AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER , 1996
REGISTRATION NO. 333-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
PLUMA, INC.
(Exact name of Registrant as specified in its charter)
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<S> <C> <C>
NORTH CAROLINA 2253 56-1541893
(State or other jurisdiction (Primary Standard Industrial (I.R.S. employer
of incorporation or organization) Classification Code Number) identification number)
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801 FIELDCREST ROAD
EDEN, NC 27288
(910) 635-4000
(Address, including zip code, and telephone number, including
area code, of Registrant's principal executive offices)
FORREST H. TRUITT, II
PLUMA, INC.
801 FIELDCREST ROAD
EDEN, NC 27288
(910) 635-4000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
COPIES TO:
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THOMAS T. CRUMPLER, ESQ. ZEB E. BARNHARDT, JR., ESQ. JAMES D. PHYFE, ESQ.
ALLMAN SPRY LEGGETT & CRUMPLER, P.A. WOMBLE CARLYLE SANDRIDGE & RICE, PLLC DAVIS POLK & WARDWELL
380 KNOLLWOOD STREET, SUITE 700 1600 BB&T FINANCIAL CENTER 450 LEXINGTON AVENUE
WINSTON-SALEM, NC 27103 200 W. SECOND STREET NEW YORK, NY 10017
TEL: (910) 722-2300 WINSTON-SALEM, NC 27101 TEL: (212) 450-4000
TEL: (910) 721-3505
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
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. [ ]
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. [ ]
CALCULATION OF REGISTRATION FEE
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TITLE OF CLASS OF PROPOSED PROPOSED MAXIMUM
SECURITIES TO BE AMOUNT TO BE MAXIMUM OFFERING AGGREGATE OFFERING PRICE
REGISTERED REGISTERED PRICE PER SHARE (1)
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Common Stock,
no par value.............. $40,000,000
TITLE OF CLASS OF
SECURITIES TO BE AMOUNT OF
REGISTERED REGISTRATION FEE (2)
Common Stock,
no par value.............. $13,973
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(1) Estimated solely for the purpose of computing the registration fee.
(2) Calculated pursuant to Rule 457(o) promulgated under the Securities Act of
1933.
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.
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
PROSPECTUS SUBJECT TO COMPLETION
DATED , 199
SHARES
(Pluma logo)
COMMON STOCK
(NO PAR VALUE)
Of the shares of the Company's Common Stock (the "Common Stock")
offered hereby (the "Offering"), shares are being issued and sold by
Pluma, Inc., a North Carolina corporation (the "Company" or "Pluma"), and
shares are being sold by certain of the Company's shareholders named
herein (the "Selling Shareholders"). The Company will not receive any of the
proceeds from the shares of Common Stock sold by the Selling Shareholders.
Following the Offering, management of the Company will own approximately % of
the outstanding shares of Common Stock.
Prior to this Offering, there has been no public market for the Common Stock. It
is currently anticipated that the initial public offering price will be between
$ and $ per share. See "Underwriting" for information relating to the
factors considered in determining the initial public offering price of the
Common Stock.
Application will be made for quotation of the Common Stock on the Nasdaq
National Market under the symbol "PLMA".
SEE "RISK FACTORS" BEGINNING ON PAGE 8 FOR INFORMATION THAT SHOULD BE CONSIDERED
BY PROSPECTIVE INVESTORS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT (1) COMPANY (2)
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Per Share $ $ $
Total (3) $ $ $
PROCEEDS TO
SELLING SHAREHOLDERS
Per Share $
Total (3) $
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(1) The Company and the Selling Shareholders have agreed to indemnify the
several Underwriters against certain liabilities, including liabilities under
the Securities Act of 1933, as amended. See "Underwriting."
(2) Before deducting expenses of the Offering payable by the Company estimated
at $ .
(3) The Company has granted an option to the Underwriters, exercisable within 30
days from the date of this Prospectus, to purchase up to additional
shares of Common Stock on the same terms and conditions as set forth above,
solely to cover over-allotments, if any. If such option is exercised in full,
the total Price to Public, Underwriting Discount, Proceeds to Company and
Proceeds to Selling Shareholders will be $ , $ , $ and
$ , respectively. See "Underwriting."
The shares of Common Stock being offered by this Prospectus are offered by the
Underwriters, subject to prior sale, when, as and if delivered to and accepted
by the Underwriters, and subject to approval of certain legal matters by Davis
Polk & Wardwell, counsel for the Underwriters. It is expected that delivery of
the shares of Common Stock offered hereby will be made against payment therefor
on or about , 199 , at the offices of J.P. Morgan Securities Inc., 60
Wall Street, New York, New York.
J.P. MORGAN & CO.
INTERSTATE/JOHNSON LANE
CORPORATION
WHEAT FIRST BUTCHER SINGER
, 199
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[ARTWORK TO COME]
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. SEE
"UNDERWRITING."
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No person is authorized to give any information or to make any representations
not contained in this Prospectus and, if given or made, such information or
representations must not be relied upon as having been authorized by the
Company, any Selling Shareholder or any Underwriter. This Prospectus does not
constitute an offer to sell, or a solicitation of an offer to buy, the Common
Stock in any jurisdiction to any person to whom it is unlawful to make such
offer or solicitation. Neither the delivery of this Prospectus nor any sale made
hereunder shall, under any circumstances, create any implication that there has
been no change in the affairs of the Company or any Selling Shareholder since
the date hereof or that information contained herein is correct as of any time
subsequent to the date hereof.
TABLE OF CONTENTS
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PAGE
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Prospectus Summary.................................... 4
Risk Factors.......................................... 8
Use of Proceeds....................................... 11
Dividend Policy....................................... 11
Dilution.............................................. 12
Capitalization........................................ 13
Selected Financial and Operating Data................. 14
Management's Discussion and Analysis of Financial
Condition and Results of Operations................. 16
Business.............................................. 21
Management............................................ 29
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PAGE
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Certain Relationships and Related Transactions........ 38
Principal Shareholders................................ 39
Selling Shareholders.................................. 41
Description of Capital Stock.......................... 42
Shares Eligible for Future Sale....................... 45
Underwriting.......................................... 46
Legal Matters......................................... 47
Experts............................................... 47
Available Information................................. 47
Index to Financial Statements......................... F-1
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UNTIL , 199 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING
IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN
ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
The Company intends to furnish its shareholders with annual reports containing
audited financial statements certified by an independent public accounting firm
and quarterly reports containing unaudited financial information for the first
three quarters of each fiscal year.
3
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PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ IN
CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND FINANCIAL STATEMENTS,
INCLUDING THE NOTES THERETO, APPEARING ELSEWHERE IN THIS PROSPECTUS. EXCEPT AS
SET FORTH IN THE FINANCIAL STATEMENTS OR OTHERWISE NOTED HEREIN, THE INFORMATION
IN THIS PROSPECTUS ASSUMES THAT THERE WILL BE NO EXERCISE OF THE UNDERWRITERS'
OVER-ALLOTMENT OPTION AND CERTAIN STOCK OPTIONS HELD BY EMPLOYEES AND DIRECTORS
OF THE COMPANY. ALSO, UNLESS OTHERWISE INDICATED HEREIN, ALL INFORMATION WITH
REGARD TO THE CAPITAL STOCK OF THE COMPANY, INCLUDING SHARE AND PER SHARE DATA
AND DIVIDENDS, HAS BEEN RESTATED TO REFLECT ALL STOCK SPLITS THAT OCCURRED PRIOR
TO THE DATE OF THIS PROSPECTUS.
THE COMPANY
Pluma is a vertically integrated manufacturer of high quality fleece and jersey
activewear. The Company is focused on increasing sales and profitability by
offering high value products to a diverse customer base. Pluma sells its
products, either directly or through distributors, to companies such as Adidas,
DKNY, Guess?, Nike, Starter and Walt Disney. In addition, the Company sells
products under its own "Pluma," "SANTEE" and "SNOWBANK" brand names to retail
and wholesale customers such as Sam's Club and Frank L. Robinson Company. The
Company has increased net sales from $61.4 million in 1991 to $100.7 million in
1995, a compound annual growth rate of 13.2%, and has been profitable every year
since its first full year of operation.
Since its incorporation in 1986, Pluma has been an industry leader in developing
new products and styles and establishing higher quality standards. The Company
was one of the first to introduce heavyweight, fuller cut fleece products at
attractive price points and heavyweight cotton jersey products suitable for
outerwear. Today, the Company continues to be a leading innovator of products
and recently introduced pique fleece, 100% cotton fleece and cotton/SpandexTM
five-way stretch fleece. In addition, the Company believes its ability to
collaborate with customers in developing new styles provides a distinct
competitive advantage. As a result of Pluma's flexible manufacturing
capabilities, customers often select the Company as their "manufacturer of
choice" for its ability to develop specialized products that meet customers'
cost, quality and delivery criteria.
The Company competes in the growing $37.6 billion retail activewear sector of
the apparel industry. The industry's growth is attributable to several factors.
First, the trends toward increased physical fitness and the "casualization of
America" have resulted in increased acceptance of fleece and jersey apparel as
daily attire. Second, the versatility of fleece and jersey fabric, coupled with
technological advances in product development and manufacturing, has
significantly improved product design and quality, resulting in increased
consumer demand. Finally, basic styles of fleece and jersey activewear are not
primarily driven by fashion trends or fads, contributing to the stability of
product demand.
The Company believes that its business strategy positions it to capitalize on
the growth of the activewear sector. The principal elements of this strategy
are:
PRODUCING HIGH QUALITY PRODUCTS
Pluma is recognized as a leading manufacturer of high quality products across
all of its price points by today's value-conscious customers. Pluma's fleece and
jersey activewear meet consumer preferences for heavier weights and higher
cotton content. In addition, Pluma's emphasis on quality is demonstrated
throughout its design and manufacturing processes.
INCREASING SALES THROUGH A DIVERSE CUSTOMER BASE
Pluma targets a diverse customer base across multiple markets and distribution
channels. Currently, Pluma sells to branded customers such as Adidas, Nike,
Reebok and Starter, retailers such as Miller's Outpost, Sam's Club and T.J. Maxx
and entertainment customers such as Busch Gardens, Hard Rock Cafe and Walt
Disney. In addition, the Company sells to wholesale distributors, screenprinters
and embroiderers who sell the Company's products to companies such as DKNY,
Eddie Bauer and Guess?. The Company's diverse customer base provides product
exposure to many consumer markets and enables Pluma to balance its production
more evenly throughout the year, thereby improving sales and profitability.
DEVELOPING NEW PRODUCTS AND STYLES
Pluma has been an industry leader in developing new products of various fabric
weights and blends, as well as unique styles, that are often designed
exclusively for its customers to meet their individual needs. Typically, new
products and styles command higher prices resulting in better margins. New
products manufactured for one customer frequently become popular with other
4
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customers. In addition, the ability to customize new product styles that meet
stringent customer standards enables the Company not only to attract new
customers but also to cross-sell its more basic products.
CAPITALIZING ON FLEXIBLE MANUFACTURING CAPABILITIES
Using proprietary equipment and advanced manufacturing processes, Pluma has the
flexibility to shift its knitting, dyeing and sewing operations between various
fabric weights, blends and styles, as well as between fleece and jersey, with
minimal downtime. These capabilities allow Pluma to service effectively and
efficiently its diverse customer base.
INVESTING IN ADVANCED TECHNOLOGIES
The Company continues to upgrade its manufacturing, distribution and management
information systems as proven cost and quality related advances become
available. The Company has made significant investments to improve efficiencies
throughout its manufacturing processes including knitting, dyeing, cutting,
sewing and distribution. As a result, Pluma believes that its manufacturing and
distribution processes are among the most modern in the industry. In addition,
the Company is in the process of implementing a new management information
system to enhance the timing and accuracy of its controls.
Pluma is a North Carolina corporation, incorporated on December 1, 1986. The
principal executive offices of the Company are located at 801 Fieldcrest Road,
Eden, North Carolina 27288, and its telephone number is (910) 635-4000.
RISK FACTORS
An investment in the Common Stock also involves certain risks associated with
the Company's business including the following: (i) fluctuations in the apparel
retail environment; (ii) impact of seasonality; (iii) competition; (iv)
concentration of customers; (v) availability and price of raw materials; and
(vi) certain operating and financial restrictions imposed on the Company by its
lender in connection with the Company's revolving credit facility. For a more
complete discussion of these and other risk factors, see "Risk Factors."
THE OFFERING
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COMMON STOCK OFFERED (1):
By the Company.......................................... shares
By the Selling Shareholders............................. shares
TOTAL OFFERING.............................................. shares
COMMON STOCK OUTSTANDING AFTER THE
OFFERING (1)(2)........................................... shares
USE OF PROCEEDS TO THE COMPANY.............................. To repay indebtedness. See "Use of Proceeds."
DIVIDEND POLICY............................................. The Company does not expect that a dividend will be paid in the
foreseeable future. See "Dividend Policy."
PROPOSED NASDAQ NATIONAL MARKET SYMBOL...................... "PLMA"
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(1) Assumes the Underwriters' over-allotment option for up to shares of
Common Stock is not exercised. See "Underwriting."
(2) Excludes an aggregate of 520,000 shares of Common Stock issuable upon the
exercise of stock options as of the date hereof, at a purchase price of $9.625
per share, granted to certain Company employees and directors pursuant to the
Company's 1995 Stock Option Plan, as defined elsewhere in this Prospectus. See
"Management -- Stock Option Plan."
5
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SUMMARY FINANCIAL DATA
Statement of Operations Data for each of the years in the three-year period
ended December 31, 1995, and the Balance Sheet Data as of December 31, 1995 and
1994 set forth below have been derived from the Company's audited financial
statements included elsewhere in this Prospectus, which have been audited by
Deloitte & Touche LLP, the Company's independent auditors. The Statement of
Operations Data for each of the years in the two-year period ended December 31,
1992, and the Balance Sheet Data as of December 31, 1993, 1992 and 1991 are
derived from the Company's audited financial statements which are not included
in this Prospectus. Statement of Operations Data for each of the nine months
ended September 30, 1996 and 1995, and the Balance Sheet Data as of September
30, 1996 set forth below have been derived from the Company's unaudited
financial statements which are included in this Prospectus and which reflect, in
the opinion of the Company, all adjustments (consisting of normal recurring
adjustments) necessary for a fair presentation.
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NINE MONTHS ENDED
SEPTEMBER 30, YEARS ENDED DECEMBER 31,
IN THOUSANDS, EXCEPT PER SHARE DATA 1996(1) 1995(1) 1995(1)(2)(3) 1994 1993 1992 1991
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STATEMENT OF OPERATIONS DATA:
Net sales $95,538 $ 74,178 $100,710 $97,908 $86,645 $83,569 $61,366
Gross profit 14,705 14,162 19,281 16,499 13,883 14,148 12,077
Income from operations 8,026 7,510 4,896 9,199 7,628 8,360 7,328
Income before income taxes and cumulative
effect of accounting change 5,540 5,265 1,766 6,944 5,995 7,586 6,338
Income before cumulative effect of
accounting change 3,501 3,328 1,107 4,350 3,793 4,791 3,887
Net income 3,501 3,328 1,107 4,350 3,867(4) 4,791 3,887
Earnings per common share and common
equivalent -- primary and fully diluted:
Income before cumulative effect of
accounting change $ .48 $ .46 $ .15 $ .61 $ .50 $ .64 $ .52
Net income $ .48 $ .46 $ .15 $ .61 $ .51 $ .64 $ .52
Weighted average number of shares
outstanding 7,227 7,227 7,227 7,130 7,551 7,527 7,524
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AS OF
SEPTEMBER 30, AS OF DECEMBER 31,
IN THOUSANDS 1996 1995 1994 1993 1992 1991
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BALANCE SHEET DATA:
Working capital $ 49,443 $ 50,052 $31,926 $29,935 $24,735 $ 8,842
Total assets 99,586 88,613 68,554 61,941 52,442 45,533
Long-term debt, net of current portion 45,452 50,120 30,465 28,684 22,169 6,842
Total shareholders' equity 29,970 26,902 26,373 25,110 21,946 17,453
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NINE MONTHS ENDED
SEPTEMBER 30, YEARS ENDED DECEMBER 31,
DOLLARS IN THOUSANDS 1996(1) 1995(1) 1995(1)(2)(3) 1994 1993 1992 1991
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OTHER DATA:
Gross profit as a percentage of net sales 15.4% 19.1% 19.1% 16.9% 16.0% 16.9% 19.7%
Income from operations as a percentage of
net sales 8.4% 10.1% 4.9% 9.4% 8.8% 10.0% 11.9%
Depreciation and amortization $ 2,832 $ 2,522 $ 3,440 $ 2,885 $ 2,292 $ 1,753 $ 1,449
Capital expenditures 1,974 5,376 5,856 4,495 7,086 5,952 3,770
EBITDA(5) 11,218 10,222 8,627 12,386 9,928 10,695 9,290
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(1) In December 1995, the Company brought its sales and marketing functions
in-house in order to increase control and enhance profitability (the "Box
Transaction"). The Company had previously conducted its sales and marketing
activities through an exclusive sales agent, Box & Company ("Box & Company"),
under an arrangement (the "Sales & Marketing Agreement") pursuant to which the
Company paid a commission of 3.0% of net sales plus an allowance for certain
promotional material. Box & Company is a corporation owned by a principal
shareholder of the Company who is also its Chairman of the Board. The Company
terminated the Sales & Marketing Agreement as of December 31, 1995, and recorded
a non-recurring charge of $2.0 million, the amount of the termination payment.
The Company's sales and marketing expenses have decreased as a result of the Box
Transaction. For the nine months ended September 30, 1996, the Company's sales
and marketing expenses as a percent of net sales were 1.2% compared to 3.3% for
the same period in 1995. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Certain Relationships and Related
Transactions."
(2) Includes a non-recurring charge of $3.3 million to increase the allowance
for doubtful accounts receivable primarily related to the bankruptcy of a
customer. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
(3) Had the Box Transaction occurred at the beginning of 1995, excluding the two
non-recurring charges mentioned in notes (1) and (2), for the year ended
December 31, 1995, selling, general and administrative expenses ("SG&A") would
have been $7.3 million compared to $14.4 million as reported. In addition,
Income from operations, Net income, Earnings per common share and common
equivalent -- primary and fully diluted, and EBITDA would have been $12.0
million, $5.5 million, $0.77 and $15.7 million, respectively.
(4) Includes $73,651 of income from the cumulative effect of a change in
accounting for the adoption of SFAS No. 109.
(5) Represents earnings before interest expense, income taxes, depreciation and
amortization. EBITDA is commonly used to analyze companies on the basis of
operating performance, leverage and liquidity. EBITDA should not be considered
as a measure of profitability or liquidity as determined in accordance with
generally accepted accounting principles in the statements of operations and
cash flows.
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RISK FACTORS
THIS PROSPECTUS CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS WITHIN THE MEANING
OF THE FEDERAL SECURITIES LAWS. ACTUAL RESULTS AND THE TIMING OF CERTAIN EVENTS
COULD DIFFER MATERIALLY FROM THOSE PROJECTED IN FORWARD-LOOKING STATEMENTS DUE
TO A NUMBER OF FACTORS, INCLUDING THOSE SET FORTH BELOW AND ELSEWHERE IN THIS
PROSPECTUS. IN ADDITION TO OTHER INFORMATION IN THIS PROSPECTUS, THE FOLLOWING
FACTORS SHOULD BE CONSIDERED CAREFULLY BY PROSPECTIVE INVESTORS IN EVALUATING
THE COMPANY AND ITS BUSINESS BEFORE PURCHASING SHARES OF COMMON STOCK OFFERED
HEREBY.
FLUCTUATIONS IN APPAREL RETAIL ENVIRONMENT
In general, the retail industry has experienced significant changes and
difficulties over the past several years, including consolidation of ownership,
increased centralization of buying decisions, customer order cancellations,
restructuring, bankruptcies and liquidations. As a result of a weak apparel
retailing environment during the second half of 1995, the Company experienced
lower than anticipated demand, which resulted in higher inventory levels.
Although the Company believes that demand for apparel products has recovered,
there can be no assurance that the apparel industry will not experience weakness
in the future.
While various retailers and wholesalers, including some of the Company's
customers, experienced financial difficulties in the past few years, which
increased the risk of extending credit to certain customers, the Company's bad
debt experience was limited until 1995. In that year, the Company increased its
allowance for doubtful accounts receivable by $3.3 million, which was
principally related to the anticipated bankruptcy of a major customer that
occurred on February 1, 1996. As a result, the Company believes its allowance
for doubtful accounts is sufficient. However, there can be no assurance that the
Company will not have to increase such allowances in the future. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
IMPACT OF SEASONALITY
Typically, demand for fleece products is higher during the third and fourth
quarters than in the first two quarters of each year. As a result, the Company
produces and stores fleece finished goods inventory in order to meet the heavy
demand for delivery in the second half of the year. If, after producing and
storing fleece inventory in anticipation of third and fourth quarter deliveries,
demand is significantly less than expected, the Company may be required to hold
inventory for an extended period of time at the Company's expense, or sell the
excess inventory at reduced prices, thereby reducing profits. The holding of
excess inventory could also necessitate the slowing of production, resulting in
lower plant and equipment utilization and lower fixed operating cost absorption.
See "Business -- Seasonality."
COMPETITION
The fleece and jersey activewear industry is highly competitive. The Company
believes that its primary competitors are vertically integrated manufacturers
such as Fruit of the Loom, Inc. ("Fruit of the Loom"), Oneita Industries, Inc.
("Oneita"), Russell Corporation ("Russell"), Sara Lee Corporation ("Sara Lee"),
Tultex Corporation ("Tultex") and VF Corporation ("VF") among others. Certain of
these competitors have greater financial resources and manufacturing,
distribution and marketing capabilities than the Company. The Company's future
success will depend to a significant extent upon its ability to remain
competitive in the areas of quality, price, marketing, product development,
manufacturing, distribution and order processing. There can be no assurance that
the Company will be able to compete effectively in all such areas in the future.
See "Business -- Competition."
In recent years, certain fleece and jersey apparel manufacturers have
overproduced inventory as a result of excess plant and equipment capacity. This
oversupply of inventory has on occasion led to inventory dumping, resulting in
price reductions for fleece and jersey apparel. Such lower prices have had an
adverse effect upon the Company's operating results. The Company believes that
continuation of this practice would have an adverse impact on fleece and jersey
apparel manufacturers, including the Company.
Recently, import protection afforded to domestic manufacturers has been
declining, resulting in increased foreign competition. Over a period of ten
years beginning in 1995, the General Agreement on Tariffs and Trade ("GATT")
eliminates restrictions on imports of apparel. In addition, on January 1, 1994,
the North American Free Trade Agreement ("NAFTA"), which reduces or repeals
trade barriers with Canada and Mexico, became effective. The implementation of
both GATT and NAFTA, as well as other free trade agreements, could result in
increased apparel imports from foreign manufacturers and have an adverse effect
upon the Company.
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In general, wholesale distributors warehouse inventory longer than other
distribution channels. Consequently, manufacturers, including the Company, have
extended to wholesale customers longer payment terms. In addition, certain
manufacturers recently began a practice of consigning products to wholesale
distributors for competitive reasons. Should wholesale distributors of fleece
and jersey apparel demand and receive longer payment terms than currently exist,
or should consignment of inventory become common within the industry, the
Company could be adversely impacted by increased inventory costs, delays in
collecting receivables and return of inventory.
CONCENTRATION OF CUSTOMERS
The Company's top ten customers accounted for approximately 75.9% of its net
sales for the nine months ended September 30, 1996 and 73.0% of its accounts
receivable as of September 30, 1996. The Company's top ten customers accounted
for approximately 75.6% of its net sales in 1995 and 78.2% of its accounts
receivable as of December 31, 1995. Its top three customers for the nine months
ended September 30, 1996, Sam's Club, Adidas and Nike, accounted for 26.1%,
14.6% and 7.6%, respectively, of net sales. For the nine months ended September
30, 1995, the Company's top three customers, Frank L. Robinson, Sam's Club and
Galt Sand, accounted for 15.9%, 14.4% and 12.7%, respectively, of the Company's
net sales. In the event that any of these customers or any of the Company's
other significant customers were to substantially reduce their orders or cease
buying from the Company, such an occurrence would have a material adverse effect
on the Company's business should the Company be unable to replace that business
with other customers. See "Business -- Customers."
AVAILABILITY AND PRICE OF RAW MATERIALS
The Company purchases raw materials such as yarn, dye stuffs and chemicals used
in manufacturing its products. The Company is dependent upon the ability of its
suppliers to furnish these materials in sufficient volumes at fair prices and to
meet performance, quality and delivery criteria. Except for contracts
periodically entered into by the Company that obligate yarn suppliers to deliver
the cotton portion of yarn at a fixed price over a period of time, the Company
does not have any contracts with its suppliers that obligate them to continue
selling to the Company. The prices of cotton and polyester have been volatile
since 1994. Should shortages of materials occur or should the prices of these
materials rise, the Company's inability to increase its prices to recover such
cost increases could have a material adverse effect upon the Company. See
"Business -- Sources of Raw Materials."
RESTRICTIONS IMPOSED BY CREDIT AGREEMENT
The Company's loan agreement evidencing its revolving credit facility (the
"Credit Facility") with First Union National Bank of North Carolina ("FUNB")
imposes certain operating and financial restrictions on the Company. In the
past, the Company has been out of compliance with these financial covenants and
has been required to seek waivers. As of September 30, 1996, the Company was in
full compliance with the loan agreement. However, there can be no assurance that
the Company will remain in compliance with these covenants in the future, and
there can be no assurance that it will be successful in obtaining waivers from
FUNB in the event of subsequent defaults.
ENVIRONMENTAL CONTROLS AND OTHER REGULATORY REQUIREMENTS
The Company is subject to various federal, state and local environmental laws
and regulations governing, among other things, the discharge, storage, handling
and disposal of a variety of hazardous and nonhazardous substances and wastes
used in or resulting from its present and past operations. While the Company
does not expect that compliance with any of such laws and regulations will
adversely affect the Company's operations, there can be no assurance that
environmental regulatory requirements will not become more stringent in the
future or that the Company will not incur significant costs relating to
environmental matters in the future. The Company's operations also are governed
by laws and regulations relating to employee safety and health, principally the
Occupational Safety and Health Act ("OSHA") and regulations thereunder, that,
among other things, establish exposure limitations for cotton dust,
formaldehyde, asbestos and noise and regulate chemical and ergonomic hazards in
the workplace. See "Business -- Environmental Matters."
RELIANCE ON KEY PERSONNEL
The success of the Company's business will be partially dependent upon the
performance of certain members of senior management. The loss of key members of
senior management could have an adverse effect on the Company's business. See
"Management." The Company's key executive officers are parties to employment
contracts. See "Management -- Employment Agreements, Change in Control
Arrangements." The Company maintains key man life insurance on certain
executives.
9
<PAGE>
CONTROL BY PRINCIPAL SHAREHOLDERS
Upon consummation of the Offering, shareholders who are officers or directors of
the Company will control (directly or through beneficial ownership) % ( %
if the Underwriters' over-allotment option is exercised in full) of the
outstanding voting securities of the Company. Furthermore, certain family
members of these officers and directors own additional Pluma shares that are not
attributable to the officers and directors. The officers and directors will have
the ability to control the business affairs of the Company (including the
perpetuation of their positions with the Company), if % of other holders of
the Common Stock vote their shares consistently with such officers and
directors. See "Principal Shareholders."
ANTITAKEOVER PROVISIONS
The Company's Bylaws and Articles of Incorporation include provisions that may
have the effect of discouraging a nonnegotiated takeover of the Company and
preventing certain changes of control. These provisions, among other things (i)
classify the Company's Board of Directors into three classes serving staggered
three-year terms; (ii) permit the Company's Board of Directors, without further
shareholder approval, to issue up to 1.0 million shares of preferred stock with
rights and preferences determined by the Board of Directors at the time of
issuance; and (iii) create a supermajority vote requirement (66 2/3%) of the
Company's shareholders and directors prior to a sale of the Company's assets or
other change in control of the Company. Such restrictions might, therefore, have
the effect of inhibiting shareholders' ability to realize maximum value for
their shares of Common Stock that might otherwise be realized as a result of a
merger or other event affecting the control of the Company. See "Description of
Capital Stock."
NO PRIOR PUBLIC MARKET; DETERMINATION OF OFFERING PRICE; POSSIBLE VOLATILITY OF
STOCK PRICE
Prior to this Offering, there has been no public market for the Company's Common
Stock. There can be no assurance that an active trading market in the Common
Stock will develop or be sustained after this Offering. The initial public
offering price will be determined through negotiations among the Company, the
Selling Shareholders and the representatives of the Underwriters based on the
factors described under "Underwriting" and may not be indicative of the market
price of the Common Stock after the Offering. The trading price of the Common
Stock could be subject to significant fluctuations in response to variations in
the Company's quarterly operating and financial results, changes in earnings
estimates by research analysts and other events or factors. In addition, the
stock market has in recent years experienced significant price fluctuations.
These fluctuations often have been unrelated to the operating performance of
specific companies. Broad market fluctuations, as well as economic conditions
generally, and in the apparel manufacturing industries specifically, may
adversely affect the market price and liquidity of the Company's Common Stock.
SHARES ELIGIBLE FOR FUTURE SALE
Sales of substantial amounts of Common Stock, or the availability of substantial
amounts of Common Stock for future sale, could adversely affect the prevailing
market price of the Common Stock. Each of the Company, its directors and
officers has agreed with the Underwriters not to offer, pledge, sell, file a
registration statement relating to, announce the intention to sell, issue (in
the case of the Company), contract to sell or otherwise dispose of any shares of
Common Stock or securities convertible into Common Stock, subject to certain
limited exceptions, for 180 days from the date of this Prospectus. All of the
currently outstanding shares of Common Stock are "restricted securities" within
the meaning of Rule 144 ("Rule 144") under the Securities Act of 1933, as
amended (the "Securities Act"). Such shares may be resold only in compliance
with the registration requirements of the Securities Act or pursuant to an
exemption therefrom, including the exemptions contained in Rule 144. See "Shares
Eligible for Future Sale."
DILUTION
Purchasers of Common Stock in this Offering will experience immediate and
substantial dilution in net tangible book value of the Common Stock offered
hereby (based on an initial public offering price of $ per share) of
approximately $ per share ($ per share if the Underwriters' over-allotment
option is exercised in full). See "Dilution."
10
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of shares of the Common
Stock offered by the Company (after deducting the underwriting discounts and
estimated expenses associated with the Offering) are estimated to be
approximately $ ($ if the Underwriters' over-allotment option is exercised
in full) assuming an initial public offering price of $ per share. The
Company intends to use the net proceeds it receives from the Offering to reduce
the Company's outstanding indebtedness to FUNB under the Credit Facility. The
Company's interest rate on the FUNB loan is variable. On September 30, 1996, the
interest rate on the Credit Facility was 6.74%, and the amount outstanding was
$44,602,547. The Company's Credit Facility expires on May 30, 2000. The proceeds
previously drawn under the Credit Facility were used to fund working capital
requirements of the Company and certain purchases of plant and equipment. The
Company will not receive the benefit of that portion of the net proceeds of this
Offering to be paid to Selling Shareholders.
DIVIDEND POLICY
The Company has declared and paid quarterly cash dividends on its Common Stock
since 1991. Quarterly cash dividends paid since January 1994 have been $0.02 per
share. The Company does not anticipate paying a dividend in the foreseeable
future. Any dividend declarations in the future will depend upon the Company's
profitability, financial condition, capital needs, possible lender consent and
other factors deemed relevant by the Board of Directors. The Company's loan
agreement with FUNB prohibits the Company from paying a dividend if such payment
would cause the Company to violate certain financial covenants imposed on the
Company by the loan agreement.
11
<PAGE>
DILUTION
Purchasers of the Common Stock offered hereby will experience an immediate
dilution in the net tangible book value of their Common Stock from the assumed
initial public offering price. The net tangible book value of the Common Stock
at , 199 , was approximately $ , or $ per share of
outstanding Common Stock.
Net tangible book value per share represents total assets of the Company (there
are no significant intangible assets) less total liabilities, divided by the
number of shares of Common Stock outstanding. After giving effect to the
issuance and sale by the Company of shares of Common Stock at an assumed
initial public offering price of $ per share (after deducting the
underwriting discount and the estimated expenses associated with the Offering to
be paid by the Company), the pro forma net tangible book value as of
, 199 would be approximately $ or $ per share ($ per share,
assuming the Underwriters' over-allotment option is exercised in full). This
represents an immediate increase in pro forma net tangible book value of $ per
share to existing shareholders, and an immediate dilution of $ per share to
investors purchasing shares at the initial public offering price.
The following table illustrates this per share dilution:
<TABLE>
<CAPTION>
<S> <C> <C>
Assumed initial public offering price per share of Common Stock $
Net tangible book value per share at , 199 $
Increase attributable to new investors
Pro forma net tangible book value per share after the Offering
Dilution in net tangible book value per share to new investors $
</TABLE>
The following table sets forth the number of shares of Common Stock purchased
from the Company, the total consideration paid to the Company and the average
price per share paid to the Company by existing shareholders and the investors
purchasing shares of Common Stock in the Offering:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
<S> <C> <C> <C> <C> <C>
Existing shareholders (1) % $ % $
New investors
Total
</TABLE>
(1) If the Underwriters' over-allotment option is exercised in full, the number
of shares held by the new investors will increase to , or % of the total
number of shares to be outstanding after this Offering, and the number of shares
held by the existing shareholders will be shares, or % of the total
number of shares to be outstanding after the Offering.
12
<PAGE>
CAPITALIZATION
The following table sets forth short-term borrowings and the capitalization of
the Company (i) at September 30, 1996, and (ii) as adjusted to give effect to
the sale of the shares of Common Stock offered by the Company at an assumed
initial public offering price of $ per share and the application of the
estimated net proceeds to be received by the Company from the Offering to the
reduction of the outstanding balance of the Credit Facility. See "Use of
Proceeds." The information set forth below should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Financial Statements of the Company included elsewhere in
this Prospectus.
<TABLE>
<CAPTION>
AS OF
SEPTEMBER 30, 1996
ACTUAL AS ADJUSTED (1)
<S> <C> <C>
Short-term borrowings, including current portion of long-term debt $ 10,849,640 $
Long-term debt:
Revolving loan $ 44,602,547
Subordinated debt 849,640
Total long-term debt, net of current portion 45,452,187
Shareholders' equity:
Preferred stock, no par value, 1,000,000 shares authorized, none outstanding -- --
Common stock, no par value, 15,000,000 shares authorized;
7,222,550 shares outstanding; shares outstanding as adjusted (2) 7,222,550
Retained earnings 22,747,676
Total shareholders' equity 29,970,226
Total capitalization (3) $ 75,422,413 $
</TABLE>
(1) Assumes the Underwriters' over-allotment option for up to shares of
Common Stock is not exercised. See "Underwriting."
(2) Excludes an aggregate of 520,000 shares of Common Stock issuable upon the
exercise of stock options as of the date hereof at a purchase price of $9.625
per share granted to certain Company employees and directors pursuant to the
Company's 1995 Stock Option Plan, as defined elsewhere in this Prospectus. See
"Management -- Stock Option Plan."
(3) The Company paid a $0.02 per share dividend subsequent to September 30,
1996, which reduced retained earnings, total shareholders' equity and total
capitalization by $ .
13
<PAGE>
SELECTED FINANCIAL AND OPERATING DATA
Statement of Operations Data for each of the years in the three-year period
ended December 31, 1995, and the Balance Sheet Data as of December 31, 1995 and
1994 set forth below have been derived from the Company's audited financial
statements included elsewhere in this Prospectus, which have been audited by
Deloitte & Touche LLP, the Company's independent auditors. The Statement of
Operations Data for each of the years in the two-year period ended December 31,
1992, and the Balance Sheet Data as of December 31, 1993, 1992 and 1991 are
derived from the Company's audited financial statements which are not included
in this Prospectus. Statement of Operations Data for each of the nine months
ended September 30, 1996 and 1995, and the Balance Sheet Data as of September
30, 1996 set forth below have been derived from the Company's unaudited
financial statements which are included in this Prospectus and which reflect, in
the opinion of the Company, all adjustments (consisting of normal recurring
adjustments) necessary for a fair presentation.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEARS ENDED DECEMBER 31,
IN THOUSANDS, EXCEPT PER SHARE DATA 1996(1) 1995(1) 1995(1)(2)(3) 1994 1993 1992 1991
STATEMENT OF OPERATIONS DATA:
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales $95,538 $74,178 $ 100,710 $97,908 $86,645 $83,569 $61,366
Cost of goods sold 80,833 60,016 81,429 81,409 72,762 69,421 49,289
Gross profit 14,705 14,162 19,281 16,499 13,883 14,148 12,077
Selling, general and administrative
expenses 6,679 6,652 14,385 7,300 6,255 5,788 4,749
Income from operations 8,026 7,510 4,896 9,199 7,628 8,360 7,328
Other expenses, net 2,486 2,245 3,130 2,255 1,633 774 990
Income before income taxes and
cumulative effect of accounting
change 5,540 5,265 1,766 6,944 5,995 7,586 6,338
Income taxes 2,039 1,937 659 2,594 2,202 2,795 2,451
Income before cumulative effect of
accounting change 3,501 3,328 1,107 4,350 3,793 4,791 3,887
Cumulative effect of accounting change -- -- -- -- 74(4) -- --
Net income $ 3,501 $ 3,328 $ 1,107 $ 4,350 $ 3,867(4) $ 4,791 $ 3,887
Earnings per common share and common
equivalent -- primary and fully
diluted:
Income before cumulative effect of
accounting change $ .48 $ .46 $ .15 $ .61 $ .50 $ .64 $ .52
Net income $ .48 $ .46 $ .15 $ .61 $ .51 $ .64 $ .52
Supplemental (5) $ .60
Weighted average number of shares
outstanding 7,227 7,227 7,227 7,130 7,551 7,527 7,524
Cash dividends per common share $ .06 $ .06 $ .08 $ .08 $ .08 $ .06 $ .17
</TABLE>
<TABLE>
<CAPTION>
AS OF
SEPTEMBER 30, AS OF DECEMBER 31,
IN THOUSANDS 1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital $49,443 $ 50,052 $31,926 $29,935 $24,735
Total assets 99,586 88,613 68,554 61,941 52,442
Long-term debt, net of current
portion 45,452 50,120 30,465 28,684 22,169
Total shareholders' equity 29,970 26,902 26,373 25,110 21,946
IN THOUSANDS 1991
BALANCE SHEET DATA:
Working capital $ 8,842
Total assets 45,533
Long-term debt, net of current
portion 6,842
Total shareholders' equity 17,453
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEARS ENDED DECEMBER 31,
DOLLARS IN THOUSANDS 1996(1) 1995(1) 1995(1)(2)(3) 1994 1993 1992 1991
OTHER DATA:
<S> <C> <C> <C> <C> <C> <C> <C>
Gross profit as a percentage of net
sales 15.4% 19.1% 19.1% 16.9% 16.0% 16.9% 19.7%
Income from operations as a
percentage of net sales 8.4% 10.1% 4.9% 9.4% 8.8% 10.0% 11.9%
Depreciation and amortization $ 2,832 $ 2,522 $ 3,440 $ 2,885 $ 2,292 $ 1,753 $1,449
Capital expenditures 1,974 5,376 5,856 4,495 7,086 5,952 3,770
EBITDA (6) 11,218 10,222 8,627 12,386 9,928 10,695 9,290
</TABLE>
14
<PAGE>
SELECTED FINANCIAL AND OPERATING DATA (CONTINUED)
(1) In December 1995, the Company brought its sales and marketing functions
in-house in order to increase control and enhance profitability (the "Box
Transaction"). The Company had previously conducted its sales and marketing
activities through an exclusive sales agent, Box & Company ("Box & Company"),
under an arrangement (the "Sales & Marketing Agreement") pursuant to which the
Company paid a commission of 3.0% of net sales plus an allowance for certain
promotional material. Box & Company is a corporation owned by a principal
shareholder of the Company who is its Chairman of the Board. The Company
terminated the Sales & Marketing Agreement as of December 31, 1995, and recorded
a non-recurring charge of $2.0 million, the amount of the termination payment.
The Company's sales and marketing expenses have decreased as a result of the Box
Transaction. For the nine months ended September 30, 1996, the Company's sales
and marketing expenses as a percent of net sales were 1.2% compared to 3.3% for
the same period in 1995. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Certain Relationships and Related
Transactions."
(2) Includes a non-recurring charge of $3.3 million to increase the allowance
for doubtful accounts receivable primarily related to the bankruptcy of a
customer. See "Managements Discussion and Analysis of Financial Condition and
Results of Operation."
(3) Had the Box Transaction occurred at the beginning of 1995, excluding the two
non-recurring charges mentioned in notes (1) and (2), for the year ended
December 31, 1995, selling, general and administrative expenses ("SG&A") would
have been $7.3 million compared to $14.4 million as reported. In addition,
Income from operations, Net income, Earnings per common share and common
equivalent -- primary and fully diluted and EBITDA would have been $12.0
million, $5.5 million, $0.77 and $15.7 million, respectively.
(4) Includes $73,651 of income from the cumulative effect of a change in
accounting for the adoption of SFAS No. 109.
(5) Based upon earnings with adjusted interest expense and adjusted weighted
average number of shares after use of proceeds from the Offering for repayment
of indebtedness.
(6) Represents earnings before interest expense, income taxes, depreciation and
amortization. EBITDA is commonly used to analyze companies on the basis of
operating performance, leverage and liquidity. EBITDA should not be considered
as a measure of profitability or liquidity as determined in accordance with
generally accepted accounting principles in the statements of operations and
cash flows.
15
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
Incorporated in 1986, Pluma is a vertically integrated manufacturer of high
quality fleece and jersey activewear. Historically, the Company's sales have
been derived predominantly from fleece products. However, since introducing
jersey products in 1990, the Company has increased jersey sales in order to
diversify its product mix, more efficiently utilize its manufacturing base and
reduce the impact of seasonality that is inherent in the fleece industry.
Generally, jersey products are sold at lower price points and generate lower
gross margins than fleece products.
In December 1995, the Company brought its sales and marketing functions in-house
in order to increase control and enhance profitability (the "Box Transaction").
The Company had previously conducted its sales and marketing activities through
an exclusive sales agent, Box & Company ("Box & Company"), under an arrangement
(the "Sales and Marketing Agreement") pursuant to which the Company paid a
commission of 3.0% of net sales plus an allowance for certain promotional
material. Box & Company is a corporation owned by a principal shareholder of the
Company who is also its Chairman of the Board. The Company terminated the Sales
and Marketing Agreement as of December 31, 1995, and recorded a non-recurring
charge of $2.0 million, the amount of the termination payment. Sales and
marketing expenses have decreased as a result of the Box Transaction. For the
nine months ended September 30, 1996, the Company's sales and marketing expenses
as a percent of net sales were 1.2% as compared to 3.3% for the same period in
1995. In addition, in December 1995, the Company incurred a non-recurring charge
of $3.3 million to increase the allowance for doubtful accounts receivable
related to the bankruptcy of a customer. Had the Box Transaction occurred as of
the beginning of 1995, and excluding the two non-recurring charges, for the year
ended December 31, 1995, SG&A as a percent of net sales would have been 7.3% as
compared to 14.2%, as reported.
The following table presents the major components of the Company's Statements of
Operations as a percentage of net sales:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEARS ENDED DECEMBER 31,
1996 1995 1995 1994 1993
<S> <C> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of goods sold 84.6 80.9 80.9 83.1 84.0
Gross profit 15.4 19.1 19.1 16.9 16.0
Selling, general and administrative expenses 7.0 9.0 14.2 7.5 7.2
Income from operations 8.4 10.1 4.9 9.4 8.8
Other expenses, net 2.6 3.0 3.1 2.3 1.9
Income before income taxes and cumulative effect of
accounting change 5.8 7.1 1.8 7.1 6.9
Income taxes 2.1 2.6 .7 2.7 2.5
Net income 3.7% 4.5% 1.1% 4.4% 4.5%
</TABLE>
RESULTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1996, COMPARED TO NINE MONTHS ENDED SEPTEMBER
30, 1995
NET SALES. Net sales increased 28.8% to $95.5 million in 1996 from $74.2 million
in 1995, an increase of $21.4 million. Gross dozens sold of fleece and jersey
increased 27.8% to 1.2 million dozens in 1996 from 1.0 million dozens in 1995.
The increase in net sales was principally attributable to increased sales of
jersey activewear, sales of new products and revenue from the addition of new
customers. Sales of jersey activewear increased by 79.5% to $37.3 million in
1996 from $20.8 million in 1995, an increase of $16.5 million. Sales of new
products accounted for 16.3% of 1996 net sales. Average sales price per dozen
for total products increased 0.6% in 1996 as a result of an increased average
sales price per dozen for fleece that was partially offset by a slight decline
in the average sales price per dozen for jersey products. See
"Business -- Products."
GROSS PROFIT. Gross profit was 15.4% of net sales in 1996 as compared to 19.1%
in 1995. This decrease in gross profit was the result of increased sales of
jersey activewear as a percent of total sales, higher raw material costs, harsh
winter weather causing higher fuel costs, lower than expected utilization of the
Company's plant facilities, sales of higher cost inventory that was
16
<PAGE>
manufactured during the fourth quarter of 1995 and increased medical and
workers' compensation insurance costs due to an increase in the labor force.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. SG&A was $6.7 million in 1996 and
in 1995. SG&A as a percent of net sales for 1996 was 7.0% compared to 9.0% in
1995. This decrease in SG&A as a percentage of net sales resulted primarily from
bringing sales and marketing functions in-house.
OTHER EXPENSES, NET. Other expenses, net, increased 10.8% to $2.5 million in
1996 from $2.2 million in 1995, an increase of $0.2 million. This increase was
primarily the result of an increase in interest expense as a result of
additional borrowings to fund higher inventories.
YEAR ENDED DECEMBER 31, 1995, COMPARED TO YEAR ENDED DECEMBER 31, 1994
NET SALES. Net sales increased 2.9% to $100.7 million in 1995 from $97.9 million
in 1994, an increase of $2.8 million. Gross dozens sold of fleece and jersey
increased 9.5% to 1.3 million dozens in 1995 from 1.2 million dozens in 1994.
The increase in net sales was principally attributable to increased sales of
jersey activewear, sales of new products and additional revenue from a major
customer. Sales of jersey activewear increased by 89.6% to $30.0 million in 1995
from $15.8 million in 1994, an increase of $14.2 million. Sales of new products
accounted for 12.5% of 1995 net sales. Sales to one major customer increased by
$8.7 million. This increase in net sales was offset by a 10.6% decrease in sales
of fleece activewear to $70.6 million in 1995 from $79.0 million in 1994. This
decrease was primarily attributable to a general weakness in demand for
back-to-school and holiday seasonal purchasing. Average sales price per dozen
for total products decreased 3.1% in 1995 as a result of increased sales of
jersey products, which generally sell at lower price points than fleece.
However, average sales price per dozen for fleece and jersey each increased. See
"Business -- Products."
GROSS PROFIT. Gross profit was 19.1% of net sales in 1995, as compared to 16.9%
in 1994. This increase in gross profit was a result of efficiency improvements
resulting from computerized purchasing and scheduling controls and higher
utilization of capacity for the first three quarters. This increase in gross
profit was offset primarily by lower than expected utilization of the Company's
plant and equipment in the fourth quarter of 1995, increased sales of jersey
products and increased medical and workers' compensation insurance costs.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. SG&A increased 97.0% to $14.4
million in 1995 from $7.3 million in 1994, an increase of $7.1 million. SG&A as
a percent of net sales for 1995 was 14.2% compared to 7.5% in 1994. This
increase was due primarily to a non-recurring charge of $3.3 million to increase
the allowance for doubtful accounts receivable principally related to 20/20
Sport, Inc. ("20/20 Sport"), a customer that filed for bankruptcy protection in
the U.S. Bankruptcy Court in the Southern District of New York in February 1996
and a non-recurring charge of $2.0 million for termination of the Sales and
Marketing Agreement as a result of the Box Transaction. In addition,
compensation costs increased by $0.9 million. Had the Box Transaction occurred
as of the beginning of 1995, and excluding the two non-recurring charges, for
the year ended December 31, 1995, SG&A as a percent of net sales would have been
7.3% as compared to 14.2%, as reported.
OTHER EXPENSES, NET. Other expenses, net, increased 38.9% to $3.1 million in
1995 from $2.3 million in 1994, an increase of $0.9 million. This increase was
primarily the result of an increase in interest expense as a result of
additional borrowings to fund higher inventories and the absence of the $0.3
million insurance settlement recognized in 1994.
INCOME TAXES. The effective tax rate was 37.3% in 1995 compared to 37.4% in
1994.
YEAR ENDED DECEMBER 31, 1994, COMPARED TO YEAR ENDED DECEMBER 31, 1993
NET SALES. Net sales increased 13.0% to $97.9 million in 1994 from $86.6 million
in 1993, an increase of $11.3 million. Gross dozens sold of fleece and jersey
increased 7.5% to 1.2 million dozens in 1994 from 1.1 million dozens in 1993.
This increase in net sales principally was attributable to strong retail demand
and the addition of two new significant customers. Sales of fleece activewear
increased by 8.0% to $79.0 million in 1994. Sales of jersey activewear increased
by 24.1% to $15.8 million in 1994. Sales of new products accounted for 21.8% of
1994 net sales. Sales to new customers accounted for 10.2% of 1994 net sales.
The increase in net sales was partially offset by a reduction in sales to M.J.
Soffe Company ("Soffe"), which purchased approximately $10.1 million of products
from the Company in 1993 as compared to $2.3 million in 1994. Soffe became a
vertically integrated manufacturer in 1994 and began manufacturing its own
products. Additionally, on August 17, 1994, a tornado struck one of the
Company's leased warehouses damaging approximately 23,000 dozens of finished
goods. As a result, the Company believes that its net sales were approximately
$2.0 million lower than they would have been. However, the Company was
reimbursed by its insurance carrier in an amount equal to the sales price of the
damaged products, which resulted
17
<PAGE>
in $0.3 million of other income. Average sales price per dozen for total
products increased 2.7% in 1994. See "Business -- Products."
GROSS PROFIT. Gross profit was 16.9% of net sales in 1994 compared to 16.0% in
1993. This increase in gross profit was a result of manufacturing efficiency
improvements primarily related to sewing process improvements offset by lower
plant and equipment utilization.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. SG&A increased 16.7% to $7.3
million in 1994 from $6.3 million in 1993, an increase of $1.0 million. SG&A as
a percent of net sales for 1994 was 7.5% compared to 7.2% in 1993. This increase
in SG&A as a percent of net sales was primarily due to increased warehousing
costs as a result of the tornado.
OTHER EXPENSES, NET. Other expenses, net, increased 38.0% to $2.3 million in
1994 from $1.6 million in 1993, an increase of $0.6 million. This increase was
primarily the result of an increase in interest expense associated with
additional borrowings to fund inventories and purchase equipment. This increase
was offset partly by a gain of $0.3 million in 1994 as a result of an insurance
settlement related to inventory damaged by the tornado.
INCOME TAXES. The effective tax rate was 37.4% in 1994 compared to 36.7% in
1993.
SELECTED QUARTERLY OPERATING RESULTS (UNAUDITED)
The following table sets forth quarterly unaudited financial information of the
Company for the seven quarters ended September 30, 1996. This information has
been prepared on the same basis as the annual information presented elsewhere in
this Prospectus and, in management's opinion, reflects all adjustments necessary
for a fair presentation of the information for the quarters presented when read
in conjunction with the Company's financial statements and the notes thereto
included elsewhere in this Prospectus. The operating results for any quarter are
not necessarily indicative of the results for any subsequent period or for the
entire fiscal year. The quarterly unaudited financial information below differs
from amounts previously reported by the Company as a result of allocating
certain year-end accruals to the respective interim periods in which the related
charges were incurred. Except as otherwise indicated, any comparison discussed
below reflects a change from the comparable quarter of the prior year.
<TABLE>
<CAPTION>
QUARTERS ENDED
IN THOUSANDS, 1995 1996
EXCEPT PER SHARE DATA MARCH 31 JUNE 30 SEPT. 30 DEC. 31 MARCH 31 JUNE 30 SEPT. 30
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales $ 19,220 $23,141 $ 31,817 $26,532 $ 21,932 $33,887 $ 39,719
Cost of goods sold 15,351 18,461 26,204 21,413 18,948 29,759 32,126
Gross profit 3,869 4,680 5,613 5,119 2,984 4,128 7,593
Selling, general and administrative expenses 1,893 2,202 2,557 7,733 2,025 2,298 2,356
Income (loss) from operations 1,976 2,478 3,056 (2,614) 959 1,830 5,237
Other expenses, net 595 782 868 885 761 816 909
Income (loss) before income taxes 1,381 1,696 2,188 (3,499) 198 1,014 4,328
Income taxes (benefits) 508 624 805 (1,278) 73 373 1,593
Net income (loss) $ 873 $ 1,072 $ 1,383 $(2,221) $ 125 $ 641 $ 2,735
Earnings per common share and common
equivalent -- primary and fully diluted $ .12 $ .15 $ .19 $ (.31) $ .02 $ .08 $ .38
</TABLE>
The activewear business is seasonal. Typically, demand for fleece products is
lower during the first and second quarters of each year, which is partially
offset by increased demand for jersey products in these periods.
Compared to first quarter sales in 1995, first quarter sales in 1996 were $2.7
million higher. This increase was due, in part, to a carryover of additional
demand for jersey and fleece products the Company experienced in the fourth
quarter of 1995. Second quarter and third quarter sales increased $10.7 million
and $7.9 million, respectively, over the prior year's second and third quarters'
sales. These sales increases exhibit the overall growth in sales which the
Company experienced in 1996. The first and second quarters' gross profit as a
percentage of net sales in 1995 was 20.1% and 20.2%, respectively. The first and
second quarters' gross profit as a percentage of net sales in 1996 decreased to
13.6% and 12.2%, respectively. This decrease in gross profit was the result of
increased sales of jersey activewear as a percent of total sales, higher raw
material costs, harsh winter
18
<PAGE>
weather causing higher fuel costs, lower than expected utilization of the
Company's plant and equipment during 1996 and sales of higher cost inventory
which was manufactured during the fourth quarter of 1995. In the third quarter
of 1996, gross profit as a percentage of net sales increased to 19.1%. This
increase resulted from improved utilization, higher average sales price per
dozen for fleece products and greater shipments of fleece than in prior periods.
During the fourth quarter of 1995 the Company incurred two non-recurring
charges: a $2.0 million termination charge as a result of the Box Transaction
and a $3.3 million increase in the allowance for doubtful accounts due to the
bankruptcy of 20/20 Sport.
The Company has experienced and expects to continue to experience fluctuations
in its quarterly results. The Company's revenues and operating performance are
affected by a number of factors, including, but not limited to, changes in raw
material prices, product mix and the general retailing environment. Therefore,
the Company believes that quarter-to-quarter comparisons of its operating
results are not necessarily indicative of future performance.
LIQUIDITY AND CAPITAL RESOURCES
PRINCIPAL SOURCES OF LIQUIDITY. Principal sources of liquidity have been bank
financing, cash generated from the Company's operations and private placements
of equity securities. Pursuant to a loan agreement executed on May 25, 1995 (the
"Loan Agreement"), the Company entered into the Credit Facility with FUNB in the
amount of the lesser of $55.0 million or the Company's "borrowing base" as
defined in the Loan Agreement. As of September 30, 1996, $10.4 million was
available to be borrowed under the Credit Facility. The Loan Agreement expires
on May 30, 2000. The interest rate of the Credit Facility is variable, and, on
September 30, 1996, it was 6.74%. The net proceeds of the Offering received by
the Company will be used to reduce the outstanding balance of the Credit
Facility. See "Use of Proceeds."
The Loan Agreement imposes certain operating and financial restrictions on the
Company, including a restriction inhibiting the Company's ability to seek
additional debt financing without FUNB's prior written consent. The Company's
obligations under the Loan Agreement are secured by substantially all of the
Company's assets.
As of September 30, 1996, the Company's debt to equity ratio was approximately
1.5 to 1. Assuming an initial public offering price of $ per share, after
applying the net proceeds of this Offering, the Company's debt to equity ratio
will be approximately to 1.
In 1994, the Company conducted a private placement of Common Stock at $7.87 per
share. The Company received approximately $1.7 million for 220,000 shares as a
result of that offering. Proceeds from this private placement were used to
reduce outstanding indebtedness.
As of September 30, 1996, the Company owed $1.7 million to a former
officer/shareholder of the Company. This sum is due on a promissory note given
in January 1994 as a portion of the purchase price paid to redeem all of such
individual's Pluma shares. The Company will owe annual installments of
approximately $0.8 million in January 1997 and 1998 plus interest on the unpaid
balance at 5.0% per annum. In the event the Company defaults on this obligation,
it will be required to issue shares of Common Stock to this former
officer/shareholder equal in value to the unpaid amount of the indebtedness plus
any unpaid interest at the time of default.
CASH FLOWS FROM OPERATING ACTIVITIES. For the nine months ended September 30,
1996, the Company's operations used $3.3 million of cash. The principal use of
cash was $9.5 million for accounts receivable. Accounts receivable increased due
to increased sales during 1996. This use was offset by increases in accounts
payable and accrued expenses, consisting primarily of interest payable and
reserves for medical and workers' compensation claims. For the year ended
December 31, 1995, the Company's operations used $10.6 million of cash. The
principal uses of cash were a $14.0 million increase in inventories and a $2.4
million increase in tax-related assets. Inventories increased primarily due to
lower than expected demand in the fourth quarter of 1995. These uses were offset
by increases in accrued expenses, primarily interest payable and reserves for
medical and workers' compensation claims. For the year ended December 31, 1994,
the Company's operations generated $4.0 million of cash. The principal use of
cash was $5.6 million to fund accounts receivable.
CASH FLOWS FROM INVESTING ACTIVITIES. In each of the last three years and the
nine months ended September 30, 1996, the Company has invested heavily in plant
and equipment to grow its business. Capital expenditures were $2.0 million for
the nine months ended September 30, 1996. Capital expenditures were $5.9
million, $4.5 million and $7.1 million in 1995, 1994 and 1993, respectively.
CASH FLOWS FROM FINANCING ACTIVITIES. For the nine months ended September 30,
1996, the Company had net proceeds from borrowings of $5.3 million to fund
operations and investments and paid cash dividends of $0.4 million. In 1995, the
Company had net proceeds from borrowings of $17.5 million to fund operations and
investments and paid cash dividends of $0.6 million.
19
<PAGE>
In 1994, the Company had net repayments of borrowings of $0.4 million and paid
cash dividends of $0.6 million. In addition, in 1994, the Company had proceeds
of $1.7 million from issuance of Common Stock and repurchases of stock totaling
$0.8 million.
CAPITAL EXPENDITURES. Additional capital expenditures are expected in future
years to meet continued growth expectations. The Company anticipates expending
approximately $3.0 million in 1997 for additional plant and equipment as well as
approximately $2.0 million for the purchase and implementation of a new
management information system to enhance the timing and accuracy of controls.
See "Business -- Management Information Systems."
NEW ACCOUNTING STANDARDS
In October 1995, the Financial Accounting Standards Board issued SFAS No. 123,
"Accounting for Stock-Based Compensation." SFAS No. 123 is effective for
transactions entered into in fiscal years that begin after December 15, 1995.
This statement adopts a "fair value based method" of accounting for employee
stock option plans or similar stock-based compensation plans. Under the fair
value based method, compensation cost is measured at the grant date based on the
fair value of the award and is recognized over the service or vesting period.
The statement does allow entities to continue to measure compensation using the
"intrinsic value based method" of APB No. 25 provided that they make pro forma
disclosures on net income and earnings per common share as if the fair value
based method of accounting had been applied. The Company will continue to follow
APB No. 25 and will disclose the pro forma effect of the fair value based method
on net income and earnings per common share.
In March 1995, the Financial Accounting Standards Board issued SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed of," which requires that long-lived assets, certain identifiable
intangibles, and goodwill related to those assets to be held and used and to
long-lived assets and certain identifiable intangibles to be disposed of, be
reported at the lower of carrying amount or fair value less cost to sell. An
entity shall review long-lived assets and certain identifiable intangibles to be
held and used for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. An
impairment loss recognized in accordance with this standard shall be measured as
the amount by which the carrying amount of the asset exceeds the fair value of
the asset. SFAS No. 121 is effective for financial statements for fiscal years
beginning after December 15, 1995. The effect of implementing this standard is
not expected to have a material impact on the Company's financial statements.
20
<PAGE>
BUSINESS
GENERAL
Pluma is a vertically integrated manufacturer of high quality fleece and jersey
activewear. The Company is focused on increasing sales and profitability by
offering high value products to a diverse customer base. Pluma sells its
products, either directly or through distributors, to companies such as Adidas,
DKNY, Guess?, Nike, Starter and Walt Disney. In addition, the Company sells
products under its own "Pluma," "SANTEE" and "SNOWBANK" brand names to retail
and wholesale customers such as Sam's Club and Frank L. Robinson Company. The
Company has increased net sales from $61.4 million in 1991 to $100.7 million in
1995, a compound annual growth rate of 13.2%, and has been profitable every year
since its first full year of operation.
Pluma was incorporated in December 1986 by certain principal executive officers
and members of the Board of Directors who had over 100 years of collective
industry experience. They envisioned that the Company could cost effectively
produce higher quality activewear and sell to a more diverse customer base than
was common in the industry. The Company seized the opportunity to produce low
cost, high quality products by developing a manufacturing base with the most
advanced equipment available.
Since its inception, the Company has been an industry leader in developing new
products and styles while establishing higher quality standards. The Company was
one of the first to introduce heavyweight, fuller cut fleece products at
attractive price points and fleecewear with higher cotton content. These
products were well-received by consumers, and the Company rapidly increased
sales and profitability as it expanded its business across broad market
segments. In 1990, the Company began to produce heavyweight cotton jersey
products suitable for outerwear in order to diversify its product mix, more
efficiently utilize its manufacturing base and increase sales and profitability.
Today, the Company continues to be a leading innovator of products and recently
introduced pique fleece, 100% cotton fleece and cotton/SpandexTM five-way
stretch fleece.
In addition, the Company believes its ability to collaborate with customers in
developing new styles provides a distinct competitive advantage. As a result of
Pluma's flexible manufacturing capabilities, customers often select the Company
as their "manufacturer of choice" for its ability to develop specialized
products that meet customers' cost, quality and delivery criteria.
INDUSTRY
The Company competes in the growing activewear sector of the apparel industry.
According to SPORTING GOODS MANUFACTURERS ASSOCIATION ("SGMA"), retail sales of
activewear increased from $34.4 billion in 1994 to $37.6 billion in 1995. In
particular, according to SGMA, industry sales for fleecewear increased from $4.9
billion to $5.1 billion, while jersey sales also increased from $11.5 billion to
$12.3 billion over the same period. SGMA estimates that sales of activewear will
increase approximately 5% in 1996 to $40 billion.
The growth of the fleece and jersey activewear industry is attributable to
several factors. First, the trends toward increased physical fitness and the
"casualization of America" have resulted in fleece and jersey apparel's becoming
more acceptable as daily attire. In particular, the popularity of branded
activewear products from companies such as Adidas, Nike and Reebok has also
increased significantly. Second, the versatility of fleece and jersey fabric,
coupled with technological advances in product development and manufacturing,
has significantly improved product design and quality, resulting in increased
consumer demand. Finally, although design detailing may change, basic styles of
fleece and jersey activewear are not primarily driven by fashion trends or fads,
which contributes to the stability of product demand.
In recent years, the fleece and jersey activewear industry has been impacted by
several trends. Consumers are increasingly demanding greater value in the form
of higher quality goods with more variety at fair prices. In particular,
consumers are seeking fuller cut products in heavier, more shrink-resistant
fabrics, with cotton-dominant blends becoming the fabric of choice.
Meanwhile, distribution channels to reach consumers have become more
diversified. Historically, fleece and jersey apparel was distributed
predominantly through department stores, specialty retailers and sporting goods
chains. However today, as value-oriented retailing concepts proliferate, mass
merchandisers, wholesale clubs, discount retailers and other distribution
channels represent a growing customer base for manufacturers. As a result,
retailers are demanding a wider range of products to target specific consumer
markets.
In response to these emerging trends, competitive manufacturers have adjusted
their business strategies. In order to meet consumer demands for higher quality
without increases in pricing, manufacturers have upgraded their production
processes by investing in new equipment and technology. In addition, the
increasing breadth and diversity of distribution channels have
21
<PAGE>
required successful manufacturers to become more flexible in new product
development, manufacturing and distribution to meet customers' requirements. The
Company believes that its growth strategy positions it to capitalize on these
industry trends.
BUSINESS STRATEGY
The Company is focused on increasing sales and profitability by offering high
value products to a diverse customer base. The principal elements of this
strategy are:
PRODUCING HIGH QUALITY PRODUCTS
Pluma is recognized as a leading manufacturer of high quality products across
all of its price points by today's value-conscious customers. Examples of
Pluma's emphasis on quality exist throughout its design and manufacturing
processes. Pluma's fleece and jersey activewear meet consumer preferences for
heavier weights and higher cotton content and are fuller cut than industry
standards. The Company incorporates SpandexTM in its ribbed fabric, which
enables it to retain shape. Pluma produces higher stitch count fabrics to reduce
shrinkage and increase softness. Pluma's advanced sewing processes add greater
product detail and durability.
INCREASING SALES THROUGH A DIVERSE CUSTOMER BASE
Pluma targets a diverse customer base across multiple markets and distribution
channels. Currently, Pluma sells to branded customers such as Adidas, Nike,
Reebok and Starter, retailers such as Miller's Outpost, Sam's Club and T.J. Maxx
and entertainment customers such as Busch Gardens, Hard Rock Cafe and Walt
Disney. In addition, Pluma sells to wholesale distributors, screenprinters and
embroiderers who sell the Company's products to a wide variety of retailers,
ranging from small souvenir and resort stores to large nationwide department
stores, as well as to companies such as DKNY, Eddie Bauer and Guess?. Pluma
seeks to grow both by increasing sales to existing customers and by adding new
customers. The Company's diverse customer base provides product exposure to many
consumer markets and enables Pluma to balance its production more evenly
throughout the year, thereby improving sales and profitability.
DEVELOPING NEW PRODUCTS AND STYLES
Pluma has been an industry leader in developing new products of various fabric
weights and blends, as well as unique styles, that are often designed
exclusively for its customers to meet their individual needs. Typically, the
Company's new products and styles command higher prices resulting in better
margins. Additionally, new products initially manufactured for a single customer
frequently become popular with other customers. The Company was one of the first
to introduce heavyweight, fuller cut fleece products at attractive price points
and fleecewear with higher cotton content. Pluma was also one of the first to
produce heavyweight cotton jersey products suitable for outerwear. Today, the
Company continues to be a leading innovator of products and recently introduced
pique fleece, 100% cotton fleece and cotton/SpandexTM blend five-way stretch
fleece. In addition, the ability to customize efficiently new product styles
that meet stringent customer standards enables the Company not only to attract
new customers, but also to cross-sell its more basic products.
CAPITALIZING ON FLEXIBLE MANUFACTURING CAPABILITIES
Pluma manufactures products that meet customers' cost, quality and delivery
criteria, ranging from highly customized products to more basic fleece and
jersey apparel. Using proprietary equipment and advanced manufacturing
processes, Pluma has the flexibility to shift its knitting, dyeing and sewing
operations between various fabric weights, blends and styles, as well as between
fleece and jersey products, with minimal downtime. These capabilities allow
Pluma to service effectively and efficiently its diverse customer base, thus
maintaining a significant competitive advantage.
INVESTING IN ADVANCED TECHNOLOGIES
The Company continues to upgrade its manufacturing, distribution and management
information systems as proven cost and quality related advances become
available. The Company has made significant investments to improve efficiencies
including (i) upgrading knitting equipment, (ii) adding computerized monitoring
and control systems for its dyeing processes, (iii) improving sewing and cutting
processes with new machines and other modern innovations, such as its patented
tandem sewing table, and (iv) automating and computerizing order processing and
distribution. As a result, Pluma believes that its manufacturing and
distribution processes are among the most modern in the industry. In addition,
the Company is in the process of implementing a new management information
system to enhance the timing and accuracy of its controls.
22
<PAGE>
PRODUCTS
Pluma's high quality fleece and jersey activewear meet consumer preferences for
heavier weights and higher cotton content. The Company's fleece products include
a variety of styles and colors of tops and bottoms in seven and one-half, nine,
ten and eleven ounce weights in cotton/polyester blends ranging from 50%
cotton/50% polyester to 100% cotton. Pluma also manufactures five and one-half
and seven ounce 100% cotton jersey tops and bottoms designed for outerwear.
The Company believes that certain design and construction features enhance the
quality and appeal of its products relative to most competitors:
(Bullet) Pluma's fleece and jersey tops are fuller cut and heavier weight.
(Bullet) Pluma produces higher stitch count fabrics to reduce shrinkage,
provide a better printing surface and increase softness.
(Bullet) Pluma uses air jet spun yarn for its 50% cotton/50% polyester
fleece fabric to prevent pilling.
(Bullet) All of Pluma's ribbed fabrics contain Spandex(tm) to retain
shape.
(Bullet) Pluma uses greater detail in its sewing processes to enhance
durability and appearance.
(Bullet) Pluma utilizes advanced finishing techniques, including the
application of softeners and napping (brushing), to give its
fleece fabrics more bulk and softer texture.
The sales mix of fleece and jersey products for the nine months ended September
30, 1995 and 1996 and for the three years ended December 31, 1995, in sales,
gross dozens sold, excluding close-outs and irregulars, and the average sales
price per dozen is as follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
1996 1995
GROSS AVG. GROSS
IN THOUSANDS, DOZENS SALES PRICE/ DOZENS
EXCEPT AVERAGE SALES PRICE PER DOZEN SALES SOLD DOZEN SALES SOLD
<S> <C> <C> <C> <C> <C>
Fleece $57,310 609 $94.08 $52,824 620
Jersey 37,307 629 59.35 20,787 348
Total/Avg. $94,617 1,238 $76.44 $73,611 968
AVG.
IN THOUSANDS, SALES PRICE/
EXCEPT AVERAGE SALES PRICE PER DOZEN DOZEN
Fleece $85.14
Jersey 59.66
Total/Avg. $75.97
</TABLE>
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
1995 1994 1993
GROSS AVG. GROSS AVG. GROSS AVG.
DOZENS SALES PRICE/ DOZENS SALES PRICE/ DOZENS SALES PRICE/
SALES SOLD DOZEN SALES SOLD DOZEN SALES SOLD DOZEN
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Fleece $ 70,634 826 $ 85.50 $79,040 900 $ 87.80 $73,171 876 $ 83.58
Jersey 29,989 480 62.43 15,819 293 53.99 12,742 234 54.39
Total/Avg. $100,623 1,306 $ 77.01 $94,859 1,193 $ 79.50 $85,913 1,110 $ 77.42
</TABLE>
Historically, the Company's sales have been derived predominantly from fleece
products. However, since introducing jersey products in 1990, the Company has
increased jersey sales in order to diversify its product mix, more efficiently
utilize its manufacturing base and reduce the impact of seasonality that is
inherent in the fleece industry. Generally, jersey products sell at lower price
points and generate lower profit margins than fleece.
As of December 31, 1996 and 1995, the Company had backlog orders of
approximately dozens, or approximately $ million, and
353,034 dozens or approximately $21.9 million, respectively. Backlogs are
computed from orders on hand at the last day of each fiscal period. The Company
believes that as a result of the seasonality and the just-in-time nature of its
business, order backlogs are not a reliable indicator of future sales volume.
SALES AND MARKETING
The Company's sales and marketing efforts are directed by its marketing
department headquartered in Martinsville, Virginia. The sales office is
comprised of nine employees who are involved in day-to-day sales efforts and
customer service activities.
Unlike many of its competitors, Pluma maintains a centralized sales office
organized around customer accounts rather than using a regional sales office
strategy. By maintaining a centralized location, management believes that the
Company can implement
23
<PAGE>
better its sales strategy which requires that each of its salespeople be
informed about and involved with all of the Company's market segments and
customers. This structure allows the Company to be more flexible in responding
to customers' needs and to operate more efficiently with a smaller sales staff.
CUSTOMERS
Pluma targets a diverse customer base, which is composed of five primary
markets:
BRANDED
Branded accounts consist of customers such as Adidas, Nike, Reebok and Starter.
These accounts require the manufacturer to meet exact specifications, such as
styling, color, screenprinting and embroidery. Products are labeled, packaged
and shipped ready for sale to consumers. The Company's ability to accommodate
the specialized nature of products manufactured for these customers often
results in higher margins. Branded accounts constituted approximately 10.2% of
the Company's net sales for the nine months ended September 30, 1995 and 22.1%
for the same period in 1996.
RETAILERS
Retail customers include specialty, high-end and value-oriented retailers. The
Company's largest retail customer in 1995 was Sam's Club, which markets and
sells "Pluma" labeled products. Pluma's other retail customers include Miller's
Outpost and T.J. Maxx, which sell their own private label products manufactured
by Pluma or products with Pluma's "SANTEE" label. The Company believes that this
market segment holds significant opportunity for growth as other value-oriented
retail formats continue to grow in popularity. Retail customers constituted
approximately 25.1% of the Company's net sales for the nine months ended
September 30, 1995 and 34.3% for the same period in 1996. As a result of the
growth of the Company's business with Sam's Club, coupled with increased
consumer recognition of the "Pluma" brand name, the Company has granted a
license to Kayser Roth Corporation ("Kayser Roth") that allows it to manufacture
and distribute socks to Sam's Club under the "Pluma" brand name. See
"Business -- Trademarks and Licenses."
ENTERTAINMENT
Entertainment accounts consist of customers such as Busch Gardens, Hard Rock
Cafe and Walt Disney. This market segment demands a basic product on which
designs are printed or embroidered for souvenir sales. Demand for goods sold to
this market segment is relatively consistent throughout the year. Entertainment
accounts constituted approximately 11.0% of the Company's net sales for the nine
months ended September 30, 1995 and 6.0% for the same period in 1996.
SCREENPRINTERS AND EMBROIDERERS
Screenprinters and embroiderers include Starter (Galt Sand Division) and PM
Enterprises among others. These customers typically purchase basic products to
which they add designs and logos; they then resell these products to a wide
variety of retailers, ranging from small souvenir and resort stores to large,
nationwide department stores, as well as companies such as DKNY and Eddie Bauer.
Certain screenprinters and embroiderers resell under Pluma's "SANTEE" label.
Screenprinters and embroiderers constituted approximately 25.4% of the Company's
net sales for the nine months ended September 30, 1995 and 19.8% for the same
period in 1996.
WHOLESALE DISTRIBUTORS
Wholesale distributors include Frank L. Robinson Company, Skyline and Stardust.
These customers generally purchase goods in large volume for further
distribution to companies such as Guess?, as well as to small customers, which
are typically more difficult for the Company to service. All products sold to
these customers contain Pluma's "SANTEE" label, which is becoming more
recognizable by consumers. Wholesale distributors constituted approximately
28.3% of the Company's net sales for the nine months ended September 30, 1995
and 17.8% for the same period in 1996.
For the nine months ended September 30, 1996, Pluma's top ten customers
accounted for 75.9% of the Company's net sales and 73.0% of its accounts
receivables. The Company's top three customers, Sam's Club, Adidas and Nike,
accounted for 26.1%, 14.6% and 7.6%, respectively, of such sales. For the nine
months ended September 30, 1995, the Company's top three customers, Frank L.
Robinson, Sam's Club and Galt Sand, accounted for 15.9%, 14.4% and 12.7%,
respectively, of the Company's net sales.
24
<PAGE>
MANUFACTURING
Pluma is a vertically integrated manufacturer. The Company's manufacturing
process consists of knitting, dyeing, finishing, cutting and sewing. Using
proprietary equipment and advanced manufacturing processes, Pluma has the
flexibility to shift its knitting, dyeing and sewing operations between various
fabric weights, blends and styles, as well as between fleece and jersey, with
minimal downtime. These capabilities allow Pluma to service effectively and
efficiently its diverse customer base.
Pluma currently manufactures all of its products domestically at sites within
close proximity to each other and uses technologically advanced equipment and
sophisticated production scheduling systems. Several of the Company's
competitors have chosen to move some of their production offshore. The Company,
however, believes that its strategy improves the Company's ability to service
its customers' just-in-time delivery requirements, minimizes transportation
costs and offsets most of the advantages of lower labor cost inherent in
offshore production.
The Company believes it has the manufacturing capacity to increase sales by
approximately 10% to 15% without any significant capital expenditures based upon
its current product mix and prices. By adding equipment, the Company believes it
has the capacity to increase sales by an additional 30% to 40% without the need
for additional manufacturing space.
KNITTING
The Company operates modern, high-speed circular knitting machines that produce
various types of fabric in its manufacturing facilities in Eden, North Carolina.
The circular knitting process eliminates the need for side-seaming, reduces
waste and, consequently, lowers production costs. The Company is in the process
of purchasing new knitting equipment and components that should increase
efficiency in its knitting operations. Proprietary knitting processes enable the
Company to change its production with minimal downtime for setup. The Company
can shift its knitting processes between various fabric blends, weights and
styles, as well as between fleece and jersey fabrics, without significant loss
of utilization. Pluma uses Spandex(tm) in all of its ribbed fabrics to retain
shape and produces high stitch count fabrics, which results in lower shrinkage,
a better printing surface and a softer feel.
DYEING
The Company believes that its computer-controlled, pressurized dyeing operations
in Eden, North Carolina, are state-of-the-art. Computerized controls reduce
processing time and improve control of dyeing cycles, temperatures, water
pressure and chemical usage, thereby producing greater color consistency and
minimizing waste. In addition, the Company's pressurized dyeing process
increases bulking, which reduces shrinkage and color bleeding of its fabrics.
FINISHING
The finishing process consists of extracting, drying, napping (brushing) and
compacting the fabric. The extraction process involves the addition of fabric
softeners to ensure that the fabric retains its softness during the drying
process. Fleece fabrics are then napped to produce a soft and heavy feel. Also,
fabrics are compacted to minimize shrinkage and increase stability.
CUTTING
Pluma's cutting operation in Eden, North Carolina, uses Bierrebi automatic
continuous-cutting machines with computer-controlled hydraulic die-cutting
heads. In addition, Pluma is adding a Gerber cutting system that will interface
with its computerized pattern design process. The Company utilizes these
machines to improve consistency and efficiency and generate less waste. Manual
cutting is used to provide flexibility to process low-volume orders.
SEWING
The Company's sewing facilities are in Eden, North Carolina, and in
Martinsville, Rocky Mount, Chatham, Vesta and Altavista, Virginia. Pluma's
sewing operations begin with the preassembly of component parts utilizing
computerized sewing equipment. Preassembled parts are then sewn using the
Company's proprietary tandem sewing process or conventional sewing. Management
believes that its tandem sewing process is unique and gives the Company a
competitive advantage in sewing operations by enhancing product quality and
manufacturing flexibility.
Pluma's proprietary tandem sewing process utilizes the Company's patented tandem
sewing table. This proprietary equipment allows operators to move rapidly
between sewing steps to reduce further assembly time. The table is easily
adjustable to accommodate different operators' physical characteristics,
minimizing downtime between shifts and thereby facilitating multishift
operations.
25
<PAGE>
The Company engages independent sewing contractors for low volume, special style
products that require specific equipment. These independent contractors also
assist the Company during peak manufacturing periods by providing additional
capacity. Approximately 16% of the Company's products were sewn by independent
contractors in the first nine months of 1996.
The Company hires independent embroidery and screen printing subcontractors to
print or embroider special images on products ordered by certain of its
entertainment and branded accounts. The Company believes that it is more cost
effective to outsource these services.
PACKAGING AND DISTRIBUTION
Pluma operates a three-building complex in Martinsville, Virginia, which serves
as its central packaging and distribution facility. The complex contains
approximately 462,950 square feet of storage space.
The packaging process includes folding, tagging, bagging, packing and bar
coding. The Company's packaging operation employs automated folding machines and
other technologically advanced equipment that package products efficiently.
Pluma uses computers, scanners, radios, conveyor systems and order pickers to
track, locate and move products within its facilities and to the loading docks
for shipping. One conveyor system links two facilities, thereby significantly
reducing handling time.
The Company leases a fleet of 11 tractors and 63 trailers and owns five trailers
and two trucks to transport materials between plants, as necessary. It relies
upon common carriers for delivery to its customers.
MANAGEMENT INFORMATION SYSTEMS
The Company operates state-of-the-art computer systems for receiving and
tracking customer orders from the moment they are received in the Company's
sales office in Martinsville, Virginia, until final delivery. After a customer's
order is entered in the Company's sales office, it is reviewed at Pluma's main
office in Eden, North Carolina, for customer credit, production scheduling and
delivery. After this process is completed, the order becomes active and is
formally scheduled into production. The Company's proprietary computer program
and sophisticated electronic scanners allow the Company to monitor specific
customer orders during all stages of the manufacturing process from knitting to
sewing and during packaging and distribution.
During 1996, the Company entered into a license agreement with SAP America, Inc.
("SAP") to use SAP's proprietary financial and manufacturing controls software.
The system is highly portable, operates on the newest client-server platform and
can be utilized internationally. In addition to the license agreement, the
Company executed a professional services agreement with SAP for consultant
services to install and implement the software. The SAP system will upgrade the
Company's production planning and scheduling, sales, distribution and financial
systems. The Company believes that this system will enhance its ability to meet
customer demands more efficiently and better manage the growth of its business.
This system is currently being implemented, and management expects that it will
be completed by December 1997.
Pluma is connected via electronic data interchange ("EDI") with Sam's Club and
is exploring using a similar system with wholesale distributors and a number of
its suppliers. Additionally, the Company intends to utilize the Internet to
facilitate customer orders, investor relations and direct sales. The Company's
Internet address is http://www.plumainc.com.
SOURCES OF RAW MATERIALS
Pluma purchases yarn, dye stuffs and chemicals that are the principal raw
materials used in its products. Management believes that there is sufficient
availability of raw materials from a number of suppliers at competitive prices
to satisfy current and anticipated needs of the Company.
The Company does not spin its own yarn. Yarn spinning is a capital intensive
operation in which there is substantial domestic and foreign competition. The
Company has stable relationships with its principal yarn suppliers and often
makes advance purchases of yarn based on projected demand. The Company has
contracted to purchase substantially all of its projected yarn needs for 1997.
Pluma maintains a five-day to ten-day supply of raw material inventories,
minimizing the need for storage space. During the first nine months of 1996,
Pluma's principal yarn suppliers included Unifi, Inc. (Spun Yarn Division),
Parkdale Mills, Inc., Mayo Yarns, Inc. and Globe Manufacturing, and its
principal suppliers of dyes and chemicals included Ciba-Geigy, DyStar and
Clairiant (formerly Sandoz). The Company anticipates that these suppliers, as
well as others, will continue to supply the Company with raw material as needed.
See "Risk Factors -- Availability and Price of Raw Materials."
26
<PAGE>
SEASONALITY
The activewear business is seasonal. Typically, demand for fleece products is
much lower during the first and second quarters of each year and is partially
offset by increased demand for jersey products in these periods. Notwithstanding
the Company's efforts to diversify its products and customer base to create a
more consistent demand for its products throughout the year, the Company
produces and stores fleece finished goods inventory during the first half of
each year. This practice enables the Company to meet the heavy demand for
delivery during the second half of the year. See "Risk Factors -- Impact of
Seasonality."
COMPETITION
The fleece and jersey activewear industry is highly competitive. Pluma's major
competitors are vertically integrated manufacturers such as Fruit of the Loom,
Oneita, Russell, Sara Lee, Tultex and VF. Certain of these competitors have
greater financial resources and larger manufacturing, distribution and marketing
capabilities than the Company. Among other factors, the Company's future success
will depend to a significant extent upon its ability to remain competitive in
the areas of price, quality, marketing, product development, manufacturing
capabilities, distribution and order processing, which are the principal methods
of competing within the fleece and jersey apparel industry. See "Risk
Factors -- Competition."
ENVIRONMENTAL MATTERS
The Company is subject to various federal, state and local environmental laws
and regulations governing, among other things, the discharge, storage, handling
and disposal of a variety of hazardous and nonhazardous substances and wastes
used in or resulting from its operations and potential remediation obligations
thereunder. At the Company's textile manufacturing facility in Eden, North
Carolina, the Company disposes of dye waste through the city's municipal
wastewater treatment system under a permit issued by state regulatory
authorities.
The Company's operations also are governed by laws and regulations relating to
employee safety and health, principally OSHA and regulations thereunder, which,
among other things, establish exposure limitations for cotton dust,
formaldehyde, asbestos and noise, and regulate chemical and ergonomic hazards in
the workplace. See "Risk Factors -- Environmental Controls and Other Regulatory
Requirements."
PROPERTIES
All of the Company's facilities are located in North Carolina and Virginia. All
buildings are well maintained. The location, approximate size, owned or leased
status, year in which operations commenced and use of the Company's principal
facilities are summarized in the following table:
<TABLE>
<CAPTION>
SQUARE OPERATIONS
LOCATION FOOTAGE OWNERSHIP COMMENCED USE
<S> <C> <C> <C> <C>
Eden, NC 170,900 Owned 1987 Executive offices, knitting, dyeing,
finishing and cutting
Eden, NC 83,900 Owned 1993 Sewing
Eden, NC 20,600 Leased 1996 Outlet store
Eden, NC 18,000 Leased 1987 (1) Sewing
Martinsville, VA 198,000 Leased 1996 Distribution and warehouse
Martinsville, VA 181,600 Leased 1988 Distribution, packaging and
warehouse
Martinsville, VA 83,200 Leased 1994 Packaging, warehouse and management
information systems
Martinsville, VA 43,900 Owned 1988 Sewing
Martinsville, VA 15,600 Leased 1992 Storage
Martinsville, VA 3,900 Leased 1996 Marketing and sales office
Rocky Mount, VA 82,000 Owned 1995 Sewing
Chatham, VA 52,000 Owned 1990 Sewing
Vesta, VA 24,000 Owned 1994 Sewing
Altavista, VA 12,000 Leased 1996 Sewing
Collinsville, VA 9,000 Leased 1996 Outlet store
</TABLE>
(1) The Company leased this facility from 1987 through 1993 and subsequently
executed a new lease for this facility in December 1996.
27
<PAGE>
LABOR
The Company had approximately 2,200 employees at September 30, 1996. Management
considers labor relations to be excellent. The Company has no collective
bargaining agreements; however, some of the Company's competitors located in its
geographic area are unionized, and there can be no assurance that the Company
will not become a target for union organizing activity or party to collective
bargaining agreements in the future. To the extent that unionization increases
the Company's cost of operations, the Company would be impacted adversely from
both an operating and financial standpoint.
LITIGATION
The Company is not a party to nor is any of its property the subject of any
legal proceedings, the result of which it believes could have a material adverse
impact on its business, properties or financial condition.
TRADEMARKS AND LICENSES
Pursuant to an agreement effective December 4, 1990 (the "Superba Agreement"),
Superba, Inc. ("Superba") granted to the Company the exclusive right and license
to utilize the name "SANTEE" in connection with the manufacture, sale and
distribution of fleece and jersey products. Superba manufactures neckties and
sport shirts and is the sole owner of all trademark and other proprietary rights
in the name "SANTEE." The term of this license is perpetual. The Company paid a
one-time fee of $20,000 in consideration for the grant of the rights described
above and has no continuing obligations for the payment of royalties in
connection with the use of the name "SANTEE." Under the terms of the Superba
Agreement, Superba retained the right to utilize the name "SANTEE" for
commercial purposes, provided such use is not competitive with the Company in
the fleece and jersey apparel industry. Superba is obligated to renew the
trademark registration (at Superba's expense) upon its expiration.
The Company claims common law proprietary rights to the name "Pluma;" however,
at this time, the Company does not own any registered trademark rights to the
name "Pluma." Furthermore there was a registered owner of the name "Peso Pluma."
However, in November 1994, the Company filed a proceeding with the United States
Patent and Trademark Office ("USPTO") alleging that the owner of the name "Peso
Pluma" abandoned its right to such name and requesting that such rights be
canceled. This proceeding was determined favorably to the Company, which has
filed an application with the USPTO for trademark protection related to the name
"Pluma." The Company believes that such protection will be granted in the first
quarter of 1997.
The Company has filed an application with the USPTO for trademark protection for
the trademark "SNOWBANK." The application has been approved pending submission
of an acceptable statement of use after actual use of this trademark has begun,
which will occur in early 1997. "SNOWBANK" will be utilized in connection with
marketing certain styles of the Company's activewear.
On October 24, 1995, the Company entered into a license agreement with Kayser
Roth granting to Kayser Roth a limited exclusive license to use the name "Pluma"
in connection with the manufacture and sale of socks in the United States and
Mexico to Sam's Club (the "Kayser Roth Agreement"). The Company made no
representations to Kayser Roth related to its ownership rights in the name
"Pluma," and has no liability to Kayser Roth or Sam's Club in the event superior
rights to the name "Pluma" are established by another company. The Company
receives a royalty from Kayser Roth equal to 2.0% of net sales of socks bearing
the Pluma label up to $3,000,000 of such sales and 1.5% of all net sales of
socks thereafter (in each case, less customary trade discounts, shipping
charges, returns and allowances and sales taxes). The Kayser Roth Agreement
terminates on December 31, 1998, but is renewable by Kayser Roth for successive
one-year terms thereafter. The Company maintains appropriate quality control
standards in the Kayser Roth Agreement designed to ensure that only quality
products are distributed under the "Pluma" name.
On July 30, 1996, U.S. Patent No. 5,540,160 was issued by the USPTO for the
Company's tandem sewing table. See "Business -- Manufacturing -- SEWING."
28
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
Set forth below are the names, ages, positions and brief descriptions of
business experience of the Company's executive officers and directors:
<TABLE>
<CAPTION>
NAME AGE POSITION
<S> <C> <C>
George G. Wade 63 Chairman Emeritus of the Board, Secretary and Director
G. Walker Box 46 Chairman of the Board of Directors
R. Duke Ferrell, Jr. 44 President, Chief Executive Officer and Director
C. Monroe Light 56 Executive Vice President of Manufacturing and Director
Milton A. Barber, IV 36 Vice President of Sales and Marketing
Nancy B. Barksdale 39 Vice President and Controller
Jeffrey D. Cox 41 Vice President of Manufacturing
David S. Green 46 Vice President of Human Resources
Walter E. Helton 57 Vice President of Operations
Raymond L. Rea 55 Vice President of Manufacturing
Forrest H. Truitt, II 42 Vice President, Treasurer and Chief Financial Officer
Barry A. Bowles 51 Director
Kemp D. Box 42 Director
David C. Jones, DDS 50 Director
William K. Mileski 54 Director
R. Stephens Pannill 50 Director
J. Robert Philpott, Jr. 50 Director
</TABLE>
GEORGE G. WADE, a founder of the Company, served as Chairman of the Company's
Board of Directors until January 1996, when he became Chairman Emeritus. Mr.
Wade served as the Company's President and Chief Executive Officer from January
1987, until he relinquished the titles of Chief Executive Officer and President
in September 1993 to become the Company's Secretary. Mr. Wade is a member of the
Company's Strategic Planning Committee. Mr. Wade was employed by Bassett-Walker,
Inc. from 1956 to 1986.
G. WALKER BOX, a founder of the Company, has served as a member of the Board
since 1987 and became Chairman of the Company's Board of Directors in January
1996. He is a member of the Company's Nominating Committee and Strategic
Planning Committee. Mr. Box was employed by Bassett-Walker, Inc. from 1973 to
1986 when he became the President of Box-Ferrell and Company, the Company's
first exclusive sales agent. Mr. Box is President of Box & Company which served
as the Company's exclusive sales agent from 1991 until December 1995. Mr. Box is
also a member of the Board of Directors of the North Carolina Textile
Foundation. Mr. Box is the brother of Kemp D. Box, a Director of the Company.
R. DUKE FERRELL, JR., a founder of the Company, has been the Company's President
since January 1992 and its Chief Executive Officer since September 1993. He
served as the Company's Executive Vice President and Chief Operating Officer
from 1991 until he became President of the Company and is a member of the Board
of Directors, serving on its Nominating Committee and Strategic Planning
Committee. In 1987, Mr. Ferrell was employed by Box-Ferrell and Company until
his employment by Pluma as Executive Vice President and Chief Operating Officer.
He was employed by Bassett-Walker, Inc. from 1982 to 1986.
C. MONROE LIGHT, a founder of the Company, has been a Vice President of
Manufacturing responsible for yarn sourcing and knitting and a Director since
1987. He became an Executive Vice President in January 1996. Mr. Light was
employed from 1960 to 1986 by Bassett-Walker, Inc. He serves on the Company's
Strategic Planning Committee.
MILTON A. BARBER, IV became Vice President of Sales and Marketing in January
1996. From July 1991 until December 1995, Mr. Barber served as an Assistant Vice
President of Sales and Marketing for Box & Company. Mr. Barber was employed by
Bassett-Walker, Inc. from 1980 until 1989.
29
<PAGE>
NANCY B. BARKSDALE is Vice President and Controller. From 1979 to 1983, Ms.
Barksdale was a staff accountant for Deloitte & Touche LLP. She received her CPA
certification from the Commonwealth of Virginia in 1983. From 1983 until 1987,
Ms. Barksdale was employed by Bassett-Walker, Inc. as Assistant Controller.
Since 1987, Ms. Barksdale has served as Controller for Pluma, and served as
Treasurer from August 1993 until March 1996. She was promoted to Vice President
in January 1996.
JEFFREY D. COX became the Company's Vice President of Manufacturing responsible
for dyeing and finishing operations in January 1996. Before that date, Mr. Cox
served the Company as superintendent of dyeing and finishing from September 1991
through December 1994 and as Assistant Vice President responsible for dyeing and
finishing from January 1995 through December 1995. Prior to joining the Company
in 1991, he was employed at Ciba-Geigy from February 1989 to August 1991.
DAVID S. GREEN is Vice President of Human Resources. Prior to joining the
Company in 1993, Mr. Green had been employed by Sara Lee for 17 years where his
most recent title was Director of Employee Relations at the Martinsville,
Virginia knitwear division.
WALTER E. HELTON is Vice President of Operations responsible for management
information systems and distribution. Before joining the Company in January
1992, Mr. Helton was employed by Sara Lee as Director of Information Systems.
RAYMOND L. REA is Vice President of Manufacturing responsible for all sewing
operations. Prior to his employment with the Company in 1987, Mr. Rea had been
employed by Bassett-Walker, Inc. for 25 years.
FORREST H. TRUITT, II became Vice President, Treasurer and Chief Financial
Officer in March 1996. From February 1994 until he joined the Company, Mr.
Truitt was a self-employed financial consultant. Prior to that time, he served
as the Chief Financial Officer of Mayo Yarns from September 1993 to February
1994, and Vice President of Finance and Secretary/Treasurer of Vintage Yarns,
Inc. from 1982 until 1993.
BARRY A. BOWLES became a member of the Board of Directors in 1988 and is the
chairman of the Compensation Committee and a member of the Nominating Committee.
Mr. Bowles is Chairman of the Board of Directors of Stanley W. Bowles
Corporation, a general construction contractor by which he has been employed
since 1967.
KEMP D. BOX became a member of the Board of Directors in 1988 and is a member of
the Audit Committee. He is a private investor. Mr. Box is the brother of G.
Walker Box, who is a Director and executive officer of the Company.
DAVID C. JONES, D.D.S. became a member of the Board of Directors in 1994 and has
been engaged in the private practice of orthodontics since 1978. He serves as a
member of the Compensation Committee.
WILLIAM K. MILESKI, a founder of the Company, has served as a member of the
Board of Directors since 1987 and is a member of the Audit Committee. He was
Vice President of the Company responsible for dyeing, finishing and cutting
operations from 1987 until he left the Company in December 1995 to found
Meritage, LLC, a contract garment-dyeing company.
R. STEPHENS PANNILL became a member of the Board of Directors in 1988 and is the
chairman of the Audit Committee and a member of the Nominating Committee. Mr.
Pannill is a private investor.
J. ROBERT PHILPOTT, JR. became a director in April 1996. Mr. Philpott is
President, Treasurer and a director of Philpott, Ball & Company ("Philpott,
Ball"), a private investment banking firm that he co-founded in 1991. Philpott,
Ball has served as a financial adviser to the Company since 1991, providing
corporate financial advisory services and valuations of Company stock from time
to time. Prior to founding Philpott, Ball, Mr. Philpott was a Senior Vice
President and Managing Director of Interstate/Johnson Lane, Capital Markets
Group. Mr. Philpott is a member of the Compensation and Strategic Planning
Committees.
The Board of Directors of the Company (the "Board") is currently composed of ten
directors, four of whom are employees of the Company. The Company's Bylaws
provide that the Board shall be divided into three classes designed to contain a
relatively equal number of members, with the term of each class expiring in
successive years. See "Description of Capital Stock -- Board of Directors."
Subject to the terms of certain employment agreements to which certain of the
executive officers are a party, the Company's executive officers serve at the
discretion of the Board. See "Management -- Employment Agreements, Change In
Control Arrangements."
COMMITTEES OF THE BOARD OF DIRECTORS
The Company's Board of Directors currently has four committees: an Audit
Committee, Compensation Committee, Nominating Committee and Strategic Planning
Committee.
30
<PAGE>
The Audit Committee was established in March 1994. The responsibilities of the
Audit Committee include recommending to the Board of Directors the independent
public accountants to be selected to conduct the annual audit of the Company's
financial statements, reviewing the proposed scope of such audit and approving
the audit fees to be paid. This committee is also responsible for reviewing the
adequacy and effectiveness of the internal auditing, accounting and financial
controls of the Company with the independent public accountants and the
Company's financial and accounting staff and reviewing and approving
transactions between the Company and its directors, officers and their
affiliates. The Audit Committee consists exclusively of outside directors who
are R. Stephens Pannill (chairman), Kemp D. Box and William K. Mileski.
The Company's Board of Directors established a Compensation Committee in April
1989. The Compensation Committee provides a general review of the Company's
compensation plans to ensure that they meet corporate objectives. The
responsibilities of the Compensation Committee also include administering the
Company's Senior Executive Bonus Plan, Sales Incentive Plan, Non-Qualified
Deferred Compensation Plan and 1995 Stock Option Plan, including selecting the
officers and salaried employees to whom bonuses and stock options will be
granted. The Compensation Committee consists exclusively of outside directors
who are Barry A. Bowles (chairman), David C. Jones, D.D.S. and J. Robert
Philpott, Jr. See "Management -- Compensation Committee, Interlocks and Insider
Participation."
The Company's Board of Directors established a Nominating Committee in January
1994. The Nominating Committee is responsible for making recommendations to the
Board of Directors concerning executive officer appointments. The Nominating
Committee consists of R. Duke Ferrell, Jr. (chairman), Barry A. Bowles, G.
Walker Box and R. Stephens Pannill.
The Company's Board of Directors also established a Strategic Planning Committee
in October 1996. This Committee is responsible for monitoring industry trends
and making recommendations to the Company's Board of Directors regarding Company
actions designed to enable the Company to compete effectively in the future. The
Strategic Planning Committee consists of G. Walker Box, R. Duke Ferrell, Jr., C.
Monroe Light, J. Robert Philpott, Jr. and George G. Wade.
EXECUTIVE COMPENSATION
The following table sets forth information concerning all cash and non-cash
compensation awarded to, earned by or paid to the Company's Chief Executive
Officer and the four most highly compensated executive officers other than the
Chief Executive Officer (the "Named Officers"), for services rendered to the
Company during 1996, 1995 and 1994:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION SECURITIES
(1) UNDERLYING ALL OTHER
NAME AND POSITION YEAR SALARY BONUS (2) OPTIONS (#) COMPENSATION (3)
<S> <C> <C> <C> <C> <C>
G. Walker Box 1996(4) $196,500
Chairman of the Board 1995 -- -- 60,000 --
1994 -- -- --
R. Duke Ferrell, Jr. 1996 196,500
President, Chief Executive 1995 192,520 $118,164 60,000 $1,857
Officer and Director 1994 179,925 32,887 1,280
George G. Wade 1996 189,200
Chairman Emeritus of the 1995 185,323 80,760 60,000 4,513
Board, Secretary and Director 1994 179,925 26,309 3,023
C. Monroe Light 1996 168,000
Executive Vice President of 1995 153,465 66,877 60,000 2,451
Manufacturing and Director 1994 146,157 16,546 2,242
Milton A. Barber, IV 1996(5) 165,000
Vice President of Sales 1995 -- --(6) 20,000 --
and Marketing 1994 -- --(6) --
</TABLE>
31
<PAGE>
(1) Certain of the Company's executive officers receive personal benefits in
addition to salary and cash bonuses, including car allowances. The aggregate
amount of such personal benefits, however, do not exceed the lesser of $50,000
or 10.0% of the total of the annual salary and bonus reported for the named
executive officer.
(2) Bonuses are reflected in the year in which they are earned and are paid in
the following year.
(3) These amounts represent the Company's contribution to the Company's 401(k)
plan and the payment of premiums on split-dollar life insurance policies owned
by the employee.
(4) On January 1, 1996, G. Walker Box became the Chairman of the Company's Board
of Directors and an employee of the Company. Prior to that date, Mr. Box had
never been a paid employee of the Company.
(5) On January 1, 1996, Milton A. Barber, IV became a Vice President of the
Company, in charge of sales and marketing. Prior to that date, Mr. Barber had
never been employed by the Company.
(6) Mr. Barber is a participant in the Company's Senior Executive Bonus Plan and
Sales Incentive Plan.
PLUMA'S SENIOR EXECUTIVE BONUS PLAN
The Company's Compensation Committee administers Pluma's Senior Executive Bonus
Plan (the "Bonus Plan"), which is designed to create incentive for participants
in the Bonus Plan to increase Company profitability. Participants in the Bonus
Plan are stratified by the Compensation Committee into one of two tiers, based
upon the executive's responsibility, past performance with the Company and
possible impact on Company profitability as a result of his or her executive
position with the Company. Ten executives participated in the Bonus Plan in 1996
(the "Participants"). R. Duke Ferrell, Jr., G. Walker Box, George G. Wade and C.
Monroe Light participated in tier 1, and Milton A. Barber, IV, David S. Green,
Walter E. Helton, Raymond L. Rea, Nancy B. Barksdale and Jeffrey D. Cox
participated in tier 2.
The "Bonus Pool" available for distribution is determined by reference to the
Company's fiscal year end pre-tax income before bonuses are paid under the Bonus
Plan, as adjusted by adding back to such pre-tax income the Participants' base
salaries paid for the year for which bonuses are calculated. In 1996, 20% of
this adjusted pre-tax income was the "Compensation Pool" from which the Bonus
Pool was determined; however, this percentage could be increased or decreased,
in the discretion of the Compensation Committee, to adjust for increases or
decreases in the number of Participants. The Bonus Pool is then taken from the
Compensation Pool. The Bonus Pool is equal to the amount of the "Compensation
Pool" less the sum of all base salaries paid to the Participants for the year in
which bonuses are calculated.
The Compensation Committee allocates the Bonus Pool between the two tiers
described above in a discretionary manner, with consideration given to the
number of Participants in each tier as determined in the sole discretion of the
Compensation Committee. Participants in tier 1 receive a pro rata share of that
portion of the Bonus Pool allocated to his or her tier. This pro rata share is
determined by dividing the base salary of each tier 1 Participant by the sum of
all base salaries paid to all of the Participants within the tier. Tier 2
Participants are eligible to receive a percentage of the Bonus Pool allocated to
his or her tier as determined by the Company's Chief Executive Officer and
Chairman in their discretion, but subject to the approval of the Compensation
Committee. In addition, the Compensation Committee and the Board grant to the
tier 1 Participants an extraordinary bonus ("Bonus Percentage") equal to a
percentage (as determined by the Compensation Committee) of any annual pre-tax
profits earned in excess of a pre-determined pre-tax profit level (the "Profit
Target"), is also allocated on a pro rata basis. The Bonus Percentage was 10% of
pre-tax profits in 1996, however, the Bonus Percentage shall be determined
annually at the discretion of the Compensation Committee. The Profit Target is
determined in the early part of each fiscal year at the discretion of the
Compensation Committee.
Notwithstanding the formulization of the process used to determine bonuses under
the Bonus Plan, the Compensation Committee is allowed discretion to consider or
disregard extraordinary items, usually of a one-time nature, that might either
increase or decrease the amount of the Compensation Pool. For example, when
determining senior executive bonuses for 1995, the Compensation Committee
disregarded the impact on the Company's pre-tax profit of payments made to Box &
Company to terminate the Company's marketing agreement and the election by the
Company to reserve fully for the 20/20 Sport account receivable in 1995 (which
may be uncollectible), rather than reserve for it over a longer period of time.
PLUMA'S SALES INCENTIVE PLAN
The Company's Compensation Committee administers Pluma's Sales Incentive Plan
(the "Sales Incentive Plan") which is designed to create incentive for the
Company's sales staff to increase customer sales. Each year, the Company's
Compensation
32
<PAGE>
Committee establishes a base level of annual sales volume (the "Sales
Threshold") upon which the incentive sales bonus is calculated. At each fiscal
year end, the Company subtracts the Sales Threshold from the Company's actual
total net sales for such year. This difference (the "Bonus Base") is the base
amount upon which bonuses are determined for the Company's salespeople. In the
event the Company's actual net sales for a fiscal year exceed the Sales
Threshold, then each Company salesperson is entitled to the payment of a bonus
determined by multiplying his or her base annual salary by a fraction, the
numerator of which is the Bonus Base and the denominator of which is the Sales
Threshold. The Sales Threshold is determined annually by the Company's Board of
Directors after a recommendation from its Compensation Committee.
EMPLOYMENT AGREEMENTS, CHANGE IN CONTROL ARRANGEMENTS
Pursuant to employment contracts dated December 19, 1996 (the "Employment
Agreements"), George G. Wade, R. Duke Ferrell, Jr., G. Walker Box, C. Monroe
Light, David S. Green, Walter E. Helton, Raymond L. Rea, Nancy B. Barksdale,
Forrest H. Truitt, II, Jeffrey D. Cox and Milton A. Barber, IV (each an
"employee") are employed by the Company in their various executive capacities.
Each of these Employment Agreements, if not sooner terminated (for reasons of
death, disability, change of control or "for cause"), terminates on December 18,
1998. Thereafter an employee's employment may continue until terminated by the
Company or the employee. Under the Employment Agreements, these individuals are
entitled to annual bonus payments pursuant to Pluma's Senior Executive Bonus
Plan and all benefits made available to other senior executives under any
employee benefit plans including the Company's 401(k) Plan, medical expense
reimbursement plans, group life, health, accident, medical, hospitalization and
disability insurance plans. Currently, no senior executive is the beneficiary of
any such plans not made available to all Pluma employees except for Pluma's
Senior Executive Bonus Plan, Non-Qualified Deferred Compensation Plan, Sales
Incentive Plan (with respect to the Company's salespeople) and the split-dollar
insurance policies referenced in note (3) to the Summary Compensation Table.
The Company or the employee may terminate his or her Employment Agreement upon a
"change of control" of the Company. A change of control shall mean the
occurrence of any one of the following events:
(1) if any "person," as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934 (the "Act") (other than the Company, any
trustee, fiduciary or other person or entity holding securities under any
employee benefit plan of the Company), together with all "affiliates" and
"associates" (as such terms are defined in Rule 12b-2 under the Act) of such
person, shall become the "beneficial owner" (as such term is defined in Rule
13d-3 under the Act), directly or indirectly, of securities of the Company
representing 50.0% or more of either (a) the combined voting power of the
Company's then outstanding securities having the right to vote in an
election of the Company's Board of Directors ("Voting Securities"), or (b)
the then outstanding shares of the Company (in either such case other than
as a result of acquisition of securities directly from the Company); or
(2) if the majority of those persons who, as of January 1, 1996, constituted
the Company's Board of Directors (the "Incumbent Directors") cease for any
reason, including, without limitation, as a result of a tender offer, proxy
contest, merger or similar transaction, to constitute at least a majority of
the Board of Directors, provided that any person becoming a director of the
Company subsequent to January 1, 1996, whose election or nomination for
election was approved by a vote of at least a majority of the Incumbent
Directors or Directors chosen by the Incumbent Directors shall be considered
an Incumbent Director; or
(3) if the shareholders of the Company shall approve (a) any consolidation
or merger of the Company where the shareholders of the Company, immediately
prior to the consolidation or merger, would not, immediately after the
consolidation or merger, beneficially own (as such term is defined in Rule
13d-3 under the Act), directly or indirectly, shares representing in the
aggregate 50.0% of the voting shares of the corporation issuing cash
securities in the consolidation or merger (or of its ultimate parent
corporation, if any), (b) any sale, lease, exchange or other conveyance, in
a transaction or series of transactions of all or substantially all of the
assets of the Company, or (c) any plan or proposal for the liquidation or
dissolution of the Company.
Upon termination of the Employment Agreements after a "change of control," if
the employee is eligible (as defined below), the Company shall:
(1) Within 30 days after termination, pay to the employee an amount, in
cash, equal to: (a) three times the employee's (i) average annual salary for
the 36-month period prior to such change of control and (ii) any bonuses
received during the 18 months preceding the effective date of the change of
control, less (b) 1/36 of the amount calculated in (a) above for each month
that the employee remains employed with the Company following the effective
date of the change of control; and
33
<PAGE>
(2) Continue the medical, disability and life insurance benefits the
employee was receiving at the time of termination for a period of 36 months
after termination of employment or, if earlier, until the employee has
commenced employment elsewhere and becomes eligible for participation in the
medical, disability and life insurance programs, if any, of the successor
employer. Coverage under the Company's medical, disability and life
insurance programs shall cease with respect to each such program as the
employee becomes eligible for the medical, disability and life insurance
programs, if any, of the successor employer. During the first 18 months of
such 36-month period, the Company shall be responsible for the costs
associated with continued insurance coverage for the employee, but only to
the extent it would have been responsible for such costs if the employee was
still employed by the Company. The employee shall be responsible for the
remaining costs. If at the end of 18 months, the employee is still afforded
medical, disability and life insurance coverage under the Company's
insurance programs, the Company shall arrange to provide continued coverage
under said programs, but the employee will be responsible for the total cost
of all such continued coverage after the first 18-month period.
The employee is eligible for the benefits provided above, unless the Company or
the Company's successor, after a change of control, offers the employee a bona
fide employment contract for a term that would expire no earlier than three
years after the effective date of the change of control under the terms of which
the employee would perform the same duties for the same or greater levels of
compensation as were afforded under the terms of the Employment Agreements, and
the employee rejects the offer.
The employee's employment may also be terminated under the Employment Agreement
in the event of death, "for cause" or, at the Company's election, in the event
of the employee's long-term disability. In the event of the death of the
employee during employment, the following payments shall be made to the
employee's designated beneficiary, or, in the absence of such designation, to
the estate or other legal representative of the employee: (i) base salary for
the month in which death occurs, and (ii) such bonuses (if any) as have been
earned and not paid at the time of death. Any rights and benefits the employee
or his/her estate or any other person may have under employee benefit plans and
programs of the Company generally applicable in the event of the employee's
death shall be determined in accordance with the terms of such plans and
programs. Except as provided in the Employment Agreement, neither the employee's
estate nor any other person shall have any rights or claims against the Company
in the event of the death of the employee during employment.
Upon termination for cause, the employee shall receive his or her base salary
only through the date of termination, and neither the employee nor any other
person shall be entitled to any further payments from the Company for salary,
unpaid bonuses or any other amounts. Any rights and benefits the employee may
have under employee benefit plans and programs of the Company generally
following a termination of the employee's employment for cause shall be
determined in accordance with the terms of such plans and programs.
In the event of the employee's disability during his or her employment under the
Employment Agreement, employment may be terminated by the Company. For the first
three months following termination of employment due to disability, the employee
shall be paid the base salary in effect at the time of the commencement of
disability. Thereafter, the employee shall be entitled to benefits in accordance
with and subject to the terms and provisions of the Company's long-term
disability plan for senior management employees, as in effect at the time of the
commencement of disability. If, during the three-month period following a
termination of employment because of disability in which salary continuation
payments are payable by the Company, the employee becomes re-employed (whether
as an employee, partner, consultant or otherwise), any salary or other
remuneration or benefits earned by him or her from such employment or engagement
shall not offset any payments due the employee from the Company as the result of
disability.
