SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 1-8941
FRUIT OF THE LOOM, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 36-3361804
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5000 SEARS TOWER,
233 SOUTH WACKER DRIVE,
CHICAGO, ILLINOIS 60606
(Address of principal executive offices, including Zip Code)
(312) 876-1724
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Common shares outstanding at August 5, 1994:69,128,049 shares of
Class A Common Stock, $.01 par value and 6,690,976 shares of
Class B Common Stock, $.01 par value.
<PAGE>
FRUIT OF THE LOOM, INC. AND SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION Page No.
Item 1. Financial Statements
Condensed Consolidated Balance
Sheet; June 30, 1994
(Unaudited) and December 31,
1993 3
Condensed Consolidated Statement
of Earnings (Unaudited);
Three and Six Months Ended
June 30, 1994 and 1993 4
Condensed Consolidated Statement
of Cash Flows (Unaudited);
Six Months Ended June 30,
1994 and 1993 5
Notes to Condensed Consolidated
Financial Statements
(Unaudited) 6
Item 2. Management's Discussion and
Analysis of Financial
Condition and Results of
Operations 8
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security
Holders 13
Item 6. Exhibits and Reports on Form 8-K 14
<PAGE>
FRUIT OF THE LOOM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(In thousands of dollars)
<TABLE>
<CAPTION> June 30, December 31,
1994 1993
(Unaudited)
ASSETS
Current Assets
<S> <S> <C> <S> <C>
Cash and cash equivalents (including
restricted cash) . . . . . . . . . . . . . . . . . . . . $ 4,300 $ 74,200
Accounts receivable
(less allowance for possible losses
of $16,200 and $16,100, respectively) . . . . . . . . . 405,800 239,700
Inventories
Finished goods . . . . . . . . . . . . . . . . . . . . . 514,700 454,500
Work in process . . . . . . . . . . . . . . . . . . . . 134,300 94,000
Materials and supplies . . . . . . . . . . . . . . . . . 31,700 25,600
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . 40,600 54,700
Total current assets . . . . . . . . . . . . . . . . 1,131,400 942,700
Property, Plant and Equipment . . . . . . . . . . . . . . . . . . 1,340,500 1,233,900
Less accumulated depreciation . . . . . . . . . . . . . . . 413,400 367,900
Net property, plant and equipment . . . . . . . . . 927,100 866,000
Other Assets
Goodwill (less accumulated amortization
of $223,900 and $207,200, respectively) . . . . . . . . 972,500 895,300
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . 53,900 30,000
Total other assets . . . . . . . . . . . . . . . . . 1,026,400 925,300
$ 3,084,900 $ 2,734,000
LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities
<S> <S> <C> <S> <C>
Current maturities of long-term debt . . . . . . . . . . . $ 27,900 $ 34,000
Trade accounts payable . . . . . . . . . . . . . . . . . . . 69,800 78,100
Other accounts payable and accrued expenses . . . . . . . . 223,600 138,400
Total current liabilities . . . . . . . . . . . . . 321,300 250,500
Noncurrent Liabilities
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . 1,402,100 1,194,000
Deferred income taxes . . . . . . . . . . . . . . . . . . . 49,500 51,000
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . 188,000 191,500
Total noncurrent liabilities . . . . . . . . . . . . 1,639,600 1,436,500
Common Stockholders' Equity . . . . . . . . . . . . . . . . . . 1,124,000 1,047,000
$ 3,084,900 $ 2,734,000
</TABLE>
See accompanying notes.<PAGE>
FRUIT OF THE LOOM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF EARNINGS (Unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1994 1993 1994 1993
<S> <S> <C> <S> <C> <S><C> <S> <C>
Net sales . . . . . . . . . . . . . . . . . . . $ 635,200 $ 523,000 $ 1,073,400 $ 951,900
Cost of sales . . . . . . . . . . . . . . . . . . . 444,400 330,200 736,800 601,400
Gross earnings . . . . . . . . . . . . . . . . 190,800 192,800 336,600 350,500
Selling, general and
administrative expenses . . . . . . . . . . . . . 90,300 64,900 161,700 122,100
Goodwill amortization . . . . . . . . . . . . . . . 9,000 6,200 16,700 12,400
Operating earnings . . . . . . . . . . . . . . 91,500 121,700 158,200 216,000
Interest expense . . . . . . . . . . . . . . . . . (23,800) (18,500) (44,900) (36,100)
Other income (expense) - net . . . . . . . . . . . 4,500 (3,400) 2,300 (5,300)
Earnings before income tax expense
and cumulative effect of change
in accounting principle . . . . . . . . . 72,200 99,800 115,600 174,600
Income tax expense . . . . . . . . . . . . . . . . 33,500 41,400 51,800 72,100
Earnings before cumulative effect of change
in accounting principle . . . . . . . . . 38,700 58,400 63,800 102,500
Cumulative effect of change in
accounting for income taxes . . . . . . . -- -- -- 3,400
Net earnings . . . . . . . . . . . . . . . . . $ 38,700 $ 58,400 $ 63,800 $ 105,900
Earnings per common share:
Earnings before cumulative effect of
change in accounting principle . . . . . . $ .51 $ .77 $ .84 $ 1.35
Cumulative effect of change in accounting
for income taxes . . . . . . . . . . . . . -- -- -- .04
Net earnings . . . . . . . . . . . . . . . . . $ .51 $ .77 $ .84 $ 1.39
Average common shares outstanding . . . . . . 76,000 76,000 76,000 76,000
</TABLE>
See accompanying notes.<PAGE>
FRUIT OF THE LOOM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)
(In thousands of dollars)
<TABLE>
<CAPTION> Six Months Ended
June 30,
1994 1993
Cash Flows from Operating Activities
<S> <S> <C> <S> <C>
Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . $ 63,800 $ 105,900
Adjustments to reconcile to net cash
used for operating activities:
Cumulative effect of change in
accounting for income taxes . . . . . . . . . . . . . . -- (3,400)
Depreciation and amortization . . . . . . . . . . . . . . . 72,000 56,900
Deferred income taxes . . . . . . . . . . . . . . . . . . . 1,300 11,900
Increase in working capital . . . . . . . . . . . . . . . . (149,400) (235,500)
Other-net . . . . . . . . . . . . . . . . . . . . . . . . . 8,000 (12,700)
Net cash used for operating activities . . . . . . . . . (4,300) (76,900)
Cash Flows from Investing Activities
Capital expenditures . . . . . . . . . . . . . . . . . . . . . . (99,100) (138,600)
Acquisition of Gitano . . . . . . . . . . . . . . . . . . . . . (98,100) --
Acquisition of Artex . . . . . . . . . . . . . . . . . . . . . . (44,600) --
Other-net . . . . . . . . . . . . . . . . . . . . . . . . . . . (23,200) 6,500
Net cash used for investing activities . . . . . . . . . (265,000) (132,100)
Cash Flows from Financing Activities
Net borrowings under long-term credit agreements . . . . . . . . 223,700 --
Increase in short-term notes payable . . . . . . . . . . . . . . -- 246,700
Principal payments on long-term debt . . . . . . . . . . . . . .
and capital leases . . . . . . . . . . . . . . . . . . . . . (24,500) (75,200)
Other-net . . . . . . . . . . . . . . . . . . . . . . . . . . . 200 (600)
Net cash provided by financing
activities . . . . . . . . . . . . . . . . . . . . . . 199,400 170,900
Net decrease in Cash and cash
equivalents (including restricted cash) . . . . . . . . . . (69,900) (38,100)
Cash and cash equivalents (including restricted
cash) at beginning of period . . . . . . . . . . . . . . . . 74,200 57,400
Cash and cash equivalents (including restricted
cash) at end of period . . . . . . . . . . . . . . . . . . . $ 4,300 $ 19,300
</TABLE>
See accompanying notes.<PAGE>
FRUIT OF THE LOOM, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. No dividends were declared on the Company's common stock for
the three and six month periods ended June 30, 1994 and
1993.
2. In late January 1994 the Company acquired Artex
Manufacturing Co., Inc. ("Artex") for approximately
$44,600,000 (the "Artex Acquisition"). In late March 1994
the Company acquired certain assets of the Gitano Group,
Inc. ("Gitano") for approximately $98,100,000 (the "Gitano
Acquisition" and, together with the Artex Acquisition, the
"Acquisitions"). The Acquisitions were accounted for using
the purchase method of accounting. Accordingly, the
purchase prices were preliminarily allocated to assets and
liabilities based on their estimated fair values as of the
date of the Acquisitions. The cost in excess of the net
assets acquired in the Acquisitions was approximately
$93,900,000 and is being amortized over periods ranging from
15 to 20 years. The results of operations of Artex and
Gitano are not material in relation to the Company's
consolidated financial statements and, therefore, pro forma
financial information has not been presented.
3. In June 1994, pursuant to authorization from the Company's
Board of Directors, the Company guaranteed a loan from a
bank in an amount up to $12,000,000 to Mr. Farley, the
Company's Chairman of the Board and Chief Executive Officer.
In exchange for the guarantee, the Company received an
annual fee from Mr. Farley equal to 1% of the value of the
loans covered by the guarantee. The guarantee is secured by
a second lien on certain shares of the Company held by the
bank for other loans made to Mr. Farley.
4. Effective January 1, 1993, the Company recorded the
cumulative effect of an accounting change related to the
initial adoption of Statement of Financial Accounting
Standards No. 109 "Accounting for Income Taxes" ("SFAS No.
109") resulting in a $3,400,000 ($.04 per share) benefit in
the first quarter of 1993. Under SFAS No. 109, the liability
method is used in accounting for income taxes.
