IN THIS
PROSPECTUS OR THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE
INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
THIS PROSPECTUS INCORPORATES CERTAIN DOCUMENTS BY REFERENCE WHICH ARE NOT
PRESENTED HEREIN OR DELIVERED HEREWITH. SUCH DOCUMENTS (OTHER THAN EXHIBITS TO
SUCH DOCUMENTS UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE)
ARE AVAILABLE WITHOUT CHARGE TO ANY PERSON TO WHOM THIS PROSPECTUS IS DELIVERED
UPON WRITTEN OR ORAL REQUEST. REQUESTS FOR SUCH DOCUMENTS SHOULD BE DIRECTED TO
PILLOWTEX CORPORATION, 4111 MINT WAY, DALLAS, TEXAS 75237, ATTENTION: MARK
KIRKPATRICK, TELEPHONE (214) 333-3225. IN ORDER TO ENSURE TIMELY DELIVERY OF
DOCUMENTS, ANY REQUEST SHOULD BE MADE BY MARCH 18, 1998.
(ii)
<PAGE> 6
The following documents which have been filed by the Company with the
Commission are hereby incorporated by reference in this Prospectus: (i) Annual
Report on Form 10-K for the year ended December 28, 1996; (ii) Quarterly Reports
on Form 10-Q for the fiscal quarters ended March 29, 1997, June 28, 1997, and
September 27, 1997; (iii) Current Report on Form 8-K, dated September 10, 1997
(as amended by an amendment on Form 8-K/A); (iv) Proxy Statement on Schedule 14A
for the Annual Meeting of Shareholders held May 8, 1997; (v) Registration
Statement on Form 8-A, effective March 17, 1993 (Commission File No. 1-11756),
and (vi) Current Report on Form 8-K, dated January 6, 1998 (as amended by an
amendment on Form 8-K/A).
The following documents which have been filed by Fieldcrest with the
Commission are hereby incorporated by reference in this Prospectus: (i) Annual
Report on Form 10-K for the year ended December 31, 1996; (ii) Quarterly Reports
on Form 10-Q for the quarters ended March 31, 1997, June 30, 1997, and September
30, 1997; (iii) Current Report on Form 8-K, dated September 15, 1997; and (iv)
Current Report on Form 8-K dated December 29, 1997.
The information relating to Pillowtex and Fieldcrest contained in this
Prospectus should be read together with the information in the documents
incorporated by reference.
All documents and reports filed by the Company pursuant to Section 13(a),
13(c), 14, or 15(d) of the Exchange Act after the date of this Prospectus and
prior to the termination of the Exchange Offer are deemed to be incorporated by
reference in this Prospectus and to be a part hereof from the dates of filing of
such documents or reports. Any statement contained in a document incorporated or
deemed to be incorporated by reference herein is deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any other subsequently filed documents which also is or
is deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded will not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
NOTE REGARDING FORWARD-LOOKING INFORMATION
THE INFORMATION CONTAINED IN THIS PROSPECTUS CONTAINS "FORWARD-LOOKING
STATEMENTS" WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT
OF 1995, WHICH ARE IDENTIFIED BY THE USE OF FORWARD-LOOKING TERMINOLOGY SUCH AS
"MAY," "WILL," "COULD," "SHOULD," "EXPECT," "ANTICIPATE," "INTEND," "PLAN,"
"ESTIMATE," OR "CONTINUE" OR THE NEGATIVE THEREOF OR OTHER VARIATIONS THEREOF.
SUCH FORWARD-LOOKING STATEMENTS ARE NECESSARILY BASED ON VARIOUS ASSUMPTIONS AND
ESTIMATES AND ARE INHERENTLY SUBJECT TO VARIOUS RISKS AND UNCERTAINTIES,
INCLUDING RISKS AND UNCERTAINTIES RELATING TO THE POSSIBLE INVALIDITY OF THE
UNDERLYING ASSUMPTIONS AND ESTIMATES AND POSSIBLE CHANGES OR DEVELOPMENTS IN
SOCIAL, ECONOMIC, BUSINESS, INDUSTRY, MARKET, LEGAL, AND REGULATORY
CIRCUMSTANCES AND CONDITIONS AND ACTIONS TAKEN OR OMITTED TO BE TAKEN BY THIRD
PARTIES, INCLUDING CUSTOMERS, SUPPLIERS, BUSINESS PARTNERS, AND COMPETITORS AND
LEGISLATIVE, REGULATORY, JUDICIAL, AND OTHER GOVERNMENTAL AUTHORITIES AND
OFFICIALS. IN ADDITION TO ANY RISKS AND UNCERTAINTIES SPECIFICALLY IDENTIFIED IN
THE TEXT SURROUNDING SUCH FORWARD-LOOKING STATEMENTS, THE STATEMENTS IN "RISK
FACTORS" BEGINNING ON PAGE 16 OF THIS PROSPECTUS OR IN THE REPORTS, PROXY
STATEMENTS, AND OTHER INFORMATION REFERRED TO IN "AVAILABLE INFORMATION"
CONSTITUTE CAUTIONARY STATEMENTS IDENTIFYING IMPORTANT FACTORS THAT COULD CAUSE
ACTUAL AMOUNTS, RESULTS, EVENTS, AND CIRCUMSTANCES TO DIFFER MATERIALLY FROM
THOSE REFLECTED IN SUCH FORWARD-LOOKING STATEMENTS.
(iii)
<PAGE> 7
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information....................................... ii
Incorporation of Certain Information by Reference........... ii
Note Regarding Forward-Looking Information.................. iii
Summary..................................................... 1
Risk Factors................................................ 16
The Merger.................................................. 23
Use of Proceeds............................................. 25
Pro Forma Capitalization of Pillowtex....................... 26
Unaudited Pro Forma Combined Financial Information.......... 28
Selected Historical Financial Information of Pillowtex...... 36
Selected Historical Financial Information of Fieldcrest..... 37
Pro Forma Liquidity and Capital Resources................... 38
The Exchange Offer.......................................... 39
Business.................................................... 46
Description of Notes........................................ 59
Post-Merger Indebtedness.................................... 87
Pillowtex Series A Redeemable Convertible Preferred Stock... 90
Certain United States Federal Income Tax Considerations..... 92
Plan of Distribution........................................ 93
Legal Matters............................................... 93
Experts..................................................... 93
</TABLE>
(iv)
<PAGE> 8
SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and financial data, including
the financial statements and notes thereto included elsewhere in this
Prospectus.
On December 19, 1997, Fieldcrest merged with and into a wholly owned
subsidiary of Pillowtex pursuant to an Agreement and Plan of Merger dated
September 10, 1997 (as amended, the "Merger Agreement"). Upon consummation of
the Merger, Fieldcrest became a wholly owned subsidiary of Pillowtex. Except as
otherwise required by the context, references herein to periods prior to
December 19, 1997 to (i) "Pillowtex" are to Pillowtex Corporation and its
subsidiaries prior to giving effect to the Merger; (ii) "Fieldcrest" are to
Fieldcrest Cannon, Inc. and its subsidiaries prior to giving effect to the
Merger; and (iii) the "Company" are to Pillowtex Corporation and its
subsidiaries, including Fieldcrest, following the Merger. References herein to
periods after December 19, 1997 to "Pillowtex" or the "Company" include
Fieldcrest and its subsidiaries.
The unaudited pro forma condensed combined financial information contained
herein gives effect to the consummation of the Merger and the Financing
Transactions, as if such transactions had been consummated as of September 27,
1997, in the case of the balance sheet information of Pillowtex, and on December
31, 1995, the first day of Pillowtex's 1996 fiscal year, in the case of the
statement of operations information. References herein to "fiscal" years are
references to fiscal years of Pillowtex (which end on December 31 for years
prior to 1995 and on the Saturday nearest December 31 for years after 1994) or
to fiscal years of Fieldcrest (which end on December 31), as the case may be.
THE COMPANY
The Company is one of the largest, based on net sales, North American
designers, manufacturers, and marketers of home textile products, offering a
full line of bed pillows, sheets, blankets, mattress pads, down comforters,
towels, bath rugs, and other home textile products. As a leading supplier across
all distribution channels, the Company sells its products to most major mass
merchants, department stores, and specialty retailers, providing its customers a
centralized "one-stop" source for their home textile merchandise.
The Company manufactures and markets products utilizing established and
well recognized Company-owned trademarks and trade names, including Royal
Velvet(R), Cannon(R), Charisma(R), Touch of Class(R), Fieldcrest(R), Nettle
Creek(R), and Beacon(R). In addition, the Company has licensed, for certain
products, highly recognizable brands such as Ralph Lauren, Disney's Mickey
UNLIMITED(R), Mickey's Stuff for Kids(R), and Mickey & Co.(R), Comforel(R),
Adrienne Vittadini(R), Ellen Tracy(R), and Waverly(R) as well as such well-known
copyrighted characters as Mickey Mouse and Winnie the Pooh. This diverse
portfolio of premier brand names allows the Company to differentiate its
products from those of its competitors and provides distinct brand names for
different channels of retail distribution and for different price points. The
Company believes that this portfolio of well-known brands and trade names
provides it with a significant competitive advantage.
On a pro forma combined basis, after giving effect to the Merger and the
Financing Transactions, the Company would have had net sales and pro forma
EBITDA (as defined herein) of approximately $1.6 billion and $158.5 million,
respectively, for the last 12 months ended September 27, 1997. See "Business --
General."
The Company's principal executive office is located at 4111 Mint Way,
Dallas, Texas 75237, and its telephone number is (214) 333-3225.
RECENT DEVELOPMENTS
Since the consummation of the Merger on December 19, 1997, the Company has
disposed of certain non-core business assets of Fieldcrest for approximately
$24.0 million in cash. The Company plans to continue to evaluate certain
Fieldcrest properties and lines of business unrelated to its core home textile
business of towels, bath rugs, sheets and fashion bedding and expects to enter
into additional agreements for the disposal of these properties and businesses.
1
<PAGE> 9
On January 20, 1998, the Company announced that it was consolidating its
four blanket production units into two facilities in Westminster, South Carolina
and Swannanoa, North Carolina. In connection with this consolidation the Company
has announced that it is closing certain facilities operated by its
subsidiaries, Manetta Home Fashions, Inc. and Tennessee Woolen Mills, Inc. The
consolidation is expected to be completed by the end of the second quarter of
this year. As part of the consolidation, the Company will take a pre-tax charge
to earnings of approximately $6.0 million for the period ended January 3, 1998,
and approximately $1.5 million for the period ending April 4, 1998. Management
expects these nonrecurring costs to be initially funded through cash flows and
borrowings under the New Senior Credit Facilities.
PILLOWTEX
Pillowtex, founded in 1954, is a leading North American designer,
manufacturer, and marketer of bed pillows, blankets, mattress pads, and down
comforters. Other complementary bedroom textile furnishings offered by Pillowtex
include comforter covers, featherbeds, pillow protectors, decorative pillows,
bedspreads, synthetic comforters, pillow shams, dust ruffles, and window
treatments. Pillowtex has positioned itself as a single-source supplier to
retailers for top-of-the-bed home textile furnishings (other than sheets),
offering a broad assortment of products across multiple price points.
Pillowtex markets its products primarily to department stores, mass
merchants, wholesale clubs, specialty retail stores, catalogs, and institutional
distributors. Pillowtex believes it is one of the principal suppliers of bedroom
textile products to several of the largest retailers in the United States,
including Wal-Mart Stores, Inc. (including Wal-Mart and Sam's Club stores)
("Wal-Mart"), Dayton Hudson Corporation (including Mervyn's, Marshall Field's,
and Target stores) ("Dayton Hudson") and Federated Department Stores, Inc.
(including Macy's East and Macy's West, Bloomingdale's, and Burdine's stores)
("Federated").
Pillowtex manufactures and markets its products under numerous
Company-owned trademarks, trade names, and customer-owned private labels, as
well as certain licensed trademarks. Pillowtex uses trademarks, trade names, and
private labels as merchandising tools to assist its customers in coordinating
their product offerings and to differentiate their products from those of their
competitors. Pillowtex has also entered into various license agreements under
which it markets pillows, down comforters, blankets, and related products, using
such well-known trademarks as Ralph Lauren, The Walt Disney Company's ("Disney")
Mickey UNLIMITED(R), Mickey's Stuff for Kids(R), and Mickey & Co.(R), and
Comforel(R). In 1996, Pillowtex entered into exclusive license agreements with
Fieldcrest for the manufacture and sale of various goods including bed pillows,
mattress pads, and down comforters under a variety of Fieldcrest's trademarks,
including Royal Velvet(R), Cannon(R), Charisma(R), Touch of Class(R), and
Fieldcrest(R). In addition, Pillowtex manufactures pillows, blankets, throws,
and mattress pads under the MARTHA STEWART EVERYDAY(TM) brand name for Kmart
Corporation ("Kmart").
Pillowtex's net sales and EBITDA were $525.5 million and $59.0 million,
respectively, for the 12 months ended September 27, 1997. See "Business."
FIELDCREST
Fieldcrest, founded in 1953, designs, manufactures, and markets a broad
range of household textile products including towels, bath rugs, sheets, and
comforters. Other complementary products include furniture coverings, ceramic
accessories, and shower curtains. Fieldcrest is the leading supplier of towels
in North America and has a significant market share in bath rugs, sheets, and
fashion bedding items.
Fieldcrest markets a broad range of household textile products through all
major distribution channels, including department stores, mass merchants,
wholesale clubs, specialty retail stores, catalogs, and institutional
distributors. Fieldcrest is a leading supplier to department and specialty
stores, including Federated, The May Department Stores Company, Dayton Hudson,
and Bed Bath & Beyond Inc. In addition, Fieldcrest has achieved a significant
market share in the mass merchant channel by developing relationships with the
channel's leading retailers including Wal-Mart, Kmart, and Target. Fieldcrest
also serves the institutional
2
<PAGE> 10
segment of the industry, including Hilton Hotels Corporation; Marriott Hotels,
Resorts, and Suites, a division of Marriott International, Inc.; and Hyatt
Hotels Corporation.
Fieldcrest's bed and bath products are sold under such brand names as Royal
Velvet(R), Cannon(R), Charisma(R), Fieldcrest(R), Royal Family(R), Caldwell(R),
and St. Mary's(R). Fieldcrest also has license agreements for the use of various
trademarks, including Waverly(R), Adrienne Vittadini(R), Court of Versailles(R),
Ellen Tracy(R), and others. In 1996, approximately 93% of Fieldcrest's sales
were derived from products carrying Fieldcrest's brand names. The Company
believes that Fieldcrest's principal brand names are widely recognized in the
industry as representing excellence and value in product quality, fashion, and
design.
Fieldcrest's net sales and EBITDA were $1.1 billion and $77.9 million,
respectively, for the 12 months ended September 30, 1997.
COMPETITIVE STRENGTHS
The Merger has created one of the largest firms, based on net sales, in the
home textile industry with competitive strengths that are significantly greater
than those of either Pillowtex or Fieldcrest on a stand-alone basis. The Company
has the largest market share in North America in each of the towel, bed pillow,
blanket, and down comforter product segments and a significant market share in
sheets, mattress pads, fashion bedding, and bath rugs.
Pillowtex's management team has successfully integrated eight acquisitions
over the last five years while improving Pillowtex's overall efficiency and
consistently producing a record of growth and profitability. From 1991 through
1996, Pillowtex's net sales have increased from $259.0 million to $490.7
million, representing a compound annual growth rate of 13.6%. Over this same
period Pillowtex's EBITDA has improved from $22.0 million to $50.9 million,
representing a compound annual growth rate of 18.3%. The combined company's
management team will provide a breadth of expertise rivaling any in the
industry.
The Company's management team will use the following competitive strengths
to enhance the Company's position in the marketplace:
- Industry Leading Brands: As a result of the Merger, the Company owns some
of the most recognizable brands in the industry, including Royal
Velvet(R), Cannon(R), Charisma(R), and Touch of Class(R). Recent consumer
research has shown that Cannon(R) and Fieldcrest(R) are the two most
recognized home textile brands in the United States. In addition,
Cannon(R) is the sixth most recognized domestic consumer brand.
Furthermore, through licensing agreements, the Company currently has
exclusive rights to manufacture and, in some instances, market certain
bedding products under such well-known brands as Ralph Lauren, Disney's
Mickey UNLIMITED(R), Mickey's Stuff for Kids(R), and Mickey & Co.(R),
Comforel(R), Adrienne Vittadini(R), Ellen Tracy(R), and Waverly(R). This
diverse portfolio of premier brand names allows the Company to
differentiate its products from those of its competitors and provides
distinct brand names for different channels of retail distribution and for
different price points. These brand names will also enable the Company to
assist its customers in coordinating their product offerings and
differentiating such offerings from those of their competitors.
- Strong Customer Relationships: The Company has established relationships
with 49 of the top 50 home textile retailers in the United States and
Canada. The combination of the two companies enhances these relationships,
providing customers the benefits of a true "one-stop" source for bed and
bath products. These strong relationships will create a stable base from
which the Company can pursue future business and new product
introductions.
- Creative Merchandising Strategies: Historically, both Pillowtex and
Fieldcrest have maintained creative partnerships with their customers,
including extensive merchandising programs, that have resulted in the
creation of successful new products, product mix strategies, point-of-sale
concepts, and advertising campaigns. Retail customers are increasingly
demanding exclusive or specially designed product lines to differentiate
their product offerings from those of other retailers and to implement
price tiering in
3
<PAGE> 11
order to achieve higher margins. The Company will continue this
collaboration with its retail customers to design products and marketing
programs responsive to individual customer needs.
- Low Cost Operating Capabilities: As a result of its continued emphasis on
cost-containment and capital expenditures to obtain greater plant
efficiencies, the Company is a low cost producer of bed pillows, mattress
pads, down comforters, and blankets in the home textile industry. The
Merger provides the Company with efficient, low cost towel and bath rug
production capabilities, including a new, state-of-the-art towel
production facility. In addition, Pillowtex has emphasized a low cost of
operations, creating a competitive advantage by operating with one of the
lowest selling, general, and administrative ("SG&A") expenses, as a
percentage of sales, in the industry. The Company believes that
significant opportunities exist to improve this competitive position by
lowering Fieldcrest's SG&A costs as a percentage of sales to Pillowtex's
historic levels.
BUSINESS STRATEGY
The Company's strategic objectives are to capitalize on its industry
leading position by leveraging the strength of its brand names, customer
relationships, and operational capabilities across the most comprehensive array
of product offerings in the home textile industry. The Company's strategic focus
will be to:
- Capitalize on Industry Leading Position: The Merger has created a
powerhouse within the home textiles industry in terms of dollar sales
volume and product offerings. The Company will focus on leveraging its
market leadership by implementing sales and marketing programs designed to
facilitate a customer-driven "pull" strategy. By cross-marketing both
Pillowtex and Fieldcrest products using the Company's strong brand names,
the Company will create enhanced product value and facilitate greater
differentiation of its products from those of its competitors.
- Develop the Premier "One-Stop Shop" for Home Textiles: The breadth of the
Company's product lines provide it with a significant competitive
advantage as it can offer its retailer customers a centralized "one-stop"
purchasing source for all their home textile merchandise. The Company's
extensive assortment of home textile products will include fashion and
utility bedding, as well as a full line of bath products. The Company will
exploit its position as a "one-stop" purchasing source by continuing its
practice of offering broad product assortments across diverse product
lines, thereby offering retailers a central source from which to
efficiently and effectively purchase their home textile items.
- Further Strengthen Customer Relationships: The Company has a long history
of strong customer relationships with the top retailers in the United
States and Canada. The Company has developed these relationships by
providing value-added services, such as innovative marketing and cross-
merchandising capabilities. The Company believes that the value of such
services to retailers will be increased significantly by combining the
traditional Pillowtex and Fieldcrest product lines in a centralized
purchasing source and utilizing the Fieldcrest portfolio of brand names
across all such product lines. The Company will also increase the use of
marketing and cross-merchandising services in connection with the
traditional Fieldcrest products, creating opportunities for added sales
and providing retailers with more opportunities to differentiate their
product offerings from those of their competitors.
- Enhance Operational Efficiencies: The Company will continue to focus on
reducing its manufacturing cost structure by rationalizing its current
operations and investing in automation, equipment modernization, process
improvements, and system controls throughout all aspects of its business.
The Company's management believes that significant opportunities exist to
improve production efficiency through capital investment, improved
operational logistics, selective outsourcing, and increased utilization of
information systems. The Company intends to make capital expenditures in
excess of $240.0 million over the next several years, principally to
modernize the acquired Fieldcrest sheet and certain of the towel
manufacturing facilities through the addition of new machinery and
equipment. The Company anticipates that approximately $80.0 million of
such capital expenditures will be made in fiscal 1998.
4
<PAGE> 12
- Realize Significant Cost Savings: The Company has identified
approximately $21.6 million of annual cost savings that it expects to
realize immediately as a result of the Merger. These cost savings are
comprised of $20.3 million of savings from the elimination of duplicate
staff salaries and $1.3 million of savings from the elimination of
duplicative corporate expenses. The Company additionally expects to
realize significant ongoing cost savings, including at least $8.4 million
to be realized within the first 12 months after consummation of the
Merger, as follows: (i) $0.9 million by eliminating other redundant cost
functions; (ii) $2.0 million by improving procurement efficiencies by
exploiting the combined company's purchasing power; (iii) $3.0 million by
reducing trade advertising; (iv) $1.0 million by rationalizing and
streamlining operations; and (v) $1.5 million by reducing the use of
outside consultants.
THE MERGER
Pillowtex and Fieldcrest entered into the Merger Agreement, pursuant to
which a wholly owned subsidiary of Pillowtex was merged on December 19, 1997
with and into Fieldcrest. Following consummation of the Merger, Fieldcrest
became a wholly owned subsidiary of Pillowtex. At the effective time of the
Merger (the "Effective Time"), (i) each then-outstanding share of common stock,
par value $1.00 per share, of Fieldcrest (the "Fieldcrest Common Stock") was
exchanged for the right to receive consideration valued at $34.00, consisting of
$27.00 in cash and 0.269 Pillowtex Common Stock, and (ii) each then-outstanding
share of preferred stock, par value $0.01 per share, of Fieldcrest (the
"Fieldcrest Preferred Stock") was exchanged for the right to receive
consideration valued at $58.12, consisting of $46.15 in cash and the remainder
in shares of Pillowtex Common Stock. Each outstanding option (each, a
"Fieldcrest Option") to purchase shares of Fieldcrest Common Stock entitled the
holder thereof to receive, at the election of the holder, an amount in cash
equal to the difference between $34.00 and the per share exercise price of such
Fieldcrest Option; Fieldcrest Options in respect of which such election was not
made were assumed by Pillowtex at the Effective Time and constitute an option to
purchase a number of shares of Pillowtex Common Stock as set forth in the Merger
Agreement. From and after the Effective Time, the 6% Convertible Subordinated
Debentures due 2012 of Fieldcrest (the "Fieldcrest Convertible Debentures") are
convertible into the same consideration that a holder of the number of shares of
Fieldcrest Common Stock into which such Fieldcrest Convertible Debentures might
have been converted immediately prior to the Merger would be entitled to receive
in the Merger. See "The Merger."
Pillowtex financed the Merger and refinanced certain indebtedness of
Pillowtex and Fieldcrest, paid related fees and expenses, and provided for the
ongoing working capital needs of the Company through a combination of (i)
initial borrowings of $149.0 million under a new $350.0 million revolving credit
facility (the "Revolver") and $250.0 million under a new term loan facility (the
"Term Loan"), each with NationsBank of Texas, N.A. (collectively, the "New
Senior Credit Facilities"), (ii) the issuance and sale of $185.0 million in
aggregate principal amount of the Series A Notes, and (iii) the issuance and
sale of $65.0 million in liquidation preference of Series A Redeemable
Convertible Preferred Stock (the "Pillowtex Preferred Stock") to affiliates of
Apollo Management, L.P. (collectively, "Apollo"). The issuance of the Series A
Notes and the Pillowtex Preferred Stock, the initial borrowings under the New
Senior Credit Facilities, the repayment of all amounts outstanding under
Pillowtex's and Fieldcrest's existing bank credit facilities, and the
satisfaction and discharge of all indebtedness represented by the Fieldcrest
11.25% Senior Subordinated Debentures due 2004 (the "Fieldcrest 11.25% Senior
Subordinated Debentures") pursuant to an irrevocable deposit of amounts
sufficient to provide for the redemption thereof are hereinafter referred to
collectively as the "Financing Transactions." See "The Merger," "Post-Merger
Indebtedness," and "Pillowtex Series A Redeemable Convertible Preferred Stock."
5
<PAGE> 13
THE EXCHANGE OFFER
The Exchange Offer......... The Series B Notes are being offered, upon the
terms and conditions set forth herein and in the
Letter of Transmittal, in exchange for a like
principal amount of Series A Notes. The issuance of
the Series B Notes is intended to satisfy
obligations of the Company contained in the
Registration Rights Agreement.
Tenders; Expiration Date;
Withdrawal............... The Exchange Offer will expire at 5:00 p.m., New
York City time, on March 25, 1998, or such later
date and time to which it 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.
The tender of Series A Notes pursuant to the
Exchange Offer may be withdrawn at any time prior
to the Expiration Date. Any Series A Note not
accepted for exchange for any reason will be
returned without expense to the tendering holder
thereof as promptly as practicable after the
expiration or termination of the Exchange Offer.
See "The Exchange Offer -- Procedures for Tendering
Series A Notes" and "The Exchange
Offer -- Withdrawal Rights."
Certain Conditions to
Exchange Offer............. The Company shall not be required to accept for
exchange, or to issue Series B Notes in exchange
for, any Series A Notes and may terminate or amend
the Exchange Offer if at any time before the
acceptance of the Series A Notes for exchange or
the exchange of the Series B Notes for such Series
A Notes certain events have occurred, which in the
reasonable judgment of the Company, make it
inadvisable to proceed with the Exchange Offer
and/or with such acceptance for exchange or with
such exchange. Such events include (i) any
threatened, instituted or pending action seeking to
restrain or prohibit the Exchange Offer, (ii) a
general suspension of trading in securities on any
national securities exchange or in the
over-the-counter market, (iii) a general banking
moratorium, (iv) the commencement of a war or armed
hostilities involving the United States, and (v) a
material adverse change or development involving a
prospective material adverse change in the
Company's business, properties, assets,
liabilities, financial condition, operations,
results of operations or prospects that may affect
the value of the Series A Notes or the Series B
Notes. In addition, the Company will not accept for
exchange any Series A Notes tendered, and no Series
B Notes will be issued in exchange for any such
Series A Notes, at any such time any stop order
shall be threatened or in effect with respect to
the Registration Statement of which the Prospectus
constitutes a part or the qualification of the
Indenture under the Trust Indenture Act of 1939
(the "Trust Indenture Act"). See "The Exchange
Offer -- Certain Conditions to the Exchange Offer."
Procedures for Tendering
Series A Notes........... Each holder of Series A Notes wishing to accept the
Exchange Offer must complete, sign, and date the
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 such Series A Notes and any other required
documentation to Norwest Bank Minnesota, National
Association, as exchange agent (the "Exchange
Agent"), at the address set forth herein.
6
<PAGE> 14
By executing the Letter of Transmittal, the holder
will represent to and agree with the Company that,
among other things, (i) the Series B Notes to be
acquired by such holder of Series A Notes in
connection with the Exchange Offer are being
acquired by such holder in the ordinary course of
its business, (ii) such holder is not
participating, does not intend to participate and
has no arrangement or understanding with any person
to participate in a distribution of the Series B
Notes, and (iii) 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 Series B Notes for its own account in
exchange for Series A Notes that were acquired as a
result of market-making 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 Series B 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 Series A Notes."
Special Procedures for
Beneficial Owners.......... Any beneficial owner whose Series A Notes are
registered in the name of a broker, dealer,
commercial bank, trust company or other nominee and
who wishes to tender such Series A 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 Series A Notes, either
make appropriate arrangements to registered
ownership of the Series A 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
Series A Notes."
Guaranteed Delivery
Procedures................. Holders of Series A Notes who wish to tender their
Series A Notes and whose Series A Notes are not
immediately available or who cannot deliver their
Series A Notes, the Letter of Transmittal or any
other documentation required by the Letter of
Transmittal to the Exchange Agent prior to the
Expiration Date must tender their Series A Notes
according to the guaranteed delivery procedures set
forth under "The Exchange Offer -- Guaranteed
Delivery Procedures."
Effect of Not Tendering
Series A Notes for
Exchange................. Series A Notes that are not tendered or that are
not properly tendered will, following the
expiration of the Exchange Offer, continue to be
subject to the existing restrictions upon transfer
thereof. The Company will have no further
obligations to provide for the registration under
the Securities Act of such Series A Notes and such
Series A Notes will, following the expiration of
the Exchange Offer, bear interest at the same rate
and in the same manner as the Series B Notes.
Federal Income Tax
Consequences............. The exchange pursuant to the Exchange Offer should
not result in gain or loss to the holders or the
Company for federal income tax purposes. See
"Certain United States Federal Income Tax
Considerations."
7
<PAGE> 15
Exchange Agent............. Norwest Bank Minnesota, National Association is
serving as exchange agent in connection with the
Exchange Offer. Norwest Bank Minnesota, National
Association also serves as the Trustee under the
Indenture.
Use of Proceeds............ There will be no proceeds to the Company from the
exchange pursuant to the Exchange Offer. See "Use
of Proceeds."
Resale of Series B Notes... Holders of Series A Notes who do not exchange their
Series A Notes for Series B Notes pursuant to the
Exchange Offer will continue to be subject to the
provisions in the Indenture regarding transfer and
exchange of the Series A Notes and the restrictions
on transfer of such Series A Notes as set forth in
the legend thereon as a consequence of the issuance
of the Series A Notes pursuant to exemptions from,
or in transactions not subject to, the registration
requirements of the Securities Act and applicable
state securities laws. In general, the Series A
Notes may not be offered or sold, unless registered
under the Securities Act, except pursuant to an
exemption from, or in a transaction not subject to,
the Securities Act and applicable state securities
laws. The Company does not currently anticipate
that it will register Series A Notes under the
Securities Act. See "Description of
Notes -- Registration Rights; Liquidated Damages."
Based on interpretations by the staff of the
Commission, as set forth in no-action letters
issued to third parties, the Company believes that
Series B Notes issued pursuant to the Exchange
Offer in exchange for Series A Notes may be offered
for resale, resold or otherwise transferred by
holders thereof (other than any holder which 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 such Series B Notes are acquired in the
ordinary course of such holders' business and such
holders have no arrangement with any person to
participate in the distribution of such Series B
Notes. However, the Company does not intend to
request the Commission to consider, and the
Commission has not considered, the Exchange Offer
in the context of a no-action letter and there can
be no assurance that the staff of the Commission
would make a similar determination with respect to
the Exchange Offer as in such other circumstances.
Each holder, other than a broker-dealer, must
acknowledge that it is not engaged in, and does not
intend to engage in, a distribution of Series B
Notes and has no arrangement or understanding to
participate in a distribution of Series B Notes. If
any holder is an affiliate of the Company, is
engaged or intends to engage in or has any
arrangement or understanding with respect to the
distribution of the Series B Notes to be acquired
pursuant to the Exchange Offer, such holder (i)
could not rely on the applicable interpretations of
the staff of the Commission and (ii) must comply
with the registration and prospectus delivery
requirements of the Securities Act in connection
with any resale transaction.
Each broker-dealer that receives Series B Notes for
its own account in exchange for Series A Notes must
acknowledge that such Series A Notes were acquired
by such broker-dealer as a result of market-making
activities or other trading activities and that it
will deliver a prospectus in connection with any
resale of such Series B 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 "under-
8
<PAGE> 16
writer" 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 Series
B Notes received in exchange for Series A Notes
where such Series A Notes were acquired by such
broker-dealer as a result of market-making
activities or other trading activities. The Company
has agreed that, for a period of one year after the
Registration Statement has been declared effective,
it will make this Prospectus available to any
broker-dealer for use in connection with any such
resale. See "Plan of Distribution." In addition, to
comply with the state securities laws, the Series B
Notes may not be offered or sold in any state
unless they have been registered or qualified for
sale in such state or an exemption from
registration or qualification is available and is
complied with. The Company currently does not
intend to register or qualify the sale of the
Series B Notes in any state where an exemption from
registration or qualification is required and not
available. See "The Exchange Offer -- Consequences
of Exchanging Series A Notes" and "Description of
Notes -- Registration Rights; Liquidated Damages."
Termination of Certain
Rights..................... All rights under the Registration Rights Agreement
accorded to holders of Series A Notes will
terminate upon the consummation of the Exchange
Offer except with respect to the Company's duty to
keep the Registration Statement effective until the
closing of the Exchange Offer and, subject to
certain conditions, for a period not to exceed one
year after the registration of the Series B Notes
has been declared effective, to provide copies of
the latest version of the Prospectus to any
broker-dealer that requests copies for use in
connection with its own account as a result of
market-making or other trading activities. See "The
Exchange Offer -- Consequences of Exchanging Series
A Notes."
9
<PAGE> 17
SERIES B NOTES
The form and terms of the Series B Notes will be the same as those of the
Series A Notes except that the Series B Notes will have been registered under
the Securities Act, and consequently will not be subject to certain transfer
restrictions, registration rights and related liquidated damages provisions
applicable to the Series A Notes. See "Description of Notes -- Registration
Rights; Liquidated Damages."
Securities Offered......... Up to $185,000,000 aggregate principal amount of 9%
Senior Subordinated Notes due 2007 of the Company,
which have been registered under the Securities
Act.
Maturity Date.............. December 15, 2007.
Interest Payment Dates..... June 15 and December 15, commencing June 15, 1998.
Optional Redemption........ The Notes may be redeemed at the option of the
Company, in whole or in part, on or after December
15, 2002, at the redemption prices set forth
herein, plus accrued and unpaid interest and
Liquidated Damages (as defined herein), if any, to
the redemption date. See "Description of
Notes -- Optional Redemption."
Ranking.................... The Notes are general unsecured obligations of the
Company, ranking senior to all existing and future
subordinated indebtedness of the Company, pari
passu in right of payment with the 10% Senior
Subordinated Notes, and subordinated in right of
payment to all existing and future Senior
Indebtedness of the Company, including indebtedness
under the New Senior Credit Facilities. As of
September 27, 1997, on a pro forma basis after
giving effect to the consummation of the Merger and
the Financing Transactions, Pillowtex and its
subsidiaries would have had $420.0 million of
indebtedness (excluding $37.8 million in letters of
credit) effectively ranking senior to the Notes.
See "Description of Notes -- Ranking and
Subordination."
Guarantees................. The payment of principal, premium, if any, and
interest on the Notes is fully and unconditionally
guaranteed on a joint and several basis by each of
the Company's existing domestic subsidiaries and
any future domestic Restricted Subsidiaries (as
defined herein) other than Receivables Subsidiaries
(as defined herein) and each other subsidiary of
the Company that guarantees the Company's
obligations under the New Senior Credit Facilities.
The Guarantees rank senior to all existing and
future subordinated indebtedness of the Guarantors,
pari passu in right of payment on the Guarantor's
Guarantees with the 10% Senior Subordinated Notes,
and are subordinated in right of payment to all
existing and future Senior Indebtedness of the
Guarantors, including the guarantees of
indebtedness under the New Senior Credit
Facilities. See "Description of Notes -- Subsidiary
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, if any, to the date of
repurchase. See "Description of Notes -- Repurchase
at the Option of Holders -- Change of Control."
Covenants.................. The Indenture restricts, among other things, the
ability of the Company and its Restricted
Subsidiaries to, among other things, incur
additional indebtedness; pay dividends or make
certain other restricted payments; incur liens;
apply net proceeds from certain asset sales; merge
or
10
<PAGE> 18
consolidate with any other person; sell, assign,
transfer, lease, convey, or otherwise dispose of
substantially all of the assets of the Company and
its Restricted Subsidiaries; enter into certain
transactions with affiliates; or incur indebtedness
that is subordinate in right of payment to any
indebtedness and senior in right of payment to the
Notes or a Guarantee. See "Description of
Notes -- Certain Covenants."
Use of Proceeds............ The Company will not receive any proceeds from the
Exchange Offer.
Book-Entry, Delivery and
Form....................... It is expected that delivery of the Series B Notes
will be made in book-entry form. The Company
expects that Series B Notes exchanged for Series A
Notes currently represented by a restricted global
notes certificate deposited with, or on behalf of,
The Depository Trust Company (the "DTC") and
registered in the name of Cede & Co., its nominee,
will be represented by global notes certificates
and deposited upon issuance with the DTC and
registered in its name or the name of its nominee.
Beneficial interests in the global notes
certificate representing the Series B Notes will be
shown on, and transfers thereof will be effected
through, records maintained by the DTC and its
participants.
For additional information regarding the Notes, see "The Exchange Offer,"
"Description of Notes," and "Certain United States Federal Income Tax
Considerations."
RISK FACTORS
See "Risk Factors," which begins at page 16 for a discussion of certain
factors that should be considered in evaluating an investment in the Notes.
11
<PAGE> 19
SUMMARY UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The following unaudited pro forma combined financial statements of
Pillowtex give effect to the consummation of the Merger and the Financing
Transactions, as if such transactions had been consummated: (i) on September 27,
1997, in the case of the Unaudited Pro Forma Combined Balance Sheet at September
27, 1997 and (ii) on December 31, 1995, the first day of Pillowtex's 1996 fiscal
year, in the case of the Unaudited Pro Forma Combined Statement of Operations
for the fiscal year ended December 28, 1996 and the nine months ended September
27, 1997. As used herein, the term "Financing Transactions" means (i) initial
borrowings under the New Senior Credit Facilities of $149.0 million under the
Revolver and $250.0 million under the Term Loan, (ii) the issuance and sale of
$185.0 million aggregate principal amount of Notes, (iii) the issuance and sale
of 65,000 shares of Pillowtex Preferred Stock, (iv) the repayment of all amounts
outstanding under Pillowtex's and Fieldcrest's existing bank credit facilities,
and (v) the satisfaction and discharge of all indebtedness represented by
Fieldcrest's 11.25% Senior Subordinated Debentures Due 2002 to 2004 pursuant to
an irrevocable deposit of amounts sufficient to provide for the redemption
thereof.
<TABLE>
<CAPTION>
HISTORICAL
-------------------------- PRO FORMA
PILLOWTEX FIELDCREST COMBINED
----------- ----------- -----------
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER
28, 1996:
Net sales........................................... $ 490,655 $ 1,092,496 $ 1,583,151
Cost of goods sold.................................. 411,048 956,522 1,364,368
----------- ----------- -----------
Gross profit........................................ 79,607 135,974 218,783
Selling, general, and administrative expenses....... 41,445 105,405 136,434
Restructuring charge................................ -- 8,130 8,130
----------- ----------- -----------
Earnings from operations............................ 38,162 22,439 74,219
Interest expense.................................... 13,971 26,869 63,446
Other income, net................................... -- (5,604) (5,604)
----------- ----------- -----------
Earnings before income taxes and extraordinary
items............................................. 24,191 1,174 16,377
Income taxes........................................ 9,459 114 8,375
----------- ----------- -----------
Earnings before extraordinary items................. 14,732 1,060 8,002
Preferred dividends................................. -- (4,500) (1,950)
----------- ----------- -----------
Earnings (loss) before extraordinary items
applicable to common stock........................ $ 14,732 $ (3,440) $ 6,052
=========== =========== ===========
OTHER DATA:
Depreciation and amortization....................... $ 12,775 $ 36,678 $ 57,394
EBITDA(1)........................................... 50,937 59,117 131,613
Ratio of earnings to fixed charges(2)............... 2.4x 1.0x 1.2x
BALANCE SHEET DATA AT SEPTEMBER 27, 1997:
Total current assets................................ $ 261,320 $ 379,828 $ 660,148
Total assets........................................ 419,168 789,479 1,436,625
Long-term debt...................................... 218,806 308,820 821,596
Shareholders' equity................................ 110,777 229,321 199,555
</TABLE>
- ---------------
(1) EBITDA is income before income taxes plus depreciation expense, amortization
expense, and net interest expense. EBITDA is presented because it is a
widely accepted financial indicator of a company's ability to service and/or
incur indebtedness; however, EBITDA should not be considered as an
alternative to net income (as a measure of operating results) or to cash
flows (as a measure of liquidity) computed in accordance with generally
accepted accounting principles. In addition, EBITDA as presented herein may
not be directly comparable to EBITDA as reported by other companies.
(2) In calculating the ratio of earnings to fixed charges, earnings consist of
income taxes plus fixed charges (excluding capitalized interest). Fixed
charges consist of interest expense (which includes amortization of deferred
financing costs) whether expensed or capitalized and one-third of rental
expense, deemed representative of that portion of rental expense estimated
to be attributable to interest.
12
<PAGE> 20
SUMMARY HISTORICAL FINANCIAL INFORMATION
The following summary historical financial information of Pillowtex and
Fieldcrest has been derived from the historical consolidated financial
statements of Pillowtex and Fieldcrest filed with the Commission, and should be
read in conjunction with such financial statements and the notes thereto and the
other financial information appearing in Pillowtex's Annual Report on Form 10-K
for the year ended December 28, 1996 and its Quarterly Report on Form 10-Q for
the quarter ended September 27, 1997 and Fieldcrest's Annual Report on Form 10-K
for the year ended December 31, 1996 and its Quarterly Report on Form 10-Q for
the quarter ended September 30, 1997, each as incorporated by reference herein.
See "Available Information," "Selected Historical Financial Information of
Pillowtex," and "Selected Historical Financial Information of Fieldcrest." The
historical financial information at the end of and for each fiscal year in the
five-year period ended December 28, 1996 with respect to Pillowtex and December
31, 1996 with respect to Fieldcrest has been extracted from audited financial
statements filed with the Commission. Historical financial information at the
end of and for the nine-month periods ended September 28, 1996 and September 27,
1997 with respect to Pillowtex and September 30, 1996 and 1997 with respect to
Fieldcrest has been extracted from unaudited financial statements filed with the
Commission and, in the opinion of management, includes all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation, in all material respects, of the results of operations and
financial position at the end of and for each of the interim periods presented.
Interim period results are not necessarily indicative of results to be expected
for a complete fiscal year. See "Incorporation of Certain Information by
Reference."
13
<PAGE> 21
SUMMARY HISTORICAL FINANCIAL INFORMATION OF PILLOWTEX
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
FISCAL YEAR -----------------------------
---------------------------------------------------- SEPTEMBER 28, SEPTEMBER 27,
1992 1993(1) 1994(2) 1995 1996 1996 1997
-------- -------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
(UNAUDITED)
STATEMENTS OF OPERATIONS DATA:
Net sales....................... $273,462 $291,624 $349,520 $474,899 $490,655 $335,770 $370,633
Cost of goods sold.............. 222,611 238,155 294,714 395,922 411,048 280,272 305,674
-------- -------- -------- -------- -------- -------- --------
Gross profit.................... 50,851 53,469 54,806 78,977 79,607 55,498 64,959
Selling, general, and
administrative expenses....... 33,376 29,227 36,399 42,508 41,445 31,170 33,728
-------- -------- -------- -------- -------- -------- --------
Earnings from operations........ 17,475 24,242 18,407 36,469 38,162 24,328 31,231
Interest expense................ 4,997 3,042 6,361 17,491 13,971 10,279 13,957
Other expense (income), net..... 1,049 -- (379) -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Earnings before income taxes and
extraordinary loss............ 11,429 21,200 12,425 18,978 24,191 14,049 17,274
Income taxes.................... 529 8,420 4,736 7,509 9,459 5,495 6,702
-------- -------- -------- -------- -------- -------- --------
Earnings before extraordinary
loss.......................... 10,900 12,780 7,689 11,469 14,732 8,554 10,572
Extraordinary loss, net......... -- -- -- -- (609) -- --
-------- -------- -------- -------- -------- -------- --------
Net earnings(3)................. $ 10,900 $ 12,780 $ 7,689 $ 11,469 $ 14,123 $ 8,554 $ 10,572
======== ======== ======== ======== ======== ======== ========
Net earnings available to common
stock shareholders(3)......... $ 8,400 $ 12,780 $ 7,689 $ 11,469 $ 14,123 $ 8,554 $ 10,572
======== ======== ======== ======== ======== ======== ========
OTHER DATA:
Depreciation and amortization... $ 3,104 $ 3,868 $ 6,365 $ 11,994 $ 12,775 $ 9,440 $ 10,642
Capital expenditures(4)......... 5,869 7,135 10,538 12,448 6,960 2,981 13,891
EBITDA(5)....................... 19,530 28,110 25,151 48,463 50,937 33,768 41,873
EBITDA margin................... 7.1% 9.6% 7.2% 10.2% 10.4% 10.1% 11.3%
Ratio of earnings to fixed
charges(6).................... 3.0x 6.8x 2.8x 2.0x 2.4x 2.2x 2.0x
BALANCE SHEET DATA:
Working capital................. $ 65,567 $ 78,141 $122,738 $110,128 $150,506 $152,787 $181,234
Total assets.................... 131,542 180,967 319,544 324,710 375,714 370,670 419,168
Long-term debt.................. 63,599 63,735 177,149 153,472 194,851 180,200 218,806
Shareholders' equity............ 7,072 69,329 76,478 87,990 100,004 95,042 110,777
</TABLE>
- ---------------
(1) Results for fiscal 1993 reflect the operations of Manetta Home Fashions,
Inc. from August 30, 1993, Tennessee Woolen Mills, Inc. from September 7,
1993 and Torfeaco Industries Limited from December 1, 1993.
(2) Results for fiscal 1994 reflect the operations of Imperial Feather Company
from August 19, 1994 and Beacon Manufacturing Company from December 1, 1994.
(3) Pillowtex, under a 1990 stock repurchase agreement with its former majority
shareholder, was committed to repurchase certain shares of common stock from
the former majority shareholder which resulted in accretion of $2,500. This
accretion was charged to retained earnings and deducted from earnings
available for common stock shareholders in the computation of pro forma
earnings per common share for fiscal 1992. Additionally, on a pro forma
basis, giving effect to the termination of Pillowtex's status as an S
corporation under subchapter S of the Internal Revenue Code (which
termination resulted from the initial public offering of Pillowtex Common
Stock), as if such termination had occurred on January 1, 1992, net earnings
and net earnings available to common stock shareholders would have been
$7,692 and $5,192 respectively, for fiscal 1992, and $12,877 and $12,877,
respectively, for fiscal 1993.
(4) Capital expenditures for fiscal year 1996 exclude $5,745 and $8,335 related
to the purchase of the assets of the Fieldcrest blanket division and the
purchase of the Mauldin, South Carolina distribution facility, respectively.
(5) EBITDA is income before income taxes plus depreciation expense, amortization
expense, and net interest expense. EBITDA is presented because it is a
widely accepted financial indicator of a company's ability to service and/or
incur indebtedness; however, EBITDA should not be considered as an
alternative to net income as a measure of operating results or to cash flows
as a measure of liquidity in accordance with generally accepted accounting
principles.
(6) In calculating the ratio of earnings to fixed charges, earnings consist of
income before income taxes plus fixed charges (excluding capitalized
interest). Fixed charges consist of interest expense (which includes
amortization of deferred financing costs) whether expensed or capitalized
and one-third of rental expense, deemed representative of that portion of
rental expense estimated to be attributable to interest.
14
<PAGE> 22
SUMMARY HISTORICAL FINANCIAL INFORMATION OF FIELDCREST
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
FISCAL YEAR ------------------------------
------------------------------------------------------------ SEPTEMBER 30, SEPTEMBER 30,
1992 1993 1994 1995 1996 1996 1997
-------- ---------- ---------- ---------- ---------- ------------- --------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Net sales......................... $981,773 $1,000,107 $1,063,731 $1,095,193 $1,092,496 $812,995 $820,635
Cost of sales..................... 818,729 834,701 898,437 966,642 956,522 706,482 695,615
-------- ---------- ---------- ---------- ---------- -------- --------
Gross profit...................... 163,044 165,406 165,294 128,551 135,974 106,513 125,020
Selling, general, and
administrative expenses(1)...... 102,189 111,843 94,756 128,663 113,535 86,536 85,563
-------- ---------- ---------- ---------- ---------- -------- --------
Operating income (loss)........... 60,855 53,563 70,538 (112) 22,439 19,977 39,457
Interest expense(2)............... 34,149 27,659 23,268 27,630 26,869 21,496 18,708
Other expense (income), net....... 130 (975) 987 67 (5,604) 519 (2,021)
-------- ---------- ---------- ---------- ---------- -------- --------
Income (loss) before income
taxes........................... 26,576 26,879 46,283 (27,809) 1,174 (2,038) 22,770
Income taxes...................... 10,886 11,913 15,538 (12,084) 114 (764) 8,087
-------- ---------- ---------- ---------- ---------- -------- --------
Income (loss) from continuing
operations before accounting
changes......................... $ 15,690 $ 14,966 $ 30,745 $ (15,725) $ 1,060 $ (1,274) $ 14,683
======== ========== ========== ========== ========== ======== ========
Net income (loss)(3).............. $ 15,250 $ (42,931) $ 30,745 $ (15,725) $ 1,060 $ (1,274) $ 14,683
Preferred dividends............... -- (463) (4,500) (4,500) (4,500) (3,375) (3,375)
-------- ---------- ---------- ---------- ---------- -------- --------
Earnings (loss) on common......... $ 15,250 $ (43,394) $ 26,245 $ (20,225) $ (3,440) $ (4,649) $ 11,308
======== ========== ========== ========== ========== ======== ========
OTHER DATA:
Depreciation and amortization..... $ 31,370 $ 31,539 $ 29,828 $ 31,746 $ 36,678 $ 26,979 $ 26,241
Capital expenditures.............. 20,687 21,594 51,929 64,153 33,386 21,035 46,214
EBITDA(4)......................... 92,225 85,102 100,366 31,634 59,117 46,956 65,698
EBITDA margin..................... 9.4% 8.5% 9.4% 2.9% 5.4% 5.8% 8.0%
Ratio of earnings to fixed
charges(5)...................... 1.7x 1.8x 2.5x -- 1.0x -- 2.0x
BALANCE SHEET DATA:
Working capital................... $296,580 $ 262,326 $ 282,461 $ 268,477 $ 229,010 $288,103 $221,210
Total assets...................... 863,991 740,446 782,665 812,946 768,493 832,992 789,479
Long-term debt.................... 353,419 294,611 317,744 365,262 311,496 373,748 308,820
Stockholders' equity.............. 284,478 193,330 231,202 215,431 215,755 213,689 229,321
</TABLE>
- ---------------
(1) Includes restructuring charges of $10,000, $20,469 and $8,130 for fiscal
years 1993, 1995 and 1996, respectively, and $8,130 for the nine months
ended September 30, 1996. Such restructuring charges were incurred in
connection with (i) a 1993 program to reduce overhead through a voluntary
early retirement program and certain corporate reorganization costs, (ii)
the 1995 reorganization of Fieldcrest's New York operations, and (iii) the
1996 sale of Fieldcrest's blanket division to Pillowtex and the closing of
the blanket facilities in Eden, North Carolina.
(2) Interest expense is net of interest income in the amount of $416, $613,
$749, $1,859 and $4,161 for fiscal years 1992 through 1996, respectively,
and $2,067 and $1,743 for the nine months ended September 30, 1996 and 1997,
respectively.
(3) Includes an extraordinary loss on early retirement of debt of $5,179 for
fiscal 1992, income from discontinued operations of $4,739 and $3,201 for
fiscal years 1992 and 1993, respectively, and a gain from disposition of
discontinued operations and cumulative effect of accounting changes of
$9,207 and ($70,305), respectively, for fiscal 1993.
(4) EBITDA is income before income taxes plus depreciation expense, amortization
expense and net interest expense. EBITDA is presented because it is a widely
accepted financial indicator of a company's ability to service and/or incur
indebtedness; however, EBITDA should not be considered as an alternative to
net income as a measure of operating results or to cash flows as a measure
of liquidity in accordance with generally accepted accounting principles.
(5) In calculating the ratio of earnings to fixed charges, earnings consist of
income before income taxes plus fixed charges (excluding capitalized
interest). Fixed charges consist of interest expense (which includes
amortization of deferred financing costs) whether expensed or capitalized
and one-third of rental expense, deemed representative of that portion of
rental expense estimated to be attributable to interest. For the year ended
December 31, 1995, and the nine months ended September 30, 1996, earnings
were insufficient to cover fixed charges by $27,809 and $2,038,
respectively.
15
<PAGE> 23
RISK FACTORS
Prospective investors should carefully consider the following factors in
addition to the other information set forth in this Prospectus before making an
investment in the Notes offered hereby. See also "Note Regarding Forward-Looking
Information." Any or all of the risk factors discussed below could have a
material adverse effect on the business, financial condition, results of
operations, and prospects of the Company.
SIGNIFICANT LEVERAGE AND DEBT SERVICE
The Company is highly leveraged. At September 27, 1997, on a pro forma
basis, after giving effect to the consummation of the Merger and the Financing
Transactions, Pillowtex would have had total outstanding long-term indebtedness
(including the current portion of long-term indebtedness) of approximately
$827.8 million and total shareholders' equity of approximately $199.6 million.
See "Pro Forma Capitalization of Pillowtex." In addition, subject to
restrictions contained in instruments governing its indebtedness, the Company
and its subsidiaries may incur additional indebtedness from time to time to
finance acquisitions or capital expenditures or for general corporate purposes.
The level of the Company's indebtedness could have important consequences
to the business activities of the Company, including: (i) a substantial portion
of the Company's cash flow from operations must be dedicated to debt service and
will not be available for other purposes; (ii) the Company's ability to obtain
additional debt financing in the future for other acquisitions, working capital,
capital expenditures, or research and development may be limited; and (iii) the
Company's level of indebtedness could limit its flexibility in reacting to
changes in its industry or economic conditions generally.
The Company's ability to service its debt obligations will depend upon its
future operating performance, which will be affected by prevailing economic
conditions and financial, business, and other factors, certain of which are
beyond its control, as well as the availability of borrowings under the New
Senior Credit Facilities or any other credit arrangement. 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 New
Senior Credit Facilities or its other indebtedness. In the absence of such
financing, the Company's ability to respond to changing business and economic
conditions, to make future acquisitions, to absorb adverse operating results, or
to fund capital expenditures or research and development costs may be adversely
affected. If the Company does not generate sufficient increases in cash flow
from operations to repay its indebtedness at maturity, it could attempt to
refinance such indebtedness; however, no assurance can be given that such
refinancing would be available on terms acceptable to the Company, if at all.
SUBORDINATION OF NOTES AND GUARANTEES
The Notes are subordinated in right of payment to all existing and future
Senior Indebtedness (as defined herein) of the Company, including borrowings
under the New Senior Credit Facilities. In the event of bankruptcy, liquidation,
or reorganization of the Company, the assets of the Company will be available to
pay obligations on the Notes only after all Senior Indebtedness has been paid in
full, and there may not be sufficient assets remaining to pay amounts due on any
or all of the Notes then outstanding. Each Guarantee will be similarly
subordinated in right of payment to all existing and future Guarantor Senior
Indebtedness (as defined herein) of the relevant Guarantor, including such
Guarantor's guaranty of the Company's indebtedness under the New Senior Credit
Facilities. In addition, under certain circumstances the Company will not be
permitted to pay its obligations under the Notes in the event of a default under
certain Senior Indebtedness. Certain operations of the Company will be conducted
by its foreign subsidiaries that are not Guarantors. Accordingly, these
subsidiaries will have no obligations to pay amounts due under the Notes. As of
September 27, 1997, on a pro forma basis after giving effect to the consummation
of the Merger and the Financing Transactions, Pillowtex and its subsidiaries
would have had $420.0 million of indebtedness (excluding $37.8 million in
letters of credit) effectively ranking senior to the Notes. If it were assumed
that
16
<PAGE> 24
the holders of all of the outstanding Fieldcrest Convertible Debentures were
converted into shares of Fieldcrest Common Stock immediately prior to the Merger
(rather than remaining outstanding), then at September 27, 1997, on a pro forma
combined basis, the revolving credit borrowings (which will be senior in right
of payment to the Notes) would have increased $71.1 million. Additional Senior
Indebtedness may be incurred by the Company from time-to-time, subject to
certain restrictions. See "Description of Notes -- Ranking and Subordination."
RISKS ASSOCIATED WITH ACQUISITIONS; ABILITY TO ACHIEVE COST SAVINGS
The Company expects to continue a strategy of identifying and acquiring
companies with complementary products or services that may be expected to
enhance the Company's operations and profitability. There can be no assurances
that the Company will be able to integrate the operations of Fieldcrest or any
other acquired company successfully with existing operations or that any of such
acquisitions will prove profitable.
The Company has identified approximately $21.6 million of annual cost
savings that it expects to realize immediately as a result of the Merger. These
cost savings are comprised of $20.3 million of savings from the elimination of
duplicate staff salaries and $1.3 million of savings from the elimination of
duplicative corporate expenses. The Company additionally expects to realize
significant ongoing cost savings, including at least $8.4 million to be realized
within the first twelve months after consummation of the Merger, as follows: (i)
$0.9 million by eliminating other redundant cost functions; (ii) $2.0 million by
improving procurement efficiencies by exploiting the combined company's
purchasing power; (iii) $3.0 million by reducing trade advertising; (iv) $1.0
million by rationalizing and streamlining operations; and (v) $1.5 million by
reducing the use of outside consultants.
There can be no assurance as to the timing or amount of any cost savings
that may actually be realized, or that unforeseen costs and expenses, decreases
in sales or revenues, or other factors will not offset any cost savings actually
realized.
DEPENDENCE ON RAW MATERIALS
The raw materials on which the Company is primarily dependent include the
raw feather and down that the Company uses to produce natural fill pillows and
down comforters. The People's Republic of China ("China") is currently the
primary source of raw feather and down for Pillowtex. See "-- Dependence on
Supply Sources in China." The raw materials on which Fieldcrest is primarily
dependent include the cotton and synthetic fibers that Fieldcrest uses to
manufacture its home furnishing products.
The raw materials used by the Company are generally available from a number
of sources, and no significant shortage of such materials is currently
anticipated. However, the Company uses significant quantities of such raw
materials, which are subject to price fluctuations, and there can be no
assurance that shortages of such materials will not occur in the future, which
could increase the cost of or delay the shipment of products.
Cotton is the primary raw material used in the Company's business. Cotton
is an agricultural product and, consequently, its availability is subject to
weather conditions and other factors affecting agricultural markets. There have
been historical periods of rapid and significant movement in the price of cotton
both upward and downward. There can be no assurance that the Company will be
able to pass on any increase in the price of cotton or other raw materials to
its customers.
DEPENDENCE ON SUPPLY SOURCES IN CHINA
In fiscal year 1996 and the nine months ended September 27, 1997,
approximately 83% and 84%, respectively, of the raw feather and down that
Pillowtex used to produce natural fill pillows and down comforters was imported
from China.
The Company's relationships with its suppliers in China could be disrupted
or adversely affected due to a number of factors, including governmental
regulation, fluctuation in exchange rates, and changes in economic and political
conditions in China. If the Company's supply sources in China were disrupted for
any reason, the
17
<PAGE> 25
Company believes, based on existing market conditions, that it could establish
alternative supply relationships. However, because establishing these
relationships involves numerous uncertainties relating to delivery requirements,
price, payment terms, quality control, and other matters, the Company is unable
to predict whether such relationships would be on terms satisfactory to the
Company.
