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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 1, 1997
[ ] 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:
Common Stock, Par Value $.01 per share, 22,000,000 shares authorized;
10,000,000 shares issued and outstanding
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, 1998, there were 8,019,176 shares of the registrant's
Common Stock, $.01 par value per share, held by non-affiliates of the
registrant.
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, 10,000,000 of the registrant's 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........................................................................................... 3
Item 2. PROPERTIES......................................................................................... 11
Item 3. LEGAL PROCEEDINGS.................................................................................. 11
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS................................................. 11
PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND
RELATED SHAREHOLDER MATTERS........................................................................ 12
Item 6. SELECTED HISTORICAL FINANCIAL DATA................................................................. 13
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.......................................................................... 15
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA........................................................ 24
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE................................................................ 60
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT................................................. 60
Item 11. EXECUTIVE COMPENSATION............................................................................. 63
Item 12. SECURITY OWNERSHIP OF PRINCIPAL SHAREHOLDERS AND MANAGEMENT........................................ 69
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS..................................................... 71
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K..................................... 71
SIGNATURES......................................................................................... 77
</TABLE>
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PART I
ITEM 1. BUSINESS
JPS Textile Group, Inc. 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.
Unless the context otherwise requires, the terms "JPS" and the "Company" as used
in this Form 10-K means JPS Textile Group, Inc. and JPS Textile Group, Inc.
together with its subsidiaries, respectively.
THE 1988 ACQUISITION
On May 9, 1988, the Company acquired substantially all the assets of certain
operating divisions of J.P. Stevens & Co., Inc. ("J.P. Stevens") in exchange for
approximately $527 million in cash and reorganized the newly acquired divisions
into wholly-owned subsidiaries. At that time, JPS raised $100 million by issuing
certain public debt and equity securities in order to partially finance the
acquisition. In June 1989, JPS raised $323.6 million by issuing certain public
debt and equity securities to refinance certain outstanding notes and a portion
of the indebtedness incurred in connection with the acquisition. Due to
prevailing market conditions, the securities were priced for sale at higher
rates than JPS anticipated would be necessary at the time of the acquisition. As
a result of the high interest rates and a weak business environment for certain
of its subsidiaries, JPS realized lower than expected operating earnings and
cash flow which, in turn, materially impaired its ability to service its
outstanding debt and fund capital expenditures.
THE 1991 RESTRUCTURING
In 1990, JPS negotiated the terms of a recapitalization proposal with a steering
committee comprised of institutional holders of a substantial amount of the
then-outstanding securities, which culminated in JPS's prepetition solicitation
of votes to accept or reject a plan of reorganization under chapter 11, title 11
of the United States Code (the "Bankruptcy Code"). The plan was overwhelmingly
accepted. On February 7, 1991, JPS filed a petition for relief under the
Bankruptcy Code, and approximately 42 days thereafter, JPS's plan was confirmed
by the bankruptcy court and JPS emerged from chapter 11 on April 2, 1991.
Pursuant to that plan, in exchange for JPS's outstanding debt securities and
JPS's equity securities, JPS issued (i) $100 million in principal amount of
senior secured notes due June 1, 1995 and June 1, 1996 (all of which were
redeemed in 1994), (ii) $151.1 million in principal amount of 10.85% Senior
Subordinated Discount Notes due June 1, 1999 (the "10.85% Notes"), (iii) $125
million in principal amount of 10.25% Senior Subordinated Notes due June 1, 1999
(the "10.25% Notes"), (iv) $75 million in principal amount of 7% Subordinated
Debentures due May 15, 2000 (the "7% Subordinated Debentures"), (v) 390,719
shares of Series A Senior Preferred Stock (the "Old Senior Preferred Stock"),
(vi) 10,000 shares of Series B Junior Preferred Stock (the "Old Junior Preferred
Stock"), (vii) 490,000 shares of class A common stock, par value $0.01 per share
(the "Class A Common Stock") and (viii) 510,000 shares of class B common stock,
par value $0.01 per share (the "Class B Common Stock" and, together with the
Class A Common Stock, the "Old Common Stock"). The 1991 restructuring did not
significantly reduce the amount of JPS's outstanding indebtedness.
DISPOSITIONS OF ASSETS; PLANT CLOSING
Subsequent to the 1991 restructuring, JPS adopted and implemented various
strategies aimed at improving and realizing value in its operating subsidiaries.
These strategies included, among other things, the exit, through asset sales or
otherwise, of certain product lines.
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The Automotive Asset Sale. On June 28, 1994, the Company sold the
businesses and assets of JPS Auto, Inc. ("Auto") and the synthetic industrial
fabrics division of JPS Converter and Industrial Corp. ("C&I") and JPS's
investment in common stock of the managing general partner of Cramerton
Automotive Products, L.P. (an 80% owned joint venture) for approximately $283
million.
The Carpet Asset Sale. On November 16, 1995, JPS and JPS Carpet Corp.
("Carpet") transferred 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") to Gulistan Holdings
Inc. ("Gulistan Holdings") and Gulistan Carpet Inc., a wholly-owned subsidiary
of Gulistan Holdings Inc. ("Gulistan Carpet" and, together with Gulistan
Holdings, "Gulistan"), for approximately $19 million in cash, a promissory note
due November 2001 issued by Gulistan Holdings in the original principal amount
of $10 million and payable to the order of Carpet, $5 million of preferred stock
of Gulistan Holdings, and warrants to purchase 25% of the common stock of
Gulistan Holdings (collectively, the "Gulistan Securities"). On August 28, 1997,
the Company sold the Gulistan Securities to Gulistan for $2 million in cash.
Plant Closing. 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. This plant was closed on October 28, 1996 and sold on
August 14, 1997 for approximately $1.2 million in cash.
The Rubber Products Group Sale. On September 30, 1996, JPS Elastomerics
Corp. ("Elastomerics") sold substantially all the assets of the Company's 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 to Elastomer Technologies Group, Inc. for approximately
$5.1 million in cash.
THE 1997 RESTRUCTURING
As a result of the continued downturn in the apparel fabrics market and various
other factors, JPS determined that it would be unable to meet certain debt
obligations on its public bonds that would become due commencing in June, 1997.
Accordingly, on May 15, 1997, JPS, JPS Capital Corp., a wholly owned subsidiary
of JPS ("JPS Capital") and an unofficial committee (the "Unofficial Bondholder
Committee") comprised of institutions that owned, or represented owners that
beneficially owned, approximately 60% of the 10.85% Notes, the 10.25% Notes and
the 7% Subordinated Debentures (the "Old Debt Securities") reached an agreement
in principle on the terms of a restructuring to be accomplished under chapter 11
of the Bankruptcy Code which culminated in a Joint Plan of Reorganization (as
amended, the "Plan of Reorganization") proposed by JPS and JPS Capital under
chapter 11 of the Bankruptcy Code. Pursuant to a disclosure statement, dated
June 25, 1997 (the "Disclosure Statement"), on June 26, 1997, JPS and JPS
Capital commenced a prepetition solicitation of votes by the holders of Old Debt
Securities and Old Senior Preferred Stock to accept or reject the Plan of
Reorganization. Under the Plan of Reorganization, the holders of Old Debt
Securities and Old Senior Preferred Stock were the only holders of impaired
claims and impaired equity interests entitled to receive a distribution, and
therefore, pursuant to section 1126 of the Bankruptcy Code, were the only
holders entitled to vote on the Plan of Reorganization. At the conclusion of the
32-day solicitation period, the Plan of Reorganization had been accepted by
holders of more than 99% of the Old Debt Securities that voted on the Plan of
Reorganization and by holders of 100% of the Old Senior Preferred Stock that
voted on the Plan of Reorganization.
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On August 1, 1997, JPS commenced its voluntary reorganization case under chapter
11 of the Bankruptcy Code in the Bankruptcy Court for the Southern District of
New York (the "Bankruptcy Court"), and filed the Plan of Reorganization and the
Disclosure Statement. None of JPS's subsidiaries, including JPS Capital which
was a co-proponent of the Plan of Reorganization, commenced a case under the
Bankruptcy Code. Pursuant to orders of the Bankruptcy Court entered on September
9, 1997, the Bankruptcy Court (i) approved the Disclosure Statement and the
solicitation of votes on the Plan of Reorganization and (ii) confirmed the Plan
of Reorganization. The Plan of Reorganization became effective on October 9,
1997 (the "Effective Date") resulting in, among other things, the cancellation
of the Old Senior Preferred Stock, Old Junior Preferred Stock, and Old Common
Stock, and the issuance of 10,000,000 shares of common stock, $.01 par value per
share (the "Common Stock").
Through the implementation of the Plan of Reorganization as of the Effective
Date, JPS's most significant financial obligations were restructured:
$240,091,318 in face amount of outstanding Old Debt Securities were converted
to, among other things, $14 million in cash, 99.25% of the shares of Common
Stock and $34 million in aggregate principal amount (subject to adjustment on
the maturity date) of contingent payment notes issued by JPS Capital (the
"Contingent Notes"); the Old Senior Preferred Stock, the Old Junior Preferred
Stock and the Old Common Stock were cancelled; warrants to purchase up to 5% of
the common stock of JPS (the "New Warrants") with an initial purchase price of
$98.76 per share were issued in respect of the Old Senior Preferred Stock; and
the obligations of JPS under its former working capital facility were satisfied
and the Revolving Credit Facility was obtained. JPS's senior management received
approximately 0.75% of the Common Stock in lieu of payment under their
contractual retention bonus agreements. As a result of the restructuring, JPS's
only significant debt obligation is its guaranty of the obligations of its
operating subsidiaries under the Revolving Credit Facility.
GENERAL
The Company is one of the largest domestic manufacturers of textile and
textile-related products for the apparel, industrial and home fashion markets.
The Company conducts its operations from ten manufacturing plants in five states
and employs approximately 3,700 people.
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.
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.
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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 various 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.
SUBSIDIARIES
JPS's wholly-owned operating subsidiaries include Elastomerics and C&I. JPS's
other wholly-owned subsidiaries do not have any significant operations: JPS
Capital, International Fabrics, Inc. ("Fabrics"), Auto and Carpet. The operating
subsidiaries each have independent administrative, manufacturing, and marketing
capabilities for all material aspects of their operations, including product
design, customer service, purchasing, and collections. JPS provides all finance
and strategic planning services and handles the legal, tax, and regulatory
affairs for its subsidiaries. JPS Capital was formed in 1994 as a special
purpose subsidiary to hold (and invest) $39.5 million, representing a portion of
the proceeds received from the sale of the assets of JPS's automotive division
in June 1994, including the assets of Auto. These funds were set aside to
satisfy possible contingent tax liabilities incurred in connection with that
sale, and will serve as the primary source of payment of any such liabilities.
Prior to the Effective Date, the funds held by JPS Capital aggregated
approximately $48 million, of which $14 million was distributed on the Effective
Date pursuant to the Plan of Reorganization to holders of certain issues of Old
Debt Securities on the Effective Date. The funds held by JPS Capital currently
aggregate approximately $34 million. In connection with the implementation of
the Plan of Reorganization, approximately $34 million in aggregate principal
amount (subject to adjustment on the maturity date thereof) of Contingent Notes
were issued by JPS Capital on the Effective Date to holders of certain issues of
Old Debt Securities.
Auto and Carpet formerly owned and operated JPS's automotive products and carpet
businesses, respectively. The assets of those businesses were sold in 1994 and
1995, respectively. See "--Disposition of Assets; Plant Closing."
In addition to its direct ownership interest in the foregoing domestic
corporations, JPS has an indirect ownership interest in a foreign corporation.
Specifically, in 1996, JPS's wholly-owned subsidiary, Fabrics, acquired a 50%
ownership interest in the Mexican corporation, Ingenieria Textil Mexicana, S.A.
de C.V. ("ITM"), which is engaged in the manufacture and sale of textile
products for the apparel industry in Mexico.
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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 has an aggressive capital spending plan to expand capacity in
certain segments and improve productivity in other segments, as described in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included in Item 7 herein. The Company believes that its
manufacturing facilities and capital spending plan are sufficient for its
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.
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
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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.
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.
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
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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 $73.3 million at
November 1, 1997 and $52.6 million at November 2, 1996. 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 1, 1997 will be filled in the 52-week
period ending October 31, 1998 ("Fiscal 1998"). Unfilled open orders, which the
Company believes are firm, were approximately $62.9 million at December 31, 1997
compared to $60.8 million at December 31, 1996. The increase in open orders at
December 31, 1997 as compared to December 31, 1996 is primarily due to an
increase 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 3,700 employees of which approximately
3,200 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.
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 non-hazardous 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.
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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 1998 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
meet its debt service obligations, competition from a variety of large textile
mills and foreign textile manufacturers which 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. 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>
Laurens, SC 475,000 Kingsport, TN 625,000
Greenville, SC 460,000 Slater, SC 433,000
Stanley, NC 338,000 Westfield, NC 237,000
S. Boston, VA 286,000 Easthampton, MA 50,000
Rocky Mount, VA 81,000
<CAPTION>
Home Fashion Textiles All Segments
--------------------- ------------
<S> <C> <C> <C>
Lincolnton, NC 387,000 New York, NY(1) 10,000
</TABLE>
(1) The New York, NY facility is leased by the Company under a lease
agreement which expires on May 30, 1999.
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 or the conclusion of JPS's
chapter 11 case. 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 1997 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 1997.
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
SHAREHOLDER MATTERS.
To date, there has been only sporadic trading of the Common Stock in the
over-the-counter market. Based upon limited information available, the Company
believes that over-the-counter trades of Common Stock have been in the range of
$10.50 to $14.50 per share. The Common Stock of the Company has been approved
for listing and trading on the Nasdaq National Market System effective January
30, 1998.
As of January 7, 1998, there were approximately 11 holders of record of the
Company's Common Stock.
The Company presently 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. The payment
of future cash dividends, if any, would be made only from assets legally
available therefor, and would also depend on the Company's financial condition,
results of operations, current and anticipated capital requirements,
restrictions under then existing indebtedness (including, without limitation,
indebtedness evidenced by the Revolving Credit Facility (as defined below) and
refundings and refinancings thereof) and other factors deemed relevant by JPS's
Board of Directors.
The Company's ability to pay cash dividends is dependent on its earnings and
cash flow. The subsidiaries that are borrowers under certain credit agreements
are restricted from paying cash dividends to JPS with respect to their capital
stock unless, among other things, JPS and its subsidiaries satisfy certain
specified financial tests.
On October 9, 1997 (the Effective Date of the Plan of Reorganization proposed by
JPS and JPS Capital and confirmed by order of the Bankruptcy Court entered on
September 9, 1997), 10,000,000 shares of Common Stock, par value of $.01 per
share, of JPS and warrants to purchase up to 526,316 shares of common stock of
JPS at an initial purchase price of $98.76 per share were issued by JPS and
distributed pursuant to the Plan of Reorganization.
-12-
<PAGE> 13
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 selected
historical financial data for each of the five years ended November 2, 1996, the
period from November 3, 1996 to October 9, 1997 and the period from October 10,
1997 to November 1, 1997 has been derived from the Consolidated Financial
Statements of the Company for such periods, which have been audited. The
presentation of certain previously reported amounts has 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 5 to the Consolidated Financial Statements of the
Company at Item 8 in this Form 10-K. The financial statements for the period
from October 10, 1997 to November 1, 1997 reflect the Company's emergence from
chapter 11 and were prepared utilizing the principles of fresh start accounting
contained in the American Institute of Certified Public Accountants' Statement
of Position 90-7, "Financial Reporting by Entities in Reorganization Under the
Bankruptcy Code". As a result of the implementation of fresh start accounting,
certain of the selected financial data for the period from October 10, 1997 to
November 1, 1997 is not comparable to the selected financial data of prior
periods. Therefore, selected financial data for the "Reorganized Company" has
been separately identified from that of the "Predecessor Company". The selected
unaudited pro forma financial data for the fiscal year ended November 1, 1997
gives effect to the Plan of Reorganization and adoption of fresh start reporting
as if they had occurred on November 3, 1996. This pro forma information is
provided for informational purposes only and should not be construed to be
indicative of the results of operations of the Company had the transaction been
consummated on the date indicated and is not intended to be predictive of the
results of operations of the Company for any future period. The following
information should be read in conjunction with the Consolidated Financial
Statements of the Company and Notes thereto, and "Management's Discussion and
Analysis of Financial Conditions and Results of Operations" presented elsewhere
herein.
<TABLE>
<CAPTION>
Predecessor Company Reorganized Pro Forma
------------------------------------------------------------------| Company -----------
Fiscal Year Ended | ----------- (Unaudited)
---------------------------------------------------- Period from| Period from Fiscal Year
10/30/93 10/29/94 10/28/95 11/2/96 11/3/96 | 10/10/97 Ended
INCOME STATEMENT DATA: (52 Weeks) (52 Weeks) (52 Weeks) (53 Weeks) to 10/9/97| to 11/1/97 11/1/97
---------- ---------- ---------- ---------- ----------| ----------- -----------
<S> <C> <C> <C> <C> <C> | <C> <C>
Net sales $457,552 $461,871 $472,565 $448,824 $379,643 | $ 38,728 $418,371
Cost of sales 396,160 397,921 406,070 397,804 327,667 | 31,058 349,844
-------- -------- -------- -------- -------- | -------- --------
Gross profit 61,392 63,950 66,495 51,020 51,976 | 7,670 68,527
Selling, general and |
administrative expenses 39,023 39,805 39,586 40,579 37,146 | 2,466 40,744
Other income (expense), net (1,236) (2,914) (6,248) (2,498) (622)| 11 (611)
Charges for plant closing, loss on |
sale of certain operations and |
writedown of certain |
long-lived assets -- -- -- (30,028) 574 | -- 574
-------- -------- -------- -------- -------- | -------- --------
Operating profit (loss) 21,133 21,231 20,661 (22,085) 14,782 | 5,215 27,746
Valuation allowance on |
Gulistan securities -- -- -- (4,242) (5,070)| -- --
Interest income 48 749 2,821 2,856 2,744 | 93 1,192
Interest expense (60,407) (55,570) (39,946) (40,510) (32,164)| (584) (8,676)
-------- -------- -------- -------- -------- | -------- --------
Income (loss) before |
reorganization items, income |
taxes, discontinued operations, |
extraordinary items and |
cumulative effects of |
accounting changes (3) (39,226) (33,590) (16,464) (63,981) (19,708)| 4,724 20,262
Reorganization items: |
Fair-value adjustments -- -- -- -- (4,651)| -- --
Professional fees and |
expenses -- -- -- (2,255) (8,420)| -- --
-------- -------- -------- -------- -------- | -------- --------
</TABLE>
-13-
<PAGE> 14
<TABLE>
<CAPTION>
Predecessor Company Reorganized Pro Forma
----------------------------------------------------------------| Company -----------
Fiscal Year Ended | ----------- (Unaudited)
-------------------------------------------------- Period from| Period from Fiscal Year
10/30/93 10/29/94 10/28/95 11/2/96 11/3/96 | 10/10/97 Ended
(52 Weeks) (52 Weeks) (52 Weeks) (53 Weeks) to 10/9/97 | to 11/1/97 11/1/97
---------- ---------- ---------- ---------- -----------| ----------- -----------
<S> <C> <C> <C> <C> <C> | <C> <C>
Income (loss) before income taxes, |
discontinued operations, |
extraordinary items and |
cumulative effects of |
accounting changes (39,226) (33,590) (16,464) (66,236) (32,779)| 4,724 20,262
Income taxes (benefit) 1,782 2,800 1,200 (300) (8,822)| 2,007 8,643
-------- --------- -------- -------- --------- | ----------- -----------
Income (loss) before discontinued |
operations, extraordinary |
items and cumulative effects |
of accounting changes (41,008) (36,390) (17,664) (65,936) (23,957)| 2,717 11,619
Discontinued operations, |
net of taxes: |
Income (loss) from |
discontinued operations 24,165 23,628 (7,079) -- -- | -- --
Net gain (loss) on sale of |
discontinued operations -- 132,966 (26,241) (1,500) -- | -- --
Extraordinary gain (loss) on |
early extinguishment of debt -- (7,410) 20,120 -- 100,235 | -- --
Cumulative effects of accounting |
changes, net of taxes (4,988) (708) -- -- -- | -- --
-------- --------- -------- -------- --------- | ----------- -----------
Net income (loss) $(21,831) $ 112,086 $(30,864) $(67,436) $ 76,278 | $ 2,717 $ 11,619
======== ========= ======== ======== ========= | =========== ===========
Weighted average number |
of shares outstanding (1) | 10,000,000 10,000,000
| =========== ===========
Net income (loss) per common |
share (1) | $ 0.27 $ 1.16
| =========== ===========
</TABLE>
<TABLE>
<CAPTION>
BALANCE SHEET DATA: 10/30/93 10/29/94 10/28/95 11/2/96 11/1/97
--------- --------- --------- ------------- --------
<S> <C> <C> <C> <C> <C>
Working capital, excluding net assets held for sale $ 63,821 $ 65,855 $ 72,670 $(257,866)(2) $ 82,132
Total assets 532,608 452,811 412,822 335,927 322,381
Total long-term debt, less current portion 522,947 335,472 327,668 4,226 (2) 94,891
Senior redeemable preferred stock 21,007 24,340 28,171 32,676 --
Shareholders' equity (deficit) (111,103) (2,350) (37,045) (108,986) 126,047
</TABLE>
(1) Share and per share data are not meaningful on or prior to October 9,
1997 due to the significant change in the capital structure in
connection with the Plan of Reorganization.
(2) 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.
(3) The following non-cash charges have been included in the determination
of income (loss) before reorganization items, income taxes,
discontinued operations, extraordinary items and cumulative effects of
accounting changes for the periods shown above:
<TABLE>
<CAPTION>
Pro Forma
Predecessor Company Reorganized -----------
--------------------------------------------------------------- Company (Unaudited)
Fiscal Year Ended | ----------- Fiscal Year
------------------------------------------------ Period from| Period from Ended
10/30/93 10/29/94 10/28/95 11/2/96 11/3/96 | 10/10/97 -----------
(52 Weeks) (52 Weeks) (52 Weeks) (53 Weeks) to 10/9/97| to 11/1/97 11/1/97
---------- ---------- ---------- ---------- -----------| ----------- -----------
<S> <C> <C> <C> <C> <C> | <C> <C>
Certain non-cash charges to income: |
Depreciation $19,799 $22,242 $20,820 $21,756 $16,986 | $ 681 $ 9,230
Amortization of goodwill |
and other 969 964 965 983 894 | 165 2,313
Product liability charge -- -- 5,000 -- -- | -- --
Plant closing, loss on sale of |
certain operations and |
writedown of certain |
long-lived assets -- -- -- 17,554 -- | -- --
Early retirement offer -- -- -- 1,125 -- | -- --
Valuation allowance on |
Gulistan securities -- -- -- 4,242 5,070 | -- --
Other non-cash charges to income 1,957 131 371 -- -- | -- --
Non-cash interest 11,729 11,161 8,818 10,088 7,303 | 20 385
------- ------- ------- ------- ------- | ------- -------
$34,454 $34,498 $35,974 $55,748 $30,253 | $ 866 $11,928
======= ======= ======= ======= ======= | ======= =======
</TABLE>
-14-
<PAGE> 15
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
On October 9, 1997, JPS consummated a Plan of Reorganization as discussed in
Item 1 herein under the caption "The 1997 Restructuring". The following
discussion should be read in conjunction with Item 1 and with the Consolidated
Financial Statements of the Company and the Notes thereto included in Item 8
herein.
<TABLE>
<CAPTION>
Reorganized
Predecessor Company Company (3) PRO FORMA (4)
---------------------------------------------- ----------- ----------------------------
| (UNAUDITED)
Fiscal Year Ended Period from| Period from FISCAL YEAR ENDED
------------------------- 11/3/96 | 10/10/97 ----------------------------
10/28/95 11/2/96 to 10/9/97 | to 11/1/97 11/2/96 11/1/97
--------- --------- -----------| ----------- --------- ---------
<S> <C> <C> <C> | <C> <C> <C>
NET SALES |
Apparel fabrics and |
products $ 247,846 $ 221,799 $ 167,070 | $ 18,590 $ 221,799 $ 185,660
Industrial fabrics and |
products 191,985 193,001 179,434 | 17,847 193,001 197,281
Home fashion textiles 32,734 34,024 33,139 | 2,291 34,024 35,430
--------- --------- --------- | --------- --------- ---------
$ 472,565 $ 448,824 $ 379,643 | $ 38,728 $ 448,824 $ 418,371
========= ========= ========= | ========= ========= =========
OPERATING PROFIT |
(LOSS) |
Apparel fabrics and |
products $ 16,667 $ (22,422)(1) $ 1,210 | $ 2,201 $ (15,063)(1) $ 9,253
Industrial fabrics and |
products 7,590 5,947 (2) 16,748 | 2,652 8,752 (2) 21,241
Home fashion textiles 1,749 647 976 | 693 1,791 2,980
Indirect corporate expenses, |
net (5,345) (6,257) (4,152)| (331) (7,611) (5,728)
--------- --------- --------- | --------- --------- ---------
|
Operating Profit (Loss) 20,661 (22,085) 14,782 | 5,215 (12,131) 27,746
|
Valuation allowance on |
Gulistan securities -- (4,242) (5,070)| -- -- --
Interest income 2,821 2,856 2,744 | 93 1,130 1,192
Interest expense (39,946) (40,510) (32,164)| (584) (8,561) (8,676)
--------- --------- --------- | --------- --------- ---------
|
Income (loss) before |
reorganization items, |
income taxes, |
discontinued operations |
and extraordinary items $ (16,464) $ (63,981) $ (19,708)| $ 4,724 $ (19,562) $ 20,262
========= ========= ========= | ========= ========= =========
</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.
(3) The financial statements for the period from October 10, 1997 to November
1, 1997 reflect the Company's emergence from chapter 11 and were prepared
utilizing the principles of fresh start reporting contained in the American
Institute of Certified Public Accountants' Statement of Position 90-7,
"Financial Reporting by Entities in Reorganization Under the Bankruptcy
Code." As a result of the implementation of fresh start accounting, the
financial information for the period from October 10, 1997 to November 1,
1997 is not comparable to the financial information of prior periods.
-15-
<PAGE> 16
(4) The pro forma financial information was prepared for comparison purposes
and gives effect to the Plan of Reorganization as if the transactions had
occurred on October 29, 1995 (for Fiscal 1996) and November 3, 1996 (for
Fiscal 1997). The unaudited pro forma financial information was derived by
adjusting the historical consolidated financial statements of the Company
for the effects of fresh start accounting as described in Notes 2 and 3 to
the Consolidated Financial Statements included in Item 8 herein. Such
adjustments primarily relate to decreased depreciation expense resulting
from revaluation of the Company's fixed assets, decreased interest expense
resulting from extinguishment of Old Debt Securities in the reorganization,
increased amortization resulting from reorganization value in excess of
amounts allocable to identifiable assets and the elimination of
reorganization items, and their related tax effects. This pro forma
information is provided for informational purposes only and should not be
construed to be indicative of the results of operations of the Company had
the transactions been consummated on the respective dates indicated and are
not intended to be predictive of the results of operations of the Company
for any future period.
RESULTS OF OPERATIONS
FISCAL 1997 (PRO FORMA) COMPARED TO FISCAL 1996 (PRO FORMA)
The financial statements for the period subsequent to the consummation of the
Plan of Reorganization (period from October 10, 1997 to November 1, 1997) were
prepared under the principles of fresh-start reporting for companies emerging
from a plan of reorganization and are not comparable to prior periods. The
Company believes that the most meaningful comparisons are made using the pro
forma financial information and therefore this discussion addresses such pro
forma information.
Consolidated net sales declined $30.4 million (6.8%) from $448.8 million in
Fiscal 1996 to $418.4 million in Fiscal 1997. Pro forma operating profit (loss)
increased $39.8 million from a pro forma operating loss of $12.1 million in
Fiscal 1996 to a pro forma operating profit of $27.7 million in Fiscal 1997.
Fiscal 1996 results included charges for plant closings, loss on sale of certain
operations, and charges for writedown of certain long-lived assets which totaled
$30 million. Excluding such charges for comparative purposes, pro forma
operating profit in Fiscal 1996 was $17.9 million. All segments reported
improved earnings in Fiscal 1997 compared to Fiscal 1996.
Net sales in Fiscal 1997 in the apparel fabrics and products segment, which
includes unfinished woven apparel fabrics (greige goods) and yarn primarily for
women's wear declined $36.1 million (16.3%) from $221.8 million in Fiscal 1996
to $185.7 million in Fiscal 1997. Much of this decline in net sales was expected
as a result of the Company's actions in Fiscal 1996 to exit certain product
lines which included plant closings and asset sales. Net sales in Fiscal 1996
included $12.8 million of apparel elastics sales. As discussed below, the
Company sold its rubber products business, which produced these elastic
products, in September 1996. Apparel fabric sales declined $20.5 million in
Fiscal 1997 primarily as a result of the Company's decision in Fiscal 1996 to
close one of its facilities in Greenville, South Carolina and cease production
of certain commodity-type apparel fabrics which, due to competitive pressures
from abroad, carried very weak margins.
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 continually works to develop new fabric constructions and
styles in an effort to improve the profitability of its product mix. During
Fiscal
-16-
<PAGE> 17
1997, the market conditions for certain of the Company's apparel fabrics
improved slightly as a result of the exit of certain domestic competitors.
Pro forma operating profit (loss) in Fiscal 1997 for the apparel fabrics and
products segment increased by $24.4 million from a $15.1 million pro forma loss
to a pro forma operating profit of $9.3 million. Fiscal 1996 included charges of
approximately $20.4 million for plant closing and loss on sale of certain
operations. Pro forma operating profit before such charges increased by $4.0
million from $5.3 million in Fiscal 1996 to $9.3 million in Fiscal 1997. The
improvement is the result of several factors. Fiscal 1997 results were not
adversely affected by the negative operating margins associated with the product
lines exited during Fiscal 1996. In addition, manufacturing efficiency and
productivity have improved as a result of certain capital projects completed
during Fiscal 1997. The Company expects to realize further improvements in its
cost structure in Fiscal 1998 as a result of these capital expenditures.
Net sales in Fiscal 1997 in the industrial fabrics and products segment, which
includes single-ply roofing and environmental membrane, woven fabrics
constructed of cotton, synthetics and fiberglass for lamination, insulation, and
filtration applications, and extruded urethane products increased $4.3 million
(2.2%) to $197.3 million from $193.0 million in Fiscal 1996. Net sales in Fiscal
1996 included $4.0 million of industrial elastic sales. The Company sold its
rubber products business, which produced these elastic products, in September
1996 and therefore Fiscal 1997 includes no industrial elastic sales.
Sales of fiberglass fabrics increased $5.0 million in Fiscal 1997 primarily as a
result of the continued growth in demand for fabrics used in the manufacture of
electrical circuit boards. The Company expects that the global demand for
electronic products which has fueled the growth in demand for fiberglass fabric
will continue for the foreseeable future. Therefore, the Company has expanded
and enhanced its productive capacity and expects to continue to invest in
additional machinery and equipment in order to satisfy customer demand and
improve product quality. Sales of roofing membrane increased $1.4 million from
Fiscal 1996. The Company's "Hi-Tuff/EP" line of roofing products have enjoyed
success in recent years as a result of the membrane's competitive price and
outstanding performance characteristics. The Company expects its roofing sales
to continue to grow as the Company capitalizes on the market enthusiasm for its
line of roofing products. Sales of urethane products increased $3.7 million from
Fiscal 1996 primarily as a result of stronger demand for certain of the
Company's products used in the manufacture of athletic footwear. The Company has
been successful in developing a variety of urethane film and sheet products for
specific customer requirements. The Company's capital plan involves investments
in Fiscal 1998 to increase productive capacity in this area which is expected to
allow further sales growth for urethane products. Sales of cotton industrial
fabrics increased $3.7 million from Fiscal 1996 due to improved unit volumes and
selling prices. Sales of other industrial fabrics declined $5.5 million
primarily as a result of the exit of certain low margin products and redirecting
such weaving capacity toward more profitable goods.
Pro forma operating profit in Fiscal 1997 for the industrial fabrics and
products segment increased by $12.5 million from $8.8 million in Fiscal 1996 to
$21.2 million in Fiscal 1997. Included in the Fiscal 1996 pro forma operating
profit are charges of approximately $9.6 million for writedown of certain
long-lived assets and loss on sale of operations. Adjusting for such charges,
pro forma operating profit in Fiscal 1997 increased by $2.8 million (15.2%) from
Fiscal 1996. The increases in sales as described above, and the exit of certain
low margin product lines, combined with improved operating efficiencies,
increased pro forma operating income in Fiscal 1997.
Net sales in Fiscal 1997 in the home fashion textiles segment, which includes
woven drapery fabrics and yarns for the home furnishings industry, increased
$1.4 million (4.1%) to $35.4 million in Fiscal 1997 from $34.0 million in Fiscal
1996 primarily as a result of new product development and styling which has
resulted in higher unit volumes and selling prices.
-17-
<PAGE> 18
Pro forma operating profit in Fiscal 1997 for the home fashion textiles segment
increased $1.2 million (67%) to $3.0 million from $1.8 million in Fiscal 1996.
The aforementioned volume and product mix enhancements were the primary causes
for improved operating results. Substantially all of such improvement in pro
forma operating increase occurred during the first half of Fiscal 1997.
Indirect corporate expenses (pro forma) declined by $1.9 million from $7.6
million in Fiscal 1996 to $5.7 million in Fiscal 1997. Fiscal 1996 pro forma
expenses included a $1.1 million charge resulting from an early retirement offer
extended to certain salaried employees. Fiscal 1996 also included an expense of
$1.0 million for management services provided by a former shareholder pursuant
to a management services agreement. Pursuant to the Plan of Reorganization on
the Effective Date, such agreement was cancelled and rejected and claims for
rejection damages were waived. Accordingly, no such expense was incurred in
Fiscal 1997. Offsetting such decreases were slightly higher employee
compensation costs and insurance costs.
Reorganization-related fees and expenses incurred in Fiscal 1997 totaled $8.4
million. These fees and expenses totaled $2.3 million in Fiscal 1996. Such fees
and expenses, which represent fees and expenses of the Company's financial
advisor, legal counsel and other professionals associated with the Company's
financial restructuring and the financial advisor and legal counsel for the
holders of a substantial majority of the Company's old outstanding bonds, have
been excluded from the pro forma financial statements.
During Fiscal 1997, the Company sold its debt and equity securities of Gulistan
Holdings consisting of a $10 million Promissory Note due in November 2001, $5
million of preferred stocks redeemable in November 2005 and warrants to purchase
up to 25% of the common stock of Gulistan Holdings. Proceeds from the sale were
$2 million. The writedown of the carrying value of the Gulistan securities to $2
million was reported in the period from November 3, 1996 to October 9, 1997.
Such writedown, which totaled $4.2 million in Fiscal 1996 and $5.1 million in
Fiscal 1997, has been excluded from the pro forma financial statements.
As a result of the application of fresh start accounting as required by
Statement of Position 90-7 ("SOP 90-7") of the American Institute of Certified
Public Accountants, entitled "Financial Reporting by Entities in Reorganization
Under the Bankruptcy Code", a gain on early extinguishment of debt of
approximately $100.2 million and reorganization items of approximately $13.1
million were recorded as of the Effective Date. The reorganization items include
professional fees and expenses of approximately $8.4 million (discussed above)
and fair value adjustments of approximately $4.7 million. These items have been
excluded from the pro forma financial information.
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 for Fiscal 1996 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.
Net sales in Fiscal 1996 in the apparel fabrics and products segment 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.
-18-
<PAGE> 19
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 was 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.
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.
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
in Fiscal 1995. 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
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. 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. 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 $7.9 million
(105%) to $15.5 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.
-19-
<PAGE> 20
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, was 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 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 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 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.
