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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] Annual Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the fiscal year ended November 2, 1996
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from _____ to _____.
Commission File Number: 33-27038
JPS TEXTILE GROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware 57-0868166
(STATE OF OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
555 North Pleasantburg Drive, Suite 202, Greenville, SC 29607
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
Registrant's telephone number, including area code: (864) 239-3900
Securities registered pursuant to Section 12(b) of the Act: None.
Securities registered pursuant to Section 12(g) of the Act: None.
Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days: /X/
Indicate by check mark if disclosure of delinquent filers, pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K: /X/
As of January 30, 1997, there were 490,000 shares of the registrant's
Class A Common Stock, $.01 par value per share (the "Class A Common Stock"),
held by non-affiliates of the registrant. There is no established public trading
market for such shares.
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Section 12, 13, or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court: /X/
As of the date hereof, 490,000 shares of Class A Common Stock and
510,000 shares of the registrant's Class B Common Stock, $.01 par value per
share, were issued and outstanding.
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JPS TEXTILE GROUP, INC.
Table of Contents
PART I
<TABLE>
<S> <C> <C>
Item 1. BUSINESS........................................................ 2
Item 2. PROPERTIES...................................................... 10
Item 3. LEGAL PROCEEDINGS............................................... 10
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS.............. 10
PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS..................................... 11
Item 6. SELECTED HISTORICAL FINANCIAL DATA.............................. 12
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS....................................... 14
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA..................... 24
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE............................. 51
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT............... 51
Item 11. EXECUTIVE COMPENSATION........................................... 53
Item 12. SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND MANAGEMENT...... 58
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS................... 60
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K... 60
SIGNATURES....................................................... 66
</TABLE>
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PART I
ITEM 1. BUSINESS.
HISTORICAL BACKGROUND
JPS Textile Group, Inc. ("JPS" or the "Company") is a Delaware corporation,
incorporated in December 1986, with its principal executive offices located at
555 North Pleasantburg Drive, Suite 202, Greenville, South Carolina 29607;
telephone number (864) 239-3900.
On March 14, 1988, the Company executed a merger agreement providing for the
acquisition of J.P. Stevens & Co., Inc. ("J.P. Stevens"). On March 15, 1988, the
Company commenced a tender offer pursuant to such merger agreement for all of
the outstanding stock of J.P. Stevens. Subsequently, the Company terminated its
tender offer and J.P. Stevens agreed to be acquired by another entity.
Simultaneously therewith, J.P. Stevens agreed to sell to the Company the
business and substantially all of the assets of five J.P. Stevens divisions: the
Converter and Yarn division; the Automotive Products division; the Elastomerics
division; the Carpet division; and the Industrial Fabrics division (the
"Predecessor Stevens Divisions"), for approximately $527.0 million (the
"Acquisition").
Subsequent to the Acquisition, due to certain financial concerns, the Company
engaged certain financial advisors in March 1990 to advise the Company
concerning a possible restructuring of its debts and equity capitalization. In
furtherance thereof, the Company, together with its legal and financial
advisors, met with representatives of the Company's senior lenders and with the
respective legal and financial representatives of certain large institutional
holders of the Company's (i) Senior Variable Rate Notes due June 1, 1996, (ii)
Senior Subordinated Discount Notes due June 1, 1999, (iii) 15.25% Senior
Subordinated Notes due June 1, 1999, and (iv) 14.25% Subordinated Debentures due
May 15, 2000 (collectively, the "Old Debt Securities"), to discuss the Company's
general business and financial status, and to explore various financial
restructuring alternatives.
In November 1990, the Company and representatives of the holders of the Old Debt
Securities determined that a transaction involving the exchange of the Old Debt
Securities for a significant percentage of "new" common stock and "new" debt
securities with a fixed lower per annum interest rate, together with the
issuance to the holders of the Company's Series A Exchangeable Adjustable Rate
Preferred Stock and Series B Junior Preferred Stock (together, the "Old
Securities") of a significant percentage of the Company's "new" preferred equity
securities, would improve the Company's financial condition and overall
creditworthiness and simplify its capital structure, and that such transaction
would best be accomplished pursuant to a pre-petition solicitation of votes to
accept or reject a voluntary plan of reorganization (the "Plan of
Reorganization") under chapter 11 of Title 11 of the United States Code (the
"Bankruptcy Code").
The Company's solicitation was successfully completed and the chapter 11 case
was commenced in early February 1991 before the United States Bankruptcy Court
for the Southern District of New York (the "Bankruptcy Court"). The Plan of
Reorganization was confirmed by the Bankruptcy Court pursuant to a court order
signed on March 21, 1991 and the Plan of Reorganization became effective on
April 2, 1991. As part of the Plan of Reorganization, the Company, together with
its senior bank lenders, agreed to restructure the then-existing bank debt of
the Company.
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On June 28, 1994, pursuant to the terms of an Asset Purchase Agreement dated May
25, 1994, as amended, (the "Asset Purchase Agreement"), by and among the
Company, JPS Auto Inc., a wholly-owned subsidiary of the Company ("Auto"), JPS
Converter and Industrial Corp., a wholly-owned subsidiary of the Company
("C&I"), Foamex International Inc. ("Foamex") and JPS Automotive Products Corp.,
an indirect, wholly-owned subsidiary of Foamex ("Purchaser"), the Company
consummated the disposition of its Automotive Assets (as described below) to the
Purchaser.
The "Automotive Assets" consisted of the businesses and assets of Auto and the
synthetic industrial fabrics division of C&I, and the Company's investment in
common stock of the managing general partner of Cramerton Automotive Products,
L.P. (an 80% owned joint venture). Pursuant to the Asset Purchase Agreement, the
Purchaser agreed to assume substantially all of the liabilities and obligations
associated with the Automotive Assets. In addition, the Company and its
affiliates agreed, for a four year period, not to directly or indirectly compete
in North, Central and South America with the businesses that were sold.
The sale price for the Automotive Assets was approximately $283 million,
consisting of $264 million of cash paid at closing, $15 million of assumed debt
as of June 28, 1994, and certain post-closing adjustments which resulted in a
net gain of $4.4 million recognized in 1995. The sale of the Automotive Assets
resulted in an approximate total gain of $137.4 million, net of income taxes of
$2.9 million.
The net cash proceeds from the disposition of the Automotive Assets (after
deductions for fees, other expenses and amounts designated by management to
satisfy possible contingent tax liabilities) were approximately $217 million,
and such proceeds were used by the Company to reduce its outstanding
indebtedness.
On November 16, 1995, pursuant to the terms of an Asset Transfer Agreement dated
as of November 16, 1995, by and among the Company, JPS Carpet Corp. ("Carpet"),
a wholly-owned subsidiary of the Company, Gulistan Holdings Inc. and Gulistan
Carpet Inc., a wholly-owned subsidiary of Gulistan Holdings Inc. (collectively,
"Gulistan"), the Company and Carpet consummated the sale of substantially all
the assets of Carpet used in the business of designing and manufacturing tufted
carpets for sale to residential, commercial and hospitality markets (the "Carpet
Business"). Pursuant to the Asset Transfer Agreement, Gulistan agreed to assume
substantially all of the liabilities and obligations associated with the Carpet
Business. Gulistan was formed and its common stock is owned by certain members
of the former management team at Carpet. The Company and its subsidiaries have
agreed, for a three-year period, not to compete in certain specified geographic
areas directly or indirectly with the business that was sold.
The consideration received for the Carpet Business consisted of approximately
$22.5 million in cash, subject to certain post-closing adjustments based on the
audited amount of working capital transferred which resulted in a reduction to
net cash proceeds of approximately $3.5 million, and other debt and equity
securities of Gulistan as follows: a $10 million Promissory Note due in November
2001, $5 million preferred stock redeemable in November 2005, and warrants to
purchase 25% of the common stock of Gulistan. Based on an independent valuation
at the asset transfer date, the Company determined the fair value of these debt
and equity securities to be approximately $11.3 million.
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The Carpet Assets were reduced to their net realizable value as of October 28,
1995 and such reduction was reflected as a loss on sale of discontinued
operations of $30.7 million in the 1995 consolidated financial statements. In
May 1996, the Company and Gulistan agreed on the amount of the post-closing
adjustment to the consideration received for the Carpet Business. As a result,
the Company paid a post-closing adjustment of $3.5 million (an estimated
post-closing adjustment of $2.0 million was included in the Fiscal 1995 loss on
sale of discontinued operations) and has recognized in Fiscal 1996 an additional
loss of $1.5 million on the sale of discontinued operations. The final amount of
net cash proceeds applied by the Company to reduce outstanding borrowings under
its senior credit facility was approximately $16.7 million (net of fees,
expenses and the post-closing adjustment resulting from the level of working
capital transferred at the closing date).
Pursuant to an Asset Purchase Agreement dated September 30, 1996 between JPS
Elastomerics Corp. ("Elastomerics"), a wholly-owned subsidiary of the Company,
and Elastomer Technologies Group, Inc. ("Elastomer") and a Receivables Purchase
Agreement dated September 30, 1996 between Elastomerics and the Bank of New York
Commercial Corporation, Elastomerics completed the sale of substantially all the
assets of its rubber products division, a business engaged in the manufacture
and sale of natural and synthetic elastic for use in apparel products, diaper
products and specialty industrial applications (the "Rubber Products Business").
The Rubber Products Business had accounted for sales of $22.6, $20.7 million and
$16.8 million in Fiscal 1994, 1995 and 1996 (eleven months), respectively. Under
the terms of the agreement, Elastomer agreed to assume substantially all the
liabilities and obligations associated with the Rubber Products Business. The
Company and its subsidiaries have agreed not to compete directly or indirectly
with the business that was sold for a period of two years. The consideration for
the Rubber Products Business consisted of approximately $5.1 million in cash,
subject to certain post-closing adjustments based on the audited amount of
working capital transferred on the closing date, and resulted in a loss of
approximately $7.7 million which was charged to operations in Fiscal 1996. The
net proceeds from the sale, after fees and expenses, were approximately $4.8
million and were used to reduce the Company's outstanding indebtedness.
GENERAL
The Company is one of the largest diversified domestic manufacturers of textile
and textile related products, principally for the apparel, industrial and home
fashion markets. JPS conducts its operations from 10 manufacturing plants in
five states and employs approximately 4,000 people. The Company competes in
three industry segments; apparel fabrics and products, industrial fabrics and
products and home fashion textiles. Certain financial information about the
Company's industry segments for each of the last three fiscal years is included
in Note 12 of the Notes to Consolidated Financial Statements included in Item 8
herein.
APPAREL FABRICS AND PRODUCTS
The Company is a leading manufacturer of greige goods (unfinished woven fabrics)
and yarn. The Company's products are used in the manufacture of a broad range of
consumer apparel products including blouses, dresses, sportswear and
undergarments.
Greige Goods. The Company produces fabrics from spun and filament yarns that are
used ultimately in the manufacture of apparel such as blouses, dresses and
sportswear. Greige goods are produced from rayon, acetate, polyester and cotton
yarns, and are primarily sold to other textile manufacturers for use in
producing printed and dyed fabrics.
Yarn. The Company produces a variety of rayon and polyester spun yarns for its
own use and for sale to manufacturers of knitted apparel.
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INDUSTRIAL FABRICS AND PRODUCTS
Commercial Roofing Products. The Company is a well-established manufacturer of
single-ply membrane roofs that are made from woven synthetic fabrics and
rubber-based or polypropylene specialty polymer compounds which are sold
principally to roofing distributors for use in both the new and replacement
commercial markets.
Other Building Construction Products. The Company is a producer of fabrics made
from glass and synthetic fibers that are used in a number of applications in the
building construction industry. Products include various scrims used for
wallboard tapes and certain roofing applications, and reinforcement substrates
used for the installation of internal and external tiles and synthetic wall
surfaces. The Company produces and sells membrane products (similar to
commercial roofing products) for use in environmental containment applications
such as reservoir liners and covers.
Other Industrial Products. The Company produces a wide variety of other
industrial textile products that are used in many industries for many different
end uses. Many of these products have characteristics that provide insulation or
filtration properties. These specialty fabrics are used in the manufacture of
such products as flame-retardant clothing, filtration products, tarpaulins,
awnings, athletic tapes, printed circuit boards and advanced composites. In
addition, the Company produces urethane products for use in the manufacture of
various products such as athletic shoes, "bulletproof" glass, disposable
intravenous bags, seamless welded drive belts and tubing.
HOME FASHION TEXTILES
The Company produces a variety of unfinished woven fabrics and yarns for use in
the manufacture of draperies, curtains and lampshades and is a major producer of
solution-dyed drapery fabrics.
OPERATIONS
Each operating unit of the Company has individual administrative, manufacturing
and marketing capabilities for all material aspects of operations, including
product design, customer service, purchasing and credit and collection.
Corporate support services include finance, strategic planning, legal, tax and
regulatory affairs.
Following the Acquisition and through the date hereof, management's business
plans have included many cost-reduction activities aimed at improving return on
assets. These activities included consolidating manufacturing operations,
exiting unprofitable product lines, more aggressive capital spending programs to
improve quality and productivity and reorganizing certain manufacturing
operations. The Company plans to continue its manufacturing modernization
program to improve efficiency and productivity and further reduce its cost
structure.
The Company's corporate headquarters is located in Greenville, South Carolina.
The Company maintains a sales office in New York, New York for certain of its
operations. Five additional regional sales offices are maintained by the
Company, principally for its roofing and building construction products. See
Item 2, "PROPERTIES".
5
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MANUFACTURING
The Company's experienced workforce and wide variety of yarn making, fabric
forming and other manufacturing equipment allow the Company to rapidly and
efficiently change its product mix to meet style and seasonal requirements. The
Company's activities generally encompass all phases of manufacturing its
products.
In the manufacture of woven textile products, the Company purchases synthetic
and natural fibers and spins them into yarn or purchases filament yarn for
processing. In addition, the Company purchases certain spun yarns. Yarns are
then coated, sized or directly woven into unfinished fabric. Upon completion of
the weaving process, fabric is generally shipped to customers who dye, finish,
coat and cut those fabrics for resale.
Single-ply membrane roofing is made by processing a Company-manufactured woven
substrate with specialty polymers. Other industrial fabric products are produced
from either woven fiberglass or cotton and synthetic fibers, which fibers are
processed into yarn, woven and finished into fabrics by the Company. Other
specialty industrial products are produced by extrusion of urethane resins.
The Company believes that its manufacturing facilities are sufficient for its
present and reasonably foreseeable future production requirements.
RAW MATERIALS
The Company maintains good relationships with its suppliers and has, where
possible, diversified its supplier base so as to avoid a disruption of supply.
In most cases, the Company's raw materials are staple goods that are readily
available from numerous domestic fiber and chemical manufacturers. For several
products, however, branded goods or other circumstances prevent such a
diversification, and an interruption of the supply of these raw materials could
have a significant negative impact on the Company's ability to produce certain
products. The Company believes that its practice of purchasing such items from
large, stable companies minimizes the risk of such an interruption in supply.
MARKETING AND COMPETITION
The textile industry is highly competitive and includes a number of participants
with aggregate sales and financial resources greater than the Company's. The
Company generally competes on the basis of price, quality, design and customer
service. Many companies compete in limited segments of the textile market. In
recent years, a large and growing percentage of domestic consumer apparel demand
has been met by foreign competitors whose products, both fabrics and garments,
are imported into the United States. The Company is well-positioned due to its
ability to respond quickly to changing styling and fashion trends. This ability
generally provides advantages for domestic textile manufacturers. Although no
single company dominates the industry, most market segments are dominated by a
small number of competitors. The Company believes it has a significant market
share in the market for rayon and acetate apparel fabrics, rayon yarn,
solution-dyed satin fabrics and quartz fabrics.
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The Company's marketing efforts include the development of new product designs
and styles which meet customer needs. The Company's operating units have been
established suppliers to each of its markets for many years and are taking
advantage of well-established customer relationships to increase product
development with its customers. The "J.P. Stevens" trade name, which the Company
has a non-exclusive, royalty-free license to use (see "--Patents, Licenses and
Trademarks" below), is widely recognized throughout the textile industry. The
Company believes that its relatively broad base of manufacturing operations
provides it with a competitive advantage in developing new textile products. In
addition to its direct marketing capabilities, the Company markets certain of
its products through distributors.
The following is a discussion of marketing and competitive factors as they
relate to each of the Company's segments.
Apparel Fabrics and Products
Greige Goods. The Company markets its spun and filament fabrics to converters
who finish and/or dye these products prior to shipping to finished apparel
manufacturers. The Company has sought to maintain a relatively high proportion
of such sales in product areas where its manufacturing flexibility can provide a
competitive advantage. The Company has entered into a joint venture with a
Mexican company involved in dyeing, printing and finishing fabrics primarily for
use in Mexico. The Company expects its sales of greige goods to Mexico to grow
significantly as a result of this venture.
Yarn. The Company competes with a large number of companies which sell yarn to
woven and knit goods manufacturers. Yarns are generally sold on a direct basis,
and the Company believes that quality and price are the primary competitive
factors.
Industrial Fabrics and Products
Construction Products. The Company markets its single-ply roofing products on a
direct basis to roofing distributors. The Company competes with manufacturers of
this and other types of roofing products. The Company believes that its
product's ease of installation and warranty are important competitive factors.
Other Products. Other industrial fabrics and products are marketed directly to
other manufacturers and distributors. The Company believes that price and its
ability to meet customer technical specifications are important competitive
factors.
Home Fashion Textiles
The Company's home fashion operations compete with a large number of
manufacturers of similar woven fabric products. In general, product markets are
differentiated on the basis of price and quality. The Company believes that
design and style features are important competitive factors.
CUSTOMERS
No customer accounts for more than 10% of the Company's sales. However, the loss
of certain customers could have a material adverse effect on sales.
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PRODUCT DEVELOPMENT
In general, the textile industry expends its efforts on design innovation and
capital expenditures for process enhancements rather than on basic research,
relying on fiber suppliers or machinery manufacturers for basic research.
The Company's research and development activities are directed toward the
development of new fabrics and styles which meet specific styling requirements
(in the case of apparel and home furnishing fabrics and products) or other
specific properties such as insulation, weight, strength, filtration or laminate
adherence (in the case of industrial fabrics and products). Significant time is
spent by employees in activities such as meeting with stylists, designers,
customers, suppliers and machinery manufacturers, as well as producing samples
and running trials in order to develop new products and markets. These
activities are performed at various levels and at various locations, and their
specifically identifiable incremental costs are not material in relation to the
Company's total operating costs.
BACKLOG
Unfilled open orders, which the Company believes are firm, were $52.6 million at
November 2, 1996 and $50.5 million at October 28, 1995 (1995 amount is adjusted
to exclude the discontinued operations of the Carpet Business sold in November
1995). The Company generally fills its open orders in the following fiscal year
and the Company expects that all of the open orders as of November 2, 1996 will
be filled in the 52-week period ending November 1, 1997 ("Fiscal 1997").
Unfilled open orders, which the Company believes are firm, were $60.8 million at
December 30, 1996 compared to $68.0 million at December 30, 1995. The decrease
in open orders at December 30, 1996 as compared to December 30, 1995 is
primarily due to a decrease in customer demand for apparel fabrics and products
and is representative of a change in the timing of the acceptance of certain
orders by the Company. The Company believes that the amount of backlog provides
some indication of the sales volume that can be expected in coming months,
although changes in economic conditions may result in deferral or acceleration
of orders which may affect sales volume for a period.
No significant portion of the Company's business is subject to renegotiation of
profits, or termination of contracts or subcontracts at the election of the
government.
PATENTS, LICENSES AND TRADEMARKS
Certain of the Company's products are sold under registered trademarks which
have been licensed royalty-free to the Company from J.P. Stevens until May 2013,
including trademarks for certain products using the "J.P. Stevens" name.
Patented processes used in the manufacturing process are not a significant part
of the Company's business. The Company does not license its name or products to
others except for the licenses of certain trade names granted royalty free to
operations that the Company has sold.
EMPLOYEES
The Company currently has approximately 4,000 employees of which approximately
3,500 are hourly and approximately 500 are salaried. The Company's employees are
not represented by unions. The Company believes its relations with its employees
to be good and has not had any work stoppages or strikes.
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ENVIRONMENTAL AND REGULATORY MATTERS
The Company is subject to various federal, state and local government laws and
regulations concerning, among other things, the discharge, storage, handling and
disposal of a variety of hazardous and nonhazardous substances and wastes. The
Company's plants generate small quantities of hazardous waste that are either
recycled or disposed of off-site by or at licensed disposal or treatment
facilities.
The Company believes that it is in substantial compliance with all existing
environmental laws and regulations to which it is subject. In addition, the
Company is subject to liability under environmental laws relating to the past
release or disposal of hazardous materials. To date, and in management's belief
for the foreseeable future, liability under and compliance with existing
environmental laws has not had and will not have a material adverse effect on
the Company's financial or competitive positions. No representation or assurance
can be made, however, that any change in federal, state or local requirements or
the discovery of unknown problems or conditions will not require substantial
expenditures by the Company.
SEASONALITY
Certain portions of the business of the Company are seasonal (principally
construction products) and sales of these products tend to decline during winter
months in correlation with construction activity. These declines have
historically tended to result in lower sales and operating profits in the first
and second quarters than in the third and fourth quarters of the Company's
fiscal year.
WORKING CAPITAL
Information regarding the Company's working capital position and practices is
set forth in Item 7 of this Form 10-K under the caption "Liquidity and Capital
Resources."
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
The statements contained in this Item 1 "BUSINESS" and Item 7 "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" that
are not historical facts are forward-looking statements subject to the safe
harbor created by the Private Securities Litigation Reform Act of 1995. The
Company cautions readers of this Annual Report on Form 10-K that a number of
important factors could cause the Company's actual results in Fiscal 1997 and
beyond to differ materially from those expressed in any such forward-looking
statements. These factors include, without limitation, the general economic and
business conditions affecting the textile industry, the Company's ability to
restructure its debt and meet its debt service obligations, competition from a
variety of large textile mills and foreign textile manufacturers who export to
the U.S., the seasonality of the Company's sales, the volatility of the
Company's raw materials cost, and the Company's dependence on key personnel.
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ITEM 2. PROPERTIES.
The following table sets forth certain information relating to the Company's
principal facilities (segment information relates to principal use). All of the
facilities owned or leased by the Company are used for manufacturing, except for
the facility in New York, New York, which is used for sales offices, and a
facility in Greenville, South Carolina, comprising 399,000 square feet, which
was closed effective October 28, 1996. Except as noted, all of the Company's
facilities are owned in fee and substantially all owned facilities are pledged
as collateral for the Company's bank financing arrangement.
<TABLE>
<CAPTION>
Square Square
Location Footage Location Footage
-------- ------- -------- -------
Apparel Fabrics and Products Industrial Fabrics and Products
---------------------------- -------------------------------
<S> <C> <C> <C>
Greenville, SC 399,000 Kingsport, TN 625,000
Laurens, SC 475,000 Slater, SC 433,000
Greenville, SC 460,000 Westfield, NC 237,000
Stanley, NC 338,000 Easthampton, MA 50,000
S. Boston, VA 286,000
Rocky Mount, VA 81,000 All Segments
------------
New York, NY(1) 10,000
Home Fashion Textiles
---------------------
Lincolnton, NC 387,000
</TABLE>
(1) The New York, NY facility is leased by the Company under a lease agreement
which expires on May 30, 1997.
The Company also leases certain other warehouse facilities, various regional
sales offices, a subsidiary's corporate office and its corporate headquarters.
The Company believes that all of its facilities are suitable and adequate for
the current and anticipated conduct of its operations.
ITEM 3. LEGAL PROCEEDINGS.
The Company is involved in various legal proceedings which are routine
litigations incidental to the conduct of its business. Management believes that
none of this litigation, if determined unfavorably to the Company, would have a
material adverse effect on the financial condition or results of operations of
the Company. No proceeding was terminated in the fourth quarter of Fiscal 1996
that had a material adverse effect on the financial condition or results of
operations of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS.
No matters were submitted to a vote of securityholders during the fourth quarter
of Fiscal 1996.
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
There is currently no established public trading market for the Company's Class
A Common Stock, $.01 par value per share (the "Class A Common Stock"), or the
Company's Class B Common Stock, $.01 par value per share (the "Class B Common
Stock" and together with the Class A Common Stock, the "Common Stock").
As of January 17, 1997, there were 12 holders of record of Class A Common Stock
and 2 holders of record of Class B Common Stock.
As a holding company, the Company's ability to pay cash dividends is dependent
on the earnings and cash flows of its subsidiaries and the ability of its
subsidiaries to make funds available to the Company for such purpose. Under the
terms of its outstanding indebtedness, the Company is currently prohibited from
paying cash dividends on the Common Stock.
Given the Company's existing indebtedness and its current financial condition,
it intends to retain earnings to fund working capital and for general corporate
purposes, and, therefore, does not intend to pay cash dividends on shares of the
Common Stock in the foreseeable future.
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ITEM 6. SELECTED HISTORICAL FINANCIAL DATA.
(Dollars in Thousands Except Per Share Data)
The following table presents selected consolidated historical financial data for
the Company as of the dates and for the fiscal years indicated. The presentation
of certain previously reported amounts have been reclassified to conform to the
current presentation and to reflect discontinued operations of the Automotive
Assets (sold in 1994) and the Carpet Business (sold on November 16, 1995) as
discussed in Note 3 to the financial statements at Item 8 in this Form 10-K.
<TABLE>
<CAPTION>
Fiscal Year Ended
---------------------------------------------------------
10/31/92 10/30/93 10/29/94 10/28/95 11/2/96
INCOME STATEMENT DATA: (52 Weeks) (52 Weeks) (52 Weeks) (52 Weeks) (53 Weeks)
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net sales $ 476,326 $ 457,552 $ 461,871 $ 472,565 $ 448,824
Cost of sales 404,547 396,160 397,921 406,070 397,804
--------- --------- --------- --------- ---------
Gross profit 71,779 61,392 63,950 66,495 51,020
Selling, general and administrative expenses 37,391 39,023 39,805 39,586 40,579
Other expense, net 1,372 1,236 2,914 6,248 2,498
Charges for plant closing, loss on sale of
certain operations and writedown of certain
long-lived assets - - - - 30,028
--------- --------- --------- --------- ---------
Operating profit (loss) 33,016 21,133 21,231 20,661 (22,085)
Valuation allowance on Gulistan securities - - - - (4,242)
Interest income 1 48 749 2,821 2,856
Interest expense (58,513) (60,407) (55,570) (39,946) (40,510)
--------- --------- --------- --------- ---------
Loss before reorganization items, income
taxes, discontinued operations, extraordinary
items and cumulative effects of accounting
changes (1) (25,496) (39,226) (33,590) (16,464) (63,981)
Reorganization items - professional fees and
expenses - - - - (2,255)
--------- --------- --------- --------- ---------
Loss before income taxes, discontinued
operations, extraordinary items and
cumulative effects of accounting changes (25,496) (39,226) (33,590) (16,464) (66,236)
Income taxes (benefit) 1,446 1,782 2,800 1,200 (300)
--------- --------- --------- --------- ---------
Loss before discontinued operations,
extraordinary items and cumulative effects
of accounting changes (26,942) (41,008) (36,390) (17,664) (65,936)
Discontinued operations, net of taxes:
Income (loss) from discontinued operations 16,089 24,165 23,628 (7,079) -
Net gain (loss) on sale of discontinued
operations - - 132,966 (26,241) (1,500)
Extraordinary gain (loss), net of taxes - - (7,410) 20,120 -
Cumulative effects of accounting changes,
net of taxes - (4,988) (708) - -
--------- --------- --------- --------- ---------
Net income (loss) $ (10,853) $ (21,831) $ 112,086 $ (30,864) $ (67,436)
========= ========= ========= ========= =========
Income (loss) applicable to common stock $ (13,312) $ (24,694) $ 108,753 $ (34,695) $ (71,941)
========= ========= ========= ========= =========
</TABLE>
(Continued)
12
<PAGE> 14
INCOME STATEMENT DATA (CONTINUED):
<TABLE>
<CAPTION>
Fiscal Year Ended
---------------------------------------------------------
10/31/92 10/30/93 10/29/94 10/28/95 11/2/96
(52 Weeks) (52 Weeks) (52 Weeks) (52 Weeks) (53 Weeks)
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Weighted average number of shares
outstanding 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000
========= ========= ========= ========= =========
Earnings (loss) per common share:
Loss before discontinued operations,
extraordinary items and effects of
accounting changes $ (29.40) $ (43.87) $ (39.73) $ (21.50) $ (70.44)
Discontinued operations, net of taxes:
Income (loss) from discontinued
operations 16.09 24.17 23.63 (7.08) -
Net gain (loss) on sale of discontinued
operations - - 132.97 (26.24) (1.50)
Extraordinary gain (loss), net of taxes - - (7.41) 20.12 -
Cumulative effects of accounting changes,
net of taxes - (4.99) (0.71) - -
--------- --------- --------- --------- ---------
Net income (loss) $ (13.31) $ 24.69) $ 108.75 $ (34.70) $ (71.94)
========= ========= ========= ========= =========
BALANCE SHEET DATA:
Working capital, excluding net assets
held for sale $ 61,431 $ 63,821 $ 65,855 $ 72,670 $(257,866)(2)
Total assets 511,535 532,608 452,811 412,822 335,927
Total long-term debt, less current portion 488,280 522,947 335,472 327,668 4,226
Senior redeemable preferred stock 18,144 21,007 24,340 28,171 32,676
Shareholders' deficit (86,409) (111,103) (2,350) (37,045) (108,986)
</TABLE>
(1) The following non-cash charges have been included in the determination of
loss before reorganization items, income taxes, discontinued operations,
extraordinary items and cumulative effects of accounting changes for the
periods shown above.
(2) As discussed in Note 6 of the Notes to Consolidated Financial Statements
included in Item 8 herein, all of the Company's senior credit facility
revolving line of credit and all of the Company's subordinated notes and
debentures are classified as current liabilities as of November 2, 1996.
<TABLE>
<CAPTION>
10/31/92 10/30/93 10/29/94 10/28/95 11/2/96
(52 Weeks) (52 Weeks) (52 Weeks) (52 Weeks) (53 Weeks)
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Certain non-cash charges to income:
Depreciation $ 19,736 $ 19,799 $ 22,242 $ 20,820 $ 21,756
Amortization of goodwill and other 975 969 964 965 983
Product liability charge - - - 5,000 -
Writedown of certain long-lived assets - - - - 17,554
Valuation allowance on Gulistan securities - - - - 4,242
Other non-cash charges to income 888 1,957 131 371 -
Non-cash interest 18,502 11,729 11,161 8,818 10,088
---------- ---------- ---------- ---------- ----------
$ 40,101 $ 34,454 $ 34,498 $ 35,974 $ 54,623
========== ========== ========== ========== ==========
</TABLE>
13
<PAGE> 15
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The following discussion should be read in conjunction with the Consolidated
Financial Statements of the Company and the Notes thereto included in Item 8
herein.
<TABLE>
<CAPTION>
Fiscal Year Ended
-----------------------------------------------
10/29/94 10/28/95 11/2/96
----------- ----------- ------------
(In Thousands)
<S> <C> <C> <C>
NET SALES
Apparel fabrics and products $ 254,810 $ 247,846 $ 221,799
Industrial fabrics and products 169,736 191,985 193,001
Home fashion textiles 37,325 32,734 34,024
----------- ----------- ------------
$ 461,871 $ 472,565 $ 448,824
=========== =========== ============
OPERATING PROFIT (LOSS)
Apparel fabrics and products $ 18,487 $ 16,667 $ (22,422)(1)
Industrial fabrics and products 7,618 7,590 5,947 (2)
Home fashion textiles 2,564 1,749 647
Indirect corporate expenses, net (7,438) (5,345) (6,257)
----------- ----------- ------------
Operating Profit (Loss) 21,231 20,661 (22,085)
Valuation allowance on Gulistan securities - - (4,242)
Interest income 749 2,821 2,856
Interest expense (55,570) (39,946) (40,510)
Restructuring fees and expenses - - (2,255)
----------- ----------- ------------
Loss before income taxes, discontinued operations,
extraordinary items and cumulative effects of
accounting changes $ (33,590) $ (16,464) $ (66,236)
=========== =========== ============
</TABLE>
(1) The Fiscal 1996 operating loss for apparel fabrics and products includes
charges of approximately $14.2 million for plant closing and $6.2 million
for loss on sale of certain operations.
(2) The Fiscal 1996 operating profit for industrial fabrics and products
includes charges of approximately $8.1 million for writedown of certain
long-lived assets and $1.5 million for loss on sale of certain operations.
14
<PAGE> 16
RESULTS OF OPERATIONS
FISCAL 1996 COMPARED TO FISCAL 1995
Consolidated net sales from continuing operations declined $23.8 million (5.0%)
from $472.6 million in Fiscal 1995 to $448.8 million in Fiscal 1996. Operating
profit (loss) from continuing operations decreased $42.8 million from an
operating profit of $20.7 million in Fiscal 1995 to an operating loss of $22.1
million in Fiscal 1996. Excluding charges for plant closings, loss on sale of
certain operations, and charges for writedown of certain long-lived assets,
operating profit would have been $7.9 million, compared to $25.7 million in
Fiscal 1995 (excluding the product liability charge). Substantially all of the
declines in sales and operating profits are attributable to the apparel fabrics
segment which has been severely impacted by lower unit volumes and margins.
Net sales in Fiscal 1996 in the apparel fabrics and products segment, which
includes unfinished woven apparel fabrics (greige goods) primarily for women's
wear, yarn sales and elastic products for various apparel uses, declined $26.0
million (10.5%) from $247.8 million in Fiscal 1995 to $221.8 million in Fiscal
1996. Fiscal 1996 saw the continuation of the trend of weakened demand for
apparel fabrics which began during the second half of Fiscal 1995.
Apparel fabric sales declined $22.3 million in Fiscal 1996 as a result of lower
unit volume combined with lower average selling prices. Fiscal 1996 has been
marked by generally poor retail women's apparel sales, increased competitive
pressures from abroad (particularly in commodity-type fabrics), and falling
margins. As a result of this weaker demand, the Company curtailed production for
most of its apparel fabrics, and experienced a less favorable product mix with a
higher ratio of commodity-type fabrics than was experienced in Fiscal 1995.
These and other conditions led management to conclude in the third fiscal
quarter of 1996 that one of its facilities in Greenville, South Carolina should
be closed. The plant, which was closed on October 28, 1996, had been operating
on a significantly reduced production schedule and was not cost-effective. The
accompanying consolidated statement of operations for Fiscal 1996 includes a
"charge for plant closing" of approximately $14.2 million related principally to
the loss on impairment of the plant in accordance with SFAS No. 121, employee
severance costs and estimated costs of equipment relocation. The Company expects
that the plant closure will result in improved earnings and cash flow from
operations in the future.