The Company's relationships with its suppliers in China are also subject to
risks associated with changes in United States legislation and regulations
relating to imports, including quotas, duties, and taxes, and other charges or
restrictions on imports. Products that the Company imports from China currently
receive preferential tariff treatment accorded goods from countries granted
"most favored nation" status. Under the Trade Act of 1974, the President of the
United States is authorized, upon making specified findings, to waive certain
restrictions that would otherwise render China ineligible for most favored
nation treatment. The President has waived these provisions each year since
1979. Most favored nation status was accordingly renewed in June 1997 despite
legislation pursued by Congress demanding that China desist from certain trade
and military activities. Congress will continue to monitor these activities and
may encourage the President to reconsider the renewal of most favored nation
status for China in June 1998 and no assurance can be given that China will
continue to enjoy this status in the future. Raw materials and finished products
entering the United States from China without the benefit of most favored nation
treatment would be subject to significantly higher duty rates.
ADVERSE RETAIL INDUSTRY CONDITIONS
The Company sells its products to a number of department stores and other
major retailers who have experienced financial difficulties during the past
several years. Some of these retailers have recently emerged from the protection
of federal bankruptcy laws and some current retail customers of the Company may
seek protection under the federal bankruptcy laws or state insolvency laws in
the future. As a result of these financial difficulties and bankruptcy and
insolvency proceedings, the Company may be unable to collect some or all amounts
owed by these retail customers. Additionally, all or part of the operations of a
retail customer that seeks bankruptcy or other debtor protection may be
discontinued or sales of the Company's products to such a customer may be
curtailed or terminated as a result of bankruptcy or insolvency proceedings.
DEPENDENCE ON KEY LICENSES
The Company holds licenses with organizations such as Polo Ralph Lauren
Corporation, Disney, and others, using such well-known trademarks and trade
names as Ralph Lauren and Disney's Mickey UNLIMITED(R), Mickey's Stuff for
Kids(R), and Mickey & Co.(R) Although the significance of specific licenses
varies from year to year, a substantial portion of the Company's net sales for
fiscal year 1996 and the nine-month period ended September 27, 1997 were
attributable to products sold under licensed trademarks and trade names. These
licenses generally require the payment of royalties based on net sales,
including the payment of minimum annual royalties, and expire at various dates
through 1998. No assurance can be given that the Company will be able to renew
these licenses on acceptable terms upon their expiration or will be able to
acquire new licenses to use other popular trademarks.
The Company's license with Polo Ralph Lauren Corporation expires on June
30, 1998. The Company has had a longstanding relationship with Polo Ralph Lauren
Corporation and has no reason to believe that its Ralph Lauren license will not
be renewed, however, renewal of the license on terms acceptable to the Company
cannot be assured and the loss of the license could have a material adverse
effect on the Company. In addition, the Company's license with Polo Ralph Lauren
Corporation provides that if Charles M. Hansen, Jr., Pillowtex's Chairman of the
Board and Chief Executive Officer, and Mary R. Silverthorne, a director of
Pillowtex, or their immediate families, in the aggregate, cease to beneficially
own at least 25% of the outstanding Pillowtex Common Stock, such license will
become subject to termination at the option of the licensor.
The Company's licenses for the use of various Disney trademarks and trade
names have tended to be of brief duration, usually two years or less. The market
for new and renewal Disney licenses has become increasingly competitive, and
there can be no assurance that the Company will be able to continue to receive
18
<PAGE> 26
new Disney licenses as granted or to obtain renewals of its licenses on
acceptable terms. The loss of one or more of the Company's existing Disney
licenses is unlikely to have a material adverse effect on the business of the
Company.
Fieldcrest also holds licenses with third parties, including Waverly(R),
Adrienne Vittadini(R), and Ellen Tracy(R). Fieldcrest, however, primarily
manufactures and markets products bearing its own proprietary brand names. See
"-- Dependence on Brand Names."
DEPENDENCE ON BRAND NAMES
In fiscal year 1996, approximately 93% of Fieldcrest's net sales were from
sales of products bearing Fieldcrest's proprietary brand names of Royal
Velvet(R), Cannon(R), Charisma(R), Fieldcrest(R), Royal Family(R), Caldwell(R),
Monticello(R), SureFit(R), and St. Mary's(R). The remaining 7% of Fieldcrest's
1996 net sales were from sales of private label products. Accordingly, the
Company's future success may depend in part upon the goodwill associated with
Fieldcrest's brand names.
Fieldcrest's principal brand names are registered in the United States and
certain foreign countries. However, there can be no assurance that the steps
taken by Fieldcrest to protect its proprietary rights in such brand names will
be adequate to prevent the misappropriation thereof in the United States or
abroad. In addition, the laws of some foreign countries do not protect
proprietary rights in brand names to the same extent as do the laws of the
United States.
RISK OF LOSS OF MATERIAL CUSTOMERS
In fiscal year 1996, sales to Wal-Mart and Dayton Hudson accounted for 14%
and 13% of Pillowtex's total sales, respectively. For the nine months ended
September 27, 1997, sales to Wal-Mart and Dayton Hudson accounted for 12% and
13%, respectively, of Pillowtex's total sales. No other single customer
accounted for more than 10% of Pillowtex's total sales during such periods.
In fiscal year 1996, sales to Wal-Mart and its affiliates accounted for 21%
of Fieldcrest's total sales. For the nine months ended September 30, 1997, sales
to Wal-Mart and its affiliates accounted for 25% of Fieldcrest's total sales. No
other single customer accounted for more than 10% of Fieldcrest's net sales
during such periods.
On a pro forma basis, after giving effect to the consummation of the Merger
as if it had been consummated December 31, 1995, sales to Wal-Mart would have
accounted for 19% of the Company's total sales for fiscal 1996 and sales to the
top ten customers would have accounted for 57% of total sales for such period.
Consistent with industry practice, the Company does not operate under a
long-term written supply contract with any of its customers. The business,
financial condition, and results of operations of the Company could be
materially adversely affected by the loss of Dayton Hudson or Wal-Mart as a
customer.
LABOR RELATIONS
Pillowtex has approximately 3,800 employees, approximately 14% of which are
subject to collective bargaining agreements. Fieldcrest has approximately 10,400
employees, approximately 27% of which are subject to collective bargaining
agreements.
Since 1991, the Union of Needletrades, Industrial and Textile Workers
("UNITE") has campaigned to organize approximately 5,500 additional hourly
workers at five Fieldcrest plants, including Fieldcrest's main manufacturing
facility in Kannapolis, North Carolina. Fieldcrest has opposed UNITE's
organizing efforts. Although a majority of employees at these plants recently
voted not to select UNITE as a bargaining representative, the results are
subject to legal challenge. There can be no assurance as to whether or when the
results of such election will be certified or a new election will be scheduled.
It is impossible to predict what effect, if any, a lengthy continuation of
another organizing campaign will have on the productivity of the Fieldcrest
workforce.
19
<PAGE> 27
INDUSTRY COMPETITION AND COMPETITIVE FACTORS
The Company operates in a highly competitive industry. Each of Pillowtex
and Fieldcrest has competed, and continues to compete, with a number of
established manufacturers, importers, and distributors of home textile
furnishings, some of which have greater financial, distribution, manufacturing,
and marketing resources.
SEASONALITY OF BUSINESS
The Company business is subject to a pattern of seasonal fluctuation.
During the past three years, sales and earnings from operations generated during
the second half of the year averaged approximately 61% and 66%, respectively, of
Pillowtex's total sales and earnings from operations. Pillowtex's needs for
working capital increase in the second half of the year and, accordingly, total
debt levels tend to peak in the third and fourth quarters, falling off again in
the first quarter of the following year. The amount of Pillowtex's sales
generated during the second half of the year generally depends upon a number of
factors, including the level of retail sales for home textile furnishings during
the fall and winter, weather conditions affecting the level of sales of down
comforters and blankets (which are sold in greater quantities in cold weather),
general economic conditions, and other factors beyond Pillowtex's control.
Fieldcrest's business is subject to a similar pattern of seasonal
fluctuation, having greater sales volume in the last three quarters of the
calendar year than in the first calendar quarter. Accordingly, it is likely that
Fieldcrest's operating performance in the first quarter of a given calendar year
will be less favorable than operating performance in the last three quarters.
INFLUENCE BY SIGNIFICANT SHAREHOLDERS
As of January 26, 1998, Charles M. Hansen, Jr., Mary R. Silverthorne,
certain trusts for which Ms. Silverthorne acts as trustee (i.e., the John H.
Silverthorne Marital Trust B and the John H. Silverthorne Family Trust A), and
adult children of Ms. Silverthorne owned, in the aggregate, approximately 39.6%
of the outstanding shares of the Pillowtex Common Stock. Accordingly, such
shareholders will continue to exert significant influence over the management
and direction of Pillowtex.
DEPENDENCE ON KEY PERSONNEL
Pillowtex's business is managed by or under the direction of Charles M.
Hansen, Jr., who serves as Chairman of the Board and Chief Executive Officer.
The Company believes that its future success will be highly dependent upon its
ability to attract and retain skilled managers and other personnel, including
Mr. Hansen. The loss of Mr. Hansen's services could have a material adverse
effect on the Company.
RESTRICTIONS IMPOSED BY TERMS OF THE COMPANY'S INDEBTEDNESS
Certain instruments governing the Company's indebtedness, including the
Indenture, restrict, among other things, the ability of the Company and its
subsidiaries to incur additional indebtedness, pay dividends or make certain
other restricted payments, incur liens to secure pari passu or subordinated
indebtedness, sell stock of subsidiaries, apply net proceeds from certain asset
sales, merge or consolidate with any other person, sell, assign, transfer,
lease, convey, or otherwise dispose of substantially all of the assets of the
Company, enter into certain transactions with affiliates, or incur indebtedness
that is subordinate in right of payment to any Senior Indebtedness and senior in
right of payment to the Notes.
The New Senior Credit Facilities contain more extensive and restrictive
covenants than the Indenture and require the Company to maintain specified
financial ratios and satisfy certain financial condition tests. The Company's
ability to meet those financial ratios and tests can be affected by events
beyond its control, and there can be no assurance that the Company will meet
those tests. The New Senior Credit Facilities also prohibit the Company from
prepaying other indebtedness (including the Notes) before indebtedness under the
New Senior Credit Facilities. A breach of any of these covenants or covenants
contained in the New Senior Credit Facilities could result in a default
thereunder. Upon the occurrence of an event of default under the New Senior
Credit Facilities, the lenders thereunder could elect to declare all amounts
outstanding under
20
<PAGE> 28
the New Senior Credit Facilities, including accrued interest or other
obligations, to be immediately due and payable or proceed against the collateral
granted to them to secure that indebtedness. If any other Senior Indebtedness
(as defined herein) were to be accelerated, there can be no assurance that the
assets of the Company would be sufficient to repay in full that indebtedness and
the other indebtedness of the Company, including the Notes.
As a result of the covenants described above, the ability of the Company to
respond to changing business and economic conditions and to secure additional
financing, if needed, may be significantly restricted, and the Company may be
prevented from engaging in transactions that might otherwise be considered
beneficial to the Company. See "Description of Notes -- Certain Covenants."
FRAUDULENT CONVEYANCE STATUTES
Under applicable provisions of federal bankruptcy law or comparable
provisions of state fraudulent transfer law, if, among other things, the Company
or any Guarantor, at the time it incurred the indebtedness evidenced by the
Notes or its Guarantee, as the case may be, (i)(a) was or is insolvent or
rendered insolvent by reason of such occurrence, (b) was or is engaged in a
business or transaction for which the assets remaining with the Company or such
Guarantor constituted unreasonably small capital, or (c) intended or intends to
incur, or believed or believes that it would incur, debts beyond its ability to
pay such debts as they mature, and (ii) the Company or such Guarantor received
or receives less than reasonably equivalent value or fair consideration for the
incurrence of such indebtedness, the Notes or the applicable Guarantee could be
voided, or claims in respect of the Notes or the Guarantee could be subordinated
to all other debts of the Company or such Guarantor, as the case may be. The
voiding or subordination of any of such pledges or other security interests or
of any of such indebtedness could result in an Event of Default (as defined
herein) with respect to such indebtedness, which could result in acceleration
thereof. In addition, the payment of interest and principal by the Company
pursuant to the Notes or the payment of amounts by a Guarantor pursuant to a
Guarantee could be voided and required to be returned to the person making such
payment, or to a fund for the benefit of the creditors of the Company or such
Guarantor, as the case may be.
The measures of insolvency for purposes of the foregoing considerations
will vary depending upon the law applied in any proceeding with respect to the
foregoing. Generally, however, the Company or a Guarantor would be considered
insolvent if (i) the sum of its debts, including contingent liabilities, were
greater than the fair saleable value of all of its assets at a fair valuation or
if the present fair saleable value of its assets were less than the amount that
would be required to pay its probable liability on its existing debts, including
contingent liabilities, as they become absolute and mature or (ii) it could not
pay its debts as they become due.
To the extent any Guarantees were voided as a fraudulent conveyance or held
unenforceable for any other reason, holders of Notes would cease to have any
claim in respect of such Guarantor and would-be creditors solely of the Company
and any Guarantor whose Guarantee was not avoided or held unenforceable. In such
event, the claims of the holders of Notes against the issuer of an invalid
Guarantee would be subject to the prior payment of all liabilities and preferred
stock claims of such Guarantor. There can be no assurance that, after providing
for all prior claims and preferred stock interests, if any, there would be
sufficient assets to satisfy the claims of the holders of Notes relating to any
voided portions of any of the Guarantees.
The Company is a holding company whose material assets consist primarily of
the capital stock of the Guarantors and certain intellectual property assets.
Consequently, the Company will be dependent upon dividends paid by the
Guarantors to pay its operating expenses, service its debt obligations,
including the Notes, and satisfy any mandatory repurchase obligations relating
to the Notes, as a result of a Change of Control (as defined herein) or a sale
or other disposition of certain assets. See "Description of Notes -- Repurchase
at the Option of the Holders."
POTENTIAL INABILITY TO FUND A CHANGE OF CONTROL OFFER
Upon a Change of Control (as defined herein), the Company will be required
to offer to repurchase all outstanding Notes and all 10% Senior Subordinated
Notes at 101% of the principal amount thereof plus accrued and unpaid interest
to the date of repurchase and Liquidated Damages (as defined herein). There can
21
<PAGE> 29
be no assurance, however, that sufficient funds will be available at the time of
any Change of Control to make any required repurchases of Notes and 10% Senior
Subordinated Notes tendered. Moreover, restrictions in the New Senior Credit
Facilities prohibit the Company from making such required repurchases;
consequently, any such repurchases would constitute an event of default under
the New Senior Credit Facilities. There can be no assurance that the Company
will be able to obtain appropriate consents under the New Senior Credit
Facilities to enable it to fulfill such repurchase obligations. 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
Notes -- Repurchase at the Option of Holders."
CONSEQUENCES OF FAILURE TO EXCHANGE
The Series B Notes will be issued in exchange for Series A Notes only after
timely receipt by the Exchange Agent of such Series A Notes, a properly
completed and duly executed Letter of Transmittal and all other required
documents. Therefore, holders of Series A Notes desiring to tender such Series A
Notes in exchange for Series B Notes should allow sufficient time to ensure
timely delivery. Neither the Exchange Agent nor the Company are under any duty
to give notification of defects or irregularities with respect to tenders of
Series A Notes for exchange. Series A Notes that are not tendered or that are
tendered but not accepted will, following consummation of the Exchange Offer,
continue to be subject to the existing restrictions upon transfer thereof and
will not retain any rights to registration. See "The Exchange Offer --
Consequences of Exchanging Series A Notes." In addition, any holder of Series A
Notes who tenders in the Exchange Offer for the purpose of participating in a
distribution of the Series B 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 who holds Series A
Notes acquired for its own account as a result of market-making or other trading
activities and who receives Series B Notes for its own account in exchange for
such Series A Notes pursuant to the Exchange Offer must acknowledge that it will
deliver a prospectus in connection with any resale of such Series B Notes. To
the extent that Series A Notes are tendered and accepted in the Exchange Offer,
the trading market for untendered and tendered but unaccepted shares of Series A
Notes could be adversely affected due to the limited number of shares of Series
A Notes that are expected to remain outstanding following the Exchange Offer.
See "Plan of Distribution" and "The Exchange Offer."
ABSENCE OF PUBLIC MARKET
The Series B Notes are being offered to the Holders of the Series A Notes.
The Series A Notes were issued on December 18, 1997 pursuant to an exemption
from registration under applicable securities laws and are subject to certain
transfer restrictions; accordingly, no public market for the Series A Notes has
developed. The Series B Notes are a new issue of securities for which there is
currently no active trading market. If any such securities are traded after
their initial issuance, they may trade at a discount from their initial offering
price, depending upon the liquidity of such securities, the market for similar
securities, and other factors, including general economic conditions and the
financial condition, performance of, and prospects for the Company.
22
<PAGE> 30
THE MERGER
GENERAL
Pillowtex and Fieldcrest entered into the Merger Agreement, pursuant to
which a wholly owned subsidiary of Pillowtex was merged on December 19, 1997
with and into Fieldcrest. Following consummation of the Merger, Fieldcrest
became a wholly owned subsidiary of Pillowtex.
CONVERSION OF FIELDCREST SHARES
At the Effective Time, each then-outstanding share of Fieldcrest Common
Stock (other than any shares held in the treasury of Fieldcrest, by any of its
subsidiaries, or directly or indirectly by Pillowtex, which shares will be
canceled and shares held by stockholders, if any, who properly exercised their
appraisal rights under Delaware law) was converted into the right to receive
total consideration valued at $34.00, consisting of (i) a cash payment in an
amount equal to $27.00 and (ii) 0.269 (the "Conversion Number") shares of
Pillowtex Common Stock.
At the Effective Time, each then-outstanding share of Fieldcrest Preferred
Stock (other than shares converted into Fieldcrest Common Stock prior to the
Closing Date and any shares held in the treasury of Fieldcrest, by any of its
subsidiaries, or directly or indirectly by Pillowtex, which shares were
cancelled and shares held by stockholders, if any, who properly exercised their
appraisal rights under Delaware law) was converted into a right to receive total
consideration valued at $58.12, consisting of (i) a cash payment of $46.15 and
(ii) 0.4598286 shares of Pillowtex Common Stock.
TREATMENT OF FIELDCREST OPTIONS
Each holder of an outstanding Fieldcrest Option had the option to elect,
prior to the Effective Time, to receive for each share of Fieldcrest Common
Stock subject to such Fieldcrest Option an amount in cash equal to the
difference between $34.00 and the per share exercise price of such Fieldcrest
Option. At the Effective Time, each outstanding Fieldcrest Option, other than
Fieldcrest Options in respect of which the above-described election was made,
was assumed by the Company and now constitutes an option to purchase, in lieu of
each share of Fieldcrest Common Stock previously subject thereto, a number of
shares of Pillowtex Common Stock (increased to the nearest whole share) equal to
the product of (i) the number of shares of Fieldcrest Common Stock subject to
such Fieldcrest Option immediately prior to the Effective Time and (ii) 1.308
(the "Option Conversion Number") at an exercise price per share of Pillowtex
Common Stock (increased to the nearest whole cent) equal to the exercise price
per share of Fieldcrest Common Stock subject to such Fieldcrest Option
immediately prior to the Effective Time divided by the Option Conversion Number.
TREATMENT OF FIELDCREST CONVERTIBLE DEBENTURES
Fieldcrest presently has outstanding $112.5 million ($118.5 million at
September 30, 1997) in aggregate principal amount of its Fieldcrest Convertible
Debentures. The Fieldcrest Convertible Debentures are convertible into the same
consideration that a holder of the number of shares of Fieldcrest Common Stock
into which such Fieldcrest Convertible Debentures might have been converted
immediately prior to the Merger would be entitled to receive in the Merger. For
example, a Fieldcrest Convertible Debenture having an aggregate principal amount
of $1,000 is convertible into (i) a cash payment equal to the product of (a) the
amount of the cash payment to be made on account of each share of Fieldcrest
Common Stock converted in the Merger and (b) 22.60 and (ii) a number of shares
of Pillowtex Common Stock equal to the product of (i) the Conversion Number and
(ii) 22.60. It is anticipated that the Company will use funds available to it
under the Revolver to fund any conversions after the consummation of the Merger.
If it were assumed that all holders of Fieldcrest Convertible Debentures elected
this option, then at September 27, 1997, on a pro forma combined basis, the
revolving credit borrowings would have increased $71.1 million, total debt would
have declined by $26.8 million and shareholder equity would have increased by
$20.1 million. See "Unaudited Pro
23
<PAGE> 31
Forma Combined Financial Information," and "Post-Merger
Indebtedness -- Fieldcrest Convertible Debentures."
MERGER FINANCING
Pillowtex financed the Merger and refinanced certain indebtedness of
Pillowtex and Fieldcrest, paid related fees and expenses, and provided for the
ongoing working capital needs of the Company through a combination of (i)
initial borrowings of $149.0 million under the Revolver and $250.0 million under
the Term Loan, (ii) the issuance and sale of $185.0 million in aggregate
principal amount of the Series A Notes, and (iii) the issuance and sale of $65.0
million in liquidation preference of the Pillowtex Preferred Stock to affiliates
of Apollo. The Financing Transactions were effected concurrently with the
consummation of the Merger. See "Post-Merger Indebtedness," and "Pillowtex
Series A Redeemable Convertible Preferred Stock."
24
<PAGE> 32
USE OF PROCEEDS
The Company will not receive any proceeds from the Exchange Offer. The
approximate net proceeds to the Company from the issuance of the Series A Notes
of $179.9 million (after deducting certain discounts and commissions) together
with proceeds from the New Senior Credit Facilities, and the Pillowtex Preferred
Stock purchased by Apollo, were used to pay the merger consideration, repay
certain outstanding indebtedness of both Fieldcrest and Pillowtex, pay related
fees and expenses, and provide for the ongoing working capital needs of the
Company. See "The Merger -- Merger Financing."
The following table sets forth the sources and uses of funds required to
effect the Merger on a pro forma basis, assuming the Merger was consummated on
September 27, 1997. The actual amounts of sources and uses of funds differed at
the closing (dollars in thousands).
<TABLE>
<S> <C>
Sources of Funds:
New Senior Credit Facilities(1)........................... $398,956
Notes..................................................... 185,000
Pillowtex Preferred Stock................................. 65,000
--------
$648,956
========
Uses of Funds:
Cash to be paid to Fieldcrest stockholders(2)............. $318,802
Repayment of indebtedness(3).............................. 186,350
Redemption of Fieldcrest 11.25% Senior Subordinated
Debentures............................................. 85,000
Settlement of Fieldcrest options and stock appreciation
rights................................................. 6,774
Fees and expenses(4)...................................... 52,030
--------
$648,956
========
</TABLE>
- ---------------
(1) The New Senior Credit Facilities include the Term Loan and the Revolver. The
amount shown excludes letters of credit totaling $37,809 outstanding at the
Effective Time. After giving effect to the Merger the Company had $163,235
available under the Revolver. At the consummation of the Merger, the initial
borrowings under the New Senior Credit Facilities were approximately
$379,900. The borrowings are expected to increase as additional expenses
incurred in connection with the Merger are paid. From and after the
Effective Time, the Fieldcrest Convertible Debentures are convertible into
the same consideration that a holder of the number of shares of Fieldcrest
Common Stock into which such Fieldcrest Convertible Debentures might have
been converted immediately prior to the Merger would be entitled to receive
in the Merger. If it were assumed that all holders of Fieldcrest Convertible
Debentures elected this option, then at September 27, 1997, on a pro forma
combined basis, the revolving credit borrowings would have increased
$71,071, total debt would have declined by $26,770, and shareholders' equity
would have increased by $20,081. See "Unaudited Pro Forma Combined Financial
Information of Pillowtex," "The Merger -- Fieldcrest Convertible
Debentures," and "Post-Merger Indebtedness -- Fieldcrest Convertible
Debentures."
(2) Assumes that cash to be paid to holders of Fieldcrest Common Stock will be
$249,577 (9,243,602 shares at $27.00 per share) and the cash to be paid to
holders of Fieldcrest Preferred Stock will be $69,225 (1,500,000 shares at
$46.15 per share). At the consummation of the Merger, actual cash paid to
holders of Fieldcrest Common Stock was $249,559 (9,242,935 shares at $27.00
per share), cash paid to holders of Fieldcrest Preferred Stock was $69,225
(1,500,000 shares at $46.15 per share) and cash paid for fractional shares
was $38.
(3) Assumes repayment of $86,350 of the existing Pillowtex senior credit
facility and $100,000 of the Fieldcrest revolving credit facility. At the
consummation of the Merger, repayment of the existing Pillowtex senior
credit facility and the Fieldcrest revolving credit facility was $85,964 and
$114,085, respectively.
(4) Includes premium of $4,782 associated with the redemption of the Fieldcrest
11.25% Senior Subordinated Debentures, $13,606 of severance payments,
estimated discounts to NationsBanc Montgomery Securities, Inc. and Bear,
Stearns & Co. Inc. (the "Initial Purchasers"), bank fees, financial advisory
fees, and legal, accounting and other expenses payable or reimbursable by
the Company in connection with the Merger and the Financing Transactions.
25
<PAGE> 33
PRO FORMA CAPITALIZATION OF PILLOWTEX
The following table sets forth the historical capitalization of each of
Pillowtex and Fieldcrest as of September 27, 1997 and September 30, 1997,
respectively, and the pro forma capitalization of Pillowtex as of September 27,
1997, adjusted to give effect to the consummation of the Merger and the
Financing Transactions, as if such transactions had been consummated on
September 27, 1997. "Financing Transactions" means (i) initial borrowings under
the New Senior Credit Facilities of $149.0 million under the Revolver and $250.0
million under the Term Loan, (ii) the issuance and sale of $185.0 million
aggregate principal amount of Notes, (iii) the issuance and sale of 65,000
shares of Pillowtex Preferred Stock, (iv) the repayment of all amounts
outstanding under Pillowtex's and Fieldcrest's existing bank credit facilities,
and (v) the satisfaction and discharge of all indebtedness represented by
Fieldcrest's 11.25% Senior Subordinated Debentures pursuant to an irrevocable
deposit of amounts sufficient to provide for the redemption thereof.
The pro forma information set forth below is presented for illustrative
purposes only and is not necessarily indicative of what Pillowtex's actual
consolidated capitalization would have been had the foregoing transactions been
consummated on September 27, 1997, nor does it give effect to (i) any
transactions other than the foregoing transactions and those discussed in the
Notes to Unaudited Pro Forma Combined Financial Information of Pillowtex
contained elsewhere herein or (ii) Pillowtex's or Fieldcrest's respective
results of operations since September 27, 1997 and September 30, 1997,
respectively. Accordingly, the pro forma information set forth below does not
purport to be indicative of Pillowtex's consolidated capitalization as of the
Effective Time, the date hereof, or any future date.
The following table should be read in conjunction with the historical
financial statements of Pillowtex and Fieldcrest and the unaudited pro forma
combined financial information and the related notes contained elsewhere herein
or incorporated herein by reference to documents previously filed with the
Commission.
26
<PAGE> 34
CAPITALIZATION
SEPTEMBER 27, 1997
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL
----------------------- PRO FORMA
PILLOWTEX FIELDCREST COMBINED
--------- ---------- ----------
<S> <C> <C> <C>
Short-term debt:
Current portion of long-term debt......................... $ 1,553 $ 4,697 $ 6,250
-------- -------- ----------
Total short-term debt................................... 1,553 4,697 6,250
Long-term debt:
Revolving credit borrowings............................... 86,350 100,000 148,956
Senior bank term A........................................ -- -- 125,000
Senior bank term B........................................ -- -- 125,000
Notes..................................................... -- -- 185,000
10% Senior Subordinated Notes............................. 125,000 -- 125,000
Fieldcrest 6% Convertible Subordinated Debentures......... -- 112,500 93,864(a)
Fieldcrest 11.25% Senior Subordinated Debentures.......... -- 85,000 --
Deed of Trust Note........................................ 2,199 -- 2,199
PEDFA Industrial Revenue Bonds............................ 2,310 -- 2,310
MBFC Industrial Revenue Bonds............................. 2,760 -- 2,760
Industrial Development Bonds due 2021..................... -- 10,000 10,000
Industrial Revenue Installment Bonds due 2002............. -- 1,320 1,320
Other long-term debt...................................... 187 -- 187
-------- -------- ----------
Total long-term debt.................................... 218,806 308,820 821,596
-------- -------- ----------
Total debt.......................................... 220,359 313,517 827,846
Pillowtex Series A Redeemable Convertible Preferred Stock,
$0.01 par value, 200,000 shares authorized, 65,000 shares
issued and outstanding (as adjusted)...................... -- -- 62,882
Shareholders' equity:
Preferred Stock, $0.01 par value, 20,000,000 shares
authorized, none issued and outstanding (Pillowtex
historical); $0.01 par value, 10,000,000 shares
authorized, 1,500,000 shares issued and outstanding
(Fieldcrest historical); $0.01 par value, 20,000,000
shares authorized, none issued and outstanding (as
adjusted)................................................. -- 15 --
Common Stock, $0.01 par value, 30,000,000 shares authorized,
10,786,819 shares issued and outstanding (Pillowtex
historical); $0.01 par value, 25,000,000 shares
authorized, 12,850,002 shares issued and outstanding
(Fieldcrest historical); $0.01 par value, 30,000,000
shares authorized, 13,963,348 shares issued and
outstanding (as adjusted)................................. 108 12,850 140
Additional paid-in capital.................................. 60,825 226,758 150,539
Retained earnings........................................... 50,316 106,923 49,348(b)
Treasury stock, 3,606,400 shares (Fieldcrest historical); ..
0 shares (as adjusted).................................... -- (117,225) --
Currency translation adjustment............................. (472) -- (472)
-------- -------- ----------
Total shareholders' equity................................ 110,777 229,321 199,555
-------- -------- ----------
Total capitalization................................ $331,136 $542,838 $1,090,283
======== ======== ==========
Ratio of total debt to total capitalization......... 66.55% 57.76% 75.93%(c)
======== ======== ==========
</TABLE>
- ---------------
(a) Reflects an adjustment to record the Fieldcrest 6% Convertible Debentures
due 2012 at fair market value.
(b) Reflects a charge of $968, net of income tax benefit, for the write off of
Pillowtex unamortized debt issuance costs.
(c) Including the Pillowtex Preferred Stock together with total debt, the ratio
would be 81.70%.
See accompanying Notes to Unaudited Pro Forma Combined Financial Information.
27
<PAGE> 35
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The following unaudited pro forma combined financial statements of
Pillowtex give effect to the consummation of the Merger and the Financing
Transactions, as if such transactions had been consummated: (i) on September 27,
1997, in the case of the Unaudited Pro Forma Combined Balance Sheet at September
27, 1997 and (ii) on December 31, 1995, the first day of Pillowtex's 1996 fiscal
year, in the case of the Unaudited Pro Forma Combined Statement of Operations
for the fiscal year ended December 28, 1996 and the nine months ended September
27, 1997. As used herein, the term "Financing Transactions" means (i) initial
borrowings under the New Senior Credit Facilities of $149.0 million under the
Revolver and $250.0 million under the Term Loan, (ii) the issuance and sale of
$185.0 million aggregate principal amount of Notes, (iii) the issuance and sale
of 65,000 shares of Pillowtex Preferred Stock, (iv) the repayment of all amounts
outstanding under Pillowtex's and Fieldcrest's existing bank credit facilities,
and (v) the satisfaction and discharge of all indebtedness represented by
Fieldcrest's 11.25% Senior Subordinated Debentures Due 2002 to 2004 pursuant to
an irrevocable deposit of amounts sufficient to provide for the redemption
thereof.
The following unaudited pro forma combined financial information is
presented for illustrative purposes only and is not necessarily indicative of
what Pillowtex's actual financial position or results of operations would have
been had the foregoing transactions been consummated on such dates, nor does it
give effect to (i) any transactions other than the foregoing transactions and
those described in the accompanying Notes to Unaudited Pro Forma Combined
Financial Information, (ii) Pillowtex's or Fieldcrest's results of operations
since September 27, 1997 and September 30, 1997, respectively, or (iii) one-time
charges of approximately $7.5 million, including approximately $2.0 million of
cash charges, expected to result from the Merger and the integration of the
operations of Pillowtex. Although the following unaudited pro forma combined
financial information gives effect to assumed annual cost savings of $21.6
million, it does not give effect to certain additional annual cost savings
expected to be achieved following consummation of the Merger. The pro forma
combined financial information does not purport to be indicative of the
Company's financial position or results of operations as of the date of the
closing of the Merger or for any period ended on the date of the closing of the
Merger, as of the date hereof or for any period ending on the date hereof, or as
of or for any future date or period.
The following unaudited pro forma combined financial information is based
upon the historical financial statements of Pillowtex and Fieldcrest and should
be read in conjunction with such historical financial statements and the related
notes. See "Available Information," "Incorporation of Certain Information by
Reference," "Selected Historical Information of Pillowtex," and "Selected
Historical Information of Fieldcrest." In the preparation of the following
unaudited pro forma combined financial information, it has been generally
assumed that the historical value of Fieldcrest's assets and liabilities
approximates the fair value thereof (except as described in the accompanying
Notes to Unaudited Pro Forma Combined Financial Information), as an independent
valuation has not been completed. The Company will be required to determine the
fair value of the assets and liabilities of Fieldcrest (including intangible
assets) as of the Effective Time. Although such determination of fair value is
not presently expected to result in values that are materially greater or less
than the values assumed in the preparation of the following unaudited pro forma
combined financial information, there can be no assurance with respect thereto.
The Unaudited Pro Forma Combined Balance Sheet at September 27, 1997 is
based upon Pillowtex's financial position at September 27, 1997 and upon
Fieldcrest's financial position at September 30, 1997. The Unaudited Pro Forma
Combined Statement of Operations for the fiscal year ended December 28, 1996 is
based upon Pillowtex's results of operations for its fiscal year ended December
28, 1996 and upon Fieldcrest's results of operations for its fiscal year ended
December 31, 1996. The Unaudited Pro Forma Combined Statement of Operations for
the nine months ended September 27, 1997 is based upon Pillowtex's results of
operations for the nine months ended September 27, 1997 and upon Fieldcrest's
results of operations for the nine months ended September 30, 1997.
The home textiles and furnishings industry is seasonal in nature, with a
higher proportion of sales and earnings usually being generated in the third and
fourth quarters of the fiscal year than in other periods. Because of this
seasonality and other factors, results of operations for interim periods are not
necessarily indicative of results of operations for an entire fiscal year.
28
<PAGE> 36
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
BALANCE SHEET
SEPTEMBER 27, 1997
(IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
--------------------------- ----------------------------
PILLOWTEX FIELDCREST ADJUSTMENTS COMBINED
--------- -------------- ----------- ----------
<S> <C> <C> <C> <C>
Current assets:
Cash................................. $ 34 $ 5,475 $ --(2) $ 5,509
Accounts receivable.................. 104,353 170,071 -- 274,424
Inventories.......................... 150,084 202,064 19,000(1) 371,148
Prepaid expenses and other current
assets............................ 6,849 2,218 -- 9,067
-------- -------- -------- ----------
Total current assets.............. 261,320 379,828 19,000 660,148
Property, plant, and equipment, net.... 98,916 342,392 50,000(1) 491,308
Goodwill, net.......................... 45,683 6,495 186,544(1) 238,722
Other assets, net...................... 13,249 60,764 (44,129)(1) 46,447
(1,600)(3)
18,163(4)
-------- -------- -------- ----------
Total assets................. $419,168 $789,479 $227,978 $1,436,625
======== ======== ======== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable..................... $ 50,699 $ 63,893 $ -- $ 114,592
Accrued expenses..................... 25,253 69,435 5,318(1) 99,374
(632)(3)
Current portion of long-term debt.... 1,553 4,697 -- 6,250
Deferred income taxes................ 2,581 20,593 1,266(1) 24,440
-------- -------- -------- ----------
Total current liabilities......... 80,086 158,618 5,952 244,656
Long-term debt......................... 218,806 308,820 293,970(2)(4) 821,596
Deferred income taxes.................. 9,499 39,758 4,984(1) 54,241
Other non-current liabilities.......... -- 52,962 733(1) 53,695
-------- -------- -------- ----------
Total liabilities................. 308,391 560,158 305,639 1,174,188
Redeemable convertible preferred
stock................................ -- -- 62,882(5) 62,882
Shareholders' equity:
Preferred stock...................... -- 15 (15)(6) --
Common stock......................... 108 12,850 (12,818)(6) 140
Additional paid-in capital........... 60,825 226,758 (137,044)(6) 150,539
Retained earnings.................... 50,316 106,923 (106,923)(6) 49,348
(968)(3)
Treasury stock....................... -- (117,225) 117,225(6) --
Currency translation adjustment...... (472) -- -- (472)
-------- -------- -------- ----------
Total shareholders' equity... 110,777 229,321 (140,543) 199,555
-------- -------- -------- ----------
Total liabilities and
shareholders' equity....... $419,168 $789,479 $227,978 $1,436,625
======== ======== ======== ==========
</TABLE>
See accompanying Notes to Unaudited Pro Forma Combined Financial Information.
29
<PAGE> 37
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 28, 1996
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
------------------------- --------------------------
PILLOWTEX FIELDCREST ADJUSTMENTS COMBINED
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales.............................. $ 490,655 $ 1,092,496 $ -- $ 1,583,151
Cost of goods sold..................... 411,048 956,522 3,713(7) 1,364,368
(6,915)(8)
----------- ----------- --------- -----------
Gross profit......................... 79,607 135,974 3,202 218,783
Selling, general, and administrative
expenses............................. 41,445 105,405 (530)(1) 136,434
412(7)
(14,644)(8)
4,825(7)
(479)(9)
Restructuring charges.................. -- 8,130 -- 8,130
----------- ----------- --------- -----------
Earnings from operations............. 38,162 22,439 13,618 74,219
Nonoperating (income) expense:
Interest expense..................... 13,971 26,869 22,606(10) 63,446
Other income, net.................... -- (5,604) -- (5,604)
----------- ----------- --------- -----------
Total nonoperating expense... 13,971 21,265 22,606 57,842
----------- ----------- --------- -----------
Earnings before income taxes and
extraordinary items............... 24,191 1,174 (8,988) 16,377
Income taxes........................... 9,459 114 (1,198)(11) 8,375
----------- ----------- --------- -----------
Earnings before extraordinary
items............................. 14,732 1,060 (7,790) 8,002
Preferred dividends.................... -- (4,500) 2,550(12) (1,950)
----------- ----------- --------- -----------
Earnings (loss) before extraordinary
items applicable to common
stock............................. $ 14,732 $ (3,440) $ (5,240) $ 6,052
=========== =========== ========= ===========
PRIMARY EARNINGS PER SHARE:
Earnings (loss) before extraordinary
items............................. $ 1.39 $ (0.38) $ 0.44
=========== =========== ===========
Weighted average common shares
outstanding....................... 10,617,722 9,023,958 13,794,251(13)
=========== =========== ===========
FULLY DILUTED EARNINGS PER SHARE:
Earnings (loss) before extraordinary
items............................. $ -- $ 0.44
=========== ===========
Weighted average common shares
outstanding....................... 14,413,901 13,794,251(13)
=========== ===========
OTHER OPERATING DATA:
Depreciation and amortization........ $ 12,775 $ 36,678 $ 57,394
EBITDA(14)........................... 50,937 59,117 131,613
Ratio of earnings to fixed
charges(15)....................... 2.4x 1.0x 1.2x
</TABLE>
See accompanying Notes to Unaudited Pro Forma Combined Financial Information.
30
<PAGE> 38
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 27, 1997
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
------------------------ ---------------------------
PILLOWTEX FIELDCREST ADJUSTMENTS COMBINED
----------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales............................... $ 370,633 $ 820,635 $ -- $ 1,191,268
Cost of goods sold...................... 305,674 695,615 2,784(7) 998,887
(5,186)(8)
----------- ---------- --------- -----------
Gross profit.......................... 64,959 125,020 2,402 192,381
Selling, general, and administrative
expenses.............................. 33,728 85,563 (398)(1) 111,520
310(7)
(10,983)(8)
3,619(7)
(319)(9)
----------- ---------- --------- -----------
Earnings from operations.............. 31,231 39,457 10,173 80,861
Nonoperating (income) expense:
Interest expense...................... 13,957 18,708 19,970(10) 52,635
Other income, net..................... -- (2,021) -- (2,021)
----------- ---------- --------- -----------
Total nonoperating expense.... 13,957 16,687 19,970 50,614
----------- ---------- --------- -----------
Earnings before income taxes and
extraordinary items................ 17,274 22,770 (9,797) 30,247
Income taxes............................ 6,702 8,087 (1,412)(11) 13,377
----------- ---------- --------- -----------
Earnings before extraordinary items... 10,572 14,683 (8,385) 16,870
Preferred dividends..................... -- (3,375) 1,912(12) (1,463)
----------- ---------- --------- -----------
Earnings before extraordinary items
applicable to common stock......... $ 10,572 $ 11,308 $ (6,473) $ 15,407
=========== ========== ========= ===========
PRIMARY EARNINGS PER SHARE:
Earnings before extraordinary items... $ 0.99 $ 1.23 $ 1.11(13)
=========== ========== ===========
Weighted average common shares
outstanding........................ 10,669,225 9,204,171 16,554,087
=========== ========== ===========
FULLY DILUTED EARNINGS PER SHARE:
Earnings before extraordinary items... $ 1.23 $ 1.11(13)
========== ===========
Weighted average common shares
outstanding........................ 9,247,477 16,554,087
========== ===========
OTHER OPERATING DATA:
Depreciation and amortization......... $ 10,642 $ 26,241 $ 42,879
EBITDA(14)............................ 41,873 65,698 123,740
Ratio of earnings to fixed
charges(15)........................ 2.0x 2.0x 1.5x
</TABLE>
See accompanying Notes to Unaudited Pro Forma Combined Financial Information.
31
<PAGE> 39
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
(1) In connection with the Merger, at the Effective Time each then-outstanding
share of Fieldcrest Common Stock was converted into the right to receive
total consideration consisting of $27.00 in cash and 0.269 shares of
Pillowtex Common Stock and each then-outstanding share of Fieldcrest
Preferred Stock was converted into a right to receive total consideration
consisting of $46.15 in cash and 0.4598286 shares of Pillowtex Common
Stock. For purposes of the unaudited pro forma combined financial
information contained herein, the fair market value of Pillowtex Common
Stock is assumed to be $28.36 per share, which is the average closing
market price of the Pillowtex Common Stock for the four consecutive trading
days immediately preceding December 19, 1997 (i.e., the closing date of the
Merger). The aggregate purchase price assumed to be paid by Pillowtex in
connection with the acquisition of Fieldcrest pursuant to the Merger is
summarized below.
ISSUANCE OF PILLOWTEX COMMON STOCK:
<TABLE>
<S> <C>
Number of shares of Fieldcrest Common Stock outstanding at
the Effective Time........................................ 9,243,602
Conversion ratio............................................ 0.269
------------
Number of shares of Pillowtex Common Stock assumed to be
issued to holders of Fieldcrest Common Stock in connection
with the Merger........................................... 2,486,529
------------
Number of shares of Fieldcrest Preferred Stock outstanding
at the Effective Time..................................... 1,500,000
Conversion ratio (rounded to the nearest one-hundredth)..... 0.46
------------
Number of shares of Pillowtex Common Stock assumed to be
issued to holders of Fieldcrest Preferred Stock in
connection with the Merger................................ 690,000
------------
Total shares of Pillowtex Common Stock assumed to be issued
in connection with the Merger............................. 3,176,529
============
</TABLE>
AGGREGATE PURCHASE PRICE:
<TABLE>
<S> <C>
Cash assumed to be paid to holders of Fieldcrest Common
Stock (9,243,602 shares at $27.00 per share).............. $249,577,000
Cash assumed to be paid to holders of Fieldcrest Preferred
Stock (1,500,000 shares at $46.15 per share).............. 69,225,000
Assumed fair value of Pillowtex Common Stock assumed to be
issued in connection with the Merger (3,176,529 shares at
$28.36 per share)......................................... 90,086,000
Severance costs assumed to be incurred in connection with
the Merger................................................ 13,021,000(a)
Settlement of Fieldcrest Options and Fieldcrest SARs........ 6,774,000(b)
Early call premium on Fieldcrest 11.25% Senior Subordinated
Debentures................................................ 4,782,000
Financial advisors, legal, accounting, and other
professional fees......................................... 13,606,000
------------
Aggregate purchase price.................................... $447,071,000
============
</TABLE>
32
<PAGE> 40
ALLOCATION OF PURCHASE PRICE:
<TABLE>
<S> <C> <C>
Aggregate purchase price........................... $447,071,000
Less net book value of assets acquired............. 229,321,000
------------
Excess of cost over net book value of assets
acquired......................................... 217,750,000
Less adjustments to record assets and liabilities
acquired
at fair market value:
Inventory........................................ 19,000,000(c)
Property, plant, and equipment................... 50,000,000(d)
Goodwill......................................... (6,495,000)(e)
Other assets..................................... (44,129,000)(f)
Accrued expenses................................. (5,318,000)(g)
Deferred income taxes -- current................. (1,266,000)(h)
Long-term debt................................... 18,636,000(i)
Deferred income taxes -- noncurrent.............. (4,984,000)(h)
Noncurrent liabilities........................... (733,000)(j) 24,711,000
----------- ------------
Excess of cost over fair market value of net assets
acquired (k)..................................... $193,039,000
============
</TABLE>
- ---------------
(a) Reflects severance costs to be incurred in connection with the Merger
in accordance with EITF 95-3, "Recognition of Liabilities in Connection
with a Purchase Business Combination."
(b) Reflects the settlement of the outstanding options to purchase shares
of Fieldcrest Common Stock (the "Fieldcrest Options") and outstanding
stock appreciation rights issued by Fieldcrest (the "Fieldcrest SARs")
in connection with the Merger.
(c) Reflects principally the elimination of Fieldcrest's last-in, first-out
reserve, together with certain offsetting adjustments necessary to
state inventory at fair market value.
(d) Reflects a preliminary adjustment to fair value of Fieldcrest's
property, plant, and equipment. The preliminary adjustment is based
upon internal estimates and is allocated as follows:
<TABLE>
<S> <C>
Land.................................... $ 5,000,000
Buildings............................... 20,000,000
Machinery and Equipment................. 25,000,000
-----------
$50,000,000
===========
</TABLE>
(e) Reflects the elimination of Fieldcrest's existing goodwill of
$6,495,000. The reversal of the related amortization was $530,000 for
the year ended December 28, 1996 and $398,000 for the nine months ended
September 27, 1997.
(f) Reflects an adjustment to record the (i) preliminary fair value
remeasurement of Fieldcrest's pension asset resulting in a reduction of
$27,087,000, (ii) elimination of the asset related to the Fieldcrest
licensing agreement with Pillowtex of $10,393,000, (iii) write-off of
the unamortized balance of debt issuance costs related to Fieldcrest's
bank credit facility, Fieldcrest's 11.25% Senior Subordinated
Debentures Due 2002 (the "11.25% Senior Subordinated Debentures"), and
Fieldcrest's 6% Convertible Debentures due 2012 (the "Fieldcrest
Convertible Debentures") of $4,649,000 and (iv) preliminary fair value
adjustment related to notes receivable of $2,000,000.
(g) Reflects the adjustment to record miscellaneous reserves of $5,318,000
charged to pre-Merger earnings.
(h) To record a $6,250,000 deferred tax liability related to the temporary
difference between the financial statement carrying amount and the tax
basis of the Fieldcrest acquired assets as adjusted at an assumed
income tax rate of 35.0% for the years in which those differences are
expected to be recovered or settled.
(i) Reflects the adjustment to record the Fieldcrest Convertible Debentures
at an amount that approximates the market value of the Fieldcrest
Convertible Debentures on December 19, 1997, (i.e., the closing date of
the Merger). The discount of $18,636,000 will be amortized to interest
expense using the interest method over the remaining life of the
Fieldcrest Convertible Debentures.
33
<PAGE> 41
(j) Reflects the preliminary fair value remeasurement of Fieldcrest's
liability for post-retirement benefits other than pension ("OPEB") of
$733,000.
(k) Upon completion of its determination of fair values, Pillowtex may
identify intangible assets (such as trade names) to which a portion of
the purchase price should be allocated. Pillowtex believes that the
amortization period for such identifiable intangible assets will also
be 40 years.
(2) Reflects the adjustment to record the following:
<TABLE>
<S> <C>
Initial borrowings under the New Senior Credit Facilities... $ 398,956,000
Gross proceeds from the issuance and sale of the Notes...... 185,000,000
Gross proceeds from the issuance and sale of Pillowtex
Preferred Stock........................................... 65,000,000
Cash assumed to be paid to holders of Fieldcrest Common
Stock (9,243,602 shares at $27.00 per share).............. (249,577,000)
Cash assumed to be paid to holders of Fieldcrest Preferred
Stock (1,500,000 shares at $46.15 per share).............. (69,225,000)
Repayment of Pillowtex's revolving credit facility.......... (86,350,000)
Repayment of Fieldcrest's revolving credit facility......... (100,000,000)
Satisfaction and discharge of Fieldcrest's 11.25% Senior
Subordinated Debentures................................... (85,000,000)
Severance costs assumed to be incurred in connection with
the Merger (see note 1(a))................................ (13,021,000)
Settlement of Fieldcrest Options and Fieldcrest SARs (see
note 1(b))................................................ (6,774,000)
Early call premium on Fieldcrest 11.25% Senior Subordinated
Debentures................................................ (4,782,000)
Financial advisors, legal, accounting, and other
professional fees......................................... (34,227,000)
-------------
$ --
=============
</TABLE>
(3) Reflects the adjustment to (a) write off the unamortized balance of debt
issuance costs related to the existing Pillowtex bank credit facility of
$1,600,000, (b) record the related tax benefit of $632,000 and (c) record a
net reduction in retained earnings of $968,000.
(4) Reflects the adjustment to record the following:
<TABLE>
<S> <C>
Bank borrowings required to finance the Merger.............. $ 398,956,000
Issuance and sale of the Notes.............................. 185,000,000
Repayment of Pillowtex's revolving credit facility.......... (86,350,000)
Repayment of Fieldcrest's revolving credit facility......... (100,000,000)
Satisfaction and discharge of Fieldcrest's 11.25% Senior
Subordinated Debentures................................... (85,000,000)
Discount of the Fieldcrest Convertible Debentures at fair
market value (see note 1(i)).............................. (18,636,000)
-------------
$ 293,970,000
=============
</TABLE>
Additionally, debt issuance costs of $18,163,000 were incurred in
connection with the Merger.
(5) Reflects the issuance and sale of 65,000 shares of Pillowtex Preferred
Stock at an offering price of $1,000 per share, net of offering costs of
$2,118,000.
(6) Reflects the (i) elimination of Fieldcrest's equity which will be canceled
upon consummation of the Merger, (ii) issuance of 3,176,529 shares of
Pillowtex Common Stock at a par value of $0.01 in connection with the
Merger, and (iii) the related additional paid-in capital of $90,054,000,
net of equity issuance costs of $340,000.
(7) Reflects incremental depreciation and amortization expense as a result of
the preliminary adjustment to fair value of Fieldcrest's property, plant,
and equipment and the excess of cost over fair market value of the net
assets acquired (see note 1) as follows:
34
<PAGE> 42
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED
ESTIMATED DECEMBER 28, SEPTEMBER 27,
USEFUL LIFE 1996 1997
------------- ------------ -------------
<S> <C> <C> <C>
Additional depreciation of Fieldcrest
Merger property, plant, and equipment.... 8 to 20 years $4,125,000 $3,094,000
========== ==========
Amortization of excess of cost over fair
value of net assets acquired............. 40 years $4,825,000 $3,619,000
========== ==========
</TABLE>
(8) Reflects the elimination of duplicate corporate expenses of $21,559,000 for
the year ended December 28, 1996 and $16,169,000 for the nine months ended
September 27, 1997.
(9) Reflects the reversal of the amortization related to Pillowtex's debt
issuance costs which have been written off in connection with the Merger
(see note 3) of $479,000 for the year ended December 28, 1996 and $319,000
for the nine months ended September 27, 1997.
(10) Reflects an adjustment to record additional interest expense, amortization
of debt issuance costs, and the amortization of the discount on the
Fieldcrest Convertible Debentures incurred in connection with the Merger.
For each 1/8% change in the assumed effective interest rate on Pillowtex's
floating-rate debt, interest expense would change by $672,000 and $481,000
for the year ended December 28, 1996 and the nine months ended September
27, 1997, respectively.
(11) Reflects the income tax benefit related to the effects of the pro forma
adjustments based upon an assumed composite income tax rate of 39.5%.
(12) Reflects an adjustment to (i) reverse Fieldcrest's historical preferred
stock dividends and (ii) record the dividends on the Pillowtex Preferred
Stock assuming a 3% dividend rate as follows:
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED
DECEMBER 28, SEPTEMBER 27,
1996 1997
------------ -------------
<S> <C> <C>
Reversal of historical Fieldcrest Preferred Stock
dividends.............................................. $(4,500,000) $(3,375,000)
Addition of Pillowtex Preferred Stock dividends.......... 1,950,000 1,463,000
----------- -----------
$(2,550,000) $(1,912,000)
=========== ===========
</TABLE>
If Pillowtex were to fail to attain specified earnings per share targets in
1999, dividends for fiscal years after 1999 would increase from the initial
3.0% rate to 7.0% or 10.0% and Pillowtex would be required to pay an
additional dividend consisting of shares of Pillowtex Preferred Stock, in
each case as described above.
(13) The assumed conversion of the Fieldcrest Convertible Debentures and the
Pillowtex Preferred Stock would have an anti-dilutive effect on earnings
per share for the year ended December 28, 1996, and therefore has been
excluded from the computation thereof.
The assumed conversion of the Fieldcrest Convertible Debentures would have
an anti-dilutive effect on earnings per share for the nine months ended
September 27, 1997, and therefore has been excluded from the computation
thereof.
(14) EBITDA is income before income taxes plus depreciation expense,
amortization expense, and net interest expense. EBITDA is presented because
it is a widely accepted financial indicator of a company's ability to
service and/or incur indebtedness; however, EBITDA should not be considered
as an alternative to net income (as a measure of operating results) or to
cash flows (as a measure of liquidity) computed in accordance with
generally accepted accounting principles. In addition, EBITDA as presented
herein may not be directly comparable to EBITDA as reported by other
companies.
(15) In calculating the ratio of earnings to fixed charges, earnings consist of
income before income taxes plus fixed charges (excluding capitalized
interest). Fixed charges consist of interest expense (which includes
amortization of deferred financing costs) whether expensed or capitalized
and one-third of rental expense, deemed representative of that portion of
rental expense estimated to be attributable to interest.
35
<PAGE> 43
SELECTED HISTORICAL FINANCIAL INFORMATION OF PILLOWTEX
The following summary historical financial information of Pillowtex has
been derived from the historical consolidated financial statements of Pillowtex
filed with the Commission, and should be read in conjunction with such financial
statements and the notes thereto and the other financial information appearing
in Pillowtex's Annual Report on Form 10-K for the year ended December 28, 1996
and the Quarterly Report on Form 10-Q of Pillowtex for the quarter ended
September 27, 1997, and incorporated herein by reference. See "Available
Information" and "Incorporation of Certain Information by Reference." The
historical financial information at the end of and for each fiscal year in the
five-year period ended December 28, 1996 has been extracted from audited
financial statements filed with the Commission. Historical financial information
at the end of and for the nine-month periods ended September 28, 1996 and
September 27, 1997 has been extracted from unaudited financial statements filed
with the Commission and incorporated herein by reference and, in the opinion of
management, includes all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation, in all material respects, of the
results of operations and financial position at the end of and for each of the
interim periods presented. Interim period results are not necessarily indicative
of results to be expected for a complete fiscal year.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
FISCAL YEAR -----------------------------
---------------------------------------------------- SEPTEMBER 28, SEPTEMBER 27,
1992 1993(1) 1994(2) 1995 1996 1996 1997
-------- -------- -------- -------- -------- ------------- -------------
(DOLLARS IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales.................................. $273,462 $291,624 $349,520 $474,899 $490,655 $335,770 $370,633
Cost of goods sold......................... 222,611 238,155 294,714 395,922 411,048 280,272 305,674
-------- -------- -------- -------- -------- -------- --------
Gross profit............................... 50,851 53,469 54,806 78,977 79,607 55,498 64,959
Selling, general, and administrative
expenses ................................ 33,376 29,227 36,399 42,508 41,445 31,170 33,728
-------- -------- -------- -------- -------- -------- --------
Earnings from operations................... 17,475 24,242 18,407 36,469 38,162 24,328 31,231
Interest expense........................... 4,997 3,042 6,361 17,491 13,971 10,279 13,957
Other expense (income), net................ 1,049 -- (379) -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Earnings before income taxes and
extraordinary loss....................... 11,429 21,200 12,425 18,978 24,191 14,049 17,274
Income taxes............................... 529 8,420 4,736 7,509 9,459 5,495 6,702
-------- -------- -------- -------- -------- -------- --------
Earnings before extraordinary loss......... 10,900 12,780 7,689 11,469 14,732 8,554 10,572
Extraordinary loss, net.................... -- -- -- -- (609) -- --
-------- -------- -------- -------- -------- -------- --------
Net earnings(3)............................ $ 10,900 $ 12,780 $ 7,689 $ 11,469 $ 14,123 $ 8,554 $ 10,572
======== ======== ======== ======== ======== ======== ========
Net earnings available to common stock
shareholders(3).......................... $ 8,400 $ 12,780 $ 7,689 $ 11,469 $ 14,123 $ 8,554 $ 10,572
======== ======== ======== ======== ======== ======== ========
OTHER DATA:
Depreciation and amortization.............. $ 3,104 $ 3,868 $ 6,365 $ 11,994 $ 12,775 $ 9,440 $ 10,642
Capital expenditures(4).................... 5,869 7,135 10,538 12,448 6,960 2,981 13,891
EBITDA(5).................................. 19,530 28,110 25,151 48,463 50,937 33,768 41,873
EBITDA margin.............................. 7.1% 9.6% 7.2% 10.2% 10.4% 10.1% 11.3%
Ratio of earnings to fixed charges(6)...... 3.0x 6.8x 2.8x 2.0x 2.4x 2.2x 2.0x
BALANCE SHEET DATA:
Working capital............................ $ 65,567 $ 78,141 $122,738 $110,128 $150,506 $152,787 $181,234
Total assets............................... 131,542 180,967 319,544 324,710 375,714 370,670 419,168
Long-term debt............................. 63,599 63,735 177,149 153,472 194,851 180,200 218,806
Shareholders' equity....................... 7,072 69,329 76,478 87,990 100,004 95,042 110,777
</TABLE>
- ---------------
(1) Results for fiscal 1993 reflect the operations of Manetta Home Fashions,
Inc. from August 30, 1993, Tennessee Woolen Mills, Inc. from September 7,
1993 and Torfeaco Industries Limited from December 1, 1993.
(2) Results for fiscal 1994 reflect the operations of Imperial Feather Company
from August 19, 1994 and Beacon Manufacturing Company from December 1, 1994.
(3) Pillowtex, under a 1990 stock repurchase agreement with its former majority
shareholder, was committed to repurchase certain shares of common stock from
the former majority shareholder which resulted in accretion of $2,500. This
accretion was charged to retained earnings and deducted from earnings
available for common stock shareholders in the computation of pro forma
earnings per common share for fiscal 1992. Additionally, on a pro forma
basis, giving effect to the termination of Pillowtex's status as an S
corporation under subchapter S of the Internal Revenue Code (which
termination resulted from the initial public offering of Pillowtex Common
Stock), as if such termination had occurred on January 1, 1992, net earnings
and net earnings available to common stock shareholders would have been
$7,692 and $5,192, respectively, for fiscal 1992 and $12,877 and $12,877,
respectively, for fiscal 1993.