-20-
<PAGE> 21
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). On the Effective Date, Elastomerics and C&I (the "Borrowing
Subsidiaries") and JPS entered into the Credit Facility Agreement, dated as of
the Effective Date (the "Credit Agreement"), by and among the financial
institutions party thereto, Citibank, as agent, and NationsBank, N.A., as
co-agent. The Credit Agreement 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) $135 million and (b) a specified borrowing
base (the "Borrowing Base"), which is based upon eligible receivables, eligible
inventory and a specified dollar amount ($55,000,000 (subject to reduction)
based on fixed assets of the Borrowing Subsidiaries), except that (i) no
Borrowing Subsidiary may borrow an amount greater than the Borrowing Base
attributable to it (less any reserves as specified in the Credit Agreement) and
(ii) letters of credit may not exceed $20 million in the aggregate. The maturity
date of the Revolving Credit Facility is October 9, 2002. Until the delivery of
the Company's certificate with respect to its compliance with the terms of the
Credit Agreement during its second fiscal quarter of 1998 (the date of such
delivery being the "Delivery Date"), all loans outstanding under the Revolving
Credit Facility bear interest at either (i) the Eurodollar Rate (as defined in
the Credit Agreement) plus 1.5% per annum or (ii) the Base Rate (as defined in
the Credit Agreement) and, thereafter, will bear interest at the Base Rate or
the Eurodollar Rate plus an applicable margin (the "Applicable Margin") based
upon the Company's consolidated leverage ratio (which margin will not exceed
.25% for Base Rate borrowings and 1.75% for Eurodollar Rate borrowings). The
weighted average interest rate at November 1, 1997 is approximately 7.33%. The
Company currently pays (i) a fee of .375% per annum on the average unused
commitments under the Revolving Credit Facility until the Delivery Date and
thereafter such fees will be reduced to .25% per annum if a specified leverage
ratio is satisfied and (ii) a letter of credit fee equal to the Applicable
Margin for Eurodollar Rate borrowings. 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. As of November 1, 1997, unused
and outstanding letters of credit totaled $2,040,000. The outstanding letters of
credit reduce the funds available under the Revolving Credit Facility. At
November 1, 1997, the Company had approximately $40.7 million available for
borrowing under the Revolving Credit Facility.
The Credit Agreement contains restrictions on investments, acquisitions and
dividends unless, among other things, the Company satisfies a specified pro
forma fixed charge coverage ratio and maintains a specified minimum availability
under the Revolving Credit Facility for a stated period of time, and no default
exists under the Credit Agreement. The Credit Agreement also restricts, among
other things, indebtedness, liens, affiliate transactions, operating leases,
fundamental changes and asset sales other than the sale of up to $35 million of
fixed assets, subject to the satisfaction of certain conditions. The Credit
Agreement contains financial covenants relating to minimum levels of EBITDA,
minimum interest coverage ratio, minimum fixed charge coverage ratio and maximum
capital expenditures. As of November 1, 1997, the Company was in compliance with
these restrictions and all financial covenants.
Net cash provided by operations increased by approximately $2.0 million in the
combined periods from November 3, 1996 to October 9, 1997 and October 10, 1997
to November 1, 1997 (Fiscal 1997) compared to Fiscal 1996 primarily due to a
decrease in interest payments associated with the Old Debt Securities offset by
the payment of $14.0 million to holders of the 10.85% Notes and 10.25% Notes as
part of the Plan of Reorganization. Working capital at November 1, 1997 was
$82.1 million compared to a deficit of $257.9 million at November 2, 1996. This
increase of $340.0 million is primarily due to the effects of the consummation
of the Plan of Reorganization including the conversion of approximately $271.1
million of Old Debt Securities and the reclassification of the borrowings under
the Revolving Credit Facility from current liabilities to long-term debt.
-21-
<PAGE> 22
The Company expects that its planned capital expenditures in Fiscal 1998 of
approximately $25 million will be funded by cash from operations, bank and other
equipment financing sources. At November 1, 1997, the Company had commitments
for capital expenditures of approximately $1.5 million.
The Company has reviewed Year 2000 issues related to its management information
systems. The Company does not believe that Year 2000 issues are likely to
materially affect the Company's business, operations or financial condition.
Based upon the Company's ability to generate working capital through its
operations and its Revolving Credit Facility, the Company believes that it has
the financial resources necessary to pay its capital obligations and implement
its business plan.
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.
For the period from October 10, 1997 to November 1, 1997, the Company recorded a
tax expense of $2.0 million. The tax expense includes the utilization of a
portion of the deferred tax asset, described below, which was recorded as of the
Effective Date of the Plan of Reorganization of the Company. The effective tax
rate exceeds the statutory federal income tax rate due to the impact of items
not deductible for federal income tax purposes and because of state income
taxes. See Note 11 to the Consolidated Financial Statements for additional
information.
The Company recorded a tax benefit for the period ending October 9, 1997 of
approximately $8.8 million. This consists of a benefit from the implementation
of the Plan of Reorganization net of state taxes on subsidiary operations that
could not be offset by operating loss carryovers or current year losses of JPS
or its subsidiaries. The benefit arose as consummation of the Plan of
Reorganization substantially deleveraged JPS. Accordingly, the reserve
established against the deferred tax assets that was required due to the
operating history was significantly reduced. However, the deferred tax asset
attributable to the net operating loss carryforwards was also reduced as a
result of the reduction in net operating loss carryforwards that is required for
reorganizations such as that provided in the Plan of Reorganization. The
reduction in reserves and reduction in deferred tax liabilities exceeded the
reduction in the gross deferred tax asset by a net amount of $9.7 million thus
resulting in a deferred tax benefit. The recording of the tax benefit and the
net deferred tax asset reflects the Company's determination that it is more
likely than not that these deferred tax assets, net of the valuation allowance,
will be realized based on current income tax laws and expectations of future
taxable income stemming from the reversal of deferred tax liabilities or
operations. Uncertainties surrounding income tax law changes, shifts in
operations between state taxing jurisdictions and future operating income levels
may, however, affect the ultimate realization of all or some portion of these
deferred income tax assets.
The Internal Revenue Code (the "Code") provides that there are no taxes payable
on gains such as the extraordinary gain on early extinguishment of debt that was
realized on the reorganization of the Company in the period from November 3,
1996 to October 9, 1997. However, the Company is required under provisions of
the Code to reduce certain net operating loss carryforwards and certain other
tax attributes as a result of such gain. The Company estimates that beginning
net operating loss carryovers will be reduced by approximately $60 million. In
addition, alternative minimum tax credit carryovers will be reduced by
approximately $0.7 million. As a result of valuation allowances on these assets,
there is no tax expense attributable to such reductions. In addition to
attribute reduction, any remaining net operating loss carryforwards and certain
other tax attributes are subject to the limitations imposed by Section 382 of
the
-22-
<PAGE> 23
Code. The effect of these limitations is to limit the utilization of the
approximately $28 million in remaining net operating loss carryovers and certain
other attributes to an annual amount equal to the value of the Company
immediately after the ownership change (subject to certain adjustments)
multiplied by the Federal long-term tax exempt rate as of the date of
reorganization.
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 the 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, $0.2
million current year provision for state income taxes was required. In Fiscal
1995, the Company recorded $0.6 million in tax liabilities resulting from the
gain on the open market purchases of certain of its debt securities. Such amount
was recorded as a reduction of the extraordinary gain from early extinguishment
of debt. The loss recorded on the disposition of the Carpet Business was not
currently recognizable for tax purposes. The Company recorded no net tax benefit
in its financial statements due to uncertainties surrounding the Company's
ability to utilize such losses in the future.
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.
Although the Company believes use of its net operating loss carryforwards 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 Section 382 of the Code have not been issued.
Therefore, in accordance with provisions of the indentures governing the Old
Debt Securities, 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. As
of November 1, 1997 and November 2, 1996, the aggregate fair value of the
investments was approximately $34.6 million and $46.2 million, respectively.
Under the terms of the Plan of Reorganization, the holders of the 10.25% and
10.85% Notes received $14 million in cash from these investments and Contingent
Notes with an aggregate principal amount of $34 million (subject to adjustment
on the maturity date), payable from these investments upon the occurrence of
certain events. The respective amounts of the cash distribution and the initial
principal amount of the Contingent Notes were determined based on the
assumptions used to determine the original amount set aside for contingent tax
liabilities related to the 1994 sale of the Company's automotive business with
adjustments for certain events arising subsequent to the sale and such original
determination. A current liability in an amount equal to the approximate
aggregate fair value of invested funds is recorded in the Company's Consolidated
Balance Sheet as of November 1, 1997.
Even before giving effect to the previously described limitations on use of net
operating loss carryforwards occurring under the Plan of Reorganization, due to
the Company's operating history, it was uncertain that it would be able to
utilize all deferred tax assets. Therefore, for years ending prior to November
1, 1997, a valuation allowance had 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. As described above, a
portion of the valuation allowance was reversed and a tax benefit recognized
upon the Effective Date of the Plan of Reorganization.
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 128 "Earnings Per Share", which will be
effective during Fiscal 1998. The Company does not believe that the adoption of
SFAS No. 128 will have a significant effect on its earnings per share
disclosure.
-23-
<PAGE> 24
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 1, 1997 (Reorganized
Company consolidated balance sheet) and November 2, 1996 (Predecessor Company
consolidated balance sheet), and the related consolidated statements of
operations and shareholders' equity and of cash flows for the period from
October 10, 1997 to November 1, 1997 (Reorganized Company consolidated
operations), and the consolidated statements of operations, senior redeemable
preferred stock and shareholders' equity (deficit) and of cash flows for the
period from November 3, 1996 to October 9, 1997 and each of the two years in the
period ended November 2, 1996 (Predecessor Company consolidated operations). 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.
As discussed in Note 1 to the consolidated financial statements, on September 9,
1997, the Bankruptcy Court entered an order confirming the plan of
reorganization which became effective after the close of business on October 9,
1997. The accompanying consolidated financial statements as of November 1, 1997
and for the period from October 10, 1997 to November 1, 1997 have been prepared
in conformity with AICPA Statement of Position 90-7, "Financial Reporting for
Entities in Reorganization Under the Bankruptcy Code". Accordingly, the
Reorganized Company is a new entity with assets, liabilities, and a capital
structure having carrying values not comparable with prior periods as described
in Note 1.
In our opinion, the Reorganized Company consolidated financial statements
present fairly, in all material respects, the financial position of the Company
at November 1, 1997, and the results of its operations and its cash flows for
the period from October 10, 1997 to November 1, 1997 in conformity with
generally accepted accounting principles. Further, in our opinion, the
Predecessor Company consolidated financial statements referred to above present
fairly, in all material respects, the financial position of the Predecessor
Company as of November 2, 1996 and the results of its operations and its cash
flows for the period from November 3, 1996 to October 9, 1997 and each of the
two 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.
DELOITTE & TOUCHE LLP
Greenville, South Carolina
December 18, 1997
-24-
<PAGE> 25
JPS TEXTILE GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(In Thousands)
<TABLE>
<CAPTION>
Predecessor Reorganized
Company Company
----------- -----------
November 2, November 1,
1996 1997
----------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ 1,460 $ 3,888
Accounts receivable, less allowance of $2,511
in 1996 and $1,053 in 1997 (Note 9) 75,166 79,569
Inventories (Notes 2, 7, and 9) 48,374 44,770
Prepaid expenses and other (Notes 7, 8 and 9) 1,967 37,085
-------- --------
Total current assets 126,967 165,312
PROPERTY, PLANT AND EQUIPMENT, net 124,004 104,554
(Notes 2, 7, and 9)
REORGANIZATION VALUE IN EXCESS
OF AMOUNTS ALLOCABLE TO IDENTIFIABLE
ASSETS, less accumulated amortization of
$164 in 1997 (Note 2) -- 45,690
EXCESS OF COST OVER FAIR VALUE OF
NET ASSETS ACQUIRED, less accumulated
amortization of $7,860 in 1996 30,506 --
OTHER ASSETS (Notes 2, 7 and 8) 54,450 6,825
-------- --------
Total assets $335,927 $322,381
======== ========
</TABLE>
-25-
<PAGE> 26
<TABLE>
<CAPTION>
Predecessor Reorganized
Company Company
----------- -----------
November 2, November 1,
1996 1997
----------- -----------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS'
EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable $ 24,708 $ 24,353
Accrued interest 9,608 421
Accrued salaries, benefits and withholdings
(Note 12) 10,440 9,148
Other accrued expenses (Notes 7, 12 and 14) 13,987 13,182
Senior credit facility, revolving line of credit
(Notes 1, 2 and 9) 85,639 --
Current portion of long-term debt (Note 9) 240,451 36,076
--------- --------
Total current liabilities 384,833 83,180
LONG-TERM DEBT (Notes 1, 2 and 9) 4,226 94,891
DEFERRED INCOME TAXES (Notes 2 and 11) 3,665 --
OTHER LONG-TERM LIABILITIES
(Notes 2, 7 and 12) 19,513 18,263
--------- --------
Total liabilities 412,237 196,334
--------- --------
COMMITMENTS AND CONTINGENCIES
(Notes 9, 11 and 12)
SENIOR REDEEMABLE PREFERRED STOCK,
redemption value of $54,520 in 1996
(Notes 1, 2 and 10) 32,676 --
--------- --------
SHAREHOLDERS' EQUITY (DEFICIT)
(Note 10):
Junior preferred stock 250 --
Common stock:
Common stock - Reorganized Company -- 100
Common stock - Predecessor Company 10 --
Additional paid-in capital 25,108 123,230
Retained earnings (deficit) (134,354) 2,717
--------- --------
Total shareholders' equity (deficit) (108,986) 126,047
--------- --------
Total liabilities and shareholders' equity $ 335,927 $322,381
========= ========
</TABLE>
See notes to consolidated financial statements.
-26-
<PAGE> 27
JPS TEXTILE GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in Thousands Except Per Share Data)
<TABLE>
<CAPTION>
Predecessor Company Reorganized
------------------------------------------------------| Company
Year Ended | -------------------
------------------------------- Period from | Period from
October 28, November 2, November 3, 1996 | October 10, 1997
1995 1996 to October 9, 1997| to November 1, 1997
----------- ----------- ------------------| -------------------
<S> <C> <C> <C> | <C>
Net sales $ 472,565 $ 448,824 $ 379,643 | $ 38,728
Cost of sales 406,070 397,804 327,667 | 31,058
--------- --------- --------- | --------
Gross profit 66,495 51,020 51,976 | 7,670
Selling, general and administrative |
expenses (Note 12) 39,586 40,579 37,146 | 2,466
Other income (expense), net (Note 12) (6,248) (2,498) (622) | 11
Charges for plant closing, loss |
on sale of certain operations |
and writedown of certain |
long-lived assets (Note 6) -- (30,028) 574 | --
--------- --------- --------- | --------
Operating profit (loss) 20,661 (22,085) 14,782 | 5,215
Valuation allowance on Gulistan |
securities (Note 5) -- (4,242) (5,070) | --
Interest income 2,821 2,856 2,744 | 93
Interest expense (Note 9) (39,946) (40,510) (32,164) | (584)
--------- --------- --------- | --------
Income (loss) before reorganization |
items, income taxes, discontinued |
operations and extraordinary items (16,464) (63,981) (19,708) | 4,724
Reorganization items (Notes 1 and 2): |
Fair-value adjustments -- -- (4,651) | --
Professional fees and expenses -- (2,255) (8,420) | --
--------- --------- --------- | --------
Income (loss) before income taxes, |
discontinued operations and |
extraordinary items (16,464) (66,236) (32,779) | 4,724
Provision (benefit) for income |
taxes (Note 11) 1,200 (300) (8,822) | 2,007
--------- --------- --------- | --------
Income (loss) before discontinued |
operations and extraordinary |
items (17,664) (65,936) (23,957) | 2,717
Discontinued operations (Note 5): |
Loss from discontinued operations (7,079) -- -- | --
Loss on sale of discontinued |
operations, net of taxes of |
$100 in 1995 and $0 in 1996 (26,241) (1,500) -- | --
--------- --------- --------- | --------
Income (loss) before extraordinary |
items (50,984) (67,436) (23,957) | 2,717
</TABLE>
-27-
<PAGE> 28
CONSOLIDATED STATEMENTS OF OPERATIONS (Continued)
<TABLE>
<CAPTION>
Predecessor Company Reorganized
------------------------------------------------------| Company
Year Ended | -------------------
------------------------------- Period from | Period from
October 28, November 2, November 3, 1996 | October 10, 1997
1995 1996 to October 9, 1997| to November 1, 1997
----------- ----------- ------------------| -------------------
<S> <C> <C> <C> | <C>
Extraordinary gain on early |
extinguishment of debt, net of |
taxes of $600 in 1995 and |
$0 in 1997 (Notes 1 and 9) 20,120 -- 100,235 | --
------------ ------------ ------------ | -----------
Net income (loss) $ (30,864) $ (67,436) $ 76,278 | $ 2,717
============ ============ ============ | ===========
|
Weighted average number of |
common shares outstanding (A) | 10,000,000
|
Net income per common share (A) | $ 0.27
===========
</TABLE>
(A) Share and per share data are not meaningful on or prior to October 9, 1997
due to the significant change in the capital structure in connection with
the Plan of Reorganization.
See notes to consolidated financial statements.
-28-
<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 Retained
Preferred Common Preferred Paid-In Earnings
Stock Stock Stock Capital (Deficit)
---------- ------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Predecessor Company
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)
Net income for the period from
November 3, 1996 to October 9, 1997 76,278
Preferred stock-in-kind dividends
and discount accretion 3,827 (3,827)
Fresh start adjustments (36,503) 90 (250) 101,949 58,076
-------- ------- ----- -------- ---------
Reorganized Company
Balance - October 9, 1997 0 100 0 123,230 0
Net income for the period from
October 10, 1997 to November 1, 1997 2,717
-------- ------- ----- -------- ---------
Balance - November 1, 1997 $ 0 $ 100 $ 0 $123,230 $ 2,717
======== ======= ===== ======== =========
</TABLE>
See notes to consolidated financial statements.
-29-
<PAGE> 30
JPS TEXTILE GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
<TABLE>
<CAPTION>
Predecessor Company Reorganized
----------------------------------------------------| Company
Year Ended | -------------------
------------------------------ Period from | Period from
October 28, November 2, November 3, 1996 | October 10, 1997
1995 1996 to October 9, 1997| to November 1, 1997
---------- ----------- ------------------| -------------------
<S> <C> <C> <C> | <C>
CASH FLOWS FROM |
OPERATING ACTIVITIES |
Net income (loss) $(30,864) $(67,436) $ 76,278 | $ 2,717
-------- -------- --------- | --------
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 (574) | --
Loss from discontinued |
operations 7,079 -- -- | --
Loss on sale of |
discontinued operations 26,241 1,500 -- | --
Extraordinary gain on |
early extinguishment of debt (20,120) -- (100,235) | --
Depreciation and amortization, |
except amounts included |
in interest expense 21,785 22,739 17,880 | 846
Interest accretion and debt |
issuance cost amortization 8,818 10,088 7,303 | 20
Reorganization charges -- -- 5,581 | --
Tax benefit from reduction |
of valuation allowance -- -- (9,745) | --
Product liability charge 5,000 -- -- | --
Deferred income tax |
provision (benefit) -- (500) -- | 1,256
Valuation allowance on |
Gulistan securities -- 4,242 5,070 | --
Other, net (498) (3,163) (3,229) | (295)
Changes in assets and liabilities: |
Accounts receivable (1,086) 10,372 10,599 | (15,002)
Inventories (685) (2,635) (6,920) | 9,664
Prepaid expenses and other |
assets (2,505) (2,348) (18,565) | 816
Accounts payable (911) (3,983) 1,243 | (1,599)
Accrued expenses and other |
liabilities (7,202) (1,688) 15,432 | 650
-------- -------- --------- | --------
Total adjustments 35,916 64,652 (76,160) | (3,644)
-------- -------- --------- | --------
Net cash provided by (used in) |
operating activities 5,052 (2,784) 118 | (927)
-------- -------- --------- | --------
</TABLE>
-30-
<PAGE> 31
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
<TABLE>
<CAPTION>
Reorganized
Predecessor Company Company
----------------------------------------------------| -------------------
Year Ended |
------------------------------ Period from | Period from
October 28, November 2, November 3, 1996 | October 10, 1997
1995 1996 to October 9, 1997| to November 1, 1997
----------- ----------- ------------------| -------------------
<S> <C> <C> <C> | <C>
CASH FLOWS FROM |
INVESTING ACTIVITIES |
Property and equipment additions (18,811) (9,834) (14,467) | (1,618)
Receipts from discontinued |
operations, net 3,453 -- -- | --
Proceeds from sale of |
discontinued operations, net 4,415 17,077 -- | --
Proceeds from sale of certain |
operations -- 5,113 988 | --
Proceeds from sale of long-term |
investments -- -- 49,500 | --
Purchase of investments -- -- (33,500) | --
-------- -------- -------- | -------
Net cash provided by (used in) |
investing activities (10,943) 12,356 2,521 | (1,618)
-------- -------- -------- | -------
|
CASH FLOWS FROM |
FINANCING ACTIVITIES |
Financing costs incurred (25) (614) (1,465) | (66)
Proceeds from issuance of |
long-term debt 5,000 29 -- | --
Revolving credit facility |
borrowings (repayments), net 41,808 (6,087) 3,361 | 3,245
Purchases and repayment of other |
long-term debt, net (41,384) (2,792) (2,655) | (86)
-------- -------- -------- | -------
Net cash provided by (used in) |
financing activities 5,399 (9,464) (759) | 3,093
-------- -------- -------- | -------
|
NET INCREASE (DECREASE) |
IN CASH (492) 108 1,880 | 548
Cash at beginning of period 1,844 1,352 1,460 | 3,340
-------- -------- -------- | -------
Cash at end of period $ 1,352 $ 1,460 $ 3,340 | $ 3,888
======== ======== ======== | =======
|
SUPPLEMENTAL INFORMATION |
ON CASH FLOWS FROM |
CONTINUING OPERATIONS: |
Interest paid $ 33,681 $ 30,709 $ 7,944 | $ 24
Income taxes paid (received), net 3,314 693 (46) | (8)
Non-cash financing activities: |
Senior redeemable preferred |
stock dividends-in-kind 2,936 3,114 -- | --
</TABLE>
See notes to consolidated financial statements.
-31-
<PAGE> 32
JPS TEXTILE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BUSINESS AND BASIS OF PRESENTATION
Unless the context otherwise requires, the terms "JPS" and the
"Company" as used in these Consolidated Financial Statements mean JPS
Textile Group, Inc. and JPS Textile Group, Inc. together with its
subsidiaries, respectively.
The 1988 Acquisition - JPS 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 5 and
6, certain of the acquired businesses and operations have been
subsequently sold.
The 1991 Restructuring - In 1990, JPS negotiated the terms of a
recapitalization proposal with a steering committee comprised of
institutional holders of a substantial amount of the then-outstanding
securities, which culminated in JPS's prepetition solicitation of votes
to accept or reject a chapter 11 plan of reorganization. The plan was
overwhelmingly accepted. On February 7, 1991, JPS filed a petition for
relief under the Bankruptcy Code, and approximately 42 days thereafter,
JPS's plan was confirmed by the bankruptcy court and JPS emerged from
chapter 11 on April 2, 1991. Pursuant to that plan, in exchange for
JPS's outstanding debt securities and JPS's equity securities, JPS
issued (i) $100 million in principal amount of senior secured notes due
June 1, 1995 and June 1, 1996 (all of which were redeemed in 1994),
(ii) $151.1 million in principal amount of 10.85% Senior Subordinated
Discount Notes due June 1, 1999 (the "10.85% Notes"), (iii) $125
million in principal amount of 10.25% Senior Subordinated Notes due
June 1, 1999 (the "10.25% Notes"), (iv) $75 million in principal amount
of 7% Subordinated Debentures due May 15, 2000 (the "7% Subordinated
Debentures"), (v) 390,719 shares of Series A Senior Preferred Stock
(the "Old Senior Preferred Stock"), (vi) 10,000 shares of Series B
Junior Preferred Stock (the "Old Junior Preferred Stock"), (vii)
490,000 shares of class A common stock, par value $0.01 per share (the
"Class A Common Stock") and (viii) 510,000 shares of class B common
stock, par value $0.01 per share (the "Class B Common Stock" and,
together with the Class A Common Stock, the "Old Common Stock"). Since
this 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 was amortized as interest expense or dividends over the life
of the related debt or senior redeemable preferred stock instrument
using the interest method.
The 1997 Restructuring - In 1996, JPS, and JPS Capital Corp., a
wholly-owned subsidiary of JPS ("JPS Capital") commenced negotiations
with an unofficial committee (the "Unofficial Bondholder Committee")
comprised of institutions that owned, or represented holders that
beneficially owned, approximately 60% of the 10.85% Notes, the 10.25%
Notes and the 7% Subordinated Debentures (the "Old Debt Securities").
On May 15, 1997, the parties reached an agreement in principle on the
terms of a restructuring to be accomplished under chapter 11 of the
Bankruptcy Code which culminated in
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<PAGE> 33
a Joint Plan of Reorganization (as amended the "Plan of
Reorganization") proposed by JPS and JPS Capital under the Bankruptcy
Code. Pursuant to a disclosure statement, dated June 25, 1997 (the
"Disclosure Statement"), on June 26, 1997, JPS and JPS Capital
commenced a prepetition solicitation of votes by the holders of Old
Debt Securities and Old Senior Preferred Stock to accept or reject the
Plan of Reorganization. Under the Plan of Reorganization, the holders
of Old Debt Securities and Old Senior Preferred Stock were the only
holders of impaired claims and impaired equity interests entitled to
receive a distribution, and therefore, pursuant to section 1126 of the
Bankruptcy Code, were the only holders entitled to vote on the Plan of
Reorganization. At the conclusion of the 32-day solicitation period,
the Plan of Reorganization had been accepted by holders of more than
99% of the Old Debt Securities that voted on the Plan of Reorganization
and by holders of 100% of the Old Senior Preferred Stock that voted on
the Plan of Reorganization.
On August 1, 1997, JPS commenced its voluntary reorganization case
under chapter 11 of the Bankruptcy Code in the United States Bankruptcy
Court for the Southern District of New York (the "Bankruptcy Court"),
and filed the Plan of Reorganization and the Disclosure Statement. None
of JPS's subsidiaries, including JPS Capital which was a co-proponent
of the Plan of Reorganization, commenced a case under the Bankruptcy
Code. Pursuant to orders of the Bankruptcy Court entered on September
9, 1997, the Bankruptcy Court (i) approved the Disclosure Statement and
the solicitation of votes on the Plan of Reorganization and (ii)
confirmed the Plan of Reorganization. The Plan of Reorganization became
effective on October 9, 1997 (the "Effective Date") resulting in, among
other things, the cancellation of the Old Senior Preferred Stock, Old
Junior Preferred Stock, and Old Common Stock, and the issuance of 10
million shares of $.01 par value new common stock (the "Common Stock").
Through the implementation of the Plan of Reorganization as of the
Effective Date, JPS's most significant financial obligations were
restructured: $240,091,318 in face amount of outstanding Old Debt
Securities were converted to, among other things, $14 million in cash,
99.25% of the shares of Common Stock and approximately $34 million in
aggregate principal amount (subject to adjustment on the maturity date)
of contingent payment notes issued by JPS Capital (the "Contingent
Notes"); the Old Senior Preferred Stock, the Old Junior Preferred Stock
and the Old Common Stock were cancelled; warrants to purchase up to 5%
of the common stock of JPS (the "New Warrants") with an initial
purchase price of $98.76 per share were issued in respect of the Old
Senior Preferred Stock; and the obligations of JPS under its former
working capital facility were satisfied and the Revolving Credit
Facility was obtained. JPS's senior management received approximately
0.75% of the Common Stock in lieu of payment under their contractual
retention bonus agreements.
2. FRESH START REPORTING
The Plan of Reorganization was accounted for pursuant to Statement of
Position 90-7 ("SOP 90-7") of the American Institute of Certified
Public Accountants, entitled "Financial Reporting by Entities in
Reorganization under the Bankruptcy Code." The accompanying
consolidated financial statements reflect the use of "fresh start"
reporting as required by SOP 90-7, in which assets and liabilities were
adjusted to their fair values and resulted in the creation of a new
reporting entity (the "Company" or the "Reorganized Company") with no
retained earnings or accumulated deficit as of October 9, 1997.
Accordingly, the consolidated financial statements for the periods
prior to October 9, 1997 (the "Predecessor Company") are not comparable
to consolidated financial statements presented subsequent to October 9,
1997. A black line has been drawn on the accompanying consolidated
financial statements and notes thereto to distinguish between the
Reorganized Company and Predecessor Company balances.
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<PAGE> 34
The total reorganization value assigned to the Company's assets was
determined, by independent valuation, by calculating projected cash
flows before debt service requirements, for a three-year period, plus
an estimated terminal value of the Company (calculated using a multiple
of projected EBITDA), each discounted back to its present value using a
discount rate of 10% (estimating the after-tax weighted average cost of
capital). The above calculations resulted in an estimated
reorganization value attributable to the common stock of approximately
$123.3 million of which the Excess Reorganization Value was
approximately $45.9 million. The Excess Reorganization Value will be
amortized over twenty years.
As a result of the restructuring and the application of fresh start
accounting as required by SOP 90-7, a gain on early extinguishment of
debt of approximately $100.2 million and reorganization items of
approximately $13.1 million were recorded in the Predecessor Company
period ending October 9, 1997.
The effect of the Plan of Reorganization and the implementation of
fresh start accounting on the Company's consolidated balance sheet as
of October 9, 1997 was as follows (in thousands) (unaudited):
<TABLE>
<CAPTION>
Pre-Fresh Start Fresh Start
Balance Sheet Reorganization Fresh Start Balance Sheet
October 9, 1997 Adjustments (a) Adjustments (b) October 9, 1997
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Current assets $ 125,176 $ (861) $124,315
Property, plant and
equipment, net 121,299 (17,682) 103,617
Reorganization value in
excess of amounts
allocable to identifiable
assets 45,854 45,854
Excess of cost over fair
value of net assets
acquired 29,612 (29,612) --
Other assets 54,254 $ (6,555) (3,637) 44,062
--------- --------- --------- --------
Total $ 330,341 $ (6,555) $ (5,938) $317,848
========= ========= ========= ========
Current liabilities
excluding current
portion of long-term
debt $ 48,070 $ 49 $ 48,119
Long-term debt including
current portion 91,408 36,400 127,808
Deferred income taxes 3,665 (3,665) --
Other long-term liabilities 19,878 $ (1,287) 18,591
Liabilities subject to
compromise 271,082 (271,082) --
Senior redeemable
preferred stock 36,503 (36,503) --
Capital stock 21,540 101,790 123,330
Accumulated deficit (161,805) 166,456 (4,651) --
--------- --------- --------- --------
Total $ 330,341 $ (6,555) $ (5,938) $317,848
========= ========= ========= ========
</TABLE>
- ------------------------------------
(a) To record the transactions associated with the Plan of Reorganization
as described in Note 1 and eliminate the deficit in retained earnings.
(b) To record the adjustments to assets and liabilities to reflect their
estimated fair value, including the establishment of reorganization
value in excess of amounts allocable to identifiable assets.
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<PAGE> 35
3. PRO FORMA FINANCIAL INFORMATION (Unaudited)
The following unaudited pro forma consolidated statement of operations
combines the period from November 3, 1996 to October 9, 1997 and the
period from October 10, 1997 to November 1, 1997 and reflects the
financial results of the Company as if the Plan of Reorganization had
been effective November 3, 1996 (in thousands except share and per
share data). The pro forma information does not purport to be
indicative of the results that actually would have been obtained had
such transactions been completed as of the beginning of the period
presented or that may be obtained in the future.
<TABLE>
<CAPTION>
Year Ended November 1, 1997
----------------------------------------------------------------------------------------
Predecessor
Company Reorganized Company
------------------| --------------------------------------------------------------------
Period from | Period from
November 3, 1996 | October 10, 1997 Pro forma
to October 9, 1997| to November 1, 1997 Total Adjustments Pro forma
------------------| ------------------- --------- ----------- -----------
<S> <C> | <C> <C> <C> <C>
Net sales $ 379,643 | $ 38,728 $ 418,371 $ 418,371
Cost of sales 327,667 | 31,058 358,725 $ (8,881)(a) 349,844
--------- | -------- --------- --------- -----------
Gross profit 51,976 | 7,670 59,646 8,881 68,527
Selling, general and |
administrative expenses 37,146 | 2,466 39,612 1,132 (b) 40,744
Other income (expense), net (48) | 11 (37) (37)
--------- | -------- --------- --------- -----------
Operating profit (loss) 14,782 | 5,215 19,997 7,749 27,746
Valuation allowance on |
Gulistan securities (5,070) | -- (5,070) 5,070 (c) --
Interest income 2,744 | 93 2,837 (1,645)(d) 1,192
Interest expense (32,164) | (584) (32,748) 24,072 (e) (8,676)
--------- | -------- --------- --------- -----------
Income (loss) before |
reorganization items, |
income taxes and |
extraordinary items (19,708) | 4,724 (14,984) 35,246 20,262
Reorganization items: |
Fair-value adjustments (4,651) | -- (4,651) 4,651 (f) --
Professional fees and expenses (8,420) | -- (8,420) 8,420 (f) --
--------- | -------- --------- --------- -----------
Income (loss) before income |
taxes and extraordinary |
items (32,779) | 4,724 (28,055) 48,317 20,262
Provision (benefit) for income |
taxes (8,822) | 2,007 (6,815) 15,458(g) 8,643
--------- | -------- --------- --------- -----------
Income (loss) before |
extraordinary items (23,957) | 2,717 (21,240) 32,859 11,619
Extraordinary gain on early |
extinguishment of debt 100,235 | -- 100,235 (100,235)(h) --
--------- | -------- --------- --------- -----------
Net income (loss) $ 76,278 | $ 2,717 $ 78,995 $ (67,376) $ 11,619
========= | ======== ========= ========= ===========
|
Weighted average number of |
common shares outstanding | 10,000,000
| ===========
|
Net income per common share | $ 1.16
===========
</TABLE>
- ------------------------------------
-35-
<PAGE> 36
(a) The following table details the net adjustment to cost of goods sold
related to fresh start accounting:
<TABLE>
<S> <C>
Decrease in depreciation expense reflecting revaluation of the Company's
property, plant and equipment $ (8,530)
Net decrease in pension and post-retirement expense reflecting the full
recognition of unamortized gains and losses on the Effective Date (351)
-----------
$ (8,881)
===========
</TABLE>
(b) The following table details the net adjustment to selling, general and
administrative expenses:
<TABLE>
<S> <C>
Decrease in depreciation expense reflecting revaluation of the Company's
property, plant and equipment $ (123)
Elimination of goodwill amortization (953)
Addition of amortization of reorganization value in excess of amounts
allocable to identifiable assets 2,208
-----------
$ 1,132
===========
</TABLE>
(c) Reflects the elimination of the valuation allowance on Gulistan Securities
since these assets were sold in connection with the reorganization.
(d) Reflects the elimination of interest income on the $14 million cash
distribution to the holders of 10.25% Notes and 10.85% Notes.
(e) The following table details the net adjustment to interest expense related
to the reorganization:
<TABLE>
<S> <C>
Decrease in interest expense due to exchange of JPS's 10.25% Notes,
10.85% Notes and 7% Subordinated Debentures $ 25,617
Elimination of amortization of deferred financing costs of the former
revolving Credit Facility 297
Amortization of deferred financing costs of the new Credit Agreement (344)
Increase in interest expense resulting from additional borrowings under
the new Credit Agreement (489)
Interest expense on the Contingent Notes (1,009)
-----------
$ 24,072
===========
</TABLE>
(f) Reflects the elimination of reorganization items.