Many participants in the domestic women's apparel industry have suffered from
falling margins in recent years as a result of a number of factors, including
increased imports of both fabric and garments, generally relaxed consumer
attitudes regarding fashion, and price pressures from a troubled retail
industry. Many of the Company's customers for apparel fabric (converters) have
seen their importance to the industry diminish and their volumes decline. The
Company has taken steps to broaden its sales distribution in its apparel fabrics
segment to include export sales to Mexico, Europe and other continents. Exports
have not comprised a significant portion of the Company's sales in the past. In
addition, the Company expects to increase its level of capital investment in
this segment, with such investments focused primarily on cost reduction and
productivity improvements.
Sales of elastic apparel products declined $4.6 million to $12.8 million in
Fiscal 1996 from $17.4 million in Fiscal 1995. As discussed below, the Company
sold its rubber products business, which produced these elastic products, in
September 1996. Discontinuation in Fiscal 1996 of certain unprofitable product
lines, changes in customer requirements to non-rubber elastomers, and less than
a full year's sales in Fiscal 1996 caused the decline in elastic sales from
Fiscal 1995.
15
<PAGE> 17
Operating loss in Fiscal 1996 for the apparel fabrics and products segment
decreased by $39.1 million to a $22.4 million loss from a $16.7 million profit.
Included in the Fiscal 1996 operating loss are charges of approximately $14.2
million for plant closing and $6.2 million for loss on sale of certain
operations. Operating profit (loss) in Fiscal 1996 for the apparel fabrics and
products segment before the charges for plant closing and loss on sale of
certain operations declined by $18.7 million to a $2.0 million loss from a $16.7
million profit in Fiscal 1995. Such decline results from the significantly lower
unit volume and the lower margins associated with the Fiscal 1996 product mix.
Net sales in Fiscal 1996 in the industrial fabrics and products segment, which
includes single-ply roofing and environmental membrane, woven fabrics
constructed of cotton, synthetics and fiberglass for insulation, filtration, and
lamination applications, and extruded urethane products, increased $1.0 million
(0.5%) to $193.0 million from $192.0 million in Fiscal 1995. Sales of fiberglass
fabrics increased $7.7 million from Fiscal 1995 as a result of the continued
growth in demand for fabrics used in the manufacture of electrical circuit
boards. The growing global demand for electronic products has fueled significant
increases in sales of fiberglass fabric for the last several years. The Company
expects this demand to continue in the foreseeable future. The Company has
expanded and enhanced its productive capacity in the fiberglass weaving area in
order to satisfy this demand and improve product quality. Sales of roofing
membrane increased $8.8 million from Fiscal 1995, as a result of the continued
success of the Company's "Hi-Tuff/EP" line of roofing products, which was
introduced in late 1993. This product's competitive price and improved
performance characteristics have driven its sales growth, and the product now
accounts for 75% of the Company's roofing sales. The Company expects roofing
sales to continue to grow as the Company capitalizes on the market acceptance of
its roofing products to gain market share. Sales of extruded urethane products
increased $1.9 million from Fiscal 1995 as a result of the Company's expanded
productive capacity and success in developing and satisfying the
specification-driven customer requirements for urethane products. Sales of
cotton industrial fabrics declined $12.8 million as a result of weak markets and
intense foreign competition, particularly from China. Sales of other industrial
fabrics and products declined $4.6 million primarily as a result of exiting
certain industrial fabric markets during late 1995.
Operating profit in Fiscal 1996 for the industrial fabrics and products segment
decreased by $1.7 million from $7.6 million in 1995 to $5.9 million in 1996.
Included in the Fiscal 1996 operating profit are charges of approximately $8.1
million for writedown of certain long-lived assets and $1.5 million for loss on
sale of certain operations. Operating profit in Fiscal 1996 for the industrial
fabrics and products segment before the charge for the writedown of certain
long-lived assets and loss on sale of certain operations increased $8.0 million
(105%) to $15.6 million from $7.6 million in Fiscal 1995. Fiscal 1995 operating
profit reflects a charge of $5 million related to product liability costs. No
such charge occurred in Fiscal 1996. The aforementioned sales volume increases
in roofing, fiberglass, and extruded urethane products, combined with improved
manufacturing and operating efficiencies, increased operating profits. Partially
offsetting these improvements, however, are the effects of lower sales volumes
of cotton industrial fabrics and other synthetic industrial fabrics. Curtailed
production schedules in the Company's cotton manufacturing facility and the
resulting under-absorption of costs were negative influences on operating
profit. The Company does not expect the demand for its cotton industrial fabric
to rebound from Fiscal 1996 levels and has adjusted its operating schedule
accordingly.
As a result of the Company's assessment of the market conditions for its cotton
industrial fabrics, management concluded that its plant in Kingsport, Tennessee,
which manufactures such fabrics, is impaired under the criteria of Statement of
Financial Accounting Standard ("SFAS") No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed Of". SFAS No. 121
requires a writedown to fair value in circumstances in which the expected future
net cash flows from the operation of the plant are less than its carrying value.
The accompanying consolidated statement of operations for Fiscal 1996 includes a
charge, "writedown of certain long-lived assets", of $8.1 million for the excess
of the
16
<PAGE> 18
carrying amount of this plant over its estimated fair value.
Pursuant to the terms of an Asset Purchase Agreement dated September 30, 1996,
between JPS Elastomerics Corp., a wholly-owned subsidiary of the Company, and
Elastomer Technologies Group, Inc. and a Receivables Purchase Agreement dated
September 30, 1996 between JPS Elastomerics Corp. and the Bank of New York
Commercial Corporation, JPS Elastomerics Corp. consummated the sale of
substantially all of the assets of its rubber products division, a business
engaged in the manufacture and sale of natural and synthetic elastics for use in
apparel products, diaper products, and specialty industrial applications (the
"Rubber Products Business"). Pursuant to the Asset Purchase Agreement, Elastomer
Technologies Group, Inc. agreed to assume substantially all of the liabilities
and obligations associated with the Rubber Products Business.
The consideration for the sale of the Rubber Products Business consisted of
approximately $5.1 million in cash, subject to certain post-closing adjustments
based on the amount of working capital transferred. The net cash proceeds of
approximately $4.8 million were used by the Company to reduce outstanding
borrowings under its senior credit facility. Revenues of the Rubber Products
Business for Fiscal 1994, Fiscal 1995 and Fiscal 1996 were $22.6 million, $20.7
million and $16.8 million, respectively.
Net sales in Fiscal 1996 in the home fashion textiles segment, which includes
woven drapery fabrics and yarns for the home furnishings industry increased $1.3
million (3.9%) to $34.0 million from $32.7 million in Fiscal 1995 due primarily
to an increase in yarn sales. Sales of home furnishings fabrics in Fiscal 1996
were approximately flat with Fiscal 1995. Demand for the Company's woven fabrics
used in home decoration has been in decline for several years.
Operating profit in Fiscal 1996 in the home fashion textile segment declined by
$1.1 million (64%) to $0.6 million from $1.7 million in Fiscal 1995 primarily as
a result of lower margins on fabric sales.
Indirect corporate expenses in Fiscal 1996 increased $1.0 million from $5.3
million in Fiscal 1995 to $6.3 million in Fiscal 1996 primarily as a result of
the $1.1 million cost of an early retirement offer extended to certain salaried
employees. Lower corporate employee compensation costs in Fiscal 1996 partially
offset this increase.
Debt restructuring fees and expenses totaled $2.3 million in Fiscal 1996. There
were no comparable charges in Fiscal 1995. Such expenses represent fees and
expenses of the Company's financial advisor, the financial advisor for the
holders of a substantial majority of its outstanding bonds, the Company's legal
counsel and other professionals associated with the Company's financial
restructuring.
During Fiscal 1996, Gulistan reported net losses of approximately $4.5 million
before interest expense on the promissory note held by the Company. Accordingly,
the Company did not record interest income on any of the Gulistan securities
held by the Company. Also, in accordance with relevant accounting literature,
the Company has recorded a valuation allowance against its investment in the
Gulistan securities and a corresponding charge to income of $4.2 million as a
result of the net loss ($4.5 million reduced by the $0.3 million of common
equity held by Gulistan management) incurred by Gulistan during Fiscal 1996.
Interest expense in Fiscal 1996 was $40.5 million, or $0.6 million more than
Fiscal 1995 due primarily to the compounding effect of accretion of debt
discounts and non-cash interest.
17
<PAGE> 19
FISCAL 1995 COMPARED TO FISCAL 1994 (RESTATED FOR EFFECT OF CLASSIFYING CARPET
BUSINESS AS DISCONTINUED OPERATIONS)
Consolidated net sales from continuing operations increased $10.7 million (2.3%)
from $461.9 million in Fiscal 1994 to $472.6 million in Fiscal 1995. Operating
profit from continuing operations decreased $0.5 million (2.4%) from $21.2
million in Fiscal 1994 to $20.7 million in Fiscal 1995. Excluding a $5 million
charge to income in Fiscal 1995 for product liability costs (discussed below),
operating income would have increased $4.5 million in Fiscal 1995 over Fiscal
1994. Substantially all of these increases in consolidated net sales and
operating profits occurred in the first two fiscal quarters of 1995. The last
two fiscal quarters of 1995 saw declines in operating results from comparable
prior year levels.
Net sales in Fiscal 1995 in the apparel fabrics and products segment declined
$7.0 million (2.7%) from $254.8 million in Fiscal 1994 to $247.8 million in
Fiscal 1995. Fiscal 1995 results in the apparel fabrics and products segment
were marked by two distinct halves. During the first two fiscal quarters of
1995, the Company reported results which were stronger than the comparable 1994
quarters primarily as a result of the Company's change in its product offering
to emphasize specialty fabrics with more fashion and styling characteristics.
Although overall apparel market conditions were not strong, these fabrics
commanded higher average selling prices and margins than commodity type fabrics
and allowed the Company to improve its margins in the face of the continued
flood of imported commodity apparel fabrics, primarily from Chinese and Eastern
European sources. The passage of the General Agreement on Tariffs and Trade
(GATT) is expected to foster such foreign competition in the commodity apparel
fabrics market in the future. During the second half of Fiscal 1995, consumer
demand for apparel products weakened significantly which in turn has led to a
much weaker market for the Company's fabrics. As a result of this lower unit
demand for all fabric styles, the impact of the aforementioned change in product
offering was much less apparent in the second half.
Operating profit in the apparel fabrics and products segment declined by $1.8
million (9.8%) from $18.5 million in Fiscal 1994 to $16.7 million in Fiscal
1995. This decrease is primarily the result of lower unit volume and poor
average selling prices for the Company's apparel fabrics and products. In
addition to the weak market conditions, the Company has experienced significant
price increases for many of its most important raw materials, including rayon
and polyester fiber.
Net sales in Fiscal 1995 in the industrial fabrics and products segment
increased $22.3 million (13.1%) to $192.0 million from $169.7 million in Fiscal
1994. Sales of fiberglass fabrics for electrical circuit boards and
construction-related scrims increased $7.0 million. The market for fiberglass
fabrics, particularly those used in the manufacture of electronic circuit boards
has been growing in connection with the rapidly expanding worldwide consumer
demand for electronic products. Sales of cotton industrial fabrics increased
$6.7 million as a result of higher unit volume in the first fiscal quarter and
the pass-through of relatively higher cotton costs in Fiscal 1995. Sales of
roofing membrane increased $4.9 million primarily as a result of the continued
success of the Company's new line of roofing products introduced in late 1993.
Operating profit in Fiscal 1995 for the industrial fabrics and products segment
was level with Fiscal 1994 at $7.6 million. The operating profit in Fiscal 1995
was reduced as a result of a $5 million charge for product liability costs for
which there was no comparable charge to income in Fiscal 1994.
18
<PAGE> 20
During the fourth quarter of Fiscal 1995, management determined that the
estimate of the future costs associated with providing services and materials to
repair or replace certain defective roofing products sold by the Company's
predecessor prior to 1987 required revision. In 1988, the Company estimated the
aggregate future costs to repair or replace those defective roofing products to
be approximately $34.1 million. This estimate was based on a number of factors,
including assumed claim rates and costs to repair or replace. Through October
28, 1995, approximately $29.8 million has been incurred and charged to this
liability. The Company reevaluated the exposure based on recent experience and
claims in process. The liability for future costs associated with these
defective roofing products is subject to management's best estimate, including
factors such as expected future claims experience by geographic region and
roofing compound applied; expected costs to repair or replace such roofing
products; estimated remaining length of time that such claims will be made by
customers; and the estimated costs to litigate and settle certain claims now in
litigation and those that may result in future litigation. Based on warranties
that were issued on the roofs, the Company estimates that the defective roofing
product claims will be substantially settled by 2000. Based on management's
estimate of a range of future costs of approximately $9.3 million to $11.4
million, the Company recorded a $5.0 million addition to the liability for such
defective products increasing such liability to $9.3 million at October 28,
1995.
Operating profit in Fiscal 1995 in the industrial fabrics and products segment,
excluding the aforementioned charge for product liability costs, increased $5.0
million (65.3%) to $12.6 million from $7.6 million in Fiscal 1994. The increase
in operating profit is primarily a result of the higher sales volumes described
above combined with the effects of improved manufacturing and operating
efficiencies.
Net sales in Fiscal 1995 in the home fashion textiles segment declined by $4.6
million (12.3%) to $32.7 million from $37.3 million in Fiscal 1994. The decline
in volume results from weak demand for the Company's woven fabrics used in home
decoration, a continuation of a trend in home fashion textile use for several
years, combined with the weak soft goods market in 1995.
Operating profit in Fiscal 1995 in the home fashion textile segment declined by
$0.8 million (31.8%) to $1.7 million primarily as a result of the lower sales
volume described above and lower average selling prices for the Company's
fabrics.
Indirect corporate expenses in Fiscal 1995 declined $2.1 million from $7.4
million in Fiscal 1994 to $5.3 million in Fiscal 1995, primarily as a result of
lower professional fees and lower depreciation and amortization.
Interest expense in Fiscal 1995 was $15.6 million lower than it was for Fiscal
1994. Giving effect to the reduction of debt associated with the use of the net
proceeds from the sale of the Automotive Assets in Fiscal 1994 on a pro forma
basis would reduce interest expense by $14.1 million in Fiscal 1994. Such pro
forma reduction includes $1.3 million representing interest accretion and debt
issuance cost amortization. After giving pro forma effect to the debt reduction
described above, interest expense decreased approximately $1.5 million in Fiscal
1995 from Fiscal 1994. In Fiscal 1995, a $3.4 million decrease in interest
expense as a result of the lower debt balances caused by the Company's open
market purchases of certain of its previously outstanding notes and debentures
(as discussed below) was offset to the extent of $1.9 million due primarily to
higher average interest rates and the compounding effect of accretion of debt
discounts and non-cash interest.
19
<PAGE> 21
During the first quarter of Fiscal 1995, the Company expended $36.6 million to
make open market purchases of certain of its outstanding notes and debentures
with an aggregate face value of $66.6 million and a carrying value (including
interest due at maturity) of $59.2 million. The Company recognized a gain from
early extinguishment of debt of $20.1 million, net of expenses of $1.9 million
and income taxes of $0.6 million. The Company has made no further open market
purchases and is not currently seeking to make any such purchases.
The terms of the Asset Purchase Agreement dated May 25, 1994, as amended,
regarding the sale of the Automotive Assets on June 28, 1994, provided that the
selling price be adjusted based on the net assets sold. During Fiscal 1995, such
amount was finalized and resulted in additional cash proceeds to the Company of
$4.5 million. Such amount, net of $0.1 million of tax, has been included as gain
on sale of discontinued operations in Fiscal 1995.
On November 16, 1995, pursuant to the terms of an Asset Transfer Agreement dated
as of November 16, 1995, by and among the Company, JPS Carpet Corp. ("Carpet"),
a wholly-owned subsidiary of the Company, Gulistan Holdings Inc., and Gulistan
Carpet Inc., a wholly-owned subsidiary of Gulistan Holdings Inc. (collectively,
"Gulistan"), the Company and Carpet consummated the sale of substantially all of
the assets of Carpet used in the business of designing and manufacturing tufted
carpets for sale to residential, commercial and hospitality markets (the "Carpet
Business"). Pursuant to the Asset Transfer Agreement, Gulistan agreed to assume
substantially all of the liabilities and obligations associated with the Carpet
Business.
The consideration for the sale of the Carpet Business consisted of approximately
$19.0 million in cash, as adjusted, and other debt and equity securities of
Gulistan as follows: a $10 million Promissory Note due in November 2001, $5
million of preferred stock redeemable in November 2005, and warrants to purchase
25% of the common stock of Gulistan. Based on an independent valuation, the
Company has determined the fair value of these debt and equity securities to be
approximately $11.3 million. The net assets of the Carpet Business (adjusted to
net realizable value) have been classified as "net assets held for sale" on the
October 28, 1995 Consolidated Balance Sheet. As of October 28, 1995, the Company
adjusted the net assets of the Carpet Business to their net realizable value,
which resulted in a charge to the 1995 Consolidated Statement of Operations of
$30.7 million, classified as loss on sale of discontinued operations. The cash
consideration was adjusted in Fiscal 1996 pursuant to the terms of the Asset
Transfer Agreement based on the audited amount of working capital transferred,
which adjustment resulted in a reduction of $3.5 million in the cash
consideration and an additional charge to income in Fiscal 1996 of $1.5 million.
The fiscal amount of net cash proceeds (net of fees, expenses and the
post-closing adjustment) of $16.7 million was applied by the Company to reduce
outstanding borrowings under the credit agreement for the senior credit
facility. The loss on the sale is not currently recognizable for tax purposes
and the Company has recorded no net tax benefit as a result of this loss due to
uncertainties regarding the ability to utilize these losses in future years.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal sources of liquidity for operations and expansion are
funds generated internally and borrowings under its Revolving Credit Facility
(as defined below). At November 2, 1996, the Company had $18.6 million available
for borrowing under the Revolving Credit Facility. Borrowings under the
Revolving Credit Facility are made or repaid on a daily basis in amounts equal
to the net cash requirements or proceeds for that business day.
20
<PAGE> 22
The Company expects that its planned capital expenditures in Fiscal 1997 of
approximately $23 million will be funded by cash from operations, bank and other
equipment financing sources. Should such capital resources be inadequate or
unavailable, however, management would defer certain of its planned capital
expenditures or take other appropriate actions to preserve liquidity. At
November 2, 1996, the Company had commitments for capital expenditures of
approximately $1.4 million.
The Company and its operating subsidiaries (being hereinafter collectively
referred to as the "Borrowing Subsidiaries") are parties to the Fourth Amended
and Restated Credit Agreement, dated as of June 24, 1994, as amended (the
"Restated Credit Agreement"), by and among the financial institutions party
thereto, Citibank, N.A. ("Citibank"), as administrative agent and co-agent, and
General Electric Capital Corporation ("GECC"), as collateral agent and co-agent.
The Restated Credit Agreement, as amended, provides for a revolving credit loan
facility and letters of credit (the "Revolving Credit Facility") in a maximum
principal amount equal to the lesser of (a) $118 million and (b) a specified
borrowing base, which is based upon eligible receivables and inventory of the
Borrowing Subsidiaries (the "Borrowing Base"), except that (i) no Borrowing
Subsidiary may borrow an amount greater than the Borrowing Base attributable to
it, (ii) letters of credit may not exceed $15 million in the aggregate, and
(iii) $20 million of the Revolving Credit Facility is available, not subject to
the Borrowing Base, to purchase property, plant and equipment or to finance or
refinance such purchases ("Capex Loans"), provided that the aggregate of all
revolving credit loans, including Capex Loans, and letters of credit may not
exceed the lesser of (A) $118 million and (B) the sum of the Borrowing Base plus
$25 million (subject to certain reductions).
The Revolving Credit Facility (or a similar credit facility) is essential for
the Company's continued operations. On September 6, 1996, the Revolving Credit
Facility was amended to, among other things, extend its expiration date and
reduce the interest rate by 0.25%. Under the terms of the Restated Credit
Agreement, the Revolving Credit Facility expires on March 1, 1997 (unless
otherwise extended) if the Company has not commenced a case under chapter 11 of
the Bankruptcy Code. If such a case is commenced on or prior to March 1, 1997,
the Revolving Credit Facility will be extended automatically to the earlier of
November 1, 1997 or the effective date of a reorganization under chapter 11 of
the Bankruptcy Code. At this time, the Company has not made a decision to
commence a case under the Bankruptcy Code. The Company has classified the $85.6
million outstanding under its Revolving Credit Facility revolving line of credit
as a current liability in the accompanying consolidated balance sheet. In
addition, the loan covenants were amended to be based upon the activities of the
consolidated operating subsidiaries (JPS Converter and Industrial Corp. and JPS
Elastomerics Corp.) rather than the consolidated Company (i.e., excludes the
assets and liabilities of the parent company and other non-operating
subsidiaries). The Restated Credit Agreement does not permit additional
borrowings by the Borrowing Subsidiaries for, among other things, loans or
dividends to the Company for the payment of interest on its notes and
debentures. As a result of the aforementioned restriction on the use of proceeds
of revolving loans, the Company did not make scheduled November 15, 1996
interest payments of approximately $1.9 million on its subordinated debentures
and did not make scheduled December 1, 1996 interest payments of approximately
$5.4 million on its senior subordinated discount notes and approximately $3.6
million on its senior subordinated notes. The failure to make these scheduled
interest payments constitutes an event of default under the indentures governing
these debt securities. As a result, the holders of these debt securities are
entitled to accelerate the debt represented thereby, among other things.
Accordingly, these debt obligations are classified as current liabilities in the
accompanying consolidated balance sheet as of November 2, 1996. The Company does
not have the ability to repay such indebtedness if the same were to be
accelerated.
On May 8, 1996, the Company engaged The Blackstone Group, L.P. to act as its
financial advisor in connection with a potential financial restructuring of its
debt obligations. In addition, at the request of the holders of a substantial
majority of its outstanding bonds, the Company engaged Houlihan, Lokey, Howard &
Zukin, Inc., effective April 10, 1996 to act as financial advisors to the
holders of the Company's debt
21
<PAGE> 23
securities in connection with such a financial restructuring. The Company has
provided substantial information to these financial advisors on a confidential
basis regarding the Company's business, strategies, plans and prospects. In
addition, the Company is discussing the terms of a potential financial
restructuring with these advisors and the holders of a substantial majority of
its outstanding bonds. The Company's ability to accomplish a restructuring of
the terms of its debt securities or any refinancing thereof will depend on a
number of factors, including its operating performance, market conditions and
the ability of the Company and its bondholders to come to an agreement as to the
appropriate terms of any such restructuring. Although no agreement, formal or
informal, has been reached between the Company and its bondholders regarding the
terms of a potential financial restructuring, management is optimistic that a
restructuring will be accomplished. Management is unable to predict the impact
of any such restructuring on the accompanying financial statements.
INFLATION AND TAX MATTERS
The Company is subject to the effects of changing prices. It has generally been
able to pass along inflationary increases in its costs by increasing the prices
for its products; however, market conditions sometimes preclude this practice.
The Company recorded a net $0.3 million income tax benefit on continuing
operations in Fiscal 1996. The Company had a $0.5 million deferred state tax
benefit from the charge for plant closing and writedown of certain long-lived
assets. While no tax expense resulted from applying the statutory tax rate to
the loss before income taxes, the Company was not able to fully offset
subsidiary income in all tax jurisdictions with net operating losses of the
Company or other subsidiaries or operating loss carryovers. As a result, a $0.2
million current year provision for state income taxes was required. During
Fiscal 1994, the Company utilized approximately $141 million of net operating
loss carryforwards to offset the gain on sale of the Automotive Assets. Income
tax expense incident to the sale was reduced by approximately $49 million as a
result of such utilization. Federal alternative minimum and state taxes of
approximately $2.8 million were recognized as a result of the sale. The
Company's future ability to utilize its net operating losses may be
significantly limited under the income tax laws should there be changes in the
ownership of the Company's stock which constitute an ownership change for tax
purposes. The effect of such an ownership change would be to significantly limit
the annual utilization of the remaining net operating loss to an amount equal to
the value of the Company immediately prior to the time of the change (subject to
certain adjustments) multiplied by the Federal long-term tax exempt rate. The
Company does not believe that this potential limitation on net operating loss
carryforwards is currently applicable. However, there is no assurance that the
Internal Revenue Service will not take a contrary position or that such
limitation will not become applicable for subsequent taxable periods. The
Company has provided a 100% valuation allowance of $53.6 million for its
remaining deferred tax asset, net of existing taxable "temporary differences,"
except those related to certain deferred state tax liabilities. The gross
deferred tax asset relates primarily to the benefit of the net operating loss
carryforward and losses from discontinued operations not currently recognizable
for tax purposes. In the Company's opinion, the valuation allowance is required
as realization of the tax benefit is not assured based on prior operating
history.
Although the Company believes use of its net operating losses to offset the gain
on the Automotive Assets will more likely than not be sustained under existing
tax laws, uncertainty exists primarily due to the fact that applicable
regulations under Internal Revenue Code Section 382 have not been issued.
Therefore, in accordance with provisions of the Indentures, the Company set
aside, in a special-purpose subsidiary, a portion ($39.5 million) of the net
proceeds from the sale of the Automotive Assets to satisfy, if necessary, these
possible contingent tax liabilities. These funds have been invested in U.S.
Government securities and are classified as other noncurrent assets in the
Company's consolidated balance sheets.
22
<PAGE> 24
In the first quarter of Fiscal 1995, the Company estimated that the open market
purchases of certain of its debt securities would result in additional tax
liabilities of approximately $3.2 million. Such amount was recorded as a
reduction of the extraordinary gain from early extinguishment of debt in the
first fiscal quarter. This amount of tax was based on management's best estimate
at that time of alternative minimum taxable income for Fiscal 1995. During the
fourth fiscal quarter, management's estimate of Fiscal 1995 alternative minimum
taxable income was revised downward. Accordingly, the Company reduced the $3.2
million tax estimate by $2.6 million to $0.6 million during the fourth quarter
of Fiscal 1995.
The loss recorded on the disposition of the Carpet Business is not currently
recognizable for tax purposes. The Company has recorded no net tax benefit in
its financial statements due to uncertainties surrounding the Company's ability
to utilize such losses in future years.
23
<PAGE> 25
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
INDEPENDENT AUDITORS' REPORT
JPS Textile Group, Inc.:
We have audited the accompanying consolidated balance sheets of JPS Textile
Group, Inc. and subsidiaries (the "Company") as of November 2, 1996 and October
28, 1995, and the related consolidated statements of operations, senior
redeemable preferred stock and shareholders' equity (deficit), and cash flows
for each of the three years in the period ended November 2, 1996. Our audits
also included the financial statement schedule listed in the index at page S-1.
These financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and financial statement schedule based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of the Company at November 2, 1996 and
October 28, 1995, and the results of its operations and its cash flows for each
of the three years in the period ended November 2, 1996 in conformity with
generally accepted accounting principles. Also, in our opinion, such financial
statement schedule, when considered in relation to the basic consolidated
financial statements taken as a whole, presents fairly in all material respects
the information set forth therein.
The accompanying consolidated financial statements for the years ended November
2, 1996 and October 28, 1995 have been prepared assuming that the Company will
continue as a going concern. As discussed in Note 14 to the consolidated
financial statements, the Company has had recurring net losses from continuing
operations since inception, has a net shareholders' deficiency, is in default on
its senior subordinated discount notes, the senior subordinated notes and the
subordinated debentures and, under certain conditions, the Company's senior
revolving credit facility expires on March 1, 1997. The events of default
entitle the holders of these debt securities to accelerate payment on such debt.
The Company's default on its notes and debentures, its inability to service its
debt without a restructuring thereof, the uncertainty of the Company's ability
to restructure its notes and debentures and to meet the requirements for
extension of its senior revolving credit facility or to obtain alternative
sources of financing as described in Note 14 raise substantial doubt about the
Company's ability to continue as a going concern. Management's plans in regard
to these matters are also described in Note 14. The consolidated financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
DELOITTE & TOUCHE LLP
Greenville, South Carolina
January 17, 1997
24
<PAGE> 26
JPS TEXTILE GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(In Thousands Except Share Data)
<TABLE>
<CAPTION>
October 28, November 2,
1995 1996
----------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ 1,352 $ 1,460
Accounts receivable, less allowance of $2,131 in 1995
and $2,511 in 1996 (Note 6) 88,186 75,166
Inventories (Notes 5 and 6) 48,729 48,374
Prepaid expenses and other 2,545 1,967
Net assets held for sale (Note 3) 28,932 -
-------- --------
Total current assets 169,744 126,967
PROPERTY, PLANT AND EQUIPMENT, net (Notes 5 and 6) 161,436 124,004
EXCESS OF COST OVER FAIR VALUE OF NET ASSETS
ACQUIRED, less accumulated amortization of $6,877 in 1995 and 31,489 30,506
$7,860 in 1996
OTHER ASSETS (Notes 5, 9, 10 and 13) 50,153 54,450
-------- --------
Total $412,822 $335,927
======== ========
</TABLE>
25
<PAGE> 27
<TABLE>
<CAPTION>
October 28, November 2,
1995 1996
----------- -----------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable $ 29,754 $ 24,708
Accrued interest 9,895 9,608
Accrued salaries, benefits and withholdings (Note 9) 11,503 10,440
Other accrued expenses (Notes 5, 9 and 11) 12,699 13,987
Senior credit facility, revolving line of credit (Note 6) - 85,639
Current portion of long-term debt (Note 6) 2,770 240,451
-------- --------
Total current liabilities 66,621 384,833
LONG-TERM DEBT (Note 6) 327,668 4,226
DEFERRED INCOME TAXES (Note 8) 4,165 3,665
OTHER LONG-TERM LIABILITIES (Notes 5, 9 and 10) 23,242 19,513
-------- --------
Total liabilities 421,696 412,237
-------- --------
COMMITMENTS AND CONTINGENCIES (Notes 4, 6, 8 and 9)
SENIOR REDEEMABLE PREFERRED STOCK, redemption
value of $51,324 in 1995 and $54,520 in 1996 (Note 7) 28,171 32,676
-------- --------
SHAREHOLDERS' EQUITY (DEFICIT) (Note 7):
Junior preferred stock 250 250
Common stock:
Class A, 490,000 shares issued and outstanding 5 5
Class B, 510,000 shares issued and outstanding 5 5
Additional paid-in capital 29,613 25,108
Deficit (66,918) (134,354)
-------- --------
Total shareholders' deficit (37,045) (108,986)
-------- --------
Total $412,822 $335,927
======== ========
</TABLE>
See notes to consolidated financial statements.
26
<PAGE> 28
JPS TEXTILE GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in Thousands Except Per Share Data)
<TABLE>
<CAPTION>
Year Ended
------------------------------------------
October 29, October 28, November 2,
1994 1995 1996
----------- ----------- -----------
<S> <C> <C> <C>
Net sales $ 461,871 $ 472,565 $ 448,824
Cost of sales 397,921 406,070 397,804
--------- --------- ---------
Gross profit 63,950 66,495 51,020
Selling, general and administrative expenses (Note 11) 39,805 39,586 40,579
Other expense, net (Notes 9 and 10) 2,914 6,248 2,498
Charges for plant closing, loss on sale of certain operations
and writedown of certain long-lived assets (Note 4) - - 30,028
--------- --------- ---------
Operating profit (loss) 21,231 20,661 (22,085)
Valuation allowance on Gulistan securities (Note 3) (4,242)
Interest income 749 2,821 2,856
Interest expense (Note 6) (55,570) (39,946) (40,510)
Debt restructuring fees and expenses (Note 1) - - (2,255)
--------- --------- ---------
Loss before income taxes, discontinued operations,
extraordinary items and cumulative effects
of accounting changes (33,590) (16,464) (66,236)
Provision (benefit) for income taxes (Note 8) 2,800 1,200 (300)
--------- --------- ---------
Loss before discontinued operations, extraordinary items
and cumulative effects of accounting changes (36,390) (17,664) (65,936)
Discontinued operations:
Income (loss) from discontinued operations 23,628 (7,079) -
Net gain (loss) on sales of discontinued operations,
net of taxes of $2,800 in 1994 and $100 in 1995 (Note 3) 132,966 (26,241) (1,500)
--------- --------- ---------
Income (loss) before extraordinary items and
cumulative effects of accounting changes 120,204 (50,984) (67,436)
Extraordinary gain (loss) on early extinguishment of debt,
net of taxes of $600 in 1995 (Note 6) (7,410) 20,120 -
Cumulative effects of accounting changes (Note 10) (708) - -
--------- --------- ---------
Net income (loss) 112,086 (30,864) (67,436)
Senior redeemable preferred stock in-kind
dividends and discount accretion (Note 7) (3,333) (3,831) (4,505)
--------- --------- ---------
Income (loss) applicable to common stock $ 108,753 $ (34,695) $ (71,941)
========= ========= =========
Weighted average number of common shares outstanding 1,000,000 1,000,000 1,000,000
========= ========= =========
Earnings (loss) per common share:
Loss before discontinued operations, extraordinary items
and cumulative effects of accounting changes $ (39.73) $ (21.50) $ (70.44)
Discontinued operations:
Income (loss) from discontinued operations 23.63 (7.08) -
Net gain (loss) on sales of discontinued operations 132.97 (26.24) (1.50)
--------- --------- ---------
Income (loss) before extraordinary items and cumulative
effects of accounting changes 116.87 (54.82) (71.94)
Extraordinary gain (loss) on early extinguishment of debt (7.41) 20.12 -
Cumulative effects of accounting changes (0.71) - -
--------- --------- -
Net income (loss) $ 108.75 $ (34.70) $ (71.94)
========= ========= =========
</TABLE>
See notes to consolidated financial statements.
27
<PAGE> 29
JPS TEXTILE GROUP, INC.
CONSOLIDATED STATEMENTS OF SENIOR REDEEMABLE PREFERRED STOCK
AND SHAREHOLDERS' EQUITY (DEFICIT)
(In Thousands)
<TABLE>
<CAPTION>
Shareholders' Equity (Deficit)
----------------------------------------------
Senior
Redeemable Junior Additional
Preferred Common Preferred Paid-In
Stock Stock Stock Capital Deficit
---------- --------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Balance - October 30, 1993 $ 21,007 $ 10 $ 250 $ 36,777 $(148,140)
Net income for 52 weeks 112,086
Preferred stock-in-kind dividends
and discount accretion 3,333 (3,333)
--------- --------- --------- --------- ---------
Balance - October 29, 1994 24,340 10 250 33,444 (36,054)
Net loss for 52 weeks (30,864)
Preferred stock-in-kind dividends
and discount accretion 3,831 (3,831)
--------- --------- --------- --------- ---------
Balance - October 28, 1995 28,171 10 250 29,613 (66,918)
Net loss for 53 weeks (67,436)
Preferred stock-in-kind dividends
and discount accretion 4,505 (4,505)
--------- --------- --------- --------- ---------
Balance - November 2, 1996 $ 32,676 $ 10 $ 250 $ 25,108 $(134,354)
========= ========= ========= ========= =========
</TABLE>
See notes to consolidated financial statements.