(4) Capital expenditures for fiscal year 1996 exclude $5,745 and $8,335 related
to the purchase of the assets of the Fieldcrest blanket division and the
purchase of the Mauldin, South Carolina distribution facility, respectively.
(5) EBITDA is income before income taxes plus depreciation expense, amortization
expense, and net interest expense. EBITDA is presented because it is a
widely accepted financial indicator of a company's ability to service and/or
incur indebtedness; however, EBITDA should not be considered as an
alternative to net income as a measure of operating results or to cash flows
as a measure of liquidity in accordance with generally accepted accounting
principles.
(6) In calculating the ratio of earnings to fixed charges, earnings consist of
income before income taxes plus fixed charges (excluding capitalized
interest). Fixed charges consist of interest expense (which includes
amortization of deferred financing costs) whether expensed or capitalized
and one-third of rental expense, deemed representative of that portion of
rental expense estimated to be attributable to interest.
36
<PAGE> 44
SELECTED HISTORICAL FINANCIAL INFORMATION OF FIELDCREST
The following summary historical financial information of Fieldcrest has
been derived from the historical consolidated financial statements of Fieldcrest
filed with the Commission, and should be read in conjunction with such financial
statements and the notes thereto and the other financial information appearing
in Fieldcrest's Annual Report on Form 10-K for the year ended December 31, 1996
and the Quarterly Report on Form 10-Q of Fieldcrest for the quarter ended
September 30, 1997, and incorporated herein by reference. See "Available
Information" and "Incorporation of Certain Information by Reference." The
historical financial information at the end of and for each fiscal year in the
five-year period ended December 31, 1996 has been extracted from audited
financial statements filed with the Commission. Historical financial information
at the end of and for the nine-month periods ended September 30, 1996 and 1997
has been extracted from unaudited financial statements filed with the Commission
and, in the opinion of management, includes all adjustments, consisting only of
normal recurring adjustments, necessary for a fair presentation, in all material
respects, of the results of operations and financial position at the end of and
for each of the interim periods presented. Interim period results are not
necessarily indicative of results to be expected for a complete fiscal year.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
FISCAL YEAR SEPTEMBER 30,
------------------------------------------------------------ -------------------
1992 1993 1994 1995 1996 1996 1997
-------- ---------- ---------- ---------- ---------- -------- --------
(DOLLARS IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales.................................... $981,773 $1,000,107 $1,063,731 $1,095,193 $1,092,496 $812,995 $820,635
Cost of sales................................ 818,729 834,701 898,437 966,642 956,522 706,482 695,615
-------- ---------- ---------- ---------- ---------- -------- --------
Gross profit................................. 163,044 165,406 165,294 128,551 135,974 106,513 125,020
Selling, general and administrative
expenses(1)................................ 102,189 111,843 94,756 128,663 113,535 86,536 85,563
-------- ---------- ---------- ---------- ---------- -------- --------
Operating income (loss)...................... 60,855 53,563 70,538 (112) 22,439 19,977 39,457
Interest expense............................. 34,149 27,659 23,268 27,630 26,869 21,496 18,708
Other expense (income), net.................. 130 (975) 987 67 (5,604) 519 (2,021)
-------- ---------- ---------- ---------- ---------- -------- --------
Income (loss) before income taxes............ 26,576 26,879 46,283 (27,809) 1,174 (2,038) 22,770
Income taxes................................. 10,886 11,913 15,538 (12,084) 114 (764) 8,087
-------- ---------- ---------- ---------- ---------- -------- --------
Income (loss) from continuing operations
before accounting charges.................. $ 15,690 $ 14,966 $ 30,745 $ (15,725) $ 1,060 $ (1,274) $ 14,683
======== ========== ========== ========== ========== ======== ========
Net income (loss)(3)......................... $ 15,250 $ (42,931) $ 30,745 $ (15,725) $ 1,060 $ (1,274) $ 14,683
Preferred dividends.......................... -- (463) (4,500) (4,500) (4,500) (3,375) (3,375)
-------- ---------- ---------- ---------- ---------- -------- --------
Earnings (loss) on common.................... $ 15,250 $ (43,394) $ 26,245 $ (20,225) $ (3,440) $ (4,649) $ 11,308
======== ========== ========== ========== ========== ======== ========
OTHER DATA:
Depreciation and amortization................ $ 31,370 $ 31,539 $ 29,828 $ 31,746 $ 36,678 $ 26,979 $ 26,241
Capital expenditures......................... 20,687 21,594 51,929 64,153 33,386 21,035 46,214
EBITDA(4).................................... 92,225 85,102 100,366 31,634 59,117 46,956 65,698
EBITDA margin................................ 9.4% 8.5% 9.4% 2.9% 5.4% 5.8% 8.0%
Ratio of earnings to fixed charges(5)........ 1.7x 1.8x 2.5x -- 1.0x -- 2.0x
BALANCE SHEET DATA:
Working capital.............................. $296,580 $ 262,326 $ 282,461 $ 268,477 $ 229,010 $288,103 $221,210
Total assets................................. 863,991 740,446 782,665 812,946 768,493 832,992 789,479
Long-term debt............................... 353,419 294,611 317,744 365,262 311,496 373,748 308,820
Stockholders' equity......................... 284,478 193,330 231,202 215,431 215,755 213,689 229,321
</TABLE>
- ---------------
(1) Includes restructuring charges of $10,000, $20,469 and $8,130 for fiscal
years 1993, 1995 and 1996, respectively, and $8,130 for the nine months
ended September 30, 1996. Such restructuring charges were incurred in
connection with (i) a 1993 program to reduce overhead through a voluntary
early retirement program and certain corporate reorganization costs, (ii)
the 1995 reorganization of Fieldcrest's New York operations, and (iii) the
1996 sale of Fieldcrest's blanket division to Pillowtex and the closing of
the blanket facilities in Eden, North Carolina.
(2) Interest expense is net of interest income in the amount of $416, $613,
$749, $1,859 and $4,161 for fiscal years 1992 through 1996, respectively,
and $2,067 and $1,743 for the nine months ended September 30, 1996 and 1997,
respectively.
(3) Includes extraordinary loss on early retirement of debt of $5,179 for fiscal
1992, income from discontinued operations of $4,739 and $3,201 for fiscal
years 1992 and 1993, respectively, and a gain from disposition of
discontinued operations and cumulative effect of accounting changes of
$9,207 and ($70,305), respectively, for fiscal 1993.
(4) EBITDA is income before income taxes plus depreciation expense, amortization
expense, and net interest expense. EBITDA is presented because it is a
widely accepted financial indicator of a company's ability to service and/or
incur indebtedness; however, EBITDA should not be considered as an
alternative to net income as a measure of operating results or to cash flows
as a measure of liquidity in accordance with generally accepted accounting
principles.
(5) In calculating the ratio of earnings to fixed charges, earnings consist of
income before income taxes plus fixed charges (excluding capitalized
interest). Fixed charges consist of interest expense (which includes
amortization of deferred financing costs) whether expended or capitalized
and one-third of rental expense, deemed representative of that portion of
rental expense estimated to be attributable to interest. For the year ended
December 31, 1995, and the nine months ended September 30, 1996, earnings
were insufficient to cover fixed charges by $27,809 and $2,038,
respectively.
37
<PAGE> 45
PRO FORMA LIQUIDITY AND CAPITAL RESOURCES
Approximately $649.0 million of financing was required in connection with
the Merger and related transactions. The Company obtained the necessary funds
from (i) the sale of the Pillowtex Preferred Stock, (ii) the issuance and sale
of the Series A Notes, and (iii) borrowings under the New Senior Credit
Facilities. See "The Merger," "Use of Proceeds," and "Post-Merger Indebtedness."
The Merger had a significant impact on the capitalization of the Company.
At September 27, 1997, the pro forma combined indebtedness of Pillowtex would
have been $827.8 million compared to $220.4 million on a Pillowtex stand-alone
basis at that date.
The Company intends to use cash flows from operations and funds available
under the Revolver to meet its working capital requirements, debt service
obligations, capital expenditure requirements, and, if permitted, to make
preferred and common stock dividend payments. Financing available under the New
Senior Credit Facilities includes $350.0 million under the Revolver,
approximately $163.2 million of which currently remains available. In addition,
the New Senior Credit Facilities include $250.0 million under the Term Loan, all
of which was drawn upon closing of the Merger. See "Unaudited Pro Forma Combined
Financial Information" and "Post-Merger Indebtedness."
The Fieldcrest Convertible Debentures are convertible into the same
consideration that a holder of the number of shares of Fieldcrest Common Stock
into which such Fieldcrest Convertible Debentures might have been converted
immediately prior to the Merger would be entitled to receive in the Merger. If
all of the outstanding Fieldcrest Convertible Debentures were so converted
following the consummation of the Merger, the resulting cash component required
to be paid by the Company to the holders of such debentures would be
approximately $71.1 million. The Company expects to utilize funds available from
the Revolver to pay the cash portion of the conversion value of the Fieldcrest
Convertible Debentures to the extent these securities are converted.
The Revolver matures on the sixth anniversary of the Merger. The Term Loan
consists of a $125.0 million Tranche A Term Loan and a $125.0 million Tranche B
Term Loan. The Tranche A Term Loan and the Tranche B Term Loan will begin
scheduled quarterly amortization of principal in arrears commencing in 1999 and
1998, respectively, with final maturities on December 31, 2003 and December 31,
2004, respectively. Interest on loans under the New Senior Credit Facilities
bears interest at rates based upon federal or Eurodollar rates plus an
applicable margin. Loans under the New Senior Credit Facilities are guaranteed
by any and all existing or future domestic subsidiaries of the Company and will
be secured by substantially all of the assets of the Company and its domestic
subsidiaries. See "Risk Factors -- Significant Leverage and Debt Service" and
"Post-Merger Indebtedness -- New Senior Credit Facilities."
The Company enters into interest-rate swap agreements to modify the
interest characteristics of portions of its outstanding debt. Swap agreements
are designated with all or a portion of the principal balance and term of a
specific debt obligation. These agreements involve the exchange of amounts based
on a fixed or variable rate for the opposite type of rate over the life of the
agreement without an exchange of the notional amount upon which the payments are
based. The differential to be paid or received as interest rates change is
accrued and recognized as an adjustment of interest expense related to the debt
(the accrual accounting method). The fair value of the swap agreements and
changes in fair value as a result of changes in market interest rates are not
recognized in the financial statements. Subsequent to January 3, 1998, the
Company terminated a swap agreement in place covering approximately $125.0
million of indebtedness for a cash gain of approximately $1.0 million. The gain
has been deferred and will be amortized as an adjustment to interest expense
over the remaining three-year term of the terminated swap agreement. On January
9, 1998, the Company entered into an interest rate swap agreement covering
$250.0 million of indebtedness expiring February 19, 1999 at a fixed rate of
5.56%.
As a result of recent discussions with the Pension Benefit Guaranty
Corporation, the Company has a $15.0 million letter of credit in support of
certain funding obligations it may have after the Merger in connection with
certain of the Fieldcrest pension plans.
38
<PAGE> 46
The Company intends to make capital expenditures in excess of $240.0
million over the next several years, principally to modernize the acquired
Fieldcrest sheet and certain of the towel manufacturing facilities through the
addition of new machinery and equipment. The Company anticipates that
approximately $80.0 million of such capital expenditures will be made in fiscal
1998. See "Business -- Business Strategy."
Subsequent to the Merger, the Company will implement measures intended to
maximize economies of scale and operating efficiencies, and to achieve cost
savings, in the operation of the businesses of Pillowtex and Fieldcrest on a
combined basis. On January 20, 1998, the Company announced that it was
consolidating its four blanket production units into two facilities in
Westminster, South Carolina and Swannanoa, North Carolina. In connection with
this consolidation the Company has announced that it is closing certain
facilities operated by its subsidiaries, Manetta Home Fashions, Inc. and
Tennessee Woolen Mills, Inc. The consolidation is expected to be completed by
the end of the second quarter of this year. As part of the consolidation, the
Company will take a pre-tax charge to earnings of approximately $6.0 million for
the period ended January 3, 1998, and approximately $1.5 million for the period
ending April 4, 1998. Management expects these nonrecurring costs to be
initially funded through cash flows and borrowings under the New Senior Credit
Facilities.
The Company anticipates that it will continue to pay a quarterly dividend
of $0.06 per share on its common stock. Through December 31, 1999 and subject to
obligations under its various debt instruments, the Company will pay dividends
on the Pillowtex Preferred Stock at a rate per annum equal to 3%, or
approximately $2.0 million per year. Thereafter, the Pillowtex Preferred Stock
will accrue dividends based upon the Company's earnings per share for the fiscal
year. See "Pillowtex Series A Redeemable Convertible Preferred Stock." The
payment of such dividends is restricted under the New Senior Credit Facilities
and the Indenture.
The Company anticipates that its principal use of cash following the Merger
will be working capital requirements, debt service requirements, payment of
dividends (if permitted), and capital expenditures as well as expenditures
relating to acquisitions and integrating acquired businesses. Based upon current
and anticipated levels of operations, the Company believes that its cash flow
from operations, together with amounts available under the New Senior Credit
Facilities, will be adequate to meet its anticipated requirements through
December 31, 1998 for working capital, capital expenditures, and interest
payments. There can be no assurance, however, that the Company's business will
continue to generate sufficient cash flow from operations in the future to
service its debt, and the Company may be required to refinance all or a portion
of its existing debt or to obtain additional financing. These increased
borrowings may result in higher interest payments. There can be no assurance
that any such refinancing would be possible or that any additional financing
could be obtained. The inability to obtain additional financing could have a
material adverse effect on the Company. See "Risk Factors -- Significant
Leverage and Debt Service."
THE EXCHANGE OFFER
On December 18, 1997, the Company sold $185,000,000 in aggregate principal
amount of the Series A Notes in a transaction exempt from the registration
requirements of the Securities Act. In connection with the sale of the Series A
Notes, the Company entered into the Registration Rights Agreement that requires
the Company, among other things, to use its best efforts to file with the
Commission a registration statement under the Securities Act covering the offer
by the Company to exchange all of the Series A Notes for the Series B Notes and
to cause such registration statement to become effective under the Securities
Act. The Company is further obligated, upon the effectiveness of that
registration statement, to offer each Holder of the Series B Notes the
opportunity to exchange such Series A Notes for an equal principal amount at
maturity of Series B Notes. A copy of the Registration Rights Agreement has been
filed previously with the Commission. The Exchange Offer is being made pursuant
to the Registration Rights Agreement to satisfy the Company's obligations
thereunder. The term "Holder" with respect to the Exchange Offer means any
person in whose name Series A Notes are registered on the Company's books or any
other person who has obtained a properly completed assignment from the
registered holder.
39
<PAGE> 47
Upon the terms and subject to the conditions set forth in this Prospectus
and in the accompanying Letter of Transmittal (which together constitute the
Exchange Offer), the Company will accept for exchange Series A Notes which are
properly tendered on or prior to the Expiration Date and not withdrawn as
permitted below. As used herein, the term "Expiration Date" means 5:00 p.m., New
York City Time, on March 25, 1998; provided, however, that if the Company, in
its sole discretion, has extended the period of time for which the Exchange
Offer is open, the term "Expiration Date" means the latest time and date to
which the Exchange Offer is extended.
As of the date of this Prospectus, $185,000,000 aggregate principal amount
of the Series A Notes were outstanding. This Prospectus, together with the
Letter of Transmittal, is first being sent on or about February 18, 1998, to all
holders of Series A Notes known to the Company. The Company expressly reserves
the right, at any time or from time to time, to extend the period of time during
which the Exchange Offer is open, and thereby delay acceptance for exchange of
any Series A Notes, by giving oral or written notice of such extension to the
holders thereof as described below. During any such extension, all Series A
Notes previously tendered will remain subject to the Exchange Offer and may be
accepted for exchange by the Company. Any Series A Notes not accepted for
exchange for any reason will be returned without expense to the tendering holder
thereof as promptly as practicable after the expiration or termination of the
Exchange Offer.
Series A Notes tendered in the Exchange Offer must be in denominations of
principal amount of $1,000 and any integral multiple thereof. The Company will
give oral or written notice of any extension, amendment, non-acceptance or
termination to the holders of the Series A Notes as promptly as practicable,
such notice in the case of any extension to be issued by means of a press
release or other public announcement no later than 9:00 a.m., New York City
time, on the next business day after the previously scheduled Expiration Date.
PROCEDURES FOR TENDERING SERIES A NOTES
The tender to the company of Series A Notes by a Holder thereof as set
forth below and the acceptance thereof by the Company will constitute a binding
agreement between the tendering Holder and the Company upon the terms and
subject to the conditions set forth in this Prospectus and in the accompanying
Letter of Transmittal. Except as set forth below, a Holder who wishes to tender
Series A Notes for exchange pursuant to the Exchange Offer must transmit either
(i) a properly completed and duly executed Letter of Transmittal, including all
other documents required by such Letter of Transmittal, to the Exchange Agent,
at the address set forth below under "-- Exchange Agent" on or prior to the
Expiration Date, or (ii) if such Series A Notes are tendered pursuant to the
procedures for book-entry transfer set forth below, a holder tendering Series A
Notes may transmit an Agent's Message (as defined herein) to the Exchange Agent
in lieu of the Letter of Transmittal, in either case on or prior to the
Expiration Date. In addition, either (i) certificates for such Series A 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 Series A Notes, if such procedure is available, into the
Exchange Agent's account at the DTC (the "Book-Entry Transfer Facility")
pursuant to the procedure for book-entry transfer described below, along with
the Letter of Transmittal or an Agent's Message, as the case may be, 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 term
"Agent's Message" means a message, transmitted to the Book-Entry Transfer
Facility and received by the Exchange Agent and forming a part of the Book-Entry
Confirmation, which states that the Book-Entry Transfer Facility has received an
express acknowledgment from the tendering Participant (as defined herein) that
such Participant has received and agrees to be bound by the Letter of
Transmittal and the Company may enforce the Letter of Transmittal against such
Participant. THE METHOD OF DELIVERY OF SERIES A NOTES, LETTERS OF TRANSMITTAL OR
AGENT'S MESSAGE AND ALL OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF
THE HOLDER. IF SUCH DELIVERY IS BY MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL,
PROPERLY INSURED, WITH RETURN RECEIPT REQUESTED, BE USED. IN ALL CASES,
SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY. NO LETTERS OF
TRANSMITTAL OR SERIES A NOTES SHOULD BE SENT TO THE COMPANY.
40
<PAGE> 48
Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed unless the Series A Notes surrendered for
exchange pursuant thereto are tendered (i) by a registered holder of the Series
A Notes who has not completed the box entitled "Special Issuance Instructions"
or "Special Delivery Instructions" on the Letter of Transmittal or (ii) for the
account of an Eligible Institution (as defined herein). 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 guarantees must be by a firm which is a
member of a registered national securities exchange or a member of the National
Association of Securities Dealers, Inc. or by a commercial bank or trust company
having an office or correspondent in the United States (collectively, "Eligible
Institutions"). If Series A Notes are registered in the name of a person other
than a signatory of the Letter of Transmittal, the Series A Notes surrendered
for exchange must be endorsed by, or be accompanied by a written instrument or
instruments of transfer or exchange, in satisfactory form as determined by the
Company in its sole discretion, duly executed by, the registered Holder with the
signature thereon guaranteed by an Eligible Institution.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of Series A Notes tendered for exchange will be
determined by the Company in its sole discretion, which determination shall be
final and binding. The Company reserves the absolute right to reject any and all
tenders of any particular Series A Notes not properly tendered or to refuse to
accept any particular Series A Notes which acceptance might, in the judgment of
the Company or its counsel, be unlawful. The Company also reserves the absolute
right to waive any defects or irregularities or conditions of the Exchange Offer
as to any particular Series A Notes either before or after the Expiration Date
(including the right to waive the ineligibility of any holder who seeks to
tender Series A Notes in the Exchange Offer). The interpretation of the terms
and conditions of the Exchange Offer as to any particular Series A Notes either
before or after the Expiration Date (including the Letter of Transmittal and the
instructions thereto) by the Company shall be final and binding on all parties.
Unless waived, any defects or irregularities in connection with tenders of
Series A Notes for exchange must be cured within such reasonable period of time
as the Company shall determine. Neither the Company, the Exchange Agent nor any
other person shall be under any duty to give notification of any defect or
irregularity with respect to any tender of Series A Notes for exchange, nor
shall any of them incur any liability for failure to give such notification.
If the Letter of Transmittal is signed by a person or persons other than
the registered holder or holders of Series A Notes, such Series A Notes must be
endorsed or accompanied by appropriate powers of attorney, in either case signed
exactly as the name or names of the registered holder or holders that appear on
the Series A Notes.
If the Letter of Transmittal or any Series A Notes or powers of attorney
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, proper evidence satisfactory to the Company of their authority to
so act must be submitted.
By tendering, each Holder will represent to the Company that, among other
things, the Series B Notes acquired pursuant to the Exchange Offer are being
obtained in the ordinary course of business of the person receiving such Series
B Notes, whether or not such person is the holder, and that neither the holder
nor such other person has any arrangement or understanding with any person to
participate in the distribution of the Series B Notes. In the case of a Holder
that is not a broker-dealer, each such holder, by tendering, will also represent
to the Company that such holder is not engaged in, or does not intend to engage
in, a distribution of the Series B Notes. If any Holder or any such other person
is an "affiliate," as defined under Rule 405 of the Securities Act, of the
Company, or is engaged in or intends to engage in or has an arrangement or
understanding with any person to participate in a distribution of such Series B
Notes to be acquired pursuant to the Exchange Offer, such Holder or any such
other person (i) could not rely on the applicable interpretations of the staff
of the Commission and (ii) must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with any resale
transaction. Each broker-dealer that receives Series B Notes for its own account
in exchange for Series A Notes, where such Series A 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 Series B Notes. See "Plan
41
<PAGE> 49
of Distribution." 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.
ACCEPTANCE OF SERIES A NOTES FOR EXCHANGE; DELIVERY OF SERIES B NOTES
Upon satisfaction or waiver of all of the conditions to the Exchange Offer,
the Company will accept, promptly after the Expiration Date, all Series A Notes
properly tendered and will issue the Series B Notes promptly after acceptance of
the Series A Notes. For purposes of the Exchange Offer, the Company shall be
deemed to have accepted properly tendered Series A Notes for exchange when, as
and if the Company has given oral or written notice thereof to the Exchange
Agent, with written confirmation of any oral notice to be given promptly
thereafter.
For each Series A Note accepted for exchange, the holder of such Series A
Note will receive a Series B Note having a principal amount equal to that of the
surrendered Series A Note. The Series B Note will bear interest from the date
which the Series A Note bears interest. Series A Notes accepted for exchange
will cease to accrue interest from and after the date of consummation of the
Exchange Offer. Holders of Series A Notes whose Series A Notes are accepted for
exchange will not receive any payment in respect of interest on such Series A
Notes otherwise payable on any interest payment date the record date for which
occurs on or after consummation of the Exchange Offer. If the Exchange Offer is
not consummated within the time period set forth herein under the heading
"Description of Notes -- Registration Rights; Liquidation Rights," special
interest in the form of Liquidated Damages will accrue and be payable on the
Series A Notes until the Exchange Offer is consummated.
In all cases, issuance of Series B Notes for Series A Notes that are
accepted for exchange pursuant to the Exchange Offer will be made only after
timely receipt by the Exchange Agent of certificates for such Series A Notes or
a timely Book-Entry Confirmation of such Series A Notes into the Exchange
Agent's account at the Book-Entry Transfer Facility, a properly completed and
duly executed Letter of Transmittal and all other required documents or, in the
case of a Book-Entry Confirmation, an Agent's Message in lieu thereof. If any
tendered Series A Notes are not accepted for any reason set forth in the terms
and conditions of the Exchange Offer of if Series A Notes are submitted for a
greater principal amount than the holder desired to exchange, such unaccepted or
non-exchanged Series A Notes will be resumed without expense to the tendering
holder thereof (or, in the case of Series A Notes tendered by book-entry
transfer into the Exchange Agent's account at the Book-Entry Transfer Facility
pursuant to the book-entry procedures described below, such non-exchanged Series
A Notes will be credited to an account maintained with such Book-Entry Transfer
Facility) as promptly as practicable after the expiration or termination of the
Exchange Offer.
CERTAIN CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provision of the Exchange Offer, the Company
shall not be required to accept for exchange, or to issue Series B Notes in
exchange for, any Series A Notes and may terminate or amend the Exchange Offer,
if at any time before the acceptance of such Series A Notes for exchange or the
exchange of the Series B Notes for exchange or the exchange of the Series B
Notes for such Series A Notes, any of the following shall occur:
(a) there shall be threatened, instituted or pending any action or
proceeding before, or any injunction, order of decree shall have been
issued by, any court or governmental agency or other governmental
regulatory or administrative agency or commission, (i) seeking to restrain
or prohibit the making or consummation of the Exchange Offer or any other
transaction contemplated by the Exchange Offer, or assessing or seeking any
damages as a result thereof, or (ii) resulting in a material delay in the
ability of the Company to accept for exchange or exchange some or all of
the Series A Notes pursuant to the Exchange Offer; or any statute, rule,
regulation, order or injunction shall be sought, proposed, introduced,
enacted, promulgated or deemed applicable to the Exchange Offer or any of
the transactions contemplated by the Exchange Offer by any government or
governmental authority, domestic or foreign, or any action shall have been
taken, proposed or threatened, by any government, governmental authority,
agency or court, domestic or foreign, that in the reasonable judgment of
the Company might directly or
42
<PAGE> 50
indirectly result in any of the consequences referred to in clauses (i) or
(ii) above or, in the reasonable judgment of the Company, might result in
the holders of Series B Notes having obligations with respect to resales
and transfers of Series B Notes which are greater than those described in
the interpretation of the Commission referred to on the cover page of this
Prospectus, or would otherwise make it inadvisable to proceed with the
Exchange Offer; or
(b) there shall have occurred (i) any general suspension of or general
limitation on prices for, or trading in, securities on any national
securities exchange or in the over-the-counter market, (ii) any limitation
by any governmental agency or authority which may adversely affect the
ability of the Company to complete the transactions contemplated by the
Exchange Offer, (iii) a declaration of a banking moratorium or any
suspension of payments in respect of banks in the United States or any
limitation by any governmental agency or authority which adversely affects
the extension of credit, or (iv) a commencement of a war, armed hostilities
or other similar international calamity directly or indirectly involving
the United States, or, in the case of any of the foregoing existing at the
time of the commencement of the Exchange Offer, a material acceleration or
worsening thereof; or
(c) any change (or any development involving a prospective change)
shall have occurred or be threatened in the business, properties, assets,
liabilities, financial condition, operations, results of operations or
prospects of the Company and its subsidiaries taken as a whole that, in the
reasonable judgment of the company, is or may be adverse to the Company, or
the Company shall have become aware of facts that, in the reasonable
judgment of the Company, have or may have adverse significance with respect
to the value of the Series A Notes or the Series B Notes;
which in the reasonable judgment of the company in any case, and regardless of
the circumstances (including any action by the Company) giving rise to any event
described above, makes it inadvisable to proceed with the Exchange Offer and/or
with such acceptance for exchange or with such exchange.
The foregoing conditions are for the sole benefit of the Company and may be
asserted by the Company regardless of the circumstances giving rise to any such
condition or may be waived by the Company in whole or in part at any time and
from time to time in its sole discretion. The failure by the Company at any time
to exercise any of the foregoing rights shall not be deemed a waiver of any such
right and each such right shall be deemed an ongoing right which may be asserted
at any time and from time to time.
In addition, the Company will not accept for exchange any Series A Notes
tendered, and no Series B Notes will be issued in exchange for any such Series A
Notes, if at such time any stop order shall be threatened or in effect with
respect to the Registration Statement of which this Prospectus constitutes a
part or the qualification of the Indenture under the Trust Indenture Act.
BOOK ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect
to the Series A Notes at the Book-Entry Transfer Facility 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 Book-Entry Transfer
Facility's systems may make book-entry delivery of Series A Notes by causing the
Book-Entry Transfer Facility to transfer such Series A Notes into the Exchange
Agent's account at the Book-Entry Transfer Facility in accordance with such
Book-Entry Transfer Facility's procedures for transfer. However, although
delivery of Series A Notes may be effected through book-entry transfer at the
Book-Entry Transfer Facility, the Letter of Transmittal or facsimile thereof,
with any required signature guarantees, or an Agent's Message in lieu of a
Letter of Transmittal, and any other required documents, must, in any case, be
transmitted to and received by the Exchange Agent at one of the addresses set
forth below under "-- Exchange Agent" on or prior to the Expiration Date or the
guaranteed delivery procedures described below must be complied with.
GUARANTEED DELIVERY PROCEDURES
If a registered holder of the Series A Notes desires to tender Series A
Notes held by such Holder and such Series A Notes are not immediately available,
or time will not permit such Holder's Series A Notes or
43
<PAGE> 51
other required documents to reach the Exchange Agent before the Expiration Date,
or the procedure for book-entry transfer cannot be completed on a timely basis,
a tender may be effected if (i) the tender is made through an Eligible
Institution, (ii) prior to the Expiration Date, the Exchange Agent receives from
such Eligible Institution a properly completed and duly executed Letter of
Transmittal (or a facsimile thereof) and Notice of Guaranteed Delivery,
substantially in the form provided by the Company (by telegram, telex, facsimile
transmission, mail or hand delivery), setting forth the name and address of the
Holder of Series A Notes and the amount of Series A Notes tendered, stating that
the tender is being made thereby and guaranteeing that within three NYSE trading
days after the date of execution of the Notice of Guaranteed Delivery, the
certificates for all physically tendered Series A 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 (iii) the certificates for all
physically tendered Series A Notes, in proper form for transfer, or a Book-Entry
Confirmation, as the case may be, and all other documents required by the Letter
of Transmittal, are received by the Exchange Agent within three NYSE trading
days after the date of execution of the Notice of Guaranteed Delivery.
WITHDRAWAL RIGHTS
Tenders of Series A Notes may be withdrawn at any time prior to the
Expiration Date.
For a withdrawal to be effective, a written notice of withdrawal must be
received by the Exchange Agent at the addresses set forth below under
"-- Exchange Agent." Any such notice of withdrawal must specify the name of the
person having tendered the Series A Notes to be withdrawn, identify the Series A
Notes to be withdrawn (including the principal amount of such Series A Notes),
and (where certificates for Series A Notes have been transmitted) specify the
name in which such Series A Notes are registered, if different from that of the
withdrawing holder. If certificates for Series A Notes have been delivered or
otherwise identified to the Exchange Agent, then, prior to the release of such
certificates the withdrawing holder must also submit the serial numbers of the
particular certificates to be withdrawn and signed notice of withdrawal with
signatures guaranteed by an Eligible Institution unless such holder is an
Eligible Institution. If Series A Notes have been tendered pursuant to the
procedure for book-entry transfer described above, any notice of withdrawal must
specify the name and number of the account at the Book-Entry Transfer Facility
to be credited with the withdrawn Series A Notes and otherwise comply with the
procedures of such facility. All questions as to the validity, form and
eligibility (including time of receipt) of such notices will be determined by
the Company, whose determination shall be final and binding on all parties. Any
Series A Notes so withdrawn will be deemed not to have been validly tendered for
exchange for purposes of the Exchange Offer. Any Series A Notes which have been
tendered for exchange but which are not exchanged for any reason will be
returned to the holder thereof without cost to such holder (or, in the case of
Series A Notes tendered by book-entry transfer into the Exchange Agent's account
at the Book-Entry Transfer Facility pursuant to the book-entry transfer
procedures described above, such Series A Notes will be credited to an account
maintained with such Book-Entry Transfer Facility for the Series A Notes) as
soon as practicable after withdrawal, rejection of tender or termination of the
Exchange Offer. Properly withdrawn Series A Notes may be retendered by following
one of the procedures described under "-- Procedures for Tendering Series A
Notes" above at any time on or prior to the Expiration Date.
EXCHANGE AGENT
Norwest Bank Minnesota, National Association has been appointed as the
Exchange Agent for the Exchange Offer. All executed Letters of Transmittal
should be directed to the Exchange Agent at one of the addresses set forth
below. Questions and requests for assistance, requests for additional copies of
this Prospectus or of the Letter of Transmittal and requests for Notices of
Guaranteed Delivery should be directed to the Exchange Agent addressed as
follows:
By Mail or Overnight Courier:
Norwest Bank Minnesota, National Association
6th Street and Marquette Avenue
M.S. 0069
44
<PAGE> 52
Minneapolis, MN 55479
Attn: Jane Schweiger
By Facsimile (for Eligible Institutions only): (612) 667-9825
By Telephone (to confirm receipt of facsimile): (612) 667-2344
DELIVERY OF THE LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH
ABOVE DOES NOT CONSTITUTE A VALID DELIVERY OF SUCH LETTER OF TRANSMITTAL.
FEES AND EXPENSES
The Company will not make any payment to brokers, dealers, or others
soliciting acceptances of the Exchange Offer.
The estimated 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
$225,000.
TRANSFER TAXES
Holders who tender their Series A Notes for exchange will not be obligated
to pay any transfer taxes in connection therewith, except that holders who
instruct the Company to register Series B Notes in the name of, or request that
Series A Notes not tendered or not accepted in the Exchange Offer be returned
to, a person other than the registered tendering holder will be responsible for
the payment of any applicable transfer tax thereon.
ACCOUNTING TREATMENT
The Series B Notes will be recorded at the same carrying value as the
Series A Notes, which is face value, as reflected in the Company's accounting
records on the date of the exchange. Accordingly, no gain or loss for accounting
purposes will be recognized. The expenses of the Exchange Offer and the
unamortized expenses related to the issuance of the Series A Notes will be
amortized over the term of the Series B Notes.
CONSEQUENCES OF EXCHANGING SERIES A NOTES
Holders of Series A Notes who do not exchange their Series A Notes for
Series B Notes pursuant to the Exchange Offer will continue to be subject to the
provisions in the Indenture regarding transfer and exchange of the Series A
Notes and the restrictions on transfer of such Series A Notes as set forth in
the legend thereon as a consequence of the issuance of the Series A Notes
pursuant to exemptions from, or in transactions not subject to, the registration
requirements of the Securities Act and applicable state securities laws. In
general, the Series A Notes may not be offered or sold, unless registered under
the Securities Act, except pursuant to an exemption from, or in a transaction
not subject to, the Securities Act and applicable state securities laws. The
Company does not currently anticipate that it will register Series A Notes under
the Securities Act. See "Description of Notes." Based on interpretations by the
staff of the Commission, as set forth in no-action letters issued to third
parties, the Company believes that Series B Notes issued pursuant to the
Exchange Offer in exchange for Series A Notes may be offered for resale, resold
or otherwise transferred by holders thereof (other than any such holder which 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 such Series B Notes are acquired
in the ordinary course of such holders' business and such holders have no
arrangement or understanding with any person to participate in the distribution
of such Series B Notes. However, the Company does not intend to request the
Commission to consider, and the Commission has not considered, the Exchange
Offer in the context of a no-action letter and there can be no assurance that
the staff of the Commission would make a similar determination with respect to
the Exchange Offer as in such other circumstances.
45
<PAGE> 53
Each Holder, other than a broker-dealer, must acknowledge that it is not
engaged in, and does not intend to engage in, a distribution of Series B Notes
and has no arrangement or understanding to participate in a distribution of
Series B Notes. If any Holder is an affiliate of the Company, is engaged in or
intends to engage in or has any arrangement or understanding with respect to the
distribution of the Series B Notes to be acquired pursuant to the Exchange
Offer, such Holder (i) could not rely on the applicable interpretations of the
staff of the Commission and (ii) must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
resale transaction. In addition, to comply with state securities laws, the
Series B Notes may not be offered or sold in any state unless they have been
registered or qualified for sale in such state or an exemption from registration
or qualification is available and is complied with. The offer and sale of the
Series B Notes to "qualified institutional buyers" (as such term is defined
under Rule 144A of the Securities Act) is generally exempt from registration or
qualification under the state securities laws. The Company currently does not
intend to register or qualify the sale of the Series B Notes in any state where
an exemption from registration or qualification is required and not available.
All rights under the Registration Rights Agreement accorded to Holders of
Series A Notes will terminate upon the consummation of the Exchange Offer except
with respect to the Company's duty to keep the Registration Statement effective
until the closing of the Exchange Offer and, for a period not to exceed one year
after the Registration Statement has been declared effective, to provide copies
of the latest version of this Prospectus to any broker-dealer that requests
copies of such Prospectus in the Letter of Transmittal for use in connection
with any resale by such broker-dealer of Exchange Senior Notes received for its
own account pursuant to the Exchange Offer in exchange for Private Notes
acquired for its own account as a result of market-making or other trading
activities, subject to the conditions described above.
BUSINESS
GENERAL
The Company is one of the largest, based on net sales, North American
designers, manufacturers, and marketers of home textile products, offering a
full line of bed pillows, sheets, blankets, mattress pads, down comforters,
towels, bath rugs, and other home textile products. As a leading supplier across
all distribution channels, the Company markets to virtually all major mass
merchants, department stores, and specialty retail stores, providing its
customers a centralized "one-stop" source for their home textile merchandise.
The Company manufactures and markets products utilizing established and
well recognized Company-owned trademarks and trade names, including Royal
Velvet(R), Cannon(R), Charisma(R), Touch of Class(R), Fieldcrest(R), Beacon(R),
and Nettle Creek(R). Recent consumer research has shown that Cannon(R) and
Fieldcrest(R) are the two most recognized home textile brands in the United
States. In addition, Cannon(R) is the sixth most recognized domestic consumer
brand in the United States. Furthermore, the Company has licensed, for certain
products, highly recognizable brands such as Ralph Lauren, Disney's Mickey
UNLIMITED(R), Mickey's Stuff for Kids(R), and Mickey & Co.(R), Comforel(R),
Adrienne Vittadini(R), Ellen Tracy(R), Court of Versailles(R), and Waverly(R) as
well as such well-known copyrighted characters as Mickey Mouse and Winnie the
Pooh.
On a pro forma combined basis, after giving effect to the Merger and the
Financing Transactions, the Company would have had net sales and pro forma
EBITDA of approximately $1.6 billion and $131.6 million, respectively, for the
fiscal year ended December 28, 1996, and $1.2 billion and $123.7 million,
respectively, for the nine months ended September 27, 1997.
RECENT DEVELOPMENTS
Since the consummation of the Merger on December 19, 1997, the Company has
disposed of certain non-core business assets of Fieldcrest for approximately
$24.0 million in cash. The Company plans to continue to evaluate certain
Fieldcrest properties and lines of business unrelated to its core home textile
business of towels, bath rugs, sheets and fashion bedding and expects to enter
into more additional agreements for the disposal of these properties and
businesses.
46
<PAGE> 54
On January 20, 1998, the Company announced that it was consolidating its
four blanket production units into two facilities in Westminster, South Carolina
and Swannanoa, North Carolina. In connection with this consolidation the Company
has announced that it is closing certain facilities operated by its
subsidiaries, Manetta Home Fashions, Inc. and Tennessee Woolen Mills, Inc. The
consolidation is expected to be completed by the end of the second quarter of
this year. As part of the consolidation, the Company will take a pre-tax charge
to earnings of approximately $6.0 million for the period ended January 3, 1998,
and approximately $1.5 million for the period ending April 4, 1998. Management
expects these nonrecurring costs to be initially funded through cash flows and
borrowings under the New Senior Credit Facilities.
COMPETITIVE STRENGTHS
The Merger has created one of the largest firms, based on net sales, in the
home textile industry with competitive strengths that are significantly greater
than those of either Pillowtex or Fieldcrest on a stand-alone basis. The Company
has the largest market share in North America in each of the towel, bed pillow,
blanket, and down comforter product segments and a significant market share in
sheets, mattress pads, fashion bedding, and bath rugs.
Pillowtex's management team has successfully integrated eight acquisitions
over the last five years while improving Pillowtex's overall efficiency and
consistently producing a record of growth and profitability. From 1991 through
1996, Pillowtex's net sales have increased from $259.0 million to $490.7
million, representing a compound annual growth rate of 13.6%. Over this same
period Pillowtex's EBITDA has improved from $22.0 million to $50.9 million,
representing a compound annual growth rate of 18.3%. The combined company's
management team will provide a breadth of expertise rivaling any in the
industry.
The Company's management team will use the following competitive strengths
to enhance the Company's position in the marketplace:
- Industry Leading Brands: As a result of the Merger, the Company owns some
of the most recognizable brands in the industry, including Royal
Velvet(R), Cannon(R), Charisma(R), and Touch of Class(R). Recent consumer
research has shown that Cannon(R) and Fieldcrest(R) are the two most
recognized home textile brands in the United States. In addition,
Cannon(R) is the sixth most recognized domestic consumer brand.
Furthermore, through licensing agreements, the Company currently has
exclusive rights to manufacture and, in some instances, market certain
bedding products under such well-known brands as Ralph Lauren, Disney's
Mickey UNLIMITED(R), Mickey's Stuff for Kids(R), and Mickey & Co.(R),
Comforel(R), Adrienne Vittadini(R), Ellen Tracy(R), and Waverly(R). This
diverse portfolio of premier brand names allows the Company to
differentiate its products from those of its competitors and provides
distinct brand names for different channels of retail distribution and
for different price points. These brand names will also enable the
Company to assist its customers in coordinating their product offerings
and differentiating such offerings from those of their competitors.
- Strong Customer Relationships: The Company has established relationships
with 49 of the top 50 home textile retailers in the United States and
Canada. The combination of the two companies enhances these
relationships, providing customers the benefits of a true "one-stop"
source for bed and bath products. These strong relationships will create
a stable base from which the Company can pursue future business and new
product introductions.
- Creative Merchandising Strategies: Historically, both Pillowtex and
Fieldcrest have maintained creative partnerships with their customers,
including extensive merchandising programs, that have resulted in the
creation of successful new products, product mix strategies,
point-of-sale concepts, and advertising campaigns. Retail customers are
increasingly demanding exclusive or specially designed product lines to
differentiate their product offerings from those of other retailers and
to implement price tiering in order to achieve higher margins. The
Company will continue this collaboration with its retail customers to
design products and marketing programs responsive to individual
customer's needs.
- Low Cost Operating Capabilities: As a result of its continued emphasis on
cost-containment and capital expenditures to obtain greater plant
efficiencies, Pillowtex is a low cost producer of bed pillows,
47
<PAGE> 55
mattress pads, down comforters, and blankets in the home textile
industry. The Merger provides the Company with efficient, low cost towel
and bath rug production capabilities, including a new, state-of-the-art
towel production facility. In addition, Pillowtex has emphasized a low
cost of operations, creating a competitive advantage by operating with
one of the lowest SG&A expenses, as a percentage of sales, in the
industry. The Company believes that significant opportunities exist to
improve this competitive position by lowering Fieldcrest's SG&A costs as
a percentage of sales to Pillowtex's historic levels.
BUSINESS STRATEGY
The Company's strategic objectives are to capitalize on its industry
leading position by leveraging the strength of its brand names, customer
relationships, and operational capabilities across the most comprehensive array
of product offerings in the home textile industry. The Company's strategic focus
will be to:
- Capitalize on Industry Leading Position: The Merger has created a
powerhouse within the home textiles industry in terms of dollar sales
volume and product offerings. The Company will focus on leveraging its
market leadership by implementing sales and marketing programs designed to
facilitate a customer-driven "pull" strategy. By cross-marketing both
Pillowtex and Fieldcrest products using the Company's strong brand names,
the Company will create enhanced product value and facilitate greater
differentiation of its products from those of its competitors.
- Develop the Premier "One-Stop Shop" for Home Textiles: The breadth of the
Company's product lines provide it with a significant competitive
advantage as it can offer its retailer customers a centralized "one-stop"
purchasing source for all their home textile merchandise. The Company's
extensive assortment of home textile products will include fashion and
utility bedding, as well as a full line of bath products. The Company will
exploit its position as a "one-stop" purchasing source by continuing its
practice of offering broad product assortments across diverse product
lines, thereby offering retailers a central source from which to
efficiently and effectively purchase their home textile items.
- Further Strengthen Customer Relationships: The Company has a long history
of strong customer relationships with the top retailers in the United
States and Canada. The Company has developed these relationships by
providing value-added services, such as innovative marketing and cross-
merchandising capabilities. The Company believes that the value of such
services to retailers will be increased significantly by combining the
traditional Pillowtex and Fieldcrest product lines in a centralized
purchasing source and utilizing the Fieldcrest portfolio of brand names
across all such product lines. The Company will also increase the use of
marketing and cross-merchandising services in connection with the
traditional Fieldcrest products, creating opportunities for added sales
and providing retailers with more opportunities to differentiate their
product offerings from those of their competitors.
- Enhance Operational Efficiencies: The Company will continue to focus on
reducing its manufacturing cost structure by rationalizing its current
operations and investing in automation, equipment modernization, process
improvements, and system controls throughout all aspects of its business.
The Company's management believes that significant opportunities exist to
improve production efficiency through capital investment, improved
operational logistics, selective outsourcing, and increased utilization of
information systems. The Company intends to make capital expenditures in
excess of $240.0 million over the next several years, principally to
modernize the acquired Fieldcrest sheet and certain of the towel
manufacturing facilities through the addition of new machinery and
equipment. The Company anticipates that approximately $80.0 million in
capital expenditures will be made in fiscal 1998.
- Realize Significant Cost Savings: Currently, the Company has identified
approximately $21.6 million of annual cost savings that it expects to
realize immediately as a result of the Merger. These cost savings are
comprised of $20.3 million of savings from the elimination of duplicate
staff salaries and $1.3 million of savings from the elimination of
duplicative corporate expenses. The Company
48
<PAGE> 56
additionally expects to realize significant ongoing cost savings,
including at least $8.4 million to be realized within the first 12 months
after consummation of the Merger, as follows: (i) $0.9 million by
eliminating other redundant cost functions; (ii) $2.0 million by improving
procurement efficiencies by exploiting the combined company's purchasing
power; (iii) $3.0 million by reducing trade advertising; (iv) $1.0 million
by rationalizing and streamlining operations; and (v) $1.5 million by
reducing the use of outside consultants.
PRODUCTS
Pillowtex
Pillowtex, originally founded in 1954 as a pillow manufacturer, expanded
its product lines through acquisitions into other categories of top-of-the-bed
home textiles including mattress pads, comforters and blankets. Pillowtex has
been successful in integrating these acquisitions into its existing operations,
resulting in increased sales, more efficient distribution, and a broader product
line.
Pillowtex originally expanded its product line to include blankets through
the acquisition of Manetta Mills, Inc. in August 1993 and Tennessee Woolen
Mills, Inc. in September 1993. However, see "-- Recent Developments." In
addition, in December 1994, Pillowtex acquired substantially all of the assets
of Beacon Manufacturing Company ("Beacon"), a manufacturer of cotton and
synthetic blankets and throws. Pillowtex expanded its manufacturing operations
into Canada through the acquisition of Torfeaco Industries, Ltd. ("Torfeaco"), a
manufacturer of fashion and synthetic bedding products, in December 1993, and
Imperial Feather Company ("Imperial"), a manufacturer of bedding products,
including natural fill and synthetic bed pillows, down comforters, and comforter
covers, in August 1994. In 1996, Pillowtex acquired certain assets from
Fieldcrest's blanket operations, including a large number of newer, more
efficient looms that have been installed at Pillowtex's other blanket
facilities.
The combination of its historic pillow operations with the acquired
top-of-the-bed product lines has enabled Pillowtex to build its core business
around four utility bedding product lines that have a low risk of obsolescence.
These include bed pillows (including natural fill, synthetic fiber fill, and
latex), blankets (including cotton, wool blends, acrylic and polyester blankets,
and throws), down comforters, and mattress pads (including thread quilt, sonic
quilt and convoluted foam). Pillowtex also sells other bedroom textile
furnishings, including comforter covers, featherbeds, pillow protectors,
decorative pillows, bedspreads, synthetic comforters, pillow shams, dust
ruffles, and window treatments.
Bed Pillows. Pillowtex believes that it is a leading manufacturer and
marketer of bed pillows in the United States and Canada. Pillowtex produces and
markets a broad line of traditional bed pillows, as well as specially designed
bed pillows such as the BedMate(R) body pillow and Great Shapes(R) pillows,
including Euro Square, U-Neck and Neck Roll. Pillowtex offers products at
various levels of quality and price, from synthetic pillows sold at retail
prices as low as $4 to fine white goose down pillows sold at a retail price of
up to approximately $185.
Pillowtex believes that it is a leading feather and down pillow
manufacturer in the United States and Canada, offering products filled with
quality goose and duck down, or blends of feather and down, in a range of
grades. These materials, known as "natural fill," are noted for their loft and
resiliency.
Pillowtex also manufactures and markets a full line of bed pillows
featuring staple (cut and crimped), tow (continuous filament), and cluster
(individual ball) synthetic fiber fills. Pillowtex believes that it is a leading
supplier of premium synthetic and latex bed pillows in the United States and
Canada.
Blankets. Pillowtex believes that it is a leading producer of blankets in
the United States and Canada, manufacturing woven and nonwoven conventional and
thermal weave blankets and throws in a wide assortment of fibers, including
cotton, wool blend, acrylic, and polyester. Pillowtex is the exclusive supplier
in the United States and Canada of blankets for Ralph Lauren. Pillowtex has a
strong presence in the infant blanket market with products ranging from nonwoven
receiving blankets, to jacquard throws, to the finest Supima(R) cotton crib
blanket. Pillowtex also designs and manufactures a full line of decorative
cotton and acrylic jacquard throws.
49
<PAGE> 57
Down Comforters. Pillowtex was a pioneer in marketing down comforters in
the United States, and Pillowtex believes that it is a leading manufacturer and
marketer of down comforters in the United States and Canada. Down comforters
have become increasingly popular for both their insulation and fashion
qualities, selling well in both warm and cool climates. They sell at department
stores at prices ranging from $70 to approximately $400. Increasingly popular
higher end comforters typically offer more down fill, sport higher thread count
shells and feature more appealing "surface interest," such as damask dots,
stripes and checks.
Mattress Pads. Pillowtex believes that it is a leading manufacturer and
marketer of mattress pads in the United States and Canada, producing and
marketing a complete line of mattress pads, including sizes for adults and
children, natural and synthetic filled, flat, and fitted as well as its skirted
Adjust-A-Fit(R) mattress pad, an adjustable fit mattress pad made with Lycra(R),
a multidirectional stretch material produced by E.I. DuPont de Nemours & Co.
("DuPont"). The Adjust-A-Fit(R) mattress pad correctly fits a broad range of
mattress thicknesses, including pillow top mattresses.
Other Bedroom Textiles. Pillowtex offers a variety of other complementary
bedroom textile products including comforter covers, featherbeds, pillow
protectors, synthetic fill comforters, decorative pillows, pillow shams, dust
ruffles, and window treatments. These products represent a source of additional
profitability as "add-on" sales for retailers.
Fieldcrest
Fieldcrest manufactures and markets quality bed and bath products,
including towels, sheets, comforters, and bath rugs, which are sold under such
brand names as Royal Velvet(R), Cannon(R), Fieldcrest(R), Charisma(R), St.
Mary's(R), and Royal Family(R).
Towels. Fieldcrest's bathroom textile products include bath, hand and
fingertip towels, washcloths, and bath mats. Royal Velvet(R), Cannon(R),
Charisma(R), Fieldcrest(R), and St. Mary's(R) are well-known, high quality towel
brand names, providing Fieldcrest with a strong market position in key sectors
of the United States market. Fieldcrest is also recognized as the color leader
in the towel industry as it markets 40 colors in its Royal Velvet(R) franchise.
In the marketplace, Fieldcrest differentiates its towels by using fine ring spun
cotton yarns to produce Royal Velvet(R) towels and pima cotton yarns for
Charisma(R). The towel line includes solid color cam and dobby towels, woven
stripes and fancy jacquards as well as printed towels. Retail prices of
Fieldcrest's towels range from $1.84 for a 25 inch by 42 inch solid color towel
to $25.00 for a 30 inch by 52 inch Charisma(R) towel made of Supima(R) cotton.
Bath Rugs. Fieldcrest markets a variety of bath and accent rugs in
conjunction with its towel offering. Sizes range from 18 inches by 30 inches to
50 inches by 30 inches. Products are marketed under the Royal Velvet(R),
Charisma(R), Fieldcrest(R) Cannon(R), and Cannon Royal Family(R) brands, as well
as private labels. Retail prices for bath rugs range from $4.99 to $35.00.
Other Bath Products. Fieldcrest had marketed shower curtains and ceramic
bath accessories as complementary bath products for its towel and bath mat
product lines. In January 1998, the Company entered into a license agreement
with Ex-Cell Home Fashions, Inc. ("Ex-Cell"), pursuant to which the Company
granted Ex-Cell an exclusive, world-wide license to manufacture, sell and
distribute shower curtains and bath accessories under the highly recognized
family of Fieldcrest brands, including Charisma(R), Touch of Class(R), Royal
Velvet(R), Fieldcrest(R) and Cannon(R). The license agreement requires royalty
payments based upon product sales, including payments of minimum annual
royalties, and is for an initial term of five years with up to two optional
renewal terms of five years each.
Sheets and Fashion Bedding. Fieldcrest produces a wide variety of sheets,
ranging from a 128-thread count sheet of blended cotton and polyester to
top-of-the-line 310-thread count 100% pima cotton sheets. Its principal brand
names for this product line include Cannon(R), Fieldcrest(R), Royal Velvet(R),
and Charisma(R), all of which are widely recognized by consumers. Among
Fieldcrest's sheeting strengths are solid color sheets with coordinating
decorative bedding accessories. In addition to sheets, Fieldcrest's fashion
bedding products consist of matching comforters, duvet covers, and pillow shams
along with coordinated ruffled or pleated bed skirts. Retail prices of
Fieldcrest's sheets start at approximately $6.99 for a twin size, 128-thread
count sheet
50
<PAGE> 58
set and extend to $150.00 for a king size, 310-thread count Charisma(R) sheet.
Comforters are sold at retail prices as low as $19.99 for a solid color twin
size to approximately $449.00 for a king size Charisma(R) comforter.
Furniture Covering Products. Fieldcrest also manufactures and markets a
full line of ready-made furniture coverings through its SureFit(R) operations.
Product sizes include chair, love-seat, sofa, and large sofa. These products
sell at retail prices ranging from $16.99 for lower-end solid and
polyester-cotton prints to $199.99 for novelty upholstery weight sofa covers.
MARKETING, SALES AND DISTRIBUTION
Pillowtex
Pillowtex markets its products to virtually all major retailers through
channels of distribution that include department and specialty stores, mass
merchants, discounters and catalogs, as well as institutional suppliers.
Pillowtex believes that it is one of the principal suppliers of bedroom textile
products to several of the largest retailers in the United States. Pillowtex's
top ten customers accounted for approximately 65% of total sales in 1996.
Wal-Mart and Dayton Hudson accounted for 14% and 13% of Pillowtex's total sales
in 1996, respectively. No other customer accounted for more than 10% of total
sales in 1996. For the nine months ended September 27, 1997, sales to Wal-Mart
and Dayton Hudson accounted for 12% and 13%, respectively, of Pillowtex's total
sales. Consistent with industry practice, Pillowtex does not generally operate
under long-term written supply contracts with its customers. Pillowtex does not
anticipate a reduction in customer orders after the Effective Time solely as a
result of the overlap of customers of both Pillowtex and Fieldcrest, though
there can be no assurance in this regard. See "Risk Factors -- Risk of Loss of
Material Customers."
Pillowtex's current international business is concentrated in Canada,
although it also sells in Mexico, Latin America, and overseas. Pillowtex's
acquisition of Torfeaco in 1993, and of Imperial and Beacon in 1994, greatly
enhanced Pillowtex's market position in Canada and its relationships with
important Canadian retailers.
Pillowtex's relationship with the Polo Ralph Lauren Corporation began in
1987 and Ralph Lauren is among Pillowtex's most important licensed trademarks.
Pillowtex holds an exclusive license for pillows, down comforters, mattress
pads, and blankets in the United States and Canada, and a non-exclusive license
to manufacture, and in certain cases to sell, a variety of fashion bedding
products in the territory. Ralph Lauren products are sold worldwide to fine
department and specialty stores.
In an effort to maximize Pillowtex's product exposure and increase sales,
Pillowtex works closely with its major customers to assist them in merchandising
and promoting Pillowtex's products to the consumer. In addition to frequent
personal consultation with the employees of these customers, Pillowtex meets
with its customers' senior management periodically to jointly develop
merchandise assortments and plan promotional events specifically tailored to
that customer. Pillowtex provides merchandising assistance with store layouts,
fixture designs, advertising and point of sale displays and also provides
customers with preprinted, customized advertising materials designed to increase
sales.
Pillowtex's electronic data interchange system allows customers to place,
and allows Pillowtex to fill, track and bill, orders by computer. This system
enables Pillowtex to ship products on a "quick response" basis.
Pillowtex generally employs salespeople who have many years of industry
experience. Most sales people are compensated with a combination of salary and
discretionary bonus. Certain Ralph Lauren products are sold by the Ralph Lauren
sales force.
Fieldcrest
Fieldcrest offers its customers a broad selection of home textile items,
from affordably priced cotton-polyester blend products to the finest pima and
Supima(R) cotton products. Design leadership is a key element of Fieldcrest's
marketing strategy. Fieldcrest employs in-house design staff as well as
licensing designer names such as Waverly(R), Adrienne Vittadini(R), Court of
Versailles(R), and Ellen Tracy(R). Fieldcrest's
51
<PAGE> 59
products are marketed by its sales and marketing staff consisting of
approximately 71 professionals and distributed nationally to customers for
ultimate retail sale. Fieldcrest generally introduces new products to the retail
trade during the April and October industry home textile markets while private
label products manufactured by Fieldcrest are introduced throughout the year.
Fieldcrest's top ten customers accounted for approximately 53% of total sales
for fiscal 1996. In 1996, Wal-Mart was Fieldcrest's largest customer,
representing approximately 21% of total sales. No other customer accounted for
more than 10% of total sales in 1996. See "Risk Factors -- Risk of Loss of
Material Customers."
As a supplement to its primary distribution channels, Fieldcrest operates
retail outlet stores which sell Fieldcrest's products directly to customers.
These stores sell both first quality merchandise and seconds or "off-goods."
Fieldcrest's strategy is to locate its outlet stores in regions which are not
served by its primary customers and to sell its products at competitive retail
prices. Fieldcrest believes that its retail outlet stores provide an effective
channel for the distribution of its inventory of second quality merchandise and
enhances its distribution of first quality products in regions where consumers
would not otherwise have access to Fieldcrest's products. In 1996, retail outlet
stores sales were $46.3 million or 4.2% of total sales.
Fieldcrest segments its use of brand names by distribution channel to
solidify the perceived value of such brands and maintain their integrity. Royal
Velvet(R), Fieldcrest(R), and Cannon Royal Family(R) brand name bed and bath
products are distributed primarily to leading department stores, specialty home
furnishing stores, and catalog merchants. St. Mary's(R) and Cannon(R) brand name
bed and bath products are distributed through mass merchants. Fieldcrest
supports its brands with national consumer advertising. In addition, Fieldcrest
utilizes private brands through large chain stores and also sells a smaller
amount of unbranded products to institutional and government customers. In 1996,
approximately 93% of Fieldcrest's sales were derived from products carrying
Fieldcrest's brand names.