(g) Reflects the estimated income tax effects reflecting the reorganization and
the application of fresh start accounting. Pro forma income tax expense is
calculated using a 38% effective tax rate times taxable income before
amortization of excess reorganization value. Cash tax expense is calculated
after giving effect to certain differences in taxable income for tax
purposes including the amortization of excess reorganization value and
differences in depreciation expense and pension expense.
(h) Reflects the elimination of the gain on early extinguishment of debt.
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<PAGE> 37
4. SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation - The consolidated financial statements
include JPS Textile Group, Inc. and its direct subsidiaries, all of
which are wholly owned. Significant intercompany transactions and
accounts have been eliminated.
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 12). 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
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.
Investments - At November 1, 1997, all debt and equity securities are
classified as held-for-sale and reported at fair value as determined
based on market prices or dealer quotes. At November 2, 1996, all debt
and equity securities were classified as held-to-maturity and carried
at amortized cost, adjusted for amortization of premiums and accretion
of discounts to maturity.
Property, Plant and Equipment - As a result of the adoption of fresh
start accounting as described in Note 2, property, plant and equipment
was adjusted to estimated fair value as of October 9, 1997 and
historical accumulated depreciation was eliminated. 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:
<TABLE>
<S> <C>
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
</TABLE>
Excess of Cost Over Fair Value of Net Assets Acquired - Excess of cost
over fair value of net assets acquired was being amortized on a
straight-line basis over a period of forty years. As a result of the
implementation of fresh start accounting as described in Note 2, the
excess of cost over fair value of net assets acquired was written off
as of October 9, 1997.
-37-
<PAGE> 38
Reorganization Value in Excess of Amounts Allocable to Identifiable
Assets - Reorganization value in excess of amounts allocable to
identifiable assets results from the application of "fresh start"
reporting, as discussed in Note 2, which requires the Predecessor
Company's unidentified intangibles, net of amortization, to be reduced
to zero and a new amount to be recorded equaling the excess of the fair
value of the Company over the fair value allocated to its identifiable
assets. This excess is classified as reorganization value in excess of
amounts allocable to identifiable assets and is being amortized over a
twenty-year period.
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 13 for a further description of the
accounting for postretirement benefits.
Postemployment Benefits - The Company accounts for postemployment
benefits using the principles of 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. See
Note 13 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.
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 $1,355,000 and
$1,967,000 in Fiscal 1995 and 1996, respectively, and $1,947,000 and
$122,000 in the period from November 3, 1996 to October 9, 1997 and the
period from October 10, 1997 to November 1, 1997, 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.
-38-
<PAGE> 39
Earnings Per Share - Earnings per share is computed by dividing
earnings applicable to common stock by the weighted average number of
shares of common stock outstanding during the period. In the period
from October 10, 1997 to November 1, 1997, the inclusion of additional
shares assuming the exercise of stock options and warrants was
antidilutive. Therefore, primary and fully diluted earnings per share
are the same. In February 1997, the Financial Accounting Standards
Board issued SFAS No. 128 "Earnings Per Share", which will be effective
during Fiscal 1998. The Company does not believe that the adoption of
SFAS No. 128 will have a significant effect on its earnings per share
disclosure.
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. Fiscal 1995 consisted of fifty-two weeks and Fiscal 1996 had
fifty-three weeks. The 1997 fiscal year consisted of fifty-two weeks
including the period from November 3, 1996 to October 9, 1997
(Predecessor Company) and the period from October 10, 1997 to November
1, 1997 (Reorganized Company).
Reclassifications - Certain Fiscal 1995 and 1996 amounts have been
reclassified to conform to the 1997 presentation.
5. 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
JPS, JPS Carpet Corp. ("Carpet"), a wholly-owned subsidiary of JPS,
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 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 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
loss on the sale was not currently recognizable for tax purposes and
the Company 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 $120.1 million in Fiscal 1995.
-39-
<PAGE> 40
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 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).
The Company did not record interest income on any of the Gulistan
securities held by the Company because of net losses reported by
Gulistan since the date of sale. Also, in accordance with relevant
accounting literature, the Company recorded a valuation allowance
against its investment in Gulistan securities and corresponding charges
to income of approximately $4.2 million in Fiscal 1996 and $2.1 million
in the period from November 3, 1996 to October 9, 1997 as a result of
the net losses incurred by Gulistan. On August 28, 1997, the Company
sold its investment in the Gulistan securities to Gulistan for $2.0
million in cash resulting in an additional charge of approximately $3.0
million.
Automotive Businesses - On June 28, 1994, pursuant to the terms of an
Asset Purchase Agreement dated May 25, 1994 (the "Asset Purchase
Agreement"), by and among JPS, JPS Auto Inc., a wholly-owned subsidiary
of JPS ("Auto"), JPS Converter and Industrial Corp., a wholly-owned
subsidiary of JPS ("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 to the Purchaser.
The sale price for the automotive assets was approximately $283
million, consisting of $264 million of cash paid at closing and $15
million of assumed debt as of June 28, 1994. In addition, certain
post-closing adjustments which resulted in a gain of $4.4 million, net
of $0.1 million of taxes, were recognized in Fiscal 1995.
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 portion
was approximately $1.6 million in Fiscal 1995.
6. 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 $20.7 million and $16.8 million in Fiscal 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
-40-
<PAGE> 41
and was used to reduce the Company's outstanding indebtedness. In April
1997, the Company paid $0.3 million to Elastomer as final settlement
for certain post-closing adjustments based on the audited amount of net
assets transferred.
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. The plant closing was completed on October 28,
1996 and the plant was sold on August 14, 1997 for approximately $1.2
million in cash.
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, was
impaired under the criteria of SFAS No. 121 because expected future
cash flows from the operation of the plant were 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.
-41-
<PAGE> 42
7. BALANCE SHEET COMPONENTS
The components of certain balance sheet accounts are (in thousands):
<TABLE>
<CAPTION>
Predecessor Reorganized
Company Company
----------- -----------
November 2, November 1,
1996 1997
----------- -----------
<S> <C> <C>
Inventories:
Raw materials and supplies $ 13,155 $ 12,508
Work-in-process 16,912 17,168
Finished goods 18,307 15,094
--------- ---------
$ 48,374 $ 44,770
========= =========
Prepaid expenses and other:
Investments $ -- $ 34,597
Deferred current tax -- 867
Prepaid insurance 620 555
Other 1,347 1,066
--------- ---------
$ 1,967 $ 37,085
========= =========
Property, plant and equipment, net:
Land and improvements $ 5,921 $ 4,187
Buildings and improvements 42,775 13,548
Machinery and equipment 183,320 81,108
Furniture, fixtures and other 8,116 1,069
--------- ---------
240,132 99,912
Less accumulated depreciation (117,642) (681)
--------- ---------
122,490 99,231
Construction in progress 1,514 5,323
--------- ---------
$ 124,004 $ 104,554
========= =========
Other noncurrent assets:
Unamortized debt issuance costs $ 351 $ 1,438
Prepaid pension costs 1,055 2,043
Deferred income tax -- 3,344
Investments 52,986 --
Other 58 --
--------- ---------
$ 54,450 $ 6,825
========= =========
Other accrued expenses:
Roofing product liability costs $ 3,000 $ 1,500
Taxes payable other than income taxes 1,250 1,090
Income taxes 2,150 3,292
Other 7,587 7,300
--------- ---------
$ 13,987 $ 13,182
========= =========
Other long-term liabilities:
Roofing product liability costs and deferred warranty income $ 14,361 $ 14,744
Accrued postretirement benefit plan liability 4,808 3,393
Other 344 126
--------- ---------
$ 19,513 $ 18,263
========= =========
</TABLE>
-42-
<PAGE> 43
8. INVESTMENTS
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. During 1997, the original investments matured and were
reinvested as detailed below. The following table details the original
and reinvested amounts at November 2, 1996 and November 1, 1997 (in
thousands):
<TABLE>
<CAPTION>
1996
--------------------------------------------------------------
Held to Maturity: Adjusted Cost Gross Unrealized Gains Fair Value
----------------- ------------- ---------------------- -----------
<S> <C> <C> <C>
U.S. Treasury obligations $ 45,257 $ 437 $ 45,694
Other 464 - 464
---------- ------- -----------
$ 45,721 $ 437 $ 46,158
========== ======= ===========
</TABLE>
<TABLE>
<CAPTION>
1997
--------------------------------------------------------------
Held for Sale: Adjusted Cost Gross Unrealized Gains Fair Value
------------------- ------------- ---------------------- -----------
<S> <C> <C> <C>
U.S. Treasury obligations $ 28,553 - $ 28,553
Corporate obligations 5,938 - 5,938
Other 106 - 106
---------- ------- -----------
$ 34,597 - $ 34,597
========== ======= ===========
</TABLE>
At November 2, 1996, the investments are included in other assets and
classified as long-term. At November 1, 1997, the investments are
included in other current assets because, as discussed in Note 9, the
Company expects to use these investments to satisfy certain contingent
liabilities in 1998. All investment securities at November 1, 1997 have
a contractual maturity of less than one year.
9. LONG-TERM DEBT
Long-term debt consists of (in thousands):
<TABLE>
<CAPTION>
Predecessor Reorganized
Company Company
----------- -----------
November 2, November 1,
1996 1997
----------- -----------
<S> <C> <C>
Senior credit facility, revolving line of credit $ 85,639 $ 92,246
10.85% Notes (including interest due
at maturity of $6,002) 115,249 --
10.25% Notes (including interest due at maturity
of $5,609) 82,382 --
7% Subordinated Debentures 54,071 --
Contingent Notes -- 34,540
Equipment financing 7,016 4,181
--------- ---------
Total 344,357 130,967
Less reorganization discount:
10.85% Notes (3,308) --
10.25% Notes (2,694) --
7% Debentures (8,039) --
--------- ---------
Total long-term debt 330,316 130,967
Less current portion (326,090) (36,076)
--------- ---------
Long-term portion $ 4,226 $ 94,891
========= =========
</TABLE>
-43-
<PAGE> 44
Senior Credit Facility - Until the Effective Date, JPS and its
operating subsidiaries (being hereinafter collectively referred to as
the "Borrowing Subsidiaries") were 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 provided
for a revolving credit loan facility and letters of credit (the "Old
Revolving Credit Facility") in a maximum principal amount equal to the
lesser of (a) $118 million and (b) a specified borrowing base, which
was based upon eligible receivables and inventory of the Borrowing
Subsidiaries (the "Borrowing Base"), except that (i) no Borrowing
Subsidiary could borrow an amount greater than the Borrowing Base
attributable to it, (ii) letters of credit could not exceed $15 million
in the aggregate, and (iii) $20 million of the Old Revolving Credit
Facility was 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 did not exceed the
lesser of (A) $118 million and (B) the sum of the Borrowing Base plus
$25 million (subject to certain reductions). Borrowings under the
Restated Credit Agreement bore interest at a Base Rate (as defined)
plus 1.0% per annum or at the Eurodollar Rate (as defined) plus 2.5%
per annum. A fee of 1/2 of 1% per annum was paid on the unused line of
credit.
During the first quarter of Fiscal 1995, the Company borrowed
$36,607,000 under the Restated Credit Agreement 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.
On the Effective Date, JPS and the Borrowing Subsidiaries entered into
the Credit Facility Agreement, dated as of the Effective Date (the
"Credit Agreement"), by and among the financial institutions party
thereto, Citibank, as agent, and NationsBank, N.A., as co-agent. The
Credit Agreement 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) $135 million and (b) a
specified borrowing base (the "Borrowing Base"), which is based upon
eligible receivables, eligible inventory and a specified dollar amount
($55,000,000 (subject to reduction) based on fixed assets of the
Borrowing Subsidiaries), except that (i) no Borrowing Subsidiary may
borrow an amount greater than the Borrowing Base attributable to it
(less any reserves as specified in the Credit Agreement) and (ii)
letters of credit may not exceed $20 million in the aggregate. The
maturity date of the Revolving Credit Facility is October 9, 2002.
Until delivery of the Company's certificate with respect to its
compliance with the terms of the Credit Agreement during the second
fiscal quarter of 1998 (the date of such delivery being the "Delivery
Date"), all borrowings under the Revolving Credit Facility bear
interest at either (i) the Eurodollar Rate (as defined in the Credit
Agreement) plus 1.5% per annum or (ii) the Base Rate (as defined in the
Credit Agreement) and, thereafter, will bear interest at the Base Rate
or the Eurodollar Rate plus an applicable margin (the "Applicable
Margin") based upon the Company's consolidated leverage ratio (which
margin will not exceed .25% for Base Rate borrowings and 1.75% for
Eurodollar Rate borrowings). The weighted average interest rate at
November 1, 1997 is approximately 7.33%. The Company currently pays (i)
a fee of .375% per annum on the average unused commitments under the
Revolving Credit Facility until the Delivery Date and thereafter such
fees will be reduced to .25% per annum if a specified leverage ratio is
satisfied and (ii) a letter of credit fee equal to the Applicable
Margin for Eurodollar Rate borrowings. As of November 1, 1997, unused
and outstanding letters of credit totaled $2,040,000. The outstanding
letters of credit reduce the funds available under the Revolving Credit
Facility. At November 1, 1997, the Company had $40,714,000 available
for borrowing under the Revolving Credit Facility.
-44-
<PAGE> 45
The Credit Agreement contains restrictions on investments, acquisitions
and dividends unless, among other things, the Company satisfies a
specified pro forma fixed charge coverage ratio and maintains a
specified minimum availability under the Revolving Credit Facility for
a stated period of time, and no default exists under the Credit
Agreement. The Credit Agreement also restricts, among other things,
indebtedness, liens, affiliate transactions, operating leases,
fundamental changes and asset sales other than the sale of up to $35
million of fixed assets, subject to the satisfaction of certain
conditions. The Credit Agreement contains financial covenants relating
to minimum levels of EBITDA (as defined), minimum interest coverage
ratio, minimum fixed charge coverage ratio and maximum capital
expenditures. As of November 1, 1997, the Company was in compliance
with these restrictions and all financial covenants.
The loans and extensions of credit to the Borrowing Subsidiaries under
the Credit Agreement are guaranteed by JPS and its other existing
subsidiaries other than JPS Capital, and are secured by the assets of
JPS (excluding the stock of JPS Capital) and its existing subsidiaries
other than JPS Capital.
10.85% Notes - The Company issued the 10.85% Notes in the 1991
reorganization. The 10.85% 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 compounded semi-annually at the
annual rate of 10.85%. In connection with the 1991 reorganization, the
carrying value of the 10.85% Notes was reduced to its estimated net
present value using an effective interest rate of 13%. As discussed in
Note 1, under the terms of the Plan of Reorganization, the discount
notes were converted to cash, Common Stock and Contingent Notes as of
the Effective Date.
10.25% Notes - The Company issued the 10.25% Notes in the 1991
reorganization. The 10.25% Notes began accruing interest June 1, 1992
at 10.25% with 9.25% paid semi-annually and 1% payable at maturity.
Interest payable at maturity compounded 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%. As discussed
in Note 1, under the terms of the Plan of Reorganization, the 10.25%
Notes were converted to cash, Common Stock and Contingent Notes as of
the Effective Date.
7% Subordinated Debentures - 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%. The subordinated debentures accrued
interest at 7%, payable semi-annually. As discussed in Note 1, under
the terms of the Plan of Reorganization, the 7% Subordinated Debentures
were converted to Common Stock as of the Effective Date.
Contingent Notes - As discussed in Note 1, on the Effective Date, under
the terms of the Plan of Reorganization, JPS Capital, the Company and
First Trust National Association, as trustee, entered into an
indenture, dated as of the Effective Date (the "Contingent Note
Indenture"), pursuant to which JPS Capital issued the Contingent Notes
in an initial principal amount of approximately $34 million, subject to
adjustment as set forth below. The Contingent Notes are unsecured
obligations of JPS Capital and are contingent as to timing and amount
of payments.
The timing and amount of payments due pursuant to the Contingent Notes
will depend upon the amount of cash on hand at JPS Capital at maturity,
which in turn will depend on the ultimate resolution of certain
possible contingent tax liabilities of the Company. JPS Capital was
established in 1994 at the time of the Company's sale of its automotive
assets. During fiscal year 1994, the Company utilized approximately
$141 million of tax net operating loss carryforwards to offset the gain
-45-
<PAGE> 46
recognized on such sale. Although the Company believes that the use of
such carryforwards to offset such gain more likely than not will be
sustained under existing tax laws, uncertainty existed at the time of
such sale and continues to exist. Therefore, in accordance with
provisions of the Old Debt Securities, the Company set aside in JPS
Capital a portion of the net proceeds from such sale to satisfy, if
necessary, these possible contingent tax liabilities. Such amounts were
invested in United States Treasury Securities and subsequently
reinvested in United States Treasury Securities and corporate
obligations by JPS Capital. As of the Effective Date, JPS Capital held
funds of approximately $34 million. Pursuant to the Plan of
Reorganization, JPS Capital will continue to hold those funds on behalf
of the JPS tax affiliates, and following the final resolution of such
possible contingent tax liabilities, provide to them from such funds
the amounts with which they will satisfy their finally determined
liabilities.
In the event the aggregate funds held by JPS Capital are less than $34
million following the date on which the possible contingent tax
liability in respect of the Company's 1994 fiscal year is finally
resolved, and to the extent of any such liability, satisfied, the
aggregate principal amount of the Contingent Notes will be reduced to
equal the aggregate funds held by JPS Capital. The Contingent Notes
will mature and be payable on the forty-fifth day following the date on
which the possible contingent tax liability in respect of fiscal year
1994 is finally resolved, and to the extent of any such liability
satisfied. No interest is payable on the Contingent Notes prior to
maturity. However, on the maturity date thereof, as provided above,
interest will be payable on the Contingent Notes to the extent the
aggregate funds held by JPS Capital on such date exceeds $34 million.
If, on such date, the aggregate principal amount, reduced as provided
above, is zero or less, the Contingent Notes will be deemed
automatically cancelled and no longer an obligation of JPS Capital.
The Contingent Note Indenture prohibits redemption by JPS Capital of
any portion of the Contingent Notes prior to maturity other than with
funds contributed to it by the Company in the Company's sole
discretion. No acceleration of obligations under the Contingent Notes
may occur prior to maturity.
Except as specifically provided in the Contingent Note Indenture,
neither JPS Capital, JPS, nor the trustee under the Contingent Note
Indenture may amend or waive compliance by JPS Capital or reorganized
JPS with any provision of the Contingent Notes or the Contingent Note
Indenture without the requisite consent of the holders of the
Contingent Notes and a final order of the Bankruptcy Court. In
addition, prior to maturity, the Restated Certificate of Incorporation
of JPS Capital (i) restricts the Company from transferring, pledging or
otherwise disposing of any shares of capital stock of JPS Capital, and
(ii) prohibits JPS Capital from declaring any dividends, making any
distributions to JPS or any other entity, incurring any obligations or
liens, or making any transfer or disposition of property not permitted
by JPS Capital's Restated Certificate of Incorporation.
Due to the uncertainties in connection with the contingent tax
liabilities described above, the Company has not assigned a fair value
to the Contingent Notes.
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 through December
2001.
Other - Substantially all of the Company's assets are pledged as
collateral for the Credit Agreement and the equipment financing.
-46-
<PAGE> 47
Interest expense includes $8,818,000 in Fiscal 1995, $10,088,000 in
Fiscal 1996, $7,303,000 in the period from November 3, 1996 to October
9, 1997 and $19,000 in the period from October 10, 1997 to November 1,
1997, representing amortization of debt issuance expenses and accretion
of interest on the discounted notes and accrued product liability costs
(see Note 12).
Maturities - Aggregate principal maturities of all long-term debt are
as follows (in thousands):
<TABLE>
<CAPTION>
Fiscal Year Ending
------------------
<S> <C>
1998 $ 36,076
1999 689
2000 638
2001 639
2002 92,925
-----------
$ 130,967
===========
</TABLE>
10. EQUITY SECURITIES AND SENIOR REDEEMABLE PREFERRED STOCK
Through the implementation of the Plan of Reorganization as of the
Effective Date, approximately $240 million in face amount of
outstanding debt securities were converted to, among other things, $14
million in cash, 9,924,623 shares of Common Stock and approximately $34
million in aggregate principal amount of Contingent Notes. The Old
Senior Preferred Stock, Old Junior Preferred Stock and Old Common Stock
were cancelled. Warrants to purchase up to 5% of the Common Stock
exercisable until October 9, 2000 with an initial purchase price of
$98.76 per share were issued in respect of the Old Senior Preferred
Stock. Senior management received 75,377 shares of Common Stock on the
Effective Date in lieu of payment under their contractual retention
bonus arrangements.
Certain information on equity securities and senior redeemable
preferred stock at November 2, 1996 and November 1, 1997 is as follows:
<TABLE>
<CAPTION>
Shares Issued and Outstanding
-----------------------------
Par Value November 2, November 1,
Per Share Authorized 1996 1997
--------- ------------- ------------- -----------
<S> <C> <C> <C> <C>
Old Series A Senior Redeemable
Preferred Stock $ .01 700,000(1) 538,176 --
Old Series B Junior Preferred Stock .01 700,000(1) 10,000 --
Old Class A Common Stock .01 700,000 490,000 --
Old Class B Common Stock .01 700,000 510,000 --
New Common Stock .01 22,000,000 -- 10,000,000
</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.
Until the Effective Date, the Old Senior Preferred Stock was
redeemable, prior to its maturity date of May 15, 2003, at 103% of the
liquidation preference of $100 per share. Dividends were cumulative and
calculated based on an annual rate of 6% of the liquidation preference.
Under the terms of various credit agreements, dividends had to be in
the form of additional shares until 1998. In connection with the 1991
restructuring, the Old Senior 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.
-47-
<PAGE> 48
The difference between the net carrying amount of the Old Senior
Preferred Stock and its mandatory value was 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 unamortized discount was approximately $21,844,000 at
November 2, 1996. The Company did not issue first, second or third
quarter Fiscal 1997 dividends on its senior redeemable preferred stock.
Such cumulative dividends that had not been declared or issued totaled
$3,827,000 at October 9, 1997.
1997 Incentive and Capital Accumulation Plan
As of the Effective Date, the Company adopted the 1997 Incentive and
Capital Accumulation Plan (the "Incentive Plan") which provides certain
key employees and non-employee directors of the Company the right to
acquire shares of Common Stock or monetary payments based on the value
of such shares. Pursuant to the Incentive Plan, approximately 853,000
shares of Common Stock were reserved for issuance to the participants
in the form of stock options, stock appreciation rights, stock awards,
performance awards, and stock units that may be granted by the
compensation committee comprised of certain members of the Company's
Board of Directors. The Incentive Plan will terminate ten years from
the date of adoption.
On October 30, 1997, options to acquire approximately 569,000 shares of
the shares reserved pursuant to the Incentive Plan were granted to
senior management of the Company. These options include a combination
of time vesting options which vest solely on the lapse of time and
performance options which vest upon achievement of specified corporate
performance goals and the lapse of time. These options are according to
specific vesting schedules as set forth in individual participant's
grant letters. In addition, on the Effective Date, each non-employee
director (except one, who waived his right to receive such options)
received options to purchase 25,000 shares of Common Stock. These
options vest equally in amounts of 5,000 shares per director, on the
Effective Date and the first, second, third and fourth anniversaries of
the Effective Date.
A summary of the activity in the Company's stock options for the period
from the Effective Date to November 1, 1997 is presented below:
<TABLE>
<CAPTION>
Number of Shares Exercise Price
---------------- --------------
<S> <C> <C>
Options granted on the Effective Date 100,000 $ 12.33
Options granted during the period from the
Effective Date to November 1, 1997 568,990 12.33
Options exercised -- --
Options cancelled -- --
------- -------
Outstanding at November 1, 1997 668,990 $ 12.33
======= =======
Exercisable at November 1, 1997 20,000 $ 12.33
======= =======
Weighted average remaining contractual life (years) 10
=======
</TABLE>
The Company applies the principles of APB Opinion 25 in accounting for
employee stock option plans. Had compensation cost been determined on
the basis of SFAS No. 123, "Accounting for Stock-Based Compensation",
compensation expense would have been recorded based on the estimated
fair value of stock options granted during the period from the
Effective Date to November 1, 1997. The total fair value of stock
options granted for the period from October 10, 1997 to November 1,
1997 was estimated at $3,266,000, based upon the Black-Scholes option
pricing model. The following weighted-average assumptions were used in
the Black-Scholes option pricing model for stock options granted during
the period from the Effective Date to November 1, 1997 (i) risk-free
interest rates of approximately 5.7%, (ii) a weighted average expected
life of approximately 4.4 years from the grant date, and (iii) 38%
volatility. The expected life of the stock options granted and the
stock price
-48-
<PAGE> 49
volatility during the expected life of the options were estimated based
upon historical information from public textile companies and
management's expectations. Had compensation cost for the Company's
stock option plans been determined based on the estimated fair value at
the grant dates for awards under those plans consistent with the method
of SFAS 123, the Company's income and earnings per share would have
been decreased by approximately $70,000 and $0.01 respectively, for the
period from October 10, 1997 to November 1, 1997.
11. INCOME TAXES
The provision (benefit) for income taxes on continuing operations
included in the consolidated statements of operations consists of the
following (in thousands):
<TABLE>
<CAPTION>
Reorganized
Predecessor Company Company
-------------------------------------------| -------------------
Period from | Period from
Fiscal Fiscal November 3, 1996 | October 10, 1997
1995 1996 to October 9, 1997| to November 1, 1997
------ ------ ------------------| -------------------
<S> <C> <C> <C> | <C>
Current state provision (benefit) $1,200 $ 200 $ 923 | $ (17)
Deferred federal provision (benefit) -- -- (6,080) | 1,714
Deferred state provision (benefit) -- (500) (3,665) | 310
------ ----- ------- | -------
Provision (benefit) for income |
taxes $1,200 $(300) $(8,822) | $ 2,007
====== ===== ======= | =======
</TABLE>
There is no current 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 1995 and 1996, the period from November 3, 1996 to
October 9, 1997 and the period from October 10, 1997 to November 1,
1997 is as follows (in thousands):
<TABLE>
<CAPTION>
Reorganized
Predecessor Company Company
--------------------------------------------------| -------------------
Period from | Period from
Fiscal Fiscal November 3, 1996 | October 10, 1997
1995 1996 to October 9, 1997| to November 1, 1997
------- -------- ------------------| -------------------
<S> <C> <C> <C> | <C>
Income tax provision (benefit) |
at Federal statutory rate $(5,762) $(23,183) $(11,473) | $1,653
Increase (decrease) in income |
taxes arising from effect of: |
State and local income taxes 1,200 (300) (2,742) | 293
Non-deductible reorganization |
costs -- -- 2,947 | --
Amortization of goodwill |
or excess reorganization |
value 316 344 312 | 57
Losses not resulting in tax benefits -- -- 8,158 | --
Change in valuation reserve 5,234 22,730 (6,080) | --
Other 212 109 56 | 4
------- -------- -------- | ------
Provision (benefit) for income |
taxes $ 1,200 $ (300) $ (8,822) | $2,007
======= ======== ======== | ======
</TABLE>
-49-
<PAGE> 50
Presented below are the elements which comprise deferred tax assets and
liabilities (in thousands):
<TABLE>
<CAPTION>
Predecessor Reorganized
Company Company
----------- -----------
November 2, November 1,
1996 1997
----------- -----------
<S> <C> <C>
Gross deferred assets:
Estimated allowance for doubtful accounts $ 412 $ 1,035
Excess of tax over financial statement basis of inventory 647 580
Accruals deductible for tax purposes when paid 2,497 2,275
Deferred compensation deductible for tax purposes when paid 157 --
Postretirement benefits deductible for tax purposes when paid 2,141 1,562
Miscellaneous 83 120
Alternative minimum tax credit carryforward available 2,564 1,827
Deferred financial statement income recognized for tax purposes
when received 6,489 5,013
Excess of tax over financial statement carrying value of
investment in discontinued operation 13,474 --
Excess of tax basis of intangibles over financial statement basis 8,817 10,406
Net operating loss carryforward 33,291 11,880
Less valuation allowance (53,578) (28,444)
-------- --------
Gross deferred assets 16,994 6,254
-------- --------
Gross deferred liabilities:
Pension asset recognized for book purposes (411) (776)
Excess of financial statement over tax basis of property, plant,
and equipment (11,898) (1,267)
Excess of tax over financial statement basis of debt instruments
(net of deferred financing fees) (4,685) --
Deferred state taxes resulting from filing separate subsidiary
returns in some jurisdictions (3,665) --
-------- --------
Gross deferred liabilities (20,659) (2,043)
-------- --------
Net deferred tax (liability) asset $ (3,665) $ 4,211
======== ========
Recognized in the accompanying consolidated balance sheets
as follows:
Non-current deferred income tax liability $ (3,665)
Prepaid expenses and other -- $ 867
Other non-current assets -- 3,344
-------- --------
$ (3,665) $ 4,211
======== ========
</TABLE>
The Company recorded a tax benefit for the period ending October 9,
1997 of approximately $8.8 million. This consists of a benefit from the
implementation of the Plan of Reorganization net of state taxes on
subsidiary operations that could not be offset by operating loss
carryovers or current year losses of JPS or its subsidiaries. The
benefit arose as consummation of the Plan of Reorganization
substantially deleveraged JPS. The deferred tax asset attributable to
the net operating loss carryforwards was reduced as a result of the
reduction in net operating loss carryforwards that is required for
reorganizations such as that provided in the Plan of Reorganization,
and the reserve established against the deferred tax assets that was
required due to the operating history was also significantly reduced.
The reduction in reserves and reduction in deferred tax liabilities
during the period ended October 9, 1997 results in a deferred tax
benefit of $9.7 million. The recording of the tax benefit and the net
deferred tax asset reflects the Company's determination that it is more
likely
-50-
<PAGE> 51
than not that these deferred tax assets, net of the valuation
allowance, will be realized based on current income tax laws and
expectations of future taxable income stemming from operations or the
reversal of deferred tax liabilities. Uncertainties surrounding income
tax law changes, shifts in operations between state taxing
jurisdictions and future operating income levels may, however, affect
the ultimate realization of all or some portion of these deferred
income tax assets.
At November 1, 1997, the Company had regular federal net operating loss
carryforwards for tax purposes of approximately $28 million. The net
operating loss carryforwards expire in years 2004 through 2011. The
Company also has federal alternative minimum tax net operating loss
carryforwards of approximately $22 million which expire in 2005 through
2012. Alternative minimum tax credits can be carried forward
indefinitely and used as a credit against regular federal taxes,
subject to limitation. During 1997, the Company reduced net operating
loss carryforwards by approximately $60 million due to the provisions
of the Code requiring attribute reduction in certain reorganizations,
such as the Plan of Reorganization. The Company was also required to
reduce alternative minimum tax credit carryforwards by approximately
$737,000 as a result of these provisions. The Company utilized
approximately $2 million of net operating losses during the period from
October 10, 1997 to November 1, 1997.
The Company's future ability to utilize its net operating loss
carryforwards is limited under the income tax laws as a result of the
change in the ownership of the Company's stock occurring as a part of
the reorganization. The effect of such an ownership change is to limit
the annual utilization of the net operating loss carryforwards to an
amount equal to the value of the Company immediately after the time of
the change (subject to certain adjustments) multiplied by the Federal
long-term tax exempt rate. 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.
12. COMMITMENTS AND CONTINGENCIES
The Company leases office facilities, machinery and computer equipment
under noncancellable operating leases. Rent expense was approximately,
$3,411,000, $5,158,000, $5,178,000 and $399,000 in Fiscal 1995, Fiscal
1996, the period from November 3, 1996 to October 9, 1997 and the
period from October 10, 1997 to November 1, 1997, respectively.
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 1, 1997 (in thousands):
<TABLE>
<CAPTION>
Fiscal Year Ending
------------------
<S> <C>
1998 $ 4,096
1999 3,605
2000 2,878
2001 1,165
2002 197
---------
$ 11,941
=========
</TABLE>
The Company has planned expenditures of approximately $25.0 million for
property, plant and equipment additions in Fiscal 1998. At November 1,
1997, the Company had commitments for capital expenditures of
approximately $1.5 million.
-51-
<PAGE> 52
On the Effective Date, the Company entered into employment agreements
with certain of its executives and key employees. These agreements have
three-year terms and are automatically extended on an annual basis
after the third year unless the Company or the participant elects in
advance not to extend the employment period. The employment agreements
provide specific salary levels and bonus eligibility for each
participant. In addition, the agreements provide severance benefits if
the Company terminates the participant's employment for reasons other
than for cause (as defined). Under the terms of the employment
agreements, on the Effective Date, the participants received, in the
aggregate, a retention grant cash payment of $588,000 and 75,377 shares
of Common Stock.
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. 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. 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 $4,040,000, $3,111,000, $1,815,000 and
$521,000 in Fiscal 1995, Fiscal 1996, the period from November 3, 1996
to October 9, 1997 and the period from October 10, 1997 to November 1,
1997, 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.
13. 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.
Assets of the pension plan are invested in common and preferred stocks,
government and corporate bonds, real estate and various short-term
investments.
-52-
<PAGE> 53
A reconciliation as of the most recent measurement date (November 1,
1996) of the funded status of the plan with amounts reported in the
Company's Consolidated Balance Sheets follows (in thousands):
<TABLE>
<CAPTION>
Predecessor Reorganized
Company Company
----------- -----------
November 2, November 1,
1996 1997
----------- -----------
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested $ 88,983 $90,574
Non-vested 377 197
-------- -------
Accumulated benefit obligation 89,360 90,771
Provision for future pay increases 6,755 5,528
-------- -------
Total projected benefit obligation 96,115 96,299
Plan assets at fair value 89,410 97,312
-------- -------
Projected benefit obligation (greater than) less than plan assets (6,705) 1,013
Unrecognized net loss 4,212 1,030
Prior service cost not yet recognized in net periodic pension cost 3,548 --
-------- -------
Pension asset in accompanying Consolidated Balance Sheets $ 1,055 $ 2,043
======== =======
</TABLE>
<TABLE>
<CAPTION>
Predecessor Company Reorganized Company
------------------------------------------------| --------------------
Period from | Period from
Fiscal Fiscal November 3, 1996 | October 10, 1997
1995 1996 to October 9, 1997 | to November 1, 1997
-------- ------- ------------------ | --------------------
<S> <C> <C> <C> | <C>
Components of net periodic |
pension cost: |
Service cost-benefits earned |
during the period $ 2,483 $ 2,378 $ 2,026 | $ 136
Interest cost on projected |
benefit obligation 7,131 7,048 6,683 | 449
Return on plan assets (15,628) (7,674) (7,184) | (483)
Net amortization and deferral 8,478 451 330 | --
-------- ------- ------- | -----
Net periodic pension cost 2,464 2,203 1,855 | 102
Cost allocated to |
discontinued operations 444 -- -- | --
-------- ------- ------- | -----
Net periodic pension cost for |
continuing operations $ 2,020 $ 2,203 $ 1,855 | $ 102
======== ======= ======= | =====
</TABLE>
As a result of the application of fresh start accounting as described
in Note 2, all unamortized prior service costs and unrecognized gains
were immediately recognized as of October 9, 1997 and included in
reorganization items for the period then ended.
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.
-53-
<PAGE> 54
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 November 2, 1996
and November 1, 1997 was 7.8%. The expected long-term rate of return on
assets was 9% at November 2, 1996 and November 1, 1997. The assumed
rate of increase in compensation levels was based on age-related tables
at November 2, 1996 and November 1, 1997. 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.
401(k) Savings Plan - The Company also has a savings, investment and
profit-sharing plan available to employees meeting eligibility
requirements. 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 $589,000 in Fiscal 1995, $587,000 in
Fiscal 1996, $523,000 in the period from November 3, 1996 to October 9,
1997 and $47,000 in the period from October 10, 1997 to November 1,
1997.