28
<PAGE> 30
JPS TEXTILE GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
<TABLE>
<CAPTION>
Year Ended
-------------------------------------
October 29, October 28, November 2,
1994 1995 1996
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 112,086 $ (30,864) $ (67,436)
--------- --------- ---------
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Charges for plant closing, loss on sale of certain
operations and writedown of certain long-lived assets -- -- 30,028
Loss (income) from discontinued operations (23,628) 7,079 --
Loss (gain) on sales of discontinued operations (132,966) 26,241 1,500
Extraordinary loss (gain) on early extinguishment of
debt 7,410 (20,120) --
Cumulative effects of accounting changes 708 -- --
Depreciation and amortization, except amounts
included in interest expense 23,206 21,785 22,739
Interest accretion and debt issuance cost amortization 11,161 8,818 10,088
Product liability charge -- 5,000 --
Deferred income tax provision (benefit) 1,227 -- (500)
Financing costs incurred (2,943) (25) (614)
Valuation allowance on Gulistan securities -- -- 4,242
Other, net (2,970) (498) (3,163)
Changes in assets and liabilities:
Accounts receivable 426 (1,086) 10,372
Inventories (179) (685) (2,635)
Prepaid expenses and other assets (1,248) (2,505) (2,348)
Accounts payable 228 (911) (3,983)
Accrued expenses and other liabilities (2,951) (7,202) (1,688)
--------- --------- ---------
Total adjustments (122,519) 35,891 64,038
--------- --------- ---------
Net cash provided by (used in) operating activities (10,433) 5,027 (3,398)
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Property and equipment additions (18,423) (18,811) (9,834)
Receipts from discontinued operations, net 17,115 3,453 --
Proceeds from sale of discontinued operations, net 259,044 4,415 17,077
Proceeds from sale of certain operations -- -- 5,113
Purchase of long-term investments (39,500) -- --
--------- --------- ---------
Net cash provided by (used in) investing activities 218,236 (10,943) 12,356
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of long-term debt 285 5,000 29
Revolving credit facility borrowings (repayments), net (41,666) 41,808 (6,087)
Purchases and repayment of other long-term debt (166,044) (41,384) (2,792)
--------- --------- ---------
Net cash provided by (used in) financing activities (207,425) 5,424 (8,850)
--------- --------- ---------
NET INCREASE (DECREASE) IN CASH 378 (492) 108
Cash at beginning of year 1,466 1,844 1,352
--------- --------- ---------
Cash at end of year $ 1,844 $ 1,352 $ 1,460
========= ========= =========
</TABLE>
29
<PAGE> 31
JPS TEXTILE GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(In Thousands)
<TABLE>
<CAPTION>
Year Ended
-----------------------------------------------
October 29, October 28, November 2,
1994 1995 1996
----------- ----------- -----------
<S> <C> <C> <C>
SUPPLEMENTAL INFORMATION ON CASH FLOWS
FROM CONTINUING OPERATIONS:
Interest paid $ 48,219 $ 33,681 $ 30,709
Income taxes paid 376 3,314 693
Non-cash financing activities:
Senior redeemable preferred stock dividends-in-kind 2,765 2,936 3,114
</TABLE>
See notes to consolidated financial statements.
30
<PAGE> 32
JPS TEXTILE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BUSINESS AND BASIS OF PRESENTATION
JPS Textile Group, Inc. (the "Company") purchased from J.P. Stevens &
Co., Inc. ("J.P. Stevens") substantially all of the property, plant and
equipment, inventories, certain other assets and the business of five
former divisions of J.P. Stevens (the "Predecessor Stevens Divisions")
on May 9, 1988 (the "Acquisition"). The purchase was financed through
long-term borrowings and the sale of preferred and common stock. The
Company operates principally as a manufacturer of apparel fabrics and
products, industrial fabrics and products and home fashion textiles.
These products are sold primarily to the domestic clothing
manufacturing and construction industries. As described in Notes 3 and
4, certain of the acquired businesses and operations have been
subsequently sold.
A Plan of Reorganization (the "Plan") which was distributed to the
Company's bondholders and preferred stockholders (the
"Securityholders") on December 21, 1990, was approved by the
securityholders in early February 1991 and in accordance with the Plan,
the Company filed a voluntary petition for reorganization under Chapter
11 of the United States Bankruptcy Code. Subsequently, in March 1991,
the bankruptcy court confirmed the Plan and it became effective April
2, 1991. The Plan provided for, among other things, the cancellation of
certain existing debt and preferred stock securities in exchange for
490,000 shares of new Class A common stock along with new debt
instruments and new preferred stock with lower interest and dividend
rates. Since the Company's reorganization did not meet the criteria for
"fresh-start" accounting, the primary adjustment to historical carrying
values as a result of the reorganization was to state the new long-term
debt and senior redeemable preferred stock at present values of amounts
to be paid determined at appropriate current interest rates as of April
2, 1991, the effective date of the Plan. The resulting present value
discount is amortized as interest expense or dividends over the life of
the related debt or senior redeemable preferred stock instrument using
the interest method.
2. SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation - The consolidated financial statements
include JPS Textile Group, Inc. and its subsidiaries, all of which are
wholly owned. Significant intercompany transactions and accounts have
been eliminated.
The equity method of accounting is used to account for the Company's
50% interest in a joint venture with a Mexican company (see Note 13).
Under the equity method, the Company's original investment is recorded
at cost and is adjusted by the Company's share of undistributed
earnings or loss of the investee.
Use of Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
The Company's most significant financial statement estimates include
the estimate of the allowance for doubtful accounts, reserve for
self-insurance liabilities and the reserve for certain defective
roofing products sold by the Predecessor Stevens Division operations
(discussed in Note 9). Management determines its estimate of the
allowance for doubtful accounts considering a number of factors,
including historical experience, aging of the accounts and the current
31
<PAGE> 33
creditworthiness of its customers. The Company self-insures, with
various insured stop-loss limitations, its workers' compensation,
general liability and health claims. Management determines its estimate
of the reserve for self-insurance considering a number of factors,
including historical experience and third party claims administrator
and actuarial assessment of the liabilities for reported claims and
claims incurred but not reported. Management believes that its
estimates provided in the financial statements, including those for the
above-described items, are reasonable and adequate. However, actual
results could differ from those estimates.
Inventories - Inventories are stated at the lower of cost or market.
Cost, which includes labor, material and factory overhead, is
determined on the first-in, first-out basis.
Property, Plant and Equipment - Property, plant and equipment is
recorded at cost and depreciation is recorded using the straight-line
method for financial reporting purposes. The estimated useful lives
used in the computation of depreciation are as follows:
Land improvements 10 to 45 years
Buildings and improvements 25 to 45 years
Machinery and equipment 3 to 15 years
Furniture, fixtures and other 5 to 10 years
Excess of Cost Over Fair Value of Net Assets Acquired - Excess of cost
over fair value of net assets acquired is being amortized on a
straight-line basis over a period of forty years. Periodically, the
Company evaluates the realizability of the excess of cost over fair
value of net assets acquired based upon expectations of undiscounted
future cash flows and comparing such future cash flows to the carrying
amount of the related asset.
Debt Issuance Costs - Costs incurred in securing and issuing long-term
debt are deferred and amortized over the terms of the related debt in
amounts which approximate the interest method of amortization.
Product Warranties - On certain of its products, the Company provides a
warranty against defects in materials and workmanship under separately
priced extended warranty contracts generally for a period of ten years.
Revenue from such extended warranty contracts is deferred and
recognized as income on a straight-line basis over the contract period.
The cost of servicing such product warranties is charged to expense as
incurred.
Postretirement Benefits - The Company accounts for postretirement
benefits other than pensions using the principles of Statement of
Financial Accounting Standards ("SFAS") No. 106, "Employers' Accounting
for Postretirement Benefits Other Than Pensions". SFAS No. 106 requires
that the projected future cost of providing postretirement benefits,
such as health care and life insurance, be recognized as an expense as
employees render service. See Note 10 for a further description of the
accounting for postretirement benefits.
Postemployment Benefits - Effective October 31, 1993, the Company
adopted SFAS No. 112, "Employers' Accounting for Postemployment
Benefits". SFAS No. 112 requires that the cost of benefits provided to
former or inactive employees after employment but before retirement be
recognized on the accrual basis of accounting instead of when paid, as
had been the Company's practice. See Note 10 for a further description
of the accounting for postemployment benefits.
Revenue Recognition - The Company recognizes revenue from product sales
when it has shipped the goods or ownership has been transferred to the
customer for goods to be held for future shipment at the customer's
request.
32
<PAGE> 34
Advertising Costs - The Company defers advertising related costs until
the advertising is first run in magazines or other publications or in
the case of brochures, until the brochures are printed and available
for distribution. Advertising costs were approximately $708,000,
$1,225,000 and $1,856,000 in Fiscal 1994, 1995 and 1996, respectively.
Income Taxes - The Company accounts for income taxes using the
principles of SFAS No. 109, "Accounting for Income Taxes". Under SFAS
No. 109, deferred taxes represent the future income tax effect of
temporary differences between the book and tax bases of the Company's
assets and liabilities, assuming they will be realized and settled at
the amount reported in the Company's financial statements.
Earnings Per Share - Earnings per share is computed by dividing
earnings applicable to common stock (net income or loss adjusted by
senior redeemable preferred stock dividends) by the weighted average
number of shares of common stock outstanding during the period.
Cash Flows - For purposes of reporting cash flows, cash includes cash
on hand and in banks. The Company has no investments that are deemed to
be cash equivalents.
Fiscal Year - The Company's operations are based on a fifty-two or
fifty-three week fiscal year ending on the Saturday closest to October
31. The 1994 and 1995 fiscal years each consisted of fifty-two weeks
and Fiscal 1996 had fifty-three weeks.
Reclassifications - Certain Fiscal 1995 and 1994 amounts have been
reclassified to conform to the 1996 presentation. In addition, see Note
3 regarding reclassifications of Fiscal 1994 amounts for discontinued
operations.
3. SALE OF DISCONTINUED OPERATIONS
Carpet Business - On November 16, 1995, pursuant to the terms of an
Asset Transfer Agreement dated as of November 16, 1995, by and among
the Company, JPS Carpet Corp. ("Carpet"), a wholly-owned subsidiary of
the Company, Gulistan Holdings Inc. and Gulistan Carpet Inc., a
wholly-owned subsidiary of Gulistan Holdings Inc. (collectively,
"Gulistan"), the Company and Carpet consummated the sale of
substantially all of the assets of Carpet used in the business of
designing and manufacturing tufted carpets for sale to residential,
commercial and hospitality markets (the "Carpet Business"). Pursuant to
the Asset Transfer Agreement, Gulistan agreed to assume substantially
all of the liabilities and obligations associated with the Carpet
Business. Gulistan was formed and its common stock is owned by certain
members of the former management team at Carpet. The Company and its
subsidiaries have agreed, for a three-year period, not to compete
directly or indirectly with the business that was sold. The
Consolidated Statements of Operations and Cash Flows for Fiscal 1994
have been reclassified to reflect the Carpet Business as discontinued
operations.
The consideration for the sale of the Carpet Business consisted of
approximately $22.5 million in cash, subject to certain post-closing
adjustments based on the audited amount of working capital transferred
on November 16, 1995, and other debt and equity securities of Gulistan
as follows: a $10 million Promissory Note due in November 2001, $5
million of preferred stock redeemable in November 2005, and warrants to
purchase 25% of the common stock of Gulistan. Based on an independent
valuation at the asset transfer date, the Company determined the fair
value of these debt and equity securities to be approximately $11.3
million. These debt and equity securities are included in other
non-current assets on the November 2, 1996 balance sheet. Since the
disposal of
33
<PAGE> 35
the Carpet Business occurred subsequent to the end of Fiscal 1995, the
net assets of the Carpet Business (adjusted to net realizable value)
were classified as "net assets held for sale" on the October 28, 1995
Consolidated Balance Sheet. As of October 28, 1995, the Company
adjusted the net assets of the Carpet Business to their net realizable
value, which resulted in a charge to the 1995 Consolidated Statement of
Operations of $30.7 million (net of tax), classified as loss on sale of
discontinued operations. The loss on the sale is not currently
recognizable for tax purposes and the Company has recorded no net tax
benefit as a result of this loss due to uncertainties regarding the
ability to utilize these losses in future years. Net sales from the
discontinued operations of the Carpet Business were $141.6 million and
$120.1 million in Fiscal years 1994 and 1995, respectively.
In May 1996, the Company and Gulistan agreed on the amount of the
post-closing adjustment. As a result, the Company paid a post-closing
adjustment of $3.5 million (an estimated post-closing adjustment of
$2.0 million was included in the Fiscal 1995 loss on sale of
discontinued operations) and has recognized in Fiscal 1996 an
additional loss of $1.5 million on the sale of discontinued operations.
The final amount of net cash proceeds applied by the Company to reduce
outstanding borrowings under its senior credit facility was
approximately $16.7 million (net of fees, expenses, and the
post-closing adjustment resulting from the level of working capital
transferred at the closing date).
In Fiscal 1996, Gulistan reported a net loss of approximately $4.5
million before interest expense on the promissory note held by the
Company. Accordingly, the Company did not record interest income on any
of the Gulistan securities held by the Company. Also, in accordance
with relevant accounting literature, the Company has recorded a
valuation allowance against its investment in the Gulistan securities
and a corresponding charge to income of $4.2 million as a result of the
net loss ($4.5 million reduced by the $0.3 million of common equity
held by Gulistan management) incurred by Gulistan during the 1996
fiscal year. The valuation allowance will be increased or decreased
(but not below zero) with a corresponding charge or credit to income to
give effect to future losses or earnings of Gulistan as those losses or
earnings occur.
Automotive Businesses - On June 28, 1994, pursuant to the terms of an
Asset Purchase Agreement dated May 25, 1995 (the "Asset Purchase
Agreement"), by and among the Company, JPS Auto Inc., a wholly-owned
subsidiary of the Company ("Auto"), JPS Converter and Industrial Corp.,
a wholly-owned subsidiary of the Company ("C&I"), Foamex International
Inc. ("Foamex") and JPS Automotive Products Corp., an indirect,
wholly-owned subsidiary of Foamex ("Purchaser"), the Company
consummated the disposition of its Automotive Assets (as described
below) to the Purchaser.
The Automotive Assets consisted of the businesses and assets of Auto
and the synthetic industrial fabrics division of C&I, and the Company's
investment in common stock of the managing general partner of Cramerton
Automotive Products, L.P. (an 80% owned joint venture). Net sales from
the discontinued operations of the Automotive Assets were $224.9
million for the eight months ended June 28, 1994. Pursuant to the terms
of the Asset Purchase Agreement, the Purchaser agreed to assume
substantially all of the liabilities and obligations associated with
the Automotive Assets. In addition, the Company and its affiliates
agreed, for a period of four years, not to directly or indirectly
compete in North, Central and South America with the businesses that
were sold.
The sale price for the Automotive Assets was approximately $283
million, consisting of $264 million of cash paid at closing, $15
million of assumed debt as of June 28, 1994 and certain post-closing
adjustments which resulted in a gain of $4.4 million, net of $0.1
million of taxes, recognized in Fiscal 1995. The sale of the Automotive
Assets resulted in an approximate total gain of $137.4 million, net of
income taxes of $2.9 million.
34
<PAGE> 36
The net cash proceeds from the disposition of the Automotive Assets
(after deductions for fees, other expenses and amounts designated by
management to satisfy possible contingent tax liabilities) were
approximately $217 million and such proceeds were used by the Company
to reduce its outstanding indebtedness.
The Company has allocated to the discontinued operations of the
Automotive Assets and the Carpet Business a pro-rata portion of the
interest expense of its senior credit facility, which pro-rata portions
were approximately $3.4 million and $1.6 million in Fiscal 1994 and
1995, respectively.
4. SALE OF CERTAIN OPERATIONS, PLANT CLOSING AND WRITEDOWN OF CERTAIN
LONG-LIVED ASSETS
Pursuant to an Asset Purchase Agreement dated September 30, 1996
between JPS Elastomerics Corp. ("Elastomerics"), a wholly-owned
subsidiary of the Company, and Elastomer Technologies Group, Inc.
("Elastomer") and a Receivables Purchase Agreement dated September 30,
1996 between Elastomerics and the Bank of New York Commercial
Corporation, Elastomerics sold substantially all the assets of its
rubber products division, a business engaged in the manufacture and
sale of natural and synthetic elastic for use in apparel products,
diaper products and specialty industrial applications (the "Rubber
Products Business"). The Rubber Products Business had accounted for
sales of $22.6 million, $20.7 million and $16.8 million in Fiscal 1994,
1995 and 1996 (eleven months), respectively. Under the terms of the
agreement, Elastomer agreed to assume substantially all the liabilities
and obligations associated with the Rubber Products Business. The
Company and its subsidiaries have agreed not to compete directly or
indirectly with the business that was sold for a period of two years.
The consideration for the Rubber Products Business consisted of
approximately $5.1 million in cash, subject to certain post-closing
adjustments based on the audited amount of working capital transferred
on the closing date, and resulted in a loss of approximately $7.7
million. This loss on sale was charged to operations in Fiscal 1996.
The net proceeds from the sale, after fees and expenses, was
approximately $4.8 million and was used to reduce the Company's
outstanding indebtedness.
On August 28, 1996, the Company implemented a plan to close its Dunean
plant in Greenville, South Carolina, as a result of management's
determination that a permanent decline in the Company's spun apparel
business had occurred. This plant had been operating on a reduced
schedule due to poor market conditions and financial projections
indicated it would continue to do so. As a result of the plant closing,
the accompanying Consolidated Statement of Operations includes a
"charge for plant closing" of approximately $14.2 for Fiscal 1996
related principally to the estimated loss on the impairment of
long-lived assets in accordance with SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of", employee severance costs and estimated costs for
equipment relocation. As of November 2, 1996, this plant closing was
substantially complete. Of the approximately $4.8 million in exit costs
recognized in association with the plant closing, approximately $2.3
million related to equipment relocation and employee severance was not
paid at November 2, 1996.
Also, in connection with the Company's review of present and expected
conditions in the markets it serves, management determined that its
plant in Kingsport, Tennessee, which manufactures cotton fabrics, is
impaired under the criteria of SFAS No. 121 because expected future
cash flows from the operation of the plant are less than the carrying
value of the plant assets. The accompanying Consolidated Statement of
Operations for Fiscal 1996 includes a "writedown of certain long-lived
assets" of $8.1 million for the excess of the carrying value of the
plant over its estimated fair value. Estimated fair value was
determined based on an independent appraisal of the plant's property,
plant and equipment.
35
<PAGE> 37
5. BALANCE SHEET COMPONENTS
The components of certain balance sheets accounts are (in thousands):
<TABLE>
<CAPTION>
October 28, November 2,
1995 1996
----------- -----------
<S> <C> <C>
Inventories:
Raw materials and supplies $ 13,909 $ 13,155
Work-in-process 18,334 16,912
Finished goods 16,486 18,307
----------- -----------
$ 48,729 $ 48,374
=========== ===========
Property, plant and equipment, net:
Land and improvements $ 7,349 $ 5,921
Buildings and improvements 53,649 42,775
Machinery and equipment 205,345 183,320
Furniture, fixtures and other 7,725 8,116
----------- -----------
274,068 240,132
Less accumulated depreciation (118,866) (117,642)
----------- -----------
155,202 122,490
Construction in progress 6,234 1,514
----------- -----------
$ 161,436 $ 124,004
=========== ===========
Other noncurrent assets:
Unamortized debt issuance costs $ 1,092 $ 351
Prepaid pension costs 5,973 1,055
Investments (Notes 3 and 9) 42,885 52,986
Other 203 58
--- --
$ 50,153 $ 54,450
=========== ===========
Other accrued expenses:
Roofing product liability costs $ 4,000 $ 3,000
Taxes payable other than income taxes 1,433 1,250
Income taxes 2,753 2,150
Other 4,513 7,587
----------- -----------
$ 12,699 $ 13,987
=========== ===========
Other long-term liabilities:
Roofing product liability costs and deferred warranty income $ 15,700 $ 14,361
Accrued postretirement benefit plan liability 5,249 4,808
Other 2,293 344
----------- -----------
$ 23,242 $ 19,513
=========== ===========
</TABLE>
36
<PAGE> 38
6. LONG-TERM DEBT
Long-term debt consists of (in thousands):
<TABLE>
<CAPTION>
October 28, November 2,
1995 1996
---------- -----------
<S> <C> <C>
Senior credit facility, revolving line of credit $ 91,726 $ 85,639
Senior subordinated discount notes (including interest due
at maturity of $4,370 and $6,002, respectively) 113,617 115,249
Senior subordinated notes (including interest due at maturity
of $4,347 and $5,609, respectively) 81,120 82,382
Subordinated debentures 54,071 54,071
Equipment financing 9,780 7,016
--------- ---------
Total 350,314 344,357
Less reorganization discount:
Senior subordinated discount notes (5,171) (3,308)
Senior subordinated notes (4,435) (2,694)
Subordinated debentures (10,270) (8,039)
--------- ---------
Total long-term debt 330,438 330,316
Less current portion (2,770) (326,090)
--------- ---------
Long-term portion $ 327,668 $ 4,226
========= =========
</TABLE>
Senior Credit Facility - On September 6, 1996, the senior credit
facility was amended to, among other things, extend its expiration date
and reduce the interest rate by 0.25%. Under the terms of the amended
credit agreement, the senior credit facility expires on March 1, 1997
(unless otherwise extended) if the Company has not commenced a case
under chapter 11 of the Bankruptcy Code. If such a case is commenced on
or prior to March 1, 1997 (or any extended date), the senior credit
facility will be extended automatically until the earlier of November
1, 1997 or the effective date of a reorganization under chapter 11 of
the Bankruptcy Code. The Company has classified the $85.6 million
outstanding under its senior credit facility revolving line of credit
as a current liability in the accompanying Consolidated Balance Sheet.
In addition, the loan covenants were amended to be based upon the
activities of the consolidated operating subsidiaries (JPS Converter
and Industrial Corp. and JPS Elastomerics Corp.) rather than the
consolidated Company (i.e. excludes the assets and liabilities of the
parent company and other non-operating subsidiaries). The amended
credit agreement does not permit additional borrowings by the operating
subsidiaries for, among other things, loans or dividends to the Company
for the payment of interest on its notes and debentures. As a result of
this restriction, the Company did not make interest payments of
approximately $1.9 million on its subordinated debentures due November
15, 1996, and did not make interest payments of approximately $5.4
million and $3.6 million on its senior subordinated discount notes and
senior subordinated notes, respectively, due December 1, 1996. The
terms of the indentures governing the Company's subordinated debt
provide that such a failure to pay interest when due results in an
event of default on such indebtedness and as a result, the holders of
these debt securities are entitled to accelerate the debt represented
thereby. Accordingly, all of the Company's notes and debentures have
been classified as current liabilities as of November 2, 1996. As
discussed in Note 14, the Company has engaged financial advisors
regarding extension, replacement or refinancing of its debt securities.
37
<PAGE> 39
The senior credit facility provides for a $118 million revolving line
of credit. The Company pays a fee of 1/2 of 1% per annum of the average
unused line of credit. All senior borrowings bear interest at a Base
Rate (as defined) plus 1.0% per annum (9.25% at November 2, 1996) or at
the Eurodollar Rate (as defined) plus 2.50% per annum (approximately
7.88% at November 2, 1996). Borrowings under the revolving line of
credit (other than for loans used to purchase property, plant and
equipment or to finance or refinance such purchases ("Capex Loans"))
are limited to specified percentages of eligible accounts receivable
and inventories, as defined, and such borrowings plus letters of credit
outstanding and Capex Loans may not exceed the lesser of $118 million
and the borrowing base plus an additional amount of $25,000,000. As of
November 2, 1996, unused letters of credit issued and outstanding
totaled $2,385,000. The outstanding unused letters of credit reduce the
funds available under the revolving line of credit. At November 2,
1996, the Company had $18,656,000 available for borrowing under the
revolving credit agreement.
The senior credit facility also permits, subject to certain conditions,
the sale of fixed assets to the extent the net cash proceeds of all
such sales made from March 1994 forward do not cumulatively exceed $35
million (excluding the proceeds from the sale or transfer of the
Automotive Assets and the Carpet Business). As of November 2, 1996,
such limit has not been exceeded.
During the first quarter of Fiscal 1995, the Company borrowed
$36,607,000 under the revolving line of credit and made open market
purchases of certain of its outstanding notes and debentures with an
aggregate face value (including interest due at maturity) of
$68,318,000 and a carrying value of $59,225,000. The Company recognized
an extraordinary gain from early extinguishment of debt of $20,120,000,
net of expenses of $1,898,000 and income taxes of $600,000.
Senior Subordinated Discount Notes - The Company issued the discount
notes in the 1991 reorganization. The discount notes began accruing
interest on June 1, 1992 at 10.85% with 9.85% paid semi-annually and 1%
payable at maturity. Interest payable at maturity compounds
semi-annually at the annual rate of 10.85%. In connection with the 1991
reorganization, the carrying value of the discount notes was reduced to
its estimated net present value using an effective interest rate of
13%. Under the terms of the indenture, mandatory redemption payments
equal to $37,777,000, plus accrued interest, are due on each of June 1,
1997 and June 1, 1998 prior to maturity on June 1, 1999 with optional
early redemption available. However, due to the event of default
discussed above, all of the discount notes are classified as current
liabilities as of November 2, 1996.
Senior Subordinated Notes - The senior subordinated notes bear interest
at 10.25% with 9.25% paid semi-annually and 1% payable at maturity and
were issued in the 1991 reorganization. Interest payable at maturity
compounds semi-annually at the annual rate of 10.25%. In connection
with the 1991 reorganization, the notes were adjusted to their
estimated net present value by recording a discount resulting in an
effective interest rate of 13%. Under the terms of the indenture,
mandatory redemption payments equal to $31,250,000, plus accrued
interest, are due on each of June 1, 1997 and June 1, 1998 with
optional early redemption available. However, due to the event of
default discussed above, all of the senior subordinated notes are
classified as current liabilities as of November 2, 1996.
38
<PAGE> 40
Subordinated Debentures - The subordinated debentures bear interest at
7%, payable semi-annually, with a mandatory redemption payment of
principal of $37,500,000 due May 15, 1999, prior to maturity on May 15,
2000, with optional early redemption available. In connection with the
1991 reorganization, the debentures were adjusted to an estimated net
present value by recording a discount of $24,390,000 resulting in an
effective interest rate of 13.5%. Due to the event of default discussed
above, the subordinated debentures are classified as current
liabilities as of November 2, 1996.
Equipment Financing - The Company has financed a portion of its
equipment purchases with loans from a finance company and certain
equipment vendors at fixed interest rates ranging from 7.6% to 9.7%.
Monthly principal payments are due in various amounts as determined by
the terms of the loans which have final maturity dates ranging from
October 1997 through December 2001.
Restrictive Covenants - Provisions of the senior credit agreement and
the Company's other debt indentures place significant restrictions on
certain corporate acts such as mergers, consolidations, acquisitions,
repurchases of stock, the making of certain other restricted payments,
transactions with affiliates and the sale of assets and prohibit the
payment of cash dividends. The Company must maintain minimum levels of
"net worth", defined to be total assets (excluding investments
designated by management to satisfy possible contingent tax
liabilities) minus total liabilities plus the subordinated notes and
debentures and other adjustments, which vary quarterly from $100
million at November 2, 1996 to $105 million in the fourth quarter of
1997. In addition, the senior credit agreement contains requirements to
meet certain financial ratios which vary quarterly or annually and
place limitations on the Company's ability to incur additional debt or
grant a security interest in its assets. Other customary covenants,
conditions and default provisions are also present in the agreement and
indentures. The Company was in compliance with the restrictions and
financial covenants of its senior credit agreement and its long-term
debt indentures at November 2, 1996. However, as discussed above,
subsequent to November 2, 1996, the Company did not make the scheduled
interest payments on its debt securities which constituted a default
under the indentures.
Fair Value - The fair value of the Company's long-term debt based on
estimated quoted prices, compared to the carrying values (at discounted
amounts), is as follows (in thousands):
<TABLE>
<CAPTION>
October 28, 1995 November 2, 1996
--------------------- -------------------
Carrying Fair Carrying Fair
Value Value Value Value
-------- ----- --------- -----
<S> <C> <C> <C> <C>
10.85% Senior Subordinated Discount Notes $108,446 $ 96,138 $ 111,941 $ 63,364
10.25% Senior Subordinated Notes 76,685 66,025 79,688 44,544
7% Subordinated Debentures 43,081 32,443 46,032 10,820
</TABLE>
Because of the lack of significant trading activity of the Company's
notes and debentures, estimated quoted prices vary.
Other - Substantially all of the Company's assets are pledged as
collateral for the senior credit facility and the equipment financing.
Interest expense includes $11,161,000 in Fiscal 1994, $8,818,000 in
Fiscal 1995 and $10,088,000 in Fiscal 1996 representing amortization of
debt issuance expenses and accretion of interest on the discounted
notes and accrued product liability costs (see Note 9).
39
<PAGE> 41
In 1994, the Company recorded a $7,410,000 loss on early extinguishment
of debt in connection with the retirement of certain debt with a
portion of the proceeds of the Automotive Assets sale as discussed
above. The loss represents deferred financing fees and reorganization
discounts associated with the retired debt along with expenses of the
transactions.
Maturities - Aggregate principal maturities of all long-term debt are
as follows (in thousands):
<TABLE>
<CAPTION>
Fiscal Year Ending
------------------
<S> <C>
1997 $ 340,132
1998 1,580
1999 689
2000 638
2001 638
Thereafter 680
-----------
$ 344,357
===========
</TABLE>
7. SENIOR REDEEMABLE PREFERRED STOCK AND EQUITY SECURITIES
Certain information on senior redeemable preferred stock and equity
securities at October 28, 1995 and November 2, 1996 is as follows:
<TABLE>
<CAPTION>
Shares Issued and Outstanding
-----------------------------
Par Value October 28, November 2,
Per Share Authorized 1995 1996
--------- ---------- --------- ---------
<S> <C> <C> <C> <C>
Series A Senior Redeemable Preferred Stock $.01 700,000(1) 507,031 538,176
Series B Junior Preferred Stock .01 700,000(1) 10,000 10,000
Class A Common Stock .01 700,000 490,000 490,000
Class B Common Stock .01 700,000 510,000 510,000
</TABLE>
(1) The aggregate number of authorized shares of preferred stock is
700,000, including both the senior redeemable preferred stock and
the junior preferred stock.
The senior redeemable preferred stock must be redeemed on May 15, 2003.
Its holders vote with the junior preferred stockholders as a single
class to elect two directors, otherwise, except in the event of
default, the senior redeemable preferred stock is non-voting. The
senior redeemable preferred stock is redeemable at the option of the
Company prior to maturity at 103% of the liquidation preference of $100
per share. Dividends are cumulative and are calculated based on an
annual rate of 6% of the liquidation preference and are paid quarterly.
Under the terms of various credit agreements, dividends must be in the
form of additional shares until 1998. In connection with the 1991
reorganization, the senior redeemable preferred stock was discounted to
its estimated net present value with the net discount of $23,351,000
reflected as an adjustment of additional paid-in capital. The
difference between the net carrying value of the senior redeemable
preferred stock and its mandatory redemption value is being amortized
using the interest method of amortization over the life of the shares
by charges to additional paid-in capital or, if available, by charges
to retained earnings. The effective dividend rate on the senior
redeemable preferred stock is 15.0%. The unamortized discount was
approximately $23,153,000 at October 28, 1995 and $21,844,000 at
November 2, 1996. Because of the lack of recent trading activity and
disparities in potential valuation methodologies, determination of the
fair value of the Company's senior redeemable preferred stock is
impractical.
40
<PAGE> 42
The junior preferred stock has a liquidation preference of $25 per
share. Its holders vote with the senior redeemable preferred
stockholders as a single class to elect two directors, otherwise,
except in the event of default, the junior preferred stock is
non-voting. The liquidation preference increases $15 per share for each
year that the Company attains certain specified earnings levels for
each of the first five fiscal years ended after April 2, 1991. No
increase in the liquidation preference occurred because actual earnings
were less than the specified earnings levels in each of the years.
Dividends are non-cumulative and are payable at the same rate as is
paid on the common stock, if any. As of November 2, 1996, no dividends
had been paid. The Company's senior credit agreement prohibits the
payment of cash dividends.
The Class A and Class B common stocks have substantially the same
voting rights except in the election of directors. The Class A common
stockholders, voting separately as a class, have the right to elect
three out of the seven Company directors.
8. INCOME TAXES
The Fiscal 1994, 1995 and 1996 provision (benefit) for income taxes on
continuing operations included in the consolidated statements of
operations consists of the following (in thousands):
<TABLE>
<CAPTION>
Fiscal Fiscal Fiscal
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Current state $ 1,573 $ 1,200 $ 200
Deferred state provision (benefit) 1,227 - (500)
-------- -------- -------
Provision (benefit) for income taxes $ 2,800 $ 1,200 $ (300)
======== ======== =======
</TABLE>
There is no provision for Federal income taxes.
A reconciliation between income taxes at the 35% statutory Federal
income tax rate and the provision (benefit) for income taxes for the
fiscal years ended 1994, 1995 and 1996 is as follows (in thousands):
<TABLE>
<CAPTION>
Fiscal Fiscal Fiscal
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Income tax benefit at Federal statutory rate $ (11,757) $ (5,762) $ (23,183)
Increase (decrease) in income taxes arising
from effect of:
State and local income taxes 2,800 1,200 (300)
Amortization of goodwill 316 316 344
Other 250 212 109
Losses not resulting in tax benefits 11,191 5,234 22,730
---------- --------- ----------
Provision (benefit) for income taxes $ 2,800 $ 1,200 $ (300)
========== ========= ==========
</TABLE>
41
<PAGE> 43
Presented below are the elements which comprise deferred tax assets and
liabilities (in thousands):
<TABLE>
<CAPTION>
October 28, November 2,
1995 1996
---------- ----------
<S> <C> <C>
Gross deferred assets:
Estimated allowance for doubtful accounts $ 476 $ 412
Excess of tax over financial statement basis of inventory 634 647
Accruals deductible for tax purposes when paid 2,263 2,497
Deferred compensation deductible for tax purposes when paid 39 157
Postretirement benefits deductible for tax purposes when paid 2,177 2,141
Miscellaneous 56 83
Alternative minimum tax credit carryforward available 2,300 2,564
Deferred financial statement income recognized for tax purposes
when received 5,432 6,489
Excess of tax over financial statement carrying value of
investment in discontinued operation 11,231 13,474
Excess of tax basis of intangibles over financial statement basis 8,004 8,817
Net operating loss carryforward 23,519 33,291
Less valuation allowance (26,020) (53,578)
---------- ----------
Gross deferred assets 30,111 16,994
---------- ----------
Gross deferred liabilities:
Pension asset recognized for book purposes (2,208) (411)
Excess of financial statement over tax basis of property, plant,
and equipment (21,550) (11,898)
Excess of tax over financial statement basis of debt instruments
(net of deferred financing fees) (6,353) (4,685)
Deferred state taxes resulting from filing separate subsidiary
returns in some jurisdictions (4,165) (3,665)
---------- ------
Gross deferred liabilities (34,276) (20,659)
---------- ----------
Net deferred noncurrent tax liability $ (4,165) $ (3,665)
========== ==========
</TABLE>
At November 2, 1996, the Company had regular federal net operating loss
carryforwards for tax purposes of approximately $90,000,000. The net
operating losses expire in years 2005 through 2011. The Company also
has federal alternative minimum tax net operating losses of
approximately $45,000,000 which expire in 2007 and 2011. During 1995,
the Company utilized approximately $6,000,000 of alternative minimum
tax net operating loss carryovers to offset income from the
extraordinary gain on early extinguishment of debt. As previously
noted, alternative minimum taxes can be carried forward indefinitely
and used as a credit against regular federal taxes.
