UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended July 2,1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 1-10095
DELTA WOODSIDE INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
South Carolina 57-0535180
(State of Incorporation) (I.R.S. Employer Identification No.)
233 N. Main Street, Hammond Square, Suite 200
Greenville, South Carolina
29601
(Address of principal executive offices) (Zip code)
803/232-8301
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
Common Stock, Par Value $.01 New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
Title of each class
None
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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
Exhibit Index at Page No.__19
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K ( 229.405 of this chapter)
is not contained herein, and will not be contained, to be 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 [ ].
The aggregate market value of the voting stock held by non-
affiliates of the registrant as of September 7, 1994 was :
Common Stock, $.01 par value - $170,101,772
The number of shares outstanding of each of the registrant's
classes of Common Stock, as of September 7, 1994 was:
Common Stock, par value $.01 24,305,122 shares
DOCUMENTS INCORPORATED BY REFERENCE: Portions of the Company's
Annual Report to shareholders for the fiscal year ended July 2,
1994 are incorporated by reference into Parts I and II.
Portions of the Company's definitive Proxy Statement to be filed
pursuant to Regulation 14A for the annual shareholders' meeting
to be held on November 10, 1994, are incorporated by reference
into Part III.
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Part I
Item 1. BUSINESS
General
Delta Woodside Industries, Inc. ("Delta Woodside" or the
"Company") is a South Carolina corporation with its principal
executive offices located at 233 North Main Street, Hammond
Square, Suite 200, Greenville, South Carolina 29601 (telephone
number: 803-232-8301). All references herein to Delta Woodside
or the Company refer to Delta Woodside Industries, Inc., its
subsidiaries and its predecessor, Delta Woodside Industries,
Inc., a Delaware corporation (which was incorporated in 1986),
unless the context otherwise indicates.
The Company manufactures and markets woven and knitted
fabrics and apparel. The Company's textile segment produces a
range of cotton, synthetic and blended fabrics, woven and knit,
which are sold for the ultimate production of apparel, home
furnishings and other products. The Company's apparel segment
produces woven and knit apparel, including the "Duck Head" (Reg.
trademark) line of casualwear marketed primarily in the
Southeastern United States to department stores and specialty
apparel retailers. The Company also operates 36 retail apparel
outlet stores that sell primarily closeout and irregular "Duck
Head" products and other woven and knit casualwear produced by
the "Duck Head" division and other manufacturers. The Company
also manufactures and distributes physical fitness equipment
under the "Nautilus" (Reg. trademark) name. In June 1994, the
Company sold its office products business. The Company has
operations in 15 states and Costa Rica and employs approximately
8,100 employees.
Products, Marketing and Manufacturing
The Company conducts its textile fabrics operations through
the Delta Mills Marketing (woven fabrics) and Stevcoknit (knitted
fabrics) divisions. It conducts its woven and its knit apparel
operations through the "Duck Head" and "Delta Apparel" (Reg.
trademark) divisions. Certain retail sales of "Duck Head" and
other manufacturers' products are made through the "Duck Head"
Retail outlet stores. Each division has its own management and
employees and operates independently of the other divisions.
Inter-segment sales in fiscal 1994, fiscal 1993 and 1992
accounted for no more than approximately 4%, 3% and 3%,
respectively, of the total sales of any segment.
Fabrics produced by Delta Woodside are either woven or
knitted and are manufactured from cotton, wool or synthetic
fibers or from synthetic filament yarns. Cotton and wool are
purchased from
numerous suppliers. Synthetic fiber and synthetic filament yarns
are purchased from a smaller number of competitive suppliers.
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The Company sells its woven fabrics primarily to numerous
apparel manufacturers and apparel and fabric resellers, including
Levi, Haggar and Farah and private label apparel manufacturers
for J. C. Penney, Sears and other retailers. The Company's
knitted fabrics are sold for production of apparel for ultimate
sales to catalogue companies, as well as to other branded and
private label manufacturers. Apparel products are sold primarily
to department and specialty retailers under the Company's "Duck
Head" label, to private label apparel resellers and to screen
printers.
Textile Segment
The textile segment manufactures and markets woven and
knitted fabrics to manufacturers of apparel and home furnishings
and other products. The Company's net sales of woven fabrics
were $288.6 million, $325.1 million and $336.9 million and the
Company's net sales of knit fabrics were $102.8 million, $119.9
million and $135.9 million, during fiscal 1994, 1993 and 1992,
respectively.
Delta Mills Marketing Company (Woven Fabrics). Delta Mills
Marketing Company produces finished and unfinished woven fabrics
used in the production of apparel, home furnishings and other
products. "Finished" fabric refers to fabric which has been
treated by washing, bleaching, dyeing and applying certain
chemical finishes. Finished apparel fabric is ready to be cut
and sewn into garments and is typically sold to manufacturers of
apparel.
Unfinished fabric, commonly referred to as "greige" (pronounced
"gray") goods, is typically sold to converters who subsequently
finish the fabric and sell it to manufacturers of apparel, home
furnishings and other products. Through fiscal 1990, the
Company's finished and unfinished woven fabric businesses
operated as separate divisions under the names "Delta Mills
Marketing Company" and "Woodside Mills, Inc." The two businesses
together now comprise Delta Mills Marketing Company.
Item 1 (Continued)
Finished Woven Fabrics. The Company's finished woven
fabrics operation, through 7 of its plants, manufactures medium-
weight woven fabrics sold in a finished state for use in the
manufacture of men's and women's apparel and professional
uniforms.
Finished woven fabrics produced by the division are
primarily sold directly to major apparel manufacturers. The
division's marketing efforts focus on four primary apparel
manufacturing groups: women's apparel, including fashion
apparel; men's apparel; career apparel and uniforms; and military
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and other government uniforms and apparel. The division also
engages in commission finishing, whereby it finishes fabric for
converters. The finished woven fabrics operation sells and
distributes its fabrics through Delta Mills Sales Company, a
marketing office based in New York City, with sales personnel
also operating from Atlanta, Chicago, Dallas, Los Angeles, San
Francisco and London.
Approximately 65% of the division's finished woven fabrics
are made from cotton or cotton/synthetic blends, while
approximately 35% are made from spun synthetics, including
varying blends of rayon, polyester and wool. Finished woven
fabrics are principally woven according to projected sales based
on strong indications from major customers, but finished
according to specific purchase orders. The division's production
of cotton and cotton/synthetic blend finished woven fabrics is
largely integrated, with the division performing most of its own
spinning and substantially all of its own weaving and finishing.
The production of spun synthetic finished woven fabrics is fully
integrated, with various plants in the division involved in
spinning, weaving and finishing. With its printing capability,
the Company believes that the division is the only substantially
vertically integrated producer of camouflage military fabrics in
the United States. The Company expects that its finished woven
all cotton facilities will run at or near full capacity during
fiscal 1995. However, woven synthetic and greige goods
facilities are not expected to run full schedules for at least
the first half of fiscal 1995.
Unfinished Woven Fabrics. The division, through the three
plants included in its Woodside operation, produces a variety of
unfinished light-weight woven fabrics sold for ultimate use in
manufacturing apparel such as blouses, dresses and pajamas, and
in manufacturing home furnishings, including draperies, curtains
and comforters, and in medical and industrial products.
The Woodside operation sells its products primarily to
converters who arrange for the dyeing, printing and finishing of
the fabric before ultimately selling the fabric to apparel, home
furnishing and other manufacturers. Woodside's marketing and
sales are also performed by Delta Mills Sales Company, through
its offices in New York City and additional sales personnel in
the Boston, Massachusetts area. The Company sells to more than
150 converters and other customers. Woodside's operations are
designed to allow for changes in production to different items in
its various product lines, thus allowing it to respond to shifts
in market demand. Orders generally are received three to six
months in advance, with products generally made to customer
specifications.
Fabrics sold by the Woodside operation include 100% cotton,
polyester/cotton blends, 100% polyester, 100% rayon,
polyester/rayon blends, textured polyester and other "semifancy"
fabrics of more complicated construction. The Woodside operation
also produces acetate fabrics used for apparel linings, surgical
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tapes and other industrial and home furnishing uses. Woodside's
operations are largely integrated. All of the operation's plants
weave fabrics and one of the plants spins some of the yarn used
to manufacture these fabrics. The Woodside operation currently
is operating at less than full production capacity.
Stevcoknit (Knitted Fabrics). Stevcoknit, through its 5
plants, spins yarn, knits and finishes a wide range of circular
knit fabrics for use in the manufacture of knit apparel, and also
provides yarn to the Company's apparel segment.
Stevcoknit products are marketed to numerous apparel
manufacturers through marketing staffs employed by Stevcoknit
Marketing Company in New York City and Los Angeles, with sales
personnel also located in North Carolina, Dallas and San
Francisco. To further promote sales of Stevcoknit's fabrics to
apparel manufacturers, the marketing staff of Stevcoknit
Marketing Company also contacts major retailers of products
manufactured from the division's knitted fabrics. Discussions
with these retailers provide information relating to fabric
quality and trends in style and color. In addition to its sales
to apparel manufacturers, the division also sells prepared for
print fabrics to converters through a broker. Certain knitting
operations are scheduled according to projected sales, but most
knitting and finishing of the fabrics are performed to specific
customer orders.
The operations within the knitted fabrics operation are
largely integrated. Various plants are equipped to perform all
stages of the manufacturing process, from carding the raw fiber
stock, to dyeing and finishing the final fabric product. The
fabrics produced by this segment are manufactured by using
Item 1 (Continued)
100% cotton, polyester/cotton blends and 100% polyester. The
Company believes that its knit textile facilities will run at or
near full capacity during fiscal 1995.
Apparel Segment
The apparel segment produces and markets both woven apparel
and knit apparel. The segment's products include the "Duck Head"
line of men's and boys' casualwear, which includes pants,
shorts and shirts. The knit apparel business includes T-shirts
and sweatshirts which are sold under the labels of "Duck Head",
"Delta Apparel", and various private labels.
"Duck Head" Division. The division produces a line of men's
and boys' casual apparel, sold under the "Duck Head" label,
including pants, shorts, shirts, skirts and accessories. This
division also sells a relatively small amount of men's and boys'
woven workwear, sportswear and casualwear under the private
labels of its customers. In fiscal 1994 the division began
licensing various other categories of apparel and accessories.
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"Duck Head" labeled products are primarily marketed by sales
staff employed by Duck Head Marketing Company to regional and
national retailers with stores in the South and South Atlantic
regions. The "Duck Head" trademark has been associated with
apparel for many decades, but has traditionally been marketed
primarily to a Southeastern customer base. The Company acquired
the brand in February 1989.
The division sells its "Duck Head" products primarily to
regional and national department store chains as well as
specialty apparel retailers and through Company-operated outlet
stores. The division currently displays "Duck Head" products in
"Duck Head" specialty departments within some department stores.
The "specialty department" display format permits the
presentation of an entire line of clothing in a dedicated section
of a store's clothing department, and has been increasingly used
in department stores by the major national clothing brands. The
Company believes that these specialty
department displays will continue to increase recognition of the
"Duck Head" name and logo and expand consumer acceptance of the
line. Gross sales of "Duck Head" labeled products were
approximately $130.4 million in fiscal 1992, $137.3 million in
fiscal 1993, and $95.4 million in fiscal 1994.
"Duck Head" Apparel operates a total of 9 facilities located
in Georgia, Tennessee and Costa Rica. The division purchases the
fabrics used in its products from a number of producers. "Duck
Head" is now acquiring less than one-half of its finished
products from other companies throughout the world. This outside
production takes the form of sewing fabric parts cut at "Duck
Head" facilities, cutting and sewing with fabric and patterns
supplied by "Duck Head", or providing finished garments made to
"Duck Head" specifications. The division maintains a staff of
quality specialists who consistently monitor work in process at
outside companies. The Company believes that there is ample
capacity among outside contractors worldwide to meet its future
production requirements. The majority of the products is
warehoused in the division's leased facilities.
"Duck Head" labeled apparel items are generally required to
be inventoried to permit quick shipment and to level production
schedules, and customer private label apparel items are generally
made only to order. The division's products are manufactured
primarily from 100% cotton. The division's marketing office is
based in Winder, Georgia with regional sales managers and sales
personnel located throughout the country.
"Delta Apparel". "Delta Apparel", which is headquartered in
Duluth, Georgia, operates a total of 9 facilities and produces
knitted T-shirts and sweatshirts. The division markets its
products primarily to companies that screen print shirts for
resale, and to department stores and other clothing stores for
resale under the customer's private labels or under the Company's
"Delta Apparel" label.
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The division's knit apparel marketing is performed by sales
personnel of Delta Apparel Marketing Company with sales personnel
located throughout the country. Sales personnel call directly on
the retail trade, contacting department stores and the mass
markets such as discount houses. This operation utilizes
independent sales representatives to sell to screen printing
companies. Some knit apparel items are required to be
inventoried to permit quick shipment and to level production
schedules. Special fashion knit apparel items and customer
private label knit apparel styles generally are made only to
order.
Of the yarn used by the Company's knit apparel operation,
approximately one-third is produced by Stevcoknit with the
remainder purchased from outside vendors; the knit apparel
operation is otherwise largely vertically integrated. The
business manufactures its own knitted fabrics, utilizing
Item 1 (Continued)
knitting, dyeing and finishing processes, and cuts and sews its
finished knitted fabrics into apparel. The fabrics used by the
division are either polyester/cotton blends or 100% cotton.
Retail Apparel. The Company has 36 outlet stores in 13
states that sell principally closeout and irregular "Duck Head"
products. These stores also sell a small amount of apparel items
manufactured by other companies.
Fitness Equipment
"Nautilus" Fitness Equipment. Nautilus produces weight
resistance and aerobic equipment for the institutional, medical
and home markets. The current product line in the weight
resistance category is called the "Next Generation", which
consists of 40 individual machines that exercise the various
muscle groups. Nautilus also produces an exclusive line of 25
weight resistance machines for women called "Nautilus for Women".
As a supplement to the weight resistance line, Nautilus produces
five versions of a multi-station machine that serves those
markets that have space and budget limitations. Nautilus
currently produces, for the institutional market, five aerobic
machines, two recumbent bikes, two stairclimbers and a treadmill.
Nautilus historically has been focused on the institutional
market. During the last six months Nautilus has launched a
concerted effort to penetrate the home and medical market.
Nautilus historically targets health clubs, the public sector,
YMCAs and similar institutions and the medical, amenity and
corporate markets. In fiscal 1995, Nautilus plans to enter the
consumer market in the strength and aerobic areas, as well as
expand its efforts in the medical markets to the areas of
diagnosis (exercise components with the ability to measure the
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strength of a particular muscle and muscle group) and
rehabilitation.
The manufacturing operations at Nautilus are vertically
integrated, including metal fabrication, upholstery, and a vacuum
formed and injection molded plastics process. Raw material is
inventoried, but finished machines are generally manufactured
against customer orders. All manufacturing is done in
Independence, Virginia. The Company believes that the
manufacturing operation is currently operating at approximately
75% of present capacity.
Competition
The cyclical nature of the textile and apparel industries,
characterized by rapid shifts in fashion, consumer demand and
competitive pressures, results in both price and demand
volatility. The demand for any particular product varies from
time to time based largely upon changes in consumer preferences
and general economic conditions affecting the textile and apparel
industries, such as consumer expenditures for nondurables. The
textile and apparel industries are also cyclical because the
supply of particular products changes as competitors enter or
leave the market. The cyclical nature of the various businesses
in which the Company operates was a contributing factor to the
business downturn experienced by the Company in fiscal 1994 and
1993 and the varying manner in which each division's results in
one fiscal year differs from its results in another fiscal year.
See "Management's Discussion and Analysis of Results of
Operations and Financial Condition."
The Company sells primarily to domestic customers and
competes with numerous competitors, both domestic and foreign.
The principal competitive factors are price, service, delivery
time, quality and flexibility, with the significance of each
factor depending upon the product involved. The Company's
competitive position varies among the different goods produced.
There are several major domestic competitors in the finished
cotton and cotton/polyester blend woven fabrics area, none of
which dominates the market. The Company believes that it has a
strong competitive position with respect to the manufacture of
spun synthetic slack-weight and skirt-weight woven fabrics, as
well as wrinkle-resistant all cotton sportswear fabrics.
The woven fabrics' Woodside operation is a major supplier of
both polyester/rayon print cloth used in home furnishings and
women's blouses and acetate fabric used in apparel linings and
surgical tapes. There are several major domestic competitors in
the Company's acetate linings business and its
unfinished cotton and cotton/polyester blend print cloth
business, but no company dominates any of these businesses.
The knitted fabrics business in which Stevcoknit competes is
highly competitive with several large competitors. However, the
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significant vertical integration of Stevcoknit's manufacturing
operations
Item 1 (Continued)
and its experience in performing the more complicated
manufacturing techniques required in the production of 100%
cotton fabrics provide the Company with certain competitive
advantages. The industry, nevertheless, remains highly
competitive.
The apparel segment competes with numerous domestic and
foreign manufacturers of branded and private label apparel.
Foreign competition has been an increasingly significant factor
in the apparel manufacturing industry, particularly with respect
to items that require labor-intensive production, such as shirts
and jackets, and high cost luxury items. Although domestic
apparel companies must compete to some extent on a price basis
with foreign competition, the Company's management believes that
domestic apparel companies can best compete by selling branded
products, by manufacturing off-shore, by offering product
flexibility, by responding quickly to changes in consumer demand
and by providing more timely deliveries. The latter
characteristics permit retailers to reduce their inventory costs
and lower the risk that product availability will not match
consumer demand. The Company's operations are oriented toward
providing its apparel segment and the customers of its textile
segment with all or some of these competitive advantages. The
Company believes that it and its domestic customers can address
quality control problems more easily than can manufacturers and
distributors of foreign products. Furthermore, the customers of
foreign suppliers generally face letter of credit fees, and
occasionally face delivery delays and claims resolution
difficulties.
Nautilus competes in the institutional fitness market which
is fragmented and highly competitive. Nautilus competes with
several national and local companies. The fitness equipment
industry generally competes for business on price, quality,
specifications and service. Management of the Company believes
that Nautilus has a strong competitive position because of its
high name recognition in markets and its reputation for high
quality, durable equipment.
The Company believes that several aspects of its operations
may mitigate some of the problems posed by competition within the
domestic textile and apparel industries. The variety of the
Company's products offers some degree of protection against the
cyclical nature of the business of individual products.
Management of the Company believes that the percentage of its
production cost attributable to labor is comparable to that of
its competitors. Other competitive strengths include: the
ability to produce special fabrics such as textured blends; the
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modern equipment in several of its plants; and the Company's
achievement of substantial vertical integration in its various
divisions.
Employees
The Company has approximately 8,100 employees. The
Company's employees are not represented by unions. The Company
believes that its relations with its employees are good.
Environmental and Regulatory Matters
Delta Woodside is subject to federal, state and local
environmental laws and regulations concerning, among other
things, wastewater discharges, storm water flows, air emissions,
ozone depletion and solid waste disposal. Delta Woodside's
plants generate very small quantities of hazardous waste which
are either recycled or disposed of off-site. Most of its plants
are required to possess one or more discharge permits.
The subsidiary which conducts the finished woven fabrics
operations is subject to a Consent Order with the South Carolina
Department of Health and Environmental Control dated September
26, 1985, which was executed prior to Delta Woodside's
acquisition of the business. Pursuant to the Consent Order,
which arose from a determination that several private drinking
wells in the area of two of the subsidiary's plants had been
contaminated, the subsidiary has discontinued the operation near
these plants of a large spray field into which waste water sludge
had been disposed and has placed into operation for such purpose
a new and larger spray field. Delta Woodside expects that any
continuing expenditures to comply with the Consent Order will be
immaterial in amount.
Some of the Company's plants have been unable to comply with
the acute toxicity limits contained in the National Pollutant
Discharge Elimination System (NPDES) permits held by the Company.
With respect to certain such plants in North Carolina, the
Company has signed a Special Order by Consent with the North
Carolina Department of Environmental Health and Natural Resources
(DEHNR) which will require the plants to achieve compliance with
the acute toxicity limits by July 1995. By a March 1992 letter,
the Natural Resources Defense Council notified the Company of its
intent to institute a "citizens' suit" under the Clean Water Act
for certain alleged NPDES violations in North Carolina. No such
suit has been initiated to date. By reason of the Special Order,
the Company
Item 1 (Continued)
believes that any such suit, and compliance with the Special
Order, would not have a material adverse impact on the Company.
With respect to certain South Carolina plants, the Company is
working with
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the appropriate state agency in developing a corrective action
plan for addressing the toxicity issue. The Company is examining
several courses of action to achieve compliance with its NPDES
permits and does not believe that the matter will have a material
adverse impact on the Company.
Generally, the environmental rules applicable to the Company
are becoming increasingly stringent. The Company incurs capital
and other expenditures in each year that are aimed at achieving
compliance with current and future environmental standards. The
Company does not expect that the amount of such expenditures will
have a material adverse effect on its operations or financial
condition. There can be no assurance, however, that changes in
federal, state or local regulations, changes in regulatory policy
or the discovery of currently unknown problems or conditions will
not require substantial additional expenditures. Similarly, the
extent of Delta Woodside's liability, if any, for past failures
to comply with laws, regulations and permits applicable to its
operations cannot be determined.
Information contained under the subheading "Environmental
Matters" in Management's Discussion and Analysis of Results of
Operations and Financial Condition--Liquidity and Sources of
Capital incorporated into Item 7 of this Form 10-K is
incorporated herein by reference.
Industry Segment Information
Segment information in Note G of the Company's consolidated
financial statements for the fiscal year ended July 2, 1994 is
incorporated herein by reference.
Other
Information concerning order backlogs in Management's
Discussion and Analysis of Results of Operations and Financial
Condition - "Results of Operations, Consolidated Company Results,
Fiscal 1994 versus Fiscal 1993" incorporated into Item 7 of this
Form 10-K is incorporated herein by reference.
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Item 2. PROPERTIES
The following table provides a description of Delta Woodside's
production and warehouse facilities.
Approximate
Square Approximate
Location Utilization Footage Acreage
Textile Segment
Beattie Plant, Fountain Inn, SC (9) spin/weave 390,000 112
Furman Plant, Fountain Inn, SC (9) weave 116,000 21
Haynsworth Plant, Anderson, SC (9) weave 155,000 16
Distribution Center, Greenville, SC (9) warehouse 88,000 12
Estes Plant, Piedmont, SC (9) spin/weave 332,000 114
Greer Plant, Greer SC (9) weave 255,000 10
Delta 3 Plant, Wallace, SC (9) dye/finish 555,000 527
Cypress Plant, Pamplico, SC (9) spin 144,000 4
Pamplico Plant, Pamplico, SC (9) spin/weave 275,000 520
Delta 2 Plant, Wallace, SC (9) dye/finish 347,000 295
Catawba Plant, Maiden, NC spin 115,000 34
Fayetteville Plant, Fayetteville, NC (7) unused 238,000 15
Carter Plant, Wallace, NC dye/finish 485,000 72
Greensboro Plant, Greensboro, NC knit 195,000 10
Holly Plant, Wallace, NC knit/finish 224,000 3
Edgefield Plant, Edgefield, SC (4) unused 129,000 21
Rainsford Plant, Edgefield, SC spin 296,000 43
Mickel Plant, Spartanburg, SC spin 207,000 14
Apparel Segment
Maiden Plant, Maiden NC knit/dye
finish/cut 305,000 45
Washington Plant, Washington, GA sew 129,800 6
Sandersville Plant, Sandersville, GA sew 27,000 5
Knoxville Plant, Knoxville, TN (2) distribution 550,000 21
Decatur Plant, Decatur, TN (2) sew 75,000 11
Tellico Plains Plant, Tellico
Plains, TN (8) sew 100,000 17
Sparta Plant, Sparta, GA (1) sew 21,000 2
Baldwin Plant, Baldwin, GA (8) press/
distribution 148,000 24
Monroe #3, Monroe, GA cut 52,000 7
Monroe #2, Monroe, GA sew/
distribution 93,000 8
Winder Plant, Winder, GA (3)(8) warehouse/
retail 119,000 3
Jellico Plant, Jellico, TN sew 56,000 5
Harmony Plant, San Jose, Costa Rica sew 14,000
San Jose Plant, San Jose, Costa Rica (1) sew 60,000
6
Jupiter Plant, San Jose, Costa Rica sew 25,000
Ashburn Plant, Ashburn, GA (1) sew 43,000 7
Winder, GA warehouse 10,000
Various (5) warehouse
Various (6) stores
Fitness Equipment Division
Independence, VA manufacturing 254,000 54
Independence, VA (1) manufacturing 30,000
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Galax, VA (1) manufacturing 40,000
Item 2 (Continued
_____________
(1) Leased facility.
(2) "Duck Head" Outlet Stores lease a portion of the facility for
retail sales.
(3) Approximately 40,000 square feet are currently not used.
(4) The knitted fabrics operation closed this facility during fiscal
1992.
(5) The apparel segment leases certain additional warehouse space from
time to time.
Approximately 226,000 square feet is leased currently with leases
expiring through November 1994.
(6) The "Duck Head" Outlet Stores Operation leases 36 facilities in 13
states, which leased space is Approximately 130,000 square feet.
These leases expire at various dates through 1998.
(7) The knitted fabrics operation closed this facility during fiscal
1993.
(8) These locations will be closed in fiscal 1995.
(9) Title to these facilities are held by the county under a fee-in-
lieu arrangement.
Except as noted above all of the above production and warehouse
facilities are owned by Delta Woodside and its subsidiaries, subject in
certain cases to various outstanding mortgages and security interests.
The apparel segment's Sparta plant, Sparta, Georgia and San Jose plant
in San Jose, Costa Rica are leased on a month-to-month basis, and the
Ashburn Plant in Ashburn, Georgia has a lease which expires `in February
1999. The lease of the Tellico Plains Plant has expired and the Company
is in the process of acquiring the facility for a nominal price. The
fitness division leases manufacturing capacity in Independence, Virginia
which lease expires in July 1998.
Delta Woodside leases corporate and division administrative offices
in Greenville, South Carolina. The lease on the corporate offices
expires December 1997 and leases on the administrative offices expire in
2008. Sales offices are leased in Charlotte, New York, Chicago,
Raleigh, Newport Beach, San Francisco and Los Angeles with leases
expiring through February 1998.
At the date of execution of this Form 10-K, the Company believes
that its finished woven all cotton plants and its knit textile plants
are operating virtually at full production capacity while its finished
woven synthetic and unfinished woven fabrics operations are operating at
slightly less than full production capacity. Various factors affect the
relative use by the Company's apparel segment of its own facilities and
outside contractors in the various apparel production phases. This
segment is currently using all its internal productive capacity. The
fitness equipment operation is operating at approximately 75% of its
production capacity as a result of new building space in excess of
current volume.
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Item 3. LEGAL PROCEEDINGS
In its Form 8-K, dated January 11, 1994, and Forms 10-Q for
the fiscal quarters ended January 1, 1994 and April 2, 1994, the
Company has previously reported the award on November 24, 1993 by
a jury in the Circuit Court of Montgomery County, Alabama (the
"Circuit Court"), of $29,056,000 to a former Duck Head
independent sales representative (Ken Hoots) and two of his
salesmen (Terry Long and Bill Pace) against a subsidiary of the
Company in a suit captioned "Ken Hoots, Terry Long and Bill Pace
v. Duck Head Apparel Company Inc. et. al. (the "Hoots Suit").
The Hoots Suit commenced on March 17, 1993.
After a hearing, the Circuit Court judge reduced the verdict
to $22,852,000 and entered
judgment against the Company's subsidiary on March 28, 1994 as
follows:
(a) $852,000 to the plaintiffs on their claim of breach of
contract respecting alleged unpaid commissions,
(b) $4,000,000 to Ken Hoots, $2,000,000 to Terry Long, and
$1,000,000 to Bill Pace for mental anguish on their
claim for fraud, and
(c) $15,000,000 to the plaintiffs as punitive damages on
their claim of fraud.
The Company believes that the verdict is fundamentally
unjust and intends vigorously to seek its reversal on appeal. On
April 9, 1994, the Company's subsidiary filed a notice of appeal
of judgment with the Alabama Supreme Court.
In order to prevent execution of the judgment during the
appellate process, the Company has guaranteed payment of the
final adjudicated award and posted bond in the amount of
$28,565,000.
The Company is seeking recovery of a portion of the award
under certain of its insurance policies. At this time, however,
there is no assurance that any portion of the award will be
recovered by the Company through insurance.
Alabama law permits the plaintiffs to recover interest at
the rate of 12% per annum on the amount of the final adjudicated
award from the date the original judgment was entered (November
24, 1993) until the date that any final adjudicated award is paid
to the plaintiffs.
The Company made a charge to income during fiscal 1994 to
establish reserves which it feels are sufficient in order to
cover payment of any final adjudicated award.
A lawsuit with allegations similar to those in the Hoots
Suit is pending against a subsidiary of the Company in the United
States District Court for Western District of Kentucky brought by
an individual (Donnie Cecil) who previously served as an
17
<PAGE>
independent sales representative for the Duck Head division. The
suit was filed on October 1, 1993. The amount of damages claimed
in the suit has not yet been determined, and the ultimate impact
of the suit on the Company is as yet unknown.
In addition to those actions noted above, from time to time
the Company and its subsidiaries are defendants in legal actions
arising if the normal course of its business, including product
liability claims. The Company believes that, as a result of its
legal defenses, insurance arrangements and indemnification
provisions with parties believed by the Company to be financially
capable, none of these actions, if decided adversely, should have
a material adverse effect on its results of operations or
financial condition taken as a whole.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
No matter was submitted to a vote of security holders during
the fourth quarter of the Company's 1994 fiscal year.
18
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
The material under the heading "Common Stock Market Prices
and Dividends" on the inside front cover of the Company's annual
shareholders' report for the year ended July 2, 1994 is
incorporated herein by reference.
Item 6. SELECTED FINANCIAL DATA
The material under the heading "Selected Financial Data" on
page 1 of the Company's annual shareholders' report for the year
ended July 2, 1994 is incorporated herein by reference.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The material under the heading "Management's Discussion and
Analysis of Results of Operations and Financial Condition" on
pages 4 through 11 (exclusive of graphs) of the Company's annual
shareholders' report for the year ended July 2, 1994 is
incorporated herein by reference.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements included on pages 15
through 28 of the Company's annual shareholders' report for the
year ended July 2, 1994 are incorporated herein by reference.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
The Company filed a Form 8-K on August 25, 1994 reporting a
change in accountants.
19
<PAGE>
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this Item is incorporated herein
by reference from the portions of the definitive Proxy Statement
to be filed with the Securities and Exchange Commission on or
prior to 120 days following the end of the Company's fiscal year
under the headings "Election of Directors", "Executive Officers",
and "Stock Ownership of Principal Shareholders and Management".
Item 11. EXECUTIVE COMPENSATION
The information required by this Item is incorporated herein
by reference from the portions of the definitive Proxy Statement
to be filed with the Securities and Exchange Commission on or
prior to 120 days following the end of the Company's fiscal year
under the headings "Management Compensation" and "Compensation
Committee Interlocks and Insider Participation".
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The information required by this Item is incorporated herein
by reference from the portion of the definitive Proxy Statement
to be filed with the Securities and Exchange Commission on or
prior to 120 days following the end of the Company's fiscal year
under the heading "Stock Ownership of Principal Shareholders and
Management".
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item is incorporated herein
by reference from the portion of the definitive Proxy Statement
to be filed with the Securities and Exchange Commission on or
20
prior to 120 days following the end of the Company's fiscal year
under the heading "Related Party Transactions".
21
<PAGE>
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
(a) (1) and (2) Financial Statements and Financial
Statement Schedules
The response to this portion of Item 14 is set forth on page F-2
included herein, which response is incorporated herein by
reference.
(3) Listing of Exhibits:*
3.1 Articles of Incorporation of the Company, as
amended through February 5, 1989: Incorporated by
reference to Exhibit 3.1 to the Registration
Statement on Form S-4 of RSI Corporation and
Porter Brothers, Inc., File No. 33-30247 (the
"Form S-4").
3.1.1 Articles of Amendment to Articles of
Incorporation of the Company: Incorporated by
reference to Exhibit 3.1.2 to the Form S-4.
3.1.2 Articles of Merger of Harper Brothers, Inc.
into RSI Corporation: Incorporated by reference
to Exhibit 4.1.1 to the Registration Statement of
the Company on Form S-8, File No. 33-33116 (the
"1990 Form S-8").
3.1.3 Articles of Merger of Delta Woodside
Industries, Inc., a Delaware corporation, into RSI
Corporation: Incorporated by reference to Exhibit
4.1.2 to the 1990 Form S-8.
3.1.4 Articles of Merger of Duncan Office Supplies,
Inc., into Delta Woodside Industries, Inc:
Incorporated by reference to Exhibit 3.1 to the
Company's Form 10-Q for the quarterly period ended
December 29, 1990 (the "December 1990 10-Q").
3.1.5 Articles of Amendment to the Articles of
Incorporation of Delta Woodside Industries, Inc.,
filed with the South Carolina Secretary of State
on November 15, 1991: Incorporated by reference
to Exhibit 4.6 to the Form 10-Q of the Company for
the quarterly period ended December 28, 1991.
3.2 By-laws of the Company, as amended: Incorporated
by reference to Exhibit 3.1.1 to the Form S-4.
3.2.1 Amendments to By-laws of the Company:
Incorporated by reference to Exhibit 3.2 to the
December 1990 10-Q.
22
<PAGE>
3.2.2 Amendment to By-laws of the Company, adopted
as of June 29, 1992: Incorporated by reference to
Exhibit 3.2.2 to the Company's Form 10-K for the
fiscal year ended June 27, 1992 (the "1992 10-K").
4.1 See Exhibits 3.1, 3.1.1, 3.1.2, 3.1.3, 3.1.4,
3.1.5, 3.2, 3.2.1. and 3.2.2.
4.1.1 Specimen of Certificate for the Company's
Common Stock: Incorporated by reference to
Exhibit 4.7 to the Company's Registration
Statement on Form S-3, File No. 33-42710 (the
"Form S-3").
Item 14 (Continued)
4.2.1 Credit Agreement dated as of June 24, 1992
among Delta Woodside Industries,
Inc., the Lenders named therein, and The First
National Bank of Boston, as Agent (with exhibits
and schedules omitted) together with forms of
Promissory
Note, Subsidiary Guaranty, Contribution Agreement
and certain other documents: Incorporated by
reference to Exhibit 4.2.1 to the 1992 10-K. The
Company agrees to furnish supplementally to the
Securities and Exchange Commission a copy of any
omitted schedule, exhibit or annex to the Credit
Agreement or any of its amendments upon request of
the Commission. This Credit Agreement, as
amended, terminated as of September 7, 1994.
4.2.2 Amendment No. 1 dated as of September 1993 to
Credit Agreement dated as of June 24, 1992:
Incorporated by reference to Exhibit 4.2.2 to the
Form 10-K of the Company for the fiscal year ended
July 3, 1993.
4.2.3 Waiver and Amendment No. 2 to Credit
Agreement (excluding Annex 1 and Annex 2):
Incorporated by reference to Exhibit 4.2.4 to the
Form 10-Q of the Company for the quarterly period
ended January 1, 1994.
4.2.4 Waiver and Amendment No. 3 to Credit
Agreement: Incorporated by reference to Exhibit
4.2.4 to the Form 10-Q of the Company for the
quarterly period ended April 2, 1994.
4.3 Credit Agreement dated as of September 7, 1994
among Delta Woodside Industries, Inc., the Lenders
named therein, and NationsBank of North Carolina,
N.A., as Agent (with exhibits and schedules
omitted) together with forms of Promissory Note,
23
<PAGE>
Subsidiary Guaranty and certain other documents.
The Company agrees to furnish supplementally to
the Securities and Exchange Commission a copy of
any omitted schedule or exhibit to the Credit
Agreement upon request of the Commission.
4.4 The Company hereby agrees to furnish to the
Commission upon request of the Commission a copy
of any instrument with respect to long-term debt
not being registered in a principal amount less
than 10% of the total assets of the Company and
its subsidiaries on a consolidated basis.
10.1 Lease, dated December 27, 1987 by and between
Hammond Square, Ltd. and the Company:
Incorporated by reference to Exhibit 10.10 to
Registration Statement No. 33-22563 on Form S-4 of
Delta Woodside Industries, Inc., a Delaware
corporation ("Registration Statement No. 33-
22563").
10.2** Delta Woodside Deferred Compensation Plan for
Key Employees: Incorporated by reference to
Exhibit 10.6 to the Form 10-Q of the Company for
the quarterly period ended December 30, 1989.
10.3** Incentive Stock Award Plan effective July 1,
1990: Incorporated by reference to Exhibit 10.1
to the Form 10-Q of the Company for the fiscal
quarter ended March 31, 1990.
10.4.1** Stock Option Plan effective as of July 1,
1990: Incorporated by reference to Exhibit 10.11
to the Company's Form 10-K for the fiscal year
ended June 30, 1990.
10.4.2** Amendment No. 1 to Stock Option Plan:
Incorporated by reference to Exhibit 10.1 to the
December 1990 10-Q.
Item 14 (Continued)
10.4.3** Amendment to Stock Option Plan: Incorporated
by reference to Exhibit 10.9.2 to the Company's
Form 10-K for the fiscal year ended June 29, 1991
(the "1991 10-K").
10.5 Stock Transfer Restrictions and Right of First
Refusal Agreement between the Company and E. Erwin
Maddrey, II: Incorporated by reference to Exhibit
10.2 to the December 1990 10-Q.
10.6 Stock Transfer Restrictions and Right of First
Refusal Agreement between the Company and Bettis
C. Rainsford: Incorporated by reference to
Exhibit 10.3 to the December 1990 10-Q.
24
<PAGE>
10.7** Summary of Delta Woodside Industries, Inc.,
Director Charitable Giving Program: Incorporated
by reference to Exhibit 10.11 to the 1992 10-K.
10.8.1** Directors Stock Acquisition Plan: Incorporated by
reference to Exhibit 10.14 to the 1991 10-K.
10.8.2** Amendment of Director Stock Acquisition Plan,
dated April 30, 1992: Incorporated by reference
to Exhibit 10.12.2 to the 1992 10-K.
10.9 See Exhibits 4.2.1, 4.2.2, 4.2.3,4.2.4 and 4.3.
13 Annual Report to Shareholders of the Company for
the fiscal year ended July 2, 1994.
22 Subsidiaries of the Company.
23 Consent of independent auditors.
27 Financial Data Schedule
* All reports previously filed by the Company with
the Commission pursuant to the Exchange Act, and
the rules and regulations promulgated thereunder,
exhibits of which are incorporated to this Report
by reference thereto, were filed under Commission
File Number 1-10095.
** This is a management contract or compensatory plan
or arrangement.
(b) Reports on Form 8-K
The Company did not file any report on Form 8-K during
the fourth quarter of the fiscal year ended July 2,
1994.
(c) Exhibits
The response to this portion of Item 14 is submitted as
a separate section of this report.
(d) Financial Statement Schedules
The response to this portion of Item 14 is submitted as
a separate section of this report.
25
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
DELTA WOODSIDE INDUSTRIES,INC.
8/30/94 /s/ E. Erwin Maddrey,II
Date E. Erwin Maddrey,II
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.
/s/ C. C. Guy 9/7/94 /s/ E. Erwin Maddrey, II 8/30/94
C. C. Guy Date E.Erwin Maddrey, II Date
Director President and
Chief Executive Officer
/s/ James F. Kane 9/12/94 /s/ Bettis C.Rainsford 9/26/94
James F. Kane Date Bettis C. Rainsford Date
Director Executive Vice President,
Chief Financial Officer and
Treasurer
/s/ Max Lennon 9/16/94 /s/ Douglas J.Stevens 8/29/94
Max Lennon Date Douglas J. Stevens Date
Director Controller and Assistant
Secretary
/s/ Buck A. Mickel 9/20/94
Buck A. Mickel Date
Director
/s/ Buck Mickel 9/20/94
Buck Mickel Date
Director
27
<PAGE>
ANNUAL REPORT ON FORM 10-K
ITEM 14(a) (1) and (2), (c) and (d)
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
CERTAIN EXHIBITS
FINANCIAL STATEMENT SCHEDULES
YEAR ENDED JULY 2, 1994
DELTA WOODSIDE INDUSTRIES, INC.
GREENVILLE, SOUTH CAROLINA
<PAGE>
F-1
FORM 10-K--ITEM 14(a)(1) AND (2)
DELTA WOODSIDE INDUSTRIES, INC.
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
The following consolidated financial statements of Delta Woodside
Industries, Inc. and subsidiaries included in the Annual Report
of the Registrant to its shareholders for the Year ended July 2,
1994 are incorporated by reference in Item 8:
Consolidated balance sheets--July 2, 1994 and July 3, 1993.
Consolidated statements of operations--Years ended July 2,
1994, July 3, 1993, and June 27, 1992.
Consolidated statements of shareholders' equity--Years ended
July 2, 1994, July 3, 1993 and June 27, 1992.
Consolidated statements of cash flows--Years ended July 2,
1994, July 3, 1993 and June 27, 1992.
Notes to consolidated financial statements--July 2,1994.
The following consolidated financial statement schedules of Delta
Woodside Industries, Inc. are included in Item 14(d):
Schedule V - Property, plant and equipment
Schedule VI - Accumulated depreciation, depletion and
amortization of property, plant and equipment
Schedule VIII - Valuation and qualifying accounts
Schedule IX - Short-term borrowings
Schedule X - Supplementary income statement information
All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission
are not required under the related instructions or are
inapplicable, and therefore have been omitted. Columns omitted
from schedules filed have been omitted because the information is
not applicable.
F-2
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE V--PROPERTY, PLANT AND EQUIPMENT
DELTA WOODSIDE INDUSTRIES, INC.
COL. A COL. B COL. C COL. D COL. E COL.F
Balance at Other
CLASSIFICATION Beginning of Additions at Changes-Add Balance at end
of Period Cost Retirements (Deduct) Describe of Period
Year Ended July 2, 1994:
<S> <C> <C> <C> <C> <C>
Land and land improvements $ 5,149,000 $ 213,000 $ (44,000) $ 5,318,000
Buildings 59,782,000 5,274,000(1)(7) (559,000) 64,497,000
Machinery and equipment 171,900,000 22,088,000(1) (2,721,000) 191,267,000
Furniture and fixtures 5,984,000 1,237,000 (278,000) 6,943,000
Leasehold improvements 2,903,000 167,000 (553,000) 2,517,000
Construction in progress 8,397,000 877,000(4) (3,000) 9,271,000
Totals $254,115,000 $ 29,856,000 $(4,158,000)(6) $279,813,000
<CAPTION>
Year Ended July 3, 1993:
<S> <C> <C> <C> <C> <C>
Land and land improvements $ 3,763,000 $ 1,419,000 $ ( 33,000) $ 5,149,000
Buildings 47,189,000 14,033,000(2) (1,440,000) 59,782,000
Machinery and equipment 127,214,000 48,201,000(2) (3,515,000) 171,900,000
Furniture and fixtures 3,572,000 2,692,000 (280,000) 5,984,000
Leasehold improvements 1,824,000 1,079,000 2,903,000
Construction in progress 20,078,000 (11,681,000)(2)(4) 8,397,000
Totals $203,640,000 $ 55,743,000(5) $(5,268,000) $254,115,000
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE V--PROPERTY, PLANT AND EQUIPMENT
DELTA WOODSIDE INDUSTRIES, INC.
COL. A COL. B COL. C COL. D COL. E COL.F
Balance at Other
CLASSIFICATION Beginning of Additions at Changes-Add Balance at end
of Period Cost Retirements (Deduct) Describe of Period
Year Ended June 27, 1992:
<S> <C> <C> <C> <C> <C>
Land and land improvements $ 3,825,000 $ 38,000 $ (100,000) $ 3,763,000
Buildings 41,796,000 5,602,000(3) (209,000) 47,189,000
Machinery & equipment 105,664,000 24,495,000(3) (2,945,000) 127,214,000
Furniture and fixtures 3,047,000 565,000 (40,000) 3,572,000
Leasehold improvements 1,700,000 124,000 1,824,000
Construction in progress 7,986,000 12,092,000(3)(4) 20,078,000
Totals $164,018,000 $42,916,000 $ (3,294,000) $203,640,000
<CAPTION>
__________
NOTES:
(1) Includes $13,079,000 and $6,626,000 for plant modernization in the knitted fabrics division and
the woven fabrics division, respectively.
(2) Includes $9,026,000 and $31,143,000 for building and machinery and equipment for the open-end
yarn plant in the knitted fabrics operations.
(3) Includes $19,390,000 in loom projects for the woven fabrics operations and $18,323,000 for the
open-end yarn plant in the knitted fabrics operations.
(4) Includes $864,000, $1,694,000, and $6,610,000 of purchases payable for the years ended July 2,
1994, July 3, 1993, and June, 27, 1992 respectively.
(5) Includes assets acquired through a business acquisition of $6,168,000 during the year ended
July 3, 1993.
(6) Includes the sale of the office product division effective June 4, 1994.
<PAGE>
SCHEDULE V--PROPERTY, PLANT AND EQUIPMENT
DELTA WOODSIDE INDUSTRIES, INC.
COL. A COL. B COL. C COL. D COL. E COL.F
Balance at Other
CLASSIFICATION Beginning of Additions at Changes-Add Balance at end
of Period Cost Retirements (Deduct) Describe of Period
(7) The annual provisions for depreciation have been computed principally in accordance with the
following range of rates.
Buildings and land improvements 3% to 7%
Machinery and equipment 7% to 33%
Furniture and fixtures 10% to 25%
Leasehold improvements 5% to 20%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE VI--ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION
OF PROPERTY, PLANT AND EQUIPMENT
DELTA WOODSIDE INDUSTRIES, INC.
COL. A COL. B COL. C COL. D COL. E COL. F
Balance at Additions Other
DESCRIPTION Beginning of Charged to Cost Changes-Add Balance at end
of Period and Expenses Retirements (Deduct) Describe of Period
Year Ended July 2, 1994:
<S> <C> <C> <C> <C> <C>
Buildings and land improvements $14,019,000 $ 2,898,000 $ (127,000) $1,992,000 $18,782,000
Machinery and equipment 51,206,000 17,178,000 (2,134,000) 66,250,000
Furniture and fixtures 2,649,000 1,091,000 (165,000) 149,000 3,724,000
Leasehold improvements 1,095,000 177,000 (246,000) 1,026,000
Totals $68,969,000 $21,344,000 $(2,672,000) $2,141,000(1) $89,782,000
Year Ended July 3, 1993:
Buildings and land improvements $11,427,000 $ 2,636,000 $ (44,000) $14,019,000
Machinery and equipment 40,250,000 13,211,000 (2,255,000) 51,206,000
Furniture and fixtures 1,770,000 886,000 (7,000) 2,649,000
Leasehold improvements 738,000 357,000 1,095,000
Totals $54,185,000 $17,090,000 $(2,306,000) $68,969,000
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
SCHEDULE VI--ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION
OF PROPERTY, PLANT AND EQUIPMENT
DELTA WOODSIDE INDUSTRIES, INC.
COL. A COL. B COL. C COL. D COL. E COL. F
Balance at Additions Other
DESCRIPTION Beginning of Charged to Cost Changes-Add Balance at end
of Period and Expenses Retirements (Deduct) Describe of Period
Year Ended June 27, 1992:
<S> <C> <C> <C> <C> <C>
Buildings and land improvements $ 9,165,000 $ 2,294,000 $ (32,000) $11,427,000
Machinery and equipment 32,409,000 10,700,000 (2,859,000) 40,250,000
Furniture and fixtures 1,247,000 534,000 (11,000) 1,770,000
Leasehold improvements 555,000 183,000 738,000
Totals $43,376,000 $13,711,000 $(2,902,000) $54,185,000
(1) Writedowns of property, plant and equipment in connection with the restructuring charge.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE VIII--VALUATION AND QUALIFYING ACCOUNTS
DELTA WOODSIDE INDUSTRIES, INC.
COL. A COL. B COL. C COL. D COL. E
ADDITIONS
Balance at
DESCRIPTION Beginning (1) (2) Deductions Balance at End
of Period Charged to Costs Charged to Other -Describe of Period
and Expenses Accounts-Describe
Year Ended July 2, 1994:
<S> <C> <C> <C> <C> <C>
Deducted from asset accounts:
Allowance for doubtful
accounts and sales
allowances $5,537,000 $3,886,000 $(1,658,000)(2) $4,490,000(1) $3,275,000
Year Ended July 3, 1993:
Deducted from asset accounts:
Allowance for doubtful
accounts and sales
allowances $5,413,000 $2,025,000 $353,000(2) $2,254,000(1) $5,537,000
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE VIII--VALUATION AND QUALIFYING ACCOUNTS
DELTA WOODSIDE INDUSTRIES, INC.
COL. A COL. B COL. C COL. D COL. E
ADDITIONS
Balance at
DESCRIPTION Beginning (1) (2) Deductions Balance at End
of Period Charged to Costs Charged to Other -Describe of Period
and Expenses Accounts-Describe
<S> <C> <C> <C> <C> <C>
Year Ended June 27, 1992:
Deducted from asset accounts:
Due from factor $ 95,000 $ (39,000) $ 56,000
Allowance for doubtful
accounts and sales
allowances 2,277,000 3,389,000 $1,774,000 2,027,000(1) $5,413,000
Totals $2,372,000 $3,350,000 $1,774,000(2) $2,083,000 $5,413,000
<CAPTION>
__________
NOTES:
(1) Uncollectible accounts written off.
(2) Net change in sales allowances charged to income as a reduction of sales.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE IX--SHORT-TERM BORROWINGS
DELTA WOODSIDE INDUSTRIES, INC.
COL. A COL. B COL. C COL. D COL. E COL. F
Weighted Maximum Amount Average Amount Weighted Average
CATEGORY OF AGGREGATE Balance at End Average Outstanding Outstanding Interest Rate
SHORT-TERM BORROWINGS of Period Interest During the During the During the
Rate Period Period(5) Period(4)
<S> <C> <C> <C> <C> <C>
Year Ended July 2, 1994:
Notes payable to banks:
Line of credit (1) $ -0- 0% $ 41,364,000 $ 23,162,000 4.1%
Year Ended July 3, 1993:
Notes payable to banks:
Line of credit $ -0- 0% $ 12,087,000 $ 3,568,000 3.8%
Year Ended June 27, 1992:
Notes payable to banks:
Line of Credit
secured (2)(3) $ -0- 0% $114,023,000 $ 47,310,000 7.7%
<PAGE>
SCHEDULE IX--SHORT-TERM BORROWINGS
DELTA WOODSIDE INDUSTRIES, INC.
COL. A COL. B COL. C COL. D COL. E COL. F
Weighted Maximum Amount Average Amount Weighted Average
CATEGORY OF AGGREGATE Balance at End Average Outstanding Outstanding Interest Rate
SHORT-TERM BORROWINGS of Period Interest During the During the During the
Rate Period Period(5) Period(4)
NOTES:
(1) The line of credit ($10,347,000) was refinanced with a long-term credit facility on September
7, 1994.
(2) The line of credit was converted to a long-term credit facility on June 24, 1992.
(3) Line of credit secured by assigned receivables of certain subsidiaries of the Company.
(4) The weighted average interest rate during the period was computed by dividing actual
interest expense by average short-term debt outstanding.
(5) The average amount outstanding during the period was computed by averaging the month-end
outstanding principal balances.
</TABLE>
<PAGE>
SCHEDULE X--SUPPLEMENTARY INCOME STATEMENT INFORMATION
DELTA WOODSIDE INDUSTRIES, INC.
COL. A COL. B
ITEM CHARGED TO COSTS AND EXPENSES
______________Year Ended________________
July 2, July 3, June 27,
1994__ 1993__ 1992__
Maintenance and repairs $24,064,000 $24,341,000 $21,517,000
Advertising $ 7,036,000 $ 7,021,000 $ 2,943,000
_______________
NOTE:
The amounts for amortization of intangible assets, pre-operating costs
and similar deferrals, taxes (other than payroll and income taxes) and
royalties for the years ended July 2, 1994, July 3, 1993 and June 27,
1992 are not presented as such amounts are less than 1% of net sales.
<PAGE>
F-12
EXHIBIT INDEX
4.3 Credit Agreement dated as of September 7, 1994
among Delta Woodside Industries, Inc., the Lenders
named therein, and NationsBank of North Carolina,
N.A., as Agent (with exhibits and schedules
omitted) together with forms of Promissory Note,
Subsidiary Guaranty and certain other documents.
The Company agrees to furnish supplementally to
the Securities and Exchange Commission a copy of
any omitted schedule or exhibit to the Credit
Agreement upon request of the Commission.
13 Annual Report to Shareholders of the Company for
the fiscal year ended July 2, 1994.