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>
Predecessor Reorganized
Company Company
----------- -----------
November 2, November 1,
1996 1997
----------- -----------
<S> <C> <C>
Retirees $1,721 $1,444
Fully eligible active plan participants 1,075 1,130
Other active plan participants 914 807
Unrecognized gain 1,098 12
------ ------
Accrued postretirement benefit plan liability $4,808 $3,393
====== ======
</TABLE>
-54-
<PAGE> 55
Net periodic postretirement benefit expense included the following
components (in thousands):
<TABLE>
<CAPTION>
Reorganized
Predecessor Company Company
----------------------------------------| -------------------
Period from | Period from
Fiscal Fiscal November 3, 1996 | October 10, 1997
1995 1996 to October 9, 1997 | to November 1, 1997
------ ------ ------------------ | -------------------
<S> <C> <C> <C> | <C>
Service cost for benefits earned $ 1 $ 5 $ 5 | $ 6
Interest cost on APBO 357 297 229 | 16
------ ------ ------- | -------
Net periodic postretirement cost $ 358 $ 302 $ 234 | $ 32
====== ====== ======= | =======
</TABLE>
As a result of the application of fresh start accounting as described
in Note 1, all unamortized gains were fully recognized as of October 9,
1997 and included in reorganization items for the period then ended.
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 November 2, 1996 and
November 1, 1997.
Postemployment Benefits - The Company provides certain benefits to
former or inactive employees after employment but before retirement. In
accordance with SFAS No. 112, these benefits are recognized on the
accrual basis of accounting. The liability for postemployment benefits
at November 2, 1996 and November 1, 1997 is included in other long-term
liabilities in the accompanying consolidated financial statements.
14. RELATED PARTIES
The Company incurred fees of $1,000,000 in each of Fiscal 1995 and 1996
for management services provided by a former shareholder pursuant to a
management services agreement. The accompanying Consolidated Balance
Sheet as of November 2, 1996 includes accrued fees of $1,000,000 in
other accrued expenses. On the Effective Date, the agreement was
cancelled and rejected and rejection damage claims were waived by the
shareholders. Accordingly, no amount was accrued for the period from
November 3, 1996 to October 9, 1997.
15. 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
-55-
<PAGE> 56
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.
-56-
<PAGE> 57
Industry segment information (in thousands):
<TABLE>
<CAPTION>
Reorganized
Predecessor Company Company
---------------------------------------------------------------------------
Year Ended |
-------------------------------- Period from | Period from
October 28, November 2, November 3, 1996 | October 10, 1997
1995 1996 to October 9, 1997 | to November 1, 1997
-------------------------------- ------------------- |--------------------
<S> <C> <C> <C> |<C>
Net sales: |
Apparel fabrics and products $ 247,846 $ 221,799 $ 167,070 | $ 18,590
Industrial fabrics and products 191,985 193,001 179,434 | 17,847
Home fashion textiles 32,734 34,024 33,139 | 2,291
--------- --------- --------- | --------
$ 472,565 $ 448,824 $ 379,643 | $ 38,728
========= ========= ========= | ========
Operating profit (loss): |
Apparel fabrics and products $ 16,667 $ (22,422) $ 1,210 | $ 2,201
Industrial fabrics and products 7,590 5,947 16,748 | 2,652
Home fashion textiles 1,749 647 976 | 693
Indirect corporate expenses, net (5,345) (6,257) (4,152) | (331)
--------- --------- --------- | --------
|
Operating profit (loss) 20,661 (22,085) 14,782 | 5,215
|
Valuation allowance of |
Gulistan Securities -- (4,242) (5,070) | --
Interest income 2,821 2,856 2,744 | 93
Interest expense (39,946) (40,510) (32,164) | (584)
Restructuring fees and expenses -- (2,255) (13,071) | --
--------- --------- --------- | --------
|
Loss before income taxes, |
discontinued operations and |
extraordinary items $ (16,464) $ (66,236) $ (32,779) | $ 4,724
========= ========= ========= | ========
|
Depreciation and amortization |
expense: |
Apparel fabrics and products $ 12,722 $ 12,946 $ 9,410 | $ 297
Industrial fabrics and products 5,690 6,282 5,032 | 283
Home fashion textiles 2,394 2,517 2,537 | 100
--------- --------- --------- | --------
Total segments 20,806 21,745 16,979 | 680
Corporate and other 979 994 901 | 166
--------- --------- --------- | --------
$ 21,785 $ 22,739 $ 17,880 | $ 846
========= ========= ========= | ========
Capital expenditures: |
Apparel fabrics and products $ 8,852 $ 4,389 $ 10,473 | $ 472
Industrial fabrics and products 9,312 4,545 3,636 | 1,130
Home fashion textiles 643 899 353 | 16
--------- --------- --------- | --------
Total segments 18,807 9,833 14,462 | 1,618
Corporate and other 4 1 5 | --
--------- --------- --------- | --------
$ 18,811 $ 9,834 $ 14,467 | $ 1,618
========= ========= ========= | ========
</TABLE>
-57-
<PAGE> 58
Industry segment information (in thousands) (Continued):
<TABLE>
<CAPTION>
Reorganized
Predecessor Company Company
---------------------------- -------------
October 28, November 2, November 1,
1995 1996 1997
------------- ----------- -------------
<S> <C> <C> <C>
Identifiable assets:
Apparel fabrics and products $ 165,622 $ 127,909 $ 110,891
Industrial fabrics and products 115,710 101,376 100,140
Home fashion textiles 20,731 21,333 21,028
----------- ----------- ------------
Total segments 302,063 250,618 232,059
Corporate and other 81,827 85,309 90,322
----------- ----------- ------------
383,890 335,927 322,381
Net assets held for sale 28,932 -- --
----------- ----------- ------------
$ 412,822 $ 335,927 $ 322,381
=========== =========== ============
</TABLE>
Unaudited interim financial data (in thousands):
The results for each quarter include all adjustments which are, in the opinion
of management, necessary for a fair presentation of the results for interim
periods. The consolidated financial results on an interim basis are not
necessarily indicative of future financial results on either an interim or
annual basis. Selected consolidated financial data for each quarter within
Fiscal 1996 and Fiscal 1997 are as follows:
<TABLE>
<CAPTION>
Predecessor Company
-----------------------------------------------------------
First Second Third Fourth
Year Ended November 2, 1996: Quarter Quarter Quarter Quarter
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Net sales $ 98,741 $ 124,437 $ 110,266 $ 115,380
Cost of sales 88,846 109,881 95,908 103,169
----------- ----------- ----------- -----------
Gross profit 9,895 14,556 14,358 12,211
Selling, general and administrative expenses 9,875 10,838 9,888 9,978
Other income (expense), net (241) (1,708) (129) (420)
Charges for plant closing, loss on sale of
certain operations and writedown of
certain long-lived assets -- -- (30,055) 27
----------- ----------- ----------- -----------
Operating profit (loss) (221) 2,010 (25,714) 1,840
Valuation allowance on Gulistan Securities (1,500) (2,568) (1,395) 1,221
Interest income 695 693 714 754
Interest expense (9,737) (9,828) (10,082) (10,863)
Debt restructuring fees and expenses -- (175) (727) (1,353)
----------- ----------- ----------- -----------
Loss before income taxes and discontinued
operations (10,763) (9,868) (37,204) (8,401)
Income taxes 70 138 (582) 74
----------- ----------- ----------- -----------
Loss before discontinued operations (10,833) (10,006) (36,622) (8,475)
Loss on sale of discontinued operations,
net of taxes -- (1,500) -- --
----------- ----------- ----------- -----------
Net loss $ (10,833) $ (11,506) $ (36,622) $ (8,475)
=========== =========== =========== ===========
</TABLE>
-58-
<PAGE> 59
<TABLE>
<CAPTION>
Reorganized
Predecessor Company Company
----------------------------------------------------------------------------
Period from | Period from
First Second Third August 3, 1997 | October 10, 1997
Year Ended November 1, 1997: Quarter Quarter Quarter to October 9, 1997 | to November 1, 1997
------- ------- ------- ------------------ | -------------------
<S> <C> <C> <C> <C> | <C>
Net sales $ 97,167 $ 108,138 $ 95,883 $ 78,455 | $ 38,728
Cost of sales 84,934 93,038 80,682 69,013 | 31,058
-------- --------- ---------- ----------- | -----------
Gross profit 12,233 15,100 15,201 9,442 | 7,670
Selling, general and |
administrative expenses 9,314 10,293 10,256 7,283 | 2,466
Other income (expense), net (6) (377) (102) 437 | 11
-------- --------- ---------- ----------- | -----------
Operating profit (loss) 2,913 4,430 4,843 2,596 | 5,215
Valuation allowance on |
Gulistan securities (1,299) (789) (2,982) -- | --
Interest income 737 734 761 512 | 93
Interest expense (10,174) (10,049) (10,086) (1,855) | (584)
-------- --------- ---------- ----------- | -----------
Income (loss) before |
reorganization items, income |
taxes and extraordinary items (7,823) (5,674) (7,464) 1,253 | 4,724
Reorganization items: |
Fair-value adjustments -- -- -- (4,651) | --
Professional fees and |
expenses (1,162) (1,982) (3,332) (1,944) | --
-------- --------- ---------- ----------- | -----------
Income (loss) before income |
taxes and extraordinary items (8,985) (7,656) (10,796) (5,342) | 4,724
Provision (benefit) for |
income taxes 157 252 275 (9,506) | 2,007
-------- --------- ---------- ----------- | -----------
Income (loss) before |
extraordinary items (9,142) (7,908) (11,071) 4,164 | 2,717
Extraordinary gain on early |
extinguishment of debt -- -- -- 100,235 | --
-------- --------- ---------- ----------- | -----------
Net income (loss) $ (9,142) $ (7,908) $ (11,071) $ 104,399 | $ 2,717
======== ========= ========== =========== | ===========
|
Net income per common share | $ 0.27
| ===========
</TABLE>
Net income (loss) per share on or prior to October 9, 1997 are not meaningful
due to the significant change in the capital structure in connection with the
Plan of Reorganization.
During the second quarter of Fiscal 1996, the Company finalized the selling
price for the assets and operations of the Carpet business which resulted in
loss on sale of discontinued operations of $1.5 million.
During the period from August 3, 1997 to October 9, 1997, the Company
consummated its Plan of Reorganization, as described in Notes 1, 2 and 3.
Accordingly, the results of operations subsequent to October 9, 1997 are not
comparable to results of operations for periods preceding that date.
-59-
<PAGE> 60
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 JPS. Each
director took office as of the Effective Date and will serve until a successor
is elected and qualified or until his earlier resignation or removal.
<TABLE>
<CAPTION>
Name Age Position(s) Held
---- --- ----------------
<S> <C> <C>
Robert J. Capozzi 33 Director
Jeffrey S. Deutschman 40 Director
Nicholas P. DiPaolo 56 Director
Michael L. Fulbright 47 Director
Jerry E. Hunter 60 Chairman of the Board, Director,
Chief Executive Officer and President
John M. Sullivan, Jr. 51 Director
David H. Taylor 42 Director, Executive Vice President--
Finance and Secretary
</TABLE>
The business experience of each of the directors and executive officers during
the past five years is as follows:
Mr. Capozzi became a director of JPS on the Effective Date and is a Managing
Director of Magten Asset Management Corp. ("Magten"), an investment advisory
firm established in 1978. Magten, a registered investment adviser under the
Investment Advisers Act of 1940, as amended, beneficially owns approximately
19.05% of the Common Stock of JPS as of December 3, 1997. See "Security
Ownership of Principal Shareholders and Management." Mr. Capozzi has been with
Magten since 1986. Currently, Mr. Capozzi serves as a member of the Board of
Directors of Magten Offshore Fund Ltd.
Mr. Deutschman became a director of JPS on the Effective Date and is a private
investor and merchant banker. From 1992 to 1995, he was a Managing Director with
Aurora Capital Partners, L.P. Prior to that, he was a Managing Director and
principal of Deutschman Clayton & Company. Mr. Deutschman has been Co- Chairman
of the Board of Directors of The Cherokee Group, a designer, manufacturer, and
marketer of casual apparel, and an officer and director of Fair Holdings
Corporation and Fair Lanes, Inc., a manager and operator of bowling centers.
-60-
<PAGE> 61
Mr. DiPaolo became a director of JPS on the Effective Date and was Chairman of
the Board, President and Chief Executive Officer of Salant Corporation, a
diversified apparel company listed on the New York Stock Exchange from March
1991 until his retirement in May 1997. Prior to that, Mr. DiPaolo served as
President and Chief Operating Officer of Salant Corporation since June 1988.
From 1985 to 1988, Mr. DiPaolo served as President and Chief Operating Officer
of Manhattan Industries, which was merged into Salant Corporation in 1988. Prior
to that he was Chairman and Chief Executive Officer of the Villager, a women's
sportswear company, from 1979 to 1985. Mr. DiPaolo has served on the Board of
Directors of Manhattan Far East, a trading company based in Hong Kong. He is
also a member of the Board of Directors of the American Apparel Manufacturers
Association and other industry associations.
Mr. Fulbright became a director of JPS on the Effective Date and has served as
President and Chief Executive Officer of The Bibb Company, a diversified textile
company, since August 1996. Prior to that, he served as President of the Denim
Division of Cone Mills, Inc. from December 1994 to August 1996. Prior to that,
Mr. Fulbright was employed with Springs Industries, serving as President of the
Greige Manufacturing Division from August 1992 to November 1994, as President of
Wamsutta/Pacific Home Products from July 1986 to July 1992, and as Executive
Vice President of Wamsutta/Pacific Home Products from December 1985 to July
1986. Prior to that, Mr. Fulbright was employed by M. Lowenstein Corporation and
WestPoint Pepperell.
Mr. Hunter was appointed as a director of JPS on April 6, 1993 and as Chief
Executive Officer of JPS on November 29, 1994. Mr. Hunter has served as
President of JPS since September 1988. Prior to that time, from May 1988 to
September 1988, he was Executive Vice-President--Operations. In addition, on
January 18, 1994, Mr. Hunter was appointed as Chief Operating Officer of JPS
Converter and Industrial Corp., a wholly-owned subsidiary of JPS, and he also
serves as a Vice-President of each of JPS'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 21 years.
Mr. Sullivan became a director of JPS on the Effective Date and has served as
President of American Silk Mills Corp. since 1985, as President and Chief
Executive Officer of Gerli & Co., Inc. since 1987, as President of International
Silk Association (USA), N.Y., N.Y. since 1988, and as Co-Chairman of the Home
Furnishings Committee, I.S.A., Lyons France, since 1995. From 1987 to 1991, Mr.
Sullivan served as President of Cheney Brothers Inc. Prior to that, he served as
Executive Vice President (Merchandising, Marketing & Sales) of Gerli & Co., Inc.
from 1984 to 1987. Prior to that, Mr. Sullivan served as President of A.H. Rice
Company Inc., Pittsfield, Massachusetts from 1982 to 1989, as Vice President of
Marketing and Sales for Gerli & Co., Inc. from 1979-1982, and as Sales Manager
of American Silk Mills Corp. from 1974 to 1979.
Mr. Taylor was appointed as a director of JPS on April 15, 1993. Mr. Taylor has
served as Executive Vice- President--Finance and Secretary of JPS since June
1991, and prior thereto he was Controller and Assistant Secretary of JPS 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 JPS's subsidiaries.
None of the directors or executive officers listed herein is related to any
other such director or executive officer.
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<PAGE> 62
Committees of the Board of Directors
The Board of Directors has established an Audit Committee and a Compensation
Committee.
The Audit Committee, which consists of Messrs. Deutschman and Sullivan, makes
recommendations to the Board of Directors regarding the independent auditors to
be nominated for ratification by the shareholders, reviews the independence of
such auditors, approves the scope of the annual activities of the independent
auditors and reviews audit results.
Prior to the Effective Date, the Compensation Committee consisted of certain
members of the Board of Directors of JPS who, as of the Effective Date, were
replaced by the current Board of Directors of JPS. The Compensation Committee,
which consists of Messrs. Capozzi, DiPaolo and Fulbright, recommends to the
Board of Directors compensation plans and arrangements with respect to the
Company's executive officers and key personnel.
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<PAGE> 63
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 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Compensation
-----------------------
Awards
-----------
Securities
Annual Compensation Underlying
Name and ------------------- Options/ All Other
Principal Position Year Salary ($) Bonus SAR's Payouts Compensation(2)
- ------------------ ---- ---------- ----- ----- ------- ---------------
<S> <C> <C> <C> <C> <S> <C>
Jerry E. Hunter 1997 $ 361,218 $ 137,052 115,000 $ 9,059
Chairman of the Board, 1996 332,025 -- 3,371
President and Chief 1995 306,075 195,902 3,228
Executive Officer
Carl Rosen 1997 267,650 43,195 30,000 3,178
President, JPS Converter & 1996 251,875 -- 3,131
Industrial Corp.(1) 1995 243,750 83,000 3,046
David H. Taylor 1997 209,973 79,566 75,000 8,025
Executive Vice President - 1996 204,783 -- 2,291
Finance and Secretary 1995 196,350 118,139 2,238
Monnie L. Broome 1997 167,040 63,272 30,000 8,016
Vice President-Human 1996 162,775 -- 2,295
Resources 1995 155,925 91,822 2,250
Bruce R. Wilby 1997 165,000 78,779 30,000 $ 27,751 6,205
President, JPS Elastomerics 1996 161,474 57,761 6,040
Corp. (1) 1995 140,359 -- 5,591
Heyward D. Maddox 1997 133,883 66,857 30,000 1,798
Vice President-Sales and 1996 124,813 93,249 2,258
Marketing, JPS Converter & 1995 119,242 -- 1,724
Industrial Corp.(1)
</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.
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<PAGE> 64
Agreements with Executive Officers
On the Effective Date, JPS entered into an employment agreement with Jerry E.
Hunter. The agreement, which provides that Mr. Hunter will serve as President
and Chief Executive Officer of JPS until the third anniversary of the Effective
Date (the "Termination Date"), shall automatically be extended on an annual
basis following the Termination Date unless either party elects in advance not
to extend the employment period. The initial base salary under the agreement is
$380,000 and may be increased but not reduced over the term of the agreement. In
addition, under the new employment agreement, on the Effective Date Mr. Hunter
received a retention grant cash payment of $256,274 and 32,852 shares of Common
Stock. Mr. Hunter is eligible for an annual bonus up to 50% of base salary based
upon the Company's attainment of certain performance goals specified in the 1997
Management Incentive Bonus Plan. If JPS terminates Mr. Hunter's employment for
reasons other than for cause (as defined in the agreement), he will be entitled
to severance benefits equal to (i) his annual base salary continued through the
Termination Date or for one year from the date of termination, if later, (ii)
his target annual bonus continued through the Termination Date or for one year,
if greater and (iii) continuation of all health and life insurance benefits for
up to twenty-four months following the termination of employment. In the event
JPS reduces Mr. Hunter's base salary or bonus, materially changes the
requirements of his position or requires that he relocate his principal
residence, or in the event Mr. Hunter elects to terminate his employment no
earlier than six months following a change in control (as defined in the
agreement), Mr. Hunter may voluntarily terminate his employment with JPS with
such termination being treated, for purposes of severance benefits, as a
termination by JPS.
On the Effective Date, JPS entered into substantially similar employment
agreements with David H. Taylor and Monnie L. Broome, with Mr. Taylor serving as
Executive Vice President--Finance and Secretary of JPS and Mr. Broome serving as
Vice President--Human Resources of JPS. Under the agreements, base salary for
Mr. Taylor is $225,000 and for Mr. Broome is $180,000. In addition, under the
new employment agreements, Mr. Taylor received a retention grant cash payment of
$163,694 and 20,984 shares of Common Stock and Mr. Broome received a retention
grant cash payment of $115,531 and 14,810 shares of Common Stock. Each of Mr.
Taylor and Mr. Broome is also eligible for an annual bonus of up to 50% of his
salary based upon the Company's attainment of certain performance goals
specified in the 1997 Management Incentive Bonus Plan. The new employment
agreements of Mr. Taylor and Mr. Broome do not provide that within six months
following a change in control, Mr. Taylor or Mr. Broome (as the case may be) may
voluntarily terminate their employment with JPS, with such termination being
treated, for purposes of severance benefits, as a termination by JPS.
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 30, 1998, 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.
-64-
<PAGE> 65
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.
<TABLE>
<CAPTION>
PENSION PLAN TABLE*
Years of Service
--------------------------------------------------------------------------
Remuneration 15 Years 20 Years 25 Years 30 Years 35 Years
- ------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$125,000 $19,863 $26,484 $33,104 $39,725 $46,346
150,000 24,362 32,483 40,604 48,725 56,846
160,000 and above 26,162 34,884 43,604 52,325 61,046
</TABLE>
* Assumes individual retires at age 65 in 1997 with the indicated years
of service and compensation. The social security integration level of
such individuals would be $29,304. The social security integration
level is adjusted annually.
Credited years of service for benefit accrual under the Pension Plan as of
November 1, 1997 for the following executive officers are:
Jerry E. Hunter 11 years
Carl Rosen 6 years
David H. Taylor 9 years
Monnie L. Broome 9 years
Bruce R. Wilby 22 years
Heyward D. Maddox 29 years
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 $29,304 in 1997) 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 55.
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<PAGE> 66
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 an adjusted maximum of $160,000 per individual for the plan year
beginning November 1, 1997. 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.
1997 Management Incentive Bonus Plan
The Company's 1997 Management Incentive Bonus Plan provides incentives for key
management employees of the Company and its subsidiaries based upon the
financial performance of the Company. The plan is designed to provide incentives
to maximize operating earnings while minimizing the net assets required to
generate those earnings. Targets are set annually for operating earnings
(defined as EBITDA before bonus expense and restructuring and reorganization
expenses) and net assets employed (defined as average total assets less average
current liabilities other than debt-related liabilities such as accrued
interest) for each fiscal year and for each operating subsidiary. If actual
operating earnings and net assets employed are equal to the targets, a targeted
bonus is paid to each participant. To the extent actual operating earnings are
greater than the target, amounts in excess of the targeted bonuses are paid to
each participant. Likewise, operating earnings lower than target result in a
bonus payment that is less then the targeted bonus. A participant's bonus is
reduced to zero if actual operating earnings are 80% of target or less. The
operating earnings target is adjusted up or down by 12.5% of the excess or
deficiency of actual net assets employed compared to the target for net assets
employed. Targeted bonus amounts expressed as a percentage of salary for
participants in the plan range from 15% to 50%. Individuals listed on the
Summary Compensation Table have targeted bonus amounts equal to 50% of salary.
1997 Incentive and Capital Accumulation Plan
The Company's Incentive and Capital Accumulation Plan (the "Incentive Plan") is
intended to provide incentives that will attract, retain, and motivate highly
competent individuals as key employees of the Company and its subsidiaries, by
providing them with opportunities to acquire shares of Common Stock or monetary
payments based on the value of such shares. Pursuant to the Incentive Plan,
853,485 shares of Common Stock are reserved for issuance to salaried key
employees and non-employee directors of the Company pursuant to benefits in the
form of stock options, stock appreciation rights, stock awards, performance
awards, and stock units that may be granted by the compensation committee
comprised of disinterested members of the Company's Board of Directors. The
Incentive Plan will terminate on the tenth anniversary of its adoption.
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<PAGE> 67
On October 30, 1997, options to acquire approximately 569,000 shares of the
shares reserved pursuant to the Incentive Plan were granted to senior management
of the Company. These options include a combination of time vesting options
which vest solely on the lapse of time and performance options which vest upon
achievement of specified corporate performance goals. These options are
according to specific vesting schedules set forth in individual participant's
grant letters. In addition, on the Effective Date, each non-employee director
(except one, who waived his right to receive options) received options to
purchase 25,000 shares of Common Stock.
In the event the employment of any of Jerry E. Hunter, David H. Taylor or Monnie
L. Broome, is terminated by the Company without "cause" or by such employee for
"good reason" (as such terms are defined in each such employee's employment
agreement), such employee's rights immediately will be fully vested in 100% of
the shares granted to him.
The following table contains information about stock options granted in 1997 to
the executive officers:
<TABLE>
<CAPTION>
Potential Realizable Value
at Assumed Annual Rates of
Stock Price Appreciation
Individual Grants for Option Term (3)
- -------------------------------------------------------------------------------- -------------------------------
Percent
Number of of Total
Securities Options/
Underlying SARs
Options/ Granted to Exercise
SARs Employees or Base
Granted in Fiscal Price Expiration
Name (#) Year ($/Sh) (1) Date (2) 5% ($) 10% ($)
- --------------------- ----------- ----------- ----------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Jerry E. Hunter 115,000 20.21% $12.33 10/30/2007 $ 891,741 $ 2,259,847
Carl Rosen 30,000 5.27% $12.33 10/30/2007 $ 232,628 $ 589,525
David H. Taylor 75,000 13.18% $12.33 10/30/2007 $ 581,570 $ 1,473,813
Monnie L. Broome 30,000 5.27% $12.33 10/30/2007 $ 232,628 $ 589,525
Bruce R. Wilby 30,000 5.27% $12.33 10/30/2007 $ 232,628 $ 589,525
Heyward D. Maddox 30,000 5.27% $12.33 10/30/2007 $ 232,628 $ 589,525
</TABLE>
(1) The exercise price (the price that the executive officer must pay to
purchase each share of common stock that is subject to option) is equal to
the fair market value of the stock on the date of grant of the option.
All options shown were granted on October 30, 1997.
(2) One-half of options granted become exercisable ratably over three years
from the fiscal year end. The remaining one-half of options granted are
subject to the Company meeting certain performance goals in addition to the
time requirements applicable to the other options. All options expire 10
years from grant. Vesting accelerates in the event of death, disability,
involuntary termination, and in certain other events at the discretion of
the compensation committee of the Board of Directors.
(3) The potential realizable value shown for the executive officers is net of
the option exercise price. The dollar gains under these columns result from
calculations assuming 5% and 10% growth rates in stock price as prescribed
by the Securities and Exchange Commission and achievement of performance of
goals, and are not intended to forecast future price appreciation of JPS
Textile Group, Inc. common stock. The gains reflect a future value based
upon growth at these prescribed rates. It is important to note that options
have value to the executive officers and to other option recipients only if
the stock price advances beyond the grant date price shown in the Table
during the effective option period.
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<PAGE> 68
Compensation of Directors
Each director who is not an employee of the Company will be paid $20,000
annually for his services as a director, $1,200 for attendance at each meeting
of the Board of Directors and each committee meeting which does not occur in
conjunction with a directors' meeting, and $1,000 annually for his or her
services as the chairman of any committee. In addition, each non-employee
director received on the Effective Date a grant of options to purchase 25,000
shares of common stock of JPS (other than Robert J. Capozzi who has waived his
right to receive such options) at an exercise price based on the per share price
of the Common Stock as of the Effective Date (which was $12.33 per share). With
respect to the options granted to each non-employee director on the Effective
Date, options to purchase 5,000 shares of common stock of JPS vested on the
Effective Date and with respect to the balance of the options so granted,
options to purchase 5,000 shares of common stock of JPS will vest on each of the
first, second, third and fourth anniversaries of the Effective Date. Moreover,
non-employee directors are eligible to participate in the Incentive Plan. Under
the Incentive Plan each non-employee director appointed subsequent to the
Effective Date will receive on the date such director is appointed (the
"Appointment Date") a grant of options to purchase 25,000 shares of common stock
of JPS at an exercise price based on the per share price of the common stock of
JPS as of the Appointment Date. With respect to the options granted to each
non-employee director appointed subsequent to the Effective Date, options to
purchase 5,000 shares of common stock of JPS will vest on the applicable
Appointment Date and with respect to the balance of the options so granted,
options to purchase 5,000 shares of common stock of JPS will vest on each of the
first, second, third and fourth anniversaries of such Appointment Date.
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<PAGE> 69
Item 12. SECURITY OWNERSHIP OF PRINCIPAL SHAREHOLDERS AND MANAGEMENT.
Based upon information known to JPS as of January 7, 1998, the following table
sets forth the ownership of the shares of Common Stock issued and outstanding as
of such date by (a) each person or group that is the beneficial owner of more
than 5% of such shares on such date, (b) each director of JPS on such date and
(c) all directors of JPS as a group on such date.
<TABLE>
<CAPTION>
Common Stock (1)
----------------
Name and Address of Beneficial Owners Number of Shares Percent of Class
------------------------------------- ---------------- ----------------
<S> <C> <C>
Magten Asset Management Corp.(2) 1,905,435 18.07%
35 East 21st Street
New York, New York 10010
Northeast Investors Trust 1,038,823 9.85%
50 Congress Street, 10th Floor
Boston, Massachusetts 02109
TCW Shared Opportunity Fund II, L.P.(3) 568,376 5.39%
11100 Santa Monica Boulevard
Suite 2000
Los Angeles, California 90025
Swiss Bank Corporation, London Branch 1,027,214 9.74%
222 Broadway
New York, New York 10038
Merrill Lynch, Pierce, Fenner & Smith, Incorporated 925,685 8.78%
250 Vesey Street
World Financial Center-North Tower
New York, New York 10281
Daystar L.L.C. 1,679,360 15.92%
411 Theodore Fremd Avenue
Rye, New York 10580
Robert J. Capozzi(5) 1,905,435 18.07%
Magten Asset Management Corp.
35 East 21st Street
New York, New York 10010
Jeffrey S. Deutschman 5,000 (4) 0.05%
10519 Ashton Avenue
Los Angeles, California 90024
Nicholas P. DiPaolo 5,000 (4) 0.05%
4 Powder Hill
Saddle River, New Jersey 07458
Michael L. Fulbright 5,000 (4) 0.05%
1940 Dinsmore Road
Alpharetta, Georgia 30201
</TABLE>
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<PAGE> 70
<TABLE>
<CAPTION>
Common Stock (1)
----------------
Name and Address of Beneficial Owners Number of Shares Percent of Class
------------------------------------- ---------------- ----------------
<S> <C> <C>
Jerry E. Hunter 32,852 0.31%
JPS Textile Group, Inc.
555 North Pleasantburg Drive
Suite 202
Greenville, South Carolina 29607
John M. Sullivan 5,000 (4) 0.05%
American Silk Mills Corp.
41 Madison Avenue
41st Floor
New York, New York 10010
David H. Taylor 20,984 0.20%
JPS Textile Group, Inc.
555 North Pleasantburg Drive
Suite 202
Greenville, South Carolina 29607
Directors and executive officers as a group 1,979,271 (6) 18.77%
</TABLE>
(1) After giving effect to (i) the exercise in full of the New Warrants
issued on the Effective Date and (ii) the exercise in full of all
options to purchase shares of common stock of JPS which became vested
on the Effective Date.
(2) Includes shares of the Common Stock held by Magten in accounts managed
by Magten on behalf of various investment advisory clients, including
the City of Los Angeles Fire and Police Pension Systems (719,411
shares, or 6.82%, of the Common Stock) and Hughes Retirement Plans
Trust (575,617 shares, or 5.46%, of the Common Stock). Certain of such
shares are held for the benefit of family interests of Talton R. Embry,
the Chairman, a director and controlling shareholder of Magten, or in
employee plans with respect to which Mr. Embry serves as a trustee.
Magten has shared voting and investment power over all of such
1,905,447 shares.
(3) The general partner and investment advisor of TCW Shared Opportunity
Fund II, L.P. ("SHOP II") is TCW Investment Management Company
("TIMCO"). Messrs. Mark L. Attanasio, Robert D. Beyer, Jean-Marc
Chapus and Mark L. Gold are portfolio managers of SHOP II and exercise
voting and dispositive power on its behalf. Messrs. Attanasio, Beyer,
Chapus and Gold disclaim any beneficial ownership of the capital
stock of JPS.
(4) Represents options granted to non-employee directors of JPS (other
than Robert J. Capozzi) on the Effective Date. See "EXECUTIVE
COMPENSATION--Compensation of Directors."
(5) By virtue of 1,905,435 shares of Common Stock of JPS beneficially
owned by Magten, of which Mr. Capozzi is Managing Director. Mr.
Capozzi disclaims beneficial ownership of all of these shares. Mr.
Capozzi has informed JPS that he has waived his entitlement to receive
any options to purchase shares of common stock of JPS to which each
non-employee director will be entitled on the Effective Date. See
"EXECUTIVE COMPENSATION--Compensation of Directors."
(6) Includes 1,905,435 shares of Common Stock of JPS beneficially owned by
Magten. See Note 5.
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<PAGE> 71
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 1, 1997
(Reorganized Company) and November 2, 1996 (Predecessor
Company).
(iii) Consolidated Statements of Operations for the periods
from October 10, 1997 to November 1, 1997
(Reorganized Company) and November 3, 1996 to October
9, 1997 (Predecessor Company) and the fiscal years
ended November 2, 1996 and October 28, 1995
(Predecessor Company).
(iv) Consolidated Statements of Senior Redeemable
Preferred Stock and Shareholders' Equity (Deficit)
for the periods from October 10, 1997 to November 1,
1997 (Reorganized Company) and November 3, 1996 to
October 9, 1997 (Predecessor Company) and the fiscal
years ended November 2, 1996 and October 28, 1995
(Predecessor Company).
(v) Consolidated Statements of Cash Flows for the periods
from October 10, 1997 to November 1, 1997
(Reorganized Company) and November 3, 1996 to October
9, 1997 (Predecessor Company) and the fiscal years
ended November 2, 1996 and October 28, 1995
(Predecessor Company).
(vi) Notes to Consolidated Financial Statements.
The registrant is primarily a holding company and all direct 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) No reports on Form 8-K were filed during the quarter ended
November 1, 1997.
(c) Reference is made to Item 14(a)(3) above.
(d) Reference is made to Item 14(a)(2) above.