The Company's future ability to utilize its net operating losses
may be significantly limited under the income tax laws should
there be changes in the ownership of the Company's stock which
constitute an ownership change for tax purposes. The effect of such an
ownership change would be to significantly limit the annual utilization
of the net operating loss carryforwards to an amount equal to the value
of the Company immediately prior to the time of the change (subject to
certain adjustments) multiplied by the Federal long-term tax exempt
rate. The Company does not believe this potential limitation on
utilization of the net operating loss carryforwards currently applies.
However, there is no assurance that the Internal Revenue Service will
not take a contrary position or that such limitation will not become
applicable for subsequent taxable periods. Due to the Company's
operating history, it is uncertain that it will be able to utilize all
deferred tax assets. Therefore, a valuation allowance has been provided
equal to the deferred tax assets remaining after deducting all deferred
tax liabilities, exclusive of those related to certain deferred state
tax liabilities.
42
<PAGE> 44
9. COMMITMENTS AND CONTINGENCIES
The Company leases office facilities, machinery and computer equipment
under noncancellable operating leases. Rent expense was approximately,
$2,810,000 in Fiscal 1994, $3,411,000 in Fiscal 1995 and $5,158,000 in
Fiscal 1996.
Future minimum payments, by year and in the aggregate, under the
noncancellable operating leases with terms of one year or more consist
of the following at November 2, 1996 (in thousands):
<TABLE>
<S> <C>
1997 $ 4,235
1998 3,816
1999 3,239
2000 2,581
2001 907
---------
$ 14,778
=========
</TABLE>
The Company has planned expenditures of approximately $23.5 million for
property, plant and equipment additions in Fiscal 1997.
The Company has established long-term incentive compensation plans for
certain of its key executives. One plan provides for payments to
participants at retirement or termination based on the increase of the
fair value, as defined, of the common stock of the Company over certain
established levels, as determined by the Company's Board of Directors.
No amounts have been earned under the provisions of this plan, except
for a termination and death benefit of $203,000 which was paid in
Fiscal 1994. Another plan, effective November 1, 1994, provides for
payments to covered participants from amounts accumulated in individual
award banks. Awards are determined based on the achievement of
specified returns on net assets employed. No awards are expected to be
paid out under this plan for operating results through November 2,
1996. The Company's policy is to accrue the cost of the plans as the
fair value of the common stock increases over the established levels or
as actual earnings occur if the cumulative earnings for the periods
included under the plan are expected to reach the specified levels
necessary for bonuses to be payable.
As required by the September 6, 1996 amendment to the senior credit
facility, the Company entered into retention bonus agreements with
certain of its executives and key employees during Fiscal 1996. The
retention bonus agreements provide specific individual awards if the
participants continue active employment with the Company for at least
six months following the completion of the proposed financial
restructuring discussed in Note 14. Under the terms of the agreements,
an aggregate of approximately $675,000 will be paid out on the
effective date of a restructuring and an aggregate of approximately
$1,200,000 will be paid out six months after the effective date of a
restructuring. No amounts are considered earned until the effective
date of a restructuring. In Fiscal 1996, approximately $363,000 was
accrued and included in restructuring fees and expenses in the
accompanying Consolidated Statements of Operations.
43
<PAGE> 45
The Company has provided for all estimated future costs associated with
certain defective roofing products sold by the Predecessor Stevens
Division operations. The liability for future costs associated with
these defective roofing products is subject to management's best
estimate, including factors such as expected future claims by
geographic region and roofing compound applied; expected costs to
repair or replace such roofing products; estimated remaining length of
time that such claims will be made by customers; and the estimated
costs to litigate and settle certain claims now in litigation and those
that may result in future litigation. Based on warranties that were
issued on the roofs, the Company estimates that the defective roofing
product claims will be substantially settled by 2000. Management
updates its assessment of the adequacy of the remaining reserve for
defective roofing products quarterly and if it is deemed that an
adjustment to the reserve is required, it will be charged to operations
in the period in which such determination is made. Based on
management's estimate of a range of future costs, the Company recorded
a $5,000,000 addition to the liability for such defective products,
charged to other expense in the accompanying Fiscal 1995 Consolidated
Statement of Operations. No additional amounts were accrued in Fiscal
1996. The Company charges the costs of settling these defective
material obligations as a reduction of the recorded liability balance
and, accordingly, such costs are not charged against the results of
operations. Payments on the defective product liability claims were
$3,870,000, $4,040,000 and $3,111,000 in fiscal years 1994, 1995 and
1996, respectively.
In connection with the sale of the Automotive Assets in June 1994, the
Company invested $39.5 million of the sale proceeds in long-term
securities (principally United States Treasury Securities maturing in
1997) designated by management to be available to satisfy possible
contingent tax liabilities. The investments are classified as
"held-to-maturity" and recorded at amortized cost. As of October 28,
1995 and November 2, 1996, the aggregate fair value of the United
States Treasury Securities was approximately $43,400,000 and
$46,200,000, respectively, with gross unrealized holding gains of
approximately $500,000 and $400,000 in Fiscal 1995 and 1996,
respectively.
The Company is exposed to a number of asserted and unasserted potential
claims encountered in the normal course of business. In the opinion of
management, the resolution of these matters will not have a material
adverse effect on the Company's financial position or future results of
operations.
10. RETIREMENT PLANS
Defined Benefit Pension Plan - Substantially all of the Company's
employees are covered by a company-sponsored defined benefit pension
plan. The plan also provides benefits to individuals employed by the
Automotive Businesses which were sold by the Company on June 28, 1994,
the Carpet Business sold on November 16, 1995 and the Rubber Products
Business sold on September 30, 1996. The benefits of these former
employees were "frozen" at the respective dates of sale of the
businesses. Accordingly, these former employees will retain benefits
earned through the respective disposal dates, however, they will not
accrue additional benefits. In addition, the plan provides benefits to
individuals employed by the Dunean plant which was closed effective
October 28, 1996. Benefits for employees who were terminated as a
result of the plant closing were also "frozen" as of October 28, 1996
and no additional benefits will accrue subsequent to that date. The
plan provides pension benefits that are based on the employees'
compensation during the last ten years of employment. The Company's
policy is to fund the annual contribution required by applicable
regulations.
44
<PAGE> 46
Assets of the pension plan are invested in common and preferred stocks,
government and corporate bonds, real estate and various short-term
investments.
A reconciliation as of the most recent measurement date (November 1,
1995) of the funded status of the plan with amounts reported in the
Company's Consolidated Balance Sheets follows (in thousands):
<TABLE>
<CAPTION>
October 28, November 2,
1995 1996
--------- --------
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested $ 89,236 $ 88,983
Non-vested 613 377
Accumulated benefit obligation 89,849 89,360
Provision for future pay increases 6,232 6,755
--------- --------
Total projected benefit obligation 96,081 96,115
Plan assets at fair value 91,996 89,410
--------- --------
Projected benefit obligation greater than plan assets (4,085) (6,705)
Unrecognized net loss 4,460 4,212
Prior service cost not yet recognized in net periodic pension cost 5,598 3,548
--------- --------
Pension asset in accompanying Consolidated Balance Sheets $ 5,973 $ 1,055
========= ========
</TABLE>
<TABLE>
<CAPTION>
Fiscal Fiscal Fiscal
Components of net periodic pension cost: 1994 1995 1996
---------- ---------- -------
<S> <C> <C> <C>
Service cost-benefits earned during the period $ 2,925 $ 2,483 $ 2,378
Interest cost on projected benefit obligation 6,987 7,131 7,048
Return on plan assets 3,802 (15,628) (7,674)
Net amortization and deferral (10,291) 8,478 451
---------- --------- --------
Net periodic pension cost 3,423 2,464 2,203
Cost allocated to discontinued operations 1,051 444 -
---------- --------- ---
Net periodic pension cost for continuing operations $ 2,372 $ 2,020 $ 2,203
========== ========= ========
</TABLE>
On February 15, 1996, the Company offered special early retirement
benefits to approximately fifty salaried employees who met certain
criteria. Approximately $2.2 million of pension benefits were paid in
lump-sums by the plan to twenty-eight employees who accepted the offer.
In Fiscal 1996 a charge of $1,125,000 representing the actuarial cost
to the plan of the early retirement offer as accepted by the employees
is included in other expense in the accompanying Consolidated Statement
of Operations.
In Fiscal 1996 the Company recognized losses of approximately $632,000
for pension curtailment and special termination benefits in accordance
with SFAS No. 88, "Employees' Accounting for Settlements and
Curtailments of Defined Benefit Pension Plans and for Termination
Benefits", which related primarily to the sale of the Rubber Products
Business and the Dunean plant closing and related termination of
participation in the plan of these employees.
The weighted-average discount rate used in determining the actuarial
present value of the projected benefit obligation at October 28, 1995
and November 2, 1996 was 7.8%. The expected long-term rate of return on
assets was 9% at October 28, 1995 and November 2, 1996. The assumed
rate of increase in compensation levels was based on age-related tables
at October 28, 1995 and November 2, 1996. Effective November 1, 1993,
the Company amended the benefit formula for salaried employees to
provide for an additional benefit on compensation in excess of the
average social security wage base.
45
<PAGE> 47
401(k) Savings Plan - The Company also has a savings, investment and
profit-sharing plan available to employees meeting eligibility
requirements. Effective January 1, 1994, the Company amended the plan
to include coverage of hourly wage employees (previously the plan
covered substantially only salaried employees). The plan is a tax
qualified plan under Section 401(k) of the Internal Revenue Code. The
Company makes a matching contribution of 25% of each participant's
contribution with a maximum matching contribution of 1-1/2% of the
participant's base compensation. Company contributions were
approximately $536,000 in Fiscal 1994, $589,000 in Fiscal 1995 and
$587,000 in Fiscal 1996.
Postretirement Benefits - The Company has several unfunded
postretirement plans that provide certain health care and life
insurance benefits to eligible retirees. The plans are contributory,
with retiree contributions adjusted periodically, and contain
cost-sharing features such as deductibles and coinsurance. The
Company's life insurance plan provides benefits to both active
employees and retirees. Active employee contributions in excess of the
cost of providing active employee benefits are applied to reduce the
cost of retirees' life insurance benefits. The following table sets
forth the status of the Company's postretirement plans as recorded in
the accompanying Consolidated Balance Sheets (in thousands):
Accumulated postretirement benefit obligation (APBO):
<TABLE>
<CAPTION>
October 28, November 2,
1995 1996
-------- ---------
<S> <C> <C>
Retirees $ 2,974 $ 1,721
Fully eligible active plan participants 1,242 1,075
Other active plan participants 551 914
Unrecognized gain 482 1,098
-------- ---------
Accrued postretirement benefit plan liability $ 5,249 $ 4,808
======== =========
</TABLE>
Net periodic postretirement benefit expense included the following
components (in thousands):
<TABLE>
<CAPTION>
Fiscal Fiscal Fiscal
1994 1995 1996
------ ------ -----
<S> <C> <C> <C>
Service cost for benefits earned $ 7 $ 1 $ 5
Interest cost on APBO 352 357 297
------ ------ -----
Net periodic postretirement cost $ 359 $ 358 $ 302
====== ====== =====
</TABLE>
In Fiscal 1996, the Company recognized a curtailment gain of
approximately $347,000 related to the sale of the Rubber Products
Business and the Dunean plant closing, and related termination of
participation in the plans of these employees.
Since the Company has capped its annual liability per person and all
future cost increases will be passed on to retirees, the annual rate of
increase in health care costs does not affect the postretirement
benefit obligation.
The weighted-average discount rate used in determining the accumulated
postretirement benefit obligation was 7.8% as of October 28, 1995 and
November 2, 1996.
46
<PAGE> 48
Postemployment Benefits - Effective October 31, 1993, the Company
adopted SFAS No. 112, which requires that the cost of benefits provided
to former or inactive employees after employment but before retirement
be recognized on the accrual basis of accounting instead of when paid,
as had been the Company's practice.
The cumulative effects as of October 31, 1993 of adopting SFAS No. 112
were to increase accrued postemployment benefit costs by approximately
$708,000 and charge income for approximately $708,000. Income taxes
were not applicable. The effect of adopting SFAS No. 112 on income from
operations in 1994 was not significant. The liability for
postemployment benefits at October 28, 1995 and November 2, 1996 is
included in other long-term liabilities in the accompanying
Consolidated Balance Sheets.
11. RELATED PARTIES
The Company incurred fees of $1,250,000 in Fiscal 1994 and $1,000,000
in each of Fiscal 1995 and 1996 for management services provided by a
certain shareholder pursuant to a management services agreement. The
balance sheets as of October 28, 1995 and November 2, 1996 include
accrued fees of $1,000,000 each in other accrued expenses. The
agreement provides for payments of $1,000,000 to the shareholder
annually through the year 2001. Payment of the Fiscal 1996 accrued
management fee is limited to $450,000 by the Company's senior credit
facility, as amended on September 6, 1996, with the balance to be paid
upon the earlier of the consummation of a financial restructuring as
discussed in Note 14 or completion of the Company's 1997 second fiscal
quarter.
12. BUSINESS SEGMENTS
The Company competes in three industry segments: Apparel Fabrics and
Products, Industrial Fabrics and Products and Home Fashion Textiles.
The apparel fabrics and products segment manufactures a broad range of
apparel fabrics and apparel related products, including unfinished
woven apparel fabrics (greige goods) for men's, women's and children's
wear, and spun yarns for use in apparel. The industrial fabrics and
products segment manufactures commercial roofing products made from
woven synthetic fabrics and rubber-based specialty polymer compounds,
other building construction products made from glass and synthetic
fibers, various industrial products which generally have insulation or
filtration characteristics, and other rubber products and various
extruded polyurethane products. The home fashion textiles segment
manufactures a variety of unfinished woven fabrics and yarns for use in
the manufacturing of draperies, curtains and lampshades and is a major
producer of solution-dyed drapery fabrics.
Export sales are approximately 4% of net sales and the Company has no
significant foreign operations. Earnings by business segment represent
operating profit, excluding net unallocated corporate operating
expenses. Identifiable segment assets are those assets used in the
operations of the segment. Corporate assets are cash and other assets.
47
<PAGE> 49
Industry segment information (in thousands):
<TABLE>
<CAPTION>
Fiscal Fiscal Fiscal
1994 1995 1996
---------- ---------- ---------
<S> <C> <C> <C>
Net sales:
Apparel fabrics and products $ 254,810 $ 247,846 $ 221,799
Industrial fabrics and products 169,736 191,985 193,001
Home fashion textiles 37,325 32,734 34,024
---------- ---------- ---------
$ 461,871 $ 472,565 $ 448,824
========== ========== =========
Operating profit (loss):
Apparel fabrics and products $ 18,487 $ 16,667 $ (22,422)
Industrial fabrics and products 7,618 7,590 5,947
Home fashion textiles 2,564 1,749 647
Indirect corporate expenses, net (7,438) (5,345) (6,257)
---------- ---------- ---------
Operating profit (loss) 21,231 20,661 (22,085)
Valuation allowance on Gulistan Securities - - (4,242)
Interest income 749 2,821 2,856
Interest expense (55,570) (39,946) (40,510)
Restructuring fees and expenses - - (2,255)
---------- ---------- ---------
Loss before income taxes, discontinued operations,
extraordinary items and cumulative effects on
accounting changes $ (33,590) $ (16,464) $ (66,236)
========== ========== =========
Depreciation and amortization expense:
Apparel fabrics and products $ 13,329 $ 12,722 $ 12,946
Industrial fabrics and products 6,103 5,690 6,282
Home fashion textiles 2,359 2,394 2,517
---------- ---------- ---------
Total segments 21,791 20,806 21,745
Corporate and other 1,415 979 994
---------- ---------- ---------
$ 23,206 $ 21,785 $ 22,739
========== ========== =========
Capital expenditures:
Apparel fabrics and products $ 8,120 $ 8,852 $ 4,389
Industrial fabrics and products 6,171 9,312 4,545
Home fashion textiles 4,122 643 899
---------- ---------- ---------
Total segments 18,413 18,807 9,833
Corporate and other 10 4 1
---------- ---------- ---------
$ 18,423 $ 18,811 $ 9,834
========== ========== =========
</TABLE>
Continued
48
<PAGE> 50
Industry segment information (in thousands):
<TABLE>
<CAPTION>
October 29, October 28, November 2,
1994 1995 1996
--------- ----------- -----------
<S> <C> <C> <C>
Identifiable assets:
Apparel fabrics and products $ 171,164 $ 165,622 $ 127,909
Industrial fabrics and products 106,124 115,710 101,376
Home fashion textiles 24,752 20,731 21,333
--------- ----------- -----------
Total segments 302,040 302,063 250,618
Corporate and other 81,087 81,827 85,309
--------- ----------- -----------
383,127 383,890 335,927
Net assets held for sale 69,684 28,932 -
--------- ----------- -----------
$ 452,811 $ 412,822 $ 335,927
========= =========== ===========
</TABLE>
13. JOINT VENTURE
In May 1996, the Company purchased a 50% ownership interest in a
Mexican corporation engaged in the manufacture and sale of textile
products for the apparel industry in Mexico. The investment is
accounted for on the equity method of accounting. As of November 2,
1996, the carrying value of the investment was approximately $146,000.
The effect of the joint venture on Fiscal 1996 results of operations
was not significant.
In 1996, the Company had sales to the joint venture of approximately
$2.0 million. As of November 2, 1996, the Company's accounts receivable
from the joint venture was approximately $1.8 million.
14. LIQUIDITY AND GOING CONCERN
The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern which
contemplates the realization of assets and the settlement of
liabilities and commitments in the normal course of business. The
Company has had recurring net losses from continuing operations since
its inception, has a net shareholder's deficiency of approximately
$108,986,000 at November 2, 1996, is in default on its senior
subordinated discount notes, senior subordinated notes and subordinated
debentures, and, under the circumstances discussed below, the Company's
senior revolving credit facility expires on March 1, 1997. The
Company's senior revolving credit facility (or a similar credit
facility) is essential for the Company's continued operations. On
September 6, 1996, the senior credit agreement was amended to, among
other things, extend its expiration date and reduce the interest rate
by 0.25%. Under the terms of the amended credit agreement, the senior
credit facility expires on March 1, 1997 (unless otherwise extended) if
the Company has not commenced a case under chapter 11 of the Bankruptcy
Code. If such a case is commenced on or prior to March 1, 1997, the
senior credit facility will be extended automatically to the earlier of
November 1, 1997 or the effective date of a reorganization under
chapter 11 of the Bankruptcy Code. At this time, the Company has not
made a decision to commence a case under the Bankruptcy Code. In
addition, the loan covenants were amended to be based upon the
activities of the consolidated operating subsidiaries (JPS Converter
and Industrial Corp. and JPS Elastomerics Corp.) rather than the
consolidated Company (i.e., excludes the assets and liabilities of the
parent company and other non-operating subsidiaries). The amended
credit agreement does not permit additional borrowings by the borrowing
subsidiaries for, among other things, loans or dividends to the Company
for the payment of interest on its notes and debentures. As a result of
the aforementioned restriction on the use of proceeds of revolving
loans, the Company
49
<PAGE> 51
did not make scheduled November 15, 1996 interest payments of
approximately $1.9 million on its subordinated debentures and did not
make scheduled December 1, 1996 interest payments of approximately $5.4
million on its senior subordinated discount notes and approximately
$3.6 million on its senior subordinated notes. The failure to make
these scheduled interest payments constitutes an event of default under
the indentures governing these debt securities. As a result, the
holders of these debt securities are entitled to accelerate the debt
represented thereby, among other things. The Company does not have the
ability to repay such indebtedness if the same were to be accelerated.
On May 8, 1996, the Company engaged The Blackstone Group, L.P. to act
as its financial advisor in connection with a potential financial
restructuring of its debt obligations. In addition, at the request of
the holders of a substantial majority of its outstanding bonds, the
Company engaged Houlihan, Lokey, Howard & Zukin, Inc., effective April
10, 1996 to act as financial advisors to the holders of the Company's
debt securities in connection with such a financial restructuring. The
Company has provided substantial information to these financial
advisors on a confidential basis regarding the Company's business,
strategies, plans and prospects. In addition, the Company is discussing
the terms of a potential financial restructuring with these advisors
and the holders of a substantial majority of its outstanding bonds. The
Company's ability to accomplish a restructuring of the terms of its
debt securities or any refinancing thereof will depend on a number of
factors, including its operating performance, market conditions and the
ability of the Company and its bondholders to come to an agreement as
to the appropriate terms of any such restructuring. Although no
agreement, formal or informal, has been reached between the Company and
its bondholders regarding the terms of a potential financial
restructuring, management is optimistic that a restructuring will be
accomplished. Management is unable to predict the impact of any such
restructuring on the accompanying financial statements. If the Company
is not successful in this regard, the default on the Company's debt
securities and its inability to service such debt as required raise
substantial doubt about the Company's ability to continue as a going
concern.
50
<PAGE> 52
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The following table sets forth certain information with respect to the persons
who are members of the Board of Directors or executive officers of the Company.
Each director serves until a successor is elected and qualified. Directors
receive no compensation for their services.
<TABLE>
<CAPTION>
Name Age Position(s) Held
- ---- --- ----------------
<S> <C> <C>
Jerry E. Hunter 59 Director, Chairman of the Board, President and
Chief Executive Officer
David H. Taylor 41 Director, Executive Vice President-Finance and Secretary
Steven M. Friedman 42 Director
Muzzafar Mirza 38 Director
Alain M. Oberrotman 45 Director
Marc C. Particelli 51 Director
</TABLE>
The business experience of each of the directors and executive officers during
the past five years is as follows:
Jerry E. Hunter was appointed Chairman of the Board of the Company on July 30,
1996. Mr. Hunter has been a director of the Company since April 6, 1993 and
Chief Executive Officer since November 29, 1994. Mr. Hunter has served as
President of the Company since September 1988. Prior to that time, from May 1988
to September 1988, he was Executive Vice President - Operations. He also serves
as a Vice President of each of the Company's subsidiaries. From April 1986 to
May 1988 he was Vice President - Technical Services at J.P. Stevens. From March
1983 to March 1986, he was Senior Vice President at Cannon Mills, Inc., a
textile manufacturer. Prior to March 1983, he was employed by Springs
Industries, a textile manufacturer, for twenty-one years.
David H. Taylor was appointed as a director of the Company on April 15, 1993.
Mr. Taylor has served as Executive Vice President - Finance and Secretary of the
Company since June 1991, and prior thereto he was Controller and Assistant
Secretary of the Company since May 1988. Prior to that time, he was a Senior
Manager at Deloitte Haskins & Sells, a public accounting firm by which he was
employed from June 1977 through May 1988. In addition, Mr. Taylor serves as a
Vice President and Assistant Secretary of each of the Company's subsidiaries.
51
<PAGE> 53
Steven M. Friedman has served as a director of the Company since May 1988. He
was Chief Executive Officer of the Company from April 1991 to November 1994. Mr.
Friedman became a general partner of EOS Partners, L.P. ("EOS") (a private
investment firm) on January 1, 1994. Prior thereto, he was a general partner of
Odyssey Partners, a private investment partnership with substantial capital
invested in marketable securities and closely-held businesses, since July 1988.
He is also a director of Forstmann & Company, Inc., a manufacturer of textiles
and textile-related products, Eagle Food Centers, Inc., a chain of grocery
stores, The Leslie Fay Companies, Inc., a women's wear designer and
manufacturer, Rickel Home Centers, Inc., a chain of home center retail stores,
and The Caldor Corporation, a chain of discount retail stores.
Muzzafar Mirza was appointed as a director of the Company on October 25, 1993.
He has been a principal of Odyssey Partners since July 1993. From May 1988 to
June 1993, he was employed by General Electric Capital Corporation, as head of
Merchant Banking for the GE Capital Corporate Finance Group. From 1983 to 1988,
he was a Vice President of Marine Midland Bank, N.A. Mr. Mirza is also a
director of The Scotsman Group, Inc. and its parent, Scotsman Holdings, Inc., a
lessor of mobile office units.
Alain M. Oberrotman was appointed as a director of the Company on January 25,
1994. He has been a principal of Odyssey Partners since October 1992. From
September 1990 to October 1992, he was a principal of Hambro International
Equity Partners, a venture capital firm.
Marc C. Particelli was appointed as a director of the Company on November 29,
1994. He has been a principal of Odyssey Partners since October 1, 1994. Prior
thereto, he was worldwide Practice Leader for the Consumer Products group at
Booz, Allen & Hamilton, an international management consulting firm by which he
was employed from 1974 to 1994.
The Company's directors are elected annually to serve until the next annual
meeting of stockholders and until their successors have been elected and
qualified.
None of the directors or executive officers listed herein is related to any
other such director or executive officer.
52
<PAGE> 54
ITEM 11. EXECUTIVE COMPENSATION.
The following summary compensation table sets forth information concerning
compensation for the last three years for services in all capacities awarded to,
earned by or paid to the Company's Chief Executive Officer and the five other
most highly compensated executive officers of the Company during Fiscal 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Name and Annual Compensation All Other
Principal Position Year Salary Bonus Compensation(2)
- ------------------ ---- ------ ----- ---------------
<S> <C> <C> <C> <C>
Jerry E. Hunter 1996 $ 332,025 $ - $ 3,371
Chairman of the Board, President 1995 306,075 195,902 3,228
and Chief Executive Officer 1994 291,500 292,793 5,219
Carl Rosen 1996 251,875 - 3,131
President, JPS Converter & 1995 243,750 83,000 3,046
Industrial Corp.(1) 1994 217,708 60,000 4,354
David H. Taylor 1996 204,783 - 2,291
Executive Vice President - 1995 196,350 118,139 2,238
Finance and Secretary 1994 187,000 162,631 3,271
Monnie L. Broome 1996 162,775 - 2,295
Vice President-Human Resources 1995 155,925 91,822 2,250
1994 148,500 122,590 3,029
Bruce R. Wilby 1996 161,474 57,761 6,040
President, JPS Elastomerics Corp. (1) 1995 140,359 - 5,591
1994 139,669 75,000 6,173
Heyward D. Maddox 1996 124,813 93,249 2,258
Vice President - Sales and Marketing, 1995 119,242 - 1,724
JPS Converter & Industrial Corp.(1) 1994 114,321 54,000 1,530
</TABLE>
(1) Such executive officers of the Company's subsidiaries perform certain
policy-making functions for the Company and are therefore included herein
pursuant to Item 402(a)(3) of Regulation S-K and Rule 36-7 under the
Exchange Act.
(2) Employer-matching 401(k) plan contribution, employer-provided life
insurance premiums and imputed lease value of company-provided automobiles.
53
<PAGE> 55
The following table sets forth certain information regarding estimated potential
awards to named executive officers of the Company pursuant to Retention Bonus
Agreements dated July 12, 1996:
LONG-TERM INCENTIVE PLANS/AWARDS IN 1996
<TABLE>
<CAPTION>
Performance Estimated Future Payouts Under
or other Period Non-Stock Price-Based Plans
Name Until Maturation or Payout (1) Threshold Target Maximum
- ---- -------------------------- --------- ------ -------
<S> <C> <C> <C> <C>
Jerry E. Hunter NA N/A N/A $794,000 (2)
David H. Taylor NA N/A N/A $510,000 (3)
Monnie L. Broome NA N/A N/A $359,000 (2)
</TABLE>
(1) The Retention Bonus Agreements have no specified maturation or payout
period. Payment of the bonuses are contingent on the successful
completion of a restructuring of the terms of the Company's debt
securities and the continuing employment of the named executives with
the Company. The Retention Bonus Agreements are void if the individuals
are terminated for cause (as defined in the agreements) or if they
voluntarily discontinue employment with the Company.
(2) Pursuant to the Retention Bonus Agreements dated July 12, 1996 (subject
to the contingencies specified in Note (1) above), each named executive
will receive a retention bonus, payable in two components, as follows:
(i) an amount equal to 50% of the sum of annual base salary plus the
average of annual bonuses with the Company for the years 1989 through
1995 payable on the effective date of a proposed restructuring and (ii)
an amount equal to 100% of the sum of annual base salary plus the
average of annual bonuses with the Company for the years 1989 through
1995 payable six months after the effective date of a proposed
restructuring.
(3) Pursuant to the Retention Bonus Agreement dated July 12, 1996 (subject
to the contingencies specified in Note (1) above), the named executive
will receive a retention bonus, payable in two components, as follows:
(i) an amount equal to 50% of the sum of annual base salary plus the
average of annual bonuses with the Company for the years 1989 through
1995 payable on the effective date of a proposed restructuring and (ii)
an amount equal to 50% of the sum of annual base salary plus the
average of annual bonuses with the Company for the years 1989 through
1995 plus an amount equal to $200,000 payable six months after the
effective date of a proposed restructuring.
LONG-TERM INCENTIVE PLAN
The Company and certain of its subsidiaries (the "Subsidiary Participants") have
adopted a Long-Term Incentive Plan for certain officers and key employees
effective November 1, 1994. The plan provides for annual awards which are
accumulated in individual award banks. Awards may be either positive or negative
in any given year and are added or subtracted each year from each participant's
respective award bank. A percentage of each participant's award bank balance is
paid out annually beginning after Fiscal 1996. Awards are based on the
achievement of certain financial performance targets by the Company and the
Subsidiary Participants. Such financial performance targets are established on a
rolling three-year basis and are subject to change at the discretion of the
Boards of Directors of the Company and the Subsidiary Participants.
54
<PAGE> 56
The following employees named in the Summary Compensation Table are currently
employee participants in the Long-Term Incentive Plan: Jerry E. Hunter, Carl
Rosen, David H. Taylor and Monnie L. Broome. As of January 31, 1997, there have
been no awards granted under this plan.
AGREEMENTS WITH EXECUTIVE OFFICERS
On December 23, 1991, the Company entered into an employment agreement with
Bruce R. Wilby. This agreement, as amended, provides severance benefits in the
event Mr. Wilby is terminated prior to December 23, 1999 for reasons other than
for cause (as defined in the agreement). If such termination occurs, Mr. Wilby
is entitled to receive an amount equal to his annual base salary including
normal fringe benefits payable in the normal course as if employment had not
been terminated. As of January 31, 1997, there have been no payments under this
agreement.
On May 1, 1993, the Company entered into an employment agreement with Carl
Rosen. This agreement, as amended, provides that Mr. Rosen will serve as
President of JPS Converter & Industrial Corp. until April 30, 1998. Base salary
under the agreement is currently $265,000 and may be increased but not reduced
over the term of the agreement. Mr. Rosen is eligible for an annual bonus with a
target level equal to 50% of base salary. If the Company terminates Mr. Rosen's
employment for reasons other than for cause (as defined in the agreement), he is
entitled to severance benefits equal to his annual base salary including fringe
benefits plus a pro rata bonus amount up to the date of termination. In the
event the Company reduces Mr. Rosen's base salary or bonus or materially changes
the requirements of his position, Mr. Rosen may voluntarily terminate his
employment with the Company with such termination being treated, for purposes of
severance benefits, as a termination by the Company.
On October 30, 1995, the Company entered into substantially similar severance
agreements with Jerry E. Hunter, David H. Taylor and Monnie L. Broome. These
agreements provide certain payments if there is a termination of employment for
reasons other than for cause (as defined in the agreements) or as a result of a
change in control or ownership of the Company or in the event of the executive's
death. These payments include an amount equal to the annual base salary
including normal fringe benefits payable for a one-year period and a lump sum
bonus payment equal to the average of all annual bonuses from 1989 through the
date of termination or death. As of January 31, 1997, there have been no
payments under these agreements.
As required by the September 6, 1996 amendment to the senior credit facility,
the Company entered into retention bonus agreements with certain of its key
executives and key employees during Fiscal 1996. The retention bonus agreements
provide specific individual awards if the participants continue active
employment with the Company for at least six months following the completion of
the proposed financial restructuring discussed in Note 14 to the Consolidated
Financial Statements. Under the terms of the agreements, an aggregate of
approximately $675,000 will be paid out on the effective date of a restructuring
and an aggregate of approximately $1,200,000 will be paid out six months after
the effective date of a restructuring. No amounts are considered earned until
the effective date of a restructuring. As of January 31, 1997, there have been
no payments under these agreements.
The accompanying Long Term Incentive Plan Table discloses the estimated future
payout to executive officers who participate in the Retention Bonus Plan.
55
<PAGE> 57
RETIREMENT PENSION PLAN
The Company maintains a Retirement Pension Plan for all employees (the "Pension
Plan"), including its salaried employees. The Pension Plan is a defined benefit
pension plan providing a formula benefit with contributions determined on an
actuarial basis. The Pension Plan generally covers all employees 21 years of age
or older who have completed one year of service with the Company. The Pension
Plan generally takes into account annual compensation earned under certain
predecessor plans of J.P. Stevens.
The following table indicates the approximate amounts of annual retirement
income that would be payable to a salaried employee under the Pension Plan based
on the compensation levels and years of credited service shown. There would be
no social security or other offset deducted from the amounts shown.
PENSION PLAN TABLE*
<TABLE>
<CAPTION>
Years of Service
---------------------------------------------------------------------
Remuneration 15 Years 20 Years 25 Years 30 Years 35 Years
- ------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$125,000 $20,018 $26,691 $33,364 $40,036 $46,709
150,000 and above 24,518 32,691 40,864 49,036 57,209
</TABLE>
* Assumes individual retires at age 65 in 1996 with the indicated years
of service and compensation. The social security integration level of
such individuals would be $27,576. The social security integration
level is adjusted annually.
Credited years of service for benefit accrual under the Pension Plan as of
November 2, 1996 for the following executive officers are:
<TABLE>
<S> <C>
Jerry E. Hunter............................... 10 years
Carl Rosen.................................... 5 years
David H. Taylor............................... 8 years
Monnie L. Broome.............................. 8 years
Bruce R. Wilby................................ 21 years
Heyward D. Maddox............................. 28 years
</TABLE>
Annual retirement benefits for salaried employees are generally computed as the
sum of 0.6% of a participant's average compensation (the annual average of five
consecutive, complete plan years of highest compensation during the last 10 plan
years of service) multiplied by the years of benefit service plus 0.6% of a
participant's compensation which exceeds the Participant's Social Security
Integration Level (equal to $27,576 in 1996) multiplied by the participant's
years of benefit service. The Pension Plan provides that each participant's
benefits fully vest after five years of service or the attainment of age 65.
