<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 27, 1998
REGISTRATION STATEMENT NO. 333-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
ONEITA INDUSTRIES, INC.
(Exact Name of Registrant as Specified in its Charter)
<TABLE>
<CAPTION>
DELAWARE 2253 57-0351045
<S> <C> <C>
(State or other Jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Incorporation or Organization) Classification Code No.) Identification Number)
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
C. MICHAEL BILLINGSLEY
CHIEF EXECUTIVE OFFICER
ONEITA INDUSTRIES, INC.
4130 FABER PLACE DRIVE, SUITE 200 4130 FABER PLACE DRIVE, SUITE 200
ASHLEY CORPORATE CENTER ASHLEY CORPORATE CENTER
CHARLESTON, SOUTH CAROLINA 29405 CHARLESTON, SOUTH CAROLINA 29405
(803)529-5225 (803)529-5225
(Address, Including Zip Code, and Telephone Number, (Name, Address, Including Zip Code,
Including Area Code, of Registrant's Principal and Telephone Number , Including
Executive Offices) Area Code, of Agent for Service)
</TABLE>
Copies to:
NANCY D. LIEBERMAN, ESQ.
BLAU, KRAMER, WACTLAR & LIEBERMAN, P. C.
100 JERICHO QUADRANGLE, SUITE 225
JERICHO, NEW YORK 11753
(516) 822-4820
(516) 822-4824 FAX
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ X ]
If this form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]_____________
If this form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.[ ]___________________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ X ]
<PAGE> 2
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Proposed Proposed Maximum
Title of Each Class of Amount to Maximum Aggregate Offering Amount of
Securities to be Registered be Offering Price Price Registration
Registered Per Security Fee
(1)(2)
<S> <C> <C> <C> <C>
Common Stock, $.25 par 7,820,923 $.20 $1,564,185 $462
value
</TABLE>
(1) Estimated solely for purposes of calculating the registration fee
pursuant to Rule 457 under the Securities Act of 1933, as amended.
(2) Pursuant to Rule 457(c) under the Securities Act of 1933, as amended,
the proposed maximum offering price of each share of the Registrant's
Common Stock is estimated to be the average of the bid and asked prices
of a share as of a date not more than five business days before the
filing of this Registration Statement. Accordingly, the Registrant has
used $.20 as such price per share, which is the average of the high sale
price of $ .20 and the low sale price of $ .20 reported on the Nasdaq
Electronic Bulletin Board on February 25, 1998.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
<PAGE> 3
Information contained herein is subjected to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
SUBJECT TO COMPLETION, DATED FEBRUARY __, 1998
PRELIMINARY PROSPECTUS
ONEITA INDUSTRIES, INC.
7,820,923 SHARES OF COMMON STOCK
The 7,820,923 shares (the "Shares") of Common Stock (the "Common Stock")
of Oneita Industries, Inc. (the "Company") are being offered by certain selling
stockholders (the "Selling Stockholders"). The Company will not receive any of
the proceeds from the sale of Shares by the Selling Stockholders. See "Principal
and Selling Stockholders."
The Common Stock is traded on the Nasdaq Electronic Bulletin Board under
the symbol "ONET." On February 25, 1998 the closing sale price of the Company's
Common Stock as reported by the Nasdaq Electronic Bulletin Board was $.20 per
share. See "Price Range of Common Stock."
SEE "RISK FACTORS" ON PAGE 6 FOR A DISCUSSION
OF CERTAIN RISKS THAT SHOULD BE CONSIDERED
PRIOR TO PURCHASING THE SHARES.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
===========================================================================================================
PRICE TO PUBLIC PROCEEDS TO COMPANY PROCEEDS TO SELLING STOCKHOLDERS
<S> <C> <C> <C>
Per Share . . . . . $ -- $
Total . . . . . $ -- $
===========================================================================================================
</TABLE>
The date of this Prospectus is February , 1998
<PAGE> 4
AVAILABLE INFORMATION
The Company and the Selling Stockholders have filed with the Securities
and Exchange Commission (the "Commission") a registration statement on Form S-1
(the "Registration Statement"), pursuant to the Securities Act of 1933, as
amended (the "Securities Act"), with respect to the Securities. This Prospectus
does not contain all of the information set forth in the Registration Statement,
and the exhibits thereto. For further information with respect to the Company
and the Securities, reference is made to the Registration Statement and its
exhibits. The Company is also subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy and information statements, and other
information with the Commission. The Registration Statement and such reports,
proxy and information statements, and other information can be inspected and
copied at the public reference facilities maintained by the Commission at
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at its
following regional offices: Suite 788, 1375 Peachtree St. N.E., Atlanta, Georgia
30367; Northwestern Atrium Center, 500 W. Madison Street, Suite 1400, Chicago,
Illinois 60621-2511; and 7 World Trade Center, 13th Floor, New York, New York
10048. Copies of such material can be obtained at prescribed rates from the
Public Reference Section of the Commission at Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549, or at the Commission's Web site located at
http://www.sec.gov. In addition, the Company's Common Stock is traded on the
Nasdaq Electronic Bulletin Board and copies of the foregoing materials and other
information concerning the Company can be inspected at the offices of Nasdaq at
1735 K Street, N.W., Washington, D.C. 20006.
2
<PAGE> 5
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements, including the notes thereto, appearing
elsewhere in this Prospectus. All references herein to the Company are to Oneita
Industries, Inc. on a consolidated basis with its subsidiaries, and includes
their predecessors, unless the context otherwise requires. Capitalized terms
used in this Prospectus are defined in the Glossary appearing at the end of this
Prospectus.
THE COMPANY
Oneita Industries, Inc. ("Oneita" or the "Company") manufactures and
markets activewear and infantswear. Oneita's activewear includes T-shirts and
sweatshirts for screen printing sold under the Oneita Power-T(R), Oneita Power
50 Plus(R), Oneita Power-Sweats(R) and Oneita Colorwear brand names. Oneita's
infantswear includes layette and playwear sold primarily under private labels.
Activewear products are marketed to the imprinted sportswear (screenprint)
industry and to retailers, and infantswear products are marketed to major
retailers.
Oneita has grown since 1987 by building a brand name activewear
business. Oneita's net sales of activewear increased from $37,400,000 in 1987 to
$137,500,000 and $112,900,000 in 1996 and 1997, respectively. In 1991, Oneita
expanded its activewear line by introducing sweatshirts under the Oneita
Power-Sweats label. Sweatshirts accounted for approximately $16,900,000 and
$8,300,000 of the activewear sales in 1996 and 1997, respectively.
In infantswear, Oneita has focused on developing a variety of products,
each targeted at specific retail markets, including department stores, chain
stores and mass merchandisers. Net sales of infantswear increased from
$14,200,000 in 1987 to $30,800,000 and $22,100,000 in 1996 and 1997,
respectively.
Notwithstanding the overall growth of the Company's business since
1987, in recent years the Company has experienced decreased sales due to reduced
demand for its products resulting in substantial losses from operations in four
of the last five fiscal years. Consequently, on January 23, 1998, the Company
filed a petition with the United States Bankruptcy Court for the District of
Delaware under Chapter 11 of the Bankruptcy Code, together with a Plan of
Reorganization implementing the restructuring with its lenders (the "Plan").
Prior to the filing, certain of the Company's debtholders entered into
agreements with the Company agreeing, among other things, to cooperate with the
Company in implementing the Plan. A hearing to consider approval of a disclosure
statement is scheduled for March 13, 1998 and a hearing to consider confirmation
of the Plan is scheduled for April 29, 1998. On February 26, 1998, the Company
obtained Bankruptcy Court final approval (i) to continue its use of cash
collateral and (ii) to borrow up to $10,000,000 from Foothill Capital Corp.
under a debtor-in-possession facility (the "D-I-P Agreement"). The D-I-P
Agreement is secured by a pledge of certain of the Company's property, plant and
equipment. In addition, to permit its continued use of cash collateral, the
Company has, among other things, agreed to grant the Old Revolving Credit
Lenders and Prudential a replacement lien on the Company's accounts receivable
and inventory and the proceeds thereof to the extent necessary to provide
adequate protection against any dimunition of the cash collateral. The Company
estimates that it will emerge from these bankruptcy proceedings before June 30,
1998. However, there can be no assurance that the Plan will be confirmed by the
Bankruptcy Court or that other events will not occur in the bankruptcy case
affecting the Company's ability to implement the Plan. If either of these events
take place, a non-negotiated Chapter 11 proceeding is likely to occur. The
Company has a commitment from Foothill Capital Corp. under the New Revolving
Credit Agreement pursuant to which financing will be available upon emergence
from the Chapter 11 proceedings. This facility will permit the borrowing of up
to $35,000,000 based upon availability under a borrowing base formula (estimated
to be $25,000,000 at date of emergence) and will be secured primarily by
accounts receivable and inventory.
The Company was incorporated in Delaware in September 1987. The
Company's executive offices are located at 4130 Faber Place Drive, Suite 200
Ashley Corporate Center, Charleston, S.C. 29405, and its telephone number is
(803) 529-5225.
3
<PAGE> 6
THE OFFERING
<TABLE>
<CAPTION>
<S> <C>
Securities Offered by
Selling Stockholders .................... 7,820,923 Shares of Common Stock
Use of Proceeds.......................... The Company will not receive any of the
proceeds of the sale of Shares by the Selling
Stockholders
Nasdaq Electronic Bulletin Board Symbol "ONET"
Risk Factors............................. See "Risk Factors."
</TABLE>
- -----------------
SUMMARY FINANCIAL INFORMATION
The following summary financial information concerning the Company has
been derived from the consolidated financial statements included elsewhere in
this Prospectus and should be read in conjunction with such consolidated
financial statements and the notes thereto. See "Financial Statements." The
summary pro forma financial information gives effect to the proposed
confirmation of the Plan as if it occurred on September 28, 1996.
<TABLE>
<CAPTION>
Three Months Ended Fiscal Year Ended Pro forma
------------------- Pro forma ---------------------------- Fiscal Year
December 27 December 28 Three Months Ended September 27 September 28, Ended
1997 1996 December 27, 1997 1997 1996 September 27, 1997
---- ---- ------------------ ---- ---- ------------------
(In thousands, except share and per share data)
<S> <C> <C> <C> <C> <C>
Operations:
Net sales ............................ $ 26,342 $ 33,897 $ 26,342 $ 135,006 $ 168,346 $135,006
Cost of sales ........................ 31,227 34,639 31,227 139,303 192,094 139,303
Interest expense, net ................ 2,016 1,880 1,532 7,863 7,001 6,534
(Loss) income before income taxes .... (10,054) (5,910) (8,901) (40,656) (56,632) (37,505)
Income taxes ......................... 0 0 0 0 (2,939) 0
Net (loss) income (1)................. (10,054) (5,910) (8,901) (40,656) (53,693) (37,505)
Financial data:
Inventories .......................... $ 28,436 $ 38,193 $ 28,436 $ 31,214 $ 43,883 N/A (2)
Accounts receivable .................. 9,506 18,394 9,506 17,200 25,675 N/A (2)
Depreciation amortization and
goodwill write-off (see note below) 1,357 1,633 1,198 6,974 5,886 N/A (2)
Working capital ...................... (51,885) (17,167) 20,288 (42,595) (13,582) N/A (2)
Long-term debt and
capital lease obligations ......... 1,615 3,015 57,115 2,032 3,125 N/A (2)
Shareholder's equity (deficiency) .... (18,796) 26,004 (2,540) (8,742) 31,914 N/A (2)
Total assets ......................... 75,880 116,548 74,805 86,977 129,525 N/A (2)
Common Stock data:
Net (loss) income per share .......... $ (1.10) $ (0.65) $ (0.99) $ (4.44) $ (7.58) $ (4.15)
Book value per share ................. $ (2.05) $ 2.84 $ (0.28) $ (0.96) $ 3.49 N/A (2)
Number of common
shares outstanding ............... 9,149 9,149 9,036 9,149 9,149 9,036
</TABLE>
(1) Net loss for fiscal 1997, 1996, 1995 and 1994 includes after-tax
amounts of $15,282, $6,229, $2,519 and $4,700, respectively, for restructuring
charges as described in Note 5 to the Company's financial statements for the
fiscal year ended September 27, 1997. Net loss for fiscal 1994 also includes a
$6,651 write-off of goodwill. See Note 1 to the Company's financial statements
for the fiscal year ended September 27, 1997.
(2) Pro forma information only presented as of December 27, 1997 for
balance sheet financial data.
4
<PAGE> 7
FORWARD-LOOKING STATEMENTS
All statements other than statements of historical fact included in
this Prospectus, including without limitation statements under "Risk Factors,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business," regarding the Company's financial position, business
strategy and the plans and objectives of the Company's management for future
operations, are forward-looking statements. When used in this Prospectus, words
such as "anticipate," "believe," "estimate," "expect," "intend" and similar
expressions, as they relate to the Company or its management, identify
forward-looking statements. Such forward-looking statements are based on the
beliefs of the Company's management, as well as assumptions made by and
information currently available to the Company's management. Actual results
could differ materially from those contemplated by the forward-looking
statements as a result of certain factors, such as those disclosed under "Risk
Factors," including but not limited to, competitive factors and pricing
pressures, changes in legal and regulatory requirements, technological change or
difficulties, product development risks, commercialization and trade
difficulties, general economic conditions, confirmation of the Plan and the
impact of the Reorganization Case on the business of the Company. Such
statements reflect the current views of the Company with respect to future
events and are subject to these and other risks, uncertainties and assumptions
relating to the operations, results of operations, growth strategy and liquidity
of the Company. All subsequent written and oral forward-looking statements
attributable to the Company or persons acting on its behalf are expressly
qualified in their entirety by this paragraph.
5
<PAGE> 8
RISK FACTORS
This Prospectus contains forward-looking statements that involve risk
and uncertainties. Actual results could differ materially from those discussed
in the forward-looking statements as a result of certain factors, including
those set forth below and elsewhere in this Prospectus. The following risk
factors should be considered carefully in addition to the other information in
this Prospectus before purchasing the Securities offered hereby.
DISRUPTION OF OPERATIONS
The Company's Reorganization Case could adversely affect the Company's
relationships with its customers and suppliers, as well as the Company's ability
to retain or attract high quality employees. See "Business - Reorganization
Proceedings."
SUBSTANTIAL HISTORICAL OPERATING LOSSES; GOING CONCERN ISSUES IN INDEPENDENT
AUDITOR'S REPORT; NO ASSURANCE OF PROFITABILITY.
The Company has incurred losses from operations for its fiscal years
ended September 27, 1997, September 28, 1996, September 30, 1994 and September
30, 1993, continuing into fiscal 1998. As a result of the Company incurring such
losses, the Company's independent certified public accountants have included an
explanatory paragraph in their report on the Company's financial statements,
regarding having substantial doubt about the Company's ability to continue as a
going concern. The Company believes that the terms of the Plan, if confirmed by
the Bankruptcy Court, and certain agreements with lenders will enable it to
become profitable. However, there can be no assurance that the Plan will be
confirmed by the Bankruptcy Court or that final agreements required by the
Company's debt restructuring, including new financing, will be obtained from the
lenders. If either of such events fails to occur the Company will not become
profitable and a non-negotiated Chapter 11 proceeding is likely to occur. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business - Reorganization Proceedings."
ADEQUACY OF AVAILABLE CAPITAL.
The Company's future liquidity requirements are expected to consist
primarily of capital expenditures and working capital requirements. The
Company's liquidity requirements are expected to be financed from operating cash
flow, amounts available under the D-I-P Agreement and, upon the confirmation of
the Plan, amounts available under its New Revolving Credit Agreement; however,
no assurance can be given that such financing will be available and, if
available, sufficient to fund its ongoing operations. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Business - Reorganization Proceedings."
COMPETITION
The apparel industry is highly competitive and includes a number of
participants with aggregate sales and financial resources greater than those of
Oneita and its subsidiaries. However, at present, most market segments are
dominated by a number of competitors with no single company dominating the
industry. Oneita believes that it compares favorably in quality, price, customer
service and availability of product. There are no assurances that such
conditions will be maintained or occur or that Oneita's expansion into new
markets will be successful. See "Business - Products, Distribution and the
Industry."
DECREASED SALES DUE TO REDUCED DEMAND FOR PRODUCTS
Net sales of the Company for the fiscal year ended September 30, 1997
were approximately $135,006,000, as compared to approximately $168,346,000 for
the immediately preceding fiscal year, a decrease of $33,340,000 or 19.8%. The
decrease was due primarily to a reduction in customer orders
6
<PAGE> 9
reflecting industry trends. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
EXCESS CAPACITY AND EFFECTS ON FINANCIAL PERFORMANCE
Fluctuations in customer demand for the Company's products, caused by
overcapacity in the industry and increased competition has required the Company
to reduce the prices for its products and temporarily suspend and/or limit its
manufacturing operations. Operating at reduced levels has and in the future may
be expected to continue to adversely affect the Company's results of operations
and financial performance.
PRODUCT PRICE FLUCTUATIONS
The Company's revenues and profitability are directly affected by the
prices it charges for its products. These prices historically have varied
significantly based primarily on supply and demand factors, as well as raw
material costs. Product prices are often determined based on competitive
pressures. Accordingly, the Company's financial performance has been materially
adversely affected during periods in which prices are reduced or fail to rise
correspondingly with costs.
YARN PRICE FLUCTUATIONS; EXPIRATION OF SUPPLY CONTRACTS
Unlike certain of its competitors, the Company does not spin its own
yarn. The Company obtains yarn from several yarn suppliers pursuant to
requirements contracts generally with a term of approximately one year, and for
the fiscal year ended September 30, 1997 purchased approximately 69% of its yarn
from Avondale Mills, Inc., one of the Selling Stockholders. If the Company were
unable to extend or renew its supply contracts on satisfactory terms, or replace
these contracts with suitable alternative sources of supply, the Company may be
forced to pay higher prices for its yarn and the Company's business and
financial performance could be materially adversely affected. See "Business -
Relationship with Avondale."
SIGNIFICANT DEPENDENCE ON MAJOR CUSTOMERS
Approximately 17% of the Company's revenues in the fiscal year ended
September 27, 1997 are attributable to one customer, SanMar Corporation, and
approximately 50% of the Company's revenues for such period are attributable to
its 10 largest customers. The loss of these customers or a substantial
reduction in their purchases from the Company could have a material adverse
effect on the Company's financial performance. The Company's remaining sales of
Activewear products are made to approximately 300 customers. There can be no
assurance that the Company will not continue to be dependent upon a small
number of major customers for a significant portion of its revenues and
earnings. See "Business - Major Customers."
LACK OF TRADING MARKET
The Company's Old Common Stock was listed and traded on the New York
Stock Exchange and, since February 1998, on the Nasdaq Electronic Bulletin
Board. Although the Company expects to apply for listing the Common Stock on the
Nasdaq National Market System ("Nasdaq NMS") and, if the Common Stock is not
listed on the Nasdaq NMS, on the NASDAQ Electronic Bulletin Board, there can be
no assurance that an active trading market for the securities will develop or,
if developed, that it can continue. In addition, there can be no assurance as to
the degree of price volatility in the market for the Common Stock that does
develop. Accordingly, no assurance can be given that a holder of Common Stock
will be able to sell the Shares in the future or as to the price at which any
such sale may occur. See "Plan of Distribution."
7
<PAGE> 10
DEPENDENCE ON KEY PERSONNEL.
The Company is highly dependent on the continued service of C. Michael
Billingsley, its Chief Executive Officer and a member of its Board of Directors.
The terms of each of the D-I-P Agreement and the New Revolving Credit Agreement
provide that it is a default if Mr. Billingsley or another individual reasonably
acceptable to the requisite number of lenders under the respective agreement is
not the Chief Executive Officer of the Company. Accordingly, the loss of the
services of Mr. Billingsley could have a material adverse effect on the Company.
The Company does not have an employment agreement with Mr. Billingsley and does
not maintain key man life insurance on his life or the life of its other
executive officers. See "Management."
REGULATION.
The Company's activities are subject to various environmental, health
and employee safety laws. The Company has expended resources, both financial and
managerial, to comply with applicable environmental, health and worker safety
laws in its operations and at its facilities and anticipates that it will
continue to do so in the future. The Company does not require any governmental
approval of its principal products or services. Compliance with environmental
laws has not historically had a material effect on the Company's capital
expenditures, earnings or competitive position, and the Company does not
anticipate that such compliance will have a material effect on the Company in
the future. Although the Company believes that it is generally in compliance
with all applicable environmental, health and worker safety laws, there can be
no assurance that additional costs for compliance will not be incurred in the
future or that such costs will not be material. See "Business - Environmental
Matters."
NO DIVIDENDS ON COMMON STOCK
The Company has not paid any cash dividends on the Old Common Stock in
the past two fiscal years or the current fiscal year and anticipates that no
cash dividends on the shares of Common Stock will be declared in the foreseeable
future. Payment of future dividends will be subject to the discretion of the
Company's Board of Directors and will depend upon, among other things, future
earnings, the operating and financial condition of the Company, its capital
requirements, general business conditions and other pertinent facts. It is not
anticipated that any dividends will be paid on the Common Stock for the
foreseeable future. See "Dividend Policy."
BACKLOG
The Company's order backlog is subject to fluctuations and is not
necessarily indicative of future sales. There can be no assurance that current
backlog will necessarily lead to sales in any future period. The Company's order
backlog was approximately $13,100,000 at December 27, 1997. See "Business -
Backlog."
POTENTIAL ANTI-TAKEOVER EFFECTS OF DELAWARE LAW
Certain provisions of Delaware law could make a merger, tender offer or
proxy contest involving the Company more difficult, even if such events could be
beneficial to the interests of the stockholders. These provisions include
Section 203 of the Delaware General Corporation Law, which prohibits certain
business combinations with interested stockholders. Such provisions could limit
the price that certain investors might be willing to pay in the future for
shares of the Common Stock. See "Description of Securities."
8
<PAGE> 11
LIMITATIONS ON PERSONAL LIABILITY OF DIRECTORS
The Company's Certificate of Incorporation and By-laws contain
provisions that reduce the potential personal liability of directors for certain
monetary damages and provide for indemnity of directors and other persons. The
Company is unaware of any pending or threatened litigation against the Company
or its directors that would result in any liability for which a director would
seek indemnification or similar protection. The Company also maintains officers
and directors liability insurance and has entered into indemnification
agreements with certain of its officers. The indemnification agreements provide
for reimbursement for all direct and indirect costs of any type or nature
whatsoever (including attorneys' fees and related disbursements) reasonably
incurred in connection with either the investigation, defense or appeal of a
covered legal proceeding, including amounts paid in settlement by or on behalf
of an indemnitee thereunder. See "Description of Securities - Certain Provisions
of the By-laws."
PENNY STOCK REGULATION.
The Commission has adopted rules that regulate broker-dealer practices
in connection with transactions in "penny stocks." Penny stocks generally are
equity securities with a price of less than $5.00 (other than securities
registered on certain national securities exchanges or quoted on the NASDAQ
system, provided that current price and volume information with respect to
transactions in such securities is provided by the exchange or system). The
penny stock rules require a broker-dealer, prior to a transaction in a penny
stock not otherwise exempt from the rules, to deliver a standardized risk
disclosure document prepared by the Securities and Exchange Commission that
provides information about penny stocks and the nature and level of risks in the
penny stock market. The broker-dealer also must provide the customer with other
information. In addition, the penny stock rules require that prior to a
transaction in a penny stock not otherwise exempt from such rules, the
broker-dealer must make a special written determination that the penny stock is
a suitable investment for the purchaser and receive the purchaser's written
agreement to the transaction. These disclosure requirements may have the effect
of reducing the level of trading activity in the secondary market for a stock
that becomes subject to the penny stock rules. If the Company's Common Stock
becomes subject to the penny stock rules, investors in this offering may find it
more difficult to sell their Common Stock in the event it becomes otherwise
freely resalable.
9
<PAGE> 12
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the Common
Stock sold by the Selling Stockholders.
PRICE RANGE OF COMMON STOCK
The Old Common Stock has been trading on the Nasdaq Electronic
Bulletin Board under the symbol "ONET" since February 2, 1998. Prior thereto,
the Old Common Stock was traded on the New York Stock Exchange under the symbol
"ONA". The following table sets forth the high bid and low ask price as reported
by the New York Stock Exchange through the first quarter of fiscal 1998 and the
Nasdaq Electronic Bulletin Board thereafter for the Old Common Stock for the
periods indicated and does not give effect to the 1-for-5 reverse stock split of
the Common Stock to be effected on the Effective Date. See "Risk Factors - Lack
of Trading Market."
<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
Fiscal Year 1996
First Quarter........................................ $8 1/4 $6 1/8
Second Quarter....................................... 7 1/4 4 3/8
Third Quarter........................................ 5 3 1/8
Fourth Quarter....................................... 4 1/8 2 5/8
Fiscal Year 1997
First Quarter........................................ 4 1/4 1 1/4
Second Quarter....................................... 2 1/4 1 1/4
Third Quarter........................................ 1 1/2 3/8
Fourth Quarter....................................... 1 5/8 3/8
Fiscal Year 1998
First Quarter........................................ 11/16 1/4
Second Quarter (through February __, 1998)
</TABLE>
The closing price on February 20, 1998 was $.20. As of February 20,
1998, there were approximately 167 record holders of the Old Common Stock.
There have been no cash dividends declared or paid by the Company on
the Old Common Stock during the past two fiscal years or the current fiscal
year.
DIVIDEND POLICY
Holders of the Common Stock will be entitled to dividends when, as and
if declared by the Board of Directors out of funds legally available therefor.
The Company has not declared or paid any dividends for the past two fiscal
years, or the current fiscal year. The Company does not intend to pay cash
dividends in the foreseeable future.
10
<PAGE> 13
SELECTED FINANCIAL DATA
The following selected consolidated financial data for the five fiscal
years ended September 27, 1997, September 28, 1996, September 30, 1995,
September 30, 1994 and September 30, 1993 are derived from the Company's audited
financial statements. This data should be read in conjunction with the
consolidated financial statements of the Company, related notes, and other
financial information included elsewhere in this Prospectus. See "Financial
Statements."
<TABLE>
<CAPTION>
Fiscal Year Ended
September 27, September 28, September 30, September 30, September 30,
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
(In thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Net sales ....................... $ 135,006 $ 168,346 $ 175,036 $ 193,459 $ 177,610
Cost of goods sold .............. 139,303 192,094 146,820 166,051 152,776
Interest expense, net ........... 7,863 7,001 3,006 3,868 4,388
(Loss) income before income taxes (40,656) (56,632) 4,372 (6,794) (4,609)
Income taxes .................... 0 (2,939) 1,552 27 (1,632)
Net (loss) income ............... (40,656) (53,693) 2,820 (6,821) (2,977)
Balance Sheet Data :
Inventories ..................... $ 31,214 $ 43,883 $ 79,968 $ 44,720 $ 63,086
Accounts receivable ............. 17,200 25,675 29,438 35,757 28,718
Depreciation, amortization and
goodwill write-off (see note
below) ......................... 6,974 5,886 4,649 11,443 4,266
Working capital ................. (42,595) (13,582) 72,904 60,885 84,361
Long-term debt and
capital lease obligations ..... 2,032 3,125 37,404 17,133 47,228
Shareholders' equity (deficiency) (8,742) 31,914 77,840 76,022 82,822
Total assets .................... 86,977 129,525 165,017 120,917 149,266
Net (loss) income per share ..... $ (4.44) $ (7.58) $ .40 $ (.98) $ (.43)
Book value per share ............ $ (0.96) $ 3.49 $ 11.32 $ 10.92 $ 11.09
Number of common
shares outstanding ............ 9,149 9,149 6,879 6,961 6,957
</TABLE>
<TABLE>
<CAPTION>
Three Months
Ended
----------------------------------
(unaudited)
December 27, December 28,
1997 1996
---- ----
(In thousands, except per share amounts)
<S> <C> <C>
Statement of Operations Data:
Net sales ....................... $ 26,342 $ 33,897
Cost of goods sold .............. 31,227 34,639
Interest expense, net ........... 2,016 1,880
(Loss) income before income taxes (10,054) (5,910)
Income taxes .................... 0 0
Net (loss) income ............... (10,054) (5,910)
Balance Sheet Data :
Inventories ..................... 28,436 38,193
Accounts receivable ............. 9,506 18,394
Depreciation, amortization and
goodwill write-off (see note
below) ......................... 1,357 1,633
Working capital ................. (51,885) (17,167)
Long-term debt and
capital lease obligations ..... 1,615 3,015
Shareholders' equity (deficiency) (18,796) 26,004
Total assets .................... 75,880 116,548
Net (loss) income per share ..... $ (1.10) $ (.65)
Book value per share ............ $ (2.05) $ 2.84
Number of common
shares outstanding ............ 9,149 9,149
</TABLE>
Net loss for fiscal 1997, 1996, 1995 and 1994 includes after-tax amounts of
$15,282, $6,229, $2,519 and $4,700, respectively, for restructuring charges as
described in Note 5 to the Company's financial statements for the fiscal year
ended September 27, 1997. Net loss for fiscal 1994 also includes a $6,651
write-off of goodwill. See Note 1 to the Company's financial statements for the
fiscal year ended September 27, 1997.