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<PAGE> 72
INDEX TO EXHIBITS
The following is a complete list of Exhibits filed as part of this report, which
are incorporated herein:
Exhibit
Number Description
- ------- -----------
2.1(i) Joint Plan of Reorganization for JPS Textile Group, Inc., a
Delaware corporation ("JPS"), proposed by JPS and JPS Capital
Corp., a Delaware corporation, pursuant to chapter 11 of title 11
United States Code (the "Bankruptcy Code"), dated August 1, 1997
(as amended, the "Plan").(K)
2.1(ii) Revised Technical and Conforming Amendment to the Plan, dated
September 4, 1997.(L)
3.1 Restated Certificate of Incorporation of JPS, filed with the
Secretary of State of the State of Delaware on October 9, 1997.(P)
3.2 Amended and Restated By-laws of JPS.(P)
4.1 Indenture, dated as of October 9, 1997 (the "Contingent Note
Indenture"), between JPS Capital Corp. ("Capital") and First Trust
National Association ("First Trust"), as Trustee, relating to
Capital's Contingent Notes (the "Contingent Notes").(K)
4.2 Form of Contingent Note, incorporated by reference to Exhibit A to
the Contingent Note Indenture.(K)
10.1 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)
10.2 First Amendment to the CIT Loan Agreement, dated as of June 26,
1992, by and between JCIC and CIT.(A)
10.3 Second Amendment to the CIT Loan Agreement, dated as of December
22, 1992, by and between JCIC and CIT.(A)
10.4 Agreement of Lease, dated as of June 1, 1988, by and between 1185
Avenue of the Americas Associates ("1185 Associates") and JCIC.(A)
10.5 Lease Modification and Extension Agreement, dated as of April 2,
1991, by and between 1185 Associates and JCIC.(A)
10.6 Third Amendment to the CIT Loan Agreement, dated as of August 6,
1993, by and between JCIC and CIT.(B)
10.7 Trademark License Agreement, dated as of May 9, 1988, by and
between J.P. Stevens and JPS Acquisition Corp. (predecessor to the
Company.)(B)
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<PAGE> 73
Exhibit
Number Description
- ------- -----------
10.8 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)
10.9 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)
10.10 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)
10.11 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)
10.12 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)
10.13 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)
10.14 Fourth Amendment to CIT Loan Agreement, dated as of December 29,
1994, by and between JCIC and CIT.(E)
10.15 Lease Modification and Extension Agreement, dated as of April 30,
1993, by and between 1185 Associates and JCIC.(E)
10.16 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.(F)
10.17 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.(G)
10.18 Lease Modification and Extension Agreement, dated as of November
17, 1994, by and between 1185 Associates and JCIC.(G)
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<PAGE> 74
Exhibit
Number Description
- ------- -----------
10.19 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.(H)
10.20 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.(I)
10.21 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.(I)
10.22 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.(J)
10.23 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.(J)
10.24 Employment Agreement dated October 9, 1997, between the Company
and Jerry E. Hunter. (P)
10.25 Employment Agreement dated October 9, 1997, between the Company
and David H. Taylor. (P)
10.26 Employment Agreement dated October 9, 1997, between the Company
and Monnie L. Broome.(P)
10.27 Employment Agreement, dated May 1, 1993 and amended September 11,
1995 between the Company and Carl Rosen.(J)
10.28 Employment Agreement, dated December 23, 1991 and amended August
20, 1996 and December 23, 1996 between the Company and Bruce
Wilby.(G)
10.29 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.(G)
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<PAGE> 75
Exhibit
Number Description
- -------- -----------
10.30 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.(G)
10.31 Registration Rights Agreement, dated as of October 9, 1997, by and
among JPS and the holders of JPS's Common Stock.(P)
10.32 Ninth Amendment to Existing Credit Agreement, dated as of February
21, 1997, by and among JPS, 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.(N)
10.33 Tenth Amendment to the Existing Credit Agreement, dated as of
April 29, 1997, by and among JPS, 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.(O)
10.34 Eleventh Amendment to the Existing Credit Agreement, dated as of
May 15, 1997, by and among JPS, 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.(O)
10.35 Credit Facility Agreement, dated as of October 9, 1997, by and
among JPS, C&I, Elastomerics, the financial institutions listed on
the signature pages thereto, and the agent and co-agent party
thereto.(M)
10.36 1997 Incentive and Capital Accumulation Plan dated as of October
9, 1997.(P)
10.37 Warrant Agreement dated as of October 9, 1997.(P)
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)
24.1 Power of Attorney relating to JPS (included as part of the
signature page hereof).(M)
27.1 Financial data schedule.(P)
- ------------------------------------
(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.
-75-
<PAGE> 76
(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 April 29, 1995.
(G) Previously filed as an exhibit to the Company's Annual Report on Form
10-K for the year ended November 2, 1996.
(H) Previously filed as an exhibit to the Company's Current Report on
Form 8-K dated December 1, 1995.
(I) Previously filed as an exhibit to the Company's Quarterly Report on
Form 10-Q for the quarter ended April 27, 1996.
(J) Previously filed as an exhibit to the Company's Quarterly Report on
Form 10-Q for the quarter ended July 27, 1996.
(K) Previously filed as an exhibit to JPS's Current Report on Form 8-K
dated July 2, 1997.
(L) Previously filed as an exhibit JPS's Registration Statement on
Form 8-A filed on September 8, 1997.
(M) Previously filed.
(N) Previously filed as an exhibit to JPS's Quarterly Report on Form 10-Q
for the quarter ended February 1, 1997.
(O) Previously filed as an exhibit to JPS's Quarterly Report on Form 10-Q
for the quarter ended May 3, 1997.
(P) Filed herewith.
-76-
<PAGE> 77
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 30, 1998 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 30, 1998
- --------------------------------- President and Chief Executive Officer
Jerry E. Hunter
/s/ David H. Taylor Director, Executive January 30, 1998
- --------------------------------- Vice President-Finance,
David H. Taylor Principal Financial Officer and
Secretary
/s/ Robert J. Capozzi Director January 30, 1998
- ---------------------------------
Robert J. Capozzi
/s/ Jeffrey S. Deutschman Director January 30, 1998
- ---------------------------------
Jeffrey S. Deutschman
/s/ Nicholas P. DiPaolo Director January 30, 1998
- ---------------------------------
Nicholas P. DiPaolo
/s/ Michael J. Fulbright Director January 30, 1998
- ---------------------------------
Michael L. Fulbright
/s/ John M. Sullivan. Jr. Director January 30, 1998
- ---------------------------------
John M. Sullivan, Jr.
/s/ L. Allen Ollis Controller January 30, 1998
- ---------------------------------
L. Allen Ollis
</TABLE>
-77-
<PAGE> 78
JPS TEXTILE GROUP, INC.
INDEX TO SCHEDULE
INDEX TO FINANCIAL STATEMENT SCHEDULE
For the Fiscal Years Ended October 28, 1995, November 2, 1996 and the periods
from November 3, 1996 to October 9, 1997 and from October 10, 1997 to November
1, 1997.
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> 79
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
-------------- ---------- ---------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
(a) (b)
Allowances Deducted from Asset to Which They Apply:
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
========= ======== ========= ======= ========
For the Period From November 3, 1996
to October 9, 1997
Allowance for doubtful accounts $ 2,348 $ 781 $ (1,258) $ 24 $ 1,847
Claims, returns and other allowances 163 -- 164 179 148
--------- -------- --------- ------- --------
$ 2,511 $ 781 $ (1,094) $ 203 $ 1,995
========= ======== ========= ======= ========
For the Period From October 10, 1997
to November 1, 1997
Allowance for doubtful accounts $ 1,847 $ -- $ (945) $ -- $ 902
Claims, returns and other allowances 148 -- 7 4 151
--------- -------- --------- ------- --------
$ 1,995 $ -- $ (938) $ 4 $ 1,053
========= ======== ========= ======= ========
</TABLE>
(a) Change in various reserves charged to net sales.
(b) Uncollected receivables written off, net of recoveries.
S-2
<PAGE> 1
EXHIBIT 3.1
RESTATED
CERTIFICATE OF INCORPORATION
OF
JPS TEXTILE GROUP, INC.
1. The name of the Corporation is JPS Textile Group, Inc.
2. The original Certificate of Incorporation was filed with the
Secretary of State of the State of Delaware on December 31, 1986 under the name
Grambling, Inc. IV and was amended by Certificates of Amendment filed with the
Secretary of State on March 14, 1988, April 7, 1988 and May 12, 1988. In
addition, a Restated Certificate of Incorporation was filed with the Secretary
of State on April 1, 1991 and a Certificate of Correction was filed with the
Secretary of State on April 2, 1991.
3. This Restated Certificate of Incorporation, which restates and
further amends the Restated Certificate of Incorporation as currently in effect,
is made and filed pursuant to the order, dated September 9, 1997, of the United
States Bankruptcy Court (the "Bankruptcy Court"), Southern District of New York
in (In re JPS Textile Group, Inc., No. 97-45133(CB), and the Plan of
Reorganization filed on August 1, 1997 confirmed therein (the "Plan of
Reorganization") in connection with the reorganization of the Corporation under
Title 11 of the United States Code and in accordance with Sections 103, 245 and
303 of the General Corporation Law of the State of Delaware.
4. This Restated Certificate of Incorporation shall become effective at
9:00 a.m. on October 9, 1997.
5. The Corporation's Restated Certificate of Incorporation, as currently
in effect, is hereby restated and further amended so as to read in its entirety
as follows:
FIRST: The name of the Corporation is:
JPS TEXTILE GROUP, INC.
SECOND: The address of the Corporation's registered office in the State
of Delaware is Corporation Trust Center, 1209 Orange Street, in the City of
Wilmington, County of New Castle. The name of its registered agent at such
address is The Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware, as from time to time amended.
FOURTH: (a) The total number of shares of capital stock which the
Corporation shall have authority to issue is 25,000,000 shares. Of these, (i)
22,000,000 shares shall be shares of Common Stock having a par value of $0.01
per share (the "Common Stock"), and (ii) 3,000,000 shares shall be shares of
Preferred Stock, having a par value of $0.01 per share (the "Preferred Stock").
Except as otherwise provided by law, the shares of capital stock of the
Corporation regardless of class, may be issued by the Corporation from time to
time in such amounts, for such lawful consideration and for such corporate
purpose(s) as the Board of Directors may from time to time determine.
<PAGE> 2
(b) Preferred Stock may be issued in one or more series as may be
determined from time to time by the Board of Directors. Authority is hereby
expressly granted to the Board of Directors to authorize the issuance of one or
more series of Preferred Stock, and, subject to Article FIFTH, to fix by
resolution or resolutions providing for the issue of each such series the voting
powers, designations, preferences, and relative, participating, optional,
redemption, conversion, exchange or other special rights, qualifications,
limitations or restrictions of such series, and the number of shares in each
series, to the full extent now or hereafter permitted by law.
FIFTH: The Corporation shall not create, designate, authorize or cause
to be issued any class or series of nonvoting stock. For purposes of this
Article FIFTH, any class or series of stock, including any series of Preferred
Stock, that has only such voting rights as are mandated by the General
Corporation Law of the State of Delaware, shall be deemed to be nonvoting stock
subject to the restrictions of this Article FIFTH.
SIXTH: In furtherance and not in limitation of the powers conferred by
law, subject to any limitations contained elsewhere in this Restated
Certificate, by-laws of the Corporation may be adopted, amended or repealed by a
majority of the board of directors of the Corporation, but any by-laws adopted
by the board of directors may also be amended or repealed by the stockholders
entitled to vote thereon. Election of directors need not be by written ballot.
SEVENTH: (a) Without the approval of the Board of Directors and the
approval, given by written consent or by vote at any regular or special meeting
of stockholders, of the holders of record of not less than 100% of the shares of
Common Stock at the time outstanding, voting together as a single class, the
Corporation shall not enter into any single transaction or series of related
transactions, or take any other action that would have the effect of, whether
directly or indirectly, prohibiting, restricting, delaying or otherwise
hindering the payment of any and all amounts due under the Contingent Notes (as
defined below) issued by JPS Capital Corp. ("Capital") in accordance with the
terms thereof. Notwithstanding the foregoing, nothing contained in this Restated
Certificate of Incorporation shall restrict (i) the actions taken by the
Corporation or its Tax Affiliates (as defined below) in connection with the
resolution of their liabilities (if any) for Taxes (as defined below) or (ii) a
sale of the Corporation.
(b) Until after the occurrence of the later of (i) the Maturity Date (as
defined below), and (ii) the payment in full of the obligations of Capital
arising under the Contingent Notes, the Corporation shall not Transfer (as
defined below) or permit the Transfer of all or any portion of the outstanding
shares of capital stock of Capital owned by the Corporation to any person or
entity.
(c) For purposes of this Restated Certificate of Incorporation, the
following terms are defined as follows:
(i) "Contingent Note Indenture" means the indenture, dated as of
October 9, 1997, among Capital, the Corporation and First Trust National
Association as trustee (the "Trustee");
(ii) "Contingent Notes" means the Contingent Payment Notes due on
the Maturity Date issued pursuant to the Contingent Note Indenture;
(iii) "Maturity Date," "Tax Affiliate," and "Taxes" have the
meanings ascribed to such terms in the Contingent Note Indenture; and
(iv) "Transfer" means (A) any direct or indirect, whether voluntary
or involuntary, knowing or unknowing, by operation of law or otherwise,
disposition of any assets or property, whether by sale, exchange, merger,
consolidation, transfer, conveyance, distribution, inheritance, gift or
otherwise, or (B) any consensual
2
<PAGE> 3
security interest in, pledge or assignment of, mortgage of, encumbrance upon,
lien in or any other preferential arrangement with respect to, any assets or
property. Notwithstanding any understandings or agreements to which a holder of
Capital's capital stock is a party, any arrangement, the effect of which is to
Transfer any or all of the rights arising from ownership of Capital's capital
stock, shall be treated as a Transfer of such capital stock for purposes of
this Article SEVENTH.
EIGHTH: (a) A director of the Corporation shall not be personally liable
either to the Corporation or to any of its stockholders for monetary damages for
breach of fiduciary duty as a director, except for liability for (i) any breach
of the director's duty of loyalty to the Corporation or its stockholders, or
(ii) acts or omissions which are not in good faith or which involve intentional
misconduct or knowing violation of the law, or (iii) any matter in respect of
which such director shall be liable under Section 174 of Title 8 of the General
Corporation Law of the State of Delaware or any amendment thereto or successor
provision thereto, or (iv) any transaction from which the director shall have
derived an improper personal benefit. Neither amendment nor repeal of this
paragraph (a) nor the adoption of any provision of the Restated Certificate of
Incorporation inconsistent with this paragraph (a) shall eliminate or reduce the
effect of this paragraph (a) in respect of any matter occurring, or any cause of
action, suit or claim that, but for this paragraph (a) of this Article EIGHTH,
would accrue or arise, prior to such amendment, repeal or adoption of an
inconsistent provision. If the General Corporation Law of Delaware is hereafter
amended to permit further elimination or limitation of the personal liability of
directors, then the liability of a director of the Corporation shall be
eliminated or limited to the fullest extent permitted by the General Corporation
Law of Delaware as so amended.
(b) The Corporation shall indemnify any person who was or is a party or
is threatened to be made a party to, or testifies in, any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (hereinafter, a "proceeding"), other than an action by or in the
right of the Corporation, by reason of the fact that such person is or was a
director, officer, employee or agent of the Corporation, or is or was serving at
the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, employee benefit plan, trust or
other enterprise (hereinafter, an "indemnitee"), whether the basis of such
proceeding is alleged action in an official capacity as a director, officer,
employee or agent or in any other capacity while serving as such a director,
officer, employee or agent. The indemnitee shall be indemnified and held
harmless by the Corporation to the full extent authorized by the General
Corporation Law of Delaware, as the same exists or may hereafter be amended
(but, in the case of any such amendment, only to the extent that such amendment
permits the Corporation to provide broader indemnification rights than said law
permitted the Corporation to provide prior to such amendment), or by other
applicable law as then in effect, against all expense, liability and loss
(including attorneys' fees, judgments, fines, excise taxes under the Employee
Retirement Income Security Act of 1974, as amended from time to time ("ERISA"),
penalties and amounts to be paid in settlement) actually and reasonably incurred
or suffered by such indemnitee in connection therewith. The Corporation may
adopt By-laws or enter into agreements with any such person for the purpose of
providing for such indemnification.
(c) The Corporation shall indemnify any person who was or is a party or
is threatened to be made a party to, or testifies in, any proceeding by or in
the right of the Corporation to procure a judgment in its favor by reason of the
fact that such person is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, employee benefit plan, trust or other enterprise against expenses
(including attorneys' fees) actually and reasonably incurred by such person in
connection with the defense or settlement of such action or suit if such person
acted in good faith and in a manner such person reasonably believed to be in or
not opposed to the best interests of the Corporation, provided that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the Corporation
unless and only to the extent that the Court of
3
<PAGE> 4
Chancery of the State of Delaware or the court in which such action or suit was
brought shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the Court
of Chancery or such other court shall deem proper.
(d) Any indemnification under this Article EIGHTH (unless ordered by a
court) shall be made by the Corporation only as authorized in the specific case
upon a determination that indemnification of the present or former director,
officer, employee or agent is proper in the circumstances because he or she has
met the applicable standard of conduct set forth in the General Corporation Law
of Delaware, as the same exists or hereafter may be amended (but, in the case of
any such amendment, only to the extent that such amendment permits the
Corporation to provide broader indemnification rights than said law permitted
the Corporation to provide prior to such amendment). Such determination shall be
made with respect to a person who is a director or officer at the time of such
determination (A) by a majority vote of the directors who were not parties to
such action, suit or proceeding (the "Disinterested Directors"), even though
less than a quorum, or (B) by a committee of Disinterested Directors designated
by a majority vote of such directors, even though less than a quorum or (C) if
there are no Disinterested Directors or if the Disinterested Directors so
direct, by independent legal counsel in a written opinion, or (D) by the
stockholders.
(e) Costs, charges and expenses (including attorneys' fees) incurred by
a director, officer, employee or agent of the Corporation in defending a civil
or criminal action, suit or proceeding shall be paid by the Corporation in
advance of the final disposition of such action, suit or proceeding upon receipt
of an undertaking by or on behalf of the director, officer, employee or agent to
repay all amounts so advanced in the event that it shall ultimately be
determined that such director, officer, employee or agent is not entitled to be
indemnified by the Corporation as authorized in this Article EIGHTH. The
majority of the Disinterested Directors may, in the manner set forth above, and
upon approval of such director, officer, employee or agent of the Corporation,
authorize the Corporation's counsel to represent such person, in any action,
suit or proceeding, whether or not the Corporation is a party to such action,
suit or proceeding.
(f) Any indemnification or advance of costs, charges and expenses under
this Article EIGHTH shall be made promptly, and in any event within 60 days upon
the written request of the director, officer, employee or agent. The right to
indemnification or advances as granted by this Article EIGHTH shall be
enforceable by the director, officer, employee or agent, as the case may be, in
any court of competent jurisdiction, if the Corporation denies such request, in
whole or in part, or if no disposition thereof is made within 60 days. Such
person's costs and expenses incurred in connection with successfully
establishing his or her right to indemnification, in whole or in part, in any
such action shall also be indemnified by the Corporation. It shall be a defense
to any such action (other than an action brought to enforce a claim for the
advance of costs, charges and expenses under this Article EIGHTH where the
required undertaking has been received by the Corporation) that the claimant has
not met the standard of conduct set forth in the General Corporation Law of
Delaware, as the same exists or hereafter may be amended (but, in the case of
any such amendment, only to the extent that such amendment permits the
Corporation to provide broader indemnification rights than said law permitted
the Corporation to provide prior to such amendment), but the burden of proving
such defense shall be on the Corporation. Neither the failure of the Corporation
(including its Board of Directors, its independent legal counsel and its
stockholders) to have made a determination prior to the commencement of such
action that indemnification of the claimant is proper in the circumstances
because he or she has met the applicable standard of conduct set forth in the
General Corporation Law of Delaware, as the same exists or hereafter may be
amended (but, in the case of any such amendment, only to the extent that such
amendment permits the Corporation to provide broader indemnification rights than
said law permitted the Corporation to provide prior to such amendment), nor the
fact that there has been an actual determination by the Corporation (including
its Board of Directors, its independent legal counsel and its stockholders)
that the claimant has not met
4
<PAGE> 5
such applicable standard of conduct, shall be a defense to the action or create
a presumption that the claimant has not met the applicable standard of conduct.
(g) The indemnification and advancement of expenses provided by this
Article EIGHTH shall not be deemed exclusive of any other rights to which a
person seeking indemnification or advancement of expenses may be entitled under
any law (common or statutory), by-law, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in his or her official
capacity and as to action in another capacity while holding office or while
employed by or acting as agent for the Corporation, and shall continue as to a
person who has ceased to be a director, officer, employee or agent and shall
inure to the benefit of the estate, heirs, executors and administrators of such
person. All rights to indemnification under this Article EIGHTH shall be deemed
to be a contract between the Corporation and each director, officer, employee or
agent of the Corporation who serves or served in such capacity at any time while
this Article EIGHTH is in effect. Any repeal or modification of this Article
EIGHTH shall not in any way diminish any rights to indemnification of such
director, officer, employee or agent or the obligations of the Corporation
arising hereunder with respect to any action, suit or proceeding arising out of,
or relating to, any actions, transactions or facts occurring prior to the final
adoption of such modification or repeal. For the purposes of this Article
EIGHTH, references to "the Corporation" include all constituent corporations
absorbed in a consolidation or merger as well as the resulting or surviving
corporation, so that any person who is or was a director, officer, employee or
agent of such a constituent corporation or is or was serving at the request of
such constituent corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise shall
stand in the same position under the provisions of this Article EIGHTH, with
respect to the resulting or surviving corporation, as he or she would if he or
she had served the resulting or surviving corporation in the same capacity.
(h) The Corporation shall have the power to purchase and maintain
insurance on behalf of any person who is or was or has agreed to become a
director, officer, employee or agent of the Corporation, or is or was serving at
the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
against any liability asserted against him or her and incurred by him or her or
on his or her behalf in any such capacity, or arising out of his or her status
as such, whether or not the Corporation would have the power to indemnify him or
her against such liability under the provisions of this Article EIGHTH,
provided, however, that such insurance is available on acceptable terms, which
determination shall be made by a vote of a majority of the Board of Directors.
(i) If this Article EIGHTH or any portion hereof shall be invalidated on
any ground by any court of competent jurisdiction, then the Corporation shall
nevertheless indemnify each person entitled to indemnification under the first
paragraph of this Article EIGHTH as to all expense, liability and loss
(including attorneys' fees, judgments, fines, ERISA excise taxes, penalties and
amounts to be paid in settlement) actually and reasonably incurred or suffered
by such person and for which indemnification is available to such person
pursuant to this Article EIGHTH to the full extent permitted by any applicable
portion of this Article EIGHTH that shall not have been invalidated and to the
full extent permitted by applicable law.
NINTH: The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Restated Certificate of Incorporation in
the manner now or hereafter prescribed by statute, and all rights conferred by
the stockholders herein are granted subject to this reservation. Notwithstanding
the foregoing, none of the provisions of Article SEVENTH of this Restated
Certificate of Incorporation or this sentence of Article NINTH may be amended,
altered, changed or repealed without the prior approval of the Bankruptcy Court
pursuant to a Final Order (as defined in the Plan of Reorganization).
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TENTH: The Corporation expressly elects not to be governed by Section
203 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, JPS Textile Group, Inc. has caused this Restated
Certificate of Incorporation to be signed by David H. Taylor, its Executive Vice
President - Finance and Secretary, and attested by Jerry E. Hunter, its Chairman
of the Board, President and Chief Executive Officer, this 9th day of October,
1997.
JPS TEXTILE GROUP, INC.
By /s/ David H. Taylor
-------------------------------------
Name: David H. Taylor
Title: Executive Vice President -
Finance and Secretary
ATTEST:
By /s/ Jerry E. Hunter
------------------------------------------
Name: Jerry E. Hunter
Title: Chairman of the Board, President
and Chief Executive Officer
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EXHIBIT 3.2
AMENDED AND RESTATED
BY-LAWS
OF
JPS TEXTILE GROUP, INC.
(a Delaware corporation)
ARTICLE I
STOCKHOLDERS
SECTION 1. Fixing Date for Determination of Stockholders of Record. In
order that the Corporation may determine the stockholders entitled to notice of
or to vote at any meeting of stockholders or any adjournment thereof, or to
express consent to corporate action in writing without a meeting, or entitled to
receive payment of any dividend or other distribution or allotment of any
rights, or entitled to exercise any rights in respect of any change, conversion,
or exchange of stock or for the purpose of any other lawful action, the Board of
Directors may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted by the Board of
Directors and which record date: (1) in the case of determination of
stockholders entitled to vote at any meeting of stockholders or adjournment
thereof, shall, unless otherwise required by law, not be more than sixty nor
less than ten days before the date of such meeting; (2) in the case of
determination of stockholders entitled to express consent to corporate action in
writing without a meeting, shall not be more than ten days after the date upon
which the resolution fixing the record date is adopted by the Board of
Directors; and (3) in the case of any other action, shall not be more than sixty
days prior to such other action. If no record date is fixed: (1) the record date
for determining stockholders entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the day next preceding the day
on which notice is given, or, if notice is waived, at the close of business on
the day next preceding the day on which the meeting is held; (2) the record date
for determining stockholders entitled to express consent to corporate action in
writing without a meeting, when no prior action of the Board of Directors is
required by law, shall be the first date on which a signed written consent
setting forth the action taken or proposed to be taken is delivered to the
corporation in accordance with applicable law, or, if prior action by the Board
of Directors is required by law, shall be at the close of business on the day on
which the Board of Directors adopts the resolution taking such prior action; and
(3) the record date for determining stockholders for any other purpose shall be
at the close of business on the day on which the Board of Directors adopts the
resolution relating thereto. A determination of stockholders of record entitled
to notice of or to vote at a meeting of stockholders shall apply to any
adjournment of the meeting; provided, however, that the Board of Directors may
fix a new record date for the adjourned meeting.
SECTION 2. Annual Meetings. The annual meeting of stockholders for the
election of directors and for the transaction of such other business as may
properly come before the meeting shall be held each year at such date and time,
and at such place within or without the State of Delaware, as shall be
designated by the Board of Directors and set forth in the notice or in a duly
executed waiver of notice thereof.
SECTION 3. Special Meetings. Special meetings of stockholders for the
transaction of such business as may properly come before the meeting may be
called by order of the Board of Directors or by stockholders holding together at
least 25% in voting power of all the shares of the Corporation entitled to vote
at the meeting, and shall be held at such date and time, and at such place
within or without the State of Delaware, as may be specified in the notice or in
a duly executed waiver of notice of such meeting. Whenever the directors shall
fail to fix such
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place, the meeting shall be held at the principal executive office of the
Corporation. Only such business as is stated in the written notice of special
meeting may be acted upon thereat.
SECTION 4. Notice of Meetings. Except as otherwise provided by law, written
notice of all meetings of the stockholders, stating the place, date and hour of
the meeting and the place within the city or other municipality or community at
which the list of stockholders may be examined, shall be mailed or delivered to
each stockholder not less than 10 nor more than 60 days prior to the meeting.
Notice of any special meeting shall state in general terms the purpose or
purposes for which the meeting is to be held. If mailed, such notice shall be
deemed to be given when deposited in the United States mail, postage prepaid,
directed to the stockholder at such stockholder's address as it appears on the
records of the Corporation. If, prior to the time of mailing, the Secretary
shall have received from any stockholder entitled to vote a written request that
notices intended for such stockholder are to be mailed to an address other than
the address that appears on the records of the Corporation, notices intended for
such stockholder shall be mailed to the address designated in such request.
Notice of a special meeting may be given by the person or persons calling
the meeting, or, upon the written request of such person or persons, by the
Secretary of the Corporation on behalf of such person or persons. If the person
or persons calling a special meeting of stockholders gives notice thereof, such
person or persons shall forward a copy thereof to the Secretary. Every request
to the Secretary for the giving of notice of a special meeting of stockholders
shall state the purpose or purposes of such meeting.
SECTION 5. Waiver of Notice. Notice of any annual or special meeting of
stockholders need not be given to any stockholder entitled to vote at such
meeting who files a written waiver of notice with the Secretary, duly executed
by the person entitled to notice, whether before or after the meeting. Neither
the business to be transacted at, nor the purpose of, any meeting of
stockholders need be specified in any written waiver of notice. Attendance of a
stockholder at a meeting, in person or by proxy, shall constitute a waiver of
notice of such meeting, except as provided by law.
SECTION 6. Adjournments. When a meeting is adjourned to another date, hour
or place, notice need not be given of the adjourned meeting if the date, hour
and place thereof are announced at the meeting at which the adjournment is
taken. If the adjournment is for more than 30 calendar days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at the adjourned meeting. At the adjourned meeting any business may be
transacted which might have been transacted at the original meeting.
When any meeting is convened the presiding officer may adjourn the meeting
if (a) no quorum is present for the transaction of business or (b) the Board of
Directors determines that adjournment is necessary or appropriate to enable the
stockholders (i) to consider fully information which the Board of Directors
determines has not been made sufficiently or timely available to stockholders or
(ii) otherwise to exercise effectively their voting rights.
SECTION 7. Stockholder Lists. The officer who has charge of the stock
ledger of the Corporation shall prepare and make, at least 10 days before every
meeting of stockholders, a complete list of the stockholders entitled to vote at
the meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, either at a place within the city where the meeting is
to be held, which place shall be specified in the notice of the meeting, or, if
not so specified, at the place where the meeting is to be held. The list shall
also be produced and kept at the time and place of the meeting during the whole
time thereof, and may be inspected by any stockholder who is present.
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The stock ledger shall be the only evidence as to who are the stockholders
entitled to examine the stock ledger, the list required by this section or the
books of the Corporation, or to vote in person or by proxy at any meeting of
stockholders.
SECTION 8. Quorum. Except as otherwise provided by law or the
Corporation's Restated Certificate of Incorporation, a quorum for the
transaction of business at any meeting of stockholders shall consist of the
holders of record of a majority in voting power of the issued and outstanding
shares of the capital stock of the Corporation entitled to vote at the meeting,
present in person or by proxy. If there be no such quorum, the holders of a
majority in voting power of such shares so present or represented may adjourn
the meeting from time to time, without further notice, until a quorum shall
have been obtained. When a quorum is once present it is not broken by the
subsequent withdrawal of any stockholder.
SECTION 9. Organization. Meetings of stockholders shall be presided over
by the Chairman, if any, or if none or in the Chairman's absence the
Vice-Chairman, if any, or if none or in the Vice-Chairman's absence the
President, if any, or if none or in the President's absence a Vice-President,
or, if none of the foregoing is present, by a chairman to be chosen by the
stockholders entitled to vote who are present in person or by proxy at the
meeting. The Secretary of the Corporation, or in the Secretary's absence an
Assistant Secretary, shall act as secretary of every meeting, but if neither
the Secretary nor an Assistant Secretary is present, the presiding officer of
the meeting shall appoint any person present to act as secretary of the
meeting.
SECTION 10. Voting; Proxies; Required Vote. (a) At each meeting of
stockholders, every stockholder shall be entitled to vote in person or by proxy
(but no such proxy shall be voted or acted upon after three years from its date,
unless the proxy provides for a longer period), and, unless the Restated
Certificate of Incorporation provides otherwise, shall have one vote for each
share of stock entitled to vote registered in the name of such stockholder on
the books of the Corporation on the applicable record date fixed pursuant to
these By-laws. At all elections of directors the voting may but need not be by
ballot. Except as otherwise required by law or the Restated Certificate of
Incorporation, any action other than the election of directors shall be
authorized by a majority in voting power of the shares present in person or
represented by proxy at the meeting.
(b) Any action required or permitted to be taken at any meeting of
stockholders may, except as otherwise required by law or the Restated
Certificate of Incorporation, be taken without a meeting, without prior notice
and without a vote, if a consent in writing, setting forth the action so taken,
shall be signed by the holders of record of the issued and outstanding capital
stock of the Corporation having not less than the minimum number of votes that
would be necessary to authorize or take such action at a meeting at which all
shares entitled to vote thereon were present and voted, and the writing or
writings are filed with the permanent records of the Corporation. Prompt notice
of the taking of corporate action without a meeting by less than unanimous
written consent shall be given to those stockholders who have not consented in
writing.
(c) Where a separate vote by a class or classes, present in person or
represented by proxy, is required by law or the Restated Certificate of
Incorporation, the affirmative vote of the majority in voting power of shares of
such class or classes present in person or represented by proxy at the meeting
shall be the act of such class, unless otherwise provided in the Corporation's
Restated Certificate of Incorporation.
SECTION 11. Inspectors. The Board of Directors, in advance of any meeting,
may, but need not, unless required by law, appoint one or more inspectors of
election to act at the meeting or any adjournment thereof. If an inspector or
inspectors are not so appointed, the person presiding at the meeting may, but
need not, unless required by law, appoint one or more inspectors. In case any
person who may be appointed as an inspector fails to appear or act, the vacancy
may be filled by appointment made by the directors in advance of the meeting or
at
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the meeting by the person presiding thereat. Each inspector, if any, before
entering upon the discharge of his or her duties, shall take and sign an oath
faithfully to execute the duties of inspector at such meeting with strict
impartiality and according to the best of his ability. The inspectors, if any,
shall determine the number of shares of stock outstanding and the voting power
of each, the shares of stock represented at the meeting, the existence of a
quorum, and the validity and effect of proxies, and shall receive votes, ballots
or consents, hear and determine all challenges and questions arising in
connection with the right to vote, count and tabulate all votes, ballots or
consents, determine the result, and do such acts as are proper to conduct the
election or vote with fairness to all stockholders. On request of the person
presiding at the meeting, the inspector or inspectors, if any, shall make a
report in writing of any challenge, question or matter determined by such
inspector or inspectors and execute a certificate of any fact found by such
inspector or inspectors.
ARTICLE II
BOARD OF DIRECTORS
SECTION 1. General Powers. The business, property and affairs of the
Corporation shall be managed by, or under the direction of, the Board of
Directors, which may exercise all such powers of the Corporation and do all such
lawful acts and things as are not by law or by the Restated Certificate of
Incorporation directed or required to be exercised or done by the stockholders.
SECTION 2. Qualification; Number; Term; Remuneration. (a) Each director
shall be at least 18 years of age. A director need not be a stockholder, a
citizen of the United States, or a resident of the State of Delaware. The number
of directors constituting the entire Board shall initially consist of 7 members
and henceforward shall consist of not less than 3 nor more than 10 members, the
exact number of which shall be fixed from time to time by action of the Board of
Directors, one of whom may be selected by the Board of Directors to be its
Chairman. The use of the phrase "entire Board" herein refers to the total number
of directors which the Corporation would have if there were no vacancies or
unfilled newly created directorships. Except as provided in Section 11 of this
Article II, directors shall be elected by a plurality of the votes cast at
annual meetings of stockholders, and each director so elected shall hold office
as provided by the Restated Certificate of Incorporation. None of the directors
need be stockholders of the Corporation.
(b) Directors who are elected at an annual meeting of stockholders, and
directors who are elected in the interim to fill vacancies and newly created
directorships, shall hold office until the next annual meeting of stockholders
and until their successors are elected and qualified or until their earlier
resignation or removal.
(c) Directors may be paid their expenses, if any, of attendance at each
meeting of the Board of Directors and may be paid a fixed sum for attendance at
each meeting of the Board of Directors or a stated salary as director. No such
payment shall preclude any director from serving the Corporation in any other
capacity and receiving compensation therefor. Members of special or standing
committees may be allowed like compensation for attending committee meetings.
SECTION 3. Quorum and Manner of Voting. Except as otherwise provided by
law, a majority of the entire Board shall constitute a quorum. A majority of the
directors present, whether or not a quorum is present, may adjourn a meeting
from time to time to another time and place without notice. The vote of the
majority of the directors present at a meeting at which a quorum is present
shall be the act of the Board of Directors.
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SECTION 4. Places of Meetings. Meetings of the Board of Directors may be
held at any place within or without the State of Delaware, as may from time to
time be fixed by resolution of the Board of Directors, or as may be specified in
the notice of meeting.
SECTION 5. Annual Meeting. Following the annual meeting of stockholders,
the newly elected Board of Directors shall meet for the purpose of the election
of officers and the transaction of such other business as may properly come
before the meeting. Such meeting may be held without notice immediately after
the annual meeting of stockholders at the same place at which such stockholders'
meeting is held.
SECTION 6. Regular Meetings. Regular meetings of the Board of Directors
shall be held at such times and places as the Board of Directors shall from time
to time by resolution determine. Notice need not be given of regular meetings of
the Board of Directors held at times and places fixed by resolution of the Board
of Directors.
SECTION 7. Special Meetings. Special meetings of the Board of Directors
shall be held whenever called by the Chairman of the Board, President,
Vice-Chairman or a majority of the directors then in office.
SECTION 8. Notice of Special Meetings. A notice of the place, date and
time and the purpose or purposes of each special meeting of the Board of
Directors shall be given to each director by mailing the same at least two days
before the special meeting, or by telegraphing or telephoning the same or by
delivering the same personally not later than the day before the day of the
meeting.
SECTION 9. Organization. At all meetings of the Board of Directors, the
Chairman, if any, or if none or in the Chairman's absence or inability to act
the President, or in the President's absence or inability to act any
Vice-President who is a member of the Board of Directors, or in such
Vice-President's absence or inability to act a chairman chosen by the directors,
shall preside. The Secretary of the Corporation shall act as secretary at all
meetings of the Board of Directors when present, and, in the Secretary's
absence, the presiding officer may appoint any person to act as secretary.