The Board of Directors believes that these Employment Agreements will enable key
employees to conduct Company business with less concern for personal economic
risk when faced with a possible change of control. Furthermore, it is the
opinion of Pluma's Board of Directors that these agreements also should enhance
the Company's ability to attract new key executives as needed.
34
<PAGE>
FISCAL YEAR-END OPTION HOLDINGS
The following table sets forth information regarding the exercisable and
unexercisable options to acquire Common Stock held at December 31, 1996 by the
Named Officers.
These values have not been, and may never be, realized, as these options have
not been, and may never be, exercised. Actual gains, if any, upon exercise will
depend on the value of Common Stock on the date of any exercise of options. No
options were exercised in 1996.
AGGREGATED OPTION EXERCISES IN THE
LAST FISCAL YEAR AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
UNEXERCISED
IN-THE-MONEY
UNEXERCISED OPTIONS OPTIONS AT
AT FY-END (#) FY-END (1)
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE
<S> <C> <C> <C>
G. Walker Box 12,000 48,000 $ --
George G. Wade 60,000 -- --
R. Duke Ferrell, Jr. 12,000 48,000 --
C. Monroe Light 12,000 48,000 --
Milton A. Barber, IV 4,000 16,000 --
NAME UNEXERCISABLE
G. Walker Box $ --
George G. Wade --
R. Duke Ferrell, Jr. --
C. Monroe Light --
Milton A. Barber, IV --
</TABLE>
(1) Value of unexercised in-the-money options at fiscal year-end is the
difference between the exercise or base price of such options and an assumed
initial public offering price of $ per share.
COMPENSATION OF DIRECTORS
Each non-employee director of the Company receives $10,000 annually for serving
as a director, $750 for each board meeting attended and $500 for each meeting of
any committee of the board attended. In addition, directors may be compensated
through stock options. See "Stock Option Plan."
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the fiscal year ended December 31, 1996, the Company's Compensation
Committee consisted of Barry A. Bowles (Chairman), David C. Jones, DDS and J.
Robert Philpott, Jr. Until April 10, 1996, G. Walker Box also served as a member
of this committee.
On December 29, 1995, pursuant to an Agreement of Termination and Release, the
Company terminated the Sales and Marketing Agreement with Box & Company by
paying to Box & Company a cancellation payment in the amount of $2.0 million.
The Company paid Box & Company $1,000 on December 29, 1995, and the balance on
January 30, 1996, pursuant to a promissory note given as a part of the
termination payment. In addition to the $2.0 million termination payment, the
Company paid Box & Company all commissions due under the Sales and Marketing
Agreement for shipments made by the Company to customers prior to December 31,
1995 ("Final Commissions"). The amount of the Final Commissions was $152,418,
which was paid in full on February 5, 1996. Also, Pluma assumed the risk of all
customer returns of products previously shipped (for which commissions had been
paid) and waived any further right of offset against sums due Box & Company as
the result of uncollected accounts receivable due from Pluma's customers (on
which commissions had been paid previously), including the 20/20 Sport account
receivable. For a discussion of the 20/20 Sport account receivable, see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
North Bowles Partnership is a general partnership of which Barry A. Bowles, a
director of Pluma and a member of its Compensation Committee, owns a 33.0%
general partnership interest.
On June 10, 1989, the Company entered into a lease with North Bowles Partnership
for a building located in Martinsville, Virginia, to operate a distribution
center. On December 1, 1990, this lease was amended to add 67,500 square feet to
the building subject to the original lease. The building now contains 181,550
square feet. Rental expense for 1996 was $52,026 per month, or a total of
$624,312 annually. Rental payments increase with any annual increase in the
Consumer Price Index for Urban Wage Earners and Clerical Workers. The term of
this lease is 20 years. As additional rent, the Company is responsible for
paying 75.0% of the increase in taxes and insurance premium payments due on this
property. This lease grants the Company the option to purchase the distribution
center at the end of the fifth year, tenth year and fifteenth year of the lease
term, as well
35
<PAGE>
as at the end of the lease term in June 2009, at a price to be agreed upon by
the parties, or if no agreement can be reached, at a price determined by
appraisers.
On December 1, 1995 the Company entered into a lease with North Bowles
Partnership for a 83,200 square foot building that is being utilized by the
Company as a warehouse, packing facility and the Company's management
information systems location. Rent is payable in monthly installments of
$14,500. This lease terminates on February 1, 1998.
On February 1, 1996, the Company entered into a lease with North Bowles
Partnership for a 200,000 square foot building that is being utilized by the
Company as a warehouse and distribution facility. Annual rental on this facility
is $384,000 payable in equal monthly installments of $32,000. This lease
terminates on July 31, 1998. As additional rent, the Company is responsible for
paying any increase in North Bowles Partnership's taxes and insurance premiums
related to the property in excess of 1995 levels.
For the nine months ended September 30, 1996, the Company paid North Bowles
Partnership $310,240 for services rendered in connection with the installation
of a new conveyor system linking two of the Company's distribution facilities.
This payment included the cost of the equipment, labor and materials utilized
for installation.
For the nine months ended September 30, 1996 the Company paid Diversified
Distribution, Inc. $223,338 in fees related to contract services rendered to the
Company for packaging and preparing Company products for shipment. These
services were contracted for on a job-by-job basis as needed during busy
delivery times. The Company has no long-term contract for such services. Barry
A. Bowles owns 22.5% of the Common Stock of Diversified Distribution, Inc.
The Company has a contract to pay Philpott, Ball $120,000 of advisory fees plus
out-of-pocket expenses during 1996, of which it had paid $90,179 as of September
30, 1996. J. Robert Philpott, Jr., a director of the Company, owns 50.0% of the
outstanding equity interests in Philpott, Ball.
STOCK OPTION PLAN
In May 1995, the Company and its shareholders adopted the Pluma, Inc. 1995 Stock
Option Plan (the "1995 Stock Option Plan"), which provides for the issuance of
incentive stock options within the meaning of Section 422 of the Internal
Revenue Code of 1986 and non-qualified stock options to purchase an aggregate of
up to 700,000 shares of Common Stock. The 1995 Stock Option Plan permits the
grant of options to officers, employees, directors and independent contractors
of the Company and their employees.
The 1995 Stock Option Plan is administered by the Company's Compensation
Committee, of which all voting members are "disinterested persons" within the
meaning of Rule 16b-3 under the Act, as amended (the "Committee"). Each option
is evidenced by written agreement in a form approved by the Committee. No
options granted under the 1995 Stock Option Plan are transferable by the
optionee other than by will or by the laws of descent and distribution, and each
option is exercisable, during the lifetime of the optionee, only by the
optionee.
Under the 1995 Stock Option Plan, the exercise price of an incentive stock
option must be at least equal to 100.0% of the fair market value of the Common
Stock on the date of grant (110.0% of the fair market value in the case of
options granted to employees who hold more than ten percent of the voting power
of the Company's capital stock on the date of grant). The exercise price of a
non-qualified stock option is the same as for incentive stock options. The term
of an incentive or non-qualified stock option is not to exceed ten years (five
years in the case of an incentive stock option granted to a ten percent Pluma
shareholder). The Committee has the discretion to determine the vesting schedule
and the period required for full exercisability of stock options, and all
options granted under the Plan to date have contained a 20.0% per year vesting
schedule, except for options granted to George G. Wade and to a former director,
who became 100% vested in all option shares granted to them under the 1995 Stock
Option Plan at the time of the grant. Upon exercise of any option granted under
the 1995 Stock Option Plan, the exercise price may be paid in cash, and/or such
other form of payment as may be permitted under the applicable option agreement,
including, without limitation, previously owned shares of Common Stock.
EMPLOYEE BENEFIT PLANS
In 1991, the Company adopted the Pluma, Inc. 401(k) Retirement Savings Plan (the
"401(k) Plan"), which is intended to be qualified under section 401(k) of the
Internal Revenue Code of 1986, as amended. To be eligible, an employee must have
been employed by the Company for at least one year. The 401(k) Plan permits
employees who have completed one year of service to defer up to 10.0% of their
annual compensation into the 401(k) Plan, provided, the total amount of
compensation deferred in 1996 does not exceed $9,500 (which sum is adjusted
annually). Additional annual contributions may be made at the discretion
36
<PAGE>
of the Company, and matching contributions may be made by the Company up to a
maximum of 6.0% of a participating employee's annual compensation. To date,
Company matching contributions have equaled $0.35 for every $1.00 contributed by
the employee. Contributions made by the Company vest after two years of
employment.
Effective December 19, 1996, the Company adopted a Non-Qualified Deferred
Compensation Plan for certain selected key executives and a similar
Non-Qualified Deferred Compensation Plan for certain of its Directors. Both
plans are designed to mirror the 401(k) Plan. Key executive employees and
directors chosen to participate in these plans are selected by the Compensation
Committee of the Company's Board of Directors. The purposes of these plans are
to provide certain directors and selected key executives of the Company the
opportunity to defer elements of their compensation which might not otherwise be
deferrable under other Company plans, including the 401(k) Plan, to receive the
benefit of additions to their deferral comparable to those obtainable under the
401(k) Plan in the absence of certain restrictions and limitations in the
Internal Revenue Code, and to provide the directors with benefits similar to the
401(k) Plan (absent certain restrictions and limitations) were they eligible to
participate in such 401(k) Plan.
37
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On December 29, 1995, pursuant to an Agreement of Termination and Release, the
Company terminated the Sales and Marketing Agreement with Box & Company by
paying to Box & Company a termination payment in the amount of $2.0 million. The
Company paid Box & Company $1,000 on December 29, 1995, and the balance on
January 30, 1996, pursuant to a promissory note given as payment for the
termination payment. In addition to the $2.0 million termination payment, the
Company paid Box & Company all commissions due under the Sales and Marketing
Agreement for shipments made by the Company to customers prior to December 31,
1995 ("Final Commissions"). The amount of the Final Commissions was $152,418,
which was paid in full on February 5, 1996. Also, Pluma assumed the risk of all
customer returns of products previously shipped (for which commissions had been
paid) and waived any further right of offset against sums due Box & Company as
the result of uncollected accounts receivable due from Pluma's customers (on
which commissions had been paid previously), including the 20/20 Sport account
receivable. For a discussion of the 20/20 Sport account receivable, see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
North Bowles Partnership is a general partnership of which Barry A. Bowles, a
director of Pluma and a member of its Compensation Committee, owns a 33.0%
general partnership interest.
On June 10, 1989, the Company entered into a lease with North Bowles Partnership
for a building located in Martinsville, Virginia, to operate a distribution
center. On December 1, 1990, this lease was amended to add 67,500 square feet to
the building subject to the original lease. The building now contains 181,550
square feet. Rental expense for 1996 was $52,026 per month, or a total of
$624,312 annually. Rental payments increase with any annual increase in the
Consumer Price Index for Urban Wage Earners and Clerical Workers. The term of
this lease is 20 years. As additional rent, the Company is responsible for
paying 75.0% of the increase in taxes and insurance premium payments due on this
property. This lease grants the Company the option to purchase the distribution
center at the end of the fifth year, tenth year and fifteenth year of the lease
term, as well as at the end of the lease term in June 2009, at a price to be
agreed upon by the parties, or if no agreement can be reached, at a price
determined by appraisers.
On December 1, 1995, the Company entered into a lease with North Bowles
Partnership for a 83,200 square foot building that is being utilized by the
Company as a warehouse, packaging facility and management information systems
location. Rent is payable in monthly installments of $14,500. This lease
terminates on February 1, 1998.
On February 1, 1996, the Company entered into a lease with North Bowles
Partnership for a 200,000 square foot building that is being utilized by the
Company as a warehouse and distribution facility. Annual rental on this facility
is $384,000 payable in equal monthly installments of $32,000. This lease
terminates on July 31, 1998. As additional rent, the Company is responsible for
paying any increase in North Bowles Partnership's taxes and insurance premiums
related to the property in excess of 1995 levels.
For the nine months ended September 30, 1996, the Company paid North Bowles
Partnership $310,240 for services rendered in connection with the installation
of a new conveyor system linking two of the Company's distribution facilities.
This payment included the cost of the equipment and labor and materials utilized
for installation.
For the nine months ended September 30, 1996, the Company paid Diversified
Distribution, Inc. $223,338 in fees related to contract services rendered to the
Company for packaging and preparing Company products for shipment. These
services were contracted for on a job-by-job basis as needed during busy
delivery times. The Company has no long term contract for such services. Barry
A. Bowles owns 22.5% of the Common Stock of Diversified Distribution, Inc.
The Company has a contract to pay Philpott, Ball $120,000 of advisory fees, plus
out-of-pocket expenses during 1996, of which it had paid $90,179 as of September
30, 1996. J. Robert Philpott, Jr., a director of the Company, owns 50.0% of the
outstanding equity interests in Philpott, Ball.
38
<PAGE>
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of the date of this Prospectus and as
adjusted to reflect the sale of the shares offered hereby with respect to (i)
each person known by the Company to own beneficially more than five percent of
the outstanding shares of Common Stock, (ii) each of the Company's directors and
the Named Officers and (iii) all directors and executive officers as a group.
Unless otherwise indicated, each of the shareholders has sole voting and
investment power with respect to the shares beneficially owned.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED
PRIOR TO OFFERING SHARES BENEFICIALLY
OWNED
SHARES TO BE SOLD AFTER OFFERING
NAME* NUMBER PERCENT** NUMBER NUMBER PERCENT**
<S> <C> <C> <C> <C> <C>
G. Walker Box 1,191,828(1)(2) 16.15%
R. Duke Ferrell, Jr. 777,162(1)(3) 10.53%
George G. Wade 694,894(4) 9.41%
Kemp D. Box 567,258(5)(6) 7.68%
Post Office Box 6822
Columbia, SC 29260
David C. Jones, D.D.S. 514,886(5)(7) 6.98%
25 E. Cleveland Ave., Suite E
Martinsville, VA 24112
William K. Mileski 459,562(5)(8) 6.23%
Meritage
P.O. Box 1198
Mooresville, NC 28115
C. Monroe Light 405,546(1)(9) 5.49%
R. Stephens Pannill 357,644(5)(10) 4.85%
835 Colville Road
Charlotte, NC 28207
Barry A. Bowles 204,978(5)(11) 2.78%
Stanley W. Bowles Corp.
Post Office Box 4706
Martinsville, VA 24115
Milton A. Barber, IV 19,608(5) 0.27%
J. Robert Philpott, Jr. --(12) --
Philpott, Ball & Company
212 S. Tryon Street, Suite 1050
Charlotte, NC 28281
All directors and executive 4,842,544 65.60%
officers as a group (16 persons)
</TABLE>
* Except as otherwise noted, the address of each person who is a director,
executive officer, or five percent shareholder of the Company is c/o Pluma,
Inc., 801 Fieldcrest Road, Eden, North Carolina 27288.
** The percentages calculated are based on 7,222,550 shares issued and
outstanding as of the date hereof plus 159,200 shares subject to presently
exercisable stock options issued under the Company's Stock Option Plan, a total
of 7,381,750 shares.
(1) Includes 12,000 shares issuable upon the exercise of options that have
vested (does not include 48,000 shares issuable upon the exercise of options
that have not yet vested).
(2) Includes (a) 32,000 shares owned by the George Walker Box Family Trust of
which G. Walker Box is the trustee and has sole voting and investment power; (b)
322,944 shares owned by Box, Ferrell & Co. of which Mr. Box shares voting power
and investment power equally with R. Duke Ferrell, Jr. -- these shares are
included in both Mr. Box's and Mr. Ferrell's beneficially owned shares; (c)
63,530 shares owned by Mr. Box as custodian for his minor children living in his
household; (d) 137,222 shares owned by the George Henry Box, Jr. Revocable Trust
dated April 27, 1992 of which Mr. Box as Co-trustee, shares voting and
investment power equally with Kemp D. Box -- these shares are included in both
Mr. Box's and Kemp Box's beneficially owned shares; and (e) 22,065 shares owned
by Mr. Box's wife of which shares Mr. Box disclaims beneficial ownership.
39
<PAGE>
(3) Includes (a) 322,944 shares owned by Box, Ferrell & Co. of which Mr. Ferrell
shares voting power and investment power equally with G. Walker Box -- these
shares are included in both Mr. Ferrell's and Mr. Box's beneficially owned
shares; (b) 26,860 shares held by Mr. Ferrell as custodian for his minor
children living in his household; (c) 6,440 shares held by Mr. Ferrell's
Individual Retirement Account; and (d) 27,200 shares owned of record by Mr.
Ferrell's wife of which shares Mr. Ferrell disclaims beneficial ownership.
(4) Includes (a) 60,000 shares issuable upon the exercise of options that are
currently exercisable; and (b) 116,000 shares owned by Mr. Wade's wife. Mr. Wade
disclaims beneficial ownership of the shares owned by his wife. Does not include
800 shares owned by Mr. Wade's adult children who do not reside in his
household.
(5) Includes 4,000 shares issuable upon the exercise of options that are
currently exercisable (does not include 16,000 shares issuable upon the exercise
of options that have not yet vested).
(6) Includes (a) 137,222 shares owned by the George Henry Box, Jr. Revocable
Trust dated April 27, 1992 of which Mr. Box as Co-trustee, shares voting and
investment power equally with G. Walker Box -- these shares are included in both
Mr. Box's and G. Walker Box's beneficially owned shares; (b) 32,000 shares owned
by the Kemp D. Box Family Trust, of which Mr. Box is the trustee and has sole
voting and investment power; (c) 6,066 shares owned by Mr. Box's wife; (d)
25,092 shares owned by Mr. Box's wife as trustee for trusts for her and Mr.
Box's minor children living in Mr. Box's household; and (e) 58,908 shares owned
by Mr. Box's wife as trustee for the Kemp D. Box Descendants' Trust. Mr. Box
disclaims beneficial ownership of all shares beneficially owned by his wife.
(7) Includes 42,256 shares owned by his Individual Retirement Account.
(8) Includes 30,000 shares owned by Mr. Mileski's wife of which shares Mr.
Mileski disclaims beneficial ownership. Does not include 4,300 shares owned by
Mr. Mileski's adult children who do not reside in his household.
(9) Includes 80,000 shares owned by Mr. Light's wife of which shares Mr. Light
disclaims beneficial ownership. Does not include 11,806 shares owned by Mr.
Light's adult children who do not reside in his household and 8,000 shares owned
by Mr. Light's grandchildren who do not reside in his household.
(10) Includes (a) all of the 350,000 shares Mr. Pannill owns of record with his
wife as a joint tenant with right of survivorship; and (b) 3,644 shares owned by
Mr. Pannill's wife of which shares Mr. Pannill disclaims beneficial ownership.
(11) Includes 2,000 shares held by Mr. Bowles' Individual Retirement Account.
Does not include 40 shares owned by Mr. Bowles' adult children who do not reside
in his household and does not include 15,600 shares owned of record by the Barry
A. Bowles Irrevocable Trust of which John L. Gregory III is the trustee.
(12) Does not include 20,000 shares issuable upon the exercise of options that
have not yet vested.
40
<PAGE>
SELLING SHAREHOLDERS
The Selling Shareholders listed in the table below have agreed to sell the
number of shares of Common Stock set forth opposite their respective names. The
table sets forth information with respect to beneficial ownership of the Common
Stock by the Selling Shareholders immediately prior to the consummation of the
Offering and as adjusted to reflect the sale of shares of Common Stock pursuant
to the Offering. The Selling Shareholder's position, office or other material
relationship with the Company for the last three years is also stated. All
information with respect to beneficial ownership has been furnished by the
respective Selling Shareholders.
<TABLE>
<CAPTION>
BENEFICIAL
OWNERSHIP
BENEFICIAL OWNERSHIP AFTER
PRIOR TO OFFERING SHARES TO BE SOLD OFFERING
NAME NUMBER PERCENT IN OFFERING NUMBER
<S> <C> <C> <C> <C>
</TABLE>
41
<PAGE>
DESCRIPTION OF CAPITAL STOCK
GENERAL
The authorized capital stock of the Company consists of 16,000,000 shares,
consisting of 15,000,000 shares of Common Stock, no par value, and 1,000,000
shares of preferred stock, no par value (the "Preferred Stock"). The following
summary description of the capital stock of the Company does not purport to be
complete and is subject to the detailed provisions of and is qualified in its
entirety by reference to the Company's Articles of Incorporation and Bylaws and
to the applicable provisions of the North Carolina Business Corporation Act.
COMMON STOCK
As of the date hereof, 7,222,550 shares of the Company's Common Stock are issued
and outstanding to 154 shareholders. Upon completion of this Offering, it is
anticipated that shares of Common Stock will be issued and
outstanding ( shares if the Underwriters exercise their
over-allotment option in full).
Holders of the Common Stock are entitled to receive dividends when and as
declared by the Board of Directors out of funds legally available therefor. The
Company has declared and paid quarterly cash dividends on its Common Stock since
1991. Quarterly cash dividends paid since January 1994 have been $0.02 per
share. However, the Company has not established a dividend policy to follow
subsequent to this Offering and does not expect that a dividend will be declared
and paid in the foreseeable future. See "Dividend Policy." Holders of the Common
Stock have no preemptive rights to purchase additional shares, which rights, if
they existed, would entitle a shareholder to maintain his or her proportionate
percentage interest in the Company by purchasing additional shares at any time
the Company issues any additional shares. Furthermore, the shares of Common
Stock being sold hereby have no conversion, sinking fund or redemption rights.
Holders of the Common Stock are entitled to share on a prorated basis in the
assets of the Company legally available for distribution to shareholders in the
event of the Company's liquidation, dissolution or winding up. The Common Stock
offered hereby will be, when issued, fully paid and nonassessable. Each holder
of shares of the Common Stock is entitled to one vote for each share of the
Common Stock held of record on all matters submitted to a vote of shareholders,
including the election of directors. Pursuant to the provisions of the North
Carolina General Statutes that will apply to the Company, a shareholder of the
Company following the Offering will not have the right to vote his shares
cumulatively, in the election of directors. Under a cumulative voting method of
election, each shareholder computes the number of votes available to him by
multiplying the number of shares he owns by the number of directors to be
elected. He can then cast the total number of such votes for a single candidate
or can distribute them in any manner among any number of candidates.
Except as set forth below, the vote of holders of a majority of the shares of
Common Stock voted at a meeting of the shareholders shall be sufficient to take
or authorize action upon any matter that may properly come before a meeting of
the shareholders. Notwithstanding the preceding sentence, the Company's Bylaws
provide that a vote of holders of 66 2/3% of the Company's Common Stock (as well
as the Board of Directors) shall be required for the authorization of (a) any
consolidation or merger of the Company where the shareholders of the Company,
immediately prior to the consolidation or merger, would not, immediately after
the consolidation or merger, beneficially own, directly or indirectly, shares
representing in the aggregate at least 50.1% of the voting shares of the
corporation issuing cash and/or securities in the consolidation or merger (or of
its ultimate parent corporation, if any), (b) any sale, lease, exchange or other
transfer (in one transaction or a series of transactions contemplated or
arranged by a party as a single plan) of all or substantially all of the assets
of the Company or (c) any plan or proposal for the liquidation or dissolution of
the Company.
The above-referenced provisions of the Company's Bylaws are designed to
encourage any person interested in acquiring the Company to negotiate with and
obtain the approval of a large majority of the Company's Board of Directors and
a large majority of its shareholders, thus possibly slowing down an unfriendly
takeover attempt and initiating more discussion and analysis before the
occurrence of a "change in control" of the Company. These provisions may,
however, discourage a future acquisition of the Company not approved by the
Board of Directors in which shareholders might receive the maximum value for
their shares or which a substantial number and perhaps even a majority of the
Company's shareholders believe to be in the best interests of all shareholders.
As a result, shareholders who might desire to participate in such a "change of
control" transaction may not have the opportunity to do so. See "Risk
Factors -- Antitakeover Provisions."
Application will be made for listing the Common Stock on the Nasdaq National
Market under the symbol "PLMA." The transfer agent and registrar for the
Company's Common Stock will be First Union National Bank of North Carolina, 2
First Union Center, Charlotte, North Carolina.
42
<PAGE>
PREFERRED STOCK
As of the date of this Prospectus, no shares of Preferred Stock were
outstanding. The Board of Directors is authorized to issue Preferred Stock in
one or more series and to determine, with respect to any such series, the
designations, powers, preferences and rights of such series, including: (i) the
number of shares of the series, which number the Board of Directors may
thereafter (except where otherwise provided in the preferred stock designation)
increase or decrease (but not below the number of shares thereof then
outstanding); (ii) whether dividends, if any, will be cumulative or
noncumulative and the dividend rate of the series; (iii) the dates at which
dividends, if any, will be payable; (iv) the redemption rights and price or
prices, if any, for shares of the series; (v) the terms and amounts of any
sinking fund provided for the purchase or redemption of shares of the series;
(vi) the amounts payable, and the preferences, if any, on shares of the series
in the event of any voluntary or involuntary liquidation, dissolution or winding
up of the affairs of the Company; (vii) whether the shares of the series will be
convertible into shares of any other class or series, or any other security, of
the Company or any other corporation, and, if so, the specification of such
other class or series or such other security; (viii) the conversion price or
prices or rate or rates, and any adjustments thereof, the date or dates as of
which such shares shall be convertible and all other terms and conditions upon
which such conversion may be made; (ix) restrictions on the issuance of shares
of the same series or of any other class or series; (x) the voting rights, if
any, of the holders of such series and (xi) such other powers, preferences and
relative, participating, optional and other special rights, and the
qualifications, limitations and restrictions thereof, as the Board of Directors
shall determine.
The Company believes that the ability of the Board of Directors to issue one or
more series of Preferred Stock will provide the Company with flexibility in
structuring possible future financings and acquisitions, and in meeting other
corporate needs which might arise. The authorized shares of Preferred Stock, as
well as shares of Common Stock, will be available for issuance without further
action by the Company's shareholders, unless such action is required by
applicable law or the rules of any stock exchange or automated quotation system
on which the Company's securities may be listed or traded.
Although the Board of Directors has no intention at the present time of doing
so, it could issue a series of Preferred Stock that could, depending on the
terms of such series, impede the completion of a merger, tender offer or other
takeover attempt. The Board of Directors will make any determination to issue
such shares based on its judgment as to the best interests of the Company and
its shareholders. The Board of Directors, in so acting, could issue Preferred
Stock having terms that could discourage an acquisition attempt through which an
acquiror may be able to change the composition of the Board of Directors,
including a tender offer or other transaction that some, or a majority, of the
Company's shareholders might believe to be in their best interests or in which
shareholders might receive a premium for their stock over the then current
market price of such stock.
BOARD OF DIRECTORS
The Company's Board of Directors currently consists of ten directors and is
divided into three classes designed to contain a relatively equal number of
members. The terms of office of the directors are staggered so that the terms of
office of no more than approximately one-third of the directors expire in any
one year. The classification system of electing directors may discourage a third
party from making a tender offer or otherwise attempting to obtain control of
the Company and may maintain the incumbency of the Board of Directors, as it
generally makes it more difficult for shareholders to replace a majority of the
Board of Directors.
The number of directors constituting the Board of Directors shall not be less
than nine or more than twelve. The Board of Directors has the right to increase
the number of directors, provided the number of such directors is not greater
than twelve. A majority of the Board of Directors then in office has the sole
authority to fill any vacancies on the Board of Directors.
CERTAIN PROVISIONS OF NORTH CAROLINA STATUTES AND OF THE COMPANY'S BYLAWS
The North Carolina General Statutes ("NCGS") provide in the North Carolina
Shareholder Protection Act (the "Shareholder Act") a mechanism designed to
prevent a two-phase tender offer for shares of a publicly held North Carolina
corporation which attempts to force shareholders to sell their shares in the
first phase of any such tender offer in order to avoid the risk of receiving a
lower price in the second phase of the offer. The Shareholder Act's purpose is
to assure a fair price for all shareholders of a corporation subject to a
"change of control," merger or other business combination. Generally, the
Shareholder Act requires the vote of 95.0% of the voting shares of a publicly
held corporation to approve a business combination unless the shareholders of
such corporation who have their shares purchased in the business combination
receive a "fair price" equal to the highest of (i) the highest per share price
ever paid by anyone who is a part of an acquiring "other entity," (ii) a price
that exceeds the market price when the second phase of the acquisition is
announced by the same percentage as the highest price paid by any member of the
"other entity" exceeds the market price immediately before the commencement of
acquisition of the
43
<PAGE>
corporation's shares by the other entity or (iii) a price computed by
multiplying the corporation's annual earnings per share by the price/earnings
multiple, if any, of the acquiring "other entity." Furthermore, certain
procedural requirements must be met.
As allowed by the Shareholder Act, the Company's Board of Directors has amended
the Company's Bylaws, exempting the Company from the requirements and provisions
of the Shareholder Act. This could allow for a two-phase tender offer for the
Company's shares that could result in a lower price to shareholders who sell
their Pluma shares in the second phase of any such tender offer. Furthermore,
the elimination of the Shareholder Act may allow for a successful hostile
takeover of the Company that is not favored. However, the Company's Board of
Directors believes that the Shareholder Act is too broad in its application and
could work to block a business combination transaction desired by virtually all
of the Company's shareholders.
The Control Share Acquisition Act, promulgated under the NCGS, generally
prohibits a person who acquires "control shares" in a "control share
acquisition" from voting its shares so acquired unless such voting rights are
granted by a majority of all outstanding voting shares of the Company exclusive
of the shares acquired by the person acquiring "control shares." The voting
rights to be granted to the acquiring person must be granted at a shareholders
meeting for which there are special notice requirements, and such meeting could
be held within 50 days after the shareholders receive certain information from
the acquiring person. Thus, a normal tender offer is delayed by at least 50 days
since the acquiring person would not want to purchase shares he could not
subsequently vote. Although it appears that this act might inhibit an
acquisition of the Company that a majority of the shareholders desires, it could
also be viewed as an assistance to a person engineering a hostile takeover of
the Company. In any event, as allowed by the Control Share Acquisition Act, the
Company's Board of Directors has amended the Company's Bylaws exempting the
Company from the requirements and provisions of this act.
INDEMNIFICATION OF OFFICERS AND DIRECTORS
The Bylaws of the Company provide that any person who at any time serves or has
served as director, officer, employee or agent of the Company, shall have a
right to be indemnified by the Company to the fullest extent permitted by law
against (a) liability and litigation expenses, including reasonable attorney's
fees incurred in connection with any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative,
and whether or not brought by or on behalf of the Company, seeking to hold him
liable by reason of the fact that he is or was acting in such capacity, and (b)
reasonable payments made by him in satisfaction of any judgment, money decree,
fine, penalty or settlement for which he may become liable in any such action,
suit or proceeding.
The Securities and Exchange Commission has taken the position that insofar as
indemnification from liabilities of officers and directors of a Company arising
under the Securities Act of 1933 may be permitted, the Company has been informed
that in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Securities Act of
1933, as amended, and is, therefore, unenforceable.
44
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this Offering, the Company will have outstanding shares
of Common Stock, of which the shares sold in this Offering ( shares
if the Underwriters' over-allotment options are exercised in full) will be
freely tradeable without restrictions or further registration under the
Securities Act, except for those shares held by "affiliates" (as defined in the
Securities Act) of the Company.
The remaining shares (the "Restricted Shares") are currently held by the
existing shareholders and were issued and sold by the Company in private
transactions in reliance upon exemptions from the registration provisions of the
federal securities laws, and are subject to certain restrictions under Rule 144
of the Securities Act. The Restricted Shares may not be resold in the absence of
registration under the Securities Act or pursuant to an exemption to such
registration, including exemptions provided by Rule 144 under the Securities
Act. In general, under Rule 144 as currently in effect, a person who has
beneficially owned Restricted Shares for at least two years, including
"affiliates" of the Company, would be entitled to sell in broker's transactions
or to market makers within any three-month period a number of shares that does
not exceed the greater of 1.0% of the then outstanding shares of Common Stock
(approximately shares after giving effect to the Offering) or the average
weekly trading volume of the Common Stock on the Nasdaq National Market during
the four calendar weeks preceding the date of such sale. Sales under Rule 144
are also subject to certain manner of sale restrictions and notice requirements
and to the availability of current public information concerning the Company. In
addition, a person (or persons whose shares are aggregated) who is not an
"affiliate" of the Company at any time during the 90 days preceding a sale, and
who has beneficially owned such shares for at least three years would be
entitled to sell such shares under Rule 144(k) without regard to the
availability of current public information, volume limitations, manner of sale
provisions or notice requirements. The current holders of the Restricted Shares
will be eligible to sell a portion of such shares pursuant to Rule 144, subject
to the manner of sale, volume, notice and information requirements of Rule 144.
The above is a summary of Rule 144 and is not intended to be a complete
description thereof.
The Company, its directors, executive officers and shareholders have agreed that
they will not, directly or indirectly, offer, sell, offer to sell, contract to
sell, grant any option to purchase or otherwise sell or dispose (or announce any
offer, sale, offer of sale, contract of sale, grant of any option to purchase or
other sale or disposition) of any shares of Common Stock or any securities
convertible into, or exercisable or exchangeable for, Common Stock or other
capital stock of the Company, for a period of 180 days after the date of this
Prospectus, without the prior written consent of J.P. Morgan Securities Inc., on
behalf of the Underwriters, except that the Company may grant options to
purchase shares of Common Stock under the 1995 Stock Option Plan. See
"Management -- Executive Compensation, Stock Option Plan."
Prior to this offering, there has been no market for the Common Stock and no
precise predictions can be made as to the effect, if any, that sales of shares
or the availability of such shares for sale in the public market will have on
the market prices prevailing from time to time. Nevertheless, sales of
substantial amounts of Common Stock in the public market could adversely affect
prevailing market prices and impair the Company's ability to raise capital
through the sale of equity securities.
45
<PAGE>
UNDERWRITING
Under the terms and subject to the conditions set forth in an Underwriting
Agreement dated the date hereof (the "Underwriting Agreement"), the Company and
the Selling Shareholders have agreed to sell to the Underwriters named below,
and each of such Underwriters, for whom J.P. Morgan Securities Inc.,
Interstate/Johnson Lane Corporation and Wheat, First Securities, Inc. are acting
as representatives, has severally agreed to purchase from the Company and the
Selling Shareholders, the respective number of shares of Common Stock set forth
opposite their names below:
<TABLE>
<CAPTION>
UNDERWRITERS NUMBER OF SHARES
<S> <C>
J.P. Morgan Securities Inc.
Interstate/Johnson Lane Corporation
Wheat, First Securities, Inc.
Total.........................................................................
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters to purchase shares of Common Stock are subject to the approval of
certain legal matters by counsel and certain other conditions. Under the terms
and conditions of the Underwriting Agreement, the Underwriters are obligated to
take and pay for all such shares of Common Stock, if any are taken.
The Underwriters propose initially to offer the shares of Common Stock directly
to the public at the public offering price set forth on the cover page of this
Prospectus and to certain dealers at such price less a concession not in excess
of $ per share. The Underwriters may allow, and such dealers may
reallow, a concession not in excess of $ per share to certain other
dealers. After the initial public offering of the Common Stock, the public
offering price and such concession may be changed.
The Company has granted to the Underwriters an option, expiring at the close of
business on the 30th day after the date of this Prospectus, to purchase up to
additional shares of Common Stock from the Company, at the initial public
offering price, less the underwriting discount. The Underwriters may exercise
such option solely for the purpose of covering over-allotments, if any. To the
extent that the Underwriters exercise their option, each Underwriter will have a
firm commitment, subject to certain conditions, to purchase approximately the
same percentage of such additional shares as the number set forth next to such
Underwriter's name in the preceding table bears to the total number of shares of
Common Stock initially offered hereby.
The Company and the Selling Shareholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act.
Each of the Company, its directors and executive officers, the Selling
Shareholders and certain other shareholders has agreed, with certain limited
exceptions, not to offer, sell, contract to sell or otherwise dispose of any
shares of Common Stock, any options for the sale of Common Stock, or any
securities convertible into or exchangeable or exercisable for any such shares,
for a period of 180 days after the date of this Prospectus, without the consent
of J.P. Morgan Securities Inc.
Prior to this Offering, there has been no public market for the Common Stock.
The initial public offering price for the Common Stock offered hereby has been
determined by agreement among the Company, the Selling Shareholders and the
Underwriters. Among the factors considered in making such determination were the
history of and the prospects for the industry in which the Company competes, an
assessment of the Company's management, the present operations of the Company,
the historical results of operations of the Company and the trend of its
revenues and earnings, the prospects for future earnings of the Company, the
46
<PAGE>
general condition of the securities markets at the time of the offering and the
prices of similar securities of generally comparable companies.
Application will be made for quotation of the Common Stock on the Nasdaq
National Market under the symbol "PLMA." There can be no assurance that an
active trading market will develop for the Common Stock or that the Common Stock
will trade in the public market subsequent to the offering at or above the
initial public offering price.
At the Company's request, the Underwriters have reserved up to shares of
Common Stock for sale at the initial public offering price to the Company's
employees and other persons having business relationships with the Company. The
number of shares of Common Stock available for sale to other members of the
public will be reduced to the extent that these persons purchase such reserved
shares. Any reserved shares not purchased will be offered by the Underwriters on
the same basis as the other shares offered hereby.
LEGAL MATTERS
Certain legal matters in respect to the validity of the shares of Common Stock
offered hereby will be passed upon for the Company by Allman Spry Leggett &
Crumpler, P.A., Winston-Salem, North Carolina. Certain legal matters will be
passed upon for the Underwriters by Davis Polk & Wardwell, New York, New York.
Davis Polk & Wardwell will rely on Allman Spry Leggett & Crumpler, P.A. as to
matters of North Carolina law.
EXPERTS
The financial statements as of December 31, 1995 and 1994 and for each of the
three years in the period ended December 31, 1995, included in this Prospectus
have been audited by Deloitte & Touche LLP, independent auditors, as stated in
their report appearing herein, and have been so included in reliance upon the
report of such firm given upon their authority as experts in accounting and
auditing.
AVAILABLE INFORMATION
A Registration Statement on Form S-1 relating to the Common Stock offered hereby
has been filed by the Company with the Securities and Exchange Commission (the
"Commission"), Washington, D.C. This Prospectus does not contain all the
information set forth in the Registration Statement and the exhibits and
schedules thereto. Statements contained in this Prospectus with respect to the
contents of any contract or any other document referred to herein are not
necessarily complete and in each instance reference is made to the copy of such
contract or other document filed as an exhibit to the Registration Statement,
each such statement being qualified in all respects by such reference. For
further information with respect to the Company and the Common Stock offered
hereby, reference is hereby made to the Registration Statement and to the
exhibits and schedules thereto. A copy of the Registration Statement may be
inspected by anyone without charge and may be obtained at prescribed rates at
the Commission at the Public Reference Section of the Commission, maintained by
the Commission at its principal office located at 450 Fifth Street, N.W.,
Washington, D.C. 20549. The Commission also maintains a Website
(http://www.sec.gov) that contains reports, proxy and information statements and
other information that is filed electronically with the Commission.
47
<PAGE>
PLUMA, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Independent Auditors' Report........................................................................................... F-2
Balance Sheets as of September 30, 1996 (unaudited) and December 31, 1995 and 1994..................................... F-3
Statements of Operations for the Nine Months Ended September 30, 1996 and 1995 (unaudited) and the Years Ended December
31, 1995, 1994 and 1993.............................................................................................. F-4
Statements of Shareholders' Equity for the Nine Months Ended September 30, 1996 (unaudited) and the Years Ended
December 31, 1995, 1994 and 1993..................................................................................... F-5
Statements of Cash Flows for the Nine Months Ended September 30, 1996 and 1995 (unaudited) and the Years Ended December
31, 1995, 1994 and 1993.............................................................................................. F-6
Notes to Financial Statements.......................................................................................... F-7
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
Shareholders and Board of Directors of Pluma, Inc.:
We have audited the accompanying balance sheets of Pluma, Inc. as of December
31, 1995 and 1994, and the related statements of operations, shareholders'
equity, and cash flows for each of the three years in the period ended December
31, 1995. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Pluma, Inc. at December 31, 1995 and 1994,
and the results of its operations and its cash flows for each of the three years
in the period ended December 31, 1995 in conformity with generally accepted
accounting principles.
As discussed in note 2 to the financial statements, the Company changed its
method of accounting for income taxes in 1993.
March 4, 1996
(April 10, 1996 as to note 17)
Winston-Salem, North Carolina
F-2
<PAGE>
PLUMA, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
(UNAUDITED)
SEPTEMBER
30, DECEMBER 31,
1996 1995 1994
<S> <C> <C> <C>
ASSETS
Current assets:
Cash $ 56,701 $ 596,429 $ 149,854
Accounts receivable (less allowance -- 1996, $862,866; 1995, $4,069,763; 1994,
$867,962) (note 5) 34,666,905 21,939,763 21,440,240
Income taxes receivable -- 1,057,783 --
Deferred income taxes (note 9) 1,491,235 2,296,429 582,792
Inventories (notes 3 and 5) 33,226,954 32,169,247 18,123,093
Other current assets 434,659 148,130 255,175
Total current assets 69,876,454 58,207,781 40,551,154
Property, plant and equipment (notes 5, 12 and 13):
Land 599,978 599,978 479,978
Land improvements 678,160 662,885 592,885
Buildings and improvements 13,646,697 13,516,551 12,312,735
Machinery and equipment 30,763,069 28,966,411 24,874,854
Total property, plant and equipment 45,687,904 43,745,825 38,260,452
Less accumulated depreciation 16,495,899 13,682,273 10,526,555
Property, plant and equipment, net 29,192,005 30,063,552 27,733,897
Other assets 517,193 341,787 269,394
TOTAL $99,585,652 $88,613,120 $68,554,445
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt (notes 5 and 16) $ 849,640 $ 849,640 $ 3,050,783
Note payable -- Bank (note 6) 10,000,000 -- --
Note payable -- related party sales agency (note 13) -- 1,999,000 --
Accounts payable 5,495,728 2,828,781 4,406,018
Income taxes payable 109,808 -- 125,234
Accrued expenses, including related party sales agency -- 1995, $152,418;
1994, $224,761 (notes 4 and 13) 3,978,305 2,478,081 1,042,694
Total current liabilities 20,433,481 8,155,502 8,624,729
Long-term debt (notes 5 and 16) 45,452,187 50,120,280 30,464,712
Deferred income taxes (note 9) 3,729,758 3,435,020 3,091,871
Commitments and contingencies (notes 10 and 12)
Shareholders' equity (notes 7, 8 and 17):
Preferred stock, no par value, 1,000,000 shares authorized -- -- --
Common stock, no par value, 15,000,000 shares authorized, shares issued and
outstanding -- 1996, 7,222,550; 1995, 7,222,550; 1994, 7,222,550 7,222,550 7,222,550 3,611,275
Paid-in capital -- -- 1,620,300
Retained earnings 22,747,676 19,679,768 21,141,558
Total shareholders' equity 29,970,226 26,902,318 26,373,133
TOTAL $99,585,652 $88,613,120 $68,554,445
</TABLE>
See notes to financial statements.
F-3
<PAGE>
PLUMA, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
(UNAUDITED)
NINE MONTHS
ENDED SEPTEMBER 30, FOR THE YEARS ENDED DECEMBER 31,
1996 1995 1995 1994 1993
<S> <C> <C> <C> <C> <C>
Net sales including related party customers --
1994, $2,313,230; 1993, $10,124,804 (notes 13
and 14) $95,538,124 $74,177,563 $100,710,495 $97,907,504 $86,645,055
Cost of goods sold (notes 11 and 13) 80,833,439 60,016,113 81,429,370 81,408,677 72,761,761
Gross profit 14,704,685 14,161,450 19,281,125 16,498,827 13,883,294
Selling, general and administrative expenses
including related party sales agency -- nine
months ended September 30, 1995, $2,454,189;
1995, $3,327,307; 1994, $3,181,467; 1993,
$2,697,163
(notes 10, 13 and 15) 6,678,229 6,651,592 12,384,876 7,300,187 6,255,062
Termination fee (note 13) -- -- 2,000,000 -- --
Total selling, general and administrative
expenses 6,678,229 6,651,592 14,384,876 7,300,187 6,255,062
Income from operations 8,026,456 7,509,858 4,896,249 9,198,640 7,628,232
Other income (expenses):
Interest expense (note 5) (2,846,090) (2,434,976) (3,421,385) (2,556,134) (1,641,002)
Other income (expenses) 359,606 190,349 291,261 (10,794) 7,616
Casualty gain (note 11) -- -- -- 312,733 --
Total other expenses, net (2,486,484) (2,244,627) (3,130,124) (2,254,195) (1,633,386)
Income before income taxes and cumulative effect
of accounting change 5,539,972 5,265,231 1,766,125 6,944,445 5,994,846
Income taxes (note 9):
Current 938,779 2,942,993 2,029,624 1,888,986 1,955,665
Deferred 1,099,932 (1,005,388) (1,370,488) 705,008 246,312
Total income taxes 2,038,711 1,937,605 659,136 2,593,994 2,201,977
Income before cumulative effect of accounting
change 3,501,261 3,327,626 1,106,989 4,350,451 3,792,869
Cumulative effect of accounting change (note 9) -- -- -- -- 73,651
Net income $ 3,501,261 $ 3,327,626 $ 1,106,989 $ 4,350,451 $ 3,866,520
Earnings per common share and common
equivalent -- primary and fully diluted:
Income before cumulative effect of accounting
change $ .48 $ .46 $ .15 $ .61 $ .50
Cumulative effect of accounting change -- -- -- -- .01
Net income $ .48 $ .46 $ .15 $ .61 $ .51
Weighted average number of shares outstanding 7,227,098 7,227,098 7,227,098 7,129,629 7,550,576
</TABLE>
See notes to financial statements.
F-4
<PAGE>
PLUMA, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK (NOTES 7 AND
17) PAID-IN RETAINED SHAREHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS EQUITY
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1993 7,293,384 $ 3,646,692 $ 576,686 $17,722,211 $21,945,589
Sale of common stock (note 8) 277,000 138,500 34,625 -- 173,125
Repurchase of common stock (27,694) (13,847) (263,370) -- (277,217)
Net income -- -- -- 3,866,520 3,866,520
Dividends ($.08 per share) -- -- -- (598,430) (598,430)
Balance, December 31, 1993 7,542,690 3,771,345 347,941 20,990,301 25,109,587
Sale of common stock 220,000 110,000 1,620,300 -- 1,730,300
Repurchase of common stock (540,140) (270,070) (347,941) (3,630,190) (4,248,201)
Net income -- -- -- 4,350,451 4,350,451
Dividends ($.08 per share) -- -- -- (569,004) (569,004)
Balance, December 31, 1994 7,222,550 3,611,275 1,620,300 21,141,558 26,373,133
Stock split -- 3,611,275 (1,620,300) (1,990,975) --
Net income -- -- -- 1,106,989 1,106,989
Dividends ($.08 per share) -- -- -- (577,804) (577,804)
Balance, December 31, 1995 7,222,550 7,222,550 -- 19,679,768 26,902,318
Net income -- -- -- 3,501,261 3,501,261
Dividends ($.06 per share) -- -- -- (433,353) (433,353)
Balance, September 30, 1996 7,222,550 $ 7,222,550 $ -- $22,747,676 $29,970,226
</TABLE>
See notes to financial statements.
F-5
<PAGE>
PLUMA, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
(UNAUDITED)
NINE MONTHS
ENDED SEPTEMBER 30, FOR THE YEARS ENDED DECEMBER 31,
1996 1995 1995 1994 1993
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 3,501,261 $ 3,327,626 $ 1,106,989 $ 4,350,451 $ 3,866,520
Adjustments to reconcile net income to net
cash provided by (used in) operating
activities:
Provision for depreciation and amortization 2,832,072 2,522,018 3,439,559 2,885,179 2,291,993
Provision for (reduction in) losses on
accounts receivable, net of writeoffs (3,206,897) 81,781 3,201,801 (70,207) 167,138
Other, net (282,488) 57,274 13,260 70,406 60,490
Increase in accounts receivable (9,520,245) (14,225,162) (3,701,324) (5,559,058) (883,544)
(Increase) decrease in income taxes
receivable -- -- (1,057,783) 436,752 (365,975)
(Increase) decrease in deferred income taxes 1,099,932 (1,005,388) (1,370,488) 705,008 172,661
Increase in inventories (1,057,709) (16,470,549) (14,046,154) (523,378) (2,876,068)
Increase (decrease) in accounts payable 2,666,946 2,653,564 (1,577,237) 1,595,554 (923,402)
Increase (decrease) in accrued expenses 1,500,224 2,850,290 1,435,387 107,071 (184,499)
Increase in income taxes payable 1,167,591 1,256,732 -- -- --
Increase (decrease) in note payable --
related party sales agency (1,999,000) -- 1,999,000 -- --
Net cash provided by (used in) operating
activities (3,298,313) (18,951,814) (10,556,990) 3,997,778 1,325,314
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment (1,974,263) (5,376,233) (5,855,714) (4,494,511) (7,086,304)
Other, net (165,706) 504 (17,342) (48,418) (97,415)
Net cash used in investing activities (2,139,969) (5,375,729) (5,873,056) (4,542,929) (7,183,719)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt -- -- -- 1,926,223 4,616,813
Repayments of long-term debt (849,640) (14,102,575) (14,102,575) (1,997,132) (1,427,991)
Net borrowings from (repayments of) revolving
loan (3,818,453) 33,758,000 31,557,000 (371,000) 3,928,000
Borrowings from note payable -- Bank 10,000,000 5,000,000
Payment of dividends (433,353) (433,353) (577,804) (569,004) (598,430)
Proceeds from sale of common stock -- -- -- 1,730,300 173,125
Repurchase of common stock -- -- -- (849,640) (277,217)
Net cash provided by (used in) financing
activities 4,898,554 24,222,072 16,876,621 (130,253) 6,414,300
Net increase (decrease) in cash (539,728) (105,471) 446,575 (675,404) 555,895
Cash, beginning of period 596,429 149,854 149,854 825,258 269,363
Cash, end of period $ 56,701 $ 44,383 $ 596,429 $ 149,854 $ 825,258
Supplemental disclosures of cash flow
information:
Cash paid during the period for:
Interest $ 2,886,131 $ 1,552,141 $ 2,538,550 $ 2,556,134 $ 1,641,002
Income taxes $ 171,188 $ 1,686,261 $ 3,212,641 $ 1,327,000 $ 2,333,024
Cash received during the period for:
Income taxes $ 400,000
Noncash financing activities -- A subordinated promissory note was issued in exchange for
common stock of $3,398,561 during 1994 (notes 5 and 7).
</TABLE>
See notes to financial statements.
F-6
<PAGE>
PLUMA, INC.
NOTES TO FINANCIAL STATEMENTS
Information and amounts as of September 30, 1996 and for the nine months ended
September 30, 1996 and 1995 are unaudited.
(1) ORGANIZATION
Pluma, Inc. (the "Company") is a vertically integrated manufacturer of high
quality fleece and jersey activewear. The Company is focused on increasing sales
and profitability by offering high value products to a diverse customer base.
The Company sells its products, either directly or through its distributors, to
a number of highly recognized companies such as Adidas, DKNY, Guess?, Nike,
Starter and Walt Disney. In addition, it sells products under its own "Pluma,"
"SANTEE" and "SNOWBANK" brand names to retail and wholesale customers such as
Sam's Club and Frank L. Robinson Company. The Company operates in a single
business segment.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
INVENTORIES -- Inventories are valued at the lower of cost, as determined by the
first-in, first-out method, or market. Inventory cost includes material and
conversion costs.
PROPERTY, PLANT AND EQUIPMENT -- Property, plant and equipment is stated at cost
and is depreciated using the straight-line method for financial reporting
purposes and accelerated method for income tax purposes. Maintenance and repairs
are charged to income and betterments are capitalized.
The average estimated useful lives of property for purposes of computing
depreciation are:
<TABLE>
<S> <C>
Land improvements 15 years
Buildings and improvements 39 years
Machinery and equipment 10 years
</TABLE>
SELF-INSURANCE RESERVES -- Self-insurance reserves represent the estimated
liability on medical and workers' compensation claims reported to the Company
plus reserves for claims incurred but not yet reported and the estimated
settlement expenses related to these claims. The liabilities for claims and
related settlement expenses are determined using "case basis" evaluations and
statistical analysis and represent estimates of the ultimate net cost of all
losses incurred through the balance sheet date. The Company's policy is to
discount its workers' compensation reserves at a discount rate not to exceed a
risk free rate of return on U.S. government securities of similar duration as
the reserves being discounted. Although considerable variability is inherent in
such estimates, management believes that the liabilities for unpaid claims and
related settlement expenses are adequate. The estimates are continually reviewed
by management and, as adjustments to these liabilities become necessary, such
adjustments are reflected in current operations. Self-insurance reserves are
included in accrued expenses.
INCOME TAXES -- Income taxes are provided on pre-tax earnings as reported in the
financial statements. Deferred income taxes result from temporary differences
between the amounts of assets and liabilities for financial reporting purposes
and such amounts as measured for income tax purposes.
Effective January 1, 1993, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 109, "Accounting for Income Taxes" for accounting for
deferred income taxes. As permitted under provisions of this statement, prior
years' financial statements have not been restated. The cumulative effect of
adopting SFAS No. 109, as of January 1, 1993, was to increase net income by
$73,651. This amount is reflected in 1993 net income as the cumulative effect of
a change in accounting principle.
TREASURY STOCK -- Under the state laws of North Carolina, shares of stock
repurchased by the Company are considered authorized but unissued shares, and
are reflected as such in the financial statements.
EARNINGS PER COMMON SHARE AND COMMON EQUIVALENT -- Primary earnings per common
share and common equivalent amounts are based on the weighted average number of
shares actually outstanding plus shares that would be outstanding assuming
exercise of dilutive stock options, all of which are considered to be common
stock equivalents. The number of shares that would be issued from the exercise
of stock options has been reduced by the number of shares that could have been
purchased from the proceeds at the average market price of the Company's stock.
The number of shares used in the computations were 7,227,098
F-7
<PAGE>
PLUMA, INC.
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
for 1996 and 1995, 7,129,629 for 1994 and 7,550,576 for 1993. Fully diluted
earnings per share amounts are not materially dilutive.
REVENUE RECOGNITION -- The Company recognizes the sale of goods when the goods
are shipped or ownership is assumed by the customer. Sales are recognized net of
estimated returns and allowances.
CAPITALIZED SOFTWARE COSTS -- The Company capitalizes certain computer software
costs which are amortized utilizing the straight-line method over the economic
lives of the related products not to exceed five years.
ACCOUNTING 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 and the reported amounts of revenues and expenses
during the reported period. Actual results could differ from these estimates.
For the year ended December 31, 1995, the statement of operations includes a
provision for doubtful accounts receivable which totals $3,250,071 principally
related to 20/20 Sport, a customer that filed for bankruptcy protection.
RECLASSIFICATIONS -- Certain 1993 and 1994 amounts have been reclassified to
conform with 1995 presentation.
NEW ACCOUNTING STANDARDS -- In October 1995, the Financial Accounting Standards
Board issued SFAS No. 123, "Accounting for Stock-Based Compensation." SFAS No.
123 is effective for transactions entered into in fiscal years that begin after
December 15, 1995. This statement adopts a "fair value based method" of
accounting for employee stock option plans or similar stock-based compensation
plans. Under the fair value based method, compensation cost is measured at the
grant date based on the fair value of the award and is recognized over the
service or vesting period. The statement does allow entities to continue to
measure compensation using the "intrinsic value based method" of APB No. 25
provided that they make pro forma disclosures on net income and earnings per
common share as if the fair value based method of accounting had been applied.
The Company will continue to follow APB No. 25 and will disclose the pro forma
effect of the fair value based method on net income and earnings per common
share.
In March 1995, the Financial Accounting Standards Board issued SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed of", which requires that long-lived assets, certain identifiable
intangibles, and goodwill related to those assets to be held and used and to
long-lived assets and certain identifiable intangibles to be disposed of, be
reported at the lower of carrying amount or fair value less cost to sell. An
entity shall review long-lived assets and certain identifiable intangibles to be
held and used for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. An
impairment loss recognized in accordance with this standard shall be measured as
the amount by which the carrying amount of the asset exceeds the fair value of
the asset. SFAS No. 121 is effective for financial statements for fiscal years
beginning after December 15, 1995. The effect of implementing this standard is
not expected to have a material impact on the Company's financial statements.
(3) INVENTORIES
Inventories at September 30, 1996, December 31, 1995 and 1994 consist of the
following:
<TABLE>
<CAPTION>
(UNAUDITED)
SEPTEMBER
30, DECEMBER 31,
1996 1995 1994
<S> <C> <C> <C>
Raw materials $ 1,464,742 $ 695,225 $ 681,396
Work-in-progress 3,558,696 2,641,316 2,937,666
Finished goods 27,642,360 28,106,795 14,051,588
Production supplies 561,156 725,911 452,443
Total $ 33,226,954 $ 32,169,247 $ 18,123,093
</TABLE>
F-8
<PAGE>
PLUMA, INC.
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
(4) ACCRUED EXPENSES
Accrued expenses at September 30, 1996, December 31, 1995 and 1994 consist of
the following:
<TABLE>
<CAPTION>
(UNAUDITED)
SEPTEMBER 30, DECEMBER 31,
1996 1995 1994
<S> <C> <C> <C>
Salaries, commissions and bonuses $ 1,324,157 $ 663,672 $ 719,694
Interest 842,794 882,835 --
Insurance 1,289,538 738,172 323,000
Other 521,816 193,402 --
Total $ 3,978,305 $ 2,478,081 $ 1,042,694
</TABLE>
(5) LONG-TERM DEBT
Long-term debt at September 30, 1996, December 31, 1995 and 1994 consists of the
following:
<TABLE>
<CAPTION>
(UNAUDITED)
SEPTEMBER
30, DECEMBER 31,
1996 1995 1994
<S> <C> <C> <C>
Revolving loan $ 44,602,547 $ 48,421,000 $ 16,864,000
Equipment loan -- -- 6,511,318
Building term loan -- -- 4,578,448
Building term loan #2 -- -- 2,163,169
Subordinated debt 1,699,280 2,548,920 3,398,560
Total 46,301,827 50,969,920 33,515,495
Less current maturities 849,640 849,640 3,050,783
Long-term debt $ 45,452,187 $ 50,120,280 $ 30,464,712
</TABLE>
On May 25, 1995, the Company renegotiated the revolving loan in its entirety.
All term loans and the prior revolving loan were consolidated into one revolving
loan (the "Loan Agreement") with a maximum borrowing limit of $55,000,000. The
revolving line of credit is subject to defined borrowings based on eligible
assets as defined in the Loan Agreement. Interest is computed daily and payable
quarterly at the lowest borrower selected rate of (a) prime rate minus 25 basis
points, (b) certificates of deposit contract rate or (c) monthly LIBOR contract
rate. The selected rate of interest is determined monthly and is subject to
defined adjustments pursuant to the interest coverage ratio. At September 30,
1996 and December 31, 1995 and 1994, the interest rate was 6.74%, 7.04% and
7.88%, respectively. A fee is payable quarterly based on the product of the
unused commitment margin times the difference between the committed amount
during the prior quarter and the average daily balance of the loans outstanding
during such quarter.
Among the various provisions, limitations and restrictions contained in the Loan
Agreement, the Company must meet specified tangible net worth, debt to equity
ratio and interest coverage ratio requirements. Under the Loan Agreement, the
Company is restricted in the amount of its capital expenditures, indebtedness to
certain other parties, or redemption of its stock that would create an event of
default. In the event of default, unless a waiver is not obtained, the Company's
dividends will be restricted in full. The Loan Agreement may be terminated at
any time upon the occurrence of an event of default. The Company retains the
right to remedy certain events of default within 10 days after notice. The
Company was in compliance with all covenants as of September 30, 1996. The
Company was in violation of the indebtedness and capital leases, transactions
with related persons, capital expenditures, liabilities to equity ratio, and
interest coverage ratio covenants and has obtained waivers for these violations
as of December 31, 1995. The Company was in compliance with all other covenants.
For each of the term loans, interest was payable monthly at the prime rate which
was 8.5% at December 31, 1994. Both the building and equipment term loans were
consolidated into the revolving loan on May 25, 1995.
Long-term debt is collateralized by substantially all accounts receivable,
inventories and property.
F-9
<PAGE>
PLUMA, INC.
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
The Company issued a promissory note dated January 28, 1994 to a former
officer/shareholder in connection with the repurchase of his stock (see note 7).
This note matures on January 31, 1998 and requires annual payments of $849,640.
Interest on the unpaid principal balance is paid quarterly at an annual rate of
5.0%, since May 1, 1994. The promissory note is subordinated to the Loan
Agreement. The Company's obligations under the promissory note are secured by
the shares repurchased from the former shareholder. In the event the Company is
in default under the terms of the promissory note, the former
officer/shareholder will be entitled to have the Company's Common Stock
re-issued to him. The number of shares to be re-issued in the event of default
will be determined by dividing the amount due under the note at the time of such
default by the fair value of the Company's Common Stock shares at such time.
Aggregate annual payments on long-term debt during each of the next five years
subsequent to September 30, 1996 are $849,640, $849,640, and $44,602,547 for
1997, 1998 and 2000, respectively.
(6) NOTE PAYABLE -- BANK
On April 16, 1996, the Company borrowed $10,000,000 at the rate of monthly LIBOR
plus 150 basis points. During September 1996, the Company repaid the April 1996
note and borrowed $10,000,000 bearing interest at the rate of monthly LIBOR plus
120 basis points. The principal is due January 15, 1997 but was repaid during
November 1996 (note 17).
(7) CAPITAL STOCK
On July 22, 1996, the Company amended its Articles of Incorporation changing the
par value of Common Stock from $1.00 per share to Common Stock having no par
value and authorizing 1,000,000 shares of no par value Preferred Stock.
On June 27, 1995, the Board of Directors declared a two-for-one common stock
split for shareholders of record on October 1, 1995. The shares were issued on
November 27, 1995. All references in the accompanying financial statements to
the number of common shares and per share amounts for 1994 and 1993 have been
restated to reflect the stock split. In December of 1995, the shareholders of
the Company adopted an amendment to the Articles of Incorporation to increase
the Company's authorized shares of Common Stock from 8,000,000 to 15,000,000,
which was effective January 10, 1996.
During the years ended December 31, 1995, 1994 and 1993, the Company held stock
exchanges under the terms of its Stock Transfer and Redemption Agreement adopted
by the Company on June 10, 1991. Numerous transactions among authorized parties
(as defined in the agreement) took place under these exchanges. As the total
number of shares of Common Stock placed for sale under this exchange during 1993
exceeded the number requested for purchase during the exchange, the Company
repurchased 27,694 shares of Common Stock for $277,217. The Company did not
repurchase shares during 1995 and 1994 under the Stock Transfer and Redemption
Agreement.
On January 28, 1994, the Company repurchased 540,140 shares of Common Stock
owned by a former officer/shareholder at $7.865 per share. Twenty percent of the
purchase price, or $849,640, was paid in cash with the balance to be paid under
terms of a promissory note (note 5).
During the year ended December 31, 1994, the Company held a private placement of
stock. The Company received $1,730,300 (220,000 shares issued at $7.865 per
share) as a result of the stock offering.
(8) STOCK OPTIONS
In October 1995, the Company adopted the 1995 Stock Option Plan in which
700,000 shares of the Company's Common Stock may be issued. The exercise price
of the options may not be less than the fair value of the Common Stock on the
date of grant. The options granted become exercisable at such time or times as
shall be determined by the Compensation Committee of the Board of Directors
(the "Committee"). The Committee may at any time accelerate the exercisability
of all or any portion of any stock option. These options expire, if not
exercised, ten years from the date of grant. Participants in the Plan may be
independent contractors or employees of independent contractors, full or
part-time officers and other employees of the Company, or independent directors
of the Company.
F-10
<PAGE>
PLUMA, INC.
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
In October 1995 and April 1996, the Company granted 516,000 and 44,000 options,
respectively,to purchase Common Stock at an exercise price of $9.625 per share
of which 80,000 options are exercisable and 40,000 are forfeited as of December
31, 1995. The remaining 440,000 options become exercisable in 20% increments on
the anniversary date of the grant as follows:
<TABLE>
<CAPTION>
YEAR SHARES
<S> <C>
1996 79,200
1997 88,000
1998 88,000
1999 88,000
2000 88,000
2001 8,800
Total 440,000
</TABLE>
The Company granted to certain shareholders of record as of March 11, 1987 the
option to purchase at $0.625 per share, on January 1 of each year from 1989
through 1993, 100 shares of Common Stock for each 2,000 shares of Common Stock
purchased at the initial offering, except for certain other shareholders and
officer/directors who were granted the option to purchase 200 shares of Common
Stock for each 2,000 shares of Common Stock purchased at the initial offering.
Effective for years 1990 through 1993, such options were to be exercised in
April of each year. Options representing 277,000 shares were exercised at
$0.625 per share on April 30, 1993.
(9) INCOME TAXES
Effective January 1, 1993, the Company adopted SFAS No. 109. Since the Company
elected not to restate prior years' financial statements, the cumulative effect
on years prior to the change in accounting principle, an increase in net income
of $73,651, has been reflected in the statements of operations in 1993.
The provision for income tax expense for the nine months ended September 30,
1996 and 1995 and for the years ended December 31, 1995, 1994 and 1993 consists
of the following:
<TABLE>
<CAPTION>
(UNAUDITED)
NINE MONTHS
ENDED SEPTEMBER 30, YEARS ENDED DECEMBER 31,
1996 1995 1995 1994 1993
<S> <C> <C> <C> <C> <C>
Current federal income tax expense $ 835,371 $ 2,621,470 $ 1,808,190 $1,658,236 $1,708,409
Current state income tax expense 103,408 321,523 221,434 230,750 247,256
Total current income tax expense 938,779 2,942,993 2,029,624 1,888,986 1,955,665
Deferred federal income tax expense (benefit) 979,492 (884,002) (1,202,587) 637,156 216,635
Deferred state income tax expense (benefit) 120,440 (121,386) (167,901) 67,852 29,677
Total deferred income tax expense (benefit) 1,099,932 (1,005,388) (1,370,488) 705,008 246,312
Total income tax expense $2,038,711 $ 1,937,605 $ 659,136 $2,593,994 $2,201,977
</TABLE>
F-11
<PAGE>
PLUMA, INC.
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
The provision for income taxes differs from the amount computed by applying the
U.S. federal income tax rate (34%) because of the effect of the following items:
<TABLE>
<CAPTION>
(UNAUDITED)
NINE MONTHS
ENDED SEPTEMBER 30, YEARS ENDED DECEMBER 31,
1996 1995 1995 1994 1993
<S> <C> <C> <C> <C> <C>
Income taxes computed at U.S. federal statutory rate $1,883,590 $1,790,179 $ 600,482 $2,361,111 $2,038,248
State income taxes, net of federal income tax effect 147,740 140,465 47,473 196,862 182,776
Other, net 7,381 6,961 11,181 36,021 (19,047)
Total income tax expense $2,038,711 $1,937,605 $ 659,136 $2,593,994 $2,201,977
</TABLE>
Deferred income taxes result from temporary differences between the tax basis
of assets and liabilities and their reported amounts in the financial
statements. Significant components comprising the Company's net deferred tax
assets and liabilities were as follows:
<TABLE>
<CAPTION>
(UNAUDITED)
SEPTEMBER
30, DECEMBER 31,
1996 1995 1994
<S> <C> <C> <C>
Deferred tax liabilities:
Current -- Prepaid insurance $ (31,929) $ (54,287) $ (84,525)
Current -- Medical reserve -- -- (28,899)
Long-term -- Property, plant and equipment (3,729,758) (3,435,020) (3,091,871)
Total deferred tax liabilities (3,761,687) (3,489,307) (3,205,295)
Deferred tax assets:
Current --
Bad debt reserve 316,228 1,328,963 192,043
Medical reserve 112,541 73,276 --
Uniform capitalization 942,508 699,121 376,504
Returns reserve -- 162,545 127,669
Workers' compensation reserve 151,887 86,811 --
Total deferred tax assets 1,523,164 2,350,716 696,216
Net deferred tax liability $(2,238,523) $(1,138,591) $(2,509,079)
</TABLE>
(10) LEASES
At September 30, 1996, the Company was committed to pay rentals under various
noncancelable operating leases with lease terms in excess of one year as
follows:
<TABLE>
<CAPTION>
<S> <C>
Year ending December 31
1996 $ 442,080
1997 1,737,821
1998 1,379,391
1999 1,055,930
2000 973,242
Thereafter 6,237,889
Total $11,826,353
</TABLE>
Lease agreements frequently include renewal options and require that the
Company pay for utilities, taxes, insurance and maintenance expenses. Options
to purchase are also included in some lease agreements.
F-12
<PAGE>
PLUMA, INC.
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
Rental expense under all leases accounted for as operating leases was
$1,629,706, $1,236,097, $1,730,932, $1,414,971 and $979,447 for the nine months
ended September 30, 1996 and 1995 and years ended December 31, 1995, 1994 and
1993, respectively (see note 13).
(11) INSURANCE SETTLEMENT
On August 17, 1994, a tornado partially destroyed one of the Company's leased
warehouses and substantially damaged finished goods inventory. The inventory
loss was covered by insurance. Insurance and salvage proceeds were $1,763,431.
The remaining proceeds are reflected as a reduction of cost of goods sold
($1,450,698) to offset expense and inventory losses incurred as a result of the
storm. The proceeds in excess of inventory costs and miscellaneous expenses are
reflected in the financial statements as other income ($312,733).
(12) COMMITMENTS AND CONTINGENCIES
At September 30, 1996 and December 31, 1995 and 1994, the Company had
commitments of $9,326, $252,291 and $192,593, respectively, to purchase various
equipment.
The Company has Employment Agreements with its senior executive officers, the
terms of which expire December, 1998. Upon termination of an Employment
Agreement after a change of control in the Company, as defined, the Company
would be liable for a maximum of three times the eligible employee's, as
defined, (i) average annual salary, as defined, and (ii) any bonuses, as
defined. In addition, under the Employment Agreements, the senior executive
officers are entitled to annual incentive bonus payments if specified
management goals are attained under Pluma's Bonus Plan.
The Company maintains a Sales Incentive Plan payable to the sales staff if
specified sales volume is reached.
Arising out of the conduct of its business, on occasion, various claims, suits
and complaints have been filed or are pending against the Company. In the
opinion of management, all matters are adequately covered by insurance or, if
not covered, are without merit or are of such kind, or involve such amounts, as
would not have a material effect on the financial position of the Company if
disposed of unfavorably.
(13) RELATED PARTY TRANSACTIONS
During the nine months ended September 30, 1995 and the years ended December
31, 1995, 1994 and 1993 sales commissions of $2,454,189, $3,327,307, $3,181,467
and $2,697,163, respectively, at a rate of 3.0% of the aggregate sales price of
orders shipped by the Company, plus marketing reimbursements, were paid to the
Company's sales agency, a company owned by a certain shareholder and director
of the Company. At December 31, 1995 and 1994, balances of $152,418 and
$224,761, respectively, were due the sales agency. During December 1995, the
Company entered into an agreement for the termination of the sales contract
with the sales agency. Under the terms of this agreement, the Company paid the
sales agency $1,000 on December 29, 1995 and $1,999,000 with a promissory note
payable on January 30, 1996. The note is subordinated to the revolving loan
agreement. Since December 31, 1995, the Company has not paid commissions to the
sales agency for sales subsequent to December 31, 1995. Selling, general and
administrative expenses would have been $12,384,876 if the cost of terminating
the sales agreement were excluded for the year ended December 31, 1995. The
Company will be liable for any returns or uncollectible accounts resulting from
sales prior to December 31, 1995. The sales agency and the Company have
released and discharged each other from any and all past, present and future
actions.
The Company has various operating leases from certain shareholders. The leases
have terms of approximately one to 14 years with aggregate monthly payments of
$98,526, $64,820, $65,254, $63,150 and $32,281 in the nine months ended
September 30, 1996 and 1995 and the years ended 1995, 1994 and 1993,
respectively. As of September 30, 1996, future minimum lease payments under
these operating leases total $8,895,983.
The Company leased sewing equipment and accessories from relatives of an
officer/director. Lease payments under these leases were $28,650 and $93,100,
respectively, in 1994 and 1993. Equipment under these leases was purchased by
the Company for $98,384 and $67,000 during 1994 and 1993, respectively, after
the leases expired.
F-13
<PAGE>
PLUMA, INC.
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
In 1992, the Company started construction of a new sewing plant in Eden and an
addition to the knitting area at the main plant facility. These facilities were
completed in 1993. Certain shareholders of the Company are affiliated with the
contractor for these projects. Progress payments in 1993 were $712,784 for the
sewing plant and $334,553 for the knitting area. The contractor also performed
miscellaneous work totaling $31,032 and $40,358 for the years ended December
31, 1995 and 1994, respectively.
The president of one of the Company's major customers was re-elected to the
Board of Directors at the annual shareholders' meeting in April 1995. The
Company had sales in 1994 and 1993 of $2,313,230 and $10,124,804, respectively,
to this customer. These sales were consummated on terms equivalent to those
that prevail in arm's-length transactions.
During the nine months ended September 30, 1996 and 1995 and year ended
December 31, 1995 the Company made payments totaling $223,338, $132,486 and
$247,324, respectively, for contract services rendered to the Company for
packaging and preparing Company products for shipment. A director/shareholder
is affiliated with this contractor.
During the nine months ended September 30, 1996 and 1995 and year ended
December 31, 1995, the Company made payments totaling $310,240, $31,032, and
$31,032 respectively, for construction and repair services. Certain
shareholders and a director/shareholder are affiliated with this contractor.
During the nine months ended September 30, 1996, the Company made payments
totaling $90,179 for advisory fees. A director/shareholder is affiliated with
this contractor.
(14) SALES TO MAJOR CUSTOMERS AND CONCENTRATIONS OF CREDIT RISK
A substantial amount of sales and receivables are to relatively few customers.
Credit limits, ongoing credit evaluations and account monitoring procedures are
utilized to minimize the risk of loss. Collateral is generally not required.
Sales to major customers (customers representing greater than 10% of net sales)
for the nine months ended September 30, 1996 and 1995 accounted for 40.7% and
43.0%, respectively, and in 1995, 1994 and 1993 accounted for 40.2%, 33.7% and
34.4%, respectively, of total net sales in each year.
(15) 401(K) RETIREMENT SAVINGS PLAN
The Company maintains a 401(k) retirement savings plan for the benefit of its
employees who have completed at least one year of service and have attained age
21. The amount of the Company's annual matching contribution is discretionary,
and the Company currently funds accrued profit sharing expenses.
During the nine months ended September 30, 1996 and 1995 and the years ended
1995, 1994 and 1993, the Company contributed $113,796, $98,049, $129,378,
$121,279 and $111,421, respectively, to the 401(k) retirement savings plan.
(16) FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments for which it is practicable to estimate
that value. The carrying amount of cash, accounts receivable and trade accounts
payable is a reasonable estimate of fair value. The fair value of long-term
debt is estimated based on quoted market prices. At September 30, 1996, the
carrying value and the fair value of long-term debt totaled $46,301,827 and
$43,344,770, respectively. At December 31, 1995, the carrying value and the
fair value of long-term debt totaled $50,969,920 and $51,232,939, respectively.
All financial instruments are held for purposes other than trading.
(17) EVENTS SUBSEQUENT TO DECEMBER 31, 1995
On April 10, 1996, the Board of Directors approved an amendment to the Articles
of Incorporation reducing the par value of the common stock from $1.00 per
share to no par value, and authorizing 1,000,000 shares of preferred stock. On
July 22, 1996, the Company amended its Articles of Incorporation changing the
par value of Common Stock from $1.00 per share to Common Stock having no par
value and authorizing 1,000,000 shares of no par value preferred stock.
F-14
<PAGE>
PLUMA, INC.
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
Also, on April 10, 1996, the Board of Directors granted an additional 44,000
options to purchase common stock at an exercise price of $9.625 per share under
the 1995 Stock Option Plan. The options become exercisable in 20% increments on
the anniversary date of the grant as follows:
<TABLE>
<CAPTION>
YEAR SHARES
<S> <C>
1997 8,800
1998 8,800
1999 8,800
2000 8,800
2001 8,800
</TABLE>
<TABLE>
<S> <C>
Total 44,000
</TABLE>
During April 1996, the Company borrowed $10,000,000 bearing interest at the
rate of monthly LIBOR plus 150 basis points. During September 1996, the Company
repaid the April 1996 note and borrowed $10,000,000 bearing interest at the
rate of monthly LIBOR plus 120 basis points. The principal was due January 15,
1997 but was repaid during November 1996.
The Board declared a $0.02 per share dividend payable to Shareholders of record
as of April 16, 1996, July 9, 1996, October 15, 1996, and January 7, 1997.
On October 14, 1996, the Company entered into a license agreement with SAP
America, Inc. ("SAP") to use SAP's proprietary R/3 software. The total license
fee is $429,000 payable in installments through April 15, 1997. The software is
to be delivered in October 1996. In addition to the license agreement, the
Company executed a professional services agreement with SAP for consultant
services to install and implement the R/3 Software. Compensation for the
services will be based on hours required at various rates.
On October 28, 1996, the Company entered into a lease agreement with a purchase
option with Starview Sales, Inc. and Craig Dallmeyer for a sewing manufacturing
facility, including equipment located in Altavista, Virginia. The lease is for
a term of one year with an option to renew for an additional year. The rental
is $2,000 per month, the first six months of which will be applied toward the
purchase in the event the Company exercises its option to purchase. The
purchase price under this option is $175,000.
On December 19, 1996, the Company adopted a Non-Qualified Deferred Compensation
Plan for certain selected key executives and a similar Non-Qualified Deferred
Compensation Plan for certain of its Directors. Key executive employees and
directors chosen to participate in these plans are selected by the Compensation
Committee of the Company's Board of Directors. The purposes of these plans are
to provide certain selected key executives and directors of the Company the
opportunity to defer elements of their compensation which might not otherwise
be deferrable under other Company plans.
F-15
<PAGE>
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than underwriting
discounts and commissions incurred or to be incurred in connection with the
issuance and sale of the Common Stock being registered (all amounts are
estimated except the Securities and Exchange Commission registration fee, the
National Association of Securities Dealers, Inc. filing fee and Nasdaq National
Market listing fee).
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee.......................................$
National Association of Securities Dealers, Inc. filing fee...............................
Nasdaq National Market listing fee........................................................
Blue sky fees and expenses................................................................
Printing expenses.........................................................................
Legal fees and expenses...................................................................
Accounting fees and expenses..............................................................
Investment advisor's fee..................................................................
Transfer agent and registrar fees.........................................................
Miscellaneous.............................................................................
Total............................................................................ $
</TABLE>
ITEM 14. INDEMNIFICATION OF OFFICERS AND DIRECTORS
The Bylaws of the Company provide that any person who at any time serves or has
served as director, officer, employee or agent of the Company, shall have a
right to be indemnified by the Company to the fullest extent permitted by law
against (a) liability and litigation expenses, including reasonable attorney
fees incurred by him in connection with any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative, and whether or not brought by or on behalf of the Company,
seeking to hold him liable by reason of the fact that he is or was acting in
such capacity, and (b) reasonable payments made by him in satisfaction of any
judgment, money decree, fine, penalty or settlement for which he may become
liable in any such action, suit or proceeding.
North Carolina General Statutes, (section mark) 55-8-51, provides that a
corporation may indemnify an individual made a party to a proceeding because he
is or was a director against liability incurred in the proceeding if:
(1) He conducted himself in good faith.
(2) He reasonably believed (i) in the case of conduct in his official
capacity with the corporation, that his conduct was in its best interests;
and (ii) in all other cases, that his conduct was at least not opposed to
its best interests.
(3) In the case of any criminal proceeding, he had no reasonable cause to
believe his conduct was unlawful. G.S. (section mark) 55-8-51(a).
Any right of recovery by directors for actions brought against them by third
parties depends upon the success of the director in such action. If he is wholly
successful, on the merits or otherwise, in the defense of any proceeding to
which he is a party because he is or was a director, he has the right to recover
all of the reasonable expenses of his defense or participation, including
attorney fees. G.S. (section mark) 55-8-52. If the officer or director is
unsuccessful or partially successful in any proceeding or action referenced
above, or if the proceeding or action results in an indictment, fine or other
penalty, the Company may, but is not obligated to indemnify such person, but
only if authorized in a specified case after a determination is made that the
director met the standard of conduct set forth in North Carolina General
Statutes (section mark) 55-8-51 (see the preceding paragraph). The determination
must be made:
(1) By the Board of Directors by majority vote of a quorum consisting of
directors not at the time parties to the proceeding.
(2) If such a quorum cannot be obtained, by majority vote of a committee
duly designated by the Board of Directors (in which designated directors who
are parties may participate), consisting solely of two or more directors not
at the time parties to the proceeding.
(3) By special legal counsel selected by the board or its committee, except
that if a quorum of the board consisting of disinterested directors cannot
be obtained and a committee cannot be designated, the special legal counsel
may be selected by majority vote of the full Board of Directors.
II-1
<PAGE>
(4) By the shareholders, (however, shares owned by or voted under the
control of directors who are at the time parties to the proceeding, may not
be voted on the determination).
Unless a corporation's articles of incorporation provide otherwise, a director
of the corporation who is a party to a proceeding may apply for indemnification
to the court conducting the proceeding or to another court of competent
jurisdiction. On receipt of an application, the court, after giving any notice
the court considers necessary, may order indemnification if it determines:
(1) The director is entitled to mandatory indemnification under G.S.
(section mark)55-8-52, in which case the court shall also order the
corporation to pay the director's reasonable expenses incurred to obtain
court-ordered indemnification.
(2) The director is fairly and reasonably entitled to indemnification in
view of all the relevant circumstances, whether or not he met the standard
of conduct set forth in G.S. (section mark) 55-8-51 or was adjudged liable
as described in G.S. (section mark) 55-8-51(d), but if he was adjudged so
liable his indemnification is limited to reasonable expenses incurred.
Thus, despite the Company's bylaws, an officer or director of the Company may or
may not be entitled to indemnity for his actions depending on the particular
circumstances.
Officers of the Company are entitled to mandatory or court-ordered
indemnification to the same extent as directors. Officers, agents or employees
of the Company may be indemnified under NCGS (section mark) 55-8-51 to the same
extent as directors.
The form of Underwriting Agreement attached hereto as Exhibit 1.1, which
provides for, among other things, the sale to the Underwriters of the securities
being registered herein, will obligate the Underwriters to indemnify the
Registrant, the Selling Shareholders and officers and directors of the
Registrant against certain liabilities under the Securities Act of 1933 and the
Securities and Exchange Act of 1934.
ITEM 15. RECENT SALE OF UNREGISTERED SECURITIES.
In June and July of 1994, accredited investors purchased 181,753 shares of the
Company's Common Stock at an aggregate purchase price of $1,730,300. The shares
were sold in reliance upon the exemption from the registration provisions of the
federal securities laws provided by Regulation D. The transactional exemption
provided by Section 4(6) of the Securities Act of 1933 was also available to the
Company for this private offering. The Common Stock sold by the Company in this
private offering was sold on behalf of the Company by certain of the Company's
officers and directors without any general solicitation and without the
assistance of an underwriter. No sales commissions or other selling fees were
paid in connection with this private offering.
The securities were sold to the following persons:
<TABLE>
<CAPTION>
SHARES
PURCHASER PURCHASED
<S> <C>
Frank L. Robinson Company.................................................................. 80,000
Adams, John B., Jr......................................................................... 20,000
Capital Ventures Limited Partnership....................................................... 20,000
Magnolia Partners I........................................................................ 20,000
Offen, Robert.............................................................................. 20,000
Truitt, Forrest H., II..................................................................... 20,000
W & S Investments.......................................................................... 20,000
Riddle, Douglas E.......................................................................... 10,000
Riddle, Douglas E.......................................................................... 5,000
Riddle, Lewis S............................................................................ 5,000
</TABLE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENTS SCHEDULE.
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
<S> <C>
1.1* Form of Underwriting Agreement
3.1 Amended and Restated Articles of Incorporation
3.2 Bylaws as amended
</TABLE>
II-2
<PAGE>
<TABLE>
<S> <C>
4.1* Specimen Common Stock Certificate
5.1* Opinion of Allman Spry Leggett & Crumpler, P. A.
10.1 Lease Agreement dated June 10, 1989, by and between North Bowles Partnership and Pluma, Inc. and amendment thereto
dated December 1, 1990
10.2.1 Lease Agreement dated February 1, 1996, by and between North Bowles Partnership and Pluma, Inc.
10.2.2 Lease Agreement dated December 1, 1995, by and between North Bowles Partnership and Pluma, Inc.
10.3 License Agreement dated December 4, 1990, by and between Superba, Inc. and Pluma, Inc.
10.4 Loan and Security Agreement dated May 25, 1995, between First Union National Bank of North Carolina and Pluma,
Inc.
10.5 Promissory Note in the principal amount of $55,000,000 dated May 25, 1995 by Pluma, Inc. in favor of First Union
National Bank of North Carolina
10.6 Promissory Note in the principal amount of $10,000,000 dated April 16, 1996 in favor of First Union National Bank
of North Carolina.
10.7 Trademark License Agreement dated July 2, 1996, by and between Pluma, Inc. and Kayser Roth Corporation
10.8.1 Agreement and Release dated September 16, 1993, by and between Glazier B. Piland and Pluma, Inc.
10.8.2 Stock Redemption Agreement dated September 16, 1993, between Pluma, Inc. and Glazier B. Piland
10.8.3 Amendment to Stock Redemption Agreement dated October 21, 1993, between Pluma, Inc. and Glazier B. Piland
10.8.4 Promissory Note in the principal amount of $3,398,560.88 dated January 28, 1994 by Pluma, Inc. to Glazier B.
Piland
10.8.5 Security Agreement dated January 28, 1994, by and between Pluma, Inc. and Glazier B. Piland
10.8.6 Subordination Agreement by and among Glazier B. Piland, First Union National Bank and Pluma, Inc. dated January
28, 1994.
10.9.1 Agreement of Termination and Release dated December 29, 1995, by and between Box & Company, Inc. and Pluma, Inc.
10.9.2 Promissory Note in the principal amount of $1,999,000.00 dated December 29, 1995 by Pluma, Inc. to Box & Company,
Inc.
10.9.3 Assignment of Lease dated as of December 29, 1995 by and between Box & Company, Inc. and Pluma, Inc.
10.10 Lease Agreement dated April 1, 1995, by and between Tultex Corporation and Box & Company, Inc.
10.11 Adoption Agreement #005 Nonstandardized Code(section mark)401(k) Profit Sharing Plan by Pluma, Inc. to First Union
National Bank of North Carolina dated November 30, 1993 and Amendments thereto
10.12 1995 Stock Option Plan of Pluma, Inc.
10.13 Form of Incentive Stock Option Agreement by and among Pluma, Inc. and the Named Officers
10.14 Form of Nonstatutory Stock Option Agreement by and among Pluma, Inc. and its Directors
10.15 Pluma, Inc. Non-Qualified Deferred Compensation Plan
10.16 Pluma, Inc. Senior Executive Bonus Plan
10.17 Pluma, Inc. Sales Incentive Plan
10.18.1 License Agreement dated October 9, 1996 between SAP America, Inc. and Pluma, Inc. for license to utilize SAP R/3
Software
10.18.2 Professional Services Agreement dated October 9, 1996 between SAP America, Inc and Pluma, Inc. for installation of
R/3 Software
10.19 Consulting Agreement dated January 17, 1996, between Philpott Ball & Company and Pluma, Inc.
10.20 Form of Sale and Purchase Agreement dated May 10,1995, by and between Sara Lee Corporation and Pluma, Inc. for
approximately 42 acres of improved real estate located in Rocky Mount, Virginia
10.21 Form of Employment Agreement by and among Pluma, Inc. and R. Duke Ferrell, G. Walker Box, George G. Wade, C.
Monroe Light, David S. Green, Walter Helton, Raymond Rea, Nancy Barksdale, Forrest H. Truitt, II; Milton A. Barber
and Jeffrey D. Cox
</TABLE>
II-3
<PAGE>
<TABLE>
<S> <C>
11* Statement re: Computation of Per Share Earnings
23.1 Consent of Deloitte & Touche LLP.
23.2 Consent of Allman Spry Leggett & Crumpler P.A. (to be included in the opinion filed herewith as Exhibit 5).
24 Power of Attorney (included as the signature page hereto).
</TABLE>
* To be filed by amendment
+ Confidential treatment will be requested for portions of these exhibits
(b)Financial Statements
Financial Statements filed as part of this Registration Statement are listed
in the Index to Financial Statements as page F-1.
ITEM 17. UNDERTAKINGS
A. The undersigned registrant hereby undertakes to provide to the
underwriter at the closing specified in the Underwriting Agreements
Certificates in such denominations and registered in such names as
required by the underwriters to permit prompt delivery to each purchaser.
B. Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other
than the payment by the registrant of expenses incurred or paid by a
director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
C. The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained
in a form of prospectus filed by the registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to
be part of this registration statement as of the time it was declared
effective.
(2) For the purpose of determining any liability under the Securities Act of
1933, each post-effective amendment that contains a form of prospectus
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-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Winston-Salem, State of
North Carolina, on December , 1996.
PLUMA, INC.
By: /s/
R. DUKE FERRELL, JR.
PRESIDENT AND CHIEF EXECUTIVE OFFICER
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that we, the undersigned officers and
directors of Pluma, Inc. hereby severally constitute R. Duke Ferrell and
G. Walker Box and each of them singly, our true and lawful attorneys with full
power to them, and each of them singly, to sign for us and in our names in the
capacities indicated below, the Registration Statement filed herewith and any
and all amendments to said Registration Statement, and generally to do all such
things in our names and in our capacities as officers and directors to enable
Pluma, Inc. To comply with the provisions of the Securities Act of 1933, and all
requirements of the Securities and Exchange Commission, hereby ratifying and
confirming our signature as they may be signed by our said attorneys, or any of
them, to said Registration Statement and any and all amendments thereto.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ GEORGE G. WADE Chairman Emeritus of the Board of Directors December , 1996
GEORGE G. WADE
/s/ G. WALKER BOX Chairman of the Board of Directors December , 1996
G. WALKER BOX
President, Chief Executive Officer and December , 1996
R. DUKE FERRELL, JR. Director
/s/ C. MONROE LIGHT Executive Vice President and Director December , 1996
C. MONROE LIGHT
/s/ FORREST H. TRUITT, II Vice President of Finance December , 1996
FORREST H. TRUITT, II (Principal Financial Officer)
/s/ NANCY B. BARKSDALE Vice President (Principal Accounting December , 1996
NANCY B. BARKSDALE Officer)
/s/ WILLIAM K. MILESKI Director December , 1996
WILLIAM K. MILESKI
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ BARRY A. BOWLES Director December , 1996
BARRY A. BOWLES
/s/ KEMP D. BOX Director December , 1996
KEMP D. BOX
/s/ R. STEPHENS PANNILL Director December , 1996
R. STEPHENS PANNILL
/s/ DR. DAVID C. JONES Director December , 1996
DR. DAVID C. JONES
/s/ J. ROBERT PHILPOTT, JR. Director December , 1996
J. ROBERT PHILPOTT, JR.
</TABLE>
II-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION OF EXHIBIT PAGE
<S> <C> <C>
1.1* Form of Underwriting Agreement
3.1 Amended and Restated Articles of Incorporation
3.2 Bylaws as amended
4.1* Specimen Common Stock Certificate
5.1* Opinion of Allman Spry Leggett & Crumpler, P. A.
10.1 Lease Agreement dated June 10, 1989, by and between North Bowles
Partnership and Pluma, Inc. and amendment thereto dated December 1, 1990
10.2.1 Lease Agreement dated February 1, 1996, by and between North Bowles
Partnership and Pluma, Inc.
10.2.2 Lease Agreement dated December 1, 1995, by and between North Bowles
Partnership and Pluma, Inc.
10.3 License Agreement dated December 4, 1990, by and between Superba, Inc. and
Pluma, Inc.
10.4 Loan and Security Agreement dated May 25, 1995, between First Union
National Bank of North Carolina and Pluma, Inc.
10.5 Promissory Note in the principal amount of $55,000,000 dated May 25, 1995
by Pluma, Inc. in favor of First Union National Bank of North Carolina
10.6 Promissory Note in the principal amount of $10,000,000 dated April 16, 1996
in favor of First Union National Bank of North Carolina.
10.7 Trademark License Agreement dated July 2, 1996, by and between Pluma, Inc.
and Kayser Roth Corporation
10.8.1 Agreement and Release dated September 16, 1993, by and between Glazier B.
Piland and Pluma, Inc.
10.8.2 Stock Redemption Agreement dated September 16, 1993, between Pluma, Inc.
and Glazier B. Piland
10.8.3 Amendment to Stock Redemption Agreement dated October 21, 1993, between
Pluma, Inc. and Glazier B. Piland
10.8.4 Promissory Note in the principal amount of $3,398,560.88 dated January 28,
1994 by Pluma, Inc. to Glazier B. Piland
10.8.5 Security Agreement dated January 28, 1994, by and between Pluma, Inc. and
Glazier B. Piland
10.8.6 Subordination Agreement by and among Glazier B. Piland, First Union
National Bank and Pluma, Inc. dated January 28, 1994.
10.9.1 Agreement of Termination and Release dated December 29, 1995, by and
between Box & Company, Inc. and Pluma, Inc.
10.9.2 Promissory Note in the principal amount of $1,999,000.00 dated December 29,
1995 by Pluma, Inc. to Box & Company, Inc.
10.9.3 Assignment of Lease dated as of December 29, 1995 by and between Box &
Company, Inc. and Pluma, Inc.
10.10 Lease Agreement dated April 1, 1995, by and between Tultex Corporation and
Box & Company, Inc.
10.11 Adoption Agreement #005 Nonstandardized Code(section mark)401(k) Profit
Sharing Plan by Pluma, Inc. to First Union National Bank of North Carolina
dated November 30, 1993 and Amendments thereto
10.12 1995 Stock Option Plan of Pluma, Inc.
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
10.13 Form of Incentive Stock Option Agreement by and among Pluma, Inc. and the
Named Officers
10.14 Form of Nonstatutory Stock Option Agreement by and among Pluma, Inc. and
its Directors
10.15 Pluma Inc. Non-Qualified Deferred Compensation Plan
10.16 Pluma, Inc. Senior Executive Bonus Plan
10.17 Pluma, Inc. Sales Incentive Plan
10.18.1 License Agreement dated October 9, 1996 between SAP America, Inc. and
Pluma, Inc. for license to utilize SAP R/3 Software
10.18.2 Professional Services Agreement dated October 9, 1996 between SAP America,
Inc and Pluma, Inc. for installation of R/3 Software
10.19 Consulting Agreement dated January 17, 1996, between Philpott Ball &
Company and Pluma, Inc.
10.20 Form of Sale and Purchase Agreement dated May 10,1995, by and between Sara
Lee Corporation and Pluma, Inc. for approximately 42 acres of improved real
estate located in Rocky Mount, Virginia
10.21 Form of Employment Agreement by and among Pluma, Inc. and R. Duke Ferrell,
G. Walker Box, George G. Wade, C. Monroe Light, David S. Green, Walter
Helton, Raymond Rea, Nancy Barksdale, Forrest H. Truitt, II; Milton A. Gus
Barber and Jeffrey D. Cox
11* Statement re: Computation of Per Share Earnings
23.1 Consent of Deloitte & Touche LLP
23.2 Consent of Allman Spry Leggett & Crumpler P.A. (to be included in the
opinion filed herewith as Exhibit 5)
24 Power of Attorney (included as the signature page hereto)
</TABLE>
* To be filed by amendment
+ Confidential treatment will be requested for portions of these exhibits
<PAGE>
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
PLUMA, INC.
The undersigned, being of the age of eighteen (18) years or more, does
hereby make and acknowledge these Articles of Incorporation for the purposes of
forming a business corporation under and by virtue of the laws of the State of
North Carolina:
1. The name of the corporation is PLUMA, INC.
2. The period of duration of the corporation is perpetual
3. The purposes for which the corporation is organized are:
(a) To engage in the business of the manufacture of
active sportswear.
(b) To engage in any lawful act or activity for which
corporations may be organized under Chapter 55 of the General
Statutes of North Carolina.
4. The aggregate number of shares which the Corporation shall
have authority to issue is sixteen million (16,000,000)
shares which shall be divided into two (2) classes, with the
first class consisting of fifteen million (15,000,000) shares
of common stock with no par value, and with the second class
consisting of one million (1,000,000) shares of blank stock
with no par value.
The Board of Directors, by a resolution or by resolutions,
may classify and reclassify any unissued shares of blank
preferred stock by setting or changing in any one or more
respects, from time to time before issuance of such shares,
the preferences, conversion or other rights, voting powers,
restrictions (including restrictions on transfers of shares),
limitations as to dividends, qualifications or terms or
conditions of the redemption of such shares of blank
preferred stock. Subject to the foregoing, the power of the
Board of Directors to classify and reclassify any of the
shares of preferred stock shall include, without limitation
<PAGE>
subject to the provisions of the Articles of Incorporation,
authority to determine, fix, or alter one or more of the
following:
(i) The distinctive designation of such class or series and
the number of shares to constitute such class or series;
provided that, unless otherwise prohibited by the terms
of such or any class or series may be increased by the
Board of Directors in connection with any such
classification or reclassification, and any shares of any
class or series which have been redeemed, purchased,
otherwise acquired or converted into shares of Common
Stock or any other class or series shall become part of
the authorized capital stock and be subject to
classification and reclassification as provided in this
subparagraph.
(ii) Whether or not and, if so, the rates, amounts and times at
which, and the conditions under which, dividends shall be
payable on shares of such class or series, whether any
such dividends shall rank senior, or junior to or on a
parity with the dividends payable on any other class or
series of stock, and the status of any such dividends as
cumulative, cumulative to a limited extent or
non-cumulative and as participating or non-participating.
(iii) Whether or not shares of such class or series shall have
voting rights, in addition to any voting rights provided
by law and, if so, the terms of such voting rights.
(iv) Whether or not shares of such class or series shall have
conversion or exchange privileges and, if so, the terms
and conditions thereof, including provision for adjustment
of the
<PAGE>
conversion or exchange rate in such events or at such
times as the Board of Directors shall determine.
(v) Whether or not shares of such class or series shall be
subject to redemption and, if so, the terms and conditions
of such redemption, including the date or dates upon or
after which they shall be redeemable and the amount per
share payable in case of redemption, which amount may vary
under different conditions and at different redemption
dates; and whether or not there shall be any sinking fund
or purchase account in respect thereof, and if so, the
terms thereof.
(vi) The rights of the holders of shares of such class or
series upon the liquidation, dissolution or winding up of
the affairs of, or upon any distribution of the assets of,
the Corporation, which rights may vary depending upon
whether such liquidation, dissolution or winding up is
voluntary or involuntary and, if voluntary, may vary at
different dates, and whether such rights shall rank senior
or junior to or on a parity with such rights of any other
class or series of stock.
(vii) Whether or not there shall be any limitations applicable,
while shares of such class or series are outstanding,
upon the payment of dividends or making of distributions
on, or the acquisition of, or the use of moneys for
purchase or redemption of, any stock of the Corporation,
or upon any other action of the Corporation, including
action under this sub-paragraph, and, if so, the terms and
conditions thereof.
(viii) Any other preferences, rights, restrictions, including
restrictions on transferability, and qualifications of
shares of such class or series, not inconsistent
with law and the Articles of Incorporation of
the Corporation.
5. The minimum amount of consideration to be received by the
corporation for its shares before it shall commence business is One Dollar
($1.00) in cash or property of equivalent value.
6. The shareholders of the corporation shall have no pre-
emptive right to acquire additional or treasury shares of the
corporation.
7. The address of the initial registered office of the
corporation in the State of North Carolina is 801 Fieldcrest Road, Eden,
North Carolina, Rockingham County; and the name its registered agent at
such address is Nancy B. Barksdale.
8. The number of directors constituting the initial Board of Directors
shall be eight; and the name and addresses of the persons who are to serve as
directors until the first meeting of shareholders, or until his successors be
elected and qualify are:
NAME ADDRESS
<PAGE>
Monroe Light 221 Commerce Place
Greensboro, NC 27401
<PAGE>
William K. Mileski 221 Commerce Place
Greensboro, NC 27401
Henry Gurganus 221 Commerce Place
Greensboro, NC 27401
George C. Wade 221 Commerce Place
Greensboro, NC 27401
Edwin B. Monroe 221 Commerce Place
Greensboro, NC 27401
G. Wallker Box 221 Commerce Place
Greensboro, NC 27401
R. Duke Ferrell, Jr. 221 Commerce Place
Greensboro, NC 27401
Glazier B. Piland 221 Commerce Place
Greensboro, NC 27401
9. That the name and address of the incorporator is Richard
D. Hall, Jr., 221 Commerce Place, Greensboro, Guilford County,
North Carolina 27401.
IN WITNESS WHEREOF, I have hereunto set my hand this the 18th day of
November, 1986.
/s/ Richard D. Hall, Jr.
Richard D. Hall, Jr.
Incorporator
NORTH CAROLINA
GUILFORD COUNTY
This is to certify that on this 18th day of November, 1986, before me,
a notary public, personally appeared Richard D. Hall, Jr., whom being by me
first duly sworn, declared that he signed the foregoing document in the capacity
indicated, that he was authorized so to sign, and that the statements herein
contained are true.
WITNESS my hand and notarial seal, this the 18th day of July, 1996.
<PAGE>
/s/ Georgia R. Halvorsen
Notary Public
My commission Expires: 10-28-89
[SEAL]
<PAGE>
BY-LAWS
OF
PLUMA, INC.
ARTICLE I
Offices
Section 1. Principal Office. The principal office of the Corporation
shall be located at 800 West Fieldcrest Drive, Eden, North
Carolina 27288.
Section 2. Registered Office. The registered office of the
Corporation, which by law is required to be maintained within
the State of North Carolina, shall be located at 800 West
Fieldcrest Drive, Eden, North Carolina 27288, or at such other
place within the State of North Carolina as may, from time to
time, be fixed and determined by the Board of Directors.
Section 3. Other Offices. The corporation may have offices at such
places, either within or outside the State of North Carolina,
as the Board of Directors may from time to time determine.
ARTICLE II
Meeting of Shareholders
Section 1. Annual Meetings. The annual meeting of the shareholders for
the election of Directors and for the transaction of such
other business as may properly come before the meeting shall
be held at any time designated in a written notice to
shareholders, on any day of April each year, except Saturday,
Sunday of a legal holiday.
Section 2. Substitute Annual Meeting. If the annual meeting shall not
be held on the day designated by these By-Laws, or on
adjournment thereof, a substitute annual meeting may be called
in the manner provided for the call of a special meeting in
accordance with the provision of Section 3 of this Article II
and a substitute annual meeting so called shall be designated
as and shall be treated, for all purposes, as the annual
meeting.
Section 3. Special Meetings. Special meetings of the shareholders may
be called at any time by the Chief Executive Officer,
President, Secretary, or any member of the Board of Directors,
or by any shareholder pursuant to the written request of the
holders of not less one-tenth of all the shares entitled to
vote at the meeting.
Section 4. Place of Meeting. All meetings of shareholders shall be
held at the principal office of the corporation or Meadowgreen
Country Club, Eden, North Carolina, except that a meeting may
be held at such other place, within or outside the State of
North Carolina, as may be designated in a duly executed waiver
of notice or notice of such meeting or as may be otherwise
agreed upon in advance by a majority of the shareholders
entitled to vote at such a meeting.
<PAGE>
Section 5. Notice of Meetings. Written or printed notice stating the
time and place of a meeting of shareholders shall be
delivered, personally or by mail, by or at the direction of
the Chief Executive Officer, President, the Secretary or other
persons authorized to call such meeting, to each shareholder
of record entitled to vote at such meeting not less than
fifteen days from the date such notice is delivered to a
carrier (overnight or other carrier) for delivery, provided,
that such notice must be given not less than twenty days
before the date of any meeting at which a merger or
consolidation is to be considered. If mailed, such notice
shall be directed to each shareholder at the address of such
shareholder as set forth in the records of the corporation
except that if any shareholder shall have filed with the
Secretary a written request that notices intended for such
shareholder be mailed to some other address then all notices
to such shareholder shall be mailed to the address designated
in such request. A statement of the business to be transacted
at an annual or substitute annual meeting of shareholders need
not be set forth in the notice of such meeting except that if
any matter is to be considered or acted upon, other than the
election of Directors, on which the vote of shareholders is
required under the provisions of the North Carolina Business
Corporation Act then a specific statement thereof shall be set
forth in such notice. In the case of a special meeting, the
notice shall set forth the nature of the business to be
transacted. If a meeting shall be adjourned for more than
thirty days, notice of such adjourned meeting shall be given
as in the case of an original meeting and if the adjournment
shall be for less than thirty days no notice thereof need be
given except that such adjournment shall be announced at the
meeting at which the adjournment is taken. Notice of a meeting
need not be given if each shareholder entitled to notice
thereof shall, in person, or by attorney thereunto duly
authorized, waive notice thereof in writing, either before or
after such meeting.
Section 6. Voting Lists. At least en days before each meeting of
shareholders the Secretary of the corporation shall prepare an
alphabetical list of the shareholders entitled to vote at such
meeting, with the address of and number of shares held by
each, which list shall be kept on file at the registered
office of the corporation for a period of ten days prior to
such meeting, and shall be subject to inspection by any
shareholder at anytime during the usual business hours. This
list shall also be produced and kept open at the time and
place of the meeting and shall be subject to inspection by any
shareholder during the whole time of the meeting.
Section 7. Quorum. Except as otherwise provided by statute, or by the
charter of the corporation, or by these By-Laws, the presence
in person or by proxy of holders of record of a majority of
the shares entitled to vote at the meeting shall be necessary
to constitute a quorum for the transaction of business. In the
absence of a quorum, a majority in interest of the
shareholders entitled to vote present in person or by proxy,
may adjourn the meeting from time to time. At any such
adjourned meeting at which a quorum shall be present, any
business may be transacted which might have been transacted at
the meeting as originally called if a quorum had been there
present. The shareholders present in person or by proxy at the
meeting at which a quorum is present may continue to do
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<PAGE>
business until adjournment notwithstanding the withdrawal of
enough shareholders to leave less than a quorum.
Section 8. Voting; Proxies. At each meeting of shareholders every
holder of record of shares entitled to vote shall be entitled
to one vote for every share standing in his name on the books
of the corporation, except as otherwise provided by law with
respect to cumulative voting on the election of Directors.
Persons holding shares in a fiduciary capacity shall be
entitled to vote the shares so held. Any shareholder entitled
to vote may vote by proxy, provided that the instrument
authorizing such proxy to act shall have been executed in
writing by the shareholder or his duly authorized attorney. No
proxy shall be valid after the expiration of eleven months
from the date of its execution, unless the person executing it
shall have specified therein the length of time it is to
continue in force or limits its use to a particular meeting,
and in any event no proxy shall be valid after ten years from
the date of its execution. Each instrument designating a proxy
shall be exhibited to the Secretary of the meeting and shall
be filed with the records of the corporation. Voting on all
matters, except the election of Directors, shall be by voice
vote or by a show of hands, except that if, prior to voting on
any particular matter demand shall be made by or on behalf of
the holders of not less than one-tenth of the shares
represented at such meeting that the vote thereon be taken by
ballot, then the vote on such matter shall be taken by ballot.
Section 9. Votes Required. The vote of a majority of the shares voted
at a meeting of the shareholders duly held at which a quorum
is present shall be sufficient to take or authorize action
upon any matter which may properly come before the meeting
except as otherwise provided by law, the Company's charter, or
these By-Laws including the next sentence of these By-Laws.
Notwithstanding the preceding sentence, a vote of sixty-six
and two=thirds percent (66-2/3%) of the Company's shareholders
shall be required for the authorization of (a) any
consolidation or merger of the Company where the shareholders
of the Company, immediately prior to the consolidation or
merger, would not, immediately after the consolidation or
merger, beneficially own (as such term is defined in Rule
13d-3 of the Securities Exchange Act of 1934), directly or
indirectly, shares representing in the aggregate at least
50.1% of the voting shares of the corporation issuing cash
and/or securities in the consolidation or merger (or of its
ultimate parent corporation, if any), (b) any sale, lease,
exchange or other transfer (in one transaction or a series of
transactions contemplated or arranged by a party as a single
plan) of all or substantially all of the assets of the
Company, or (c) any plan or proposal for the liquidation or
dissolution of the Company.
Section 10. Information Action by Shareholders. Any action which may
be taken by the shareholders at a meeting thereof may be taken
without a meeting if consent in writing, setting forth the
action taken, shall be signed by all of the persons who would
be entitled to vote upon such action at a meeting and filed
with the Secretary of the corporation. Any consent so filed
with the Secretary of the corporation shall be filed in the
corporate minute book in
3
<PAGE>
like manner as minutes of at meeting. Any such consent shall
have the same force and effect as a unanimous vote of
shareholders.
ARTICLE III.
Board of Directors
Section 1. General Powers. The property, affairs and business of the
corporation shall be managed by the Board of Directors.
Section 2. Number, Tenure and Qualifications. The number of Directors
constituting the Board of Directors shall be such number, not
less than nine (9), nor more than twelve (12), as shall from
time to time be determined by a majority vote of the whole
number of Directors or Shareholders, provided that until
a different number shall have been determined by the Board
in accordance therewith, the number of Directors shall be
ten (10). The Directors shall be elected at the annual
or adjourned annual meeting or a special meeting of the
Shareholders (except as herein otherwise provided for the
filling of vacancies). The Directors shall be classified,
with respect to the time for which they severally hold
office, into three classes, as nearly equal in number
as possible. One class shall serve for a term expiring
at the annual meeting of Stockholders to be held in 1997.
Another class shall serve for a term expiring at the
annual meeting of Stockholders to be held in 1998. Another
class shall serve for a term of expiring at the annual
meeting of Stockholders to be held in 1999. Each class
will hold office until its successors are elected. At each
annual meeting of the Stockholders of the Corporation, the
successors of the class of Directors whose terms expire
at that meeting shall be elected to hold office for
a term expiring at the annual meeting of Stockholders
held in the third year following the year of their election.
Directors need not be residents of the State of North Carolina
or shareholders of the Corporation.
Section 3. Election of Directors. Except as provided in Section 6 of
this Article, the Directors shall be elected at the annual
meeting or any special meeting of shareholders and the persons
who shall receive the highest number of votes for the
available Director positions shall be the elected Directors.
If prior to voting for the election of Directors, demand
therefor shall be made by or on behalf of any shares entitled
to vote at such meeting the election of Directors shall be by
ballot.
Section 4. Cumulative Voting. Every shareholder entitled to vote at an
election of Directors shall have the right to vote the number
of shares standing of record in such shareholder's name for as
many persons as there are Directors to be elected and for
whose election such shareholder has a right to vote, or to
cumulate such vote by giving one candidate as many votes as
shall be equal to the number of such Directors, multiplied by
the number of shares of such shareholder, or by distributing
such votes on the same principle among any number of such
candidates. This right of cumulative voting shall not be
exercised unless some shareholder or proxy holder announces in
open meeting, before the voting for the Directors starts, such
shareholder's intention to so vote cumulatively and if such
announcement is made, the chair shall declare that all shares
entitled to vote have the right to vote cumulatively and shall
thereupon grant a recess if requested by any shareholder of
not less than one or more than four hours, as he shall
determine, or of such other period of time as is unanimously
then agreed upon.
4
<PAGE>
Section 5. Removal of Directors. The Board of Directors or any
individual Director may be removed from office with or without
cause by a vote of shareholders holding a majority of the
shares entitled to vote at an election of Directors, provided,
however, that except in the event the entire Board shall be
removed, a particular Director may not be removed if the
number of shares voting against the removal would be
sufficient to elect a Director if such shares were voted
cumulatively at an annual election. If any or all Directors
are so removed, new Directors may be elected at the same
meeting.
Section 6. Vacancies. A vacancy in the Board of Directors created by
an increase in the authorized number of Directors shall be
filled only by election at an annual meeting of shareholders
or at a special meeting of shareholders called for that
purpose. Any vacancy in the Board of Directors created other
than by an increase in the number of Directors may be filled
by a majority of the remaining Directors, though less than a
quorum, or by the sole remaining Director. The shareholders
may elect a Director at any time to fill any vacancy not
filled by the Directors. Any Director elected to fill a
vacancy shall be elected for the unexpired term of his
predecessor in office.