56
<PAGE> 58
This table may understate the benefits available to certain participants because
salaried employees who were covered by the Pension Plan before July 1, 1989 are
entitled to the greater of the benefit formula noted above or the prior benefit
formula, plus additional accrued benefits under the new formula since July 1,
1989. Under the prior formula, a participant's annual pension payable as of
normal retirement age was equal to 1% of the portion of "final average
compensation" which was equal to the "social security integration level" in
effect for the year of retirement, plus 1.5% of the portion of the participant's
final average compensation in excess of the social security integration level,
the sum of which was multiplied by the number of years of credited service not
exceeding 35. In addition, as noted below, the table assumes that covered
compensation was limited to the current allowable amount for all years while
benefits may have been accrued in years when limitations were higher.
Compensation covered by the Pension Plan consists of all payments made to a
participant for personal services rendered as an employee of the Company which
are subject to federal income tax withholding, excluding imputed income
attributable to certain fringe benefit programs. In accordance with the Revenue
Reconciliation Act of 1993 with respect to salaried employees, plan compensation
covers up to a maximum of $150,000 as adjusted per individual for the plan year
beginning November 1, 1994. Plan compensation was subject to substantially
higher limits in previous years ($235,840 for 1994). The amounts shown are also
subject to possible maximum limitations under Section 415 of the Internal
Revenue Code of 1986, as amended (the "Code"), and are subject to possible
reduction for amounts payable under other JPS qualified plans.
COMPENSATION OF DIRECTORS
Members of the Board of Directors receive no compensation for their services.
MANAGEMENT AGREEMENT
Pursuant to a management agreement (the "Management Agreement"), dated as of
April 2, 1991, between the Company and Odyssey Investors, Inc., a Delaware
corporation and an affiliate of Odyssey Partners ("Odyssey Investors"), the
Company agreed to pay Odyssey Investors a $1.0 million fee for Fiscal 1995 and
for each fiscal year thereafter through April 2, 2001, in exchange for certain
management services provided by Odyssey Investors. Such services include
continual financial advisory and business management services in order to
maximize the efficiency of operations and enhance profitability. Payment of the
Fiscal 1996 accrued management fee is limited to $450,000 by provisions of the
Company's Restated Credit Agreement, as amended on September 6, 1996, with the
balance to be paid upon the earlier of the consummation of a financial
restructuring as discussed in Note 14 to the Consolidated Financial Statements
or completion of the Company's 1997 second fiscal quarter.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company does not have a compensation committee or other board committee
performing equivalent functions thereto. However, Odyssey Investors, as part of
its duties under the Management Agreement, from time to time during the past
fiscal year has participated in certain discussions with Jerry E. Hunter, the
Chairman, Chief Executive Officer and a Director of the Company, David H.
Taylor, Executive Vice President-Finance and Director of the Company and Monnie
L. Broome, Vice President-Human Resources of the Company in determining certain
business and financial objectives and other criteria to enable the Company to
set compensation awards and Long Term Incentive Plan targets for the Company's
executive officers.
57
<PAGE> 59
ITEM 12. SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND MANAGEMENT.
The following table sets forth information as of December 19, 1996 with respect
to the beneficial ownership of shares of (i) Senior Preferred Stock; (ii) Junior
Preferred Stock; (iii) Class A Common Stock; and (iv) Class B Common Stock by
(a) each person or group that is known to the Company to be the beneficial owner
of more than 5% of the outstanding shares, (b) each director of the Company, and
(c) all directors and executive officers of the Company as a group.
<TABLE>
<CAPTION>
Senior Preferred Stock Junior Preferred Stock Class A Common Stock Class B Common Stock
---------------------- ---------------------- -------------------- --------------------
Number Percent Number Percent Number Percent Number Percent
Name of 5% of of of of of of of of
Beneficial Owner Shares Class Shares Class Shares Class (1) Shares Class (1)
- ---------------- ------ ----- ------ ----- ------ --------- ------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Bear Stearns Securities Corp. 169,966 31.58%
(4)
% ADP Proxy Services
51 Mercedes Way
Edgewood, NY 11717
Presidential Life 53,813 10.00%
Insurance Company
c/o The Bank of New York
Post Office Box 16203
New York, NY 10249
Romulus Holdings Inc. 42,591 7.91%
20 Rockridge Circle
New Rochelle, NY 10804
Citibank, N.A. (4) 28,436 5.28%
P. O. Box 1530, Grand Central
111 Wall Street
20th FL., Zone 9
New York, NY 10043
Lehman Brothers (6)(7) 27,333 5.08% 73,847 7.38%
c/o ADP Proxy Services
51 Mercedes Way
Edgewood, NY 11717
BT Securities Corp (4) 26,904 5.00%
130 Liberty Street
New York, NY 10015
Dabney Resnick Imperial LLC 52,504 5.25%
Trading Account (4)
150 S. Rodeo Dr., #100
Beverly Hills, CA 90212
Odyssey Partners, L.P. (2) 5,000 50.00% 340,000 34.00%
31 West 52nd Street
New York, NY 10019
DLJ Capital Corp. (3) 170,000 17.00%
140 Broadway
New York, NY 10005-1285
Messrs. Grant M. Wilson, 5,000 50.00%
William J. DeBrule
and Yehochai Schneider
111 Pond Street
Cohasset, MA 02025
</TABLE>
58
<PAGE> 60
<TABLE>
<CAPTION>
Senior Preferred Stock Junior Preferred Stock Class A Common Stock Class B Common Stock
---------------------- ---------------------- -------------------- --------------------
Number Percent Number Percent Number Percent Number Percent
Name of 5% of of of of of of of of
Beneficial Owner Shares Class Shares Class Shares Class (1) Shares Class (1)
- ---------------- ------ ----- ------ ----- ------ --------- ------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Lutheran Brotherhood Research 70,180 7.02%
Corp.
625 Fourth Avenue South
Minneapolis, MN 55415
Everest Capital Fund, L.P. 51,223 5.12%
c/o Morgan Stanley & Co., Inc.
One Pierpont Plaza
Brooklyn, NY 11201
Directors and executive officers 510,000 51.0%
as a group (5)
(6 persons)
</TABLE>
<TABLE>
<S> <C>
(1) Percentages represented hereunder are based on the combined Class A
Common Stock and Class B Common Stock issued and outstanding.
(2) Represents shares of Class B Common Stock and Junior Preferred Stock
owned by Odyssey Partners. In addition, Odyssey Partners has voting
control with respect to the 5,000 shares of Junior Preferred Stock held
by Grant M. Wilson, William J. DeBrule and Yehochai Schneider. The
Class B Common Stock shares are subject to a Stockholders' Agreement,
which provides, among other things, for certain restrictions on the
voting and transfer of such shares. Leon Levy, Jack Nash, Stephen
Berger, Joshua Nash, the Nash Family Partnership and Brian Wruble, by
virtue of being general partners of Odyssey Partners, share voting and
dispositive power with respect to the Class B Common Stock and Junior
Preferred Stock owned by Odyssey Partners and, accordingly, may each be
deemed to own beneficially such stock owned by Odyssey Partners. Each
of such persons has expressly disclaimed any such beneficial ownership
(within the meaning of Rule 13d-3(a) under the Securities and Exchange
Act of 1934, as amended (the "Exchange Act")) which exceeds the
proportionate interest in the Class B Common Stock and Junior Preferred
Stock which he or it may be deemed to own as a general partner of
Odyssey Partners. Mr. Friedman has an indirect fractional financial
interest in the shares of Class B Common Stock owned by Odyssey
Partners; however, he has no voting or dispositive power over any
shares owned by Odyssey Partners.
(3) Such shares are subject to the Stockholders' Agreement, which provides,
among other things, for certain restrictions on the voting and transfer
of such shares. In addition, pursuant to the Voting Trust Agreement,
dated as of April 2, 1991, between DLJ and Lincoln National, DLJ
conferred the right to vote 120,000 of such shares of Class B Common
Stock to Lincoln National, as voting trustee. Such shares include
shares held by DLJ First ESC L.L.C. which is an "employee securities
corporation" formed to hold securities on behalf of participants in
certain DLJ incentive compensation plans.
(4) It is not known if these shares are held beneficially or as nominee for
one or more beneficial owners.
(5) None of Jerry E. Hunter, Carl Rosen, David H. Taylor, Monnie L. Broome,
Bruce R. Wilby or Heyward D. Maddox, the executive officers listed above
in Item 11, " -- Executive Compensation -- Summary Compensation Table,"
beneficially own, or may be deemed to own, any shares of capital stock of
the Company, and therefore are not listed in this table.
(6) Disclaims beneficial ownership.
(7) Per Lehman Brothers preferred stock was sold subsequent to December 19.
</TABLE>
59
<PAGE> 61
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
None.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND REPORTS ON FORM
8-K.
(a) (1) The following financial statements are included in Item 8:
(i) Independent Auditors' Report.
(ii) Consolidated Balance Sheets as of November 2, 1996 and
October 28, 1995.
(iii) Consolidated Statements of Operations for the fiscal years
ended November 2, 1996, October 28, 1995 and October 29, 1994.
(iv) Consolidated Statements of Senior Redeemable Preferred Stock
and Shareholders' Equity (Deficit) for the fiscal years ended
November 2, 1996, October 28, 1995 and October 29, 1994.
(v) Consolidated Statements of Cash Flows for the fiscal years
ended November 2, 1996, October 28, 1995 and October 29, 1994.
(vi) Notes to Consolidated Financial Statements.
The registrant is primarily a holding company and all subsidiaries are wholly
owned.
(2) The financial statement schedule required by Item 8 is listed on
Index to Financial Statement Schedule, starting at page S-1 of this report.
(3) The exhibits required by Item 601 of Regulation S-K are listed in
the accompanying Index to Exhibits. Registrant will furnish to any
securityholder, upon written request, any exhibit listed in the accompanying
Index to Exhibits upon payment by such securityholder of registrant's reasonable
expenses in furnishing any such exhibit.
(b) Report on Form 8-K dated December 15, 1996, containing
disclosure of the Company's default on the indentures
governing its subordinated debentures, senior subordinated
discount notes and senior subordinated notes due to the
Company's failure to make scheduled interest payments on
November 15, 1996 and December 1, 1996.
(c) Reference is made to Item 14(a)(3) above.
(d) Reference is made to Item 14(a)(2) above.
60
<PAGE> 62
INDEX TO EXHIBITS
The following is a complete list of Exhibits filed as part of this report, which
are incorporated herein:
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<S> <C>
2.1(i) Plan of Reorganization of JPS Textile Group, Inc., a Delaware
corporation (the "Company"), filed pursuant to Chapter 11 of the United
States Bankruptcy Code, dated February 7, 1991 (the "Plan).(A)
2.1(ii) Revised Technical and Conforming Amendment to the Company's Plan, dated
March 20, 1991.(A)
3.1 Restated Certificate of Incorporation of the Company, filed with the
Secretary of State of the State of Delaware on April 1, 1991.(A)
3.2 By-laws of the Company.(A)
3.3 Certificate of Designations of the Company's Series A Senior Preferred
Stock (the "Senior Preferred Stock").(A)
3.4 Certificate of Designations of the Company's Series B Junior Preferred
Stock.(A)
4.1 Indenture, dated as of April 2, 1991 (the "Discount Note Indenture"),
between the Company and First Trust National Association ("First
Trust"), as Trustee, relating to the Company's Senior Subordinated
Discount Notes due June 1, 1999 (the "Discount Notes").(A)
4.2 Form of Discount Note, incorporated by reference to Exhibit A to the
Discount Note Indenture.(A)
4.3 Indenture, dated as of April 2, 1991 (the "Subordinated Note
Indenture"), between the Company and First Trust, as Trustee, relating
to the Company's 10.25% Senior Subordinated Notes due June 1, 1999 (the
"Subordinated Notes"). (A)
4.4 Form of Subordinated Note, incorporated by reference to Exhibit A to
the Subordinated Note Indenture.(A)
4.5 Indenture, dated as of April 2, 1991 (the "Debenture Indenture"),
between the Company and First Bank National Association, as Trustee,
relating to the Company's 7% Subordinated Debentures due May 15, 2000
(the "Debentures").(A)
4.6 Form of Debenture, incorporated by reference to Exhibit A to the
Debenture Indenture.(A)
4.7 Stockholders' Agreement, dated as of April 2, 1991, among Odyssey Partners,
L.P. ("Odyssey Partners"), DLJ Capital Corp. ("DLJ Capital") and Lincoln
National Bank and Trust Company of Fort Wayne ("Lincoln National").(A)
</TABLE>
61
<PAGE> 63
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<S> <C>
4.8 Letter Agreement, dated April 2, 1991 regarding certain rights of
"co-sale" granted by Odyssey partners, DLJ Capital and Lincoln National
to the holders of the Company's Class A Common Stock.(A)
4.9 Letter Agreement, dated April 2, 1991, among Odyssey Partners, Grant M.
Wilson, William J. DeBrule and Yehochai Schneider.(A)
9.1 Voting Trust Agreement, dated as of April 2, 1991, between DLJ Capital
and Lincoln National.(A)
10.1 Management Agreement, dated as of April 2, 1991, between the Company
and Odyssey Investors, Inc.(A)
10.2 Registration Rights Agreement, dated as of April 2, 1991, by and among
the Company and the holders of the Company's Senior Notes, Discount
Notes, Subordinated Notes, Senior Preferred Stock and Class A Common
Stock (collectively, the "Securities").(A)
10.3 Loan and Security Agreement, dated as of October 30, 1991, (the "CIT
Loan Agreement"), between JPS Converter and Industrial Corp., a
Delaware corporation ("JCIC") and The CIT Group/Equipment Financing,
Inc. ("CIT").(A)
10.4 First Amendment to the CIT Loan Agreement, dated as of June 26, 1992,
by and between JCIC and CIT.(A)
10.5 Second Amendment to the CIT Loan Agreement, dated as of December 22,
1992, by and between JCIC and CIT.(A)
10.6 Agreement of Lease, dated as of June 1, 1988, by and between 1185
Avenue of the Americas Associates ("1185 Associates") and JCIC.(A)
10.7 Lease Modification and Extension Agreement, dated as of April 2, 1991,
by and between 1185 Associates and JCIC.(A)
10.8 Third Amendment to the CIT Loan Agreement, dated as of August 6, 1993,
by and between JCIC and CIT.(B)
10.9 Trademark License Agreement, dated as of May 9, 1988, by and between
J.P. Stevens and JPS Acquisition Corp. (predecessor to the Company.)(B)
10.10 Omnibus Real Estate Closing Agreement, dated as of May 9, 1988, by and
among J.P. Stevens, JPS Acquisition Corp., JPS Acquisition Automotive
Products Corp., JPS Acquisition Carpet Corp., JPS Acquisition
Industrial Fabrics Corp., JPS Acquisition Converter and Yarn Corp. and
JPS Acquisition Elastomerics Corp.(B)
</TABLE>
62
<PAGE> 64
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<S> <C>
10.11 Purchase Agreement, dated as of April 24, 1988, by and among JPS
Holding Corp., the Company, Odyssey Partners, West Point-Pepperell,
Inc., STN Holdings Inc., Magnolia Partners, L.P. and J.P. Stevens.(B)
10.12 Asset Purchase Agreement, dated as of May 25, 1994, by and among the
Company, JAPC, JCIC, JPS Auto Inc., a Delaware corporation, and Foamex
International Inc., a Delaware corporation.(C)
10.13 Fourth Amended and Restated Credit Agreement (the "Existing Credit
Agreement"), dated as of June 24, 1994, by and among the Company, JCIC,
JPS Elastomerics Corp., a Delaware corporation ("JEC"), JPS Carpet
Corp., a Delaware corporation ("JCC"), the financial institutions
listed on the signature pages thereof, Citibank, N.A. ("Citibank") as
Agent and Administrative Agent, and General Electric Capital
Corporation ("GECC") as Co-Agent and Collateral Agent.(D)
10.14 First Amendment to the Existing Credit Agreement, dated as of November
4, 1994, by and among the Company, JCIC, JEC, JCC, the financial
institutions listed on the signature pages thereof, Citibank, as Agent
and Administrative Agent, and GECC, as Co-Agent and Collateral
Agent.(E)
10.15 Second Amendment to the Existing Credit Agreement, dated as of December
21, 1994, by and among the Company, JCIC, JEC, JCC, the financial
institutions listed on the signature pages thereof, Citibank, as Agent
and Administrative Agent, and GECC as Co-Agent and Collateral Agent.(E)
10.16 Fourth Amendment to CIT Loan Agreement, dated as of December 29, 1994,
by and between JCIC and CIT.(E)
10.17 Lease Modification and Extension Agreement, dated as of April 30, 1993,
by and between 1185 Associates and JCIC.(E)
10.18 Long-Term Incentive Plan of the Company effective November 1, 1994.(F)
10.19 Third Amendment to Existing Credit Agreement, dated as of May 31, 1995
by and among the Company, JCIC, JEC, JCC, the financial institutions
listed on the signature pages thereof, Citibank, as Agent and
Administrative Agent, and GECC, as Co-Agent and Collateral Agent.(G)
10.20 Fourth Amendment to Existing Credit Agreement, dated as of October 28,
1995 by and among the Company, JCIC, JEC, JCC, the financial
institutions listed on the signature pages thereof, Citibank, as Agent
and Administrative Agent, and GECC, as Co-Agent and Collateral
Agent.(H)
10.21 Lease Modification and Extension Agreement, dated as of November 17,
1994, by and between 1185 Associates and JCIC.(H)
</TABLE>
63
<PAGE> 65
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<S> <C>
10.22 Asset Transfer Agreement, dated as of November 16, 1995, by and among
the Company, JPS Carpet Corp., a Delaware corporation, Gulistan
Holdings Inc. ("GHI"), a Delaware corporation and Gulistan Carpet Inc.,
a Delaware Corporation and wholly-owned subsidiary of GHI.(I)
10.23 Fifth Amendment to the Fourth Amended & Restated Credit Agreement,
dated as of May 6, 1996, by and among the Company, JPS Elastomerics
Corp., JPS Converter and Industrial Corp., JPS Auto Inc., JPS Carpet
Corp., International Fabrics, Inc., the financial institutions listed
on the signature pages thereof, Citibank, N.A. as agent and
Administrative Agent and General Electric Capital Corporation as
Co-Agent and Collateral Agent.(C)
10.24 Sixth Amendment to the Fourth Amended & Restated Credit Agreement,
dated as of May 15, 1996, by and among the Company, JPS Elastomerics
Corp., JPS Converter and Industrial Corp., JPS Auto Inc., JPS Carpet
Corp., International Fabrics, Inc., the financial institutions listed
on the signature pages thereof, Citibank, N.A. as agent and
Administrative Agent and General Electric Capital Corporation as
Co-Agent and Collateral Agent.(C)
10.25 Seventh Amendment to the Fourth Amended and Restated Credit Agreement,
dated as of July 22, 1996, by and among the Company, JPS Elastomerics
Corp., JPS Converter and Industrial Corp., JPS Auto Inc., JPS Carpet
Corp., International Fabrics, Inc., the financial institutions listed
on the signature pages thereof, Citibank, N.A. as agent and
Administrative Agent and General Electric Capital Corporation as
Co-Agent and Collateral Agent.(L)
10.26 Eighth Amendment to the Fourth Amended and Restated Credit Agreement,
dated as of September 6, 1996, by and among the Company, JPS
Elastomerics Corp., JPS Converter and Industrial Corp., JPS Auto Inc.,
JPS Carpet Corp., International Fabrics, Inc., the financial
institutions listed on the signature pages thereof, Citibank, N.A. as
agent and Administrative Agent and General Electric Capital Corporation
as Co-Agent and Collateral Agent.(L)
10.27 Retention Bonus Agreement, dated July 12, 1996, between the Company and
Jerry E. Hunter.(L)
10.28 Retention Bonus Agreement, dated July 12, 1996, between the Company and
David H. Taylor.(L)
10.29 Retention Bonus Agreement, dated July 12, 1996 between the Company and
Monnie L. Broome.(L)
10.30 Employment Agreement, dated October 30, 1995, between the Company and
Jerry E. Hunter.(L)
10.31 Employment Agreement, dated October 30, 1995 between the Company and
David H. Taylor.(L)
10.32 Employment Agreement, dated October 30, 1995 between the Company and
Monnie L. Broome.(L)
10.33 Employment Agreement, dated May 1, 1993 and amended September 11, 1995
between the Company and Carl Rosen.(L)
</TABLE>
64
<PAGE> 66
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<S> <C>
10.34 Employment Agreement, dated December 23, 1991 and amended August 20,
1996 and December 23, 1996 between the Company and Bruce Wilby.(H)
10.35 Asset Purchase Agreement, dated as of September 30, 1996 between
Elastomer Technologies Group, Inc. a Delaware Corporation, and JPS
Elastomerics Corp., a Delaware Corporation and wholly- owned subsidiary
of the Company.(H)
10.36 Receivables Purchase Agreement dated as of September 30, 1996 between
The Bank of New York Commercial Corporation, a New York Corporation and
JPS Elastomerics Corp., a Delaware Corporation and wholly-owned
subsidiary of the Company.(H)
11.1 Statement re: Computation of Per Share Earnings - not required since
such computation can be clearly determined from the material contained
herein.
12.1 Computation of Ratio of Earnings to Fixed Charges - not required for
Form 10-K per Item 503(d) of Regulation S-K.
12.2 Computation of Ratio of Earnings to Combined Fixed Charges and
Preferred Stock Dividends--not required for Form 10-K per Item 503(d)
of Regulation S-K.
21.1 List of Subsidiaries of the Company.(E)
27.1 Financial data schedule.(for SEC use only)(H)
--------
(A) Previously filed as an exhibit to Registration Statement No. 33-58272
on Form S-1, declared effective by the SEC on July 26, 1993, and
incorporated herein by reference.
(B) Previously filed as an exhibit to the Company's Annual Report on Form
10-K for the year ended October 30, 1993.
(C) Previously filed as an exhibit to the Company's Quarterly Report on
Form 10-Q for the quarter ended April 30, 1994.
(D) Previously filed as an exhibit to the Company's Quarterly Report on
Form 10-Q for the quarter ended July 30, 1994.
(E) Previously filed as an exhibit to the Company's Annual Report on Form
10-K for the year ended October 29, 1994.
(F) Previously filed as an exhibit to the Company's Quarterly Report on
Form 10-Q for the quarter ended January 28, 1995.
(G) Previously filed as an exhibit to the Company's Quarterly Report on
Form 10-Q for the quarter ended April 29, 1995.
(H) Filed herewith.
(I) Previously filed as an exhibit to the Company's Current Report on Form
8-K dated December 1, 1995.
(J) Previously filed as an exhibit to the Company's Annual Report on Form
10-K for the year ended October 28, 1995.
(K) Previously filed as an exhibit to the Company's Quarterly Report on
Form 10-Q for the quarter ended April 27, 1996.
(L) Previously filed as an exhibit to the Company's Quarterly Report on
Form 10-Q for the quarter ended July 27, 1996.
</TABLE>
65
<PAGE> 67
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
JPS TEXTILE GROUP, INC.
Date: January 31, 1997 By: /s/ Jerry E. Hunter
-------------------
JERRY E. HUNTER
Chairman of the Board, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following persons in the capacities and on the dates
indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/ Jerry E. Hunter Director, Chairman of the Board, January 31, 1997
- ------------------------------ President and Chief Executive Officer
JERRY E. HUNTER
/s/David H. Taylor Director, Executive January 31, 1997
- ----------------------------- Vice President-Finance,
DAVID H. TAYLOR Principal Financial Officer and
Secretary
/s/ Steven M. Friedman Director January 31, 1997
- -------------------------
STEVEN M. FRIEDMAN
/s/ Muzzafar Mirza Director January 31, 1997
- -------------------------
MUZZAFAR MIRZA
/s/ Alain M. Oberrotman Director January 31, 1997
- -------------------------
ALAIN M. OBERROTMAN
/s/ Marc C. Particelli Director January 31, 1997
- -------------------------
MARC. C. PARTICELLI
/s/ L. Allen Ollis Controller January 31, 1997
- -------------------------
L. ALLEN OLLIS
</TABLE>
66
<PAGE> 68
JPS TEXTILE GROUP, INC.
INDEX TO SCHEDULE
INDEX TO FINANCIAL STATEMENT SCHEDULE
For the Fiscal Years Ended October 29, 1994, October 28, 1995 and November 2,
1996
FINANCIAL STATEMENT SCHEDULE
II. Valuation and Qualifying Accounts and Reserves S-2
Note: All other schedules are omitted because they are not applicable or not
required, or because the required information is shown either in the
consolidated financial statements or in the notes thereto.
S-1
<PAGE> 69
JPS TEXTILE GROUP, INC. SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(IN THOUSANDS)
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
------------- ---------- ------------------------ ----------- ----------
Charged to
Balance at Charged to Other Balance at
Beginning Costs and Accounts Deductions End of
Classification of Period Expenses Describe Describe Period
-------------- --------- -------- -------- -------- ------
(a) (b)
<S> <C> <C> <C> <C> <C>
Allowances Deducted from Asset to Which They Apply:
Fiscal Year Ended October 29, 1994 (52 Weeks)
Allowance for doubtful accounts $ 1,938 $ 748 $ 847 $ 1,606 $ 1,927
Claims, returns and other allowances 777 (73) 369 423 650
-------- ------ ------- ------- --------
$ 2,715 $ 675 $ 1,216 $ 2,029 $ 2,577
======== ====== ======= ======= ========
Fiscal Year Ended October 28, 1995 (52 Weeks)
Allowance for doubtful accounts $ 1,927 $(114) $ 206 $ 69 $ 1,950
Claims, returns and other allowances 650 175 644 181
-------- ----- ------- ------- --------
$ 2,577 $(114) $ 381 $ 713 $ 2,131
======== ====== ======= ======= ========
Fiscal Year Ended November 2, 1996 (53 Weeks)
Allowance for doubtful accounts $ 1,950 $ 72 $ 563 $ 237 $ 2,348
Claims, returns and other allowances 181 - 338 356 163
-------- ------ ------- ------- --------
$ 2,131 $ 72 $ 901 $ 593 $ 2,511
======== ====== ======= ======= ========
</TABLE>
(a) Change in various reserves charged to net sales.
(b) Uncollected receivables written off, net of recoveries.
S-2
<PAGE> 1
EXHIBIT 10.34
December 23, 1991
JPS Textile Group, Inc.
Suite 312
555 North Pleasantburg Drive
Greenville, South Carolina 29607
Gentlemen:
This letter confirms my agreement with JPS Textile Group, Inc. (the
"Company"), for good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, with respect to the following:
1. If the Company terminates my employment prior to the fifth
anniversary of the date hereof (the "Five-Year Period") other than for "cause"
(as defined in Paragraph 2 below), I shall be entitled to receive as severance
an amount equal to my annual base salary in effect at the time of such
termination payable in the ordinary course, as if my employment had not been
terminated (this shall include fringe benefits accorded all active employees,
except L.T.D., provided appropriate contributions are made as required);
provided, however, that in no event shall any payment be made pursuant to this
Paragraph 1 to the extent such payment would constitute an "excess parachute
payment" as defined in Section 280G(b) of the Internal Revenue Code of 1986, as
amended, or the corresponding provisions of any successor statute.
2. For the purposes hereof, the term "cause" shall mean any of
the following:
(i) My failure to perform any material obligations of my
employment and which I shall have failed to cure within ten (10) days
after receiving written notice thereof from the Company; or
(ii) I shall have violated the provisions of Paragraph 3 hereof; or
(iii) The Company shall reasonably believe that I have committed an
act of fraud, embezzlement, theft or dishonesty against the Company; or
<PAGE> 2
JPS Textile Group, Inc
December 23, 1991
Page 2
(iv) I shall have been convicted of (or plead nolo contendere to)
any felony or any misdemeanor involving moral turpitude or which might,
in the reasonable opinion of the Company, cause embarrassment to the
Company.
In the event that during the Five-Year Period, the Company elects
to terminate my employment for "cause", the Company shall send me written
notice thereof terminating my employment and describing the action constituting
"cause", and thereupon the Company shall have no further obligations pursuant
to this letter agreement, but I shall have the obligations provided for in
Paragraph 3 below. In the event that during the Five-Year Period, I leave the
employ of the Company of my own accord, the Company shall have no further
obligations pursuant to this letter agreement but I shall have the obligations
provided for in Paragraph 3 below.
3. (a) I hereby agree that during my employment and during the
period from the date of termination of my employment through and including the
date which is one year from the date of the termination of my employment, I
shall not, without the prior written approval of the Company, directly or
indirectly through any other person, firm or corporation, (i) engage or
participate in or become employed by or render advisory or other services to or
for any person, firm or corporation, or in connection with any business
enterprise, which is, directly or indirectly, in competition with any of the
business operations or activities of the Company, (ii) hire, solicit, raid,
entice or induce any person or organization who on the date of termination of
employment is, or within the last six (6) months of my employment was a
customer of the Company, to become a customer of any person, firm or
corporation, and I shall not approach any such customer for such purpose or
knowingly approve the taking of such actions by other persons, or (iii)
solicit, raid, entice or induce any such person who on the date of termination
of my employment is, or within the last six (6) months of my employment by the
Company was, an employee of the Company, to become employed by any person, firm
or corporation, and I shall not approach any such employee for such purpose or
authorize or knowingly approve the taking of such actions by any other person;
provided, however, that I shall not be bound by the restrictions contained in
clause (i) of this Paragraph 3(a) if the Company terminates my employment prior
to the fifth anniversary of the date hereof other than for "cause" (as defined
in Paragraph 2 hereof). For the purposes hereof, a person, firm, corporation
or other business enterprise shall be deemed to be in competition with the
Company if it is a textile manufacturer or seller which sells
<PAGE> 3
JPS Textile Group, Inc.
December 23, 1991
Page 3
and/or manufacturers, as the case may be, products of the kind manufactured and
sold by the Company, within any geographic area in which the Company operates
or sells its products.
(b) Recognizing that the knowledge, information and relationship with
customers, suppliers, and agents, and the knowledge of the Company's and its
subsidiary companies' business methods, systems, plans and policies which I
have established, received or obtained during my employment or hereafter shall
establish, receive or obtain as an employee of the Company or its subsidiary
companies, are valuable and unique assets of the respective businesses of the
Company and its subsidiary companies, I agree that, during my employment and at
all times thereafter, I shall not (otherwise than pursuant to my duties)
disclose or use, without the prior written approval of the Company, any such
knowledge or information pertaining to the Company or any of its subsidiary
companies, their business, personnel or policies, to any person, firm,
corporation or other entity, for any reason or purpose whatsoever. The
provisions of this Paragraph 3(b) shall not apply to information which is or
shall become generally known to the public or the trade (except by reason of
the breach of my obligations hereunder), information which is or shall become
available in trade or other publications, information known to me prior to
entering the employ of the Company, and information which I am required to
disclose by law or an order of a court of competent jurisdiction. If I am
required by law or a court order to disclose such information, I shall notify
the Company of such requirement prior to disclosing such information and
provide the Company an opportunity (if the Company so elects) to contest such
law or court order.
4. If any provision of this letter agreement or the application
of any such provision to any party or circumstances shall be determined by any
court of competent jurisdiction to be invalid and unenforceable to any extent,
the remainder of this letter agreement or the application of such provision to
such person or circumstances other than those to which it is so determined to
be invalid and unenforceable, shall not be affected thereby, and each provision
thereof shall be validated and shall be enforced to the fullest extent
permitted by law.
5. This letter agreement (i) is in lieu of any other provision
for severance payments by the Company which are hereby waived, (ii) contains
the entire agreement among the parties hereto with respect to the subject
matter hereof and supercedes all prior and contemporaneous agreements with
respect thereto, (iii) may be executed and delivered in one or more
counterparts, all of which
<PAGE> 4
JPS Textile Group, Inc.
December 23, 1991
Page 4
taken together shall constitute but one and the same original instrument, and
(iv) shall be governed and construed in accordance with the laws of the State
of New York without regard to the conflicts of law principles of such state.
Very truly yours,
By: /s/ Bruce R. Wilby (Signature)
--------------------
Print Name: Bruce R. Wilby
Print Title: V.P./General Manager
ACCEPTED AND AGREED TO:
JPS TEXTILE GROUP, INC.
By: /s/ Jerry E. Hunter
-----------------------
Name: Jerry E. Hunter
Title: President
<PAGE> 5
MUTUAL MODIFICATION
AND ASSIGNMENT OF
EMPLOYMENT AGREEMENT
The parties to this modification and assignment are Bruce R. Wilby
(hereafter "Employee"), JPS Textile Group, Inc. (hereafter "Company"), and JPS
Elastomerics Corp. (hereafter "Employer").
1. BACKGROUND AND STATEMENT OF INTENT. On December 23, 1991, the
Employee and the Company entered into an Employment Agreement, a copy of which
is attached as Attachment A. It is the intent and desire of the parties that
the Employment Agreement be assigned from the Company to the Employer. After
the execution of this document, the Employer shall be the employer-in-fact of
the Employee, and the Company shall be released from any and all liability
under the prior agreement.
2. ASSIGNMENT AND MODIFICATION. The parties to this agreement do hereby
specifically modify the Employment Agreement by replacing the Company (JPS
Textile Group, Inc.) in the Employment Agreement, with the Employer (JPS
Elastomerics Corp.), such that the Employer shall be the employer-in-fact of
the Employee. To this end, the Company transfers and assigns to the Employer
all of its right, title, and interest in and to the Employment Agreement.
Likewise, the Employer accepts and assumes all of the obligations and
responsibilities of the Employment Agreement, including the payment of
compensation to the Employee, as stated herein. Moreover, the Employer does
also release, acquit, and discharge the Company from any and all liability and
responsibility under the Employment Agreement.
3. CONSENT BY EMPLOYEE. The Employee does hereby consent to the
modification and assignment of the Employment Agreement from the Company to the
Employer, and does
<PAGE> 6
acknowledge that the assignment and modification is supported by good and
sufficient consideration which includes, but is not limited to, the assumption
by the Employer of the financial responsibility of the Employment Agreement,
and the Employee's opportunity for continued employment and payment of
compensation as provided in the Employment Agreement. Furthermore, since the
Employment Agreement has been assigned and the Employer has assumed all of the
responsibilities thereunder, the Employee does hereby release, acquit, and
discharge the Company from any liability, claim, debt, payment, or
consideration, whatsoever, under the Employment Agreement.
4. This modification and assignment is the entire agreement of the
parties and supersedes any prior agreement or understanding between them
regarding the subject of this agreement. Its language shall be construed as a
whole and according to its fair meaning, and not strictly for or against either
party. It is expressly understood and agreed that any rule requiring
construction of this modification and assignment against its drafter shall not
be applied in this case. This modification and assignment is governed by the
laws of the State of New York.