22 Subsidiaries of the Company.
23 Consent of independent auditors.
27 Financial Data Schedule
<PAGE>
[Execution Copy]
CREDIT AGREEMENT
Dated as of September 7, 1994
Among
DELTA WOODSIDE INDUSTRIES, INC.,
the Borrower,
the Lenders parties hereto,
NATIONSBANK OF NORTH CAROLINA, N.A.,
as the Agent,
and
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION
and
THE BANK OF NEW YORK,
as Co-Agents
##
TABLE OF CONTENTS
Page
ARTICLE 1
DEFINITIONS 1
Section 1.1. Definitions. 1
Section 1.2. General 26
ARTICLE 2
REVOLVING CREDIT FACILITY 27
Section 2.1. Committed Loans 27
Section 2.2. Making Committed Loans 28
Section 2.3. Notice and Manner of Borrowing or Conversion or
Continuation of
Committed Loan 29
Section 2.4. Duration of Interest Periods; Number of Committed
Loans 31
Section 2.5. Repayment 32
Section 2.6. Interest Rates and Payments of Interest with
respect to Committed Loans 32
Section 2.7. Committed Loan Notes 32
Section 2.8. Competitive Loan Subfacility 33
<PAGE>
Section 2.9. Swingline Loan Subfacility 36
Section 2.10. Extension of Commitments 38
ARTICLE 3
LETTER OF CREDIT FACILITY 39
Section 3.1. Letters of Credit 39
Section 3.2. Purchase and Sale of Participations 39
Section 3.3. Unreimbursed Draws Under Letters of Credit 40
Section 3.4. Sharing of Payments and Risk 42
Section 3.5. Administration of Letters of Credit and Credit
Documents 43
Section 3.6. Exoneration 44
Section 3.7. Cash Collateral; Supporting Letters of Credit
45
ARTICLE 4
DEFAULT INTEREST RATE; PREPAYMENTS; GENERAL PROVISIONS 46
Section 4.1. Default Interest Rate 46
Section 4.2. Conversion/Continuation 47
Section 4.3. Reduction of Commitments 47
Section 4.4. Prepayments. 48
Section 4.5. Changed Circumstances 49
Section 4.6. Interest Rate Determination 51
Section 4.7. Manner of Payment 52
Section 4.8. Payments Not at End of Interest
Period; Failure to Borrow
53
Section 4.9. Computation of Interest and Fees 54
Section 4.10. Termination of Agreement 54
Section 4.11. Ratable Treatment 54
Section 4.12. Sharing of Payments, etc. 55
Section 4.13. U.S. Taxes 55
Section 4.14. Loan Account 57
Section 4.15. Fees 58
ARTICLE 5
CONDITIONS PRECEDENT 59
Section 5.1. Conditions Precedent to Initial Loans 59
Section 5.2. Conditions Precedent to Each Loan 61
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF THE BORROWER 62
Section 6.1. Representations and Warranties 62
Section 6.2. Survival of Representations and Warranties, etc.
68
ARTICLE 7
AFFIRMATIVE COVENANTS 68
Section 7.1. Preservation of Corporate Existence and Similar
Matters 69
<PAGE>
Section 7.2. Compliance with Applicable Law 69
Section 7.3. Maintenance of Property 69
Section 7.4. Conduct of Business 69
Section 7.5. Insurance 69
Section 7.6. Payment of Taxes and Claims 70
Section 7.7. Accounting Methods and Financial Records 70
Section 7.8. Visits and Inspections 70
Section 7.9. Use of Proceeds 70
Section 7.10. Subsidiary Guaranties 71
ARTICLE 8
INFORMATION 71
Section 8.1. Financial Statements 71
Section 8.2. Accountants' Certificate 72
Section 8.3. Officer's Certificate 72
Section 8.4. Copies of Other Reports 72
Section 8.5. Notice of Litigation and Other Matters 73
Section 8.6. ERISA 74
Section 8.7. Other Information 74
Section 8.8. Accuracy of Information 74
ARTICLE 9
NEGATIVE COVENANTS 75
Section 9.1. Financial Ratios 75
Section 9.2. Indebtedness for Money Borrowed 75
Section 9.3. Guaranties 75
Section 9.4. Investments; Business Units 76
Section 9.5. Capital Expenditures 76
Section 9.6. Restricted Dividend Payments. 77
Section 9.7. Merger, Consolidation and Sale of Assets 77
Section 9.8. Transactions with Affiliates 78
Section 9.9. Liens 78
Section 9.10. Plans 78
Section 9.11. Sales and Leasebacks 78
Section 9.12. Issuance of Stock by Subsidiaries 78
Section 9.13. Additional Restrictions 79
Section 9.14. Special Provisions Regarding International
Apparel Marketing Corporation 79
Section 9.15. Limitation on Foreign Operations 79
ARTICLE 10
DEFAULT 79
Section 10.1. Events of Default 79
Section 10.2. Remedies 83
ARTICLE 11
AGENT AND CO-AGENTS 84
Section 11.1. Grant of Authority 84
Section 11.2. Action on Instructions 84
Section 11.3. Responsibility of the Agent 85
Section 11.4. Representations by the Lenders 86
Section 11.5. Expenses and Indemnification 86
<PAGE>
Section 11.6. Rights of the Bank 86
Section 11.7. Right to Resign 87
Section 11.8. Co-Agents 87
ARTICLE 12
MISCELLANEOUS 87
Section 12.1. Notices 87
Section 12.2. Expenses 88
Section 12.3. Stamp and Other Taxes 88
Section 12.4. Setoff 89
Section 12.5. Litigation 89
Section 12.6. Consent to Advertising and Publicity 90
Section 12.7. Reversal of Payments 90
Section 12.8. Injunctive Relief 90
Section 12.9. Accounting Matters 91
Section 12.10. Assignment 91
Section 12.11. Amendments 96
Section 12.12. Performance of Borrower's Duties 96
Section 12.13. Indemnification 97
Section 12.14. All Powers Coupled with Interest 97
Section 12.15. Survival 97
Section 12.16. Titles and Captions 97
Section 12.17. Severability of Provisions 98
Section 12.18. Governing Law 98
Section 12.19. Counterparts 98
Section 12.20. Reproduction of Documents 98
Section 12.21. Confidentiality 98
Section 12.22. Entire Agreement 99
<PAGE>
EXHIBITS AND SCHEDULES
EXHIBIT A FORM OF ASSIGNMENT AND ACCEPTANCE
EXHIBIT B FORM OF COMMITTED LOAN NOTE
EXHIBIT C FORM OF COMPETITIVE LOAN NOTE
EXHIBIT D FORM OF SUBSIDIARY GUARANTY
EXHIBIT E FORM OF SWINGLINE LOAN NOTE
EXHIBIT F FORM OF COMPETITIVE BID REQUEST
EXHIBIT G FORM OF CONFIRMATION OF NOTICE OF BORROWING
EXHIBIT H FORM OF CONFIRMATION OF NOTICE OF
CONVERSION/CONTINUATION
EXHIBIT I FORM OF OPINION OF COUNSEL FOR BORROWER AND
SUBSIDIARIES
EXHIBIT J FORM OF OPINION OF COUNSEL FOR AGENT
Schedule 1.1 Existing Letters of Credit
Schedule 6.1(b) Subsidiaries
Schedule 6.1(d) Compliance with Laws
Schedule 6.1(e) Business
Schedule 6.1(f) Governmental Approvals
Schedule 6.1(g) Title to Properties
Schedule 6.1(h) Existing Liens
Schedule 6.1(i) Existing Indebtedness and Guaranties
Schedule 6.1(j) Litigation
Schedule 6.1(k) Patents and Trademarks
Schedule 6.1(p) ERISA
<PAGE>
CREDIT AGREEMENT
Dated as of September 7, 1994
DELTA WOODSIDE INDUSTRIES, INC., a South Carolina corporation,
hereby agrees with each of the Lenders parties hereto, NATIONSBANK
OF NORTH CAROLINA, N.A., a national banking association, as agent
for the Lenders, and BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION, a national banking association, and THE BANK OF NEW
YORK, a New York banking corporation, as co-agents for the Lenders,
as follows:
ARTICLE
DEFINITIONS
Section Definitions. For the purposes of this Agreement:
"Acquire" or "Acquisition", as applied to any Business Unit or
Investment, means the acquiring or acquisition of such Business Unit
or Investment by purchase, exchange, issuance of stock or other
securities, or by merger, reorganization or any other method.
"Affiliate" means, with respect to a Person, any other Person
that (a) directly or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with, such
given Person, (b) directly or indirectly beneficially owns or holds
5% or more of any class of voting stock of such Person, or (c) 50%
or more of the voting stock of which is directly or indirectly
beneficially owned or held by such Person or a Subsidiary of such
Person. The term "control" means the possession, directly or
indirectly, of the power to direct or cause the direction of the
management and policies of a Person, whether through ownership of
voting securities, by contract or otherwise.
"Agent" means the Bank, acting in its capacity as agent for the
Lenders pursuant to the terms of Article 11, and any successor Agent
appointed pursuant to Section 11.7.
"Agent's Office" means the office of the Agent designated from
time to time pursuant to Section 12.1(c).
"Agreement" means and includes this Agreement and all
amendments, modifications and supplements thereto.
"Agreement Date" means the date as of which this Agreement is
dated.
"Alabama Judgment" means the judgment entered on
<PAGE>
November 24, 1993 by the Circuit Court of Montgomery County, Alabama
in the Alabama Litigation as modified by the acceptance of
Remittitur dated March 31, 1994.
"Alabama Letter of Credit" means that certain standby Letter of
Credit in the original Stated Amount of $28,565,000 to be issued by
the Bank on the Effective Date in accordance with the terms of
Section 3.1, for the account of Alchem in favor of The Aetna
Casualty and Surety Company, as beneficiary, in order to secure the
bonding obligations of Alchem in connection with the Alabama
Judgment, which Letter of Credit shall have an expiration date of
May 18, 1995 (subject to extension as provided therein).
"Alabama Litigation" means the case styled Hoots v. Duck Head
Apparel Company, Inc., Case No. CV-92-561-PR filed in the Circuit
Court of Montgomery County, Alabama on March 17, 1992, and all
appeals therefrom and retrials or new trials thereof.
"Alchem" means Alchem Capital Corporation, a Delaware
corporation and Wholly Owned Subsidiary of the Borrower, and its
successors and assigns.
"Applicable Law" means all applicable provisions of
constitutions, statutes, rules, regulations and orders of all
governmental bodies and of all orders and decrees of all courts and
arbitrators, including, without being limited to, applicable
provisions of Environmental Laws.
"Applicable Lending Office" means, (i) with respect to each
Lender, such Lender's Domestic Lending Office in the case of a Base
Rate Advance or a Competitive Loan, and such Lender's Eurodollar
Lending Office in the case of a Eurodollar Advance, and (ii) with
respect to the Swingline Lender, the Swingline Lender's Domestic
Lending Office.
"Applicable Margin" means, at any time, the applicable margin
corresponding to the ratio described below in effect as of the most
recent Rate Measurement Date:
Interest
Coverage Ratio
Leverage Ratio Applicable
Margin
Greater than or
equal to 1.15:1.00
0.75%
Greater than or equal to 3.00:1.00 Less than 1.15:1.00,
but greater than or
equal to 1.00:1.00
0.50%
Less than 1.00:1.00 0.25%
<PAGE>
Less than 3.00:1.00 Greater than or
equal to 1.15:1.00
0.75%
Less than 1.15:1.00 0.50%
The Applicable Margin as of the Effective Date and until the
first Applicable Margin Change Date is 0.50%. Thereafter,
determination of the appropriate Applicable Margin based on the
Interest Coverage Ratio and the Leverage Ratio shall be made as of
each Rate Measurement Date. The Interest Coverage Ratio and the
Leverage Ratio in effect as of a Rate Measurement Date shall
establish the Applicable Margin that shall be effective as of the
date designated by the Agent as the Applicable Margin Change Date
with respect to such Rate Measurement Date. The Agent shall
determine the Applicable Margin as of each Rate Measurement Date
occurring after the Effective Date and shall promptly notify the
Borrower and the Lenders of the Applicable Margin so determined and
of the Applicable Margin Change Date. Such determinations by the
Agent of the Applicable Margin shall be conclusive absent manifest
error.
"Applicable Margin Change Date" means, with respect to any Rate
Measurement Date, a date designated by the Agent that is not more
than five (5) Business Days after receipt by the Agent of the
Required Financial Information for such Rate Measurement Date.
"Application" means the Borrower's application for and
reimbursement agreement in respect of a Letter of Credit, which may
be on any form customarily used by the Issuer of such Letter of
Credit, subject to the provisions of Section 3.1.
"Assignment and Acceptance" means an assignment and acceptance
entered into by a Lender and an Eligible Assignee, and accepted by
the Agent, in substantially the form of Exhibit A hereto.
"Authorized Officer" means the President, the Executive Vice
President, the Chief Financial Officer, any Vice President, or the
Treasurer of a Person or any other officer designated as an
"Authorized Officer" by the Board of Directors (or equivalent
governing body) of such Person.
"Bank" means NationsBank of North Carolina, N.A., and its
successors and assigns.
"Base Rate" means the greater of (i) the rate of interest
announced from time to time by the Bank at its principal office in
Charlotte, North Carolina as its "prime" rate as in effect at such
time, and (ii) the Federal Funds Effective Rate (rounded upwards, if
necessary, to the next 1/8 of 1%) plus 1/2 of 1%, per annum.
<PAGE>
"Base Rate Advance" means a Committed Advance bearing interest
determined with reference to the Base Rate.
"Borrower" means Delta Woodside Industries, Inc., a South
Carolina corporation, and its successors and assigns.
"Business Day" means (i) for all purposes other than as covered
by clause (ii) below, any day other than a Saturday, Sunday or legal
holiday on which banks in Charlotte, North Carolina and New York,
New York are open for the conduct of a substantial part of their
commercial banking business; and (ii) with respect to all notices
and determinations in connection with, and payments of principal and
interest on, Eurodollar Advances, any day that is a Business Day
described in clause (i) and that is also a day for trading by and
between banks in U.S. Dollar deposits in the London interbank
market.
"Business Unit" means the assets constituting the business or a
division or operating unit thereof of any Person.
"Capital Expenditures" means, with respect to any Person, all
expenditures made and liabilities incurred for the acquisition of
assets (other than assets which constitute a Business Unit or an
Investment) which are not, in accordance with GAAP, treated as
expense items for such Person in the year made or incurred or as a
prepaid expense applicable to a future year or years.
"Capitalized Lease" means a lease that is required to be
capitalized for financial reporting purposes in accordance with
GAAP.
"Capitalized Lease Obligation" means Indebtedness represented
by obligations under a Capitalized Lease and the amount of such
Indebtedness shall be the capitalized amount of such obligations
determined in accordance with GAAP.
"Cash Collateral" means collateral consisting of cash or
Permitted Investments of the types referred to in Section 3.7 in
which the Agent, for the benefit of itself as Agent, the Issuers, as
applicable, and the Lenders, has a first priority Lien.
"Change of Control" means the occurrence of any of the
following events: (i) any Person or two or more Persons acting in
concert (other than E. Erwin Maddrey, II, Bettis C. Rainsford and/or
Micco Corporation) shall have acquired beneficial ownership,
directly or indirectly, of, or shall have acquired by contract or
otherwise, or shall have entered into a contract or arrangement
that, upon consummation, will result in its or their acquisition of,
control over, Voting Stock of the Borrower (or other securities
convertible into such Voting Stock) representing 35% or more of the
combined voting power of all Voting Stock of
<PAGE>
the Borrower, or (ii) during any period of up to 24 consecutive
months, commencing after the Agreement Date, individuals who at the
beginning of such 24 month period were directors of the Borrower
(together with any new director whose election by the Borrower's
Board of Directors or whose nomination for election by the
Borrower's shareholders was approved by a vote of at least two-
thirds of the directors then still in office who either were
directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any
reason to constitute a majority of the directors of the Borrower
then in office. As used herein, "beneficial ownership" shall have
the meaning provided in Rule 13d-3 of the Securities and Exchange
Commission under the Securities Exchange Act of 1934.
"Co-Agents" means a collective reference to Bank of America
National Trust and Savings Association, a national banking
association and The Bank of New York, a New York banking
corporation, and their respective successors and assigns.
"Commitment" means, as to each Lender, the amount set forth
opposite such Lender's name on the signature pages hereof under the
caption "Commitment" (or, if such Lender has entered into one or
more Assignments and Acceptances, set forth for such Lender in the
Register maintained by the Agent pursuant to Section 12.10(d)), as
such amount may be reduced pursuant to Section 4.3 or 10.2.
"Commitment Percentage" of any Lender at any time means the
product of (i) the amount of such Lender's Commitment at such time
divided by the amount of the Facility at such time, multiplied by
(ii) 100.
"Committed Advance" means an advance by a Lender to the
Borrower pursuant to Sections 2.1 and 2.2 and refers to a Base Rate
Advance or a Eurodollar Advance (each a "Type" of Committed
Advance).
"Committed Loan" means a borrowing by the Borrower pursuant to
Sections 2.1 and 2.2, consisting of Committed Advances of the same
Type made on the same day by the Lenders.
"Committed Loan Note" means any of the promissory notes made by
the Borrower payable to the order of a Lender evidencing the
obligation of the Borrower to pay the aggregate unpaid principal
amount of all Committed Advances constituting part of Committed
Loans and payments pursuant to Section 3.3(c)(ii) and subject to
Section 3.3(c)(iii)(B) made to it or for its benefit by such Lender
(and any promissory note or notes that may be issued from time to
time in substitution, renewal, extension, replacement or exchange
therefor, whether payable to the same or different Lenders, whether
issued in connection with a Person becoming a Lender after the
Agreement Date or otherwise) substantially in the form of Exhibit B
hereto, with all blanks properly completed, either as originally
executed or as the same may from time to
<PAGE>
time be supplemented, modified, amended, renewed, extended or
refinanced.
"Competitive Bid" means an offer by a Lender to make a
Competitive Loan pursuant to the terms of Section 2.8.
"Competitive Bid Rate" means, as to any Competitive Bid made by
a Lender in accordance with the provisions of Section 2.8, the fixed
rate of interest offered by the Lender making such Competitive Bid.
"Competitive Bid Request" means a request by the Borrower for
Competitive Bids in accordance with the provisions of Section 2.8.
"Competitive Loan" means a borrowing by the Borrower made by a
Lender in its discretion pursuant to Section 2.8.
"Competitive Loan Note" means any of the promissory notes made
by the Borrower payable to the order of a Lender evidencing the
obligation of the Borrower to pay the aggregate unpaid principal
amount of all Competitive Loans made to it or for its benefit by
such Lender (and any promissory note or notes that may be issued
from time to time in substitution, renewal, extension, replacement
or exchange therefor, whether payable to the same or different
Lenders, whether issued in connection with a Person becoming a
Lender after the Agreement Date or otherwise) substantially in the
form of Exhibit C hereto, with all blanks properly completed, either
as originally executed or as the same may from time to time be
supplemented, modified, amended, renewed, extended or refinanced.
"Consolidated", when used with reference to any accounting
terms relating to a Person, shall mean the sum of all applicable
items relating to such Person and its Subsidiaries, as consolidated
in accordance with GAAP after the elimination of intercompany items.
"Consolidated Subsidiaries", when used with reference to any
Person, means the Subsidiaries of such Person whose accounts are at
the time in question in accordance with GAAP consolidated with those
of such Person.
"Current Assets" means, with respect to any Person, (i) the
aggregate amount of assets of such Person which should properly be
classified as current assets in accordance with GAAP, after
deducting adequate reserves in each case where a reserve is
appropriate in accordance with GAAP, plus (ii) all accounts
receivable of such Person against which Indebtedness for Money
Borrowed of such Person has been offset (with the result that
neither such accounts receivable nor such Indebtedness appears on
the balance sheet of such Person) for financial reporting purposes.
<PAGE>
"Current Liabilities" means, with respect to any Person, (i)
the aggregate amount of all Indebtedness of such Person which should
properly be classified as current liabilities on the balance sheet
of such Person in accordance with GAAP, plus (ii) all Indebtedness
for Money Borrowed (not constituting Funded Indebtedness) which has
been offset against such Person's accounts receivable, as described
in clause (ii) of the definition "Current Assets."
"Current Maturities" means, with respect to any Person, current
maturities of all items which would be classified as long-term debt
(including the portion of Capitalized Leases so categorized) of such
Person as of the date in question, determined in accordance with
GAAP.
"Default" means any of the events specified in Section 10.1
which with the passage of time or giving of notice or both would
constitute an Event of Default.
"Depreciation and Amortization Expense" means total
depreciation and amortization expense of a Person for the period in
question, determined in accordance with GAAP.
"Dollar", "dollar", "U.S. Dollar" and "$" means freely
transferrable United States dollars.
"Domestic Lending Office" means, with respect to any Lender,
the office of such Lender specified as its "Domestic Lending Office"
on the signature pages hereof, or such other office of such Lender
as such Lender may from time to time specify in writing to the
Borrower and the Agent as its Domestic Lending Office.
"Effective Date" means the later of:
(a) the Agreement Date, and
(b) the first date on which all of the conditions set
forth in Article 5 shall have been fulfilled.
"Eligible Assignee" means (i) a Lender, (ii) a commercial bank
organized under the laws of the United States, or any State thereof,
and having total assets in excess of five billion dollars, or (iii)
a commercial bank organized under the laws of any other country
which is a member of the Organization for Economic Cooperation and
Development (the "OECD"), or a political subdivision of any such
country, and having total assets in excess of five billion dollars
(or the equivalent in other currencies), provided that such bank is
acting through a branch or agency located in the United States; and,
provided further, that each such entity described in the foregoing
clauses (i), (ii) and (iii) is consented to by each of the Agent and
the Borrower, such consent not to be unreasonably withheld or
delayed.
<PAGE>
"Environmental Laws" means all federal, state, local and
foreign laws now or hereafter in effect relating to pollution or
protection of the environment, including laws relating to emissions,
discharges, releases or threatened releases of pollutants,
contaminants, chemicals, or industrial, toxic or hazardous
substances or wastes into the environment (including, without
limitation, ambient air, surface water, ground water, or land), or
otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, removal, transport, or handling
of pollutants, contaminants, chemicals, or industrial, toxic or
hazardous substances or wastes, and any and all regulations issued,
entered or promulgated thereunder; such laws and regulations include
but are not limited to the Resource Conservation and Recovery Act,
42 U.S.C. 6901 et seq., as amended; the Comprehensive Environmental
Response, Compensation and Liability Act, 15 U.S.C. 2601 et seq.,
as amended; the Clean Air Act, 46 U.S.C. 7401 et seq., as amended;
and state and federal environmental cleanup programs.
"ERISA" means the Employee Retirement Income Security Act of
1974, as in effect from time to time.
"Eurocurrency Liability" has the meaning specified in
Regulation D of the Board of Governors of the Federal Reserve
System, as in effect from time to time.
"Eurodollar Advance" means a Committed Advance bearing interest
at a rate determined with reference to the Eurodollar Rate.
"Eurodollar Lending Office" means, with respect to any Lender,
the office of such Lender specified as its "Eurodollar Lending
Office" on the signature pages hereof (or, if no such office is
specified, its Domestic Lending Office), or such other office of
such Lender as such Lender may from time to time specify in writing
to the Borrower and the Agent as its Eurodollar Lending Office.
"Eurodollar Rate" means for the Interest Period for each
Eurodollar Advance comprising part of the same Committed Loan, a
rate per annum equal to the average (rounded upward to the nearest
whole multiple of 1/16 of 1% per annum if such average is not such a
multiple) of the rates per annum at which deposits in U.S. Dollars
are offered to each of the Reference Banks by prime banks in the
London interbank market at 11:00 a.m. (London time) (or as soon
thereafter as is practicable), in each case two Business Days before
the first day of such Interest Period in an amount approximately
equal to the principal amount of such Reference Bank's Eurodollar
Advance comprising part of such Committed Loan and for a period
approximately equal to such Interest Period. The Eurodollar Rate
for the Interest Period for each Eurodollar Advance comprising part
of the same Committed Loan shall be determined by the Agent on the
basis of the
<PAGE>
applicable rates furnished to and received by the Agent from the
Reference Banks two Business Days before the first day of such
Interest Period, subject, however, to the provisions of Section 4.6.
"Eurodollar Reserve Percentage" of any Lender for the Interest
Period for any Eurodollar Advance means the reserve percentage
applicable during such Interest Period (or if more than one such
percentage shall be so applicable, the daily average of such
percentages for those days in such Interest Period during which any
such percentage shall be so applicable) under regulations issued
from time to time by the Board of Governors of the Federal Reserve
System (or any successor) for determining the maximum reserve
requirement (including, without limitation, any emergency,
supplemental or other marginal reserve requirement) for such Lender
with respect to liabilities or assets consisting of or including
Eurocurrency Liabilities having a term equal to such Interest
Period.
"Event of Default" means any of the events specified in Section
10.1, provided that any requirement for notice or lapse of time or
any other condition has been satisfied.
"Existing Credit Agreement" means that certain Credit Agreement
dated as of June 24, 1992, as amended from time to time thereafter,
among the Borrower, the lenders parties thereto and The First
National Bank of Boston, as agent for such lenders.
"Existing Guaranties" means the Guaranties outstanding on the
Agreement Date to the extent set forth on Schedule 6.1(i).
"Existing Indebtedness" means Indebtedness for Money Borrowed
issued and outstanding on the Agreement Date to the extent set forth
on Schedule 6.1(i) and any renewals, extensions or refundings
thereof, but not any increases in principal amount thereof
outstanding on the date of such renewal, extension or refunding.
"Existing Letter of Credit" means each letter of credit issued
by a Lender and outstanding as of the Agreement Date and more fully
described on Schedule 1.1 hereto.
"Existing Liens" means the Liens outstanding on the Agreement
Date to the extent set forth on Schedule 6.1(h), but only to the
extent that the same relate to Existing Indebtedness.
"Facility" means, on any date, an amount equal to the aggregate
amount of the Commitments of all Lenders on such date.
"Factoring Agreement" means each agreement between the Borrower
or any of its Subsidiaries and BNY Financial Corporation ("BNY
Financial") or any other Person approved by the Majority Lenders
(each of BNY Financial and each such other Person, in such capacity,
a "Factor"), providing for credit, collection and
<PAGE>
application services to be performed by a Factor with respect to
accounts receivable of the Borrower or any of such Subsidiaries, as
applicable, and/or for the purchase by a Factor, subject to the
terms thereof, of some or all of such accounts receivable, and which
may grant to a Factor a security interest in the factored accounts
receivable and related property of the Borrower or any of such
Subsidiaries, as applicable; provided, however, that no such
agreement shall require or permit a Factor to make loans or advances
to the Borrower or any of its Subsidiaries secured by such accounts
receivable or related property.
"Federal Funds Effective Rate" means for any day, the interest
rate per annum equal to the weighted average of the rates on
overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published for
such day (or, if such day is not a Business Day, for the next
preceding Business Day) by the Federal Reserve Bank of New York, or,
if such rate is not so published for any day that is a Business Day,
the average of the quotations for such day on such transactions
received by the Agent from three Federal funds brokers of recognized
standing selected by the Agent.
"Financial Officer" of any Person means the Chief Financial
Officer, Treasurer or Controller of such Person.
"Fiscal Quarter" means each period of approximately 90 days
beginning on the Sunday following the last day of the immediately
preceding Fiscal Quarter and ending on the Saturday nearest March
31, June 30, September 30 or December 31 in each calendar year.
"Fiscal Year" means each period of approximately 365 days
beginning on the Sunday following the Saturday nearest to June 30 in
one calendar year and ending on the Saturday nearest to June 30 in
the next succeeding calendar year and when preceded by numbers
indicating a calendar year, means the Fiscal Year ending during such
calendar year.
"Fixed Charge Coverage Ratio" means, as of any date of
determination, the ratio of (i) Consolidated Net Income of the
Borrower and its Consolidated Subsidiaries (before Consolidated
Interest Expense, Consolidated Income Tax Expense and Consolidated
Depreciation and Amortization Expense) minus Consolidated Income Tax
Expense minus Consolidated Capital Expenditures, in each case for
the Fiscal Year then ended to (ii) Consolidated Interest Expense for
the Fiscal Year then ended plus Consolidated Current Maturities
(excluding any principal amount of the Loans and the Letter of
Credit Obligations so categorized) as of the last day of the Fiscal
Year then ended.
"Funded Indebtedness" means Indebtedness for Money Borrowed
having a maturity of more than 12 months from the date of the most
recent Consolidated balance sheet of the Borrower and its
Consolidated Subsidiaries or having a maturity of less than 12
months from the date of such Consolidated balance sheet but by
<PAGE>
its terms being renewable or extendable beyond 12 months from the
date of such Consolidated balance sheet at the option of the Person
liable thereon.
"GAAP" means generally accepted accounting principles
consistently applied and maintained throughout the period indicated
and consistent with the prior financial practice of the Borrower as
reflected on the financial statements referred to in Section 6.1(n);
provided, however, that, in the event that changes shall be mandated
by the Financial Accounting Standards Board or any similar
accounting authority of comparable standing, or shall be recommended
by the Borrower's certified public accountants, such changes shall
be included in GAAP only from and after such date as the Borrower,
the Agent and the Majority Lenders shall have amended this Agreement
to the extent necessary to reflect any such changes in the financial
covenants set forth in Article 9.
"Governmental Approvals" means all authorizations, consents,
approvals, licenses and exemptions of, registrations and filings
with, and reports to, all governmental bodies, whether federal,
state or local, and all agencies thereof, including, without being
limited to, all such authorizations, consents, approvals, licenses,
exemptions, registrations, filings and reports related to the
environment, the production, treatment, release, storage, handling
and disposal of toxic, hazardous or other substances, and similar
matters.
"Guaranteed Obligations" means any and all of the obligations
of each Subsidiary Guarantor arising under its Subsidiary Guaranty.
"Guaranty", "Guaranteed" or to "Guarantee" as applied to any
obligation of another Person shall mean and include
(a) a guaranty (other than by endorsement of negotiable
instruments for collection in the ordinary course of business),
directly or indirectly, in any manner, of any part or all of
such obligation of such other Person, and
(b) an agreement, direct or indirect, contingent or
otherwise, and whether or not constituting a guaranty, the
practical effect of which is to assure to or for the benefit of
a third party the payment or performance (or payment of damages
in the event of nonperformance) of any part or all of such
obligation of such other Person whether by
(i) purchase of securities or obligations,
(ii) the purchase, sale or lease (as lessee or
lessor) of property or the purchase or sale of services
primarily for the purpose of enabling the obligor with
respect to such obligation to make any payment or
performance (or payment of damages in the event of
<PAGE>
nonperformance) of or on account of any part or all of such
obligation, or to assure the owner of such obligation against loss,
(iii) the supplying of funds to or in any other manner
investing in the obligor with respect to such obligation,
(iv) repayment of amounts drawn down by beneficiaries of
letters of credit, or
(v) the supplying of funds to or investing in a Person on
account of all or any part of such Person's obligation under a
Guaranty of any obligation or indemnifying or holding harmless,
in anyway, such Person against any part or all of such
obligation.
"Income Tax Expense" means total income tax liability of a
Person to federal, state and local governments for the period in
question, determined in accordance with GAAP.
"Indebtedness" as applied to a Person means, without
duplication,
(a) all items (except items of minority interests, excess
of assigned value of net assets acquired over cost, capital
stock, additional paid-in capital or retained earnings, or of
general contingency or deferred tax reserves) which in
accordance with GAAP would be included in determining total
liabilities as shown on the liability side of a balance sheet
of such Person as at the date as of which Indebtedness is to be
determined,
(b) all obligations (including, during the noncancellable
term of any lease (other than an Operating Lease) in the nature
of a title retention agreement, all future payment obligations
under such lease discounted to their present value in
accordance with GAAP) secured by any Lien to which any property
or asset owned or held by such Person is subject, whether or
not the obligation secured thereby shall have been assumed,
(c) all obligations of other Persons which such Person
has Guaranteed, including, but not limited to, all obligations
of such Person consisting of recourse liability with respect to
accounts receivable sold or otherwise disposed of by such
Person (other than pursuant to a Factoring Agreement), and
(d) in the case of the Borrower (without duplication) the
Loans and unreimbursed drawings under Letters of Credit and in
the case of the Subsidiary Guarantors the Guaranteed
Obligations with respect thereto.
<PAGE>
"Intercompany Indebtedness" means Indebtedness for Money
Borrowed owed by the Borrower to any Subsidiary of the Borrower or
by any Subsidiary Guarantor to the Borrower or any other Subsidiary
Guarantor.
"Interest Coverage Ratio" means, as of any date of
determination, the ratio of (i) Consolidated Net Income of the
Borrower and its Consolidated Subsidiaries (before Consolidated
Interest Expense and Consolidated Income Tax Expense) for the Fiscal
Quarter then ended to (ii) Consolidated Interest Expense of the
Borrower and its Consolidated Subsidiaries for the Fiscal Quarter
then ended.
"Interest Expense" means total interest expense on Indebtedness
of a Person during the period in question, determined in accordance
with GAAP.
"Interest Payment Date" means, (i) with respect to any Base
Rate Advance, the first day of each January, April, July and
October, commencing on October 1, 1994 and the date when such Base
Rate Advance is due (whether on the Termination Date, by reason of
acceleration or otherwise) and (ii) with respect to any Eurodollar
Advance, Competitive Loan or Swingline Loan, the last day of the
Interest Period for such Eurodollar Advance, Competitive Loan or
Swingline Loan and the date when such Eurodollar Advance,
Competitive Loan or Swingline Loan is due (whether on the
Termination Date, by reason of acceleration or otherwise), and, in
addition, where the applicable Interest Period for any Eurodollar
Advance is more than 3 months, then also on the date 3 months from
the beginning of the Interest Period, and each 3 months thereafter.
"Interest Period" means
(a) with respect to each Eurodollar Advance, the period
commencing on the date of the making or continuation of or
conversion to such Eurodollar Advance and ending one, two,
three or six months thereafter, as the Borrower may elect in
the applicable Notice of Borrowing or Conversion/Continuation;
(b) with respect to each Competitive Loan, a period
commencing on the date of the making of such Competitive Loan
and ending on the date specified in the applicable Competitive
Bid whereby the offer to make such Competitive Loan was
extended (such ending date in any event not to be less than 7
nor more than 90 days from the date of borrowing); and
(c) with respect to each Swingline Loan, a period
commencing on the date of the making of such Swingline Loan and
ending on the date agreed to by the Borrower and the
<PAGE>
Swingline Lender in accordance with the provisions of Section 2.9(c)
(such ending date in any event to be not more than 7 days from the
date of borrowing);
provided, that:
(i) any Interest Period that would otherwise
end on a day that is not a Business Day shall,
subject to the provisions of clause (iii) below, be
extended to the next succeeding Business Day unless,
in the case of Eurodollar Advances, such Business Day
falls in the next calendar month, in which case such
Interest Period shall end on the immediately
preceding Business Day;
(ii) any Interest Period applicable to a
Eurodollar Advance that begins on the last Business
Day of a calendar month (or on a day for which there
is no numerically corresponding day in the calendar
month at the end of such Interest Period) shall,
subject to clause (iii) below, end on the last
Business Day of a calendar month;
(iii) no Interest Period shall end after the
Termination Date; and
(iv) notwithstanding clause (iii) above, no
Interest Period applicable to a Eurodollar Advance
shall have a duration of less than one month; and if
any applicable Interest Period would be for a shorter
period, such Interest Period shall not be available
hereunder.
"Internal Revenue Code" means the Internal Revenue Code of
1986, as amended from time to time.
"Investment" means, with respect to any Person (an "Investor"):
(a) any share of capital stock, evidence of Indebtedness
or other security issued by any other Person,
(b) any loan, advance or extension of credit to, or
contribution to the capital of, any other Person,
(c) any Guaranty of the obligations of any other Person
(other than any Subsidiary Guaranty),
(d) any other investment in any other Person,
(e) any commitment to make an Investment, and
(f) any option to make an Investment, the
<PAGE>
consideration for which exceeds $100;
provided, that if the Investor is the Borrower or any Subsidiary of
the Borrower and any of the foregoing results in any other Person
becoming a Subsidiary of the Investor or of the Borrower or in the
Acquisition by the Borrower or any of its Subsidiaries of a Business
Unit, such Investment shall be subject to the other provisions of
this Agreement applicable to Acquisitions of Business Units, rather
than the provisions of this Agreement applicable to Investments.
"Issuer" means any Lender, in its capacity as the issuer of a
Letter of Credit.
"Lender" means each of the Persons listed as a "Lender" on the
signature pages hereof, each of their respective successors and each
Eligible Assignee that shall become a party hereto pursuant to
Section 12.10.
"Letter of Credit" means (i) each letter of credit, whether a
documentary letter of credit or a standby letter of credit issued by
an Issuer pursuant to an Application and with the prior written
consent of the Agent, which consent shall not be unreasonably
withheld, in each case for the account of the Borrower and which
names the Borrower, or at the request of the Borrower, a Subsidiary
Guarantor, as the account party, and (ii) each Existing Letter of
Credit.
"Letter of Credit Facility" means, at any time, Letters of
Credit in an aggregate Stated Amount not to exceed $25,000,000,
plus, until the Alabama Letter of Credit has been fully drawn, has
expired in accordance with its terms or otherwise been terminated
and returned to the Bank, an amount equal to the then Stated Amount
of the Alabama Letter of Credit.
"Letter of Credit Obligations" means, as of any date, the sum
of (i) the aggregate Stated Amount of all Letters of Credit
outstanding on such date, plus (ii) the aggregate amount of all
unreimbursed drawings under Letters of Credit on such date
(including as unreimbursed, any drawings reimbursed pursuant to
Section 3.3(b) or (c) and subject to the provisions of Section
3.3(c)(iii)(B)). For purposes of clause (i) of this definition,
each documentary Letter of Credit shall be deemed to be outstanding
from the date of issuance thereof until and including the earlier of
(A) the date which is 30 days after the stated expiration date of
such Letter of Credit and (B) the date on which such Letter of
Credit is fully drawn or returned to the applicable Issuer for
cancellation by the beneficiary thereof.
"Leverage Ratio" means, as of any date of determination, the
ratio of Consolidated Indebtedness (including Consolidated
Indebtedness for Money Borrowed which has been offset against
amounts owing under accounts receivable, but excluding the aggregate
Stated Amount of Letters of Credit outstanding on such
<PAGE>
date) of the Borrower and its Consolidated Subsidiaries to
Consolidated Tangible Net Worth of the Borrower and its Consolidated
Subsidiaries, in each case as of such date.
"Lien" as applied to the property of any Person means:
(a) any mortgage, deed to secure debt, deed of trust,
lien, pledge, charge, lease constituting a Capitalized Lease
Obligation, conditional sale or other title retention
agreement, or other security interest, security title or
encumbrance of any kind in respect of any property of such
Person, or upon the income or profits therefrom,
(b) any arrangement, express or implied, under which any
property of such Person is transferred, sequestered or
otherwise identified for the purpose of subjecting the same to
the payment of Indebtedness or performance of any other
obligation in priority to the payment of the general, unsecured
creditors of such Person,
(c) any Indebtedness which is unpaid more than 30 days
after the same shall have become due and payable and which if
unpaid might by law (including but not limited to bankruptcy
and insolvency laws), or otherwise, be given any priority
whatsoever over general unsecured creditors of such Person, and
(d) the filing of, or any agreement to give, any
financing statement under the Uniform Commercial Code of any
State or its equivalent in any jurisdiction, other than any
such financing statement filed by a lessor of personal property
under an Operating Lease and that states on its face that it is
filed in respect of leased property.
"Loan" means any Committed Loan, Competitive Loan or Swingline
Loan.
"Loan Documents" means collectively this Agreement, the Notes,
the Subsidiary Guaranties, the Applications and each of the other
documents, instruments and agreements referred to herein or
contemplated hereby.
"Majority Lenders" means, at any time, Lenders which are then
in compliance with their material obligations hereunder (as
determined by the Agent) and holding in the aggregate more than 50%
of (i) the aggregate Commitments or (ii) if the Commitments have
been terminated, the aggregate outstanding principal amount of the
Loans and Letter of Credit Obligations.
"Materially Adverse Effect" means, with respect to any Person,
a materially adverse effect upon such Person's business, assets,
liabilities, financial condition, results of operations or business
prospects.
<PAGE>
"Money Borrowed" means, as applied to Indebtedness,
(a) Indebtedness for money borrowed, including, without
limitation, in the case of the Borrower (without duplication)
the Loans and unreimbursed drawings under Letters of Credit and
in the case of the Subsidiary Guarantors the Guaranteed
Obligations with respect thereto,
(b) Indebtedness, whether or not in any such case the
same was for money borrowed (but excluding accounts payable
incurred in the ordinary course of business),
(i) represented by notes payable, and drafts
accepted, that represent extensions of credit,
(ii) constituting obligations evidenced by bonds,
debentures, notes or similar instruments, or
(iii) upon which interest charges are customarily paid
or that was issued or assumed as full or partial payment
for property,
(c) Purchase Money Indebtedness,
(d) Indebtedness that constitutes a Capitalized Lease
Obligation, and
(e) Indebtedness that is such by virtue of clause (c) of
the definition thereof, but only to the extent that the
obligations Guaranteed are obligations that would constitute
Indebtedness for Money Borrowed.
"Multiemployer Plan" has the meaning set forth in Section
4001(a)(3) of ERISA, as amended or revised from time to time.
"Net Amount" means, with respect to any Investments (a) made by
any Person, the gross amount of all such Investments minus the
aggregate amount of all cash received and the fair value, at the
time of receipt by such Person, of all property received as payments
of principal or premiums, returns of capital, liquidating dividends
or distributions, proceeds of sale or other dispositions with
respect to such investments, (b) committed to be made by any Person,
the gross amount such Person is committed to pay in connection with
the consummation thereof and (c) as to which any Person holds an
option, the gross amount paid for such option.
"Net Disposition Proceeds" means the gross "cash proceeds"
received by the Borrower or any of its Subsidiaries from the sale or
disposition of any of its respective assets (excluding (i) sales of
inventory in the ordinary course of business, (ii) sales of accounts
pursuant to a Factoring Agreement and (iii) sales or dispositions of
assets (not constituting a substantial part of
<PAGE>
the assets of any Person) if, in any case covered by this clause
(iii), neither the book value of such assets nor the cash proceeds
received on the sale or other disposition of such assets exceeds
$100,000) less (a) necessary or incidental reasonable selling
expenses incurred in connection therewith, (b) taxes (if any)
estimated in good faith to be payable as a result of such sale or
disposition, and (c) any amounts thereof paid by the Borrower or its
selling Subsidiary, or set aside for such payment, as certified by
the Borrower to the Agent by an instrument in form and substance
acceptable to the Agent, to purchase property of a similar type, in
replacement of the assets so sold or disposed of and to be used in
the business of the Borrower or such Subsidiary. For purposes of
this definition, "cash proceeds" means (without duplication) the sum
of (i) cash, (ii) an amount equal to the value of readily marketable
securities and (iii) the principal amount of any promissory note,
received at any time by the Borrower or the selling Subsidiary in
consideration of such sale. Net Disposition Proceeds shall be
deemed to be received for purposes of this Agreement (i) in the case
of cash, when paid to the recipient, (ii) in the case of readily
marketable securities, when delivered to the recipient in form for
transfer, (iii) when evidenced by a promissory note (x) secured by a
valid, perfected first priority security interest in or first
mortgage lien on the assets so sold or disposed of, when payments of
principal are received thereunder and (y) not secured as provided in
clause (x), when payments of principal would have been received
thereunder if such principal were required to be repaid in
substantially equal consecutive annual installments over a period of
three years commencing on the date of delivery of such note or, if
earlier, when payments of principal are actually received
thereunder, and (iv) in the case of any amounts set aside pursuant
to clause (c) above and not paid to purchase property within six
months of the date on which such amounts would otherwise be deemed
to be received hereunder, the last day of such six-month period.
"Net Income" means, as applied to any Person, the net income
(or net loss) of such Person for the period in question after giving
effect to deduction of or provision for all operating expenses, all
taxes and reserves (including reserves for deferred taxes) and all
other proper deductions, all determined in accordance with GAAP,
provided that there shall be excluded:
(a) the net income (or net loss) of any Person accrued,
prior to the date it becomes a Subsidiary of, or is merged into
or consolidated with, the Person whose Net Income is being
determined or a Subsidiary of such Person,
(b) the net income (or net loss) of any Person (other
than a Subsidiary) in which the Person whose Net Income is
being determined or any Subsidiary of such Person has an
ownership interest, except, in the case of net income, to the
extent that any such income has actually been received by such
Person or such Subsidiary in the form of cash
<PAGE>
dividends or similar distributions,
(c) any restoration of any contingency reserve, except to
the extent that provision for such reserve was made out of
income during such period,
(d) any net gains or losses on the sale or other
disposition, not in the ordinary course of business, of
Investments, Business Units and other capital assets, provided
that there shall also be excluded any related charges for taxes
thereon,
(e) any net gain arising from the collection of the
proceeds of any insurance policy (provided that amounts
received under policies of business interruption insurance
shall not be excluded),
(f) any write-up of any asset, and
(g) any other extraordinary item.
"Net Worth" means, with respect to any Person, such Person's
total shareholders' equity (including capital stock, additional
paid-in capital and retained earnings, after deducting treasury
stock) and minority interests which would appear as such on a
balance sheet of such Person prepared in accordance with GAAP.
"Note" means any Committed Loan Note, Competitive Loan Note or
Swingline Loan Note.
"Notice of Borrowing" has the meaning specified in Section
2.3(a).
"Notice of Conversion/Continuation" has the meaning specified
in Section 2.3(e).
"Obligations" means, in each case whether now in existence or
hereafter arising,
(a) the principal of, and interest and premium, if any,
on, the Loans,
(b) any fees payable by the Borrower with respect to the
Facility,
(c) all obligations under each Application, including,
without limitation, reimbursement of drawings and payment of
fees and charges as provided therein, and all obligations of
the Borrower under each Letter of Credit, including, without
limitation, all obligations to provide Cash Collateral under
Section 3.7, and
(d) all indebtedness, liabilities, obligations,
<PAGE>
covenants and duties of the Borrower to the Agent or the Lenders, of
every kind, nature and description, direct or indirect, absolute or
contingent, due or not due, contractual or tortious, liquidated or
unliquidated, in respect of indemnities, and whether or not
evidenced by any note, and whether or not for the payment of money,
under or in respect of this Agreement, any Note or any other Loan
Document.
"Operating Lease" means any lease (other than a lease
constituting a Capitalized Lease Obligation) of real or personal
property.
"PBGC" means the Pension Benefit Guaranty Corporation and any
successor agency.
"Permitted Indebtedness for Money Borrowed" means
(a) Indebtedness for Money Borrowed of the Borrower
represented by the Loans and the Notes or arising under the
Letters of Credit or the related Applications,
(b) the Guaranteed Obligations,
(c) Intercompany Indebtedness,
(d) Existing Indebtedness,
(e) Indebtedness for Money Borrowed owed by International
Apparel Marketing Corporation to the Borrower or any Subsidiary
Guarantor the aggregate principal amount of which outstanding
at any time does not exceed $1,000,000,
(f) other Indebtedness for Money Borrowed of the Borrower
or any of its Subsidiaries the aggregate principal amount of
which outstanding at any time does not exceed $10,000,000, and
(g) Guaranties of any Indebtedness for Money Borrowed
described in any of clauses (a) through (f) above.
provided, however, that the aggregate outstanding principal amount
of all Permitted Indebtedness for Money Borrowed shall not exceed at
any time an amount equal to $280,000,000 minus the aggregate amount
of all reductions in the Commitments from time to time pursuant to
Section 4.3.
"Permitted Investments" means:
(a) Investments of the Borrower or any of its
Subsidiaries in:
(i) negotiable certificates of deposit, time
deposits and banker's acceptances issued by a Lender or
<PAGE>
any Affiliate of a Lender or by any United States bank or trust
company having capital, surplus and undivided profits in excess of
$100,000,000,
(ii) short-term corporate obligations rated Prime- 1
by Moody's Investors Service or A-1 by Standard & Poor's
Corporation,
(iii) any direct obligation of the United States of
America or any agency or instrumentality thereof which has
a remaining maturity at the time of purchase of not more
than two years and repurchase agreements relating to the
same,
(iv) sales on credit in the ordinary course of
business, or
(v) notes, accepted in the ordinary course of
business, evidencing overdue accounts payable arising in
the ordinary course of business;
(b) Investments of the Borrower or any of its
Subsidiaries, consisting of the capital stock of or capital
contributions to any Wholly Owned Subsidiary that is a
Subsidiary Guarantor;
(c) Guaranties permitted pursuant to Section 9.3 and
Investments constituting Intercompany Indebtedness; and
(d) any other Investment of the Borrower or any
Subsidiary consented to by the Majority Lenders.
"Permitted Liens" means:
(a) Liens securing taxes, assessments and other
governmental charges or levies (excluding any Lien imposed
pursuant to any of the provisions of ERISA) or the claims of
materialmen, mechanics, carriers, warehousemen or landlords for
labor, materials, supplies or rentals incurred in the ordinary
course of business, but in all cases only if payment shall not
at the time be required to be made in accordance with Section
7.6,
(b) Liens consisting of deposits or pledges made in the
ordinary course of business in connection with, or to secure
payment of, obligations under workers' compensation,
unemployment insurance or similar legislation or obligations to
utilities,
(c) Liens constituting encumbrances in the nature of
zoning restrictions, easements, and rights or restrictions of
record on the use of real property, which do not materially
detract from the value of such property as used by the Borrower
or any of its Subsidiaries, as applicable,
<PAGE>
or impair the use thereof in the business of the Borrower or any
Subsidiary,
(d) Liens existing on property of any Person at the time
such Person becomes a Subsidiary of the Borrower, but only if
the obligation secured by any such Lien is not in default and
such Lien is and remains confined to the property subject
thereto at the time such Person becomes a Subsidiary,
(e) Liens affecting accounts receivable and related
property, created or existing in favor of a Factor pursuant to
a Factoring Agreement, but only to the extent of the applicable
factored accounts receivable and related property,
(f) Existing Liens,
(g) Permitted Purchase Money Liens,
(h) Liens of an Issuer on goods or documents securing
reimbursement obligations with respect to a Letter of Credit
issued to insure the payment for such goods or documents,
(i) Liens created solely by the filing or recording of
any judgment in public records or by an attempt to execute on
any judgment, provided that in either such case no Event
ofDefault has occurred and is continuing under Section 10.1(j)
with respect to such judgment, and
(j) Liens in favor of the Agent for the benefit of the
Lenders or the Lenders and the Issuers, on Cash Collateral and
proceeds thereof.
"Permitted Purchase Money Indebtedness" means Purchase Money
Indebtedness of the Borrower or any of its Subsidiaries incurred
after the Agreement Date, including any Capitalized Lease Obligation
constituting Purchase Money Indebtedness,
(a) which is secured by a Purchase Money Lien,
(b) the aggregate principal amount of which does not
exceed the lesser of
(i) the cost (including the principal amount of such
Indebtedness, whether or not assumed) of the property
subject to such Lien, and
(ii) the fair value of such property at the time of
its acquisition, and
(c) which, when the principal amount thereof is
aggregated with the principal amount of all other Indebtedness
for Money Borrowed of the Borrower and all of
<PAGE>
its Subsidiaries at the time outstanding, does not constitute a
breach of the provisions of Section 9.2.
"Permitted Purchase Money Lien" means a Purchase Money Lien
securing Permitted Purchase Money Indebtedness.
"Person" means an individual, corporation, partnership,
association, trust or unincorporated organization, or a government
or any agency or political subdivision thereof.
"Plan" means an employee benefit plan maintained for employees
of the Borrower or any Subsidiary that is covered by Title IV of
ERISA, including such plans as may be established after the
Agreement Date.
"Purchase Money Indebtedness" means the following, other than
Indebtedness for trade payables incurred in the ordinary course of
business,
(a) Indebtedness created to secure the payment of all or
any part of the purchase price of any property,
(b) any Indebtedness incurred at the time of or within 10
days prior to or after the acquisition of any property for the
purpose of financing all or any part of the purchase price
thereof, and
(c) any renewals, extensions or refinancings thereof, but
not any increases in the principal amounts thereof outstanding
at the time.
"Purchase Money Lien" means a Lien securing Purchase Money
Indebtedness but only if such Lien shall at all times be confined
solely to the property (and proceeds thereof, to the extent provided
in the security agreement creating such Lien) the purchase price of
which was financed through the incurrence of the Purchase Money
Indebtedness secured by such Lien.
"Rate Measurement Date" means the last day of each Fiscal
Quarter occurring after the Effective Date.
"Reference Banks" means the Bank, Bank of America National
Trust and Savings Association and The Bank of New York.
"Register" has the meaning specified in Section 12.10(d).
"Reportable Event" has the meaning set forth in Section 4043(b)
of ERISA, but shall not include a Reportable Event as to which the
provision for 30 days' notice to the PBGC is waived under applicable
regulations.
"Required Financial Information" means, with respect to the
applicable Rate Measurement Date, (i) the financial statements of
<PAGE>
the Borrower required to be delivered pursuant to Section 8.1 for
the Fiscal Year or Fiscal Quarter ending as of such Rate Measurement
Date, and (ii) the certificate of the President or the Financial
Officer of the Borrower required by Section 8.3 to be delivered with
the financial statements described in clause (i) above.
"Restricted Dividend Payment" means any dividend, distribution
or payment on or with respect to any shares of the capital stock of
the Borrower or any Subsidiary (other than dividends payable solely
in shares of its capital stock and other than dividends,
distributions and payments made to the Borrower or to a Wholly Owned
Subsidiary of the Borrower), but excluding any such payment on
account of the purchase, redemption or other acquisition or
retirement of any shares of capital stock of the Borrower or any
Subsidiary.
"Revolving Credit Facility" means, on any date, an amount equal
to the amount of the Facility on such date, less the Letter of
Credit Obligations on such date (other than any portion thereof
attributable to unreimbursed drawings which are to be reimbursed by
a Committed Loan to be made on such date).
"Significant Subsidiary" means each Subsidiary of the Borrower
other than any Subsidiary of the Borrower having total assets of
less than $1,000,000 and not designated a Significant Subsidiary by
the Borrower (which excluded Subsidiaries on the Agreement Date
include only International Apparel Marketing Corporation and Harper
Brothers, Inc.), provided that the aggregate total assets of all
Subsidiaries excluded from the definition "Significant Subsidiary"
shall not exceed $10,000,000.
"Stated Amount" means at any time, as to any Letter of Credit,
the maximum amount available to be drawn at such time under such
Letter of Credit, assuming all conditions to drawings thereunder
have been satisfied.