Section 7. Chairman of Board. There may be a Chairman of the Board of
Directors elected by the Directors from their number at any
meeting of the Board of Directors. The Chairman, if any, shall
preside at all meetings of the Board of Directors and perform
such other duties as may be directed by the Board. There may
be one or more Vice Chairmen of the Board of Directors elected
by the Directors from their number at any meeting of the Board
of Directors, who shall perform such duties as may be directed
by the Board of Directors.
ARTICLE IV.
Meetings of Directors
Section 1. Regular Meetings. A regular annual meeting of the Board of
Directors may be held immediately after the annual meeting of
the shareholders and if not then same shall be held within a
reasonable time thereafter.
Section 2. Special Meetings. Special meetings of the Board of
Directors may be called by or at the request of the Chairman
of the Board, Chief Executive Officer, President or any
Director.
Section 3. Place of Meetings. All meetings of the Board of Directors
shall be held at the principal office of the corporation
except that such meetings may be held at such other place,
within or outside the State of North Carolina as may be
designated in a duly executed waiver of notice or notice of
such meeting or as may be otherwise agreed upon in advance of
the meeting by a majority of the Directors.
Section 4. Notice of Meetings. Regular Meetings of the Board of
Directors may be held without notice. Special meetings shall
be called on not less than two days' prior notice. Notice of a
special meeting need not state the purpose thereof, and such
notice shall be directed
5
<PAGE>
to each Director at his residence or usual place of business
by mail, cable, telegram, facsimile, or may be delivered
personally. The presence of a Director at a meeting shall
constitute a waiver of notice of that meeting except only when
such Director attends the meeting solely for the purpose of
objecting to the transaction of any business thereat, on the
ground that the meeting has not been lawfully called, and does
not otherwise participate in such meeting.
Section 5. Quorum and Manner of Acting. A majority of the number of
Directors of the Corporation shall constitute a quorum for the
transaction of any business at any meeting of the Board of
Directors. Notwithstanding the above, such quorum must include
no less than one person who is not "affiliated" with the
Corporation. For the purpose of this Section, "affiliated"
shall mean a person employed by the Corporation, a person
having a contractual relationship with the Corporation and/or
a person who owns an interest in a legal entity which has a
contractual relationship with the Corporation.
Except as otherwise expressly provided in these By-Laws,
including the next sentence hereof, the act of a majority of
the Directors present at a meeting at which a quorum is
present shall be the act of the Board of Directors.
Notwithstanding the preceding sentence, a vote of sixty-six
and two-thirds percent (66-23%) of the Company's Directors
shall be required for the authorization of (a) any
consolidation or merger of the Company where the shareholders
of the Company, immediately prior to the consolidation or
merger, would not, immediately after the consolidation or
merger, beneficially own (as such term is defined in Rule
13d-3 of the Securities Exchange Act of 1934), directly or
indirectly, shares representing in the aggregate at least
50.1% of the voting shares of the corporation issuing cash
and/or securities in the consolidation or merger (or of its
ultimate parent corporation, if any), (b) any sale, lease,
exchange or other transfer ( in one transaction or a series of
transactions contemplated or arranged by a party as a single
plan) of all or substantially all of the assets of the
Company, or (c) any plan or proposal for the liquidation or
dissolution of the Company.
Section 6. Informal Action of Directors. Action taken by a majority of
the Directors without a meeting shall constitute Board action
if written consent to the action in question is signed by all
the Directors and filed with the minutes of the proceedings of
the Board, whether done before or after the action so taken.
Additionally, action taken by the directors as the result of a
telephonic meeting declared as a meeting of the directors and
attended by all directors by a telephone hook-up in which all
directors can hear and be heard by all other directors, shall
constitute valid board action and an authorized meeting of the
board of directors.
Section 7. Resignations. Any Director may resign at any time by giving
written notice to the Chief Executive Officer, President or
the Secretary of the corporation. Such resignation shall take
effect at the time specified therein, or if no time is
specified therein at the time such resignation is received by
the Chief Executive Officer, President or Secretary of the
6
<PAGE>
corporation, unless it shall be necessary to accept such
resignation before it becomes effective, in which event the
resignation shall taken effect upon its acceptance by the
Board of Directors. Unless otherwise specified therein, the
acceptance of any such resignation shall not be necessary to
make it effective.
Section 8. Presumption of Assent. A Director of the corporation who is
present at a meeting of the Board of Directors shall be
presumed to have assented to the action taken unless his
contrary vote is recorded or his dissent is otherwise entered
in the minutes of the meeting or unless he shall file his
written dissent to such action with the person acting as the
Secretary of the meeting before the adjournment thereof or
shall forward such dissent by registered mail tot he Secretary
immediately after the adjournment of the meeting. Such right
to dissent shall not apply to a Director who voted in favor of
such action.
Section 9. Compensation. Directors of the corporation whether
regularly employed by the corporation or not shall received
such stipend, if any, as may be determined by the Board of
Directors, plus their expenses, if any, of attending such
Directors' meetings. Directors may be paid for official board
meetings even if not attended by a director, and the amount of
compensation may vary between directors not otherwise employed
by the corporation and directors regularly employed by the
corporation. No such payments, however, shall preclude any
such Director from serving the corporation in any other
capacity and receiving compensation therefore.
Section 10 Conflicts of Interest. Any contract, transaction or series
of transaction in which a director (hereinafter the
"Interested Director") may receive, either directly or
indirectly through any entitled with which the director is
affiliated as a shareholder, partner, owner, director,
officer, employee or agent, compensation or benefits of more
than Twenty-Five Thousand Dollars ($25,000.00) within a twelve
month period shall be brought before and subject to approval
by the Board of Directors, provided, however, that wit respect
to particular contracts, transactions or series of
transactions in the ordinary course of business between the
Corporation and an Interested Director, the Board may exempt
such transactions from the requirements of this Section. The
Interested Director, and any family member of the Interested
Director, shall have no right to vote approval or disapproval
of any such contracts or transactions before the Board. A
board member who is being considered for any senior management
position in the Corporation shall also be considered an
Interested Directed and neither he nor any of his family
members may vote on that decision. Contrary to Section 8 of
this Article, no abstention of any director required by this
Section shall be presumed to be assent by that director to the
action being voted upon.
ARTICLE V.
Executive Committee
Section 1. Creation of Powers. The Board of Directors, by resolution
adopted by a majority of the whole number of Directors, may
designate an Executive Committee and one or more
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other committees each consisting of two (2) or more members of
the Board. During the intervals between the meetings of the
Board of Directors, the Executive Committee and any other
committee so designated by a majority of the whole number of
Directors shall possess and may exercise all of the powers of
the Board of Directors as may be lawfully conferred upon them
by the Board of Directors of the corporation, provided that
they shall have no power or authority to perform any acts
required by law to be performed only by the Board of
Directors, and shall have not power to fix or alter the number
of Directors, to fill vacancies in the Board of Directors or
Executive Committee or other committee so designated by a
majority of the whole number of Directors, to issue shares of
stock, to declare dividends or to make, amend or repeal
By-Laws. All actions of the Executive committee and any other
committee so designated by a majority of the whole number of
Directors shall be reported to the Board of Directors at its
next meeting succeeding such action and shall be subject to
revision and alteration by the Board, provided, however, that
no rights of third parties shall be affected by any such
revision or alteration. No resolution relating to the powers
or authority of the Executive Committee and any other
committee so designated by a majority of the whole number of
Directors may be altered, amended, rescinded, or repealed in
whole or part except upon the affirmation vote of a majority
of the whole Board of Directors then holding office.
Section 2. Vacancy. Any vacancy occurring in an Executive Committee or
any other committee so designated by a majority of the whole
number of Directors shall be filled by a majority of the whole
Board of Directors at a regular or special meeting of the
Board of Directors.
Section 3. Removal. Any member of an Executive Committee or any other
committee so designated by a majority of the whole number of
Directors may be removed at any time with or without cause by
a majority of the whole Board of Directors.
Section 4. Minutes. The Executive Committee or any other committee so
designated by a majority of the whole number of directors
shall keep regular minutes of its proceedings and report to
the same to the Board of Directors at the next succeeding
regular or special meeting of the Board.
Section 5. Responsibility of Directors. The designation of an
Executive Committee or any other committee so designated by a
majority of the whole umber of directors and the delegation
thereto of authority shall not operate to relieve the Board of
Directors, or any member thereof, of any responsibility or
liability imposed upon it or him by the law.
If action taken by an Executive Committee or any other
committee so designated by a majority of the whole number of
Directors is not thereafter formally reported to the Board, as
set forth in Section 4, a Director may dissent from such
action by filing his written objection with the Secretary with
reasonable promptness after learning of such action.
8
<PAGE>
Section 6. Quorum. A majority of the members of the Executive
Committee or any other committee so designated by a majority
of the whole number of Directors shall constitute a quorum of
such committee. Any action shall be taken by a majority vote
of those present when a quorum is present.
Section 7. Reversal of Executive Committee by Board. Any action of the
Executive Committee or any other committee so designated by a
majority of the whole number of Directors may be reversed,
amended or nullified by a majority of all Directors then
holding office at any regular or special meeting of Directors.
ARTICLE VI.
Officers
Section 1. Number of Officers. The officers of the corporation shall
be a Chief Executive Officer, President, one or more
Vice-Presidents, a Secretary and a Treasurer, and such other
officers as may be appointed in accordance with the provisions
of Section 3 of this Article VI. Any two offices or more may
be held by one person, except the offices of Chief Executive
Officer and Secretary or execute any document in more than one
capacity. The Board of Directors may elect a Chairman of the
Board if and when it shall determine the need for such
officer.
Section 2. Election, Term of Office and Qualifications. Each officer,
except such officers as may be appointed in accordance with
the provisions of Section 3 of this Article VI, shall be
chosen by the Board of Directors and shall hold office until
the annual meeting of the Board of Directors held next after
his election or until his successor shall have been duly
chosen and qualified or until his death or until he shall
resign or shall have been disqualified or shall have been
removed from office.
Section 3. Other Officers and Agents. The Board of Directors from time
to time may appoint other officers or agents, each of whom
shall hold office for such period, have such authority, and
perform such duties as the Board of Directors from time to
time may determine. The Board of Directors may delegate to any
officer or agent the power to appoint any subordinate officer
or agent and to prescribe his respective authority and duties.
Section 4. Removal. All officers and agents of the Corporation may be
removed, either with or without cause, by the Board of
Directors at a special meeting of the Board of Directors, by a
majority vote of the Directors present any meeting, or by an
Officer or agent upon whom such power of removal may be
conferred by the Board of Directors. The removal of any person
from office shall be without prejudice to the contract rights,
if any, of the person so removed.
Section 5. Resignations. Any officer may resign at any time by giving
written notice to the Board of Directors or to the Chief
Executive Officer, President or the Secretary of the
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corporation, or if he was appointed by an officer or agent in
accordance with Section 3 of this Article VI, by giving
written notice to the officer or agent who appointed him. Any
such resignation shall taken effect upon its being accepted by
the Board of Directors or by the officer or agent appointing
the person so resigning.
Section 6. Vacancies. A vacancy in any office because of death,
resignation, removal, or disqualification, or any other case,
shall be filled form the unexpired portion of the term in the
manner prescribed in these By-Laws for regular appointments or
elections to such offices.
Section 7A. Chief Executive Officer. The chief Executive Officer shall be
the primary executive of the Corporation with ultimate
responsibility for the Corporation's operations,
notwithstanding the President's responsibility for overseeing
the general operations of the business of the Corporation as
Chief Operating Officer. In the absence or incapacity of the
President, the Chief Executive Officer shall preside at all
meetings of the shareholders at which he is present, and in
the absence or incapacity of the Chairman of the Board, at
all meeting of the Board of Directors at which he may be
present. he shall have authority to sign, with any other
proper officer, certificates for shares of the Corporation and
any deeds, mortgages, bonds, contracts or other instruments
which may be lawfully executed on behalf of the Corporation,
except where required or permitted by the Corporation, except
where required or permitted by law to be otherwise signed and
executed and except where the signing and execution thereof
shall be delegated by the Board of Directors to some other
officer or agent; and, in general, he shall perform all duties
incident to the office of Chief Executive Officer and such
other duties as may be prescribed by the Board of Directors
from time to time. He shall have power to make and execute
any contract on behalf of the Corporation that he believes to
be necessary and suitable for the profitable operation of the
company.
Section 7B. President. The President shall be the Chief Operating Officer
(unless operating responsibilities are otherwise designated)
of the Corporation, and subject to the instructions of the
Board of Directors or the Chief Executive Officer, shall have
general charge of the business, affairs, and property of the
Corporation and control over its other officers (except the
Chief Executive Officer), agents and employees, He shall
preside at meetings of the shareholders at which he his
present, and in the absence or incapacity of the Chairman of
the Board and Chief Executive Officer, he shall preside at
all meetings of the Board of Directors at which he may be
present. He shall have authority to sign, with any other
proper officer, certificates for shares of the Corporation and
any deeds, mortgages, bonds, contracts or other instruments
which may be lawfully executed on behalf of the Corporation,
except where required or permitted by law to be otherwise
signed and executed and except for the signing and execution
thereof shall be delegated by the Board of Directors to some
other officer or agent; and, in general, he shall perform
all duties incident to the office of President and such other
duties as may be prescribed by the Board of Directors from
time to time. He shall have the power to make and execute
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any contract on behalf of the Corporation that he believes to
be necessary and suitable for the profitable operation of the
company.
Section 8. Vice President. At the request of the Chief Executive Officer
or President, or in the absence or disability of either of
them, the Vice President, and if there be more than one
Vice President, the Vice President designated by the Board of
Directors, or in the absence of such designation, the Vice
President designated by the Chief Executive Officer or
President, shall perform all the duties of the Chief Executive
Officer or President, and when so acting shall have all the
powers of and be subject to all the restrictions upon the
Chief Executive Officer or President. The Vice President
shall perform such other duties and have such authority from
time to time may be assigned by the Board of Directors.
Section 9. Secretary. The Secretary shall keep the minutes of the
meetings of shareholders and of the Board of Directors, and
shall see that all notices are duly given in accordance with
the provisions of these By-Laws or as required by law. He
shall be custodian of the records, books, reports, statements,
certificates and other documents of the corporation and of the
seal of the corporation, and see that the seal is affixed to
all share certificates prior to their issuance and to all
documents required such seal. In general, he shall perform
all duties and possess all authority incident to the office of
Secretary, and he shall perform such other duties and have
such other authority as from time to time may be assigned to
him by the Board of Directors.
Section 10. Treasurer. The Treasurer shall have supervision over the
funds, securities, receipts and disbursements of the
corporation. He shall keep full and accurate amounts of the
finances of the corporation in books especially provided for
that purpose, and he shall cause a true statement of its
assets and liabilities, as of the close of each fiscal year,
and of the results of its operations and of changes in surplus
for such fiscal year, all in reasonable detail, including
particulars as to convertible securities then outstanding, to
be made and filed at the registered or principal office of the
corporation within four months after the end of such fiscal
year. The statement so filed shall be kept available for
inspection by any shareholder upon his written request for the
same. He shall in general perform all duties and have all
authority incident to the office of Treasurer ans shall
perform such other duties and have such other authority as
from time to time may be assigned or granted to him by the
Board of Directors. He may be required to give a bond for the
faithful performance of his duties in such form and amount as
the Board of Directors may determine.
Section 11. Duties of Officers May Be Delegated. In case of the
absence of any officer of the corporation of for any other
reason that the Board may deem sufficient, the Board may
delegate the powers or duties of such officer to any other
officer or to any Director for the time being, provided a
majority of the entire Board of Directors concurs therein.
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Section 12. Salaries of Officers. No officer of the corporation shall be
prevented from receiving a salary as such officer, provided no
director who is an officer of the corporation shall be
allowed to vote as a director on the amount of his
compensation whether as a member of the compensation committee
or board of directors of the corporation, or from voting
thereon by reason of the fact that he is also a Director of
the corporation. The salaries of the officers of the
corporation, including such officers as may be Directors of
the corporation, shall be fixed from time to time by the Board
of Directors after considering recommendations from a
compensation committee appointed by the board of directors,
except that the Board of Directors may delegate to any officer
who has been given power to appoint subordinate officers or
agents, as provided in Section 3 of this Article VI, the
authority to fix the salaries or other compensation of any
such officers or agents appointed by him. The compensation
committee adopted by the board of directors shall contain at
least two member that are no regularly employed by the
corporation.
ARTICLE VII
Contracts, Loans, Deposits, Checks, Drafts, Etc.
Section 1. Contracts. Except as otherwise provided in this By-Laws,
the Board of Directors may authorize any officer or officers,
agent or agents to enter into any contract or to execute or
deliver any instrument on behalf of the corporation, and such
authority may be general or confined to specific instances.
Section 2. Loans. Except in the ordinary course of business, no loans
shall be contracted on behalf of the corporation and no
evidence of indebtedness shall be issued in its name unless
and except as authorized by the Board of Directors. Those
officers authorized by the board of directors may incur debt
on behalf of the corporation in its ordinary course of
business. Any officer or agent of the corporation thereunto so
authorized may effect loans or advances for the corporation
and for such loans and advances for the corporation and for
such loans and advances may make, execute and deliver
promissory notes, bonds or other evidences of indebtedness of
the corporation. Any such officer or agent, when thereunto
so authorized, may mortgage, pledge, hypothecate or transfer
as security for the payment of any and all loans, advances,
indebtedness and liabilities of the corporation any real
property and all stocks, bonds, other securities and other
personal property at any time held by the corporation, and to
that end may endorse, assign and deliver the same, and do
every act and thing necessary or proper in connection
therewith. Such authority may be general or confined to
specific instances.
Section 3. Deposits. All funds of the corporation shall be deposited
from time to time to the credit of the corporation in such
banks or trust companies or with such bankers or other
depositories as the Board of Directors may select, or as may
be selected by any officer or officers, agent or agents of the
corporation to whom such power may from time to time be given
by the Board of Directors.
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Section 4. Checks, Drafts, Etc. All notes, drafts, acceptances, checks
and endorsements or other evidence of indebtedness prepared in
the normal course of business shall be signed by the Chief
Executive Officer, President, Vice President, Secretary,
Treasurer or Controller, or in such other manner as the Board
of Directors from time to time may determine. Endorsements
for deposit to the credit of the corporation in any of its
duly authorized depositories will be made by the President or
Treasurer or by any officer or agent who may be designated by
resolution of the Board of Directors in such manner as such
resolution may provide.
Section 5. Proxies. Any share in any other corporation which may from
time to time be held by the corporation may be represented and
voted at any meeting of shareholders of such other corporation
by any person or persons thereunto authorized by the Board of
Directors or if no one be so authorized, by the Chief
Executive Officer, President or a Vice-President or by any
proxy appointed in writing by the Chief Executive Officer,
Present or a Vice- President.
ARTICLE VIII.
Certificates for Shares and Their Transfer
Section 1. Issuance of Shares. The Board of Directors have the power
by resolution duly adopted to issue from time to time any part
or all of the authorized but unissued shares or dispose of any
Treasury Shares of the corporation and to determine the time
when, the terms upon which, and the consideration for which
the corporation shall issue or dispose of such shares.
Section 2. Certificates of Shares. Certificates representing shares of
the corporation shall be in such form as shall be determined
by the Board of Directors. The corporation shall issue and
deliver to each Shareholder certificates representing all
fully paid shares owned by him. Certificates shall be signed
by or impressed with the facsimile signature of either the
Chief Executive Officer, President or Vice President and
countersigned by the Secretary, and Assistance Secretary,
Treasurer or Assistant Treasurer, provided that if facsimile
signatures are used, each certificate shall be countersigned
by a transfer agent or registered by a restrar other than the
corporation or any employee thereof. All certificates
for shares shall be consecutively numbered or otherwise
identified. The name and address of the person to whom the
shares represented thereby are issued, with the number and
class of shares and the date of issue, shall be entered on
the stock transfer books of the corporation.
Section 3. Transfers of Shares. A book shall be kept containing the
names, alphabetically arranged, of all shareholders of the
corporation, showing their places of residence, the number of
shares held by them respectively, the time when they
respectively become the owners thereof and the amount paid
thereon. Transfers of the shares of the corporation shall be
made on the books of the corporation at the direction of the
record holder thereof or his
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attorney thereunto duly authorized by a power of attorney duly
executed and filed with the Secretary, or with the transfer
agent, if any, for such shares, and the surrender of the
certificate or certificates for such shares properly endorsed.
The corporation shall be entitled to treat the holder of
record of any share or shares as the holder and owner thereof
and shall not be bound to recognize any legal, equitable or
other claim to or interest in such share or shares on the part
of any person, whether or not it shall have express or other
notice thereof, except as otherwise expressly provided by the
laws of the State of North Carolina. Transfer of shares shall
be subject to any and all restrictions placed thereupon by the
Board of Directors.
Section 4. Lost or Destroyed Certificates. The holder of any share or
shares of the corporation shall immediately notify the
corporation of any loss, destruction, theft or mutilation of
the certificate therefor and the corporation with the approval
of the Board of Directors may issue a new certificate of such
share or shares in the place of such certificate theretofore
issued by it alleged to have been lost, destroyed, stolen or
mutilated. The Board of Directors in its discretion may
require the owner of the certificate alleged to have been
lost, destroyed, stolen or mutilated, or his legal
representative to give the corporation and its transfer agent
and its registrar, if any, before the issuance of such new
certificate, a bond of indemnity in such sum and in such form
and with sure surety or sureties as the Board of Directors
may direct or the Board, by resolution reciting that the
circumstances justifying such action, may authorize the
issuance of such new certificate without requiring such bond.
Section 5. Closing Transfer Books and Fixing Record Date. For the
purpose of determining shareholders entitled to notice of or
to vote at any meeting of shareholders or any adjournment
thereof, or entitled to receive payment of any dividends, or
in order to make a determination of shareholders for any
other proper purpose, the Board of Directors may provide that
the share transfer books shall be closed for a stated period
but not to exceed, in any case, fifty days. If the share
transfer books shall be closed for the purpose of determining
shareholders entitled to notice of or to vote at a meeting of
shareholders, such books shall be closed for at least ten days
immediately preceding such meeting. In lieu of closing the
share transfer books, the Board of Directors may fix in
advance a date as the record date for any such determination
of shareholders, such record date in any case to be not more
than fifty days and, in case of a meeting of shareholders, not
less than ten days immediately preceding the date on which the
particular action, requiring such determination of
shareholders, is to be taken. If the share transfer books
are not closed and no record date is fixed for the
determination of shareholders entitled to notice of or
to vote at a meeting of shareholders, or shareholders entitled
to receive payment of a dividend, the date on which notice of
the meeting is mailed or the date on which the resolution of
the Board of Directors declaring such dividend is adopted as
the case may be shall be the record date for such
determination of shareholders.
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When a determination of Shareholders entitled to vote at any
meeting of Shareholders has been made as provided in this
Section 5, such determination shall apply to any adjournment
thereof except where the determination has been made through
the closing of the stock transfer books and the stated period
of closing has expired.
Section 6. Treasury Shares. Treasury Shares of the corporation shall
consist of such shares as have been issued and thereafter
acquired but not canceled by the corporation. Treasury Shares
shall not carry voting or dividend rights.
Section 7. Negating Application of The North Carolina Control Share
Acquisition Act. The terms and provisions of Article 9 A. Of
The North Carolina Business Corporation Act, known as Th North
Carolina Control Share Acquisition Act, are hereby negated and
shall have no application with respect to this Corporation.
ARTICLE IX.
General Provisions
Section 1. Corporate Seal. The corporate shall be in such form as shall
be approved from time to time by the Board of Directors.
Section 2. Fiscal Year. The fiscal year of the corporation shall be
established by resolution of the Board of Directors.
Section 3. Waiver of Notice. Whenever any notice is required to be
given to any shareholder or director under the provisions of
the North Carolina Business Corporation Act or under the
provisions of the charter or By-Las of this corporation, a
waiver thereof in writing signed by the person or persons
entitled to such notice, whether before or after the time
stated therein, shall be equivalent to the giving of such
notice.
Section 4. Amendments. Except as otherwise provided herein, these
By-Laws may be amended or repealed and new By-Laws may be
adopted by the affirmative vote of a majority of the
Directors then holding office at any regular or special
meeting of the Board of Directors. The Board of Directors
shall not have power to adopt a By-Law: (1) requiring more
than a majority of the voting shares for a quorum at a meeting
of shareholders or more than a majority of the votes cast to
constitute action by the shareholders, except where
percentages are required by law, (2) providing for the
management of the corporation other than by the Board of
Directors or its Executive Committees. The shareholders may
make, alter, amend and repeal the By-Laws of the corporation
at any annual meeting or at a special meeting called for such
purpose, and By-Laws adopted by the Directors may be altered
or repealed by the shareholders provided, however, no such
amendment to the last sentence of Article 2, Section 9 of
these By-Laws shall be effective unless such amendment is
adopted by sixty-six and two/thirds percent (66-2/3%) of the
Company's shareholders. No By-Law adopted or amended by the
shareholders shall be altered or repealed by the Board of
Directors.
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shareholders. No By-Law adopted or amended by the
shareholders shall be altered or repealed by the Board of
Directors.
Section 5. Dividends. The Board of Directors may from time to time
declare, and the corporation may pay, dividends on its
outstanding shares in cash, property or its own shares in the
manner and upon the terms and conditions provided by law and
by its charter.
ARTICLE X
Indemnification of Officers and Directors
and Limitation of Their Liability
Section 1. Indemnification. In addition to any right to indemnification
provided by statute, any Person who at any time serves or has
served as a director, officer, employee or agent of the
corporation, or in such capacity at the request of the
corporation for any other corporation, partnership, joint
venture, trust or other enterprise, or as a trustee or
administrator under an employee benefit plan maintained by the
corporation, shall have a right to be indemnified by the
corporation to the fullest extend allowed by law (a) against
liability and litigation expense, including reasonable
attorney's fees, incurred by him in connection with any
threatened, pending or completed action, suit or proceedings,
whether civil, criminal, administrative or investigative, and
whether or not brought by or on behalf of the corporation,
seeking to hold him liable by reason of the fact that he is or
was acting in such capacity and (b) against reasonable
payments made by him in satisfaction of any judgment, money
decree, fine, penalty or settlement for which he may
have become liable in any such action, suit or proceeding.
Notwithstanding the foregoing, no person shall be indemnified
by the corporation hereunder against liability or litigation
expense incurred on account of activities which were at the
time taken, known or believed by him to be clearly in
conflict with the best interests of the corporation.
The corporation shall pay the expenses of any of the above
described persons, including attorney's fees and expenses,
incurred in defending any such action, suit or proceeding in
advance of the final disposition of said action, suit or
proceeding.
The Board of Directors of the corporation shall take all such
action as may be necessary and appropriate to authorize the
corporation to pay the indemnification required by this
By-law, including without limitation to the extend needed,
making a good faith evaluation of the manner in which the
claimant for indemnity acted and of the reasonable amount of
indemnity due him and giving notice to, and obtaining approval
by, the shareholders of the corporation.
Any person who at any time after the adoption of this By-law
serves or has served in any aforesaid capacities for or on
behalf of the corporation shall be deemed to be doing or to
have done so in reliance upon, and as consideration for, the
right of indemnification provided herein. Such right shall
inure to the benefit of the legal representative of any
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such person and shall not be exclusive of any other rights to
which such person may be entitled apart from the provision of
this By-law.
Section 2. Limitation of Liability. No officer or director of the
corporation shall be personally liable to the corporation or
its shareholders for monetary damages for breach of duty by
such officer or director; provided, however, that this
Article X shall not eliminate the liability of an officer or
director (unless otherwise permitted by applicable law) (i)
for acts or omissions not in good faith that the officer or
director, at the time of the breach, knew or believed
conflicted with the best interests of the corporation; (ii)
any liability under North Carolina General Statutes
ss.55-8-33, as it may be amended from time to time; (iii) for
any transaction from which the officer or director derived
any improper personal benefit; and (iv) for acts and omissions
occurring prior to the adoption of this Article. No amendment
to or repeal of this Article X shall apply to or have any
effect on the liability or alleged liability of any officer or
director of the Corporation for or with respect to any acts or
omissions of such director occurring prior to such amendment
or repeal.
ARTICLE XI.
Abolition of Certain Shareholder Protection Laws
Section 1. The provisions of The North Carolina Control Share Acquisition
Act (North Carolina General Statute (section mark)
55-9A-0l et seq.) shall not apply to the Corporation at any
time.
Effective as amended and revised on June 6, 1996.
/s/ R. Duke Ferrell
R. Duke Ferrell, President and
Chief Executive Officer
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Exhibit 10.1
THIS LEASE AGREEMENT made and entered into this 10th day of June, 1989,
by and between NORTH BOWLES PARTNERSHIP, a Virginia general partnership, party
of the first part and Lessor herein, and PLUMA, INC., a North Carolina
corporation, party of the second part and Lessee herein;
W I T N E S S E T H:
WHEREAS, Lessor has purchased a parcel of land (Exhibit 1) in the
Martinsville Magisterial District of Henry County, Virginia and caused a
manufacturing facility to be constructed thereon; and,
WHEREAS, Lessor desire to lease to Lessee the land and manufacturing
facility and Lessee desires to lease from Lessor the land and manufacturing
facility; and,
WHEREAS, Lessor and Lessee desire to set forth the terms and conditions
of such lease herein;
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I. DEFINITION AND RULES OF CONSTRUCTION;
IDENTIFICATION OF PARTIES
Section 1.1. Definitions.
In addition to other terms defined elsewhere in this
Agreement, the following terms shall have the following meanings in this
Agreement unless the context requires otherwise:
"Lease" shall mean this Agreement including any amendments
hereto;
"Authorized Representative of Lessee" shall mean such person
or persons as may be designated by Lessee to act on behalf of Lessee;
"Authorized Representative of Lessor" shall mean such person
or persons as may be designated by Lessor to act on behalf of Lessor;
"Building" shall mean that building and attached structures
and improvements set forth on the plans and specifications;
"Land" shall mean the real estate described in Exhibit 1
attached hereto;
<PAGE>
"Plans" shall mean the plans and specifications for the
building prepared by Stanley W. Bowles Corporation; and
"Builder" shall mean Stanley W. Bowles Corporation.
Section 1.2 Rules of Construction.
The following rules shall apply to the construction of this
Lease Agreement unless the context otherwise requires:
(a) Singular words shall connote the plural number as well as
the singular and vice versa.
(b) All references herein to particular articles or sections
are references to articles or sections of this Lease Agreement.
(c) The headings and table of contents herein are solely for
convenience of reference and shall not constitute a part of this Lease Agreement
nor shall they affect its meaning, construction or effect.
ARTICLE II. REPRESENTATIONS
Section 2.1 Representations by Lessor.
The Lessor makes the following representations as the basis
for its undertakings hereunder:
(a) Lessor is duly organized as a Virginia general partnership
under the laws of the Commonwealth of Virginia and has the power and authority
to enter into the transactions contemplated by this Lease Agreement and to carry
out its obligations hereunder and by proper partnership action has duly
authorized the execution and delivery of, and the performance under, this Lease
Agreement.
(b) Lessor has acquired a certain tract or parcel of land in
the Martinsville Magisterial District of Henry County, Virginia, which said land
is more particularly described on a description of said land attached to this
Lease Agreement, as Exhibit 1.
(c) Lessor has obtained a binding contract from builder and
Builder has commenced construction of the Building.
(d) Lessor has diligently pursued and shall continue to
diligently pursue construction of the Building with an estimated occupancy date
of May 1, 1989.
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Section 2.2 Representations by Lessee.
The Lessee makes the following representations as the basis
for its undertaking hereunder:
(a) Lessee is a corporation organized and existing under the
laws of the State of North Carolina and has the power to enter into this Lease
Agreement and the transactions contemplated hereby and to perform its
obligations hereunder and its representative is authorized to execute and
deliver this Lease Agreement and assure the performance of its obligations
hereunder. Lessee has obtained from the State Corporation Commission authority
to do business in the Commonwealth of Virginia and has appointed a registered
agent in the Commonwealth of Virginia.
ARTICLE III. PREMISES; TERM
Section 3.1
Lessor hereby leases to Lessee and Lessee hereby leases from
Lessor the Land described on the exhibits attached hereto and the Building to be
constructed substantially in accordance with plans and specifications prepared
by Stanley W. Bowles Corporation, which said plans and specifications are on
file at the office of Stanley W. Bowles Corporation at V-C Drive in
Martinsville, Virginia, which said plans and specifications have been exhibited
to Lessee, approved by Lessee and accepted by Lessee.
To have and hold the same unto Lessee for the initial term of
twenty (20) years and if the commencement date (DEFINED IN ARTICLE IV HEREOF) is
other than the first day of a month plus the number of days from commencement
date to the last day of such month; commencing on the commencement date and
ending unless sooner terminated in accordance herewith, and unless extended in
accordance herewith on the last day of the month during which the twentieth
anniversary of the commencement date occurs. Yielding and Paying the rents
hereinafter set forth, all on the covenants, conditions, and agreements
hereinbefore and hereinafter stated. Promptly after the commencement date,
Lessor and Lessee shall execute an agreement in recordable form commonly known
as a "Memorandum of Lease" stating among other things the exact commencement
date and termination date of this Lease Agreement.
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ARTICLE IV. COMMENCEMENT OF TERM
Section 4.1 Commencement Date.
The term of this Lease Agreement and the payment of rent
hereunder shall commence on the date that the premises shall be substantially
completed. Lessor agrees that it shall diligently pursue construction of the
Building as quickly as commercially and reasonably possible. The parties agree
that they have established a target date of May 1, 1989, as a date towards which
the parties shall pursue completion and occupancy of the Building. The parties
acknowledge that this is a mere target date and actual occupancy and
commencement of term may occur reasonably sooner or reasonably later depending
upon the construction progress. Lessor and Lessee will each give the other full
cooperation in having available at the job site those persons who are necessary
to settle any problems arising out of job conditions. Lessor shall maintain at
its office in or near the Building and make available to Lessee a complete set
of plans, drawings, and specifications.
ARTICLE V. RENT
Section 5.1 Rent Payments.
During the term of this Lease Agreement, Lessee covenants and
agrees to pay the Lessor a monthly rent, the amount of which said monthly rent
shall be Twelve Thousand Five Hundred Dollars ($12,500) per month for the first
full lease year and Thirteen Thousand Five Hundred Dollars ($13,500) thereafter
(plus any increases as set out further herein). Rent shall be payable in equal
monthly installments in advance on the first day of each month during the term
of this Lease Agreement at the office of Lessor or such place as Lessor may
designate without any offset or deduction. Lessee agrees to pay such rent by
check drawn on a bank which is a member of the New York Clearing House payable
in lawful money of the United States which is legal tender for the payment of
public and private debts. If the commencement date shall be a date other than
the first day of a calendar month; Lessee shall on the commencement date pay
Lessor an amount equal to such proportion of an equal monthly installment as the
number of days from the commencement date to the end of the calendar month in
which the commencement date occurs bears to the total number of days in such
calendar month, and such payment shall represent the pro rata rent from the
commencement date to the end of such calendar month.
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Section 5.2
The parties agree that Lessee may be required to pay
additional rent during the initial term or any extended term, which additional
rent shall be due if Lessor's cost of taxes and insurance relating to the Land
and Building increase. If such increase occurs, Lessee shall pay an amount, as
additional rent, equal to three-fourths (3/4) of such increase. If Lessor
verifies in writing to Lessee that real estate taxes and/or insurance on the
Land and Building have increased, Lessee agrees to an increase in rent equal to
three-fourths (3/4) of the cost of such increase.
Section 5.3
The rent referred to in Section 5.1 shall be automatically
increased at the beginning of each lease year if the cost of living has at that
time increased since the commencement date of this Lease as evidenced by a
change in the official Consumer Price Index for Urban Wage Earners and Clerical
Workers (including single workers) published by the Bureau of Labor Statistics,
United States Department of Labor (1957-59=100) hereinafter referred to as
"Bureau of Labor Statistics Consumer Price Index." The rent for each lease year,
or part thereof should the term sooner expire, shall be increased by an amount
which shall bear the same proportion to the rent as the Bureau of Labor
Statistics Consumer Price Index for the calendar year preceding the commencement
of such one-year period bears to the Bureau of Labor Statistics Consumer Price
Index for the year of the commencement date of this Lease. These increases are
cumulative from year to year. If the Bureau of Labor Statistics changes the form
or basis of calculating Bureau of Labor Statistics Consumer Price Index, the
parties agree that payments hereunder shall be calculated from the most recent
cost of living index statistics published by the Bureau of Labor Statistics.
ARTICLE VI. USE
Section 6.1 Use of the Premises.
Lessee shall use and occupy the premises for its legal
activities which shall include the operation of a textile manufacturing facility
and general offices related thereto and for no other purpose without the express
consent of Lessor. Lessee shall not suffer or permit the premises or any part
thereof to be used in any manner, or anything to be done therein, or suffer or
permit anything to be
5
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brought into or kept in the premises which would in any way (i) violate any law
or requirement of public authorities; (ii) cause structural injury to the
Building or any part thereof; (iii) interfere with the normal operations of the
heating, air-conditioning, ventilating, plumbing, or other mechanical or
electrical systems of the Building or the elevators installed therein; (iv)
constitute a public or private nuisance; (v) alter the appearance of the
exterior of the Building or conduct any major alterations on the interior of the
Building without the written consent of Lessor.
ARTICLE VII. CONSTRUCTION OF BUILDING
Section 7.1 Building.
Lessor shall, subject to delays by causes beyond Lessor's
reasonable control, proceed to construct the Building in accordance with the
plans and specifications available at Lessor's office.
ARTICLE VIII. REPAIRS; ALTERATIONS; FIXTURES
Section 8.1 Lessor Maintenance.
Lessor shall, at Lessor's own expense, maintain the roof of
the premises.
Section 8.2 Lessee Maintenance.
Lessee shall take good care of the demised premises and suffer
no damage or injury to it save ordinary wear and tear. Lessee shall be
responsible for all maintenance of any kind, nature or description except
maintenance of the roof. Lessee shall be responsible to maintain the interior of
its premises including all electrical fixtures, plumbing fixtures, trade
fixtures, special electronic or computer equipment, and security devices and any
and all other equipment of every kind, nature or description.
ARTICLE IX. TAXES
Section 9.1
Lessor shall be responsible to pay and shall pay when they are
due all real estate taxes attributable to Lessor's ownership of the Land and
Building.
6
<PAGE>
ARTICLE X. UTILITIES
Section 10.1
Lessee shall bear the cost of all utilities.
ARTICLE XI. INSURANCE
Section 11.1
Lessee at Lessee's own expense and cost shall maintain
insurance protecting and indemnifying Lessee, Lessor and their assigns against
any and all claims for injury and/or damage to persons or property or for the
loss of life or of property occurring in or about the premises occupied by
Lessee. Such insurance shall be not less than One Million Dollars ($1,000,000)
in respect of bodily injury, death to any one person and not less than Three
Million Dollars ($3,000,000) in respect of any one occurrence or accident and
not less than One Hundred Thousand Dollars ($100,000) for property damage.
Lessee shall, at its own expense, provide such insurance as it may deem
necessary to protect itself for damage by fire or other casualty occurring
within the space leased by Lessee. On or before the commencement date, Lessee
shall furnish Lessor with a certificate evidencing the aforesaid coverage.
ARTICLE XII. DAMAGE BY FIRE OR OTHER CASUALTY
Section 12.1
If the Building shall be damaged or destroyed by fire or other
casualty, Lessor shall be solely responsible at Lessor's cost for the complete
repair of the same and there shall be no abatement of rent during the period of
repairs. Each party shall be responsible to carry such insurance or take such
action as shall enable the other to meet the obligations imposed by this
section. Specifically, Lessee shall be responsible to maintain such insurance on
its trade fixtures and personal property in the Building as will enable Lessee
to replace the same and Lessee shall maintain such insurance such as business
interruption insurance to allow Lessee to make the rent payments during the
repair period. Lessor shall be responsible to maintain such fire, hazard and
casualty insurance as will permit Lessor to have the financial means to
reconstruct or repair the premises.
7
<PAGE>
ARTICLE XIII. ASSIGNMENT; SUBLETTING
Section 13.1 Lessee shall not assign or sublet the premises
without the prior written consent of Lessor. A change in identify of Lessee, by
virtue of acquisition, merger, consolidation, or other corporate reorganization
shall not be deemed to be an assignment or sublease. Lessor shall have the right
to withhold its consent to assign or sublet the premises for any reason. Lessee
acknowledges that Lessor has obtained financing through a lender. Lessee may not
sublet or assign without the prior written consent not only of Lessor but also
Lessor's lender for this project.
Section 13.2
Upon Lessor's request, Lessee shall agree to subordinate this
Lease to any mortgage or trust deeds which may hereafter be placed on the
demised premises and to any and all advances to be made thereunder, and to the
interest thereon, and all renewals, replacements and extensions thereof, and
shall execute any and all further instruments necessary to that purpose,
provided such mortgagee or trustee named in such mortgage or trust deeds
shall agree to recognize the lease and the rights under this Lease in the
event of foreclosure if Lessee is not in default hereunder.
ARTICLE XIV. NO LIABILITY ON LESSOR'S PART
Section 14.1
Lessor and its agents shall not be liable for any damage to
property of Lessee or of others entrusted to employees of the Building, nor for
the loss of or damage to any property of Lessee by theft or otherwise. Lessor
and its agents shall not be liable for any injury or damage to persons or
property resulting from fire, explosion, falling plaster, steam, gas,
electricity, water, rain, snow or leaks from any part of the Building or from
the pipes, appliances, or plumbing works or from the street, or subsurface or
from any other place or by dampness or any other cause of whatsoever nature
unless caused or due to the negligence of
8
<PAGE>
Lessor, its agents, servants, or employees; nor shall Lessor and its agents be
liable for any such damage caused by other tenants or persons in the Building or
caused by operations in construction of any private, public or quasi-public
work; nor shall Lessor be liable for damages or injury to the person or
property of Lessee or others. Notwithstanding any provision herein to the
contrary, Lessor shall be liable for such damages as directly result to Lessor
from failure of the Lessor to repair, with reasonable promptness, the roof.
Upon receiving notice from Lessee that the roof is leaking, Lessor shall have
a commercially reasonable time to repair the same and it shall not be liable
for any damages sustained by Lessee arising from leaks occurri uring a
commercially reasonable repair period. If Lessor should fail to repair such
leaks within a commercially reasonable time, then Lessor shall be responsible
for such damages sustained by Lessee upon Lessor's failure to repair the
premises in a commercially reasonable time.
ARTICLE XV. CONDEMNATION
Section 15.1
In the event that all or a material part of the Building shall
be condemned or taken in any manner for any public or quasi-public use, this
Lease Agreement shall cease and terminate as of the date of the vesting of
title. A condemnation of part of the parking area shall not work a termination
of the Lease Agreement unless the part so taken renders the Lessee's operation
practically impossible, in which event this Lease Agreement shall cease and
terminate. In the event of any condemnation or taking hereinabove mentioned
which causes a termination of the Lease Agreement, Lessor shall be required to
account to Lessee for the condemnation award to the extent that such
condemnation award includes compensation to Lessor for improvements installed at
Lessee's sole expense.
ARTICLE XVI. DEFAULTS; REMEDIES
Section 16.1 Default and Remedies.
(a) If Lessee defaults (1) in fulfilling any of the covenants
of this Lease Agreement, requiring the payment of rent or additional rent, or
(2) in complying with any of the other terms, conditions or provisions of this
Lease Agreement, or (3) if Lessee ceases to conduct its business in the demised
premises or leaves the same vacant, then, in the case of nonpayment of rent
which continues for ten (10)
9
<PAGE>
days after Lessor serves a written notice upon Lessee specifying such default,
or if lessee defaults in any one or more of the events referred to in (2) or (3)
above, then upon Lessor's serving a fifteen-day (15-day) written notice upon
Lessee specifying the nature of said default and upon the expiration of said
fifteen (15) days, if Lessee shall have failed to comply with or remedy such
default, or if said default or omission complained of shall be of such a nature
that the same cannot be completely cured or remedied within said fifteen-day
(15-day) period, and if Lessee shall not have diligently commenced curing such
default within such fifteen-day (15-day) period, and shall not thereafter with
reasonable diligence and in good faith proceed to remedy or cure such default,
then Lessor may serve a written fifteen-day (15-day) notice of cancellation of
this Lease Agreement upon Lessee and upon the expiration of said fifteen (15)
days, this Lease Agreement and the term hereunder shall end and expire as fully
and completely as if the date of expiration of such fifteen-day (15-day) period
were the day herein definitely fixed for the end and expiration of this Lease
Agreement and the term thereof and Lessee shall then quit and surrender the
demised premises to Lessor but Lessee shall remain liable as hereinafter
provided.
(b) If the fifteen-day (15-day) notice of cancellation provided for in
(a) hereof shall have been given and the term shall expire as aforesaid; or if
Lessee shall make default after ten (10) days notice and the payment of the rent
set forth herein or any item of additional rent herein mentioned, then and in
any of such events, Lessor may without further notice re-enter the demised
premises either by force or otherwise and dispossess Lessee by summary
proceedings or otherwise, and the legal representatives of Lessee or other
occupant of the demised premises and remove their effects and hold the premises
as if this Lease Agreement had not been made, but Lessee shall remain liable
hereunder as hereinafter provided and Lessee hereby waives the service of notice
of intention to re-enter or institute legal proceeding to that end.
Section 16.2 Rent Deficiency.
In case of any such default, re-entry, expiration and/or
dispossess by summary proceedings or otherwise, (a) the rent and additional rent
shall become due thereupon and be paid up to the time of such re-entry, or
dispossess together with such expenses as Lessor may incur for legal expenses,
attorney's fees, brokerage, and/or putting the demised premises in good order or
for preparing the same for re-rental; (b) Lessor may re-let the premises or any
part or parts
10
<PAGE>
thereof, either in the name of Lessor or otherwise for a term or terms, which
may at Lessor's option be less than or exceed the period which would otherwise
have constituted the balance of the term of this Lease Agreement and may grant
concessions or free rent and/or (c) Lessee or the legal representatives of
Lessee shall also pay Lessor's liquidated damages for the failure of Lessee to
observe and perform said Lessee's covenants herein contained, any deficiency
between the rents and additional rents hereby reserved and/or covenanted to be
paid and the net amount, if any, of the rents collected or to be collected on
account of the lease or leases of the demised premises for each month of the
period which would otherwise have constituted the balance of the term of this
Lease Agreement. The failure or refusal of Lessor to re-let the premises or any
part or parts thereof shall not release or affect Lessee's liability for damages
although Lessor shall be under a duty to exercise diligence and good faith in an
effort to re-let the same and mitigate Lessor's damages. In computing such
damages, there shall be added to said deficiency such expenses as Lessor may
incur in connection with re-letting such as legal expenses, attorney's fees,
brokerage, and for keeping the demised premises in good order or for preparing
the same for re-letting. Any such damages shall be paid in monthly installments
by Lessee on the rent date specified in this Lease Agreement and any suit
brought to collect the amount of the deficiency for any month shall not
prejudice in any way the rights of Lessor to collect the deficiency for any
subsequent month or months by a similar proceeding. Lessor may at Lessor's
option make such alterations, repairs, replacements and/or decorations in the
demised premises as Lessor in Lessor's sole judgment considers advisable and
necessary for the purpose of re-letting the demised premises; and the making of
such alterations and/or decorations shall not operate or be construed to release
Lessee from liability hereunder as aforesaid. Lessor shall in no event be liable
in any way whatsoever for failure to re-let the demised premises provided Lessor
makes a good faith effort to re-let the same, or in the event that the demised
premises are re-let for failure to collect the rent thereunder provided
reasonable diligence is used in an attempt to collect such rent. Any such action
against Lessee may be an action for the full amounts of all rents and damages
suffered or to be suffered by Lessor. In the event of a breach or threatened
breach by Lessee of any of the covenants or provisions hereof, Lessor shall
have the right of injunction and the right to invoke any remedy allowed at law
or in equity as if re-entry, summary proceedings and other remedies were not
herein provided for. Mention in this Lease Agreement of any particular remedy
shall not
11
<PAGE>
preclude Lessor from any other remedy, in law or in equity, the foregoing
remedies and rights of Lessor are cumulative. Lessee hereby expressly waives
any and all rights of redemption granted by or under any present or future
laws in the event of Lessee being evicted or dispossessed for any cause, or
in the event of Lessor obtaining possession of the demised premises, by
reason of the violation by Lessee of any of the covenants and conditions
of this Lease Agreement or otherwise.
Section 16.3 Default by Lessor.
Should Lessor default in Lessor's duty to pay taxes,
insurance, and debt service payments to Crestar Bank and in its obligation to
maintain the roof, Lessee shall have and enjoy, in addition to any other rights
under this Lease or under common law or by statute, have and enjoy the right to
divert rent payments hereunder from Lessor to pay directly taxes, insurance
required to be maintained by Lessor, bank payments at Crestar Bank or to
necessary roof repairs. Provided, however, the Lessee's right to divert rent
payments for roof repairs shall be conditioned upon Lessee's reasonable notice
to Lessor of the necessity for repairs and upon Lessor's failure to make
such repairs in a commercially reasonable time.
ARTICLE XVII. COVENANT OF QUIET ENJOYMENT
Section 17.1
Lessor warrants and represents that it has full authority to
execute this Lease Agreement for the term aforesaid and covenants that upon
Lessee's paying the rent and performing the covenants to be observed and
performed on Lessee's part. Lessee may peaceably and quietly have, hold, and
enjoy the demised premises, subject, nevertheless, to the terms and conditions
of this Lease Agreement.
ARTICLE XVIII. NOTICES
Section 18.1 Notice to Lessor.
Any notice required or permitted to be given to Lessor shall
be deemed to have been properly given upon mailing the same by certified or
registered mail to NORTH BOWLES PARTNERSHIP, c/o Stanely W. Bowles Corporation,
P.O. Box
12
<PAGE>
4706, Martinsville, VA 24115-4706. Lessor reserves the right to designate
another representative for the purpose of receiving notices required or
permitted to be made hereunder provided the designation is made in writing and
delivered to Lessee.
Section 18.2 Notice to Lessee.
Any notice required or permitted to be given to Lessee shall
be deemed to have been properly given upon mailing the same by certified or
registered mail to PLUMA, INC., Post Office Box 487, Eden, North Carolina 27288.
ARTICLE XIX. OPTION GRANTED LESSEE
Section 19.1
Lessee shall have the option to purchase the property from
Lessor at the end of the fifth (5th) year of the lease term, at the end of the
tenth (10th) year of the lease term, at the end of the fifteenth (15th) year of
the lease term, and at the end of the lease term. If Lessee desires to exercise
the option to purchase, Lessee shall notify Lessor in writing not less than six
(6) months prior to the expiration of the term of years designating the option
dates. For example, if Lessee desires to exercise its option to purchase the
property at the end of the fifth (5th) year of the lease, then, Lessee shall so
notify Lessor, in writing, which writing shall be delivered to Lessor, at least
six (6) months prior to the expiration of the fifth (5th) year. If Lessee
delivers a timely notice to Lessor of its exercise of its option to purchase,
the parties shall negotiate in good faith in an attempt to reach an agreeable
purchase price. If the parties cannot reach an agreeable purchase price, either
party may elect to have the purchase price determined in accordance with this
paragraph. If the parties cannot agree upon a purchase price and either party
nevertheless wishes to proceed with Lessee's purchase, then the purchase price
shall be determined by the average of two appraisals of the property with one
appraisal being performed by an appraiser of Lessor's choice and one appraisal
being performed by an appraiser of Lessee's choice. Such appraisers shall be
persons experienced and knowledgeable in the field and each party shall bear the
expense of the appraisal conducted by such party. The average of the two
appraisals shall equal the purchase price unless either party elects to have the
purchase price determined by the addition of another appraisal, in which event
such party shall solely bear the cost of such
13
<PAGE>
appraisal and the appraisal shall be conducted by a third party selected by the
two appraisers selected by the parties. Upon the completion of such appraisal,
the appraisal amount shall be added to the other two appraisals and the average
so determined shall equal the purchase price and shall be binding upon both of
the parties. In the event the Lessee exercises the option to purchase, then
Lessee shall tender the purchase price within thirty (30) days of the
determination of the purchase price in accordance with this paragraph.
Section 19.2
Lessee shall have the right to make alterations to the
premises. Such right shall be conditioned upon Lessee obtained
Lessor's approval, which said approval will not be unreasonably withheld.
Lessee's request for Lessor's approval shall be in writing and Lessor's response
to Lessee shall be in writing. If alterations are made by Lessee, at Lessee's
expense, and said alterations increase the value of the property, such increase
in value shall be taken into account in determining the purchase price of the
property. To the extent that Lessee's improvements to the leased premises
enhance or increase the purchase price which Lessee must pay Lessor for such
leased premises, then Lessee shall receive a reduction in the purchase price
determined in accordance with Section 19.1 of Article XIX. The amount of the
reduction in the purchase price on account of Lessee's improvements or
alterations shall depend upon the cost of the improvement or alteration, the
nature of the improvement or alteration, and the date such improvement or
alteration is made and the extent, if any, to which such alteration is
depreciated by Lessee. Such reduction in purchase price shall be determined
initially by negotiation between the parties and if the parties cannot reach an
acceptable determination between themselves, the same shall be determined by the
appraisers appointed in accordance with Section 19.1 of Article XIX.
Section 19.3
Upon the exercise of the option granted Lessee in Section 19.1
of Article XIX, the parties shall prorate real estate taxes in the year of the
exercise of the option. Upon closing of the transaction, Lessor shall be
responsible to deliver to Lessee a deed, in proper form to be approved by
Lessee's attorney, conveying the property in fee simple with general warranty of
title from Lessor to Lessee. Lessor shall furnish Lessee with the deed at
Lessor's cost and Lessor shall pay such recording costs of the deed as are
customary for grantors or sellers to pay
14
<PAGE>
Under Virginia law. Lessee shall be responsible to obtain and pay for such title
insurance or examination of title as Lessee may deem necessary.
ARTICLE XX. SUBORDINATION
Section 21.1
Lessee's rights under this Lease Agreement are subordinate to
the terms and conditions of Lessor's deed of trust as executed with Lessor's
lending institution and is further subject to the security interest of that
lending institution.
WITNESS the following signatures and seals the day and year
first above written:
LESSOR: NORTH BOWLES PARTNERSHIP, a Virginia general
partnership
By: /s/Barry A. Bowles
------------------------------------
Barry A. Bowles
By: /s/Robert S. Bowles
------------------------------------
Robert S. Bowles
By: /s/David W. Bowles
------------------------------------
David W. Bowles
By: /s/Stanley W. Bowles
-------------------------------------
Stanley W. Bowles
LESSEE: PLUMA, INC., a North Carolina corporation
By: /s/ George G. Wade, President
--------------------------------
Attest:
/s/G.B. Piland
- ----------------------------
G.B. Piland, Secretary
[lease/pluma:MARCH]
15
<PAGE>
STATE OF VIRGINIA, AT LARGE
CITY OF MARTINSVILLE, TO-WIT;
I, SANDRA J. MARTIN, a Notary Public for said City and State, certify
that the foregoing instrument was acknowledged before me this 22 day of JUNE,
1989, by North Bowles Partnership, a Virginia general partnership, by Barry A.
Bowles, Robert S. Bowles, David W. Bowles, and Stanley W. Bowles, Jr.
My commission expires: May 9, 1993.
/s/Sandra J. Martin
--------------------------------
Notary Public
(SEAL)
STATE OF NORTH CAROLINA,
CITY/COUNTY OF ROCKINGHAM, TO-WIT;
I, EUGENIA CORUM, a Notary Public for said City/County and State
certify that G.B. Piland personally came before me this day and being by me duly
sworn, acknowledged that he is Secretary of Pluma, Inc., a corporation, and that
by authority duly given and as the act of corporation, the foregoing instrument
was signed in its name by its President, George G. Wade, sealed with its
corporate seal, and attested by himself as its Secretary.
Witness my hand and official seal this the 2 day of June, 1989.
My commission expires: November 2, 1993.
/s/Eugenia Corum
-------------------------------
Notary Public
16
<PAGE>
(MAP)
<PAGE>
AMENDMENT TO LEASE AGREEMENT, made and entered into as of the 1st day
of December, 1990, by and between NORTH BOWLES PARTNERSHIP, a Virginia General
Partnership, party of the first part (hereinafter referred to as "Lessor"), and
PLUMA, INC., a North Carolina corporation, party of the second part (hereinafter
referred to as "Lessee").
WHEREAS, the parties hereto were the Lessor and Lessee, respectively,
in a certain Lease Agreement dated June 10, 1989, in reference to certain real
property, and improvements thereon, located in Martinsville Magisterial
District of Henry County, Virginia; and
WHEREAS, if was originally contemplated that said property would be
comprised of Lot #2 located on an access road leading east from State Route 714,
said Lot #2 containing 11.306 acres, plus or minus; and
WHEREAS, following the construction of the improvements on said
property, the parties have determined that a portion of said real property is
not needed for the Lessee's use and enjoyment of said premises, and the parties
have agreed to release the unneeded portion from the terms and conditions of
said Lease Agreement; and
WHEREAS, Lessee has requested that Lessor cause to be constructed on
the leased property an addition containing approximately 67,500 square feet,
with occupancy thereof to be available to Lessee on or before December 1, 1990;
WITNESSETH; That for and in consideration of the sum of One Dollar
($1.00), cash in hand paid by the Lessor to the Lessee,
<PAGE>
and other good and valuable consideration, the receipt and sufficiency of
all of which are hereby acknowledged, the parties hereto hereby agree as
follows:
1. Lot #2-A, containing 1.629 acres, plus or minus, as shown on Plat of
Survey for North Bowles Partnership, prepared by Lawrence W. Cockram, L.L.S.,
dated May 1, 1990 (a copy of which Plat is attached hereto marked Exhibit A), is
hereby deleted from the property subject to said Lease Agreement and is
therefore deemed to be completely released by the Lessee, which will make no
further claims against or use thereof.
2. Lessor shall forthwith commence construction of a 67,500 square foot
addition to the distribution center of Lessee located on the leased property
said addition to be constructed in substantially in accordance with the plans
and specifications prepared by Stanley W. Bowles Corporation, which said plans
and specifications are on file at the offices of Stanley W. Bowles Corporation,
V-C Drive, Martinsville, Virginia, which said plans and specifications have been
exhibited to Lessee, approved by Lessee and accepted by Lessee. Occupancy of the
addition will be available to Lessee on or before December 1, 1990. Effective
December 1, 1990, Lessee shall pay to Lessor the sum of eighteen and one-half
cents ($0.1850) per square foot per month [Twelve Thousand Four Hundred
Eighty-Seven and 50/100ths Dollars ($12,487.50) per month] for the new addition
to the leased property as additional rent. The additional rent specified herein
shall be subject to all terms and conditions of Article V (including,
<PAGE>
without limitation, Section 5.3) of the Lease Agreement dated June 10, 1989,
between the parties.
3. In all other respects, the aforesaid Lease Agreement shall remain in
full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused these presents to be
duly executed as of the day and year first above written.
NORTH BOWLES PARTNERSHIP
a Virginia General Partnership
By: /s/ Robert S. Bowles
-----------------------------------
ROBERT S. BOWLES, Partner
By: /s/Barry A. Bowles
------------------------------------
BARRY A. BOWLES, Partner
By: /s/ David W. Bowles
-------------------------------------
DAVID W. BOWLES, Partner
By: /s/ Stanley W. Bowles, Jr.
---------------------------------------
STANLEY W. BOWLES, JR., Partner
PLUMA, INC., a North Carolina
Corporation
By: /s/ George G. Wade
------------------------------------
President
ATTEST:
/s/ G. B. Piland
- --------------------------
Secretary
<PAGE>
COMMONWEALTH OF VIRGINIA
CITY OF MARTINSVILLE, TO-WIT:
The foregoing was acknowledged before me, this day of January, 1991,
by Robert S. Bowles, Barry A. Bowles, David W. Bowles and Stanley W. Bowles,
Jr., General Partners of North Bowles Partnership, a Virginia general
partnership.
My Commission expires:
NOTARY PUBLIC
STATE OF NORTH CAROLINA
COUNTY/CITY OF ROCKINGHAM/EDEN, TO-WIT:
The foregoing was acknowledged before me, this 19th day of
February, 1991, by George G. Wade, and Glazier Piland, the President and
Secretary, respectively, of Pluma, Inc., a North Carolina corporation.
My commission expires: 10-22-91
/s/ Lucille S. Johnson
--------------------------
NOTARY PUBLIC
<PAGE>
AMENDMENT TO LEASE AGREEMENT, made and entered into as of the 1st day of
December, 1990, by and between NORTH BOWLES PARTNERSHIP, a Virginia General
Partnership, party of the first part (hereinafter referred to as "Lessor"),
and PLUMA, INC., a North Carolina corporation, party of the second part
(hereinafter referred to as "Lessee").
WHEREAS, the parties hereto were the Lessor and Lessee, respectively, in
a certain Lease Agreement dated June 10, 1989, in reference to certain real
property, and improvements thereon, located in Martinsville Magisterial District
of Henry County, Virginia; and
WHEREAS, it was originally contemplated that said property would be
comprised of Lot #2 located on an access road leading east from State Route
714, said Lot #2 containing 11.306 acres, plus or minus; and
WHEREAS, following the construction of the improvements on said property,
the parties have determined that a portion of said real property is not needed
for the Lessee's use and enjoyment of said premises, and the parties have agreed
to release the unneeded portion from the terms and conditions of said Lease
Agreement; and
WHEREAS, Lessee has requested that Lessor cause to be constructed on the
leased property an addition containing approximately 67,500 square feet, with
occupancy thereof to be available to Lessee on or before December 1, 1990;
WITNESSETH: That for and in consideration of the sum of One Dollar ($1.00),
cash in hand paid by the Lessor to the Lessee,
<PAGE>
and other good and valuable consideration, the receipt and sufficiency of all of
which are hereby acknowledged, the parties hereto hereby agree as follows:
1. Lot #2-A, containing 1.629 acres, plus or minus, as shown on Plat of
Survey for North Bowles Partnership, prepared by Lawrence W. Cockram, L.L.S.,
dated May 1, 1990 (a copy of which Plat is attached hereto marked Exhibit A),
is hereby deleted from the property subject to said Lease Agreement and is
therefore deemed to be completely released by the Lessee, which will make no
further claims against or use thereof.
2. Lessor shall forthwith commence construction of a 67,500 square foot
addition to the distribution center of Lessee located on the leased property,
said addition to be constructed in substantially in accordance with the plans
and specifications prepared by Stanley W. Bowles Corporation, which said plans
and specifications are on file at the offices of Stanley W. Bowles Corporation,
V-C Drive, Martinsville, Virginia, which said plans and specifications have
been exhibited to Lessee, approved by Lessee and accepted by Lessee. Occupancy
of the addition will be available to Lessee on or before December 1, 1990.
Effective December 1, 1990, Lessee shall pay to Lessor the sum of eighteen
and one-half cents ($0.1850) per square foot per month [Twelve Thousand Four
Hundred Eighty-Seven and 50/100ths Dollars ($12,487.50) per month] for the new
addition to the leased property as additional rent. The additional rent
specified herein shall be subject to all terms and conditions of Article V
(including,
<PAGE>
without limitation, Section 5.3) of the Lease Agreement dated June 10, 1989,
between the parties.
3. In all other respects, the aforesaid Lease Agreement shall remain in
full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused these presents to be
duly executed as of the day and year first above written.
NORTH BOWLES PARTNERSHIP,
a Virginia General Partnership
BY: /s/ Robert S. Bowles
---------------------------------
ROBERT S. BOWLES, Partner
BY: /s/ Barry A. Bowles
---------------------------------
BARRY A. BOWLES, Partner
BY: /s/ David W. Bowles
---------------------------------
DAVID W. BOWLES, Partner
BY: /s/ Stanley W. Bowles, Jr.
---------------------------------
STANLEY W. BOWLES, JR., Partner
PLUMA, INC., a North Carolina
Corporation
ATTEST:
/s/ G. B. Piland BY: /s/ George G. Wade
- -------------------------- --------------------------------
Secretary President
<PAGE>
COMMONWEALTH OF VIRGINIA
CITY OF MARTINSVILLE, TO-WIT:
The foregoing was acknowledged before me, this _____ day of January, 1991,
by Robert S. Bowles, Barry A. Bowles, David W. Bowles and Stanley W. Bowles Jr.,
General Partners of North Bowles Partnership, a Virginia general partnership.
My Commission expires: ____________________________
_____________________________
NOTARY PUBLIC
STATE OF NORTH CAROLINA
COUNTY/CITY OF ROCKINGHAM/EDEN, TO-WIT:
The foregoing was acknowledged before me, this 19th day of February, 1991,
by George G. Wade and Glazier B. Piland, the President and Secretary,
respectively, of Pluma, Inc., a North Carolina corporation.
My Commission expires: 10-22-91
----------
(Official Seal Appears here Text follows)
(Official Seal /s/ Lucille S. Johnson
Notary Public North Carolina -------------------------
County of Rockingham NOTARY PUBLIC
Lucille S. Johnson
My Commission Expires 12-22-91)
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PREPARED BY DATE
REVIEWED BY DATE
Pluma N. Bowles Lease Agreement
12-31-90 PF 340-6A
Martinsville Dist Center
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THIS LEASE AGREEMENT made and entered into as of the 1st day of
February, 1996, by and between NORTH BOWLES PARTNERSHIP, a Virginia General
Partnership, party of the first part and Lessor herein, and PLUMA, INC., a North
Carolina corporation, party of the second part and Lessee herein;
W I T N E S S E T H:
WHEREAS, Lessor has acquired a certain parcel of land located off State
Route 108 in Martinsville Magisterial District of Henry County, Virginia, known
as Tract 5A (see Exhibit 1), and has constructed thereon certain facilities
containing a total of 200,000 square feet of floor area; and
WHEREAS, Lessor desires to lease to Lessee said Land and Building, and
Lessee desires to lease the same from Lessor; and
WHEREAS, Lessor and Lessee desire to set forth the terms and conditions
of such lease herein;
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I. DEFINITIONS AND RULES OF CONSTRUCTION
Section 1.1. Definitions. In addition to other terms defined elsewhere
in this Agreement, the following terms shall have the following meanings in this
Agreement unless the context requires otherwise:
"Lease" shall mean this Agreement including any amendments hereto;
"Authorized Representative of Lessee" shall mean such person or persons
as may be designated by Lessee;
"Authorized Representative of Lessor" shall mean such person or persons
as may be designated by Lessor;
"Building" shall mean the building described hereinabove located on the
Land shown on Exhibit l; and
"Commencement Date" shall mean February 1, 1996.
"Land" shall mean the real estate described as Tract 5A on Exhibit 1
attached hereto.
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Section 1.2. Rules of Construction. The following rules shall apply to
the construction of this Lease Agreement unless the context otherwise requires:
(a) Singular words shall connote the plural number as well as the
singular and vice versa.
(b) All references herein to particular articles or sections are
references to articles or sections of this Lease Agreement.
(c) The headings herein are solely for convenience of reference and
shall not constitute a part of this Lease Agreement nor shall they affect its
meaning, construction or effect.
ARTICLE II. REPRESENTATIONS
Section 2.1. Representations of Lessor. The Lessor makes the following
representations as the basis for its undertakings hereunder: Lessor is duly
organized as a Virginia general partnership under the laws of the Commonwealth
of Virginia and has the power and authority to enter into the transactions
contemplated by this Lease Agreement and to carry out its obligations hereunder
and by proper action has duly authorized the execution and delivery of, and the
performance under, this Lease Agreement.
Section 2.2. Representations of Lessee. The Lessee makes the following
representations as the basis for its undertaking hereunder: Lessee is a
corporation duly organized and existing and has the power to enter into this
Agreement and the transactions contemplated hereby and to perform its
obligations hereunder and by proper action has duly authorized the execution and
delivery of and the performance under this Lease Agreement.
ARTICLE III. PREMISES
Section 3.1. Premises. Lessor hereby leases to Lessee and Lessee hereby
leases from Lessor the Land described on Exhibit 1 attached hereto and the
Building located thereon.
ARTICLE IV. COMMENCEMENT OF TERM
Section 4.1. Term. To have and hold the same unto Lessee for the
initial term of five (5) years, commencing on the Commencement Date, on the
covenants, conditions, and agreements hereinbefore and hereinafter stated.
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ARTICLE V. RENT
Section 5.1. Rent Payments. During the term of this Lease Agreement,
Lessee covenants and agrees to pay the Lessor a monthly rent, the amount of
which said monthly rent shall be sixteen cents ($0.16) per square foot per month
through April 30, 1996, and shall increase to seventeen cents ($0.17) per square
foot per month commencing on May 1, 1996, and continuing thereafter for the
initial term of this Lease Agreement. Rent shall be payable in equal monthly
installments in advance on the first day of each month during the term of this
Lease Agreement at the offices of Lessor or such place as Lessor may designate
without any offset or deduction. In addition to said rent, a late charge of two
percent (2%) of the amount of any monthly rental payment shall be due and
payable if such monthly rental payment is not received by Lessor on or before
the tenth (10th) day of the month in which it was due.
Section 5.2. Additional Rent. The parties agree that Lessee may be
required from time to time to pay additional rent during the initial term or any
extended or renewal term, which additional rent shall be due if Lessor's costs
of taxes or insurance relating to the Land and Building increase. If such
increases occur from time to time, Lessee shall pay an amount, as additional
rent, equal to such increases, payable in equal monthly installments. If Lessor
verifies in writing to Lessee that real estate taxes and/or insurance on the
Land and Building have increased, Lessee agrees to an increase in rent equal to
the cost of such increase.
ARTICLE VI. USE
Section 6.1. Use of the Premises. Lessee shall use and occupy the
premises for its legal activities, which shall include the operation of a
warehouse and light manufacturing facility and general offices related thereto
and for no other purpose, without the express consent of Lessor, which consent
may not be unreasonably withheld. Lessee shall not suffer or permit the premises
or any part thereof to be used in any manner, or anything to be done therein, or
suffer or permit anything to be brought into or kept in the premises which would
in any way (i) violate any law or requirement of public authorities; (ii) cause
structural injury to the Building or any part thereof; (iii) interfere with the
normal operations of the heating, air-conditioning, ventilating, plumbing or
other mechanical or electrical systems of the Building or the elevators
installed therein; (iv) constitute a public or private nuisance; (v) alter the
appearance of the exterior of the Building or conduct any major alterations on
the interior of the Building without the written consent of Lessor.
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ARTICLE VII. REPAIRS; ALTERATIONS; FIXTURES
Section 7.1. Lessor Maintenance. Lessor shall, at Lessor's own expense,
maintain only the roof, exterior walls, foundation and other structural portions
of the premises, and fire protection system, except damages occasioned by acts
or omissions of Lessee or its employees or invitees.
Section 7.2. Lessee Maintenance. Lessee shall maintain the demised
premises in the condition it is in on the day possession is accepted by Lessee
and suffer no damage or injury to it save ordinary wear and tear. Lessee shall
be responsible for all repair and maintenance of any kind, nature or
description, excepting only maintenance of the roof, exterior walls, foundation
and other structural portions (except damages occasioned by acts or omissions of
Lessee or its employees or invitees) and the fire protection system. Lessee
shall be responsible to maintain the interior of its premises including all
electrical fixtures, plumbing fixtures, trade fixtures, and any and all other
equipment of every kind, nature or description. Lessee at its own expense shall
cause such regular, periodic inspections as may be reasonably required by Lessor
to be performed on the fire control system serving the premises in accordance
with Factory Mutual requirements and submit copies of same to Lessor.
ARTICLE VII. TAXES
Section 8.1. Payment of Taxes. Lessor shall be responsible to pay and
shall pay when they are due all real estate taxes attributable to Lessor's
ownership of the Land and Building, subject, however, to the provisions of
Section 5.2 above.
ARTICLE IX. UTILITIES
Section 9.1. Payment of Utility Expenses. Lessee shall bear the cost of
all utilities.
ARTICLE X. INSURANCE
Section 10.1. Insurance. Lessee at Lessee's own expense and cost shall
maintain insurance protecting and indemnifying Lessee, Lessor and their assigns
against any and all claims for injury and/or damage to persons or property or
for the loss of life or of property occurring in or about the premises occupied
by Lessee. Such insurance shall not be less than One Million Dollars
($1,000,000) in respect of bodily injury, death to any one person and not less
than Three Million Dollars ($3,000,000) in respect of any one occurrence or
accident and not less than One Hundred Thousand Dollars ($100,000) for property
damage. Lessee shall, at its own expense, provide such insurance as it may deem
necessary to protect itself for damage by fire or other casualty occurring
within the space leased by Lessee. On or
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before the Commencement Date, Lessee shall furnish Lessor with a certificate
evidencing the aforesaid coverage.
Section 10.2 Waiver of Subrogation. Lessor and Lessee agree (to the
extent that such agreement does not invalidate coverage under any policy of
insurance) that, in the event the demised premises, or any part thereof, are
damaged or destroyed by fire or other casualty that is covered by insurance of
the Lessor or Lessee, or the sublessees, assignees or transferees of Lessee, the
rights of any party against the other or against the employees, agents or
licensees of any part, with respect to such damage or destruction and with
respect to any loss resulting therefrom, including the interruption of the
business of any of the parties, are hereby waived to the extent of the coverage
of said insurance. Lessor and Lessee further agree that all policies of fire,
extended coverage, business interruption and other insurance covering the
demised premises or the contents therein shall, if possible, provide that the
insurance shall not be impaired if the insureds have waived their right of
recovery from any person or persons prior to the date and time of loss or
damage. Any additional premiums for such clause or endorsement shall be paid by
the primary insured.
ARTICLE XI. DAMAGE BY FIRE OR OTHER CASUALTY
Section 11.1. Damages. In the event of total or partial destruction of
or damage to the leased premises by fire or any other cause during the term
hereof, Lessor shall be obligated to and shall with due diligence rebuild or
restore the leased premises to a condition comparable to that existing prior to
the occurrence of said destruction or damage.
If any such destruction or damage to the leased premises is such as to
prevent the operation of Lessee's business on the leased premises, or to make it
impractical so to do, then the rent, taxes and any other charges to be paid by
Lessee hereunder shall abate from the occurrence of any destruction or damage up
to and including the time that the leased premises has been rebuilt or restored.
The amount of such abatement is to be determined by taking a fraction, the
numerator of which shall be the square foot area of the building which is a part
of the leased premises which is usable in the operation of Lessee's business on
the leased premises following any destruction or damage thereto and the
denominator of which shall be the total square foot area, inside dimensions, of
such building. The amount of which results from the multiplication of such
fraction by all rent and taxes and all other charges that would have been due
from Lessee to Lessor hereunder but not for the destruction or damage, shall be
the amount payable to Lessee for the period commencing with any destruction or
damage and terminating with the completion by Lessor, of the aforesaid
rebuilding or restoration.
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In the event of the destruction of more than fifty percent (50%) of the
leased premises, either Lessor or Lessee shall have the option to terminate this
lease upon notice to the other within thirty (30) day of such destruction.
ARTICLE XII. ASSIGNMENT; SUBLETTING
Section 12.1. Assignment. Lessee shall not assign or sublet the
premises without the prior written consent of Lessor. A change in identity of
Lessee, by virtue of acquisition, merger, consolidation, or other corporate
reorganization shall not be deemed to be an assignment or sublease. Lessor shall
have the right to withhold its consent to assign or sublet the premises for any
reason. Lessee acknowledges that Lessor has obtained financing which may require
assignment of this Lease. Lessee expressly consents to such assignment. Lessee
may not sublet or assign without the prior written consent of Lessor, which
consent may not be unreasonably withheld. The foregoing notwithstanding, the
parties agree that Tultex is pre-approved as an acceptable assignee or sublessee
of this Lease.
Section 12.2. Subordination. Lessee's rights under this Lease Agreement
are subordinate to the terms and conditions of Lessor's deed of trust as
executed with Lessor's lending institution and is further subject to the
security interest of that lending institution. Upon Lessor's request, Lessee
shall agree to subordinate this lease to any mortgage or trust deeds which may
hereafter be placed on the demised premises and to any and all advances to be
made thereunder, and to the interest thereon, and all renewals, replacements and
extensions thereof, and shall execute any and all further instruments necessary
to that purpose, provided such mortgagee or trustee named in such mortgage or
trust deeds shall agree to recognize the lease and the rights under this Lease
in the event of foreclosure if Lessee is not in default hereunder.
ARTICLE XIII. NO LIABILITY ON LESSOR'S PART
Section 13.1. Lessor Liability. Except as specified herein, Lessor and
its agents shall not be liable for any damage to property of Lessee or of others
entrusted to employees of the Building, nor for the loss of or damage to any
property of Lessee by theft or otherwise. Lessor and its agents shall not be
liable for any injury or damage to persons or property resulting from fire,
explosion, falling plaster, steam, gas, electricity, water, rain, snow or leaks
from any part of the Building or from the pipes, alliances, or plumbing works or
from the street, or subsurface or from any other place or by dampness or any
other cause of whatsoever nature unless caused or due to the willful act or
negligence of Lessors, its agents, servants or employees; nor shall Lessor and
its agents be liable for any such damage caused by other tenants or persons in
the Building or caused by operations in construction of any private, public or
quasi-public work; nor shall Lessor be liable for damages or injury to the
person or property of Lessee or others unless caused by the willful act or
negligence of
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Lessor. Notwithstanding any provision herein to the contrary, Lessor shall be
liable for such damages as directly result to Lessee from failure of the Lessor
to maintain or repair, with reasonable promptness, those items which Lessor is
required to maintain and repair. Upon receiving notice from Lessee that
maintenance or repairs are required, Lessor shall have a commercially reasonable
time to repair the same and it shall not be liable for any damages sustained by
Lessee during a commercially reasonable repair period. If Lessor shall fail to
perform such maintenance or repair within a commercially reasonable time, then
Lessor shall be responsible for such damages sustained by Lessee upon Lessor's
failure to maintain and repair the premises in a commercially reasonable time;
however, in no event shall Lessor be held responsible for indirect or
consequential damages, such as loss of profit, goodwill, etc.
ARTICLE XIV. CONDEMNATION
Section 14.1. Condemnation of Premises. In the event that all or a
material part of the Building shall be condemned or taken in any manner for any
public or quasi-public use, this Lease Agreement shall cease and terminate as of
the date of the vesting of title. A condemnation of part of the parking area
shall not work a termination of the Lease Agreement unless the part so taken
renders the Lessee's operation practically impossible, in which event this Lease
Agreement shall cease and terminate. In the event of any condemnation or taking
hereinabove mentioned which causes a termination of the Lease Agreement, Lessor
shall be required to account to Lessee for the condemnation award to the extent
that such condemnation award includes compensation to Lessor for improvements
installed at Lessee's sole expense.
ARTICLE XV. DEFAULTS; REMEDIES
Section 15.1. Default and Remedies.
(a) If Lessee defaults (1) in fulfilling any of the covenants of this
Lease Agreement requiring the payment of rent or additional rent, or (2) in
complying with any of the other terms, conditions or provisions of this Lease
Agreement, or (3) if Lessee ceases to conduct its business in the demised
premises or leaves the same vacant, then, in the case of nonpayment of rent
which continues for ten (10) days after Lessor serves a written notice upon
Lessee specifying such default, or if Lessee defaults in any one or more of the
events referred to in (2) or (3) above, then upon Lessor's serving a fifteen
(15) day written notice upon Lessee specifying the nature of said default and
upon the expiration of said fifteen (15) days, if Lessee shall have failed to
comply with or remedy such default, or if said default or omission complained of
shall be of such a nature that the same cannot be completely cured or remedied
within said fifteen (15) day period, and if Lessee shall not have diligently
commenced curing such default with such fifteen (15) day period, and shall not
thereafter with reasonable diligence and in good faith proceed to remedy or cure
such default, then
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Lessor may serve a written fifteen (15) day notice of cancellation of this Lease
Agreement upon Lessee and upon the expiration of said fifteen (15) days, this
Lease Agreement and the term hereunder shall end and expire as fully and
completely as if the date of expiration of such fifteen (15) day period were the
day herein definitely fixed for the end and expiration of this Lease Agreement
and the term thereof and Lessee shall then quit and surrender the demised
premises to Lessor but Lessee shall remain liable as hereinafter provided.
(b) If the fifteen (15) day notice of cancellation provided for in (a)
hereof shall have been given and the term shall expire as aforesaid; or if
Lessee shall make default after ten (10) days notice and the payment of the rent
set forth herein or any item of additional rent herein mentioned, then and in
any of such events, Lessor may without further notice re-enter the demised
premises either by force or otherwise and dispossess Lessee by summary
proceedings or otherwise, and the legal representatives of Lessee or other
occupant of the demised premises and remove their effects and hold the premises
as if this Lease Agreement had not been made, but Lessee shall remain liable
hereunder as hereinafter provided and Lessee hereby waives the service of notice
of intention to re-enter or institute legal proceedings to that end.
Section 15.2. Rent Deficiency. In case of any such default, re-entry,
expiration and/or dispossess by summary proceedings or otherwise, (a) the rent
and additional rent shall become due thereupon and be paid up to the time of
such re-entry, or dispossess together with such expenses as Lessor may incur for
legal expenses, attorney's fees, brokerage, and/or putting the demised premises
in good order or for preparing the same for re-rental; (b) Lessor may re-let the
premises or any part or parts thereof, either in the name of lessor or otherwise
for a term or terms, which may at Lessor's option be less than or exceed the
period which would otherwise have constituted the balance of the term of this
Lease Agreement and may grant concessions or free rent; and/or (c) Lessee or the
legal representatives of Lessee shall also pay Lessor's liquidated damages for
the failure of Lessee to observe and perform said Lessee's covenants herein
contained, any deficiency between the rents and additional rents hereby reserved
and/or covenanted to be paid and the net amount, if any, of the rents collected
or to be collected on account of the lease or leases of the demised premises for
each month of the period which would otherwise have constituted the balance of
the term of this Lease Agreement. The failure or refusal of Lessor to re-let the
premises or any part or parts thereof shall not release or affect Lessee's
liability for damages although Lessor shall be under a duty to exercise
diligence and good faith in an effort to re-let the same and mitigate damages.
In computing such damages, there shall be added to said deficiency such expenses
as Lessor may incur in connection with re-letting such as legal expenses,
attorney's fees, brokerage, and for keeping the demised premises in good order
or for preparing the same for re-letting. Any such damages shall be paid in
monthly installments by Lessee on the rent date specified in this Lease
Agreement and any suit brought to collect the amount of the deficiency for any
month shall not prejudice in any way the rights of Lessor to collect the
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deficiency for any subsequent month or months by a similar proceeding. Lessor
may at Lessor's option make such alterations, repairs or replacements in the
demised premises as Lessor in Lessor's sole judgment considers advisable and
necessary for the purpose of re-letting the demised premises; and the making of
such alterations, repairs or replacements shall not operate or be construed to
release Lessee from liability hereunder as aforesaid. Lessor shall in no event
be liable in any way whatsoever for failure to re-let the demised premises
provided Lessor makes a good faith effort to re-let the same, or in the event
that the demised premises are re-let for failure to collect the rent thereunder
provided reasonable diligence is used in an attempt to collect such rent. Any
such action against Lessee may be an action for the full amounts of all rents
and damages suffered or to be suffered by Lessor. In the event of a breach by
Lessee of any of the covenants or provisions hereof, Lessor shall have the right
of injunction and the right to invoke any remedy allowed at law or in equity as
if re-entry, summary proceedings and other remedies were not herein provided
for. Mention in this Lease Agreement of any particular remedy shall not preclude
Lessor from any other remedy, in law or in equity, the foregoing remedies and
rights of Lessor are cumulative. Lessee hereby expressly waives any and all
rights of redemption granted by or under any present or future laws in the event
of Lessee being evicted or dispossessed for any cause, or in the event of Lessor
obtaining possession of the demised premises, by reason of the violation by
Lessee of any of the covenants and conditions of this Lease Agreement or
otherwise.
Section 15.3. Default by Lessor. Should Lessor default in Lessor's duty
to pay taxes, insurance and debt service payments to a lending institution or in
its obligation to maintain the roof, Lessee shall have and enjoy, in addition to
any other rights under this Lease or under common law or by statute, the right
to divert rent payments hereunder from Lessor to pay directly taxes, insurance
required to be maintained by Lessor, bank payments a lending institution or to
necessary roof repairs. Provided, however, that Lessee's right to divert rent
payments for roof repairs shall be conditioned upon Lessee's reasonable notice
to Lessor of the necessity for repairs and upon Lessor's failure to make such
repairs in a commercially reasonably time.
ARTICLE XVI. COVENANT OF QUIET ENJOYMENT
Section 16.1. Quiet Enjoyment. Lessor warrants and represents that it
has full authority to execute this Lease Agreement for the term aforesaid and
covenants that upon Lessee's paying the rent and performing the covenants to be
observed and performed on Lessee's part, Lessee may peaceably and quietly have,
hold and enjoy the demised premises, subject, nevertheless, to the terms and
conditions of this Lease Agreement.
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ARTICLE XVII. NOTICES
Section 17.1. Notice to Lessor. Any notice required or permitted to be
given to Lessor shall be deemed to have been properly given upon mailing the
same by certified or registered mail to Lessor, c/o Stanley W. Bowles
Corporation, P.0. Box 4706, Martinsville, VA 24115-4706. Lessor reserves the
right to designate another representative for the purpose of receiving notices
required or permitted to be made hereunder provided the designation is made in
writing and delivered to Lessee.
Section 17.2. Notice to Lessee. Any notice required or permitted to be
given to Lessee shall be deemed to have been properly given upon mailing the
same by certified or registered mail to Pluma, Inc., Post Office Box 487, Eden,
North Carolina 27288, ATTN: R. Duke Ferrell, Jr. Lessee reserves the right to
designate another representative for the purpose of receiving notices required
or permitted to be made hereunder provided the designation is made in writing
and delivered to Lessor.
ARTICLE XVIII. EXTENSION OPTION GRANTED LESSEE
Section 18.1. Extensions. Provided that Lessee shall be in compliance
with all other terms hereof and further provided that Lessee shall have given
Lessor at least twelve (12) months written notice of its intention to do so,
Lessee shall have the option to extend this lease for four (4) additional five
(5) year periods, upon the said terms and conditions hereof, except that rent
increases during such extensions shall be agreed upon by good faith negotiation
between the parties. If the parties are unable, in good faith, to agree on the
amount of rent increases to be paid during such renewal terms at least six (6)
months prior to the expiration of the term then in effect, then such renewal
options shall lapse and become void and of no effect whatsoever.
Section 18.2. Alterations; Improvements. Lessee shall have the right to
make alterations to the premises, conditioned upon Lessee obtaining Lessor's
approval, which said approval shall not be unreasonably withheld. Lessee's
request for Lessor's approval shall be in writing describing the proposed
alterations in detail and Lessor's response to Lessee shall be in writing. All
improvements shall become the property of Lessor upon termination of occupancy.
ARTICLE XIX. MISCELLANEOUS
Section 19.1. Entire Agreement. This Agreement constitutes the entire
understanding between the parties and shall be conclusively deemed to supersede
all prior written or verbal communications between the parties. This Agreement
may not be modified or terminated unless in writing, signed by the party to be
bound thereby.
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Section 19.2. Governing Law. This Agreement is to be governed and
construed in accordance with the laws of the Commonwealth of Virginia.
Section 19.3. Attorneys' Fees. In the event of a breach of this
Agreement, the breaching party shall be responsible for all cost and expenses of
the other party, including reasonable attorneys' fees.
WITNESS the following signatures and seals the day and year first above
written:
LESSOR:
NORTH BOWLES PARTNERSHIP, a
Virginia General Partnership,
BY: /s/ David W. Bowles
BY: /s/ Barry A. Bowles
BY: /s/ Stanley w. Bowles, Jr.
LESSEE:
PLUMA, INC.
BY: /s/ R. Duke Ferrell, Jr.
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COMMONWEALTH OF VIRGINIA
CITY OF MARTINSVILLE, TO-WIT:
The foregoing was acknowledged before me, this 16th day of January ,
1996, by Barry A. Bowles, David W. Bowles and Stanley W. Bowles, Jr., partners
of North Bowles Partnership, a Virginia general partnership.
My commission expires: 11-30-98
/s/ Tammy B. Davis
NOTARY PUBLIC
STATE OF Virginia , COUNTY OF Henry , TO-WIT:
The foregoing was acknowledged before me, this 30 day of January ,
1996, by R. Duke Ferrell, Jr. , the President of Pluma, Inc.
My commission expires: 1-31-98
/s/ M. Cheryl Wine
NOTARY PUBLIC
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LEASE AGREEMENT
THIS LEASE AGREEMENT made and entered into as of the
1st day of December, 1995, by and between NORTH BOWLES PARTNERSHIP,
a Virginia General Partnership, party of the first part and Lessor
herein, and PLUMA, INC., party of the second part and Lessee
herein;
W I T N E S S E T H:
WHEREAS, Lessor is the owner of a certain lot or
parcel of land off State Route 108 in Martinsville Magisterial
District of Henry County, Virginia (see Exhibit 1 attached to the
Lease Agreement described hereinafter), on which is located certain
improvements containing a total of 75,700 square feet of floor
area; and
WHEREAS, Lessor desires to lease to Lessee said land
and building as shown on Exhibit 1 and Lessee desires to lease the
same from Lessor; and
WHEREAS, Lessor and Lessee desire to set forth the
terms and conditions of such lease herein;
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I. DEFINITIONS AND RULES OF CONSTRUCTION
Section 1.1. Definitions. In addition to other
terms defined elsewhere in this Agreement, the following terms
shall have the following meanings in this Agreement unless the
context requires otherwise:
"Lease" shall mean this Agreement including any
amendments hereto;
"Authorized Representative of Lessee" shall mean
such person or persons as may be designated by Lessee;
"Authorized Representative of Lessor" shall mean
such person or persons as may be designated by Lessor;
"Building" shall mean the building containing 75,700
square feet as shown on Exhibit l; and
"Land" shall mean the real estate described in
Exhibit 1 attached hereto.
Section 1.2. Rules of Construction. The following
rules shall apply to the construction of this Lease Agreement
unless the context otherwise requires:
LAW OFFICES
YOUNG, HASKINS
MANN & GREGORY
MARTINSVILLE, VA.
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(a) Singular words shall connote the plural number
as well as the singular and vice versa.
(b) All references herein to particular articles or
sections are references to articles or sections of this Lease
Agreement.
(c) The headings herein are solely for convenience
of reference and shall not constitute a part of this Lease
Agreement nor shall they affect its meaning, construction or
effect.
ARTICLE II. REPRESENTATIONS
Section 2.1. Representations of Lessor. The Lessor
makes the following representations as the basis for its
undertakings hereunder: Lessor is duly organized as a Virginia
general partnership under the laws of the Commonwealth of Virginia
and has the power and authority to enter into the transactions
contemplated by this Lease Agreement and to carry out its
obligations hereunder and by proper action has duly authorized the
execution and delivery of, and the performance under, this Lease
Agreement.
Section 2.2. Representations of Lessee. The Lessee
makes the following representations as the basis for its
undertaking hereunder: Lessee is a corporation duly organized and
existing and has the power to enter into this Agreement and the
transactions contemplated hereby and to perform its obligations
hereunder and by proper action has duly authorized the execution
and delivery of and the performance under this Lease Agreement.
ARTICLE III. PREMISES
Section 3.1. Premises. Lessor hereby leases to
Lessee and Lessee hereby leases from Lessor the Land and the
Building containing approximately 75,700 square feet of floor area,
as described on Exhibit 1 attached hereto, all of which have been
inspected and accepted in their present condition. Lessor
represents and warrants that the Land and Building will be in the
same condition on the date Lessee takes possession, reasonable wear
and tear and items removed by current tenant excepted, and Lessee
shall have the right to inspect and verify.
ARTICLE IV. COMMENCEMENT OF TERM
Section 4.1. Term. To have and hold the same unto
Lessee for the initial term, commencing on
December 1, 1995, the commencement date, and ending on February 1
1998, all on the covenants, conditions, and agreements hereinbefore
and hereinafter stated.
LAW OFFICES
YOUNG, HASKINS
MANN & GREGORY
MARTINSVILLE, VA.
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ARTICLE V. RENT
Section 5.1. Rent Payments. During the term of this
Lease Agreement, Lessee covenants and agrees to pay the Lessor a
monthly rent, the amount of which said monthly rent shall be
Fourteen Thousand Five Hundred and No/lOOths Dollars ($14,500.00)
per month. Rent shall be payable in equal monthly installments in
advance on the first day of each month during the term of this
Lease Agreement at the offices of Lessor or such place as Lessor
may designate without any offset or deduction. In addition to said
rent, a late charge of five percent (5%) of the amount of any
monthly rental payment shall be due and payable if such monthly
rental payment is not received by Lessor on or before the tenth
(lOth) day of the month in which it was due.
Section 5.2. Additional Rent. The rent referred to
herein shall be automatically increased on December 1 of each lease
year during the term of this Lease if the cost of living has at
that time increased since the previous December 1 as evidenced by
a change in the official Consumer Price Index for Urban Wage
Earners and Clerical Workers (including single workers) published
by the Bureau of Labor Statistics, United States Department of
Labor (1957-59 = 100) hereinafter referred to as "Bureau of Labor
Statistics Consumer Price Index." The rent for each lease year, or
part thereof should the term sooner expire, shall be increased by
one half (1/2) of an amount which shall bear the same proportion to
the previous year's rent as the Bureau of Labor Statistics Consumer
Price Index for the calendar year preceding the commencement of
such one-year period bears to the Bureau of Labor Statistics
Consumer Price Index for the preceding year of this lease. These
increases are to be compounded from year to year. If the Bureau of
Labor Statistics changes the form or basis of calculating Bureau of
Labor Statistics Consumer Price Index, the parties agree that
payments hereunder shall be calculated from the most recent cost of
living index statistics published by the Bureau of Labor
Statistics.
The parties agree that Lessee may be required from
time to time to pay additional rent during the initial term or any
extended or renewal term, which additional rent shall be due if
Lessor's costs of taxes and/or insurance relating to the Land and
Building increase. If such increase occurs, Lessee shall pay an
amount, as additional rent, equal to one-half (1/2) of such
increase, payable in equal monthly installments. If Lessor
verifies in writing to Lessee that real estate taxes and/or
insurance on the Land and Building have increased, Lessee agrees to
an increase in rent equal to one-half (1/2) of the cost of such
increase.
LAW OFFICES
YOUNG, HASKINS
MANN & GREGORY
MARTINSVILLE, VA.
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ARTICLE VI. USE
Section 6.1. Use of the Premises. Lessee shall use
and occupy the premises for its legal activities, which shall
include the operation of a textile warehouse manufacturing facility
and general offices related thereto and for no other purpose
without the express consent of Lessor. Lessee shall not suffer or
permit the premises or any part thereof to be used in any manner,
or anything to be done therein, or suffer or permit anything to be
brought into or kept in the premises which would in any way (i)
violate any law or requirement of public authorities; (ii) cause
structural injury to the Building or any part thereof; (iii)
interfere with the normal operations of the heating,
air-conditioning, ventilating, plumbing or other mechanical or
electrical systems of the Building or the elevators installed
therein; (iv) constitute a public or private nuisance; (v) alter
the appearance of the exterior of the Building or conduct any major
alterations on the interior of the Building without the written
consent of Lessor.
Section 6.2. Hazardous Materials. Lessee shall not
cause or permit any Hazardous Material to be brought on or kept or
used in or about the Leased Premises by Lessee, its agents,
employees, contractors or invitees without the prior written
consent of Lessor, which Lessor shall not unreasonably withhold so
long as Lessee demonstrates to Lessor's reasonable satisfaction
that the Hazardous Material is necessary or useful to Lessee's
business and will be used, kept and stored in a manner that
complies with all laws, rules, statutes, and ordinances regulating
any such Hazardous Materials so brought on or used or kept in or
about the premises.
If Lessee breaches the obligation stated above in this
paragraph, or if the presence of hazardous material on or about the
premises caused or permitted by Lessee results in contamination of
the premises, or if contamination of the premises or surrounding area
by Hazardous Material otherwise occurs for which the Lessee is
legally liable to Lessor for damage resulting therefrom, Lessee
shall indemnify, defend and hold Lessor completely harmless from
any and all claims, judgments, damages, penalties, fines, costs,
liabilities or losses (including, without limitation, diminution in
value of the premises or the improvements thereon, damages for the
loss or restriction on the use of rentable or usable space or of any
immunity of the premises, damages arising from any adverse impact on
marketing of space in the premises, and sums paid in settlement of
claims, attorneys' fees, consultant fees, and expert fees) that arise
during or after the term of this Lease as a result of that
contamination. This indemnification of Lessor by Lessee includes,
without limitation, costs incurred in connection with any
investigation of site conditions or any cleanup, remedial, removal or
restoration work required by any federal, state or local governmental
agency or political
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MANN & GREGORY
MARTINSVILLE, VA.
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subdivision because of Hazardous Material present in the soil or
ground water on, under or about the premises. Without limiting the
foregoing, if the presence of any Hazardous Material on or about
the premises caused or permitted by Lessee results in the
contamination of the premises or surrounding area or causes the
premises or surrounding area to be in violation of any laws, rules,
statutes or ordinances, Lessee shall promptly take all actions at
its sole expense as is necessary to return the premises and
surrounding area to the condition existing before the introduction
of any such Hazardous Material, provided, that Lessor's approval of
those actions shall first be obtained, which approval shall not be
unreasonably withheld so long as those actions would not
potentially have any material adverse long-term or short-term
effect on the premises or surrounding area.
As used herein, the term "Hazardous Materials" shall
mean and include any hazardous or toxic materials, substances, or
wastes, including (i) any material, substances or wastes that are
toxic, ignitable, corrosive or reactive and that are regulated by
any local governmental authority, any agency of the Commonwealth of
Virginia, or any agency of the United States government; (ii)
asbestos; (iii) petroleum and petroleum-based products; (iv) urea
formaldehyde foam insulation; (v) polychlorinated biphenyls
("PCBs"); (vi) freon and other chlorofluorocarbons; (vii) those
designated as hazardous substances pursuant to Section 1004 of the
Federal Resource Conservation and Recovery Act, 42 USCS 6901, et
seq., and (viii) those designated as hazardous substances pursuant
to Section 101 of the Comprehensive Environmental Response,
Compensation and Recovery Act, 42 USCS 9601, et seq.
Lessee shall promptly notify Lessor of and shall
promptly provide Lessor with true, correct, complete and legible
copies of all of the following environmental items relating to the
leased premises that may be filed or prepared by or on behalf of,
or delivered to or served on, Lessee or Lessee's agents: reports
filed pursuant to any self-reporting requirements, reports filed
pursuant to any applicable laws or this Lease, all permit
applications, permits, monitoring reports, workplace exposure, and
community exposure warnings or notices, and all other reports,
disclosures, plans, manifests or documents (even those that may be
characterized as confidential) relating to water discharges, air
pollution, waste generation or disposal, underground storage tanks
or Hazardous Materials.
The provisions of this Section, including, without
limitation, the indemnification provisions set forth herein, shall
survive any termination or expiration of this Lease.
ARTICLE VII. REPAIRS; ALTERATIONS; FIXTURES
Section 7.1. Lessor Maintenance. Lessor shall, at
Lessor's own expense, maintain only the roof, exterior walls,
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MANN & GREGORY
MARTINSVILLE, VA.
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foundation and other structural portions of the premises, except
damages occasioned by acts or omissions of Lessee or its employees
or invitees.
Section 7.2. Lessee Maintenance. Lessee shall
maintain the demised premises in the condition it is in on the day
possession is accepted by Lessee and suffer no damage or injury to
it save ordinary wear and tear. Lessee shall be responsible for
all repair and maintenance of any kind, nature or description,
excepting only maintenance of the roof, exterior walls, foundation
and other structural portions (except damages occasioned by acts or
omissions of Lessee or its employees or invitees). Lessee shall be
responsible to maintain the interior of its premises including all
electrical fixtures, plumbing fixtures, trade fixtures, fire system
and security devices and any and all other equipment of every kind,
nature or description. Lessee at its own expense shall cause such
regular, periodic inspections as may be reasonably required by
Lessor to be performed on the fire control system serving the
premises in accordance with Factory Mutual requirements and submit
copies of same to Lessor.
ARTICLE VII. TAXES
Section 8.1. Payment of Taxes. Lessor shall be
responsible to pay and shall pay when they are due all real estate
taxes attributable to Lessor's ownership of the Land and Building,
subject, however, to the provisions of Section 5.2 above.
ARTICLE IX. UTILITIES
Section 9.1. Payment of Utility Expenses. Lessee
shall bear the cost of all utilities.
ARTICLE X. INSURANCE
Section 10.1. Insurance. Lessee at Lessee's own
expense and cost shall maintain insurance protecting and
indemnifying Lessee, Lessor and their assigns against any and all
claims for injury and/or damage to persons or property or for the
loss of life or of property occurring in or about the premises
occupied by Lessee. Such insurance shall not be less than One
Million Dollars ($l,000,000) in respect of bodily injury, death to
any one person and not less than Three Million Dollars ($3,000,000)
in respect of any one occurrence or accident and not less than One
Hundred Thousand Dollars ($100,000) for property damage. Lessee
shall, at its own expense, provide such insurance as it may deem
necessary to protect itself for damage by fire or other casualty
occurring wlthin the space leased by Lessee. On or before the
commencement date, Lessee shall furnish Lessor with a certificate
evidencing the aforesaid coverage.
LAW OFFICES
YOUNG, HASKINS
MANN & GREGORY
MARTINSVILLE, VA.
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Section 10.2 Waiver of Subroqation. Lessor and
Lessee agree (to the extent that such agreement does not invalidate
coverage under any policy of insurance) that, in the event the
demised premises, or any part thereof, are damaged or destroyed by
fire or other casualty that is covered by insurance of the Lessor
or Lessee, or the sublessees, assignees or transferees of Lessee,
the rights of any party against the other or against the employees,
agents or licensees of any part, with respect to such damage or
destruction and with respect to any loss resulting therefrom,
including the interruption of the business of any of the parties,
are hereby waived to the extent of the coverage of said insurance.
Lessor and Lessee further agree that all policies of fire, extended
coverage, business interruption and other insurance covering the
demised premises or the contents therein shall, if possible,
provide that the insurance shall not be impaired if the insureds
have waived their right of recovery from any person or persons
prior to the date and time of loss or damage. Any additional
premiums for such clause or endorsement shall be paid by the
primary insured.
ARTICLE XI. DAMAGE BY FIRE OR OTHER CASUALTY
Section 11.1. Damages. In the event of total or
partial destruction of or damage to the leased premises by fire or
any other cause during the term hereof, Lessor shall be obligated
to and shall with due diligence rebuild or restore the leased
premises to a condition comparable to that existing prior to the
occurrence of said destruction or damage.
If any such destruction or damage to the leased
premises is such as to prevent the operation of Lessee's business
on the leased premises, or to make it impractical so to do, then
the rent, taxes and any other charges to be paid by Lessee
hereunder shall abate from the occurrence of any destruction or
damage up to and including the time that the leased premises has
been rebuilt or restored. The amount of such abatement is to be
determined by taking a fraction, the numerator of which shall be
the square foot area of the building which is a part of the leased
premises which is usable in the operation of Lessee's business on
the leased premises following any destruction or damage thereto and
the denominator of which shall be the total square foot area,
inside dimensions, of such building. The amount of which results
from the multiplication of such fraction by all rent and taxes and
all other charges that would have been due from Lessee to Lessor
hereunder but not for the destruction or damage, shall be the
amount payable to Lessee for the period commencing with any
destruction or damage and terminating with the completion by
Lessor, of the aforesaid rebuilding or restoration.
In the event of the destruction of more than fifty
percent (50%) of the leased premises, either Lessor or Lessee shall
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MANN & GREGORY
MARTINSVILLE, VA.
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have the option to terminate this lease upon notice to the other
within thirty (30) day of such destruction.
ARTICLE XII. ASSIGNMENT; SUBLETTING
Section 12.1. Assiqnment. Lessee shall not assign or
sublet the premises without the prior written consent of Lessor. A
change in identity of Lessee, by virtue of acquisition, merger,
consolidation, or other corporate reorganization shall not be deemed
to be an assignment or sublease. Lessor shall have the right to
withhold its consent to assign or sublet the premises for any reason.
Lessee acknowledges that Lessor has obtained financing which may
require assignment of this Lease. Lessee expressly consents to such
assignment. Lessee may not sublet or assign without the prior written
consent of Lessor, which consent may not be unreasonably withheld.
Section 12.2. Subordination. Lessee's rights under
this Lease Agreement are subordinate to the terms and conditions of
Lessor's deed of trust as executed with Lessor's lending institution
and is further subject to the security interest of that lending
institution. Upon Lessor's request, Lessee shall agree to subordinate
this lease to any mortgage or trust deeds which may hereafter be
placed on the demised premises and to any and all advances to be made
thereunder, and to the interest thereon, and all renewals,
replacements and extensions thereof, and shall execute any and all
further instruments necessary to that purpose, provided such
mortgagee or trustee named in such mortgage or trust deeds shall
agree to recognize the lease and the rights under this Lease in the
event of foreclosure if Lessee is not in default hereunder.
ARTICLE XIII. NO LIABILITY ON LESSOR'S PART
Section 13.1. Lessor Liability. Except as specified
herein, Lessor and its agents shall not be liable for any damage to
property of Lessee or of others entrusted to employees of the Lessee,
nor for the loss of or damage to any property of Lessee by theft or
otherwise. Lessor and its agents shall not be liable for any injury
or damage to persons or property resulting from fire, explosion,
falling plaster, steam, gas, electricity, water, rain, snow or leaks
from any part of the Building or from the pipes, alliances, or
plumbing works or from the street, or subsurface or from any other
place or by dampness or any other cause of whatsoever nature unless
caused or due to the willful act or negligence of Lessors, its
agents, servants or employees; nor shall Lessor and its agents be
liable for any such damage caused by other tenants or persons in the
Building or caused by operations in construction of any private,
public or quasi-public work; nor shall Lessor be liable for damages
or injury to the person or property of Lessee or others unless caused
by the willful act or negligence of Lessor. Notwithstanding any
provision herein to the contrary,
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YOUNG, HASKINS
MANN & GREGORY
MARTINSVILLE, VA.
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Lessor shall be liable for such damages as directy result to
Lessee from failure of the Lessor to maintain or repair, with
reasonable promptness, those items which Lessor is required to
maintain and repair. Upon receiving notice from Lessee that
maintenance or repairs are required, Lessor shall have a
commercially reasonable time to repair the same and it shall not be
liable for any damage sustained by Lessee during a commercially
reasonable repair period. If Lessor shall fail to perform such
maintenance or repair within a commercially reasonable time, then
Lessor shall be responsible for such damages sustained by Lessee
upon Lessor's failure to maintain and repair the premises in a
commercially reasonable time; however, in no event shall Lessor be
held responsible for indirect or consequential damages, such as
loss of profit, goodwill, etc.
ARTICLE XIV. CONDEMNATION
Section 14.1. Condemnation of Premises. In the
event that all or a material part of the Building shall be
condemned or taken in any manner for any public or quasi-public
use, this Lease Agreement shall cease and terminate as of the date
of the vesting of title. A condemnation of part of the parking
area shall not work a termination of the Lease Agreement unless the
part so taken renders the Lessee's operation practically
impossible, in which event this Lease Agreement shall cease and
terminate. In the event of any condemnation or taking hereinabove
mentioned which causes a termination of the Lease Agreement, Lessor
shall be required to account to Lessee for the condemnation award
to the extent that such condemnation award includes compensation to
Lessor for improvements installed at Lessee's sole expense.
ARTICLE XV. DEFAULTS; REMEDIES
Section 15.1. Default and Remedies.
(a) If Lessee defaults (l) in fulfilling any of the
covenants of this Lease Agreement, requiring the payment of rent or
additional rent, or (2) in complying with any of the other terms,
conditions or provisions of this Lease Agreement, or (3) if Lessee
ceases to conduct its business in the demised premises or leaves
the same vacant, then, in the case of nonpayment of rent which
continues for ten (10) days after Lessor provides written notice to
Lessee specifying such default, or if Lessee defaults in any one or
more of the events referred to in (2) or (3) above, then upon
Lessor's providing a fifteen (15) day written notice upon Lessee
specifying the nature of said default and upon the expiration of
said fifteen (15) days, if Lessee shall have failed to comply with
or remedy such default, or if said default or omission complained
of shall be of such a nature that the same cannot be completely
cured or remedied within said fifteen (15) day period, and if
Lessee shall not have diligently commenced curing such default with
such fifteen (15) day period, and shall not thereafter with
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MANN & GREGORY
MARTINSVILLE, VA.
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reasonable diligence and in good faith proceed to remedy or cure
such default, then Lessor may provide a written fifteen (15) day
notice of cancellation of this Lease Agreement to Lessee and upon
the expiration of said fifteen (15) days, this Lease Agreement and
the term hereunder shall end and expire as fully and completely as
if the date of expiration of such fifteen (15) day period were the
day herein definitely fixed for the end and expiration of this
Lease Agreement and the term thereof and Lessee shall then quit and
surrender the demised premises to Lessor but Lessee shall remain
liable as hereinafter provided.
(b) If the fifteen (15) day notice of cancellation
provided for in (a) hereof shall have been given and the term shall
expire as aforesaid; or if Lessee shall remain in default after ten
(10) days notice in the payment of the rent set forth herein or any
item of additional rent herein mentioned, then and in any of such
events, Lessor may without further notice re-enter the demised
premises either by force or otherwise and dispossess Lessee by
summary proceedings or otherwise, and the legal representatives of
Lessee or other occupant of the demised premises and remove their
effects and hold the premises as if this Lease Agreement had not
been made, but Lessee shall remain liable hereunder as hereinafter
provided and Lessee hereby waives the service of notice of
intention to re-enter or institute legal proceedings to that end.
Section 15.2. Rent Deficiency. In case of any such
default, re-entry, expiration and/or dispossess by summary
proceedings or otherwise, (a) the rent and additional rent shall i
become due thereupon and be paid up to the time of such re-entry,
or dispossess together with such expenses as Lessor may incur for
legal expenses, attorney's fees, brokerage, and/or putting the
demised premises in good order or for preparing the same for
re-rental; (b) Lessor may re-let the premises or any part or parts
thereof, either in the name of lessor or otherwise for a term or
terms, which may at Lessor's option be less than or exceed the
period which would otherwise have constituted the balance of the
term of this Lease Agreement and may grant concessions or free
rent; and/or (c) Lessee or the legal representatives of Lessee
shall also pay Lessor's liquidated damages for the failure of
Lessee to observe and perform said Lessee's covenants herein
contained, any deficiency between the rents and additional rents
hereby reserved and/or covenanted to be paid and the net amount, if
any, of the rents collected or to be collected on account of the
lease or leases of the demised premises for each month of the
period which would otherwise have constituted the balance of the
term of this Lease Agreement. The failure or refusal of Lessor to
re-let the premises or any part or parts thereof shall not release
or affect Lessee's liability for damages although Lessor shall be
under a duty to exercise diligence and good faith in an effort to
re-let the same and mitigate damages. In computing such damages,
there shall be added to said deficiency such expenses as Lessor may
incur in connection with re-letting such as legal expenses,
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MANN & GREGORY
MARTINSVILLE, VA.
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attorney's fees, brokerage, and for keeping the demised premises in
good order or for preparing the same for re-letting. Any such
damages shall be paid in monthly installments by Lessee on the rent
date specified in this Lease Agreement and any suit brought to
collect the amount of the deficiency for any month shall not
prejudice in any way the rights of Lessor to collect the deficiency
for any subsequent month or months by a similar proceeding. Lessor
may at Lessor's option make such alterations, repairs or
replacements in the demised premises as Lessor in Lessor's sole
judgment considers advisable and necessary for the purpose of
re-letting the demised premises; and the making of such
alterations, repairs or replacements shall not operate or be
construed to release Lessee from liability hereunder as aforesaid.
