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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended October 30, 1994
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or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 1-9474
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FORSTMANN & COMPANY, INC.
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(Exact name of registrant as specified in its charter)
GEORGIA 58-1651326
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1185 Avenue of the Americas, New York, N.Y. 10036
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 642-6900
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Securities registered pursuant to Section 12(b) of the Act: None
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Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.001 par value
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(Title of class)
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
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Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ X ]
State the aggregate market value of the voting stock held by non-
affiliates of the registrant. The aggregate market value shall be computed by
reference to the price at which the stock was sold, or the average bid and asked
prices of such stock, as of a specified date within 60 days prior to the date of
filing. Approximately $33,712,800 based on the published closing price
($6.00) on the NASDAQ National Market System on January 26, 1995.
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date:
As of January 26, 1995 - 5,618,800 shares of Common Stock
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the registrant's definitive proxy statement to be mailed
to shareholders in connection with the registrant's April 4, 1995 Annual Meeting
of Shareholders are incorporated by reference into Part III hereof.
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Item 1. BUSINESS
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General
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Forstmann & Company, Inc., a Georgia corporation (the "Company" or
"Forstmann"), is a leading designer, marketer and manufacturer of innovative,
high quality fabrics which are used primarily in the production of brand-name
and private label apparel for men and women. Forstmann's fabrics are used in
suits, dresses, sportwear, trousers, sportcoats and outerwear made by some of
the world's leading apparel manufacturers. The Company also produces
specialty fabrics for use in billiard and gaming tables, sports caps and
career uniforms. The Company's customers are demanding increasingly high
levels of service and innovation from their suppliers. To create fabrics to
meet shifting consumer tastes and stringent product specifications, the
Company works in partnership with its customers through extensive product
development and design efforts. To support its customer-oriented marketing
strategy, the Company's manufacturing operations are designed to accommodate
relatively short production runs of these customized fabrics. The Company
manufactures fabrics produced from 100% wool and wool blends and, recently,
of blends of other natural and man-made fibers. The Company believes that it
is the largest manufacturer of domestically produced woolen fabrics and the
second largest manufacturer of domestically produced worsted fabrics.
During the Company's 1994 fiscal year (the fifty-two week period from
November 1, 1993 through October 30, 1994) ("Fiscal Year 1994"), womenswear
and outerwear fabrics accounted for approximately 64.0% of revenues and
menswear fabrics accounted for approximately 28.5% of revenues. Specialty
fabrics, including government and other, accounted for its remaining
revenues.
Although Forstmann was incorporated in December 1985, its predecessors
have been in business for over 100 years. The Company is the successor to the
business of the Woolen and Worsted Fabrics Division of J.P. Stevens & Co.,
Inc., the assets of which the Company acquired in February 1986.
The principal executive offices of the Company are located at 1185
Avenue of the Americas, New York, New York 10036, and its telephone number is
(212) 642-6900.
Significant Events
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The 1992 Recapitalization
During fiscal year 1992, the Company completed a restructuring and
recapitalization (the "1992 Recapitalization") whereby the Company (a) merged
with an affiliated company (the "Merger"), which resulted in each issued and
outstanding share of the Company's common stock and non-voting common stock
prior to the Merger (except with respect to the shares held by dissenting
shareholders. See Item 3. Legal Proceedings) being converted into 1/2,172 of
an identical share of common stock of the Company without any payment or
other consideration in respect thereof (the "Reverse Stock Split"), (b)
accepted $46,240,100 aggregate face amount of the Split Coupon Notes in
exchange for $19,596,758 cash and 2,420,904 unregistered shares of the
Company's common stock (the "Exchange Offer"), (c) completed an initial
public offering and sold 2,750,000 shares of common stock at $8.37 net per
share (the "Public Offering"), and (d) received from Odyssey $3,712,500 of
the cash consideration Odyssey had received in the Exchange Offer as the
purchase price for 412,500 unregistered shares of the Company's common stock.
In connection with the Exchange Offer, in March 1992, the Company agreed that
it would not exercise its rights of optional redemption with respect to the
14-3/4% Senior Subordinated Notes and Split Coupon Notes due April 1999
(collectively, the "Subordinated Notes"). The 1992 Recapitalization reduced
the Company's long-term indebtedness by $46.2 million (see Note 14 to the
Financial Statements included in Item 8. of this Annual Report on Form 10-K).
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Quasi Reorganization
The Company, with approval from its Board of Directors, revalued its
assets and liabilities to fair value as of the beginning of the Company's
1993 fiscal year (the fifty-two week period from November 2, 1992 through
October 31, 1993) ("Fiscal Year 1993") pursuant to the principles of quasi-
reorganization accounting (the "Quasi Reorganization"), which is a voluntary
accounting procedure that permits an entity which has emerged from previous
financial difficulty to restate its accounts to estimated fair values and to
eliminate its retained deficit against additional paid-in capital. Quasi
Reorganization fair value adjustments recorded during Fiscal Year 1993
resulted in a writedown of the Company's net assets of $22.5 million that was
charged to the Company's retained deficit account. Subsequent to the fair
value adjustments, the balance in the Company's retained deficit account of
$59.6 million was eliminated against the Company's additional paid-in capital
account. The fair value adjustments of the Quasi Reorganization had the
effect of reducing shareholders' equity from $51.1 million to $28.6 million
as of the beginning of Fiscal Year 1993.
At the effective date of the Quasi Reorganization, the Company had
certain unresolved contingencies related to specific environmental matters
and litigation with certain dissenting shareholders (the "Dissenters'
Proceeding") (see Item 3. Legal Proceedings). In accordance with the
principles of quasi-reorganization accounting, the difference between the
actual costs subsequently incurred to resolve these matters and the
liabilities recorded at the time of the Quasi Reorganization will be charged
or credited to additional paid-in capital, as appropriate. During Fiscal
Year 1994, $206,000 (net of income taxes) and $1,788,000 related to the
environmental matters and Dissenters' Proceeding, respectively, were charged
to additional paid-in capital as adjustments to the amounts initially
recorded in the Quasi Reorganization (see Note 14 to the Financial Statements
included in Item 8. of this Annual Report on Form 10-K).
Other Financing Events
The Company, as of October 30, 1992, entered into a five-year, $100
million senior secured credit facility with General Electric Capital
Corporation ("GECC"), as agent and lender (the "GECC Facility"). The GECC
Facility consisted of a $15 million term loan (the "Original Term Loan") and
an $85 million revolving line of credit (the "Revolving Line of Credit"). In
April 1993, the Original Term Loan was prepaid in full. The initial
borrowing under the GECC Facility, on November 13, 1992, repaid the Company's
then existing $85 million senior secured credit facility, which was scheduled
to expire in November 1994, and secured then outstanding letters of credit.
See "Financing Arrangements -- GECC Facility".
On April 5, 1993, the Company issued an aggregate of $20 million Senior
Secured Notes (the "Original Senior Secured Notes") and on March 30, 1994,
the Company issued an aggregate of $10 million Senior Secured Notes (the
"Additional Senior Secured Notes"), all of which are due October 30, 1997
(collectively the "Senior Secured Notes"). The net proceeds from the
Original Senior Secured Notes were used to repay the Original Term Loan and
to repay a portion of borrowings outstanding under the Revolving Line of
Credit. The net proceeds from the Additional Senior Secured Notes were used
to repay a portion of the borrowings outstanding under the Revolving Line of
Credit. The Senior Secured Notes were issued pursuant to an indenture, dated
April 5, 1993, which was amended and restated as of March 30, 1994 between
the Company and Shawmut Bank Connecticut, National Association, as trustee
(the "Senior Secured Notes Indenture"). See "Financing Arrangements --
Senior Secured Notes".
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Subsequent to Fiscal Year 1994 certain financial covenants under the
GECC Facility, the Indenture to the Senior Secured Notes and the CIT
Equipment Facility (see Financing Arrangements -CIT Equipment Facility) were
further amended, in part to reflect the effect of rising interest rates,
final settlement of claims with the Company's remaining dissenting
shareholders as discussed in Item 3. Legal Proceeding -- Dissenters'
Proceedings and the additional debt the Company incurred to fund higher
working capital needs and capital expenditures. Also, the GECC Facility was
further amended to provide the $7.5 million Term Loan and the CIT Equipment
Facility (hereinafter defined) was amended to provide for up to $5.0 million
of additional equipment financing. In January 1995, the Company borrowed
$7.5 million under the Term Loan, the proceeds of which were used to repay
outstanding borrowings under the Revolving Line of Credit.
Description of Business
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MARKETS AND PRODUCTS. Forstmann fulfills many of the diverse fabric needs of
leading men's, women's and outerwear apparel makers by offering a collection
of wool, wool-blend, synthetic and synthetic-blend fabrics, as well as
fabrics blended with natural fibers such as linen, cotton and silk. These
fabrics are offered in a wide variety of styles, colors, weaves and weights
which can be used in tailored clothing, sportswear, coats for men and women,
as well as for specialty applications. The Company introduces new
collections throughout the year to ensure that its customers are frequently
exposed to the latest fabric offerings and to accommodate seasonal retail
cycles. This has resulted in stronger, year-round customer relationships and
more balanced manufacturing.
Womenswear and Outerwear. The Company designs, markets and manufactures
woolen and worsted fabrics for women's apparel in the moderate, better and
bridge price range for sportswear, suits and dresses, as well as for women's
outerwear. The fabric selection for women's apparel includes traditional
fabrics, such as 100% wool gabardines, crepes and 100% wool flannels, meltons
and velours, as well as additional fabrics made from 100% viscose and blends
of wool/nylon, wool/viscose, and viscose/linen. These additional fabrics
enable the Company to serve its womenswear customers year-round. The Company
is a dominant supplier of outerwear fabrics for women's woolen coats. In
Fiscal Year 1994, womenswear and outerwear accounted for 64.0% of total
revenue.
Menswear. The Company designs, markets and manufactures fabrics in the
moderate and better price range for men's apparel such as suits, sportcoats,
blazers, trousers and formal wear. The fabric selection includes traditional
fabrics, such as tropicals, gabardines and flannels in wool and wool blends,
as well as fabrics made from wool, man-made fibers such as viscose and
polyester and natural fibers such as silk, linen and cotton. These fabrics
have allowed the Company to expand from its traditional base of tailored
clothing manufacturers to new areas such as suit separates, casual sportswear
and weekend wear. In Fiscal Year 1994, menswear accounted for 28.5% of total
revenue.
Specialty Fabrics. The Company produces specialty fabrics for a wide
variety of end uses, including billiard and gaming tables, sports caps and
school uniforms. The Company is a leading billiard table fabric manufacturer
in the United States, selling directly to manufacturers and distributors. In
addition, during fiscal year 1992, the Company began distributing billiard
table fabric in Europe. The Company also is the sole supplier of wool fabric
used in the production of official major league baseball caps for on-field
play. Recently the Company has begun marketing career uniform apparel
designed to meet stringent requirements for comfort and durability and, in
some cases, washability. Although specialty fabrics currently represent a
small portion of total revenues, the Company considers its initiatives in the
specialty fabrics division important to its overall strategy of product
diversification and innovation.
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Forstmann International. In July 1992, the Company formed its Forstmann
International division and entered into a licensing, technical information
and consulting arrangement with Compagnia Tessile, S.p.A., an Italian
corporation, and its affiliate. Under the arrangement, the Company has the
exclusive right to sell "Carpini/TM/ USA" fabrics for men's and women's
apparel in the United States, Canada and nonexclusive rights in Mexico for an
initial period of five years. These high quality fabrics, styled in Italy and
manufactured in Georgia, are marketed through a specialized sales force to
the designer and bridge apparel markets in North America. Additionally, the
Company imports certain fabrics from Carpini and its affiliate which the
Company markets in the United States and Canada.
MERCHANDISING AND MARKETING. The Company's merchandising and marketing
functions are integrated and include both the conceptualization
(merchandising) and the sale (marketing) of the product line. The Company's
merchandising and marketing functions are directed from its New York office
and are organized around the Company's three customer end-use divisions.
MANUFACTURING. The Company's vertically integrated facilities (which perform
operations beginning with opening, blending and spinning raw stock into yarn
through weaving, to dyeing and finishing fabric) enable the Company to
produce, in addition to woolens and worsteds, a wide variety of other natural
and synthetic-blend fabrics. The Company is the only major United States
mill which produces fabrics on both the woolen and worsted systems.
Woolen fabrics, such as flannels, are woven from yarns containing short,
unstraightened wool fibers which remain in a haphazard arrangement, creating
a "fuzzy" appearance. Worsted fabrics, such as gabardine and serge, are
woven from yarns composed of longer wool fibers that have been combed to
align the fibers in parallel and to remove shorter fibers.
For the production of woolen yarns, the Company purchases scoured
(cleansed and degreased) wool, which is then blended and carded to remove
impurities, disentangle locks and straighten individual fibers. The carded
wool is then spun into woolen yarn. To produce worsted yarns, the Company
purchases combed wool top, which is pin-drafted and straightened to produce
long staple wool fibers spun into worsted yarn. Polyester or other synthetic
fibers are, sometimes, combined with wool in the spinning process to produce
a variety of woolen and worsted blends.
Woolen, worsted or wool-blend yarns are woven to produce either greige
or patterned fabrics. Other yarns, such as viscose, linen, silk, polyester
or cotton (all of which the Company purchases from outside suppliers), are
sometimes woven directly into non-wool fabrics or combined with woolen or
worsted yarn.
After weaving, most fabric is piece-dyed and finished to impart the
desired color and feel (or "hand") to the fabric. Fabrics woven, dyed and
finished in this manner are referred to as "plain" fabrics. Multicolored
patterned fabrics, known as "fancy" fabrics, are woven from colored yarns
which are dyed by the Company either as scoured wool prior to spinning or in
packages of spun yarn. As with piece-dyed fabrics, fancy fabrics go through
various finishing processes to achieve the appropriate "hand" or feel.
The Company maintains a physical testing laboratory to ensure product
quality from blending through finishing. In addition, all fabrics go through
multiple cleaning stages and a final quality inspection prior to packaging
and shipping.
The Company's facilities are sufficiently flexible to allow the Company
to perform both short and long runs of all types of fabrics it produces.
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Carpini is a trademark of Carpini S.r.l.
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CAPITAL INVESTMENT PROGRAM. During fiscal year 1992, the Company established
a six-year, $100 million capital investment program. This program is
designed to (i) reduce manufacturing costs, (ii) enhance product quality,
(iii) provide greater manufacturing flexibility while maintaining operating
efficiencies, (iv) improve the Company's technical capabilities to provide
new blends, styles and colors of fabrics to be offered. Through the end of
Fiscal Year 1994, the Company has made capital expenditures (including
capital leased assets) of $42.3 million in connection with this program and
entered into certain operating leases associated with machinery and
equipment, constituting approximately one-half of its capital investment
program. When completed, these investments will cover virtually every phase
of the Company's manufacturing operations, from yarn manufacturing to weaving
to fabric dyeing and finishing. The Company believes that the program will
improve productivity and produce savings in the areas of labor, energy, raw
material usage and asset maintenance. In light of increasing interest rates,
as well as increased borrowings to fund its working capital needs, the
Company is reassessing the timing of its capital investment program. The
Company expects spending for capital expenditures, primarily machinery and
equipment, in fiscal year 1995 to be slightly less than Fiscal Year 1994.
The Company has allocated approximately 35% of its planned expenditures
to the yarn-making process, in which major projects include updating fiber-
blending systems and modernizing spinning, card condenser and winding
equipment. Approximately 22% of its planned expenditures will be in the area
of weaving, in which major projects will include adding rapier looms.
Approximately 28% of its planned expenditures will be in the area of dyeing
and finishing, in which major projects will include adding a computerized dye
house formula and control process and dyeing equipment that is highly
flexible in batch size. The remaining planned expenditures will be for
management information systems and facilities. During Fiscal Year 1994, the
Company spent approximately $15.0 million on capital improvements, including
the modernization of certain bin blending and yarn-handling equipment and the
addition of certain yarn-making, dyeing and finishing equipment.
RAW MATERIALS. The Company's raw material costs constituted approximately
31% of its cost of goods sold during Fiscal Year 1994. The primary raw
material used by the Company is wool. As a result, the Company's costs are
dependent on its ability to manage its wool inventory and control its wool
costs. Approximately two-thirds of the Company's wool is imported from
Australia and substantially all of the balance is purchased in the United
States. The Company purchases its wool from brokers and is not dependent on
a single supply source. The Company's foreign wool purchases are denominated
in U.S. dollars and the Company generally does not incur any currency
exchange risk. However, future changes in the relative exchange rates
between United States and Australian dollars can materially affect the
Company's results of operations for financial reporting purposes. Much of
the Company's wool is purchased on extended payment terms. Recently, the
cost of certain raw wool categories sourced from Australia has risen
significantly, and a drought in Australia which has resulted in a reduction
in sheep herds indicates that such costs will continue to increase in the
near future. Based on the Company's forward purchase commitments and wool
market trends, the Company expects wool costs to increase significantly in
fiscal year 1995.
CUSTOMERS. The Company has more than 571 active customers. In Fiscal Year
1994, no single customer accounted for 10% or more of the Company's revenues.
Substantially all of the Company's customers are located within the
United States. During each of fiscal year 1992, Fiscal Year 1993 and Fiscal
Year 1994, less than two percent of the Company's revenues arose from non-
United States sales. In late 1994, a key executive was designated to create
and implement a plan to develop international sales of Forstmann's products.
Initially the Company will focus on developing export sales of its woolen
products to Western Europe, Japan and Pacific Rim countries.
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BACKLOG. The Company's sales order backlog at January 1, 1995 was $61.3
million, a decrease of $12.0 million from the comparable period one year ago.
Excluding government orders, which yield lower gross profit margins, the
backlog at January 1, 1995 was $8.5 million less than the comparable period
one year ago. The decline in the backlog, excluding government orders, is
attributable to a decline in orders for women's outerwear, which was somewhat
offset by increases in orders for menswear, specialty, converted and Carpini
USA fabrics. The Company believes that the decline in orders for women's
outerwear is due to the exceptionally warm temperatures registered across the
country in the fall and early winter. Although the Company expects the
effects of the warmer weather, which depressed retail sales of women's
outerwear, to somewhat reverse itself during fiscal year 1995, there can be
no assurance that such will occur. Sales of women's outerwear represented
approximately 22% of net sales for Fiscal Year 1994. All of such backlog is
expected to be filled during the current fiscal year.
SEASONALITY. The wool fabric business is seasonal, with the vast majority of
orders placed from December through April for manufacture and shipment from
February through July to enable apparel manufacturers to produce apparel for
retail sale during the fall and winter seasons. As a result of normal
payment terms for sale of such fabrics, the Company receives the major
portion of its payments thereon during July through October. The Company's
worsted fabrics sales tend to be less seasonal because the lighter weight of
such fabrics makes them suitable for retail sale in the spring and summer
seasons as well as in the fall and winter seasons. The Company continues to
develop and implement an aggressive marketing plan for the sale of blended
fabrics and synthetics, which tend to be less seasonal.
COMPETITION. The textile business in the United States is highly competitive
and the Company competes with many other textile companies, some of which are
larger and have greater resources than the Company.
The Company believes that it is the largest domestic manufacturer of
woolen fabrics and the second largest domestic manufacturer of worsted
fabrics. The Company's principal competitors in the sale of woolen fabrics
are Warshaw Woolen Associates, Inc. and Carleton Woolen Mills, Inc., and its
principal competitors in the sale of worsted fabrics are Burlington
Industries Equity Inc. and The Worcester Company, Inc. The Company believes
that the principal competitive factors are fashion, quality, price and
service, with the significance of each factor depending upon the product
involved. The competitive position of the Company varies among the different
fabrics it manufactures. The Company believes that its competitive
advantages include its broad range of products, its ability to respond
effectively to changing customer demands and its ability to deliver products
in a timely manner.
Currently, imports of foreign-manufactured woolen and worsted
fabrics face strict quotas and high import duties upon entering the United
States. During calendar year 1993, imports of wool fabrics into the United
States increased approximately 4.9% from calendar year 1992. The Company
believes that such imports did not have a significant impact on its business
since such imports were primarily of fabrics which normally are marketed in
price ranges and are of a quality which are not within the price and quality
ranges of the Company's fabrics.
Two major trading agreements evolved during the last year which,
when implemented, are expected to have an impact on Forstmann's operations.
The North American Free Trade Agreement ("NAFTA"), which became effective on
January 1, 1994, is expected to have a long-term positive effect on the
Company's growth. The Company believes that an increasing percentage of
foreign-produced garments for sale in the United States, Canada and Mexico
will be manufactured in Mexico, as compared to the Far East. In order for
such garments to qualify for duty-free treatment into the United States and
Canada, the fabric has to be sourced from the United States, Canada or
Mexico. With limited wool fabric production capacity currently in Mexico and
Canada, this requirement represents a major opportunity for woolen mills in
the United States. The General Agreement on Trade and Tariffs ("GATT"),
reduces tariffs on wool fabric from about one third, to 25%, over a ten-year
period. In exchange for the tariff reduction, market access for products
manufactured in the United States to countries that are parties to GATT is
improved.
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The Company believes that, overall, GATT will enable the Company to compete
more effectively in the world market, thereby offsetting the effect of the
tariff reductions.
TRADEMARKS. The Company owns the Forstmann (R) name, which it uses as a
trade name, as a trademark in connection with various merchandise, and as a
service mark. The Company owns rights to various trademarks registered in
the United States used in connection with its business and products,
including Forstmann(R), Fast Forward(R), Casuwools(R) and Formula One(R).
The Forstmann name is registered in various countries, including Austria,
Australia, the Benelux countries, Canada, Denmark, France, Germany, Hong
Kong, Ireland, Japan, Switzerland and the United Kingdom, under International
Class 24. In addition, the Company has applied to register the Forstmann
name in various countries, including Indonesia, Italy, Norway, Portugal,
Spain and Sweden. The Company believes that no individual trademark or trade
name, other than Forstmann(R), is material to the Company's business.
EMPLOYEES. As of January 1, 1995, the Company employed approximately 2,450
hourly-paid, full-time skilled personnel at its plants and approximately 440
additional salaried, supervisory, management and administrative employees.
None of the Company's employees is represented by a union or a labor
organization. The Company has never experienced a strike and believes that
its relations with its employees are good.
EXECUTIVE OFFICERS OF THE REGISTRANT
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The executive officers of the Company are:
Position with the
Name Age Company
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Christopher L. Schaller 53 Chairman of the Board
of Directors, President and
Chief Executive Officer
William B. Towne 50 Executive Vice President
and Chief Financial Officer
Fred D. Matheson 47 Executive Vice President--
Manufacturing
Richard Pactor 57 Executive Vice President--
Product Development
and President of the
Forstmann International division
Peter Roaman 44 Executive Vice President--
Marketing and Styling
Rodney J. Peckham 39 Vice President and Treasurer
Jane S. Pollack 49 Vice President, Secretary and
General Counsel
Gary E. Schafer 43 Vice President and Corporate
Controller
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The business experience of each of the executive officers during the past
five years is as follows:
Christopher L. Schaller joined the Company in April 1990 as President and
Chief Operating Officer, at which time he was also elected a director. Mr.
Schaller became Chief Executive Officer in October 1990 and Chairman of the
Board of Directors in March 1992. From 1988 until joining the Company, Mr.
Schaller was President of the Apparel Fabrics Division of WestPoint Stevens,
Inc. (a textile manufacturer).
William B. Towne joined the Company in June 1990 as Vice President and
Chief Financial Officer. He also served as Treasurer from June 1990 to
November 1990, and in March 1991, Mr. Towne was elected an Executive Vice
President. Prior to joining the Company, Mr. Towne served with Tambrands,
Ltd. (a manufacturer of consumer products), as Chief Financial Officer and
Director of Finance-Europe from 1989 to June 1990.
Fred D. Matheson joined the Company in October 1990 as Executive Vice
President--Manufacturing. Prior thereto, Mr. Matheson served with Fieldcrest
Cannon Inc. (a manufacturer of consumer textiles and consumer products), as
Executive Vice President.
Richard Pactor joined the Company in December 1988 as Executive Vice
President--Product Development, and was named President of the Forstmann
International division in July 1992.
Peter Roaman joined the Company in June 1989 as Vice President--
Womenswear and was elected Senior Vice President--Marketing in December 1990
and Executive Vice President--Marketing and Styling in July 1991.
Jane S. Pollack joined the Company in May 1993 as Vice President and
General Counsel and was elected Secretary in September 1993. Prior thereto,
Ms. Pollack was Associate General Counsel and Assistant Secretary of Athlone
Industries, Inc. (a manufacturer of specialty steels and consumer products).
Rodney J. Peckham was elected a Vice President of the Company in January
1991 and Treasurer in March 1992. From August 1986 until he became
Treasurer, Mr. Peckham was Corporate Controller, and from December 1992 to
September 1993 he also served as Secretary.
Gary E. Schafer was elected Vice President and Corporate Controller of
the Company in March 1992. In 1990, when Mr. Schafer joined the Company, he
served as Director of Cost Accounting. Prior thereto, Mr. Schafer was Chief
Financial Officer of Racal-Milgo Skynetworks (a telecommunications company).
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ENVIRONMENTAL MATTERS. By the nature of its operations, the Company's
manufacturing facilities are subject to various federal, state and local
environmental laws and regulations, including the Clean Air Act, the Clean
Water Act, the Resource Conservation and Recovery Act and the Comprehensive
Environmental Response, Compensation and Liability Act. Although the Company
occasionally has been subject to proceedings and orders pertaining to
emissions into the environment, the Company believes that it is in
substantial compliance with existing environmental laws and regulations.
Pursuant to Georgia's Hazardous Site Response Act (the "Response Act"),
property owners in Georgia were required to notify the Environmental
Protection Division of the Georgia Department of Natural Resources (the
"GDNR") of known releases of regulated substances on their properties above
certain levels by March 22, 1994. Pursuant to the Response Act, the Company
notified the GDNR of two releases at the Dublin facility, one relating to the
presence of trichloroethylene at the site, and one relating to another
constituent near the southern property boundary. Based upon the Company's
March 1994 notification, the GDNR has determined that a release exceeding a
reportable quantity has occurred at the site. As a result, the site has been
listed on the Georgia Hazardous Site Inventory ("HSI"), which currently
consists of 277 other sites. The Company has also recently notified the GDNR
of another possible release near the western property boundary of the Dublin
facility, asserting vigorously that this release should not be listed on the
HSI. This release was identified by the Company through the sampling
procedures in connection with the Company's environmental remediation plan
submitted to the GDNR in May 1992. The GDNR intends to evaluate the sites on
the HSI to determine which sites need corrective action. The GDNR has
finalized procedures for determining corrective action levels under the
Response Act. In January 1995, the GDNR notified the Company that, pursuant
to the Response Act, the Company is required to submit a compliance status
report and compliance status certification with respect to the site by June
30, 1995. The GDNR has also informed the Company of its obligation to
identify all other potentially responsible parties, and, in compliance
therewith, the Company plans to identify the prior owner and operator of the
Dublin facility.
The Company believes that, based on its review and after meetings with
counsel and engineering specialists, no material liability, in excess of
amounts already recorded by the Company will result from this matter.
However, depending upon how the GDNR will implement its new corrective action
regulations, the remedial expenditures required, in the aggregate, could be
material.
Financing Arrangements
----------------------
The Company's long-term debt as of October 30, 1994, consists of
indebtedness outstanding under the GECC Facility, the Senior Secured Notes,
the CIT Equipment Facility (hereinafter defined), the capital lease
obligations and the Subordinated Notes. (See Note 7 to the Financial
Statements included in Item 8. of this Annual Report on Form 10-K.)
GECC FACILITY. The Company entered into the GECC Facility as of October
30, 1992, for borrowings of up to $100 million. Subject to certain borrowing
base limitations, the GECC Facility provides for a maximum available non-
amortizing Revolving Line of Credit (which includes a $7.5 million letter of
credit facility) of $85 million and had a term loan of $15 million (the
"Original Term Loan"). On April 5, 1993, the Company issued the Senior
Secured Notes in the aggregate principal amount of $20 million and prepaid in
full the Original Term Loan. In January 1995, the GECC Facility was amended,
subject to loan availability to provide the $7.5 million Term Loan. In
January 1995, the Company borrowed $7.5 million under the Term Loan, the
proceeds of which were used to repay a portion of outstanding borrowings
under the Revolving Line of Credit.
SENIOR SECURED NOTES. On April 5, 1993, the Company issued an aggregate
of $20 million Senior Secured Notes. On March 30, 1994, the Company issued
the Additional Senior Secured Notes in the aggregate principal amount of $10
million. The proceeds from the sale of the Senior Secured Notes were used to
repay the Original Term Loan and to reduce outstanding borrowings under the
Revolving Line of Credit.
CIT EQUIPMENT FACILITY. On December 27, 1991, the Company entered into a
loan and security agreement (as amended, the "CIT Equipment Facility") with
the CIT Group/Equipment Financing, Inc. ("CIT") to finance the acquisition
of, and to refinance borrowings incurred to acquire, various textile
machinery and equipment. CIT has made purchase money loans to the Company
pursuant to the CIT Equipment Facility in the principal amount of
10
<PAGE>
$656,123 at an interest rate of 8.61% per annum on December 27, 1991, of
$1,262,595 at an interest rate of 7.86% per annum on September 15, 1992, of
$2,584,230 at an interest rate of 8.55% per annum on December 31, 1992, of
$1,209,995 at an interest rate of 7.75% per annum on August 2, 1993, of
$1,988,150 at an interest rate of 7.45% per annum on August 24, 1993, of
$1,653,137 at an interest rate of 7.36% per annum on October 22, 1993 and of
$1,113,005 at an interest rate of 7.74% per annum on December 29, 1993. The
Company is obligated to provide CIT with irrevocable letters of credit in an
amount equal to 25% of the original principal amount of each loan incurred
after August 1, 1993 through December 31, 1993, which requirement expires on
or after January 31, 1996. Subsequent to Fiscal Year 1994 the CIT Equipment
Facility was amended to provide for up to two additional loans not to exceed
an aggregate of $5.0 million of additional equipment financing equal to 80%
of the acquisition cost of machinery and equipment, net of all taxes,
freight, installation and certain other fees, costs and expenses. The
commitment period ends on July 31, 1995. On December 22, 1994, the Company
borrowed $2.5 million at an interest rate of 10.58%. The interest rate on the
remaining loan available under the CIT Equipment Facility is fixed at the
Treasury Rate (as defined) plus 287 basis points. Each loan under the CIT
Equipment Facility is payable in 60 monthly installments. The Company may
prepay all, but not less than all, of its loans under the CIT Equipment
Facility after July 1995, at a premium of 400 basis points, declining ratably
over the remaining loan term.
SUBORDINATED INDEBTEDNESS. In April 1989, through an underwritten public
offering, the Company sold $100 million of the Subordinated Notes which
currently have an interest rate until maturity of 14-3/4%. As of January 1,
1995, an aggregate of $100,000,000 face amount of the Subordinated Notes
were outstanding - an aggregate of $43,365,100 of which are owned by the
Company. The Subordinated Notes are subordinated to all existing senior
indebtedness of the Company (which currently consist of the loans under the
GECC Facility, the Senior Secured Notes and the CIT Equipment Facility) and
any extensions, modifications or refinancings thereof. The Subordinated
Notes Indenture limits, subject to certain financial tests, the incurrence of
additional indebtedness and prohibits the incurrence of any indebtedness
senior to the Subordinated Notes that is subordinated to the Company's then
existing senior indebtedness. The Subordinated Notes Indenture contains
restrictions relating to payment of dividends, the repurchase of capital
stock and the making of certain other restricted payments, certain
transactions with affiliates and subsidiaries, and certain mergers,
consolidations and sales of assets. In addition, the Subordinated Notes
Indenture requires the Company to make an offer to purchase (1) a portion of
the Subordinated Notes if (a) the Company's adjusted tangible net worth (as
defined) falls below $15 million at the end of any two consecutive fiscal
quarters or (b) the Company consummates an asset sale (as defined) at certain
times or (2) all of the Subordinated Notes if a change of control (as
defined) occurs. In connection with the Exchange Offer, the Company
acquired, and did not retire or cancel, $46,240,100 aggregate face amount of
the Subordinate Notes. The Company used $2,875,000 of such Subordinated
Notes to satisfy the January 31, 1993 mandatory redemption required in the
Subordinated Notes Indenture. The Company is required to redeem on April 15,
1998, $50.0 million of the aggregate face amount of the Subordinated Notes at
a redemption price equal to par, plus accrued interest to the redemption
date. The remaining Subordinated Notes are due on April 15, 1999. The
Company may use the remaining $43,365,100 of the Subordinated Notes acquired
in the Exchange Offer to satisfy partially the April 15, 1998 mandatory
redemption required in the Subordinated Notes Indenture.
11
<PAGE>
Item 2. PROPERTIES
----------
Information regarding the Company's manufacturing facilities, all of
which are owned, is as follows:
<TABLE>
<CAPTION>
Approximate
Square Feet of
Building Acreage
-------- --------------
<S> <C> <C>
Dublin Plant 363,000 295
Dublin, Georgia
Nathaniel Plant 313,000 *
Dublin, Georgia
Milledgeville Plant 580,000 141
Milledgeville, Georgia
Louisville Plant 153,000 393
Louisville, Georgia
Tifton Plant 244,000 99
Tifton, Georgia
</TABLE>
* The Nathaniel plant adjoins the Dublin plant and is located on the same
property.
The Company owns a 24,000 square foot office building adjoining its
Dublin plant, which is used for administrative offices.
The Company leases approximately 29,470 square feet of office space at
1185 Avenue of the Americas, New York City (the "1185 Lease"), for its
principal executives offices, its styling, sales and marketing operations and
its Forstmann International division. Such lease will expire in October 1996
and the Company believes it has adequate time to obtain suitable premises
elsewhere.
The Company also leases storage facilities in Georgia and a regional
sales office in Dallas, Texas, primarily on a short-term basis.
The Company believes that its facilities are adequate to serve its
present needs and, with its planned capital expenditures, allow for expanded
future production. Substantially all of the Company's properties, plants and
equipment are encumbered by security interests under the GECC Facility and
the Senior Secured Notes Indenture. See "Business -- Financing Arrangements"
in Item 1 of this Annual Report on Form 10-K.
Item 3. LEGAL PROCEEDINGS
-----------------
The Company is a party to legal actions arising out of the ordinary
course of business. The Company has no material pending legal proceedings.
Dissenters' Proceeding
----------------------
As required under Georgia Statute O.C.G.A. (S)14-2-1330, the Company
commenced, on July 10, 1992, a civil action against: Resolution Trust
Corporation as receiver for Columbia Savings & Loan Association, F.A., (the
12
<PAGE>
"RTC"); James E. Kjorlien; Gary M. Smith; Grace Brothers, Ltd.; The Henley
Group; Randall D. Smith, Jeffrey A. Smith and Russell B. Smith, as Trustees
for Lake Trust dtd 9/4/91; (the Non-RTC defendants) and the record owners of
the shares of the Non-RTC defendants (the "Dissenters' Proceeding"). The RTC
and Non-RTC defendants were record owners or beneficial holders of an
aggregate of 1,473,562 shares of the Company's then existing voting and non-
voting common stock (the "Pre-Merger Stock") who dissented from the Merger.
Under Georgia law, holders of the outstanding shares of Pre-Merger Stock who
were deemed to have dissented from the Merger became entitled to payment of
the "fair value" of their Pre-Merger Stock, determined as of a time
immediately before consummation of the Merger plus interest on that amount
from the date of the Merger.
In September 1994, the Company settled the claims of the RTC in exchange
for payment by the Company of $475,000 and the issuance of 30,000 shares of
the Company's common stock. In December 1994, in settlement of the remaining
claims, the Company paid the Non-RTC defendants $365,000. The action has
been dismissed and no claims remain pending in the Dissenters' Proceeding.
Item 4. SUBMISSION OF MATTERS TO A
VOTE OF SECURITY HOLDERS
--------------------------
During the fourth quarter of Fiscal Year 1994, no matters were submitted
by the Company to a vote of its shareholders.
13
<PAGE>
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
-------------------------------------
The Company's Common Stock is traded on the NASDAQ National Market System
("NASDAQ-NMS"), the automated quotation system of The National Association of
Securities Dealers, Inc. (the "NASD") under the symbol "FSTM".
The following table sets forth the high and low sales prices for each
quarterly fiscal period of the Common Stock on the NASDAQ-NMS, as reported by
the NASD. These quotations represent prices between dealers, do not include
retail markup, markdown or commission and may not necessarily represent
actual transactions.
<TABLE>
<CAPTION>
High Sales Price Low Sales Price
---------------- ---------------
<S> <C> <C>
Fiscal Year 1993
----------------
1st Fiscal Quarter
(November 2, 1992 through
January 31, 1993) $ 9-1/4 $ 5-1/2
2nd Fiscal Quarter
(February 1 through
May 2) 9-1/4 7
3rd Fiscal Quarter
(May 3 through
August 1) 9-1/4 7-1/4
4th Fiscal Quarter
(August 2 through
October 31) 11-1/2 8-1/4
Fiscal Year 1994
----------------
1st Fiscal Quarter
(November 1, 1993 through
January 30, 1994) 12 10-1/2
2nd Fiscal Quarter
(January 31 through
May 1) 12 9
3rd Fiscal Quarter
(May 2 through
July 31) 11-3/4 10-3/4
4th Fiscal Quarter
(August 1 through
October 30) 11-1/2 6-1/4
</TABLE>
At December 31, 1994, the Company had 49 record holders of its Common
Stock, including CEDE & Co., the nominee of Depositary Trust Company, that
held 2,719,088 shares of Common Stock as nominee for an unknown number of
beneficial holders.
14
<PAGE>
The Company has not paid, and has no present intention to pay in the
foreseeable future, any cash dividends in respect of its Common Stock. The GECC
Facility prohibits and the Senior Secured Notes Indenture and the Subordinated
Notes Indenture restrict the payment of cash dividends. The payment of future
cash dividends, if any, would be made only from assets legally available
therefor, and would generally depend on the Company's financial condition,
results of operations, current and anticipated capital requirements, plans for
expansion, if any, restrictions under its then existing credit and other debt
instruments and arrangements, and other factors deemed relevant by the Company's
Board of Directors, in its sole discretion.
15
<PAGE>
Item 6. SELECTED FINANCIAL DATA
-----------------------
Presented below are selected operating statement data for the Company for the
fiscal years ended October 30, 1994, October 31, 1993, November 1, 1992, October
27, 1991 and October 28, 1990. Also presented are selected balance sheet data
for the Company as of October 30, 1994, October 31, 1993, November 1, 1992,
October 27, 1991 and October 28, 1990. The selected financial data have been
derived from the audited financial statements of the Company, are not covered by
the report of the Company's independent public accountants and should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" in Item 7 of this Annual Report on Form 10-K and the
Company's financial statements (and the related notes and schedules thereto) in
Item 8 of this Annual Report on Form 10-K.
<TABLE>
<CAPTION>
FISCAL YEAR FISCAL YEAR FISCAL YEAR FISCAL YEAR FISCAL YEAR
ENDED ENDED ENDED ENDED ENDED
OCTOBER 30, OCTOBER 31, NOVEMBER 1, OCTOBER 27, OCTOBER 28,
1994 1993 1992 1991 1990
----------- ----------- ----------- ----------- -----------
OPERATING STATEMENT DATA(1): (amounts in thousands, except per share and share information)
<S> <C> <C> <C> <C> <C>
Net sales.......................................... $237,085 $233,365 $208,908 $194,622 $196,401
Gross profit....................................... 47,852 51,018 39,833 31,863 24,127
Operating income................................... 23,417 26,618/(2)/ 21,847 5,570/(2)/ 9,489
Income (loss) before income taxes and
extraordinary loss............................... 5,900 10,869 3,864 (15,584) (18,482)/(3)/
Income tax (provision) benefit..................... (2,331) (4,245) (5,690)/(4)/ 6,047 6,968
Income (loss) before extraordinary loss............ 3,569 6,624 (1,826) (9,537) (11,514)
Net income (loss).................................. 3,569 6,624 (3,005)/(5)/ (9,537) (11,514)
Income (loss) applicable to common shareholders.... 3,339 6,415 (3,245) (9,752) (16,107)
Per share and share information (pro forma as to
1992 and 1991)(6):
Income (loss) before extraordinary loss
applicable to common shareholders............. .60 1.15 .61 (1.08) /(7)/
Income (loss) applicable to common shareholders .60 1.15 .40 (1.08) /(7)/
Common shares outstanding...................... 5,592,022shs. 5,585,014shs. 5,585,014shs. 5,585,014shs. /(7)/
OTHER OPERATING DATA:
Income before interest, income taxes,
depreciation, amortization and loss from
abandoned property and other assets............... 37,066 37,946 32,583 26,271 20,422
Capital expenditures............................... 14,979 14,955 12,354 6,986 4,859
<CAPTION>
AS OF AS OF AS OF AS OF AS OF
OCTOBER 30, OCTOBER 31, NOVEMBER 1, OCTOBER 27, OCTOBER 28,
1994 1993 1992 1991 1990
----------- ----------- ----------- ----------- -----------
BALANCE SHEET DATA/(8)/: (amounts in thousands)
<S> <C> <C> <C> <C> <C>
Current assets..................................... $140,801 $130,172 $123,626 $112,519 $ 99,394
Property, plant and equipment, net of accumulated
depreciation and amortization.................... 79,479 76,521 92,231 89,974 98,496
Total assets....................................... 229,256 215,567 223,424 209,027 207,113
Long-term debt..................................... 155,597 136,038 115,705 156,593 151,636
Old Senior Preferred Stock......................... 0 0 0 0 31,817
Senior Preferred Stock, redeemable................. 2,425 2,195 4,930 4,690 0
Shareholders' equity (deficiency).................. 35,836 33,890 51,083 8,337 (14,095)
</TABLE>
- ----------
Notes to Operating Statement Data and Balance Sheet Data next page.
16
<PAGE>
(1) The year ended November 1, 1992 ("Fiscal Year 1992") consists of a 53
week period. The years ended October 30, 1994 ("Fiscal Year 1994"),
October 31, 1993 ("Fiscal Year 1993"), October 27, 1991 ("Fiscal Year
1991") and October 28, 1990 ("Fiscal Year 1990") consist of 52 week
periods. No cash dividends on the Common Stock were paid during any of
the foregoing periods.
(2) After taking into account a $9.2 million provision in Fiscal Year 1991
and a $1.0 million provision in Fiscal Year 1993 for a non-cash loss from
abandonment, disposal and impairment of machinery and equipment and other
assets to reflect their remaining future economic value.
(3) Includes $4.6 million debt restructuring and recapitalization expenses
incurred in connection with the 1990 Recapitalization.
(4) The Company recorded a net deferred income tax expense of $4.2 million
primarily to reflect previously recognized income tax benefits.
(5) After taking into account an extraordinary loss of $1.2 million, net of
income tax benefit, resulting from a debt refinancing.
(6) The per share and share information for Fiscal Year 1992 and Fiscal Year
1991 is presented on a pro forma basis to give effect to the transactions
described in Note 12 to the Financial Statements included in Item 8 of
this Annual Report on Form 10-K, as if such transactions occurred at the
beginning of Fiscal Year 1991 and as if such transactions were effected
as a recapitalization of the Company. The per share information for
Fiscal Year 1994 and 1993 is actual.
(7) As a result of the complexity of the 1990 Recapitalization, pro forma
information for Fiscal Year 1990 has not been included, since such
information would not provide a meaningful comparison to the subsequent
periods.
(8) The Company revalued its assets and liabilities to fair value as of the
beginning of Fiscal Year 1993 pursuant to the principles of quasi-
reorganization accounting as more fully described in Note 14 to the
Financial Statements included in Item 8 of this Annual Report on Form
10-K.
17
<PAGE>
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
---------------------------------------------------------------
Results of Operations
---------------------
The Fifty-Two Week Period Ended October 30, 1994 ("Fiscal Year 1994")
compared to the Fifty-Two Week Period ended October 31, 1993 ("Fiscal Year
1993")
Net sales for Fiscal Year 1994 were $237.1 million, an increase of less
than 2% from Fiscal Year 1993. Total yards of fabric sold decreased 1%
during Fiscal Year 1994. The increase in sales is attributable primarily to
an increase in the sale of menswear fabrics which the Company believes is the
result of focusing the menswear product line on specific market niches over
the last two years. A decline in the sale of womenswear fabrics somewhat
offset the increase in the sale of menswear fabrics. Womenswear fabric sales
declined due to an over-ordering of certain wool fabrics by the Company's
customers in Fiscal Year 1993 which was somewhat offset by a shift from
woolen to worsted fabrics due to changing fashion trends in Fiscal Year 1994.
Excluding government sales ($2.9 million in Fiscal Year 1994 and $0.1 million
in Fiscal Year 1993) which traditionally yield lower gross profit margins,
net sales for Fiscal Year 1994 increased less than 0.5% from Fiscal Year
1993.
Cost of goods sold increased to $189.2 million from $182.3 million in
Fiscal Year 1993. Gross profit decreased 6.2% in Fiscal Year 1994 to $47.9
million, and gross profit margin for Fiscal Year 1994 was 20.2% compared to
21.9% for Fiscal Year 1993. Production of certain fabrics and related yarns,
particularly during the fourth quarter of Fiscal Year 1994, was slowed in
response to the decline in womenswear fabrics. The lowering of production,
its resultant lower absorption of manufacturing costs, as well as an
unusually high increase in healthcare claims and workers' compensation
expenses, adversely effected gross profit for the year. Fiscal Year 1994 and
Fiscal Year 1993 include the effects of the Company's Quasi Reorganization
(hereinafter defined) which was effected as of the beginning of Fiscal Year
1993.
Selling, general and administrative expenses, excluding the provision for
uncollectible accounts, increased 7.6% to $22.4 million in Fiscal Year 1994,
compared to $20.7 million in Fiscal Year 1993. Human resources related
expenses increased $0.3 million during Fiscal Year 1994 due to the hiring of
personnel for marketing and in-house legal counsel and the lowering of the
assumed discount rate used to measure the accumulated benefit obligation for
the Company's hourly and salaried pension plans under SFAS No. 87,
"Employers' Accounting for Pensions," as of the end of Fiscal Year 1993. The
increase in human resources related expenses was partially offset by a $1.0
million decline in incentive compensation expense in Fiscal Year 1994. Due
to the modernization and computerization of the Company's styling, sales and
marketing operations in New York, coupled with other computer equipment
upgrades, facility, depreciation and amortization expenses were higher in
Fiscal Year 1994 than in the Fiscal Year 1993. During the fourth quarter of
Fiscal Year 1994, approximately $0.3 million in costs associated with
potential acquisitions were expensed as such potential acquisitions did not
materialize.
The provision for uncollectible accounts declined from $2.7 million in
Fiscal Year 1993 to $2.2 million in Fiscal Year 1994. The provision for
uncollectible accounts in Fiscal Year 1993 includes the effect of several of
the Company's customers filing for protection under the Federal Bankruptcy
Code, which customers, at the time of such filings, owed the Company an
aggregate of $2.5 million.
18
<PAGE>
Interest expense for Fiscal Year 1994 was $17.5 million compared to $15.7
million in Fiscal Year 1993. The $1.8 million increase in interest expense
in Fiscal Year 1994 primarily was due to higher interest rates and additional
borrowings under the Company's various financing facilities. Increases in
the Federal Reserve discount rates during Fiscal Year 1994 have resulted in
the Company's interest rates applicable to borrowings under the Revolving
Line of Credit and Senior Secured Notes increasing by approximately 1.5% per
annum since the beginning of Fiscal Year 1994.
In Fiscal Year 1994, the Company recorded an income tax provision of $2.3
million. The Company's effective tax rate was 39.5% on income before taxes
for Fiscal Year 1994, while the effective tax rate for Fiscal Year 1993 was
38.5%.
As a result of the foregoing, the Company's net income was $3.6 million
in Fiscal Year 1994 compared to net income of $6.6 million in Fiscal Year
1993.
Preferred stock in-kind dividends and accretion to redemption value was
$230,000 in Fiscal Year 1994 compared to $209,000 in Fiscal Year 1993. As a
result of the foregoing, the Company's income applicable to common
shareholders was $3.3 million in Fiscal Year 1994, compared to income
applicable to common shareholders of $6.4 million in Fiscal Year 1993.
In light of the Federal Reserve discount rates increasing during Fiscal
Year 1994, which effect is expected to continue during fiscal year 1995, and
the Company's higher borrowings under its floating interest rate debt
facilities, the Company expects interest expense in fiscal year 1995 to be
significantly higher than in Fiscal Year 1994. As further discussed in
Liquidity and Capital Resources, during fiscal year 1995, the Company is
-------------------------------
reassessing its capital investment program and is more closely monitoring its
inventory levels. Further, the Company expects wool costs to increase
significantly in fiscal year 1995 due to recent increases which the Company
began to realize during the fourth quarter of Fiscal Year 1994 and a drought
in Australia which has resulted in a reduction in sheep herds.
The Company's sales order backlog at January 1, 1995 was $61.3 million,
$12.0 million less than the comparable period one year ago. Excluding
government orders, which yield lower gross profit margins, the backlog at
January 1, 1995 was $8.5 million less than the comparable period in the prior
year. The decline in the backlog, excluding government orders, is
attributable to a decline in orders for women's outerwear fabrics, which was
somewhat offset by increases in orders for menswear, specialty, converted and
Carpini/TM/ USA fabrics. The Company believes that the decline in orders for
women's outerwear is due to the exceptionally warm temperatures registered
across the country in the fall and early winter. Although the Company
expects the effects of the warmer temperatures, which depressed retail sales
of women's coats, to somewhat reverse itself during fiscal year 1995, there
can be no assurance that such market inprovement will occur. Sales of
women's outerwear fabrics represented approximately 22% of net sales for
Fiscal Year 1994.
19
<PAGE>
The Fifty-Two Week Period Ended October 31, 1993 ("Fiscal Year 1993")
compared to the Fifty-Three Week Period Ended November 1, 1992 ("Fiscal Year
1992")
The Company, with approval from its Board of Directors, revalued its
assets and liabilities to fair value as of the beginning of Fiscal Year 1993
pursuant to the principles of quasi-reorganization accounting (the "Quasi
Reorganization"). The fair value adjustments were revised in the fourth
quarter of Fiscal Year 1993 to adjust certain amounts initially recorded,
which had been based upon estimates (principally the write-down of property,
plant and equipment and the accrual of costs to effect the Quasi
Reorganization). The Quasi Reorganization directly affected cost of goods
sold, interest expense, income tax provision and preferred stock in-kind
dividends and accretion for Fiscal Year 1993 and will affect future reported
results of operations. As a result of the fair value adjustments made in the
Quasi Reorganization (a) the value of inventories was reduced, which affects
cost of goods sold to the extent such inventories are utilized, (b) the value
of property, plant and equipment was reduced, which affects cost of goods
sold as the related property is depreciated, (c) the value of the hourly
pension plan's net assets was eliminated, which affects cost of goods sold to
the extent such value would have been amortized, (d) an accrual for
unfavorable (commitment price exceeded fair value) wool purchase commitments
was recorded, which subsequently reduced cost of goods sold in the periods
wool was delivered and subsequently sold as finished product, (e) interest
expense was decreased as a result of the reduction of deferred financing
costs and the valuation of long-term debt, (f) income tax provision was
increased due to the effect of the above items, and (g) preferred stock in-
kind dividends and accretion was reduced as a result of the decrease in value
of the preferred stock. As a result of the Quasi Reorganization, the Company
estimates that earnings per share during each of the next five years will be
$0.18 higher, principally due to lower depreciation and interest charges.
Additionally, the Company recognized a one-time benefit to cost of goods sold
during Fiscal Year 1993 of $3.0 million ($1.8 million net of income taxes or
$0.33 per share) related to the reversal of unfavorable wool purchase
commitments recorded as a liability in connection with the Quasi
Reorganization.
Since Fiscal Year 1993 comprises fifty-two weeks and Fiscal Year 1992
comprises fifty-three weeks, and because of the effects of the Quasi
Reorganization with respect to Fiscal Year 1993, the results for the
respective fiscal years are not directly comparable. Because the Company's
customers place orders based on their calendar month needs, the Company
believes that net sales, unlike certain manufacturing and selling, general
and administrative expenses, were not significantly impacted by one less week
in Fiscal Year 1993 and were not affected by the Quasi Reorganization.
Net sales for Fiscal Year 1993 were $233.4 million, an increase of 11.7%
from Fiscal Year 1992. Total yards of fabric sold increased 12.5% during
Fiscal Year 1993, which outpaced net sales growth, as volume continued to
grow fastest in styles with per yard selling prices below last year's average
per yard selling price. Excluding government sales (minimal during Fiscal
Year 1993) which traditionally yield selling prices per yard in excess of the
Company's average price per yard, but lower gross profit margins, net sales
for Fiscal Year 1993 increased 14.0% from Fiscal Year 1992. Such increase
was primarily attributable to an increase in womenswear (including outerwear)
fabric sales, which comprised approximately two-thirds of net sales in both
Fiscal Year 1993 and Fiscal Year 1992.
Cost of goods sold increased to $182.3 million in Fiscal Year 1993 from
$169.1 million in Fiscal Year 1992. Gross profit increased 28.1% in Fiscal
Year 1993 to $51.0 million from $39.8 million in Fiscal Year
20
<PAGE>
1992, and gross profit margin for Fiscal Year 1993 was 21.9%, compared to
19.1% for Fiscal Year 1992. This improvement was primarily attributable to
the effects of the Quasi Reorganization, strategic raw wool purchasing,
improved manufacturing efficiencies and an improved product mix.
Selling, general and administrative expenses, excluding the provision for
uncollectible accounts, increased 23.5% to $20.7 million in Fiscal Year 1993,
compared to $16.8 million in Fiscal Year 1992. Such increase was due, in
part, to the hiring of additional marketing and management information
services personnel. In addition, the formation of Forstmann International, a
licensing, technical information and consulting arrangement with Carpini (see
Note 11 to the Financial Statements included in Item 8 of this Annual Report
on Form 10-K), an exclusive licensing arrangement for fire retardant for wool
fabrics and the formation of a converting function responsible for
coordinating the dyeing and finishing of greige fabrics purchased throughout
the world contributed to the increase in Fiscal Year 1993 in selling, general
and administrative expenses. Expenses incurred in connection with these
endeavors during Fiscal Year 1992 were negligible. Legal and investor
relation costs incurred during Fiscal 1993 increased as a result of the
Company's initial public offering consummated during the second quarter of
Fiscal Year 1992. In addition, the Company's incentive compensation expense
increased during Fiscal Year 1993 as a result of both the Company's improved
financial performance and the accrual of estimated liabilities related to the
equity referenced deferred incentive awards granted in March 1992 to certain
key executives of the Company.
The provision for uncollectible accounts increased to $2.7 million in
Fiscal Year 1993, compared to $1.2 million in Fiscal Year 1992. Such
provision (and the allowance for uncollectible accounts) is based on a
specific review and assessment of the collectibility of aged balances
included in accounts receivable and a general assessment of the
collectibility of remaining accounts based, in part, on historical trends and
the state of the economy and its effect on the Company's customers. Most of
the Company's customers are in apparel industries, which industries generally
have experienced an economic downturn. Included in the provision for
uncollectible accounts is the Company's loss of approximately $0.4 million on
the sale of receivables of Leslie Fay (which filed a petition for
reorganization on April 5, 1993) recorded through April 5, 1993 and the
write-off of $0.3 million related to the settlement of a long-term note
receivable.
The loss from disposal and impairment of machinery and equipment of $1.0
million during Fiscal Year 1993 related to the Company's disposal and write-
down of idle equipment to reflect its remaining future economic value.
Interest expense for Fiscal Year 1993 was $15.7 million. The $2.2
million decrease in interest expense in Fiscal Year 1993 compared to Fiscal
Year 1992 primarily was due to lower interest rates on the Company's
borrowings under the GECC Facility (hereinafter defined) and the Senior
Secured Floating Rate Notes due October 30, 1997 initially issued on April 5,
1993 in an aggregate principal amount of $20 million (the "Original Senior
Secured Notes") compared to the interest rates on borrowings under a prior
revolving credit facility. Borrowings under the GECC Facility and the
Original Senior Secured Notes bear interest, at the Company's option at a
floating rate (which is based on the prime lending rate, as defined) or fixed
rate (which is based on LIBOR), payable monthly as to the Revolving Line of
Credit and quarterly as to the Original Senior Secured Notes. The Company
benefited favorably from the use of the fixed interest rate option during
Fiscal Year 1993. The fixed interest rate was approximately 1.0% less than
the prime base interest rate during Fiscal Year 1993. Further, the Company
benefited more in Fiscal Year 1993 than in Fiscal Year 1992 from the
repurchase of $46.2 million face amount of Subordinated Notes in connection
with the consummation of the offer for up to $50 million aggregate face
amount of
21
<PAGE>
the Subordinated Notes (the "Exchange Offer") in March 1992. Interest
expense on increased wool purchases, to take strategic advantage of lower
wool prices, partially offset the overall decrease in interest expense.