"Subsidiary"
(a) when used to determine the relationship of a Person
to another Person, means a Person of which an aggregate of 50%
or more of the stock of any class or classes or 50% or more of
other ownership interests is owned of record or beneficially by
such other Person, or by one or more Subsidiaries of such other
Person, or by such other Person and one or more Subsidiaries of
such Person,
(i) if the holders of such stock, or other ownership
interests, (A) are ordinarily, in the absence of
contingencies, entitled, as such holders, to vote for the
election of a majority of the directors (or other
individuals performing similar functions) of such Person,
even though the right so to vote has been suspended by the
happening of such a contingency, or
<PAGE>
(B) are entitled, as such holders, to vote for the election of a
majority of the directors (or individuals performing similar
functions) of such Person, whether or not the right so to vote
exists by reason of the happening of a contingency, or
(ii) in the case of such other ownership interests,
if such ownership interests constitute a majority voting
interest, and
(b) when used with respect to a Plan, ERISA, the PBGC or
a provision of the Internal Revenue Code pertaining to employee
benefit plans, also means any corporation, trade or business
(whether or not incorporated) which is under common control
with the Borrower or any Subsidiary and is treated as a single
employer with the Borrower or any Subsidiary under Section
414(b) or (c) of the Internal Revenue Code and the regulations
thereunder.
(c) Unless the context otherwise requires, each reference
herein to a Subsidiary shall mean and be a reference to a
Subsidiary of the Borrower.
"Subsidiary Guarantor" means each Subsidiary of the Borrower
which has executed and delivered a Subsidiary Guaranty.
"Subsidiary Guaranty" means each Guaranty of a Subsidiary
Gurarator, in substantially the form of Exhibit D, in favor of the
Agent for its benefit and the benefit of the Lenders, pursuant to
Section 5.1(b)(vi) or Section 7.10.
"Swingline Facility" means, at any time, Swingline Loans in an
aggregate outstanding principal amount not to exceed $15,000,000.
"Swingline Lender" means the Bank, or, if the Bank shall no
longer be the Agent, such Lender which shall become the Agent
hereunder in accordance with the provisions of Section 11.7.
"Swingline Loan" means a borrowing by the Borrower made by the
Swingline Lender pursuant to Section 2.9.
"Swingline Loan Note" means the promissory note made by the
Borrower payable to the order of the Swingline Lender evidencing the
obligation of the Borrower to pay the aggregate unpaid principal
amount of all Swingline Loans made to it or for its benefit (and any
promissory note or notes that may be issued from time to time in
substitution, renewal, extension, replacement or exchange therefor)
substantially in the form of Exhibit E hereto, with all banks
properly completed, either as originally executed or as the same may
from time to time be supplemented, modified, amended, renewed,
extended or refinanced.
"Tangible Net Worth" means, as applied to any Person, the
<PAGE>
Net Worth of such Person at the time in question, after deducting
therefrom the amount of all intangible items reflected therein,
including all unamortized debt discount and expense, unamortized
research and development expense, unamortized deferred charges,
goodwill (net of any excess of assigned value of net assets acquired
over cost), patents, trademarks, service marks, trade names,
copyrights, unamortized excess cost of investment in Subsidiaries
over equity at dates of acquisition, and all similar items which
should properly be treated as intangibles in accordance with GAAP.
"Termination Date" means September 30, 1997 or such later date
as may be established pursuant to Section 2.10 or such earlier date
on which the Commitments shall have been reduced to zero in
accordance with the terms hereof.
"Termination Event" means
(a) a Reportable Event, or
(b) the filing of a notice of intent to terminate a Plan
or the treatment of a Plan amendment as a termination under
Section 4041 of ERISA, or
(c) the institution of proceedings to terminate a Plan by
the PBGC under Section 4042 of ERISA, or the appointment of a
trustee to administer any Plan.
"Unfunded Vested Accrued Benefits" means with respect to any
Plan at any time, the amount (if any) by which
(a) the present value of all vested nonforfeitable
benefits under such Plan exceeds
(b) the fair market value of all Plan assets allocable to
such benefits,
all determined as of the then most recent valuation date for such
Plan.
"Variable CD Rate" means, for any day a rate per annum (rounded
upwards to the nearest whole multiple of 1/16 of 1% per annum if
such rate is not such a multiple) equal to the rate obtained (a) by
dividing (i) the rate of interest determined by the Swingline Lender
to be the rate for 30-day domestic certificates of deposit published
for the immediately preceding business day by the Board of Governors
of the Federal Reserve System (or any successor) by (ii) a
percentage equal to 100% minus the applicable CD Reserve Percentage,
and adding thereto (b) the applicable CD Assessment Rate. As used
herein, (A) "CD Reserve Percentage" means the percentage applicable
to the rate of interest described in clause (a) above under
regulations issued from time to time by the Board of Governors of
the Federal
<PAGE>
Reserve System (or any successor) for determining the maximum
reserve requirement for a member bank of the Federal Reserve System
in New York City with deposits exceeding $1,000,000,000 with respect
to liabilities consisting of or including (among other liabilities)
U.S. dollar non-personal time deposits in the United States with a
maturity of 30 days and (B) "CD Assessment Rate" means the annual
assessment rate estimated by the Swingline Lender to be applicable
for determining the then current annual assessment payable by the
Swingline Lender to the Federal Deposit Insurance Corporation (or
any successor) for insuring U.S. dollar deposits of the Swingline
Lender in the United States.
"Voting Stock" means, with respect to any Person, capital stock
issued by a corporation, or equivalent interests in any other
Person, the holders of which are ordinarily, in the absence of
contingencies, entitled to vote for the election of directors (or
persons performing similar functions) of such Person, even though
the right so to vote has been suspended by the happening of such a
contingency.
"Wholly Owned Subsidiary" when used to determine the
relationship of a Subsidiary to a Person or Persons means a
Subsidiary all of the issued and outstanding shares (other than
directors' qualifying shares) of the capital stock of which shall at
the time be owned by such Person or Persons or one or more of such
Person's Wholly Owned Subsidiaries or by such Person or Persons and
one or more of its respective Wholly Owned Subsidiaries.
Section General. (a) All terms of an accounting nature not
specifically defined herein shall have the meanings ascribed thereto
by GAAP.
(b) The terms accounts, chattel paper, contract rights,
documents, equipment, instruments, general intangibles and
inventory, as and when used in this Agreement, shall have the
meanings given those terms in the Uniform Commercial Code as in
effect from time to time in the State of North Carolina.
(c) Unless otherwise specified, a reference in this Agreement
to a particular section or subsection or exhibit or schedule is a
reference to that section or subsection of or exhibit or schedule to
this Agreement.
(d) Wherever from the context it appears appropriate, each
term stated in either the singular or plural shall include the
singular and plural, and pronouns stated in the masculine, feminine
or neuter gender shall include the masculine, the feminine and the
neuter.
(e) Whenever a period is described herein as extending from a
day or date to or until a later day or date, "from" means "from and
including" such first day or date and "to" and "until" each
<PAGE>
means "to but excluding" such later day or date.
ARTICLE
Revolving Credit Facility
Section Committed Loans. Upon the terms and subject to the
conditions of, and in reliance upon the representations and
warranties made under, this Agreement, each Lender severally and not
jointly agrees to make Committed Advances to the Borrower from time
to time, on any Business Day from and after the Effective Date until
the Termination Date, up to an aggregate principal amount at any
time outstanding equal to such Lender's Commitment Percentage of the
Revolving Credit Facility at such time; provided, however, the sum
of the principal amounts of Committed Loans outstanding plus
Competitive Loans outstanding plus Swingline Loans outstanding shall
not exceed at any time the Revolving Credit Facility. Each
Committed Loan comprised of (i) Base Rate Advances shall be in an
aggregate amount of $5,000,000 or an integral multiple of $1,000,000
in excess thereof and (ii) Eurodollar Advances shall be in an
aggregate amount of $5,000,000 or an integral multiple of $1,000,000
in excess thereof, and shall consist of Committed Advances of the
same Type made on the same day by the Lenders ratably according to
their respective Commitments. Within the limits of each Lender's
Commitment, the principal amount of any Committed Advance which is
prepaid pursuant to Section 4.4(b) may be reborrowed in accordance
with the terms of this Section 2.1. Each Lender is hereby
authorized to, and prior to any transfer of its Committed Loan Note
each Lender shall, endorse the date and amount of each Committed
Advance made by such Lender to the Borrower and each repayment of
principal of each Committed Advance on the schedule annexed to and
constituting a part of such Committed Loan Note, which endorsement
shall constitute prima facie evidence of the accuracy of the
information so endorsed; provided, that a Lender's failure so to
endorse any Committed Loan Note held by it shall not affect the
Borrower's Obligations hereunder.
Section Making Committed Loans.
(a) Requests. Committed Loans shall be requested by
delivery of a Notice of Borrowing, given in the manner
specified in Section 2.3(a), by the Borrower to the Agent and
deemed requested as provided in Section 2.3(b), 2.3(c) and
2.3(d).
(b) Disbursement of Committed Loans. Promptly following
receipt of a Notice of Borrowing, the Agent shall notify each
Lender by telephone (confirmed by telecopier or telex),
telecopier or telex of the date and amount of the Committed
Loan, the Type of Committed Advances comprising such Committed
Loan, and, in the case of Eurodollar Advances, the applicable
interest rate under Section 2.6(b)
<PAGE>
and the Interest Period for such Committed Advances. Not later than
11:00 a.m. (Charlotte, North Carolina time) on the date specified
for any Committed Loan, each Lender shall make available for the
account of its Applicable Lending Office its ratable portion of such
Committed Loan in immediately available funds to the Agent at the
Agent's Office. After the Agent's receipt of such funds and upon
fulfillment of the applicable conditions set forth in Article 5, the
Agent will, and the Borrower hereby irrevocably authorizes the Agent
to, disburse the proceeds of the Committed Advances made in respect
of each such Committed Loan requested by it pursuant to this Section
2.2, in lawful money of the United States of America in immediately
available funds, by making such funds available to the Borrower at
the Agent's Office or by wire transfer to such account of the
Borrower as the Borrower may instruct the Agent from time to time.
(c) Assumption by Agent. Unless the Agent shall have
received notice from a Lender prior to the date of any
Committed Loan that such Lender will not make available to the
Agent such Lender's ratable portion of such Committed Loan, the
Agent may assume that such Lender has made such portion
available to the Agent on the date of such Committed Loan in
accordance with Section 2.2(b) and the Agent may, in reliance
upon such assumption, make available to the Borrower on such
date a corresponding amount. If and to the extent such Lender
shall not have so made such ratable portion available to the
Agent, such Lender and the Borrower severally agree to repay to
the Agent forthwith on demand such corresponding amount
together, with interest thereon, for each day from the date
such amount is made available to the Borrower until the date
such amount is repaid to the Agent, at (i) in the case of the
Borrower, the interest rate applicable at the time to the
Committed Advances comprising such Committed Loan and (ii) in
the case of such Lender, at theFederal Funds Effective Rate.
If such Lender shall repay to the Agent such corresponding
amount, such amount so repaid shall constitute such Lender's
Committed Advance as part of such Committed Loan for purposes
of this Agreement and the Borrower's obligation under this
Section 2.2(c) to repay such Committed Advance shall terminate.
The failure of any Lender to make the Committed Advance to be
made by it as part of any Committed Loan shall not relieve any
other Lender of its obligation, if any, hereunder to make its
Committed Advance on the date of such Committed Loan, or
relieve any Lender of its obligation, if any, hereunder to make
its Committed Advance as part of any subsequent Committed Loan,
but no Lender shall be responsible for the failure of any other
Lender to make the Committed Advance to be made by such other
Lender as part of any Committed Loan.
Section Notice and Manner of Borrowing or Conversion or
Continuation of Committed Loan.
<PAGE>
(a) Whenever the Borrower desires to obtain a Committed
Loan hereunder pursuant to Section 2.3(a), the Borrower shall
notify the Agent (which notice shall be irrevocable) by telex,
telegraph, telecopy or telephone not later than 10:00 a.m.
(Charlotte, North Carolina time) on the date one Business Day
before the day on which the requested Committed Loan is to be
made as a Committed Loan comprised of Base Rate Advances, and
not later than 10:00 a.m. (Charlotte, North Carolina time) on
the date three Business Days before the day on which the
requested Committed Loan is to be made as a Committed Loan
comprised of Eurodollar Advances. Each such notice (a "Notice
of Borrowing") shall specify (i) the effective date (which
shall be a Business Day) and amount of each Committed Loan
requested, (ii) the Type of Committed Advances comprising such
Committed Loan, and (iii) if such Committed Loan is to be
comprised of Eurodollar Advances, the duration of the
applicable Interest Period, and shall be immediately followed
by a written confirmation thereof by the Borrower in
substantially the form of Exhibit G hereto, provided that if
such written confirmation differs in any material respect from
the action taken by the Agent, the records of the Agent shall
control absent manifest error.
(b) The receipt by the Agent of notification from an
Issuer pursuant to Section 3.3(c)(i) to the effect that a
drawing has been made under a Letter of Credit and that the
Borrower and, if applicable, the Subsidiary Guarantor named
therein as the account party have failed to reimburse the
Issuer in accordance with the terms of the related Application,
either by means of a Swingline Loan as contemplated by Section
3.3(b) or otherwise, shall be deemed to be a Notice of
Borrowing in respect of a Committed Loan consisting of Base
Rate Advances, in the amount of the unreimbursed drawing, to be
made as of the date such drawing was paid, without regard to
the times of notice and disbursement set forth in Section
2.3(a), but subject to the provisions of Section 3.3(c)(ii).
(c) The failure of the Borrower to notify the Agent of
its intention to repay any Competitive Loan on the last day of
the Interest Period applicable thereto pursuant to Section
2.8(g) prior to 12:00 noon (Charlotte, North Carolina time) on
the last day of such Interest Period shall be deemed to be a
Notice of Borrowing in respect of a Committed Loan consisting
of Base Rate Advances, in the amount of such maturing
Competitive Loan, to be made as of the last day of the Interest
Period for such Competitive Loan, without regard to the times
of notice and disbursement set forth in Section 2.3(a).
(d) A demand from the Swingline Lender for repayment of
Swingline Loans pursuant to Section 2.9(b)(iv) shall be
<PAGE>
deemed to be a Notice of Borrowing in respect of a Committed Loan
consisting of Base Rate Advances, in the amount of such Swingline
Loans, to be made as of the date of demand for repayment of the
Swingline Loans by the Swingline Lender, without regard to the times
of notice and disbursement set forth in Section 2.3(a), but subject
to the provisions of Section 2.9(b)(iv).
(e) Whenever the Borrower desires, subject to the
provisions of Section 4.2, to convert an outstanding Committed
Loan into a Committed Loan comprised of Committed Advances of a
different Type provided for in this Agreement or to continue an
outstanding Committed Loan for a subsequent Interest Period,
the Borrower shall notify the Agent (which notice shall be
irrevocable) by telex, telegraph, telecopy or telephone not
later than 10:00 a.m. (Charlotte, North Carolina time) on the
date one Business Day before the day on which a proposed
conversion of a Committed Loan into, or a continuation of a
Committed Loan as, a Committed Loan comprised of Base Rate
Advances is to be effective and three Business Days before the
day on which a proposed conversion of a Committed Loan into, or
continuation of a Committed Loan as, a Committed Loan comprised
of Eurodollar Advances is to be effective (and if the Committed
Loan to be continued is comprised of Eurodollar Advances, such
effective date shall be the last day of the Interest Period for
such Committed Advances). Each such notice (a "Notice of
Conversion/Continuation") shall (i) identify the Committed Loan
to be converted or continued, including the Type of Committed
Advances comprising such Committed Loan, the aggregate
outstanding principal balance thereof and, in the case of a
Committed Loan comprised of Eurodollar Advances, the last day
of the Interest Period therefor, (ii) specify the effective
date of such conversion or continuation, (iii) specify the
principal amount of such Committed Loan to be converted or
continued and, if converted, the Type of Committed Advance into
which conversion of such principal amount or specified portions
thereof is to be made and (iv) in the case of any conversion
into or continuation as Eurodollar Advances, the Interest
Period to be applicable to each Type of Committed Advance
comprising each such converted or continued Committed Loan, and
shall be immediately followed by a written confirmation thereof
by such Borrower substantially in the form of Exhibit H hereto,
provided that if such written confirmation differs in any
material respect from the action taken by the Agent, the
records of the Agent shall control absent manifest error. The
Agent shall promptly notify each of the Lenders of its receipt
of any Notice of Conversion/Continuation pursuant to this
Section 2.3(e).
(f) Subject to the terms and conditions of this
Agreement, the Agent shall cause each Committed Loan to be made
available to the Borrower on the effective date
<PAGE>
specified therefor in the manner provided in Section 2.2(b);
provided that if such Committed Loan is to be made on a day on which
the Borrower is to repay all or any part of an outstanding Committed
Loan, the Agent shall apply the proceeds of such new Committed Loan
to make such repayment and only an amount equal to the difference
(if any) between the amount being borrowed and the amount being
repaid shall be made available by the Agent to the Borrower.
Section Duration of Interest Periods; Number of Committed
Loans.
(a) Subject to the provisions of the definition of
"Interest Period", the duration of each Interest Period
applicable to the Committed Advances comprising a Committed
Loan shall be as specified in the applicable Notice of
Borrowing or Notice of Conversion/Continuation. The Borrower
may elect a subsequent Interest Period to be applicable to any
Committed Loan by giving a Notice of Conversion/Continuation
with respect to such Committed Loan in accordance with Section
2.3(e).
(b) If the Agent does not receive a notice of election
pursuant to Section 2.3(e) of duration of a subsequent Interest
Period for a Committed Loan comprised of Eurodollar Advances
within the applicable time limits specified in said Section
2.3(e), or if, when such notice must be given, a Default or
Event of Default exists, the Borrower shall be deemed to have
elected to convert such Committed Loan in whole into a
Committed Loan comprised of Base Rate Advances on the last day
of the then current Interest Period therefor.
(c) Notwithstanding the foregoing, the Borrower may not
select an Interest Period (i) that would end, but for the
provisions of the definition "Interest Period," after the
Termination Date, or (ii) which, when added to the number of
Interest Periods then applicable, would result in there being,
at any one time (and treating all Committed Loans comprised of
Base Rate Advances as a single Committed Loan) more than ten
Committed Loans outstanding.
Section Repayment. The principal amount of all Committed
Advances shall be repaid by the Borrower in full on the Termination
Date, together with accrued and unpaid interest thereon to such
date.
Section Interest Rates and Payments of Interest with respect
to Committed Loans.
(a) Each Base Rate Advance shall bear interest on the
outstanding principal amount thereof, for the period from the date
such Committed Advance is made until the principal amount thereof is
paid or converted to a Committed Advance of a
<PAGE>
different Type, at a rate per annum equal to the Base Rate, which
rate shall change contemporaneously with any change in the Base
Rate. Such interest shall be payable on each Interest Payment Date
in respect of such Base Rate Advance outstanding from and after the
immediately preceding Interest Payment Date to such Interest Payment
Date, and upon any prepayment of the principal amount of such Base
Rate Advance or conversion of the principal amount (or any portion
thereof) into a Committed Advance of a different Type, on the
principal amount so prepaid or converted.
(b) (i) Each Eurodollar Advance shall bear interest on the
outstanding principal amount thereof, for each Interest Period
applicable thereto, at a rate per annum equal to the Eurodollar Rate
plus the Applicable Margin. Such interest shall be payable on each
Interest Payment Date in respect of such Eurodollar Advance.
(ii) Additional interest on the unpaid principal amount of
each Eurodollar Advance of each Lender shall also be payable from
the date of such Eurodollar Advance until such principal amount is
paid in full, so long as such Lender shall be required under
regulations of the Board of Governors of the Federal Reserve System
to maintain reserves with respect to liabilities or assets
consisting of or including Eurocurrency Liabilities, at an interest
rate per annum equal at all times to the remainder obtained by
subtracting (A) the Eurodollar Rate for the Interest Period for such
Eurodollar Advance from (B) the rate obtained by dividing such
Eurodollar Rate by a percentage equal to 100% minus the Eurodollar
Reserve Percentage of such Lender for such Interest Period, payable
on each date on which interest is payable on such Eurodollar
Advance. Such additional interest shall be determined by such
Lender and notified to the Borrower through the Agent.
Section Committed Loan Notes. The Committed Advances made by
each Lender to the Borrower and the obligation of the Borrower to
repay such Committed Advances shall be evidenced by, and be
repayable in accordance with the terms of, a single Committed Loan
Note, made by the Borrower payable to the order of such Lender.
Subject to the provisions of Section 12.10, each such Committed Loan
Note shall be dated the Agreement Date and be duly and validly
executed and delivered by the Borrower.
Section Competitive Loan Subfacility.
(a) Competitive Loans. The Borrower may, from and after
the Effective Date until the Termination Date subject to
satisfaction of the conditions to borrowing set forth in
Section 5.2, request and each Lender may, in its sole
discretion, agree to make Competitive Loans to the Borrower;
provided, however, the sum of the principal amounts of
Committed Loans outstanding plus Competitive Loans outstanding
plus Swingline Loans outstanding shall not at any time exceed
the Revolving Credit Facility. Each
<PAGE>
Competitive Loan shall be not less than $1,000,000 in the aggregate
and in integral multiples of $500,000 in excess thereof.
(b) Competitive Bid Requests. The Borrower may solicit
Competitive Bids by delivery of a Competitive Bid Request
substantially in the form of Exhibit F to the Agent by 12:00
noon (Charlotte, North Carolina time) on a Business Day not
less than three (3) nor more than ten (10) Business Days prior
to the date of a requested Competitive Loan advance. Each
Competitive Bid Request (i) shall specify (A) the effective
date of the requested Competitive Loan (which shall be a
Business Day), (B) the amount of the requested Competitive Loan
and (C) the applicable Interest Periods requested, and (ii)
shall be accompanied by payment to the Agent for its own
account of a fee of $1,500. The Agent shall notify the Lenders
of its receipt of a Competitive Bid Request and the contents
thereof and invite the Lenders to submit Competitive Bids in
response thereto. No more than five (5) Competitive Bid
Requests (e.g., the Borrower may request Competitive Bids for
no more than five (5) different Interest Periods at a time)
shall be submitted at any one time.
(c) Competitive Bid Procedure. Each Lender may, in its
sole discretion, make one or more Competitive Bids to the
Borrower in response to a Competitive Bid Request. Each
Competitive Bid must be received by the Agent not later than
10:00 a.m. (Charlotte, North Carolina time) on the proposed
date of a Competitive Loan; provided, however, that should the
Agent, in its capacity as a Lender, desire to submit a
Competitive Bid it shall notify the Borrower of its Competitive
Bid and the terms thereof not later than 9:30 a.m. (Charlotte,
North Carolina time) on the proposed date of a Competitive
Loan. A Lender may offer to make all or part of the requested
Competitive Loan and may submit multiple Competitive Bids in
response to a Competitive Bid Request. The Competitive Bid
shall specify (i) the particular Competitive Bid Request as to
which the Competitive Bid is submitted, (ii) the minimum (which
shall be not less than $1,000,000 and in integral multiples of
$500,000 in excess thereof) and maximum principal amounts of
the requested Competitive Loan or Loans which such Lender is
willing to make, and (iii) the applicable interest rate or
rates and Interest Period or Periods therefor. A Competitive
Bid submitted by a Lender in accordance with the provisions
hereof shall be irrevocable. The Agent shall promptly notify
the Borrower of all Competitive Bids made and the terms
thereof. The Agent shall send a copy of each of the
Competitive Bids to the Borrower for its records as soon as
practicable.
(d) Acceptance of Competitive Bids. The Borrower may, in
its sole and absolute discretion, subject only to the
<PAGE>
provisions of this subsection (d), accept or refuse any Competitive
Bid offered to it. To accept a Competitive Bid, the Borrower shall
give written notification of its acceptance of any or all such
Competitive Bids to the Agent by 11:00 a.m. (Charlotte, North
Carolina time) on the proposed date of Competitive Loan; provided,
however, (i) the failure by the Borrower to give timely notice of
its acceptance of a Competitive Bid shall be deemed to be a refusal
thereof, (ii) the Borrower may accept Competitive Bids for a
particular Interest Period only in ascending order of rates, (iii)
the aggregate amount of Competitive Bids accepted by the Borrower
shall not exceed the principal amount specified in the Competitive
Bid Request, (iv) if the Borrower shall accept a bid or bids made at
a particular Competitive Bid Rate, but the amount of such bid or
bids shall cause the total amount of bids to be accepted by the
Borrower to be in excess of the amount specified in the Competitive
Bid Request, then the Borrower shall accept a portion of such bid or
bids in an amount equal to the amount specified in the Competitive
Bid Request less the amount of all other Competitive Bids accepted
with respect to such Competitive Bid Request, which acceptance in
the case of multiple bids at such Competitive Bid Rate, shall be
made pro rata in accordance with the amount of each such bid at such
Competitive Bid Rate, and (v) no bid shall be accepted for a
Competitive Loan unless such Competitive Loan is in a minimum
principal amount of $1,000,000 and integral multiples of $500,000 in
excess thereof, except that where a portion of a Competitive Bid is
accepted in accordance with the provisions of clause (iv) of this
Section 2.8(d), then in a minimum principal amount of $100,000 and
integral multiples thereof (but not in any event less than the
minimum amount specified in the Competitive Bid), and in calculating
the pro rata allocation of acceptances of portions of multiple bids
at a particular Competitive Bid Rate pursuant to clause (iv) of this
Section 2.8(d), the amounts shall be rounded to integral multiples
of $100,000 in a manner which shall be in the discretion of the
Borrower. A notice of acceptance of a Competitive Bid given by the
Borrower in accordance with the provisions hereof shall be
irrevocable. The Agent shall, not later than 12:00 noon (Charlotte,
North Carolina time) on the proposed date ofCompetitive Loan, notify
each bidding Lender whether or not its Competitive Bid has been
accepted (and if so, in what amount and at what Competitive Bid
Rate), and each successful bidder will thereupon become bound,
subject to the other applicable conditions hereof, to make the
Competitive Loan in respect of which its bid has been accepted. In
addition, the Agent shall, upon the request of any Lender, provide
such Lender with information regarding the range of Competitive Bids
submitted by the Lenders in connection with any Competitive Bid
Request.
(e) Funding of Competitive Loans. Each Lender which
<PAGE>
is to make a Competitive Loan shall make its Competitive Loan
available to the Agent by 2:00 P.M. (Charlotte, North Carolina time)
on the date specified in the Competitive Bid Request by deposit in
dollars of immediately available funds at the office of the Agent in
Charlotte, North Carolina, or at such other address as the Agent may
designate in writing. The Agent shall, by 3:00 p.m. (Charlotte,
North Carolina time) on the same day, upon fulfillment of the
applicable conditions set forth in Article 5, credit the amount so
received to the general deposit account of the Borrower with the
Agent.
(f) Competitive Loan Notes. The Competitive Loans made
by each Lender to the Borrower and the obligation of the
Borrower to repay such Competitive Loans shall be evidenced by,
and be repayable in accordance with the terms of, a single
Competitive Loan Note, made by the Borrower payable to the
order of such Lender. Subject to the provisions of Section
12.10, each such Competitive Loan Note shall be dated the
Agreement Date and be duly and validly executed and delivered
by the Borrower.
(g) Repayment of Competitive Loans. The principal amount
of each Competitive Loan shall be payable on the last day of
the Interest Period applicable thereto; provided, however,
unless the Borrower shall give notice to the Agent otherwise,
the Borrower, subject to the provisions of Section 5.2, shall
be deemed to have submitted a Notice of Borrowing as
contemplated pursuant to Section 2.3(c), effective on the last
day of such Interest Period, with respect to a Committed Loan
comprised solely of Base Rate Advances in the amount of a
maturing Competitive Loan, the proceeds of which will be used
to repay such Competitive Loan. The Agent, in turn, shall
promptly notify each Lender of such deemed Notice of Borrowing.
(h) Interest on Competitive Loans. Subject to the
provisions of Section 4.1, each Competitive Loan shall bear
interest at the Competitive Bid Rate applicable thereto.
Interest on Competitive Loans shall be payable in arrears on
each applicable Interest Payment Date.
Section Swingline Loan Subfacility.
(a) Swingline Commitment. The Swingline Lender, in its
individual capacity, agrees to make Swingline Loans to the
Borrower from and after the Agreement Date until the
Termination Date (including, without limitation, in connection
with reimbursement of drawings of Letters of Credit as
contemplated by Section 3.3(b)) subject to satisfaction of the
conditions to borrowing set forth in Section 5.2; provided,
however, (i) the aggregate principal amount of Swingline Loans
outstanding at any time shall not
<PAGE>
exceed the Swingline Facility and (ii) the sum of the principal
amounts of Committed Loans outstanding plus Competitive Loans
outstanding plus Swingline Loans outstanding shall not exceed at any
time the Revolving Credit Facility. Swingline Loans may be repaid
and reborrowed in accordance with the provisions hereof.
(b) Swingline Loans.
(i) General Terms. Swingline Loans shall be
provided by the Swingline Lender to the Borrower on terms and
in a manner mutually acceptable to the Swingline Lender and the
Borrower. Each Swingline Loan shall bear interest at a rate
determined pursuant to Section 2.9(c) and shall have such
maturity date as the Swingline Lender and the Borrower shall
agree (subject to the terms of the definition of "Interest
Period" set forth in Section 1.1 and to the terms of Section
2.9(b)(iv)).
(ii) Minimum Amounts. Each Swingline Loan shall be
in a minimum principal amount mutually acceptable to the
Swingline Lender and the Borrower.
(iii) Swingline Loan Note. The Swingline Loans made
by the Swingline Lender to the Borrower and the obligation of
the Borrower to repay such Swingline Loans shall be evidenced
by, and be repayable in accordance with the terms of, a single
Swingline Loan Note, made by the Borrower payable to the order
of the Swingline Lender. The Swingline Loan Note shall be
dated the Agreement Date and be duly and validly executed and
delivered by the Borrower.
(iv) Repayment of Swingline Loans. The principal
amount of each Swingline Loan shall be payable on the earlier
of (A) the maturity date agreed to by the Swingline Lender and
the Borrower with respect to such Swingline Loan (which
maturity date shall not be a date more than seven (7) Business
Days from the date of advance thereof) or (B) the Termination
Date; provided, however, that the Swingline Lender may, at any
time, in its sole discretion, by written notice to the Borrower
and the Lenders, demand repayment of its Swingline Loans, and
such demand shall be deemed to have been given one (1) Business
Day prior to the Termination Date and on the date of the
occurrence of any Event of Default described in Section 10.1(g)
or (h) and upon acceleration of the indebtedness hereunder and
the exercise of remedies in accordance with the provisions of
Section 10.2. Any such demand (or deemed demand) for repayment
of the Swingline Loans shall be deemed to constitute a Notice
of Borrowing as contemplated pursuant to Section 2.3(d),
effective on the date of such demand (or deemed demand), with
respect to a Committed Loan comprised solely of Base Rate
Advances in the aggregate principal amount of all outstanding
Swingline Loans. The Agent, in turn, shall
<PAGE>
promptly notify each Lender of such deemed Notice of Borrowing.
Each Lender shall pay to the Agent, for the account of the Swingline
Lender's Domestic Lending Office or such other office as the
Swingline Lender may instruct, an amount equal to such Lender's
Commitment Percentage (determined before giving effect to any
termination of the Commitments pursuant to Section 10.2) of the
aggregate principal amount of all such outstanding Swingline Loans,
in immediately available funds, on the date demand for repayment of
the Swingline Loans is made (or deemed made as provided above) by
the Swingline Lender if notice of such demand (or deemed demand) is
given by the Swingline Lender to the Lenders at or prior to 12:00
noon (Charlotte, North Carolina time) or, if notice of such demand
(or deemed demand) is given by the Swingline Lender to the Lenders
after 12:00 noon (Charlotte, North Carolina time), then not later
than 12:00 noon (Charlotte, North Carolina time) on the next
Business Day, together with interest on such amount at the Federal
Funds Effective Rate for each day from and including the date of the
giving of notice of such demand (or deemed demand) by the Swingline
Lender to the Lenders to but excluding the date of payment by such
Lender. If the applicable conditions to borrowing set forth in
Section 5.2 are satisfied, each such payment by a Lender pursuant to
this Section 2.9(b)(iv) shall constitute a Committed Advance which
is a Base Rate Advance by such Lender under the Revolving Credit
Facility as of the date of demand for repayment of the Swingline
Loans was made (or deemed made as provided above) by the Swingline
Lender, and each Lender hereby irrevocably agrees to make its
Committed Advance of each Committed Loan in connection with any such
demand for repayment of the Swingline Loans by the Swingline Lender
in the amount, in the manner and on the date specified above
notwithstanding (I) the amount of such Committed Loan may not comply
with the minimum amount for Committed Loans otherwise required
hereunder or (II) failure of any such request or deemed request for
such Committed Loan to be made by the time otherwise required under
Section 2.3. If the applicable conditions to borrowing set forth in
Section 5.2 are not satisfied, each such payment by a Lender
pursuant to this Section 2.9(b)(iv) shall constitute the purchase of
participations by such Lender in the then outstanding Swingline
Loans; provided, however, that all interest payable on the Swingline
Loans shall be for the account of the Swingline Lender until the
date as of which any such participation is purchased. Each Lender
acknowledges and agrees that its obligation to pay an amount equal
to its Commitment Percentage of the principal amount of all
outstanding Swingline Loans upon demand (or deemed demand) for
repayment thereof by the Swingline Lender as provided above shall at
all times and in all events be absolute, unconditional and
irrevocable and in each case shall be made without counterclaim,
deduction or set-off by such Lender. Without limiting the generality
of the foregoing, each
<PAGE>
Lender's obligation to pay its ratable share of the principal amount
of all outstanding Swingline Loans upon any demand (or deemed
demand) for repayment thereof by the Swingline Lender as provided
above shall not be affected by:
(a) any failure or inability of the Borrower to
satisfy the applicable conditions to borrowing set forth
in Section 5.2,
(b) any lack of validity or enforceability of this
Agreement or any of the other Loan Documents,
(c) the occurrence of any Default or Event of
Default, or
(d) the Agent's failure to notify the Lenders of the
issuance of any Letter of Credit.
The Borrower hereby irrevocably instructs the Agent to disburse
the proceeds of any Committed Advances or any payments for
participations made as provided above in this Section
2.9(b)(iv) to the Swingline Lender. Proceeds of Committed
Advances made pursuant this Section 2.9(b)(iv) shall be applied
to the repayment of the Swingline Loans.
(c) Interest on Swingline Loans. Subject to the
provisions of Section 4.1, Swingline Loans shall bear interest
at a per annum rate equal to, at the Borrower's election,
either (i) a rate equal to the Variable CD Rate (which rate
shall change contemporaneously with any change in the Variable
CD Rate) plus the Applicable Margin or (ii) such other rate as
may be quoted by the Swingline Lender to the Borrower in the
sole discretion of the Swingline Lender and accepted by the
Borrower at or promptly following the time of such quote.
Interest on Swingline Loans shall be payable in arrears on each
applicable Interest Payment Date.
Section Extension of Commitments. The Borrower may request
that the Termination Date be extended for successive periods of one
year, by notice to the Agent given not later than 14 months (nor
earlier than 15 months) prior to the then effective Termination
Date. The Agent will promptly notify each Lender of any such
request and, if such extension request is agreed to in writing by
all Lenders, will use reasonable efforts to notify the Borrower that
such extension has been approved not later than 13 months prior to
the then effective Termination Date.
ARTICLE
LETTER OF CREDIT FACILITY
Section Letters of Credit. The Bank, subject to
<PAGE>
satisfaction of the conditions to borrowing set forth in Section
5.2, shall issue the Alabama Letter of Credit, and, in addition, any
Lender in its sole discretion may, with the consent of the Agent,
which consent shall not be unreasonably withheld, issue, at any time
after the Effective Date until the date five Business Days prior to
the Termination Date subject to satisfaction of the conditions to
borrowing set forth in Section 5.2, a Letter of Credit for the
account of the Borrower or a Subsidiary Guarantor, naming the
Borrower or such Subsidiary Guarantor as the account party, provided
that (i) the Letter of Credit Obligations at any time outstanding
shall not exceed the Letter of Credit Facility, (ii) the Letter of
Credit Obligations at any time outstanding with respect to all
Letters of Credit other than the Alabama Letter of Credit shall not
exceed $25,000,000, (iii) the sum of the principal amounts of
Committed Loans outstanding plus Competitive Loans outstanding plus
Swingline Loans outstanding shall not exceed at any time the
Revolving Credit Facility (in each case, after giving effect to
issuance of any requested Letter of Credit), and (iv) no Letter of
Credit shall have a stated expiration date later than the first to
occur of (x) the fifth Business Day prior to the Termination Date in
effect on the date of issuance of such Letter of Credit and (y)
except for the Alabama Letter of Credit, the first anniversary of
the date of issuance of such Letter of Credit. Each Application
shall provide for the unconditional obligation, without regard to
any defense or claim or counterclaim against the beneficiary of the
related Letter of Credit of the Borrower or Subsidiary Guarantor the
account party thereon, to reimburse on demand the Issuer of such
Letter of Credit for any amount drawn under such Letter of Credit
and, in respect of standby Letters of Credit, for fees consistent
with Section 4.15(c). The Borrower hereby agrees with each Issuer,
for its benefit and for the benefit of the Agent and the Lenders,
that the Borrower shall be obligated to perform the reimbursement
and other payment Obligations of each Subsidiary Guarantor named as
the account party in any Letter of Credit, not as a guarantor or
surety, but as a primary obligor under the related Application to
the same extent as the Subsidiary Guarantor named therein.
Section Purchase and Sale of Participations. Subject to the
terms and conditions of this Agreement, effective the date of
issuance of each Letter of Credit (or, as to each Existing Letter of
Credit, effective the Effective Date), the Issuer thereof hereby
sells to each Lender, and each Lender hereby purchases from such
Issuer, an undivided participating interest equal to its Commitment
Percentage in all of such Issuer's right, title and interest in and
to such Letter of Credit and such Issuer's obligations thereunder,
together with all of such Issuer's right, title and interest in and
to the related Application (but excluding certain fees and payments
referred to in Section 3.4). Each Lender acknowledges and agrees
that its obligation to pay an amount equal to its Commitment
Percentage of all draws under each Letter of Credit as hereinafter
provided shall at all times and in all events be absolute,
unconditional
<PAGE>
and irrevocable and in each case shall be made without counterclaim,
deduction or setoff by such Lender. Without limiting the generality
of the foregoing, each Lender's obligation to pay its ratable share
of any drawing under a Letter of Credit to the Agent for the account
of the Issuer thereof shall not be affected by:
(a) any failure or inability of the Borrower to satisfy
the applicable conditions to borrowing set forth in Section
5.2,
(b) any lack of validity or enforceability of this
Agreement or any of the other Loan Documents,
(c) any draft, certificate or any other document
presented under the Letter of Credit upon which payment has
been made in good faith and according to its terms proving to
be forged, fraudulent, invalid or insufficient in any respect
or any statement therein being untrue or inaccurate in any
respect,
(d) the surrender or impairment of any collateral or any
other security for the reimbursement obligation of the Borrower
under such Letter of Credit,
(e) the occurrence of any Default or Event of Default, or
(f) the Agent's failure to notify the Lenders of the
issuance of any Letter of Credit.
Section Unreimbursed Draws Under Letters of Credit.
(a) Each Issuer shall promptly notify the Agent upon the
occurrence of any drawing under a Letter of Credit of the date
and amount of such drawing, the remaining amount, if any,
available to be drawn under such Letter of Credit, and whether
the amount of such drawing has been reimbursed to the Issuer by
the Borrower or the Subsidiary Guarantor named as the account
party therein.
(b) Each notice from an Issuer pursuant to subsection (a)
above to the effect that a drawing has not been reimbursed in
full shall constitute a request by the Borrower for a Swingline
Loan from the Swingline Lender in the unreimbursed amount of
such drawing, unless the sum of the unreimbursed amount of such
drawing plus the principal amount of all outstanding Swingline
Loans (prior to giving effect to a Swingline Loan relating to
the unreimbursed amount of such drawing) exceeds the Swingline
Facility. Any Swingline Loan made in order to reimburse the
Issuer for the unreimbursed amount of a drawing under any
Letter of Credit as contemplated by this subsection (b) shall
be on such terms as are mutually acceptable to the Swingline
Lender and
<PAGE>
the Borrower and shall be subject to all other terms, conditions and
limitations set forth in Section 2.9, including, without limitation,
satisfaction of the conditions to borrowing set forth in Section
5.2.
(c) (i) If the unreimbursed amount of a drawing under any
Letter of Credit is not, for any reason, reimbursed to the
Issuer with proceeds of a Swingline Loan pursuant to subsection
(b) above, each notice pursuant to subsection (a) above from an
Issuer to the effect that a drawing has not been reimbursed in
full shall constitute a Notice of Borrowing as contemplated
pursuant to Section 2.3(b) with respect to a Committed Loan
comprised solely of Base Rate Advances in the unreimbursed
amount of such drawing. The Agent, in turn, shall promptly
notify each Lender of its receipt of such deemed Notice of
Borrowing.
(ii) Each Lender shall pay to the Agent, for the account
of such Issuer's Domestic Lending Office or such other office
as such Issuer may instruct, an amount equal to such Lender's
Commitment Percentage (determined before giving effect to any
termination of the Commitments pursuant to Section 10.2) of
such unreimbursed drawing, in immediately available funds, on
the date notice is given by the Agent if such notice is given
at or prior to 12:00 noon (Charlotte, North Carolina time) or,
if notice is given after 12:00 noon (Charlotte, North Carolina
time), then not later than 12:00 noon (Charlotte, North
Carolina time) on the next succeeding Business Day, together
with interest on such amount at the Federal Funds Effective
Rate for each day from and including the date of such drawing
to but excluding the date of payment by such Lender.
(iii) (A) If the applicable conditions to borrowing set
forth in Section 5.2 are satisfied, each such payment by a
Lender pursuant to Section 3.3(c)(ii) shall constitute a
Committed Advance which is a Base Rate Advance by such Lender
under the Revolving Credit Facility as of the date the
unreimbursed drawing was paid by the Issuer, or
(B) if the applicable conditions to borrowing set forth
in Section 5.2 are not satisfied, each such payment pursuant to
Section 3.3(c)(ii) shall constitute Obligations, payable on
demand by the Borrower, and shall bear interest at the rate set
forth in Section 4.1 from the date on which the unreimbursed
drawing was paid by the Issuer until such Obligations are paid
in full.
(d) The Borrower hereby irrevocably instructs the Agent
to disburse the proceeds of any Swingline Loans, Committed
Advances or payments made pursuant to subsections (b) or (c),
as the case may be, to the applicable Issuer, on behalf of the
Borrower, to be applied to the reimbursement
<PAGE>
obligation under the related Letter of Credit and Application, but
only the making of Swingline Loans or Committed Advances shall be
deemed to satisfy the Borrower's reimbursement obligation to the
Issuer under such Letter of Credit and Application; provided, that
the Issuer's rights and remedies in respect of any collateral for
the Borrower's Obligations under the Application shall remain
unaffected by any payments under Section 3.3(c)(ii) that are subject
to Section 3.3(c)(iii)(B), subject to the requirements of Section
3.4; and provided, further, that any amounts paid to the Agent for
the account of the Lenders for application to demand Obligations
arising pursuant to Section 3.3(c)(iii)(B) shall also reduce,
dollar-for-dollar, any claim for reimbursement by the Issuer of such
Letter of Credit under the Application.
Section Sharing of Payments and Risk.
(a) Each Issuer shall remit to the Agent, for the ratable
account of the Lenders for application to the Obligations (and,
if applicable, specifically for application to the demand
Obligations arising under Section 3.3(c)(iii)(B)) all monies
received by such Issuer as payments under or proceeds of
collateral securing any Application or Letter of Credit, other
than (x) documentation, negotiation, cable, amendment and other
similar fees and charges, if any, customarily imposed by such
Issuer in connection with the issuance of similar letters of
credit and (y) the portion of any standby Letter of Credit fee
expressly provided in Section 4.15(c) to be retained by the
Issuer; provided, however, that the Issuer may receive and
retain any amounts paid to it by or on behalf of the Borrower
or the named account party in reimbursement of drawings under a
Letter of Credit if and to the extent that no payments under
Section 3.3(b) or (c)(ii) have been made by the Lenders in
respect of such reimbursement obligation prior to the receipt
thereof by the Issuer. Such monies shall include, without
limitation, but subject to the preceding sentence, fees paid by
the Borrower or the named account party under an Application
for a standby Letter of Credit and payments by the Borrower or
the named account party to the Issuer in reimbursement for
drafts or drawings paid by such Issuer under a Letter of
Credit, and shall be remitted by the Issuer in the same type of
funds received by the Issuer, on the day of the Issuer's
receipt thereof if received on or prior to 12:00 noon
(Charlotte, North Carolina time) or, if received after 12:00
noon (Charlotte, North Carolina time), then not later than
12:00 noon (Charlotte, North Carolina time) on the next
succeeding Business Day.
(b) Each Lender shall share ratably in all risks
associated with any Applications and Letters of Credit
(including, without limitation, the risk that any fee
<PAGE>
associated with a Letter of Credit is not paid when due) to the
extent of its participation hereunder. An Issuer shall have no
obligation to pay any Lender such Lender's share of any payments
under or relating to an Application or Letter of Credit until such
Issuer actually receives payment thereof. At the time an Issuer
receives any funds for application to payment of any amounts (other
than the fees specified above payable to the Issuer only or amounts
in reimbursement of drawings in respect of which no payments under
Section 3.3(b) or (c)(ii) have been made) under or relating to such
Application or Letter of Credit, whether through payment by the
Borrower, from any other obligor thereunder, offset, counterclaim or
otherwise (but excluding payments made by the Lenders), such Issuer
will pay to the Agent, for the ratable account of the Lenders, such
amount in the same type of funds received by the Issuer. If an
Issuer is ever required for any reason to refund any such payment,
each Lender agrees to refund to the Agent, for the account of such
Issuer, promptly upon such Issuer's request, such Lender's ratable
share of such payment, together with such Lender's ratable share of
interest or penalties, if any, payable by the Issuer in connection
with the refund made by the Issuer. In the event that an Issuer is
not reimbursed by the Borrower in respect of any drawing under a
Letter of Credit issued by such Issuer and with regard to which it
has been determined by a final, unappealable decision of a court
having jurisdiction in the matter that the Borrower is not required
to reimburse the Issuer, then the Issuer shall refund to each Lender
any amount previously paid by such Lender to the Issuer with respect
to such unreimbursed drawing.
Section Administration of Letters of Credit and
Credit Documents. As between each Issuer, the Lenders and the
Agent:
(a) (i) After the issuance of a Letter of Credit, no
Issuer will reduce any principal, interest or fees reimbursable
or payable under the related Application or postpone any date
fixed for the payment of such principal, interest or fees
without the prior written consent of all of the Lenders and no
Issuer will increase the Stated Amount of any Letter of Credit
without the consent of the Agent, which consent shall not be
unreasonably withheld, and
(ii) subject to the provisions of Section 3.5(a)(i), an
Issuer may change, modify, waive or amend the terms of any
Letter of Credit or Application so long as such Letter of
Credit or Application, as amended, complies with the
requirements of Section 3.1; provided, however, that if any
Default or Event of Default shall have occurred and be
continuing, no Issuer will, without the prior written consent
of all of the Lenders, change, modify, waive or amend the terms
of any Letter of Credit or Application, except (A) to the
extent to which such Issuer is
<PAGE>
specifically required to do so by the terms thereof, or (B) to waive
immaterial nonconformity of documents presented as a condition to
draws.
(b) An Issuer shall have no duty (i) to exercise any
right, power, remedy or privilege granted to it under or
relating to a Letter of Credit or Application, (ii) to
ascertain whether any default under such Application has
occurred and is continuing or otherwise to inquire into the
performance or observance on the part of the Borrower or named
account party of any term, covenant, condition or agreement to
be performed or observed by it, or (iii) to take or not to take
any action under or relating to a Letter of Credit or
Application (other than as specifically required to do so by
the terms thereof).
(c) An Issuer shall not be obligated (i) to extend or
otherwise amend or modify a Letter of Credit (except to the
extent such Issuer is specifically required to do so by the
terms thereof) or any payment terms relating to any principal,
interest or fees reimbursable under an Application; or (ii) to
execute any amendment or modification of a Letter of Credit or
Application to the extent such amendment or modification would
have an adverse effect on the Issuer.
(d) Each Issuer will notify the Agent promptly of its
issuance of each approved Letter of Credit, including the named
account party, Stated Amount, expiration date, name of the
beneficiary, and type (whether standby or documentary) of such
Letter of Credit, and the Agent will notify all Lenders not
less frequently than quarterly of the Letters of Credit
outstanding from time to time.
Section Exoneration.
(a) It is understood and agreed that each Lender has made
and shall continue to make its own credit determinations and
analyses to enter into the transactions contemplated hereby
based upon such information as such Lender may deem sufficient
and not based on any statements or representations by an Issuer
or the Agent. It is understood and agreed that the sales of
participations to the Lenders in Letters of Credit and related
Applications, collateral and other Obligations are made without
recourse to any Issuer and that no Issuer makes any
representation or warranty of any kind to any Lender and shall
not be responsible to any Lender for (i) the due execution,
legality, validity, enforceability, genuineness, sufficiency or
collectability of any Application, (ii) any representation,
warranty or statement made in or in connection with any
Application, (iii) the financial condition or creditworthiness
of the Borrower or any named account party, (iv) the
performance of or compliance with
<PAGE>
any of the terms or provisions of any Application on the part of the
Borrower or any named account party or of any Letter of Credit on
the part of the beneficiary thereof, or (v) inspecting any of the
property, books or records of the Borrower or any named account
party.
(b) No Issuer nor any of its officers, directors,
employees, agents or attorneys shall be liable for any mistake,
error of judgment or action taken or omitted to be taken in
connection with a Letter of Credit or an Application, except
for its or their own gross negligence or willful misconduct.
An Issuer may consult with legal counsel (including counsel for
the Borrower, the named account party, if different, and the
beneficiary under the applicable Letter of Credit), independent
public accountants and other experts selected by it and shall
not be liable for any action taken or omitted to be taken by it
(x) in accordance with the advice of its counsel or (y) except
as may be otherwise provided in the Letter of Credit or related
Application, in connection with the applicable Letter of Credit
or Application pursuant to any notice, consent, certificate or
other writing received by such Issuer and believed by it in
good faith to be genuine. An Issuer shall incur no liability
under or in respect of an Application or Letter of Credit or
any document relating thereto, to any other Lender or, except
as may be otherwise provided in the Letter of Credit or related
Application, to the Borrower or other named account party, by
acting upon any notice, consent, certificate or other
instrument or writing (which may be by facsimile, telegram,
cable or telex) believed by it in good faith to have been
delivered or made by an authorized Person. An Issuer and its
subsidiaries and affiliates may engage in any kind of banking
or trust business with any obligor under an Application without
liability or obligation to account to the Lenders therefor,
except as set forth herein.
Section Cash Collateral; Supporting Letters of Credit. If,
notwithstanding the provisions of Section 3.1, any Letter of Credit
is outstanding when this Agreement is terminated (including, without
limitation, any termination of the Commitments pursuant to Section
10.2) or when an Event of Default shall have occurred and be
continuing, then on or prior to such Termination Date or on demand
by the Agent after the occurrence and during the continuation of
such Event of Default, the Borrower shall deposit with the Agent,
for the benefit of the Issuer and for the ratable benefit of the
Lenders, with respect to each Letter of Credit then outstanding,
Cash Collateral in an amount equal to the sum of the Stated Amount
of such Letter of Credit, plus the amount of any unreimbursed
drawings thereunder, plus the amount of any fees, charges, and other
amounts which may become payable to such Issuer under such Letter of
Credit or the related Application for application to the
reimbursement and other Obligations of the Borrower thereunder. The
Borrower may,
<PAGE>
so long as no Event of Default has occurred and is continuing, in
lieu of making such deposit of Cash Collateral with respect to any
such Letter of Credit, arrange for the issuance of a standby letter
of credit, naming the Issuer of such Letter of Credit as the
beneficiary, and otherwise in form and substance reasonably
satisfactory to such Issuer, or make such other arrangements with
such Issuer as shall, in any event, cause such Issuer to repurchase
from each Lender such Lender's participation in such Letter of
Credit and release the Agent and each Lender from any and all
obligation in respect of such Letter of Credit, by a written
instrument in form and substance reasonably satisfactory to the
Agent and each Lender, and cause such instrument to be delivered to
the Agent and each Lender, duly executed by such Issuer. At the
Borrower's request, but subject to the Agent's reasonable approval,
the Agent shall invest any Cash Collateral consisting of cash or any
proceeds of Cash Collateral consisting of cash in Permitted
Investments of the types described in clauses (i), (ii) and (iii) of
paragraph (a) of the definition thereof, and any commissions,
reasonable expenses and penalties reasonably incurred by the Agent
in connection with any investment and redemption of such Cash
Collateral shall be Obligations and may be paid out of the proceeds
of any earnings received by the Agent from the investment of such
Cash Collateral or out of such cash itself. The Agent makes no
representation or warranty as to, and shall not be responsible for,
the rate of return, if any, earned on any investment of any Cash
Collateral. Any earnings on such Cash Collateral shall be held as
additional Cash Collateral on the terms set forth in this Section
3.7. If, after all Letters of Credit outstanding on the Termination
Date have expired and all reimbursement Obligations of the Borrower
thereunder and under the related Applications have been paid in
full, any other Obligations remain unpaid, any remaining Cash
Collateral may be applied to pay such Obligations in such order as
the Agent may determine, and any Cash Collateral remaining after the
indefeasible payment in full of all Obligations shall promptly be
paid to the Borrower or to whomever may be legally entitled thereto.