Lessor shall in no event be liable in any way whatsoever for
failure to re-let the demised premises provided Lessor makes a good
faith effort to re-let the same, or in the event that the demised
premises are re-let for failure to collect the rent thereunder
provided reasonable diligence is used in an attempt to collect such
rent. Any such action against Lessee may be an action for the full
amounts of all rents and damages suffered or to be suffered by
Lessor. In the event of a breach by Lessee of any of the covenants
or provisions hereof, Lessor shall have the right of injunction and
the right to invoke any remedy allowed at law or in equity as if
re-entry, summary proceedings and other remedies were not herein
provided for. Mention in this Lease Agreement of any particular
remedy shall not preclude Lessor from any other remedy, in law or
in equity, the foregoing remedies and rights of Lessor are
cumulative. Lessee hereby expressly waives any and all rights of
redemption granted by or under any present or future laws in the
event of Lessee being evicted or dispossessed for any cause, or in
the event of Lessor obtaining possession of the demised premises,
by reason of the violation by Lessee of any of the covenants and
conditions of this Lease Agreement or otherwise.
Section 15.3. Default by Lessor. Should Lessor
default in Lessor's duty to pay taxes, insurance and debt service
payments to a lending institution or in its obligation to maintain
the roof, Lessee shall have and enjoy, in addition to any other
rights under this Lease or under common law or by statute, the
right to divert rent payments hereunder from Lessor to pay directly
taxes, insurance required to be maintained by Lessor, bank payments
a lending institution or to necessary roof repairs. Provided,
however, that Lessee's right to divert rent payments for roof
repairs shall be conditioned upon Lessee's reasonable notice to
Lessor of the necessity for repairs and upon Lessor's failure to
make such repairs in a commercially reasonably time.
ARTICLE XVI. COVENANT OF QUIET ENJOYMENT
Section 16.1. Quiet Enjoyment. Lessor warrants and
represents that it has full authority to execute this Lease
Agreement for the term aforesaid and covenants that upon Lessee's
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paying the rent and performing the covenants to be observed and
performed on Lessee's part, Lessee may peaceably and quietly have,
hold and enjoy the demised premises, subject, nevertheless, to the
terms and conditions of this Lease Agreement.
ARTICLE XVII. NOTICES
Section 17.1. Notice to Lessor. Any notice
required or permitted to be given to Lessor shall be deemed to have
been properly given upon mailinh the same by certified or
registered mail to Lessor, c/o Stanley W. Bowles Corporation, Post
Office Box 4706, Martinsville, Virginia 24115-4706. Lessor
reserves the right to designate another representative for the
purpose of receiving notices required or permitted to be made
hereunder provided the designation is made in writing and delivered
to Lessee.
Section 17.2. Notice to Lessee. Any notice
required or permitted to be given to Lessee shall be deemed to have
been properly given upon mailing the same by certified or
registered mail to Pluma, Inc., Post Office Box 487, Eden, North
Carolina 27288, ATTN: R. Duke Ferrell, Jr. Lessee reserves the
right to designate another representative for the purpose of
receiving notices required or permitted to be made hereunder
provided the designation is made in writing and delivered to
Lessor.
ARTICLE XVIII. ALTERATIONS
Section 18.1. Alterations; Improvements. Lessee
shall have the right to make alterations to the premises,
conditioned upon Lessee obtaining Lessor's approval, which said
approval shall not be unreasonably withheld. Lessee's request for
Lessor's approval shall be in writing describing the proposed
alterations in detail and Lessor's response to Lessee shall be in
writing. All improvements shall become the property of Lessor upon
termination of occupancy.
ARTICLE XIX. MISCELLANEOUS
Section 19.1. Entire Agreement. This Agreement
constitutes the entire understanding between the parties and shall
be conclusively deemed to supersede all prior written or verbal
communications between the parties. This Agreement may not be
modified or terminated unless in writing, signed by the party to be
bound thereby.
Section 19.2. Governing Law. This Agreement is to
be governed and construed in accordance with the laws of the
Commonwealth of Virginia.
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Section 19.3. Attorneys Fees. In the event of a
breach of this Agreement, the breaching party shall be responsible
for all cost and expenses of the other party, including reasonable
attorneys' fees.
WITNESS the following signatures and seals the day
and year first above written:
LESSOR:
NORTH BOWLES PARTNERSHIP, a
Virginia General Partnership,
BY: /s/ Barry A. Bowles
BY: /s/ David W. Bowles
BY: /s/ Stanley W. Bowles, Jr.
LESSEE:
PLUMA, INC.
BY: /s/ R. Duke Ferrell
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MANN & GREGORY
MARTINSVILLE, VA.
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COMMONWEALTH OF VIRGINIA
CITY OF MARTINSVILLE, TO-WIT:
The foregoing was acknowledged before me, this 16th
day of January , 1996, by Barry A. Bowles, David W. Bowles
and Stanley W. Bowles, Jr., partners of North Bowles Partnership,
a Virginia general partnership.
My commission expires: 11-30-98
/s/ Tammy B. Davis
NOTARY PUBLIC
STATE OF Virginia
COUNTY OF ?????? , TO-WIT:
The foregoing was acknowledged before me, this 26th
day of June 1996, by R. Duke Ferrell
the President of Pluma, Inc.
My commission expires: 11-30-2000
/s/ Tanya J. McPelk
NOTARY PUBLIC
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MANN & GREGORY
MARTINSVILLE, VA.
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NORTH CAROLINA )
) AGREEMENT
FORSYTH COUNTY )
THIS AGREEMENT is made this 4th day of December, 1990, by and between
SUPERBA, INC., a corporation organized and existing under the laws of the State
of California (hereinafter "Licensor"), and PLUMA, INC., a corporation organized
and existing under the laws of the State of North Carolina (hereinafter
"Licensee").
W I T N E S S E T H :
WHEREAS, Licensor has rights to the name, character, symbol, design,
likeness, visual representation and components thereof of "Santee", as evidenced
by Registration No. 830,629, (hereinafter collectively "Name"), such Name having
been used in promotional and advertising material in the sale of ties and sport
shirts, and is well known and recognized by the general public and is associated
in the public mind with Licensor; and
WHEREAS, Licensee desires to utilize the Name upon and in connection
with the manufacture, sale, and distributions of Articles hereinafter described.
NOW, THEREFORE, in consideration of the mutual promises herein
contained, it is agreed:
1. Licensor's Representation. The Licensor represents
that it is the sole and exclusive owner of all trademark rights and
any other proprietary rights and interest in and to the Name, free
<PAGE>
and clear of all known claims and encumbrances, and has not relinquished any
rights therein, voluntarily or involuntarily, by license, assignment,
abandonment or any other form of transfer.
2. Grant of License.
(a) Upon the terms and conditions set forth herein,
Licensor grants to Licensee, and Licensee hereby accepts, the exclusive right,
license and privilege of utilizing the Name solely upon and in connection with
the manufacture, sale, and distribution of sweatclothes, fleeceware and t-shirts
(hereinafter, the "Articles").
(b) The term of the license shall continue
perpetually.
3. Terms of Payment. Licensee shall pay to Licensor a fee of
twenty thousand dollars ($20,000) in consideration for the grant of the license.
4. Exclusivity. Nothing in this Agreement shall be construed
to prevent Licensor from utilizing the Name in any manner whatsoever so long as
such use is in no way competitive with Licensee in the fleecewear, sportswear,
t-shirt or clothing industry; provided, however, Licensor will not grant, during
the term hereof, any licenses to use the Name which would be competitive with
Licensee in the fleecewear, sportswear, t-shirt or clothing industry.
2
<PAGE>
5. Indemnification of Licensee.
(a) Licensor hereby indemnifies Licensee and
undertakes to hold it harmless against any claims or suits arising solely out of
the use by Licensee of the Name as authorized in this Agreement, provided that
prompt notice is given to Licensor of any such claim or suit, and provided,
further, that Licensor shall have the option to participate in the defense of
any suit so brought, and no settlement of any such claim or suit is made without
prior notification of Licensor.
(b) Licensee shall assist Licensor, to the extent
necessary and at the expense of Licensor, in the procurement of any protection
or defense of any of Licensor's rights to the Name; and Licensor or Licensee, if
either so desires, may commence or prosecute any claims or suits in its own
name. Licensee shall notify Licensor in writing of any infringements or
imitations by others of the Name on articles similar to Articles which may come
to Licensee's attention, and Licensor shall notify Licensee in writing of any
infringements or imitations by others of the Name or articles similar to
Articles which may come to Licensor's attention.
6. Protection of Licensee. Licensor acknowledges that the use
of the Name is essential to the manufacture, sale and distribution of Licensee's
Articles. In the event that Licensor is determined not to have rights in the
Name, Licensor shall indemnify Licensee for any and all damages to Licensee
resulting from
3
<PAGE>
required discontinued use of the Name.
7. Renewal of Registration. The Licensor warrants and
represents that as of the date hereof the Name is validly registered with the
United States Patent and Trademark Office and that such registration is
currently in effect. Licensor further agrees, at his own expense and without
notice from Licensee, to timely renew such registration from time to time as
such renewal is required; provided, that in the event Licensor intends not to
obtain such renewal, Licensor shall notify Licensee at least one hundred twenty
(120) days prior to such required renewal of its intention not to renew and
shall, without additional consideration other than the mutual covenants and
consideration contained herein, assign, transfer and convey all its rights,
titles and interests in the Name to Licensee, and Licensee shall be entitled to
seek such renewal.
8. Quality of Merchandise. Licensee warrants that the Articles
shall be of high standard and of such style, appearance, and quality as to be
adequate and suited to their exploitation to the best advantage and to the
protection and enhancement of the Name and the goodwill pertaining thereto. Such
Articles will be manufactured, sold, and distributed in accordance with all
applicable Federal, State and local laws. The policies of sale, distribution and
exploitation by Licensee shall be of high standard and to the best advantage and
shall in no manner reflect adversely upon the good name of Licensor or any of
its programs or the Name. To this end, Licensee shall, at Licensor's request,
furnish to
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<PAGE>
Licensor free of cost a reasonable number of samples of each Article, its
cartons, containers, and packing and wrapping material.
9. No Joint Venture. Nothing herein contained shall be
construed to place the parties in the relationship of partners or joint
venturers.
10. Assignment or Sublicense. This Agreement and all rights
and duties hereunder may be assigned by Licensee, except Licensee shall have no
right to assign this License to any corporation, partnership, person or other
legal entity which engages in the business of the manufacture, marketing and
sale of neckties. Licensee shall furnish to Licensor written notice of any
permitted assignment of this License.
11. Waiver. None of the terms of this Agreement may be waived
or modified except by an express agreement in writing signed by both parties.
There are no representations, promises, warranties, covenants, or undertakings
other than those contained in this Agreement, which represents the entire
understanding of the parties. The failure of either party hereto to enforce, or
the delay by either party in enforcing, any of its rights under this Agreement
shall not be deemed a continuing waiver or a modification thereof and either
party may, within the time provided by applicable law, commence appropriate
legal proceedings to enforce any or all of such rights. No person, firm, group,
or corporation (whether included in the Name or otherwise) other than Licensee
and Licensor shall be deemed to have acquired any rights by reason of
5
<PAGE>
anything contained in this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be duly executed as of the day and year first above written.
SUPERBA, INC.
(Corporate Seal)
By: /s/
President
ATTEST:
/s/
Secretary
PLUMA, INC.
(Corporate Seal)
By: /s/ George G. Wade
President
ATTEST:
/s/ G. B. Piland
Secretary
6
<PAGE>
=================================================================
LOAN AND SECURITY AGREEMENT
BETWEEN
FIRST UNION NATIONAL BANK OF NORTH CAROLINA
AND
PLUMA, INC.
=================================================================
May 25, 1995
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<PAGE>
TABLE OF CONTENTS
Page
1. DEFINITIONS.
1.1 Defined Terms 1
1.2 Accounting Terms 16
1.3 Other Terms 17
2. THE LOANS; INTEREST; FEES; AND PURPOSES OF THE LOANS.
2.1 Revolving Line of Credit 17
2.2 Reduction of the Committed Amount 17
2.3 Interest Rate 18
2.4 Selection of Interest Rate 18
2.5 Unused Commitment Fee 18
2.6 Calculation of Interest 18
2.7 Late Charges 18
2.8 Maximum Lawful Rate of Interest 18
2.9 All Advances to Constitute One Loan 19
2.10 Loan Purposes 19
2.11 Additional Costs 19
2.12 Unavailability 19
2.13 Prepayment Fees 20
3. PAYMENTS.
3.1 Payments 20
3.2 Receipt of Payments 21
3.3 Collections; Lender's Right to Notify
Account Debtors and to Endorse
Borrower's Name 21
3.4 Application of Payments and Collections 21
3.5 Statement of Account 22
4. SECURITY FOR THE OBLIGATIONS.
4.1 Security Interest in the Collateral 22
4.2 Security Interest in the Realty 22
4.3 Disclosure of Security Interest 23
4.4 Supplemental Documentation 23
4.5 Inspection 23
4.6 Cross-Collateralization 23
5. CLOSING; CONDITIONS PRECEDENT.
5.1 Conditions Precedent to Closing 24
5.2 Conditions Precedent to All Loans 26
5.3 Waiver of Conditions Precedent 27
<PAGE>
6. REPRESENTATIONS AND WARRANTIES.
6.1 Corporate Organization and Power 27
6.2 Litigation; Government Regulation 27
6.3 Taxes 28
6.4 Enforceability of Loan Documents;
Compliance With Other Instruments 28
6.5 Governmental Authorization 29
6.6 Event of Default 29
6.7 Margin Securities 29
6.8 Full Disclosure 29
6.9 Principal Place of Business 29
6.10 ERISA 29
6.11 Financials 30
6.12 Title to Assets 30
6.13 Solvency 30
6.14 Use of Proceeds 30
6.15 Assets for Conduct of Business 30
6.16 Trade Relations 30
6.17 Compliance With Laws 31
7. AFFIRMATIVE COVENANTS.
7.1 Repayment of Obligations 31
7.2 Performance Under Loan Documents 31
7.3 Financial and Business Information as to
Borrower 31
7.4 Notice of Certain Events 33
7.5 Corporate Existence and Maintenance of
Properties 33
7.6 Payment of Indebtedness; Performance of
Other Obligations 33
7.7 Maintenance of Insurance 34
7.8 Maintenance of Books and Records;
Inspection 35
7.9 Comply with ERISA 36
7.10 Maintenance of Cash Management Agreement 36
7.11 Primary Accounts 36
8. NEGATIVE COVENANTS.
8.1 Merger and Dissolution 36
8.2 Acquisitions 37
8.3 Indebtedness and Capital Leases 37
8.4 Liens and Encumbrances 37
8.5 Disposition of Assets 37
8.6 Transactions With Related Persons 37
8.7 Restricted Investments 38
8.8 Restrictions on Dividends 38
8.9 Capital Expenditures 38
8.10 Tangible Net Worth 38
8.11 Liabilities to Equity Ratio 39
8.12 Fiscal Year 39
<PAGE>
8.13 Sale and Leaseback 39
8.14 New Business 39
8.15 Subsidiaries 39
8.16 Guaranties 39
8.17 Transactions Affecting the Collateral or
the Realty 39
8.18 Interest Coverage Ratio 39
9. PROVISIONS WITH RESPECT TO THE COLLATERAL AND THE REALTY.
9.1 Perfection and Priority; Location of
Collateral 40
9.2 Audit/Verification of Collateral 40
9.3 Assignments, Records and Schedules of
Accounts 40
9.4 Notice Regarding Disputed Accounts 41
9.5 Sale and Safekeeping of Inventory 41
9.6 Records and Schedules of Inventory 41
9.7 Returns of Inventory 41
9.8 Maintenance of Equipment 42
9.9 Evidence of Ownership of Equipment 42
9.10 Records and Schedules for Equipment 42
9.11 Lender's Payment of Claims Asserted
Against the Collateral or the Realty 42
9.12 Environmental Representations,
Warranties and Covenants 42
10. WARRANTIES WITH RESPECT TO ACCOUNTS AND INVENTORY.
10.1 Account Warranties and Representations 43
10.2 Inventory Warranties and Representations 44
10.3 Reaffirmation of Warranties and
Representations 45
10.4 Survival of Warranties and Representations 45
11. TERM OF AGREEMENT.
11.1 Term 45
11.2 Borrower's Right to Terminate 45
11.3 Lender's Right to Terminate 45
11.4 Effect of Termination 46
12. EVENTS OF DEFAULT.
12.1 Event of Default 46
12.2 Acceleration of the Obligations 48
12.3 Default Rate of Interest 48
13. RIGHTS AND REMEDIES AFTER EVENT OF DEFAULT.
13.1 Rights and Remedies 49
13.2 Application of Proceeds 50
<PAGE>
13.3 Appointment of Lender as Borrower's
Lawful Attorney 50
13.4 Rights and Remedies Cumulative;
Non-Waiver; Etc. 51
14. PAYMENT OF EXPENSES.
14.1 Fees and Expenses 51
14.2 Stamp Taxes 52
14.3 Brokerage Fees 52
14.4 Agent's Fee 52
15. MISCELLANEOUS.
15.1 Survival of Agreements 52
15.2 Governing Law; Waiver of Jury Trial; Etc. 53
15.3 Notice 53
15.4 Indemnification of Lender 54
15.5 Waivers by Borrower 55
15.6 Lawful Charges 55
15.7 Assignment 55
15.8 Amendment 55
15.9 Severability 55
15.10 Entire Agreement 56
15.11 Binding Effect 56
15.12 Captions 56
15.13 Disbursement of Loan Proceeds 56
15.14 Participant 56
15.15 Conflict of Terms 56
15.16 Injunctive Relief 56
15.17 Liens; Setoff by Lender 57
15.18 Acquisition of Rocky Mount, Virginia
Real Estate 57
15.19 Time of Essence 57
<PAGE>
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT, made and entered into this 25th day
of May, 1995, by and between FIRST UNION NATIONAL BANK OF NORTH CAROLINA, a
national banking association with its principal office at Charlotte, North
Carolina ("Lender"); and PLUMA, INC., a North Carolina corporation with its
principal office at 801 Fieldcrest Road, Eden, North Carolina 27288
("Borrower");
W I T N E S S E T H:
WHEREAS, Borrower and Lender are parties to a certain Fourth Amended
and Restated Loan and Security Agreement, dated March 11, 1994, as amended by
First Amendment thereto dated May 13, 1994, by Second Amendment thereto dated
July 1, 1994 and by Third Amendment thereto dated March 15, 1995 ("Existing Loan
Agreement") pursuant to which Lender agreed to make loans and advances to
Borrower; and
WHEREAS, Borrower has requested that Lender continue to extend
financial accommodations to it in order to provide funds for the refinancing of
the indebtedness owing by Borrower to Lender under the Existing Loan Agreement,
for working capital and for such other corporate purposes as are permitted
hereunder;
WHEREAS, Lender has agreed to extend financial accommodations for such
purposes to Borrower in the form of a $55,000,000 credit facility to be made in
accordance with, and subject to, the terms and conditions set forth below; and
WHEREAS, this Agreement shall supersede and replace in its entirety the
Existing Loan Agreement, and it shall represent the entire agreement between
Borrower and Lender with respect to the terms and conditions upon which Lender
is to make loans and advances to Borrower from and after the date hereof;
NOW, THEREFORE, in consideration of the terms and conditions contained
herein, and of any loan or other financial accommodation heretofore, now or
hereafter made by Lender to or on behalf of Borrower, the parties hereto hereby
agree as follows:
SECTION 1. DEFINITIONS.
1.1 Defined Terms. For purposes of this Agreement, in ad-
dition to the terms defined elsewhere in this Agreement, the
following terms shall have the meanings set forth below:
"Accounts" shall mean all accounts, accounts receivable, contract
rights, notes, bills, acceptances, choses in action, chattel paper, instruments,
documents, and other forms of obligations at any time owing to Borrower, the
proceeds thereof and
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<PAGE>
all of Borrower's rights with respect to any goods represented thereby, whether
or not delivered, goods returned by customers and all rights as an unpaid vendor
or lienor, including rights of stoppage in transit and of recovering possession
by proceedings including replevin and reclamation, together with all customer
lists, books and records, ledger and account cards, computer tapes, disks,
printouts and records, whether now in existence or hereafter created, relating
to Accounts.
"Account Debtor" shall mean any Person who is or who may become
obligated to Borrower under or on account of an Account.
"Affiliate" shall mean any Person which, (i) directly or indirectly,
owns or controls, on an aggregate basis, including all beneficial ownership and
ownership or control as a trustee, guardian or other fiduciary, at least five
percent (5%) of the outstanding Stock having ordinary voting power to elect a
majority of the board of directors (irrespective of whether, at the time, Stock
of any other class or classes of such corporation shall have or might have
voting power by reason of the happening of any contingency) of Borrower or any
Subsidiary , or (ii) which is controlled by or is under common control with any
Person defined as an Affiliate by (i) of this definition, or (iii) is controlled
by or is under common control with Borrower or any Subsidiary. For the purpose
of this definition, "control" means the possession, directly or indirectly, of
the power to direct or cause the direction of management and policies, whether
through the ownership of voting securities, by contract or otherwise.
"Agreement" or "this Agreement" shall include all amendments,
modifications and supplements hereto and shall refer to this Agreement as the
same may be in effect at the time such reference becomes operative.
"Applicable Margin" shall have the following meaning at the times
indicated: (i) from the date hereof to the end of the Quarter ending June 30,
1995, in the case of CD Rate Loans, 123 Basis Points and in the case of LIBOR
Rate Loans, 110 Basis Points; and (ii) after June 30, 1995 as computed at the
end of each fiscal quarter in accordance with the following schedule:
Ratio of EBIT
for the previous
four consecutive
fiscal quarters
(including the
quarter then ending)
to Interest Expense Applicable Applicable
for such four Margin Margin
consecutive for for
fiscal quarters Libor Rate Loan CD Rate Loan
less than 3.0 130 Basis Points 143 Basis Points
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<PAGE>
3.0 to 3.99 110 Basis Points 123 Basis Points
4.0 to 4.99 90 Basis Points 103 Basis Points
5.0 or greater 70 Basis Points 83 Basis Points
"Assessment Rate" shall mean the actual, if known, or the estimated, if
the actual rate is not known, assessment rate percentage (expressed as a
decimal rounded upwards, if necessary, to the next higher 1/100 of one percent)
paid by Lender to the Federal Deposit Insurance Corporation (or any successor),
excluding any refund, insuring Lender's liability for time deposits as in effect
from time to time.
"Available Amount" shall mean at any time the lesser of (i) the
Committed Amount at such date, or (ii) the Borrowing Base.
"Bank" or "Lender" shall mean First Union National Bank of North
Carolina, a national banking association.
"Basis Point" shall mean one hundredth of one percent.
"Borrower" shall mean Pluma, Inc., a North Carolina corpo-
ration.
"Borrowing Base" shall mean the sum of (a) eighty-five per cent (85%)
of the face amount (less maximum discounts, credits and allowances which may be
taken by or granted to Account Debtors in connection therewith) of Borrower's
Eligible Accounts; plus (b) sixty percent (60%) of the value of Borrower's
Eligible Inventory calculated on the basis of the lower of cost or market, with
cost calculated on a first-in, first-out basis, plus (c) fifty percent (50%) of
the Net Book Value of Eligible Equipment; plus (d) eighty percent (80%) of the
Net Book Value of the Realty; minus (e) any write-up in the Net Book Value of
Eligible Equipment or the Net Book Value of the Realty resulting from a
revaluation thereof at any time subsequent to the Closing Date; and minus (f)
the amount of Permitted Liens. Lender, at any time or times hereafter, may
increase or decrease the ratio of its Loans against Eligible Accounts or
Eligible Inventory for any reason Lender reasonably shall deem necessary, based
upon Lender's usual and customary credit and collateral considerations, and each
such increase or decrease shall become effective immediately for purposes of
calculating new Loans hereunder.
"Business Day" shall mean any day on which Lender is open for the
transaction of business in the State of North Carolina.
"CD Base Rate" shall mean that rate per annum at which Lender can
obtain funds in the national certificate of deposit market in the amount of Five
Million and No/100 Dollars ($5,000,000.00) at approximately ten o'clock a.m.,
Charlotte,
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<PAGE>
North Carolina time, on the first Business Day of a month for a maturity period
equal to thirty (30) days.
"CD Contract Rate" shall mean the Cost-Adjusted CD Base Rate plus the
Applicable Margin.
"CD Rate Loans" shall mean Loans bearing interest at the CD Contract
Rate.
"CD Reserve Percentage" means for the purposes of computing the
Cost-Adjusted CD Base Rate, the reserve requirement percentage (expressed as a
decimal) applicable to Lender, including any supplemental, marginal or emergency
reserves as in effect from time to time, imposed by the Board of Governors of
the Federal Reserve System (or any successor).
"CERCLA" shall mean the Comprehensive, Environmental, Response,
Compensation and Liability Act of 1980, as amended from time to time, and all
rules and regulations from time to time promulgated thereunder.
"Capital Expenditures" shall mean, for any fiscal year of Borrower, the
aggregate cost (less the amount of trade-in allowance included in such cost) of
all capital assets acquired by Borrower during such fiscal year, plus all
Capital Lease Obligations with respect to any Capital Lease entered into,
renewed, assumed or guaranteed during such year.
"Capital Lease" shall mean any lease of any property which would, in
accordance with Generally Accepted Accounting Principles, be required to be
classified and accounted for as a capital lease on a balance sheet of the
lessee.
"Capital Lease Obligation" shall mean, with respect to any Capital
Lease, the amount of the obligation of the lessee thereunder which would, in
accordance with Generally Accepted Accounting Principles, appear on a balance
sheet of such lessee in respect of such Capital Lease.
"Chatham Deed of Trust" shall mean the Credit Line Deed of Trust and
Security Agreement , and all amendments, modifications and supplements thereto,
with respect to the Chatham Realty executed and delivered by Borrower to Lender
pursuant to Section 5.1(a) hereof as security for the Obligations.
"Chatham Realty" shall mean those certain tract(s) or parcel(s) of land
owned by Borrower and situated in Pittsylvania County, Virginia, which are more
particularly described in Exhibit F-2 attached to this Agreement, and all
buildings and improvements now or hereafter located thereon, and all additions
and substitutions thereto, whether now or hereafter existing.
"Closing Date" shall mean the date referred to in Section
5.1 hereof.
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<PAGE>
"Collateral" shall mean and include the assets, property or interests
in property of Borrower securing the Obligations pursuant to Sections 4.1(a),
(b), (c), (d) and (e), and all other property and interests in personal property
which shall, from time to time, secure the Obligations.
"Committed Amount" shall mean Fifty-five Million Dollars
($55,000,000.00) as such amount may be reduced from time to time pursuant to
Section 2.2 of this Agreement.
"Cost-Adjusted CD Base Rate" means a rate per annum (rounded upwards,
if necessary, to the next higher 1/100 of one percent) determined pursuant to
the following formula:
Cost-Adjusted = CD Base Rate + Assessment Rate
-----------------------
CD Base Rate 1-CD Reserve Percentage
"Deeds of Trust" shall mean collectively the Eden Deed of
Trust, the Chatham Deed of Trust, the Martinsville Deed of Trust,
and the Vesta Deed of Trust.
"Default" shall mean any event or condition, which, with the giving of
notice or the passage of time or both, would constitute an Event of Default if
Borrower took no action to correct the same.
"EBIT" shall mean the earnings (or loss) before provision for income
taxes and interest for such fiscal period, as reflected on the financial
statements of Borrower supplied to Lender pursuant to Section 7.3 of this
Agreement, but excluding (a) any gain or loss arising from the sale of capital
assets, (b) any gain arising from any writeup of assets, (c) earnings of any
Subsidiary of Borrower accrued prior to the date it became a Subsidiary, (d)
earnings of any corporation, substantially all of the assets of which have been
acquired in any manner by Borrower or any of its Subsidiaries, realized by such
corporation prior to the date of such acquisition, (e) the earnings of any
Person to which the assets of Borrower or any of its Subsidiaries shall have
been sold, transferred or disposed of, or into which Borrower or any of its
Subsidiaries shall have merged, or been a party to any consolidation or other
form of reorganization, prior to the date of such transaction, (f) any gain
arising from the acquisition of any securities of Borrower or any of its
Subsidiaries, and (g) any gain or loss arising from extraordinary or
non-recurring items.
"EBITDA" shall mean the earnings (or loss) before provision for income
taxes, interest, depreciation and amortization for such fiscal period, as
reflected on the financial statements of Borrower supplied to Lender pursuant to
Section 7.3 of this Agreement, but excluding (a) any gain or loss arising from
the sale of capital assets, (b) any gain arising from any writeup of assets, (c)
earnings of Subsidiary of Borrower accrued prior to the date it became a
Subsidiary, (d) earnings of any corporation,
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<PAGE>
substantially all of the assets of which have been acquired in any manner by
Borrower or any of its Subsidiaries, realized by such corporation prior to the
date of such acquisition, (e) the earnings of any Person to which the assets of
Borrower or any of its Subsidiaries shall have been sold, transferred or
disposed of, or into which Borrower or any of its Subsidiaries shall have
merged, or been a party to any consolidation or other form of reorganization,
prior to the date of such transaction, (f) any gain arising from the acquisition
of any securities of Borrower or any of its Subsidiaries, and (g) any gain or
loss arising from extraordinary or non-recurring items.
"EPA" shall mean the Environmental Protection Act, as amended from time
to time, and all rules and regulations from time to time promulgated thereunder.
"Eden Deed of Trust" shall mean the Deed of Trust and Security
Agreement, and all amendments, modifications and supplements thereto, with
respect to the Eden Realty executed and delivered by Borrower to Lender pursuant
to Section 5.1(a) hereof as security for the Obligations.
"Eden Realty" shall mean those certain tracts or parcels of land owned
by Borrower and situated in Rockingham County, North Carolina, which are more
particularly described in Exhibit F-l attached to this Agreement, and all
buildings and improvements now or hereafter located thereon, and all additions
and substitutions thereto, whether now or hereafter existing.
"Eligible Account" shall mean all Accounts created or acquired by
Borrower in the ordinary course of its business as presently conducted, which
Lender, in its sole discretion, deems to be Eligible Accounts. Lender may
determine, on a daily basis, whether any Account constitutes and continues to
constitute an Eligible Account. If an Eligible Account subsequently becomes
ineligible for failure to continue to satisfy each of the below listed
requirements, its ineligibility shall become effective immediately. If an
Eligible Account subsequently becomes ineligible even though it satisfies each
of the below listed requirements, its ineligibility shall become effective upon
five days notice from Lender to Borrower. Unless Lender shall determine
otherwise in its sole discretion, in order to be an Eligible Account, an Account
must satisfy and continue to satisfy the following requirements:
(a) The Account is a bona fide existing obligation of the
named Account Debtor arising from the sale and delivery of merchandise or the
rendering of services to such Account Debtor in the ordinary course of
Borrower's business and is actually and absolutely owing to Borrower and is not
contingent for any reason;
(b) The subject merchandise has been shipped or deliv-
ered on open account to the named Account Debtor on an absolute
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<PAGE>
sale basis and not on consignment, on approval or on a sale or return basis or
subject to any other repurchase or return agreement and no material part of the
subject goods has been returned;
(c) The Account is not evidenced by chattel paper or an
instrument of any kind, unless such chattel paper or instrument is duly endorsed
to and is in the possession of Lender;
(d) If the Account Debtor is located outside the United States
(including its territories and possessions), the Account is payable in the full
amount of the face value of the Account in United States dollars and is
supported by an irrevocable letter of credit issued by a United States financial
institution satisfactory to Lender and the letter of credit and all documents
required to draw thereon have been delivered to Lender or Lender's agent bank;
(e) The Account is a valid, legally enforceable obligation of
the Account Debtor and no offset or other defense on the part of such Account
Debtor or to any claim on the part of such Account Debtor denying liability
thereunder has been asserted; provided, however, that, if the Account is
subject to any such offset, defense or claim, or any Inventory related thereto
has been returned, such Account shall not be an Eligible Account only to the
extent of the maximum amount of such offset, defense, claim or return and the
balance of such Account, if it represents a valid, uncontested and legally
enforceable obligation of the Account Debtor and meets all of the other criteria
for eligibility set forth herein, shall be considered an Eligible Account;
(f) The Account is not subject to any lien or security
interest whatsoever, except for Lender's security interest and Permitted Liens,
and a currently effective UCC financing statement filed by Lender against
Borrower covering such Account is on file in all appropriate filing locations
for all of Borrower's places of business and records concerning such Account;
(g) The Account is evidenced by an invoice in form acceptable
to Lender and has not remained unpaid for a period exceeding ninety (90) days
(or, in the case of an Account owing by an account debtor located outside the
United States and which meets all of the other criteria for eligibility, such
longer period of time as may be acceptable to Lender) after the due date of
such invoice or one hundred twenty (120) days after the date of such invoice;
(h) The Account Debtor is not located in the State of New
Jersey or, if the Account Debtor is located in the State of New Jersey, Borrower
has either qualified as a foreign corporation authorized to transact business
in the State of New Jersey or has filed a Notice of Business Activities report
with the New Jersey Division of Taxation for the then current year;
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<PAGE>
(i) The Account Debtor is Solvent and not the subject of any
bankruptcy or insolvency proceeding of any kind and the creditworthiness of the
Account Debtor is, in all other respects, acceptable to Lender, in its sole
discretion, at the time in question;
(j) The Account does not arise out of transactions with
an employee, officer, agent, director, stockholder or Affiliate
of Borrower;
(k) The Account is not due from an Account Debtor whose
indebtedness to Borrower on Accounts which are more than ninety (90) days after
the invoice due date of the respective invoices exceeds fifty percent (50%) of
such Account Debtor's total indebtedness to Borrower;
(1) The Account does not arise out of a contract with the
United States of America, or any department, agency, subdivision or
instrumentality thereof, or if so, Borrower has complied with all requirements
of the Federal Assignment of Claims Act relative to the assignment of such
Account to Lender;
(m) There are no material regulatory administrative or
judicial obstacles to Lender's direct enforcement of the Account against the
Account Debtor or to Lender's intervention in any enforcement action which might
be brought by Borrower with respect thereto and Lender shall not be subjected
to any material adverse tax consequences (other than taxes measured by the
income of Lender) as a result of taking such enforcement action or lending
against such Account; and
(n) Each of the warranties and representations set forth in
Section 10.1 has been reaffirmed with respect thereto at the time the most
recent Schedule of Accounts was provided to Lender.
"Eligible Equipment" shall mean Equipment (i) which is located at
either the Realty or premises leased by Borrower provided landlord agreements
satisfactory to Lender have been provided to Lender with respect to such leased
premises and (ii) for which currently effective UCC financing statements filed
by Lender against Borrower are on record in all appropriate filing locations.
"Eligible Inventory" shall mean all Inventory created or acquired by
Borrower in the ordinary course of its business presently conducted, which
Lender, in its sole discretion, deems to be Eligible Inventory. Lender may
determine, on a daily basis, whether any Inventory constitutes and continues to
constitute Eligible Inventory. If Eligible Inventory subsequently becomes
ineligible for failure to continue to satisfy each of the below listed
requirements, its ineligibility shall become effective immediately. If Eligible
Inventory subsequently become ineligible even though it satisfies each of the
below listed
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requirements, its ineligibility shall become effective upon five days notice
from Lender to Borrower. In making its determination of Eligible Inventory,
Lender will consider whether Inventory satisfies and continues to satisfy the
following requirements:
(a) The Inventory consists of raw materials or finished goods
Inventory created or acquired by Borrower in the ordinary course of its business
located at Borrower's places of business specified on Exhibit A hereto, or
consists of dyed fabric and greige cloth on rolls located at Borrower's main
manufacturing plant specified on Exhibit A hereto, but excluding in any event,
supplies, containers, work in process and lot fabric;
(b) The Inventory is deemed by Lender in its sole discretion
to be in good saleable condition, not deteriorating in quality or obsolete and
subject to satisfactory internal control and management procedures;
(c) The Inventory is in good condition, meets all standards
imposed by any governmental agency, or department or division thereof, having
regulatory authority over such Inventory, its use or sale and is either
currently usable or currently saleable in the normal course of Borrower's
business;
(d) The Inventory is not subject to any lien or security
interest whatsoever, except for Lender's security interest and Permitted Liens,
and a currently effective UCC financing statement filed by Lender against
Borrower covering such Inventory is on file in all appropriate filing locations
where such Inventory is located;
(e) The Inventory is not consigned Inventory; and
(f) Each of the warranties and representations set forth in
Section 10.2 below has been reaffirmed with respect thereto at the time the most
recent Schedule of Inventory was provided to Lender.
"Environmental Laws" shall mean CERCLA, EPA, RCRA, OPHSCA, OSHA, SARA
and all other federal, state, local and foreign laws and regulations relating to
pollution or protection of the environment, including laws relating to
emissions, discharges, releases or threatened releases of Hazardous Materials
into the environment (including, without limitation, ambient air, surface water,
ground water or land) or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport, or handling of
Hazardous Materials, and any and all regulations, codes, plans, orders, decrees,
judgments, injunctions, notices or demand letters issued, entered, promulgated
or approved thereunder.
"Equipment" shall mean all goods of Borrower, including without
limitation, all machinery, equipment, motor vehicles, parts, supplies,
apparatus, appliances, tools, patterns, molds,
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dies, blueprints, fittings, furniture, furnishings, fixtures and articles of
tangible personal property of every description now or hereafter owned by
Borrower or in which Borrower may have or may hereafter acquire any interest,
located at, upon or about, or attached to, the principal place of business of
Borrower herein described or at any other location.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended from time to time, and all rules and regulations from time to time
promulgated thereunder.
"Event of Default" shall have the meaning specified in Section 12
hereof.
"Financials" shall mean the audited balance sheet and statement of
income and retained earnings of Borrower for the fiscal years ended December 31,
1994 and December 31, 1993.
"General Intangibles" shall mean all general intangibles, now existing
or hereafter owned or acquired or arising or in which Borrower now has or
hereafter acquires any rights, including but not limited to, causes of action,
corporate or business records, inventions, designs, patents, patent
applications, trademarks, trademark registrations and applications therefor,
goodwill, trade names, trade secrets, trade processes, copyrights, copyright
registrations and applications therefor, licenses, permits, franchises,
customer lists, all claims under guaranties, tax refund claims, rights and
claims against carriers and shippers, leases, claims under insurance policies,
all rights to indemnification and all other intangible personal property of
every kind and nature.
"Generally Accepted Accounting Principles" shall mean those generally
accepted principles of accounting recognized as such by the American Institute
of Certified Public Accountants or the Financial Accounting Standards Board or
other similar accounting body of comparable standing consistently applied and
maintained on a basis for Borrower throughout the period indicated and
consistent with the prior financial practice of Borrower as reflected in the
Financials.
"Hazardous Material" shall mean any pollutants, contaminants,
chemicals, or industrial, toxic or hazardous substance or material defined as
such in (or for purposes of) the Environmental Laws, or any other
environmentally regulated substances, including without limitation, any
materials containing asbestos and any waste constituents coming within the
definition or list of hazardous substances in 40 C.F.R. ss.261.1 through 261.33.
"Indebtedness" shall mean all liabilities, obligations and indebtedness
of any and every kind and nature, including, without limitation, the Obligations
and all obligations to trade creditors, whether heretofore, now or hereafter
owing, arising, due or payable from Borrower to any Person and howsoever
evidenced,
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created, incurred, acquired or owing, whether primary, secondary, direct,
contingent, fixed or otherwise. Without in any way limiting the generality of
the foregoing, Indebtedness specifically includes the following:
(a) All obligations or liabilities of any Person that are
secured by any lien, claim, encumbrance or security interest upon property owned
by Borrower, even though Borrower has not assumed or become liable for the
payment thereof;
(b) All obligations or liabilities created or arising under
any lease (including but not limited to leases required to be capitalized under
Generally Accepted Accounting Principles) of real or personal property, or
conditional sale or other title retention agreement with respect to property
used or acquired by Borrower, even though the rights and remedies of the lessor,
seller or lender thereunder are limited to repossession of such property;
(c) All unfunded pension fund obligations and liabili-
ties; and
(d) Deferred taxes.
"Interest Expense" shall mean with respect to any period of
determination the total payments of interest on Indebtedness required to be paid
by Borrower or any of its Subsidiaries during such period, determined in
accordance with Generally Accepted Accounting Principles.
"Interest Period" shall mean a calendar month.
"Inventory" shall mean all inventory of Borrower wherever located,
including without limitation, all goods manufactured or acquired for sale or
lease, and any piece goods, raw materials, work in process and finished
merchandise, bindings or component materials, and all supplies, goods,
incidentals, office supplies, packaging materials and any and all items used or
consumed in the operation of the business of Borrower or which may contribute to
the finished product or to the sale, promotion and shipment thereof, in which
Borrower now or at any time hereafter may have an interest, whether or not the
same is in transit or in the constructive, actual or exclusive occupancy or
possession of Borrower or is held by Borrower or by others for Borrower's ac-
count.
"LIBOR Contract Rate" shall mean the LIBOR Rate plus the Applicable
Margin.
"LIBOR Rate" shall mean that rate per annum (adjusted to reflect
reserve, deposit insurance or other similar requirements to which Lender may be
subject) at which deposits in United States dollars would be offered to Lender
for a period equal to thirty (30) days at 11:00 a.m., Greensboro, North Carolina
time,
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two (2) Business Days prior to the first Business Day of an Interest Period for
settlement in immediately available funds by major banks in the London interbank
market, in an amount approximately equal to the outstanding principal amount of
the Loans at such time.
"LIBOR Rate Loans" shall mean Loans bearing interest at the LIBOR
Contract Rate.
"Liabilities" shall mean at any date the aggregate of the liabilities
of Borrower appearing on the liability side of its balance sheet prepared as of
such date in accordance with Generally Accepted Accounting Principles.
"Loans" shall mean and refer to the loans and advances made by Lender
to Borrower pursuant to the terms of this Agreement.
"Loan Documents" shall mean and collectively refer to this Agreement,
the Note, the Deeds of Trust, all Supplemental Documentation and any and all
agreements, instruments and documents, including, without limitation, notes,
guaranties, mortgages, deeds to secure debt, deeds of trust, chattel mortgages,
pledges, powers of attorney, consents, assignments, contracts, notices, security
agreements, trust account agreements and all other written matters whether
heretofore, now or hereafter executed by or in behalf of Borrower and/or
delivered to Lender or any Participant, with respect to this Agreement, or with
respect to the transactions contemplated by this Agreement.
"Martinsville Deed of Trust" shall mean the Credit Line Deed of Trust
and Security Agreement, and all amendments, modifications and supplements
thereto, with respect to the Martinsville Realty executed and delivered by
Borrower to Lender pursuant to Section 5.1(a) hereof as security for the
Obligations.
"Martinsville Realty" shall mean those certain tract(s) or parcel(s) of
land owned by Borrower and situated in Henry County, Virginia, which are more
particularly described in Exhibit F-3 attached to this Agreement, and all
buildings and improvements now or hereafter located thereon, and all additions
and substitutions thereto, whether now or hereafter existing.
"Net Book Value of Eligible Equipment" shall mean the historical cost
of Borrower's Eligible Equipment less accumulated depreciation to date, all as
determined in accordance with Generally Accepted Accounting Principles.
"Net Book Value of the Realty" shall mean the historical cost of the
Realty and of any real property of Borrower acquired after the Closing Date upon
which Lender has a duly perfected first priority deed of trust or mortgage, less
accumulated depreciation to date, all as determined in accordance with Generally
Accepted Accounting Principles.
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"Note" shall mean the promissory note of Borrower in the original
principal amount of $55,000,000 executed by Borrower and delivered to Lender
pursuant to Section 2.1 hereof, together with any amendments, modifications and
supplements thereto, and any renewals or extensions thereof, in whole or in
part, evidencing Loans made by Lender to Borrower pursuant to this Agreement.
"OPHSCA" shall mean the Oil Pollution and Hazardous Substances Control
Act of 1978, N.C.G.S. ss.143-215.75 et seq., as amended from time to time, and
all rules and regulations from time to time promulgated thereunder.
"OSHA" shall mean the Occupational Safety and Health Act, as amended
from time to time, and all rules and regulations from time to time promulgated
thereunder.
"Obligations" shall mean and include the Loans and all other loans,
advances, debts, liabilities, obligations, covenants and duties owing, arising,
due or payable from Borrower to Lender of any kind or nature, present or future,
whether or not evidenced by any note, guaranty or other instrument, whether
arising under this Agreement, the Note, the Deeds of Trust, the other Loan
Documents or otherwise, whether direct or indirect (including those acquired by
assignment), absolute or contingent, primary or secondary, due or to become due,
now existing or hereafter arising and however acquired. The term includes, but
without limitation, all interest, charges, expenses, fees, attorney's and
paralegal's fees and any other sums chargeable to Borrower by Lender under this
Agreement or any of the other Loan Documents.
"Participant" shall mean any Person, now or any time hereafter,
participating with Lender in the Loans by Lender to Borrowers pursuant to this
Agreement.
"Permitted Liens" shall mean any of the following liens securing any
Indebtedness of Borrower on Borrower's property, real or personal, whether now
owned or hereafter acquired:
(a) Liens of carriers, warehousers, mechanics and materialmen
incurred in the ordinary course of business for sums not overdue or being
contested in good faith and with due diligence by appropriate proceedings;
(b) Liens incurred in the ordinary course of business in
connection with workers' compensation, unemployment insurance or other forms of
governmental insurance or benefits, or to secure the performance of letters of
credit, bids, tenders, statutory obligations, leases and contracts (other than
for borrowed funds) entered into in the ordinary course of business or to se-
cure obligations on surety or appeal bonds;
(c) Liens for current taxes, assessments or other gov-
ernmental charges which are not delinquent or remain payable without any penalty
or which are being contested in good faith
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and with due diligence by appropriate proceedings but do not in Lender's
judgement adversely affect Lender's rights or the priority of Lender's lien in
the Collateral or the Realty, and if reasonably requested by Lender, Borrower
shall establish reserves satisfactory to Lender with respect thereto;
(d) Liens placed upon fixed assets hereafter acquired at the
time of, or within ten (10) days after, the acquisition thereof to secure a
portion of the purchase price thereof or to secure a Capital Lease, provided (i)
any such lien shall not encumber any other property of Borrower, (ii) any such
lien shall not exceed 100% of the purchase price of such fixed assets, and (iii)
the aggregate amount of Indebtedness and Capital Leases secured by such liens
incurred as a result of such purchases during any fiscal year shall not exceed
$100,000.00;
(e) Liens existing on the date hereof with respect to
the Equipment and set forth on Exhibit B attached hereto; and
(f) Reservations, exceptions, encroachments, easements,
rights-of-way, covenants, conditions, restrictions, leases and other similar
title exceptions or encumbrances affecting the Realty, provided they do not in
the aggregate materially detract from the value thereof or materially interfere
with its use in the ordinary conduct of Borrower's business.
"Person" shall mean a corporation, an association, a partnership, an
organization, a business, an individual or a government or political
subdivision thereof or any government agency.
"Prime Rate" shall mean the interest rate publicly announced from time
to time by Lender to be its prime rate, which may not necessarily be its best
lending rate. In the event Lender shall abolish or abandon the practice of
announcing its Prime Rate or should the same be unascertainable, Lender shall
designate a comparable reference rate which shall be deemed to be the Prime Rate
under this Agreement and the other Loan Documents.
"Quarter" shall mean one of the four calendar quarters in
each calendar year.
"RCRA" shall mean the Resource Conservation and Recovery Act, as
amended from time to time, and all rules and regulations from time to time
promulgated thereunder.
"Realty" shall collectively mean the Eden Realty, the
Chatham Realty, the Martinsville Realty, and the Vesta Realty.
"SARA" shall mean the Superfund Reauthorization and Amendments Act of
1986, as amended from time to time, and all rules and regulations promulgated
thereunder.
"Schedule of Accounts" shall mean a Schedule of Accounts in the form
specified in Section 9.3 hereof.
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"Schedule of Inventory" shall mean a Schedule of Inventory in the form
specified in Section 9.6 hereof.
"Solvent" shall mean, as to any Person, that such Person has capital
sufficient to carry on its business and transactions and all business and
transactions in which it is about to engage and is able to pay its debts as they
mature and owns property having a value, both at fair valuation and at present
fair saleable value, greater than the amount required to pay its debts.
"Stock" shall mean all shares, options, interests, partnerships or
other equivalents (howsoever designated) of or in a corporation, whether voting
or non-voting, including, without limitation, common stock, warrants, preferred
stock, convertible debentures and all agreements, instruments and documents
convertible, in whole or in part, into any one or more or all of the foregoing.
"Subordinated Debt" shall mean all Indebtedness for borrowed money or
the equivalent which is subordinated in right of payment to the Obligations owed
to Lender and the holder of such Subordinated Debt has executed and delivered
to Lender a subordination agreement in form and substance acceptable to Lender.
"Subsidiary" shall mean any corporation, more than fifty percent (50%)
of the outstanding Stock having ordinary voting power to elect a majority of the
board of directors of which is at the time, directly or indirectly, owned by
Borrower and/or one or more Subsidiaries (irrespective of whether, at the time,
Stock of any other class or classes of such corporation shall have or might have
voting power by reason of the happening of any contingency).
"Supplemental Documentation" shall mean all agreements, instruments,
documents, financing statements, warehouse receipts, bills of lading, notices of
assignment of accounts, schedules of accounts assigned, mortgages, deeds of
trust, certificates of title and other written matter necessary or requested by
Lender to perfect and maintain perfected Lender's security interest in the
Collateral and the Realty and to consummate the transactions contemplated by
this Agreement and the other Loan Documents.
"Tangible Net Worth" shall mean at any date the total shareholder's
equity (including capital stock, additional paid-in capital and retained
earnings after deducting treasury stock) appearing on a balance sheet of
Borrower prepared as of such date in accordance with Generally Accepted
Accounting Principles, minus (a) the amount, if any, of Borrower's intangible
assets as reflected on such balance sheet of Borrower, including without
limitation, General Intangibles and any other asset which would be treated as an
intangible under Generally Accepted Accounting Principles; (b) any indebtedness
owed to Borrower by any Affiliate; (c) any write-up in the book value of any
fixed asset resulting from a revaluation thereof at any time subsequent to
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the Closing Date; and (d) the amount, if any, at which any shares of Stock of
Borrower appear on the asset side of its balance sheet.
"Unused Commitment Margin" shall be the applicable Basis Points as
computed at the end of each fiscal quarter in accordance with the following
schedule:
Ratio of EBIT for
the previous four
consecutive fiscal
quarters (including
the quarter then
ending) to Interest
Expense for such
consecutive fiscal
quarters Unused Commitment Margin
Less than 3.0 30 Basis Points
3.0 to 3.99 25 Basis Points
4.0 to 4.99 20 Basis Points
5.0 or greater 15 Basis Points
"Vesta Deed of Trust" shall mean the Credit Line Deed of Trust and
Security Agreement, and all amendments, modifications and supplements thereto,
with respect to the Vesta Realty executed and delivered by Borrower to Lender
pursuant to Section 5.1(a) hereof as security for the Obligations.
"Vesta Realty" shall mean those certain tract(s) or parcel(s) of land
owned by Borrower and situated in Patrick County, Virginia, which are more
particularly described in Exhibit F-4 attached to this Agreement, and all
buildings and improvements now or hereafter located thereon, and all additions
and substitutions thereto, whether now or hereafter existing.
1.2 Accounting Terms. Any accounting terms used in this Agreement which
are not specifically defined shall have the meanings customarily given them in
accordance with Generally Accepted Accounting Principles; provided, however,
that, in the event that changes in Generally Accepted Accounting Principles
shall be mandated by the Financial Accounting Standards Board, or any similar
accounting body of comparable standing, or shall be recommended by Borrower's
certified public accountants, to the extent that such changes would modify such
accounting terms or the interpretation or computation thereof, such changes
shall be followed in defining such accounting terms only from and after such
date as Borrower and Lender shall have amended this Agreement to the extent
necessary to reflect any such changes in the financial covenants and other terms
and conditions of this Agreement. Non cash changes, if any, to Borrower's
balance
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sheet, statement of income and retained earnings or statement of cash flows made
subsequent to the Closing Date because of adjustments required by currently
existing Generally Accepted Accounting Principles shall be excluded from
financial covenant calculations under this Agreement until such date as Borrower
and Lender shall have amended this Agreement to the extent necessary to reflect
any such changes in the financial covenants and other terms and conditions of
this Agreement.
1.3 Other Terms. All other terms contained in this Agreement shall,
when the context so indicates, have the meanings provided for by the Uniform
Commercial Code of the State of North Carolina to the extent the same are used
or defined therein.
SECTION 2. THE LOANS; INTEREST; FEES; AND PURPOSES OF THE
LOANS.
2.1 Revolving Line of Credit. Subject to the provisions of Section 5
below and all of the other terms and conditions set forth in this Agreement and
the other Loan Documents, and provided there does not then exist a Default or
an Event of Default, upon Borrower's oral or written request therefor, Lender
shall make a revolving line of credit available for Borrower's use from time to
time during the term of this Agreement (until May 30, 2000 unless extended in
accordance herewith) in an aggregate amount at any one time outstanding of up to
the Available Amount. All Loans to Borrower shall be less such reserves as
Lender, based upon Lender's usual and customary credit and collateral
considerations may deem proper and necessary, shall be evidenced by the Note
and, subject to the provisions of Section 12.3 below, shall be payable at the
interest rate set forth in Section 2.4 hereof. Borrower may borrow, repay and
reborrow up to the limits of the Available Amount all in accordance with the
provisions of this Agreement and the other Loan Documents. All requests for
Loans shall be irrevocable and binding upon Borrower if made by any of the
Persons set forth on Exhibit G attached hereto or any other Person authorized in
writing by Borrower to do so.
2.2 Reduction of the Committed Amount. Borrower shall have the right,
upon at least fifteen (15) days written notice given to Lender in the manner set
forth in Section 15.3 below, and upon payment of the prepayment fee set forth in
Section 2.13 below, to reduce the Committed Amount effective upon the beginning
of the following Interest Period. Any such reduction of the Committed Amount
shall be in the amount of One Million and No/100 Dollars ($1,000,000.00) or any
integral multiple thereof and shall be effective for all times during the term
of this Agreement. In the event that Borrower elects to reduce the Committed
Amount during the term of this Agreement, the Committed Amount shall not
thereafter be increased without Lender's prior written consent, which consent
may be withheld in Lender's sole discretion.
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2.3 Interest Rate. Subject to the provisions of Sections 2.8 and 12.3
below, Borrower shall pay to Bank interest on the principal amount of the Loans
outstanding at a rate per annum equal to one of the following three rates:
(i) the Prime Rate minus twenty-five Basis Points;
(ii) CD Contract Rate; or
(iii) LIBOR Contract Rate.
2.4 Selection of Interest Rate. Borrower may select the interest rate
which will apply for a particular Interest Period by notice to Lender before one
o'clock p.m., Charlotte, North Carolina time, on the second Business Day prior
to the first day of the Interest Period if the LIBOR Base Rate is selected, and
otherwise before one o'clock p.m., Charlotte, North Carolina Time, on the last
Business Day prior to the first day of the Interest Period. For any Interest
Period in which the Prime Rate applies, changes in the rate of interest payable
by Borrower due to a change in the Prime Rate shall take effect on the same day
on which the Prime Rate changes. For any Interest Period in which the CD
Contract Rate or the LIBOR Contract Rate applies, such interest rate will remain
constant throughout the Interest Period and will not fluctuate. If Borrower
fails to notify Lender of its selection of interest rate by the deadlines set
forth in this Section 2.4.2, Borrower will be deemed to have selected the Prime
Rate option for the applicable Interest Period.
2.5 Unused Commitment Fee. During the term of this
Agreement, Borrower agrees to pay to Lender each Quarter a per annum unused
commitment fee equal to the product of: (a) the Unused Commitment Margin times
(b) the difference between the Committed Amount during the prior Quarter and
the average daily balance of the Loans outstanding during such Quarter.
Such per annum unused commitment fee shall be calculated on the basis of a
three hundred sixty (360) day year consisting of four (4) ninety (90) day
quarters for the actual number of days elapsed and shall be payable quarterly
in arrears on the first day of each Quarter commencing on July 1, 1995.
2.6 Calculation of Interest. Interest will be calculated on a daily
basis and computed on the basis of actual days elapsed over a year of 360 days.
2.7 Late Charges. Borrower shall be obligated under the Note to pay
Lender a late charge equal to four percent (4%) of the amount of any installment
of principal or interest, or both, received by Lender more than fifteen (15)
days after the due date thereof.
2.8 Maximum Lawful Rate of Interest. In no contingency or
event whatsoever shall the interest rate charged pursuant to the
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terms of this Agreement or the Note exceed the highest rate permissible under
any law which a court of competent jurisdiction shall, in a final determination,
deem applicable hereto. In the event that such a court determines that Lender
has received interest herein in excess of the highest applicable rate, such ex-
cess interest shall be first applied to any unpaid principal balance owed by
Borrower, and if the then remaining excess interest is greater than any unpaid
principal balance, Lender shall promptly refund such excess interest to
Borrower.
2.9 All Advances to Constitute One Loan. All Loans by Lender to
Borrower under this Agreement and the other Loan Documents shall constitute one
general obligation of Borrower and shall be secured by Lender's security
interest in all of the Collateral and the Realty granted hereunder or under the
other Loan Documents, and by all other security interests, liens, claims and
encumbrances heretofore, now, or at any time or times hereafter granted by
Borrower to Lender.
2.10 Loan Purposes. Borrower shall use the proceeds of the initial Loan
hereunder to pay and satisfy the Indebtedness of Borrower owed to Lender under
the Existing Loan Agreement and Borrower shall use the proceeds of all
subsequent Loans for legal and proper corporate purposes (duly authorized by
Borrower's Board of Directors) which are consistent with all applicable laws and
statutes.
2.11 Additional Costs. If at any time a change in any law, regulation
or reserve requirement applicable to this Agreement or interpretation or
administration of the same by any governmental authority, central bank or
comparable agency charged with the interpretation or administration thereof, or
any reversal by such entities of an interpretation by the Lender as to
compliance with such law or regulation, shall impose, increase or modify any
reserve, and the result of any of the foregoing is to increase the cost to the
Lender of maintaining the Loans by an amount deemed by the Lender in its sole
discretion to be material, then within fifteen (15) days after demand by the
Lender, the Borrower agrees to pay to the Lender such additional amount or
amounts as will compensate the Lender for such increased costs.
2.12 Unavailability. With respect to any Interest Period for which
Lender is in the process of determining a CD Contract Rate or a LIBOR Contract
Rate, or if such CD Contract Rate or LIBOR Contract Rate is currently in effect,
and the Lender in its sole opinion determines that funds are not available to it
in the applicable markets, then in that event: (a) the Lender's obligation to
make, maintain or convert Loans at or into a CD Contract Rate or LIBOR Contract
Rate shall be suspended until such time as the Lender shall have concluded that
the circumstances giving rise to such a suspension no longer exists; and (b)
the Lender, upon a determination of unavailability of funds as set out above,
shall, until notice to the Borrower that the circumstances giving rise to the
suspension of the CD Contract
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Rate or LIBOR Contract Rate interest rates no longer exist, charge a rate of
interest and the Borrower agrees to pay a rate of interest based on the Prime
Rate.
2.13 Prepayment Fees. If Borrower shall reduce the Committed Amount
pursuant to Section 2.2 of this Agreement or if this Agreement shall be
terminated early pursuant to Section 11.2 or 11.3, then Borrower shall pay to
Lender a prepayment fee equal to (a) one quarter of one percent (1/4%) times (b)
the amount of (i) such reduction of the Committed Amount, or (ii) the Committed
Amount, at the time of early termination; provided, however, Borrower shall not
be required to pay a prepayment fee at such time as Borrower reduces the
Committed Amount pursuant to Section 2.2 or terminates the Agreement early
pursuant to Section 11.2 if, at such time, Borrower has raised funds through
sale of Borrower's common stock or preferred stock (excluding any form of
debenture, bond or other debt instrument) in a public or private stock offering
sufficient to reduce the Committed Amount or repay the Loans in full as
applicable.
SECTION 3. PAYMENTS.
3.1 Payments. All Obligations of Borrower to Lender shall be payable at
Lender's address set forth in Section 15.3 below or at such other place or
places as Lender may designate from time to time. That portion of the
Obligations consisting of:
(a) Principal, shall be payable by Borrower to Lender
immediately upon the earlier of (i) the termination of this Agreement by
Borrower or Lender pursuant to Sections 11.2 or 11.3 hereof, (ii) to the extent
of any collections with respect to any proceeds of any of the Collateral or the
Realty, the receipt of said collections, (iii) any time that the amount of the
Loans outstanding exceeds the Available Amount, the amount of such excess, or
(iv) the last day of the term of this Agreement (May 30, 2000 unless such date
is extended);
(b) Interest, payable on the Loans pursuant to this Agreement
or any of the other Loan Documents, shall be payable quarterly on each January
1, April 1, July 1 and October 1;
(c) Reasonable costs, fees and expenses payable pursuant to
this Agreement or the other Loan Documents shall be payable by Borrower to
Lender or to such other Person designated by Lender in writing on demand; and
(d) The balance of the Obligations, if any, shall be payable
by Borrower to Lender as and when provided in this Agreement or the other Loan
Documents, whichever is earlier.
With respect to any sums due and payable by Borrower to Lender pursuant
to subsection (b) above, Borrower authorizes and directs Lender, at its option,
to cause such sums to be paid on their respective due dates by charging such
payment as a Loan
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under this Agreement on Borrower's behalf as of such date. With respect to any
sums due and payable by Borrower to Lender pursuant to subsection (c) and
subsection (d) above, Borrower authorizes and directs Lender, at its option,
after notice to Borrower, to cause such sums to be paid on their respective due
dates by charging such payment as a Loan under this Agreement on Borrower's
behalf as of such date.
3.2 Receipt of Payments. In the event Borrower (or any of its
Affiliates, Subsidiaries, stockholders, directors, officers, employees or
agents) shall receive any monies, checks, notes, drafts or any other items of
payment relating to and/or proceeds of the Collateral or the Realty, Borrower
agrees with Lender that the deposit and application of all such items of payment
shall be governed by the Master Agreement between Borrower and Lender dated
September 27, 1993, as amended or modified from time to time (the "Cash
Management Agreement"). In the event that Borrower receives any such items of
payment, Borrower shall hold the same in trust for Lender and as the property of
Lender pursuant to the terms hereof, separate from the funds of Borrower. If
required by Lender in its sole discretion, Borrower shall forward the same to a
lockbox maintained by Lender pursuant to the Cash Management Agreement.
3.3 Collections; Lender's Right to Notify Account Debtors and to
Endorse Borrower's Name. Borrower hereby authorizes Lender, at any time or times
after the occurrence and during the continuance of an Event of Default, to (a)
open Borrower's mail and collect any and all amounts due to Borrower from
Account Debtors; (b) notify any or all Account Debtors that the Accounts have
been assigned to Lender and that Lender has a security interest therein; and (c)
direct such Account Debtors to make all payments due from them to Borrower upon
the Accounts directly to Lender. Lender shall promptly furnish Borrower with a
copy of any such notice sent and Borrower hereby agrees that any such notice, in
Lender's sole discretion, may be sent on Borrower's stationery, in which event
Borrower shall co-sign such notice with Lender. Borrower irrevocably makes,
constitutes and appoints Lender (and all Persons designated by Lender for that
purpose) as Borrower's true and lawful attorney (and agent-in-fact) to endorse
Borrower's name on any checks, notes, drafts or any other payment relating to
and/or proceeds of the Collateral or the Realty which come into Lender's
possession or Lender's control.
3.4 Application of Payments and Collections. Subject to the provisions
of Section 3.1 hereof and any other provisions herein expressly directing the
application of payments and collections, Borrower irrevocably waives the right
to direct the application of any and all payments and collections at any time or
times hereafter received by Lender from or on behalf of Borrower, and Borrower
does hereby irrevocably agree that Lender shall have the continuing exclusive
right to apply and to reapply any and all such payments and collections received
at any time or
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times hereafter by Lender or its agent against the Obligations, in such manner
as Lender, in its sole discretion, may determine, notwithstanding any entry by
Lender upon any of its books and records. Notwithstanding the foregoing, if no
Default or Event of Default has occurred and is continuing, all collections with
respect to the proceeds of Accounts received by Lender when there are no
outstanding Loans in excess of the minimum loan balance reasonably established
by Lender shall be remitted by Lender to Borrower.
3.5 Statement of Account. Lender shall provide Borrower with a
statement of account on a monthly basis and each statement of account which is
delivered by Lender to Borrower and which relates to the Obligations shall be
deemed correct and conclusively binding upon Borrower and Lender, unless
thereafter waived in writing by Lender or unless, within ninety (90) days after
Borrower's receipt of such statement, Borrower delivers to Lender, in the
manner set forth in Section 15.3 below, written objection thereto specifying
the error or errors, if any, contained in any such statements.
SECTION 4. SECURITY FOR THE OBLIGATIONS.
4.1 Security Interest in the Collateral. To secure the prompt payment
and performance of all of the Obligations, Borrower hereby pledges and assigns
to Lender and grants to Lender a continuing general security interest in and to
the following assets, property and interests in property of Borrower, whether
now owned or existing or at any time hereafter acquired, arising or created,
wherever located:
(a) The Equipment;
(b) The Accounts;
(c) The Inventory;
(d) The General Intangibles; and
(e) Proceeds and products of any and all of the fore-
going, including insurance proceeds thereof.
Such security interests shall give Lender a continuing lien in, on and
to all of the Collateral, and the proceeds and products thereof and thereto,
and any replacements, additions, accessions or substitutions thereof, including
without limitation, the proceeds of insurance covering the Collateral.
4.2 Security Interest in the Realty. In addition to the Collateral, the
Obligations shall be secured by the Deeds of Trust, conveying a first priority
security interest and lien in the Realty, subject only to the Permitted Liens
applicable thereto.
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4.3 Disclosure of Security Interest. Borrower shall make appropriate
entries upon its financial statements and its books and records disclosing
Lender's security interest in the Collateral and the Realty.
4.4 Supplemental Documentation. At Lender's request, Borrower shall
execute and/or deliver to Lender, at any time or times hereafter, all
Supplemental Documentation that Lender may reasonably request, in form and
substance acceptable to Lender, and pay all charges, expenses and fees Lender
may reasonably incur in filing any of the Supplemental Documentation, and all
taxes relating thereto. Borrower hereby irrevocably makes, constitutes and
appoints Lender (and all Persons designated by Lender for that purpose) as
Borrower's true and lawful attorney (and agent-in-fact) to sign the name of
Borrower on any of the Supplemental Documentation which Borrower fails to
execute and deliver to Lender within ten (10) days of written request therefor
and to deliver any of the Supplemental Documentation to such Persons as Lender,
in its sole discretion, may elect. Borrower ratifies and approves all acts of
such attorney other than actions that increase the amount of the outstanding
Loans or the Obligations owing by Borrower to Lender and agrees that such power
is irrevocable so long as any Obligations of Borrower are outstanding. Borrower
agrees that a carbon, photographic, photostatic, or other reproduction of this
Agreement or a financing statement is sufficient as a financing statement and
may be filed by Lender in any filing office.
4.5 Inspection. Lender (by any of its officers, employees and agents)
shall have the right, at any time or times during Borrower's usual business
hours, to inspect the Collateral, all records related thereto (and to make
extracts from such records), and the premises upon which any of the Collateral
is located, to discuss Borrower's affairs and finances with any director,
officer, employee or agent of Borrower and to verify the amount, quality,
quantity, value and condition of, or any other matter relating to, the
Collateral with any Person having knowledge thereof. Lender may, at any time
upon and after the occurrence of an Event of Default and during the continuance
thereof, employ and maintain in Borrower's premises custodians selected by
Lender who shall have full authority to do all acts necessary to protect
Lender's interest. All expenses incurred by Lender by reason of the employment
of such custodians shall be paid by Borrower, added to the Obligations and
secured by the Collateral.
4.6 Cross-Collateralization. The Collateral, the Realty and all other
collateral which Lender may at any time acquire from any other source in
connection with the Obligations of Borrower to Lender shall constitute
cross-collateral for all Obligations of Borrower without apportionment or
designation as to particular Obligations, and all Obligations, howsoever and
whensoever incurred, shall be secured by all of the Collateral and the Realty,
howsoever and whensoever acquired, and Lender shall have the right, in its sole
discretion, to determine the
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order in which Lender's rights in or remedies against the Collateral or the
Realty are to be exercised and which types of the Collateral and the Realty or
which portions of the Collateral or the Realty are to be proceeded against and
the order of application of proceeds of the Collateral and the Realty as
against particular Obligations of Borrower.
SECTION 5. CLOSING; CONDITIONS PRECEDENT.
5.1 Conditions Precedent to Closing. The closing hereunder shall be
held on the date of this Agreement ("Closing Date") at the offices of Tuggle
Duggins & Meschan, P.A., Lender's counsel, in Greensboro, North Carolina or at
such other place as Borrower and Lender may select. Notwithstanding any other
provision of this Agreement or the other Loan Documents, and without limiting in
any manner the rights of Lender under the other sections of this Agreement, it
is understood and agreed that Lender shall have no obligation to make the Loans
on or after the Closing Date under this Agreement unless and until the following
conditions have been and continue to be satisfied:
(a) Documentation. Lender shall have received the
following documents, each to be in form and substance satisfac-
tory to Lender and it counsel;
(i) Certified copies or certificates of Borrower's casualty
insurance policies, together with loss payable endorsements on
Lender's standard form of loss payee endorsement naming Lender as loss
payee, and certified copies or certificates of Borrower's liability
insurance policies, together with endorsements naming Lender as an
additional insured thereunder, as required to be maintained by Borrower
pursuant to Section 7.7 hereof;
(ii) Copies of all filing receipts or acknowledgements issued
by any governmental authority to evidence any filing or recordation
necessary to perfect the security interests of Lender in the Collateral
and evidence in a form acceptable to Lender that such security
interests constitute valid and first priority perfected security
interests, subject only to Permitted Liens;
(iii) Certificate of the Secretary or an Assistant Secretary
of Borrower certifying (a) that attached thereto is a true and complete
copy of the Bylaws of Borrower as in effect on the date of such
certification, (b) that attached thereto is a true and complete copy of
Resolutions adopted by the Board of Directors of Borrower, authorizing
the execution, delivery and performance of this Agreement and the
other Loan Documents, and the consummation of the transactions
contemplated hereby and thereby and (c) as to the incumbency and
genuineness of the signature of each officer of Borrower executing this
Agreement or any of the other Loan Documents;
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(iv) Copies of the Articles of Incorporation of Borrower, and
all amendments thereto, certified by the Secretary of State of North
Carolina;
(v) Good standing certificates for Borrower issued by the
Secretary of State or other appropriate official of the States of North
Carolina and Virginia and of each other jurisdiction where the conduct
of Borrower's business activities or the ownership of its properties
necessitates qualification;
(vi) A certificate signed by an officer of Borrower, dated as
of the Closing Date, stating that: (a) the representations and
warranties set forth in Section 6 hereof are true and correct on and as
of such date, (b) Borrower is on such date in compliance with all of
the terms and provisions set forth in this Agreement and the other Loan
Documents, and (c) on such date no Default or Event of Default has oc-
curred and is continuing;
(vii) The acceptable written opinion of counsel to
Borrower as to such matters as Lender and its counsel may
require;
(viii) The duly executed Note;
(ix) The duly executed Deeds of Trust;
(x) Agreements duly executed by each warehouseman, bailee or
other Person in possession of the Collateral, waiving each of their
respective liens and claims in the Collateral;
(xi) Landlord agreements satisfactory to Lender with respect
to all premises leased by Borrower at which Collateral is located;
(xii) Policies of title insurance (including revolving credit
and zoning endorsements) in standard ALTA form, in such amounts as
required by Lender, issued by a title insurance company selected by
Borrower and acceptable to Lender insuring that the Deeds of Trust
constitute valid, enforceable first priority liens on the Realty, free
and clear from all title defects and encumbrances whatsoever except for
and subject to Permitted Liens applicable thereto and other exceptions
as shall be acceptable to Bank in its sole discretion, and receipt of
satisfactory evidence of the payment of all premiums thereon;
(xiii) Such UCC financing statements, in addition to
existing filed UCC financing statements, as Lender may
request; and
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(xiv) Such other documents, opinions, certificates and
agreements as Lender shall reasonably request in connection with the
transactions contemplated by this Agreement or with any of the
foregoing matters; and
(b) Pending Action, Etc. No action, proceeding, in-
vestigation, regulation or legislation shall have been instituted, threatened
or proposed before any court, governmental agency or legislative body to enjoin,
restrain or prohibit, or to obtain substantial damages in respect of, or which
is related to or arises out of this Agreement or the consummation of the
transactions contemplated hereby, or which, in Lender's sole discretion, would
make it inadvisable to consummate the transactions contemplated by this
Agreement.
(c) Payment at Closing. There shall have been paid to the
respective parties thereto the amounts specified in Section 14 to the extent any
such amounts are or have been billed to Lender at or prior to the Closing Date,
and in addition Borrower shall have paid to Lender a non-refundable facility fee
of $50,000.00.
(d) Governmental Approval. All necessary approvals,
authorizations and consents, if any be required, of all governmental bodies
(including courts) having jurisdiction with respect to the Collateral, the
Realty and the transactions contemplated by this Agreement, shall have been
obtained.
(e) Proceedings and Documents. All opinions, certificates and
other instruments and all proceedings in connection with the closing of the
transactions contemplated by this Agreement shall be satisfactory in form and
substance to Lender and its special counsel, and Lender shall have received
copies of all other instruments and other evidence as Lender may reasonably
request with respect to the transactions contemplated by this Agreement and the
taking of all actions in connection herewith.
5.2 Conditions Precedent to All Loans. Notwithstanding any other
provisions of this Agreement or any of the other Loan Documents, and without
affecting in any manner the rights of Lender under the other sections of this
Agreement, it is understood and agreed that Lender shall have no obligation
under Section 2 of this Agreement to make any Loans, unless and until, in
addition to each of the conditions set forth in Sections 5.1 hereof, the
following conditions have been and continue to be satisfied:
(a) No Material Adverse Change. There shall not have occurred
any material adverse change in the financial condition, results of operations or
business of Borrower, or any event, condition or state of facts which would be
expected materially and adversely to affect the financial condition, results of
operations, business or prospects of Borrower, as determined by Lender in its
reasonable discretion.
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(b) Delivery of Documents. Lender shall have received copies
of all documents required to be delivered to Lender pursuant to the terms of
this Agreement and the other Loan Documents and all other reports and
information required to be delivered to Lender hereunder.
(c) Representations and Warranties. The representations and
warranties contained in this Agreement and the other Loan Documents shall
continue to be true and correct in all material respects on and as of such date
as though made on and as of such date.
(d) No Default or Event of Default. No Default or Event of
Default, nor any event or condition which with the making of any Loan would
constitute a Default or an Event of Default, shall have occurred and be
continuing.
(e) Performance of Agreement. All covenants and agreements on
the part of Borrower to be performed hereunder shall have been performed, and,
unless otherwise expressly agreed in writing by Lender, any conditions precedent
set forth herein shall have been fulfilled.
5.3 Waiver of Conditions Precedent. If Lender makes any Loan hereunder
prior to the fulfillment of any of the conditions precedent set forth in
Sections 5.1 and 5.2 hereof, the making of such Loan shall constitute only an
extension of time for the fulfillment of such condition and not a waiver
thereof, and Borrower shall thereafter use its best efforts to fulfill each such
condition promptly.
SECTION 6. REPRESENTATIONS AND WARRANTIES.
In order to induce Lender to enter into this Agreement and to make the
Loans, Borrower makes the following warranties and representations to Lender:
6.1 Corporate Organization and Power. Borrower (a) is a corporation
duly organized, validly existing and in good standing under the laws of the
State of North Carolina; (b) is qualified to do business and is in good standing
in Virginia and in every other jurisdiction where the nature of its business or
the ownership of its properties requires it to be so qualified; (c) has the
power to own and give a lien on and security interest in the Collateral and the
Realty and to engage in the transactions contemplated hereby; and (d) has the
full power, authority and legal right to execute and deliver this Agreement and
the other Loan Documents and to perform and observe the terms and provisions
thereof. Except as set forth in Exhibit C attached hereto, Borrower has not,
during the preceding five (5) years, been known as or used any other corporate,
fictitious or trade names.
6.2 Litigation; Government Regulation. Except as set forth
on Exhibit D attached hereto, there are no actions, suits or
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proceedings pending or, to the knowledge of Borrower, threatened against or
affecting Borrower at law or in equity before any court or administrative
officer or agency which might result in a material adverse change in the
business or financial condition of Borrower or impair Borrower's ability to
perform its obligations under the Loan Documents. To the best of its knowledge,
Borrower is not in violation of, or in default under, any applicable statute,
rule, order, decree, writ, injunction or regulation of any governmental body
(including any court) where such violation would have a materially adverse
effect upon the Collateral, the Realty or Borrower's business, property, assets,
operations or condition, financial or otherwise.
6.3 Taxes. Borrower is not delinquent in the payment of any taxes which
have been levied or assessed by any governmental authority against it or its
assets. Borrower has timely filed all tax returns which are required by law to
be filed, and has paid all taxes shown on said returns and all other assessments
or fees levied upon Borrower or upon its properties to the extent that such
taxes, assessments or fees have become due. To the knowledge of Borrower, no
material controversy in respect of income taxes is pending or threatened.
6.4 Enforceability of Loan Documents; Compliance With Other
Instruments. The Loan Documents are the legal, valid and binding obligations of
Borrower, and are enforceable against Borrower in accordance with their
respective terms except as stated in the written opinion of Borrower's counsel
delivered pursuant to Section 5.1(a) hereof. Borrower is not subject to any
corporate or other restriction or to any order, rule, regulation, writ,
injunction or decree of any court or governmental authority or to any statute
(other than those statutes of general application which may affect Borrower's
operations in the ordinary course of its business) which materially and
adversely affects its business, property, assets or financial condition.
Borrower is not a party to any labor dispute, there are no strikes or walkouts
relating to any labor contracts and no labor contract is scheduled to expire
during the term of this Agreement. Borrower is not in default with respect to
any indenture, loan agreement, mortgage, lease, deed or similar agreement
related to the borrowing of monies to which Borrower is a party or by which it
is bound. Neither the execution, delivery or performance of the Loan Documents,
nor compliance therewith: (a) conflicts or will conflict with or results or will
result in any breach of, or constitutes or will constitute with the passage of
time or the giving of notice or both, a default under, (i) the Articles of
Incorporation or Bylaws of Borrower, (ii) any law, order, writ, injunction or
decree of any court or governmental authority, or (iii) any agreement or
instrument to which Borrower is a party or by which Borrower, the Realty or the
Collateral is bound or (b) results or will result in the creation or imposition
of any lien, charge or encumbrance upon its properties pursuant to any such
agreement or instrument, except the liens and security interests created by the
Loan Documents and Permitted Liens.
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6.5 Governmental Authorization. No authorization, consent or approval
of any governmental authority is required for the execution, delivery and
performance of the Loan Documents or the consummation of the transactions
contemplated thereby. To the best of its knowledge, Borrower has, and is in good
standing with respect to, all governmental approvals, permits, certificates,
inspections, consents and franchises necessary to continue to conduct its
business as heretofore conducted and to own or lease and operate its properties
as now owned or leased by it. None of such approvals, permits, certificates,
consents, or franchises contains any term, provision, condition or limitation
more burdensome than such as are generally applicable to Persons engaged in the
same or similar business as Borrower.
6.6 Event of Default. No event has occurred and is continuing which
constitutes an Event of Default or would constitute a Default.
6.7 Margin Securities. None of the transactions contemplated by this
Agreement (including, without limitation thereof, the use of the proceeds of the
Loans) will violate or result in a violation of Section 7 of the Securities
Exchange Act of 1934, as amended, or any regulations issued pursuant thereto.
Borrower does not own or intend to carry or purchase directly or indirectly any
margin securities. None of the proceeds of the Loans will be used to purchase or
carry (or refinance any borrowing, the proceeds of which were used to purchase
or carry) any "margin security" within the meaning of the Securities Exchange
Act of 1934, as amended.
6.8 Full Disclosure. To the best of Borrower's knowledge, none of the
Loan Documents, nor any statements furnished by or on behalf of Borrower to
Lender in connection with the Loan Documents, contain any untrue statement of a
material fact or omit a material fact necessary to make the statements contained
therein or herein not misleading. To the best of Borrower's knowledge, there is
no fact which Borrower has not disclosed to Lender in writing which materially
affects adversely or, to the best of Borrower's knowledge, will materially
affect adversely the Collateral, the Realty, other assets, business, profits or
conditions (financial or otherwise) of Borrower or the ability of Borrower to
perform its Obligations.
6.9 Principal Place of Business. Borrower's chief executive office and
principal place of business, and the place where Borrower maintains all records
relating to its Accounts, is at the address set forth on page one of this
Agreement.
6.10 ERISA. No fact, including but not limited to, any Reportable Event
(as defined in section 4043 of ERISA) exists in connection with any employee
benefit plan or other plan for Borrower's employees which is covered by ERISA,
which might constitute grounds for the termination of any such plan by the
Pension Benefit Guaranty Corporation or for the appointment by the ap-
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propriate United States district court of a trustee to administer any such plan.
6.11 Financials. The Financials delivered to Lender have been prepared
in accordance with Generally Accepted Accounting Principles, contain no
misstatement or omission, and fairly present the financial position, assets and
liabilities of Borrower as of the respective dates thereof and the results of
operations of Borrower for the respective periods then ended. Except for the
transactions contemplated by this Agreement, since the date of the last of the
Financials, there has been no material adverse change in the assets,
liabilities or financial position of Borrower or in the results of Borrower's
operations, and Borrower has not incurred any obligation or liability which
would materially and adversely affect its financial condition, business
operations, the Collateral or the Realty.
6.12 Title to Assets. Borrower has good, indefeasible and merchantable
title to and ownership of the Collateral, the Realty and all of its other
assets, including without limitation, the assets reflected in the Financials,
free and clear of all liens, claims, security interests and encumbrances except
those in favor of Lender and Permitted Liens.
6.13 Solvency. Borrower is Solvent.
6.14 Use of Proceeds. Borrower's use of the proceeds of any Loans made
by Lender to Borrower pursuant to this Agreement are, and continue to be, legal
and proper corporate uses (duly authorized by Borrower's Board of Directors, if
such authorization is required) and such uses are and will be consistent with
all applicable laws and statutes, as in effect from time to time.
6.15 Assets for Conduct of Business. Borrower possesses adequate
assets, licenses, patents, patent applications, copyrights, trademarks and
tradenames to conduct its business as heretofore conducted and all such
licenses, patents, patent applications, copyrights, trademarks and trade names
are listed on Exhibit E attached hereto and made a part hereof.
6.16 Trade Relations. To the best of Borrower's knowledge, there exists
no actual or threatened termination, cancellation or limitation of, or any
modification or change in, the business relationship of Borrower or any customer
or any group of customers whose purchases individually or in the aggregate are
material to the business of Borrower, or with any material supplier, and there
exists no present condition or state of facts or circumstances which would
materially adversely affect Borrower or prevent Borrower from conducting such
business after the consummation of the transaction contemplated by this
Agreement in substantially the same manner in which it has heretofore been con-
ducted.
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6.17 Compliance With Laws. Borrower has duly complied with, and the
Collateral, the Realty and its business operations and leaseholds are in
compliance in all material respects with, the provisions of all federal, state
and local laws, rules and regulations applicable to Borrower, the Collateral,
the Realty or the conduct of Borrower's business, including, without limita-
tion, all Environmental Laws, and there have been no citations, notices or
orders of noncompliance issued to Borrower under any such law, rule or
regulation.
SECTION 7. AFFIRMATIVE COVENANTS.
Until payment in full of all Obligations of Borrower to Lender,
Borrower covenants and agrees that, unless Lender consents in writing:
7.1 Repayment of Obligations. Borrower will repay the Obligations
according to the terms of this Agreement and the other Loan Documents.
7.2 Performance Under Loan Documents. Borrower will perform all
Obligations required to be performed by it under the terms of this Agreement and
the other Loan Documents and any other agreements now or hereafter existing or
entered into between Borrower and Lender.
7.3 Financial and Business Information as to Borrower.
Borrower shall deliver to Lender:
(a) Within thirty (30) days after the end of each Quarter,
beginning with the current Quarter ending, a balance sheet of Borrower as of the
close of such Quarter, a statement of cash flows for the Quarter, and statements
of income and retained earnings for that portion of the fiscal year to date then
ended, prepared in accordance with Generally Accepted Accounting Principles,
applied on a basis consistent with that of the preceding period or containing
disclosure of the effect on the financial position or results of operations of
any change in the application of accounting principles and practices during the
period, and certified by the treasurer of Borrower or his designee;
(b) Within ninety (90) days after the close of each fiscal
year of Borrower: (i) a balance sheet of Borrower as of the close of such fiscal
year and statements of income and retained earnings and cash flows for the
fiscal year then ended, prepared in accordance with Generally Accepted
Accounting Principles, applied on a basis consistent with the preceding year or
containing disclosure of the effect on financial position or results of
operation of any change in the application of accounting principles and
practices during the year, and accompanied by a report thereon, containing an
unqualified opinion, without scope limitations imposed by Borrower, from a firm
of independent certified public accountants selected by Borrower and acceptable
to Lender;
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(c) Concurrently with the delivery of the financial statements
described in subsection (b) above, a certificate from the independent certified
public accountants that in making their examination of the financial statements
of Borrower, they obtained no knowledge of the occurrence or existence of any
condition or event which constitutes or would constitute, upon the giving of
notice or lapse of time or both, any Event of Default, or a statement specifying
the nature and period of existence of any such condition or event disclosed by
their examination;
(d) Concurrently with the delivery of the financial statements
described in subsections (a) and (b) above, a certificate from the treasurer of
Borrower certifying to Lender that to the best of his knowledge, Borrower has
kept, observed, performed and fulfilled each and every covenant, obligation and
agreement binding upon Borrower contained in this Agreement or the other Loan
Documents, and that no Default or Event of Default has occurred or specifying
any such Default or Event of Default, together with a financial covenant
compliance worksheet, in form satisfactory to Lender, reflecting the computation
of the financial covenants set forth in Section 8 as of the end of the period
covered by such financial statements;
(e) As soon as possible, but not later than the twentieth
(20th) day of each month, a monthly borrowing base and loan report accompanied
by a certificate in the form attached hereto as Exhibit H, which shall be signed
by the treasurer of Borrower, which shall include as of the last day of the
preceding month: (i) an aged trial balance of all then existing Accounts,
specifying the names, face value and due dates of each Account Debtor obligated
on an Account listed therein, (ii) a Schedule of Inventory owned by Borrower and
valued at the lower of cost or market with cost calculated on a first-in,
first-out basis, (iii) the outstanding principal balance of the Loans and (iv)
such other information about the Accounts or the Inventory as Lender may
reasonably request;
(f) As soon as possible, but not later than the thirtieth
(30th) day after the end of a Quarter, a quarterly report, which shall include,
as of the last day of such Quarter: (i) an aged trial balance of all then
existing Indebtedness of Borrower, specifying the names, amounts, and payment
due dates of each Indebtedness listed therein and (ii) such other information
about the Indebtedness as Lender may reasonably request;
(g) Immediately upon issuance, each report, notice, proxy
statement, or financial statement which Borrower shall from time to time render
to its stockholders and each financial report or notice which Borrower shall
file with any governmental agency or authority;
(h) As soon as possible, but not later than December 1 of each
year, a budget of Borrower's Capital Expenditures for Borrower's next fiscal
year; and
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(i) Upon Lender's written request, such other information
about the Collateral, the Realty, or the financial condition and operations of
Borrower as Lender may from time to time reasonably request.
7.4 Notice of Certain Events. Borrower shall promptly, but in no event
later than three (3) Business Days after obtaining knowledge thereof, give
written notice to Lender of: (a) any material litigation or proceeding brought
against Borrower, whether or not the claim is considered by Borrower to be
covered by insurance, and Borrower shall, if requested by Lender, set up such
reserves for claims not covered by insurance or claims not within the coverage
limits of any such insurance as Lender reasonably determines as are necessary
to protect Borrower against loss; (b) any written notice of a violation received
by Borrower from any governmental regulatory body or law enforcement authority
which, if such violation were established, might have a materially adverse
effect on the business of Borrower or the value of the Collateral or the Realty;
(c) any labor controversy which has resulted in a strike or other work action
materially affecting Borrower; (d) any attachment, judgment, lien, levy or
order which may be placed on or assessed against or threatened against Borrower,
the Collateral or the Realty; (e) any Event of Default or any event which, after
notice or lapse of time or both, would become an Event of Default; (f) any
material delay in Borrower's performance of any of its obligations to any
Account Debtor; (g) any material adverse information relating to any Account
Debtor; and (h) any other matter which has resulted in a material adverse change
in the financial condition or operations of Borrower.
7.5 Corporate Existence and Maintenance of Properties. Borrower shall
maintain and preserve its corporate existence and all rights, privileges and
franchises now enjoyed; and Borrower shall conduct its business in an orderly,
efficient and customary manner, keep its properties in good working order and
condition, and from time to time make all needed repairs to, renewals of or
replacements of its properties (except to the extent that any of such properties
is obsolete or is being replaced) so that the efficiency of such property shall
be fully maintained and preserved. Borrower shall file or cause to be filed in
a timely manner all reports, applications and licenses which shall be required
by any governmental authority and which, if not timely filed, would have a
material adverse effect on Borrower, the Collateral or the Realty.
7.6 Payment of Indebtedness; Performance of Other Obligations.
Borrower shall pay all Indebtedness for borrowed money at maturity, all taxes,
assessments and other governmental charges which may be levied or assessed upon
Borrower, the Realty or the Collateral when due and all other obligations in
accordance with customary trade practices, and comply with all acts, rules,
regulations and orders of any legislative, administrative or judicial body or
official applicable to the Collateral, the Realty or any part thereof or to the
operation of Borrower's business;
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provided, however, that Borrower may in good faith by appropriate proceedings in
good faith and with due diligence contest any such taxes, assessments,
governmental charges, acts, rules, regulations, orders and directions that do
not in Lender's judgment materially adversely affect the value of the
Collateral, the Realty or the priority of Lender's lien in the Collateral or
the Realty, and if requested by Lender, shall establish reserves reasonably
satisfactory to Lender. Borrower shall also observe and remain in compliance
with all laws, ordinances, governmental rules and regulations to which it is
subject and obtain all licenses, permits, franchises or other governmental
authorizations necessary to the ownership of its properties or the conduct of
its business, and all covenants and conditions of all agreements and instruments
to which Borrower is a party, which failure to comply or failure to obtain would
materially and adversely affect the business, prospects, profits, properties or
condition (financial or otherwise) of Borrower.
7.7 Maintenance of Insurance. Borrower shall maintain and pay for
insurance upon all Collateral and Realty, wherever located, covering casualty,
hazard, public liability and such other risks and in such amounts and with such
insurance companies as shall be reasonably satisfactory to Lender, and deliver
such certificates of insurance to Lender with satisfactory Lender's Loss Payable
Endorsements naming Lender as loss payee thereunder. Borrower also agrees to
maintain and pay for insurance in such amount, with such companies and in such
form as shall be satisfactory to Lender insuring Borrower against any claims,
suits, loss or damages suffered by any Person on any property owned or leased by
Borrower, and against such other casualties and contingencies as is customary
in the business in which Borrower is engaged, and deliver such certificates of
insurance to Lender with satisfactory endorsements naming Lender as additional
insured thereunder. Each policy of insurance shall contain a clause requiring
the insurer to give not less than thirty (30) days prior written notice to
Lender before any cancellation of the policies for any reason whatsoever and a
clause that the interest of Lender shall not be impaired or invalidated by any
act or neglect of Borrower or the owner of the property nor by the occupation of
the premises wherein such property is located for purposes more hazardous than
are permitted by said policy. Borrower hereby directs all insurers under such
policies of insurance on the Collateral and Realty to pay all proceeds payable
thereunder directly to Lender. After deducting from such proceeds any expenses
incurred by Lender in the collection or handling of such funds, the net
proceeds received by Lender shall be applied as follows:
(a) If a Default or Event of Default shall have occurred and
is continuing, the entire net proceeds of any insurance claim received by
Lender shall, at Lender's option, be applied to the Obligations in such order
and against such particular Obligations as Lender, in its sole discretion, may
determine; or
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(b) If no Default or Event of Default shall have occurred and
be continuing, then the net proceeds of any claim of less than $100,000.00 shall
be released to Borrower to be used solely by Borrower for repairing, replacing
or restoring the damaged Collateral or Realty to the equivalent of its original
condition, and the net proceeds of any claim of more than $100,000.00 shall be
held by Lender in an interest bearing account for Borrower's benefit (subject to
the lien and security interest of Lender therein as security for the
Obligations) and, for so long as no Default or Event of Default shall occur,
advanced to Borrower from time to time, but not more often than monthly, against
such requisition or other evidence of repair, replacement or restoration of the
damaged Collateral or Realty as Lender may reasonably require. Upon the
occurrence of a Default or Event of Default, all monies held by Lender in such
interest bearing account shall, at Lender's option, be applied to the
Obligations in such order and against such particular Obligations as Lender, in
its sole discretion, may determine.
Borrower hereby irrevocably makes, constitutes and appoints Lender (and
all officers, employees or agents designated by Lender) as Borrower's true and
lawful attorney (and agent-in-fact) for the purpose of making, settling and
adjusting claims under such policies of insurance, endorsing the name of
Borrower on any check, draft, instrument or other item or payment for the
proceeds of such policies of insurance and for making all determinations and
decisions with respect to such policies of insurance; provided, however, so
long as no Default or Event of Default shall have occurred and be continuing,
Lender shall consult with Borrower before making any determinations and
decisions with respect to such policies of insurance. If Borrower fails to
obtain and maintain any of the policies of insurance or to pay any premium in
whole or in part, then Lender may, at Borrower's expense, without waiving or
releasing any obligation or default by Borrower hereunder, procure the same, but
shall not be required to do so. All sums so disbursed by Lender, including
reasonable attorney's fees, court costs, expenses and other charges related
thereto, shall be payable on demand by Borrower to Lender and shall be
additional Obligations hereunder secured by the Collateral. Borrower shall
deliver to Lender, promptly as rendered, true copies of all monthly reports made
in any reporting forms to insurance companies. Not less than thirty (30) days
prior to the expiration date of the insurance policies required to be
maintained by Borrower hereunder, Borrower shall deliver to Lender one or more
certificates of insurance evidencing renewal of the insurance coverage required
hereunder plus such other evidence of payment of premiums therefor as Lender
may request.
7.8 Maintenance of Books and Records; Inspection. Borrower shall
maintain adequate books, accounts and records, and prepare all financial
statements required under this Agreement in accordance with Generally Accepted
Accounting Principles and in compliance with the regulations of any
governmental regulatory body
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having jurisdiction over it; and permit employees or agents of Lender at any
reasonable time to inspect Borrower's properties, and to examine or audit
Borrower's books, accounts and records and make copies and memoranda of them.
Borrower shall permit any representative of Lender to visit and inspect any of
the properties of Borrower, to examine all books of accounts, records, reports
and other papers, to make copies and extracts therefrom, and to discuss the
affairs, finances and accounts of Borrower with its officers, employees and
independent public accountants (and by this provision Borrower authorizes said
accountants to discuss the finances and affairs of Borrower), all at such rea-
sonable times and as often as may be reasonably requested.
7.9 Comply with ERISA. Borrower shall at all times make prompt payment
of contributions required to meet the minimum funding standards set forth in
ERISA with respect to any employee benefit plan; promptly after the filing
thereof, furnish to Lender copies of any annual report required to be filed
under ERISA in connection with each employee benefit plan; not withdraw from
participation in, permit the termination or partial termination of, or permit
the occurrence of any other event with respect to any employee benefit plan
that could result in liability to the Pension Benefit Guaranty Corporation;
notify Lender as soon as practicable of any Reportable Event and of any
additional act or condition arising in connection with any employee benefit plan
which Borrower believes might constitute grounds for the termination thereof by
the Pension Benefit Guaranty Corporation or for the appointment by the
appropriate United States district court of a trustee to administer such plan;
and furnish to Lender upon Lender's request, such additional information about
any employee benefit plan as may be reasonably requested.
7.10 Maintenance of Cash Management Agreement. Borrower shall maintain
in full force and effect the Cash Management Agreement with Lender and perform
and comply with all provisions under such Cash Management Agreement.
7.11 Primary Accounts. Borrower shall maintain its primary
depository accounts and its cash management accounts with Lender.
SECTION 8. NEGATIVE COVENANTS.
Until payment in full of all Obligations of Borrower to Lender,
Borrower covenants and agrees that, unless Lender consents in writing, Borrower
will not:
8.1 Merger and Dissolution. Liquidate or dissolve, or enter into any
consolidation, merger, syndicate or other combination or sell, lease or dispose
of its business or assets as a whole or in such part, as in the opinion of
Lender, constitutes a substantial portion of its business or assets.
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8.2 Acquisitions. Acquire the business or all or a
substantial portion of the assets of any Person, whether by purchase
of stock, assets or otherwise.
8.3 Indebtedness and Capital Leases. Create, incur or suffer to exist
any Indebtedness for money borrowed or the equivalent or enter into any Capital
Leases except for: (a) the Obligations ; (b) Indebtedness secured by Permitted
Liens; (c) Indebtedness to trade creditors incurred in Borrower's ordinary
course of business; (d) Subordinated Debt existing on the Closing Date; and (e)
unsecured Indebtedness which when added to the Indebtedness secured by Permitted
Liens shall not exceed $1,000,000 in the aggregate at any time.
8.4 Liens and Encumbrances. Create, assume or suffer to exist any deed
of trust, mortgage, encumbrance or other lien (including a lien of attachment,
judgment or execution which is not dismissed, discharged or bonded within thirty
(30) days) or security interest (including the interest of a conditional seller
of goods), securing a charge or obligation, on or of any of its property, real
or personal, whether now owned or hereafter acquired, except (i) for liens and
security interests in favor of Lender and (ii) Permitted Liens.
8.5 Disposition of Assets. Sell, lease, transfer, convey or otherwise
dispose of any of its assets or property except for (i) sales of Inventory in
the ordinary course of business; (ii) dispositions of Equipment which, in the
aggregate during any consecutive twelve (12) month period, have a fair market
value of not more than $500,000.00, and (iii) replacements of Equipment that is
substantially worn, damaged or obsolete with Equipment of like kind and function
having a value, as determined by Lender, of no less than the value of the
Equipment disposed of, provided that the replacement Equipment shall be acquired
prior to the date on which a disposition is to be made of the Equipment that is
to be replaced, and the replacement Equipment shall be free and clear of liens
and security interests, except for Permitted Liens.
8.6 Transactions With Related Persons. Directly or indirectly, make
any loan or advance, purchase, assume or guarantee any note to or from any of
its officers, directors, stockholders or Affiliates, or to or from any member of
the immediate family of any of its officers, directors, shareholders or
Affiliates, or subcontract any operations to any Affiliate, except for travel or
other reasonable expense advances to employees in the ordinary course of
business; or, except as permitted by Section 8.8 below, enter into, or be a
party to, any transaction with any Affiliate or stockholder of Borrower, except
in the ordinary course of and pursuant to the reasonable requirements of
Borrower's business and upon fair and reasonable terms which are fully disclosed
to Lender and are no less favorable to Borrower than would obtain in a
comparable arm's length transaction with a Person not an Affiliate or
stockholder of Borrower.
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8.7 Restricted Investments. Make any loans, advances or extensions of
credit to, or any investment in cash or by delivery of property in, any Person,
whether by acquisition of stock, indebtedness or other obligation or security,
or by loan, advance or capital contribution, or otherwise, except for (a) travel
or other reasonable expense advances to employees in the ordinary course of
business, (b) investments in readily marketable, direct obligations of the
Government of the United States of America, maturing not more than one (1) year
after the date of the purchase thereof, (c) investments representing stock or
obligations issued to Borrower in settlement of claims against any other Person
by reason of a composition or readjustment of debt or a reorganization of any
debtor of Borrower, and (d) certificates of deposit, having terms of less than
thirty (30) days, with a bank or trust company organized under the laws of the
United States or any state thereof having combined capital, surplus and
undivided profits of no less than $500,000,000.
8.8 Restrictions on Dividends. Declare or pay any dividends (other
than dividends payable solely in its own Stock) upon any of its Stock, or
purchase, redeem or otherwise acquire, directly or indirectly, any shares of
its Stock, or make any distribution of cash, property or assets among the
holders of shares of its Stock, or make any material change in its capital
structure; provided, however, in any fiscal year Borrower may pay dividends on
the Stock of Borrower and may purchase or redeem shares of its Stock if no
Default or Event of Default exists and, if after giving effect to such dividend,
purchase or redemption, no Default or Event of Default will exist.
8.9 Capital Expenditures. Make any Capital Expenditure , if, after
giving effect to such Capital Expenditure, the aggregate amount of all such
Capital Expenditures made by Borrower during any fiscal year shall exceed the
greater of: (i) two hundred percent (200%) of Borrower's depreciation expense
for the preceding fiscal year or (ii) Borrower's budget for Capital Expenditures
for such fiscal year as submitted to Lender pursuant to Section 7.3(h) of this
Agreement and approved by Lender in its sole discretion.
8.10 Tangible Net Worth. Permit Tangible Net Worth to be
less than the following amounts at the following times:
(i) $25,000,000 from the Closing Date through December 31,
1995;
(ii) for all times after December 31, 1995 the greater of (a)
$25,000,000 plus an annual increase of $2,000,000 effective each January 1
beginning January 1, 1996 or (b) Tangible Net Worth as of the immediately
preceding December 31 less $4,000,000 but such amount shall not be less than any
amount previously computed under this Section 8.10(ii)(b).
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8.11 Liabilities to Equity Ratio. Permit the ratio of
Liabilities to Tangible Net Worth to be greater than the
following ratios at the following times:
(i) 2.5 to 1 from January 1 through November 30 in any
year; and
(ii) 2.0 to 1 from December 1 through December 31 in any
year.
8.12 Fiscal Year. Change its fiscal year.
8.13 Sale and Leaseback. Enter into any arrangement with any Person
providing for the leasing by Borrower of any asset which has been sold or
transferred by Borrower to such Person.
8.14 New Business. Engage in any business other than the business in
which Borrower is currently engaged or a business reasonably related thereto or
make any material change in any of its business objectives, purposes and
operations which might in any way adversely affect the repayment of the
Obligations; provided however, Borrower may open one retail store to sell
merchandise manufactured by Borrower in addition to the outlet store currently
operated by Borrower at the Martinsville Realty.
8.15 Subsidiaries. Create any Subsidiary or transfer any
assets to a Subsidiary.
8.16 Guaranties. Guarantee or otherwise, in any way, be come liable
with respect to the obligations or liabilities of any Person except (a) an
Affiliate's obligations to Lender, and (b) by endorsement of instruments or
items of payment for deposit to the general account of Borrower or for delivery
to Lender on account of the Obligations.
8.17 Transactions Affecting the Collateral or the Realty. Borrower
shall not enter into any transaction which materially and adversely affects the
Collateral, the Realty or Borrower's ability to repay any Indebtedness, and
Borrower shall not permit or agree to any extension, compromise or settlement or
make any change or modification of any kind or nature with respect to any
Account, including any of the terms relating thereto, other than discounts and
allowances in the ordinary course of business which shall be reflected in the
Schedule of Accounts submitted to Lender pursuant to Section 9.3.
8.18 Interest Coverage Ratio. Permit at any time the ratio of EBITDA
for the previous four consecutive fiscal quarters of Borrower to Interest
Expense payable during such four consecutive fiscal quarters to be less than 3.5
to 1.0.
SECTION 9. PROVISIONS WITH RESPECT TO THE COLLATERAL AND
THE REALTY.
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9.1 Perfection and Priority; Location of Collateral. Borrower warrants
and represents that: (a) none of the Collateral or the Realty is subject to any
lien, security interest or other encumbrance, other than those in favor of
Lender and Permitted Liens; (b) the addresses specified on Exhibit A include and
designate Borrower's chief executive office, principal place of business and
other offices and places of business; and (c) the offices and/or locations where
Borrower now or hereafter may keep the Collateral and books and records,
including, without limitation, computer programs, printouts and other computer
materials and records concerning the Collateral, are at the locations set forth
on Exhibit A attached hereto and made a part hereof, and Borrower shall not
remove such books and records and/or the Collateral therefrom, except for sales
of Inventory or transfers of Inventory from one such location to another in the
ordinary course of business, and shall not keep any of such books and records
and/or the Collateral at any other offices or locations unless (i) Borrower
gives Lender written notice of such removal and the new location of said books
and records and/or the Collateral at least thirty (30) days prior thereto, (ii)
the other office or location is within the continental United States of America,
(iii) Borrower prepares, executes and files appropriate financing statements
with respect to the Collateral showing Borrower, as debtor, and Lender, as
secured party, and after filing, conducts a search of all filings made against
Borrower in all jurisdictions in which the Collateral to be removed or trans-
ferred is to be located and delivers to Lender copies of the results of all
searches, (iv) such searches confirm that Lender's security interest in the
Collateral, including the Collateral to be removed or transferred to the new
location, shall be first and prior on the Collateral, except for Permitted
Liens, and (v) Borrower causes the lessor, bailee, warehouseman or similar
Person of the Collateral to be removed or transferred to execute and deliver to
Lender an agreement waiving in favor of Lender such person's liens and security
interests in the Collateral and containing such other assurances as may be
requested by Lender.
9.2 Audit/Verification of Collateral. Any of Lender's officers,
employees, or agents shall have the right, at any time or times hereafter, in
Lender's name or in the name of Borrower, to verify the validity, amount, value,
condition or any other matter relating to any Collateral or the Realty by mail,
telephone, telegraph, field audit or otherwise. Unless waived by Lender in its
discretion, field audits shall be performed by Lender or its agents in January
and July of each year and may be performed at other intervals if Lender so
requires.
9.3 Assignments, Records and Schedules of Accounts. From time to time
at intervals designated by Lender, Borrower shall provide Lender with Schedules
of Accounts describing all Accounts created or acquired by Borrower and shall
execute and deliver written assignments of such Accounts to Lender; provided,
however, that Borrower's failure to execute and deliver such Schedules of
Accounts or assignments shall not affect or limit
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Lender's security interest or other rights in and to any Accounts. If requested
by Lender, Borrower shall furnish Lender with copies of proof of delivery and
the original copy of all documents, including, without limitation, repayment
histories and present status reports, relating to the Accounts so scheduled and
such other matter and information relating to the status of then existing
Accounts as Lender shall reasonably request.
9.4 Notice Regarding Disputed Accounts. In the event any amounts due
and owing in excess of $250,000.00 are in dispute between any Account Debtor
and Borrower (which shall include, without limitation, any dispute in which an
offset, claim or counterclaim may result), Borrower shall notify Lender of the
same immediately, explaining in detail the reason for the dispute, all claims
relating thereto and the amount in controversy.
9.5 Sale and Safekeeping of Inventory. Until an Event of Default
occurs, Borrower may sell Inventory in the ordinary course of its business
(which does not include a transfer in partial or total satisfaction of
Indebtedness). Borrower shall be responsible for the safekeeping of Inventory,
and in no event shall Lender have any responsibility for: (a) any loss or damage
to Inventory or destruction thereof occurring or arising in any manner or
fashion from any cause; (b) any diminution in the value of Inventory; or (c) any
act or default of any carrier, warehouseman, bailee or forwarding agency
thereof or other Person in any way dealing with or handling Inventory.
9.6 Records and Schedules of Inventory. Borrower shall keep correct and
accurate daily records, itemizing and describing the kind, type, location,
quality and quantity of Inventory, Borrower's cost therefor and selling price
thereof, and the daily withdrawals therefrom and additions thereto, and shall
furnish to Lender from time to time at reasonable intervals designated by
Lender, a current Schedule of Inventory based upon its most recent physical
inventory and its inventory records. Borrower shall conduct a physical inventory
no less frequently than annually, and more often if reasonably requested by
Lender, and shall furnish to Lender such other documents and reports as Lender
shall request with respect to the Inventory, including, without limitation,
copies of invoices relating to Borrower's purchase of Inventory. Borrower shall
keep its inventory records on a perpetual basis for all inventory other than
dyes, yarns and supplies.
9.7 Returns of Inventory. If any Account Debtor returns any Inventory
to Borrower after shipment thereof, and such return generates a credit in excess
of $250,000.00, in the aggregate, on any Account or Accounts of such Account
Debtor, Borrower shall notify Lender of the same immediately, specifying the
reason for such return, the amount of such credit and the location and con-
dition of the returned Inventory.
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9.8 Maintenance of Equipment. Borrower shall keep and maintain its
Equipment in good operating condition and repair and shall make all necessary
replacements thereof so that the value and operating efficiency thereof shall at
all times be maintained and preserved. Borrower shall not permit any such items
to become a fixture to real estate (other than the Realty while the Deeds of
Trust are in effect) or accessions to other personal property.
9.9 Evidence of Ownership of Equipment. Borrower immediately on demand
therefor by Lender, shall deliver to Lender any and all evidence of ownership,
if any, of any of the Equipment (including, without limitation, certificates of
title and applications for title).
9.10 Records and Schedules for Equipment. Borrower shall maintain
accurate, itemized records itemizing and describing the kind, type, quality,
quantity and value of its Equipment and shall furnish Lender with a current
schedule containing the foregoing information on at least an annual basis and
more often if requested by Lender.
9.11 Lender's Payment of Claims Asserted Against the Collateral or the
Realty. Lender may, after consulting with Borrower, at any time or times
hereafter, in its sole discretion, without waiving or releasing any obligation,
liability or duty of Borrower under this Agreement or the other Loan Documents,
or any Event of Default, pay, acquire and/or accept an assignment of, any
security interest, lien, claim or encumbrance asserted by any Person against the
Collateral or the Realty, including without limitation, any Permitted Liens. All
sums paid by Lender in respect thereof and all costs, fees and expenses,
including, without limitation, attorneys' fees, court costs, expenses and other
charges relating thereto, which are incurred by Lender on account thereof, shall
be payable, upon demand, by Borrower to Lender and shall be additional
Obligations hereunder secured by the Collateral and the Realty.
9.12 Environmental Representations, Warranties and Cove-
nants. With respect to Hazardous Material, Borrower represents,
warrants and covenants as follows:
(a) The Realty is now and at all times hereafter will
continue to be in full compliance with Environmental Laws;
(b) (i) as of the date hereof there are no Hazardous Materials
located on, in or under the Realty or used in connection therewith other than
in compliance with Environmental Laws, and (ii) Borrower will fully disclose to
Lender in writing within fifteen (15) days of the date of this Agreement the
existence, extent and nature of any Hazardous Materials, which Borrower is
legally authorized and empowered to maintain on, in or under the Realty or use
in connection therewith, and Borrower has obtained and will maintain all
licenses, permits and approvals required
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with respect thereto, and is in full compliance with all of the
terms, conditions and requirements of such licenses, permits and
approvals;
(c) Borrower shall promptly, but in no event later than three
(3) Business Days after obtaining knowledge thereof, give written notice to
Lender of any change in the nature or extent of any Hazardous Materials
maintained on, in or under the Realty or used in connection therewith, and will
transmit to Lender copies of any citations, orders, notices or other
governmental or other communication received with respect to any Hazardous
Materials affecting the Realty;
(d) Borrower shall indemnify and hold Lender and its
directors, officers, shareholders and employees harmless from and against any
and all damages, penalties, fines, claims, liens, suits, liabilities, costs
(including clean-up costs) judgments and expenses (including attorneys',
consultants' or experts' fees and expenses) of every kind and nature suffered by
or asserted against Lender as a direct or indirect result of any warranty or
representation made by Borrower in this Section 9.12 being false or untrue in
any material respect or any requirement under any Environmental Law, which
requires the elimination or removal of any Hazardous Materials by Lender,
Borrower or any transferee of Borrower or Lender;
(e) Without limitation of Lender's rights under this
Agreement, Lender shall have the right, but not the obligation, to enter onto
the Realty or to take such other actions as it deems necessary or advisable to
clean up, remove, resolve or minimize the impact of, or otherwise deal with, any
of the events for which Borrower has agreed to indemnify Lender pursuant to
Section 9.12(d) above, or any event which, in the sole opinion of Lender, could
jeopardize Lender's security interest under the Deeds of Trust. All costs and
expenses incurred by Lender in the exercise of any such right shall constitute
part of the Obligations under this Agreement and shall be secured by the
Collateral and the Realty and shall be payable by Borrower upon demand; and
(f) Borrower's obligations under this Section 9.12 shall
continue, survive and remain in full force and effect notwithstanding payment
in full of the Obligations and the termination of this Agreement or any
foreclosure under the Deeds of Trust or delivery of a deed to the Realty in lieu
of foreclosure.