In Fiscal Year 1993, the Company recognized an income tax provision of
$4.2 million on income before income taxes, while in Fiscal Year 1992, the
Company recognized an income tax provision of $5.7 million. Reference is
made to Note 9 to the 1994 Financial Statements for information concerning
such provisions.
As a result of the foregoing, the Company's income before extraordinary
loss was $6.6 million for Fiscal Year 1993, compared to a loss of $1.8
million for Fiscal Year 1992. Pro forma income before extraordinary loss for
Fiscal Year 1992 was $3.6 million, which gives effect to the 1992
Recapitalization transactions described in Note 14 to the Financial
Statements, as if such transactions occurred at the beginning of Fiscal Year
1992.
The Company's income applicable to common shareholders was $6.4 million
or $1.15 per share for Fiscal Year 1993, compared to a loss applicable to
common shareholders of $3.2 million or $0.58 per share for Fiscal Year 1992.
Included in Fiscal Year 1992's loss is a $1.2 million extraordinary loss, net
of a $0.7 million deferred income tax benefit, which resulted from the write-
off of unamortized deferred financing costs caused by the Company's debt
refinancing at the end of Fiscal Year 1992. Pro forma income before
extraordinary loss applicable to common shareholders for Fiscal Year 1992 was
$3.4 million or $0.61 per share.
Liquidity and Capital Resources
-------------------------------
The Company historically has financed its operations and investing
activities through a combination of borrowings, equipment leasing, and
internally generated funds. The Company's financing needs have arisen
principally in connection with modernization and expansion of the Company's
production capacity and with increased working capital needs that have
accompanied sales growth. During Fiscal Year 1994, additional borrowings
were needed to finance an increase in inventories and accounts receivable.
Inventories at October 30, 1994 were approximately equal to inventories at
October 31, 1993. However, during Fiscal Year 1994, inventories were higher
on average than in Fiscal Year 1993 as a result of an increase in raw
materials purchased to take advantage of favorable wool prices during the
first half of Fiscal Year 1994 and an increase in work-in-process inventories
due to the decline in womenswear woolen sales. Accounts receivable increased
at the end of Fiscal Year 1994 due to higher sales and the granting of
extended payment terms to customers, in response to competitive pressures in
certain markets.
The Company, as of October 30, 1992, entered into a loan agreement with
General Electric Capital Corporation (the "GECC Facility"), which, as
subsequently amended, includes a $7.5 million term loan (the "Term Loan") and
an $85.0 million revolving line of credit (the "Revolving Line of Credit")
(which includes a $7.5 million letter of credit facility). The Term Loan and
borrowings under the Revolving Line of Credit are subject to certain
borrowing base limitations and are due in October 1997.
The Company's cash requirements, including working capital and capital
expenditures during Fiscal Year 1994, were funded from the proceeds from
borrowings under the Revolving Line of Credit and the sale of $10 million of
additional Senior Secured Floating Rate Notes due October 30, 1997 (the
"Additional Senior Secured Notes," collectively, with the Original Senior
Secured Notes, the "Senior Secured Notes"). At October 30, 1994 the
aggregate amount of revolving loans and letters of credit outstanding under
the Revolving Line of Credit was approximately $61.7 million and loan
availability, in excess of the Company's outstanding borrowings and letters
of credit, was approximately $7.5 million.
22
<PAGE>
During Fiscal Year 1994, the Company and CIT Group/Equipment Financing,
Inc. amended its loan and security agreement (the "CIT Equipment Facility")
to increase the Company's permitted adjusted leverage ratio (the ratio of
total liabilities to tangible net worth) from 160% to 170% for the period
January 31, 1994 through October 30, 1994. The Company's adjusted leverage
ratio increased during Fiscal Year 1994 due in part to the effects of: (1)
the assumed discount rate assumption used to measure the accumulated benefit
obligation for the Company's pension plans under SFAS No. 87, "Employers'
Accounting for Pensions," being lowered from 8.75% to 7.0% at the end of
Fiscal Year 1993 which resulted in the recognition of a $1.9 million accrual
of additional pension liability in excess of accumulated benefit obligation
and a charge to shareholders' equity of $1.1 million, net of deferred income
taxes; (2) settling claims with the Company's dissenting shareholders as
discussed in Note 11 to the Financial Statements; and (3) the additional debt
the Company incurred to fund higher working capital needs and capital
expenditures. Absent the amendments to the CIT Equipment Facility, an
adjusted leverage ratio of more than 160% during the Company's second, third
or fourth quarters of Fiscal Year 1994 would have been an event of default
under the CIT Equipment Facility. In addition, such an event of default
would have triggered a cross default under the terms of the GECC Facility.
The lender under the GECC Facility has consented to the amendments to the CIT
Equipment Facility and acknowledged that no event of default under the GECC
Facility exists as a result of the events giving rise to such amendments.
Subsequent to Fiscal Year 1994 certain financial covenants under the GECC
Facility, the Indenture to the Senior Secured Notes and the CIT Equipment
Facility were further amended, in part to reflect the effect of rising
interest rates, final settlement of claims with the Company's remaining
dissenting shareholders as discussed in Note 11 to the Financial Statements
and the additional debt the Company incurred to fund higher working capital
needs and capital expenditures. Also, the GECC Facility was further amended
to provide the $7.5 million Term Loan and the CIT Equipment Facility was
amended to provide for up to $5.0 million of additional equipment financing.
On January 23, 1995, the Company borrowed $7.5 million under the Term Loan,
the proceeds of which were used to repay a portion of outstanding borrowings
under the Revolving Line of Credit. On December 22, 1994, the Company
borrowed $2.5 million under the CIT Equipment Facility at an interest rate of
10.58% payable in sixty equal monthly installments.
Capital additions, including capital lease obligations, for plant and
equipment were $15.0 million in Fiscal Year 1994. The Company expects
spending for capital expenditures, primarily machinery and equipment, in
fiscal year 1995 to be slightly less than Fiscal Year 1994. The Company has
completed approximately one-half of its $100 million capital investment
program which commenced in Fiscal Year 1992. In light of increasing interest
rates, as well as increased borrowings to fund its working capital needs, the
Company is reassessing the timing of its capital investment program. Capital
additions, including capital lease obligations, for plant and equipment were
$15.0 million in Fiscal Year 1993 and $12.4 million in Fiscal Year 1992.
The Company believes that cash generated from operations, borrowings
under the Revolving Line of Credit, and permitted operating and capital
leases will be sufficient to fund its fiscal year 1995 working capital and
capital expenditures requirements. After fiscal year 1995, additional
sources of financing will be needed to support expected working capital
needs, capital expenditures and maturities of its long-term debt facilities
which increase significantly in fiscal year 1996 and fiscal year 1997 (see
Note 7 to the Financial Statements). Due to the seasonal nature of the
Company's core woolen and worsted business, the Company's borrowings under
its Revolving Line of Credit tend to increase throughout each fiscal year
until the fourth quarter, when, at year-end, borrowings tend to be the
lowest.
23
<PAGE>
Net cash used by operating activities during Fiscal Year 1994 was $2.5
million, an increase of $2.9 million from Fiscal Year 1993. Historically,
during the first half of its fiscal year, the Company utilizes cash to fund
operations, whereas operations provide cash during the second half of the
Company's fiscal year. Net cash used in investing activities during Fiscal
Year 1994, primarily for capital expenditures, was $13.2 million, a decrease
of $3.7 million from Fiscal Year 1993. Such decrease was due to the Company
acquiring approximately $3.6 million of its capital investments under capital
leases in Fiscal Year 1994 as compared to none in Fiscal Year 1993. Cash
utilized to fund the Company's operations and investing activities during
Fiscal Year 1994 was obtained primarily from borrowings, net of repayments,
under the Revolving Line of Credit ($11.5 million), proceeds from the sale of
the Additional Senior Secured Notes ($9.7 million, net of underwriter's fee
of $0.3 million) and Equipment Facilities ($1.1 million).
Working capital at October 30, 1994 was $112.7 million, an increase of
$20.0 million from October 31, 1993. This increase resulted, in part, from a
$10.6 million increase in current assets, primarily attributable to an
increase in accounts receivable of $10.1 million. The increase in accounts
receivable is due to the Company granting extended payment terms for the sale
of certain products in response to competitive pressures in certain markets
and an increase in sales during the fourth quarter of Fiscal Year 1994 over
the fourth quarter of Fiscal Year 1993. Further, working capital increased
as a result of a $9.4 million temporary decrease in current liabilities,
primarily accounts payable, as a result of the timing of the Company's wool
purchases. Such increase in working capital was funded primarily from
borrowings under the Revolving Line of Credit and proceeds from the sale of
the Additional Senior Secured Notes.
Historically, the Company experiences an increase in accounts receivable
during the first three quarters of its fiscal year (primarily during the
second and third quarters), due to the seasonal increase in sales which
typically occurs in January through July of each year. This seasonal pattern
is influenced by the industry practice of providing coating fabric customers
with favorable billing terms (referred to as "dating"), which permit payment
60 days beyond July 1 for invoices billed in January through June. Accounts
receivable at October 30, 1994 included $8.2 million of receivables with
dating, an increase of $6.0 million compared to October 31, 1993. This
increase in dating is partially attributable to the competitive pressures and
the granting of extended credit terms referred to above.
Inventories remained relatively constant from October 31, 1993 to October
30, 1994. Due primarily to rising wool costs, the Company reduced raw
materials from $18.1 million at October 31, 1993 to $9.9 million at October
30, 1994. The decline in raw materials was offset by an $8.6 million
increase in work-in-process which is primarily due to the manufacturing of
certain fabric components to fill an existing government order and the
purchasing of greige cloth for converting. During the fourth quarter of
Fiscal Year 1994, work-in-process and finished goods inventories increased
$4.6 million, which was $1.0 million less than the fourth quarter of Fiscal
Year 1993. This decline was due to the Company curtailing production levels
during the fourth quarter of Fiscal Year 1994 in response to softness in
women's outerwear and sportswear markets.
The Company purchases a significant amount of its raw wool inventory from
Australia. Since all of the Company's forward purchase commitments for raw
wool are denominated in U.S. dollars, there is no actual currency exposure on
outstanding contracts. However, future changes in the relative exchange
rates between United States and Australian dollars can materially affect the
Company's results of operations for financial reporting purposes. Recently,
the cost of certain raw wool categories sourced from Australia has risen
significantly, and a drought in Australia which has resulted in a
24
<PAGE>
reduction in sheep herds indicates that such costs will continue to increase
in the near future. Based on the Company's forward purchase commitments and
wool market trends, the Company expects wool costs to increase significantly
in fiscal year 1995.
The Company's assumed discount rate (the "discount rate") used to measure
the accumulated benefit obligation for its hourly and salaried pension plans
under SFAS No. 87, "Employers' Accounting for Pensions," as of the end of
Fiscal Year 1994 was increased from 7.00% to 8.75% based on the composition
of the accumulated benefit obligation and current economic conditions. As of
the end of Fiscal Year 1994 the Company's hourly pension plan's accumulated
benefit obligation exceeded the plan assets at fair value by $0.5 million.
As of the end of Fiscal Year 1993, the discount rate was lowered from 8.75%
to 7.00% based on then prevailing economic conditions. The lowering of the
discount rate at the end of Fiscal Year 1993 caused the Company's hourly and
salaried pension plan's accumulated benefit obligation to exceed plan assets
at fair value by $1,466,000 and $118,000, respectively.
During Fiscal Year 1994, the Company reduced its accrued additional
pension liability in excess of accumulated benefit obligation from $1,900,000
to $943,000 and reduced the $1,101,000 excess of additional pension liability
over unrecognized prior service cost, net of $719,000 deferred tax benefit
charged to shareholders' equity at the end of Fiscal Year 1993 to $525,000,
net of $343,000 deferred tax benefit. Based primarily on the raising of the
discount rate, the Company estimates that net periodic pension cost for both
the hourly and salaried pension plans during fiscal year 1995 will be
approximately $0.4 million lower than in Fiscal Year 1994.
The Company does not believe that inflation has had a material impact on
its business. The Company expects wool costs to be significantly higher in
fiscal year 1995 than Fiscal Year 1994. Higher average borrowings to fund
the Company's working capital needs and capital investment program, coupled
with increases in the Federal Reserve discount rates during Fiscal Year 1994,
will cause the Company's interest expense and cash interest payments to
increase significantly during fiscal year 1995.
25
<PAGE>
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
-------------------------------------------
INDEX TO FINANCIAL STATEMENTS
Independent Auditors' Report ...................................... 27
Balance Sheets as of October 30, 1994
and October 31, 1993 .............................................. 28
Statements of Operations for the Fifty-Two
Weeks Ended October 30, 1994 and October 31, 1993
and the Fifty-Three Weeks Ended November 1, 1992................... 29
Statements of Cash Flows for the Fifty-Two
Weeks Ended October 30, 1994 and October 31, 1993
and the Fifty-Three Weeks Ended November 1, 1992................... 30
Statements of Changes in Shareholders' Equity
for the Fifty-Three Weeks Ended
November 1, 1992 and the Fifty-Two Weeks
Ended October 31, 1993 and October 30, 1994 ....................... 32
Notes to Financial Statements for the
Fifty-Two Weeks Ended October 30, 1994
and October 31, 1993, and the Fifty-Three Weeks
Ended November 1, 1992 ............................................ 33
26
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of
Forstmann & Company, Inc.:
We have audited the accompanying balance sheets of Forstmann & Company, Inc.
as of October 30, 1994 and October 31, 1993 and the related statements of
operations, shareholders' equity and cash flows for the fifty-two weeks ended
October 30, 1994 and October 31, 1993 and the fifty-three weeks ended
November 1, 1992. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Forstmann & Company, Inc. at October 30,
1994 and October 31, 1993 and the results of its operations and its cash
flows for the fifty-two weeks ended October 30, 1994 and October 31, 1993 and
the fifty-three weeks ended November 1, 1992, in conformity with generally
accepted accounting principles.
As discussed in Note 14 to the financial statements, the Company effected a
quasi reorganization as of November 2, 1992 (the beginning of fiscal year
1993) and revalued its assets and liabilities to fair value at such date and
during the fifty-two weeks ended October 30, 1994, the Company recorded
certain adjustments to the quasi reorganization related to unresolved
contingencies as of the effective date of the quasi reorganization. As
discussed in Note 9 to the financial statements, the Company changed its
method of accounting for income taxes to conform with Statement of Financial
Accounting Standards No. 109.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Atlanta, Georgia
December 8, 1994
(January 23, 1995 as to paragraph 2 of Note 7)
27
<PAGE>
FORSTMANN & COMPANY, INC.
- --------------------------------------------------------------------------------
BALANCE SHEETS
OCTOBER 30, 1994 AND OCTOBER 31, 1993
<TABLE>
<CAPTION>
NOTES 1994 1993
----- ------------ ------------
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash.......................................... $ 49,000 $ 53,000
Accounts receivable, net of allowance
of $2,100,000 and $2,195,000................ 57,089,000 48,816,000
Current income taxes receivable............... 9 1,500,000 -
Inventories................................... 3 76,881,000 76,936,000
Current deferred tax assets................... 9 4,339,000 2,869,000
Other current assets.......................... 943,000 1,498,000
------------ ------------
Total current assets........................ 140,801,000 130,172,000
Property, plant and equipment, net.............. 4 79,479,000 76,521,000
Other assets.................................... 5 8,976,000 8,874,000
------------ ------------
Total....................................... $229,256,000 $215,567,000
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt.......... 7 $ 2,714,000 $ 2,821,000
Accounts payable.............................. 13,153,000 24,580,000
Accrued liabilities........................... 6,11 12,272,000 10,110,000
------------ ------------
Total current liabilities................... 28,139,000 37,511,000
Long-term debt.................................. 7 155,597,000 136,038,000
Deferred tax liability.......................... 9 6,316,000 4,033,000
Accrued additional pension liability in
excess of accumulated benefit obligation...... 10 943,000 1,900,000
Commitments and contingencies................... 11
Redeemable preferred stock, $1.00 par value,
100,000 shares authorized, 54,110.8 and
51,487.7 shares issued and outstanding
(aggregate redemption and liquidation value
of $100 per share or $5,411,080 and
$5,148,774, respectively)..................... 8 2,425,000 2,195,000
SHAREHOLDERS' EQUITY: 10,11
Common stock, $.001 par value, 20,000,000
shares authorized, 5,618,800 and 5,585,014
shares issued and outstanding............... 5,619 5,585
Non-voting common stock, $.001 par value,
120,000 shares authorized, nil shares
issued and outstanding......................
Additional paid-in capital.................... 26,602,381 28,570,415
Excess of additional pension liability
over unrecognized prior service cost,
net of deferred income tax benefit of
$343,000 and $719,000....................... (526,000) (1,101,000)
Retained earnings since November 2, 1992...... 9,754,000 6,415,000
------------ ------------
Total shareholders' equity.................. 35,836,000 33,890,000
------------ ------------
Total....................................... $229,256,000 $215,567,000
============ ============
</TABLE>
See notes to financial statements.
28
<PAGE>
FORSTMANN & COMPANY, INC.
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
FOR THE FIFTY-TWO WEEKS ENDED OCTOBER 30, 1994
AND OCTOBER 31, 1993 AND THE FIFTY-THREE WEEKS ENDED NOVEMBER 1, 1992
<TABLE>
<CAPTION>
NOTES 1994 1993 1992
----- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net sales................................ $237,085,000 $233,365,000 $208,908,000
Cost of goods sold....................... 189,233,000 182,347,000 169,075,000
------------ ------------ ------------
Gross profit............................. 47,852,000 51,018,000 39,833,000
Selling, general and administrative
expenses............................... 22,377,000 20,723,000 16,780,000
Provision for uncollectible accounts
and notes receivable................... 2,167,000 2,714,000 1,206,000
Gain (loss) from abandonment, disposal
and impairment of machinery and
equipment.............................. 4 109,000 (963,000) -
------------ ------------ ------------
Operating income......................... 23,417,000 26,618,000 21,847,000
Interest expense......................... 17,517,000 15,749,000 17,983,000
------------ ------------ ------------
Income before income taxes and
extraordinary loss..................... 5,900,000 10,869,000 3,864,000
Income tax provision..................... 9 2,331,000 4,245,000 5,690,000
------------ ------------ ------------
Income (loss) before extraordinary loss.. 3,569,000 6,624,000 (1,826,000)
Extraordinary loss from debt
refinancing, net of $0.7 million
income tax benefit..................... 7 - - (1,179,000)
------------ ------------ ------------
Net income (loss)........................ 3,569,000 6,624,000 (3,005,000)
Preferred stock in-kind dividends
and accretion to redemption
value.................................. 8 (230,000) (209,000) (240,000)
------------ ------------ ------------
Income (loss) applicable to common
shareholders........................... $ 3,339,000 $ 6,415,000 $ (3,245,000)
============ ============ ============
Per share and share information (pro
forma as to 1992): 12
Income before extraordinary loss
applicable to common
shareholders....................... $.60 $ 1.15 $.61
Extraordinary loss................... - - ( .21)
------------ ------------ ------------
Income applicable to common
shareholders....................... $.60 $ 1.15 $.40
============ ============ ============
Weighted average common shares
outstanding........................ 5,592,022 5,585,014 5,585,014
============ ============ ============
</TABLE>
See notes to financial statements.
29
<PAGE>
FORSTMANN & COMPANY, INC.
- --------------------------------------------------------------------------------
STATEMENTS OF CASH FLOWS
FOR THE FIFTY-TWO WEEKS ENDED OCTOBER 30, 1994
AND OCTOBER 31, 1993 AND THE FIFTY-THREE WEEKS
ENDED NOVEMBER 1, 1992
<TABLE>
<CAPTION>
1994 1993 1992
------------ ------------ ------------
<S> <C> <C> <C>
Net income (loss)............................... $ 3,569,000 $ 6,624,000 $ (3,005,000)
------------ ------------ ------------
Adjustments to reconcile net income (loss)
to net cash provided (used) by
operating activities:
Depreciation and amortization................ 13,942,000 10,347,000 12,476,000
Income tax provision......................... 2,331,000 4,245,000 5,782,000
Income tax payments.......................... (3,429,000) (1,075,000) (335,000)
Deferred interest payable.................... - - 3,837,000
Provision for uncollectible accounts
and notes receivable........................ 2,167,000 2,714,000 1,206,000
Loss (gain) from abandonment, disposal
and impairment of machinery and
equipment and other assets.................. (109,000) 963,000 7,000
Foreign currency transaction gain............ (10,000) (80,000) -
Changes in current assets and current
liabilities, exclusive of quasi-
reorganization adjustments:
Accounts receivable........................ (10,071,000) (6,535,000) (2,456,000)
Inventories................................ 55,000 (13,776,000) (9,035,000)
Other current assets....................... 102,000 (101,000) (909,000)
Accounts payable........................... (11,427,000) 4,116,000 6,451,000
Accrued liabilities........................ 1,019,000 (4,044,000) (3,782,000)
Investment in notes receivable, net.......... 161,000 (131,000) (786,000)
Deferred financing costs..................... (821,000) (2,898,000) (3,001,000)
Extraordinary loss from debt
refinancing, net of tax benefit............. - - 1,179,000
------------ ------------ ------------
Total adjustments............................... (6,090,000) (6,255,000) 10,634,000
------------ ------------ ------------
Net cash provided (used) by
operating activities....................... (2,521,000) 369,000 7,629,000
------------ ------------ ------------
Cash flows used in investing activities:
Investment in property, plant and
equipment.................................... (11,338,000) (14,955,000) (11,909,000)
Investment in computer information systems.... (2,054,000) (2,217,000) (2,464,000)
Net proceeds from disposal of machinery
and equipment................................ 185,000 277,000 54,000
------------ ------------ ------------
Net cash used by investing activities ...... (13,207,000) (16,895,000) (14,319,000)
------------ ------------ ------------
Cash flows from financing activities:
Net borrowings (repayments) under Credit
Facilities................................... 11,478,000 (9,268,000) 3,212,000
Proceeds from the Original Term Loan.......... - 15,000,000 -
Repayment of the Original Term Loan........... - (15,000,000) -
Proceeds from sales of Senior Secured Notes... 10,000,000 20,000,000 -
Borrowings under the CIT Equipment Facility... 1,113,000 7,436,000 2,007,000
Repayment of other financing arrangements..... (6,090,000) (1,641,000) (1,370,000)
Incentive stock options exercised............. 26,000 - -
Cash paid in connection with Dissenters'
Proceeding................................... (803,000) - -
Sale of common stock to majority
shareholder.................................. - - 3,713,000
Cash paid in connection with Exchange
Offer........................................ - - (21,136,000)
Net proceeds from Public Offering............. - - 20,177,000
------------ ------------ ------------
Net cash provided by
financing activities...................... 15,724,000 16,527,000 6,603,000
------------ ------------ ------------
</TABLE>
30
<PAGE>
FORSTMANN & COMPANY, INC.
- --------------------------------------------------------------------------------
STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE FIFTY-TWO WEEKS ENDED OCTOBER 30, 1994
AND OCTOBER 31, 1993 AND THE FIFTY-THREE WEEKS
ENDED NOVEMBER 1, 1992
<TABLE>
<CAPTION>
1994 1993 1992
------------ ------------ ------------
<S> <C> <C> <C>
Net increase (decrease) in cash................. (4,000) 1,000 (87,000)
Cash at beginning of period..................... 53,000 $ 52,000 $ 139,000
------------ ------------ ------------
Cash at end of period........................... $ 49,000 $ 53,000 $ 52,000
============ ============ ============
Supplemental disclosure of cash flow
information:
Cash paid during the period for interest..... $ 17,316,000 $ 16,046,000 $ 12,606,000
============ ============ ============
Cash paid during the period for
income taxes................................ $ 3,429,000 $ 1,075,000 $ 335,000
============ ============ ============
Supplemental schedule for non-cash
investing and financing activities:
Capital lease obligations incurred........... $ 3,641,000 $ - $ 445,000
============ ============ ============
Preferred stock in-kind dividends and
accretion to redemption value............... $ 230,000 $ 209,000 $ 240,000
============ ============ ============
Supplemental schedule of changes in
current assets and current liabilities:
Accounts receivable trade, net:
(Increase) from operations.................. $(10,071,000) $ (6,535,000) $ (2,456,000)
Provision for uncollectible accounts........ 1,798,000 2,104,000 1,206,000
------------ ------------ ------------
Net (increase)............................. $ (8,273,000) $ (4,431,000) $ (1,250,000)
============ ============ ============
Inventories:
(Increase) from operations.................. $ (235,000) $(13,441,000) $ (8,333,000)
(Decrease) increase in market
reserves................................... 290,000 (335,000) (702,000)
Quasi-reorganization adjustment............. - 14,781,000 -
------------ ------------ ------------
Net decrease (increase).................... $ 55,000 $ 1,005,000 $ (9,035,000)
============ ============ ============
Accrued liabilities:
Increase (decrease) from operations......... $ 1,019,000 $ (4,044,000) $ (3,782,000)
Quasi-reorganization adjustments............ 1,172,000 4,048,000 -
------------ ------------ ------------
Net increase (decrease).................... $ 2,191,000 $ 4,000 $ (3,782,000)
============ ============ ============
</TABLE>
See notes to financial statements.
31
<PAGE>
FORSTMANN & COMPANY, INC.
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE FIFTY-THREE WEEKS ENDED NOVEMBER 1, 1992 AND
THE FIFTY-TWO WEEKS ENDED OCTOBER 31, 1993 AND OCTOBER 30, 1994
<TABLE>
<CAPTION>
Pension
Common Stock Liability
----------------- Additional Over Prior Retained Total
Non- Paid-In Service (Deficit) Shareholders'
Voting Voting Capital Cost Earnings Equity
-------- ------- ------------- ------------ ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Balance, October 27,
1991.................. $ 4,857 $ 112 $ 42,179,031 $ - $(33,847,000) $ 8,337,000
1992 Recapitalization:
Reverse Stock Split... (4,856) (112) 4,968 - - -
Exchange Offer........ 2,421 - 22,098,579 - - 22,101,000
Public Offering....... 2,750 - 20,174,750 - - 20,177,500
Sale of common stock
to majority
shareholder......... 413 - 3,712,087 - - 3,712,500
Loss applicable to
common shareholders... - - - - (3,245,000) (3,245,000)
------- ------ ------------ ----------- ------------ ------------
Balance, November 1,
1992.................. 5,585 - 88,169,415 - (37,092,000) 51,083,000
Quasi Reorganization.... - - (59,599,000) - 37,092,000 (22,507,000)
Excess of additional
pension liability
over unrecognized
prior service cost,
net of tax benefit.... - - - (1,101,000) - (1,101,000)
Income applicable to
common shareholders... - - - - 6,415,000 6,415,000
------- ------ ------------ ----------- ------------ ------------
Balance, October 31,
1993.................. 5,585 - 28,570,415 (1,101,000) 6,415,000 33,890,000
Adjustments to Quasi
Reorganization........ 30 - (1,993,660) - - (1,993,630)
Adjustments to pension
liability over prior
service cost.......... - - - 575,000 - 575,000
Incentive stock
options exercised..... 4 - 25,626 - - 25,630
Income applicable to
common shareholders... - - - - 3,339,000 3,339,000
------- ------ ------------ ----------- ------------ ------------
Balance, October 30,
1994.................. $ 5,619 $ - $ 26,602,381 $ (526,000) $ 9,754,000 $ 35,836,000
======= ====== ============ =========== ============ ============
</TABLE>
See notes to financial statements.
32
<PAGE>
FORSTMANN & COMPANY, INC.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS FOR THE FIFTY-TWO WEEKS
ENDED OCTOBER 30, 1994 AND OCTOBER 31, 1993 AND
THE FIFTY-THREE WEEKS ENDED NOVEMBER 1, 1992
1. LINES OF BUSINESS
Forstmann & Company, Inc. (the "Company") designs, manufactures and markets
woolen, worsted and other fabrics primarily used in the production of brand name
and private label apparel for men and women, as well as specialty fabrics for
use in billiard and gaming tables, sports caps and career uniforms. A majority
(50.4%) of the Company's common stock is owned by Odyssey Partners, L.P.
("Odyssey").
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Fiscal Year - The Company has adopted a fiscal year ending on the Sunday
nearest to October 31. The fiscal years ended October 30, 1994 and October 31,
1993 comprise fifty-two weeks ("Fiscal Year 1994" and "Fiscal Year 1993",
respectively), whereas the fiscal year ended November 1, 1992 comprises fifty-
three weeks ("Fiscal Year 1992").
Revenue Recognition - Generally, sales and related costs are recognized when
goods are sold and then shipped to the Company's customers. A portion of such
sales is made on extended terms of up to 240 days. At October 30, 1994, $8.2
million of sales made on extended terms were included in accounts receivable
under terms of specific sales.
When customers, under the terms of specific orders, request that the Company
manufacture, invoice and ship goods on a bill and hold basis, the Company
recognizes revenue based on the completion date required in the order and actual
completion of the manufacturing process. Accounts receivable included bill and
hold receivables of $19.4 million at October 30, 1994 and $15.9 million at
October 31, 1993.
None of the Company's customers accounts for 10% or more of the Company's
revenues.
Allowance for Uncollectible Accounts - Based on a review and assessment of the
collectibility of aged balances included in accounts receivable, the Company
establishes a specific allowance for uncollectible accounts. Additionally, the
Company establishes a general allowance for uncollectible accounts based, in
part, on historical trends and the state of the economy and its effect on the
Company's customers. The Company also establishes allowances for estimated
sales returns. The Company grants credit to certain customers, most of which
are companies in apparel industries, which industries generally have experienced
an economic downturn. The ability of such customers to honor their debts is
somewhat dependent upon the apparel business sector. No individual customer's
accounts receivable balance exceeded 7% of gross accounts receivable at October
30, 1994.
Inventories - Inventories are stated at the lower of cost, determined
principally by the last-in, first-out ("LIFO") method, or market.
Property, Plant and Equipment - Property, plant and equipment is recorded at
cost, net of accumulated depreciation and amortization. Depreciation and
amortization is computed using the straight-line method over the estimated
useful lives of the assets or the lease terms of certain capital lease assets.
For income tax purposes, accelerated methods of depreciation are used.
Maintenance and repairs are charged to income, and renewals or betterments are
capitalized.
Deferred Financing Costs - Costs incurred to obtain financing are included as
other assets and amortized using the straight-line method over the expected
maturities of the related debt.
33
<PAGE>
Computer Information Systems - Costs directly associated with the initial
purchase, development and implementation of computer information systems are
deferred and included as other assets. Such costs are amortized on a straight-
line basis over the expected useful life of the systems, principally five years.
Ongoing maintenance costs of computer information systems are expensed.
Environmental Remediation Liabilities - The Company recognizes environmental
remediation liabilities when a loss is probable and can be reasonably estimated.
Estimates are developed in consultation with environmental consultants and legal
counsel and are periodically revised based on expenditures against established
reserves and the availability of additional information. Such liabilities are
included on the balance sheet as accrued liabilities.
Earnings Per Share - The computations of per share information for Fiscal
Years 1994 and 1993 are based on actual shares outstanding during the years and
on actual income applicable to common shareholders. Shares issuable upon the
exercise of employee stock options do not have a material dilutive effect on
earnings per share for the periods presented. The computation of per share
information for Fiscal Year 1992 gives effect to (a) the 1992 Recapitalization
(hereinafter defined, see Note 14) and (b) elimination of the income tax
provision (benefit) arising from the ownership change for federal income tax
purposes which is more fully described in Note 9, as if such transactions
occurred at the beginning of Fiscal Year 1992 and as if such transactions were
effected as a recapitalization of the Company.
New Accounting Standards - Statement of Financial Accounting Standards
("SFAS") No. 112, "Employers' Accounting for Postemployment Benefits,"
establishes accounting standards for employers that provide benefits to former
or inactive employees after employment but before retirement and is effective
for fiscal years beginning after December 15, 1993. The Company expects that
there will be no material effect upon implementing SFAS No. 112 on its financial
position or results of operations.
Reclassifications - Certain prior years' financial statement balances have
been reclassified to conform with the current year's presentations.
3. INVENTORIES
Inventories consist of the following at October 30, 1994 and October 31, 1993
(in thousands):
<TABLE>
<CAPTION>
1994 1993
-------- --------
<S> <C> <C>
Raw materials and supplies........ $ 9,873 $18,073
Work-in-process................... 53,730 45,165
Finished products................. 15,471 15,601
Less market reserves.............. (2,193) (1,903)
------- -------
Total........................ 76,881 76,936
Difference between LIFO carrying
value and current replacement
cost............................ 2,558 (1,565)
------- -------
Current replacement cost.......... $79,437 $75,371
======= =======
</TABLE>
Although current replacement cost for inventories at October 31, 1993 was less
than LIFO carrying value, the Company's management believed that the carrying
value would be recovered through future sales which would yield normal profit
margins.
34
<PAGE>
4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following at October 30, 1994 and
October 31, 1993 (in thousands):
<TABLE>
<CAPTION>
1994 1993
--------- --------
<S> <C> <C>
Land............................... $ 1,100 $ 1,100
Buildings.......................... 16,382 15,016
Machinery and equipment............ 78,657 68,406
Construction in progress........... 3,906 1,598
-------- -------
Total........................... 100,045 86,120
Less accumulated depreciation and
amortization..................... (20,566) (9,599)
-------- -------
Net........................ $ 79,479 $76,521
======== =======
</TABLE>
Capital lease assets (principally machinery and equipment) at October 30, 1994
and October 31, 1993 was $3,799,000 and $3,077,000, respectively. Accumulated
amortization related to such capital lease assets at October 30, 1994 and
October 31, 1993 was $1,278,000 and $587,000, respectively.
Depreciation expense and amortization of capital lease assets was $11,945,000
for Fiscal Year 1994, $9,685,000 for Fiscal Year 1993 and $10,007,000 for Fiscal
Year 1992.
The Company recognized a $963,000 loss from disposal and impairment of
machinery and equipment during Fiscal Year 1993 related to the disposal and
write-down of idle equipment to reflect its remaining future economic value.
5. OTHER ASSETS
Other assets consist of the following at October 30, 1994 and October 31, 1993
(in thousands):
<TABLE>
<CAPTION>
1994 1993
------ ------
<S> <C> <C>
Computer information systems,
net of accumulated amortization
$2,669,000 and $1,577,000........ $5,896 $5,128
Deferred financing costs, net of
accumulated amortization of
$1,512,000 and $629,000.......... 2,961 3,024
Other.............................. 119 722
------ ------
Total.............................. $8,976 $8,874
====== ======
</TABLE>
6. OTHER ACCRUED LIABILITIES
Other accrued liabilities consist of the following at October 30, 1994 and
October 31, 1993 (in thousands):
<TABLE>
<CAPTION>
1994 1993
------- -------
<S> <C> <C>
Salaries and wages
(including related payroll
taxes)........................... $ 1,314 $ 1,150
Incentive compensation and ERA's.. 1,027 2,070
Vacation.......................... 2,022 1,933
Employee benefit plans............ 834 304
Interest on long-term debt........ 773 648
Medical insurance premiums........ 1,540 1,322
Environmental remediation......... 589 446
Dissenters' settlement............ 831 -
Other............................. 3,342 2,237
------- -------
Total........................... $12,272 $10,110
======= =======
</TABLE>
35
<PAGE>
7. LONG-TERM DEBT
Long-term debt consists of the following at October 30, 1994 and October 31,
1993 (in thousands):
<TABLE>
<CAPTION>
1994 1993
--------- ---------
<S> <C> <C>
Credit Facilities.................. $ 58,696 $ 47,218
Senior Secured Notes............... 27,000 20,000
Subordinated Notes................. 56,632 56,632
Equipment Facilities............... 7,082 8,318
Capital lease obligations
(see Note 11).................... 4,572 1,655
-------- --------
Total.......................... 153,982 133,823
Debt premium - Subordinated Notes.. 4,329 5,036
Current portion of long-term debt.. (2,714) (2,821)
-------- --------
Long-term debt............. $155,597 $136,038
======== ========
</TABLE>
Credit Facilities - The Company entered into a five-year loan agreement as of
October 30, 1992 with General Electric Capital Corporation ("GECC"), as agent
and lender, for borrowings up to $100 million (the "GECC Facility"). The GECC
Facility provides revolving loans up to a maximum of $85 million (the "Revolving
Line of Credit") (which includes a $7.5 million letter of credit facility) and
provided a $15 million term loan (the "Original Term Loan"). In January 1995,
the GECC Facility was amended, subject to loan availability (as defined), to
provide a $7.5 million term loan (the "Term Loan"). On January 23, 1995, the
Company borrowed $7.5 million under the Term Loan, the proceeds of which were
used to repay a portion of outstanding borrowings under the Revolving Line of
Credit.
The initial borrowings under the GECC Facility were used to repay the
outstanding borrowings under the $85 million Senior Secured Revolving Credit
Facility between the Company and various lenders (the "Bank Facility") and to
secure previously issued letters of credit. The revolving loans under the Bank
Facility were payable in full on November 2, 1994. Unamortized deferred
financing costs of $1.9 million related to the Bank Facility were written off in
Fiscal Year 1992 and such write-off, net of a $0.7 million deferred income tax
benefit, was reflected as an extraordinary loss in the Company's statement of
operations for Fiscal Year 1992.
Outstanding borrowings (including outstanding letters of credit) under the
Revolving Line of Credit cannot exceed the sum of (1) 85% of eligible accounts
receivable (other than bill and hold accounts receivable), (2) the lesser of (a)
$10 million, or (b) a percentage (based on aging) of eligible bill and hold
accounts receivable, (3) 60% of eligible inventory (other than seconds and
samples), and (4) the lesser of (a) $3 million, or (b) 60% of eligible inventory
consisting of samples and seconds. The Company's borrowing base is subject to
reserves determined by GECC. At October 30, 1994, the Company's loan
availability as defined in the GECC Facility, in excess of its outstanding
borrowings and letters of credit, was approximately $7.5 million.
Borrowings under the Revolving Line of Credit bear interest, at the Company's
option, at a floating rate (which is based on a defined index rate) or a fixed
rate (which is based on LIBOR), payable monthly. The floating rate is 1.5% per
annum above the index rate, and the fixed rate is 3.0% per annum above LIBOR.
At October 30, 1994, the Revolving Line of Credit bore interest at the fixed
rate of 8.25% per annum through December 31, 1994 and was adjusted to 8.98% per
annum on January 1, 1995 through January 31, 1995.
Proceeds from the Company's ordinary operations are applied to reduce the
principal amount of borrowings outstanding under the Revolving Line of Credit.
Unused portions of the Revolving Line of Credit may be borrowed and reborrowed,
subject to availability in accordance with the then applicable commitment and
borrowing base limitations.
36
<PAGE>
The Company's obligations under the GECC Facility are secured by liens on
substantially all of the Company's assets. The GECC Facility expires in October
1997.
Subject to certain exceptions, the GECC Facility restricts, among other
things, the incurrence of indebtedness, the sale of assets, the incurrence of
liens, the making of certain restricted payments, the making of specified
investments, the payment of cash dividends and the making of certain fundamental
corporate changes and amendments to the Company's corporate organizational and
governance instruments. In addition, the Company is required to satisfy, among
other things, certain financial performance criteria, including minimum tangible
net worth levels, interest coverage, fixed charge and current ratios, minimum
EBITDA levels, maximum leverage ratios, inventory and accounts receivable
turnover ratios and maximum capital expenditure levels.
The Company pays GECC, for the account of each of the lenders party to the
GECC Facility, a fee of 0.5% per annum on the average daily unused portion of
the Revolving Line of Credit. In addition, the Company pays GECC, for its own
account, an agency fee of $150,000 per annum and certain fees in connection with
extending and making available letters of credit.
Senior Secured Notes - On April 5, 1993, the Company issued an aggregate of
$20 million Senior Secured Floating Rate Notes and on March 30, 1994, the
Company issued an aggregate of $10 million Senior Secured Floating Rate Notes,
all of which are due October 30, 1997 (collectively the "Senior Secured Notes").
The proceeds from the sale of the Senior Secured Notes were used to repay the
Original Term Loan and to reduce outstanding borrowings under the Revolving Line
of Credit.
Borrowings under the Senior Secured Notes bear interest, at the Company's
option, at a floating rate (which is based on the prime lending rate, as
defined) or a fixed rate (which is based on LIBOR), payable quarterly. The
floating rate is 1.75% per annum above the prime lending rate, as defined, and
the fixed rate is 3.25% per annum above LIBOR. The Senior Secured Notes bear
interest at the fixed rate of 8.94% per annum from October 30, 1994 through
January 31, 1995.
The Senior Secured Notes require principal payments of $4.0 million on October
31, 1995, $5.0 million on October 31, 1996 and a final payment of the unpaid
principal balance on October 30, 1997. The Company may redeem, on any interest
payment date, all or any portion of the Senior Secured Notes at a redemption
price of 100% of the principal amount to be redeemed.
In addition, under the Indenture to the Senior Secured Notes (the "Senior
Secured Notes Indenture"), the net proceeds from the sale or other disposition
by the Company of assets (excluding, among other things, the sales of inventory
in the ordinary course of business and dispositions of equipment which are in
excess of permitted sales of equipment, whereby the proceeds of such sales are
used to purchase permitted assets) are required to be deposited with the Senior
Secured Notes Indenture trustee. If the net proceeds deposited with the trustee
aggregates $1.0 million in excess of the amount of such proceeds which will be
reinvested within twelve months of deposit with the trustee, the Company is
required to make an offer to redeem an applicable portion of the Senior Secured
Notes. As of October 30, 1994, under the terms of the Senior Secured Notes
Indenture, the Company had not deposited any net proceeds with the trustee.
The Company's obligations under the Senior Secured Notes are secured by liens
on substantially all of the Company's assets. The Senior Secured Notes
Indenture contains restrictions similar to that of the GECC Facility. Further,
the Senior Secured Notes Indenture requires the Company to satisfy, among other
things, certain financial performance criteria, including minimum adjusted
tangible net worth levels, fixed charge and interest coverage ratios and minimum
EBITDA levels. Generally, such financial performance criteria are less
stringent than similar financial performance criteria required by the GECC
Facility.
Subordinated Notes - On April 20, 1989, through an underwritten public
offering, the Company sold $100 million of 14-3/4% Senior Subordinated Notes due
37
<PAGE>
April 15, 1999 (the "14-3/4% Notes") (effective rate 15%). In connection with a
recapitalization of the Company in 1990 (the "1990 Recapitalization"), the
Company amended the Indenture to the 14-3/4% Notes (the "Subordinated Notes
Indenture") and holders of 95.735% of the outstanding 14-3/4% Notes agreed to a
reduction in the interest rate payable on such 14-3/4% Notes to 6% per annum for
the period commencing October 16, 1990 through October 15, 1992 by accepting
Split Coupon Redeemable Amended Senior Subordinated Notes (the "Split Coupon
Notes") in exchange for the 14-3/4% Notes. The Company issued additional Split
Coupon Notes under the Subordinated Notes Indenture with a face value of
$2,872,050 on November 19, 1990 in settlement of $2,273,706 of interest due to
certain holders of the 14-3/4% Notes on October 15, 1990. The interest rate
reduction and issuance of additional notes in lieu of cash reduced the effective
interest rate on the outstanding 14-3/4% Notes and Split Coupon Notes
(collectively the "Subordinated Notes") to 12.35% per annum.
The Subordinated Notes are subordinated to all existing and future senior
indebtedness (as defined) of the Company. The Subordinated Notes Indenture
limits, subject to certain financial tests, the incurrence of additional senior
indebtedness and prohibits the incurrence of any indebtedness senior to the
Subordinated Notes that is subordinated to the Company's then existing senior
indebtedness. The Subordinated Notes Indenture contains restrictions relating
to payment of dividends, the repurchase of capital stock and the making of
certain other restricted payments, certain transactions with affiliates and
subsidiaries, and certain mergers, consolidations and sales of assets. In
addition, the Subordinated Notes Indenture requires the Company to make an offer
to purchase (1) a portion of the Subordinated Notes if (a) the Company's
adjusted tangible net worth (as defined) falls below $15 million at the end of
any two consecutive fiscal quarters or (b) the Company consummates an asset sale
(as defined) at certain times or (2) all of the Subordinated Notes if a change
of control (as defined) occurs.
In connection with the Exchange Offer (hereinafter defined, see Note 14), the
Company acquired, and did not retire or cancel, $46,240,100 aggregate face
amount of the Subordinated Notes. The Company used $2,875,000 of such
Subordinated Notes to satisfy the January 31, 1993 mandatory redemption required
in the Subordinated Notes Indenture. The Company is required to redeem on April
15, 1998, $50.0 million of the aggregate face amount of the Subordinated Notes
at a redemption price equal to par, plus accrued interest to the redemption
date. The remaining Subordinated Notes are due on April 15, 1999. The Company
may use the remaining $43,365,100 of the 14-3/4% Notes acquired in the Exchange
Offer to satisfy partially the April 15, 1998 mandatory redemption required in
the Subordinated Notes Indenture.
As a result of the Exchange Offer, the effective interest rate on the
outstanding Subordinated Notes increased from 12.35% to 12.55% per annum.
Subsequently, as a result of the Quasi Reorganization (hereinafter defined, see
Note 14), the Subordinated Notes were fair valued, which, for financial
reporting purposes, resulted in the elimination of the previously existing
deferred interest payable and debt discount, the creation of a debt premium of
$5,663,000 and a decrease in the effective interest rate on the outstanding
Subordinated Notes to 12.43% per annum.
Equipment Facilities - The Company is a party to a loan and security agreement
(the "CIT Equipment Facility") with the CIT Group/Equipment Financing, Inc.
("CIT") which provides financing for the acquisition of, and to refinance
borrowings incurred to acquire, various textile machinery and equipment.
Pursuant to the CIT Equipment Facility, commencing on December 27, 1991 and
through December 31, 1992, the Company borrowed an aggregate of $4,502,948 at
interest rates ranging from 7.86% to 8.61% per annum.
On August 2, 1993, the CIT Equipment Facility was amended to permit up to four
additional loans not to exceed an aggregate of $6.0 million with the commitment
period ending on January 31, 1994. Through October 30, 1994, the Company
borrowed an aggregate of $5,964,327 at interest rates ranging from 7.36% to
7.75% per annum. At October 30, 1994, an aggregate of $7,082,000 was
38
<PAGE>
outstanding under the CIT Equipment Facility. On December 22, 1994, the CIT
Equipment Facility was further amended to permit up to two additional loans not
to exceed an aggregate of $5.0 million with the commitment period ending on July
31, 1995. On December 22, 1994, the Company borrowed $2.5 million at an
interest rate of 10.58%. The interest rate on the remaining loan available
under the CIT Equipment Facility is fixed at the Treasury Rate (as defined) plus
287 basis points.
Each loan under the CIT Equipment Facility is a five-year purchase money loan,
secured by a first (and only) perfected security interest in the equipment, and
is payable in 60 consecutive installments of principal plus interest, payable
monthly in arrears.
The Company may prepay all, but not less than all, of its loans under the CIT
Equipment Facility after July 1995, at a premium of 400 basis points, declining
ratably over the remaining loan term. The Company is required to provide CIT
with an irrevocable letter of credit in an amount equal to 25% of the original
principal amount of each additional loan made under the $6.0 million amendment
which requirement terminates on January 31, 1996 or thereafter.
Aggregate Maturities - At October 30, 1994, aggregate long-term debt
maturities excluding capital lease obligations (see Note 11), are as follows (in
thousands):
<TABLE>
<CAPTION>
Fiscal Year Amount
----------- --------
<S> <C>
1995......... $ 1,714
1996......... 11,073
1997......... 78,659
1998......... 7,881
1999......... 50,083
Thereafter... -
--------
Total..... $149,410
========
</TABLE>
8. REDEEMABLE PREFERRED STOCK
The Company's senior preferred stock, with a dividend rate of 5% per annum, is
non-voting, except in limited circumstances, and ranks senior to any
subsequently issued class or series of preferred stock. The Company is
prohibited from paying cash dividends on the senior preferred stock under its
existing financial arrangements (see Note 7), except that the Company may, at
its option, pay such dividends through the issuance of additional shares of
senior preferred stock with an aggregate liquidation preference equal to the
dollar value of the required dividend. The senior preferred stock, plus
accumulated unpaid dividends, is mandatorily redeemable on December 15, 2010
(and earlier under certain circumstances upon a change in control (as defined))
at a price equal to the liquidation preference thereof.
As a result of the Company effecting the Quasi Reorganization, the senior
preferred stock was fair valued, resulting in a decrease in the carrying value
of $2,944,000, which is being accreted to redemption value. The fair valuation
resulted in an effective dividend rate of 10.11% per annum.
9. INCOME TAXES
At the beginning of Fiscal Year 1993, the Company adopted SFAS No. 109,
"Accounting for Income Taxes." This statement supersedes SFAS No. 96,
"Accounting for Income Taxes," which the Company adopted in fiscal year 1988.
The adoption of SFAS No. 109 did not have an effect on the Company's results of
operations for Fiscal Year 1993.
39
<PAGE>
The provision for income taxes, exclusive of the amounts related to
extraordinary items, is as follows (in thousands):
<TABLE>
<CAPTION>
1994 1993 1992
------ ------ ------
<S> <C> <C> <C>
Current... $1,759 $ 624 $ 282
Deferred.. 572 3,621 5,408
------ ------ ------
Total... $2,331 $4,245 $5,690
====== ====== ======
</TABLE>
The Company's statutory rate, including state income taxes (net of federal
benefit), for Fiscal Years 1994, 1993 and 1992 was 39.5%, 38.5% and 38.0%,
respectively. The Company's effective rate rose to 38.5% in Fiscal Year 1993
due to a change in the tax status of the Company. The Company's effective rate
rose to 39.5% in Fiscal Year 1994 due to the Omnibus Budget Reconciliation Act
of 1993 which increased the corporate income tax rate from 34% to 35% for
taxable income in excess of $10.0 million, as well as made certain other changes
to the corporate tax law.
A reconciliation between federal income taxes at the statutory rate and the
Company's income tax provision is as follows:
<TABLE>
<CAPTION>
1994 1993 1992
------ ------ -------
<S> <C> <C> <C>
Federal statutory tax rate........... 35.00% 34.00% 34.00%
State income taxes, net of federal
benefit............................. 4.50 4.50 4.00
Recapture of prior net operating
losses.............................. - - 146.28
Tax credits recapture................ - - 8.36
Benefit of built-in gain recognized.. - - (45.74)
Other................................ .01 .56 .35
----- ----- ------
Income tax provision................. 39.51% 39.06% 147.25%
===== ===== ======
</TABLE>
At October 30, 1994, the Company had cumulative net operating loss
carryforwards for federal income tax purposes of $15.5 million, of which $7.4
million is available to offset future taxable income as discussed below. For
federal income tax purposes, net operating loss carryforwards begin to expire in
the year 2002.
As a result of the 1992 Recapitalization, the Company underwent an ownership
change as defined in Section 382 of the Internal Revenue Code of 1986, as
amended (the "Internal Revenue Code"). This ownership change limits the
Company's ability to utilize its net operating loss carryforwards. During
Fiscal Year 1992, the Company recorded a non-cash deferred income tax provision
of $6.0 million to reflect the recapture of previously recognized benefits of
the Company's losses and credits incurred in prior years. Reducing the $6.0
million non-cash charge for Fiscal Year 1992 was a $1.8 million permanent income
tax benefit resulting from certain events that occurred subsequent to the
ownership change, which will enable the Company to utilize a portion of its net
operating loss carryforwards existing prior to the ownership change.
Deferred income taxes reflect the net tax effects of (a) temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes, and (b) operating loss
and tax credit carryforwards. The tax effects of significant items comprising
the Company's net deferred tax liability at October 30, 1994 and October 31,
1993 are as follows (in thousands):
40
<PAGE>
<TABLE>
<CAPTION>
1994 1993
-------- ---------
<S> <C> <C>
Deferred tax liabilities:
Differences between book and tax
basis of property, plant and
equipment............................ $ 9,922 $ 10,724
Inventories............................ - 1,548
Deferred interest payable.............. 1,742 2,034
Other.................................. 379 196
-------- --------
Total................................ 12,043 14,502
-------- --------
Deferred tax assets:
Operating loss carryforwards........... (6,126) (8,597)
Alternative minimum tax carryforwards.. (516) (906)
Allowance for uncollectible accounts... (830) (1,108)
Inventories............................ (800) -
Long-term debt......................... (1,710) (1,989)
Other.................................. (3,650) (4,304)
-------- --------
Total................................ (13,632) (16,904)
Valuation allowance.................... 3,566 3,566
-------- --------
Net deferred tax liability........... $ 1,977 $ 1,164
======== ========
</TABLE>
To the extent that the book basis of the Company's assets and liabilities was
adjusted in the Quasi Reorganization, the Company adjusted its deferred tax
assets and liabilities pursuant to the principles of quasi-reorganization
accounting.
The valuation allowance relates to operating loss carryforwards incurred prior
to the Company's Quasi Reorganization that were charged to expense in Fiscal
Year 1992 at the time of the ownership change for federal income tax purposes
which resulted from the 1992 Recapitalization. Certain future events may result
in such benefits being utilized in the Company's future income tax returns,
which the Company will record as a reduction in the valuation allowance and, in
accordance with the principles of quasi-reorganization accounting, a credit to
additional paid-in-capital.
10. EMPLOYEE BENEFIT PLANS
The Company has established and presently maintains qualified pension plans
and qualified and non-qualified profit sharing and savings plans covering
eligible hourly and salaried employees. The qualified noncontributory defined
benefit pension plans cover substantially all salaried and hourly employees.
Pension plan assets consist primarily of common stocks, bonds and United
States government securities. The plans provide pension benefits that are
determined by years of service and for salaried plan participants are based on
the plan participants' average compensation for the last five years of service
and for hourly plan participants are based on the plan's applicable hourly rate
for each specific participant's year of service. The Company's funding policy
is to make the annual contribution required by applicable regulations and
recommended by its actuary.
41
<PAGE>
Net periodic pension cost for the periods indicated include the following
components at October 30, 1994, October 31, 1993 and November 1, 1992,
(in thousands, except assumption percentages):
<TABLE>
<CAPTION>
1994 1993 1992
------------------- ------------------- -------------------
Hourly Salaried Hourly Salaried Hourly Salaried
Pension Pension Pension Pension Pension Pension
Plan Plan Plan Plan Plan Plan
-------- --------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Service cost............. $ 568 $ 878 $ 413 $ 563 $ 367 $ 524
Interest cost............ 532 476 463 379 402 356
Return on plan assets.... (390) (356) (393) (339) (355) (270)
----- ----- ----- ----- ----- -----
Net periodic pension
cost................... $ 710 $ 998 $ 483 $ 603 $ 414 $ 610
===== ===== ===== ===== ===== =====
Assumptions used in
the accounting are:
Discount rates........... 8.75% 8.75% 7.00% 7.00% 8.75% 8.75%
Rate of increase in
compensation levels.... - 5.50% - 5.50% - 5.50%
Expected long-term rate
of return on assets.... 8.00% 8.00% 8.00% 8.00% 8.00% 8.00%
</TABLE>
The following schedule sets forth the funded status of the hourly and salaried
pension plans and the plan assets (accrued pension costs) included in the
Company's balance sheets at October 30, 1994 and October 31, 1993,
(in thousands):
<TABLE>
<CAPTION>
1994 1993
------------------- -------------------
Hourly Salaried Hourly Salaried
Pension Pension Pension Pension
Plan Plan Plan Plan
-------- --------- -------- ---------
<S> <C> <C> <C> <C>
Actuarial present value
of pension obligation:
Vested...................... $(6,184) $(4,945) $(6,806) $(4,643)
Nonvested................... (617) (327) (661) (395)
------- ------- ------- -------
Accumulated benefit obligation.. (6,801) (5,272) (7,467) (5,038)
Effects of projected future
compensation levels.......... - (907) - (1,494)
------- ------- ------- -------
Projected benefit obligation... (6,801) (6,179) (7,467) (6,532)
Plan assets at fair value...... 6,224 5,325 6,001 4,920
Unrecognized net loss (gain)... 943 (242) 1,883 954
------- ------- ------- -------
Plan assets (accrued pension
costs) included in balance
sheet........................ $ 366 $(1,096) $ 417 $ (658)
======= ======= ======= =======
</TABLE>
The Company's assumed discount rate ("discount rate") used to measure the
accumulated benefit obligation for its hourly and salaried pension plans under
SFAS No. 87, "Employers' Accounting for Pensions," as of the end of Fiscal Year
1994 was increased from 7.00% to 8.75% based on the composition of the
accumulated benefit obligation and current economic conditions. As of the end
of Fiscal Year 1993 the discount rate was lowered from 8.75% to 7.00% based on
then prevailing economic conditions. The Company's hourly pension plan benefit
obligation exceeds the plan assets at fair value at the end of Fiscal Year 1994
by $577,000. During Fiscal Year 1994, the Company reduced its accrued
additional pension liability in excess of accumulated benefit obligation from
$1,900,000 to $943,000 and reduced the $1,101,000 excess of additional pension
liability over unrecognized prior service cost, net of $719,000 deferred tax
benefit charged to shareholders' equity at the end of Fiscal Year 1993 to
$526,000, net of $343,000 deferred tax benefit.