11
<PAGE> 14
CAPITALIZATION
The following table sets forth the capitalization and certain other
items of the Company as of February 26, 1998. This table should be read in
conjunction with the financial statements and related notes included elsewhere
in this Prospectus. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
<TABLE>
<CAPTION>
HISTORICAL PRO-FORMA
---------- ---------
(Dollars in thousands)
<S> <C> <C>
Cash $1,585 $927
------ ----
Long-term debt (including current
portion and amounts in default):
Old revolving credit facility $57,000 $0
New revolving credit facility 0 17,000
New senior secured notes 0 37,500
Industrial development bond obligations 2,500 2,500
Other capital lease obligations 520 520
Senior promissory note 6,154 0
Subordinated Gintel notes 7,500 0
Subordinated Foothill note 0 1,000
------- -------
Total long-term debt $73,674 $58,520
Stockholders' equity:
Preferred Stock, $1.00 par value, 2,000,000
shares authorized, none issued on a historical
basis, none authorized on a pro-forma basis $0 $0
Common Stock, $.25 par value, 15,000,000
authorized shares, 1,829,868 outstanding
on historical basis, 9,036,384 outstanding
on a pro-forma basis 2,287 11,295
Other shareholders' equity (21,083) (13,835)
-------- --------
Total shareholders' equity ($18,796) ($2,540)
-------- --------
Total capitalization $54,878 $55,980
======= =======
</TABLE>
12
<PAGE> 15
UNAUDITED PRO FORMA FINANCIAL STATEMENTS
The following unaudited pro forma financial statements of Oneita
Industries, Inc. have been derived by the application of pro forma adjustments
to historical financial statements included elsewhere in the Registration
Statement. The unaudited pro forma statements of operations for the year ended
September 27, 1997 and the quarter ended December 27,1997 give effect to the
confirmation of the Plan as if the transactions contemplated by the Plan had
occurred on September 28,1996. The unaudited pro forma balance sheet gives
effect to the confirmation of the Plan as if the transactions contemplated by
the Plan occurred on December 27,1997. The unaudited pro forma financial
statements should not be considered indicative of actual results that would
have been achieved had the confirmation of the Plan been consummated on the
date or for the periods indicated and do not purport to indicate balance sheet
data or results of operations as of any future date or period. The unaudited
pro forma financial statements should be read in conjunction with the
historical financial statements and the notes thereto included elsewhere in the
Registration Statement.
The conversion of debt by certain existing debtholders to common
stock upon the emergence from bankruptcy are the transactions contemplated by
the Plan in the unaudited pro forma financial statements. The unaudited pro
forma financial statements do not include adjustments related to "fresh-start"
accounting, if any, that may be required upon the emergence from the bankruptcy
proceedings by Oneita Industries, Inc.
13
<PAGE> 16
UNAUDITED PRO FORMA BALANCE SHEET
AS OF DECEMBER 27, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
<S> <C> <C> <C>
ASSETS
Current assets:
Cash $ 1,585 $ (658)(1) $ 927
Accounts receivable, net 9,506 -- 9,506
Inventories 28,436 -- 28,436
Prepaids and other 1,649 -- 1,649
------- -------- -------
Total current assets 41,176 (658) 40,518
------- -------- -------
Property, plant, and equipment, net 31,848 -- 31,848
Other assets 2,856 (417)(2) 2,439
------- -------- -------
Total assets $75,880 $ (1,075) $74,805
======= ======== =======
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable $ 3,832 $ -- $ 3,832
Accrued liabilities 17,170 (2,177)(1) 14,993
Long-term debt in default 70,654 (70,654)(1) 0
Current portion of long-term debt 1,405 -- 1,405
------- -------- -------
Total current liabilities 93,061 (72,831) 20,230
Capital Lease Obligations 1,615 -- 1,615
Long term debt 0 55,500 (1) 55,500
------- -------- -------
Total liabilities 94,676 (17,331) 77,345
------- -------- -------
Equity:
Common Stock 2,287 9,008 11,295
Preferred stock 0 -- 0
Other equity (21,083) 7,248 (13,835)
------- -------- -------
Total equity (18,796) 16,256 (3) (2,540)
------- -------- -------
Total liabilities and equity $75,880 $ (1,075) $74,805
======= ======== =======
</TABLE>
See notes to unaudited pro forma balance sheet.
14
<PAGE> 17
NOTES TO UNAUDITED PRO FORMA BALANCE SHEET
AS OF DECEMBER 27, 1997
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
The pro forma financial data have been derived by the application
of pro forma adjustments to the Company's historical financial statements for
the period noted.
(1) The sources and uses of funds are as follows:
<TABLE>
<S> <C>
Total Sources of Funds:
Senior notes $37,500
New revolver 17,000
Subordinated note 1,000
-------
New debt 55,500
Debt exchanged for stock 18,638
Available cash 658
-------
$74,796
=======
Total Uses of Funds:
Payment of debt in default $70,654
Payment of interest 2,177
Closing costs 1,965
-------
$74,796
=======
</TABLE>
(2) This pro forma adjustment represents the write-off of loan
costs related to the paid off debt.
(3) This pro forma adjustment reflects the net adjustment to
equity as follows:
Debt exchanged for stock $ 18,638
Write-off of loan costs (417)
Closing costs (1,965)
--------
$ 16,256
========
The debt exchanged for stock results from the issuance of
36,032,582 new shares of common stock at approximately
$0.52 per share and the reverse 1 to 5 stock split in
exchange for outstanding indebtedness. The new number of
shares outstanding is 9,036,384.
15
<PAGE> 18
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE QUARTER ENDED DECEMBER 27, 1997
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
<S> <C> <C> <C>
Net sales $ 26,342 $ -- $ 26,342
Cost of sales 31,227 -- 31,227
-------- -------- --------
Gross loss (4,885) -- (4,885)
Selling, general and administrative
expenses 3,153 (669)(1) 2,484
Consolidation and restructuring charges -- -- --
-------- -------- --------
Operating loss (8,038) 669 (7,369)
Interest expense 2,016 (484)(2) 1,532
-------- -------- --------
Income before income taxes (10,054) 1,153 (8,901)
Provision for income taxes -- -- --
-------- -------- --------
Net loss $(10,054) $ 1,153 $ (8,901)
======== ======== ========
Net loss per share $ (1.10) $ 0.11 (3) $ (0.99)
======== ======== ========
</TABLE>
See notes to unaudited pro forma income statement.
16
<PAGE> 19
NOTES TO UNAUDITED PRO FORMA INCOME STATEMENT
FOR THE QUARTER ENDED DECEMBER 27, 1997
(DOLLARS IN THOUSANDS)
The pro forma financial data have been derived by the application
of pro forma adjustments to the Company's historical financial statements for
the period noted.
(1) This pro forma adjustment reflects the elimination of the legal and
professional fees related to the confirmation of the Plan and the
elimination of loan amortization costs on the paid off debt.
(2) This pro forma adjustment reflects the change in the interest
expense due to the confirmation of the Plan:
<TABLE>
<S> <C>
Interest expense on old loans $(2,004)
Interest expense on new loans 1,520
-------
$ (484)
=======
</TABLE>
(3) This pro forma adjustment relates to the two adjustments above, the
issuance of new shares of common stock and the 1 to 5 reverse
split. The new number of shares outstanding is 9,036,384.
17
<PAGE> 20
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 27, 1997
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
<S> <C> <C> <C>
Net sales $ 135,006 $ -- $ 135,006
Cost of sales 139,303 -- 139,303
--------- --------- ---------
Gross loss (4,297) -- (4,297)
Selling, general and administrative
expenses 13,214 (1,822)(1) 11,392
Consolidation and restructuring charges 15,282 -- 15,282
--------- --------- ---------
Operating loss (32,793) 1,822 (30,971)
Interest expense 7,863 (1,329)(2) 6,534
--------- --------- ---------
Income before income taxes (40,656) 3,151 (37,505)
Provision for income taxes -- -- --
--------- --------- ---------
Net loss $ (40,656) $ 3,151 $ (37,505)
========= ========= =========
Net loss per share $ (4.44) $ 0.29 (3) $ (4.15)
========= ========= =========
</TABLE>
See notes to unaudited pro forma income statement.
18
<PAGE> 21
NOTES TO UNAUDITED PRO FORMA INCOME STATEMENT
For the Year Ended September 27, 1997
(Dollars in thousands)
The pro forma financial data have been derived by the application of
pro forma adjustments to the Company's historical financial statements for the
period noted.
(1) This pro forma adjustment reflects the elimination of the legal and
professional fees related to the confirmation of the Plan and the
elimination of loan amortization costs on the paid off debt.
(2) This pro forma adjustment reflects the change in the interest expense
due to the confirmation of the Plan:
Interest expense on old loans $(7,889)
Interest expense on new loans 6,560
--------
$(1,329)
========
(3) This pro forma adjustment relates to the two adjustments above, the
issuance of new shares of common stock and the 1 to 5 reverse split.
The new number of shares outstanding is 9,036,384.
19
<PAGE> 22
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the
historical consolidated financial statements of the Company, related notes
and other financial information included elsewhere in this Prospectus.
OVERVIEW
Oneita Industries, Inc. (the "Company") manufactures and markets
activewear including T-shirts and fleecewear, and infantswear primarily for
the newborn and toddler markets. These products are marketed to the imprinted
sportswear (screenprint) industry and to major retailers.
The Company incurred a net loss of $40,656,000 for the fiscal year ended
September 27, 1997. Market pressures that resulted in reduced sales volumes
and prices and operating losses during the fiscal year ended September 27,
1997 are continuing in fiscal year 1998. Management's operating plans include
continued close monitoring of costs and concentrating the manufacturing and
sales efforts on a more profitable product mix. In September 1997, the
Company announced a plan to consolidate certain of its operations in order to
further lower its costs and make its operations more efficient. The
consolidation involves the closing of one facility, the write down to
estimated fair value of certain excess production equipment and the shift of
more assembly operations to existing offshore facilities.
At December 27, 1997, the Company was and continues to be in
non-compliance with certain terms of its long-term revolving credit
agreement, a loan agreement with an institutional lender, and subordinated
notes held by Robert M. Gintel. Mr. Gintel resigned as Chairman of the Board
and as a director of the Company on August 8, 1997. These obligations,
$57,000,000, $6,154,000 and $7,500,000 in principal amount, respectively,
have been classified as current liabilities. The Company has entered into
agreements with its lenders to restructure these agreements through the
pre-negotiated Chapter 11 case discussed below. These obligations, which
aggregate $70,654,000, plus accrued interest, yield maintenance amounts and
fees, will be exchanged for (i) payment of $15,000,000 in cash, (ii) the
issuance of various notes totaling $38,500,000 and (iii) 79.75% of the
outstanding Common Stock of the Company.
On January 23, 1998, the Company filed a Chapter 11 petition with the
United States Bankruptcy Court for the District of Delaware under Chapter 11
of the Bankruptcy Code together with the Plan. Prior to the filing, the
holders of the debt mentioned in the preceding paragraph entered into
agreements with the Company agreeing, among other things, to cooperate with
the Company in implementing the Plan. A hearing to consider approval of a
disclosure statement is scheduled for March 13, 1998 and a hearing to
consider confirmation of the Plan is scheduled for April 29, 1998. On
February 26, 1998, the Company obtained Bankruptcy Court final approval (i)
to continue its use of cash collateral and (ii) to borrow up to $10,000,000
under a the D-I-P Agreement. The D-I-P Agreement is secured by a pledge of
certain of the Company's property, plant and equipment. In addition, to
permit its continued use of cash collateral, the Company has, among other
things, agreed to grant the Old Revolving Credit Lenders and Prudential a
replacement lien on the Company's accounts receivable and inventory and the
proceeds thereof to the extent necessary to provide adequate protection
against any dimunition of the cash collateral. The Company estimates that it
will emerge from these bankruptcy proceedings before June 30, 1998. However,
there can be no assurance that the Plan will be confirmed by the Bankruptcy
Court or that other events will not occur in the bankruptcy case affecting
the Company's ability to implement the Plan. If either of these events take
place, a non-negotiated Chapter 11 proceeding is likely to occur. The Company
has a commitment from Foothill Capital Corp. under the New Revolving Credit
Agreement pursuant to which financing will be available upon emergence from
the Chapter 11 proceedings. This revolving credit facility will permit the
borrowing of up to $35,000,000 based upon availability under a borrowing base
formula (estimated to be $25,000,000 at date of emergence) and will be
secured primarily by accounts receivable and inventory.
20
<PAGE> 23
Of the $38,500,000 restructured debt, $37,500,000 consists of the New
Senior Secured Notes with a maturity of three years, bearing interest at 12%
per annum. The interest accrues but is not paid in cash for the first two
years of the term of the New Senior Secured Notes, except that interest
payments in the first two years as well as principal prepayments may be
triggered upon the Company achieving certain financial targets. The remaining
$1,000,000 of restructured debt will consist of a subordinated note with
principal and interest, accruing at 10% per annum, payable in 10 years.
The obligations under both the New Revolving Credit Agreement and the New
Senior Secured Notes will be secured by the pledge by the Company and certain
of its subsidiaries of all property, plant and equipment of the Company and
certain of its subsidiaries. The priorities of the security interests in the
distribution of the proceeds of the collateral will be governed by an
Intercreditor Agreement. See "Business - Bankruptcy Proceedings."
RESULTS OF OPERATIONS
Three Months Ended December 31, 1997 Compared to Three Months Ended
December 31, 1996
Net sales for the three months ended December 27, 1997 were $26,342,000
as compared to $33,897,000 in the comparable period of the prior year, a
decrease of $7,555,000 or 22.3%. The decrease was due primarily to reduced
unit selling prices of $5,800,000 caused by continued production overcapacity
in the industry and lower priced imports and to the sale of inventories at
discounted prices to generate cash flow. Additionally, increased competition
in the market place resulted in lower units sold decreasing sales further by
$1,750,000.
A gross profit (loss) for the quarter ended December 27, 1997 of
$(4,885,000) decreased $(4,143,000) from the comparable period of the prior
year. Gross profit (loss), as a percentage of net sales, decreased to (18.5)%
compared to (2.2)%. The reduction in gross profit was caused by discounted
sales prices mentioned above and additional inventory writedowns of
$1,000,000 reflecting further reductions in selling prices late in the first
quarter, offset by generally lower operating costs resulting from the
Company's cost reduction program discussed in Note 2 of Notes to Condensed
Consolidated Financial Statements.
Selling, general and administrative expenses for the three months ended
December 27, 1997 decreased $645,000 from the comparable period of the prior
year as a result of the Company's cost reduction program discussed in Note 1
of Notes to Condensed Consolidated Financial Statements offset by $510,000 of
legal and professional expenditures related to the debt restructuring.
Interest expense, net of interest income, for the first quarter of fiscal
1998 was $2,016,000 compared to $1,880,000 for the corresponding period last
year. The increase was due primarily to higher borrowing rates. At December
27, 1997, the Company was not in compliance with certain terms of its
revolving credit agreement and accordingly interest at higher rates are
payable during the default period.
Fiscal Year 1997 Compared to 1996
Net sales of the Company for the fiscal year ended September 27, 1997
were $135,000,000 as compared to $168,300,000 in the prior fiscal year, a
decrease of $33,300,000 or 19.8%. $21,500,000 of the sales decrease was
attributable to lower units sold as a result of high inventory balances in
customers' warehouses and increased competition in the marketplace. Lower
unit selling prices further reduced sales by $11,800,000 and were caused by
continued production overcapacity in the industry and lower priced imports.
Gross profit for fiscal year 1997 increased $19,400,000 from the prior
fiscal year due to lower raw material prices of $1,200,000 and improved
manufacturing efficiencies and cost reductions of
21
<PAGE> 24
$14,900,000 as well as fiscal year 1996 second quarter writedowns of
$10,500,000 offset by reduced revenues of $11,800,000 attributable to
decreased prices and promotional pricing resulting from the Company's efforts
to reduce inventory levels and from generally lower selling prices within the
marketplace. Gross profit, as a percentage of net sales, increased to (3.2)%
compared to (14.1)% in the prior fiscal year. Market pressures that resulted
in reduced sales volumes and prices and operating losses during the fiscal
year ended September 27, 1997 are continuing in fiscal year 1998.
Selling, general and administrative expenses for fiscal year 1997
decreased $6,400,000 or 32.8% from fiscal year 1996. Selling, general and
administrative expense, as a percent of net sales, is expected to further
decrease in fiscal year 1998 due to the staffing reductions mentioned below.
Interest expense, net of interest income, was $7,900,000 for fiscal year
1997 compared to $7,000,000 for fiscal year 1996. The increase was due to
higher average borrowings as well as higher interest rates.
Net loss for fiscal year 1997 was $40,656,000 compared to $53,693,000 for
fiscal year 1996. Included in the net loss for fiscal year 1997 were
restructuring costs totaling $15,282,000 related to the consolidation
discussed below. Included in the net loss for fiscal year 1996 were
restructuring costs totaling $6,229,000 related to the shutdown of two
facilities located in South Carolina and reductions in administrative and
supervisory staffing. In fiscal year 1996 and fiscal year 1997 the Company
reduced its administrative and supervisory staff by approximately 340 persons
which reduced costs by approximately $12,000,000 in fiscal year 1998.
In September 1997, the Company announced a plan to consolidate certain of
its operations in order to lower its costs and make its operations more
efficient. The consolidation will involve the closing of one facility, the
write down to estimated fair value of certain excess production equipment and
the shift of more assembly operations to existing offshore facilities. The
consolidation is expected to reduce annual operating costs by $17,000,000 in
fiscal year 1998.
Fiscal Year 1996 Compared to Fiscal Year 1995
Net sales of the Company were $168,300,000 in fiscal year 1996 as
compared to $175,000,000 in the prior fiscal year, a decrease of $6,700,000
or 3.8% due primarily to reduced selling prices of $19,500,000 attributable
to decreased prices of T-shirts and fleece and promotional pricing; offset by
an increase in unit sales of $14,594,000.
Gross profit for fiscal year 1996 decreased $52,000,000 from the prior
fiscal year due to charges of approximately $11,300,000 to write down certain
inventories to their net realizable value, as well as reduced revenues of
$26,000,000 attributable to decreased prices and promotional pricing
resulting from the Company's efforts to reduce inventory levels, and
generally lower selling prices within the marketplace. Additionally,
unfavorable absorption of fixed costs aggregating approximately $14,600,000
was incurred due to lower units produced. Gross profit, as a percentage of
net sales, decreased to (14.1%) compared to 16.1% in the prior fiscal year.
Selling, general and administrative expenses for fiscal year 1996
decreased $1,200,000 or 5.7% from fiscal year 1995.
Interest expense, net of interest income, was $7,000,000 for fiscal year
1996 compared to $3,000,000 for fiscal year 1995. The increase was due to
higher average borrowings as well as higher interest rates.
Net loss for fiscal year 1996 was $53,700,000 compared to a net income of
$2,800,000 for fiscal year 1995. Included in the net loss for fiscal year
1996 were restructuring costs totaling $6,229,000
22
<PAGE> 25
related to the shutdown of two facilities located in South Carolina and
reductions in administrative and supervisory staffing. In fiscal year 1996
the Company reduced its administrative and supervisory staff by approximately
150 persons.
Fiscal Year 1995 Compared to Fiscal Year 1994
Net sales of the Company in fiscal year 1995 were $175,000,000 as
compared to $193,500,000 in fiscal year 1994, a decrease of $18,500,000 or
9.6%. The decrease was due to a reduction in customer orders, partially
offset by net price increases over fiscal year 1994. During the first nine
months of fiscal year 1995, the Company, following other industry leaders and
reflecting firm customer demand, increased prices over the prior year an
average of 6.5%. However, in the fourth quarter of fiscal year 1995 customer
demand was significantly reduced from earlier quarters and the Company
offered certain promotional pricing arrangements for fourth quarter sales
which resulted in overall average price increases for fiscal year 1995 of 4%.
These pricing arrangements reduced fourth quarter gross profit by an
estimated $3,600,000. In September of fiscal year 1995, the Company announced
price changes for its activewear products effective October 1, 1995. While
certain styles and colors had no price change, most white and light colored
T-shirts reflect reduced prices in fiscal year 1996 of approximately 9%.
Net sales of activewear were $142,300,000 in fiscal year 1995 as compared
to $157,100,000 in fiscal year 1994, a decrease of $14,800,000 or 9.4%. Net
sales of T-shirts decreased by $14,800,000 in fiscal year 1995 compared to
fiscal year 1994 principally due to lower unit sales of T-shirts of
$14,000,000. Net sales of sweatshirts in fiscal year 1995 were approximately
the same as fiscal year 1994.
Net sales of retail products were $32,700,000 in fiscal year 1995 as
compared to $36,400 in fiscal year 1994, a decrease of $3,700,000 or 10.2%.
The decrease was due to lower unit sales.
Gross profit for fiscal year 1995 was $28,200,000, an increase of
$800,000 or 2.9% over fiscal year 1994. Such increase was principally
attributable to higher selling prices offset by decreased unit sales. Gross
profit as a percentage of net sales increased to 16.1% for fiscal year 1995
compared to 14.2% for fiscal year 1994. Such increase was principally
attributable to the price increases mentioned above (4%) and overall reduced
per unit operating costs (2.1%) offset by both increased raw material prices
(3.2%) and costs associated with reduced production schedules in the fourth
fiscal quarter (1%).
Selling, general and administrative expenses for fiscal year 1995
increased $1,200,000 or 6.1% over fiscal year 1994 primarily due to increases
in personnel and related costs ($800,000) and increases in product
development costs ($400,000).
Interest expense, net of interest income for fiscal year 1995 was
$3,000,000 compared to $3,900,000 for fiscal year 1994. The reduction was due
primarily to lower average borrowings.
Net income for fiscal year 1995 was $2,800,000, compared to a net loss of
$6,800,000 for fiscal year 1994. During fiscal year 1994, the Company changed
its accounting method for evaluating the impairment of intangible assets from
a recoverability through future operations method to a fair value method. As
a result of this change, the Company wrote-off $6,651,000 of goodwill in
fiscal year 1994. The results for the fiscal year ended September 30, 1994
also included a pretax charge of $4,080,000 for the write-down of facilities
to their fair market value that the Company intended to sell or abandon after
usable machinery and equipment was redeployed, and the transitional costs
related to the reorganization of certain administrative functions. The
write-downs of these facilities were associated with the Company's
reorganization of its Retail Division and consolidation of distribution and
manufacturing facilities in order to improve productivity and customer
service, reduce transportation costs and cut lead times.
23
<PAGE> 26
LIQUIDITY AND CAPITAL RESOURCES
The Company had a working capital deficit of $51,885,000 at December 27,
1997 compared to a deficit of $42,595,000 at September 27, 1997. This change
was caused primarily by reductions in accounts receivable and inventories.
The Company had a decrease in cash of $69,000 in the first quarter of
fiscal 1998 compared to a net increase in cash of $2,400,000 in the
comparable period last fiscal year. Cash provided by operating activities for
the first fiscal quarters of 1998 and 1997 were $641,000 and $4,399,000,
respectively. The primary components of cash provided by operating activities
for both fiscal quarters were decreases in receivables and inventories as
well as the net loss adjustment for depreciation and amortization offset by
net losses in both fiscal quarters.
Cash used in investing activities the first quarter of fiscal 1998
consisted mostly of capital expenditures of $317,000.
At December 27, 1997, the Company was and continues to be in
non-compliance with certain terms of its long-term revolving credit
agreement, a loan agreement with an institutional lender, and subordinated
notes held by Robert M. Gintel. Mr. Gintel resigned as Chairman of the Board
and as a director of the Company on August 8, 1997. These obligations,
$57,000,000 $6,154,000 and $7,500,000 in principal amount, respectively, have
been classified as current liabilities. The Company has entered into
agreements with its lenders to restructure these agreements through the pre-
negotiated Chapter 11 case discussed below. These obligations, which
aggregate $70,654,000, plus accrued interest, yield maintenance amounts and
fees, will be exchanged for (i) payment of $15,000,000 in cash, (ii) the
issuance of various notes totaling $38,500,000 and (iii) 79.75% of the
outstanding Common Stock of the Company.
Notwithstanding the overall growth of the Company's business since 1987,
in recent years the Company has experienced decreased sales due to a reduced
demand for its products resulting in substantial losses from operations for
four of the last five years. Consequently, on January 23, 1998, the Company
filed a petition with the United States Bankruptcy Court for the District of
Delaware under Chapter 11 of the Bankruptcy Code together with the Plan.
Prior to the filing, the holders of the debt mentioned in the preceding
paragraph entered into agreements with the Company agreeing, among other
things, to cooperate with the Company in implementing the Plan. A hearing to
consider approval of a disclosure statement is scheduled for March 13, 1998
and a hearing to consider confirmation of the Plan is scheduled for April 29,
1998. On February 26, 1998, the Company obtained Bankruptcy Court final
approval (i) to continue its use of cash collateral and to borrow up to
$10,000,000 from Foothill Capital Corp. under the D-I-P Agreement. The D-I-P
Agreement is secured by a pledge of certain of the Company's property, plant
and equipment. In addition, to permit its continued use of cash collateral,
the Company has, among other things, agreed to grant the Old Revolving Credit
Lenders and Prudential a replacement lien on the Company's accounts
receivable and inventory and the proceeds thereof to the extent necessary to
provide adequate protection against any dimunition of the cash collateral.
The Company estimates that it will emerge from these bankruptcy proceedings
before June 30, 1998. However, there can be no assurance that the Plan will
be confirmed by the Bankruptcy Court or that other events will not occur in
the bankruptcy case affecting the Company's ability to implement the Plan. If
either of these events take place, a non-negotiated Chapter 11 proceeding is
likely to occur. The Company has a commitment from Foothill Capital Corp.
under the New Revolving Credit Agreement pursuant to which financing will be
available upon emergence from the Chapter 11 proceedings. This revolving
credit facility will permit the borrowing of up to $35,000,000 based upon
availability under a borrowing base formula (estimated to be $25,000,000 at
date of emergence) and will be secured primarily by accounts receivable and
inventory.
The Company's future liquidity requirements are expected to consist
primarily of capital expenditures and working capital requirements. The
Company's liquidity requirements are expected to be financed from operating
cash flow, amounts available under the New Revolving Credit Agreement and,
upon emerging from bankruptcy, the New Revolving Credit Agreement; however,
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no assurance can be given that such financings will be available or
sufficient. The opinion of the Company's independent public accountants
covering the financial statements for the year ended September 27, 1997
included a paragraph questioning the Company's ability to continue as a going
concern.
BUSINESS
GENERAL
Oneita was incorporated in 1987. Oneita manufactures and markets
activewear and infantswear. Oneita's activewear includes T-shirts and
sweatshirts for screen printing sold under the Oneita Power-T(R), Oneita
Power 50 Plus(R), Oneita Power-Sweats(R) and Oneita Colorwear brand names.
Oneita's infantswear includes layette and playwear sold primarily under
private labels. Activewear products are marketed to the imprinted sportswear
(screenprint) industry and to retailers, and infantswear products are
marketed to major retailers.
Oneita has grown since its incorporation in 1987 by building a brand name
activewear business with a high quality image. Oneita's net sales of
activewear increased from $37,400,000 in 1987 to $137,500,000 and
$112,900,000 in 1996 and 1997, respectively. In 1991, Oneita expanded its
activewear line by introducing sweatshirts under the Oneita Power-Sweats
label. Sweatshirts accounted for approximately $16,900,000 and $8,300,000 of
the activewear sales in 1996 and 1997, respectively.
In infantswear, Oneita has focused on developing a variety of products,
each targeted at specific retail markets, including department stores, chain
stores and mass merchandisers. Net sales of infantswear increased from
$14,200,000 in 1987 to $30,800,000 and $22,100,000 in 1996 and 1997,
respectively.
BANKRUPTCY PROCEEDINGS
Notwithstanding the overall growth of the Company's business since 1987,
in recent years the Company gas experienced decreased sales due to reduced
demand for its products resulting in substantial losses from operations in
four of the last five fiscal years. Consequently, on January 23, 1998 (the
"Petition Date"), the Company filed a voluntary petition for relief under
Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for
the District of Delaware (the "Court"), together with the pre-negotiated Plan
and a Disclosure Statement relating to the Plan.
Prior to the Petition Date, the Company had entered into a Revolving
Credit Agreement dated as of January 26, 1996 (the " Old Revolving Credit
Agreement") with Sun Trust Bank, Atlanta, individually, and as Agent and
Administrative Agent, First Union National Bank of South Carolina,
individually and as Agent and NatWest Bank, N. A. which was secured by, among
other things, its accounts receivable and inventory. As of the Petition Date,
the Old Revolving Credit Lenders were Foothill Capital Corp. ("Foothill"),
UBS Mortgage Finance, Inc., Albert Fried & Co., L.L.C., and Lazard Freres &
Co., L.L.C. Prior to the Petition Date, the Company had also entered into a
Note Agreement dated as of December 20, 1988 (the "Prudential Note
Agreement") with The Prudential Insurance Company of America ("Prudential")
and a Subordinated Note Agreement dated as of December 28, 1995 (the
"Subordinated Note Agreement") with Robert M. Gintel ("Gintel"). On the
Petition Date, there was principal and interest of approximately
$57,000,000 outstanding under the Revolving Credit Agreement, $6,379,066
outstanding under the Prudential Note Agreement and $9,061,250 outstanding
under the Subordinated Note Agreement. The claims under these agreements
are being restructured pursuant to the Plan.