5. The condensed consolidated financial statements contained
herein should be read in conjunction with the consolidated
financial statements and related notes contained in the
Company's 1993 Annual Report on Form 10-K.
The information furnished herein reflects all adjustments
(consisting only of normal recurring adjustments) which are,
in the opinion of management, necessary to a fair statement
of the results of the interim periods and is not necessarily
indicative of results for the entire year.
<PAGE>
FRUIT OF THE LOOM, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements -
(Concluded) - (Unaudited)
The Company uses the last-in, first-out ("LIFO") method of
accounting for the majority of inventories for financial
reporting purposes. Interim determinations of LIFO
inventories are necessarily based on management's estimates
of year-end inventory levels and costs. Subsequent changes
in these estimates, including the final year-end LIFO
determination, and the effect of such changes on earnings
are recorded in the interim periods in which they occur.
<PAGE>
FRUIT OF THE LOOM, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the
accompanying condensed consolidated financial statements for the
period ended June 30, 1994 and the Company's Annual Report on
Form 10-K for the year ended December 31, 1993.
The table below sets forth selected operating data (in millions
of dollars and as percentages of net sales) of the Company.
<TABLE>
<CAPTION> Three Months Ended Six Months Ended
June 30, June 30,
1994 1993 1994 1993
<S> <S> <C> <S> <C> <S> <C> <S> <C>
Net sales $ 635.2 $ 523.0 $ 1,073.4 $ 951.9
Gross earnings $ 190.8 $ 192.8 $ 336.6 $ 350.5
Gross margin 30.0% 36.9% 31.4% 36.8%
Operating earnings $ 91.5 $ 121.7 $ 158.2 $ 216.0
Operating margin 14.4% 23.3% 14.7% 22.7%
</TABLE>
Net Sales
Net sales increased 21.5% and 12.8%, respectively, in the second
quarter and first six months of 1994 compared to the same periods
of 1993. The increased net sales in the three months ended June
30, 1994 were primarily due to the results of the Company's new
licensed sports apparel line, principally as a result of the
acquisitions of Salem Sportswear Corporation ("Salem") in
November 1993 and Artex in January 1994, and volume increases in
certain of the Company's existing businesses. These increases
were partially offset by lower selling prices (principally for
domestic activewear as a result of the Company's pricing strategy
announced in the second half of 1993). The increased net sales
in the six months ended June 30, 1994 were principally due to the
Salem and Artex acquisitions and volume increases in
international and casualwear operations. These increases were
partially offset by the negative effects of lower selling prices
(principally for domestic activewear) and lower unit volume in
underwear. The volume decrease in underwear was impacted by
promotions which were run in the fourth quarter of 1993 and which
were not repeated in the first quarter of 1994.
<PAGE>
FRUIT OF THE LOOM, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - CONTINUED
Gross Earnings
Gross earnings decreased 1.0% and 4.0%, respectively, in the
second quarter and first six months of 1994 compared to the same
periods of 1993. The gross margins were 30.0% and 31.4%,
respectively, in the second quarter and first six months of 1994
compared to 36.9% and 36.8%, respectively, in the same periods of
1993. The decrease in gross earnings and margins were primarily
due to the effect of lower prices and promotional activities, the
unfavorable effects of reduced operating schedules for certain of
the Company's facilities in the beginning of the first quarter of
1994, costs associated with rehiring and retraining workers and
other general cost increases, including cotton cost increases.
Operating Earnings
Operating earnings decreased 24.8% compared to the second quarter
of 1993 while the operating margin decreased 8.9 percentage
points to 14.4% of net sales for the quarter ended June 30, 1994.
For the first six months of 1994, operating earnings decreased
26.8% compared to the same period in 1993 while the operating
margin decreased eight percentage points to 14.7% for the first
half of 1994. The decreases for both periods resulted from the
decreases in gross earnings and gross margin and higher selling,
general and administrative expenses in 1994. Selling, general
and administrative expenses increased to 14.2% and 15.1% of net
sales, respectively, in the second quarter and first six months
of 1994 compared to 12.4% and 12.8% of net sales, respectively,
in the same periods of 1993. Higher selling and other
administrative costs arose both from the acquisitions of Salem,
Artex and Gitano and from the Company's continuing effort to
improve customer service by making investments in added
distribution capabilities, computer systems and other
infrastructure required to service customers more effectively.
The increases in selling, general and administrative expenses
also include higher royalty costs in 1994, principally due to the
acquisitions of the Salem and Artex licensed sports apparel
operations.
Interest Expense
Interest expense for the second quarter and first six months of
1994 increased 28.6% and 24.4%, respectively, from the same
periods of 1993. These increases were principally attributable
to the effect of higher debt levels which more than offset the
effects of lower average interest rates on the Company's debt
instruments. Higher debt levels were primarily due to the
acquisitions of Salem, Artex and Gitano, which were financed
through borrowings under the Company's $800,000,000 revolving
line of credit (the "New Credit Agreement"), and higher working
capital levels.
<PAGE>
FRUIT OF THE LOOM, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - CONTINUED
Other Income (Expense) - Net
Included in other income (expense) - net in the second quarter
and first six months of 1994 is $8,800,000 of service fee income
from Gitano's operations which represents Gitano's transition to
a marketing organization from a manufacturing base. These
revenues are not expected to recur after the third quarter of
1994. This was partially offset by $2,700,000 and $3,500,000 in
the second quarter and first six months of 1994, respectively, of
legal expenses pertaining to litigation related to retained
liabilities of former subsidiaries. In addition, other income
(expense) - net in the second quarter and first six months of
1994 includes approximately $1,500,000 and $2,900,000,
respectively, of deferred debt fee amortization and bank fees.
Other income (expense) - net for the second quarter and first six
months of 1993 includes approximately $2,400,000 and $5,000,000,
respectively, of deferred debt fee amortization and bank fees.
Income Taxes
The effective income tax rate for the second quarter and first
six months of 1994 and 1993 differed from the Federal statutory
rate of 35% and 34% in 1994 and 1993, respectively, primarily due
to the impact of goodwill amortization, a portion of which is not
deductible for Federal income tax purposes, state income taxes
and the provision for interest related to prior years' taxes.
In the first quarter of 1993, the Company recorded the cumulative
effect of an accounting change related to the adoption of SFAS
No. 109 resulting in a $3,400,000 ($.04 per share) benefit.
Earnings Per Share
Earnings per share were $.51 for the second quarter of 1994
compared to $.77 for the prior year period, a 33.8% decrease.
For the first six months of 1994, earnings per share before
cumulative effect of change in accounting principle decreased
37.8% to $.84 from $1.35 for the same period of 1993. Net
earnings per share in 1993 were $1.39 and included a $.04 benefit
related to the cumulative effect of a change in accounting for
income taxes.
Effects of Inflation
Management believes that the moderate rate of inflation over the
past few years has not had a significant impact on the Company's
sales or profitability.
<PAGE>
FRUIT OF THE LOOM, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - CONTINUED
Liquidity and Capital Resources
Funds generated from the Company's operations are the major
source of liquidity and are supplemented by funds derived from
capital markets including bank facilities. During 1994, the
Company obtained bank revolving lines of credit for certain of
its foreign operations and separate letter of credit facilities
to replace certain letters of credit under the New Credit
Agreement. The Company has reduced the amount of letters of
credit outstanding under the New Credit Agreement by
approximately $28,200,000 since December 31, 1993. The Company
has available for the funding of its operations approximately
$818,000,000 of revolving lines of credit. As of August 5, 1994
approximately $190,600,000 was available and unused under these
facilities.
Net cash used for operating activities in the six months ended
June 30, 1994 and 1993 was $4,300,000 and $76,900,000,
respectively. The primary components of cash used for operating
activities in the first six months of 1994 and 1993 were
increases in working capital of $149,400,000 and $235,500,000,
respectively. The working capital increases in the first six
months of 1994 and 1993 were driven by higher accounts receivable
($144,600,000 and $122,500,000, respectively) and higher
inventories ($87,300,000 and $138,400,000, respectively) which
were partially offset by changes in other working capital items.
The increases in accounts receivable and inventory in the first
six months of 1994 and 1993 reflect the seasonality of the
Company's business and the Company's ongoing efforts to improve
customer service.
Net cash used for investing activities in the six months ended
June 30, 1994 and 1993 was $265,000,000 and $132,100,000,
respectively. Capital expenditures were $99,100,000 and
$138,600,000 in the first half of 1994 and 1993, respectively.
In the first six months of 1994 the Company spent approximately
$142,700,000 on the acquisitions of Artex and Gitano, the funds
for which were provided by borrowings under the New Credit
Agreement. Capital spending for the full year ended December 31,
1994, primarily to increase distribution and yarn manufacturing
capabilities, is anticipated to approximate $225,000,000 to
$250,000,000.
Net cash provided by financing activities in the six months ended
June 30, 1994 and 1993 was $199,400,000 and $170,900,000,
respectively, and consisted principally of borrowings under the
Company's bank credit agreements.
<PAGE>
FRUIT OF THE LOOM, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - CONCLUDED
Liquidity and Capital Resources
On August 5, 1994, the Company acquired Daniel Young
International Corporation ("Pro Player"), which does business
under the PRO PLAYER brand. The total funds required to acquire
Pro Player, including the planned repayment of certain debt of
Pro Player and the fees and expenses of this acquisition, total
approximately $60,000,000. Such funds are being provided from
borrowings under the New Credit Agreement. The principals of
Pro Player may be entitled to receive compensation based in part
upon the attainment of certain levels of operating performance
by the acquired entity.