42
<PAGE>
The Company has a qualified salaried employees' savings, investment and profit
sharing plan under Section 401(k) of the Internal Revenue Code (the "Qualified
Plan"). The Company has adopted a non-qualified salaried employees' savings,
investment and profit sharing plan covering certain employees not covered under
the Qualified Plan.
On September 18, 1992, the Company adopted the Forstmann & Company, Inc.
Common Stock Incentive Plan, as subsequently amended (the "Option Plan"), for
key employees of the Company, pursuant to which 450,000 shares of common stock
were reserved for issuance by the Company. On March 30, 1994, the Company's
shareholders increased the number of shares reserved for issuance by the Company
under the Option Plan to 700,000. Options granted under the Option Plan may be
either incentive stock options ("ISOs"), which are intended to meet the
requirements of Section 422 of the Internal Revenue Code, or non-qualified stock
options ("NSOs").
The Compensation Committee of the Company's Board of Directors may grant under
the Option Plan (1) ISOs at an exercise price per share which is not less than
the fair market value (as defined) of the common stock at the date of grant and
(2) NSOs at an exercise price not less than $.001 per share. The Option Plan
further provides that the maximum period in which options may be exercised will
be determined by the Compensation Committee, except that ISOs may not be
exercised after the expiration of ten years from the date of grant (five years
in the case of an optionee who is a 10% shareholder). The Option Plan requires
that ISOs terminate on the date the optionee's employment with the Company
terminates, except in the case of death, disability, termination of employment
without cause or a change of control (as defined) of the Company, as determined
by the Compensation Committee. Options are non-transferable, except by will or
by the laws of descent and distribution, and may be exercised upon the payment
of the option price in cash or any other form of consideration acceptable to the
Compensation Committee.
The following summarizes stock option activity:
<TABLE>
<CAPTION>
1994 1993
------------ ------------
<S> <C> <C>
Shares under option at beginning
of fiscal year.................. 247,300 115,000
Granted........................... - 137,800
Exercised......................... (3,797) -
Terminated........................ (2,235) (5,500)
----------- -----------
Shares under option at end of
fiscal year..................... 241,268 247,300
=========== ===========
Options exercisable at end of
fiscal year..................... 158,928 -
=========== ===========
Options available for future
grant........................... 454,935 202,700
=========== ===========
Option prices per share:
Granted........................... $ - $ 6.75
Exercised......................... $ 6.75 $ -
Outstanding at end of
fiscal year..................... $6.75-$9.00 $6.75-$9.00
</TABLE>
On December 8, 1994, an additional 39,197 of the ISOs granted at an exercise
price of $6.75 per share became exercisable. On January 6, 1995, the
Compensation Committee granted an aggregate of 225,000 ISOs to 14 management
level employees of the Company at an exercise price of $8.50 per share.
Five senior officers of the Company were granted equity referenced deferred
incentive awards ("ERAs") on March 4, 1992, which generally vest three years
after grant and are exercisable only if, after vesting, the Company's common
stock maintains a market price of at least $9.00 per share for a continuous
period of 30 days provided that such event occurs before March 4, 1998. Upon
exercise, the ERAs have a value of $9.00, multiplied by the number of shares
covered by the senior officer's ISOs, thus permitting the officers to be
reimbursed, on a pre-tax basis, for the exercise price of their ISOs. The
senior officers will be entitled
43
<PAGE>
to exercise their ERAs even if they determine not to exercise their ISOs. At
October 30, 1994, $919,000 had been accrued in connection with the ERAs.
On December 8, 1992, the Compensation Committee approved a supplemental
retirement benefit plan (the "SERP") to provide additional retirement benefits
to senior officers of the Company. The SERP provides supplemental retirement
income benefits, supplemental welfare benefit coverage and death benefits to
senior officers who have been selected by the Compensation Committee. The level
of benefits a participant may receive depends upon the participant's accrued or
projected benefits under the Company's tax-qualified pension plan, the
participant's length of service with the Company and the circumstances under
which the participant retires. If a participant is terminated from employment
without cause or after a change in control (as defined), the participant will
receive the same benefits which would have been provided by the SERP if the
participant continued in the Company's employ until age 62. As of October 30,
1994, $55,000 of contributions have been made to the SERP. During Fiscal Years
1994 and 1993, $128,000 and $64,000, respectively, was expensed in connection
with the SERP.
11. COMMITMENTS AND CONTINGENCIES
Lease Commitments - Aggregate future minimum lease commitments under operating
leases and capital leases with an initial or remaining non-cancellable term in
excess of one year, together with the present value of the minimum capital lease
payments at October 30, 1994, are as follows (in thousands):
<TABLE>
<CAPTION>
Operating Capital
Fiscal Year Leases Leases
----------- --------- -------
<S> <C> <C>
1995.................................. $2,376 $1,374
1996.................................. 2,212 1,333
1997.................................. 672 1,046
1998.................................. 517 924
1999.................................. 320 922
Thereafter............................ 413 56
------ ------
Total minimum lease payments.......... $6,510 $5,655
======
Less amount representing interest.. 1,083
------
Present value of minimum lease
payments......................... 4,572
Less current portion of capital
lease obligations................ 1,000
------
Long-term portion of capital
lease obligations................ $3,572
======
</TABLE>
Rental expense under operating leases was $2.2 million for Fiscal Year 1994
and Fiscal Year 1993 and $2.4 million for Fiscal Year 1992.
License & Royalty Agreements - In July 1992, the Company formed its Forstmann
International division and entered into a licensing, technical information and
consulting arrangement with Compagnia Tessile, S.p.A., an Italian corporation,
and its affiliate (collectively "Carpini/TM/"). Under the arrangement, the
Company has the exclusive right to manufacture "Carpini/TM/ USA for Forstmann
International" fabrics for women's and men's apparel for distribution and sale
in the United States, Canada and Mexico for an initial period through December
31, 1997. The Company also has the right to acquire certain technical
information. In consideration of the licensing and consulting arrangement, the
Company has agreed to pay Carpini an annual royalty and guaranteed minimum fee
as follows (in thousands):
<TABLE>
<CAPTION>
Fiscal Year Amount
----------- ------
<S> <C>
1995........ $ 458
1996........ 738
1997........ 1,325
1998........ 522
</TABLE>
44
<PAGE>
Additionally, the Company is required to pay Carpini a sales fee equal to five
percent (5%) of annual net sales of "Carpini USA" fabrics, after deducting the
annual guaranteed minimum fee. Further, the arrangement permits the Company to
purchase certain fabrics manufactured by Carpini which can be resold by the
Company in the United States and Canada.
Purchase Commitments - In the ordinary course of business, the Company has
significant purchase orders for raw wool outstanding, which generally require
the placement of an order six to nine months prior to delivery. Additionally,
at October 30, 1994 the Company had outstanding commitments to purchase
machinery and equipment with an approximate value of $8.5 million.
Letters of Credit - At October 30, 1994, the Company had outstanding letters
of credit aggregating $2,959,372.
Litigation - The Company is a party to legal actions arising out of the
ordinary course of business. In the opinion of management, after consultation
with counsel, the resolution of these claims will not have a material adverse
effect on the financial position or results of operations of the Company.
Environmental - By the nature of its operations, the Company is subject to
various governmental environmental regulations and occasionally has been subject
to proceedings and orders pertaining to emissions into the environment. As part
of its completion of the identification and valuation of the assets acquired and
liabilities assumed in connection with the acquisition of the Company on
December 13, 1988, the Company accrued $1.9 million for environmental matters
based on the Company's estimate at that time that it would incur between $1.9
million and $3.5 million in costs to remove excess wastes accidentally released
into the environment, to upgrade existing waste facilities and to monitor
chemical levels in the groundwater.
Pursuant to the Georgia Hazardous Site Response Act (the "Response Act"),
property owners in Georgia were required to notify the Environmental Protection
Division of the Georgia Department of Natural Resources (the "GDNR") of known
releases of regulated substances on their properties above certain levels by
March 22, 1994. Pursuant to the Response Act, the Company notified the GDNR of
two historical releases at the Company's Dublin, Georgia facility, one relating
to the presence of trichloroethylene at the site and one relating to another
constituent near the southern property boundary. Based upon the Company's March
1994 notification, the GDNR has determined that a release exceeding a reportable
quantity has occurred at the site. As a result, the site has been listed on the
Georgia Hazardous Site Inventory ("HSI"), which currently consists of 277 other
sites. The Company has also recently notified the GDNR of another possible
release near the western property boundary of the Dublin facility, asserting
vigorously that this release should not be listed on the HSI. This release was
identified by the Company through the sampling procedures in connection with the
Company's Environmental Plan. The GDNR intends to evaluate most of the sites on
the HSI to determine which sites need corrective action. The GDNR has finalized
procedures for determining corrective action levels under the Response Act. In
January 1995, the GDNR notified the Company that it is a Responsible Party for
the site, and has informed the Company that, pursuant to the Response Act, the
Company is required to submit a compliance status report and compliance status
certification with respect to the site by June 30, 1995. The GDNR has also
informed the Company of its obligation to identify all other potentially
responsible parties, and, in compliance therewith, the Company plans to identify
the prior owner and operator of the Dublin facility.
Based on an environmental remediation plan that the Company submitted to the
GDNR in May 1992 for investigation and remediation of groundwater, and
additional soil and groundwater sampling (the "Environmental Plan"), and on
advice of outside environmental consultants, the Company estimated that the
remaining costs associated with the Environmental Plan as of October 30, 1994
was $589,000 and such amount was accordingly reflected in the Company's
financial statements at that date. The Company believes that, based on its
review as described above, costs incurred to date and after meetings with
counsel and engineering specialists, no material liability, in addition to
amounts already recorded by the Company, will result from these matters.
However, depending upon how the GDNR will implement its new corrective action
regulations, the remedial expenditures required, in the aggregate, could be
material.
45
<PAGE>
Dissenters' Proceeding - As required under Georgia Statute O.C.G.A. (S) 14-2-
1330, the Company commenced, on July 10, 1992, a civil action against:
Resolution Trust Corporation as receiver for Columbia Savings & Loan
Association, F.A. (the "RTC"); James E. Kjorlien; Gary M. Smith; Grace Brothers,
Ltd.; The Henley Group; Randall D. Smith, Jeffrey A. Smith and Russell B. Smith,
as Trustees for Lake Trust dtd 9/4/91; (the "Non-RTC defendants") and the record
owners of the shares of the Non-RTC defendants (the "Dissenters' Proceeding").
The RTC and Non-RTC defendants were record owners or beneficial holders of an
aggregate of 1,473,562 shares of the Company's then existing voting and non-
voting common stock who dissented (the "Pre-Merger Stock") from the Merger
(hereinafter defined, see Note 14). Under Georgia law, holders of the
outstanding shares of Pre-Merger Stock who were deemed to have dissented from
the Merger became entitled to payment of the "fair value" of their Pre-Merger
Stock, determined as of a time immediately before consummation of the Merger
plus interest on that amount from the date of the Merger.
In September 1994, the Company settled the claims of the RTC in exchange for
payment by the Company of $475,000 and the issuance of 30,000 shares of the
Company's common stock. In December 1994, in settlement of the remaining
claims, the Company paid the Non-RTC defendants $365,000. The action has been
dismissed and no claims remain pending in the Dissenters' Proceeding. Total
costs of $1,788,000, including legal fees to settle the Dissenters' Proceeding,
were charged to additional paid-in capital during Fiscal Year 1994 in accordance
with the principles of quasi-reorganization accounting (see Note 14).
12. PRO FORMA INCOME AND INCOME PER SHARE (UNAUDITED)
The following information for Fiscal Year 1992 gives effect to (a) the 1992
Recapitalization (see Note 14) and (b) the elimination of the income tax
provision, net of benefit, arising from the ownership change for federal income
tax purposes which is more fully described in Note 9, as if such transactions
occurred at the beginning of Fiscal Year 1992 and as if such transactions were
affected as a recapitalization of the Company (in thousands):
<TABLE>
<CAPTION>
1992
-----------
<S> <C>
Loss before extraordinary loss,
as reported........................... $ (1,826)
Reduction in interest expense........... 1,985
Income tax provision on the reduction
in interest expense................... (754)
Elimination of income tax provision,
net of benefit, related to ownership
change.............................. 4,222
Preferred stock in-kind dividends....... (240)
----------
Pro forma income applicable to common
shareholders.......................... $ 3,387
==========
Pro forma income per share applicable
to common shareholders................ $.61
==========
Pro forma common shares outstanding..... $5,585,014
==========
</TABLE>
13. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount and estimated fair value of the Company's financial
instruments at October 30, 1994 are as follows (in thousands):
<TABLE>
<CAPTION>
Carrying Estimated
Amount Fair Value
-------- ----------
<S> <C> <C>
Assets:
Cash................................ $ 49 $ 49
Accounts receivable................. 57,089 57,089
Liabilities:
Accounts payable.................... 13,153 13,153
Long-term debt (other than capital..
lease obligations)................ 153,739 153,185
Senior preferred stock.............. 2,425 2,097
</TABLE>
46
<PAGE>
Considerable judgement is required in developing the estimates of fair value
presented herein. Accordingly, these estimates are not necessarily indicative
of the amounts the Company could realize in a current market exchange. The use
of different market assumptions and/or estimation methodologies may have a
material effect on the estimated fair value amounts.
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments:
Cash, accounts receivable, notes receivable and accounts payable - The
carrying amount of these items is a reasonable estimate of their fair value.
Long-term debt (other than capital lease obligations) - Based upon the nature
of the Company's Revolving Line of Credit and Senior Secured Notes, the Company
believes its carrying amount approximates fair value. The Company's
Subordinated Notes are publicly traded on occasion, and the fair value is based
on estimates of market value for instruments with similar terms and remaining
maturities. Interest rates that are currently available to the Company for
issuance of fixed rate debt with similar terms and remaining maturities are used
to estimate the fair value of the Company's Equipment Facilities.
Senior preferred stock - The discounted cash flow of the senior preferred
stock based on estimates of market requirements for instruments with similar
terms and remaining maturities as provided by a third-party financial
institution is used to estimate the fair value of the Company's senior preferred
stock.
14. RECAPITALIZATION AND QUASI REORGANIZATION
Recapitalization - During Fiscal Year 1992, the Company completed a
restructuring and recapitalization (the "1992 Recapitalization") whereby the
Company (a) merged with an affiliated company (the "Merger"), which resulted in
each issued and outstanding share of the Company's common stock and non-voting
common stock prior to the Merger (except with respect to the Pre-Merger Stock)
being converted into 1/2,172 of an identical share of common stock of the
Company without any payment or other consideration in respect thereof (the
"Reverse Stock Split"), (b) accepted $46,240,100 aggregate face amount of the
Split Coupon Notes in exchange for $19,596,758 cash and 2,420,904 unregistered
shares of the Company's common stock (the "Exchange Offer"), (c) completed an
initial public offering and sold 2,750,000 shares of common stock at $8.37 net
per share (the "Public Offering"), and (d) received from Odyssey $3,712,500 of
the cash consideration Odyssey had received in the Exchange Offer as the
purchase price for 412,500 unregistered shares of the Company's common stock.
Quasi Reorganization - The Company, with approval from its Board of Directors,
revalued its assets and liabilities to fair value as of the beginning of Fiscal
Year 1993 pursuant to the principles of quasi-reorganization accounting (the
"Quasi Reorganization"), which is a voluntary accounting procedure that permits
an entity which has emerged from previous financial difficulty to restate its
accounts to estimated fair values and to eliminate its retained deficit against
additional paid-in capital. The Quasi Reorganization fair value adjustments
recorded during Fiscal Year 1993 resulted in a write-down of the Company's net
assets of $22,507,000 that was charged to the Company's retained deficit
account. The assets and liabilities principally affected by the fair value
adjustments and the amounts of such adjustments are as follows (in thousands):
47
<PAGE>
<TABLE>
<CAPTION>
Increase (Decrease)
in Net Assets
-------------------
<S> <C>
Inventories........................ $(14,781)
Property, plant and equipment...... (19,740)
Deferred financing costs........... (1,726)
Net assets of hourly pension plan.. (245)
Other accrued liabilities.......... (4,048)
Long-term debt..................... (6,114)
Deferred interest payable.......... 5,752
Deferred tax liability............. 15,451
Senior preferred stock............. 2,944
--------
Net decrease....................... $(22,507)
========
</TABLE>
Subsequent to the fair value adjustments, the balance in the Company's
retained deficit account of $59,599,000 was eliminated against the Company's
additional paid-in capital account.
At the effective date of the Quasi Reorganization, the Company had certain
unresolved contingencies related to specific environmental matters and the
Dissenters' Proceeding (see Note 11). In accordance with the principles of
quasi-reorganization accounting, the difference between the actual costs
subsequently incurred to resolve these matters and the liabilities recorded at
the time of the Quasi Reorganization will be charged or credited to additional
paid-in capital, as appropriate. During Fiscal Year 1994, $206,000 (net of
income taxes) and $1,788,000 related to the environmental matters and
Dissenters' Proceeding, respectively, were charged to additional paid-in capital
as adjustments to the amounts initially recorded in the Quasi Reorganization.
15. QUARTERLY FINANCIAL DATA (UNAUDITED)
Quarterly financial data for Fiscal Year 1994 and Fiscal Year 1993 are
summarized as follows (in thousands, except per share information):
<TABLE>
<CAPTION>
Fiscal Quarter
------------------------------------
First Second Third Fourth
-------- ------- ------- --------
<S> <C> <C> <C> <C>
Fiscal Year 1994
- ----------------
Net sales.................... $37,451 $76,508 $69,092 $54,034
Gross Profit................. 8,768 18,566 14,173 6,345
Income (loss) applicable to
common shareholders........ (1,197) 5,229 2,391 (3,084)
Income (loss) per share
applicable to common
shareholders............... (.21) .94 .43 (.55)
<CAPTION>
Fiscal Quarter
-----------------------------------
First Second Third Fourth
------- ------- ------- -------
<S> <C> <C> <C> <C>
Fiscal Year 1993
- ----------------
Net sales.................... $43,124 $71,649 $66,073 $52,519
Gross Profit................. 8,330 17,097 15,329 10,262
Income (loss) applicable to
common shareholders........ (73) 3,493 3,017 (22)
Income (loss) per share
applicable to common
shareholders............... (.01) .63 .54 -
</TABLE>
48
<PAGE>
During the fourth quarter of Fiscal Year 1994, the Company accrued an
additional amount for workers' compensation expense of approximately $550,000
and increased its inventory valuation by $1,165,000 for the effects of LIFO
accounting. Also, during the fourth quarter of Fiscal Year 1994, the Company
incurred significant unfavorable manufacturing variances resulting from a
slowdown of production and a shift in product mix at its manufacturing
facilities.
During the fourth quarter of Fiscal Year 1993, the Company recognized a
provision for uncollectible accounts of $900,000, an increase of $500,000 from
the fourth quarter of Fiscal Year 1992. The additional provison was based on
the Company's continuing review and assessment of the collectibility of aged
balances included in accounts receivable. Also, during the fourth quarter of
Fiscal Year 1993, the Company recognized $1,100,000 for incentive compensation
expense.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
---------------------------------------------
Deloitte & Touche LLP, independent public accountants, currently is, and for
more than the Company's last two fiscal years has been, the Company's
independent accounting firm. Since the beginning of such two fiscal year
period, (i) Deloitte & Touche LLP has not expressed reliance, in its audit
report, on the audit services of any other accounting firm, and (ii) there have
been no reported disagreements between the Company and Deloitte & Touche LLP on
any matter of accounting principles or practices, financial statement disclosure
or auditing scope or procedure.
49
<PAGE>
PART III
Item 10. DIRECTORS AND EXECUTIVE
OFFICERS OF THE REGISTRANT
--------------------------
The information required for this Item 10 is incorporated by reference from
the Company's definitive proxy statement to be filed with the Securities and
Exchange Commission (the "Commission") pursuant to Regulation 14A under the
Securities Exchange Act of 1934 ("Regulation 14A") within 120 days after the end
of the Company's fiscal year covered by this Annual Report on Form 10-K.
Item 11. EXECUTIVE COMPENSATION
----------------------
The information required for this Item 11 is incorporated by reference from
the Company's definitive proxy statement to be filed with the Commission
pursuant to Regulation 14A within 120 days after the end of the Company's fiscal
year covered by this Annual Report on Form 10-K.
Item 12. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
--------------------------------
The information required for this Item 12 is incorporated by reference from
the Company's definitive proxy statement to be filed with the Commission
pursuant to Regulation 14A within 120 days after the end of the Company's fiscal
year covered by this Annual Report on Form 10-K.
Item 13. CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS
-------------------------
The information required for this Item 13 is incorporated by reference from
the Company's definitive proxy statement to be filed with the Commission
pursuant to Regulation 14A within 120 days after the end of the Company's fiscal
year covered by this Annual Report on Form 10-K.
50
<PAGE>
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT
SCHEDULES, AND REPORTS ON FORM 8-K
----------------------------------
(a) Documents filed as part of this Annual Report on Form 10-K:
1. Financial Statements.
All financial statements required to be filed as part of this Annual
Report on Form 10-K are filed under Item 8. A listing of such financial
statements is set forth in Item 8, which listing is incorporated herein
by reference.
2. Schedules.
Schedules for the Fifty-Three Weeks Ended November 1, 1992 and the
Fifty-Two Weeks Ended October 31, 1993 and October 30, 1994.
SCHEDULE
NUMBER
--------
VIII. Valuation and Qualifying Accounts
Schedules other than those listed above are omitted because (a) they are
not required or are not applicable or (b) the required information is
shown in the financial statements or notes related thereto.
(b) No Current Report on Form 8-K was filed by the Company during the fourth
quarter of its fiscal year ended October 30, 1994.
(c) Exhibits
3.1(a) Articles of Restatement setting forth the Amended and Restated Articles
of Incorporation of the Company, as filed with the Secretary of State
of Georgia on November 19, 1990 (Exhibit 3(i)1. to the Company's
Quarterly Report on Form 10-Q for the quarter ended July 31, 1994).
3.1(b) Articles of Correction, as filed with the Secretary of State of Georgia
on December 18, 1990 (Exhibit 3(i)2. to the Company's Quarterly Report
on Form 10-Q for the quarter ended July 31, 1994).
3.1(c) Articles of Merger of Forstmann Georgia Corp. and the Company, as filed
with the Secretary of State of Georgia on March 3, 1992 (Exhibit 3(i)3.
to the Company's Quarterly Report on Form 10-Q for the quarter ended
July 31, 1994).
3.1(d)* Articles of Amendment to the Articles of Incorporation of the Company,
as filed with the Secretary of State of Georgia on April 5, 1994.
3.2(a) By-Laws of the Company (Exhibit 4.4 to the Company's Registration
Statement (No. 33-55770) on Form S-8).
3.2(b) Amended and Restated By-Laws of the Company on March 30, 1994 (Exhibit
3(ii) to the Company's Quarterly Report on Form 10-Q for the quarter
ended July 31, 1994).
4.1(a) Amended and Restated Indenture, dated as of November 19, 1990, relating
to Senior Subordinated Notes due April 15, 1999 (Exhibit 2 to the
Company's Current Report on Form 8-K dated November 19, 1990).
4.1(b) First Supplemental Indenture, dated as of November 29, 1990, relating
to Senior Subordinated Notes due April 15, 1999 (Exhibit 3 to the
Company's Current Report on Form 8-K dated November 19, 1990).
4.1(c) Second Supplemental Indenture, dated as of March 4, 1992, relating to
Senior Subordinated Notes due April 15, 1999 (Exhibit 4.3 to the
Company's Quarterly Report on Form 10-Q for the quarter ended February
2, 1992).
4.2 Form of 14-3/4% Senior Subordinated Note due April 15, 1999 (Exhibit A
to Exhibit 4.1(a) hereof, as amended by Exhibits 4.1(b) and 4.1(c)
hereof).
4.3 Form of Amended Senior Subordinated Note due April 15, 1999 (Exhibit B
to Exhibit 4.1(a) hereof, as amended by Exhibits 4.1(b) and 4.1(c)
hereof).
4.4(a) Loan Agreement, dated as of October 30, 1992, between the Company and
General Electric Capital Corporation ("GECC"), as lender and agent for
the lenders named therein ("Loan Agreement") (Exhibit 4.4(a) to the
Company's Annual Report on Form 10-K for the year ended November 1,
1992).
4.4(b) Security Agreement, dated as of November 13, 1992, by the Company, in
favor of GECC, as lender and agent for the lenders named therein
(Exhibit 4.4(b) to the Company's Annual Report on Form 10-K for the
year ended November 1, 1992).
4.4(c) Form of Trademark Security Agreement, dated as of November 13, 1992, by
the Company, in favor of GECC, as lender and agent for the lenders
named therein (Exhibit 4.4(c) to the Company's Annual Report on Form
10-K for the year ended November 1, 1992).
4.4(d) Form of Deed to Secure Debt, Assignment of Leases and Rents, Security
Agreement and Fixture Filing, dated as of November 13, 1992, between
the Company and GECC, as agent (Exhibit 4.4(d) to the Company's Annual
Report on Form 10-K for the year ended November 1, 1992).
4.4(e) First Amendment, dated as of November 13, 1992, to the Loan Agreement
(Exhibit 19.1 to the Company's Quarterly Report on Form 10-Q for the
quarter ended August 1, 1993).
4.4(f) Form of Promissory Note for the Loan Agreement (Exhibit 19.2 to the
Company's Quarterly Report on Form 10-Q for the quarter ended August 1,
1993).
4.4(g) Second Amendment, dated as of December 30, 1992, to the Loan Agreement
(Exhibit 19.3 to the Company's Quarterly Report on Form 10-Q for the
quarter ended August 1, 1993).
4.4(h) Third Amendment, dated as of April 5, 1993, to the Loan Agreement
(Exhibit 19.5 to the Company's Quarterly Report on Form 10-Q for the
quarter ended August 1, 1993).
51
<PAGE>
4.4(i) Consent and Waiver Letter, dated as of June 10, 1994, to the Company
from GECC (Exhibit 4.3 to the Company's Quarterly Report on Form 10-Q
for the quarter ended July 31, 1994).
4.4(j) Fourth Amendment, dated as of June 11, 1993, to the Loan Agreement
(Exhibit 19.6 to the Company's Quarterly Report on Form 10-Q for the
quarter ended August 1, 1993).
4.4(k) Fifth Amendment, dated as of August 2, 1992, to the Loan Agreement
(Exhibit 4.4(j) to the Company's Annual Report on Form 10-K for the
year ended October 31, 1993).
4.4(l) Sixth Amendment, dated as of October 29, 1993, to the Loan Agreement
(Exhibit 4.4(k) to the Company's Annual Report on Form 10-K for the
year ended October 31, 1993).
4.4(m) Seventh Amendment, dated as of March 30, 1994, to the Loan Agreement
(Exhibit 4.9 to the Company's Quarterly Report on Form 10-Q for the
quarter ended May 1, 1994).
4.4(n)* Eighth Amendment, dated as of August 29, 1994, to the Loan Agreement.
4.4(o) Consent and Waiver Letter, dated as of September 12, 1994, to the
Company from GECC (Exhibit 4.6 to the Company's Quarterly Report on
Form 10-Q for the quarter ended July 31, 1994).
4.4(p)* Ninth Amendment, dated as of November 4, 1994, to the Loan Agreement.
4.4(q)* Tenth Amendment, dated January 4, 1995, to the Loan Agreement.
4.4(r)* Eleventh Amendment, dated as of January 23, 1995, to the Loan
Agreement.
4.5(a) Loan and Security Agreement ("Loan and Security Agreement"), dated
December 27, 1991, between the Company and The CIT Group/Equipment
Financing, Inc. ("CIT") (Exhibit 28.2 to the Company's Quarterly Report
on Form 10-Q for the quarter ended February 2, 1992).
4.5(b) Amendment, dated September 2, 1992, to the Loan and Security Agreement
(Exhibit 4.5(b) to the Company's Annual Report on Form 10-K for the
year ended November 1, 1992).
4.5(c) Amendment, dated October 30, 1992, to the Loan and Security Agreement
(Exhibit 4.5(c) to the Company's Annual Report on Form 10-K for the
year ended November 1, 1992).
4.5(d) Amendment, dated December 31, 1992, to the Loan and Security Agreement
(Exhibit 4.5(d) to Post-Effective Amendment No. 4 to the Company's
Registration Statement (No. 33-38520) on Form S-1).
4.5(e) Amendment, dated as of July 30, 1993, to the Loan and Security
Agreement (Exhibit 4.5(e) to Post-Effective Amendment No. 4 to the
Company's Registration Statement (No. 33-38520) on Form S-1).
4.5(f) Third Amendment to the Loan and Security Agreement, dated as of June
13, 1994 (Exhibit 4.4 to the Company's Quarterly Report on Form 10-Q
for the quarter ended July 31, 1994.)
4.5(g) Fourth Amendment to the Loan and Security Agreement, dated as of
September 12, 1994 (Exhibit 4.5 to the Company's Quarterly Report on
Form 10-K for the quarter ended July 31, 1994).
4.5(h)* Fifth Amendment to the Loan and Security Agreement, dated as of
December 22, 1994.
4.6(a) Indenture, dated as of April 5, 1993, between the Company and Shawmut
Bank Connecticut, National Association ("Shawmut"), as trustee,
relating to the Senior Secured Floating Rate Notes ("Senior Secured
Notes") (Exhibit 4.6(a) to Post-Effective Amendment No. 4 to the
Company's Registration Statement (No. 33-38520) on Form S-1).
4.6(b) Form of Senior Secured Note due October 30, 1997 (Exhibit 4.6(b) to
Post-Effective Amendment No. 4 to the Company's Registration Statement
(No. 33-38520) on Form S-1).
4.6(c) Form of Deed to Secure Debt, Assignments of Leases and Rents, Security
Agreements and Fixture Filings, dated as of April 5, 1993, between the
Company and Shawmut, as trustee (Exhibit 4.6(c) to Post-Effective
Amendment No. 4 to the Company's Registration Statement (No. 33-38520)
on Form S-1).
4.6(d) Security Agreement, dated as of April 5, 1993, between the Company and
Shawmut, as trustee (Exhibit 4.6(d) to Post-Effective Amendment No. 4
to the Company's Registration Statement (No. 33-38520) on Form S-1).
52
<PAGE>
4.6(e) Form of Trademark Security Agreement, dated as of April 5, 1993,
between the Company and Shawmut, as trustee (Exhibit 4.6(e) to Post-
Effective Amendment No. 4 to the Company's Registration Statement (No.
33-38520) on Form S-1).
4.6(f) Form of Patent Security Agreement, dated as of April 5, 1993, between
the Company and Shawmut, as trustee (Exhibit 19.4 to the Company's
Quarterly Report on Form 10-Q for the quarter ended August 1, 1993).
4.6(g) Amended and Restated Indenture, dated as of March 30, 1994, between the
Company and Shawmut Bank of Connecticut, National Association, as
trustee, relating to the Senior Secured Notes (Exhibit 4.1 to the
Company's Quarterly Report on Form 10-Q for the quarter ended May 1,
1994).
4.6(h) Form of Original Senior Secured Note (incorporated herein by reference
to Exhibit 4.6(g)).
4.6(i) Form of Additional Senior Secured Note (incorporated herein by
reference to Exhibit 4.6(g).
4.6(j) Form of First Amendment to Deed to Secure Debt, Assignments of Leases
and Rents, Security Agreements and Fixture Filings, dated as of March
30, 1994, between the Company and Shawmut Bank Connecticut, National
Association, as trustee (Exhibit 4.4 to the Company's Quarterly Report
on Form 10-Q for the quarter ended May 1, 1994).
4.6(k) First Amendment to Pledge and Security Agreement, dated as of March 30,
1994 between the Company and Shawmut Bank Connecticut, National
Association, as trustee (Exhibit 4.5 to the Company's Quarterly Report
on Form 10-Q for the quarter ended May 1, 1994).
4.6(l) First Amendment to Trademark Security Agreement (foreign), dated as of
March 30, 1994, between the Company and Shawmut Bank Connecticut,
National Association, as trustee (Exhibit 4.6 to the Company's
Quarterly Report on Form 10-Q for the quarter ended May 1, 1994).
4.6(m) First Amendment to Trademark Security Agreement (U.S.), dated as of
March 30, 1994, between the Company and Shawmut Bank Connecticut,
National Association, as trustee (Exhibit 4.7 to the Company's
Quarterly Report on Form 10-Q for the quarter ended May 1, 1994).
4.6(n) First Amendment to Patent Security Agreement, dated as of March 30,
1994, between the Company and Shawmut Bank Connecticut, National
Association, as trustee (Exhibit 4.8 to the Company's Quarterly Report
on Form 10-Q for the quarter ended May 1, 1994).
4.6(o)* Supplemental Indenture, dated as of January 23, 1995, between the
Company and Shawmut Bank Connecticut, National Association, as trustee,
relating to the Senior Secured Notes.
10.1(a) J. P. Stevens & Co., Inc. Trademark Assignments to the Company,
effective December 28, 1985, dated January 29, 1986 (Exhibit 10(h) to
the Company's Registration Statement (No. 33-27296) on Form S-1).
10.1(b) Lease, dated July 21, 1986, between the Company and 1185 Avenue of the
Americas Associates ("1185 Associates") (Exhibit 10(t) to the Company's
Registration Statement (No. 33-27296) on Form S-1).
10.1(c) Lease Modification Agreement, dated December 5, 1991, between the
Company and 1185 Associates (Exhibit 10.7 to the Company's Registration
Statement (No. 33-44417) on Form S-1).
10.1(d) Consent to Lease Modification Agreement, dated May 11, 1992, between
the Company and 1185 Associates (Exhibit 10.2(c) to the Company's
Annual Report on Form 10-K for the year ended November 1, 1992).
10.1(e) Lease Modification Agreement, dated May 11, 1992, between the Company
and 1185 Associates (Exhibit 10.1(d) to the Company's Annual Report on
Form 10-K for the year ended November 1, 1992).
10.2(a) Amended Note Registration Rights Agreement, dated as of November 19,
1990, among the Company and the parties thereto (Exhibit 10.4 to the
Company's Registration Statement (No. 33-38520) on Form S-1).
10.2(b) Common Stock Registration Rights Agreement, dated as of November 19,
1990, among the Company, Columbia Savings & Loan Association, CSL
Investments, Executive Life Insurance Company and the parties thereto
(Exhibit 10.5 to the Company's Registration Statement (No. 33-38520) on
Form S-1).
10.2(c) Preferred Stock Registration Rights Agreement, dated as of November 19,
1990, between the Company and Executive Life Insurance Company (Exhibit
10.6 to the Company's Registration Statement (No. 33-38520) on
Form S-1).
53
<PAGE>
10.2(d)* Common Stock Registration Rights Agreement, dated as of September 9,
1994, between the Company and Resolution Trust Corporation as receiver
for Columbia Savings & Loan Association, F.A.
10.3(a)* Common Stock Incentive Plan as amended as of March 30, 1994.
10.3(b) Form of Incentive Stock Option Agreement (Exhibit 4.2(a) to the
Company's Registration Statement (No. 33-55770) on Form S-8).
10.3(c) Alternative Form of Incentive Stock Option Agreement (Exhibit 4.2(b) to
the Company's Registration Statement (No. 33-55770) on Form S-8).
10.4(a) Form of Equity Referenced Deferred Incentive Award Agreement ("ERA")
(Exhibit 10.13 to the Company's Registration Statement (No. 33-44417)
on Form S-1).
10.4(b)* Amendment, dated February 10, 1994, to the ERA Agreement, dated
February 26, 1992.
10.5(a) Form of Change in Control Agreement (Exhibit 10.6 to the Company's
Annual Report on Form 10-K for the year ended November 1, 1992).
10.5(b) Employment Agreement dated December 16, 1993 between the Company and
Christopher L. Schaller. (Exhibit 10.5(b) to the Company's Annual
Report on Form 10-K for the year ended October 31, 1993).
10.5(c) Form of Employment Agreement for Executive Vice Presidents. (Exhibit
10.5(c) to the Company's Annual Report on Form 10-K for the year ended
October 31, 1993).
10.6(a) Supplemental Retirement Benefit Plan (Exhibit 10.7 to the Company's
Annual Report on Form 10-K for the year ended November 1, 1992).
10.6(b) Trust Agreement, dated December 30, 1993, of the Supplemental
Retirement Benefit Plan Trust. (Exhibit 10.6(b) to the Company's Annual
Report on Form 10-K for the year ended October 31, 1993).
10.7* Management Incentive Plan - Fiscal Year 1995.
10.8 Non-Qualified Salaried Employees' Savings, Investment and Profit
Sharing Plan (Exhibit 10.9 to the Company's Annual Report on Form 10-K
for the year ended November 1, 1992).
10.9(a)* Form of Indemnity Agreement, effective as of February 7, 1994, between
the Company and its corporate officers.
10.9(b)* Form of Indemnity Agreement, effective as of February 7, 1994,
between the Company and its directors.
10.10(a)*License Agreement, dated July 1, 1992, between Campagia Tessile
S.p.A. ("licensor") and the Company.
10.10(b)*Guarantee Agreement, dated July 1, 1992, between the Licensor and
the Company.
10.10(c)*Italian Fabrics Purchase Agreement, dated July 1, 1992, between the
Licensor and the Company.
10.10(d)*Liquidated Damages Agreement, dated July 1, 1992, between the Licensor
and the Company.
10.10(e)*Use of the mark "Carpini" Agreement, dated July 1, 1992, between the
Licensor and the Company.
10.10(f)*Consultancy/Sales Fee Agreement, dated July 1, 1992, between
Woolverton Limited ("Consultant") and the Company.
10.10(g)*Guarantee Agreement, dated July 1, 1992, between the Consultant and
the Company.
10.10(h)*Consultation for Purchase of Italian Fabrics Agreement, dated July
1, 1992, between the Consultant and the Company.
10.10(i)*Liquidated Damages Agreement, dated July 1, 1992, between the
Consultant and the Company.
10.10(j)*Renegotiation of Sales Fee Arrangements for Non-Registration of
Marks, dated July 1, 1992, between the Consultant and the Company.
54
<PAGE>
11.1* Computation of per share earnings.
23.1* Consent of Deloitte & Touche LLP.
27.1* Financial Data Schedule.
* Filed herewith.
55
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Date: January 26, 1995 By: /s/ Christopher L. Schaller
----------------------------
Christopher L. Schaller
President and Chief
Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Christopher L. Schaller President and Chief January 26, 1995
- --------------------------------- Executive Officer
Christopher L. Schaller and Director
(Principal Executive
Officer)
/s/ William B. Towne Executive Vice January 26, 1995
- --------------------------------- President and
William B. Towne Chief Financial
Officer (Principal
Financial and
Accounting Officer)
/s/ Stephen Berger Director January 26, 1995
- ---------------------------------
Stephen Berger
/s/ Cameron Clark, Jr. Director January 26, 1995
- ---------------------------------
Cameron Clark, Jr.
/s/ Steven M. Friedman Director January 26, 1995
- ---------------------------------
Steven M. Friedman
/s/ F. Peter Libassi Director January 26, 1995
- ---------------------------------
F. Peter Libassi
/s/ Alain Oberrotman Director January 26, 1995
- ---------------------------------
Alain Oberrotman
56
<PAGE>
INDEPENDENT AUDITORS' REPORT
To The Board of Directors and Shareholders of
Forstmann & Company, Inc.:
We have audited the financial statements of Forstmann & Company, Inc. as of
October 30, 1994 and October 31, 1993 and the related statements of operations,
shareholders' equity, and cash flows for the fifty-two weeks ended October 30,
1994 and October 31, 1993 and the fifty-three weeks ended November 1, 1992 and
have issued our report thereon dated December 8, 1994 (January 23, 1995 as to
paragraph 2 of Note 7)(which expresses an unqualified opinion and includes an
explanatory paragraph relating to the Company's quasi reorganization and its
changes in its method of accounting for income taxes)(included elsewhere in the
Annual Report on Form 10-K). Our audits also included the financial statements
listed in Item 14(a)2 of this Annual Report on Form 10-K. These financial
statement schedules are the responsibility of the Company's management. Our
responsibility is to express an opinion based on our audits. In our opinion,
such financial statement schedules, when considered in relation to the basic
financial statements taken as a whole, present faily in all material respects
the information set forth therein.
/s/Deloitte & Touche LLP
- ------------------------
Deloitte & Touche LLP
Atlanta, Georgia
December 8, 1994
57
<PAGE>
SCHEDULE VIII
FORSTMANN & COMPANY, INC.
VALUATION AND QUALIFYING ACCOUNTS
THE FIFTY-THREE WEEKS ENDED NOVEMBER 1, 1992 AND THE FIFTY-TWO WEEKS
ENDED OCTOBER 31, 1993 AND OCTOBER 30, 1994
<TABLE>
<CAPTION>
Additions
Balance at Charged to Balance
Beginning Costs and at End
Description of Period Expenses Deductions of Period
- ----------- ---------- ---------- ------------------ ----------
<S> <C> <C> <C> <C>
Allowance for Doubtful Accounts:
- --------------------------------
Fifty-Three Weeks Ended
November 1, 1992 $6,836,000 $1,206,000 $ (189,000) /(1)/ $7,853,000
Fifty-Two Weeks Ended
October 31, 1993 $7,853,000 $2,714,000 $(8,372,000) /(1)/ $2,195,000
Fifty-Two Weeks Ended
October 30, 1994 $2,195,000 $2,167,000 $(2,262,000) /(1)/ $2,100,000
Inventory Market Reserves:
- --------------------------
Fifty-Three Weeks Ended
November 1, 1992 $2,940,000 $ (702,000) /(2)/ $2,238,000
Fifty-Two Weeks Ended
October 31, 1993 $2,238,000 $ (335,000) /(2)/ $1,903,000
Fifty-Two Weeks Ended
October 30, 1994 $1,903,000 $ 290,000 $2,193,000
</TABLE>
/(1)/ Accounts written off net of recoveries of accounts previously written off.
/(2)/ Net reduction due to disposal of identified excess cloth and yarn
inventories.
58
<PAGE>
EXHIBIT INDEX
-------------
Sequential
Exhibit No. Description Page No.
- ----------- ------------ ----------
3.1(a) Articles of Restatement setting forth the
Amended and Restated Articles of Incorporation
of the Company, as filed with the Secretary
of State of Georgia on November 19, 1990
(Exhibit 3(i)1. to the Company's Quarterly
Report on Form 10-Q for the quarter ended
July 31, 1994). *
3.1(b) Articles of Correction, as filed with the
Secretary of State of Georgia on
December 18, 1990 (Exhibit 3(i)2. to the
Company's Quarterly Report on Form 10-Q
for the quarter ended July 31, 1994). *
3.1(c) Articles of Merger of Forstmann Georgia Corp.
and the Company, as filed with the Secretary
of State of Georgia on March 3, 1992
(Exhibit 3(i)3. to the Company's Quarterly
Report on Form 10-Q for the quarter ended
July 31, 1994). *
3.1(d) Articles of Amendment to the Articles of
Incorporation of the Company, as filed with
the Secretary of State of Georgia on
April 5, 1994.
3.2(a) By-Laws of the Company (Exhibit 4.4 to the
Company's Registration Statement (No. 33-55770)
on Form S-8). *
3.2(b) Amended and Restated By-Laws of the Company
on March 30, 1994 (Exhibit 3(ii) to the
Company's Quarterly Report on Form 10-Q
for the quarter ended July 31, 1994). *
4.1(a) Amended and Restated Indenture, dated as of
November 19, 1990, relating to Senior
Subordinated Notes due April 15, 1999
(Exhibit 2 to the Company's Current Report
on Form 8-K dated November 19, 1990). *
4.1(b) First Supplemental Indenture, dated as of
November 29, 1990, relating to Senior
Subordinated Notes due April 15, 1999
(Exhibit 3 to the Company's Current Report
on Form 8-K dated November 19, 1990). *
4.1(c) Second Supplemental Indenture, dated as of
March 4, 1992, relating to Senior Subordinated
Notes due April 15, 1999 (Exhibit 4.3 to the
Company's Quarterly Report on Form 10-Q
for the quarter ended February 2, 1992). *
__________
*Incorporated herein by reference as indicated.
(i)
<PAGE>
EXHIBIT INDEX
-------------
Sequential
Exhibit No. Description Page No.
- ----------- ------------ ----------
4.2 Form of 14-3/4% Senior Subordinated Note
due April 15, 1999 (Exhibit A to Exhibit
4.1(a) hereof, as amended by Exhibits
4.1(b) and 4.1(c) hereof). *
4.3 Form of Amended Senior Subordinated Note
due April 15, 1999 (Exhibit B to Exhibit
4.1(a) hereof, as amended by Exhibits
4.1(b) and 4.1(c) hereof). *
4.4(a) Loan Agreement, dated as of October 30, 1992,
between the Company and General Electric
Capital Corporation ("GECC"), as lender
and agent for the lenders named therein
("Loan Agreement") (Exhibit 4.4(a) to the
Company's Annual Report on Form 10-K for the
year ended November 1, 1992). *
4.4(b) Security Agreement, dated as of November
13, 1992, by the Company, in favor of GECC,
as lender and agent for the lenders named
therein (Exhibit 4.4(b) to the Company's
Annual Report on Form 10-K for the year
ended November 1, 1992). *
4.4(c) Form of Trademark Security Agreement, dated
as of November 13, 1992, by the Company, in
favor of GECC, as lender and agent for the
lenders named therein (Exhibit 4.4(c) to the
Company's Annual Report on Form 10-K for the
year ended November 1, 1992). *
4.4(d) Form of Deed to Secure Debt, Assignment of
Leases and Rents, Security Agreement and
Fixture Filing, dated as of November 13,
1992, between the Company and GECC, as agent
(Exhibit 4.4(d) to the Company's Annual
Report on Form 10-K for the year ended
November 1, 1992). *
4.4(e) First Amendment, dated as of November 13,
1992, to the Loan Agreement (Exhibit 19.1
to the Company's Quarterly Report on
Form 10-Q for the quarter ended August
1, 1993). *
4.4(f) Form of Promissory Note for the Loan
Agreement (Exhibit 19.2 to the Company's
Quarterly Report on Form 10-Q for the
quarter ended August 1, 1993). *
__________
*Incorporated herein by reference as indicated.
(ii)
<PAGE>
EXHIBIT INDEX
-------------
Sequential
Exhibit No. Description Page No.
- ----------- -------------- ----------
4.4(g) Second Amendment, dated as of December
30, 1992, to the Loan Agreement (Exhibit
19.3 to the Company's Quarterly Report
on Form 10-Q for the quarter ended
August 1, 1993). *
4.4(h) Third Amendment, dated as of April 5,
1993, to the Loan Agreement (Exhibit
19.5 to the Company's Quarterly Report
on Form 10-Q for the quarter ended
August 1, 1993). *
4.4(i) Consent and Waiver Letter, dated as of
June 10, 1994, to the Company from GECC
(Exhibit 4.3 to the Company's Quarterly
Report on Form 10-Q for the quarter ended
July 31, 1994). *
4.4(j) Fourth Amendment, dated as of June 11, 1993,
to the Loan Agreement (Exhibit 19.6 to the
Company's Quarterly Report on Form 10-Q for
the quarter ended August 1, 1993). *
4.4(k) Fifth Amendment, dated as of August 2, 1992,
to the Loan Agreement (Exhibit 4.4(j) to the
Company's Annual Report on Form 10-K for the
year ended October 31, 1993). *
4.4(l) Sixth Amendment, dated as of October 29, 1993,
to the Loan Agreement (Exhibit 4.4(k) to the
Company's Annual Report on Form 10-K for the
year ended October 31, 1993). *
4.4(m) Seventh Amendment, dated as of March 30, 1994,
to the Loan Agreement (Exhibit 4.9 to the
Company's Quarterly Report on Form 10-Q for
the quarter ended May 1, 1994). *
4.4(n) Eighth Amendment, dated as of August 29, 1994,
to the Loan Agreement.
4.4(o) Consent and Waiver Letter, dated as of September
12, 1994, to the Company from GECC (Exhibit 4.6
to the Company's Quarterly Report on Form 10-Q
for the quarter ended July 31, 1994). *
4.4(p) Ninth Amendment, dated as of November 4, 1994,
to the Loan Agreement.
4.4(q) Tenth Amendment, dated January 4, 1995, to the
Loan Agreement.
4.4(r) Eleventh Amendment, dated as of January 23,
1995, to the Loan Agreement.
__________
*Incorporated herein by reference as indicated.
(iii)
<PAGE>
EXHIBIT INDEX
-------------
Sequential
Exhibit No. Description Page No.
- ----------- ------------- ----------
4.5(a) Loan and Security Agreement ("Loan and
Security Agreement"), dated December 27,
1991, between the Company and The CIT
Group/Equipment Financing, Inc. ("CIT")
(Exhibit 28.2 to the Company's Quarterly
Report on Form 10-Q for the quarter ended
February 2, 1992). *
4.5(b) Amendment, dated September 2, 1992, to the
Loan and Security Agreement (Exhibit 4.5(b)
to the Company's Annual Report on Form 10-K
for the year ended November 1, 1992). *
4.5(c) Amendment, dated October 30, 1992, to the
Loan and Security Agreement (Exhibit 4.5(c)
to the Company's Annual Report on Form 10-K
for the year ended November 1, 1992). *
4.5(d) Amendment, dated December 31, 1992, to the
Loan and Security Agreement (Exhibit 4.5(d)
to Post-Effective Amendment No. 4 to the
Company's Registration Statement (No. 33-38520)
on Form S-1). *
4.5(e) Amendment, dated as of July 30, 1993, to the
Loan and Security Agreement (Exhibit 4.5(e)
to Post-Effective Amendment No. 4 to the
Company's Registration Statement (No. 33-38520)
on Form S-1). *
4.5(f) Third Amendment to the Loan and Security
Agreement, dated as of June 13, 1994 (Exhibit
4.4 to the Company's Quarterly Report on Form
10-Q for the quarter ended July 31, 1994.) *
4.5(g) Fourth Amendment to the Loan and Security
Agreement, dated as of September 12, 1994
Exhibit 4.5 to the Company's Quarterly Report
on Form 10-K for the quarter ended July 31,
1994). *
4.5(h) Fifth Amendment to the Loan and Security
Agreement, dated as of December 22, 1994.
__________
*Incorporated herein by reference as indicated.
(iv)
<PAGE>
EXHIBIT INDEX
-------------
Sequential
Exhibit No. Description Page No.
- ----------- ------------- ----------
4.6(a) Indenture, dated as of April 5, 1993,
between the Company and Shawmut Bank
Connecticut, National Association ("Shawmut"),
as trustee, relating to the Senior
Secured Floating Rate Notes ("Senior
Secured Notes") (Exhibit 4.6(a) to
Post-Effective Amend-ment No. 4 to the
Company's Registration Statement
(No. 33-38520) on Form S-1). *
4.6(b) Form of Senior Secured Note due October
30, 1997 (Exhibit 4.6(b) to Post-Effective
Amendment No. 4 to the Company's
Registration Statement (No. 33-38520)
on Form S-1). *
4.6(c) Form of Deed to Secure Debt, Assignments
of Leases and Rents, Security Agreements
and Fixture Filings, dated as of April
5, 1993, between the Company and Shawmut,
as trustee (Exhibit 4.6(c) to
Post-Effective Amendment No. 4 to the
Company's Registration Statement
(No. 33-38520) on Form S-1). *
4.6(d) Security Agreement, dated as of April 5,
1993, between the Company and Shawmut,
as trustee (Exhibit 4.6(d) to
Post-Effective Amendment No. 4 to the
Company's Registration Statement
No. 33-38520) on Form S-1). *
4.6(e) Form of Trademark Security Agreement,
dated as of April 5, 1993, between the
Company and Shawmut, as trustee (Exhibit
4.6(e) to Post-Effective Amendment No. 4
to the Company's Registration Statement
(No. 33-38520) on Form S-1). *
4.6(f) Form of Patent Security Agreement, dated as
of April 5, 1993, between the Company and
Shawmut, as trustee (Exhibit 19.4 to the
Company's Quarterly Report on Form 10-Q
for the quarter ended August 1, 1993). *
4.6(g) Amended and Restated Indenture, dated as of
March 30, 1994, between the Company and
Shawmut Bank of Connecticut, National
Association, as trustee, relating to the
Senior Secured Notes (Exhibit 4.1 to the
Company's Quarterly Report on Form 10-Q for
the quarter ended May 1, 1994). *
__________
*Incorporated herein by reference as indicated.
(v)
<PAGE>
EXHIBIT INDEX
-------------
Sequential
Exhibit No. Description Page No.
- ----------- ----------- ----------
4.6(h) Form of Original Senior Secured Note
(incorporated herein by reference to
Exhibit 4.6(g)). *
4.6(i) Form of Additional Senior Secured Note
(incorporated herein by reference to
Exhibit 4.6(g). *
4.6(j) Form of First Amendment to Deed to
Secure Debt, Assignments of Leases
and Rents, Security Agreements and Fixture
Filings, dated as of March 30, 1994, between
the Company and Shawmut Bank Connecticut,
National Association, as trustee (Exhibit
4.4 to the Company's Quarterly Report on
Form 10-Q for the quarter ended May 1, 1994). *
4.6(k) First Amendment to Pledge and Security
Agreement, dated as of March 30, 1994 between
the Company and Shawmut Bank Connecticut,
National Association, as trustee (Exhibit
4.5 to the Company's Quarterly Report on
Form 10-Q for the quarter ended May 1, 1994). *
4.6(l) First Amendment to Trademark Security
Agreement (foreign), dated as of March 30,
1994, between the Company and Shawmut Bank
Connecticut, National Association, as trustee
(Exhibit 4.6 to the Company's Quarterly
Report on Form 10-Q for the quarter ended
May 1, 1994). *
4.6(m) First Amendment to Trademark Security
Agreement (U.S.), dated as of March 30, 1994,
between the Company and Shawmut Bank
Connecticut, National Association, as trustee
(Exhibit 4.7 to the Company's Quarterly
Report on Form 10-Q for the quarter ended
May 1, 1994). *
4.6(n) First Amendment to Patent Security Agreement,
dated as of March 30, 1994, between the
Company and Shawmut Bank Connecticut,
National Association, as trustee (Exhibit
4.8 to the Company's Quarterly Report on
Form 10-Q for the quarter ended May 1, 1994). *
4.6(o) Supplemental Indenture, dated as of January 23,
1995, between the Company and Shawmut Bank
Connecticut, National Association, as trustee,
relating to the Senior Secured Notes.
__________
*Incorporated herein by reference as indicated.
(vi)
<PAGE>
EXHIBIT INDEX
-------------
Sequential
Exhibit No. Description Page No.
- ----------- ----------- ----------
10.1(a) J. P. Stevens & Co., Inc. Trademark
Assignments to the Company, effective
December 28, 1985, dated January 29,
1986 (Exhibit 10(h) to the Company's
Registration Statement (No. 33-27296)
on Form S-1). *
10.1(b) Lease, dated July 21, 1986, between the
Company and 1185 Avenue of the Americas
Associates ("1185 Associates") (Exhibit
10(t) to the Company's Registration
Statement (No. 33-27296) on Form S-1). *
10.1(c) Lease Modification Agreement, dated
December 5, 1991, between the Company
and 1185 Associates (Exhibit 10.7 to the
Company's Registration Statement
(No. 33-44417) on Form S-1). *
10.1(d) Consent to Lease Modification Agreement,
dated May 11, 1992, between the Company
and 1185 Associates (Exhibit 10.2(c) to
the Company's Annual Report on Form 10-K
for the year ended November 1, 1992). *
10.1(e) Lease Modification Agreement, dated
May 11, 1992, between the Company and
1185 Associates (Exhibit 10.1(d) to the
Company's Annual Report on Form 10-K for
the year ended November 1, 1992). *
10.2(a) Amended Note Registration Rights Agreement,
dated as of November 19, 1990, among the
Company and the parties thereto (Exhibit
10.4 to the Company's Registration Statement
(No. 33-38520) on Form S-1). *
10.2(b) Common Stock Registration Rights Agreement,
dated as of November 19, 1990, among the
Company, Columbia Savings & Loan Association,
CSL Investments, Executive Life Insurance
Company and the parties thereto (Exhibit
10.5 to the Company's Registration Statement
(No. 33-38520) on Form S-1). *
10.2(c) Preferred Stock Registration Rights Agreement,
dated as of November 19, 1990, between the
Company and Executive Life Insurance Company
(Exhibit 10.6 to the Company's Registration
Statement (No. 33-38520) on Form S-1). *
__________
*Incorporated herein by reference as indicated.
(vii)
<PAGE>
EXHIBIT INDEX
-------------
Sequential
Exhibit No. Description Page No.
- ----------- ------------- ----------
10.2(d) Common Stock Registration Rights Agreement,
dated as of September 9, 1994, between the
Company and Resolution Trust Corporation as
receiver for Columbia Savings & Loan
Association,F.A.
10.3(a) Common Stock Incentive Plan as amended
as of March 30, 1994.