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Under the Plan, holders of claims under the Old Revolving Credit
Agreement and the Prudential Note Agreement will receive in the aggregate on
the Effective Date (i) $15,000,000 in cash which is to be funded by the New
Revolving Credit Agreement, (ii) the New Senior Secured Notes in the
principal amount of $37,500,000 and (iii) 72% of the Common Stock. In
addition, certain holders of claims under the Old Revolving Credit Agreement
(i.e. Foothill) will receive on the Effective Date of the Plan the
Subordinated Foothill Note in the sum of $1,000,000 in exchange for a
distribution of additional Common Stock to which they would have otherwise
been entitled.
The New Senior Secured Notes will be secured by a first lien on the
property, plant and equipment of the Company, the stock of certain
subsidiaries of the Company, certain intangibles and certain of the Company's
real property and by a second lien among other things, the Company's accounts
receivable and inventory. The priorities of the security interests in the
collateral securing the New Senior Secured Notes will be governed by an
intercreditor agreement between Prudential, IBJ Schroder and Foothill, the
lenders under the Old Revolving Credit Agreement on the Effective Date of the
Plan. The Obligations under the New Senior Secured Notes will be guarantied
by Kinston. The New Senior Secured Notes will be due three years following
the Effective Date of the Plan and will bear interest at 12% per annum.
Interest on the New Senior Secured Notes for the first two years will be paid
with additional New Senior Secured Notes unless the Company meets a certain
EBITDA threshold set forth in the New Revolving Credit Agreement. Up to
$15,000,000 of the New Senior Secured Notes can be prepaid in increments of
$1,000,000 during the term of the New Senior Secured Notes if certain average
available cash benchmarks contained in the New Revolving Credit Agreement are
satisfied. The New Senior Secured Notes contain numerous affirmative and
negative covenants and events of default, including a covenant that the
Company maintain a minimum net worth as of certain net worth testing dates.
The Subordinated Foothill Note is for a term of 10 years from the
Effective Date of the Plan. The Subordinated Foothill Note will bear interest
at 10% per annum payable monthly in arrears, payable in additional
subordinated notes; provided, however, that upon final payment in full of all
principal, interest, fees and other amounts due on the New Senior Secured
Notes current interest on the Subordinated Foothill Note will become payable
in cash. The Subordinated Foothill Note is subordinated to Senior
Indebtedness, which includes the obligations under the New Revolving Credit
Agreement and New Senior Secured Notes. The Subordinated Foothill Note is
prepayable upon the sale of all or substantially all of the assets of the
Company or a change in control
Pursuant to the Plan, the holder(s) of claims under the Subordinated Note
Agreement will receive on the Effective Date of the Plan 7.75% of the Common
Stock.
Holders of unsecured claims under the Plan will either be paid in full in
cash on the Effective Date of the Plan (if their claims are due and payable
as of such date) or will be unaffected by the Reorganization Case. Certain
other operating expenses of the Company including its obligations in
connection with the Fayette Facilities will be unaffected by the
Reorganization Case and will remain outstanding following the Reorganization
Case.
Finally, pursuant to the Plan, holders of the Old Common Stock will
receive their Pro Rata Share of 20.25% of the Common Stock following a
1-for-5 reverse stock split which will result in each share of Old Common
Stock being converted into one-fifth (.2) of a share of Common Stock. (Any
fractional shares held by a stockholder will be rounded up to the next
greater whole share).
The New Revolving Credit Agreement will be for a term of three years from
the Effective Date of the Plan. The borrowers under the New Revolving Credit
Agreement will be the Company and Kinston (if it has not previously been
merged into the Company.) The lenders under the New Revolving Credit
Agreement will be Foothill Capital Corp. and certain affiliates. The facility
will be an asset based revolving credit/letter of credit facility.
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The New Revolving Credit Agreement consists of two facilities, a primary
facility in the sum of up to $31,000,000 and an overline facility of up to
$4,000,000. The interest rate on the primary facility (the "Base Rate") will
be three hundred basis points over the London Interbank Offered Rate except
for non-Eurodollar rate advances which will bear interest at the Norwest Bank
Minnesota, N.A. prime rate plus 1% per annum, provided, that the Base Rate
shall not be less than 7% per annum. The default rate for the primary
facility will be the Base Rate plus 3%. The interest rate on the overline
facility will be 12% per annum, with a default rate of 13.5% per annum. The
fee for letters of credit will be 1.25% per annum, with a default rate of
3.25% per annum, on amounts outstanding under letters of credit, plus issuing
bank charges which are projected to be approximately 0.82%. An agency fee of
one-half of one percent (.50%) of the maximum credit line will be earned and
payable upon the earlier of (i) the issuance of a written letter of
commitment and (ii) the initial loan closing. A facility fee of one quarter
of one percent(.25%) of the maximum credit line will be charged upon the
initial loan closing as well as upon each anniversary of the initial loan
closing. An unused line fee of three eighths of one percent (.375%) per annum
would be charged per diem and be payable monthly in arrears for the average
daily unused portion of the accounts receivable and inventory subline. A
collateral management fee of $3,000 is also payable monthly in arrears. A
clearance charge of 2 business days' interest will be payable on all of the
Company's collections.
The New Revolving Credit Agreement will be secured by a first lien on the
accounts receivable, inventory and cash of the Company and a second priority
lien in the other assets of the Company. The priorities of the security
interests in the collateral securing the New Revolving Credit Agreement will
be governed by an intercreditor agreement among Foothill Capital Corp., IBJ
Schroder, Prudential and the lenders under the New Revolving Credit Agreement
on the Effective Date of the Plan. The borrowing base under the New Revolving
Credit Agreement will be 85% of the Company's eligible accounts receivable
plus 63.5% of the Company's eligible inventory. To the extent that amounts
outstanding at any time would require inclusion in the borrowing base of
eligible inventory in excess of the sum of (i) 40% of raw materials, (ii) 30%
of piece goods located on Oneita plants, (iii) 25% of domestic
work-in-process, (iv) 55% of finished goods in transit (including in transit
from Mexico and Jamaica) and (v) 60% against finished goods, such excess will
be deemed to be outstanding under the overline facility. Inventory included
in borrowing base cannot exceed 200% of eligible accounts receivable included
in borrowing base. All advances are net of customary reserves.
The New Revolving Credit Agreement contains numerous affirmative and
negative covenants and events of default, including a negative covenant that
the Company maintain a minimum net worth as of certain net worth testing
dates.
On the Effective Date of the Plan, the Old Revolving Credit Agreement,
the Prudential Note Agreement, the Subordinated Note Agreement and all
related security agreements and guaranties entered into in connection with
each of the foregoing shall be deemed canceled and such agreements and
securities, together with all security interests, liens and instruments
issued pursuant thereto, shall have no further legal effect other than as
evidence of any right to receive distributions under the Plan.
PRODUCTS, DISTRIBUTION AND THE INDUSTRY
Oneita manufactures and markets T-shirts and sweatshirts (activewear) for
the imprinted sportswear (screenprint) industry. Screen printing consists of
imprinting designs, patterns or letters ranging from simple lettering to
complex color patterns on apparel. Oneita's T-shirts, in management's
opinion, are of high quality because they are heavy in weight, have full cut
specifications and possess long-lasting construction features such as
shoulder-to-shoulder taping and a seamless tubular collar design.
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During 1995, Oneita expanded its Power 50 Plus line (a premium T-shirt
comprised of 60% cotton and 40% polyester), enhanced its "PFD" T-shirt
collection (an all-cotton shirt that is re-dyed by customers) and also
introduced a new T-shirt, the Power Rib-T. In 1996, the PFD program was
further expanded by the offering of the Colorwear Collection, a garment dyed
assortment of both old and new styles in new colors. In 1997, the number of
activewear product offerings was reduced due to competitive market conditions
and in an effort to increase manufacturing efficiency.
Oneita estimates that branded imprinted T-shirt sales exceed $3.5 billion
annually. The market for T-shirts for the screen printing industry is very
competitive and is based upon quality, service, price, availability of
product and name recognition. Oneita's primary competitors, Fruit of the
Loom, Inc., Russell Corporation and Sara Lee Knit Products (a subsidiary of
Sara Lee Corporation and the maker of Hanes) are larger, have substantially
greater resources and in the aggregate account for a majority of the T-shirt
market.
In 1991, Oneita introduced sweatshirts to its activewear line under the
Oneita Power-Sweats label. Oneita sells sweatshirts to the same customers to
whom it sells T-shirts and believes that its ability to do so may result in
stronger relationships with such customers and the addition of new customers
for both T-shirts and sweatshirts. In 1996, the ONEITA'S KIDS(R) line was
expanded with new styles of fleecewear and T-shirts and marketed to the
imprinted sportswear industry.
Oneita sells activewear through in-house salespersons to approximately
330 customers located throughout the United States, including 50
distributors. Oneita also sells activewear to distributors in Europe, Canada
and the Pacific Rim. Such export sales accounted for approximately $2,000,000
of net sales in both fiscal year 1996 and fiscal year 1997.
Oneita's business in the past has been seasonal with respect to T-shirt
sales to the extent that approximately 50% of annual T-shirt sales have been
in the March through June period. Sweatshirts provide a seasonal balance for
Oneita since its customers tend to stock higher levels of T-shirts in the
spring and summer months and higher levels of sweatshirts in the fall and
winter months.
Historically, Oneita has manufactured and sold private label cotton and
cotton blend layette and playwear for infants and toddlers. Layette is
apparel for newborns while playwear is apparel for infants and toddlers up to
36 months of age. In fiscal 1996 and 1997, net sales of infantswear under
Oneita's own brand names accounted for less than 5% of its total infantswear
sales. Oneita sells its private label infantswear to substantially all of the
major department store chains and major retail chain stores.
Oneita has redirected its infantswear sales efforts by de-emphasizing
small orders and higher priced playwear and concentrating on sales of layette
and basic infantswear to larger customers, including mass merchandisers.
Oneita markets infantswear primarily through in-house salespeople.
The infantswear market is highly competitive and consists of companies,
including William H. Carter, Gerber Products Company and Oshkosh B'Gosh,
Inc., which are larger and have substantially greater market share and
resources than Oneita. Oneita believes that it compares favorably with other
manufacturers of private label products as well as with other manufacturers
of high quality brand name infantswear on the basis of quality, service,
price and availability of product.
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MANUFACTURING
Oneita's historical strategy has been to decrease costs by operating its
facilities at maximum capacity and, from time to time, using outside
contractors to meet increased customer demand.
Oneita's manufacturing operations consist of knitting, bleaching and
dyeing, cutting and sewing, and packaging. Oneita's operations begin with raw
yarns. The yarn is knitted into four basic fabric constructions (jersey,
fleece, rib and interlock) from which Oneita produces its products. The
knitted fabric is batched in lots for bleaching or scoured and dyed in a
variety of both pressure and atmospheric vessels for color, consistency and
quality. Next, the finishing operation sets the width and length and
pre-shrinks the fabric. The finished fabric lots are then transported to a
cutting operation which cuts specific garment parts such as sleeves, collars,
cuffs and bodies for sewing. The cut parts are then sewn together in an
assembly line. Various sewing thread, stitches, trims and colors are mixed
and matched for desired styling. The finished garments are inspected, folded
and packaged. Quality assurance systems are utilized throughout the
manufacturing process to check raw materials, in-process inventories and
finished products.
In December 1995, Oneita consolidated its five activewear warehouse
locations in South Carolina to one warehouse near Atlanta, Georgia. During
fiscal 1996, Oneita closed two manufacturing plants located in South Carolina
as part of a restructuring plan to streamline and consolidate its
manufacturing operations. The consolidation, as well as new state of the art
material handling equipment, has reduced transportation costs and lead times.
Oneita has an on-going program to modernize its manufacturing facilities
through the addition of technologically advanced equipment. Since 1993,
Oneita has added approximately $48,000,000 of technologically advanced
machinery and equipment. These expenditures are designed to increase
manufacturing efficiencies and reduce operating costs. In September 1997,
Oneita also began implementing a major consolidation of its manufacturing
operations in an effort to further reduce production costs. Pursuant to the
consolidation plan, Oneita is closing its knitting facility in Kinston, North
Carolina, which is leased pursuant to a lease agreement expiring on April 30,
1998, moving its knitting operations and most of its machinery and equipment
from the Kinston facility to the Sterilon Facility and refurbishing a new
knitting room at the Sterilon Facility. At the same time, Oneita is moving
its cutting and automated sewing operations currently located at the Sterilon
Facility to the Spindale Facility and moving its machinery and equipment from
the Sterilon Facility to the Spindale Facility. Finally, Oneita is moving its
non-automated garment assembly operations and machinery and equipment from
the Spindale Facility to the assembly facilities operated by its subsidiaries
in Mexico and Jamaica and renovating these facilities. Much of the work with
respect to this consolidation was implemented prior to the Petition Date.
Oneita anticipates that the consolidation of its manufacturing operations
will be substantially completed by April 1998. Following the closure of the
Kinston and Andrews facilities, Oneita will have six remaining manufacturing
facilities located in South Carolina, Alabama, Jamaica and Mexico. The costs
of Oneita's planned consolidation are estimated to total $15,281,990,
including net cash expenditures of $7,829,515. Most of these costs were
incurred prior to the Petition Date. Oneita expects that the consolidation
will reduce operating costs by $17,000,000 per year.
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Oneita has also reduced and consolidated its administrative and
supervisory staff in the last two fiscal years by 340 persons in an effort to
reduce costs.
Simultaneously with the commencement of the Reorganization Case, Oneita
filed a motion for authority to pay any prepetition expenses related to the
consolidation of its operations and to continue to implement the
consolidation program.
MAJOR CUSTOMERS
Net Sales to Oneita's ten largest customers for the fiscal year ended
September 27, 1997 accounted for approximately 50% of Oneita's total sales
for such period. One customer, SanMar Corporation, a distributor of
activewear for screen printing, accounted for approximately 17% of total net
sales in fiscal year 1997. Net sales to Oneita's five largest activewear
customers in fiscal year 1997 accounted for approximately 34% of Oneita's
total net sales. Net sales to Oneita's five largest infantswear customers for
fiscal year 1997 accounted for approximately 11% of Oneita's total net sales.
EFFECT OF IMPORTS
In November 1994, the United States Congress approved the North American
Free Trade Agreement ("NAFTA"), which is intended to eliminate barriers to
trade among the United States, Canada and Mexico over a ten year period. In
December 1994, the Uruguay round of negotiations under the auspices of the
General Agreement on Tariffs and Trade ("GATT") was concluded. GATT will
require that quotas on apparel and textile products be phased out over a ten
year period and tariffs on such products be reduced by approximately 11% over
the same ten year period. Oneita is unable to determine at this time what
effect, if any, changes resulting from NAFTA and GATT may have on its
business, operations or financial condition. The Company believes import
competition will increase and accelerate as quota are phased out.
Over the last several years, the Company, as well as other domestic
apparel manufacturers, moved much of its sewing operations offshore to reduce
costs and compete with increased import competition that is resulting from
the trade agreements mentioned above. The Company expects that in fiscal year
1998 substantially all of its T-shirts will be sewn in its offshore plants.
The Company believes that its fiscal year 1997 consolidation of operations
will combine low cost textile manufacturing in the United States with the
sewing of most of its products offshore so that the Company can continue to
be competitive.
RAW MATERIALS
The principal raw materials used in Oneita's products are cotton and
cotton-blend yarns. These yarns are readily available from numerous domestic
and foreign suppliers. Market prices of cotton and cotton-blend yarns
fluctuate from time to time. In previous years, Oneita has purchased
quantities of these yarns under supply contracts generally at fixed prices
with various expiration dates. Oneita is not currently a party to any
significant supply contracts for these cotton yarns; instead, it purchases
most of its current requirements within the spot market at more favorable
prices. Oneita may enter into yarn contracts in the future depending on
anticipated market prices. For the fiscal year ended September 27, 1997,
Oneita purchased approximately 69% of its yarn from Avondale, which currently
owns 24.8% of the Old Common Stock and will own approximately 5.0% of the
Common Stock if the Plan is confirmed. Other raw materials, such as
chemicals, dyes and packaging materials, are purchased on the open market.
The sources and availability of these materials are believed to be adequate
to meet present needs.
BACKLOG
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Oneita's backlog of unfilled orders was approximately $13,100,000 as of
December 27, 1997, compared with approximately $11,600,000 as of September
27, 1997, and approximately $17,000,000 as of September 28, 1996. The amount
of unfilled orders at a particular time is affected by a number of factors.
Accordingly, the amount of unfilled orders may not be indicative of eventual
shipments.
TRADEMARKS AND LICENSES
Oneita has registered the Oneita Power-T(R), Oneita Power 50 Plus(R),
Soupcon(R), ONEITA'S KIDS(R) and Oneita Power-Sweats(R) trademarks and
certain other trademarks. The expiration dates of these trademarks range from
July 2006 to December 2008. The loss of certain of these trademarks would
have a material adverse effect upon Oneita's business.
EMPLOYEES AND EMPLOYEE RELATED AGREEMENTS
As of September 27, 1997, Oneita, together with its non-debtor
subsidiaries, had approximately 2,450 full time employees. Approximately 100
of the employees at the Andrews Textile Facility who are involved in
manufacturing operations are covered by the Andrews Collective Bargaining
Agreement, which expires in October 1998. Oneita intends to seek to assume
the Andrews Collective Bargaining Agreement in the Reorganization Case
pursuant to Section 365 of the Bankruptcy Code.
Oneita provides eligible employees the opportunity to participate in its
401k Plan. Pursuant to the 401k Plan, participants are permitted to
contribute a portion of their salary to the 401k Plan on either a pre-tax or
an after-tax basis. Oneita matches a portion of the plan participants'
pre-tax contributions, makes an additional contribution which is shared pro
rata by the plan participants and pays the fees associated with the operation
and administration of the 401k plan. The 401k Plan is administered by a Plan
Committee appointed by Oneita's Board of Directors. Pursuant to the 401k
Plan, Oneita indemnifies the Plan Committee and its officers and directors in
connection with actions with respect to the 401k Plan. Oneita may amend or
terminate the 401k Plan or discontinue its contributions under the 401k Plan
at any time. The 401k Plan assets are held and invested by a Trustee,
Vanguard Fiduciary Trust Company, pursuant to the Trust Agreement and the
VISTA Select Recordkeeping and Service Fee Agreement. The amount of Oneita
contributions to the 401k Plan for fiscal year 1997, which contributions will
become due in fiscal year 1998, are not yet known. As part of the
Reorganization Case, Oneita intends to seek to assume the 401k Plan (to the
extent it is an executory contract), as well as the agreements related
thereto, pursuant to Section 365 of the Bankruptcy Code.
Oneita also maintained a self-insured vision plan for certain employees.
The plan was administered by VSP of the Southeast, Inc., pursuant to an
agreement dated as of November 1, 1993. This plan was terminated by Oneita
effective November 1, 1997.
Oneita maintains self-insured medical, dental and short-term disability
insurance plans for certain employees. The plans are administered by Blue
Cross and Blue Shield of South Carolina pursuant to an agreement dated August
1, 1996. Pursuant to such agreement, Blue Cross and Blue Shield of South
Carolina provides stop-loss insurance coverage under the medical and dental
plans in the event that claims exceed a certain amount. The agreement with
Blue Cross and Blue Shield of South Carolina automatically renews each year
for an additional year but may be canceled by either party upon thirty-one
(31) days written notice. Oneita intends to seek to assume the agreement with
Blue Cross and Blue Shield of South Carolina with respect to the medical and
disability plans in the Reorganization Case pursuant to Section 365 of the
Bankruptcy Code. Oneita terminated its dental coverage effective November 1,
1997.
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Oneita maintains a Group Term Life Policy for certain employees with The
Canada Life Assurance Company. The policy renews annually unless terminated.
The Canada Life Assurance Company must provide Oneita thirty-one (31) days
notice of termination. Oneita intends to seek to assume the agreement with
The Canada Life Assurance Company in the Reorganization Case pursuant to
Section 365 of the Bankruptcy Code.
In addition, Oneita maintains a Long-Term Disability Insurance Policy
with Continental Casualty Company. Oneita intends to seek to assume the
agreement with Continental Casualty Company in the Reorganization Case
pursuant to Section 365 of the Bankruptcy Code.
Oneita also maintains a Directors and Officers Insurance Policy with the
National Union Fire Insurance Company of Pittsburgh, PA. On or before April
1998, Oneita will either: (a) reject this agreement in part and cover its
current officers and directors under a "tail policy" with National Union Fire
Insurance Company of Pittsburgh, PA from any claims made after the Effective
Date for any acts or omissions in their respective capacities taking place
prior to the Effective Date, and purchase a new policy for the directors and
officers of Reorganized Oneita to take effect on the Effective Date, or (b)
seek to assume the existing agreement with the National Union Fire Insurance
Company of Pittsburgh, PA in the Reorganization Case pursuant to Section 365
of the Bankruptcy Code.
RELATIONSHIP WITH AVONDALE
Avondale, a company with in excess of one billion dollars in annual
revenues, has historically been Oneita's largest supplier of cotton and
cotton-blend yarns. For the fiscal year ended September 27, 1997, Oneita
purchased approximately 69% of its yarn totaling $31,000,000 from Avondale.
In January 1996, Avondale and Gintel each loaned Oneita the sum of
$7,500,000 on a subordinated basis pursuant to a note purchase agreement. In
February 1996, Jack R. Altherr, Jr., Avondale's Vice Chairman and Chief
Financial Officer, was elected to Oneita's Board of Directors at Oneita's
annual meeting. In August 1996, the $7,500,000 debt to Avondale was converted
into approximately 2.2 million shares of Old Common Stock, representing 24.8%
of the then outstanding common stock of Oneita. As part of the conversion of
Avondale's subordinated debt to equity, G. Stephen Felker, Avondale's
Chairman and Chief Executive Officer, was appointed to Oneita's Board of
Directors, and Avondale agreed that it would not increase its stake in Oneita
beyond 35% for a period of three years without prior approval of Oneita's
Board of Directors. In addition, C. Michael Billingsley, Oneita's current
President, Chief Executive Officer and a member of the Board of Directors
since approximately March 1996, was prior thereto the President of Avondale's
yarn division. Finally, John G. Hudson, a current director of Oneita, is the
former President and Chief Operating Officer of Avondale.
PROPERTIES
As of January 23, 1998, Oneita occupied manufacturing, general office and
warehouse facilities in Alabama, Georgia, New York, North Carolina and South
Carolina. In addition, certain of Oneita's non-debtor subsidiaries lease
facilities in Jamaica and Mexico. Approximately 550,000 square feet of the
space occupied by Oneita and its non-debtor subsidiaries is leased. The
following is a summary of Oneita's facilities:
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<PAGE> 35
Leased Facilities
I. Charleston, South Carolina. Oneita leases approximately
27,000 square feet of space in Charleston, South Carolina which it uses for
its executive offices. These premises are leased through September 30, 2004
at an annual rental of $404,000. Oneita has an option to renew the lease for
two additional five-year periods.
II. Andrews, South Carolina. Oneita leases a 3,300 square foot
showroom in Andrews, South Carolina. These premises are leased through June
30, 1998 at an annual rental of $21,000. Oneita has an option to renew this
lease for one five-year period.
III. Atlanta, Georgia. Oneita leases approximately 412,000
square feet of space in Atlanta, Georgia which it uses as a distribution
center. This facility is leased through November 30, 1999 at an annual rental
of $966,000. Oneita has an option to renew this lease for one five-year
period.
IV. Kinston, North Carolina. Oneita leases approximately
114,000 square feet of space in Kinston, North Carolina which it uses as a
manufacturing facility. This facility is leased through April 30, 1998 at an
annual rental of $285,000.
V. Birmingham, Alabama. Oneita leases approximately 2,200
square feet of office space in Birmingham, Alabama which it uses for
executive offices. These premises are leased through August 1998 at an annual
rental of $36,000.
VI. New York, New York. Oneita leases approximately 4,000
square feet of office space in New York, New York which it uses as a sales
office. These premises are leased through April 2000 at an annual rental of
$95,000.
Oneita intends to seek to assume all of the foregoing leases, except the
lease of the Andrews, South Carolina showroom, in the Reorganization Case
pursuant to Section 365 of the Bankruptcy Code.
Owned Facilities
I. Cullman, Alabama. Oneita owns a 177,000 square foot
manufacturing and distribution facility located in Cullman, Alabama. Oneita's
infantswear operations are located at this facility.
II. Fayette, Alabama. Oneita owns (subject to satisfaction of
the two outstanding industrial development bond issues in the amount of
$10,000,000) the Fayette Facilities located in Fayette, Alabama, which have a
total square footage of 220,000, and which it uses for manufacturing.
III. Andrews, South Carolina. Oneita owns the Andrews Textile
Facility, consisting of 122,000 square feet, and located in Andrews, South
Carolina. Oneita also owns a 150,000 square foot distribution facility in
Andrews, South Carolina comprised of two buildings located on 6.9 acres which
it no longer uses and which it is attempting to sell.
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<PAGE> 36
EQUIPMENT LEASES
As of January 23, 1998, Oneita was a lessee under the following equipment
leases pursuant to which Oneita leased various manufacturing and office
equipment for its facilities in North Carolina, South Carolina, Alabama and
Georgia:
I. Master Lease and Lease Schedules 07-006-00211-05 and 07-006-00211-06
dated June 29, 1990, and Lease Schedules 07-006-00211-08 and 07-006-0211-09
dated April 2, 1991, between Oneita and Trust Company Bank, pursuant to which
Oneita leases certain manufacturing equipment for the Andrews Textile
Facility.
II. Lease Commitment dated April 22, 1991, Master Lease and Lease
Schedules #1 and #2 dated July 19, 1991, and Lease Schedule #3 dated April
29, 1992, between Oneita and MetLife Capital Credit Corporation, pursuant to
which Oneita leases certain apparel manufacturing and other equipment for its
facilities in Kinston, North Carolina, Cullman, Alabama and the Andrews
Textile Facility.
III. Lease Commitment dated June 25, 1992, Lease Schedules #1, #2 and #3
dated October 5, 1992, Lease Schedules #1A #4, #5 and #6 dated December 30,
1992, Lease Schedules #7 and #8 dated March 26, 1993, Lease Schedule #9 dated
May 7, 1993, and Lease Schedules #10 and #11 dated July 5, 1993, between
Oneita and NationsBanc Leasing Corporation, pursuant to which Oneita leases
certain knitting, sewing, dyeing, cutting and other machines for its
facilities in Kinston, North Carolina, Cullman, Alabama and the Andrews
Textile Facility.
IV. Lease Commitment dated April 6, 1994, and Lease Schedules #1, #2, #3
and #4 dated July 25, 1994, between Oneita and First Union Commercial
Corporation, pursuant to which Oneita leases certain knitting, sewing and
cutting machines for the Andrews Textile Facility, the Fayette Facilities and
its facility in Kinston, North Carolina.
V. Lease Agreement dated December 15, 1994 between Oneita and Sun Data,
Inc., pursuant to which Oneita leases certain computer equipment and
accessories for its administrative offices in Charleston, South Carolina.
VI. Lease Commitment dated June 7, 1995, and Lease Schedules #1, #2 and
#3 dated July 17, 1995, between Oneita and First Union Commercial
Corporation, pursuant to which Oneita leases certain knitting machines for
its facility in Kinston, North Carolina, forklifts for its distribution
center in Atlanta, Georgia and sewing equipment for the Fayette Facilities.
VII. Master Lease dated May 30, 1996 between Oneita and Richlund Capital,
Inc., pursuant to which Oneita leases certain computer equipment and
accessories for the Andrews Textile Facility, the Fayette Facilities, its
manufacturing facilities in Kinston, North Carolina and Cullman, Alabama and
its distribution center in Atlanta, Georgia.
VIII. Master Lease dated March 13, 1997 and Lease Schedules #213301 and
#213302 dated March 18, 1997, between Oneita and Kronos Incorporated,
pursuant to which Oneita leases certain computer equipment for the Sterilon
Facility and its facility located in Cullman, Alabama.
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<PAGE> 37
ENVIRONMENTAL MATTERS
In the normal operation of its business, Oneita routinely handles,
stores, and/or disposes of paint products, fuel oil, natural gas, dyes and
cleaning products which may be considered hazardous materials. Additionally,
materials containing non-friable asbestos are present at the Andrews Textile
Facility. The following is a discussion of Oneita's environmental matters:
Andrews, South Carolina. In 1991, Oneita discontinued use of three
wastewater lagoons at the Andrews Textile Facility which were not in
compliance with South Carolina environmental regulations. Oneita has
completely closed these areas and has received verbal notification from the
South Carolina Department of Health and Environmental Control (the "SCDHEC")
that no further action will be required with respect to these areas. In
addition, Oneita and the SCDHEC are currently negotiating the terms of a
Consent Order, pursuant to which Oneita will complete voluntary remediation
efforts at its former distribution facility in Andrews, South Carolina. The
remediation involves removing dirt and treating groundwater which Oneita
believes were contaminated by dry cleaning materials used by Oneita at this
facility in 1984 and 1985. Oneita estimates that as of the Petition Date
approximately $8,000 is due with respect to voluntary remediation efforts
undertaken before the Petition Date. Oneita expects to reach an agreement
with the SCDHEC and intends to seek authority in the Reorganization Case to
enter into a final Consent Order relating to this facility and to complete
remediation efforts in compliance with the terms of such final Consent Order
and applicable regulations.