Management believes the funding available to the Company is
sufficient to meet anticipated requirements for capital
expenditures, working capital and other needs.
The Company's debt instruments, principally the New Credit
Agreement, contain covenants restricting its ability to sell
assets, incur debt, pay dividends and make investments and
requiring the Company to maintain certain financial ratios.
<PAGE>
FRUIT OF THE LOOM, INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The annual meeting of stockholders was held on May 17, 1994. Two
proposals were submitted to stockholders as described in the
Company's Proxy Statement dated April 7, 1994 and were voted upon
and approved by stockholders at the meeting. The table below
briefly describes the proposals and results of the stockholder
votes.
<TABLE>
<CAPTION>
Votes Votes Authority Broker
in Favor Opposed Abstain Withheld Nonvotes
<S> <C> <C> <C> <C> <C>
Proposal to elect the
following nine directors:
Elected by holders of Class A Common Stock:
Omar Z. Al Askari 50,692,400 -- -- 235,585 --
Dennis S. Bookshester 50,686,117 -- -- 241,868 --
Lee W. Jennings 50,698,649 -- -- 229,336 --
Elected by holders of Class A
and Class B Common Stock:
William Farley 84,125,060 -- -- 257,805 --
John B. Holland 84,132,874 -- -- 249,991 --
Henry A. Johnson 84,148,889 -- -- 233,976 --
Richard C. Lappin 84,134,377 -- -- 248,488 --
A. Lorne Weil 84,148,245 -- -- 234,620 --
Sir Brian Wolfson 84,146,215 -- -- 236,650 --
Proposal to approve
the Company's Executive
Incentive Compensation Plan 73,908,671 2,271,928 231,119 -- 7,971,147
</TABLE>
<PAGE>
FRUIT OF THE LOOM, INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION - Continued
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
4(a)* $800,000,000 Credit Agreement dated as of August 16,
1993, among the several banks and other financial
institutions from time to time parties thereto (the
"Lenders"), Bankers Trust Company, a New York banking
corporation, as administrative agent for the Lenders
thereunder, Chemical Bank, NationsBank of North
Carolina N.A., The Bank of New York and the Bank of
Nova Scotia, as co-agents (incorporated herein by
reference to Exhibit 4.3 to the Company's Registration
Statement on Form S-3, Reg. No. 33-50567 (the "1993 S-
3").
4(b)* Subsidiary Guarantee Agreement dated as of August 16,
1993 by each of the guarantors signatory thereto in
favor of the beneficiaries referred to therein
(incorporated herein by reference to Exhibit 4.4 to the
1993 S-3).
10(a) Guarantee of Payment dated as of June 27, 1994 by Fruit
of the Loom, Inc. and NationsBank of Florida N.A.
10(b) Stock Pledge Agreement dated as of June 27, 1994
between William F. Farley and Fruit of the Loom, Inc.
10(c) Management Agreement between Farley Industries, Inc.
and the Company dated as of January 1, 1994.
* Document is available at the Public Reference Section of the
Securities and Exchange Commission, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549 (Commission file No.
1-8941).
The Registrant has not listed nor filed as an Exhibit to this
Quarterly Report certain instruments with respect to long-term
debt representing indebtedness of the Registrant and its
subsidiaries which do not exceed 10% of the total assets of the
Registrant and its subsidiaries on a consolidated basis.
Pursuant to Item 601(b)(4)(iii) of Regulation S-K, the Registrant
agrees to furnish such instruments to the Securities and Exchange
Commission upon request.
b. Reports on Form 8-K
No report on Form 8-K was filed by the Registrant during the
quarter ended June 30, 1994.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
FRUIT OF THE LOOM, INC.
-----------------------
(Registrant)
Date: August 12, 1994 LARRY K. SWITZER
-----------------------------
Larry K. Switzer
Executive Vice President
and Chief Financial Officer
(Principal Financial Officer
and duly authorized to sign
on behalf of Registrant)
<PAGE>
GUARANTY OF PAYMENT
THIS GUARANTY OF PAYMENT is made as of June 27, 1994 by
FRUIT OF THE LOOM, INC., a Delaware corporation (the
"Guarantor"), in favor of NATIONSBANK OF FLORIDA, N.A. a national
banking corporation (the "Lender").
W I T N E S S E T H:
WHEREAS, Lender has been requested to make a loan in the sum
of U.S. $12,000,000.00 (the "Loan") to William F. Farley (the
"Borrower"), evidenced by a Revolving Promissory Note dated as of
June 27, 1994 (the "Note"); and
WHEREAS, the Note and all other instruments and documents
executed by Borrower or Guarantor in favor of Lender in connec-
tion with the Loan are referred to herein as the "Credit Docu-
ments", and the Loan and all other debts, obligations and liabi-
lities of Borrower to Lender under the Credit Documents from time
to time are referred to herein as the "Obligations";
WHEREAS, Guarantor will be benefitted if Borrower borrows
said sum from Lender because Guarantor is receiving from
Borrower, as consideration for execution of this Guaranty, a
second priority pledge and security interest (subordinate to the
rights of Lender) in certain stock owned by Borrower and defined
as the "Securities" in that certain General Security Agreement
made by Borrower to Lender dated as of the 18th day of December,
1992, as amended, and because Guarantor otherwise has or may have
other interests, directly or indirectly, in the transactions to
be funded with the Loan; and
WHEREAS, Lender has declined to make the Loan to Borrower
unless Guarantor unconditionally guarantees the payment of the
Obligations;
NOW, THEREFORE, in consideration of Lender's agreement to
advance Loan funds to Borrower, Guarantor hereby unconditionally
guarantees to Lender, its successors and assigns, the prompt and
full payment of the Obligations.
1. Guarantor shall pay any Obligations that are not paid
as and when required of Borrower under the Credit Documents
(including the expiration of any applicable grace period set
forth therein). Each such sum may be recovered in a separate
action as it comes due, or, in the event that Lender shall
accelerate the maturity of the Obligations in accordance with the
Credit Documents, Guarantor shall promptly pay all sums which
become due and payable on such acceleration of maturity. Lender
shall have the absolute right to seek one or more money judgments
for each cause of action based solely upon this Guaranty.<PAGE>
2. The obligations of Guarantor under this Guaranty are
direct, unconditional and completely independent of the obliga-
tions of Borrower. Lender may exercise any of its rights under
this Guaranty, including without limitation bringing and prose-
cuting any action against Guarantor, without any requirement that
Lender join Borrower as a party to the action, or proceed against
any security then held by Lender for the Obligations, or notify
or make demand upon or proceed against or exhaust any other
remedy against Borrower, any other guarantor of the Obligations,
or any other person who might have become liable for the
Obligations. Guarantor hereby waives and renounces all benefits
of discussion and division.
3. The liability assumed under this Guaranty shall not be
affected by Lender's acceptance of any settlement or composition
offered by Borrower or decreed with respect to Borrower by any
court, either in liquidation, readjustment, receivership, bank-
ruptcy or otherwise, except only to the extent that such settle-
ment has resulted in actual payment of a part of the Obligations,
and then only to that extent. This Guaranty shall continue and
remain in full force and effect (or shall be reinstated, as the
case may be) in the event that all or part of any payment made by
Borrower in connection with the Obligations is recovered from
Lender as a preference, fraudulent transfer or similar voidable
payment under any bankruptcy or insolvency law.
4. This instrument is a continuing, binding, absolute and
unconditional guaranty of payment which shall remain in full
force and effect until actual payment in full of the Obligations
or until terminated by written agreement between Lender and
Guarantor.
5. Guarantor hereby waives any and all defenses to any
action or proceeding brought to enforce this Guaranty or any part
of this Guaranty, except the single defense that the sum claimed
has actually been paid to Lender. Without limiting the foregoing
in any way, but merely by way of illustration, Guarantor hereby
specifically waives all technical, dilatory or nonmeritorious
defenses, and any defense predicated upon:
(a) Incapacity, disability or lack of authority on the
part of Borrower or any other person; or
(b) Any change or modification or extension or waiver
of any term of the Obligations or any Credit Document, or any
indulgence or forbearance or delay on the part of Lender in the
enforcement of any term of the Obligations or any Credit Docu-
ment, or any other or further dealings or agreements between
Lender and Borrower or between Lender and any other guarantors or
sureties for all or any part of the Obligations; or
- 2 -<PAGE>
(c) Any failure to perfect, release of, substitution
for, addition to, increase in or impairment of all or any part of
the security for the Obligations or this Guaranty, whether for
valuable consideration or otherwise; or
(d) The fact that there may now or hereafter be other
guarantors or sureties liable for all or any part of the Obliga-
tions, or that solvent persons other than Borrower or Guarantor
may have undertaken the payment of all or any part of the Obliga-
tions, whether in connection with any transfer of any collateral
for the Obligations or otherwise; or
(e) The full or partial release or discharge of
Borrower or any other present or future guarantors or sureties
for all or any part of the Obligations; or
(f) Any other act or omission by Lender or failure by
Lender to proceed promptly or diligently, or any other matter
which might, but for this waiver by Guarantor, be deemed a legal
or equitable release or discharge of a surety or guarantor,
regardless of whether such act or omission or failure or other
matter varies or increases the risk of Guarantor or affects or
impairs the rights or remedies of Guarantor.