The Fieldcrest sales organization works closely with its customers in the
development of new product, production planning, and forecasting of the
business. Fieldcrest is currently working with several mass retailers on vendor
managed and co-managed inventory replenishment. Fieldcrest also develops
in-store collateral signing for its retail customers on the Royal Velvet(R) bed
and bath events.
Fieldcrest sales and marketing personnel generally are experienced industry
professionals with diverse backgrounds in the home textiles business and
compensated with a salary and a performance oriented bonus.
TRADEMARKS AND LICENSE AGREEMENTS
Pillowtex
Pillowtex markets its products under its own proprietary trademarks, trade
names, and customer-owned private labels, as well as certain licensed trademarks
and trade names. Pillowtex uses trademarks, trade names, and private labels as
merchandising tools to assist its customers in coordinating their product
offerings and differentiating their products from those of their competitors.
Pillowtex owns various trademarks and trade names, including Beacon(R),
Nettle Creek(R), Softie(R), Globe(R), and BedMate(R). Pillowtex regards its
trademarks and trade names as valuable assets and vigorously protects them
against infringement.
Pillowtex holds the exclusive license for the highly regarded Ralph Lauren
trademark for pillows, down comforters, mattress pads, and blankets in the
United States and Canada. In addition, Pillowtex holds a non-exclusive license
to manufacture, and in certain cases sell, a variety of fashion bedding products
under the Ralph Lauren trademark in North America. Pillowtex's licenses with
Polo Ralph Lauren Corporation expire on June 30, 1998. Pillowtex has had a
long-standing relationship with Polo Ralph Lauren Corporation and has no reason
to believe that such licenses will not be renewed. However, there can be no
assurance that Pillowtex will be able to renew these licenses on acceptable
terms upon their expiration. See "Risk Factors -- Dependence on Key Licenses."
In addition, Pillowtex manufactures and sells various goods, including
pillows, blankets, and throws under non-exclusive license agreements with Disney
for the Disney standard characters including Mickey Mouse,
52
<PAGE> 60
Minnie Mouse, and Donald Duck, as well as other characters and film properties
such as Winnie the Pooh and the Lion King. In 1996, Pillowtex entered into
exclusive license agreements with Fieldcrest for the manufacture and sale of
various goods including bed pillows, mattress pads, and down comforters under
the Royal Velvet(R), Cannon(R), Charisma(R), and Touch of Class(R) trademarks.
These license agreements generally require royalty payments based upon product
sales, including payments of minimum annual royalties, and generally expire at
various future dates in 1998. See "Risk Factors -- Dependence on Key Licenses."
Fieldcrest
Fieldcrest owns various trademarks and trade names including Royal
Velvet(R), Cannon(R), Charisma(R), Fieldcrest(R), Royal Family(R), Caldwell(R),
and St. Mary's(R). Recent consumer research has shown that Cannon(R) is not only
the most recognized towel brand in the United States, but is also the sixth most
recognized domestic consumer brand. Fieldcrest's other principal brand names are
widely recognized in the industry and along with Cannon(R), represent excellence
and value in product quality, fashion, and design. Fieldcrest regards its
trademarks and trade names as valuable assets and vigorously protects them
against infringement. See "Risk Factors -- Dependence on Brand Names."
Fieldcrest utilizes license agreements with Waverly(R), Adrienne
Vittadini(R), Court of Versailles(R), Ellen Tracy(R), and others. Fieldcrest is
only partially dependent upon such licenses in certain product lines and the
loss of any exclusivity in these areas would not materially adversely affect
overall profitability.
PRODUCT DEVELOPMENT
Pillowtex
Pillowtex's product development staff creates and develops products with
new or superior performance characteristics in cooperation with various outside
sources, including its suppliers and customers. Pillowtex believes that this
ability is an important competitive advantage. As a result, Pillowtex commits
time and resources to identifying new materials, designs and products from a
variety of domestic and international vendors.
In addition to internal product development, Pillowtex's acquisitions have
expanded its product lines and enhanced its manufacturing and other resources
available for developing existing and new product lines.
Fieldcrest
Fieldcrest works closely with its customers to develop new products that
would provide value to its customers and stimulate sales. In 1996, Fieldcrest
and Wal-Mart associates worked together to develop Sahara(R), a new towel that
features the patented Cannon DryFast(R) System for quicker drying. DryFast(R) is
a special combination of spinning, weaving, and finishing processes that results
in super-absorbency. In 1997, Fieldcrest extended its offering of DryFast(R)
products to kitchen towels, tub mats, and bath sheets.
MANUFACTURING, RAW MATERIALS AND IMPORTS
Pillowtex
Pillowtex operates an extensive network of manufacturing and distribution
facilities in Texas, North Carolina, South Carolina, Tennessee, California,
Pennsylvania, Mississippi, Illinois, and Toronto, Canada. Pillowtex's nationwide
manufacturing and distribution network enables Pillowtex to ship pillows,
mattress pads, and comforters cost effectively to all major cities in the United
States and Canada. The hub of the network for pillows and comforters is located
in Dallas, Texas, where Pillowtex operates what it believes to be the largest
feather and down processing facility in North America, producing significant
economies of scale. Feather and down are processed by state-of-the-art
computerized washing and sorting equipment and are sorted into a variety of
mixtures and grades used in manufacturing natural fill pillows and comforters.
The raw materials are shipped along with imported products to Pillowtex's
regional facilities for final assembly and distribution to customers. Pillowtex
also operates an automated sewing facility in Dallas, Texas, where high speed,
computerized machines cut and sew fabric into pillow shells.
53
<PAGE> 61
Many of Pillowtex's regional manufacturing facilities produce natural fill
and synthetic fill pillows. Natural fill pillows are assembled by blowing
processed feather and down into the pillow shell and sewing the open seam
closed. Synthetic fill pillows are produced on machines known as garnets that
pull, comb, and expand compressed polyester fibers. Once expanded, the fibers
are inserted into a pillow shell and the open seam is sewn shut.
Mattress pads are manufactured at the California, Mississippi,
Pennsylvania, and Toronto, Canada facilities by two automated methods. The
traditional quilt sewing method uses high speed equipment that sews the top,
bottom and fill material together. The sonic method fuses the top, bottom, and
fill material together.
Pillowtex's line of natural fill comforters are manufactured by Pillowtex
at its California, Illinois, Pennsylvania, Mississippi, and Toronto, Canada
locations using processed down from the Dallas facility. Pillowtex imports the
majority of its comforter shells from China, Hong Kong, and India.
Pillowtex produces blankets and spins yarn at manufacturing facilities in
North Carolina, South Carolina, and Tennessee. These plants provide full
vertical production capability, including spinning, weaving, dyeing, and
finishing. During 1996, Pillowtex acquired a 746,600 square foot warehouse in
Mauldin, South Carolina to consolidate the operations of four smaller warehouses
in a more central distribution facility.
In late 1996, Pillowtex acquired certain assets from Fieldcrest's blanket
operations, including newer and faster equipment which has been installed at
Pillowtex's existing blanket facilities. As with its other lines of business,
Pillowtex plans the continuation of equipment and plant upgrades over the next
several years in order to increase production efficiency and add capacity.
Pillowtex's quality control program is designed to assure that its products
meet predetermined quality standards established both internally and by its
customers. Pillowtex has devoted significant resources to support its quality
improvement efforts. Each manufacturing facility is staffed with a quality
control team that identifies and resolves quality issues. Pillowtex attempts to
maintain close contact with customer quality control or other appropriate
personnel to assure that Pillowtex understands the customer's requirements.
Pillowtex analyzes feather and down and other raw materials, as well as
finished products of both Pillowtex and its competitors, at its facilities in
Dallas, Texas. Pillowtex maintains a computerized tracking system to monitor
feather and down processing from the receipt of raw materials through the
delivery of finished products. At the blanket production plants, numerous
distinct quality check points are monitored throughout the manufacturing
process. Pillowtex also has a program with its major suppliers to assure the
consistency of purchased raw materials by imposing strict standards and
materials inspection, and requiring rapid response to Pillowtex's complaints.
The principal raw materials that Pillowtex uses in manufacturing its
products are: feather and down; synthetic (polyester and acrylic), cotton and
wool fibers; and cotton and polyester-cotton blend fabrics. Pillowtex imports
feather and down from several sources outside the United States. A majority of
such purchases are from China, where feather and down are by-products of ducks
and geese raised for food. Pillowtex believes that it is currently the largest
United States importer of feather and down from China, the world's largest
producing country. Pillowtex is generally able to purchase feather and down from
its suppliers in China on open credit terms without letters of credit. See "Risk
Factors -- Dependence on Supply Sources in China."
As of July 1, 1996, quota restrictions on down comforter shells from China
were eliminated, allowing Pillowtex to import shells on an unlimited and
as-needed basis.
Pillowtex purchases its Adjust-A-Fit(R) mattress pad Lycra(R) skirting from
DuPont. Because of DuPont's patent on Lycra(R), it is the exclusive supplier for
this material. Pillowtex believes that the risk that DuPont will cease to
manufacture and sell Lycra(R) to Pillowtex is minimal. Pillowtex purchases
synthetic fiber from, among others, DuPont, Wellman, Inc., Monsanto Company,
Cytec Industries Inc., Hoechst Celanese Textile Fibers, and Kanematsu U.S.A.
Inc. To reduce the effect of potential price fluctuations, Pillowtex makes
commitments from time to time for future purchases of synthetic and natural
fibers. In 1996, Pillowtex experienced
54
<PAGE> 62
some decreases in costs of cotton and synthetic raw materials, however, cotton
in particular is subject to price volatility. See "Risk Factors -- Dependence on
Raw Materials."
Pillowtex uses fabric purchased from third parties in the production of
pillow shells, comforter covers, and various other products. Although Pillowtex
believes that fabric is a commodity-type product that is available from numerous
sources, Pillowtex currently purchases large quantities of pillow ticking fabric
from a single supplier, Santee Print Works, to control costs and quality.
Consistent with industry practice, Pillowtex and Santee Print Works have not
entered into a long-term supply contract. However, to reduce the effect of
potential price fluctuations Pillowtex makes commitments from time to time for
future purchases from Santee Print Works.
Management of Pillowtex believes that its relationships with its suppliers
are good.
Fieldcrest
Fieldcrest is principally vertically integrated in that it purchases raw
materials, principally cotton and synthetic fibers, and converts these materials
into finished consumer products. Fieldcrest operates 15 principal facilities in
the United States; nine in North Carolina, one in Georgia, two in Alabama, one
in Pennsylvania, one in New York, and one in Virginia. Generally, each facility
ships its finished products directly to the customer. Fieldcrest has and will
continue to implement electronic data interchange and vendor-managed inventory
programs with major customers in order to minimize the lead time for customer
orders and permit a more efficient, targeted manufacturing schedule.
Fieldcrest produces bath towels at its facilities in Virginia, North
Carolina, Georgia, and Alabama. Cotton and synthetic fibers are spun into yarn
utilizing Fieldcrest's spinning capacity and, then, woven into fabric or greige
cloth. The greige cloth is finished, dyed, cut, and sewn into finished towel
products. Fieldcrest's Fieldale, Virginia facility generally produces the higher
quality, department and specialty stores' products. The Columbus, Georgia and
Phenix City, Alabama facilities generally support Fieldcrest's mass merchant
business segment. The Kannapolis, North Carolina facility is capable of
producing both types of products and, as a result, is used to support both
segments.
Bed sheet products are produced in Fieldcrest's facilities in the
Kannapolis, North Carolina area. As with Fieldcrest's towel operations, these
facilities provide the full range of Fieldcrest's sheet products for
substantially all channels of distribution. Cotton and synthetic fibers are spun
into yarn and woven into greige cloth for finishing, dyeing, cutting, and
sewing. In late 1995, however, Fieldcrest outsourced certain yarn production and
closed two operations to take advantage of certain cost savings made available
by a supplier of yarn. In an effort to maximize cost savings, Pillowtex intends
to review Fieldcrest's trend toward outsourcing certain manufacturing and
corporate functions on a case by case basis. Pillowtex initially intends to
continue Fieldcrest's outsourcing practices in areas that appear to result in
reduced operating costs, such as in sheeting yarn spinning, and may increase or
curtail the use of outsourcing in spinning and other areas based on future cost
and other considerations, although the potential impact of any future
outsourcing decisions on the combined companies' operating results cannot be
determined at this time.
Fieldcrest produces comforters and other decorative bedding products such
as pillow shams and decorative pillows at its Eden and Laurel Hill, North
Carolina facilities. Finished cloth generally is supplied by Fieldcrest's bed
sheet operations. The cloth is cut, polyester fiber-fill is inserted, and the
product is sewn and packaged for shipment to retail customers.
Bath rugs are produced in Fieldcrest's Scottsboro, Alabama facility. Tufted
yarn is punched into fabric and cut into a uniform height. A latex coating is
applied to the underside of the fabric to hold the fibers. The product is dyed,
cut and finished. Furniture coverings are produced at Fieldcrest's SureFit(R)
operations in Allentown, Pennsylvania. Finished cloth is purchased from
third-party vendors, cut and sewn into generally four sizes to match standard
furniture sizes.
Fieldcrest's quality control program is designed to assure that its
products meet predetermined quality standards established both internally and by
its customers. Fieldcrest has devoted significant resources to support its
quality improvement efforts. Each manufacturing facility is staffed with a
quality control team that
55
<PAGE> 63
identifies and resolves quality control issues. Fieldcrest attempts to maintain
close contact with customer quality control or other appropriate personnel to
assure that Fieldcrest understands the customer's requirements.
Over the past years, Fieldcrest has initiated a number of modernization
programs. For example, Fieldcrest replaced a substantial portion of its
Fieldale, Virginia weaving capacity with modern rapier looms, reducing unit cost
and the proportion of off-goods produced. In 1996, Fieldcrest completed its
$86.0 million Phenix City, Alabama weaving facility. This program included the
installation of 172 Tsudakoma air-jet looms, automatic cutting and sewing
stations and new warehouse sortation operations, making Phenix City one of the
world's most state-of-the-art towel facilities.
Fieldcrest's basic raw materials are cotton and synthetic fibers. These
materials are generally available from a wide variety of sources, and no
significant shortage of such materials is currently anticipated. Domestic cotton
merchants are Fieldcrest's primary source of cotton, and domestic fiber
producers are Fieldcrest's primary source of synthetic fibers. Fieldcrest uses
significant quantities of cotton which is subject to ongoing price fluctuations.
Fieldcrest in the ordinary course of business may arrange for purchase
commitments with vendors for future cotton requirements.
BACKLOG
The amount of both Pillowtex's and Fieldcrest's backlog orders at any
particular time is affected by a number of factors, including seasonality and
scheduling of the manufacturing and shipment of products. In general, both
Pillowtex's and Fieldcrest's electronic data interchange and "quick response"
capabilities have resulted in shortened lead times between submission of
purchase orders and delivery and lowered the level of backlog orders.
Consequently, the Company believes that the amount of its backlog is not an
appropriate indicator of levels of future production.
EMPLOYEES
Pillowtex
As of February 2, 1998, Pillowtex had approximately 3,800 employees.
Pillowtex is subject to four collective bargaining agreements covering
approximately 550 employees. These agreements are between Pillowtex and each of
United Auto Workers; Warehouse, Mail Order, Office, Technical and Professional
Employees (Teamsters); and UNITE. One of these agreements expires August 1,
1999; the remainder expire in the first quarter of 2000.
To date, none of these unions have engaged in strikes or work stoppages
against Pillowtex. Pillowtex believes that its relationships with both its union
and non-union employees are good. See "Risk Factors -- Labor Relations."
Fieldcrest
As of February 2, 1998, Fieldcrest had approximately 10,400 employees.
Fieldcrest is subject to three collective bargaining agreements covering
approximately 2,800 employees. These agreements are between Fieldcrest and each
of UNITE, United Textile Workers of America and United Food and Commercial
Workers International Union. The agreements expire January 6, 2000, March 28,
1998 and June 28, 1998, respectively.
Since 1991, UNITE has campaigned to organize approximately 5,500 additional
hourly workers at five Fieldcrest plants, including Fieldcrest's main
manufacturing facility in Kannapolis, North Carolina. Fieldcrest has opposed
UNITE's organizing efforts. Although a majority of employees at these plants
recently voted not to select UNITE as a bargaining representative, the results
are subject to legal challenge. There can be no assurances as to whether or when
the results of such election will be certified or a new election will be
scheduled. It is impossible to predict the effect, if any, a lengthy
continuation of another organizing campaign will have on the productivity of the
Fieldcrest workforce.
56
<PAGE> 64
Fieldcrest believes that its relationships with both its union and nonunion
employees are good. See "Risk Factors -- Labor Relations."
FACILITIES
Pillowtex
The following table summarizes certain information concerning certain of
Pillowtex's facilities:
<TABLE>
<CAPTION>
APPROX. OWNED/
LOCATION PRINCIPAL USE SQUARE FEET LEASED
-------- ------------- ----------- ------
<S> <C> <C> <C>
Dallas, Texas Headquarters and feather and down processing 104,000 Owned
Dallas, Texas General administration, manufacturing and
distribution 150,000 Owned
Los Angeles, California Manufacturing and distribution
320,000 Leased
Tunica, Mississippi Manufacturing and distribution 288,000 Owned
Hanover, Pennsylvania Manufacturing and distribution 291,000 Owned
Rocky Mount, North Carolina Manufacturing and distribution 139,000 Owned
Rocky Mount, North Carolina Manufacturing and distribution
78,000 Leased
Chicago, Illinois Manufacturing and distribution 121,000 Owned
New York, New York Principal sales office and showroom
12,500 Leased
Monroe, North Carolina Manufacturing and distribution
288,000 Leased
Goodlettsville, Tennessee Warehouse and distribution
158,000 Leased
Lebanon, Tennessee Warehouse and distribution
53,000 Leased
Lebanon, Tennessee Manufacturing 175,000 Owned
Toronto, Ontario, Canada Manufacturing and distribution
99,000 Leased
Toronto, Ontario, Canada Manufacturing and distribution
60,000 Leased
Swannanoa, North Carolina Manufacturing, distribution, warehouse, and
office 1,425,000 Owned
Swannanoa, North Carolina Outlet Store 5,000 Owned
Asheville, North Carolina Warehouse
177,000 Leased
Asheville, North Carolina Warehouse
254,000 Leased
Asheville, North Carolina Warehouse
185,000 Leased
Westminster, South Carolina Manufacturing, distribution, warehouse, and
office 652,000 Owned
Westminster, South Carolina Warehouse
29,000 Leased
Newton, North Carolina Manufacturing and distribution
297,000 Leased
Mauldin, South Carolina Warehouse and distribution 746,600 Owned
</TABLE>
Pillowtex also maintains small sales offices for its sales staff in
Arkansas, California, Massachusetts, Minnesota, North Carolina, and Washington.
Pillowtex believes that its facilities are generally well maintained, in
good operating condition and adequate for its current needs. Pillowtex will
continue to emphasize improvements at these plants, upgrading the physical plant
and purchasing additional and newer machinery and equipment.
57
<PAGE> 65
Fieldcrest
The following table summarizes certain information concerning certain of
Fieldcrest's principal facilities:
<TABLE>
<CAPTION>
APPROX. OWNED/
LOCATION PRINCIPAL USE SQUARE FEET LEASED
-------- ------------- ----------- ------
<S> <C> <C> <C>
Kannapolis, North Carolina Offices, manufacturing and warehouse 5,863,041 Owned
Kannapolis, North Carolina Manufacturing 760,939 Owned
Concord, North Carolina Manufacturing 696,963 Owned
Eden, North Carolina Manufacturing and warehouse 529,273 Owned
Eden, North Carolina Warehouse 185,214 Owned
Rockwell, North Carolina Manufacturing 98,240 Owned
Salisbury, North Carolina Manufacturing 229,361 Owned
Salisbury, North Carolina Manufacturing and warehouse 567,000 Owned
Laurel Hill, North Carolina Manufacturing and warehouse 238,072 Owned
Scottsboro, Alabama Manufacturing and warehouse 272,800 Owned
Phenix City, Alabama Manufacturing and warehouse 678,681 Owned
Columbus, Georgia Manufacturing and warehouse 727,246 Owned
New York, New York Sales office and showroom
64,490 Leased
Allentown, Pennsylvania Manufacturing and warehouse
315,000 Leased
Fieldale, Virginia Manufacturing and warehouse 973,253 Owned
</TABLE>
In addition to the foregoing, Fieldcrest maintains certain warehousing and
distribution centers in the states where its manufacturing facilities are
located and maintains small sales and marketing offices in seven additional
states. Fieldcrest also owns various other properties, both developed and
undeveloped, which are unrelated to its manufacturing operations. Certain of
these properties were acquired throughout the years for investment or ancillary
to specific acquisitions. Some of such properties are currently held for
investment by Fieldcrest, some are listed for sale, and some are leased by
Fieldcrest to third parties.
The facilities of Fieldcrest are considered to be generally well
maintained, in good operating condition, and adequate for its current needs.
Significant capital expenditures for new plants, modernization and improvements
have been made in recent years. The plants generally operate on either a three
shift basis for a five-day week or a four shift basis for a seven-day week
during 50 weeks a year except during periods of curtailment.
LEGAL PROCEEDINGS
Pillowtex
Louisville Bedding Company ("Louisville") filed a complaint for patent
infringement against Pillowtex in the United States District Court for the
Western District of Kentucky, Louisville Division, in 1994. Louisville's
complaint alleges that certain of Pillowtex's Adjust-A-Fit(R) mattress pad
product lines infringe on certain of Louisville's patents. Louisville's
allegations relate both to Pillowtex's current mattress pad product line as well
as to certain discontinued product lines sold from 1991 through 1995.
Louisville's complaint seeks an injunction against Pillowtex's sale of its
current stretch-to-fit mattress pad line, as well as an accounting of profits
and unspecified damages relating to both Pillowtex's current and discontinued
product lines. In addition, Louisville's complaint seeks trebled damages,
interest, costs, and attorneys' fees.
During April of 1997, Louisville voluntarily dismissed its infringement
claims against Pillowtex's current opening price point mattress pad line and,
during October of 1997, the district court granted summary judgment for
Pillowtex on the issue of infringement with respect to Pillowtex's current
premium product. On January 30, 1998, the district court entered an additional
order confirming that Pillowtex's current premium price point product did not
infringe Louisville's patents as alleged. The Company does not expect the
Louisville suit to have any effect on the Company's continued right to market
its current line of stretch-to-fit mattress pads. Notwithstanding the foregoing,
Louisville continues to allege that the Company's discontinued product lines
infringed upon the Louisville patents at the time of their sale and continues to
seek an accounting of profits, trebled damages, interest, costs and attorneys'
fees with respect to the Company's discontinued mattress pad line. The Company
continues to deny Louisville's allegations and is vigorously defending the suit.
58
<PAGE> 66
Fieldcrest
Fieldcrest is involved in various claims and lawsuits incidental to its
business; however, the outcome of these suits is not expected to have a material
effect on the Company's financial position or results of operations.
COMPETITION
The home textile industry consists of 15 product categories including area
rugs, bath rugs, bath towels, blankets, comforters/bedspreads,
curtains/draperies, decorative pillows, down comforters, kitchen textiles,
mattress pads, sheets/pillowcases, shower curtains, sleep pillows, table linen,
and throws. This industry is highly competitive. The Company competes with a
number of established manufacturers, importers, and distributors of home textile
furnishings, some of which have greater financial, distribution, and marketing
resources. The Company's current competitors consist primarily of domestic
suppliers of bed pillows, blankets, mattress pads, down comforters, other
bedroom textile furnishings, towels, sheets, and bath rugs.
The Company competes on the basis of price, quality, brand names, and
service. The Company believes that the principal competitive factors affecting
its business and the business of the combined operations of Pillowtex and
Fieldcrest include its sales and marketing expertise, its ability to create and
develop products offering superior performance characteristics, its
relationships with customers, and its manufacturing and distribution
capabilities.
GOVERNMENT REGULATION
The Company is subject to various federal, state and local environmental
laws and regulations governing the discharge, storage, handling and disposal of
various substances, including provisions of the California Health and Safety
Code pertaining to air quality management. The Company is also subject to
federal and state laws and regulations that require products such as bed pillows
and comforters to bear product content labels containing specified information,
including their place of origin and fiber content. In addition, the Company's
operations are governed by a variety of federal, state, local and foreign laws
and regulations relating to worker safety and health, advertising, importing and
exporting, and other matters applicable to businesses in general. All laws and
regulations are subject to change and the Company cannot predict what effect, if
any, changes in laws and regulations might have on its business.
DESCRIPTION OF NOTES
GENERAL
The Series B Notes will be issued pursuant to the Indenture, a copy of
which is filed as an exhibit to the Registration Statement of which this
Prospectus forms a part. 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. The Notes are subject to all such terms, and the Holders 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. The form and
terms of the Series B Notes will be the same as the form and terms of the Series
A Notes except that the Series B Notes will be registered under the Securities
Act and hence will not bear legends restricting the transfer thereof. Following
consummation of the Exchange Offer, all rights under the Registration Rights
Agreement accorded to holders of Series A Notes, including the right to receive
Liquidated Damages, to the extent and in the circumstances specified therein,
will terminate. As of the date of the Indenture, all of the Company's domestic
Subsidiaries will be Restricted Subsidiaries. However, under certain
circumstances, the Company will be able to designate current or future
Subsidiaries as Unrestricted Subsidiaries. Unrestricted Subsidiaries will not be
subject to many of the restrictive covenants set forth in the Indenture. The
definitions of certain terms used in the following summary are set forth below
under "-- Certain Definitions." All references to the "Company" in this
"Description of Notes" are to Pillowtex and not to any of its subsidiaries.
59
<PAGE> 67
PRINCIPAL, MATURITY AND INTEREST
The Notes are limited in aggregate principal amount to $185.0 million and
will mature on December 15, 2007. Interest on the Notes will accrue at the rate
of 9% per annum and will be payable semiannually in arrears on June 15 and
December 15, commencing on June 15, 1998, to Holders of record on the
immediately preceding June 1 and December 1. 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, premium,
if any, and interest and Liquidated Damages (as defined below) 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 may be made by check mailed to the Holders of
Notes at their respective addresses set forth in the register of Holders of
Notes; provided that all payments with respect to Notes that 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 Notes will be issued in denominations of $1,000
and integral multiples thereof.
RANKING AND SUBORDINATION
The Series A Notes are, and the Series B Notes will be, general unsecured
obligations of the Company, ranking senior to all existing and future
subordinated indebtedness of the Company, pari passu in right of payment with
the 10% Senior Subordinated Notes; and subordinated in right of payment to all
existing and future Senior Indebtedness of the Company. The payment of principal
of, premium, if any, and interest and Liquidated Damages, if any, on the Notes
will be subordinated in right of payment, as set forth in the Indenture, to the
prior payment in full of all Senior Indebtedness, whether outstanding on the
date of the Indenture or thereafter incurred.
Upon any distribution to creditors of the Company in a liquidation or
dissolution of the Company or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to the Company or its property, an
assignment for the benefit of creditors or any marshaling of the Company's
assets and liabilities, the holders of Senior Indebtedness will be entitled to
receive payment in full of all obligations due in respect of such Senior
Indebtedness (including, in the case of Senior Indebtedness under the New Senior
Credit Facilities, interest after the commencement of any such proceeding at the
rate specified in the applicable Senior Indebtedness) before the Holders of
Notes will be entitled to receive any payment with respect to the Notes, and
until all Obligations with respect to Senior Indebtedness are paid in full, any
distribution to which the Holders of Notes would be entitled shall be made to
the holders of Senior Indebtedness (except that Holders of Notes may receive
common equity securities or debt securities that are subordinated at least to
the same extent as the Notes to Senior Indebtedness and any securities issued in
exchange for Senior Indebtedness (collectively, "Permitted Junior Securities")
and payments made from the trust described under "-- Legal Defeasance and
Covenant Defeasance").
The Company also may not make any payment upon or in respect of the Notes
(except in Permitted Junior Securities or from the trust described under
"-- Legal Defeasance and Covenant Defeasance") if (i) a default in the payment
of the principal of, premium, if any, or interest on Designated Senior
Indebtedness occurs and is continuing beyond any applicable period of grace or
(ii) any other default occurs and is continuing with respect to Designated
Senior Indebtedness that permits holders of the Designated Senior Indebtedness
as to which such default relates to accelerate its maturity and the Trustee
receives a notice of such default (a "Payment Blockage Notice") from the Company
or the holders of any Designated Senior Indebtedness. Payments on the Notes may
and shall be resumed (a) in the case of a payment default, upon the date on
which such default is cured or waived and (b) in case of a nonpayment default,
the earlier of the date on which such nonpayment default is cured or waived or
179 days after the date on which the applicable Payment Blockage Notice is
received, unless the maturity of any Designated Senior Indebtedness has been
accelerated. No new period of payment blockage may be commenced unless and until
(i) 360 days have elapsed since the effectiveness of the immediately prior
Payment Blockage Notice and (ii) all scheduled
60
<PAGE> 68
payments of principal, premium, if any, and interest on the Notes that have come
due have been paid in full in cash. No nonpayment default that existed or was
continuing on the date of delivery of any Payment Blockage Notice to the Trustee
shall be, or be made, the basis for a subsequent Payment Blockage Notice unless
such default shall have been waived for a period of not less than 90 days.
The Indenture further requires that the Company promptly notify holders of
Senior Indebtedness if payment of the Notes is accelerated because of an Event
of Default.
As a result of the subordination provisions described above, in the event
of a liquidation or insolvency, Holders of Notes may recover less ratably than
creditors of the Company who are holders of Senior Indebtedness. On a pro forma
basis, after giving effect to the Merger and the Financing Transactions,
including the offering of the Series A Notes and the application of the proceeds
therefrom, the principal amount of Senior Indebtedness outstanding at September
27, 1997 would have been approximately $420.0 million (excluding $37.8 million
in letters of credit). The Indenture limits, subject to certain financial tests,
the amount of additional Indebtedness, including Senior Indebtedness, that the
Company and its Restricted Subsidiaries may incur. See "Certain
Covenants -- Incurrence of Indebtedness and Issuance of Preferred Stock."
SUBSIDIARY GUARANTEES
The Company's payment obligations under the Notes are jointly and severally
guaranteed by all Restricted Subsidiaries of the Company (collectively, the
"Guarantors") other than (x) Receivables Subsidiaries and (y) Restricted
Subsidiaries organized outside the United States and which do not guarantee any
Indebtedness or other obligations of the Company and its Restricted
Subsidiaries. The Guarantees are senior obligations of the Guarantors, pari
passu with all other unsubordinated Indebtedness of the Guarantors and senior to
all subordinated Indebtedness of the Guarantors. The Guarantee of each Guarantor
is subordinated to the prior payment in full of all Guarantor Senior
Indebtedness of such Guarantor, which includes the guarantees issued by the
Guarantors of the Company's obligations under the New Senior Credit Facilities.
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 under the Notes and the
Indenture pursuant to a supplemental indenture in form and substance reasonably
satisfactory to the Trustee, and (ii) immediately after giving effect to such
transaction, no Default or Event of Default exists.
The Indenture provides that (i) upon the release by all holders of Senior
Indebtedness and Guarantor Senior Indebtedness of all guarantees issued by a
Guarantor relating to such Senior Indebtedness and Guarantor Senior Indebtedness
and all Liens on the property and assets of such Guarantor relating to Senior
Indebtedness and Guarantor Senior Indebtedness or (ii) 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 clause (i) above or
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 corporation
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 Guarantee; provided that the Net Proceeds of any such sale or other
disposition described in clause (ii) above are applied in accordance with the
applicable provisions of the Indenture. See "-- Repurchase at the Option of
Holders -- Asset Sales." In addition, the Indenture provides that, in the event
the Company (i) designates a Restricted Subsidiary to be an Unrestricted
Subsidiary in accordance with the Indenture or (ii) designates a Subsidiary as a
Receivables Subsidiary in accordance with the Indenture, then such newly
designated Unrestricted Subsidiary or Receivables Subsidiary, as the case may
be, shall be released from its obligations under its Subsidiary Guarantee.
61
<PAGE> 69
OPTIONAL REDEMPTION
The Notes will not be redeemable at the Company's option prior to December
15, 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 thereon
to the applicable redemption date, if redeemed during the 12-month period,
beginning on December 15 of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2002....................................... 104.500%
2003....................................... 103.000%
2004....................................... 101.500%
2005....................................... 100.000%
</TABLE>
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 if the
Company has deposited with the Paying Agent funds in satisfaction of the
redemption price pursuant to the Indenture.
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, if any, and Liquidated Damages thereon to the date of repurchase (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 pursuant to the procedures required by the Indenture and described in such
notice. The Company will comply with the requirements of Rule 14e-l 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
62
<PAGE> 70
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 Indenture will provide that, prior to complying
with the provisions of this covenant, but in any event within 90 days following
a Change of Control, the Company will either repay all outstanding Senior
Indebtedness or obtain the requisite consents, if any, under all agreements
governing outstanding Senior Indebtedness to permit the repurchase of Notes
required by this covenant. 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 Holders of Notes to require that the Company repurchase
or redeem the Notes in the event of a takeover, recapitalization or similar
transaction.
The New Senior Credit Facilities provide 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 Senior Indebtedness to
which the Company becomes a party may contain similar restrictions and
provisions. In the event a Change of Control occurs at a time when the Company
is prohibited from repurchasing Notes, the Company could seek the consent of its
lenders to the repurchase of Notes or could attempt to refinance the borrowings
that contain such prohibition. If the Company does not obtain such a consent or
repay such borrowings, the Company will remain prohibited from repurchasing
Notes. In such case, the Company's failure to repurchase tendered Notes would
constitute an Event of Default under the Indenture which would, in turn,
constitute a default under the New Senior Credit Facilities. In such
circumstances, the subordination provisions in the Indenture would likely
restrict payments to Holders of Notes.
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," the phrase varies according to the facts and circumstances of the subject
transaction and 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 Restricted Subsidiaries to, consummate an Asset Sale unless (i) the
Company (or the Restricted 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 or a committee of the
Board of Directors, having at least one Independent director, set forth in an
officers' certificate delivered to the Trustee, or by an independent appraisal
by an accounting, appraisal or investment banking firm of national standing or,
in the case of Investment Assets, an officer's certificate) of the assets or
Equity Interests issued or sold or otherwise disposed of and (ii) at least 75%
of the consideration therefor (or 50%, in the case of any Investment Assets)
received by the Company or such Restricted Subsidiary is in the form of cash;
provided that (a) the amount of any liabilities (as shown on the Company's or
such Restricted Subsidiary's most recent balance sheet) of the Company or any
such Restricted Subsidiary (other than contingent liabilities and liabilities
that by their terms are 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 and its Restricted Subsidiaries
from all obligations
63
<PAGE> 71
in respect thereof) shall be deemed to be cash for purposes of this provision
and (b) any notes or other obligations received by the Company or such
Restricted Subsidiary from such transferee in exchange for any such assets that
are promptly converted into cash (to the extent of 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 all such Net Proceeds, at its option, (i) to permanently
reduce Senior Indebtedness (and correspondingly reduce commitments with respect
thereto in the case of any reduction of borrowings under the New Senior Credit
Facilities, (ii) to the acquisition of a controlling interest in another
business, the making of a capital expenditure or the acquisition of other
long-term assets ("Productive Assets"), in each case, in the same or a similar
line of business as the Company was engaged in on the date of the Indenture, or
(iii) to reimburse the Company or 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
proceeds received on account of such loss, damage or taking. Pending the final
application of any such Net Proceeds, the Company may temporarily reduce Senior
Indebtedness or otherwise invest such Net Proceeds in any manner that is not
prohibited by the Indenture. Any Net Proceeds from Asset Sales that are not
applied or invested as provided in the first sentence of this paragraph will be
deemed to constitute "Excess Proceeds." When the aggregate amount of Excess
Proceeds exceeds $10.0 million, the Company will be required to make an offer to
all Holders of Notes and, to the extent required by the terms of any Pari Passu
Indebtedness, to all holders of such Pari Passu Indebtedness (an "Asset Sale
Offer") to repurchase the maximum principal amount of Notes and any such Pari
Passu Indebtedness that may be repurchased 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 thereon, if any, to the
date of purchase, in accordance with the procedures set forth in the Indenture
or such Pari Passu Indebtedness, as applicable. To the extent that the aggregate
amount of Notes and any such Pari Passu Indebtedness tendered pursuant to an
Asset Sale Offer is less than the Excess Proceeds, the Company may use any
remaining Excess Proceeds for general corporate purposes. If the aggregate
principal amount of Notes and any Pari Passu Indebtedness surrendered by Holders
thereof exceeds the amount of Excess Proceeds, the Trustee shall select the
Notes to be repurchased on a pro rata basis. Upon completion of such offer to
repurchase, the amount of Excess Proceeds shall be reset at zero.
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 Notes pursuant to an Asset Sale Offer.
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 not in excess of $10.0 million in
the aggregate subsequent to the date of the Indenture without complying with
clause (ii) of the first paragraph of this covenant; provided that (x) at least
75% of the consideration for such Asset Sale constitutes either Productive
Assets or cash, and (y) any Net Proceeds received by the Company or any of its
Restricted Subsidiaries in connection with any Asset Sale permitted to be
consummated under this paragraph shall be subject to the provisions of the
second paragraph of this covenant.
CERTAIN COVENANTS
Restricted Payments
The Indenture provides that the Company will not, and will not permit any
of its Restricted Subsidiaries to, directly or indirectly: (i) declare or pay
any dividend or make any other payment or distribution on account of the Equity
Interests of the Company or any of its Restricted Subsidiaries (including,
without limitation, any payment in connection with any merger or consolidation
involving the Company or any of its Restricted Subsidiaries) to the direct or
indirect holders of the Equity Interests of the Company or any of its Restricted
Subsidiaries in their capacity as such (other than dividends or distributions
payable in Equity Interests (other than Disqualified Stock) of the Company,
dividends or distributions payable to the Company or any Restricted Subsidiary
of the Company (other than a Receivables Subsidiary) or dividends or
distributions made by a Restricted Subsidiary of the Company (other than a
Receivables Subsidiary) to all holders of its
64
<PAGE> 72
common stock on a pro rata basis); (ii) purchase, redeem or otherwise acquire or
retire for value any Equity Interests of the Company, any Restricted Subsidiary
of the Company or any direct or indirect parent of the Company, (other than any
such Equity Interests owned by the Company or any Restricted Subsidiary of the
Company (other than a Receivables Subsidiary)); (iii) make any payment on or in
respect of, or purchase, redeem, defease or otherwise acquire or retire for
value any Indebtedness that is pari passu with or subordinated to the Notes,
except at Stated Maturity 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; and
(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 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 made by the Company and its Subsidiaries after the date
of the Indenture (excluding Restricted Payments permitted by clauses (u)
and (x) of the next succeeding paragraph), is less than the sum of (i) 50%
of the Consolidated Net Income of the Company for the period (taken as one
accounting period) commencing on the effective date of the Merger 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 (ii) 100% of the aggregate net cash proceeds
received by the Company from the issue or sale subsequent to 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 (iii) to the extent that any
Restricted Investment that was made after the date of the Indenture is sold
for cash or otherwise liquidated or paid 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, plus (iv) $20.0 million.
The foregoing provisions will not prohibit (v) 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; (w) the making of any Restricted Investment, or 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 Restricted Subsidiary of the Company) of other
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 (c)(ii) of the preceding paragraph; (x) the
defeasance, redemption or repurchase of pari passu or subordinated Indebtedness
with the net cash proceeds from an incurrence of Permitted Refinancing
Indebtedness or the substantially concurrent sale (other than to a Restricted
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, repurchase, retirement or other
acquisition shall be excluded from clause (c) (ii) of the preceding paragraph;
(y) the repurchase, redemption or other acquisition or retirement for value of
any Equity Interests of the Company or any Restricted Subsidiary of the Company
held by any member of the Company's (or any of its Subsidiaries') management
pursuant to any management equity subscription agreement or stock option
agreement in effect as of the date of the Indenture; provided that (A) the
aggregate price paid for all such repurchased, redeemed, acquired or retired
Equity Interests shall not exceed $1.0 million in any 12-month period plus the
aggregate cash proceeds received by the Company during such 12-month period from
any reissuance of Equity Interests by the Company to members of management of
the Company and its Restricted Subsidiaries, and (B) no
65
<PAGE> 73
Default or Event of Default shall have occurred and be continuing immediately
after such transaction; and (z) so long as no Default or Event of Default shall
have occurred and be continuing, ordinary dividends paid by the Company in
respect of its Common Stock in an aggregate amount not to exceed $6.0 million
since the date of the Indenture.
The Board of Directors may designate any Restricted Subsidiary to be an
Unrestricted Subsidiary if such designation would not cause a Default. For
purposes of making such determination, all outstanding Investments by the
Company and its Restricted Subsidiaries (except to the extent repaid in cash) in
the Subsidiary so designated will be deemed to be Restricted Payments at the
time of such designations and will reduce the amount available for Restricted
Payments under the first paragraph of this covenant. All such outstanding
Investments will be deemed to constitute Investments in an amount equal to the
fair market value of such Investments at the time of such designation. Such
designation will only be permitted if such Restricted Payment would be permitted
at such time and if such Restricted Subsidiary otherwise meets the definition of
an Unrestricted Subsidiary.
The amount of all Restricted Payments (other than cash) shall be the fair
market value (evidenced by a resolution of the Board of Directors or a committee
of the Board of Directors having at least one Independent director 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
Restricted 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 the covenant "-- Restricted Payments" were computed, which
calculations may be based upon the Company's latest available financial
statements.
The Indenture provides that the Merger (including the payment of the Merger
consideration) does not constitute a Restricted Payment under the Indenture.
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 Indebtedness) 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 (x) the Company and the Guarantors may
incur Indebtedness (including Acquired Indebtedness) and (y) the Company may
issue shares of Disqualified Stock, in each case if the Fixed Charge Coverage
Ratio for the Company's most recently ended four full fiscal quarters 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 1.0, 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.
The foregoing provisions will not apply to:
(i) the incurrence by the Company of Indebtedness under the New Senior
Credit Facilities (and guarantees thereof by the Guarantors) 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) $600.0 million and (y) the sum of 80% of Eligible Receivable
and 65% of Eligible Inventory, less, in the case of each of clause (x) and
clause (y), the aggregate amount of all Net Proceeds of Asset Sales applied
to permanently reduce the commitments with respect to such Indebtedness
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 Guarantees;
66
<PAGE> 74
(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 Restricted Subsidiary, in an aggregate principal amount not
to exceed $15.0 million at any time outstanding;
(iv) the incurrence by the Company or any of its Subsidiaries of
Permitted Refinancing Indebtedness in exchange for, or the net proceeds of
which are used to extend, refinance, renew, replace, defease or refund,
Existing Indebtedness or Indebtedness that was permitted by the Indenture
to be incurred (other than any such Indebtedness incurred pursuant to
clause (i), (iii), (v), (vi), (vii) (viii) or (xiii) of this paragraph);
(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); provided, however, that
(i) if the Company is the obligor on such Indebtedness, such Indebtedness
is expressly subordinate to the payment in full of all Obligations with
respect to the Notes and (ii)(A) 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 (B) 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 or any Subsidiary of Hedging
Obligations that are incurred for the purpose of fixing or hedging interest
rate risk that is permitted by the terms of the Indenture to be incurred;
(vii) the incurrence by the Company of Hedging Obligations under
commodity hedging and currency exchange agreements; provided that, such
agreements were entered into in the ordinary course of business for the
purpose of limiting risks that arise in the ordinary course of business;
(viii) the incurrence of Indebtedness of a Guarantor represented by
guarantees of Indebtedness of the Company that has been incurred in
accordance with the terms of the Indenture;
(ix) the incurrence of Indebtedness by the Company and its
Subsidiaries solely in respect of performance bonds, workers' compensation
claims, payment obligations in connection with self-insurance and other
similar requirements (to the extent that such incurrence does not result in
the incurrence of any obligation to repay any obligation relating to
borrowed money of others) in the ordinary course of business in accordance
with customary industry practices, in amounts and for the purpose customary
in the Company's industry;
(x) Existing Indebtedness;
(xi) the incurrence of Indebtedness arising from agreements providing
for indemnification, adjustment of purchase price or similar obligations,
or from guarantees or letters of credit, surety bonds or performance bonds
securing any such obligations of the Company or any such Subsidiary
pursuant to such agreements, in each case incurred in connection with the
disposition of any business, assets or Subsidiary of the Company, other
than Guarantees of Indebtedness incurred by any Person acquiring all or any
portion of such business, assets or Subsidiary for the purpose of financing
such acquisition, provided that none of the foregoing results in
Indebtedness required to be reflected as indebtedness on the balance sheet
of the Company or any such Subsidiary in accordance with GAAP and the
maximum aggregate liability in respect of all such Indebtedness shall at no
time exceed 100% of the gross proceeds actually received by the Company and
its Subsidiaries in connection with such disposition;
67
<PAGE> 75
(xii) the incurrence of Indebtedness by a Receivables Subsidiary that
is not recourse to the Company or to any other Subsidiary of the Company
(other than Standard Securitization Undertakings) incurred in connection
with a Qualified Receivables Transaction;
(xiii) the incurrence by the Company 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 $20.0 million; and
(xiv) the incurrence by the Company's Unrestricted Subsidiaries of
Non-Recourse Debt, provided, however, that if any such Indebtedness ceases
to be Non-Recourse Debt of an Unrestricted Subsidiary, such event shall be
deemed to constitute an incurrence of Indebtedness by a Restricted
Subsidiary of the Company that was not permitted by this clause (xiv).
Liens
The Indenture provides that the Company will not, and will not permit any
of its Restricted Subsidiaries to, directly or indirectly, create, incur, assume
or suffer to exist any Lien securing Indebtedness on any asset 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 Guarantee, the Lien securing such Indebtedness
shall be subordinate and junior to the Lien securing the Notes and the
Guarantees with the same relative priority as such subordinate or junior
Indebtedness shall have with respect to the Notes and the Guarantees.
Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries
The Indenture provides that the Company will not, and will not permit any
of its Restricted Subsidiaries to, directly or indirectly, create or otherwise
cause or suffer to exist or become effective any encumbrance or restriction on
the ability of any Restricted Subsidiary to (i)(a) pay dividends or make any
other distributions to the Company or any of its Restricted Subsidiaries (1) on
its Capital Stock or (2) with respect to any other interest or participation in,
or measured by, its profits, or (b) pay any Indebtedness owed to the Company or
any of its Restricted Subsidiaries, (ii) make loans or advances to the Company
or any of its Restricted Subsidiaries or (iii) transfer any of its properties or
assets to the Company or any of its Restricted Subsidiaries. The foregoing shall
not apply to encumbrances or restrictions existing under or by reason of (a)
applicable law, (b) any instrument governing Indebtedness or Capital Stock of a
Person acquired by the Company or any of its Restricted 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 (iii) above
on the property so acquired, or (e) Permitted Refinancing Indebtedness, provided
that the restrictions contained in the agreements governing such Permitted
Refinancing Indebtedness 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 of a Receivables
Subsidiary, in each case, incurred in connection with a Qualified Receivables
Transaction, provided that such restrictions apply only to such Receivables
Subsidiary.
Merger, Consolidation, or Sale of Assets
The Indenture provides that the Company may not consolidate or merge with
or into (whether or not the Company is the surviving corporation), or sell,
assign, transfer, lease, convey or otherwise dispose of all or substantially all
of its properties or assets in one or more related transactions, to another
corporation, Person or entity unless (i) the Company is the surviving
corporation or the entity or the Person formed by or surviving
68
<PAGE> 76
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; (ii) the entity or Person
formed by or surviving any such consolidation or merger (if other than the
Company) or the entity or Person to which such sale, assignment, transfer,
lease, conveyance or other disposition shall have been made assumes all the
obligations of the Company under the Notes and the Indenture pursuant to a
supplemental indenture in a form reasonably satisfactory to the Trustee; (iii)
immediately after such transaction no Default or Event of Default exists; and
(iv) 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 Company or
the entity or 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 Consolidated
Net Worth immediately after the transaction equal to or greater than 95% of 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."
Transactions with Affiliates
The Indenture provides that the Company will not, and will not permit any
of its Restricted 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 Restricted Subsidiary than those that would have been obtained in a
comparable transaction by the Company or such Restricted Subsidiary with an
unrelated Person, (ii) with respect to any Affiliate Transaction or series of
related Affiliate Transactions involving aggregate consideration in excess of
$2.0 million the Company delivers to the Trustee, a resolution of the Board of
Directors 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 of the Board of
Directors and (iii) 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 Notes of such Affiliate Transaction from a financial point of
view issued by an accounting, appraisal or investment banking firm of national
standing; provided that (v) any issuance of securities, or other payments,
awards or grants in cash, securities or otherwise pursuant to, or the funding
of, employment arrangements, stock options and stock ownership plans approved by
the Board of Directors or the payment of fees and indemnities to directors of
the Company and its Restricted Subsidiaries in the ordinary course of business
and consistent with the past practice of the Company or such Restricted
Subsidiary, (w) loans or advances to employees in the ordinary course of
business, (x) transactions between or among the Company and/or its Restricted
Subsidiaries (other than a Receivables Subsidiary) or between Restricted
Subsidiaries (other than Receivables Subsidiaries), (y) Restricted Payments
(other than Investments) that are permitted by the provisions of the Indenture
described above under the caption "-- Restricted Payments," and (z) sales or
other transfers or dispositions of accounts receivable and other related assets
customarily transferred in an asset securitization transaction involving
accounts receivable to a Receivables Subsidiary in a Qualified Receivables
Transaction, in each case, shall not be deemed Affiliate Transactions.
Guarantees of Certain Indebtedness
The Indenture provides that (i) the Company will not permit any of its
Subsidiaries that is not a Guarantor to incur, guarantee or secure through the
granting of Liens the payment of any Senior Indebtedness and (ii) the Company
will not and will not permit any of its Subsidiaries to pledge any intercompany
notes representing obligations of any of its Subsidiaries, to secure the payment
of any Senior Indebtedness, in each case unless such Subsidiary, the Company and
the Trustee execute and deliver a supplemental indenture
69
<PAGE> 77
evidencing such Subsidiary's Guarantee (providing for the unconditional
guarantee by such Subsidiary, on a senior subordinated basis, of the Notes).
Limitation on Layering
The Indenture provides that (i) the Company will not incur, create, issue,
assume, guarantee or otherwise become liable for any Indebtedness that is
subordinate or junior in right of payment to any Indebtedness of the Company and
senior in any respect in right of payment to the Notes, and (ii) no Guarantor
will incur, create, issue, assume, guarantee or otherwise become liable for any
Indebtedness of such Guarantor that is subordinate or junior in right of payment
to any Indebtedness of such Guarantor and senior in any respect in right of
payment to the Guarantee of such Guarantor.
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 Commission, so long as any Notes are outstanding, the Company
will furnish to Holders of Notes (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 under the Exchange Act if the Company were
required to file such Forms, including a "Management's Discussion and Analysis
of Financial Condition and Results of Operations" that describes the financial
condition and results of operations of the Company and its consolidated
Subsidiaries (showing in reasonable detail, either on the face of the financial
statements or in the footnotes thereto and in Management's Discussion and
Analysis of Financial Condition and Results of Operations, the financial
condition and results of operations of the Company and its Restricted
Subsidiaries separate from the financial condition and results of operation of
the Unrestricted Subsidiaries of the Company) and, with respect to the annual
information only, a report thereon by the Company's certified independent
accountants and (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. In
addition, whether or not required by the rules and regulations of the
Commission, the Company will file a copy of all such information and reports
with the Commission for public availability and make such information available
to securities analysts and prospective investors upon request. In addition, the
Company and the Guarantors have agreed that, for so long as any Notes remain
outstanding, they will 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.
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 (whether or not prohibited by the
subordination provisions of the Indenture); (ii) default in payment when due of
the principal of or premium, if any, on the Notes (whether or not prohibited by
the subordination provisions of the Indenture); (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," "--Restricted Payments," "-- Incurrence of Indebtedness
and Issuance of Preferred Stock" or "Special Redemption"; (iv) failure by the
Company for 60 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
Restricted Subsidiaries (or the payment of which is guaranteed by the
70
<PAGE> 78
Company or any of its Restricted 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 or (b) results in the
acceleration of such Indebtedness prior to its maturity and, in each case, the
principal amount of which Indebtedness, together with the principal amount of
any other such Indebtedness described in clauses (a) and (b) above, aggregates
$10.0 million or more; (vi) failure by the Company or any of its Subsidiaries to
pay final judgments aggregating in excess of $10.0 million, which judgments are
not paid, discharged or stayed for a period of 60 days; (vii) certain events of
bankruptcy or insolvency with respect to the Company or any of its Significant
Subsidiaries; or (viii) the 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 Guarantee (other than by
reason of a release of such Guarantor from its 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; provided, however, that
if any Senior Indebtedness is outstanding under the New Senior Credit
Facilities, upon a declaration of acceleration, the Notes shall be payable upon
the earlier of (x) the day which is five Business Days after the provision to
the Company and the agent under the New Credit Senior Facilities of written
notice of such declaration and (y) the date of acceleration of any Indebtedness
under the New Senior Credit Facilities. Notwithstanding the foregoing, in the
case of an Event of Default arising from certain events of bankruptcy or
insolvency, with respect to the Company, any Significant Subsidiary or any group
of Subsidiaries that, taken together, would constitute a Significant Subsidiary,
all outstanding Notes will become due and payable without further action or
notice. Holders of 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 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) 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
December 15, 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 December 15, 2002, then the
premium specified in the Indenture 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 AND SHAREHOLDERS
No director, officer, employee, incorporator or shareholder 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 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
71
<PAGE> 79
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 accrued and unpaid interest and Liquidated Damages 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 Notes, cash in United States 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, premium, if any, and accrued and unpaid interest and
Liquidated Damages 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 after the
91st day following the deposit, the trust funds will not be subject to the
effect of any applicable bankruptcy, insolvency, reorganization or similar 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 with the intent of defeating,
hindering, delaying or defrauding creditors, any Guarantor of the Company or
others; 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 relating to the Legal Defeasance or the Covenant
Defeasance have been complied with.
72
<PAGE> 80
SATISFACTION AND DISCHARGE
The Indenture will be discharged and will cease to be of further effect as
to all Notes issued thereunder when (i) either (a) all such Notes theretofore
authenticated and delivered (except lost, stolen or destroyed Notes which have
been replaced or paid and Notes for which payment money has theretofore been
deposited in trust and thereafter repaid to the Company) have been delivered to
the Trustee for cancellation; or (b) all such Notes not theretofore delivered to
such Trustee for cancellation have become due and payable by reason of the
making of a notice of redemption or otherwise or will become due and payable
within one year and the Company has irrevocably deposited or caused to be
deposited with such Trustee as trust funds in trust solely for the benefit of
the Holders, cash in United States dollars, non-callable Government Securities,
or a combination thereof, in such amounts as will be sufficient without
consideration of any reinvestment of interest, to pay and discharge the entire
indebtedness on such Notes not theretofore delivered to the Trustee for
cancellation for principal, premium, if any, and accrued interest to the date of
maturity or redemption; (ii) no Default or Event of Default with respect to the
Indenture or the Notes shall have occurred and be continuing on the date of such
deposit or shall occur as a result of such deposit and such deposit will not
result in a breach or violation of, or constitute a default under, any other
instrument to which the Company is a party or by which the Company is bound;
(iii) the Company has paid or caused to be paid all sums payable by it under
such Indenture; and (iv) the Company has delivered irrevocable instructions to
the Trustee under such Indenture to apply the deposited money toward the payment
of such Notes at maturity or the redemption date, as the case may be. In
addition, the Company must deliver an Officers' Certificate and an opinion of
counsel to the Trustee stating that all conditions precedent to satisfaction and
discharge have been satisfied.
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 aggregate 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 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 aggregate
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, supplement 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 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 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 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 Guarantee or
the Indenture, except in accordance with the terms of the Indenture, (ix) make
any change to the provisions of the Indenture described under "Special
Redemption" above, or (x) make any change in the foregoing amendment and waiver
provisions. In addition, any amendment to the provisions of Article 10 of the
Indenture (which relate to subordination) or the related definitions will
require the consent of the Holders of at least 75% in aggregate principal amount
of the Notes then outstanding if such amendment would adversely affect the
rights of Holders of Notes.
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
73
<PAGE> 81
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 location 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 aggregate 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),
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 of a prudent man 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.
BOOK-ENTRY, DELIVERY AND FORM
The Series A Notes were offered and sold (i) to qualified institutional
buyers in reliance on Rule 144A under the Securities Act ("Rule 144A Notes"),
(ii) to institutional "accredited investors" as defined in Rule 501(a)(1), (2),
(3) or (7) under the Securities Act ("Accredited Investor Notes") and (iii) in
offshore transactions in reliance on Regulation S under the Securities Act
("Regulation S Notes") and in each case are represented by a separate note in
registered, global form (collectively, the "Series A Global Notes").
The Series B Notes will initially be issued in the form of one global
certificate (the "Series B Global Note" and collectively with the Series A
Global Notes, the "Global Notes"). The Series B Global Note will be deposited on
the date of the consummation of the Exchange Offer (the "Exchange Offer Closing
Date") with or on behalf of DTC and registered in the name of DTC or its
nominee.
The Company understands that DTC is a limited purpose trust company
organized under the laws of the State of New York, a "banking organization"
within the meaning of New York Banking Law, a member of the Federal Reserve
System, a "clearing corporation" within the meaning of the Uniform Commercial
Code, and a "Clearing Agency" registered pursuant to the provisions of Section
17A of the Exchange Act. DTC was created to hold securities for its participants
and facilitate the clearance and settlement of securities transactions between
participants through electronic book-entry changes in accounts of its
participants, thereby eliminating the need for physical movement of
certificates. Participants include securities brokers and dealers, banks, trust
companies, and clearing corporations and may include certain other
organizations. Indirect access to the DTC system is available to others such as
banks, brokers, dealers, and trust companies that clear through or maintain a
custodial relationship with a participant, either directly or indirectly
("indirect participants").
So long as DTC, or its nominee, is the registered owner or holder of the
Series B Global Note, DTC or such nominee, as the case may be, will be
considered the sole owner or holder of the Notes represented by such Series B
Global Note for all purposes under the Indenture. The Company understands that
pursuant to procedures established by DTC (i) upon deposit of the Series B
Global Note in amounts proportionate to the respective beneficial interests in
the principal amount of the Series B Global Note and (ii) ownership of the
Series B Notes evidenced by the Series B Global Note will be shown on, and the
transfer of ownership thereof will be effected only through, records maintained
by DTC (with respect to the interests of DTC's
74
<PAGE> 82
participants), DTC's participants and DTC's indirect participants. No beneficial
owner of an interest in the Series B Global Note will be able to transfer that
interest except in accordance with DTC's applicable procedures, in addition to
those provided for under the Indenture.
Payments made with respect to the Series B Global Note will be made to DTC
or its nominee, as the case may be, as the registered owner thereof. The Company
will have no responsibility or liability for any aspect of the records relating
to or payments made on account of beneficial ownership interests in the Series B
Global Note or for maintaining, supervising, or reviewing any records relating
to such beneficial ownership interests.
The Company expects that DTC or its nominee, upon receipt of any payments
made with respect to the Series B Global Note, will credit participants'
accounts with payments in amounts proportionate to their respective beneficial
interests in the amount of such Series B Global Note as shown on the records of
DTC or its nominee. The Company also expects that payments by participants to
owners of beneficial interests in such Series B Global Note held through such
participants will be governed by standing instructions and customary practices,
as is now the case with securities held for the accounts of customers registered
in the names of nominees for such customers. Such payments will be the
responsibility of such participants.