SECTION 10. WARRANTIES WITH RESPECT TO ACCOUNTS AND INVENTORY.
10.1 Account Warranties and Representations. With respect to its
Accounts, Borrower represents and warrants to Lender that Lender may rely, in
determining which Accounts listed on any Schedule of Accounts are Eligible
Accounts, on all statements or representations made by Borrower on or with
respect to any such Schedule of Accounts, and, unless otherwise indicated in
writing
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by Borrower, that each Account listed on the Schedule of Accounts: (a) will
cover a bona fide sale and delivery of Inventory usually dealt in by Borrower,
or the rendition by Borrower of services, to an Account Debtor in the ordinary
course of business; (b) will be genuine and in all respects what it purports to
be, will not be evidenced by an instrument or document, or if so, will be only
evidenced by one original instrument or document which has been duly delivered
to Lender; (c) will be for a liquidated amount maturing as stated in the
Schedule of Accounts and in the duplicate invoice covering said sale; (d)
Lender's security interest therein will not be subject to any offset, deduction,
counterclaim, lien or other adverse condition; (e) there are no discounts,
allowances, claims, setoffs, counterclaims or disputes of any kind or
description existing or asserted with respect thereto except as may be stated in
the Schedule of Accounts and in the duplicate invoice covering said sale; (f)
there are, to Borrower's knowledge, no facts, events or occurrences which would
in any way impair the validity or enforcement thereof; (g) the goods giving rise
thereto are not, and were not at the time of the sale thereof, subject to any
lien, claim, encumbrance or security interest except those held by Lender and
Permitted Liens; and (h) to Borrower's knowledge, each Person obligated on an
Account is Solvent and will continue to be fully able to pay all Accounts on
which it is obligated in full when due. If any warranty is breached as to any
Account, or if any Account is not paid in full within ninety (90) days after its
due date or one hundred twenty (120) days after its invoice date, then Lender
may deem such Account to be an ineligible Account, but Lender shall retain its
security interest in all Accounts, eligible and ineligible, until all
Obligations to Lender have been paid and satisfied in full.
10.2 Inventory Warranties and Representations. With respect to its
Inventory, Borrower represents and warrants to Lender that Lender may rely on
all statements or representations made by Borrower on or with respect to any
such Schedule of Inventory, and, unless otherwise indicated in writing by
Borrower and consented to by Lender that all Inventory listed on the Schedule of
Inventory: (a) will be located on the premises listed in Exhibit A attached
hereto; (b) shall not at any time be stored with a bailee, warehouseman or
similar party without Lender's prior written consent, and if Lender gives such
consent, Borrower will concurrently therewith cause any such bailee,
warehouseman or similar party to issue and deliver to Lender in form and
substance acceptable to Lender, warehouse receipts therefor in Lender's name;
and (c) will be new Inventory of good and merchantable quality, substantially
free from defects. If the requirements set forth in paragraphs (a), (b) and (c)
of this Section 10.2 are not met, then Lender may deem ineligible such
Inventory, but Lender shall retain its security interest in all Inventory,
eligible or ineligible, until all Obligations to Lender have been paid and
satisfied in full.
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10.3 Reaffirmation of Warranties and Representations. Each request for
a Loan, by Borrower pursuant to this Agreement shall constitute (a) an automatic
warranty and representation by Borrower to Lender that there does not then exist
a Default or an Event of Default or if an Event of Default has occurred, such
Event of Default has been waived in writing by Lender and (b) a reaffirmation as
of the date of said request of all of the representations and warranties of
Borrower contained in this Agreement and the other Loan Documents.
10.4 Survival of Warranties and Representations. Borrower covenants,
warrants and represents to Lender that all representations and warranties of
Borrower contained in this Agreement and the other Loan Documents shall be true
at the time of Borrower's execution of this Agreement and the other Loan
Documents and shall survive the execution, delivery and acceptance thereof by
the parties thereto and the closing of the transactions described therein or
related thereto.
SECTION 11. TERM OF AGREEMENT.
11.1 Term. Subject to Lender's right to cease making Loans to Borrower
upon or after the occurrence of any Default or Event of Default, this Agreement
shall be in effect through May 30, 2000, and for such periods thereafter as may
be requested by Borrower and agreed to in writing by Lender in the exercise of
its discretion, unless sooner terminated as provided in Section 11.2 and Section
11.3 hereof. Such requests for extension by Borrower, if made, shall be made in
June of each year beginning in June, 1996 and shall be in each case for an
additional one year extension. In no event shall Borrower be entitled to
request, or Lender be obligated to consider a request, for an extension of the
term of the Agreement to a date after May 1, 2010.
11.2 Borrower's Right to Terminate. Borrower may terminate the
financing arrangements under this Agreement and the other Loan Documents at any
time by giving Lender not less than ninety (90) days written notice of
Borrower's intention to terminate this Agreement in the manner set forth in
Section 15.3 below; provided, however, that in order for any such notice of
termination by Borrower pursuant to this Section 11.2 to become effective,
Borrower, on or before such termination date, shall pay the Obligations to
Lender in full in immediately available funds and shall pay the prepayment fee
specified in Section 2.13 of this Agreement.
11.3 Lender's Right to Terminate. Lender may terminate the financing
arrangements under this Agreement and the other Loan Documents at any time,
without demand, notice or legal process of any kind, upon the occurrence of an
Event of Default; provided, however, that Lender shall retain the right to
payment of the Obligations in accordance with Section 3.1 above; and provided
further that all of Lender's rights and remedies under this
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Agreement and the other Loan Documents shall survive such termination until all
of the Obligations have been paid in full. On or before the termination date,
Borrower shall pay the Obligations to Lender in full in immediately available
funds together with the prepayment fee specified in Section 2.13 of this Agree-
ment.
11.4 Effect of Termination. Upon the effective date of termination, all
Obligations to Lender, whether or not incurred under this Agreement, and
notwithstanding any term or credit allowed by the Note or by any other
instrument evidencing the Obligations, shall become immediately due and payable
without notice, demand, presentment, protest or notice of any kind, all of
which are hereby waived by Borrower. Notwithstanding any termination, until all
Obligations to Lender of every nature whatsoever shall have been fully paid and
satisfied, Lender shall be entitled to retain its security interest in the
Collateral and the Realty, and Borrower shall continue to comply fully with the
terms of this Agreement and shall turn over all proceeds of the Collateral and
the Realty to Lender, and Lender shall retain all of its other rights and
remedies hereunder.
SECTION 12. EVENTS OF DEFAULT.
12.1 Event of Default. The occurrence of any one or more
of the following events shall constitute an "Event of Default":
(a) Borrower fails to pay any portion of the Obligations when
due and payable or declared due and payable, or fails to remit or deposit items
or funds as required by the terms of this Agreement;
(b) Borrower fails or neglects to observe, perform or comply
with any other term, provision, condition, covenant, warranty or representation
contained in this Agreement or the other Loan Documents or in any other
agreement now existing or hereafter executed evidencing, securing or relating
in any way to the Obligations of Borrower, which is required to be observed, per
formed or complied with by Borrower and the same is not cured to Lender's
satisfaction within ten (10) days after the earlier of (i) Borrower's having
knowledge thereof or (ii) Lender's giving Borrower written notice thereof;
(c) If any representation or warranty made in writing by or on
behalf of Borrower in this Agreement or in the other Loan Documents or in any
other agreement now existing or hereafter executed between Borrower and Lender,
or in connection with the transactions contemplated hereby or thereby, shall
prove to have been false or incorrect in any material respect at the time as of
which such representation or warranty was made;
(d) The occurrence of any default or event of default on the
part of Borrower (including specifically, but without limitation, due to
non-payment) under the terms of any agreement,
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document or instrument pursuant to which Borrower has incurred any Indebtedness
(other than the Obligations), which default is not cured within the time, if
any, permitted therefor in the agreement governing such Indebtedness;
(e) There shall occur any material uninsured damage to
or loss, theft or destruction of any of the Collateral or the
Realty;
(f) The filing by Borrower of any voluntary petition seeking
liquidation, reorganization, arrangement, readjustment of debts or for any other
relief under the Bankruptcy Code or under any other act or law pertaining to
insolvency or debtor relief, whether state, federal or foreign, now or hereafter
existing;
(g) The filing against Borrower of any involuntary petition
seeking liquidation, reorganization, arrangement, readjustment of debts or for
any other relief under the Bankruptcy Code or under any other act or law
pertaining to insolvency or debtor relief, whether state, federal or foreign,
now or hereafter existing, and such petition is not dismissed within forty-five
(45) days of the filing thereof or within such forty-five (45) day period an
order for relief under the Bankruptcy Code or any other applicable act or law
shall be entered;
(h) Borrower ceases to be Solvent, or Borrower ceases to
conduct its business as now conducted or is enjoined, restrained or in any way
prevented by court order from conducting all or any material part of its
business affairs;
(i) A notice of lien, levy or assessment is filed of record to
all or any portion of Borrower's assets by the United States, or any department,
agency or instrumentality thereof, or by any state, county, municipal or other
governmental agency, including, without limitation, the Pension Benefit Guaranty
Corporation, or if any taxes or debts owing at any time or times hereafter to
any one of them becomes a lien or encumbrance upon the Collateral, the Realty or
any other asset of Borrower and the same is not dismissed, released or
discharged within thirty (30) days after the same becomes a lien or encumbrance
or, in the case of ad valorem taxes, prior to the last day when payment may be
made without penalty;
(j) The entry of a judgment or the issuance of a warrant of
attachment, execution or similar process against Borrower or any of its assets,
which shall not be dismissed, discharged or bonded within thirty (30) days;
(k) If a custodian, trustee, receiver or assignee for the
benefit of creditors is appointed or takes possession of the Collateral, the
Realty or any of Borrower's other assets;
(1) The occurrence of any of the following events: (i)
the happening of a Reportable Event with respect to any profit
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sharing or pension plan of Borrower governed by ERISA; (ii) the termination of
any such plan; (iii) the appointment of a trustee by an appropriate United
States District Court to administer any such plan; (iv) the institution of any
proceedings by the Pension Benefit Guaranty Corporation to terminate any such
plan or to appoint a trustee to administer any such plan; (v) the failure of
Borrower to furnish to Lender a copy of each report which is filed by Borrower
with respect to each such plan promptly after the filing thereof with the
Secretary of Labor or the Pension Benefit Guaranty Corporation; (vi) the failure
of Borrower to notify Lender promptly upon receipt by Borrower of any notice of
the institution of any proceeding or any other actions which may result in the
termination of any such plan; or (vii) the failure of Borrower to acquire and
maintain, when available, the contingent employer liability coverage insurance
provided for under section 4023 of ERISA, such insurance to be satisfactory to
Lender in coverage and amount; or
(m) There shall occur any material adverse change in the
Collateral, the Realty or in the business of Borrower or its operations, conduct
or prospects thereof, which, individually or in the aggregate, would have a
material adverse effect on Borrower's ability to repay the Obligations.
(n) There shall occur a change of 50% or more in the ownership
or control of Borrower's outstanding voting Stock after the Closing Date.
12.2 Acceleration of the Obligations. Without in any way limiting the
right of Lender to demand payment of any portion of the Obligations pursuant to
Section 3.1 of this Agreement, (a) upon and after an Event of Default (other
than an Event of Default specified in Section 12.1(f) or (g) hereof), all of
the Obligations may, at the option of Lender, and without demand, notice or
legal process of any kind, be declared, and immediately shall become, due and
payable, and (b) upon the occurrence of an Event of Default specified in Section
12.1(f) or (g) hereof, all of the Obligations shall automatically become due and
payable, without demand, notice or legal process of any kind, anything in the
Note or other contract evidencing any such Obligation or in the Loan Documents
or in any other agreement to the contrary notwithstanding.
12.3 Default Rate of Interest. Upon the occurrence and during the
continuance of an Event of Default, at the election of Lender, the Loans
outstanding shall bear interest at a rate per annum equal to the Prime Rate plus
two percent (2%) per annum (hereinafter called the "Default Rate"), until either
such Event of Default is cured to Lender's satisfaction or otherwise waived in
writing by Lender or the Obligations are paid in full and this Agreement is
terminated.
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SECTION 13. RIGHTS AND REMEDIES AFTER EVENT OF DEFAULT.
13.1 Rights and Remedies. Upon and after the occurrence of any Event of
Default, Lender shall have, in addition to all other rights and remedies which
Lender may have under this Agreement, the other Loan Documents, and applicable
law, the following rights and remedies, all of which may be exercised with or
without further notice to Borrower: (a) all of the rights and remedies of a
secured party under the Uniform Commercial Code of the State of North Carolina,
or any other state where such rights and remedies are asserted; (b) to foreclose
the liens and security interests created under this Agreement and the other Loan
Documents or under any other agreement relating to the Collateral or the
Realty, by any available judicial procedure or without judicial process; (c) to
enter any premises where the Collateral may be located, through self-help and
without judicial process, without first obtaining a final judgment or giving
Borrower notice and opportunity for a hearing on the validity of Lender's
claim, for the purpose of taking possession or removing the same, or require
Borrower to assemble the Collateral and make it available to Lender at a place
to be designated by Lender; and (d) to sell, assign, lease, or otherwise dispose
of the Collateral or any part thereof, either at public or private sale, in
lots or in bulk, for cash, on credit or otherwise, with or without
representation or warranties, and upon such terms as shall be acceptable to
Lender, in its sole discretion, and Lender may bid or become the purchaser at
any such public sale, free from any right of redemption which is hereby
expressly waived by Borrower, and Lender shall have the option to apply or be
credited with the amount of all or any part of the Obligations owing to Lender
against the purchase price bid by Lender at any such sale. Lender may, if it
deems it reasonable, postpone or adjourn any sale of the Collateral from time to
time by an announcement at the time and place of such postponed or adjourned
sale, without being required to give a new notice of sale. Borrower agrees that
Lender has no obligation to preserve rights to the Collateral or the Realty
against prior Persons or to marshall any Collateral or the Realty for the
benefit of any Person. Lender is hereby granted a license or other right to use,
without charge, Borrower's labels, patents, copyrights, rights of use of any
name, trade secrets, trade names, trademarks, and advertising matter, or any
property of a similar nature, as it pertains to the Collateral, in completing
production of, advertising for sale, and selling any Collateral and Borrower's
rights under all licenses and franchise agreements shall inure to Lender's bene-
fit. In addition, Borrower agrees that in the event notice is necessary under
applicable law, written notice mailed to Borrower in the manner specified in
Section 15.3 hereof five (5) days prior to the date of public sale of any of the
Collateral or prior to the date after which any private sale or other disposi-
tion of the Collateral will be made shall constitute commercially reasonable
notice to Borrower.
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13.2 Application of Proceeds. The net cash proceeds resulting from the
collection, liquidation, sale, lease or other disposition of the Collateral or
the Realty shall be applied first to the expenses (including all reasonable
attorneys' fees) of retaking, holding, storing, processing and preparing for
sale, selling, collecting, liquidating and the like, and then to the
satisfaction of all Obligations, application as to particular Obligations or
against principal or interest to be in Lender's absolute discretion. Borrower
shall be liable to Lender and shall pay to Lender on demand any deficiency which
may remain after such sale, disposition, collection or liquidation of the
Collateral or the Realty. Lender shall remit to Borrower or the Person entitled
thereto any surplus remaining after all Obligations have been paid in full. If
any of the Collateral or the Realty shall require repairs, maintenance,
preparation or the like, or is in process or other unfinished state, Lender
shall have the right, but shall not be obligated to perform such repairs,
maintenance, preparation, processing or completion of manufacturing for the
purpose of putting the same in such saleable form as Lender shall deem
appropriate, but Lender shall have the right to sell or dispose of the
Collateral or the Realty without such processing. Borrower will, at Lender's
request, assemble all the Collateral and make it available to Lender at places
which Lender may select, whether at premises of Borrower or elsewhere, and will
make available to Lender all premises and facilities of Borrower for the purpose
of Lender's taking possession of the Collateral or the Realty or of removing or
putting the Collateral in saleable form.
13.3 Appointment of Lender as Borrower's Lawful Attorney. Upon and
during the continuance of an Event of Default, Borrower irrevocably designates,
makes, constitutes and appoints Lender (and all Persons designated by Lender) as
Borrower's true and lawful attorney (and agent-in-fact) and Lender, or Lender's
agent, may, without notice to Borrower, and at such time or times thereafter as
Lender or said agent, in its sole discretion, may determine, in Borrower's or
Lender's name: (i) demand payment of the Accounts; (ii) enforce payment of the
Accounts, by legal proceedings or otherwise; (iii) exercise all of Borrower's
rights and remedies with respect to the collection of the Accounts; (iv) settle,
adjust, compromise, extend or renew the Accounts; (v) settle, adjust or
compromise any legal proceedings brought to collect the Accounts; (vi) if
permitted by applicable law, sell or assign the Accounts upon such terms, for
such amounts and at such time or times as Lender deems advisable; (vii)
discharge and release the Accounts; (viii) take control, in any manner, of any
item of payment relating to and/or proceeds of Collateral and the Realty; (ix)
prepare, file and sign Borrower's name on a proof of claim in bankruptcy or
similar document against any Account Debtor; (x) prepare, file and sign
Borrower's name on any notice of lien, assignment or satisfaction of lien or
similar document in connection with the Accounts; (xi) do all acts and things
necessary, in Lender's sole discretion, to fulfill Borrower's obligations under
this Agreement; (xii) endorse the name of
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Borrower upon any of the items of payment relating to and/or proceeds of
Collateral and the Realty and deposit the same to the account of Lender on
account of the Obligations; (xiii) endorse the name of Borrower upon any chattel
paper, document, instrument, invoice, freight bill, bill of lading or similar
document or agreement relating to the Accounts or Inventory; (xiv) use
Borrower's stationery and sign the name of Borrower to verifications of the
Accounts and notices thereof to Account Debtors; and (xv) use the information
recorded on or contained in any data processing equipment and computer hardware
and software relating to the Accounts and Inventory to which Borrower has
access. All acts of Lender or its designee taken pursuant to this Section 13.3
are hereby ratified and confirmed and Lender or its designee shall not be liable
for any acts of omission or commission nor for any error of judgment or mistake
of fact or law. This power, being coupled with an interest, is irrevocable by
Borrower until all Obligations of Borrower to Lender are paid in full.
13.4 Rights and Remedies Cumulative; Non-Waiver; Etc. The enumeration
of Lender's rights and remedies set forth in this Agreement is not intended to
be exhaustive and the exercise by Lender of any right or remedy shall not
preclude the exercise of any other rights or remedies, all of which shall be
cumulative, and shall be in addition to any other right or remedy given
hereunder, under the Loan Documents or under any other agreement between
Borrower or Lender or which may now or hereafter exist in law or in equity or by
suit or otherwise. No delay or failure to take action on the part of Lender in
exercising any right, power or privilege shall operate as a waiver thereof, nor
shall any single or partial exercise of any such right, power or privilege
preclude other or further exercise thereof or the exercise of any other right,
power or privilege or shall be construed to be a waiver of any Event of Default.
No course of dealing between Borrower and Lender or its agents or employees
shall be effective to change, modify or discharge any provision of this
Agreement or to constitute a waiver of any Event of Default. Lender shall not,
under any circumstances or in any event whatsoever, have any liability for any
error, omission or delay of any kind occurring in the liquidation of the
Collateral or the Realty or for any damages resulting therefrom, except for
liability resulting from Lender's gross negligence or willful misconduct.
SECTION 14. PAYMENT OF EXPENSES.
Whether or not the transactions contemplated by this Agreement shall
be consummated, Borrower will:
14.1 Fees and Expenses. Pay or reimburse Lender and any Participant
upon demand for all expenses (including, without limitation, reasonable
attorneys' and paralegals' expenses) incurred or paid by Lender and any
Participant in connection with: (a) the preparation, execution, delivery,
interpretation, modification or amendment of this Agreement or the other Loan
Docu-
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ments; (b) reasonable charges for appraisers, examiners, auditors or
similar Persons (except salaries of Lender's regularly employed personnel) whom
Lender may engage with respect to rendering opinions concerning Borrower's
financial condition and the condition and value of the Collateral and the
Realty; (c) any litigation, contest, dispute, suit, proceeding or action
(whether instituted by Lender, Borrower or any other Person) in any way relating
to the Collateral and the Realty, this Agreement or the other Loan Documents, or
Borrower's affairs; provided, however, that if Borrower initiates any proceeding
or action against Lender arising out of or related to this Agreement or the
other Loan Documents and Borrower is the prevailing party, then Borrower shall
have no obligation to reimburse Lender for its attorneys' fees incurred in
Lender's defense thereof; (d) any attempt to enforce any rights of Lender or
any Participant against Borrower or any other Person which may be obligated to
Lender by virtue of this Agreement or the other Loan Documents, including
without limitation, the Account Debtors; (e) any attempt to inspect, verify,
protect, collect, sell, liquidate or otherwise dispose of the Collateral or the
Realty; (f) the filing and recording of all documents required by Lender to
perfect Lender's liens in the Collateral and the Realty, including without limi-
tation, any documentary stamp tax or any other taxes incurred because of such
filing or recording.
14.2 Stamp Taxes. Pay and save Lender harmless from and against any and
all liability and loss with respect to or resulting from the nonpayment or
delayed payment of any and all intangibles, documentary stamp and other similar
taxes, fees and excises, if any, including any interest and penalties, which may
be, or be determined to be, payable in connection with the transactions
contemplated by this Agreement or in any modification hereof or thereof.
14.3 Brokerage Fees. Hold Lender harmless from and against any and all
finder's or brokerage fees and commissions which may be payable in connection
with the transactions contemplated by this Agreement other than any fees or
commissions of finders or brokers engaged by Lender.
14.4 Agent's Fee. Borrower shall pay Lender an agent's fee of $5,000.00
each Quarter in which there is a Participant in the Loans, with such fee to be
payable on the first day of each such Quarter.
SECTION 15. MISCELLANEOUS.
15.1 Survival of Agreements. All agreements, representations and
warranties contained herein or made in writing by or on behalf of Borrower in
connection with the transactions contemplated hereby shall survive the
execution and delivery of this Agreement and the other Loan Documents. No
termination or cancellation (regardless of cause or procedure) of this
Agreement shall in any way affect or impair the powers, obligations, du-
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ties, rights and liabilities of the parties hereto in any way with respect
to (a) any transaction or event occurring prior to such termination or
cancellation, (b) the Collateral or the Realty, or (c) any of Borrower's
undertakings, agreements, covenants, warranties and representations contained
in this Agreement and the other Loan Documents and all such undertakings,
agreements, covenants, warranties and representations shall survive such
termination or cancellation. Borrower further agrees that to the extent Borrower
makes a payment or payments to Lender, which payment or payments or any part
thereof are subsequently invalidated, declared to be fraudulent or preferential,
set aside and/or required to be repaid to a trustee, receiver or any other party
under any bankruptcy, insolvency or similar state or federal law, common law or
equitable cause, then, to the extent of such payment or repayment, the
Obligation or part thereof intended to be satisfied shall be revived and
continued in full force and effect as if such payment had not been received by
Lender.
15.2 Governing Law; Waiver of Jury Trial; Etc.. THIS AGREEMENT HAS BEEN
EXECUTED, DELIVERED AND ACCEPTED AT, AND SHALL BE DEEMED TO HAVE BEEN MADE AT
GREENSBORO, NORTH CAROLINA, AND SHALL BE INTERPRETED, AND THE RIGHTS AND
LIABILITIES OF THE PARTIES HERETO DETERMINED, IN ACCORDANCE WITH THE INTERNAL
LAWS (AS OPPOSED TO CONFLICTS OF LAW PROVISIONS) OF THE STATE OF NORTH CAROLINA.
AS PART OF THE CONSIDERATION FOR NEW VALUE THIS DAY RECEIVED, BORROWER HEREBY
CONSENTS TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE
STATE OF NORTH CAROLINA, AND CONSENTS THAT ALL SERVICE OF PROCESS BE MADE BY
REGISTERED OR CERTIFIED MAIL DIRECTED TO BORROWER AT THE ADDRESS STATED IN
SECTION 15.3 BELOW AND SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED UPON THE
EARLIER OF ACTUAL RECEIPT THEREOF OR THREE (3) DAYS AFTER DEPOSIT IN THE UNITED
STATES MAILS, PROPER POSTAGE PREPAID. TO THE EXTENT PERMITTED BY LAW, BORROWER
AND LENDER WAIVE ANY RIGHT TO TRIAL BY JURY EITHER MAY HAVE IN ANY ACTION OR
PROCEEDING IN CONNECTION WITH THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR THE
TRANSACTIONS RELATED HERETO AND BORROWER WAIVES ANY OBJECTION WHICH BORROWER MAY
HAVE BASED ON LACK OF JURISDICTION OR IMPROPER VENUE OR FORUM NON CONVENIENS TO
THE CONDUCT OF ANY PROCEEDING INSTITUTED HEREUNDER AND CONSENTS TO THE GRANTING
OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY THE COURT. NOTHING
IN THIS SECTION 15.2 SHALL AFFECT THE RIGHT OF LENDER TO SERVE LEGAL PROCESS IN
ANY OTHER MANNER PERMITTED BY LAW OR AFFECT THE RIGHT OF LENDER TO BRING ANY
ACTION OR PROCEEDING AGAINST BORROWER OR ITS PROPERTY IN THE COURTS OF ANY OTHER
JURISDICTION WHICH HAS JURISDICTION OVER BORROWER OR ITS PROPERTY.
15.3 Notice. All notices and other communications hereunder shall be
made by telegram, telex, electronic transmitter or overnight air courier or
certified or registered mail, return receipt requested, and shall be deemed to
be received by the other party one (1) business day after sending, if sent by
telegram, telex, electronic transmitter or overnight air courier and
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three (3) business days after mailing, if sent by certified or registered mail.
All notices shall be addressed to the party to be notified as follows:
If to Borrower: Pluma, Inc.
801 Fieldcrest Road
Eden, North Carolina 27288
Attn: President
Telecopier No. 910-635-3488
With a copy to: Allman Spry Leggett
& Crumpler, P.A.
Post Office Drawer 5129
Suite 700
380 Knollwood Street 27103-4152
Winston-Salem, North Carolina
27113-5129
Attn: Thomas T. Crumpler, Esq.
Telecopier No. 910-721-0414
If to Lender at: First Union National Bank of
North Carolina
Post Office Box 21965
300 N. Greene Street 27401
Greensboro, North Carolina 27420
Attn: City Executive
Telecopier No. 910-378-4043
With a copy to: Tuggle Duggins & Meschan, P.A.
Post Office Box 2888
228 West Market Street 27401
Greensboro, North Carolina 27402
Attn: Paul M. Dennis, Jr., Esq.
Telecopier No. 910-274-4339
or to such other address as each party may designate for itself
by like notice.
15.4 Indemnification of Lender. From and at all times after the date
of this Agreement, and in addition to all of Lender's other rights and remedies
against Borrower, Borrower agrees to hold Lender harmless from, and to indemnify
Lender against, all losses, damages, costs and expenses (including, but not lim-
ited to, reasonable attorneys' and paralegals' fees, costs and expenses)
incurred by Lender from and after the date hereof, whether direct, indirect or
consequential, as a result of or arising from or relating to any suit, action or
proceeding by any Person other than Borrower, whether threatened or initiated,
asserting a claim for any legal or equitable remedy against any Person under
any statute or regulation, including, but not limited to, any federal or state
securities laws, or under any common law or equitable cause or otherwise,
arising from or in connection with the negotiation, preparation, execution or
perfor-
-54-
<PAGE>
mance of, or the financing transactions contemplated by, this Agreement
and the other Loan Documents, or Lender's furnishing of funds to Borrower
pursuant to this Agreement; provided, however, that the foregoing
indemnification shall not protect Lender from loss, damage, cost or expense
directly attributable to Lender's willful misconduct or gross negligence. All of
the foregoing losses, damages, costs and expenses of Lender shall be payable by
Borrower upon demand by Lender and shall be additional Obligations hereunder
secured by the Collateral and the Realty.
15.5 Waivers by Borrower. Except as otherwise provided for in this
Agreement, Borrower waives (a) presentment, demand and protest and notice of
presentment, protest, default, nonpayment, maturity and all other notices; (b)
notice prior to taking possession or control of the Collateral or the Realty or
any bond or security which might be required by any court prior to allowing
Lender to exercise any of Lender's remedies; and (c) the benefit of all
valuation, appraisement and exemption laws.
15.6 Lawful Charges. It being the intent of the parties that the rate
of interest and all other charges due from Borrower be lawful, if for any reason
payment of a portion of interest or charges as required by this Agreement would
exceed the limit established by applicable law, then the obligation to pay
interest or charges shall automatically be reduced to such limit and if any
amounts in excess of such limit shall have been paid, then such amounts shall be
applied to the unpaid principal amount of the Obligations of Borrower to Lender
or refunded so that under no circumstances shall interest or charges required
hereunder exceed the maximum rate allowed by law.
15.7 Assignment. Borrower may not sell, assign or transfer this
Agreement, or the other Loan Documents or any portion thereof, including without
limitation, Borrower's rights, title, interests, remedies, powers, and duties
hereunder or thereunder. Borrower hereby consents to Lender's participation,
sale, assignment, transfer or other disposition at any time or times hereafter
of this Agreement or the other Loan Documents, or of any portion hereof or
thereof, including without limitation, Lender's rights, title, interests,
remedies, powers and duties hereunder or thereunder; provided, however, that
promptly after any sale, assignment or transfer of this Agreement or the other
Loan Documents, Lender shall give Borrower written notice thereof in the manner
set forth in Section 15.3 above.
15.8 Amendment. This Agreement and the other Loan Documents cannot be
amended, changed, discharged or terminated orally, but only by an instrument in
writing signed by Lender and Borrower.
15.9 Severability. To the extent any provision of this
Agreement is prohibited by or invalid under applicable law, such
provision shall be ineffective to the extent of such prohibition
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<PAGE>
or invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Agreement.
15.10 Entire Agreement. This Agreement and the Loan Documents
constitute the entire agreement between the parties and supersede and rescind
any prior agreements relating to the subject matter hereof, including without
limitation, the commitment letter between Lender and Borrower dated March 15,
1995.
15.11 Binding Effect. All of the terms of this Agreement and the other
Loan Documents, as the same may from time to time be amended, shall be binding
upon, inure to the benefit of and be enforceable by the respective successors
and assigns of Borrower and Lender. This provision, however, shall not be deemed
to modify Section 15.7.
15.12 Captions. The captions to the various sections and subsections of
this Agreement have been inserted for convenience only and shall not limit or
affect any of the terms hereof.
15.13 Disbursement of Loan Proceeds. Borrower hereby authorizes and
directs Lender to disburse, for and on behalf of Borrower and for Borrower's
account, the proceeds of Loans made by Lender to Borrower pursuant to this
Agreement to such Person or Persons as Borrower shall direct, whether in writing
or orally.
15.14 Participant. If a Participant shall at any time participate with
Lender in making Loans hereunder or under any other agreement between Lender and
Borrower, Borrower hereby grants to such Participant (in addition to any other
rights which such Participant shall have) and such Participant shall have and is
hereby given a continuing lien and security interest in any money, securities or
other property of Borrower in the custody or possession of Participant,
including the right to setoff, to the extent of Participant's participation and
security interest in any money, securities or other property of Borrower in the
custody or possession of Participant, including the right of setoff, to the
extent of Participant in the Obligations of Borrower to Lender, as it would have
if it were a direct lender to Borrower.
15.15 Conflict of Terms. The provisions of the other Loan Documents and
any Schedule of Accounts or Inventory are incorporated in this Agreement by
this reference thereto. Except as otherwise provided in this Agreement and
except as otherwise provided in the other Loan Documents, if any provision
contained in this Agreement is in conflict with, or inconsistent with, any
provision of the other Loan Documents, the provision contained in this Agreement
shall control.
15.16 Injunctive Relief. Borrower recognizes that in the
event Borrower fails to perform, observe or discharge any of its
obligations or liabilities under this Agreement, any remedy of
law may prove to be inadequate relief to Lender. Borrower
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<PAGE>
therefor agrees that Lender, if Lender so requests, shall be entitled to
temporary and permanent injunctive relief in any such case, as the law may
allow, without the necessity of proving actual damages.
15.17 Liens; Setoff By Lender. As additional security for the
Obligations owed to Lender, Borrower hereby grants to Lender a continuing lien
upon any and all monies, securities and other property of Borrower and the
proceeds thereof, now or hereafter held or received by or in transit to, Lender
from or for Borrower, and also upon any and all deposits and credits of
Borrower, against Lender, at any time existing. Upon the occurrence of an Event
of Default, Lender is authorized at any time and from time to time, without
prior notice to Borrower, to setoff, appropriate and apply any and all items
hereinabove referred to against the Obligations owed to Lender.
15.18 Acquisition of Rocky Mount, Virginia Real Estate. Borrower, as
"Buyer," has entered into a Sale and Purchase Agreement with Sara Lee
Corporation, as "Seller," dated May 9, 1995, for the purchase by Buyer of
approximately 42 acres of real property in Rocky Mount, Virginia (the "Sara Lee
Contract"). Upon closing of the transactions under the Sara Lee Contract,
Borrower agrees that it promptly, upon Lender's request, will: (i) execute and
deliver for the benefit of Lender a first deed of trust securing the Obligations
upon the real property acquired by Borrower, with such deed of trust to be in
form and substance satisfactory to Lender; (ii) upon recordation of such deed of
trust, obtain a loan policy of title insurance in the amount of the purchase
price of the real property naming Lender as insured from a title insurance
company acceptable to Lender; (iii) provide Lender with copies of any surveys of
such real property and environmental assessments of such real property as are in
the possession of the Borrower; and (iv) as required by this Agreement, execute
any UCC financing statements or other Supplemental Documentation as Lender may
determine to be necessary in order to perfect a security interest in favor of
Lender in any personal property of Borrower located at such real property.
15.19 Time of Essence. Time is of the essence of this
Agreement and the other Loan Documents.
[Remainder of page Intentionally Left Blank]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in their corporate names by their duly authorized corporate officers
and their seals to be affixed as of the date first above written.
ATTEST: PLUMA, INC.
/s/ George G. Wade By: /s/ R. Duke Ferrell, Jr.
_____________ Secretary Title: President
[CORPORATE SEAL]
FIRST UNION NATIONAL BANK
ATTEST: OF NORTH CAROLINA
/s/ Nancy F. McCollum By: /s/ E. Neal Crawford
Assistant Secretary Title: Vice President
[CORPORATE SEAL]
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<PAGE>
SCHEDULE OF EXHIBITS
<TABLE>
<CAPTION>
Exhibit Description of Exhibits Section
<S> <C> <C>
A Places of Business and Locations 1.1,
of Collateral 9.1
B Permitted Liens 1.1
C Fictitious or Assumed Names 6.1
D Litigation 6.2
E Licenses, Patents and Trademarks 6.15
F-l Eden Realty 1.1
F-2 Chatham Realty 1.1
F-3 Martinsville Realty 1.1
F-4 Vesta Realty 1.1
G Authorized Persons 2.1
H Monthly Report 7.3(e)
</TABLE>
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<PAGE>
EXHIBIT A
Places of Business and Locations of Collateral
I. Borrower's chief executive office, principal place of
business and main manufacturing plant:
801 Fieldcrest Road
Eden, North Carolina 27288
II. Other Business Locations:
a. 750 Fieldcrest Road
Eden, North Carolina
(sewing facility)
b. State Road 714
Martinsville, Virginia
(sewing facility, distribution facility and
distribution annex facility)
c. Chatham Industrial Park
Chatham, Virginia
d. Lester Group Warehouses
617-A Liberty Street
Martinsville, Virginia
(warehouse)
e. U.S. 58 and State Route 639
Vesta, Patrick County, Virginia
(sewing facility)
f. MGM Warehouse
VC Drive
Martinsville, Virginia
(warehouse)
III. Other Locations of Collateral:
a. Knitcraft (knitting) in Belmont, Gaston County, North
Carolina.
b. Liberty Embroidery (embroidery) in Madison, Rockingham
County, North Carolina.
c. Liberty Printing (screen printing) in Madison,
Rockingham County, North Carolina.
d. Southprint (screen printing) in Martinsville, Henry
County, Virginia.
e. Bengle Manufacturing in Stuart, Patrick County,
Virginia.
f. Cedar Hill in Anson, Anson County, North Carolina.
g. Eagle Pointe in Huddleston, Bedford County, Virginia.
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<PAGE>
h. Ramseur Inter-Lock Knitting Co. in Ramseur, Randolph
County, North Carolina
i. T. L. Edwards in Statesville, Iredell County, North
Carolina
j. Galax Apparel in Galax, Carroll County, Virginia
k. Diversified Apparel in Pulaski, Pulaski County,
Virginia
l. Grassy Creek Apparel, Gate City, Scott County,
Virginia
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<PAGE>
EXHIBIT B
TO
LOAN AND SECURITY AGREEMENT
Permitted Liens
UCC Financing Statements filed in the Office of:
A. Secretary of State of North Carolina:
<TABLE>
<CAPTION>
Date of Collateral
Secured Party File No. Filing Description
<S> <C> <C> <C>
1. Toyota Motor Credit
Corporation 0973106 03/01/93 2 Toyota forklifts
2. Toyota Motor Credit 0973107 03/01/93 2 Toyota forklifts
Corporation
3. Toyota Motor Credit 013699 07/08/93 1 Toyota forklift
Corporation
4. Toyota Motor Credit 1117170 06/13/94 1 Toyota forklift
Corporation
5. Gaston Co. Dying 1195221 02/17/95 1 dyeing machine
Machine Co.
6. MJL Corporation 1143195 09/06/94 1 cutting system
7. MJL Corporation 1214404 04/13/95 1 cutting system
B. Register of Deeds of Rockingham County, North Carolina:
1. Toyota Motor Credit
Corporation 1467 03/01/93 2 Toyota forklifts
2. Toyota Motor Credit 1468 03/01/93 2 Toyota forklifts
Corporation
3. Toyota Motor Credit 2481 07/06/93 1 Toyota forklift
Corporation
4. Toyota Motor Credit 4605 06/13/94 1 Toyota forklift
Corporation
5. Gaston Co. Dyeing 6085 02/17/95 1 dyeing machine
Machine Co.
C. Clerk of Circuit Court of Henry County, Virginia:
1. Crown Credit Co. 000513 07/26/94 equipment
2. Crown Credit Co. 000612 09/07/94 equipment
</TABLE>
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<PAGE>
EXHIBIT C
TO
LOAN AND SECURITY AGREEMENT
Fictitious or Assumed Names
Pluma
Santee
-63-
<PAGE>
EXHIBIT D
TO
LOAN AND SECURITY AGREEMENT
Litigation
None
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<PAGE>
EXHIBIT E
TO
LOAN AND SECURITY AGREEMENT
Licenses, Patents and Trademarks
Borrower has a license from Superba, Inc. to use the name
"Santee" in certain labels.
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<PAGE>
EXHIBIT F-l Page 1 of 2
TO
LOAN AND SECURITY AGREEMENT
Eden Realty
Eden
Rockingham County, North Carolina
TRACT 1:
Those certain parcels or tracts of land located in Rockingham County,
North Carolina, being more particularly
described as follows:
BEGINNING at an iron pin in the north line of Fieldcrest Road, being
the southeast corner of Parcel "E" as shown on the map hereinafter referred to,
said beginning point also being located a chord, courses and distance along a
curve to the right of South 71 deg. 17 min. 09 sec. West 172.14 feet from the
southwestern corner of the property of the First Baptist Church of Draper as
recorded in Book 660, Page 520, Rockingham County Registry, and running thence
from said point and place of BEGINNING along the northern right of way line of
Fieldcrest Road, on a curve to the right, chord, courses and distances: South 74
deg. 40 min. 25 sec. West 499.84 feet, and South 81 deg. 17 min. 28 sec. West
812.65 feet to an iron; thence leaving the right of way of Fieldcrest Road and
running with the eastern line of a private street, North 4 deg. 27 min. 30 sec.
West 491.28 feet to an iron located in the southeast line of the Norfolk and
Southern Railway, and being the northwestern most corner of the within described
property; running thence with the Norfolk and Southern Railway line, North 70
deg. 11 min. 58 sec. East 1,159.69 feet to an existing iron pin, being the
northeast corner of the herein described property and the northwest corner of
Parcel "F" as shown on the map hereinafter referred to; thence leaving said
railroad line in a southerly direction with the west line of Parcel "F", South
20 deg. 16 min. 56 sec. East 669.03 feet to the point and place of BEGINNING,
containing 17 acres, and being all of Parcels "D" and "E" as shown on the survey
entitled "As-Built Survey for North Bowles Partnership of Pluma Manufacturing,
Inc.," dated Mary 5, 1990, prepared by C. E. Robinson & Associates, Registered
Land Surveyor, Eden, North Carolina.
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<PAGE>
TRACT 2: Page 2 of 2
This being a 15.648 acre tract of land located on the south side of Fieldcrest
Road, west side of Eden Avenue, north side of a proposed street and east side of
Norfolk Southern Railway leading to Duke Power Steam Station.
Beginning at a point in the southern right-of-way of Fieldcrest Road said point
being in the eastern right-of-way (50' right-of-way) of Norfolk Southern Railway
spur line serving Duke Power Steam Station; thence from said beginning point
with the southern right-of-way of Fieldcrest Road South 88(degrees) 21' 02" East
828.48 feet to a point; thence with said right-of-way as it curves to the left a
chord bearing and distance North 89(degrees) 01' 08" East 527.48 feet chord,
527.67 feet arc. to a point in the western right-of-way of Eden Avenue said
street having a 100 foot right of way; thence with the western right of way of
Eden Avenue South 4(degrees) 27' 30" East 492.98 feet to a point; thence South
42(degrees) 07' 30" West 34.16 feet to a point in the northern right-of-way of a
pro posed street, said street being unnamed and having a 100' right-of-way;
thence with the northern right-of-way of proposed street South 88(degrees) 42'
30" West 766.00 feet to a point; thence North 71(degrees) 19' 10" West 44.40
feet chord, 45.32 feet arc. to a point; thence South 80(degrees) 12' 45" West
127.21 feet chord, 143.73 feet arc. to a point; thence leaving proposed street
North 58(degrees) 13' 40" West 629.83 feet to a point in the eastern
right-of-way of Norfolk Southern Railway; thence with said right-of-way North
23(degrees) 30' 22" East 245.00 feet chord, 245.72 feet arc. to the POINT OF
BEGINNING and containing 15.648 acres as shown on plat of survey for Fieldcrest
Cannon, Inc. by C. E. Robertson dated April 20, 1992.
(DL013)
The above-described property was conveyed to Grantor by Citizens Economic
Development, Inc., a North Carolina tax-exempt corporation by special warranty
deed dated June 22, 1992, and recorded on June 23, 1992, in Deed Book 866, page
2288, Rockingham County Registry.
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<PAGE>
EXHIBIT F-2
TO
LOAN AND SECURITY AGREEMENT
Chatham Realty
Located in Chatham Magisterial District, Pittsylvania County,
Commonwealth of Virginia:
Lot 2 containing 16.325 acres as shown on plat of survey showing Chatham North
Industrial Park by Dewberry & Davis, dated September 19, 1987, recorded in Map
Book 42, Page 210, in the Clerk's Office of the Circuit Court of Pittsylvania
County, Virginia.
And being the same property conveyed to Pluma, Inc., a North Carolina
corporation, from Industrial Development Authority of Pittsylvania County,
Virginia, by Deed dated November 13, 1989 recorded in Deed Book 862, Page 783,
in the aforesaid Clerk's Office.
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<PAGE>
EXHIBIT F-3 Page 1 of 2
TO
LOAN AND SECURITY AGREEMENT
Martinsville Realty
(Henry County, Virginia)
All of that certain tract or parcel of land, together with all
improvements thereon and all appurtenances thereunto appertaining, situated on
the East side of State Route 714, on the South side of a 50-foot access drive
and on the North side of a 45-foot access easement in the Collinsville (formerly
Martinsville) Magisterial District of Henry County, Virginia, being all of Tract
2 as shown on "Subdivision Plat of Bowles Industrial Park", of record in the
Henry County Circuit Court Clerk's Office in Map Book 84, Page 97, said Tract
containing 8.205 acres, more or less, and as shown on Plat of Survey for Pluma,
Inc., prepared by J. A. Gustin & Associates, P.E. & L.L.S., dated January 7,
1992, to be recorded contemporaneously herewith; and being more particularly
described thereon as follows, to-wit:
BEGINNING at a reinforcing rod set on the eastern margin of State Route
714, which rod is located 0.2 mile, plus or minus, north of the intersection
with State Route 714, thence along the eastern margin of State Route 714, and
with the chord of a curve to the left, having a centerline radius of 3839.72
feet and a delta of 4 degrees 11 minutes 47 seconds, bearing North 8 degrees 27
minutes 37 seconds East 281.16 to a reinforcing rod set; thence continuing along
the eastern margin of State Route 714, North 6 degrees 21 minutes 44 seconds
East 248.69 feet to a reinforcing rod; thence leaving the eastern margin of
State Route 714, North 69 degrees 45 minutes 29 seconds East 119.55 feet to a
reinforcing rod; thence South 79 degrees 43 minutes 51 seconds East 500.00 to a
reinforcing rod; thence South 10 degrees 16 minutes 09 seconds West 603.47 feet
to reinforcing rod; thence with the chord of a curve to the right, having a
centerline radius of 1570.00 feet and a delta of 6 degrees 56 minutes 30
seconds, bearing North 83 degrees 12 minutes 07 seconds West 190.10 feet to a
reinforcing rod set; thence North 79 degrees 43 minutes 51 seconds West 362.38
feet to a reinforcing rod; thence North 34 degrees 36 minutes 53 feet West 35.49
feet to the point of the beginning and containing 8.205 acres, plus or minus,
according to the aforesaid Plat of Survey for Pluma, Inc., dated January 7, 1992
(the subject property being hereinafter referred to as the "Grantor's Tract");
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<PAGE>
Page 2 of 2
TOGETHER WITH perpetual non-exclusive easements to and from the
Grantor's Tract over any portion of the easement areas described below for the
purposes of ingress and egress to and from the Grantor's Tract, with the
property constituting said access easements more particularly described as
follows:
Access Easement 1: Being known and designated as that 45-foot access
easement lying immediately south of the southern line of the Grantor's Tract,
and designated as such in the aforesaid plat dated January 7, 1992, to be
recorded in the Clerk's Office of the Circuit Court of Henry County, Virginia,
said access easement extending eastwardly from State Road No. 714.
Access Easement 2: Being known and designated as that 50-foot access
drive lying immediately north of the northern line of the Grantor's Tract, and
designated as such in the aforesaid plat dated January 7, 1992, to be recorded
in the Clerk's Office of the Circuit Court of Henry County, said access road
extending eastwardly from State Road No. 714; provided however, this easement
shall end at the eastern margin of Grantor's Tract.
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<PAGE>
EXHIBIT F-4
TO
LOAN AND SECURITY AGREEMENT
Vesta Realty
(Patrick County, Virginia)
LYING AND BEING in the Blue Ridge Magisterial District, Patrick County,
Virginia, and BEGINNING at an iron pin located in the southeastern right of way
line of State Road 639, said iron being located at the northwestern corner of
the John Gordon Cruise property (now or formerly) as recorded in Deed Book 108,
Page 462, the Patrick County Clerk's Office; running thence from said point and
place of beginning with the southeastern right of way line of State Road 639;
thence North 37 degrees 02 minutes 17 seconds East 186.74 feet to an iron;
thence North 40 degrees 41 minutes 01 seconds East 324.30 feet to an iron;
thence North 43 degrees 39 minutes 02 seconds East 244.42 feet to an iron;
thence North 46 degrees 25 minutes 54 seconds East 352.46 feet to an iron, said
iron being located at the northwestern corner of the Herman Vaughn property as
described in Deed Book 238-286, Patrick County Registry; thence leaving State
Road 639 South 20 degrees 11 minutes 20 seconds East 264.81 feet to an iron;
thence South 36 degrees 25 minutes 42 seconds East 206.79 feet to an iron;
thence South 25 degrees 42 minutes 39 seconds East 72.30 feet to an iron in
Little Ivy Creek; thence South 76 degrees 13 minutes 17 seconds West 39.29 feet;
thence South 50 degrees 32 minutes 54 seconds West 44.68 feet; thence South 85
degrees 56 minutes 40 seconds West 44.34 feet; thence South 40 degrees 26
minutes 10 seconds West 55.19 feet; thence South 38 degrees 43 minutes 26
seconds West 61.19 feet; thence South 16 degrees 21 minutes 56 seconds West
48.17 feet; South 21 degrees 06 minutes 03 seconds East 48.24 feet; South 17
degrees 41 minutes 32 seconds West 59.16 feet; South 14 degrees 11 minutes 09
seconds East 94.53 feet; South 02 degrees 21 minutes 59 seconds East 48.70 feet;
South 09 degrees 44 minutes 31 seconds East 367.01 feet; thence North 63 degrees
01 minutes 59 seconds West 982.50 feet to the point and place of beginning and
containing 13.3309 acres as shown on a survey by Larry G. Rakes dated April 9,
1990.
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<PAGE>
EXHIBIT G
TO
LOAN AND SECURITY AGREEMENT
Authorized Persons
George C. Wade Chairman of the Board/
Secretary
R. Duke Ferrell, Jr. President/Chief Executive
Officer
William Mileski Vice President
Nancy Barksdale Controller/Treasurer
C. Monroe Light Vice President
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<PAGE>
EXHIBIT H
TO
LOAN AND SECURITY AGREEMENT
Monthly Borrowing Base and Loan Report
Date _____________, 19___
As of _____________, 19___
Report No. ___________________
Pursuant to Section 7.3(e) of that certain Loan and Security Agreement
("Loan Agreement") dated May 25, 1995 between PLUMA, INC. ("Borrower") and FIRST
UNION NATIONAL BANK OF NORTH CAROLINA ("Lender"), the undersigned on behalf of
Borrower hereby delivers this Monthly Borrowing Base and Loan Report to Lender
to induce Lender to make Loans to Borrower. All capitalized terms used herein
shall have the meanings ascribed to such terms in the Loan Agreement.
COLLATERAL STATUS
1. Total Accounts (as set
forth in the attached
aged trial balance) $_____________
2. Ineligible Accounts:
(a) Accounts unpaid more
than 90 days from due
date of invoice or
more than 120 days
after date of invoice $_____________
(b) Accounts arising on
other than an absolute
sale basis $_____________
(c) Accounts from Account
Debtors located out-
side the United States $_____________
(d) Accounts that are
subject to offset
or defense, including
counterclaims or contra-
accounts $_____________
(e) Accounts from Account
Debtors located in
New Jersey $_____________
(f) Accounts from
Affiliates $_____________
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<PAGE>
(g) Accounts owed by
Account Debtors who
are not Solvent, or
are subject of a
bankruptcy or in-
solvency proceeding,
or are otherwise not
creditworthy $_____________
(h) Other ineligible
Accounts $_____________
Total Ineligible Accounts $_____________
3. Discounts, credits and
allowances $_____________
4. Total Eligible Accounts
(line 1 minus line 2
minus line 3) $_____________
5. Eligible Accounts portion
of Borrowing Base
(line 4 x 85%) $_____________
6. Total Inventory (as set
forth in attached Schedule
of Inventory) $_____________
7. Less ineligible Inventory
(a) Supplies, containers,
work in process, lot
fabric $_____________
(b) Inventory in possession
of or on premises of
third parties $_____________
(c) Other ineligible
inventory $_____________
Total Ineligible Inventory $_____________
8. Total Eligible Inventory
(line 6 minus line 7) $_____________
9. Inventory Portion of Borrowing
Base (line 7 x
60%) $_____________
10. Net Book Value of Eligible Equipment $_____________
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<PAGE>
11. Equipment Portion of Borrowing
Base (line 10 x 50%) $_____________
12. Net Book Value of the Realty $_____________
13. Realty Portion of Borrowing Base
Base (line 12 x 80%) $_____________
LOAN STATUS
14. Borrowing Base (line 5 +
line 9 + line 11 + line 13) $_____________
15. Principal balance of
Loans Outstanding $_____________
16. Committed Amount $_____________
17. Available Amount (lesser of
line 14 or line 16) $_____________
18. Required payment pursuant
to Section 3.1(a)(iii)
(line 15 minus line 17) $_____________
The undersigned certifies to Lender on behalf of Borrower that: (a)
this Monthly Borrowing Base and Loan Report, including the attached schedules,
is true and correct in all respects, is in accordance with the books and records
of Borrower, and is prepared in accordance with the terms of the Loan Agreement;
(b) as of the date hereof, all of the representations and warranties of Borrower
contained in the Loan Agreement and the other Loan Documents are true and
correct (except to the extent that they are untrue or incorrect solely as a
result of occurrences permitted under the Loan Agreement); and (c) no Default
or Event of Default has occurred and is continuing.
-----------------------------
Treasurer
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<PAGE>
<PAGE>
PROMISSORY NOTE
$55,000,000 Greensboro, North Carolina
May 25, 1995
FOR VALUE RECEIVED, the undersigned PLUMA, INC., a North Carolina
corporation ("Borrower"), promises to pay to the order of FIRST UNION NATIONAL
BANK OF NORTH CAROLINA, a national banking association ("Lender"), or order, at
the principal office of the Lender in Greensboro, North Carolina, or at such
other place as the Lender may from time to time designate in writing, the
principal sum of Fifty-Five Million and No/100 Dollars ($55,000,000), or, if
less, the aggregate unpaid balance of all Loans made by Lender to Borrower
pursuant to the Loan Agreement (as hereinafter defined), the provisions of which
hereby are incorporated herein by reference, in lawful money of the United
States of America in federal or other immediately available funds, such
principal amount to be payable at the times and in the manner set forth in the
Loan Agreement with a final maturity date of May 30, 2000 unless such date is
extended pursuant to the terms of the Loan Agreement.
Borrower also unconditionally promises to pay interest on the unpaid
principal amount of this Note for each day from the date hereof until repaid in
full at the rate or rates and in the manner provided for in the Loan Agreement,
payable in arrears, at the times and in the manner set forth in the Loan
Agreement. In no contingency or event whatsoever shall the interest rate charged
pursuant to the terms of this Note exceed the highest lawful rate permissible
under any law which a court of competent jurisdiction shall, in a final
determination, deem applicable hereto. In the event that such a court determines
that the Lender has received interest hereunder in excess of the highest
applicable rate, then such excess shall be applied to the unpaid principal
amount due hereunder or, if the principal amount of this Note has been paid in
full, refunded to the Borrower.
Each overdue and unpaid installment of principal or inter est, or both,
required hereunder shall be subject to a late payment charge of four percent
(4%) of the amount of any such unpaid installment which is not paid within
fifteen (15) days after the due date hereof. The acceptance of payment of any
installment hereof by Lender after the date on which such in stallment becomes
due as set forth herein shall not be held to establish a custom or to constitute
a waiver of any rights of Lender to enforce prompt payment of any further
installment.
For purposes of this Note, the term "Loan Agreement" shall mean the
Loan and Security Agreement dated of even date herewith, between Borrower and
Lender, as the same may be hereafter amended or supplemented from time to time.
All other capitalized terms used in this Note without definition shall have the
meanings ascribed to such terms in the Loan Agreement.
<PAGE>
Borrower, for itself and its successors and assigns, ex pressly waives
presentment for payment, demand, protest and notice of demand, notice of
dishonor and notice of nonpayment and all other notices, and consents that
Lender may release or surrender, exchange or substitute any collateral security
now held or which may hereafter be held as security for the payment of this
Note.
This Note is the Note issued to evidence the Loans made pursuant to the
provisions of the Loan Agreement and is secured in accordance with the terms of,
and is entitled to the benefits of, the Loan Agreement, including those terms
relating to the acceleration of the maturity of this Note upon the occurrence of
an Event of Default or upon the termination of the Loan Agreement pursuant to
Section 11.2 or 11.3 thereof. Payment of this Note is secured by the Collateral
as described in the Loan Agreement and by the Deeds of Trust on the Realty dated
of even date herewith as described in the Loan Agreement.
This Note shall be governed by and construed and enforced in accordance
with the internal laws, and not the laws of conflicts, of the State of North
Carolina.
In the event that this Note shall at any time after maturity be placed
with an attorney for collection, Borrower agrees to pay, in addition to the
entire unpaid principal balance and interest due hereunder, all collection
costs, including reason able attorneys' fees, incurred by Lender in collecting
the indebtedness due hereunder.
Upon and after the occurrence of an Event of Default, the unpaid
principal amount of this Note shall bear interest at the election of Lender at
the Default Rate provided in the Loan Agreement until either such Event of
Default is cured to Lender's satisfaction or otherwise waived in writing by
Lender or the indebtedness evidenced by this Note is paid in full.
IN WITNESS WHEREOF, Borrower has caused this Note to be executed by its
duly authorized officers and its corporate seal to be hereunto affixed on the
day and year first above written.
PLUMA, INC.
By: /s/ R. Duke Ferrell, Jr.
ATTEST: Title: President
/s/ George G. Wade
___________ Secretary
[CORPORATE SEAL]
-2-
<PAGE>
PROMISSORY NOTE
$10,000,000 Greensboro, North Carolina
April 16, 1996
FOR VALUE RECEIVED, the undersigned PLUMA, INC., a North Carolina
corporation ("Borrower"), promises to pay to the order of FIRST UNION NATIONAL
BANK OF NORTH CAROLINA, a national banking association ("Lender"), or order, at
the principal office of the Lender in Greensboro, North Carolina, or at such
other place as the Lender may from time to time designate in writing, in lawful
money of the United States of America in federal or other immediately available
funds, the principal sum of Ten Million and No/100 Dollars ($10,000,000),
together with interest on the unpaid principal amount of this Note for each day
from the date hereof until April 30, 1996 at the rate of seven percent (7.0%)
per annum and thereafter until repaid in full at the LIBOR Rate plus 150 Basis
Points, with the LIBOR Rate to be determined at the times set forth in the Loan
Agreement and to be effective throughout an Interest Period.
So long as no Event of Default shall have occurred under the Loan
Agreement (as hereinafter defined) or the Loan Agreement shall not have been
terminated by Borrower or Lender pursuant to Section 11.2 or 11.3 thereof,
principal and interest hereunder
shall be due and payable as follows:
(a) Interest shall be payable in arrears on the last day of each
month commencing on the last day of the month hereof and continuing on
the last day of each month thereafter until the full principal sum has
been paid;
(b) Principal shall be due and payable in full on the earlier of
(i) September 30, 1996 or (ii) completion of an initial public
offering of Borrower's stock; and
(c) Principal may be prepaid in whole or in part without penalty
at the end of any Interest Period. Principal payments may not be made
during an Interest Period without Lender's consent.
Interest shall be computed on the basis of the actual number of days
elapsed over a year of three hundred and sixty (360) days commencing on the date
hereof. In no contingency or event whatsoever shall the interest rate charged
pursuant to the terms of this Note exceed the highest lawful rate permissible
under any law which a court of competent jurisdiction shall, in a final
determination, deem applicable hereto. In the event that such a
<PAGE>
court determines that Lender has received interest hereunder in excess of the
highest applicable rate, then such excess shall be applied to the unpaid
principal amount due hereunder or refunded to the Borrower.
Each overdue and unpaid monthly installment of principal or interest,
or both, required hereunder shall be subject to a late payment charge of four
percent (4%) of the amount of any such unpaid installment which is not paid
within fifteen (15) days after the due date thereof. The acceptance of payment
of any installment hereunder by Lender after the date on which such installment
becomes due as set forth herein shall not be held to establish a custom or to
constitute a waiver of any rights of Lender to enforce prompt payment of any
further installment.
For purposes of this Note:
"Loan Agreement" shall mean the Loan and Security Agreement dated May
25, 1995 between Borrower and Lender as the same may be
hereafter amended from time to time.
All other capitalized terms used in this Note without definition shall
have the meanings ascribed to such terms in the Loan Agreement.
Borrower, for itself and its successors and assigns, ex pressly waives
presentment for payment, demand, protest and notice of demand, notice of
dishonor and notice of nonpayment and all other notices, and consents that
Lender may release or surrender, exchange or substitute any collateral security
now held or which may hereafter be held as security for the payment of this
Note.
This Note is issued to evidence a loan from Lender to Borrower and is
one of the Obligations as defined in the Loan Agreement and is secured in
accordance with the terms of, and is entitled to the benefits of, the Loan
Agreement, including those terms relating to the acceleration of the maturity of
this Note upon the occurrence of an Event of Default or upon the termina tion of
the Loan Agreement pursuant to Section 11.2 or 11.3 thereof. Payment of this
Note is secured by the Collateral as described in the Loan Agreement, by the
Deeds of Trust on the Realty as described in the Loan Agreement, and by the Deed
of Trust dated August 22, 1995 and recorded in Deed Book 573, Page 304 of the
Circuit Court of Franklin County, Virginia.
This Note shall be governed by, construed and enforced in accordance
with the internal laws, and not the laws of conflicts, of the State of North
Carolina.
-2-
<PAGE>
In the event that this Note shall at any time after maturity be placed
with an attorney for collection, Borrower agrees to pay, in addition to the
entire unpaid principal balance and interest due hereunder, all collection
costs, including reason able attorneys' fees, incurred by Lender in collecting
the indebtedness due hereunder.
Upon and after the occurrence of an Event of Default, the unpaid
principal amount of this Note shall bear interest, at the option of Lender, at
the Default Rate provided in the Loan Agreement until either such Event of
Default is cured to Lender's satisfaction or otherwise waived in writing by
Lender or the indebtedness evidenced by this Note is paid in full.
IN WITNESS WHEREOF, Borrower has caused this Note to be executed by its
duly authorized officers and its corporate seal to be hereunto affixed on the
day and year first above written.
PLUMA, INC.
By: /s/ R. Duke Ferrell, Jr.
ATTEST: Title: President
/s/ George G. Wade
___________ Secretary
[CORPORATE SEAL]
-3-
<PAGE>
<PAGE>
Exhibit 10.7
TRADEMARK LICENSE AGREEMENT
THIS AGREEMENT is made and entered into this 2nd day of July, 1996, by
and between PLUMA, INC. ("Licensor"), a North Carolina corporation having its
principal office at 801 Fieldcrest Drive, Eden, North Carolina 27288 and KAYSER
ROTH ("Licensee"), a Delaware corporation, having its principal office at 4905
Koger Boulevard, Greensboro, NC 27407.
W I T N E S S E T H:
WHEREAS, Licensor owns the common law proprietary rights in and to the
trademark "Pluma" (the trademark "Pluma" being hereinafter referred to as "the
Licensed Mark") and has filed an application with the United States Patent and
Trademark Office for protection of its proprietary rights related to the
Licensed Mark; and
WHEREAS, Licensor manufactures and sells articles of wearing apparel to
which the Licensed mark is affixed or applied; and
WHEREAS, Licensor has promoted the Licensed Mark and has developed
goodwill in connection therewith; and
WHEREAS, Licensee wishes to license from Licensor the right to use the
Licensed Mark for the limited purposes subject to all of the conditions and
limitations set forth hereinafter in this Agreement and wishes to extend such
usage; and
WHEREAS, Licensor is willing to grant to Licensee a limited license for
the Licensed Mark, all as hereinafter set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual promises and covenants
expressed herein, the parties hereto, intending to be legally bound, agree as
follows:
(a) "LICENSED ARTICLES" shall mean those articles of apparel
listed on APPENDIX A attached hereto and incorporated herein
by reference, or in any written modification to APPENDIX A
subject to the condition that any such written modification
shall have been acknowledged by the signatures of authorized
officers of both Licensor and Licensee, said articles of
apparel being sometimes referred to herein as legwear.
(b) "TERRITORY" shall mean only the United States of America,
territories of the United States, Canada and Mexico.
(c) "ACCOUNTS" shall mean those accounts specifically listed in
APPENDIX B
Page 1 of 14
<PAGE>
attached hereto, or in any written modification to APPENDIX B
subject to the condition that any such written modification
shall have been acknowledged by the signatures of authorized
officers of both Licensor and Licensee.
(d) "NET SALES" shall mean the gross sales of Licensed Articles
sold by Licensee, less customary trade discounts, shipping
charges, returns and allowances and any sales taxes (but in no
event shall any income or franchise taxes be deducted for this
purpose from the dollar value of gross sales).
(e) "YEAR" shall mean each twelve months period of time from
January to December.
2. GRANT OF RIGHTS. Licensor, subject to the terms and conditions herein, hereby
grants a limited, nontransferable, non-exclusive license to Licensee to use the
Licensed Mark only on Licensed Articles manufactured by Licensee for sale by
Licensee in the Territory to the Accounts during the term hereinafter set forth
in Section 3 of this Agreement. The Licensed Mark may not be used by Licensee,
or anyone acting through Licensee, on any articles of wearing apparel or
anything used by Licensee, or anyone acting through Licensee, on any articles of
wearing apparel or anything whatsoever except for the Licensed Articles.
Licensor may grant licenses to the others for the use of the Licensed Mark on
apparel. Furthermore, Licensor may continue to manufacture and distribute
wearing apparel utilizing the Licensed Mark, whether such apparel is of the type
currently being manufactured by Licensor, or is of a new type of apparel not
being manufactured by Licensor on the date hereof.
So long as Licensor does not manufacture and distribute legwear products, if the
Account desires that Licensee manufacture additional Licensed Articles bearing
the Licensed mark, Licensor shall provide Licensee with the right to manufacture
such additional Licensed Articles; however, should the Account desire to utilize
a manufacturer other than Licensee for the manufacture of legwear products
bearing the Licensed Mark, Licensor shall have the right to grant to other such
manufacturer(s) a license for the use of the Licensed Mark in conjunction with
the manufacture and sale of legwear.
3. TERM OF THIS AGREEMENT; OPTION TO EXTEND THE TERM.
(a) This Agreement shall be binding as of the date hereof and it shall
continue in full force and effect until December 31, 1998, subject to possible
earlier termination in accordance with paragraph 13 hereof.
Page 2 of 14
<PAGE>
(b) Provided no event of default has occurred under paragraph 13 of
this Agreement and provided that Licensee shall have paid royalties to Licensor
for the Year ending December 31, 1997 and for 1998 and provided that Licensee
shall have delivered to Licensor its election, by no later than November 30,
1998, of its exercise of an option to extend the term of this Agreement for an
additional one (1) year period, then in such event the term of this Agreement
shall be extended for a one year period and shall be extended each year
thereafter if the same conditions are met for the extended term.
4. ROYALTIES.
(a) In consideration for the rights and license granted by Licensor to
Licensee pursuant to this Agreement, Licensee shall pay to Licensor during the
initial term of this Agreement, as set forth in 3(a) above, and during each
extension thereafter, as set forth in 3(b) above, royalties (hereinafter
"Royalties") equal to two percent (2%) of the Net Sales earned up to three
million dollars ($3,000,000) and then one and one-half percent (1.5%) of the Net
Sales which exceed three million dollars ($3,000,000) received by Licensee from
the sale of the Licensed Articles in such Year.
(b) Licensed Articles will be deemed to be sold when shipped to
Licensee's customers comprising the Accounts.
(c) Royalties payable by Licensee to Licensor pursuant to this
Agreement shall be accounted for and paid quarter-annually within thirty (30)
days after the last day of each quarter-annual period during the term of this
Agreement (or, in the event of early termination for any reason, within thirty
days following the date of such early termination).
(d) All payments required of Licensee hereunder shall be made in United
States Dollars by checks drawn upon Licensee's regular banking institutions.
(e) Licensee shall deliver to Licensor, together with each payment of
Royalties due under this Agreement, a statement (hereinafter the "QUARTER-ANNUAL
REPORT") signed by a duly authorized officer of Licensee, and certified by such
officer as accurate, indicating by style, the quantity and invoice price of all
Licensed Articles shipped during the period covered by such Royalties payment,
the amount of discounts and other credits from gross sales which may be deducted
therefrom pursuant to this Agreement and a computation of the amount of
Royalties payable for such quarter- annual period.
5. MONTHLY REPORT. Within ten (10) days following the close of each month,
Licensor shall deliver to Licensee a detailed shipping report indicating by
style, the quantity and
Page 3 of 14
<PAGE>
invoice price of all Licensed Articles shipped for that month.
6. ANNUAL STATEMENT. Within forty-five (45) days following the close of each
Year during the term of this Agreement (or portion thereof in the event of prior
termination for any reason), Licensee will furnish to Licensor a statement
(hereinafter the "Annual Statement") signed and certified by Licensee's chief
financial officer, relating to such Year, setting forth the same information
provided under paragraph 4(e) hereof, except that such information shall
encompass the full Year instead of a quarter-annual period.
7. MARKING LICENSED ARTICLES. All Licensed Articles and all packaging used for
the Licensed Articles shall prominently show the Licensed Mark. Licensee shall
obtain the express written approval of Licensor with respect to all signs,
labels, packaging material, advertising, or the like bearing the Licensed Mark
prior to the use thereof by Licensee. Licensor will not unduly delay approval of
Licensee's submissions for Licensor's approval.
Licensee shall be entitled to use all graphics, artwork and logos developed by
Licensor prior to the date hereof and related to the Licensed Mark. The Licensed
Marks must be used by Licensee on labels attached to each Licensed Article. The
form style and manner of presentation of the Licensed Mark by Licensee shall be
in accordance with Licensor's quality standards furnished by Licensor to
Licensee upon the execution hereof, or as such standards may be amended from
time to time by Licensor. All labels, tags and other material containing the
Licensed Mark will be at Licensee's expense.
In the event Licensor modifies its Licensed Mark in any manner, whether used
alone or in conjunction with the Licensed Articles, then in such event, and upon
Licensor's request, Licensee shall display the modified or improved Licensed
Mark on all Licensed Articles as soon as is practicable, provided, however,
Licensee may be allowed to use up all packaging, labels and other methods of
displaying the Licensed Mark before it shall be required to display the modified
Licensed Mark.
8. LICENSEE'S UNDERTAKINGS. Licensee agrees that the limited non-exclusive
license granted under this Agreement is conditioned upon Licensee undertaking
all reasonable action, at Licensee's expense, as Licensee shall reasonably
determine in its business judgment, to maximize sales of Licensed Articles,
while upholding the high quality and reputation of products bearing the Licensed
Mark. Licensee shall not in any way use the Licensed Mark or any of Licensor's
proprietary interests in any manner except as specifically provided in this
Agreement. Licensee is specifically prohibited from assigning, sublicensing,
transferring or otherwise disposing of any of the rights granted to Licensee
pursuant to this Agreement.
9. MAINTENANCE OF QUALITY STANDARDS; COMPLIANCE WITH APPLICABLE LAWS.
Page 4 of 14
<PAGE>
(a) Licensee acknowledges that the sale of merchandise of poor quality
can have an adverse effect on Licensor's name and business reputation. Licensee
therefore covenants and agrees that all Licensed Articles shall be of good and
merchantable quality and shall be manufactured to the standards, and consist of
materials, equal to or better than those customarily used by Licensee in similar
products manufactured by or for it, or by its subsidiaries or affiliate
corporations, for sale at comparable retail price points, and fully consistent
with the prestige and reputation which the Licensed Articles have developed.
(b) All Licensed Articles will be manufactured, sold, distributed and
advertised in compliance with all applicable government laws, rules or
regulations.
10. BOOKS AND RECORDS; AUDITS.
(a) Licensee shall prepare and maintain complete and accurate books of
account and records (specifically including without limitation, the originals or
copies of documents supporting entries in the books of account) covering all
transactions arising out of or relating to this Agreement, in such manner as
will allow its accountants (and where deemed appropriate by Licensor, as will
allow Licensor and/or its representatives or accountants) to audit same in
accordance with generally accepted accounting principles. Licensor and its duly
authorized representatives, upon appropriate advance notice, and at times
reasonably convenient to Licensee, shall have the right, during regular business
hours, for the duration of this Agreement, and for a term of two (2) years
following the termination of this Agreement, or any extension hereof, to audit
said books of account and records and examine all other documents and materials
in the possession of, or under the control of, Licensee with respect to the
subject matter of this Agreement including, without limitation, invoices,
credits and shipping documents. All such books of account, records and documents
shall be kept available by Licensee for at least two (2) years after the annual
period to which they relate.
(b) If, as a result of any audit of Licensee's books and records, it is
shown that Licensee's payments were less than the amount which shall have been
paid, by an amount equal to five percent (5%) or more of the payments actually
made with respect to sales occurring during the period in questions, Licensee
shall reimburse Licensor for the cost to Licensor of such audit together with
all amounts which are required to be made to eliminate any discrepancy revealed
by such audit. Such payments shall be made within fifteen (15) days following
the completion of such audit.
11. QUALITY CONTROL: SAMPLES OF LICENSED ARTICLES; PACKAGING; SELLING PRICE.
(a) The styles, designs, packaging, contents, workmanship and quality
of the Licensed Articles are subject to approval by Licensor prior to the
distribution or sale thereof. It is understood and agreed that Licensor's
approvals of same may be based
Page 5 of 14
<PAGE>
solely on Licensor's subjective standards and may be withheld in Licensor's sole
and absolute discretion. All requests for approval shall be made by Licensee in
writing and whenever Licensor shall fail to send to Licensee written notice of a
disapproval within fifteen (15) business days following the date of Licensor's
receipt of any request for approval, it shall be conclusively assumed that the
request has been approved.
(b) Before selling or distributing any Licensed Articles, Licensee
shall deliver to Licensor for its approval, free of charge, one (1) sample of
each such Licensed Article, together with the tags, labels and packaging to be
used in connection therewith. In addition, upon Licensor's request, Licensee
shall submit to Licensor then current production samples of each Licensed
Article produced hereunder so that Licensor may assure itself of the maintenance
of the quality standards set forth herein. All Licensed Articles to be sold
hereunder shall be of equal or higher quality than the samples approved by
Licensor subject, however, to those normal variance tolerances which customarily
occur in the process of manufacture.
(c) If Licensor should deny approval of any sample Licensed Article or
any sample tag, label or packaging, Licensee shall neither use nor permit the
same to be used in any manner.
(d) Licensee shall from time to time, at Licensor's request, furnish
Licensor with schedules of Licensee's pricing as to any or all Licensed
Articles.
12. INSURANCE. Licensee shall procure and maintain, at its own expense, in full
force and effect at all times during which Licensed Articles are being sold,
with responsible insurance carriers acceptable to Licensor, at least Two Million
Dollars ($2,000,000) of Products Liability Insurance coverage with respect to
its manufacture and sale of Licensed Articles. Such insurance coverage shall
name Licensor as an additional insured and shall provide for a minimum of twenty
(20) days prior written notice to Licensor in the event of an intent by Licensee
or the insurance carriers to cancel or substantially modify the insurance
coverage. Such insurance coverage may be obtained in conjunction with a policy
of product liability insurance which covers other products manufactured and/or
sold by Licensee.
13. INDEMNIFICATION.
(a) INDEMNITY BY LICENSEE. Licensee does hereby indemnify Licensor
against and agrees to save and hold it harmless of and from any and all losses,
liability,
Page 6 of 14
<PAGE>
damages and expenses (including reasonable attorney's fees and expenses) for
which it may become liable or may incur or be compelled to pay or shall pay in a
settlement mutually acceptable to Licensor and Licensee, in connection with, or
by reason of any acts, whether of omission or commission, that may be committed
or suffered by Licensee or any of its servants, agents or employees in
connection with Licensee's performance of this Agreement or the breach of any
representation or warranty made by Licensee hereunder and transactions arising
therefrom or in connection with Licensed Products. Licensor shall give prompt
notice to Licensee of any claim, action or suit that may give rise to liability
hereunder when it becomes aware of the same. Provided Licensee shall acknowledge
in writing its obligations hereunder with respect thereto, Licensee shall have
the option to defend any such claim, action or suit including, but not limited
to, the right to select counsel, control the defense, assert counterclaims and
crossclaims, bond any lien or judgment, take any appeal and to settle on such
terms as Licensee deems advisable. Licensee will take no such action without
first consulting with Licensor (and where a settlement of such claim, action or
suit relates to Licensor's ownership of or the validity or value of the Licensed
Mark without first obtaining Licensor's approval, and will keep Licensor
apprised of all on-going actions as they occur and, where practicable, in
advance of any action to be taken by Licensee. The provisions of this paragraph
and the obligations of Licensee set forth therein shall survive expiration or
other termination of this Agreement.
(b) INDEMNITY OF LICENSOR. Licensor does hereby indemnify Licensee
against and agrees to save and hold Licensee and its officers and directors
harmless of and from any and all losses, liability, damages and expenses
(including reasonable attorney's fees and expenses) for which they or any of
them may become liable or may incur to be compelled to pay or shall pay in a
settlement mutually acceptable to Licensor and Licensee, subject to the
limitations set forth below, in connection with (a) Licensee's use of the
Licensed mark on Licensed Products therein in accordance with this Agreement and
(b) from any breach of any representation or warranty made by Licensor
hereunder. Licensor's liability shall be limited to $3,000,000.00. Licensee
shall give prompt notice to Licensor of any claim, action or suit that may give
rise to Liability hereunder, provided Licensor shall acknowledge in writing its
obligation hereunder with respect thereto, Licensor shall have the option to
defend any such claim, action or suit including, but not limited to, the right
to select counsel, control the defense, assert counterclaims and crossclaims,
bond any lien or judgment, take any appeal, and to settle on such terms as
Licensor deems advisable. The provisions of this paragraph and the obligations
of Licensor set forth therein shall survive expiration or other termination of
this Agreement.
Page 7 of 14
<PAGE>
14. EVENTS OF DEFAULT; TERMINATION OF AGREEMENT.
(a) Licensor and Licensee agree that:
(i) If Licensee shall fail to make any payment due to Licensor
hereunder within the time periods provided in this Agreement, and if such
failure shall continue for a period of thirty (30) calendar days following the
date of notice by Licensor of each failure to make payment, or
(ii) If Licensee discontinues the manufacture and distribution
of Licensed Articles for a consecutive period of ninety (90) days for reasons
other than a seasonal discontinuance, or
(iii) If Licensee otherwise fails to perform any of the terms,
conditions, agreements or covenants in this Agreement and such failure is not
curable, or, if such default is curable but continues uncured for a period of
thirty (30) days after the date of notice thereof in writing by Licensor to
Licensee, or
(iv) If Licensee discontinues the manufacture and distribution
of Licensed Articles to Sam's Wholesale Club for a period greater than six (6)
months, provided that after such termination, Licensee shall have the right to
distribute all licensed articles in inventory or being manufactured on the date
of such termination,
then, in any of the foregoing events, Licensor, at its sole discretion, may
terminate this Agreement forthwith by written notice to Licensee and this
Agreement, in such event, shall terminate upon the date of such notice provided
that, after such termination, Licensee shall have the right to distribute all
Licensed Articles in inventory or being manufactured on the date of such
termination.
(b) In the event that Licensee fails to inform Licensor at least thirty
(30) days prior to Licensee (i) filing a petition in bankruptcy, (ii) being
adjudicated a bankrupt, (iii) otherwise seeking to have a petition in bankruptcy
filed against it which is not discharged within sixty (60) days, or appointed
for it or for a substantial portion of Licensee's business or assets, this
Agreement shall terminate automatically and forthwith, as any such event shall
be deemed a material, pre-petition incurable breach of this Agreement.
15. OWNERSHIP OF LICENSED MARK.
(a) Licensee acknowledges that, as between Licensee and Licensor,
Licensor is the owner of all right, title and interest in and to the Licensed
Mark in any form or embodiment thereof and is also the owner of the goodwill
attached or which shall become attached to the Licensed Mark in connection with
the business and goods in
Page 8 of 14
<PAGE>
relation to which the same has been, is or shall be used. Sales by Licensee
shall be deemed to have been made by Licensor for purposes of trademark
registration and all uses of the Licensed Mark by Licensee shall insure to the
benefit of Licensor. Licensee shall not, at any time, do or suffer to be done
any act or thing which may in any way adversely affect any rights of Licensor in
and to the Licensed Mark or any registrations thereof or which, directly or
indirectly, may reduce the value of the Licensed Mark or detract from their
reputation.
(b) At Licensor's request, Licensee shall execute any documents
reasonably required by Licensor to confirm Licensor's ownership of all rights in
and to the Licensed Mark and the respective rights of Licensor and Licensee
pursuant to this Agreement.
(c) Licensee never shall challenge Licensor's ownership of, or the
validity of, the Licensed Mark or any application for registration thereof, or
any trademark registration thereof, or any rights of Licensor therein.
16. LICENSOR'S OTHER BUSINESS. It is understood that Licensor may hereafter use,
or license others to use, the Licensed Mark, or any other trademarks or trade
names associated with the Licensed Mark, in connection with products other than
the Licensed Articles for sale or distribution to any customer or customers
within or outside the Territory and may hereafter use or license others to use,
the Licensed Mark in connection with products which are the same or similar to
the Licensed Articles for sale to customers. Nothing herein shall prohibit
Licensor from engaging in such activities nor give Licensee any rights to such
products or businesses, or any of the income, profits or proceeds thereof, or
any other interest therein.
17. NON-AGENCY. It is understood that Licensee is only a licensee of Licensor
and that neither Licensee nor Licensor will act as the agent or employee of the
other. Neither Licensee nor Licensor will enter into any agreement or incur any
obligation on behalf of the other or comment to the other in any other manner
without the other's prior written consent.
18. NOTICES. Any legal notice or other communication under this Agreement shall
be in writing, and shall be considered given when delivered personally or
mailed, by Certified or Registered Mail, Return Receipt Requested, to the
parties at the following addresses (or at such other address as a party may
specify by notice to the other):
Legal notices to Licensor at:
PLUMA, INC. (STREET ADDRESS)
P. O. Drawer 487 801 Fieldcrest Road
Eden, NC 27289 Eden, NC 27288
ATTN: Cheryl Wine, Esquire
Fax: 910-635-3488
Page 9 of 14
<PAGE>
Monthly reports to Licensor at:
PLUMA, INC.
P. O. Box 4431
Martinsville, VA 24115
ATTN: Cheryl Muscatello
Samples and all other correspondence to:
PLUMA, INC. (STREET ADDRESS)
P. O. Box 4431 26 Broad Street
Martinsville, VA 24115 or Martinsville, VA 24112
ATTN: Walker Box
To Licensee at:
KAYSER ROTH CORPORATION
4905 Koger Boulevard
Greensboro, NC 27407
ATTN: Jerome A. Perlmutter, Esquire
Fax: 910-547-4612
19. ASSIGNABILITY; BINDING EFFECT.
(a) Neither this Agreement nor the license or other rights granted
hereunder may be assigned, sublicensed or transferred by Licensee and any such
attempted assignment or sublicense, whether voluntary or by operation of law,
directly or indirectly, shall be void and of no force or effect. The direct or
indirect transfer or issuance of any shares of Licensee or the voting rights of
such shares shall be deemed a violative assignment hereof if such transfer or
issuance shall limit the ability of the current owners of Licensee to control
the business and affairs of Licensee.
(b) This Agreement shall inure to the benefit of and shall be binding
upon the parties, their respective successors and Licensor's transferees and
assigns.
20. ARBITRATION. Except as specifically set forth in this Agreement, any and all
disputes, controversies and claims arising out of or relating to this Agreement
or concerning the respective rights or obligations hereunder of the parties
hereto except disputes, controversies and claims relating to or affecting in any
way the ownership of or the validity of the Licensed mark or any registration
thereof, or any application for registration thereof (hereinafter referred to as
"Licensed Mark Disputes") shall be settled and determined by arbitration in
Winston-Salem, North Carolina before the Commercial Panel of the American
Arbitration Association in accordance with and pursuant to the then existing
Commercial Arbitration Rules. The arbitrators shall have the power to award
specific performance or injunctive relief and reasonable attorneys' fees and
expenses to any party in any such arbitration. However, in any arbitration
Page 10 of 14
<PAGE>
proceeding arising under this Agreement, the arbitrators shall not have the
power to change, modify or alter any express condition, term or provision
hereof, and to that extent the scope of their authority is limited. The
arbitration award shall be final and binding upon the parties and judgment
thereon may be entered in any court having jurisdiction thereof. The service of
any notice, process, motion or other document in connection with an arbitration
under this Agreement or for the enforcement of any arbitration award hereunder
may be effectuated in the manner in which notices are to be given to a party
pursuant to Section 19 above.
21. MODIFICATIONS TO ACCOUNTS LISTING AND LICENSED ARTICLES.
(a) Additions or modifications to the list of Accounts or Licensed
Articles may only be made with the prior written consent of Licensor. There
shall be no obligation on the part of Licensor to approve any such request; the
approval shall be at the sole discretion of Licensor.
(b) Any account listed on the schedule of Accounts shall be
automatically deleted from that schedule if Licensee has failed to sell
reasonable quantities of Licensed Articles to such account for a consecutive
period of six (6) consecutive months and during the term of this Agreement or
any extension thereof.
22. MISCELLANEOUS.
(a) Licensee shall not give away Licensed Articles or sell Licensed
Articles in connection with any tie-in or promotional campaign relating to
products other than Licensed Articles without the prior written consent of
Licensor.
(b) This Agreement shall be construed and interpreted in accordance
with the laws of the State of North Carolina applicable to agreements made and
to be performed in said State, except that the Federal laws of the United States
shall apply with respect to Licensed mark disputes. Notwithstanding anything to
the contrary herein, Licensed Mark disputes shall be brought and determined only
in the Federal courts located in Greensboro, North Carolina.
(c) This agreement contains the entire understanding and agreement
between the parties hereto with respect to the subject matter hereof, supersedes
all prior oral or written understandings and agreements relating thereto and may
not be modified, discharged or terminated, nor may any of the provisions hereof
be waived, orally.
(d) No waiver by either party, whether express or implied, of any
provision of this Agreement, or of any breach or default thereof, shall
constitute a continuing waiver of such provision or of any other provision of
this Agreement. Acceptance of payments by Licensor shall not be deemed a waiver
by Licensor of any violation of or default under
Page 11 of 14
<PAGE>
any of the provisions of this Agreement by Licensee.
(e) If any provision or any portion of any provision of this Agreement
shall be held to be void or unenforceable, the remaining provisions of this
Agreement and the remaining portion of any provision held void or unenforceable
in part shall continue in full force and effect.
(f) Section headings contained in this Agreement are for reference only
and shall not be considered or used in construing the meaning of the terms
hereof.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
ATTESTED: PLUMA, INC.
a North Carolina Corporation
By: /s/ George G. Wade By: /s/ R. Duke Ferrell, Jr.
_________________________ ___________________________
Secretary R. Duke Ferrell, Jr.
President
ATTESTED: KAYSER ROTH CORPORATION
a Delaware Corporation
By: /s/ Jerome A. Perlmutter By: /s/ Roger L. Cheney
__________________________ ____________________________
Jerome A. Perlmutter Roger L. Cheney
Secretary Vice-President
Page 12 of 14
<PAGE>
Appendix A
LICENSED ARTICLES
Men's Athletic Crew Sock
Men's Quarter Top Sock
Men's Athletic Tube Sock
Athletic Crew Socks for Women/Youth Size 9-11
Quarter Top Socks for women/youth, size 9-11
Women's sheer hosiery, including pantyhose, stockings and knee highs
Women's tights
Page 13 of 14
<PAGE>
Appendix B
ACCOUNTS
Sam's Club, a division of Wal-Mart, Inc.
Page 14 of 14
<PAGE>
STATE OF NORTH CAROLINA )
) AGREEMENT AND RELEASE
COUNTY OF ROCKINGHAM )
THIS AGREEMENT, made and entered into this 16th day of September, 1993,
by and between Glazier B. Piland ("Piland"), Martinsville, Virginia and Pluma,
Inc. ("Pluma" or the "Company"), a corporation with its principal offices in
Eden, North Carolina;
WHEREAS, Piland was hired by Pluma on January 1, 1987 and was employed
by the Company as Secretary Treasurer; and
WHEREAS, the parties have entered into this Agreement for the purpose
of resolving any actual or potential disputes between them; and
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein and the Stock Purchase Agreement entered into contemporaneously
herewith, the parties agree as follows:
1. Piland resigns as a director of Pluma effective September 16, 1993.
2. Pluma will pay to Piland the sum of Fifty Thousand Dollars
($50,000.00) on September 16, 1993.
3. Other than the payments provided for in this Agreement and the Stock
Purchase Agreement entered into simultaneously with this Agreement, Pluma shall
have no obligation to make any payments to or for the benefit of Piland or to
provide any benefits to Piland of any kind available to employees of Pluma and
Piland expressly releases Pluma of and from any obligation to make any other
payments or provide any benefits to him arising out of or related to his
employment by Pluma. Notwithstanding the foregoing, Pluma acknowledges that
Piland is a participant in a 401(k) plan available to employees of Pluma and
that this Agreement shall not in any way affect Piland's entitlement to benefits
pursuant to such plan.
4. Piland agrees for a period of two (2) years that he will not in any
fashion, form or manner, either directly or indirectly, solicit or use for his
own purposes or for the purposes of any third party, or divulge, disclose or
communicate to any third party, "confidential business information" in any form
concerning Pluma. As used herein, "confidential business information" means any
information concerning the business and operations of Pluma, its agreements or
relations with agents, contractors, customers or employees, the status of work
in progress, its products, processes, costs, pricing, customers, employees,
trade secrets, plans, commercial intentions, business practices, or financial
matters.
5. Piland further agrees that he has returned all originals and all
copies of documents or other materials which contain or otherwise reflect
"confidential business information," including,
<PAGE>
without limitation, letters, memoranda, notes, reports, calendars, telegrams,
telecopies, contracts, records, tables, charts, photographs, video and audio
tapes and transcriptions thereof, computer records -- including without
limitation any and all computer disks, computer tapes and electronic or "E" mail
- -- and business or financial records.
6. Nothing in this Agreement shall preclude Piland from describing,
without in any way disclosing "confidential business information," in general
terms to prospective employers and to no one else, specifically and solely for
the purpose of securing other employment, the general nature of the work
performed at Pluma.
7. Piland specifically acknowledges the following:
a. Piland has been given at least twenty-one (21)
days within which to consider and negotiate the terms resulting in this
Agreement;
b. Piland has been advised in writing that he has the
right to and may consult with an attorney before executing this Agreement, and
Piland acknowledges that he has had the opportunity to consult an attorney and
that he has exercised his right to do so;
c. Piland has seven (7) days following the execution
of this Agreement to revoke the Agreement, and the Agreement will not become
effective or enforceable until after this seven (7) day period has expired. To
revoke the Agreement, Piland should advise Pluma in writing of his election to
revoke it within the seven (7) day period. If Piland revokes this Agreement, he
shall immediately repay the sum of Fifty Thousand Dollars ($50,000.00) and his
resignation from the Board shall be null and void;
d. Piland recognizes that he is specifically
releasing, among other claims, any claims he may have arising under the Age
Discrimination in Employment Act of 1967 ("ADEA") and all amendments thereto;
e. Piland is not waiving any rights or claims that he
may have which arise after the date this Agreement is executed.
f. Piland also acknowledges that this Agreement is
intended by the parties to comply with the terms and provisions of the Older
Workers Benefit Protection Act of 1990 (OWBPA") and all amendments thereto.
g. The Effective Date of this Agreement shall be the
first day after the expiration of the seven (7) day period described in
paragraph 7c above.
8a. Piland for himself and his heirs, executors,
administrators, successors and assigns (collectively "Piland"), hereby releases,
acquits and forever discharges Pluma, together with those officers and directors
who sign this Agreement (collectively "Pluma"), and their respective
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<PAGE>
executors, administrators, successors and assigns of and from all claims and
alleged claims by Piland, whether or not previously asserted, against Pluma.
This release specifically includes all claims by or on behalf of Piland against
Pluma, together with any and all claims which might have been asserted by or on
behalf of Piland against Pluma in any suit, claim, or charge, on account of any
matter or things whatsoever up to and including the date of the execution of
this Agreement. Piland further agrees that he will not institute or be a party
to, whether directly or indirectly, any civil action or administrative
proceeding against Pluma, under any federal, state or local authority or any
common law theory (whether founded in tort or contract), including but not
limited to, 42 U.S.C. 1981, Title VII of the Civil Rights Act of 1964, the Equal
Pay Act of 1963, the Civil Rights Act of 1991, the Age Discrimination in
Employment Act, the Americans With Disabilities Act, the Employee Retirement
Income Security Act of 1974, or any similar legislation, constitutional
provision, executive order or regulation, or any common law theory (whether
founded in tort or contract) in connection with any act, state of facts, or
occurrence or omission, whether or not previously asserted, either occurring
before or existing on the date of the execution of this Agreement.
8b. Pluma, together with those officers and directors who sign
this Agreement and their respective heirs, executors, administrators, successors
and assigns (collectively "Pluma and its officers and directors"), hereby
release, acquit and forever discharge Piland, and his heirs, executors,
administrators, successors and assigns (collectively "Piland"), of and from all
claims and alleged claims by Pluma and its officers and directors, whether or
not previously asserted, against Piland. This Release specifically includes all
claims by or on behalf of Pluma and its officers and directors against Piland,
together with any and all claims which might have been asserted by or on behalf
of Pluma and its officers and directors against Piland in any suit, claim, or
charge, on account of any matter or thing whatsoever up to and including the
date of the execution of this Agreement.
8c. In the event of the initiation of any proceeding by either
Piland or Pluma and its officers and directors against any party released herein
asserting a claim released by this Paragraph 8, such party released shall be
entitled to plead this release in bar to any such claim and to assert a
counterclaim alleging breach of this Agreement, including the release of claims
set forth in this Paragraph 8. Piland or Pluma and its officers and directors,
as the case may be, shall indemnify and hold harmless the party released of and
from any and all loss or damage whatsoever, costs, direct and indirect, and
attorney's fees incurred in the defense of such proceeding and prosecution of
counterclaim.
9. In the event of a breach or alleged breach of the Agreement by
either party, the non- breaching parties sole remedy shall be to institute an
action for breach of this Agreement and damages therefore or specific
performance of this Agreement. It is specifically acknowledged that in the event
of a breach or alleged breach of this Agreement, neither party shall be entitled
to rescind this Agreement and maintain an action based upon any claims released
by this Agreement.
10. Piland and Pluma and its officers and directors represent that no
promise, inducement or agreement not herein expressed has been made and that
this Agreement is the entire agreement between the parties hereto.
3
<PAGE>
11. This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective heirs, executors, administrators,
successors and assigns.
12. This Agreement shall be construed in accordance with the laws of
the state of North Carolina.
13. If any provision of this Agreement is determined by a court of
competent jurisdiction to be void, voidable, unlawful or for any reason
unenforceable, such provision shall be deemed fully severable, and the balance
of the Agreement shall be given full force and effect in accordance with its
terms.
IN TESTIMONY WHEREOF, the parties hereto set their hands and seals the
day and year first above written.
/s/ /s/ Glazier B. Piland
Witness Glazier B. Piland
ATTEST: PLUMA, INC.
/s/ George G. Wade By: /s/ R. Duke Ferrell, Jr.
(Affix Corporate Seal)
(SEAL)
4
<PAGE>
The following officers and directors of Pluma, hereby sign and
acknowledge their agreement to the terms and conditions of the Agreement And
Release entered into between Glazier B. Piland and Pluma, Inc. On the 23rd day
of September, 1993.
OFFICERS AND/OR DIRECTORS:
/s/ Kemp D. Box /s/ George G. Wade
/s/ G. Walker Box /s/ John D. Soffe
/s/ C. Monroe Light /s/ R. Duke Ferrell, Jr.
/s/ William K. Mileski /s/ Raymond L. Rea
/s/ George W. Box /s/ David S. Green
/s/ R. Stephens Pannill /s/ Nancy B. Barksdale
5
<PAGE>
<PAGE>
STOCK REDEMPTION AGREEMENT
This Stock Redemption Agreement is entered into this 16th day of
September, 1993 between PLUMA, INC. ("Pluma") and GLAZIER B. PILAND ("Piland").
Contemporaneously herewith Pluma and Piland have entered into an
Agreement and Release, and this Stock Redemption Agreement is being executed
pursuant thereto.
For and in consideration of the agreements hereinafter set forth,
Piland agrees to sell to Pluma and Pluma agrees to purchase from Piland 270,077
shares of the common stock of Pluma (the "Shares") which constitute all of the
Pluma common stock owned by Piland. Pluma agrees to redeem the Shares from
Piland upon the following terms and conditions:
1. PURCHASE PRICE. The purchase price to be paid for the Shares shall
be that price determined by Philpott Ball & Company in November, 1993 for Pluma
and its shareholders (the "Appraised Value") for Pluma's next annual Stock
Exchange Program which will be conducted at the end of 1993 and the early part
of 1994, provided the Appraised Value must be determined pursuant to the same
methodology utilized by Philpott Ball & Company for Pluma's last two annual
Stock Exchange Programs.
2. PAYMENT OF PURCHASE PRICE. Pluma shall pay the purchase price as
follows:
(a) Twenty percent (20%) of the purchase price shall be paid
in cash at the Closing on January 31, 1994.
(b) The balance of the purchase price shall be paid by Pluma
executing a promissory note to Piland in an amount equal to 80% of the purchase
price (the "Note"). The principal balance of the Note shall be repaid in four
(4) consecutive equal annual installments beginning on January 31, 1995. The
unpaid principal balance of the Note shall bear interest at the annual rate of
five percent (5%). Interest shall be paid in arrears quarterly beginning on May
1, 1994.
The Note may be prepaid at any time without penalty.
The Note shall indicate on its face and shall be
subordinate to all of Pluma's indebtedness to First Union National Bank of North
Carolina, whether said indebtedness is currently in existence or hereinafter
incurred, and the Note shall also be subordinate to any loans made by other
lenders which may refinance any portion of the First Union National Bank of
North Carolina indebtedness referenced above.
Pluma's obligations of payment under the note shall
be secured by Pluma pledging the Shares pursuant to a Security Agreement
attached hereto as Exhibit "A".
Upon Pluma's payment of the cash portion of the
Purchase Price as set forth above, Piland shall deliver to Pluma a stock power
duly endorsed in blank in form necessary to enable the transfer of the title to
the Shares to Pluma.
<PAGE>
3. CONDITION PRECEDENT. Notwithstanding Pluma's obligation to purchase
the Shares and Piland's obligation to sell the Shares at the price set forth
above, Pluma and Piland agree (i) that if the Appraised Value is less than
$15.00 per share, Piland shall have no obligation to, but may, sell any portion
of his Shares to Pluma, and Pluma will be obligated to purchase those Shares so
tendered for sale by Piland at the Appraised Value even though less than $15.00
per share, and (ii) if the Appraised Value is more than $20.02 per share, Pluma
shall have no obligation to, but may, purchase any portion of Piland's Shares
and Piland will be obligated to sell those Shares so requested by Pluma to be
purchased at the Appraised Value even though greater than $20.02 per share, and
in either event the Purchase Price shall be as set forth in Section 2 above.
4. DEPOSIT OF SHARE CERTIFICATES. Within five (5) days of the execution
hereof, Piland agrees to deposit with Allman Spry Humphreys Leggett & Howington,
P.A. (the "Escrow Agent") the stock certificates representing the Shares. The
Escrow Agent shall hold the Shares in escrow from the date of the deposit of
said Shares until the purchase price for the Shares is paid or Pluma or Piland
elect not to exercise their right to sell or purchase, as the case may be, as
set forth in Section 3 above. The Shares shall be released to Pluma upon the
payment by Pluma of the cash portion of the purchase price and the execution of
the Note as set forth in Section 2 above, but, shall continue to be held by the
Escrow Agent (as Collateral Agent) pursuant to the terms of the Security
Agreement. The Escrow Agent shall release the Shares to Piland in the event
Piland elects not to sell his Shares to Pluma, or Pluma elects not to purchase
the Shares from Piland pursuant to the terms of Section 3 above.
The following are other terms and conditions related to the
Shares while they are held by the Escrow Agent:
(a) Notwithstanding that the Shares are held in escrow, the
Shares may be transferred by will, or pursuant to the laws of descent and
distribution, or through appropriate legal proceedings, but in all cases the
Shares shall remain in escrow and subject to the terms of this Agreement until
released pursuant to the terms hereof. The Shares in escrow may be transferred
by gift to "immediate" family members as that term is defined in Plum's Stock
Transfer and Redemption Agreement to which Pluma is a party, provided that the
Shares shall remain subject to the terms of this Agreement. The Shares may not
be pledged to secure a debt.
(b) Piland shall have all voting rights with respect to the
escrowed shares until the shares are delivered by the Escrow Agent to Pluma at
closing.
(c) Any dividends paid on the Shares shall be paid to Piland
until the Shares are delivered to Pluma according to the terms hereof.
(d) The Escrow Agent may conclusively rely on, and shall be
protected, when it acts in good faith upon, any statement, certificate, notice,
request, consent, order or other document which it believes to be genuine and
signed by the proper party. The Escrow Agent shall have no duty or liability to
verify any such statement, certificate, notice, request, consent, order or other
document
2
<PAGE>
and its sole responsibility shall be to act only as expressly set forth in this
Agreement. The Escrow Agent shall be under no obligation to institute or defend
any action, suit or proceeding in connection with this Agreement unless it is
indemnified to its satisfaction. The Escrow Agent may consult counsel with
respect to any questions arising under this Agreement and the Escrow Agent shall
not be liable for any action taken, or omitted, in good faith upon advise of
counsel. In performing any of its duties hereunder, the Escrow Agent shall not
incur any liability to anyone for any damages, losses or expenses except for
willful default or negligence, and it shall accordingly not incur any such
liability with respect to: (i) any action taken or omitted in good faith upon
advise of its counsel or counsel for the Issuer given with respect to any
questions relating to the duties and responsibility of the Escrow Agent under
this Agreement, or (ii) any action taken or omitted in reliance upon any
instrument, including written advise provided for herein, not only as to its due
execution and the validity and effectiveness of its provisions, but also as to
the truth and accuracy of any information contained therein, which the Escrow
Agent shall in good faith believe to be genuine, to have been signed or
presented by a proper person or persons, and to conform with the provisions of
the Agreement.
(e) Pluma and Piland agree to hold the Escrow Agent harmless
from, and indemnify the Escrow Agent for, any and all costs of investigation or
claims, costs, expenses, attorney fees or other liabilities or disbursements
arising out of any administrative investigation or proceeding or any litigation,
commenced or threatened, relating to this Agreement, including without
limitation, the implementation of this Agreement, the distribution of stock or
funds, the investment of funds, the interpretation of this Agreement or similar
matters, provided that the Escrow Agent shall not be indemnified for any claims,
costs, expenses or other liability arising from its bad faith or negligence or
that of its employees, officers, directors or agents.
5. REPRESENTATIONS AND WARRANTIES OF PILAND. Piland represents and
warrants to Pluma that:
(a) Piland has clear and unencumbered title to the Shares to
be sold by him hereunder; and on January 1, 1994, there will be no lien or other
encumbrance on the Shares.
(b) Piland has the full right, power and authority and legal
capacity and authority to enter into this Agreement and to sell and transfer to
Pluma the Shares to be sold and transferred by Piland hereunder.
6. MISCELLANEOUS. This Agreement shall be governed by the laws of the
State of North Carolina, may not be assigned and shall inure to the benefit of
and shall be binding upon the parties hereto and their respective
representatives, heirs, legatees and devisees. This Agreement supersedes all
prior understandings between the parties with respect to the subject matter
hereof and may be signed in any number of counterparts which together shall
constitute one Agreement.
IN WITNESS WHEREOF, the parties hereto have made and entered into this
Agreement the date first set forth above.
3
<PAGE>
PLUMA, INC.
By: /s/ R. Duke Ferrell, Jr.
ATTEST: President
/s/ George G. Wade
[CORPORATE SEAL]
/s/ G. B. Piland (SEAL)
GLAZIER B. PILAND
4
<PAGE>
<PAGE>
AMENDMENT TO STOCK REDEMPTION AGREEMENT
THIS AMENDMENT constitutes an amendment to the Stock Redemption
Agreement dated the 16th day of September, 1993 (the "Agreement") between PLUMA,
INC. ("Pluma") and GLAZIER B. PILAND
("Piland").
Statement of Purpose
At the time of the execution of the Agreement, the parties thereto
understood and agreed that the obligations of Pluma set forth in the Agreement
were conditional upon Pluma's lender, First Union National Bank ("First Union"),
approving the use of borrowed funds from First Union for the purpose of making
payments to Piland set forth in the Agreement. This condition to Pluma's
obligations was mistakenly omitted from the terms and provisions of the
Agreement. The purpose of this Amendment is to set forth the parties'
understanding and agreement relative to the condition precedent set forth above,
and to correct one clerical error which appears in the third paragraph of the
Agreement.
NOW, THEREFORE, the parties hereby agree to amend the Agreement as
follows:
1. The reference in the second line of the third paragraph of the
Agreement to 270,077 shares shall be amended to read "270,070" shares.
2. The following paragraph shall be added as the second paragraph to
Section 3 of the Agreement on Page 2:
"Additionally, Pluma's obligations under this Agreement are
specifically conditioned upon the consent of First Union National Bank
of North Carolina authorizing Pluma to enter into, and consummate the
transactions contemplated by, this Stock Redemption Agreement. Pluma
covenants and agrees to use its best efforts to procure First Union's
consent as set forth above. In the event of the failure of this
condition, Pluma may terminate its obligations under this Agreement, in
which event Piland's obligations under this Agreement shall terminate,
the Escrow Agent shall release the Shares from escrow, and deliver the
Shares to Piland within two (2) days following Escrow Agent's receipt
of notice of this failed condition and, thereafter, this Agreement
shall be null and void."
3. Except as otherwise set forth above, the parties hereby ratify and
confirm all other terms and provisions of the Agreement.
IN WITNESS WHEREOF, the parties have caused this Amendment to be
executed on this the 21st day of October, 1993.
PLUMA, INC.
By: /s/ R. Duke Ferrell, Jr.
President
/s/ G. B. Piland (SEAL)
GLAZIER B. PILAND
<PAGE>
<PAGE>
THE RIGHTS OF THE HOLDER OF THIS NOTE ARE SUBORDINATE TO THE RIGHTS OF FIRST
UNION NATIONAL BANK OF NORTH CAROLINA AND/OR OTHER LENDERS OF THE MAKER HEREOF
AS MORE SPECIFICALLY SET FORTH HEREIN.
PROMISSORY NOTE
$3,398,560.88 January 28, 1994
Winston-Salem, N. C.
FOR VALUE RECEIVED, the undersigned promises to pay to Glazier B.
Piland, or order, the principal amount of Three Million Three Hundred
Ninety-eight Thousand Five Hundred Sixty and 88/100 Dollars ($3,398,560.88) with
interest at the rate of five per cent (5%) per annum. The principal unpaid
balance of this Note, together with all interest which accrues hereon from time
to time shall be payable in lawful money of the United States to Glazier B.
Piland at
, or such other places as the Noteholder may designate, said
payment to be made as follows:
Interest on the unpaid balance hereof shall be paid in quarterly
installments beginning on May 1, 1994, with such payments continuing on
each August 1, November 1, February 1, and May 1 thereafter until the
principal of this Note is paid in full.
The principal amount of this Note shall be paid in four consecutive
equal annual installments of Eight Hundred Forty-nine Thousand Six
Hundred Forty and 22/100 Dollars ($849,640.22), beginning on January
31, 1995, and continuing on each January 31 thereafter until the
principal amount of this Note is paid in full.
In the event of default in payment of the principal balance of this
Note when it becomes due, or default under the terms of any instrument securing
this Note, this Note will bear interest at the rate of five percent (5%) per
annum until paid, and the holder may, without notice, declare the remainder of
the debt evidenced hereby at once due and payable.
All parties to this Note, whether principal, surety, guarantor or
endorsers, hereby waive presentment for payment, demand, protest and notice of
dishonor, and all defenses on the ground of extension of time for the payment
hereof, which may be given by the holder of the Note to them or either of them,
or to anyone who has assumed the payment of this Note.
Upon default the holder of this Note may employ an attorney to enforce
the holder's rights and remedies and the maker, principal, surety, guarantor and
endorsers of this Note hereby agree to pay to the holder reasonable attorney's
fees, plus all other reasonable expenses incurred by the holder in exercising
any of the holder's rights and remedies upon default.
Further, this Note is secured by the pledge of common shares of Pluma,
Inc. pursuant to a Security Agreement of even date herewith. The provisions of
the Security Agreement are incorporated herein by reference.
<PAGE>
The rights of the Noteholder to receive any payment of principal and
interest hereon are subject and subordinate to the rights of First Union
National Bank of North Carolina ("First Union") to receive payment or exercise
any rights or remedies set forth in:
(i) that loan agreement dated the _____ day of ______________,
1993 between the maker hereof and First Union, or under any document
executed by the maker hereof in connection therewith,
(ii) any indebtedness of the maker to First Union created
after the execution hereof and the rights of First Union to receive
payments or exercise any rights or remedies created in connection
therewith as set forth in any loan documents evidencing such new or
additional loan(s), and
(iii) any indebtedness of the maker to any lender who may
refinance any portion of any indebtedness of the maker to First Union,
and the rights of any such lender to receive payment or exercise any
rights or remedies set forth in any loan documents evidencing such
loan(s)
all as the same may be deferred, renewed, modified, or extended (the "Senior
Indebtedness"). Upon any receivership, insolvency, assignment for the benefit of
creditors, bankruptcy, reorganization, sale of all or substantially all of the
assets and liabilities of the maker hereof, or in the event this Note is
declared due and payable upon the occurrence of a default as defined herein, no
amount shall be paid by the maker hereof with respect to principal and interest
on this Note unless and until all principal of, and interest on, the Senior
Indebtedness then outstanding is paid in full.
The undersigned expressly agree to remain and continue bound for the
payment of the principal amount provided for by the terms of this Note
notwithstanding any extension or extensions of time of, or for the payment of
such principal, or any change or changes in the amount or amounts agreed to be
paid under and by virtue of the obligation to pay provided for in this Note, or
any change or changes by way of release or surrender of any collateral held as
security for this Note and waive all and every kind of notice of such extension
or extensions, change or changes and agree that the same may be made without the
joinder of the undersigned.
This note may be prepaid in whole or in part, at any time prior to the
maturity date hereof, without penalty.
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<PAGE>
IN WITNESS WHEREOF, the undersigned have caused this Purchase Money
Promissory Note to be executed as of the day and year first above written.
PLUMA, INC.
By: /s/ R. Duke Ferrell
_______ President
Attest: /s/ George G. Wade
_______ Secretary
[Corporate Seal]
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<PAGE>
NORTH CAROLINA
SECURITY AGREEMENT
GUILFORD COUNTY
THIS AGREEMENT, made this the ______ day of _______________, 1994, by
and between PLUMA, INC., a North Carolina corporation (hereinafter referred to
as the "Company"), and GLAZIER B. PILAND (hereinafter referred to as "SECURED
PARTY"). ALLMAN SPRY HUMPHREYS LEGGETT & HOWINGTON, P.A. has agreed to act as
the agent of Secured Party for the purposes set forth in this Agreement and
shall be hereinafter referred to as "Collateral Agent."
WITNESSETH, that:
WHEREAS, pursuant to the Stock Redemption Agreement entered into by and
among the Company and Secured Party as of September 16, 1993, (the "Stock
Redemption Agreement"), a copy of which is attached hereto as Exhibit 1 and
incorporated herein by reference, the Company and Secured Party have agreed to
the terms and conditions upon which a certain number of shares of Pluma, Inc.
stock currently owned by Secured Party (the "Stock") may be redeemed by the
Company; and
WHEREAS, the Company has agreed to secure the performance of all of the
obligations owing by the Company to Secured Party arising under the Stock
Redemption Agreement, the note to be delivered to Secured Party at the Closing
contemplated in the Stock Redemption Agreement (the "Note") or any other
agreement or document executed in connection therewith by Secured Party and the
Company (hereinafter referred to collectively as the "Obligations") by granting
the Secured Party a security interest in the Stock.