6. Lender shall not be required to notify Guarantor of (a)
Lender's acceptance of this Guaranty, (b) any disbursements of
funds by or on behalf of Lender, (c) any modification of any
other document executed by Borrower or any other guarantor or
surety in connection with the Obligations, nor (d) any default by
Borrower under the Obligations or by any other guarantor or
surety for all or any part of the Obligations. Guarantor hereby
waives presentment for payment, demand, protest, notice of pro-
test or dishonor, notice of default, and any other notice or
demand whatsoever before Lender commences to enforce its rights
under this Guaranty, whether by judicial proceedings or in any
other manner. Lender shall have no obligation whatsoever to
disclose to Guarantor any information Lender may now possess or
hereafter obtain about Borrower, regardless of whether (i) Lender
has reason to believe that such information materially increases
the risk of Guarantor beyond that which Guarantor intends to
assume hereunder, or (ii) Lender has reason to believe that such
information is unknown to Guarantor, or (iii) Lender has a
reasonable opportunity to communicate such information to
Guarantor; Guarantor understands and agrees that Guarantor is
fully responsible for being and keeping informed of the financial
condition of Borrower and of all circumstances bearing on the
risk of failure to repay the Obligations.
7. Until the Obligations shall have actually been paid in
full, Guarantor hereby (a) agrees not to seek reimbursement or
repayment from Borrower or the liquidation of any security for
the Obligations by reason of having paid monies pursuant to this
- 3 -<PAGE>
Guaranty, (b) waives any right to enforce any remedy as subrogees
of Lender or its successors and assigns or to participate in the
Obligations or in any security for the Obligations, (c) agrees
not to seek or accept repayment or reimbursement from Borrower of
any sums advanced, contributed or lent to Borrower by Guarantor,
all of which are hereby subordinated and postponed to the full
repayment of the Obligations, and (d) agrees not to seek or
accept any distributions or dividends by Borrower.
8. Guarantor agrees to pay any expenses incurred by Lender
in the collection or enforcement of this Guaranty, including
costs and attorney's fees (including those incurred for appellate
or administrative or bankruptcy proceedings) in the event that
Lender shall be obliged to resort to the courts or require the
services of an attorney to collect under this Guaranty.
9. The rights and authority granted to Lender in this
Guaranty shall inure to the benefit of its successors and
assigns, and the agreements by Guarantor contained in this
Guaranty shall bind Guarantor and Guarantor's successors and
assigns, jointly and severally.
10. Lender may assign this Guaranty, in whole or as to such
part which has not been realized upon, to any assignee(s) or
transferee(s) of the Obligations without prior notice to or the
consent of Guarantor.
11. Time shall be of the essence with respect to all of the
provisions of this Guaranty.
12. Any provision of this Guaranty which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction
only, be ineffective only to the extent of such prohibition or
unenforceability without invalidating the remaining provisions
hereof or affecting the validity or enforceability of such pro-
vision in any other jurisdiction.
13. Whenever used in this Guaranty and unless the context
otherwise requires, words in the singular include the plural,
words in the plural include the singular, and pronouns of any
gender include the other genders. All references in this
Guaranty to numbered paragraphs refer to the paragraphs of this
Guaranty, unless such reference specifically identifies another
document. All references in this Guaranty to sums expressed in
dollars refer to the lawful currency of the United States of
America, unless such reference specifically identifies another
currency.
14. This Guaranty shall be governed by, and construed and
enforced in accordance with, the laws of the State of Florida,
except that federal law shall govern to the extent that it may
permit Lender to charge interest from time to time at a rate
- 4 -<PAGE>
greater than may be permissible under Florida law. Nothing con-
tained in this Guaranty shall be construed as obligating
Guarantor in any way to be responsible for interest in excess of
the maximum rate permitted by applicable law.
15. Guarantor hereby WAIVES TRIAL BY JURY and submits to
the jurisdiction of the state and federal courts in the State of
Florida for purposes of any action arising from or growing out of
this Guaranty, and further agrees that the venue of any such
action may be laid in Broward County and that (in addition to any
other method provided by law for service of process) service of
process in any such action may be made on Guarantor by the
delivery of the process to Katten, Muchin & Zavis, Attn: Susan
Schneider, Esq.,
whose present address is 525 West Monroe Street, Suite 1600,
Chicago, Illinois 60661, whom Guarantor hereby appoints as
Guarantor's agent for service of process. Nothing contained in
this Guaranty, however, shall be deemed to constitute, or to
imply the existence of, any agreement by Lender to bring any such
action only in said courts or to restrict in any way any of
Lender's remedies or rights to enforce the terms of this Guaranty
as, when and where Lender shall deem appropriate, in its sole
discretion.
16. If for the purposes of obtaining judgment against
Guarantor in any court it becomes necessary to convert a sum due
in U.S. dollars into another currency, then the rate of exchange
used shall be that at which Lender could purchase U.S. dollars
with the other currency in accordance with normal banking proce-
dures on the business day preceding the day on which final judg-
ment is obtained. Notwithstanding any judgment in such other
currency, the obligations of Guarantor hereunder shall be dis-
charged only to the extent that (i) Lender can purchase U.S.
dollars with the other currency in accordance with normal banking
procedures on the business day following Lender's receipt of any
such sum adjudged to be due in the other currency, and (ii)
Lender can remit the purchased U.S. dollars to its office at its
address for notices set forth in the Credit Documents. If the
U.S. dollars so purchased and remitted are less than the sum
owing to Lender in U.S. dollars before the judgment, then
Guarantor agrees, as a separate obligation and notwithstanding
any such judgment, to indemnify Lender on demand against such
loss.
17. In order to induce Lender to extend credit to Borrower,
and knowing that Lender shall rely on the following warranties
and representations, Guarantor represents and warrants to Lender
that: (a) if Guarantor is a natural person, then Guarantor has
full legal capacity; (b) if Guarantor is a business entity, then
(i) Guarantor is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its creation, has
full power and authority to make this Guaranty in favor of
- 5 -<PAGE>
Lender, and has duly authorized the execution, delivery and per-
formance of this Guaranty by all necessary actions, and (ii) the
execution, delivery and performance of this Guaranty do not and
shall not violate any provision of Guarantor's governing or con-
stituent documents; (c) Guarantor shall be benefitted if Lender
extends credit to Borrower; (d) the execution, delivery and per-
formance of this Guaranty do not and shall not contravene any
applicable law, nor result in a breach of or default under any
other agreement to which Guarantor is a party or by which
Guarantor may be bound or affected; (e) except as otherwise pre-
viously or concurrently disclosed to Lender in writing or in any
filing made by Guarantor with the Securities and Exchange
Commission, there are no material suits, actions or proceedings
pending or threatened against or affecting Guarantor before any
court of law or equity or any administrative board or tribunal or
governmental authority; (f) Guarantor is not in material default
under the terms of any other indebtedness or obligation of
Guarantor or with respect to any order, writ, injunction,
judgment, decree or demand of any court or tribunal or
governmental authority; and (g) Guarantor has received good,
valuable and adequate consideration from Borrower for the
execution and delivery to Lender of this Guaranty.
- 6 -<PAGE>
18. GUARANTOR, BY ITS EXECUTION HEREOF, AND LENDER, BY ITS
ACCEPTANCE HEREOF, EACH AGREES NOT TO SEEK A JURY TRIAL IN ANY
LAWSUIT, PROCEEDING, COUNTERCLAIM, OR ANY OTHER LITIGATION
PROCEDURE (WHETHER AT LAW OR IN EQUITY) BASED UPON OR ARISING OUT
OF THIS GUARANTY, THE LOAN OR ONE OR MORE OF THE CREDIT DOCUMENTS
OR ANY OTHER DOCUMENTS, INSTRUMENTS OR AGREEMENTS EXECUTED OR
ENTERED INTO IN CONNECTION WITH THIS GUARANTY, THE LOAN OR THE
LOAN DOCUMENTS. NEITHER ENTITY WILL SEEK TO CONSOLIDATE ANY SUCH
ACTION IN WHICH A JURY TRIAL HAS BEEN WAIVED, WITH ANY ACTION IN
WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED. THE
PROVISIONS OF THIS WAIVER HAVE BEEN FULLY DISCUSSED BY GUARANTOR
AND LENDER, AND THE PROVISIONS HEREOF SHALL BE SUBJECT TO NO
EXCEPTIONS. GUARANTOR AND LENDER HAVE HAD THE OPPORTUNITY TO
HAVE THIS WAIVER REVIEWED BY LEGAL COUNSEL OF THEIR CHOICE. NO
SUCH ENTITY HAS IN ANY WAY AGREED WITH OR REPRESENTED TO THE
OTHER THAT THE PROVISIONS OF THIS WAIVER WILL NOT BE FULLY
ENFORCED IN ALL INSTANCES.
THIS WAIVER IS BINDING UPON AND SHALL INURE TO THE
BENEFIT OF LENDER AND GUARANTOR, AND THEIR RESPECTIVE SUCCESSORS,
ASSIGNS, PARTNERS, PRINCIPALS, AGENTS, SHAREHOLDERS, OFFICERS,
DIRECTORS, LEGAL AND PERSONAL REPRESENTATIVES, EXECUTORS,
ADMINISTRATORS, HEIRS AND OTHER TRANSFEREES.
IN WITNESS WHEREOF, Guarantor has executed this Guaranty
under seal on June 27, 1994, to be effective on the date first
written above.
Signed, sealed and delivered
in the presence of:
FRUIT OF THE LOOM, INC., a
Delaware corporation
By:
---------------------------
Name:
___________________________
Title:
---------------------------
[CORPORATE SEAL]
- 7 - <PAGE>
STATE OF ___________ )
) SS:
COUNTY OF ___________ )
The foregoing instrument was acknowledged before me this
day of , 1994 by
as of FRUIT OF THE LOOM, INC., a Delaware
corporation, on behalf of the corporation. He/she/they
personally appeared before me, is/are personally known to me or
produced as identification, and [did]
[did not] take an oath.