5. The parties acknowledge having an adequate opportunity to consider
the terms of this modification and assignment with counsel and advisors of
their choice and do voluntarily accept and agree to its terms, as evidenced by
their signatures below.
-2-
<PAGE> 7
IN WITNESS WHEREOF, this agreement is made and entered into on this 20
day of August, 1996.
WITNESSES:
/s/Sally L. Lepage /s/Bruce R. Wilby
- ------------------------- --------------------------
Signature of "Employee"
- -------------------------
/s/Phyllis Fagen /s/Jerry E. Hunter
- ------------------------- --------------------------
/s/Janice Lollis JPS Textile Group, Inc.
- ------------------------- (the "Company")
/s/Phyllis Fagen /s/Jerry E. Hunter
- ------------------------- --------------------------
/s/Janice Lollis (the "Employer")
-3-
<PAGE> 8
SECOND MODIFICATION OF EMPLOYMENT AGREEMENT
The parties to this Second Modification of Employment Agreement are Bruce
R. Wilby ("Employee") and JPS Elastometrics Corp. ("Employer").
1. BACKGROUND AND STATEMENT OF INTEREST. On December 23, 1991, the
Employee entered into an Employment Agreement, a copy of which is attached and
incorporated by reference. That Agreement was subsequently modified and
assigned by mutual agreement on August 20, 1996, to JPS Elastometrics Corp.
Significant portions of the Employment Agreement are scheduled to expire in
December 23, 1996, and it is the intent of the Employee and Employer to
postpone the original expiration date and extend the Employment Agreement for a
period of three years, or until December 23, 1999.
2. MUTUAL MODIFICATION. In exchange for good and valuable consideration,
including the promises made herein, the Employee and Employer agree to extend
the duration of the Employment Agreement by modifying it as follows:
a. At Paragraph 1, page 1, substitute the following language:
"If the Company [JPS Elastometrics Corp.] terminates my
employment between December 23, 1996, to December 23, 1999
(the "Three-Year-Period"), other than for "cause" (as defined
in paragraph 2 below), I shall be entitled to receive as
severance an amount equal to my annual base salary in effect
at the time of such termination payable in the ordinary course,
as if my employment had not been terminated (this shall include
fringe benefits accorded all active employees, except L.T.D.,
provided appropriate contributions are made as required);
provided, however, that in no event shall any payment be made
pursuant to this paragraph 1 to the extent such payment would
constitute as "excess parachute payment" as defined in Section
280G(b) of the Internal Revenue Service Code of 1986, as
amended, or the corresponding provisions of any successor
statute.
b. At paragraph 2, page 2, substitute "Three-Year-Period" for
"Five-Year-Period."
c. At paragraph 3(a), fifth line from the bottom of page 2,
substitute "third anniversary" for "fifth anniversary."
d. At any other portions of the Employment Agreement referencing
"Five-Year Period" or "Five-Year Anniversary" substitute
"Three-Year Period" or "Three-Year Anniversary."
<PAGE> 9
3. EFFECTIVE DATE. The parties agree that this Second Modification of
the Employment Agreement shall take effect on the last day of the original term
of the Employment Agreement, December 23, 1996, such that employment shall
continue until December 23, 1999, unless sooner terminated pursuant to the
provisions of the Employment Agreement.
4. Except as specifically modified above, all other provisions of the
Employment Agreement will remain in full force and effect for the new term of
the Employment Agreement.
Accepted and Agreed to: Accepted and Agreed to:
By: /s/Jerry E. Hunter By:
--------------------------- -----------------------------
V.P. JPS Elastomerics Corp. Bruce R. Wilby
Date: 11-5-96 Date:
--------------------------- --------------------------
<PAGE> 1
EXHIBIT 10.35
===============================================================================
ASSET PURCHASE AGREEMENT
BETWEEN
ELASTOMER TECHNOLOGIES GROUP, INC.
(Purchaser)
AND
JPS ELASTOMERICS CORP.
(Seller)
FOR THE SALE OF SELLER'S RUBBER PRODUCTS GROUP
Dated: September 30, 1996
===============================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I GENERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.01. Sale and Purchase of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.02. Liabilities Assumed by Purchaser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.03. Retained Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.04. Delivery of Certain Assets, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE II PURCHASE PRICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.01. Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.02. Estimated Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.03. Preparation of Closing Balance Sheet and Closing
Date Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.04. Adjustment of Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.05. Allocation of Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.06. Certain Payments and Prorations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE III REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.01. Representations and Warranties of Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(a) Organization and Standing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(b) Consents, Authorizations and Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(c) Financial Statements and Financial Condition . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(d) Title and Condition of Purchased Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(e) Real Estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(f) Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(g) Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(h) Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(i) Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(j) Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(k) Environment, Health and Safety . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(1) Taxes and Other Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
(m) Customers and Suppliers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(n) Patents, Trademarks, Trade Secrets, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(o) Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(p) Pension and Other Employee Plans and Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(q) Company Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(r) Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(s) Labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(t) Product Liability Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(u) Warranties and Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(v) Absence of Certain Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(w) Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
(x) Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
(y) Solvency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
3.02. Representations and Warranties of Purchaser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
(a) Due Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(b) Consents, Authorizations and Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(c) Financing Arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(d) Disputes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(e) Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(f) Solvency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE IV CLOSING AND CONDITIONS OF CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.01. Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
4.02. Conditions of Obligations of Purchaser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(a) Representations and Warranties; Performance of Obligations . . . . . . . . . . . . . . . . . . . . 23
(b) Authorization of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(c) Transfer of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(d) Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(e) Surveys and Title Insurance Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(f) Security Interests, Encumbrances, Liens, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(g) Opinion of Counsel to Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(h) Suits or Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(i) Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(j) Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
4.03. Conditions of Obligations of Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(a) Representations and Warranties; Performance of Obligations . . . . . . . . . . . . . . . . . . . . 25
(b) Authorization of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(c) Opinion of Counsel to Purchaser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(d) Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(e) Assumption of Liabilities and Certain Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(f) Suits or Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(g) Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE V INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.01. Indemnification of Purchaser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.02. Indemnification of Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.03. Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE VI CERTAIN POST CLOSING MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
6.01. Allocation of Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
6.02. Non-Competition and Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
6.03. Certain Employee and Employee Benefits Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
6.04. Offers of Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
6.05. Product Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
6.06. Access to Records After Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
6.07. Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
6.08. Accounts Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
ARTICLE VII MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
7.01. Further Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
7.02. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
7.03. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
7.04. Descriptive Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
7.05. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
7.06. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
7.07. Assignability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
7.08. Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
7.09. Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
7.10. Waivers and Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
7.11. Third Party Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
7.12. Illegality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
7.13. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
7.14. Bulk Transfer Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
</TABLE>
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<PAGE> 4
ASSETS PURCHASE AGREEMENT dated as of the 30th day of September, 1996
(this "Agreement") between (i) ELASTOMER TECHNOLOGIES GROUP, INC., a Delaware
corporation ("Purchaser"), and (ii) JPS ELASTOMERICS CORP., a Delaware
corporation ("Seller").
Seller is engaged through its Rubber Products Group in the design,
production and marketing of rubber and synthetic elastic used in apparel
products, diaper products and specialty applications (being sometimes
hereinafter called the "Business").
Seller desires to sell to Purchaser, and Purchaser desires to purchase
from Seller, the Business and manufacturing assets used in the Business, upon
the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual benefits to be derived and
the representations and warranties, conditions and promises herein contained,
and intending to be legally bound hereby, Purchaser and Seller hereby agree as
follows:
ARTICLE I
GENERAL
1.01. Sale and Purchase of Assets. On the Closing Date (as defined in
Article IV) and with effect from the close of business on the day immediately
preceding the Closing Date, Seller shall convey, sell, transfer, assign and
deliver to Purchaser, and its successors and assigns forever, all of the right,
title and interest of Seller in the businesses, franchises, rights, claims
(including insurance claims), privileges, properties and manufacturing assets
used in the Business, except as set forth on Schedule 1.01(o), wherever
located, consistent with the representations and warranties with respect
thereto made in or pursuant to this Agreement (hereinafter sometimes
collectively referred to as the "Purchased Assets"), including the Business'
petty cash and the following:
(a) All machinery, equipment and other items of personal property
located at the Patrick Facility, the Greensboro Facility and, to the extent
dedicated to the Business, the Westfield Facility (as such terms are defined in
Schedule 1.01(b)) including without limitation the machinery and equipment
listed on Schedule 1.01(a).
(b) All owned real property relating to the Business, including
buildings, structures and improvements located thereon, fixtures contained
therein and appurtenances attached thereto, as described on Schedule 1.01(b);
<PAGE> 5
(c) All work-in-process and inventories (wherever located) of raw
materials, finished products, supplies, spare parts and materials of the
Business, including any inventory on consignment located at the locations set
forth on Schedule 1.01(c) (collectively, the "Inventories");
(d) All prepaid expenses, advances and deposits reflected on the Closing
Statement (as hereinafter defined);
(e) All rights of Seller in and to insurance and indemnity claims
relating to the Purchased Assets (as hereinafter defined) or the Assumed
Liabilities, except as set forth on Schedule 1.01(e);
(f) Subject to Section 1.04 hereof, all rights of Seller with respect to
the Business in, to and under all written contracts, licenses, leases, and
commitments assumed by Purchaser and/or identified on Schedule 1.01(f), and the
Ordinary Course purchase orders, sales orders and other agreements not required
to be specifically listed as a Company Contract pursuant to Section 3.01(q) and
consistent with the representations, warranties and agreements of Seller in
this Agreement (the "Seller Contracts" and, together with the Company
Contracts, the "Contracts");
(g) The entire right, title and interest of Seller in and to all
patents, patent applications, trade names, service marks, trademarks, trademark
applications, copyrights, copyright applications, inventions, trade secrets,
logos, slogans, proprietary processes and formulae, and to the extent
transferable, computer software and all other proprietary, technical or other
information, know-how and intellectual property rights, whether patentable or
unpatentable, to the extent used in the Business (collectively, the
"Intellectual Property"), including without limitation, the items listed on
Schedule 3.01(n)(i) and all variants thereof, associated tradestyle and all
related good will, but excluding the trademarks and tradenames that are the
subject matter of the License Agreement (as hereinafter defined);
(h) All records and files of Seller in existence on the Closing Date
relating to the Business including, but not limited to, property records,
production records, engineering records, purchasing and sales records,
personnel records, plant records, mailing lists, customer and vendor lists and
records, and computer programs, computer records, computer files and related
software (collectively, the "Transferred Records");
(i) All interests of Seller in and to any telephone and facsimile and
other data communication numbers and accounts used primarily by the Business
and all listings pertaining thereto in any telephone books and directories, in
each case, to the extent transferable;
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<PAGE> 6
(j) All stationery, purchase orders, forms, labels, shipping material,
catalogs, brochures, art work, photographs and advertising material relating to
the Business;
(k) All Federal, state, local and foreign governmental licenses,
permits, authorizations and approvals required for the operation of the
Business which are transferable to Purchaser;
(l) All rights of the Seller with respect to insurance reserves relating
to insurance policies and/or insured liabilities that are being assumed by
Purchaser, to the extent legally transferable to Purchaser;
(m) All rights against third parties relating to the Purchased Assets or
the Assumed Liabilities (as defined in Section 1.02); and
(n) Those additional assets, properties and rights, if any, set forth on
Schedule 1.01(n), provided, however, that the Purchased Assets shall not
include the properties, assets and other items identified on Schedule 1.01(o)
hereto (the "Excluded Assets") or the accounts receivable (the "Accounts
Receivable") of Seller related to the Business which are being purchased by a
third party financial institution contemporaneously with the Closing.
1.02. Liabilities Assumed by Purchaser. (a) Subject to the terms and
provisions of this Agreement, and except as otherwise provided by this Section
1.02, on the Closing Date, Purchaser shall assume and pay, perform and
discharge as and when due all debts, claims, liabilities, obligations and
expenses of every kind and nature, whether known, unknown, contingent,
absolute, determined, indeterminable or otherwise arising prior to the Closing
(excluding the Retained Liabilities (as hereinafter defined)), to the extent
relating to or arising from the Business, including, without limitation, those
claims against, and liabilities and obligations of, Seller with respect to (i)
any Contracts related to the Business and assigned to Purchaser to the extent
they remain unsatisfied and are required to be performed on or after the
Closing Date, including, without limitation, the lease with respect to Seller's
facilities in Greensboro, North Carolina, (ii) accounts payable to third
parties, together with any interest accrued thereon, incurred in connection
with the Business and set forth on the Closing Statement, (iii) the Employees
(other than with respect to the "Excluded Employee Benefits" as defined in
Section 1.03) and (iv) environmental claims and environmental costs and
liabilities relating to or arising from the Business (collectively, the
"Assumed Liabilities").
(b) Notwithstanding the foregoing, the Assumed Liabilities shall not
include any liabilities or obligations to the extent they constitute an
intentional or grossly negligent
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<PAGE> 7
breach of the representations and warranties made by Seller in this Agreement.
1.03. Retained Liabilities. Regardless of whether any of the following may
be disclosed to Purchaser or whether Purchaser may have knowledge of the same,
the Assumed Liabilities shall not include and Seller shall retain
responsibility for the following debts, claims, liabilities and obligations
(the "Retained Liabilities"): (A) liabilities relating to the Excluded Assets,
(B) income Taxes, franchise Taxes imposed on net income and sales Taxes (except
for the sales and transfer taxes contemplated by Section 2.06(b)) which are
owed or incurred by Seller (or any other corporation which is or was included
in a consolidated, combined or unitary group with Seller) in respect of all
periods prior to the Closing Date or as a result of the sale of the Purchased
Assets contemplated hereby (the "Retained Taxes"), (C) any liability or
obligations for or related to purchase money debt, debt for borrowed money or a
guaranty in respect thereof (including, but not limited to obligations and
liabilities under the Seller Credit Agreement), except to the extent such
liabilities are specifically assumed by Purchaser and are reflected on the
Closing Statement, (D) liabilities arising out of the ownership or use by
Seller of facilities, assets or businesses other than those included in the
Purchased Assets, (E) liabilities of Seller under this Agreement and for its
expenses in connection with the negotiation, execution and consummation of the
transaction contemplated by this Agreement, (F) the liabilities and obligations
of Seller for the repair or replacement of products sold or shipped by the
Business prior to the Closing Date, to the extent such liabilities or
obligations are "Retained Warranty Obligations" as provided in Section 6.05,
and (G) liabilities arising out of or in connection with any legal proceeding
pending on the Closing Date against Seller or involving the Business including
without limitation the matters described on Schedule ' 3.01(i), (H) liabilities
arising out of or with respect to any of the "Benefit Plans" as such term is
defined in Section 3.01(p), including without limitation, "Retiree Health
Benefits," "Pre-Closing Severance Benefits," "Pre-Closing Health Benefits,"
"Pre-Closing Workers' Compensation Benefits" and "Seller's Disability
Obligations" as such terms are defined in Section 6.03, collectively, the
"Excluded Employee Benefits"), and (I) liabilities and obligations under the
agreements pursuant to which Seller acquired the Business, subject to
obligations otherwise assumed by Buyer under this Agreement.
(a) For all purposes of this Agreement, any reference to any "liability"
or "obligation" of Seller shall include without limitation (i) any right to
payment and (ii) any right to an equitable remedy, in each case whether or not
such right is reduced to judgment, liquidated, unliquidated, fixed, contingent,
matured, unmatured, disputed, undisputed, legal, equitable, secured or
unsecured.
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<PAGE> 8
1.04. Delivery of Certain Assets, Etc. Seller shall take all reasonable
action to obtain and deliver to Purchaser on the Closing Date, where necessary,
assignments and consents authorizing the transfer and assignment to Purchaser
of, or the substitution of Purchaser for Seller under, all Purchased Assets.
Possession of all Purchased Assets to be acquired by Purchaser pursuant to this
Agreement shall be delivered to Purchaser on the Closing Date, except that
possession of the Transferred Records listed on Schedule 1.04 hereof may be
delivered to Purchaser simultaneously with the delivery of the Closing
Statement. Without limitation to Seller's indemnification obligation in respect
of any breach of the foregoing provisions of this Section 1.04, Seller agrees
to hold in trust for the benefit of Purchaser any non-assignable Purchased
Assets and Purchased Assets with respect to which consents to assignments shall
not be obtained or any attempted assignment would be ineffective or would
impair the rights of Seller thereunder, if any, and, insofar as permissible, to
assign to Purchaser, at Purchaser's written request from time to time, any or
all of such Purchased Assets, and to remit to Purchaser all amounts paid to
Seller with respect thereto after the Closing, promptly upon receipt thereof
and to cooperate with Purchaser in any reasonable arrangement designed to
provide for Purchaser the benefits thereunder. Nothing contained in this
Section shall be deemed to require Seller to make any payments to obtain a
consent or approval from any third party to the assignment by Seller to
Purchaser of any of the Purchased Assets. In addition, Seller shall not obtain
any consent that will affect Purchaser to its economic detriment unless
Purchaser expressly approves the obtaining of such consent. All material
consents not obtained by reason of the immediately preceding two sentences are
listed in Schedule 1.04.
ARTICLE II
PURCHASE PRICE
2.01. Purchase Price. The purchase price (the "Purchase Price") for the
Purchased Assets being acquired by Purchaser pursuant to this Agreement is an
amount equal to (i) the sum of the Closing Adjusted Net Working Capital (as
hereinafter defined) plus $500,000 (ii) less $2,597,328.
2.02. Estimated Purchase Price. At the Closing, Purchaser shall pay to
Seller the sum of $2,520,075 by wire transfer in immediately available funds to
an account in the United States designated by Seller (the "Estimated Purchase
Price").
2.03. Preparation of Closing Balance Sheet and Closing Date Statement.
(a) As soon as practicable after the Closing, Seller shall prepare a
statement setting forth the Closing Adjusted Net Working Capital (as
hereinafter defined) (the "Closing Statement"). Seller shall be responsible for
causing Deloitte &
5
<PAGE> 9
Touche LLP, its independent auditors, to conduct a complete audit (the "Audit")
of the Closing Statement as of the close of business on the day immediately
preceding the Closing Date, as a stand-alone entity, which audit shall include
the taking of a physical inventory of all merchandise, materials and products
of the Business. The Closing Statement shall be prepared in accordance with
accounting principles and practices described on Schedule 2.04 (the "Accounting
Principles") and U.S. generally accepted accounting principles applicable to
financial statements, consistently applied throughout the periods involved
("GAAP"). Seller shall use its best efforts to cause Deloitte & Touche LLP to
complete the Audit within 120 days after the Closing.
(b) In connection with the preparation and audit of the Closing
Statement, Purchaser shall grant Seller and its accountants, counsel and other
representatives, full and complete access to all of the books and records of
the Business. Seller and Purchaser shall provide such independent public
accountants with such information, certificates and representations (including
but not limited to a management's letter of representation) reasonably
requested by such accountants in order for such accountants to render an
opinion with respect to the Closing Statement. Concurrently with their delivery
of the Closing Statement to Purchaser, Seller shall cause reasonable access to
be granted to Purchaser to the work papers, schedules and other documents
prepared or used by Seller and its accountants in connection with the
preparation of the Closing Statement.
(c) Unless Purchaser, within 45 days after receipt of the Closing
Statement, gives Seller a notice (the "Dispute Notice") (i) objecting in good
faith to the Closing Statement and (ii) setting forth in reasonable detail the
items being disputed and the reasons therefor or that Purchaser requires
additional information to state such reasons, the Closing Adjusted Net Working
Capital as set forth in the Closing Statement and the adjustment to the
Purchase Price set forth therein shall be binding and final upon the parties.
If a Dispute Notice is given by Purchaser, the parties shall negotiate in good
faith with a view to agreeing upon the Closing Adjusted Net Working Capital as
of the day immediately preceding the Closing Date and the corresponding amount
of the adjustment required by Section 2.04. After receipt of a Dispute Notice,
Seller shall have the right to dispute items disputed by Purchaser and to
provide additional information with respect thereto ("Seller's Disputed
Items"). If negotiations between Purchaser and Seller fail to resolve all
disputed items within 30 days after the Dispute Notice was given to Seller, the
remaining disputed items (including the remaining Seller's Disputed Items) at
the request of either Seller or Purchaser shall be submitted to a nationally
recognized firm of independent public accountants which is not affiliated with
either party and is designated jointly by Seller and Purchaser. After affording
each of Seller and Purchaser and their respective accountants the opportunity to
present its position as to such
6
<PAGE> 10
determination (which opportunity shall not extend for more than 30 days from
the date the independent public accountants are retained), the accounting firm
selected pursuant to this paragraph shall determine the adjustment pursuant to
Section 2.04 and such determination shall be final and binding. All fees, costs
and expenses of such accounting firm shall be subject to pro rata allocation
between the parties based on a percentage calculated by dividing the total
dollar amount of all disputed items with respect to which a party was the
prevailing party by the total dollar amount of all disputed items.
Notwithstanding the foregoing, to the extent that any amount of the adjustment
to the Purchase Price is not disputed, such undisputed amount shall be
delivered to Seller or Purchaser, as the case may be, in accordance with
Section 2.04(c) below.
2.04. Adjustment of Purchase Price. For the purposes of this adjustment,
the "Closing Adjusted Net Working Capital" shall mean the amount of current
assets minus current liabilities of the Business as of the close of business on
the day immediately preceding the Closing Date, all determined from the Audit.
The parties acknowledge that the Accounts Receivable are being included in
working capital solely for purposes of this adjustment and that the Purchased
Assets do not include the Accounts Receivable.
(a) If the sum of the Closing Adjusted Net Working Capital plus $500,000
exceeds $5,117,403, Purchaser will promptly pay to Seller the difference,
together with interest at the "Prime Rate" from time to time in effect on such
amount from the Closing Date until paid. As used in this Agreement, "Prime
Rate" means the a rate of interest equal to the highest "prime rate" reported
from time to time in the "Money" column of The Wall Street Journal, and shall
change from time to time effective with any changes in the reporting of such
rate.
(b) If the sum of the Closing Adjusted Net Working Capital plus $500,000
is less than $5,117,403, Seller will promptly pay to Purchaser the difference,
together with interest at the "Prime Rate" from time to time in effect on such
amount from the Closing Date until paid.
(c) Any payments to be made pursuant to this Section shall be made by
wire transfer of immediately available funds to the account designated in
Schedule 2.04(c) or to another account designated by the recipient at least two
business days prior to the transfer, except that payments of less than $5,000
may be made by check subject to collection.
2.05. Allocation of Purchase Price. The Estimated Purchase Price shall be
allocated among the Purchased Assets in accordance with Schedule 2.05 hereto.
The Purchase Price as adjusted pursuant to Section 2.04 shall be allocated in a
manner consistent with Schedule 2.05, taking into account the nature of
adjustments made pursuant to Section 2.04. Such adjustment shall
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<PAGE> 11
be reflected in Revised Schedule 2.05, to be initialed by the parties.
2.06. Certain Payments and Prorations.
(a) Liabilities such as taxes (to the extent described in 6.07(c)),
rent, utilities, deposits and other like items included in the Assumed
Liabilities shall be prorated between Seller and Purchaser on the basis of the
number of days of the calendar year or service period which has elapsed as of
the close of business on the day immediately preceding the Closing Date and
shall be appropriately reflected on the Closing Statement.
(b) Seller and Purchaser shall equally share the cost of all sales and
transfer taxes, including without limitation real estate transfer and recording
fees, if any, imposed upon the sales and transfers provided for in this
Agreement.
(c) If the amount of the payments and prorations required pursuant to
this Section 2.06 cannot be ascertained prior to the adjustment of the Purchase
Price pursuant to Section 2.04 hereof, such payments and prorations shall be
made based upon the best estimates of the parties and adjusted, if necessary,
as soon as possible thereafter.
ARTICLE III
REPRESENTATIONS-AND WARRANTIES
3.01. Representations and Warranties of Seller. Simultaneously with the
execution and delivery of this Agreement, Seller is delivering to Purchaser a
Disclosure Schedule consisting of the Schedules referred to in this Agreement
(the "Disclosure Schedule"). Except as and to the extent set forth in the
Disclosure Schedule, Seller represents and warrants to Purchaser as follows and
acknowledges and confirms that Purchaser is relying upon such representations
and warranties in connection with the execution, delivery and performance of
this Agreement, notwithstanding any investigation made by Purchaser or on its
behalf.
(a) Organization and Standing. Seller is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation and is qualified to transact business as a foreign corporation in
the jurisdictions (which are listed on Schedule 3.01(a) hereto) where it is
required to qualify in order to conduct the Business as presently conducted;
except where the failure so to qualify would not have a Material Adverse Effect
(as hereinafter defined). As used in this Agreement, "Material Adverse Effect"
means a material effect on the operations, financial condition, results of
operations, assets or liabilities of the Business taken as a whole or the
Purchased Assets taken as a whole. Seller has the power and authority to own,
lease and operate its properties, to carry on the Business as it is now being
conducted and to enter into this Agreement.
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<PAGE> 12
(b) Consents, Authorizations and Binding Effect. Seller may execute,
deliver and perform this Agreement without the necessity of obtaining any
consent, approval, authorization or waiver or giving any notice, except for
such consents, approvals, authorizations or waivers (collectively, "Consents")
which have been obtained and are unconditional and such notices which have been
duly given (including, without limitation, any such consents or notices
delivered pursuant to Section 1.03 of this Agreement) in connection with the
execution, delivery and performance of this Agreement. This Agreement has been
duly authorized, executed and delivered by Seller and, assuming execution and
delivery thereof by Purchaser, constitutes its legal, valid and binding
obligation, enforceable against it in accordance with its terms, except as may
be limited by bankruptcy, reorganization, insolvency, fraudulent conveyance,
moratorium or other similar laws of general application relating to or
affecting the enforcement of rights of creditors and by general principles of
equity (whether considered in an action at law or in equity). The execution,
delivery and performance of this Agreement by Seller will not:
(i) constitute a violation of its respective Certificate or Articles
of Incorporation or By-Laws,
(ii) conflict with, result in the breach of or constitute a
default, or give any other person the right to terminate and/or to
accelerate any obligation, under any contract, agreement commitment,
undertaking, restriction or other instrument to which Seller is a party or
by which Seller is bound or to which any of the Purchased Assets may be
bound or affected, and which could reasonably be expected to result in a
Material Adverse Effect, or
(iii) constitute a violation of any statute, judgment, order,
decree, regulation or rule of any court, governmental authority or
arbitrator applicable or relating to or binding upon Seller, the Purchased
Assets or the Business, or
(iv) result in the creation of any Lien (as defined in Section
3.01(d)) upon any of the Purchased Assets. No consent, approval or
authorization of, waiver from or notice to any other person is required to
maintain in full force and effect for the benefit of Purchaser the Company
Contracts, other than such consents and waivers which have been obtained
and are unconditional and in full force and effect and such notices which
have been duly given. For all purposes of this Agreement, all references
to this Agreement shall be deemed to include the documents, agreements and
instruments executed and delivered by Seller pursuant to or in connection
with this Agreement, unless the context clearly requires otherwise.
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<PAGE> 13
(c) Financial Statements and Financial Condition. Seller has
maintained its books of account in accordance with applicable laws, rules and
regulations and with GAAP. Seller has previously provided to Purchaser the
following financial statements:
(i) the (x) unaudited balance sheet of the Business as of October
28, 1995 (the "October 28 Balance Sheet") and (y) an income statement of
the Business for the year ended October 28, 1995 (collectively, the
"Annual Financial Statements") and
(ii) the unaudited (x) balance sheet of the Business as of July
27, 1996 (the "Interim Balance Sheet") and (y) income statements of the
Business for the ten months then ended (the "Interim Financial Statements"
and, together with the Annual Financial Statements, sometimes collectively
referred to herein as the "Financial Statements").
Copies of the Interim Financial Statements are included on Schedule 3.01(c).
The Annual Financial Statements have been prepared in conformity with GAAP,
and, except as set forth on Schedule 3.01(c), present fairly the financial
position of Seller as of the dates of such statements and the results of
operations for the periods covered by such statements. The Annual Financial
Statements furnished the basis (without further material adjustment) for the
preparation of the audited financial statements of JPS Textile Group, Inc. for
the corresponding date or fiscal period, insofar as such audited statements
relate to Seller or their operations. To Seller's knowledge, as of the date
hereof, Seller has no material liabilities related to the Business other than:
(i) those set forth or reserved against in the Interim Balance
Sheet,
(ii) those incurred since the date of the Interim Balance Sheet in
the ordinary course of business in arms' length transactions and
consistent in nature, amount and scope with past practice ("Ordinary
Course"),
(iii) obligations under contracts, agreements and leases to be
assumed by Purchaser pursuant to Section 1.01(f) hereof, and
(iv) those described on Schedule 3.01(c)(ii) hereto.
(d) Title and Condition of Purchased Assets. Seller has, and
pursuant to this Agreement will convey, sell, transfer and assign to Purchaser
on the Closing Date, good and marketable title to the Purchased Assets, free
and clear of liens, encumbrances, claims, security interests, mortgages,
pledges, agreements and rights of others (individually a "Lien" and
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collectively "Liens"), other than Permissible Liens (as hereinafter defined)
and Liens described on Schedule 3.01(d)(i) hereto, none of which affects the
marketability of the title to such assets or the use or enjoyment thereof in
the Ordinary Course of the Business or materially detracts from the value of
such assets. The improvements, fixtures and appurtenances on or to the real
property included in the Purchased Assets (the "Owned Real Property") or on or
to any real property the subject of any lease included in the Purchased Assets
(the "Leased Real Property"), and the tangible assets included in the Purchased
Assets or the subject of any lease included in the Purchased Assets, are in
good operating condition, order and repair, subject to ordinary wear and tear,
and are suitable for the purposes of the Business as presently operated. Except
as set forth on Schedule 3.01(d)(i) and in Exhibit A hereto, the Purchased
Assets constitute all of the assets used in the operation of the Business as
presently conducted. Schedule 3.01(d)(ii) hereto includes a summary description
of material tangible personal property in the nature of machinery and equipment
owned or leased by Seller and used in connection with the Business. "Permissible
Liens" means, with respect to any Purchased Asset, (i) any minor imperfection of
title with-respect to such asset which does not materially affect the full use
and enjoyment of such asset for the purposes for which it is currently used or
detract from its value, (ii) the exceptions to title set forth on the title
policies (or title commitments) identified on Schedule 3.01(d)(ii) hereto and
obtained by Purchaser in connection with the acquisition of the Owned Real
Property and the Leased Real Property, (iii) Taxes not yet due and payable, (iv)
such matters as are set forth on the surveys (if any) delivered by Seller to
Purchaser with respect to the Owned Real Property and the Leased Real Property
and (v) mechanics, liens for maintenance or other work that has been performed
on any of the Purchased Assets and with respect to which obligations and
liabilities arising from such maintenance or other work have been paid or
included on the Closing Statement.
(e) Real Estate. Schedule 3.01(e)(i) hereto contains a true and complete
list of all real property owned or leased by Seller and used in the conduct of
its Business. Except as listed on Schedule 3.01(e)(i) and except for
Permissible Liens, Seller has good and marketable title in fee simple to the
real property listed on Schedule 3.01(e)(i) as owned by Seller.
(f) Inventories. Except as described on Schedule 3.01(f), Seller is not
under any material liability or obligation with respect to the return of
inventory or merchandise used in connection with its Business or in the
possession of wholesalers, distributors, retailers or other customers. Except
as described on Schedule 3.01(f), no inventory is on consignment.
(g) Receivables. The trade accounts and other receivables of Seller with
respect to its Business are bona fide receivables and arose out of arms-length
transactions.
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(h) Insurance. Schedule 3.01(h)(i) hereto contains a list of all
policies of insurance maintained by or on behalf of Seller with respect to its
Business, including insurance providing benefits for employees, in effect on
the date hereof and generally describing the coverage thereby. Except as set
forth in Schedule 3.01(h) (ii) and except for claims with respect to employee
benefits, there are no claims pending or, to the knowledge of Seller,
threatened under any of said policies or disputes with underwriters, and all
premiums due and payable have been paid and all such policies are in full force
and effect in accordance with their respective terms. To Seller's knowledge,
Seller has not been denied insurance, or been offered insurance only at a
commercially prohibitive premium, with respect to its Business - Nothing in
this Section 3.01(h) shall be deemed to be an express or implied representation
or warranty of Seller as to the adequacy of any policies of insurance or the
assignability thereof to Purchaser.
(i) Litigation and other Proceedings. Except as described on Schedule
3.01(i) hereof, and whether or not covered by insurance, there are no actions,
suits, liens, claims or proceedings, whether in law or equity, or governmental
or administrative investigations pending or, to Seller's knowledge, threatened
against Seller, and no requests for environmental cleanup actions, cost
reimbursement or contribution by any federal, state or local agencies or by any
private parties pending or, to Seller's knowledge, threatened against Seller,
in connection with the Business or with respect to any of the Purchased Assets
or any asset or property of others leased or used by such Seller or the.subject
of any contract, lease or agreement to be assigned to Purchaser pursuant to
this Agreement, or which questions or challenges the validity of this Agreement
or any action taken or to be taken pursuant to this Agreement.
(j) Compliance. Except as described in Schedule 3.01(j) (i): (i) Seller
is in compliance with, and no default or violation exists under, laws, rules,
regulations, decrees and orders applicable to its Business, employees and
properties, except where such non-compliance could not reasonably be expected
to result in a Material Adverse Effect; (ii) to Seller's knowledge, neither
Seller, the Purchased Assets nor the transactions contemplated under this
Agreement are subject to any judgment, order or decree entered in any lawsuit
or governmental or legal proceeding, and no material investigations have been
conducted during the two (2) years prior to the date of this Agreement, in
connection with the ownership, operation or use by Seller of the Purchased
Assets or the operations of the Business; and (iii) to Seller's knowledge,
Seller has duly filed all reports and returns required to be filed by each of
them with governmental authorities and obtained all governmental or regulatory
permits and licenses and other governmental consents which are required in
connection with the Business. To Seller's knowledge, such permits, licenses and
consents are in full force and effect, no proceedings for the suspension or
cancellation of any of them is pending or threatened, and none will lapse,
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terminate or otherwise become ineffective upon the consummation of this
Agreement and all have been or will be transferred to Purchaser in connection
with this Agreement. Schedule 3.01 (j) (ii) contains a complete list of
permits, licenses and consents referred to in clause (iii) above, as well as
other permits, licenses and consents obtained or issued to Seller during the
past three (3) years relating to the ownership, use and operation of the
Business and the Purchased Assets. To Seller's knowledge, except as specified
in Schedule 3.01 (j) (ii), no application for any such permits, licenses or
consents within such three (3) year period has been denied.
(k) Environment, Health and Safety. Except as specified in Schedule
3.01(k):
(i) To Seller's knowledge, Seller has complied with, and Seller's
operations are in compliance with, all Environmental Laws (as hereinafter
defined) in all material respects. No charge, complaint, action, suit,
proceeding, hearing, investigation, claim, demand or notice has been filed
or commenced, or to the knowledge of Seller, threatened, against any of
them alleging any failure to comply with any such law or regulation.