NOW, THEREFORE, IT IS AGREED:
1. Pledge of Stock. As security for the satisfaction of the Obligations
including, but not limited to, the repayment of the Note according to its terms,
and the full, complete and absolute performance by Company of each of the terms
and conditions of the Stock Redemption Agreement, Company hereby grants a
security interest in and pledges the Stock (such stock together with any
additional stock or other properties that may hereafter be brought within the
operation of this Agreement shall be hereinafter referred to collectively as the
"Stock") to the Secured Party by depositing said Stock with the Collateral
Agent. Secured Party hereby appoints Collateral Agent as the agent of Secured
Party for purposes of taking possession of the Stock. The Collateral Agent shall
hold the Stock as security for the satisfaction of the Obligations including,
but not limited to, the repayment of the Note according to its terms, and the
full, complete and absolute performance by Company of each of the terms and
conditions of the Stock Redemption Agreement. Collateral Agent shall not
encumber or dispose of such shares except in accordance with the provisions of
this Agreement.
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<PAGE>
2. Voting Rights, Etc.
(a) As long as the Stock is held as Collateral for the
Obligations pursuant to paragraph 1 above, and so long as Company is not in
default in the performance of any of the terms of the Note, the Stock Redemption
Agreement or this Agreement, the Company shall have the right to vote the Stock
on all corporate matters.
(b) In the event, any dividend, reclassification, adjustment
or other change is declared or made in the capital structure of the Company
while the Stock is held by the Collateral Agent, all new, substituted and
additional shares, or other securities or other property issued by the Company
in respect of the Stock shall be held by the Collateral Agent under the terms of
this Agreement and in the same manner as the shares originally pledged
hereunder.
(c ) From and after the occurrence of a default by Company in
the performance of any of the terms of the Note, the Stock Redemption Agreement
or this Agreement, the Secured Party shall have the right to vote the Stock and
to receive all cash dividends and other cash distributions or payments on the
stock held by Collateral Agent or thereafter paid by the Company.
3. Representations. Secured Party represents and warrants that there
are no restrictions upon or agreements relating to the transfer or pledge of, or
grant of security interest in the Stock other than the Stock Transfer And
Redemption Agreement between Company and its shareholders. Company represents
and warrants that upon the redemption of the Stock at Closing, except as set
forth above, there shall be no restrictions upon or agreements relating to the
transfer or pledge of, or grant of a security interest in, the Stock and that
the Company has the right to pledge, assign and transfer the Stock as provided
herein.
4. Terms. Upon satisfaction of the Obligations including, but not
limited to, the repayment of the Note according to its terms, and the full,
complete and absolute performance by Company of each of the terms and conditions
of the Stock Redemption Agreement, Secured Party shall provide immediate written
notice of such satisfaction to Collateral Agent. Upon receiving such notice from
Secured Party, Collateral Agent shall deliver the Stock to the Company and this
Agreement shall terminate.
5. Default. The occurrence of any default under the Stock Redemption
Agreement or the Note shall constitute a default under this Agreement. In the
event Company is in default hereunder, all unpaid installments under the Note
and Stock Redemption Agreement shall, at Secured Party's option, become
immediately due and payable. Waiver of any default by Secured Party shall not be
deemed a waiver of any other default and all Secured Party's rights are
cumulative and not alternative. Upon the occurrence of a default by Company
which is not waived by Secured Party, the Secured Party shall deliver written
notice of such default to Collateral Agent and to Company. Collateral Agent
shall, at Secured Party's request and at Secured Party's option, either (a)
deliver to the Secured Party the Stock, in satisfaction of the Note, or (b)
offer the Stock for sale at public or private sale. In the event Security Party
elects to have the Stock offered for sale, the
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<PAGE>
Secured Party may be a purchaser. The Collateral Agent shall give Company and
the Secured Party notice of the time and place of any public or private sale of
the stock not less than forty-five (45) nor more than sixty (60) days prior
thereto, which Company and Secured Party acknowledge to be reasonable notice. In
the case of a private sale, such notice shall specify the price per share at
which the proposed sale is to be made and such price shall be deemed to be fair
and adequate price for such shares unless either the Company or the Secured
Party, not less than fifteen (15) days prior to such sale, shall notify the
Collateral Agent in writing of such party's objection to the proposed sale, in
which case the Collateral Agent shall proceed thereafter to sell the Stock by
means of a public sale. All of the Stock shall be sold by the Collateral Agent
regardless of whether such sale is private or a public sale and regardless of
whether the amount owed by the Company. The proceeds of the sale of any or all
of the Stock shall be applied first to pay the expenses of conducting the sale,
including the Collateral Agent's reasonable attorney's fees incurred in
connection therewith; and then the balance of the proceeds shall be applied to
the principal, interest and actual attorney's fees due and payable under the
Stock Redemption Agreement and under the provisions of the Note relating to the
acceleration of the Note. After the foregoing obligations have been satisfied in
full, any excess proceeds from the sale of the Stock shall be delivered to the
Company and Collateral Agent's obligations and duties hereunder shall terminate;
however, if the proceeds of the sale of the stock are insufficient to satisfy
the liability of the Company hereunder, the Company shall remain liable for any
such deficiency. In addition to the rights specifically granted Secured Party
hereunder with respect to a default by the Company, Secured Party shall, after
default, have all rights and remedies granted by the Uniform Commercial Code in
force in the State of North Carolina as of the date of this Agreement.
6. Delivery of Stock Certificates. Collateral Agent hereby acknowledges
its prior receipt of the Stock.
7. Limitation of Liability. In determining the liability of the
Collateral Agent, the parties agree as follows:
(a) In performing any of his duties under this Security
Agreement, or upon the claimed failure to perform its duties hereunder,
Collateral Agent shall not be liable to anyone for damages, losses or expenses
which such person may incur as a result of the Collateral Agent's so acting, or
failing to act; provided, however, Collateral Agent shall be liable for damages
arising out of its willful default or gross negligence under this Agreement.
Without limiting the foregoing, the parties hereto agree that Collateral Agent
shall not incur any liability for taking any action provided for herein upon the
instructions of Secured Party including but not limited to, the delivery of the
Stock to Secured Party or the offering of the Stock for sale as provided in
Paragraph 6 hereof upon receiving notice from Secured Party that Company is in
default hereunder and the Collateral Agent shall be entitled, without further
inquiry or investigation, to rely upon any notice given to him by the Secured
Party.
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<PAGE>
(b) The Collateral Agent shall not be responsible for the validity of
this Agreement or the execution hereof or for the truth of any of the recitals
or statements of fact herein contained.
(c) The Collateral Agent shall not be under any obligation to take any
legal action in connection with this pledge, or to appear in, prosecute or
defend any action or legal proceeding or to file any income or other tax return.
(d) N amendment or modification of this Agreement or waiver of its
terms shall affect the rights and duties of the Collateral Agent unless its
written consent thereto shall have been obtained.
8. Successor Collateral Agent. Should the Collateral Agent acting
hereunder die or resign at any time during the continuance of this Agreement, a
successor Collateral Agent shall be appointed by Secured Party, his personal
representative or assigns. Any such successor Collateral Agent shall deliver to
the parties hereto and to the resigning Collateral Agent a written instrument
accepting such appointment hereunder and thereupon shall succeed to all the
rights and duties of the Collateral Agent hereunder, and shall be entitled to
receive the Stock and any other property then held by the resigning Collateral
Agent hereunder.
9. Effect. This Agreement shall inure to the benefit of and be binding
upon Company, Secured Party and Collateral Agent, and their respective heirs,
executors, administrators, successors and assigns. In the event of the death of
Secured Party, the holder of the Note shall be treated as, and inure to all of
the rights and benefits of, the Secured Party.
10. Counterparts. This Agreement may be executed in three or more
identical counterparts, each of which when executed and delivered shall be an
original, but all such counterparts constitute one and the same instrument.
11. Further Assurances and Power of Attorney. Company agrees to execute
such other and further documents, including, without limitation, security
agreements, pledge agreements, agreements, financing statements, continuation
statements, and the like as may from time to time be reasonably necessary, to
perfect, confirm, establish, reestablish, continue, or complete the security
interests and liens in the Stock and the purposes and intentions of this
Agreement, it being the intention of the Company to provide hereby a full and
absolute warranty of further assurance to Secured Party. If Company fails to
execute any such documents within ten (10) days of being requested to do so by
the Secured Party, the Company hereby appoints the Secured Party as the
Company's attorney-in-fact for purposes of executing such documents in the
Company's name, place and stead, which power of attorney shall be considered as
coupled with an interest and irrevocable.
12. Situs. This Agreement shall be construed and governed in accordance
with the laws of the State of North Carolina.
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<PAGE>
13. Waiver, Modification or Cancellation. Any waiver, alteration or
modification of any of the provisions of this Agreement or cancellation or
replacement of this Agreement shall not be valid unless in writing and signed by
the parties.
14. Notices. Notices under this Agreement shall be in writing and shall
be delivered personally or mailed, postage prepaid, certified mail, return
receipt requested, to the party to whom such notice is being given at the
address of such party as set forth below or to such other address as may be
furnished by a notice given in compliance with this Section:
Secured Party: G. B. Piland
113 Plantation Drive
Collinsville, VA 24078
Company: PLUMA, Inc.
800 West Fieldcrest Road
Eden, NC 27289
Collateral Agent: Allman Spry Humphreys Leggett &
Howington, P.A.
380 Knollwood Street, Suite 700
Winston-Salem, NC 27103
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the
day and year first above written and the Collateral Agent has executed this
Agreement indicating his consent to be bound under the terms of this Agreement.
COMPANY:
PLUMA, INC.
By: /s/ R. Duke Ferrell
Name:
Title: President
SECURED PARTY:
/s/ G. B. Piland (SEAL)
G. B. PILAND
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<PAGE>
I, ____________________________, accept and agree to serve as the Collateral
Agent, subject to the terms of this Security Agreement.
COLLATERAL AGENT:
--------------------------------------------
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<PAGE>
SUBORDINATION AGREEMENT
THIS SUBORDINATION AGREEMENT ("Agreement"), is made and entered into
this 28th day of January, 1994, by and among GLAZIER B. PILAND ("Subordinating
Creditor"); PLUMA, INC., a North Carolina corporation and FIRST UNION NATIONAL
BANK OF NORTH CAROLINA, a national banking association ("Bank");
W IT N E S SE T H:
WHEREAS, Borrower and Bank are parties to that certain Third Amended
and Restated Loan and Security Agreement dated May 25, 1993, as amended by First
Amendment thereto dated August 2, 1993 (the "Loan Agreement"), pursuant to
which, and upon the terms and subject to the conditions contained therein, Bank
has agreed to extend credit to Borrower;
WHEREAS, Borrower, contemporaneously with the execution of this
Agreement, desires to incur indebtedness to the subordinating creditor in the
amount of $3,398,560.88 as evidenced by a promissory note ("Subordinated Note")
dated of even date herewith, a copy of such subordinated
Note being attached hereto as Exhibit A;
WHEREAS, the Borrower desires to secure payment of the Subordinated
Note with the pledge of 270,070 shares of the common stock of Borrower being
acquired by Borrower from Subordinating Creditor, such security being more
particularly described in that certain security agreement of even date herewith
being entered into between Borrower and Subordinating Creditor (the "Security
Agreement");
WHEREAS, Borrower is precluded under Section 8.3 of the Loan Agreement
from incurring the indebtedness evidenced by the Subordinated Note without the
prior written consent of the
Bank;
WHEREAS, Borrower has requested that Bank provide its written consent
to the incurrence of the indebtedness evidenced by the Subordinated Note;
WHEREAS, as a condition precedent to providing its written consent to
the incurrence by Borrower of the debt evidenced by the Subordinated Note, Bank
has required the execution of this Agreement by the Subordinating Creditor and
the Borrower;
NOW, THEREFORE, for and in consideration of the premises and other good
and valuable considerations, the receipt and adequacy of which is hereby
acknowledged, and in order to induce Bank to consent to the incurrence by
Borrower of the indebtedness evidenced by the Subordinated Note, the parties do
hereby agree as follows:
1. Certain Definitions. An addition to the terms defined in the
recitals hereto, the following terms shall have the following meanings for the
purposes of this Agreement:
<PAGE>
A. "Default" shall have the meaning ascribed to such term in the Loan
Agreement.
B. "Event of Default" shall have the meaning ascribed to such term in
the Loan Agreement.
C. "Senior Debt" shall mean all "obligations" (as such term is defined
in the Loan Agreement) now or hereafter owed to Bank under the Loan
Agreement or otherwise without any dollar limitation, and any
replacements, renewals, refundings or refinancings thereof by Bank or
by any other lender.
D. "Subordinated Indebtedness" shall mean all indebtedness now or
hereafter owed to the subordinating Creditor under the Subordinated
Note and any replacements, renewals, refundings or refinancings
thereof.
E. "Permitted Security Interest" shall mean the security interest of
Subordinating Creditor in the Stock as such term is defined in the
Security Agreement.
2. Subordination. Subordinating Creditor covenants and agrees that the
payment of the subordinated Indebtedness is expressly subordinated to the prior
payment in full of all Senior Debt. subordinating Creditor further agrees that
any liens or security interests other than the Permitted Security interest on
Borrower's assets now or hereafter securing the Subordinated Indebtedness are
subordinated in all respects to liens and security interests on Borrower's
assets now or hereafter securing the Senior Debt notwithstanding the relative
priorities that might otherwise be determined by applicable law.
3. Prohibited Payments an Actions. Except as set forth in Section 4
below, Subordinating Creditor will not (a) ask, demand, sue for, take or receive
from or on behalf of Borrower, by setoff or in any manner, the whole or any part
of any monies which may now or hereafter be owing to Subordinating Creditor on
the subordinated Indebtedness, (b) initiate, commence, participate or join with
any creditor other than Bank in commencing any bankruptcy, arrangement,
reorganization or, insolvency proceeding, or any other suit, action or
proceeding against Borrower to enforce payment of all or any portion of the
Subordinated Indebtedness, or (c) ask, demand, take or receive any security
other than the Permitted Security Interest for any of the Subordinated
Indebtedness, unless and until all of the Senior Debt shall have been fully paid
and satisfied and the Loan Agreement is terminated in writing.
4. Permitted Payments. Notwithstanding the provisions of Section 3,
Borrower may pay the scheduled payments of interest and principal under the
Subordinated Note if and so long as: (a) no Default or event of Default shall
have occurred and be continuing; and (b) after giving effect to such proposed
payment of Subordinated Indebtedness, no
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<PAGE>
Default or Event of Default shall occur. However, no part of the principal of,
or the interest on, the Subordinated Note may be prepaid by the Borrower except
by transfer of the Stock pursuant to the Security Agreement under any
circumstances without the prior written consent of Bank, which consent may be
given or withheld in Bank's sole discretion.
5. Modifications of the Subordinated Indebtedness. Subordinating
Creditor agrees that without Bank's prior written consent it will not (a) extend
additional loans, extensions of credit or other accommodations to or for the
account of Borrower; (b) purchase or extend credit upon any instrument in
respect to which Borrower may be liable in any capacity; (c) amend or modify any
terms of the Subordinated Note or the Security Agreement.
6. Priority on Distribution. In the event of any distribution, division
or application, partial or complete, voluntary or involuntary, by operation of
law or otherwise, of all or any part of the assets of Borrower or the proceeds
thereof to the creditors of Borrower or of any readjustment of the obligations
and indebtedness of Borrower, whether by reason of liquidation, bankruptcy,
arrangement, receivership, assignment for the benefit of creditors or any other
action or proceeding involving the readjustment of all or any of Borrower's
indebtedness, or the application of the assets of Borrower to the payment or
liquidation thereof 1 or the dissolution or winding up of Borrower's business,
or the sale of all or substantially all of Borrower's assets, then, and in such
event, Bank shall first be entitled to receive payment in full of all of the
senior Debt prior to the payment of all or any part of the Subordinated
Indebtedness, and all payments or distributions of any assets of Borrower of any
kind or character, whether in cash, property or securities, to which
Subordinating creditor would be entitled, except for the provisions of this
Agreement, including any such payment or distribution which may be payable or
deliverable by reason of the payment of any other indebtedness of Borrower being
subordinated to the payment of the subordinated Indebtedness, shall be paid to
Bank for application on the Senior Debt, to the extent necessary to make payment
in full of all Senior Debt remaining unpaid, after giving effect to any
concurrent payment or distribution to or for Bank.
7. Turnover or Prohibited Transfers. If any payment, distribution or
security (other than the stock) or the proceeds thereof are received by
Subordinating Creditor on account of or with respect to the payment of the
Subordinated Indebtedness other than is permitted in Section 4 hereof,
subordinating Creditor shall receive and hold the same in trust for the benefit
of Bank, and shall forthwith pay over and deliver the same to Bank in precisely
the same form received (except for the endorsement or assignment of
Subordinating Creditor when necessary) for application on the Senior Debt, to
the extent necessary to make payment in full of all of the Senior Debt remaining
unpaid, after giving effect to any concurrent payment or distribution to or for
Bank.
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<PAGE>
8. Enforcement of Agreement. If subordinating Creditor in violation of
this Agreement shall initiate, commence, participate or join with any creditor
other than Bank in commencing any bankruptcy, arrangement, reorganization or
insolvency proceeding, or any other suit, action or proceeding against Borrower
to enforce payment of all or any portion of the Subordinated Indebtedness or
shall attempt to enforce, foreclose or take any other action to realize upon any
security for the Subordinated Indebtedness other than the Stock, thereof and in
any such event, Borrower or Bank may interpose as a defense or plea the making
of this Agreement and Bank may intervene and interpose such defense in its name
or in the name of Borrower, and Borrower or Bank may by virtue of this Agreement
restrain the enforcement thereof in the name of Borrower or Bank.
9. Grant of Authority. If any proceeding referred to in Section 6 above
is commenced by or against Borrower, Bank is hereby irrevocably authorized and
empowered (in its own name or the name of the Subordinating Creditor or
otherwise), but shall have no obligation, to demand, sue for, collect and
receive every payment or distribution referred to in Section 6 above and give
acquittance therefor and file claims and proof or claim in any such proceeding
in respect of the Subordinated Indebtedness and take such other action
(including, without limitation, voting such claim or proof of claim or enforcing
any security interest or lien securing payment of the Subordinated Indebtedness)
as it may deem necessary or advisable for. the exercise or enforcement of any.
other rights or interests or Bank hereunder. subordinating Creditor shall duly
and promptly take such action as Bank may request (a) to collect the
Subordinated Indebtedness for the account of Bank and to file appropriate claims
or proof of claims in respect of the Subordinated Indebtedness, (b) to execute
and deliver to Bank such powers of attorney, assignments or other instruments or
documents, as Bank may request, in order to enable it to enforce any and all
claims upon or with respect to any and all of the Subordinated Indebtedness, and
(c) to collect and receive any and all payments or distributions which may be
payable or deliverable upon or with respect to the Subordinated Indebtedness.
10. Subordinated Indebtedness Owed only to Subordinating Creditor.
Subordinating Creditor warrants and represents to Bank that subordinating
Creditor has not previously assigned any interest in the Subordinated
indebtedness to any party, that no party owns an interest in the Subordinated
Indebtedness other than subordinating creditor (whether as joint holder of the
Subordinated Indebtedness, participants or otherwise), that the entire
Subordinated Indebtedness is owing to Subordinating Creditor, and Subordinating
Creditor covenants that the Subordinating Indebtedness shall continue to be
owing only to Subordinating Creditor, unless assigned or disposed of in
accordance with the terms of this Agreement as provided in Section 14 hereof.
11. Instrument Legend. Each instrument evidencing any of the
Subordinated Indebtedness, and any renewals or replacements thereof, will be
inscribed with a legend conspicuously indicating that the
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<PAGE>
payment, priority and enforcement thereof is subordinated to the payment in full
of Senior Debt and the claims of Bank pursuant to the terms of this Agreement
and copies thereof will be delivered to Bank promptly thereafter.
12. Subrogation. After all of the Senior Debt has been paid in full and
until the Subordinated Indebtedness has been paid in full, Subordinating
Creditor shall be subrogated to the rights of Bank to receive payments and
distributions of assets of Borrower applicable to the Senior Debt, to the extent
that payments or distributions otherwise payable to Subordinating creditor have
been applied to the payment of the Senior Debt in accordance with the provisions
of this Agreement. As between Borrower and Subordinating Creditor, a payment or
distribution applied to the payment of the senior Debt in accordance with the
provisions of this Agreement which otherwise would have been made to
Subordinating Creditor shall not be deemed a payment by Borrower on the
Subordinated Indebtedness, it being understood that the subordination provisions
of this Agreement are intended solely for the purpose of defining the relative
rights of Subordinating Creditor, on the one hand, and Bank, on the other hand.
13. Obligation of Borrower Unconditional. Nothing contained in this
Agreement is intended to nor shall impair, as between Borrower, its creditors
other than Bank and subordinating Creditor, the obligations of Borrower, which
are absolute and unconditional, to pay to Subordinating Creditor the
Subordinated Indebtedness as and when the same shall become due and payable in
accordance with its terms, except as such obligations are modified by the rights
confirmed hereunder in favor of Bank, or affect the relative rights of
Subordinating Creditor and the creditors of Borrower other than Bank.
14. Assignment of Subordinated Indebtedness. Subordinating Creditor
agrees that until the Senior Debt has been paid in full and satisfied and the
Loan Agreement has been terminated in writing, Subordinating Creditor will not
assign, transfer or otherwise dispose of the Subordinated Indebtedness or any
portion thereof unless such assignment, transfer or other disposition is made
expressly subject to this Agreement and the transferee expressly acknowledges in
a writing delivered to Bank and in form acceptable to it that the Subordinated
Indebtedness is being sold subject to the terms of this Agreement.
15. Subordination Non-Impaired. All rights and interests of Bank, and
all agreements and obligations of subordinating Creditor hereunder, shall remain
in full force and effect irrespective of: (a) any change in the time, manner, or
place of payment of, or in any other term of, all or any of the Senior Debt; (b)
any change, release or nonperfection of any collateral, or any release or
amendment or waiver of or consent to the departure from, any guaranty for all or
any of the senior Debt; or (c) any other circumstances which might otherwise
constitute a defense available to, or a discharge of, Borrower in respect of the
Senior Debt or Subordinating Creditor in respect or its obligations under this
Agreement. The provisions of this Agreement
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<PAGE>
shall continue to be effective or be reinstated, as the case may be, if at any
time any payment of any of the Senior Debt is rescinded or must otherwise be
returned by Bank upon the insolvency, bankruptcy or reorganization of Borrower
or otherwise, all as though such payment had not been made.
16. Waivers of Subordinating Creditor. All of the Senior Debt shall be
deemed to have been made or incurred in reliance upon this Agreement, and
Subordinating Creditor expressly waives all notice of acceptance by Bank of the
subordination and other provisions of this Agreement, notice of the incurring of
any Senior Debt from time to time under the Loan Agreement or otherwise and all
other notices not specifically required pursuant to the terms of this Agreement
or by law, and reliance by Bank upon the subordination and other agreements as
herein provided. Subordinating Creditor agrees that Bank shall be entitled to
manage and supervise its loans to borrower in accordance with its usual
practices, modified from time to time as it deems appropriate under the
circumstances. Subordinating Creditor agrees that Bank has made no warranties or
representations with respect to the due execution, legality, validity,
completeness or enforceability of the Loan Agreement or the collectability of
the Senior Debt; and that Bank shall have no responsibility to Subordinating
Creditor to advise it of information known to Bank regarding the financial
condition of Borrower or of any circumstances bearing upon the risk of
non-payment of the Senior Debt or any other indebtedness of Borrower.
17. Waivers of Parties. No waiver shall be deemed to be made by any
party of any of its rights hereunder, unless the same shall be in writing signed
on behalf of such party, and each waiver, if any, shall be a waiver only with
respect to the specific instance involved and shall in no way impair the rights
of such party or the obligations of the other parties in any other respect at
any other time.
18. Agreements of Borrower. Borrower agrees that it will not pay any or
the Subordinated Indebtedness except as this Agreement provides, and will be
bound by all of the provisions of this Agreement, including, without limitation,
the subrogation provisions of Section 12 hereof. In the event of a breach by
Borrower of any of the provisions herein, all of the Senior Debt shall, without
presentment, demand, protest or notice of any kind except as otherwise required
by the Loan Agreement, become immediately due and payable unless Bank shall
otherwise elect in writing.
19. Notices. Any notice required to be given under this Agreement shall
be sent by certified mail, postage prepaid, return receipt requested, overnight
air courier or delivered by hand, and shall be deemed to have been received upon
hand delivery, one (1) day after sending if sent by overnight air courier and
three (3) days after mailing if sent by certified mail. Notices shall be
addressed as follows:
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<PAGE>
(a) If to Borrower: Pluma, Inc.
800 West Fieldcrest Road
Eden, North Carolina 27288
(b) If to subordinating
Creditor: Glazier B. Piland
113 Plantation Drive
Collinsvi1le, VA 24078
(c) If to Bank: First Union National Bank
of North Carolina
300 North Greene Street
P.O. Box 21965
Greensboro, NC 27420
Any party may change the address to which notices are to be given to it
hereunder by giving notice of such change of address in conformity with the
provisions hereof.
20. Consent of Bank. In reliance on the terms and conditions of this
Agreement, Bank hereby consents to the incurrence of the Subordinated
Indebtedness by Borrower and to the execution by Borrower of the Subordinated
Note and the Security Agreement Borrower agrees that for purposes of the Loan
Agreement the Subordinated Indebtedness is excluded from Subordinated Debt (as
defined in the Loan Agreement).
21. Governing Law. This Agreement shall be interpreted, and the rights
and liabilities of the parties' hereto determined, in accordance with the laws
and decisions of the State of North Carolina.
22. Parties. This Agreement shall be binding upon, and inure to the
benefit of, the parties hereto and their respective heirs, personal
representatives, successors and assigns. The term "Borrower" as used herein
shall also refer to the successors and assigns of Borrower, including, without
limitation, a receiver, trustee, custodian or debtor in possession.
23. Term of Agreement. This Agreement shall continue in full force and
effect and shall be irrevocable by any party hereto until the earliest to occur
of the following: (a) the parties hereto mutually agree in writing to terminate
this Agreement, or (b) the Senior Debt is fully paid and satisfied and the Loan
Agreement is terminated in writing.
24. Section Titles. The section titles contained in this Agreement are
and shall be without substantive meaning or content of any kind whatsoever and
are not a part of the agreement between the parties hereto.
25. Counterparts. In order to expedite the execution of this Agreement,
this Agreement may be executed in any number of
-7-
<PAGE>
counterparts, all of which, taken together, shall constitute one and the same
instrument, and any of the parties hereto may execute this Agreement by signing
any such counterpart.
IN WITNESS WHEREOF, this Agreement has been duly executed by the
parties under seal as of the day and year first above written.
(Signature of Glazier B. Piland appears here)(SEAL)
Glazier B. Piland
PLUMA, INC.
By: (Signature appears here)
____________ President
ATTEST:
(Signature appears here)
______________ Secretary
[CORPORATE SEAL]
FIRST UNION NATIONAL BANK OF
NORTH CAROLINA
ATTEST:
By: (Signature appears here)
Vice President
(Signature appears here)
Assistant Secretary
[CORPORATE SEAL]
-8-
<PAGE>
EXHIBIT A
TO
SUBORDINATION AGREEMENT
THE PAYMENT, PRIORITY AND ENFORCEMENT OF THIS NOTE ARE SUBORDINATE TO THE
PAYMENT IN FULL AND RIGHTS OF FIRST UNION NATIONAL BANK OF NORTH CAROLINA AND/OR
OTHER LENDERS OF THE MAKER HEREOF AS MORE SPECIFICALLY SET FORTH HEREIN AND THAT
CERTAIN SUBORDINATION AGREEMENT OF EVEN DATE HEREWITH.
PROMISSORY NOTE
January 28, 1994
$3,398,560.88 Winston-Salem, N.C.
FOR VALUE RECEIVED, the undersigned promises to pay to Glazier B.
Piland, or order, the principal amount of Three Million Three Hundred
Ninety-eight Thousand Five Hundred Sixty and 88/100 Dollars ($3,398,560.88) with
interest at the rate of five per cent (5%) pr annum. The principal unpaid
balance of this Note, together with all interest which accrues hereon from time
to time shall be payable in lawful money of the United States to Glazier B.
Piland at 113 Plantation Drive, Collinsville, VA 24078, or such other places as
the Noteholder may designate, said payment to be made as follows:
Interest on the unpaid balance hereof shall be paid in quarterly
installments beginning on May 1, 1994, with such payments continuing on
each August 1, November 1, February 1, and May thereafter until the
principal f this Note is paid in full.
The principal amount of this Note shall be paid in four consecutive
equal annual installments of Eight Hundred Forty-nine Thousand Six
Hundred Forty and 22/100 Dollars ($849,640.22), beginning on January
31, 1995, and continuing on each January 31 thereafter until the
principal amount of this Note is paid in full.
In the event of default in payment of the principal balance or any
interest payment due on this Note when it becomes due, or default under the
terms of any instrument securing this Note, the unpaid balance and any past due
interest on this Note will bear interest at the rate of nine percent (9%) per
annum until paid, and the holder may, without notice, declare the remainder of
the debt evidenced hereby at once due and payable.
All parties to this Note, whether principal, surety, guarantor or
endorsers, hereby waive presentment for payment, demand, protest and notice of
dishonor, and all defenses on the ground of extension of time for the payment
hereof, which may be given by the holder of the Note to them, or to anyone who
has assumed the payment of this Note.
<PAGE>
Upon default the holder of this Note may employ an attorney to enforce
the holder's rights and remedies and the maker, principal, surety, guarantor and
endorsers of this Note hereby agree to pay to the holder reasonable attorney's
fees, plus all other reasonable expenses incurred by the holder in exercising
any of the holder's rights and remedies upon default under this Note or the
Security Agreement.
Further, this Note is secured by the pledge of common shares of Pluma,
Inc. pursuant to a Security Agreement of event date herewith. The provisions of
the Security Agreement are incorporated herein by reference.
The payment, priority and enforcement of this Note are subject and
subordinate to
(i) the payment in full of, and the rights of First Union National Bank
of North Carolina ("First Union") as more fully set forth in that
certain Subordination Agreement of even date herewith by and among the
Maker and Payee hereof and First Union (the "Subordination Agreement");
and
(ii) the payment in full of any indebtedness of the maker to any lender
who may refinance any portion of the indebtedness of the maker to First
Union, and the rights of any such lender to receive payment or exercise
any rights or remedies set forth in any loan documents evidencing such
loan(s)
all as the same may be deferred, renewed, modified, or extended (the "Senior
Indebtedness").
The undersigned expressly agree to remain and continue bound for the
payment of the principal amount provided for by the terms of this Note
notwithstanding any extension or extensions of tie of, or for the payment of
such principal, or any change or changes in the amount or amounts agreed to be
paid under and by virtue of the obligation to pay the amount or amounts agreed
to be paid under and by virtue of the obligation to pay provided for in this
Note, or any change or changes by way of release or surrender of any collateral
held as security for this Note and waive all and every kind of notice of such
extension or extensions, change or changes and agree that the same may be made
without the joinder of the undersigned.
This note may be prepaid in whole or in part, at any time prior to the
maturity date hereof, without penalty.
The rights and remedies of the Holder as provided in this Note and the
Security Agreement shall be cumulative and may be pursued singularly,
successively, or together against the collateral described in the Security
Agreement, in the sole discretion of the Holder. The failure to exercise any
such right or remedy shall not be a waiver or release of such rights or remedies
or the right to exercise any of them at another time.
2
<PAGE>
IN WITNESS WHEREOF, the undersigned have caused this Purchase Money
Promissory Note to be executed as of the day and year first above written.
PLUMA, INC.
By: ______________________________
___________ President
Attest: __________________________
___________ Secretary
[CORPORATE SEAL]
<PAGE>
<PAGE>
STATE OF NORTH CAROLINA ) AGREEMENT
) OF
COUNTY OF ROCKINGHAM ) TERMINATION AND RELEASE
THIS AGREEMENT OF TERMINATION AND RELEASE (the "Contract") is made and
entered into as of this the 29th day of December, 1995, by and between Box &
Company, Inc., a Virginia corporation (hereinafter called "Box"), and Pluma,
Inc., a North Carolina corporation (hereinafter called "Pluma").
STATEMENT OF PURPOSE
Pluma is an established manufacturer of sportswear apparel products.
Box has been responsible for marketing and selling all of Pluma's products since
January 1, 1992, pursuant to a Representative's Agreement between Box and Pluma
dated January 1, 1992 (the "Sales Agreement"). Pluma has determined that it is
in Pluma's best interest to control the marketing and sales of its products
internally and has requested that Box terminate the Sales Agreement and Box has
agreed to a termination of the Sales Agreement upon the terms and conditions set
forth herein.
NOW, THEREFORE, for and in consideration of the mutual covenants and
conditions herein set forth, the payment by Box of those sums described herein,
and other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the parties hereto agree as follows:
1. Termination of Sales Agreement and Releases. It is agreed that from
and after December 31, 1995, the Sales Agreement shall be terminated and of no
further force and effect, and except as set forth below with respect to Pluma's
obligations to pay to Box Final Commissions (as defined below), neither party
shall have any further obligations to the other related to the Sales Agreement.
In this regard, Pluma hereby releases and discharges Box from any and all past,
present and future actions, causes of action, claims, demands, damages, costs,
loss of services, expenses, compensation, third party actions, suits at law or
in equity, including claims or suits for contribution and/or indemnity, of
whatever nature, and all consequential damage on account of or in any way
growing out of any and all known and unknown loss or damage resulting from or
arising out of Box's obligations under the Sales Agreement. Likewise, except as
set forth below with respect to Final Commissions, Box hereby releases and
discharges Pluma from any and all past, present and future actions, causes of
action, claims, demands, damages, costs, loss of services, expenses,
compensation, third party actions, suits at law or in equity, including claims
or suits for contribution and/or indemnity, of whatever nature, and all
consequential damage on account of or in any way growing out of any and all
known and unknown loss or damage resulting from or arising out of Pluma's
obligations under the Sales Agreement.
2. Termination Payment. In consideration of Box's agreement to
terminate the Sales Agreement as set forth above, Pluma agrees to pay to Box a
termination payment in the amount of Two Million and 00/100 Dollars
($2,000,000.00). The termination payment shall be paid by Pluma
<PAGE>
paying to Box One Thousand and 00/100 Dollars ($1,000.00) upon the execution
hereof and simultaneously executing and delivering to Box a promissory note in
the form set forth on EXHIBIT A which is attached hereto and incorporated herein
by reference.
3. Pluma's Obligation to Pay Final Commissions. Notwithstanding
anything to the contrary set forth in Section 1 above, Pluma agrees to pay to
Box on or before January 26, 1996, commissions due under Section 15 of the Sales
Agreement for shipments made by Pluma of its products to customers prior to
December 31, 1995 (the "Final Commissions"). Pluma will assume the risk of all
returns of its products by customers, and Box shall not be liable to Pluma for
any return credits issued by Pluma after such date. Additionally, Pluma shall
have no claim against Box in the future, or any right to offset against Final
Commissions due as set forth above, as the result of any uncollected accounts
receivable due from Pluma's customers, including the 20/20 account receivable.
4. Box's Representations and Warranties. Box represents and warrants
the following to Pluma:
(a) Corporate Organization. Box at the time of closing will be
a corporation duly formed, validly existing, and in good standing under the laws
of the State of Virginia with all requisite power and authority to carry on its
business as it is being conducted.
(b) Authorization. Box has full corporate power and is duly
authorized to execute this Agreement and to carry out the transactions
contemplated hereby. This Agreement and all actions contemplated herein which
require the approval of Box's directors or shareholders shall be lawfully
approved by such directors and shareholders and Box shall deliver at the time of
closing a certified copy of resolutions of Box's board of directors and
shareholders giving such approval.
(c) No Violation. Box is not subject to or obligated under any
certificate of incorporation, by-law, law, or regulation of any governmental
authority, or any agreement or instrument (including any loan agreement or
guarantee), or any license, franchise or permit, or subject to any order, writ,
injunction or decree, which would be breached or violated by its execution,
delivery, and performance of this Agreement. Box shall comply with all laws,
rules, and regulations of any governmental authority in connection with its
execution hereof, save and except the Virginia Bulk Sales Act (if applicable to
this transaction), the compliance with which is specifically waived.
(d) Litigation. Box has no actual knowledge, nor has Box
received any notice of, any actual or threatened action, litigation or
proceeding by any organization, person, individual, or governmental agency
against Box, nor does Box know of any basis for any such action against Box.
5. Pluma's Representations and Warranties. Pluma makes the following
representations and warranties to Box:
2
<PAGE>
(a) Corporate Organization. Pluma at the time of closing will
be a corporation duly formed, validly existing, and in good standing under the
laws of the State of North Carolina with all requisite power and authority to
carry on its business as it is being conducted.
(b) Authorization. Pluma has full corporate power and is duly
authorized to execute this Agreement and to carry out the transactions
contemplated hereby. This Agreement and all actions contemplated herein which
require the approval of Pluma's directors shall be lawfully approved by such
directors and Pluma shall deliver at the time of closing a certified copy of
resolutions of Pluma's board of directors giving such approval.
(c) No Violation. Pluma is not subject to or obligated under
any certificate of incorporation, by-law, law, or regulation of any governmental
authority, or any agreement or instrument (including any loan agreement or
guarantee), or any license, franchise or permit, or subject to any order, writ,
injunction or decree, which would be breached or violated by its execution,
delivery, and performance of this Agreement.
(d) Litigation. Pluma has no actual knowledge, nor has Pluma
received any notice of, any actual or threatened action, litigation or
proceeding by any organization, person, individual, or governmental agency
against Pluma, nor does Pluma know of any basis for any such action against
Pluma.
6. Closing and Closing Documents.
(a) This transaction shall close no later than December 29,
1995, at the offices of Box.
(b) At Closing, Box shall deliver:
(i) Proper consent resolutions of Box's shareholders
and directors authorizing the transaction contemplated hereby;
(ii) An opinion of counsel from Box in the form
attached hereto as EXHIBIT B; and
(iii) Such other documents as may be reasonable and
necessary in the
opinion of counsel for Box and Pluma to consummate and close the purchase and
sale contemplated by this Agreement.
(c) At Closing Pluma shall deliver:
(i) A check made payable to Box in the amount of One
Thousand and 00/100 Dollars ($1,000.00);
3
<PAGE>
(ii) The Promissory Note referenced in Section 2
hereof;
(iii) An Opinion of Counsel from Pluma in the form
set forth as EXHIBIT
C attached hereto and incorporated herein by reference; and
(iv) Such other documents as may be reasonable and
necessary in the
opinion of counsel for Box and Pluma to consummate and close the purchase and
sale contemplated by this Agreement.
7. Indemnities. Box agrees to hold Pluma harmless from all claims made,
or losses, damages and expenses (including reasonable attorney fees) incurred by
Pluma as the result of a claim against Pluma arising out of the acts or
omissions of Box prior to the Closing contemplated hereby.
Pluma agrees to hold Box harmless from all claims made, or losses,
damages and expenses (including reasonable attorney fees) incurred by Box as the
result of a claim against Box arising out of the acts or omissions of Pluma
prior to the Closing.
8. Miscellaneous.
(a) Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which, taken
together, shall constitute one and the same instrument.
(b) Entire Agreement. This Agreement contains the entire
agreement between the parties, and supersedes all prior and contemporaneous
understandings and agreements, whether oral or in writing, between the parties
respecting the subject matter hereof. There are no representations, agreements,
arrangements or understandings, oral or in writing, between or among the parties
to this Agreement relating to the subject matter of this Agreement which are not
fully expressed in this Agreement.
(c) Construction. The provisions of this Agreement shall be
construed as to their fair meaning, and not for or against any party based upon
attribution to such party as the source of the language in question. Headings
used in this Agreement are for convenience of reference only and shall not be
used on construing this Agreement.
(d) Applicable Law. This Agreement shall be governed by the
laws of the State of North Carolina. Time is of the essence in the Closing of
this transaction.
(e) Severability. If any term, covenant, condition or
provisions of this Agreement, or the application thereof to any person or
circumstance, shall to any extent be held by a court of competent jurisdiction
to be invalid, void or unenforceable, the remainder of the terms, covenants,
conditions or provisions of this Agreement, or the application thereof to any
person or circumstance, shall remain in full force and effect and shall in no
way be affected, impaired or invalidated thereby.
4
<PAGE>
(f) Waiver of Covenants, Conditions and Remedies. The waiver
by one party of the performance of any covenant, condition or promise under this
Agreement shall not invalidate this Agreement nor shall it be considered a
waiver by it of any other covenant, condition or promise under this Agreement.
The waiver by either or both parties of the time for performing any act under
this contract shall not constitute a waiver of the time for performing any other
act or an identical act required to be performed at a later time.
(g) Schedules. All schedules to which reference is made in
this Agreement are deemed incorporated into this contract and made a part
hereof, whether or not actually attached.
(h) Amendment. This Agreement may be amended at any time by
the written agreement of Pluma and Box. All amendments, changes, revisions and
discharges of this Agreement, in whole or in part, and from time to time, shall
be binding upon the parties despite any lack of legal consideration, so long as
the same shall be in writing and executed by the parties hereto. No party may
assign this Agreement or any interest therein without the prior written approval
of all parties.
(i) Relationship to Parties. The parties agree that their
relationship is that of seller and Pluma, and that nothing contained herein
shall constitute either party the agent or legal representative of the other for
any purpose whatsoever, nor shall this Agreement be deemed to create any form of
business organization between the parties hereto, nor is either party granted
any right or authority to assume or create any obligations or responsibility on
behalf of the other party, nor shall either party be in any way liable for any
debt of the other, except as expressly provided herein.
(j) Further Acts. Each party agrees to perform any further
acts and to execute, acknowledge and deliver any documents which may be
reasonably necessary to carry out the provisions of this Agreement.
(k) Confidentiality. Notwithstanding anything to the contrary
contained elsewhere herein, Pluma and Box hereby acknowledge that this
transaction shall be treated as confidential. In connection therewith, Pluma and
Box further acknowledge that neither will disclose any of the contents or
information contained in or obtained as a result of any investigation, financial
or otherwise, undertaken or done pursuant to this Agreement, to the public or
any third party (except advisors to Pluma in this transaction) without a bona
fide interest in any transaction contemplated by this Agreement.
(l) Press Releases. Box and Pluma agree that neither of them
shall make any public statement, including without limitation, any press
release, or any private statement with respect to this Agreement and the
transactions contemplated hereby without first allowing the other party an
opportunity to review such statement and render an approval thereof. It is the
intention of this subparagraph that both Pluma and Box must agree as to the
timing and content of any information contained in any public statement or press
release regarding the transaction contemplated hereby. Both parties agree to
exercise reasonableness when asked to consent to the content of any such press
release or other public or private statement regarding this transaction.
5
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Agreement by
their hands and under seal affixed hereto as of the date and year first above
written.
BOX & COMPANY, INC., a Virginia Corporation
[Corporate Seal] /s/ George Walker Box
George Walker Box
President
ATTEST:
Secretary
PLUMA, INC., a North Carolina Corporation
[Corporate Seal] /s/ R. Duke Ferrell, Jr.
R. Duke Ferrell, Jr.
President
ATTEST:
/s/ George G. Wade
Secretary
6
<PAGE>
LIST OF EXHIBITS
A Promissory Note
B Box's Counsel's Opinion Letter
C Pluma's Counsel's Opinion Letter
<PAGE>
EXHIBIT A
PROMISSORY NOTE
$1,999,000.00 Martinsville, Virginia
December 29, 1995
FOR VALUE RECEIVED, the undersigned promises to pay to the order of Box
& Company, Inc., or its assigns, the sum of One Million Nine Hundred Ninety-Nine
Thousand and 00/100 Dollars ($1,999,000.00) without interest on the unpaid
balance hereof until default [and after any such default at the rate of ten
percent (10%) per annum until such default is cured] both principal (and
interest, if applicable) shall be payable in the lawful money of the United
States to Box & Company, Inc. or its assigns at 26 Broad Street, Martinsville,
Virginia, or at such other place as the legal holder(s) hereof may designate in
writing, as follows:
The entire unpaid principal amount of this Note is due and payable on
January 30, 1996.
This Note may not be prepaid in whole or in part at any time prior to
January 1, 1996.
All parties to this Note, whether maker, principal, surety, guarantor
or endorsers, hereby waive presentment for payment, demand, protest and notice
of dishonor, and all defenses on the ground of extension of time for the payment
hereof, which may be given by the holders of the Note to them or either of them,
or to anyone who has assumed the payment of this Note.
Upon default the holders of this Note may employ an attorney to enforce
the holders' rights and remedies and the maker, principal, surety, guarantor and
endorsers of this Note hereby agree to pay to the holders the sum of fifteen
percent (15%) of the outstanding balance owing on the Note for reasonable
attorney fees, plus other reasonable expenses incurred by the holders in
exercising any of the holders' rights and remedies upon default.
This Note shall be governed and construed in accordance with the laws
of the State of North Carolina.
IN TESTIMONY WHEREOF, the maker has caused this Note to be signed and
sealed the day and year first above written.
PLUMA, INC., a North Carolina Corporation
[CORPORATE SEAL] By:
R. Duke Ferrell, Jr.
President
ATTEST:
Secretary
<PAGE>
EXHIBIT B
(Box's Counsel's Letterhead)
December 29, 1995
Pluma, Inc.
801 Fieldcrest Road
Eden, NC 27288
Gentlemen:
We have acted as counsel to Box & Company, Inc., a Virginia corporation
("Seller") in connection with the sale by Seller to you of certain of its assets
pursuant to a Contract of Purchase and Sale dated December 29, 1995 (the
"Contract").
In rendering this opinion, we have reviewed and relied to the extent
necessary on certificates of officers of Seller as to factual matters,
certificates of public officials and such other instruments, documents and
agreements as we have deemed necessary and relevant as a basis of our opinion.
We have assumed the genuineness of signatures on the Contract and other
documents executed in connection therewith. We have also assumed the due
authorization, execution and delivery of the Contract and other documents
executed in connection therewith to be delivered by you to the Seller.
Based upon the foregoing, we are of the opinion that giving effect to
the consummation of the transaction contemplated by the Contract:
1. Seller: (a) is a corporation duly organized, validly existing and in
good standing under the laws of the State of Virginia; (b) is qualified to do
business and is in good standing in Virginia; (c) has the power to engage in the
transactions contemplated by the Contract; and (d) has the full power, authority
and legal right to execute and deliver the Contract and other documents to be
executed in connection therewith.
2. The execution, delivery and performance (as contemplated therein) by
Seller of the Contract and other documents to be executed in connection
therewith: (a) will not conflict with, result in a breach of, or constitute a
default under (i) the Articles of Incorporation or Bylaws of Seller, (ii) any
law (including any law related to usury), order, writ, injunction or decree of
any court or governmental authority known to us to which the Seller is subject,
or (iii) any agreement or instrument known to us to which Seller is a party or
by which Seller may be bound; however, we have not made an independent
investigation or inquiry as to any agreement or instrument which binds the
Seller; and (b) will not result in the creation or imposition of any lien,
charge or encumbrance upon the property of Seller.
3. All necessary corporate action by Seller for the authorization,
execution, delivery and performance of the Contract and other documents to be
executed in connection
<PAGE>
therewith has been duly taken, and the Contract and other documents to be
executed in connection therewith constitute the legal, valid and binding
obligations of Seller and is enforceable against Seller in accordance with their
respective terms, except as such terms may be limited by applicable bankruptcy,
reorganization, insolvency or similar laws affecting the enforcement of
creditors' rights generally and by the rules of law or equity governing specific
performance, injunctive relief and other legal and equitable remedies limiting
creditors' rights generally.
4. All consents, approvals or authorizations, if any, of any
governmental authority or any other party required on the part of Seller in
connection with the issuance, execution, delivery and performance of the
Contract have been duly obtained.
We are members of the bar of the Commonwealth of Virginia and do not
express any opinion as to the laws of any jurisdiction other than the laws of
the United States of America and the Commonwealth of Virginia. The opinions
rendered herein are solely for the benefit of Pluma, Inc. its successors and
assigns and, without our prior written consent, may not be relied upon by any
other person nor quoted or reproduced in any report or other document without
our prior written consent.
Yours very truly,
THOMPSON AND McMULLAN
By:
John Thompson
36363-1
<PAGE>
EXHIBIT C
December 29, 1995
Box & Company, Inc.
26 Broad Street
Martinsville, VA
Gentlemen:
We have acted as counsel to Pluma, Inc., a North Carolina corporation
("Buyer") in connection with the purchase by Buyer of certain of your assets
pursuant to a Contract of Purchase and Sale dated December 29, 1995 (the
"Contract").
In rendering this opinion, we have reviewed and relied to the extent
necessary on certificates of officers of Buyer as to factual matters,
certificates of public officials and such other instruments, documents and
agreements as we have deemed necessary and relevant as a basis of our opinion.
We have assumed the genuineness of signatures on the Contract and other
documents executed in connection therewith. We have also assumed the due
authorization, execution and delivery of the Contract and other documents
executed in connection therewith to be delivered by you to the Buyer.
Based upon the foregoing, we are of the opinion that giving effect to
the consummation of the transaction contemplated by the Contract:
1. Buyer: (a) is a corporation duly organized, validly existing and in
good standing under the laws of the State of North Carolina; (b) is qualified to
do business and is in good standing in North Carolina and Virginia; (c) has the
power to engage in the transactions contemplated by the Contract; and (d) has
the full power, authority and legal right to execute and deliver the Contract
and other documents to be executed in connection therewith.
<PAGE>
2. The execution, delivery and performance (as contemplated therein) by
Buyer of the Contract and other documents to be executed in connection
therewith: (a) will not conflict with, result in a breach of, or constitute a
default under (i) the Articles of Incorporation or Bylaws of Buyer, (ii) any law
(including any law related to usury), order, writ, injunction or decree of any
court or governmental authority known to us to which the Buyer is subject, or
(iii) any agreement or instrument known to us to which Buyer is a party or by
which Buyer may be bound; however, we have not made an independent investigation
or inquiry as to any agreement or instrument which binds the Buyer; and (b) will
not result in the creation or imposition of any lien, charge or encumbrance upon
the property of Buyer.
3. All necessary corporate action by Buyer for the authorization,
execution, delivery and performance of the Contract and other documents to be
executed in connection therewith has been duly taken, and the Contract and other
documents to be executed in connection therewith constitute the legal, valid and
binding obligations of Buyer and is enforceable against Buyer in accordance with
their respective terms, except as such terms may be limited by applicable
bankruptcy, reorganization, insolvency or similar laws affecting the enforcement
of creditors' rights generally and by the rules of law or equity governing
specific performance, injunctive relief and other legal and equitable remedies
limiting creditors' rights generally.
4. All consents, approvals or authorizations, if any, of any
governmental authority or any other party required on the part of Buyer in
connection with the issuance, execution, delivery and performance of the
Contract have been duly obtained.
We are members of the bar of the State of North Carolina and do not
express any opinion as to the laws of any jurisdiction other than the laws of
the United States of America and the State of North Carolina. The opinions
rendered herein are solely for the benefit of Box & Company, Inc., its
successors and assigns and, may not be relied upon by any other person nor
quoted or reproduced in any report or other document without our prior written
consent.
Yours very truly,
ALLMAN SPRY LEGGETT & CRUMPLER, P.A.
By:
Thomas T. Crumpler
<PAGE>
PROMISSORY NOTE
$1,999,000.00 Martinsville, Virginia
December 29, 1995
FOR VALUE RECEIVED, the undersigned promises to pay to the order of Box
& Company, Inc., or its assigns, the sum of One Million Nine Hundred Ninety-Nine
Thousand and 00/100 Dollars ($1,999,000.00) without interest on the unpaid
balance hereof until default [and after any such default at the rate of ten
percent (10%) per annum until such default is cured] both principal (and
interest, if applicable) shall be payable in the lawful money of the United
States to Box & Company, Inc. or its assigns at 26 Broad Street, Martinsville,
Virginia, or at such other place as the legal holder(s) hereof may designate in
writing, as follows:
The entire unpaid principal amount of this Note is due and payable on
January 30, 1996.
This Note may not be prepaid in whole or in part at any time prior to
January 1, 1996.
All parties to this Note, whether maker, principal, surety, guarantor
or endorsers, hereby waive presentment for payment, demand, protest and notice
of dishonor, and all defenses on the ground of extension of time for the payment
hereof, which may be given by the holders of the Note to them or either of them,
or to anyone who has assumed the payment of this Note.
Upon default the holders of this Note may employ an attorney to enforce
the holders' rights and remedies and the maker, principal, surety, guarantor and
endorsers of this Note hereby agree to pay to the holders the sum of fifteen
percent (15%) of the outstanding balance owing on the Note for reasonable
attorney fees, plus other reasonable expenses incurred by the holders in
exercising any of the holders' rights and remedies upon default.
This Note shall be governed and construed in accordance with the laws
of the State of North Carolina.
IN TESTIMONY WHEREOF, the maker has caused this Note to be signed and
sealed the day and year first above written.
PLUMA, INC., a North Carolina Corporation
[CORPORATE SEAL] By: /s/ R. Duke Ferrell, Jr.
R. Duke Ferrell, Jr.
President
ATTEST:
/s/ George G. Wade
Secretary
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ASSIGNMENT OF LEASES
THIS ASSIGNMENT dated as of December 29, 1995 (the "Assignment"), is
entered into by and between Box & Company, Inc., a Virginia corporation
("Assignor"), and Pluma, Inc., a North Carolina corporation ("Assignee").
W I T N E S S E T H :
WHEREAS, Assignor is the tenant under that certain lease dated April 1,
1995, between Tultex Corporation as landlord and Assignor with respect to that
certain real property commonly known as 26 Broad Street, Martinsville, Virginia,
containing 3,840 square feet (the "Property") (the "Lease"); and
WHEREAS, Assignor desires to assign its interest as tenant in the Lease
to Assignee, and Assignee desires to accept the assignment thereof;
NOW, THEREFORE, in consideration of the promises and conditions
contained herein, the parties hereby agree as follows:
1. Effective as of January 1, 1996 Assignor hereby assigns to
Assignee all of its right, title and interest in and to the Lease.
2. Assignor warrants and represents that as of the date hereof Schedule
1 is a true and accurate copy of the Lease, and as of the date hereof, there are
no assignments of or agreements to assign the Lease to any other party.
3. Assignor hereby agrees to indemnify Assignee against and hold
Assignee harmless from any and all cost, liability, loss, damage or expense,
including without limitation, attorneys' fees, arising out of acts or omissions
of Assignor prior to the date hereof which in any way relate to the Assignor's
obligations under the Lease, or the Property, and provided this indemnity shall
not apply to any loss or damage incurred by Assignee resulting from the Assignor
and Assignee not procuring Tultex Corporation's consent to the assignment of
this Lease.
4. Except as otherwise set forth above or in the Contract of Purchase
and Sale between Assignor and Assignee of even date herewith effective as of
January 1, 1996, Assignee hereby assumes all of the Lessor's obligations under
the Lease and agrees to indemnify Assignor against and hold Assignor harmless
from any and all cost, liability, loss, damage or expense, including without
limitation, attorneys' fees, arising out of acts or omissions of Assignee
subsequent to the date hereof which in any way relate to the Assignor's
obligations under the Lease, or the Property, which arise after December 31,
1995.
5. In the event of any arbitration or litigation arising out of this
Assignment, the losing party shall pay the prevailing party's costs and expenses
of such litigation, including without limitation, attorneys' fees.
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6. This Assignment shall be binding on and inure to the benefit
of the parties hereto, their heirs, executors, administrators, successors in
interest and assigns.
7. This Assignment shall be governed by and construed in
accordance with the laws of the State of North Carolina.
IN WITNESS WHEREOF, Assignor and Assignee have executed this Assignment
by hand and under seal as of the day and year first above written.
ASSIGNOR:
BOX & COMPANY, INC, a Virginia Corporation
By: /s/ George Walker Box
George Walker Box
President
ASSIGNEE:
PLUMA, INC., a North Carolina Corproation
By: /s/ R. Duke Ferrell, Jr.
R. Duke Ferrell, Jr.
President
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SCHEDULE 1 to Assignment of Leases
Property Description
Schedule 1 to Exhibit E - 1
<PAGE>
SCHEDULE 2 to Assignment of Leases
Schedule of Leases
Schedule 2 to Exhibit E - 1
<PAGE>
THIS LEASE is made this 1st day of April, 1995 by and between TULTEX
CORPORATION, hereinafter called Landlord, and Box & Company, Inc. hereinafter
called Tenant.
W I T N E S S E T H
That for and in consideration of the mutual promises and undertakings
hereinafter set forth, the Landlord does hereby lease and demise unto Tenant the
premises hereinafter described upon the terms and conditions set forth in this
lease:
1. The Demised Premises
1.1 The demised premises consist of a building, commonly known as
the BURCH-HODGES-STONE BUILDING, located at 26 Broad Street, Martinsville,
Virginia containing approximately 3,840 square feet. Also included in the lease
are ten (10) designated parking spaces and permission for unlimited use of
undesignated parking spaces.
2. Term
2.1 The term of this lease shall be for a period of two (2) years,
commencing on April 1, 1995 and continuing through March 31, 1997. At the
option of the Tenant, the lease may be renewed for two (2) additional periods of
one (1) year each beginning April 1, 1997 through March 31, 1998, and April 1,
1998 through March 31, 1999, at ten percent (10%) increase in rent for each
renewal year. The Tenant will also, if requested, be given an additional five
(5) parking spaces when options are exercised.
3. Base Rental
3.1 Tenant shall pay the Landlord the base rental for the demised
premises and the parking spaces, the amount of FORTY ONE THOUSAND FIVE HUNDRED
AND TWENTY DOLLARS ($41,520.00), payable in advance in twenty-four (24) equal
consecutive monthly
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installments of SEVENTEEN HUNDRED AND THIRTY DOLLARS ($1,730.00) each due and
payable on the first of each month commencing April 1, 1995, and continuing
through March 31, 1997.
4. Responsibilities of Tenants
4.1 Tenant shall be responsible for all ordinary and routine
repairs applicable to the demised premises and the ten (10) parking spaces
leased, excluding specifically the heating, electrical and plumbing facilities
and any other repairs to the external portion of the building which are
specifically applicable to the demised premises.
5. Utilities
5.1 At the commencement of this Lease, Tenant shall transfer all
utilities into its name and shall be responsible for the payment of all
utilities during the term of this Lease and in the renewal thereof.
5.2 For purposes of this document, utilities shall include
specifically, electricity, water, sewer service, garbage and trash services and
any heating whether electricity or gas or oil.
6. Insurance
6.1 Tenant shall procure and keep in effect during the Term a policy or
policies of comprehensive liability insurance, including public liability and
property damage, with a minimum combined single limit of liability of
$1,000,000.00, but excepting from the policy coverage injuries or damage to
person or property resulting from the negligence of Landlord or from Landlord's
breach of any of Landlord's covenants in this Lease. The policy or policies
shall (i) name Landlord as an additional insured; and (ii) provide that the
insurance shall not be canceled nor shall there be any change in the scope or
amount of coverage of the policy unless ten (10) days' prior written notice
shall have been given to Landlord. The policy or policies, or certificates
<PAGE>
thereof, shall be delivered to Landlord and Tenant upon the commencement of the
term of this Lease and upon each renewal of the insurance.
6.2 Landlord shall procure and keep in effect during the Term a
policy or policies of comprehensive liability insurance, including public
liability and property damage, with a minimum single limit of liability of
$1,000,000.00 for personal injuries or deaths of persons occurring in or about
the Building.
7. Repairs
7.1 If, during the Term, the Building or any portion thereof is damaged
by fire, or other casualty or peril, Landlord shall, upon the receipt of the
insurance proceeds, repair or rebuild the Building with all due diligence to a
condition at least equal to that existing immediately prior to the damage.
7.2 If, during the Term, the Building or any portion thereof
becomes damaged to the point that, in the Landlord's opinion, the Premises have
become untenantable for continued occupancy for a period of sixty (60) days or
more, then Tenant shall have the option to terminate this Lease upon thirty (30)
days' notice to Landlord.
8. Default-Bankruptcy-Termination
8.1 The Landlord may terminate this Lease by written or telegraph
notice: (1) If the Tenant shall become insolvent or make a general assignment
for the benefit of creditors; or (2) if a petition under any bankruptcy act or
similar statute is filed by or against Tenant; or (3) if, at any time, the
Tenant shall default in the payment of his rent or shall fail to provide the
notification of insurance as outlined in this document.
9. Workers' Compensation Insurance
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9.1 Tenant shall maintain Workers Compensation Insurance in
accordance with the laws of the State of Virginia.
9.2 Tenant shall be responsible for its employees under the
applicable Workmen's Compensation laws and for those employees' use of the
demised parking spaces including any activity with regard to those spaces by
said employee.
10. Hold Harmless
10.1 Tenant shall indemnify and hold Landlord harmless from and
against all suits, actions, demands or expenses of any kind resulting from any
claims by Tenant's employees, visitors or Tenant's creditors during the term of
this Lease. Tenant hereby agrees to pay Landlord's legal expenses including
attorney's fees and costs which may be incurred as well as any damages which may
be assessed against Landlord in any action arising out of any suits, actions,
demands, resulting from Tenant's employees, visitors, creditors, during the term
of this Lease.
11. Assignment
11.1 Tenant shall not, directly or indirectly, sell, assign, encumber,
pledge, transfer or obligate (collectively assignment) all or any part of the
premises or Tenant's leasehold estate, or sublet the premises or any portion
thereof, or permit their occupation by anyone other than Tenant (collectively
sublease) without the Landlord's prior written consent in each instance.
Notwithstanding the foregoing, Tenant shall have the right, without Landlord's
consent, to enter into an assignment of this Lease or a Sublease of the premises
to the Parent Corporation of Tenant, and wholly owned subsidiary corporation of
Tenant or Tenant's Parent Corporation, any corporation succeeding to
substantially all of the assets of Tenant as a result of a consolidation or
merger, or a corporation to which all or substantially all of the assets of
Tenant have been sold;
<PAGE>
provided, however, that the other corporation shall assume in writing all of the
Tenant's obligations hereunder, and, except for the parent corporation of the
Tenant or a wholly owned subsidiary corporation of Tenant or Tenant parent
corporation shall have a net worth immediately prior to the assignment or
sublease equal to or greater than Tenant's net worth. Notwithstanding any such
assignment or sublease, Tenant shall not be released from any and shall perform
all, obligations imposed upon it hereunder.
12. Condition of Premises
12.1 At the conclusion of its occupancy the Tenant shall deliver
the demised premises to Landlord in the same general condition as received,
reasonable wear and tear excepted.
13. Leasehold Improvements
13.1 Tenant shall have the right to remove at the termination of
this Lease, any and all of their property situated on the demised premises, but
not any such property that has become so affixed to the real property as to be
considered part of the freehold.
14. Governing Law
14.1 This agreement shall be governed by and construed according to
the laws of the Commonwealth of Virginia.
15. Notice
Any notice under this Lease shall be sent as follows:
(a) Landlord: Don P. Shook
Vice President, Administration
TULTEX CORPORATION
P. O. BOX 5191
MARTINSVILLE, VA 24115
703-632-2961
(b) Tenant In: G. Walker Box, President
Box & Company
<PAGE>
P. O. Box 4431
Martinsville, VA 24115
As a result of any resignations or terminations of the persons named in
this Notice provision prior to the expiration of this Lease the notices required
shall be made to the respective person who has the same title or similar title.
16. Right of Access
16.1 The Landlord or their representatives may enter the demised
premises at any reasonable time and with knowledge of Tenant for the purpose of
inspecting the same, performing any work or repairs which may be needed or
desirable, exhibiting the demised premises for lease or mortgage financing or
for other reasonable purposes not unduly prejudicial to the use of the demised
premises by the Tenant.
IN WITNESS WHEREOF, the parties have duly executed this Deed of Lease
as of the day, month and year first above written.
6/12/95 /s/ Don P. Shook
Date Don P. Shook,
Vice President - Administration
Tultex Corporation
6/12/95 /s/ G. Walker Box
Date G. Walker Box,
President
Box & Company, Inc.
<PAGE>
Exhibit 10.11
ADOPTION AGREEMENT #005
NONSTANDARDIZED CODE SS401(k) PROFIT SHARING PLAN
The undersigned, Pluma, Inc. ("Employer"), by executing this Adoption
Agreement, elects to become a participating Employer in the First Union
National Bank of North Carolina Defined Contribution Master Plan (basic plan
document #01) by adopting the accompanying Plan and Trust in full as if the
Employer were a signatory to that Agreement. The Employer makes the following
elections granted under the provisions of the Master Plan.
ARTICLE I
DEFINITIONS
1.02 TRUSTEE. The Trustee executing this Adoption Agreement is: (CHOOSE
(A) OR (B))
[x] (a) A discretionary Trustee. See Section 10.03[A] of the Plan.
[ ] (b) A nondiscretionary Trustee. See Section 10.03[B] of the Plan. [NOTE:
THE EMPLOYER MAY NOT ELECT OPTION (B) IF A CUSTODIAN EXECUTES THE ADOPTION
AGREEMENT.]
1.03 PLAN. The name of the Plan as adopted by the Employer is Pluma, Inc.
401(k) Retirement Savings Plan.
1.07 EMPLOYEE. The following Employees are not eligible to participate in
the Plan: (CHOOSE (A) OR AT LEAST ONE OF (B) THROUGH (G))
[ ] (a) No exclusions.
[ ] (b) Collective bargaining employees (as defined in Section 1.07 of the
Plan). [NOTE: IF THE EMPLOYER EXCLUDES UNION EMPLOYEES FROM THE PLAN,
THE EMPLOYER MUST BE ABLE TO PROVIDE EVIDENCE THAT RETIREMENT BENEFITS
WERE THE SUBJECT OF GOOD FAITH BARGAINING.]
[ ] (c) Nonresident aliens who do not receive any earned income (as defined
in Code SS911(d)(2)) from the Employer which constitutes United States
source income (as defined in Code SS861(a)(3)).
[x] (d) Commission Salesmen.
[ ] (e) Any Employee compensated on a salaried basis.
[ ] (f) Any Employee compensated on an hourly basis.
[ ] (g) (SPECIFY) _______________________________________________.
LEASED EMPLOYEES. Any Leased Employee treated as an Employee under Section
1.31 of the Plan, is: (CHOOSE (H) OR (I))
[x] (h) Not eligible to participate in the Plan.
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[ ] (i) Eligible to participate in the Plan, unless excluded by reason of an
exclusion classification elected under this Adoption Agreement Section
1.07.
RELATED EMPLOYERS. If any member of the Employer's related group (as defined
in Section 1.30 of the Plan) executes a Participation Agreement to this
Adoption Agreement, such member's Employees are eligible to participate in
this Plan, unless excluded by reason of an exclusion classification elected
under this Adoption Agreement Section 1.07. In addition: (CHOOSE (J) OR (K))
[x] (j) No other related group member's Employees are eligible to participate
in the Plan.
[ ] (k) The following nonparticipating related group member's Employees are
eligible to participate in the Plan unless excluded by reason of an
exclusion classification elected under this Adoption Agreement Section
1.07: _____________________________________________________________.
1.12 COMPENSATION.
TREATMENT OF ELECTIVE CONTRIBUTIONS. (Choose (a) or (b))
[x] (a) "Compensation" includes elective contributions made by the Employer
on the Employee's behalf.
[ ] (b) "Compensation" does not include elective contributions.
MODIFICATIONS TO COMPENSATION DEFINITION. (CHOOSE (C) OR AT LEAST ONE OF (D)
THROUGH (J))
[x] (c) No modifications other than as elected under Options (a) or (b).
[ ] (d) The Plan excludes Compensation in excess of $__________.
[ ] (e) In lieu of the definition in Section 1.12 of the Plan, Compensation
means any earnings reportable as W-2 wages for Federal income tax
withholding purposes, subject to any other election under this Adoption
Agreement Section 1.12.
[ ] (f) The Plan excludes bonuses.
[ ] (g) The Plan excludes overtime.
[ ] (h) The Plan excludes Commissions.
[ ] (i) Compensation will not include Compensation from a related employer
(as defined in Section 1.30 of the Plan) that has not executed a
Participation Agreement in this Plan unless, pursuant to Adoption
Agreement Section 1.07, the Employees of that related employer are
eligible to participate in this Plan.
[ ] (j) (SPECIFY) _________________________________________________________
________________________________________.
If, for any Plan Year, the Plan uses permitted disparity in the contribution
or allocation formula elected under Article III, any election of Options (f),
(g), (h) or (j) is ineffective for such Plan Year with respect to any Nonhighly
Compensated Employee.
2
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Special definition for matching contributions. "Compensation" for purposes of
any matching contribution formula under Article III means: (CHOOSE (K) OR (L)
ONLY IF APPLICABLE)
[x] (k) Compensation as defined in this Adoption Agreement Section 1.12.
[ ] (l) (SPECIFY) ____________________________________________________.
Special definition for salary reduction contributions. An Employee's salary
reduction agreement applies to his Compensation determined prior to the
reduction authorized by that salary reduction agreement, with the following
exceptions: (CHOOSE (M) OR AT LEAST ONE OF (N) OR (O), IF APPLICABLE)
[x] (m) No exceptions.
[ ] (n) If the Employee makes elective contributions to another plan
maintained by the Employer, the Advisory Committee will determine the
amount of the Employee's salary reduction contribution for the
withholding period: (CHOOSE (1) OR (2))
[ ] (1) After the reduction for such period of elective contributions
to the other plan(s).
[ ] (2) Prior to the reduction for such period of elective contributions
to the other plan(s).
[ ] (o) (SPECIFY) _______________________________________________________.
1.17 PLAN YEAR/LIMITATION YEAR.
PLAN YEAR. Plan Year means: (CHOOSE (A) OR (B))
[x] (a) The 12 consecutive month period ending every December 31.
[ ] (b) (SPECIFY) _______________________________________________________.
LIMITATION YEAR. The Limitation Year is: (CHOOSE (C) OR (D))
[x] (c) The Plan Year.
[ ] (d) The 12 consecutive month period ending every ____.
1.18 EFFECTIVE DATE.
NEW PLAN. The "Effective Date" of the Plan is _____________.
RESTATED PLAN. The restated Effective date is January 1, 1994.
This Plan is a substitution and amendment of an existing retirement plan(s)
originally established May 1, 1991. [NOTE: SEE THE EFFECTIVE DATE ADDENDUM.]
1.27 HOUR OF SERVICE. The crediting method for Hours of Service is:
(CHOOSE (A) OR (B))
[x] (a) The actual method.
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[ ] (b) The equivalency method, except:
[ ] (1) No exceptions.
[ ] (2) The actual method applies for purposes of: (CHOOSE AT LEAST ONE)
[ ] (i) Participation under Article II.
[ ] (ii) Vesting under Article V.
[ ] (iii) Accrual of benefits under Section 3.06.
[Note: On the blank line, insert "daily," "weekly," "semi-monthly payroll
periods" or "monthly."]
1.29 SERVICE FOR PREDECESSOR EMPLOYER. In addition to the predecessor
service the Plan must credit by reason of Section 1.29 of the Plan, the Plan
credits Service with the following predecessor employer(s): N/A. Service with
the designated predecessor employer(s) applies: (CHOOSE AT LEAST ONE OF (A)
OR (B); (C) IS AVAILABLE ONLY IN ADDITION TO (A) OR (B))
[ ] (a) For purposes of participation under Article II.
[ ] (b) For purposes of vesting under Article V.
[ ] (c) Except the following Service: __________________________________.
[Note: If the Plan does not credit any predecessor service under this
provision, insert "N/A" in the first blank line. The Employer may attach
a schedule to this Adoption Agreement, in the same format as this Section 1.29,
designating additional predecessor employers and the applicable service
crediting elections.]
1.31 LEASED EMPLOYEES. If a Leased Employee is a Participant in the Plan
and also participates in a plan maintained by the leasing organization:
(CHOOSE (A) OR (B))
[x] (a) The Advisory Committee will determine the Leased Employee's allocation
of Employer contributions under Article III without taking into account
the Leased Employee's allocation, if any, under the leasing organization's
plan.
[ ] (b) The Advisory Committee will reduce a Leased Employee's allocation of
Employer nonelective contributions (other than designated qualified
nonelective contributions) under this Plan by the Leased Employee's
allocation under the leasing organization's plan, but only to the extent
that allocation is attributable to the Leased Employee's service provided
to the Employer. The leasing organization's plan:
[ ] (1) Must be a money purchase plan which would satisfy the definition
under Section 1.31 of a safe harbor plan, irrespective of whether the
safe harbor exception applies.
[ ] (2) Must satisfy the features and, if a defined benefit plan, the
method of reduction described in an addendum to this Adoption
Agreement, numbered 1.31.
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ARTICLE II
EMPLOYEE PARTICIPANTS
2.01 ELIGIBILITY.
ELIGIBILITY CONDITIONS. To become a Participant in the Plan, an Employee must
satisfy the following eligibility conditions: (Choose (a) or (b) or both;
(c) is optional as an additional election)
[x] (a) Attainment of age 21 (SPECIFY AGE, NOT EXCEEDING 21).
[x] (b) Service requirement. (CHOOSE ONE OF (1) THROUGH (3))
[x] (1) One Year of Service.
[ ] (2) __ months (not exceeding 12) following the Employee's Employment
Commencement Date.
[ ] (3) One Hour of Service.
[ ] (c) Special requirements for non-401(k) portion of plan. (MAKE ELECTIONS
UNDER (1) AND UNDER (2))
(1) The requirements of this Option (c) apply to participation in:
(Choose at least one of (i) through (iii))
[ ] (i) The allocation of Employer nonelective contributions and
Participant forfeitures.
[ ] (ii) The allocation of Employer matching contributions (including
forfeitures allocated as matching contributions).
[ ] (iii) The allocation of Employer qualified nonelective
contributions.
(2) For participation in the allocations described in (1), the
eligibility conditions are: (CHOOSE AT LEAST ONE OF (I) THROUGH (IV))
[ ] (i) _ (one or two) Year(s) of Service, without an intervening
Break in Service (as described in Section 2.03(A) of the Plan)
if the requirement is two Years of Service.
[ ] (ii) _ months (not exceeding 24) following the Employee's
Employment Commencement Date.
[ ] (iii) One Hour of Service.
[ ] (iv) Attainment of age ___ (SPECIFY AGE, NOT EXCEEDING 21).
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PLAN ENTRY DATE. "Plan Entry Date" means the Effective Date and: (CHOOSE
(D), (E) OR (F))
[ ] (d) Semi-annual Entry Dates. The first day of the Plan Year and the
first day of the seventh month of the Plan Year.
[ ] (e) The first day of the Plan Year.
[X] (f) (Specify entry dates) January 1st, April 1st, July 1st and October
1st.
TIME OF PARTICIPATION. An Employee will become a Participant (and, if
applicable, will participate in the allocations described in Option (c)(1)),
unless excluded under Adoption Agreement Section 1.07, on the Plan Entry Date
(if employed on that date): (Choose (g), (h) or (i))
[x] (g) immediately following
[ ] (h) immediately preceding
[ ] (i) nearest
the date the Employee completes the eligibility conditions described in Options
(a) and (b) (or in Option (c)(2) if applicable) of this Adoption Agreement
Section 2.01. [NOTE: THE EMPLOYER MUST COORDINATE THE SELECTION OF (G), (H)
OR (I) WITH THE "PLAN ENTRY DATE" SELECTION In (D), (E) OR (F). UNLESS
OTHERWISE EXCLUDED UNDER SECTION 1.07, THE EMPLOYEE MUST BECOME A PARTICIPANT
BY THE EARLIER OF: (1) THE FIRST DAY OF THE PLAN YEAR BEGINNING AFTER THE DATE
THE EMPLOYEE COMPLETES THE AGE AND SERVICE REQUIREMENTS OF CODE SS410(A); OR
(2) 6 MONTHS AFTER THE DATE THE EMPLOYEE COMPLETES THOSE REQUIREMENTS.]
DUAL ELIGIBILITY. The eligibility conditions of this Section 2.01 apply to:
(CHOOSE (J) AND (K))
[x] (j) All Employees of the Employer, except: (CHOOSE (1) OR (2))
[x] (1) No exceptions.
[ ] (2) Employees who are Participants in the Plan as of the Effective
Date.
[ ] (k) Solely to an Employee employed by the Employer after ______________.
If the Employee was employed by the Employer on or before the specified
date, the Employee will become a Participant: (CHOOSE (1), (2) OR (3))
[ ] (1) On the latest of the Effective Date, his Employment Commencement
Date or the date he attains age ___ (not to exceed 21).
[ ] (2) Under the eligibility conditions in effect under the Plan prior
to the restated Effective Date. If the restated Plan required more
than one Year of Service to participate, the eligibility condition
under this Option (2) for participation in the Code SS401(k)
arrangement under this Plan is one Year of Service for Plan Years
beginning after December 31, 1988. [FOR RESTATED PLANS ONLY]
[ ] (3) (SPECIFY) ____________________________________________________
_________________________.
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<PAGE>
2.02 YEAR OF SERVICE - PARTICIPATION
HOURS OF SERVICE. An Employee must complete: (CHOOSE (A) OR (B))
[x] (a) 1,000 Hours of Service
[ ] (b) ___ Hours of Service
during an eligibility computation period to receive credit for a Year of
Service. [NOTE: THE HOURS OF SERVICE REQUIREMENT MAY NOT EXCEED 1,000.]
ELIGIBILITY COMPUTATION PERIOD. After the initial eligibility computation
period described in Section 2.02 of the Plan, the Plan measures the
eligibility computation period as: (CHOOSE (C) OR (D))
[ ] (c) The 12 consecutive month period beginning with each anniversary of
an Employee's Employment Commencement Date.
[x] (d) The Plan Year, beginning with the Plan Year which includes the first
anniversary of the Employment Commencement Date.
2.03 BREAK IN SERVICE - PARTICIPATION. The Break in Service rule described
in Section 2.03(B) of the Plan: (CHOOSE (A) OR (B))
[x] (a) Does not apply to the Employer's Plan.
[ ] (b) Applies to the Employer's Plan.
2.06 ELECTION NOT TO PARTICIPATE. The Plan: (CHOOSE (A) OR (B))
[x] (a) Does not permit an eligible Employee or a Participant to elect
not to participate.
[ ] (b) Does permit an eligible Employee or a Participant to elect
not to participate in accordance with Section 2.06 and with the following
rules: (COMPLETE (1), (2), (3) AND (4))
(1) An election is effective for a Plan Year if filed no later than
______________________________________________________.
(2) An election not to participate must be effective for at least
__ Plan year(s).
(3) Following a re-election to participate, the Employee or Participant:
[ ] (i) May not again elect not to participate for any subsequent Plan
Year.
[ ] (ii) May again elect not to participate, but not earlier than
the ____________ Plan Year following the Plan Year in which the
re-election first was effective.
(4) (Specify) _____________________________________[INSERT "N/A" IF
NO OTHER RULES APPLY].
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ARTICLE III
EMPLOYER CONTRIBUTIONS AND FORFEITURES
3.01 AMOUNT.
PART I. [Options (a) through (g)[ Amount of Employer's contribution. The
Employer's annual contribution to the Trust will equal the total amount of
deferral contributions, matching contributions, qualified nonelective
contributions and nonelective contributions, as determined under this
Section 3.01. (CHOOSE ANY COMBINATION OF (A), (B), (C) AND (D), OR CHOOSE
(E))
[x] (a) DEFERRAL CONTRIBUTIONS (CODE SS401(k) ARRANGEMENT). (CHOOSE
(1) OR (2) OR BOTH)
[x] (1) Salary reduction arrangement. The Employer must contribute the
amount by which the Participants have reduced their Compensation for
the Plan Year, pursuant to their salary reduction agreements on
file with the Advisory Committee. A reference in the Plan to salary
reduction contributions is a reference to these amounts.
[ ] (2) Cash or deferred arrangement. The Employer will contribute on
behalf of each Participant the portion of the Participant's
proportionate share of the cash or deferred contribution which he
has not elected to receive in cash. See Section 14.02 of the Plan.
The Employer's cash or deferred contribution is the amount the
Employer may from time to time deem advisable which the Employer
designates as a cash or deferred contribution prior to making
that contribution to the Trust.
[x] (b) MATCHING CONTRIBUTIONS. The Employer will make matching contributions
in accordance with the formula(s) elected in Part II of this Adoption
Agreement Section 3.01.
[x] (c) DESIGNATED QUALIFIED NONELECTIVE CONTRIBUTIONS. The employer, in its
sole discretion, may contribute an amount which it designates as a
qualified nonelective contribution.
[x] (d) NONELECTIVE CONTRIBUTIONS. (CHOOSE ANY COMBINATION OF (1) THROUGH
(4))
[x] (1) Discretionary contribution. The amount (or additional amount)
the Employer may from time to time deem advisable.
[ ] (2) The amount (or additional amount) the Employer may from time
to time deem advisable, separately determined for each of the
following classifications of Participants: (CHOOSE (i) OR (ii))
[ ] (i) Nonhighly Compensated Employees and Highly Compensated
Employees.
[ ] (ii) (SPECIFY CLASSIFICATIONS) _____________________________
Under this Option (2), the Advisory Committee will allocate the
amount contributed for each Participant classification in accordance
with Part II of Adoption Agreement Section 3.04, as if the
Participants in that classification were the only Participants
in the Plan.
[ ] (3) ___% of the Compensation of all Participants under the Plan,
determined for the Employer's taxable year for which it makes
the contribution. [NOTE: THE PERCENTAGE SELECTED MAY NOT
EXCEED 15%.]
<PAGE>
[ ] (4) ____% of Net Profits but not more than $______
[ ] (e) FROZEN PLAN. This Plan is a frozen Plan effective ______. The
Employer will not contribute to the Plan with respect to any period
following the stated date.
NET PROFITS. The Employer: (CHOOSE (F) OR (G))
[x] (f) Need not have Net Profits to make its annuual contribution under this
Plan.
[ ] (g) Must have current or accumulated Net Profits exceeding $_____ to make
the following contributions: (CHOOSE AT LEAST ONE)
[ ] (1) Cash or deferred contributions described in Option (a)(2).
[ ] (2) Matching contributions described in Option (b), except: _________.
[ ] (3) Qualified nonelective contributions described in Option (c).
[ ] (4) Nonelective contributions described in Option (d).
The term "Net Profits" means the Employer's net income or profits for any
taxable year determined by the Employer upon the basis of its books of
account in accordance with generally accepted accounting practices consistently
applied without any deductions for Federal and state taxes upon income or for
contributions made by the Employer under this Plan or under any other employee
benefit plan the Employer maintains. The term "Net Profits" specifically
excludes ___________________________________________________________________
______________. [NOTE: ENTER "N/A" IF NO EXCLUSIONS APPLY.]
If the Employer requires Net Profits for matching contributions and the
Employer does not have sufficient Net Profits under Option (g), it will reduce
the matching contribution under a fixed formula on a prorata basis for all
Participants. A Participant's share of the reduced contribution will bear the
same ratio as the matching contribution the Participant would have received if
Net Profits were sufficient bears to the total matching contribution all
Participants would have received if Net Profits were sufficient. If more than
one member of a related group (as defined in Section 1.30) execute this
Adoption Agreement, each participating member will determine Net Profits
separately but will not apply this reduction unless, after combining the
separately determined Net Profits, the aggregate Net Profits are insufficient
to satisfy the matching contribution liability. "Net Profits" includes both
current and accumulated Net Profits.
PART II [OPTIONS (H) THROUGH (J)] MATCHING CONTRIBUTION FORMULA. [NOTE:
IF THE EMPLOYER ELECTED OPTION (B), COMPLETE OPTIONS (H), (I) AND (J).]
[x] (h) AMOUNT OF MATCHING CONTRIBUTIONS. For each Plan Year, the
Employer's matching contribution is: (CHOOSE ANY COMBINATION OF (1),
(2), (3), (4) AND (5))
[ ] (1) An amount equal to _____% of each Participant's eligible
contributions for the Plan Year.
9
<PAGE>
[ ] (2) An amount equal to _____% of each Participant's eligible
contributions for the Plan Year, plus the following matching
percentage(s) for the following subsequent tiers of eligible
contributions for the Plan __________________________________________
________________________.
[x] (3) Discretionary formula.
[x] (i) An amount (or additional amount) equal to a matching
percentage the Employer from time to time may deem advisable of
the Participant's eligible contributions for the Plan Year.
[ ] (ii) An amount (or additional amount) equal to a matching
percentage the Employer from time to time may deem advisable of
each tier of the Participant's eligible contributions for the
Plan Year.
[ ] (4) An amount equal to the following percentage of each Participant's
eligible contributions for the Plan Year, based on the Participant's
Years of Service:
Number of Years of Service Matching Percentage
-- --
-- --
-- --
-- --
The Advisory Committee will apply this formula by determining Years
of Service as follows: _____________________________________________.
[ ] (5) A Participant's matching contributions may not: (CHOOSE (I) OR
(II))
[ ] (i) Exceed _______________________________________________
[ ] (ii) Be less than ________________________________________
RELATED EMPLOYERS. If two or more related employers (as defined in
Section 1.30) contribute to this Plan, the related employers may elect
different matching contribution formulas by attaching to the Adoption
Agreement a separately completed copy of this Part II. NOTE: SEPARATE
MATCHING CONTRIBUTION FORMULAS CREATE SEPARATE CURRENT BENEFIT
STRUCTURES THAT MUST SATISFY THE MINIMUM PARTICIPATION TEST OF CODE
SS401(A)(26).]
[x] (i) DEFINITION OF ELIGIBLE CONTRIBUTIONS. Subject to the requirements
of Option (j), the term "eligible contributions" means: (CHOOSE ANY
COMBINATION OF (1) THROUGH (3))
[x] (1) Salary reduction contributions.
[ ] (2) Cash or deferred contributions (including any part of the
Participant's proportionate share of the cash or deferred contribution
which the Employer defers without the Participant's election).
10
<PAGE>
[ ] (3) Participant Mandatory contributions, as designated in Adoption
Agreement Section 4.01. See Section 14.04 of the Plan.
[x] (j) AMOUNT OF ELIGIBLE CONTRIBUTIONS TAKEN INTO ACCOUNT. When determining
a Participant's eligible contributions taken into account under the
matching contributions formula(s), the following rules apply: (CHOOSE
ANY COMBINATION OF (1) THROUGH (4))
[ ] (1) The Advisory Committee will take into account all eligible
contributions credited for the Plan Year.
[x] (2) The Advisory Committee will disregard eligible contributions
exceeding 6% of a participant's compensation for the valuation period.
[ ] (3) The Advisory Committee will treat as the first tier of eligible
contributions, an amount not exceeding: __________________________.
The subsequent tiers of eligible contributions are: ________________
__________.
[ ] (4) (SPECIFY) The Advisory Committee may set the matching formula at
any percentage amount up to but not to exceed 6% of a participant's
compensation for the valuation period.
PART III. [OPTIONS (K) AND (L)]. SPECIAL RULES FOR CODE SS401(K) ARRANGEMENT.
(CHOOSE (K) OR (L), OR BOTH, AS APPLICABLE)
[x] (k) SALARY REDUCTION AGREEMENTS. The following rules and restrictions
apply to an Employee's salary reduction agreement: (MAKE A SELECTION
UNDER (1), (2), (3) AND (4))
(l) Limitation on amount. The Employee's salary reduction contributions:
(CHOOSE (i) OR AT LEAST ONE OF (ii) OR (iii))
[ ] (i) NO maximum limitation other than as provided in the Plan.
[x] (ii) May not exceed 10% of Compensation for the Plan Year, subject to
the annual additions limitation described in Part 2 of Article III and
the 402(g) limitation described in Section 14.07 of the Plan.
[x] (iii) Based on percentages of Compensation must equal at least 1%.
(2) An Employee may revoke, on a prospective basis, a salary reduction
agreement: (CHOOSE (I), (II), (III) OR (IV))
[ ] (i) Once during any Plan Year but not later than __________________
____________ of the Plan Year.
[ ] (ii) As of any Plan Entry Date.
[x] (iii) As of the first day of any month.
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<PAGE>
[ ] (iv) (SPECIFY) but must be at least once per Plan Year_____________
________________________.
(3) An Employee who revokes his salary reduction agreement may file a new
salary reduction agreement with an effective date: (CHOOSE (i), (ii),
(iii), or (iv))
[ ] (i) No earlier than the first day of the next Plan Year.
[x] (ii) As of any subsequent Plan Entry Date.
[ ] (iii) As of the first day of any month subsequent to the month in
which he revoked an Agreement
[ ] (iv) (SPECIFY, BUT MUST BE AT LEAST ONCE PER PLAN YEAR FOLLOWING THE
PLAN YEAR OF REVOCATION)____________________________________.
(4) A Participant may increase or may decrease, on a prospective basis, his
salary reduction percentage or dollar amount: (CHOOSE (i), (ii), (iii) or
(iv))
[ ] (i) As of the beginning of each payroll period.
[ ] (ii) As of the first day of each month.
[x] (iii) As of any Plan Entry Date.
[ ] (iv) (SPECIFY, BUT MUST PERMIT AN INCREASE OR A DECREASE AT LEAST
ONCE PER PLAN YEAR) ___________________________________.
[ ] (l) CASH OR DEFERRED CONTRIBUTIONS. For each Plan Year for which the
Employer makes a designated cash or deferred contribution, a Participant may
elect to receive directly in cash not more than the following portion (or,
if less, the 402(g) limitation described in Section 14.07 of the Plan) of
his proportionate share of that cash or deferred contribution: (CHOOSE (1)
OR (2))
[ ] (1) All or any portion.
[ ] (2) _________________________%.
3.04 CONTRIBUTION ALLOCATION. The Advisory Committee will allocate deferral
contributions, matching contributions, qualified nonelective contributions and
nonelective contributions in accordance with Section 14.06 and the elections
under this Adoption Agreement Section 3.04.
PART I. [OPTIONS (A) THROUGH (D)]. SPECIAL ACCOUNTING ELECTIONS. (CHOOSE
WHICHEVER ELECTIONS ARE APPLICABLE TO THE EMPLOYER'S PLAN)
[x] (a) MATCHING CONTRIBUTIONS ACCOUNT. The Advisory Committee will allocate
matching contributions to a Participant's: (CHOOSE (1) or (2); (3) IS
AVAILABLE ONLY IN ADDITION TO (1))
[x] (1) Regular Matching Contributions Account.
12
<PAGE>
[ ] (2) Qualified Matching Contributions Account.
[ ] (3) Except, matching contributions under Option(s) of Adoption
Agreement Section 3.01 are allocable to the Qualified Matching
Contributions Account.
[x] (b) SPECIAL ALLOCATION DATES FOR SALARY REDUCTION CONTRIBUTIONS. The
Advisory Committee will allocate salary reduction contributions as of the
Accounting Date and as of the following additional allocation dates:
as of any payroll date.
[x] (c) SPECIAL ALLOCATION DATES FOR MATCHING CONTRIBUTIONS. The Advisory
Committee will allocate matching contributions as of the Accounting Date
and as of the following additional allocation dates: as of any payroll date.
[x] (d) DESIGNATED QUALIFIED NONELECTIVE CONTRIBUTIONS - DEFINITION OF
PARTICIPANT. For purposes of allocating the designated qualified nonelective
contribution, "Participant" means: (CHOOSE (1), (2) or (3))
[ ] (1) All Participants.
[x] (2) Participants who are Nonhighly Compensated Employees for the Plan
Year.
[ ] (3) (SPECIFY) ________________________________________________________
_____________________.
PART II. METHOD OF ALLOCATION - NONELECTIVE CONTRIBUTION. Subject to any
restoration allocation required under Section 5.04, the Advisory Committee will
allocate and credit each annual nonelective contribution (and Participant
forfeitures treated as nonelective contributions) to the Employer Contributions
Account of each Participant who satisfies the conditions of Section 3.06, in
accordance with the allocation method selected under this Section 3.04. If the
Employer elects Option (e)(2), Option (g)(2) or Option (h), for the first 3% of
Compensation allocated to all Participants, "Compensation" does not include any
exclusions elected under Adoption Agreement Section 1.12 (other than the
exclusion of elective contributions), and the Advisory Committee must take into
account the Participant's Compensation for the entire Plan Year. (CHOOSE AN
ALLOCATION METHOD UNDER (E), (F), (G) OR (H); (I) IS MANDATORY IF THE EMPLOYER
ELECTS (F), (G) OR (H); (J) IS OPTIONAL IN ADDITION TO ANY OTHER ELECTION.)
[x] (e) NONINTEGRATED ALLOCATION FORMULA. (CHOOSE (1) OF (2))
[x] (1) The Advisory Committee will allocate the annual nonelective
contributions in the same ratio that each Participant's Compensation for
the Plan Year bears to the total Compensation of all Participants for
the Plan Year.
[ ] (2) The Advisory Committee will allocate the annual nonelective
contributions in the same ratio that each Participant's Compensation for
the Plan Year bears to the total Compensation of all Participants
for the Plan Year. For purposes of this Option (2), "Participant" means,
in addition to a Participant who satisfies the requirements of Section
3.06 for the Plan Year, any other Participant entitled to a top heav
minimum allocation under Section 3.04(B), but such Participant's
allocation will not exceed 3% of his Compensation for the Plan Year.
13
<PAGE>
[ ] (f) TWO-TIERED INTEGRATED ALLOCATION FORMULA - MAXIMUM DISPARITY. First, the
Advisory Committee will allocate the annual Employer nonelective
contributions in the same ratio that each Participant's Compensation plus
Excess Compensation for the Plan Year bears to the total Compensation
plus Excess Compensation of all Participants for the Plan Year. The
allocation under this paragraph, as a percentage of each Participant's
Compensation plus Excess Compensation, must not exceed the applicable
percentage (5.7%, 5.4% or 4.3%) listed under the Maximum Disparity Table
following Option (i).
The Advisory Committee then will allocate any remaining nonelective
contributions in the same ratio that each Participant's Compensation for the
Plan Year bears to the total Compensation of all Participants for the Plan
Year.
[ ] (g) THREE-TIERED INTEGRATED ALLOCATION FORMULA. First, the Advisory
Committee will allocate the annual Employer nonelective contributions in the
same ratio that each Participant's Compensation for the Plan Year bears to
the total Compensation of all Participants for the Plan Year. The
allocation under this paragraph, as a percentage of each Participant's
Compensation may not exceed the applicable percentage (5.7%, 5.4%, or 4.3%)
listed under the Maximum Disparity Table following Option (i). Solely for
purposes of the allocation in this first paragraph, "Participant" means,
in addition to a Participant who satisfies the requirements of Section 3.06
for the Plan Year: (CHOOSE (1) OR (2))
[ ] (1) No other Participant.
[ ] (2) Any other Participant entitled to a top heavy minimum allocation
under Section 3.04(B), but such Participant's allocation under this
Option (g) will not exceed 3% of his Compensation for the Plan Year.
As a second tier allocation, the Advisory Committee will allocate the
nonelective contributions in the same ratio that each Participant's Excess
Compensation for the Plan Year bears to the total Excess Compensation of
all Participants for the Plan Year. The allocation under this paragraph,
as a percentage of each Participant's Excess Compensation, may not exceed
the allocation percentage in the first paragraph.
Finally, the Advisory Committee will allocate any remaining nonelective
contributions in the same ratio that each Participant's Compensation for
the Plan Year bears to the total Compensation of all Participants for the
Plan Year.
[ ] (h) FOUR-TIERED INTEGRATED ALLOCATION FORMULA. First, the Advisory Committee
will allocate the annual Employer nonelective contributions in the same
ratio that each Participant's Compensation for the Plan Year bears to the
total Compensation of all Participants for the Plan Year, but not exceeding
3% of each Participant's Compensation. Solely for purposes of this first
tier allocation, a "Participant" means, in addition to any Participant who
satisfies the requirements of Section 3.06 for the Plan Year, any other
Participant entitled to a top heavy minimum allocation under Section 3.04(B)
of the Plan.
As a second tier allocation, the Advisory Committee will allocate the
nonelective contributions in the same ratio that each Participant's Excess
Compensation for the Plan Year bears to the total Excess Compensation of
all Participants for the Plan Year, but not exceeding 3% of each
Participant's Excess Compensation.
14
<PAGE>
As a third tier allocation, the Advisory Committee will allocate the annual
Employer contributions in the same ratio that each Participant's
Compensation plus Excess Compensation for the Plan Year bears to the total
Compensation plus Excess Compensation of all Participants for the Plan
Year. The allocation under this paragraph, as a percentage of each
Participant's Compensation plus Excess Compensation, must not exceed the
applicable percentage (2.7%, 2.4% or 1.3%) listed under the Maximum
Disparity Table following Option (i).
The Advisory Committee then will allocate any remaining nonelective
contributions in the same ratio that each Participant's Compensation for the
Plan Year bears to the total Compensation of all Participants for the Plan
Year.
[ ] (i) EXCESS COMPENSATION. For purposes of Option (f), (g), or (h), "Excess
Compensation" means Compensation in excess of the following Integration
Level: (CHOOSE (1) OR (2))
[ ] (1) ___% (not exceeding 100% of the taxable wage base, as determined
under Section 230 of the Social Security Act, in effect on the first
day of the Plan Year: (CHOOSE ANY COMBINATION OF (I) AND (II) OR
CHOOSE (III))
[ ] (i) Rounded to __________________________ (but not exceeding the
taxable wage base).
[ ] (ii) But not greater than $___.
[ ] (iii) Without any further adjustment or limitation.
[ ] (2) $___ [NOTE: NOT EXCEEDING THE TAXABLE WAGE BASE FOR THE PLAN YEAR
IN WHICH THIS ADOPTION AGREEMENT FIRST IS EFFECTIVE.]
MAXIMUM DISPARITY TABLE. For purposes of Options (f), (g) and (h), the
applicable percentage is:
<TABLE>
<CAPTION>
<S> <C> <C>
Integration Level (as Applicable Percentages for Applicable Percentages
percentage of taxable wage base) Option (f) or Option (g) for Option (h)
100% 5.7% 2.7%
More than 80% but less than 100% 5.4% 2.4%
More than 20% (but less than $10,001)
and not more than 80% 4.3% 1.3%
20% (or $10,000 if greater) or less 5.7% 2.7%
</TABLE>
[ ] (j) ALLOCATION OFFSET. The Advisory Committee will reduce a Participant's
allocation otherwise made under Part II of this Section 3.04 by the
Participant's allocation under the following qualified plan(s) maintained
by the Employer: ________________________________________________________.
15
<PAGE>
The Advisory Committee will determine this allocation reduction. (CHOOSE
(1) OR (2))
[ ] (1) By treating the term "nonelective contribution" as including all
amounts paid or accrued by the Employer during the Plan Year to the
qualified plan(s) referenced under this Option (j). If a Participant
under this Plan also participates in that other plan, the Advisory
Committee will treat the amount the Employer contributes for or during
a Plan Year on behalf of a particular Participant under such other plan
as an amount allocated under this Plan to that Participant's Account
for that Plan Year. The Advisory Committee will make the computation of
allocation required under the immediately preceding sentence before
making any allocation of nonelective contributions under this
Section 3.04.
[ ] (2) In accordance with the formula provided in an addendum to this
Adoption Agreement, numbered 3.04(j).
TOP HEAVY MINIMUM ALLOCATION - METHOD OF COMPLIANCE. If a Participant's
allocation under this Section 3.04 is less than the top heavy minimum allocation
to which he is entitled under Section 3.04(B): (CHOOSE (K) OR (L))
[x] (k) The Employer will make any necessary additional contribution to the
Participant's Account, as described in Section 3.04(B)(7)(a) of the Plan.
[ ] (l) The Employer will satisfy the top heavy minimum allocation under the
following plan(s) it maintains: _______________________________. However,
the Employer will make any necessary additional contribution to satisfy the
top heavy minimum allocation for an Employee covered only under this Plan
and not under the other plan(s) designated in this Option (l). See Section
3.04(B)(7)(b) of the Plan.
If the Employer maintains another plan, the Employer may provide in an addendum
to this Adoption Agreement, numbered Section 3.04, any modifications to the Plan
necessary to satisfy the top heavy requirements under Code ss416.
Related employers. If two or more related employers (as defined in Section 1.30)
contribute to this Plan, the Advisory Committee must allocate all Employer
nonelective contributions (and forfeitures treated as nonelective contributions)
to each Participant in the Plan, in accordance with the elections in this
Adoption Agreement Section 3.04: (CHOOSE (M) OR (N))
[x] (m) Without regard to which contributing related group member employs the
Participant.
[ ] (n) Only to the Participants directly employed by the contributing Employer.
If a Participant receives Compensation from more than one contributing
Employer, the Advisory Committee will determine the allocations under this
Adoption Agreement Section 3.04 by prorating among the participating
Employers the Participant's Compensation and, if applicable, the
Participant's Integration Level under Option (i).
16
<PAGE>
3.05 FORFEITURE ALLOCATION. Subject to any restorative allocation
required under Sections 5.04 or 9.14, the Advisory Committee will allocate a
Participant forfeiture in accordance with Section 3.04: (CHOOSE (A) OR (B);
(C) AND (D) ARE OPTIONAL IN ADDITION TO (A) OR (B))
[ ] (a) As an Employer nonelective contribution for the Plan Year in which
the forfeiture occurs, as if the Participant forfeiture were an
additional nonelective contribution for that Plan Year.
[x] (b) To reduce the Employer matching contributions and nonelective
contributions for the Plan Year: (CHOOSE (1) OR (2))
[ ] (1) in which the forfeiture occurs.
[x] (2) immediately following the Plan Year in which the forfeiture occurs.
[x] (c) To the extent attributable to matching contributions: (CHOOSE (1),
(2) OR (3))
[x] (1) In the manner elected under Options (a) or (b).
[ ] (2) First to reduce Employer matching contributions for the Plan Year:
(CHOOSE (i) OR (ii))
[ ] (i) in which the forfeiture occurs,
[ ] (ii) immediately following the Plan Year in which the forfeiture
occurs, then as elected in Options (a) or (b).
[ ] (3) As a discretionary matching contribution for the Plan Year in which
the forfeiture occurs, in lieu of the manner elected under Options (a)
or (b).
[ ] (d) First to reduce the Plan's ordinary and necessary administrative
expenses for the Plan Year and then will allocate any remaining forfeitures
in the manner described in Options (a), (b) or (c), whichever applies.
If the Employer elections Option (c), the forfeitures used to reduce Plan
expenses: (CHOOSE (1) OR (2))
[ ] (1) relate proportionately to forfeitures described in Option (c) and
to forfeitures described in Options (a) or (b).
[ ] (2) relate first to forfeitures described in Option __.
ALLOCATION OF FORFEITED EXCESS AGGREGATE CONTRIBUTIONS. The Advisory Committee
will allocate any forfeited excess aggregate contributions (as described in
Section 14.09): (CHOOSE (E), (F) OR (G))
[ ] (e) To reduce Employer matching contributions for the Plan Year: (CHOOSE (1)
or (2))
[ ] (1) in which the forfeiture occurs.
[ ] (2) immediately following the Plan Year in which the forfeiture occurs.
17
<PAGE>
[ ] (f) As Employer discretionary matching contributions for the Plan Year
in which forfeited, except the Advisory Committee will not allocate
these forfeitures to the Highly Compensated Employees who incurred
the forfeitures.
[x] (g) In accordance with Options (a) through (d), whichever applies,
except the Advisory Committee will not allocate these forfeitures under
Option (a) or under Option (c)(3) to the Highly Compensated Employees
who incurred the forfeitures.
3.06 ACCRUAL OF BENEFIT.
COMPENSATION TAKEN INTO ACCOUNT. For the Plan Year in which the Employee
first becomes a Participant, the Advisory Committee will determine the
allocation of any cash or deferred contribution, designated qualified
nonelective contribution or nonelective contribution by taking into
account: (Choose (a) or (b))
[ ] (a) The Employee's Compensation for the entire Plan Year.
[x] (b) The Employee's Compensation for the portion of the Plan Year
in which the Employee actually is a Participant in the Plan.
ACCRUAL REQUIREMENTS. Subject to the suspension of accrual requirements
of Section 3.06(E) of the Plan, to receive an allocation of cash or deferred
contributions, matching contributions, designated qualified nonelective
contributions, nonelective contributions and Participant forfeitures, if
any, for the Plan Year, a Participant must satisfy the conditions described
in the following elections: (Choose (c) or at least one of (d) through (f))
[ ] (c) SAFE HARBOR RULE. If the Participant is employed by the Employer on
the last day of the Plan Year, the Participant must complete at least
one Hour of Service for that Plan Year. If the Participant is not
employed by the Employer on the last day of the Plan Year, the
Participant must complete at least 501 Hours of Service during the
Plan Year.
[x] (d) HOURS OF SERVICE CONDITION. The Participant must complete the
following minimum number of Hours of Service during the Plan Year:
(Choose at least one of (1) through (5))
[x] (1) 1,000 Hours of Service.
[ ] (2) (Specify, but the number of Hours of Service may not exceed
1,000) _____________________________________________________.
[x] (3) No Hour of Service requirement if the Participant terminates
employment during the Plan Year on account of: (Choose (i), (ii)
or (iii))
[x] (i) Death.
[x] (ii) Disability.
[x] (iii) Attainment of Normal Retirement Age in the current Plan
Year or in a prior Plan Year.
18
<PAGE>
[ ] (4) __ Hours Service (not exceeding 1,000) ? Participant terminates
employment with the Employer during the Plan Year, subject to any
election in Option (3).
[x] (5) No Hour of Service requirement for an allocation of the following
contributions: Employer match.
[x] (e) EMPLOYMENT CONDITION. The Participant must be employed by the Employer
on the last day of the Plan Year, irrespective of whether he satisfies any
Hours of Service condition under Option (d), with the following
exceptions: (Choose (1) or at least one of (2) through (5))
[ ] (1) No exceptions.
[x] (2) Termination of employment because of death.
[x] (3) Termination of employment because of disability.
[x] (4) Termination of employment following attainment of
Normal Retirement Age.
[ ] (5) No employment condition for the following contributions:
____________________________________________________________.
[x] (f) (Specify other conditions, if applicable): Employment on last day
of the Plan Year not required for Employer Matching contribution.
SUSPENSION OF ACCRUAL REQUIREMENTS. The suspension of accrual requirements of
Section 3.06(E) of the Plan: (Choose (g), (h) or (i))
[x] (g) Applies to the Employer's Plan.
[ ] (h) Does not apply to the Employer's Plan.
[ ] (i) Applies in modified form to the Employer's Plan, as described in
an addendum to this Adoption Agreement, numbered Section 3.06(E).
SPECIAL ACCRUAL REQUIREMENTS FOR MATCHING CONTRIBUTIONS. If the Plan allocates
matching contributions on two or more allocation dates for a Plan Year, the
Advisory Committee, unless otherwise specified in Option (1), will apply
any Hours of Service condition by dividing the required Hours of Service
on a prorata basis to the allocation periods included in that Plan Year.
Furthermore, a Participant who satisfies the conditions described in this
Adoption Agreement Section 3.06 will receive an allocation of matching
contributions (and forfeitures treated as matching contributions) only if
the Participant satisfies the following additional condition(s): (Choose
(j) or at least one of (k) or (l))
[ ] (j) No additional conditions.
[ ] (k) The Participant is not a Highly Compensated Employee for the
Plan Year. This Option (k) applies to: (Choose (1) or (2))
[ ] (1) All matching contributions.
19
<PAGE>
[ ] (2) Matching contributions described in Option(s) ____ _____
of Adoption Agreement Section 3.01.
[x] (l) (Specify) Employment on the last day of the Plan Year condition does
not apply to Employer Matching contribution.
3.15 MORE THAN ONE PLAN LIMITATION. If the provisions of Section 3.15
apply, the Excess Amount attributed to this Plan equals: (Choose (a), (b)
or (c))
[ ] (a) The product of:
(i) the total Excess Amount allocated as of such date (including
any amount which the Advisory Committee would have allocated but
for the limitations of Code SS415), times
(ii) the ratio of (1) the amount allocated to the Participant as
of such date under this Plan divided by (2) the total amount
allocated as of such date under all qualified defined contribution
plans (determined without regard to the limitations of Code SS415).
[x] (b) The total Excess Amount.
[ ] (c) None of the Excess Amount.
3.18 DEFINED BENEFIT PLAN LIMITATION.
APPLICATION OF LIMITATION. The limitation under Section 3.18 of the Plan:
(Choose (a) or (b))
[x] (a) Does not apply to the Employer's Plan because the Employer does not
maintain and never has maintained a defined benefit plan covering any
Participant in this Plan.
[ ] (b) Applies to the Employer's Plan. To the extent necessary to satisy the
limitation under Section 3.18, the Employer will reduce: (Choose (1)
or (2))
[ ] (1) The Participant's projected annual benefit under the defined
benefit plan under which the Participant participates.
[ ] (2) Its contribution or allocation on behalf of the Participant
to the defined contribution plan under which the Participant
participates and then, if necessary, the Participant's projected
annual benefit under the defined benefit plan under which the
Participant participates.
[NOTE: IF THE EMPLOYER SELECTS (A), THE REMAINING OPTIONS IN THIS SECTION
3.18 DO NOT APPLY TO THE EMPLOYER'S PLAN.]
COORDINATION WITH TOP HEAVY MINIMUM ALLOCATION. The Advisory Committee will
apply the top heavy minimum allocation provisions of Section 3.04(B) of the
Plan with the following modifications: (Choose (c) or at least one of (d)
or (e))
[ ] (c) No modifications.
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[ ] (d) For Non-Key Employees participating only in this Plan. Top heavy
minimum allocation is the minimum allocation described in Section
3.04(B) determined by substituting __% (not less than 4%) for "3%"
except: (Choose (i) or (ii))
[ ] (i) No exceptions.
[ ] (ii) Plan Years in which the top heavy ratio exceeds 90%.
[ ] (e) For Non-Key Employees also participating in the defined benefit
plan, the top heavy minimum is: (Choose (1) or (2))
[ ] (1) 5% of Compensation (as determined under Section 3.04(B) or
the Plan) irrespective of the contribution rate of any Key
Employee, except: (Choose (i) or (ii))
[ ] (i) No exceptions.
[ ] (ii) Substituting "7 1/2%" for "5%" if the top heavy
ratio does not exceed 90%.
[ ] (2) 0%. [Note: The Employer may not select this Option (2) unless
the defined benefit plan satisfies the top heavy minimum benefit
requirements of Code SS416 for these Non-Key Employees.]
ACTUAL ASSUMPTIONS FOR TOP HEAVY CALCULATION. To determine the top heavy
ratio, the Advisory Committee will use the following interest rate and
mortality assumptions to value accrued benefits under a defined benefit
plan: ________________________________________________________________
If the elections under this Section 3.18 are not appropriate to satisfy
the limitations of Section 3.18, or the top heavy requirements under Code
SS416, the Employer must provide the appropriate provisions in an addendum
to this Adoption Agreement.
ARTICLE IV
PARTICIPANT CONTRIBUTIONS
4.01 PARTICIPANT NONDEDUCTIBLE CONTRIBUTIONS. The Plan: (Choose (a)
or (b); (c) is available only with (b))
[x] (a) Does not permit Participant nondeductible contributions.
[ ] (b) Permits Participant nondeductible contributions, pursuant
to Section 14.04 of the Plan.
[ ] (c) The following portion of the Participant's nondeductible
contributions for the Plan Year are mandatory contributions under
Option (i)(3) of Adoption Agreement Section 3.01: (Choose (1) or (2))
[ ] (1) The amount which is not less than: _________________________
____________________.
[ ] (2) The amount which is not greater than: ______________________
_____________________________.
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ALLOCATION DATES. The Advisory Committee will allocate nondeductible
contributions for each Plan Year as of the Accounting Date and the
following additional allocation dates: (Choose (d) or (e))
[ ] (d) No other allocation dates.
[ ] (e) (Specify) __________________________________________.
As of an allocation date, the Advisory Committee will credit all nondeductible
contributions made for the relevant allocation period. Unless otherwise
specified in (e), a nondeductible contribution relates to an allocation
period only if actually made to the Trust no later than 30 days after that
allocation period ends.
4.05 PARTICIPANT CONTRIBUTION - WITHDRAWAL/DISTRIBUTION. Subject to the
restrictions of Article VI, the following distribution options apply to
a Participant's Mandatory Contributions Account, if any, prior to his
Separation from Service: (Choose (a) or at least one of (b) through
(d))
[ ] (a) No distribution options prior to Separation from Service.