Notary:
[NOTARIAL SEAL] Print Name:
Notary Public, State of
My commission expires:
- 8 - <PAGE>
STOCK PLEDGE AGREEMENT
This STOCK PLEDGE AGREEMENT (this "Pledge Agreement"), dated
as of June 27, 1994, is between WILLIAM F. FARLEY ("Pledgor") and
FRUIT OF THE LOOM, INC., a Delaware corporation ("Pledgee").
Preliminary Statement:
A. Pursuant to that certain Revolving Promissory Note
dated as of June 27, 1994 (the "Note") executed by Pledgor in
favor of NationsBank of Florida, N.A., a national banking
corporation ("Lender"), Lender has agreed to make a loan to
Pledgee (the "Loan"), subject to the terms and conditions set
forth in the Note.
B. One of the conditions precedent to the obligation of
Lender to make the Loan is the execution by Pledgee of that
certain Guaranty of Payment, dated of even date herewith and
executed by Pledgee in favor of Lender (the "Guaranty").
C. One of the conditions precedent to the execution and
delivery by Pledgee of the Guaranty is the execution and delivery
by Pledgor of this Pledge Agreement and the performance by
Pledgor of his obligations hereunder.
NOW, THEREFORE, in order to induce Pledgee to issue the
Guaranty, and for other good and valuable consideration, the
receipt and sufficiency of which hereby are acknowledged, Pledgor
and Pledgee hereby agree as follows:
1. Definitions.
1.1 Note. All capitalized terms not elsewhere defined
in this Pledge Agreement and defined in the Note shall have the
respective meanings ascribed to such terms in the Note.
1.2 Additional Definitions. The following terms shall
have the following meanings in this Pledge Agreement:
Collateral: the Securities and all dividends,
distributions and other amounts or additional
securities of Pledgee or any successor in interest to
Pledgee to which Pledgor or any successor in interest
to Pledgor (with or without additional consideration)
is or becomes entitled by virtue of the ownership by
such Person of any of the Securities or as the result
of any corporate reorganization, merger, consolidation,
stock split, stock dividend, conversion, preemptive
right or otherwise, and the proceeds thereof.
Pledgor's Obligations: (i) any and all indebted-
ness, due or to become due, now existing or hereafter
-1-<PAGE>
arising, of Pledgor to Pledgee pursuant to the terms of
this Pledge Agreement, including the reimbursement
obligations set forth in Section 3.6 hereof and (ii)
the performance of the covenants of Pledgor contained
in this Pledge Agreement.
Securities: the capital stock of Pledgee
described in Exhibit A hereto and any warrants, options
or other rights to purchase capital stock of Pledgee
which arise as a result of the ownership by Pledgor of
the Securities, and duly executed assignments separate
from certificate satisfactory to Pledgee attached
thereto.
2. Pledge of Collateral. To secure payment and performance
of Pledgor's Obligations, Pledgor hereby pledges to Pledgee the
Securities and hereby assigns and grants to Pledgee a valid and
perfected lien in (i) such Securities and (ii) all other items of
Collateral now owned or hereafter acquired by Pledgor. Pledgor
hereby notifies Pledgee that the Securities are being held by
Lender. Pursuant to the provisions of Sections 9-305 and 8-321 of
the Uniform Commercial Code (the "Code"), Pledgee has delivered to
Lender a notice, a copy of which is attached as Exhibit B,
pursuant to which Lender has acknowledged that Lender is holding
such Securities as a bailee under the Code for the benefit of
Pledgee and in order to perfect the security interest of Pledgee
in such Securities.
3. Representations, Warranties and Covenants. Pledgor
hereby represents, warrants and covenants to Pledgee as follows:
3.1 Restrictions. Pledgor is not a party to and has no
knowledge of any agreements restricting the transfer of any
of the Collateral other than as provided in the Loan
Documents. Except as described in the Loan Documents,
Pledgor has not granted to any person any options for the
purchase of, or any calls, commitments or claims of any
character relating to, any of the Collateral.
3.2 Binding Agreements. This Pledge Agreement, when
executed and delivered, will constitute the valid and legally
binding obligations of Pledgor, enforceable against Pledgor
in accordance with their respective terms, except as such
enforceability may be limited by (i) applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally and
(ii) equitable principles.
3.3 Conflicting Agreements. Pledgor is not in default
under any agreement to which Pledgor is a party or by which
Pledgor or any of the property of Pledgor is bound, the
effect of which default might have a material adverse effect
-2-<PAGE>
upon the business, prospects or profits of Pledgor
(hereinafter referred to as a "Material Adverse Effect"). No
authorization, consent, approval or other action by, and no
notice to or filing with, any governmental body or any other
person which has not already been obtained, taken or filed,
as applicable, is required (i) for the execution, delivery or
performance by Pledgor of this Pledge Agreement or (ii) as a
condition to the validity or enforceability of this Pledge
Agreement or any of the transactions contemplated hereby, or
the validity, enforceability or priority of the security
interests pertaining to the Collateral pledged by Pledgor to
Pledgee hereunder. No provision of any mortgage, indenture,
contract, agreement, statute, rule, regulation, judgment,
decree or order binding on Pledgor or affecting the property
of Pledgor conflicts with, or requires any consent which has
not already been obtained under, or would in any way prevent
the execution, delivery or performance of the terms of this
Pledge Agreement. The execution, delivery and carrying out
of this Pledge Agreement will not constitute a default under,
or result in the creation or imposition of, or obligation to
create, any lien upon the property of Pledgor pursuant to the
terms of any such mortgage, indenture, contract or agreement.
3.4 Burdensome Obligations. After giving effect to
the transactions contemplated by this Pledge Agreement,
Pledgor (i) will not be a party to or be bound by any
franchise, agreement, deed, lease or other instrument, or be
subject to any restriction, which is so unusual or
burdensome, so as to cause a Material Adverse Effect, (ii)
does not intend to incur, and does not believe that Pledgor
will incur, debts beyond Pledgor's ability to pay such debts
as they become due, (iii) owns and will own property, the
fair saleable value of which is (A) greater than the total
amount of the liabilities of Pledgor (including contingent
liabilities) and (B) greater than the amount that will be
required to pay the probable liabilities of the then existing
debts of Pledgor as they become absolute and matured and (iv)
has and will have capital that is not unreasonably small in
relation to the business of Pledgor, as such business
presently is conducted and as such business is proposed to be
conducted. Pledgor does not presently anticipate that future
expenditures needed to meet the provisions of federal or
state statutes, orders, rules or regulations will be so
burdensome so as to have a Material Adverse Effect.
3.5 Collateral. With respect to the Collateral pledged
by Pledgor on the date hereof, (i) Pledgor is the legal and
beneficial owner of such Collateral as more specifically
described on Exhibit A hereto, (ii) such Collateral is
validly issued, fully paid and non-assessable and is
registered in the name of Pledgor, (iii) the pledge of such
Collateral pursuant to the terms of this Pledge Agreement,
-3-<PAGE>
together with delivery of the notice to Lender described in
Section 2 above, creates a valid and perfected lien on such
Collateral in favor of Pledgee, (iv) the assignments separate
from certificate attached to the respective certificates
representing such Collateral have been duly executed and
delivered by Pledgor to Lender on behalf of Pledgee, (v) none
of such Collateral is subject to any lien of any kind
whatsoever, except for the perfected (A) first lien on such
Collateral granted to Lender and (B) second lien on such
Collateral granted to Pledgee hereby, (vi) no authorization,
approval or other action by, or notice to or filing with, any
governmental body is required for the pledge by Pledgor of
such Collateral pursuant to the terms of this Pledge
Agreement, (vii) until all of Pledgor's Obligations have been
paid and performed in full, subject to the terms and
provisions of the Loan Documents, Pledgor: (A) will not
create or permit to exist any lien upon or with respect to
the Collateral, except for the (I) first lien thereon granted
to Lender and (II) second lien granted to Pledgee by this
Pledge Agreement, and (B) will not sell, transfer, convey,
assign, or otherwise divest Pledgor's interest in the
Collateral, or any part thereof, to any other person.
3.6 Payment and Performance Reimbursement. Pledgor
will (i) cause all amounts which become due and payable under
any of the Loan Documents to be paid and performed in full on
a timely basis and (ii) reimburse Pledgee, promptly upon
demand therefor, but subject to the provisions of the
Subordination Agreement (defined below) for all payments made
under and costs and expenses incurred by Pledgee pursuant to
the Guaranty.
4. Stock Splits, Stock Dividends.
4.1 Additional Securities. Pledgor agrees that in the
event that Pledgor, by virtue of the ownership by Pledgor of
the Collateral, now is, or hereafter becomes, entitled (with
or without additional consideration) to other or additional
securities as the result of any corporate reorganization,
merger, consolidation, stock split, stock dividend,
conversion or preemptive right or otherwise, Pledgor shall:
4.1.1 Delivery. Cause the issuer of such
additional securities to deliver to Lender, to hold for
the benefit of Lender and as bailee for Pledgee as
described above, the certificates evidencing the
ownership by Pledgor of such additional securities and
hereby authorizes and empowers Pledgee to demand the
same from such issuer, and agrees if such certificates
are delivered to Pledgor, to take possession thereof in
trust for Lender and Pledgee;
-4-<PAGE>
4.1.2 Assignment Separate from Certificate.
Deliver to Lender, to hold for the benefit of Lender and
as bailee for Pledgee as described above, an assignment
separate from certificate with respect to such
securities, executed in blank by Pledgor;
4.1.3 Representations and Warranties. Deliver to
Pledgee a certificate, executed by Pledgor and dated the
date of such pledge, as to the truth and correctness on
such date of the representations and warranties set
forth in Section 3 hereof; and
4.1.4 Additional Documents. Deliver to Pledgee
such other certificates, forms and other instruments as
Pledgee may request in connection with such pledge.