ARTICLE
DEFAULT INTEREST RATE; PREPAYMENTS; GENERAL PROVISIONS
Section Default Interest Rate. Any amount of principal of
any Loan which is not paid when due (whether at maturity, by reason
of acceleration or otherwise) and, to the extent permitted by
Applicable Law, overdue interest and fees or any other amounts
payable hereunder or under the Notes shall bear interest from and
including the due date thereof until paid, compounded daily and
payable on demand, at a rate per annum equal to (i) if such due date
occurs prior to the end of the Interest Period for such Loan, 2%
above the interest rate applicable to such Loan for such Interest
Period until the expiration of such Interest Period, and thereafter,
2% above the Base Rate, and (ii)
<PAGE>
in all other cases, 2% above the rate then applicable to Base Rate
Advances.
Section Conversion/Continuation. Provided that no Default or
Event of Default shall have occurred and be continuing, the Borrower
may convert or continue all or any part (subject to the restrictions
applicable to Committed Loans comprised of each Type of Committed
Advance as set forth in Section 2.1 and to the provisions of
Sections 2.4 and 4.5) of any outstanding Committed Loan comprised of
Committed Advances of one Type (a) into a Committed Loan or
Committed Loans comprised of Committed Advances of any other Type
provided for in this Agreement or (b) as a Committed Loan or
Committed Loans comprised of Committed Advances of the same Type, in
the same aggregate principal amount, on any Business Day (which, in
the case of a conversion or continuation of a Committed Loan
comprised of Eurodollar Advances, shall be the last day of the
Interest Period applicable to such Committed Advances), upon notice
(which notice shall be irrevocable) given in accordance with Section
2.3(e). Competitive Loans and Swingline Loans may not be converted
or continued.
Section Reduction of Commitments.
(a) Voluntary Reductions. The Borrower shall have the
right, upon at least three Business Days' notice to the Agent,
to terminate in whole or permanently reduce ratably in part the
unused portions of the Commitments of the Lenders, provided
that each partial reduction shall be in the aggregate amount of
$10,000,000 or an integral multiple of $1,000,000 in excess
thereof. The Agent shall promptly notify each of the Lenders
of its receipt of any notice pursuant to this Section 4.3(a).
(b) Mandatory Reductions.
(i) The Commitments of the Lenders automatically shall be
reduced ratably on the first to occur of (A) the date that the
Alabama Letter of Credit is fully drawn, (B) the expiration
date of the Alabama Letter of Credit and (C) the date that the
Alabama Letter of Credit is returned to the Bank for
cancellation, such reduction to be in an amount (rounded
downwards, if necessary, to the nearest whole multiple of
$500,000) equal to the undrawn amount of the Alabama Letter of
Credit as of such date.
(ii) The Commitments of the Lenders automatically shall be
reduced ratably by an amount equal to the amount of any
prepayment of principal of the Committed Loans made pursuant to
Section 4.4(a)(ii).
Section Prepayments.
<PAGE>
(a) Mandatory.
(i) If at any time the sum of the principal amounts of
Committed Loans outstanding plus Competitive Loans outstanding
plus Swingline Loans outstanding shall exceed the Revolving
Credit Facility, then the Borrower shall prepay so much of the
Loans as shall be necessary to eliminate such excess, together
with accrued and unpaid interest on the principal amount
prepaid to the date of prepayment.
(ii) If at any time on or after the Agreement Date the
Borrower or any of its Subsidiaries shall receive Net
Disposition Proceeds (other than in connection with the sale by
the Borrower prior to the Agreement Date of the Harper Brothers
Business Unit) which in the aggregate exceed $25,000,000, then
the Borrower shall promptly prepay the Loans by an amount equal
to such excess, together with accrued and unpaid interest on
the principal amount prepaid to the date of prepayment.
(iii) Amounts prepaid pursuant to clauses (i) and (ii)
above shall be applied first to the Swingline Loans (first to
Swingline Loans bearing interest at a rate based on the
Variable CD Rate and then to Swingline Loans bearing interest
at a fixed rate (in chronological order of the occurrence of
the last days of the Interest Periods applicable thereto)),
second to the Committed Loans (first to Base Rate Advances and
then to Eurodollar Advances (in chronological order of the
occurrence of the last days of the Interest Periods applicable
thereto)) and third to the Competitive Loans (in chronological
order of the occurrence of the last days of the Interest
Periods applicable thereto).
(b) Optional.
(i) The principal amount of each Committed Loan
comprised of Base Rate Advances may be prepaid, in whole or
from time to time in part, together with accrued and unpaid
interest on the principal amount prepaid to the date of
prepayment, by the Borrower, at any time, without premium or
penalty, on not less than one Business Day's prior notice to
the Agent specifying the Committed Loan to be prepaid, the date
of prepayment and the principal amount to be prepaid, and if
such notice is given, such prepayment shall be made on the date
specified in such notice. The Agent shall promptly notify each
of the Lenders of its receipt of any notice pursuant to this
Section 4.4(b)(i). The principal amount of each Committed Loan
comprised of Eurodollar Advances may be prepaid, in whole or in
part by the Borrower, without premium or penalty, on the last
day of the Interest Period applicable to such Committed
Advances, upon notless than three Business Day's notice, to the
Agent,
<PAGE>
specifying the Committed Loan to be prepaid, the last day of the
Interest Period applicable to the Committed Advances comprising such
Committed Loan and the principal amount to be prepaid, and if such
notice is given, such prepayment shall be made on the last day of
the Interest Period specified in such notice. Amounts prepaid on
the Committed Loans pursuant to this Section 4.4(b)(i) may be
reborrowed in accordance with the provisions hereof.
(ii) The principal amount of each Swingline Loan bearing
interest at a rate based on the Variable CD Rate may be
prepaid, in whole or from time to time in part, together with
accrued and unpaid interest on the principal amount prepaid to
the date of prepayment, by the Borrower, at any time, without
premium or penalty, on not less than one Business Day's prior
notice to the Agent specifying the Swingline Loan to be
prepaid, the date of prepayment and the principal amount to be
prepaid, and if such notice is given, such prepayment shall be
made on the date specified in such notice. Except as otherwise
provided in Section 2.9(b)(iv) and Section 4.4(a), Swingline
Loans bearing interest at a fixed rate may not be prepaid.
Amounts prepaid on the Swingline Loans pursuant to this Section
4.4(b)(ii) may be reborrowed in accordance with the provisions
hereof.
(iii) Except as otherwise provided in Section 4.4(a),
Competitive Loans may not be prepaid.
Section Changed Circumstances.
(a) If the introduction of or any change in or in the
interpretation of (in each case, after the date hereof) any law
or regulation makes it unlawful, or any central bank or other
governmental authority asserts, after the date hereof, that it
is unlawful, for any Lender or its Eurodollar Lending Office to
perform its obligations hereunder to make Eurodollar Advances
or to fund or maintain Eurodollar Advances hereunder, the Agent
shall notify the Borrower of such event and the right of the
Borrower to select Eurodollar Advances for any subsequent
Committed Loan or in connection with any subsequent conversion
of any Committed Loan shall be suspended until such Lender
shall notify the Agent that the circumstances causing such
suspension no longer exist or such Lender shall cease to be a
party hereto, and the Borrower shall forthwith prepay in full
all Eurodollar Advances then outstanding, with interest accrued
thereon, unless the Borrower, within three Business Days of
such notice from the Agent, requests the conversion of all
Eurodollar Advances then outstanding into Base Rate Advances in
accordance with Sections 2.3(e) and 4.2; provided, that if the
date of such repayment or proposed conversion is not the last
day of the Interest Period applicable to such Eurodollar
Advances, the Borrower shall also pay any amount due pursuant
to Section 4.8.
<PAGE>
(b) If the Majority Lenders shall, at least one Business
Day before the date of any requested Committed Loan or the date
of any conversion or continuation of any existing Committed
Loan (each such Committed Loan requested to be made, or as such
Committed Loan is to be converted or continued, a "Pending
Committed Loan"), notify the Agent that the Eurodollar Rate for
Eurodollar Advances comprising such Pending Committed Loan will
not adequately reflect the cost to such Majority Lenders of
making or funding their respective Eurodollar Advances, as the
case may be, for such Pending Committed Loan, the right of the
Borrower to select Eurodollar Advances for such Pending
Committed Loan, any subsequent Committed Loan or in connection
with any subsequent conversion or continuation of any Committed
Loan shall be suspended until the Agent shall notify the
Borrower and the Lenders that the circumstances causing such
suspension no longer exist, and each Committed Advance
comprising each Pending Committed Loan and each such subsequent
Committed Loan requested to be made, continued or converted
shall be made or continued as, or converted into, a Base Rate
Advance or, upon notice given in accordance with Section 2.3(a)
or 2.3(e), as applicable, a Committed Advance of the Type, if
any, as to which the Majority Lenders shall not have given the
notice provided in this subparagraph (b).
(c) If, due to either (i) the introduction of or any
change (other than any change by way of imposition or increase
of reserve requirements included in the Eurodollar Reserve
Percentage) in or in the interpretation of, in each case after
the date hereof, any law or regulation (except to the extent
such introduction, change or interpretation affects taxes
measured by net income) or (ii) the compliance with any
guideline or request (except to the extent such guideline or
request affects taxes measured by net income) from any central
bank or other governmental authority (whether or not having the
force of law) made after the date hereof, there shall be any
increase in the cost to any Lender of agreeing to make or
making, funding or maintaining Eurodollar Advances (other than
as separately provided for in Section 4.5(d)), then the
Borrower shall from time to time, upon demand by such Lender
(with a copy of such demand to the Agent), pay to the Agent for
the account of such Lender additional amounts sufficient to
compensate such Lender for such increased cost; provided, that
no Lender shall be entitled to demand, nor shall the Borrower
be obligated to pay, any such amount attributable to a period
more than 90 days prior to the date of such demand.
(d) If (x) the adoption of or change in, after the date
hereof, any law, rule, regulation or guideline regarding
capital requirements for banks or bank holding companies, or
any change, after the date hereof, in the interpretation or
application thereof by any governmental
<PAGE>
authority charged with the interpretation or administration thereof,
or (y) compliance by such Lender with any guideline, request or
directive, made or promulgated after the date hereof, of any such
entity regarding capital adequacy (whether or not having the force
of law), has the effect of reducing the return on a Lender's capital
as a consequence of its Commitments hereunder, its maintaining its
Committed Advances or other Loans hereunder, or its obligations
pursuant to Article 3 in respect of Letters of Credit, to a level
below that which such Lender could have achieved but for such
adoption, change or compliance (taking into consideration such
Lender's policies with respect to capital adequacy immediately
before such adoption, change or compliance and assuming the full
utilization of such Lender's capital immediately before such
adoption, change or compliance) by any amount deemed by such Lender
to be material, then such Lender shall promptly after its
determination of such occurrence notify the Borrower and the Agent
thereof. The Borrower agrees to pay to the Agent, for the account
of such Lender, as an additional fee from time to time, on demand by
such Lender, such amount as such Lender certifies to be the amount
that will compensate it for such reduction in connection with its
Commitments hereunder or its obligations pursuant to Article 3 in
respect of Letters of Credit; provided, that no Lender shall be
entitled to demand, nor shall the Borrower be obligated to pay, any
such amount attributable to a period more than 90 days prior to the
date of such demand.
(e) Before giving any notice pursuant to Section 4.5(a)
or making any demand pursuant to Section 4.5(c) or (d) each
Lender agrees to use its best efforts (consistent with its
internal policy and legal and regulatory restrictions) to
designate a different Applicable Lending Office if the making
of such a designation would avoid the need for such notice or
demand, or reduce the amount of such increased cost or
reduction in return and would not, in the reasonable judgment
of such Lender, be otherwise disadvantageous to such Lender.
(f) A certificate of the Lender claiming compensation
under Section 4.5(c) or (d) shall be conclusive in the absence
of manifest error. Such certificate shall set forth the nature
of the occurrence giving rise to such compensation, the
additional amount or amounts to be paid to it hereunder and the
method by which such amounts were determined. In determining
such amount, a Lender may use any reasonable averaging and
attribution methods.
Section Interest Rate Determination.
(a) Each Reference Bank agrees to furnish to the Agent
timely information for the purpose of determining each
Eurodollar Rate, as applicable. If any one or more of the
<PAGE>
Reference Banks shall not furnish such timely information to the
Agent for the purpose of determining any such interest rate, the
Agent shall determine such interest rate on the basis of timely
information furnished by the remaining Reference Banks; provided,
however, that if fewer than two Reference Banks furnish timely
information to the Agent for determining the Eurodollar Rate for
Eurodollar Advances comprising any Committed Loan requested or as to
which a Notice of Conversion/Continuation has been given, the right
of the Borrower to select Eurodollar Advances for such Committed
Loan or for any subsequent Committed Loan or to request any
subsequent conversion to or continuation of Eurodollar Advances
comprising any Committed Loan shall be suspended until the Agent
shall notify the Borrower and the Lenders that the circumstances
causing such suspension no longer exist, and each Eurodollar Advance
comprising any such Committed Loan shall be or become a Base Rate
Advance.
(b) The Agent shall give prompt notice to the Borrower
and the Lenders of the applicable interest rate determined by
the Agent for purposes of Section 2.6, and the applicable rate,
if any, furnished by each Reference Bank for the purpose of
determining the applicable interest rate under Section
2.6(b)(i).
Section Manner of Payment.
(a) Each payment (including prepayments) by the Borrower
on account of the principal of or interest on any Loans or of
any other of the Obligations payable to the Agent or to the
Agent for the account of any or all Lenders under this
Agreement or any Note shall be made not later than 10:00 a.m.
(Charlotte, North Carolina time) on the date specified for
payment under this Agreement to the Agent at the Agent's
Office, in Dollars, in immediately available funds, and shall
be made without any setoff, counterclaim or deduction
whatsoever. The Borrower shall, at the time it makes any
payment under this Agreement or any Note, specify to the Agent
the Loans or other Obligations to which such payment is to be
applied (and in the event it fails so to specify, or if an
Event of Default has occurred and is continuing, the Agent may
distribute such payment to the Lenders in such manner as the
Majority Lenders or, failing receipt by the Agent of
instructions from the Majority Lenders, the Agent may determine
to be appropriate, subject to the provisions of Section 4.11
hereof). Any payment received after such time but before 2:00
p.m. (Charlotte, North Carolina time) on such day shall be
deemed a payment on such date for the purposes of Section 10.1,
but for all other purposes shall be deemed to have been made on
the next succeeding Business Day.
(b) The Borrower hereby irrevocably authorizes the Agent,
each Lender and each Affiliate of each Lender to
<PAGE>
charge any account of the Borrower maintained with the Agent, such
Lender or Affiliate with such amounts (whether in U.S. Dollars or
the equivalent in other currencies) as may be necessary from time to
time to pay any Obligations (whether or not owed to the Agent or
such Lender) which are not paid when due.
Section Payments Not at End of Interest Period; Failure to
Borrow. If for any reason:
(i) any payment of principal with respect to any
Eurodollar Advance or Competitive Loan of any Lender or
any Swingline Loan bearing interest at a fixed rate is
made on any day other than the last day of the Interest
Period applicable thereto, or,
(ii) after (A) having given a Notice of Borrowing
pursuant to Section 2.3(a) with respect to any Committed
Loan to be comprised of Eurodollar Advances, (B) having
accepted a Competitive Bid pursuant to Section 2.8(d) with
respect to any Competitive Loan or (C) having given a
notice of borrowing pursuant to Section 2.9(b)(i) with
respect to any Swingline Loan bearing interest at a fixed
rate, such Committed Loan, Competitive Loan or Swingline
Loan, as the case may be, is not made due to the
Borrower's failure to fulfill the applicable conditions
set forth in Article 5,
then the Borrower shall pay to the Agent, for the account of each
affected Lender, an amount computed pursuant to the following
formula:
L = (R - T) x P x D
360
L = amount payable to such Lender
R = interest rate for the applicable Eurodollar Advance,
Competitive Loan or Swingline Loan
T = effective interest rate per annum at which any readily
marketable bonds or other obligations of the United
States, selected at the Agent's reasonable discretion,
maturing on or near the last day of the then applicable or
requested Interest Period for the applicable Eurodollar
Advance, Competitive Loan or Swingline Loan and in
approximately the same amount as the applicable Eurodollar
Advance, Competitive Loan or Swingline Loan, can be
purchased by the Agent on the day of such payment of
principal or failure to borrow
P = the amount of principal paid or the amount of the
requested Eurodollar Advance, Competitive Loan or
Swingline Loan
D = the number of days remaining in the Interest Period as of
the date of such payment or the number of days in the
requested Interest Period
<PAGE>
The Borrower shall pay such amount upon presentation by the Agent of
a statement setting forth the amount and the Agent's calculation
thereof pursuant hereto, which statement shall be deemed true and
correct absent manifest error.
Section Computation of Interest and Fees. Interest and fees
payable hereunder shall be computed on the basis of a year of 360
days and paid for the actual number of days elapsed. If any payment
required by this Agreement becomes due on a day that is not a
Business Day such payment shall be made on the next succeeding
Business Day, and such extension shall be included in computing
payments of interest (at the rate applicable on such due date) or
facility fee, as the case may be, provided, that if the due date for
any payment of principal of any of the Obligations is extended by
operation of law, interest shall be payable on such amount of
principal for the period of such extension, at the applicable rate
set forth in Section 4.1, to the extent permitted by Applicable Law,
but in no event at a rate less than the rate applicable to such
Obligations on the original due date. Interest shall accrue from
and include the date of advance, but exclude the date of payment.
Section Termination of Agreement. The Borrower shall have
the right, at any time, to terminate this Agreement upon not less
than three Business Days' prior written notice to the Agent, which
notice shall specify the effective date of such termination. On the
date specified in such notice, such termination shall be effected,
provided, that the Borrower shall, on or prior to such date, (a) pay
to the Agent for the account of the Lenders, in immediately
available funds, an amount equal to the outstanding principal amount
of all Loans, together with (i) accrued interest thereon, (ii)
accrued fees payable pursuant to Section 4.15(b) from the date such
fees were last paid through the effective date of termination, (iii)
any amounts payable pursuant to Section 12.2 or 12.13, (iv) any
amounts payable pursuant to Section 4.5 or 4.8 and (v) any and all
other amounts owing to the Agent or any Lender under this Agreement
or any Note, and (b) satisfy its Obligations under Section 3.7.
Section Ratable Treatment. Each Committed Loan, all payments
in respect of participations pursuant to Section 2.9(b)(iv) and all
payments pursuant to Section 3.3(c)(ii) shall be made ratably by the
Lenders on the basis of their respective Commitments. Each
repayment or prepayment of principal and each payment of interest on
each Committed Loan or any Obligations in which the Lenders have
purchased ratable participations pursuant to Section 2.9(b)(iv) or
Section 3.3(c)(iii)(B) and each payment of fees pursuant to Section
4.15(a) or 4.15(b) shall be made to the Agent for the account of the
Lenders, in immediately available funds, and shall be distributed by
the Agent to the Lenders in like funds ratably (other than amounts
payable pursuant to Section 2.6(b)(ii), 4.5(c), 4.5(d) or 4.8) for
the account of their respective Applicable Lending Offices, and each
<PAGE>
payment of any other amount payable to any Lender hereunder or under
the Notes or to any Issuer hereunder, shall be made to the Agent in
immediately available funds and shall be distributed by the Agent,
in like funds, to such Lender for the account of its Applicable
Lending Office or to such Issuer, in each case to be applied in
accordance with the terms of this Agreement. With respect to
Competitive Loans, if the Borrower fails to specify the particular
Competitive Loan or Loans as to which any payment or other amount
should be applied and it is not otherwise clear as to the particular
Competitive Loan or Loans to which such payment or other amounts
relate, or any such payment or other amount is to be applied to
Competitive Loans without regard to any such direction by the
Borrower, then each payment or prepayment of principal on
Competitive Loans and each payment of interest or other amount on or
in respect of Competitive Loans, shall be allocated pro rata among
the relevant Lenders in accordance with the then outstanding amounts
of their respective Competitive Loans.
Section Sharing of Payments, etc. If any Lender shall obtain
any payment (whether voluntary, involuntary, through the exercise of
any right of setoff, receipt of payment under any Subsidiary
Guaranty, or otherwise) on account of the Obligations owing to it
(other than pursuant to Section 2.6(b)(ii), 4.5(c), 4.5(d) or 4.8)
in excess of its ratable share of payments on account of the
Obligations obtained by all the Lenders, such Lender shall forthwith
purchase from the other Lenders such participations in the
Obligations owing to them as shall be necessary to cause such
purchasing Lender to share the excess payment ratably with each of
them; provided, however, that if all or any portion of such excess
payment is thereafter recovered from such purchasing Lender, such
purchases shall be rescinded and each other Lender shall repay to
the purchasing Lender the purchase price received by it to the
extent of its Commitment Percentage of such recovery together with
an amount equal to such other Lender's ratable share (according to
the proportion of (i) the amount of such Lender's required repayment
to (ii) the total amount so recovered from the purchasing Lender) of
any interest or other amount paid or payable by the purchasing
Lender in respect of the total amount so recovered. The Borrower
agrees that any Lender so purchasing a participation from another
Lender pursuant to this Section 4.12 may, to the fullest extent
permitted by law, exercise all its rights of payment (including any
right of set-off) with respect to such participation as fully as if
such Lender were the direct creditor of the Borrower in the amount
of such participation. Nothing contained in this Section 4.12 shall
or shall be deemed (A) to prevent any Issuer from receiving monies
from the Borrower or a Subsidiary Guarantor and applying such monies
to the Borrower's outstanding reimbursement obligation under any
Letter of Credit issued by such Issuer and in respect of which no
Swingline Loan pursuant to Section 3.3(b) and no Committed Loan or
other payment by the Lenders pursuant to Section 3.3(c)(ii) has been
made or (B) to prevent the Swingline Lender from receiving monies
from the Borrower or a Subsidiary
<PAGE>
Guarantor and applying such monies to the Borrower's outstanding
Swingline Loans in respect of which no Committed Loan or other
payment by the Lenders pursuant to Section 2.9(b)(iv) has been made.
Section U.S. Taxes. (a) The Borrower agrees to pay to each
Lender that is not a U.S. Person (a "Foreign Lender") such
additional amounts as are necessary in order that the net payment of
any amount due to such Foreign Lender hereunder, after deduction for
or withholding in respect of any U.S. Taxes imposed with respect to
such payment (or in lieu thereof, payment of such U.S. Taxes by such
Foreign Lender), will not be less than the amount stated herein to
be then due and payable, provided that the foregoing obligation to
pay such additional amounts shall not apply:
(i) to any payment to any Foreign Lender hereunder
unless such Foreign Lender is, on the Agreement Date (or
on the date it becomes a Lender as provided in Section
12.10) and on the date of any change in the Applicable
Lending Office of such Foreign Lender, entitled to submit
either a Form 1001 (relating to such Foreign Lender and
entitling it to a complete exemption from withholding on
all interest to be received by it hereunder in respect of
the Obligations) or a Form 4224 (relating to all interest
to be received by such Foreign Lender hereunder in respect
of the Obligations); and any Foreign Lender that is, on
the Agreement Date (or on the date that it becomes a
Lender as provided in Section 12.10) and on the date of
any change in its Applicable Lending Office, entitled to
submit a Form 1001 or a Form 4224 will submit such Form in
duplicate to the Borrower, with a copy to the Agent at
such time; or
(ii) to any U.S. Tax imposed solely by reason of the
failure by such Foreign Lender to comply with applicable
certification, information, documentation or other
reporting requirements concerning the nationality,
residence, identity, or connections with the United States
of America of such Foreign Lender if such compliance is
required by statute or regulation of the United States of
America as a precondition to relief or exemption from such
U.S. Taxes;
and provided further that the Borrower shall have no obligation to
pay additional amounts to any Foreign Lender pursuant to this
Section 4.13 with respect to any payment to such Foreign Lender made
prior to the date that the Borrower has been notified by such
Foreign Lender that payments to such Foreign Lender hereunder are or
have become subject to deduction for or withholding in respect of
any U.S. Taxes.
For the purposes of this Section 4.13(a), (1) "Form 1001" shall
<PAGE>
mean Form 1001 (Ownership, Exemption, or Reduced Rate Certificate)
of the Department of the Treasury of the United States of America,
(2) "Form 4224" shall mean Form 4224 (Exemption from Withholding of
Tax on Income Effectively Connected with the Conduct of a Trade or
Business in the United States) of the Department of the Treasury of
the United States of America (or in relation to either such Form
such successor and related forms as may from time to time be adopted
by the relevant taxing authorities of the United States of America
to document a claim to which such Form relates), (3) "U.S. Person"
shall mean a citizen, national or resident of the United States of
America, a corporation, partnership or other entity created or
organized in or under any laws of the United States of America or
any state thereof or the District of Columbia, or any estate or
trust that is subject to Federal income taxation regardless of the
source of its income and (4) "U.S. Taxes" shall mean any present or
future tax, assessment or other charge or levy imposed by or on
behalf of the United States of America that is not imposed on U.S.
Persons.
(b) Within thirty (30) days after paying any amount to
the Agent or any Foreign Lender from which it is required by
law to make any deduction or withholding, and within thirty
(30) days after it is required by law to remit such deduction
or withholding to any relevant taxing or other authority, the
Borrower shall deliver to the Agent for delivery to such
Foreign Lender evidence reasonably satisfactory to such Foreign
Lender of such deduction, withholding or payment (as the case
may be).
Section Loan Account.
(a) Each Lender shall open and maintain on the books of
its Applicable Lending Offices a separate loan account in the
name of the Borrower. Each such loan account shall show as
debits thereto such Lender's Loans made for the account of such
Applicable Lending Office to the Borrower under this Agreement,
any amounts paid other than as Loans by such Lender to or for
the account of the Swingline Lender pursuant to Section
2.9(b)(iv) or to or for the account of any Issuer pursuant to
Section 3.3(c)(iii)(B), and, as credits thereto, all payments
received by such Lender and applied to principal of such Loans
or such other payments, so that the aggregate balance of the
loan accounts of the Borrower at all times reflects the
principal amount outstanding from such Lender to the Borrower.
(b) The Agent shall maintain on its books a control
account for the Borrower in which shall be recorded (i) the
amount of each disbursement made hereunder to or for the
account of the Borrower, (ii) the Stated Amount of each
outstanding Letter of Credit, (iii) the amount of any principal
or interest due or to become due from the Borrower hereunder,
(iv) the amount of any sum received by the Agent
<PAGE>
hereunder in respect of principal or interest from the Borrower and
each Lender's ratable share thereof, and (v) the amount of each
payment received by any Issuer from the Borrower or any Subsidiary
Guarantor in reimbursement of a payment by such Issuer under any
Letter of Credit issued by it.
(c) The entries made in the accounts pursuant to
paragraphs (a) and (b) shall be prima facie evidence, in the
absence of manifest error, of the existence and amounts of
theObligations of the Borrower therein recorded and in the case
of discrepancy between such accounts, in the absence of
manifest error, the accounts maintained pursuant to paragraph
(b) shall be controlling.
Section Fees.
(a) Upfront Fee. The Borrower shall pay to the Agent for
the account of each Lender on the Agreement Date, in
consideration of the Commitments of the Lenders, an upfront fee
in accordance with the terms of a separate letter agreement
between the Borrower and the Agent.
(b) Facility Fee. The Borrower agrees to pay a facility
fee on the average daily amount of each Lender's Commitment
(whether used or unused) from (a) the Effective Date in the
case of each Lender a party hereto on such date and (b) the
effective date specified in the Assignment and Acceptance
pursuant to which it becomes a Lender in the case of each other
Lender, until the Termination Date at the rate of 0.25% per
annum, such facility fee to be payable in arrears on the first
day of each January, April, July and October, commencing on
October 1, 1994, and on the Termination Date.
(c) Letter of Credit Fees. The Borrower shall pay to
each Issuer, for such Issuer's own account, in connection with
each Letter of Credit issued by such Issuer, all documentation,
negotiation, cable, amendment and other similar fees and
charges customarily imposed by such Issuer in connection with
its issuance of similar letters of credit. If, in connection
with the issuance of any documentary Letter of Credit, the
Borrower shall be liable to the Issuer for any additional fees
not in the nature of reimbursement of expenses incurred or
compensation for services performed in administering such
Letter of Credit, such fees shall be paid by the Borrower to
the Agent for the ratable account of the Lenders. If any
standby Letter of Credit (including without limitation the
Alabama Letter of Credit) shall be issued, the Borrower shall
pay to the Issuer thereof a per annum fee equal to the
Applicable Margin plus 0.125% on the daily Stated Amount of any
such standby Letter of Credit, payable in arrears on the first
day of each January, April, July and October, commencing on
<PAGE>
October 1, 1994, and on the Termination Date, and the Issuer shall
remit to the Agent, for the ratable account of the Lenders (net of
such Issuer's Commitment Percentage thereof), the excess of such fee
over 0.125% per annum on the Stated Amount of such Letter of Credit
for the applicable period; provided, however, the Lenders shall not
be entitled to any such fee in respect of a standby Letter of Credit
which is an Existing Letter of Credit if such fee has been deemed to
be earned during the period prior to the Effective Date (it being
understood and agreed by each of the Lenders that any such fee in
respect of a standby Letter ofCredit which is an Existing Letter of
Credit shall be deemed to be earned evenly throughout the period for
which it is paid regardless of when it was paid).
(d) Agent Fee. In connection with and in consideration
of the ongoing administration of the Facility, the Borrower
shall pay to the Agent for its account alone, a fee in
accordance with the terms of a separate letter agreement
between the Borrower and the Agent.
ARTICLE
CONDITIONS PRECEDENT
Section Conditions Precedent to Initial Loans. The
obligations of the Lenders to make the initial Loan or Loans
hereunder are subject to the conditions precedent that (a) no
action, proceeding, investigation, regulation or legislation shall
have been instituted, threatened or proposed before any court,
governmental agency or legislative body to enjoin, restrain, or
prohibit, or to obtain substantial damages in respect of, or which
is related to or arises out of, this Agreement, or the consummation
of the transactions contemplated hereby, or which may have a
Materially Adverse Effect on the Borrower or on the Borrower and its
Subsidiaries taken as a whole and (b) the Agent shall have received
on or before the day of such initial Loan or Loans the following,
each dated the Agreement Date (or such recent date as may be
acceptable to the Agent), in form and substance satisfactory to the
Agent and, as applicable, in sufficient copies (except for the
Notes) for each Lender:
(i) The Notes to the order of the respective Lenders.
(ii) Copies of the certificate or articles of
incorporation and by-laws of the Borrower and each Subsidiary
Guarantor as in effect on the Effective Date, certified by an
Authorized Officer of the Borrower or such Subsidiary
Guarantor, as the case may be.
(iii) Certified copies of all corporate action, including
stockholder approval, if necessary, taken by the
<PAGE>
Borrower and each Subsidiary Guarantor to authorize the execution,
delivery and performance of this Agreement and the Loan Documents to
which it is a party and the borrowings and guaranty of the
Obligations under this Agreement and the Subsidiary Guaranties.
(iv) Certificates of incumbency and specimen signatures
with respect to each of the officers of the Borrower and each
Subsidiary Guarantor authorized to execute and deliver this
Agreement and the Loan Documents on its behalf or any
certificate or instrument to be delivered in connection with
this Agreement or to request borrowings or Letters of Credit
under this Agreement.
(v) A certificate evidencing the existence, and where
the same may be obtained, the good standing of the Borrower and
each Subsidiary Guarantor in the jurisdiction of its
incorporation and, if different, the jurisdiction(s) in which
its chief executive office and/or principal place of business
is located.
(vi) A Subsidiary Guaranty, duly executed and delivered
by each Significant Subsidiary of the Borrower.
(vii) Copies of all the financial statements referred to
in Section 6.1(n) and meeting the requirements thereof.
(viii) A favorable opinion of Wyche, Burgess, Freeman &
Parham, P.A., counsel for the Borrower and each Subsidiary
Guarantor which is incorporated in either South Carolina or
Delaware, substantially in the form of Exhibit I and opining as
to such other matters in connection with this Agreement as the
Agent or any Lender may reasonably request.
(ix) For each jurisdiction (other than the State of
South Carolina and other than Costa Rica) in which any
Subsidiary Guarantor is incorporated, a favorable opinion of
counsel licensed to practice law in such state and satisfactory
to the Agent and its counsel, in a form reasonably acceptable
to the Agent and its counsel.
(x) An opinion of Moore & Van Allen, PLLC, special
counsel for the Agent, substantially in the form of Exhibit J
hereto.
(xi) Copies of each of the other Loan Documents duly
executed by the parties thereto, together with evidence
satisfactory to the Agent of the due authorization and binding
effect of each such Loan Document on such party.
(xii) A certification from the principal officers of the
Borrower and any Subsidiary as to such factual matters as shall
be requested by the Agent.
<PAGE>
(xiii) A Consolidated balance sheet and the related
Consolidated statements of income and cash flow of the Borrower
and its Consolidated Subsidiaries as at April 2, 1994 for the
nine-month period ended on such date and the related
consolidating balance sheets and statements of income of the
Borrower and each of its Consolidated Subsidiaries as of such
date and for the portion of the Fiscal Year ended on such date.
(xiv) Payment, for the account of each Lender, of the
upfront fee described in Section 4.15(a).
(xv) Such other documents and instruments as any Lender,
acting through the Agent, may reasonably request.
Section Conditions Precedent to Each Loan. The obligations
of the Lenders to make any Loans (including the initial Loan or
Loans) shall be subject to the further conditions precedent that:
(a) (i) in the case of any Committed Loan, the Agent
shall have received in accordance with the provisions of
Section 2.3(a), 2.3(b), 2.3(c) or 2.3(d) a Notice of Borrowing
with respect to such Committed Loan; (ii) in the case of any
Competitive Loan, the applicable Lender or Lenders shall have
received an appropriate notice of acceptance of its related
Competitive Bid; and (iii) in the case of any Swingline Loan,
the Swingline Lender shall have received an appropriate notice
of borrowing in accordance with the provisions of Section
2.9(b)(i) (any Notice of Borrowing for a Committed Loan
described in clause (i) above, any notice of acceptance of a
Competitive Bid described in clause (ii) above and any notice
of borrowing for a Swingline Loan described in clause (iii)
above hereinafter being referred to in this Section 5.2 as a
"Credit Request").
(b) each Person which has become a Significant Subsidiary
since the Effective Date, shall have duly executed and
delivered a Subsidiary Guaranty in substantially the form of
Exhibit D.
(c) on the date of such Credit Request and of the making
of the related Loan the following statements shall be true and
the Agent shall have received for the account of each Lender a
certificate signed by a duly authorized officer of the
Borrower, dated the date of such Loan, stating that (and each
of the giving of the applicable Credit Request and the
acceptance by the Borrower of the proceeds of the related Loan
shall constitute a representation and warranty by the Borrower
that on the date of such Loan such statements are true):
<PAGE>
(i) all of the representations and warranties of the
Borrower made or deemed to be made under this Agreement
are true and correct as of the date of such Loan, both
with and without giving effect to the Loans to be made at
such time and the application of the proceeds thereof,
(ii) no Default or Event of Default exists, and
(iii) a Subsidiary Guaranty has been duly executed
and delivered, and the conditions precedent set forth in
Section 5.1(b)(ii), (iii), (iv), (v), (viii) and (ix) have
been satisfied, by each Significant Subsidiary of the
Borrower, and
(d) the Agent shall have received such other approvals,
opinions or documents as any Lender through the Agent may
reasonably request.
ARTICLE
REPRESENTATIONS AND WARRANTIES OF THE BORROWER
Section Representations and Warranties. The Borrower
represents and warrants to the Agent and to each Lender as follows:
(a) Organization; Power; Qualification. Each of the
Borrower and each of its Subsidiaries is a corporation, duly
organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation, has the corporate
power and authority to own its properties and to carry on its
business as now being and proposed to be conducted hereafter
and is duly qualified and authorized to do business in each
jurisdiction in which the character of its properties or the
nature of its business requires such qualification or
authorization except for jurisdictions where failure to be so
qualified or authorized will not have a Materially Adverse
Effect on the Borrower and its Subsidiaries, taken as a whole.
(b) Subsidiaries. Schedule 6.1(b) correctly sets forth
as of the Agreement Date the name of each Subsidiary of the
Borrower, its jurisdiction of incorporation, the name of its
immediate parent or parents, and the percentage of its issued
and outstanding securities owned by the Borrower or any other
Subsidiary of the Borrower and indicating whether such
Subsidiary is a Consolidated Subsidiary. Except as set forth on
Schedule 6.1(b), as of the Agreement Date,
(i) no Subsidiary has issued any outstanding
securities convertible into shares of such Subsidiary's
<PAGE>
capital stock or any outstanding options, warrants or other rights
to acquire any shares or securities convertible into such shares,
(ii) the outstanding stock and securities of each
such Subsidiary are owned by the Borrower or a Wholly
Owned Subsidiary of the Borrower, or by the Borrower and
one or more of its Wholly Owned Subsidiaries, free and
clear of all Liens, warrants, options and rights of others
of any kind whatsoever, and
(iii) the Borrower has no Subsidiaries.
The outstanding stock of the Borrower and each of its
Subsidiaries has been duly and validly issued and is fully paid and
nonassessable by the issuer.
(c) Authorization of Agreement and Loan Documents. The
Borrower and each of its Subsidiaries has the right and power,
and has taken all necessary corporate action to authorize it,
to execute, deliver and perform this Agreement and each of the
Loan Documents to which it is a party in accordance with their
respective terms. This Agreement and each of the Loan
Documents have been, or will be, duly executed and delivered by
the duly authorized officers of the Borrower and each
Subsidiary a party thereto and each is, or when executed and
delivered will be, a legal, valid and binding obligation of the
Borrower and each Subsidiary a party thereto, enforceable in
accordance with its terms.
(d) Compliance of Agreement and Loan Documents with Laws,
etc. Except as disclosed in Schedule 6.1(d), the execution,
delivery and performance of this Agreement and each of the Loan
Documents in accordance with their respective terms and the
borrowings hereunder do not and will not, by the passage of
time, the giving of notice or otherwise,
(i) require any Governmental Approval or violate
any Applicable Law relating to the Borrower or any
Subsidiary,
(ii) conflict with, result in a breach of or
constitute a default under the articles or certificate of
incorporation or by-laws of the Borrower or any of its
Subsidiaries, any material indenture, agreement or other
instrument to which any of the Borrower or any of its
Subsidiaries is a party or by which it or any of its
property may be bound or any Governmental Approval
relating to any of the Borrower or any of its
Subsidiaries, or
(iii) result in or require the creation or imposition
of any Lien upon or with respect to any
<PAGE>
property now owned or hereafter acquired by any of the Borrower or
any of its Subsidiaries.
(e) Business. As of the Agreement Date, the Borrower is
a holding company and conducts no active business other than
providing management services to its subsidiaries. The
business of each of the Subsidiaries of the Borrower as of the
Agreement Date is as described on Schedule 6.1(e).
(f) Compliance with Law; Governmental Approvals. Except
as set forth in Schedule 6.1(f), each of the Borrower and each
of its Subsidiaries
(i) has all Governmental Approvals, including
permits relating to Environmental Laws, required by any
Applicable Law for it to conduct its business, each of
which is in full force and effect, is final and not
subject to review on appeal and is not the subject of
anypending or threatened attack by direct or collateral
proceeding, and
(ii) is in compliance with each Governmental
Approval applicable to it and in compliance with all other
Applicable Law, including all Environmental Laws, relating
to the Borrower or such Subsidiary, as the case may be,
except for any Governmental Approvals the absence of which and
instances of noncompliance which would not, singly or in the
aggregate, cause a Default or Event of Default or have a
Materially Adverse Effect on the Borrower and its Subsidiaries,
taken as a whole, and in respect of which adequate reserves
where a reserve is appropriate in accordance with GAAP have
been established on the books of the Borrower or such
Subsidiary, as appropriate.
(g) Titles to Properties. Except as set forth in
Schedule 6.1(g), each of the Borrower and each of its
Subsidiaries has good, marketable and legal title to, or a
valid leasehold interest in, its real properties and valid and
legal title to all machinery and equipment and material items
of other personal property and assets, except those which have
been disposed of in the ordinary course of business or in a
manner not in violation of this Agreement or which are subject
to Capitalized Leases.
(h) Liens. None of the properties and assets of any of
the Borrower or any of its Subsidiaries is subject to any Lien,
except Permitted Liens. No financing statement under the
Uniform Commercial Code of any State constituting a Lien and
which names the Borrower or any Subsidiary as debtor is
currently filed in any State or other jurisdiction and neither
the Borrower nor any of its Subsidiaries has signed any such
financing statement or any security agreement
<PAGE>
authorizing any secured party thereunder to file any such financing
statement on or after the Agreement Date, except to perfect or
protect Permitted Liens.
(i) Indebtedness and Guaranties. Schedule 6.1(i) is a
complete and correct listing of all (i) Indebtedness for Money
Borrowed (other than Intercompany Indebtedness and other than
Indebtedness owed by International Apparel Marketing
Corporation to the Borrower or any Subsidiary) and (ii)
Guaranties of Indebtedness for Money Borrowed of each of the
Borrower and each of its Subsidiaries as of the Effective Date
and after the application of the proceeds of the Loans to be
made on the Effective Date. Each of the Borrower and each such
Subsidiary has performed and is in compliance in all material
respects with all of the terms of any such Indebtedness for
Money Borrowed and Guaranties of Indebtedness for Money
Borrowed involving a principal amount outstanding in excess of
$2,500,000, and all instruments and agreements relating
thereto, and no default or event of default, or event or
condition which with notice or lapse of time or both would
constitute such a default or event of default, exists with
respect to any such Indebtedness for Money Borrowed or Guaranty
of Indebtedness for Money Borrowed.
(j) Litigation. Except as set forth on Schedule 6.1(j),
there are no actions, suits or proceedings pending (nor, to the
knowledge of the Borrower, are there any actions, suits or
proceedings threatened, nor is there any basis therefor)
against or in any other way relating adversely to or affecting
any of the Borrower or any of its Subsidiaries or any of its or
their property in any court or before any arbitrator of any
kind or before or by any governmental body except actions,
suits or proceedings which will not singly or in the aggregate
have a Materially Adverse Effect on the Borrower and its
Subsidiaries, taken as a whole, and there are no strikes or
walkouts in progress relating to any labor contracts to which
the Borrower or any of its Subsidiaries is a party which,
singly or in the aggregate, will have a Materially Adverse
Effect on the Borrower and its Subsidiaries, taken as a whole.
(k) Patents. The Borrower and its Subsidiaries own or
possess all material patents, patent rights or licenses, patent
applications, trademarks, trademark rights, trade names, trade
name rights, copyrights and rights with respect to the
foregoing which are required to conduct the business of the
Borrower and its Subsidiaries as now and presently planned to
be conducted without conflict with the rights of others and
Schedule 6.1(k) is a list of certain patents and trademarks
owned by the Borrower or its Subsidiaries as of the Agreement
Date, including all such material patents and
trademarks used by the Borrower or any Subsidiary in the conduct of
its business.
<PAGE>
(l) Tax Returns and Payments. All material federal,
state and other tax returns of each of the Borrower and its
Subsidiaries required by law to be filed have been duly filed,
and all material federal, state and other taxes, assessments
and other governmental charges or levies upon the Borrower or
its Subsidiaries and their property, income, profits and assets
which are due and payable have been paid, except any such
nonpayment which is at the time permitted under Section 7.6.
The charges, accruals and reserves on the books of each of the
Borrower and each of its Subsidiaries in respect of federal and
state taxes are in the judgment of the Borrower, and in
accordance with GAAP, adequate, and the Borrower knows of no
reason to anticipate any additional assessments which, singly
or in the aggregate, might have a Materially Adverse Effect on
the Borrower and its Subsidiaries, taken as a whole.
(m) Burdensome Provisions. Neither the Borrower nor any
Subsidiary is a party to any indenture, agreement, lease
orother instrument, or subject to any charter or corporate
restriction, Governmental Approval or Applicable Law,
compliance with the terms of which might have a Materially
Adverse Effect on the Borrower and its Subsidiaries, taken as a
whole, nor, except to the extent permitted pursuant to Section
9.13, is the Borrower or any Subsidiary subject to any
contractual restrictions which limit the amount of dividends
payable by any Subsidiary.
(n) Financial Statements. The Borrower has furnished to
the Lenders and the Agent copies of the Consolidated balance
sheet of the Borrower and its Consolidated Subsidiaries as at
April 2, 1994 and of the related Consolidated statements of
income and cash flow for the portion of the 1994 Fiscal Year
ended on such date. Such Consolidated financial statements are
complete and correct in all material respects, and present
fairly in accordance with GAAP the Consolidated financial
position of the Borrower and its Consolidated Subsidiaries as
at their date and the results of operations of the Borrower and
its Consolidated Subsidiaries for the portion of the Fiscal
Year ended on such date. Except as disclosed or reflected in
such balance sheet or the notes relating thereto as at such
date, and except as disclosed in writing to the Lenders and the
Agent prior to the Agreement Date, as of the Effective Date the
Borrower and its Consolidated Subsidiaries have no material
liabilities, contingent or otherwise, and there are no material
unrealized or anticipated losses of the Borrower or its
Consolidated Subsidiaries.
(o) Adverse Change. Since the date of the latest annual
or quarterly financial statements received by the Agent and the
Lenders pursuant to Section 8.1 (or, prior to receipt by the
Agent and the Lenders of the first financial
<PAGE>
statements pursuant to Section 8.1 since the date of the financial
statements described in Section 6.1(n)),
(i) no material adverse change in the business,
assets, liabilities, financial condition, results of
operations or business prospects of the Borrower and its
Subsidiaries, taken as a whole, has occurred, and
(ii) no event has occurred or failed to occur which
has had, or is likely to have, a Materially Adverse Effect
on the Borrower and its Subsidiaries, taken as a whole.
(p) ERISA. Schedule 6.1(p) is a complete and correct
listing of all Plans of the Borrower and its Subsidiaries in
effect on the Agreement Date. Each Plan of the Borrower and
its Subsidiaries is in compliance with ERISA in all material
respects. No material liability to the PBGC or to a Multi-
employer Plan has been, or is expected by the Borrower or any
Subsidiary to be, incurred by the Borrower or such Subsidiary.
(q) Absence of Defaults. Neither the Borrower nor any
Subsidiary is in default under its articles of incorporation or
certificate of incorporation or by-laws and no event has
occurred, which has not been remedied, cured or waived,
(i) which constitutes a Default or an Event of
Default, or
(ii) which constitutes, or which with the passage of
time or giving of notice or both would constitute, a
default or event of default by the Borrower or any
Subsidiary under any material agreement (other than this
Agreement) or judgment, decree or order to which the
Borrower or any Subsidiary is a party or by which the
Borrower or any Subsidiary or any of their respective
properties may be bound, except, in the case only of any
such agreement, for alleged defaults which are being
contested in good faith by appropriate proceedings and
with respect to which adequate reserves where a reserve is
appropriate in accordance with GAAP have been established
on the books of the Borrower or such Subsidiary, as the
case may be, and except for defaults that have been
disclosed and consented to by the Majority Lenders.
(r) Accuracy and Completeness of Information. All
written information, reports and other papers and data
furnished by the Borrower or any of its Subsidiaries to the
Agent or any Lender, were or will be, at the time the same were
or are so furnished, complete and correct in all material
respects, to the extent necessary to give the
<PAGE>
recipient a true and accurate knowledge of the subject matter. As
of the Effective Date, no fact is known to the Borrower which has
had, or may in the future have (so far as the Borrower can foresee),
a Materially Adverse Effect upon the Borrower and its Subsidiaries,
taken as a whole, which has not been set forth in the financial
statements referred to in Section 6.1(n) or in such information,
reports or other papers or data or otherwise disclosed in writing to
the Agent and each Lender prior to the Agreement Date. No document
furnished or written statement made by the Borrower or any of its
Subsidiaries to the Agent or any Lender in connection with the
negotiation, preparation or execution of this Agreement or any of
the Loan Documents contains or will contain any untrue statement of
a fact material to the creditworthiness of the Borrower or any
Subsidiary or omits or will omit to state a material fact necessary
in order to make the statement contained therein not misleading.
(s) Solvency. In each case after giving effect to the
Indebtedness represented by the Loans and the Letter of Credit
Obligations outstanding and to be incurred and the transactions
contemplated by this Agreement and each of the Subsidiary
Guaranties and assuming full utilization of the Commitments,
each of the Borrower and each Subsidiary Guarantor is solvent,
having assets of a fair salable value which exceeds the amount
required to pay its debts, and each of the Borrower and each of
the Subsidiary Guarantors is able to and anticipates that it
will be able to meet its debts as they mature and has adequate
capital to conduct the business in which it is, or proposes to
be, engaged.
(t) Federal Regulations. Neither the Borrower nor any
Subsidiary is engaged or will engage, principally or as one of
its important activities, in the business of extending credit
for the purpose of "purchasing" or "carrying" any "margin
stock" (as each of the quoted terms is defined or used in
Regulations G and U of the Board of Governors of the Federal
Reserve System). Following the application of the proceeds of
each Loan hereunder, not more than 25% of the value of the
assets of the Borrower only, or of the Consolidated assets of
the Borrower and its Consolidated Subsidiaries, will be margin
stock.
(u) Investment Company Act. Neither the Borrower nor any
Subsidiary is an "investment company" or a company "controlled"
by an "investment company" (as each of the quoted terms is
defined or used in the Investment Company Act of 1940, as
amended).
Section Survival of Representations and Warranties, etc. All
representations and warranties set forth in this Article 6 and all
statements contained in any certificate, financial statement,
opinion or other instrument delivered by or on behalf of the
Borrower or any of its Subsidiaries pursuant to
<PAGE>
or in connection with this Agreement or any of the Loan Documents
(including but not limited to any such made in or in connection with
any amendment thereto) shall constitute representations and
warranties made under this Agreement. All representations and
warranties made under this Agreement shall be made or deemed to be
made at and as of the Agreement Date, at the Effective Date and at
and as of the date of making each Loan or issuance of each Letter of
Credit. All representations and warranties made or deemed to be
made under this Agreement shall survive and not be waived by the
execution and delivery of this Agreement, any investigation made by
or on behalf of the Agent or any Lender, or any borrowing hereunder.
ARTICLE
AFFIRMATIVE COVENANTS
Until the Commitments have been terminated and all the
Obligations have been paid in full, unless the Majority Lenders
shall otherwise consent in writing, the Borrower will, and will
cause each of its Subsidiaries to:
Section Preservation of Corporate Existence and Similar
Matters. Except as otherwise permitted pursuant to Section 9.7,
preserve and maintain its corporate existence, rights, franchises,
licenses and privileges in the jurisdiction of its incorporation and
qualify and remain qualified as a foreign corporation and authorized
to do business in each jurisdiction in which the character of its
properties or the nature of its business requires such qualification
or authorization except where the failure to maintain such corporate
existence, rights, franchises, licenses, privileges, qualification
or authorization would not, either singly or in the aggregate, have
a Materially Adverse Effect on the Borrower and its Subsidiaries,
taken as a whole.
Section Compliance with Applicable Law. Comply with all
Applicable Law, the failure to comply with which would have a
Materially Adverse Effect on the Borrower and its Subsidiaries,
taken as a whole.
Section Maintenance of Property. Protect and preserve all
properties, including copyrights, patents, trade names and
trademarks, material to its business and maintain in good repair,
working order and condition in all material respects all tangible
properties, and from time to time make or cause to be made all
needed and appropriate repairs, renewals, replacements and additions
to such properties, necessary for the conduct of its business, so
that the business carried on in connection therewith may be properly
and advantageously conducted at all times.
Section Conduct of Business. At all times carry on
<PAGE>
its business in an efficient manner and engage only in businesses in
substantially the same fields as the businesses conducted on the
Agreement Date; provided, that the Borrower and any Subsidiary may
engage in one or more businesses unrelated to those engaged in on
the Agreement Date so long as, at the time such unrelated business
is proposed to be first engaged in (including the date of
Acquisition by the Borrower or any Subsidiary of a Business Unit
engaged in such an unrelated business), the revenues or net sales
(as appropriate) of such unrelated business and all other unrelated
businesses, as projected by the Borrower for the Borrower's next
following full Fiscal Year as certified to the Agent and the Lenders
by a Financial Officer of the Borrower, do not, in the aggregate,
exceed 20% of the Consolidated revenues of the Borrower and its
Consolidated Subsidiaries for such full Fiscal Year, as projected by
the Borrower and certified to the Agent and the Lenders by a
Financial Officer of the Borrower.
Section Insurance. Maintain insurance with responsible
insurance companies against such risks and in such amounts as is
customarily maintained by similar businesses or as may be required
by Applicable Law, and from time to time deliver to the Agent or any
Lender upon its request a detailed list of the insurance then in
effect, stating the names of the insurance companies, the amounts
and rates of the insurance, the dates of the expiration thereof and
the properties and risks covered thereby.
Section Payment of Taxes and Claims. Pay or discharge when
due
(a) all taxes, assessments and governmental charges or
levies imposed upon it or upon its income or profits or upon
any properties belonging to it, and
(b) all lawful claims of materialmen, mechanics,
carriers, warehousemen and landlords for labor, materials,
supplies and rentals which, if unpaid, might become a Lien on
any of its properties;
except that this Section 7.6 shall not require the payment or
discharge of any such tax, assessment, charge, levy or claim which
is being contested in good faith by appropriate proceedings and for
which adequate reserves where a reserve is appropriate in accordance
with GAAP have been established on the appropriate books.
Section Accounting Methods and Financial Records. Maintain a
system of accounting, and keep such books, records and accounts
(which shall be true and complete), as may be required by or as may
be necessary to permit the preparation of financial statements in
accordance with GAAP.