Transfers between participants in DTC will be effected in the ordinary way
in accordance with DTC rules and will be settled in same-day funds.
Although DTC is expected to follow the foregoing procedures in order to
facilitate transfers of interests in the Series B Global Note among participants
of DTC, it is under no obligation to perform or continue to perform such
procedures, and such procedures may be discontinued at any time. The Company
will have no responsibility for the performance by DTC or its respective
participants or indirect participants of its respective obligations under the
rules and procedures governing their operations.
CERTIFICATED NOTES
Subject to certain conditions contained in the Indenture, any person having
a beneficial interest in the Global Notes may, upon request to the Trustee,
exchange such beneficial interest for Series B Notes in registered certificated
form ("Certificated Notes"). Upon any such issuance, the Trustee is required to
register such Certificated Notes in the name of, and cause the same to be
delivered to, such person or persons (or the nominee of any thereof). In
addition, if (i) the Company notifies the Trustee in writing that DTC is no
longer willing or able to act as a depositary and the Company is unable to
locate a qualified successor within 90 days or (ii) the Company, at its option,
notifies the Trustee in writing that it elects to cause the issuance of Series B
Notes in the form of Certificated Notes under the Indenture, then, upon
surrender by the Global Note Holder of the Global Notes, Series B Notes in such
form will be issued to each person that the Global Note Holder and the DTC
identify as being the beneficial owner of the related Series A Notes.
Neither the Company nor the Trustee will be liable for any delay by the
Global Note Holder or the DTC in identifying the beneficial owners of the 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 DTC for all
purposes.
SAME DAY SETTLEMENT AND PAYMENT
The Indenture requires that payments in respect of the Notes represented by
the Global Notes (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 Notes in
certificated form, 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. The Notes represented by the Global Notes are expected to trade in the
DTC's Same-Day Funds Settlement System and any permitted secondary market
trading activity in such Notes will, therefore, be required by the DTC to be
settled in immediately available funds. The Company expects that secondary
trading in any certificated Notes will also be settled in immediately available
funds.
75
<PAGE> 83
Because of time zone differences, the securities account of a Euroclear
System ("Euroclear") or Cedel Bank societe anonyme ("Cedel") participant
purchasing an interest in a Global Note from a Participant in DTC will be
credited, and any such crediting will be reported to the relevant Euroclear or
Cedel participant, during the securities settlement processing day (which must
be a business day for Euroclear and Cedel) immediately following the settlement
date of DTC. DTC has advised the Company that cash received in Euroclear or
Cedel as a result of sales of interests in a Global Note by or through a
Euroclear or Cedel participant to a Participant in DTC will be received with
value on the settlement date of DTC but will be available in the relevant
Euroclear or Cedel cash account only as of the business day for Euroclear or
Cedel following DTC's settlement date.
REGISTRATION RIGHTS; LIQUIDATED DAMAGES
The Holders of the Series B Notes are not entitled to any registration
rights with respect to the Series B Notes. The Company, the Guarantors, and the
Initial Purchasers have entered into the Registration Rights Agreement dated as
of December 18, 1997. Pursuant to the Registration Rights Agreement, the Company
agreed to file with the Commission the Exchange Offer Registration Statement on
the appropriate form under the Securities Act with respect to the Series B
Notes. The Registration Statement of which this Prospectus forms a part
constitutes the Exchange Offer Registration Statement. Upon the effectiveness of
the Exchange Offer Registration Statement, the Company will offer to the Holders
of Transfer Restricted Securities pursuant to the Exchange Offer who are able to
make certain representations the opportunity to exchange their Transfer
Restricted Securities for Series B Notes. If (i) the Company and the Guarantors
are not required to file the Exchange Offer Registration Statement or permitted
to consummate the Exchange Offer because the Exchange Offer is not permitted by
applicable law or Commission policy or (ii) any Holder of Transfer Restricted
Securities notifies the Company within the specified time period that (a) it is
prohibited by law or Commission policy from participating in the Exchange Offer,
or (b) that it may not resell the Series B Notes acquired by it in the Exchange
Offer to the public without delivering a prospectus and the prospectus contained
in the Exchange Offer Registration Statement is not appropriate or available for
such resales, or (c) that it is a broker-dealer and owns Series A Notes acquired
directly from the Company or an affiliate of the Company, the Company and the
Guarantors will file with the Commission a Shelf Registration Statement to cover
resales of the Series A Notes by the Holders thereof who satisfy certain
conditions relating to the provision of information in connection with the Shelf
Registration Statement. The Company will use its best efforts (x) to cause the
applicable registration statement to be declared effective as promptly as
possible by the Commission and (y) to keep such Shelf Registration Statement
effective for up to one year after the Closing Date or such shorter period
ending when all of the Notes have been sold thereunder. For purposes of the
foregoing, "Transfer Restricted Securities" means each Series A Note until (i)
the date on which such Note has been exchanged by a person other than a
broker-dealer for a Series A Note in the Exchange Offer, (ii) following the
exchange by a broker-dealer in the Exchange Offer of a Series A Note for a
Series B Note, the date on which such Series B Note is sold to a purchaser who
receives from such broker-dealer on or prior to the date of such sale a copy of
the prospectus contained in the Exchange Offer Registration Statement, (iii) the
date on which such Series A Note has been effectively registered under the
Securities Act and disposed of in accordance with the Shelf Registration
Statement or (iv) the date on which such Series A Note is distributed to the
public pursuant to Rule 144 under the Securities Act.
The Registration Rights Agreement provides that (i) the Company will file
an Exchange Offer Registration Statement with the Commission on or prior to 60
days after December 18, 1997, (ii) the Company will use its best efforts to have
the Exchange Offer Registration Statement declared effective by the Commission
on or prior to 105 days after December 18, 1997, (iii) unless the Exchange Offer
would not be permitted by applicable law or Commission policy, the Company will
commence the Exchange Offer and use its best efforts to issue on or prior to 30
business days after the date on which the Exchange Offer Registration Statement
was declared effective by the Commission, Series B Notes in exchange for all
Series A Notes tendered prior thereto in the Exchange Offer, and (iv) if
obligated to file the Shelf Registration Statement, the Company will use its
best efforts to file the Shelf Registration Statement with the Commission on or
prior to 45 days after such filing obligation arises and to cause the Shelf
Registration Statement to be declared effective by the Commission on or prior to
105 days after such obligation arises. If (a) the Company fails to
76
<PAGE> 84
file any of the Registration Statements required by the Registration Rights
Agreement on or before the date specified for such filing, (b) any of such
Registration Statements is not declared effective by the Commission on or prior
to the date specified for such effectiveness (the "Effectiveness Date"), or (c)
the Company fails to Consummate the Exchange Offer within 30 business days of
the Effectiveness Target Date with respect to the Exchange Offer Registration
Statement, or (d) the Shelf Registration Statement or the Exchange Offer
Registration Statement is declared effective but thereafter ceases to be
effective or usable in connection with resales of Transfer Restricted Securities
during the periods specified in the Registration Rights Agreement (each such
event referred to in clauses (a) through (d) above a "Registration Default"),
then the Company will pay Liquidated Damages to each Holder of Notes, 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 Notes held by such Holder. The amount of the Liquidated Damages will
increase by an additional $.05 per week per $1,000 principal amount of Notes
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 Notes. All accrued Liquidated Damages will be
paid by the Company on each Damages Payment Date to the Global Note Holder by
wire transfer of immediately available funds or by federal funds check and to
Holders of Certificated Notes by wire transfer to the accounts specified by them
or by mailing checks to their registered addresses if no such accounts have been
specified. Following the cure of all Registration Defaults, the accrual of
Liquidated Damages will cease.
Holders of Series A Notes will be required to make certain representations
to the Company (as described in the Registration Rights Agreement) in order to
participate in the Exchange Offer and will be required to deliver information to
be used in connection with the Shelf Registration Statement and to provide
comments on the Shelf Registration Statement within the time periods set forth
in the Registration Rights Agreement in order to have their Series A Notes
included in the Shelf Registration Statement and benefit from the provisions
regarding Liquidated Damages set forth above.
The summary herein of certain provisions of the Registration Rights
Agreement does not purport to be complete and is subject to, and is qualified in
its entirety by, reference to all the provisions of the Registration Rights
Agreement, a copy of which is filed as an exhibit to the Registration Statement
of which this Prospectus constitutes a part.
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 Indebtedness" 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 Restricted Subsidiary of such specified Person
that was not incurred in connection with, or in contemplation of, such other
Person merging with or into or becoming a Restricted 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,
beneficial ownership of 10% or more of the voting securities of a Person shall
be deemed to be control, except with respect to the definition of "Related
Party" below.
"Asset Sale" means the sale, lease, conveyance or other disposition of any
assets (including; without limitation, by way of a sale and leaseback) whether
in a single transaction or a series of related transactions that (a) have a fair
market value in excess of $1,000,000 or (b) net proceeds in excess of
$1,000,000; provided that, the sale, lease, conveyance or other disposition of
all or substantially all of the assets of the Company and
77
<PAGE> 85
its Restricted Subsidiaries taken as a whole will be governed by the provisions
of the Indenture described above under the caption "-- Repurchase at the Option
of Holders -- Change of Control" and/or the provisions described above under the
caption "-- Certain Covenants -- Merger, Consolidation or Sale of Assets" and
shall not be deemed to be "Asset Sales." Notwithstanding the foregoing, the
following transactions shall not constitute Asset Sales: (i) the conveyance,
sale, transfer, assignment or other disposition of inventory and other property
in the ordinary course of business; (ii) the sale or disposition of damaged,
worn out or other obsolete personal property in the ordinary course of business
so long as such property is no longer necessary for the proper conduct of the
business of the Company or such Restricted Subsidiary, as applicable; (iii) the
surrender or waiver of contract rights or the settlement, release or surrender
of contract, tort or other claims of any kind; (iv) the granting of Liens not
prohibited by the Indenture; (v) sales of accounts receivable and related assets
customarily transferred in an asset securitization transaction involving
accounts receivable to a Receivables Subsidiary or by a Receivables Subsidiary
in connection with a Qualified Receivables Transaction; (vi) a transfer of
assets by the Company to a Wholly Owned Restricted Subsidiary (other than a
Receivables Subsidiary) or by a Wholly Owned Restricted Subsidiary (other than a
Receivables Subsidiary) to the Company or to another Wholly Owned Restricted
Subsidiary (other than a Receivables Subsidiary); (vii) an issuance of Equity
Interests by a Wholly Owned Restricted Subsidiary (other than a Receivables
Subsidiary) to the Company or to another Wholly Owned Subsidiary (other than a
Receivables Subsidiary); (viii) a Restricted Payment that is permitted by the
covenant described above under the caption "-- Restricted Payments;" and (ix)
the execution of contracts to provide manufacturing consideration and other
services, including in connection with Asset Sales.
"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 having maturities of not more than 12
months from the date of acquisition, (iii) United States dollar or Canadian
dollar denominated (or foreign currency fully hedged) time deposits,
certificates of deposit, Eurodollar time deposits or Eurodollar certificates of
deposit of (a) any domestic commercial bank of recognized standing having
capital and surplus in excess of $500 million or (b) any bank whose short term
commercial paper rating from Standard & Poor's is at least A-1 or the equivalent
thereof or from Moody's is at least P-1 or the equivalent thereof (any such bank
being an "Approved Lender"), in each case with maturities of not more than 12
months from the date of acquisition; and (iv) commercial paper issued by any
Approved Lender (or by the parent company thereof) or any variable rate notes
issued by, or guaranteed by, any domestic corporation rated A-2 (or the
equivalent thereof) or better by Standard & Poor's or P-2 (or the equivalent
thereof) or better by Moody's and maturing within 12 months of 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 Restricted 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 or their Related Parties, (ii) the
adoption of a plan relating to the liquidation or dissolution of the Company,
(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 and their Related Parties, 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 the Company or (iv) the first day on which a majority of the members of the
Board of Directors of the Company are not Continuing Directors. The Indenture
provides that the Merger shall not constitute a Change of Control.
78
<PAGE> 86
"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 Restricted 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
Restricted 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 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 Restricted 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 Restricted 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 Restricted 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 Restricted 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 dividend to the Company by such
Restricted 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 Restricted
Subsidiary or its shareholders.
"Consolidated Net Income" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its Restricted 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
Restricted 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 Restricted
Subsidiary thereof, (ii) the Net Income of any Restricted Subsidiary shall be
excluded to the extent that the declaration or payment of dividends or similar
distributions by that Restricted 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 Restricted Subsidiary or its
shareholders, (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, (iv) the cumulative effect of a change in accounting principles
shall be excluded, and (v) the Net Income of any Unrestricted Subsidiary 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 shareholders 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 in respect of the year of such
declaration and payment, but only to the extent of any cash received by such
Person upon issuance of such preferred stock, less (x) 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 Restricted Subsidiary of such
Person, (y) all investments as of such date in unconsolidated
79
<PAGE> 87
Restricted Subsidiaries and in Persons that are not Subsidiaries (except, in
each case, Permitted Investments), and (z) 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 of the Company who (i) was a member of such Board of
Directors on the Issue Date 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.
"Designated Senior Indebtedness" means (i) so long as Senior Indebtedness
is outstanding under the New Senior Credit Facilities, all Senior Indebtedness
outstanding under the New Senior Credit Facilities and (ii) thereafter, any
other Senior Indebtedness permitted under the Indenture the principal amount of
which is $50.0 million or more and that has been designated by the Company as
"Designated Senior Indebtedness."
"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, all inventory of the Company
and any of its Subsidiaries, wherever located, valued in accordance with GAAP
and shown on the balance sheet of the Company for the quarterly period most
recently ended prior to such date for which financial statements of the Company
are available.
"Eligible Receivables" means, as of any date, all accounts receivable of
the Company and any of its Restricted Subsidiaries arising out of the sale of
inventory in the ordinary course of business, valued in accordance with GAAP and
shown on the balance sheet of the Company for the quarterly period most recently
ended prior to such date 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).
"Existing Indebtedness" means (i) Indebtedness of the Company and its
Restricted Subsidiaries in existence on the Issue Date and (ii) Indebtedness of
Fieldcrest and its Subsidiaries outstanding on the effective date of the Merger;
provided that immediately following the consummation of the Merger all
Indebtedness of Fieldcrest outstanding under its existing credit facilities
shall be refinanced with the proceeds of borrowings under the New Senior Credit
Facility and Fieldcrest's obligations under its 11.25% Senior Subordinated
Debentures shall have been satisfied and discharged in accordance with the terms
of the Indenture governing such securities.
"Fixed Charges" means, with respect to any Person for any period, the sum
of (i) the consolidated interest expense of such Person and its Restricted
Subsidiaries for such period calculated in conformity with GAAP, 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, 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 debt,
issuance costs and deferred financing fees, incurred in connection with the
Merger on or before the Issue Date) and (ii) the consolidated interest expense
of such Person and its Restricted 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 Restricted Subsidiaries or secured by a
Lien on assets of such Person or one of its Restricted 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 Restricted Subsidiary) on any series of preferred stock of
80
<PAGE> 88
such Person and its Restricted Subsidiary, 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 and its
Restricted Subsidiaries for such period to the Fixed Charges of such Person and
its Restricted Subsidiaries for such period. In the event that the Company or
any of its Restricted Subsidiaries incurs, assumes, guarantees or redeems any
Indebtedness (other than revolving credit borrowings) or issues 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 or redemption 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 Restricted 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 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 Restricted 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 Issue Date.
"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 Senior Indebtedness" means, with respect to any Guarantor, (i)
the guarantee of such Guarantor of the Company's Obligations under the New
Senior Credit Facilities and (ii) any other Indebtedness permitted to be
incurred by such Guarantor under the terms of the Indenture, unless the
instrument under which such Indebtedness is incurred expressly provides that it
is on a parity with or subordinated in right of payment to the Guarantee of such
Guarantor. Notwithstanding anything to the contrary in the foregoing, Guarantor
Senior Indebtedness will not include (u) any Indebtedness of such Guarantor
representing a guarantee of Indebtedness of the Company or any other Guarantor
which Indebtedness is subordinate or junior to, or pari passu with, the Notes or
the Guarantee of such other Guarantor, as the case may be, (v) any Indebtedness
that is expressly subordinate or junior in right of payment to any other
Indebtedness of such Guarantor, (w) any liability for federal, state, local or
other taxes owed or owing by such Guarantor, (x) any Indebtedness of such
Guarantor to any of its Subsidiaries or other Affiliates, (y) any trade payables
or (z) that portion of any Indebtedness that is incurred in violation of the
Indenture.
"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 Restricted Subsidiaries in the ordinary course of
business.
81
<PAGE> 89
"Indebtedness" means, with respect to any Person, (a) any indebtedness of
such Person, whether or not contingent, (i) in respect of borrowed money; (ii)
evidenced by bonds, notes, debentures or similar instruments; (iii) evidenced by
letters of credit (or reimbursement agreements in respect thereof) or banker's
acceptances; (iv) representing Capital Lease Obligations; (v) representing the
balance deferred and unpaid of the purchase price of any property; or (vi)
representing any net obligations under Hedging Obligations, if and only 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, and excluding therefrom any portion of
any indebtedness constituting an accrued expense or trade payable; (b) 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, (c) to the extent not
otherwise included, the guarantee by such Person of any indebtedness of any
other Person.
"Independent" means, with respect to the Company and its Subsidiaries, any
person who (i) is in fact independent, (ii) does not have any direct financial
interest or any material indirect financial interest in the Company or any of
its Subsidiaries, or in any Affiliate of the Company or any of its Subsidiaries
(other than as a result of holding securities of the Company) and (iii) is not
an officer, employee, promoter, underwriter, trustee, partner or person
performing similar functions for the Company or any of its Subsidiaries.
"Investment Assets" means assets and property of the Company and its
Restricted Subsidiaries held for investment on the effective date of the Merger
with an aggregate fair market value not exceeding $25.0 million.
"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),
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 for consideration consisting of common equity securities of the
Company shall not be deemed to be an Investment.
"Issue Date" means the date of the original issuance of Notes under the
Indenture.
"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 option
or other agreement to sell or give a security interest in and any filing of or
agreement to give any financing statement under the Uniform Commercial Code (or
equivalent statutes) of any jurisdiction, any capital lease and any other
preferential arrangement that has substantially the same practical effect as a
security interest in an 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 Restricted
Subsidiaries or the extinguishment of any Indebtedness of such Person or any of
its Restricted 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 Restricted 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), amounts
82
<PAGE> 90
required to be applied to the repayment of Indebtedness (other than Indebtedness
under the New Senior Credit Facilities) secured by a Lien on the asset or assets
that were the subject of such Asset Sale, and any reserve for adjustment in
respect of the sale price of such asset or assets established in accordance with
GAAP.
"New Senior Credit Facilities" means the credit agreements entered into by
and among the Company, NationsBanc Montgomery Securities, Inc., as arranger and
syndication agent, certain lending parties thereto and NationsBank of Texas,
N.A., as agent, including any related notes, guarantees, collateral documents,
instruments and agreements executed in connection therewith, as such credit
agreements and/or related documents may be amended, restated, supplemented,
renewed, replaced or otherwise modified from time to time whether or not with
the same agent, trustee, representative lenders or holders, and, subject to the
proviso to the next succeeding sentence, irrespective of any changes in the
terms and conditions thereof. Without limiting the generality of the foregoing,
the term "New Senior Credit Facilities" shall include any amendment, amendment
and restatement, renewal, extension, restructuring, supplement or modification
to any New Senior Credit Facilities and all refundings, refinancings and
replacements of any New Senior Credit Facilities, including any agreement (i)
extending the maturity of any Indebtedness incurred thereunder or contemplated
thereby, (ii) adding or deleting borrowers or guarantors thereunder, so long as
borrowers and issuers include one or more of the Company and its Subsidiaries
and their respective successors and assigns, or (iii) increasing the amount of
Indebtedness incurred thereunder or available to be borrowed thereunder.
"Non-Recourse Debt" means Indebtedness (i) as to which neither the Company
nor any of its Restricted Subsidiaries (a) provides credit support of any kind
(including any undertaking, agreement or instrument that would constitute
Indebtedness), (b) is directly or indirectly liable (as a guarantor or
otherwise), or (c) constitutes the lender; and (ii) no default with respect to
which (including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness (other than
the Notes being offered hereby) of the Company or any of its Restricted
Subsidiaries to declare a default on such other Indebtedness or cause the
payment thereof to be accelerated or payable prior to its stated maturity; and
(iii) as to which the lenders have been notified in the documents governing such
Indebtedness that they will not have any recourse to the stock or assets of the
Company or any of its Restricted Subsidiaries.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Pari Passu Indebtedness" means Indebtedness ranking pari passu in right of
payment with the Notes.
"Permitted Investment" means (i) Investments by the Company or any
Guarantor in any person that is or immediately after such Investment becomes a
Guarantor, or immediately after such Investment merges or consolidates into the
Company or any Guarantor in compliance with the terms of the Indenture, provided
that such Person is engaged in all material respects in Related Business; (ii)
Investments in the Company by any Guarantor; provided that in the case of
Indebtedness constituting any such Investment, such Indebtedness shall be
unsecured and subordinated in all respects to the Company's obligations under
the Notes; (iii) Hedging Obligations entered into in the ordinary course of the
Company's or its Subsidiaries' businesses and otherwise in compliance with the
Indenture; (iv) Investments in securities of trade creditors or customers
received in settlement of obligations that arose in the ordinary course of
business or pursuant to any plan of reorganization or similar arrangement upon
the bankruptcy or insolvency of such trade creditors or customers; (v)
Investments made by the Company or any of its Subsidiaries as a result of
non-cash consideration received in connection with an Asset Sale made in
compliance with the covenant described above under the caption "-- Repurchase at
the Option of Holders -- Asset Sales;" (vi) any Investment by the Company or a
Subsidiary of the Company in a Receivables Subsidiary or any Investment by a
Receivables Subsidiary in any other person or assets in connection with a
Qualified Receivables Transaction; provided, that the foregoing 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; (vii)
Investments by the Company outstanding on the Issue Date; (viii) acquisitions by
the Company of
83
<PAGE> 91
assets, Equity Interests or other securities for consideration consisting solely
of Capital Stock (other than Disqualified Stock) of the Company; and (ix)
Investments in Cash Equivalents or money market funds which invest solely in
Cash Equivalents.
"Permitted Lien" means (i) Liens existing on the Issue Date; (ii) Liens
securing Senior Indebtedness and Liens on assets of Restricted Subsidiaries
securing Guarantor Senior Indebtedness permitted to be incurred under the
Indenture; (iii) Liens securing Permitted Refinancing Indebtedness which is
incurred to refinance any Indebtedness which has been secured by a Lien
permitted under the Indenture and which has been incurred in accordance with the
provisions of the Indenture, provided, however, that such Liens (a) are not
materially less favorable to the Holders and are not materially more favorable
to the lienholders with respect to such Liens than the Liens in respect of the
Indebtedness being refinanced and (b) do not extend to or cover any property or
assets of the Company or any of its Restricted Subsidiaries not securing the
Indebtedness so refinanced; (iv) Liens securing the Notes; (v) Liens securing
Indebtedness of a Person existing at the time such Person becomes a Subsidiary,
provided that such liens were in existence prior to the contemplation of such
acquisition, merger or consolidation, were not incurred in anticipation thereof,
and do not extend to any other assets; (vi) Liens arising from Indebtedness
permitted to be incurred under clause (iii) of the covenant "Limitation on
Incurrence of Additional Indebtedness and Issuance of Preferred Stock," provided
such Liens relate solely to the property, plant or equipment which is purchased,
constructed or improved pursuant to such financing; (vii) Liens imposed by
governmental authorities for taxes, assessments or other charges or claims
either (a) not delinquent or (b) contested in good faith by appropriate
proceedings and as to which the Company or any of its Subsidiaries shall have
set aside on its books such reserves as may be required pursuant to GAAP; (viii)
statutory Liens of landlords, carriers, warehousemen, mechanics, suppliers,
materialmen, repairmen and other like Liens arising by operation of law in the
ordinary course of business for sums not yet delinquent or being contested in
good faith, if such reserves or other appropriate provisions, if any, as shall
be required by GAAP shall have been made in respect thereof; (ix) Liens incurred
or deposits made in the ordinary course of business in connection with workers'
compensation, unemployment insurance and other types of social security or
similar obligations, including any Lien securing letters of credit issued in the
ordinary course of business in connection therewith, or to secure the
performance of tenders, statutory obligations, surety and appeal bonds, bids,
leases, government contracts, performance and return-of-money bonds and other
similar obligations (exclusive of obligations for the payment of borrowed money)
incurred in the ordinary course of business; (x) judgment Liens not giving rise
to an Event of Default so long as such Lien is adequately bonded and any
appropriate legal proceedings which may have been duly initiated for the review
of such judgment shall not have been finally terminated or the period within
which such proceedings may be initiated shall not have expired; (xi) easements,
rights-of-way, zoning restrictions, minor defects or irregularities with title
and other similar charges or encumbrances in respect of real property not
materially detracting from the value of the property subject thereto and not
interfering in any material respect with the ordinary conduct of business of the
Company or any of its Subsidiaries; (xii) Liens upon specific items of inventory
or other goods and proceeds of any person securing such person's obligations in
respect of banker's acceptances issued or created for the account of such person
to facilitate the purchase, shipment or storage of such inventory or other goods
in the ordinary course of business; (xiii) Liens in favor of the Company or a
Guarantor; (xiv) leases or subleases granted to others not interfering in any
material respect with the business of the Company or its Subsidiaries; (xv)
Liens arising out of consignment or similar arrangements for the sale of goods
entered into by the Company or any of its Subsidiaries in the ordinary course of
business; and (xvi) Liens on assets of a Receivables Subsidiary securing
Indebtedness incurred in connection with a Qualified Receivables Transaction.
"Permitted Refinancing Indebtedness" means any Indebtedness of the Company
or any of its Restricted 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 Restricted Subsidiaries;
provided that: (i) the aggregate principal amount (or accreted value, if
applicable) of such Permitted Refinancing Indebtedness does not exceed the
aggregate 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 Indebtedness has a final maturity date later than the
final maturity date of, and has a Weighted Average Life to Maturity equal to or
84
<PAGE> 92
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
Indebtedness 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 Restricted Subsidiary that is the obliger on the Indebtedness
being extended, refinanced, renewed, replaced, defeased or refunded.
"Principals" means Charles M. Hansen, Jr., his spouse and any of his lineal
descendants.
"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 pursuant
to which the Company or any Subsidiary may sell, convey or otherwise transfer to
(i) a Receivables Subsidiary (in the case of a transfer by the Company or any
Subsidiary) and (ii) 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 Restricted Subsidiary of the
Company (other than a Subsidiary Guarantor) which engages in no activities other
than in connection with the financing or sale of accounts receivable and which
is designated by the Board of Directors of the Company (as provided below) as a
Receivables Subsidiary (i) no portion of any Indebtedness or any other
Obligations (contingent or otherwise) of which (a) is guaranteed by the Company
or any other Restricted Subsidiary of the Company (excluding guarantees of
obligations (other than the principal of and interest on, Indebtedness) pursuant
to Standard Securitization Undertakings), (b) is recourse to or obligates the
Company or any other Restricted Subsidiary of the Company in any way other than
pursuant to Standard Securitization Undertakings, or (c) 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, (ii) with which neither the
Company nor any other Restricted 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 Restricted 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 (iii) to which
neither the Company nor any of its other Restricted Subsidiaries 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
the 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 that such designation complied with the foregoing
conditions.
"Related Business" means the business conducted (or proposed to be
conducted) by the Company and its Subsidiaries as of the Issue Date and any and
all businesses that in the good faith judgment of the Board of Directors of the
Company are materially related businesses.
85
<PAGE> 93
"Related Party" with respect to any Principal means any trust, corporation,
partnership or other entity, the beneficiaries, shareholders, partners, owners,
or Persons beneficially holding a 50% or more controlling interest of which
consist of such Principal.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Subsidiary" means each Subsidiary of the Company that is not
designated as an Unrestricted Subsidiary in accordance with the provisions of
the Indenture.
"Senior Indebtedness" means (i) Indebtedness under the New Senior Credit
Facilities (including interest in respect thereof accruing after the
commencement of any bankruptcy or similar proceeding to the extent that such
interest is allowable as a bankruptcy claim in such proceeding) and (ii) any
other Indebtedness permitted to be incurred by the Company under the terms of
the Indenture, unless the instrument under which such Indebtedness is incurred
expressly provides that it is on a parity with or subordinated in right of
payment to the Notes. Notwithstanding anything to the contrary in the foregoing,
Senior Indebtedness will not include (v) any Indebtedness that is expressly
subordinate or junior in right of payment to any other Indebtedness of the
Company, (w) any liability for federal, state, local or other taxes owed or
owing by the Company (x) any Indebtedness of the Company to any of its
Subsidiaries or other Affiliates, (y) any trade payables or (z) that portion of
Indebtedness that is incurred in violation of the Indenture.
"Significant Subsidiary" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Act, as such Regulation is in effect on the date hereof.
"Standard Securitization Undertaking" means representations, warranties,
covenants, and indemnities entered into by the Company or any Subsidiary of the
Company that are reasonably customary in an accounts receivable transaction.
"Stated Maturity" means, with respect to any payment of interest on or
principal of any Indebtedness, the date on which such payment was scheduled to
be made in the documentation governing such Indebtedness, without regard to the
occurrence of any subsequent event or contingency.
"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 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 or of one or more
Subsidiaries of such Person (or any combination thereof).
"Unrestricted Subsidiary" means any Subsidiary that is designated by the
Board of Directors as an Unrestricted Subsidiary pursuant to a Board Resolution;
but only to the extent that such Subsidiary: (i) has no Indebtedness other than
Non-Recourse Debt; (ii) is not party to any agreement, contract, arrangement or
understanding with the Company or any Restricted Subsidiary of the Company
unless the terms of any such agreement, contract, arrangement or understanding
are no less favorable to the Company or such Restricted Subsidiary than those
that might be obtained at the time from Persons who are not Affiliates of the
Company; (iii) is a Person with respect to which neither the Company nor any of
its Restricted Subsidiaries has any direct or indirect obligations (x) to
subscribe for additional Equity Interests or (y) to maintain or preserve such
Person's financial condition or to cause such Person to achieve any specified
levels of operating results; and (iv) has not guaranteed or otherwise directly
or indirectly provided credit support for any Indebtedness of the Company or any
of its Restricted Subsidiaries. Any such designation by the Board of Directors
shall be evidenced to the Trustee by filing with the Trustee a certified copy of
the Board Resolution giving effect to such designation and an Officers'
Certificate certifying that such designation complied with the foregoing
conditions and was permitted by the covenant described above under the caption
"Certain Covenants -- Restricted Payments." If, at any time, any Unrestricted
Subsidiary would fail to meet the foregoing requirements as an Unrestricted
Subsidiary, it shall thereafter cease to be an Unrestricted Subsidiary for
86
<PAGE> 94
purposes of the Indenture and any Indebtedness of such Subsidiary shall be
deemed to be incurred by a Restricted Subsidiary of the Company as of such date
(and, if such Indebtedness is not permitted to be incurred as of such date under
the covenant described under the caption "Incurrence of Indebtedness and
Issuance of Preferred Stock," the Company shall be in default of such covenant).
The Board of Directors of the Company may at any time designate any Unrestricted
Subsidiary to be a Restricted Subsidiary; provided that such designation shall
be deemed to be an incurrence of Indebtedness by a Restricted Subsidiary of the
Company of any outstanding Indebtedness of such Unrestricted Subsidiary and such
designation shall only be permitted if (i) such Indebtedness is permitted under
the covenant described under the caption "Certain Covenants -- Incurrence of
Indebtedness and Issuance of Preferred Stock," calculated on a pro forma basis
as if such designation had occurred at the beginning of the four-quarter
reference period, and (ii) no Default or Event of Default would be in existence
following such designation.
"Voting Stock" means, with respect to any Person as of any date, 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 and one or
more Wholly Owned Subsidiaries of such Person.
POST-MERGER INDEBTEDNESS
INTRODUCTION
Principal indebtedness of the Company currently outstanding following the
Merger is described briefly below.
NEW SENIOR CREDIT FACILITIES
The agreement with respect to the New Senior Credit Facilities (the "New
Senior Credit Facilities Agreement") provides for, on the terms and subject to
the conditions set forth therein, (i) the Revolver (including $55.0 million for
standby and commercial letters of credit and up to $25.0 million for swing line
loans) and (ii) the Term Loan. The Term Loan consists of a $125.0 million
Tranche A Term Loan and a $125.0 million Tranche B Term Loan. The Revolver will
terminate on December 31, 2003. The Tranche A Term Loan and the Tranche B Term
Loan will begin scheduled quarterly amortization of principal in arrears
commencing in 1999 and 1998, respectively, with final maturities on December 31,
2003 and December 31, 2004, respectively. Pillowtex drew fully on the Term Loan
at the closing of the New Senior Credit Facilities and drew a portion of the
Revolver contemporaneously with the consummation of the Merger. The Company will
initially pay quarterly a commitment fee of 50 basis points per annum calculated
on the unused portion of the Revolver. The commitment fee could, however, be
reduced during future periods depending upon the ratio of the Company's
consolidated indebtedness to EBITDA (as defined in the definitive documents with
respect to the New Senior Credit Facilities).
The Revolver and the Tranche A Term Loan bear interest, at the option of
the Company, at a rate per annum equal to either (i) the LIBOR interbank rate,
adjusted for reserves, plus a margin of up to 225 basis points or (ii) the "Base
Rate" (which is the higher of (a) the prime rate then in effect and published by
NationsBank of Texas, N.A. and (b) the Federal Funds rate plus 0.5%), plus a
margin of up to 75 basis points, subject to adjustments in accordance with the
terms of the New Senior Credit Facilities Commitment.
87
<PAGE> 95
The specific margin in any particular case will depend upon the ratio of the
Company's consolidated indebtedness to EBITDA, as calculated based upon the
Company's quarterly financial statements. The Tranche B Term Loan bears interest
on a similar basis, plus an additional margin of 50 basis points, but will not
bear interest at a rate less than LIBOR plus 200 basis points or the Base Rate
plus 50 basis points. The initial interest rates will not be less than (i) the
LIBOR interbank rate plus 200 basis points or the Base Rate plus 50 basis points
for the Revolver and the Tranche A Term Loan and (ii) the LIBOR interbank rate
plus 250 basis points or the Base Rate plus 100 basis points for the Tranche B
Term Loan, and will not be subject to any change until the receipt of the
Company's March 31, 1998 financial statements.
The Revolver and the Term Loan are guaranteed by each of the domestic
subsidiaries of the Company, including Fieldcrest and its domestic subsidiaries,
and are secured by first priority liens on all of the capital stock of each
domestic subsidiary of the Company, including Fieldcrest and its domestic
subsidiaries, and by 65% of the capital stock of each foreign subsidiary of the
Company and Fieldcrest. The Company also granted a first priority security
interest in all of its presently unencumbered and future domestic assets and
properties and all presently unencumbered and future domestic assets and
properties of each of its subsidiaries, including Fieldcrest and its
subsidiaries. The Term Loan is subject to mandatory prepayment from all net cash
proceeds of asset sales and debt issuances by the Company or any of its
subsidiaries, 50% of the net cash proceeds of equity issuances by the Company or
any of its subsidiaries, and 75% of Excess Cash Flow (as defined). All mandatory
prepayments will be applied pro rata between the Tranche A Term Loan and the
Tranche B Term Loan (and within each tranche pro rata) to reduce the remaining
installments of principal.
The New Senior Credit Facilities Agreement includes representations,
warranties, and covenants (including financial covenants) usual and customary
for credit facilities such as the New Senior Credit Facilities, and provides for
usual and customary events of default, including without limitation nonpayment
of principal, interest, or fees, violation of any covenant, inaccurate
representations and warranties, bankruptcy, actual or asserted invalidity of any
loan documents or security interests, change of control, and cross-default with
other material agreements and indebtedness of the Company.
10% SENIOR SUBORDINATED NOTES
The Company presently has outstanding $125.0 million aggregate principal
amount of the 10% Senior Subordinated Notes. The 10% Senior Subordinated Notes
bear interest at a rate of 10% per annum, payable semiannually in arrears on May
15 and November 15 of each year. The 10% Senior Subordinated Notes are scheduled
to mature in their entirety on November 15, 2006. The Company has the option to
redeem the 10% Senior Subordinated Notes, in whole or in part, at any time on or
after November 15, 2001, at redemption prices starting at 105% of stated
principal on November 15, 2001 and decreasing at a rate of 1.667% per year to
100% on and after November 15, 2004, plus all accrued and unpaid interest to the
redemption date. There is no mandatory redemption of the 10% Senior Subordinated
Notes except upon a Change of Control (as defined in the Indenture with respect
to the 10% Senior Subordinated Notes). Upon the occurrence of a Change of
Control, each holder of 10% Senior Subordinated Notes will have the right to
require the Company to repurchase all or any part of such holder's 10% Senior
Subordinated Notes pursuant to a Change of Control Offer (as defined in the
Indenture with respect to the 10% Senior Subordinated Notes) at a price equal to
101% of the aggregate principal amount thereof plus accrued and unpaid interest
and Liquidated Damages (as defined in the Indenture with respect to the 10%
Senior Subordinated Notes) thereon to the date of purchase.
The 10% Senior Subordinated Notes are subject to certain covenants which
restrict, among other things, the Company's ability to incur additional
indebtedness and issue preferred stock, incur liens to secure subordinated
indebtedness, pay dividends or make certain other restricted payments, apply net
proceeds from certain asset sales, enter into certain transactions with
affiliates, incur indebtedness that is subordinate in right of payment to any
senior indebtedness and senior in right of payment to the 10% Senior
Subordinated Notes, merge or consolidate with any other person, sell stock of
subsidiaries, or sell, assign, transfer, lease, convey, or otherwise dispose of
substantially all of the assets of the Company.
88
<PAGE> 96
FIELDCREST CONVERTIBLE DEBENTURES
Fieldcrest presently has outstanding $112.5 million ($118.5 million at
September 30, 1997) in aggregate principal amount of its Convertible Debentures,
of which $4.0 million is current maturities. The Fieldcrest Convertible
Debentures currently remain outstanding as debt obligations of the Company. The
Fieldcrest Convertible Debentures bear interest at the rate of 6.0% per annum,
payable on March 15 and September 15 of each year. The Fieldcrest Convertible
Debentures are convertible into the same consideration that a holder of the
number of shares of Fieldcrest Common Stock into which such Fieldcrest
Convertible Debentures might have been converted immediately prior to the Merger
would be entitled to receive in the Merger. For example, a Fieldcrest
Convertible Debenture having an aggregate principal amount of $1,000 is
convertible into (i) a cash payment equal to the product of (a) the amount of
the cash payment to be made on account of each share of Fieldcrest Common Stock
converted in the Merger and (b) 22.60 and (ii) a number of shares of Pillowtex
Common Stock equal to the product of (a) the Conversion Number and (b) 22.60.
The Fieldcrest Convertible Debentures are presently redeemable at their
stated principal amount, in whole or in part, at the option of Fieldcrest, plus
any accrued and unpaid interest to the date of redemption. The Fieldcrest
Convertible Debentures are subject to mandatory redemption at their stated
principal amount plus any accrued and unpaid interest pursuant to a sinking fund
provision whereby Fieldcrest is required on March 15 of the years 1997 to 2011
inclusive, to deposit with the indenture trustee an amount equal to 5.0% of the
original $125.0 million aggregate principal amount of Fieldcrest Convertible
Debentures. The sinking fund provision is designed to cause the redemption of
75% of the Fieldcrest Convertible Debentures as of their maturity date.
PILLOWTEX DEED OF TRUST NOTE
Pillowtex presently has outstanding a $2.4 million deed of trust note
collateralized by land and buildings (the "Pillowtex Trust Note"). The Pillowtex
Trust Note bears interest at 10.5% per annum, payable monthly in arrears, and
matures on July 1, 1998.
PILLOWTEX INDUSTRIAL REVENUE BONDS
Pillowtex has certain obligations in respect of certain industrial revenue
bonds issued by the Pennsylvania Economic Development Financing Authority (the
"PEDFA Bonds"). The PEDFA Bonds bear interest, payable semiannually, at a
variable rate (7.0% to 7.85% per annum), and mature serially in annual amounts
ranging from $285,000 to $640,000 through April 1, 2002. Approximately $2.8
million in aggregate principal amount of PEDFA Bonds is presently outstanding.
Pillowtex also has certain obligations in respect of certain industrial
revenue bonds issued by the Mississippi Business Finance Corporation (the "MBFC
Bonds"). The MBFC Bonds bear interest, payable monthly (or, in certain
circumstances, quarterly), at a variable rate (2.75% to 4.5% per annum), provide
for annual principal payments of $460,000 beginning July 1, 1995, and mature on
July 1, 2004. Approximately $3.2 million in aggregate principal amount of MBFC
Bonds is presently outstanding.
FIELDCREST INDUSTRIAL REVENUE BONDS
Fieldcrest has additional obligations in respect of certain industrial
revenue bonds issued by the Industrial Development Board of the City of
Scottsboro, Alabama (the "Scottsboro Bonds"). The Scottsboro Bonds bear
interest, payable semiannually, at a rate equal to 6.75% per annum, provide for
annual principal payments of $200,000 beginning September 1, 1998, and mature on
September 1, 2002. Approximately $1.0 million in aggregate principal amount of
the Scottsboro Bonds is presently outstanding.
Fieldcrest has further obligations in respect of certain industrial revenue
bonds issued by the State Industrial Development Authority of the State of
Alabama (the "Alabama Bonds"). The Alabama Bonds bear interest at a variable
rate (approximating LIBOR), and mature on July 1, 2021. Approximately
$10,000,000 in aggregate principal amount of the Alabama Bonds is presently
outstanding.
89
<PAGE> 97
PILLOWTEX SERIES A REDEEMABLE CONVERTIBLE PREFERRED STOCK
General. Pursuant to the terms of Pillowtex Preferred Stock Purchase
Agreement, as amended (the "Preferred Stock Purchase Agreement"), Apollo
purchased of 65,000 shares of Pillowtex Preferred Stock at an offering price of
$1,000 per share, which resulted in net proceeds to Pillowtex of approximately
$62.9 million.
Liquidation Preference; Ranking. Each share of Pillowtex Preferred Stock
has a liquidation preference of $1,000, plus accrued and unpaid dividends (the
"Liquidation Preference"). The Pillowtex Preferred Stock ranks senior in right
of payment to all common equity stock and all other classes of preferred stock
of the Company (other than parity securities), but ranks junior in right of
payment to all indebtedness of the Company. The terms of the Pillowtex Preferred
Stock restrict, among other things, the Company's ability to pay dividends or
make certain other restricted payments on the Pillowtex Common Stock.
Dividends. Subject to the provisions described below, dividends will accrue
on the Pillowtex Preferred Stock from the issue date through and including
December 31, 1999, at a rate per annum equal to 3.0%. However, the Company may
at its option pay dividends in cash during each quarterly period during calendar
years 1998 and 1999 at a rate in excess of 3.0%. Beginning January 1, 2000,
dividends will accrue on the Pillowtex Preferred Stock at the Applicable
Dividend Rate, which is defined as 3.0%, 7.0%, or 10.0% depending upon the
Company's 1999 Pro Forma EPS (as defined herein) as set forth in the following
table:
<TABLE>
<CAPTION>
APPLICABLE DIVIDEND
1999 RATE AT
PRO FORMA EPS JANUARY 1, 2000
------------- -------------------
<S> <C>
$2.70 or greater................................. 3.0% per annum
$2.35 to $2.69................................... 7.0% per annum
$2.34 or less.................................... 10.0% per annum
</TABLE>
The term "1999 Pro Forma EPS" is defined as the Company's diluted earnings
per share as included in its audited financial statements for the fiscal year
ending January 1, 2000, as adjusted to exclude the after-tax effect of (i) any
change in generally accepted accounting principles from September 5, 1997, other
than the effects of Financial Accounting Standards Board Statement No. 128; (ii)
extraordinary gains or losses, and (iii) gain on sale of assets having a fair
market value in excess of $1.0 million ("1999 EPS"), calculated on a pro forma
basis assuming (a) the dividend rate on the Pillowtex Preferred Stock for
calendar 1997 (if applicable) and calendar 1998 was (1) 3.0% per annum if 1999
EPS is equal to or greater than $2.35 or (2) 10.0% per annum if 1999 EPS is less
than $2.35; (b) the dividend rate on the Pillowtex Preferred Stock for calendar
1999 was (1) 3.0% per annum if 1999 EPS is greater than or equal to $2.70, (2)
7.0% per annum if 1999 EPS is greater than or equal to $2.35 but less than
$2.70, and (3) 10.0% per annum if 1999 EPS is less than $2.35; and (c) any
incremental dividends included pursuant to clauses (a) and (b) which were not
paid when due (either in cash or in shares of Pillowtex Preferred Stock) were
paid in additional shares of Pillowtex Preferred Stock (including the effect of
all dividends earned on unpaid dividends).
In addition to paying dividends from and after January 1, 2000 at the
Applicable Dividend Rate, the Company is required to pay a one-time Catch Up
Dividend in shares of Pillowtex Preferred Stock in 1999 equal to the difference
between the aggregate amount of dividends paid (whether in cash or additional
shares of Pillowtex Preferred Stock)(the "Aggregate Dividends Paid") and the
aggregate amount of dividends that would have been paid on the Pillowtex
Preferred Stock from the issue date through and including the last Dividend
Payment Date prior to the date on which the Company finally determines the
amount of 1999 Pro Forma EPS ("Aggregate Dividends Owed") assuming (i) the
dividend rate for calendar 1997 (if applicable) and calendar 1998 was (a) 3.0%
per annum if 1999 Pro Forma EPS is equal to or greater than $2.35 or (b) 10.0%
per annum if 1999 Pro Forma EPS is less than $2.35, (ii) the dividend rate for
calendar 1999 was the Applicable Dividend Rate, and (iii) any incremental
dividends included in calculating dividends described in clauses (i) and (ii)
which were not paid when due (either in cash or in shares of Pillowtex Preferred
Stock) were paid in additional shares of Pillowtex Preferred Stock (including
the effect of all dividends earned on unpaid dividends). If the Aggregate
Dividends Paid is more than the Aggregate Dividends Owed, then no Catch Up
Dividend will be payable and an amount equal to the difference between Aggregate
Dividends Paid
90
<PAGE> 98
and Aggregate Dividends Owed will be offset against dividends payable on the
next succeeding Dividend Payment Date or Dividend Payment Dates, as the case may
be.
The following table sets forth for each of the three categories of 1999 Pro
Forma EPS indicated the number of shares to be issued as a Catch Up Dividend
(assuming that the Pillowtex Preferred Stock were to be initially issued on
December 31, 1997, that dividends due prior to January 1, 2000 are paid in cash
when due at a rate per annum of 3.0%, and that the Determination Price is $24.00
per share):
<TABLE>
<CAPTION>
1999 APPLICABLE CATCH
PRO FORMA EPS UP DIVIDEND
------------- -------------------
<S> <C>
$2.70 or greater................................. N/A
$2.35 to $2.69................................... 2,669.05 shares
$2.34 or less.................................... 9,952.15 shares
</TABLE>
If the Determination Price is less than $23.00, each of the $2.35 and $2.70
targets for 1999 Pro Forma EPS will be reduced by an amount equal to the product
of (i) 0.065 and (ii)(a) $23.00 minus (b) the Determination Price. All dividends
will be cumulative, whether or not declared, on a daily basis from the date of
issuance and will be payable quarterly, in arrears, on March 31, June 30,
September 30, and December 31 (each a "Dividend Payment Date"). Dividends (in
the form of additional dividends due) will compound quarterly on all unpaid
dividends from the Dividend Payment Date with respect thereto until the date of
payment. At the option of the Company, dividends other than the Catch Up
Dividend will be payable either in cash or in kind (through the issuance of
additional shares of Pillowtex Preferred Stock) for the first five years after
issuance and will be payable only in cash thereafter.
In the event that after the fifth anniversary of the initial issuance of
the Pillowtex Preferred Stock, Pillowtex fails to pay dividends in cash on the
Dividend Payment Date when due, the dividend rate applicable to any period in
which any such dividends remain unpaid will be increased by 0.5% per quarter for
each quarter in which any such dividends remain unpaid (such rate increase, the
"Dividend Increase"). The applicable dividend rate plus the Dividend Increase
applicable to any period will not exceed the lesser of (i) 18.0% per annum and
(ii) the maximum rate permitted by applicable law. After a Dividend Increase,
when the Company pays all accrued and unpaid dividends, and upon the payment of
dividends on the next Dividend Payment Date at the rate in effect prior to
giving effect to any Dividend Increase, the annual dividend rate will be
decreased to the otherwise applicable dividend rate.
Conversion. At the option of the holders thereof, at any time or from time
to time, each share of the Pillowtex Preferred Stock will be convertible into
the number of shares of Pillowtex Common Stock as is determined by dividing (i)
the sum of (a) $1,000 and (b) any unpaid dividends on such share by (ii) an
initial conversion price equal to $24.00 per share, except that if the
Determination Price is less than $23.00, then the conversion price will be equal
to the Determination Price plus $1.00, subject to subsequent adjustment in
certain circumstances to prevent dilution.
Mandatory Redemption. Each share of Pillowtex Preferred Stock is subject to
mandatory redemption on the date ten and one-half years after the initial
issuance of the Pillowtex Preferred Stock (the "Mandatory Redemption Date"), at
a redemption price equal to $1,000, plus accrued and unpaid dividends.
Optional Redemption. The Company has the right to, at any time and from
time to time after the fourth anniversary of the initial issuance of the
Pillowtex Preferred Stock, call all or any portion of the Pillowtex Preferred
Stock for redemption at a redemption price equal to (i) the Liquidation
Preference plus (ii) the product of (a) a premium, which declines ratably from
the percentage equal to the applicable dividend rate on such fourth anniversary
to zero on the Mandatory Redemption Date, and (b) the Liquidation Preference
(minus any accrued and unpaid dividends from the Dividend Payment Date prior to
the date fixed for redemption).
Voting Rights. Except as described below and as otherwise required by law,
holders of Pillowtex Preferred Stock are not entitled to any vote on matters
presented to shareholders of the Company.
91
<PAGE> 99
So long as any shares of the Pillowtex Preferred Stock are outstanding, the
Company may not (i) amend its Articles of Incorporation (the "Pillowtex
Articles") so as to (a) affect adversely the specified rights, preferences,
privileges, or voting rights of holders of shares of Pillowtex Preferred Stock
or (b) authorize the issuance of additional shares of any class of senior
securities or (ii) merge, consolidate, or enter into any other reclassification
that would (a) materially affect adversely the special or relative rights,
preferences, privileges, or voting rights of the Pillowtex Preferred Stock or
(b) result in a breach of the terms of the Pillowtex Preferred Stock without, in
any such case, the affirmative vote or consent of holders of more than 50% of
the outstanding shares of the Pillowtex Preferred Stock. In addition, any
amendment to the Pillowtex Articles that would alter in any material respect the
dividend rates, liquidation preference, redemption rights, or conversion rights
of the Pillowtex Preferred Stock will require the affirmative vote or consent of
each holder of Pillowtex Preferred Stock.
In the event of the Company's failure to pay dividends or the occurrence of
certain breaches that shall have continued for a period of 60 days after notice
thereof from any holder of Pillowtex Preferred Stock, within ten business days
of such events, the number of members on the Board of Directors of Pillowtex
would be automatically increased by 25% and the holders of the Pillowtex
Preferred Stock would be entitled to elect directors to fill the new positions
created by such expansion, so long as such nonpayment of dividends and breaches
were not cured after notice thereof, except that if the event of default related
to (i) the failure to redeem the Pillowtex Preferred Stock, (ii) a breach of
certain restrictions on the Company's activities, or (iii) a bankruptcy event
with respect to the Company or any of its subsidiaries, there would be no 60-day
grace period or right to cure and the holders' right to so elect directors would
continue for as long as the Pillowtex Preferred Stock were outstanding.
Registration Rights. Upon the occurrence of certain conditions, holders of
Pillowtex Preferred Stock will have the right to require the Company to file a
registration statement with the Commission to register shares of Pillowtex
Common Stock receivable by such holders upon conversion of Pillowtex Preferred
Stock. Holders will also have so-called "piggyback" registration rights with
respect to shares of Pillowtex Common Stock receivable upon conversion of
Pillowtex Preferred Stock.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The exchange of Series A Notes for Series B Notes pursuant to the Exchange
Offer will not be considered a taxable exchange for federal income tax purposes
because the Series B Notes will not differ materially in kind or extent from the
Series A Notes and because the exchange will occur by operation of the terms of
the Series B Notes. Accordingly, such exchange will have no federal income tax
consequences to Holders of Series A Notes. A Holder's adjusted tax basis and
holding period in a Series B Note will be the same as such Holder's adjusted tax
basis and holding period, respectively, in the Series A Note exchanged therefor.
Holders considering the exchange of Series A Notes for Series B Notes
should consult their own tax advisors concerning the United States federal
income tax consequences in light of their particular situations as well as any
consequences arising under state, local, and foreign income tax and other tax
law.
92
<PAGE> 100
PLAN OF DISTRIBUTION
The Series B Notes will be offered by the Company to the holders of the
Series A Notes in exchange for the Series A Notes pursuant to the Exchange
Offer.
Except as described below, a broker-dealer may not participate in the
Exchange Offer in connection with a distribution of the Series B Notes. Each
broker-dealer that receives Series B 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 Series B Notes. 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 Series B Notes received in exchange for Series A Notes where
such Series A Notes were acquired as a result of market-making activities or
other trading activities. The Company has agreed that for a period of one year
after the Registration Statement has been declared effective, it will make this
Prospectus, as amended or supplemented, available to any broker-dealer for use
in connection with any such resale subject to the conditions described under
"The Exchange Offer -- Consequences of Exchanging Series A Notes."
The Company will not receive any proceeds from any sale of Series B Notes
by broker-dealers. Series B 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 Series B 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 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 Series B Notes. Any broker or
dealer that participates in a distribution of such Series B Notes may be deemed
to be an "underwriter" within the meaning of the Securities Act, and any profit
on any such resale of Series B 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 Exchange Offer
other than commissions or concessions of any brokers or dealers and expenses of
counsel for the holders of the Series B Notes and will indemnify the holders of
the Series B Notes (including any broker-dealers) against certain liabilities,
including liabilities under the Securities Act.
LEGAL MATTERS
Certain legal matters with respect to the validity of the Series B Notes
offered hereby will be passed upon for the Company by Jones, Day, Reavis &
Pogue, Dallas, Texas.
EXPERTS
The consolidated financial statements of Pillowtex as of December 30, 1995
and December 28, 1996, and for each of the years in the three-year period ended
December 28, 1996 have been incorporated by reference herein and in the
Registration Statement in reliance upon the report of KPMG Peat Marwick LLP,
independent certified public accountants, incorporated by reference herein, and
upon the authority of said firm as experts in accounting and auditing.
The consolidated financial statements of Fieldcrest incorporated by
reference in and included in an exhibit to Fieldcrest's Annual Report (Form
10-K) for the year ended December 31, 1996 and incorporated herein by reference,
have been audited by Ernst & Young LLP, independent auditors, as set forth in
their report incorporated by reference therein and included in an exhibit
thereto and incorporated herein by reference. Such consolidated financial
statements are incorporated herein by reference in reliance upon such report
given upon the authority of such firm as experts in accounting and auditing.
93
<PAGE> 101
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Set forth below is a description of certain provisions of the articles of
incorporation and bylaws of the Company and the Guarantors. These descriptions
are intended as a summary only and are qualified in their entirety by reference
to the appropriate articles, bylaws and state law.
(a) Pillowtex Corporation (a Texas corporation). Under the Texas Business
Corporation Act (the "TBCA"), a corporation may indemnify a person who was, is,
or is threatened to be made a named defendant or respondent in any threatened,
pending, or completed action, suit, or proceeding, whether civil, criminal,
administrative, arbitrative, or investigative, any appeal in such an action,
suit, or proceeding, or any inquiry or investigation that could lead to such an
action, suit, or proceeding (a "proceeding"), because the person is or was a
director of the corporation or, while a director of the corporation, is or was
serving at the request of the corporation as a director, officer, partner,
venturer, proprietor, trustee, employee, agent, or similar functionary of
another foreign or domestic corporation, partnership, joint venture, sole
proprietorship, trust, employee benefit plan, or other enterprise, but only if
it is determined in the manner described below that the person: (i) conducted
himself in good faith; (ii) reasonably believed (a) in the case of conduct in
his official capacity as a director of the corporation, that his conduct was in
the corporation's best interests, and (b) in all other cases, that his conduct
was at least not opposed to the corporation's best interests; and (iii) in the
case of any criminal proceeding, had no reasonable cause to believe his conduct
was unlawful. Except to the extent described in the next following sentence, a
director may not be indemnified under the TBCA in respect of a proceeding in
which the person is found liable on the basis that personal benefit was
improperly received by him, whether or not the benefit resulted from an action
taken in the person's official capacity, or in which the person is found liable
to the corporation. A person may be indemnified as described in the second
preceding sentence against judgments, penalties (including excise and similar
taxes), fines, settlements, and reasonable expenses (including court costs and
attorneys' fees) actually incurred by the person in connection with a
proceeding, except that if the person is found liable to the corporation or is
found liable on the basis that personal benefit was improperly received by the
person, the indemnification (i) is limited to reasonable expenses (including
court costs and attorneys' fees) actually incurred by the person in connection
with the proceeding and (ii) will not be made in respect of any proceeding in
which the person shall have been found liable for willful or intentional
misconduct in the performance of his duty to the corporation.
Under the TBCA, a corporation must indemnify a director against reasonable
expenses (including court costs and attorneys' fees) incurred by him in
connection with a proceeding in which he is a named defendant or respondent
because he is or was a director of the corporation or, while a director of the
corporation, is or was serving at the request of the corporation as a director,
officer, partner, venturer, proprietor, trustee, employee, agent, or similar
functionary of another foreign or domestic corporation, partnership, joint
venture, sole proprietorship, trust, employee benefit plan, or other enterprise,
if he has been wholly successful, on the merits or otherwise, in the defense of
the proceeding. Under the TBCA, if, in a suit for the indemnification required
as described in the immediately preceding sentence, a court of competent
jurisdiction determines that the director is entitled to such indemnification,
the court will order indemnification and will award to the director the expenses
(including court costs and attorneys' fees) incurred in securing the
indemnification. Under the TBCA, if, upon application of a director, a court of
competent jurisdiction determines, after giving any notice the court considers
necessary, that the director is fairly and reasonably entitled to
indemnification in view of all the relevant circumstances, whether or not he has
met the requirements for indemnification described in the first sentence of the
immediately preceding paragraph or has been found liable in the circumstances
described in the second sentence of such paragraph, the court may order the
indemnification that the court determines is proper and equitable, except that
if the person is found liable to the corporation or is found liable on the basis
that personal benefit was improperly received by the person, the indemnification
will be limited to reasonable expenses (including court costs and attorneys'
fees) actually incurred by the person in connection with the proceeding.