[ ] (b) The same distribution options applicable to the Deferral
Contributions Account prior to the Participant's Separation from
Service, as elected in Adoption Agreement Section 6.03.
[ ] (c) Until he retires, the Participant has a continuing election to
receive all or any portion of his Mandatory Contributions Account if:
(Choose (1) or at least one of (2) through (4))
[ ] (1) No conditions.
[ ] (2) The mandatory contributions have accumulated for at
least __Plan Years since the Plan Year for which contributed.
[ ] (3) The Participant suspends making nondeductible contributions
for a period of _ months.
[ ] (4) (Specify) ______________________________________.
[ ] (d) (Specify) ____________________________________________
ARTICLE V
TERMINATION OF SERVICE - PARTICIPANT VESTING
5.01 NORMAL RETIREMENT. Normal Retirement Age under the Plan is: (Choose
(a) or (b))
[x] (a) 62 [State age, but may not exceed age 65].
[ ] (b) The later of the date the Participant attains ___years of age or the
anniversary of the first day of the Plan Year in which the Participant
commenced participation in the Plan. [THE AGE SELECTED MAY NOT EXCEED
AGE 65 AND THE ANNIVERSARY SELECTED MAY NOT EXCEED THE 5TH.]
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<PAGE>
5.02 PARTICIPANT DEATH OR DISABILITY. The 100% ? rule under Section 5.02
of the Plan: (Choose (a) or choose one or both of (b) and (c))
[ ] (a) Does not apply.
[x] (b) Applies to death.
[x] (c) Applies to disability.
5.03 VESTING SCHEDULE.
DEFERRAL CONTRIBUTIONS ACCOUNT/QUALIFIED MATCHING CONTRIBUTIONS ACCOUNT/
QUALIFIED NONELECTIVE CONTRIBUTIONS ACCOUNT/MANDATORY CONTRIBUTIONS ACCOUNT. A
Participant has a 100% Nonforfeitable interest at all times in his Deferral
Contributions Account, his Qualified Matching Contributions Account, his
Qualified Nonelective Contributions Account and in his Mandatory
Contributions Account.
REGULAR MATCHING CONTRIBUTIONS ACCOUNT/EMPLOYER CONTRIBUTIONS ACCOUNT. With
respect to a Participant's Regular Matching Contributions Account and
Employer Contributions Account, the Employer elects the following vesting
schedule: (Choose (a) or (b); (c) and (d) are available only as additional
options)
[ ] (a) Immediate vesting. 100% Nonforfeitable at all times. [Note: The
Employer must elect Option (a) if the eligibility conditions under Adoption
Agreement Section 2.01(c) require 2 years of service or more than 12 months
of employment.]
[x] (b) Graduated Vesting Schedules.
TOP HEAVY SCHEDULE NON TOP HEAVY SCHEDULE
(MANDATORY) (OPTIONAL)
Years of Nonforfeitable Years of Nonforfeitable
Service Percentage Service Percentage
Less than 1 0% Less than 1 0%
1 0% 1 0%
2 100% 2 100%
3 100% 3 100%
4 100% 4 100%
5 100% 5 100%
6 or more 100% 6 100%
7 or more 100%
[ ] (c) Special vesting election for Regular Matching Contributions
Account. In lieu of the election under Options (a) or (b), the Employer
elects the following vesting schedule for a Participant's Regular
Matching Contributions Account: (Choose (1) or (2))
[ ] (1) 100% Nonforfeitable at all times.
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<PAGE>
[ ] (2) In accordance with the vesting schedule described in the addendum
to this Adoption Agreement, numbered 5.03(c). [NOTE: IF THE EMPLOYER
ELECTS THIS OPTION (C)(2), THE ADDENDUM MUST DESIGNATE THE APPLICABLE
VESTING SCHEDULE(S) USING THE SAME FORMAT AS USED IN OPTION (B).]
[NOTE: UNDER OPTIONS (B) AND (C)(2), THE EMPLOYER MUST COMPLETE A TOP HEAVY
SCHEDULE WHICH SATISFIES CODE SS416. THE EMPLOYER, AT ITS OPTION, MAY COMPLETE
A NON TOP HEAVY SCHEDULE. THE NON TOP HEAVY SCHEDULE MUST SATISFY CODE
SS411(A)(2). ALSO SEE SECTION 7.05 OF THE PLAN.]
[x] (d) The Top Heavy Schedule under Option (b) (and, if applicable, under
Option (c)(2)) applies: (Choose (1) or (2))
[ ] (1) Only in a Plan Year for which the Plan is top heavy.
[x] (2) In the Plan Year for which the Plan first is top heavy and then in
all subsequent Plan Years. [Note: The Employer may not elect Option
(d) unless it has completed a Non Top Heavy Schedule.]
Minimum vesting. (Choose (e) or (f))
[x] (e) The Plan does not apply a minimum vesting rule.
[ ] (f) A Participant's Nonforfeitable Accrued Benefit will never be less
than the lesser of $__ or his entire Accrued Benefit, even if the
application of a graduated vesting schedule under Options (b) or (c)
would result in a smaller Nonforfeitable Accrued Benefit.
LIFE INSURANCE INVESTMENTS. The Participant's Accrued Benefit attributable to
insurance contracts purchased on his behalf under Article XI is: (Choose (g)
or (h))
[ ] (g) Subject to the vesting election under Options (a), (b) or (c).
[x] (h) 100% Nonforfeitable at all times, irrespective of the vesting election
under Options (b) or (c)(2).
5.04 CASH-OUT DISTRIBUTIONS TO PARTIALLY-VESTED PARTICIPANTS/RESTORATION
OF FORFEITED ACCRUED BENEFIT. The deemed cash-out rule described in Section
5.04(C) of the Plan: (Choose (a) or (b))
[x] (a) Does not apply.
[ ] (b) Will apply to determine the timing of forfeitures for 0% vested
Participants. A Participant is not a 0% vested Participant if he has a
Deferral Contributions Account.
5.06 YEAR OF SERVICE - VESTING.
VESTING COMPUTATION PERIOD. The Plan measures a Year of Service on the basis
of the following 12 consecutive month periods: (Choose (a) or (b))
[x] (a) Plan Years.
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[ ] (b) Employment Years An Employment Year is the 12 consecutive month period
measured from the Employee's Employment Commencement Date and each
successive 12 consecutive month period measured from each anniversary of
that Employment Commencement Date.
HOURS OF SERVICE. The minimum number of Hours of Service an Employee must
complete during a vesting computation period to receive credit for a Year
of Service is: (Choose (c) or (d))
[x] (c) 1,000 Hours of Service.
[ ] (d)__ Hours of Service. [Note: The Hours of Service requirement may not
exceed 1,000.]
5.08 INCLUDED YEARS OF SERVICE - VESTING. The Employer specifically
excludes the following Years of Service: (CHOOSE (A) OR AT LEAST ONE OF
(B) THROUGH (e))
[x] (a) None other than as specified in Section 5.08(a) of the Plan.
[ ] (b) Any Year of Service before the Participant attained the age of __.
Note: The age selected may not exceed age 18.]
[ ] (c) Any Year of Service during the period the Employer did not maintain
this Plan or a predecessor plan.
[ ] (d) Any Year of Service before a Break in Service if the number of
consecutive Breaks in Service equals or exceeds the greater of 5 or the
aggregate number of the Years of Service prior to the Break. This
exception applies only if the Participant is 0% vested in his Accrued
Benefit derived from Employer contributions at the time he has a Break
in Service. Furthermore, the aggregate number of Years of Service before
a Break in Service do not include any Years of Service not required to be
taken into account under this exception by reason of any prior Break in
Service.
[ ] (e) Any Year of Service earned prior to the effective date of ERISA if
the Plan would have disregarded that Year of Service on account of an
Employee's Separation from Service under a Plan provision in effect and
adopted before January 1, 1974.
ARTICLE VI
TIME AND METHOD OF PAYMENTS OF BENEFITS
CODE SS411(D)(6) PROTECTED BENEFITS. The elections under this Article VI
may not eliminate Code ss411(d)(6) protected benefits. To the extent the
elections would eliminate a Code ss411(d)(6) protected benefit, see
Section 13.02 of the Plan. Furthermore, if the elections liberalize the
optional forms of benefit under the Plan, the more liberal options apply
on the later of the adoption date or the Effective Date of this Adoption
Agreement.
6.01 TIME OF PAYMENT OF ACCRUED BENEFIT.
Distribution date. A distribution date under the Plan means the first day of
every month of the Plan Year. [NOTE: THE EMPLOYER MUST SPECIFY THE APPROPRIATE
DATE(S). THE SPECIFIED DISTRIBUTION DATES PRIMARILY ESTABLISH ANNUITY STARTING
DATES AND THE NOTICE AND CONSENT PERIODS PRESCRIBED BY THE PLAN. THE PLAN
ALLOWS THE TRUSTEE AN ADMINISTRATIVELY PRACTICABLE PERIOD OF TIME TO MAKE
THE ACTUAL DISTRIBUTION RELATING TO A PARTICULAR DISTRIBUTION DATE.]
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<PAGE>
NONFORFEITABLE ACCRUED BENEFIT NOT EXCEEDING $3,500. Subject to the limitations
of Section 6.01(A)(1), the distribution date for distribution of a
Nonforfeitable Accrued Benefit not exceeding $3,500 is: (Choose (a), (b), (c),
(d) or (e)).
[ ] (a) ______________________________________________________________________
_____ of the __________________Plan Year beginning after the Participant's
Separation from Service.
[x] (b) The first administratively feasible date following the Participant's
Separation from Service.
[ ] (c) ______________________________________________________________________
_____ of the Plan Year after the Participant incurs ____ Break(s) in
Service (as defined in Article V).
[ ] (d) _____________________________following the Participant's attainment of
Normal Retirement Age, but not earlier than _______________ days following
his Separation from Service.
[ ] (e) (SPECIFY) ________________________________________.
NONFORFEITABLE ACCRUED BENEFIT EXCEEDS $3,500. See the elections under Section
6.03.
DISABILITY. The distribution date, subject to Section 6.01(A)(3), is: (CHOOSE
(F), (G) OR (H))
[x] (f) The first administratively feasible date after the Participant
terminates employment because of disability.
[ ] (g) The same as if the Participant had terminated employment without
disability.
[ ] (h) (SPECIFY) ________________________________________.
HARDSHIP. (Choose (i) or (j))
[x] (i) The Plan does not permit a hardship distribution to a Participant who
has separated from Service.
[ ] (j) The Plan permits a hardship distribution to a Participant who has
separated from Service in accordance with the hardship distribution policy
stated in: (CHOOSE (1), (2) OR (3))
[ ] (1) Section 6.01(A)(4) of the Plan.
[ ] (2) Section 14.11 of the Plan.
[ ] (3) The addendum to this Adoption Agreement, numbered Section 6.01.
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<PAGE>
DEFAULT ON A LOAN. If a Participant or Beneficiary defaults on a loan,
pursuant to a loan policy adopted by the Advisory Committee pursuant to Section
9.04, the Plan: (CHOOSE (K), (L) OR (M))
[x] (k) Treats the default as a distributable event. The Trustee, at the time
of the default, will reduce the Participant's Nonforfeitable Accrued
Benefit by the lesser of the amount in default (plus accrued interest) or
the Plan's security interest in that Nonforfeitable Accrued Benefit. To
the extent the loan is attributable to the Participant's Deferral
Contributions Account. Qualified Matching Contributions Account or
Qualified Nonelective Contributions Account, the Trustee will not reduce
the Participant's Nonforfeitable Accrued Benefit unless the Participant
has separated from Service or unless the Participant has attained age
59-1/2.
[ ] (l) Does not treat the default as a distributable event. When an otherwise
distributable event first occurs pursuant to Section 6.01 or Section 6.03
of the Plan, the Trustee will reduce the Participant's Nonforfeitable
Accrued Benefit by the lesser of the amount in default (plus accrued
interest) or the Plan's security interest in that Nonforfeitable Accrued
Benefit.
[ ] (m) (SPECIFY) ________________________________________.
6.02 METHOD OF PAYMENT OF ACCRUED BENEFIT. The Advisory Committee will
apply Section 6.02 of the Plan with the following modifications: (CHOOSE (A) OR
AT LEAST ONE OF (B), (C), (D) AND (E))
[x] (a) No modifications.
[ ] (b) Except as required under Section 6.01 of the Plan, a lump sum
distribution is not available: _______________________.
[ ] (c) An installment distribution: (CHOOSE (1) OR AT LEAST ONE OF (2) OR
(3))
[ ] (1) Is not available under the Plan.
[ ] (2) May not exceed the lesser of ____ years or the maximum period
permitted under Section 6.02.
[ ] (3) (Specify) ___________________________________.
[ ] (d) The Plan permits the following annuity options: ______________________
___________.
Any Participant who elects a life annuity option is subject to the
requirements of Sections 6.04(A), (B), (C) and (D) of the Plan. See
Section 6.04(E). [NOTE: THE EMPLOYER MAY SPECIFY ADDITIONAL ANNUITY
OPTIONS IN AN ADDENDUM TO THIS ADOPTION AGREEMENT, NUMBERED 6.02(D).]
[ ] (e) If the Plan invests in qualifying Employer securities, as described in
Section 10.03(F), a Participant eligible to elect distribution under
Section 6.03 may elect to receive that distribution in Employer securities
only in accordance with the provisions of the addendum to this Adoption
Agreement, numbered 6.02(e).
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<PAGE>
6.03 BENEFIT PAYMENT ELECTIONS.
PARTICIPANT ELECTIONS AFTER SEPARATION FROM SERVICE. A Participant who is
eligible to make distribution elections under Section 6.03 of the Plan may
elect to commence distribution of his Nonforfeitable Accrued Benefit: (CHOOSE
AT LEAST ONE OF (A) THROUGH (C))
[ ] (a) As of any distribution date, but not earlier than __________of the ___
_____ Plan Year beginning after the Participant's Separation for Service.
[x] (b) As of the following date(s): (Choose at least one of Options (1)
through (6))
[ ] (1) Any distribution date after the close of the Plan Year in which
the Participant attains Normal Retirement Age.
[x] (2) Any distribution date following his Separation from Service with
the Employer.
[ ] (3) Any distribution date in the _____________ Plan Year(s) beginning
after his Separation from Service.
[ ] (4) Any distribution date in the Plan Year after the Participant
incurs ______________ Break(s) in Service (as defined in Article V).
[ ] (5) Any distribution date following attainment of age ___ and
completion of at least __ Years of Service (as defined in Article V).
[ ] (6) (SPECIFY) ___________________________________.
[ ] (c) (SPECIFY) ________________________________________.
The distribution events described in the election(s) made under Options
(a), (b) or (c) apply equally to all Accounts maintained for the Participant
unless otherwise specified in Option (c).
Participant Elections Prior to Separation from Service - Regular Matching
Contributions Account and Employer Contributions Account. Subject to the
restrictions of Article VI, the following distribution options apply to a
Participant's Regular Matching Contributions Account and Employer Contributions
Account prior to his Separation from Service: (CHOOSE (D) OR AT LEAST ONE OF
(E) THROUGH (H))
[ ] (d) No distribution options prior to Separation from Service.
[ ] (e) Attainment of Specified Age. Until he retires, the Participant has a
continuing election to receive all or any portion of his Nonforfeitable
interest in these Accounts after he attains: (CHOOSE (1) OR (2))
[ ] (1) Normal Retirement Age.
[ ] (2) ____ years of age and is at least ____% vested in these Accounts.
[NOTE: IF THE PERCENTAGE IS LESS THAN 100%, SEE THE SPECIAL VESTING
FORMULA IN SECTION 5.03.]
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[ ] (f) After a Participant has participated in the Plan for a period of not
less than ____ years and he is 100% vested in these Accounts, until he
retires, the Participant has a continuing election to receive all or any
portion of the Accounts. [Note: The number in the blank space may not be
less than 5.]
[x] (g) Hardship. A Participant may elect a hardship distribution prior to his
Separation from Service in accordance with the hardship distribution
policy: (Choose (1), (2) or (3); (4) is available only as an additional
option)
[ ] (1) Under Section 6.01(A)(4) of the Plan.
[x] (2) Under Section 14.11 of the Plan.
[ ] (3) Provided in the addendum to this Adoption Agreement, numbered
Section 6.03.
[ ] (4) In no event may a Participant receive a hardship distribution
before he is at least ____% vested in these Accounts. [Note: If the
percentage in the blank is less than 100%, see the special vesting
formula in Section 5.03.]
[ ] (h) (Specify) ________________________________________.
[NOTE: THE EMPLOYER MAY USE AN ADDENDUM, NUMBERED 6.03, TO PROVIDE ADDITIONAL
LANGUAGE AUTHORIZED BY OPTIONS (B)(6), (C), (G)(3) OR (H) OF THIS ADOPTION
AGREEMENT SECCTION 6.03.]
PARTICIPANT ELECTIONS PRIOR TO SEPARATION FROM SERVICE - DEFERRAL CONTRIBUTIONS
ACCOUNT, QUALIFIED MATCHING CONTRIBUTIONS ACCOUNT AND QUALIFIED NONELECTIVE
CONTRIBUTIONS ACCOUNT. Subject to the restrictions of Article VI, the following
distribution options apply to a Participant's Deferral Contributions Account,
Qualified Matching Contributions Account and Qualified Nonelective
Contributions Account prior to his Separation from Service: (CHOOSE (I) OR AT
LEAST ONE OF (J) THROUGH (L))
[ ] (i) No distribution options prior to Separation from Service.
[ ] (j) Until he retires, the Participant has a continuing election to
receive all or any portion of these Accounts after he attains: (CHOOSE
(1) OR (2))
[ ] (1) The later of Normal Retirement Age or age 59-1/2.
[ ] (2) Age ____ (at least 59-1/2).
[x] (k) Hardship. A Participant, prior to this Separation from Service, may
elect a hardship distribution from his Deferral Contributions Account in
accordance with the hardship distribution policy under Section 14.11 of
the Plan.
[ ] (l) (SPECIFY) __________________________________ [NOTE: OPTION (L) MAY NOT
PERMIT IN SERVICE DISTRIBUTIONS PRIOR TO AGE 59-1/2 (OTHER THAN HARDSHIP)
AND MAY NOT MODIFY THE HARDSHIP POLICY DESCRIBED IN SECTION 14.11.]
<PAGE>
SALE OF TRADE OR BUSINESS/SUBSIDIARY. If the Employer sells substantially
all of the assets (within the meaning of Code (section mark)409(d)(2))
used in a trade or business or sells a subsidiary (within the meaning of
Code (section mark)409(d)(3)), a Participant who continues employment
with the acquiring corporation is eligible for distribution from his
Deferral Contributions Account. Qualified Matching Contributions
Account and Qualified Nonelective Contributions Account: (CHOOSE (M) OR (N)).
[ ] (m) Only as described in this Adoption Agreement Section 6.03 for
distributions prior to Separation from Service.
[x] (n) As if he has a Separation from Service. After March 31, 1988, a
distribution authorized solely by reason of this Option (n) must
constitute a lump sum distribution, determined in a manner consistent
with Code (section mark)401(k)(10) and the applicable Treasury
regulations.
6.04 ANNUITY DISTRIBUTIONS TO PARTICIPANTS AND SURVIVING SPOUSES.
The annuity distribution requirements of Section 6.04: (CHOOSE (A) OR (B)).
[x] (a) Apply only to a Participant described in Section 6.04(E) of the
Plan (relating to the profit sharing exception to the joint and
survivor requirements).
[ ] (b) Apply to all Participants.
ARTICLE IX
ADVISORY COMMITTEE - DUTIES WITH RESPECT TO PARTICIPANTS' ACCOUNTS
9.10 VALUE OF PARTICIPANT'S ACCRUED BENEFIT. If a distribution (other
than a distribution from a segregated Account and other than a corrective
distribution described in Sections 14.07, 14.08, 14.09 or 14.10 of the
Plan) occurs more than 90 days after the most recent valuation date, the
distribution will include interest at: (Choose (a), (b) or (c)).
[x] (a) 0% per annum. [NOTE: THE PERCENTAGE MAY EQUAL 0%.]
[ ] (b) The 90 day Treasury bill rate in effect at the beginning of the
current valuation period.
[ ] (c) (SPECIFY) .
9.11 ALLOCATION AND DISTRIBUTION OF NET INCOME GAIN OR LOSS. Pursuant
to Section 14.12, to determine the allocation of net income, gain or loss:
(COMPLETE ONLY THOSE ITEMS, IF ANY, WHICH ARE APPLICABLE TO THE EMPLOYER'S
PLAN).
[x] (a) For salary reduction contributions, the Advisory Committee will:
(CHOOSE (1), (2), (3), (4) OR (5)).
[ ](1) Apply Section 9.11 without modification.
[ ](2) Use the segregated account approach described in Section 14.12.
[ ](3) Use the weighted average method described in Section 14.12,
based on a ___________ weighting period.
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[x] (4) Treat as par the relevant Account at the beginning of the
valuation period 100% of the salary reduction contributions:
(CHOOSE (I) OR (II)).
[x] (i) made during that valuation period.
[ ] (ii) made by the following specified time:
[ ] (5) Apply the allocation method described in the addendum to this
Adoption Agreement numbered 9.11(a).
[x] (b) For matching contributions, the Advisory Committee will: (CHOOSE
(1), (2), (3) OR (4)).
[ ] (1) Apply Section 9.11 without modification.
[ ] (2) Use the weighted average method described in Section 14.12, based
on a weighting period.
[x] (3) Treat as part of the relevant Account at the beginning of the
valuation period 100% of the matching contributions allocated during
the valuation period.
[ ] (4) Apply the allocation method described in the addendum to this
Adoption Agreement numbered 9.11(b).
[ ] (c) For Participant nondeductible contributions, the Advisory Committee
will: (Choose (1), (2), (3), (4), or (5)).
[ ] (1) Apply section 9.11 without modification.
[ ] (2) Use the segregated account approach described in Section 14.12.
[ ] (3) Use the weighted average method described in Section 14.12,
based on a weighting period.
[ ] (4) Treat as part of the relevant Account at the beginning of the
valuation period % of the Participant nondeductible contributions:
(CHOOSE (I) OR (II)).
[ ] (i) made during that valuation period.
(ii) made by the following specified time:
[ ] (5) Apply the allocation method described in the addendum to this
Adoption Agreement numbered 9.11(c).
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<PAGE>
ARTICLE X
TRUSTEE AND CUSTODIAN, POWERS AND DUTIES
10.03 INVESTMENT POWERS. Pursuant to Section 10.03[F] of the Plan, the
aggregate investments in qualifying Employer securities and in qualifying
Employer real property: (CHOOSE (a) OR (b)).
[ ] (a) May not exceed 10% of Plan assets.
[x] (b) May not exceed 0% of Plan assets. [NOTE: THE PERCENTAGE MAY NOT
EXCEED 100%.]
10.14 VALUATION OF TRUST. In addition to each Accounting Date, the
Trustee must value the Trust Fund on the following valuation date(s):
(CHOOSE (A) OR (B)).
[ ] (a) No other mandatory valuation dates.
[x] (b) (Specify) As of any business day on which the financial markets are
open.
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EFFECTIVE DATE ADDENDUM
(Restated Plan Only)
The Employer must complete this addendum only if the restated Effective
Date specified in Adoption Agreement Section 1.18 is different than the
restated effective date for at least one of the provisions listed in this
addendum. In lieu of the restated Effective Date in Adoption Agreement
Section 1.18, the following special effective dates apply: (Choose whichever
elections apply).
[ ] (a) COMPENSATION DEFINITION. The Compensation definition of Section 1.12
(other than the $200,000 limitation) is effective for Plan Years beginning
after . [Note: May not be effective later than the first day of the
first Plan Year beginning after the Employer executes this Adoption
Agreement to restate the Plan for the Tax Reform Act of 1986, if
applicable.]
[ ] (b) ELIGIBILITY CONDITIONS. The eligibility conditions specified in
Adoption Agreement Section 2.01 are effective for Plan Years beginning
after .
[ ] (c) SUSPENSION OF YEARS OF SERVICE. The suspension of Years of Service
rule elected under Adoption Agreement Section 2.03 is effective for
Plan Years beginning after .
[ ] (d) CONTRIBUTION/ALLOCATION FORMULA. The contribution formula elected
under Adoption Agreement Section 3.01 and the method of allocation
elected under Adoption Agreement Section 3.04 is effective for Plan Years
beginning after .
[ ] (e) ACCRUAL REQUIREMENTS. The accrual requirements of Section 3.06 are
effective for Plan Years beginning after .
[ ] (f) EMPLOYMENT CONDITION. The employment condition of Section 3.06 is
effective for Plan Years beginning after .
[ ] (g) ELIMINATION OF NET PROFITS. The requirement for the Employer not to
have net profits to contribute to this Plan is effective for Plan Years
beginning after . [NOTE: THE DATE SPECIFIED MAY NOT BE EARLIER THAN
DECEMBER 31, 1985.]
[ ] (h) VESTING SCHEDULE. The vesting schedule elected under Adoption
Agreement Section 5.03 is effective for Plan Years beginning after .
[ ] (i) ALLOCATION OF EARNINGS. The special allocation provisions elected
under Adoption Agreement Section 9.11 are effective for Plan Years
beginning after .
[ ] (j) (SPECIFY) .
For Plan Years prior to the special Effective Date, the terms of the Plan
prior to its restatement under this Adoption Agreement will control for
purposes of the designated provisions. A special Effective Date may not result
in the delay of a Plan provision beyond the permissible Effective Date under
any applicable law requirements.
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Execution Page
The Trustee (and Custodian, if applicable), by executing this Adoption
Agreement, accepts its position and agrees to all of the obligations,
responsibilities and duties imposed upon the Trustee (or Custodian) under
the Master Plan and Trust. The Employer hereby agrees to the provisions of
this Plan and Trust, and in witness of its agreement, the Employer by its
duly authorized officers, has executed this Adoption Agreement, and the
Trustee (and Custodian, if applicable) signified its acceptance, on this
30 day of November, 1993.
Name and EIN of Employer: Pluma, Inc. 56-1541893
------------------------
Signed: /s/ signature illegible
--------------------------
Name(s) of Trustee: First Union National Bank of North Carolina
Signed: /s/ signature illegible
---------------------------
Name of Custodian:
______________________________________
Signed:
-------------------------------------------
[NOTE: A TRUSTEE IS MANDATORY, BUT A CUSTODIAN IS OPTIONAL. SEE SECTION 10.03
OF THE PLAN.]
PLAN NUMBER. The 3-digit plan number the Employer assigns to this Plan for
ERISA reporting purposes (Form 5500 Series) is: 001.
USE OF ADOPTION AGREEMENT. Failure to complete properly the elections in this
Adoption Agreement may result in disqualification of the Employer's Plan.
The 3-digit number assigned to this Adoption Agreement (see page 1) is solely
for the Master Plan Sponsor's recordkeeping purposes and does not necessarily
correspond to the plan number the Employer designated in the prior paragraph.
MASTER PLAN SPONSOR. The Master Plan Sponsor identified on the first page of
the basic plan document will notify all adopting employers of any amendment of
this Master Plan or of any abandonment or discontinuance by the Master Plan
Sponsor of its maintenance of this Master Plan. For inquiries regarding the
adoption of the Master Plan, the Master Plan Sponsor's intended meaning of
any plan provisions or the effect of the option letter issued the Master Plan
Sponsor, please contact the Master Plan Sponsor at the following address
and telephone number: 1200 Tow First Union Center, T-12 Charlotte, NC 28288-1156
(704)374-4008.
RELIANCE ON OPTION LETTER. The Employer may not rely on the Master Plan
Sponsor's opinion letter covering this Adoption Agreement. For reliance on the
Plan's qualification, the Employer must obtain a determination letter from
the applicable IRS Key District office.
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<PAGE>
PLUMA, INC.
1995 STOCK OPTION PLAN
SECTION 1. GENERAL PURPOSE OF THE PLAN: DEFINITIONS
The name of the plan is the PLUMA, INC. 1995 Stock Option Plan (the
"Plan"). The purpose of the Plan is to encourage and enable the officers,
employees and directors of PLUMA, INC. (the "Company") together with independent
contractors rendering services to the Company and employees of such independent
contractors upon whose judgment, initiative and efforts the Company largely
depends for the successful conduct of its business to acquire a proprietary
interest in the Company. It is anticipated that providing such persons with a
direct stake in the Company's welfare will assure a closer identification of
their interests with those of the Company, thereby stimulating their efforts on
the company's behalf and strengthening their desire to remain with the Company.
The following terms shall be defined as set forth below:
"Act" means the Securities Exchange Act of 1934, as amended.
"Affiliate" shall have the same meaning as defined in Rule 12b-2 under
the Act.
"Award" or "Awards," except where referring to a particular category of
grant under the Plan, shall include Incentive Stock Options and Nonqualified
Stock Options.
"Board" means the Board of Directors of the Company.
"Cause" means and shall be limited to a vote of the Board of Directors
resolving that the participant should be dismissed as a result of (i) any
material breach by the participant of any agreement to which the participant and
the Company are parties, (ii) any act (other than retirement) or omission to act
by the participant which may have a material and adverse effect on the business
of the Company or on the participant's ability to perform services for the
Company, including, without limitation, the commission of any crime (other than
ordinary traffic violations), or (iii) any material misconduct or neglect of
duties by the participant in connection with the business or affairs of the
Company.
"Change of Control" is defined in Section 10.
"Code" means the Internal Revenue Code of 1986, as amended, and any
successor Code, and related rules, regulations and interpretations.
"Committee" means the Board or any Committee of the Board referred to
in Section 2.
"Disability" shall have the same meaning as given that term under the
Company's long-term disability plan, as in effect from time to time.
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"Disinterested Person" means an Independent Director who qualifies as
such under Rule 16b- 3(c)(2)(i) promulgated under the Act, or any successor
definition under the Act.
"Effective Date" means the date on which the Plan is approved by
shareholders as set forth in Section 12.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the related rules, regulations and interpretations.
"Fair Market Value" on any given date means the value per share of the
Company stock as of such date as appraised by Philpott, Ball & Company or other
appraisers hired by the Company for the purpose of valuing Company stock shares.
"Incentive Stock Option" means any Stock Option designated and
qualified as an "incentive stock option" as defined in Section 422 of the Code.
"Independent Contractor" shall mean any person or other legal entity
not considered an employee of the Company who renders services to the Company
for compensation paid by the Company.
"Independent Director" means a member of the Board who is not also an
employee of the Company or Affiliate of the Company.
"Nonqualified Stock Option" means any Stock Option that is not an
Incentive Stock Option.
"Option" or "Stock Option" means any option to purchase Shares granted
pursuant to Section 5.
"Optionee" means any person who is granted an option.
"Share" means one or more, respectively, of the Company's shares of
common stock, par value $1.00 per share, subject to adjustments pursuant to
Section 3.
SECTION 2. ADMINISTRATION OF PLAN: COMMITTEE AUTHORITY TO SELECT
PARTICIPANTS AND DETERMINE AWARDS
(a) Committee. The Plan shall be administered by the Committee, which
shall consist of not less than three members of the Board if the Committee is
comprised of less than the entire Board, and each member of the Committee shall
be a Disinterested Person after the date the Company closes any initial public
offering of its shares pursuant to a registration statement filed with the
United States Securities and Exchange Commission.
(b) Powers of Committee. The Committee shall have the power and
authority to grant Awards consistent with the terms of the Plan, including the
power and authority:
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(i) to select the officers, other employees (including
directors who are employees), independent directors and independent contractors
of the Company, and employees of independent contractors of the Company, to whom
Awards may be granted from time to time;
(ii) to determine the time or times of grant, and the extent,
if any, of Incentive Stock Options and Nonqualified Stock Options, or any
combination of the foregoing, granted to any one or more participants;
(iii) to determine the number of Shares to be covered by any
Award;
(iv) to determine and modify the terms and conditions,
including restrictions, not inconsistent with the terms of the Plan, of any
Award, which terms and conditions may differ among individual Awards and
participants, and to approve the form of written instruments evidencing the
Awards;
(v) to accelerate the exercisability or vesting of all or any
portion of any Award;
(vi) subject to the provisions of Section 5(b)(iii), to extend
the period in which Stock Options may be exercised;
(vii) to determine whether, to what extent, and under what
circumstances Shares and other amounts payable with respect to an Award shall be
deferred either automatically or at the election of the participant and whether
and to what extent the Company shall pay or credit amounts constituting interest
(at rates determined by the Committee) or dividends or deemed dividends on such
deferrals; and
(viii) to adopt, alter and repeal such rules, guidelines and
practices for administration of the Plan and for its own acts and proceedings as
it shall deem advisable; to interpret the terms and provisions of the Plan and
any Awards (including related written instruments); to make all determinations
it deems advisable for the administration of the Plan; to decide all disputes
arising in connection with the Plan; and to otherwise supervise the
administration of the Plan.
All decisions and interpretations of the Committee shall be binding on
all persons, including the Company and Plan participants.
SECTION 3. SHARES AVAILABLE UNDER THE PLAN; MERGERS; SUBSTITUTIONS
(a) Shares Issuable. The maximum number of Shares reserved and
available for issuance under the Plan shall be 350,000 Shares of the Company's
common stock, of which 180,000 Shares shall be reserved and available for
issuance pursuant to Incentive Stock Options as provided herein, and 170,000
Shares shall be reserved and available for issuance pursuant to Nonqualified
Stock Option as provided herein. For purposes of this limitation, the Shares
underlying any Awards which are forfeited, canceled, reacquired by the Company
or otherwise terminated (other than by exercise) shall be added back to the
Shares available for issuance under the Plan so long as the participants to
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<PAGE>
whom such Awards had been previously granted received no benefits of ownership
of the underlying Shares to which the Award related. Subject to such overall
limitation, Shares may be issued up to such maximum number pursuant to any type
or types of Award, including Incentive Stock Options. Shares issued under the
Plan may be authorized but unissued Shares or Shares reacquired by the Company.
(b) Stock Dividends, Mergers, etc. In the event of a stock dividend,
stock split or similar change in capitalization affecting the Shares, the
Committee shall make appropriate adjustments in (i) the number and kind of stock
or securities on which Awards may thereafter be granted, (ii) the number and
kind of stock or securities remaining subject to outstanding Awards, and (iii)
the option or purchase price in respect of such stock or securities. In the
event of any merger, consolidation, dissolution or liquidation of the Company,
the Committee in its sole discretion may, as to any outstanding Awards, make
such substitution or adjustment in the aggregate number of Shares reserved for
issuance under the Plan and the number and purchase price (if any) of Shares
subject to such Awards as it may determine and as may be permitted by the terms
of such transaction, or amend or terminate such Awards upon such terms and
conditions as it shall provide (which, in the case of the termination of the
vested portion of any Award, shall require payment or other consideration which
the Committee deems equitable in the circumstances) or take such other action as
it may determine equitable in the circumstances and within the powers and
authority granted to the Committee hereunder.
SECTION 4. ELIGIBILITY
Participants in the Plan may be Independent Contractors or employees of
Independent Contractors, or full or part-time officers and other employees of
the Company (including directors who are employees) and Independent Directors of
the Company who are responsible for or contribute to the management, growth, or
profitability of the Company and its subsidiaries and who are selected from time
to time by the Committee, in its sole discretion.
SECTION 5. STOCK OPTIONS
Any Stock Option granted under the Plan shall be in such form as the
Committee may from time to time approve. Each Option granted under this Plan
shall be evidenced by an Option Agreement, which shall be signed by an officer
of the Company and by the participant and which shall contain such provisions,
not inconsistent with the terms of this Plan, as may be approved by the
Committee.
(a) Types of Stock Options and Time Limit. Stock Options granted under
the Plan may be either Incentive Stock Options or Nonqualified Stock Options. To
the extent that any Option does not qualify as an Incentive Stock Option, it
shall constitute a Nonqualified Stock Option.
No Incentive Stock Option shall be granted under the Plan after
___________, 2005.
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<PAGE>
(b) Stock Options Granted to Employees, Officers, Directors,
Independent Directors and Independent Contractors and Employees of Independent
Contractors. The Committee in its discretion may grant Stock Options to
employees, including employees who are also officers and/or directors, directors
who are not employees of the Company, Independent Contractors and employees of
Independent Contractors. Stock Options granted pursuant to this Section 5(b)
shall be subject to the following terms and conditions and shall contain such
additional terms and conditions, not inconsistent with the terms of the Plan, as
the Committee shall deem desirable:
(i) Exercise Price. The exercise price per share for the
Shares covered by a Stock Option granted pursuant to this Section 5(b) shall be
determined by the Committee at the time of grant but shall not be less than 100%
of Fair Market Value on the date of grant. If a participant owns or is deemed to
own [by reason of the attribution rules applicable under Section 424(d) of the
code] more than 10% of the combined voting power of all classes of stock of the
Company and an Incentive Stock Option is granted to such participant, the option
price of such Incentive Stock Option shall not be less that 110% of Fair Market
Value on the grant date.
(ii) Option Term. The term of each Stock Option shall be fixed
by the Committee, but no Incentive Stock Option shall be exercisable more than
ten years after the date the Option is granted. If a participant owns or is
deemed to own [by reason of the attribution rules of Section 424 (d) of the
Code] more than 10% of the combined voting power of all classes of stock of the
Company and an Incentive Stock Option is granted to such participant, the term
of such Option shall be no more than five years from the date of grant.
(iii) Exercisability; Rights of a Shareholder. Stock Options
shall become vested and exercisable at such time or times, whether or not in
installments, as shall be determined by the Committee at or after the grant
date. The Committee may at any time accelerate the exercisability of all or any
portion of any Stock Option. An Optionee shall have the rights of a shareholder
only as to Shares acquired upon the exercise of a Stock Option and not as to
unexercised Stock Options.
(iv) Method of Exercise. Stock Options may be exercised in
whole or in part, by giving written notice of exercise to the Company,
specifying the number of Shares to be purchased. Payment of the purchase price
may be made by one or more of the following methods or by such other method as
the Committee may allow:
(A) In cash, by certified or bank check or other
instrument acceptable to the Committee;
(B) By the Optionee delivering to the Company a
properly executed exercise notice together with irrevocable instructions to a
broker to promptly deliver to the Company cash or a check payable and acceptable
to the Company to pay the purchase price; provided that in the event the
optionee chooses to pay the purchase price as so provided, the optionee and the
broker shall comply with such procedures and enter into such agreements of
indemnity and other agreements as the Committee shall prescribe as a condition
of such payment procedure. Payment instruments will be received subject to
collection.
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<PAGE>
The delivery of certificates representing the Shares to be purchased pursuant to
the exercise of a Stock Option will be contingent upon receipt from the Optionee
(or a purchaser acting in his stead in accordance with the provisions of the
Stock Option) by the Company of the full purchase price for such Shares and the
fulfillment of any other requirements contained in the Stock Option or
applicable provisions or laws.
(v) Termination by Reason of Death. If any Optionee's
employment by or contractual relationship with the Company terminates by reason
of death, the Stock Option may thereafter be exercised, to the extent
exercisable at the date of death, by the legal representative or legatee of the
Optionee, for a period of six months (or such longer periods as the Committee
shall specify at any time) from the date of death, or until the expiration of
the stated term of the Option, if earlier.
(vi) Termination by Reason of Disability.
(A) Any Stock Option held by an Optionee whose
employment by or contractual relationship with the Company has terminated by
reason of Disability may thereafter be exercised, to the extent it was
exercisable at the time of such termination, for a period of six months (or such
longer period as the Committee shall specify at any time) from the date of such
termination of employment, or until the expiration of the stated term of the
Option, if earlier.
(B) The Committee shall have sole authority and
discretion to determine whether a participant's employment has been terminated
by reason of Disability.
(C) Except as otherwise provided by the Committee at
the time of grant, the death of an Optionee during a period provided in this
Section 5(b) (vi) for the exercise of a Nonqualified Stock Option, shall extend
such period of six months from the date of death, subject to termination on the
expiration of the stated term of the Option, if earlier.
(vii) Termination for Cause. If any Optionee's employment by
or contractual relationship with the Company has been terminated for Cause, any
Stock Option held by such Optionee shall immediately terminate and be of no
further force and effect; provided, however, that the Committee may, in its sole
discretion, provide that such Stock Option can be exercised for a period of up
to 30 days from the date of termination of employment or until the expiration of
the stated term of the Option, if earlier.
(viii) Other Termination. Unless otherwise determined by the
Committee, if an Optionee's employment by or contractual relationship with the
Company terminates for any reason other than death, Disability, or for Cause,
any Stock Option held by such Optionee may thereafter be exercised, to the
extent it was exercisable on the date of termination for six months (or such
longer period as the Committee shall specify at any time) from the date of
termination or until the expiration of the stated term of the Option, if
earlier.
(ix) Annual Limit on Incentive Stock Options. To the extent
required for "Incentive Stock Option" treatment under Section 422 of the Code,
the aggregate Fair Market Value
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(determined as of the time of grant) of the Shares with respect to which
Incentive Stock Options granted under this Plan and any other plan of the
Company become exercisable for the first time by an Optionee during any calendar
year shall not exceed $100,000.
(x) Restrictions on Shares. Shares issued upon exercise of a
Stock Option shall be free of all restrictions under the Plan, except as
otherwise provided in this Plan.
SECTION 6. TAX WITHHOLDING
Payment by Participant. Each participant in this Plan shall, no later
than the date as of which the value of an Award of any Shares or other amounts
received thereunder first becomes includable in the gross income of the
participant for federal income tax purposes, pay to the Company, or make
arrangements satisfactory to the Committee regarding payment of any federal,
state, or local taxes of any kind required by law to be withheld with respect to
such income. The Company shall, to the extent permitted by law, have the right
to deduct any such taxes from any payment of any kind otherwise due to the
participant.
SECTION 7. TRANSFER, LEAVE OF ABSENCE, ETC.
For purpose of this Plan, the following event shall not be deemed a
termination of employment:
An approved leave of absence for military service or sickness,
or for any other purposes approved by the Company, if the
employee's right to re-employment is guaranteed either by a
statute or by contract or under the policy pursuant to which
the leave of absence was granted or if the Committee otherwise
so provides in writing.
SECTION 8. AMENDMENTS AND TERMINATION
The Board may, at any time, amend or discontinue the Plan and the
Committee may, at any time, amend or cancel any outstanding Award (at the same
or reduced exercise or purchase price or with no exercise or purchase price, but
such price, if any, must satisfy the requirements which would apply to the
amended Award as if it were then initially granted under this Plan) for the
purpose of satisfying changes in law or for any outstanding Award without the
participant's consent. To the extent required by the Code to ensure that Options
granted hereunder qualify as Incentive Stock Options, Plan amendments shall be
subject to approval by the Company's shareholders.
SECTION 9. STATUS OF PLAN
With respect to the portion of any Award which has not been exercised
and any payments in cash, shares or other consideration not received by a
participant, a participant shall have no rights
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greater than those of a general creditor of the Company unless the Committee
shall otherwise expressly determine in connection with any Award or Awards. In
its sole discretion, the Committee may authorize the creation of trusts or other
arrangements to meet the Company's obligations to deliver Shares or make
payments with respect to Awards hereunder, provided that the existence of such
trusts or other arrangements is consistent with the provisions of the foregoing
sentence.
SECTION 10. CHANGE OF CONTROL PROVISIONS
Upon the occurrence of a Change of Control as defined in this Section
10:
(a) Each outstanding Stock Option shall automatically become fully
exercisable notwithstanding any provision to the contrary herein.
(b) "Change of Control" shall mean the occurrence of any one of the
following events:
(i) any "person," as such term is used in Section 13 (d) and
14 (d) of the Act (other than the Company, any trustee, fiduciary or other
person or entity holding securities under any employee benefit plan of the
Company), together with all "affiliates" and "associates" (as such terms are
defined in Rule 12b-2 under the Act) of such person, shall become the
"beneficial owner" (as such term is defined in Rule 13d-3 under the Act),
directly or indirectly, of securities of the Company representing 40% or more of
either (A) the combined voting power of the Company's then outstanding
securities having the right to vote in an election of the Company's Board of
Directors ("Voting Securities"), or (B) the then outstanding Shares of the
Company (in either such case other than as a result of acquisition of securities
directly from the Company); or
(ii) persons who, as of ____________ _____, 1995, constitute
the Company's Board of Directors (the "Incumbent Directors") cease for any
reason, including, without limitation, as a result of a tender offer, proxy
contest, merger or similar transaction, to constitute at least a majority of the
Board, provided that any person becoming a director of the Company subsequent to
___________ ____, 1995 whose election or nomination for election was approved by
a vote of at least a majority of the Incumbent Directors shall, for purposes of
this Plan, be considered an Incumbent Director; or
(iii) the shareholders of the Company shall approve (A) any
consolidation or merger of the Company where the shareholders of the Company,
immediately prior to the consolidation or merger, would not, immediately after
the consolidation or merger, beneficially own (as such term is defined in Rule
13d-3 under the Act), directly or indirectly, shares representing in the
aggregate 50% of the voting shares of the corporation issuing cash and/or
securities in the consolidation or merger (or of its ultimate parent
corporation, if any), (B) any sale, lease, exchange or other contemplated
transfer (in one transaction or a series of transactions contemplated or
arranged by a party as a single plan) of all or substantially all of the assets
of the Company, or (C) any plan or proposal for the liquidation or dissolution
of the Company.
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Notwithstanding the foregoing, a "Change of Control" shall not be
deemed to have occurred for purposes of the foregoing clause (i) solely as the
result of an acquisition of securities by the Company which, by reducing the
number of Shares or other Voting Securities outstanding, increases (x) the
proportionate number of Shares beneficially owned by any person to 40% or more
of the Shares then outstanding or (y) the proportionate voting power represented
by the Voting Securities beneficially owned by any person to 40% or more of the
combined voting power of all then outstanding Voting Securities; provided,
however, that if any person referred to in clause (x) or (y) of this sentence
shall thereafter become the beneficial owner of any additional Shares or other
Voting Securities (other than pursuant to a stock split, stock dividend, or
similar transaction), then a "Change of Control" shall be deemed to have
occurred for purposes of the foregoing clause (i).
SECTION 11. GENERAL PROVISIONS
(a) No Distribution: Compliance with Legal Requirements. The Committee
may require each person acquiring Shares pursuant to an Award to represent to
and agree with the Company in writing that such person is acquiring the Shares
without a view to distribution thereof.
No Shares shall be issued pursuant to an Award until all
applicable legal requirements, if any, have been satisfied. The Committee may
require the placing of such stop-orders and restrictive legends on certificates
for Shares and Awards as it deems appropriate.
(b) Delivery of Stock Certificates. Delivery of stock certificates to
participants under this Plan shall be deemed effected for all purposes when the
Company or a stock transfer agent of the Company shall have delivered such
certificates in the United States mail, addressed to the participant, at the
participant's last known address on file with the Company.
(c) Other Compensation Arrangements: No Employment Rights. Nothing
contained in this Plan shall prevent the Board from adopting other or additional
compensation arrangements, including trusts, subject to shareholder approval if
such approval is required; and such arrangements may be either generally
applicable or applicable only in specific cases. The adoption of the Plan and
the grant of Awards do not confer upon any employee any right to continued
employment with the Company nor upon any director, independent director,
independent contractor or employee of an independent contractor any right to a
continuing contractual relationship.
SECTION 12. EFFECTIVE DATE OF PLAN
The Plan shall become effective upon approval by the holders of a
majority of the Shares of the Company present or represented and entitled to
vote at a meeting of shareholders. Subject to such approval by the shareholders,
and to the requirement that no Shares may be issued hereunder prior to such
approval, Stock Options and other Awards may be granted hereunder on and after
adoption of the Plan by the Board.
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SECTION 13. GOVERNING LAW
This Plan shall be governed by North Carolina law except to the extent
such law is preempted by federal law.
SECTION 14. CONFORMITY TO SECURITIES LAWS
After the completion by the Company of any initial public offering of
its Shares pursuant to a registration statement filed with the United States
Securities and Exchange Commission, this Plan is intended to conform to the
extent necessary with all provisions of the Act and any and all regulations and
rules promulgated by the Securities and Exchange Commission thereunder,
including without limitation Rule 16b-3. Notwithstanding anything herein to the
contrary, the Plan shall be administered and Awards shall be granted and may be
exercised, only in such a manner as to conform to such laws, rules and
regulations. To the extent permitted by applicable law, the Plan and Awards
granted hereunder shall be deemed amended to the extent necessary to conform to
such laws, rules and regulations.
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INCENTIVE STOCK OPTION AGREEMENT
THIS AGREEMENT is made this, the ______ day of
________________, 19____, by and between PLUMA, INC., a North Carolina
corporation (hereinafter called the "Company"), and ________________________
(hereinafter called "Employee").
WHEREAS, the Employee is a valued and productive member of the
Company's management team; and
WHEREAS, the Company considers it desirable and in its best
interests that the Employee be given an inducement to acquire a proprietary
interest in the Company and an added incentive to advance the interests of the
Company in the form of options to purchase common shares of the Company; and
WHEREAS, the stock option granted hereunder is granted
pursuant to the terms of the Pluma, Inc. Stock Option Plan, dated October 26,
1995, and is to be an Incentive Stock Option as defined in Section 422 of the
Internal Revenue Code of 1986, as may be amended from time to time.
NOW, THEREFORE, in consideration of the premises, it is agreed
as follows:
1. Grant of Option. The Company grants to the Employee the
right and option to purchase from it, on the terms and conditions following, all
or any part of an aggregate of 2,000 shares of the authorized, issued and
outstanding $1 par value common shares of the Company. The purchase price shall
be $19.25 per share, which is the fair market value per share in the Company's
$1 par value common shares on the date of this Agreement. The Employee is hereby
granted the option to purchase shares of common stock in the company at the
times and for the number of shares indicated as follows: (a) on October 25,
1996, the Employee is granted the option to purchase 400 shares; (b) on October
25, 1997, the Employee is granted the option to purchase an additional 400
shares; (c) on October 25, 1998, the Employee is granted the option to purchase
an additional 400 shares; (d) on October 25, 1999, the Employee is granted the
option to purchase an additional 400 shares; and (e) on October 25, 2000, the
Employee is granted the option to purchase an additional 400 shares.
2. Time of Exercise of Option. All granted options must be
exercised, if at all, by the Employee on or before October 25, 2005 (hereinafter
referred to as the "Terminal Date"), provided that the aggregate fair market
value of stock with respect to which incentive stock options are exercisable
under this Agreement for the first time by the Employee during any calendar year
shall not exceed One Hundred Thousand Dollars ($100,000.00.)
3. Method of Exercise. The option shall be exercised by
written notice directed to the Company at its principal place of business,
accompanied by check in payment
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of the option price for the number of shares specified and paid for. The Company
shall make immediate delivery of such shares, provided that if any law or
regulation requires the Company to take any action with respect to the shares
specified in such notice before the issuance thereof, then the date of delivery
of such shares shall be extended for the period necessary to take such action.
4. Termination of Option. Except as otherwise stated in this
Agreement, the option, to the extent not previously exercised, shall terminate
as provided below:
(a) If the Employee's employment by or contractual
relationship with the Company terminates by reason of the Employee's
death, or if the Employee dies within the three (3) month period
following the termination of employment (excluding an Employee
discharged for cause as provided in subparagraph (c), below), the stock
option may thereafter be exercised, to the extent exercisable at the
date of death, by the legal representative or legatee of the Employee,
for a period of six (6) months from the date of the Employee's death,
or until the expiration of the stated term of the option, if earlier.
(b) Any stock option held by the Employee, whose employment by
or contractual relationship with the Company is terminated by reason of
disability (as such term is defined in the Pluma, Inc. 1995 Stock
Option Plan) may thereafter be exercised, to the extent it was
exercisable at the time of such termination, for a period of six (6)
months from the date of such termination of employment, or until the
expiration of the stated term of the option, if earlier.
(c) If the Employee's employment by or contractual
relationship with the Company has been terminated for cause (as defined
in the Company's 1995 Stock Option Plan), any stock option held by such
Employee shall immediately terminate and be of no further force and
effect; provided, however, the Company, acting through the appropriate
committee of its Board of Directors, may, in its sole discretion,
provide that such stock option can be exercised for a period of up to
thirty (30) days from the date of termination of employment or until
the expiration of the stated term of the option, if earlier.
(d) If the Employee's employment by or contractual
relationship with the Company terminates for any reason other than
Death, Disability or for Cause, any stock option held by the Employee
may thereafter be exercised, to the extent it was exercisable on the
date of termination for three (3) months from the date of termination
or until the expiration of the stated term of the option, if earlier.
5. Limitations. In accordance with the terms of Section 422
of the Internal Revenue Code of 1986, the option granted under this Agreement
is limited so that the
2
<PAGE>
aggregate fair market value of the stock which the Employee may purchase
hereunder in any calendar year does not exceed $100,000.
6. Limitation Upon Transfer.
(a) During the lifetime of the Employee, this option and all
rights granted in this Agreement shall be exercisable only by the
Employee, and except as paragraph 4 otherwise provides, this option and
all rights granted under this contract shall not be transferred,
assigned, pledged, or hypothecated in any way (whether by operation of
law or otherwise), other than by will or the laws of descent and
distribution of the state of residence of Employee, or pursuant to a
qualified domestic relations order as defined by the Internal Revenue
Code of 1986, as amended, 26 United States Code ss. 1, et seq., or
Title I of the Employee Retirement Income Security Act or the rules
thereunder. Furthermore, this option shall not be subject to execution,
attachment, or similar process. Upon any attempt to transfer, assign,
pledge, hypothecate, or otherwise dispose of such option or of such
rights contrary to the provisions in this Agreement, or upon the levy
of any attachment or similar process upon such option or such rights,
such option and such rights shall immediately become null and void.
(b) The underlying shares of stock acquired by the Employee as
a result of the exercise of any stock option granted herein shall be
held by the Employee and shall not be transferred, assigned, pledged or
hypothecated in any way by the Employee (other than by will or the laws
of descent and distribution of the state of residence of the Employee,
or pursuant to a qualified domestic relations order as defined by the
Internal Revenue Code of 1986, as amended, 26 United States Code ss. 1,
et seq., or Title I of the Employee Retirement Security Act or the
rules thereunder), and shall not be subject to execution, attachment,
or similar process, for a period of two years and one day from the date
of grant of the stock option so exercised, or for a period of one year
and one day after the stock is transferred to the Employee, whichever
is later.
7. Reclassification, Consolidation, or Merger. If and to the
extent that the number of issued common shares of the Company shall be increased
or reduced by a change in par value, split-up, reclassification, distribution of
a dividend payable in shares, or the like, the number of shares subject to
option and the option price for them shall be proportionately adjusted. If the
Company is reorganized or consolidated or merged with another corporation, the
Employee shall be entitled to receive options covering shares of such
reorganized, consolidated, or merged company in the same proportion, at an
equivalent price, and subject to the same conditions. For purposes of the
preceding sentence, the excess of the aggregate fair market value of the shares
subject to the option immediately after the reorganization, consolidation, or
merger over the aggregate option price of such shares shall not be more than the
excess of the aggregate fair market value of all shares subject to the option
immediately before such reorganization, consolidation, or merger over the
aggregate
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<PAGE>
option price of such shares. The new option or assumption of the old option
shall not give the Employee additional benefits which he did not have under the
old option.
8. Rights Prior to Exercise of Option. The option is
nontransferable by the Employee, except as herein otherwise provided in
paragraph 4 (a) hereof, and during his lifetime is exercisable only by him, and
the Employee shall have no rights as a shareholder in the option shares until
payment of the option price and delivery to him of such shares as herein
provided.
9. Approval by Shareholders. The granting of the option is
being made pursuant to a plan adopted by the Board of Directors of the Company
on October 26, 1995, which includes the aggregate number of 180,000 common
shares of the Company which may be issued under incentive stock options, and
which specifies that the Employee is a member of the class of employees eligible
to receive such options. Such plan was approved by the shareholders of the
Company on October 26, 1995. The Company will submit this Agreement for approval
to the shareholders at the earliest practical date.
10. Notices. Any notice to be given under the terms of this
Agreement shall be addressed to the Company in care of its Secretary at Pluma,
Inc., 801 Fieldcrest Road, Eden, NC 27288, or at such other address as either
party may hereafter designate in writing to the other. Any such notice shall be
deemed duly given when enclosed in a properly sealed envelope or wrapper
addressed as herein required certified and deposited (postage and certification
fee prepaid) in a post office or branch post office regularly maintained by the
United States Government.
11. Binding Effect. This Agreement shall be binding upon the
heirs, executors, administrators, and successors of the parties hereto.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed the day and year first above written.
PLUMA, INC.
[CORPORATE SEAL] By: ______________________________
___________ President
ATTEST:
- ---------------------------------
__________ Secretary
___________________________(SEAL)
________________________, Employee
4
<PAGE>
<PAGE>
Exhibit 10.14
NONSTATUTORY STOCK OPTION AGREEMENT
THIS AGREEMENT is made this, the 26th day of October, 1995, by
and between PLUMA, INC., a North Carolina corporation (hereinafter called the
"Company"), and ____________________________, (hereinafter called
"______________").
WHEREAS, the __________________ has rendered valuable service
and advice to the Company, and the Company desires to foster his continued
loyalty to the Company; and
WHEREAS, the Company considers it desirable and in its best
interests that the ____________________ be given an inducement to acquire and/or
to increase his proprietary interest in the Company in the form of options to
purchase common shares of the Company; and
WHEREAS, the stock option granted hereunder is granted
pursuant to the terms of the Pluma, Inc. Stock Option Plan, dated October 26,
1995, and is to be a Nonstatutory Stock Option.
NOW, THEREFORE, in consideration of the premises, it is agreed
as follows:
1. Grant of Option. The Company grants to the
_________________ the right and option to purchase from it, on the terms and
conditions following, all or any part of an aggregate of 10,000 shares of the
authorized, issued and outstanding $1 par value common shares of the Company.
The purchase price shall be $19.25 per share, which is the fair market value per
share in the Company's $1 par value common shares on the date of this Agreement.
The _________________ is hereby granted the option to purchase shares of common
stock in the company at the times and for the number of shares indicated as
follows: (a) on October 25, 1996, the _______________________ is granted the
option to purchase 2,000 shares; (b) on October 25, 1997, the
_______________________ is granted the option to purchase an additional 2,000
shares; (c) on October 25, 1998, the ____________________ is granted the option
to purchase an additional 2,000 shares; (d) on October 25, 1999, the
_______________________ is granted the option to purchase an additional 2,000
shares; and (e) on October 25, 2000, the ______________________ is granted the
option to purchase an additional 2,000 shares.
2. Time of Exercise of Option. All granted options must be
exercised, if at all, by the ___________________________ on or before October
25, 2005.
3. Method of Exercise. The option shall be exercised by
written notice directed to the Company at its principal place of business,
accompanied by check in payment of the option price for the number of shares
specified and paid for. The Company shall make immediate delivery of such
shares, provided that if any law or regulation requires the
1
<PAGE>
Company to take any action with respect to the shares specified in such notice
before the issuance thereof, then the date of delivery of such shares shall be
extended for the period necessary to take such action.
4. Termination of Option. Except as otherwise stated in this
Agreement, the option, to the extent not previously exercised, shall terminate
as provided below:
(a) If the _____________________'s contractual relationship
with the Company terminates by reason of his death, the stock option
may thereafter be exercised, to the extent exercisable at the date of
death, by the legal representative or legatee of the
______________________, for a period of three (3) months from the date
of the Independent Contractor's death, or until the expiration of the
stated term of the option, if earlier.
(b) Any stock option held by the ________________________,
whose contractual relationship with the Company is terminated by reason
of disability (as such term is defined in the Pluma, Inc. 1995 Stock
Option Plan) may thereafter be exercised, to the extent it was
exercisable at the time of such termination, for a period of three (3)
months from the date of such termination, or until the expiration of
the stated term of the option, if earlier.
(c) If the ________________________'s contractual relationship
with the Company has been terminated for cause (as defined in the
Company's 1995 Stock Option Plan), any stock option held by such
________________________ shall immediately terminate and be of no
further force and effect; provided, however, the Company, acting
through the appropriate committee of its Board of Directors, may, in
its sole discretion, provide that such stock option can be exercised
for a period of up to thirty (30) days from the date of termination of
employment or until the expiration of the stated term of the option, if
earlier.
(d) If the __________________________'s contractual
relationship with the Company terminates for any reason other than
Death, Disability or for Cause, any stock option held by the
________________________ may thereafter be exercised, to the extent it
was exercisable on the date of termination for three (3) months from
the date of termination or until the expiration of the stated term of
the option, if earlier.
5. Limitation Upon Transfer.
During the lifetime of the ______________________, this option
and all rights granted in this Agreement shall be exercisable only by
the ________________________, and except as paragraph 4 otherwise
provides, this
2
<PAGE>
option and all rights granted under this contract shall not be
transferred, assigned, pledged, or hypothecated in any way (whether by
operation of law or otherwise), other than by will or the laws of
descent and distribution of the state of residence of
_________________________, or pursuant to a qualified domestic
relations order as defined by the Internal Revenue Code of 1986, as
amended, 26 United States Code ss. 1, et seq., or Title I of the
Employee Retirement Income Security Act or the rules thereunder.
Furthermore, this option shall not be subject to execution, attachment,
or similar process. Upon any attempt to transfer, assign, pledge,
hypothecate, or otherwise dispose of such option or of such rights
contrary to the provisions in this Agreement, or upon the levy of any
attachment or similar process upon such option or such rights, such
option and such rights shall immediately become null and void.
6. Reclassification, Consolidation, or Merger. If and to the
extent that the number of issued common shares of the Company shall be increased
or reduced by a change in par value, split-up, reclassification, distribution of
a dividend payable in shares, or the like, the number of shares subject to
option and the option price for them shall be proportionately adjusted. If the
Company is reorganized or consolidated or merged with another corporation, the
_____________________ shall be entitled to receive options covering shares of
such reorganized, consolidated, or merged company in the same proportion, at an
equivalent price, and subject to the same conditions. For purposes of the
preceding sentence, the excess of the aggregate fair market value of the shares
subject to the option immediately after the reorganization, consolidation, or
merger over the aggregate option price of such shares shall not be more than the
excess of the aggregate fair market value of all shares subject to the option
immediately before such reorganization, consolidation, or merger over the
aggregate option price of such shares. The new option or assumption of the old
option shall not give the _____________________________ additional benefits
which he did not have under the old option.
7. Rights Prior to Exercise of Option. The option is
nontransferable by the _______________________________, except as herein
otherwise provided in paragraph 4 (a) hereof, and during his lifetime is
exercisable only by him, and the ___________________________ shall have no
rights as a shareholder in the option shares until payment of the option price
and delivery to him of such shares as herein provided.
8. Approval by Shareholders. The granting of the option is
being made pursuant to a plan adopted by the Board of Directors of the Company
on October 26, 1995, which includes the aggregate number of 132,000 common
shares of the Company which may be issued as nonstatutory stock options, and
which specifies that the ____________________________ is a member of the class
of employees eligible to receive such options. Such plan was approved by the
shareholders of the Company on October 26, 1995. The Company will submit this
Agreement for approval to the shareholders at the earliest practical date.
3
<PAGE>
9. Notices. Any notice to be given under the terms of this
Agreement shall be addressed to the Company in care of its Secretary at Pluma,
Inc., 800 W. Fieldcrest Road, Eden, NC 27288, or at such other address as either
party may hereafter designate in writing to the other. Any such notice shall be
deemed duly given when enclosed in a properly sealed envelope or wrapper
addressed as herein required certified and deposited (postage and certification
fee prepaid) in a post office or branch post office regularly maintained by the
United States Government.
10. Binding Effect. This Agreement shall be binding upon the
heirs, executors, administrators, and successors of the parties hereto.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed the day and year first above written.
PLUMA, INC.
[CORPORATE SEAL] By: ______________________________
___________ President
ATTEST:
- ---------------------------------
__________ Secretary
___________________________(SEAL)
__________________________________
__________________________________
4
<PAGE>
Exhibit 10.15
MULTI ACCOUNT 401(k) "MIRROR" PLAN SAMPLE
Nonqualified Deferred Compensation
Prototype Plan Document
(General MCG Version)
For Review by Client's Legal Counsel
1. Multi-Account deferral crediting options (401(k) plan funds) in 5%
allocation amounts
2. Deferral amounts:
(a) 100% of base salary
(b) 100% of bonus compensation (FICA from undeferred salary)
3. Distribution Election Options:
(a) Retirement (Payout over up to 10 years)
(b) Specific Future Year (Payout over up to 10 years). No limits
on use.
(c) Change of Control
4. Special Distributions
(a) Death, disability or termination (5 years)
(b) Hardship
(c) Partial Forfeiture when non-hardship withdrawal (subject to
committee approval) (10% amount, loss of plan participation
for 1 year and committee approval)
(d) Small accounts under $25,000 lump sum at committee discretion
5. Company may provide employee match on some of the deferred funds on a
fully discretionary basis. Salary deferral is required to earn the
match. No vesting requirements on company matches (100% vested).
6. Minimum deferral of $1000 (salary & bonus)
7. Company pays annual administration fee until Participant is notified
REVIEWED & REVISED 12/18/96 SRR
<PAGE>
PLUMA, INC.
DEFERRED COMPENSATION PLAN
12/18/96
Note: This page should always accompany the attached prototype document
<PAGE>
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ARTICLE PAGE
<S> <C>
ARTICLE I
INTRODUCTION 1
1.1 Name of Plan 1
1.2 Purposes of Plan 1
1.3 "Top Hat" Pension Benefit Plan 1
1.4 Funding 1
1.5 Effective Date 1
1.6 Administration 1
ARTICLE II
DEFINITIONS AND CONSTRUCTION 2
2.1 Definitions 2
2.2 Number and Gender 6
2.3 Heading 6
ARTICLE III
PARTICIPATION AND ELIGIBILITY 7
3.1 Participation 7
3.2 Commencement of Participation 7
3.3 Cessation of Active Participation 7
ARTICLE IV
DEFERRALS AND MATCHING CONTRIBUTIONS 8
4.1 Deferrals by Participants 8
4.2 Effective Date of Deferred Compensation Agreement 8
4.3 Modification or Revocation of Election of Participant 8
4.4 Matching Contributions 9
ARTICLE V
VESTING, DEFERRAL PERIODS AND EARNINGS ELECTION 10
5.1 Vesting 10
5.2 Deferral Periods 10
5.3 Earnings Election 10
ARTICLE VI
ACCOUNTS 11
6.1 Establishment of Bookkeeping Accounts 11
6.2 Subaccounts 11
6.3 Hypothetical Nature of Accounts 11
<PAGE>
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
ARTICLE VII
PAYMENT OF ACCOUNT 12
7.1 Timing of Distribution of Benefits 12
7.2 Adjustment for Investment Gains and Losses Upon a Distribution 13
7.3 Form of Payment or Payments 13
7.4 Designation of Beneficiaries 14
7.5 Unclaimed Benefits 14
7.6 Hardship Withdrawals 14
7.7 Other Withdrawals 15
ARTICLE VIII
ADMINISTRATION 16
8.1 Committee 16
8.2 General Powers of Administration 16
8.3 Costs of Administration 16
8.4 Indemnification of Committee 16
ARTICLE IX
DETERMINATION OF BENEFITS, CLAIMS
PROCEDURE AND ADMINISTRATION 17
9.1 Claims 17
9.2 Claim Decision 17
9.3 Request for Review 17
9.4 Review of Decision 18
ARTICLE X
MISCELLANEOUS 19
10.1 Not Contract of Employment 19
10.2 Non-Assignability of Benefits 19
10.3 Withholding 19
10.4 Amendment and Termination 19
10.5 No Trust Created 20
10.6 Unsecured General Creditor Status Of Employee 20
10.7 Severability 20
10.8 Governing Laws 20
10.9 Binding Effect 21
10.10 Entire Agreement 21
</TABLE>
<PAGE>
ARTICLE I - INTRODUCTION
- --------------------------------------------------------------------------------
1.1 Name of Plan.
Pluma, Inc. (the "Company") hereby adopts the Pluma, Inc. Deferred
Compensation Plan for Selected Management Employees (the "Plan").
1.2 Purposes of Plan.
The purposes of the Plan are to provide certain eligible employees of
the Company the opportunity to defer elements of their compensation
which might not otherwise be deferrable under other Company plans,
including the Pluma, Inc. Profit Sharing 401(k) Plan (the "401(k)
Plan") and to receive the benefit of additions to their deferral
comparable to those obtainable under the 401(k) Plan in the absence of
certain restrictions and limitations in the Internal Revenue Code.
1.3 "Top Hat" Pension Benefit Plan.
The Plan is an "employee pension benefit plan" within the meaning of
ERISA. However, the Plan is unfunded and maintained for a select group
of management or highly compensated employees and, therefore, it is
intended that the Plan will be exempt from Parts 2, 3 and 4 of Title 1
of ERISA. The Plan is not intended to qualify under Code section
401(a).
1.4 Funding.
The Plan is unfunded. All benefits will be paid from the general assets
of the Company.
1.5 Effective Date.
The Plan is effective as of December 31, 1996.
1.6 Administration.
The Plan shall be administered by the Committee.
1
<PAGE>
ARTICLE II - DEFINITIONS AND CONSTRUCTION
- --------------------------------------------------------------------------------
2.1 Definitions.
For purposes of the Plan, the following words and phrases shall have
the respective meanings set forth below, unless their context clearly
requires a different meaning:
(a) "Account" means the bookkeeping account maintained by the
Company on behalf of each Participant pursuant to Article VI
that is credited with Base Salary Deferrals, Bonus Deferrals
and Matching Contributions made by the Company on behalf of
each Participant pursuant to Article IV, and the earnings and
losses on such amounts as determined in accordance with
Article V. As of any Valuation Date, a Participant's benefit
under the Plan shall be equal to the amount credited to his
Account as of such date.
(b) "Base Salary" means the base rate of cash compensation paid by
the Company to or for the benefit of a Participant for
services rendered or labor performed while a Participant,
including base pay a Participant could have received in cash
in lieu of (A) deferrals pursuant to Section 4.1 and (B)
contributions made on his behalf to any qualified plan
maintained by the Company or to any cafeteria plan under
section 125 of the Code maintained by the Company.
(c) "Base Salary Deferral" means the amount of a Participant's
Base Salary which the Participant elects to have withheld on a
pre-tax basis from his Base Salary and credited to his Account
pursuant to Section 4.1.
(d) "Beneficiary" means the person or persons designated by the
Participant in accordance with Section 7.4.
(e) "Bonus Compensation" means the amount awarded to a Participant
for a Plan Year under any bonus plan maintained by the
Company.
(f) "Bonus Deferral" means the amount of a Participant's Bonus
Compensation which the Participant elects to have withheld on
a pre-tax basis from his Bonus Compensation and credited to
his account pursuant to Section 4.1.
(g) "Change In Control" means the happening of any of the
following events:
(i) An acquisition by an individual, entity or
group (within the meaning of Section
13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the
"Exchange Act") (a "Person") of beneficial
2
<PAGE>
ARTICLE II - DEFINITIONS AND CONSTRUCTION
- --------------------------------------------------------------------------------
ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 20%
or more of either (1) the then outstanding
shares of common stock of the Company (the
"Outstanding Company Common Stock") or (2)
the combined voting power of the then
outstanding voting securities of the Company
entitled to Vote generally in the election
of directors (the "Outstanding Company
Voting Securities"); provided, however, that
the following acquisitions shall not
constitute a Change of Control: (A) any
acquisition directly from the Company
(excluding an acquisition by virtue of the
exercise of a conversion privilege), (B) any
acquisition by the Company, (C) any
acquisition by any employee benefit plan (or
related trust) sponsored or maintained by
the Company or any of its affiliated
companies or (D) any acquisition of the
Company by any corporation pursuant to a
reorganization, merger, consolidation, if,
following such reorganization, merger or
consolidation, the conditions described in
clauses (i), (ii) and (iii) of subsection
(iii) of this Section 2.1(g) are satisfied;
or
(ii) Individuals who, as of the date hereof,
constitute the Board (the Incumbent Board")
cease for any reason to constitute at least
a majority of the Board; provided, however,
that any individual becoming a director
subsequent to the date hereof whose
election, or nomination for election by the
Company's shareholders, was approved by a
vote of at least a majority of the directors
then comprising the Incumbent Board shall be
considered as though such individual were a
member of the Incumbent Board, but
excluding, for this purpose, any such
individual whose initial assumption of
office occurs as a result of either an
actual or threatened election contest (as
such terms are used in Rule 14a-11 of
Regulation 14A promulgated under the
Exchange Act) or other actual or threatened
solicitation of proxies or consents by or on
behalf of a Person other than the Board; or
(iii) Approval by the shareholders of the Company
of a reorganization, merger or consoli
dation, in each case, unless, following such
reorganization, merger of consolidation
(1) all or substantially all of the
individuals and entities who were beneficial
owners, respectively, of the Outstanding
Company Common Stock and Outstanding Company
Voting Securities immediately prior to
such reorganization,
3
<PAGE>
ARTICLE II - DEFINITIONS AND CONSTRUCTION
- --------------------------------------------------------------------------------
merger or consolidation
beneficially own, directly or indirectly,
more than 50% of, respectively, the then
outstanding shares of common stock and the
combined voting power of the then
outstanding voting securities entitled to
vote generally in the election of directors,
as the case may be, of the corporation
resulting from such reorganization, merger
or consolidation of the Outstanding Company
Common Stock and Outstanding Company Voting
Securities, as the case may be, (2) no
Person (excluding the Company and any
employee benefit plan (or related trust) of
the Company or of the corporation resulting
from such reorganization, merger or
consolidation and any Person beneficially
owning, immediately prior to such
reorganization, merger or consolidation,
directly or indirectly, 20% or more of the
Outstanding Company Common Stock or
Outstanding Company Voting Securities, as
the case may be) beneficially owns, directly
or indirectly, 20% or more of, respectively,
the then outstanding shares of common stock
of the corporation resulting from such
reorganization, merger or consolidation or
the combined voting power of the then
outstanding voting securities of such
corporation and (3) at least a majority of
the members of the board of directors of the
corporation resulting from such
reorganization, merger or consolidation were
members of the Incumbent Board at the time
of the execution of the initial agreement
providing for such reorganization, merger of
consolidation; or
(iv) The approval by the shareholders of the
Company of (1) a complete liquidation or
dissolution of the Company or (2) the sale
or other disposition of all or substantially
all of the assets of the Company; excluding,
however, such a sale or other disposition to
a corporation, with respect to which
following such sale or other disposition,
(A) more than 60% of, respectively, the
outstanding shares of common stock of such
corporation and the combined voting power of
the outstanding voting securities of such
corporation entitled to vote generally in
the election of directors will be
beneficially owned, directly or indirectly,
by all or substantially all of the
individuals and entities who were the
beneficial owners, respectively, of the
Outstanding Company Common Stock and
Outstanding Company Voting Securities
immediately prior to such sale or other
disposition in substantially the same
proportions as their ownership, immediately
4
<PAGE>
ARTICLE II - DEFINITIONS AND CONSTRUCTION
- --------------------------------------------------------------------------------
prior to such sale or other disposition, of
the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as
the case may be, (B) no Person (other than
the Company and any employee benefit plan
(or related trust) of the Company or of such
corporation and any Person beneficially
owning, immediately prior to such sale or
other disposition, 20% or more of the
Outstanding Company Common Stock or
Outstanding Company Voting Securities, as
the case may be) then beneficially owns,
directly or indirectly, 20% or more of,
respectively, the then outstanding shares of
common stock of such corporation and the
combined voting power of the then
outstanding voting securities of such
corporation entitled to vote generally in
the election of directors and (C)
individuals who were members of the
Incumbent Board will constitute at least a
majority of the members of the board of
directors of such corporation.
(h) "Code" means the Internal Revenue Code of 1986, as amended.
(i) "Committee" means the administrative committee appointed by
the Compensation Committee to administer the Plan in
accordance with Article VIII.
(j) "Company" means Pluma, Inc. and any successor thereto.
(k) "Compensation Committee" means the Compensation Committee of
the Directors.
(l) "Deferral Period" means the period of time for which a
Participant elects to defer receipt of the Base Salary
Deferrals, Bonus Deferrals and Matching Contributions credited
to such Participant's Account and shall be either the
Retirement Date, a period of years to a Specific Future Year
as specified in Section 5.2 or upon a Change In Control.
Deferral Periods shall be measured on the basis of Plan Years,
beginning with the Plan Year that commences immediately
following the Plan Year for which the applicable Base Salary
Deferrals, Bonus Deferrals and/or Matching Contributions are
credited to the Participant's Account.
(m) "Deferred Compensation Agreement" means the written agreement
(regardless of how they may be titled) as prescribed by the
Committee and entered into between the Company and a
Participant pursuant to which the Participant elects the
amount of his Base Salary and/or his Bonus Compensation to be
deferred into the Plan, and the form of payment for such
amounts, the Deferral Period and the deemed investment.
(n) "Directors" means the Board of Directors of the Company.
5
<PAGE>
ARTICLE II - DEFINITIONS AND CONSTRUCTION
- --------------------------------------------------------------------------------
(o) "Effective Date" means December 15, 1996.
(p) "Employee" means any common-law employee of the Company.
(q) "ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
(r) "401(k) Plan" means the Pluma, Inc. Profit Sharing 401(k) Plan.
(s) "Matching Contribution" means the amount, as determined by the
Company on an annual basis, credited by the Company to the
Account of each Participant based on such Participant's Base
Salary Deferrals.
(t) "Participant" means each Employee who has been selected for
participation in the Plan and who has become a Participant
pursuant to Article III.
(u) "Plan" means the Pluma, Inc. Deferred Compensation Plan, as
amended from time to time.
(v) "Plan Year" means the twelve-consecutive month period
commencing January 1 of each year ending on December 31.
(w) "Retirement Date" means the date the Participant is eligible
for and retires under any qualified retirement plan maintained
by the Company.
(x) "Specific Future Year" means a calender year in the future
voluntarily elected by a participant to begin distribution of
Base Salary Deferrals, Bonus Deferrals and Matching
Contributions, limited only by the minimum and maximum
Deferral Periods.
(y) "Valuation Date" means the last business day of each calendar
month and each special valuation date designated by the
Committee.
2.2 Number and Gender.
Wherever appropriate herein, words used in the singular shall be
considered to include the plural and words used in the plural shall be
considered to include the singular. The masculine gender, where
appearing in the Plan, shall be deemed to include the feminine gender.
2.3 Headings.
The headings of Articles and Sections herein are included solely for
convenience, and if there is any conflict between such headings and the
text of the Plan, the text shall control.
6
<PAGE>
ARTICLE III - PARTICIPATION AND ELIGIBILITY
- --------------------------------------------------------------------------------
3.1 Participation.
Participants in the Plan are those employees who are (a) subject to the
income tax laws of United States, (b) members of a select group of
highly compensated or management Employees of the Company, which
Employees must meet the definition of a "Highly Compensated Employee"
as defined in the Treasury Regulations to Section 414 of the Code, as
amended, and (c) selected by the Committee, in its sole discretion, as
Participants. The Committee shall notify each Participant of his
selection as a Participant. Subject to the provisions of Section 3.3 a
Participant shall remain eligible to continue participation in the Plan
for each Plan Year following his initial year of participation in the
Plan. The initial Participants in the plan, having been selected as per
above, are signatories to this plan document by separate Addendum and
by so signing such Addendum agree to be bound by the terms and
provisions of this Plan. Additional participants, selected as per
above, will join in the Plan by signing separate addendum agreements
hereto.
As a participant in this plan, an employee may also be eligible for a
medical benefit continuation payment as determined by the Committee.
This payment may be made at the discretion of the Committee to
participants in this program when they have terminated employment with
the company on a year to year basis. The payment if made will be in an
amount equal to the tax due on the taxable income charged to said
participant for his/her continuation in coverage under the company's
medical program following termination.
3.2 Commencement of Participation.
An Employee shall become a Participant effective as of the date the
Committee determines, which date shall be on or after the date his
Deferred Compensation Agreement becomes effective. The initial
Participants in the Plan shall participate effective December 31, 1996.
3.3 Cessation of Active Participation.
Notwithstanding any provision herein to the contrary, an individual who
has become a Participant in the Plan shall cease to be a Participant
hereunder effective as of any date designated by the Committee. Any
such Committee action shall be communicated to such Participant prior
to the effective date of such action.
7
<PAGE>
ARTICLE IV - DEFERRALS & MATCHING CONTRIBUTIONS
- --------------------------------------------------------------------------------
4.1 Deferrals by Participants.
Before the first day of each Plan Year (or the remaining portion
thereof for an Employee who commences participation in the Plan other
than on the first day of a Plan Year), a Participant may file with the
Committee a Deferred Compensation Agreement pursuant to which such
Participant elects to make Base Salary Deferrals and/or Bonus
Deferrals. Any such Participant election shall be subject to any
maximum or minimum percentage or dollar amount limitations and to any
other rules prescribed by the Committee in its sole discretion;
however, the initial cap on the amount of base salary which may be
deferred by each Participant shall be one-hundred percent (100%), and
the initial cap on the amount of any bonuses which may be deferred by
each Participant is one-hundred percent (100%). Base salary and bonus
deferrals elected by a Participant must be in whole percentages, no
fractional percentages being permitted. Furthermore, as a prerequisite
to participate in this plan, the Participant must elect to defer a
minimum of one thousand dollars $1,000) per Plan Year. Base Salary
Deferrals will be credited to the Account of each Participant as of the
last day of each calendar month, provided that such Participant is an
Employee on the last day of such calendar month. A Participant whose
employment terminates during the calendar month shall be paid the
amount of his Base Salary Deferrals for such month in cash. Bonus
Deferrals will be credited to the Account of each Participant as of the
last day of the month in which such Bonus Compensation otherwise would
have been paid to the Participant in cash, provided that the
Participant is an Employee on the last day of such month. A Participant
whose employment terminates during the calendar month in which his
Bonus Compensation would have been paid to him in cash will be paid his
Bonus Deferral in cash.
4.2 Effective Date of Deferred Compensation Agreement.
A Participant's initial Deferred Compensation Agreement shall be
effective as of the first payroll period after the date the Participant
commences participation in the Plan. Each subsequent Deferred
Compensation Agreement shall become effective on the first day of the
Plan Year to which it relates. If a Participant fails to complete a
Deferred Compensation Agreement on or before the date the Participant
commences participation in the Plan or the first day of any Plan Year,
the Participant shall be deemed to have elected not to make Base Salary
Deferrals and/or Bonus Deferrals for such Plan Year (or remaining
portion thereof if the Participant enters the Plan other than on the
first day of a Plan Year).
4.3 Modification or Revocation of Election by Participant.
A Participant may not change the amount of his Base Salary or Bonus
Deferrals during a Plan Year. However, a Participant may discontinue a
Base Salary Deferral election at any time by filing, on such forms and
subject to such limitations and restrictions as the
8
<PAGE>
ARTICLE IV - DEFERRALS & MATCHING CONTRIBUTIONS
- --------------------------------------------------------------------------------
Committee may prescribe in its discretion, a revised Deferred
Compensation Agreement with the Committee.
If approved by the Committee, revocation shall take effect as of the
first payroll period next following its filing. If a Participant
discontinues a Base Salary Deferral election during a Plan Year, he
will not be permitted to elect to make Base Salary Deferrals again
until the next Plan Year. Under no circumstances may a Participant's
Deferred Compensation Agreement be made, modified or revoked
retroactively.
4.4 Matching Contributions.
The committee in its sole discretion may provide for a company match on
any portion of the amount deferred. Included in the committee's
discretion is the ability to name specific individuals to whom a match
applies and the amount and timing of that match.
9
<PAGE>
ARTICLE V - VESTING, DEFERRAL PERIODS
AND EARNINGS ELECTION
- --------------------------------------------------------------------------------
5.1 Vesting.
A Participant shall be 100% vested in his Account, including Matching
Contributions, at all times.
5.2 Deferral Periods.
A Deferral Period shall, at the Participant's election, be until (i)
Retirement Date, or (ii) a Specific Future Year and upon (iii) a Change
in Control. In the case of an election to defer until a Specific Future
Year, the Deferral Period must be for any period of at least five (5)
years or more, but may not end later than the year in which the
Participant attains age 70, unless a Participant is over age 55 as of
the date such Deferred Compensation Agreement is made with respect to
such amount in which case the deferral period need only be for one (1)
year. A Participant must specify on the Deferred Compensation Agreement
the Deferral Period for the Base Salary Deferrals, Bonus Deferrals and
Matching Contributions to be made to the Plan for the Plan Year (or the
remaining portion thereof for a Participant who enters the Plan other
than on the first day of a Plan Year) to which the Deferred
Compensation Agreement relates, subject to certain rules as determined
by the Committee from time to time. In the event a Participant does not
elect a Deferral Period for any such Base Salary Deferrals, Bonus
Deferrals and Matching Contributions for a Plan Year, such Participant
shall be deemed to have elected a Deferral Period of five (5) years.
5.3 Earnings Elections.
Amounts credited to a Participant's Account shall be credited with
earnings and losses based on hypothetical investment directions made by
the Participant, in accordance with investment deferral crediting
options and procedures adopted by the Committee from time to time. The
Company specifically retains the right in its sole discretion to change
the investment deferral crediting options and procedures. Any amounts
credited to a Participant's Account with respect to which a Participant
does not provide investment direction shall be credited with earnings
as if 100% of the amount was invested in the Stable Value Fund. A
Participant's Account shall be adjusted as of each Valuation Date to
reflect investment gains and losses.
10
<PAGE>
ARTICLE VI - ACCOUNTS
- --------------------------------------------------------------------------------
6.1 Establishment of Bookkeeping Accounts.
A separate bookkeeping account shall be maintained for each
Participant. Such account shall be credited with the Base Salary
Deferrals and Bonus Deferrals made by the Participant pursuant to
Section 4.1, and Matching Contributions made by the Company pursuant to
Section 4.4 and credited (or charged, as the case may be) with the
hypothetical investment results determined pursuant to Section 5.3.
6.2 Subaccounts.
Within each Participant's bookkeeping account, separate subaccounts
shall be maintained to the extent necessary for the administration of
the Plan. For example, it may be necessary to maintain separate
subaccounts where the Participant has specified different Deferral
Periods, methods of payment or investment directions with respect to
his Base Salary Deferrals, Bonus Deferrals and Matching Contributions
for different Plan Years
6.3 Hypothetical Nature of Accounts.
The account established under this Article VI shall be hypothetical in
nature and shall be maintained for bookkeeping purposes only so that
earnings and losses on the Base Salary Deferrals, Bonus Compensation
Deferrals and Matching Contributions made to the Plan can be credited
(or charged, as the case may be). Neither the Plan nor any of the
accounts (or subaccounts) established hereunder shall hold any actual
funds or assets. The right of any person to receive one or more
payments under the Plan shall be an unsecured claim against the general
assets of the Company. Any liability of the Company to any Participant,
former Participant, or Beneficiary with respect to a right to payment
shall be based solely upon contractual obligations created by the Plan.
Neither the Company, the Directors, nor any other person shall be
deemed to be a trustee of any amounts to be paid under the Plan.
Nothing contained in the Plan, and no action taken pursuant to its
provisions, shall create or be construed to create a trust of any kind,
or a fiduciary relationship, between the Company and a Participant or
any other Person.
11
<PAGE>
ARTICLE VII - PAYMENT OF ACCOUNT
- --------------------------------------------------------------------------------
7.1 Timing of Distribution of Benefits.
(a) Distribution of Base Salary Deferrals, Bonus Deferrals and
Matching Contributions, if any, to a Participant shall be made
as soon as practicable following the date the Deferral Period
for such amounts ends. If the Participant elects to receive a
distribution in the event of a Change in Control or Change in
Financial Condition, distribution shall be made within 45 days
of the Change in Control or Change in Financial Condition.
Notwithstanding the foregoing, upon the Participant's
retirement from the Company, the Participant's entire Account
shall be distributed to him in not more than ten annual
installments following his Retirement Date. In the event of
the Participant's death (and provided the Participant is not
presently receiving retirement or disability benefit payments
under this Plan), the Participant's entire Account shall be
distributed to his named Beneficiary in five annual
installments. The Participant's entire Account shall be
distributed to him in five annual installments following his
permanent disability (as defined in the Company's long-term
disability program). If the Participant dies while he is
receiving retirement or permanent disability benefit payments
hereunder, the Participant's remaining Account balance shall
be distributed to his named Beneficiary in one lump sum.
Furthermore, a Participant's entire Account balance shall be
distributed to him in one lump sum if his employment with the
Company is terminated for any reason other than death,
retirement or permanent disability (as defined in the
Company's long-term disability program). If the Participant
dies and has not named a Beneficiary and filed such
Beneficiary designation with the Company, the Participant's
Account balance shall be paid to his surviving spouse, if any,
or if none, to his Executor or administrator, or to his heirs
at law if there is no administration of such Participant's
estate, in one lump sum. Any distributions described in the
Section 7.1 as being payable in installments may be
accelerated, including to lump sum, based upon a showing of a
severe financial hardship in accordance with Section 7.6 by
the Participant or his beneficiary.
Should the Participant so elect, the participant will receive
a distribution of his account balance in a lump sum within 45
days of the failure of existing bank lines of credit to be
renewed in the normal course of business or at the discretion
of the committee should the committee determine that the
company has undergone a material deterioration in financial
condition.
12
<PAGE>
ARTICLE VII - PAYMENT OF ACCOUNT
- --------------------------------------------------------------------------------
(b) Distribution of Contribution to 401(k) Plan.
As soon as practicable, but in no event later than March 15 of
the Plan Year following the Plan Year for which the
Participant executed the Participation and Deferral Election
Form and for which the participant indicated participation in
the 401(k) wrap feature of the program, the lesser of (i) the
allowable before-tax contribution which may be made on behalf
of the Participant to the 401(k) Plan for the Plan Year for
which the Participant executed the participation and Deferral
Election Form, and (ii) the sum of the Salary Deferral and the
Bonus Deferral for the Plan Year for which the Participant
executed the Participation and Deferral Election Form, shall
be paid directly to Participant as compensation earned in the
Plan Year for which the Participation and Deferral Election
Form applies, unless the Participant previously elected to
have such amount contributed to the 401(k) Plan as an elective
before-tax contribution. If the Participant elected to have
such amount contributed to the 401(k) Plan as an elective
before-tax contribution, such amount shall be distributed
directly to the Participant's Account in the 401(k) Plan.
Notwithstanding the preceding, the Plan shall not make
distributions to the Participant or the 401(k) Plan in excess
of the Participant's Account balance.
If, pursuant to the preceding paragraph, an elective
before-tax contribution is distributed to the Participant's
Account in the 401(k) Plan, the Company may, pursuant to the
terms of the 401(k) Plan, make any matching contribution
required on account of such elective before-tax contribution.
An additional amount equal to the matching contribution
required from the Company under the 401(k) Plan for such
elective before-tax contribution may be deducted from the
Matching Contribution in the Participant's Account.
(c) Distribution After Deferral Period
Distribution of that portion of a Participant's Account which
is not distributed under Section 7.1(b) shall be made as soon
as practicable following the date the Deferral Period for such
amounts ends.
(d) Anything to the contrary herein notwithstanding, if a
Participant's Account is equal to or less than twenty-five
thousand dollars ($25,000.00) when such Participant dies,
retires or becomes permanently disabled, such Account balance
shall be paid to such Participant or to his named Beneficiary
in one lump sum.
7.2 Adjustment for Investment Gains and Losses Upon a Distribution.
Upon a distribution pursuant to this Article VII, the balance of a
Participant's Account shall be determined as of the Valuation Date
immediately preceding the date of the distribution
13
<PAGE>
ARTICLE VII - PAYMENT OF ACCOUNT
- --------------------------------------------------------------------------------
to be made and shall be adjusted for investment gains and losses which
have accrued to the date of distribution but which have not been
credited to his Account.
7.3 Form of Payment or Payments.
Base Salary Deferrals, Bonus Deferrals and Matching Contributions shall
be distributed in accordance with the form of payment elected by the
Participant on the Deferred Compensation Agreement to which such
amounts relate. The form of payment with respect to amounts and the
earnings credited thereon may be in any of the following forms:
(a) A lump sum; or
(b Installment payments for a period not to exceed ten years,
subject to the limitations in Section 7.1, above.
Installment payments shall be processed annually on the first business
day of January of each Plan Year or quarterly on the first business day
of each calendar quarter as elected by the Participant on the Deferred
Compensation Agreement. Each installment payment shall be determined by
multiplying the amounts to be distributed by a fraction, the numerator
of which is one and the denominator of which is the number of remaining
installment payments to be made to Participant. Anything contained
herein to the contrary notwithstanding, total distribution of a
Participant's Account must be made by the date such Participant attains
age 85. In the tax year prior to the year in which a distribution of a
Participant's Account is scheduled to begin distribution (but no less
than 60 days prior to the distribution date in all events), a
Participant may request a change in form of payment which may be
approved or disapproved by the Committee in its sole discretion.
7.4 Designation of Beneficiaries.
Each Participant shall have the right to designate the beneficiary or
beneficiaries to receive payment of his benefit in the event of his
death. A beneficiary designation shall be made by executing the
beneficiary designation form prescribed by the Committee and filing the
same with the Committee. Any such designation may be changed at any
time by execution of a new designation in accordance with this Section.
If no such designation is on file with the Committee at the time of the
death of the Participant or such designation is not effective for any
reason as determined by the Committee, then the designated beneficiary
or beneficiaries to receive such benefit shall be the Participant's
surviving spouse, if any, or if none, the Participant's executor or
administrator, or his heirs at law if there is no administration of
such Participant's estate.
14
<PAGE>
ARTICLE VII - PAYMENT OF ACCOUNT
- --------------------------------------------------------------------------------
7.5 Unclaimed Benefits.
In the case of a benefit payable on behalf of such Participant, if the
Committee is unable to locate the Participant or beneficiary to whom
such benefit is payable, such benefit may be forfeited to the Company,
upon the Committee's determination. Notwithstanding the foregoing, if
subsequent to any such forfeiture the Participant or beneficiary to
whom such benefit is payable makes a valid claim for such benefit, such
forfeited benefit shall be paid by the Company or restored to the Plan
by the Company.
7.6 Hardship Withdrawals.
A Participant may apply in writing to the Committee for, and the
Committee may permit, a hardship withdrawal of all or any part of a
Participant's Account if the Committee, in its sole discretion,
determines that the Participant has incurred a severe financial
hardship resulting from a sudden and unexpected illness or accident of
the Participant or of a dependent (as defined in section 152(a) of the
Code) of the Participant, loss of the Participant's property due to
casualty, or other similar extraordinary and unforeseeable
circumstances arising as a result of events beyond the control of the
Participant, as determined by the Committee, in its sole and absolute
discretion. The amount that may be withdrawn shall be limited to the
amount reasonably necessary to relieve the hardship or financial
emergency upon which the request is based, plus the federal and state
taxes due on the withdrawal, as determined by the Committee. The
Committee may require a Participant who requests a hardship withdrawal
to submit such evidence as the Committee, in its sole discretion, deems
necessary or appropriate to substantiate the circumstances upon which
the request is based.
7.7 Other Withdrawals
At any time, a Participant may request that 90% of all (or a designated
portion of) his account balance may be paid to him. The Committee in
its sole discretion may approve or disapprove such a request. If it
approves the request and a Participant receives a payment under this
Section, (1) the remaining 10% of the entire account balance (or
designated portion of it) shall be permanently forfeited and shall not
be paid to, or in respect of, the Participant; and (2) the Participant
shall also lose the right to participate in the Plan until 1 Plan Year
after receiving a distribution under this Section.
15
<PAGE>
ARTICLE VIII - ADMINISTRATION
- --------------------------------------------------------------------------------
8.1 Committee.
The Plan shall be administered by a Committee appointed by the
Compensation Committee of the Directors. The Committee shall be
responsible for the general operation and administration of the Plan
and for carrying out the provisions thereof. The Committee may delegate
to others certain aspects of the management and operational
responsibilities of the Plan including the employment of advisors and
the delegation of ministerial duties to qualified individuals, provided
that such delegation is in writing. The Committee shall be "named
fiduciary" as that term is defined in Section 402(a)(2) of ERISA.
8.2 General Powers of Administration.
The Committee shall have all powers necessary or appropriate to enable
it to carry out its administrative duties. Not in limitation, but in
application of the foregoing, the Committee shall have the duty and
power to interpret the Plan and determine all questions that may arise
hereunder as to the status and rights of Employees, Participants, and
Beneficiaries. The Committee may exercise the powers hereby granted in
its sole and absolute discretion. No member of the Committee shall be
personally liable for any actions taken by the Committee unless the
member's action involves willful misconduct.
8.3 Costs of Administration
The costs of administering the Plan shall be borne by the Company
unless and until the Participant receives written notice of the
imposition of such administrative costs, with such costs to begin with
the next Plan Year and none may be assessed retroactively for prior
Plan Years. Such costs shall be charged against the Participant's
Account and shall be uniform for all Plan Participants. Such costs
shall not exceed the standard rates for similarly designed nonqualified
plans under administration by high quality third party administrators
at the time such costs are initially imposed and thereafter.
8.4 Indemnification of Committee.
The Company shall indemnify the members of the Committee against any
and all claims, losses, damages, expenses, including attorney's fees,
incurred by them, and any liability, including any amounts paid in
settlement with their approval, arising from their action or failure to
act, except when the same is judicially determined to be attributable
to their gross negligence or willful misconduct.
.
16
<PAGE>
ARTICLE IX - DETERMINATION OF BENEFITS,
CLAIMS PROCEDURE AND ADMINISTRATION
- --------------------------------------------------------------------------------
9.1 Claims.
A person who believes that he is being denied a benefit to which he is
entitled under the Plan (hereinafter referred to as a "Claimant") may
file a written request for such benefit with the Committee, setting
forth his claim. The request must be addressed to the Committee at the
Company at its then principal place of business.
9.2 Claim Decision.
Upon receipt of a claim, the Company shall advise the Claimant that a
reply will be forthcoming within ninety (90) days and shall, in fact,
deliver such reply within such period. The Company may, however, extend
the reply period for an additional ninety (90) days for reasonable
cause.
If the claim is denied in whole or in part, the Committee shall adopt a
written opinion, using language calculated to be understood by the
Claimant, setting forth:
(1) The specific reason or reasons for such denial;
(2) The specific reference to pertinent provisions of the Plan on
which such denial is based;
(3) A description of any additional material or information
necessary for the Claimant to perfect his claim and an
explanation why such material or such information is
necessary;
(4) Appropriate information as to the steps to be taken if the
Claimant wishes to submit the claim for review; and
(5) The time limits for requesting a review under Section 9.3 and
for review under Section 9.4 hereof.
9.3 Request for Review.
With sixty (60) days after the receipt by the Claimant of the written
opinion described above, the Claimant may request in writing that the
Company review the determination of the Committee. Such request must be
addressed to the Secretary of the Company, at its then principal place
of business. The Claimant or his duly authorized representative may,
but need not, review the pertinent documents and submit issues and
comments in writing for consideration by the Company. If the Claimant
does not request a review of the
17
<PAGE>
ARTICLE IX - DETERMINATION OF BENEFITS,
CLAIMS PROCEDURE AND ADMINISTRATION
- --------------------------------------------------------------------------------
Corporation's determination by the Secretary of the Company within such
sixty (60) day period, he shall be barred and estopped from challenging
the Company's determination.
9.4 Review of Decision.
Within sixty (60) days after the Secretary's receipt of a request for
review, he will review the Company's determination. After considering
all materials presented by the Claimant, the Secretary will render a
written opinion, written in a manner calculated to be understood by the
Claimant, setting forth the specific reasons for the decision and
containing specific references to the pertinent provisions of this
Agreement on which the decision is based. If special circumstances
require that the sixty (60) day time period be extended, the Secretary
will so notify the Claimant and will render the decision as soon as
possible, but no later than one hundred twenty (120) days after receipt
of the request for review.
18
<PAGE>
ARTICLE X - MISCELLANEOUS
- --------------------------------------------------------------------------------
10.1 Not Contract of Employment.
The adoption and maintenance of the Plan shall not be deemed to be a
contract between the Company and any person or to be consideration for
the employment of any person. Nothing herein contained shall be deemed
to give any person the right to be retained in the employ of the
Company or to restrict the right of the Company to discharge any person
at any time nor shall the Plan be deemed to give the Company the right
to require any person to remain in the employ of the Company or to
restrict any person's right to terminate his employment at any time.
10.2 Non-Assignability of Benefits
No Participant, Beneficiary or distributee of benefits under the Plan
shall have any power or right to transfer, assign, anticipate,
hypothecate or otherwise encumber any part or all of the amounts
payable hereunder, which are expressly declared to be unassignable and
non-transferable. Any such attempted assignment or transfer shall be
void. No amount payable hereunder shall, prior to actual payment
thereof, be subject to seizure by any creditor of any such Participant,
Beneficiary or other distributee for the payment of any debt judgment
or other obligation, by a proceeding at law or in equity, nor
transferable by operation of law in the event of the bankruptcy,
insolvency or death of such Participant, Beneficiary or other
distributee hereunder.
10.3 Withholding.
All deferrals and payments provided for hereunder shall be subject to
applicable withholding and other deductions as shall be required of the
Company under any applicable local, state or federal law.
10.4 Amendment and Termination.
The Compensation Committee may from time to time, in its discretion,
amend, in whole or in part, any or all of the provisions of the Plan;
provided, however, that no amendment may be made that would impair the
rights of a Participant with respect to amounts already allocated to
his Account. The Compensation Committee may terminate the Plan at any
time. In the event that the Plan is terminated, the balance in a
Participant's Account shall be paid to such Participant or his
Beneficiary in a single cash lump sum, in full satisfaction of all such
Participant's or Beneficiary's benefits hereunder. Any such amendment
to or termination of the Plan shall be in writing and signed by a
member of the Compensation Committee.
19
<PAGE>
ARTICLE X - MISCELLANEOUS
- --------------------------------------------------------------------------------
10.5 No Trust Created.
Nothing contained in this Agreement, and no action taken pursuant to
its provisions by either party hereto, shall create, nor be construed
to create, a trust of any kind or a fiduciary relationship between the
Company and the Participant, his beneficiary, or any other person.
10.6 Unsecured General Creditor Status Of Employee.
The payments to Participant, his Beneficiary or any other distributee
hereunder shall be made from assets which shall continue, for all
purposes, to be a part of the general, unrestricted assets of the
Company; no person shall have nor acquire any interest in any such
assets by virtue of the provisions of this Agreement. The Company's
obligation hereunder shall be an unfunded and unsecured promise to pay
money in the future. To the extent that the Participant Beneficiary or
other distributee acquires a right to receive payments from the Company
under the provisions hereof, such right shall be no greater than the
right of any unsecured general creditor of the Company; no such person
shall have nor require any legal or equitable right, interest or claim
in or to any property or assets of the Company.
In the event that, in its discretion, the Company purchases an
insurance policy or policies insuring the life of the Employee (or any
other property) to allow the Company to recover the cost of providing
the benefits, in whole, or in part, hereunder, neither the Participant,
Beneficiary or other distributee shall have nor acquire any rights
whatsoever therein or in the proceeds therefrom. The Company shall be
the sole owner and beneficiary of any such policy or policies and, as
such, shall possess and, may exercise all incidents of ownership
therein. No such policy, policies or other property shall be held in
any trust for a Participant, Beneficiary or other distributee or held
as collateral security for any obligation of the Company hereunder. An
Employee's participation in the underwriting or other steps necessary
to acquire such policy or policies may be required by the Company and,
if required, shall not be a suggestion of any beneficial interest in
such policy or policies to a Participant.
10.7 Severability.
If any provision of this Plan shall be held illegal or invalid for any
reason, said illegality or invalidity shall not affect the remaining
provisions hereof; instead, each provision shall be fully severable and
the Plan shall be construed and enforced as if said illegal or invalid
provision had never been included herein.
10.8 Governing Laws.
All provisions of the Plan shall be construed in accordance with the
laws of North Carolina except to the extent preempted by federal law.
20
<PAGE>
ARTICLE X - MISCELLANEOUS
- --------------------------------------------------------------------------------
10.9 Binding Effect.
This Plan shall be binding on each Participant and his heirs and legal
representatives and on the Company and its successors and assigns.
10.10 Entire Agreement.
This document and any amendments contain all the terms and provisions
of the Plan and shall constitute the entire Plan, any other alleged
terms or provisions being of no effect.
IN WITNESS WHEREOF, the Company has caused this Plan to be properly executed on
the ______ day of _________________, 1996.
PLUMA, INC.
(Corporate Seal) By:______________________________
Its:____________________________
Attested to:
- ------------------------------------
Secretary
21
<PAGE>
<PAGE>
Exhibit 10.18.1
(S&P Logo Goes
Here)
SAP AMERICA INC.
R/3 SOFTWARE END-USER INDIVIDUAL LICENSE AGREEMENT
("Agreement")
This Agreement is made effective this 9th day of October 1996, by and
between SAP America, Inc., a Delaware corporation, with offices at 701 Lee
Road, Suite 200, Wayne, Pennsylvania 19087 ("SAP"), and Pluma, Inc., a North
Carolina corporation, with offices at 801 Fieldcrest Road, Eden, North
Carolina 27288 ("Licensee")
RECITAL
WHEREAS, SAP desires to grant to Licensee and Licensee desires to accept
from SAP, a license to Use (as defined herein) SAP's proprietary R/3 Software
(as defined herein) upon the terms and conditions hereinafter set forth;
NOW, THEREFORE, SAP and Licensee agree as follows:
1. DEFINITIONS.
1.1 "ABAP/4 Development Workbench Users" means those individuals, who by
password allocation, are authorized to log on to the Software to use the ABAP/4
Development Workbench tools to create Modifications and Extensions to the
Software and in-house developments. Such Users may also be referred to as
"D/W Users". Each D/W User must also be licensed as a Basis/Workflow User.
1.2 "Affiliate" means a corporation located in the Territory in which
Licensee owns at least fifty percent (50%) of the voting securities. Any such
entity shall be considered an Affiliate for only such time as Licensee
continues to own such equity interest.
1.3 "Application Database" means an integrated set of files used with the
Software which contain data and information for supporting the business
operations of Licensee and its authorized Affiliates, including master data
and associated transaction detail, system tables, and internal control
information. An Application Database shall not contain any database table
more than once.
1.4 "Application Server" means each individual server connected to each
Designated Unit into which the Software is downloaded from such Designated
Unit for presentation to a computer terminal or workstation.
1.5 "Basis/Workflow Users" means those individuals, who by password
allocation, are authorized to log on to the licensed Software solely for the
purpose of executing the following transactions: (i) e-mail; (ii) calendar
functions; (iii) entering travel arrangements and expenses; (iv) document
management, including optical archiving; (v) workflow organizational
mangement; (vi) monitoring and administration of the Software; (vii) creating
IDocs; (viii) entry and approval of vacation
applications; (ix) initializing workflows; and (x) in the event Human Resources
functionality is licensed, all transactions contained in such Human Resources
functionality.
1.6 "Correction Level" means an update to, correction of, or further
developmental work in the Software as between Versions and is identified by the
letter following the Version identifier (e.g., 2.1(a)).
1.7 "Designated Site" means those facilities of Licensee located in the
Territory in which one or more Designated Units are located and which are
identified in Appendices to this Agreement.[qp]
1.8 "Designated Unit" means each individual computer located at a Designated
Site in which the Software and Third-Party Database are installed. Each
Designated Unit must be approved by SAP as compatible with the Software and
must be identified as specified in Appendices hereto.
1.9 "Documentation" means SAP's standard documentation, in human- or
machine readable format, in any medium, which is delivered to Licensee under
this Agreement, including SAP's standard manuals, program listings, date
models, flow charts, logic diagrams, input and output forms, functional
specifications, instructions, and complete or partial copies of the foregoing.
1.10 "Extension" means an addition to the Software which does not require a
Modification.
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1.11 "Information Users" means those individuals who by password allocation
are authorized to log on to the Software solely to "read only" Software
transactions for internal information purposes and are not authorized to input
data; write data; or execute Software transactions. Each information User must
also be licensed as a Basis/Workflow User.
1.12 "Modification" means a change to the Software which changes the source
code.
1.13 "Multiple Utilization" means the installation of the Software on more
than one Designated Unit for Productive Use, or the setting up of more than
one Application Database on one Designated Unit for Productive Use. Multiple
Utilization of the Software may subject Licensee to payment of additional
license fees.
1.14 "Named Users" means those individuals who by password allocation to log
onto the Software and execute Software transactions. Named Users may also be
referred to as "Operational Users". Each Named User must also be licensed as
a Basis/Workflow User.
1.15 "Non-Productive Use" means Use of the Software solely for Licensee's or
an authorized Affiliate's internal training or testing.
1.16 "Productive Use" means Use of the Software soley to operate Licensee's or
an authorized Affiliate's business, including Electronic Data interchange
transactions and developemental work.
1.17 "Program Concepts" means the concepts, techniques, ideas, and know-how
embodied and expressed in any computer programs or modules included in the
Software, including the structure, sequence, and organization of such programs
or modules.
1.18 "Proprietary Information" means (i) with respect to SAP and SAP AG, the
Software and Documentation and any complete or partial copies thereof, the
Program Concepts, SAP licensors' Third-Party Database, any other third-party
software licensed with or as part of the Software, benchmark results, and any
other information identified or reasonably identifiable as confidential and
proprietary information of SAP, SAP AG, or their licensors ("SAP Proprietary
Information"); and (ii) with respect to Licensee, information identified or
reasonably identifiable as the confidential and proprietary information of
Licensee ("Licensee Proprietary Information"), provided that, any part of the
SAP or Licensee Proprietary Information which: (a) is or becomes publicly
available through no act or failure of the other party; or (b) was or is
rightfully acquired by the other party from a source other than the disclosing
party prior to receipt from the disclosing party; or (c) becomes independently
available to the other party as a matter of right, shall be excluded.
1.19 "Release" means each issuance of the Software by SAP AG which
incorporates SAP AG's most recent technological functionality and is identified
by the numeral to the left of the decimal point (e.g. 2.0).
1.20 "SAP AG" means SAP Aktiengesellschaft, a German corporation, with
offices located in Walldorf, Germany.
1.21 "Single Utilization" means Productive Use and Non-Productive Use of the
Software on one Designated Unit with one Application Database.
1.22 "Software" means: (i) all R/3 software specified in agreed upon
Appendices hereto, in machine- or human-readable form, developed by or licensed
to SAP AG and delivered to Licensee hereunder, (ii) any Releases, Versions,
or Correction Levels of the Software as contemplated by this Agreement; and
(iii) any complete or partial copies or replacements of any of the foregoing.
1.23 "Territory" means the United States of America and any additional
countries as agreed upon in advance in writing by the parties.
1.24 "Third-Party Database" means a third-party proprietary database
described in Section 2.5.
1.25 "Use" means to load, execute, employ, utilize, store, or display the
Software. Use is deemed to occur on the Designated Unit(s) where any such
processes occur and at any Application Server or computer terminal or
workstation that initiates or is activated by these processes.
1.26 "Users" means any combination of Named, Information, R/C, D/W or
Basic/Workflow Users licensed under this Agreement. Each User must be
separately licensed for Use in each functional block of Software required
and for each
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Licensee company code of each Application Database for which access to the
Software is required. Users allcoated to funcitional blocks of Software may
not be subsequently allocated to other functional blocks of Software.
1.27 "Version" means each issuance of each Release of the Software developed
by SAP AG which has incorporated further development work within the technology
of that Release and is identified by the numeral to the right of the decimal
point (e.g., 2.1)
2. LICENSE GRANT.
2.1 Grant of License.
(a) Subject to this Agreement, SAP grants and Licensee accepts a
non-exclusive, non-transferable license to Use the Software, Documentation,
Third-Party Database, and other SAP Proprietary Information provided by SAP
to Licensee for Single Utilization. Licensee agrees that this license does
not permit Licensee to: (i) Use the Software and Third-Party Database for a
service bureau application; or (ii) sublicense, or otherwise transfer,
assign, or rent the Software or Third-Party Database.