Section Visits and Inspections. Permit
<PAGE>
representatives of the Agent and any Lender from time to time, as
often as may be reasonably requested, but only during normal
business hours, to
(a) visit and inspect its properties,
(b) inspect and make extracts from its relevant books and
records, including but not limited to management letters
prepared by independent accountants, and
(c) discuss with its principal officers, and its
independent accountants, its business, assets, liabilities,
financial condition, results of operations and business
prospects.
Section Use of Proceeds.
(a) Use the proceeds of the Loans (i) to refinance existing
Indebtedness of the Borrower under the Existing Credit Agreement and
(ii) for working capital and general business purposes of the
Borrower and the Subsidiary Guarantors and to effect Acquisitions
and other Investments permitted under Section 9.4, and
(b) not use any part of such proceeds for any purpose which
would involve a violation of Regulation G or U or T or X of the
Board of Governors of the Federal Reserve System, or for any other
purpose prohibited by Applicable Law or by the terms and conditions
of this Agreement.
Section Subsidiary Guaranties. Cause any Person which
becomes a Significant Subsidiary of the Borrower after the Effective
Date forthwith to execute and deliver a Subsidiary Guaranty and
comply with the conditions precedent contained in Section
5.1(b)(ii), (iii), (iv), (v), (viii) and (ix).
ARTICLE
INFORMATION
Until the Commitments have been terminated and all the
Obligations have been paid in full, unless the Majority Lenders
shall otherwise consent in writing, the Borrower will furnish to the
Agent and the Lenders the following:
Section Financial Statements.
(a) Quarterly Financial Statements. Within 45 days after the
close of each of the first three Fiscal Quarters of each Fiscal
Year, Consolidated and consolidating balance sheets of the Borrower
and its Consolidated Subsidiaries as at the end of such Fiscal
Quarter and the related Consolidated and consolidating statements of
income and cash flow of the Borrower and its Consolidated
Subsidiaries for such Fiscal Quarter and for the
<PAGE>
portion of the Fiscal Year through the end of such Fiscal Quarter,
in each case, reflecting the operations of the Borrower and such
Consolidated Subsidiaries and setting forth (other than in
consolidating statements of cash flow) in comparative form the
figures for the corresponding periods of the previous Fiscal Year,
all of which shall be certified by the President or a Financial
Officer of the Borrower to be, in his opinion, complete and correct
and to present fairly, in accordance with GAAP, subject to year-end
audit adjustments, the Consolidated financial position of the
Borrower and its Consolidated Subsidiaries as at the date thereof
and the results of operations for such period.
(b) Audited Year-End Statements. Within 90 days after the end
of each Fiscal Year, Consolidated and consolidating balance sheets
of the Borrower and its Consolidated Subsidiaries as at the end of
such Fiscal Year and the related Consolidated and consolidating
statements of income, retained earnings and cash flow of the
Borrower and its Consolidated Subsidiaries for such Fiscal Year, in
each case setting forth in comparative form the figures as at the
end of and for the previous Fiscal Year, certified, in the case of
such Consolidated (but not consolidating) balance sheets and
statements, by Ernst & Young, KPMG Peat Marwick or other independent
certified public accountants of recognized national standing, whose
certificates shall be in scope and substance reasonably satisfactory
to the Majority Lenders and who shall have authorized the Borrower
to deliver such financial statements and certifications thereof to
the Lenders pursuant to this Agreement.
Section Accountants' Certificate. Together with the
financial statements referred to in Section 8.1(b), the Borrower
shall deliver a certificate of such accountants addressed to the
Lenders
(a) stating that in making the examination necessary for
the certification of such financial statements, nothing has
come to its attention to lead it to believe that any Default or
Event of Default exists and, in particular, it has no knowledge
of any Default or Event of Default or, if such is not the case,
specifying such Default or Event of Default and its nature, and
(b) having attached the calculations required to be
prepared by the Borrower pursuant to Section 8.3(a)(i), (ii)
and (iii) for the Fiscal Year covered by such financial
statements and reviewed by such accountants.
Section Officer's Certificate. At the time the financial
statements are furnished pursuant to Section 8.1, the Borrower shall
also furnish a certificate of its President or a Financial Officer
substantially in the form of Exhibit K:
(a) setting forth as at the end of such Fiscal Quarter or
Fiscal Year, as the case may be, (i) the calculations
<PAGE>
required to establish whether or not the Borrower was in compliance
with the requirements of Sections 9.1, 9.5 and 9.6, and, (ii) the
outstanding Net Amount of all Investments (other than Permitted
Investments) made by the Borrower or any Subsidiary Guarantor since
the Agreement Date and (iii) the aggregate purchase price of all
Acquisitions of any Business Units made by the Borrower or any
Subsidiary Guarantor since the Agreement Date; and
(b) stating that, based on an examination sufficient to
enable him to make an informed statement, no Default or Event
of Default exists, or, if such is not the case, specifying such
Default or Event of Default and its nature, when it occurred,
whether it is continuing and the steps being taken by the
Borrower with respect to such event.
Section Copies of Other Reports.
(a) Promptly upon receipt thereof, copies of all reports,
if any, submitted to any of the Borrower or any of its
Subsidiaries or their respective Boards of Directors by their
independent public accountants (in their capacity as auditors),
including without limitation any management report.
(b) As soon as practicable, copies of all such financial
statements and reports as the Borrower shall send to its
stockholders and of all registration statements (other than
registration statements on Form S-8) and all regular or
periodic reports which any of the Borrower or any of its
Subsidiaries shall file with the Securities and Exchange
Commission or any successor commission.
(c) From time to time and promptly upon each request,
such data, certificates, reports, statements, documents or
further information regarding the business, assets,
liabilities, financial condition, results of operations or
business prospects of the Borrower and its Subsidiaries as any
Lender through the Agent may reasonably request and that the
Borrower has or without unreasonable expense can obtain. The
rights of the Agent and the Lenders under this Section 8.4(c)
are in addition to and not in derogation of their rights under
any other provision of this Agreement.
(d) If requested by any Lender, the Borrower will furnish
to such Lender statements in conformity with the requirements
of Federal Reserve Form G-3 or U-1 referred to in Regulation G
or U of the Board of Governors of the Federal Reserve System.
Section Notice of Litigation and Other Matters. Prompt notice
of:
<PAGE>
(a) to the extent the Borrower is aware of the same, the
commencement of all proceedings and investigations by or before
any governmental or nongovernmental body and all actions and
proceedings in any court or before any arbitrator against or in
any other way relating adversely to or adversely affecting the
Borrower, any of its Subsidiaries or any of their respective
properties, assets or businesses, which are reasonably likely,
singly or in the aggregate, to cause a Default or an Event of
Default or have a Materially Adverse Effect on the Borrower and
its Subsidiaries, taken as a whole;
(b) any amendment of the articles or certificate of
incorporation or by-laws of the Borrower or any Subsidiary;
(c) any change in the business, assets, liabilities,
financial condition, results of operations or business
prospects of the Borrower or any Subsidiary which has had or
may have any Materially Adverse Effect on the Borrower and its
Subsidiaries, taken as a whole, and any change in the chief
executive officers of the Borrower or any Subsidiary Guarantor;
and
(d) any Default or Event of Default or any event which
constitutes or which with the passage of time or giving of
notice or both would constitute a default or event of default
by the Borrower or any Subsidiary under any material agreement
other than this Agreement to which the Borrower or such
Subsidiary is a party or by which the Borrower or such
Subsidiary or any of its respective properties may be bound,
describing such Default or Event of Default or other event and
the action the Borrower has taken or proposes to take with
respect thereto.
Section ERISA. As soon as possible and in any event within
30 days after the Borrower knows, or has reason to know, that:
(a) any Termination Event with respect to a Plan has
occurred or will occur, or
(b) the aggregate present value of the Unfunded Vested
Accrued Benefits under all Plans has increased to an amount in
excess of $1.00, or
(c) the Borrower or any Subsidiary is in "default" (as
defined in Section 4219(c) (5) of ERISA) with respect to
payments to a Multiemployer Plan required by reason of its
complete or partial withdrawal (as described in Section 4203 or
4205 of ERISA) from such Plan,
a certificate of the President or a Financial Officer of the
Borrower or such Subsidiary setting forth the details of such of the
events described in clauses (a) through (c) as applicable and
<PAGE>
the action which is proposed to be taken with respect thereto,
together with any notice or filing which may be required by the PBGC
or other agency of the United States government with respect to such
of the events described in clauses (a) through (c) as is applicable.
Section Other Information. In addition to the other notices
required hereunder, the Borrower will give the Agent prompt written
notice (with sufficient copies for each Lender) of (a) any change
from the information set forth on Schedule 6.1(b), (b) the nature of
any business entered into by the Borrower or any Subsidiary after
the Agreement Date that is not in substantially the same fields as
the businesses conducted by the Borrower and its Subsidiaries as of
the Agreement Date, and (c) the establishment of any Plan after the
Agreement Date.
Section Accuracy of Information. All written information,
reports, statements and other papers and data furnished to the Agent
by or at the direction of the Borrower or any Subsidiary, whether
pursuant to this Article 8 or any other provision of this Agreement,
or any of the Loan Documents, shall be, at the time the same is so
furnished, complete and correct in all material respects to the
extent necessary to give the Agent and the Lenders true and accurate
knowledge of the subject matter.
ARTICLE
NEGATIVE COVENANTS
Until all the Commitments have been terminated and all the
Obligations have been paid in full, unless the Majority Lenders
shall otherwise consent in writing, the Borrower will not, nor will
it permit any Subsidiary to, directly or indirectly:
Section Financial Ratios. Permit:
(a) Minimum Consolidated Tangible Net Worth. Consolidated
Tangible Net Worth of the Borrower and its Consolidated
Subsidiaries as of the end of any Fiscal Quarter (i) occurring
after the Agreement Date to be less than $240,000,000 and (ii)
as at and after the first day of each Fiscal Year beginning
after the Agreement Date to be less than $10,000,000 greater
than the amount required hereunder immediately prior to such
first day.
(b) Leverage Ratio. The Leverage Ratio as of the end of
any Fiscal Quarter occurring after the Agreement Date to be
greater than 1.50 to 1.00.
(c) Consolidated Current Ratio. The ratio of the
Consolidated Current Assets of the Borrower and its
<PAGE>
Consolidated Subsidiaries, to the Consolidated Current Liabilities
(excluding any principal amount of the Loans and the Letters of
Credit Obligations so categorized and the current portion of Funded
Indebtedness) of the Borrower and its Consolidated Subsidiaries as
of the end of any Fiscal Quarter occurring after the Agreement Date
to be less than 2.50 to 1.00.
(d) Interest Coverage Ratio. The Interest Coverage Ratio
as of the end of any Fiscal Quarter occurring after the
Agreement Date to be less than 2.50 to 1.00.
(e) Fixed Charge Coverage Ratio. The Fixed Charge
Coverage Ratio as of the end of any Fiscal Year occurring after
the Agreement Date to be less than 1.25 to 1.00.
Section Indebtedness for Money Borrowed. On or after the
Effective Date, create, assume, or otherwise become or remain
obligated in respect of, or permit or suffer to exist or to be
created, assumed or incurred or to be outstanding, any Indebtedness
for Money Borrowed other than Permitted Indebtedness for Borrowed
Money.
Section Guaranties. After the Effective Date, become or
remain liable with respect to any Guaranty of any obligation of any
other Person, except for (i) Existing Guaranties, (ii) the
Subsidiary Guaranties, (iii) Guaranties permitted by Section 9.2 and
(iv) in the case of the Borrower, Guaranties in respect of
obligations of its Consolidated Subsidiaries (A) to trade or similar
creditors, incurred by such Subsidiaries in the ordinary course of
their respective businesses, (B) in connection with contracts with
their respective customers entered into in the ordinary course of
their respective businesses and (C) under leases of property used by
such Subsidiaries in their respective businesses.
Section Investments; Business Units. Acquire, after the
Agreement Date, any Business Unit or Investment or, after such date,
permit any Investment to be outstanding, except that this Section
9.4 shall not apply to:
(i) Permitted Investments,
(ii) other Investments made by the Borrower or any
Subsidiary Guarantor, provided that (A) the aggregate Net
Amount of all such Investments shall not exceed, on a
Consolidated basis, $25,000,000 at any time, and (B) after
giving effect thereto, the unused portion of the Revolving
Credit Facility (at the time of, and after giving effect to,
the Acquisition of such Investment) shall be equal to or
greater than $15,000,000, or
(iii) Acquisitions of one or more Business Units by the
Borrower or any Subsidiary Guarantor after the Agreement
<PAGE>
Date, the aggregate purchase price of which, on a Consolidated
basis, does not exceed $25,000,000, provided that, after giving
effect thereto, the unused portion of the Revolving Credit Facility
(at the time of, and after giving effect to, the making of such
Acquisition) shall be equal to or greater than $15,000,000.
As used in this Section 9.4, "purchase price" for any Acquisition
means the total consideration for such Acquisition, including
(without duplication) the amount of any payment made in cash or by
delivery of a promissory note of the Borrower or any Subsidiary, the
fair market value, as determined in good faith by the Board of
Directors of the Borrower, of any property other than cash or notes
transferred by the Borrower or the acquiring Subsidiary Guarantor in
connection with such Acquisition, the face amount of any
Indebtedness assumed or guaranteed by the Borrower or any Subsidiary
in connection with such Acquisition, and the market value of any
equity security issued or transferred by the Borrower or any
Subsidiary in connection with such Acquisition (or, if any such
equity security does not have a readily determinable market value,
the fair value thereof as determined in good faith by the Board of
Directors of the Borrower).
Section Capital Expenditures. Make or incur any Capital
Expenditure, except that this Section 9.5 shall not apply to Capital
Expenditures of the Borrower or any Subsidiary in any Fiscal Year
which, together with all other Capital Expenditures by the Borrower
and its Consolidated Subsidiaries made during such Fiscal Year,
would not exceed, in the aggregate, an amount equal to the sum of
$50,000,000, plus (for any Fiscal Year occurring after Fiscal Year
1995) up to $10,000,000 of the unused portion (if any) of permitted
Capital Expenditures for the immediately preceding Fiscal Year
(without inclusion of amounts carried forward from any prior Fiscal
Year).
Section Restricted Dividend Payments. Declare or make any
Restricted Dividend Payment unless (i) no Default or Event of
Default has occurred and is continuing on the date of such
declaration and (ii) the aggregate amount of all dividends
constituting Restricted Dividend Payments declared during any Fiscal
Year does not exceed the Permitted Annual Dividend Amount for such
Fiscal Year. "Permitted Annual Dividend Amount" for any Fiscal Year
means, as to each declaration of cash dividends made during such
Fiscal Year, an amount equal to the lesser of
(i) $25,000,000, or
(ii) an amount equal to the sum of
(A) 50% of the Consolidated Net Income of the
Borrower and its Consolidated Subsidiaries for the
immediately preceding Fiscal Year (but without taking into
account any net loss for such period),
<PAGE>
plus
(B) $25,000,000 (as such amount may be reduced and/or
replenished from time to time as hereinafter described,
the "Dividend Basket"), provided that, the Dividend Basket
shall be reduced from time to time by the aggregate amount
of the excess, if any, of all cash dividends declared
after the Agreement Date and prior to the date of such
declaration over the applicable amounts in respect of each
such dividend declaration computed pursuant to clause (A)
above, and provided further that, the Dividend Basket
shall be replenished from time to time by the sum of the
excesses, if any, of the applicable amounts computed
pursuant to clause (A) above for each Fiscal Year
(commencing with Fiscal Year 1995) over the amount of all
cash dividends declared during such Fiscal Year, provided
further still that, the Dividend Basket shall not exceed
$25,000,000 at any time.
Section Merger, Consolidation and Sale of Assets. Merge or
consolidate with any other Person or sell, lease or transfer or
otherwise dispose of, directly or indirectly, in a single
transaction or a series of transactions, all or a substantial
portion of the assets of the Borrower or any Subsidiary Guarantor to
the extent that the cash proceeds (as defined in the definition "Net
Disposition Proceeds" in Section 1.1) of all such assets of the
Borrower and all Subsidiary Guarantors disposed of after the
Agreement Date would exceed $25,000,000; provided, however, that
this Section 9.7 shall not apply to any
(x) sales, leases, transfers or other dispositions of
assets between the Borrower and any Subsidiary Guarantor or
between Subsidiary Guarantors,
(y) sales, leases, transfers or other dispositions of
assets in the ordinary course of business, or
(z) merger, consolidation or liquidation of any
Subsidiary with or into the Borrower or any Subsidiary
Guarantor, provided in each case, that immediately after giving
effect thereto no Default or Event of Default shall have
occurred and be continuing, that in the case of any merger to
which the Borrower is a party, the Borrower is the surviving
corporation, and that in the case of any merger, consolidation
or liquidation to which a Subsidiary Guarantor and any
Subsidiary not a Subsidiary Guarantor are parties, such
Subsidiary Guarantor is the surviving corporation and has a Net
Worth immediately following consummation of such merger,
consolidation or liquidation equal to or greater than its Net
Worth immediately prior to such merger, consolidation or
liquidation, as certified to the Agent by a
<PAGE>
Financial Officer of such Subsidiary Guarantor.
Section Transactions with Affiliates. Effect any transaction
giving rise to Intercompany Indebtedness on terms other than
ordinary business terms or any other transaction with any Affiliate
(other than with the Borrower or a Subsidiary Guarantor) on a basis
less favorable to the Borrower or such Subsidiary than would be the
case if such transaction had been effected with a Person not an
Affiliate.
Section Liens. Create, assume or permit or suffer to exist
or to be created or assumed any Lien on any of its property or
assets, real, personal or mixed, tangible or intangible, other than
Permitted Liens.
Section Plans. Permit, or take any action which would result
in, the aggregate present value of the Unfunded Vested Accrued
Benefits under all Plans of the Borrower and any of its Subsidiaries
to exceed $2,500,000.
Section Sales and Leasebacks. Enter into any arrangement
with any Person providing for its leasing from such Person of real
or personal property which has been or is to be sold or transferred,
directly or indirectly, by the Borrower or any of its Subsidiaries
to such Person.
Section Issuance of Stock by Subsidiaries. Except as
permitted by Section 9.7, issue, sell or otherwise dispose of any
shares of any class of its capital stock (either directly or
indirectly by issuance of rights or options for, or securities
convertible into, such shares), other than directors' qualifying
shares, to any Person other than the Borrower or any Subsidiary of
the Borrower, provided, that this Section 9.12 shall not apply to
any such issuance, sale or disposition by the Borrower, directly or
indirectly, of shares of its capital stock.
Section Additional Restrictions. Create, consent or agree to
or permit any Subsidiary to create any restrictions on any such
Subsidiary's ability to pay dividends or to repay Intercompany
Indebtedness other than any such restrictions (i) applicable to a
Person, or its stock, at the time such Person becomes a Subsidiary
of the Borrower and not placed thereon by or with the consent of the
Borrower in contemplation of such acquisition directly or indirectly
by the Borrower or (ii) resulting from compliance by any Subsidiary
with any financial covenant contained in any agreement to which it
is a party evidencing Existing Indebtedness.
Section 9.14. Special Provisions Regarding
International Apparel Marketing Corporation. Permit International
Apparel Marketing Corporation to have total assets of $1,000,000 or
more.
Section 9.15. Limitation on Foreign Operations. Permit at any
time those of its Subsidiaries which are not incorporated or
<PAGE>
organized under the laws of any state of the United States or the
District of Columbia to have assets which in the aggregate
constitute more than 10% of the total assets of the Borrower and its
Consolidated Subsidiaries at such time, as determined in accordance
with GAAP.
ARTICLE
DEFAULT
Section Events of Default. Each of the following shall
constitute an Event of Default, whatever the reason for such event
and whether it shall be voluntary or involuntary or be effected by
operation of law or pursuant to any judgment or order of any court
or any order, rule or regulation of any governmental or
nongovernmental body:
(a) Default in Payment. The Borrower shall fail to pay
any principal of any Loan or any Obligation arising under
Section 3.3(c)(iii)(B) when and as due (whether at maturity, on
demand, by reason of acceleration or otherwise) or any interest
on any Loan or any such other Obligation within two Business
Days after the same is due.
(b) Other Payment Default. The Borrower shall fail to
pay, when and as due (whether at maturity, by reason of
acceleration or otherwise), any amount of any Obligation (other
than as described in Section 10.1(a)), and such default shall
continue for a period of five Business Days after written
notice thereof has been given to the Borrower by the Agent on
behalf of the Lenders.
(c) Misrepresentation. Any representation or warranty
made or deemed to be made by the Borrower under this Agreement
or any Loan Document, or by any Subsidiary Guarantor under any
Loan Document to which it is a party, or any amendment hereto
or thereto, shall prove to have been incorrect or misleading in
any material respect when made.
(d) Default in Performance. The Borrower shall fail to
perform or observe any term, covenant, condition or agreement
contained in
(i) Article 9 (other than Section 9.4, 9.5 or 9.8)
or Section 7.1 (insofar as it requires the preservation of
the corporate existence of the Borrower or any Significant
Subsidiary), 7.9 or 8.6,
(ii) this Agreement (other than a default in the
performance or observance of which is dealt with
specifically elsewhere in this Section 10.1) and such
default shall continue for a period of 15 days after
written notice thereof has been given to the Borrower
<PAGE>
by the Agent.
(e) Indebtedness Cross-Default.
(i) The Borrower or any Subsidiary shall fail to pay
when due and payable the principal of or interest on any
Indebtedness for Money Borrowed (other than the Loans or
any of the other Obligations or pursuant to the Subsidiary
Guaranties, as the case may be) which is outstanding in a
principal amount in excess of $2,500,000, or
(ii) the maturity of any Indebtedness for Money
Borrowed of any Subsidiary (other than the Loans or any of
the other Obligations or pursuant to the Subsidiary
Guaranties, as the case may be) which is outstanding in a
principal amount in excess of $2,500,000 shall have been
(A) accelerated in accordance with the provisions of any
indenture, contract or instrument providing for the
creation of or concerning such Indebtedness or (B)
required to be prepaid prior to the stated maturity
thereof.
(f) Other Cross-Defaults. The Borrower or any Subsidiary
shall default in the payment when due, or in the performance or
observance, of any material obligation or condition of any
contract or lease material to the Borrower and its
Subsidiaries, taken as a whole (other than under the Loan
Documents or relating to Indebtedness for Money Borrowed),
unless, but only as long as, the existence of any such default
is being contested by the Borrower or such Subsidiary in good
faith by appropriate proceedings and adequate reserves in
respect thereof where a reserve is appropriate in accordance
with GAAP have been established on the books of the Borrower or
such Subsidiary.
(g) Voluntary Bankruptcy Proceeding. The Borrower or any
Significant Subsidiary (or other Subsidiary, obligations of
which are Guaranteed by the Borrower or any Subsidiary
Guarantor) shall
(i) commence a voluntary case under the federal
bankruptcy laws (as now or hereafter in effect),
(ii) file a petition seeking to take advantage of any
other laws, domestic or foreign, relating to bankruptcy,
insolvency, debt reorganization, winding up or composition
for adjustment of debts,
(iii) consent to or fail to contest in a timely and
appropriate manner any petition filed against it in an
involuntary case under such bankruptcy laws or other laws,
<PAGE>
(iv) apply for or consent to, or fail to contest in a
timely and appropriate manner, the appointment of, or the
taking of possession by, a receiver, custodian, trustee,
or liquidator of itself or of a substantial part of its
property, domestic or foreign,
(v) admit in writing its inability to pay its debts
as they become due,
(vi) make a general assignment for the benefit of
creditors, or
(vii) take any formal corporate action for the
purpose of effecting any of the foregoing.
(h) Involuntary Bankruptcy Proceeding. A case or other
proceeding shall be commenced against the Borrower or any
Significant Subsidiary (or other Subsidiary, obligations of
which are Guaranteed by the Borrower or any Subsidiary
Guarantor) in any court of competent jurisdiction seeking
(i) relief under the federal bankruptcy laws (as now
or hereafter in effect) or under any other laws, domestic
or foreign, relating to bankruptcy, insolvency, debt
reorganization, winding up or adjustment of debts, or
(ii) the appointment of a trustee, receiver,
custodian, liquidator or the like of the Borrower or any
Subsidiary or of all or any substantial part of the
assets, domestic or foreign, of the Borrower or any
Subsidiary,
and such case or proceeding shall continue undismissed or
unstayed for a period of 30 consecutive calendar days, or an
order granting the relief requested in such case or proceeding
against the Borrower or any Subsidiary (including, but not
limited to, an order for relief under such federal bankruptcy
laws) shall be entered.
(i) Litigation. The Borrower or any Subsidiary shall
challenge or contest in any action, suit or proceeding in any
court or before any arbitrator or governmental body the
validity or enforceability of this Agreement or any Loan
Document.
(j) Judgment. A judgment or order for the payment of
money shall be entered against the Borrower or any Subsidiary
by any court which, when added to all other unsatisfied
judgments or orders against the Borrower and all Subsidiaries,
would exceed $2,500,000 in amount and such judgment or order
shall continue undischarged and unstayed for 30 days.
<PAGE>
(k) Attachment. A warrant or writ of attachment or
execution or similar process shall be issued against any
property of the Borrower or any Subsidiary which warrant, writ
or similar process, when added to all other outstanding
warrants, writs or similar process against the Borrower and all
Subsidiaries, would exceed $2,500,000 in value and such
warrant, writ or similar process shall continue undischarged
and unstayed for 30 days.
(l) ERISA.
(i) Any Termination Event with respect to a Plan
shall occur that, after taking into account the excess, if
any, of (A) the fair market value of the assets of any
other Plan with respect to which a Termination Event
occurs on the same day (but only to the extent that such
excess is the property of the Borrower or any Subsidiary)
over (B) the present value on such day of all vested
nonforfeitable benefits under such other Plan, results in
an Unfunded Vested Accrued Benefit in excess of
$2,500,000, or
(ii) any Plan shall incur an "accumulated funding
deficiency" (as defined in Section 412 of the Code or
Section 302 of ERISA) for which a waiver has not been
obtained in accordance with the applicable provisions of
the Code and ERISA, or
(iii) the Borrower or any Subsidiary is in "default"
(as defined in Section 4219(c) (5) of ERISA) with respect
to payments to a Multiemployer Plan resulting from the
Borrower's or any Subsidiary's complete or partial
withdrawal (as described in Section 4203 or 4205 of ERISA)
from such plan.
(m) Change in Management. If E. Erwin Maddrey, II ceases
to serve actively as the President and Chief Executive Officer
of the Borrower or Bettis C. Rainsford ceases to serve actively
as the Executive Vice President and Chief Financial Officer of
the Borrower.
(n) Failure of Agreements. Any material provision of
this Agreement, any Note, any Subsidiary Guaranty or of any
other Loan Document after delivery thereof hereunder, shall for
any reason cease to be valid and binding on the Borrower or any
Subsidiary a party thereto, or the Borrower or any Subsidiary
(or any Person on behalf of the Borrower or any Subsidiary)
shall so state in writing, including by any written denial or
disaffirmance of any Subsidiary's Obligations under the
Subsidiary Guaranty to which such Subsidiary is a party.
(o) Ownership Change. There shall occur a Change of
<PAGE>
Control.
(p) Material Adverse Change. Since the date of the latest
annual or quarterly financial statements required to be
delivered to the Agent and each Lender pursuant to Section 8.1
(or, prior to delivery of the first financial statements
pursuant to Section 8.1, since the date of the financial
statements described in Section 6.1(n)),
(i) there shall occur a material adverse change in
the business, assets, liabilities, financial condition,
results of operations or business prospects of the
Borrower and its Subsidiaries, taken as a whole, or
(ii) an event has occurred or failed to occur which
has had a Materially Adverse Effect on the Borrower and
its Subsidiaries, taken as a whole.
Section Remedies.
(a) Automatic Acceleration and Termination of Facilities.
Upon the occurrence of an Event of Default specified in Section
10.1(g) or 10.1(h), (i) the principal of and the interest on
the Loans at the time outstanding, and all other Obligations
owed to the Agent and the Lenders under this Agreement or any
of the Loan Documents, including, without being limited to,
amounts to be deposited as Cash Collateral pursuant to Section
3.7 upon termination of this Agreement, shall thereupon become
due and payable without presentment, demand, protest, or other
notice of any kind, all of which are expressly waived by the
Borrower, anything in this Agreement or any of the Loan
Documents to the contrary notwithstanding, and (ii) the
Commitments and the obligation of each Lender to make Committed
Advances, of the Swingline Lender to make Swingline Loans and
of the Bank toissue the Alabama Letter of Credit shall
immediately terminate.
(b) Other Remedies. If any Event of Default, other than
as specified in Section 10.1(g) or 10.1(h), shall have occurred
and be continuing, the Agent shall at the request, or may with
the consent, of the Majority Lenders (i) declare the principal
of and interest on the Loans and the Notes at the time
outstanding, and all other Obligations owed to the Agent and
any of the Lenders under this Agreement or any of the Loan
Documents, including, without being limited to, amounts to be
deposited as Cash Collateral pursuant to Section 3.7 upon
termination of this Agreement, to be forthwith due and payable,
whereupon the same shall immediately become due and payable
without presentment, demand, protest or other notice of any
kind, all of which are expressly waived by the Borrower,
anything in this Agreement or the Loan Documents to the
contrary
<PAGE>
notwithstanding, and (ii) terminate the Commitments and the
obligation of each Lender to make Committed Advances, of the
Swingline Lender to make Swingline Loans and of the Bank to issue
the Alabama Letter of Credit, and the same shall thereupon be
terminated.
ARTICLE
AGENT AND CO-AGENTS
Section Grant of Authority. Each Lender and each holder of a
Note by its acceptance thereof hereby appoints and authorizes the
Agent to take such action and exercise such powers hereunder as are
specifically delegated to the Agent by the terms of this Agreement,
together with such other powers as are reasonably incidental
thereto.
Section Action on Instructions. The Agent shall in all cases
(including, without limitation, enforcement or collection of any
Notes) be fully protected in acting or refraining from acting under
this Agreement and any of the Loan Documents upon written
instructions of the Majority Lenders, and such instructions and any
action taken or any failure to act pursuant thereto shall be binding
on all the Lenders, all holders of the Notes and their respective
successors and assigns. The Agent shall not have any duty to any
Lender to exercise any right, power or remedy under this Agreement
or any of the Loan Documents or to take any affirmative action
hereunder or thereunder unless directed to do so by the Majority
Lenders. The Agent shall not be required to take any action under
Article 10, nor shall any other provision of this Agreement be
deemed to impose a duty on the Agent to take any action, if the
Agent has been advised by legal counsel that such action is contrary
to the terms of this Agreement or is otherwise contrary to any
Applicable Law; provided, however, that if the Agent fails or
refuses to act in accordance with the direction of the Majority
Lenders based on such advice of counsel, such advice shall be in
writing and a copy thereof shall be delivered to each Lender. The
Agent will forward to each Lender copies or, where appropriate,
originals of the documents delivered to the Agent pursuant to
Section 5.1. The Agent agrees to give each Lender prompt notice of
each notice given to it by the Borrower or any Subsidiary pursuant
to the terms of this Agreement or any other Loan Document, and to
provide to any Lender, upon such Lender's request therefor, a copy
of any such notice.
Section Responsibility of the Agent. Neither the Agent nor
any of its directors, officers, agents or employees shall be liable
for any action taken or omitted to be taken under or in connection
with this Agreement or any of the Loan Documents, except for its or
their gross negligence or willful misconduct. Without limiting the
generality of the foregoing, the Agent:
<PAGE>
(a) shall not be responsible to the Borrower, any
Subsidiary Guarantor or any other Person as a result of any
failure or delay in performance by, or any breach by, any
Issuer of its obligations in respect of any Letter of Credit or
hereunder or any Lender of any of its obligations under this
Agreement, the Notes or any of the other Loan Documents,
(b) shall not be responsible to any Lender or the holder
of any Note or any Issuer as a result of any failure or delay
in performance by, or any breach by, the Borrower or any
Subsidiary Guarantor of any of its obligations under this
Agreement, the Notes, the Subsidiary Guaranties or any of the
Loan Documents,
(c) shall not be responsible to any Lender for any
statements, representations or warranties in this Agreement or
any of the Loan Documents or for the validity, effectiveness,
enforceability or sufficiency of this Agreement or any of the
Loan Documents or any document or instrument delivered in
connection with the transactions contemplated by this
Agreement, including, without limitation, any documents that
may be delivered pursuant to Article 5,
(d) shall not be bound to ascertain or inquire as to the
performance or observance of any of the terms, provisions or
conditions of this Agreement, the Notes, the Subsidiary
Guaranties or any of the Loan Documents on the part of any of
the Borrower or any Subsidiary,
(e) shall be entitled to rely upon any writing, statement
or notice or any telegraphed, telexed or teletyped message
believed by it in good faith to be genuine and to have been
signed or sent by the proper Person,
(f) may consult with counsel and shall be fully protected
in any action taken or omitted to be taken in accordance with
the advice or opinion of such counsel,
(g) may employ agents and attorneys-in-fact and shall not
be liable for the default or misconduct of any such selected by
the Agent with reasonable care, and
(h) may treat the payee of a Note as the holder thereof
until it receives written notice of the assignment or transfer
thereof signed by such payee and in form satisfactory to the
Agent.
Section Representations by the Lenders. Each Lender hereby
represents and warrants to each other Lender, the Agent and the
Borrower that its decision to enter into this Agreement
<PAGE>
and to make its Committed Advances and Competitive Loans and acquire
participations in any Letters of Credit and Swingline Loans was made
on the basis of its own credit judgment and in making such decision
it did not rely upon any representation by the Agent or any other
Lender as to the credit worthiness or financial position of the
Borrower or any Subsidiary. Each Lender also acknowledges that it
will, independently and without reliance upon the Agent or any other
Lender, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions
in taking or not taking any action under this Agreement.
Section Expenses and Indemnification. To the extent that the
Borrower fails to do so (and without limiting the Obligations of the
Borrower), each Lender and each subsequent holder of a Note, by its
acceptance thereof, agrees to reimburse the Agent upon demand in
proportion to the respective Commitment Percentage of each Lender,
or, in the case of any such subsequent holder, in proportion that
the outstanding balance of such holder's Notes bears to the total
balance outstanding under all Notes, and to indemnify and hold the
Agent harmless in such proportion against any and all losses,
liabilities or expenses incurred by the Agent arising out of or in
connection with the administration of this Agreement, including the
costs and expenses of defending itself against any claim or
liability in connection with the exercise or performance of any of
its powers and duties hereunder and of taking any action hereunder,
provided that neither the Lenders nor any holder of any Note shall
be liable for any portion of such losses, liabilities or expenses
incurred by the Agent as a result of the Agent's gross negligence or
willful misconduct.
Section Rights of the Bank. The Bank and any Affiliate of
the Bank may accept deposits from, lend money to, and generally
engage in any kind of lending, banking or trust business with, the
Borrower and any of its Subsidiaries and Affiliates as if it were
not the Agent or such Affiliate.
Section Right to Resign. The Agent may resign at any time by
giving 30 days written notice thereof to each Lender and the
Borrower. Upon any such resignation, the Majority Lenders shall
have the right to appoint a successor Agent and if no successor
Agent shall have been so appointed by the Majority Lenders and shall
have accepted such appointment within 30 days after any such notice
of resignation, then the retiring entity may, on behalf of the
Lenders, appoint a successor Agent. Each successor Agent shall be a
Lender (acting exclusively through a United States branch), if any
Lender shall be willing to serve, or a commercial bank organized
under the laws of the United States of America or any State thereof
having a combined capital and surplus of at least $100,000,000 and
shall be acceptable to the Borrower in its reasonable judgment.
After any such resignation, the provisions of this Article 11 shall
continue in
<PAGE>
effect for the benefit of the retiring entity with respect to any
actions taken or omitted by it while acting as Agent.
Section 11.8. Co-Agents. The Co-Agents, in their respective
capacities as such, shall have no rights, powers, duties or
obligations under this Agreement or any of the other Loan Documents.
ARTICLE
MISCELLANEOUS
Section Notices.
(a) Method of Communication. Except as otherwise
specifically provided in this Agreement, all notices and other
communications provided for hereunder shall be in writing.
Notices in writing shall be delivered personally (including by
courier) or sent by certified or registered mail postage
prepaid or by telegraph or telex or telecopier and shall be
effective in the case of personal delivery, when delivered
against a receipt therefor, in the case of mailing, on the
third Business Day after mailing, in the case of telegraph, on
the day after delivery to the telegraph office, in the case of
telex, upon transmittal, answerback received and in the case of
telecopy, when transmitted and transmission is confirmed,
provided that notices to the Agent shall be effective only when
actually received by the Agent.
(b) Addresses for Notices. Notices to any party shall be
sent to it at the following addresses, or any other address of
which all the other parties are notified in writing
If to the Borrower: Delta Woodside Industries, Inc.
233 N. Main Street
Suite 200
Hammond Square
Greenville, South Carolina 29601
Attention: President
With copies to: Bettis C. Rainsford
P. 0. Box 388
108-1/2 Courthouse Square
Edgefield, South Carolina 29824
Eric B. Amstutz, Esq.
Wyche, Burgess, Freeman & Parham, P.A.
P.O. Box 728
44 E. Camperdown Way
Greenville, South Carolina 29602
<PAGE>
If to the Agent: NationsBank of North Carolina, N.A.
NationsBank Corporate Center
100 North Tryon Street
NC1-007-08-11
Charlotte, North Carolina 28255
Attn: E. Phifer Helms
If to a Lender: To such Lender at the address of its
Domestic Lending Office on the signature
pages hereof
(c) Agent's Office. The Agent hereby designates its
office located at NationsBank Corporate Center, 100 North Tryon
Street, NC1-007-08-11, Charlotte, North Carolina 28255, Attn:
E. Phifer Helms, or any subsequent office which shall have been
specified for such purpose by written notice to the parties, as
the office to which payments due are to be made and at which
Loans will be disbursed.
Section Expenses. The Borrower agrees to pay on demand all
reasonable costs and expenses incurred by the Agent in connection
with the preparation, execution, delivery, administration,
modification and amendment of this Agreement, the Notes, the
Subsidiary Guaranties and the other documents to be delivered
hereunder, including, without limitation, the reasonable fees and
expenses of counsel for and other advisors retained by the Agent
with respect thereto and with respect to advising the Agent as to
its rights and responsibilities under this Agreement, and all costs
and expenses, if any (including, without limitation, reasonable fees
and expenses of counsel), of the Agent and each of the Lenders in
connection with the enforcement (whether through negotiations, legal
proceedings or otherwise) of this Agreement, the Notes and the other
documents to be delivered hereunder.
Section Stamp and Other Taxes. The Borrower shall pay any
and all stamp, registration, recordation and similar taxes, fees or
charges and shall indemnify the Agent and the Lenders against any
and all liabilities with respect to or resulting from any delay in
the payment or omission to pay any such taxes, fees or charges,
which may be payable or determined to be payable in connection with
the execution, delivery, performance or enforcement of this
Agreement and any of the Loan Documents or the perfection of any
rights thereunder.
Section Setoff. In addition to any rights now or hereafter
granted under Applicable Law and not by way of limitation of any
such rights, upon and after the occurrence of any Default or Event
of Default, each Lender is hereby authorized by the Borrower at any
time or from time to time, without notice to the Borrower or to any
other Person, any such notice being hereby expressly waived, to set
off and to appropriate and to apply any and all deposits (general or
special, including, but
<PAGE>
not limited to, indebtedness evidenced by certificates of deposit,
whether matured or unmatured) and any other indebtedness at any time
held or owing by such Lender or any Affiliate of the Lender to or
for the credit or the account of the Borrower against and on account
of the Obligations irrespective or whether or not
(a) the Agent shall have made any demand under this
Agreement or any of the Loan Documents, or
(b) the Agent shall have declared any or all of the
Obligations to be due and payable as permitted by Section 10.2
and although such Obligations shall be contingent or unmatured.
Each Lender acknowledges, for the benefit of each other Lender, that
the provisions of Section 4.12 shall apply to amounts obtained by
any Lender by reason of its exercise of any rights pursuant to this
Section 12.4.
Section Litigation. THE BORROWER, THE AGENT AND THE LENDERS
HEREBY WAIVE TRIAL BY JURY IN ANY ACTION OR PROCEEDING OF ANY KIND
OR NATURE IN ANY COURT IN WHICH AN ACTION MAY BE COMMENCED BY OR
AGAINST THE BORROWER ARISING OUT OF THIS AGREEMENT, OR BY REASON OF
ANY OTHER CAUSE OR DISPUTE WHATSOEVER BETWEEN THE BORROWER, THE
AGENT AND ANY LENDER OF ANY KIND OR NATURE, PERTAINING DIRECTLY OR
INDIRECTLY TO THIS AGREEMENT OR THE LOAN DOCUMENTS OR TO ANY MATTER
ARISING THEREFROM. THE BORROWER AND THE AGENT AND THE LENDERS
HEREBY AGREE THAT THE FEDERAL COURT OF THE WESTERN DISTRICT OF NORTH
CAROLINA OR, AT THE ELECTION OF THE MAJORITY LENDERS, ANY COURT IN
WHICH THE AGENT SHALL, AT THE DIRECTION OF THE MAJORITY LENDERS,
INITIATE LEGAL OR EQUITABLE PROCEEDINGS AND WHICH HAS SUBJECT MATTER
JURISDICTION OVER THE MATTER IN CONTROVERSY AND IS LOCATED IN A
JURISDICTION WHICH HAS A REASONABLE RELATIONSHIP TO THE TRANSACTION
SURROUNDING THE NEGOTIATION, EXECUTION, ENFORCEMENT OR PERFORMANCE
OF THIS AGREEMENT, SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND
DETERMINE ANY CLAIMS OR DISPUTES BETWEEN THE BORROWER, THE AGENT AND
ANY LENDER, PERTAINING DIRECTLY OR INDIRECTLY TO THIS AGREEMENT OR
THE LOAN DOCUMENTS OR TO ANY MATTER ARISING THEREFROM. THE BORROWER
EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN
ANY ACTION OR PROCEEDING COMMENCED IN SUCH COURTS, HEREBY WAIVING
PERSONAL SERVICE OF THE SUMMONS AND COMPLAINT, OR OTHER PROCESS OR
PAPERS ISSUED THEREIN, AND AGREEING THAT SERVICE OF SUCH SUMMONS AND
COMPLAINT OR OTHER PROCESS OR PAPERS MAY BE MADE BY REGISTERED OR
CERTIFIED MAIL, RETURN RECEIPT REQUESTED, ADDRESSED TO THE BORROWER
AT ITS ADDRESS SET FORTH ABOVE. SHOULD THE BORROWER FAIL TO APPEAR
OR ANSWER ANY SUMMONS, COMPLAINT, PROCESS OR PAPERS SO SERVED WITHIN
THIRTY (30) DAYS AFTER ITS RECEIPT THEREOF (OR SUCH SHORTER PERIOD
AS MAY BE PRESCRIBED BY APPLICABLE RULES OF CIVIL PROCEDURE), IT
SHALL BE DEEMED IN DEFAULT AND AN ORDER AND/OR JUDGMENT MAY BE
ENTERED AGAINST IT AS DEMANDED OR PRAYED FOR IN SUCH SUMMONS,
COMPLAINT, PROCESS OR
<PAGE>
PAPERS. THE EXCLUSIVE CHOICE OF FORUM SET FORTH IN THIS SECTION
SHALL NOT BE DEEMED TO PRECLUDE THE ENFORCEMENT OF ANY JUDGMENT
OBTAINED IN SUCH FORUM OR THE TAKING OF ANY ACTION UNDER THIS
AGREEMENT TO ENFORCE SAME IN ANY APPROPRIATE JURISDICTION.
Section Consent to Advertising and Publicity. The Borrower
hereby agrees that the Agent may, after consulting with the
Borrower, issue and disseminate to the public information describing
the credit accommodation entered into pursuant to this Agreement,
including the names and addresses of the Borrower and its
Affiliates, the amount, interest rate, maturity, collateral, and a
general description of the Borrower's and each of its Subsidiary's
business; provided, however, that publication or dissemination of
such information other than through a "tombstone" type advertisement
shall not be made without the Borrower's prior consent.
Section Reversal of Payments. Subject to the provisions of
Section 4.7(a), the Agent and each Lender shall have the continuing
and exclusive right to apply, reverse, and re-apply any and all
payments to any portion of the Obligations. To the extent the
Borrower or any Subsidiary Guarantor makes a payment or payments to
the Agent on behalf of the Lenders or to a Lender or the Agent,
which payment(s) or proceeds or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside
and/or required to be repaid to a trustee, receiver or any other
party under any bankruptcy law, state or federal law, common law or
equitable cause, then, to the extent of such payment or proceeds
received, the Obligations or part thereof intended to be satisfied
shall be revived and continued in full force and effect, as if such
payment or proceeds had not been received by the Agent or such
Lender.
Section Injunctive Relief. The Borrower recognizes that, in
the event the Borrower fails to perform, observe or discharge any of
its Obligations or liabilities under this Agreement, any remedy of
law may prove to be inadequate relief to the Lenders; therefore, the
Borrower agrees that the Agent, on behalf of the Lenders, if the
Agent so requests, shall be entitled to temporary and permanent
injunctive relief in any such case without the necessity of proving
actual damages.
Section Accounting Matters. All financial and accounting
calculations, measurements and computations made for any purpose
relating to this Agreement, including without limitation all
computations utilized by the Borrower in complying with any covenant
contained herein, shall, unless there is an express written
direction by the Majority Lenders to the contrary which is consented
to by the Borrower, be performed in accordance with GAAP.
Section Assignment.
(a) All the provisions of this Agreement shall be
<PAGE>
binding upon and inure to the benefit of the parties hereto and
their respective successors and permitted assigns, except that the
Borrower may not assign or transfer any of its rights under this
Agreement without the prior written consent of all the Lenders, nor
may any Lender assign or transfer any of its rights or obligations
hereunder or under any Note other than in accordance with the
provisions of this Section 12.10; provided, that, notwithstanding
any other provision of this Agreement, any Lender may at any time
assign all or any portion of its rights under this Agreement and the
Notes held by such Lender to a United States Federal Reserve Bank as
collateral in accordance with Regulation A of the Board of Governors
of the Federal Reserve System as in effect from time to time and the
applicable operating circular of such Federal Reserve Bank.
(b) (i) Notwithstanding the provisions of Section
4.4(b), the Borrower may, at any time following a notice by a
Lender pursuant to Section 4.5(a) or a demand by a Lender
pursuant to Section 2.6(b)(ii), 4.5(c), 4.5(d) or 4.13, demand,
upon at least three Business Days' notice to such Lender and
the Agent, that such Lender assign in accordance with the
instructions of the Borrower and, if so demanded, such Lender
shall assign, to one or more banks or other entities all or a
portion of its rights and obligations under this Agreement
(including, without limitation, all or a portion of its
Commitment, and a corresponding portion of its rights and
obligations under the Letter of Credit Facility, the Swingline
Facility, the Committed Advances, Competitive Loans and other
Obligations owing to it and the Notes held by it); provided,
however, that (i) each such assignment shall be to an Eligible
Assignee (and if to one or more Lenders, ratably to all Lenders
(subject to each Lender's consent as to the assignment to it)
or on such other basis as the Agent and the Majority Lenders
(before giving effect to such assignment) shall agree), (ii)
each such assignment made as a result of a demand by the
Borrower pursuant to this Section 12.10(b)(i) shall be arranged
by the Borrower after consultation with the Agent and shall be
either an assignment of all of the rights and obligations of
theassigning Lender under this Agreement or an assignment of a
portion of such rights and obligations made concurrently with
another such assignment or other such assignments which
together effect an assignment of all of the rights and
obligations of the assigning Lender under this Agreement, (iii)
no Lender shall be obligated to make any such assignment as a
result of a demand by the Borrower pursuant to this Section
12.10(b)(i) unless and until such Lender shall have received
one or more payments from either the Borrower or one or more
Eligible Assignees in an aggregate amount at least equal to the
aggregate outstanding principal amount of the Obligations owing
to such Lender, together with accrued interest thereon and
accrued fees with respect thereto to the date of payment of
such principal
<PAGE>
amount, and (iv) the parties to each such assignment shall execute
and deliver to the Agent, for its acceptance and recording in the
Register, an Assignment and Acceptance, together with the Notes
subject to such assignment and a processing and recordation fee of
$2,500. Upon such execution, delivery, acceptance and recording,
from and after the effective date specified in each Assignment and
Acceptance, which effective date shall be at least three Business
Days after the execution thereof, (x) the assignee thereunder shall
be a party hereto and, to the extent that rights and obligations
hereunder have been assigned to it pursuant to such Assignment and
Acceptance, have the rights and obligations of a Lender hereunder
and (y) the Lender assignor thereunder shall, to the extent that
rights and obligations hereunder have been assigned by it pursuant
to such Assignment and Acceptance, relinquish its rights and be
released from its obligations under this Agreement (and, in the case
of an Assignment and Acceptance covering all or the remaining
portion of an assigning Lender's rights and obligations under this
Agreement, such Lender shall cease to be a party hereto).
(ii) Each Lender may, with the prior written consent
of the Borrower and the Agent, which consent shall not be
unreasonably withheld or delayed, assign, to one or more banks
or other entities a portion of its rights and obligations under
this Agreement (which shall include a portion of its
Commitment, and a corresponding portion of its rights and
obligations under the Letter of Credit Facility, the Swingline
Facility, the Committed Advances owing to it and the Committed
Note held by it and which may include all or a portion of the
Competitive Loans owing to it); provided, however, that (A)
each such assignment shall be to an Eligible Assignee, (B) the
minimum amount of any such assignment shall be $10,000,000 (or,
as to any original Lender, if less, an amount equal to 50% of
such Lender's Commitment as of the Effective Date, as the same
may have been reduced pursuant to Section 4.3), (C) such Lender
shall retain for its own account at least 50% of its original
Commitment hereunder, and (D) the parties to each such
assignment shall execute and deliver to the Agent, for its
acceptance and recording in the Register, an Assignment and
Acceptance, together with the Notes subject to such assignment
and a processing and recordation fee of $2,500. Upon such
execution, delivery, acceptance and recording, from and after
the effective date specified in each Assignment and Acceptance,
which effective date shall be at least three Business Days
after the execution thereof, (x) the assignee thereunder shall
be a party hereto and, to the extent that rights and
obligations hereunder have been assigned to it pursuant to such
Assignment and Acceptance, have the rights and obligations of a
Lender hereunder and (y) the Lender assignor thereunder shall,
to the extent that rights and obligations hereunder have been
assigned by it
<PAGE>
pursuant to such Assignment and Acceptance, relinquish its rights
and be released from its obligations under this Agreement.
(c) By executing and delivering an Assignment and
Acceptance, the Lender assignor thereunder and the assignee
thereunder confirm to and agree with each other and the other
parties hereto as follows: (i) other than as provided in such
Assignment and Acceptance, such assigning Lender makes no
representation or warranty and assumes no responsibility with
respect to any statements, warranties or representations made
in or in connection with this Agreement or the execution,
legality, validity, enforceability, genuineness, sufficiency or
value of this Agreement or any other instrument or document
furnished pursuant hereto; (ii) such assigning Lender makes no
representation or warranty and assumes no responsibility with
respect to the financial condition of the Borrower or any
Subsidiary Guarantor or the performance or observance by the
Borrower or any Subsidiary Guarantor of any of its Obligations
under this Agreement, any Subsidiary Guaranty, any Letter of
Credit or related Application, or any other instrument or
document furnished pursuant hereto; (iii) such assignee
confirms that it has received a copy of this Agreement,
together with copies of the financial statements referred to in
Section 6.1(n), each Subsidiary Guaranty and such other
documents and information as it has deemed appropriate to make
its own credit analysis and decision to enter into such
Assignment and Acceptance; (iv) such assignee will,
independently and without reliance upon the Agent, such
assigning Lender or any other Lender and based on such
documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or
not taking action under this Agreement; (v) such assignee
confirms that, subject to the acceptance rights of the Agent
and the Borrower, it is an Eligible Assignee; (vi) such
assignee appoints and authorizes the Agent to take such action
as agent on its behalf and to exercise such powers under this
Agreement as are delegated to the Agent by the terms hereof,
together with such powers as are reasonably incidental thereto;
and (vii) such assignee agrees that it will perform in
accordance with their terms all of the obligations which by
theterms of this Agreement are required to be performed by it
as a Lender.
(d) The Agent shall maintain at the Agent's Office a copy
of each Assignment and Acceptance delivered to and accepted by
it and a register for the recordation of the names and
addresses of the Lenders and the Commitment of, and principal
amount of the Loans, reimbursement obligations with respect to
Letters of Credit, obligations with respect to participations
in Swingline Loans and all other Obligations owing from the
Borrower to, each Lender from time to time (the "Register").
The entries in the Register
<PAGE>
shall be conclusive and binding for all purposes, absent manifest
error, and the Borrower, the Agent and the Lenders may treat each
Person whose name is recorded in the Register as a Lender hereunder
for all purposes of this Agreement. The Register shall be available
for inspection by the Borrower or any Lender at any reasonable time
and from time to time upon reasonable prior notice.