Fingerville, South Carolina. In 1997, Oneita sold its manufacturing
facility located in Fingerville, South Carolina. This facility included an
industrial wastewater treatment plant which Oneita had operated pursuant to a
permit issued by the SCDHEC allowing it to release discharge from the plant
as effluent into the North Pacolet River. After the sale of the facility,
Oneita continued to operate the plant to accommodate the approximately 50
families residing in the Fingerville community, to whom Oneita had provided
sewer services through the plant. Oneita estimates that the total cost of
closing down the industrial system will be approximately $50,000, which costs
will be incurred between the Petition Date and March 1998. The contract of
sale of the Fingerville facility required the buyers to apply for a renewal
of the SCDHEC effluent permit in their own names. In November 1997, however,
Oneita was notified that the SCDHEC effluent permit would not be renewed and
that Oneita would be required to close the plant before the permit expired at
the end of March 1998. Oneita intends to close the plant in accordance with
applicable environmental regulations and has entered into an agreement with
the Spartanburg Sanitary Sewer District (the "District") to replace the plant
with a smaller wastewater treatment plant more suitable to the needs of the
Fingerville residents, which upon completion will be owned and operated by
the District. Oneita estimates that as of the Petition Date approximately
$20,000 is owed in connection with closing the industrial system and
constructing and installing the residential system. The buyers of the
Fingerville facility have been notified of the additional work required of
Oneita with respect to this location and of Oneita's reservation of all
rights against the buyers in connection therewith.
Fayette, Alabama. On April 23, 1997, Oneita entered into a Consent Order
with the Alabama Department of Environmental Management regarding wastewater
treatment and monitoring at the Sterilon Facility. Oneita has taken steps to
comply with the terms of the Consent Order, and does not owe any penalty
thereunder for the period prior to the Petition Date. Oneita has also begun
the process of constructing, testing and installing a color filtration system
in order to ensure that its dyeing operations at the Sterilon Facility will
operate in compliance with the Consent Order. Oneita will request
authorization in the Reorganization Case to pay any amounts owed with respect
to the construction, testing or installation of the color filtration system
incurred before the commencement of the Reorganization Case. Oneita estimates
this amount to be less than $100,000. Oneita expects
35
<PAGE> 38
to be in compliance with the Consent Order and with applicable regulations
within the time period set forth in the Consent Order.
Charlotte, North Carolina. Prior to 1996, Oneita had disposed of oily
wastewater at a site in Charlotte, North Carolina (the "Cherokee Resources
Site), which was subsequently designated by the United States Environmental
Protection Agency (the "EPA") as a Superfund site pursuant to the
Comprehensive Environmental Response, Compensation and Liability Act of 1980.
In 1996, Oneita was notified that it had been named as a Potentially
Responsible Person ("PRP") with respect to the Cherokee Resources Site. The
Cherokee Resources Site was owned by third parties unrelated to Oneita and
was never owned or leased by Oneita. Oneita's obligations with respect to
this site have been settled pursuant to the terms of a Partial Consent Decree
entered by the United States District Court for the Western District of North
Carolina in August 1997 after negotiations between the major PRP's and the
EPA.
Simultaneous with the commencement of the Reorganization Case, Oneita has
filed a motion for authority to pay any prepetition environmental related
expenses and to continue to perform its obligations under the environmental
agreements referenced above.
36
<PAGE> 39
LEGAL PROCEEDINGS
The Company is not a party to any material pending legal proceedings.
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
In connection with the Reorganization Case, five new members of the Board
of Directors shall be appointed pursuant to the Confirmation Order but will
not take office or be deemed appointed until the Effective Date. Two members
of the Company's current Board of Directors will continue in office and those
not continuing in office shall be deemed removed as of the Effective Date. By
consenting to the Plan, the Company's current debtholders have agreed to vote
for the election to the Board of Directors of the persons listed below as
directors. The current executive officers of the Company will continue to
serve as executive officers. On the Effective Date, the directors and
executive officers of the Company will be as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION(S) WITH THE COMPANY
---- --- ----------------------------
<S> <C> <C>
C. Michael Billingsley 46 President, Chief Executive
Officer and Director
William H. Boyd 51 Vice President-Administration and Treasurer
Edward I. Kramer 62 Secretary
Albert Fried, Jr. 67 Director
Kevin S. Flannery 53 Director
Michael Bernstein 54 Director
Grant Beadle 65 Director
Michael T. Yonker 55 Director
John G. Hudson 72 Director
</TABLE>
Mr. C. Michael Billingsley, a director of the Company since March 1996,
has been President and Chief Executive Officer of the Company since March
1996. Prior to joining the Company, from July 1990 to March 1996, Mr.
Billingsley was Corporate Vice President of Avondale Mills, Inc. and
President of Avondale Yarns. See "Certain Transactions".
Mr. William H. Boyd, Vice President-Administration since January 1986 and
Treasurer since September 1994, has been employed by the Company in various
accounting and financial positions since August 1982.
Mr. Edward I. Kramer, has been a practicing attorney in the State of New
York since 1960, and is a member of the law firm of Blau, Kramer, Wactlar &
Lieberman, P.C., counsel to the Company. Mr. Kramer was appointed Secretary
in August 1988. See "Certain Transactions".
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<PAGE> 40
Mr. Albert Fried will be a director of the Company from the Effective
Date. For more than the past five years, Mr. Fried has been a managing member
of Albert Fried & Co. LLC, a New York Stock Exchange broker/dealer and the
Chairman of the Board and a director of Portec, Inc., a producer of
engineered products for railroad, construction and materials handling
industries. Mr. Fried is also a director of Emcor Group Inc. Mr. Fried
previously served as Vice Chairman of the Board of the Company from October
1993 until February 1996.
Mr. Kevin S. Flannery will be a director of the Company from the
Effective Date. Mr. Flannery has been Executive Vice President of Dominick &
Dominick, an investment company, since December 1997 and prior thereto, from
May 1993, was President and a director of Whelan Management Corp., also an
investment company. Mr. Flannery continues to be a director of Whelan
Management Corp. and is also a director of Geneva Steel Company.
Mr. Michael Bernstein will be a director of the Company from the
Effective Date. For more than the past five years, Mr. Bernstein has been
President and Chief Executive Officer of Crown Craft, Inc., a textile
manufacturing company.
Mr. Grant Beadle will be a director of the Company from the Effective
Date. Prior to his retirement in 1994, Mr. Beadle was an Associate Director
of Northwestern University. Mr. Beadle is also director of Woodward Governor
Company, Portec, Inc. and William Blair Mutual Funds.
Mr. Michael T. Yonker will be a director of the Company from the
Effective Date. For more than the past five years, Mr. Yonker has been
President, Chief Executive Officer and a director of Portec, Inc. Mr. Yonker
is also director of Woodward Governor Company and Modine Manufacturing
Company.
Mr. John G. Hudson, a director of the Company since December 1993, was
President and Chief Operating Officer of Avondale Mills, Inc. from 1986
through 1990. Mr. Hudson is also a director of West Point Stevens, Inc.
EXECUTIVE COMPENSATION
The following table sets forth the annual and long-term compensation with
respect to the Chief Executive Officer, one other executive officer, and two
former executive officers whose total annual salary and bonus equaled or
exceeded $100,000 for services rendered for the fiscal years ended September
27, 1997, September 28, 1996 and September 30, 1995 except as listed below.
38
<PAGE> 41
SUMMARY COMPENSATION TABLE
(In thousands, except per share and share amounts)
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
ANNUAL COMPENSATION (1) STOCK
FISCAL OPTION ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS AWARDS # COMPENSATION (2)
--------------------------- ---- ------ ----- -------- ----------------
<S> <C> <C> <C> <C> <C>
C. Michael Billingsley 1997 $300 $50 120,000 $1.2
Chief Executive Officer 1996 156 50 -- .6
1995 -- -- -- --
William H. Boyd 1997 $108 -- 5,000 $1.4
Vice President, Treasurer 1996 108 -- -- 1.5
1995 107 -- 2,000 1.5
</TABLE>
(1) No Other Annual Compensation is shown because the amounts of perquisites
and other non-cash benefits provided by the Company do not exceed the
lesser of $50.0 or 10% of the total annual base salary and bonus
disclosed in this table for the respective officer.
(2) All Other Compensation includes (a) for fiscal 1997, $1.2 and $0.8 of
premiums paid by the Company in respect of term life insurance policies
on each of Messrs. Billingsley and Boyd, and $0.6 contributed by the
Company to Mr. Boyd's account pursuant to the Company's 401(k) Savings
Plan, (b) for fiscal 1996, $0.6 and $0.8 of premiums paid by the Company
in respect of term life insurance policies on each of Messrs. Billingsley
and Boyd, and $0.7 contributed by the Company to Mr. Boyd's account
pursuant to the Company's 401(k) Savings Plan, and (c) for fiscal 1995,
$0.8 of premium paid by the Company in respect of term life insurance
policy on Mr. Boyd and $0.7 contributed by the Company to Mr. Boyd's
account pursuant to the Company's 401(k) Savings Plan.
STOCK OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth all stock option grants to the executive
officers named in the "Summary Compensation Table" during the fiscal year
ended September 27, 1997:
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------------------------------------
% OF TOTAL
NUMBER OF OPTIONS POTENTIAL REALIZABLE VALUE AT
SHARES GRANTED TO ASSUMED ANNUAL RATES OF
UNDERLYING EMPLOYEES STOCK PRICE APPRECIATION
OPTIONS IN FISCAL EXERCISE EXPIRATION FOR OPTION TERM
NAME GRANTED YEAR PRICE ($/SH) DATE 5% 10%
---- ------- ---- ------------ ---- -- ---
<S> <C> <C> <C> <C> <C>
C. Michael Billingsley 120,000 70.6% $1.75-$3.75 2/27/02 $0 $0
William H. Boyd 5,000 2.9% $1.75 2/27/02 $0 $0
</TABLE>
(1) All grants are under the Company's stock option plans.
(2) Grants were made in fiscal 1997 at the market value of the Company's
Old Common Stock on the date of grant. Grants vest for Mr.
Billingsley at 16,667 at date of grant, 51,667 after one year and
51,666 after two years. All other grants vest 50% one year after date
of grant and the remaining balance two years after date of grant.
(3) Total options granted to employees in fiscal 1997 were 170,000
shares of Old Common Stock.
39
<PAGE> 42
AGGREGATE OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION/SAR VALUES
No stock options were exercised during fiscal 1997. The following table
sets forth all unexercised stock option grants to the executive officers
named in the "Summary Compensation Table" as of September 27, 1997.
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
IN-THE-MONEY
SHARES NUMBER OF UNEXERCISED OPTIONS AT
ACQUIRED ON VALUE OPTIONS AT FISCAL YEAR-END FISCAL YEAR-END (2)
NAME EXERCISE REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- -------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
C. Michael Billingsley . -- -- 16,667 103,333 -- --
William H. Boyd ........ -- -- 6,050 5,000 -- --
</TABLE>
(1) Values are calculated by subtracting the exercise price from the fair
market value of the Common Stock as of the exercise date.
(2) Based upon the closing price of the Company's Old Common Stock of $0.6875
on September 27, 1997.
EXECUTIVE MANAGEMENT INCENTIVE PROGRAM
The Company has an executive management incentive program which is
intended to provide financial incentives to senior management and other key
employees, as defined, of the Company upon meeting certain predetermined
objectives. These objectives include the Company attaining certain levels of
earnings and eligible employees achieving individual performance goals as
determined by the Board of Directors. The Board of Directors, in its sole
discretion, shall determine those employees eligible for the executive
management incentive program at the beginning of each year.
For the fiscal year ended September 27, 1997, approximately 20 employees
were eligible to participate in the executive management incentive program.
No amounts have been or will be paid under the executive management incentive
program for the fiscal year ended September 27, 1997.
401(k) SAVINGS PLAN
The Company sponsors a retirement plan (the "401(k) Savings Plan")
intended to be qualified under section 401(k) of the Internal Revenue Code of
1986, as amended. All employees over age 21 who have completed at least 1,000
hours in their first year of employment by the Company are eligible to
participate in the 401(k) Savings Plan. Employees may contribute to the
401(k) Savings Plan on a tax deferred basis up to 15% of their total annual
salary, but in no event more than the maximum permitted by the Code ($9,500
in calendar 1997). The Company matches all employee contributions up to $500
per year per employee, and all Company contributions are fully vested. As of
September 27, 1997, approximately 1,300 employees had elected to participate
in the 401(k) Savings Plan. For the fiscal year ended September 27, 1997, the
Company contribution is approximately $350,000 to the 401(k) Savings Plan, of
which $500 was a contribution for Mr. Boyd.
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<PAGE> 43
Effective May 1, 1993, the Company's profit sharing plan was merged with
and into the 401(k) Savings Plan, and now operates as part of the 401(k)
Savings Plan. For each plan year, the Company contributes to the profit
sharing component of the 401(k) Savings Plan an amount equal to the lesser of
(a) $450,000 (b) the greater of (i) 3.765% of its net income, as defined, for
the fiscal year ending during such plan year, or (ii) $120,000 (c) 15% of
that year's participants' earnings plus any available carryover from prior
years or (d) the maximum amount permitted by law based on available or
accrued profits. Employees may also contribute one to ten percent (in whole
multiples) of their earnings to the profit sharing component of the
401(k)Savings Plan, up to a maximum of (i) 25% of compensation for the plan
year, or (ii) $30,000. All Company contributions are fully vested and are
allocated to employees' accounts proportionally based on their respective
earnings, up to a maximum of $20,000 per year per participant.
STOCK PLANS
Pursuant to the Plan, Oneita intends to reject the issued and outstanding
options to purchase shares of Old Common Stock.
Stock Option Plan
Under the Company's Stock Option Plan (the "Option Plan"), key employees,
directors and officers may be granted options to purchase an aggregate of
514,652 shares of the Company's Old Common Stock. The term "key employees"
includes employees whose judgment, initiative and efforts are deemed valuable
for the successful conduct and development of the Company's business. The
Option Plan is administered by the Compensation Committee (the "Committee"),
consisting of at least three members of the Board of Directors. The
Committee, subject to provisions in the Option Plan, will designate, in its
discretion, which persons are to be granted options, the number of shares
subject to each option, the number of options to be granted and the period of
each option. Each recipient must be an employee of the Company at the time of
grant and throughout the period ending on the day three months before the
date of exercise. Under the terms of the Option Plan, the exercise price of
the shares subject to each option granted will be not less than 100% of the
fair market value at the date of grant, or 110% of such fair market value for
options granted to any employee or director who owns stock possessing more
than ten percent (10%) of the total combined voting power of all classes of
stock of the Company. Adjustments will be made to the purchase price in the
event of stock dividends, corporate reorganizations, or similar events.
During fiscal 1997, 85,000 options were granted under the Option Plan. As of
September 27, 1997, options to purchase 53,413 shares of Old Common Stock
were exercisable and options to purchase 215,881 shares of Old Common Stock
have been exercised.
Non-Qualified Stock Option Plan
In February 1990, the Company's stockholders approved a Non-Qualified
Stock Option Plan (the "Non-Qualified Plan") which covers 453,876 shares of
the Company's Old Common Stock. The options become exercisable in
installments as determined at the time of grant by the Board of Directors.
During fiscal 1997, 85,000 options were granted under the Non-Qualified Plan.
As of September 27, 1997, options to purchase 115,554 shares of Old Common
Stock were exercisable, and 57,040 options to purchase Old Common Stock had
been exercised.
Outside Director Stock Option Plan
41
<PAGE> 44
In February 1995, the Company's stockholders approved an Outside Director
Stock Option Plan (the "Director Plan") which covers 60,000 shares of the
Company's Old Common Stock and became effective November 15, 1994. All
directors of the Company who are not employees of the Company, of which there
are presently six (6), are eligible to participate in the Director Plan. The
Director Plan is administered by the Board of Directors. Under the Director
Plan, each non-employee director annually is granted options to purchase
2,000 shares of Old Common Stock at a price equal to the fair market value on
the date of grant. During fiscal 1997, the Company granted options to
purchase 12,000 shares of Old Common Stock at an exercise price of $1.75.
Employee Stock Purchase Plan
In February 1996, the Company's stockholders approved an Employee Stock
Purchase Plan (the "Stock Purchase Plan") which makes available 250,000
shares of the Company's Old Common Stock for purchase by eligible employees
of the Company and certain of its subsidiaries. An eligible employee may
elect to participate in the Stock Purchase Plan by authorizing limited
payroll deductions to be applied to the purchase of Old Common Stock. As of
September 27, 1997, the Stock Purchase Plan had not yet been implemented.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Company's Board of Directors consisted
during fiscal 1997 of Messrs. Hudson (Chairman), Gintel, Gross, and Moore.
Mr. Gintel resigned as a director and as Chairman of the Board of the Company
on August 8, 1997. In January 1996, the Company issued 10% subordinated notes
to Robert M. Gintel in the aggregate principal amount of $7,500,000 maturing
February 26, 1999, concurrent with the funding of the Company's new bank
credit facility. The notes payable to Mr. Gintel are subordinated to the
Company's bank debt and certain other senior debt. In addition, in connection
with the issuance of one of the notes to Robert M. Gintel, the Company issued
to Robert M. Gintel a warrant to purchase up to 125,000 shares of Common
Stock at $7.00 per share. The issuance of such warrant was approved by
stockholders of the Company in February 1996. The proceeds from issuance of
the subordinated notes have been used for working capital and capital
expenditures. During fiscal 1996, the Company determined not to proceed with
a proposed rights offering of Common Stock which had been intended to repay
50% of the subordinated notes payable to Mr. Gintel.
CERTAIN TRANSACTIONS
In January 1996, the Company issued 10% subordinated notes to Avondale
Mills, Inc. and Robert M. Gintel in the aggregate principal amount of
$15,000,000 maturing February 26, 1999, concurrently with the funding of the
Company's new bank credit facility. In August 1996, the note issued to
Avondale Mills, Inc., in the principal amount of $7,500,000, along with
accrued interest thereon, was converted into 2,270,833 shares of Old Common
Stock of the Company at a rate of $3.50 principal amount of notes per share
of Old Common Stock in a transaction exempt from the registration
requirements of the Securities Act of 1933, as amended, pursuant to Section
4(2)thereof. The remaining notes payable to Mr. Gintel are subordinated to
the Company's bank debt and certain other senior debt. The proceeds from
issuance of the subordinated notes have been used for working capital and
capital expenditures. During fiscal 1996, the Company determined not to
proceed with a proposed rights offering of Old Common Stock which had been
intended to repay the subordinated notes issued to Avondale Mills Inc. and
50% of the subordinated notes payable to Mr. Gintel. In addition, in
connection with the issuance of one of the notes to Robert M. Gintel, the
Company issued to Robert M. Gintel a warrant to purchase up to 125,000 shares
of Old
42
<PAGE> 45
Common Stock at $7.00 per share. The issuance of such warrant was approved by
stockholders of the Company in February 1996.
During fiscal year 1997, the Company made purchases totaling
approximately $31,000,000 of yarn and other raw materials from Avondale
Mills, Inc. Messrs. Altherr, Jr. and Felker are directors of the Company and
are directors and executive officers of Avondale Mills, Inc. C. Michael
Billingsley, the Company's President and Chief Executive Officer, is a former
executive officer of Avondale Mills, Inc. John G. Hudson, a director of the
Company, is a former President and Chief Operating Officer of Avondale Mills,
Inc.
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<PAGE> 46
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth the indicated information as of the date
of this Prospectus with respect to the beneficial ownership of the Company's
securities by: (i) each director and named executive officer of the Company,
(ii) by all executive officers and directors as a group and (iii) all persons
known to the Company to be beneficial owners of more than 5% of the
outstanding shares of Common Stock:
<TABLE>
<CAPTION>
Shares of Common Shares of Common
Stock Beneficially Shares to be Stock Beneficially
Owned Prior to this Sold in this Owned After
Executive Officers Offering (1) Offering this Offering
and Directors Shares Percent Shares Percent
------------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C>
C. Michael Billingsley 1,330 * ---- 1,330 *
William H. Boyd 832 * ---- 832 *
Albert Fried, Jr. 1,531,229(2) 17.0% 1,531,229(2) * *
Kevin S. Flannery 0 * ---- * *
Michael Bernstein 0 * ---- * *
Grant Beadle 0 * ---- * *
Michael T. Yonker 0 * ---- * *
John G. Hudson 5,000 * ---- 5,000 *
Directors and executive
officers as a group
(8 persons) 1,538,391 17.0 ---- 7,162 *
5% Stockholders
The Foothill Group, Inc (3) 2,652,709 29.4 2,652,709 * *
Albert Fried & Co. LLC (4) 1,490,989 16.5 1,490,989 * *
UBS Mortgage Finance Inc.(5) 1,197,406 13.3 1,197,406 * *
Lazard Freres & Co. LLC (6) 530,565 5.9 530,565 * *
The Prudential Insurance
Company of America (7) 657,119 7.3 657,119 * *
Robert M. Gintel (8) 797,729 8.8 797,729 * *
Avondale Mills, Inc. (9) 454,167 5.0 454,167 * *
</TABLE>
---------
* Less than 1%.
(1) Ownership represents sole voting and investment power.
(2) Includes 1,490,989 shares of Common Stock beneficially owned by Albert
Fried & Co. LLC (to be sold in this Offering).
(3) Address is 11111 Santa Monica Boulevard, Los Angeles, CA 90025.
(4) Address is 40 Exchange Place, New York, NY 10005.
(5) Address is 299 Park Avenue, New York, NY 10171.
(6) Address is 30 Rockefeller Plaza, 60th Floor, New York, NY 10020.
(7) Address is c/o Prudential Capital Group, Four Gateway Center, 100
Mulberry Street, Newark, NJ 07102.
(8) Address is 6 Greenwich Office Park, Greenwich, CT 06831.
(9) Address is 506 S. Broad Street, Monroe, GA 30655.
44
<PAGE> 47
PLAN OF DISTRIBUTION
The shares of Common Stock offered hereby were issued to the following
Selling Stockholders in exchange for certain of the Company's indebtedness
and certain issued and outstanding shares of Old Common Stock pursuant to the
terms of the Plan: (i) The Prudential Insurance Company of America, a holder
of 657,119 shares of Common Stock, received its shares in exchange for
indebtedness of the Company in the amount of approximately $6,379,066 and
(ii) Albert Fried & Co. LLC, UBS Mortgage Finance, Inc., The Foothill Group,
Inc. and Lazard Freres & Co. LLC holders of 1,531,229; 1,197,406; 2,652,709
and 530,565 shares of Common Stock, received their shares in exchange for
indebtedness of the Company in the amount of approximately $57,000,000 in the
aggregate and, in the case of Albert Fried & Co. LLC, in exchange for
201,220 shares of Old Common Stock. Gintel, a holder of 797,729 shares of
Common Stock, received his shares in exchange for indebtedness of the
Company in the amount of approximately $9,061,250 and 600,000 shares of Old
Common Stock. Avondale, a holder of 454,167 shares of Common Stock,
received its shares in exchange for 2,270,833 shares of Old Common Stock.
The shares of Common Stock owned by the Selling Stockholders are being
registered pursuant to the terms of a Registration Rights Agreement.
The Old Common Stock was traded on the Nasdaq Electronic Bulletin Board
under the symbol "ONET." Pursuant to the Plan, the Company is required to
apply for listing of the Common Stock on the Nasdaq NMS. In the event the
Common Stock is not listed on the Nasdaq NMS, the Company will apply for
listing of the Common Stock on the Nasdaq Electronic Bulletin Board. There
can be no assurance that the Shares will actually be listed on the Nasdaq
Electronic Bulletin Board. See "Risk Factors - Lack of Trading Market" In the
event the Shares are so listed or traded, the Shares may be sold from time to
time directly by the Selling Stockholders. Alternatively, the Selling
Stockholders may from time to time offer such securities through
underwriters, dealers or agents. The distribution of securities by the
Selling Stockholders may be effected in one or more transactions that may
take place on the over-the-counter market, including ordinary broker's
transactions, privately-negotiated transactions or through sales to one or
more broker-dealers for resale of such shares as principals, at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices or at negotiated prices. Usual and customary or specifically
negotiated brokerage fees or commissions may be paid by the Selling
Stockholders in connection with such sales of securities.
At the time a particular offer of securities is made by or on behalf of
the Selling Stockholders, to the extent required, a prospectus will be
distributed which will set forth the number of shares being offered and the
terms of the offering, including the name or names of any underwriters,
dealers or agents, if any, the purchase price paid by any underwriter for
shares purchased from the Selling Stockholders and any discounts, commissions
or concessions allowed or reallowed or paid to dealers, and the proposed
selling price to the public.
DESCRIPTION OF SECURITIES
CAPITAL STOCK
Prior to the confirmation of the Plan, the Company's authorized capital
stock consisted of 15,000,000 shares of Old Common Stock, $.25 par value per
share, 9,149,339 shares of which were issued and outstanding and 2,000,000
shares of Preferred Stock, $1.00 par value per share, none of which were
issued and outstanding. In accordance with the terms of the Plan, the Company
will amend its Certificate of Incorporation so that (i) on the Effective Date
immediately prior to the cancellation of the Old Common
45
<PAGE> 48
Stock and the issuance of the Common Stock, the Company will effect a 1-for-5
reverse stock split of the Old Common Stock and (ii) the Company will not be
authorized to issue preferred stock.
Following the confirmation of the Plan, the Company will have 17,000,000
authorized shares of Common Stock, $.25 par value per share 9,036,384 of
which will be issued and outstanding.
COMMON STOCK
General. All shares of Old Common Stock currently outstanding are validly
issued, fully paid and non-assessable, and all shares of Common Stock, when
issued pursuant to the terms of the Plan, will be validly issued, fully paid
and non-assessable.
Voting Rights. Each share of Common Stock will entitle the holder thereof
to one vote, either in person or by proxy, at meetings of the stockholders.
The holders are not permitted to vote their shares cumulatively. Accordingly,
the holders of more than 50% of the outstanding shares of Common Stock can
elect all of the directors of the Company standing for election at a
stockholders' meeting.
Dividend Policy. All shares of Common Stock will be entitled to
participate ratably in dividends when and as declared by the Company's Board
of Directors out of the funds legally available therefor. Any such dividends
may be paid in cash, property or additional shares of Common Stock. The
Company has not paid any cash dividends on the Old Common Stock in the past
two fiscal years or the current fiscal year and anticipates that no cash
dividends on the shares of Common Stock will be declared in the foreseeable
future. Payment of future dividends will be subject to the discretion of the
Company's Board of Directors and will depend upon, among other things, future
earnings, the operating and financial condition of the Company, its capital
requirements, general business conditions and other pertinent facts. It is
not anticipated that dividends on the Common Stock will be paid in the
foreseeable future. See "Dividend Policy."
Miscellaneous Rights and Provisions. Holders of Common Stock will have no
preemptive or other subscription rights, conversion rights, redemption or
sinking fund provisions. In the event of the liquidation or dissolution,
whether voluntary or involuntary, of the Company, each share of Common Stock
will be entitled to share ratably in any assets available for distribution to
holders of the equity of the Company after satisfaction of all liabilities.
Shares Eligible for Future Sale. Upon the confirmation of the Plan, the
Company will have 9,036,385 shares of Common Stock outstanding. Section 1145
of the Bankruptcy Code generally exempts from registration requirements the
offer or sale of a debtor's securities under a chapter 11 plan if such
securities are offered or sold in exchange for a claim against, or equity
interest in, such debtor. In reliance upon this exemption, the Common Stock
to be issued on the Effective Date as provided in the Plan will be exempt
from the registration requirements of the Securities Act and state and local
securities laws. Accordingly, such securities may be resold without
registration under the Securities Act or other federal securities laws
pursuant to the exemption provided by Section 4(1) of the Securities Act,
unless the holder is an "underwriter" with respect to such securities, as
that term is defined in the Bankruptcy Code. In addition, such securities
generally may be resold without registration under state securities laws
pursuant to various exemptions provided by the respective laws of the several
states. However, recipients of securities issued under the Plan are advised
to consult with their own counsel as to the availability of any such
exemption from registration and as to any applicable requirements or
conditions to such availability.
Section 1145(b) of the Bankruptcy Code defines "underwriter" for purposes
of the Securities Act as one who (a) purchases a claim against, interest in,
or claim for an administrative expense in the case concerning the debtor if
such purchase is with a view to distribution of any security received or to
be
46
<PAGE> 49
received in exchange for such a claim or interest, or (b) offers to sell
securities offered or sold under the plan for the holders of such securities,
or (c) offers to buy securities offered or sold under the plan from the
holders of such securities, if such offer to buy is with a view to
distribution of such securities, and under an agreement made in connection
with the Plan, with the consummation of the Plan, or with the offer or sale
of securities under the Plan, or (d) is an issuer, as defined by Section 2 of
the Securities Act, with respect to such securities.
Notwithstanding the foregoing, statutory underwriters may be able to sell
securities without registration pursuant to the resale limitations of Rule
144 under the Securities Act which, in effect, permits the resale of
securities received by statutory underwriters pursuant to a chapter 11 plan,
subject to applicable volume limitations, notice and manner of sale
requirements, and certain other conditions.