(ii) Seller has not released or is not releasing (as defined in the
Comprehensive Environmental Response, Compensation and Liability Act of
1980 ("CERCLA"), "Released") and to its knowledge no prior owners,
occupants or any other persons have Released, any Hazardous Substances on,
upon, into, over or from any real property owned, operated or leased by
Seller. To Seller's knowledge, no oral or written notification of a
Release or threat of Release of a Hazardous Substance has been filed by or
on behalf of Seller or in relation to the real property or any property
owned, operated or leased by Seller within five (5) years prior to the
Closing Date.
(iii) Seller has obtained all material environmental permits that
are required under applicable laws. All such environmental permits are
listed in Schedule 3.01(k) (iii) hereto. To Seller's knowledge, except as
listed in Schedule 3.01(k) and heretofore provided to Purchaser, within
three (3) years prior to Closing Date there have been no environmental
inspections, investigations, studies, audits, tests, reviews or other
analyses conducted in relation to the Business or the Purchased Assets.
(iv) There have been no private or governmental claims, citations,
complaints, notices of violation or requests for information, demands or
notices, letters made, issued to or, to the knowledge of Seller,
threatened against Seller or any Affiliate of Seller by any governmental
entity or private or other party within five (5) years prior to the date
of this
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Agreement for the impairment or diminution of, or damage, injury or other
adverse effects to, the environment or public health resulting, in whole
or in part, from the ownership, use or operation of the Purchased Assets,
Excluded Assets or the operation of the Business or the off-site transport
or disposal or Release of any Hazardous Substances. Schedule 3.01(k)(ii)
sets forth a description of locations used by Seller prior to the date of
this Agreement for the treatment, storage, transportation or disposal of
"Hazardous Substances," or to Seller's knowledge, used by any other person
in connection with the operations of the Business.
(l) Taxes and Other Payments. Purchaser will not incur or assume
and Seller shall indemnify and hold Purchaser and Purchaser's Affiliates (as
hereinafter defined) harmless against any liability or obligation with respect
to any liability or obligation, direct or indirect, absolute or contingent, of
Seller or any of its Affiliates for any Retained Taxes for any period up to and
including the Closing Date. As used in this Agreement, "Taxes" means all
federal, state, local and foreign taxes, charges, fees, levies, imposts, duties
or other assessments, including, without limitation, income, gross receipts,
excise, employment, sales, use, transfer, license, payroll, franchise,
severance, stamp, occupation, windfall profits, environmental (including taxes
under code section 59A), premium, federal highway use, commercial rent, customs
duties, capital stock, paid up capital, profits, withholding, Social Security,
single business and unemployment, disability, real property, personal property,
registration, ad valorem, value-added, alternative or add-on minimum,
estimated, or other tax or governmental fee of any kind whatsoever, imposed or
required to be withheld by the United States or any state, local, foreign
government or subdivision or agency thereof, including any interest, penalties
or additions thereto. Except for Taxes to be allocated on the Closing Balance
Sheet in accordance with this Agreement, to the knowledge of Seller with
respect to any tax which is not a Retained Tax, Seller has paid or will
adequately accrue on the Closing Statement all Taxes, other than Retained
Taxes, for all periods up to and including the Closing Date in respect of the
Business and the employees of the Business, and is not in default in payment of
any such tax or tax related obligation, and Seller has duly filed or will file
or cause to be filed in a timely fashion all tax reports and returns required
for all periods up to and including the Closing Date, and all such reports and
returns are correct and complete as filed in all material respects. Except as
described in Schedule 3.01(l), Seller has not received notice of any tax
deficiency outstanding other than with respect to Retained Taxes, proposed or
assessed against it in connection with the Business, nor has it executed any
waiver of any statute of limitations on the assessment or collection of any tax
or tax related obligation. Except as disclosed in Schedule 3.01(l) there are no
powers of attorney executed by Seller with respect to taxes other than with
respect to Retained
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Taxes owed to or by such Seller. Schedule 3.01(l) lists all such deficiencies
asserted in connection with the Business within the last five calendar years
other than with respect to Retained Taxes.
(m) Customers and Suppliers. Schedule 3.01(m) sets forth a list (i) of
the 20 largest customers and (ii) of the 20 largest suppliers, of the Business,
in terms of sales and purchases, as the case may be, during the years ended
October 28, 1995 and 1994, and the ten months ended August 31, 1996. To the
knowledge of Seller, there has been no loss nor has it received written notice
of any threatened loss, and there is no acquisition pending or announced, of
any customer, supplier or account of Seller listed on Schedule 3.01(m), or any
loss of a customer, supplier or account which would be material to the
Business, except to the extent specifically disclosed in Schedule 3.01(m). For
purposes of this Section 3.01(m), the term "material" with respect to any
customer or account means any customer or account that accounted for net sales
in excess of $200,000 during the years ended October 28, 1995 or 1994 or
$150,000 for the nine-month period ended July 31, 1996, and with respect to
any supplier means any supplier that accounted for purchases in excess of
$100,000 during the years ended October 28, 1995 or 1994 or $75,000 for the
nine-month period ended July 31, 1996. Nothing in this Section 3.01(m) shall be
deemed to be an express or implied representation or warranty of Seller as to
continued sales to customers or as to the continued availability of products
and services from suppliers.
(n) Patents, Trademarks, Trade Secrets, Etc. Schedule 3.01(n)(i) hereto
contains a list and description of:
(i) all patents, patent applications, trademarks, trademark
registrations, applications for trademark registration, trade names and
copyright registrations and applications therefor in which Seller has any
ownership interest and is used currently or was used in any material
respect during the last two years in connection with the Business;
(ii) computer software and programming in which Seller or any of
Seller's Affiliates has any ownership interest or which Seller is
developing and is used currently or was used in any material respect
during the last two years in connection with the Business; and
(iii) all license agreements (except "shrink wrap" software license
agreements) with respect to any of the types of Intellectual Property to
which reference is made in clauses (i) and (ii) of this Section 3.01(n) as
to which Seller is a licensor or licensee.
To Seller's knowledge, no patents, trademarks, trade names or copyright
registrations not described on Schedule 3.01(n)(i), or trade secrets or
proprietary secrets not included in the
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Purchased Assets, are necessary in connection with the conduct of the Business
in the manner presently operated by Seller. Except as described on Schedule
3.01(n)(ii) hereto, there are no pending or to Seller's knowledge threatened
claims against Seller by any person with respect to any of the items, or their
use, listed on Schedule 3.01(n)(i) and, to Seller's knowledge no valid basis
exists for any such claim. Seller owns and the Business has the right to use
free of the claims of any third parties Seller's wide-width slitting technology
currently used in the Business. For purposes of this Agreement, the term
Affiliate means and includes any entity controlling, controlled by or under
common control with Seller (as "control" is used in the Securities Exchange Act
of 1934, as amended), including without limitation any direct or indirect
parent corporation or subsidiary of Seller (an "Affiliate"); provided, however,
that Odyssey Partners, L.P., and its Affiliates (other than Seller, JPS Textile
Group, Inc., JPS Carpet Corp. and JPS Converter and Industrial Corp.) shall not
be deemed Affiliates of Seller.
(o) Employees. Schedule 3.01(o) hereto contains a list of all
persons who work in the Business receiving compensation from Seller in excess
of $50,000 per annum and a description of the compensation and the components
thereof to which each such person presently is or in the future will be
entitled.
(p) Pension and-other Employee Plans and Contracts.
(i) The only employee pension benefit plans (as defined in Section
3(2) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), welfare benefit plans (as defined in Section 3(i) of ERISA),
bonus, stock purchase, stock ownership, stock option, deferred
compensation, incentive, severance, termination or other compensation plan
or arrangement, and other employee fringe benefit plans maintained by, or
contributed to by Seller or any Affiliate of Seller with respect to
Seller's employees within the past five years are those listed in Schedule
3.01(p) (the "Benefit Plans"). For purposes of this Section 3.01(p), all
references to Seller shall include any other employer that is or was at
any time, together with Seller, treated as a "single employer" under
section 414(b), 414(c) or 414(m) of the Code.
(ii) Seller and each of the Benefit Plans, is in compliance with
the terms of the Benefit Plans, the applicable provisions of ERISA, and
those provisions of the Code applicable to the Benefit Plans, except for
any noncompliance that would not have any adverse effect on Purchaser or
the Purchaser 401(k) Plans, as defined in Section 6.03.
(iii) Each of the Benefit Plans from which Seller will make
"eligible rollover distributions" as described in Section 6.03(a) has
received a
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determination letter from the Internal Revenue Service ("IRS") to the
effect that such plan is qualified and exempt from federal income taxes
under sections 401(a) and 501(a), respectively, of the Code; and no
determination letter with respect to any such Benefit Plan has been
revoked nor, to the knowledge of Seller, has revocation been threatened,
nor has anything occurred with respect to any such Benefit Plan since the
date of its most recent determination letter which would adversely affect
its qualification.
(q) Company Contracts. All Company Contracts (as hereinafter defined)
are valid and in full force and effect, constitute the legal, valid and binding
obligations of Seller and, to Seller's knowledge, the other parties thereto.
There are no existing defaults by Seller or, to Seller's knowledge, by any
other party under the Company Contracts and, to the knowledge of Seller, no
event, act or omission (including without limitation after giving effect to the
Closing contemplated under this Agreement) has occurred which (with or without
notice, lapse of time or the happening or occurrence of any other event) would
result in a default thereunder. To Seller's knowledge, no other party to any
Company Contract has asserted in writing the right to renegotiate the terms or
conditions of any Company Contract. For purposes of this Agreement, the term
"Company Contracts" means and includes those items listed on Schedule 3.01(q)
hereto, and all other contracts, mortgages, debt instruments, security
agreements, licenses, commitments, guarantees, leases, charters, franchises,
powers of attorney and agency and other agreements (i) relating to or affecting
any of the Purchased Assets or (ii) to which Seller or any Affiliate of Seller
is a party or is bound and which relate in part or whole to or affect the
Business, but excluding the Fourth Amended and Restated Credit Agreement, dated
as of June 24, 1994, as amended, restated, supplemented or modified from time
to time, among JPS Textile Group, Inc., JPS Carpet Corp., JPS Converter and
Industrial Corp, Seller, the financial institutions party thereto (the "Senior
Lenders"), Citibank, N.A., as agent and administrative agent for the Senior
Lenders, and General Electric Capital Corporation, in its capacity as co-agent
and collateral agent or the Senior Lenders (the "Seller Credit Agreement").
Schedule 3.01(q) lists all Company Contracts that:
(i) involve or would involve the payment of in excess of $50,000
during any fiscal year or in excess of $50,000 in the aggregate during the
remaining term of such contract, or are otherwise material to the
Business,
(ii) relate to the design of any products sold by Seller or relate
to the payment of royalties with respect thereto,
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(iii) guarantee, indemnify or otherwise cause Seller to be liable
for the obligations or liabilities of another,
(iv) involve the borrowing or lending of money,
(v) involve an agreement with any bank, finance company or similar
organization for the sale of products on credit,
(vi) involve the sale of products on consignment,
(vii) are or contain a power of attorney,
(viii) contain any renegotiation or redetermination provision,
(ix) restrict Seller from carrying on its business anywhere in the
world,
(x) involve as a party (A) any officer or director of Seller or
any Affiliate of Seller or any associate of any such person, as the term
"associate" is defined in the rules and regulations of the Securities and
Exchange Commission ("Associate") or (B) any corporation (other than
Seller), firm or individual in which any such person has any material
interest, or with whom such person has any relation by blood or marriage,
direct or indirect,
(xi) require or are otherwise contingent upon the payment of
commissions or compensation to any person not a party to such Contract, or
(xii) is a collective bargaining agreement.
True and complete copies of all Company Contracts listed on Schedule 3.01(q)
have heretofore been furnished to Purchaser. The contracts, mortgages, debt
instruments, security agreements, licenses, commitments, guarantees, leases,
charters, franchises, powers of attorney, agency and other agreements to which
Seller is a party, which relate to the Business and which are being assigned to
and assumed by Purchaser under this Agreement and which are not listed on
Schedule 3.01(q) will not involve the payment by Purchaser thereunder in the
aggregate under all such contracts of more than $150,000. The bills of sale and
other instruments of transfer delivered at the Closing effectively transfer and
vest in Purchaser all the rights and benefits to which, immediately prior to
the Closing, Seller was entitled under each Company Contract.
(r) Conflicts; Intercompany Relations. To Seller's knowledge, Seller has
not engaged in any transaction, or entered into any material contract, or
conducted any business with any present officer or director of Seller, or with
any Affiliate of
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Seller, with respect to the Business except on terms and conditions no less
favorable to the Business than obtainable from independent third parties.
(s) Labor. Except as set forth on Schedule 3.01(s), (a) there is no
unfair labor practice complaint against Seller pending or, to the knowledge of
Seller, threatened before the National Labor Relations Board or other similar
forum, or to the knowledge of Seller, efforts to organize with respect to
employees of Seller; (b) there is not now, nor has there been within the last
three years, any labor strike, slowdown or stoppage actually pending or
threatened against Seller; (c) no grievance which would have a material adverse
effect on the Business nor any arbitration proceeding arising out of or under
any collective bargaining agreement is pending and no claim therefor exists.
True and complete copies of all collective bargaining or union contracts or
agreements have been provided by Seller to Purchaser and are listed in Schedule
3.01(s).
(t) Product Liability Claims. Except as listed in Schedule 3.01(t),
there are no material product liability or material service liability claims
pending or to Seller's knowledge, threatened against Seller or against any
other party with respect to the products or services of the Business. Schedule
3.01(t) lists all pending product and service liability claims seeking damages
in excess of $10,000 in respect of which Seller or any Affiliate of Seller has
received notice with respect to the products or services of the Business during
the last five years; such claims not listed on such Schedule do not aggregate
more than $50,000. Seller has not experienced any unusual or excessive product
or service liability claims during the last three years with respect to the
products or services of the Business.
(u) Warranties and Returns. Schedule 3.01(u)(i) sets forth a summary of
the present practices and policies followed by Seller with respect to
guarantees, warranties, servicing or repairs of any products sold and services
rendered by the Business, whether such practices are oral or in writing or are
deemed to be legally enforceable. To Seller's knowledge, except as set forth in
Schedule 3.01(u) (ii), there is not presently, nor has there been within the
last two years, any failure of a product sold by Seller such as to require a
general recall or replacement campaign with respect to such product or a
reformulation or change of such product, nor has there been any acceptance of
returns of defective goods of in excess of five percent (5%) of any such
product sold by Seller during either of the years ended October 28, 1995 and
October 28, 1994 or the nine-month period ended July 31, 1996.
(v) Absence of Certain Changes. Except as set forth on Schedule 3.01(v),
since October 28, 1995 there have been no changes in the Business, assets or
liabilities of Seller which individually or in the aggregate have had a
Material Adverse Effect, except for such changes as have affected others
engaged
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in the same business as Seller in a similar way. Since October 28, 1995, except
as set forth in Schedule 3.01(v), (i) the Business has been operated in the
ordinary Course of business consistent with past practice, (ii) Seller has not
entered into, or agreed to enter into, any transaction not in the Ordinary
Course of business and (iii) Seller has not made any changes in its accounting
principles. Without limiting the generality of the foregoing, Seller has not:
(i) increased or experienced any adverse change in any assumption
underlying any method of calculating bad debts, contingencies or other
reserves from that reflected in the financial statements as at June 30,
1996,
(ii) since August 31, 1996, cancelled or waived any claim or right
of substantial value or sold, transferred, distributed or otherwise
disposed of any of its assets, except for a fair consideration in the
Ordinary Course of business,
(iii) since June 30, 1996, written down the value of any inventory
having an aggregate value in excess of $50,000 or written off as
uncollectible notes, trade accounts or other receivables having an
aggregate value in excess of $50,000,
(iv) made any commitment that remains unfulfilled for additions to
property, plant or equipment having an aggregate cost in excess of
$100,000,
(v) since June 30, 1996, experienced any damage, destruction or
loss, whether or not covered by insurance, in excess of $100,000,
(vi) since June 30, 1996, made or agreed to make any increase in
the compensation payable to any of its employees, other than in accordance
with continuing obligations disclosed in the Schedules,
(vii) since October 25, 1995, lost any key employees or key
salespersons,
(viii) since August 31, 1996, entered into or amended any bonus,
incentive, compensation, deferred compensation, or any employment or
consulting agreement,
(ix) since June 30, 1996, sold or disposed of any of its assets,
except dispositions of Inventory in the Ordinary Course of business,
(x) since June 30, 1996, entered into any transaction or contract,
or amended or terminated any transaction or contract, with respect to the
Business,
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except normal transactions or contracts consistent in nature and scope with
prior practices and entered into in the Ordinary Course of business in
arm's length transactions, none of which transactions or contracts, or
amendments or terminations thereof, could reasonably be expected to have a
Material Adverse Effect upon the Purchased Assets or the Business, or the
financial condition or prospects thereof, acquired by Purchaser pursuant to
this Agreement, or
(xi) since the applicable date set forth above, agreed, whether in
writing or not, to do any of the foregoing.
(w) Other Information. The representations and warranties of Seller
set forth in this Agreement or in any certificate furnished pursuant hereto are
correct and complete in all material respects, and do not contain any untrue
statement of a fact or omit to state any fact necessary in order to make the
statements and information contained therein not materially misleading.
(x) Brokers. No Person has acted directly or indirectly as a
broker, finder or financial advisor for Seller in connection with the
negotiations relating to or the transactions contemplated by this Agreement and
no Person is entitled to any fee or commission or like payment in respect
thereof based in any way on agreements, arrangements or understandings made by
or on behalf of Seller. As used in this Agreement, "Person" shall mean any
individual, corporation, partnership, limited liability company, association,
joint stock company, trust, unincorporated organization or a government or
political subdivision thereof.
(y) Solvency. Based upon information presently known to Seller and
assuming the accuracy of Purchaser's representations and warranties contained in
this Agreement, Seller has adequate capital and is able to satisfy its known and
reasonably probable liabilities as they come due in the ordinary course of
business, and the fair salable value of the assets of Seller exceeds such
liabilities.
For purposes of this Agreement, references to the "knowledge of Seller",
"Seller's knowledge" or "Seller's awareness" or words of similar import shall
mean and include the actual knowledge of the officers and directors of Seller,
after due inquiry of the officers and personnel listed on Schedule 3.01(y) with
respect to the indicated matters.
3.02. Representations and Warranties of Purchaser. Purchaser
represents and warrants to Seller as follows, and acknowledges and confirms
that Seller is relying upon such representations and warranties in connection
with the execution, delivery and performance of this Agreement, notwithstanding
any investigation made by Seller or any of its Affiliates.
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(a) Due Organization. Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation and is qualified to transact business as a foreign corporation in
the jurisdictions (listed on Schedule 3.02(a) hereto) where it is required to
qualify in order to conduct the Business as presently conducted, except where
the failure so to qualify would not have a Material Adverse Effect. Purchaser
has the power and authority to own, lease and operate its properties, to carry
on its business as it is now being conducted and to enter into this Agreement.
(b) Consents, Authorizations and Binding Effect. Purchaser may
execute, deliver and perform this Agreement without the necessity of Purchaser
obtaining any consent, approval, authorization or waiver or giving any notice,
except for such consents, approvals, authorizations or waivers which have been
obtained and are unconditional and in full force and effect and such notices
which have been given. This Agreement has been duly authorized, executed and
delivered by Purchaser and constitutes the legal, valid and binding obligation
of Purchaser, enforceable against it in accordance with its terms, except as may
be limited by bankruptcy, reorganization, insolvency, fraudulent conveyance,
moratorium or other similar laws of general application relating to or affecting
the enforcement of rights of creditors and by general principles of equity
(whether considered in an action at law or in equity) . The execution, delivery
and performance of this Agreement will not:
(i) constitute a violation of the Certificate of Incorporation or
the By-laws of Purchaser, or
(ii) conflict with, result in the breach of, or constitute a
default, or give any other person the right to terminate and/or to
accelerate any obligation, under, any restriction or other instrument to
which Purchaser is a party or by which Purchaser may be bound or affected,
or
(iii) constitute a violation of any statute, order, decree,
regulation or rule of any court, government authority or arbitrator which
may be applicable to the Purchaser or its parent company or shareholders.
(c) Financing Arrangements. On the Closing Date, Purchaser will
have sufficient funds available to comply with Purchaser's obligations under
Article IV and to consummate the transactions contemplated in this Agreement.
(d) Disputes. There is no litigation pending or, to Purchaser's
knowledge, threatened, against Purchaser which would materially impair the
ability of Purchaser to consummate the transactions contemplated by this
Agreement.
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(e) Brokers. No person has acted directly or indirectly as a
broker, finder or financial advisor for Purchaser in connection with the
negotiations relating to or the transactions contemplated by this Agreement and
no Person is entitled to any fee or commission or like payment in respect
thereof based in any way on agreements, arrangements or understandings made by
or on behalf of Purchaser.
(f) Solvency. Immediately following the Closing, and after giving
effect to any financing obtained by Purchaser in connection with the financing
and the consummation of the transactions contemplated under this Agreement,
based upon information presently known to Purchaser regarding future operations
of the Business and assuming the accuracy of Seller's representations and
warranties contained in this Agreement, Purchaser will have adequate capital and
will be able to satisfy its known and reasonably probable liabilities as they
come due in the ordinary course of business, and the fair salable value of the
assets of Purchaser will exceed such liabilities.
ARTICLE IV
CLOSING AND CONDITIONS OF CLOSING
4.01. Closing. The closing of the transactions contemplated by this
Agreement is taking place at the offices of Dechert Price & Rhoads in New York,
New York commencing at 9:00 a.m. local time on the date of this Agreement (the
"Closing Date"), or at such other location, or at such other time, as the
parties hereto shall agree. The Closing shall be deemed to be effective as of
the opening of business on the date of this Agreement, which shall be the
"Closing" or the "Closing Date" for the purposes of this Agreement or any
instrument or document delivered in connection herewith.
4.02. Conditions of Obligations of Purchaser. The obligations of
Purchaser to consummate the sale and purchase under this Agreement are subject
to the satisfaction of the following conditions, each of which may be waived by
Purchaser.
(a) Representations and Warranties; Performance of Obligations. The
representations and warranties of Seller set forth in this Agreement shall be
true and correct in all material respects. Seller shall have performed in all
material respects the obligations necessary to be performed by it under this
Agreement prior to the Closing Date. Purchaser shall have received certificates,
dated as of the Closing Date, signed by the President and Secretary of Seller
with respect to the foregoing.
(b) Authorization of Agreement. All action necessary to authorize
the execution, delivery and performance of this Agreement by Seller shall have
been duly and validly taken by the Board of Directors, Seller and the
stockholders of Seller, and
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Seller shall have full power and right to consummate the transactions
contemplated hereby on the terms provided herein.
(c) Transfer of Assets. Seller shall have delivered to Purchaser
the Purchased Assets and such warranty deeds, bills of sale with covenants of
warranty, endorsements, assignments, and other good and sufficient instruments
of transfer and conveyance, and opinions and documents of further assurance, in
form and substance reasonably satisfactory to Purchaser and its counsel, as
shall be effective to vest in Purchaser, and evidence the vesting in Purchaser
of, good and valid title to the Purchased Assets as provided for, and subject to
the limitations and exceptions set forth, in this Agreement.
(d) Consents. Subject to Section 1.03, Purchaser shall have
received evidence, in form and substance reasonably satisfactory to Purchaser,
that any licenses, trademarks, trade names, patents, permits, consents,
registrations, authorizations and/or orders of governmental authorities and
parties to contracts with Seller as are necessary to the consummation of the
transactions contemplated by this Agreement, and for Purchaser to operate the
Business, have been obtained. All governmental authorizations, consents,
approvals, exemptions, or other actions required to consummate the transactions
contemplated by this Agreement shall have been obtained and shall be in full
force and effect.
(e) Surveys and Title Insurance Policies. Purchaser shall have
received surveys (certified to Purchaser and its lender(s) and prepared at
Seller's expense) and preliminary title insurance binders (obtained at
Purchaser's expense) in form and substance reasonably satisfactory to counsel to
Purchaser, showing good and marketable title in fee simple, as warranted in
Section 3.01(e), to the real property vested in Seller, title to which is to be
transferred to Purchaser pursuant to Section 1.01.
(f) Security Interests, Encumbrances, Liens, etc. Purchaser shall
have received written advice (which shall be obtained at Purchaser's expense and
updated as of the Closing Date), in form and substance reasonably satisfactory
to counsel to Purchaser, to the effect that a search of the public records has
disclosed that no Liens, other than those reflected in Schedule 3.01(d) or being
released at Closing, have been filed or recorded with respect to the Business or
the Purchased Assets.
(g) Opinion of Counsel to Seller. Purchaser shall have received
the favorable opinion of Weil, Gotshal & Manges LLP, counsel to Seller, dated as
of the Closing Date.
(h) Suits or Proceedings. No suit, proceeding or investigation
shall have been commenced or, to Seller's knowledge, threatened by any
governmental authority or private person on any grounds to restrain, enjoin or
hinder, or to seek material damages on account of, the consummation of the
transactions herein contemplated.
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(i) Financial Statements. Seller shall have delivered to Purchaser
the management reports of the Business as at the end of each calendar month
prior to the Closing Date commencing with the month ending November 30, 1995,
through August 31, 1996.
(j) Agreements. Seller shall have entered into a Trademarks
Agreement providing for the transfer of certain rights in certain Intellectual
Property not being conveyed as part of the Purchased Assets (the "License
Agreement"), a sublease with respect to the lease of the Business's Westfield,
North Carolina real property (the "Sublease") and a services agreement with
respect to the provision by Seller of certain services by Seller to Purchaser
(the "Services Agreement").
4.03. Conditions of Obligations of Seller. The obligations of Seller
to consummate the sale and purchase under this Agreement are subject to the
satisfaction of the following conditions, each of which may be waived by Seller:
(a) Representations and Warranties; Performance of Obligations. The
representations and warranties of Purchaser set forth in this Agreement shall be
true and correct in all material respects. Purchaser shall have performed the
obligations necessary to be performed by it under this Agreement prior to the
Closing Date. Seller shall have received the certificates, dated as of the
Closing Date, signed by the Chairman and the Secretary of Purchaser with respect
to the foregoing.
(b) Authorization of Agreement. All action necessary to authorize
the execution, delivery and performance of this Agreement by Purchaser shall
have been duly and validly taken by the Board of Directors of Purchaser and the
stockholders of Purchaser and Purchaser shall have full power and right to
consummate the transactions contemplated hereby on the terms provided herein.
(c) Opinion of Counsel to Purchaser. Seller shall have received the
opinion of Messrs. Dechert Price & Rhoads, counsel to Purchaser dated as of the
Closing Date.
(d) Purchase Price. Purchaser shall have delivered to Seller the
Estimated Purchase Price.
(e) Assumption of Liabilities and Certain Contracts. Purchaser
shall have executed and delivered to Seller an agreement of assumption, assuming
and agreeing to pay and perform, and covenanting with Seller that Purchaser will
pay and perform the Assumed Liabilities.
(f) Suits or Proceedings. No suit, proceeding or investigation
shall have been commenced or, to Purchaser's knowledge, threatened by any
governmental authority or private person on any grounds to restrain, enjoin or
hinder, or to seek material damages on account of, the consummation of the
transactions herein contemplated.
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(g) Consents. All governmental and third party authorizations,
consents, approvals, exemptions, lien releases, or other actions required to
consummate the transactions contemplated by this Agreement shall have been
obtained and shall be in full force and effect, including without limitation any
consents pursuant to the Seller Credit Agreement.
ARTICLE V
INDEMNIFICATION
5.01. Indemnification of Purchaser. Subject to the terms and
conditions of this Article V, Seller shall defend, at its own expense, and shall
indemnify Purchaser, its Affiliates and their respective directors, officers,
employees, shareholders and agents (collectively, "Purchaser's Indemnified
Persons") against, and hold Purchaser's Indemnified Persons harmless from, any
and all loss, damage or liability, and all expenses (including without
limitation legal fees and costs of investigation, remediation or other response
action and other costs) (the "Damages"), asserted against or incurred by
Purchaser's Indemnified Persons resulting from or arising out of:
(i) any breach of the representations and warranties made by
Seller in or pursuant to this Agreement or by Seller or any Affiliate of
Seller in any certificate or other instrument or agreement furnished or to
be furnished to Purchaser hereunder; and
(ii) the non-fulfillment of any agreement or covenant made by
Seller in or pursuant to this Agreement or by Seller or any Affiliate of
Seller in any certificate or other instrument or agreement furnished or to
be furnished to Purchaser hereunder;
(iii) the Retained Liabilities; and
(iv) the litigation, claims and proceedings identified in Schedule
3.01(i).
5.02. Indemnification of Seller. Subject to the terms and conditions
of this Article V, Purchaser shall defend, at its own expense, and shall
indemnify Seller, its Affiliates and their respective directors, officers,
employees, shareholders and agents against, and hold Seller and its directors,
officers, employees, shareholders and agents harmless from, any and all Damages
incurred by Seller and its directors, officers, employees, shareholders and
agents, resulting from or arising out of:
(i) any breach of the representations and warranties made by
Purchaser in or pursuant to this Agreement or by Purchaser or any
Affiliate of Purchaser
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in any certificate or other instrument furnished or to be furnished to
Seller hereunder;
(ii) the non-fulfillment of any agreement or covenant made by
Purchaser in or pursuant to this Agreement, or by Purchaser or any
Affiliate of Purchaser in any certificate or other instrument or agreement
furnished or to be furnished to Seller hereunder; and
(iii) the Assumed Liabilities.
5.03. Claims.
(a) General. Promptly after receipt by an indemnified party of
written notice of the commencement of any investigation, claim, proceeding or
other action in respect of which indemnity may be sought from the indemnitor (an
"Action"), such indemnified party shall notify the indemnitor in writing of the
commencement of such Action; but the omission to so notify the indemnitor shall
not relieve it from any liability that it may otherwise have to such indemnified
party, except to the extent that the indemnitor is materially prejudiced or
forfeits substantive rights or defenses as a result of such failure. In
connection with any Action in which indemnitor and any indemnified party are
parties, the indemnitor shall be entitled to participate therein, and may assume
the defense thereof. If the indemnifying party advises the indemnified party in
writing that it is assuming the defense of such Action and responsibility for
any judgments or settlements resulting therefrom, notwithstanding the assumption
of the defense of any such Action by the indemnitor, each indemnified party
shall have the right to employ separate counsel and to participate in the
defense of such Action, and the indemnitor shall bear the reasonable fees, costs
and expenses of such separate counsel to such indemnified party if: (a) the
indemnitor shall have agreed to the retention of such separate counsel, (b) the
indemnified party shall have reasonably concluded that representation of such
indemnified party and the indemnitor by the same counsel would be inappropriate
due to actual or, as reasonably determined by such indemnified party's counsel,
potential differing interests between them in the conduct of the defense of such
Action, or if there may be legal defenses available to such indemnified party
that are different from or additional to those available to the indemnitor, or
(c) the indemnitor shall have failed to employ counsel reasonably satisfactory
to such indemnified party within a reasonable period of time after notice of the
institution of such Action or shall not be diligently defending such action. If
such indemnified party retains separate counsel in cases other than as described
in clauses (a), (b) or (c) above, such counsel shall be retained at the expense
of such indemnified party. Except as provided above, it is hereby agreed and
understood that the indemnitor shall not, in connection with any Action in the
same jurisdiction, be liable for the fees and expenses of more than one counsel
(plus appropriate local counsel) for all such
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indemnified parties. The party from whom indemnification is sought shall not,
without the written consent of the party seeking indemnification (which consent
shall not be unreasonably withheld), settle or compromise any claim or consent
to entry of any judgment that does not include an unconditional release of the
party seeking indemnification from all liabilities with respect to such claim.
(b) Other Claims. In the event one party hereunder should have a
claim for indemnification that does not involve a claim or demand being asserted
by a third party, the party seeking indemnification shall promptly send notice
of such claim to the party from whom indemnification is sought. If the latter
does not dispute such claim, the latter shall pay such claim in full within 10
Business days. If the latter disputes such claim, such dispute shall be resolved
by agreement of the parties or in any other manner available under law.
(c) Limitations on Indemnification. Notwithstanding any other
provision of this Agreement, with respect to any Damages resulting from a breach
of any of the representations and warranties by either party hereto, the other
party hereto (an "Indemnitee") shall be entitled to indemnification for only
those Damages which arise out of such breach and are in excess of $150,000 in
the aggregate (it being agreed that such Indemnitee shall bear the first
$150,000 of Damages arising from such breaches or alleged breaches); Provided,
however, that such limitations in this paragraph (c) shall not apply to Damages
resulting from a breach of Sections 3.01(b), the first sentence of 3.01(d),
3.01(x), 3.02(b) or 3.02(e) or from the breach of any covenant, agreement or
undertaking made in or pursuant to this Agreement. In no event will either party
be liable under or with respect to this Agreement for any Damages or any portion
of any Damages arising out of the breach of any representation or warranty in
excess of the sum of the Purchase Price, as adjusted pursuant to Section 2.04,
plus $2,597,328.
(d) Subject to the provisions of Section 6.02 and 7.08, each party
hereto acknowledges and agrees that, after the Closing Date, its sole and
exclusive legal remedy with respect to any and all claims relating to or arising
out of a breach of any representation, warranty, covenant or agreement made by
the other party in this Agreement shall be pursuant to the indemnification
provisions set forth in this Article Five.
(e) In calculating any amounts payable pursuant to this Article
Five by the Seller or the Purchaser, as the case may be, such amounts shall be
reduced by (i) any tax benefit actually realized by the Indemnified Party, after
taking into account any tax burden realized by the Indemnified Party, as a
result of the facts giving rise to the claim for indemnification and receipt of
the indemnification payment, and (ii) any insurance recoveries received by the
Indemnified Party. All amounts paid pursuant to this Article five by one party
to another party shall be treated
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by such parties as an adjustment to the Purchase Price for the Purchased Assets.
ARTICLE VI
CERTAIN POST CLOSING MATTERS
6.01. Allocation of Purchase Price. Seller and Purchaser acknowledge
and agree that the allocation of the Purchase Price provided for by Schedule
2.05 hereto, and the following undertaking with respect to tax reporting, have
been specifically negotiated by the parties at arms's length, and are part of
the basis of this Agreement. Seller and Purchaser covenant and agree that each
shall execute such tax forms and schedules as may be necessary or appropriate
with respect to this transaction and such allocation and each shall prepare its
Federal, state and local income tax returns employing the allocation of the
Purchase Price set forth on Schedule 2.05 and will not take a contrary position
with respect to such allocation in any tax proceeding or audit provided,
however, that nothing contained herein shall require Seller or Purchaser to
contest any proposed deficiency or adjustment by any taxing authority or
agency; exhaust administrative remedies; or litigate before any court with
respect to such allocation of the Purchase Price.