10.3(b) Form of Incentive Stock Option Agreement
(Exhibit 4.2(a) to the Company's Registration
Statement (No. 33-55770) on Form S-8). *
10.3(c) Alternative Form of Incentive Stock Option
Agreement (Exhibit 4.2(b) to the Company's
Registration Statement (No. 33-55770)
on Form S-8). *
10.4(a) Form of Equity Referenced Deferred Incentive
Award Agreement ("ERA") (Exhibit 10.13 to
the Company's Registration Statement
(No. 33-44417) on Form S-1). *
10.4(b) Amendment, dated February 10, 1994, to the
ERA Agreement, dated February 26, 1992.
10.5(a) Form of Change in Control Agreement (Exhibit
10.6 to the Company's Annual Report on
Form 10-K for the year ended November 1, 1992). *
10.5(b) Employment Agreement dated December 16, 1993
between the Company and Christopher L. Schaller.
(Exhibit 10.5(b) to the Company's Annual
Report on Form 10-K for the year ended
October 31, 1993). *
10.5(c) Form of Employment Agreement for Executive
Vice Presidents. (Exhibit 10.5(c) to the
Company's Annual Report on Form 10-K for the
year ended October 31, 1993). *
10.6(a) Supplemental Retirement Benefit Plan (Exhibit
10.7 to the Company's Annual Report on
Form 10-K for the year ended November 1, 1992). *
10.6(b) Trust Agreement, dated December 30, 1993,
of the Supplemental Retirement Benefit Plan
Trust. (Exhibit 10.6(b) to the Company's
Annual Report on Form 10-K for the year ended
October 31, 1993). *
__________
*Incorporated herein by reference as indicated.
(viii)
<PAGE>
EXHIBIT INDEX
-------------
Sequential
Exhibit No. Description Page No.
- ----------- ------------ ----------
10.7 Management Incentive Plan - Fiscal Year 1995.
10.8 Non-Qualified Salaried Employees' Savings,
Investment and Profit Sharing Plan (Exhibit
10.9 to the Company's Annual Report on Form
10-K for the year ended November 1, 1992). *
10.9(a) Form of Indemnity Agreement, effective as of
February 7, 1994, between the Company and its
corporate officers.
10.9(b) Form of Indemnity Agreement, effective
as of February 7, 1994, between the
Company and its directors.
10.10(a) License Agreement, dated July 1, 1992,
between Campagia Tessile S.p.A. ("licensor")
and the Company.
10.10(b) Guarantee Agreement, dated July 1, 1992,
between the Licensor and the Company.
10.10(c) Italian Fabrics Purchase Agreement, dated
July 1, 1992, between the Licensor and
the Company.
10.10(d) Liquidated Damages Agreement, dated
July 1, 1992, between the Licensor and the
Company.
10.10(e) Use of the mark "Carpini" Agreement, dated
July 1, 1992, between the Licensor and the
Company.
10.10(f) Consultancy/Sales Fee Agreement, dated
July 1, 1992, between Woolverton Limited
("Consultant") and the Company.
10.10(g) Guarantee Agreement, dated July 1, 1992,
between the Consultant and the Company.
10.10(h) Consultation for Purchase of Italian Fabrics
Agreement, dated July 1, 1992, between the
Consultant and the Company.
10.10(i) Liquidated Damages Agreement, dated
July 1, 1992, between the Consultant and
the Company.
10.10(j) Renegotiation of Sales Fee Arrangements
for Non-Registration of Marks, dated
July 1, 1992, between the Consultant and
the Company.
11.1 Computation of per share earnings.
23.1 Consent of Deloitte & Touche LLP.
27.1 Financial Data Schedule.
__________
*Incorporated herein by reference as indicated.
(ix)
<PAGE>
EXHIBIT 3.1(d)
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
FORSTMANN & COMPANY, INC.
I.
The name of the corporation is Forstmann & Company, Inc.
II.
Effective the date hereof, Article FIFTH of the Articles of Incorporation
of Forstmann & Company, Inc. is amended to read as follows:
The corporation shall have authority to issue (i) 20,000,000 shares of
common stock, $.001 par value (the "Common Stock"), (ii) 120,000 shares of
non-voting common stock, $.001 par value (the "Non-Voting Common Stock"),
and (iii) 100,000 shares of preferred stock, $1.00 par value, which shall
be designated 5% Senior (Pay-in-Kind) Preferred Stock (the "Preferred
Stock").
All other provision of the Articles of Incorporation shall remain in full force
and effect.
III.
This amendment was recommended to the shareholders by the board of
directors, duly approved by the shareholders in accordance with the provisions
of Section 14-2-1003 of the Georgia Business Corporation Code and adopted on
March 30, 1994.
IN WITNESS WHEREOF, the Corporation has caused these Articles of Amendment
to be executed and attested by its duly authorized officers of this 30th day of
March, 1994.
Forstmann & Company, Inc.
By: /s/ Jane S. Pollack
------------------------------
Jane S. Pollack, Vice
President and Secretary
<PAGE>
EXHIBIT 4.4(n)
EIGHTH AMENDMENT TO LOAN AGREEMENT
----------------------------------
THIS EIGHTH AMENDMENT TO LOAN AGREEMENT (this "Amendment"), made and
entered into effective as of August 29, 1994, by and between FORSTMANN &
COMPANY, INC., a Georgia corporation ("Borrower"), and GENERAL ELECTRIC CAPITAL
CORPORATION, a New York corporation ("GE Capital"), as sole "Lender" under the
"Loan Agreement" hereinafter referred to and as agent for itself and the other
"Lenders" who may hereafter become parties to the Loan Agreement (GE Capital, in
such capacity, the "Agent").
RECITALS:
--------
A. Borrower and GE Capital, as a Lender and as Agent, entered into
a certain Loan Agreement, dated as of October 30, 1992, as amended (the "Loan
Agreement"; capitalized terms used herein and not defined herein shall have the
meanings ascribed to them in the Loan Agreement) whereby, subject to the terms
and conditions set forth therein, GE Capital, as sole Lender thereunder, made
certain financial accommodations available to Borrower; and
B. Borrower and GE Capital, as Lender and Agent, desire to enter
into this Amendment in order to amend the Loan Agreement in certain respects as
hereinafter set forth.
In consideration of the premises and the mutual covenants and
agreements herein contained, the parties hereto covenant and agree as follows:
1. AMENDMENT. Effective upon execution of this Amendment:
---------
(a) The Loan Agreement shall be deemed to be amended by adding the
following sentence at the end of the definition of "Adjusted Tangible Net Worth"
contained in Section 1.1 of the Loan Agreement:
Notwithstanding anything contained herein to the contrary, during the
period commencing on August 29, 1994 and ending on December 31, 1994,
there shall not be taken into account in calculating Borrower's
Adjusted Tangible Net Worth (a) the effect of Borrower's recognition
of accrued pension liabilities during such period from August 29, 1994
through December 31, 1994 or (b) the effect of settlement costs in the
amount of $931,000 incurred in connection with Borrower's settlement
with Resolution Trust Company of the lawsuit captioned Forstmann &
-----------
Company, Inc. v. Resolution Trust Company, et al., Civil Action File
-------------------------------------------------
No. 92-CV-1947-RHH, United
<PAGE>
States District Court for the Northern District of Georgia, Atlanta
Division.
(b) The Loan Agreement shall be deemed to be further amended by
deleting from Section 9.1(e) thereof the phrase "if the effect thereof (with or
without the giving of notice or lapse of time or both)" and substituting in lieu
thereof the following phrase:
"and in each case shall continue beyond the last day of any applicable
grace, notice and/or cure period, if the effect thereof"
2. OTHER AGREEMENTS.
----------------
(a) Except as set forth expressly herein and above, all terms of the
Loan Agreement and the other Loan Documents shall be and remain in full force
and effect and shall constitute the legal, valid, binding and enforceable
obligations of Borrower to the Agent and Lenders, subject to Debtor Relief Laws.
In furtherance of the foregoing, Borrower acknowledges that from and after the
date hereof, it shall continue to be bound by all provisions of the Loan
Agreement as amended hereby. To the extent any terms and conditions in any of
the other Loan Documents shall contradict or be in conflict with any terms or
conditions of the Loan Agreement, after giving effect to this Amendment, such
terms and conditions are hereby deemed modified and amended accordingly to
reflect the terms and conditions of the Loan Agreement as modified and amended
hereby.
(b) Borrower hereby affirms that each of the representations and
warranties of Borrower contained in the Loan Agreement or in any of the Loan
Documents is correct in all material respects on and as of the date hereof and
after giving effect to this Amendment (except to the extent that such
representations and warranties relate solely to an earlier date and except as
affected by transactions expressly contemplated by the Loan Agreement or this
Amendment). In addition, with respect to this Amendment, Borrower warrants and
represents as follows: The execution, delivery and performance by Borrower of
this Amendment and the other Loan Documents contemplated hereby (i) are within
Borrower's corporate power; (ii) have been duly authorized by all necessary or
proper corporate action; (iii) are not in contravention of any provision of
Borrower's articles of incorporation or bylaws; (iv) will not violate any law or
regulation, or any order or decree of any court or governmental instrumentality;
(v) will not require a consent or approval under, conflict with or result in the
breach or termination of, constitute a default under or accelerate any
performance required by, any indenture, mortgage, deed of trust, lease,
agreement or other instrument to which Borrower is a party or by which Borrower
or any of its property is bound; (vi) will not result in the creation or
imposition of any Lien upon any of the property of Borrower other than those in
favor of the Agent pursuant to the Loan Documents;
- 2 -
<PAGE>
and (vii) do not require the authorization, consent, approval, order, license or
permit from, or filing, registration or qualifi cation with, any Governmental
Agency in order to authorize or per mit such execution, delivery and performance
under applicable Laws. This Amendment has been duly executed and delivered for
the benefit of or on behalf of Borrower and constitutes a legal, valid and
binding obligation of Borrower, enforceable against Borrower in accordance with
its terms subject to Debtor Relief Laws.
(c) Borrower hereby represents that, after giving effect to this
Amendment, no Default or Event of Default has occurred and is continuing as of
the date hereof.
(d) Borrower agrees to pay on demand all reasonable costs and out-of-
pocket expenses of GE Capital in connection with the preparation, execution,
delivery and enforcement of this Amendment, the closing hereof, and any other
transactions contemplated hereby, including the fees and out-of-pocket expenses
of King & Spalding, counsel to GE Capital.
(e) To induce the Agent and Lenders to enter into this Amendment,
Borrower hereby acknowledges and agrees that, as of the date hereof, there
exists no right of offset, defense or counterclaim in favor of Borrower as
against the Agent or Lenders with respect to the Obligations.
(f) This Amendment shall be governed by, and construed in accordance
with the laws of the State of New York applicable to contracts made and
performed in such State and all applicable laws of the United States of America.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed under seal by their respective officers thereunto duly authorized,
as of the date first above written.
FORSTMANN & COMPANY, INC.
By:/s/Rod J. Peckham
-----------------
Rod J. Peckham, Vice President
and Treasurer
GENERAL ELECTRIC CAPITAL CORPORATION,
as Agent and initial Lender
By:/s/Rick Luck
------------
Rick Luck,
Vice President, GE Capital
Commercial Finance, Inc., being
duly authorized
- 3 -
<PAGE>
EXHIBIT 4.4(p)
NINTH AMENDMENT TO LOAN AGREEMENT
---------------------------------
THIS NINTH AMENDMENT TO LOAN AGREEMENT (this "Amendment"), made and
entered into effective as of November 4, 1994, by and between FORSTMANN &
COMPANY, INC., a Georgia corporation ("Borrower"), and GENERAL ELECTRIC CAPITAL
CORPORATION, a New York corporation ("GE Capital"), as sole "Lender" under the
"Loan Agreement" hereinafter referred to and as agent for itself and the other
"Lenders" who may hereafter become parties to the Loan Agreement (GE Capital, in
such capacity, the "Agent").
RECITALS:
--------
A. Borrower and GE Capital, as a Lender and as Agent, entered into
a certain Loan Agreement, dated as of October 30, 1992, as amended (the "Loan
Agreement"; capitalized terms used herein and not defined herein shall have the
meanings ascribed to them in the Loan Agreement) whereby, subject to the terms
and conditions set forth therein, GE Capital, as sole Lender thereunder, made
certain financial accommodations available to Borrower; and
B. Borrower and GE Capital, as Lender and Agent, desire to enter
into this Amendment in order to amend the Loan Agreement in certain respects as
hereinafter set forth.
In consideration of the premises and the mutual covenants and
agreements herein contained, the parties hereto covenant and agree as follows:
1. AMENDMENTS. Effective upon execution of this Amendment:
----------
(a) The Loan Agreement shall be deemed to be amended by deleting in
its entirety the definition of "Dissenters' Rights Payments" which appears in
Section 1.1 thereof and substituting in lieu thereof the following revised
definition of "Dissenters' Rights Payments":
"Dissenters' Rights Payments" means, collectively, the following
---------------------------
payments and stock issuances to be made by Borrower in settlement
of Borrower's action pursuant to O.C.G.A. (S) 14-2-1301 et seg.,
captioned Forstmann & Company, Inc. v. Resolution Trust
---------------------------------------------
Corporation, et al., Civil Action File No. 92-CV-1947-RHH, United
------------------
States District Court for the Northern District of Georgia,
Atlanta, Division: (a) the payment by Borrower of Cash in an
amount not to exceed $500,000, and the issuance by Borrower of
30,000 shares of its common stock, in each case, to the Resolution
Trust Corporation, as Receiver for Columbus Savings & Loan, a
dissenting shareholder
<PAGE>
of Borrower and (b) the payment by Borrower of Cash in an amount
not to exceed $500,000 in the aggregate to James E. Kjorlien, Gary
M. Smith, Grace Brothers Ltd., The Henley Group and Randall D.
Smith, Jeffrey A. Smith and Russell B. Smith, as Trustees for Lake
Trust, also dissenting shareholders of Borrower.
(b) The Loan Agreement shall be deemed to be further amended by adding
at the end of Section 6.20 thereof, the following sentence:
Notwithstanding anything contained in this Section 6.20 or
elsewhere in this Agreement to the contrary, Borrower's aggregate
Capital Expenditures for its Fiscal Year ending October 29, 1995
shall not exceed $10,500,000.
2. OTHER AGREEMENTS.
----------------
(a) Except as set forth expressly herein and above, all terms of the
Loan Agreement and the other Loan Documents shall be and remain in full force
and effect and shall constitute the legal, valid, binding and enforceable
obligations of Borrower to the Agent and Lenders, subject to Debtor Relief Laws.
In furtherance of the foregoing, Borrower acknowledges that from and after the
date hereof, it shall continue to be bound by all provisions of the Loan
Agreement as amended hereby. To the extent any terms and conditions in any of
the other Loan Documents shall contradict or be in conflict with any terms or
conditions of the Loan Agreement, after giving effect to this Amendment, such
terms and conditions are hereby deemed modified and amended accordingly to
reflect the terms and conditions of the Loan Agreement as modified and amended
hereby.
(b) Borrower hereby affirms that each of the representations and
warranties of Borrower contained in the Loan Agreement or in any of the Loan
Documents is correct in all material respects on and as of the date hereof and
after giving effect to this Amendment (except to the extent that such
representations and warranties relate solely to an earlier date and except as
affected by transactions expressly contemplated by the Loan Agreement or this
Amendment). In addition, with respect to this Amendment, Borrower warrants and
represents as follows: The execution, delivery and performance by Borrower of
this Amendment and the other Loan Documents contemplated hereby (i) are within
Borrower's corporate power; (ii) have been duly authorized by all necessary or
proper corporate action; (iii) are not in contravention of any provision of
Borrower's articles of incorporation or bylaws; (iv) will not violate any law or
regulation, or any order or decree of any court or governmental instrumentality;
(v) will not require a consent or approval under, conflict with or result in the
breach or termination of, constitute a default under or accelerate any
performance required by, any
- 2 -
<PAGE>
indenture, mortgage, deed of trust, lease, agreement or other instrument to
which Borrower is a party or by which Borrower or any of its property is bound;
(vi) will not result in the creation or imposition of any Lien upon any of the
property of Borrower other than those in favor of the Agent pursuant to the Loan
Documents; and (vii) do not require the authorization, consent, approval, order,
license or permit from, or filing, registration or qualifi cation with, any
Governmental Agency in order to authorize or per mit such execution, delivery
and performance under applicable Laws. This Amendment has been duly executed
and delivered for the benefit of or on behalf of Borrower and constitutes a
legal, valid and binding obligation of Borrower, enforceable against Borrower in
accordance with its terms subject to Debtor Relief Laws.
(c) Borrower hereby represents that, after giving effect to this
Amendment, no Default or Event of Default has occurred and is continuing as of
the date hereof.
(d) Borrower agrees to pay on demand all reasonable costs and out-of-
pocket expenses of GE Capital in connection with the preparation, execution,
delivery and enforcement of this Amendment, the closing hereof, and any other
transactions contemplated hereby, including the fees and out-of-pocket expenses
of King & Spalding, counsel to GE Capital.
(e) To induce the Agent and Lenders to enter into this Amendment,
Borrower hereby acknowledges and agrees that, as of the date hereof, there
exists no right of offset, defense or counterclaim in favor of Borrower as
against the Agent or Lenders with respect to the Obligations.
(f) This Amendment shall be governed by, and construed in accordance
with the laws of the State of New York applicable to contracts made and
performed in such State and all applicable laws of the United States of America.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed under seal by their respective officers thereunto duly authorized,
as of the date first above written.
FORSTMANN & COMPANY, INC.
By: /s/ Rod J. Peckham
------------------
Rod J. Peckham, Vice President
and Treasurer
GENERAL ELECTRIC CAPITAL
CORPORATION, as Agent and initial
Lender
- 3 -
<PAGE>
By: /s/ Rick Luck
-------------
Rick Luck,
Vice President, GE Capital
Commercial Finance, Inc., being
duly authorized
- 4 -
<PAGE>
EXHIBIT 4.4(q)
TENTH AMENDMENT TO LOAN AGREEMENT
---------------------------------
THIS TENTH AMENDMENT TO LOAN AGREEMENT (this "Amendment"), made and
entered into on January 4, 1995, by and between FORSTMANN & COMPANY, INC., a
Georgia corporation ("Borrower"), and GENERAL ELECTRIC CAPITAL CORPORATION, a
New York cor poration ("GE Capital"), as sole "Lender" under the "Loan Agree
ment" hereinafter referred to and as agent for itself and the other "Lenders"
who may hereafter become parties to the Loan Agreement (GE Capital, in such
capacity, the "Agent").
RECITALS:
--------
A. Borrower and GE Capital, as a Lender and as Agent, entered into
a certain Loan Agreement, dated as of October 30, 1992, as amended (the "Loan
Agreement"; capitalized terms used herein and not defined herein shall have the
meanings ascribed to them in the Loan Agreement) whereby, subject to the terms
and conditions set forth therein, GE Capital, as sole Lender thereunder, made
the Commitment and the Term Loans available to Borrower; and
B. On April 5, 1993, Borrower prepaid the Term Loans in full; and
C. The Commitment continues in effect and, pursuant thereto, GE
Capital, as sole Lender under the Loan Agreement, continues to make Advances to
Borrower and to incur Letter of Credit Obligations; and
D. Borrower has requested that GE Capital amend the financial
covenants in the Loan Agreement in certain respects as hereinafter set forth
and, subject to the terms and conditions set forth herein, GE Capital is willing
to do so; and
E. Borrower and GE Capital, as Lender and Agent, desire to enter
into this Amendment in order to set forth their mutual understandings regarding
such amendments and certain related matters.
In consideration of the premises and the mutual covenants and
agreements herein contained, the parties hereto covenant and agree as follows:
1. AMENDMENTS. Upon satisfaction of all conditions precedent set
----------
forth in Section 2 hereof, effective as of October 31, 1994, the Loan Agreement
shall be deemed to be amended as follows:
(a) AMENDMENTS TO SECTION 1.1 OF THE LOAN AGREEMENT.
-----------------------------------------------
<PAGE>
(i) Amendment to Definition of "Adjusted Tangible Net Worth". The
-------------------------------------------------------
definition of "Adjusted Tangible Net Worth" contained in Section 1.1 of the Loan
Agreement shall be deemed amended by deleting the last sentence thereof (which
sentence was added to such definition pursuant to the Eighth Amendment to Loan
Agreement dated as of August 29, 1994 and begins with the words "Notwithstanding
anything contained herein to the contrary" and ends with the words "of Georgia,
Atlanta Division") and substituting in lieu thereof the following sentence:
Notwithstanding anything contained herein to the contrary, there
shall not be taken into account in calculating Borrower's
Adjusted Tangible Net Worth (a) the effect of Borrower's
recognition of accrued pension liabilities pursuant to Statement
of Accounting Standards No. 87 (Employer's Accounting for
Pensions), in an aggregate amount not in excess of $1,500,000 and
(b) the effect of the making by Borrower of the Dissenters'
Rights Payments, in an aggregate amount not in excess of
$1,800,000.
(ii) Amendment to Definition of "Closing Date" The definition of
----------------------------------------
"Closing Date" contained in Section 1.1 of the Loan Agreement shall be deemed
deleted in its entirety and the following revised definition of "Closing Date"
substituted in lieu thereof:
"Closing Date" means November 13, 1992, the day on which the
------------
initial Advance, the initial Letter of Credit and the 1992
Term Loan were made available to Borrower.
(iii) Amendment to Definition of Dissenter' Rights Payments. The
-----------------------------------------------------
definition of "Dissenters' Rights Payments" contained in Section 1.1 of the Loan
Agreement shall be deemed deleted in its entirety and the following revised
definition of "Dissenters' Rights Payments" substituted in lieu thereof:
"Dissenters' Rights Payments" means, collectively, the following
---------------------------
payments and stock issuances made by Borrower in settlement of
Borrower's action pursuant to O.C.G.A. (S) 14-2-1301 et seq. ,
------
captioned Forstmann & Company, Inc. v. Resolution Trust
---------------------------------------------
Corporation, et al., Civil Action File No. 92-CV-1947-RHH, United
------------------
States District Court for the Northern District of Georgia,
Atlanta Division: (a) the payment by Borrower of settlement
payments to Resolution Trust Corporation, as Receiver for
Columbus Savings & Loan, James E. Kjorlien, Gary M. Smith, Grace
Brothers Ltd., The Henley Group and Randall D. Smith, Jeffrey A.
Smith and Russell B. Smith, as Trustees for Lake Trust, all
dissenting shareholders of Borrower and of the
- 2 -
<PAGE>
costs and expenses (including legal fees) of Borrower and such
dissenting shareholders in connection with the above captioned
action in an aggregate amount not in excess of $1,800,000 in Cash
and (b) the issuance by Borrower of 30,000 shares of its common
stock to the Resolution Trust Corporation, as Receiver for
Columbus Savings and Loan.
(iv) Amendments to Definitions of "Securities", "Additional
---------------------------------------- ----------
Securities" and "Notes".
- ----------------------
(A) The term "Securities", as defined in Section 1 of the Third
Amendment to Loan Agreement, dated as of April 5, 1993, between Borrower and GE
Capital, as Agent and sole Lender (the "Third Amendment"), shall be re-
designated as the "1993 Securities". The term "Securities" contained in Section
1.1 of the Loan Agreement shall mean "any Capital Stock, shares, voting trust
certificates, bonds, debentures, notes, or other evidences of Indebtedness,
limited partnership interests, or any warrant, option or other right to purchase
or acquire any of the foregoing".
(B) The term "Additional Securities", as defined in Section 1
of the Seventh Amendment to Loan Agreement, dated as of March 30, 1994, between
Borrower and GE Capital, as Agent and sole Lender (the "Seventh Amendment"),
shall be re-designated as the "1994 Securities".
(C) The term "Notes", as defined in Section 1 of the Seventh
Amendment, shall be deleted in its entirety and the following revised definition
of "Restated Indenture Securities" inserted in lieu thereof:
"Restated Indenture Notes" means, collectively, the 1993
------------------------
Securities and the 1994 Securities.
(D) The term "Notes" contained in Section 1.1 of the Loan
Agreement shall mean "the Revolving Credit Notes".
(b) AMENDMENT TO SECTION 6.1 OF THE LOAN AGREEMENT. Section 6.1 of the
----------------------------------------------
Loan Agreement (as previously amended in the Third Amendment and the Seventh
Amendment) shall be deemed further amended by changing each reference to "Notes"
therein to a reference to "Restated Indenture Notes".
(c) AMENDMENT TO SECTION 6.3 OF THE LOAN AGREEMENT. Section 6.3 of the
----------------------------------------------
Loan Agreement (as previously amended in the Third Amendment and the Seventh
Amendment) shall be deemed further amended by changing each reference to "Notes"
therein to a reference to "Restated Indenture Notes".
(d) AMENDMENT TO SECTION 6.7 OF THE LOAN AGREEMENT. Section 6.7 of the
----------------------------------------------
Loan Agreement (as previously amended in the Third Amendment and the Seventh
Amendment) shall be deemed further
- 3 -
<PAGE>
amended by changing the reference to "Notes" in clause (e) thereof to a
reference to "Restated Indenture Notes".
(e) AMENDMENT TO SECTION 6.8 OF THE LOAN AGREEMENT. Section 6.8 of the
----------------------------------------------
Loan Agreement (as previously amended in the Third Amendment and the Seventh
Amendment) shall be deemed further amended by changing the references to
"Securities" and "Additional Securities" in subclause (b)(ix) thereof to
references to the "1993 Securities" and the "1994 Securities", respectively.
(f) Amendment to Section 6.20 of the Loan Agreement. Section 6.20 of
-----------------------------------------------
the Loan Agreement shall be deemed deleted in its entirety and the following
revised Section 6.20 substituted in lieu thereof:
6.20 Capital Expenditures. Borrower shall not make, or incur
--------------------
any Contractual Obligation to make, any Capital Expenditure if to
do so would cause Borrower's aggregate Capital Expenditures for
any Fiscal Year set forth below to exceed the Base Amount set
forth opposite such Fiscal Year:
<TABLE>
<CAPTION>
Additional
Fiscal Year Ending Base Amount Amount
------------------ ----------- ----------
<S> <C> <C>
October 30, 1994 8,000,000 5,100,000
October 29, 1995 8,000,000 2,500,000
November 3, 1996 8,000,000 5,000,000
November 2, 1997 8,000,000 5,200,000;
</TABLE>
provided that:
(a) Borrower may make Capital Expenditures in connection with
the relocation of its chief executive office from 1185 Avenue of
the Americas, Stevens Tower-4th Floor, New York, New York 10036
to 1155 Avenue of the Americas, Third and Fourth Floors, New
York, New York 10036 only during its Fiscal Year ending October
29, 1995, and the aggregate amount of such Capital Expenditures
shall not exceed $3,000,000.
(b) The "Base Amount" (as set forth above) of Capital
Expenditures which Borrower may make, or incur contractual
obligations to make, during its Fiscal Year ending November 3,
1996 shall be reduced from $8,000,000 to $5,000,000 unless
Borrower's EBITDA for its Fiscal Year ending October 29, 1995 is
at least $39,750,000.
(c) The amount of Capital Expenditures permitted to be made
or incurred pursuant to this Section 6.20 for the Fiscal Year
------------
ending October 30,
- 4 -
<PAGE>
1994 and each subsequent Fiscal Year shall be increased by an
amount equal to the lesser of (i) the Additional Amount set forth
opposite such Fiscal Year above and (ii) the amount (if any) by
which Borrower's EBITDA for the immediately preceding Fiscal Year
exceeds the amount set forth below opposite such Fiscal Year:
<TABLE>
<CAPTION>
EBITDA for Preceding
Fiscal Year Ending Fiscal Year
------------------ --------------------
<S> <C>
October 30, 1994 $34,000,000
October 29, 1995 $37,150,000
November 3, 1996 $39,750,000
November 2, 1997 $42,550,000
</TABLE>
(d) In addition to the increase provided in clause (c)
above, the amount of Capital Expenditures permitted to be made
or incurred pursuant to this Section 6.20 for the Fiscal Year
------------
ending October 30, 1994 and each subsequent Fiscal Year, other
than Borrower's Fiscal Year ending October 29, 1995, shall be
further increased by an amount equal to the lesser of (i) the
------
amount by which Borrower's actual Capital Expenditures for the
immediately preceding Fiscal Year were less than the amount of
such Capital Expenditures permitted to be made or incurred
during such Fiscal Year pursuant to this Section 6.20 (without
------------
giving effect to any increase in such amount provided for in
this clause (d)) and (ii) an amount equal to fifty percent (50%)
of the amount of Capital Expenditures permitted to be made or
incurred during such Fiscal Year pursuant to this Section 6.20
------------
(without giving effect to any increase in such amount provided
for in this clause (d)).
(g) Amendment to Section 6.23 of the Loan Agreement. Section 6.23 of
-----------------------------------------------
the Loan Agreement shall be deemed deleted in its entirety and the following
revised Section 6.23 substituted in lieu thereof:
6.23 Adjusted Tangible Net Worth. Borrower shall not permit
---------------------------
its Adjusted Tangible Net Worth, calculated as of the last day of
each Fiscal Quarter set forth below, to be less than the Amount
set forth opposite such Fiscal Quarter:
<TABLE>
<CAPTION>
Fiscal Quarter Ending Amount
--------------------- --------
<S> <C>
January, 1995 25,000,000
April, 1995 28,700,000
July, 1995 31,300,000
</TABLE>
- 5 -
<PAGE>
<TABLE>
<S> <C>
October, 1995 30,500,000
January, 1996 29,500,000
April, 1996 31,500,000
July, 1996 34,000,000
October, 1996 33,500,000
January, 1997 32,500,000
April, 1997 36,500,000
July, 1997 39,000,000
October, 1997 39,000,000
</TABLE>
(h) Amendment to Section 6.24 of the Loan Agreement. Section 6.24 of
-----------------------------------------------
the Loan Agreement shall be deemed deleted in its entirety and the following
revised Section 6.24 substituted in lieu thereof:
6.24 Interest Coverage Ratio. Borrower shall not permit its
-----------------------
Interest Coverage Ratio, calculated as of the last day of each
Fiscal Quarter set forth below, to be less than the Ratio set
forth opposite such Fiscal Quarter:
<TABLE>
<CAPTION>
Fiscal Quarter Ending Ratio
--------------------- --------
<S> <C>
January, 1995 1.65:1.00
April, 1995 1.50:1.00
July, 1995 1.50:1.00
October, 1995 1.70:1.00
January, 1996 1.70:1.00
April, 1996 1.70:1.00
July, 1996 1.75:1.00
October, 1996 1.75:1.00
January, 1997 1.75:1.00
April, 1997 1.75:1.00
July, 1997 1.80:1.00
October, 1997 1.80:1.00
</TABLE>
(i) Amendment to Section 6.25 of the Loan Agreement. Section 6.25 of
-----------------------------------------------
the Loan Agreement shall be deemed deleted in its entirety and the following
revised Section 6.25 substituted in lieu thereof:
6.25 Fixed Charge Coverage Ratio. Borrower shall not permit
---------------------------
its Fixed Charge Coverage Ratio, calculated as of the last day of
each Fiscal Quarter set forth below, to be less than the Ratio
set forth opposite such Fiscal Quarter:
<TABLE>
<CAPTION>
Fiscal Quarter Ending Ratio
--------------------- --------
<S> <C>
January, 1995 .75:1.00
April, 1995 .70:1.00
July, 1995 .65:1.00
October, 1995 .80:1.00
</TABLE>
- 6 -
<PAGE>
<TABLE>
<S> <C>
January, 1996 .75:1.00
April, 1996 .80:1.00
July, 1996 .90:1.00
October, 1996 .85:1.00
January, 1997 .85:1.00
April, 1997 .85:1.00
July, 1997 .85:1.00
October, 1997 .70:1.00
</TABLE>
(j) Amendment to Section 6.26 of the Loan Agreement. Section 6.26 of
-----------------------------------------------
the Loan Agreement shall be deemed deleted in its entirety and the following
revised Section 6.26 substituted in lieu thereof:
6.26 Accounts Receivable Turnover. Borrower shall not permit
----------------------------
its Accounts Receivable Turnover, expressed in days, calculated
as of the last day of each Fiscal Quarter set forth below, to be
greater than the number of days set forth opposite such Fiscal
Quarter:
<TABLE>
<CAPTION>
Fiscal Quarter Ending No. of Days
--------------------- -----------
<S> <C>
January, 1995 129
April, 1995 130
July, 1995 131
October, 1995 131
January, 1996 132
April, 1996 133
July, 1996 134
October, 1996 136
January, 1997 135
April, 1997 136
July, 1997 136
October, 1997 137
</TABLE>
(k) Amendment to Section 6.27 of the Loan Agreement. Section 6.27 of
-----------------------------------------------
the Loan Agreement shall be deemed deleted in its entirety and the following
revised Section 6.27 substituted in lieu thereof:
6.27 Inventory Turnover. Borrower shall not permit its
------------------
Inventory Turnover, expressed in times turned per year,
calculated as of the last day of each Fiscal Quarter set forth
below, to be less than the number of times turned per year set
forth below opposite such Fiscal Quarter:
<TABLE>
<CAPTION>
Times Turned
Fiscal Quarter Ending Per Year
--------------------- ------------
<S> <C>
January, 1995 1.92
April, 1995 1.96
</TABLE>
- 7 -
<PAGE>
<TABLE>
<S> <C>
July, 1995 2.00
October, 1995 2.06
January, 1996 2.08
April, 1996 2.11
July, 1996 2.14
October, 1996 2.18
January, 1997 2.21
April, 1997 2.24
July, 1997 2.27
October, 1997 2.32
</TABLE>
(l) Amendment to Section 6.28 of the Loan Agreement. Section 6.28 of
-----------------------------------------------
the Loan Agreement shall be deemed deleted in its entirety and the following
revised Section 6.28 substituted in lieu thereof:
6.28 EBITDA. Borrower shall not permit its EBITDA for any
------
period of twelve consecutive fiscal months ending on the last day
of any Fiscal Quarter set forth below, to be less than the amount
set forth opposite such Fiscal Quarter:
<TABLE>
<CAPTION>
Fiscal Quarter Ending Amount
--------------------- ------
<S> <C>
January, 1995 32,000,000
April, 1995 31,300,000
July, 1995 32,200,000
October, 1995 37,200,000
January, 1996 37,800,000
April, 1996 36,000,000
July, 1996 36,500,000
October, 1996 37,200,000
January, 1997 37,500,000
April, 1997 38,300,000
July, 1997 39,000,000
October, 1997 39,500,000
</TABLE>
(m) AMENDMENT TO SECTION 6.29 OF THE LOAN AGREEMENT. Section 6.29 of
-----------------------------------------------
the Loan Agreement (as added to the Loan Agreement in the Third Amendment and as
previously amended in the Seventh Amendment) shall be deemed further amended by
changing each reference to "Notes" therein to a reference to "Restated Indenture
Notes", by changing each reference to "Securities" therein to a reference to
"1993 Securities" and by changing each reference to "Additional Securities"
therein to a reference to "1994 Securities".
(n) AMENDMENT TO SECTION 9.1 OF THE LOAN AGREEMENT. Section 9.1 of the
----------------------------------------------
Loan Agreement shall be deemed amended by deleting clause (e) thereof in its
entirety and substituting in lieu thereof the following revised clause (e):
(e) Default as to Other Indebtedness. Borrower shall fail to make
--------------------------------
any payment when due (whether by
- 8 -
<PAGE>
scheduled maturity, required prepayment, acceleration, demand or
otherwise) with respect to any Subordinated Indebtedness, the Restated
Indenture Notes or any other Indebtedness (other than an Obligation)
if the aggregate amount of such other Indebtedness is Two Million Five
Hundred Thousand Dollars ($2,500,000) or more; or any breach, default
or event of default shall occur, or any other condition shall exist
under any instrument, agree ment or indenture pertaining to any such
Indebtedness (including, without limitation, a "Change of Control", as
defined in Section 4.18 of the Senior Subordinated Note Indenture or a
"Change of Control", as defined in Section 4.18 of the Restated
Indenture but exclusive of an "Asset Sale", as that term is defined in
the Restated Indenture, as in effect on March 30, 1994), and in each
case shall continue beyond the last day of any applicable grace,
notice and/or cure period, if the effect thereof is to cause an
acceleration, mandatory redemption or other required repurchase of
such Indebtedness (other than a regularly scheduled required
prepayment or redemption), or permit the holder or holders of such
Indebtedness to accelerate the maturity of any such Indebtedness or
require a redemption or other repurchase of such Indebtedness (other
than a regularly scheduled required prepayment or redemption); or any
such Indebtedness shall be otherwise declared to be due and payable
(by acceleration or otherwise) or required to be prepaid, redeemed or
otherwise repurchased by Borrower (other than by a regularly scheduled
required prepayment or redemption or a redemp tion required by the
Asset Sale Provision or Section 6.1 hereof) prior to the stated
maturity thereof; or the holder or holders of any Lien, in any amount,
shall commence foreclosure of such Lien upon property of Borrower
having an aggregate value in excess of Two Million Five Hundred
Thousand Dollars ($2,500,000);
2. CONDITIONS PRECEDENT. This Amendment shall not become
--------------------
effective unless and until all of the following conditions precedent have been
fulfilled to the satisfaction of GE Capital:
(a) Borrower shall have (i) reviewed with representatives of GE
Capital all Property of Borrower as to which the Agent may not, or does not,
have a perfected Lien, (ii) provided GE Capital with values for such property,
on a basis satisfactory to GE Capital, and (iii) taken such actions as may be
required by GE Capital to perfect a Lien in favor of the Agent in such Property;
and GE capital shall be satisfied with all of the foregoing.
(b) Borrower shall have paid to GE Capital the amendment fee
described in Section 3 below.
- 9 -
<PAGE>
(c) No Default or Event of Default shall have occurred and be
continuing.
3. Amendment Fee. On the date hereof, Borrower shall pay to GE
-------------
Capital an amendment fee in the amount of One Hundred Fifty Thousand Dollars
($150,000). Such fee shall be fully earned and non-refundable on the date
hereof.
4. OTHER AGREEMENTS.
----------------
(a) Except as set forth expressly herein and above, all terms of the
Loan Agreement and the other Loan Documents shall be and remain in full force
and effect and shall constitute the legal, valid, binding and enforceable
obligations of Borrower to the Agent and Lenders, subject to Debtor Relief Laws.
In furtherance of the foregoing, Borrower acknowledges that from and after the
date hereof, it shall continue to be bound by all provisions of the Loan
Agreement as amended hereby. To the extent any terms and conditions in any of
the other Loan Documents shall contradict or be in conflict with any terms or
conditions of the Loan Agreement, after giving effect to this Amendment, such
terms and conditions are hereby deemed modified and amended accordingly to
reflect the terms and conditions of the Loan Agreement as modified and amended
hereby.
(b) Borrower hereby affirms that each of the representations and
warranties of Borrower contained in the Loan Agreement or in any of the other
Loan Documents is correct in all material respects on and as of the date hereof
and after giving effect to this Amendment (except to the extent that such
representations and warranties relate solely to an earlier date and except as
affected by transactions expressly contemplated by the Loan Agreement or this
Amendment). In addition, with respect to this Amendment, Borrower warrants and
represents as follows: The execution, delivery and performance by Borrower of
this Amendment and the other Loan Documents contemplated hereby, (i) are within
Borrower's corporate power; (ii) have been duly authorized by all necessary or
proper corporate action; (iii) are not in contravention of any provision of
Borrower's articles of incorporation or bylaws; (iv) will not violate any law or
regulation, or any order or decree of any court or governmental instrumentality;
(v) will not require a consent or approval under, conflict with or result in the
breach or termination of, constitute a default under or accelerate any
performance required by, any indenture, mortgage, deed of trust, lease,
agreement or other instrument to which Borrower is a party or by which Borrower
or any of its property is bound; (vi) will not result in the creation or
imposition of any Lien upon any of the property of Borrower other than those in
favor of the Agent pursuant to the Loan Documents; and (vii) do not require the
authorization, consent, approval, order, license or permit from, or filing,
registration or qualifi cation with, any Governmental Agency in order to
authorize or per mit such execution, delivery and performance under applicable
Laws. This Amendment has been duly executed and delivered for the
- 10 -
<PAGE>
benefit of or on behalf of Borrower and constitutes a legal, valid and binding
obligation of Borrower, enforceable against Borrower in accordance with its
terms subject to Debtor Relief Laws.
(c) Borrower hereby represents that no Default or Event of Default
has occurred and is continuing as of the date hereof.
(d) Borrower agrees to pay on demand all reasonable costs and out-of-
pocket expenses of GE Capital in connection with the preparation, execution,
delivery and enforcement of this Amendment, the closing hereof, and any other
transactions contemplated hereby, including the fees and out-of-pocket expenses
of King & Spalding, counsel to GE Capital.
(e) To induce the Agent and Lenders to enter into this Amendment,
Borrower hereby acknowledges and agrees that, as of the date hereof, there
exists no right of offset, defense or counterclaim in favor of Borrower as
against the Agent or Lenders with respect to the Obligations.
(f) This Amendment shall be governed by, and construed in accordance
with the laws of the State of New York applicable to contracts made and
performed in such State and all applicable laws of the United States of America.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed under seal by their respective officers thereunto duly authorized,
as of the date first above written.
FORSTMANN & COMPANY, INC.
By:/s/ Rod J. Peckham
------------------
Rod J. Peckham, Vice President
and Treasurer
GENERAL ELECTRIC CAPITAL
CORPORATION, as Agent and initial
Lender
By:/s/ Rick Luck
-------------
Rick Luck,
Vice President, GE Capital
Commercial Finance, Inc., being
duly authorized
- 11 -
<PAGE>
EXHIBIT 4.4 (r)
ELEVENTH AMENDMENT TO LOAN AGREEMENT
------------------------------------
THIS ELEVENTH AMENDMENT TO LOAN AGREEMENT (this "Amendment"), made and
entered into as of January 23, 1995, by and between FORSTMANN & COMPANY, INC., a
Georgia corporation ("Borrower"), and GENERAL ELECTRIC CAPITAL CORPORATION, a
New York corporation ("GE Capital"), as sole "Lender" under the "Loan Agree-
ment" hereinafter referred to and as agent for itself and the other "Lenders"
who may hereafter become parties to the Loan Agreement (GE Capital, in such
capacity, the "Agent").
RECITALS:
--------
A. Borrower and GE Capital, as a Lender and as Agent, entered into
a certain Loan Agreement, dated as of October 30, 1992, as amended (the "Loan
Agreement"; capitalized terms used herein and not defined herein shall have the
meanings ascribed to them in the Loan Agreement) whereby, subject to the terms
and conditions set forth therein, GE Capital, as sole Lender thereunder, made
the Commitment and the Term Loans available to Borrower; and
B. On April 5, 1993, Borrower prepaid the Term Loans in full; and
C. The Commitment continues in effect and, pursuant thereto, GE
Capital, as sole Lender under the Loan Agreement, continues to make Advances to
Borrower and to incur Letter of Credit Obligations; and
D. Borrower has requested that GE Capital make an additional term
loan to it under the Loan Agreement in the principal amount of $7,500,000,
bearing interest at the rates provided in the Loan Agreement with respect to the
Revolving Credit Loan and maturing on October 30, 1997 (or if earlier, on the
date of termination of the Commitment) , the proceeds of which shall be used by
Borrower to prepay Advances as provided herein, and, subject to the terms and
conditions set forth herein and in the Loan Agreement, GE Capital is willing to
do so; and
E. Borrower and GE Capital, as Lender and Agent, desire to enter
into this Amendment in order to set forth their mutual understandings regarding
such term loan and certain related matters.
In consideration of the premises and the mutual covenants and
agreements herein contained, the parties hereto covenant and agree as follows:
1. AMENDMENTS. Effective upon satisfaction of all conditions
----------
precedent set forth in Section 2 hereof, the Loan Agreement shall be deemed to
be amended as follows:
(a) AMENDMENTS TO SECTION 1.1 OF THE LOAN AGREEMENT.
-----------------------------------------------
<PAGE>
(i) Addition of New Defined Terms. Section 1.1 of the Loan Agreement
-----------------------------
shall be deemed amended by adding therein in appropriate alphabetical order the
following new defined terms:
"Eleventh Amendment" means the Eleventh Amendment to Loan
------------------
Agreement, dated as of January 23, 1995, between Borrower and GE
Capital, as Agent and sole Lender.
"1992 Term Loans" means, collectively, the term loans in the
---------------
aggregate principal amount of $15,000,000 made by Lenders to
Borrower on the Closing Date and repaid in full on April 5, 1993.
"1992 Term Note" means any of the promissory notes issued by
--------------
Borrower in favor of Lenders evidencing the 1992 Term Loans.
(ii) Amendment to Definition of "Borrowing Base" The definition of
------------------------------------------
"Borrowing Base" contained in Section 1.1 of the Loan Agreement shall be deemed
amended by adding at the end of such definition the following sentence:
Without limitation of the foregoing, Borrower acknowledges and
agrees that on the date on which Lenders make the Term Loans to
Borrower the Agent shall establish a reserve against the
Borrowing Base in an amount equal to the aggregate outstanding
principal amount of the Term Loans ($7,500,000, initially)
which reserve shall remain in effect until payment in full of
the Term Loans (subject to reduction upon any partial payment
or prepayment of the Term Loans by the amount of any such
payment or prepayment).
(iii) Deletion of Definition of "Excess Cash Flow" The definition
-------------------------------------------
of Excess Cash Flow contained in Section 1.1 of the Loan Agreement shall be
deemed to be deleted in its entirety.
(iv) Amendment to Definition of "Fixed Charges" The definition of
-----------------------------------------
"Fixed Charges" contained in Section 1.1 of the Loan Agreement shall be deemed
amended by deleting clause (c) thereof in its entirety and substituting in lieu
thereof the following revised clause (c):
(c) principal amortization of Indebtedness during such period,
but excluding any mandatory prepayments of the Loans pursuant
to Section 3.3.
-----------
- 2 -
<PAGE>
(v) Amendment to Definition of "Fixed Rate Loan". The definition
-------------------------------------------
of "Fixed Rate Loan" contained in Section 1.1 of the Loan Agreement shall be
deemed to be deleted in its entirety and the following revised definition of
"Fixed Rate Loan" inserted in lieu thereof:
"Fixed Rate Loan" means, as applicable, the Term Loans at any
---------------
time during which the Term Loans are to bear interest at the
Fixed Rate pursuant to Section 3.5 and the Revolving Credit
-----------
Loan at any time during which the Revolving Credit Loan is to
bear interest at the Fixed Rate pursuant to Section 3.5.
-----------
(vi) Amendment to Definition of "Fixed Rates". The definition of
---------------------------------------
"Fixed Rates" contained in Section 1.1 of the Loan Agreement shall be deemed
deleted in its entirety and the following revised definition of "Fixed Rate"
inserted in lieu thereof:
"Fixed Rate" means the LIBOR Rate plus three percent (3%)
----------
per annum.
In connection with the foregoing, the term "Fixed Rates", wherever it appears in
the Loan Agreement, shall be deemed to refer to the "Fixed Rate".
(vii) Amendment to Definition of "Floating Rate Loan". The definition
----------------------------------------------
of "Floating Rate Loan" shall be deemed to be deleted in its entirety and the
following revised definition of "Floating Rate Loan" inserted in lieu thereof:
"Floating Rate Loan" means, as applicable, the Term Loans at
------------------
any time during which the Term Loans are to bear interest at
the Floating Rate pursuant to Section 3.4 and the Revolving
-----------
Credit Loan at any time during which the Revolving Credit Loan
is to bear interest at the Floating Rate pursuant to
Section 3.4.
-----------
(viii) Amendment to Definition of "Floating Rates" The definition of
------------------------------------------
"Floating Rates" contained in Section 1.1 of the Loan Agreement shall be deemed
to be deleted in its entirety and the following revised definition of "Floating
Rate" inserted in lieu thereof:
"Floating Rate" means the Index Rate plus one and one-half
------------- ----
percent (1.5%) per annum.
In connection with the foregoing, the term "Floating Rates", whenever it appears
in the Loan Agreement, shall be deemed to refer to the "Floating Rate".
- 3 -
<PAGE>
(ix) Deletion of Definition of "Quarterly Payment Date". The
--------------------------------------------------
definition of "Quarterly Payment Date" contained in Section 1.1 of the Loan
Agreement shall be deemed to be deleted in its entirety.
(x) Deletion of Definitions of "Revolving Credit Loan Fixed Rate" and
-----------------------------------------------------------------
"Revolving Credit Loan Floating Rate". The definitions of "Revolving Credit
- ------------------------------------
Loan Fixed Rate" and "Revolving Credit Loan Floating Rate" contained in Section
1.1 of the Loan Agreement shall be deemed to be deleted in their entireties. In
connection with the foregoing, the term "Revolving Credit Loan Fixed Rate",
wherever it appears in the Loan Agreement, shall be deemed to refer to the
"Fixed Rate", and the term "Revolving Credit Loan Floating Rate", wherever it
appears in the Loan Agreement shall be deemed to refer to the "Floating Rate".
(xi) Amendments to Definitions of "Term Loan" and "Term Loans". The
---------------------------------------------------------
definitions of "Term Loan" and "Term Loans" contained in Section 1.1 of the Loan
Agreement shall be deemed to be deleted in their entireties and the following
revised definitions of "Term Loan" and "Term Loans" inserted in lieu thereof:
"Term Loan" means a term loan made by a Lender to Borrower, on
---------
January 23, 1995, pursuant to Section 2.3 "Term Loans" shall mean,
----------- ----------
collectively, all of such term loans.
(xii) Amendment to Definition of Term Note. The definition of "Term
------------------------------------
Note" contained in Section 1.1 of the Loan Agreement shall be deemed to be
deleted in its entirety and the following revised definition of "Term Note"
inserted in lieu thereof:
"Term Note" means any of the promissory notes, substantially in the
---------
form of Exhibit N, issued by Borrower in favor of a Lender on or
---------
after January 23, 1995 evidencing the Term Loan made by such Lender.
"Term Notes" shall mean, collectively, all of such notes.
----------
(xiii) Deletion of Definitions of "Term Loan Fixed Rate" and "Term
-----------------------------------------------------------
Loan Floating Rate". The definitions of "Term Loan Fixed Rate" and "Term Loan
- ------------------
Floating Rate" contained in Section 1.1 of the Loan Agreement shall be deemed to
be deleted in their entireties. In connection with the foregoing, the term
"Term Loan Fixed Rate", wherever it appears in the Loan Agreement, shall be
deemed to refer to the "Fixed Rate", and the term "Term Loan Floating Rate",
wherever it appears in the Loan Agreement, shall be deemed to refer to the
"Floating Rate".
(xiv) Amendment to Definition of "Notes". The term "Notes" contained
----------------------------------
in Section 1.1 of the Loan Agreement shall mean "collectively, the Revolving
Credit Notes and the Term Notes".
- 4 -
<PAGE>
(b) AMENDMENT TO SECTION 2.3 OF THE LOAN AGREEMENT. Section 2.3 of the
----------------------------------------------
Loan Agreement shall be deemed to be deleted in its entirety and the following
revised Section 2.3 substituted in lieu thereof:
2.3 Term Loans
----------
(a) Subject to the terms and conditions set forth in this Agreement
and in the Eleventh Amendment, on January 23, 1995, each Lender shall make a
Term Loan to Borrower in an amount equal to the amount set forth beneath the
name of that Lender on the signature pages to the Eleventh Amendment. The
aggregate principal amount of the Term Loans shall be $7,500,000. Borrower may
not re-borrow the Term Loans or any portion thereof once repaid.
(b) Subject to the terms and conditions set forth in this Agreement
and in the Eleventh Amendment, not later than 11 a.m., New York time, on January
23, 1995, each Lender shall make its Term Loan available to the Agent by wire
transfer of immediately available funds to the Agent's Deposit Account. Upon
fulfillment of the applicable conditions set forth in this Agreement and in the
Eleventh Amendment, each such Term Loan shall be made available to Borrower by
the Agent by wire transfer of immediately available funds, as instructed by
Borrower, to the extent actually received from Lenders. No Lender shall be
responsible for the failure of any other Lender to make the Term Loan to be made
by such other Lender.
(c) Each Lender's Term Loan shall be evidenced by that Lender's
Term Note, subject to the provisions of Section 2.6.
-----------
(c) AMENDMENT TO SECTION 3.1 OF THE LOAN AGREEMENT. Section 3.1 of the
----------------------------------------------
Loan Agreement shall be deemed to be amended by deleting subsection (b) thereof
in its entirety and substituting in lieu thereof the following revised
subsection (b):
(b) the aggregate principal amount of the Term Loans shall, if not
sooner paid, be payable in full on the Maturity Date, i.e. on October
----
30, 1997.
(d) Amendment to Section 3.2 of the Loan Agreement. Section 3.2 of the
----------------------------------------------
Loan Agreement shall be deemed to be amended by deleting the second sentence of
subsection (a) thereof in its entirety and substituting in lieu thereof the
following:
On such effective date, upon compliance by Borrower with the
provisions of Sections 2.2(i) and 3.8, the Commitment shall reduce to
zero, and in accordance with Sections 3.3(a) and 3.3(e), Borrower
shall immediately pay any outstanding principal amounts of the
Revolving
- 5 -
<PAGE>
Credit Loan and the Term Loans, together with any accrued and unpaid
interest, any accrued and unpaid commitment fees pursuant to Section
3.7 and accrued and unpaid letter of credit fees pursuant to Section
3.9 in cash.
(e) AMENDMENT TO SECTION 3.3 OF THE LOAN AGREEMENT. Section 3.3 of the
----------------------------------------------
Loan Agreement, as previously amended pursuant to the Third Amendment, shall be
deemed to be further amended by
(i) deleting subsection (c) thereof in its entirety and substituting
in lieu thereof the following revised subsection (c):
(c) Except as otherwise provided in Section 6.1 or in the
Intercreditor Agreement with regard to the Noteholders' Primary
Collateral, the outstanding principal amounts of the Revolving Credit
Loan and the Term Notes shall be payable in amounts equal to one
hundred percent (100%) of the proceeds of any sale of Borrower's
Property (net of reasonable expenses of sale except in the case of
sales of Accounts or Inventory), and of any insurance proceeds or
payments of compensation for any Property taken by condemnation or
eminent domain which the Agent retains as provided in Section 6 of the
Security Agreement or in Section 7 or 8 of the Mortgage, as
applicable. All such payments shall be applied first in payment of
Advances outstanding under the Revolving Credit Loan and then, to the
extent that no Advances are outstanding, in payment of the Term Loans,
except that if a Default or Event of Default has occurred and is
continuing, such payments may be applied by the Majority Lenders in
payment of the Obligations in such order as the Majority Lenders
elect.
(ii) adding at the end thereof a new subsection (e) to read as
follows:
(e) The Term Loans shall be prepaid in full on the date of termination
of the Commitment pursuant to Section 3.2(a) hereof, together with accrued and
--------------
unpaid interest thereon.
(f) AMENDMENT TO SECTION 3.4 OF THE LOAN AGREEMENT. Section 3.4 of the
-----------------------------------------------
Loan Agreement is hereby amended by deleting
- 6 -
<PAGE>
subsection (b) thereof in its entirety and substituting in lieu thereof the
following revised subsection (b):
(b) Except as otherwise provided in Sections 3.5, 3.16 and 3.22, the
Revolving Credit Loan and the Term Loans shall bear interest at the
Floating Rate.
(g) AMENDMENT TO SECTION 3.5 OF THE LOAN AGREEMENT. Section 3.5 of the
----------------------------------------------
Loan Agreement is hereby amended by deleting subsection (c) thereof in its
entirety and substituting in lieu thereof the following revised subsection (c):
(c) Except as otherwise provided in Sections 3.5(d), 3.5(e), 3.14,
3.16 and 3.22, at all times during an Interest Period selected by
Borrower in a Request for Fixed Rate Election, the Revolving Credit
Loan or the Term Loans, or both, as elected by Borrower, shall bear
interest at the Fixed Rate.
(h) AMENDMENT TO SECTION 3.6 OF THE LOAN AGREEMENT. Section 3.6 of the
----------------------------------------------
Loan Agreement shall be deemed to be amended by changing the references to the
"Term Loans" therein to references to the "1992 Term Loans".
(i) DELETION OF SECTION 3.11 OF THE LOAN AGREEMENT. Section 3.11 of
----------------------------------------------
the Loan Agreement shall be deemed to be deleted in its entirety and the phrase
"[Intentionally Omitted]" substituted in lieu thereof.
(j) AMENDMENT TO SECTION 3.17 OF THE LOAN AGREEMENT. Section 3.17 of
-----------------------------------------------
the Loan Agreement is hereby amended by deleting the first sentence thereof in
its entirety and substituting in lieu thereof the following:
Interest shall be payable at the rate or rates herein specified on
each Monthly Payment Date and on the Commitment Termination Date, in the case of
the Revolving Credit Loan; on each Monthly Payment Date and on the Maturity Date
(or if earlier on the date of prepayment of the Term Loans in full), in the case
of the Term Loans; and on demand, after the occurrence of an Event of Default,
in the case of any of the Loans.