4.2 Additional Collateral. Pledgor agrees that such
additional securities shall constitute a portion of the
Collateral and be subject to this Pledge Agreement in the
same manner and to the same extent as the Securities pledged
hereby to Pledgee on the date hereof.
5. Voting Power; Distributions. Unless and until an Event
of Default shall have occurred, but subject to the provisions of
the Loan Documents, Pledgor shall be entitled to exercise all
voting powers in all corporate matters pertaining to the
Collateral or otherwise, for any purpose not inconsistent with, or
in violation of, the provisions of any of the Loan Documents or
this Pledge Agreement.
6. Default and Remedies.
6.1 Occurrence. If Pledgee shall be called upon to
make any payments under the Guaranty, any such payments shall
constitute an "Event of Default" hereunder.
6.2 Remedies. If an Event of Default shall occur,
Pledgee, subject to the provisions of Section 11 hereof, at
its option, may:
6.2.1 Registration. Cause the Collateral to be
registered in its name or in the name of its nominee;
6.2.2 Voting Power. Exercise all voting powers
pertaining to the Collateral and otherwise act with
respect thereto as though Pledgee were the owner
thereof;
6.2.3 Distributions. Receive all dividends and
all other distributions of any kind whatsoever on all or
any part of such Collateral;
-5-<PAGE>
6.2.4 Collection, Conversion. Exercise any and
all rights of collection, conversion or exchange, and
any and all other rights, privileges, options or powers
of Pledgor pertaining or relating to such Collateral;
6.2.5 Sale of Collateral. Subject to any
applicable state or federal securities laws, sell,
assign and deliver the whole, or from time to time, any
part of the Collateral at any broker's board or at any
private sale or at public auction, with or without
demand for performance or advertisement of the time or
place of sale or adjournment thereof or otherwise, and
free from any right of redemption (all of which hereby
expressly are waived by Pledgor) for cash, for credit or
for other property, for immediate or future delivery,
and for such price and on such terms as Pledgee in its
sole discretion may determine; and
6.2.6 Other Remedies. Exercise any other remedy
specifically granted under this Pledge Agreement or now
or hereafter existing in equity, or at law, by virtue of
statute or otherwise.
With respect to the actions described in each of subsections
6.2.2 and 6.2.4 above, Pledgor hereby irrevocably constitutes
and appoints Pledgee his proxy and attorney-in-fact with full
power of substitution and acknowledges that the constitution
and appointment of such proxy and attorney-in-fact are
coupled with an interest and are irrevocable.
6.3 Agreement to Sell Collateral. For the purposes of
this Section 6, an agreement to sell all or any part of the
Collateral shall be treated as a sale thereof and Pledgee
shall be free to carry out such sale pursuant to such
agreement, and Pledgor shall not be entitled to the return of
any of the same subject thereto, notwithstanding the fact
that after Pledgee shall have entered into such an agreement,
all Events of Default hereunder may have been remedied or all
of Pledgor's Obligations may have been paid and/or performed
in full.
6.4 Pledgee May Bid. At any sale made pursuant to
Section 6.2 above, Pledgee may bid for and purchase, free
from any right of equity or redemption on the part of Pledgor
(the same hereby being waived and released by Pledgor), any
part or all of the Collateral that is offered for sale, and
Pledgee, upon compliance with the terms of sale, may hold,
retain and dispose of such Collateral without further
accountability therefor.
6.5 Proceeds of Sale. The proceeds of any sale of the
whole or any part of the Collateral and any other monies at
-6-<PAGE>
the time held by Pledgee under the provisions of this Pledge
Agreement shall be applied to reimburse Pledgee for any
payments made by Pledgee under the Guaranty.
6.6 No Duty of Pledgee. Pledgee shall not have any
duty to exercise any of the rights, privileges, options or
powers or to sell or otherwise realize upon any of the
Collateral, as hereinbefore authorized, and Pledgee shall not
be responsible for any failure to do so or delay in so doing.
6.7 Effect of Sale. Any sale of all or any portion of
the Collateral pursuant to Section 6.2 above shall operate to
divest all right, title and interest of Pledgor to the
Collateral which is the subject of any such sale.
6.8 Securities Act. Pledgor acknowledges that any sale
of the Securities by Pledgee will be subject to certain
restrictions contained in the Securities Act of 1933, as
amended (the "Securities Act"), and that Pledgee it may be
able to make any such sale only after delay which might
adversely affect the value that might be realized upon the
sale of the Collateral.
6.9 Notice. Pledgee shall give not less than 10
business days prior written notice to Pledgor of any sale
pursuant to this Section 6. Pledgor hereby agrees that such
notice is commercially reasonable.
7. Pledgee's Obligations; Custodial Agreement; Performance
Rights. Pledgee shall not have any duty to protect, preserve or
enforce rights against the Collateral other than a duty of
reasonable custodial care of any such Collateral in its
possession, it being understood that Pledgee shall have no
responsibility for (i) ascertaining or taking action with respect
to calls, conversions, exchanges, maturities, tenders or other
matters relating to the Collateral, whether or not Pledgee has or
is deemed to have knowledge of such matters, (ii) taking any
necessary steps to preserve rights against any parties with
respect to the Collateral or (iii) making any capital
contributions or other payments on behalf of Pledgor.
8. Termination of Pledge Agreement. Upon the payment and
performance in full of all of Pledgor's Obligations, Pledgee shall
deliver to Pledgor the Collateral in its possession and this
Pledge Agreement thereupon shall terminate.
9. Miscellaneous.
9.1 Exercise of Rights. The obligations of Pledgor
under this Pledge Agreement shall be absolute and
unconditional and shall remain in full force and effect
-7-<PAGE>
without regard to, and shall not be released or discharged or
in any way affected by:
9.1.1 Amendments. Any amendment or modification
of or supplement to this Pledge Agreement or to any of
the Loan Documents;
9.1.2 Exercise or Non-Exercise of Rights. Any
exercise or non-exercise of any right or remedy
hereunder, or the granting of any postponements or
extensions for time of payment or other indulgences to
Pledgor or any other person;
9.1.3 Bankruptcy. The institution of any
bankruptcy, insolvency, reorganization, debt
arrangement, readjustment, composition, receivership or
liquidation proceedings by or against Pledgor; or
9.1.4 Other Defenses. Any other circumstance
which otherwise might constitute a defense to, or a
discharge of, Pledgor with respect to Pledgor's
Obligations.
9.2 Rights Cumulative. Each and every right, remedy
and power granted to Pledgee hereunder shall be cumulative
and in addition to any other right, remedy or power
specifically granted herein or now or hereafter existing in
equity, at law, by virtue of statute or otherwise and may be
exercised by Pledgee, from time to time, concurrently or
independently and as often and in such order as Pledgee may
deem expedient. Any failure or delay on the part of Pledgee
in exercising any such right, remedy or power, or abandonment
or discontinuance of steps to enforce the same, shall not
operate as a waiver thereof or affect the right of Pledgee
thereafter to exercise the same, and any single or partial
exercise of any such right, remedy or power shall not
preclude any other or further exercise thereof or the
exercise of any other right, remedy or power, and no such
failure, delay, abandonment or single or partial exercise of
rights of Pledgee hereunder shall be deemed to establish a
custom or course of dealing or performance between the
parties hereto.
9.3 Modification. Any modification or waiver of any
provision of this Pledge Agreement, or any consent to any
departure by Pledgor herefrom, shall not be effective in any
event unless the same is in writing and signed by Pledgee and
Pledgor and then such modification, waiver or consent shall
be effective only in the specific instance and for the
specific purpose given. Any notice to or demand on Pledgor
in any event not specifically required of Pledgee hereunder
shall not entitle Pledgor to any other or further notice or
-8-<PAGE>
demand in the same, similar or other circumstances unless
specifically required hereunder.
9.4 Further Assurances. Pledgor agrees that at any
time, and from time to time, after the execution and delivery
of this Pledge Agreement, Pledgor, upon the request of
Pledgee and at the expense of Pledgor, promptly will execute
and deliver such further documents and do such further acts
and things as Pledgee reasonably may request in order to
effect fully the purposes of this Pledge Agreement and to
subject to the security interest created hereby any property
intended by the provisions hereof to be covered hereby.
Pledgor acknowledges the intent that, upon the occurrence of
an Event of Default, Pledgee shall receive, to the fullest
extent permitted by law and governmental policy, all rights
necessary or desirable to obtain, use or sell the Collateral,
and to exercise all remedies available to Pledgee under this
Pledge Agreement, the Uniform Commercial Code or other
applicable law. Pledgor further acknowledges and agrees
that, in the event of changes in law or governmental policy
occurring subsequent to the date hereof that affect in any
manner the rights of Pledgee with respect to access to, or
use or sale of, the Collateral, or the procedures necessary
to enable Pledgee to obtain such rights of access, use or
sale, Pledgee and Pledgor shall amend this Pledge Agreement
in such manner as Pledgee reasonably shall request, in order
to provide Pledgee such rights to the greatest extent
possible consistent with then applicable law and governmental
policy.
9.5 Preservation of Collateral. Pledgor agrees that
Pledgor will warrant, preserve, maintain and defend, at the
expense of Pledgor, the right, title and interest of Pledgee
in and to the Collateral and all right, title and interest
represented thereby against all claims, charges and demands
of all persons.