(e) Upon its receipt of an Assignment and Acceptance
executed by an assigning Lender and an assignee representing
that it is an Eligible Assignee, together with any Notes
subject to such assignment, the Agent shall, if such Assignment
and Acceptance has been completed and is in substantially the
form of Exhibit A hereto and the required fee is tendered, (i)
accept such Assignment and Acceptance, (ii) record the
information contained therein in the Register and (iii) give
prompt notice thereof to the Borrower. Within five Business
Days after its receipt of such notice, the Borrower, at its own
expense, shall execute and deliver to the Agent, in exchange
for delivery to it of the surrendered Note or Notes, (A) a new
Committed Loan Note to the order of such Eligible Assignee in
an amount equal to the Commitment assumed by it pursuant to
such Assignment and Acceptance and to the order of the
assigning Lender in an amount equal to the Commitment retained
by it hereunder (such new Committed Loan Notes to be in an
aggregate principal amount equal to the principal amount of the
surrendered Committed Loan Note of the assigning Lender) and
(B) a new Competitive Loan Note to the order of such Eligible
Assignee in an amount equal to the then current amount of the
Facility. Each of such new Notes shall be dated the effective
date of such Assignment and Acceptance and shall otherwise be
in substantially the form of Exhibit B hereto and/or Exhibit C
hereto, as applicable.
(f) Each Lender may sell participations to one or more
banks or other entities in or to a portion of its rights and
obligations under this Agreement (including, without
limitation, a portion of its Commitment, its rights and
obligations under the Letter of Credit Facility, the Swingline
Facility, the Committed Advances, Competitive Loans and other
Obligations owing to it and the Notes held by it); provided,
however, that (i) except in connection withthe sale of a
participation in the Competitive Loans or Competitive Loan Note
of any Lender the purchaser of each participation shall be a
United States commercial bank or a Wholly Owned Subsidiary of
such a bank or of a corporation of which such a bank is a
Wholly Owned Subsidiary, (ii) such Lender's obligations under
this Agreement (including, without limitation, its Commitment
hereunder) shall remain unchanged, (iii) such Lender shall
remain solely responsible to the other parties hereto for the
performance of such obligations, and the exercise of such
Lender's rights and remedies hereunder, other than any such
exercise which would
<PAGE>
(x) increase the amount of its Commitment, (y) reduce the principal
of or interest on any Note subject to such participation, or any
facility or other fee, payable to such Lender after the date of sale
of such participation, or (z) postpone any date fixed for the
payment to such Lender of principal of or interest on any Note
subject to such participation, or any facility or other fee, shall
not be subject to the consent of the purchaser of such
participation, (iv) the minimum amount of principal of Committed
Advances or Commitment subject to each such participation shall be
$5,000,000 (or, if less, an amount equal to 50% of such Lender's
Commitment), (v) each Lender shall at all times retain for its own
account an interest in its rights and obligations hereunder equal to
at least 50% of its Commitment as of the Effective Date, as the same
may have been reduced pursuant to Section 4.3, (vi) each purchaser
of a participation shall be prohibited from selling any interest in
such participation, (vii) such Lender shall remain the holder of any
such Notes for all purposes of this Agreement, and (viii) the
Borrower, the Agent and the other Lenders shall continue to deal
solely and directly with such Lender in connection with such
Lender's rights and obligations under this Agreement.
Notwithstanding the foregoing provisions of this Section 12.10(f),
each Lender may sell one participation in its rights and obligations
under this Agreement to a United States commercial bank which is a
Wholly Owned Subsidiary of the same Person of which such Lender is a
Wholly Owned Subsidiary, which participation need not comply with
the requirements of clauses (i), (iv) and (v) above, but shall
otherwise comply with the provisions of this Section 12.10(f).
(g) Any Lender may, in connection with any assignment or
participation or proposed assignment or participation pursuant
to this Section 12.10, disclose to the assignee or participant
or proposed assignee or participant, any information relating
to the Borrower furnished to such Lender by or on behalf of the
Borrower; provided that, prior to any such disclosure, the
assignee or participant or proposed assignee or participant
shall agree to preserve the confidentiality of any confidential
information relating to the Borrower or any Subsidiary received
by it from such Lender on substantially the terms set forth in
Section 12.21.
Section Amendments. No amendment or waiver of any provision
of this Agreement, the Notes or any Subsidiary Guaranty, nor consent
to any departure by the Borrower or any Subsidiary party hereto or
thereto therefrom, shall in any event be effective unless the same
shall be in writing and, in the case of this Agreement and the
Notes, signed by the Majority Lenders and, in the case of an
amendment, by the Borrower, or in the case of any Subsidiary
Guaranty, consented to by the Majority Lenders
<PAGE>
and signed in accordance with the terms thereof, and then such
waiver or consent shall be effective only in the specified instance
and for the specific purpose for which given; provided, however,
that no amendment, waiver or consent shall, unless in writing and
signed by all the Lenders and, in the case of an amendment, by the
Borrower (or by the Subsidiary party to the relevant Loan Document,
as the case may be), do any of the following: (a) waive any of the
conditions specified in Section 5.1 or 5.2, (b) increase the
Commitments of the Lenders or subject the Lenders to any additional
obligations, (c) reduce the principal of, or interest on, the Notes
or any fees or other amounts payable hereunder, (d) postpone any
date fixed for any payment of principal of, or interest on, the
Notes or any fees or other Obligations payable hereunder or under
any of the other Loan Documents, (e) release any Subsidiary
Guarantor from its obligations under its Subsidiary Guaranty, other
than in accordance with the terms thereof or as a result of a
transaction permitted pursuant to Section 9.7, (f) change the
percentage of the Commitments or of the aggregate unpaid principal
amount of the Loans and Letter of Credit Obligations, or the number
of Lenders, which shall be required for the Lenders or any of them
to take any action hereunder or (g) amend this Section 12.11; and
provided, further, that no amendment, waiver or consent shall,
unless in writing and signed by the Agent in addition to the Lenders
required above to take such action, affect the rights or duties of
the Agent under this Agreement or any Note or any other Loan
Document. Notwithstanding the foregoing terms of Section 12.11,
including, without limitation, the terms of subsections (c) and (d)
above, any Lender may agree with the Borrower (i) to change the
interest rate applicable to any Competitive Loan owing to such
Lender and (ii) subject to the terms of the definition of "Interest
Period" set forth in Section 1.1 and to the limitation that none of
the Obligations shall be due and payable later than the Termination
Date, to postpone any date fixed for any payment of principal of, or
interest on, the Competitive Loans owing to such Lender.
Section Performance of Borrower's Duties.
(a) The Borrower's Obligations under this Agreement and each
of the Loan Documents shall be performed by the Borrower at its sole
cost and expense.
(b) If the Borrower shall fail to do any act or thing which it
has covenanted to do under this Agreement or any of the Loan
Documents, the Agent on behalf of the Lenders may (but shall not be
obligated to) do the same or cause it to be done either in the name
of the Agent or the Lenders or in the name and on behalf of the
Borrower and the Borrower hereby irrevocably authorizes the Agent so
to act.
Section Indemnification. The Borrower agrees to reimburse
the Agent and each Lender for all costs and expenses
<PAGE>
incurred (including reasonable counsel fees and disbursements) and
to indemnify and hold the Agent and each Lender harmless from and
against all losses suffered by the Agent or any Lender (except to
the extent arising out of the Agent's or such Lender's gross
negligence or willful misconduct) in connection with
(i) the exercise by the Agent or any Lender of any
right or remedy granted to it under this Agreement or any
of the Loan Documents,
(ii) any claim, and the prosecution or defense
thereof, arising out of or in any way connected with this
Agreement or any of the Loan Documents (except any claim
asserted only by a Lender or the Agent against a Lender or
the Agent), and
(iii) the collection or enforcement of the
Obligations or any of them.
Section All Powers Coupled with Interest. All authorizations
granted to the Agent and the Lenders and any Persons designated by
the Agent or any Lender pursuant to any provisions of this Agreement
or any of the Loan Documents shall be deemed coupled with an
interest and shall be irrevocable so long as any of the Obligations
remain unpaid or unsatisfied.
Section Survival. Notwithstanding any termination of this
Agreement,
(a) until all Obligations have been irrevocably paid in
full or otherwise satisfied, the Agent on behalf of the Lenders
shall retain all rights under this Agreement and each of the
Loan Documents as fully as though this Agreement had not been
terminated, and
(b) without regard to payment of principal of and
interest on the Committed Advances, the indemnities to which
the Agent and the Lenders are entitled under the provisions of
this Article 12 and any other provision of this Agreement and
the Loan Documents shall continue in full force and effect and
shall protect the Agent and the Lenders against events arising
after such termination as well as before.
Section Titles and Captions. Titles and captions of
Articles, Sections and subsections in this Agreement are included
for convenience only, and neither limit nor amplify the provisions
of this Agreement.
Section Severability of Provisions. Any provision of this
Agreement or any Loan Document which is prohibited or unenforceable
in any jurisdiction shall, as to such jurisdiction, be ineffective
only to the extent of such prohibition or unenforceability without
invalidating the remainder of such provision or the remaining
provisions hereof or thereof or
<PAGE>
affecting the validity or enforceability of such provision in any
other jurisdiction.
Section Governing Law. This Agreement and the Notes shall be
construed in accordance with and governed by the laws of the State
of North Carolina.
Section Counterparts. This Agreement may be executed in any
number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be
an original and shall be binding upon all parties, their successors
and assigns, and all of which taken together shall constitute one
and the same agreement.
Section Reproduction of Documents. This Agreement, each of
the Loan Documents and all documents relating thereto, including,
without limitation, (a) consents, waivers and modifications that may
hereafter be executed, (b) documents received by the Agent or the
Lenders and (c) financial statements, certificates and other
information previously or hereafter furnished to the Agent or the
Lenders, may be reproduced by the Agent or the Lenders by any
photographic, photostatic, microfilm, microcard, miniature
photographic or other similar process and such Person may destroy
any original document so produced. Each party hereto stipulates
that, to the extent permitted by Applicable Law, any such
reproduction shall be as admissible in evidence as the original
itself in any judicial or administrative proceeding (whether or not
the original shall be in existence and whether or not such
reproduction was made by such Lender in the regular course of
business), and any enlargement, facsimile or further reproduction of
such reproduction shall likewise be admissible in evidence.
Section Confidentiality. Each Lender and the Agent agrees
(on behalf of itself and each of its Affiliates, directors,
officers, employees, and representatives) to use reasonable
precautions to keep confidential, in accordance with its customary
procedures for handling confidential information of this nature and
in accordance with safe and sound banking practices, any non-public
information supplied to it by the Borrower or any Subsidiary
pursuant to this Agreement (collectively the "Confidential
Information"), provided that nothing herein shall limit disclosure
of any such information (i) to the extent required by statute, rule,
regulation, or judicial process, (ii) to counsel for any of the
Lenders or the Agent, solely in their capacities as such, (iii) to
examiners, auditors or accountants, solely in their capacities as
such, of such Lender or the Agent, (iv) to the Agent or any other
Lender, or by any Lender to any Affiliate of such Lender, (v) filed
by the Borrower with any governmental agency, which information is
available to the public or available for inspection by the public,
(vi) in accordance with the provisions of Section 12.10(g) or (vii)
where necessary in any litigation between or among the parties
hereto arising out of this Agreement or any
<PAGE>
other Loan Document.
Section Entire Agreement. This Agreement and the other Loan
Documents contain the entire agreement among the parties hereto with
respect to the transactions contemplated hereby and thereby, and
supersede all prior arrangements or understandings with respect
thereto, written or oral.
[Remainder of page intentionally left blank]
<PAGE>
## IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their duly authorized officers in
several counterparts all as of the day and year first written above.
BORROWER:
DELTA WOODSIDE INDUSTRIES, INC.
By: /s/ Bettis C. Rainsford____
Title: Executive Vice President
AGENT:
NATIONSBANK OF NORTH CAROLINA, N.A.
By: /s/ E. Phifer Helms_______
Title: Senior Vice President
CO-AGENTS:
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION
By: /s/ Jennifer Williams______
Title: Vice President
THE BANK OF NEW YORK
By: /s/ Gregory Batson_________
Title: Assistant Vice President
##
LENDERS:
Commitment NATIONSBANK OF NORTH CAROLINA, N.A.
$50,000,000 By: /s/ E. Phifer Helms_______
Title: Senior Vice President
<PAGE>
Domestic Lending Office:
NationsBank Corporate Center
100 North Tryon Street
NC1-007-08-11
Charlotte, NC 28255
Attn: Mr. E. Phifer Helms
Telecopier: 704-386-1270
Eurodollar Lending Office:
Domestic Lending Office
<PAGE>
Commitment BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION
$40,000,000
By: /s/ Jennifer Williams______
Title: Vice President
Domestic Lending Office:
Bank of America National Trust
and Savings Association
1850 Gateway Boulevard
Concord, California 94520
Attn: Jennifer Williams
Telecopier: 510-675-7531
[with a copy to:
Bank of America National Trust
and Savings Association
1230 Peachtree Street, Suite 3600
Atlanta, Georgia 30309
Attn: Mr. Wayne Riess
Telecopier: 404-249-6938]
Eurodollar Lending Office:
Domestic Lending Office
<PAGE>
Commitment THE BANK OF NEW YORK
$30,000,000 By: /s/ Gregory Batson_________
Title: Assistant Vice President
Domestic Lending Office:
The Bank of New York
22nd Floor - Southern Division
One Wall Street
New York, New York 10286
Attn: Mr. Greg Batson
Telecopier: 212-635-6434
Eurodollar Lending Office:
Domestic Lending Office
<PAGE>
Commitment FIRST UNION NATIONAL BANK
OF SOUTH CAROLINA
$30,000,000
By: /s/ Charles P. Cecil_______
Title: Senior Vice President
Domestic Lending Office:
First Union National Bank
of South Carolina
1 Insignia Plaza
Greenville, South Carolina 29602
Attn: Mr. Chuck Cecil
Telecopier: 803-255-8357
Eurodollar Lending Office:
Domestic Lending Office
<PAGE>
Commitment WACHOVIA BANK OF SOUTH CAROLINA
$30,000,000 By: /s/ Thomas F. Snider_____
Title: VP
Domestic Lending Office:
Wachovia Bank of South Carolina
Corporate Banking
15 South Main Street
Greenville, South Carolina 29601
Attn: Mr. Tom Snider
Telecopier: 803-239-6894
Eurodollar Lending Office:
Domestic Lending Office
<PAGE>
Commitment CHASE MANHATTAN BANK, N.A.
$25,000,000 By: /s/ Jo Meer_______________
Title: Vice President
Domestic Lending Office:
Chase Manhattan Bank
1 Chase Manhattan Plaza
29th Floor
New York, New York 10005
Attn: Ms. Jo Meer
Telecopier: 212-768-9514
[with a copy to:
Chase Manhattan Bank
1411 Broadway, 4th Floor
New York, New York 10018
Attn: Ms. Jo Meer
Telecopier: 212-768-9514]
Eurodollar Lending Office:
Domestic Lending Office
<PAGE>
Commitment THE BANK OF NOVA SCOTIA
$25,000,000 By: /s/ W. E. Zarrett______
Title: Reltaionship Manager
Domestic Lending Office:
The Bank of Nova Scotia
600 Peachtree Street, Suite 2700
Atlanta, Georgia 30308
Attn: Mr. Bill Zarrett
Telecopier: 404-888-8998
Eurodollar Lending Office:
Domestic Lending Office
<PAGE>
Commitment PNC BANK, NATIONAL ASSOCIATION
$25,000,000 By: /s/ Jim Fink______________
Title: VP
Domestic Lending Office:
PNC Bank, National Association
5th and Wood Street, 2nd Floor
Pittsburgh, Pennsylvania 15222
Attn: Mr. Jim Fink
Telecopier: 412-762-6484
Eurodollar Lending Office:
Domestic Lending Office
<PAGE>
Commitment NATIONAL WESTMINSTER BANK USA
$20,000,000 By: /s/ Kurt Pohmer___________
Title: AVP
Domestic Lending Office:
National Westminster Bank USA
350 Fifth Avenue
New York, New York 10018
Attn: Mr. Kurt Pohmer
Telecopier: 212-290-1654
Eurodollar Lending Office:
Domestic Lending Office
<PAGE>
FORM OF ASSIGNMENT AND ACCEPTANCE
EXHIBIT A
that it is the legal and beneficial owner of the interest being
assigned by it hereunder and that such interest is free and clear of
any adverse claim; (iii) makes no representation or warranty and
assumes no responsibility with respect to any statements, warranties
or representations made in or in connection with the Credit
Agreement or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of the Credit Agreement or any
other instrument or document furnished pursuant thereto; (iv) makes
no representation or warranty and assumes no responsibility with
respect to the financial condition of the Borrower or any Subsidiary
Guarantor or the performance or observance by the Borrower or any
Subsidiary Guarantor of any of its respective obligations under the
Credit Agreement, any Subsidiary Guaranty, any Letter of Credit or
related Application or any other instrument or document furnished
pursuant thereto; and (v) attaches the Committed Loan Note referred
to in paragraph 1 above and requests that the Agent (A) exchange
such Committed Loan Note for a new Committed Loan Note as set forth
on Schedule 1 hereto and (B) cause a new Competitive Note to be
delivered to the Assignee as contemplated by Section 12.10(e) of the
Credit Agreement.
4. The Assignee (i) confirms that it has received a copy of
the Credit Agreement, together with copies of the financial
statements referred to in Section 6.1(n) thereof, each Subsidiary
Guaranty and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter
into this Assignment and Acceptance; (ii) agrees that it will,
independently and without reliance upon the Agent, the Assignor or
any other Lender and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit
decisions in taking or not taking action under the Credit Agreement;
(iii) confirms that, subject to the consent rights of the Agent and
the Borrower, it is an Eligible Assignee; (iv) appoints and
authorizes the Agent to take such action as agent on its behalf and
to exercise such powers under the Credit Agreement as are delegated
to the Agent by the terms thereof, together with such powers as are
reasonably incidental thereto; (v) agrees that it will perform in
accordance with their terms all of the obligations which by the
terms of the Credit Agreement are required to be performed by it as
a Lender; [and] (vi) specifies as its Domestic Lending Office (and
address for notices) and Eurodollar Lending Office the offices set
forth beneath its name on the signature pages hereof [and (vii)
attaches the forms prescribed by the Internal Revenue Service of the
United States certifying as to the Assignee's status for purposes of
determining exemption from United States withholding taxes with
respect to all payments to be made to the Assignee under the Credit
Agreement and the Notes or such other documents as are necessary to
indicate that all such payments are subject to such taxes at a rate
reduced by an applicable tax treaty].
***. If the Assignee is organized under the laws of a
<PAGE>
FORM OF ASSIGNMENT AND ACCEPTANCE
jurisdiction outside the United States**
5. The effective date for this Assignment and Acceptance
shall be ____________, 199_ (the "Assignment Effective Date").
**42. See Section 12.10. Such date shall be at least three
Business Days after the execution of this Assignment and
Acceptance**
Following the execution of this Assignment and Acceptance, it will
be delivered to the Agent for acceptance and recording by the Agent.
6. Upon such acceptance and recording, as of the Assignment
Effective Date, (i) the Assignee shall be a party to the Credit
Agreement and, to the extent of the interest assigned pursuant to
this Assignment and Acceptance, have the rights and obligations of a
Lender thereunder and (ii) the Assignor shall, to the extent of the
interest assigned pursuant to this Assignment and Acceptance,
relinquish its rights and be released from its obligations under the
Credit Agreement.
7. Upon such acceptance and recording, from and after the
Assignment Effective Date, the Agent shall make all payments under
the Credit Agreement and the Notes in respect of the interest
assigned hereby (including, without limitation, all payments of
principal, interest and fees with respect thereto) to the Assignee.
The Assignor and Assignee shall make all appropriate adjustments in
payments under the Credit Agreement and the Notes for periods prior
to the Assignment Effective Date directly between themselves.
8. This Assignment and Acceptance shall be governed by, and
construed in accordance with, the laws of the State of North
Carolina.
<PAGE>
FORM OF ASSIGNMENT AND ACCEPTANCE
IN WITNESS WHEREOF, the Assignor and the Assignee have caused
this Assignment and Acceptance to be duly executed by their
respective duly authorized officers as of the day and year first
above written.
[NAME OF ASSIGNOR]
By:
Title:
[NAME OF ASSIGNEE]
By:
Title:
Domestic Lending Office (and
address for notices):
[Address]
Eurodollar Lending Office:
[Address]
Accepted this _____ day
of __________, 19__.
DELTA WOODSIDE INDUSTRIES, INC.
By:_____________________________
Title:
NATIONSBANK OF NORTH CAROLINA, N.A.
By:______________________________
Title:
<PAGE>
FORM OF ASSIGNMENT AND ACCEPTANCE
SCHEDULE 1 to
Assignment and
Acceptance
Notes
Note
Date Type Principal Amount Payee
<PAGE>
FORM OF ASSIGNMENT AND ACCEPTANCE
EXHIBIT B
FORM OF
COMMITTED LOAN NOTE
$_________ ___________, 199_
FOR VALUE RECEIVED, DELTA WOODSIDE INDUSTRIES, INC., a
South Carolina corporation (the "Borrower"), hereby promises to pay
to ______________________ (the "Bank"), at the office of NationsBank
of North Carolina, N.A., as Agent (the "Agent"), at One NationsBank
Plaza, NC1-007-08-11, Charlotte, North Carolina 28255 (or at such
other place or places as the holder hereof may designate), at the
times set forth in the Credit Agreement dated as of September __,
1994, among the Borrower, the Agent, the Bank and certain other
lenders (as it may be amended, modified, extended or restated from
time to time, the "Credit Agreement"; all capitalized terms not
otherwise defined herein shall have the meanings set forth in the
Credit Agreement), but in no event later than the Termination Date,
in Dollars and in immediately available funds, the principal amount
of _______________________ ($__________) or, if less than such
principal amount, the aggregate unpaid principal amount of all
Committed Advances made by the Bank to the Borrower pursuant to the
Credit Agreement, and to pay interest from the date hereof on the
unpaid principal amount hereof, in like money, at said office, on
the dates and at the rates determined in accordance with Sections
2.6 and 4.1 of the Credit Agreement.
If payment of all sums due hereunder is accelerated under the
terms of the Credit Agreement, this Committed Loan Note and all
other indebtedness of the Borrower to the Bank shall become
immediately due and payable, without presentment, demand, protest or
notice of any kind, all of which are hereby waived by the Borrower.
In the event this Committed Loan Note is not paid when due at
any stated or accelerated maturity, the Borrower agrees to pay, in
addition to the principal and interest, all costs of collection,
including reasonable attorneys' fees.
All borrowings evidenced by this Committed Loan Note and all
payments and prepayments of the principal hereof and interest hereon
and the respective dates thereof shall be endorsed by the holder
hereof on Schedule A attached hereto and incorporated herein by
reference, or on a continuation thereof which shall be attached
hereto and made a part hereof; provided, however, that any failure
to endorse such information on such schedule or continuation thereof
shall not in any manner affect the Borrower's Obligations under the
Credit Agreement.
<PAGE>
FORM OF ASSIGNMENT AND ACCEPTANCE
IN WITNESS WHEREOF, the Borrower has caused this Committed Loan
Note to be duly executed by its duly authorized officer as of the
day and year first above written.
DELTA WOODSIDE INDUSTRIES, INC.
By_____________________________
Title__________________________
<PAGE>
FORM OF ASSIGNMENT AND ACCEPTANCE
SCHEDULE A TO THE
COMMITTED LOAN NOTE EXECUTED IN FAVOR OF
_____________________________________
DATED ___________, 199_
Date Person
Making Notation
Amount
Interest Period
Rate
Payments
Principal Interest
Bala
of N
<PAGE>
FORM OF ASSIGNMENT AND ACCEPTANCE
EXHIBIT C
FORM OF
COMPETITIVE LOAN NOTE
$275,000,000 ___________, 199_
FOR VALUE RECEIVED, DELTA WOODSIDE INDUSTRIES, INC., a
South Carolina corporation (the "Borrower"), hereby promises to pay
to ______________________ (the "Bank"), at the office of NationsBank
of North Carolina, N.A., as Agent (the "Agent"), at One NationsBank
Plaza, NC1-007-08-11, Charlotte, North Carolina 28255 (or at such
other place or places as the holder hereof may designate), at the
times set forth in the Credit Agreement dated as of September __,
1994, among the Borrower, the Agent, the Bank and certain other
lenders (as it may be amended, modified, extended or restated from
time to time, the "Credit Agreement"; all capitalized terms not
otherwise defined herein shall have the meanings set forth in the
Credit Agreement), but in no event later than the Termination Date,
in Dollars and in immediately available funds, the principal amount
of TWO HUNDRED SEVENTY-FIVE MILLION DOLLARS ($275,000,000) or, if
less than such principal amount, the aggregate unpaid principal
amount of all Competitive Loans made by the Bank to the Borrower
pursuant to the Credit Agreement, and to pay interest from the date
hereof on the unpaid principal amount hereof, in like money, at said
office, on the dates and at the rates determined in accordance with
Sections 2.8(h) and 4.1 of the Credit Agreement.
If payment of all sums due hereunder is accelerated under the
terms of the Credit Agreement, this Competitive Loan Note and all
other indebtedness of the Borrower to the Bank shall become
immediately due and payable, without presentment, demand, protest or
notice of any kind, all of which are hereby waived by the Borrower.
In the event this Competitive Loan Note is not paid when due at
any stated or accelerated maturity, the Borrower agrees to pay, in
addition to the principal and interest, all costs of collection,
including reasonable attorneys' fees.
All borrowings evidenced by this Competitive Loan Note and all
payments and prepayments of the principal hereof and interest hereon
and the respective dates thereof shall be endorsed by the holder
hereof on Schedule A attached hereto and incorporated herein by
reference, or on a continuation thereof which shall be attached
hereto and made a part hereof; provided, however, that any failure
to endorse such information on such schedule or continuation thereof
shall not in any manner affect the Borrower's Obligations under the
Credit Agreement.
<PAGE>
FORM OF ASSIGNMENT AND ACCEPTANCE
IN WITNESS WHEREOF, the Borrower has caused this Competitive
Loan Note to be duly executed by its duly authorized officer as of
the day and year first above written.
DELTA WOODSIDE INDUSTRIES, INC.
By_____________________________
Title__________________________
<PAGE>
FORM OF ASSIGNMENT AND ACCEPTANCE
SCHEDULE A TO THE
COMPETITIVE LOAN NOTE EXECUTED IN FAVOR OF
_____________________________________
DATED __________, 199_
Date Person
Making Notation
Amount
Interest Period
Rate
Payments
Principal Interest
Bala
of N
<PAGE>
FORM OF ASSIGNMENT AND ACCEPTANCE
EXHIBIT D
FORM OF
SUBSIDIARY GUARANTY
THIS GUARANTY AGREEMENT, dated as of _____________, 199_ (the
"Guaranty Agreement"), is given by __________________, a
______________ corporation (the "Guarantor"), in connection with
that certain Credit Agreement dated as of September __, 1994 (as
amended from time to time, the "Credit Agreement") among Delta
Woodside Industries, Inc., a South Carolina corporation (herein with
its successors called the "Borrower"), various financial
institutions parties thereto (the "Lenders") and NationsBank of
North Carolina, N.A., as Agent for such Lenders. Terms defined in
the Credit Agreement are, unless otherwise defined herein, used
herein as defined in the Credit Agreement.
W I T N E S S E T H :
WHEREAS, pursuant to the Credit Agreement, the Lenders have
agreed to provide the Borrower with certain credit facilities,
including Committed Loans, Competitive Loans and Swingline Loans and
Letters of Credit, in an aggregate principal amount outstanding of
up to $275,000,000; and
WHEREAS, the Guarantor is a direct or indirect Subsidiary of
the Borrower and the Borrower is required pursuant to Section 5.1 or
Section 7.10 of the Credit Agreement to cause the Guarantor to enter
into this Guaranty Agreement.
NOW, THEREFORE, to induce the Lenders to make available the
credit facilities described above pursuant to the Credit Agreement
and in consideration of the premises, the Guarantor hereby agrees as
follows:
1. Guaranty of Payment. The Guarantor hereby irrevocably and
unconditionally guarantees to the Agent and the Lenders the prompt
payment, when due, by acceleration or otherwise, of the Guaranteed
Obligations. For purposes of this Guaranty Agreement, "Guaranteed
Obligations" means any and all indebtedness of the Borrower or any
other Subsidiary Guarantor to the Agent or the Lenders under the
Credit Agreement, the Notes, the Subsidiary Guaranties or any other
of the Loan Documents including, without limitation, all principal,
interest and fees and any and all reimbursement obligations and
other indebtedness arising on account of drawings under Letters of
Credit plus any and all other indebtedness of the Borrower or any
other Subsidiary Guarantor to the Agent or any Lender under the Loan
Documents, whether existing now or arising hereafter, as such
Guaranteed Obligations may be modified, extended or renewed from
time to time. The guaranty of the Guarantor as set forth in this
section
<PAGE>
FORM OF ASSIGNMENT AND ACCEPTANCE
is a guaranty of payment and not of collection.
Notwithstanding any provision to the contrary contained herein or in
the Loan Documents, the liability of the Guarantor with respect to
the Guaranteed Obligations shall not exceed the Maximum Obligated
Amount (as hereinafter defined).
For the purposes hereof:
"Adjusted Net Worth" means, as of any date of determination thereof,
the excess of (i) the amount of the "present fair saleable value" of
the assets of the Guarantor as of such date of determination, over
(ii) the amount of all "liabilities, contingent or otherwise", of
the Guarantor as of such date of determination, as such quoted terms
are determined in accordance with applicable Federal and state laws
governing determinations of the insolvency of debtors. In
determining Adjusted Net Worth for the purposes of calculating the
Maximum Obligated Amount in respect of any Extension of Credit, the
liabilities to be used in such determination pursuant to clause (ii)
of the preceding sentence shall in any event include the liabilities
of the Guarantor hereunder in respect of all Extensions of Credit
other than the Extension of Credit in respect of which such
calculation is being made;
"Extension of Credit" means any Loan advanced under the Credit
Agreement and any Letter of Credit issued under the Credit Agreement
(and obligations to make advances thereunder);
"Maximum Obligated Amount" means, as of any date of determination
thereof, the sum of (i) with respect to each Extension of Credit (or
portion thereof) which is used (or the proceeds of which are used)
to make a Direct Transfer to the Guarantor, the outstanding amount
of such Extension of Credit (or such portion thereof) as of such
date, plus (ii) with respect to each Extension of Credit (or portion
thereof) which is not used (or the proceeds of which are not used)
to make a Direct Transfer to the Guarantor, the lesser of (a) the
outstanding amount of all such Extensions of Credit (or such
portions thereof) as of the earlier of the date that enforcement is
sought against the Guarantor with respect to the Guaranteed
Obligations hereunder or the date of the commencement of a case
under the U.S. Bankruptcy Code in which the Guarantor is a debtor,
or (b) 95% of the Adjusted Net Worth of the Guarantor at the time of
each such Extension of Credit; and
"Direct Transfer" means (i) all loans, advances or capital
contributions made to or for the direct benefit of, or letters of
credit issued for the account of or direct benefit of, the Guarantor
with any Extension of Credit (or with any proceeds thereof), (ii)
all debt securities or other obligations of the Guarantor acquired
from the Guarantor, retired by the Guarantor or collateralized by
the Guarantor with any Extension of Credit
<PAGE>
FORM OF ASSIGNMENT AND ACCEPTANCE
(or with any proceeds thereof), (iii) the fair market value of all
property acquired with any Extension of Credit (or with any proceeds
thereof) and transferred, absolutely and not as collateral, to the
Guarantor and (iv) all equity securities of the Guarantor acquired
from the Guarantor with any Extension of Credit (or with any
proceeds thereof).
2. Release of Collateral, Parties Liable, etc. The Guarantor
agrees that the whole or any part of the security now or hereafter
held for the Guaranteed Obligations may be exchanged, compromised,
released or surrendered from time to time; that neither the Agent
nor the Lenders (in their respective capacities as such) shall have
any obligation to protect, perfect, secure or insure any security
interests, liens or encumbrances now or hereafter held for the
Guaranteed Obligations or the properties subject thereto; that the
time or place of payment of the Guaranteed Obligations may be
changed or extended, in whole or in part, to a time certain or
otherwise, and may be renewed or accelerated, in whole or in part;
that the Borrower or any other Subsidiary Guarantor may be granted
indulgences generally; that any of the provisions of the Loan
Documents, or any of them, or any other documents executed in
connection with this transaction, may be modified, amended or
waived; that any party liable for the payment thereof may be granted
indulgences or released; and that any deposit balance for the credit
of the Borrower or any other Subsidiary Guarantor or any other party
liable for the payment of the Guaranteed Obligations or liable upon
any security therefor may be released, in whole or in part, at,
before and/or after the stated, extended or accelerated maturity of
the Guaranteed Obligations, all without notice to or further assent
by the Guarantor, who shall remain bound hereon, notwithstanding any
such exchange, compromise, surrender, extension, renewal,
acceleration, modification, indulgence or release.
3. Waiver of Rights. The Guarantor expressly waives: (a)
notice of acceptance of this Guaranty Agreement by the Agent and the
Lenders and of all extensions of credit to the Borrower by the Agent
or any Lender; (b) presentment and demand for payment of any of the
Guaranteed Obligations; (c) protest and notice of dishonor or of
default to the Guarantor or to any other party with respect to the
Guaranteed Obligations or with respect to any security therefor; (d)
notice of the Agent or any Lender obtain- ing, amending,
substituting for, releasing, waiving or modifying any security
interest, liens, or encumbrances now or hereafter securing the
Guaranteed Obligations, or the Agent's or any Lender's
subordinating, compromising, discharging or releasing such security
interests, liens or encumbrances; (e) all other notices to which the
Guarantor might otherwise be entitled; (f) demand for payment under
this Guaranty Agreement; and (g) any right to assert against the
Agent or any Lender, as a defense, counterclaim, set-off, or cross-
claim any defense (legal or equitable), set-off, counterclaim or
claim which the Guarantor may now or hereafter have against the
Agent or any Lender or the
<PAGE>
FORM OF ASSIGNMENT AND ACCEPTANCE
Borrower or any other Subsidiary Guarantor, but such waiver shall
not prevent the Guarantor from asserting against the Agent, any
Lender, the Borrower or any other Subsidiary Guarantor in a separate
action, any claim, action, cause of action, or demand that the
Guarantor might have, whether or not arising out of this Guaranty
Agreement.
4. Primary Liability of Guarantor. The Guarantor agrees that
this Guaranty Agreement may be enforced by the Agent and the Lenders
without the necessity at any time of resorting to or exhausting any
other security or collateral and without the necessity at any time
of having recourse to the Notes, any other Subsidiary Guaranty or
any collateral now or hereafter securing the Guaranteed Obligations
or otherwise, and the Guarantor hereby waives the right to require
the Agent and the Lenders to proceed against the Borrower, any other
Subsidiary Guarantor or any other person (including a co-guarantor)
or to require the Agent and the Lenders to pursue any other remedy
or enforce any other right. Without limiting the generality of the
foregoing, the Guarantor hereby specifically waives the benefits of
N.C. Gen. Stat. Sections 26-7 through 26-9, inclusive. In addition,
the Guarantor hereby waives and renounces any and all rights it has
or may have for subrogation, indemnity, reimbursement or
contribution against the Borrower or any other Subsidiary Guarantor
for amounts paid under this Guaranty Agreement. This waiver is
expressly intended to prevent the existence of any claim in respect
of such reimbursement by the Guarantor against the estate of the
Borrower or of any other Subsidiary Guarantor within the meaning of
Section 101 of the Bankruptcy Code, and to prevent the Guarantor
from being deemed a "creditor" of the Borrower or any other
Subsidiary Guarantor in respect of such reimbursement within the
meaning of Section 547(b) of the Bankruptcy Code in the event of a
subsequent case involving the Borrower or any such other Subsidiary
Guarantor. The Guarantor further agrees that nothing contained
herein shall prevent the Agent or the Lenders from suing on the
Notes or on any other Subsidiary Guaranty or foreclosing their
security interest in or lien on any collateral now or hereafter
securing the Guaranteed Obligations or from exercising any other
rights available to them under the Notes, any other Subsidiary
Guaranty, or any other instrument of security if neither the
Borrower, the other Subsidiary Guarantors nor the Guarantor timely
perform the obligations of the Borrower or such other Subsidiary
Guarantors, as the case may be thereunder, and the exercise of any
of the aforesaid rights and the completion of any foreclosure
proceedings shall not constitute a discharge (except to the extent
of any payment received which irrevocably reduces the amount of the
Guaranteed Obligations) of the Guarantor's obligations hereunder; it
being the purpose and intent of the Guarantor that its obligations
hereunder shall be absolute, independent and unconditional under any
and all circumstances. Neither the Guarantor's obligations under
this Guaranty Agreement nor any remedy for the enforcement thereof
shall be impaired, modified, changed or released in any manner
whatsoever by an
<PAGE>
FORM OF ASSIGNMENT AND ACCEPTANCE
impairment, modification, change, release or limitation of the
liability of the Borrower or any other Subsidiary Guarantor, by
reason of the Borrower's or any other Subsidiary Guarantor's
bankruptcy or insolvency or by reason of the invalidity or
unenforceability of all or any portion of the Guaranteed
Obligations. The Guarantor acknowledges that the term "Guaranteed
Obligations" as used herein includes any payments made by the
Borrower or any other Subsidiary Guarantor to the Agent or any
Lender and subsequently recovered by the Borrower or such other
Subsidiary Guarantor or a trustee for the Borrower or such other
Subsidiary Guarantor pursuant to the Borrower's or such other
Subsidiary Guarantor's bankruptcy or insolvency and that the
guaranty of the Guarantor hereunder shall be reinstated to the
extent of such recovery.
5. Attorneys' Fees and Costs of Collection. If at any time
or times hereafter the Agent or the Lenders employ counsel to pursue
collection, to sue for enforcement of the terms hereof or of the
Notes or of any other Subsidiary Guaranty, or to file a petition,
complaint, answer, motion or other pleading in any suit or
proceeding relating to this Guaranty Agreement or the Notes or any
other Subsidiary Guaranty, then in such event, all of the reasonable
attorneys' fees relating thereto shall be an addi- tional liability
of the Guarantor to the Agent and the Lenders, payable on demand.
6. Security Interests and Setoff. As security for the
Guarantor's obligations hereunder, the Guarantor agrees that (a) in
the event the Guarantor fails to pay its obligations hereunder when
due and payable under this Guaranty Agreement, any of the
Guarantor's assets of any kind, nature or description (including,
without limitation, deposit accounts) in the possession, control or
custody of the Agent or any Lender may, without notice to the
Guarantor, be reduced to cash or the like and applied by the Agent
or such Lender in reduction or payment of the Guarantor's
obligations hereunder; (b) all outstanding security interests, liens
and encumbrances heretofore, now and at any time or times hereafter
granted by the Guarantor to the Agent or any Lender shall also
secure the Guarantor's obligations hereunder; and (c) after any of
the Guaranteed Obligations have become due and payable as the result
of the occurrence of an Event of Default under the Credit Agreement,
the Agent and each Lender shall have the right, immediately and
without further action by them, to set off against the Guaranteed
Obligations all money owed by the Agent or such Lender in any
capacity to the Guarantor, whether or not due, and the Agent or such
Lender shall be deemed to have made a charge against any such money
immediately upon the occurrence of such obligation becoming due even
though such charge is made or entered on the books of the Agent or
such Lender subsequent thereto.
7. Term of Guaranty; Warranties. This Guaranty Agreement
shall continue in full force and effect until the Guaranteed
Obligations are fully and indefeasibly paid, performed and
<PAGE>
FORM OF ASSIGNMENT AND ACCEPTANCE
discharged. This Guaranty Agreement covers the Guaranteed
Obligations whether presently outstanding or arising subsequent to
the date hereof including all amounts advanced by the Agent or any
Lender in stages or installments. The Guarantor warrants and
represents to the Agent and the Lenders (i) that the Guarantor is a
corporation duly incorporated, validly existing and in good standing
under the laws of its state of incorporation, (ii) that the
Guarantor has all requisite corporate power and authority to
execute, deliver and perform this Guaranty Agreement, (iii) that the
execution, delivery and performance of this Guaranty Agreement by
the Guarantor do not violate or constitute a breach of any material
agreement or instrument by which the Guarantor or its properties or
assets are bound or of any material provision of law, any order of
any court or other agency of government or the corporate charter or
certificate of incorporation or bylaws of the Guarantor, (iv) that
this Guaranty Agreement is binding upon and enforceable against the
Guarantor, in accordance with its terms, (v) that, except as
disclosed in Schedule 6.1(j) to the Credit Agreement, there is no
litigation, claim, action or proceeding pending, or, to the best
knowledge of the Guarantor, threatened, against the Guarantor which
would materially adversely affect the financial condition of the
Guarantor or its ability to fulfill its obligations hereunder, and
(vi) that no consent, approval or authorization of, or filing,
registration or qualification with, any governmental authority on
the part of the Guarantor is required as a condition to the
execution, delivery or performance by the Guarantor, or for the
validity or enforceability, of this Guaranty Agreement. This
Guaranty Agreement is binding on and enforceable against the
Guarantor and its successors and assigns.
8. Further Representations and Warranties. The Guarantor
agrees that the Agent and the Lenders will have no obligation to
investigate the financial condition or affairs of the Borrower or
any other Subsidiary Guarantor for the benefit of the Guarantor nor
to advise the Guarantor of any fact respecting, or any change in,
the financial condition or affairs of the Borrower or of any other
Subsidiary Guarantor which might come to the knowledge of the Agent
or any Lender at any time, whether or not the Agent or any Lender
knows or believes or has reason to know or believe that any such
fact or change is unknown to the Guarantor or might (or does)
materially increase the risk of the Guarantor as guarantor or might
(or would) affect the willingness of the Guarantor to continue as
guarantor with respect to the Guaranteed Obligations.
9. Additional Liability of Guarantor. If the Guarantor is or
becomes liable for any indebtedness owing by the Borrower or any
other Subsidiary Guarantor to the Agent or any Lender by endorsement
or otherwise other than under this Guaranty Agreement, such
liability shall not be in any manner impaired or reduced hereby but
shall have all and the same force and effect it would have had if
this Guaranty Agreement had not existed and the Guarantor's
liability hereunder shall not be in any manner
<PAGE>
FORM OF ASSIGNMENT AND ACCEPTANCE
impaired or reduced thereby.
10. Cumulative Rights. All rights of the Agent and each
Lender hereunder or otherwise arising under any documents executed
in connection with or as security for the Guaranteed Obligations are
separate and cumulative and may be pursued separately, successively
or concurrently, or not pursued, without affecting or limiting any
other right of the Agent or any Lender and without affecting or
impairing the liability of the Guarantor hereunder.
11. Pronouns; Severability. The pronouns used in this
instrument shall be construed as masculine, feminine or neuter as
the occasion may require.
12. Agent and Lender Assigns. This Guaranty Agreement is
intended for and shall inure to the benefit of the Agent and each
Lender and each and every person who shall from time to time be or
become the owner or holder of any of the Guaranteed Obligations, and
each and every reference herein to "Agent" or "Lender" shall include
and refer to each and every successor or assignee of the Agent or
any Lender at any time holding or owning any part of or interest in
any part of the Guaranteed Obligations. This Guaranty Agreement
shall be transferable and negotiable with the same force and effect,
and to the same extent, that the Guaranteed Obligations are
transferable and negotiable, it being understood and stipulated that
upon assignment or transfer by the Agent or any Lender of any of the
Guaranteed Obligations the legal holder or owner of the Guaranteed
Obligations (or a part thereof or interest therein thus transferred
or assigned by the Agent or any Lender) shall (except as otherwise
stipulated by the Agent or any such Lender in its assignment) have
and may exercise all of the rights granted to the Agent or such
Lender under this Guaranty Agreement to the extent of that part of
or interest in the Guaranteed Obligations thus assigned or
transferred to said person. The Guarantor expressly waives notice
of transfer or assignment of the Guaranteed Obligations, or any part
thereof, or of the rights of the Agent or any Lender hereunder.
Failure to give notice will not affect the liabilities of the
Guarantor hereunder.
13. Application of Payments. The Agent and any Lender may
apply any payments received by them from any source against that
portion of the Guaranteed Obligations (principal, interest, court
costs, attorneys' fees or other) in such priority and fashion as
they may deem appropriate in conformity with the Credit Agreement.
14. Notices. Any notice shall be conclusively deemed to have
been received by any party hereto and be effective on the day on
which delivered to such party at the address set forth below or such
other address as such party shall specify to the other party in
writing, or if sent prepaid by certified or registered mail on the
third Business Day after the day on which
<PAGE>
FORM OF ASSIGNMENT AND ACCEPTANCE
mailed, addressed to such party at such address:
<PAGE>
FORM OF ASSIGNMENT AND ACCEPTANCE
a. if to the Guarantor:
c/o Delta Woodside Industries, Inc.
233 N. Main Street
Suite 200
Hammond Square
Greenville, South Carolina 29601
Attention: President
with copies to:
Bettis C. Rainsford
P.O. Box 388
108-1/2 Courthouse Square
Edgefield, South Carolina 29824
Eric B. Amstutz, Esq.
Wyche, Burgess, Freeman & Parham, P.A.
P.O. Box 728
44 E. Camperdown Way
Greenville, South Carolina 29602
b. if to the Agent and/or the Lenders:
c/o NationsBank of North Carolina, N.A.
NationsBank Corporate Center, 8th Floor
100 North Tryon Street
NC1-007-08-11
Charlotte, North Carolina 28255
Attention: E. Phifer Helms
This section shall not be construed in any way to affect or
impair any waiver of notice or demand herein provided or to require
giving of notice or demand to or upon the Guarantor in any situation
or for any reason.
15. Headings. The headings herein are inserted only as a
matter of convenience and for reference and in no way define, limit
or describe the scope of this Guaranty Agreement nor the intent of
any provisions hereof.
16. Severability. In the event any one or more of the
provisions contained in this Guaranty Agreement should be held
invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby.
17. Net Payments. All payments made by the Guarantor
hereunder will be made without setoff or counterclaim. All payments
by the Guarantor hereunder shall be made free and clear of and
without deduction or withholding for any present or future license,
registration or other fees, taxes or other amounts for
<PAGE>
FORM OF ASSIGNMENT AND ACCEPTANCE
or on account of levies, imposts, duties, deductions, withholdings
or other charges of whatsoever nature, imposed, levied, collected,
withheld or assessed by any governmental or taxing authority (other
than the United States of America or any state thereof or the
District of Columbia), excluding income and franchise taxes imposed
on a Lender by a jurisdiction under which such Lender is organized
or operating in connection with the Credit Agreement or any
political subdivision thereof (the "Taxes"). If the Guarantor shall
be required to withhold or deduct Taxes from any sum payable
hereunder, (i) the sum payable shall be increased as may be
necessary so that the amount received is equal to the sum which
would have been received had no withholdings or deductions been
made, (ii) the Guarantor shall make such necessary withholdings or
deductions and (iii) the Guarantor shall pay the full amount
withheld or deducted to the relevant authority according to
applicable law so that the Lenders shall not be required to make any
deduction or payment of Taxes.
18. Entire Agreement. The Guaranty Agreement constitutes the
entire contract among the parties relative to the subject matter
hereof. Any previous agreement among the parties with respect to
the subject matter hereof is superseded by this Guaranty Agreement.
19. Governing Law; Submission to Jurisdiction; Venue; Waiver
of Jury Trial; Arbritration. (a) This Guaranty Agreement shall be
deemed to be a contract made under, and for all purposes shall be
construed in accordance with, the internal laws and judicial
decisions of the State of North Carolina. Each of the Guarantor,
the Agent and the Lenders agree that any dispute arising out of this
Guaranty Agreement shall be subject to the jurisdiction of both the
state and federal courts in North Carolina. For that purpose, the
Guarantor hereby submits to the jurisdiction and venue of the state
and federal courts of North Carolina and agrees not to raise as a
defense that such courts are not a convenient forum. The Guarantor
further agrees to accept service of process out of any of the
beforementioned courts in any such dispute by registered or
certified mail, return receipt requested, addressed to the
Guarantor.
(b) THE GUARANTOR HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL
BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR
RELATING TO THIS GUARANTY AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
[(c)(i)(A) Without limiting the generality of subsections (a)
and (b) above, the Guarantor agrees that any controversy or claim
with respect to the Guarantor arising out of or relating to this
Guaranty Agreement may, at the option of the Agent and the Lenders,
be settled immediately by submitting the same to binding arbitration
in the City of Charlotte, North Carolina (or such other place as the
parties may agree) in accordance with the Commercial Arbitration
Rules then obtaining of the American
<PAGE>
FORM OF ASSIGNMENT AND ACCEPTANCE
Arbitration Association. Upon the request and submission of any
controversy or claim for arbitration hereunder, the Agent shall give
the Guarantor not less than 45 days written notice of the request
for arbitration, the nature of the controversy or claim, and the
time and place set for arbitration. The Guarantor agrees that such
notice is reasonable to enable the Guarantor sufficient time to
prepare and present its case before the arbitration panel. Judgment
on the award rendered by the arbitration panel may be entered in any
court in which any action could have been brought or maintained
pursuant to subparagraph (C) below, including without limitation any
court of the State of North Carolina or any Federal court sitting in
the State of North Carolina. The expenses of arbitration shall be
paid by the non- prevailing party(ies).
(B) The provisions of subparagraph (A) above are intended to
comply with the requirements of the Convention on the Recognition
and Enforcement of Foreign Arbitral Awards (the "Convention"). To
the extent that any provisions of such subparagraph (A) are not
consistent with or fail to conform to the requirements set out in
the Convention, such subparagraph (A) shall be deemed amended to
conform to the requirements of the Convention.
(C) The Guarantor hereby specifically consents and submits to
the jurisdiction of the courts of the State of North Carolina and
courts of the United States located in the State of North Carolina
for purposes of entry of a judgment or arbitration award entered by
the arbitration panel.
(D) The Guarantor hereby irrevocably appoints the President of
the Nautilus division of Nautilus International, Inc., with an
address on the date hereof at 9800 West Kincey Avenue, Suite 150,
Huntersville, NC 28078 (the "North Carolina Process Agent"), as
process agent in its name, place and stead to receive and forward
service of any and all writs, summonses and other legal process in
any suit, action or proceeding brought in the State of North
Carolina, agrees that such service in any such suit, action or
proceeding may be made upon the North Carolina Process Agent and
agrees to take all such action as may be necessary to continue said
appointment in full force and effect or to appoint another agent so
that the Guarantor will at all times have an agent in the State of
North Carolina for service of process for the above purposes.
(ii) The guarantee of the Guarantor pursuant to this
Guaranty Agreement is (in part) an international transaction in
which payment of dollars in Charlotte, North Carolina, is of the
essence, and dollars shall be the currency of account in all events.
The payment obligation of the Guarantor shall not be discharged by
an amount paid in another currency or in another place, whether
pursuant to a judgment or otherwise, to the extent that the amount
so paid on prompt conversion to dollars and transfer to Charlotte,
North Carolina, under normal banking
<PAGE>
FORM OF ASSIGNMENT AND ACCEPTANCE
procedures does not yield the amount of dollars in Charlotte, North
Carolina due hereunder. In the event that any payment by the
Guarantor, whether pursuant to a judgment or otherwise, upon
conversion and transfer does not result in payment of such amount of
dollars in Charlotte, North Carolina, the Agent and the Lenders
shall have a separate cause of action against the Guarantor for the
additional amount necessary to yield the amount due and owing to the
Agent and the Lenders hereunder.]
***. For use if the Guarantor is not organized or incorporated
under the laws of any of the United States or the District of
Columbia. *
IN WITNESS WHEREOF, the Guarantor has caused this Guaranty
Agreement to be duly executed by its duly authorized officer as of
the date first above written.
[NAME OF GUARANTOR]
By____________________________
Title:
ACCEPTED:
NATIONSBANK OF NORTH CAROLINA, N.A.,
as Agent for the Lenders
By__________________________________
Title:
<PAGE>
FORM OF ASSIGNMENT AND ACCEPTANCE
EXHIBIT E
FORM OF
SWINGLINE LOAN NOTE
$15,000,000 September __, 1994
FOR VALUE RECEIVED, DELTA WOODSIDE INDUSTRIES, INC., a
South Carolina corporation (the "Borrower"), hereby promises to pay
to NationsBank of North Carolina, N.A. (the "Swingline Lender"), at
the office of NationsBank of North Carolina, N.A., as Agent (the
"Agent"), at One NationsBank Plaza, NC1-007-08-11, Charlotte, North
Carolina 28255 (or at such other place or places as the holder
hereof may designate), at the times set forth in the Credit
Agreement dated as of September __, 1994, among the Borrower, the
Agent, the Swingline Lender and certain other lenders (as it may be
amended, modified, extended or restated from time to time, the
"Credit Agreement"; all capitalized terms not otherwise defined
herein shall have the meanings set forth in the Credit Agreement),
but in no event later than the Termination Date, in Dollars and in
immediately available funds, the principal amount of FIFTEEN MILLION
DOLLARS ($15,000,000) or, if less than such principal amount, the
aggregate unpaid principal amount of all Swingline Loans made by the
Swingline Lender to the Borrower pursuant to the Credit Agreement,
and to pay interest from the date hereof on the unpaid principal
amount hereof, in like money, at said office, on the dates and at
the rates determined in accordance with Sections 2.9(c) and 4.1 of
the Credit Agreement.
If payment of all sums due hereunder is accelerated under the
terms of the Credit Agreement, this Swingline Loan Note and all
other indebtedness of the Borrower to the Swingline Lender shall
become immediately due and payable, without presentment, demand,
protest or notice of any kind, all of which are hereby waived by the
Borrower.
In the event this Swingline Loan Note is not paid when due at
any stated or accelerated maturity, the Borrower agrees to pay, in
addition to the principal and interest, all costs of collection,
including reasonable attorneys' fees.
All borrowings evidenced by this Swingline Loan Note and all
payments and prepayments of the principal hereof and interest hereon
and the respective dates thereof shall be endorsed by the holder
hereof on Schedule A attached hereto and incorporated herein by
reference, or on a continuation thereof which shall be attached
hereto and made a part hereof; provided, however, that any failure
to endorse such information on such schedule or continuation thereof
shall not in any manner affect the Borrower's Obligations under the
Credit Agreement.