(k) AMENDMENT TO SECTION 5.1 OF THE LOAN AGREEMENT. Section 5.1 of the
----------------------------------------------
Loan Agreement shall be deemed to be deleted in its entirety and the following
revised Section 5.1 substituted in lieu thereof:
- 7 -
<PAGE>
5.1 Use of Proceeds. Borrower shall use the proceeds of the Term
---------------
Loans made hereunder only to repay Advances; use the proceeds of
Advances made hereunder only for Capital Expenditures permitted
hereunder and for working capital and for other general corporate
purposes of Borrower; and use Letters of Credit arranged for hereunder
only to secure Borrower's obligations with respect to workers'
compensation, capital lease obligations, purchase money financings of
Equipment, patent, trademark and technology licensing arrangements,
Equipment purchases from foreign vendors and for other general
corporate purposes of Borrower, in each case to the extent that such
purpose is not otherwise prohibited by this Agreement.
(l) AMENDMENT TO SECTION 8.1 OF THE LOAN AGREEMENT. Section 8.1 of the
----------------------------------------------
Loan Agreement shall be deemed amended by changing each reference therein to
"Term Loan" and "Term Loans" to references to "1992 Term Loan" and "1992 Term
Loans", respectively, and by changing each reference therein to "Term Note" and
"Term Notes" to references to "1992 Term Note" and "1992 Term Notes",
respectively.
(m) APPLICATION OF SECTION 8.2 OF THE LOAN AGREEMENT. Borrower
------------------------------------------------
acknowledges that each of the conditions specified in subsections (b) through
(e) of Section 8.2 of the Loan Agreement shall constitute conditions precedent
to the making of the Term Loans contemplated by this Amendment.
(n) AMENDMENT TO SECTION 11.8 OF THE LOAN AGREEMENT. Section 11.8 of
-----------------------------------------------
the Loan Agreement shall be deemed amended by adding the following subsection
(g) at the end thereof:
(g) Notwithstanding anything contained herein to the contrary, any
assignment by a Lender pursuant to subsection (b) above or
participation by a Lender pursuant to subsection (f) above shall be
made by such Lender on a pro rata basis as between its Pro Rata Share
of the Commitment and its Term Loan.
(o) NEW EXHIBIT "N" TO THE LOAN AGREEMENT. Exhibit N attached hereto
-------------------------------------
shall be deemed to replace Exhibit "N" to the Loan Agreement.
-----------
2. CONDITIONS PRECEDENT. This Amendment shall not become
--------------------
effective unless and until all of the following conditions precedent have been
fulfilled to the satisfaction of GE Capital:
- 8 -
<PAGE>
(a) Borrower shall have paid to GE Capital the amendment fee
described in Section 3 below.
(b) Borrower shall have issued to GE Capital a Term Note in the amount
of $7,500,000 evidencing the Term Loan (as defined in Section 1(a)(xi) above) to
be made by GE Capital under the Loan Agreement, as amended hereby, and shall
have entered with GE Capital into amendments to such other of the Loan Documents
as GE Capital shall deem necessary or appropriate in order to give effect to
this Amendment, each to be in form and substance satisfactory to GE Capital and,
to the extent that GE Capital determines that it is necessary to record any
such amendment in any public records, Borrower shall have paid all taxes and
fees payable in connection therewith.
(c) Borrower shall have delivered to GE Capital resolutions of its
Board of Directors, authorizing the execution, delivery and performance by
Borrower of this Amendment and all other Loan Documents to be executed in
connection herewith, certified by the Secretary or an assistant secretary of
Borrower to be true, correct and complete.
(d) Borrower shall have obtained written consents to the Borrower's
obtaining of the Term Loans and execution, delivery and performance of this
Amendment from the number of holders of the 1993 Securities and the 1994
Securities whose consent is required pursuant to the Restated Indenture, which
consents shall be in form and substance satisfactory to GE Capital and shall
include, in any event (i) amendments to Section 4.08(a)(w) of the Restated
Indenture to provide that the maximum amount of Indebtedness which Borrower may
incur under the Loan Agreement is Ninety-Two Million Five Hundred Thousand
Dollars ($92,500,000), rather than Eighty-Five Million Dollars ($85,000,000) and
may include term indebtedness under the Term Loans, (ii) an acknowledgment of
the Trustee and such holders of the 1993 Securities and the 1994 Securities
that, after giving effect to the amendments described in the preceding clause
(i), the Term Loans contemplated to be made hereby are permitted to be made and
incurred pursuant to Section 4.2(a) of the Intercreditor Agreement and that the
Term Loans shall constitute "Revolving Obligations" for all purposes of the
Intercreditor Agreement, and (iii) a consent by such holders to an amendment to
the Intercreditor Agreement to give effect to the foregoing.
(e) The Agent and the Trustee shall have entered into such amendments
to the Intercreditor Agreement as GE Capital shall deem necessary or appropriate
in connection with the transactions contemplated hereby.
(f) GE Capital shall be satisfied (based on certifications of
Borrower's officers and other evidence satisfactory to it) that (1) from and
after the date of the making of the Term Loans, the Loan Agreement, as further
amended by this Amendment, shall continue to constitute the "Credit Agreement"
- 9 -
<PAGE>
within the meaning of the Senior Subordinated Note Indenture, (2) the Term Loans
contemplated hereby constitute "Senior Indebtedness" of Borrower and
indebtedness under the "Credit Agreement" within the meaning of the Senior
Subordinated Note Indenture, (3) the holders thereof from time to time shall be
entitled to all of the rights of a holder of "Senior Indebtedness" pursuant to
Article 10 of the Senior Subordinated Note Indenture and (4) notwithstanding the
making of the Term Loans, all other Obligations of Borrower to Lenders under the
Loan Agreement and the Other Loan Documents shall continue to constitute "Senior
Indebtedness".
(g) GE Capital shall have received an opinion of Borrower's counsel,
in form and substance satisfactory to it, as to the matters described in the
preceding clause (f).
(h) No Default or Event of Default shall have occurred and be
continuing.
3. AMENDMENT FEE. On the date hereof, Borrower shall pay to GE
-------------
Capital an amendment fee in the amount of One Hundred Fifty Thousand Dollars
($150,000). Such fee shall be fully earned and non-refundable on the date
hereof.
4. COLLATERAL. Borrower acknowledges that pursuant to the terms
----------
of the Loan Agreement and the other Loan Documents, Borrower's Obligations under
the Term Loans are secured by all of the Collateral.
5. OTHER AGREEMENTS.
----------------
(a) Except as set forth expressly herein and above, all terms of the
Loan Agreement and the other Loan Documents shall be and remain in full force
and effect and shall constitute the legal, valid, binding and enforceable
obligations of Borrower to the Agent and Lenders, subject to Debtor Relief Laws.
In furtherance of the foregoing, Borrower acknowledges that from and after the
date hereof, it shall continue to be bound by all provisions of the Loan
Agreement as amended hereby. To the extent any terms and conditions in any of
the other Loan Documents shall contradict or be in conflict with any terms or
conditions of the Loan Agreement, after giving effect to this Amendment, such
terms and conditions are hereby deemed modified and amended accordingly to
reflect the terms and conditions of the Loan Agreement as modified and amended
hereby.
(b) Borrower hereby affirms that each of the representations and
warranties of Borrower contained in the Loan Agreement or in any of the other
Loan Documents is correct in all material respects on and as of the date hereof
and after giving effect to this Amendment (except to the extent that such
representations and warranties relate solely to an earlier date and except as
affected by transactions expressly contemplated by the Loan Agreement or this
Amendment). In addition, with respect to this Amendment, Borrower warrants and
represents as follows: The
- 10 -
<PAGE>
execution, delivery and performance by Borrower of this Amendment and the other
Loan Documents contemplated hereby, (i) are within Borrower's corporate power;
(ii) have been duly authorized by all necessary or proper corporate action;
(iii) are not in contravention of any provision of Borrower's articles of
incorporation or bylaws; (iv) will not violate any law or regulation, or any
order or decree of any court or governmental instrumentality; (v) will not
require a consent or approval under, conflict with or result in the breach or
termination of, constitute a default under or accelerate any performance
required by, any indenture, mortgage, deed of trust, lease, agreement or other
instrument to which Borrower is a party or by which Borrower or any of its
property is bound (after giving effect to the consents of the holders of the
Restated Indenture Notes which have been obtained in connection with the Tenth
Amendment); (vi) will not result in the creation or imposition of any Lien upon
any of the property of Borrower other than those in favor of the Agent pursuant
to the Loan Documents; and (vii) do not require the authorization, consent,
approval, order, license or permit from, or filing, registration or
qualification with, any Governmental Agency in order to authorize or permit such
execution, delivery and performance under applicable Laws. This Amendment has
been duly executed and delivered for the benefit of or on behalf of Borrower and
constitutes a legal, valid and binding obligation of Borrower, enforceable
against Borrower in accordance with its terms subject to Debtor Relief Laws.
Borrower further represents and warrants that (i) after giving effect to the
making of the Term Loans contemplated hereby, the representations of Borrower
set forth in Section 4.21(i) of the Loan Agreement continue to be true and
correct in all respects with respect to the Term Loans contemplated hereby and
all other Obligations; (ii) Borrower has calculated its Fixed Charge Coverage
Ratio (as defined in the Senior Subordinated Note Indenture) for the four full
fiscal quarters next preceding the date hereof, on a pro forma basis (including
a pro forma application of the net proceeds of the Term Loans) as if the Term
Loans had been incurred at the beginning of such four-quarter period, (iii)
after consultation with its counsel, the calculation described in the
immediately preceding clause (ii) complies with the requirements of the
definition of Fixed Charge Coverage Ratio set forth in the Senior Subordinated
Note Indenture as modified by the provisions of Section 4.09 thereof, and (iv)
based on such calculation, Borrower's Fixed Charge Coverage Ratio, on a pro
forma basis after giving effect to the incurrence of the Term Loan for the four
fiscal quarters next preceding the date hereof, was at least 1.65 to 1.
(c) Borrower hereby represents that no Default or Event of Default
has occurred and is continuing as of the date hereof.
(d) Borrower agrees to pay on demand all reasonable costs and out-of-
pocket expenses of GE Capital in connection with the preparation, execution,
delivery and enforcement of this Amendment, the closing hereof, and any other
transactions contemplated hereby, including the fees and out-of-pocket expenses
of King & Spalding, counsel to GE Capital.
- 11 -
<PAGE>
(e) To induce the Agent and Lenders to enter into this Amendment,
Borrower hereby acknowledges and agrees that, as of the date hereof, there
exists no right of offset, defense or counterclaim in favor of Borrower as
against the Agent or Lenders with respect to the Obligations.
(f) This Amendment shall be governed by, and construed in accordance
with the laws of the State of New York applicable to contracts made and
performed in such State and all applicable laws of the United States of America.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed under seal by their respective officers thereunto duly authorized,
as of the date first above written.
FORSTMANN & COMPANY, INC.
By: /s/ Rod J. Peckham
------------------
Rod J. Peckham, Vice President
and Treasurer
GENERAL ELECTRIC CAPITAL
CORPORATION, as Agent and initial
Lender
By: /s/ Rick Luck
--------------
Rick Luck,
Vice President, GE Capital
Commercial Finance, Inc., being
duly authorized
Dollar amount of Term Loan:
$7,500,000
- 12 -
<PAGE>
Exhibit 4.5(h)
FIFTH AMENDMENT
TO
LOAN AND SECURITY AGREEMENT
This Fifth Amendment ("Fifth Amendment"), dated as of this 22nd day of
December, 1994 to a Loan and Security Agreement dated December 27, 1991 and
previously amended by amendments dated September 2, 1992, July 30, 1993, June
13, 1994 and September 12, 1994, is entered into by and between THE CIT
GROUP/EQUIPMENT FINANCING, INC. ("CIT"), a New York corporation, having an
address at 1211 Avenue of the Americas, New York, New York 10036 and FORSTMANN
& COMPANY, INC., a Georgia corporation, having its principal executive offices
at 1185 Avenue of the Americas, New York, New York 10036.
RECITALS
A. CIT and Debtor first entered into a Loan and Security Agreement (the
"Original Loan Agreement") dated December 27, 1991.
B. CIT and Debtor thereafter entered into an Amendment Agreement (the
"First Amendment"), amending the Original Loan Agreement in certain respects, on
September 2, 1992.
C. Pursuant to a Second Amendment to Loan and Security Agreement dated as
of July 30, 1993 (the "Second Amendment"), CIT committed to provide up to Six
Million Dollars ($6,000,000) in additional loans to Debtor.
D. The Original Loan Agreement was thereafter further amended by
amendments dated June 13, 1994 and September 12, 1994 (The Original Loan
Agreement, as amended to date by each of the foregoing amendments, is sometimes
referred to herein as the "Amended Loan Agreement").
E. Debtor has requested that CIT make additional Loans to Debtor and CIT
has agreed to make such Loans, subject to the terms of the Original Loan
Agreement, as amended by each of the prior amendments, and as further amended by
this Fifth Amendment.
NOW THEREFORE, in consideration of the foregoing premises and for other
good and valuable consideration, the parties hereto hereby agree as follows:
SECTION 1. DEFINED TERMS
-------------
1.1 Terms Defined in Original Loan Agreement. Terms used herein which
----------------------------------------
are not otherwise defined or modified herein, shall be used herein with the
meanings set forth in the
<PAGE>
Amended Loan Agreement. Without limiting the generality of the foregoing, the
term "Equipment" shall include, in addition to all items of Equipment previously
---------
financed by CIT, all Equipment financed with the proceeds of any of the Further
Loans made pursuant to this Fifth Amendment; the term "Collateral" shall
----------
include, in addition to all Collateral in which Debtor has previously granted a
security interest to Debtor, all additional Collateral in which Debtor has
granted or will grant a security interest to CIT pursuant to this Fifth
Amendment; and the term "Obligations" shall include, in addition to all
-----------
Obligations of Debtor existing on the date hereof, all Obligations evidenced by
the Further Notes or otherwise created or arising pursuant to this Fifth
Amendment.
1.2 Additional Defined Terms. The following additional terms shall be
------------------------
added to the Amended Loan Agreement and inserted in their proper alphabetical
sequence:
"Amended Loan Agreement" shall mean the Original Loan Agreement, as amended
----------------------
by Amendments dated September 2, 1992, July 30, 1993, June 13, 1994 and
September 12, 1994.
"Commitment Period for Further Loans" shall mean the period commencing on
-----------------------------------
the Fifth Amendment Closing Date and ending on July 31, 1995.
"Fifth Amendment" shall mean this Fifth Amendment to Loan and Security
---------------
Agreement.
"Fifth Amendment Closing Date" shall mean the date on which this Fifth
----------------------------
Amendment is executed and delivered by the parties.
"Further Loan Documents" shall mean this Fifth Amendment and the other
----------------------
agreements, instruments and certificates executed in connection with the making
of the Further Loans, including each Further Note and Supplement, as any of the
foregoing may be modified, amended, restated or extended.
"Further Loans" shall mean one or more of the additional loans made by CIT
-------------
to Debtor pursuant to subsection 2.1 of this Fifth Amendment.
"Further Notes" shall mean the promissory notes of Debtor executed and
-------------
delivered by Debtor to evidence the Further Loans, substantially in the form of
Exhibit A, annexed hereto, as the same may from time to time be modified,
amended, restated or extended.
"Original Loan Agreement" shall mean the Loan and Security Agreement, as
-----------------------
originally executed by Debtor and CIT on December 27, 1991.
"Second Additional Commitment" shall mean the obligation of CIT described
----------------------------
in Section 2.1 of this Fifth Amendment to make up to Five Million ($5,000,000)
Dollars in Further Loans to Debtor during the Commitment Period for the Further
Loans.
-2-
<PAGE>
"Treasury Rate for Further Loans" shall mean a rate per annum equal to the
-------------------------------
yield to maturity for the United States Treasury obligation having a remaining
term to maturity closest to three years as at the close of business on the third
Business Day prior to the making of a Further Loan pursuant to the Fifth
Amendment, as reported on page 5 ("U.S. Treasury and Money Markets") of the
information ordinarily provided by Telerate Systems, Inc. If at any time such
service shall no longer publish such rates, or shall publish the rate
information in a different format, CIT shall select an alternative source which
then publishes the yields on United States Treasury securities.
SECTION 2. AMOUNT AND TERMS OF FURTHER LOANS
---------------------------------
2.1 Commitment. Subject to the terms and conditions of this Fifth
----------
Amendment and the Amended Loan Agreement, CIT agrees to make up to two (2)
Further Loans to Debtor, from time to time during the Commitment Period for the
Further Loans, in accordance with the limitations described in this section, in
an aggregate amount not to exceed Five Million ($5,000,000) Dollars; provided,
---------
that none of the Further Loans shall exceed eighty five (85%) percent of the
Cost of the Equipment designated by Debtor on a Supplement with respect to such
Further Loan; and provided, further that the first of the Further Loans made
-------- -------
hereunder shall be in a minimum amount of Two Million ($2,000,000) Dollars. The
Equipment acquired by Debtor in connection with any Further Loan shall consist
of new weaving, winding and spinning equipment which is satisfactory to CIT.
Debtor shall give CIT at least ten Business Days' prior written notice of the
date and amount of each proposed Further Loan, except in the case of the initial
Further Loan, which may be made on at least two Business Days' notice. All
Further Loans shall be funded by wire transfer of immediately available funds.
2.2 The Notes. (a) Each Further Loan shall be evidenced by a Note of
---------
Debtor, substantially in the form of Exhibit A hereto, with appropriate
insertions therein as to amounts and dates. Each Further Note shall (i) be dated
the date on which the Further Loan evidenced thereby is made; (ii) be for a term
of five (5) years from the date such Further Loan is made; (iii) be stated to be
repaid in sixty consecutive equal monthly installments of principal, plus
interest, which installments will be payable on the dates and in the amounts set
forth in the respective Further Note; and (iv) bear interest from the date
thereof on the unpaid principal amount thereof at a rate equal to the Treasury
Rate for Further Loans plus two and eight hundred seventy five one-thousandths
(2.875%) percent per annum until such amount shall become due and payable
(whether at the stated maturity thereof, by acceleration or otherwise).
(b) Any amount not paid when due under a Further Note shall bear late
charges thereon, calculated at the Late Charge Rate, from the due date thereof
until such amount shall be paid in full.
(c) The principal amount of each Further Loan shall be repaid in sixty
consecutive equal installments. Payments shall commence thirty (30) days from
the date each such Further Loan is made. Interest accrued on the unpaid
principal balance of each Further Loan shall be paid with
-3-
<PAGE>
each installment of principal. The remaining principal balance and interest
accrued thereon shall be due and payable at maturity.
(d) Each Further Note shall be identified with the Equipment financed by
the Further Loan it evidences by reference to the Supplement covering that
Equipment. That identification of each Further Note is for convenience of
reference only and is not intended to imply that any Note (including any Further
Note) is collateralized only by the Equipment identified with it; all Notes,
Additional Notes and Further Notes being equally secured by all Equipment.
2.3 Prepayment. The provisions governing prepayment set forth in Section
----------
2.3 of the Original Loan Agreement shall be equally applicable to the prepayment
of any or all of the Further Loans to the same extent as if set forth at length
herein, except that the 30 month period set forth therein shall be calculated
separately for the Further Notes and shall begin as to each of the Further Notes
on the date the last of the Further Loans is made.
2.4 Other Provisions. The remaining provisions of Section 2 of the
----------------
Original Loan Agreement, including 2.4 ("Use of Proceeds"), 2.5 ("Manner of
Payment"), 2.6 ("Payment on Non-Business Days"), 2.7 ("Interest Limits"), and
2.8 ("Liability for Returned Payments") shall be equally applicable to each and
all of the Further Loans to the same extent as if set forth at length herein.
SECTION 3. CONDITIONS PRECEDENT TO THE
FURTHER LOANS.
---------------------------
3.1 Conditions Precedent to the First of the Further Loans. CIT shall
-----------------------------------------------------------
not be required to make the first of the Further Loans hereunder unless on the
Closing Date of such Further Loan:
(a) Certificate of Incumbency of Debtor. CIT shall have received a
-----------------------------------
certificate of incumbency of Debtor signed by the Secretary or Assistant
Secretary of Debtor, which certificate shall certify the names of the officers
of Debtor authorized to execute any documents hereunder or under any other
related document on behalf of Debtor, together with specimen signatures of such
officers, and CIT may conclusively rely on such certificate until receipt of a
further certificate of the Secretary or Assistant Secretary of Debtor canceling
or amending the prior certificate and submitting the signatures of the officers
named in such further certificate.
(b) Good Standing Certificates. CIT shall have received a good standing
--------------------------
certificate for Debtor issued by the Secretary of State of Georgia and by the
Secretary of State of each other state in which Debtor is qualified to do
business.
-4-
<PAGE>
(c) Charter Documents. CIT shall have received a copy of the certificate
-----------------
of incorporation of Debtor, duly certified by the Secretary of State of Georgia,
as of a recent date acceptable to CIT, or a certificate of the Secretary or
Assistant Secretary certifying that since the date of the prior certificate
furnished to CIT on the Closing Date of the Second Amendment, there has been no
amendment adopted or other change with respect to Debtor's certificate of
incorporation, together with a copy of the by-laws of Debtor, duly certified by
the Secretary or Assistant Secretary, or a certificate of such person certifying
that there has been no modification, amendment or change to such by-laws since
the last date on which Debtor's by-laws were submitted and certified to CIT.
(d) Resolutions. CIT shall have received a certified copy of all
-----------
corporate proceedings of Debtor evidencing that all actions required to be taken
in connection with the authorization, execution, delivery and performance of
this Fifth Amendment, the Further Notes, the other Further Loan Documents and
the consummation of the transactions contemplated hereby and thereby, have been
duly taken.
(e) Opinion of Debtor's Counsel. CIT shall have received the written
---------------------------
opinion addressed to it of Jane S. Pollack, Esq., counsel to the Company, in
substantially the form annexed hereto as Exhibit B.
(f) Increase in Senior Credit Facility. Debtor shall have entered into an
----------------------------------
Amendment to its Senior Credit Facility increasing the amount available under
such facility and the amount of such increase shall be acceptable to CIT;
provided that prior to effecting such increase, if all other conditions
precedent have been satisfied, CIT will fund up to $3,000,000 of the Second
Additional Commitment.
3.2 Conditions of Each Further Loan. CIT shall not be required to make
--------------------------------
any Further Loan under this Fifth Amendment (including the first of the Further
Loans) unless on the closing date of each Loan, each of the further conditions
set forth in Section 3.2 of the Original Loan Agreement, to the extent
applicable, shall be satisfied, or waived, except that (i) the representations
and warranties referred to in subsection 3.2(h) of the Original Loan Agreement
shall include, in addition to the representations and warranties contained in
the Original Loan Agreement, or to the extent not applicable, be superseded by,
the representations and warranties contained in this Fifth Amendment, (ii) the
measurement date contained in subsection 3.2(i) of the Original Loan Agreement
for determining the occurrence of a material adverse change shall be deleted and
August 1, 1994 shall be substituted in its place, and (iii) the letters of
credit previously provided by Debtor shall remain in effect and shall secure the
payment of the Further Loans, as well as all prior Loans made by CIT, but no
additional letter of credit shall be required.
-5-
<PAGE>
SECTION 4. REPRESENTATIONS AND WARRANTIES.
------------------------------
4.1 Reaffirmation. In order to induce CIT to enter into this Fifth
-------------
Amendment and to make the Further Loans, Debtor hereby repeats each of the
representations and warranties set forth in Section 4 of the Original Loan
Agreement, except as modified or otherwise amended by this Fifth Amendment, as
if set forth at length herein. Schedule 4.17 of the Amended Loan Agreement is
amended in its entirety and the Amended Schedule 4.17 attached hereto is
substituted in lieu thereof. In addition, Section 4.7 of the Original Loan
Agreement is amended by adding a new Schedule 4.7 in the form annexed hereto.
4.2 Power and Authority. Debtor has full power, authority and legal right
-------------------
to execute and deliver this Fifth Amendment, the Further Notes and each of the
other Further Loan Documents, to perform its obligations hereunder and under the
Further Loan Documents, to borrow hereunder and to grant the security interests
created by the Original Loan Agreement or any other Loan Document.
4.3 Consents and Permits. No consent of any other party (including any
---------------------
stockholders, trustees or holders of any indebtedness of Debtor), and no
consent, license, approval or authorization of, exemption by, or registration or
declaration with, any Governmental Authority is required in connection with the
execution, delivery or performance by Debtor of this Fifth Amendment, the
Further Notes or other Further Loan Documents, or the validity or enforceability
of this Fifth Amendment, the Further Notes or any other Further Loan Document,
including the enforcement by CIT of its rights and remedies hereunder or
thereunder, other than those previously obtained or made or which will be
obtained or made prior to the making of the first of the Further Loans.
4.4 No Legal Bar; Senior Debt. The execution, delivery and performance by
--------------------------
Debtor of this Fifth Amendment, the Further Notes and the other Further Loan
Documents do not and will not violate any provision of any Applicable Laws or of
any judgment, award, order, writ or decree of any court or Governmental
Authority, will not violate any provision of the charter or by-laws of Debtor
and will not violate any provision of or cause a default under any mortgage,
indenture, contract, agreement or other undertaking to which Debtor is a party
or which purports to be binding upon Debtor or upon any of its assets, except
any such violation or default, the consequences of which would not have a
Material Adverse Effect, and will not result in the creation or imposition of
any Lien on any of the assets of Debtor, other than the security interest
created by the Original Loan Agreement. Each of the Further Loans will
constitute "senior indebtedness" as such term is defined in, and which Debtor is
permitted to incur under, the indenture pursuant to which the Subordinated Notes
were issued.
4.5 Enforceability. This Fifth Amendment and the other Further Loan Docu
---------------
ments have been duly authorized, executed and delivered by Debtor and constitute
the legal, valid and binding obligations of Debtor, enforceable in accordance
with their respective terms, except to the
-6-
<PAGE>
extent the enforcement of remedies provided for herein may be limited under
applicable bankruptcy and insolvency laws and by applicable equitable
principles. When executed and delivered, each Further Note will have been duly
authorized, executed and delivered by Debtor and shall constitute a legal, valid
and binding obligation of Debtor enforceable in accordance with its terms.
4.6 Financial Condition of Debtor. The financial statements of Debtor (i)
------------------------------
as at and for its fiscal year ended October 31, 1993, audited by Deloitte &
Touche, and (ii) as at and for the period ended July 31, 1994, copies of which
have heretofore been delivered to CIT, are complete and correct, have been
prepared in accordance with GAAP (except in the case of interim financial
statements, subject to normal year-end audit adjustments), and present fairly
the financial position of Debtor as at said dates and the results of its
operations for the period ended on said dates. There are no known material
contingent liabilities or material liabilities for taxes which are not reflected
in said financial statements or the notes thereto and, except as has been
disclosed to CIT, there has been no material adverse change in the financial
condition, business or operations of Debtor since said dates.
SECTION 5. COVENANTS
---------
5.1 Cash Flow Coverage Ratio. Paragraph (b) of Section 5.5 of the Amended
-------------------------
Loan Agreement is hereby amended by deleting the covenant in its entirety and
substituting the following in its place:
"(b) Cash Flow Coverage Ratio. Debtor will not permit its Cash Flow Coverage
------------------------
Ratio, at the end of any of its Fiscal Quarters, based on that Fiscal Quarter
and the three immediately preceding Fiscal Quarters, to be less than the
following amounts:
<TABLE>
<CAPTION>
FISCAL YEAR OR OTHER
PERIOD MINIMUM RATIO
- ------------------------------- -------------
<S> <C>
From 10/31/94 through 1/31/95 1.30 to 1.0
For Each of the Fiscal Quarters 1.20 to 1.0
for the period beginning 2/1/95
and ending 10/31/96
Thereafter 1.25 to 1.0"
</TABLE>
5.2 Adjusted Leverage Ratio. Paragraph (c) of Section 5.5 of the Amended
------------------------
Loan Agreement is hereby amended by deleting the covenant in its entirety and
substituting the following in its place:
-7-
<PAGE>
"Adjusted Leverage Ratio. Debtor will not permit its Adjusted Leverage
------------------------
Ratio to exceed at any time the following limits during the respective periods
indicated below:
<TABLE>
<CAPTION>
FISCAL YEAR OR OTHER
FISCAL PERIOD MAXIMUM RATIO
- -------------------------- -------------
<S> <C>
During any fiscal year 1.95 to 1.0
At Fiscal Year End 10/95 1.50 to 1.0
At Fiscal Year End 10/96 1.45 to 1.0
At Fiscal Year End 10/97 1.40 to 1.0
Each Subsequent Fiscal
Year End 1.35 to 1.0
</TABLE>
5.3 Working Capital. Paragraph (d) of Section 5.5 of the Original Loan
----------------
Agreement is hereby amended by deleting the covenant in its entirety and
substituting the following in its place:
"(d) Working Capital. Debtor shall maintain at all times during the term
----------------
of the Loan Agreement Working Capital of at least the following amounts for the
respective periods indicated below:
<TABLE>
<CAPTION>
FISCAL YEAR OR OTHER
FISCAL PERIOD MINIMUM WORKING CAPITAL
- ------------------------- -----------------------
<S> <C>
From 10/31/94 through 10/31/96 $85,000,000
Beginning 11/1/96 and
continuing thereafter $90,000,000
</TABLE>
provided, however, that the minimum amounts of Working Capital set forth for
- -------- -------
each of the respective periods listed above shall be reduced by Five Million
($5,000,000) Dollars during the period from November 1 through and including
December 31 of each year".
5.4 Tangible Capital Funds. Paragraph (e) of Section 5.5 of the Amended
-----------------------
Loan Agreement is hereby amended by deleting the covenant in its entirety and
substituting the following in its place:
-8-
<PAGE>
"(e) Tangible Capital Funds. Debtor shall maintain at all times during the
-----------------------
term of the Loan Agreement minimum Tangible Capital Funds of at least the
following amounts for the respective periods indicated below:
<TABLE>
<CAPTION>
FISCAL YEAR OR OTHER
FISCAL PERIOD MINIMUM AMOUNT
- ------------------------- --------------
<S> <C>
From 10/31/94 through
10/29/95 $ 83,000,000
From 10/30/95 through
10/29/96 $ 88,000,000
<CAPTION>
FISCAL YEAR OR OTHER
FISCAL PERIOD MINIMUM AMOUNT
- -------------------- --------------
<S> <C>
Beginning 10/30/96 and
continuing thereafter $ 92,000,000"
</TABLE>
SECTION 6. GRANT OF SECURITY INTEREST
--------------------------
Debtor expressly acknowledges and agrees that the security interest granted
pursuant to Section 6.1 of the Original Loan Agreement extends to and includes
all of the Equipment financed by CIT pursuant to the terms of this Fifth
Amendment and described in exhibits attached to Supplements delivered pursuant
to this Fifth Amendment. Debtor further agrees that all of the Collateral
granted to CIT pursuant to the terms of the Original Loan Agreement (as modified
and supplemented by the Second Amendment), expressly including all letters of
credit previously provided by Debtor, shall also serve as Collateral for the
Further Loans, securing the payment and performance by Debtor of the Further
Loans and the obligations of Debtor under the Amended Loan Agreement, as further
amended by this Fifth Amendment. Debtor further agrees and confirms that all of
the Collateral granted to CIT pursuant to this Fifth Amendment shall secure the
payment and performance by Debtor of both the original Loans made pursuant to
the terms of the Original Loan Agreement and the Additional Loans made pursuant
to the Second Amendment, it being the intention of the parties that all Loans
made pursuant to the Loan Agreement shall be cross-collateralized to the fullest
extent permitted by law.
SECTION 7. MISCELLANEOUS
-------------
7.1 Expenses. Debtor agrees that the provisions of Section 9.3 of the
--------
Original Loan Agreement shall apply equally to the negotiation, preparation,
execution and delivery of this Fifth Amendment and the Further Loan Documents.
-9-
<PAGE>
7.2 Commitment Fee. CIT acknowledges receipt from Debtor of a com mitment
--------------
fee in the amount of $50,000 (the "Commitment Fee"). Of the foregoing amount,
$25,000 shall be non-refundable under all circumstances and may be retained by
CIT regardless of whether or not the transactions contemplated by this Fifth
Amendment are consummated. The remaining $25,000 shall be refunded to Debtor in
accordance with the provisions of this Section. Following the expiration of the
Commitment Period for the Further Loans and the deduction by CIT of any and all
then outstanding costs and expenses of CIT incurred in connection with this
Fifth Amendment and the transactions contemplated hereby (the net amount of the
Commitment Fee, determined after deducting the $25,000 non-refundable portion
and all fees and expenses incurred by CIT is hereinafter referred to as the
"Refundable Portion"), CIT shall make a pro rata refund to Debtor of the
Refundable Portion of the Commitment Fee based upon the aggregate principal
amount of Further Loans made pursuant hereto relative to the aggregate amount of
the Second Additional Commitment. In the event that Debtor declines to
consummate the contemplated transaction, CIT may retain the entire Commitment
Fee.
7.3 Ratification. Other than as specifically set forth herein, Debtor
------------
hereby ratifies and confirms the Original Loan Agreement and all instruments and
agreements relating thereto, as modified by all prior amendments through the
date hereof, confirms that all of the foregoing remain in full force and effect,
subject to the terms of this Fifth Amendment, and confirms that each of the
foregoing is enforceable against Debtor in accordance with its terms, except to
the extent the enforcement of the remedies provided for herein may be limited
under applicable bankruptcy and insolvency laws and by applicable equitable
principles.
7.4 Other Provisions. Except as modified hereby, the provisions of
----------------
Section 9 of the Loan Agreement, captioned "Miscellaneous", are incorporated
herein by reference as if set forth at length herein and apply equally to the
terms of this Fifth Amendment.
-10-
<PAGE>
IN WITNESS WHEREOF, the undersigned have caused this Amendment to be duly
executed and delivered by their proper and duly authorized officers as of the
day and year first above written.
FORSTMANN & COMPANY, INC.
By:/s/Rod J. Peckham
----------------- -
Name:Rod J. Peckham
Title:VP and Treasurer
THE CIT GROUP/EQUIPMENT
FINANCING, INC.
By:/s/Burt Feinberg
---------------- -
Name:Burt Feinberg
Title:VP
-11-
<PAGE>
Exhibit 4.6(o)
FORSTMANN & COMPANY, INC.
AND
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION,
as TRUSTEE
__________________________________________
Supplemental Indenture
Dated as of January 23, 1995
________________________________________
Supplementing and Amending the
Amended and Restated Indenture
Dated as of March 30, 1994
which amends and restates the
Indenture Dated as of April 5, 1993
<PAGE>
This SUPPLEMENTAL INDENTURE, dated as of January 23, 1995,
(hereinafter this "Supplemental Indenture") made by and between FORSTMANN &
COMPANY, INC., a Georgia corporation (the "Company"), and SHAWMUT BANK
CONNECTICUT, NATIONAL ASSOCIATION, as trustee (the "Trustee") under the Amended
and Restated Indenture (the "Restated Indenture") dated as of March 30, 1994,
which amends and restates the Indenture dated as of April 5, 1993 (the "Original
Indenture"; the Restated Indenture and Original Indenture being collectively
referred to hereinafter as the "Indenture"):
WHEREAS, the Company wishes to amend the Indenture to increase the
maximum amount of Indebtedness (as defined hereinafter) incurred by the Company
pursuant to the Loan Agreement dated as of October 30, 1992 among the Company,
the Lenders named therein and General Electric Capital Corporation (the "Credit
Agent"), and to amend such other covenants and requirements as described
hereinafter;
WHEREAS, Section 9.02 of the Indenture provides that the Company, when
authorized by a resolution of its Board of Directors, and the Trustee may, upon
receipt of evidence of the written consent of the Holders of at least a majority
in principal amount of the then outstanding Notes (as defined hereinafter),
execute a supplemental indenture to amend the Indenture;
WHEREAS, the Holders of at least a majority in principal amount of the
then outstanding Notes did, as of December 21, 1994, consent to the aforesaid
amendment to the Indenture;
WHEREAS, all conditions and requirements necessary to authorize the
execution, acknowledgement and delivery of this Supplemental Indenture and to
make the Indenture, as supplemented by this Supplemental Indenture, a valid,
binding and legal instrument for the benefit of the parties hereto and the
Holders of the Company's Senior Secured Floating Rate Notes due October 30, 1997
of which $20,000,000 in aggregate principal amount were initially issued on
April 5, 1993 and $10,000,000 in aggregate principal amount were issued on March
30, 1994 (collectively, the "Notes"), have been complied with or have been
fulfilled and performed;
NOW, THEREFORE, this Supplemental Indenture
witnesseth that each party agrees as follows:
SECTION 1. Unless otherwise noted, capitalized terms used herein and
not defined shall have the meanings ascribed to such terms in the Restated
Indenture, to the extent defined therein.
SECTION 2. The definition of "Adjusted Tangible Net Worth" as set
forth in Section 1.01 of the Indenture is hereby amended to read in its entirety
as follows:
"Adjusted Tangible Net Worth" means, as of the last day of the
---------------------------
most recently completed fiscal quarter of the Company, the Net Worth of the
Company
-2-
<PAGE>
as of the last day of the most recently completed fiscal quarter, plus (x)
----
and minus (y) (without duplication), where (x) equals the sum of (i)
-----
extraordinary losses on a cumulative basis from and after August 3, 1992,
(ii) negative LIFO adjustments on a cumulative basis from and after August
3, 1992 and (iii) the lesser of (A) $2,000,000 and (B) the amount charged
by the Company against its additional paid-in capital as a result of
payments or settlements made by the Company in connection with the
dissenters' rights proceeding captioned Forstmann & Company, Inc. v.
----------------------------
Resolution Trust Company, et al., Civil Action File No. 92-CV-1947-RHH,
-------------------------------
United States District Court for the Northern District of Georgia, Atlanta
Division, and (y) equals the sum of (i) extraordinary gains on a cumulative
basis from and after August 3, 1992, (ii) positive LIFO adjustments on a
cumulative basis from and after August 3, 1992, (iii) organizational
expenses which are capitalized, goodwill, covenants not to compete,
research and development costs, deferred financing costs and other like
intangible assets and (iv) amounts due from, or Investments in, Affiliates
(other than Subsidiaries), all as determined in accordance with generally
accepted accounting principles.
SECTION 3. The definition of "Fixed Charges" as set forth in Section
1.01 of the Indenture is hereby amended to read in its entirety as follows:
"Fixed Charges" means, with respect to any period, the sum
-------------
(without duplication) of (a) Interest Expense for such period, plus (b) any
decrease in the Company's deferred interest payable account during such
period, plus (c) principal amortization of Indebtedness during such period
(excluding any mandatory prepayments required to be paid (and actually
paid) under the Loan Agreement whether or not such prepayments are applied
to the Revolving Credit Facility and whether or not such prepayments
reduce the commitment amount thereunder) plus (d) Capital Expenditures,
principal payments under Capital Leases and MIS Expenditures made during
such period, plus (e) income taxes payable in cash during such period, plus
(f) dividends payable in cash by the Company during such period.
SECTION 4. The first paragraph of Section 4.04 of the Indenture is
hereby amended to read in its entirety as follows:
Section 4.04. Compliance Certificate.
------------ ----------------------
(a) The Company shall deliver to the Trustee, within 60 days
after the end of each of the first three fiscal quarters of each fiscal
year of the Company and within 120 days after the end of the last fiscal
quarter of each fiscal year of the Company, an Officer's Certificate
stating that a review of the activities of the Company during the preceding
fiscal quarter has been made under the supervision of the signing officers
with a view to determining whether the Company has kept,
-3-
<PAGE>
observed, performed and fulfilled its obligations under the Indenture, and
further stating, as to each such officer signing such certificate, that to
the best of his knowledge the Company has kept, observed, performed and
fulfilled each and every covenant contained in this Indenture and is not in
default in the performance or observance of any of the terms, provisions
and conditions hereof (or, if a Default or Event of Default shall have
occurred, describing all such Defaults or Events of Default of which he may
have knowledge and what action the Company is taking or proposes to take
with respect thereto).
SECTION 5. Paragraph (a)(w) of Section 4.08 of the Indenture is hereby
amended to read in its entirety as follows:
(w) Indebtedness incurred pursuant to the Loan Agreement;
provided, however, that the principal amount of such Indebtedness for the
-------- -------
purposes of this clause (w) shall not exceed $92,500,000, which amount will
be reduced from time to time by (A) the amount of all permanent reductions,
pursuant to the Loan Agreement, of the commitments for revolving loans
under the Loan Agreement and (B) all payments (other than a payment
constituting a refinancing) of the term loans under the Loan Agreement;
SECTION 6. Section 4.09 of the Indenture is hereby amended to read in its
entirety as follows:
Section 4.09. Maintenance of Adjusted Tangible Net Worth.
------------ -------------------------------------------
The Company shall not permit its Adjusted Tangible Net Worth,
calculated as of the last day of the Company's fiscal quarters set forth
below, to be less than the amount set forth below next to such respective
fiscal quarter:
<TABLE>
<CAPTION>
Company's Fiscal Adjusted Tangible
Quarter Net Worth
---------------- -----------------
<S> <C>
1st Quarter 1994 $19,240,000
2nd Quarter 1994 $22,710,000
3rd Quarter 1994 $25,235,000
4th Quarter 1994 $25,465,000
1st Quarter 1995 $23,750,000
2nd Quarter 1995 $27,265,000
3rd Quarter 1995 $29,735,000
4th Quarter 1995 $28,975,000
1st Quarter 1996 $28,025,000
2nd Quarter 1996 $29,925,000
3rd Quarter 1996 $32,300,000
</TABLE>
-4-
<PAGE>
<TABLE>
<S> <C>
4th Quarter 1996 $31,825,000
1st Quarter 1997 $30,875,000
2nd Quarter 1997 $34,675,000
3rd Quarter 1997 $37,050,000
4th Quarter 1997 $37,050,000
</TABLE>
SECTION 7. Section 4.10 of the Indenture is hereby amended to read in its
entirety as follows:
Section 4.10. Maintenance of the Company's EBITDA.
------------ -----------------------------------
The Company shall not permit its EBITDA for the period of four
consecutive fiscal quarters ending on the last day of the Company's fiscal
quarters set forth below to be less than the amount set forth below next to
such respective fiscal quarter:
<TABLE>
<CAPTION>
Company's Fiscal
Quarter EBITDA
- ---------------------------- -----------
<S> <C>
1st Quarter 1994 $28,710,000
2nd Quarter 1994 $29,385,000
3rd Quarter 1994 $30,105,000
4th Quarter 1994 $30,600,000
1st Quarter 1995 $30,400,000
2nd Quarter 1995 $29,735,000
3rd Quarter 1995 $30,590,000
4th Quarter 1995 $35,340,000
1st Quarter 1996 $35,910,000
2nd Quarter 1996 $34,200,000
3rd Quarter 1996 $34,675,000
4th Quarter 1996 $35,340,000
1st Quarter 1997 $35,625,000
2nd Quarter 1997 $36,385,000
3rd Quarter 1997 $37,050,000
4th Quarter 1997 $37,525,000
</TABLE>
SECTION 8. Section 4.11 of the Indenture is hereby amended to read in
its entirety as follows:
Section 4.11. Maintenance of Fixed Charge Coverage Ratio.
------------ ------------------------------------------
The Company will not permit its Fixed Charge Coverage Ratio for the
period of four consecutive fiscal quarters ending on the last day of the
Company's
-5-
<PAGE>
fiscal quarters set forth below to be less than the ratio set forth below
next to such respective fiscal quarter:
<TABLE>
<CAPTION>
Company's Fiscal Fixed Charge
Quarter Coverage Ratio
- ---------------------------- --------------
<S> <C>
1st Quarter 1994 0.72
2nd Quarter 1994 0.72
3rd Quarter 1994 0.70
4th Quarter 1994 0.69
1st Quarter 1995 0.71
2nd Quarter 1995 0.67
3rd Quarter 1995 0.62
4th Quarter 1995 0.76
1st Quarter 1996 0.71
2nd Quarter 1996 0.76
3rd Quarter 1996 0.86
4th Quarter 1996 0.81
1st Quarter 1997 0.81
2nd Quarter 1997 0.81
3rd Quarter 1997 0.81
4th Quarter 1997 0.67
</TABLE>
SECTION 9. Section 4.12 of the Indenture is hereby amended to read in
its entirety as follows:
Section 4.12. Maintenance of Interest Coverage Ratio.
------------ --------------------------------------
The Company will not permit its Interest Coverage Ratio for the period
of four consecutive fiscal quarters ending on the last day of the Company's
fiscal quarters set forth below to be less than the ratio set forth below
next to such respective fiscal quarter:
<TABLE>
<CAPTION>
Company's Fiscal Interest Coverage
Quarter Ratio
---------------- -----------------
<S> <C>
1st Quarter 1994 1.73
2nd Quarter 1994 1.75
3rd Quarter 1994 1.76
4th Quarter 1994 1.77
1st Quarter 1995 1.57
2nd Quarter 1995 1.43
3rd Quarter 1995 1.43
</TABLE>
-6-
<PAGE>
<TABLE>
<S> <C>
4th Quarter 1995 1.62
1st Quarter 1996 1.62
2nd Quarter 1996 1.62
3rd Quarter 1996 1.66
4th Quarter 1996 1.66
1st Quarter 1997 1.66
2nd Quarter 1997 1.66
3rd Quarter 1997 1.71
4th Quarter 1997 1.71
</TABLE>
SECTION 10. Paragraph (b) of Section 4.13 of the Indenture is hereby
amended to read in its entirety as follows:
Section 4.13. Sale of Assets; Application of Net Proceeds.
------------ -------------------------------------------
(b) Upon the receipt by the Company or a Subsidiary of the Company of
the Net Proceeds of any Asset Sale, the Company shall, and shall cause such
Subsidiary to, deposit in the Proceeds Account (i) to the extent that the
assets subject to such Asset Sale constitute Noteholders' Primary
Collateral (as defined in the Intercreditor Agreement), 100% of the Net
Proceeds of the Asset Sale relating to such assets, (ii) to the extent that
the assets subject to such Asset Sale constitute Lenders' Primary
Collateral (as defined in the Intercreditor Agreement), the Net Proceeds of
the Asset Sale relating to such assets remaining after application of the
proceeds of such sale to Indebtedness outstanding pursuant to the Loan
Agreement in full and (iii) with respect to any other assets, a portion of
the Net Proceeds of the Asset Sale relating to such assets equal to the
product of such Net Proceeds and a fraction, the numerator of which is the
principal amount of the Notes then outstanding (determined as of the close
of business on the day immediately preceding the closing date of the Asset
Sale) and the denominator of which is the principal amount of the Notes
then outstanding plus the maximum amount of the Indebtedness which may be
incurred by the Company and its Subsidiaries pursuant to the Loan Agreement
(as limited by Section 4.08(a)(w)), each determined as of the close of
business on the day immediately preceding the closing date of the Asset
Sale; provided that if, after giving effect to such application of Net
--------
Proceeds under this clause (iii), the outstanding balance of the
Indebtedness under the Loan Agreement is reduced to zero, then any
remaining Net Proceeds otherwise allocable to such Indebtedness shall be
applied to the Notes. Notwithstanding the foregoing, the Company and its
Subsidiaries shall be entitled to retain the Net Proceeds of any Asset Sale
(and need not either deposit such Net Proceeds in the Proceeds Account or
redeem or make an offer to redeem Notes therewith) if the Net Proceeds of
such Asset Sale and any related series of Asset Sales shall not exceed
$100,000; provided that the aggregate amount of all Net
--------
-7-
<PAGE>
Proceeds retained by the Company and its Subsidiaries pursuant to this
sentence shall not exceed $1,000,000.
SECTION 11. This Supplemental Indenture may be executed in several
counterparts, and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one
instrument.
SECTION 12. Except as specifically supplemented and amended by this
Supplemental Indenture, the terms and provisions of the Indenture shall be and
remain in full force and effect.
SECTION 13. The Company hereby acknowledges the receipt of an executed
counterpart of this Supplemental Indenture, and the Trustee hereby acknowledges
the receipt of an executed counterpart of this Supplemental Indenture.
SECTION 14. This Supplemental Indenture shall be governed by the laws of
the State of New York.
SECTION 15. In case any provision in this Supplemental Indenture shall
be invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
SECTION 16. The recitals of fact preceding Section 1 of this
Supplemental Indenture are statements of the Company and the Trustee has no
responsibility for the accuracy or completeness thereof.
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed, all as of the day and year first above written.
FORSTMANN & COMPANY, INC.
By:/s/Rod J. Peckham
-----------------
Rod J. Peckham
Vice President and Treasurer
Attest:
/s/Jane S. Pollack (SEAL)
- ------------------
Jane S. Pollack
Secretary
SHAWMUT BANK CONNECTICUT, NATIONAL
ASSOCIATION, as Trustee
By:/s/Elizabeth Hammer
-------------------
Title:Vice President
(SEAL)
-8-
<PAGE>
Exhibit 10.2(d)
REGISTRATION RIGHTS AGREEMENT
-----------------------------
This Registration Rights Agreement (the "Agreement") is made and entered
into as of the 9th day of September, 1994, by and between Forstmann & Company,
Inc., a Georgia corporation (the "Company"), and Resolution Trust Corporation,
in its capacity as receiver for Columbia Savings & Loan Association F.A.
("RTC").
WHEREAS, RTC was the holder of approximately 1,265,000 Dissenting Shares of
Pre-Merger Common Stock (the "Dissenting Shares");
WHEREAS, the Company and RTC have entered into a Settlement Agreement dated
September 9, 1994 (the "Settlement Agreement") to compromise and settle all
disputed and contested issues and claims related to the Dissenting Shares in
consideration of the payment by the Company to RTC of $475,000 in cash and the
issuance by the Company to RTC of 30,000 shares (the "Common Shares") of the
Company's unregistered Common Stock, par value $.001 per share (the "Common
Stock");
WHEREAS, the Company and RTC desire to provide for the registration of the
Common Shares held by RTC under the Securities Act of 1933, as amended (the
"Securities Act"), under certain circumstances as further set forth herein;
NOW, THEREFORE, in consideration of the following mutual covenants and
agreements, and subject to the terms and conditions set forth herein, the
parties hereto agree as follows:
ARTICLE I.
DEFINITIONS
1.1 Certain Definitions. Except as otherwise defined herein, capitalized
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terms in this Agreement shall have the meaning set forth in the Settlement
Agreement. The following terms shall have the following meanings when used in
this Agreement:
(a) "Commission." The term "Commission" shall mean the Securities and
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Exchange Commission or any other federal agency at the time administering the
Securities Act.
(b) "Common Shares." The term "Common Shares" shall have the meaning set
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forth in the preamble.
(c) "Common Stock." The term "Common Stock" shall have the meaning set
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forth in the preamble.
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(d) "Company." The term "Company" shall mean Forstmann & Company, Inc. and
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the successors to the business of Forstmann & Company, Inc. by merger,
consolidation or sale of substantially all of its assets.
(e) "Investor." The term "Investor" shall mean RTC, so long as RTC holds
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the Registrable Stock, and any other holder of the Registrable Stock who has
agreed with the Company in writing to be bound by this Agreement.
(f) "Offering." The term "Offering" shall mean the public offering of the
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Registrable Stock, including on a continuous or delayed basis pursuant to a
shelf offering as permitted under Rule 415 promulgated under the Securities Act.
(g) "Prior Agreement." The term "Prior Agreement" shall mean that certain
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Common Stock Registration Rights Agreement dated as of November 19, 1990, by and
between the Company and certain holders of the Company's Common Stock named
therein.
(h) "Register." The terms "register," "registered" and "registration"
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refer to a registration effected by preparing and filing a registration
statement with the Securities and Exchange Commission ("Commission") in
compliance with the Securities Act.
(i) "Registrable Stock." The term "Registrable Stock" shall mean (i) the
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Common Shares and (ii) any securities of the Company issued or issuable with
respect to the Common Shares by reason of a stock dividend or stock split or in
connection with a combination of shares, recapitalization, merger, consolidation
or other reorganization. Each share of Registrable Stock shall continue to be
Registrable Stock only for the duration of the Registration Period (as herein
defined) and only in the hands of (y) RTC, and (z) any transferee or assignee of
RTC which acquires all of the Common Shares then owned by RTC from RTC in a
transaction exempt from registration under the Securities Act and which agrees
with the Company in writing to be bound by this Agreement.
(j) "Registration Period." The term "Registration Period" shall mean, with
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respect to any Investor and the shares of Registrable Stock then held by such
Investor, that period beginning on the date hereof and ending on the third
anniversary of the delivery of the Common Shares to RTC, subject to extensions
as provided in Section 2.7.
(k) "Registration Statement." The term "Registration Statement" shall mean
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a registration statement relating to any shares of the Registrable Stock which
is prepared and filed with
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the Commission under the Securities Act and in accordance with the terms and
conditions of this Agreement.
(l) "RTC." The term "RTC" shall include its successors.
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(m) "Securities Act." The term "Securities Act" shall have the meaning set
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forth in the preamble.
ARTICLE II.
SECURITIES REGISTRATION
2.1 Registration on Request. At any time during the Registration Period,
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upon the written request of an Investor requesting that the Company effect the
registration (including a shelf registration under Rule 415 under the Securities
Act) under the Securities Act of all of the Registrable Stock held by such
Investor and specifying the intended method or methods of disposition thereof,
the Company will, within 120 days (not more than 45 days if the Registration
Statement is on Form S-3) after it receives such written request, prepare and
file a Registration Statement with respect to the Registrable Stock for
disposition in accordance with the intended method or methods of disposition
stated in such written request, and the Company will thereafter use all
reasonable efforts to cause such Registration Statement to become effective
within 180 days (90 days if the Registration Statement is on Form S-3) after the
date on which it receives such written request; provided, however, that the
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Company shall not be required to effect more than one registration pursuant to
this Section 2.1. In the event that any offering pursuant to a Registration
Statement filed under this Section 2.1 is to be an underwritten offering, the
Investor shall have the right to select the underwriter for such offering,
subject to the approval of the Company which approval shall not be unreasonably
withheld. The Investor shall not be required to use an underwriter.
2.2 Registration Procedures.
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(a) In connection with the registration by the Company of shares of the
Registrable Stock pursuant to Section 2.1 above, the Company shall:
(i) prepare and file with the Commission a Registration Statement with
respect to such securities on such form as the Company deems appropriate (except
that if a shelf offering is to be requested by RTC, the Registration Statement
shall be on Form S-3, or its successor form, if eligible) and use all reasonable
efforts to cause such Registration Statement to become and remain effective as
provided herein;
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(ii) prepare and file with the Commission such amendments and supplements
to such Registration Statement and the prospectuses used in connection therewith
as may be necessary to keep such Registration Statement continuously effective
and current and to comply with the provisions of the Securities Act with respect
to the sale or other disposition of all shares covered by such Registration
Statement, including such amendments and supplements as may be necessary to
reflect the intended method of disposition from time to time of the Investor
whose shares of the Registrable Stock are included in any registration pursuant
to Section 2.1, until the earliest of (a) such time as all of the securities
covered by such Registration Statement have been disposed of in accordance with
the intended methods of disposition by the seller or sellers thereof or (b) the
end of the Registration Period;
(iii) promptly notify (but in no event later than one business day after
such event) the Investor and confirm such advice in writing, (a) when such
Registration Statement and each post-effective Amendment and Supplement have
been filed and when they become effective, and (b) of the entry of any stop
order suspending the effectiveness of such Registration Statement or the
initiation of any proceedings for that purpose (in which event the Company shall
make every reasonable effort to correct the deficiency that may cause the entry
of a stop order) , and, if such stop order shall be entered, the Company shall
use its reasonable efforts to obtain the lifting thereof at the earliest
practicable moment;
(iv) furnish to the Investor promptly, but in no event later than one (1)
business day after the filing thereof with the Commission (a) a copy of the
Registration Statement; (b) a copy of any amendment (including any post-
effective amendment) to such Registration Statement; and (c) a conformed copy of
the Registration Statement as declared effective by the Commission and of each
post-effective amendment thereto, including financial statements and all
exhibits and reports incorporated therein by reference;
(v) furnish to each Investor (and, if applicable, each underwriter) such
number of copies of each prospectus, including preliminary prospectuses, and
such other documents, as the Investor (and, if applicable, the underwriter) may
reasonably request in order to facilitate the public sale or other disposition
of the shares of Registrable Stock owned by it;
(vi) use all reasonable efforts to register or qualify the shares of
Registrable Stock covered by such Registration Statement under such other
securities or Blue Sky or other applicable laws of such jurisdictions as the
Investor shall reasonably request to enable such Investor to consummate the
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public sale or other disposition of the shares of Registrable Stock owned by
Investor; provided that the Company shall not be required in connection
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therewith or as an election thereto to qualify to do business or to file a
general consent to service of process in any such jurisdiction, or to maintain
the effectiveness of any such registration or qualification for any period
during which it is not required to maintain the effectiveness of the related
Registration Statement under the Securities Act as set forth in Section
2.2(a)(ii);
(vii) use all reasonable efforts to cause all such Registrable Stock to be
listed on each securities exchange or other securities trading market on which
Common Stock issued by the Company is then listed;
(viii) enter into such customary agreements (including an underwriting
agreement with respect to underwritten offerings) in form and substance
reasonably acceptable to the Company (which underwriting agreements may provide
for indemnification of and to underwriters on terms other than as provided in
Section 2.5 hereof) and take such other customary actions as the Investor (or
underwriter) may reasonably request in order to expedite or facilitate the
disposition of such Registrable Stock (including compliance with the Company's
undertakings contained in the underwriting agreement; and
(ix) make reasonably available for inspection by the Investor, any
underwriter participating in any disposition of the Registrable Stock, and any
attorney, accountant or other agent retained by any such seller or underwriter,
all financial and other records, pertinent corporate documents and properties of
the Company, and use all reasonable efforts to cause the Company's officers,
directors and employees to supply all information reasonably requested by such
Investor, underwriter, attorney, accountant or agent in connection with the
registration contemplated by Section 2.1 above, in each case as and to the
extent necessary to permit the Investor to conduct a reasonable investigation
within the meaning of the Securities Act. To minimize disruption and expense to
the Company during the course of the registration process, the Investor will act
through a single law firm and a single accounting firm and will enter into
confidentiality agreements with the Company in form and substance reasonably
satisfactory to the Company and the Investor prior to receiving any confidential
or proprietary information of the Company;
(x) provide Investor (and, if applicable, the underwriters) with a copy of
all documents to be filed with the Commission, including the Registration
Statement and all Amendments for review and comment by the Investor at least
forty-eight (48) hours prior to any filings pursuant to
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Sections 2.1 and 2.11;
(xi) use reasonable efforts to maintain the qualification or listing of
the class of Registrable Stock with NASDAQ, or a national stock exchange;
(xii) promptly (but in no event later than one business day after receipt)
provide Investor with a copy of all written correspondence to and from the
Commission or order of the Commission, including members of the Commission's
staff; and
(xiii) cooperate with the Investor and managing underwriter, if any, to
facilitate the timely preparation and delivery of the certificates representing
the Registrable Stock to be sold and the removal of any restrictive legend
thereon; and enable such Registrable Stock to be in such denominations and
registered in such names as the Investor may request by written notice to the
Company at least two business days prior to the settlement(s) pursuant to a
takedown of any sale of Registrable Stock by the Investor.