II-1
<PAGE> 102
A determination that indemnification as described in the first sentence of
the second preceding paragraph is permissible must be made: (i) by a majority
vote of a quorum consisting of directors who at the time of the vote are not
named defendants or respondents in the proceeding; (ii) if such a quorum cannot
be obtained, by a majority vote of a committee of the board of directors,
designated to act in the matter by a majority vote of all directors, consisting
solely of two or more directors who at the time of the vote are not named
defendants or respondents in the proceeding; (iii) by special legal counsel
selected by the board of directors or a committee of the board by vote as
described in clauses (i) and (ii) above, or, if such a quorum cannot be obtained
and such a committee cannot be established, by a majority vote of all directors;
or (iv) by the shareholders in a vote that excludes the shares held by directors
who are named defendants or respondents in the proceeding. Under the TBCA,
authorization of indemnification and determination as to reasonableness of
expenses must be made in the same manner as the determination that
indemnification is permissible, except that if the determination that
indemnification is permissible is made by special legal counsel, authorization
of indemnification and determination as to reasonableness of expenses must be
made in the manner described in clause (iii) of the immediately preceding
sentence for the selection of special legal counsel; a provision contained in
the articles of incorporation, the bylaws, a resolution of shareholders or
directors, or an agreement that makes mandatory the indemnification permitted
under the TBCA will be deemed to constitute authorization of indemnification in
the manner required by the TBCA even though such provision may not have been
adopted or authorized in the same manner as the determination that
indemnification is permissible. The TBCA provides that reasonable expenses
(including court costs and attorneys' fees) incurred by a director who was, is,
or is threatened to be made a named defendant or respondent in a proceeding may
be paid or reimbursed by the corporation, in advance of the final disposition of
the proceeding and without the determination, authorization, or determination
described above, after the corporation receives a written affirmation by the
director of his good faith belief that he has met the standard of conduct
necessary for indemnification and a written undertaking by or on behalf of the
director to repay the amount paid or reimbursed if it is ultimately determined
that he has not met the standard or if it is ultimately determined that
indemnification of the director against expenses incurred by him in connection
with that proceeding is prohibited by the TBCA; a provision contained in the
articles of incorporation, the bylaws, a resolution of shareholders or
directors, or an agreement that makes mandatory the payment or reimbursement
permitted under the TBCA will be deemed to constitute authorization of that
payment or reimbursement.
Under the TBCA, an officer of the corporation must be indemnified as, and
to the same extent described in the second preceding paragraph, for a director.
A corporation may indemnify and advance expenses to an officer, employee, or
agent of the corporation to the same extent that it may indemnify and advance
expenses to directors as described above. In addition, under the TBCA, a
corporation may indemnify and advance expenses to persons who are not or were
not officers, employees, or agents of the corporation but who are or were
serving at the request of the corporation as a director, officer, partner,
venturer, proprietor, trustee, employee, agent, or similar functionary of
another foreign or domestic corporation, partnership, joint venture, sole
proprietorship, trust, employee benefit plan, or other enterprise to the same
extent that it may indemnify and advance expenses to directors.
Under the TBCA, a corporation may purchase and maintain insurance or
another arrangement on behalf of any person who is or was a director, officer,
employee, or agent of the corporation or who is or was serving at the request of
the corporation as a director, officer, partner, venturer, proprietor, trustee,
employee, agent, or similar functionary of another foreign or domestic
corporation, partnership, joint venture, sole proprietorship, trust, employee
benefit plan, or other enterprise, against any liability asserted against him
and incurred by him in such a capacity or arising out of his status as such a
person, whether or not the corporation would have the power to indemnify him
against that liability under the TBCA. Pillowtex has purchased liability
insurance policies covering its directors and officers to insure against losses
incurred in their capacities, including liabilities under the Securities Act.
The Pillowtex Articles do not address indemnification of directors,
officers, or other persons. The Bylaws of Pillowtex (the "Pillowtex Bylaws"),
however, provide that: (i) Pillowtex will indemnify persons who are or were
directors or officers (both in their capacities as directors and officers and,
if serving at the request of Pillowtex as a director, officer, trustee,
employee, agent, or similar functionary of another foreign or domestic
II-2
<PAGE> 103
corporation, trust, partnership, joint venture, sole proprietorship, employee
benefit plan, or other enterprise, in each of those capacities) to the full
extent permitted by the TBCA; (ii) Pillowtex will pay or reimburse, in advance
of the final disposition of any proceeding, to all persons who are or were
directors or officers of Pillowtex all reasonable expenses incurred by such
persons to the full extent permitted by the TBCA; and (iii) Pillowtex will
indemnify persons who are or were employees or agents (other than directors or
officers), or persons who are not or were not employees or agents but who are or
were serving at the request of Pillowtex as directors, officers, trustees,
employees, agents, or similar functionaries of another foreign or domestic
corporation, trust, partnership, joint venture, sole proprietorship, employee
benefit plan or other enterprise (collectively, together with the directors and
officers, "Corporate Functionaries"), to the full extent permitted by the TBCA.
The Pillowtex Bylaws also provide that Pillowtex may purchase or maintain
insurance on behalf of any Corporate Functionary against any liability asserted
against him and incurred by him in such a capacity or arising out of his status
as a Corporate Functionary, whether or not Pillowtex would have the power to
indemnify him against the liability under the TBCA or the Pillowtex Bylaws.
Pillowtex has entered into Indemnification Agreements with each of its
directors pursuant to which Pillowtex has agreed to indemnify the directors to
the full extent authorized or permitted by the TBCA.
Pillowtex Corporation maintains directors' and officers' liability
insurance on behalf of the directors and officers of Pillowtex Corporation and
each of its subsidiaries (including Fieldcrest) against liability arising from
actions taken in their capacity as directors or officers. Additionally, pursuant
to the Merger Agreement, the Company has purchased and will maintain directors'
and officers' liability insurance on behalf of former directors and officers of
Fieldcrest for a period of four years after consummation of the Merger.
(b) Guarantors.
Under the Delaware General Corporation Law (the "DGCL"), directors and
officers as well as other employees and individuals may be indemnified against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement in connection with specified actions, suits, or proceedings, whether
civil or criminal, administrative, or investigative (other than an action by or
in the right of the corporation as a derivative action) if they acted in good
faith and in a manner they 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 their conduct was unlawful.
However, the DGCL does not permit a corporation to eliminate or limit a
director's personal liability for monetary damages to the corporation or its
stockholders (i) for any branch of the director's duty of loyalty to such
corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of the law, (iii)
for paying a dividend or approving a stock repurchase in violation of Section
174 of the DGCL, or (iv) for any transaction from which the director derived an
improper personal benefit.
Amoskeag Company (a Delaware corporation). The Amended and Restated
Certificate of Incorporation provides that, except to the extent that the DGCL
prohibits the elimination or limitation of liability of directors for breaches
of fiduciary duty, no director of Amoskeag Company shall be personally liable to
Amoskeag Company or its stockholders for monetary damages for any breach of
fiduciary duty as a director, notwithstanding any provision of law imposing such
liability.
The Amended and Restated Certificate of Incorporation provides that
Amoskeag Company shall, to the fullest extent permitted by Section 145 of the
DGCL, as amended from time to time, indemnify each 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, by reason of the fact that he is or was, or has agreed to become,
a director or officer of Amoskeag Company, or is or was serving, or has agreed
to serve, at the request of Amoskeag Company, as a director, officer or trustee
of, or in a similar capacity with, another corporation, partnership, joint
venture, trust or other enterprise (including any employee benefit plan), or by
reason of any action alleged to have been taken or omitted in such capacity,
against all expenses (including attorneys' fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred by him or on his behalf in
connection with such action, suit or proceeding and any appeal therefrom.
II-3
<PAGE> 104
With respect to any action, suit, proceeding or investigation for which
indemnity will or could be sought, Amoskeag Company will be entitled to
participate therein at its own expense and/or to assume the defense thereof at
its own expense, with legal counsel reasonably acceptable to the person seeking
indemnification.
In the event that Amoskeag Company does not assume the defense of any
action, suit, proceeding or investigation for which indemnity will or could be
sought, any expenses (including attorneys' fees) incurred by the person seeking
indemnification in defending a civil or criminal action, suit, proceeding or
investigation or any appeal therefrom shall be paid by Amoskeag Company in
advance of the final deposition of such matter upon receipt of any undertaking
by the person indemnified to repay such payment if it is ultimately determined
that such person is not entitled to indemnification under the Amended and
Restated Certificate of Incorporation, which undertaking may be accepted without
reference to the financial ability of such person to make such repayment.
Amoskeag Company will not indemnify any such person seeking indemnification
in connection with a proceeding (or part thereof) initiated by such person
unless the initiation thereof was approved by the Board of Directors.
The indemnification rights provided in the Amended and Restated Certificate
of Incorporation (i) shall not be deemed exclusive of any other rights to which
those indemnified may be entitled under any law, agreement or vote of
stockholders or disinterested directors or otherwise, and (ii) shall inure to
the benefit of the heirs, executors and administrators of such persons. Amoskeag
Company may, to the extent authorized from time to time by its Board of
Directors, grant indemnification rights to other employees or agents of Amoskeag
Company or other persons serving Amoskeag Company and such rights may be
equivalent to, or greater or less than, those set forth in the Amended and
Restated Certificate of Incorporation.
The Bylaws of Amoskeag Company do not contain any indemnification
provisions.
Amoskeag Management Corporation (a Delaware corporation). The Certificate
of Incorporation provides that Amoskeag Management Corporation shall 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 (including an action by or in the
right of the corporation) by reason of the fact that he is or was a director,
officer, employee or agent of Amoskeag Management Corporation), or a stockholder
purporting to act on behalf 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 and fines actually imposed or
reasonably incurred by him in connection with such action, suit or proceeding
unless in any proceeding he shall be finally adjudged not to have acted in good
faith and in a manner reasonably believed to be in or not opposed to the best
interest of Amoskeag Management Corporation; provided, however, that such
indemnification shall not cover liabilities in connection with any manner which
shall be disposed of through a compromise payment by such person, pursuant to a
consent decree or otherwise, unless such compromise shall be approved as in the
best interests of Amoskeag Management Corporation, after notice that it involves
such indemnification, (i) by a vote of the directors in which no interested
director participates, or (ii) by a vote or the written approval of the holders
of a majority of the outstanding stock at the time having the right to vote for
directors, not counting as outstanding any stock owned by any interested
director or officer. Such indemnification may include payment by Amoskeag
Management Corporation of expenses incurred in defending a civil or criminal
action or proceeding in advance of the final disposition of such action or
proceeding, upon receipt of an undertaking by the person indemnified to repay
such payment if he shall be adjudicated to be not entitled to indemnification
under these provisions.
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 any presumption that the person did not act in good
faith and in a manner in which he reasonably believed to be in the best
interests of the corporation, and with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful. The
rights of indemnification hereby provided shall not be exclusive of or affect
other rights to which any director, officer, employee, agent or stockholder may
be entitled. As used in this paragraph, the terms "director", "officer",
"employee", "agent", or "stockholder" include their respective heirs, executors
and
II-4
<PAGE> 105
administrators, and an "interested" director or officer is one against whom as
such the proceeding in question or another proceeding on the same or similar
grounds is then pending. Any indemnification to which a person is entitled under
the Certificate of Incorporation shall be provided although the person to be
indemnified is no longer such a director, officer, employee, agent or
stockholder.
The Bylaws of Amoskeag Management Corporation do not contain any
indemnification provisions.
Downeast Securities Corporation (a Delaware corporation). The Certificate
of Incorporation, as amended, provides that Downeast Securities Corporation
shall indemnify any person who was or is 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 (including an action by
or in the right of the corporation) by reason of the fact that he is or was a
director, officer, employee or agent of the corporation, or a stockholder
purporting to act on behalf 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 and fines actually imposed or
reasonably incurred by him in connection with such action, suit or proceeding
unless in any proceeding he shall be finally adjudged not to have acted in good
faith in reasonable belief that his action was in the best interest of the
corporation; provided, however, that such indemnification shall not cover
liabilities in connection with any matter which shall be disposed of through a
compromise payment by such person, pursuant to a consent decree or otherwise,
unless such compromise shall be approved as in the best interests of the
corporation, after notice that it involves such indemnification, (i) by vote of
the directors in which no interested director participates, or (ii) by a vote or
the written approval of the holders of a majority of the outstanding stock at
the time having the right to vote for directors, not counting as outstanding any
stock owned by any interested director or officer. Such indemnification may
include payment by the corporation of expenses incurred in defending a civil or
criminal action or proceeding in advance of the final disposition of such action
or proceeding, upon receipt of an undertaking by the person indemnified to repay
such payment if he shall be adjudicated to be not entitled to indemnification
under these provisions.
The rights of indemnification provided shall not be exclusive of or affect
other rights to which any director, officer, employee, agent or stockholder may
be entitled. As used in this paragraph, the terms "director", "officer",
"employee", "agent" or "stockholder" include their respective heirs, executors
and administrators, and an "interested" director or officer is one against whom
as such the proceeding in question or another proceeding on the same or similar
grounds is then pending. Any indemnification to which a person is entitled under
this paragraph shall be provided although the person to be indemnified is no
longer such a director, officer, employee, agent or stockholder.
The Bylaws of Downeast Securities Corporation do not contain any
indemnification provisions.
Encee, Inc. (a Delaware corporation). The Certificate of Incorporation
provides that Encee, Inc. shall, to the full extent permitted by Section 145 of
the DGCL, as amended from time to time, indemnify all persons whom it may
indemnify pursuant thereto. The Bylaws of Encee, Inc. do not contain any
indemnification provisions.
FCC Canada, Inc. (a Delaware corporation). The Certificate of
Incorporation eliminates the personal liability of the directors of FCC Canada,
Inc. to the fullest extent permitted by the DGCL, as the same may be amended and
supplemented.
The Certificate of Incorporation also, to the fullest extent permitted by
the DGCL, indemnifies any and all persons whom it shall have power to indemnify
from and against any and all of the expenses, liabilities or other matters. The
indemnification provided for in the Certificate of Incorporation is not
exclusive of any other rights to which those indemnified may be entitled under
any By-Law, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office, and shall 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.
The Bylaws of FCC Canada, Inc. do not contain any indemnification
provisions.
II-5
<PAGE> 106
Fieldcrest Cannon Financing, Inc., Fieldcrest Cannon Licensing, Inc.,
Fieldcrest Cannon Sure Fit, Inc., Fieldcrest Cannon Transportation, Inc. (each,
a Delaware corporation). These four entities have identical indemnification
provisions in their Certificates of Incorporation and Bylaws.
The Certificates of Incorporation provide that no person who is serving or
has served as a director shall be liable to the corporation or to any
stockholder for monetary damages for breach of any fiduciary duty of such person
as a director by reason of any act or omission occurring on or after the date
this article becomes effective. Nothing within such Certificate of Incorporation
shall be deemed to limit or eliminate the liability of any person (i) for any
breach of such person's duty of loyalty as a director to the corporation or its
stockholders; (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of the law; (iii) for the unlawful
payment of a dividend by the corporation or the unlawful purchase or redemption
of the corporation's capital stock by the corporation; (iv) for any transaction
from which such person derived an improper personal benefit; or (v) to any
extent that such liability may not be limited or eliminated by virtue of the
provisions of Section 102(b)(7) of the DGCL or any successor statute.
The indemnification provisions of the Bylaws provide that each person who
was or is made a party to or is threatened to be made a party to or is otherwise
involved in any action, suit or proceeding, whether civil, criminal,
administrative or investigative (hereinafter a "proceeding"), by reason of the
fact that he or she is or was a director, officer or employee of the corporation
or is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation or of a partnership, joint venture,
trust or other enterprise, including service with respect to employee benefit
plans (hereinafter an "indemnitee"), whether the basis of such proceeding is
alleged action in an official capacity as a director, officer, employee or
agent, shall be indemnified and held harmless by the corporation to the fullest
extent authorized by the DGCL. Indemnification shall continue as to an
indemnitee who has ceased to be a director, officer, employee or agent and shall
inure to the benefit of the indemnitee's heirs, executors and administrators.
The corporation shall indemnify and any such indemnitee in connection with a
proceeding (or part thereof) initiated by such indemnitee only if such
proceeding (or part thereof) was authorized by the Board of Directors of the
corporation. The right to indemnification conferred is a contract right and
shall include the right to be paid by the corporation and the expenses incurred
in defending any such proceeding in advance of its final disposition
(hereinafter an "advancement of expenses"); provided, however, that if the DGCL
requires, an advancement of expenses incurred by an indemnitee in his or her
capacity as a director or officer (and not in any other capacity in which
service was or is rendered by such indemnitee, including without limitation,
service to an employee benefit plan) shall be made only upon delivery to the
corporation of an undertaking, by or on behalf of such indemnitee, to repay all
amounts so advanced if it shall ultimately be determined by final judicial
decision from which there is no further right to appeal that such indemnitee is
not entitled to be indemnified for such expenses under the Bylaws.
If a claim for indemnification is not paid in a timely manner, the
indemnitee may at any time thereafter bring suit against the corporation to
recover the unpaid amount of the claim. If successful in whole or in part in any
suit or in a suit brought by the corporation to recover an advancement of
expenses pursuant to the terms of an undertaking, the indemnitee shall be
entitled to be paid also the expense of prosecuting or defending such suit. In
any suit brought by the indemnitee to enforce a right hereunder, or by the
corporation to recover an advancement of expenses pursuant to the terms of an
undertaking, the burden of proving that the indemnitee is not entitled to be
indemnified or to such advancement of expenses under the Bylaws shall be on the
corporation.
The rights to indemnification and to the advancement of expenses shall not
be exclusive of any other right which any person may have or acquire. In
addition, the corporation may maintain insurance, at its expense, to protect
itself and any director, officer, employee or agent of the corporation or
another corporation, partnership, joint venture, trust or other enterprise
against any expense, liability or loss under the DGCL.
The corporation may, to the extent authorized from time to time by the
Board of Directors, grant rights to indemnification and to the advancement of
expenses, to any agent of the corporation to the fullest extent allowed under
these bylaws with respect to the indemnification and advancement of expenses of
directors, officers and employees of the corporation.
II-6
<PAGE> 107
Fieldcrest Cannon, Inc. (a Delaware corporation). The Restated Certificate
of Incorporation, as amended, provides that the corporation will indemnify each
person (and his heirs, executors, administrators, or other legal
representatives) who is, or shall have been, a director, officer or employee of
the corporation or any person who is serving, or shall have served, at the
request of this corporation as a director or officer of another corporation,
against all liabilities and expenses (including judgments, fines, penalties and
attorneys' fees) reasonably incurred by any such director, officer, employee or
person in connection with, or arising out of, any action, suit or proceeding in
which any such director, officer, employee or person may be a party defendant or
with which he may be threatened or otherwise involved, directly or indirectly,
by reason of his being or having been a director, officer or employee of this
corporation or such other corporation, except in relation to matters as to which
any such director, officer, employee or person shall be finally adjudged in such
action, suit or proceeding to have been liable for misconduct or negligence in
the performance of his duty as such director, officer or employee. Where a
director, officer, employee or person has not been finally adjudged to have been
liable for negligence or misconduct in the performance of his duty as such
director, officer or employee, indemnity will not be made unless the corporation
has received an opinion of independent counsel to the effect that such director,
officer, employee or person acted in good faith, for a purpose which he
reasonably believed would be in the best interests of the corporation and had no
reasonable cause to believe that his conduct was unlawful.
The indemnification provision also applies to all amounts paid in
compromise or settlement (other than amounts paid to the corporation or such
other corporation), and all expenses (including attorneys' fees) reasonably
incurred, provided that prior to such indemnification the corporation shall have
received an opinion of independent counsel to the effect that the director,
officer, employee or person making such compromise or settlement was not liable
for misconduct or negligence in the performance of his duty in connection with
the matter or matters out of which such compromise or settlement arose.
The corporation may from time to time, if authorized by the directors,
prior to final adjudication or compromise or settlement of the matter or matters
as to which indemnification is claimed, advance to such director, officer,
employee or person all expenses imposed upon or incurred by him if the
corporation shall have received an opinion of independent counsel to the effect
that it is probable that upon the termination of the action, suit or proceeding
or threatened action, suit or proceeding as to which such reimbursement is
sought, such director, officer, employee or person will be entitled to indemnity
under the Restated Certificate of Incorporation, as amended, in respect of such
advances and that such advances may properly be made by the corporation. The
rights of indemnification shall not be exclusive of other rights to which any
director, officer, employee or person is entitled.
The Amended and Restated Bylaws of Fieldcrest Cannon, Inc. provide that the
corporation will 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 he
is or was a director, officer or employee of the corporation, or is or was
serving at the request of the corporation as a director, officer or employee 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 him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
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 his 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, will not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
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 his conduct was unlawful.
Further, the corporation will 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 he is or was a director, officer or employee of the
corporation, or is or was serving at the request of the corporation as a
director, officer or employee of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorneys' fees)
actually and
II-7
<PAGE> 108
reasonably incurred by him in connection with the defense or settlement of such
action or suit if he acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interests of the corporation. To the extent
that a director, officer, employee or agent of the corporation has been
successful on the merits or otherwise in defense of any such action, suit or
proceeding he shall be indemnified against expenses actually and reasonably
incurred. Indemnification will not be made, however if such person has been
adjudged to be liable for negligence or misconduct in the performance of his
duty 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
indemnify for such expenses which the Court of Chancery or such other court
shall deem proper.
Whether indemnification is available will be decided (i) by the Board of
Directors by a majority vote of a quorum consisting of directors who were not
parties to such action, suit or proceeding, or (ii) if such a quorum is not
obtainable, or, even if obtainable a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion, or (iii) by the
stockholders.
Expenses incurred by an officer or director in defending a civil or
criminal action, suit or proceeding may be paid by the corporation in advance of
the final disposition of such action, suit or proceeding as authorized by the
Board of Directors in the specific case upon receipt of an undertaking by or on
behalf of such director or officer to repay such amount unless it shall
ultimately be determined that he is entitled to be indemnified by the
corporation as authorized. Such expenses incurred by other employees may be paid
upon such terms and conditions, if any, as the Board of Directors deems
appropriate.
The indemnification provided shall not be deemed exclusive of any other
rights to which those seeking indemnification may be entitled as to action in
his official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a director,
officer or employee and shall inure to the benefit of the heirs, executors and
administrators of such a person.
The corporation may 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 him
in any such capacity.
Fieldcrest Cannon International, Inc. (a Delaware corporation). The
Certificate of Incorporation, as amended, provides that any person made a party
to any action, suit or proceeding by reason of the fact that he, his testator or
intestate, is or was a director, officer or employee of the corporation or of
any corporation which he served as such at the request of the corporation, shall
be indemnified by the corporation against the reasonable expenses, including
attorneys' fees, actually and necessarily incurred by him in connection with the
defense of such action, suit or proceeding, or in connection with any appeal
therein, except in relation to matters as to which it shall be adjudged in such
action, suit or proceeding that such officer, director or employee is liable for
negligence or misconduct in the performance of his duties. Such right of
indemnification shall not be deemed exclusive of any other rights to which such
director, officer or employee may be entitled by law.
The Bylaws of Fieldcrest Cannon International, Inc., as amended, do not
contain any indemnification provisions.
Moore's Falls Corporation (a Delaware corporation). The Certificate of
Incorporation, as amended, provides that the corporation shall 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 action by or in the right
of the corporation) by reason of the fact that he 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 him in connection with such action, suit or
proceeding if he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the corporation,
II-8
<PAGE> 109
and, with respect to any criminal action or proceeding, had no reasonable cause
to believe his 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 he 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 his conduct was unlawful.
The corporation shall 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 he 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 him in conjunction with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation. Indemnification will not be made in respect of any claim, issue or
matter as to which such person shall have been adjudged to be liable for
negligence or misconduct in the performance of his duty to the corporation
unless and only to the extent that the Court of Chancery of the State of
Delaware 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
indemnify for such expenses which the Court of Chancery of the State of Delaware
or such other court shall deem proper.
Any indemnification will be made by the corporation only as authorized in
the specific case upon a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances because he has met the
applicable standard of conduct. Such determination shall be made (i) by the
Board of Directors by a majority vote of a quorum consisting of directors who
were not parties to such action, suit or proceeding, or (ii) if such quorum is
not obtainable, or, even if obtainable a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion or (iii) by the
stockholders.
Expenses incurred in defending a civil or criminal action, suit or
proceeding may be paid by the corporation in advance of the final disposition of
such action, suit or proceeding as authorized by the Board of Directors in the
specific case upon receipt of an undertaking by or on behalf of the directors,
officer, employee or agent to repay such amount unless it shall ultimately be
determined that he is entitled to be indemnified by the corporation.
The indemnification provided shall not be deemed exclusive of any other
rights to which those seeking indemnification may be entitled, both as to action
in his official capacity and as to action in another capacity while holding such
office, and shall 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.
The corporation may 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 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 him in any such capacity.
The Bylaws of Moore's Falls Corporation do not contain any indemnification
provisions.
Pillowtex, Inc. and PTEX Holding Company (each, a Delaware
corporation). The Certificates of Incorporation of both Pillowtex, Inc. and
PTEX Holding Company provide that a director of the corporation shall not be
personally liable to the corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director, except for liability (i) for any
breach of the director's duty of loyalty to the corporation or its stockholders,
(ii) for acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law, (iii) under Section 174 of the DGCL,
or (iv) for any transaction from which the director derived an improper personal
benefit. The limitation on personal liability shall be limited to the fullest
extent permitted by the amended DGCL. Any repeal or modification of this
paragraph by
II-9
<PAGE> 110
the stockholders of the corporation shall be prospective only, and shall not
adversely affect any limitation on the personal liability of a director of the
corporation existing at the time of such repeal or modification.
Bylaws of both entities provide that the corporation will indemnify (i) any
person who is or was a director, officer, agent, or employee of the corporation,
and (ii) any person who serves or served at the corporation's request as a
director, officer, partner, venturer, proprietor, trustee, agent, employee, or
similar functionary of another corporation or of a partnership, joint venture,
sole proprietorship, joint venture, sole proprietorship, trust, employee benefit
plan, or other enterprise (collectively "indemnitees").
In case of a suit, action, or proceeding (whether civil, criminal,
administrative, or investigative), other than a suit by or on behalf of the
corporation against an indemnitee, collectively hereinafter referred to as a
nonderivative suit, the corporation may indemnify such person for amounts
actually and reasonably incurred by such person in connection with the defense
or settlement of the nonderivative suit for judgments, penalties, including
excise and similar taxes, fines, settlements, and reasonable expenses actually
incurred (including attorneys' fees).
In case of a derivative suit, an indemnitee may be indemnified if such
person acted in good faith in the transaction that is the subject of the suit,
and in a manner reasonably believed to be in or not opposed to the corporation's
best interest; provided that no indemnification shall be made in respect to 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 other such court
shall deem proper. In the case of nonderivative suit, indemnification will be
provided if such person acted in good faith and in a manner reasonably believed
to be in or not opposed to the corporation's best interest. With respect to any
criminal action or proceeding, the person must have had no reasonable cause to
believe that the conduct that is the subject of such action was unlawful. The
termination of a nonderivative proceeding by judgment, order, settlement,
conviction, or on a plea of nolo contendere or its equivalent, does not of
itself create a presumption that the person does not meet the standards set
forth in this paragraph.
The corporation will indemnify against expenses (including attorneys' fees)
actually and reasonably incurred in connection with a proceeding in which such
person is a party by reason of such person holding their position to the extent
such person has been successful, on the merits or otherwise, in the defense of
the proceeding.
A determination that the standard has been satisfied shall be made by (i)
majority vote of the directors of the corporation who at the time of the vote
are not parties to the action, suit, or proceeding even though less than a
quorum, or (ii) if there are no such directors, or if such directors so direct,
by independent legal counsel in a written opinion, or (iii) the shareholders of
the corporation.
The corporation may pay in advance any expense (including attorneys' fees)
that may become subject to indemnification under the bylaws if the person
receiving the payment affirms in writing that in good faith the person believes
the standards set forth in the bylaws have been met, and undertakes to repay any
advance payments if it is ultimately determined that such person has not yet met
those standards.
The corporation may purchase and maintain insurance on behalf of any person
who holds or who has held any position named in the bylaws, against any
liability asserted against or incurred by such person in any such position, or
arising out of such person's status.
The rights of indemnification provided in the bylaws shall be in addition
to any other rights to which any person named may otherwise be entitled by
contract, under the DGCL or as a matter of law; and if any such person dies,
then such rights shall extend to such person's heirs and legal representatives.
St. Marys, Inc. (a Delaware corporation). The Certificate of Incorporation
provides that the corporation shall indemnify all persons to the full extent
permitted by Section 145 of the DGCL. The Bylaws of St. Mary's, Inc. do not
contain any indemnification provisions.
II-10
<PAGE> 111
Under Section 3817 of the Delaware Business Trust Act, a business trust may
indemnify and hold harmless any trustee or beneficial owner or other person from
and against any and all claims and demands subject to any standards and
restrictions, if any, set forth in the governing instrument. The absence of a
provision for indemnity in the governing instrument shall not be construed to
deprive any trustee or beneficial owner or other person of any right to
indemnity which is otherwise available to such person under Delaware law.
Pillowtex Management Services Company (a Delaware business trust). The
Certificate of Trust of Pillowtex Management Services Company does not contain
any indemnification provisions, however, the Declaration of Trust provides that
no Beneficial Interest Holder will be liable for any debt, claim, demand,
judgment or obligation of any kind of, against or with respect to the Trust by
reason of being a Beneficial Interest Holder, nor shall any Beneficial Interest
Holder, by reason of such status, be subject to any personal liability
whatsoever, in tort, contract or otherwise, to any person in connection with the
Trust Estate or the affairs of the Trust.
A Trustee, when acting in such capacity, will be personally liable to any
person other than the Trust or a Beneficial Interest Holder for any act,
omission or obligation of the Trust or any Trustee. To the maximum extent that
Delaware law in effect from time to time permits limitation of the liability of
trustees of a business trust, no Trustee will be liable to the Trust or to any
Beneficial Interest Holder for monetary damages for breach of any duty
(including, without limitation, fiduciary duty) as a Trustee, except (i) for
acts or omissions which involve actual fraud or willful misconduct or (ii) for
any transaction from which the Trustee derived improper personal benefit.
Neither the Beneficial Interest Holders nor the Trustees, officers,
employees or agents of the Trust will be liable under any written instrument
creating an obligation of the Trust, and all persons shall look solely to the
Trust Estate for the payment of any claim under or for the performance of that
instrument. All such written instruments may contain an express exculpatory
clause to the foregoing effect. The omission of the foregoing exculpatory
language from any instrument shall not affect the validity or enforceability of
such instrument and shall not render any Beneficial Interest Holder, Trustee,
officer, employee or agent liable thereunder to any third party, nor shall the
Trustee or any officer, employee or agent of the Trust be liable to anyone for
such omission.
The Trust shall indemnify and hold harmless each Trustee and officer of the
Trust (including any persons who, while a Trustee or officer of the Trust, is or
was serving at the request of the Trust as a director, officer, partner,
trustee, employee or agent of another foreign or domestic corporation,
partnership, joint venture, trust, other enterprise or employee benefit plan) to
the maximum extent permitted by law, except to the extent that the indemnitee is
found liable for (i) an act or omission involving actual fraud or willful
misconduct or (ii) a transaction in which the indemnitee received an improper
personal benefit. The Trust shall, upon request by the concerned Trustee or
officer assume the defense of any claim made against such Trustee or officer and
(i) whether or not such request is made, pay in advance of any final disposition
of such claims all costs of defense upon an undertaking by or on behalf of such
Trustee or officer to repay such amount if it shall be ultimately determined
that such Trustee or officer is not entitled to indemnification by the Trust,
and (ii) satisfy any judgment thereon from the assets of the Trust.
In the event any Beneficial Interest Holder or former Beneficial Interest
Holder shall be held to be personally liable for any obligation of the Trust
solely by reason of his or its being or having been a Beneficial Interest Holder
and not because of his or its acts or omissions or some other reason, the
Beneficial Interest Holder or former Beneficial Interest Holder (or his or its
legal representatives or successors) shall be entitled to be indemnified and
held harmless out of the Trust Estate against all loss and expenses arising from
such liability. The Trust shall, upon request by the concerned Beneficial
Interest Holder, assume the defense of any claim made against the Beneficial
Interest Holder and (i) whether or not such request is made, pay in advance of
any final disposition of such claims all costs of defense upon an undertaking by
or on behalf of such Beneficial Interest Holder to repay such amount if it is
ultimately determined that such Beneficial Interest Holder is not entitled to
indemnification by the Trust, and (ii) satisfy any judgment thereon from the
assets of the Trust.
II-11
<PAGE> 112
Subject to any express restrictions in the Declaration of Trust or adopted
by the Managing Trustees, the Trust may enter into any contract or transaction
of any kind (including without limitation, for the purchase or sale of property
or for any type of services, including those in connection with underwriting or
the offer of sale of securities of the Trust) with any person, including any
Trustee, officer, employee or agent of the Trust or any person affiliated with a
Trustee, officer, employee or agent of the Trust, whether or not any of them has
a financial interest in such transaction.
The Maine Business Corporation Act generally provides that a corporation
must indemnify, if so provided in the bylaws of the corporation, any person who
was or is a party or threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, if that 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, trustee, partner, fiduciary, employee or agent of another
corporation, partnership, joint venture, trust, pension or other employee
benefit plan or other enterprise, against expenses, including attorneys' fees,
judgments, fines and amounts paid in settlement actually and reasonably incurred
by that person in connection with such action, suit or proceeding; provided that
no indemnification may be provided for any person with respect to any matter as
to which that person shall have been fully adjudicated. A corporation may not
indemnify any person with respect to any claim, issue or matter asserted by or
in the right of the corporation as to which that person is finally adjudicated
to be liable to the corporation unless the court in which the action, suit or
proceeding was brought shall determine that, in view of all the circumstances of
the case, that person is fairly and reasonably entitled to indemnity for such
amounts as the court shall deem reasonable.
Bangor Investment Company (a Maine corporation). The Articles of
Incorporation of Bangor Investment Company, as amended, do not contain any
indemnification provisions, however, the Bylaws provide that the company shall
indemnify each present and future director and officer of the company (and his
heirs, executors and administrators) against all expenses and liabilities
reasonably incurred by him in connection with or arising out of any action, suit
or proceeding in which he may be involved by reason of his being or having been
a director or officer of the company, except in relation to matters as to which
he shall be adjudged in such action, suit or proceeding to have been liable for
negligence or misconduct in the performance of his duties as such director or
officer.
The North Carolina Business Corporation Act ("NCBCA") grants corporations
the power to indemnify an individual made a party to a proceeding because he or
she is or was a director against liability incurred in the proceeding if: (i)
the director conducted himself or herself in good faith, (ii) he or she
reasonably believed (a) if in the case of conduct in official capacity, the
conduct was in the best interests of the corporation and (b) in all other cases,
that the conduct was at the least not opposed to the best interests of the
corporation, and (iii) in the case of any criminal proceeding, he had no
reasonable cause to believe his conduct was unlawful. A corporation may not
indemnify a director (i) if the director was adjudged liable to the corporation,
or (ii) if the director was adjudged liable on the basis that personal benefit
was improperly received. The NCBCA mandates that unless limited by its articles
of incorporation, a corporation must indemnity a director who was wholly
successful, on the merits or otherwise, in the defense of any proceeding to
which he or she was a party because he or she is or was a director of the
corporation against reasonable expenses incurred by the director in connection
with the proceeding. In addition, the NCBCA generally provides that a
corporation indemnify an officer to the same extent as a director.
Beacon Manufacturing Company, Manetta Home Fashions, Inc. (each, a North
Carolina corporation). The Articles of Incorporation, as amended, of both
corporations provide that to the fullest extent permitted by law, no person who
is serving or who has served as a director of the corporation shall be
personally liable in any action for monetary damages for breach of his or her
duty as a director, whether such action is brought by or in the right of the
corporation or otherwise.
The Bylaws for both corporations provide that any person who at any time
serves or has served as a director or officer of the corporation or of any
wholly owned subsidiary of the corporation, or in such capacity at the request
of the corporation for any other foreign or domestic corporation, partnership,
joint venture, trust or other enterprise, or as a trustee or administrator under
any employee benefit plan of the corporation or of
II-12
<PAGE> 113
any wholly owned subsidiary thereof (a "Claimant"), shall have the right to be
indemnified and held harmless by the corporation to the fullest extent permitted
by law against all liabilities and litigation expenses in the event a claim
shall be made or threatened against that person in, or that person is made or
threatened to be made a party to, any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative,
and whether or not brought by or on behalf of the corporation, including all
appeals therefrom (a "proceeding"), arising out of such service; provided, that
such indemnification shall not be effective with respect to (i) that portion of
any liabilities or litigation expenses with respect to which the Claimant is
entitled to receive payment under any insurance policy or (ii) any liabilities
or litigation expenses incurred on account of any of the Claimant's activities
which were at the time taken known or believed by the Claimant to be clearly in
conflict with the best interests of the corporation.
The corporation shall not be liable to indemnify the Claimant for any
amounts paid in settlement of any proceeding effected without the corporation's
written consent. The corporation will not unreasonably withhold its consent to
any proposed settlement.
Except as provided below, any litigation expenses shall be advanced to any
Claimant within 30 days of receipt by the secretary of the corporation of a
demand therefor, together with an undertaking by or on behalf of the Claimant to
repay to the corporation such amount unless it is ultimately determined that the
Claimant is entitled to be indemnified by the corporation against such expenses.
The secretary shall promptly forward notice of the demand and undertaking
immediately to all directors of the corporation. Within 10 days after mailing of
notice to the directors, any disinterested director may, if desired, call a
meeting of all disinterested directors to review the reasonableness of the
expenses so requested. No advance shall be made if a majority of the
disinterested directors affirmatively determines that the item of expense is
unreasonable in amount; but if the disinterested directors determine that a
portion of the expense item is reasonable, the corporation shall advance such
portion. The board of directors may take action to advance any litigation
expenses to a Claimant upon receipt of an undertaking by or on behalf of the
Claimant to repay to the corporation such amount unless it is ultimately
determined that the Claimant is entitled to be indemnified by the corporation
against such expenses.
No Claimant shall be entitled to bring suit against the corporation to
enforce his rights under this Article until sixty days after a written claim has
been received by the corporation, together with any undertaking to repay.
Neither the failure of the corporation to determine that indemnification of the
Claimant is proper, nor determination by the corporation that indemnification is
not due shall be a defense to the action or create a presumption that the
Claimant has not met the applicable standard or conduct.
The right of indemnification provided herein or therein shall inure to the
benefit of the legal representatives of any Claimant, and the right shall not be
exclusive of any other rights to which the Claimant or legal representative may
be entitled. The rights granted shall not be limited by the provisions of the
NCBCA or any successor statute.
The Tennessee Business Corporation Act grants corporations the power to
indemnify an individual made a party to a proceeding because he or she is or was
a director against liability incurred in the proceeding if: (i) the director
conducted himself or herself in good faith, (ii) he or she reasonably believed
(a) if in the case of conduct in official capacity, the conduct was in the best
interests of the corporation and (b) in all other cases, that the conduct was at
the least not opposed to the best interests of the corporation, and (iii) in the
case of any criminal proceeding, he had no reasonable cause to believe his
conduct was unlawful. A corporation may not indemnify a director (i) if the
director was adjudged liable to the corporation, or (ii) if the director was
adjudged liable on the basis that personal benefit was improperly received. The
Tennessee Business Corporation Act mandates that unless limited by its articles
of incorporation, a corporation must indemnity a director who was wholly
successful, on the merits or otherwise, in the defense of any proceeding to
which he or she was a party because he or she is or was a director of the
corporation against reasonable expenses incurred by the director in connection
with the proceeding. The Tennessee Business Corporation Act generally provides
that a corporation indemnify an officer to the same extent as a director.
Crestfield Cotton Company (a Tennessee corporation). The Charter of
Crestfield Cotton Company, as amended, does not contain any indemnification
provisions, however, the Bylaws, as amended, provide that the
II-13
<PAGE> 114
corporation shall indemnify each present and future director and officer of the
corporation against, and each director or officer shall be entitled without
further act to indemnity from the corporation for, all expenses (including
counsel fees and the amount of judgments and the amount of reasonable
settlements made with a view to the curtailment of costs of litigation, other
than amounts paid to the corporation itself) reasonably incurred in connection
with or arising out of any action, suit or proceeding in which he may be
involved by reason of being or having been a director or officer. Provided,
however, that the director or officer (i) conducted himself in good faith; and
(ii) reasonably believed: (a) in the case of conduct in his official capacity
with the corporation that his conduct was in its best interest; and (b) in all
other cases, that his conduct was at least not opposed to the corporation's best
interest; and (iii) in the case of any criminal proceeding, he had no reasonable
cause to believe his conduct was unlawful. However, the corporation shall not
indemnify a director or officer in connection with: (i) a proceeding by or in
the right of the corporation in which the director was adjudged liable to the
corporation; or (ii) in connection with any other proceeding charging improper
personal benefit to him, whether or not involving action in his official
capacity, in which he was adjudged liable on the basis that personal benefit was
improperly received by him.
In addition, the corporation may pay for or reimburse the reasonable
expenses incurred by an officer or director who is a party to a proceeding in
advance of the final disposition of the proceeding if: (i) the director or
officer furnishes the corporation a written affirmation of his good faith belief
that he has met the standard of conduct hereinbefore described; (ii) the
director or officer furnishes the corporation a written undertaking, executed
personally or on his behalf, to repay the advance if it is ultimately determined
that he is not entitled to indemnification; and (iii) a determination is made
that the facts then known to those making the determination would not preclude
indemnification. The determination whether indemnification is permissible shall
be made by (i) a majority vote of a quorum of the Board of Directors not parties
to the proceeding; (ii) by majority vote of a committee duly designated by the
Board of Directors consisting of two or more directors not parties to the
proceeding; (iii) by independent special legal counsel selected by the Board of
Directors, or its committee; or by the shareholders, except the shares owned or
voted under the control of directors who are at the time parties to the
proceeding may not be voted on the determination. In no event shall
indemnification be made to, or on behalf of any director or officer if a
judgment or final adjudication adverse to the director or officer establishes
his liability (i) for any breach of the duty of loyalty to the corporation or
its shareholders; (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of the law; or (iii) for any
unlawful distributions from the corporation. The foregoing right of
indemnification shall inure to the benefit of the heirs, executors or
administrators of each director or officer and shall be in addition to all other
rights to which the director or officer may be entitled as a matter of law.
Tennessee Woolen Mills, Inc. (a Tennessee corporation). The Restated
Charter of Tennessee Woolen Mills, Inc., as amended, provides that to the
fullest extent permitted by the Tennessee Business Corporation Act, a director
of the corporation shall not be liable to the corporation or its shareholders
for monetary damages for breach of fiduciary duty as a director. If the
Tennessee Business Corporation Act or any successor statute is amended after
adoption of this provision to authorize corporate action further eliminating or
limiting the personal liability of directors, then the liability of a director
of the corporation shall be eliminated or limited to the fullest extent
permitted by the Tennessee Business Corporation Act, as so amended from time to
time. Any repeal or modification of this indemnification by the shareholders of
the corporation shall not adversely affect any right or protection of a director
of the corporation existing at the time of such repeal or modification or with
respect to events occurring prior to such time.
The Bylaws provide that 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 (including
any action by or in the right of the corporation) by reason of the fact that he
is or was serving as an officer or director of the corporation or is or was
serving at the request of the corporation as a director or officer of another
corporation, partnership, joint venture, trust or other enterprise, shall be
indemnified by the corporation against expenses (including reasonable attorneys'
fees), judgments, fines, and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith for a purpose which he reasonably believed to be in the best
interest of the
II-14
<PAGE> 115
corporation, and, in criminal actions or proceedings, in addition, had no
reasonable cause to believe that his conduct was unlawful, to the maximum extent
permitted by, and in the manner provided by, the Tennessee General Corporation
Act.
ITEM 21. EXHIBITS
Pursuant to Item 601 of Regulation S-K, 17 C.F.R. sec. 229.601 (b) (4)
(iii) (A), the Company has excluded from Exhibit No. 4 instruments defining the
rights of holders of long-term debt with respect to debt that does not exceed
10% of the total assets of the Company. The Company agrees to furnish copies of
such instruments to the Commission upon request.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------- -----------------------
<C> <S>
2.1 -- Agreement and Plan of Merger, dated as of September 10,
1997, by and among Pillowtex Corporation, Pegasus Merger
Sub, Inc., and Fieldcrest Cannon, Inc. (incorporated by
reference to Exhibit 2.1 to Pillowtex Corporation's
Registration Statement on Form S-4 (No. 333-36663) filed
on September 29, 1997)
2.2 -- Amendment to Agreement and Plan of Merger, dated as of
September 23, 1997, by and among Pillowtex Corporation,
Pegasus Merger Sub, Inc., and Fieldcrest Cannon, Inc.
(incorporated by reference to Exhibit 2.2 to Pillowtex
Corporation's Registration Statement on Form S-4 (No.
333-36663) filed on September 29, 1997)
3.1 -- Restated Articles of Incorporation of Pillowtex
Corporation, as amended (incorporated by reference to
Exhibit 3.1 to Pillowtex Corporation's Current Report on
Form 8-K No. 001-11756) filed on January 6, 1998)
3.2 -- Amended and Restated Bylaws of Pillowtex Corporation, as
amended (incorporated by reference to Exhibit 3.2 to
Pillowtex Corporation's Annual Report on Form 10-K for
the fiscal year ended December 30, 1994)
3.3 -- Restated Certificate of Incorporation of Fieldcrest
Cannon, Inc., as amended (incorporated by reference to
Exhibit 3.1 to Fieldcrest Cannon, Inc.'s Registration
Statement on Form S-3 (No. 33-52325) filed on February
18, 1994)
3.4 -- Amended and Restated Bylaws of Fieldcrest Cannon, Inc.,
as amended (incorporated by reference to Exhibit 3.1 of
Fieldcrest Cannon, Inc.'s Current Report on Form 8-K
dated November 24, 1993)
*3.5 -- Amended and Restated Certificate of Incorporation of
Amoskeag Company
*3.6 -- Bylaws of Amoskeag Company, as amended
*3.7 -- Certificate of Incorporation of Amoskeag Management
Corporation
*3.8 -- Bylaws of Amoskeag Management Corporation
*3.9 -- Articles of Incorporation of Bangor Investment Company,
as amended
*3.10 -- Bylaws of Bangor Investment Company
*3.11 -- Articles of Amendment of Beacon Manufacturing Company
*3.12 -- Amended and Restated Bylaws of Beacon Manufacturing
Company
*3.13 -- Charter of Crestfield Cotton Company, as amended
*3.14 -- Bylaws of Crestfield Cotton Company, as amended
*3.15 -- Certificate of Incorporation of Downeast Securities
Corporation, as amended
*3.16 -- Bylaws of Downeast Securities Corporation
*3.17 -- Certificate of Incorporation of Encee, Inc.
*3.18 -- Bylaws of Encee, Inc.
*3.19 -- Certificate of Incorporation of FCC Canada, Inc.
*3.20 -- Bylaws of FCC Canada, Inc.
</TABLE>
II-15
<PAGE> 116
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------- -----------------------
<C> <S>
*3.21 -- Certificate of Incorporation of Fieldcrest Cannon
Financing, Inc.
*3.22 -- Bylaws of Fieldcrest Cannon Financing, Inc.
*3.23 -- Certificate of Incorporation Fieldcrest Cannon
International, Inc., as amended
*3.24 -- Bylaws of Fieldcrest Cannon International, Inc., as
amended
*3.25 -- Certificate of Incorporation of Fieldcrest Cannon
Licensing, Inc.
*3.26 -- Bylaws of Fieldcrest Cannon Licensing, Inc.
*3.27 -- Certificate of Incorporation of Fieldcrest Cannon Sure
Fit, Inc.
*3.28 -- Bylaws of Fieldcrest Cannon Sure Fit, Inc.
*3.29 -- Certificate of Incorporation of Fieldcrest Cannon
Transportation, Inc.
*3.30 -- Bylaws of Fieldcrest Cannon Transportation, Inc.
*3.31 -- Articles of Incorporation of Manetta Home Fashions, Inc.,
as amended
*3.32 -- Bylaws of Manetta Home Fashions, Inc.
*3.33 -- Certificate of Incorporation of Moore's Falls
Corporation, as amended
*3.34 -- Bylaws of Moore's Falls Corporation
*3.35 -- Certificate of Incorporation of Pillowtex, Inc.
*3.36 -- Bylaws of Pillowtex, Inc.
*3.37 -- Certificate of Trust of Pillowtex Management Services
Company
*3.38 -- Declaration of Trust of Pillowtex Management Services
Company
*3.39 -- Certificate of Trust of PTEX Holding Company
*3.40 -- Bylaws of PTEX Holding Company
*3.41 -- Certificate of Incorporation of St. Mary's, Inc.
*3.42 -- Bylaws of St. Mary's, Inc.
*3.43 -- Articles of Amendment to the Restated Charter of
Tennessee Woolen Mills, Inc.
*3.44 -- Bylaws of Tennessee Woolen Mills, Inc.
*4.1 -- Indenture, dated as of December 18, 1997, among Pillowtex
Corporation, the guarantors listed on the signature page
thereto, and Norwest Bank Minnesota, National
Association, as Trustee
*4.2 -- Supplemental Indenture, dated as of December 19, 1997,
among Pillowtex Corporation, the guarantors listed on the
signature page thereto, and Norwest Bank Minnesota,
National Association, as Trustee
4.3 -- Registration Rights Agreement, dated as of December 18,
1997, among Pillowtex Corporation, the guarantors listed
on the signature page thereto, and NationsBanc Montgomery
Securities, Inc. and Bear, Stearns & Co. Inc.
(incorporated by reference to Exhibit 10.7 to Pillowtex
Corporation's Current Report on Form 8-K (No. 001-11756)
filed on January 6, 1998)
4.4 -- Registration Rights Agreement Supplement, dated as of
December 19, 1997, among Pillowtex Corporation, the
guarantors listed on the signature page thereto, and
NationsBanc Montgomery Securities, Inc. and Bear, Stearns
& Co. Inc. (incorporated by reference to Exhibit 10.8 to
Pillowtex Corporation's Current Report on Form 8-K (No.
001-11756) filed on January 6, 1998)
*4.5 -- Form of 9% Senior Subordinated Note
*4.6 -- Form of Guarantee
+5.1 -- Opinion of Jones, Day, Reavis & Pogue regarding the
legality of securities to be issued
9.1 -- Voting Agreement, dated as of October 2, 1997, by and
between Pillowtex Corporation and Charles M. Hansen, Jr.
(incorporated by reference to Exhibit 9.1 to Pillowtex
Corporation's Registration Statement on Form S-4 (No.
333-36663) filed on September 29, 1997)
</TABLE>
II-16
<PAGE> 117
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------- -----------------------
<C> <S>
9.2 -- Voting Agreement, dated as of October 2, 1997, by and
between Pillowtex Corporation, on the one hand, and Mary
R. Silverthorne, the John H. Silverthorne Marital Trust
B, and the John H. Silverthorne Family Trust A, on the
other hand (incorporated by reference to Exhibit 9.2 to
Pillowtex Corporation's Registration Statement on Form
S-4 (No. 333-36663) filed on September 29, 1997)
10.1 -- Commitment Letter, dated September 10, 1997, by and
between NationsBank of Texas, N.A. and Pillowtex
Corporation (incorporated by reference to Exhibit 10.1 to
Pillowtex Corporation's Current Report on Form 8-K dated
September 10, 1997, as amended by a Form 8-K/A (Amendment
No. 1) dated September 10, 1997)
10.2 -- Registration Rights Agreement, dated as of November 12,
1996, by and among Pillowtex Corporation, each domestic
subsidiary of Pillowtex Corporation, and NationsBanc
Capital Markets, Inc., and Merrill Lynch, Pierce, Fenner
& Smith, Incorporated (incorporated by reference to
Exhibit 10.59 to Pillowtex Corporation's Form S-4 (No.
333-17731) filed on December 12, 1996)
10.3 -- Restated Credit Agreement, dated as of November 12, 1996,
by and among Pillowtex Corporation and NationsBank of
Texas, N.A., as Agent for the Lenders specified therein
(excludes Schedules) (incorporated by reference to
Exhibit 10.60 to Pillowtex Corporation's Form S-4 (No.
333-17731) filed on December 12, 1996)
10.4 -- Form of Swing-Line Note, dated as of November 12, 1996,
by and among Pillowtex Corporation and NationsBank of
Texas, N.A. (incorporated by reference to Exhibit 10.61
to Pillowtex Corporation's Form S-4 (No. 333-17731) filed
on December 12, 1996)
10.5 -- Form of Revolving Note, by and among Pillowtex
Corporation and NationsBank of Texas, N.A. (incorporated
by reference to Exhibit 10.62 to Pillowtex Corporation's
Form S-4 (No. 333-17731) filed on December 12, 1996)
10.6 -- Form of Restated Guaranty, by and among Beacon
Manufacturing Company, Manetta Home Fashions, Inc.,
Tennessee Woolen Mills, Inc., Pillowtex, Inc., PTEX
Holding Company, and Pillowtex Management Services
Company as guarantors, NationsBank of Texas, N.A. as
Agent, and Pillowtex Corporation as Borrower
(incorporated by reference to Exhibit 10.63 to Pillowtex
Corporation's Form S-4 (No. 333-17731) filed on December
12, 1996)
10.7 -- Form of Restated Security Agreement, by and among
Pillowtex Corporation as Debtor/Borrower, NationsBank of
Texas, N.A. as Secured Party, and Beacon Manufacturing
Company, Manetta Home Fashions, Inc., Tennessee Woolen
Mills, Inc., Pillowtex, Inc., PTEX Holding Company, and
Pillowtex Management Services Company as Subsidiary
Debtors (incorporated by reference to Exhibit 10.64 to
Pillowtex Corporation's Form S-4 (No. 333-17731) filed on
December 12, 1996)
10.8 -- Asset Purchase Agreement, dated as of October 3, 1996, by
and among Pillowtex Corporation and Fieldcrest Cannon,
Inc. (incorporated by reference to Exhibit 10.65 to
Pillowtex Corporation's Form S-4 (No. 333-17731) filed on
December 12, 1996)
10.9 -- Mississippi Business Finance Corporation Industrial
Development Variable Rate Demand Notes (Pillowtex
Corporation Project) Series 1992 Loan Agreement,
Indenture of Trust, Promissory Note, Remarketing and
Interest Services Agreement, Placement Agreement, Deed of
Trust and Security Agreement, Bond Fund Trustee
Agreement, Reimbursement Agreement, and Lease Agreement
(including First Amendment) (incorporated by reference to
Exhibit 10.3 to Pillowtex Corporation's Registration
Statement on Form S-1 (No. 33-57314) filed on January 22,
1993)
10.10 -- Second through Fourth Amendment to Mississippi Business
Finance Corporation Industrial Development Variable Rate
Demand Notes (Pillowtex Corporation Project) Loan
Agreement (incorporated by reference to Exhibit 10.4 to
Pillowtex Corporation's Annual Report on Form 10-K for
the fiscal year ended December 31, 1993)
</TABLE>
II-17
<PAGE> 118
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------- -----------------------
<C> <S>
10.11 -- Deed of Trust (with Security Agreement and Assignment of
Rents and Leases), dated as of July 15, 1988, between
Pillowtex Corporation and Principal Mutual Life Insurance
Company, as amended, Deed of Trust Note, and Loan
Modification and Amendment Agreement (incorporated by
reference to Exhibit 10.5 to Pillowtex Corporation's
Registration Statement on Form S-1 (No. 33-57314) filed
on January 22, 1993)
10.12 -- Second Loan Agreement Modification and Amendment
Agreement dated as of January 19, 1993, between Pillowtex
Corporation and Principal Mutual Life Insurance Company
(incorporated by reference to Exhibit 10.6 to Pillowtex
Corporation's Registration Statement on Form S-1 (No.
33-57314) filed on January 22, 1993)
10.13 -- Deed of Trust Note dated as of July 15, 1988, from
Pillowtex Corporation to Principal Mutual Life Insurance
Company (incorporated by reference to Exhibit 10.7 to
Pillowtex Corporation's Registration Statement on Form
S-1 (No. 33-57314) filed on January 22, 1993)
10.14 -- Loan and Security Agreement dated April 6, 1992, between
MetLife Capital Corporation and Pillowtex Corporation, as
amended, and including Term Note dated June 5, 1992
(incorporated by reference to Exhibit 10.8 to Pillowtex
Corporation's Registration Statement on Form S-1 (No.
33-57314) filed on January 22, 1993)
10.15 -- Pennsylvania Economic Development Financing Authority
("PEDFA") Economic Development Revenue Bonds 1990 Series
C (Silversen-Hanover Corporation Project), dated April 1,
1990, Indenture of Trust between PEDFA and First
Pennsylvania Bank; Financing Agreement between PEDFA and
Silversen-Hanover Corporation; Bond Placement Agreement
among PEDFA, NCNB National Bank of North Carolina, and
Silversen-Hanover Corporation; Reimbursement Agreement
between Silversen-Hanover Corporation and NCNB National
Bank of North Carolina; and Form of Bond (incorporated by
reference to Exhibit 10.44 to Pillowtex Corporation's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1993)
10.16 -- Distribution Agreement, dated February 1, 1995 by and
among Beacon Manufacturing Company, Manetta Home
Fashions, Inc.,Tennessee Woolen Mills, Inc., NEMCOR,
Inc., Norm McIntyre, Tim McIntyre, and Don McIntyre
(incorporated by reference to Exhibit 10.35 to Pillowtex
Corporation's Annual Report on Form 10-K for the fiscal
year ended December 31, 1994)
10.17 -- The Priorities Agreement, dated February 27, 1995,
between Toronto Dominion Bank, Manetta Home Fashions,
Inc., Tennessee Woolen Mills, Beacon Manufacturing
Company, and NEMCOR, Inc. (incorporated by reference to
Exhibit 10.36 to Pillowtex Corporation's Annual Report on
Form 10-K for the fiscal year ended December 31, 1994)
10.18 -- A Guarantee, dated February 27, 1995, between Beacon
Manufacturing Company, Manetta Home Fashions, Inc.,
Tennessee Woolen Mills, Inc., and NEMCOR, Inc.
(incorporated by reference to Exhibit 10.37 to Pillowtex
Corporation's Annual Report on Form 10-K for the fiscal
year ended December 30, 1994)
10.19 -- Security Agreement, dated February 16, 1995, between
NEMCOR, Inc. and Manetta Home Fashions, Inc.
(incorporated by reference to Exhibit 10.38 to Pillowtex
Corporation's Annual Report on Form 10-K for the fiscal
year ended December 31, 1994)
10.20 -- Security Agreement, dated February 16, 1995, between
NEMCOR, Inc. and Tennessee Woolen Mills, Inc.
(incorporated by reference to Exhibit 10.39 to Pillowtex
Corporation's Annual Report on Form 10-K for the fiscal
year ended December 31, 1994)
10.21 -- Security Agreement, dated February 16, 1995, between
NEMCOR, Inc. and Beacon Manufacturing Company
(incorporated by reference to Exhibit 10.40 to Pillowtex
Corporation's Annual Report on Form 10-K for the fiscal
year ended December 31, 1994)
</TABLE>
II-18
<PAGE> 119
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------- -----------------------
<C> <S>
10.22 -- Amended and Restated Acquisition Agreement, dated as of
November 30, 1994, by and among David H. Murdock, Beacon
Manufacturing Company, Wiscassett Mills Company,
Pillowtex Corporation, Be-Ac, Inc., Realmac, Inc., and
Wiscat, Inc. (incorporated by reference to Exhibit 10.41
to Pillowtex Corporation's Current Report on Form 8-K
dated December 14, 1994)
10.23 -- Purchase agreement between Coopers & Lybrand and Torfeaco
Industries Limited for certain assets, dated August 19,
1994 (incorporated by reference to Exhibit 10.42 to
Pillowtex Corporation's Annual Report on Form 10-K for
the fiscal year ended December 31, 1994)
10.24 -- Indenture dated as of February 1, 1994, by and among
Torfeaco Industries Limited and Lodestone Investments
Limited, Lese Holdings Limited, Golden Elms Limited, M.