SECTION 10. Resignation. Any director may resign at any time upon written
notice to the Corporation and such resignation shall take effect upon receipt
thereof by the President or Secretary, unless otherwise specified in the
resignation. Any or all of the directors may be removed, with or without cause,
by the holders of a majority in voting power of the shares of stock outstanding
and entitled to vote for the election of directors.
SECTION 11. Vacancies. Unless otherwise provided in these By-laws,
vacancies on the Board of Directors, whether caused by resignation, death,
disqualification, removal, an increase in the authorized number of directors or
otherwise, may be filled by the affirmative vote of a majority of the remaining
directors, although less than a quorum, or by a sole remaining director, or at a
special meeting of the stockholders, by the holders of shares entitled to vote
for the election of directors.
SECTION 12. Action by Written Consent. Any action required or permitted to
be taken at any meeting of the Board of Directors may be taken without a meeting
if all the directors consent thereto in writing, and the writing or writings are
filed with the minutes of proceedings of the Board of Directors.
SECTION 13. Meetings by Conference Telephone, etc. Any one or more members
of the Board of Directors, or of any committee thereof, may participate in a
meeting of the Board of Directors, or of such committee, by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and participation in a meeting
by such means shall constitute presence in person at such meeting.
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ARTICLE III
COMMITTEES
SECTION 1. Appointment. From time to time the Board of Directors by
resolution may appoint any committee or committees for any purpose or purposes,
to the extent lawful, which shall have powers as shall be determined and
specified by the Board of Directors in the resolution of appointment. In the
absence or disqualification of a member of a committee, the member or members
present at any meeting and not disqualified from voting, whether or not such
member or members constitute a quorum, may unanimously appoint another member of
the Board of Directors to act at the meeting in the place of any such absent or
disqualified member.
SECTION 2. Procedures, Quorum and Manner of Acting. Each committee shall
fix its own rules of procedure and shall meet where and as provided by such
rules or by resolution of the Board of Directors. Except as otherwise provided
by law, the presence of a majority of the then appointed members of a committee
shall constitute a quorum for the transaction of business by that committee, and
in every case where a quorum is present the affirmative vote of a majority of
the members of the committee present shall be the act of the committee. Each
committee shall keep minutes of its proceedings, and actions taken by a
committee shall be reported to the Board of Directors.
SECTION 3. Action by Written Consent. Any action required or permitted to
be taken at any meeting of any committee of the Board of Directors may be taken
without a meeting if all the members of the committee consent thereto in writing
and the writing or writings are filed with the minutes of proceedings of the
committee.
SECTION 4. Term; Termination. In the event any person shall cease to be a
director of the Corporation, such person shall simultaneously therewith cease to
be a member of any committee appointed by the Board of Directors.
ARTICLE IV
OFFICERS
SECTION 1. Election and Qualifications. The Board of Directors shall elect
the officers of the Corporation, which shall include a President and a
Secretary, and may include, by election or appointment, one or more Vice-
Presidents (any one or more of whom may be given an additional designation of
rank or function), a Treasurer and such Assistant Secretaries, such Assistant
Treasurers and such other officers as the Board of Directors may from time to
time deem proper. Each officer shall have such powers and duties as may be
prescribed by these Bylaws and as may be assigned by the Board of Directors or
the President. Any two or more offices may be held by the same person except the
offices of President and Secretary.
SECTION 2. Term of Office and Remuneration. The term of office of all
officers shall be one year and until their respective successors have been
elected and qualified, but any officer may be removed from office, either with
or without cause, at any time by the Board of Directors. Any vacancy in any
office arising from any cause may be filled for the unexpired portion of the
term by the Board of Directors. The remuneration of all officers of the
Corporation may be fixed by the Board of Directors or in such manner as the
Board of Directors shall provide.
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SECTION 3. Resignation; Removal. Any officer may resign at any time upon
written notice to the Corporation and such resignation shall take effect upon
receipt thereof by the President or Secretary, unless otherwise specified in the
resignation. Any officer shall be subject to removal, with or without cause, at
any time by vote of a majority of the entire Board of Directors.
SECTION 4. Chairman of the Board. The Chairman of the Board of Directors,
if there be one, shall preside at all meetings of the Board of Directors and
shall have such other powers and duties as may from time to time be assigned by
the Board of Directors.
SECTION 5. President. The President shall have general management and
supervision of the property, business and affairs of the Corporation and over
its other officers; may appoint and remove assistant officers and other agents
and employees, other than any Vice-President, the Secretary, the Treasurer, any
Assistant Secretaries or Assistant Treasurers or any officers which the Board of
Directors may from time to time appoint; and may execute and deliver in the name
of the Corporation powers of attorney, contracts, bonds and other obligations
and instruments.
SECTION 6. Vice-President. A Vice-President may execute and deliver in the
name of the Corporation contracts and other obligations and instruments
pertaining to the regular course of the duties of said office, and shall have
such other authority as from time to time may be assigned by the Board of
Directors or the President.
SECTION 7. Treasurer. The Treasurer shall in general have all duties
incident to the position of Treasurer and such other duties as may be assigned
by the Board of Directors or the President.
SECTION 8. Secretary. The Secretary shall in general have all the duties
incident to the office of Secretary and such other duties as may be assigned by
the Board of Directors or the President.
SECTION 9. Assistant Officers. Any assistant officer shall have such powers
and duties of the officer such assistant officer assists as such officer or the
Board of Directors shall from time to time prescribe.
ARTICLE V
BOOKS AND RECORDS
SECTION 1. Location. The books and records of the Corporation may be kept
at such place or places within or outside the State of Delaware as the Board of
Directors or the respective officers in charge thereof may from time to time
determine. The record books containing the names and addresses of all
stockholders, the number and class of shares of stock held by each and the dates
when they respectively became the owners of record thereof shall be kept by the
Secretary as prescribed in the By-laws and by such officer or agent as shall be
designated by the Board of Directors.
SECTION 2. Addresses of Stockholders. Notices of meetings and all other
corporate notices may be delivered personally or mailed to each stockholder at
the stockholder's address as it appears on the records of the Corporation.
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ARTICLE VI
CERTIFICATES REPRESENTING STOCK
SECTION 1. Certificates; Signatures. The shares of the Corporation shall be
represented by certificates, provided that the Board of Directors of the
Corporation may provide by resolution or resolutions that some or all of any or
all classes or series of its stock shall be uncertificated shares. Any such
resolution shall not apply to shares represented by a certificate until such
certificate is surrendered to the Corporation. Notwithstanding the adoption of
such a resolution by the Board of Directors, every holder of stock represented
by certificates and upon request every holder of uncertificated shares shall be
entitled to have a certificate, signed by or in the name of the Corporation by
the Chairman or Vice-Chairman of the Board of Directors, or the President or
Vice-President, and by the Treasurer or an Assistant Treasurer, or the Secretary
or an Assistant Secretary of the Corporation, representing the number of shares
registered in certificate form. Any and all signatures on any such certificate
may be facsimiles. In case any officer, transfer agent or registrar who has
signed or whose facsimile signature has been placed upon a certificate shall
have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the Corporation with the same effect
as if he were such officer, transfer agent or registrar at the date of issue.
The name of the holder of record of the shares represented thereby, with the
number of such shares and the date of issue, shall be entered on the books of
the Corporation.
SECTION 2. Transfers of Stock. Upon compliance with contractual or other
provisions, if any, restricting the transfer or registration of transfer of
shares of stock, shares of capital stock shall be transferable on the books of
the Corporation only by the holder of record thereof in person, or by duly
authorized attorney, upon surrender and cancellation of certificates for a like
number of shares, properly endorsed, and the payment of all taxes due thereon.
SECTION 3. Fractional Shares. The Corporation may, but shall not be
required to, issue certificates for fractions of a share where necessary to
effect authorized transactions, or the Corporation may pay in cash the fair
value of fractions of a share as of the time when those entitled to receive such
fractions are determined, or it may issue scrip in registered or bearer form
over the manual or facsimile signature of an officer of the Corporation or of
its agent, exchangeable as therein provided for full shares, but such scrip
shall not entitle the holder to any rights of a stockholder except as therein
provided.
The Board of Directors shall have power and authority to make all such
rules and regulations as it may deem expedient concerning the issue, transfer
and registration of certificates representing shares of the Corporation.
SECTION 4. Lost, Stolen or Destroyed Certificates. The Corporation may
issue a new certificate of stock in place of any certificate theretofore issued
by it alleged to have been lost, stolen or destroyed, and the Board of Directors
may require the owner of any lost, stolen or destroyed certificate, or his legal
representative, to give the Corporation a bond sufficient to indemnify the
Corporation against any claim that may be made against it on account of the
alleged loss, theft or destruction of any such certificate or the issuance of
any such new certificate.
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ARTICLE VII
DIVIDENDS
SECTION 1. Dividends. Subject to the provisions of applicable law and the
Corporation's Restated Certificate of Incorporation, dividends upon the shares
of capital stock of the Corporation may be declared by the Board of Directors at
any regular or special meeting. Dividends may be paid in cash, in property or in
shares of stock of the Corporation, unless otherwise provided by applicable law
or the Corporation's Restated Certificate of Incorporation.
SECTION 2. Reserves. Before payment of any dividend, there may be set aside
out of any funds of the Corporation available for dividends such sum or sums as
the Board of Directors may, from time to time, in its absolute discretion, think
proper as a reserve or reserves to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the Corporation or
for such other purpose as the Board of Directors may think conducive to the
interests of the Corporation. The Board of Directors may modify or abolish any
such reserve in the manner in which it was created.
ARTICLE VIII
INDEMNIFICATION OF DIRECTORS AND OFFICERS
SECTION 1. Nature of Indemnity. (a) To the fullest extent permitted by
applicable law, including the provisions of the General Corporation Law of the
State of Delaware, the Corporation shall indemnify any person who was or is a
party or is threatened to be made a party to, or testifies in, any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (hereinafter a "proceeding"), other than an
action by or in the right of the Corporation, by reason of the fact that such
person is or was a director, officer, employee or agent of the Corporation, or
is or was serving at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, employee
benefit plan, trust or other enterprise (hereinafter an "indemnitee"), whether
the basis of such proceeding is alleged action in an official capacity as a
director, officer, employee or agent or in any other capacity while serving as
such a director, officer, employee or agent. The indemnitee shall be indemnified
and held harmless by the Corporation to the full extent authorized by the
General Corporation Law of Delaware, as the same exists or may hereafter be
amended (but, in the case of any such amendment, only to the extent such
amendment permits the Corporation to provide broader indemnification rights than
said law permitted the Corporation to provide prior to such amendment), or by
other applicable law as then in effect, against all expense, liability and loss
(including attorneys' fees, judgments, fines, excise taxes under the Employee
Retirement Income Security Act of 1974, as amended from time to time ("ERISA"),
penalties and amounts to be paid in settlement) actually and reasonably incurred
or suffered by such indemnitee in connection therewith.
(b) The Corporation shall indemnify any person who was or is a party to or
is threatened to be made a party to, or testifies in, any proceeding by or in
the right of the Corporation to procure a judgment in its favor by reason of the
fact that such person is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, employee benefit plan, trust or other enterprise against expenses
(including attorneys' fees) actually and reasonably incurred by such person in
connection with the defense or settlement of such action or suit if such person
acted in good faith and in a manner such person reasonably believed to be in or
not opposed to the best interests of the Corporation, provided that no
indemnification shall be made in respect of any claim,
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issue or matter as to which such person shall have been adjudged to be liable to
the Corporation unless and only to the extent that the Court of Chancery of the
State of Delaware or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or such
other court shall deem proper.
SECTION 2. Procedure. Any indemnification under this Article VIII (unless
ordered by a court) shall be made by the Corporation only as authorized in the
specific case upon a determination that indemnification of the present or former
director, officer, employee or agent is proper in the circumstances because he
or she has met the applicable standard of conduct set forth in the General
Corporation Law of Delaware, as the same exists or hereafter may be amended
(but, in the case of any such amendment, only to the extent that such amendment
permits the Corporation to provide broader indemnification rights than said law
permitted the Corporation to provide prior to such amendment). Such
determination shall be made with respect to a person who is a director or
officer at the time of such determination (A) by a majority vote of the
directors who were not parties to such action, suit or proceeding (the
"Disinterested Directors"), even though less than a quorum, or (B) by a
committee of Disinterested Directors designated by a majority vote of such
directors, even though less than a quorum, or (C) if there are no Disinterested
Directors or if the Disinterested Directors so direct, by independent legal
counsel in a written opinion, or (D) by the stockholders.
SECTION 3. Advances for Expenses. Costs, charges and expenses (including
attorneys' fees) incurred by a director, officer, employee or agent of the
Corporation in defending a civil or criminal action, suit or proceeding shall be
paid by the Corporation in advance of the final disposition of such action, suit
or proceeding upon receipt of an undertaking by or on behalf of the director,
officer, employee or agent to repay all amounts so advanced in the event that it
shall ultimately be determined that such director, officer, employee or agent is
not entitled to be indemnified by the Corporation as authorized in this Article
VIII. The majority of the Disinterested Directors may, in the manner set forth
above, and upon approval of such director, officer, employee or agent of the
Corporation, authorize the Corporation's counsel to represent such person, in
any action, suit or proceeding, whether or not the Corporation is a party to
such action, suit or proceeding.
SECTION 4. Procedure for Indemnification. Any indemnification or advance of
costs, charges and expenses under this Article VIII shall be made promptly, and
in any event within 60 days upon the written request of the director, officer,
employee or agent. The right to indemnification or advances as granted by this
Article VIII shall be enforceable by the director, officer, employee or agent,
as the case may be, in any court of competent jurisdiction, if the Corporation
denies such request, in whole or in part, or if no disposition thereof is made
within 60 days. Such person's costs and expenses incurred in connection with
successfully establishing his or her right to indemnification, in whole or in
part, in any such action shall also be indemnified by the Corporation. It shall
be a defense to any such action (other than an action brought to enforce a claim
for the advance of costs, charges and expenses under this Article VIII where the
required undertaking has been received by the Corporation) that the claimant has
not met the standard of conduct set forth in the General Corporation Law of
Delaware, as the same exists or hereafter may be amended (but, in the case of
any such amendment, only to the extent that such amendment permits the
Corporation to provide broader indemnification rights than said law permitted
the Corporation to provide prior to such amendment), but the burden of proving
such defense shall be on the Corporation. Neither the failure of the Corporation
(including its Board of Directors, its independent legal counsel and its
stockholders) to have made a determination prior to the commencement of such
action that indemnification of the claimant is proper in the circumstances
because he or she has met the applicable standard of conduct set forth in the
General Corporation Law of Delaware, as the same exists or hereafter may be
amended (but, in the case of any such amendment, only to the extent that such
amendment permits the Corporation to provide broader indemnification rights that
said law permitted the Corporation to provide prior to such amendment), nor the
fact
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that there has been an actual determination by the Corporation (including its
Board of Directors, its independent legal counsel and its stockholders) that the
claimant has not met such applicable standard of conduct, shall be a defense to
the action or create a presumption that the claimant has not met the applicable
standard of conduct.
SECTION 5. Other Rights; Continuation of Right to Indemnification. The
indemnification and advancement of expenses provided by this Article VIII shall
not be deemed exclusive of any other rights to which a person seeking
indemnification or advancement of expenses may be entitled under any law (common
or statutory), by-law, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his or her official capacity and as
to action in another capacity while holding office or while employed by or
acting as agent for the Corporation, and shall continue as to a person who has
ceased to be a director, officer, employee or agent and shall inure to the
benefit of the estate, heirs, executors and administers of such person. All
rights to indemnification under this Article VIII shall be deemed to be a
contract between the Corporation and each director, officer, employee or agent
of the Corporation who serves or served in such capacity at any time while this
Article VIII is in effect. Any repeal or modification of this Article VIII shall
not in any way diminish any rights to indemnification of such director, officer,
employee or agent or the obligations of the Corporation arising hereunder with
respect to any action, suit or proceeding arising out of, or relating to, any
actions, transactions or facts occurring prior to the final adoption of such
modification or repeal. For purposes of this Article VIII, references to "the
Corporation" include all constituent corporations absorbed in a consolidation or
merger as well as the resulting or surviving corporation, so that any person who
is or was a director, officer, employee or agent of such a constituent
corporation or is or was serving at the request of such constituent corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise shall stand in the same position under
the provisions of this Article VIII, with respect to the resulting or surviving
corporation, as he or she would if he or she had served the resulting or
surviving corporation in the same capacity.
SECTION 6. Insurance. The Corporation shall have power to purchase and
maintain insurance on behalf of any person who is or was or has agreed to become
a director, officer, employee or agent of the Corporation, or is or was serving
at the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
against any liability asserted against him or her and incurred by him or her or
on his or her behalf in any such capacity, or arising out of his or her status
as such, whether or not the Corporation would have the power to indemnify him or
her against such liability under the provisions of this Article VIII, provided,
however, that such insurance is available on acceptable terms, which
determination shall be made by a vote of a majority of the Board of Directors.
SECTION 7. Savings Clause. If this Article VIII or any portion hereof shall
be invalidated on any ground by any court of competent jurisdiction, then the
Corporation shall nevertheless indemnify each person entitled to indemnification
under the first paragraph of this Article VIII as to all expense, liability and
loss (including attorneys' fees, judgments, fines, ERISA excise taxes, penalties
and amounts to be paid in settlement) actually and reasonably incurred or
suffered by such person and for which indemnification is available to such
person pursuant to this Article VIII to the full extent permitted by any
applicable portion of this Article VIII that shall not have been invalidated and
to the full extent permitted by applicable law.
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ARTICLE IX
CORPORATE SEAL
The corporate seal shall have inscribed thereon the name of the Corporation
and the year of its incorporation and shall be in such form and contain such
other words and/or figures as the Board of Directors shall determine. The
corporate seal may be used by printing, engraving, lithographing, stamping or
otherwise making, placing or affixing, or causing to be printed, engraved,
lithographed, stamped or otherwise made, placed or affixed, upon any paper or
document, by any process whatsoever, an impression, facsimile or other
reproduction of said corporate seal.
ARTICLE X
FISCAL YEAR
The fiscal year of the Corporation shall be fixed, and shall be subject to
change, by the Board of Directors.
ARTICLE XI
WAIVER OF NOTICE
Whenever notice is required to be given by these By-laws or by the Restated
Certificate of Incorporation or by law, a written waiver thereof, signed by the
person or persons entitled to said notice, whether before or after the time
stated therein, shall be deemed equivalent to notice.
ARTICLE XII
BANK ACCOUNTS, DRAFTS, CONTRACTS, ACTIVITIES, ETC.
SECTION 1. Bank Accounts and Drafts. In addition to such bank accounts as
may be authorized by the Board of Directors, the primary financial officer or
any person designated by said primary financial officer, whether or not an
employee of the Corporation, may authorize such bank accounts to be opened or
maintained in the name and on behalf of the Corporation as he or she may deem
necessary or appropriate, payments from such bank accounts to be made upon and
according to the check of the Corporation in accordance with the written
instructions of said primary financial officer, or other person so designated by
the Treasurer.
SECTION 2. Contracts. The Board of Directors may authorize any person or
persons, in the name and on behalf of the Corporation, to enter into or execute
and deliver any and all deeds, bonds, mortgages, contracts and other obligations
or instruments, and such authority may be general or confined to specific
instances.
SECTION 3. Proxies; Powers of Attorney; Other Instruments. The Chairman,
the President or any other person designated by either of them shall have the
power and authority to execute and deliver proxies, powers of attorney and other
instruments on behalf of the Corporation in connection with the rights and
powers incident to the ownership of stock by the Corporation. The Chairman, the
President or any other person authorized by proxy or power of attorney executed
and delivered by either of them on behalf of the Corporation may attend and vote
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at any meeting of stockholders of any company in which the Corporation may hold
stock, and may exercise on behalf of the Corporation any and all of the rights
and powers incident to the ownership of such stock at any such meeting, or
otherwise as specified in the proxy or power of attorney so authorizing any such
person. The Board of Directors, from time to time, may confer like powers upon
any other person.
SECTION 4. Financial Reports. The Board of Directors may appoint the
primary financial officer or other fiscal officer and/or the Secretary or any
other officer to cause to be prepared and furnished to stockholders entitled
thereto any special financial notice and/or financial statement, as the case may
be, which may be required by any provision of law.
ARTICLE XIII
AMENDMENTS
The Board of Directors shall have power to adopt, amend or repeal By-laws.
By-laws adopted by the Board of Directors may be repealed or changed, and new
By-laws made, by the stockholders.
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EXHIBIT 10.24
JPS TEXTILE GROUP, INC.
555 NORTH PLEASANTBURG DRIVE, SUITE 202
GREENVILLE, SOUTH CAROLINA 29607
October 9, 1997
Mr. Jerry E. Hunter
111 Sanderling Drive
Greenville, South Carolina 29607
Dear Jerry:
We are writing with respect to your employment by JPS Textile Group, Inc.
(the "Company") as President and Chief Executive Officer of the Company. The
Company acknowledges and recognizes the value of your experience and abilities
to the Company since the beginning of your employment with the Company, and
desires to continue to retain and make secure for itself such experience and
abilities on the terms and subject to the conditions set forth in this agreement
(the "Agreement").
1. Employment. The Company agrees to employ you and you agree to be
employed by the Company commencing on the consummation of the Joint Plan of
Reorganization of the Company and its wholly owned subsidiary, JPS Capital
Corp., dated October 9, 1997 (the "Effective Date") and ending on the third
anniversary thereof (unless sooner terminated as hereinafter provided) (the
"Employment Period"), on the terms and subject to the conditions set forth in
this Agreement; provided, however, that commencing on the third anniversary of
the Effective Date and each anniversary thereafter, the Employment Period shall
automatically be extended for one additional year (the "Extended Employment
Period") unless not later than the end of the Employment Period or the Extended
Employment Period, as the case may be, the Company or you shall have given
written notice to the other not to extend the Employment Period or any Extended
Employment Period. Unless specifically provided to the contrary, the Employment
Period shall be deemed to include any Extended Employment Period.
2. Duties. (a) You shall continue to be nominated as a director of the
Company, subject to your election thereto by the Board of Directors of the
Company (the "Board") or the stockholders of the Company. In addition, you shall
be employed as the President and Chief Executive Officer of the Company. In such
capacities, you shall serve as a senior executive officer of the Company and
shall have the duties and responsibilities prescribed for such positions by the
By-Laws of the Company, and shall have such other duties and responsibilities as
may from time to time be prescribed by the Board and are customarily performed
by someone in your position, provided that such duties and responsibilities are
consistent with your positions as President and Chief Executive Officer of the
Company. In the performance of your duties, you shall be subject to the
supervision and direction of the Board.
(b) Subject to the terms of your employment hereunder, you shall devote
such time as is reasonably necessary to the proper performance of your duties
and responsibilities as President and Chief Executive Officer of the Company.
You hereby represent and warrant to the Company that, except as described above,
you have no obligations under any existing employment or service agreement and
that your performance of the services required of you hereunder will not
conflict with your other existing obligations described above.
3. Compensation.
(a) (i) Base Salary. During the term of your employment hereunder, the
Company shall pay you, and you shall accept from the Company for your services,
a salary at the rate of not less than $380,000 per year (the
<PAGE> 2
Mr. Jerry E. Hunter
Page 2
"Base Salary"), payable in accordance with the Company's policy with respect to
the compensation of executives. The Board shall annually review your performance
and determine, in its sole discretion, whether or not to increase your Base
Salary and, if so, the amount of such increase.
(ii) Bonus. In addition to your Base Salary, unless you voluntarily
terminate your employment for other than Good Reason (as hereinafter
defined), or are terminated by the Company for Cause (as hereinafter
defined), you will be eligible to participate in the 1997 Management
Incentive Bonus Plan (the "1997 Bonus Plan") and receive a bonus in an
amount and based upon the attainment of the performance goals specified
therein. The Board shall establish a performance-based annual bonus program
for senior executives of the Company including you for fiscal years after
1997 (a "Future Bonus Plan") and award you an annual bonus opportunity
thereunder which is not less favorable than the opportunity provided
pursuant to the 1997 Bonus Plan without restricting the discretion of the
Board to set reasonable targets and criteria for such incentive
compensation.
(iii) Retention Grant. In addition to your Base Salary, you will
receive on the Effective Date a cash payment in the amount of $256,274 and
32,852 shares of common stock of the Company.
(iv) Incentive Compensation and Other Plans. During the term of your
employment hereunder, you shall participate in any incentive compensation
(including stock options, restricted stock and/or other long-term incentive
compensation), deferred compensation, savings and retirement plans,
practices, policies and programs as adopted and approved by the Board from
time to time.
(b) Reimbursement of Expenses. During your employment, you will be entitled
to receive prompt reimbursement for all reasonable expenses incurred by you in
performing your services hereunder, provided that you properly account therefor
in accordance with Company policy.
4. Vacations. During your employment, you shall be entitled to reasonable
vacations from time to time in accordance with the regular procedures of the
Company governing senior executives. You shall also be entitled to all paid
holidays given by the Company to its senior executives.
5. Participation in Benefit Plans; Automobile.
(a) Benefit Plans. You shall be entitled to participate in and to receive
benefits under all the Company's employee benefit plans and arrangements in
effect on the date hereof, and you shall also be entitled to participate in or
receive benefits under any pension or retirement plan, savings plan, or
health-and-accident plan made available by the Company in the future to its
senior executives and other key management employees, subject to and on a basis
consistent with the terms, conditions and overall administration of such plans
and arrangements and provided that you meet the eligibility requirements
thereof.
(b) Automobile. You shall be entitled to the use of an automobile supplied
by the Company. If you choose to use such automobile, the cost of insurance,
repair and maintenance shall be borne by the Company. If you elect not to accept
a Company automobile, you shall receive an annual payment of Five Thousand Six
Hundred Dollars ($5,600) in lieu of such automobile.
6. Other Offices. You further agree to serve without additional
compensation, if elected or appointed thereto, as an officer or director of any
of the Company's subsidiaries or affiliates.
7. Termination.
(a) Death. Your employment hereunder shall terminate upon your death.
<PAGE> 3
Mr. Jerry E. Hunter
Page 3
(b) Disability. In the event of your permanent disability (as hereinafter
defined) during the term of your employment hereunder, the Company shall have
the right, upon written notice to you, to terminate your employment hereunder,
effective upon the giving of such notice. For the purposes hereof, "permanent
disability" shall be defined as any physical or mental disability or incapacity
which renders you incapable of fully performing the services required of you in
accordance with your obligations hereunder for a period of 150 consecutive days
or for shorter periods aggregating 150 days during any period of twelve (12)
consecutive months.
(c) Cause. The Company may terminate your employment hereunder for "Cause."
For purposes hereof, termination for "Cause" shall mean termination after:
(i) your violation of any of the provisions of paragraph 9 hereof;
(ii) your commission of an intentional act of fraud, embezzlement,
theft or dishonesty against the Company or its affiliates;
(iii) your conviction of (or pleading by you of nolo contendere to)
any crime which constitutes a felony or misdemeanor involving moral
turpitude or which might, in the reasonable opinion of the Company, cause
embarrassment to the Company; or
(iv) the gross neglect or willful failure by you to perform your
duties and responsibilities in all material respects as set forth in
paragraph 2 hereof, if such breach of duty is not cured within 30 days
after written notice thereof to you by the Board.
For purposes of clause (iv), no act, or failure to act, on your part shall be
deemed "willful" unless done, or omitted to be done, by you not in good faith
and without reasonable belief that your act, or failure to act, was in the best
interest of the Company.
(d) Termination by You. You may terminate your employment hereunder for
Good Reason. For purposes of this Agreement, "Good Reason" shall mean (A) any
assignment to you of any duties (other than incident to a promotion) materially
different than or in addition to those contemplated by, or any limitation of
your powers in any respect not contemplated by, paragraph 2 hereof, provided
that you first deliver written notice thereof to the Board and the Company shall
have failed to cure such non-permitted assignment or limitation within thirty
(30) days after receipt of such written notice, (B) a reduction in your rate of
base salary or the failure to maintain incentive bonus arrangements
substantially similar in earnings potential to those in effect on the Effective
Date, or a material reduction in your fringe benefits or any other material
failure by the Company to comply with paragraphs 3 through 5 hereof, provided
that you first deliver written notice thereof to the Board and the Company shall
have failed to cure such reduction or failure within thirty (30) days after
receipt of such written notice, (C) your being required to relocate your
principal residence from its existing location without your consent, or (D) you
elect to terminate your employment no earlier than six months following a Change
in Control (as hereinafter defined), provided that you first deliver written
notice thereof to the Board.
For purposes of this Agreement, a "Change in Control" means the
occurrence of any one of the following events following the Effective Date
(other than the consummation of the Joint Plan of Reorganization of the
Company and its wholly owned subsidiary, JPS Capital Corp.): (a) any person
or other entity (other than any of the Company's subsidiaries), including
any person as defined in Section 13(d)(3) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), becoming the beneficial owner, as
defined in Rule 13d-3 of the Exchange Act, directly or indirectly, of more
than fifty percent (50%) of the total combined voting power of all classes
of capital stock of the Company ordinarily entitled to vote for the
election of directors of the Company, (b) the sale of all or substantially
all of the property or assets of the Company (other than a sale to any of
the Company's subsidiaries), (c) the consolidation or merger of the
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Mr. Jerry E. Hunter
Page 4
Company with another corporation (other than with any of the Company's
subsidiaries or in which the Company is the surviving corporation), the
consummation of which would result in the shareholders of the Company
immediately before the occurrence of the consolidation or merger owning, in
the aggregate, less than 50% of the voting stock of the surviving entity
immediately following the occurrence of such consolidation or merger, or
(d) a change in the Board occurring with the result that the members of the
Board on the Effective Date (the "Incumbent Directors") no longer
constitute a majority of such Board, provided that any person becoming a
director whose election or nomination for election was supported by a
majority of the Incumbent Directors (other than you if you are a Director)
shall be considered an Incumbent Director for purposes hereof.
(e) Notice. Any termination by the Company pursuant to paragraphs 7(b) or
7(c) above or by you pursuant to paragraph 7(d) above shall be communicated by
written Notice of Termination to the other party hereto. For the purposes
hereof, a "Notice of Termination" shall mean a notice which shall indicate the
specific termination provision in this Agreement relied upon and shall set forth
in reasonable detail the facts and circumstances claimed to provide a basis for
termination of your employment under the provision so indicated.
(f) Date of Termination. "Date of Termination" shall mean (i) if your
employment is terminated by your death, the date of your death, and (ii) if your
employment is terminated for any other reason, the date on which a Notice of
Termination is given.
8. Compensation Upon Termination of Employment or During Disability.
Subject to paragraph 8(f) below:
(a) Death. If your employment shall be terminated by reason of your death,
the Company shall pay or grant, to such person as you shall designate in a
notice filed with the Company, or, if no such person shall be designated, to
your estate as a lump sum death benefit, (i) an amount equal to any accrued but
unpaid Base Salary at the time of your death, plus an additional payment equal
to your Base Salary for the period from such date through the end of the month
following the month in which you die, (ii) an amount equal to any accrued but
unpaid bonus under the 1997 Bonus Plan or any bonus payable pursuant to any
Future Bonus Plans, to the extent earned but not paid with respect to any year
prior to the year in which your death occurs, and (iii) a pro rata portion
(based on the number of days worked) of the bonus payable under the 1997 Bonus
Plan or any Future Bonus Plan in effect for the year in which your death occurs
based upon the assumption that the performance goals established under the
applicable program with respect to the entire year in which your death occurs
are met. In addition, you shall retain all stock options that are vested in
accordance with the terms of the stock option plan and grant letter controlling
such stock options, with such options remaining exercisable for six months from
the date of your death and you shall receive such additional benefits as may be
provided by the then existing plans, programs and/or arrangements of the
Company. This amount and these benefits shall be exclusive of and in addition to
any payments your widow, beneficiaries or estate may be entitled to receive
pursuant to any pension or employee benefit plan maintained by the Company. Your
designated beneficiary or the executor of your estate, as the case may be, shall
accept the payment provided for in this paragraph 8 in full discharge and
release of the Company of and from any further obligations under this Agreement.
(b) Disability. During any period that you fail to perform your duties
hereunder as a result of incapacity due to physical or mental illness, you shall
continue to receive your full Base Salary until your employment is terminated
pursuant to paragraph 7(b) hereof. If your employment is terminated by the
Company pursuant to paragraph 7(b), the Company shall pay to you in a lump sum
payment, an amount equal to (i) any accrued but unpaid bonus under the 1997
Bonus Plan or any bonus payable pursuant to any Future Bonus Plans, to the
extent earned but not paid with respect to any year prior to the year in which
your disability occurs; and (ii) a pro rata portion (based on the number of days
worked) of the bonus payable under the 1997 Bonus Plan or any Future
<PAGE> 5
Mr. Jerry E. Hunter
Page 5
Bonus Plan in effect for the year in which your disability occurs based upon the
assumption that the performance goals established under the applicable program
with respect to the entire year in which your disability occurs are met. In
addition, you shall retain all stock options that are vested in accordance with
the terms of the stock option plan and grant letter controlling such stock
options, with such options remaining exercisable for six months from the date of
your disability and you shall receive such additional benefits as may be
provided by the then existing plans, programs and/or arrangements of the
Company. During any such period and thereafter you shall continue to bear the
obligations provided for in paragraph 9 below in accordance with the terms of
such paragraph 9.
(c) Cause or Other Than Good Reason. If your employment shall be terminated
for Cause or you shall terminate your employment other than for Good Reason, the
Company shall be discharged and released of and from any further obligations
under this Agreement except for any Base Salary through the Date of Termination
or the date on which you terminate your employment at the rate in effect at the
time Notice of Termination is given or the date on which you terminate your
employment, to the extent required by law. Thereafter you shall continue to have
the obligations provided for in paragraph 9 below. Nothing contained herein
shall be deemed to be a waiver by the Company of any rights that it may have
against you in respect of your actions which gave rise to the termination of
your employment for Cause or for any reason other than for Good Reason.
(d) Other Than for Cause or For Good Reason. If the Company shall terminate
your employment other than pursuant to paragraphs 7(b) or 7(c) hereof or if you
shall terminate your employment for Good Reason, then:
(i) The Company shall continue to pay you your Base Salary, at the
rate in effect at the time that the Notice of Termination is given in
accordance with paragraph 7(e) hereof, without interest through the later
of (A) the third anniversary of the Effective Date and (B) one year from
the Date of Termination, in accordance with normal payroll practices;
provided, however, that in the event of your death prior to the expiration
of payment hereunder your estate or beneficiary shall receive the remaining
amount hereunder in a lump sum payment;
(ii) The Company shall pay you an amount equal to the sum of (A) any
bonus earned as of the Date of Termination under the 1997 Bonus Plan or any
Future Bonus Plan for a fiscal year ending prior to the Date of Termination
but not paid as of such date, (B) a pro rata portion (based on the number
of days worked) of the target bonus (not in excess of fifty percent (50%)
of your Base Salary) payable under the 1997 Bonus Plan or any Future Bonus
Plan in effect for the fiscal year in which your Date of Termination occurs
(determined without regard to whether the performance goals established
under the applicable program are met) and (C) an amount equal to your
target bonus (not in excess of fifty percent (50%) of your Base Salary)
under the 1997 Bonus Plan or any Future Bonus Plan in effect for the fiscal
year in which your Date of Termination occurs (determined without regard to
whether the performance goals established under the applicable program are
met), multiplied by (1) if the Date of Termination is during the initial
three year Employment Period, the greater of (x) the number (not in excess
of three) of years and fractions of years remaining in the initial three
year Employment Period or (y) one or (2) if the Date of Termination is
during any Extended Employment Period, one;
(iii) You shall become fully vested in any stock options, with such
options remaining exercisable for six months from the date of your
termination of employment; and
(iv) The Company shall maintain in full force and effect, for your
continued benefit for twenty-four months after termination of employment,
all employee benefit plans and programs providing health and/or life
insurance benefits in which you were entitled to participate immediately
prior to the Date of Termination provided that your continued participation
is possible under the general terms and provisions of such plans and
programs. In the event that your participation in any such plan or program
is barred, the Company shall provide you with comparable benefits under a
mirror benefit plan. Notwithstanding the above, if you are
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Mr. Jerry E. Hunter
Page 6
employed by a new employer and are eligible to receive comparable coverage
from such employer (including the waiver of any pre-existing condition
limitation) at a comparable cost to you, you shall no longer be eligible to
receive coverage under this paragraph.