(b) Licensee agrees to install the Software and Third-Party Database only
on Designated Unit(s) located at Designated Site(s) as agreed to by the parties
in Appendices hereto. Licensee further agrees to Use the Software and
Third-Party Database only in accordance with the Documentation. Licensee may
connect multiple Application Servers to each Designated Unit and connect a
network of computer terminals and workstations to the Application Servers.[qp]
(c) Licensee may transfer the Software and Third-Party Database from one
Designated Unit to another at a licensed Designated Site upon prior written
notice to SAP. The Software and Third-Party Database must be promptly deleted
in their entirety from the Designated Unit no longer in Use and from each
archival and back-up copy for that Designated Unit.
(d) If Licensee is unable to Use the Software and Third-Party Database
on a Designated Unit because of conditions beyond its control, Licensee may
temporarily install the Software and Third-Party Database on equivalent
equipment located within the Territory until such condition is corrected;
provided that: (i) the temporary installation shall not impair Licensee's
ability to prevent unlicensed access to and Use of the Software and
Third-Party Database; and (ii) Licensee shall provide written notice to SAP
within two business days of such installation.
(e) Licensee is licensed to install at the Designated Site no more than
two copies of the Software and Third-Party Database on Designated Unit(s) for
Non-Productive Use. Designated Unit(s) utilized for Non-Productive Use of the
Software and Third-Party Database must be one of the type as those used at the
Designated Site for Productive Use. Only one copy of the Third-Party Database
and one copy of the Software are licensed for Productive use on each
Designated Unit at the Designated Site, unless otherwise agreed upon in writing
by SAP.
2.2 Use of Software by Affiliates. SAP agrees that Affiliates may Use the
Software and Third-Party Database; provided that prior to any Affiliate's Use
of the Software and Third-Party Database: (i) each Affiliate shall sign and
deliver to SAP a mutually agreeable Appendix to this Agreement certifying its
agreement to be bound by the terms herein; and (ii) such Use by such
Affiliate shall be subject to the following: (A) Licensee accepts
responsibility for the acts or omissions of such Affiliates as if they were
Licensee's acts or omissions; (B) Licensee shall indemnify SAP against
losses or damages suffered by SAP arising from breach of this Agreement by any
such Affiliate as if effected by Licensee; and (C) such Use shall not
constitute an unauthorized exportation of the Software, Documentation,
Third-Party Database, or SAP Proprietary information under U.S. Government
laws and regulations.
2.3 Audit Right.
(a) This maximum number of Users applicable to the Software licensed
hereunder shall be specified in Appendices to this Agreement. Licensee shall
promptly provide written notice to SAP if the number of Users exceeds such
maximum number.
(b) Licensee and its authorized Affiliates shall allow access to the
Software, Documentation, Third-Party Database, and other DSAP Proprietary
Information, provided to Licensee and/or Affiliates, only to employees or
agents of Licensee or its authorized Affiliates acting within the scope of a
formal employment or agency relationship.
(c) During normal business hours and at any time during which the
Software, Documentation, Third-Party Database or other SAP Proprietary
Information are being utilized, SAP or its authorized representative or
licensors, shall have the right, upon reasonable advance notice, to audit
and inspect Licensee's or any Affiliate's utilization of such items, in
order to verify compliance with the terms of this Agreement.
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2.4 Archival Copy; Restriction on Copies; Legends to be Reproduced.
(a) Licensee may make one copy of the Software for archival purposes and
such number of backup copies of the Software consistent with Licensee's normal
periodic backup procedures.
(b) Licensee may reproduce or copy any portion of the Documentation into
machine-readable or printed form for its internal use and only as required to
exercise its rights hereunder.
(c) Licensee shall include SAP's and its licensors' copyright, trademark,
service mark, and other proprietary notices on any complete or partial copies
of the Software, Documentation, Third-Party Database, or SAP Proprietary
Information in the same form and location as the notice appears on the original
work.
2.5 Runtime License for Application Database. The Software requires a
Third-Party Database which may be licensed through SAP (the "Runtime License")
or directly as a full license ("Full License") from a third-party database
licensor approved by SAP. Licensee shall certify in an Appendix to this
Agreement either that it will use and maintain the Runtime License from SAP
or that it has obtained and will maintain a Full License from such a licensor.
In the event Licensee obtains a Full License directly from a third-party
database licensor, the license grant in this Section 2, shall be restricted
to such extent required to implement those restrictions imposed on Licensee
directly by such third-party database licensor. This Agreement shall terminate
automatically if, for any reason: (i) Licensee fails to obtain or maintain a
Runtime License or Full License; or (ii) Licensee's Runtime License or
Full License terminates prior to the termination of this Agreement, SAP makes
no representations or warranties as to the Third-Party Database or its
operation
3. DELIVERY AND INSTALLATION.
3.1 Delivery. One copy of the Software in machine-readable format and one
copy of the Documentation shall be delivered to Licensee at a Designated Site
during the period specified in Appendices hereto ("Delivery").
3.2 Installation; Support Services.
(a) Licensee shall be responsible for installation of the Software. At
Licensee's request and on terms to be agreed upon, SAP will install the
Software. SAP's installation services are limited to loading the Software into
the Designated Unit and testing the Software using SAP's standard set of test
data. Licensee shall be responsible for configuring and installing any required
disk storage systems, network software, Application Servers, Designated Units
and computer terminals and workstations prior to installation of the Software.
Installation will be deemed successful and completed when the Software is
loaded on a Designated Unit and is ready for Use.
(b) At Licensee's request, and on terms to be agreed upon separately,
SAP may agree to provide pre-installation support, installation support,
training, and consulting services for the Software.
4. PRICE AND PAYMENT.
4.1 License Fees. In consideration of the license granted hereunder, Licensee
shall pay to SAP license fees for the Software as set forth in Appendices
hereto ("License Fees"). The amount of License Fees shall be calculated
based on the total number of Users and Software licensed, and the payment terms
for such License Fees shall be as specified in Appendices hereto. Fees for
Maintenance Service ("Maintenance Fees") shall be paid as set forth in Section
7.4
4.2 Taxes. License and Maintenance Fees and other charges described in this
Agreement and its Appendices, or in SAP's most recent List of Prices and
Conditions, do not include federal, state, or local sales, use, property,
excise, service, or other taxes now or hereafter levied, all of which shall
be for Licensee's account. Any taxes or amounts in lieu thereof paid or payable
by SAP in respect of any such taxes on such fees or charges (excepting only
taxes on net income) shall be for Licensee's account and remitted by Licensee
directly to the applicable tax authorities.
4.3 Expenses. Daily fees, pre-approved travel expenses, and incidental
expenses relating to support services shall be paid as set forth in SAP's then
current List of Prices and Conditions. SAP shall bill such fees and expenses
monthly, attaching time sheets or other records customarily used by SAP.
5. TERM AND TERMINATION
5.1 Term. This Agreement and the license granted hereunder shall become
effective upon execution by both parties and shall continue in effect thereafter
unless terminated under Section 5.2.
5.2 Termination. This Agreement and the license granted hereunder shall
terminate upon the earliest to occur of the following: (i) thirty days
after Licensee gives SAP written notice of Licensee's desire to terminate
this Agreement, for any
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reason, but only after payment of all License and Maintenance Fees then due
and owing; (ii) thirty days after SAP gives Licensee notice of Licensee's
material breach of any provision of the Agreement (other than Licensee's
breach of its obligations under Sections 6 or 12, which breach shall result in
immediate termination), including more than thirty days delinquency in
Licensee's payment of any money due hereunder, unless Licensee has cured such
breach during such thirty day period; (iii) immediately if any of the following
events, which exist as to Licensee, remain uncured for more than sixty days:
(A) entry of an order for relief under Title 11 of the United States Code; (B)
the making of a general assignment for the benefit of creditors; (C) the
appointment of a general receiver or trustee in bankruptcy, reorganization, or
liquidation, unless within the specified sixty-day period, Licensee, its
receiver, or its trustee in bankruptcy provides to SAP adequate written
assurances, reasonably acceptable to SAP, of Licensee's continuing ability
and willingness to fulfill all its obligations under this Agreement.
5.3 Effect of Termination. Upon any termination of this Agreement, Sections
6, 8.6, 9, 10, 11, 14.7 and 14.9 shall survive such termination; Licensee's
rights under Section 2 shall immediately cease, and SAP and Licensee each shall
promptly perform it obligations under Section 6.3
5.4 No Refund. In the event of any termination hereunder, Licensee shall not be
entitled to any refund of any payments made by Licensee.
6. PROPRIETARY RIGHTS.
6.1 SAP Proprietary Information
(a) Licensee acknowledges and shall cause its authorized Affiliates to
acknowledge that ownership of and title in and to all intellectually property
rights, including patent, trademark, service mark, copyright, and trade
secret rights, in the SAP Proprietary Information are and shall remain in SAP
and and SAP AG and their respective licensors. Licensee acquires only the
right to use the SAP Proprietary Information under the terms and conditions
of this Agreement and does not acquire any ownership rights or title in or
to the SAP Proprietary Information and that of their respective licensors.
(b) Licensee shall not copy, translate, disassemble, or decompile, nor
create or attempt to create, by reverse engineering or otherwise, the source
code from the object code of the Software licensed hereunder or use it to create
a derivative work, unless authorized in writing by SAP. In the event source
code is provided to Licensee, SAP, in its sole discretion, reserves the right
to delete, or to require the deletion of, such source code and all copies
thereof from Licensee's Designated Unit(s), Application Server(s), computer
terminal or workstations, and data files whenever a future Release, Version,
or Correction Level provides for like functionality in an object code format.
Other than as specified herein, any tools licensed with or included in the
Software may not be copied, in whole or in part, without the express written
consent of SAP.
(c) Licensee shall not remove any proprietary, copyright, trademark,
or service mark legend from the Software, Documentation, Third-Party Database,
or SAP Proprietary Information.
(d) Licensee shall maintain a log of the number and location of all
originals and copies of the Software. The inclusion of a copyright notice on
any portion of the Software or Documentation shall not cause or be construed
to cause it to be a published work.
(e) All Modifications and Extensions to the Software and Documentation
shall be considered part of the Software and Documentation for purposes
of this Section 6.
6.2 Protection of Proprietary Information. In order to protect the rights
of SAP and its licensors, and Licensee in their respective Proprietary
Information, SAP and Licensee agree as follows:
(a) Neither party shall, without the other party's prior written consent,
disclose, provide, or make available any of the Proprietary Information of
the other party in any form to any person, except to bona fide employees,
officers, directors, or consultants of such party whose access is necessary
to enable such party to exercise its rights hereunder. Each party agrees
that prior to disclosing any Proprietary Information of the other party to
any consultant, it will obtain from that consultant a written acknowledgment
that such consultant will be bound by the same terms as specified in this
Section 6 with respect to the Proprietary Information.
(b) Licensee and SAP acknowledge that any disclosure to third parties
of Proprietary Information may cause immediate and irreparable harm to the
owner of the disclosed Proprietary Information; therefore, each party
agrees to take all reasonable steps and the same protective precautions to
protect the Proprietary Information from disclosure to third parties as
with its own proprietary and confidential information.
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6.3 Duties Upon Termination. Upon any termination hereunder, Licensee and
its authorized Affiliates shall immediately cease Use of the Software,
Documentation, Third-Party Database, and other SAP Proprietary Information,
and shall irretrievably delete and/or remove such items from all Designated
Units, Application Servers, computer terminals, workstations, data files,
and Designated Sites. Within thirty days after any termination, Licensee shall
deliver to SAP at Licensee's expense (adequately packaged and insured for safe
delivery) or, at SAP's request, destroy all copies of the SAP Proprietary
Information in every form. Licensee further agrees to erase the Software,
Documentation, Third-Party Database, and other provided SAP Proprietary
Information from any storage media. Licensee agrees an officer of Licensee's
organization, with the express authority to make such representation, shall
certify in writing to SAP that it and each of its authorized Affiliates
has performed the foregoing. Within thirty days after any termination, SAP
shall return the Licensee Proprietary Information to Licensee.
6.4 Modifications and Extensions.
(a) Licensee may make Modifications and Extensions to the Software for
Use on the Designated Unit(s) under the terms set forth in this Section 6.4.
(b) In the event Licensee without SAP's participation develops any
Modification or Extension (hereinafter referred to as "Licensee Extension" or
"Licensee Modification") to the Software, Licensee shall have all rights,
title, and interest in such Licensee Modification or Licensee Extension will
be used solely in connection with Licensee and its Affiliates' business
operations, and that such Licensee Modification or Licensee Extension will
not be marketed, licensed or sublicensed, sold, assigned, or otherwise
transferred or made available to any third party or other entity, without
the express prior written consent of SAP, which consent shall not be
unreasonably withheld. Licensee agrees to offer SAP the right of first refusal
to any license or to assignment of such Licensee Modification or Licensee
Extension and SAP agrees to negotiate in good faith a mutually agreeable
license or other arrangement for such rights.
(c) In the event SAP develops either independently, or jointly with
Licensee, any Modification or Extension to the licensed Software, such
Modifications or Extensions will be the exclusive property of SAP and SAP AG,
and Licensee will not grant, either expressly or impliedly, any rights, title,
interest, or licenses to such Modifications or Extensions to any third party.
Licensee shall be entitled to Use such Modifications and Extensions on
the Designated Unit(s) at the Designated Site(s) under the terms set forth
in this Agreement.
(d) The parties hereto agree that the granting of any rights, title, or
interest to Licensee in any Modification or Extension (including Licensee
Modifications and Licensee Extensions) shall not be construed by the
parties hereto, or any court of law or equity, to mean that SAP has granted
or given up any rights, title, or interest in or to the SAP Proprietary
Information or any part thereof.
(e) Licensee agrees that it will not to modify any provided third-party
software hereunder, unless expressly authorized in writing by such third-party
vendor.
(f) Licensee shall register all Modifications to the Software, using
OSS (Online Software Service), with SAP prior to making such Modifications.
Modifications may be used only on the Designated Unit(s).
(g) Licensee agrees to: (i) keep and maintain adequate and current
records of all Licensee Modifications or Licensee Extensions (which
records shall be made reasonably available to SAP); (ii) promptly disclose
to SAP and provide copies to SAP of any Licensee Modifications or Licensee
Extensions in which SAP has ownership rights; and (iii) insert in all
copies of the Software as modified all copyright, trade secret, or other
notices thereon or therein as SAP may from time to time direct.
7. MAINTENANCE
7.1 Maintenance Service.
(a) Following the expiration of the Warranty Period (as defined in
Section 8), and for such period as Licensee may elect in writing, but only
for so long as SAP makes such services generally available in the Territory,
Licensee may request maintenance service ("Maintenance Service") from SAP
with respect to the Software. Maintenance Service by SAP includes the
delivery of Releases and Versions, support via telephone, the correction of
defects, remote support/update, SAP's On-line Software Services, and, if
separately purchased at fees and terms to be agreed upon, SAP's Early Watch
Services. In order to receive Maintenance Service hereunder, Licensee must
make all required remote support and update connections to each Designated
Unit, at its expense, as requested by SAP.
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(b) Maintenance Service shall not include the other services referenced
in Section 7.3 and will be offered only for the most recent Version and the
Version immediately prior thereto. Whenever a new Release shall become
commercially available, Maintenance Service will be offered for such new
Release and the latest Version of the prior Release only until such time as
a new Version becomes available.
7.2 New Releases and Versions. Upon Licensee's request and provided that
Licensee has purchased Maintenance Service from SAP, SAP shall deliver new
Releases and Versions and related Documentation. Maintenance Service does
not include the delivery of any Software and Documentation which SAP offers
as separate products which have not been licensed by Licensee.
7.3 Other Services. All other services not referred to in this Section 7
shall be agreed upon separately and shall be subject to additional changes,
including without limitation, the installation of new Releases and Versions,
the incorporation of Modifications or Extensions into new Releases or Versions
and related Documentation, and the adaptation of any authorized Modifications
or Extensions developed by or for Licensee to new Releases or Versions.
7.4 Payment of Maintenance Fees. Unless otherwise specified in Appendices
hereto, Maintenance Fees shall be paid annually in advance in an amount
calculated as the then current percentage factor multiplied by the then
current list price of the Software licensed hereunder.
7.5 Termination of Maintenance Service. Maintenance Service may be
terminated by either party in writing at any time upon three months prior
written notice.
8. PERFORMANCE WARRANTY.
8.1 Warranty Period; Warranty. SAP warrants that the Software will
substantially conform to the functional specifications contained in the
Documentation for six months following Delivery (the "Warranty Period") and
will perform, when in Use without material alteration on the Designated
Unit(s), in accordance with the functional specifications set forth in the
Documentation. SAP's warranty is subject to Licensee providing SAP necessary
access, including remote access, to the Software.
8.2 Licensee's Defect Reports. Licensee must identify in reasonable detail
to SAP the nature of the perceived Software defect which causes the Software
not to conform substantially to the functional specifications and specifically
describe the conditions under which the perceived defect occurs. On SAP's
request, Licensee shall deliver such information in written form. Licensee
shall provide SAP with sufficient test time and support on Licensee's
Designated Unit(s) to duplicate the problem, to verify that the problem is
with the Software, and to confirm that the problem has been corrected.
8.3 SAP's Obligation to Correct or Replace Defects. Should any component of
the Software fail to conform substantially to the functional specifications
therefor during the Warranty Period, SAP's sole obligation shall be, at SAP's
option, to correct the defect by bringing the performance of the Software
into substantial compliance with the functional specifications or to
replace the defective component. When Productive Use of the Software is
significantly restricted by a reported defect and Licensee expressly so
states in written form, SAP shall use its best efforts to commence work on
correcting the defect no later than the first working day after its receipt
of written notice, subject in each case to the provisions of this Section 8.
The correction of defects shall be in the manner specified in this Section 8.
8.4 Correction of Defects. SAP will deliver a correction of the defect in
writing and, if appropriate, in machine-readable form. Any installation shall
be the responsibility of Licensee unless otherwise agreed to in writing by
the parties. If, at Licensee's request, SAP corrects a defect of any
unsupported Version or Release, SAP may request, and Licensee shall pay,
additional charges.
8.5 Scope of Warranty.
(a) The warranty set forth in this Section 8 shall not apply: (i) if
the Software is not used in accordance with the Documentation; or (ii) to
any Extensions or Modifications; or (iii) if the defect is caused by a
Modification or Extension; or (iv) if the Software is not installed on a
Designated Unit; or (v) to the extent that the defect is caused by or is
contributed to by Licensee; or (vi) if Licensee does not provide access,
including remote access, to the Software as required under Section 8.1; or
(vii) if the defect is caused by a Third-Party Database malfunction.
(b) SAP does not warrant that the Software will operate uninterrupted
or that it will be free from minor defects or errors which do not materially
affect such performance or that the applications contained in the Software
are designed to meet all Licensee's or its authorized Affiliates' business
requirements.
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8.6 Express Disclaimer. SAP DISCLAIMS ALL OTHER WARRANTIES EXPRESS OR
IMPLIED, INCLUDING WITHOUT LIMITATION, ANY IMPLIED WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE EXCEPT TO THE EXTENT
THAT ANY WARRANTIES IMPLIED BY LAW CANNOT BE VALIDLY WAIVED.
9. LIMITATION OF LIABILITY.
9.1 Licensee's Remedies. Subject to the limited warranty set forth in
Section 8, Licensee's sole and exclusive remedies for any damages or loss in
any way connected with the Software or services furnished by SAP and its
licensors, whether due to SAP's negligence or breach of any other duty, shall
be, at SAP's option: (i) replacement of the Software or performance of
services; or in the event SAP cannot replace the Software or reperform the
services, Licensee shall have the option of (ii) an appropriate return or
credit of an amount in proportion to any payment made or to be made by
Licensee with respect to the applicable portion of the Software or services. The
foregoing limitation of liability does not apply to infringement of the
property rights referred to in Section 10, or to personal injury or death
caused solely by the gross negligence or willful misconduct of SAP. With
respect to damage to tangible property, SAP and its licensors will not be
responsible in any amount in excess of the amount by which such damage is
paid by SAP's liability insurance.
9.2 SAP Not Responsible. SAP will not be responsible under this Agreement
for: (i) the modification or improvement of the Software to fit the
particular requirements of Licensee; or (ii) the correction of any program
errors resulting from Modifications or Extensions; or (iii) the correction of
any program errors as a result of misuse of the Software by Licensee.
Under no condition will SAP be responsible under this Agreement for preparation
or conversion of data into the form required for use with the Software.
9.3 Exclusion of Damages. ANYTHING TO THE CONTRARY HEREIN NOTWITHSTANDING,
UNDER NO CIRCUMSTANCES SHALL SAP AND ITS LICENSORS BE LIABLE TO LICENSEE OR
ANY OTHER PERSON OR ENTITY FOR SPECIAL, INCIDENTAL, CONSEQUENTIAL, OR
INDIRECT DAMAGES, LOSS OF GOOD WILL OR BUSINESS PROFITS, WORK STOPPAGE,
DATA LOSS, COMPUTER FAILURE OR MALFUNCTION, ANY AND ALL OTHER COMMERCIAL
DAMAGES OR LOSS, OR EXEMPLARY OR PUNITIVE DAMAGES.
9.4 Severability of Actions. IT IS EXPRESSLY UNDERSTOOD AND AGREED THAT
EACH AND EVERY PROVISION OF THIS AGREEMENT WHICH PROVIDES FOR A LIMITATION
OF LIABILITY, DISCLAIMER OF WARRANTIES, OR EXCLUSION OF DAMAGES IS INTENDED
BY THE PARTIES TO BE SEVERABLE AND INDEPENDENT OF ANY OTHER PROVISION AND TO
BE ENFORCED AS SUCH.
10. INDEMNIFICATION.
10.1 SAP Representation. SAP represents that SAP AG and its licensors own
the Proprietary Information licensed by SAP hereunder, including all
intellectual property rights therein, and that SAP has all rights from SAP AG
and its licensors necessary to license, in accordance with the terms of this
Agreement, such Proprietary Information to Licensee.
10.2 No Representation Regarding Combination Use. SAP makes no representation
with respect to the possibility of infringement by Combination Use of the
Software. The parties agree that SAP has no duty to investigate nor to warn
Licensee of any such possibility. As used herein, "Combination Use" means
Use of the Software in combination or conjunction with any of the following,
unless such Use is prescribed in the Documentation: (i) any software other
than the Software (including any Licensee Extension or Licensee Modification);
(ii) any apparatus other than a Designated Unit; and/or (iii) any activities
of Licensee or its authorized Affiliates not licensed under this Agreement.
10.3 Indemnification of Licensee.
(a) Subject to Section 10.2, SAP shall indemnify Licensee against all
claims, liabilities, and costs, including reasonable attorneys' fees, up to
the maximum amount described in Section 10.3(b), reasonably incurred in the
defense of any claim brought against Licensee in the Territory by third
parties alleging that Licensee's Use of the Software and Documentation
infringes or misappropriates: (i) any United States patent of which SAP is
aware; or (ii) a United States copyright; or (iii) trade secret rights,
provided that, Licensee promptly notifies SAP in writing of any such claim
and SAP is permitted to control fully the defense and any settlement of
such claim. Licensee shall cooperate fully in the defense of such claim
and may appear, at its own expense, through counsel reasonably acceptable
to SAP. SAP may, in its sole discretion, settle any such claim on a basis
requiring SAP to substitute for the Software and Documentation alternative
substantially equivalent non-infringing programs and supporting documentation.
(b) The maximum aggregate liability of SAP under the indemnity provided
in Section 10.3(a) above shall be a sum equal to two times the aggregate
payments actually made by Licensee to SAP under this Agreement at the time
the
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claim of infringement arises, and if there should be more than one claim of
infringement, the amount payable under such indemnity in respect of each
claim shall be divided pro rata.
10.4 Indemnification of SAP and SAP AG. Licensee shall indemnify SAP and
SAP AG and its licensors against all claims, liabilities, and costs, including
reasonable attorneys' fees, reasonably incurred in the defense of any claim
(other than for the infringement of intellectual property rights specified in
Section 10.3 above), arising out of Licensee's unauthorized Use of the Software,
Documentation, Third-Party Database, and other SAP Proprietary Information
licensed under this Agreement, provided that, SAP promptly notifies Licensee
in writing of such claim and that Licensee is permitted to control fully the
defense and any settlement of the claim.
10.5 SAP's Right to Commence Infringement Actions. SAP alone shall be
responsible for taking such actions which it determines are reasonably
necessary or desirable in its sole discretion in connection with any
infringement or alleged infringement by a third party of any portion of the
Software and Documentation. Licensee shall not undertake any action in
response to any infringement or alleged infringement of the Software and
Documentation without the prior written consent of SAP, which consent shall
not be unreasonably withheld. Licensee agrees to cooperate with and assist
SAP in taking whatever action (including consenting to being named as a party
to any suit or other proceeding) which SAP determines to be reasonably
necessary or desirable. SAP agrees to reimburse Licensee for reasonable legal
fees and other expenses incurred in connection with investigating or defending
any such claim, suit, damage, or loss.
10.6 SAP's Duty to Indemnify Licensee. THE PROVISIONS OF THIS SECTION 10
STATE THE SOLE, EXCLUSIVE, AND ENTIRE LIABILITY OF SAP, SAP AG, AND ITS
LICENSORS TO LICENSEE AND LICENSEE'S SOLE REMEDY WITH RESPECT TO THE
INFRINGEMENT OF THIRD-PARTY INTELLECTUAL PROPERTY RIGHTS.
11. ARBITRATION.
Except for the right of either party to apply to a court of competent
jurisdiction for a Temporary Restraining Order or other provisional remedy
to preserve the status quo or prevent irreparable harm pending the selection
and confirmation of a panel of arbitrators, and for the right of SAP to bring
suit on an open account for any payments due SAP hereunder, any controversy
or claim arising out of or relating to this Agreement shall be settled by
arbitration in New York, New York, in accordance with the Commercial
Arbitration Rules of the American Arbitration Association, and judgment
upon the award rendered by the arbitrators may be entered in any court
having jurisdiction thereof. Arbitration shall be conducted by a panel of
three members, SAP and Licensee each selecting one member and the third member,
who shall be chairman, selected by agreement between the other two members.
The chairman shall be an attorney-at-law, and the other members shall have
a background or training in computer law, computer science, or marketing
of computer products. The arbitrators shall have the authority to grant
injunctive relief in a form substantially similar to that which would
otherwise be granted by a court of law.
12. ASSIGNMENT.
Licensee may not, without SAP's prior written consent, assign,
delegate, sublicense, pledge, or otherwise transfer this Agreement, or any of
its rights or obligations under this Agreement, or the SAP Proprietary
Information, to any party, including any Affiliate. Any permitted assignment
of this Agreement shall provide that the provisions of this Agreement shall
continue in full force and effect and that Licensee shall guaranty the
performance of its assignee and shall remain liable for all obligations
hereunder. SAP may assign this Agreement to SAP AG.
13. ESCROW OF SOURCE CODE.
13.1 SAP warrants that the source code for the Software, together with
related Documentation as it is or becomes available, has been deposited in
an escrow account maintained at Data Securities International Inc.,
Burlington, Massachusetts (the "Escrow Agent"), pursuant to an agreement
between the Escrow Agent and SAP (the "Escrow Agreement").
13.2 SAP will from time to time deposit into the escrow account copies of
source code for Releases and Versions of the Software and related
Documentation.
13.3 SAP or SAP's trustee in bankruptcy shall authorize the Escrow Agent to
make and release a copy of the applicable deposited materials to Licensee upon
the occurrence of any of the following events:
(a) The existence of any one or more of the following circumstances,
uncorrected for more than thirty (30) days; entry of an order for relief
under Title 11 of the United States Code; the making by SAP of a general
assignment for the benefit of creditors; the appointment of a general
receiver or trustee in bankruptcy of SAP's business or property; or action
by SAP under any state insolvency or similar law for the purpose of its
bankruptcy, reorganization, or liquidation;
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unless within the specified thirty (30) day period, SAP (including its receiver
or trustee in bankruptcy) provides to Licensee adequate assurances,
reasonably acceptable to Licensee, of its continuing ability and willingness
to fulfill its maintenance obligations under this Agreement;
(b) SAP has ceased its on-going business operations or that portion of
its business operations relating to the sale, licensing and maintenance of the
Software; or
(c) Failure of SAP to carry out the material maintenance obligations
imposed on it pursuant to this Agreement after reasonable opportunity has
been provided to SAP and SAP AG to perform such obligations.
13.4 In no event shall Licensee have the right to access the applicable
deposited materials if SAP AG agrees to assume SAP's maintenance obligations
under this Agreement.
13.5 In the event of release under this Agreement, Licensee agrees that it
will treat and preserve the deposited materials as a trade secret of SAP AG
in accordance with the same precautions adopted by Licensee to safeguard its
own trade secrets against unauthorized use and disclosure and in all cases at
least with a reasonable degree of care. Release under this provision shall
not extend Licensee any greater rights or lesser obligations than are
otherwise provided or imposed under this Agreement. This provision shall
survive any termination of this Agreement.
14. GENERAL PROVISIONS.
14.1 Agreement Binding. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and
permitted assigns.
14.2 Rights to Injunctive Relief. Both parties acknowledge that remedies
at law may be inadequate to provide SAP or Licensee with full compensation
in the event of Licensee's material breach of Sections 2, 6 or 14.7, or SAP's
material breach of Section 6 with respect to Licensee Proprietary Information,
and that the non-breaching party shall therefore be entitled to seek injunctive
relief in the event of any such material breach.
14.3 Entire Agreement. This Agreement and each Appendix hereto constitute
the complete and exclusive statement of the agreement between SAP and Licensee,
and all previous representations, discussions, and writings are merged in,
and superseded by, this Agreement. This Agreement may be modified only by a
writing signed by both parties. This Agreement and each Appendix hereto shall
prevail over any additional, conflicting, or inconsistent terms and
conditions which may appear on any purchase order or other document furnished
by Licensee to SAP.
14.4 Severability. It is the intent of the parties that in case any one or
more of the provisions contained in this Agreement shall be held to be invalid
or unenforceable in any respect, such invalidity or unenforceability shall
not affect the other provisions of this Agreement, and this Agreement shall
be construed as if such invalid or unenforceable provision had never been
contained herein.
14.5 No Waiver. If either party should waive any breach of any provision of
this Agreement, it shall not thereby be deemed to have waived any preceding or
succeeding breach of the same or any other provision hereof.
14.6 Counterparts. This Agreement may be signed in two counterparts, each of
which shall be deemed an original and which shall together constitute one
Agreement.
14.7 Export Control Notice. Regardless of any disclosure made by Licensee
to SAP of an ultimate destination of the Software, Documentation, Third-Party
Database, and other provided SAP Proprietary Information Licensee
acknowledges that SAP's Software, Documentation, Proprietary Information,
and the Third-Party Database are being released or transferred to Licensee
in the United States and are therefore subject to the U.S. export control
laws. Licensee acknowledges its exclusive obligation to ensure that its
exports from the United States are in compliance with the U.S. export
control laws. Licensee shall also be responsible for complying with all
applicable governmental regulations of any foreign countries with respect
to the use of the Proprietary Information by its Affiliates outside of
the United States. Licensee agrees that it will not submit the Software
to any government agency for licensing consideration or other regulatory
approval without the prior written consent of SAP. Licensee shall defend,
indemnify, and hold SAP and SAP AG and its licensors harmless from and against
any and all claims, judgments, awards, and costs (including reasonable
attorneys' fees) arising out of Licensee's noncompliance with applicable
U.S. or foreign law with respect to the use or transfer of the Proprietary
Information outside the United States by Licensee and its Affiliates.
10
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14.8 Publicity. Neither party shall use the name of the other in publicity,
advertising, or similar activity, without the prior written consent of the
other, except that Licensee hereby consents to SAP's inclusion of Licensee's
name in customer listings which may be published as part of SAP's marketing
efforts.
14.9 Governing Law. This Agreement shall be governed by and construed under
the Commonwealth of Pennsylvania law without reference to its conflicts of law
principles. In the event of any conflicts between foreign law, rules, and
regulations, and United States of America law, rules, and regulations, United
States of America law, rules, and regulations shall prevail and govern. The
United Nations Convention on Contracts for the International Sale of Goods
shall not apply to this agreement.
14.10 Equal Opportunity. Licensee hereby incorporates by reference as part
of this Agreement applicable provisions of Executive Order 11246, regarding
equal opportunity for all persons without regarding color, religion, sex or
national origin; the Vietnam Era Veterans Readjustment Assistant Act of 1974,
as amended (the "Veterans Act"), the Rehabilitation Act of 1973 (the "Rehab
Act"), and the Small Business Act of 1958 (the "Small Business Act").
Pursuant to Executive Order 11246 and particularly 41 C.F.R. 60-1.2, and by
acceptance of this Agreement SAP certifies that it complies with the
provisions of Executive Order 11246, the Veterans Act, the Rehab Act and
the Small Business Act and SAP does not and will not maintain any facilities
in a segregated manner or permit SAP's employees to perform their services
at any locale under SAP's control, where segregated facilities are
maintained. Further, SAP agrees that SAP will obtain a certificate containing
similar statements prior to the award of any nonexempt subcontract.
14.11 Notices. All notices or reports which are required or may be given
pursuant to this Agreement shall be in writing and shall be deemed duly given
when delivered to the respective executive offices of SAP and Licensee
at the addresses first set forth above.
14.12 Force Majeure. Any delay or nonperformance of any provision of this
Agreement (other than for the payment of amounts due hereunder) caused by
conditions beyond the reasonable control of the performing party shall
not constitute a breach of this Agreement, and the time for performance of
such provision, if any, shall be deemed to be extended for a period equal
to the duration of the conditions preventing performance.
IN WITNESS WHEREOF, the undersigned, intending to be legally bound, have
duly executed this Agreement to become effective as of the date first above
written.
SAP AMERICA, INC. PLUMA, INC.
By: By: (Signature of Walter E. Helton)
--------------------------------- -------------------------------
Name: Name: WALTER E. HELTON
--------------------------------- -------------------------------
Title: Title: VICE PRESIDENT OF OPERATION
--------------------------------- -------------------------------
Date: Date: OCTOBER 14, 1996
--------------------------------- -------------------------------
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Appendix 1
issued October 9, 1996
to
SAP AMERICA, INC. ("SAP") - PLUMA, INC. ("Licensee")
R/3 SOFTWARE END-USER INDIVIDUAL LICENSE AGREEMENT
effective October 9, 1996 ("Agreement")
This Appendix 1 is hereby annexed to and made a part of the Agreement
specified above. In each instance in which provisions of this Appendix 1
contradict or are inconsistent with the provisions of the Agreement, the
provisions of this Appendix 1 shall prevail and govern, and the contradicted
or inconsistent provisions of the Agreement shall be deemed amended accordingly.
Designated Unit to be identified by Licensee to SAP in writing.
Type/Model No.: ______________________
Serial No.: ______________________
Designated Site: 450 College Drive, Martinsville, Virginia 24112
1. General Function Blocks, and Basis/Workflow and Database licensed by
Licensee from SAP to be installed on the above-referenced Designated
Unit at the above-referenced Designated Site, are as follows:
GENERAL FUNCTION BLOCKS LICENSED: Named Users* D/W Users*
Licensed Licensed
------------ ----------
FI Financial Accounting/Asset Accounting 15
------------
CO Controlling......................... 15
------------
MM Material Management................. 20
------------
SD Sales and Distribution.............. 25
------------
PP Production Planning.................. 20
------------
DW ABAP/4 Development Workbench........................ 2
------------
*The above Users are also licensed as Basis/Workflow Users
DATABASE:
Database Interface.................................. 150 Users
------------
2. The total List Price License Fee to Licensee for the Software specified
in Item 1 above for the total number of Users is USD 429,800. Provided
the following Use restrictions are observed by Licensee, and additional
Software is not subsequently licensed by Licensee, such List Price
License Fee shall be discounted by USD 800 for an invoice amount to
Licensee of USD 429,000. The Use restrictions are:
A. Not more than the total number of Users specified in Item 1 above
access and/or Use the Software as specified in the Agreement.
B. Not more than one (1) Productive copy of the Software is licensed
from SAP or SAP AG to be installed on Designated Unit in the
territory; and
C. Not more than one (1) Designated Site is provided Maintenance
Service support through SAP or SAP AG.
3. The USD 429,000 invoice amount as specified in Item 2 above shall be
invoiced on October 30, 1996, and is due and payable as follows:
USD 214,500 net thirty (30) days;
USD 107,250 due January 15, 1997;
USD 107,250 due April 15, 1997.
4. Delivery by SAP of the Software is to take place in October 1996.
5. Maintenance Service for the Software licensed hereunder, for the above-
specified number of Users, shall commence in May 1997, and shall be priced
at the then-current factor in effect multiplied by the then-current List
<PAGE>
Price for licensed Software. Until such date, Maintenance Service shall
be provided pursuant to Section 8., Performance Warranty, of the Agreement.
Maintenance Fees are invoiced on an annual basis effective January 1 of a
calendar year. Any Maintenance Fees due prior to January 1 are invoiced on
a pro-rata basis for the given calendar year in effect. The current
pro-rated Maintenance Fee for the Software licensed under this Appendix
for the period from May 1, 1997 through December 31, 1997, is USD 42,980,
which shall be invoiced in May 1997. Maintenance Fees are subject to change
once during a calendar year upon ninety (90) days notice to Licensee. SAP
agrees however, increases in Maintenance Fees per calendar year (if any)
for the Software licensed in Item 1 of this Appendix, shall not be
greater than the percentage increase in the Consumer Price Index, plus
five percent (5%) per year, unless additional Software or Users are
added to the Agreement.
6. Delivery of one (1) set of CD-ROM Documentation, in the English language,
to the above-specified Designated Site shall be initiated upon execution
of this Appendix by the parties hereto. Additional Documentation for the
above-specified Designated Site may be ordered by Licensee at SAP's then-
current prices in effect.
7. The license and maintenance fees as specified herein are predicated upon
the aforementioned Use restrictions being observed by Licensee and its
Affiliates for the licensed Software. In the event such Use restrictions
are not adhered to by Licensee or its Affiliates, or additional Software
is licensed by Licensee, Licensee agrees, within a reasonable period of
time, to provide written notice to SAP, and SAP reserves the right to
modify the fees accordingly.
8. The Software licensed hereunder contains a copy of Microsoft's SQL Server
product which has either been integrated or pre-installed as part of the
Software. Each Microsoft product is subject to its respective Microsoft
End-User License Agreement contained in the software packages or license
agreements accompanying the Microsoft SQL Server, with the exception that
the Microsoft product functionality as integrated in the Software may
differ from a non-integrated Microsoft product. Issues concerning the
functionality or performance of the Software and the Microsoft product
should be first directed to SAP and not to Microsoft. This Agreement
does not contain a license to use the integrated Microsoft Product.
Please be advised that you have no right to use and are not licensed to
use the copy of Microsoft's SQL Server contained in the Software until
you have executed the Agreement, this Appendix and purchase and/or
sign a Microsoft End-User License Agreement for the SQL Server.
9. Software specified in this Appendix shall be delivered in source code
(ABAP/4) or object code for the application modules. Source code for
the Basis System shall not be delivered; however, Basis System source
code remains available to Licensee in accordance with Section 13, Escrow
of Source Code, of the Agreement.
10. SAP has taken reasonable steps to test the Software licensed pursuant this
Appendix for Disabling Code (as defined herein) and to the best of its
knowledge, the Software is free of Disabling Code as of the date of
delivery by SAP. Disabling Code is defined as computer instructions that
alter, destroy or inhibit the licensed Software and/or Licensee's
processing environment, including but not limited to other program's data
storage and computer libraries, programs that self-replicate without
manual intervention, instructions programmed to activate at a predetermined
time upon a specified event, and/or programs purporting to do a meaningful
function but designed for a different function. It is agreed this Section
does not include screen lock-out features for: (i) Users in excess of the
number of Users authorized under this Agreement; (ii) Use of an
unauthorized copy of the Software; or (iii) unauthorized Modifications.
11. In the event Licensee is utilizing EDI functionality, Licensee is
responsible to license or purchase a required third-party EDI translator/
interpreter. Such EDI translator/interpreter shall be licensed or
provided directly from a third-party vendor to Licensee.
12. In the event Licensee elects SAP's Early Watch System Service, which
provides for remote diagnostics and performance monitoring from SAP of
the Software installed on specified Designated Units, Licensee shall
be separately invoiced at SAP's then current Early Watch System Service
fees in effect. Accordingly, a separate order form for Early Watch System
Service will be provided to Licensee upon request of such service.
Additionally, all costs associated with telecommunication access, line
charges, and remote access costs shall be borne by Licensee for the
Early Watch System. It shall be Licensee's responsibility to provide
adequate security measures for its systems and any data contained therein.
SAP agrees to treat any tangible data remotely accessed, which is
designated as confidential, proprietary, or trade secret information of
Licensee, pursuant to the terms of the Agreement.
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<PAGE>
13. Each Productive Use copy and Non-Productive Use copy of the Software
licensed hereunder requires a license keycode. For each installation of the
Software, five (5) keycodes shall be provided; quantity one (1) for
Productive Use of the Software; and quantity four (4) for Non-Productive
Use of the Software. The license keycodes will be issued by SAP AG wthin
four (4) weeks from the date of installation of the Software on each
Designated Unit. The required form to receive the license keycodes from
SAP AG must be executed by Licensee and faxed to SAP AG within the
four (4) week period following installation of the Software. The applicable
form and fax number will be included in each installation kit provided to
Licensee upon delivery of the Software. Licensees that subsequently change
Designated Units for Use of the licensed Software must be re-issued license
keycodes for each respective copy of the licensed Software. Failure of
Licensee to obtain necessary license keycodes for the licensed Software
within four (4) weeks of installation of such Software, will cause the
Software to have limited User access until such time as the license
keycodes are issued.
14. The Software, including all third-party software, is not specifically
developed or licensed hereunder for Use in any direct and active
operations of any equipment in any nuclear, aviation, mass transit,
or medical applications, or in any other inherently dangerous applications.
The parties hereto agree that Use of the Software and third-party software
for financial application purposes or such other administrative purposes
shall not be deemed inherently dangerous applications if such Use does not
affect the operations or maintenance of such equipment. SAP, SAP AG, and
its licensors shall not be liable for any claims or damages arising from
inherently dangerous Use of the Software and/or third-party software
licensed hereunder.
15. The validity of this Appendix will expire October 30, 1996, unless sooner
executed by the parties hereto, or extended in writing by SAP.
Accepted by: Accepted by:
SAP America, Inc. Pluma, Inc.
By:_______________________________________ By: (Sig of Walter E. Helton)
Name:_____________________________________ Name: (Walter E. Helton)
Title:____________________________________ Title: Vice President of Operations
Date:_____________________________________ Date: October 14, 1996
2
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Exhibit 10.18.2
PROFESSIONAL SERVICES AGREEMENT
This Professional Services Agreement ("Agreement") is entered into this
9th day of October 1996, ("Effective Date") by and between SAP America, Inc.,
a Delaware corporation, with offices at 701 Lee Road, Suite 200, Wayne,
Pennsylvania 19087, (hereinafter "SAP") and Pluma, Inc., a North Carolina
corporation, with offices at 801 Fieldcrest Road, Eden, North Carolina
27288 (hereinafter "Company").
RECITAL
WHEREAS, Company acquired from SAP utilization rights for SAP R/3 Software
System pursuant to the R/3 Software End-User Individual License Agreement
effective October 9, 1996, between SAP and Company ("End-User Agreement").
All terms set forth in the End-User Agreement and referred to herein shall
have the same meaning as set forth in the End-User Agreement unless
otherwise modified in this Agreement.
WHEREAS, SAP provides, through its employees and third party contractors,
software consulting and professional services in support of installation
and implementation of the Software in the United States which Company desires
to obtain.
NOW, THEREFORE, in consideration of the mutual promises and obligations in
this Agreement, the sufficiency of which is hereby acknowledged, the parties,
intending to be legally bound, agree as follows:
1. Services To Be Performed. SAP will provide consultants proficient with
the applicable SAP products to perform services at Company's direction on
projects as mutually agreed to in writing by SAP and Company. All activities
of the SAP staff must be coordinated with the project supervisor of Company.
Company is responsible for making the necessary internal arrangements for
the carrying out of the services to be rendered by the SAP staff. Company
and SAP will jointly agree on the scope, duration, and estimated cost of
the project prior to the commencement of services in the form set forth in
Schedule A attached hereto.
2. Satisfaction with Performance. If at any time Company is dissatisfied
with the performance of a consultant working on a Company project, Company
shall immediately report its dissatisfaction to SAP in writing and may ask
SAP to replace the individual.
3. Compensation of SAP. All services will be provided by SAP on a time and
materials basis. Activities will be charged according to the effort required
at the rates as set forth in Schedule B hereto. The services to be rendered
by SAP within the framework of this Agreement will be charged on a monthly
basis in accordance with Schedule B. Record of performance will be shown
on forms provided by SAP for this purpose. All payments are due within
thirty (30) days after receipt of invoice. All duties, taxes and levies
(excluding taxes based on SAP's net income), if any, shall be borne by
Company. SAP shall be responsible for all payroll taxes, employee benefits,
and any other payments due or imposed on any personnel performing work
under this Agreement. SAP's consulting rates are subject to change upon
thirty (30) day prior written notice.
4. Term. This Agreement shall be effective as of the Effective Date, specified
above, and shall remain in force until terminated in writing by either party
with or without cause. Company shall be liable for payment to SAP for all
services rendered or products delivered prior to the Effective Date of any
such termination.
5. Proprietary Information. Both parties shall handle Proprietary information
(as defined in Section 1.18 of the End-User Agreement) acquired in connection
with their activities under this Agreement in accordance with the obligations
regarding Proprietary Information set forth in Section 6 of the End-User
Agreement.
6. Work Product.
6.1 All rights, title and interest in any Extension or Modification
(as defined in Sections 1.10 and 1.12 of the End-User Agreement) developed
under this Agreement shall be governed by the terms set forth in Section 6.4
of the End-User Agreement.
6.2 Company agrees that any and all ideas, concepts, or other intellectual
property rights related in any way to the techniques, knowledge or processes
of the SAP services or SAP products provided under this Agreement, whether
or not developed for Company, are the exclusive property of SAP. SAP shall
have the sole and exclusive right, title and ownership in and to the said
technology.
6.3 This Section 6 shall survive any termination of this Agreement.
<PAGE>
7. Limitation of Liability.
7.1 The liability of SAP (including all persons employed by SAP in
performing any obligations of this Agreement) for any claims arising from
this Agreement shall be limited in the aggregate to the amount of the
service fees paid to SAP for the services to which the liability is
attributable.
7.2 This limitation does not apply to personal injury or death caused solely
by the gross negligence of SAP. With respect to tangible property damage, SAP
shall hold Company harmless, to the extent to which such damage is paid
by SAP's liability insurance. SAP shall maintain adequate insurance coverage
on all personnel performing work under this Agreement, including commercial
general liability coverage, automobile liability coverage, and workers'
compensation.
7.3 ANYTHING TO THE CONTRARY HEREIN NOTWITHSTANDING, UNDER NO CIRCUMSTANCES
SHALL SAP BE LIABLE TO COMPANY OR ANY OTHER PERSON FOR SPECIAL OR CONSEQUENTIAL
DAMAGES OR FOR INDIRECT DAMAGES, OR FOR LOSS OF GOOD WILL OR BUSINESS PROFITS,
WORK STOPPAGE, DATA LOSS, COMPUTER FAILURE OR MALFUNCTION, ANY AND ALL OTHER
COMMERCIAL DAMAGES OR LOSS, AND EXEMPLARY OR PUNITIVE DAMAGES, EVEN IF SAP
HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
7.4 SAP MAKES NO WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE, NOR ANY OTHER WARRANTIES, EXPRESS, IMPLIED OR STATUTORY IN CONNECTION
WITH THIS AGREEMENT AND THE SERVICES PROVIDED HEREUNDER.
8. General Provisions.
8.1 This Agreement is a personal services agreement and the performance
of any obligation hereunder may not be assigned, delegated or otherwise
transferred by either party, provided however, that SAP may assign all or
part of the work to be performed under this Agreement to a qualified third
party who shall be operating on a consulting basis for SAP.
8.2 If any provision of this Agreement is found by any court of competent
jurisdiction to be invalid or unenforceable, the invalidity of such provision
shall not affect the other provisions of this Agreement, and all provisions
not affected by such invalidity shall remain in full force and effect.
8.3 The waiver by either party of a breach or default in any of the
provisions of this Agreement by the other party shall not be construed as
a waiver of any succeeding breach of the same or other provisions; nor
shall any delay or omission on the part of either party to exercise or
avail itself of any right, power or privilege that is has or may have
hereunder operated as a waiver of any breach or default by the other party.
8.4 This Agreement constitutes the entire agreement between the parties
with respect to the subject matter hereof and supersedes all prior agreements
between the parties, whether written or oral, relating to the same subject
matter. No modifications, amendments, or supplements to this Agreement shall
be effective for any purpose unless in writing and signed by the parties.
8.5 The relationship of SAP and Company established by this Agreement
is that of independent contractors.
8.6 This Agreement and any disputes arising out of or in connection with
this Agreement shall be governed by and construed in accordance with the
laws of the Commonwealth of Pennsylvania.
8.7 Any purchase order or other document issued by Company is for
administrative convenience only. In the event of any conflict between
the provisions of this Agreement, and any purchase order, as well as the
introduction of new terms on any such purchase order, the provisions
of this Agreement shall prevail.
IN WITNESS WHEREOF, the parties have so agreed as of the date written above.
Agreed to: Agreed to:
SAP America, Inc. Pluma, Inc.
SAP Company
By:_______________________________________ By: (Sig of Walter E. Helton)
Name:_____________________________________ Name: (Walter E. Helton)
Title:____________________________________ Title: Vice President of Operations
Date:_____________________________________ Date: October 14, 1996
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SCHEDULE A
to
Professional Service Agreement
Work Order
PROJECT NAME AND COMPANY ADDRESS
LOCATION OF WORK TO BE PERFORMED
CONSULTANT CATEGORY LEVEL
START DATE
TARGET END DATE
RATE OF COMPENSATION
Basic hourly rate is based on attached Rate Schedule (Schedule B) and
individual K Rates.
EXPENSES
Pre-approved travel expenses, and incidental expenses relating to support
services shall be applicable in addition to the basic hourly rate. SAP shall
bill such fees and expenses monthly, attaching time sheets or other records
customarily used by SAP.
DESCRIPTION OF WORK
PLUMA, INC.
BY: _____________________________ DATE: _______________
TITLE:___________________________
SAP AMERICA, INC.
BY:______________________________ DATE:________________
TITLE:___________________________
<PAGE>
SCHEDULE B
to
Professional Service Agreement
Rates
The following SAP categories have been defined for SAP consultants:
K1 = Junior Consultant
K2 = Consultant
K3 = Senior Consultant
K4 = Senior System Consultant/Management consultant
K5 = Client Manager
K6 = Developer or Consulting Manager
K7 = Senior Developer
The rates applicable to each category in US dollars are as follows:
K1 K2 K3 K4 K5 K6 K7
Daily rate $1,000 $1,200 $1,400 $1,600 $1,900 $2,500 $3,000
(up to 8 hours)
Half day rate $500 $600 $700 $800 $950 $1,250 $1,500
(up to 4 hours)
Hourly rate of $125 $150 $175 $200 $200 $350 $425
overtime
Expenses: as incurred per visit
Mileage: 0.31 per mile
If customer specific modifications are carried out in SAP's computer center,
a machine time surcharge of $500 per day will be added to the above rates. If
a separate test system is required to carry out Modifications and Extensions,
an additional fee will be charged, based on resources required.
- If Software is supplied by SAP, SAP will provide all support services
including program modification (in the SAP DP center)
- Accommodations and use of public transportation facilities will be
charged according to actual expenditure.
- For work at customer's premises, a minimum charge amounting to the
half day rate for the given consultant is billable. Travel costs
are calculated from the consultant's principal office.
<PAGE>
REMOTE CONSULTING SERVICES ADDENDUM TO
PROFESSIONAL SERVICES AGREEMENT
effective October 9, 1996
issued October 9, 1996
The parties hereto agree that the terms of this Addendum dated October 9,
1996 are hereby incorporated into the Professional Services Agreement dated
October 9, 1996 between SAP America, Inc. ("SAP") and Pluma, Inc. ("Company").
A. Description of Services:
1. SAP will provide Remote Consulting Services for the R/3 System
in the following areas:
a. System technology (i.e., tuning, ABAP/4 Workbench client
copy, etc.);
b. Business process (making use of table adjustment and
customizing facilities); and
c. Software changes/enhancements or support therefor.
2. SAP shall provide such services either through telecommunication
or dial access into Company's system.
B. Company Obligations:
1. Company shall request services from SAP in writing and provide an
adequate description of the problem.
2. Company and SAP shall agree upon an appointment for provision of
the service.
3. Company must be receiving SAP Software Maintenance for the R/3
System for the duration of this Agreement.
4. The Company shall obtain the technology required for accessing the
system (an on-line connection). The Company shall pay all costs
incurred for the connection.
5. The Company shall permit SAP to access its system in order to
provide the requested services.
6. The Company is obliged to test all solution recommendations and
configurations and to check their suitability before using them
in a production system. SAP shall not be liable for any damages
or loss resulting from Company failure to do so.
C. Consulting Rate:
1. SAP's current rate for remote consulting services is $270 per
hour of consulting started. This rate may be changed at any
time upon ninety (90) days prior written notice.
2. The minimum duration for each consulting session shall be
one (1) hour.
3. Preparation time for the consulting session relating specifically
to Company's inquiry will also be charged at the hourly rate
set out above.
Agreed to: Agreed to:
SAP America, Inc. Pluma, Inc.
SAP Company
By:____________________________________ By: (Sig of Walter E. Helton)
Name:__________________________________ Name: (Walter E. Helton)
Title:_________________________________ Title: Vice President of Operations
Date:__________________________________ Date: October 14, 1996
<PAGE>
EMPLOYEMENT AGREEMENT
This Agreement is made and entered into as of this _____ day of ________, 1996,
by and between PLUMA, INC., a North Carolina corporation ("Employer"), and
__________________________ ("Employee").
WHEREAS, Employer desires to engage the services of Employee in
connection with its business; and
WHEREAS, Employee desires to be employed by Employer;
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants hereinafter set forth, and of other good and valuable consideration,
the receipt and sufficiency of which are mutually acknowledged, the parties
hereto agree as follows:
1. AGREEMENT OF EMPLOYEMENT.
Employer hereby agrees to employ Employee, and Employee hereby agrees
to become and to remain employed by Employer, subject to the terms and
conditions hereinafter set forth.
2. DUTIES OF EMPLOYEES.
a. The Board of Directors of Employer shall elect Employee to the
office of VICE PRESIDENT-CONTROLLER, and to such other office or
offices as it shall determine. Employee agrees to serve in such
capacity or capacities and to carry out the duties incident thereto,
and such other duties as may otherwise be assigned to her from time to
time by the Board of Directors of Employer or the Chief Executive
Officer of Employer, competently, diligently and in a businesslike and
professional manner. The Employer shall retain full direction and
control of the means and methods by which Employee performs the above
services and of the place(s) at which such services are to be provided.
b. Employee shall be a full-time employee of Employer and, while so
employed, shall engage in no other business, profession or employment
activity (whether or not pursued for pecuniary advantage) that is or
may be competitive with, or that might place her in a competing
position to that of the Employer or any Affiliate of Employer.
3. TERM
The initial term of this Agreement and of Employee's employment
hereunder shall continue from the date hereof, and, unless sooner terminated
pursuant hereto, shall end on the second anniversary date hereof. Subsequent to
the second anniversary date hereof, the term of this Agreement shall be for an
undefined duration, said employment being at will, subject to termination by
either party at any time, provided, any termination of Employee's at will
employment shall be subject to the Employee's rights set forth in Section 5 of
this Agreement.
4. SALARY AND BENEFITS.
A. SALARY. Employer will pay to Employee an initial salary computed on
the basis of______________________ per year, payable in installments in
accordance with Employer's normal payroll practices. Employee shall be
eligible to be considered for salary increases in accordance with
Employer's salary administration practices for senior officer
personnel. Employee shall be a participant in any incentive
compensation plan for senior management personnel of Employer at a
level to be determined in the discretion of Employer.
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B.REIMBURSABLE EXPENSES. Employer shall reimburse Employee for all
reasonable travel, lodging, entertainment and other expense incurred in
the performance of her duties as outlined in the Company's Expense
Reimbursement policy. Employee agrees to keep and maintain such records
of the aforesaid expenses as Employer may reasonably require.
C. BENEFITS. Employer will make available to Employee, during the term
of her employment hereunder, all benefits made available to other
senior officers of Employer under any employee benefit plans
established by Employer, including, without limitation, any pension and
profit-sharing plans, medical, hospitalization, or disability insurance
plans, but only to the extent that Employee is eligible and qualifies
to participate under the terms of the particular plan or plans, subject
to the same conditions and limitations as are applicable to other
senior officers of Employer. Nothing herein shall obligate Employer to
implement, maintain or continue any plan or plans.
5. TERMINATION
a. If the termination of this Agreement has not sooner occurred by the
action of either party, Employee's employment hereunder shall terminate
upon the occurrence of either of the following:
(1) UPON THE DEATH OF EMPLOYEE. In the event of the death of
the Employee during her employment under this Agreement, the
following payments shall be made to the Employee's designated
beneficiary, or, in the absence of such designation, to the
estate or other legal representative of the Employee: (i) her
base salary for the month in which her death occurs, and (ii)
such bonuses (if any) as have been earned by the Employee and
not paid to her at the time of her death. Any rights and
benefits the Employee or her estate or any other person may
have under employee benefit plans and programs of the Employer
generally in the event of the Employee's death shall be
determined in accordance with the terms of such plans and
programs. Except as provided in this Section 5a.(1), neither
the Employee's estate nor any other person shall have any
rights or claims against the Employer in the event of the
death of the Employee during her employment hereunder;
(2) AT EMPLOYER'S ELECTION, "FOR CAUSE." A termination For
Cause shall mean the occurrence of any one of the following
events:
(a) termination due to (i) willful or gross neglect of
duties for which employed, or (ii) willful misconduct in
the performance of duties for which employed, in either
such instance so as to cause material harm to the
Employer, all such facts to be determined in good faith
by the Board of Directors of the Employer;
(b) termination due to the Employee's committing fraud,
misappropriation or embezzlement in the performance of
her duties as an employee of the Employer; or
(c) termination due to the Employee's committing any
felony for which he is convicted and which, as determined
in good faith by the Board of Directors of the Employer,
constitutes a crime involving moral turpitued.
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<PAGE>
Upon termination for Cause, the Employee shall receive
her base salary only through the date of termination, and
neither the Employee nor any other person shall be
entitled to any further payments from the Employer, for
salary, unpaid bonuses or any other amounts. Any rights
and benefits the Employee may have under employee benefit
plans and programs of the Employee generally following a
termination of the Employee's employment For Cause shall
be determined in accordance with the terms of such plans
and programs.
(3) CHANGE OF CONTROL. At the election of Employee or Employer
upon a "Change of Control" of Employer, provided that notice
of such termination is given by either party to the other
after such Change of Control. A Change of Control shall mean
the occurrence of any one of the following events:
(a) any "person," as such term is used Section 13 (d)
and 14 (d) of the Securities and Exchange Act of 1934
(the "Act") (other than the Employer, any trustee,
fiduciary or other person or entity holding securities
under any employee benefit plan of the Employer),
together with all "affiliates" and "associates" (as such
terms are defined in Rule 13d-3 under the Act), directly
or indirectly, of securities of the Employer
representing 50% or more of either (i) the combined
voting power of the Employer's then outstanding
securities having the right to vote in an election of
the Employer's Board of Directors ("Voting Securities")
or (ii) the then outstanding Shares of the Employer (in
either such case other than as a result of acquisition
of securities directly from the Employer); or
(b) the majority of those persons who, as of January 1,
1996, constitute the Employer's Board of Directors (the
"Incumbent Directors") cease for any reason, including,
without limitation, as a result of a tender offer, proxy
contest, merger or similar transaction, to constitute at
least a majority of the Board, provided that any person
becoming a director of the Employer subsequent to
January 1, 1996 whose election or nomination for
election was approved by a vote of at least a majority
of the Incumbent Directors shall, for purposes of this
Plan, be considered an Incumbent Director; or
(c) the shareholders of the Employer shall approve (i)
any consolidated or merger of the Employer where the
shareholders of the Employer, immediately prior to the
consolidation or merger, would not, immediately after
the consolidation or merger, benefically own (such as
term is defined in Rule 13d-3 under the Act), directly
or indirectly, shares representing in the aggregate 50%
of the voting shares of the corporation issuing cash or
securities in the consolidation or merger (or of its
ultimate parent corporation, if any), (ii) any sale,
lease, exchange or other contemplated disposition
(arranged by a party as a single plan) of all or
substantially all of the assets of the Employer or (iii)
any plan or proposal for the liquidation or dissolution
of the Employer.
Notwithstanding the foregoing, a "Change in Control" shall not be deemed
to have occurred for purposes of the foregoing clause 5.(3) soley as the
result of an acquisition of securities by the Employer which, by
reducing the number of Shares or other Voting Securities outstanding,
increases (x) the proportionate number of
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<PAGE>
Shares beneficially owned by any person to 50% or more of the
Shares then outstanding or (y) the proportionate voting power
represented by the Voting Securities beneficially owned by any
person to 50% or more of the combined voting power of all then
outstanding Voting Securities; provided, however, that if any
person referred to in clause (x) or (y) of this sentence shall
thereafter become the beneficial owner of any additional
Shares of other Voting Securities (other than pursuant to a
stock split, stock dividend, or similar transaction), then a
"Change of Control" shall be deemed to have occurred for
purposes of the foregoing clause (3). Upon termination of this
Agreement under this SEction 5a(3), if the Employee is
eligible [as defined below], Employer shall:
(a) Within 30 days after termination upon a Change in
Control, pay to Employee an amount, in cash, equal to:
(A) three times the Employee's (i) average annual salary
for the thirty-six (36) month period prior to such
Change in Control, and (ii) bonuses received during the
eighteen months preceding the effective date of the
Change in Control, less (b) 1/36 of the amount
calculated in (a) immediately above for each month that
the Employee remains employed with Employer following
the effective date of the Change in Control; and
(b) If allowed to do so by the Company's insurance
carrier, or under the terms of the Company's insurance
plan in effect at the time of termination (in the event
the Company is a self-insured or partial self-insurer),
continue the medical, disability and life insurance
benefits which Employee was receiving at the time of
termination for a period of thirty-six (36) months after
termination of employment (the cost of which shall be
borne by Employer or Employee as set forth below) or, if
earlier, until Employee has commenced employment
elsewhere and become eligible for participation in the
medical, disability and life insurance programs, if any,
of the successor employer. Coverage under Employer's
medical, disability and life insurance programs shall
cease with respect to each such program as Employee
becomes eligible for the medical, disability and life
insurance programs, if any, of the successor employer.
During the first eighteen (18) months of such thirty-six
(36) month period, the Employer shall be responsible for
the costs associated with continued insurance coverage
for Employee, but only to the extent it would have been
responsible for such costs if the Employee was still
employed by the Company. The Employee shall be
responsible for the remaining costs. If, at the end of
18 months, the Employee is still afforded medical,
disability and life insurance coverage under the
Employer's insurance programs, Employer shall arrange to
provide continued coverage under said programs, but the
Employee will be responsible for the total cost of all
such continued coverage at the end of the first eighteen
(18) month period specified above.
The Employee is eligible for the benefits provided in
this Section 5a(3), unless the Employer or the
Employer's successor, after a Change in Control, offers
the Employee a bona fide employment contract for a term
which would expire no earlier than three years after the
effective date of the Change in Control under the terms
of which the Employee would perform the same duties for
the same or greater levels of compensation as were
afforded under the terms of this AGreement and this
offer is rejected by the Employee.
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<PAGE>
In addition, in the event Employee's employment with the
Company is terminated within 90 days before a Change in
Control occurs for a reason not described in Section
5a(1), (2) or (4), then in such event, Employee shall be
entitled to those payments and other befits described in
subparagraphs (a) and (b) of page 4 of this Section 5a.
upon such termination.
(4) AT EMPLOYER'S ELECTION IN THE EVENT OF EMPLOYEE'S
LONG-TERM DISABILITY. In the event of the Employee's
disability (as hereinafter defined) during her
employement under this Agreement, the Period of
Employment may be terminated by the Employer. For the
fist three months following termination of employement
due to disability, the Employee shall be paid her base
salary at the rate in effect at the time of the
commencement of disability. Thereafter, the Employee
shall be entitled to benefits in accordance with and
subject to the terms and provision of the Employer's
long-term disability plans for senior management
employees, as in effect at the time of the commencement
of disability. For purposes of this Agreement,
"disability" shall have the same meaning as given that
term under the Employer's long-term disability plan for
senior management employees, as in effect from time to
time. Anything herein to the contrary notwithstanding,
if, during the three month period following a
termination of employment under this Section 5a.(4) in
which salary continuation payments are payable by the
Employer, the Employee becomes re-employed or otherwise
engaged (whether as an employee, partner, consultant, or
otherwise), any salary or other renumeration or benefits
earned by her from such employement or engagement shall
not offset any payments due her under this Section
5a.(4). In the event of the Employee's disability, any
rights and benefits the Employee may have under employee
benefit plans and programs of the Employer generally
shall be determined in accordance with the terms of such
plans and programs. Upon termination of the Employee's
employment by reason of disability under this SEction
5a.(4), the Employee shall be entitled, in addition to
the other payments provided for in this Section 5a.(4),
to payment of such bonuses (if any) as may have been
earned by the Employee and not paid to her at the time
of such termination. Except as provided in this Section
5a.(4), neither the Employee nor her estate, or any
other person, shall have any rights or claims against
the Employer in the event of the termination of the
Employee's employement by reason of disability.
b. Except as provided in 5a. above and as might be provided
specifically in separate stock option or other employee benefit plans, upon
termination of this AGreement, Employee's rights to further compensation and
benefits hereunder shall cease, provided, however, that Employee shall remain
entitled to any unpaid compensation and benefits accrued prior to such
termination and to any expense reimbursements to which he was entitled at the
date of such termination, and any rights to which he is entitled by law or
pursuant to benefit plans of Employer in the event of death
disability.
6. CONFIDENTIALITY.
A. CONFIDENTIALITY INFORMATION. The Employee promises and
agrees that he will not, either while in the Employer's
employ or at any time thereafter, disclose to any person not
employed by the Employer, or not engaged to render services
to the Employer, or use, for herself or any other person,
firm, corporation or entity, any confidential information of
the Employer obtained by her while in the employ of the
Employer, including, without limitation, any of the
Employer's methods, processes, techniques, practices,
research data, marketing and sales information, personnnel
data, customer lists, financial data, plans, know-how, trade
secrets and proprietary information of the Employer;
provided, however that this provision
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<PAGE>
shall not preclude the Employee from use or disclosure of
information known generally to the public [other than
information known generally to the public as a result of a
violation of this Section 6a. by the Employee], from use or
disclosure of information acquired by the Employee outside of
her affiliation with the EMployer, from disclosure reuired by
law or court order, or from disclousre or use approprite and
in the ordinary course of carrying out her duties as an
employee of the Employer.
B. RIGHTS TO MATERIALS. The Employee further promises and
agrees that, upon termination of her employemtn for whatever
reason and at whatever time, he will not take with her,
without the prior written consent of an officer authorized to
act in the matter of the Board of Directrs of the EMployer,
any records, files, memoranda, reports, customer lists,
drawings, plans, sketches, documents, specifications, and the
like (or any copies thereof) relating to the busienss of the
Employer or any of its current or future Affilaited
Companies.
7. INJUNCTIVE RELIEF.
The Employee acknowledges and agrees that the Employer would suffer
irreparable injury in the event of a breach by her or any of the provisions of
Section 6 of this Agreement and that the Emploer shall be entitled to an
injunction restraining her from any breach or threatened breach thereof. The
Employee further agress that, in the event of her breach of any provsion of
Section 6 hereof, the Employer shall be entitled to terminate its obligation to
make any payemnts otherwise due and payable to the Employee hereudner. Nothing
herein shall be construed, however, as prohbigitng the Employer from pursing any
other remedies at law or in equity which it may have for any such breach or
threatened breach of any provision of Section 6 hereof, including the recoevery
of damages from the Employee.
8. NOTICES.
All notices required or permitted hereunder shall be in writing and
shall be delievered personally or by facsimile or sent by United States
registred or certified mail, postage prepaid, addressed to Employer at P.O. Box
487, Eden, North Carolin 27288 and to Employee at 1807 Church Street Ext., Apt.
105, Martinsville, Virginia 24112, or at such changed addresses as the
aforementioned may disignate in writing. Any such notice shall be deemed given
and effectiv when recieved at the aforesaid address or facsimile number.
9. MISCELLANEOUS.
This Agreement shall be binding upon and shall inure to the benfit of
the parties hereto, and their heirs, executors, administrators, and personal
representatives, successors, and sassigns. Paragraph headins are for convenience
covenants herein, the performance of which mayextrend beyond the term of this
Agreement, shall be deemd to survice the termination of thisAGreement. This
Agreement constitues the entire agreement between the parties hereto pertaining
to the subject matter hereof and supersedes all prior and contemporaneous
agreements and understandings of the parties, and there are not warranties,
representations or other agreements betweent he parties in connectin with the
subject matter hereof except as specifically set forth herein. This agreement
shall be governed in all respects by the internal laws of the State of Nrorht
Carolina. In the event any term or provsion hereof is unenforceable or invalid
for any reaons whatsoever or as applied to a particular cirucmstance, such term
or provision shall be modified to the extent necessary to make it valid and
enforecable, or shall be stricken herefrom, as the circumstances may require,
and this Agreement shall be construed as if such term or provsion (to such
exten) had originally been included herein, as the case may be.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement in
contuerparty on the date first above written.
PLUMA, INC.
By:
R. DUKE FERRELL, JR., President & CEO
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Exhibit 10.20
SALE AND PURCHASE AGREEMENT
THIS AGREEMENT, made and entered into as of this 10th day of May, 1995,
by and between Sara Lee Corporation, a Maryland corporation, (hereinafter called
"Seller"), and Pluma, Inc., a North Carolina corporation, (hereinafter called
"Buyer").
W I T N E S S E T H:
That for and in consideration of the mutual covenants and agreements
herein contained, the parties hereto agree as follows:
1. CONVEYANCE. Seller agrees to sell and convey and Buyer agrees to
purchase and take title to that certain parcel of improved real estate
consisting of approximately 42 acres situated in Rocky Mount, Virginia as more
particularly described in Exhibit A attached hereto and made a part hereof
(hereinafter called the "Property"). The Property shall be purchased by Buyer
upon the terms and conditions herein set forth and subject only to the Permitted
Exceptions hereinafter set out.
2. PURCHASE PRICE. The Purchase Price of the Property shall be One
Million Dollars ($1,000,000.00). Simultaneously with the final execution of this
Agreement by all parties, Buyer shall deliver to Seller, the sum of Twenty-Five
Thousand Dollars ($25,000.00) as Earnest Money. Said Earnest Money shall be
credited against the Purchase Price at closing. The balance of the Purchase
Price shall be paid at closing by wired funds transmitted to Sara Lee Knit
Products, a division of Sara Lee Corporation, Account Number 50-41694, First
National
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Bank of Chicago, ABA Routing 071000013. If it is determined that the closing
will not take place for any reason other than Buyer's default hereunder, the
Earnest Money shall be returned to Buyer.
3. BROKERAGE. Buyer and Seller each represent to the other that it has
not dealt with a broker or agent in connection with this transaction. Each party
will indemnify and hold the other harmless from and against any claims, demands,
liabilities, and causes of action (including without limitation attorneys' fees
and court costs) for brokers' fees, commissions, or charges arising out of or in
connection with such party's actions relative to this sale.
4. TITLE. Buyer agrees to purchase at its sole cost and expense,
promptly after the date hereof, a commitment from a title insurer of Buyer's
choice (the "Title Company") to issue Buyer a title insurance policy (an ALTA
Form-B Owner's Policy) showing the status of the title to the Property. Buyer
agrees at the closing or as soon as possible thereafter, to obtain at Buyer's
sole expense, an ALTA Form-B Owner's Policy issued by the Title Company,
insuring in Buyer a good and marketable fee simple title to the Property. On the
closing date hereof, the title to the Property shall be free from defects and
encumbrances except for the following (collectively, the "Permitted
Exceptions"):
(a) general real estate taxes which are not yet due and payable;
(b) general and special assessments against the Property which
are not yet due and payable;
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(c) exceptions to title pertaining to any zoning,
rezoning, variance, site plan, concept plan, or use restrictions relating to the
Property;
(d) all those certain exceptions to title set forth in
the title commitment to be obtained by Buyer pursuant to this paragraph 4;
(e) exceptions to title relating to any matters created
by, through, or under the acts (or omissions to act) of Buyer, its employees,
agents, contractors, licensees, or engineers;
(f) exceptions or encumbrances to title with respect to which
the Title Company commits to insure against loss that may be sustained by Buyer
by reason of such exceptions or encumbrances to title;
(g) the general exceptions to title and the printed
exclusions and conditions and stipulations set forth in the title commitment to
be obtained by Buyer pursuant to this paragraph 4;
(h) all easements, road right-of-way agreements,
restrictions, and encumbrances of record;
(i) exceptions to title approved by Buyer;
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(j) any matters which would be disclosed by an accurate
survey and inspection of the Property;
If a survey of the Property is necessary, it shall be made at the sole
expense of Buyer.
5. BUYER'S OBLIGATION TO CLOSE. Buyer's obligation hereunder to close
shall be subject only to the Property being (i) in substantially the same
condition on the closing date as it is on the date of this Agreement, and (ii)
the title to the Property being free from defects and encumbrances except for
the Permitted Exceptions and except as otherwise expressly provided herein. If
this condition is not fulfilled, then either party shall have the option to
terminate this Agreement on or before the closing date, in which event the
Earnest Money shall be returned immediately to Buyer, and both parties shall be
relieved of all further liability hereunder.
6. INVESTIGATION BY BUYER. Through and with the assistance of such
third- parties as Seller may hereafter approve in writing, Buyer shall have the
right, at any time after the date of this Agreement, to enter upon the Property
in order to survey the Property, to make engineering inspections thereon, and to
make drillings and borings and other examinations of the surface and subsurface
conditions of the Property, including investigations of the soil and subsurface
water conditions of the Property and environmental audits or investigations of
the Property (collectively, "the investigations"), all at Buyer's sole cost and
risk. Buyer shall forever indemnify Seller from and against any and all
liability suffered by Seller as a result of Buyer's, employees', agents', or
representatives' activity upon the Property. Following the investigations,
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the Property shall be restored by Buyer to the condition which existed prior to
the investigations. Buyer shall promptly deliver copies of all results of the
investigations, including all test data and reports, to Seller. Said
information, test data, and reports resulting from the investigations will be
kept strictly confidential and will not be used for any purpose other than the
evaluation of a possible purchase of the Property. Under no circumstances will
any part of same be provided to any third party, exclusive of professional
advisors engaged by Buyer to assist with this transaction, unless Seller has
first been satisfied that proper arrangements have been made to preserve its
confidentiality and Seller has expressly consented in writing to Buyer's
releasing the information to the other party. All necessary steps will be taken
by Buyer to keep the information in full and complete confidence. None of the
information resulting from the investigations may be copied, duplicated, or
otherwise reproduced in any form. In the event of a breach, or attempted or
contemplated breach of the foregoing obligations, Buyer hereby acknowledges that
monetary damages alone will be inadequate to compensate Seller, and accordingly,
Buyer agrees that, in such event, Seller will be entitled to injunctive relief
to prevent the disclosure of the information, together with such other remedies
as may be available to Seller either at law or in equity. The obligations of
Buyer contained in this paragraph 6 shall be continuing obligations of Buyer
which shall survive the termination of this Agreement.
7. CLOSING. The closing hereunder shall take place at the Law Offices
of Micheaux Raine, Esq., Raine & Perdue, 106 Main Street, Rocky Mount, Virginia
24151 at 11:00 a.m. on May 26, 1995 or such mutually acceptable date through May
26, 1995 as the parties may hereafter agree upon in writing.
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At the closing:
(a) Seller shall execute a Special (Limited) Warranty Deed,
conveying the Property to Buyer, subject only to the Permitted Exceptions.
(b) Buyer shall pay the balance of the Purchase Price to
Seller.
(c) Buyer shall pay all transfer taxes, revenue stamps, and
recording charges in connection with this purchase of the Property, except
recordation tax applicable to Grantors.
(d) Buyer shall pay any and all costs and fees charged by the
Title Company in connection herewith, including, without limitation, fees for
the title examination, title commitment, title insurance policy, and escrow
closing fees.
(e) Buyer shall deliver to Seller a check payable to Seller in
the amount of Forty-Three Thousand One Hundred Dollars ($43,100.00) in payment
for that personal property listed in Exhibit B annexed hereto and made a part
hereof (the "Purchased Personal Property");
(f) Seller shall execute and deliver to Buyer a Bill of
Sale conveying title to the Purchased Personal Property.
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8. POST CLOSING OBLIGATIONS.
(a) Within not more than thirty (30) days following the
closing date, and upon the taking of subsequent actual readings for water,
sewer, and utility services for the month in which closing occurs, the
apportionment of such charges shall be calculated as of the closing date. Buyer
shall make a payment to Seller based upon such calculation, if any such payment
be due, and Seller shall make payment in full to the service providers for the
month in which the closing occurs (taking into account any advance payment or
payments made by Seller for any utilities which advance payments shall be
credited against charges for same in the month in which the closing occurs). If
Seller shall not have been successful in obtaining meter readings for water,
sewer, and utility services as of the day prior to the closing date, utility
charges shall be prorated based upon the per diem charges for the month in which
the closing occurs.
(b) If any refunds of real property taxes or assessments,
water rates and charges or sewer taxes and rents shall be made after the
closing, the same shall be held in trust by Seller or Buyer, as the case may be,
and shall first be applied to the unreimbursed costs incurred in obtaining the
same, and the balance, if any, shall be paid to Seller (for the period prior to
the Closing Date) and to Buyer (for the period commencing with the Closing
Date).
(c) Buyer shall remit payment in full to City and County
authorities for all 1995 real estate and ad valorem taxes and assessments, if
any, on Property. Within not less
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than ten (10) days before the last day on which such taxes and assessments, if
any, are timely payable, Seller shall pay to Buyer a sum of money equal to
Seller's apportioned share of real estate and ad valorem taxes and assessments,
if any, based on the 1995 rates and assessed valuation, which share shall be
determined by apportionment as of midnight on the day prior to the Closing Date
(the "Apportionment Time");
(d) Buyer shall have the right to operate the Property
effective June 12, 1995. Notwithstanding the foregoing, Buyer shall afford to
Seller a period of not less than thirty (30) days following the Closing Date in
which Seller may remove from Property all Seller's equipment and personal
property except the air compressors, feed rails, air lines, dock levelers and
seals, and Purchased Personal Property. During the period in which Buyer and
Seller may both be utilizing the Property, each shall cooperate with the other
and exercise reasonable efforts not to obstruct or interfere with the other's
utilization of the Property.
9. REMEDIES.
(a) In the event Seller fails to keep or perform any of the
covenants or obligations to be kept or performed by Seller under this Agreement,
and the same shall continue for ten (10) days following written notice thereof
to Seller specifying such default, Buyer may terminate this Agreement, in which
event the Earnest Money shall be returned to Buyer, and Buyer shall have the
right to all remedies provided at law or in equity respecting Seller's default
hereunder.
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(b) In the event Buyer fails to keep or perform any of the
covenants or obligations to be kept or performed by Buyer under this Agreement
and the same shall continue for ten (10) days following written notice thereof
to Buyer specifying such default, Seller may terminate this Agreement, in which
event the Earnest Money and all interest thereon shall be paid to Seller, and
Seller shall also have the right to all remedies provided at law or in equity.
10. CONDITION OF THE PROPERTY. Possession of the Property shall be
delivered by Seller to Buyer at closing. Buyer agrees to accept the Property at
such time on an "as-is," "where is," and "with all faults" basis and condition,
and Seller shall have no obligation to improve the Property, including but not
limited to the environmental condition of the Property, or remove any existing
improvements located thereon. Seller shall have the right, but not the
obligation, at any time prior to closing hereunder, to remove from the Property
all or any part of Seller's personal property, machinery, equipment, trade
fixtures, and signs not being purchased by Buyer which, when so removed, shall
remain Seller's property. Any such property not removed by Seller prior to
closing shall remain with and be deemed a part of the Property. Buyer expressly
acknowledges and agrees that Seller has not and does not make any
representation, covenant, or warranty, express or implied, regarding the
condition of the Property or the fitness of the Property for any intended or
particular use, any and all such representations, covenants, and warranties,
express or implied, being hereby expressly denied by Seller and waived by Buyer.
Buyer represents and warrants that, prior to closing, Buyer shall have made or
caused to be made all such investigations, examinations, assessments, and audits
of the Property as Buyer wishes to make or have made, including without
limitation the
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investigations provided for in Paragraph 6 hereof. Buyer assumes the risk that
adverse physical characteristics and existing conditions may not have been or
may not be revealed by the foregoing, and Buyer waives all claims, objections
to, or complaints about physical characteristics and existing conditions of the
Property, including, without limit, subsurface conditions, solid and hazardous
wastes and substances, and toxic wastes and substances on, under, or related to
the Property, and Buyer agrees that it shall not at any time hereafter have or
assert any claims against Seller resulting from or associated with the condition
of the Property. Buyer shall forever indemnify and hold Seller harmless from and
against any and all claims, damages, judgments, costs, losses, liabilities, and
expenses which may be suffered or incurred by Seller by reason of, resulting
from, in connection with, or arising in any manner whatsoever out of any breach
by Buyer of the covenants contained in this paragraph which covenants shall
survive the closing and consummation of the transactions contemplated in this
Agreement and remain in effect. In any such action by Buyer this Agreement may
be pleaded by Seller as a defense or by way of counterclaim or cross-complaint.
11. ASSIGNMENT. The provisions of this Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their respective
successors and assigns. The Seller may assign any of its rights or interests
hereunder to any person, persons, or entities of its choosing. The Buyer may not
assign any of its rights or interest hereunder without obtaining the prior
written consent of Seller.
12. CUMULATIVE RIGHTS. All rights, privileges, and remedies of
each of the parties provided for in this Agreement shall be cumulative, and
exercise of one remedy provided
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for in any paragraph of this Agreement shall not be deemed to be a waiver of all
other rights, remedies, or privileges provided for herein.
13. INDEPENDENT CONTRACTORS. It is expressly understood and
agreed that each party hereto is an independent contracting party and that in
no event shall this Agreement be construed as creating a joint venture or
partnership.
14. ALTERATION. This Agreement embodies the complete agreement
between the parties hereto and cannot be altered, changed, or modified except
by written instrument.
15. NOTICE. Every notice, demand, or other document or instrument
required to be served upon either of the parties hereto shall be in writing and
shall be deemed to have been duly served if mailed by Certified United States
Mail, postage prepaid, return receipt requested, addressed to the parties at the
addresses stated below:
To Buyer:
Pluma, Inc.
800 West Fieldcrest Road
Eden, NC 27289-0487
with a copy to:
Thomas T. Crumpler, Esq.
Allman Spry Humphreys & Leggett PA
380 Knollwood Street, Suite 700
Winston-Salem, NC 27103-4152
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To Seller:
Steve Jesseph
c/o Sara Lee Corporation
P.O. Box 2760
Winston-Salem, North Carolina 27102
with a copy to:
Sara Lee Corporation
P.O. Box 2760
Winston-Salem, North Carolina 27102
Attention: F. Raine Remsburg
16. SPECIAL CONDITIONS. If this Agreement is not fully executed
by all parties by May 22, 1995, this Agreement shall be null and void.
17. CONDITIONS PRECEDENT TO CLOSING. The obligation of Buyer to
purchase the Property from Seller is subject to the satisfaction on or before
the Closing of the following conditions, which may be waived in whole or in part
by Buyer, but only in writing at or prior to Closing or by closing in the
absence of any such writing.
(a) All of the Seller's obligations hereunder shall have been
performed with regard to the Property;
(b) Seller must have good and marketable fee simple title to the
Property, free and clear of all liens, encumbrances, covenants and conditions,
save and except those Permitted Exceptions listed in Section 4 hereof which have
been approved by Buyer as set forth below,
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and no Building or other improvement on the Property shall encroach upon any
land adjoining the Property. As set forth above, prior to Closing, Buyer must
have approved of those exceptions set forth in Section 4.
In the event Buyer makes objection to the legal status of the
title to the Property prior to Closing, then the Seller shall have a reasonable
time, not exceeding sixty (60) days, to cure such objection, yet Seller shall
have no obligation to cure any objection. If the Seller fails to cure such
objection to title within sixty (60) days, then the Buyer may elect: (i) to
proceed with the Closing pursuant to the terms of this Agreement, or (ii) to
terminate its obligation to purchase the Property. In the event Buyer fails to
notify Seller of its objections to the title to the Property prior to Closing,
all objections to the title to the Property shall be waived by Buyer.
Seller shall not cause any encumbrance to be placed on the
Property between the date of this Agreement and the Closing Date ("New
Encumbrances") except with the approval of the Buyer which approval shall not be
unreasonably withheld or delayed (provided Buyer shall have no obligation to
approve any new lease of the Buildings), and Seller shall have the obligation to
remove all such New Encumbrances (not approved as aforesaid by Buyer) on the
Closing Date.
(c) Buyer must have procured by Closing (including a Phase II
report, if Buyer deems necessary), an engineering report assessing the
environmental condition of the Property and the Buildings located on the
Property, and such report must be acceptable to Buyer, in its sole discretion.
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(d) Buyer must have procured by Closing, engineering reports
satisfactory to Buyer in its sole discretion, assessing the condition of the
roof, roof curbs, the electrical systems, plumbing systems, heating and cooling
systems, compressors, built-in appliances, if any, and other mechanical systems
within the Buildings, and the structural soundness of the Buildings located on
the Property (the "Soundness"), and certifying that the Buildings have been
constructed in accordance with all applicable laws, rules and regulations
including zoning laws, other building codes and fire codes covering the same
(the "Compliance"), and also engineering reports certifying that the Buildings
including the roofs and the landscape surrounding the Property drains properly.
Each of the reports referenced above must be acceptable to Buyer, in its sole
discretion. In the event any such report is unacceptable to the Buyer (but
subject to the provisions hereinafter contained), then in such event Seller
shall either repair any of the above-referenced items to good working order, or
remedy any legal violation, as the case may be, or in the alternative, Seller
shall notify Buyer that it will not repair or remediate (as the case may be), in
which event, Buyer may terminate its obligations hereunder and the Earnest Money
shall be returned to Buyer.
(e) Buyer must have received by Closing (at Buyer's sole cost and
expense) a current "as-built" survey of the Property prepared by a registered
land surveyor or engineer, certified to the title company and to Buyer in full
ALTA form, sufficient to cause the title company to delete the standard printed
survey exception (except as to matters occurring after the date of said
surveys). If Buyer elects not to procure this survey, this condition will be
deemed to have been waived.
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<PAGE>
(f) The Property (including any improvements thereon) shall be in
substantially the same condition as of the date hereof and which is in a
condition which has not materially diminished after the date of execution hereof
subject, however, to normal wear and tear only, provided, in the event the
Property is not in the condition described above prior to Closing, Seller shall
have the right (but not the obligation) to restore the Property to the condition
described in this subparagraph (f), and Buyer would not have a right to
terminate this Agreement in the event of such restoration. Buyer shall be
permitted to enter the Property at any time, and from time to time, upon
reasonable notice (and accompanied by Seller or Seller's representative) in
order to satisfy itself that such condition has not materially diminished.
(g) Seller must have furnished to Buyer a standard lien waiver
acceptable to Buyer's title insurance company certifying that no work has been
done within the statutory lien period for mechanics and materialman's liens
which has not been paid for, or, if any such work has been done, agreeing to
indemnify the title insurance company against any claims arising as a
consequence of such work.
If any of the foregoing conditions in this Section 17 shall fail
to be satisfied within the time period set forth for each condition with regard
to the Property, Buyer may, at its election: (i) terminate its obligations to
purchase the Property (in which event the Earnest Money and all interest which
has been earned thereon shall be paid to Buyer); or (ii) waive such condition
and complete the purchase of the Property without any reduction in the Purchase
Price.
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<PAGE>
Also, notwithstanding any provisions in this Section 17, if Buyer
for any of the reasons stated elects not to complete the purchase of the
Property on May 26, 1995, Seller shall have the right to terminate this
Agreement and return the Earnest Money and accrued interest to Buyer. In such
event, neither Buyer nor Seller shall have any claims or causes of action
against the other arising from such event, and this Agreement shall be of no
further force or effect.
18. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
19. PERSONNEL MATTERS.
(a) All obligations, rights, and duties hereinafter described
in this paragraph 19 and in paragraphs 20 and 21 are subject to the condition
precedent that the closing occur as provided in paragraph 7.
(b) On June 11, 1995, Seller shall terminate all employees
then employed by Seller in or at the Property, other than those listed on
Exhibit C, attached hereto and incorporated herein by reference. It is
understood that prior to May 26, 1995, Seller shall have the right to offer
transfer to and transfer employees to other facilities of Seller and that such
transferred employees shall not be considered employed in or at the Property on
June 11, 1995.
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<PAGE>
(c) On or before June 12, 1995, Seller shall turn over to Buyer
the personnel files of employees employed on June 11, 1995, by Seller in the
Property, other than those listed on Exhibit C. Seller may retain copies of such
personnel files, but the original files shall become property of Buyer. Except
for those listed on Exhibit C, Buyer shall on or before May 27, 1995, offer
employment to all of the employees employed by Seller at the Property on May 26,
1995 (the Acquired Employees), such employment with Buyer (if accepted) to be
effective on June 12, 1995 (subject to subparagraph (g) hereof). Buyer shall in
no event be under any obligation to retain such employees and this provision
shall in no event constitute any right of any such employee to continue in the
employ of Buyer.
(d) Buyer will allow each Acquired Employee prior service credit
of up to one year as reflected on Seller's records for the purpose of
eligibility to participate in Buyer's 401(k) Plan.
(e) Buyer will also allow each Acquired Employee prior service
credit as reflected on Seller's records for the purpose of determining vacation
entitlement. For calendar year 1995 only, Seller will be responsible for
providing vacation pay earned by Acquired Employees under Seller's vacation
policy from December 1, 1994 through June 11, 1995. Buyer will be responsible
for vacation pay earned by Acquired Employees under Seller's vacation policy on
and after June 12, 1995, through December 1, 1995. Effective January 1, 1996,
Buyer will determine vacation eligibility for Acquired Employees under its own
policy.
(f) Buyer shall not assume or have any responsibility for the
continuation of, or contributions to or other liabilities under the Seller's
401(k) Plan, Employee Stock Ownership
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<PAGE>
Plan and Pension Plan, or any other Retirement Plans covering the eligible
employees of Seller, and Seller shall retain any liability or responsibility in
respect thereof through June 11, 1995. Each Acquired Employee who is a
participant in the Seller's Benefit Plans shall not be credited with any
additional benefits under the Benefit plans for any period beginning on or after
June 12, 1995. Seller agrees that each Acquired Employee who is a participant in
the Benefit Plans as of June 11, 1995, shall be vested in the benefits accrued
for him or her pursuant to the provisions of such plans.
(g) Buyer shall offer employment to the Acquired Employees on or
before May 27, 1995. Prior to May 26, 1995, Seller shall allow Buyer to use the
Property for the purpose of enrolling in Buyer's benefit plans employees to be
acquired by Buyer. Buyer shall provide to such employees who 1) accept
employment with Buyer, and 2) report to work on June 12, 1995 the opportunity to
participate in all of Buyer's employee benefit plans for which each such
employee would be eligible under the guidelines for such plans.
(h) All Acquired Employees will continue to be eligible to
participate in Seller's Medical and Dental Plans through June 11, 1995.
Thereafter each Acquired Employee who reports for work with Buyer on June 12,
1995 will be eligible to participate in Buyer's Medical, Dental and Short Term
Disability Plans.
(i) Buyer will allow each Acquired Employee prior service credit
as reflected on Seller's records for the purposes of internal plant transfers,
layoffs, recall, and promotions at the Property under Buyer's policies.
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(j) Acquired Employees who are disabled on June 11, 1995, and
receiving disability benefits under Seller's benefit plans, shall, to the extent
provided by Seller's benefit plans, fall under the Seller's disability plan
until the end of their disability period. Acquired Employees receiving
disability benefits on June 11, 1995, shall, to the extent provided by Seller's
benefit plans, fall under the Seller's disability plan until their recovery from
illness or injury or for 26 weeks, whichever occurs first. Exhibit D attached
hereto and incorporated herein sets forth all Acquired Employees who were
receiving disability payments on May 10, 1995. Such Exhibit shall be updated
through June 11, 1995.
20. NON-SOLICITATION OF EMPLOYEES. After June 11, 1995, Seller shall
not solicit any employee of Buyer for employment with Seller for a period of
eighteen (18) months immediately following June 11, 1995, except as Buyer or a
party who would be adversely affected thereby may otherwise agree in writing.
21. BOOKS AND RECORDS.
(a) For a period of six years following May 26, 1995, Buyer shall
retain and afford, and will cause its affiliates to retain and afford, to
Seller, its counsel and its accountants, during normal business hours,
reasonable access to the books, records and other data of what was the Property
with respect to the period prior to May 26, 1995, to the extent that such access
may be reasonably required by Seller to facilitate (i) the preparation by Seller
of such tax returns as it may be required to file with respect to the operations
of what was the Property, the making of any election related to taxes or in
connection with any audit, amended return, claim for refund
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or any suit or proceeding with respect thereto, (ii) the investigation,
litigation and final disposition of any claims, suits or proceedings which may
have been or may be made against Seller in connection with what was the
Property, and (iii) the payment of any amount in connection with any liabilities
or obligations which have not been assumed by Buyer under this Agreement.
(b) Buyer shall further cooperate with Seller in the preparation
for and prosecution of the defense of any audit, claim, action or cause of
action arising out of or relating to any liability relating to what was the
Property in which Seller has been named as a defendant including, without
limitation, by making available evidence within the control of Buyer and persons
needed as witnesses employed by Buyer, in each case as reasonably needed for
such defense. Seller shall reimburse Buyer for its out-of-pocket costs relating
to its cooperation under this subparagraph.
(c) For a period of six years following May 26, 1995, Seller shall
retain and afford to Buyer, its counsel and its accountants, during normal
business hours, reasonable access to the books, records and other data of what
was the Property with respect to the period prior to May 26, 1995, to the extent
that such access may be reasonably required by Buyer or any affiliate of Buyer
to facilitate (i) the preparation by Buyer or such affiliate of such tax returns
as it may be required to file with respect to the operations of what was
Seller's business, the making of any election relating to taxes or in connection
with any audit, amended return, claim for refund or any suit or proceeding with
respect thereto, (ii) the investigation, litigation and final disposition of any
claims, suits or proceedings which may have been or may be made against Buyer or
such
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affiliate in connection with what was the Property and (iii) the payment of any
amount in connection with any liabilities or obligations which have not been
assumed by Seller under this Agreement.
(d) Seller further agrees to cooperate with Buyer in the
preparation for and prosecution of the defense of any audit, claim, action or
cause of action arising out of or relating to any liability relating to the
operations of what was the Property which arose prior to May 26, 1995,
including, without limitation, making available evidence within the control of
Seller and persons needed as witnesses employed by Seller, in each case as
reasonably needed for such defense. Buyer shall reimburse Seller for their
out-of-pocket costs relating to its cooperation under this subparagraph.
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands as
of the date and year first above written.
BUYER:
PLUMA, INC.
BY: /s/ R. Duke Ferrell, Jr.
President
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SELLER:
SARA LEE CORPORATION
BY: /s/
Vice-President
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<PAGE>
EMPLOYMENT AGREEMENT
This Agreement is made and entered into as of this _____ day of ________,
1996, by and between PLUMA, INC., a North Carolina corporation ("Employer"),
and __________________________ ("Employee").
WHEREAS, Employer desires to engage the services of Employee in
connection with its business; and
WHEREAS, Employee desires to be employed by Employer;
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants hereinafter set forth, and of other good and valuable consideration,
the receipt and sufficiency of which are mutually acknowledged, the parties
hereto agree as follows:
1. AGREEMENT OF EMPLOYMENT.
Employer hereby agrees to employ Employee, and Employee hereby agrees
to become and to remain employed by Employer, subject to the terms and
conditions hereinafter set forth.
2. DUTIES OF EMPLOYEES.
a. The Board of Directors of Employer shall elect Employee to the
office of VICE PRESIDENT-CONTROLLER, and to such other office or
offices as it shall determine. Employee agrees to serve in such
capacity or capacities and to carry out the duties incident thereto,
and such other duties as may otherwise be assigned to her from time to
time by the Board of Directors of Employer or the Chief Executive
Officer of Employer, competently, diligently and in a businesslike and
professional manner. The Employer shall retain full direction and
control of the means and methods by which Employee performs the above
services and of the place(s) at which such services are to be provided.
b. Employee shall be a full-time employee of Employer and, while so
employed, shall engage in no other business, profession or employment
activity (whether or not pursued for pecuniary advantage) that is or
may be competitive with, or that might place her in a competing
position to that of the Employer or any Affiliate of Employer.
3. TERM
The initial term of this Agreement and of Employee's employment
hereunder shall continue from the date hereof, and, unless sooner terminated
pursuant hereto, shall end on the second anniversary date hereof. Subsequent to
the second anniversary date hereof, the term of this Agreement shall be for an
undefined duration, said employment being at will, subject to termination by
either party at any time, provided, any termination of Employee's at will
employment shall be subject to the Employee's rights set forth in Section 5 of
this Agreement.
4. SALARY AND BENEFITS.
A. SALARY. Employer will pay to Employee an initial salary computed on
the basis of $____________________ per year, payable in installments in
accordance with Employer's normal payroll practices. Employee shall be
eligible to be considered for salary increases in accordance with
Employer's salary administration practices for senior officer
personnel. Employee shall be a participant in any incentive
compensation plan for senior management personnel of Employer at a
level to be determined in the discretion of Employer.
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<PAGE>
B.REIMBURSABLE EXPENSES. Employer shall reimburse Employee for all
reasonable travel, lodging, entertainment and other expense incurred in
the performance of her duties as outlined in the Company's Expense
Reimbursement policy. Employee agrees to keep and maintain such records
of the aforesaid expenses as Employer may reasonably require.
C. BENEFITS. Employer will make available to Employee, during the term
of her employment hereunder, all benefits made available to other
senior officers of Employer under any employee benefit plans
established by Employer, including, without limitation, any pension and
profit-sharing plans, medical expenses reimbursement plans, and group
life, health, accident, medical, hospitalization, or disability
insurance plans, but only to the extent that Employee is eligible and
qualifies to participate under the terms of the particular plan or
plans, subject to the same conditions and limitations as are applicable
to other senior officers of Employer. Nothing herein shall obligate
Employer to implement, maintain or continue any plan or plans.
5. TERMINATION
a. If the termination of this Agreement has not sooner occurred by the
action of either party, Employee's employment hereunder shall terminate
upon the occurrence of either of the following:
(1) UPON THE DEATH OF EMPLOYEE. In the event of the death of
the Employee during her employment under this Agreement, the
following payments shall be made to the Employee's designated
beneficiary, or, in the absence of such designation, to the
estate or other legal representative of the Employee: (i) her
base salary for the month in which her death occurs, and (ii)
such bonuses (if any) as have been earned by the Employee and
not paid to her at the time of her death. Any rights and
benefits the Employee or her estate or any other person may
have under employee benefit plans and programs of the Employer
generally in the event of the Employee's death shall be
determined in accordance with the terms of such plans and
programs. Except as provided in this Section 5a.(1), neither
the Employee's estate nor any other person shall have any
rights or claims against the Employer in the event of the
death of the Employee during her employment hereunder;
(2) AT EMPLOYER'S ELECTION, "FOR CAUSE." A termination For
Cause shall mean the occurrence of any one of the following
events:
(a) termination due to (i) willful or gross neglect of
duties for which employed, or (ii) willful misconduct in
the performance of duties for which employed, in either
such instance so as to cause material harm to the
Employer, all such facts to be determined in good faith
by the Board of Directors of the Employer;
(b) termination due to the Employee's committing fraud,
misappropriation or embezzlement in the performance of
her duties as an employee of the Employer; or
(c) termination due to the Employee's committing any
felony for which he is convicted and which, as determined
in good faith by the Board of Directors of the Employer,
constitutes a crime involving moral turpitude.
2
<PAGE>
Upon termination for Cause, the Employee shall receive
her base salary only through the date of termination, and
neither the Employee nor any other person shall be
entitled to any further payments from the Employer, for
salary, unpaid bonuses or any other amounts. Any rights
and benefits the Employee may have under employee benefit
plans and programs of the Employee generally following a
termination of the Employee's employment For Cause shall
be determined in accordance with the terms of such plans
and programs.
(3) CHANGE OF CONTROL. At the election of Employee or Employer
upon a "Change of Control" of Employer, provided that notice
of such termination is given by either party to the other
after such Change of Control. A Change of Control shall mean
the occurrence of any one of the following events:
(a) any "person," as such term is used in Section 13 (d)
and 14 (d) of the Securities and Exchange Act of 1934
(the "Act") (other than the Employer, any trustee,
fiduciary or other person or entity holding securities
under any employee benefit plan of the Employer),
together with all "affiliates" and "associates" (as such
terms are defined in Rule 12b-2 under the Act) of such
person, shall become the "beneficial owner" (as such
term is defined in Rule 13d-3 under the Act), directly
or indirectly, of securities of the Employer
representing 50% or more of either (i) the combined
voting power of the Employer's then outstanding
securities having the right to vote in an election of
the Employer's Board of Directors ("Voting Securities")
or (ii) the then outstanding Shares of the Employer (in
either such case other than as a result of acquisition
of securities directly from the Employer); or
(b) the majority of those persons who, as of January 1,
1996, constitute the Employer's Board of Directors (the
"Incumbent Directors") cease for any reason, including,
without limitation, as a result of a tender offer, proxy
contest, merger or similar transaction, to constitute at
least a majority of the Board, provided that any person
becoming a director of the Employer subsequent to
January 1, 1996 whose election or nomination for
election was approved by a vote of at least a majority
of the Incumbent Directors shall, for purposes of this
Plan, be considered an Incumbent Director; or
(c) the shareholders of the Employer shall approve (i)
any consolidation or merger of the Employer where the
shareholders of the Employer, immediately prior to the
consolidation or merger, would not, immediately after
the consolidation or merger, beneficially own (as such
term is defined in Rule 13d-3 under the Act), directly
or indirectly, shares representing in the aggregate 50%
of the voting shares of the corporation issuing cash or
securities in the consolidation or merger (or of its
ultimate parent corporation, if any), (ii) any sale,
lease, exchange or other contemplated disposition
(arranged by a party as a single plan) of all or
substantially all of the assets of the Employer or (iii)
any plan or proposal for the liquidation or dissolution
of the Employer.
Notwithstanding the foregoing, a "Change in Control" shall not be
deemed to have occurred for purposes of the foregoing clause 5.(3)
solely as the result of an acquisition of securities by the Employer
which, by reducing the number of Shares or other Voting
Seurities outstanding, increases (x) the proportionate number of
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Shares beneficially owned by any person to 50% or more of the
Shares then outstanding or (y) the proportionate voting power
represented by the Voting Securities beneficially owned by any
person to 50% or more of the combined voting power of all then
outstanding Voting Securities; provided, however, that if any
person referred to in clause (x) or (y) of this sentence shall
thereafter become the beneficial owner of any additional
Shares of other Voting Securities (other than pursuant to a
stock split, stock dividend, or similar transaction), then a
"Change of Control" shall be deemed to have occurred for
purposes of the foregoing clause (3). Upon termination of this
Agreement under this Section 5a(3), if the Employee is
eligible [as defined below], Employer shall:
(a) Within 30 days after termination upon a Change in
Control, pay to Employee an amount, in cash, equal to:
(A) three times the Employee's (i) average annual salary
for the thirty-six (36) month period prior to such
Change in Control, and (ii) bonuses received during the
eighteen months preceding the effective date of the
Change in Control, less (b) 1/36 of the amount
calculated in (a) immediately above for each month that
the Employee remains employed with Employer following
the effective date of the Change in Control; and
(b) If allowed to do so by the Company's insurance
carrier, or under the terms of the Company's insurance
plan in effect at the time of termination (in the event
the Company is a self-insured or partial self-insurer),
continue the medical, disability and life insurance
benefits which Employee was receiving at the time of
termination for a period of thirty-six (36) months after
termination of employment (the cost of which shall be
borne by Employer or Employee as set forth below) or, if
earlier, until Employee has commenced employment
elsewhere and become eligible for participation in the
medical, disability and life insurance programs, if any,
of the successor employer. Coverage under Employer's
medical, disability and life insurance programs shall
cease with respect to each such program as Employee
becomes eligible for the medical, disability and life
insurance programs, if any, of the successor employer.
During the first eighteen (18) months of such thirty-six
(36) month period, the Employer shall be responsible for
the costs associated with continued insurance coverage
for Employee, but only to the extent it would have been
responsible for such costs if the Employee was still
employed by the Company. The Employee shall be
responsible for the remaining costs. If, at the end of
18 months, the Employee is still afforded medical,
disability and life insurance coverage under the
Employer's insurance programs, Employer shall arrange to
provide continued coverage under said programs, but the
Employee will be responsible for the total cost of all
such continued coverage at the end of the first eighteen
(18) month period specified above.
The Employee is eligible for the benefits provided in
this Section 5a.(3), unless the Employer or the
Employer's successor, after a Change in Control, offers
the Employee a bona fide employment contract for a term
which would expire no earlier than three years after the
effective date of the Change in Control under the terms
of which the Employee would perform the same duties for
the same or greater levels of compensation as were
afforded under the terms of this Agreement and this
offer is rejected by the Employee.
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In addition, in the event Employee's employment with the
Company is terminated within 90 days before a Change in
Control occurs for a reason not described in Section
5a.(1), (2) or (4), then in such event, Employee shall
be entitled to those payments and other benefits
described in subparagraphs (a) and (b) of page 4 of
this Section 5a. upon such termination.
(4) AT EMPLOYER'S ELECTION IN THE EVENT OF EMPLOYEE'S LONG-TERM DISABILITY.
In the event of the Employee's disability (as hereinafter defined)
during her employment under this Agreement, the Period of Employment
may be terminated by the Employer. For the first three months following
termination of employment due to disability, the Employee shall be paid her
base salary at the rate in effect at the time of the commencement of
disability. Thereafter, the Employee shall be entitled to benefits in
accordance with and subject to the terms and provisions of the Employer's
long-term disability plan for senior management employees, as in
effect at the time of the commencement of disability. For purposes of
this Agreement, "disability" shall have the same meaning as given that term
under the Employer's long-term disability plan for senior management employees,
as in effect from time to time. Anything herein to the contrary
notwithstanding, if, during the three month period following a
termination of employment under this Section 5a.(4) in which salary
continuation payments are payable by the Employer, the Employee becomes
re-employed or otherwise engaged (whether as an employee, partner, consultant,
or otherwise), any salary or other remuneration or benefits earned by her from
such employment or engagement shall not offset any payments due her under
this Section 5a.(4). In the event of the Employee's disability, any rights
and benefits the Employee may have under employee benefit plans and programs
of the Employer generally shall be determined in accordance with the terms of
such plans and programs. Upon termination of the Employee's employment by
reason of disability under this Section 5a.(4), the Employee shall be
entitled, in addition to the other payments provided for in this Section
5a.(4), to payment of such bonuses (if any) as may have been earned by the
Employee and not paid to her at the time of such termination. Except as
provided in this Section 5a.(4), neither the Employee nor her estate, or
any other person, shall have any rights or claims against the Employer in
the event of the termination of the Employee's employment by reason of
disability.
b. Except as provided in 5a. above and as might be provided specifically
in separate stock option or other employee benefit plans, upon termination of
this Agreement, Employee's rights to further compensation and benefits hereunder
shall cease, provided, however, that Employee shall remain entitled to any
unpaid compensation and benefits accrued prior to such termination and to
any expense reimbursements to which he was entitled at the date of such
termination, and any rights to which he is entitled by law or pursuant
benefit plans of Employer in the event of death or disability.
6. CONFIDENTIALITY.
A. CONFIDENTIALITY INFORMATION. The Employee promises and
agrees that he will not, either while in the Employer's
employ or at any time thereafter, disclose to any person not
employed by the Employer, or not engaged to render services
to the Employer, or use, for herself or any other person,
firm, corporation or entity, any confidential information of
the Employer obtained by her while in the employ of the
Employer, including, without limitation, any of the
Employer's methods, processes, techniques, practices,
research data, marketing and sales information, personnel
data, customer lists, financial data, plans, know-how, trade
secrets and proprietary information of the Employer; provided,
however, that this provision
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shall not preclude the Employee from use or disclosure of
information known generally to the public [other than
information known generally to the public as a result of a
violation of this Section 6a. by the Employee], from use or
disclosure of information acquired by the Employee outside of
her affiliation with the Employer, from disclosure required by
law or court order, or from disclosure or use appropriate and
in the ordinary course of carrying out her duties as an
employee of the Employer.
B. RIGHTS TO MATERIALS. The Employee further promises and agrees
that, upon termination of her employment for whatever reason and at
whatever time, he will not take with her, without the prior written
consent of an officer authorized to act in the matter of the Board of
Directors of the Employer, any records, files, memoranda, reports,
customer lists, drawings, plans, sketches, documents, specifications,
and the like (or any copies thereof) relating to the business of the
Employer or any of its current or future Affiliated
Companies.
7. INJUNCTIVE RELIEF.
The Employee acknowledges and agrees that the Employer would suffer
irreparable injury in the event of a breach by her or any of the provisions of
Section 6 of this Agreement and that the Employer shall be entitled to an
injunction restraining her from any breach or threatened breach thereof. The
Employee further agrees that, in the event of her breach of any provision of
Section 6 hereof, the Employer shall be entitled to terminate its obligation to
make any payments otherwise due and payable to the Employee hereunder. Nothing
herein shall be construed, however, as prohibiting the Employer from pursuing
any other remedies at law or in equity which it may have for any such breach
or threatened breach of any provision of Section 6 hereof, including the
recovery of damages from the Employee.
8. NOTICES.
All notices required or permitted hereunder shall be in writing and
shall be delivered personally or by facsimile or sent by United States
registered or certified mail, postage prepaid, addressed to Employer at P.O. Box
487, Eden, North Carolina 27288 and to Employee at 1807 Church Street Ext., Apt.
105, Martinsville, Virginia 24112, or at such changed addresses as the
aforementioned may designate in writing. Any such notice shall be deemed given
and effective when received at the aforesaid address or facsimile number.
9. MISCELLANEOUS.
This Agreement shall be binding upon and shall inure to the benefit of
the parties hereto, and their heirs, executors, administrators, and personal
representatives, successors, and assigns. Paragraph headings are for convenience
of reference only and shall not be construed as part of this Agreement. Any
covenants herein, the performance of which may extend beyond the term of this
Agreement, shall be deemed to survive the termination of this Agreement. This
Agreement constitutes the entire agreement between the parties hereto pertaining
to the subject matter hereof and supersedes all prior and contemporaneous
agreements and understandings of the parties, and there are no warranties,
representations or other agreements between the parties in connection with the
subject matter hereof except as specifically set forth herein. This Agreement
shall be governed in all respects by the internal laws of the State of North
Carolina. In the event any term or provision hereof is unenforceable or invalid
for any reason whatsoever or as applied to a particular circumstance, such term
or provision shall be modified to the extent necessary to make it valid and
enforceable, or shall be stricken herefrom, as the circumstances may require,
and this Agreement shall be construed as if such term or provision (to such
extent) had originally been included herein, as the case may be.
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IN WITNESS WHEREOF, the parties have executed this Agreement in
counterparts on the date first above written.
PLUMA, INC.
By:
R. DUKE FERRELL, JR., President & CEO
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[Deloitte & Touche Letterhead here]
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Pluma, Inc. on Form S-1
of our report dated March 4, 1996 (April 10, 1996 as to Note 17), appearing in
the Prospectus, which is part of this Registration Statement.
We also consent to the reference to us under the headings "Selected Financial
Data" and "Experts" in such Prospectus.
December 24, 1996
Winston-Salem, North Carolina
[Deloitte Touche Tohmatsu International logo appears here]
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