In general, under Rule 144 as currently in effect, subject to the
satisfaction of certain other conditions, a person, who owns restricted
securities for at least one year is entitled to sell, within any three-month
period, a number of such securities that does not exceed the greater of 1% of
the total number of securities outstanding of the same class or the average
weekly trading volume of the securities on all exchanges and/or reported
through the automated quotation system of a registered securities association
during the four calendar weeks preceding the date on which notice of the sale
is filed with the Commission. Sales under Rule 144 are also subject to
certain manner of sale provisions, notice requirements and the availability
of current public information about the issue. In addition, an affiliate of
the issuer is subject to such volume limitations when selling both restricted
and unrestricted securities. A person who has not been an affiliate of the
Company for at least the three months immediately preceding the sale and who
has beneficially owned the securities for at least two years, however, is
entitled to sell such securities under Rule144 without regard to any of the
limitations described above. Pursuant to the Plan, the Company is registering
the shares of Common Stock issued to its former debtholders. As a result of
such registration, virtually all of the Company's issued and outstanding
Common Stock will be freely tradeable.
No predictions can be made as to the effect, if any, that sales of shares
of Common Stock or the availability of shares for sale will have on the
market, if any, prevailing from time to time. Sales of a substantial number
of shares of the Common Stock may adversely affect the market price of the
Common Stock.
CERTAIN PROVISIONS OF THE BY-LAWS
The Company's By-laws contain certain provisions, including a prohibition
against removal of directors other than for cause, that are intended to
enhance the continuity and stability of management by making it more
difficult for stockholders to remove or change the incumbent members of the
Board of Directors.
The foregoing provision may adversely affect the ability of potential
acquires to obtain control of the Company in any transaction that is not
approved by the Company's Board of Directors. The use of these provisions as
anti-takeover devices might preclude stockholders from taking advantage of
certain situations that they believe could be favorable to their interests.
DELAWARE GENERAL CORPORATION LAW
The Delaware General Corporation Law further contains certain
anti-takeover provisions. Section 203 of the Delaware General Corporation Law
provides, with certain exceptions, that a Delaware corporation may not engage
in any of a broad range of business combinations with a person who owns 15%
or more of the corporation's outstanding voting stock (an "interested
stockholder") for a period of three years from the date that such person
became an interested stockholder unless: (i) the transaction
47
<PAGE> 50
resulting in a person's becoming an interested stockholder, or the business
combination, is approved by the board of directors of the corporation before
the person becomes an interested stockholder, (ii) the interested stockholder
acquires 85% or more of the outstanding voting stock of the corporation
(excluding shares owned by persons who are both officers and directors of the
corporation and shares held by certain employee stock ownership plans), or
(iii) the business combination is approved by the corporation's board of
directors and by the holders of at least 66 2/3% of the corporation's
outstanding voting stock at an annual or special meeting, excluding shares
owned by the interested stockholder.
TRANSFER AGENT, REGISTRAR AND WARRANT AGENT
The transfer agent and registrar for the Common Stock is American Stock
Transfer and Trust Company, 6201 15th Avenue, Brooklyn, New York 11219.
LEGAL MATTERS
The validity of the issuance of the Securities offered hereby will be
passed upon for the Company by the law firm of Blau, Kramer, Wactlar &
Lieberman, P.C., Jericho, New York.
EXPERTS
The financial statements of the Company as of September 27, 1997 and
September 28, 1996 and for each of the fiscal years in the three year period
ended September 27, 1997 included herein and in the Registration Statement
have been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their report with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in accounting and
auditing in giving said report.
48
<PAGE> 51
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE
<TABLE>
<CAPTION>
AUDITED FINANCIAL INFORMATION Page
<S> <C>
Report of Independent Public Accountants F-2
Consolidated balance sheets - September 27, 1997 and September 28, 1996 F-3
Consolidated statements of operations for the three years ended September 27, 1997 F-4
Consolidated statements of cash flows for the three years ended September 27, 1997 F-5
Consolidated statements of shareholders' equity for the three years ended September 27, 1997 F-6
Notes to consolidated financial statements F-7
UNAUDITED FINANCIAL INFORMATION
Consolidated Balance Sheets at December 27, 1997 and September 27, 1997 F-16
Condensed Consolidated Statements of Operations for the Three Months
Ended December 27, 1997 and December 28, 1996 F-17
Condensed Consolidated Statements of Cash Flows for
the Three Months Ended December 27, 1997 and December 28, 1996 F-18
Notes to Condensed Consolidated Financial Statements F-19
FINANCIAL STATEMENT SCHEDULE
Schedule II - Valuation and Qualifying Accounts F-22
</TABLE>
Other schedules are omitted as they are not applicable or not required under
the rules of Regulation S-X.
F-1
<PAGE> 52
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Oneita Industries, Inc.:
We have audited the accompanying consolidated balance sheets of Oneita
Industries, Inc. (a Delaware corporation) and subsidiaries as of September
27, 1997 and September 28, 1996, and the related consolidated statements of
operations, cash flows and shareholders' equity for each of the three years
in the period ended September 27, 1997. These financial statements and the
schedule referred to below are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedule 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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Oneita
Industries, Inc. and subsidiaries as of September 27, 1997 and September 28,
1996 and the results of their operations and their cash flows for each of the
three years in the period ended September 27, 1997, in conformity with
generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As shown in the accompanying
consolidated financial statements, the Company has incurred significant
losses for years ended September 27, 1997 and September 28, 1996. Unaudited
interim information indicates that losses are continuing for fiscal 1998. As
discussed in Note 1 to the accompanying consolidated financial statements, at
September 27, 1997, the Company was not in compliance with certain terms of
its long-term revolving credit agreement, a loan agreement with an
institutional lender, and subordinated notes. These obligations are subject
to acceleration (or have been accelerated) by the lenders and accordingly
have been classified as current liabilities. The Company has negotiated an
agreement to restructure the debt which the Company anticipates will be
implemented through a pre-negotiated Chapter 11 case. The documentation
related to these various agreements has not been completed. There is no
assurance that the agreements will be finalized or that the Chapter 11 case
will be implemented as planned. These matters, among others, raise
substantial doubt about the Company's ability to continue as a going concern.
Management's plans in regard to these matters are described in Note 1. The
accompanying consolidated financial statements do not include any adjustments
relating to the recoverability and classification of recorded asset amounts
or the amounts and classification of liabilities that might result should the
Company be unable to continue as a going concern.
Our audits were made for the purpose of forming an opinion on the basic
consolidated financial statements taken as a whole. The schedule listed in
the index to consolidated financial statements and schedule is presented for
purposes of complying with the Securities and Exchange Commission's rules and
is not a required part of the basic financial statements. This schedule has
been subjected to the auditing procedures applied in the audits of the basic
financial statements and, in our opinion, fairly states in all material
respects the financial data required to be set forth therein in relation to
the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Columbia, South Carolina,
November 21, 1997.
F-2
<PAGE> 53
ONEITA INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
September 27, September 28,
1997 1996
---- ----
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents ............................... $ 1,654 $ 9,135
Refundable income taxes ................................. 0 1,988
Accounts receivable, less allowance for doubtful accounts
of $836 in 1997 and $1,117 in 1996 ................. 17,200 25,675
Inventories (Note 1) .................................... 31,214 43,883
Prepaid expenses and other current assets ............... 1,024 223
----------- ------------
Total current assets ............................... 51,092 80,904
Property, plant and equipment, at cost, net of depreciation
and amortization (Note 1) ........................... 32,733 46,244
Deferred charges and other assets ......................... 3,152 2,377
----------- ------------
$ 86,977 $ 129,525
=========== ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Long-term debt in default classified as current (Note 3) .. $ 70,654 $ 72,192
Current portion of capital lease obligations (Note 3) ... 1,405 1,845
Accounts payable ........................................ 4,117 9,016
Accrued liabilities (Note 2) ............................ 17,511 11,433
----------- ------------
Total current liabilities ......................... 93,687 94,486
Capital lease obligations (Note 3) ........................ 2,032 3,125
Commitments (Note 7)
Shareholders' Equity (Note 4):
Preferred Stock, $1.00 par value, 2,000,000 shares
authorized, none issued ......................... -- --
Common Stock, $.25 par value, 15,000,000 authorized
shares, outstanding 9,149,339 shares in 1997 and
9,269,739 in 1996 ................................ 2,287 2,318
Capital in excess of par value ........................... 75,420 76,728
Accumulated deficit ..................................... (86,449) (45,793)
Treasury stock, at cost, 120,400 shares in 1996 ........... 0 (1,339)
----------- ------------
(8,742) 31,914
----------- ------------
$ 86,977 $ 129,525
=========== ============
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral part
of these balance sheets.
F-3
<PAGE> 54
ONEITA INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share data)
<TABLE>
<CAPTION>
Years Ended
---------------------------------------------------
Sept. 27, 1997 Sept. 28, 1996 Sept. 30, 1995
-------------- -------------- --------------
<S> <C> <C> <C>
Net sales (Note 6) .................................... $ 135,006 $ 168,346 $ 175,036
Cost of goods sold ................................... 139,303 192,094 146,820
--------- --------- ---------
Gross profit (loss) .................................. ( 4,297) (23,748) 28,216
Selling, general and administrative expenses ......... 13,214 19,654 20,838
Consolidation and restructuring charges (Note 5) ...... 15,282 6,229 --
--------- --------- ---------
(Loss) income from operations (32,793) (49,631) 7,378
Other expense:
Interest expense, net of interest income of
$395 in 1997, $424 in 1996 and $465 in 1995 ...... 7,863 7,001 3,006
--------- --------- ---------
(Loss) income before income taxes ................... (40,656) (56,632) 4,372
--------- --------- ---------
(Benefit) provision for income taxes (Note 1) :
State and local ..................................... 0 (270) 194
Federal ............................................. 0 (2,669) 1,358
--------- --------- ---------
0 (2 939) 1,552
--------- --------- ---------
Net (loss) income .................................... $ (40,656) $ (53,693) $ 2,820
========= ========= =========
Net (loss) income per share (Note 1) ................. $ (4.44) $ (7.58) $ .40
========= ========= =========
Weighted average number of shares outstanding ...... 9,149 7,084 6,984
========= ========= =========
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.
F-4
<PAGE> 55
ONEITA INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, except share data)
<TABLE>
<CAPTION>
Years Ended
------------------------------------------------------
Sept. 27, 1997 Sept. 28, 1996 Sept. 30, 1995
-------------- -------------- --------------
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Net (loss) income .......................................... $(40,656) $(53,693) $ 2,820
Adjustments to reconcile net (loss) income to net cash
used in operating activities:
Depreciation and amortization .......................... 6,974 5,886 4,649
Consolidation charges .................................. 8,060 2,494 808
Provision for losses on accounts receivable ............ 792 400 150
Decrease in deferred income taxes ...................... -- (1,621) (130)
Loss on sale of property and equipment ................ 1,395 874 94
Change in assets and liabilities:
Decrease in receivables ................................ 9,671 3,860 3,684
Decrease (increase) in inventories ..................... 12,669 36,085 (35,248)
(Increase) decrease in prepaid expenses and
other assets ........................................ (2,303) 647 1,560
Increase (decrease) in accounts payable
and accrued liabilities ............................. 1,179 (593) (2,181)
-------- -------- --------
Total adjustments .......................................... 38,437 48,032 (26,614)
-------- -------- --------
Net cash used in operating activities ..................... (2,219) (5,661) (23,794)
-------- -------- --------
Cash Flows From Investing Activities:
Proceeds from sale of property, plant and equipment ....... 641 819 86
Acquisition of property, plant and equipment .............. (2,832) (9,184) (17,998)
Decrease (increase) in equipment lease deposits ........... -- 883 (475)
-------- -------- --------
Net cash used in investing activities .................. (2,191) (7,482) (18,387)
-------- -------- --------
Cash Flows From Financing Activities:
Short-term borrowings ..................................... -- 2,000 30,000
Payment of short-term borrowings .......................... -- -- (7,000)
Proceeds from issuance of long-term debt .................. -- 22,219 25,000
Purchase of treasury stock ................................ -- -- (1,339)
Sale of Common Stock ...................................... -- -- 337
Decrease in funds restricted for capital projects ......... -- -- 2,342
Payment of long-term debt and capital lease obligations ... (3,071) (4,690) (5,377)
-------- -------- --------
Net cash (used in) provided by financing activities .... (3,071) 19,529 43,963
-------- -------- --------
Net (decrease) increase in cash and cash equivalents ......... (7,481) 6,386 1,782
Cash and cash equivalents at beginning of year ............... 9,135 2,749 967
-------- -------- --------
Cash and cash equivalents at end of year ..................... $ 1,654 $ 9,135 $ 2,749
======== ======== ========
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.
F-5
<PAGE> 56
ONEITA INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(In thousands, except share data)
<TABLE>
<CAPTION>
Common Stock
---------------------------------------------
Capital in Retained
Number Par Excess of (Deficit) Treasury
of Shares Value Par Value Earnings Stock
--------- ----- --------- -------- -----
<S> <C> <C> <C> <C> <C>
Balances as of September 30, 1994 .... 6,960,821 $ 1,740 $ 69,202 $ 5,080 $ --
Net income ..................... -- -- -- 2,820 --
Exercise of stock options ...... 38,085 10 327 -- --
Purchase of treasury stock ..... -- -- -- -- (1,339)
--------- ---------- ---------- ---------- ----------
Balances as of September 30, 1995 .... 6,998,906 1,750 69,529 7,900 (1,339)
Net loss ....................... -- -- -- (53,693) --
Common Stock issued ............ 2,270,833 568 7,199 -- --
--------- ---------- ---------- ---------- ----------
Balances as of September 28, 1996 .... 9,269,739 2,318 76,728 (45,793) (1,339)
Net loss ....................... -- -- -- (40,656) --
Retirement of treasury stock ... (120,400) (31) (1,308) -- 1,339
--------- ---------- ---------- ---------- ----------
Balances as of September 27, 1997 .... 9,149,339 $ 2,287 $ 75,420 $ (86,449) $ --
========= ========== ========== ========== ==========
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an
integral part of these statements.
F-6
<PAGE> 57
ONEITA INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)
(1) Financial restructuring developments:
The Company has incurred net losses of $40,656 and $53,693 for the
years ended September 27, 1997 and September 28, 1996. The Company is highly
leveraged, has no short-term liquidity and is unable to service its debts.
At September 27, 1997, the Company was and continues to be in
non-compliance with certain terms of its long-term revolving credit agreement, a
loan agreement with an institutional lender, and subordinated notes held by Mr.
Gintel. These obligations, $57,000, $6,154 and $7,500 in principal amount,
respectively, are subject to acceleration by the lenders (and in May 1997 the
institutional lender declared all of the indebtedness due to it to be
immediately due and payable) and accordingly have been classified as current
liabilities.
The Company has negotiated an agreement in principle to restructure
these obligations which aggregate $70,654, plus accrued interest and fees,
pursuant to which such obligations will be exchanged for; 1) payment of $15,000
in cash, 2) the issuance of various notes totaling $38,500 and 3) 79.75% of the
outstanding Common Stock of the Company. The Company is attempting to complete
the agreements which will be implemented through a pre-negotiated Chapter 11
case. The Company has reached an agreement in principle with a lender for debtor
in possession financing and for financing when it emerges from bankruptcy.
However, due to the complexity of the transaction and competing interests, no
assurance can be given that the final terms of the new revolving credit
agreement and the restructuring of the existing debt will ultimately be
available to the Company on satisfactory terms or that the Debtor's
Pre-negotiated Plan will be confirmed by the United States Bankruptcy Court.
(2) Summary of significant accounting policies:
NATURE OF BUSINESS AND LIQUIDITY -
Oneita Industries, Inc. (the Company) manufactures and markets high
quality activewear including T-shirts and fleecewear, and infantswear primarily
for the newborn and toddler markets. These products are marketed to the
imprinted sportswear industry and to major retailers.
Market pressures that resulted in reduced sales volumes and prices and
operating losses during the year ended September 27, 1997 are continuing in
fiscal 1998. Management's operating plans include continued close monitoring of
costs and concentrating the manufacturing and sales efforts on a more profitable
product mix. In September 1997, the Company announced a plan to consolidate
certain of its operations in order to further lower its costs and make its
operations more efficient. The consolidation will involve the closing of one
facility, the write down to estimated fair value of certain excess production
equipment and the shift of more assembly operations to existing offshore
facilities. Inventories at September 30, 1995 of $80,000 were reduced by 45% in
1996 to $43,900 and then by 29% in 1997 to $31,200. The Company believes that
inventories can be maintained at lower levels than in prior years.
The accompanying consolidated financial statements have been prepared
on the basis of accounting principles applicable to a going concern and
contemplate the realization of assets and the settlement of liabilities and
commitments in the normal course of business.
BASIS OF PRESENTATION -
The consolidated financial statements of the Company include the
accounts of the Company and all of its subsidiaries. All material intercompany
accounts and transactions have been eliminated. The Company's fiscal year ends
on the last Saturday in September. The 1997 and 1996 fiscal years each reflect a
52-week period. The 1995 fiscal year reflects a 12-month period.
CASH FLOWS -
F-7
<PAGE> 58
The Company considers all highly liquid debt instruments with an
original maturity of three months or less to be cash equivalents. Cash payments
for interest expense were $7,842, $7,022, and $3,565, (net of approximately $500
capitalized interest for property additions), in fiscal 1997, 1996, and 1995,
respectively. Cash payments for income taxes were $5,277 and $231 in fiscal 1995
and 1994, respectively. In fiscal 1997, income tax refunds of $2,620 were
received by the Company.
In January 1996, the Company utilized its $60,000 revolving credit
arrangement to repay $50,000 of its then existing debt. In August 1996, $7,767
of subordinated debt plus accrued interest, less deferred financing costs, was
converted into Common Stock of the Company. See Note 3.
INVENTORIES -
Inventories are stated at the lower of cost or market and include
material, labor and manufacturing overhead costs. The Company uses the last-in,
first-out method for valuing its inventories. No significant change would result
if the Company valued its entire inventory using the first-in, first-out method.
Inventories are comprised of the following:
<TABLE>
<CAPTION>
Sept. 27, 1997 Sept. 28, 1996
-------------- --------------
<S> <C> <C>
Finished goods ............... $20,095 $31,774
Work in process .............. 9,313 9,287
Raw materials and supplies ... 1,806 2,822
------- -------
$31,214 $43,883
======= =======
</TABLE>
PROPERTY, PLANT AND EQUIPMENT -
Property, plant and equipment are recorded at cost. Additions and
improvements are capitalized, while maintenance and repairs are expensed when
incurred. Depreciation of property, plant and equipment is provided primarily on
a straight-line basis over the estimated useful lives of the assets and over the
term of the lease for assets in use under capital leases. Leasehold improvements
are amortized over the life of the lease or life of the improvement, whichever
is shorter.
Property, plant and equipment consists of the following:
<TABLE>
<CAPTION>
Estimated Sept. 27, Sept. 28,
Useful Life 1997 1996
----------- --------- ---------
<S> <C> <C> <C>
Factory machinery and equipment ....... 8-9 $24,255 $46,058
Buildings and building improvements ... 20-25 12,713 19,511
Other fixtures and equipment .......... 5 3,498 7,139
Land .................................. -- 607 708
------- -------
41,073 73,416
Less accumulated depreciation ......... 8,340 27,172
------- -------
$32,733 $46,244
======= =======
</TABLE>
The above amounts include property and equipment recorded under capital leases
of $15,101 at September 27, 1997 and September 28, 1996.
Fourth quarter results for 1997 and second quarter results for 1996
include non-cash pretax charges of $8,060 and $2,000 (included in the
restructuring charges discussed in Note 5) related to asset write-downs and
write-offs. Certain assets were evaluated and the net book value of these assets
was adjusted to the estimated fair market value.
Maintenance and repairs related to the Company's property, plant and
equipment amounted to $1,960, $2,659, and $2,615 for the years ended September
27, 1997 and September 28, 1996, and 1995, respectively.
F-8
<PAGE> 59
DEFERRED CHARGES AND OTHER ASSETS -
Deferred charges and other assets include goodwill at September 27,
1997 and September 28, 1996 which represent costs in excess of net assets
acquired of $388 and $403 respectively, which is net of accumulated amortization
of $137 and $121, respectively. The goodwill is being amortized on a
straight-line basis over 40 years. The net carrying amount of goodwill
approximates its estimated fair value.
INCOME TAXES -
Income tax expense is based on reported income adjusted for differences
that do not enter into the computation of taxes payable under applicable tax
laws. Deferred income taxes are provided for timing differences between book and
taxable income. The primary components of deferred taxes result from the
differences in the reporting of depreciation, inventory valuation and accruals
not currently deductible.
At September 27, 1997, net operating loss carry forwards of
approximately $79,000 are available to reduce future income taxes payable by the
Company. The carry forwards expire in fifteen years.
The following table summarizes the (benefit) provision for federal and
state taxes on income:
<TABLE>
<CAPTION>
Years Ended
-------------------------------------------
Sept. 27, Sept. 28, Sept. 30,
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Current:
Federal ..................... $ -- $(1,988) $ 1,490
State ....................... -- (270) 194
------- ------- -------
-- (2,258) 1,684
Deferred
Federal .................... -- (681) (132)
State ...................... -- -- --
------- ------- -------
-- (681) (132)
------- ------- -------
Net tax (benefit) provision ... $ -- $(2,939) $ 1,552
======= ======= =======
</TABLE>
The effective income tax rate differs from the United States federal statutory
rate as follows:
<TABLE>
<CAPTION>
Years Ended
-----------------------------------------
Sept. 27, Sept. 28, Sept. 30,
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
United States federal statutory rate (benefit) ... (35.0)% (35.0)% 35.0%
State and local income taxes ..................... 0.0 (0.3) 2.9
Goodwill amortization ............................ 0.1 0.1 0.1
Losses carried forward for future years .......... 34.9 29.9 --
Other ............................................ 0.0 0.1 (2.5)
----- ----- ----
0.0% (5.2)% 35.5%
===== ===== ====
</TABLE>
Due to the loss carryforward position, the Company has eliminated its
deferred tax debits and credits. Deferred income taxes will be reinstated when
the carry forwards are recognized for tax purposes.
F-9
<PAGE> 60
Significant components of deferred income taxes are as follows:
<TABLE>
<CAPTION>
Years Ended
--------------------------------
Sept. 27, 1997 Sept. 28, 1996
-------------- --------------
<S> <C> <C>
Current deferred tax debits applicable to:
Benefit plan accruals ........................... $ 1,177 $ 1,276
Other ........................................... 4,787 4,280
-------- --------
5,964 5,556
Valuation allowance ............................. (5,964) (5,556)
-------- --------
$ 0 $ 0
======== ========
Noncurrent deferred tax debits (credits) applicable to:
Depreciation and amortization differences ....... $ (3,477) $ (3,827)
Asset reevaluations ............................. 3,108 490
Losses carried forward for future years ......... 31,029 16,974
Other ........................................... (646) (523)
-------- --------
30,014 13,114
Valuation allowance ............................. (30,014) (13,114)
-------- --------
$ 0 $ 0
======== ========
</TABLE>
BENEFIT PLAN -
The Company sponsors a defined contribution retirement plan available
to all employees who meet plan requirements. The amount of the Company's
contributions are determined by formulas outlined in the plan document. The
Company's contributions to the plan for the years ended September 1997, 1996 and
1995 were $509, $463 and $736 respectively.
The Company does not provide any additional post-retirement benefits to
its employees.
REVENUE RECOGNITION -
The Company recognizes revenue upon shipment of products to customers.
USE OF ESTIMATES -
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements. Estimates also affect the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
RECLASSIFICATIONS -
Certain balances in the prior year financial statements have been
reclassified to conform with the 1997 presentation.
EARNINGS PER SHARE -
Net income (loss) per share is calculated using the weighted average
number of shares of Common Stock outstanding during each period, adjusted to
reflect the dilutive effect of shares usable for stock options.
RELATED PARTY TRANSACTIONS -
At September 27, 1997, Avondale Mills, Inc. owned 24.8% of the
Company's outstanding Common Stock. Two members of the Company's board of
directors are executives of Avondale Mills, Inc.. For the year ending September
27, 1997, the Company purchased 69% of its yarn requirements (approximately
$31,000) from Avondale Mills, Inc. At September 27, 1997 the Company had no
accounts payable to Avondale Mills.
F-10
<PAGE> 61
(2) Accrued Liabilities:
Accrued liabilities include the following amounts at :
<TABLE>
<CAPTION>
Sept. 27, 1997 Sept. 28, 1996
-------------- --------------
<S> <C> <C>
Interest ........................... $ 1,835 $ 1,419
Payroll ............................ 1,815 1,641
Employee benefits .................. 3,092 3,398
Restructuring and reorganization ... 8,006 2,494
Other .............................. 2,763 2,481
------- -------
$17,511 $11,433
======= =======
</TABLE>
(3) Long-term debt and capital lease obligations:
<TABLE>
<CAPTION>
Sept. 27, 1997 Sept. 28, 1996
-------------- --------------
<S> <C> <C>
Long-term debt -
Notes payable to banks ........... $57,000 $57,000
Senior promissory notes .......... 6,154 7,692
Subordinated Debt ................ 7,500 7,500
Capital leases -
Industrial development bonds .... 2,907 4,383
Other ............................ 530 587
------- -------
74,091 77,162
Less current portion ............. 1,405 1,846
Less long-term debt in default ... 70,654 72,191
------- -------
$ 2,032 $ 3,125
======= =======
</TABLE>
In January 1996, the Company entered into a new $60,000, three-year
loan agreement with three of its banks. The proceeds of the loan were used to
pay off a then existing bank credit facility and existing short-term bank lines
totaling $50,000. The remaining $7,000 was used for working capital and capital
expenditures. The loan is secured by substantially all of the Company's accounts
receivable and inventory. At September 27, 1997, $57,000 was outstanding under
this agreement. The facility matures in January 1999. Interest is charged under
variable rate options which approximate the banks' prime rate. The loan
agreement contains certain financial covenant and ratio requirements such as
minimum working capital and net worth and debt to equity and debt coverage as
defined. At September 27, 1997, the Company was not in compliance with certain
terms of the loan agreement (see Note 1) and accordingly interest of 11% has
been paid during the default period.
In January 1996, the Company issued to Robert M. Gintel subordinated
notes in the aggregate amount of $7,500. The notes are subordinated to the
Company's bank debt and certain other senior debt, mature in February 1999 and
bear interest at 10%. Concurrent with the issuance of the notes, Oneita issued
to Mr. Gintel warrants to purchase 125,000 shares of Oneita Common Stock at
$7.00 per share. The Company is in default under these notes and will remain so
until the non-compliance under the loan agreement discussed above is remedied.
During this period of default, no interest may be paid to the note holders.
In addition to the bank refinancing and subordinated note, in order to
improve liquidity and strengthen the balance sheet, in January 1996 the Company
issued to Avondale Mills, Inc., the Company's largest raw material supplier, a
note in the amount of $7,500. In August 1996, the note along with accrued
interest thereon was converted to Common Stock of the Company at $3.50 per
share.
In December 1988, the Company entered into a $20,000 loan agreement
with an institutional lender which provides for interest at a fixed rate of
11.34%. The principal is due in semi-annual payments of $1,539. The loan
agreement contains certain financial ratio and covenant requirements such as
minimum working capital, debt to equity
F-11
<PAGE> 62
and debt coverage, as defined, and stock redemption and dividend limitations. At
September 27, 1997, the Company was not in compliance with certain terms of the
loan agreement (see Note 1).
The following are the scheduled maturities of long-term debt
outstanding at September 27, 1997 before consideration of default:
<TABLE>
<S> <C>
1998 ........... $ 6,154
1999 ........... 64,500
</TABLE>
In October 1989, the Company entered into a $10,000 capital lease
obligation with the Industrial Development Board of the City of Fayette, Alabama
through whom industrial development revenue bonds were issued. The bonds bear
interest and fees at a fixed rate of 8.2% per year. The principal is due in
quarterly payments of $313.
Future minimum payments under capital lease obligations consist of the
following at September 27, 1997:
<TABLE>
<S> <C>
1998 ............................................ $1,676
1999 ............................................ 1,483
2000 ............................................ 451
2001 ............................................ 91
2002 ............................................ 91
Later years ..................................... 198
------
Total minimum lease payments .................... 3,990
Less amount representing interest ............... 553
------
Present value of net minimum lease payments
( including current portion of $1,405 ) ... $3,437
======
</TABLE>
Prior to January 1996, the Company had uncommitted bank lines of credit
totaling $30,000 which provided for interest at below the prime rate. During
fiscal 1996 and 1995, the maximum amount of short-term borrowings outstanding
was $25,000 and $30,000, the average amount outstanding was $7,956 and $17,436,
respectively, and the weighted average interest rate was 7.7% and 6.9%,
respectively. Average amounts outstanding were determined by using daily
balances and the weighted average interest rate during the period was computed
by dividing the actual interest expense by the average short-term borrowings
outstanding.
4) Stock options:
The Company has an Incentive Stock Option Plan (the "Option Plan"),
which was approved by the shareholders in 1988, under which 514,652 shares of
Common Stock have been reserved for grants to directors, officers and key
employees. The prices for the shares covered by each option will not be less
than 100% of the fair market value at the date of the grant. Options expire five
years from the date of the grant and become exercisable in installments as
determined by the Board of Directors commencing one year after the date of the
grant. No charges or credits to income are made with regard to options granted
under the Option Plan.