9.6 Notices. All notices and communications under this
Pledge Agreement shall be in writing, with notices to
Pledgor and Pledgee to be sent to the address set forth
opposite such person's name on Exhibit C hereto.
9.7 GOVERNING LAW. THIS PLEDGE AGREEMENT SHALL BE
CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS AND
DECISIONS OF THE STATE OF ILLINOIS. FOR PURPOSES OF THIS
SECTION 9.7, THIS PLEDGE AGREEMENT SHALL BE DEEMED TO BE
PERFORMED AND MADE IN THE STATE OF ILLINOIS.
9.8 Severability. In the event that any provision of
this Pledge Agreement is deemed to be invalid by reason of
the operation of any law, or by reason of the interpretation
placed thereon by any court or any other governmental body,
-9-<PAGE>
this Pledge Agreement shall be construed as not containing
such provision and any and all other provisions hereof which
otherwise are lawful and valid shall remain in full force and
effect.
9.9 Successors and Assigns. This Pledge Agreement
shall inure to the benefit of the successors and assigns of
Pledgee and shall be binding upon the heirs, legal
representatives and assigns of Pledgor.
9.10 Counterparts. This Pledge Agreement may be
executed in one or more counterparts, each of which shall be
deemed to be an original, but all of which when taken
together shall be deemed to be one and the same instrument.
9.11 Notation on Books. Concurrently with the
execution and delivery hereof, Pledgor shall cause Pledgee to
register in its corporate books the security interests in and
the pledge of the Collateral effected hereby.
10. WAIVER OR RIGHT TO JURY TRIAL. EACH OF THE PARTIES
HERETO (I) ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY
ARISE UNDER THIS PLEDGE AGREEMENT OR WITH RESPECT TO THE
TRANSACTIONS CONTEMPLATED HEREBY WOULD BE BASED UPON DIFFICULT AND
COMPLEX ISSUES AND (II) AGREES THAT ANY LAWSUIT ARISING OUT OF ANY
SUCH CONTROVERSY WILL BE TRIED IN A COURT OF COMPETENT
JURISDICTION BY A JUDGE SITTING WITHOUT A JURY.
11. Subordination. Pledgee, Pledgor and Lender are parties
to that certain Subordination Agreement (the "Subordination
Agreement"), dated of even date herewith. Notwithstanding the
provisions of this Pledge Agreement to the contrary, the rights
granted to Pledgee hereunder, and the exercise thereof, are
subject to the provisions of the Subordination Agreement.
[END OF PAGE]
-10-<PAGE>
IN WITNESS WHEREOF, Pledgor and Pledgee have caused this
Pledge Agreement to be executed as of the date first above
written.
PLEDGOR:
____________________________________
WILLIAM F. FARLEY
PLEDGEE:
FRUIT OF THE LOOM, INC.
By:_________________________________
Title:______________________________
-11-<PAGE>
FARLEY INDUSTRIES
MANAGEMENT AGREEMENT
FOR FRUIT OF THE LOOM, INC.
This Management Agreement (the "Agreement") is made as of
January 1, 1994 by and among Farley Industries, Inc., a Delaware
corporation ("FII"), and Fruit of the Loom, Inc., a Delaware
corporation ("FOL") and each of its subsidiaries (FOL and its
subsidiaries are referred to herein, individually and
collectively, as the "Company").
R E C I T A L S
WHEREAS, the Company desires to retain FII to provide the
Company with legal, financial, accounting and other management
and advisory services for the period January 1, 1994 through
December 31, 1994 (the "Term of this Agreement"); and
WHEREAS, FII has provided such services in the past and has
agreed to provide such services during the Term of this
Agreement; and
WHEREAS, FII and the Company desire to enter into a written
agreement evidencing the foregoing.
NOW, THEREFORE, in consideration of the mutual covenants
contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
1. MANAGEMENT SERVICES
1.1 The Company hereby retains FII to provide the Company
with such general management services ("Management Services") as
the Company may request, and FII agrees to provide the Management
Services during the Term of this Agreement. The Management
Services shall include the following:
(1) Financial advice and services, including,
without limitation, assistance with respect to matters
such as cash management, treasury and financial
controls;
(2) Legal advice and services;
(3) Advice and services concerning foreign and
domestic taxes, including, without limitation,
assistance in preparation of tax returns;
(4) Auditing, accounting, and bookkeeping advice
and services, including, without limitation, assistance<PAGE>
in preparation of financial statements and disclosure
documents related to reporting requirements under state and
federal securities laws;
(5) Corporate planning and corporate development
advice and services;
(6) Human resources and personnel advice and
services, including, without limitation, administration
of pension and other employee benefit plans and
compliance with state and federal labor laws;
(7) Public relations and press relations advice
and services; and
(8) Such other advice and services necessitated
by the ordinary course of the Company's business, as
the Company may reasonably request from time to time.
Notwithstanding the foregoing, "Management Services" do not
include any of the services described in Articles 2, 3 or 4
hereof.
1.2 (a) In consideration of FII's provision of Management
Services, the Company agrees to pay FII a fee (the "Management
Fee") in an amount equal to the Cost of Management Services (as
defined below) provided, however, that in no event shall the
Company be responsible for more than $11.7 million less FII
Affiliate Management Fees (as defined below). For purposes of
this Agreement, the "Cost of Management Services" shall mean the
costs necessarily incurred by FII during 1994 in the proper
performance of (i) the Management Services and (ii) other
management services performed for the FII Affiliates (as
hereinafter defined) (collectively, the "Services"). The term
"Cost of Management Services" shall include the following
expenses necessarily incurred by FII in connection with the
performance of the Services:
(i) salaries, benefits and other compensation of FII's
officers (other than William Farley) and other FII
employees;
(ii) reasonable out-of-pocket transportation and
traveling expenses and long distance phone calls,
facsimile and messenger charges;
(iii) costs of materials, supplies and capital
expenditures incurred in the normal course of
FII's business;
(iv) overhead or general expenses, including rental
charges;
2<PAGE>
(v) costs of outside services including those
described in Section 1.2(c) below; and
(vi) other costs incurred in the performance of
Management Services.
For purposes of this Agreement, the term "Cost of Management
Services" shall not include:
(i) salary, bonus and other compensation of William
Farley;
(ii) transportation, traveling, entertainment and any
other expenses of William Farley, other than (A)
such expenses incurred on behalf of FII Affiliates
in the ordinary course of their respective
businesses and (B) costs of providing office
space, administrative services and other customary
services to William Farley;
(iii) interest payments on borrowed money;
(iv) costs due to the gross negligence or willful
misconduct of FII or any of its officers,
employees or agents;
(v) costs of any item not specifically and expressly
included in the items set forth in this Section
1.2(a); or
(vi) costs in excess of $13.8 million.
For purposes of this Agreement, the term "FII Affiliate
Management Fees" shall mean the management fees and expense
reimbursements paid to FII by the FII Affiliates (as hereinafter
defined, other than the Company) for management services
performed during 1994.
(b) The Management Fee shall be payable as follows:
(i) $866,667 shall be payable on the first day of each
month during the Term of this Agreement; and
(ii) within thirty days after the close of the 1994
calendar year, FII shall furnish to the Company a
statement (the "FII Statement") detailing the Cost
of Management Services. The FII Statement shall
be accompanied by a certificate signed by each of
the President and the Chief Financial Officer of
FII stating that the FII Statement is valid and
correct in accordance with the books and records
of FII. The Company and FII shall reconcile the
3<PAGE>
amount of payments made to FII pursuant to this
Section 1.2(b) with the amount of the Management
Fee which is payable based upon the Cost of
Management Services and FII Affiliate Management
Fees. Upon such reconciliation, FII or the
Company, as the case may be, shall provide such
refunds or additional payments as are then
appropriate.
(c) FII shall keep full and detailed records of its
costs and expenses incurred during 1994. The Board of Directors
of the Company shall be afforded full access to all of FII's
records, books, correspondence, vouchers and similar data
relating to its costs and expenses incurred during 1994. FII
shall employ independent auditors and shall furnish the Company a
report in form satisfactory to the Company. If a disagreement
occurs as to the Cost of Management Services, the disagreement
shall be submitted to Ernst & Young whose decision shall be final
and binding.
2. INVESTMENT BANKING SERVICES
2.1 In connection with the direct or indirect acquisition
or disposition by the Company of the assets or operations of any
business or entity, whether by purchase or sale of stock or
assets, merger or consolidation, or otherwise, FII agrees to
provide appropriate investment banking, financial, accounting,
legal and other services for such transactions ("Investment
Banking Services") as requested by the Company. Nothing in this
Article 2 shall prohibit the Company from hiring any other third
party advisers to provide Investment Banking Services and this
Agreement does not create an exclusive right in favor of FII to
perform such services.
2.2 In consideration of FII's provision of Investment
Banking Services, the Company shall pay a fee established by FII
and determined by FII to be reasonable in relation to (i) the
size and complexity of the transaction, and (ii) the fees
customarily charged by other advisors for similar Investment
Banking Services; provided, such fee shall not exceed two percent
(2%) of the total consideration paid or received by the Company,
as the case may be, in the subject transaction. Fees for
Investment Banking Services shall be payable to FII upon the
closing of the subject transaction.
2.3 If FII shall provide Investment Banking Services for a
transaction which is not consummated, FII shall establish a
reasonable fee for the services FII has provided, which may be
based upon engagement or similar fees other advisers in such or
similar transactions received or would receive.
4<PAGE>
3. FINANCING SERVICES
3.1 In connection with the arrangement by the Company of
public or private debt financing (including letter of credit
facilities), FII agrees to provide financial, accounting, legal
and other services for such transaction ("Financing Services") as
requested by the Company. Nothing in this Article 3 shall
prohibit the Company from hiring any other third party advisers
to provide Financing Services and this Agreement does not create
an exclusive right in favor of FII to perform such services.