(b) The Investor shall furnish to the Company in writing such information
as the Company may reasonably request from the Investor for use in preparing the
Registration Statement (and the prospectus included therein) and performing its
other obligations hereunder.
(c) During such time as the Investor may be engaged in a distribution of
the Registrable Stock, the Investor shall comply with Rules 10b-6 and 10b-7
promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and pursuant thereto, shall, among other things: (w) not engage in any
stabilization activity in connection with the securities of the Company in
contravention of such Rules; (x) distribute the Registrable Stock solely in the
manner described in the Registration Statement; (y) cause to be furnished to
each underwriter, broker or agent through whom the Registrable Stock may be
offered, or to the offeree if an offer is not made through a broker, such copies
of the prospectus and any amendment or supplement thereto and documents
incorporated by reference therein as may be required by law; and (z) not bid for
or purchase any securities of the Company or attempt to induce any person to
purchase any securities of the Company other than as permitted under the
Exchange Act and the Securities Act.
(d) The parties acknowledge that time is of the essence in the preparation
and filing of the Registration Statement and all amendments and supplements
thereto.
2.3 Effective Registration Statement. A request that a Registration
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Statement be filed pursuant to Section 2.1 will not
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be deemed to have been effected under Section 2.1 unless the Registration
Statement has become effective. At any time prior to the Registration Statement
becoming effective, the Investor may for any reason withdraw its request for
registration. If the Investor withdraws its request for registration of the
Registrable Stock prior to the effective date of such Registration Statement and
reimburses the Company for the reasonable out-of-pocket expenses incurred by the
Company in connection with such Registration Statement, the Investor shall not
be deemed to have exercised its right to require the Company to register the
Registrable Stock pursuant to Section 2.1.
2.4 Expenses of Registration. All expenses incurred in effecting any
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registration and/or sale of the Registrable Stock pursuant to Section 2.1
hereof, including, without limitation, all registration and filing fees,
printing expenses, expenses of compliance with Blue Sky laws, fees and
disbursements of counsel for the Company, expenses of any audits incidental to
or required by any such registration, and expenses of all marketing and
promotional efforts requested by any underwriter shall be borne by the Company;
provided, however, that the Investor shall bear all underwriting discounts or
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brokerage fees or commissions relating to the sale of its Registrable Stock and
all fees and expenses of its own counsel, accountants and other experts with
respect to any registration and/or sale of the Registrable Stock under Section
2.1 hereof.
2.5 Indemnification.
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(a) The Company shall indemnify and hold harmless the Investor, each
underwriter (as defined in the Securities Act),
each other selling agent who may be deemed to be an underwriter, and each
controlling person of any Investor, underwriter or other selling agent, if any
(within the meaning of the Securities Act), from and against any losses, claims,
damages or liabilities, joint or several (or actions in respect thereof)
("Losses"), to which such indemnified party may be subject under the Securities
Act, under any other statute or at common law, but only to the extent such
Losses arise out of or are based upon (i) any untrue statement (or alleged
untrue statement) of any material fact contained in (x) any Registration
Statement under which Registrable Stock held by such Investor was registered
under the Securities Act or offered for sale, (y) any preliminary prospectus (if
used prior to the effective date of such Registration Statement), or (z) any
final prospectus or any post-effective amendment or supplement thereto (if used
during the period the Company is required to keep the Registration Statement
effective), in each case, effective on the effective date of such Registration
Statement or post-effective amendment, or the date of such prospectus, including
any preliminary prospectus, or supplement (the "Disclosure Documents"), (ii) any
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omission (or alleged omission) to state in any of the documents referred to in
subparagraph 2.5(a)(i) a material fact required to be stated therein or
necessary to make the statements made therein not misleading or (iii) any
violation by the Company of the Securities Act or any Blue Sky law, or any rule
or regulation promulgated under the Securities Act or any Blue Sky law, or any
other law, applicable to the Company in connection with the sale, registration
or qualification of any shares of Registrable Stock held by such Investor; and
the Company shall reimburse each such indemnified party for any legal or other
expenses reasonably incurred by such party in connection with investigating or
defending any such loss, claim, damage, liability or action, whether or not
resulting in any liability, or in connection with any investigation or
proceeding by any governmental agency or instrumentality relating to any such
claims with respect to any offering of securities pursuant to this Article II,
but excluding any amounts paid in settlement of any action, suit, arbitration,
proceeding, litigation, or investigation (collectively "Litigation"), commenced
or threatened, if such settlement is effected without the prior written consent
of the Company, which consent shall not be unreasonably withheld; provided,
however, that the Company shall not be liable to any Investor, underwriter,
other selling agent or controlling person in any such case to the extent that
any such Losses arise out of or are based upon (i) an untrue statement or
omission or alleged omission of a material fact (y) made in any such Disclosure
Documents in reliance upon and in conformity with written information furnished
to the Company by or on behalf of such indemnified party expressly for use in
the preparation thereof, or (z) made in any preliminary prospectus if a copy of
the final prospectus was not delivered to the person alleging any loss, claim,
damage or liability for which Losses arise at or prior to the written
confirmation of the sale of such Registrable Stock to such person and the untrue
statement or omission concerned had been corrected in such final prospectus and
copies thereof had timely been delivered by the Company to such indemnified
party; or (ii) the use of any prospectus by the indemnified person after such
time as the Company has advised such indemnified party in writing that the
filing of a post-effective amendment or supplement thereto is required, and such
prospectus should no longer be delivered except the prospectus as so amended or
supplemented, or the use of any prospectus after such time as the obligation of
the Company to keep the same current and effective has expired; provided further
that, in accordance with the policy of the Commission, any obligation of the
Company to provide indemnification hereunder to a person who is a director,
officer or controlling person of the Company, is subject to the limitation that,
in the event of any claim for indemnification hereunder by any such person
(other than a claim for payment by the Company of expenses incurred by such
person in the successful defense of any action, suit or proceeding), the Company
will,
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unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of competent jurisdiction the question of whether
such indemnification by it is against public policy as expressed in the
Securities Act and the Company and such person shall be governed by the final
adjudication of such issue.
(b) In connection with the registration and/or sale of any shares of
Registrable Stock pursuant to this Agreement, the Investor having its shares of
the Registrable Stock included in such registration shall, and (except as to
clause (iii) below and Section 2.2(a)(viii)) shall cause any underwriter
retained by it who participates in the offering to, severally, but not jointly,
indemnify and hold harmless the Company, each of its directors, each of its
officers who have signed such Registration Statement and each controlling person
of the Company (within the meaning of the Securities Act), against any Losses,
joint or several, to which such indemnified party may become subject under the
Securities Act, under any other statute or at common law, but only to the extent
such Losses arise out of or are based upon (i) any untrue statement (or alleged
untrue statement) of any material fact contained in any of the Disclosure
Documents or any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, if the statement or omission was made in reliance upon and in
conformity with written information furnished to the Company by such
indemnifying party expressly for use in the preparation thereof; (ii) the use by
such indemnifying party of any prospectus (y) after such time as the Company has
advised such indemnifying party in writing that the filing of a post-effective
amendment or supplement thereto is required and such prospectus should no longer
be delivered, except the prospectus as so amended or supplemented, or (z) after
such time as the obligation of the Company to keep the Registration Statement
effective and current has expired and the Company has notified the indemnifying
party of such expiration date, or (iii) any information given or representation
made by such indemnifying party in connection with the sale of Registrable Stock
which is not contained in and not in conformity with the prospectus (as amended
or supplemented at the time of the giving of such information or making of such
representation); and such indemnifying party shall reimburse each such
indemnified party for any legal and other expenses reasonably incurred by such
party in investigating or defending any such loss, claim, damage, liability or
action, whether or not resulting in any liability, or in connection with any
investigation or proceeding by any governmental agency or instrumentality
relating to any such claims with respect to any offering of securities pursuant
to this Article II, but excluding any amounts paid in settlement of any
Litigation, commenced or threatened, if such settlement is effected without the
prior written consent of such indemnifying
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party. The Investor's liability hereunder shall not exceed in the aggregate the
net proceeds it has received from the sale of the Registrable Stock, after all
expenses.
(c) If the indemnification provided for in Section 2.5(a) or (b) above is
unavailable to an indemnified party in respect of any Losses referred to
therein, then the intended indemnifying party, in lieu of indemnifying such
indemnified party thereunder, shall contribute to the amount paid or payable by
such indemnified party as a result of such Losses in such proportion as is
appropriate to reflect the relative fault of the intended indemnifying party on
the one hand and of the indemnified party on the other in connection with the
statements or omissions which resulted in such Losses, as well as any other
relevant equitable considerations. The relative fault of the intended
indemnifying party and of the indemnified party shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by (or omitted to be supplied by) the intended
indemnifying party or by the indemnified party, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission.
The Company and the Investor agree that it would not be just and equitable
if contribution pursuant to this Section 2.5(c) were determined by pro rata
allocation or by any other method of allocation which does not take into account
the equitable considerations referred to in the immediately preceding paragraph.
The amount paid or payable by an indemnified party as a result of the losses,
claims, damages and liabilities or actions in respect thereof referred to in the
immediately preceding paragraph shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this Section 2.5(c), no
Investor shall be required to contribute any amount in excess of the amount by
which the net proceeds (after all expenses) from the sale of the Registrable
Stock sold by it exceeds the amount of any damages which such Investor has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentations (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
(d) Promptly after receipt by an indemnified party under Section 2.5(a) or
(b) above of notice of the commencement of any action or proceeding, such
indemnified party shall, if a claim in respect thereof is to be made under such
Section, notify
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the indemnifying party in writing of the commencement thereof; but the omission
so to notify the indemnifying party shall not relieve it from any liability
which it may have to any indemnified party otherwise than under such Section
except to the extent that it has not been prejudiced as a proximate result of
such failure. In case any such action or proceeding shall be brought against
any indemnified party, and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate
therein and, to the extent that it may wish, to assume the defense thereof, in
each case jointly with any other indemnifying party and with counsel reasonably
satisfactory to such indemnified party; provided, however, that, if the
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defendants in any such action include both the indemnified party and the
indemnifying party and representation of such indemnified party by the counsel
retained by the indemnifying party would be inappropriate due to actual or
potential differing interests between such indemnified party and any other party
represented by such counsel in such proceeding, the indemnified party or parties
shall have the right to select separate counsel to defend such action (in which
case the indemnifying party shall not have the right to direct the defense of
such action on behalf of the indemnified party or parties). Upon the permitted
assumption by the indemnifying party of the defense of such action, and approval
by the indemnified party of counsel, the indemnifying party shall not be liable
to such indemnified party under this Section 2.5 for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof (other than reasonable costs of investigation) unless (i) the
indemnified party shall have employed separate counsel in accordance with the
proviso to the next preceding sentence, (ii) the indemnifying party shall not
have employed counsel reasonably satisfactory to the indemnified party to
represent the indemnified party within a reasonable time, or (iii) the
indemnifying party has authorized in writing the employment of counsel for the
indemnified party at the expense of the indemnifying party. It is understood,
however, that the indemnifying party shall not, in respect of the legal expenses
of any indemnified party in connection with any action or related actions in the
same jurisdiction arising out of the same general allegations or circumstances,
be liable for the fees and expenses of more than one separate law firm (in
addition to any local counsel) for all indemnified parties.
2.6 Assignment and Transfer of Registration Rights. The rights of any
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Investor under this Agreement may be transferred or assigned only to a
transferee or assignee which acquires all of the Common Shares RTC then owns
from RTC in a transaction which is exempt from registration under the Securities
Act and which agrees with the Company in writing to be bound by this Agreement
and, in any event, only in connection with a transfer of securities which remain
Registrable Stock hereunder after giving
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effect to such transfer, and not to any other or subsequent transferee or
assignee of any such securities, and any such permitted transfer or assignment
shall be effective only upon the receipt by the Company of written notice of
such transfer or assignment and an instrument, in substantially the form
attached hereto as Exhibit A, pursuant to which such transferee or assignee
agrees to be bound by the provisions of this Agreement.
2.7 Holdback Agreements.
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(a) Notwithstanding any provision of this Agreement to the contrary, in the
event the Company notifies the Investor that the Company intends to file a
Registration Statement in connection with an underwritten offering (other than a
shelf offering) by the Company of any of its Common Stock after six months from
the date of this Agreement, the Investor shall refrain from selling or otherwise
distributing any Registrable Stock within the period requested in writing by the
managing underwriter for such offering, which period shall begin no earlier than
two days (subject to prior written notice thereof) prior to the effective date
of such Registration Statement and shall end no later than 90 days after such
effective date (the "Offering Restricted Period"); provided, however, that
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Investor shall not be required to refrain from selling in connection with any
offering unless Odyssey Partners, L.P. ("Odyssey") (including its affiliates and
successors) and all of the directors and officers of the Company are also
required to refrain from selling for a comparable period with respect to any
shares not registered for sale by them in such offering. The foregoing holdback
agreement by the Investor shall be applicable only to the first such
underwritten offering in any twelve-month period. If a Registration Statement
filed pursuant to Section 2.1 is in effect on the first date of the Offering
Restricted Period, the Company's obligation under Section 2.2(a)(ii) to keep
such Registration Statement current and effective shall be extended for a number
of days equal to the Offering Restricted Period, or, if earlier, until the date
on which all of the Registrable Stock has been disposed of.
(b) Notwithstanding anything set forth herein to the contrary, in the event
that the Company notifies the Investor in writing that the Company desires to
amend the Registration Statement or to supplement the prospectus in order to
disclose material information required to be disclosed in the prospectus
included in such Registration Statement, as then in effect, in order to correct
an untrue statement of a material fact or to disclose an omitted material fact
that is required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing, the Investor
shall refrain from selling Registrable Stock until the Company notifies the
Investor in writing that the required
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amendment or supplement has been filed with the Commission (the "Disclosure
Restricted Period"). If a Registration Statement filed pursuant to Section 2.1
is effective on the first date of the Disclosure Restricted Period, the
Company's obligation under Section 2.2(a)(ii) to keep such Registration
Statement current and effective shall be extended for a number of days equal to
the Disclosure Restricted Period, or, if earlier, until the date on which all of
the Registrable Stock has been disposed of. The Company shall use its
reasonable efforts to file such amendment or supplement as promptly as
practicable after the Company decides to amend the Registration Statement or
supplement the prospectus.
(c) Notwithstanding any provision of this Agreement to the contrary, in the
event the Company notifies the Investor that it has received a notice pursuant
to Section 4(b)(1) of the Prior Agreement (which notice by the Company shall
state the date on which it received such notice pursuant to Section 4(b)(1) of
such Prior Agreement and shall include a copy of the notices given pursuant to
such Prior Agreement), the Investor shall thereafter refrain from selling or
otherwise distributing any Registrable Stock in accordance with the Prior
Agreement, as and to the extent set forth in such notice by the Company, for the
period ending 20 days after receipt by the Company of such notice pursuant to
Section 4(b)(1) of such Prior Agreement (the "Prior Agreement Restricted
Period"). If a Registration Statement filed pursuant to Section 2.1 is
effective on the first date of the Prior Agreement Restricted Period, the
Company's obligation under Section 2.2(a)(ii) to keep such Registration
Statement current and effective shall be extended for a number of days equal to
the Prior Agreement Restricted Period, or, if earlier, until the date on which
all of the Registrable Stock has been disposed of.
2.8 SEC Filings. The Company will use commercially reasonable efforts to
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timely file all reports required to be filed by it under the Exchange Act and
the rules and regulations adopted thereunder to the extent required to enable
the sale of the Registrable Stock pursuant to a Registration Statement filed on
Form S-3 or pursuant to Rule 144 promulgated under the Securities Act for the
period commencing on the date hereof and ending on the earlier of (i) the last
day of the Registration Period or (ii) the sale by the Investor of all of the
Registrable Stock.
2.9 Other Registration Rights Agreements. The Company represents that,
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except for the Prior Agreement and certain registration rights it has agreed to
grant to Odyssey but has not yet negotiated or documented, it has not heretofore
granted any registration rights with respect to Common Stock. The Company
further represents and agrees that it will not, during the Registration Period,
enter into any agreement which prohibits or
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precludes the Company from registering Common Stock of the Investor, except as
expressly contemplated by this Agreement.
2.10 SEC Form S-3 and Correspondence.
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(a) The Company represents that, on the date hereof, it meets the
eligibility requirements for the use of Form S-3 adopted under the Securities
Act in transactions involving secondary offerings and will use commercially
reasonable efforts to remain eligible to use such form.
(b) The Company shall provide the Investor with prompt written notice of
any public announcement of any sale, public or private, or of any intended sale
of capital stock of the Company and of the filing of any Registration Statement
and all amendments and supplements thereto covering shares of capital stock of
the Company (except sales of capital stock registered on Form S-4 or S-8),
including shelf registrations and secondary offerings.
2.11 Piggyback Registrations.
-----------------------
(a) If the Company proposes to register any of its Common Stock (or
securities convertible into Common Stock) for its own account or on behalf of
any shareholder, other than the Investor, for sale pursuant to an underwritten
offering, other than an underwritten shelf offering, the Company shall give the
Investor written notice of such proposed registration at least 20 days prior to
the filing of such Registration Statement. At the written request of the
Investor delivered to the Company within ten days after receipt of said notice,
which request shall state the number of shares of Registrable Stock that the
Investor wishes to sell under said Registration Statement, the Company shall use
commercially reasonable efforts to cause the registration of such shares
("Piggyback Registration").
(b) The Company may, for any reason and without the consent of any
Investor, determine at any time not to proceed with any registration referred to
in Section 2.11(a) and abandon the proposed offering, whereupon the Company
shall be relieved of any further obligations hereunder to proceed with such
registration or offering.
(c) The Company shall have the right, in its sole discretion, to select the
underwriter for any offering pursuant to a Registration Statement filed pursuant
to this Section 2.11.
(d) If the managing underwriter(s) of the Piggyback Registration advise the
Company or the holders of the Company's Common Stock who have exercised their
demand registration rights that the number of shares requested to be included in
the
-14-
<PAGE>
Registration Statement, in their opinion, exceeds the maximum number which can
be sold in the offering without (i) creating a substantial risk that the
proceeds or price per unit that will be derived from such offering will be
reduced or (ii) causing such offering to be too large to be reasonably sold,
first there shall be included in the Registration Statement all of the
shares that the Company and the shareholder exercising demand
registration rights requested be included in the Registration
Statement,
then all of the shares of Registrable Stock proposed to be sold by the
Investor and all of the Common Stock proposed to be sold by Odyssey
and by holders of shares covered by the Prior Agreement shall be
included in the Registration Statement in proportion to the number of
shares each proposes to sell,
then all of the shares of Common Stock proposed to be sold by all
other shareholders who have requested pursuant to contractual
incidental or piggyback registration rights that shares be included in
the Registration Statement shall be so included in proportion to the
number of shares each such holder proposes to sell.
ARTICLE III.
MISCELLANEOUS
3.1 Notices. All notices, demands or other communications hereunder shall
-------
be in writing and shall be deemed given when delivered personally, mailed by
certified mail, return receipt requested, sent by overnight courier service or
telecopied, telegraphed or telexed (transmission confirmed), or otherwise
actually delivered:
If to the Company: Forstmann & Company, Inc.
1185 Avenue of the Americas
New York, New York 10036
Attention: Jane S. Pollack, Esq.
Telephone: (212) 642-6900
Facsimile: (212) 642-6992
-15-
<PAGE>
If to RTC: Resolution Trust Corporation
801 17th Street, N.W.
Washington, D.C. 20434
Attention: Kathy Kalser, Assistant
Director, Office of
Securities Transactions
Telephone: (202) 416-4037
Facsimile: (202) 416-2855
With a copy to: Resolution Trust Corporation
Legal Division
1717 "H" Street, N.W.
Washington, D.C. 20006
Attention: Assistant General Counsel
for Securities and Finance
Telephone: (202) 736-0301
Facsimile: (202) 736-0331
If to any other
Investor: At the address and numbers set forth in the Company's
records, marked for attention as therein indicated;
or at such other address and numbers as may have been furnished by such person
in writing to the other parties, accompanied by a written request that such
address and numbers be used for the purpose of giving notices hereunder.
3.2 Severability and Governing Law. Should any Section or any part of a
------------------------------
Section within this Agreement be rendered void, invalid or unenforceable by any
court of law for any reason, such invalidity or unenforceability shall not void
or render invalid or unenforceable any other Section or part of a Section in
this Agreement. To the extent federal law does not control, this Agreement and
the parties' rights and obligations hereunder shall be governed by and construed
in accordance with the internal laws of the State of Georgia without giving
effect to its choice of law principles, but only to the extent that applicable
Georgia law would not frustrate the purposes of FIRREA or any provision of this
Agreement. Nothing in this Agreement shall require any unlawful action or
inaction by either party.
3.3 Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
3.4 Captions and Section Headlines. Section titles or captions contained
------------------------------
in this Agreement are inserted as a matter of convenience and for reference
purposes only, and in no way define, limit, extend or describe the scope of this
Agreement or
-16-
<PAGE>
the intent of any provision hereof.
3.5 Singular and Plural, Etc. Whenever the singular number is used herein
------------------------
and where required by the context, the same shall include the plural, and the
neuter gender shall include the masculine and feminine genders.
3.6 Costs and Attorneys' Fees. In the event that any action, suit, or
-------------------------
other proceeding is instituted concerning or arising out of this Agreement, the
prevailing party shall recover all of such party's costs, and attorneys' fees
incurred in each and every such action, suit, or other proceeding, including any
and all appeals or petitions therefrom. As used herein, "attorneys' fees" shall
mean the full and actual costs of any legal services actually rendered in
connection with the matters involved, calculated on the basis of the usual fee
charged by the attorneys performing such services.
3.7 Amendments and Waivers. This Agreement may not be changed, waived,
----------------------
discharged or terminated except by written agreement signed by the Company and
the Investor; provided, however, that no such amendment or waiver shall affect
the provisions of this Section 3.7 and no such waiver shall extend to or affect
any other obligation not expressly waived. No failure to exercise and no delay
in exercising, on the part of any party, any right, remedy, power or privilege
hereunder shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, remedy, power or privilege hereunder preclude any other
or further exercise thereof or the exercise of any other right remedy, power or
privilege. The rights, remedies, powers and privileges herein provided are
cumulative and not exclusive of any rights, remedies, powers and privileges
provided by law. The failure of any party to insist upon a strict performance
of any of the terms or provisions of this Agreement, or to exercise any option,
right or remedy herein contained, shall not be construed as a waiver or as a
relinquishment for the future of such term, provision, option, right or remedy,
but the same shall continue and remain in full force and effect.
3.8 Successors and Assigns. All rights, covenants and agreements of the
----------------------
parties contained in this Agreement shall, except as otherwise provided herein,
be binding upon and inure to the benefit of their respective successors and
assigns.
3.9 Entire Agreement. This Agreement and the Settlement Agreement of even
----------------
date contain the entire understanding of the parties and there are no further or
other agreements or understandings, written or oral, in effect between the
parties relating to the subject matter hereof unless expressly referred to
herein.
-17-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
FORSTMANN & COMPANY, INC.
(SEAL)
By:___________________________
Name:
Title:
RESOLUTION TRUST CORPORATION, in its capacity as receiver
for Columbia Savings and Loan Association F.A.
(SEAL)
By:___________________________
Name:
Title:
-18-
<PAGE>
EXHIBIT A
---------
Forstmann & Company, Inc.
1185 Avenue of the Americas
New York, New York 10036
Attention: President
Re: Registration Rights Agreement ("Agreement")
Dated September 9, 1994 between Resolution Trust Company, in
its capacity as receiver for Columbia Savings & Loan
Association, F.A. ("RTC"), and Forstmann & Company, Inc.
("Company")
Gentlemen:
On [insert date] RTC, or its successor, did sell, assign and transfer
all of the shares of Common Stock of the Company that it then owned which
constituted Registrable Stock (as defined in the Agreement) to the undersigned
in a transaction which is exempt from registration under the Securities Act of
1933, together with its rights, subject to the assumptions of its obligations,
under the Registration Rights Agreement.
The undersigned hereby agrees, as provided in paragraph 2.6 of the
Agreement, to be bound by the terms and conditions of the Agreement and the
Settlement Agreement dated September 9, 1994 between RTC and the Company, it
being understood that the undersigned, upon the sale of said Common Stock and
assignment of rights in the Agreement to it, shall be deemed to be the Investor,
as defined in the Agreement.
Very truly yours,
[Undersigned' Full Name]
By: /s/ William B.Towne
--------------------
Name:William B. Towne
Title:EVP & Chief Financial Officer
-19-
<PAGE>
Exhibit 10.3(a)
FORSTMANN & COMPANY, INC.
COMMON STOCK INCENTIVE PLAN
AS AMENDED AS OF MARCH 30, 1994
-------------------------------
ARTICLE I
DEFINITIONS
-----------
1.1 Affiliate means any "subsidiary corporation" or "parent corporation" as
---------
such terms are defined in Section 424 of the Code.
1.2 Agreement means a written agreement (including any amendment or supplement
---------
thereto) between the Company and a Participant specifying the terms and
conditions of an Option granted to such Participant.
1.3 Board means the Board of Directors of the Company.
-----
1.4 Code means the Internal Revenue Code of 1986, and any amendments thereto.
----
1.5 Committee means a committee of two or more members of the Board appointed
---------
to administer the Plan, who either are not eligible to participate in the Plan
and have not been granted existing securities under the Plan or any other plan
of the Company during the one year period prior to becoming a member of the
Committee, or who are otherwise deemed to be "disinterested persons" within the
meaning of Section 16 of the Securities Exchange Act of 1934 as in effect from
time to time and the rules promulgated thereunder.
1.6 Common Stock means the common stock, $.001 par value, of the Company.
------------
1.7 Company means Forstmann & Company, Inc.
-------
1.8 Date of Exercise means, with respect to an Option, the date that the Option
----------------
price is received by the Company.
1.9 Fair Market Value means, on any given date, the closing price of the Common
-----------------
Stock on the principal securities exchange on which the Common Stock is traded
on the day immediately preceding the date as of which Fair Market Value is being
determined, or on the next preceding date on which the Common Stock is traded if
no Common Stock was traded on such immediately preceding day. If the Common
Stock is not traded on a securities exchange,
<PAGE>
but is reported by the National Association of Securities Dealers, Inc.
Automated Quotation System and market information is published on a regular
basis in The New York Times or The Wall Street Journal, then Fair Market Value
------------------ -----------------------
shall be deemed to be the average of the published high and low sales prices or
the published daily bid and asked prices of the Common Stock, as so published,
on the day immediately preceding the date as of which Fair Market Value is being
determined or on the next preceding date on which such prices were published.
If market information is not so published on a regular basis, then Fair Market
Value shall be deemed to be the average of the high bid and low asked prices of
the Common Stock in the over-the-counter market on the day immediately preceding
the date as of which Fair Market Value is being determined or on the next
preceding date on which such high bid and low asked prices were recorded as
reported by the National Association of Securities Dealers Automated Quotation
System, or, if not so reported, by a generally accepted reporting service. If
the Common Stock is not publicly traded, Fair Market Value shall be determined
by the Committee or the Board. In no case shall Fair Market Value be less than
the par value of a share of Common Stock.
1.10 Option means a stock option that entitles the holder to purchase from the
------
Company a stated number of shares of Common Stock at the price set forth in an
Agreement.
1.11 Participant means an employee of the Company or of an Affiliate, including
-----------
an employee who is a member of the Board, who in each instance satisfies the
requirements of Article IV and is selected by the Committee to receive an
Option.
1.12 Plan means the Forstmann & Company, Inc. Common Stock Incentive Plan.
----
1.13 Ten Percent Shareholder means any individual owning more than ten percent
-----------------------
(10%) of the total combined voting power of all classes of stock of the Company
or of an Affiliate at the time any Option is granted to such individual. An
individual shall be considered to own any voting stock owned (directly or
indirectly) by or for his brothers, sisters, spouse, ancestors or lineal
descendants and shall be considered to own proportionately any voting stock
owned (directly or indirectly) by or for a corporation, partnership, estate or
trust of which such individual is a shareholder, partner or beneficiary.
ARTICLE II
PURPOSES
--------
The Plan is intended primarily to assist the Company and its Affiliates in
recruiting and retaining employees with ability and initiative by enabling them
to participate in the future success of the Company and its Affiliates and to
associate the interests of such employees with those of the Company or its
Affiliates and their shareholders. The Plan is intended to permit the grant of
both Options qualifying under Section 422 of the Code ("incentive stock
options")
-2-
<PAGE>
and Options not so qualifying. No Option that is intended to be an incentive
stock option shall be invalid for failure to qualify as an incentive stock
option. The proceeds received by the Company from the sale of Common Stock
pursuant to the Plan shall be used for general corporate purposes.
ARTICLE III
ADMINISTRATION
--------------
Except as provided in this Article III, the Plan shall be administered by
the Committee. The Committee shall have authority to grant Options upon such
terms (not inconsistent with the provisions of the Plan) as the Committee may
consider appropriate. Such terms may include conditions (in addition to those
contained in the Plan) on the exercisability of all or any part of an Option.
The Committee may, in its discretion, accelerate the time at which any Option
may be exercised. In addition, the Committee shall have complete authority to
interpret all provisions of the Plan; to prescribe the form of any Agreement; to
adopt, amend, and rescind rules and regulations pertaining to the administration
of the Plan; and to make all other determinations necessary or advisable for the
administration of the Plan. The express grant in the Plan of any specific power
to the Committee shall not be construed as limiting any power or authority of
the Committee. Any decision made, or action taken, by the Committee or in
connection with the administration of the Plan shall be final and conclusive.
No member of the Committee shall be liable for any act done in good faith with
respect to the Plan or any Agreement or Option. All expenses of administering
the Plan shall be borne by the Company.
ARTICLE IV
ELIGIBILITY
-----------
4.1 General. Any employee of the Company or of any Affiliate (including any
-------
corporation that becomes an Affiliate after the adoption of the Plan) is
eligible to participate in the Plan if the Committee, in its sole discretion,
determines that such person has contributed or can be expected to contribute to
the profits or growth of the Company or an Affiliate. Any such employee may be
granted one or more Options. A director of the Company who is an employee of
the Company or an Affiliate may be granted Options under the Plan. A member of
the Committee may not participate in the Plan during the time that his or her
participation would prevent the Committee from being "disinterested" for
purposes of Section 16 of the Securities Exchange Act of 1934 as in effect from
time to time and the rules promulgated thereunder.
4.2 Grants. The Committee will designate individuals to whom Options are to be
------
granted and will specify the number of shares of Common Stock subject to each
grant. All Options
-3-
<PAGE>
granted under the Plan shall be evidenced by Agreements which shall be subject
to applicable provisions of the Plan and to such other provisions as the
Committee may adopt. No Participant may be granted incentive stock options
(under all incentive stock option plans of the Company and its Affiliates) which
are first exercisable in any calendar year for Common Stock having an aggregate
Fair Market Value (determined as of the date an Option is granted) exceeding
$100,000. The preceding annual limitation shall not apply with respect to
Options that are not incentive stock options.
ARTICLE V
STOCK SUBJECT TO THE PLAN
-------------------------
5.1 Source of Shares. Upon the exercise of any Option, the Company may deliver
----------------
to the Participant authorized but unissued shares of Common Stock.
5.2 Maximum Number of Shares. The maximum aggregate number of shares of Common
------------------------
Stock that may be issued pursuant to the exercise of Options is 700,000, subject
to increases and adjustments as provided in this Article V and Article IX.
5.3 Forfeitures, Etc.. If an Option is terminated, in whole or in part, the
-----------------
number of shares of Common Stock allocated to the Option or portion thereof may
be reallocated to other Options to be granted under the Plan.
ARTICLE VI
OPTION PRICE
------------
The price per share for Common Stock purchased on the exercise of an Option
shall be determined by the Committee on the date of grant. The price per share
for Common Stock purchased on the exercise of any Option that is an incentive
stock option shall not be less than the Fair Market Value on the date the Option
is granted; provided, however, that the price per share shall not be less than
-------- -------
110% of the Fair Market Value in the case of an incentive stock option that is
granted to a Ten Percent Shareholder.
ARTICLE VII
EXERCISE OF OPTIONS
-------------------
7.1 Ability to Exercise. An Option shall be exercisable commencing on the date
-------------------
of grant or on any other date thereafter established by the Committee, subject
to such limitations as are set
-4-
<PAGE>
forth in the Agreement; provided, however, that the Participant must be an
-------- -------
employee of the Company or an Affiliate on the Date of Exercise of an incentive
stock option, except in the event of death, disability, termination of
employment without cause or a "change in control" (as defined in any change in
control agreement to which the Company and any such Participant are parties), in
which case such Participant must exercise such Options within the time periods
set forth in the Agreement.
7.2 Maximum Exercise Period. The maximum period in which an Option may be
-----------------------
exercised shall be determined by the Committee on the date of grant except that
no Option that is an incentive stock option shall be exercisable after the
expiration of ten years from the date such Option was granted, or after the
expiration of five years from the date such Option was granted to a Ten Percent
Shareholder. The terms of any Option may provide that it is exercisable for a
period less than such maximum period. All Options which are incentive stock
options shall terminate on the date the Participant's employment with the
Company terminates, except as provided in the Agreement with respect to death,
disability, termination of employment without cause or a "change in control" (as
described in Section 7.1 above).
7.3 Nontransferability. Any Option granted under the Plan shall be
------------------
nontransferable except by will or by the laws of descent and distribution. In
the event of any such transfer, the entire Option must be transferred to the
same person or entity. During the lifetime of the Participant to whom the
Option is granted, the Option may be exercised only by the Participant. No
right or interest of a Participant in any Option shall be liable for, or subject
to, any lien, obligation or liability of such Participant.
7.4 Employee Status. For purposes of determining the applicability of Section
---------------
422 of the Code (relating to incentive stock options), or in the event that the
terms of any Option provide that it may be exercised only during employment or
within a specified period of time after termination of employment, the Committee
may decide to what extent leaves of absence for governmental or military
service, illness, temporary disability, or other reasons shall not be deemed
interruptions of employment.
ARTICLE VIII
METHOD OF EXERCISE
------------------
8.1 Exercise. An Option granted under the Plan shall be deemed to have been
--------
exercised on the Date of Exercise. Subject to the provisions of Articles VII
and X, an Option may be exercised in whole at any time or in part from time to
time at such times and in compliance with such requirements as the Committee
shall determine. An Option granted under the Plan may be exercised with respect
to any number of whole shares less than the full number of whole shares for
which the Option could be exercised. A partial exercise of an Option shall not
affect the right
-5-
<PAGE>
to exercise the Option from time to time in accordance with the Plan and the
applicable Agreement with respect to the remaining shares subject to the Option.
8.2 Payment. Unless otherwise provided by the Agreement, payment of the Option
-------
price shall be made in cash, a cash equivalent, Common Stock or any other
consideration acceptable to the Committee. If the Agreement provides, payment
of all or part of the Option price may be made by surrendering shares of Common
Stock to the Company; provided, however, that shares of Common Stock may be
-------- -------
surrendered by a Participant who is subject to the reporting and other
provisions of Section 16 of the Securities Exchange Act of 1934 as in effect
from time to time in payment of all or part of the Option price only if the
surrendered shares have been held by the Participant for at least six months
prior to the Date of Exercise. If Common Stock is used to pay all or part of
the Option price, the shares surrendered must have a Fair Market Value
(determined as of the day preceding the Date of Exercise) that is not less than
such price or part thereof.
8.3 Loans. The Company, in accordance with the requirements of Regulation G of
-----
the Federal Reserve Board Regulations ("Regulation G"), may lend the Participant
all or part of the Option price as determined in accordance with Article VI
hereof, provided that the maximum loan amount shall not exceed the current
market value at the time of purchase by the Participant of the shares of Common
Stock acquired with the loan proceeds. The principal amount of the loan shall
be repayable in not more than five annual installments. The Participant shall
pay interest on the unpaid principal balance at such rate as the Committee shall
determine, which shall be no less than the minimum rate necessary to avoid
imputed interest or original issue discount under the Code. All shares of Common
Stock acquired with cash borrowed from the Company shall be pledged to the
Company as security for the repayment thereof. In the discretion of the Board,
shares of Common Stock may be released from such pledge proportionately as
payments of the note (together with interest) are made; provided, however, that
-------- -------
the Company, in accordance with the requirements of Regulation G, shall not
release any shares of Common Stock which would cause the amount outstanding
under a loan to exceed the "maximum loan value" of the remaining shares pledged
by the Participant, determined at the time of such release. While such shares
are so pledged, and so long as there has been no default in the installment
payments, such shares shall remain registered in the name of the Participant,
and he or she shall have the right to vote such shares and to receive all
dividends thereon.
8.4 Shareholder Rights. No Participant shall have any rights as a stockholder
------------------
with respect to shares subject to his or her Option until the Date of Exercise
of such Option.
ARTICLE IX
ADJUSTMENT UPON CHANGE IN COMMON STOCK
--------------------------------------
The maximum number and kind of shares as to which Options may be granted
under the Plan shall be proportionately adjusted, and the terms of outstanding
Options shall be adjusted by
-6-
<PAGE>
way of increase or decrease, as the Committee in the exercise of its reasonable
judgment shall determine to be equitably required, in the event that (a) the
Company (i) effects one or more stock dividends, stock splits, reverse stock
splits, subdivisions, consolidations or other similar events or (ii) engages in
a transaction to which Section 424 of the Code applies or (b) there occurs any
other event which in the judgment of the Committee necessitates such action.
Any determination made under this Article IX by the Committee shall be final and
conclusive.
The issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, for cash or property, or for
labor or services rendered, either upon direct sale or upon the exercise of
rights or warrants to subscribe therefor, or upon conversion of shares or
obligations of the Company convertible into such shares or other securities,
shall not affect, and no adjustment by reasons thereof shall be made with
respect to, outstanding Options.
ARTICLE X
COMPLIANCE WITH LAW AND APPROVAL OF REGULATORY BODIES
-----------------------------------------------------
No Option shall be exercisable, no Common Stock shall be issued, no
certificates for shares of Common Stock shall be delivered, and no payment shall
be made, under the Plan except in compliance with all federal and state laws and
regulations (including, without limitation, withholding tax requirements),
federal and state securities laws and regulations and the rules of all national
securities exchanges or self-regulatory organizations on which the Company's
shares may be listed. The Company shall have the right to rely on an opinion of
its counsel as to such compliance. Any certificate issued to evidence shares of
Common Stock for which an Option is exercised may bear such legends and
statements as the Committee upon advice of counsel may deem advisable to assure
compliance with federal and state laws and regulations. No Option shall be
exercisable, no Common Stock shall be issued, no certificate for shares shall be
delivered and no payment shall be made, under the Plan until the Company has
obtained such consent or approval as the Committee may deem advisable from any
regulatory bodies having jurisdiction over such matters.
ARTICLE XI
GENERAL PROVISIONS
------------------
11.1 Effect on Employment. Neither the adoption of the Plan or its operation,
--------------------
nor any documents describing or referring to the Plan (or any part thereof)
shall confer upon any employee any right to continue in the employ of the
Company or an Affiliate or in any way affect any right and power of the company
or an Affiliate to terminate the employment of any employee at any time without
assigning a reason therefor.
-7-
<PAGE>
11.2 Unfunded Plan. The Plan, insofar as it provides for grants, shall be
-------------
unfunded, and the Company shall not be required to segregate any assets that may
at any time be represented by grants under the Plan. Any liability of the
Company to any person with respect to any grant under the Plan shall be based
solely upon any contractual obligations that may be created pursuant to the
Plan. No such obligation of the Company shall be deemed to be secured by any
pledge of, or other encumbrance on, any property of the Company.
11.3 Rules of Construction. Headings are given to the articles and sections of
---------------------
the Plan solely as a convenience to facilitate reference. The reference to any
statute, regulation or other provision of law shall be construed to refer to any
amendment to or successor of such provision of law.
ARTICLE XII
AMENDMENT
---------
The Board may amend or terminate the Plan from time to time; provided,
--------
however, that no amendment may become effective until shareholder approval is
- -------
obtained if (i) the amendment materially increases the benefits accruing to
Participants under the Plan, (ii) the amendment materially increases the
aggregate number of shares of Common Stock that may be issued under the Plan, or
(iii) the amendment materially changes the requirements as to eligibility for
participation in the Plan. No amendment shall, without a Participant's consent,
adversely affect any rights of such Participant under any Option outstanding at
the time such amendment is made.
ARTICLE XIII
DURATION OF THE PLAN
--------------------
No Option may be granted under the Plan more than ten years after the
earlier of the date that the Plan is adopted by the Board or the date that the
Plan is approved by shareholders as provided in Article XIV. Options granted
before that date shall remain valid in accordance with their terms.
ARTICLE XIV
EFFECTIVE DATE OF THE PLAN
--------------------------
Options may be granted under the Plan upon its adoption by the Board;
provided, however, that no Option will be effective unless the Plan is approved
- -------- -------
by shareholders holding a majority of the Company's outstanding voting stock,
voting either in person or by proxy at a duly held shareholders' meeting within
twelve months of such adoption.
-8-
<PAGE>
- -------------------
THIS PLAN WAS ADOPTED BY THE BOARD ON SEPTEMBER 18, 1992 AND AMENDED BY THE
BOARD ON DECEMBER 11, 1992 AND FEBRUARY 7, 1994.
-9-
<PAGE>
Exhibit 10.4(b)
AMENDMENT dated February 10, 1994 (this "Amendment") to the ERA Agreement,
dated February 26, 1992 (the "Agreement"), by and between Forstmann & Company,
Inc., a Georgia corporation (the "Company"), and Christopher L. Schaller (the
"Employee").
1. Paragraph 2(b) of the Agreement is hereby amended in its entirety as
follows:
"EXERCISE OF ERA. The ERA shall become immediately exercisable a such time
---------------
(the "Exercise Date"), if at all, as the Company's Common Stock has maintained a
market price at least equal to the per share exercise price of the ISO for a
period of thirty consecutive days commencing on or after the Vesting Date and
ending prior to the sixth anniversary of the Vesting Date; provided, however,
that if, at any time on or after the Vesting Date, the Company's Common Stock is
not traded on a national securities exchange or quoted on the automated
quotation system of the National Association of Securities Dealers, Inc.
("NASDAQ"), then (i) the market price of the Company's Common Stock thereafter
shall be deemed to be the average closing price of the Company's Common Stock
during the last ten business days that the Company's Common Stock was so traded
or quoted, and (ii) if such deemed market price is at least equal to the per
share exercise price of the ISO, the Exercise Date shall be deemed to be the
later of the Vesting Date or the date that the company's Common Stock ceased
being traded or quoted. Unless a prior
<PAGE>
deferral election has been made pursuant to paragraph 2(c) and is in effect on
the Exercise date, within five days after the Exercise Date the Employee shall
be paid by the Company, in cash, an amount equal to the product of (i) the per
share exercise price of the ISO, and (ii) the number of shares of Common Stock
covered by the ISO (the "Cash Amount")."
2. Paragraph 3(c) of the Agreement is hereby amended in its entirety as
follows:
"CHANGE OF CONTROL. In the event that (i) a "change of control" shall
-----------------
occur, as defined in any change of control agreement to which the Company and
the Employee are parties, and (ii)(A) prior to March 4, 1995 the Employee's
employment with the Company or an Affiliate terminates upon such basis as would
entitle the Employee to payment under such change of control agreement, (B) an
offer made to all holders of the Company's Common Stock, to tender or exchange
their shares of Common Stock for consideration having an aggregate value of at
least equal to $9.00 per share, is consummated, or (C) pursuant to a merger,
sale of assets or other transaction, money or other property having an aggregate
value of at least $9.00 per share is distributed, in one or a series of
distributions, to all holders of the Company's Common Stock, then, in any such
event, the ERA shall vest immediately."
<PAGE>
3. Except as supplemented by this Amendment, the Agreement as originally
executed by the parties continues in full force and effect.
IN WITNESS WHEREOF, the Company has caused this Amendment to the Agreement
to be signed by a duly authorized officer, and the Employee has affixed his
signature hereto.
FORSTMANN & COMPANY, INC.
/s/ Jane S. Pollack
By: ______________________________
Vice President & Secretary
Title: ___________________________
EMPLOYEE
/s/ Christopher L. Schaller
_______________________________
<PAGE>
Exhibit 10.7
FORSTMANN & COMPANY, INC.
INCENTIVE COMPENSATION
FISCAL 1995
MANAGEMENT INCENTIVE PLAN
- -------------------------
Participation
- -------------
Participation in the Management Incentive Plan is determined annually based
upon the recommendations of management and approval by the Board of Directors.
The levels of participation are as follows: Group I which is made up of
executive management (President, Executive Vice Presidents, and Vice
Presidents), Group II which is made up of middle managerial positions (to
include Directors, Plant Managers, and others), and Group III which is made up
of other managers in the company (Superintendents, Department Managers, and
others). Participants are notified of their selection and are provided a copy
of all necessary information. The Board has the right to exclude an otherwise
eligible participant from receiving an award under the plan.
Incentive Award Opportunities
- -----------------------------
Each participant will be informed of the amount of his/her target
incentive. The level of target incentive is expressed as a percent of earned
base salary and is based on the position level (Group I, Group II, or Group
III). The actual award is determined at the end of the Plan year, based upon
results achieved during the year. The award opportunities range from the target
incentive amount for "on target" performance, up to an established maximum
percentage of earned base salary for the achievement of maximum results, down to
a minimum of no award.
The Group I "on target" incentive is 25% (of base salary) with a maximum
potential of 50%, and a minimum of 10% if an incentive is earned.
The Group II "on target" incentive is 15% (of base salary) with a maximum
potential of 30%, and a minimum of 6% if an incentive is earned.
The Group III "on target" incentive is 10% (of base salary) with a maximum
potential of 20%, and a minimum of 4% if an incentive is earned.
<PAGE>
Page 2
Basis of Incentive Awards
- -------------------------
The participants in the Management Incentive Plan earn incentive bonuses
based upon the achievement of Company goals established at the beginning of each
fiscal year. These goals reflect key financial ratios which are approved by the
Board of Directors. Adjustments may be made during the year if Company goals
are affected by conditions outside the control of management or by non-recurring
or abnormal items. A partial list of efforts which may enhance payouts under
the plan would include:
Maximizing sales volume
Improving margins on sales
Inventory Turns
Reducing operating costs in the plants
Reducing selling, general and administrative expense
Conditions Affecting Payment of Awards
- --------------------------------------
The granting of all individual awards is subject to the review and approval
of the board.
For any participant entering the Plan after the beginning of the Plan year,
any award may be prorated directly in proportion to length of service and
earnings during the Plan year.
If a participant is placed on a paid or unpaid leave of absence, he/she
may receive an incentive award up to the maximum allowable amount computed on a
monthly prorated basis covering the period of active employment during the plan
year.
If a participant's employment with the Company terminates (either
voluntarily or involuntarily) during the Plan year, there will be no payment of
an incentive award. If, however, the employment with the Company terminates
(either voluntarily or involuntarily) AFTER the close of the Plan year, the
-----
participant may be entitled to receive their earned incentive award payment.
If a participant retires, dies, or becomes totally disabled during the Plan
year, they may be eligible to receive an incentive award payment based on
performance, prorated on a monthly basis in proportion to length of active
service during the plan year.
<PAGE>
Page 3
Receipt of Incentive Award
- --------------------------
Incentive Award payments may be made during the quarter following the
-------
fiscal year end (October 31).
Company Objectives - 1995
- -------------------------
INCENTIVE PLAN - FY 1995
($MILLIONS)
INDICATORS 1994 MIN MID MAX WEIGHT
Information between the asterisks below
has been redacted pursuant to application for
confidential treatment and filed separately
with the Securities and Exchange Commission
EARNINGS
after Taxes * * 25%
EBITDA 25%
AVG. INVENTORY 25%
AVERAGE DEBT 25%
* *
<PAGE>
Exhibit 10.9(a)
INDEMNITY AGREEMENT
AGREEMENT, effective as of ____________________ 1994 (the "Agreement"),
between FORSTMANN & COMPANY, INC., a Georgia corporation (the "Company"), and
____________________ ("Indemnitee"), _________________________.
WHEREAS, it is essential to the Company to retain and attract as executive
officers the most capable persons available; and
WHEREAS, both the Company and Indemnitee recognize the increased risk of
litigation and other claims being asserted against directors and officers of
public companies in today's environment; and
WHEREAS, the Company wishes to provide in this Agreement for the
indemnification of and the advancing of expenses to Indemnitee to the full
extent (whether partial or complete) authorized or permitted by law and as set
forth in this Agreement, and, to the extent insurance is maintained, for the
continued coverage of Indemnitee under the Company's directors' and officers'
liability insurance policies; and
WHEREAS, the Company, in order to induce Indemnitee to continue to serve as
an executive officer, has agreed to provide Indemnitee with the benefits
contemplated by this Agreement;
NOW, THEREFORE, in consideration of the premises and of Indemnitee's
agreeing to serve or to continue to serve the Company directly or, at its
request, another enterprise, and intending to be legally bound hereby, the
parties hereto agree as follows:
1. Basic Indemnification Arrangement.
---------------------------------
(a) In the event Indemnitee was, is, or becomes a party to or witness or
other participant in, or is threatened to be made a party to or witness or other
participant in, a Claim by reason of (or arising in part out of) an
Indemnifiable Event, the Company shall indemnify Indemnitee to the full extent
authorized or permitted by Applicable Law as soon as practicable but in any
event no later than thirty (30) days after written demand is presented to the
Company, against any and all Expenses, judgments, fines, penalties and amounts
paid in settlement (including all interest, assessments and other charges paid
or payable in connection with or in respect of such Expenses, judgments, fines,
penalties or amounts paid in settlement) of
<PAGE>
such Claim; provided, however, that, except for proceedings to enforce rights to
indemnification, the Company shall not be
obligated to indemnify Indemnitee in connection with a proceeding (or part
thereof) initiated by Indemnitee unless such proceeding (or part thereof) was
authorized in advance, or unanimously consented to, by the Board of Directors of
the Company; and provided further that the Company shall not be obligated to
indemnify Indemnitee hereunder for an Indemnifiable Event which is not (i)
authorized by the Company's Board of Directors or (ii) otherwise within the
authority of Indemnitee. If so requested by Indemnitee, the Company shall
advance (within two (2) business days of such request), on an unsecured and
interest-free basis, any and all Expenses to Indemnitee (an "Expense Advance"),
provided that Indemnitee affirms in writing Indemnitee's good faith belief that
Indemnitee has met the required standard of conduct for indemnification under
Applicable Law.
(b) Notwithstanding the foregoing, (i) the obligations of the Company under
Section 1(a) shall be subject to the condition that the Independent Legal
Counsel shall not have determined in a written opinion that Indemnitee would not
be permitted to be indemnified under Applicable Law, and (ii) the obligation of
the Company to make an Expense Advance pursuant to Section 1(a) shall be subject
to the condition that, if, when and to the extent that the Independent Legal
Counsel determines that Indemnitee would not be permitted to be so indemnified
under Applicable Law, the Company shall be entitled to be reimbursed by
Indemnitee (who hereby agrees to reimburse the Company) for all such amounts
theretofore paid; provided, however, that if Indemnitee has commenced or
thereafter commences legal proceedings in a court of competent jurisdiction to
secure a determination that Indemnitee should be indemnified under Applicable
Law, any determination made by the Independent Legal Counsel that Indemnitee
would not be permitted to be indemnified under applicable law shall not be
binding, and Indemnitee shall not be required to reimburse the Company for any
Expense Advance until a final judicial determination is made with respect
thereto (as to which all rights of appeal therefrom have been exhausted or
lapsed). If there has been no determination by the Independent Legal Counsel or
if the Independent Legal Counsel determines that Indemnitee would not be
permitted to be indemnified in whole or in part under Applicable Law, Indemnitee
shall have the right to commence litigation in any court in the States of
Georgia or New York having subject matter jurisdiction thereof and in which
venue is proper seeking an initial determination by the court or challenging any
such determination by the Independent Legal Counsel or any aspect thereof,
including the legal or factual bases therefor, and the Company hereby consents
to service of process and to appear in any such proceeding. Any determination
by the Independent Legal Counsel otherwise shall be conclusive and binding on
the Company and Indemnitee.
-2-
<PAGE>
(c) No change in the Company's Articles of Incorporation (the "Articles")
or By-Laws (the "By-Laws") or in the Georgia Business Corporation Code
subsequent to the date of this Agreement shall have the effect of limiting or
eliminating the indemnification available under this Agreement as to any act,
omission or capacity for which this Agreement provides indemnification at the
time of such act, omission or capacity. If any change after the date of this
Agreement in the Articles or By-Laws of the Company or in any applicable law,
statute or rule expands the power of the Company to indemnify the Indemnitee,
such change shall to the same extent expand the Indemnitee's rights and the
Company's obligations under this Agreement. If any change in the Articles or
By-Laws of the Company or in any applicable law, statute or rule diminishes the
power of the Company to indemnify the Indemnitee, such change, except to the
extent otherwise required by law, statute or rule to be applied to this
Agreement, shall have no effect on this Agreement or the parties' rights and
obligations hereunder.
2. Independent Legal Counsel. The Company agrees that, in the event of a
-------------------------
dispute with Indemnitee with respect to any matter hereafter arising concerning
the rights of Indemnitee to indemnity payments or Expense Advances under this
Agreement or any other agreement, or any Articles or By-Law provision now or
hereinafter in effect relating to Claims for Indemnifiable Events, the Company
shall seek legal advice only from Independent Legal Counsel selected by
Indemnitee and approved by the Company (which approval shall not be unreasonably
withheld or delayed). The Company shall notify Indemnitee in writing of the
Company's intention to seek legal advice, and the Indemnitee shall notify the
Company of Indemnitee's choice of Independent Legal Counsel within thirty (30)
days thereafter. Such counsel shall, among other things, render its written
opinion to the Company and Indemnitee as to whether and to what extent the
Indemnitee would be permitted to be indemnified under Applicable Law. The
Company agrees to pay the reasonable fees of the Independent Legal Counsel
referred to above and to indemnify fully such counsel against any and all
expenses (including attorneys' fees), claims, liabilities and damages arising
out of or relating to this Agreement or its engagement pursuant hereto.
Notwithstanding the foregoing, the Company shall not be required to seek legal
advice from more than one (1) Independent Legal Counsel if more than one (1)
party to an Indemnity Agreement with the Company seek indemnity payments and
Expense Advances with respect to the same or substantially similar Claims. In
such event, the Indemnitees shall have sixty (60) days to notify the Company of
their choice of Independent Legal Counsel and the selection of Independent Legal
Counsel shall be made (a) by the Independent Director(s) (as defined in the
Company's By-Laws) seeking such indemnity, or (b) if no Independent Director
seeks such indemnity, by the directors and officers of the Company who are
parties to an Indemnity Agreement with the Company and who seek such indemnity.