(e) Pension Eligible Retirement. If during the initial three year
Employment Period with the prior written consent of the Board or at any time
after such Employment Period you retire and are eligible to receive an immediate
benefit under the Retirement Pension Plan for Employees of JPS Textile Group,
Inc., the Company shall pay to you as a lump sum payment, (i) an amount equal to
any accrued but unpaid Base Salary at the time of your retirement, (ii) an
amount equal to any accrued but unpaid bonus under the 1997 Bonus Plan or any
bonus payable pursuant to any Future Bonus Plans, to the extent earned but not
paid with respect to any year prior to the year in which your retirement occurs;
(iii) a pro rata portion (based on the number of days worked) of the bonus
payable under the 1997 Bonus Plan or any Future Bonus Plan in effect for the
year in which your retirement occurs based upon the assumption that the
performance goals established under the applicable program with respect to the
entire year of your retirement occurs are met; and (iv) the Company shall
maintain in full force and effect, for your continued benefit for twenty-four
months after termination of employment, all employee benefit plans and programs
providing health and/or life insurance benefits in which you were entitled to
participate immediately prior to the Date of Termination provided that your
continued participation is possible under the general terms and provisions of
such plans and programs; provided, that in the event that your participation in
any such plan or program is barred, the Company shall provide you with
comparable benefits under a mirror benefit plan. In addition, you shall retain
any stock options vested, such vesting having been determined as a ratio the
numerator of which is the time elapsed from the Effective Date through the date
of your retirement and the denominator of which is three (3) years, with such
options remaining exercisable for six months from the date of your retirement
and you shall receive such additional benefits as may be provided by the then
existing plans, programs and/or arrangements of the Company.
(f) Parachute Payment. Notwithstanding anything herein to the contrary, if
any of the payments or benefits received or to be received by you in connection
with a Change in Control or your termination of employment (whether such
payments or benefits are provided pursuant to the terms of this Agreement or any
other plan, arrangement or agreement with the Company, any person whose actions
result in a Change in Control or any person affiliated with the Company or such
person) (such payments or benefits being hereinafter referred to as the "Total
Payments") would be subject to the excise tax (the "Excise Tax") imposed under
Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code"), then
the payments under this paragraph 8 hereof shall be reduced (by the minimal
amount necessary) so that no portion of the Total Payments is subject to the
Excise Tax.
For purposes of determining whether any of the Total Payments will be
subject to the Excise Tax and the amount of such Excise Tax, (i) all of the
Total Payments shall be treated as "parachute payments" (within the meaning of
Section 280G(b)(2) of the Code) unless, in the opinion of tax counsel (the "Tax
Counsel") selected by the Company and reasonably acceptable by you, such
payments or benefits (in whole or in part) do not constitute parachute payments,
including by reason of Section 280G(b)(4)(A) of the Code, (ii) all "excess
parachute payments" within the meaning of Section 280G(b)(1) of the Code shall
be treated as subject to the Excise Tax unless, in the opinion of Tax Counsel,
such excess parachute payments (in whole or in part) represent reasonable
compensation for services actually rendered (within the meaning of Section
280G(b)(4)(B) of the Code) in excess of the "base amount" (as defined in Section
280G(b)(3) of the Code) allocable to such payment, or are otherwise not subject
to the Excise Tax, and (iii) the value of any noncash benefits or any deferred
payment or benefit shall be determined by Tax Counsel in accordance with the
principles of Sections 280G(d)(3) and (4) of the Code.
9. Restrictive Covenants and Confidentiality; Injunctive Relief.
<PAGE> 7
Mr. Jerry E. Hunter
Page 7
(a) You agree, as a condition to the performance by the Company of its
obligations hereunder, particularly its obligations under paragraph 3 hereof,
that during the term of your employment, except for a termination of employment
without Cause or for Good Reason, hereunder and during the further period of one
(1) year after the termination of such employment, you shall not, without the
prior written approval of the Board, directly or indirectly through any other
person, firm or corporation:
(i) Solicit, raid, entice or induce any person, firm or corporation
that presently is or at any time during the term of your employment
hereunder shall be a customer of the Company, or any of its subsidiary
companies, to become a customer of any other person, firm or corporation,
and you shall not approach any such person, firm or corporation for such
purpose or authorize or knowingly approve the taking of such actions by any
other person;
(ii) Solicit, raid, entice or induce any person that presently is or
at any time during the term of your employment hereunder shall be an
employee of the Company, or any of its subsidiary companies, to become
employed by any person, firm or corporation, and you shall not approach any
such employee for such purpose or authorize or knowingly approve the taking
of such actions by any other person; or
(iii) Engage, participate, make any financial investment in, or become
employed by any person, firm, corporation or other business enterprise in
the United States which is engaged, directly or indirectly, during the term
of your employment or at the time of your termination of employment, as the
case may be, which (x) derives in excess of 20% of its gross revenues from
the sale of products substantially the same as the products of the Company
and/or any of its subsidiary companies or (y) has substantially the same
customer base for the same products as the Company and/or any of its
subsidiary companies. The foregoing covenant shall not be construed to
preclude you from making any investments in the securities of any company,
whether or not engaged in competition with the Company and/or any of its
subsidiary companies, to the extent that such securities are actively
traded on a national securities exchange or in the over-the-counter market
in the United States or any foreign securities exchange and, after giving
effect to such investment, you do not beneficially own securities
representing more than 5% of the combined voting power of the voting
securities of such company.
(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 you
shall hereafter 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, you agree that, during
and after the term of your employment hereunder, you shall not (otherwise than
pursuant to your duties hereunder) disclose or use, without the prior written
approval of the Board, 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 9 shall not apply to
information which is or shall become generally known to the public or the trade
(except by reason of your breach of your obligations hereunder), information
which is or shall become available in trade or other publications, information
known to you prior to entering the employ of the Company, and information which
you are required to disclose by law or an order of a court of competent
jurisdiction (provided that prior to your disclosure of any such information you
shall provide the Company with reasonable notice and a reasonable opportunity to
seek a protective order to prevent such disclosure).
(c) The provisions of paragraph 9(b) above shall survive the termination of
your employment hereunder, irrespective of the reason therefor.
(d) You acknowledge that the services to be rendered by you are of a
special, unique and extraordinary character and, in connection with such
services, you will have access to confidential information vital to the
<PAGE> 8
Mr. Jerry E. Hunter
Page 8
Company's and its subsidiary companies' businesses. By reason of this, you
consent and agree that if you violate any of the provisions of this Agreement
with respect to diversion of the Company's or its subsidiary companies'
customers or employees, or confidentiality, the Company and its subsidiary
companies would sustain irreparable harm and, therefore, in addition to any
other remedies which the Company may have under this Agreement or otherwise, the
Company shall be entitled to an injunction restraining you from committing or
continuing any such violation of this Agreement.
10. Deductions and Withholdings. The Company shall be entitled to withhold
any amounts payable under this Agreement on account of payroll taxes and similar
matters as are required by applicable law, rule or regulation of appropriate
governmental authorities.
11. Successors; Binding Agreement.
(a) The Company will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of the Company, by agreement in form and substance
reasonably satisfactory to you, to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the Company would be
required to perform it if no such succession had taken place. Failure of the
Company to obtain such agreement prior to the effectiveness of any such
succession shall be a breach of this Agreement and shall entitle you to
compensation from the Company in the same amount and on the same terms as you
would be entitled to hereunder if you terminated your employment for Good
Reason, except that for purposes of implementing the foregoing, the date on
which any such succession becomes effective shall be deemed the Date of
Termination. As used in this Agreement, "Company" shall include any successor to
the Company's business and/or assets as aforesaid which executes and delivers
the agreement provided for in this paragraph 11 or which otherwise becomes bound
by all the terms and provisions of this Agreement by operation of law.
(b) This Agreement and all your rights hereunder shall inure to the
benefit of and be enforceable by your personal or legal representatives,
executors, administrators, successors, heirs, distributees, devisees and
legatees. If you should die while any amounts would still be payable to you
hereunder if you had continued to live, all such amounts, unless otherwise
provided herein, shall be paid in accordance with the terms of this Agreement to
your devisee, legatee, or other designee or, if there be no such designee, to
your estate. Your obligations hereunder may not be delegated, and except as
otherwise provided herein relating to the designation of a devisee, legatee or
other designee, you may not assign, transfer, pledge, encumber, hypothecate or
otherwise dispose of this Agreement or any of your rights hereunder, and any
such attempted delegation or disposition shall be null and void and without
effect.
12. Notice. For purposes of this Agreement, notices and all other
communications provided for shall be in writing and shall be deemed to have been
duly given when delivered or mailed by United States registered or certified
mail, return receipt requested, postage prepaid, addressed as follows:
If to you:
Mr. Jerry E. Hunter
111 Sanderling Drive
Greenville, South Carolina 29607
<PAGE> 9
Mr. Jerry E. Hunter
Page 9
If to the Company:
JPS Textile Group, Inc.
555 North Pleasantburg Drive, Suite 202
Greenville, South Carolina 29607
Attention: Board of Directors
or to such other address as any party may have furnished to the other in writing
in accordance herewith, except that notices of change of address shall be
effective only upon receipt.
13. Miscellaneous. No provision of this Agreement may be modified, waived
or discharged unless such waiver, modification or discharge is agreed to in
writing signed by you and by the Company. No waiver by either party hereto at
any time of any breach by the other party hereto of, or compliance with, any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or conditions at
the same or at any prior or subsequent time. This Agreement constitutes the
complete understanding between the parties with respect to your employment and
supersedes any other prior oral or written agreements, arrangements or
understandings between you and the Company. This Agreement amends, restates and
supersedes any existing employment, retention, severance and change-in-control
agreements (collectively, the "Prior Agreements") between you and the Company
and/or any of its subsidiary companies upon the Effective Date, and any and all
claims under or in respect of the Prior Agreements that you may have or assert
shall, as of the Effective Date, be governed by, and completely satisfied and
discharged in accordance with, the terms and conditions of this Agreement. No
agreements or representations, oral or otherwise, express or implied, with
respect to the subject matter hereof have been made by either party which are
not set forth expressly in this Agreement. This Agreement may not be changed or
terminated orally but only by an agreement in writing signed by the parties
hereto. The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of South Carolina.
14. Arbitration. All differences, claims or matters in dispute arising out
of this Agreement, the breach hereof or otherwise arising between the Company or
any of its affiliates and you shall, at the election of either party, by notice
to the other, be submitted to arbitration by the American Arbitration
Association or its successor, in Greenville, South Carolina. Such arbitration
shall be governed by the then existing rules of the American Arbitration
Association and the laws of the State of South Carolina as then in effect. The
expenses, including your reasonable attorneys' fees, in connection with such
arbitration shall be borne by the Company.
15. Validity; Effectiveness. The invalidity or unenforceability of any
provision or provisions of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement, which shall remain in
full force and effect.
16. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
<PAGE> 10
Mr. Jerry E. Hunter
Page 10
If the foregoing is satisfactory, please so indicate by signing and
returning to the Company the enclosed copy of this letter whereupon this will
constitute our agreement on the subject.
JPS TEXTILE GROUP, INC.
By: /s/ David H. Taylor
----------------------------
David H. Taylor
Executive Vice President-
Finance and Secretary
ACCEPTED AND AGREED TO:
/s/ Jerry E. Hunter
- ------------------------------------
Jerry E. Hunter
<PAGE> 1
EXHIBIT 10.25
JPS TEXTILE GROUP, INC.
555 NORTH PLEASANTBURG DRIVE, SUITE 202
GREENVILLE, SOUTH CAROLINA 29607
October 9, 1997
Mr. David H. Taylor
105 Holbrook Trail
Greenville, South Carolina 29605
Dear David:
We are writing with respect to your employment by JPS Textile Group, Inc.
(the "Company") as Executive Vice President--Finance and Secretary of the
Company. The Company acknowledges and recognizes the value of your experience
and abilities to the Company since the beginning of your employment with the
Company, and desires to continue to retain and make secure for itself such
experience and abilities on the terms and subject to the conditions set forth in
this agreement (the "Agreement").
1. Employment. The Company agrees to employ you and you agree to be
employed by the Company commencing on the consummation of the Joint Plan of
Reorganization of the Company and its wholly owned subsidiary, JPS Capital
Corp., dated October 9, 1997 (the "Effective Date") and ending on the third
anniversary thereof (unless sooner terminated as hereinafter provided) (the
"Employment Period"), on the terms and subject to the conditions set forth in
this Agreement; provided, however, that commencing on the third anniversary of
the Effective Date and each anniversary thereafter, the Employment Period shall
automatically be extended for one additional year (the "Extended Employment
Period") unless not later than the end of the Employment Period or the Extended
Employment Period, as the case may be, the Company or you shall have given
written notice to the other not to extend the Employment Period or any Extended
Employment Period. Unless specifically provided to the contrary, the Employment
Period shall be deemed to include any Extended Employment Period.
2. Duties. (a) You shall continue to be nominated as a director of the
Company, subject to your election thereto by the Board of Directors of the
Company (the "Board") or the stockholders of the Company. In addition, you shall
be employed as the Executive Vice President--Finance and Secretary of the
Company. In such capacities, you shall serve as a senior executive officer of
the Company and shall have the duties and responsibilities prescribed for such
positions by the By-Laws of the Company, and shall have such other duties and
responsibilities as may from time to time be prescribed by the Board and are
customarily performed by someone in your position, provided that such duties and
responsibilities are consistent with your positions as Executive Vice
President--Finance and Secretary of the Company. In the performance of your
duties, you shall be subject to the supervision and direction of the Chief
Executive Officer of the Company.
(b) Subject to the terms of your employment hereunder, you shall devote
such time as is reasonably necessary to the proper performance of your duties
and responsibilities as Executive Vice President--Finance and Secretary of the
Company. You hereby represent and warrant to the Company that, except as
described above, you have no obligations under any existing employment or
service agreement and that your performance of the services required of you
hereunder will not conflict with your other existing obligations described
above.
3. Compensation.
(a) (i) Base Salary. During the term of your employment hereunder, the
Company shall pay you, and you shall accept from the Company for your services,
a salary at the rate of not less than $225,000 per year (the "Base Salary"),
payable in accordance with the Company's policy with respect to the compensation
of executives.
<PAGE> 2
Mr. David H. Taylor
Page 2
The Board shall annually review your performance and determine, in its sole
discretion, whether or not to increase your Base Salary and, if so, the amount
of such increase.
(ii) Bonus. In addition to your Base Salary, unless you voluntarily
terminate your employment for other than Good Reason (as hereinafter
defined), or are terminated by the Company for Cause (as hereinafter
defined), you will be eligible to participate in the 1997 Management
Incentive Bonus Plan (the "1997 Bonus Plan") and receive a bonus in an
amount and based upon the attainment of the performance goals specified
therein. The Board shall establish a performance-based annual bonus program
for senior executives of the Company including you for fiscal years after
1997 (a "Future Bonus Plan") and award you an annual bonus opportunity
thereunder which is not less favorable than the opportunity provided
pursuant to the 1997 Bonus Plan without restricting the discretion of the
Board to set reasonable targets and criteria for such incentive
compensation.
(iii) Retention Grant. In addition to your Base Salary, you will
receive on the Effective Date a cash payment in the amount of $163,694 and
20,984 shares of common stock of the Company.
(iv) Incentive Compensation and Other Plans. During the term of your
employment hereunder, you shall participate in any incentive compensation
(including stock options, restricted stock and/or other long-term incentive
compensation), deferred compensation, savings and retirement plans,
practices, policies and programs as adopted and approved by the Board from
time to time.
(b) Reimbursement of Expenses. During your employment, you will be entitled
to receive prompt reimbursement for all reasonable expenses incurred by you in
performing your services hereunder, provided that you properly account therefor
in accordance with Company policy.
4. Vacations. During your employment, you shall be entitled to reasonable
vacations from time to time in accordance with the regular procedures of the
Company governing senior executives. You shall also be entitled to all paid
holidays given by the Company to its senior executives.
5. Participation in Benefit Plans; Automobile.
(a) Benefit Plans. You shall be entitled to participate in and to receive
benefits under all the Company's employee benefit plans and arrangements in
effect on the date hereof, and you shall also be entitled to participate in or
receive benefits under any pension or retirement plan, savings plan, or
health-and-accident plan made available by the Company in the future to its
senior executives and other key management employees, subject to and on a basis
consistent with the terms, conditions and overall administration of such plans
and arrangements and provided that you meet the eligibility requirements
thereof.
(b) Automobile. You shall be entitled to the use of an automobile supplied
by the Company. If you choose to use such automobile, the cost of insurance,
repair and maintenance shall be borne by the Company. If you elect not to accept
a Company automobile, you shall receive an annual payment of Five Thousand Six
Hundred Dollars ($5,600) in lieu of such automobile.
6. Other Offices. You further agree to serve without additional
compensation, if elected or appointed thereto, as an officer or director of any
of the Company's subsidiaries or affiliates.
<PAGE> 3
Mr. David H. Taylor
Page 3
7. Termination.
(a) Death. Your employment hereunder shall terminate upon your death.
(b) Disability. In the event of your permanent disability (as hereinafter
defined) during the term of your employment hereunder, the Company shall have
the right, upon written notice to you, to terminate your employment hereunder,
effective upon the giving of such notice. For purposes hereof, "permanent
disability" shall be defined as any physical or mental disability or incapacity
which renders you incapable of fully performing the services required of you in
accordance with your obligations hereunder for a period of 150 consecutive days
or for shorter periods aggregating 150 days during any period of twelve (12)
consecutive months.
(c) Cause. The Company may terminate your employment hereunder for
"Cause." For purposes hereof, termination for "Cause" shall mean termination
after:
(i) your violation of any of the provisions of paragraph 9 hereof;
(ii) your commission of an intentional act of fraud, embezzlement,
theft or dishonesty against the Company or its affiliates;
(iii) your conviction of (or pleading by you of nolo contendere to) any
crime which constitutes a felony or misdemeanor involving moral turpitude
or which might, in the reasonable opinion of the Company, cause
embarrassment to the Company; or
(iv) the gross neglect or willful failure by you to perform your
duties and responsibilities in all material respects as set forth in
Paragraph 2 thereof, if such breach of duty is not cured within 30 days
after written notice thereof to you by the Board.
For purposes of clause (iv), no act, or failure to act, on your part shall be
deemed "willful" unless done, or omitted to be done, by you not in good faith
and without reasonable belief that your act, or failure to act, was in the best
interest of the Company.
(d) Termination by You. You may terminate your employment hereunder for
Good Reason. For purposes of this Agreement, "Good Reason" shall mean (A) any
assignment to you of any duties (other than incident to a promotion) materially
different than or in addition to those contemplated by, or any limitation of
your powers in any respect not contemplated by, paragraph 2 hereof, provided
that you first deliver written notice thereof to the Chairman of the Board and
the Company shall have failed to cure such non-permitted assignment or
limitation within thirty (30) days after receipt of such written notice, (B) a
reduction in your rate of base salary or the failure to maintain incentive bonus
arrangements substantially similar in earnings potential to those in effect on
the Effective Date, or a material reduction in your fringe benefits or any other
material failure by the Company to comply with paragraphs 3 through 5 hereof,
provided that you first deliver written notice thereof to the Chairman of the
Board and the Company shall have failed to cure such reduction or failure within
thirty (30) days after receipt of such written notice, (C) your being required
to relocate your principal residence from its existing location without your
consent, or (D) upon notice by the Company as set forth in paragraph 1 hereof
not to extend the Employment Period.
For purposes of this Agreement, a "Change in Control" means the occurrence
of any one of the following events following the Effective Date (other than
the consummation of the Joint Plan of Reorganization of the Company and its
wholly owned subsidiary, JPS Capital Corp.): (a) any person or other entity
(other than any of the Company's subsidiaries), including any person as
defined in Section 13(d)(3) of the Securities
<PAGE> 4
Mr. David H. Taylor
Page 4
Exchange Act of 1934, as amended (the "Exchange Act"), becoming the
beneficial owner, as defined in Rule 13d-3 of the Exchange Act, directly or
indirectly, of more than fifty percent (50%) of the total combined voting
power of all classes of capital stock of the Company ordinarily entitled to
vote for the election of directors of the Company, (b) the sale of all or
substantially all of the property or assets of the Company (other than a
sale to any of the Company's subsidiaries), (c) the consolidation or merger
of the Company with another corporation (other than with any of the
Company's subsidiaries or in which the Company is the surviving
corporation), the consummation of which would result in the shareholders of
the Company immediately before the occurrence of the consolidation or
merger owning, in the aggregate, less than 50% of the voting stock of the
surviving entity immediately following the occurrence of such consolidation
or merger, or (d) a change in the Board occurring with the result that the
members of the Board on the Effective Date (the "Incumbent Directors") no
longer constitute a majority of such Board, provided that any person
becoming a director whose election or nomination for election was supported
by a majority of the Incumbent Directors (other than you if you are a
Director) shall be considered an Incumbent Director for purposes hereof.
(e) Notice. Any termination by the Company pursuant to paragraphs 7(b) or
7(c) above or by you pursuant to paragraph 7(d) above shall be communicated by
written Notice of Termination to the other party hereto. For the purposes
hereof, a "Notice of Termination" shall mean a notice which shall indicate the
specific termination provision in this Agreement relied upon and shall set forth
in reasonable detail the facts and circumstances claimed to provide a basis for
termination of your employment under the provision so indicated.
(f) Date of Termination. "Date of Termination" shall mean (i) if your
employment is terminated by your death, the date of your death, and (ii) if your
employment is terminated for any other reason, the date on which a Notice of
Termination is given.
8. Compensation Upon Termination of Employment or During Disability.
Subject to paragraph 8(e) below:
(a) Death. If your employment shall be terminated by reason of your death,
the Company shall pay or grant, to such person as you shall designate in a
notice filed with the Company, or, if no such person shall be designated, to
your estate as a lump sum death benefit, (i) an amount equal to any accrued but
unpaid Base Salary at the time of your death, plus an additional payment equal
to your Base Salary for the period from such date through the end of the month
following the month in which you die, (ii) an amount equal to any accrued but
unpaid bonus under the 1997 Bonus Plan or any bonus payable pursuant to any
Future Bonus Plans, to the extent earned but not paid with respect to any year
prior to the year in which your death occurs, and (iii) a pro rata portion
(based on the number of days worked) of the bonus payable under the 1997 Bonus
Plan or any Future Bonus Plan in effect for the year in which your death occurs
based upon the assumption that the performance goals established under the
applicable program with respect to the entire year in which your death occurs
are met. In addition, you shall retain all stock options that are vested in
accordance with the terms of the stock option plan and grant letter controlling
such stock options, with such options remaining exercisable for six months from
the date of your death and you shall receive such additional benefits as may be
provided by the then existing plans, programs and/or arrangements of the
Company. This amount and these benefits shall be exclusive of and in addition to
any payments your widow, beneficiaries or estate may be entitled to receive
pursuant to any pension or employee benefit plan maintained by the Company. Your
designated beneficiary or the executor of your estate, as the case may be, shall
accept the payment provided for in this paragraph 8 in full discharge and
release of the Company of and from any further obligations under this Agreement.
<PAGE> 5
Mr. David H. Taylor
Page 5
(b) Disability. During any period that you fail to perform your duties
hereunder as a result of incapacity due to physical or mental illness, you shall
continue to receive your full Base Salary until your employment is terminated
pursuant to paragraph 7(b) hereof. If your employment is terminated by the
Company pursuant to paragraph 7(b), the Company shall pay to you in a lump sum
payment, an amount equal to (i) any accrued but unpaid bonus under the 1997
Bonus Plan or any bonus payable pursuant to any Future Bonus Plans, to the
extent earned but not paid with respect to any year prior to the year in which
your disability occurs; and (ii) a pro rata portion (based on the number of days
worked) of the bonus payable under the 1997 Bonus Plan or any Future Bonus Plan
in effect for the year in which your disability occurs based upon the assumption
that the performance goals established under the applicable program with respect
to the entire year in which your disability occurs are met. In addition, you
shall retain all stock options that are vested in accordance with the terms of
the stock option plan and grant letter controlling such stock options, with such
options remaining exercisable for six months from the date of your disability
and you shall receive such additional benefits as may be provided by the then
existing plans, programs and/or arrangements of the Company. During any such
period and thereafter you shall continue to bear the obligations provided for in
paragraph 9 below in accordance with the terms of such paragraph 9.
(c) Cause or Other Than Good Reason. If your employment shall be terminated
for Cause or you shall terminate your employment other than for Good Reason, the
Company shall be discharged and released of and from any further obligations
under this Agreement except for any Base Salary through the Date of Termination
or the date on which you terminate your employment at the rate in effect at the
time Notice of Termination is given or the date on which you terminate your
employment, to the extent required by law. Thereafter you shall continue to have
the obligations provided for in paragraph 9 below. Nothing contained herein
shall be deemed to be a waiver by the Company of any rights that it may have
against you in respect of your actions which gave rise to the termination of
your employment for Cause or for any reason other than for Good Reason.
(d) Other Than for Cause or For Good Reason. If the Company shall terminate
your employment other than pursuant to paragraphs 7(b) or 7(c) hereof or if you
shall terminate your employment for Good Reason, then:
(i) The Company shall continue to pay you your Base Salary, at the
rate in effect at the time that the Notice of Termination is given in
accordance with paragraph 7(e) hereof, without interest through the later
of (A) the third anniversary of the Effective Date and (B) one year from
the Date of Termination, in accordance with normal payroll practices;
provided, however, that in the event of your death prior to the expiration
of payment hereunder your estate or beneficiary shall receive the remaining
amount hereunder in a lump sum payment;
(ii) The Company shall pay you an amount equal to the sum of (A) any
bonus earned as of the Date of Termination under the 1997 Bonus Plan or any
Future Bonus Plan for a fiscal year ending prior to the Date of Termination
but not paid as of such date, (B) a pro rata portion (based on the number
of days worked) of the target bonus (not in excess of fifty percent (50%)
of your Base Salary) payable under the 1997 Bonus Plan or any Future Bonus
Plan in effect for the fiscal year in which your Date of Termination occurs
(determined without regard to whether the performance goals established
under the applicable program are met) and (C) an amount equal to your
target bonus (not in excess of fifty percent (50%) of your Base Salary)
under the 1997 Bonus Plan or any Future Bonus Plan in effect for the fiscal
year in which your Date of Termination occurs (determined without regard to
whether the performance goals established under the applicable program are
met), multiplied by (1) if the Date of Termination is during the initial
three year Employment Period, the greater of (x) the number (not in excess
of three) of years and fractions of years remaining in the initial three
year Employment Period or (y) one or (2) if the Date of Termination is
during any Extended Employment Period, one;
<PAGE> 6
Mr. David H. Taylor
Page 6
(iii) You shall become fully vested in any stock options, with such
options remaining exercisable for six months from the date of your
termination of employment; and
(iv) The Company shall maintain in full force and effect, for your
continued benefit for twenty-four months after termination of employment,
all employee benefit plans and programs providing health and/or life
insurance benefits in which you were entitled to participate immediately
prior to the Date of Termination provided that your continued participation
is possible under the general terms and provisions of such plans and
programs. In the event that your participation in any such plan or program
is barred, the Company shall provide you with comparable benefits under a
mirror benefit plan. Notwithstanding the above, if you are employed by a
new employer and are eligible to receive comparable coverage from such
employer (including the waiver of any pre-existing condition limitation) at
a comparable cost to you, you shall no longer be eligible to receive
coverage under this paragraph.
(e) Parachute Payment. Notwithstanding anything herein to the contrary, if
any of the payments or benefits received or to be received by you in connection
with a Change in Control or your termination of employment (whether such
payments or benefits are provided pursuant to the terms of this Agreement or any
other plan, arrangement or agreement with the Company, any person whose actions
result in a Change in Control or any person affiliated with the Company or such
person) (such payments or benefits being hereinafter referred to as the "Total
Payments") would be subject to the excise tax (the "Excise Tax") imposed under
Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code"), then
the payments under this paragraph 8 hereof shall be reduced (by the minimal
amount necessary) so that no portion of the Total Payments is subject to the
Excise Tax.
For purposes of determining whether any of the Total Payments will be
subject to the Excise Tax and the amount of such Excise Tax, (i) all of the
Total Payments shall be treated as "parachute payments" (within the meaning of
Section 280G(b)(2) of the Code) unless, in the opinion of tax counsel (the "Tax
Counsel") selected by the Company and reasonably acceptable by you, such
payments or benefits (in whole or in part) do not constitute parachute payments,
including by reason of Section 280G(b)(4)(A) of the Code, (ii) all "excess
parachute payments" within the meaning of Section 280G(b)(1) of the Code shall
be treated as subject to the Excise Tax unless, in the opinion of Tax Counsel,
such excess parachute payments (in whole or in part) represent reasonable
compensation for services actually rendered (within the meaning of Section
280G(b)(4)(B) of the Code) in excess of the "base amount" (as defined in Section
280G(b)(3) of the Code) allocable to such payment, or are otherwise not subject
to the Excise Tax, and (iii) the value of any noncash benefits or any deferred
payment or benefit shall be determined by Tax Counsel in accordance with the
principles of Sections 280G(d)(3) and (4) of the Code.
9. Restrictive Covenants and Confidentiality; Injunctive Relief.
(a) You agree, as a condition to the performance by the Company of its
obligations hereunder, particularly its obligations under paragraph 3 hereof,
that during the term of your employment, except for a termination of employment
without Cause or for Good Reason, hereunder and during the further period of one
(1) year after the termination of such employment, you shall not, without the
prior written approval of the Board, directly or indirectly through any other
person, firm or corporation:
(i) Solicit, raid, entice or induce any person, firm or corporation
that presently is or at any time during the term of your employment
hereunder shall be a customer of the Company, or any of its subsidiary
companies, to become a customer of any other person, firm or corporation,
and you shall not approach any such person, firm or corporation for such
purpose or authorize or knowingly approve the taking of such actions by any
other person;
<PAGE> 7
Mr. David H. Taylor
Page 7
(ii) Solicit, raid, entice or induce any person that presently is or
at any time during the term of your employment hereunder shall be an
employee of the Company, or any of its subsidiary companies, to become
employed by any person, firm or corporation, and you shall not approach any
such employee for such purpose or authorize or knowingly approve the taking
of such actions by any other person; or
(iii) Engage, participate, make any financial investment in, or become
employed by any person, firm, corporation or other business enterprise in
the United States which is engaged, directly or indirectly, during the term
of your employment or at the time of your termination of employment, as the
case may be, which (x) derives in excess of 20% of its gross revenues from
the sale of products substantially the same as the products of the Company
and/or any of its subsidiary companies or (y) has substantially the same
customer base for the same products as the Company and/or any of its
subsidiary companies. The foregoing covenant shall not be construed to
preclude you from making any investments in the securities of any company,
whether or not engaged in competition with the Company and/or any of its
subsidiary companies, to the extent that such securities are actively
traded on a national securities exchange or in the over-the-counter market
in the United States or any foreign securities exchange and, after giving
effect to such investment, you do not beneficially own securities
representing more than 5% of the combined voting power of the voting
securities of such company.
(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 you
shall hereafter 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, you agree that, during
and after the term of your employment hereunder, you shall not (otherwise than
pursuant to your duties hereunder) disclose or use, without the prior written
approval of the Board, 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 9 shall not apply to
information which is or shall become generally known to the public or the trade
(except by reason of your breach of your obligations hereunder), information
which is or shall become available in trade or other publications, information
known to you prior to entering the employ of the Company, and information which
you are required to disclose by law or an order of a court of competent
jurisdiction (provided that prior to your disclosure of any such information you
shall provide the Company with reasonable notice and a reasonable opportunity to
seek a protective order to prevent such disclosure).
(c) The provisions of paragraph 9(b) above shall survive the termination of
your employment hereunder, irrespective of the reason therefor.
(d) You acknowledge that the services to be rendered by you are of a
special, unique and extraordinary character and, in connection with such
services, you will have access to confidential information vital to the
Company's and its subsidiary companies' businesses. By reason of this, you
consent and agree that if you violate any of the provisions of this Agreement
with respect to diversion of the Company's or its subsidiary companies'
customers or employees, or confidentiality, the Company and its subsidiary
companies would sustain irreparable harm and, therefore, in addition to any
other remedies which the Company may have under this Agreement or otherwise, the
Company shall be entitled to an injunction restraining you from committing or
continuing any such violation of this Agreement.
10. Deductions and Withholdings. The Company shall be entitled to withhold
any amounts payable under this Agreement on account of payroll taxes and similar
matters as are required by applicable law, rule or regulation of appropriate
governmental authorities.
<PAGE> 8
Mr. David H. Taylor
Page 8
11. Successors; Binding Agreement.
(a) The Company will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of the Company, by agreement in form and substance
reasonably satisfactory to you, to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the Company would be
required to perform it if no such succession had taken place. Failure of the
Company to obtain such agreement prior to the effectiveness of any such
succession shall be a breach of this Agreement and shall entitle you to
compensation from the Company in the same amount and on the same terms as you
would be entitled to hereunder if you terminated your employment for Good
Reason, except that for purposes of implementing the foregoing, the date on
which any such succession becomes effective shall be deemed the Date of
Termination. As used in this Agreement, "Company" shall include any successor to
the Company's business and/or assets as aforesaid which executes and delivers
the agreement provided for in this paragraph 11 or which otherwise becomes bound
by all the terms and provisions of this Agreement by operation of law.
(b) This Agreement and all your rights hereunder shall inure to the
benefit of and be enforceable by your personal or legal representatives,
executors, administrators, successors, heirs, distributees, devisees and
legatees. If you should die while any amounts would still be payable to you
hereunder if you had continued to live, all such amounts, unless otherwise
provided herein, shall be paid in accordance with the terms of this Agreement
to your devisee, legatee, or other designee or, if there be no such designee,
to your estate. Your obligations hereunder may not be delegated, and except as
otherwise provided herein relating to the designation of a devisee, legatee or
other designee, you may not assign, transfer, pledge, encumber, hypothecate or
otherwise dispose of this Agreement or any of your rights hereunder, and any
such attempted delegation or disposition shall be null and void and without
effect.
12. Notice. For purposes of this Agreement, notices and all other
communications provided for shall be in writing and shall be deemed to have been
duly given when delivered or mailed by United States registered or certified
mail, return receipt requested, postage prepaid, addressed as follows:
If to you:
Mr. David H. Taylor
105 Holbrook Trail
Greenville, South Carolina 29605
If to the Company:
JPS Textile Group, Inc.
555 North Pleasantburg Drive, Suite 202
Greenville, South Carolina 29607
Attention: Chairman of the Board
or to such other address as any party may have furnished to the other in writing
in accordance herewith, except that notices of change of address shall be
effective only upon receipt.
13. Miscellaneous. No provision of this Agreement may be modified, waived
or discharged unless such waiver, modification or discharge is agreed to in
writing signed by you and by the Company. No waiver by either party hereto at
any time of any breach by the other party hereto of, or compliance with, any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar
<PAGE> 9
Mr. David H. Taylor
Page 9
provisions or conditions at the same or at any prior or subsequent time. This
Agreement constitutes the complete understanding between the parties with
respect to your employment and supersedes any other prior oral or written
agreements, arrangements or understandings between you and the Company. This
Agreement amends, restates and supersedes any existing employment, retention,
severance and change-in-control agreements (collectively, the "Prior
Agreements") between you and the Company and/or any of its subsidiary companies
upon the Effective Date, and any and all claims under or in respect of the Prior
Agreements that you may have or assert shall, as of the Effective Date, be
governed by, and completely satisfied and discharged in accordance with, the
terms and conditions of this Agreement. No agreements or representations, oral
or otherwise, express or implied, with respect to the subject matter hereof have
been made by either party which are not set forth expressly in this Agreement.