F-12
<PAGE> 63
Transactions under the Option Plan are as follows -
<TABLE>
<CAPTION>
Number Option
of Shares Price
--------- -----------------
<S> <C> <C>
Outstanding at September 30, 1995 ... 157,881 $6.625 to $12.375
Granted ................... --
Exercised ................. --
Terminated ................ (86,943) $6.625 to $12.375
-------
Outstanding at September 28, 1996 ... 70,938 $6.625 to $12.375
Granted ................... 85,000 $1.750 to $ 3.750
Exercised ................. --
Terminated ................ (20,025) $6.625 to $12.375
-------
Outstanding at September 27, 1997 ... 135,913 $1.750 to $12.375
=======
</TABLE>
The outstanding options expire at various dates through 2002. At
September 27, 1997 options for 53,413 shares are exercisable at $6.625 to
$12.375 per share and there are 162,858 options available for grant.
In 1990, the Company's shareholders approved a Non-Qualified Stock
Option Plan under which 453,876 shares of Common Stock have been reserved for
grants. Options expire five years after the date of the grant and become
exercisable in installments as determined by the Board of Directors.
Transactions under the Non-Qualified Stock Option Plan are as follows:
<TABLE>
<CAPTION>
Number Option
of Shares Price
--------- -----
<S> <C> <C>
Outstanding at September 30, 1995 ... 251,486 $6.625 to $15.36
Granted ................... --
Exercised ................. --
Terminated ................ (135,424) $6.625 to $15.36
--------
Outstanding at September 28, 1996 ... 116,062 $6.625 to $15.36
Granted ................... 85,000 $1.750 to $ 3.25
Exercised ................. --
Terminated ................ (19,675) $6.625 to $15.36
--------
Outstanding at September 27, 1997 ... 181,387 $1.750 to $15.36
========
</TABLE>
The outstanding options expire at various dates through 2002. At
September 27, 1997, options for 115,554 shares are exercisable at $3.25 to
$15.36 per share and there are 120,383 options available for grant.
In February 1994, the Board of Directors approved the Outside Directors
Stock Option Plan for Oneita Industries, Inc. (the "Directors Plan") under which
60,000 shares of Common Stock have been reserved for grants to outside
directors. The Directors Plan provides for automatic annual grants of 2,000
options to each outside director. The exercise price for the shares covered by
each option will not be less than 100% of the fair market value at the date of
grant. Options expire five years from the date of the grant and become
exercisable after the first anniversary of the grant. At September 27, 1997
there were options to purchase 40,500 shares outstanding with exercise prices of
$1.750 to $12.375 per share.
(5) Consolidation and Restructuring charges:
In September 1997, the Company announced a plan to consolidate certain
of its operations in order to further lower its costs and make its operations
more efficient. The operating results for the year ended September 27, 1997
reflect a pretax charge of $15,282 related to this consolidation. The
consolidation will involve the closing of one facility, the writedown to
estimated fair value of certain excess production equipment and the shift of
more assembly operations to existing offshore facilities.
The operating results for the year ended September 28, 1996 reflect a
pretax charge of $6,229 to streamline and consolidate the Company's
manufacturing and administrative operations. The charge reflects the costs of
equipment relocation, staff reductions and retraining and transitional employee
salaries and benefits.
F-13
<PAGE> 64
The operating results for the year ended September 30, 1995 reflect
a pretax charge of $4,080 for the write-down of facilities to their fair
market value.
(6) Major Customers and Concentration of Credit Risk:
Major customers are those that individually account for more than
10% of the Company's consolidated net sales. Sales to one customer were
16.8%, 16.3% and 17.1% of consolidated net sales in fiscal years 1997, 1996
and 1995, respectively. The Company has incurred advertising expenses of
$3,300, $3,800 and $2,400 for the fiscal years 1997, 1996 and 1995,
respectively.
Substantially all of the Company's sales are to apparel distributors
and retailers. This could unfavorably affect the Company's overall exposure
to credit risk inasmuch as these customers could be affected by similar
economic or other conditions. The Company performs periodic credit
evaluations of its customers' financial condition and establishes an
allowance for doubtful accounts based upon factors surrounding the credit
risk of specific customers, historical trends and other information.
Historically, the Company's uncollectible accounts receivable have not been
significant, and typically the Company does not require collateral for its
accounts receivable. At September 27, 1997 and September 28, 1996 and
September 30, 1995 approximately 39.3%, 41.6% and 46.6%, respectively, of net
accounts receivables were represented by six customers.
In addition, in assessing its concentration of credit risk related
to cash and cash equivalents, the Company places its cash and cash
equivalents, which may at times exceed FDIC insurance limits, in domestic
financial institutions.
(7) Commitments:
The Company and its subsidiaries rent real property and equipment
under operating leases expiring at various dates. Most of the real property
leases have escalation clauses relating to increases in real property taxes.
Future minimum payments under noncancelable operating leases (of
which $2,000 relate to payments for equipment considered excess and therefore
included in the 1997 consolidation charge) consist of the following at
September 27, 1997:
<TABLE>
<S> <C>
1998 ................................................ $ 3,777
1999 ................................................ 3,203
2000 ................................................ 1,215
2001 ................................................ 171
Later years ......................................... 58
-------
$ 8,424
</TABLE>
Rent expense for all operating leases was $4,649, $6,131 and $6,475
for the years ended September 27, 1997, September 28, 1996 and September 30,
1995, respectively.
F-14
<PAGE> 65
(8) Quarterly financial information (unaudited):
<TABLE>
<CAPTION>
Quarter Ended
-----------------------------------------------
Sept. 27, June 28, March 29, Dec. 28,
1997 1997 1997 1996
-----------------------------------------------
<S> <C> <C> <C> <C>
Net sales ............. $ 33,045 $ 35,549 $ 32,515 $ 33,897
Gross profit (loss) ... (4,148) 516 77 (742)
Net loss .............. (24,725) (4,782) (5,239) (5,910)
Net loss per share ... $ (2.70) $ (.52) $ (.57) $ (.65)
</TABLE>
<TABLE>
<CAPTION>
Quarter Ended
-----------------------------------------------
Sept. 28, June 29, March 30, Dec. 30,
1996 1996 1996 1995
-----------------------------------------------
<S> <C> <C> <C> <C>
Net sales ............. $ 34,711 $ 55,212 $ 43,236 $ 35,187
Gross profit (loss) ... (12,264) 1,444 (13,482) 554
Net loss .............. (19,728) (5,243) (25,348) (3,374)
Net loss per share .... $ (2.56) $ (.76) $ (3.68) $ (.49)
</TABLE>
Net (loss) income per share amounts are computed independently for
each of the quarters presented, on the basis described in Note 1.
Accordingly, the sum of the quarters are not equal to the full year
net (loss) income per share amount.
Net losses for the fourth quarter of fiscal 1997 and for the second
and fourth quarters of fiscal 1996 included pre-tax losses of
$15,282, $5,301 and $928, respectively, for restructuring charges as
described in Note 5.
Gross profit (loss) for the fourth quarter of fiscal 1997 was
adversely affected by reduced unit sales prices as compared to the
first three quarters of the year.
F-15
<PAGE> 66
ONEITA INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
December 27, September 27,
1997 1997
------------ -------------
(Note 1) (Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ 1,585 $ 1,654
Accounts receivable, less
allowance for doubtful accounts 9,506 17,200
Inventories (Note 2) 28,436 31,214
Prepaid expenses and other
current assets 1,649 1,024
-------- --------
Total current assets 41,176 51,092
PROPERTY, PLANT AND EQUIPMENT, at cost,
less accumulated depreciation and
amortization 31,848 32,733
OTHER ASSETS 2,856 3,152
-------- --------
$ 75,880 $ 86,977
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Long-term debt in technical default,
classified as current $ 70,654 $ 70,654
Current portion of long-term debt
and capital leases 1,405 1,405
Accounts payable 3,832 4,117
Accrued liabilities 17,170 17,511
-------- --------
Total current liabilities 93,061 93,687
CAPITAL LEASE OBLIGATIONS 1,615 2,032
SHAREHOLDERS' EQUITY:
Preferred Stock, Series I, par
value $1.00 per share, 2,000,000
shares authorized, none issued -- --
Common Stock, $.25 par value,
15,000,000 shares authorized,
9,149,339 shares issued and
outstanding at December 27, 1997
and September 27, 1997 2,287 2,287
Other shareholders' equity (21,083) (11,029)
-------- --------
$ 75,880 $ 86,977
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
F-16
<PAGE> 67
ONEITA INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended
------------------------------
December 27, December 28,
1997 1996
------------ ------------
<S> <C> <C>
Net sales $ 26,342 $ 33,897
Cost of sales 31,227 34,639
-------- --------
Gross profit (loss) (4,885) (742)
Selling, general and administrative
expenses 3,153 3,288
-------- --------
Loss from operations (8,038) (4,030)
Interest expense 2,016 1,880
-------- --------
Loss before provision for
income taxes (10,054) (5,910)
Benefit for income taxes -- --
-------- --------
Net loss $(10,054) $ (5,910)
======== ========
Net loss per share (Note 3) $ (1.10) $ (.65)
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
F-17
<PAGE> 68
ONEITA INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Three Months Ended
------------------
December 27, December 28,
1997 1996
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(10,054) $ (5,910)
Adjustments to reconcile net loss
to net cash provided by
operating activities:
Depreciation and amortization 1,357 1,633
Provision for losses on accounts receivable 120 17
Consolidation charges (1,048) --
Net change in assets and liabilities 10,266 8,659
-------- --------
Net cash provided by operating activities 641 4,399
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property, plant and equipment (317) (559)
Proceeds from sale of property, plant
and equipment 24 510
-------- --------
Net cash used in investing activities (293) (49)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of long-term debt and capital
lease obligations (417) (1,950)
-------- --------
Net cash used in financing activities (417) (1,950)
-------- --------
NET INCREASE (DECREASE) IN CASH (69) 2,400
CASH AT BEGINNING OF PERIOD 1,654 9,135
-------- --------
CASH AT END OF PERIOD $ 1,585 $ 11,535
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
F-18
<PAGE> 69
ONEITA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) (In thousands, except share data)
(1) Basis of Presentation -
Oneita Industries, Inc. (the Company) manufactures and markets high
quality activewear including T-shirts and fleecewear, and infantswear primarily
for the newborn and toddler markets. These products are marketed to the
imprinted sportswear industry and to major retailers.
The accompanying consolidated financial statements have been prepared
on the basis of accounting principles applicable to a going concern and
contemplates the realization of assets and the settlement of liabilities and
commitments in the normal course of business. The accompanying consolidated
financial statements do not include any adjustments relating to the
recoverability and classification of recorded asset amounts or the amounts and
classification of liabilities that might result should the Company be unable to
continue as a going concern.
The Company incurred a net loss of $40,656 for the year ended September
27, 1997. Market pressures that resulted in reduced sales volumes and prices and
operating losses during the year ended September 27, 1997 are continuing in
fiscal 1998. Management's operating plans include continued close monitoring of
costs and concentrating the manufacturing and sales efforts on a more profitable
product mix. In September 1997, the Company announced a plan to consolidate
certain of its operations in order to further lower its costs and make its
operations more efficient. The consolidation involves the closing of one
facility, the write down to estimated fair value of certain excess production
equipment and the shift of more assembly operations to existing offshore
facilities.
At December 27, 1997, the Company was and continues to be in
non-compliance with certain terms of its long-term revolving credit agreement, a
loan agreement with an institutional lender, and subordinated notes held by
Robert M. Gintel. Mr. Gintel resigned as Chairman of the Board and as a director
of the Company on August 8, 1997. These obligations, $57,000, $6,154 and $7,500
in principal amount, respectively, have been classified as current liabilities.
The Company has entered into agreements with its lenders to restructure these
agreements through the pre-negotiated Chapter 11 case discussed below. These
obligations, which aggregate $70,654, plus accrued interest and fees, will be
exchanged for; 1) payment of $15,000 in cash, 2) the issuance of various notes
totaling $38,500 and 3) 79.75% of the outstanding Common Stock of the Company.
On January 23, 1998, the Company filed a Chapter 11 petition with the
United States Bankruptcy Court for the District of Delaware under Chapter 11 of
the Bankruptcy Code together with a Plan of Reorganization implementing the
restructuring with its lenders (the "Plan"). Prior to the filing, the holders
of the debt mentioned in the preceding paragraph entered into agreements with
the Company agreeing, among other things, to cooperate with the Company in
implementing the Plan. A hearing to consider approval of a Disclosure Statement
is scheduled for March 13, 1998 and a hearing to consider confirmation of the
Plan is scheduled for April 29, 1998. The Company has obtained permission from
the Bankruptcy Court to continue to pay most pre-petition claims held by trade
creditors in order to avoid any disruption in its business. In addition, the
Company has obtained interim authority from the Brankruptcy Court to Continue
to use cash collateral and to borrow up to $5,000 from Foothill Capital Corp.
under a Debtor-in-Possession Facility. A hearing to consider final approval of
the cash collateral stipulation with certin of its lenders and to borrow an
additional $5,000 under the Debtor-in-Possession Facility with Foothill Capital
Corp. is scheduled for February 26, 1998. The Debtor-in-Possession Facility is
secured by a pledge of certain property, plant and equipment. The Company
estimates that it will emerge from these Brankruptcy Proceedings before June
30, 1998. However, there can be no assurance that the Plan will be confirmed by
the Bankruptcy Court or that other events will not occur in the brankruptcy
case affecting the Company's ability to implement the Plan. If either of these
events takes place, a non-negotiated Chapter 11 is likely to occur. The Company
has a commitment from Foothill Capital Corp. for a new revolving credit
facility pursuant to which financing will be available upon emergence from
Chapter 11 Proceedings. This facility will permit the borrowing of up to
$35,000 based upon availability under a borrowing base formula (estimated to
be $25,000 at date of emergence) and will be secured primarily by accounts
receivable and inventory.
F-19
<PAGE> 70
Of the $38,500 restructured debt, $37,500 consist of senior notes that
are due in three years and bears interest at 12%. The interest accrues but is
not paid in cash for the first two years of the note term, except that interest
payments in the first two years as well as note principal prepayments may be
triggered upon the Company achieving certain targets. The senior notes will be
secured by the pledge as collateral of certain property, plant and equipment.
The remaining $1,000 of restructured debt will consist of a subordinated note
with principal and interest, accruing at 10%, payable in 10 years.
The accompanying condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. The balance sheet at September 27, 1997 has been derived
from the audited financial statements at that date. In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for the
three-month period ended December 27, 1997 are not necessarily indicative of the
results that may be expected for the year ended September 26, 1998. For further
information, refer to the consolidated financial statements and footnotes
thereto included in the Company's annual report to shareholders for the year
ended September 27, 1997.
(2) Inventories -
Inventories, stated at the lower of cost or market, are comprised of
the following:
<TABLE>
<CAPTION>
December 27, September 27,
1997 1997
------------ -------------
<S> <C> <C>
Finished goods ............... $17,613 $20,095
Work in process .............. 8,748 9,313
Raw materials and supplies ... 2,075 1,806
------- -------
$28,436 $31,214
======= =======
</TABLE>
(3) Net Income Per Share -
Earnings per share are calculated using the weighted average number of
shares of common stock, and where dilutive, common stock equivalents outstanding
during each period. Shares used in computing per share results were 9,149,339
for each of the three months ended December 27, 1997 and December 28, 1996.
F-20
<PAGE> 71
SCHEDULE II
ONEITA INDUSTRIES, INC. AND SUBSIDIARIES - VALUATION AND QUALIFYING ACCOUNTS
For The Years Ended September 27, 1997 and September 28, 1996 and September 30,
1995
(In thousands)
<TABLE>
<CAPTION>
Balance at Additions Charged Balance at
Beginning (Credited) to Costs (Deductions) End of
Description of Period and Expenses Recoveries Period
--------------------------------------------------------------
<S> <C> <C> <C> <C>
For the Year Ended September 27, 1997:
Allowance for doubtful accounts ........ $ 1,117 $ 792 $(1,073) $ 836
For the Year Ended September 28, 1996:
Allowance for doubtful accounts ........ 971 400 (254) 1,117
For the Year Ended September 30, 1995:
Allowance for doubtful account ......... 1,006 150 (185) 971
</TABLE>
F-21
<PAGE> 72
GLOSSARY
401k SAVINGS PLAN The Savings Plan for Employees of Oneita
Industries, Inc. effective as of May 1, 1993.
AMENDED AND RESTATED
CERTIFICATE OF
INCORPORATION the certificate of incorporation of
Reorganized Oneita dated the Effective Date
and filed with the Secretary of State of the
State of Delaware on or about the Effective
Date, in the form attached to the Plan as
Exhibit 6.
ANDREWS COLLECTIVE
BARGAINING AGREEMENT the agreement dated October 19, 1995, as it
may have been amended from time to time,
between Oneita and the Union of Needletrades,
Industrial and Textile Employees covering
approximately 100 employees at the Andrews
Textile Facility.
ANDREWS TEXTILE FACILITY the textile manufacturing facility operated
by Oneita in Andrews, South Carolina.
AVONDALE Avondale Mills, Inc.
BANKRUPTCY CODE title 11, United States Code, as amended from
time to time, as applicable to the
Reorganization Case.
BANKRUPTCY RULES the Federal Rules of Bankruptcy Procedure and
the local rules and orders of the Court, all
as amended from time to time and as
applicable to the Reorganization Case.
BUSINESS DAY any day on which commercial banks are open
for business, and not authorized to close, in
the City of New York, New York.
BY-LAWS the amended by-laws adopted by Oneita on May
17, 1994, as they may have been amended from
time to time.
CERTIFICATE OF
INCORPORATION the certificate of incorporation of Oneita
dated August 27, 1987 and filed with the
Secretary of State of the State of Delaware
on September 1, 1987, as it may have been
amended from time to time.
G-1
<PAGE> 73
COMMON STOCK all the shares of common stock of Reorganized
Oneita, par value $.25 per share, authorized
and issued by Reorganized Oneita on the
Effective Date pursuant to Section IV.E. of
the Plan.
COMPANY collectively, Oneita Industries, Inc. and its
subsidiaries.
CONFIRMATION DATE the date on which the Confirmation Order is
entered by the Court.
CONFIRMATION ORDER the order of the Court confirming the Plan,
in accordance with the provisions of chapter
11 of the Bankruptcy Code.
CONSENT LETTER the letter agreements executed by each holder
of claims, shortly prior to, or as of, the
Petition Date, which claims are to be
classified in classes 2 and 3 under the Plan
and returned to Oneita prior to the
commencement of the Reorganization Case
pursuant to which such parties agreed,
subject to the terms thereof, inter alia, to
(i) cooperate in implementing the Plan, (ii)
execute a Ballot accepting the Plan, (iii)
not sell or assign its Claim against Oneita
unless its assignee also agrees to be bound
by the terms of the Consent Letter, and (iv)
execute all necessary documents.
COURT (a) the United States Bankruptcy Court for
the District of Delaware, having jurisdiction
over the Reorganization Case; (b) to the
extent there is no reference pursuant to
Section 157 of title 28 of the United States
Code, the United States District Court for
the District of Delaware; and (c) any other
court having jurisdiction over the
Reorganization Case.
D-I-P AGREEMENT the agreement between Oneita and Foothill
pursuant to which Foothill will provide up to
$10,000,000 of debtor-in-possession financing
to Oneita in the Reorganization Case.
EFFECTIVE DATE the first Business Day on which all of the
conditions specified in Section V.A. of the
Plan have been satisfied or waived in
accordance with Section V.B. of the Plan;
provided, that if a stay of the Confirmation
Order is in effect on such date, the
Effective Date will be the first Business Day
after such stay is no longer in effect.
FAYETTE FACILITIES the apparel and textile facilities operated
by Oneita in Fayette, Alabama located at 207
15th Street, Southwest and 1015 Temple Avenue
South, respectively.
FINAL ORDER an order or judgment of the Court that is in
effect and is not stayed, and that is not
subject to reconsideration, vacatur,
reversal, appellate review or other
modification by means of appeal, petition
G-2
<PAGE> 74
for certiorari, motion for reargument,
rehearing or otherwise (except under Rule
9024 of the Federal Rules of Bankruptcy
Procedure).
GINTEL Robert M. Gintel, Oneita's former Chairman of
the Board of Directors and the current holder
of the Old Subordinated Gintel Notes.
GINTEL NOTE
AGREEMENT the note purchase agreement dated as of
December 28, 1995, as it may have been
amended from time to time, between Oneita,
Gintel and Avondale, pursuant to which the
Old Subordinated Gintel Notes were issued.
IBJ SCHRODER IBJ Schroder Bank & Trust Company
KINSTON Oneita-Kinston Corp., a North Carolina
corporation wholly-owned by Oneita.
NEW FOOTHILL
SECURITY DOCUMENTS collectively, (a) the New Revolving Credit
Agreement, (b) all "Loan Documents" (as such
term is defined in the New Revolving Credit
Agreement) delivered pursuant to the New
Revolving Credit Agreement, in the forms
agreed to between Oneita and Foothill, (c)
that certain Intercreditor Agreement dated
the Effective Date between Foothill, the
holders of the New Senior Secured Notes and
IBJ Schroder, as collateral agent for the
holders of the New Senior Secured Notes, in
the form annexed to the Plan as Exhibit 4,
and (d) all UCC and real property lien
filings executed in connection with any of
the foregoing agreements.
NEW REVOLVING
CREDIT AGREEMENT the Loan and Security Agreement dated as of
the Effective Date between Reorganized
Oneita, Kinston and Foothill, pursuant to
which Foothill shall provide working capital
to Reorganized Oneita and Kinston. The
obligations under the New Revolving Credit
Agreement shall be secured by certain assets
of Reorganized Oneita and Kinston as more
particularly described in the New Foothill
Security Documents.
NEW SECURITY
DOCUMENTS collectively, (a) that certain Security and
Pledge Agreement dated the Effective Date
between Reorganized Oneita and IBJ Schroder,
as collateral agent for the holders of the
New Senior Secured Notes, (b) those certain
mortgages dated the Effective Date made by
G-3
<PAGE> 75
Reorganized Oneita in favor of IBJ Schroder,
as collateral agent for the holders of the
New Senior Secured Notes, (c) that certain
Intercreditor Agreement dated the Effective
Date between Foothill, IBJ Schroder, as
collateral agent for the holders of the New
Senior Secured Notes, and the holders of the
New Senior Secured Notes, in the form
attached to the Plan as Exhibit 4, (d) that
certain Subsidiary Guaranty and Security
Agreement dated the Effective Date between
IBJ Schroder, as collateral agent for the
holders of the New Senior Secured Notes, and
the subsidiaries of Oneita that are parties
thereto, (e) that certain Trademark Security
Agreement dated the Effective Date between
Reorganized Oneita and IBJ Schroder, as
collateral agent for the holders of the New
Senior Secured Notes, (f) that certain
Deposit Account Security Agreement dated the
Effective Date between Reorganized Oneita and
IBJ Schroder, as collateral agent for the
holders of the New Senior Secured Notes, (g)
that certain Agency Agreement dated the
Effective Date between Reorganized Oneita,
the holders of the New Senior Secured Notes
and IBJ Schroder, as collateral agent for the
holders of the New Senior Secured Notes, and
(h) all UCC and real property lien filings
executed in connection with any of the
foregoing agreements, in each case other than
(c) immediately above in the form to be
agreed to by Oneita, the Old Revolving Credit
Lenders and Prudential prior to the Effective
Date.
NEW SENIOR SECURED
NOTES the notes issued under the Senior Secured
Note Agreement and Section IV.E. of the Plan
and secured by liens on and security
interests in certain assets of Oneita and
certain of its subsidiaries as more
particularly described in the New Security
Documents.
OLD COMMON STOCK the common stock, par value $.25 per share,
issued by Oneita and outstanding on the
Petition Date.
OLD PRUDENTIAL CLAIM the claim in the sum of $6,379,066 as of the
Petition Date pursuant to a Note Agreement
dated as of December 20, 1988 between Oneita
and Prudential.
OLD REVOLVING CREDIT
AGREEMENT the Revolving Credit Agreement dated as of
January 26, 1996, as it may have been amended
from time to time, by and among Oneita and
SunTrust Bank, Atlanta, individually and as
Agent and Administrative Agent, First Union
National Bank of South Carolina, individually
and as Agent, and NatWest Bank N.A.
OLD REVOLVING
G-4
<PAGE> 76
CREDIT LENDERS the holders of claims under the Old Revolving
Credit Agreement or such holders'
participants or assignees as of the Effective
Date.
OLD REVOLVING CREDIT
LENDER CLAIMS the allowed claims pursuant to the Old
Revolving Credit Agreement in the aggregate
principal amount of $57,000,000 as of the
Petition Date.
PETITION DATE January 23, 1998, the date of the
commencement of the Reorganization Case.
PLAN the chapter 11 plan of reorganization.
PRUDENTIAL The Prudential Insurance Company of America
PRO RATA SHARE a proportionate share, so that the ratio of
the amount of property distributed on account
of an allowed claim or allowed Equity
Interest in a specified class, is the same as
the ratio such claim or Equity Interest bears
to the total amount of all claims or Equity
Interests (including disputed claims or
disputed Equity Interests, until disallowed)
in such specified class.
REGISTRATION RIGHTS the registration rights described in the
Registration Rights Agreement to be provided
by Reorganized Oneita to certain holders of
the New Common Stock.
REGISTRATION RIGHTS
AGREEMENT a registration rights agreement described in
Section IV.Q. of the Plan by and among
Reorganized Oneita and the Initial Holders,
substantially in the form of Exhibit 5 to the
Plan.
REORGANIZATION CASE Oneita's chapter 11 case.
REORGANIZED ONEITA Oneita Industries, Inc., or any successor
thereto by merger, consolidation, or
otherwise, on and after the Effective Date.
SECURITIES ACT the United States Securities Act of 1933, as
amended, and the rules and regulations
thereunder.
SENIOR SECURED NOTE
AGREEMENT the agreement, dated on or about the
Effective Date, substantially in the form of
Exhibit 1 to the Plan, between Reorganized
Oneita and the holders of the Old Revolving
Credit Lender Claims and the Old Prudential
Claim pursuant to which the New Senior
Secured Notes in the principal amount of
$37,500,000 shall be issued.
G-5
<PAGE> 77
SPINDALE FACILITY Oneita's sewing facility located at 207 15th
Street Southwest, Fayette, Alabama.
STERILON FACILITY Oneita's textile manufacturing facility
located at 1015 Temple Avenue South, Fayette,
Alabama.
UCC the Uniform Commercial Code as the same may,
from time to time, be in effect in the State
of New York; provided, however, in the event
that, by reason of mandatory provisions of
law, any or all of the attachment,
perfection, or priority of the security
interests and liens specified in the New
Security Documents and the New Foothill
Security Documents is governed by the Uniform
Commercial Code as in effect in a
jurisdiction other than the State of New
York, the term "UCC" shall mean the Uniform
Commercial Code as in effect in such other
jurisdiction.
G-6
<PAGE> 78
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS OFFERING
OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS. ANY INFORMATION OR PRESENTATIONS
NOT HEREIN CONTAINED, IF GIVEN OR MADE, MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL
OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITY OTHER THAN THE SECURITIES
OFFERED BY THIS PROSPECTUS, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY THE SECURITIES BY ANY PERSON IN ANY JURISDICTION
WHERE SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON
MAKING SUCH OFFER IS NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. THE DELIVERY OF THIS PROSPECTUS
SHALL NOT, UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Available Information....................................
Prospectus Summary.......................................
Risk Factors.............................................
Use of Proceeds..........................................
Price Range of Common Stock..............................
Dividend Policy..........................................
Capitalization...........................................
Pro Forma Financial Statements...........................
Selected Financial Data..................................
Management's Discussion and Analysis and
of Financial Condition and Results of
Operations ............................................
Business.................................................
Management...............................................
Principal and Selling Stockholders.......................
Plan of Distribution.....................................
Description of Securities................................
Underwriting.............................................
Legal Matters............................................
Experts..................................................
Financial Statements..................................... F-1
Glossary................................................. G-1
</TABLE>
ONEITA INDUSTRIES, INC.
7,820,923 SHARES OF COMMON STOCK
PROSPECTUS
, 1998
<PAGE> 79
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated expenses of the distribution, all of which shall be borne
by the Company, are as follows:
<TABLE>
<S> <C>
SEC Registration Fee ................................. $462
NASD Filing Fee ...................................... *
NASDAQ Application ................................... *
Blue Sky Fees and Expenses (including legal fees) .... *
Transfer Agent Fees .................................. *
Accounting Fees and Expenses ......................... *
Legal Fees and Expenses .............................. *
Printing and Engraving ............................... *
Miscellaneous ........................................ *
----
Total ........................................... $ *
====
</TABLE>
- -------
* To be filed by amendment
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company, a Delaware corporation, is empowered by Section 145 of the
Delaware General Corporation Law (the "Delaware Act"), subject to the procedures
and limitations stated therein, to indemnify certain parties. Section 145 of the
Delaware Act provides in part that a corporation shall have the power to
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding (other than
an action by or in the right of the corporation) by reason of the fact that such
person is or was a director, officer, employee or agent of the corporation or is
or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit or
proceeding if he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the corporation, and with respect
to any criminal action or proceeding had no reasonable cause to believe his
conduct was unlawful. Similar indemnity is authorized for such persons against
expenses (including attorneys' fees) actually and reasonably incurred in defense
or settlement of any threatened, pending or completed action or suit by or in
the right of the corporation, if such person acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
corporation, and provided further that (unless a court of competent jurisdiction
otherwise provides) such person shall not have been adjudged liable to the
corporation. Any such indemnification may be made only as authorized in each
specific case upon a determination by the stockholders or disinterested
directors that indemnification is proper because the indemnitee has met the
applicable standard of conduct. Where an officer or a director is successful on
the merits or otherwise in the defense of any action referred to above, the
corporation must indemnify him against the expenses which such officer or
director actually or reasonably incurred. Section 145 provides further that
indemnification pursuant to its provisions is not exclusive of other rights of
indemnification to which a person may be entitled under any law, agreement, vote
of stockholders or disinterested directors or otherwise.