-3-
<PAGE>
The Company shall have the right to select the Independent Legal Counsel if (x)
Indemnitee is entitled to select the Independent Legal Counsel but has not
timely notified the Company of Indemnitee's selection, (y) there is a dispute
involving two (2) or more Independent Directors who do not timely notify the
Company of their choice of a single Independent Legal Counsel or (z) there is a
dispute involving more than one (1) party to an Indemnity Agreement, none of
whom is an Independent Director, and all such persons do not timely notify the
Company of their choice of a single Independent Legal Counsel.
3. Indemnification for Additional Expenses. The Company shall indemnify
---------------------------------------
Indemnitee against any and all Expenses and, if requested by Indemnitee, shall
(within two (2) business days of such request) advance such Expenses to
Indemnitee, which are incurred by Indemnitee in connection with any action
brought by Indemnitee for (i) indemnification or advance payment of Expenses by
the Company under this Agreement or any other agreement, or any Articles or By-
Law provision now or hereafter in effect relating to Claims for Indemnifiable
Events and/or (ii) recovery under any directors' and officers' liability
insurance policies maintained by the Company; provided, however, that if there
is a final judicial determination (as to which all rights of appeal therefrom
have been exhausted or lapsed) that Indemnitee is not entitled to such
indemnification, advance payment of Expenses or insurance recovery, Indemnitee
shall reimburse the Company for all such Expenses theretofore paid under this
Section 3.
4. Partial Indemnity, Etc. If Indemnitee is entitled under any provision
-----------------------
of this Agreement to indemnification by the Company for some or a portion of the
Expenses, judgments, fines, penalties and amounts paid in settlement of a Claim
but not, however, for all of the total amount thereof, the Company shall
nevertheless indemnify Indemnitee for the portion thereof to which Indemnitee is
entitled. Moreover, notwithstanding any other provision of this Agreement, to
the extent that Indemnitee has been successful on the merits or otherwise in
defense of any or all Claims relating in whole or in part to an Indemnifiable
Event or in defense of any issue or matter therein, including dismissal without
prejudice, Indemnitee shall be indemnified against all Expenses incurred in
connection therewith.
5. Burden of Proof. In connection with any determination by the
---------------
Independent Legal Counsel or otherwise as to whether Indemnitee is entitled to
be indemnified hereunder, the burden of proof shall be on the Company to
establish that Indemnitee is not so entitled.
-4-
<PAGE>
6. No Presumptions. For purposes of this Agreement, the termination of
---------------
any claim, action, suit or proceeding, by judgment, order, settlement (whether
with or without court approval) or conviction, or upon a plea of nolo contendere
or its equivalent, shall not create a presumption that Indemnitee did not meet
any particular standard of conduct or have any particular belief or that a court
has determined that indemnification is not permitted by Applicable Law. In
addition, neither the failure of the Independent Legal Counsel to have made a
determination as to whether Indemnitee has met any particular standard of
conduct or had any particular belief, nor an actual determination by the
Independent Legal Counsel that Indemnitee has not met such standard of conduct
or did not have such belief, prior to the commencement of legal proceedings by
Indemnitee to secure a judicial determination that Indemnitee should be
indemnified under Applicable Law shall be a defense to Indemnitee's claim or
create a presumption that Indemnitee has not met any particular standard of
conduct or did not have any particular belief.
7. Nonexclusivity, Etc. The rights of the Indemnitee hereunder shall be
--------------------
in addition to any other rights Indemnitee may have under the Articles, the By-
Laws, or the Georgia Business Corporation Code or otherwise. To the extent that
a change in the Georgia Business Corporation Code (whether by statute or
judicial decision) permits greater indemnification by agreement than would be
afforded currently under the Articles, By-Laws and this Agreement, it is the
intent of the parties hereto that Indemnitee shall enjoy by this Agreement the
greater benefits so afforded by such change.
8. Liability Insurance.
-------------------
(a) The Company hereby represents and warrants that the Company has
purchased and maintains directors' and officers' liability insurance consisting
of a policy issued by Agricultural Excess and Surplus Insurance Company
providing $5,000,000 in coverage, and an excess policy with National Union Fire
Insurance Company of Pittsburgh, Pa. providing $5,000,000 in coverage in excess
of $5,000,000, and that each of such policies is in full force and effect (the
"D&O Insurance").
(b) The Company hereby covenants and agrees that, so long as Indemnitee
shall continue to serve as an executive officer of the Company and thereafter so
long as Indemnitee shall be subject to any possible claim or threatened, pending
or completed action, suit or proceeding, whether civil, criminal or
investigative, by reason of the fact that Indemnitee was an executive officer of
the Company, the Company shall use reasonable efforts to maintain in full force
and effect the D&O Insurance, or substantially equivalent insurance coverage;
provided, however, that the Company shall not be obligated
-5-
<PAGE>
hereunder to pay annual premiums for directors' and officers' liability
insurance in excess of one hundred fifty percent (150%) of the annualized rate
of premiums paid by the Company for D&O Insurance in Fiscal Year 1994 (the
"Increased Rate"), and if the premiums for such insurance coverage would exceed
the Increased Rate in any fiscal year, and the Company determines not to spend
in excess of the Increased Rate, the Company shall endeavor to retain such type
of coverage by amending the levels of self insured retention and/or limits of
liability of such insurance coverage so as not to exceed the Increased Rate.
(c) In all policies of D&O Insurance, Indemnitee shall be named as an
insured in such manner as to provide Indemnitee the same rights and benefits,
subject to the same limitations, as are accorded to the Company's directors or
officers most favorably insured by such policy.
9. Notices.
-------
(a) The Indemnitee shall give to the Company notice in writing as soon as
practicable of any Claim made against him for which indemnification will or
could be sought under this Agreement. Failure to give such notice shall not be
cause for the Company not to indemnify Indemnitee or advance Expenses unless the
Company can demonstrate that it was prejudiced by such failure.
(b) Notices shall be in writing and shall be either personally delivered or
sent by Federal Express or other reputable overnight courier for next business
day delivery, or sent by certified mail, return receipt requested, addressed as
follows:
If to the Company: Forstmann & Company, Inc.
1185 Avenue of the Americas
New York, New York 10036
Attn: Chief Executive Officer
Attn: General Counsel
If to the Indemnitee: at Indemnitee's address stated above
or at such other address as from time to time designated by written notice
delivered in accordance herewith. Any notice personally served shall be deemed
delivered on the date of such service. Any notice sent by overnight courier as
provided above shall be deemed delivered on the first business day after the
date such notice was actually delivered by such overnight courier or refused.
Any notice sent by mail as provided above shall be deemed delivered on the date
of actual receipt or refusal thereof.
-6-
<PAGE>
10. Amendments, Etc. No supplement, modification or amendment of this
----------------
Agreement shall be binding unless executed in writing by both of the parties
hereto. No waiver of any of the provisions of this Agreement shall be deemed or
shall constitute a waiver of any other provisions hereof (whether or not
similar) nor shall such waiver constitute a continuing waiver.
11. Subrogation. In the event of payment under this Agreement, the
-----------
Company shall be subrogated to the extent of such payment to all of the rights
of recovery of Indemnitee, who shall execute all papers required and shall do
everything reasonably within Indemnitee's power that may be necessary to secure
such rights, including the execution of such documents necessary to enable the
Company effectively to bring suit to enforce such rights.
12. No Duplication of Payments. The Company shall not be liable under
--------------------------
this Agreement to make any payment in connection with any Claim made against
Indemnitee to the extent Indemnitee has otherwise actually received payment
(under any insurance policy, the Articles, By-Laws or otherwise) of the amounts
otherwise indemnifiable hereunder. This Agreement shall supersede any agreement
or understanding, whether written or oral, between the Company and Indemnitee
regarding indemnification for any Claim.
13. Binding Effect, Etc. This Agreement shall be binding upon and inure
--------------------
to the benefit of and be enforceable by the parties hereto and their respective
successors, assigns, including any direct or indirect successor by purchase,
merger, consolidation or otherwise to all or substantially all of the business
and/or assets of the Company, spouses, heirs, executors and personal and legal
representatives. This Agreement shall continue in effect regardless of whether
Indemnitee continues to serve as an executive officer of the Company.
14. Severability. The provisions of this Agreement shall be severable in
------------
the event that any of the provisions hereof (including any provision within a
single section, paragraph or sentence) is held by a court of competent
jurisdiction to be invalid, void or otherwise unenforceable in any respect, and
the validity and enforceability of any such provision in every other respect and
of the remaining provisions hereof shall not be in any way impaired and shall
remain enforceable to the fullest extent permitted by law.
15. Governing Law. This Agreement shall be governed by and construed and
-------------
enforced in accordance with the laws of the State of Georgia applicable to
contracts made and to be performed in such state without giving effect to the
principles of conflicts of laws.
-7-
<PAGE>
16. Certain Definitions.
-------------------
(a) Applicable Law: the law that would be applicable to indemnification by
--------------
the Company of a director of the Company for the same or similar act, event or
occurrence that constitutes the Indemnifiable Event that is the subject of a
Claim against Indemnitee.
(b) Claim: any threatened, pending or completed action, suit or
-----
proceeding, or any inquiry or investigation, whether instituted by or in the
right of the Company or any other party, that Indemnitee in good faith believes
might lead to the institution of any action, suit or proceeding, whether civil,
criminal, administrative, investigative or other, arising in connection with an
Indemnifiable Event.
(c) Expenses: include attorneys' fees and all other costs, expenses and
--------
obligations paid or incurred in connection with investigating, defending, being
a witness in or participating in (including on appeal), or preparing to defend,
be a witness in or participate in any Claim relating to any Indemnifiable Event.
(d) Indemnifiable Event: any event or occurrence related to the fact that
-------------------
Indemnitee is or was an executive officer of the Company, or is or was serving
at the request of the Company as a director, officer, or trustee of another
corporation, trust or other enterprise, or by reason of anything done or not
done by Indemnitee in any such capacity.
(e) Independent Legal Counsel: an attorney or firm of attorneys, selected
-------------------------
in accordance with the provisions of Section 2, who shall not have otherwise
performed services for the Company or Indemnitee within the last two (2) years.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement this
____ day of _______________, 1994.
FORSTMANN & COMPANY, INC.
By: ____________________________
Name: Jane S. Pollack
----------------------------
Title: Vice President and Secretary
----------------------------
-8-
<PAGE>
Exhibit 10.9(b)
INDEMNITY AGREEMENT
AGREEMENT, effective as of ____________________, 1994 (the "Agreement"),
between FORSTMANN & COMPANY, INC., a Georgia corporation (the "Company"), and
____________________ ("Indemnitee"), __________________________.
WHEREAS, it is essential to the Company to retain and attract as directors
the most capable persons available; and
WHEREAS, both the Company and Indemnitee recognize the increased risk of
litigation and other claims being asserted against directors and officers of
public companies in today's environment; and
WHEREAS, the Company wishes to provide in this Agreement for the
indemnification of and the advancing of expenses to Indemnitee to the full
extent (whether partial or complete) authorized or permitted by law and as set
forth in this Agreement, and, to the extent insurance is maintained, for the
continued coverage of Indemnitee under the Company's directors' and officers'
liability insurance policies; and
WHEREAS, Indemnitee is unwilling to serve or to continue to serve the
Company as a director without the assurances provided by this Agreement; and the
Company, in order to induce Indemnitee to continue to serve as a director, has
agreed to provide Indemnitee with the benefits contemplated by this Agreement;
NOW, THEREFORE, in consideration of the premises and of Indemnitee's
agreeing to serve or to continue to serve the Company directly or, at its
request, another enterprise, and intending to be legally bound hereby, the
parties hereto agree as follows:
1. Basic Indemnification Arrangement.
---------------------------------
(a) In the event Indemnitee was, is, or becomes a party to or witness or
other participant in, or is threatened to be made a party to or witness or other
participant in, a Claim by reason of (or arising in part out of) an
Indemnifiable Event, the Company shall indemnify Indemnitee to the full extent
authorized or permitted by law as soon as practicable but in any event no later
than thirty (30) days after written demand is presented to the Company, against
any and all Expenses, judgments, fines, penalties and amounts paid in settlement
(including all interest, assessments and other charges paid or payable in
connection with or in respect of such Expenses, judgments, fines, penalties or
<PAGE>
amounts paid in settlement) of such Claim; provided, however, that, except for
proceedings to enforce rights to indemnification, the Company shall not be
obligated to indemnify Indemnitee in connection with a proceeding (or part
thereof) initiated by Indemnitee unless such proceeding (or part thereof) was
authorized in advance, or unanimously consented to, by the Board of Directors of
the Company. If so requested by Indemnitee, the Company shall advance (within
two (2) business days of such request), on an unsecured and interest-free basis,
any and all Expenses to Indemnitee (an "Expense Advance"), provided that
Indemnitee affirms in writing Indemnitee's good faith belief that Indemnitee has
met the required standard of conduct for indemnification under applicable law.
(b) Notwithstanding the foregoing, (i) the obligations of the Company under
Section 1(a) shall be subject to the condition that the Independent Legal
Counsel shall not have determined in a written opinion that Indemnitee would not
be permitted to be indemnified under applicable law, and (ii) the obligation of
the Company to make an Expense Advance pursuant to Section 1(a) shall be subject
to the condition that, if, when and to the extent that the Independent Legal
Counsel determines that Indemnitee would not be permitted to be so indemnified
under applicable law, the Company shall be entitled to be reimbursed by
Indemnitee (who hereby agrees to reimburse the Company) for all such amounts
theretofore paid; provided, however, that if Indemnitee has commenced or
thereafter commences legal proceedings in a court of competent jurisdiction to
secure a determination that Indemnitee should be indemnified under applicable
law, any determination made by the Independent Legal Counsel that Indemnitee
would not be permitted to be indemnified under applicable law shall not be
binding, and Indemnitee shall not be required to reimburse the Company for any
Expense Advance until a final judicial determination is made with respect
thereto (as to which all rights of appeal therefrom have been exhausted or
lapsed). If there has been no determination by the Independent Legal Counsel or
if the Independent Legal Counsel determines that Indemnitee would not be
permitted to be indemnified in whole or in part under applicable law, Indemnitee
shall have the right to commence litigation in any court in the States of
Georgia or New York having subject matter jurisdiction thereof and in which
venue is proper seeking an initial determination by the court or challenging any
such determination by the Independent Legal Counsel or any aspect thereof,
including the legal or factual bases therefor, and the Company hereby consents
to service of process and to appear in any such proceeding. Any determination
by the Independent Legal Counsel otherwise shall be conclusive and binding on
the Company and Indemnitee.
(c) No change in the Company's Articles of Incorporation (the "Articles")
or By-Laws (the "By-Laws") or in
-2-
<PAGE>
the Georgia Business Corporation Code subsequent to the date of this Agreement
shall have the effect of limiting or eliminating the indemnification available
under this Agreement as to any act, omission or capacity for which this
Agreement provides indemnification at the time of such act, omission or
capacity. If any change after the date of this Agreement in the Articles or By-
Laws of the Company or in any applicable law, statute or rule expands the power
of the Company to indemnify the Indemnitee, such change shall to the same extent
expand the Indemnitee's rights and the Company's obligations under this
Agreement. If any change in the Articles or By-Laws of the Company or in any
applicable law, statute or rule diminishes the power of the Company to indemnify
the Indemnitee, such change, except to the extent otherwise required by law,
statute or rule to be applied to this Agreement, shall have no effect on this
Agreement or the parties' rights and obligations hereunder.
2. Independent Legal Counsel. The Company agrees that, in the event of a
-------------------------
dispute with Indemnitee with respect to any matter hereafter arising concerning
the rights of Indemnitee to indemnity payments or Expense Advances under this
Agreement or any other agreement, or any Articles or By-Law provision now or
hereinafter in effect relating to Claims for Indemnifiable Events, the Company
shall seek legal advice only from Independent Legal Counsel selected by
Indemnitee and approved by the Company (which approval shall not be unreasonably
withheld or delayed). The Company shall notify Indemnitee in writing of the
Company's intention to seek legal advice, and the Indemnitee shall notify the
Company of Indemnitee's choice of Independent Legal Counsel within thirty (30)
days thereafter. Such counsel shall, among other things, render its written
opinion to the Company and Indemnitee as to whether and to what extent the
Indemnitee would be permitted to be indemnified under applicable law. The
Company agrees to pay the reasonable fees of the Independent Legal Counsel
referred to above and to indemnify fully such counsel against any and all
expenses (including attorneys' fees), claims, liabilities and damages arising
out of or relating to this Agreement or its engagement pursuant hereto.
Notwithstanding the foregoing, the Company shall not be required to seek legal
advice from more than one (1) Independent Legal Counsel if more than one (1)
party to an Indemnity Agreement with the Company seek indemnity payments and
Expense Advances with respect to the same or substantially similar Claims. In
such event, the Indemnitees shall have sixty (60) days to notify the Company of
their choice of Independent Legal Counsel and the selection of Independent Legal
Counsel shall be made (a) by the Independent Director(s) (as defined in the
Company's By-Laws) seeking such indemnity, or (b) if no Independent Director
seeks such indemnity, by the directors and officers of the Company who are
parties to an Indemnity Agreement with the Company and who seek such indemnity.
The Company shall have the right to select the Independent Legal Counsel if (x)
Indemnitee is entitled to select the Independent
-3-
<PAGE>
Legal Counsel but has not timely notified the Company of Indemnitee's selection,
(y) there is a dispute involving two (2) or more Independent Directors who do
not timely notify the Company of their choice of a single Independent Legal
Counsel or (z) there is a dispute involving more than one (1) party to an
Indemnity Agreement, none of whom is an Independent Director, and all such
persons do not timely notify the Company of their choice of a single Independent
Legal Counsel.
3. Indemnification for Additional Expenses. The Company shall indemnify
---------------------------------------
Indemnitee against any and all Expenses and, if requested by Indemnitee, shall
(within two (2) business days of such request) advance such Expenses to
Indemnitee, which are incurred by Indemnitee in connection with any action
brought by Indemnitee for (i) indemnification or advance payment of Expenses by
the Company under this Agreement or any other agreement, or any Articles or By-
Law provision now or hereafter in effect relating to Claims for Indemnifiable
Events and/or (ii) recovery under any directors' and officers' liability
insurance policies maintained by the Company; provided, however, that if there
is a final judicial determination (as to which all rights of appeal therefrom
have been exhausted or lapsed) that Indemnitee is not entitled to such
indemnification, advance payment of Expenses or insurance recovery, Indemnitee
shall reimburse the Company for all such Expenses theretofore paid under this
Section 3.
4. Partial Indemnity, Etc. If Indemnitee is entitled under any provision
-----------------------
of this Agreement to indemnification by the Company for some or a portion of the
Expenses, judgments, fines, penalties and amounts paid in settlement of a Claim
but not, however, for all of the total amount thereof, the Company shall
nevertheless indemnify Indemnitee for the portion thereof to which Indemnitee is
entitled. Moreover, notwithstanding any other provision of this Agreement, to
the extent that Indemnitee has been successful on the merits or otherwise in
defense of any or all Claims relating in whole or in part to an Indemnifiable
Event or in defense of any issue or matter therein, including dismissal without
prejudice, Indemnitee shall be indemnified against all Expenses incurred in
connection therewith.
5. Burden of Proof. In connection with any determination by the
---------------
Independent Legal Counsel or otherwise as to whether Indemnitee is entitled to
be indemnified hereunder, the burden of proof shall be on the Company to
establish that Indemnitee is not so entitled.
6. No Presumptions. For purposes of this Agreement, the termination of
---------------
any claim, action, suit or proceeding, by judgment, order, settlement (whether
with or without court approval) or conviction, or upon a plea of nolo contendere
or its equivalent, shall not create a presumption that Indemnitee did
-4-
<PAGE>
not meet any particular standard of conduct or have any particular belief or
that a court has determined that indemnification is not permitted by applicable
law. In addition, neither the failure of the Independent Legal Counsel to have
made a determination as to whether Indemnitee has met any particular standard of
conduct or had any particular belief, nor an actual determination by the
Independent Legal Counsel that Indemnitee has not met such standard of conduct
or did not have such belief, prior to the commencement of legal proceedings by
Indemnitee to secure a judicial determination that Indemnitee should be
indemnified under applicable law shall be a defense to Indemnitee's claim or
create a presumption that Indemnitee has not met any particular standard of
conduct or did not have any particular belief.
7. Nonexclusivity, Etc. The rights of the Indemnitee hereunder shall be
--------------------
in addition to any other rights Indemnitee may have under the Articles, the By-
Laws, or the Georgia Business Corporation Code or otherwise. To the extent that
a change in the Georgia Business Corporation Code (whether by statute or
judicial decision) permits greater indemnification by agreement than would be
afforded currently under the Articles, By-Laws and this Agreement, it is the
intent of the parties hereto that Indemnitee shall enjoy by this Agreement the
greater benefits so afforded by such change.
8. Liability Insurance.
-------------------
(a) The Company hereby represents and warrants that the Company has
purchased and maintains directors' and officers' liability insurance consisting
of a policy issued by Agricultural Excess and Surplus Insurance Company
providing $5,000,000 in coverage, and an excess policy with National Union Fire
Insurance Company of Pittsburgh, Pa. providing $5,000,000 in coverage in excess
of $5,000,000, and that each of such policies is in full force and effect (the
"D&O Insurance").
(b) The Company hereby covenants and agrees that, so long as Indemnitee
shall continue to serve as a director of the Company and thereafter so long as
Indemnitee shall be subject to any possible claim or threatened, pending or
completed action, suit or proceeding, whether civil, criminal or investigative,
by reason of the fact that Indemnitee was a director of the Company, the Company
shall use reasonable efforts to maintain in full force and effect the D&O
Insurance, or substantially equivalent insurance coverage; provided, however,
that the Company shall not be obligated hereunder to pay annual premiums for
directors' and officers' liability insurance in excess of one hundred fifty
percent (150%) of the annualized rate of premiums paid by the Company for D&O
Insurance in Fiscal Year 1994 (the "Increased Rate"), and if the premiums for
such insurance coverage would
-5-
<PAGE>
exceed the Increased Rate in any fiscal year, and the Company determines not to
spend in excess of the Increased Rate, the Company shall endeavor to retain such
type of coverage by amending the levels of self insured retention and/or limits
of liability of such insurance coverage so as not to exceed the Increased Rate.
(c) In all policies of D&O Insurance, Indemnitee shall be named as an
insured in such manner as to provide Indemnitee the same rights and benefits,
subject to the same limitations, as are accorded to the Company's directors or
officers most favorably insured by such policy.
9. Notices.
-------
(a) The Indemnitee shall give to the Company notice in writing as soon as
practicable of any Claim made against him for which indemnification will or
could be sought under this Agreement. Failure to give such notice shall not be
cause for the Company not to indemnify Indemnitee or advance Expenses unless the
Company can demonstrate that it was prejudiced by such failure.
(b) Notices shall be in writing and shall be either personally delivered or
sent by Federal Express or other reputable overnight courier for next business
day delivery, or sent by certified mail, return receipt requested, addressed as
follows:
If to the Company: Forstmann & Company, Inc.
1185 Avenue of the Americas
New York, New York 10036
Attn: Chief Executive Officer
Attn: General Counsel
If to the Indemnitee: at Indemnitee's address stated above
or at such other address as from time to time designated by written notice
delivered in accordance herewith. Any notice personally served shall be deemed
delivered on the date of such service. Any notice sent by overnight courier as
provided above shall be deemed delivered on the first business day after the
date such notice was actually delivered by such overnight courier or refused.
Any notice sent by mail as provided above shall be deemed delivered on the date
of actual receipt or refusal thereof.
10. Amendments, Etc. No supplement, modification or amendment of this
----------------
Agreement shall be binding unless executed in writing by both of the parties
hereto. No waiver of any of the
-6-
<PAGE>
provisions of this Agreement shall be deemed or shall constitute a waiver of any
other provisions hereof (whether or not similar) nor shall such waiver
constitute a continuing waiver.
11. Subrogation. In the event of payment under this Agreement, the
-----------
Company shall be subrogated to the extent of such payment to all of the rights
of recovery of Indemnitee, who shall execute all papers required and shall do
everything reasonably within Indemnitee's power that may be necessary to secure
such rights, including the execution of such documents necessary to enable the
Company effectively to bring suit to enforce such rights.
12. No Duplication of Payments. The Company shall not be liable under
--------------------------
this Agreement to make any payment in connection with any Claim made against
Indemnitee to the extent Indemnitee has otherwise actually received payment
(under any insurance policy, the Articles, By-Laws or otherwise) of the amounts
otherwise indemnifiable hereunder. This Agreement shall supersede any agreement
or understanding, whether written or oral, between the Company and Indemnitee
regarding indemnification for any Claim.
13. Binding Effect, Etc. This Agreement shall be binding upon and inure
--------------------
to the benefit of and be enforceable by the parties hereto and their respective
successors, assigns, including any direct or indirect successor by purchase,
merger, consolidation or otherwise to all or substantially all of the business
and/or assets of the Company, spouses, heirs, executors and personal and legal
representatives. This Agreement shall continue in effect regardless of whether
Indemnitee continues to serve as a director of the Company.
14. Severability. The provisions of this Agreement shall be severable in
------------
the event that any of the provisions hereof (including any provision within a
single section, paragraph or sentence) is held by a court of competent
jurisdiction to be invalid, void or otherwise unenforceable in any respect, and
the validity and enforceability of any such provision in every other respect and
of the remaining provisions hereof shall not be in any way impaired and shall
remain enforceable to the fullest extent permitted by law.
15. Governing Law. This Agreement shall be governed by and construed and
-------------
enforced in accordance with the laws of the State of Georgia applicable to
contracts made and to be performed in such state without giving effect to the
principles of conflicts of laws.
16. Certain Definitions.
-------------------
-7-
<PAGE>
(a) Claim: any threatened, pending or completed action, suit or
-----
proceeding, or any inquiry or investigation, whether instituted by or in the
right of the Company or any other party, that Indemnitee in good faith believes
might lead to the institution of any action, suit or proceeding, whether civil,
criminal, administrative, investigative or other, arising in connection with an
Indemnifiable Event.
(b) Expenses: include attorneys' fees and all other costs, expenses and
--------
obligations paid or incurred in connection with investigating, defending, being
a witness in or participating in (including on appeal), or preparing to defend,
be a witness in or participate in any Claim relating to any Indemnifiable Event.
(c) Indemnifiable Event: any event or occurrence related to the fact that
-------------------
Indemnitee is or was a director of the Company, or is or was serving at the
request of the Company as a director, officer, or trustee of another
corporation, trust or other enterprise, or by reason of anything done or not
done by Indemnitee in any such capacity.
(d) Independent Legal Counsel: an attorney or firm of attorneys, selected
-------------------------
in accordance with the provisions of Section 2, who shall not have otherwise
performed services for the Company or Indemnitee within the last two (2) years.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement this
____ day of _______________, 1994.
FORSTMANN & COMPANY, INC.
By: ____________________________
Name: Jane S. Pollack
----------------------------
Title: Vice President and Secretary
----------------------------
-8-
<PAGE>
EXHIBIT 10.10(a)
AGREEMENT made this 1st day of July, 1992, by and between COMPAGNIA
TESSILE S.p.A., an Italian corporation with offices at Via Montalese 35-50045,
Montemurlo (FI), Italy (hereinafter referred to as "Licensor"), and FORSTMANN &
COMPANY, INC., a Georgia corporation with offices at 1185 Avenue of the
Americas, New York, New York 10036 U.S.A. (hereinafter referred to as
"Licensee").
W I T N E S S E T H :
- - - - - - - - - -
In consideration of the mutual covenants hereinafter set forth,
Licensor and Licensee do hereby respectively grant, covenant and agree as
follows:
1. Grant of License
----------------
1.1 Licensor hereby grants to Licensee, during the term of this
Agreement, an exclusive license only throughout the United States of America,
its territories and possessions and Puerto Rico, Mexico (except as hereinafter
provided) and Canada (hereinafter referred to jointly and severally as the
"Territory") to use the mark "CARPINI" (hereinafter referred to as the
"Licensed Mark") in the format "CARPINI USA FOR FORSTMANN INTERNATIONAL" in the
form set forth in Exhibit A annexed hereto (the "Format") in connection with
the manufacture, distribution and sale solely of fabrics for women's and men's
apparel (hereinafter referred to as "Products"). The items within the
definition of "Products" which are manufactured, distributed and sold by
Licensee under and pursuant to this Agreement shall be referred to
collectively herein as "Articles." The Format may be changed only with the
prior written approval of Licensor.
1.2 All Articles shall bear the Licensed Mark except as hereinafter
provided and no Articles (i.e., Products bearing the Licensed Mark) shall be
- -
sold or otherwise distributed by Licensee under any trademark other than the
Licensed Mark. Licensor reserves all rights to the Licensed Mark except as
specifically granted herein to Licensee and Licensor may exercise such rights
at any time.
1.3 Licensee shall use its reasonable, good faith efforts to exploit
the rights herein granted throughout the Territory consistent with the high
standards and prestige represented by the Licensed Mark.
1.4 Licensee shall not export Articles from the Territory or sell
Articles to any entity which it knows or has reason to believe intends to
export Articles from the Territory. The foregoing shall not be deemed to
prohibit Licensee from exporting Articles for fabrication purposes provided
that such Articles are distributed only in the Territory.
1.5 Notwithstanding anything to the contrary herein, only Articles
manufactured by or for the account of
<PAGE>
Licensee (excluding those purchased from Licensor) may be distributed and sold
in Mexico and such Articles shall bear the Licensed Mark only in the Format. In
addition, Licensor may sell and permit others to sell in Mexico (but not
elsewhere in the Territory) Products bearing the Licensed Mark manufactured by
Licensor.
2. Term
----
2.1 The initial term of this Agreement shall be five (5) years and
six (6) months commencing on the date hereof and continuing through December
31, 1997. Thereafter, Licensee shall have the right to renew this Agreement for
one (1) additional term of three (3) years commencing on January 1, 1998 and
continuing through December 31, 2000, provided that (a) Licensee notifies
Licensor of its desire to renew this Agreement no later than March 31, 1997,
(b) Licensee is in compliance, in all material respects, with all of the terms
and conditions of this Agreement both at the time the option is exercised and
on the last day of the initial term, and (c) Licensor never exercised its
rights against any guaranty posted with respect to the obligations of Licensee
hereunder. The period commencing on the date hereof and continuing through
December 31, 1992 and each twelve (12) month period commencing on each January
1st thereafter during the term of this Agreement shall constitute and shall
be referred to herein as an "Annual Period."
2.2 In the event this Agreement is renewed and is not further
extended or renewed beyond the end of the renewal term and, within the
twelve (12) months after the expiration of the renewal term, Licensor
desires to make a bona fide grant to a third party of the right to use the
---- ----
Licensed Mark in connection with the manufacture, distribution or sale of
Products in the Territory, Licensor shall notify Licensee thereof. Licensor's
notice shall set forth all of the material business terms of such proposed
license, including, without limitation, the name of the prospective licensee.
If Licensee desires to be granted such a license, it shall notify Licensor
thereof within ten (10) business days after its receipt of Licensor's notice.
Thereupon, License and Licensee shall enter into a new license on substantially
the same terms and conditions as this Agreement, modified, as may be
appropriate, to incorporate and be consistent with the terms set forth in
Licensor's notice. If Licensee does not desire to be granted such a license or
fails to notify Licensor timely of its desire to be granted such a license,
Licensor may grant such license to such third party on the aforesaid terms
without any liability or responsibility to Licensee on account thereof.
- 2 -
<PAGE>
3. Product Development
-------------------
3.1 Licensor shall provide Licensee with certain technical and other
information relating to its business and operations, including manufacturing
procedures and techniques, utilization of equipment and raw material and
product control specifications. Licensee shall reimburse Licensor for its out-
of-pocket costs reasonably incurred in connection herewith, including travel
and per diem costs if travel to the United States is requested by Licensee.
3.2 During each Annual Period, Licensee shall submit to Licensor
materials, designs, sketches, colors, tags, labels and packaging from which
Licensor may select those, if any, which Licensor approves for use in
connection with Articles. In its sole discretion, Licensor shall approve or
disapprove the materials, designs, sketches, colors, tags, labels and packaging
submitted as aforesaid and shall discuss with Licensee any modifications or
alterations thereof. Any such approval by Licensor shall be given in writing
prior to use of such materials, designs, sketches, colors, tags, labels or
packaging by Licensee.
3.3 All designs and other materials provided by Licensor shall be used
by Licensee solely inconnection with the manufacture, distribution and sale of
Articles in the Territory and pursuant to this Agreement. If Licensee chooses
not to use such designs or other material, Licensee shall deliver them to
Licensor, at Licensee's expense, and may not use them or permit their use
thereafter. Whether or not Licensee chooses to use any such designs and other
material, Licensor may use and permit others to use them in any manner it
desires, provided that such use does not conflict with any rights granted to
Licensee hereunder and provided further that Licensor may not use or give the
right to others to use them in connection with Products sold in the Territory,
subject to the provisions of paragraph 1.5 above. Notwithstanding anything to
the contrary herein, Licensee may use on Products other than Articles designs
submitted by it to Licensor hereunder which are rejected by Licensor for use
in connection with Articles, provided that such designs are not similar to any
of the unique designs used in connection with Articles. No reference to
Licensor or the Licensed Mark shall be made in connection with the distribution
and sale of such Products.
3.4 Licensee shall be responsible for making all samples as well as
for the production of Articles; and Licensee shall bear all costs in connection
therewith.
4. Manufacture of Articles; Quality Control
----------------------------------------
4.1 The contents and workmanship of Articles shall be at all times of
a quality comparable to the Products manufac-
- 3 -
<PAGE>
tured or sold by Licensor and Articles shall be distributed and sold with
packaging and sales promotion materials appropriate for such quality Products.
4.2 The styles, designs, packaging, contents, workmanship and
quality of all Articles must be approved by Licensor in writing prior to the
distribution or sale thereof. Licensor has the right to take all actions which
are reasonably necessary to ensure that Articles manufactured or sold hereunder
are consistent with the reputation and prestige of the Licensed Mark as a
designation for quality products.
4.3 Before selling or distributing any Article, Licensee shall
deliver to Licensor for its approval, free of charge, one (1) sample of each
such Article together with the tags, labels and packaging to be used in
connection therewith. In addition, upon Licensor's request, Licensee shall
submit to Licensor reasonable quantities of then current production samples of
each Article produced hereunder so that Licensor may assure itself of the
maintenance of the quality standards set forth herein. All Articles to be sold
hereunder shall be at least equal in quality to the samples approved by
Licensor. Licensor and its duly authorized representatives shall have the
right, upon reasonable advance notice and during normal business hours, to
examine Articles in the process of being manufactured and to inspect all
facilities utilized by Licensee in connection therewith.
4.4 All Articles shall be manufactured, sold, labeled, packaged,
distributed and advertised in accordance with all applicable laws and
regulations. Licensee shall use and display the Licensed Mark only in such form
and manner as are specifically approved in writing by Licensor. Licensee shall
cause to appear the legends, markings and notices which Licensor reasonably may
request on all Articles produced hereunder, and on their tags, packaging and
the like, and on all advertising, promotional and publicity material used by
Licensee in connection therewith, and on any printed matter on which Licensee
elects to have the Licensed Mark appear, including but not limited to business
cards, invoices, order forms and stationery. Before using or releasing any such
material, Licensee shall submit to Licensor, for its approval, proposed
advertising, promotional and publicity copy, finished artwork for tags, labels,
packaging and the like and all printed matter on which the Licensed Mark is to
appear. Same shall not be used or released prior to Licensee's receipt of such
approval.
4.5 After any sample, copy, artwork or other material has been
approved, Licensee shall not depart therefrom in any material respect without
the prior written approval of Licensor. If Licensor should disapprove any
sample Article or any
- 4 -
<PAGE>
sample tag, label, packaging or the like, or any advertising, promotional or
publicity material, Licensee shall neither use nor permit the same to be used
in any manner in connection with Articles.
5. Approvals
---------
5.1 It is specifically understood and agreed that Licensor's approval
pursuant to Sections 3 and 4 and paragraph 9.1 of this Agreement shall not be
withheld unreasonably. It also is understood however, that in granting or
withholding its approval Licensor will be applying subjective standards based
upon its aesthetiC requirements for Products bearing the Licensed Mark and the
reputation and prestige of Products bearing the Licensed Mark. Notwithstanding
the foregoing, any sample Article or other material submitted to Licensor for
its approval which is not disapproved within ten (10) business days after
Licensor's receipt thereof shall be deemed approved for use hereunder, but only
for the use for which approval was sought. In addition, to the extent that
Licensor is able to quantify the basis of its disapproval, it shall advise
Licensee in writing of the reasons for its disapproval of any particular item.
6. Showroom
--------
6.1 During the term of this Agreement, Licensee shall maintain a
separate area in its showroom in New York City exclusively for the display of
finished Articles. Said showroom shall be staffed and maintained in a manner
commensurate with the reputation and prestige of the Licensed Mark as a
designation for quality Products.
7. Royalty
-------
7.1 In consideration of the license granted by Licensor hereunder,
Licensee shall pay to Licensor a Royalty for each Annual Period as follows:
Annual Period Royalty
--------------- ----------
1st US$ 50,000
2nd US$ 50,000
Each of 3rd-6th US$125,000
Each of 7th-9th US$150,000
7.2 Royalty payable for each Annual Period shall be paid to Licensor
in three (3) equal installments on the last day of each April, August and
December during each such Annual Period, except that, with respect to the first
Annual Period, the entire Royalty is being paid simultaneously with the
execution hereof.
- 5 -
<PAGE>
8. Confidentiality
---------------
8.1 Licensee acknowledges that all information relating to the
business and operations of Licensor which it acquires, learns or has learned
during or prior to the term of this Agreement, including any technical
information provided to Licensee pursuant to paragraph 3.1 above and any
sketches and designs provided or approved by Licensor, is valuable property of
Licensor. Licensee acknowledges the need to preserve the confidentiality and
secrecy of such information, sketches and designs and agrees that, during the
term of this Agreement and after the termination hereof, it shall not use or
disclose same, except to the extent expressly provided herein, and it shall
take all steps reasonably necessary to ensure that use by it or by its
contractors and suppliers (which use shall be solely as necessary for, and in
connection with, the manufacture, distribution, sale, advertising and promotion
of Articles) shall preserve such confidentiality and secrecy in all respects.
Licensee hereby indemnifies Licensor against any and all damage of any kind
which may be suffered by Licensor as a result of any breach by Licensee or any
of its affiliates, contractors or suppliers of the provisions of this
paragraph. Notwithstanding anything to the contrary herein, it shall not be
deemed a breach of Licensor's aforesaid confidentiality obligations if it uses
machinery and equipment which it upgrades to produce Articles in connection
with other of its Products, but it may not provide any technical or other
information to any third party regarding any such upgrades. The provisions of
this paragraph and Licensee's obligations hereunder shall survive the
expiration or termination of this Agreement.
8.2 Licensor acknowledges that all information relating to the
business and operations of Licensee which it acquires, learns or has learned
during or prior to the term of this Agreement, including any sketches and
designs submitted by Licensee, is valuable property of Licensee. Licensor
acknowledges the need to preserve the confidentiality and secrecy of such
information, sketches and designs and agrees that, during the term of this
Agreement and after the termination hereof, it shall not use or disclose same,
except to the extent expressly provided herein, and it shall take all steps
reasonably necessary to ensure that use by it shall preserve such
confidentiality and secrecy in all respects. Licensor hereby indemnifies
Licensee against any and all damage of any kind which may be suffered by
Licensee as a result of any breach by Licensor or any of its affiliates of the
provisions of this paragraph. The provisions of this paragraph and Licensor's
obligations hereunder shall survive the expiration or termination of this
Agreement.
8.3 The obligations under paragraphs 8.1 and 8.2 above shall not
apply to any information obtained by either party from the other which: (a) is
or becomes generally available to the
- 6 -
<PAGE>
public or becomes available from a third party who had the right to make such
disclosure; (b) is required to be disclosed by order of a court or other
competent governmental agency; or (c) is, at the time of its disclosure, in the
possession of the party to which disclosure is made (except for sketches and
designs submitted by Licensee and approved by Licensor for use in connection
with Articles). However, the foregoing shall not be deemed to reduce or limit
in any way Licensee's obligations and Licensor's rights under paragraph 3.2
above.
9. The Licensed Mark; Copyrights
-----------------------------
9.1 Licensee shall not use the Licensed Mark, in whole or in part, as
a corporate name or trade name. Licensee shall not join any name or names with
the Licensed Mark so as to form a new mark. Licensee shall not use any name or
names in connection with the Licensed Mark (except in the Format) in
advertising, publicity, labeling, packaging or printed matter of any kind
utilized by Licensee in connection with Articles, unless and until Licensor
consents thereto in writing.
9.2 (a) Licensee acknowledges that Licensor is the owner of all
right, title and interest in and to the Licensed Mark in each jurisdiction in
the Territory in any form or embodiment thereof and is also the owner of the
goodwill attached or which shall become attached to the Licensed Mark in
connection with the business and goods in relation to which the same has been,
is or shall be used. Sales by Licensee shall be deemed to have been made by
Licensor for purposes of trademark registration and all uses of the Licensed
Mark by Licensee shall inure to the benefit of Licensor. Licensee shall not, at
any time, do or suffer to be done any act or thing which may in any way
adversely affect any rights of Licensor in and to the Licensed Mark or any
registrations thereof or which, directly or indirectly, may reduce the value of
the Licensed Mark or detract from its reputation. Notwithstanding anything to
the contrary herein, Licensee shall not be deemed to be in default of the
provisions of the preceding sentence in the event that the alleged violation
arises out of or relates to an act or omission in accordance with the terms of
this Agreement or which was approved by Licensor. However, that such act or
omission may not constitute such a default shall not reduce or limit in any way
Licensee's indemnification obligations with respect thereto as set forth in
paragraph 10.2 below.
(b) Licensee shall not affix the Licensed Mark to any Product if
it is to be sold as a "second" or as an "irregular" and shall remove the
Licensed Mark from any Article to be sold as a "second" or as an "irregular."
9.3 At Licensor's request and expense, Licensee shall execute any
documents, including registered user agreements,
- 7 -
<PAGE>
reasonably required by Licensor to confirm Licensor's ownership of all rights
in and to the Licensed Mark in each jurisdiction in the Territory and the
respective rights of Licensor and Licensee pursuant to this Agreement. Licensee
shall cooperate with Licensor at Licensor's expense, in connection with the
filing and prosecution by Licensor of applications in Licensor's name to
register the Licensed Mark for Products in each jurisdiction in the Territory
and the maintenance and renewal of such registrations as may issue.
9.4 Licensee shall use the Licensed Mark in the Territory strictly in
compliance with the legal requirements obtaining therein and shall use such
markings in connection therewith as may be required by applicable legal
provisions. Licensee shall cause to appear on all Articles and on all materials
on or in connection with which the Licensed Mark is used, such legends,
markings and notices as may be reasonably necessary in order to give
appropriate notice of any trademark, trade name or other rights therein or
pertaining thereto.
9.5 Licensee never shall challenge Licensor's ownership of or the
validity of the Licensed Mark or any application for registration thereof, or
any trademark registration thereof, or any rights of Licensor therein.
9.6 In the event that Licensee learns of any infringement or
imitation of the Licensed Mark or of any use by any person of a trademark
similar to the Licensed Mark, it promptly shall notify Licensor thereof.
Licensor shall take such action, if any, as may be appropriate under the
circumstances, for the protection of its rights in and to the Licensed Mark
and, if requested to do so by Licensor, Licensee shall cooperate with Licensor
in all respects at Licensor's sole expense, including without limitation by
being a plaintiff or co-plaintiff and by causing its officers to execute
pleadings and other necessary documents. In no event, however, shall Licensor
be required to take any action if its regular trademark counsel issues a
written opinion that in its reasonable view taking such action may put
Licensor's rights in and to the Licensed Mark in jeopardy, and Licensee shall
have no right to take any action with respect to the Licensed Mark without
Licensor's prior written approval, which approval or disapproval shall not be
delayed unreasonably.
9.7 Any copyright which may be created in any sketch, design,
packaging, label, tag or the like approved by Licensor under this Agreement
shall be, as between Licensor and Licensee, the property of Licensor.
10. Indemnity: Insurance
--------------------
10.1 Licensor hereby saves and holds Licensee harmless of and from
and indemnifies it against any and all losses,
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<PAGE>
liability, damages and expenses (including reasonable attorneys' fees and
expenses) which Licensee may incur or be obligated to pay, or for which it may
become liable or be compelled to pay in any action, claim or proceeding against
Licensee, for or by reason of the fact that the use of the Licensed Mark in the
Territory in accordance with the terms and conditions of this Agreement
infringes upon the trademark, trade name or other rights of a third partY.
Licensee must give Licensor prompt written notice of any such action, claim or
proceeding and Licensor, in its sole discretion, then may take such action as
it deems advisable to defend such action, claim or proceeding on behalf of
Licensee. In the event appropriate action is not taken by Licensor within
thirty (30) days after its receipt of notice from Licensee, Licensee shall have
the right to defend such action, claim or proceeding, but no settlement thereof
may be made without the approval of Licensor, which approval shall not be
withheld or delayed unreasonably. In either case, Licensee and Licensor shall
keep each other fully advised of all developments and shall cooperate fully
with each other in all respects in connection with any such defense as is made.
Such indemnification shall be deemed to apply solely to (a) the amount of the
judgment, if any, against Licensee, (b) any sums paid by Licensee in
settlement, and (c) the expenses incurred by Licensee in connection with its
defense or settlement. Such indemnification by Licensor shall not apply to any
damages sustained by Licensee by reason of such infringement other than those
specified above. The provisions of this paragraph and Licensor's obligations
hereunder shall survive the expiration or termination of this Agreement.
10.2 Licensee hereby saves and holds Licensor and Mr. Sergio Carpini
harmless of and from and indemnifies each of them against any and all losses,
liability, damages and expenses (including reasonable attorneys' fees and
expenses) which they, or either of them, may incur or be obligated to pay, or
for which they, or either of them, may become liable or be compelled to pay in
any action, claim or proceeding against them or either of them, for or by
reason of any acts, whether of omission or commission, that may be committed or
suffered by Licensee or any of its servants, agents or employees in connection
with Licensee's performance of this Agreement, except to the extent that the
underlying claim is a matter covered by Licensor's indemnification obligation
under paragraph 10.1 above. Licensor must give Licensee prompt written notice
of any such action, claim or proceeding and Licensee, in its sole discretion,
then may take such action as it deems advisable to defend such action, claim or
proceeding on behalf of Licensor. In the event appropriate action is not taken
by Licensee within thirty (30) days after its receipt of notice from Licensor,
Licensor shall have the right to defend such action, claim or proceeding, but
no settlement thereof may be made without the approval of Licensee, which
approval shall not be withheld or delayed unreasonably. In either case,
Licensor and Licensee shall
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<PAGE>
keep each other fully advised of all developments and shall cooperate fully
with each other in all respects in connection with any such defense as is made.
The provisions of this paragraph and Licensee's obligations hereunder shall
survive the expiration or termination of this Agreement.
10.3 Licensee shall procure and maintain at its own expense in full
force and effect at all times during which Articles are being sold, with a
responsible insurance carrier reasonably acceptable to Licensor, a public
liability insurance policy including products liability coverage with respect
to Articles, as well as contractual liability coverage with respect to this
Agreement with a limit of liability of not less than US$3,000,000. Such
insurance policy shall be written for the benefit of Licensee, Licensor and Mr.
Carpini and shall provide for at least thirty (30) days prior written notice to
said parties of the cancellation or substantial modification thereof. Such
insurance may be obtained by Licensee in conjunction with a policy of products
liability insurance which covers products other than Articles. Licensee shall
deliver a certificate of such insurance to Licensor promptly upon issuance of
said insurance policy and, from time to time upon reasonable request by
Licensor, promptly shall furnish to Licensor evidence of the maintenance of
said insurance policy. Nothing contained in this paragraph 10.3 shall be deemed
to limit in any way the indemnification provisions of paragraph 10.2 above.
11. Defaults
--------
11.1 If Licensee fails to make any payment due hereunder and if such
default shall continue uncured for a period of ten (10) business days after
notice thereof is given to Licensee, (a) Licensee shall pay interest on the
unpaid balance thereof from and including the date such payment becomes due
until the date the entire amount is paid in full at a rate equal to the prime
rate being charged in New York, New York by Citibank, N.A. as of the close of
business on the date the payment first becomes due plus three percent (3%), and
(b) Licensor shall have the right to terminate this Agreement forthwith by
written notice thereof to Licensee. If Licensee discontinues both the
manufacture and marketing for distribution of Articles for a period of sixty
(60) or more days (other than for seasonal stoppages) so that it fails properly
to distribute and sell a seasonal collection of Articles or if it exports (for
distribution and sale) Articles from the Territory, Licensor shall have the
right to terminate this Agreement forthwith by written notice thereof to
Licensee. If Licensee otherwise fails or if Licensor fails to perform any of
the terms, conditions, agreements or covenants in this Agreement on its part to
be performed and such default continues uncured for a period of thirty (30)
business days after notice thereof has been given to the defaulting party in
writing by the other party or, if such default is not curable within such
thirty (30) business day
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<PAGE>
period, the defaulting party is not diligently taking all steps necessary to
cure the default as promptly as practicable, the other partY, at its sole
election, may terminate this Agreement forthwith by written notice thereof to
the defaulting party.
11.2 (a) In the event that Licensee or Licensor files a petition in
bankruptcy, is adjudicated a bankrupt or files a petition or otherwise seeks
relief under or pursuant to any bankruptcy, insolvency or reorganization
statute or proceeding, or if a petition in bankruptcy is filed against it and
same is not bonded or dismissed within sixty (60) days after the filing
thereof or it becomes insolvent or makes an assignment for the benefit of its
creditors or a custodian, receiver or trustee is appointed for it or a
substantial portion of its business or assets, this Agreement shall terminate
automatically and forthwith.
(b) No assignee for the benefit of creditors, custodian,
receiver, trustee in bankruptcy, sheriff or any other officer of the court or
official charged with taking over custody of Licensee's assets or business
shall have any right to exploit or in any way use the Licensed Mark if this
Agreement terminates pursuant to paragraph 11.2(a) above.
12. Rights on Expiration or Termination
-----------------------------------
12.1 Notwithstanding any termination in accordance with Section 11
above, Licensor shall have and hereby reserves all rights and remedies which it
has, or which are granted to it by operation of law, to enjoin the unlawful or
unauthorized use of the Licensed Mark (any of which injunctive relief may be
sought in the courts, notwithstanding the arbitration provisions of this
Agreement, and also may be sought prior to or in lieu of termination), to
collect unpaid Royalties payable by Licensee pursuant to this Agreement,
including, without limitation, accrued and unpaid Royalty not yet due, and to
be compensated for damages for breach of this Agreement. In addition, nothing
herein shall be deemed to prevent a party from bringing an action for damages
either prior to or in lieu of termination if a default in performance by the
other party occurs and is not cured timely in accordance with the provisions of
Section 11 above.
12.2 If this Agreement expires or is terminated other than pursuant
to paragraph 11.2(a) above, Licensee shall be entitled, for an additional
period of six (6) months only, on a non-exclusive basis, to sell and dispose of
its inventory of Articles. Such sales shall be made subject to all of the
provisions of this Agreement. Notwithstanding the foregoing, if this Agreement
is terminated by reason of a default by Licensee in the payment of any sum
owing to Licensor hereunder, Licensee may not sell or dispose of its inventory
of Articles unless and until it cures such default. Also, if this Agreement is
terminated by
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<PAGE>
reason of a default by Licensee relating to the misuse of or actions damaging
to the Licensed Mark, Licensee shall remove the Licensed Mark from Articles
prior to the sale or any other disposition thereof.
12.3 Except as specifically provided in paragraph 12.2 above, on the
expiration or termination of this Agreement, all of the rights of Licensee to
use the Licensed Mark and to sell Articles shall terminate forthwith and shall
revert immediately to Licensor and Licensee shall discontinue forthwith all use
of the Licensed Mark, no longer shall have the right to use the Licensed Mark
or any variation or simulation thereof and promptly shall transfer to Licensor,
free of charge, all registrations, filings and rights with regard to the
Licensed Mark which it may have possessed at any time. The foregoing shall not
be deemed to limit or reduce the rights of Licensee or Licensor under Sections
8 and 10 above. If Licensee continues to use the Licensed Mark thereafter, it
shall pay to Licensor, in addition to any other sums owing to Licensor on
account of the termination hereof or otherwise, an amount equal to U.S.$4,000
for each day such use continues. In addition, Licensee thereupon (a) shall
deliver to Licensor, free of charge, all materials provided to it by Licensor,
and (b) shall destroy all samples of Articles and all sketches and other
material in its possession which were approved by Licensor for use hereunder
and all labels, tags and other material in its possession with the Licensed
Mark thereon, unless Licensor desires to purchase from Licensee any such
samples or other items, in which case Licensee shall deliver same to Licensor,
at Licensor's expense. Payment therefor shall be made promptly after Licensor's
receipt thereof and of Licensee's invoice setting forth its cost of each such
item, which shall be the purchase price therefor. After the expiration or
termination of this Agreement, Licensee shall not use or give the right to
others to use any of said sketches and other material, or any variations or
simulations thereof, in connection with Products or any other merchandise.
13. Representations and Warranties
------------------------------
13.1 Licensor represents and warrants that it has full right, power
and authority to enter into this Agreement and to perform all of its
obligations hereunder. Licensor further repreSentS and warrants that it has
granted no other existing license to use the Licensed Mark on Products anywhere
in the Territory other than in Mexico and that it shall grant no such other
license during the term of this Agreement except in accordance with the
provisions of paragraph 17.1 below. Licensor further represents and warrants
that applications to register the Licensed Mark have been filed for Products in
each jurisdiction in the Territory and that no claims have been made against it
by any third parties in the Territory or elsewhere in the world alleging that
the use of the Licensed Mark therein violates any trademark or
- 12 -
<PAGE>
other rights of such third parties. In the event that Licensor is blocked from
obtaining a registration of the Licensed Mark in the United States (whether by
reason of a rejection thereof by the Patent and Trademark Office or as a result
of a successful contest thereof by a third party) and Licensee is thereby
prevented from using the Licensed Mark in connection with Products in the
United States, Licensee may terminate this Agreement by and upon written notice
thereof to Licensor given within thirty (30) days after Licensee's receipt of
written notice of such block, as if the date of termination were the date set
forth herein as the expiration date hereof. If Licensee does not elect so to
terminate this Agreement Licensor and Licensee shall renegotiate, in good
faith, the Royalty provisions hereof.
13.2 Licensee represents and warrants that it has full right, power
and authority to enter into this Agreement and to perform all of its
obligations hereunder.
14. Notice
------
14.1 All reports, approvals, requests, demands and notices
("Notices") required or permitted by this Agreement to be given to a party
shall be in writing and shall be deemed to be duly given if personally
delivered, if sent by telefax promptly confirmed by mail or courier service or
if sent by overnight mail or courier service, such as DHL or Federal Express,
which requires the addressee to acknowledge receipt thereof, to the party
concerned at its address set forth on page 1 above (or at such other address as
a party may specify by notice to the other). Any Notice shall be deemed
delivered upon receipt thereof by the addressee.
15. Assignability; Binding Effect
-----------------------------
15.1 The performance of Licensee hereunder is of a personal nature
and, therefore, neither this Agreement nor the license or other rights granted
hereunder may be assigned, sublicensed or transferred by Licensee and any such
attempted assignment or sublicense shall be void and of no force or effect.
Notwithstanding the foregoing, Licensee may assign this Agreement to a wholly-
owned subsidiary of Licensee provided that (a) Licensee advises Licensor of its
intent to assign this Agreement not less than sixty (60) days prior to the
proposed assignment and licensor does not notify Licensee prior to the proposed
date of assignment that it has serious and grave concerns regarding the
prospective assignee, which concerns shall be set forth in Licensor's said
notice, (b) the assignee remains a wholly-owned subsidiary of Licensee
throughout the term of this Agreement, and (c) Licensee guarantees in all
respects the performance of said assignee under the Agreement, which guarantee
shall be in form and substance reasonably satisfactory to Licensor. Licensee
shall provide
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<PAGE>
Licensor with evidence that the assignee continues to be a wholly-owned
subsidiary of Licensee at least once during each Annual Period and upon the
reasonable request of Licensee.
15.2 This Agreement shall inure to the benefit of and shall be
binding upon the parties, their respective successors, Licensor's transferees
and assigns and Licensee's permitted transferees and assigns.