3.2 In consideration of FII's provision of Financing
Services, the Company shall pay a fee established by FII and
determined by FII to be reasonable in relation to (i) the size
and complexity of the transaction, and (ii) the fees customarily
charged by other advisors for similar Financing Services;
provided, such fee shall not exceed two percent (2%) of the
aggregate amount available for borrowing or use under the subject
agreement or facility. Fees for Financing Services shall be
payable to FII upon the closing of the subject agreement or
facility.
3.3 If FII shall provide Financing Services for a financing
which is not consummated, FII shall establish a reasonable fee
for the services FII has provided, which may be based upon
engagement or similar fees other advisers in such or similar
financings received or would receive.
4. OTHER SERVICES
4.1 Fees for financial, accounting, legal and advisory
services rendered by FII to the Company outside the ordinary
course of the Company's business which do not come within the
scope of Sections 2 or 3 hereof shall be provided upon terms as
agreed upon by the Company and FII in writing.
5. OTHER TERMS
5.1 FII Represents and warrants to the Company as follows:
(a) FII is a corporation duly organized and validly
existing under the laws of the State of Illinois with full
corporate power and authority to execute and deliver this
Agreement. FII has the full legal right, power and capacity, and
all authority and approval required to execute and deliver this
Agreement and to perform its obligations hereunder.
(b) This Agreement has been duly authorized, executed
and delivered by FII and constitutes a valid and legally binding
agreement of FII, enforceable against FII in accordance with its
5<PAGE>
terms, subject to applicable bankruptcy, insolvency and similar
laws affecting creditors' rights generally and subject as to
enforceability to general principles of equity (regardless of
whether enforcement is sought in a proceeding at law or in
equity).
(c) The execution and delivery by FII of this
Agreement and the performance of its obligations hereunder will
not (i) require the consent, waiver, order, registration,
qualification, authorization or approval of, from or with any
governmental or regulatory authority, domestic or foreign, or of
any other individual, partnership, corporation, trust or other
entity (collectively, "Person"), (ii) conflict with or result in
any breach or violation of any of the terms or conditions or
provisions of, or constitute (or, with notice or lapse of time or
both, constitute) a default under (1) the Articles of
Incorporation or By-laws of FII; (2) any federal, state, local or
foreign statute, regulation, order, judgment or decree of any
court, arbitrator or governmental or regulatory instrumentality
applicable to FII or (3) any instrument, contract or other
agreement to which FII is a party or by or to which FII is bound
or subject.
(d) The budget previously presented to the Company by
FII is based on reasonable assumptions of management of FII as to
the costs and expenses to be incurred by FII during 1994.
(e) FII is engaged in the business of providing
management services to the Company and "affiliates" (as such term
is defined in Section 15 of the Securities Act of 1933) of
William Farley (collectively, the "FII Affiliates") and does not
conduct any other business or provide services to any other
Person.
5.2 The Company represents and warrants to FII as follows:
(a) The Company is a corporation duly organized and
validly existing under the laws of the State of Delaware, with
full power and authority to execute and deliver this Agreement.
The Company has the full legal right, power and capacity, and all
authority and approval required to execute and deliver this
Agreement and to perform all its obligations hereunder.
(b) This Agreement has been duly authorized, executed
and delivered by the Company and constitutes a valid and legally
binding agreement of the Company enforceable against the Company
in accordance with its terms, subject to applicable bankruptcy,
insolvency and similar laws affecting creditors rights generally
and subject as to enforceability to general principles of equity
(regardless of whether enforcement is sought in a proceeding at
law or in equity).
6<PAGE>
(c) The execution and delivery by the Company of this
Agreement and the performance of its obligations hereunder will
not (i) require the consent, waiver, order, registration,
qualification, authorization or approval of, from or with any
governmental or regulatory authority, domestic or foreign, or of
any other person, (ii) conflict with or result in any breach or
violation of the terms or conditions or provisions of, or
constitute (or, with notice or lapse of time or both, constitute)
a default under (1) the Articles of Incorporation or By-laws of
the Company, (2) any federal, state, local or foreign statue,
regulation, order, judgment or decree of any court, arbitrator or
governmental or regulatory instrumentality applicable to the
Company, or (3) any instrument, contract or other agreement to
which the Company is a party or by or to which the Company is
bound or subject.
6. ADDITIONAL AGREEMENTS
During the term of this Agreement, FII shall engage in the
business of providing management services to FII Affiliates and
shall not conduct any other business or provide services to any
other Person.
7. OTHER TERMS
7.1 This Agreement expires on December 31, 1994, except
Section 1.2, 7.3 and 7.6 shall survive.
7.2 The personnel of FII who provide services to the
Company hereunder will be designated solely by FII and shall
remain employees of FII. It is understood that neither FII nor
any of its employees shall be required to devote their energies
full time to the provision of services hereunder and that FII may
and intends to furnish similar services to other FII Affiliates.
7.3 Except as otherwise provided herein or required under
applicable law, the Company and FII agree to maintain as
confidential and not to disclose to any third party any and all
information provided by one party to the other or otherwise
obtained by one party from the other in the performance of this
Agreement (other than information which is a matter of public
knowledge or has otherwise become publicly available).
7.4 FII acknowledges that it and its personnel may, during
the course of provision of services hereunder, gain possession or
control of books, records, instruments, data and other
information pertaining to the Company which may prove necessary
or desirable to the Company in connection with its business
(collectively, "Information"). Accordingly, FII agrees to
provide the Company, upon the Company's written request, full and
7<PAGE>
complete access (including access to persons or firms possessing
Information), and all such Information the Company may reasonably
require in the conduct of its business, including Information
sought for audit, accounting, litigation or tax purposes or
proceedings. The Company agrees to provide FII with full and
complete access to any and all Company records, data (both
financial and operational) and persons which FII may reasonably
require to perform the Management Services contemplated by this
Agreement.
7.5 FII and its personnel shall have no liability to the
Company on account of any advice or services which are rendered
to the Company hereunder if such advice or services were rendered
in good faith; provided, this limitation shall not apply to
advice or actions deemed to have been grossly negligent in a
final judgment by a court of competent jurisdiction from which no
appeal can be or has been taken.
7.6 The Company agrees to indemnify and hold harmless FII,
the directors, officers, agents, employees, legal representatives
and affiliates of FII, and each Person, if any, controlling FII
or any of its affiliates within the meaning of Section 15 of the
Securities Act of 1933 (an "Indemnified Party"), from and against
any and all losses, claims, damages and liabilities, joint or
several, caused by, related to or arising out of FII acting for
or providing services to the Company pursuant to this Agreement,
and to reimburse any Indemnified Party for all reasonable
expenses (including Attorneys' fees) incurred by the Indemnified
Party in connection with the investigation, preparation or
defense of any such action or claim, whether or not in connection
with any pending or threatened litigation, to which such
Indemnified Party is subject; provided, however, that the Company
shall not have any obligation for any such losses, claims,
damages, liabilities or expenses that are found, in a final
judgment by a court of competent jurisdiction from which no
appeal can be or has been taken, to have resulted principally
from the Indemnified Party's bad faith, gross negligence or
willful misconduct. The Indemnified Party agrees to notify the
Company promptly of the assertion of any claim or the
commencement of any action or proceeding relating to this
indemnity, but the Indemnified Party's failure to so notify the
Company shall not relieve the Company from any obligation or
liability which the Company may have pursuant to this Agreement
to the extent that the Company has not been prejudiced in any
material respect by such failure. The Indemnified Party shall
have the right to retain counsel of its own choice to represent
it and such counsel shall, to the fullest extent consistent with
its professional responsibilities, cooperate with the Company and
any counsel designated by the Company. The Company shall not be
liable under this Agreement for any settlement of any claim
against the Indemnified Party made without the Company's written
consent, which consent will not be unreasonably withheld. The
8<PAGE>
foregoing rights are in addition to any rights that the
Indemnified Party may have at common law or otherwise.
7.7 This Agreement shall be governed by and construed under
the laws of the State of Illinois.
7.8 This Agreement may be executed in one or more
counterparts, each of which will be deemed an original and which
together shall constitute one and the same instrument.
7.9 This Agreement sets forth the entire understanding of
the parties with respect to FII's rendering of the services which
are the subject hereof. Neither this Agreement nor any provision
hereof may be modified, waived, terminated or amended other than
by the express written agreement of FII and the Company.
7.10 This Agreement may not be assigned by either party
without the consent of the other but shall be binding upon and
inure to the benefits of the parties and their respective
successor and assigns upon any assignment so permitted.
7.11 In the event that any provision of this Agreement
shall be held to be, in whole or in part, void or unenforceable,
the remaining provisions of this Agreement, and the remaining
portion of any provision held void or unenforceable in part,
shall continue in full force and effect.
7.12 Except as otherwise specifically provided herein,
notices required hereunder shall be deemed given when delivered
personally, or when deposited with a bonded overnight courier or
five (5) days after being deposited as registered or certified
United States mail, postage prepaid, in each case to the address
of the party for whom intended at the principal executive offices
of such party set forth below, or at such other address as such
party may hereafter specify by written notice to the other.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their proper officers as of the date
first written above.
FRUIT OF THE LOOM, INC. FARLEY INDUSTRIES, INC.
5000 Sears Tower 5000 Sears Tower
Chicago, Illinois 60606 Chicago, IL 60606
By: By:
------------------------ ----------------------
Vice President Vice President
9 <PAGE>