<PAGE> 80
The Company's Certificate of Incorporation and By-laws, and the
Company's Amended and Restated Certificate of Incorporation will, contain
provisions that limit the potential personal liability of directors for
certain monetary damages and provide for indemnity of directors and other
persons. The Company also maintains officers and directors liability
insurance. The policy coverage is $10,000,000, which includes reimbursement
for costs and fees, with a maximum deductible for officers and directors of
$200,000 for each claim. The Company is unaware of any pending or threatened
litigation against the Company or its directors that would result in any
liability for which such director would seek indemnification or similar
protection.
The provisions affecting personal liability do not abrogate a
director's fiduciary duty to the Company and its stockholders, but eliminate
personal liability for monetary damages for breach of that duty. The
provisions do not, however, eliminate or limit the liability of a director
for failing to act in good faith, for engaging in intentional misconduct or
knowingly violating a law, for authorizing the illegal payment of a dividend
or repurchase of stock, for obtaining an improper personal benefit, for
breaching a director's duty of loyalty (which is generally described as the
duty not to engage in any transaction that involves a conflict between the
interests of the Company and those of the director) or for violations of the
federal securities laws. The provisions also limit or indemnify against
liability resulting from grossly negligent decisions, including grossly
negligent business decisions relating to attempts to change control of the
Company.
The provisions regarding indemnification provide, in essence, that
the Company will indemnify its directors against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually
and reasonably incurred in connection with any action, suit or proceeding
arising out of the director's status as a director of the Company, including
actions brought by or on behalf of the Company (shareholder derivative
actions). The provisions do not require a showing of good faith. Moreover,
they do not provide indemnification for liability arising out of willful
misconduct, fraud, or dishonesty, for "short-swing" profits violations under
the federal securities laws, or for the receipt of illegal remuneration. The
provisions also do not provide indemnification for any liability to the
extent such liability is covered by insurance. One purpose of the provisions
is to supplement the coverage provided by such insurance.
These provisions diminish the potential rights of action that might
otherwise be available to shareholders by limiting the liability of officers
and directors to the maximum extent allowable under Delaware law and by
affording indemnification against most damages and settlement amounts paid by
a director of the Company in connection with any stockholders derivative
action. However, the provisions do not have the effect of limiting the right
of a stockholder to enjoin a director from taking actions in breach of the
director's fiduciary duty, or to cause the Company to rescind actions already
taken, although as a practical matter courts may be unwilling to grant such
equitable remedies in circumstances in which such actions have already been
taken.
The Company has entered into indemnification agreements with certain
of its officers. The indemnification agreements provide for reimbursement for
all direct and indirect costs of any type or nature whatsoever (including
attorneys' fees and related disbursements) actually and reasonably incurred
in connection with either the investigation, defense or appeal of a legal
proceeding, including amounts paid in settlement by or on behalf of an
indemnitee thereunder.
II-2
<PAGE> 81
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
In August 1996, the Company issued 2,270,833 share of Old Common
Stock to Avondale Mills, Inc. in exchange for the cancellation of $7.5
million of indebtedness in a transaction exempt from the registration
requirements of the Securities Act of 1933, as amended, pursuant to Section
4(2)thereof (a "4(2) transaction").
In January 1996, the Company issued a $60 million Promissory Note
pursuant to a Revolving Credit Agreement dated as of January 26, 1996 by and
among Oneita Industries, Inc, and SunTrust Bank, Atlanta individually, and as
Agent, and as Administrative Agent, First Union National Bank of South
Carolina, individually and as Agent, and NatWest Bank N.A. in a 4(2)
transaction.
In January 1996, the Company issued a $7.5 million 10% Convertible
Subordinated Promissory Note to Avondale Mills, Inc. under Note Purchase
Agreement among Oneita Industries, Inc. and Robert M. Gintel and Avondale
Mills, Inc. dated as of December 28, 1995 in a 4(2) transaction.
In January 1996, the Company issued a $3.75 million 10%Convertible
Subordinated Promissory Note and a $3.75 million 10% Subordinated Promissory
Note to Robert M.Gintel under Note Purchase Agreement among Oneita
Industries, Inc. and Robert M. Gintel and Avondale Mills, Inc. dated as of
December 28, 1995 in a 4(2) transaction.
In January 1995, the Company issued a $10 million Promissory Note
dated January 31, 1995 under a Variable Amount Grid Note Agreement between
Oneita Industries, Inc. and First Union National Bank dated January 21, 1995
in a 4(2) transaction.
In April 1995, the Company issued a $10 million Promissory Note
dated April 3, 1995 under an Offering Base Loan Agreement between Oneita
Industries, Inc. and First Union National Bank dated April 3, 1995 in a 4(2)
transaction.
In January 1995, the Company issued a $10 million Multiple
Disbursement Revolving Note to Trust Company Bank in a 4(2) transaction.
In April 1995, the Company issued a $10 million Promissory Note to
NatWest N.A. in a 4(2) transaction.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
Exhibits
2.1 Plan of Reorganization (incorporated by reference to Exhibit 4.2 of
Form 8-K dated January 23, 1998)
3.1 Certificate of Incorporation (incorporated by reference to Exhibit
3(a) of Form S-1 Registration Statement No. 33-16972)
3.2 By-laws as amended (incorporated by reference to Exhibit 3.1 of Form
10-Q for the quarter ended March 31, 1994)
5.1 Form of Registration Rights Agreement*
5.2 Opinion of Blau, Kramer, Wactlar & Lieberman, P.C.**
10.1 Stock Option Plan (incorporated by reference to Exhibit 10(a) of
Form S-1 Registration Statement No. 33-16972)
II-3
<PAGE> 82
10.2 1989 Non-Qualified Stock Option Plan (incorporated by reference to
Exhibit 10.2 of Annual Report on Form 10-K for the year ended
September 30, 1990)
10.3 $60,000 Revolving Credit Agreement dated January 26, 1996 among the
Company, Sun Trust Bank, Atlanta, First Union National Bank of South
Carolina and NatWest Bank N.A. (incorporated by reference to Exhibit
10.28 of Form 10-Q for the quarter ended December 31, 1995)
10.4 10% Subordinated Notes dated January 26, 1996 in the principal
amount of $7,500 issued to Robert M. Gintel (incorporated by
reference to Exhibit 10.25 of Form 10-Q for the quarter ended
December 31, 1995)
10.5 Note Agreement dated as of December 20, 1988, between Registrant and
an institutional lender, as amended. (Incorporated by reference to
Exhibit 10.10 of Annual Report on Form 10-K for the year ended
September 30, 1988 and Exhibit 10.26 to Annual Report on Form 10-K
for the year September 30, 1995)
10.6 Letter of Credit Agreement dated as of October 1, 1989, between the
Registrant and Trust Company Bank (incorporated by reference to
Exhibit 10.12 of Annual Report on Form 10-K for the year ended
September 30, 1989)
10.7 Lease Agreement dated as of October 1, 1989, between the Registrant
and the Industrial Development Board of the City of Fayette, Alabama
(incorporated by reference to Exhibit 10.13 of the Annual Report on
Form 10-K for the year ended September 30, 1989)
10.8 Guaranty Agreement dated as of October 1, 1989, between the
Registrant and Trust Company Bank (incorporated by reference to
Exhibit 10.14 of Annual Report on Form 10-K for the year ended
September 30, 1989)
10.9 Form of Indemnification Agreement between Registrant and its
officers and directors (incorporated by reference to Exhibit 28 to
Current Report on Form 8-K dated July 30, 1991)
10.10 Modification to Management Services Contract dated February 5, 1993
(incorporated by reference to Exhibit 28 to Current Report on Form
8-K dated January 1, 1993)
10.11 Registration Rights Letter Agreement between the Registrant and
Gintel & Co. Limited Partnership (incorporated by reference to
Exhibit 10 to Current Report on Form 8-K dated October 6, 1993)
10.12 Letter Agreement dated October 5, 1993, between Gintel & Co. Limited
Partnership and Instrument Systems Corporation (incorporated by
reference to Exhibit 2 to Current Report on Form 8-K dated October
6, 1993)
10.13 Note Purchase Agreement dated as of December 28, 1995 among
Registrant, Robert M. Gintel and Avondale Mills, Inc. (incorporated
by reference to Exhibit 10.24 of Annual Report on Form 10-K for the
year ended September 30, 1995)
10.14 Agreement dated August 15, 1996 (related to note conversion) between
Registrant and Avondale Mills, Inc. (incorporated by reference to
Exhibit 10.17 of Annual Report on Form 10-K for the year ended
September 28, 1996)
10.15 Senior Secured Note Purchase Agreement (incorporated by reference to
Exhibit 4.4 of Form 10-Q for the quarter ended December 31, 1997)
10.16 Subordinated Note (incorporated by reference to Exhibit 4.3 of Form
10-Q for the quarter ended December 31, 1997)
10.17 Loan and Security Agreement (incorporated by reference to Exhibit
4.2 of Form 10-Q for the quarter ended December 31, 1997)
10.18 Intercreditor Agreement (incorporated by reference to Exhibit 4.5 of
Form 10-Q for the quarter ended December 31, 1997)
11 Computation of Earnings Per Share**
II-4
<PAGE> 83
22 The following lists the Company's significant subsidiaries, all of
which are wholly-owned by the Company. The names of certain
subsidiaries which do not, when considered in the aggregate,
constitute a significant subsidiary have been omitted.
<TABLE>
<CAPTION>
Name of Subsidiary Jurisdiction of Incorporation
------------------ -----------------------------
<S> <C>
Oneita - Kinston Corp. North Carolina
Oneita - Strathleven Limited Jamaica
Oneita Freeport Limited Jamaica
Oneita Mexicana S.A. de C.V. Mexico
</TABLE>
23.1 Consent of Arthur Andersen LLP*
23.2 Consent of Blau, Kramer, Wactlar & Lieberman, P.C. (included in
Exhibit 5)**
24 Power of Attorney (included in signature page)
27 Financial Data Schedule**
-------------------------
* Filed herewith
** To be filed by amendment
Financial Statement Schedules
Not applicable.
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or
the most recent post-effective amendment thereof) which,
individually or together, represent a fundamental change in
the information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of
securities offered would not exceed that which was
registered) and any deviation from the low or high end of
the estimated maximum offering range may be reflected in
the form of prospectus filed with the Commission pursuant
to Rule 424(b) if, in the aggregate, the changes in volume
and price represent no more than 20 percent change in the
maximum aggregate offering price set forth in the
"Calculation of Registration Fee' table in the effective
registration statement; and
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
II-5
<PAGE> 84
(3) To remove from registration by means of a post-effective amendment any of
the securities that remain unsold at the end of the offering.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers, and controlling
persons of the issuer pursuant to the foregoing provisions, or otherwise, the
issuer has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
issuer of expenses incurred or paid by a director, officer or controlling
person of the issuer in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the issuer will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
II-6
<PAGE> 85
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-1 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in Charleston, South Carolina on the 26th day of
February, 1998.
Oneita Industries, Inc.
By:/s/ C. Michael Billingsley
-----------------------------
C. Michael Billingsley
President
(Chief Executive Officer)
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below on February 26, 1998, by the
following persons in the capacities indicated. Each person whose signature
appears below also constitutes and appoints C. Michael Billingsley and
William Boyd, and each of them, his true and lawful attorney-in-fact and
agent, with full power of substitution and resubstitution, for him and in his
name, place and stead, in any and all capacities to sign any and all
amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with all exhibits thereto and all other
documents in connection therewith, with the Commission, granting unto said
attorney-in-fact and agent full power and authority to do and perform each
and every act and thing requisite and necessary to be done, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorney-in-fact and agent or his substitute or
substitutes may lawfully do or cause to be done by virtue hereof.
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
/s/ C. Michael Billingsley President and Chief Executive Officer
--------------------------
C. Michael Billingsley
/s/ William H. Boyd Vice President and Treasurer
-------------------------- (Principal Accounting Officer)
William H. Boyd
/s/ Jack R. Altherr Director
--------------------------
Jack R. Altherr
/s/ Meyer A. Gross Director
--------------------------
Meyer A. Gross
/s/ G. Stephen Felker Director
--------------------------
G. Stephen Felker
/s/ H. Varnell Moore Director
--------------------------
H. Varnell Moore
/s/ Lewis Rubin Director
--------------------------
Lewis Rubin
/s/ John G. Hudson Director
--------------------------
John G. Hudson
</TABLE>
<PAGE> 1
EXHIBIT 5.1
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement, dated as of __________, ____,
between Oneita Industries, Inc., a Delaware corporation ("Oneita"), and [names
of Initial Holders] (the "Initial Holders"),
W I T N E S S E T H:
WHEREAS, pursuant to Section IV.Q of the Plan of Reorganization of
Oneita under Chapter 11 of the Bankruptcy Code dated January __, 1998, as the
same may have been amended or supplemented from time to time prior to the date
hereof (the "Plan"), as of the Effective Date (as defined in the Plan) Oneita is
obligated to enter into a registration rights agreement substantially in the
form of Exhibit ___ thereto; and
WHEREAS, the parties have agreed that the execution and delivery by
Oneita and the Initial Holders of this Agreement will satisfy such obligation
under Section IV.Q of the Plan;
NOW, THEREFORE, in consideration of the premises and of the mutual
promises and agreements set forth herein, the parties hereby agree as follows:
1. DEFINITIONS.
(a) Capitalized terms used in this Agreement but not otherwise defined
herein shall have the meanings given to them in the Plan. Each reference herein
to an agreement, document or instrument shall mean that agreement, document or
instrument as from time to time amended, modified or supplemented in accordance
with its terms, including in each case all exhibits, annexes and schedules to
such agreement, document or instrument, all of which are incorporated by
reference to such agreement, document or instrument. The use herein of the word
"or" shall not be deemed exclusive.
(b) As used in this Exhibit, the following capitalized terms shall have
the meanings ascribed to them below:
"Common Stock" means the Common Stock, par value $.25 per
share, of Oneita being issued and sold pursuant to the Plan.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any similar federal statute then in effect, and a reference
to a particular section thereof shall be deemed to include a reference
to the comparable section, if any, of any such similar federal statute.
"Holder" means a registered holder of Registrable Securities.
"Person" means an individual, partnership, joint venture,
corporation, trust,
<PAGE> 2
unincorporated organization or government or any department or agency
thereof.
"Prospectus" means the prospectus included in any Registration
Statement, as amended or supplemented by any prospectus supplement with
respect to the terms of the offering of any portion of the Registrable
Securities covered by such Registration Statement or any other
amendments and supplements to such prospectus, including without
limitation any preliminary prospectus, any pre-effective or
post-effective amendment and all material incorporated by reference in
any prospectus.
"Registrable Securities" means (i) the Common Stock which is
issued to any Initial Holder pursuant to the Plan and (ii) any
securities issued or issuable in respect of or in exchange for any of
the shares of Common Stock referred to in clause (i) by way of a stock
dividend or other distribution, stock split, reverse stock split or
other combination of shares, recapitalization, reclassification,
merger, consolidation or exchange offer. As to any particular
Registrable Securities, once issued such securities shall cease to be
Registrable Securities when (i) a Registration Statement with respect
to the sale of such securities shall have become effective under the
Securities Act and such securities shall be eligible to be disposed of
in accordance with such Registration Statement, (ii) such securities
shall have been sold pursuant to Rule 144 (or any successor provision)
under the Securities Act, (iii) such securities shall have been
otherwise transferred and new certificates for such securities not
bearing a legend restricting further transfer shall have been delivered
by Oneita or (iv) such securities shall have ceased to be outstanding.
"Registration Expenses" has the meaning set forth in Section
5.
"Registration Statement" means any registration statement of
Oneita which covers Registrable Securities pursuant to the provisions
of this Exhibit, all amendments and supplements to such Registration
Statement, including post-effective amendments, and all exhibits and
all material incorporated by reference in such Registration Statement.
"SEC" means the Securities and Exchange Commission or any
other federal agency at the time administering the Securities Act or
the Exchange Act.
"Securities Act" means the Securities Act of 1933, as amended,
or any similar federal statute then in effect, and a reference to a
particular section thereof shall be deemed to include a reference to
the comparable section, if any, of any such similar federal statute.
2. SHELF REGISTRATION.
(a) ONEITA'S OBLIGATION TO FILE. Oneita shall file as promptly as
practicable after the date of the Plan, and shall use its best efforts to cause
a Registration Statement or Registration Statements under the Securities Act for
the offering on a continuous or delayed basis in the future of each of the
Registrable Securities (the "Shelf Registration") to be declared effective prior
to the Effective Date (or if not declared effective by such date, then as soon
as possible after such date).
(b) ONEITA'S OBLIGATION TO MAINTAIN. Oneita agrees to use its best
efforts to keep the Shelf Registration continuously effective for the period
beginning on the date on which the Shelf Registration is declared effective and
ending on the earlier of (i) the second anniversary of such date plus the number
of days of any suspension of the Holders' right to sell under paragraph (c) of
this Section 2 and (ii) the first date that there are no Registrable Securities
(the "Shelf Registration Period"). During the Shelf
<PAGE> 3
Registration Period, Oneita shall supplement or make amendments to the Shelf
Registration, if required by the Securities Act or by the rules and regulations
promulgated thereunder, and shall use its best efforts to have such supplements
and amendments declared effective as soon as practicable after filing.
(c) SUSPENSION OF SALES. Oneita shall have the right to require the
Holders not to sell under the Shelf Registration during one or more periods
aggregating not more than 45 days in each twelve-month period during the Shelf
Registration Period in the event that (i) Oneita would, in accordance with the
advice of its counsel, be required to disclose in the Prospectus information not
otherwise then required by law to be publicly disclosed and (ii) in the judgment
of Oneita, there is a reasonable likelihood that such disclosure, or any other
action to be taken in connection with the Prospectus, would materially and
adversely affect any existing or prospective material business situation,
transaction or negotiation or otherwise materially and adversely affect Oneita.
(d) NOTICE. Oneita shall give each Holder prompt notice in the event
that (i) Oneita has suspended sales of Registrable Securities under paragraph
(c) of this Section 2 or (ii) the Registration Statement or any related
Prospectus is not accurate and changes should be made so that such Registration
Statement or Prospectus will not contain any untrue statement of a material fact
nor omit to state any material fact required to be stated therein or necessary
to make the statements therein not misleading.
(e) INCLUSION OF OTHER SECURITIES. No securities other than Registrable
Securities shall be included in the Shelf Registration; provided, however, that
this paragraph (e) shall not prohibit Oneita from filing other registration
statements in addition to the Shelf Registration.
3. DEMAND REGISTRATION.
(a) REQUESTS FOR REGISTRATION. Subject to the provisions of paragraphs
(b), (c) and (d) of this Section 3, at any time during the period beginning at
the end of the Shelf Registration Period and ending on the earlier of (x) the
third anniversary thereof plus the number of days of any suspension under
paragraph (d) of this Section 3 of the Holders' right to sell and (y) the first
date on which there are no Registrable Securities (the "Demand Registration
Period"), any Holder or group of Holders holding at least 7% of the aggregate
Registrable Securities still outstanding may make a written request for
registration under the Securities Act of all or any part of such Holder's or
Holders' Registrable Securities (a "Demand Registration"). Such request shall
specify the amount and kind of Registrable Securities to be registered and the
intended method or methods of disposition. Within 10 days after receipt of such
request, Oneita shall send written notice of such request to all Holders and
shall, subject to the provisions of paragraphs (b), (c) and (d) of this Section
3, include in such Demand Registration all Registrable Securities with respect
to which Oneita receives written requests (specifying the amount and kind of
Registrable Securities to be registered and the intended method or methods of
disposition) for inclusion therein within 30 days after such notice is sent. As
promptly as practicable thereafter, Oneita shall file with the SEC a
Registration Statement, registering all Registrable Securities that any Holders
have requested Oneita to register, for disposition in accordance with the
intended method or methods set forth in their notices to Oneita. Oneita shall
use its best efforts to cause such Registration Statement to be declared
effective as soon as practicable after filing and to remain effective until the
earlier of (i) 90 days following the date on which it was declared effective and
(ii) the date on which all of the Registrable Securities covered thereby are
disposed of in accordance with the method or methods of disposition stated
therein.
(b) NUMBER OF REGISTRATIONS. The Holders shall be entitled to request
an aggregate of four Demand Registrations during the Demand Registration Period;
provided, however, that Oneita will not be obligated to comply with any such
request unless (i) such request is made by Persons holding at least
<PAGE> 4
of the aggregate amount of Registrable Securities at the time outstanding, (ii)
the Registrable Securities to be registered in such Demand Registration
constitute at least 5% of the aggregate amount of Registrable Securities at the
time outstanding and (iii) Oneita has not effected another Demand Registration
in accordance with the provisions of this Agreement within the previous six
months.
(c) S-3 REGISTRATIONS. Notwithstanding anything in this Section 3 to
the contrary, any Holder may request an unlimited number of Demand Registrations
during the Demand Registration Period, if (i) the Holder, in his written request
for a Demand Registration, undertakes to bear or reimburse all Registration
Expenses incurred by Oneita in connection with the Demand Registration and (ii)
Oneita is eligible under the Securities Act to register the Registrable
Securities on a Registration Statement on Form S-3.
(d) SUSPENSION OF REGISTRATION. Oneita shall have the right to delay
the filing or effectiveness of a Registration Statement for any Demand
Registration or to require the Holders not to sell under any such Registration
Statement, during one or more periods aggregating not more than 60 days in each
twelve-month period during the Demand Registration Period in the event that (i)
Oneita would, in accordance with the advice of its counsel, be required to
disclose in the Prospectus information not otherwise then required by law to be
publicly disclosed and (ii) in the judgment of Oneita, there is a reasonable
likelihood that such disclosure, or any other action to be taken in connection
with the Prospectus, would materially and adversely affect any existing or
prospective material business situation, transaction or negotiation or otherwise
materially and adversely affect Oneita.
(e) OFFERING BY ONEITA. Oneita may include in any Demand Registration
additional shares of capital stock to be sold for Oneita's account pursuant to
such registration; provided, however, that if the managing underwriter for a
Demand Registration that involves an underwritten offering shall advise Oneita
that, in its opinion, the inclusion of the amount and kind of shares of capital
stock to be sold for Oneita's account would adversely affect the success of the
offering for the selling Holders, then the number and kind of shares of capital
stock to be sold for Oneita's account shall be reduced (and may be reduced to
zero) in accordance with the managing underwriter's recommendation.