6.02. Non-Competition and Confidentiality. (a) Seller agrees that,
without the prior written consent of Purchaser, neither it nor any of its
Affiliates shall, for a period of two years after the Closing Date, directly or
indirectly,
(i) be retained by, render consulting or advisory services to, or
be a proprietor, director, partner or shareholder of, or operate, any
enterprise that competes directly with Purchaser in the Business (as
conducted as of the Closing Date) in such geographical areas as Seller
manufactures, distributes and sells as of the date hereof or as to which
it has developed any plans or proposals to manufacture, distribute or
sell;
(ii) disrupt any then existing relationship, contractual or
otherwise, between Purchaser and any of the customers or clients of
Purchaser or the Business or other persons with whom Purchaser deals with
respect to the Business in a manner that could reasonably be expected to
have an adverse effect on Purchaser; or
(iii) solicit for employment or assist any other entity in
soliciting for employment any employee or executive employed by Seller and
hired by Purchaser on the Closing Date.
(b) Without the specific prior written consent of Purchaser, Seller
shall not, directly or indirectly, and Seller shall cause its Affiliates not to,
divulge to any person, firm, corporation or association, or use for its own
benefit, any trade
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secrets, proprietary secrets and any other confidential information concerning
the Business, affairs, customers or clients of Seller relating to the Business
or any data or statistical information of Seller relating to the Business,
acquired by Purchaser pursuant to this Agreement, it being the intent of this
Agreement to restrict Seller and its Affiliates and their officers and
employees from disseminating or using any data or information which is included
in the Purchased Assets and which is at the time of such use or dissemination
unpublished and not readily available or generally known to persons involved or
engaged in any businesses competitive with the Business; provided, however,
that nothing herein shall prohibit Seller from (i) complying with any order or
decree of any court of competent jurisdiction or governmental authority, but
Seller will give Purchaser timely notice of the receipt of any such order or
decree to enable Purchaser to attempt to obtain a protective order, or (ii)
disclosing such information to the extent necessary to the Senior Lenders under
the Seller Credit Agreement and their counsel and advisors, or as may be
required by any law or the rules of any securities exchange, and provided,
further, that the foregoing provision shall not apply to any information which
is or becomes generally available to the public through no breach of this
Agreement. In addition, Seller shall advise the respective officers and
employees of Seller and its Affiliates of the obligations of Seller and such
Affiliates under this paragraph (b), that such trade secrets, proprietary
secrets and other confidential information have been conveyed to Purchaser and
that such officers and employees are not entitled to use or disclose to any
other person any of such secrets or confidential information and that Purchaser
may enforce directly against such officers and employees whatever rights
Purchaser may have with respect to such secrets and confidential information.
(c) Although the restrictions contained in Section 6.02(a) hereof
are considered by the parties hereto to be fair and reasonable in the
circumstances, if any of such restrictions shall be adjudged to be void or
unenforceable for whatever reason, but would be valid if part of the wording
thereof were deleted, or the period thereof reduced or the area dealt with
thereby reduced in scope, the restrictions contained in Section 6.03(a) shall
apply, at the election of Purchaser, with such modifications as may be necessary
to make them valid, effective and enforceable in the particular jurisdiction in
which such restrictions are adjudged to be void or unenforceable.
(d) If a violation of any covenant contained in this Section 6.02
occurs or is threatened, Seller acknowledges that such violation or threatened
violation will cause irreparable injury to Purchaser and the remedy at law for
any such violation or threatened violation will be inadequate, and Purchaser
shall be entitled to temporary and permanent injunctive relief without the
necessity of proving actual damages.
(e) The covenants contained in this Section 6.02 shall inure to the
benefit of Purchaser and its successors and assigns.
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6.03. Certain Employee and Employee Benefits Matters.
(a) As soon as practical after the Closing Date, Purchaser shall
establish two (2) qualified defined contribution plans, that include a qualified
cash or deferred arrangement under Section 401(k) of the Code ("Purchaser 401(k)
Plans"), one for hourly employees and one for salaried employees, copies of
which plans have been furnished or made available to Seller. The Purchaser
401(k) Plans shall cover each employee eligible to participate ("Participating
Employee") under the Savings, Investment, and Profit-Sharing Plan of JPS Textile
Group ("Seller 401(k) Plan") who becomes an employee of Purchaser as of 12:01
a.m. on the day following the Closing Date and who was eligible to participate
in the Seller 401(k) Plan as of the Closing Date. To the extent allowed by law,
Seller shall cause all distributions from the Seller 401(k) Plan on or following
the Closing Date to qualify as "eligible rollover distributions" and shall
timely provide the "section 402(f) notice" to participants under the Seller
401(k) Plan or shall notify Purchaser in writing whether and to what extent
distributions from the Seller 401(k) Plan do not qualify as "eligible rollover
distributions." Purchaser shall cause the Purchaser 401(k) Plans to allow
acceptance of "eligible rollover distributions" and the transfer of any
outstanding participant loans from the Seller 401(k) Plan. The Purchaser 401(k)
Plans shall recognize for all Plan purposes all service recognized by the Seller
401(k) Plan on the Closing Date with respect to all employees of the Purchaser.
(b) Purchaser and Seller shall cooperate with one another and take,
or cause to be taken, such action as may be necessary or desirable to accomplish
the actions described in this Section 6.03. Purchaser and Seller agree to
provide each other with such records, information and assistance as they may
reasonably request including any such information necessary to carry out their
respective obligations under this Section 6.03.
(c) No employee of Purchaser, nor his spouse, former spouse or
other beneficiary under the Seller 401(k) Plan, the Purchaser 401(k) Plans, or
any other plan of Seller or Purchaser shall be entitled to assert any claim, as
a third party beneficiary or otherwise, under any provision of this Agreement
(including, but not limited to, this Section 6.03).
(d) Seller shall be liable for any and all claims for health,
medical, dental, drug or similar benefits for employees of Seller (and their
beneficiaries) with respect to which expenses were incurred on or prior to
midnight of the Closing Date including, but not limited to, any such claims
which were incurred but not reported) ("Pre-Closing Health Benefits"); provided,
however, that with respect to any employee listed on Schedule 6.04(b) (or any
eligible dependents thereof), Seller shall be liable for all such claims and
benefits incurred on or prior to his or her respective Employment Date (as
defined in Section 6.04(b) herein). Purchaser shall establish a group health
plan ("Purchaser's Health Plan") which shall provide
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coverage for medical, dental and drug benefits substantially similar to that
provided by Seller and shall apply with respect to claims by persons who become
employees of Purchaser as of 12:01 a.m. on the day following the Closing Date
("Purchaser Employees") (and their beneficiaries) with respect to which the
covered expenses were incurred after 12:01 a.m. on the day following the
Closing Date. Purchaser's Health Plan will waive eligibility waiting periods,
pre-existing conditions and "actively at work" requirements with respect to
Purchaser Employees to the extent such eligibility waiting periods, preexisting
conditions and "actively at work" requirements were satisfied by the Purchaser
Employees under Seller's group health plan as of the Closing Date, provided
however, that Purchaser's Health Plan will give credit for employment service
with Seller to the extent that any recent hires of Seller have earned service
credit with Seller toward their eligibility waiting periods, and which will
credit any health or medical service expenses incurred during the 1996 plan
year and on or before the Closing Date for purposes of applying the deductible
and out of pocket limits under Purchaser's Plans for all Purchaser Employees.
Notwithstanding the foregoing, Seller shall be liable for any and all claims
for health, medical, dental, drug or similar benefits for persons who retired
from employment with Seller (and their beneficiaries) and do not become
employees of Purchaser following the Closing Date, without regard to whether
expenses were incurred before, on or after the Closing Date ("Retiree Health
Benefits").
(e) Seller shall be liable for any and all long-term disability
benefits under the terms of its insured long term disability plan, payable to
all current and former employees of Seller who become entitled to such benefits
on or prior to the Closing Date and whose covered disability continues after the
Closing Date ("Seller's Disability Obligations"). Purchaser will provide a
long-term disability insurance plan for all salaried persons who become
employees of Purchaser effective as of 12:01 a.m. on the day following the
Closing Date.
(f) Purchaser shall provide severance benefits to such persons
hired as employees by Purchaser following the Closing Date and thereafter
terminated by Purchaser in accordance with Purchaser's own severance plan or
policy; provided, however, that Purchaser shall reimburse Seller for any
severance expense incurred by Seller with respect to any such employee
terminated within 150 days after such employee's Employment Date (as defined in
Section 6.04(b) herein). Except as provided above, Purchaser shall not assume
nor be liable for any severance obligation under any severance plans,
agreements, and policies of Seller with respect to any current or former
employee of Seller, including without limitation any severance obligation
arising as a result of the transactions contemplated by this Agreement
("Pre-Closing Severance Benefits").
(g) Effective as of the day following the Closing Date, Purchaser
will establish a Code Section 125 flexible
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benefits program ("Purchaser's FSA") substantially identical to the JPS Textile
Group, Inc. Flexible Benefits Program ("Seller's FSA") for the benefit of the
Employees (as defined in Section 6.04(a) herein). Seller will retain all
obligations and liabilities under Seller's FSA through the Closing Date.
(h) Purchaser shall credit each employee who accepts Purchaser's
offer of employment in accordance with Section 6.04(b) herein with his or her
credited service with Seller for all purposes (other than benefit accruals)
under Purchaser's employee benefit plans, arrangements and payroll practices
applicable to such employee.
(i) Seller shall be liable for any and all claims for employees of
Seller for workers, compensation benefits arising out of or with respect to
conditions or states of fact existing or events occurring on or prior to the
Closing Date ("Pre-Closing Workers' Compensation Benefits"). Purchaser shall
provide workers' compensation coverage and benefits with respect to employees of
Seller hired by Purchaser following the Closing Date.
(j) Seller shall be liable for any and all claims for employees of
Seller for life insurance benefits arising out of or with respect to events
occurring on or prior to the Closing Date. Purchaser shall provide life
insurance coverage and benefits with respect to employees of Seller hired by
Purchaser following the Closing Date.
6.04. Offers of Employment. (a) Schedules 3.01(o) and 6.04(a) list
the name, job title, current base salary or hourly wage, annual bonus
opportunity, and assigned location of all salaried employees actively employed
by Seller in connection with the Business, as well as three individuals
designated as "inactive" thereon, together with a listing by name and job title
of Seller's Hourly Employees. All individuals included on Schedule 6.04(a) are
herein referred to as the "Employees." Except as set forth on Schedules 6.04(a)
and 6.04(b), there are no other inactive employees of Seller.
(b) Effective as of the Closing, Purchaser shall offer employment
with Purchaser (or its designee) beginning as of the day after the Closing Date
to all of the Employees (other than those three inactive individuals listed on
Schedule 6.04(b)) as of the Closing Date. In addition, Purchaser (or its
designee) shall offer employment with Purchaser to the individuals who are
listed on Schedule 6.04(b) if such individual reports for active employment with
Purchaser (or its designee) upon release by his or her physician to return to
active employment from a medical leave or the expiration of an approved leave;
provided, however, no individual shall be offered employment under this
provision after six months from the Closing Date or after the expiration of any
applicable federal or state law period, if later. Such employment offers shall
include salary or wages (including, as applicable, shift differentials,
incentives and premiums) and
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employee benefits on such terms as Purchaser has disclosed to Seller; provided,
further, that nothing set forth herein shall prevent Purchaser from altering in
any way it deems advisable the salary or wages or employee benefits offered by
Purchaser to its employees after the Closing Date. Those Employees who accept
Purchaser's employment offers and become employees actively at work with
Purchaser as of the Closing (or at any time within 30 days thereafter) and
those three inactive individuals listed on Schedule 6.04 (a) are the "Affected
Employees," and the day following the Closing Date is the "Employment Date"
of the Affected Employees. Purchaser may terminate no more than 20 Employees
who accept Purchaser's offer of employment for 60 days immediately following
the Closing Date.
6.05. Product Returns. Seller shall be responsible for the repair
and/or replacement of products sold or shipped by the Business prior to the
Closing Date to the extent (i) such product is Defective (as defined herein);
(ii) a valid claim in respect of such product is received within 9 months after
the Closing Date and (iii) the cost of such repair or replacement, when
aggregated with all other repairs and replacements in respect of products sold
or shipped prior to the Closing Date exceeds the reserve for such items on the
Closing Statement (the "Retained Warranty Obligations"). As used in this
paragraph, "Defective" shall mean, with respect to a product, (i) a product
which fails to perform to or meet established internal specifications of the
Business, (ii) a product which fails to perform to or meet established
standards or (iii) a product which fails to perform to or meet customer
requirements known by Seller at time of sale. Purchaser will regularly advise
Seller of its receipt of its claims promptly after they have been received,
will permit Seller to have duplicate samples with respect to product subject to
such claims and will permit Seller to observe Buyer's internal testing of such
product in order to determine if a product is Defective. Purchaser shall use
its reasonable efforts to repair and resell any Defective products; any sums
received therefrom are referred to herein as the "Resale Amounts." Subject to
the foregoing, if Seller requests Purchaser to repair and/or replace products
sold or shipped prior to the Closing Date which are Retained Warranty
Obligations, Purchaser will use all reasonable efforts to do so. Seller will
promptly reimburse Purchaser for such repair or replacement in an amount equal
to the excess of (x) reasonable costs incurred by Purchaser for such repair or
replacement, over (y) the sum of (i) the remaining reserve for such items on
the Closing Statement, and (ii) any Resale Amounts received by Purchaser. At
the end of the nine-month period described above, Purchaser shall promptly pay
Seller an amount equal to the remaining reserve on the Closing Statement for
the repair and replacement of Defective products.
6.06. Access to Records After Closing. (a) Following the Closing,
Purchaser shall give to Seller, without charge, reasonable access, during normal
business hours and on reasonable prior advance notice, to (and the right to make
copies at the expense of Seller of) the books, files, records and tax returns
34
<PAGE> 38
of or applicable to the Business to the extent that such relate to the business
and operations of the Business on or prior to the Closing Date and are in the
Business's possession on the Closing Date or subsequently come into the
Business's possession, but any access pursuant to this Section shall be
conducted by Seller in good faith, with a reasonable and legitimate business
purpose and in such manner as not to interfere unreasonably with the operations
of the Business following the Closing. For a period of six years after the
Closing, Purchaser shall maintain such books, files, records and tax returns
and thereafter, prior to destroying or disposing of any of them, Purchaser
shall give 30 days' advance notice to Seller of the intended destruction or
disposition, and during such 30-day period Seller shall have the right to take
possession of the same or to make copies of the same, all at Seller's expense.
(b) Following the Closing, Seller shall give to Purchaser, without
charge, reasonable access, during normal business hours and on reasonable prior
advance notice, to (and the right to make copies at the expense of Purchaser of)
the books, files, records and tax returns of the Seller to the extent that such
relate to the business and operations of the Business on or prior to the Closing
Date and are in Seller's possession on the Closing Date or subsequently come
into Seller's possession, but any access pursuant to this Section shall be
conducted by Purchaser in good faith, with a reasonable and legitimate business
purpose and in such manner as not to interfere unreasonably with the operations
of Seller following the Closing. For a period of six years after the Closing,
Seller shall maintain such books, files, records and tax returns and thereafter,
prior to destroying or disposing of any of them, Seller shall give 30 days'
advance notice to Purchaser of the intended destruction or disposition, and
during such 30-day period Purchaser shall have the right to take possession of
the same or to make copies of the same, all at Purchaser's expense.
6.07. Tax Matters. (a) Seller and Purchaser shall cooperate fully
with each other and make available or cause to be made available to each other
in a timely fashion such Tax data, prior Tax returns and filings and other
information as may be reasonably required for the preparation by Purchaser or
Seller of any Tax return, elections, consents, certificates or other documents
required to be prepared or filed by Purchaser or Seller and any audit or other
examination by any taxing authority, or judicial or administrative proceeding
relating to liability for Taxes. Purchaser and Seller will each retain and
provide to the other party all records and other information which may be
relevant to any such Tax return, document, audit or examination, proceeding or
determination, and will each provide the other party with any final
determination of any such audit or examination, proceeding or determination that
affects any amount required to be shown on any Tax return of the other party for
any period. Purchaser will retain copies of all Tax returns, supporting work
schedules and other records relating to Tax
35
<PAGE> 39
periods or portions thereof ending prior to or on the Closing Date.
(b) Any sales, recording, transfer, use or other similar Taxes or
fees imposed as a result of the sale of the Business to Purchaser pursuant to
this Agreement shall be shared equally by Seller and Purchaser. At the Closing,
Purchaser shall deliver to Seller such properly completed resale exemption
certificates and other similar certificates or instruments as are necessary to
claim available exemptions from the payment of sales, transfer, use or other
similar Taxes under applicable law.
(c) All real and personal property Taxes, state and local ad
valorem Taxes and assessments applicable to the Business or the Purchased Assets
for the taxable year in which the Closing takes place shall be prorated on a
"closing of the books" basis by the parties as of the Closing Date, and all such
Taxes applicable to the portion of such taxable period prior to the Closing Date
shall be the sole obligation, responsibility and expense of Seller. All such
assessments and Taxes applicable to periods on or after the Closing Date shall
be the sole obligation, responsibility and expense of Purchaser.
(d) Following the Closing, Purchaser and Seller shall reach
agreement as to whether they shall use the "Alternative Procedure" provided in
Section 5 of Revenue Procedure 84-77 with respect to filing and furnishing
Internal Revenue Service Forms W-2, W-3 and 941 for the 1996 calendar year. If
Purchaser and Seller so agree, under such "Alternative Procedure" (i) Seller and
Purchaser each shall report on a predecessor-successor basis as set forth in
such Revenue Procedure, (ii) Seller shall be relieved from furnishing Forms W-2
to employees of Seller that become employees of Purchaser, (iii) Purchaser shall
assume the obligations of Seller to furnish such Forms W-2 to such employees for
the full 1996 calendar year, (iv) Purchaser shall use such similar procedures
and make similar elections under state or local Tax laws and (v) Purchaser
shall be responsible for filing and furnishing Internal Revenue Service Forms
W-2, W-3 and 941 for the 1996 calendar year.
6.08. Accounts Payable. Following the Closing, Purchaser shall
perform and discharge as and when due, all debts, claims, liabilities,
obligations and expenses incurred by Purchaser with respect to accounts payable
to third parties, subject to any defenses or claimed offsets asserted in good
faith against the obligee to which such debts, claims, liabilities, obligations
and expenses are owed.
ARTICLE VII
MISCELLANEOUS
7.01. Further Actions. From time to time, as and when requested by
either Party hereto (the "Requesting Party"), the other Party hereto shall
execute and deliver, or cause to be executed and delivered, all such documents
and instruments and
36
<PAGE> 40
shall take, or cause to be taken, all such further or other actions as the
Requesting Party may reasonably deem necessary or desirable to carry out the
intent and purposes of this Agreement, to convey, transfer, assign and deliver
on the Closing Date to Purchaser, and its successors and assigns, the Purchased
Assets (or to evidence the foregoing) and to consummate the other transactions
contemplated hereby.
7.02. Expenses. Whether or not the transactions contemplated by this
Agreement are consummated, each of Purchaser and Seller shall pay their
respective expenses in connection with the negotiation, execution, delivery and
performance of this Agreement.
7.03. Entire Agreement. This Agreement, which includes the Schedules
and Exhibits hereto and the other documents, agreements and instruments executed
and delivered pursuant to or in connection with this Agreement, contains the
entire agreement between Purchaser and Seller with respect to the transactions
contemplated by this Agreement and supersedes all prior arrangements or
understandings with respect thereto.
7.04. Descriptive Headings. The descriptive headings of this
Agreement are for convenience only and shall not control or affect the meaning
or construction of any provision of this Agreement.
7.05. Notices. All notices or other communications which are required
or permitted hereunder shall be in writing and sufficient if delivered by hand,
overnight receipted overnight or express delivery service, facsimile
transmission, or by registered or certified mail, postage prepaid, addressed as
follows:
If to Seller:
JPS Textile Group, Inc.
555 N. Pleasantburg Drive
Greenville, South Carolina 29607
Attention: David H. Taylor
Fax: (864) 271-9939
and to:
JPS Elastomerics Corp.
9 Sullivan Road
Holyoke, Massachusetts 01040
Attention: Bruce R. Wilby
Fax: (413) 552-1185
with copies to:
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
37
<PAGE> 41
Attention: Simeon Gold, Esq.
Fax: (212) 310-8007
If to Purchaser:
Elastomer Technologies Group, Inc.
4854 O'Hear Avenue
North Charleston, South Carolina 29405-4972
Attention: Don Hildebrand
Fax: (803) 740-0178
with copies to:
Stephen A. Magida
105 Harbor Drive - Suite 125
Stamford, Connecticut 06902
Fax: (203) 348-6790
and to:
Dechert Price & Rhoads
477 Madison Avenue
New York, New York 10022
Attn: Paul Gluck, Esq.
Fax: (212) 308-2041
Any party may by notice change the address to which notice or other
communications to it are to be delivered or mailed.
7.06. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York applicable to
transactions to be performed solely within its borders.
7.07. Assignability. This Agreement shall not be assignable otherwise
than by operation of law by either party without the prior written consent of
the other party, and any purported assignment by any party without the prior
written consent of the other party shall be void, except that:
(i) Purchaser may designate one or more direct or indirect wholly
owned subsidiaries of Purchaser to purchase a portion of the Purchased
Assets to be purchased by Purchaser pursuant to Section 1.01 hereof, and
to assume a portion of the liabilities or obligations assumed by Purchaser
pursuant to Section 1.02;
(ii) Purchaser may assign to one or more direct or indirect wholly
owned subsidiaries of Purchaser any or all rights of Purchaser to receive
the performance of the obligations of Seller hereunder;
38
<PAGE> 42
(iii) Purchaser may assign to any financial institution providing
financing or extending credit to Purchaser any or all of its rights under
this Agreement; and
(iv) Seller may assign to its lender(s) under the Seller Credit
Agreement any or all of its rights under this Agreement;
but any assignee of such rights under clause (i), (ii) or (iii) shall take such
rights subject to any defenses, counterclaims and set-offs to which Seller may
be entitled under this Agreement and any assignee of such rights under clause
(iv) shall take such rights subject to any defenses, counterclaims and set-offs
to which Purchaser may be entitled under this Agreement. This Agreement shall
inure to the benefit of and be binding upon the parties hereto and their
respective successors and permitted assigns. Notwithstanding the foregoing,
however, no assignment otherwise permitted hereunder shall, without the prior
written consent of the non-assigning party, relieve the assigning party from
any of its obligations hereunder.
7.08. Remedies. The parties hereto acknowledge that the remedy at law
for any breach of the obligations undertaken by the parties hereto is and will
be insufficient and inadequate and that the parties hereto shall be entitled to
equitable relief, in addition to remedies at law.
7.09. Survival. All representations and warranties contained herein
or made pursuant hereto, whether by Seller or Purchaser, shall survive the
Closing hereunder for a period of eighteen (18) months, and the covenants and
agreements of the parties shall survive without limitation as to time, except
that:
(i) the representations and warranties of Seller contained in or
made pursuant to the first sentence of Section 3.01(d) and 3.01(x) hereof
shall survive the closing hereunder without any limitation as to time, and
(ii) the representations and warranties of Seller contained in or
made pursuant to Section 3.01(l) and 3.01(p) hereof shall survive the
closing hereunder for a period of three years, and
(iii) the representations and warranties of Purchaser contained in
or made pursuant to Section 3.02(e) shall survive the closing hereunder
without any limitation as to time.
The expiration of any representation and warranty hereunder shall not affect
any claim made, by the giving of written notice by a party to the other in the
manner provided by this Agreement, prior to the date of such expiration.
39
<PAGE> 43
7.10. Waivers and Amendments. Any waiver of any term or condition, or
any amendment or supplementation, of this Agreement shall be effective only if
in writing. A waiver of any breach of any of the terms or conditions of this
Agreement shall not in any way be construed as a waiver of any subsequent
breach.
7.11. Third Party Rights. Except as otherwise provided in Sections
5.01 and 5.02 with respect to the indemnification obligations of Seller and
Purchaser for the benefit of the directors, officers, employees, shareholders
and agents of the Purchaser and Seller, as the case may be, this Agreement shall
be effective only as between the parties hereto, their successors and permitted
assigns.
7.12. Illegality. In the event that any one or more of the provisions
contained in this Agreement, other than Article II, shall be determined to be
invalid, illegal or unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision in any other respect and the
remaining provisions of this Agreement shall not be in any way impaired.
7.13. Insurance. At the request and expense of Purchaser, Seller will
maintain all "claims made" policies of insurance listed in the Disclosure
Schedule in full force and effect for a period of three years following the
Closing Date. No assumption by Purchaser of any Assumed Liability shall release,
or shall be deemed to release, any insurer or indemnitor of any such Assumed
Liability, and Purchaser shall be entitled to the proceeds, and the rights
thereto, of any insurance or indemnification (regardless of whether or not the
applicable policies of insurance or contracts of indemnity are assignable, or
assigned, to Purchaser) maintained by, or existing for the benefit of Seller as
of or at any time prior to the Closing which might be available to cover any
Assumed Liabilities.
7.14. Bulk Transfer Laws. Purchaser and Seller acknowledge that the
parties will not be complying with the provisions of any bulk transfer laws of
any jurisdiction in connection with the transactions contemplated by this
Purchase Agreement.
40
<PAGE> 44
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date first above written.
ELASTOMER TECHNOLOGIES GROUP, INC.
By: /s/ Charles E. Ball
----------------------------------
Name: Charles E. Ball
Title: Chairman
JPS ELASTOMERICS CORP.
By: /s/ David H. Taylor
----------------------------------
Name: David H. Taylor
Title: Vice President
41
<PAGE> 1
EXHIBIT 10.36
RECEIVABLES PURCHASE AGREEMENT
RECEIVABLES PURCHASE AGREEMENT dated as of the 30th day of September,
1996 (this "Agreement") between THE BANK OF NEW YORK COMMERCIAL CORPORATION, a
New York corporation ("Purchaser") and JPS ELASTOMERICS CORP., a Delaware
corporation ("Seller").
Seller is engaged through its Rubber Products Group (the "Rubber
Products Group") in the production and marketing of [rubber and synthetic
elastic used in apparel products, diaper products and specialty applications].
On the date hereof (the "Closing Date"), Seller is divesting the Rubber
Products Group pursuant to an Assets Purchase Agreement (the "Assets Purchase
Agreement") between Elastomer Technologies Group, Inc. ("Elastomer") and
Seller.
Seller desires to sell to Purchaser, and Purchaser desires to purchase
from Seller, all the accounts receivable of the Rubber Products Group existing
on the date hereof, upon the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual benefits to be derived
and the representations and warranties, conditions and promises herein
contained, and intending to be legally bound hereby, Purchaser and Seller
hereby agree as follows:
1. Sale and Purchase of Transferred Receivables. Seller hereby
unconditionally conveys, sells, transfers, assigns and delivers to Purchaser,
and its successors and assigns forever, and Purchaser hereby purchases, all of
the right, title and interest of Seller in and to all its unpaid existing
accounts receivable as of the date hereof, arising out of or in connection with
the sale or lease of goods or the rendering of services by the Rubber Products
Group, including, without limitation, the accounts receivable set forth on
Schedule 1 hereto (the "Transferred Receivables").
2. Purchase Price. The purchase price for the Transferred
Receivables being acquired by Purchaser pursuant to this Agreement shall be an
amount equal to $2,597,328 (the "Purchase Price"), such amount representing
100% of the face value of the Transferred Receivables, less an agreed upon
allowance for doubtful accounts
3. Representations and Warranties. (a) Seller hereby represents
and warrants that: it has full power, authority and legal right to enter into
this Agreement and to perform all its respective obligations hereunder; the
execution, delivery and performance of this Agreement are within its corporate
powers, have been duly authorized, are not in contravention of law or the terms
of its by-laws or certificate of incorporation; it is duly incorporated and in
good standing under the laws of the state of its organization and is qualified
to do business and is in good
<PAGE> 2
standing in all states in which qualification and good standing are necessary
for it to conduct its business and own its property and where the failure to so
qualify could have a material adverse effect on Seller; Seller is not in
violation of any applicable statute, regulation or ordinance in any respect
which could have a material adverse effect on Seller, nor is Seller in
violation of any order of any court, governmental authority or arbitration
board or tribunal which could have a material adverse effect on the business
conducted by the Rubber Products Group; and no provision of any mortgage,
indenture, contract, agreement, judgment, decree or order binding on Seller
conflicts with, or requires any consent which has not already been obtained, or
would in any way prevent the execution, delivery or performance of the terms of
this Agreement.
(b) Seller hereby represents and warrants that: each Transferred
Receivable is based on an actual and bona fide sale and delivery of goods or
rendition of services to customers made by it in the ordinary course of its
business; the goods and inventory sold by it and the Transferred Receivables
created thereby are its exclusive property and are not and subject to an lien,
consignment arrangement, encumbrance, security interest or financing statement
whatsoever; and any taxes or fees relating to the Transferred Receivables are
solely the responsibility of Seller.
4. Books and Records. Seller agrees to make its records, files
and books of account in any way relating to the Transferred Receivables
available to Purchaser or its designee on request and that Purchaser may visit
the premises of Seller during normal business hours to examine such records,
files and books of account and to make copies of extracts thereof and to
conduct such examinations thereof as Purchaser reasonably deems necessary.
5. Collection; Receipt of Payment. (a) As owner and assignee of
the Transferred Receivables, Purchaser shall have the right to collect the
Transferred Receivables and to bring suit in the name of Seller or Purchaser or
through the representatives and agents of Purchaser, including Elastomer, and
generally shall have all other rights of an owner of the Transferred
Receivables including without limitation the right to: accelerate or extend the
time of payment, settle, compromise, release in whole or in part any amounts
owing on any Transferred Receivables and issue credits in the name of Seller or
Purchaser. Any checks, cash, notes or other instruments or property received by
Seller with respect to any Transferred Receivables shall be held by it in
trust for Purchaser, separate from its own property and funds, and immediately
turned over to Purchaser with proper assignments or endorsements. Purchaser may
endorse or sign the name of Seller or Purchaser on any checks or other
instruments with respect to Transferred Receivables or the goods covered
thereby.
- 2 -
<PAGE> 3
(b) In the event that subsequent to the Closing Date Seller shall
receive any payment with respect to a Transferred Receivable, including,
without limitation, payment under the letters of credit listed in Exhibit A
hereto, Seller shall hold such payments in trust and promptly pay over and
deliver to Purchaser such payment and endorse to the order of Purchaser any
check received. Purchaser shall not have any obligation or liability with
respect to any account debtor by reason of this Agreement or be obligated to
perform any of the obligations or duties of Seller with respect thereto.
6. Further Actions. From time to time, as and when requested by
Purchaser, Seller shall execute and deliver, or cause to be executed and
delivered, all such documents and instruments and shall take, or cause to be
taken, all such further or other actions, as Purchaser may reasonably deem
necessary or desirable to carry out the intent and purposes of this Agreement,
to convey, transfer, assign and deliver on the date hereof to Purchaser, and
its successors and assigns, the Transferred Receivables (or to evidence the
foregoing) and to consummate the other transactions contemplated hereby.
7. Entire Agreement. This Agreement contains the entire agreement
between Purchaser and Seller with respect to the transactions contemplated by
this Agreement and supersedes all prior arrangements or understandings with
respect thereto.
8. Descriptive Headings. The descriptive headings of this
Agreement are for convenience only and shall not control or affect the meaning
or construction of any provision of this Agreement.
9. Guaranty, Inducement and Cooperation Agreement. It is a
condition precedent to the effectiveness of this Agreement that on the date
hereof Elastomer executes and delivers a guaranty in favor of the Purchaser
guaranteeing payment of the Transferred Receivables in an amount at least equal
to the Purchase Price.
10. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York applicable to
transactions to be performed solely within it borders.
11. Assignability. Seller shall not sell, assign or otherwise
transfer all or any of its rights or obligations hereunder without the consent
of Purchaser, except as required the Fourth Amended and Restated Credit
Agreement dated as of June 24, 1994, as amended, among JPS Textile Group, Inc.,
Seller, JPS Converter and Industrial Corp., General Electric Capital
Corporation, Citibank, N.A. and the other lenders named therein. Purchaser may
at any time sell, assign or otherwise transfer all
- 3 -
<PAGE> 4
or any of its rights or obligations hereunder. No assignment by Seller or
Purchaser shall relieve Seller or Purchaser of its obligations hereunder.
12. Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original but all of which taken
together shall constitute one and the same instrument.
13. Headings. Headings are for reference purposes only and shall
not in any manner affect the meaning or interpretation of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed in their respective corporate names by their respective duly
authorized officers, all as of the day and year first above written.
THE BANK OF NEW YORK COMMERCIAL CORPORATION
By: /s/ Robert Love
----------------------------------
Name: Robert Love
Title: Assistant Vice President
JPS ELASTOMERICS CORP.
By: /s/ David H. Taylor
----------------------------------
Name: David H. Taylor
Title: Vice President
- 4 -
<PAGE> 5
EXHIBIT A
Letters of Credit
1. Letter of credit issued by Banco Internacional del Peru on behalf of
Mimo, for the benefit of JPS Elastomerics dated 07/17/95
2. Letter of credit issued by Banco Santander on behalf of Fabricas
Hollywood for the benefit of JPS Elastomerics dated 07/12/96
3. Letter of credit issued by ABN AMRO Bank N.V. on behalf of Sagrin for
the benefit of JPS Elastomerics dated 09/16/96
4. Letter of credit issued by Standard Bank of South Africa on behalf of
Ninian and Lester for the benefit of JPS Elastomerics dated 09/03/96
5. Letter of credit issued by Bank International Indonesia on behalf of
PT The Univenus Company for the benefit of JPS Elastomerics dated 06/21/96
6. Letter of credit issued by Standard Bank of South Africa on behalf of
Ninian and Lester for the benefit of JPS Elastomerics dated 07/08/96
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF JPS TEXTILE GROUP, INC. CONTAINED IN THE BODY OF THE
ACCOMPANYING FORM 10-K AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> NOV-02-1996
<PERIOD-END> NOV-02-1996
<CASH> 1,460
<SECURITIES> 0
<RECEIVABLES> 77,677
<ALLOWANCES> 2,511
<INVENTORY> 48,374
<CURRENT-ASSETS> 126,967
<PP&E> 241,646
<DEPRECIATION> 117,642
<TOTAL-ASSETS> 335,927
<CURRENT-LIABILITIES> 384,833
<BONDS> 4,226
32,676
250
<COMMON> 10
<OTHER-SE> (109,246)
<TOTAL-LIABILITY-AND-EQUITY> 335,927
<SALES> 448,824
<TOTAL-REVENUES> 448,824
<CGS> 397,804
<TOTAL-COSTS> 397,804
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 40,510
<INCOME-PRETAX> (66,236)
<INCOME-TAX> (300)
<INCOME-CONTINUING> (65,936)
<DISCONTINUED> (1,500)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (67,436)
<EPS-PRIMARY> (71.94)
<EPS-DILUTED> (71.94)
</TABLE>