Swadron Limited, and Helsinor Investments Limited
(incorporated by reference to Exhibit 10.29 to Pillowtex
Corporation's Annual Report on Form 10-K for the fiscal
year ended December 31, 1993)
10.25 -- Sublicense Agreement, dated as of July 1, 1995, between
Pillowtex Corporation and the Ralph Lauren Home
Collection (incorporated by reference to Exhibit 10 to
Pillowtex Corporation's Quarterly on Form 10-Q for the
quarter ended July 1, 1995)
10.26 -- Lease Agreement, dated as of September 18, 1995, between
Pillowtex Corporation and Sanwa Business Credit Corp.
(incorporated by reference to Exhibit 10.4 to Pillowtex
Corporation's Quarterly Report on Form 10-Q, as amended
for the quarter ended September 30, 1995)
10.27 -- Agreement of Lease, dated May 23, 1995, between Ten
Seventy One Joint Venture and Pillowtex Corporation
(incorporated by reference to Exhibit 10.66 to Pillowtex
Corporation's Annual Report on Form 10-K for the fiscal
year ended December 30, 1995)
10.28 -- Lease, dated as of March 1, 1977, by and among Torfeaco
Industries Limited and Standa Investment Limited, and
Sharon Construction Limited (incorporated by reference to
Exhibit 10.43 to Pillowtex Corporation's Annual Report on
Form 10-K for the fiscal year ended December 31, 1993)
10.29 -- Industrial Lease, dated as of November 23, 1992, between
Angel and Jean Echevarria and Pillowtex Corporation
(incorporated by reference to Exhibit 10.21 to Pillowtex
Corporation's Registration Statement on Form S-1 (No.
33-57314) filed on January 22, 1993)
10.30 -- Form of Lease, dated as of October 12, 1988, between
Jimmie D. Smith, Jr. and Pillowtex Corporation
(incorporated by reference to Exhibit 10.23 to Pillowtex
Corporation's Registration Statement on Form S-1 (No.
33-57314) filed on January 22, 1993)
10.31 -- Form of Equipment Leasing Agreement between BTM Financial
& Leasing Corporation B-4 and Beacon Manufacturing
Company, Manetta Home Fashions, Inc., and Tennessee
Woolen Mills, Inc., dated as of June 14, 1996 (without
Exhibits) (incorporated by reference to Exhibit 10 to
Pillowtex Corporation's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1996)
10.32 -- Employment Agreement dated as of January 1, 1993, between
Pillowtex Corporation and Charles M. Hansen, Jr.
(incorporated by reference to Exhibit 10.2 to Pillowtex
Corporation's Registration Statement on Form S-1 (No.
33-57314) filed on January 22, 1993)
10.33 -- Amendment to Employment Agreement, dated as of July 26,
1993, between Pillowtex Corporation and Charles M.
Hansen, Jr. (incorporated by reference to Exhibit 10.26
to Pillowtex Corporation's Annual Report on Form 10-K for
the fiscal year ended December 31, 1993)
10.34 -- Forms of Employment Agreement dated as of September 1,
1995, between Pillowtex Corporation and each of
Christopher N. Baker, Jeffrey D. Cordes, and Scott E.
Shimizu (incorporated by reference to Exhibits 10.1,
10.2, and 10.3 to Pillowtex Corporation's Quarterly
Report on Form 10-Q, as amended, for the quarter ended
September 30, 1995)
</TABLE>
II-19
<PAGE> 120
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------- -----------------------
<C> <S>
10.35 -- Forms of Change of Control Agreement, dated as of
September 1, 1995, between Pillowtex Corporation and each
of Christopher N. Baker, Jeffrey D. Cordes, and Scott E.
Shimizu (incorporated by reference to Exhibits 10.5,
10.6, and 10.7 to Pillowtex Corporation's Quarterly
Report on Form 10-Q, as amended, for the quarter ended
September 30, 1995)
10.36 -- Form of Confidentiality and Noncompetition Agreement
(incorporated by reference to Exhibit 10.27 to Pillowtex
Corporation's Registration Statement on Form S-1 (No.
33-57314) filed on January 22, 1993)
10.37 -- Form of Director Indemnification Agreement (incorporated
by reference to Exhibit 10.36 to Pillowtex Corporation's
Registration Statement on Form S-1 (No. 33-57314) filed
on January 22, 1993)
10.38 -- Split Dollar Life Insurance Agreement between Pillowtex
Corporation and Charles M. Hansen, Jr. dated July 26,
1993 (incorporated by reference to Exhibit 10.32 to
Pillowtex Corporation's Annual Report on Form 10-K for
the fiscal year ended December 31, 1993)
10.39 -- Pillowtex Corporation 1993 Stock Option Plan
(incorporated by reference to Appendix A to Pillowtex
Corporation's Proxy Statement relating to its Annual
Meeting of Shareholders held on May 8, 1997)
10.40 -- Form of Employment Agreement entered into between
Pillowtex Management Services Company and each of
Christopher N. Baker, Jeffrey D. Cordes, Scott E.
Shimizu, and John H. Karnes (incorporated by reference to
Exhibit 10.1 to Pillowtex Corporation's Quarterly Report
on Form 10-Q for the quarter ended June 28, 1997)
10.41 -- Form of Guaranty Agreement dated as of April 22, 1997,
between Pillowtex Corporation and each of Christopher N.
Baker, Jeffrey D. Cordes, Scott E. Shimizu, Kevin M.
Finlay, and John H. Karnes (incorporated by reference to
Exhibit 10.2 to Pillowtex Corporation's Quarterly Report
on Form 10-Q for the quarter ended June 28, 1997)
10.42 -- Form of Employment Agreement dated as of April 11, 1997,
between Pillowtex Management Services Company and Kevin
M. Finlay (incorporated by reference to Exhibit 10.3 to
Pillowtex Corporation's Quarterly Report on Form 10-Q for
the quarter ended June 28, 1997)
10.43 -- Pillowtex Corporation Supplemental Executive Retirement
Plan, effective as of January 1, 1997 (incorporated by
reference to Exhibit 10.1.44 to Pillowtex Corporation's
Registration Statement on Form S-4 (No. 33-36663) filed
on September 29, 1997)
10.44 -- Pillowtex Corporation Management Incentive Plan
(incorporated by reference to Appendix B to Pillowtex
Corporation's Proxy Statement relating to its Annual
Meeting of Shareholders held on May 8, 1997)
10.45 -- Amended and Restated Director Stock Option Plan of the
Registrant approved by the stockholders of the
Corporation on April 28, 1992 (incorporated by reference
to Exhibit A to Fieldcrest Cannon, Inc.'s Proxy Statement
relating to its Annual Meeting of Stockholders held on
April 28, 1992)
10.46 -- Stock Option Agreement between Fieldcrest Cannon, Inc.
and James M. Fitzgibbons, dated as of September 11, 1991
(incorporated by reference to Exhibit 4.1 to Fieldcrest
Cannon, Inc.'s Registration Statement on Form S-8 (No.
33-44703) filed on December 23, 1991)
10.47 -- Employee Retention Agreement between Fieldcrest Cannon,
Inc. and James M. Fitzgibbons, effective as of July 9,
1993 (incorporated by reference to Exhibit 10.2 to
Fieldcrest Cannon, Inc.'s Quarterly Report on Form 10-Q
for the quarter ended September 30, 1993)
10.48 -- Instrument of Amendment, dated July 15, 1996 between
Fieldcrest Cannon, Inc. and James M. Fitzgibbons
(incorporated by reference to Exhibit 10.4 to Fieldcrest
Cannon, Inc.'s Annual Report on Form 10-K for the fiscal
year ended December 31, 1996)
10.49 -- Employee Retention Agreement between Fieldcrest Cannon,
Inc. and Robert E. Dellinger, effective as of July 9,
1993 (incorporated by reference to Exhibit 10.9 to
Fieldcrest Cannon, Inc.'s Annual Report on Form 10-K for
the fiscal year ending December 31, 1993)
</TABLE>
II-20
<PAGE> 121
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------- -----------------------
<C> <S>
10.50 -- Instrument of Amendment, dated July 29, 1993 between
Fieldcrest Cannon, Inc. and Robert E. Dellinger
(incorporated by reference to Exhibit 10.10 to Fieldcrest
Cannon, Inc.'s Annual Report on Form 10-K for the fiscal
year ending December 31, 1993)
10.51 -- Instrument of Amendment, dated July 15, 1996 between
Fieldcrest Cannon, Inc. and Robert E. Dellinger
(incorporated by reference to Exhibit 10.7 Fieldcrest
Cannon, Inc.'s Annual Report on Form 10-K for the fiscal
year ended December 31, 1996)
10.52 -- Employee Retention Agreement between Fieldcrest Cannon,
Inc. and Thomas R. Staab, effective as of July 9, 1993
(incorporated by reference to Exhibit 10.8 to Fieldcrest
Cannon, Inc.'s Annual Report on Form 10-K for the fiscal
year ending December 31, 1995)
10.53 -- Instrument of Amendment, dated July 29, 1993 between
Fieldcrest Cannon, Inc. and Thomas R. Staab (incorporated
by reference to Exhibit 10.9 to Fieldcrest Cannon, Inc.'s
Annual Report on Form 10-K for the fiscal year ending
December 31, 1995)
10.54 -- Instrument of Amendment, dated July 15, 1996 between
Fieldcrest Cannon, Inc. and Thomas R. Staab (incorporated
by reference to Exhibit 10.10 to Fieldcrest Cannon,
Inc.'s Annual Report on Form 10-K for the fiscal year
ended December 31, 1996)
10.55 -- Employee Retention Agreement between Fieldcrest Cannon,
Inc. and John Nevin, effective as of October 3, 1996
(incorporated by reference to Exhibit 10.11 to Fieldcrest
Cannon, Inc.'s Annual Report on Form 10-K for the fiscal
year ended December 31, 1996)
10.56 -- Form of Employee Retention Agreement between Fieldcrest
Cannon, Inc. and other executive officers of Fieldcrest
Cannon, Inc., effective as of July 9, 1993 (incorporated
by reference to Exhibit 10.6 to Fieldcrest Cannon, Inc.'s
Quarterly Report on Form 10-Q for the quarter ended
September 30, 1993)
10.57 -- Form of Instrument of Amendment, dated July 29, 1993
between Fieldcrest Cannon, Inc. and other executive
officers of Fieldcrest Cannon, Inc. (incorporated by
reference to Exhibit 10.7 to Fieldcrest Cannon, Inc.'s
Quarterly Report on Form 10-Q for the quarter ended
September 30, 1993)
10.58 -- Form of Instrument of Amendment, dated July 15, 1996
between Fieldcrest Cannon, Inc. and other executive
officers of Fieldcrest Cannon, Inc. (incorporated by
reference to Exhibit 10.14 to Fieldcrest Cannon, Inc.'s
Annual Report on Form 10-K for the fiscal year ended
December 31, 1996)
10.59 -- 1995 Employee Stock Option Plan of Fieldcrest Cannon,
Inc. (incorporated by reference to Exhibit 4.1 of
Fieldcrest Cannon, Inc.'s Registration Statement of Form
S-8 (No. 33-59145) filed on May 8, 1995)
10.60 -- Yarn Purchase Agreement between Parkdale Mills,
Incorporated and Fieldcrest Cannon, Inc. (incorporated by
reference to Exhibit 10 to Fieldcrest Cannon, Inc.'s
Quarterly Report on Form 10-Q for the quarter ended March
31, 1996)
10.61 -- Amended and Restated Credit Agreement, dated as of
December 19, 1997, among Pillowtex Corporation, certain
Lenders named therein, and NationsBank of Texas, N.A., as
Administrative Agent (incorporated by reference to
Exhibit 10.1 to Pillowtex Corporation's Current Report on
Form 8-K (No. 001-11756) filed on January 6, 1998)
10.62 -- Term Credit Agreement, dated as of December 19, 1997,
among Pillowtex Corporation, certain Lenders named
herein, and NationsBank of Texas, N.A., as Administrative
Agent (incorporated by reference to Exhibit 10.2 to
Pillowtex Corporation's Current Report on Form 8-K (No.
001-11756) filed on January 6, 1998)
10.63 -- Preferred Stock Purchase Agreement, dated as of September
10, 1997, by and among Pillowtex Corporation, Apollo
Investment Fund III, L.P., Apollo Overseas Partners III,
L.P., and Apollo (UK) Partners III, L.P. (incorporated by
reference to Exhibit 10.2 to Pillowtex Corporation's
Current Report on Form 8-K dated September 10, 1997, as
amended by a Form 8-K/A (Amendment No. 1) dated September
10, 1997)
</TABLE>
II-21
<PAGE> 122
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------- -----------------------
<C> <S>
10.64 -- Amendment No. 1 to the Preferred Stock Purchase
Agreement, dated as of November 21, 1997, by and among
Pillowtex Corporation, Apollo Investment Fund III, L.P.,
Apollo Overseas Partners III, L.P., and Apollo (UK)
Partners III, L.P. (incorporated by reference to Exhibit
10.1 to Pillowtex Corporation's Current Report on Form
8-K dated November 21, 1997)
10.65 -- Purchase Agreement, dated December 15, 1997, among
Pillowtex Corporation, the guarantors listed on the
signature page thereto, and NationsBanc Montgomery
Securities, Inc. and Bear, Stearns & Co. Inc.
(incorporated by reference to Exhibit 10.5 to Pillowtex
Corporation's Current Report on Form 8-K (No. 001-11756)
filed on January 6, 1998)
10.66 -- Purchase Agreement Supplement, dated December 19, 1997,
among Pillowtex Corporation, the guarantors listed on the
signature page thereto, and NationsBank Montgomery
Securities, Inc. and Bear, Stearns & Co. Inc.
(incorporated by reference to Exhibit 10.6 to Pillowtex
Corporation's Current Report on Form 8-K (No. 001-11756)
filed on January 6, 1998)
11.1 -- Fieldcrest Cannon, Inc.'s Computation of Primary and
Fully Diluted Net Income Per Share (incorporated by
reference to Exhibit 11 to Fieldcrest Cannon, Inc.'s
Annual Report on Form 10-K for the fiscal year ended
December 31, 1996)
11.2 -- Fieldcrest Cannon, Inc.'s Computation of Primary and
Fully Diluted Net Income Per Share (incorporated by
reference to Exhibit 11 to Fieldcrest Cannon, Inc.'s
Quarterly Report on Form 10-Q for the quarter ended
September 30, 1997)
+12.1 -- Statement regarding computation of ratios
16.1 -- Letter from Ernst & Young LLP (incorporated by reference
to Exhibit 16.1 to Fieldcrest Cannon, Inc.'s Current
Report on Form 8-K (No. 002-79328) filed on December 29,
1997)
21.1 -- List of Pillowtex Corporation's Principal Operating
Subsidiaries (incorporated by reference to Exhibit 21.1
to Pillowtex Corporation's Form S-4 (No. 333-17731) filed
on December 12, 1996)
21.2 -- List of Fieldcrest Cannon, Inc.'s Principal Operating
Subsidiaries (incorporated by reference to Exhibit 21 to
Fieldcrest Cannon, Inc.'s Annual Report on Form 10-K for
the fiscal year ended December 31, 1996)
23.1 -- Consent of Jones, Day, Reavis & Pogue (included in
Exhibit 5.1)
+23.2 -- Consent of KPMG Peat Marwick LLP
+23.3 -- Consent of Ernst & Young LLP
*24.1 -- Powers of Attorney
*25.1 -- Statement of eligibility under the Trust Indenture Act of
1939 on Form T-1
+99.1 -- Letter of Transmittal
+99.2 -- Notice of Guaranteed Delivery
</TABLE>
- ---------------
* Previously filed
+ Filed herewith
II-22
<PAGE> 123
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% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement; and
(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;
provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the
registration statement is on Form S-3 or Form S-8, and the information
required to be included in a post-effective amendment by those paragraphs
is contained in periodic reports filed with or furnished to the Commission
by the registrant pursuant to Sections 13 or 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference 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 that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement 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.
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnifica-
II-23
<PAGE> 124
tion by it is against public policy as expressed in the Act and will be governed
by the final adjudication of such issue.
(d) The undersigned registrant hereby undertakes to file an application for
the purpose of determining the eligibility of the trustee to act under
subsection (a) of Section 310 of the Trust Indenture Act in accordance with the
rules and regulations prescribed by the Commission under Section 305(b)(2) of
the Act.
(e) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 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.
(f) 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.
II-24
<PAGE> 125
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Pillowtex
Corporation has duly caused this Amendment No. 1 to Registration Statement on
Form S-4 to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Dallas, State of Texas on February 17, 1998.
PILLOWTEX CORPORATION
By /s/ JEFFREY D. CORDES
------------------------------------
Jeffrey D. Cordes
President and Chief Operating
Officer, Director
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities indicated on February 17, 1998.
<TABLE>
<CAPTION>
SIGNATURES TITLE
---------- -----
<S> <C>
* Chairman of the Board and Chief Executive Officer;
- --------------------------------------------- Director (Principal Executive Officer)
Charles M. Hansen, Jr.
* Director
- ---------------------------------------------
Christopher N. Baker
* Director
- ---------------------------------------------
Kevin M. Finlay
* Director
- ---------------------------------------------
Scott E. Shimizu
* Director
- ---------------------------------------------
Mary R. Silverthorne
* Director
- ---------------------------------------------
William B. Madden
* Director
- ---------------------------------------------
M. Joseph McHugh
* Director
- ---------------------------------------------
Paul G. Gillease
* Director
- ---------------------------------------------
Ralph La Rovere
</TABLE>
The undersigned, by signing his name hereto, does sign and execute this
Amendment No. 1 to Registration Statement on Form S-4 pursuant to the Powers of
Attorney executed on behalf of the above-named officers and directors and filed
herewith.
/s/ JEFFREY D. CORDES
--------------------------------------
Jeffrey D. Cordes
Attorney-in-Fact
II-25
<PAGE> 126
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Amoskeag
Company has duly caused this Amendment No. 1 to Registration Statement on Form
S-4 to be signed on its behalf by the undersigned, thereunto duly authorized, in
the City of Dallas, State of Texas on February 17, 1998.
AMOSKEAG COMPANY
By /s/ JEFFREY D. CORDES
------------------------------------
Jeffrey D. Cordes
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities indicated on February 17, 1998.
<TABLE>
<CAPTION>
SIGNATURES TITLE
---------- -----
<S> <C>
* Chief Executive Officer and Director
- ---------------------------------------------
Charles M. Hansen, Jr.
</TABLE>
The undersigned, by signing his name hereto, does sign and execute this
Amendment No. 1 to Registration Statement on Form S-4 pursuant to the Powers of
Attorney executed on behalf of the above-named officers and directors and filed
herewith.
/s/ JEFFREY D. CORDES
--------------------------------------
Jeffrey D. Cordes
Attorney-in-Fact
II-26
<PAGE> 127
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Amoskeag
Management Corporation has duly caused this Amendment No. 1 to Registration
Statement on Form S-4 to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Dallas, State of Texas on February 17, 1998.
AMOSKEAG MANAGEMENT CORPORATION
By /s/ JEFFREY D. CORDES
------------------------------------
Jeffrey D. Cordes
President and Director
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities indicated on February 17, 1998.
<TABLE>
<CAPTION>
SIGNATURES TITLE
---------- -----
<S> <C>
* Chief Executive Officer and Director
- ---------------------------------------------
Charles M. Hansen, Jr.
</TABLE>
The undersigned, by signing his name hereto, does sign and execute this
Amendment No. 1 to Registration Statement on Form S-4 pursuant to the Powers of
Attorney executed on behalf of the above-named officers and directors and filed
herewith.
/s/ JEFFREY D. CORDES
--------------------------------------
Jeffrey D. Cordes
Attorney-in-Fact
II-27
<PAGE> 128
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Bangor
Investment Company has duly caused this Amendment No. 1 to Registration
Statement on Form S-4 to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Dallas, State of Texas on February 17, 1998.
BANGOR INVESTMENT COMPANY
By /s/ JEFFREY D. CORDES
------------------------------------
Jeffrey D. Cordes
President and Director
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities indicated on February 17, 1998.
<TABLE>
<CAPTION>
SIGNATURES TITLE
---------- -----
<S> <C>
* Director
- ---------------------------------------------
Charles M. Hansen, Jr.
* Vice President and Controller; Director
- ---------------------------------------------
Ronald M. Wehtje
</TABLE>
The undersigned, by signing his name hereto, does sign and execute this
Amendment No. 1 to Registration Statement on Form S-4 pursuant to the Powers of
Attorney executed on behalf of the above-named officers and directors and filed
herewith.
/s/ JEFFREY D. CORDES
--------------------------------------
Jeffrey D. Cordes
Attorney-in-Fact
II-28
<PAGE> 129
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Beacon
Manufacturing Company has duly caused this Amendment No. 1 to Registration
Statement on Form S-4 to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Dallas, State of Texas on February 17, 1998.
BEACON MANUFACTURING COMPANY
By /s/ JEFFREY D. CORDES
------------------------------------
Jeffrey D. Cordes
President and Chief
Operating Officer, Director
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities indicated on February 17, 1998.
<TABLE>
<CAPTION>
SIGNATURES TITLE
---------- -----
<S> <C>
* Chairman of the Board and Chief Executive Officer;
- --------------------------------------------- Director (Principal Executive Officer)
Charles M. Hansen, Jr.
</TABLE>
The undersigned, by signing his name hereto, does sign and execute this
Amendment No. 1 to Registration Statement on Form S-4 pursuant to the Powers of
Attorney executed on behalf of the above-named officers and directors and filed
herewith.
/s/ JEFFREY D. CORDES
--------------------------------------
Jeffrey D. Cordes
Attorney-in-Fact
II-29
<PAGE> 130
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Crestfield
Cotton Company has duly caused this Amendment No. 1 to Registration Statement on
Form S-4 to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Dallas, State of Texas on February 17, 1998.
CRESTFIELD COTTON COMPANY
By /s/ JEFFREY D. CORDES
------------------------------------
Jeffrey D. Cordes
President and Director
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities indicated on February 17, 1998.
<TABLE>
<CAPTION>
SIGNATURES TITLE
---------- -----
<S> <C>
* Chief Executive Officer and Director
- ---------------------------------------------
Charles M. Hansen, Jr.
</TABLE>
The undersigned, by signing his name hereto, does sign and execute this
Amendment No. 1 to Registration Statement on Form S-4 pursuant to the Powers of
Attorney executed on behalf of the above-named officers and directors and filed
herewith.
/s/ JEFFREY D. CORDES
--------------------------------------
Jeffrey D. Cordes
Attorney-in-Fact
II-30
<PAGE> 131
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Downeast
Securities Corporation has duly caused this Amendment No. 1 to Registration
Statement on Form S-4 to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Dallas, State of Texas on February 17, 1998.
DOWNEAST SECURITIES CORPORATION
By /s/ JEFFREY D. CORDES
------------------------------------
Jeffrey D. Cordes
President and Director
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities indicated on February 17, 1998.
<TABLE>
<CAPTION>
SIGNATURES TITLE
---------- -----
<S> <C>
* Chief Executive Officer and Director
- ---------------------------------------------
Charles M. Hansen, Jr.
</TABLE>
The undersigned, by signing his name hereto, does sign and execute this
Amendment No. 1 to Registration Statement on Form S-4 pursuant to the Powers of
Attorney executed on behalf of the above-named officers and directors and filed
herewith.
/s/ JEFFREY D. CORDES
--------------------------------------
Jeffrey D. Cordes
Attorney-in-Fact
II-31
<PAGE> 132
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Encee, Inc. has
duly caused this Amendment No. 1 to Registration Statement on Form S-4 to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Dallas, State of Texas on February 17, 1998.
ENCEE, INC.
By /s/ JEFFREY D. CORDES
------------------------------------
Jeffrey D. Cordes
President and Director
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities indicated on February 17, 1998.
<TABLE>
<CAPTION>
SIGNATURES TITLE
---------- -----
<S> <C>
* Chief Executive Officer and Director
- ---------------------------------------------
Charles M. Hansen, Jr.
</TABLE>
The undersigned, by signing his name hereto, does sign and execute this
Amendment No. 1 to Registration Statement on Form S-4 pursuant to the Powers of
Attorney executed on behalf of the above-named officers and directors and filed
herewith.
/s/ JEFFREY D. CORDES
--------------------------------------
Jeffrey D. Cordes
Attorney-in-Fact
II-32
<PAGE> 133
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, FCC Canada,
Inc. has duly caused this Amendment No. 1 to Registration Statement on Form S-4
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Dallas, State of Texas on February 17, 1998.
FCC CANADA, INC.
By /s/ JEFFREY D. CORDES
------------------------------------
Jeffrey D. Cordes
President and Director
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities indicated on February 17, 1998.
<TABLE>
<CAPTION>
SIGNATURES TITLE
---------- -----
<S> <C>
* Chief Executive Officer and Director
- ---------------------------------------------
Charles M. Hansen, Jr.
</TABLE>
The undersigned, by signing his name hereto, does sign and execute this
Amendment No. 1 to Registration Statement on Form S-4 pursuant to the Powers of
Attorney executed on behalf of the above-named officers and directors and filed
herewith.
/s/ JEFFREY D. CORDES
--------------------------------------
Jeffrey D. Cordes
Attorney-in-Fact
II-33
<PAGE> 134
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Fieldcrest
Cannon, Inc. has duly caused this Amendment No. 1 to Registration Statement on
Form S-4 to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Dallas, State of Texas on February 17, 1998.
FIELDCREST CANNON, INC.
By /s/ JEFFREY D. CORDES
------------------------------------
Jeffrey D. Cordes
President and Director
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities indicated on February 17, 1998.
<TABLE>
<CAPTION>
SIGNATURES TITLE
---------- -----
<S> <C>
* Chief Executive Officer and Director
- ---------------------------------------------
Charles M. Hansen, Jr.
</TABLE>
The undersigned, by signing his name hereto, does sign and execute this
Amendment No. 1 to Registration Statement on Form S-4 pursuant to the Powers of
Attorney executed on behalf of the above-named officers and directors and filed
herewith.
/s/ JEFFREY D. CORDES
--------------------------------------
Jeffrey D. Cordes
Attorney-in-Fact
II-34
<PAGE> 135
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Fieldcrest
Cannon Financing, Inc. has duly caused this Amendment No. 1 to Registration
Statement on Form S-4 to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Dallas, State of Texas on February 17, 1998.
FIELDCREST CANNON FINANCING, INC.
By /s/ JEFFREY D. CORDES
------------------------------------
Jeffrey D. Cordes
President and Director
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities indicated on February 17, 1998.
<TABLE>
<CAPTION>
SIGNATURES TITLE
---------- -----
<S> <C>
* Chief Executive Officer and Director
- ---------------------------------------------
Charles M. Hansen, Jr.
</TABLE>
The undersigned, by signing his name hereto, does sign and execute this
Amendment No. 1 to Registration Statement on Form S-4 pursuant to the Powers of
Attorney executed on behalf of the above-named officers and directors and filed
herewith.
/s/ JEFFREY D. CORDES
--------------------------------------
Jeffrey D. Cordes
Attorney-in-Fact
II-35
<PAGE> 136
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Fieldcrest
Cannon International, Inc. has duly caused this Amendment No. 1 to Registration
Statement on Form S-4 to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Dallas, State of Texas on February 17, 1998.
FIELDCREST CANNON INTERNATIONAL, INC.
By /s/ JEFFREY D. CORDES
------------------------------------
Jeffrey D. Cordes
President and Director
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities indicated on February 17, 1998.
<TABLE>
<CAPTION>
SIGNATURES TITLE
---------- -----
<S> <C>
* Chief Executive Officer and Director
- ---------------------------------------------
Charles M. Hansen, Jr.
* Vice President and Controller; Director
- ---------------------------------------------
Ronald M. Wehtje
</TABLE>
The undersigned, by signing his name hereto, does sign and execute this
Amendment No. 1 to Registration Statement on Form S-4 pursuant to the Powers of
Attorney executed on behalf of the above-named officers and directors and filed
herewith.
/s/ JEFFREY D. CORDES
--------------------------------------
Jeffrey D. Cordes
Attorney-in-Fact
II-36
<PAGE> 137
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Fieldcrest
Cannon Licensing, Inc. has duly caused this Amendment No. 1 to Registration
Statement on Form S-4 to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Dallas, State of Texas on February 17, 1998.
FIELDCREST CANNON LICENSING, INC.
By /s/ JEFFREY D. CORDES
------------------------------------
Jeffrey D. Cordes
President and Director
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities indicated on February 17, 1998.
<TABLE>
<CAPTION>
SIGNATURES TITLE
---------- -----
<S> <C>
* Chief Executive Officer and Director
- ---------------------------------------------
Charles M. Hansen, Jr.
</TABLE>
The undersigned, by signing his name hereto, does sign and execute this
Amendment No. 1 to Registration Statement on Form S-4 pursuant to the Powers of
Attorney executed on behalf of the above-named officers and directors and filed
herewith.
/s/ JEFFREY D. CORDES
--------------------------------------
Jeffrey D. Cordes
Attorney-in-Fact
II-37
<PAGE> 138
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Fieldcrest
Cannon Sure Fit, Inc. has duly caused this Amendment No. 1 to Registration
Statement on Form S-4 to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Dallas, State of Texas on February 17, 1998.
FIELDCREST CANNON SURE FIT, INC.
By /s/ JEFFREY D. CORDES
------------------------------------
Jeffrey D. Cordes
President and Director
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities indicated on February 17, 1998.
<TABLE>
<CAPTION>
SIGNATURES TITLE
---------- -----
<S> <C>
* Chief Executive Officer and Director
- ---------------------------------------------
Charles M. Hansen, Jr.
</TABLE>
The undersigned, by signing his name hereto, does sign and execute this
Amendment No. 1 to Registration Statement on Form S-4 pursuant to the Powers of
Attorney executed on behalf of the above-named officers and directors and filed
herewith.
/s/ JEFFREY D. CORDES
--------------------------------------
Jeffrey D. Cordes
Attorney-in-Fact
II-38
<PAGE> 139
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Fieldcrest
Cannon Transportation, Inc. has duly caused this Amendment No. 1 to Registration
Statement on Form S-4 to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Dallas, State of Texas on February 17, 1998.
FIELDCREST CANNON TRANSPORTATION, INC.
By /s/ JEFFREY D. CORDES
----------------------------------------
Jeffrey D. Cordes
President and Director
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities indicated on February 17, 1998.
<TABLE>
<CAPTION>
SIGNATURES TITLE
---------- -----
<S> <C>
* Chief Executive Officer and Director
- ---------------------------------------------
Charles M. Hansen, Jr.
</TABLE>
The undersigned, by signing his name hereto, does sign and execute this
Amendment No. 1 to Registration Statement on Form S-4 pursuant to the Powers of
Attorney executed on behalf of the above-named officers and directors and filed
herewith.
/s/ JEFFREY D. CORDES
------------------------------------------
Jeffrey D. Cordes
Attorney-in-Fact
II-39
<PAGE> 140
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Manetta Home
Fashions, Inc. has duly caused this Amendment No. 1 to Registration Statement on
Form S-4 to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Dallas, State of Texas on February 17, 1998.
MANETTA HOME FASHIONS, INC.
By /s/ JEFFREY D. CORDES
------------------------------------
Jeffrey D. Cordes
President and Chief
Operating Officer, Director
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities indicated on February 17, 1998.
<TABLE>
<CAPTION>
SIGNATURES TITLE
---------- -----
<S> <C>
* Chairman of the Board and Chief Executive Officer;
- --------------------------------------------- Director (Principal Executive Officer)
Charles M. Hansen, Jr.
</TABLE>
The undersigned, by signing his name hereto, does sign and execute this
Amendment No. 1 to Registration Statement on Form S-4 pursuant to the Powers of
Attorney executed on behalf of the above-named officers and directors and filed
herewith.
/s/ JEFFREY D. CORDES
--------------------------------------
Jeffrey D. Cordes
Attorney-in-Fact
II-40
<PAGE> 141
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Moore's Falls
Corporation has duly caused this Amendment No. 1 to Registration Statement on
Form S-4 to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Dallas, State of Texas on February 17, 1998.
MOORE'S FALLS CORPORATION
By /s/ JEFFREY D. CORDES
------------------------------------
Jeffrey D. Cordes
President and Director
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities indicated on February 17, 1998.
<TABLE>
<CAPTION>
SIGNATURES TITLE
---------- -----
<S> <C>
* Chief Executive Officer and Director
- ---------------------------------------------
Charles M. Hansen, Jr.
* Vice President and Controller; Director
- ---------------------------------------------
Ronald M. Wehtje
</TABLE>
The undersigned, by signing his name hereto, does sign and execute this
Amendment No. 1 to Registration Statement on Form S-4 pursuant to the Powers of
Attorney executed on behalf of the above-named officers and directors and filed
herewith.
/s/ JEFFREY D. CORDES
--------------------------------------
Jeffrey D. Cordes
Attorney-in-Fact
II-41
<PAGE> 142
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Pillowtex, Inc.
has duly caused this Amendment No. 1 to Registration Statement on Form S-4 to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Dallas, State of Texas on February 17, 1998.
PILLOWTEX, INC.
By /s/ JEFFREY D. CORDES
------------------------------------
Jeffrey D. Cordes
President and Chief
Operating Officer, Director
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities indicated on February 17, 1998.
<TABLE>
<CAPTION>
SIGNATURES TITLE
---------- -----
<S> <C>
* Chairman of the Board and Chief Executive Officer;
- --------------------------------------------- Director (Principal Executive Officer)
Charles M. Hansen, Jr.
* Resident Director
- ---------------------------------------------
Charles H. Slaybaugh
</TABLE>
The undersigned, by signing his name hereto, does sign and execute this
Amendment No. 1 to Registration Statement on Form S-4 pursuant to the Powers of
Attorney executed on behalf of the above-named officers and directors and filed
herewith.
/s/ JEFFREY D. CORDES
--------------------------------------
Jeffrey D. Cordes
Attorney-in-Fact
II-42
<PAGE> 143
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Pillowtex
Management Services Company has duly caused this Amendment No. 1 to Registration
Statement on Form S-4 to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Dallas, State of Texas on February 17, 1998.
PILLOWTEX MANAGEMENT SERVICES COMPANY
By /s/ JEFFREY D. CORDES
------------------------------------
Jeffrey D. Cordes
President and Managing Trustee
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities indicated on February 17, 1998.
<TABLE>
<CAPTION>
SIGNATURES TITLE
---------- -----
<S> <C>
* Managing Trustee and President -- Manufacturing
- --------------------------------------------- Division
Christopher N. Baker
* Managing Trustee
- ---------------------------------------------
Scott E. Shimizu
</TABLE>
The undersigned, by signing his name hereto, does sign and execute this
Amendment No. 1 to Registration Statement on Form S-4 pursuant to the Powers of
Attorney executed on behalf of the above-named officers and directors and filed
herewith.
/s/ JEFFREY D. CORDES
--------------------------------------
Jeffrey D. Cordes
Attorney-in-Fact
II-43
<PAGE> 144
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, PTEX Holding
Company has duly caused this Amendment No. 1 to Registration Statement on Form
S-4 to be signed on its behalf by the undersigned, thereunto duly authorized, in
the City of Dallas, State of Texas on February 17, 1998.
PTEX HOLDING COMPANY
By /s/ JEFFREY D. CORDES
------------------------------------
Jeffrey D. Cordes
President and Chief
Operating Officer, Director
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities indicated on February 17, 1998.
<TABLE>
<CAPTION>
SIGNATURES TITLE
---------- -----
<S> <C>
* Chairman of the Board and Chief Executive Officer;
- --------------------------------------------- Director (Principal Executive Officer)
Charles M. Hansen, Jr.
* Resident Director
- ---------------------------------------------
Charles H. Slaybaugh
</TABLE>
The undersigned, by signing his name hereto, does sign and execute this
Amendment No. 1 to Registration Statement on Form S-4 pursuant to the Powers of
Attorney executed on behalf of the above-named officers and directors and filed
herewith.
/s/ JEFFREY D. CORDES
--------------------------------------
Jeffrey D. Cordes
Attorney-in-Fact
II-44
<PAGE> 145
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, St. Marys, Inc.
has duly caused this Amendment No. 1 to Registration Statement on Form S-4 to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Dallas, State of Texas on February 17, 1998.
ST. MARYS, INC.
By /s/ JEFFREY D. CORDES
------------------------------------
Jeffrey D. Cordes
President and Director
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities indicated on February 17, 1998.
<TABLE>
<CAPTION>
SIGNATURES TITLE
---------- -----
<S> <C>
* Chief Executive Officer and Director
- ---------------------------------------------
Charles M. Hansen, Jr.
</TABLE>
The undersigned, by signing his name hereto, does sign and execute this
Amendment No. 1 to Registration Statement on Form S-4 pursuant to the Powers of
Attorney executed on behalf of the above-named officers and directors and filed
herewith.
/s/ JEFFREY D. CORDES
--------------------------------------
Jeffrey D. Cordes
Attorney-in-Fact
II-45
<PAGE> 146
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Tennessee
Woolen Mills, Inc. has duly caused this Amendment No. 1 to Registration
Statement on Form S-4 to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Dallas, State of Texas on February 17, 1998.
TENNESSEE WOOLEN MILLS, INC.
By /s/ JEFFREY D. CORDES
------------------------------------
Jeffrey D. Cordes
President and Chief
Operating Officer, Director
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities indicated on February 17, 1998.
<TABLE>
<CAPTION>
SIGNATURES TITLE
---------- -----
<S> <C>
* Chairman of the Board and Chief Executive Officer;
- --------------------------------------------- Director (Principal Executive Officer)
Charles M. Hansen, Jr.
</TABLE>
The undersigned, by signing his name hereto, does sign and execute this
Amendment No. 1 to Registration Statement on Form S-4 pursuant to the Powers of
Attorney executed on behalf of the above-named officers and directors and filed
herewith.
/s/ JEFFREY D. CORDES
--------------------------------------
Jeffrey D. Cordes
Attorney-in-Fact
II-46
<PAGE> 147
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS PAGE NUMBER
------- ----------------------- -----------
<C> <S> <C>
2.1 -- Agreement and Plan of Merger, dated as of September 10, NOT
1997, by and among Pillowtex Corporation. Pegasus Merger APPLICABLE
Sub, Inc., and Fieldcrest Cannon, Inc. (incorporated by
reference to Exhibit 2.1 to Pillowtex Corporation's
Registration Statement on Form S-4 (No. 333-36663) filed
on September 29, 1997)
2.2 -- Amendment to Agreement and Plan to Merger, dated as of NOT
September 23, 1997, by and among Pillowtex Corporation, APPLICABLE
Pegasus Merger Sub, Inc., and Fieldcrest Cannon, Inc.
(incorporated by reference to Exhibit 2.2 to Pillowtex
Corporation's Registration Statement on Form S-4 (No.
333-36663) filed on September 29, 1997)
3.1 -- Restated Articles of Incorporation of Pillowtex NOT
Corporation, as amended (incorporated by reference to APPLICABLE
Exhibit 3.1 to Pillowtex Corporation's Current Report on
Form 8-K (No. 001-11756) filed on January 6, 1998)
3.2 -- Amended and Restated Bylaws of Pillowtex Corporation, as NOT
amended (incorporated by reference to Exhibit 3.2 to APPLICABLE
Pillowtex Corporation's Annual Report on Form 10-K for
the fiscal year ended December 30, 1994)
3.3 -- Restated Certificate of Incorporation of Fieldcrest NOT
Cannon, Inc., as amended (incorporated by reference to APPLICABLE
Exhibit 3.1 to Fieldcrest Cannon, Inc.'s Registration
Statement on Form S-3 (No. 33-52325) filed on February
18, 1994)
3.4 -- Amended and Restated Bylaws of Fieldcrest Cannon, Inc., NOT
as amended (incorporated by reference to Exhibit 3.1 to APPLICABLE
Fieldcrest Cannon, Inc.'s Current Report on Form 8-K
dated November 24, 1993)
*3.5 -- Amended and Restated Certificate of Incorporation of
Amoskeag Company
*3.6 -- Bylaws of Amoskeag Company, as amended
*3.7 -- Certificate of Incorporation of Amoskeag Management
Corporation
*3.8 -- Bylaws of Amoskeag Management Corporation
*3.9 -- Articles of Incorporation of Bangor Investment Company,
as amended
*3.10 -- Bylaws of Bangor Investment Company
*3.11 -- Articles of Amendment of Beacon Manufacturing Company
*3.12 -- Amended and Restated Bylaws of Beacon Manufacturing
Company
*3.13 -- Charter of Crestfield Cotton Company, as amended
*3.14 -- Bylaws of Crestfield Cotton Company, as amended
*3.15 -- Certificate of Incorporation of Downeast Securities
Corporation, as amended
*3.16 -- Bylaws of Downeast Securities Corporation
*3.17 -- Certificate of Incorporation of Encee, Inc.
*3.18 -- Bylaws of Encee, Inc.
*3.19 -- Certificate of Incorporation of FCC Canada, Inc.
*3.20 -- Bylaws of FCC Canada, Inc.
*3.21 -- Certificate of Incorporation of Fieldcrest Cannon
Financing, Inc.
*3.22 -- Bylaws of Fieldcrest Cannon Financing, Inc.
</TABLE>
II-47
<PAGE> 148
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS PAGE NUMBER
------- ----------------------- -----------
<C> <S> <C>
*3.23 -- Certificate of Incorporation Fieldcrest Cannon
International, Inc., as amended
*3.24 -- Bylaws of Fieldcrest Cannon International, Inc., as
amended
*3.25 -- Certificate of Incorporation of Fieldcrest Cannon
Licensing, Inc.
*3.26 -- Bylaws of Fieldcrest Cannon Licensing, Inc.
*3.27 -- Certificate of Incorporation of Fieldcrest Cannon Sure
Fit, Inc.
*3.28 -- Bylaws of Fieldcrest Cannon Sure Fit, Inc.
*3.29 -- Certificate of Incorporation of Fieldcrest Cannon
Transportation, Inc.
*3.30 -- Bylaws of Fieldcrest Cannon Transportation, Inc.
*3.31 -- Articles of Incorporation of Manetta Home Fashions, Inc.,
as amended
*3.32 -- Bylaws of Manetta Home Fashions, Inc.
*3.33 -- Certificate of Incorporation of Moore's Falls
Corporation, as amended
*3.34 -- Bylaws of Moore's Falls Corporation
*3.35 -- Certificate of Incorporation of Pillowtex, Inc.
*3.36 -- Bylaws of Pillowtex, Inc.
*3.37 -- Certificate of Trust of Pillowtex Management Services
Company
*3.38 -- Declaration of Trust of Pillowtex Management Services
Company
*3.39 -- Certificate of Incorporation of PTEX Holding Company
*3.40 -- Bylaws of PTEX Holding Company
*3.41 -- Certificate of Incorporation of St. Mary's, Inc.
*3.42 -- Bylaws of St. Mary's, Inc.
*3.43 -- Articles of Amendment to the Restated Charter of
Tennessee Woolen Mills, Inc.
*3.44 -- Bylaws of Tennessee Woolen Mills, Inc.
*4.1 -- Indenture, dated as of December 18, 1997, among Pillowtex
Corporation, the guarantors listed on the signature page
thereto, and Norwest Bank Minnesota, National
Association, as Trustee
*4.2 -- Supplemental Indenture, dated as of December 19, 1997,
among Pillowtex Corporation, the guarantors listed on the
signature page thereto, and Norwest Bank Minnesota,
National Association, as Trustee
4.3 -- Registration Rights Agreement, dated as of December 18, NOT
1997, among Pillowtex Corporation, the guarantors listed APPLICABLE
on the signature page thereto, and NationsBanc Montgomery
Securities, Inc. and Bear, Stearns & Co. Inc.
(incorporated by reference to Exhibit 10.7 to Pillowtex
Corporation's Current Report on Form 8-K (No. 001-11756)
filed on January 6, 1998)
4.4 -- Registration Rights Agreement Supplement, dated as of NOT
December 19, 1997, among Pillowtex Corporation, the APPLICABLE
guarantors listed on the signature page thereto, and
NationsBanc Montgomery Securities, Inc. and Bear, Stearns
& Co. Inc. (incorporated by reference to Exhibit 10.8 to
Pillowtex Corporation's Current Report on Form 8-K (No.
001-11756) filed on January 6, 1998)
*4.5 -- Form of 9% Senior Subordinated Note
*4.6 -- Form of Guarantee
+5.1 -- Opinion of Jones, Day, Reavis & Pogue regarding the
legality of securities to be issued
</TABLE>
II-48
<PAGE> 149
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS PAGE NUMBER
------- ----------------------- -----------
<C> <S> <C>
9.1 -- Voting Agreement, dated as of October 2, 1997, by and NOT
between Pillowtex Corporation and Charles M. Hansen, Jr. APPLICABLE
(incorporated by reference to Exhibit 9.1 to Pillowtex
Corporation's Registration Statement on Form S-4 (No.
333-36663) filed on September 29, 1997)
9.2 -- Voting Agreement, dated as of October 2, 1997, by and NOT
between Pillowtex Corporation, on the one hand, and Mary APPLICABLE
R. Silverthorne, the John H. Silverthorne Marital Trust
B, and the John H. Silverthorne Family Trust A, on the
other hand (incorporated by reference to Exhibit 9.2 to
Pillowtex Corporation's Registration Statement on Form
S-4 (No. 333-36663) filed on September 29, 1997)
10.1 -- Commitment Letter, dated September 10, 1997, by and NOT
between NationsBank of Texas, N.A. and Pillowtex APPLICABLE
Corporation (incorporated by reference to Exhibit 10.1 to
Pillowtex Corporation's Current Report on Form 8-K dated
September 10, 1997, as amended by a Form 8-K/A (Amendment
No. 1) dated September 10, 1997)
10.2 -- Registration Rights Agreement, dated as of November 12, NOT
1996, by and among Pillowtex Corporation, each domestic APPLICABLE
subsidiary of Pillowtex Corporation, and NationsBanc
Capital Markets, Inc., and Merrill Lynch, Pierce, Fenner
& Smith, Incorporated (incorporated by reference to
Exhibit 10.59 to Pillowtex Corporation's Form S-4 (No.
333-17731) filed on December 12, 1996)
10.3 -- Restated Credit Agreement, dated as of November 12, 1996, NOT
by and among Pillowtex Corporation and NationsBank of APPLICABLE
Texas, N.A., as Agent for the Lenders specified therein
(excludes Schedules) (incorporated by reference to
Exhibit 10.60 to Pillowtex Corporation's Form S-4 (No.
333-17731) filed on December 12, 1996)
10.4 -- Form of Swing-Line Note, dated as of November 12, 1996, NOT
by and among Pillowtex Corporation and NationsBank of APPLICABLE
Texas, N.A. (incorporated by reference to Exhibit 10.61
to Pillowtex Corporation's Form S-4 (No. 333-17731) filed
on December 12, 1996)
10.5 -- Form of Revolving Note, by and among Pillowtex NOT
Corporation and NationsBank of Texas, N.A. (incorporated APPLICABLE
by reference to Exhibit 10.62 to Pillowtex Corporation's
Form S-4 (No. 333-17731) filed on December 12, 1996)
10.6 -- Form of Restated Guaranty, by and among Beacon NOT
Manufacturing Company, Manetta Home Fashions, Inc., APPLICABLE
Tennessee Woolen Mills, Inc., Pillowtex, Inc., PTEX
Holding Company, and Pillowtex Management Services
Company as guarantors, NationsBank of Texas, N.A. as
Agent, and Pillowtex Corporation as Borrower
(incorporated by reference to Exhibit 10.63 to Pillowtex
Corporation's Form S-4 (No. 333-17731) filed on December
12, 1996)
10.7 -- Form of Restated Security Agreement, by and among NOT
Pillowtex Corporation as Debtor/Borrower, NationsBank of APPLICABLE
Texas, N.A. as Secured Party, and Beacon Manufacturing
Company, Manetta Home Fashions, Inc., Tennessee Woolen
Mills, Inc., Pillowtex, Inc., PTEX Holding Company, and
Pillowtex Management Services Company as Subsidiary
Debtors (incorporated by reference to Exhibit 10.64 to
Pillowtex Corporation's Form S-4 (No. 333-17731) filed on
December 12, 1996)
</TABLE>
II-49
<PAGE> 150
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS PAGE NUMBER
------- ----------------------- -----------
<C> <S> <C>
10.8 -- Asset Purchase Agreement, dated as of October 3, 1996, by NOT
and among Pillowtex Corporation and Fieldcrest Cannon, APPLICABLE
Inc. (incorporated by reference to Exhibit 10.65 to
Pillowtex Corporation's Form S-4 (No. 333-17731) filed on
December 12, 1996)
10.9 -- Mississippi Business Finance Corporation Industrial NOT
Development Variable Rate Demand Notes (Pillowtex APPLICABLE
Corporation Project) Series 1992 Loan Agreement,
Indenture of Trust, Promissory Note, Remarketing and
Interest Services Agreement, Placement Agreement, Deed of
Trust and Security Agreement, Bond Fund Trustee
Agreement, Reimbursement Agreement, and Lease Agreement
(including First Amendment) (incorporated by reference to
Exhibit 10.3 to Pillowtex Corporation's Registration
Statement on Form S-1 (No. 33-57314) filed on January 22,
1993)
10.10 -- Second through Fourth Amendment to Mississippi Business NOT
Finance Corporation Industrial Development Variable Rate APPLICABLE
Demand Notes (Pillowtex Corporation Project) Loan
Agreement (incorporated by reference to Exhibit 10.4 to
Pillowtex Corporation's Annual Report on Form 10-K for
the fiscal year ended December 31, 1993)
10.11 -- Deed of Trust (with Security Agreement and Assignment of NOT
Rents and Leases), dated as of July 15, 1988, between APPLICABLE
Pillowtex Corporation and Principal Mutual Life Insurance
Company, as amended, Deed of Trust Note, and Loan
Modification and Amendment Agreement (incorporated by
reference to Exhibit 10.5 to Pillowtex Corporation's
Registration Statement on Form S-1 (No. 33-57314) filed
on January 22, 1993)
10.12 -- Second Loan Agreement Modification and Amendment NOT
Agreement dated as of January 19, 1993, between Pillowtex APPLICABLE
Corporation and Principal Mutual Life Insurance Company
(incorporated by reference to Exhibit 10.6 to Pillowtex
Corporation's Registration Statement on Form S-1 (No.
33-57314) filed on January 22, 1993)
10.13 -- Deed of Trust Note dated as of July 15, 1988, from NOT
Pillowtex Corporation to Principal Mutual Life Insurance APPLICABLE
Company (incorporated by reference to Exhibit 10.7 to
Pillowtex Corporation's Registration Statement on Form
S-1 (No. 33-57314) filed on January 22, 1993)
10.14 -- Loan and Security Agreement dated April 6, 1992, between NOT
MetLife Capital Corporation and Pillowtex Corporation, as APPLICABLE
amended, and including Term Note dated June 5, 1992
(incorporated by reference to Exhibit 10.8 to Pillowtex
Corporation's Registration Statement on Form S-1 (No.
33-57314) filed on January 22, 1993)
10.15 -- Pennsylvania Economic Development Financing Authority NOT
("PEDFA") Economic Development Revenue Bonds 1990 Series APPLICABLE
C (Silversen-Hanover Corporation Project), dated April 1,
1990, Indenture of Trust between PEDFA and First
Pennsylvania Bank; Financing Agreement between PEDFA and
Silversen-Hanover Corporation; Bond Placement Agreement
among PEDFA, NCNB National Bank of North Carolina, and
Silversen-Hanover Corporation; Reimbursement Agreement
between Silversen-Hanover Corporation and NCNB National
Bank of North Carolina; and Form of Bond (incorporated by
reference to Exhibit 10.44 to Pillowtex Corporation's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1993)
</TABLE>
II-50
<PAGE> 151
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS PAGE NUMBER
------- ----------------------- -----------
<C> <S> <C>
10.16 -- Distribution Agreement, dated February 1, 1995 by and NOT
among Beacon Manufacturing Company, Manetta Home APPLICABLE
Fashions, Inc.,Tennessee Woolen Mills, Inc., NEMCOR,
Inc., Norm McIntyre, Tim McIntyre, and Don McIntyre
(incorporated by reference to Exhibit 10.35 to Pillowtex
Corporation's Annual Report on Form 10-K for the fiscal
year ended December 31, 1994)
10.17 -- The Priorities Agreement, dated February 27, 1995, NOT
between Toronto Dominion Bank, Manetta Home Fashions, APPLICABLE
Inc., Tennessee Woolen Mills, Beacon Manufacturing
Company, and NEMCOR, Inc. (incorporated by reference to
Exhibit 10.36 to Pillowtex Corporation's Annual Report on
Form 10-K for the fiscal year ended December 31, 1994)
10.18 -- A Guarantee, dated February 27, 1995, between Beacon NOT
Manufacturing Company, Manetta Home Fashions, Inc., APPLICABLE
Tennessee Woolen Mills, Inc., and NEMCOR, Inc.
(incorporated by reference to Exhibit 10.37 to Pillowtex
Corporation's Annual Report on Form 10-K for the fiscal
year ended December 30, 1994)
10.19 -- Security Agreement, dated February 16, 1995, between NOT
NEMCOR, Inc. and Manetta Home Fashions, Inc. APPLICABLE
(incorporated by reference to Exhibit 10.38 to Pillowtex
Corporation's Annual Report on Form 10-K for the fiscal
year ended December 31, 1994)
10.20 -- Security Agreement, dated February 16, 1995, between NOT
NEMCOR, Inc. and Tennessee Woolen Mills, Inc. APPLICABLE
(incorporated by reference to Exhibit 10.39 to Pillowtex
Corporation's Annual Report on Form 10-K for the fiscal
year ended December 31, 1994)
10.21 -- Security Agreement, dated February 16, 1995, between NOT
NEMCOR, Inc. and Beacon Manufacturing Company APPLICABLE
(incorporated by reference to Exhibit 10.40 to Pillowtex
Corporation's Annual Report on Form 10-K for the fiscal
year ended December 31, 1994)
10.22 -- Amended and Restated Acquisition Agreement, dated as of NOT
November 30, 1994, by and among David H. Murdock, Beacon APPLICABLE
Manufacturing Company, Wiscassett Mills Company,
Pillowtex Corporation, Be-Ac, Inc., Realmac, Inc., and
Wiscat, Inc. (incorporated by reference to Exhibit 10.41
to Pillowtex Corporation's Current Report on Form 8-K
dated December 14, 1994)
10.23 -- Purchase agreement between Coopers & Lybrand and Torfeaco NOT
Industries Limited for certain assets, dated August 19, APPLICABLE
1994 (incorporated by reference to Exhibit 10.42 to
Pillowtex Corporation's Annual Report on Form 10-K for
the fiscal year ended December 31, 1994)
10.24 -- Indenture dated as of February 1, 1994, by and among NOT
Torfeaco Industries Limited and Lodestone Investments APPLICABLE
Limited, Lese Holdings Limited, Golden Elms Limited, M.
Swadron Limited, and Helsinor Investments Limited
(incorporated by reference to Exhibit 10.29 to Pillowtex
Corporation's Annual Report on Form 10-K for the fiscal
year ended December 31, 1993)
10.25 -- Sublicense Agreement, dated as of July 1, 1995, between NOT
Pillowtex Corporation and the Ralph Lauren Home APPLICABLE
Collection (incorporated by reference to Exhibit 10 to
Pillowtex Corporation's Quarterly on Form 10-Q for the
quarter ended July 1, 1995)
</TABLE>
II-51
<PAGE> 152
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS PAGE NUMBER
------- ----------------------- -----------
<C> <S> <C>
10.26 -- Lease Agreement, dated as of September 18, 1995, between NOT
Pillowtex Corporation and Sanwa Business Credit Corp. APPLICABLE
(incorporated by reference to Exhibit 10.4 to Pillowtex
Corporation's Quarterly Report on Form 10-Q, as amended
for the quarter ended September 30, 1995)
10.27 -- Agreement of Lease, dated May 23, 1995, between Ten NOT
Seventy One Joint Venture and Pillowtex Corporation APPLICABLE
(incorporated by reference to Exhibit 10.66 to Pillowtex
Corporation's Annual Report on Form 10-K for the fiscal
year ended December 30, 1995)
10.28 -- Lease, dated as of March 1, 1977, by and among Torfeaco NOT
Industries Limited and Standa Investment Limited, and APPLICABLE
Sharon Construction Limited (incorporated by reference to
Exhibit 10.43 to Pillowtex Corporation's Annual Report on
Form 10-K for the fiscal year ended December 31, 1993)
10.29 -- Industrial Lease, dated as of November 23, 1992, between NOT
Angel and Jean Echevarria and Pillowtex Corporation APPLICABLE
(incorporated by reference to Exhibit 10.21 to Pillowtex
Corporation's Registration Statement on Form S-1 (No.
33-57314) filed on January 22, 1993)
10.30 -- Form of Lease, dated as of October 12, 1988, between NOT
Jimmie D. Smith, Jr. and Pillowtex Corporation APPLICABLE
(incorporated by reference to Exhibit 10.23 to Pillowtex
Corporation's Registration Statement on Form S-1 (No.
33-57314) filed on January 22, 1993)
10.31 -- Form of Equipment Leasing Agreement between BTM Financial NOT
& Leasing Corporation B-4 and Beacon Manufacturing APPLICABLE
Company, Manetta Home Fashions, Inc., and Tennessee
Woolen Mills, Inc., dated as of June 14, 1996 (without
Exhibits) (incorporated by reference to Exhibit 10 to
Pillowtex Corporation's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1996)
10.32 -- Employment Agreement dated as of January 1, 1993, between NOT
Pillowtex Corporation and Charles M. Hansen, Jr. APPLICABLE
(incorporated by reference to Exhibit 10.2 to Pillowtex
Corporation's Registration Statement on Form S-1 (No.
33-57314) filed on January 22, 1993)
10.33 -- Amendment to Employment Agreement, dated as of July 26, NOT
1993, between Pillowtex Corporation and Charles M. APPLICABLE
Hansen, Jr. (incorporated by reference to Exhibit 10.26
to Pillowtex Corporation's Annual Report on Form 10-K for
the fiscal year ended December 31, 1993)
10.34 -- Forms of Employment Agreement dated as of September 1, NOT
1995, between Pillowtex Corporation and each of APPLICABLE
Christopher N. Baker, Jeffrey D. Cordes, and Scott E.
Shimizu (incorporated by reference to Exhibits 10.1,
10.2, and 10.3 to Pillowtex Corporation's Quarterly
Report on Form 10-Q, as amended, for the quarter ended
September 30, 1995)
10.35 -- Forms of Change of Control Agreement, dated as of NOT
September 1, 1995, between Pillowtex Corporation and each APPLICABLE
of Christopher N. Baker, Jeffrey D. Cordes, and Scott E.
Shimizu (incorporated by reference to Exhibits 10.5,
10.6, and 10.7 to Pillowtex Corporation's Quarterly
Report on Form 10-Q, as amended, for the quarter ended
September 30, 1995)
10.36 -- Form of Confidentiality and Noncompetition Agreement NOT
(incorporated by reference to Exhibit 10.27 to Pillowtex APPLICABLE
Corporation's Registration Statement on Form S-1 (No.