4. REGISTRATION PROCEDURES.
(a) ONEITA TO USE BEST EFFORTS. In connection with Oneita's Shelf
Registration and Demand Registration obligations pursuant to Sections 2 and 3
hereof, Oneita shall use its best efforts to effect such registrations to permit
the sale of such Registrable Securities in accordance with the intended method
or methods of disposition thereof, and pursuant thereto Oneita shall use its
best efforts:
(i) to prepare and file with the SEC a Registration Statement
or Registration Statements relating to the Shelf Registration and the
Demand Registrations on any appropriate form under the Securities Act,
and to cause such Registration Statements to become effective as soon
as practicable and to remain continuously effective for the time period
required by the provisions of this Agreement to the extent permitted
under the Securities Act; provided, however, that as soon as
practicable but in no event later than three Business Days before
filing such Registration Statement, any related Prospectus or any
amendment or supplement thereto, other than any amendment or supplement
made solely as a result of incorporation by reference of documents
filed with the SEC subsequent to the filing of such Registration
Statement (or, in the case of any Prospectus supplement or
post-effective amendment relating to a proposed shelf "draw-down"
pursuant to Section 2 hereof, two Business Days before the filing
thereof), Oneita shall furnish to the Holders of the Registrable
Securities covered by such Registration Statement (or, in the case of
any Prospectus supplement or post-effective amendment relating to a
proposed shelf "draw-
<PAGE> 5
down" pursuant to Section 2 hereof), to the selling Holders and the
underwriters, if any, copies of all such documents proposed to be
filed, which documents shall be subject to the review of such Holders
and underwriters; Oneita shall not file any Registration Statement or
amendment thereto or any Prospectus or any supplement thereto (other
than any amendment or supplement made solely as a result of
incorporation by reference of documents filed with the SEC subsequent
to the filing of such Registration Statement) to which the managing
underwriters of the applicable offering, if any, or the Holders of a
majority of the Registrable Securities then outstanding (or, in the
case of any Prospectus supplement or post-effective amendment relating
to a proposed shelf "draw-down" pursuant to Section 2 hereof, a
majority of the selling Holders) shall have objected within two
Business Days after receipt of such documents to such filing based upon
their reasonable belief that such Registration Statement or amendment
thereto or Prospectus or supplement thereto does not comply in all
material respects with the requirements of the Securities Act (provided
that the foregoing shall not limit the right of any Holder whose
Registrable Securities are covered by a Registration Statement
reasonably to object, within two Business Days after receipt of such
documents, to any particular information that is to be contained in
such Registration Statement, amendment, Prospectus or supplement and
relates specifically to such Holder, including, without limitation, any
information describing the manner in which such Holder acquired such
Registrable Securities and the intended method or methods of
distribution of such Registrable Securities); and if Oneita is unable
to file any such document due to the objections of such underwriters or
such Holders, to cooperate with such underwriters and Holders to
prepare, as soon as practicable, a document that is responsive in all
material respects to the reasonable objections of such underwriters and
Holders;
(ii) to prepare and file with the SEC such amendments and
post-effective amendments to each Registration Statement as may be
necessary to keep such Registration Statement effective for the
applicable period set forth in paragraph (a) of Section 2 and paragraph
(a) of Section 3; and to cause the related Prospectus to be
supplemented by any required Prospectus supplement, and as so
supplemented to be filed in accordance with the Securities Act and any
rules and regulations promulgated thereunder; and otherwise to comply
with the provisions of the Securities Act as may be necessary to
facilitate the disposition of all Registrable Securities covered by
such Registration Statement during the applicable period in accordance
with the intended method or methods of disposition by the selling
Holders thereof set forth in such Registration Statement or such
Prospectus or Prospectus supplement;
(iii) to notify the selling Holders and the managing
underwriters, if any, promptly if at any time (A) any Prospectus,
Registration Statement or amendment or supplement thereto is filed, (B)
any Registration Statement, or any post-effective amendment thereto,
becomes effective, (C) the SEC requests any amendment or supplement to,
or any additional information in respect of, any Registration Statement
or Prospectus, (D) the SEC issues any stop order suspending the
effectiveness of a Registration Statement or initiates any proceedings
for that purpose, (E) the representations and warranties of Oneita
contemplated by subclause (B) of clause (xiii) of this paragraph (a)
cease to be true and correct, (F) Oneita receives any notice that the
qualification of any Registrable Securities for sale in any
jurisdiction has been suspended or that any proceeding has been
initiated for the purpose of suspending such qualification, or (G) any
event occurs which requires that any changes be made in such
Registration Statement or any related Prospectus so that such
Registration Statement or Prospectus will not contain any untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading;
(iv) to make every reasonable effort to obtain the withdrawal
of any order suspending the
<PAGE> 6
effectiveness of a Registration Statement, or the qualification of any
Registrable Securities for sale in any jurisdiction, at the earliest
possible moment;
(v) if requested by the managing underwriters or any Holder of
Registrable Securities being sold in connection with an underwritten
offering, promptly to incorporate into a Prospectus supplement or a
post-effective amendment to the Registration Statement any information
which the managing underwriters and such Holder reasonably agree is
required to be included therein relating to such sale of Registrable
Securities; and to file such supplement or post-effective amendment as
soon as practicable in accordance with the Securities Act and the rules
and regulations promulgated thereunder;
(vi) to furnish to each selling Holder and each managing
underwriter, if any, one signed copy of the Registration Statement or
Registration Statements and any post-effective amendment thereto,
including all financial statements and schedules thereto, all documents
incorporated therein by reference and all exhibits thereto (including
exhibits incorporated by reference) as promptly as practicable after
filing such documents with the SEC;
(vii) to deliver to each selling Holder and each underwriter,
if any, as many copies of the Prospectus or Prospectuses (including
each preliminary Prospectus) and any amendment or supplement thereto as
such Persons may reasonably request; and to consent to the use of such
Prospectus or any amendment or supplement thereto by each such selling
Holder and underwriter, if any, in connection with the offering and
sale of the Registrable Securities covered by such Prospectus,
amendment or supplement;
(viii) prior to any public offering of Registrable Securities,
to register or qualify, or to cooperate with the selling Holders, the
underwriters, if any, and their respective counsel in connection with
the registration or qualification of such Registrable Securities, for
offer and sale under the securities or blue sky laws of such
jurisdictions as may be requested by the Holders of a majority of the
Registrable Securities included in such Registration Statement; to keep
each such registration or qualification effective during the period set
forth in paragraph (a) of Section 2 or paragraph (a) of Section 3 that
the applicable Registration Statement is required to be kept effective;
and to do any and all other acts or things necessary to enable the
disposition in such jurisdictions of the Registrable Securities covered
by such Registration Statement; provided, however, that Oneita will not
be required to qualify generally to do business in any jurisdiction
where it is not then so qualified or to take any action which would
subject it to taxation or general service of process in any
jurisdiction where it is not then so subject;
(ix) to cooperate with the selling Holders and the
underwriters, if any, in the preparation and delivery of certificates
representing the Registrable Securities to be sold, such certificates
to be in such denominations and registered in such names as such
selling Holders or managing underwriters may request at least three
Business Days prior to any sale of Registrable Securities represented
by such certificates;
(x) to cause the Registrable Securities covered by the
applicable Registration Statement to be registered with or approved by
such other governmental agencies or authorities as may be necessary to
enable the seller or sellers thereof or the underwriters, if any, to
consummate the sale of such Registrable Securities in conformity with
federal law and the laws of the jurisdictions in which such Registrable
Securities shall be registered or qualified pursuant to clause (viii)
of this paragraph (a);
<PAGE> 7
(xi) upon the occurrence of any event described in subclause
(C) or (G) of clause (iii) of this paragraph (a), promptly to prepare
and file a supplement or post-effective amendment to the applicable
Registration Statement or Prospectus or any document incorporated
therein by reference, and any other required document, either in
accordance with the request of the SEC, or so that such Registration
Statement and Prospectus will not thereafter contain an untrue
statement of a material fact or omit to state any material fact
necessary to make the statements therein not misleading, as the case
may be, and to cause such supplement or post-effective amendment to
become effective as soon as practicable;
(xii) to cause all Common Stock constituting Registrable
Securities covered by such Registration Statement to be listed on the
NASDAQ National Market System or if the Common Stock is then listed or
included on any securities exchange (or on any other quotation system
operated by a national securities association) and either the Holders
of a majority of the Registrable Securities included in such
Registration Statement or the underwriters, if any, so request, on such
securities exchange (or other such quotations system); and to enter
into customary agreements, including, if necessary, a listing
application and indemnification agreement in customary form; to provide
a transfer agent for such Registrable Securities no later than the
effective date of such Registration Statement; to cause any other
Registrable Securities covered by such Registration Statement to be
listed (or included) on each securities exchange (or quotation system
operated by a national securities association) on which securities of
the same class and series, if any, are then listed (or included) or on
any exchange (or quotation) system on which any Person other than a
Holder shall have the right to have securities of the same class and
series, if any, listed (or included), if so requested by the Holders of
a majority of the Registrable Securities included in such Registration
Statement or the underwriters, if any, and enter into customary
agreements including, if necessary, a listing application and
indemnification agreement in customary form, and, if necessary, to
provide a transfer agent for such securities no later than the
effective date of such Registration Statement; and to obtain a CUSIP
number for the Registrable Securities no later than the effective date
of such Registration Statement;
(xiii) to take all other actions in connection therewith as
are reasonably necessary or desirable in order to expedite or
facilitate the disposition of the Registrable Securities included in
such Registration Statement and, in the case of an underwritten
offering: (A) to enter into an underwriting agreement in customary form
for the managing underwriters with respect to issuers of similar market
capitalization and reporting and financial histories; (B) to make
representations and warranties to each Holder participating in such
offering and to each of the underwriters, in such form, substance and
scope as are customarily made to the managing underwriters by issuers
of similar market capitalization and reporting and financial histories
and to confirm the same to the extent customary if and when requested;
(C) to obtain opinions of counsel to Oneita (which may be Oneita's
inside counsel) and updates thereof addressed to each Holder
participating in such offering and to each of the underwriters, such
opinions and updates to be in customary form to cover the matters
customarily covered in opinions obtained in underwritten offerings by
the managing underwriters for issuers of similar market capitalization
and reporting and financial histories; (D) to obtain "comfort" letters
and updates thereof from Oneita's independent certified public
accountants addressed to each of the underwriters, such letters to be
in customary form and to cover matters of the type customarily covered
in "comfort" letters to the managing underwriters in connection with
underwritten offerings by them for issuers of similar market
capitalization and reporting and financial histories; (E) to provide,
in the underwriting agreement to be entered into in connection with
such offering, indemnification provisions and procedures no less
favorable than those set forth in Section 7 hereof with respect to all
parties to be indemnified pursuant to such Section 7; and (F) to
deliver such customary documents and
<PAGE> 8
certificates as may be reasonably requested by Holders of a majority of
the Registrable Securities included in such Registration Statement and
the managing underwriters to evidence compliance with clause (B) of
this paragraph (xiii) and with any customary conditions contained in
the underwriting agreement entered into by Oneita in connection with
such offering;
(xiv) in the case of any offering other than an underwritten
offering: (A) to obtain an opinion of counsel to Oneita (which may be
Oneita's inside counsel) at the time of effectiveness of such
Registration Statement covering such offering and an update thereof at
the time of effectiveness of any post-effective amendment to such
Registration Statement (other than by reason of incorporation by
reference of documents filed with the SEC) addressed to each Holder of
any Registrable Securities covered by such Registration Statement,
covering matters customarily covered in opinions obtained in
underwritten offerings by issuers with similar market capitalization
and reporting and financial histories; and (B) to deliver a certificate
of a senior executive officer of Oneita at the time of effectiveness of
such Registration Statement and, upon the request of Holders of a
majority of the Registrable Securities included in such Registration
Statement, updates thereof, such certificates to cover matters
customarily covered in officers' certificates delivered in connection
with underwritten offerings by issuers with similar market
capitalization and reporting and financial histories;
(xv) to make available for inspection by representatives of
the Holders of Registrable Securities being sold pursuant to the Shelf
Registration or any Demand Registration and of the underwriters, if
any, participating in such sale all financial and other records,
pertinent corporate documents and properties of Oneita, and to cause
Oneita's officers, directors and employees to supply all information
reasonably requested by any such representatives, in connection with
the Shelf Registration or such Demand Registration; provided, however,
that all information regarding such records, documents and properties
shall be kept confidential by such Persons unless disclosure of such
information is required by court or administrative order;
(xvi) to comply with all applicable rules and regulations of
the SEC relating to such Registration Statement and the distribution of
the securities being offered or otherwise necessary in order to perform
Oneita's obligations under this paragraph (a);
(xvii) to cooperate and assist in any filings required to be
made with the National Association of Securities Dealers, Inc. and in
the performance of any customary or required due diligence
investigation by any underwriter; and
(xviii) to take all other reasonable steps necessary and
appropriate to effect such registration in the manner contemplated by
the provisions of this Agreement.
(b) HOLDERS' OBLIGATION TO FURNISH INFORMATION. Oneita may require, as
a condition precedent to Oneita's obligations under Section 4 hereof, each
Holder of Registrable Securities as to which any registration is being effected
to furnish to Oneita such information regarding the distribution of such
securities as Oneita may from time to time reasonably request.
(c) SUSPENSION OF SALES PENDING AMENDMENT OF PROSPECTUS. Each Holder
agrees that, upon receipt of any notice from Oneita of the happening of any
event of the kind described in subclause (C), (D), (E), (F) or (G) of clause
(iii) of paragraph (a) of this Section 4, such Holder will forthwith forego or
delay the disposition of any Registrable Securities covered by such Registration
Statement or Prospectus until such Holder's receipt of the copies of the
supplemented or amended Prospectus contemplated by clause (xi) of such paragraph
(a), or until it is advised in writing by Oneita that the use of the applicable
<PAGE> 9
Prospectus may be resumed, and has received copies of any additional or
supplemental filings which are incorporated by reference in such Prospectus,
and, if so directed by Oneita, such Holder will deliver to Oneita (at Oneita's
expense) all copies, other than permanent file copies, then in such Holder's
possession of any Prospectus covering such Registrable Securities. If Oneita
shall have given any such notice during a period when a Shelf Registration or
Demand Registration is in effect, the two-year period described in paragraph (b)
of Section 2 and the 90-day period described in clause (i) of paragraph (a) of
Section 3, as applicable, shall be extended by the number of days from and
including the date of the giving of such notice to and including the date when
each Holder of Registrable Securities covered by such Registration Statement
shall have received the copies of the supplemented or amended Prospectus
contemplated by clause (xi) of such paragraph (a) or shall have been advised in
writing by Oneita that the use of the applicable Prospectus may be resumed.
5. REGISTRATION EXPENSES.
All expenses incident to Oneita's performance of or compliance with its
obligations under the provisions of this Agreement shall be borne by Oneita,
including without limitation all (i) registration and filing fees, (ii) fees and
expenses of compliance with securities or blue sky laws, (iii) printing expenses
(including expenses of printing Prospectuses), (iv) messenger and delivery
expenses, (v) internal expenses (including, without limitation, all salaries and
expenses of its officers and employees performing legal or accounting duties),
(vi) fees and disbursements of its counsel and its independent certified public
accountants (including the expenses of any special audit or "comfort" letters
required by or incident to such performance or compliance), (vii) securities
acts liability insurance (if Oneita elects to obtain such insurance), (viii)
reasonable fees and expenses of any special experts retained by Oneita in
connection with any registration hereunder, (ix) reasonable fees and expenses of
other Persons retained by Oneita, and (x) reasonable fees and expenses of one
counsel for the Holders of Registrable Securities covered by each Registration
Statement, with such counsel to be selected by Holders of a majority of such
Registrable Securities (all such expenses being herein referred to as
"Registration Expenses"); provided, however, that Registration Expenses shall
not include any underwriting discounts, commissions or fees attributable to the
sale of the Registrable Securities.
<PAGE> 10
6. PIGGYBACK REGISTRATION.
(a) RIGHT TO INCLUDE REGISTRABLE SECURITIES. If at any time during the
Demand Registration Period Oneita proposes to register any of its equity
securities under the Securities Act, whether or not for sale for its own account
(other than a registration on Form S-4 or Form S-8, or any successor or similar
forms), in a manner that would permit registration of Registrable Securities for
sale to the public under the Securities Act, it will each such time promptly
give written notice to all Persons who hold of record any Registrable Securities
of its intention to do so, of the registration form of the SEC that has been
selected by Oneita and of rights of Holders under this Section 6 (the "Section 6
Notice"). Oneita will use its best efforts to include in the proposed
registration all Registrable Securities that Oneita is requested in writing,
within 15 days after the Section 6 Notice is given, to register by the Holders
thereof; provided, however, that (i) if, at any time after giving written notice
of its intention to register any equity securities and prior to the effective
date of the registration statement filed in connection with such registration,
Oneita shall determine for any reason not to register such equity securities,
Oneita may, at its election, give written notice of such determination to all
Persons who hold of record any Registrable Securities and, thereupon, shall be
relieved of its obligation to register any Registrable Securities in connection
with such abandoned registration, without prejudice, however, to the rights of
Holders under Section 3 hereof and (ii) in case of a determination by Oneita to
delay registration of its equity securities, Oneita shall be permitted to delay
the registration of such Registrable Securities for the same period as the delay
in registering such other equity securities. No registration effected under this
Section 6 shall relieve Oneita of its obligations to effect registrations upon
request under Section 3 and, notwithstanding anything to the contrary in Section
3, no Holder shall have the right to require Oneita to register any Registrable
Securities pursuant to Section 3 until the later of (A) the completion of the
distribution of the securities offered and registered pursuant to the Section 6
Notice and (B) 90 days after the date each registration statement described in
the first sentence of this paragraph (a) is declared effective.
(b) EXPENSES. Oneita shall pay all Registration Expenses in connection
with each registration of Registrable Securities requested pursuant to this
Section 6; provided, however, that each Holder shall pay all underwriting
discounts and commissions and transfer taxes, if any, relating to the sale or
disposition of such Holder's Registrable Securities pursuant to a Registration
Statement effected pursuant to this Section 6.
(c) PRIORITY IN INCIDENTAL REGISTRATION. If the managing underwriter
for a registration pursuant to this Section 6 that involves an underwritten
offering shall advise Oneita that, in its opinion, the inclusion of the amount
and kind of Registrable Securities to be sold for the account of Holders would
adversely affect the success of the offering for Oneita, then the number and
kind of Registrable Securities to be sold for the account of such Holders shall
be reduced (and may be reduced to zero) in accordance with the managing
underwriter's recommendation. In the event that the number of Registrable
Securities to be included in any registration is reduced (but not to zero), the
number of such Registrable Securities included in such registration shall be
allocated pro rata among all requesting Holders, on the basis of the relative
number of shares of such Registrable Securities each such Holder has requested
to be included in such registration. If, as a result of the proration provisions
of this paragraph (c), any Holder shall not be entitled to include all
Registrable Securities in a registration pursuant to this Section 6 that such
Holder has requested be included, such Holder may elect to withdraw its
Registrable Securities from the registration; provided, however, that such
withdrawal election shall be irrevocable and, after making a withdrawal
election, a Holder shall no longer have any right to include Registrable
Securities in the registration as to which such withdrawal election was made.
(d) MERGER, CONSOLIDATION, ETC. Notwithstanding anything in this
Section 6 to the contrary,
<PAGE> 11
Holders shall not have any right to include their Registrable Securities in any
distribution or registration of equity securities by Oneita, which is a result
of a merger, consolidation, acquisition, exchange offer, recapitalization, other
reorganization, dividend reinvestment plan, stock option plan or other employee
benefit plan, or any similar transaction having the same effect.
<PAGE> 12
7. INDEMNIFICATION.
(a) INDEMNIFICATION BY ONEITA. In the event of any registration of any
securities of Oneita under the Securities Act pursuant to Section 3, 4 or 6
hereof, Oneita will, and hereby does, indemnify and hold harmless, to the extent
permitted by law, the seller of any Registrable Securities covered by any
Registration Statement filed to effect such registration, its directors and
officers or general and limited partners (and the directors and officers
thereof), each other Person who participates as an underwriter, if any, in the
offering or sale of such securities and each other Person, if any, who controls
such seller or any such underwriter within the meaning of the Securities Act,
against any and all losses, claims, damages or liabilities, joint or several,
and expenses (including any amounts paid in any settlement effected with
Oneita's consent, which consent shall not be unreasonably withheld) to which
such seller or any such director, officer, general or limited partner,
underwriter or controlling Person may become subject under the Securities Act,
common law or otherwise, insofar as such losses, claims, damages or liabilities
(or actions or proceedings in respect thereof) arise out of or are based upon
(i) any untrue statement or alleged untrue statement of a material fact
contained in any Registration Statement under which such securities were
registered under the Securities Act or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, (ii) any untrue statement or alleged untrue
statement of a material fact contained in any preliminary Prospectus, together
with the documents incorporated by reference therein (as amended or supplemented
if Oneita shall have filed with the SEC any amendment thereof or supplement
thereto), if used prior to the effective date of such Registration Statement, or
contained in the Prospectus, together with the documents incorporated by
reference therein (as amended or supplemented if Oneita shall have filed with
the SEC any amendment thereof or supplement thereto), or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading or (iii) any violation
by Oneita of any federal, state or common law rule or regulation applicable to
Oneita and relating to action required of or inaction by Oneita in connection
with any such registration, and Oneita will reimburse such seller and each such
director, officer, general or limited partner, underwriter and controlling
Person for any legal or any other expenses reasonably incurred by any of them in
connection with investigating or defending any such loss, claim, liability,
action or proceeding; provided, however, that Oneita shall not be liable to any
such seller or any such director, officer, general or limited partner,
underwriter or controlling Person in any such case to the extent that any such
loss, claim, damage, liability (or action or proceeding in respect thereof) or
expense arises out of or is based upon any untrue statement or alleged untrue
statement or omission or alleged omission made in such Registration Statement or
amendment thereof or supplement thereto or in any such preliminary, final or
summary Prospectus in reliance upon and in conformity with written information
furnished to Oneita by or on behalf of any such seller or any such director,
officer, general or limited partner, underwriter or controlling Person, for use
in the preparation thereof; and provided further, that Oneita will not be liable
to any Person who participates as an underwriter in any underwritten offering or
sale of Registrable Securities, or to any Person who is a seller in any
non-underwritten offering or sale of Registrable Securities, or any other
Person, if any, who controls such underwriter or seller within the meaning of
the Securities Act, under the indemnity agreement in this paragraph (a) with
respect to any preliminary Prospectus or the final Prospectus (including any
amended or supplemented preliminary or final Prospectus), as the case may be, to
the extent that any such loss, claim, damage or liability of such underwriter,
seller or controlling Person results from the fact that such underwriter or
seller sold Registrable Securities to a person to whom there was not sent or
given, at or prior to the written confirmation of such sale, a copy of the final
Prospectus or of the final Prospectus as then amended or supplemented, whichever
is most recent, if Oneita has previously furnished copies thereof to such
underwriter or seller and such final Prospectus, as then amended or
supplemented, has corrected any such misstatement or omission. Such indemnity
shall remain in full force and effect regardless of any
<PAGE> 13
investigation made by or on behalf of such seller or any such director, officer,
general or limited partner, underwriter or controlling Person and shall survive
the transfer of such securities by such underwriter or seller.
(b) INDEMNIFICATION BY THE SELLERS. In consideration of Oneita's
including any Registrable Securities in any Registration Statement filed in
accordance with Section 3, 4 or 6 hereof, the prospective seller of such
Registrable Securities and any underwriter shall be deemed to have agreed to
indemnify and hold harmless (in the same manner and to the same extent as set
forth in paragraph (a) of this Section 7) Oneita and its directors and officers
and each person controlling Oneita within the meaning of the Securities Act and
all other prospective sellers and their directors, officers, general and limited
partners and respective controlling Persons with respect to any statement or
alleged statement in or omission or alleged omission from such Registration
Statement, any preliminary, final or summary Prospectus contained therein, or
any amendment or supplement, if such statement or alleged statement or omission
or alleged omission was made in reliance upon and in conformity with written
information furnished to Oneita or its representatives by or on behalf of such
seller or underwriter for use in the preparation of such Registration Statement,
preliminary, final or summary Prospectus or amendment or supplement. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of Oneita or any of the prospective sellers or any of their
respective directors, officers, general or limited partners or controlling
Persons and shall survive the transfer of such securities by such seller.
(c) NOTICES OF CLAIMS, ETC. Promptly after receipt by an indemnified
party hereunder of written notice of the commencement of any action or
proceeding with respect to which a claim for indemnification may be made
pursuant to this Section 7, such indemnified party will, if a claim in respect
thereof is to be made against an indemnifying party, give written notice to the
latter of the commencement of such action; provided, however, that the failure
of any indemnified party to give notice as provided herein shall not relieve the
indemnifying party of its obligations under the preceding paragraphs of this
Section 7, except to the extent that the indemnifying party is actually
prejudiced by such failure to give notice. If any such claim or action shall be
brought against an indemnified party, and it shall notify the indemnifying party
thereof, the indemnifying party shall be entitled to participate therein, and,
to the extent that it wishes, jointly with any other similarly notified
indemnifying party, to assume the defense thereof with counsel reasonably
satisfactory to the indemnified party; provided, however, that if, in any
indemnified party's reasonable judgment, a conflict of interest between such
indemnified party and the indemnifying party exists in respect of such claim,
then such indemnified party shall have the right to participate in the defense
of such claim and to employ one firm of attorneys at the indemnifying party's
expense to represent such indemnified party; and provided further that if, in
the reasonable judgment of any indemnified party, a conflict of interest between
such indemnified party and any other indemnified parties exists in respect of
such claim, each such indemnified party shall be entitled to one additional
counsel and the indemnifying party shall be obligated to pay the fees and
expenses of such additional counsel. Once the indemnifying party has assumed the
defense of any claim, no indemnified party will consent to entry of any judgment
or enter into any settlement without the indemnifying party's consent to such
judgment or settlement, which shall not be unreasonably withheld.
(d) OTHER INDEMNIFICATION. Indemnification similar to that specified in
the preceding paragraphs of this Section 7 (with appropriate modifications)
shall be given by Oneita and each seller of Registrable Securities with respect
to any required registration or other qualification of securities under any
state securities and "blue sky" laws.
(e) CONTRIBUTION. If the indemnification provided for in this Section 7
is unavailable or insufficient to hold harmless an indemnified party under
paragraph (a), (b) or (d) of this Section 7, then
<PAGE> 14
each indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of the losses, claims, damages or liabilities
referred to in such paragraph (a), (b) or (d) in such proportion as is
appropriate to reflect the relative fault of the indemnifying party on the one
hand and the indemnified party on the other hand in connection with statements
or omissions which resulted in such losses, claims, damages or liabilities, as
well as any other relevant equitable considerations. The relative fault shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the indemnifying party or the
indemnified party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such untrue statements or
omission. Oneita agrees, and the Holders (in consideration of Oneita's including
any Registrable Securities in any Registration Statement filed in accordance
with Section 3, 4 or 6 hereof) shall be deemed to have agreed, that it would not
be just and equitable if contributions pursuant to this paragraph (e) were to be
determined by pro rata allocation or by any other method of allocation which
does not take account of the equitable considerations referred to in the first
sentence of this paragraph (e). The amount paid by an indemnified party as a
result of the losses, claims, damages or liabilities referred to in the first
sentence of this paragraph (e) shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any action or claim (which shall be limited as
provided in paragraph (c) of this Section 7 if the indemnifying party has
assumed the defense of any such action in accordance with the provisions
thereof) which is the subject of this paragraph (e). No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. Promptly after receipt by an
indemnified party under this paragraph (e) of notice of the commencement of any
action against such party in respect of which a claim for contribution may be
made against an indemnifying party under this paragraph (e), such indemnified
party shall notify the indemnifying party in writing of the commencement thereof
if the notice specified in paragraph (c) of this Section 7 has not been given
with respect to such action; provided, however, that the omission so to notify
the indemnifying party shall not relieve the indemnifying party from any
liability which it may have to any indemnified party otherwise under this
paragraph (e), except to the extent that the indemnifying party is actually
prejudiced by such failure to give notice. Notwithstanding anything in this
paragraph (e) to the contrary, no indemnifying party (other than Oneita) shall
be required pursuant to this paragraph (e) to contribute any amount in excess of
the proceeds received by such indemnifying party from the sale of Registrable
Securities in the offering to which the losses, claims, damages or liabilities
of the indemnified parties relate.
8. RULE 144.
Oneita shall file the reports required to be filed by it under the
Securities Act and the Exchange Act and the rules and regulations promulgated
thereunder, and shall take such further action as any Holder may reasonably
request, all to the extent required from time to time to enable such Holder to
sell Registrable Securities without registration under the Securities Act within
the limitations of the exemptions provided by Rule 144. Upon the request of any
Holder, Oneita shall deliver to such Holder a written statement stating whether
it has complied with such information and requirements.
<PAGE> 15
9. UNDERWRITTEN REGISTRATIONS.
(a) SELECTION OF UNDERWRITERS. If any of the Registrable Securities
covered by the Shelf Registration or any Demand Registration are to be sold in
an underwritten offering, the underwriter or underwriters and managing
underwriter or managing underwriters that will administer the offering shall be
selected by, and the terms of any underwriting agreement and other underwriting
arrangements shall be approved by, the Holders of a majority in aggregate amount
of Registrable Securities included in such offering; provided, however, that
such underwriters and managing underwriters shall be subject to the approval of
Oneita, which approval shall not be unreasonably withheld.
(b) AGREEMENTS OF SELLING HOLDERS. No Holder shall sell any of its
Registrable Securities in any underwritten offering pursuant to a registration
hereunder unless such Holder (i) agrees to sell such Registrable Securities on
the basis provided in any underwriting agreement or other underwriting
arrangements approved by the Persons entitled hereunder to approve such
agreements or arrangements and (ii) completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents
required under the terms of such underwriting agreements or other underwriting
arrangements.
10. HOLDBACK AGREEMENTS.
(a) RESTRICTIONS ON PUBLIC SALES BY HOLDERS. To the extent not
inconsistent with applicable law, each Holder that is timely notified in writing
by the managing underwriter or underwriters shall not effect any public sale or
distribution (including a sale pursuant to Rule 144) of any issue being
registered in an underwritten offering (other than pursuant to an employee stock
option, stock purchase, stock bonus or similar plan, pursuant to a merger, an
exchange offer or a transaction of the type specified in Rule 145(a) under the
Securities Act or pursuant to a "shelf" registration), any securities of Oneita
similar to any such issue or any securities of Oneita convertible into or
exchangeable or exercisable for any such issue or any similar issue, except as
part of such registration, during the 10-day period prior to the effective date
of the applicable registration statement, or during the period beginning on such
effective date and ending on the later of (i) the completion of the distribution
of such securities pursuant to such offering and (ii) 90 days after such
effective date.
(b) RESTRICTIONS ON PUBLIC SALES BY ONEITA. Oneita shall not effect any
public sale or distribution of any issue of the same class or series as
Registrable Securities being registered in an underwritten offering (other than
pursuant to an employee stock option, stock purchase, stock bonus or similar
plan, pursuant to a merger, exchange offer or a transaction of the type
specified in Rule 145(a) under the Securities Act or pursuant to a "shelf"
registration), any securities of Oneita similar to any such issue or any
securities of Oneita convertible into or exchangeable or exercisable for any
such issue, except as part of such registration, during the 10-day period prior
to the effective date of the applicable registration statement, or during the
period beginning on such effective date and ending on the later of (i) the
completion of the distribution of such securities pursuant to such offering and
(ii) 90 days after such effective date.
<PAGE> 16
11. MISCELLANEOUS.
(a) AMENDMENTS AND WAIVERS. The provisions of this Agreement may be
amended and Oneita may take any action herein prohibited, or omit to perform any
act herein required to be performed by it, only if Oneita shall have obtained
the written consent to such amendment, action or omission to act, of the Holders
of a majority of the Registrable Securities then outstanding (and, in the case
of any amendment, action or omission to act that adversely affects any Holder or
group of Holders differently from any of the other Holders, the written consent
of such Holder or members of such group holding a majority of the Registrable
Securities held by such group). Holders shall be bound from and after the date
of the receipt of a written notice from Oneita setting forth such amendment or
waiver by any consent authorized by this paragraph (a), whether or not the
certificates representing such Registrable Securities shall have been marked to
indicate such consent.
(b) SUCCESSORS, ASSIGNS AND TRANSFEREES. The provisions of this
Agreement shall be binding upon and shall inure to the benefit of Oneita, the
Holders and their respective successors, assigns and transferees.
(c) INTEGRATION. The provisions of this Agreement and the documents
referred to herein or delivered pursuant hereto that form a part hereof contain
the entire understanding of Oneita and the Initial Holders with respect to its
subject matter. There are no restrictions, agreements, promises,
representations, warranties, covenants or undertakings with respect to the
subject matter hereof other than those expressly set forth herein. The
provisions of this Agreement supersede all prior agreements and understandings
between Oneita and the Initial Holders with respect to its subject matter.
(d) NOTICES. All notices and other communications provided for
hereunder shall be in writing and shall be sent by first class mail, telex,
telecopier or hand delivery:
if to Oneita, to:
[Name and address]
Attention:
Telecopier:
Telephone Confirmation:
with a copy to:
[Name and address]
Attention:
Telecopier:
Telephone Confirmation:
If to any Holder, to the address of such Holder as shown in the stock
record books of Oneita, with a copy to:
Milbank, Tweed, Hadley & McCloy
1 Chase Manhattan Plaza
New York, New York 10005
Attention: David C.L. Frauman, Esq.
Telecopier: (212) 530-5219
Telephone Confirmation: (212) 530-5014
<PAGE> 17
All such notices and communications shall be deemed to have been given or made
(i) when delivered by hand, (ii) five Business Days after being deposited in the
mail, postage prepaid, (iii) when telexed answer-back received or (iv) when
telecopied, receipt acknowledged.
(e) DESCRIPTIVE HEADINGS. The headings in this Agreement are for
convenience of reference only and shall not limit, expand or otherwise affect
the meaning of the provisions hereof.
(f) SEVERABILITY. In the event that any one or more of the provisions,
paragraphs, subparagraphs, sentences, clauses, subclauses phrases or words
contained herein, or the application thereof in any circumstances, is held
invalid, illegal or unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision, paragraph, word, clause,
phrase or sentence in every other respect and of the remaining provisions,
paragraphs, subparagraph, sentences, clauses, subclauses, phrases or words
hereof shall not be in any way impaired, it being intended that all rights,
powers and privileges of Oneita and the Holders shall be enforceable to the
fullest extent permitted by law.
(g) GOVERNING LAW. The provisions of this Agreement shall be governed
by and construed and enforced in accordance with the laws of the State of New
York, without regard to the principles of conflicts of laws thereof, as if it
were a contract between Oneita and the Initial Holders made and to be performed
entirely within that State.
(h) TERMINATION. The provisions of this Agreement shall terminate, and
thereby become null and void, at the end of the Demand Registration Period;
provided, however, that the provisions of Section 7 shall survive the
termination of the provisions of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
ONEITA INDUSTRIES, INC.
By:_______________________
Name:
Title:
[INITIAL HOLDERS]
By:_______________________
Name:
Title:
<PAGE> 1
ARTHUR ANDERSEN LLP
Consent of Independent Public Accountants
As independent public accountants, we hereby consent to the use of our report
(and to all references to our Firm) included in or made a part of this
Registration Statement.
/s/ Arthur Andersen LLP
Columbia, South Carolina
February 26, 1998.