<PAGE>
FORM OF ASSIGNMENT AND ACCEPTANCE
IN WITNESS WHEREOF, the Borrower has caused this Swingline Loan
Note to be duly executed by its duly authorized officer as of the
day and year first above written.
DELTA WOODSIDE INDUSTRIES, INC.
By_____________________________
Title__________________________
<PAGE>
FORM OF ASSIGNMENT AND ACCEPTANCE
SCHEDULE A TO THE
SWINGLINE LOAN NOTE EXECUTED IN FAVOR OF
NATIONSBANK OF NORTH CAROLINA, N.A.
DATED SEPTEMBER __, 1994
Date Person
Making Notation
Amount
Interest Period
Rate
Payments
Principal Interest
Bal
of
<PAGE>
FORM OF ASSIGNMENT AND ACCEPTANCE
EXHIBIT F
FORM OF
COMPETITIVE BID REQUEST
NationsBank of North Carolina,
N.A., as Agent for
the Lenders referred to below
NationsBank Corporate Center, 6th Floor
NC1-007-08-11
Charlotte, North Carolina 28255
Attn: E. Phifer Helms
Dear Sirs:
The undersigned, Delta Woodside Industries, Inc., refers to the
Credit Agreement, dated as of September __, 1994 (as amended from
time to time, the "Credit Agreement", the terms defined therein
being used herein as therein defined), among the undersigned,
certain Lenders parties thereto and NationsBank of North Carolina,
N.A., as Agent for said Lenders, and hereby gives you notice
pursuant to Section 2.8(b) of the Credit Agreement that the
undersigned hereby requests a Competitive Loan under the Credit
Agreement, and in that connection sets forth below the information
relating to such borrowing (the "Proposed Competitive Loan") as
required by Section 2.8(b) of the Credit Agreement:
(1) Date of Proposed Competitive
Loan (which is a Business Day) _________________________
(2) Principal Amount of
Proposed Competitive Loan _________________________
(3) Interest Period or Periods and the last
day or days thereof _________________________
As to each Proposed Competitive Loan, the undersigned hereby
certifies that the following statements are true on the date hereof,
and will be true on the date of such Proposed Competitive Loan:
(A) the representations and warranties contained in
Section 6.1 of the Credit Agreement are true and correct,
before and after giving effect to such Proposed Competitive
Loan and to the application of the proceeds therefrom, as
though made on and as of such date;
(B) no event has occurred and is continuing, or would
result from such Proposed Competitive Loan or from the
application of the proceeds therefrom, which constitutes a
Default or Event of Default; and
<PAGE>
FORM OF ASSIGNMENT AND ACCEPTANCE
(C) a Subsidiary Guaranty has been duly executed and
delivered, and the conditions precedent set forth in Sections
5.1(b)(ii), (iii), (iv), (v), (viii) and (ix) of the Credit
Agreement have been satisfied, by each Significant Subsidiary
of the Borrower.
Very truly yours,
DELTA WOODSIDE INDUSTRIES, INC.
By:
Name:
Title:
<PAGE>
FORM OF ASSIGNMENT AND ACCEPTANCE
EXHIBIT G
FORM OF
CONFIRMATION OF NOTICE OF BORROWING
NationsBank of North Carolina, N.A., as Agent
for the Lenders parties
to the Credit Agreement
referred to below
100 North Tryon Street
NC1-007-08-11
Charlotte, North Carolina 28255 [Date]
Attention: E. Phifer Helms
Gentlemen:
The undersigned, Delta Woodside Industries, Inc., refers to the
Credit Agreement, dated as of September __, 1994 (as amended from
time to time, the "Credit Agreement", the terms defined therein
being used herein as therein defined), among the undersigned,
certain Lenders parties thereto and NationsBank of North Carolina,
N.A., as Agent for said Lenders, and hereby gives you notice,
irrevocably, pursuant to Section 2.3(a) of the Credit Agreement that
the undersigned hereby requests a Committed Loan under the Credit
Agreement, and in that connection sets forth below the information
relating to such borrowing (the "Proposed Committed Loan") as
required by Section 2.3(a) of the Credit Agreement:
(1) The Business Day of the Proposed Committed Loan is
__________________, 199__.
(2) The Type of Committed Advances comprising the
Proposed Committed Loan is [Base Rate Advances] [Eurodollar
Advances].
(3) The aggregate amount of the Proposed Committed Loan
is $_________________.
(4) The Interest Period for each Eurodollar Advance made
as part of the Proposed Committed Loan is _____ month(s).
As to the Proposed Committed Loan, the undersigned hereby
certifies that the following statements are true on the date hereof,
and will be true on the date of the Proposed Committed Loan:
(A) the representations and warranties contained in
Section 6.1 of the Credit Agreement are true and correct,
before and after giving effect to the Proposed Committed Loan
and to the application of the proceeds therefrom, as
<PAGE>
FORM OF ASSIGNMENT AND ACCEPTANCE
though made on and as of such date;
(B) no event has occurred and is continuing, or would
result from such Proposed Committed Loan or from the
application of the proceeds therefrom, which constitutes a
Default or Event of Default; and
(C) a Subsidiary Guaranty has been duly executed and
delivered, and the conditions precedent set forth in Sections
5.1(b)(ii), (iii), (iv), (v), (viii) and (ix) of the Credit
Agreement have been satisfied, by each Significant Subsidiary
of the Borrower.
Very truly yours,
DELTA WOODSIDE INDUSTRIES, INC.
By:
Name:
Title:
<PAGE>
FORM OF ASSIGNMENT AND ACCEPTANCE
EXHIBIT H
FORM OF
CONFIRMATION OF NOTICE
OF CONVERSION/CONTINUATION
NationsBank of North Carolina, N.A., as Agent
for the Lenders parties
to the Credit Agreement
referred to below
100 North Tryon Street
NC1-007-08-11
Charlotte, North Carolina 28255 [Date]
Attention: E. Phifer Helms
Gentlemen:
The undersigned, Delta Woodside Industries, Inc., refers to the
Credit Agreement, dated as of September __, 1994 (as amended from
time to time, the "Credit Agreement", the terms defined therein
being used herein as therein defined), among the undersigned,
certain Lenders parties thereto and NationsBank of North Carolina,
N.A., as Agent for said Lenders, and hereby gives you notice,
irrevocably, pursuant to Section 2.3(e) of the Credit Agreement that
the undersigned hereby requests [the conversion] [the continuation]
of Committed Advances [of one Type] comprising a Committed Loan (the
"Existing Committed Loan") [into Committed Advances of another Type
available under the Credit Agreement] and in that connection sets
forth below the information relating to such [conversion]
[continuation] (the "Proposed [Conversion] [Continuation]") as
required by Section 2.3(e) of the Credit Agreement:
(1) The Type of Advances comprising the Existing
Committed Loan is [Base Rate Advances] [Eurodollar Advances].
(2) [The last day of the Interest Period applicable to
the Eurodollar Advances comprising the Existing Committed Loan
is _____________, 199_,] [which is the date of the Proposed
Continuation] [and] [the Business Day of the Proposed
Conversion is ____________, 199__.]
***. Both dates in item (2) should be stated and must be the
same if an Existing Loan comprised of Eurodollar Advances
is being converted to a Loan comprised of Base Rate
Advances. If the Existing Loan is comprised of Base Rate
Advances, only the date of the Proposed Conversion should
be stated**
<PAGE>
FORM OF ASSIGNMENT AND ACCEPTANCE
(3) The aggregate outstanding principal amount of the
Committed Advances comprising the Existing Committed Loan is
$____________.
(4) The Committed Advances comprising the Existing
Committed Loan are to be [converted into] [continued as] [Base
Rate Advances] [Eurodollar Advances] [in their entirety] [to
the extent of $________________ of the principal amount
thereof] [and [converted into] [continued as] [Base Rate
Advances] [Eurodollar Advances] to the extent of $____________
of the principal amount thereof].
(5) The Interest Period for each Committed Advance
[converted into] [continued as] Eurodollar Advances is ____
month(s).
As to each Proposed [Conversion] [Continuation] of any
Committed Advances [into] [as] Eurodollar Advances, the Borrower
hereby represents and warrants that as of the date hereof no Default
or Event of Default has occurred and is continuing.
Very truly yours,
DELTA WOODSIDE INDUSTRIES, INC.
By:
Name:
Title:
<PAGE>
FORM OF ASSIGNMENT AND ACCEPTANCE
##
EXHIBIT K
FORM OF OFFICER'S COMPLIANCE CERTIFICATE
For the Fiscal Quarter/Year ended _________________, 19__.
I, ______________________, _______________________ of Delta
Woodside Industries, Inc. (the "Borrower"), hereby certify that,
with respect to that certain Credit Agreement dated as of
<PAGE>
FORM OF ASSIGNMENT AND ACCEPTANCE
September 7, 1994 (as the same may be amended, modified, extended or
restated from time to time, the "Credit Agreement"; all of the
defined terms in the Credit Agreement are incorporated herein by
reference) among the Borrower, the Lenders party thereto and
NationsBank of North Carolina, N.A., as Agent:
a. As of the date hereof, based on an examination sufficient
to enable me to make an informed statement, no Default or
Event of Default exists [or, if such is not the case, a
description specifying any such Default or Event of
Default and its nature, when it occurred, whether it is
continuing and the steps being taken by the Borrower with
respect thereto shall be provided on a separate page]; and
b. Delivered herewith are detailed calculations demonstrating
(i) compliance [or non-compliance] by the Borrower with
the requirements of Sections 9.1, 9.5 and 9.6 of the
Credit Agreement as of the end of the fiscal period
referred to above, (ii) the outstanding Net Amount of all
Investments (other than Permitted Investments) made by the
Borrower or any Subsidiary Guarantor since the Agreement
Date as of the end of the fiscal period referred to above
and (iii) the aggregate purchase price of all Acquisitions
of any Business Units made by the Borrower or any
Subsidiary Guarantor since the Agreement Date through the
end of the fiscal period referred to above.
This ______ day of ___________, 199_.
[Corporate Seal] ________________________________
[Title]
Delta Woodside Industries, Inc.
<PAGE>
<PAGE>
CONTENTS
Common Stock Market Prices and
Dividends.............................................Inside Front Cover
Selected Financial Data..................................................1
Letter to Shareholders.................................................2-3
Management's Discussion and
Analysis............................................................4-11
Operations by Industry
Segment............................................................12-13
Report of Ernst & Young LLP.............................................14
Consolidated Financial
Statements.........................................................15-28
Corporate Directory.... .................................Inside Back Cover
COMMON STOCK MARKET PRICES AND DIVIDENDS
The Common Stock of the Company is listed on the New York Stock Exchange
under the symbol DLW. The stock transfer agent for Delta Woodside
Industries, Inc. is First Union National Bank of North Carolina,
Shareholder Services Group, Two First Union Center, Charlotte, North
Carolina 28288-1154.
The following table presents a two-year history of the high and low stock
sales prices for the Common Stock, as reported by the New York Stock
Exchange composite tape, and cash dividends declared per share:
<TABLE>
<CAPTION>
1994 1993
FISCAL QUARTERS: High Low High Low
<S> <C> <C> <C> <C>
First Quarter $ 11 7/8 $ 10 1/4 $ 18 3/8 $ 12 3/4
Second Quarter 11 3/8 10 3/8 16 11 1/2
Third Quarter 12 1/2 9 3/4 16 3/4 12 1/2
Fourth Quarter 12 1/4 10 7/8 14 7/8 11 1/8
<CAPTION>
Cash
Dividends Declared
1994 1993
<S> <C> <C>
First Quarter $.10 $ .10
Second Quarter .10 .10
Third Quarter .10 .10
Fourth Quarter .10 .10
</TABLE>
Fiscal Year: The Company's operations are based on a fifty-two or
fifty-three week fiscal year ending on the Saturday closest to June 30.
As of September 8, 1994 there were approximately 2,283 holders of record
of the Company's Common Stock.
Dividend payments depend upon the Company's earnings, financial
condition, capital requirements and other relevant factors. The most
restrictive of the Company's loan covenants in the new loan facility
described in Note D requires a certain minimum tangible net worth. Under
this loan covenant at July 2, 1994, retained earnings of approximately $7.6
million are available for dividends during fiscal 1995.
<PAGE>
SELECTED FINANCIAL DATA
In Thousands, Except Ratios, Percentages, Number of Shareholders and Per Share
Data
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
OPERATIONS (3) 1994(1) 1993(2) 1992 1991 1990 1989 1988 1987
Net Sales $613,776 $686,239 $5705,037 $590,019 $500,894 $569,052 $488,568 $417,461
Cost of Goods Sold 514,840 564,352 563,827 480,396 427,788 470,265 409,231 343,623
Gross Profit 98,936 121,887 141,210 109,623 73,106 98,787 79,337 73,838
Operating Profit (Loss) Excluding Litigation,
Restructuring and Plant Closing Charges 21,582 55,863 80,628 61,374 37,591 69,245 54,349 49,102
Litigation Charge 27,096
Restructuring and Plant Closing Charges 9,199 2,265
Operating Profit (Loss) (14,713) 55,863 80,628 61,374 35,326 69,245 54,349 49,102
Corporate Expense 3,300 3,278 3,802 2,140 2,249 3,009 2,002 1,167
Earnings (Loss) Before Interest and Taxes (18,013) 52,585 76,826 59,234 33,077 66,513 54,209 46,993
Interest Expense 8,639 7,775 11,479 22,115 25,768 20,929 12,685 12,939
Income (Loss) Before Income Taxes (25,930) 45,172 65,801 37,543 8,029 45,940 41,705 34,238
Income Tax Expense (Benefit) (8,633) 16,968 25,786 13,600 2,020 15,643 13,850 12,667
Income (Loss) Before Cumulative Effect of
Accounting Change (17,297) 28,204 40,015 23,943 6,009 30,297 27,855 21,571
Cumulative Effect of Accounting Change --
Income Taxes (2) (875)
Net Income (Loss) (17,297) 27,329 40,015 23,943 6,009 30,297 27,855 21,571
FINANCIAL DATA (3)
Cash Flow (Net Income (Loss) plus
depreciation and amortization) (10) 9,596 46,148 54,843 39,041 19,263 40,025 32,421 24,908
Capital Expenditures/Capital Leases 29,856 49,575 42,916 15,793 19,250 46,048 32,141 7,924
Depreciation and Amortization (10) 26,893 18,819 14,828 15,098 13,254 9,728 4,566 3,337
Working Capital 241,950 262,111 266,356 105,498 71,967 78,726 60,811 63,602
Long-Term Debt and Capital Leases 161,948 130,464 110,414 71,189 85,704 88,791 35,254 38,832
Funded Debt (4)(7) 162,812 132,200 112,133 188,352 227,097 223,397 118,528 115,732
Shareholders' Equity (5) 284,877 336,249 318,781 172,647 127,575 127,169 86,462 59,015
Capital Employed (6) 447,689 468,449 430,914 360,999 354,672 350,566 204,990 174,747
Total Assets (7) 567,003 573,946 524,756 434,424 414,497 331,066 177,300 149,116
FINANCIAL RATIOS (3)
Net Sales divided by Inventory 3.0 3.5 4.0 4.3 3.5 4.4 6.3 5.8
Net Sales divided by Accounts Receivable 5.2 4.9 4.3 4.2 4.5 4.6 4.9 4.5
Net Sales divided by Capital Employed 1.4 1.5 1.6 1.6 1.4 1.6 2.4 2.4
Operating Income (Loss) as % of Capital
Employed (3.9) 11.3 17.9 16.5 9.5 19.1 26.5 27.0
Current Ratio 3.5 4.1 4.4 1.6 1.4 1.7 2.2 2.2
Interest Coverage (2.1) 6.8 6.7 2.7 1.3 3.2 4.3 3.6
Gross Profit as % of Sales 16.1 17.8 20.0 18.6 14.6 17.4 16.2 17.7
Pre-Tax Income (Loss) as % of Sales (4.2) 6.6 9.3 6.4 1.6 8.1 8.5 8.2
Net Income (Loss) as % of Sales (2.8) 4.0 5.7 4.1 1.2 5.3 5.7 5.2
Net Income (Loss) as % of Beginning Equity (5.1) 8.6 23.2 18.8 4.7 35 47 245
COMMON STOCK DATA (PER SHARE) (3)(8)
Net Income (Loss) (.70) 1.03 1.62 1.27 .32 1.65 1.60 1.36
Dividends .40 .40 .35 .30 .30 .20 .05 --
Book Value 11.75 12.72 12.07 8.17 6.76 6.82 4.97 3.41
Price Range (9) -- High 121/2 183/8 251/4 141/8 177/8 161/2 141/4 161/2
-- Low 93/4 111/8 131/2 35/8 61/2 83/4 51/4 97/8
Weighted Average Shares Outstanding 24,550 26,421 24,670 18,879 18,733 18,338 17,385 15,840
Approximate Number of Shareholders 2,221 2,340 2,255 2,062 2,575 1,475 1,250 1,300
012
<CAPTION>
OPERATIONS (3) 1986 1985
Net Sales $141,810 $94,428
Cost of Goods Sold 118,909 80,534
Gross Profit 22,901 13,894
Operating Profit (Loss) Excluding Litigation,
Restructuring and Plant Closing Charges
Litigation Charge
Restructuring and Plant Closing Charges
Operating Profit (Loss) 15,027 9,889
Corporate Expense 138 117
Earnings (Loss) Before Interest and Taxes 14,889 9,772
Interest Expense 5,197 5,240
Income (Loss) Before Income Taxes 9,983 4,594
Income Tax Expense (Benefit) 4,724 2,219
Income (Loss) Before Cumulative Effect of
Accounting Change 5,259 2,375
Cumulative Effect of Accounting Change --
Income Taxes (2)
Net Income (Loss) 5,259 2,375
FINANCIAL DATA (3)
Cash Flow (Net Income (Loss) plus
depreciation and amortization) (10) 7,494 4,479
Capital Expenditures/Capital Leases 2,478 1,789
Depreciation and Amortization (10) 2,235 2,104
Working Capital 8,808 4,205
Long-Term Debt and Capital Leases 21,530 19,086
Funded Debt (4)(7) 48,263 40,007
Shareholders' Equity (5) 8,803 3,544
Capital Employed (6) 57,066 43,551
Total Assets (7) 56,736 43,537
FINANCIAL RATIOS (3)
Net Sales divided by Inventory 8.2 6.6
Net Sales divided by Accounts Receivable 4.6 4.9
Net Sales divided by Capital Employed 2.5 2.2
Operating Income (Loss) as % of Capital
Employed 26.6 22.6
Current Ratio 1.4 1.2
Interest Coverage 2.9 1.9
Gross Profit as % of Sales 16.1 14.7
Pre-Tax Income (Loss) as % of Sales 7.0 4.9
Net Income (Loss) as % of Sales 3.7 2.5
Net Income (Loss) as % of Beginning Equity 148 203
COMMON STOCK DATA (PER SHARE) (3)(8)
Net Income (Loss) .35 .16
Dividends -- --
Book Value .59 .24
Price Range (9) -- High -- --
-- Low -- --
Weighted Average Common Shares Outstanding 15,000 15,000
Approximate Number of Shareholders N/A N/A
</TABLE>
012
(1) During fiscal 1994, the Company recorded litigation and restructuring
charges of $27,096,000 and $9,199,000, respectively.
(2) During fiscal 1993, the Company changed its method of accounting for income
taxes. See Note F.
(3) Financial data reflect the following major business additions from their
respective dates of acquisition: (i) a portion of the knit apparel
operation acquired on March 30, 1985; (ii) a portion of the knit apparel
operation acquired on September 30, 1985; (iii) the major portion of the
woven fabrics operation and the major portion of the knitted fabrics
operation acquired at the beginning of fiscal 1987; (iv) a portion of the
knitted fabrics operation acquired on December 27, 1986; (v) a portion of
the knit apparel operation and a portion of the woven apparel operation
acquired on September 7, 1988; (vi) a portion of the woven apparel
operation (including the "Duck Head" label) acquired on February 1, 1989;
and (vii) Nautilus International and a portion of the affiliated license
products company acquired January 20, 1993.
(4) Funded Debt includes long-and short-term debt, capital leases and offset
factor borrowings. See Note 6.
(5) Shareholders' Equity at June 27, 1992 and June 29, 1991 includes
approximately $113 million and $25.5 million of net proceeds from sales of
Common Stock in October 1991 and June 1991, respectively.
(6) Capital Employed includes shareholders' equity and funded debt.
(7) Prior to fiscal 1990 the Company offset certain assigned receivables and
borrowings relating to its former factor agreements. Had these items not
been offset, the Company's accounts receivable and notes payable at the end
of the 1989, 1988, 1987 and 1986 fiscal years would have each been
increased by approximately $79.4 million, $73.6 million, $64.7 million and
$16.2 million, respectively.
(8) Per share data and weighted average common shares outstanding for fiscal
1987, 1986 and 1985 give retroactive effect to the issuance of 15,000,000
shares of Common Stock relating to the reorganization of companies under
common control effective November 25, 1986. The number of shares
outstanding at July 2, 1994, July 3, 1993, and June 27, 1992 for financial
reporting purposes was 24,245,733, 26,436,886, and 26,400,371,
respectively.
(9) The Company's Common Stock began trading publicly in February 1987.
(10) Depreciation and amortization include certain writedowns of property and
equipment.
1
<PAGE>
TO OUR FELLOW SHAREHOLDERS
(Photo of E. Erwin Maddrey, II)
E. ERWIN MADDREY, II
To Our Fellow Shareholders:
Fiscal 1994 began with most of our markets suffering from weak retail demand
which began to steadily improve as the year progressed. The weakness started
during our 1993 fiscal year and continued into 1994. It was only towards the end
of our fiscal year that we began to feel improved demand. As a result of the
lower demand through the major part of fiscal 1994, our sales dropped 11% to
$614 million from the prior year level. This weakness in demand was caused by
the continuing uncertainty of consumer confidence that has kept apparel
retailers' buying habits very cautious.
During the year, in light of the soft economic conditions, we made an in-depth
analysis of all of our businesses and determined that we should sell our office
products division. We also decided that some restructuring was necessary in our
apparel businesses. During fiscal 1994 we took a restructuring charge of $9.2
million.
Also, in the second quarter, we received the unexpected news that an Alabama
jury had awarded a former sales representative of the Company and two of his
assistants $29 million in a suit over commissions. This award was later reduced
to $23 million by the trial judge. We believe that this award is unjustifiable
and have appealed it to the Alabama Supreme Court. We recorded a litigation
reserve for the entire amount in the second quarter of fiscal 1994.
Because of the poor demand in the first part of the year, the restructuring
charge, and the litigation reserve, we reported a loss of $17 million for the
year.
Our businesses are better and we are looking forward to our 1995 fiscal year.
Our textile fabrics operation has two parts -- a woven division and a knit
division. The woven division, which produces bottom weight fabrics for the
casual pants and dress pants markets as well as a variety of other finished and
unfinished fabrics, had mixed results during the year. Demand on the casual side
was very strong and those plants have run full. However, the demand for casual
products has decreased the demand for dress pants, and that part of the
business, as well as our unfinished fabrics facilities, have run curtailed
operating schedules. We have embarked on a major expansion and modernization
program in this division which will result in increased capacity for casual
fabrics and lower costs for all of the fabrics made by this division. We expect
increased production early in fiscal 1996 which will allow our woven fabrics
division to further improve its important position in the domestic casual pants
market.
We have completed the modernization of our knit fabrics division. Over the
last few years, we have reduced this division's manufacturing facilities from
eight to five. Today, the five plants are producing more pounds than the eight
did. The extensive machinery changes that we went through to reach this point
were very disruptive and expensive and caused this division to be unprofitable
in 1994. Now, with these changes behind us and lower cost manufacturing capacity
in place, we expect this division to become a significant profit contributor.
Our knit apparel division suffered from poor demand in the T-shirt and
sweatshirt markets during the first half of the year. In the last half, demand
returned to more normal levels and our operations improved as running schedules
increased.
2
<PAGE>
Since the purchase of Duck Head in 1989 we have been trying to catch up with
demand for the product. Because some of our systems were not able to handle the
increased volume, we began experiencing delivery problems in fiscal 1992 and did
a poor job servicing our customers. We lost some customers because of this, and
we have shrunk this business back to a more manageable level. As we become
confident in our systems, we will begin to grow again. A major element is a new
distribution center to replace several smaller distribution centers. This will
be built during calendar 1995.
We have been pleased with the growth of Nautilus' core commercial business. We
are beginning to test market a consumer line. Hopefully, this will allow us to
begin participating in the much larger consumer market.
During 1994, we spent $30 million on capital expenditures. In 1995, we plan to
spend $45 million on new capital programs. The major items will be the
acceleration of the Delta Mills expansion and modernization program and the Duck
Head distribution center.
In June, we completed the sale of our office products division, Harper
Brothers, to Denver based Corporate Express, Inc. Our analysis of our business
led us to conclude that Harper Brothers would be better owned by someone in the
office products business.
Fiscal 1994 was a tough year and, frankly, one that we are glad to have behind
us. We are pleased with the condition of our businesses today and are looking
forward to the better results that better markets bring.
(Photo of Bettis C. Rainsford)
BETTIS C. RAINSFORD
(Signature of E. Erwin Maddrey, II)
E. Erwin Maddrey, II
President and
Chief Executive Officer
(Signature of Bettis C. Rainsford)
Bettis C. Rainsford
Executive Vice President, Treasurer
and Chief Financial Officer
3
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
CONSOLIDATED COMPANY RESULTS
FISCAL 1994 VERSUS FISCAL 1993
Consolidated net sales for the fiscal year ended July 2, 1994 (52 weeks) were
$613,776,000, a decrease of $72,463,000 from the prior year's $686,239,000 (53
weeks). Net sales in fiscal 1994 decreased in both the textile and apparel
segments as compared with net sales in fiscal 1993.
Consolidated gross profit margin for fiscal 1994 decreased to 16% compared to
18% in fiscal 1993. Gross margins in fiscal 1994 were impacted by disruption
costs associated with the consolidation of the Company's knit finishing plants,
by low prices on the sale of closeout apparel merchandise, and by cotton costs
rising more rapidly than prices in the January-June 1994 period.
(Net Sales bar chart appears here--see appendix)
Consolidated selling, general, and administrative expense for fiscal 1994 was
$82.2 million, or 13% of sales, compared to $73.4 million, or 11% of sales,
incurred in fiscal 1993.
In fiscal 1994, the Company charged income for $27.1 million to establish a
reserve for a judgment entered by an Alabama court in connection with a jury
award made on November 24, 1993 in favor of a former independent sales
representative of a subsidiary of the Company and two of his assistants (the
"Alabama litigation"), interest costs on that judgment, and related legal
expenses in connection with the appeals process. The appeal is now before the
Alabama Supreme Court. The Company believes that this charge to fiscal 1994
income fully reserves future costs associated with this action.
In view of weak market conditions and the Company's poor performance in the
July to December 1993 period, the Company made certain restructuring decisions
at the end of its second fiscal quarter.
One of these decisions was to dispose of its Harper Brothers office products
distribution division by sale or liquidation. The Company hoped that it would be
able to find a qualified buyer who was experienced in the office supply business
so that the employees in that division would not be displaced. The Company was
successful in finding such a buyer, a subsidiary of Corporate Express, Inc., and
the sale of Harper Brothers was completed as of June 4, 1994. The restructuring
charge, as adjusted, for this decision was $3.2 million.
The Company had been working on plans to convert its former spinning plant
building in Edgefield, South Carolina into an outlet mall. Plans were drawn,
cleanup work had been started, but after several months of research were
completed, in December 1993 the decision was made to abandon this plan and write
off the assets involved. The restructuring charge for this decision was $1.3
million.
The Company's branded apparel business incurred operating losses in the July
to December 1993 period for the first time since it was acquired in February
1989. The Company decided to close its girls and juniors branded apparel line,
including liquidating this line's inventory, and focus on its core young mens
business. The restructuring charge for this decision was $1.3 million. At the
same time, the decision was made to consolidate the branded apparel distribution
operations from several geographically scattered warehouses into a central
distribution and office complex to be constructed in calendar 1995. The
restructuring charge for this decision was $1.1 million.
The remainder of the restructuring charges to pre-tax income incurred in the
second quarter of fiscal 1994 involved several smaller projects, principally
those relating to the consolidation of the physical facilities of the knit
textile division.
These restructuring decisions included write-downs of $1.6 million of goodwill
and $2.1 of property plant and equipment. At July 2, 1994, $2.4 million remain
in accrued liabilities related
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primarily to leases on vacant facilities and other future costs of the
restructuring plan.
Net interest expense totalled $7.9 million during fiscal 1994 as compared to
$7.4 million incurred in fiscal 1993. The Company's outstanding debt at July 2,
1994 was $162.8 million compared with $132.2 million at July 3, 1993. During the
first six months of fiscal 1994, the Company repurchased 2.3 million shares of
its Common Stock for approximately $25.3 million.
Net losses for the year ended July 2, 1994 were $17.3 million compared with
net income of $27.3 million for the prior fiscal year. If the charges taken in
fiscal 1994 for the Alabama litigation and restructuring were excluded, a fiscal
1994 net income of approximately $5.7 million would have resulted.
Total Company inventories increased to $203.8 million at July 2, 1994 compared
to $198.3 million at the end of fiscal 1993, an increase of 3%.
Consolidated order backlogs totalled $151.5 million at July 2, 1994, a
decrease of $10.6 million, or 7%, from total backlogs at July 3, 1993. Order
backlogs for woven textiles and branded apparel were lower, and backlogs for
knitted textiles and apparel were higher, at the end of fiscal 1994 as compared
to fiscal 1993. The Company believes that order backlogs are generally
indicative of future sales.
Order intake and billings of the Company's unfinished woven fabrics (griege
goods) softened considerably during the second half of fiscal 1994, and they
remain very soft. Sales of finished all-cotton woven fabrics remain strong, but
sales of synthetic fiber woven fabrics are weak due to low levels of women's
wear activity at retail. As noted above, both the knitted textile and knitted
apparel operations are working off higher order backlogs than a year ago,
although recent signs indicate that the T-shirt pipeline is refilling.
The Company's results are highly dependent on retail activity in its product
categories. So far in calendar 1994, growth in sales of durable goods has
outpaced sales growth for soft goods. The Company is unable to predict when
consumers will move more of their purchases into the soft goods sector.
FISCAL 1993 VERSUS FISCAL 1992
Consolidated net sales for the fiscal year ended July 3, 1993 (53 weeks) were
$686,239,000, a decrease of $18,798,000 from the prior year's (52 weeks) record
high of $705,037,000. Net sales in fiscal 1993 decreased in the Company's
textile segment and increased in the apparel segment as compared with net sales
in fiscal 1992. Net sales in fiscal 1993 in the Company's other businesses
increased due to the acquisition of Nautilus International, Inc. in January
1993. Nautilus' sales of $7.8 million for five months beginning February 1993
are included in the Company's consolidated results for fiscal 1993.
(Net Income (Loss) bar chart appears here--see appendix)
Consolidated gross profit margin for fiscal 1993 decreased to 18% compared to
20% achieved in the prior fiscal year. Gross margins in fiscal 1993 were
adversely impacted by lower prices for knit textiles and apparel, lower prices
for unfinished woven fabrics, and higher unit sales of apparel at closeout
prices.
Consolidated selling, general, and administrative expense for fiscal 1993 was
$73.4 million, or 11% of sales, compared to $64.2 million, or 9% of sales,
incurred in fiscal 1992. These expenses were flat in the textile segment but
were higher in the Company's apparel segment in fiscal 1993 as compared to the
prior fiscal year. In addition, about one half of the increased selling,
general, and administrative expense increase over fiscal 1992 was attributable
to the inclusion of Nautilus in the Company's consolidated results for the year
ended July 3, 1993.
Interest expense decreased by $3.7 million from the prior year to the current
year. The Company's borrowing costs decreased along with the general decline in
interest rates. The Company's outstanding debt at July 3, 1993 was $132.2
million compared with $112.1 million at the beginning of fiscal 1993. During
fiscal 1993, about $20.5 million of the Company's revolving line of credit was
used in connection with the acquisition of 100% of the stock of Nautilus
International, Inc. and 70% of the stock of Apparel Marketing Corporation.
During fiscal 1993 the Company adopted FASB Statement 109, "Accounting for
Income Taxes." The cumulative effect on prior years of adopting
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the Statement resulted in a charge of $875,000, or $.04 per share.
Net income for fiscal year 1993 was $27.3 million compared to $40.0 million
earned in fiscal year 1992, a decrease of 32%. Net income for the year ended
July 3, 1993 includes approximately $1.5 million arising from a gain related to
the fire at one of the Company's Nautilus plants at Independence, Virginia on
March 13, 1993.
Total Company inventories increased to $198.3 million at July 3, 1993 from
$177.6 million at June 27, 1992, an increase of 12%. Inventory levels in all the
Company's segments increased in fiscal 1993, due principally to weakness in the
woven greige goods markets and to lower than anticipated apparel sales in the
first six months of calendar 1993. Nautilus' inventories at the end of fiscal
1993 were $2.9 million.
DIVISION RESULTS
TEXTILE SEGMENT
FISCAL 1994 VERSUS FISCAL 1993
The Company's textile segment consists of finished woven and knitted textile
fabrics sold principally to manufacturers of apparel products. The Company also
sells greige goods to fabric converters for various end uses, including
pocketing, linings, and lightweight apparel.
(Net Income as a % of Sales bar chart appears here--see appendix)
Net sales in this segment decreased from $444.9 million in the fiscal year
ended July 3, 1993 to $391.4 million in the fiscal year ended July 2, 1994. Net
sales of knitted textiles were down 14% from fiscal 1993, due to the lower
number of units sold, to lower unit sales prices, and to disruptions in the
Company's knit fabric finishing operations resulting from the combining of two
finishing plants into one during the year. Average prices in all knit fabric
categories during the first three quarters of fiscal 1994 decreased from levels
of the prior year, but began to return toward prior year levels during the last
fiscal quarter of 1994. Sales of woven textiles were 11% lower in fiscal 1994
than in fiscal 1993. Higher sales of all cotton finished fabric (1% increase)
were more than offset by a sharp decline in sales of synthetic fiber finished
fabrics (19% decrease) and greige goods (24% decrease).
Gross profit margins in the textile segment declined from 13% in fiscal 1993
to 12% in fiscal 1994. While gross profit margins in woven textiles were equal
in fiscal 1994 to those of the prior year, margins in knitted textiles were 4.4
percentage points lower. The drop in knitted textile margins was due to the
lower unit selling prices noted above, and to high unfavorable manufacturing
variances associated with the disruption caused by the finishing plants'
consolidation.
Selling, general and administrative costs in the textile segment were slightly
higher in fiscal 1994 than in fiscal 1993 in dollars. As a percent of net sales,
these costs were 6.1% in fiscal 1994 as compared to 5.2% in fiscal 1993.
(Shareholders' Equity bar chart appears here--see appendix)
Operating profits in the textile segment decreased $15.1 million, or 43%, from
fiscal 1993 to fiscal 1994. The lower volume and lower gross margins discussed
above were the principal contributors to this decrease.
During fiscal 1994, the textile segment contributed 64% of the Company's
consolidated net sales and 46% of the Company's consolidated gross profit.
Textile segment inventories increased by $8.2 million from the end of fiscal
1993 to the end of fiscal 1994. The major part of this increase was in woven
greige goods inventory.
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The textile segment's capital expenditures totalled approximately $18.3
million for the fiscal year ended July 2, 1994. The major portion of this amount
was for the knitted textile plant consolidation project and knitted fabric
finishing equipment. Also included were initial expenditures for the woven
textile long-term modernization project.
The Company expects that its knit textile facilities and its woven all-cotton
facilities will run at or near full capacity during fiscal 1995. However, woven
synthetic and greige goods facilities are not expected to run full schedules for
at least the first half of fiscal 1995.
Cotton prices increased sharply in the second half of fiscal 1994. Although
some textile fabric prices have increased, the Company has not yet passed its
total cotton cost increases to its customers. Profits of the textile segment are
sensitive to the amount of its manufacturing capacity utilized, to the cost and
availability of raw materials, and to the mix of goods produced.
FISCAL 1993 VERSUS 1992
Net sales in the textile segment decreased from $472.8 million in the fiscal
year ended June 27, 1992 to $444.9 million in the fiscal year ended July 3,
1993. Net sales of knitted textiles were down 12% to $119.9 million and net
sales of woven fabrics decreased 4% to $325.1 million from fiscal 1992 to fiscal
1993.
Sales of knitted textiles were affected adversely by prices which were 13%
lower, on average, in fiscal 1993 than in fiscal 1992. Unit sales of knitted
fabrics increased by 3%. Sales of woven camouflage and other military-type
fabrics sold primarily to the U.S. Defense Department contractors decreased to
$23.6 million in fiscal 1993 from $63.6 million in fiscal 1992, but the sales
shortfall in this area was more than offset by increases in sales of finished
woven fabrics to manufacturers of men's and women's apparel. Sales of unfinished
woven textiles were very weak for the first six months of fiscal 1993, resulting
in a year to year decline of 24% in the greige goods area. On balance, sales
increases of woven finished textiles were more than offset by decreased sales of
greige goods.
Gross profit margins in the textile segment declined from 16% in fiscal 1992
to 13% in fiscal 1993. The principal cause of this decline was the lower prices
for knitted fabrics referred to above. In addition, profit margins for
unfinished woven fabrics were significantly lower in fiscal 1993 than in the
prior fiscal year. Another factor contributing to the gross profit margin
decline was related to the rapid growth during the fiscal year in demand for the
Company's woven and dyed all cotton sportswear fabrics. Some of the Company's
woven fabrics spinning and weaving plants found it difficult to meet quality
expectations for all cotton dyed fabrics. As a result, off quality losses were
higher in fiscal 1993 than in fiscal 1992. The Company began long term capital
projects to address this issue.
Selling, general and administrative costs in the textile segment were about
the same in fiscal 1993 as in the prior fiscal year. However, as a percent of
net sales, these costs were 5.2% for the year ended July 3, 1993 as compared to
4.9% in the year ended June 27, 1992.
Operating profits in the textile segment decreased $18.3 million, or 35%, in
fiscal 1993 compared to the prior year. The lower prices for knitted fabrics and
lower demand for woven greige goods were the principal causes of the decline in
operating profits.
During fiscal 1993, the textile segment contributed 65% of the Company's
consolidated net sales and 47% of the Company's consolidated gross profit.
Inventories in the textile segment increased by less than $1 million from the
end of fiscal 1992 to the end of fiscal 1993. Inventories of knit textiles and
finished woven textiles decreased. Inventories of woven greige goods increased.
(Earnings (Loss) Per Share bar chart appears here--see appendix)
Capital expenditures in the textile segment were about $34.4 million during
the fiscal year ended July 3, 1993. The major part of these expenditures was in
the knitted textile area, including the completion of the Rainsford yarn plant
in Edgefield, SC. During the year, the Company closed its two older knit yarn
plants in North Carolina. All of the Company's internally produced yarn for
knitting now comes from its two modern yarn plants in Spartanburg and Edgefield,
SC.
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APPAREL SEGMENT
FISCAL 1994 VERSUS FISCAL 1993
The Company's apparel segment consists of woven and knit branded apparel and
knit apparel sold to screen printers and private label accounts. Net sales in
this segment decreased by $31.1 million to $178.7 million from fiscal 1993 to
fiscal 1994. Sales of branded apparel decreased significantly and sales of
non-branded knit apparel increased slightly. Sales of branded apparel in fiscal
1994 decreased 26% to $95 million as compared to sales in fiscal 1993, with both
unit sales and average unit price being lower in the same comparative period.
Sales of non-branded knit apparel increased 3% to $84 million as compared to
sales in fiscal 1993, with unit sales being higher and average unit price being
slightly lower in the same comparative period.
Although consumer demand for its "Duck Head" branded apparel remains good, the
Company believes that the delivery problems encountered by its retailer
customers during the rapid growth of the brand in the preceding two fiscal
years were the principal cause of lower sales in the latest fiscal year. The
Company has developed and will install what it believes are better planning and
distribution systems to materially improve its orders shipped to orders received
ratio. In addition, the Company has decided to build a new, central distribution
and office center for the "Duck Head" products. A site has been selected, and
construction will begin in fiscal 1995 and is expected to be completed in early
fiscal 1996. The number of Duck Head retail outlet stores increased from 33 at
the beginning of fiscal 1994 to 36 at present.
Gross profit margins decreased from 26% in fiscal 1993 to 20% in fiscal 1994.
A gross margin increase in knit apparel was more than offset by decreased gross
margins in branded apparel and outlet store operations. A significant amount of
branded apparel inventories which were carried into fiscal 1994 were sold at
closeout prices and additional reserves were established during fiscal 1994 for
future closeout inventory sales.
The apparel segment represented 29% of the Company's fiscal 1994 consolidated
net sales and 36% of the Company's fiscal 1994 gross profit.
The apparel segment's selling, general, and administrative expenses in fiscal
1994 were $37.1 million as compared to $35.1 million in fiscal 1993. These
expenses were 21% of net sales in fiscal 1994 as compared to 17% for fiscal
1993. Knit apparel selling expenses increased significantly due to efforts to
merchandise and sell a new line of "Nautilus" knit apparel, and the greater
number of outlet stores required additional expenses.
Other income and expense in the apparel segment included $30.0 million of
charges taken to establish reserves for the Alabama case and certain
restructuring items.
Fiscal 1994 operating losses for the apparel segment totalled $31.3 million,
including the $30.0 million of other expenses noted above, as compared to
operating profits of $18.9 million in fiscal 1993.
Inventories in the apparel segment at July 2, 1994 totalled $110.3 million,
compared to $110.0 million at July 3, 1993. Branded apparel inventories fell
slightly and non-branded knit apparel inventories rose slightly during fiscal
1994.
Capital expenditures in the apparel segment were $3.8 million during fiscal
1994. These repre-
sented improvements in the knitting, fabric finishing, and sewing facilities in
this segment.
The apparel segment's operating results are highly dependent on orders from
retailers, and from screen printers who supply finished product to retailers.
Generally, when retail sales of apparel are strong, the Company's apparel
segment benefits. The Company cannot be certain when (or if) retail sales of its
product categories will return to growth levels similar to those of the Spring
of 1992.
This segment's operating results are also dependent upon the utilization of
its owned manufacturing facilities. The Company believes that the internal
capacity utilization by its apparel segment will be satisfactory in fiscal 1995.
A law suit with allegations similar to those in the Alabama case refered to
above is pending in the United States District Court for the Western District of
Kentucky brought by an individual who previously served as an independent sales
representative for the Duck Head division. The amount of damages claimed in this
suit has not yet been determined.
FISCAL 1993 VERSUS FISCAL 1992
Net sales in the apparel segment increased slightly to $209.8 million for the
year ended July 3, 1993 from $206.8 million in the prior fiscal year. Net sales
of woven apparel fell 3% from the fiscal 1992 level while net sales of knit
apparel increased by 9%. Gross sales of "Duck Head" labeled products were
approximately the same in fiscal 1993 as in fiscal 1992. Knit apparel sales were
higher in fiscal 1993 than in fiscal 1992 in both the screen printing and
private label areas.
Apparel sales for fiscal 1993 were impacted adversely by generally sluggish
retail apparel sales from January to June 1993. The Duck Head retail outlet
operation opened 11 new stores during fiscal 1993, bringing the total at fiscal
year end
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to 33 stores with total sales more than twice those in fiscal 1992.
Gross profit margins in the apparel segment decreased to 26% in fiscal 1993
from 28% in fiscal 1992. Excess inventories of knitted T-shirts throughout the
industry depressed prices for these products. Lower than anticipated "in season"
sales led to higher levels of closeout sales than in the prior fiscal year. "In
season" sales of branded apparel were depressed both by the poor spring weather,
which led to very low levels of reorders for spring season merchandise, and by
generally sluggish retail apparel sales throughout the country.
Selling, general and administrative expenses increased to $35.1 million in
fiscal 1993 from $29.6 million in fiscal 1992. These costs were 17% of net sales
in fiscal 1993 as compared to 14% in fiscal 1992. Higher advertising costs for
the "Duck Head" brand and costs associated with operating the additional retail
outlet stores were the major factors that caused these increased costs.
The combination of lower gross profit margins and higher selling, general and
administrative costs as described above led to a 30% decrease in operating
earnings from the apparel segment in fiscal 1993 as compared to fiscal 1992.
The apparel segment represented 31% of the Company's fiscal 1993 consolidated
net sales and 44% of the Company's fiscal 1993 gross profit.
Inventories in the apparel segment were $110.0 million at July 3, 1993 as
compared to $90.9 million at June 27, 1992. The major increase occurred in
finished goods inventories of branded apparel, caused by products that had been
acquired in anticipation of higher sales than actually occurred.
Capital expenditures in the apparel segment were $10.9 million during fiscal
1993. Capital expenditures included improvements in the Maiden, North Carolina
knitting and finishing plant as well as improvements in the segment's sewing
plants in the United States and Costa Rica.
(Funded Debt to Equity Ratio bar chart appears here--see appendix)
LIQUIDITY AND SOURCES OF CAPITAL
During fiscal 1994, the Company financed its operations, capital expenditures,
dividends, and acquisitions primarily through cash generated from operations and
borrowings under its bank credit facility.
The Company generated cash flows from its operations of $32.8 million, $62.7
million, and $9.6 million for the 1994, 1993, and 1992 fiscal years,
respectively. During these periods, cash generated from operations, and from
sales of the Company's Common Stock, has been used primarily to reduce debt,
finance capital expenditures, including equipment purchases, pay dividends,
acquire 100% of the stock of Nautilus International, Inc., and of Armonia Textil
S.A. (Costa Rica) and its related assets, and 70% of the stock of Apparel
Marketing Corporation, and repurchase approximately 2.3 million shares of the
Company's Common Stock.
During fiscal 1994, cash used by investing activities included $30.5 million
for purchases of property, plant, and equipment. Fiscal 1994 cash used in
financing activities of $4.5 million resulted primarily from net increases in
bank debt of $32.3 million offset by $9.8 million paid in dividends and $25.3
million used to repurchase the Company's Common Stock. The repurchase of shares
resulted in a lower weighted average shares outstanding for fiscal 1994 as
compared to fiscal 1993. The lower number of shares outstanding resulted in a
proportional increase in the loss per share. In addition, borrowings to finance
the repurchase resulted in additional interest expense.
As of July 2, 1994, the Company had working capital of $242 million, as
compared to $262 million at July 3, 1993. Net accounts receivable were $22.9
million lower, and inventories were $5.5 million higher at the end of fiscal
1994 as compared to balances at the end of fiscal 1993. In addition, current
deferred tax assets were $11.3 million higher, influenced primarily by the
Alabama litigation.
On September 7, 1994, the Company obtained a $275 million long-term Revolving
Loan Facility (the "Credit Facility"). The Credit Facility has a limit of $25
million for the purpose of issuing letters of credit, and a separate $29 million
limit for the letter of credit issued in connection with the Alabama litigation
(the "Alabama L/C"). Upon termination of the Alabama L/C, whether by a drawing
or otherwise, this letter of credit facility will expire and the total Credit
Facility will be reduced by the amount of the undrawn and expired portion of the
Alabama L/C. The new Credit Facility will mature on September 30, 1997, with a
provision for one year extensions and (if the extension is made) on each
anniversary of the
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termination date thereafter, such extension to be available only if consented to
by all of the lenders. The Company's initial interest rate is LIBOR plus .50%
per annum, but the Credit Facility contains provisions that may increase or
decrease the spread over LIBOR depending upon certain financial ratios achieved
by the Company. The Credit Facility is an unsecured general obligation of the
Company. The Company has used the proceeds of the Credit Facility to refinance
the bank debt that existed under its previous credit facilities and to provide
ongoing working capital financing needs.
At July 2, 1994, borrowings under the Company's loan facilities totaled $160.4
million at a weighted average interest rate of 5.18% per annum as compared to
3.7% at July 3, 1993. Availability under the new Credit Facility is reduced by
outstanding letters of credit, which at July 2, 1994 aggregated approximately
$14.3 million. Certain conditions apply to the Company's ability to borrow under
its Credit Facility, including continued compliance with financial covenants.
See Note D of the accompanying financial statements for a description of loan
covenants.
The Company spent approximately $29.9 million in capital expenditures during
fiscal 1994. Of this amount, approximately $18 million was spent in the textile
segment with the major expenditures being for consolidation of knitted fabric
manufacturing facilities and weaving machines for the woven fabrics business as
the beginning of its major, long term modernization project. Approximately $4
million was spent in the apparel segment, and approximately $7 million was spent
in the Company's fitness equipment business, largely to rebuild facilities that
were destroyed by fire in March of 1993.
During fiscal 1995, the Company plans to spend approximately $45 million for
capital improvements and new equipment. The majority of this amount is expected
to be spent in continuing the woven fabrics modernization program. The Company
also expects to begin construction of a new, centralized distribution center for
its branded apparel division in fiscal 1995. The Company believes that its
equipment and facilities are generally adequate to allow it to remain
competitive with its principal competitors.
The Company's Board of Directors authorized a plan to repurchase up to five
million shares of the Company's outstanding Common Stock at prices and at times
at the discretion of the Company's top management. During fiscal 1994, the
Company repurchased and retired approximately 2.3 million shares at a total cost
of approximately $25.3 million. These purchases were funded by use of the
Company's revolving credit line. The Company currently has approximately 24.2
million shares outstanding.
The Company believes that cash flow generated by its operations and funds
available under its existing credit lines should be sufficient to service its
bank debt, to satisfy its day-to-day working capital needs, to fund its planned
capital expenditures and to continue the payment of dividends.
ENVIRONMENTAL MATTERS
The Company's Nautilus business has been named as a "potentially responsible
party" ("PRP") under the Comprehensive Environmental Response, Compensation and
Liability Act ("CERCLA") with respect to three sites in North Carolina, South
Carolina, and Mississippi. To the Company's knowledge, all of the transactions
with these sites were conducted by a corporation (the "Selling Corporation")
whose assets were sold in 1990 pursuant to the terms of an order of the United
States Bankruptcy Court to another corporation, the stock of which was
subsequently acquired by the Company in January 1993.
At the North Carolina site, the Company's information is that there are over
1,400 PRPs and the Selling Corporation is listed as a "de minimis" party. The
Company's most recent information indicates that the Selling Corporation's share
of the costs of the surface removal action (the removal of drums, equipment and
materials) for this site will be immaterial. The Company does not currently have
information respecting the soil and groundwater cleanup costs that may be
incurred with respect to this site.
At the South Carolina site, there are over 700 PRPs, and the Selling
Corporation has been listed as an "insolvent" party and would appear to qualify
as a "de minimis" party. The site's PRP group has completed a surface removal
action, the Selling Corporation's part of which is immaterial. The PRP group is
investigating soil and groundwater contamination at the site, but there is
currently insufficient information available to estimate the cost of remediating
that contamination.
At the Mississippi site, the PRP Group is in the process of performing a
surface removal action and is investigating soil and groundwater contamination,
both at the site and in the surrounding area. The Company's latest information
is that the Selling Corporation is ranked 11th out of a total of over 300 PRPs
in contributions of material to the site, and, based on volume, the Selling
Corporation contributed approximately 3% of the site's material. To the
Company's knowledge, latest estimates of costs to clean up the site range up to
$4 million. Trichloroethane, one of the substances delivered by the Selling
Corporation to the site, has been found in the site's groundwater and at nearby
residential drinking water wells.
Although no assurance can be provided, the Company believes that it is
shielded from liability
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at these three sites by the order of the United States Bankruptcy Court pursuant
to which the Selling Corporation sold its assets to the corporation subsequently
acquired by the Company.
The Company, therefore, has denied any responsibility at the sites
and has declined to participate as a member of the respective PRP groups.
Accordingly, the Company has not provided for any reserves for costs or
liabilities attributable to the Selling Corporation.
INCOME TAXES
The effective income tax rates for the 1994, 1993 and 1992 fiscal years were
33.3%, 39.5%, and 39%, respectively. As of June 28, 1992, the Company changed
its method of accounting for income taxes from the deferred method to the
liability method required by FASB Statement No. 109, "Accounting For Income
Taxes" (see Note F of the accompanying consolidated financial statements). The
cumulative effect of adopting Statement 109 as of June 28, 1992 was to decrease
fiscal 1993 net income by approximately $875,000, which is reflected in the
effective rate above for that year.
The Company made income tax payments of approximately $2,350,000, $20,171,000
and $19,678,000 during the 1994, 1993 and 1992 fiscal years, respectively. In
fiscal 1992, the Company utilized alternative minimum tax credits of $4.4
million generated in fiscal years 1989, 1990 and 1991 to reduce its fiscal 1992
tax liability. In addition, the Company utilized in fiscal 1992 $225,000 of
business credit carryforwards which were acquired in the Stanwood acquisition.
During fiscal 1993, the IRS concluded its audit of the Company's consolidated
tax returns for fiscal years 1988 and 1989 with no material adjustments.
Prior to its acquisition by the company, O'Bryan Brothers Inc. (which owned
the "Duck Head" trademarks) had established for income tax purposes the basis of
customer lists in the amount of $3.6 million. The IRS had audited this matter
for years prior to inclusion in the consolidated federal income tax return of
the Company and had originally disallowed the deduction of this basis. During
fiscal 1994, the IRS and the Company agreed to settle this issue which resulted
in approximately $149,000 of tax due. This tax settlement has been considered in
the above effective tax rate for 1994.
In fiscal 1994, the Company paid alternative minimum tax ("AMT") of
approximately $2 million. To the extent that the Company pays AMT, it can later
apply the AMT previously paid as a credit against future regular tax
liabilities.