33-57314) filed on January 22, 1993)
</TABLE>
II-52
<PAGE> 153
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS PAGE NUMBER
------- ----------------------- -----------
<C> <S> <C>
10.37 -- Form of Director Indemnification Agreement (incorporated NOT
by reference to Exhibit 10.36 to Pillowtex Corporation's APPLICABLE
Registration Statement on Form S-1 (No. 33-57314) filed
on January 22, 1993)
10.38 -- Split Dollar Life Insurance Agreement between Pillowtex NOT
Corporation and Charles M. Hansen, Jr. dated July 26, APPLICABLE
1993 (incorporated by reference to Exhibit 10.32 to
Pillowtex Corporation's Annual Report on Form 10-K for
the fiscal year ended December 31, 1993)
10.39 -- Pillowtex Corporation 1993 Stock Option Plan NOT
(incorporated by reference to Appendix A to Pillowtex APPLICABLE
Corporation's Proxy Statement relating to its Annual
Meeting of Shareholders held on May 8, 1997)
10.40 -- Form of Employment Agreement entered into between NOT
Pillowtex Management Services Company and each of APPLICABLE
Christopher N. Baker, Jeffrey D. Cordes, Scott E.
Shimizu, and John H. Karnes (incorporated by reference to
Exhibit 10.1 to Pillowtex Corporation's Quarterly Report
on Form 10-Q for the quarter ended June 28, 1997)
10.41 -- Form of Guaranty Agreement dated as of April 22, 1997, NOT
between Pillowtex Corporation and each of Christopher N. APPLICABLE
Baker, Jeffrey D. Cordes, Scott E. Shimizu, Kevin M.
Finlay, and John H. Karnes (incorporated by reference to
Exhibit 10.2 to Pillowtex Corporation's Quarterly Report
on Form 10-Q for the quarter ended June 28, 1997)
10.42 -- Form of Employment Agreement dated as of April 11, 1997, NOT
between Pillowtex Management Services Company and Kevin APPLICABLE
M. Finlay (incorporated by reference to Exhibit 10.3 to
Pillowtex Corporation's Quarterly Report on Form 10-Q for
the quarter ended June 28, 1997)
10.43 -- Pillowtex Corporation Supplemental Executive Retirement NOT
Plan, effective as of January 1, 1997 (incorporated by APPLICABLE
reference to Exhibit 10.1.44 to Pillowtex Corporation's
Registration Statement on Form S-4 (No. 33-36663) filed
on September 29, 1997)
10.44 -- Pillowtex Corporation Management Incentive Plan NOT
(incorporated by reference to Appendix B to Pillowtex APPLICABLE
Corporation's Proxy Statement relating to its Annual
Meeting of Shareholders held on May 8, 1997)
10.45 -- Amended and Restated Director Stock Option Plan of the NOT
Registrant approved by the stockholders of the APPLICABLE
Corporation on April 28, 1992 (incorporated by reference
to Exhibit A to Fieldcrest Cannon, Inc.'s Proxy Statement
relating to its Annual Meeting of Stockholders held on
April 28, 1992)
10.46 -- Stock Option Agreement between Fieldcrest Cannon, Inc. NOT
and James M. Fitzgibbons, dated as of September 11, 1991 APPLICABLE
(incorporated by reference to Exhibit 4.1 to Fieldcrest
Cannon, Inc.'s Registration Statement on Form S-8 (No.
33-44703) filed on December 23, 1991)
10.47 -- Employee Retention Agreement between Fieldcrest Cannon, NOT
Inc. and James M. Fitzgibbons, effective as of July 9, APPLICABLE
1993 (incorporated by reference to Exhibit 10.2 to
Fieldcrest Cannon, Inc.'s Quarterly Report on Form 10-Q
for the quarter ended September 30, 1993)
10.48 -- Instrument of Amendment, dated July 15, 1996 between NOT
Fieldcrest Cannon, Inc. and James M. Fitzgibbons APPLICABLE
(incorporated by reference to Exhibit 10.4 to Fieldcrest
Cannon, Inc.'s Annual Report on Form 10-K for the fiscal
year ended December 31, 1996)
</TABLE>
II-53
<PAGE> 154
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS PAGE NUMBER
------- ----------------------- -----------
<C> <S> <C>
10.49 -- Employee Retention Agreement between Fieldcrest Cannon, NOT
Inc. and Robert E. Dellinger, effective as of July 9, APPLICABLE
1993 (incorporated by reference to Exhibit 10.9 to
Fieldcrest Cannon, Inc.'s Annual Report on Form 10-K for
the fiscal year ending December 31, 1993)
10.50 -- Instrument of Amendment, dated July 29, 1993 between NOT
Fieldcrest Cannon, Inc. and Robert E. Dellinger APPLICABLE
(incorporated by reference to Exhibit 10.10 to Fieldcrest
Cannon, Inc.'s Annual Report on Form 10-K for the fiscal
year ending December 31, 1993)
10.51 -- Instrument of Amendment, dated July 15, 1996 between NOT
Fieldcrest Cannon, Inc. and Robert E. Dellinger APPLICABLE
(incorporated by reference to Exhibit 10.7 Fieldcrest
Cannon, Inc.'s Annual Report on Form 10-K for the fiscal
year ended December 31, 1996)
10.52 -- Employee Retention Agreement between Fieldcrest Cannon, NOT
Inc. and Thomas R. Staab, effective as of July 9, 1993 APPLICABLE
(incorporated by reference to Exhibit 10.8 to Fieldcrest
Cannon, Inc.'s Annual Report on Form 10-K for the fiscal
year ending December 31, 1995)
10.53 -- Instrument of Amendment, dated July 29, 1993 between NOT
Fieldcrest Cannon, Inc. and Thomas R. Staab (incorporated APPLICABLE
by reference to Exhibit 10.9 to Fieldcrest Cannon, Inc.'s
Annual Report on Form 10-K for the fiscal year ending
December 31, 1995)
10.54 -- Instrument of Amendment, dated July 15, 1996 between NOT
Fieldcrest Cannon, Inc. and Thomas R. Staab (incorporated APPLICABLE
by reference to Exhibit 10.10 to Fieldcrest Cannon,
Inc.'s Annual Report on Form 10-K for the fiscal year
ended December 31, 1996)
10.55 -- Employee Retention Agreement between Fieldcrest Cannon, NOT
Inc. and John Nevin, effective as of October 3, 1996 APPLICABLE
(incorporated by reference to Exhibit 10.11 to Fieldcrest
Cannon, Inc.'s Annual Report on Form 10-K for the fiscal
year ended December 31, 1996)
10.56 -- Form of Employee Retention Agreement between Fieldcrest NOT
Cannon, Inc. and other executive officers of Fieldcrest APPLICABLE
Cannon, Inc., effective as of July 9, 1993 (incorporated
by reference to Exhibit 10.6 to Fieldcrest Cannon, Inc.'s
Quarterly Report on Form 10-Q for the quarter ended
September 30, 1993)
10.57 -- Form of Instrument of Amendment, dated July 29, 1993 NOT
between Fieldcrest Cannon, Inc. and other executive APPLICABLE
officers of Fieldcrest Cannon, Inc. (incorporated by
reference to Exhibit 10.7 to Fieldcrest Cannon, Inc.'s
Quarterly Report on Form 10-Q for the quarter ended
September 30, 1993)
10.58 -- Form of Instrument of Amendment, dated July 15, 1996 NOT
between Fieldcrest Cannon, Inc. and other executive APPLICABLE
officers of Fieldcrest Cannon, Inc. (incorporated by
reference to Exhibit 10.14 to Fieldcrest Cannon, Inc.'s
Annual Report on Form 10-K for the fiscal year ended
December 31, 1996)
10.59 -- 1995 Employee Stock Option Plan of Fieldcrest Cannon, NOT
Inc. (incorporated by reference to Exhibit 4.1 of APPLICABLE
Fieldcrest Cannon, Inc.'s Registration Statement of Form
S-8 (No. 33-59145) filed on May 8, 1995)
10.60 -- Yarn Purchase Agreement between Parkdale Mills, NOT
Incorporated and Fieldcrest Cannon, Inc. (incorporated by APPLICABLE
reference to Exhibit 10 to Fieldcrest Cannon, Inc.'s
Quarterly Report on Form 10-Q for the quarter ended March
31, 1996)
</TABLE>
II-54
<PAGE> 155
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS PAGE NUMBER
------- ----------------------- -----------
<C> <S> <C>
10.61 -- Amended and Restated Credit Agreement, dated as of NOT
December 19, 1997, among Pillowtex Corporation, certain APPLICABLE
Lenders named therein, and NationsBank of Texas, N.A., as
Administrative Agent (incorporated by reference to
Exhibit 10.1 to Pillowtex Corporation's Current Report on
Form 8-K (No. 001-11756) filed on January 6, 1998)
10.62 -- Term Credit Agreement, dated as of December 19, 1997, NOT
among Pillowtex Corporation, certain Lenders named APPLICABLE
herein, and NationsBank of Texas, N.A., as Administrative
Agent (incorporated by reference to Exhibit 10.2 to
Pillowtex Corporation's Current Report on Form 8-K (No.
001-11756) filed on January 6, 1998)
10.63 -- Preferred Stock Purchase Agreement, dated as of September NOT
10, 1997, by and among Pillowtex Corporation, Apollo APPLICABLE
Investment Fund III, L.P., Apollo Overseas Partners III,
L.P., and Apollo (UK) Partners III, L.P. (incorporated by
reference to Exhibit 10.2 to Pillowtex Corporation's
Current Report on Form 8-K dated September 10, 1997, as
amended by a Form 8-K/A (Amendment No. 1) dated September
10, 1997)
10.64 -- Amendment No. 1 to the Preferred Stock Purchase NOT
Agreement, dated as of November 21, 1997, by and among APPLICABLE
Pillowtex Corporation, Apollo Investment Fund III, L.P.,
Apollo Overseas Partners III, L.P., and Apollo (UK)
Partners III, L.P. (incorporated by reference to Exhibit
10.1 to Pillowtex Corporation's Current Report on Form
8-K dated November 21, 1997)
10.65 -- Purchase Agreement, dated December 15, 1997, among NOT
Pillowtex Corporation, the guarantors listed on the APPLICABLE
signature page thereto, and NationsBanc Montgomery
Securities, Inc. and Bear, Stearns & Co. Inc.
(incorporated by reference to Exhibit 10.5 to Pillowtex
Corporation's Current Report on Form 8-K (No. 001-11756)
filed on January 6, 1998)
10.66 -- Purchase Agreement Supplement, dated December 19, 1997, NOT
among Pillowtex Corporation, the guarantors listed on the APPLICABLE
signature page thereto, and NationsBank Montgomery
Securities, Inc. and Bear, Stearns & Co. Inc.
(incorporated by reference to Exhibit 10.6 to Pillowtex
Corporation's Current Report on Form 8-K (No. 001-11756)
filed on January 6, 1998)
11.1 -- Fieldcrest Cannon, Inc.'s Computation of Primary and NOT
Fully Diluted Net Income Per Share (incorporated by APPLICABLE
reference to Exhibit 11 to Fieldcrest Cannon, Inc.'s
Annual Report on Form 10-K for the fiscal year ended
December 31, 1996)
11.2 -- Fieldcrest Cannon, Inc.'s Computation of Primary and NOT
Fully Diluted Net Income Per Share (incorporated by APPLICABLE
reference to Exhibit 11 to Fieldcrest Cannon, Inc.'s
Quarterly Report on Form 10-Q for the quarter ended
September 30, 1997)
+12.1 -- Statement regarding computation of ratios earnings to
fixed charges
16.1 -- Letter from Ernst & Young LLP (incorporated by reference NOT
to Exhibit 16.1 to Fieldcrest Cannon, Inc.'s Current APPLICABLE
Report on Form 8-K (No. 002-79328) filed on December 29,
1997)
21.1 -- List of Pillowtex Corporation's Principal Operating NOT
Subsidiaries (incorporated by reference to Exhibit 21.1 APPLICABLE
to Pillowtex Corporation's Form S-4 (No. 333-17731) filed
on December 12, 1996)
</TABLE>
II-55
<PAGE> 156
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS PAGE NUMBER
------- ----------------------- -----------
<C> <S> <C>
21.2 -- List of Fieldcrest Cannon, Inc.'s Principal Operating NOT
Subsidiaries (incorporated by reference to Exhibit 21 to APPLICABLE
Fieldcrest Cannon, Inc.'s Annual Report on Form 10-K for
the fiscal year ended December 31, 1996)
23.1 -- Consent of Jones, Day, Reavis & Pogue (included in
Exhibit 5.1)
+23.2 -- Consent of KPMG Peat Marwick LLP
+23.3 -- Consent of Ernst & Young LLP
*24.1 -- Powers of Attorney
*25.1 -- Statement of eligibility under the Trust Indenture Act of
1939 on Form T-1
+99.1 -- Letter of Transmittal
+99.2 -- Notice of Guaranteed Delivery
</TABLE>
- ---------------
* Previously filed
+ Filed herewith
II-56
<PAGE> 1
EXHIBIT 5.1
[JONES, DAY, REAVIS & POGUE LETTERHEAD]
February 17, 1998
Pillowtex Corporation
4111 Mint Way
Dallas, Texas 75237
Ladies and Gentlemen:
We are acting as counsel to Pillowtex Corporation (the "Company"), a
corporation organized under the laws of the State of Texas, in connection with
the public offering of $185,000,000 aggregate principal amount of the Company's
9% Senior Subordinated Notes due 2007 (the "Series B Notes"), which are to be
guaranteed on a senior unsecured basis pursuant to guarantees (the "Guarantees"
and together with the Series B Notes, the "Securities") by each of Amoskeag
Company, a Delaware corporation, Amoskeag Management Corporation, a Delaware
corporation, Bangor Investment Company, a Maine corporation, Beacon
Manufacturing Company, a North Carolina corporation, Crestfield Cotton Company,
a Tennessee corporation, Downeast Securities Corporation, a Delaware
corporation, Encee, Inc., a Delaware corporation, FCC Canada, Inc., a Delaware
corporation, Fieldcrest Cannon Financing, Inc., a Delaware corporation,
Fieldcrest Cannon, Inc., a Delaware corporation, Fieldcrest Cannon
International, Inc., a Delaware corporation, Fieldcrest Cannon Licensing, Inc.,
a Delaware corporation, Fieldcrest Cannon Sure Fit, Inc., a Delaware
corporation, Fieldcrest Cannon Transportation, Inc., a Delaware corporation,
Mannetta Home Fashions, Inc., a North Carolina corporation, Moore's Falls
Corporation, a Delaware corporation, Pillowtex, Inc., a Delaware corporation,
Pillowtex Management Services Company, a Delaware corporation, PTEX Holding
Company, a Delaware corporation, St. Marys, Inc., a Delaware corporation, and
Tennessee Woolen Mills, Inc., a Tennessee corporation (collectively, the
"Guarantors") and in connection with the preparation of the prospectus (the
"Prospectus") contained in the registration statement on Form S-4 (the
"Registration Statement") (No. 333-46209) filed with the Securities and
Exchange Commission by the Company for the purpose of registering the Series B
Notes and the Guarantees under the Securities Act of 1933, as amended (the
"Act"). The Series B Notes are to be issued pursuant to an exchange offer (the
"Exchange Offer") in exchange for a like principal amount of the issued and
outstanding 9% Senior Subordinated Notes due 2007 of the Company (the "Series A
Notes"), and are to be governed by an Indenture dated as of December 18, 1997
(the "Indenture") by and among the Company, the Guarantors, and Norwest Bank
Minnesota, National Association, as Trustee (the "Trustee"). Unless otherwise
defined herein, terms defined in the Prospectus are used herein as defined
therein.
<PAGE> 2
Pillowtex Corporation
February 17, 1998
Page 2
We have examined originals or copies, certified or otherwise identified
to our satisfaction, of such corporate records, agreements, documents, and
other instruments and such certificates or comparable documents of public
officials and representatives of the Company and the Guarantors and have made
such other and further investigations as we have deemed relevant and necessary
as a basis for the opinion hereinafter set forth. In such examination, we have
assumed the genuineness of all signatures, the legal capacity of natural
persons, the authenticity or all documents submitted to us as originals, the
conformity to original documents of all documents submitted to us as certified
or photostatic copies, and the authenticity of the originals of such latter
documents. In making our examination of documents executed or to be executed
by parties other than the Guarantors that are also Delaware corporations, we
have assumed that such parties had or will have the power, corporate or other,
to enter into and perform all obligations hereunder and have also assumed the
due authorization by all requisite action, corporate or other, and execution
and delivery by such parties of such documents and the validity and binding
effect of such documents on such parties.
Members of the firm are admitted to the bar in the States of New York
and Texas, and we do not express any opinion as to the laws of any other
jurisdiction other than the General Corporation Law of the State of Delaware.
Based on the foregoing, and subject to the qualifications and
limitations stated herein, we are of the opinion that, assuming the Indenture
has been qualified under the Trust Indenture Act of 1939 (the "Trust Indenture
Act"), when the Series B Notes, substantially in the form set forth in an
exhibit to the Indenture filed as Exhibit 4.5 to the Registration Statement,
have been duly executed by the Company and authenticated by the Trustee in
accordance with the Indenture and duly delivered in exchange for the Series A
Notes in accordance with the Exchange Offer in the manner described in the
Registration Statement, the Series B Notes will constitute valid and legally
binding obligations of the Company enforceable in accordance with their terms,
and the Guarantees will constitute valid and legally binding obligations of the
Guarantors, enforceable against the Guarantors, in each case, in accordance
with their terms, except to the extent enforceability may be limited by
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws relating to or affecting creditors' rights generally and
general equitable principles (whether considered in a proceeding in equity or
at law.)
We hereby consent to the use of our name under the caption "Legal
Matters" in the Prospectus forming part of the Registration Statement and to
the filing of this opinion as Exhibit 5.1 to the Registration Statement.
Very truly yours,
/s/ Jones, Day, Reavis & Pogue
JONES, DAY, REAVIS & POGUE
<PAGE> 1
EXHIBIT 12.1
PILLOWTEX CORPORATION
CALCULATION OF EARNINGS TO FIXED CHARGES RATIOS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS
NINE MONTHS ENDED SEPTEMBER 28,
YEAR ENDED DECEMBER 28, 1996 ENDED SEPTEMBER 27, 1997 1996
---------------------------------- ---------------------------------- ----------------------
PILLOWTEX FIELDCREST PRO FORMA PILLOWTEX FIELDCREST PRO FORMA PILLOWTEX FIELDCREST
--------- ---------- --------- --------- ---------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
EARNINGS:
Earnings before income
taxes...................... $24,191 $ 1,174 $16,377 $17,274 $22,770 $30,247 $14,049 $(2,038)
Fixed charges................ 16,843 33,736 72,705 16,726 23,708 60,191 11,987 26,646
------- ------- ------- ------- ------- ------- ------- -------
Earnings as adjusted(A).... $41,034 $34,910 $89,082 $34,000 $46,478 $90,437 $26,036 $24,608
======= ======= ======= ======= ======= ======= ======= =======
FIXED CHARGES:
Interest expense............. $13,971 $26,869 $63,446 $13,957 $18,708 $52,635 $10,279 $21,496
Interest capitalized......... 273 -- 273 470 -- 470 -- --
Amortization of debt issuance
costs...................... 839 -- 360 638 -- 425 408 --
Interest Component of Rent
Expense (Note 1)........... 1,760 6,867 8,626 1,661 5,000 6,661 1,300 5,150
------- ------- ------- ------- ------- ------- ------- -------
Fixed charges as
adjusted(B).............. $16,843 $33,736 $72,705 $16,726 $23,708 $60,191 $11,987 $26,646
======= ======= ======= ======= ======= ======= ======= =======
RATIO OF EARNINGS TO FIXED
CHARGES (A) DIVIDED BY (B)... 2.44 1.03 1.23 2.03 1.96 1.50 2.17 0.92
======= ======= ======= ======= ======= ======= ======= =======
</TABLE>
- ---------------
Note 1: Approximately one-third of rent expense which management believes is
representative of the interest component.
2
<PAGE> 2
PILLOWTEX CORPORATION
CALCULATION OF EARNINGS TO FIXED CHARGES RATIOS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PILLOWTEX YEARS ENDED FIELDCREST YEARS ENDED
----------------------------------------------- ------------------------------------------------
1992 1993 1994 1995 1996 1992 1993 1994 1995 1996
------- ------- ------- ------- ------- ------- ------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
EARNINGS:
Earnings before income
taxes.................... $11,429 $21,200 $12,425 $18,978 $24,191 $26,576 $26,879 $46,283 $(27,809) $ 1,174
Fixed charges.............. 5,624 3,666 7,004 19,055 16,843 40,449 33,959 30,001 34,963 33,736
------- ------- ------- ------- ------- ------- ------- ------- -------- -------
Earnings as
adjusted(A)............ $17,053 $24,866 $19,429 $38,033 $41,034 $67,025 $60,838 $76,284 $ 7,154 $34,910
======= ======= ======= ======= ======= ======= ======= ======= ======== =======
FIXED CHARGES:
Interest expense........... $ 4,997 $ 3,042 $ 6,361 $17,491 $13,971 $34,149 $27,659 $23,268 $ 27,630 $26,869
Interest capitalized....... -- -- -- -- 273 -- -- -- -- --
Amortization of debt
issuance costs........... -- -- -- 544 839 -- -- -- -- --
Interest Component of Rent
Expense (Note 1)......... 627 624 643 1,020 1,760 6,300 6,300 6,733 7,333 6,867
------- ------- ------- ------- ------- ------- ------- ------- -------- -------
Fixed charges as
adjusted(B)............ $ 5,624 $ 3,666 $ 7,004 $19,055 $16,843 $40,449 $33,959 $30,001 $ 34,963 $33,736
======= ======= ======= ======= ======= ======= ======= ======= ======== =======
RATIO OF EARNINGS TO FIXED
CHARGES (A) DIVIDED BY
(B)........................ 3.03 6.78 2.77 2.00 2.44 1.66 1.79 2.54 0.20 1.03
======= ======= ======= ======= ======= ======= ======= ======= ======== =======
</TABLE>
- ---------------
Note 1: Approximately one-third of rent expense which management believes is
representative of the interest component.
<PAGE> 1
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Pillowtex Corporation:
We consent to the use of our report incorporated herein by reference and to
the reference to our firm under the heading "Experts" in the prospectus.
/s/ KPMG PEAT MARWICK LLP
KPMG PEAT MARWICK LLP
Dallas, Texas
February 16, 1998
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated January 31, 1997, with respect to the financial
statements of Fieldcrest Cannon, Inc. incorporated by reference in the
Registration Statement (Form S-4) and related Prospectus of Pillowtex
Corporation for the registration of $185,000,000 of 9% Senior Subordinated
Notes due 2007.
/s/ Ernst & Young LLP
Ernst & Young LLP
Greensboro, North Carolina
February 16, 1998
<PAGE> 1
EXHIBIT 99.1
LETTER OF TRANSMITTAL
OFFER TO EXCHANGE
9% SENIOR SUBORDINATED NOTES DUE 2007,
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
FOR ANY AND ALL OUTSTANDING
9% SENIOR SUBORDINATED NOTES DUE 2007
OF
PILLOWTEX CORPORATION
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON MARCH 25, 1998 UNLESS EXTENDED (THE "EXPIRATION DATE").
Deliver to:
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, EXCHANGE AGENT
<TABLE>
<S> <C> <C>
By Registered or Certified Mail: By Overnight Delivery: By Hand Delivery:
Norwest Bank Minnesota, N.A. Norwest Bank Minnesota, N.A. Norwest Bank Minnesota, N.A.
Corporate Trust Operations Corporate Trust Services Northstar East Building
P.O. Box 1517 Sixth and Marquette Avenue 608 Second Avenue South, 12th
Minneapolis, MN 55480-1517 Minneapolis, MN 55479-0113 Floor
Corporate Trust Services
Minneapolis, MN
</TABLE>
Facsimile Transmission Number:
(For Eligible Institutions Only)
(612) 667-4927
Confirm Receipt of Facsimile
by Telephone:
(612) 667-9764
Delivery of this instrument to an address other than as set forth above or
transmission of instructions via a facsimile number other than the one listed
above will not constitute a valid delivery. The instructions accompanying this
Letter of Transmittal should be read carefully before this Letter of Transmittal
is completed. THIS INSTRUMENT SHOULD NOT BE DELIVERED TO THE COMPANY.
The undersigned acknowledges that the undersigned has received and reviewed
the Prospectus dated February 18, 1998 (the "Prospectus") of Pillowtex
Corporation (the "Company") and this Letter of Transmittal (the "Letter of
Transmittal"), which together constitute (i) the Company's offer (the "Exchange
Offer") to exchange $1,000 in principal amount at maturity of its newly issued
9% Senior Subordinated Notes due 2007 (the "Series B Notes"), which have been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
pursuant to a Registration Statement of which the Prospectus is a part, for
$1,000 in principal amount at maturity of its outstanding 9% Senior Subordinated
Notes due 2007 (the "Series A Notes"), of which $185,000,000 in principal amount
at maturity are issued and outstanding. Other capitalized terms used but not
defined herein have the meaning given to them in the Prospectus.
This Letter of Transmittal is to be completed by a Holder (as defined
herein) of Series A Notes either (i) if certificates are to be forwarded
herewith or (ii) if a tender of certificates for Series A Notes, if available,
is to be made by book-entry transfer to the account maintained by the Exchange
Agent at the Depository Trust Company (the "DTC") pursuant to the procedures set
forth in "The Exchange Offer -- Procedures for Tendering Series A Notes" section
of the Prospectus. Holders of Series A Notes whose certificates are not
immediately available, or who are unable to deliver their certificates or
confirmation of the book-entry tender of their Series A Notes into the Exchange
Agent's account at DTC (a "Book-Entry Confirmation") and all other documents
required by this Letter of Transmittal to the Exchange Agent on or prior to the
Expiration Date, must tender their Series A Notes according to the guaranteed
delivery procedures set forth in "The Exchange Offer -- Guaranteed Delivery
Procedures" section of the Prospectus. See Instruction 1. Delivery of documents
to DTC does not constitute delivery to the Exchange Agent.
The term "Holder" with respect to the Exchange Offer means any person in
whose name Series A Notes are registered on the books of the Company or any
other person who has obtained a properly completed bond power from the
registered Holder. The undersigned has completed, executed, and delivered this
Letter of Transmittal to indicate the action the undersigned desires to take
with respect to the Exchange Offer. Holders who wish to tender their Series A
Notes must complete this Letter of Transmittal in its entirety.
<PAGE> 2
PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL CAREFULLY BEFORE PROVIDING ANY
INFORMATION BELOW. THE INSTRUCTIONS INCLUDED WITH THIS LETTER OF TRANSMITTAL
MUST BE FOLLOWED. QUESTIONS AND REQUESTS FOR ASSISTANCE OR FOR ADDITIONAL COPIES
OF THE PROSPECTUS AND LETTER OF TRANSMITTAL SHOULD BE DIRECTED TO THE EXCHANGE
AGENT AT (612) 667-2344 OR AT ITS ADDRESS SET FORTH ABOVE.
List below the Series A Notes to which this Letter of Transmittal relates.
DESCRIPTION OF SERIES A NOTES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
AGGREGATE PRINCIPAL
NAME(S) AND ADDRESS(ES) AMOUNT OF SERIES A NOTES
OF REGISTERED HOLDERS REPRESENTED BY PRINCIPAL AMOUNT OF
(PLEASE COMPLETE, IF BLANK) CERTIFICATE NUMBER(S) CERTIFICATE(S) SERIES A NOTES TENDERED*
- ---------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
TOTAL
- ---------------------------------------------------------------------------------------------------------------------
* Unless indicated in the column labeled "Principal Amount of Series A Notes Tendered," any tendering Holder of
Series A Notes will be deemed to have tendered the entire principal amount of Series A Notes represented by the
column labeled "Aggregate Principal Amount of Series A Notes Represented by Certificate(s)."
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
If the space provided above is inadequate, list the certificate numbers and
principal amount of Series A Notes on a separate signed schedule and affix the
list to this Letter of Transmittal.
[ ] CHECK HERE IF TENDERED SERIES A NOTES ARE ENCLOSED HEREWITH.
[ ] CHECK HERE IF TENDERED SERIES A NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH DTC AND
COMPLETE THE FOLLOWING (FOR USE BY ELIGIBLE INSTITUTIONS (AS HEREINAFTER
DEFINED) ONLY):
Name of Tendering Institution:
- --------------------------------------------------------------------------------
Account Number:
- --------------------------------------------------------------------------------
Transaction Code Number:
- --------------------------------------------------------------------------------
[ ] CHECK HERE IF TENDERED SERIES A NOTES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY ENCLOSED HEREWITH AND COMPLETE THE FOLLOWING
(FOR USE BY ELIGIBLE INSTITUTIONS ONLY):
Name(s) of Registered Holder(s) of Series A Notes:
- --------------------------------------------------------------
Date of Execution of Notice of Guaranteed Delivery:
- --------------------------------------------------------------
Window Ticket Number (if available):
- -----------------------------------------------------------------------------
Name of Institution that Guaranteed Delivery:
- ---------------------------------------------------------------------
Account Number (if delivered by book-entry transfer):
- ------------------------------------------------------------
2
<PAGE> 3
- --------------------------------------------------------------------------------
- ------------------------------------------------------------
SPECIAL ISSUANCE INSTRUCTIONS
(See Instructions 4, 5 and 6)
To be completed ONLY (i) if certificates for Series A Notes not
tendered, or Series B Notes issued in exchange for Series A Notes accepted
for exchange, are to be issued in the name of someone other than the
undersigned, or (ii) if Series A Notes tendered by book-entry transfer
that are not exchanged are to be returned by credit to an account
maintained at DTC.
Issue Certificate(s) to:
Name:
(Please Print)
Address:
------------------------------------------------------------
------------------------------------------------------------
(Include Zip Code)
------------------------------------------------------------
(Taxpayer Identification or Social Security No.)
------------------------------------------------------------
(Please Also Complete Substitute Form W-9)
- ------------------------------------------------------------
- ------------------------------------------------------------
SPECIAL DELIVERY INSTRUCTIONS
(See Instructions 4, 5 and 6)
To be completed ONLY if certificates for Series A Notes not tendered,
or Series B Notes issued in exchange for Series A Notes accepted for
exchange, are to be sent to someone other than the undersigned, or to the
undersigned at an address other than that shown above.
Mail and deliver Certificate(s) to:
Name:
(Please Print)
Address:
------------------------------------------------------------
------------------------------------------------------------
(Include Zip Code)
- ------------------------------------------------------------
- --------------------------------------------------------------------------------
3
<PAGE> 4
Ladies and Gentlemen:
Subject to the terms and conditions of the Exchange Offer, the undersigned
hereby tenders to the Company the principal amount of Series A Notes indicated
above. Subject to and effective upon the acceptance for exchange of the
principal amount of Series A Notes tendered in accordance with this Letter of
Transmittal, the undersigned sells, assigns, and transfers to, or upon the order
of, the Company all right, title and interest in and to the Series A Notes
tendered hereby. The undersigned hereby irrevocably constitutes and appoints the
Exchange Agent as its agent and attorney-in-fact (with full knowledge that the
Exchange Agent also acts as the agent of the Company) with respect to the
tendered Series A Notes with full power of substitution to (i) deliver
certificates for such Series A Notes, or transfer ownership of such Series A
Notes on the account books maintained by DTC, to the Company and deliver all
accompanying evidences of transfer and authenticity to, or upon the order of,
the Company, and (ii) present such Series A Notes for transfer on the books of
the Company and receive all benefits and otherwise exercise all rights of
beneficial ownership of such Series A Notes, all in accordance with the terms of
the Exchange Offer. The power of attorney granted in this paragraph shall be
deemed to be irrevocable and coupled with an interest.
The undersigned hereby represents and warrants that he or she has full
power and authority to tender, sell, assign, and transfer the Series A Notes
tendered hereby and that the Company will acquire good and unencumbered title
thereto, free and clear of all liens, restrictions, charges, and encumbrances
and not subject to any adverse claim, when the same are acquired by the Company.
The undersigned hereby further represents that (i) any Series B Notes acquired
in exchange for Series A Notes tendered hereby will have been acquired in the
ordinary course of business of the person receiving such Series B Notes, whether
or not such person is the undersigned, (ii) neither the undersigned nor any such
other person is engaging in or intends to engage in a distribution of the Series
B Notes, (iii) neither the Holder nor any such other person has an arrangement
or understanding with any person to participate in the distribution of such
Series B Notes, and (iv) neither the Holder nor any such other person is an
"affiliate" (as defined in Rule 405 under the Securities Act) of the Company.
The undersigned also acknowledges that this Exchange Offer is being made in
reliance upon interpretations contained in letters issued to third parties by
the staff of the Securities and Exchange Commission (the "SEC") that the Series
B Notes issued in exchange for the Series A Notes pursuant to the Exchange Offer
may be offered for resale, resold, and otherwise transferred by Holders thereof
(other than any such Holder 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 such Series B Notes are acquired in the ordinary course of such Holder's
business and such Holder is not engaging in and does not intend to engage in a
distribution of the Series B Notes and has no arrangement or understanding with
any person to participate in a distribution of such Series B Notes. If the
undersigned is not a broker-dealer, the undersigned represents that it is not
engaged in, and does not intend to engage in, a distribution of Series B Notes.
If the undersigned is a broker-dealer that will receive Series B Notes for its
own account in exchange for Series A Notes that were acquired as a result of
market-making activities or other trading activities (a "Participating
Broker-Dealer"), it acknowledges that it will deliver a prospectus in connection
with any resale of such Series B Notes; however, by so acknowledging and by
delivering a prospectus, the undersigned will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act.
The undersigned will, upon request, execute and deliver any additional
documents deemed by the Exchange Agent or the Company to be necessary or
desirable to complete the assignment, transfer, and purchase of the Series A
Notes tendered hereby.
For purposes of the Exchange Offer, the Company shall be deemed to have
accepted validly tendered Series A Notes when, as and if the Company has given
oral or written notice thereof to the Exchange Agent.
If any tendered Series A Notes are not accepted for exchange pursuant to
the Exchange Offer for any reason, certificates for any such unaccepted Series A
Notes will be returned, without expense, to the undersigned at the address shown
below or at a different address as may be indicated herein under "Special
Delivery Instructions" or, in the case of Series A Notes tendered by book-entry
transfer, such unaccepted Series A Notes will be credited to an account at DTC,
as promptly as practicable after the Expiration Date.
All authority conferred or agreed to be conferred by this Letter of
Transmittal shall survive the death, incapacity or dissolution of the
undersigned, and every obligation of the undersigned under this Letter of
Transmittal shall be binding upon the undersigned's heirs, personal
representatives, successors, and assigns.
The undersigned understands that tenders of Series A Notes pursuant to the
procedures described under the caption "The Exchange Offer -- Procedures for
Tendering Series A Notes" 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.
Unless otherwise indicated under "Special Issuance Instructions," please
issue the certificates representing the Series B Notes issued in exchange for
the Series A Notes accepted for exchange and return any Series A Notes not
tendered or not exchanged in the name(s) of the undersigned. Similarly, unless
otherwise indicated under "Special Delivery Instructions," please send the
certificates representing the Series B Notes issued in exchange for the Series A
Notes accepted for exchange and any certificates for Series A Notes not tendered
or not exchanged (and accompanying documents, as appropriate) to the undersigned
at the address shown below the undersigned's signature(s). In the event that
both "Special Payment Instructions" and "Special Delivery Instructions" are
completed, please issue the certificates representing the Series B Notes issued
in exchange for the Series A Notes accepted for exchange in the name(s) of, and
return any Series A Notes not tendered or not exchanged and send said
certificates to, the person(s) so indicated. The undersigned recognizes that the
Company has no obligation pursuant to the "Special Payment Instructions" and
"Special
4
<PAGE> 5
Delivery Instructions" to transfer any Series A Notes from the name of the
registered Holder(s) thereof if the Company does not accept for exchange any of
the Series A Notes so tendered.
Holders of Series A Notes who wish to tender their Series A Notes and (i)
whose Series A Notes are not immediately available, or (ii) who cannot deliver
their Series A Notes, this Letter of Transmittal or any other documents required
hereby to the Exchange Agent prior to the Expiration Date (or who cannot comply
with the book-entry transfer procedures on a timely basis), may tender their
Series A Notes according to the guaranteed delivery procedures set forth in the
Prospectus under the caption "The Exchange Offer -- Guaranteed Delivery
Procedures." See Instruction 1 regarding the completion of this Letter of
Transmittal.
5
<PAGE> 6
PLEASE SIGN HERE WHETHER OR NOT
SERIES A NOTES ARE BEING PHYSICALLY TENDERED HEREBY
<TABLE>
<S> <C>
X
(Date)
X
(Signature(s) of Registered Holder(s) (Date)
or Authorized Signatory)
</TABLE>
Area Code and Telephone Number(s):
Tax Identification or Social Security Number(s):
The above lines must be signed by the registered Holder(s) of Series A
Notes as their name(s) appear(s) on the certificate for the Series A Notes or by
person(s) authorized to become registered Holder(s) by a properly completed bond
power from the registered Holder(s), a copy of which must be transmitted with
this Letter of Transmittal. If Series A Notes to which this Letter of
Transmittal relates are held of record by two or more joint Holders, then all
such Holders must sign this Letter of Transmittal. If signature is by trustee,
executor, administrator, guardian, attorney-in-fact, officer of a corporation or
other person acting in a fiduciary or representative capacity, then such person
must (i) set forth his or her full title below and (ii) unless waived by the
Company, submit evidence satisfactory to the Company of such person's authority
so to act. See Instruction 4 regarding the completion of this Letter of
Transmittal.
Name(s): ______________________________________
(Please Print)
Capacity:
Address:
- --------------------------------------------------------------------------------
(Include Zip Code)
SIGNATURE(S) GUARANTEED BY AN ELIGIBLE INSTITUTION
(AS HEREINAFTER DEFINED): (IF REQUIRED BY INSTRUCTION 4)
<TABLE>
<S> <C>
(Authorized Signature) (Title)
(Name of Firm) (Date)
</TABLE>
6
<PAGE> 7
PLEASE COMPLETE SUBSTITUTE FORM W-9 BELOW.
<TABLE>
<C> <S> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
PAYER'S NAME: NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
- -----------------------------------------------------------------------------------------------------------------------------------
SUBSTITUTE PART 1 -- PLEASE PROVIDE YOUR TIN IN THE BOX AT Social Security Number
FORM W-9 RIGHT AND CERTIFY BY SIGNING AND DATING BELOW OR ----------------------------------------
Employer ID Number
------------------------------------------------------------------------------------------------
DEPARTMENT OF THE TREASURY PART 2 -- Check the box if you are exempt from backup withholding. [ ]
INTERNAL REVENUE SERVICE
------------------------------------------------------------------------------------------------
CERTIFICATION -- Under the penalties of perjury, I certify that (1) the number shown on this form
is my correct taxpayer identification number (or I am waiting for a number to be issued to me) and
PAYER'S REQUEST FOR TAXPAYER (2) I am not subject to backup withholding either because I have not been notified by the Internal
IDENTIFICATION NUMBER Revenue Service (the "IRS") that I am subject to backup withholding as a result of a failure to
("TIN") report all interest or dividends or the IRS has notified me that I am no longer subject to backup
CERTIFICATION withholding. (You must cross out Item (2) above if you have been notified by the IRS that you are
subject to backup withholding because of underreporting of interest or dividends on your return.)
Signature Date
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE EXCHANGE OFFER. PLEASE
REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and either (a) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Center or Social Security Administration Office or (b) I intend
to mail or deliver an application in the near future. I understand that if I do
not provide a taxpayer identification number within sixty (60) days, 31% of all
reportable payments made to me thereafter will be withheld until I provide a
number.
<TABLE>
<S> <C>
- ------------------------------------------------------ ---------------------------------------------------
Signature Date
</TABLE>
7
<PAGE> 8
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND SERIES A NOTES. The tendered
Series A Notes or any confirmation of a book-entry transfer (a "Book-Entry
Confirmation"), as well as a properly completed and duly executed copy of this
Letter of Transmittal or facsimile hereof and any other documents required by
this Letter of Transmittal must be received by the Exchange Agent at its address
set forth herein prior to 5:00 p.m., New York City time, on the Expiration Date.
THE METHOD OF DELIVERY OF THE TENDERED SERIES A NOTES, THIS LETTER OF
TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE
ELECTION AND RISK OF THE HOLDER AND, EXCEPT AS OTHERWISE PROVIDED BELOW, THE
DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED OR CONFIRMED BY THE
EXCHANGE AGENT. 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 DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE.
NO LETTER OF TRANSMITTAL OR SERIES A 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.
Holders who wish to tender their Series A Notes and (i) whose Series A
Notes are not immediately available, or (ii) who cannot deliver their Series A
Notes, this Letter of Transmittal, or any other documents required hereby to the
Exchange Agent prior to the Expiration Date, or (iii) who are unable to complete
the procedure for book-entry transfer on a timely basis, must tender their
Series A Notes according to the guaranteed delivery procedures set forth in the
Prospectus. Pursuant to such procedure: (i) such tender must be made by or
through an Eligible Institution; (ii) prior to the Expiration Date, the Exchange
Agent must have received from 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 of the Series A
Notes, the certificate number or numbers of such Series A Notes and the
aggregate principal amount of Series A Notes tendered, stating that the tender
is being made thereby and guaranteeing that, within three New York Stock
Exchange trading days after the Expiration Date, this Letter of Transmittal (or
facsimile hereof) together with the certificate(s) representing the Series A
Notes or a Book-Entry Confirmation and any other required documents will be
deposited by the Eligible Institution (as hereinafter defined) with the Exchange
Agent; and (iii) such properly completed and executed Letter of Transmittal (or
facsimile thereof), as well as all other documents required by this Letter of
Transmittal and the certificate(s) representing all tendered Series A Notes (or
a Book-Entry Confirmation) in proper form for transfer, must be received by the
Exchange Agent within three New York Stock Exchange trading days after the
Expiration Date, all as provided in the Prospectus under the caption "The
Exchange Offer -- Guaranteed Delivery Procedures." Any Holder of Series A Notes
who wishes to tender his Series A Notes pursuant to the guaranteed delivery
procedures described above must ensure that the Exchange Agent receives the
Notice of Guaranteed Delivery prior to 5:00 p.m., New York City time, on the
Expiration Date. Upon request of the Exchange Agent, a Notice of Guaranteed
Delivery will be sent to Holders who wish to tender their Series A Notes
according to the guaranteed delivery procedures set forth above.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered Series A Notes, and withdrawal of tendered
Series A 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 Series A Notes not properly tendered or any Series A 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
irregularities or conditions of tender as to particular Series A Notes. The
Company's interpretation of the terms and conditions of the Exchange Offer,
including the instructions in this Letter of Transmittal and those set forth in
the Prospectus under the caption "The Exchange Offer -- Certain Conditions to
the Exchange Offer," shall be final and binding on all parties. Unless waived,
any defects or irregularities in connection with tenders of Series A Notes must
be cured within such time as the Company shall determine. Neither the Company,
the Exchange Agent nor any other person shall be under any duty to give
notification of defects or irregularities with respect to tenders of Series A
Notes, nor shall any of them incur any liability for failure to give such
notification. Tenders of Series A Notes will not be deemed to have been made
until such defects or irregularities have been cured or waived. Any Series A
Notes received by the Exchange Agent that are not properly tendered and as to
which the defects or irregularities have not been cured or waived will be
returned by the Exchange Agent to the tendering Holders of Series A Notes,
unless otherwise provided in this Letter of Transmittal, as soon as practicable
following the Expiration Date.
2. TENDER BY HOLDER. Only a Holder of Series A Notes may tender such Series
A Notes in the Exchange Offer. Any beneficial holder of Series A Notes who is
not the registered Holder and who wishes to tender should arrange with the
registered Holder to execute and deliver this Letter of Transmittal on his
behalf or must, prior to completing and executing this Letter of Transmittal and
delivering his Series A Notes, either make appropriate arrangements to register
ownership of the Series A Notes in such holder's name, or obtain a properly
completed bond power from the registered Holder. The transfer of registered
ownership of Series A Notes may take considerable time.
3. PARTIAL TENDERS. If less than the entire principal amount of Series A
Notes represented by a certificate is tendered, the tendering Holder should fill
in the aggregate principal amount tendered in the third column of the box
entitled "Description of Series A Notes" above. The entire principal amount of
Series A Notes set forth on the certificate delivered to the Exchange Agent will
be deemed to have been tendered unless otherwise indicated. If the entire
principal amount of all Series A Notes is not tendered, then a Series A Notes
certificate for the principal amount of Series A Notes not tendered and a
certificate or certificates representing Series B Notes issued in exchange for
any Series A Notes accepted will be sent to the Holder at his or her registered
address, unless a different address is provided in the appropriate box on this
Letter of Transmittal, promptly after the Series A Notes are accepted for
exchange, or in the case of Series A
8
<PAGE> 9
Notes tendered by book-entry transfer, such indentured Series A Notes and Series
B Notes issued in exchange for any Series A Notes accepted will be credited to
accounts at DTC.
4. SIGNATURES ON THE LETTER OF TRANSMITTAL; BOND POWERS AND ENDORSEMENTS;
GUARANTEE OF SIGNATURES. If this Letter of Transmittal (or facsimile hereof) is
signed by the record Holder(s) of the Series A Notes tendered hereby, the
signature must correspond with the name(s) as written on the face of the Series
A Notes without alteration, enlargement, or any change whatsoever.
If this Letter of Transmittal (or facsimile hereof) is signed by the
registered Holder or Holders of Series A Notes tendered and the certificate or
certificates for Series B Notes issued in exchange therefor are to be issued (or
if certificates representing the principal amount of Series A Notes not tendered
are to be reissued) to the registered Holder, the said Holder need not and
should not endorse any tendered Series A Notes, nor provide a separate bond
power. In any other case, such Holder must either properly endorse the Series A
Notes tendered or transmit a properly completed separate bond power with this
Letter of Transmittal, with the signatures on the endorsement or bond power
guaranteed by an Eligible Institution.
If this Letter of Transmittal (or facsimile hereof) is signed by a person
other than the registered Holder or Holders of any Series A Notes listed, such
Series A Notes must be endorsed or accompanied by appropriate bond powers, in
each case signed as the name of the registered Holder or Holders appears on the
Series A Notes.
If this Letter of Transmittal (or facsimile hereof) or any Series A 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 so to act must be submitted with this Letter of Transmittal.
Endorsements on Series A Notes or signatures on bond powers required by
this Instruction 4 must be guaranteed by an Eligible Institution.
Except as otherwise provided below, all signatures on this Letter of
Transmittal must be guaranteed by a participant in a Recognized Signature
Guarantee Medallion Program (an "Eligible Institution"). Signatures on this
Letter of Transmittal need not be guaranteed if (i) this Letter of Transmittal
is signed by the registered Holder(s) of the Series A Notes tendered herewith
and such Holder(s) have not completed the box set forth herein entitled "Special
Payment Instructions" or the box entitled "Special Delivery Instructions," or
(ii) if such Series A Notes are tendered for the account of an Eligible
Institution.
5. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. Tendering Holders should
indicate, in the applicable box or boxes, the name and address to which Series B
Notes or substitute Series A Notes for the principal amount of Series A Notes
not tendered or not accepted for exchange are to be issued or sent, if different
from the name and address of the person signing this Letter of Transmittal. In
the case of issuance in a different name, the taxpayer identification or social
security number of the person named must also be indicated.
6. TRANSFER TAXES. The Company will pay all transfer taxes, if any,
applicable to the exchange of Series A Notes pursuant to the Exchange Offer. If,
however, certificates representing Series B Notes or Series A Notes (for any
principal amount of Series A Notes not tendered or accepted for exchange) are to
be delivered to, or are to be registered or issued in the name of, any person
other than the registered Holder of the Series A Notes tendered hereby, or if
tendered Series A Notes are registered in the name of any person other than the
person signing this Letter of Transmittal, or if a transfer tax is imposed for
any reason other than the exchange of Series A Notes pursuant to the Exchange
Offer, then the amount of any such transfer taxes (whether imposed on the
registered Holder or on 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 this Letter of Transmittal, the amount of such transfer
taxes will be billed directly to such tendering Holder.
Except as provided in this Instruction 6, it will not be necessary for
transfer tax stamps to be affixed to the Series A Notes listed in this Letter of
Transmittal.
7. FORM W-9. Any Holder who tenders his Series A Notes is required to
provide the Exchange Agent with a correct Taxpayer Identification Number ("TIN")
on the Form W-9 which is enclosed herewith. If such Holder is an individual, the
TIN is his or her social security number. Failure to provide the information on
the Form W-9 may subject the surrendering Holder to 31% Federal income tax
withholding on any payment made to Holders of the Series B Notes. Exempt Holders
(including, among others, all corporations and certain foreign individuals) are
not subject to these backup withholding and reporting requirements. For
additional information in this regard, please refer to the enclosed Guidelines
for Certification of TIN on Substitute Form W-9. In order to satisfy the
Exchange Agent that a foreign individual qualifies as an exempt recipient, the
Holder must submit a Form W-8, signed under penalties of perjury, attesting to
that individual's exempt status. A Form W-8 may be obtained from the Exchange
Agent.
8. WAIVER OF CONDITIONS. The Company reserves the absolute right to amend,
waive, or modify specified conditions in the Exchange Offer, set forth in the
Prospectus under the caption "The Exchange Offer -- Certain Conditions to the
Exchange Offer," in the case of any Series A Notes tendered.
9. MUTILATED, LOST, STOLEN OR DESTROYED SERIES A NOTES. Any tendering
Holder whose Series A Notes have been mutilated, lost, stolen, or destroyed
should contact the Exchange Agent at the address indicated herein for further
instructions.
10. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests
for assistance and requests for additional copies of the Prospectus or this
Letter of Transmittal 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.
9
<PAGE> 10
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GUIDE THE
PAYER. -- Social Security Numbers have nine digits separated by two hyphens:
i.e. 000-00-0000. Employer Identification Numbers have nine digits separated by
only one hyphen: i.e. 00-0000000. The table below will help determine the number
to give the payer.
- ---------------------------------------------------------------
---------------------------------------------------------------
<TABLE>
<CAPTION>
GIVE THE
SOCIAL SECURITY
FOR THIS TYPE OF ACCOUNT: NUMBER OF --
- --------------------------------------------------------------
GIVE THE EMPLOYER
IDENTIFICATION
FOR THIS TYPE OF ACCOUNT: NUMBER OF --
- --------------------------------------------------------------
<C> <S> <C>
1. An individual's account The individual
2. Two or more individuals (joint The actual owner of the
account) account or, if combined
funds, any one of the
individuals (1)
3. Custodian account of a minor The minor (2)
(Uniform Gift to Minors Act)
4. (a) The usual revocable savings The grantor- trustee (1)
trust account (grantor is also
trustee)
(b) So-called trust account The actual owner (1)
that is not a legal or valid
trust under State law
5. Sole proprietorship account The owner (3)
6. A valid trust, estate, or The legal entity (Do not
pension trust furnish the identifying
number of the personal
representative or
trustee unless the legal
entity itself is not
designated in the
account title.) (4)
7. Corporate account The corporation
8. Religious, charitable, or The organization
educational organization
account
9. Partnership The partnership
10. Association, club or other The organization
tax-exempt organization
11. A broker or registered nominee The broker or nominee
12. Account with the Department of The public entity
Agriculture in the name of a
public entity (such as a State
or local government, school
district, or prison) that
receives agricultural program
payments
</TABLE>
- ---------------------------------------------------------------
---------------------------------------------------------------
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's Social Security Number.
(3) Show the name of the owner. You may also enter your business name. You may
use your Social Security Number or Employer Identification Number.
(4) List first and circle the name of the legal trust, estate, or pension trust.
NOTE: If no name is circled when there is more than one name, the number will be
considered to be that of the first name listed.
10
<PAGE> 11
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you don't have a Taxpayer Identification Number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card, or Form
SS-4, Application for Employer Identification Number, at the local office of the
Social Security Administration or the Internal Revenue Service and apply for a
number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on broker transactions
include the following:
- - A corporation.
- - A financial institution.
- - An organization exempt from tax under Section 501(a), or an individual
retirement plan.
- - The United States or any agency or instrumentality thereof.
- - A State, the District of Columbia, a possession of the United States, or any
subdivision or instrumentality thereof.
- - A foreign government, a political subdivision of a foreign government, or any
agency or instrumentality thereof.
- - An international organization or any agency or instrumentality thereof.
- - A registered dealer in securities or commodities registered in the United
States or a possession of the United States.
- - A real estate investment trust.
- - A common trust fund operated by a bank under Section 584(a).
- - An entity registered at all times under the Investment Company Act of 1940.
- - A foreign central bank of issue.
- - A person registered under the Investment Advisors Act of 1940 who regularly
acts as a broker.
Payments of interest not generally subject to backup withholding include the
following:
- - Payments to nonresident aliens subject to withholding under Section 1441.
- - Payments to partnerships not engaged in a trade or business in the United
States and which have at least one nonresident partner.
- - Payments made by certain foreign organizations.
Exempt payees described above should file Substitute Form W-9 to avoid possible
erroneous backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR
TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, SIGN AND
DATE THE FORM AND RETURN IT TO THE PAYER.
PRIVACY ACT NOTICE -- Section 6109 requires most recipients of dividend,
interest, or other payments to give Taxpayer Identification Numbers to payers
who must report the payments to the IRS. The IRS uses the numbers for
identification purposes. Payers must be given the numbers whether or not
recipients are required to file tax returns. Payers must generally withhold 31%
of taxable interest, dividend, and certain other payments to a payee who does
not furnish a Taxpayer Identification Number to a payer. Certain penalties may
also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER -- If you fail
to furnish your Taxpayer IDENTIFICATION NUMBER to a payer, you are subject to a
penalty of $50 for each such failure unless your failure is due to reasonable
cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING -- If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION -- Falsifying certifications or
affirmations may subject you to criminal penalties including fines and/or
imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR
TAX CONSULTANT OR THE IRS.
11
<PAGE> 12
(DO NOT WRITE IN SPACE BELOW)
<TABLE>
<S> <C> <C>
CERTIFICATE SERIES A NOTES SERIES A NOTES
SURRENDERED TENDERED ACCEPTED
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Delivery Prepared by:
- ----------------------------------
Checked by:
- --------------------------------------------
Date:
- -----------------------------------------------------
12
<PAGE> 1
EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY FOR
PILLOWTEX CORP. LOGO
This form or one substantially equivalent hereto must be used to accept the
Exchange Offer of Pillowtex Corporation (the "Company") made pursuant to the
Prospectus, dated February 18, 1998 (the "Prospectus"), if certificates for
Series A Notes of the Company are not immediately available or if the procedure
for book-entry transfer cannot be completed on a timely basis or time will not
permit all required documents to reach the Exchange Agent prior to 5:00 p.m.,
New York City time, on the Expiration Date of the Exchange Offer. Such form may
be delivered or transmitted by facsimile transmission, mail, overnight courier
or hand delivery to Norwest Bank Minnesota, National Association (the "Exchange
Agent") as set forth below. In addition, in order to utilize the guaranteed
delivery procedure to tender Series A Notes pursuant to the Exchange Offer, a
completed, signed and dated Letter of Transmittal (or facsimile thereof) must
also be received by the Exchange Agent prior to 5:00 p.m., New York City time,
on the Expiration Date. Capitalized terms not defined herein are defined in the
Prospectus.
Deliver to:
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, EXCHANGE AGENT
<TABLE>
<S> <C> <C>
By Registered or Certified Mail: By Overnight Delivery: By Hand Delivery:
Norwest Bank Minnesota, N.A. Norwest Bank Minnesota, N.A. Norwest Bank Minnesota, N.A.
Corporate Trust Operations Corporate Trust Services Northstar East Building
P.O. Box 1517 Sixth and Marquette Avenue 608 Second Avenue South, 12th
Minneapolis, MN 55480-1517 Minneapolis, MN 55479-0113 Floor
Corporate Trust Services
Minneapolis, MN
</TABLE>
Facsimile Transmission Number:
(For Eligible Institutions Only)
(612) 667-4927
Confirm Receipt of Facsimile
by Telephone:
(612) 667-9764
Delivery of this instrument to an address other than as set forth above or
transmission of instructions via a facsimile number other than the one listed
above will not constitute a valid delivery.
Ladies and Gentlemen:
Upon the terms and conditions set forth in the Prospectus and the
accompanying Letter of Transmittal, the undersigned hereby tenders to the
Company the principal amount of Series A Notes set forth below, pursuant to the
guaranteed delivery procedures described in "The Exchange Offer -- Guaranteed
Delivery Procedures" section of the Prospectus. By so tendering, the undersigned
hereby does make, at and as of the date hereof, the representations and
warranties of a tendering Holder of Series A Notes set forth in the Letter of
Transmittal.
<TABLE>
<S> <C>
Principal Amount of Series A Notes Tendered: If Series A Notes will be delivered by
- ------------------------------------------------ book-entry transfer to the Depository Trust
Certificate Nos. (if available): Company, provide account number:
- ------------------------------------------------ DTC Account Number:
Total Principal Amount Represented by Series A ---------------------------------
Notes Certificate(s):
- ------------------------------------------------
</TABLE>
<PAGE> 2
ALL AUTHORITY HEREIN CONFERRED OR AGREED TO BE CONFERRED SHALL SURVIVE THE
DEATH OR INCAPACITY OF THE UNDERSIGNED AND EVERY OBLIGATION OF THE UNDERSIGNED
HEREUNDER SHALL BE BINDING UPON THE HEIRS, PERSONAL REPRESENTATIVES, SUCCESSORS,
AND ASSIGNS OF THE UNDERSIGNED.
PLEASE SIGN HERE
<TABLE>
<S> <C>
- ------------------------------------------------------------ ------------------------------------------------
(Date)
- ------------------------------------------------------------ ------------------------------------------------
Signature(s) of Registered Holder(s) or Authorized Signatory (Date)
</TABLE>
Area Code and Telephone Number:
- ------------------------------------------------------
Must be signed by the Holder(s) of Series A Notes as their name(s)
appear(s) on certificates for Series A Notes or by person(s) authorized to
become registered Holder(s) by endorsement and 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 set forth his or her full
title below:
(Please print name(s) and addresses)
<TABLE>
<S> <C>
Name(s): ------------------------------------------------------------
------------------------------------------------------------
(Please Print)
Capacity: ------------------------------------------------------------
Address: ------------------------------------------------------------
------------------------------------------------------------
(Include Zip Code)
</TABLE>
2
<PAGE> 3
GUARANTEE
The undersigned, a member of a registered national securities exchange, or
a member of the National Association of Securities Dealers, Inc., or a
commercial bank or trust company having an officer or correspondent in the
United States, hereby guarantees that the certificates representing the
principal amount of Series A Notes tendered hereby in proper form for transfer,
or timely confirmation of the book-entry transfer of such Series A Notes into
the Exchange Agent's account at DTC pursuant to the procedures set forth in "The
Exchange Offer -- Guaranteed Delivery Procedures" section of the Prospectus,
together with a properly completed and duly executed Letter of Transmittal (or a
manually signed facsimile thereof) with any required signature guarantee and any
other documents required by the Letter of Transmittal, will be received by the
Exchange Agent at the address set forth above, within three New York Stock
Exchange trading days after the Expiration Date.
<TABLE>
<S> <C>
Name of Firm Authorized Signature
Address Title
Name:
Zip Code (Please Type or Print)
Area Code and Telephone No.: Dated:
</TABLE>
NOTE: DO NOT SEND CERTIFICATES FOR SERIES A NOTES WITH THIS FORM. CERTIFICATES
FOR SERIES A NOTES SHOULD ONLY BE SENT WITH YOUR LETTER OF TRANSMITTAL.
3