16. Arbitration; Court Actions
--------------------------
16.1 Except as specifically set forth in this Agreement, any and all
disputes, controversies and claims arising out of or relating to this Agreement
or concerning the respective rights or obligations hereunder of the parties
hereto (except disputes, controversies and claims relating to or affecting in
any way Licensor's ownership of or the validity of the Licensed Mark or any
registration thereof, or any application for registration thereof (hereinafter
referred to as "Licensed Mark Disputes")), shall be settled and determined by
arbitration in New York, New York before the Commercial Panel of the American
Arbitration Association in accordance with and pursuant to the then existing
Commercial Arbitration Rules. The arbitrators shall have the power to award
specific performance or injunctive relief and reasonable attorneys' fees and
expenses to any party in any such arbitration and the courts shall have similar
power with regard to that injunctive relief sought by Licensor pursuant to
paragraph 12.2 above and with regard to Licensed Mark Disputes ("Court
Actions"). However, in any arbitration proceeding arising under this Agreement,
the arbitrators shall not have the power to change, modify or alter any
express condition, term or provision hereof, and to that extent the scope of
their authority is limited. The arbitration award shall be final and binding
upon the parties and judgment thereon may be entered in any court in the United
States or Italy having jurisdiction thereof, the jurisdiction of which for
purposes of enforcing the arbitration award hereby is consented to by Licensor
and Licensee. The service of any notice, process, motion or other document in
connection with an arbitration under this Agreement or for the enforcement of
any arbitration award hereunder may be effectuated in the manner in which
notices are to be given to a party pursuant to Section 14 above.
16.2 Any Court Action shall be brought in the courts of the State of
New York, U.S.A., except that Licensor may bring a Court Action elsewhere in
the Territory if bringing such Court Action in such other jurisdiction is
reasonably necessary in order for Licensor to obtain the relief sought, and
shall be governed by the laws of the jurisdiction in which it is brought. Each
of Licensor and Licensee hereby irrevocably submits to the jurisdiction of any
of said courts in any Court Action and hereby waives any claim or defense of
inconvenient forum.
- 14 -
<PAGE>
17. Miscellaneous
-------------
17.1 Notwithstanding anything to the contrary contained in this
Agreement, Licensor shall have the right, exercisable at any time during the
initial term of this Agreement after Licensee's right to renew this Agreement
expires and, subject to the provisions of paragraph 2.2 above, at any time
during and after the renewal term, to negotiate and enter into agreements with
third parties pursuant to which it may grant a license to use the Licensed Mark
in connection with the manufacture, distribution and sale of Products in any
jurisdiction in the Territory, but only if, pursuant to such third party
agreements, the collections of such Products are not shipped prior to the
termination of this Agreement. Nothing herein contained shall be construed to
prevent any such third party licensee from showing such Products and accepting
orders therefor prior to the termination hereof. In any event, I however, the
first seasonal collection of Products to be sold by such third party licensee
shall be a collect ion after the last collection of Articles sold by Licensee
hereunder.
17.2 This Agreement shall be construed and interpreted in accordance
with the laws of the State of New York, U.S.A. applicable to agreements made
and to be performed in said state, except as provided in paragraph 16.2 above,
contains the entire understanding and agreement between the parties hereto with
respect to the subject matter hereof, supersedes all prior oral or written
understandings and agreements relating thereto and may not be modified,
discharged or terminated, nor may any of the provisions hereof be waived,
orally. The English language version of this Agreement shall control.
17.3 Nothing herein contained shall be construed to constitute the
parties hereto as partners or as joint venturers, or either as agent of the
other, and neither party shall have any power to obligate or bind the other in
any manner whatsoever.
17.4 No waiver by either party, whether express or implied, of any
provision of this Agreement, or of any breach or default thereof, shall
constitute a continuing waiver of such provision or of any other provision
of this Agreement. Acceptance of payments by Licensor shall not be deemed a
waiver by Licensor of any violation of or default under any of the provisions
of this Agreeme nt by Licensee.
17.5 If any provision or any portion of any provision of this
Agreement shall be held to be 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.
- 15 -
<PAGE>
17.6 This Agreement shall be construed without regard to any
presumption or other rule requiring construction against the party causing this
Agreement to be drafted. If any words or phrases in this Agreement shall have
been stricken out or Otherwise eliminated, whether or not any other words or
phrases have been added, this Agreement shall be construed as if those words or
phrases were never included in this Agreement, and no implication or inference
shall be drawn from the fact that the words or phrases were so stricken out or
otherwise eliminated.
17.7 References in this Agreement to "business days" shall be deemed
to mean United States business days.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Aqreement as of the day and year first above written.
COMPAGNIA TESSILE E S.P.A.
By: (SEAL)
-----------------------------
FORSTMANN & COMPANY, INC.
By: /s/ Christopher L. Schaller
-----------------------------
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<PAGE>
EXHIBIT 10.10(b)
FORSTMANN & COMPANY, INC.
1185 Avenue of the Americas
New York, New York 10036
Compagnia Tessile S.p.A.
Via Montelese, 35
50045, Montemurlo (FI), Italy
Gentlemen:
Simultaneously herewith we are entering into a license agreement with you
(the "License") pursuant to which you are granting us a license to use the mark
"CARPINI" in connection with the manufacture, distribution and sale in the
United States of America, Mexico and Canada of fabrics for women's and men's
apparel. No later than August 31, 1992, we shall deliver to you a guarantee for
your benefit in the amount of US$200,000 issued by an affiliate or correspondent
bank of Citibank N.A. located in Italy with respect to the License (the
"Original Guarantee").
The Original Guarantee shall be in form and substance reasonably acceptable
to you and shall remain effective for at least twelve (12) months after it is
issued and, if it is to expire before December 31, 1993, it shall be replaced,
at least thirty (30) days prior to its expiration date with a new guarantee in
the same substance and substantially the same form as the Original Guarantee
(the "Interim Guarantee"), which Interim Guarantee shall become effective upon
the expiration of the Original Guarantee and remain effective until December 31,
1993. We shall cause a new guarantee, in such substance and substantially such
form (the "New Guarantee" and jointly and severally, together with the Original
Guarantee and the Interim Guarantee, the "Guarantee"), to be issued to replace
the preceding Guarantee upon its expiration at least thirty (30) days before the
commencement of the succeeding calendar year (1994 for the first New Guarantee),
which New Guarantee shall remain effective until the end of the next calendar
year, e.g., through December 31, 1994 with respect to the first New Guarantee.
The amount of each New Guarantee shall be equal to the amount of liquidated
damages payable for such year pursuant to our letter agreement relating to
liquidated damages being executed this date (the "Letter Agreement").
<PAGE>
Failure to deliver a Guarantee timely or to reestablish a Guarantee to
its full amount when required, as hereinafter provided, shall be a default under
the License and you may terminate the License upon written notice given to us
within twenty (20) days after the default occurs provided that the default has
not been cured prior to our receipt of such notice. Failure by you to terminate
the License by reason of such a default by us shall not affect in any way your
rights under the Letter Agreement to receive liquidated damages, as provided
therein, if your right thereto thereafter arises.
You may draw down on a Guarantee at any time after you have delivered to us
a notice of default in payment under the License which default is not cured
within the cure period set forth in the License, to the extent of the amount of
the payment in default. In addition, you shall have the right to draw down on a
Guarantee upon the termination of the License (including a termination resulting
from our failure to deliver or reestablish a Guarantee timely) in the event that
you are entitled to liquidated damages pursuant to the Letter Agreement. With
respect to liquidated damages, you may draw down against a Guarantee to the full
extent of the liquidated damages.
The termination of the License and the drawing down of a Guarantee
thereupon with respect to the liquidated damages shall not relieve us of our
obligations to pay you any other sums due to you (whether then due or accrued)
under the License or the Letter Agreement, including, without limitation, any
portion of the liquidated damages owing not satisfied by the amount of the
Guarantee drawn down with respect thereto. In addition, if such termination is a
result of our failure to deliver the Original Guarantee timely, we shall not be
relieved of our obligations to pay you any such other sums or of our obligation
to pay you the entire amount of liquidated damages provided in the Letter
Agreement for 1992.
In the event that you draw down on a Guarantee during the term of the
License, we shall reestablish the Guarantee in the full amount thereof as
promptly as possible and in no event more than thirty (30) business days after
our receipt of notice that you have drawn down on such Guarantee.
This agreement shall be construed and interpreted in accordance with the
laws of the State of New York, U.S.A., applicable to agreements made and to be
performed in said state, and supersedes all prior arrangements or agreements
between us with respect to the subject matter hereof.
<PAGE>
This agreement may not be modified, discharged or terminated, nor may any
of the provisions hereof be waived, orally.
Dated: July 1, 1992 Very truly yours,
FORSTMANN & COMPANY, INC.
By: /s/ Christopher L. Schaller
---------------------------
AGREED TO:
COMPAGNIA TESSILE S.p.A.
By: (SEAL)
----------------------
<PAGE>
EXHIBIT 10.10(c)
FORSTMANN & COMPANY, INC.
1185 Avenue of the Americas
New York, New York 10036
Compagnia Tessile S.p.A.
Via Montelese, 35
50045, Montemurlo (FI), Italy
Gentlemen
You manufacture and sell fabrics for women's and men's apparel bearing
the mark "CARPINI" ("Products") and we desire to purchase Products from you.
Accordingly, it hereby is agreed as follows:
1. The purchase price for Products purchased by us from you shall be
equal to your regular wholesale price for such Products less fifteen percent
(15%). The purchase price shall be ex-factory (Montemurlo -- Firenze) and will
be billed to us in Italian lire. You represent that our purchase price for
Products is the lowest price at which you currently sell first quality Products
to any third party.
2. Payment for Products shall be due sixty (60) days after the later of
the invoice date and the shipping date of such Products.
3. The delivery date of Products purchased from you shall be as
mutually agreed at the time you accept the order for the Products.
4. You shall accept any orders for Products from us subject to prior
sale and compliance with the provisions of paragraph 7 below.
5. All of our purchases of Products from you shall be subject to your
regular terms and conditions of sale, except to the extent specifically modified
hereby.
6. Products purchased from you only may be resold in the United States
of America and Canada (the "Territory").
7. We shall provide you with a letter of credit or shall have in place
a stand-by letter of credit covering all orders
<PAGE>
for Products placed with and accepted by you. We acknowledge that no order for
Products will be put into production until a letter of credit covering such
order has been delivered to you.
8. You shall not fill any orders for Products placed by customers
located in the Territory, and you shall direct any such customers to us.
9. This agreement shall terminate automatically and forthwith in the
event that we have terminated manufacturing products ourselves.
10. Any and all disputes, controversies and claims arising out of or
relating to this agreement or concerning the respective rights or obligations
hereunder of the parties hereto shall be settled and determined by arbitration
in New York, New york before the Commercial Panel of the American Arbitration
Association in accordance with and pursuant to the then existing commercial
Arbitration Rules. The arbitrators shall have the power to award reasonable
attorneys' fees and expenses to any party in any such arbitration and the courts
shall have similar power with regard to court actions brought to enforce
arbitration awards. In any arbitration proceeding arising under this Agreement,
the arbitrators shall not have the power to change, modify or alter any express
condition, term or provision hereof, and to that extent the scope of their
authority is limited. The arbitration award shall be final and binding upon the
parties and judgment thereon may be entered in any court in the United States or
Italy having jurisdiction thereof, the jurisdiction of which for purposes of
enforcing the arbitration award hereby is consented to by the parties hereto.
11. This agreement shall be construed and interpreted in accordance
with the laws of the State of New York, U.S.A., applicable to agreements made
and to be performed in said state, and supersedes all prior arrangements or
agreements between us with respect to the subject matter hereof.
12. This agreement may not be modified, discharged or terminated, nor
may any of the provisions hereof be waived, orally.
Dated: July 1, 1992 Very truly yours,
FORSTMANN & COMPANY, INC.
By: /s/ Christopher L. Schaller
---------------------------
AGREED TO:
COMPAGNIA TESSILE S.p.A.
By: (SEAL)
---------------------
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<PAGE>
EXHIBIT 10.10(d)
FORSTMANN & COMPANY, INC.
1185 Avenue of the Americas
New York, New York 10036
Compagnia Tessile S.p.A.
Via Montelese, 35
50045, Montemurlo (FI), Italy
Gentlemen:
Simultaneously herewith we are entering into a license agreement (the
"License") with you pursuant to which you are granting us a license to use the
mark "CARPINI" in connection the manufacture, distribution and sale in the
United States of America, Mexico and Canada of fabrics for women's and men's
apparel. In addition, simultaneously herewith we are entering into a design
service/collaboration agreement (the "Design Agreement") with Woolverton Limited
pursuant to which Woolverton Limited is to provide us with design and other
services in connection with our performance under the License.
If the Design Agreement expires or if, for any reason, the Design
Agreement terminates prior to the expiration date thereof, including, without
limitation, due to reasons beyond our control, the License will terminate
automatically and forthwith, simultaneously with the expiration or termination
of the Design Agreement, without any action being required by either of us.
Also, in no event may the License be renewed if the Design Agreement is not also
renewed.
If the License or the Design Agreement terminates by reason of a
default by us thereunder, we shall pay to you, as liquidated damages, within
thirty (30) days after any such termination, the following amount: US$130,000 if
the termination occurs during 1992 or 1993; US$260,000 if the termination occurs
during 1994; US$300,000 if the termination occurs after 1994.
Furthermore, you hereby guarantee the performance of Woolverton Limited
under the Design Agreement and, if, for any reason, Woolverton Limited is
unwilling or unable to perform its obligations under the Design Agreement, you,
or such other company as you shall designate (whose performance you also shall
guarantee as aforesaid), shall succeed to the obligations of Woolverton Limited
under the Design Agreement.
<PAGE>
Any and all disputes, controversies and claims arising out of or
relating to this agreement or concerning the respective rights or obligations
hereunder of the parties hereto shall be settled and determined by arbitration
in New York, New York before the Commercial Panel of the American Arbitration
Association in accordance with and pursuant to the then existing Commercial
Arbitration Rules. The arbitrators shall have the power to award reasonable
attorneys' fees and expenses to any party in any such arbitration and the courts
shall have similar power with regard to court actions brought to enforce
arbitration awards ("Court Actions"), and the arbitrators and the courts shall
award you attorneys' fees and expenses in any arbitration or Court Action in
which you prevail in an effort to be awarded or to collect the aforesaid
liquidated damages. In any arbitration proceeding arising under this agreement,
the arbitrators shall not have the power to change, modify or alter any express
condition, term or provision hereof, and to that extent the scope of their
authority is limited. The arbitration award shall be final and binding upon the
parties and judgment thereon may be entered in any court in the United States or
Italy having jurisdiction thereof, the jurisdiction of which for the purposes of
enforcing the arbitration award hereby is consented to by the parties hereto.
The service of any notice, process, motion or other document in connection with
an arbitration under this agreement or for the enforcement of any arbitration
award hereunder may be effectuated in the manner in which notices are to be
given to a party pursuant to Section 14 of the License.
This agreement shall be construed and interpreted in accordance with
the laws of the State of New York, U.S.A., applicable to agreements made and to
be performed in said state, and supersedes all prior arrangements or agreements
between us with respect to the subject matter hereof.
This agreement may not be modified, discharged or terminated, nor may
any of the provisions hereof be waived, orally.
Dated: July 1, 1992 Very truly yours,
FORSTMANN & COMPANY, INC.
By: /s/ Christopher L. Schaller
---------------------------
AGREED TO:
COMPAGNIA TESSILE S.p.A.
By: (SEAL)
--------------------
- 2 -
<PAGE>
EXHIBIT 10.10(e)
COMPAGNIA TESSILE S.p.A.
Via Montelese, 35
50045, Montemurlo (FI), Italy
Forstmann & Company, Inc.
1185 Avenue of the Americas
New York, New York 10036
Gentlemen:
Referring to the agreements already reached between us, we confirm that
you are authorized to use the mark "CARPINI" exclusively, for fabrics for
women's and men's apparel, on the following conditions as well as such
additional conditions as are set forth in the agreements:
1. Duration: July 1, 1992 - December 31, 1997.
--------
2. Territory: USA - Canada - Mexico (exclusive only to fabrics
---------
manufactured by you).
3. Royalty Amount:
--------------
1992 US$ 50,000
1993 US$ 50,000
1994-1997 US$125,000 for each year
4. Payments each year are to be made in three equal installments on
April 30, August 31 and December 31.
5. Payments are to be covered by the guarantee of a bank, as agreed.
6. The mark shall be used properly and without prejudicing it as
provided in the agreements. Otherwise, the agreements may be cancelled.
Dated: July 1, 1992 Very truly yours,
COMPAGNIA TESSILE S.p.A.
By: (SEAL)
---------------------
CONFIRMED:
FORSTMANN & COMPANY, INC.
By: /s/ Christopher L. Schaller
---------------------------
<PAGE>
EXHIBIT 10.10(f)
AGREEMENT made this 1st day of July, 1992, by and between WOOLVERTON
LIMITED, a corporation organized in the Republic of Ireland with offices at 8
Inns Court, Wine Tavern Street, Dublin 8, Republic of Ireland (hereinafter
referred to as the "Consultant"), and FORSTMANN & COMPANY, INC., a Georgia
corporation With offices at 1185 Avenue of the Americas, New York, New York
10036 U.S.A. (hereinafter referred to as the "Company").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the Company has obtained a license from Compagnia Tessile S.p.A.
(the "License") to use the mark "CARPINI" (the "Licensed Mark") in connection
with the manufacture, distribution and sale in the United States of America, its
territories and possessions and Puerto Rico, Canada and Mexico (the "Territory")
of fabrics for women's and men's apparel ("Products"); and
WHEREAS, the Company desires to engage the Consultant in connection with
the design and development of Products to be produced under the License
("Articles"),
NOW, THEREFORE, in consideration of the mutual covenants hereinafter set
forth, the Consultant and the Company do hereby respectively covenant and agree
as follows:
1. Engagement
----------
1.1 The Company hereby engages the Consultant to provide the
consultation services set forth below in connection with the design and
development of Articles.
1.2 Nothing herein shall be deemed to prevent the Consultant from
performing consultation services of any kind, including with respect to
Products, to others, except that the Consultant shall not provide designs of
Articles to others for use in connection with Products in the Territory.
2. Term
----
2.1 The initial term of this Agreement shall be five (5) years and six
(6) months commencing on the date hereof and continuing through December 31,
1997. Thereafter, if the Company effectively renews the License, the Company
shall have the right to renew this Agreement for one (1) additional term of
three (3) years commencing on January 1, 1998 and continuing through December
31, 2000, provided that (a) the Company notifies the Consultant of its desire to
renew this Agreement no later than March 31, 1997, (b) the Company is in
compliance, in all material respects, with all of the terms and conditions of
this Agreement both at the time the Option is exercised and on the last day of
the initial term, (c) the Consultant never exercised its rights against any
guaranty posted with respect to the obligations of the Company hereunder, and
(d) "Net Sales" (as hereinafter defined) for the fifth "Annual Period" are not
less than ninety percent (90%) of the "Net Sales"
<PAGE>
necessary to generate the "Guaranteed Minimum Fee" for such "Annual Period" and
"Net Sales," in the aggregate, during the third through fifth "Annual Periods"
are not less than eighty percent (80%) of the "Net Sales" necessary to generate
the "Guaranteed Minimum Fee," in the aggregate, for such "Annual Periods." The
period commencing on the date hereof and continuing through December 31, 1992
and each twelve (12) month period commencing on each January 1st thereafter
during the term of this Agreement shall constitute and shall be referred to
herein as an "Annual Period."
2.2 In the event this Agreement is renewed and is not further extended
or renewed beyond the end of the renewal term and, thereafter the Company is
granted a new license, pursuant to paragraph 2.2 of the License, to use the
Licensed Mark in connection with the manufacture, distribution and sale of
Products in the Territory, the Company and the Consultant shall enter into a new
agreement on substantially the same terms and conditions of this Agreement,
modified, as may be appropriate, to incorporate and be consistent with the terms
relating to design/collaboration services, if any, as may be set forth in the
notice delivered to the Company pursuant to said paragraph 2.2.
3. Design and Other Services
-------------------------
3.1 From time to time during each Annual Period, the Consultant shall
prepare and timely deliver to the Company designs for two (2) seasonal
collections of Articles. The Company may submit to the Consultant materials,
designs, sketches, colors, tags, labels and packaging for its consideration and
advice. The Consultant shall discuss with the Company any suggested
modifications or alterations thereof. In addition, if any customer of the
Company requests that an additional Article or Articles be developed for it, the
Consultant, if it so elects in its sole discretion, shall work with the Company
to develop such additional Articles ("Customer Articles").
3.2 All designs and ideas provided by the Consultant shall be used by
the Company solely in connection with the manufacture, distribution and sale of
Articles in the Territory. Whether or not the Company chooses to use any such
designs and ideas, the Consultant may use and permit others to use them in any
manner it desires, provided that such use does not conflict with any rights
granted to the Company hereunder and provided further that the Consultant may
not use or give the right to others to use them in connection with Products in
the Territory.
3.3 The Company shall be responsible for making all samples as well as
for the production of Articles; and the Company shall bear all costs in
connection therewith. Also, in the event that the Consultant desires to engage
any necessary experts not on its staff to assist in the design or development of
Articles, it
-2-
<PAGE>
shall advise the Company thereof. If the Company approves of such an engagement,
in its reasonable discretion, which approval shall be unreasonably withheld or
delayed, the costs incurred with respect to such experts, other than Mr. Sergio
Carpini or Mr. Tino Brigatti shall be borne by the Company. In addition, all
reasonable out-of-pocket costs incurred by the Consultant, including, without
limitation, designer and travel costs, in connection with the development of
Customer Articles, including those incurred by Mr. Sergio Carpini or Mr. Tino
Brigatti on behalf of the Consultant, shall be borne by the Company.
3.4 The Consultant also shall consult with the Company in connection
with the marketing and pricing of Articles. The Company shall give serious
consideration to suggestions made by the Consultant in circumstances where the
Consultant opposes actions proposed to be taken by the Company for serious and
justified reasons. If the Company elects to take any such opposed actions, it
shall be liable for any damages (except allegedly unearned Sales Fees) which may
arise therefrom. In no event, however, shall the Company be required to take any
action proposed by the Consultant if the Company elects not to act on a
particular matter.
4. Guaranteed Minimum Fee
----------------------
4.1 In consideration of the design services to be performed by the
Consultant hereunder, the Company shall pay to the Consultant a Guaranteed
Minimum Fee for each Annual Period after the first Annual Period as follows.
There shall be no Guaranteed Minimum Fee for the first Annual Period.
<TABLE>
<CAPTION>
Guaranteed Minimum
Annual Period Fee
- --------------- ------------------
<S> <C>
2nd U.S. 100,000
3rd U.S.$ 200,000
4th U.S.$ 400,000
5th U.S.$ 720,000
6th U.S.$1,440,000
7th U.S.$1,500,000
8th U.S.$1,500,000
9th U.S.$1,500,000
</TABLE>
4.2 The Guaranteed Minimum Fee payable for an Annual Period shall be
paid to the Consultant in three (3) equal installments on the last day of each
Apri1, August and December during each such Annual Period.
4.3 The Guaranteed Minimum Fee for each Annual Period shall be credited
against the Sales Fee for only the same Annual Period.
-3-
<PAGE>
5. Sales Fee
---------
5.1 In consideration of the design services to be performed by the
Consultant hereunder, the Company shall pay to the Consultant a Sales Fee equal
to five percent (5%) of "Net Sales."
5.2 For purposes hereof, "Net Sales" shall be deemed to mean the
invoiced amount of Articles manufactured by or for the account Of the Company
shipped to unaffiliated entities by the Company or any of its affiliates, less
documented customary trade discounts, allowances in lieu of returns, cooperative
advertising allowances where the customer actually places an advertisement
featuring Articles, uncollectible accounts (but only, during each Annual Period,
to the extent of two percent (2%) of Net Sales during such Annual Period) and
returns. No deduction shall be made for other discounts, allowances,
uncollectible accounts or costs incurred by the Company. Sales of Articles made
other than in arm's length transactions shall be deemed to have been made at the
regular arm's length net wholesale price thereof.
5.3 The Sales Fee hereunder shall be accounted for and paid annually
within sixty (60) days after the end of each Annual Period (or portion thereof
in the event of prior termination for any reason). The Sales Fee payable for
each Annual Period shall be computed on the basis of Net Sales during such
Annual Period, with a credit for any Guaranteed Minimum Fee payments theretofore
made to the Consultant for said Annual Period.
5.4 No payment of Sales Fee for any Annual Period in excess of payments
of Guaranteed Minimum Fee for the same Annual Period shall be credited against
the Guaranteed Minimum Fee due to the Consultant for any other Annual Period.
6. Sales Statement
---------------
6.1 The Company shall deliver to the Consultant monthly, within twenty
(20) business days after the end of each month and at the time each Sales Fee
payment is due, a statement signed by a duly authorized officer of the Company
and certified by him as accurate indicating, by month and by customer, the
number and invoice price of all Articles shipped during such month or the Annual
Period covered by such Sales Fee payment, as the case may be, and, with respect
to the annual statement, such information as is reasonably necessary to show
clearly the computation of the amount of Sales Fee payable hereunder for said
Annual Period. Such statement shall be furnished to the Consultant whether or
not any Articles have been sold during the period for which such statement is
due. The Company shall make available to the Consultant copies upon request from
time to time of all invoices and Schedules of consignments relating to Articles
and a copy of the Company's then current customer list for Articles.
-4-
<PAGE>
7. Books and Records; Audits
-------------------------
7.1 The Company shall prepare and maintain, in such manner as will allow
its accountants to audit same in accordance with generally accepted accounting
principles, complete and accurate books of account and records (specifically
including without limitation the Originals or copies of documents supporting
entries in the books of account) covering all transactions arising out of or
relating to this Agreement. The Consultant and its duly authorized
representatives have the right, during regular business hours, for the duration
of this Agreement and for one (1) year thereafter, but not more often than once
during each Annual Period, to audit said books of account and records and
examine all other documents and material in the possession or under the control
of the Company with respect to the subject matter and the terms of this
Agreement, including, without limitation, invoices, credits and shipping
documents. All such books of account, records and documents shall be kept
available by the Company for at least three (3) years after the end of the
Annual Period to which they relate.
7.2 If, as a result of any audit of the Company's books and records, it
is finally shown that the Company's payments were less than the amount which
should have been paid, all payments required to be made to eliminate any
discrepancy revealed by said audit shall be made promptly upon the Consultant's
demand therefor, and, if the shortfall discrepancy is in an amount equal to not
less than the greater of US$5,000 and three and one-half percent (3-1/2%) of the
amount actually paid with respect to sales occurring during the period covered
by any such audit, the Company promptly shall reimburse the Consultant for the
reasonable cost of such audit, but in no event shall the Company be responsible
for more of the cost of the audit than the amount of the shortfall (e.g., if the
shortfall is US$12,000 and the Company is responsible for the cost of the audit,
it shall be responsible only for US$12,000 of the cost of the audit). Prompt
payment of any such shortfall and, if applicable, the cost of such audit shall
be deemed a complete cure of the failure previously to have paid the amount of
the shortfall. The Consultant shall provide the Company with a copy of such
audit. If the Company does not object thereto within thirty (30) days after its
receipt of such audit, the Company shall be deemed to have accepted such audit
for purposes hereof. The Company's accountant shall be permitted to discuss with
the Consultant's auditor any question he may have with respect to the audit. If
the accountants are unable to agree they shall choose a third accountant who
shall review the statements of the Company and the Consultant's audit. The
determination of the third accountant shall be employed for purposes hereof and
shall be binding on the Company and the Consultant. The cost of such third
accountant shall be allocated between the parties as determined by the third
accountant. Notwithstanding the manner in which the costs of the third
accountant are allocated, if the third accountant's determination shows that the
Company still is responsible for the cost of Licensor's audit in accordance with
the provisions of this paragraph, the Company shall reimburse Licensor for such
costs of its audit as aforesaid.
-5-
<PAGE>
8. Confidentiality
---------------
8.1 The Company acknowledges that all information relating to the
business and operations of the Consultant which it acquires learns or has
learned during or prior to the term of this Agreement and all designs and
sketches received by it from the Consultant are valuable property of the
Consultant. The Company acknowledges the need to preserve the confidentiality
and secrecy of such information, designs and sketches and agrees that, during
the term of this Agreement and after the termination hereof, it shall not use or
disclose same, except to the extent expressly provided herein, and it shall take
all steps reasonably necessary to ensure that use by it or by its contractors
and suppliers (which use shall be solely as necessary for, and in connection
with, the manufacture, distribution, sale, advertising and promotion of
Articles) shall preserve such confidentiality and secrecy in all respects. The
Company hereby indemnifies the Consultant against any and all damage of any kind
which maY be suffered by the Consultant as a result of any breach by the company
or any of its affiliates, contractors or suppliers of the provisions of this
paragraph. The provisions of this paragraph and the Company's obligations
hereunder shall survive the expiration or termination of this Agreement.
8.2 The Consultant acknowledges that all information relating to the
business and operations of the Company which it acquires, learns or has learned
during or prior to the term of this Agreement, including any sketches and
designs submitted by the Company, is valuable property of the Company. The
Consultant acknowledges the need to preserve the confidentiality and secrecy of
such information, sketches and design and agrees that, during the term of this
Agreement and after the termination hereof, it shall not use or disclose same,
except to the extent expressly provided herein, and it shall take all steps
reasonably necessary to ensure that use by it shall preserve such
confidentiality and secrecy in all respects. The Consultant hereby indemnifies
the Company against any and all damage of any kind which may be suffered by the
Company as a result of any breach by the Consultant or any of its affiliates of
the provisions of this paragraph. The provisions of this paragraph and the
Consultants obligations hereunder shall survive the expiration or termination of
this Agreement.
8.3 The obligations under paragraphs 8.1 and 8.2 above shall not apply
to any information obtained by either party from the other which: (a) is or
becomes generally available to the public or becomes available form a third
party who had the right to make such disclosure; (b) is required to be disclosed
by order of a court or other competent governmental agency; or (c) is, at the
time of its disclosure, in the possession of the party to which disclosure is
made (except for sketches and designs submitted by the Company and approved by
the Consultant for use in connection with Articles). However, the foregoing
shall not be deemed to reduce or limit in any way the Company's Obligations and
the Consultant's rights under paragraph 3.2 above.
-6-
<PAGE>
9. Indemnity
---------
9.1 The Company hereby saves and holds the Consultant harmless of and
from and indemnifies it against any and all losses, liability damages and
expenses (including reasonable attorneys' fees and expenses) which the
Consultant may incur or be obligated to pay, or for which it may become liable
or be compelled to pay in any action, claim or proceeding against it, for or by
reason of any acts, whether of omission or commission, that may be committed or
suffered by the Company or any of its servants, agents or employees in
connection with the Company's performance of this Agreement, except to the
extent that the underlying claim is a matter covered by the Consultant's
indemnification obligation under paragraph 9.2 below. The Consultant must give
the Company prompt written notice of any such action, claim or proceeding and
the Company, in its sole discretion, then may take such action as it deems
advisable to defend such action, claim or proceeding on behalf of the
Consultant. In the event appropriate action is not taken by the Company within
thirty (30) days after its receipt of notice from the Consultant, the Consultant
shall have the right to defend such action, claim or proceedinq but no
settlement thereof may be made without the approval of the Company, which
approval shall not be withheld or delayed unreasonably. In either case, the
Consultant and the Company shall keep each other fully advised of all
developments and shall cooperate fully with each other in all respects in
connection with any such defense as is made. The provisions of this paragraph
and the Company's obligations hereunder shall survive the expiration or
termination of this Agreement.
9.2 The Consultant hereby saves and holds the Company harmless of and
from and indemnifies it against any and all losses, liability, damages and
expenses (including reasonable attorneys' fees and expenses) which the Company
may incur or be obligated to pay, or for which it may become liable or be
compelled to pay in any action, claim or proceeding against the Company, for or
by reason of the fact that the sale in the Territory in accordance with the
terms and conditions of this Agreement of Articles bearing designs provided by
the Consultant infringes upon the rights of a third party. The Company must give
the Consultant prompt written notice of any such action, claim or proceeding
and the Consultant, in its sole discretion, then may take such action as it
deems advisable to defend such action, claim or proceeding on behalf of the
Company. In the event appropriate action is not taken by the Consultant within
thirty (30) days after its receipt of notice from the Company, the Company shall
have the right to defend such action, claim or proceeding but no settlement
thereof may be made without the approval of the Consultant, which approval shall
not be withheld or delayed unreasonably. In either case, the Company and the
Consultant shall keep each other fully advised of all developments and shall
cooperate fully With each other in all respects in connection with any such
defense as is made. Such indemnification shall be deemed to apply solely to (a)
the amount of the judgment, if any, against the Company, (b) any sums paid by
the Company in settlement, and (c) the expenses incurred by the Company in
connection with its defense or settlement. Such indemnification by the
Consultant shall not apply to any damages sustained by the
-7-
<PAGE>
Company by reason of such infringement other than those specified above. The
provisions of this paragraph and the Consultant's obligations hereunder shall
survive the expiration or termination of this Agreement.
10. Infringement Actions
--------------------
10.1 In the event that the Company learns of any infringement or
imitation of Articles, it promptly shall notify the consultant thereof. The
Company thereupon shall take such action, if anY, as may be appropriate under
the circumstances for the protection of its and the Consultant's rights in and
to the designs of such Articles. The Consultant shall cooperate with the Company
in all respects in any such action. Each of the Consultant and the Company shall
bear its own expenses in connection with any such action and any damage award
obtained by the Company shall be allocated between the Company and the
Consultant after reimbursement of their respective expenses, in accordance with
their respective expenditures in connection with the action. Nothing herein
shall be deemed to require the Consultant to expend any sums in connection with
an action brought by the Company.
11. Defaults
--------
11.1 If the Company fails to make any payment due hereunder and if such
default shall continue uncured for a period of ten (10) business days after
notice thereof is given to the Company, (a) the Company shall pay interest on
the unpaid balance thereof from and including the date such payment becomes due
until the date the entire amount is paid in full at a rate equal to the prime
rate being charged in New York, New York by Citibank, N.A. as of the close of
business on the date the payment first becomes due plus three percent (3%) and
(b) the Consultant shall have the right to terminate this Agreement forthwith by
written notice thereof to the Company. If the Company discontinues both the
manufacture and marketing for distribution of Articles for a period of sixty
(60) or more days (other than for seasonal stoppages) so that it fails properly
to distribute and sell a seasonal collection of Articles, the Consultant shall
have the right to terminate this Agreement forthwith by written notice thereof
to the Company. If the Company otherwise fails or if the Consultant fails to
perform any of the terms, conditions, agreements or covenants in this Agreement
on its part to be performed and such default continues uncured for a period of
thirty (30) business days after notice thereof has been given to the defaulting
party in writing by the other party or, if such default is not curable within
such thirty (30) business day period, the defaulting party is not diligently
taking all steps necessary to cure the default as promptly as practicable, the
other party, at its sole election may terminate this Agreement forthwith by
written notice thereof to the defaulting party.
11.2 (a) In the event that the Company or the Consultant files a
petition in bankruptcy, is adjudicated a bankrupt or files a petition or
otherwise seeks relief under or pursuant to any bankruptcy,
-8-
<PAGE>
insolvency or reorganization statute or proceeding, or if a petition in
bankruptcy is filed against it and same is not bonded or dismissed within sixty
(60) days after the filing thereof, or it becomes insolvent or makes an
assignment for the benefit of its creditors or a custodian, receiver or trustee
is appointed for it or a substantial portion of its business or assets, this
Agreement shall terminate automatically and forthwith.
(b) No assignee for the benefit of creditors, custodian,
receiver, trustee in bankruptcy, sheriff or any other officer of the court or
official charged with taking over custody of the Company's assets or business
shall have any right to exploit or in any way use the designs provided by the
Consultant if this Agreement terminates pursuant to paragraph 11.2(a) above.
12. Rights on Expiration or Termination
-----------------------------------
12.1 Notwithstanding any termination in accordance with Section 11
above, the Consultant shall have and hereby reserves all rights and remedies
which it has, or which are granted to it by operation of law, to collect unpaid
fees payable by the Company pursuant to this Agreement, including, without
limitation, any accrued and unpaid Guaranteed Minimum Fee not yet due, and to be
compensated for damages for breach of this Agreement. In addition, nothing
herein shall be deemed to prevent a party from bringing an action for damages
either prior to or in lieu of termination if a default in performance by the
other party occurs and is not cured timely in accordance with the provisions of
Section 11 above.
12.2 If this Agreement expires or is terminated other than pursuant to
paragraph 11.2(a) above, the Company shall be entitled, for an additional period
of six (6) months only, on a non-exclusive basis, to sell and dispose of its
inventory of Articles. Such sales shall be made subject to all of the provisions
of this Agreement and to an accounting for and the payment of Sales Fee thereon.
Such accounting and payment shall be due within thirty (30) days after the close
of the said six (6) month period. Notwithstanding the foregoing, if this
Agreement is terminated by reason of a default by the Company in the payment of
any sum owing to the Consultant hereunder, the Company may not sell or dispose
of its inventory of Articles unless and until it cures such default.
12.3 Except as specifically provided in paragraph 12.2 above on the
expiration or termination of this Agreement, all of the rights of the Company to
use designs provided by the Consultant and to sell Articles shall terminate
forthwith and shall revert immediately to the Consultant, all Sales Fees on
sales theretofore made shall become immediately due and payable and the Company
shall discontinue forthwith all use of the designs and ideas provided by the
Consultant and no longer shall have the right to use the said designs and ideas
in any manner in connection with Products or any other products. The foregoing
-9-
<PAGE>
shall not be deemed to limit or reduce the rights of the Company or the
consultant under Sections 8 and 9 above.
13. Notice
------
13.1 All reports, approvals, requests, demands and notices ("Notices")
required or permitted by this Agreement to be given to a party shall be in
writing and shall be deemed to be duly given if personally delivered or if sent
by telefax promptly confirmed by mail or courier service or by overnight mail or
courier service, such as DHL or Federal Express, which requires the addressee to
acknowledge receipt thereof, to the party concerned at its address set forth on
page 1 above (or at such other address as a party may specify by notice to the
other). Any Notice shall be deemed delivered upon receipt thereof by the
addressee.
14. Travel Expenses
---------------
14.1 The Company shall reimburse the Consultant for the reasonable
travel expenses (i.e., airfare, lodgings, meals and local transportation)
- -
incurred by the Consultant's personnel in connection with the Consultant's
required travel hereunder to and from the United States and such other places
requested by the Company.
15. Assignability; Binding Effect
-----------------------------
15.1 The performance of each party hereunder is of a personal nature
and, therefore, neither this Agreement nor any rights of a party hereunder may
be assigned or transferred by either party and any such attempted assignment or
transfer shall be void and of no force or effect. Notwithstanding the foregoing,
the Company may assign this Agreement to a wholly-owned subsidiary of the
Company provided that (a) the Company advises the Consultant of its intent to
assign this Agreement not less than sixty (60) days prior to the proposed
assignment and the Consultant does not notify the Company prior to the proposed
date of assignment that it has serious and grave concerns regarding the
prospective assignee, which concerns shall be set forth in the Consultant's said
notice, (b) the assignee remains a wholly-owned subsidiary of the Company
throughout the term of this Agreement, and (c) the Company guarantees in all
respects the performance of said assignee under the Agreement, which guarantee
shall be in form and substance reasonably satisfactory to the Consultant. The
Company shall provide the Consultant with evidence that the assignee continues
to be a wholly-owned subsidiary of the Company at least once during each Annual
Period and upon the reasonable request of the Consultant.
15.2 This Agreement shall inure to the benefit of and shall be binding
upon the parties, their respective successors and their permitted transferees
and assigns.
-10-
<PAGE>
16. Arbitration
-----------
16.1 Except as specifically set forth in this Agreement, any and all
disputes, controversies and claims arising out of or relating to this Agreement
or concerning the respective rights or obligations hereunder of the parties
hereto shall be settled and determined by arbitration in New York, New York
before the Commercial Panel of the American Arbitration Association in
accordance with and pursuant to the then existing Commercial Arbitration Rules.
The arbitrators shall have the power to award specific performance or injunctive
relief and reasonable attorneys' fees and expenses to any party in any such
arbitration. However, in any arbitration proceeding arising under this
Agreement, the arbitrators shall not have the power to change, modify or alter
any express condition, term or provision hereof, and to that extent the scope of
their authority is limited. The arbitration award shall be final and binding
upon the parties and judgment thereon may be entered in any court in the United
States or Ireland having jurisdiction thereof, the jurisdiction of which for
purposes of enforcing the arbitration award hereby is consented to by the
Company and Consultant. The service of any notice, process, motion or other
document in connection with an arbitration under this Agreement or for the
enforcement of any arbitration award hereunder may be effectuated in the manner
in which notices are to be given to a party pursuant to Section 13 above.
17. Miscellaneous
-------------
17.1 This Agreement shall be construed and interpreted in accordance
with the laws of State of New York, U.S.A., applicable to agreements made and to
be performed therein, contains the entire understanding and agreement between
the parties hereto with respect to the subject matter hereof, supersedes all
prior oral or written understandings and agreements relating thereto and may not
be modified, discharged or terminated, nor may any of the provisions hereof be
waived, orally.
17.2 Nothing herein contained shall be construed to constitute the
parties hereto as partners or as joint venturers, or either as agent of the
other, and neither party shall have any power to obligate or bind the other in
any manner whatsoever.
17.3 No waiver by either party, whether express or implied, of any
provision of this Agreement, or of any breach or default thereof, shall
constitute a continuing waiver of such provision or of any other provision of
this Agreement. Acceptance of payments by the Consultant shall not be deemed a
waiver by the Consultant of any violation of or default under any of the
provisions of this Agreement by the Company.
17.4 If any provision or any portion of any provision of this Agreement
shall be held to be void or unenforceable, the remaining provisions of this
Agreement and the remaining portion of any provision
-11-
<PAGE>
held void or unenforceable in part shall continue in full force and effect.
17.5 This Agreement shall be construed without regard to any presumption
or other rule requiring construction against the party causing this Agreement to
be drafted. If any words or phrases in this Agreement shall have been stricken
out or otherwise eliminated, whether or not any other words or phrases have been
added, this Agreement shall be construed as if those words or phrases were never
included in this Agreement, and no implication or inference shall be drawn from
the fact that the words or phrases were so stricken out or otherwise eliminated.
17.6 References in this Agreement to "business days" shall be deemed to
mean United States business days.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.
WOOLVERTON LIMITED
By: (SEAL)
-----------------------------
FORSTMANN & COMPANY, INC.
By: /s/ Christopher L. Schaller
-----------------------------
-12-
<PAGE>
EXHIBIT 10.10(g)
FORSTMANN & COMPANY, INC.
1185 Avenue of the Americas
New York, New York 10036
Woolverton Limited
8 Inns Court
Wine Tavern Street
Dublin 8, Republic of Ireland
Gentlemen:
Simultaneously herewith we are entering into an agreement with you (the
"Design Agreement") pursuant to which you will be providing to us design and
other services in connection with our performance under our license of even date
with Compagnia Tessile S.p.A. and an agreement with you (the "Consultation
Agreement") pursuant to which you will be providing to us consulting services in
connection with fabric purchases to be made by us. No later than August 31,
1992, we shall deliver to you a guarantee for your benefit in the amount of
US$800,000 issued by an affiliate or correspondent bank of Citibank N.A. located
in Ireland with respect to the Design Agreement and the Consultation Agreement
(the "Original Guarantee").
The Original Guarantee shall be in form and substance reasonably
acceptable to you and shall remain effective for at least twelve (12) months
after it is issued and, if it is to expire before December 31, 1993, it shall be
replaced, at least thirty (30) days prior to its expiration date with a new
guarantee in the same substance and substantially the same form as the Original
Guarantee (the "Interim Guarantee"), which Interim Guarantee shall become
effective upon the expiration of the Original Guarantee and remain effective
until December 31, 1993. We shall cause a new guarantee, in such substance and
substantially such form (the "New Guarantee" and jointly and severally, together
with the Original Guarantee and the Interim Guarantee, the "Guarantee"), to be
issued to replace the preceding Guarantee upon its expiration at least thirty
(30) days before the commencement of the succeeding calendar year (1994 for the
first New Guarantee), which New Guarantee shall remain effective until the end
of the next calendar year, e.g., through December 31, 1994 with respect to the
first New Guarantee. The amount of each New Guarantee shall be equal to the
amount of liquidated damages payable for such year pursuant to our letter
agreement relating to liquidated damages being executed this date (the "Letter
Agreement").
<PAGE>
Failure to deliver a Guarantee timely or to reestablish a Guarantee to
its full amount when required, as hereinafter provided, shall be a default by us
under the Design Agreement and the Consultation Agreement and you may terminate
the Design Agreement and the Consultation Agreement upon written notice given to
us within twenty (20) days after the default occurs~ provided that the default
has not been cured prior to our receipt of such notice. Failure by you to
terminate the Design Agreement and the Consultation Agreement by reason of such
a default by us shall not affect in any way your rights under the Letter
Agreement to receive liquidated damages, as provided therein, if your right
thereto thereafter arises.
You may draw down on a Guarantee at any time after you have delivered to
us a notice of default in payment under the Design Agreement or the Consultation
Agreement which default is not cured within the cure period set forth in the
Design Agreement or within ten (10) business days after written notice to us of
such default under the Consultation Agreement, as the case may be, to the extent
of the amount of the payment in default. In addition, you shall have the right
to draw down on a Guarantee upon the termination of the Design Agreement
(including a termination resulting from our failure to deliver or reestablish a
Guarantee timely) in the event that you are entitled to liquidated damages
pursuant to the Letter Agreement. With respect to liquidated damages, you may
draw down against a Guarantee to the full extent of the liquidated damages.
The termination of the Design Agreement and the Consultation Agreement
and the drawing down of a Guarantee thereupon with respect to the liquidated
damages shall not relieve us of our obligations to pay you any other sums due to
you (whether then due or accrued under the Design Agreement or the Consultation
Agreement or thereafter becoming due on account of subsequent sales of products
under the Design Agreement or purchases of fabrics by us with respect to the
Consultation Agreement) under the Design Agreement or the Consultation Agreement
or the Letter Agreement, including, without limitation, any portion of the
liquidated damages owing not satisfied by the amount of the Guarantee drawn down
with respect thereto. In addition, if such termination is a result of our
failure to deliver the Original Guarantee timely, we shall not be relieved of
our obligations to pay you any such other sums or of our obligation to pay you
the entire amount of liquidated damages provided in the Letter Agreement for
1992.
In the event that you draw down on a Guarantee during the term of the
Design Agreement and the Consultation Agreement, we shall reestablish the
Guarantee in the full amount thereof as promptly as possible and in no event
more than thirty (30) business days after our receipt of notice that you have
drawn down on such Guarantee.
- 2 -
<PAGE>
This agreement shall be construed and interpreted in accordance with the
laws of the State of New York, U.S.A., applicable to agreements made and to be
performed in said state, and supersedes all prior arrangements or agreements
between us with respect to the subject matter hereof.
This agreement may not be modified, discharged or terminated, nor may
any of the provisions hereof be waived, orally.
Dated: July 1, 1992 Very truly yours,
FORSTMANN & COMPANY, INC.
By: /s/ Christopher L. Schaller
---------------------------
AGREED TO:
WOOLVERTON LIMITED
By: (SEAL)
--------------------
- 3 -
<PAGE>
EXHIBIT 10.10(h)
FORSTMANN & COMPANY, INC.
1185 Avenue of the Americas
New York, New York 10036
Woolverton Limited
8 Inns Court
Wine Tavern Street
Dublin 8, Republic of Ireland
Gentlemen:
Simultaneously herewith we are entering into a purchase agreement with
Compagnia Tessile S.p.A. pursuant to which we will be purchasing certain fabrics
for women's and men's apparel from that company. You have acted as a consultant
for us in connection with such purchases.
As consideration for your services rendered in connection with the
foregoing, we shall pay to you a Consultation Fee in the amount of seven percent
(7%) of the purchase price payable by us for all products purchased by us from
Compagnia Tessile S.p.A. Payments of your Consultation Fee shall be made to you
within sixty (60) days after the later of the date of the invoice and the date
of shipment of any such purchase of products by us from Compagnia Tessile S.p.A.
Payment shall be made by wire transfer or in such other manner as you
shall designate. Each payment of your fee shall be accompanied by a statement
showing in reasonable detail the calculation thereof.
We also are parties to a design/collaboration agreement of even date
herewith (the "Design Agreement") pursuant to which you will be rendering
services to us in connection with the development of fabrics to be manufactured
by us. Notwithstanding anything to the contrary contained in such agreement, no
"Sales Fee" (as defined therein) shall be payable with respect to our sales of
fabrics purchased from Compagnia Tessile S.p.A. In addition, in the event the
Design Agreement terminates for any reason, this agreement shall terminate
automatically simultaneously therewith.
<PAGE>
Any and all disputes, controversies and claims arising out of or
relating to this agreement or concerning the respective rights or obligations
hereunder of the parties hereto shall be settled and determined by arbitration
in New York, New York before the Commercial Panel of the American Arbitration
Association in accordance with and pursuant to the then existing Commercial
Arbitration Rules. The arbitrators shall have the power to award reasonable
attorneys' fees and expenses to any party in any such arbitration and the courts
shall have similar power with regard to court actions brought to enforce
arbitration awards. In any arbitration proceeding arising under this agreement,
the arbitrators shall not have the power to change, modify or alter any express
condition, term or provision hereof, and to that extent the scope of their
authority is limited. The arbitration award shall be final and binding upon the
parties and judgment thereon may be entered in any court in the United States or
Ireland having jurisdiction thereof, the jurisdiction of which for the purposes
of enforcing the arbitration award hereby is consented to by the parties hereto.
The service of any notice, process, motion or other document in connection with
an arbitration under this agreement or for the enforcement of any arbitration
award hereunder may be effectuated in the manner in which notices are to be
given to a party pursuant to Section 13 of the Design Agreement.
This agreement shall be construed and interpreted in accordance with
the laws of the State of New York, U.S.A., applicable to agreements made and to
be performed in said state, and supersedes all prior arrangements or agreements
between us with subject matter hereof.
This agreement may not be modified, discharged or terminated, nor may
any of the provisions hereof be waived, orally.
Dated: July 1, 1992 Very truly yours,
FORSTMANN & COMPANY, INC.
By: /s/ Christopher L. Schaller
---------------------------
AGREED TO:
WOOLVERTON LIMITED
By: (SEAL)
---------------------------
- 2 -
<PAGE>
EXHIBIT 10.10(i)
FORSTMANN & COMPANY, INC.
1185 Avenue of the Americas
New York, New York 10036
Woolverton Limited
8 Inns Court
Wine Tavern Street
Dublin 8, Republic of Ireland
Gentlemen:
Simultaneously herewith we are entering into a license agreement (the
"License") with Compagnia Tessile S.p.A. ("CT") pursuant to which we are being a
granted a license to use the mark "CARPINI" in connection with manufacture,
distribution and sale of fabrics for women's and men's apparel. In addition,
simultaneously herewith, we are entering into an agreement with you (the "Design
Agreement") pursuant to which you will be providing to us design and other
services in connection with our performance under the License. In the event that
the License expires or, for any reason, the License terminates including,
without limitation, for reasons beyond our control, the Design Agreement shall
terminate automatically and forthwith, simultaneously with the expiration or
termination of the License, without any action being required by either of us.
Also, in no event may the Design Agreement be renewed if the License is not also
renewed. In addition, if the Design Agreement or the License terminates by
reason of our default thereunder, we shall pay to you, as liquidated damages,
within thirty (30) days after any such termination an amount equal to the
following amount, depending upon the year of termination:
<TABLE>
<CAPTION>
Amount of
Year of Termination Liquidated Damages
------------------- ------------------
<S> <C>
1992 US$520,000
1993 US$520,000
1994 US$1,040,000
and each year thereafter US$1,200,000
</TABLE>
Any and all disputes, controversies and claims arising out of or
relating to this agreement or concerning the respective rights or obligations
hereunder of the parties hereto shall be
<PAGE>
settled and determined by arbitration in New York, New York before the
Commercial Panel of the American Arbitration Association in accordance with and
pursuant to the then existing Commercial Arbitration Rules. The arbitrators
shall have the power to award reasonable attorneys' fees and expenses to any
party in any such arbitration and the courts shall have similar power with
regard to court actions brought to enforce arbitration awards ("Court Actions"),
and the arbitrators and the courts shall award you attorneys' fees and expenses
in any arbitration or Court Action in which you prevail in an effort to be
awarded or to collect the aforesaid liquidated damages. In any arbitration
proceeding arising under this agreement, the arbitrators shall not have the
power to change, modify or alter any express condition, term or provision
hereof, and to that extent the scope of their authority is limited. The
arbitration award shall be final and binding upon the parties and judgment
thereon may be entered in any court in the United States or Ireland having
jurisdiction thereof, the jurisdiction of which for the purpose of enforcing the
arbitration award hereby is consented to by the parties hereto. The service of
any notice, process, motion or other document in connection with an arbitration
under this agreement or for the enforcement of any arbitration award hereunder
may be effectuated in the manner in which notices are to be given to a party
pursuant to Section 13 of the Design Agreement.
This agreement shall be construed and interpreted in accordance with
the laws of the State of New York, U.S.A., applicable to agreements made and to
be performed in said state, and supersedes all prior arrangements or agreements
between us with respect to the subject matter hereof.
This agreement may not be modified, discharged or terminated, nor may
any of the provisions hereof be waived, orally.
Dated: July 1, 1992 Very truly yours,
FORSTMANN & COMPANY, INC.
By: /s/ Christopher L. Schaller
---------------------------
AGREED TO:
WOOLVERTON LIMITED
By: (SEAL)
--------------------------
<PAGE>
EXHIBIT 10.10(j)
FORSTMANN & COMPANY, INC.
1185 Avenue of the Americas
New York, New York
Woolverton Limited
8 Inns Court
Wine Tavern Street
Dublin 8 Republic of Ireland
Gentlemen:
Simultaneously herewith we are entering into a license agreement (the
"License") with Compagnia Tessile S.p.A. ("CT") pursuant to which we are being
granted a license to use the mark "CARPINI" in connection with the manufacture,
distribution and sale of fabrics for women's and men's apparel. In addition,
simultaneously herewith, we are entering into an agreement with you (the "Design
Agreement") pursuant to which you will be providing to us design and other
services in connection with our performance under the License. In the event
that, pursuant to the provisions of paragraph 13.1 of the License, we and C.T.
are to renegotiate, in good faith, the royalty provisions of the License, you
will renegotiate with us, in good faith, the fee provisions of the Design
Agreement. In addition, if we elect to terminate the License pursuant to the
provisions of paragraph 13.1 thereof, the Design Agreement shall terminate
automatically, simultaneously therewith, as if the date of termination were the
date set forth in the Design Agreement as the expiration thereof.
This agreement shall be construed and interpreted in accordance with
the laws of the State of New York, U.S.A., applicable to agreements made and to
be performed in said state.
This agreement may not be modified, discharged or terminated, nor may
any of the provisions hereof be waived, orally.
Dated: July 1, 1992 Very truly yours,
FORSTMANN & COMPANY, INC.
By: /s/ Christopher L. Schaller
---------------------------
AGREED TO:
WOOLVERTON LIMITED
By: (SEAL)
--------------------------
<PAGE>
Exhibit 11.1
Forstmann & Company, Inc.
Computation of Per Share Earnings
Fifty-Two
Weeks Ended
October 30, 1994
----------------
Income applicable to common shareholders $ 3,339,000
===========
Average common shares and common share
equivalents outstanding:
Average common shares outstanding 5,592,022
Add average common share equivalents -
options to purchase common shares, net 78,273
-----------
Average common shares and common share
equivalents outstanding 5,670,295
===========
Income per common share and common
share equivalent $0.59
===========
NOTE: The information provided in this exhibit is presented in accordance with
Regulation S-K, Item 601(b)(11), while income per common share on the
Company's statements of operations is presented in accordance with
Accounting Priciples Board ("APB") Opinion No. 15. This information is not
required by Footnote 2 to paragraph 14 of APB Opinion No. 15 as dilution
is less than 3%.
<PAGE>
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement No.
33-38520 of Forstmann & Company, Inc. on Form S-8 of our report dated
December 8, 1994 (January 23, 1995 as to paragraph 2 of Note 7), appearing
in this Annual Report on Form 10-K of Forstmann & Company, Inc. for the year
ended October 30, 1994.
/S/ Deloitte & Touche LLP
- ----------------------------
Atlanta, Georgia
January 27, 1995
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Forstmann &
Company Inc.'s condensed financial statements for the fifty-two weeks ended
October 30, 1994 and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-30-1994
<PERIOD-START> NOV-01-1993
<PERIOD-END> OCT-30-1994
<CASH> 49
<SECURITIES> 0
<RECEIVABLES> 57,089
<ALLOWANCES> 2,100
<INVENTORY> 76,881
<CURRENT-ASSETS> 140,801
<PP&E> 79,479
<DEPRECIATION> 20,566
<TOTAL-ASSETS> 229,256
<CURRENT-LIABILITIES> 28,139
<BONDS> 155,597
<COMMON> 6
2,425
0
<OTHER-SE> 35,830
<TOTAL-LIABILITY-AND-EQUITY> 229,256
<SALES> 237,085
<TOTAL-REVENUES> 237,085
<CGS> 189,233
<TOTAL-COSTS> 189,233
<OTHER-EXPENSES> 22,268
<LOSS-PROVISION> 2,167
<INTEREST-EXPENSE> 17,517
<INCOME-PRETAX> 5,900
<INCOME-TAX> 2,331
<INCOME-CONTINUING> 3,569
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,569
<EPS-PRIMARY> 0.60
<EPS-DILUTED> 0.60
</TABLE>