At July 2, 1994, the Company had net operating loss ("NOL") carryforwards of
$11.1 million for income tax purposes that expire in fiscal years 1995 through
2003. Approximately, $1.9 million of these carryforwards is attributable to a
company acquired in 1986. This carryover will expire in fiscal years ending in
1995 and 1996.
The remaining carryover of approximately $9.2 million was generated by a
subsidiary of Stanwood Corporation, which was acquired by the Company during its
1989 fiscal year. The total net operating loss carryforward of the Stanwood
group at the time of acquisition amounted to $10.9 million of which $1.7 million
was utilized by the Company in its fiscal 1991 tax return. In addition to net
operating loss carryforwards, at the time of acquisition, Stanwood Corporation
had general business credit carryforwards which totalled $835,000 and expire
June 1999 through June 2003. The business credit carryforward at the end of
fiscal 1994 from this acquisition was approximately $610,000.
Although the Tax Reform Act of 1986 placed annual limitations on utilizing
NOLs and tax credits from companies which have changed ownership, this should
not impact the Company's ability to ultimately utilize the carryovers. The
maximum annual usage of the Stanwood NOL is limited by applicable provisions of
the Internal Revenue Code to approximately $1 million per year. The Company
expects to utilize the Stanwood NOL prior to the expiration dates of June 2002
and June 2003.
The Company has recognized cumulative deferred tax assets of approximately $28
million, arising principally from litigation accruals, basis differences between
the recorded value for financial reporting purposes and tax basis of fixed
assets, net operating loss and general business credit carryforwards of acquired
companies and book accruals which will be future tax deductions. Such deferred
tax assets have been reduced by a valuation allowance of approximately $3.9
million. The valuation allowance will be adjusted from time to time as the tax
benefits are realized. Although the Company's business is cyclical, its history
of generating taxable income indicates it is likely that the Company will be
able to realize its deferred tax assets.
Although the Company believes that it has been, and will continue to be,
entitled to utilize the NOLs, credit carryovers and basis differences described
above, no assurance can be given that the IRS will not be able to successfully
challenge any such items on the grounds that they were not validly incurred for
Federal income tax purposes or that their use is restricted by various tax
provisions.
11
<PAGE>
OPERATIONS BY INDUSTRY SEGMENT
The Company operates principally in two segments: textiles and apparel. The
textile segment's principal products are woven and knitted fabrics for apparel
and home furnishings manufacturers. The apparel segment is the manufacturer of
the "Duck Head" brand of casualwear, completed T-shirts, fleece goods and
sportswear, and includes a retail apparel business. The apparel segment sells
primarily to department stores and other apparel retailers. The Company also
manufactures and sells Nautilus fitness equipment primarily to the institutional
market.
<TABLE>
<CAPTION>
July 2, July 3, June 27,
1994 1993 1992
<S> <C> <C> <C>
Net Sales:
Textiles
Unaffiliated customers....................................................... $391,401,000 $444,921,000 $472,766,000
Intersegment................................................................. 15,660,000 12,331,000 12,433,000
407,061,000 457,252,000 485,199,000
Apparel, including retail stores:
Unaffiliated customers....................................................... 178,681,000 209,789,000 206,796,000
Intersegment................................................................. 1,000
178,681,000 209,790,000 206,796,000
Fitness equipment, office products and other
Unaffiliated customers....................................................... 43,694,000 31,529,000 25,475,000
Intersegment................................................................. 1,474,000 1,269,000 976,000
45,168,000 32,798,000 26,451,000
Intersegment Eliminations...................................................... (17,134,000) (13,601,000) (13,409,000)
Total...................................................................... $613,776,000 $686,239,000 $705,037,000
Gross Profit:
Textiles....................................................................... $ 45,355,000 $ 57,075,000 $ 75,924,000
Apparel, including retail stores............................................... 35,846,000 53,523,000 56,950,000
Fitness equipment, office products and other................................... 17,735,000 11,289,000 8,336,000
Total...................................................................... $ 98,936,000 $121,887,000 $141,210,000
Operating Profit (Loss):
Textiles....................................................................... $ 19,606,000 $ 34,655,000 $ 52,990,000
Apparel, including retail stores............................................... (31,327,000) 18,900,000 27,032,000
Fitness equipment, office products and other................................... (2,992,000) 2,308,000 606,000
Total Operating Profit (Loss).............................................. (14,713,000) 55,863,000 80,628,000
Interest expense............................................................... (8,639,000) (7,775,000) (11,479,000)
Corporate expense.............................................................. (3,300,000) (3,278,000) (3,802,000)
Interest Income................................................................ 722,000 362,000 454,000
Income (Loss) Before Income Taxes.......................................... $(25,930,000) $ 45,172,000 $ 65,801,000
Identifiable Assets:
Textiles....................................................................... $314,378,000 $331,036,000 $320,164,000
Apparel, including retail stores............................................... 195,370,000 203,166,000 193,736,000
Fitness equipment, office products and other................................... 55,811,000 38,124,000 9,536,000
Corporate...................................................................... 1,444,000 1,620,000 1,320,000
Total...................................................................... $567,003,000 $573,946,000 $524,756,000
Depreciation and amortization:
Textiles....................................................................... $ 16,552,000 $ 13,087,000 $ 10,414,000
Apparel, including retail stores............................................... 6,210,000 4,649,000 3,844,000
Fitness equipment, office products and other................................... 3,669,000 669,000 328,000
Corporate...................................................................... 462,000 414,000 242,000
Total...................................................................... $ 26,893,000 $ 18,819,000 $ 14,828,000
Capital expenditures:
Textiles....................................................................... $ 18,334,000 $ 34,446,000 $ 37,753,000
Apparel, including retail stores............................................... 3,844,000 10,941,000 4,745,000
Fitness equipment, office products and other................................... 7,659,000 3,611,000 212,000
Corporate...................................................................... 19,000 577,000 206,000
Total...................................................................... $ 29,856,000 $ 49,575,000 $ 42,916,000
</TABLE>
12
<PAGE>
The textile segment sells to the apparel segment at a rate approximately 1%
over cost. All other intersegment sales are at prices comparable to unaffiliated
customers sales. Intersegment operating profit related to the intersegment sales
is not significant. Operating profit is total revenue less operating expenses,
excluding interest expense, corporate expense and interest income. Included in
1993 operating profit is a net gain on an involuntary conversion in the fitness
equipment division. (See Note K).
During fiscal 1994 the apparel segment recognized a charge of $27 million in
connection with a law suit, and the textile, apparel and office products and
other divisions recorded restructuring charges of $1,700,000, $2,900,000, and
$4,600,000, respectively. Depreciation and amortization include certain
writedowns of property and equipment
Identifiable assets are those assets that are used in the operations of each
segment. Amounts shown for corporate assets consist principally of corporate
office equipment, deferred loan costs and certain life insurance policies. (See
Note H). Capital expenditures include related accounts payable of $1,010,000,
$1,694,000 and $6,610,000 for the 1994, 1993 and 1992 fiscal years,
respectively.
13
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
BOARD OF DIRECTORS AND SHAREHOLDERS
DELTA WOODSIDE INDUSTRIES, INC.
We have audited the accompanying consolidated balance
sheets of Delta Woodside Industries, Inc. as of July 2,
1994 and July 3, 1993, and the related consolidated
statements of operations, shareholders' equity and cash
flows for each of the three years in the period ended July
2, 1994. 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, the financial statements referred to above
present fairly, in all material respects, the consolidated
financial position of Delta Woodside Industries, Inc. at
July 2, 1994 and July 3, 1993, and the consolidated results
of its operations and its cash flows for each of the three
years in the period ended, in conformity with generally
accepted accounting principles.
(Signature of Ernst & Young LLP)
Greenville, South Carolina
August 17, 1994, except for
the third paragraph of Note D,
as to which the date is
September 7, 1994.
14
<PAGE>
CONSOLIDATED BALANCE SHEETS
Delta Woodside Industries, Inc.
<TABLE>
<CAPTION>
JULY 2, 1994 July 3, 1993
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents........................................................ $ 2,077,000 $ 3,730,000
Accounts receivable:
Factor -- Note C.............................................................. 55,440,000 70,985,000
Customers..................................................................... 64,921,000 74,491,000
120,361,000 145,476,000
Less allowances for doubtful accounts and returns............................. 3,275,000 5,537,000
117,086,000 139,939,000
Inventories -- Note A
Finished goods................................................................ 112,101,000 111,372,000
Work in process............................................................... 69,402,000 63,027,000
Raw materials and supplies.................................................... 22,300,000 23,865,000
203,803,000 198,264,000
Deferred income taxes............................................................ 12,028,000 713,000
Prepaid expenses and other current assets........................................ 1,942,000 3,615,000
TOTAL CURRENT ASSETS 336,936,000 346,261,000
PROPERTY, PLANT AND EQUIPMENT, at cost --
Notes D and J
Land and land improvements.................................................... 5,318,000 5,149,000
Buildings..................................................................... 64,497,000 59,782,000
Machinery and equipment....................................................... 191,267,000 171,900,000
Furniture and fixtures........................................................ 6,943,000 5,984,000
Leasehold improvements........................................................ 2,517,000 2,903,000
Construction in progress...................................................... 9,271,000 8,397,000
279,813,000 254,115,000
Less accumulated depreciation................................................. 89,782,000 68,969,000
190,031,000 185,146,000
EXCESS OF COST OVER ASSIGNED VALUE OF NET ASSETS ACQUIRED, less accumulated
amortization of $3,965,000 (1994) and $4,030,000 (1993).......................... 28,164,000 31,169,000
OTHER ASSETS....................................................................... 11,872,000 11,370,000
$567,003,000 $573,946,000
</TABLE>
See notes to consolidated financial statements.
15
<PAGE>
<TABLE>
<CAPTION>
JULY 2, 1994 July 3, 1993
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Trade accounts payable........................................................... $ 46,712,000 $ 62,374,000
Accrued employee compensation.................................................... 6,806,000 8,049,000
Litigation accrual -- Note J..................................................... 25,594,000
Accrued and sundry liabilities................................................... 15,010,000 11,991,000
Current portion of long-term debt -- Note D...................................... 864,000 1,736,000
TOTAL CURRENT LIABILITIES 94,986,000 84,150,000
LONG-TERM DEBT -- Note D........................................................... 161,948,000 130,464,000
DEFERRED INCOME TAXES -- Note F.................................................... 18,808,000 17,595,000
OTHER LIABILITIES AND DEFERRED CREDITS -- Note H................................... 6,384,000 5,488,000
SHAREHOLDERS' EQUITY -- Notes D, E and H
Common Stock -- par value $.01 a share -- authorized 50,000,000 shares, issued
and outstanding 24,246,000 shares (1994) and 26,437,000 shares (1993)......... 242,000 264,000
Additional paid-in capital....................................................... 162,114,000 186,381,000
Retained earnings................................................................ 122,521,000 149,604,000
284,877,000 336,249,000
COMMITMENTS AND CONTINGENCIES --
Notes D and J
$567,003,000 $573,946,000
</TABLE>
See notes to consolidated financial statements.
16
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS
Delta Woodside Industries, Inc
<TABLE>
<CAPTION>
Year Ended
JULY 2, 1994 July 3, 1993 June 27, 1992
<S> <C> <C> <C>
Net sales...................................................... $613,776,000 $686,239,000 $705,037,000
Cost of goods sold............................................. 514,840,000 564,352,000 563,827,000
Gross profit................................................... 98,936,000 121,887,000 141,210,000
Selling, general and administrative expenses................... 82,223,000 73,404,000 64,204,000
Litigation charge -- Note J.................................... 27,096,000
Restructuring charge -- Note J................................. 9,199,000
(19,582,000 ) 48,483,000 77,006,000
Other (expense) income:
Interest expense............................................. (8,639,000 ) (7,775,000 ) (11,479,000 )
Interest income.............................................. 722,000 362,000 454,000
Other -- Note K.............................................. 1,569,000 4,102,000 (180,000 )
(6,348,000 ) (3,311,000 ) (11,205,000 )
INCOME (LOSS) BEFORE INCOME TAXES (25,930,000 ) 45,172,000 65,801,000
Income tax expense (benefit) -- Note F......................... (8,633,000 ) 16,968,000 25,786,000
Income (loss) before cumulative effect of accounting change.... (17,297,000 ) 28,204,000 40,015,000
Cumulative effect of change in the method of accounting for
income taxes -- Note F....................................... (875,000 )
NET INCOME (LOSS) $(17,297,000 ) $ 27,329,000 $ 40,015,000
Earnings (loss) per share of Common Stock before cumulative
effect of accounting change.................................. $ (.70 ) $ 1.07 $ 1.62
Cumulative effect of change in the method of accounting for
income taxes -- Note F....................................... (.04 )
Earnings (loss) per share of Common Stock...................... $ (.70 ) $ 1.03 $ 1.62
Weighted average number
of shares outstanding........................................ 24,550,000 26,421,000 24,670,000
</TABLE>
See notes to consolidated financial statements.
17
<PAGE>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Delta Woodside Industries, Inc
<TABLE>
<CAPTION>
Prepaid
Additional Contribution Total
Common Stock Paid-In Retained To Retirement Shareholders'
Shares Amount Capital Earnings Plan Equity
<S> <C> <C> <C> <C> <C> <C>
Balance at June 29, 1991................ 21,129,150 $211,000 $ 71,403,000 $101,665,000 $ (632,000) $172,647,000
Incentive Stock Award Plan
Shares issued Note E................ 74,343 1,000 343,000 344,000
Stock Option Plan, shares issued --
Note E.............................. 17,874 136,000 136,000
Tax benefits of stock plans........... 72,000 72,000
Issuance of Common Stock in public
offering -- Note E.................. 5,175,000 52,000 113,239,000 113,291,000
Net income for the year ended
June 27, 1992....................... 40,015,000 40,015,000
Cash dividends paid --
$.35 a share........................ (8,836,000) (8,836,000)
Allocation of shares of Common Stock
(65,970) in Retirement Plan -- Note
H................................... 403,000 632,000 1,035,000
Other................................. 4,004 77,000 77,000
Balance at June 27, 1992................ 26,400,371 264,000 185,673,000 132,844,000 -0- 318,781,000
Incentive Stock Award Plan
Shares issued Note E................ 2,502 37,000 37,000
Stock Option Plan, shares issued --
Note E.............................. 33,188 265,000 265,000
Tax benefits of stock plans........... 262,000 262,000
Net income for the year ended
July 3, 1993........................ 27,329,000 27,329,000
Cash dividends paid --
$.40 a share........................ (10,569,000) (10,569,000)
Other................................. 825 144,000 144,000
Balance at July 3, 1993................. 26,436,886 264,000 186,381,000 149,604,000 -0- 336,249,000
INCENTIVE STOCK AWARD PLAN
SHARES ISSUED NOTE E................ 82,309 1,000 666,000 667,000
STOCK OPTION PLAN, SHARES
ISSUED -- NOTE E.................... 22,188 194,000 194,000
TAX BENEFITS OF STOCK PLANS........... 144,000 144,000
PURCHASE AND RETIREMENT OF COMMON
STOCK -- NOTE E..................... (2,295,650) (23,000) (25,271,000) (25,294,000)
NET LOSS FOR THE YEAR ENDED
JULY 2, 1994........................ (17,297,000) (17,297,000)
CASH DIVIDENDS PAID --
$.40 A SHARE........................ (9,786,000) (9,786,000)
BALANCE AT JULY 2, 1994 24,245,733 $242,000 $162,114,000 $122,521,000 $ -0- $284,877,000
</TABLE>
See notes to consolidated financial statements.
18
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Delta Woodside Industries, Inc
<TABLE>
<CAPTION>
Year Ended
JULY 2, 1994 July 3, 1993 June 27, 1992
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss)............................................ $ (17,297,000) $ 27,329,000 $ 40,015,000
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation.............................................. 21,344,000 17,090,000 13,711,000
Amortization.............................................. 1,859,000 1,729,000 1,117,000
Reduction in excess of cost over assigned value of net
assets acquired........................................ 1,549,000
Writedown of property and equipment....................... 2,141,000
Provision for losses on accounts
receivable............................................. 3,886,000 2,025,000 3,350,000
Provision for deferred income taxes....................... (10,810,000) 2,398,000 2,143,000
Losses (gains) on disposition of property
and equipment.......................................... 113,000 (2,916,000) 173,000
Compensation under stock plans............................ 1,005,000 317,000 1,518,000
Deferred compensation..................................... 928,000 1,126,000 1,206,000
Other..................................................... 708,000 753,000 (127,000)
Changes in operating assets and liabilities
net of effects from business
acquisitions:
Accounts receivable.................................... 17,635,000 23,600,000 (25,736,000)
Inventories............................................ (6,265,000) (17,217,000) (39,505,000)
Other current assets................................... 1,610,000 (1,785,000) 156,000
Litigation accrual..................................... 25,594,000
Accounts payable and accrued
expenses............................................ (11,183,000) 8,255,000 11,621,000
NET CASH PROVIDED BY
OPERATING ACTIVITIES 32,817,000 62,704,000 9,642,000
INVESTING ACTIVITIES
Acquisitions of businesses, net of
cash acquired............................................. (1,565,000) (20,194,000)
Property, plant and equipment:
Purchases................................................. (30,525,000) (54,409,000) (36,246,000)
Proceeds of dispositions.................................. 698,000 5,878,000 219,000
Sale of business............................................. 2,102,000
Other........................................................ (697,000) (280,000) (473,000)
NET CASH USED BY
INVESTING ACTIVITIES (29,987,000) (69,005,000) (36,500,000)
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
Year Ended
JULY 2, 1994 July 3, 1993 June 27, 1992
<S> <C> <C> <C>
FINANCING ACTIVITIES
Proceeds from revolving lines of credit...................... $ 33,000,000 $ 194,000,000 $259,871,000
Repayments on revolving lines of credit...................... (11,000,000) (172,640,000) (315,500,000)
Net borrowings on short term line of credit.................. 10,347,000
Scheduled principal payments of long-term debt............... (1,781,000) (1,692,000) (13,802,000)
Principal prepayments of long-term debt...................... (7,500,000)
Net proceeds from sale of Common Stock....................... 113,291,000
Repurchase and retirement of shares of Common Stock.......... (25,294,000)
Dividends paid............................................... (9,786,000) (10,569,000) (8,836,000)
Other........................................................ 31,000 82,000 (173,000)
NET CASH PROVIDED (USED) BY
FINANCING ACTIVITIES (4,483,000) 9,181,000 27,351,000
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS............... (1,653,000) 2,880,000 493,000
Cash and cash equivalents at beginning of
year......................................................... 3,730,000 850,000 357,000
CASH AND CASH EQUIVALENTS
AT END OF YEAR $ 2,077,000 $ 3,730,000 $ 850,000
</TABLE>
See notes to consolidated financial statements.
20
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Delta Woodside Industries, Inc.
NOTE A -- SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include the
accounts of Delta Woodside Industries, Inc. (the "Company") and its subsidiaries
(all of which are wholly-owned, except for Apparel Marketing Corporation which
is 70% owned). All significant intercompany balances and transactions have been
eliminated. Certain amounts for the 1993 fiscal year end have been reclassified
to conform to the 1994 presentation.
INVENTORIES: Inventories are stated at the lower of cost or market. As of July
2, 1994 and July 3, 1993, cost for certain inventories of the apparel segment
are determined under the last-in, first-out (LIFO) method representing 35% and
32%, respectively, of the cost of consolidated inventories. The balance of the
cost of consolidated inventories is determined under the first-in, first-out
(FIFO) method. If the inventories of the apparel segment had been determined by
the FIFO method, they would have been approximately the same as the reported
amounts.
PROPERTY, PLANT AND EQUIPMENT: Property, plant and equipment is stated on the
basis of cost. Depreciation is computed by the straight-line method for
financial reporting based on estimated useful lives of three to thirty-two
years, and by accelerated methods for income tax reporting.
REVENUE RECOGNITION: Sales are recorded upon shipment or designation of specific
goods for later shipment at customers' request with related risk of ownership
passing to such customers.
AMORTIZATION: Amortization is computed using the straight-line method. The
excess of cost over assigned value of net assets acquired relating to certain
business combinations is being amortized to expense over periods of 5, 15 or 40
years. The excess of assigned value of net assets acquired over cost relating to
other business combinations is being amortized to income over 5 and 40 years.
Loan acquisition costs are being amortized over 3 years. Other intangible assets
are being amortized over periods of 3 to 40 years.
INCOME TAXES: The Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income
Taxes," which required a change from the deferred method to the liability method
of accounting for income taxes. Under the liability method, deferred income
taxes are recognized for the tax consequences of "temporary differences" by
applying enacted statutory tax rates applicable to future years to differences
between the financial statement carrying amounts and the tax bases of existing
assets and liabilities. Under SFAS No. 109, the effect on deferred taxes of a
change in tax rates is recognized in income in the period that includes the
enactment date. Under the deferred method, deferred taxes were recognized using
the tax rate applicable to the year of the calculation and were not adjusted for
subsequent changes in tax rates.
The Company adopted SFAS 109 in the first quarter of fiscal 1993 and reported
the cumulative effect on the change in method of accounting for income taxes as
of the beginning of the 1993 fiscal year. Net income was reduced by $875,000 as
a result of the cumulative effect adjustment resulting from the change in
accounting for income tax expense.
CASH EQUIVALENTS: The Company considers all highly liquid investments of three
months or less when purchased to be cash equivalents.
EARNINGS PER COMMON SHARE: Per share data are computed based on the weighted
average number of shares of Common Stock outstanding during each period.
Unallocated shares in the Company's Retirement Plan are not considered
outstanding.
FISCAL YEAR: The Company's operations are based on a fifty-two, fifty-three week
fiscal year ending on the Saturday closest to June 30. The 1994 and 1992 fiscal
years consist of 52 weeks, whereas the 1993 fiscal year was 53 weeks.
21
<PAGE>
NOTE B -- ACQUISITION OF BUSINESSES
On January 20, 1993, the Company acquired all of the outstanding stock of
Nautilus International, Inc., parent company of Nautilus Acquisition
Corporation, a manufacturer of fitness equipment. Concurrent with this
acquisition, the Company acquired 70% of the stock of Apparel Marketing
Corporation which owns the apparel and related accessory licensing rights to the
Nautilus name. These acquisitions have been accounted for by the purchase method
of accounting, and the accompanying consolidated financial statements include
the operations of the acquired businesses from the dates of their respective
acquisitions. The total purchase price for the stock acquired in these two
transactions was approximately $9.1 million. An additional $11.4 million was
paid to retire indebtedness of Nautilus. The total cost of the acquisitions
amounted to approximately $20.5 million. The cost exceeded the fair value of net
assets acquired by approximately $4.9 million, which has been recorded as
goodwill and is being amortized over 40 years for Nautilus International and 5
years for Apparel Marketing Corporation. The following unaudited pro forma
summary presents the consolidated results of operations as if the acquisitions
had occurred as of the beginning of the periods presented.
<TABLE>
<CAPTION>
1993 1992
<S> <C> <C>
(In thousands,
except per share
amounts)
Net sales.......................... $697,802 $723,840
Net income before cumulative effect
adjustment of income taxes....... 27,665 39,289
Net income......................... 26,790 39,289
Earnings per share before
cumulative effect adjustment
of income taxes.................. 1.05 1.59
Earnings per share................. 1.01 1.59
</TABLE>
In addition, the Company acquired certain other immaterial businesses during
both fiscal 1994 and 1993.
NOTE C -- ACCOUNTS RECEIVABLE
The woven fabrics operation assigns a substantial portion of its trade accounts
receivable to a bank under a factor agreement. The assignment of these
receivables is primarily without recourse, provided that customer orders are
approved by the bank prior to shipment of goods, up to a maximum for each
individual account. At July 2, 1994 the Company had no significant
concentrations of
credit risk, since substantially all of the Company's accounts receivable are
due from many companies that produce apparel, home furnishings and other
products and from department stores and specialty apparel retailers located
throughout the United States. The Company generally does not require collateral
for its accounts receivable.
22
<PAGE>
NOTE D -- LONG-TERM DEBT, CREDIT ARRANGEMENTS AND LEASES
Long-term debt consists of:
<TABLE>
<CAPTION>
July 2, 1994 July 3, 1993
<S> <C> <C>
Long-term revolving credit facility (5.2% at July 2, 1994), with interest payable monthly
refinanced................................................................................. $150,005,000 $128,005,000
Short-term note payable -- refinanced........................................................ 10,347,000
Industrial Revenue Bond payable monthly, through 2001 at 72% of a bank's base rate........... 1,535,000 1,775,000
Notes, payable in varying annual amounts, through 1996 at rates varying from
6% to 10%.................................................................................. 148,000 371,000
Capital leases payable monthly or annually................................................... 777,000 2,049,000
162,812,000 132,200,000
Less current portion......................................................................... 864,000 1,736,000
$161,948,000 $130,464,000
</TABLE>
Certain property, plant and equipment with a net book value of approximately
$13,882,000 is collateral for certain long-term debt of $1,551,000 at July 2,
1994.
At July 2, 1994 the company had an unsecured revolving credit facility for $175
million and two additional bank credit lines that aggregated $75 million. The
Company's loan covenants generally limited the Company's total indebtedness to
$225 million, plus an amount required to fund the Alabama jury award. See Note
J. At July 2, 1994 outstanding letters of credit of $14,332,000 issued to
certain suppliers and not included in the accompanying financial statements
reduced the unused portion of the facility to $50,316,000. Interest on the short
term facility was based on a bank's floating CD rate.
On September 7, 1994 the Company obtained a $275 million unsecured Revolving
Loan Facility. The new Credit Facility has a limit of $25 million for the
purpose of issuing letters of credit and a separate limit of $29 million for the
letter of credit issued in connection with certain litigation. The new Credit
Facility will mature on September 30, 1997, with a provision for one year
extensions. The Company's initial interest rate is LIBOR plus .5%, but the
Credit Facility contains provisions that may increase or decrease the spread
over LIBOR depending upon certain financial ratios achieved by the Company. The
Company used the proceeds of the new Credit Facility to refinance its revolving
credit facility and a note payable, accordingly, these have been classified as
long-term.
The new long-term revolving credit facility contains various restrictive
covenants requiring minimum tangible net worth and certain other minimum
financial ratios. The agreement also restricts additional indebtedness,
dividends and capital expenditures. The Company is permitted, absent a default,
to pay cash dividends up to $25 million. At July 2, 1994 the minimum tangible
net worth requirement under the new credit facility would have limited available
dividends to $7.6 million.
Total interest expense incurred by the Company was $8,639,000, $8,005,000 and
$11,807,000 in the 1994, 1993 and 1992 fiscal years, respectively, of which
approximately $230,000 and $328,000 was capitalized in fiscal 1993 and 1992,
respectively. Total interest paid during the 1994, 1993 and 1992 fiscal years
was $8,275,000, $9,012,000 and $12,234,000, respectively.
Rent expense relating to operating leases was approximately $5,617,000 (1994),
$5,235,000 (1993) and $4,292,000 (1992). Future minimum payments under
noncancelable operating leases with initial terms of one year or more for the
five fiscal years ended after July 2, 1994 are: $3,783,000 (1995), $2,889,000
(1996), $2,563,000 (1997), $1,896,000 (1998) and $1,319,000 (1999).
Assets recorded under capital leases are included in property, plant and
equipment. Amortization of leased assets is included in depreciation.
Aggregate principal maturities of all long-term debt and minimum payments under
capital leases are as follows:
<TABLE>
<CAPTION>
Long-term Capital
Fiscal Year Ending In debt leases
<S> <C> <C>
1995...................... $ 285,000 $621,000
1996...................... 340,000 63,000
1997...................... 239,000 50,000
1998...................... 160,591,000 50,000
1999...................... 239,000 47,000
Later Years............... 341,000 64,000
$162,035,000 895,000
Amounts representing
interest.................... (118,000)
Present value of minimum lease
payments (including current
portion of $579,000)........ $777,000
</TABLE>
23
<PAGE>
NOTE E -- SHAREHOLDERS' EQUITY
During the first six months of fiscal 1994 the Company repurchased 2,296,000
shares of Common Stock for $25.3 million. In October 1991, the Company sold
5,175,000 shares of Common Stock in a public offering resulting in net proceeds
of $113 million. Proceeds from the sale of Common Stock were used to reduce debt
under the Company's lines of credit. Registration costs of $404,000 were charged
to additional paid-in capital. Had the October 1991 sale of Common Stock and
corresponding repayment of borrowings occurred as of the beginning of the 1992
fiscal year, unaudited pro forma earnings per share for fiscal 1992 would have
been $1.59.
During fiscal 1991 the shareholders approved a new Incentive Stock Award Plan
and a Stock Option Plan. Each of the plans gives the Company the right to grant
awards or options for up to 300,000 shares of Common Stock to employees. The
Board of Directors intends to seek authorization to award additional shares
under the Incentive Stock Award Plan in the annual shareholders' meeting in the
Fall of 1995.
Transactions under the Stock Option Plan are as follows:
<TABLE>
<CAPTION>
Available
Prices Outstanding Exercisable for Grant
<S> <C> <C> <C> <C>
June 29, 1991....................................................... $ 4.00 195,500 104,500
Granted........................................................... 8.81-9.94 39,500 (39,500)
Became exercisable................................................ 4.00 47,625
Exercised......................................................... 4.00 (17,874) (17,874)
Cancelled......................................................... 4.00 (17,750) 17,750
June 27, 1992....................................................... 4.00-9.94 199,376 29,751 82,750
Granted........................................................... 7.00-7.68 16,000 (16,000)
Became exercisable................................................ 4.00-9.94 52,792
Exercised......................................................... 4.00-9.94 (33,188) (33,188)
Cancelled......................................................... 4.00-9.19 (5,500) 5,500
July 3, 1993........................................................ 4.00-9.94 176,688 49,355 72,250
Granted........................................................... 5.44 20,000 (20,000)
Became exercisable................................................ 4.00-9.94 69,959
Exercised......................................................... 4.00-9.94 (22,188) (22,188)
Cancelled......................................................... 4.00-9.94 (35,374) 35,374
July 2, 1994........................................................ 4.00-9.94 139,126 97,126 87,624
</TABLE>
The average exercise price for all options outstanding was $5.13 per share at
July 2, 1994. These options expire on various dates beginning November 17, 1995
and ending on December 12, 1997. The options generally become exercisable in
equal amounts on the first through fourth anniversaries of the date of grant and
remain exercisable until the fifth anniversary of the date of grant. The excess
of the fair market value over the exercise price at the date of grant is
recognized as compensation expense over the period during which the options
become exercisable. Related compensation expense was $232,000, $186,000 and
$110,000 during fiscal 1994, 1993 and 1992, respectively.
Under the 1991 Incentive Stock Award Plan, awards for the right to purchase for
$.01 per share up to 260,581 shares, 4,164 shares and 14,303 shares were granted
to certain management and key employees during fiscal 1994, 1993 and 1992,
respectively. The shares granted during fiscal 1994 in excess of shares
available are contingent upon shareholder approval. Generally, each award vests
based in part on service and in part on achievement of certain performance goals
over a three-year period. Compensation expense for the service portion is based
on the market price of the stock on the date of award. Compensation expense for
the performance portion is based on the prevailing market price of the stock.
Tax benefits arising from the difference in market value between the date of
grant and the date of issuance of common stock are recorded as an adjustment to
additional paid-in capital. Compensation expense for the Company's incentive
stock award plan including related tax assistance was $1,111,000, $561,000 and
$971,000 for the fiscal years 1994, 1993 and 1992, respectively. Shares
available for grant were 113,813, and 113,937 at July 3, 1993 and June 27, 1992,
respectively.
During November 1991 the shareholders authorized the Board of Directors to issue
up to 10,000,000 shares of preferred stock with a maximum aggregate par value of
$250,000,000. The Board of Directors was also authorized to establish the
particular terms including dividend rates, conversion prices, voting rights,
redemption prices and similar matters.
24
<PAGE>
NOTE F -- INCOME TAXES
Effective June 28, 1992 the Company changed its method of accounting for income
taxes from the deferred method to the liability method required by FASB
Statement No. 109, "Accounting for Income Taxes." As permitted under the new
rules, prior years' financial statements were not restated. The cumulative
effect of adopting Statement 109 as of June 28, 1992 was to decrease fiscal 1993
net income by approximately $875,000.
The Company paid alternative minimum tax ("AMT") of approximately $2 million for
fiscal 1994 since its AMT liability was greater than its regular tax liability.
To the extent that the Company pays AMT, it can later apply the AMT previously
paid as a credit against regular tax liabilities. The Company expects to utilize
future AMT credits as taxable income increases and current temporary differences
reverse.
At July 2, 1994, the Company has net operating loss carryforwards of $11.1
million for income tax purposes that expire in years 1995 through 2003. Those
carryforwards resulted from the Company's 1986 acquisition of certain companies
from J.P. Stevens & Co., Inc. and from the 1988 acquisition of Stanwood
Corporation. In addition to net operating loss carryforwards, at the time of
acquisition, Stanwood Corporation had general business credit carryforwards
which totalled $835,000. The Company utilized $225,000 of these general business
credit carryforwards in its fiscal 1992 federal income tax return. The remaining
business credit carryforwards will expire in fiscal years ending 1999 through
2003. The Company expects the net operating loss remaining from the Stanwood
acquisition of $9.2 million and general business credit carryforwards of
$610,000 will be utilized prior to the expiration of the carryforward periods.
For financial reporting purposes, a valuation allowance of $3.5 million was
recognized in fiscal 1993 to offset the deferred tax assets recorded related to
those carryforwards. When realized, the tax benefits for a portion of those
items will be applied to reduce goodwill related to business acquisitions.
During fiscal 1994 the valuation allowance increased by $286,000 for the tax
effect of Apparel Marketing's current year net operating loss, and by $86,000
for the increase in tax rates.
Deferred income taxes reflect the net tax effects of temporary differences
between the financial statement amounts and amounts used for income tax
purposes. Deferred income taxes also reflect the increase in the federal tax
rate from 34% to 35%.
Significant components of the Company's deferred tax assets and liabilities are
as follows:
012
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
Assets
Litigation accrual............ $10,316,000
Net operating loss
carryforward................ 4,971,000 $ 3,793,000
Inventory..................... 4,147,000 1,775,000
Tax credit carryforward....... 2,560,000 610,000
Deferred compensation......... 2,010,000 2,205,000
Stock compensation accruals... 810,000
Accrued vacation.............. 551,000 633,000
Workers' compensation......... 320,000 508,000
Allowance for doubtful
accounts.................... 235,000 559,000
Other......................... 2,068,000 419,000
Subtotal...................... 27,988,000 10,502,000
Valuation allowance........... (3,925,000) (3,553,000)
Deferred tax assets........... $24,063,000 $ 6,949,000
Liabilities
Depreciation.................. 22,838,000 17,580,000
Inventory -- LIFO basis
difference.................. 3,509,000 2,994,000
Intangibles................... 2,364,000 2,731,000
Other......................... 2,132,000 526,000
Deferred tax liabilities...... 30,843,000 23,831,000
Net deferred
tax liabilities......... $ 6,780,000 $16,882,000
</TABLE>
Significant components of the provision for income taxes are as follows:
<TABLE>
<CAPTION>
Deferred
Liability Method Method
1994 1993 1992
<S> <C> <C> <C>
Current:
Federal income taxes.......................................................... $ 2,029,000 $11,980,000 $18,892,000
State income taxes............................................................ 148,000 2,590,000 4,751,000
Total current............................................................... 2,177,000 14,570,000 23,643,000
Deferred:
Federal income taxes (benefits)............................................... (9,593,000) 1,901,000 1,846,000
State income taxes (benefits)................................................. (1,217,000) 497,000 297,000
Total deferred.............................................................. (10,810,000) 2,398,000 2,143,000
Total provision................................................................. $ (8,633,000) $16,968,000 $25,786,000
</TABLE>
25
<PAGE>
NOTE F -- INCOME TAXES (CONTINUED)
The components of the provision for deferred income taxes for the year ended
June 27, 1992 are as follows:
<TABLE>
<CAPTION>
1992
<S> <C>
Depreciation.................................................................................................. $2,639,000
Health claims accrued......................................................................................... 1,032,000
Inventory..................................................................................................... (256,000)
Deferred compensation......................................................................................... (644,000)
Amortization of intangibles................................................................................... (149,000)
Allowance for doubtful accounts............................................................................... (456,000)
Contingent liabilities........................................................................................ (46,000)
Other......................................................................................................... 23,000
$2,143,000
</TABLE>
The reconciliation of income tax expense (benefit) computed at the Federal
statutory tax rate:
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Income tax expense (benefit) at statutory rates.................................. $(9,076,000) $15,358,000 $22,372,000
State taxes (benefits), net of federal benefit................................... (695,000) 1,951,000 3,332,000
Permanent differences............................................................ 1,576,000 (341,000) (320,000)
State NOL benefits............................................................... (736,000)
Other............................................................................ 298,000 402,000
$(8,633,000) $16,968,000 $25,786,000
</TABLE>
The Company made income tax payments of approximately $2,350,000, $20,171,000,
and $19,678,000 during the 1994, 1993 and 1992 fiscal years, respectively.
NOTE G -- OPERATIONS BY INDUSTRY SEGMENT
Industry segment information for the Company presented on pages 12 and 13 of
this Annual Report is an integral part of these financial statements.
NOTE H -- EMPLOYEE BENEFIT PLANS
Under the terms of the Delta Woodside Industries Employee Retirement Plan, the
Board of Directors has the discretion to authorize contributions from time to
time to the Retirement Plan of cash or a maximum of 504,790 shares of the
Company's Common Stock. A trustee holds the assets of the Retirement Plan for
the benefit of the participants who may withdraw amounts or shares only upon
retirement, death, disability or other termination of employment. All employees
of the Company who are at least 21 years of age with one year of service
participate in the Retirement Plan. Amounts allocated to participant accounts
generally vest over a five-year period. Each participant has the right to direct
the trustee as to the manner in which shares held are to be voted. The
Retirement Plan qualifies as an Employee Stock Ownership Plan ("ESOP") under the
Internal Revenue Code as a defined contribution plan.
The Company's 1994, 1993 and 1992 contributions allocated to participants were
$363,000, $1,581,000 and $2,303,000, respectively. The 1994 and 1993
contributions were made in cash and the 1992 contribution included both cash
contributions and allocations of stock purchased with excess funds the
Retirement Plan received from terminated defined benefit plans the Company
acquired in a business acquisition in fiscal 1989.
The Company maintains a 401(k) employee savings and investment plan for
employees meeting certain eligibility requirements. The Company made no
contributions to the plan for any year presented.
In April 1989, the Company established a 501(c)(9) trust, the Delta Woodside
Employee Benefit Plan and Trust ("Trust"). The Trust collects both employer and
employee contributions from the Company and makes disbursements for health
claims and other qualified benefits.
The Company has a Deferred Compensation Plan which permits certain management
employees to defer a portion of their compensation. Deferred compensation
accounts are credited with interest and are distributable after retirement,
disability or employment termination. As of July 2, 1994 and July 3, 1993, the
total liability amounted to $4,428,000 and $3,496,000, respectively. The Company
insured the lives of certain management employees to assist in funding of the
deferred compensation liability. The Company is the owner and beneficiary of the
insurance policies.
NOTE I -- AFFILIATED PARTY TRANSACTIONS
The Company leases its corporate and other office space from a corporation whose
stock is owned one-third each by the president and a vice president of the
Company. Additional office space and retail store space is leased from the
executive vice president. Certain of these leases are on a monthly basis with
others expiring in 1997. Under the leases, the Company made payments of
approximately $292,000, $226,000, and $137,000 for the 1994, 1993 and 1992
fiscal years, respectively.
26
<PAGE>
NOTE J -- COMMITMENTS AND CONTINGENCIES
During fiscal 1995 the Company plans to spend approximately $45 million for
capital improvements and new equipment. About three-quarters of this amount is
expected to be incurred in the continuation of the modernization program for the
woven fabrics division of the Company's textile segment. The remainder of the
fiscal 1995 capital expenditures are planned to include the start of
construction on the "Duck Head" central distribution center, and various other
projects across all of the Company's business segments. The Company believes
that its facilities and equipment are adequate to allow it to remain competitive
with its primary competitors.
In fiscal 1994, the Company charged income for $27.1 million to establish a
reserve for a judgment entered by an Alabama court in connection with a jury
award made on November 24, 1993 in favor of a former independent sales
representative of a subsidiary of the Company and two of his assistants,
interest costs on that judgement, and related legal expenses in connection with
the appeals process. The appeal is now before the Alabama Supreme Court.
During fiscal 1994, the Company made certain decisions
regarding its operations which resulted in a restructuring charge. These
decisions included restructuring charges of $3.2 million for the sale of the
office products business, $1.3 million to abandon plans to develop a spinning
plant building and $2.4 million in the apparel segment to discontinue a women's
line of apparel and consolidate distribution operations. These restructuring
decisions include write-downs of $1.6 million of goodwill and $2.1 of property
plant and equipment. At July 2, 1994, $2.4 million remain in accrued liabilities
related primarily to leases on vacant facilities and other future costs of the
restructuring plan.
Prior to its acquisition by the Company, O'Bryan Brothers, Inc. had established
for income tax purposes the basis of customer lists in the amount of $3.6
million. The Internal Revenue Service had audited this matter for the years
prior to inclusion in the consolidated federal tax return of the Company and had
disallowed the deduction of this basis. The full amount of the customer list was
deducted by June 29, 1991. The Company appealed the disallowance. In April,
1994, the Internal Revenue Service offered a choice between two options to the
Company in an attempt to settle this case. The Company could also have chosen to
remain in the appeals process. After analyzing its options, the Company chose
one of the settlement options offered by the Internal Revenue Service. The
effect of choosing this option had no material effect on the Company's results.
The Company's Nautilus business has been named as a "potentially responsible
party" under the Comprehensive Environmental Response, Compensation, and
Liability Act with respect to three hazardous waste sites. To the Company's
knowledge, all of the transactions with these sites were conducted by a
corporation whose assets were sold in 1990 pursuant to the terms of an order of
the United States Bankruptcy Court to another corporation, the stock of which
was subsequently acquired by the Company in January 1993. The Company,
therefore, has denied any responsibility at the sites and has declined to
participate in any settlements. Accordingly, the Company has not provided for
any reserves for costs or liabilities attributable to the previous corporation.
At two sites the previous company is listed as a "de minimis" party. At the
third site the previous company is ranked eleventh out of a total of over 300
potentially responsible parties based on the company's volume of contribution of
about 3%. Latest estimates of the cost to clean up the site range up to $4
million. Although there is uncertainty as to several legal issues, the Company
believes that it has certain defenses to liability at these sites.
Based on the information currently known to it, the Company does not believe
that the potential liabilities arising from these three sites will have a
materially adverse impact on the Company.
A law suit with allegations similar to those in the Alabama case refered to
above is pending in the United States District Court for the Western District of
Kentucky brought by an individual who previously served as an independent sales
representative for the Duck Head division. The amount of damages claimed in this
suit has not yet been determined.
From time to time the Company and its subsidiaries are defendants in legal
actions involving claims arising in the normal course of business, including
product liability claims. The Company believes that, as a result of legal
defenses, insurance arrangements and indemnification provisions with parties
believed to be financially capable, none of these actions should have a material
effect on its operations or financial condition.
27
<PAGE>
NOTE K -- QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The following is a summary of quarterly results of operations for the years
ended July 2, 1994 and July 3, 1993:
<TABLE>
<CAPTION>
Quarter Ended
October 2 January 1 April 2 July 2
<S> <C> <C> <C> <C>
(In thousands, except per share data)
1994
Net sales.......................................................... $146,426 $ 149,344 $155,194 $162,812
Gross profit....................................................... 24,369 17,989 28,156 28,422
Net income (loss).................................................. 1,794 (31,995) 6,581 6,323
Earnings (loss) per share of Common Stock.......................... .07 (1.31) .27 .26
</TABLE>
<TABLE>
<CAPTION>
Quarter Ended
September 26 December 26 March 27 July 3
<S> <C> <C> <C> <C>
(In thousands, except per share data)
1993
Net sales.......................................................... $152,884 $ 162,716 $176,412 $194,227
Gross profit....................................................... 29,872 26,623 34,501 30,891
Income:
Before cumulative effect of change in accounting for income
taxes.......................................................... $ 7,305 $ 6,100 $ 9,340 $ 5,459
Cumulative effect adjustment..................................... (875)
Net income....................................................... $ 6,430 $ 6,100 $ 9,340 $ 5,459
Earnings per share of Common Stock
Before cumulative effect of change in accounting for income
taxes.......................................................... $ .28 $ .23 $ .35 $ .21
Cumulative effect adjustment..................................... (.04)
Net income....................................................... $ .24 $ .23 $ .35 $ .21
</TABLE>
During the second quarter of fiscal 1994 the Company recorded charges of $33
million for a lawsuit and $12.7 million for restructuring. The litigation charge
was reduced to $27.1 million during the third quarter and the restructuring
charge was reduced to $9.2 million during the fourth quarter due principally to
a change in estimate related to the sale of the office products business.
Included in the fourth quarter of fiscal 1993 is a pretax gain of $2,487,000
arising from insurance proceeds related to a fire at the Nautilus plant in March
1993.
The Company made certain adjustments in the fourth quarter of fiscal 1994
resulting from changes in estimates that were material to the results of
operations. The aggregate effect of the adjustments after applicable income
taxes was an increase in net income of $2,432,000.
28
<PAGE>
CORPORATE DIRECTORY
OPERATING COMPANIES OF
DELTA WOODSIDE INDUSTRIES, INC.
DELTA MILLS MARKETING COMPANY
1071 Avenue of the Americas
New York, NY 10018
STEVCOKNIT FABRICS COMPANY
P.O. Box 1500
Greer, SC 29652
DUCK HEAD APPAREL COMPANY
P.O. Box 688
89 East Athens Street
Winder, GA 30680
DELTA APPAREL COMPANY
3355 Breckinridge Boulevard
Suite 100
Duluth, GA 30136
DUCK HEAD RETAIL OPERATIONS
233 N. Main St., Suite 250
Greenville, SC 29601
APPAREL MARKETING CORP.
80 West 40th Street, Suite 80
New York, New York 10018
NAUTILUS INTERNATIONAL
9800 West Kincey Avenue
Huntersville Business Park, Suite 150
Huntersville, NC 28078
CORPORATE OFFICERS
E. ERWIN MADDREY, II
President and Chief Executive Officer
BETTIS C. RAINSFORD
Executive Vice President, Treasurer
and Chief Financial Officer
JANE H. GREER
Vice President and Secretary
DOUGLAS J. STEVENS
Controller and Assistant Secretary
BRENDA L. JONES
Assistant Secretary
012
<PAGE>
BOARD OF DIRECTORS
* C. C. GUY**
President
RSI Holdings, Inc.
* DR. JAMES F. KANE**
Dean Emeritus, College of Business
University of South Carolina
* DR. MAX LENNON**
President and
Chief Executive Officer
Eastern Foods, Inc.
E. ERWIN MADDREY, II
President and
Chief Executive Officer
Delta Woodside Industries, Inc.
BUCK A. MICKEL**
Vice President, RSI Holdings, Inc.
BUCK MICKEL**
Chairman of the Board and
Chief Executive Officer
RSI Holdings, Inc.
BETTIS C. RAINSFORD
Executive Vice President, Treasurer
and Chief Financial Officer
Delta Woodside Industries, Inc.
* Member Audit Committee
** Member Compensation Committee
FORM 10-K
Upon written request, the Company will furnish without charge to any
Delta Woodside Shareholder a copy of the Company's Annual Report on Form
10-K for the fiscal year ended July 2, 1994 including financial
statements and schedules, but excluding exhibits. Requests should be
directed to
Jane H. Greer, Vice President and Secretary, Delta Woodside Industries,
Inc., 233 North Main Street, Hammond Square, Suite 200, Greenville, South
Carolina 29601.
ANNUAL MEETING
The Annual Meeting of Shareholders of
Delta Woodside Industries, Inc. will be held
on Thursday, November 10, 1994, at 10:30 a.m.,
at the Dorothy Gunter Theater of the Peace Center, 101 West Broad Street,
Greenville, South Carolina.
<PAGE>
DELTA WOODSIDE INDUSTRIES, INC.
233 N. Main Street
Hammond Square, Suite 200
Greenville, SC 29601
(803) 232-8301
*****************************************************************************
APPENDIX
On Page 2 a photo of E. Erwin Maddrey, II appears where indicated.
On Page 3 a photo of Bettis C. Rainsford, and signatures of E. Erwin
Maddrey, II and Bettis C. Rainsford appears where indicated.
On Page 4 a bar graph appears where indicated. Plot points are listed
below:
NET SALES
FISCAL YEARS ENDED JUNE OR JULY
(IN THOUSANDS OF DOLLARS)
1989 1990 1991 1992 1993 1994
569,052 500,894 590,019 705,037 686,239 613,776
On Page 5 a bar graph appears where indicated. Plot points are listed
below:
NET INCOME (LOSS)
FISCAL YEARS ENDED JUNE OR JULY
(IN THOUSANDS OF DOLLARS)
1989 1990 1991 1992 1993 1994
30,297 6,009 23,943 40,015 27,329 (17,297)
On Page 6 two bar graphs appear where indicated. Plot points are listed
below:
NET INCOME AS A % OF SALES
FISCAL YEARS ENDED JUNE OR JULY
1989 1990 1991 1992 1993 1994
5.3 1.2 4.1 5.7 4.0 -2.8
SHAREHOLDERS' EQUITY
FISCAL YEARS ENDED JUNE OR JULY
(IN THOUSANDS OF DOLLARS)
1989 1990 1991(1) 1992(2) 1993 1994
127,169 127,575 172,647 318,781 336,249 284,877
(1) 1991 Common Stock Offering Proceeds: $25,497
(2) 1992 Common Stock Offering Proceeds: $113,291
On Page 7 a bar graph appears where indicated. Plot points are listed
below:
EARNINGS (LOSS) PER SHARE
FISCAL YEARS ENDED JUNE OR JULY
DOLLARS PER SHARE
1989 1990 1991 1992 1993 1994
1.65 .32 1.27 1.62 1.03 -.70
1898 Weighted Average Shares Outstanding--18,288,000
1990 Weighted Average Shares Outstanding--18,733,000
1990 Weighted Average Shares Outstanding--18,879,000
1990 Weighted Average Shares Outstanding--24,670,000
1990 Weighted Average Shares Outstanding--26,421,000
1990 Weighted Average Shares Outstanding--24,550,000
On Page 9 a bar graph appears where indicated. Plot points are listed
below:
FUNDED DEBT TO EQUITY RATIO*
FISCAL YEARS ENDED JUNE OR JULY
1989 1990 1991 1992 1993 1994
1.8 to 1 1.8 to 1 1.1 to 1 0.4 to 1 0.4 to 1 0.6 to 1
*For purposes of this chart only, funded debt includes long- and
short-term debt, capital leases and offset factor borrowings.
On Page 14 the signature of Ernst & Young LLP appears where indicated.
SUBSIDIARIES OF REGISTRANT
Jurisdiction % Of
of Stock Owned Other
Names Under
Name of Subsidiary Incorporation By Parent Which Do
Business
Alchem Capital
Corporation DE 100% owned
by Delta Woodside
Industries, Inc.
Delta Mills, Inc. DE 100% owned by Delta
Mills Marketing
by Alchem Capital Company;
Stevcoknit
Corporation Fabrics
Company;
Woodside
Mills
Delta Merchandising, SC 100% owned by Duck Head
Retail
Inc. Alchem Capital
Operations
Corporation
Duck Head Apparel TN 100% owned by Delta
Apparel
Company, Inc. Alchem Capital Maiden
Corporation
Delta Consolidated NY 100% owned by Delta
Mills Sales Co.
Corporation Alchem Capital
Stevcoknit Marketing
Corporation Co.
Nautilus
Marketing
Co.
Delta
Apparel
Marketing
Co.
Duck Head
Marketing
Co.
Cargud, Sociedad Costa Rica 100%
owned by
Anonima Duck Head
Apparel
Company,
Inc.
Armonia Textil, S.A. Costa Rica 100%
owned by
Cargud,
Sociedad
Anonima
Nautilus VA 100%
owned by
International, Inc. Alchem
Capital
Corporation
Nautilus Direct, Inc. NC 100%
owned by Nautilus
Internationl, Inc.
International Apparel NY 70% owned
by Alchem Capital
Marketing, Corporation.
Corporation
Harper Brothers, Inc. SC 100%
owned by Alchem
Capital
Corporation
EXHIBIT 23--Consent of Ernst & Young LLP, Independent
Auditors
We consent to the incorporation by reference in this Annual
Report (Form 10-K)of
Delta Woodside Industries, Inc. of our report dated August
17, 1994, except for the
third paragraph of Note D, as to which the date is September
7, 1994, included in the
1994 Annual Report to Shareholders of Delta Woodside
Industries,Inc.
Our audits also included the financial statement schedules
of Delta Woodside
Industries, Inc. listed in the Index at Item 14(a). These
schedules are the
responsibility of the Company's management. Our
responsibility is to express an
opinion based on our audits. In our opinion, the financial
statement schedules
referred to above, when considered in relation to the basic
financial statements
taken as a whole, present fairly in all material respects
the information set forth
therein.
We also consent to the incorporation by reference in the
Registration Statement (Form
S-8 No. 33-38930) pertaining to the Delta Woodside
Industries, Inc. Stock Option Plan
and in the Registration Statement (Form S-8 No. 33-38931)
pertaining to the Delta
Woodside Industries, Inc. Incentive Stock Award Plan, of our
report dated August 17
1994, except for the third paragraph of Note D, as to which
the date is September 7,
1994, with respect to the consolidated financial statements
incorporated herein by
reference, and our report included in the preceding
paragraph with respect to the
financial statement schedules included in this Annual Report
(Form 10-K) of Delta
Woodside Industries, Inc.
ERNST & YOUNG LLP
Greenville, South Carolina
September 29, 1994