This Agreement may not be changed or terminated orally but only by an agreement
in writing signed by the parties hereto. The validity, interpretation,
construction and performance of this Agreement shall be governed by the laws of
the State of South Carolina.
14. Arbitration. All differences, claims or matters in dispute arising out
of this Agreement, the breach hereof or otherwise arising between the Company or
any of its affiliates and you shall, at the election of either party, by notice
to the other, be submitted to arbitration by the American Arbitration
Association or its successor, in Greenville, South Carolina. Such arbitration
shall be governed by the then existing rules of the American Arbitration
Association and the laws of the State of South Carolina as then in effect. The
expenses, including your reasonable attorneys' fees, in connection with such
arbitration shall be borne by the Company.
15. Validity; Effectiveness. The invalidity or unenforceability of any
provision or provisions of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement, which shall remain in
full force and effect.
16. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
If the foregoing is satisfactory, please so indicate by signing and
returning to the Company the enclosed copy of this letter whereupon this will
constitute our agreement on the subject.
JPS TEXTILE GROUP, INC.
By: /s/ Jerry E. Hunter
--------------------------------
Name: Jerry E. Hunter
Title: Chief Executive Officer
ACCEPTED AND AGREED TO:
/s/ David H. Taylor
- ---------------------------------
David H. Taylor
<PAGE> 1
EXHIBIT 10.26
JPS TEXTILE GROUP, INC.
555 NORTH PLEASANTBURG DRIVE, SUITE 202
GREENVILLE, SOUTH CAROLINA 29607
October 9, 1997
Mr. Monnie L. Broome
11 Doyle Drive
Greenville, South Carolina 29615
Dear Monnie:
We are writing with respect to your employment by JPS Textile Group, Inc.
(the "Company") as Vice President--Human Resources of the Company. The Company
acknowledges and recognizes the value of your experience and abilities to the
Company since the beginning of your employment with the Company, and desires to
continue to retain and make secure for itself such experience and abilities on
the terms and subject to the conditions set forth in this agreement (the
"Agreement").
1. Employment. The Company agrees to employ you and you agree to be
employed by the Company commencing on the consummation of the Joint Plan of
Reorganization of the Company and its wholly owned subsidiary, JPS Capital
Corp., dated October 9, 1997 (the "Effective Date") and ending on the third
anniversary thereof (unless sooner terminated as hereinafter provided) (the
"Employment Period"), on the terms and subject to the conditions set forth in
this Agreement; provided, however, that commencing on the third anniversary of
the Effective Date and each anniversary thereafter, the Employment Period shall
automatically be extended for one additional year (the "Extended Employment
Period") unless not later than the end of the Employment Period or the Extended
Employment Period, as the case may be, the Company or you shall have given
written notice to the other not to extend the Employment Period or any Extended
Employment Period. Unless specifically provided to the contrary, Employment
Period shall be deemed to include any Extended Employment Period.
2. Duties. (a) You shall be employed as the Vice President--Human
Resources of the Company. In such capacity, you shall serve as a senior
executive officer of the Company and shall have the duties and responsibilities
prescribed for such position by the By-Laws of the Company, and shall have such
other duties and responsibilities as may from time to time be prescribed by the
Board and are customarily performed by someone in your position, provided that
such duties and responsibilities are consistent with your position as Vice
President--Human Resources of the Company. In the performance of your duties,
you shall be subject to the supervision and direction of the Chief Executive
Officer of the Company.
(b) Subject to the terms of your employment hereunder, you shall
devote such time as is reasonably necessary to the proper performance of your
duties and responsibilities as Vice President--Human Resources of the Company.
You hereby represent and warrant to the Company that, except as described above,
you have no obligations under any existing employment or service agreement and
that your performance of the services required of you hereunder will not
conflict with your other existing obligations described above.
<PAGE> 2
Mr. Monnie L. Broome
Page 2
3. Compensation.
(a) (i) Base Salary. During the term of your employment hereunder, the
Company shall pay you, and you shall accept from the Company for your services,
a salary at the rate of not less than $180,000 per year (the "Base Salary"),
payable in accordance with the Company's policy with respect to the compensation
of executives. The Board shall annually review your performance and determine,
in its sole discretion, whether or not to increase your Base Salary and, if so,
the amount of such increase.
(ii) Bonus. In addition to your Base Salary, unless you voluntarily
terminate your employment for other than Good Reason (as hereinafter
defined), or are terminated by the Company for Cause (as hereinafter
defined), you will be eligible to participate in the 1997 Management
Incentive Bonus Plan (the "1997 Bonus Plan") and receive a bonus in an
amount and based upon the attainment of the performance goals specified
therein. The Board shall establish a performance-based annual bonus program
for senior executives of the Company including you for fiscal years after
1997 (a "Future Bonus Plan") and award you an annual bonus opportunity
thereunder which is not less favorable than the opportunity provided
pursuant to the 1997 Bonus Plan without restricting the discretion of the
Board to set reasonable targets and criteria for such incentive
compensation.
(iii) Retention Grant. In addition to your Base Salary, you will
receive on the Effective Date a cash payment in the amount of $115,531 and
14,810 shares of common stock of the Company.
(iv) Incentive Compensation and Other Plans. During the term of your
employment hereunder, you shall participate in any incentive compensation
(including stock options, restricted stock and/or other long-term incentive
compensation), deferred compensation, savings and retirement plans,
practices, policies and programs as adopted and approved by the Board from
time to time.
(b) Reimbursement of Expenses. During your employment, you will be entitled
to receive prompt reimbursement for all reasonable expenses incurred by you in
performing your services hereunder, provided that you properly account therefor
in accordance with Company policy.
4. Vacations. During your employment, you shall be entitled to
reasonable vacations from time to time in accordance with the regular procedures
of the Company governing senior executives. You shall also be entitled to all
paid holidays given by the Company to its senior executives.
5. Participation in Benefit Plans; Automobile.
(a) Benefit Plans. You shall be entitled to participate in and to receive
benefits under all the Company's employee benefit plans and arrangements in
effect on the date hereof, and you shall also be entitled to participate in or
receive benefits under any pension or retirement plan, savings plan, or
health-and-accident plan made available by the Company in the future to its
senior executives and other key management employees, subject to and on a basis
consistent with the terms, conditions and overall administration of such plans
and arrangements and provided that you meet the eligibility requirements
thereof.
(b) Automobile. You shall be entitled to the use of an automobile supplied
by the Company. If you choose to use such automobile, the cost of insurance,
repair and maintenance shall be borne by the Company. If you elect not to accept
a Company automobile, you shall receive an annual payment of Five Thousand Six
Hundred Dollars ($5,600) in lieu of such automobile.
<PAGE> 3
Mr. Monnie L. Broome
Page 3
6. Other Offices. You further agree to serve without additional
compensation, if elected or appointed thereto, as an officer or director of any
of the Company's subsidiaries or affiliates.
7. Termination.
(a) Death. Your employment hereunder shall terminate upon your death.
(b) Disability. In the event of your permanent disability (as hereinafter
defined) during the term of your employment hereunder, the Company shall have
the right, upon written notice to you, to terminate your employment hereunder,
effective upon the giving of such notice. For purposes hereof, "permanent
disability" shall be defined as any physical or mental disability or incapacity
which renders you incapable of fully performing the services required of you in
accordance with your obligations hereunder for a period of 150 consecutive days
or for shorter periods aggregating 150 days during any period of twelve (12)
consecutive months.
(c) Cause. The Company may terminate your employment hereunder for
"Cause." For purposes hereof, termination for "Cause" shall mean termination
after:
(i) your violation of any of the provisions of paragraph 9 hereof;
(ii) your commission of an intentional act of fraud, embezzlement,
theft or dishonesty against the Company or its affiliates;
(iii) your conviction of (or pleading by you of nolo contendere to)
any crime which constitutes a felony or misdemeanor involving moral
turpitude or which might, in the reasonable opinion of the Company, cause
embarrassment to the Company; or
(iv) the gross neglect or willful failure by you to perform your
duties and responsibilities in all material respects as set forth in
paragraph 2 hereof, if such breach of duty is not cured within 30 days
after written notice thereof to you by the Board.
For purposes of clause (iv), no act, or failure to act, on your part shall be
deemed "willful" unless done, or omitted to be done, by you not in good faith
and without reasonable belief that your act, or failure to act, was in the best
interest of the Company.
(d) Termination by You. You may terminate your employment hereunder for
Good Reason. For purposes of this Agreement, "Good Reason" shall mean (A) any
assignment to you of any duties (other than incident to a promotion) materially
different than or in addition to those contemplated by, or any limitation of
your powers in any respect not contemplated by, paragraph 2 hereof, provided
that you first deliver written notice thereof to the Chairman of the Board and
the Company shall have failed to cure such non-permitted assignment or
limitation within thirty (30) days after receipt of such written notice, (B) a
reduction in your rate of base salary or the failure to maintain incentive bonus
arrangements substantially similar in earnings potential to those in effect on
the Effective Date, or a material reduction in your fringe benefits or any other
material failure by the Company to comply with paragraphs 3 through 5 hereof,
provided that you first deliver written notice thereof to the Chairman of the
Board and the Company shall have failed to cure such reduction or failure within
thirty (30) days after receipt of such written notice, (C) your being required
to relocate your principal residence from its existing location without your
consent, or (D) upon notice by the Company as set forth in paragraph 1 hereof
not to extend the Employment Period.
<PAGE> 4
Mr. Monnie L. Broome
Page 4
For purposes of this Agreement, a "Change in Control" means the
occurrence of any one of the following events following the Effective Date
(other than the consummation of the Joint Plan of Reorganization of the
Company and its wholly owned subsidiary, JPS Capital Corp.): (a) any person
or other entity (other than any of the Company's subsidiaries), including
any person as defined in Section 13(d)(3) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), becoming the beneficial owner, as
defined in Rule 13d-3 of the Exchange Act, directly or indirectly, of more
than fifty percent (50%) of the total combined voting power of all classes
of capital stock of the Company ordinarily entitled to vote for the
election of directors of the Company, (b) the sale of all or substantially
all of the property or assets of the Company (other than a sale to any of
the Company's subsidiaries), (c) the consolidation or merger of the Company
with another corporation (other than with any of the Company's subsidiaries
or in which the Company is the surviving corporation), the consummation of
which would result in the shareholders of the Company immediately before
the occurrence of the consolidation or merger owning, in the aggregate,
less than 50% of the voting stock of the surviving entity immediately
following the occurrence of such consolidation or merger, or (d) a change
in the Board occurring with the result that the members of the Board on the
Effective Date (the "Incumbent Directors") no longer constitute a majority
of such Board, provided that any person becoming a director whose election
or nomination for election was supported by a majority of the Incumbent
Directors (other than you if you are a Director) shall be considered an
Incumbent Director for purposes hereof.
(e) Notice. Any termination by the Company pursuant to paragraphs 7(b) or
7(c) above or by you pursuant to paragraph 7(d) above shall be communicated by
written Notice of Termination to the other party hereto. For the purposes
hereof, a "Notice of Termination" shall mean a notice which shall indicate the
specific termination provision in this Agreement relied upon and shall set forth
in reasonable detail the facts and circumstances claimed to provide a basis for
termination of your employment under the provision so indicated.
(f) Date of Termination. "Date of Termination" shall mean (i) if your
employment is terminated by your death, the date of your death, and (ii) if your
employment is terminated for any other reason, the date on which a Notice of
Termination is given.
8. Compensation Upon Termination of Employment or During Disability.
Subject to paragraph 8(e) below:
(a) Death. If your employment shall be terminated by reason of your death,
the Company shall pay or grant, to such person as you shall designate in a
notice filed with the Company, or, if no such person shall be designated, to
your estate as a lump sum death benefit, (i) an amount equal to any accrued but
unpaid Base Salary at the time of your death, plus an additional payment equal
to your Base Salary for the period from such date through the end of the month
following the month in which you die, (ii) an amount equal to any accrued but
unpaid bonus under the 1997 Bonus Plan or any bonus payable pursuant to any
Future Bonus Plans, to the extent earned but not paid with respect to any year
prior to the year in which your death occurs; and (iii) a pro rata portion
(based on the number of days worked) of the bonus payable under the 1997 Bonus
Plan or any Future Bonus Plan in effect for the year in which your death occurs
based upon the assumption that the performance goals established under the
applicable program with respect to the entire year in which your death occurs
are met. In addition, you shall retain all stock options that are vested in
accordance with the terms of the stock option plan and grant letter controlling
such stock options, with such options remaining exercisable for six months from
the date of your death and you shall receive such additional benefits as may be
provided by the then existing plans, programs and/or arrangements of the
Company. This amount and these benefits shall be exclusive of and in addition to
any payments your widow, beneficiaries or estate may be entitled to receive
pursuant to any pension or employee benefit plan maintained by the Company. Your
designated beneficiary or the executor of your estate, as
<PAGE> 5
Mr. Monnie L. Broome
Page 5
the case may be, shall accept the payment provided for in this paragraph 8 in
full discharge and release of the Company of and from any further obligations
under this Agreement.
(b) Disability. During any period that you fail to perform your duties
hereunder as a result of incapacity due to physical or mental illness, you shall
continue to receive your full Base Salary until your employment is terminated
pursuant to paragraph 7(b) hereof. If your employment is terminated by the
Company pursuant to paragraph 7(b), the Company shall pay to you in a lump sum
payment, an amount equal to (i) any accrued but unpaid bonus under the 1997
Bonus Plan or any bonus payable pursuant to any Future Bonus Plans, to the
extent earned but not paid with respect to any year prior to the year in which
your disability occurs; and (ii) a pro rata portion (based on the number of days
worked) of the bonus payable under the 1997 Bonus Plan or any Future Bonus Plan
in effect for the year in which your disability occurs based upon the assumption
that the performance goals established under the applicable program with respect
to the entire year in which your disability occurs are met. In addition, you
shall retain all stock options that are vested in accordance with the terms of
the stock option plan and grant letter controlling such stock options, with such
options remaining exercisable for six months from the date of your disability
and you shall receive such additional benefits as may be provided by the then
existing plans, programs and/or arrangements of the Company. During any such
period and thereafter you shall continue to bear the obligations provided for in
paragraph 9 below in accordance with the terms of such paragraph 9.
(c) Cause or Other Than Good Reason. If your employment shall be
terminated for Cause or you shall terminate your employment other than for Good
Reason, the Company shall be discharged and released of and from any further
obligations under this Agreement except for any Base Salary through the Date of
Termination or the date on which you terminate your employment at the rate in
effect at the time Notice of Termination is given or the date on which you
terminate your employment, to the extent required by law. Thereafter you shall
continue to have the obligations provided for in paragraph 9 below. Nothing
contained herein shall be deemed to be a waiver by the Company of any rights
that it may have against you in respect of your actions which gave rise to the
termination of your employment for Cause or for any reason other than for Good
Reason.
(d) Other Than for Cause or For Good Reason. If the Company shall
terminate your employment other than pursuant to paragraphs 7(b) or 7(c) hereof
or if you shall terminate your employment for Good Reason, then:
(i) The Company shall continue to pay you your Base Salary, at the
rate in effect at the time that the Notice of Termination is given in
accordance with paragraph 7(e) hereof, without interest through the later
of (A) the third anniversary of the Effective Date and (B) one year from
the Date of Termination, in accordance with normal payroll practices;
provided, however, that in the event of your death prior to the expiration
of payment hereunder your estate or beneficiary shall receive the remaining
amount hereunder in a lump sum payment;
(ii) The Company shall pay you an amount equal to the sum of (A) any
bonus earned as of the Date of Termination under the 1997 Bonus Plan or any
Future Bonus Plan for a fiscal year ending prior to the Date of Termination
but not paid as of such date, (B) a pro rata portion (based on the number
of days worked) of the target bonus (not in excess of fifty percent (50%)
of your Base Salary) payable under the 1997 Bonus Plan or any Future Bonus
Plan in effect for the fiscal year in which your Date of Termination occurs
(determined without regard to whether the performance goals established
under the applicable program are met) and (C) an amount equal to your
target bonus (not in excess of fifty percent (50%) of your Base Salary)
under the 1997 Bonus Plan or any Future Bonus Plan in effect for the fiscal
year in which your Date of Termination occurs (determined without regard to
whether the performance goals established under the applicable program are
met), multiplied by (1) if the Date of Termination is during the initial
three year Employment Period, the greater of (x) the number (not in excess
of three) of years and fractions of years
<PAGE> 6
Mr. Monnie L. Broome
Page 6
remaining in the initial three year Employment Period or (y) one or (2) if
the Date of Termination is during any Extended Employment Period, one;
(iii) You shall become fully vested in any stock options, with such
options remaining exercisable for six months from the date of your
termination of employment; and
(iv) The Company shall maintain in full force and effect, for your
continued benefit for twenty-four months after termination of employment,
all employee benefit plans and programs providing health and/or life
insurance benefits in which you were entitled to participate immediately
prior to the Date of Termination provided that your continued participation
is possible under the general terms and provisions of such plans and
programs. In the event that your participation in any such plan or program
is barred, the Company shall provide you with comparable benefits under a
mirror benefit plan. Notwithstanding the above, if you are employed by a
new employer and are eligible to receive comparable coverage from such
employer (including the waiver of any pre-existing condition limitation) at
a comparable cost to you, you shall no longer be eligible to receive
coverage under this paragraph.
(e) Parachute Payment. Notwithstanding anything herein to the contrary, if
any of the payments or benefits received or to be received by you in connection
with a Change in Control or your termination of employment (whether such
payments or benefits are provided pursuant to the terms of this Agreement or any
other plan, arrangement or agreement with the Company, any person whose actions
result in a Change in Control or any person affiliated with the Company or such
person) (such payments or benefits being hereinafter referred to as the "Total
Payments") would be subject to the excise tax (the "Excise Tax") imposed under
Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code"), then
the payments under this paragraph 8 hereof shall be reduced (by the minimal
amount necessary) so that no portion of the Total Payments is subject to the
Excise Tax.
For purposes of determining whether any of the Total Payments will be
subject to the Excise Tax and the amount of such Excise Tax, (i) all of the
Total Payments shall be treated as "parachute payments" (within the meaning of
Section 280G(b)(2) of the Code) unless, in the opinion of tax counsel (the "Tax
Counsel") selected by the Company and reasonably acceptable by you, such
payments or benefits (in whole or in part) do not constitute parachute payments,
including by reason of Section 280G(b)(4)(A) of the Code, (ii) all "excess
parachute payments" within the meaning of Section 280G(b)(1) of the Code shall
be treated as subject to the Excise Tax unless, in the opinion of Tax Counsel,
such excess parachute payments (in whole or in part) represent reasonable
compensation for services actually rendered (within the meaning of Section
280G(b)(4)(B) of the Code) in excess of the "base amount" (as defined in Section
280G(b)(3) of the Code) allocable to such payment, or are otherwise not subject
to the Excise Tax, and (iii) the value of any noncash benefits or any deferred
payment or benefit shall be determined by Tax Counsel in accordance with the
principles of Sections 280G(d)(3) and (4) of the Code.
9. Restrictive Covenants and Confidentiality; Injunctive Relief.
(a) You agree, as a condition to the performance by the Company of its
obligations hereunder, particularly its obligations under paragraph 3 hereof,
that during the term of your employment, except for a termination of employment
without Cause or for Good Reason, hereunder and during the further period of one
(1) year after the termination of such employment, you shall not, without the
prior written approval of the Board, directly or indirectly through any other
person, firm or corporation:
(i) Solicit, raid, entice or induce any person, firm or corporation
that presently is or at any time during the term of your employment
hereunder shall be a customer of the Company, or any of its subsidiary
companies, to become a customer of any other person, firm or corporation,
and you shall not approach any
<PAGE> 7
Mr. Monnie L. Broome
Page 7
such person, firm or corporation for such purpose or authorize or knowingly
approve the taking of such actions by any other person;
(ii) Solicit, raid, entice or induce any person that presently is or
at any time during the term of your employment hereunder shall be an
employee of the Company, or any of its subsidiary companies, to become
employed by any person, firm or corporation, and you shall not approach any
such employee for such purpose or authorize or knowingly approve the taking
of such actions by any other person; or
(iii) Engage, participate, make any financial investment in, or
become employed by any person, firm, corporation or other business
enterprise in the United States which is engaged, directly or indirectly,
during the term of your employment or at the time of your termination of
employment, as the case may be, which (x) derives in excess of 20% of its
gross revenues from the sale of products substantially the same as the
products of the Company and/or any of its subsidiary companies or (y) has
substantially the same customer base for the same products as the Company
and/or any of its subsidiary companies. The foregoing covenant shall not be
construed to preclude you from making any investments in the securities of
any company, whether or not engaged in competition with the Company and/or
any of its subsidiary companies, to the extent that such securities are
actively traded on a national securities exchange or in the
over-the-counter market in the United States or any foreign securities
exchange and, after giving effect to such investment, you do not
beneficially own securities representing more than 5% of the combined
voting power of the voting securities of such company.
(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 you
shall hereafter 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, you agree that, during
and after the term of your employment hereunder, you shall not (otherwise than
pursuant to your duties hereunder) disclose or use, without the prior written
approval of the Board, 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 9 shall not apply to
information which is or shall become generally known to the public or the trade
(except by reason of your breach of your obligations hereunder), information
which is or shall become available in trade or other publications, information
known to you prior to entering the employ of the Company, and information which
you are required to disclose by law or an order of a court of competent
jurisdiction (provided that prior to your disclosure of any such information you
shall provide the Company with reasonable notice and a reasonable opportunity to
seek a protective order to prevent such disclosure).
(c) The provisions of paragraph 9(b) above shall survive the termination
of your employment hereunder, irrespective of the reason therefor.
(d) You acknowledge that the services to be rendered by you are of a
special, unique and extraordinary character and, in connection with such
services, you will have access to confidential information vital to the
Company's and its subsidiary companies' businesses. By reason of this, you
consent and agree that if you violate any of the provisions of this Agreement
with respect to diversion of the Company's or its subsidiary companies'
customers or employees, or confidentiality, the Company and its subsidiary
companies would sustain irreparable harm and, therefore, in addition to any
other remedies which the Company may have under this Agreement or otherwise, the
Company shall be entitled to an injunction restraining you from committing or
continuing any such violation of this Agreement.
<PAGE> 8
Mr. Monnie L. Broome
Page 8
10. Deductions and Withholdings. The Company shall be entitled to withhold
any amounts payable under this Agreement on account of payroll taxes and similar
matters as are required by applicable law, rule or regulation of appropriate
governmental authorities.
11. Successors; Binding Agreement.
(a) The Company will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of the Company, by agreement in form and substance
reasonably satisfactory to you, to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the Company would be
required to perform it if no such succession had taken place. Failure of the
Company to obtain such agreement prior to the effectiveness of any such
succession shall be a breach of this Agreement and shall entitle you to
compensation from the Company in the same amount and on the same terms as you
would be entitled to hereunder if you terminated your employment for Good
Reason, except that for purposes of implementing the foregoing, the date on
which any such succession becomes effective shall be deemed the Date of
Termination. As used in this Agreement, "Company" shall include any successor to
the Company's business and/or assets as aforesaid which executes and delivers
the agreement provided for in this paragraph 11 or which otherwise becomes bound
by all the terms and provisions of this Agreement by operation of law.
(b) This Agreement and all your rights hereunder shall inure to the
benefit of and be enforceable by your personal or legal representatives,
executors, administrators, successors, heirs, distributees, devisees and
legatees. If you should die while any amounts would still be payable to you
hereunder if you had continued to live, all such amounts, unless otherwise
provided herein, shall be paid in accordance with the terms of this Agreement to
your devisee, legatee, or other designee or, if there be no such designee, to
your estate. Your obligations hereunder may not be delegated, and except as
otherwise provided herein relating to the designation of a devisee, legatee or
other designee, you may not assign, transfer, pledge, encumber, hypothecate or
otherwise dispose of this Agreement or any of your rights hereunder, and any
such attempted delegation or disposition shall be null and void and without
effect.
12. Notice. For purposes of this Agreement, notices and all other
communications provided for shall be in writing and shall be deemed to have been
duly given when delivered or mailed by United States registered or certified
mail, return receipt requested, postage prepaid, addressed as follows:
If to you:
Mr. Monnie L. Broome
11 Doyle Drive
Greenville, South Carolina 29615
If to the Company:
JPS Textile Group, Inc.
555 North Pleasantburg Drive, Suite 202
Greenville, South Carolina 29607
Attention: Chairman of the Board
or to such other address as any party may have furnished to the other in writing
in accordance herewith, except that notices of change of address shall be
effective only upon receipt.
<PAGE> 9
Mr. Monnie L. Broome
Page 9
13. Miscellaneous. No provision of this Agreement may be modified, waived
or discharged unless such waiver, modification or discharge is agreed to in
writing signed by you and by the Company. No waiver by either party hereto at
any time of any breach by the other party hereto of, or compliance with, any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or conditions at
the same or at any prior or subsequent time. This Agreement constitutes the
complete understanding between the parties with respect to your employment and
supersedes any other prior oral or written agreements, arrangements or
understandings between you and the Company. This Agreement amends, restates and
supersedes any existing employment, retention, severance and change-in-control
agreements (collectively, the "Prior Agreements") between you and the Company
and/or any of its subsidiary companies upon the Effective Date, and any and all
claims under or in respect of the Prior Agreements that you may have or assert
shall, as of the Effective Date, be governed by, and completely satisfied and
discharged in accordance with, the terms and conditions of this Agreement. No
agreements or representations, oral or otherwise, express or implied, with
respect to the subject matter hereof have been made by either party which are
not set forth expressly in this Agreement. This Agreement may not be changed or
terminated orally but only by an agreement in writing signed by the parties
hereto. The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of South Carolina.
14. Arbitration. All differences, claims or matters in dispute arising out
of this Agreement, the breach hereof or otherwise arising between the Company or
any of its affiliates and you shall, at the election of either party, by notice
to the other, be submitted to arbitration by the American Arbitration
Association or its successor, in Greenville, South Carolina. Such arbitration
shall be governed by the then existing rules of the American Arbitration
Association and the laws of the State of South Carolina as then in effect. The
expenses, including your reasonable attorneys' fees, in connection with such
arbitration shall be borne by the Company.
15. Validity; Effectiveness. The invalidity or unenforceability of any
provision or provisions of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement, which shall remain in
full force and effect.
16. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
If the foregoing is satisfactory, please so indicate by signing and
returning to the Company the enclosed copy of this letter whereupon this will
constitute our agreement on the subject.
JPS TEXTILE GROUP, INC.
By: /s/ Jerry E. Hunter
------------------------------------
Name: Jerry E. Hunter
Title: Chief Executive Officer
ACCEPTED AND AGREED TO:
/s/ Monnie L. Broome
- -----------------------------------
Monnie L. Broome
<PAGE> 1
EXHIBIT 10.31
REGISTRATION RIGHTS AGREEMENT, dated as of October 9, 1997, by and among
JPS TEXTILE GROUP, INC., a Delaware corporation (the "Company"), and the other
parties listed on the signature pages hereto (the "Initial Holders").
This Agreement is being entered into pursuant to Article IV of the Joint
Plan of Reorganization of the Company and JPS Capital Corp. under Chapter 11 of
the Bankruptcy Code (the "Plan of Reorganization"). The Plan of Reorganization
provides for the issuance of Common Stock (as hereinafter defined).
The parties hereto desire to provide certain registration rights to the
Initial Holders with respect to the shares of Common Stock.
Accordingly, the parties hereto agree as follows:
1. Definitions
As used herein, unless the context otherwise requires, the following terms
have the following respective meanings:
"Commission" means the Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act.
"Common Stock" means any shares of Common Stock, par value $.01 per share,
of the Company now or hereafter authorized to be issued, and any and all
securities of any kind whatsoever of the Company which may be issued on or after
the date hereof in respect of, or in exchange for, shares of Common Stock
pursuant to a merger, consolidation, stock split, stock dividend,
recapitalization of the Company or otherwise.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, or
any similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time. Reference to a
particular section of the Exchange Act shall include a reference to the
comparable section, if any, of any such similar Federal statute.
"Holder" means a registered holder of Registrable Common Stock.
"Initial Holders" has the meaning assigned to it in the preamble hereof.
"Material Disclosure Event" means any pending or imminent event relating to
the Company which, based on (i) the good faith, reasonable opinion of the Board
of Directors of the Company and (ii) the advice of competent outside counsel to
the Board of Directors of the Company, (x) requires disclosure of material,
non-public information relating to such event in the Shelf Registration so that
such registration statement would not be materially misleading, (y) is otherwise
not required to be publicly disclosed at that time (e.g., on Form 8-K or Form
10-Q) under applicable federal or state securities laws, and (z) if publicly
disclosed at the time of such event, would have a material adverse effect on the
business and financial condition of the Company.
"Other Holder" means any person or entity to whom the Company has granted
or does grant registration rights.
"Other Holder Registrable Common Stock" means the shares of Common Stock
held by any Other Holder.
"Person" means a corporation, an association, a partnership, an
organization, a business, a trust, an individual, or any other entity or
organization, including a government or political subdivision or an
instrumentality or agency thereof.
"Registrable Common Stock" means (i) the shares of Common Stock issued to
an Initial Holder pursuant to the Plan of Reorganization or (ii) any Common
Stock issued with respect to the Common Stock referred to in clause (i) hereof
by way of a stock dividend, stock split or reverse stock split or in connection
with a combination of shares, recapitalization, merger, consolidation or
otherwise. As to any particular Registrable Common Stock, such securities shall
cease to be Registrable Common Stock when (i) a registration statement with
respect to the sale of such securities shall have become effective under the
Securities Act and such securities shall have been disposed of in accordance
with such registration statement, (ii) they shall have been distributed to the
public pursuant to Rule 144 (or any successor
<PAGE> 2
provision) under the Securities Act, (iii) they shall have been otherwise
transferred, new certificates for them not bearing a legend restricting further
transfer shall have been delivered by the Company and subsequent disposition of
them shall not require the registration under the Securities Act, or (iv) they
shall have ceased to be outstanding.
"Registration Expenses" means all expenses incident to the registration and
disposition of the Registrable Common Stock pursuant to Section 2 hereof,
including, without limitation, all registration, filing and applicable national
securities exchange fees; all fees and expenses of complying with state
securities or blue sky laws (including fees and disbursements of counsel to the
underwriters or the Holders in connection with "blue sky" qualification of the
Registrable Common Stock and determination of their eligibility for investment
under the laws of the various jurisdictions); all duplicating and printing
expenses; all messenger and delivery expenses; the fees and disbursements of
counsel for the Company and of its independent public accountants, including the
expenses of "cold comfort" letters or, in connection with a registration
pursuant to Section 2.3 only, any special audits required by, or incident to,
such registration; all fees and disbursements of underwriters (other than
underwriting discounts and commissions); all transfer taxes; and the reasonable
fees and expenses of one counsel to the Holders; provided, however, that
Registration Expenses shall exclude and the Holders shall pay underwriting
discounts and commissions in respect of the Registrable Common Stock being
registered.
"Securities Act" means the Securities Act of 1933, as amended, or any
similar Federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time. References to a
particular section of the Securities Act shall include a reference to the
comparable section, if any, of any such similar federal statute.
2. Shelf Registration; Registration Under Securities Act, Etc.
2.1 Shelf Registration
Within 5 days following the date hereof, the Company shall file with the
Commission, at the Company's expense, a "shelf" registration statement on any
appropriate form pursuant to Rule 415 under the Securities Act covering all
Registrable Common Stock (the "Shelf Registration"). The Company shall use its
reasonable commercial efforts to have the Shelf Registration declared effective
as promptly as practicable after such filing (but not later than 65 days after
the date hereof) and to keep the Shelf Registration continuously effective three
years following the date on which the Shelf Registration is declared effective
(subject to Suspension Periods (as hereinafter defined) and extensions
coincident with the length of such Suspension Periods) (the "Shelf Registration
Period"). The Company shall, to the extent necessary, supplement or amend the
Shelf Registration (in each case, at the Company's expense) to keep the Shelf
Registration effective during the Shelf Registration Period. The Company further
agrees to supplement or amend any Shelf Registration, as required by the
registration form utilized by the Company, by the instructions applicable to
such registration form or by the Securities Act or the rules and regulations
thereunder or as reasonably requested by any Holder. The Company shall furnish
to the Holders copies, in substantially the form proposed to be used and/or
filed, of any such supplement or amendment at least 30 days prior to its being
used and/or filed with the Commission. The Company hereby consents to the use
(in compliance with applicable law) of the prospectus or any amendment or
supplement thereto by each of the selling Holders of Registrable Common Stock in
connection with the offering and sale of the Registrable Common Stock covered by
the prospectus or any amendment or supplement thereto. The Company shall pay all
Registration Expenses incurred in connection with the Shelf Registration,
whether or not it becomes effective. In no event shalthan Registrable Common
Stock, unless the Holders of all Registrable Common Stock consent to such
inclusion. Nothing herein shall obligate the Company to incur or pay for fees
and disbursements of underwriters in connection with a distribution under the
Shelf Registration.
For purposes hereof, "Suspension Period" shall mean a period of time
commencing on the date on which the Company provides notice that the Shelf
Registration is no longer effective, that the prospectus included in the Shelf
Registration no longer complies with the requirements therefor prescribed by
Section 10(a) of the Securities Act, or there is a Material Disclosure Event and
the Board of Directors of the Company has elected (in its good faith reasonable
judgment) to require the suspension of the sale by the Holder of Registrable
Common Stock pursuant to the Shelf Registration, and shall end on the date when
the Holder either receives copies of the supplemented or amended prospectus
contemplated by Section 2.4(g) or such earlier time that the Holder is otherwise
advised in writing by the Company that use of the prospectus may be resumed. The
Holder agrees that it will not sell any Registrable Common Stock pursuant to the
Shelf Registration during any Suspension Period. The Company agrees (i) that the
Company will use its best efforts to ensure that there is not more than one
Suspension Period in any 12-month period, (ii) to cause each Suspension Period
to end as soon as reasonably practicable and (iii) that no Suspension Period
shall exceed 30 consecutive days. The Company further agrees that no other
holder of any shares of the Company's capital stock will be
<PAGE> 3
permitted to sell any such shares of the Company's capital stock pursuant to a
registration statement during a Suspension Period. If one or more Suspension
Periods occur, the Shelf Registration Period shall be extended by such number of
days coincident with the aggregate number of days included in all Suspension
Periods.
2.2 Registration on Request
(a) Request
Subject to the provisions of Section 2.2(h) below, (i) if the Shelf
Registration remains continuously effective during the Shelf Registration Period
in accordance with the terms hereof, at any time or from time to time after the
expiration of the Shelf Registration Period and until the fifth anniversary
hereof, or (ii) if for any reason the Shelf Registration does not become
effective within 65 days after the date hereof or ceases to be effective at any
time prior to the expiration of the Shelf Registration Period, at any time or
from time to time after the date which is 65 days from the date hereof (if the
Shelf Registration fails to become effective) or the date on which the Shelf
Registration ceases to be effective, as the case may be, and until the fifth
anniversary hereof, the Holders, individually and jointly, of more than 10% of
issued and outstanding shares of Common Stock (the "Initiating Holders") shall
have the right to require the Company to effect the registration under the
Securities Act of all or part of the Registrable Common Stock held by such
Initiating Holders, by delivering a written request therefor to the Company
specifying the number of shares of Registrable Common Stock and the intended
method of distribution. The Company shall promptly give written notice of such
requested registration to all other Holders, and thereupon the Company shall, as
expeditiously as possible, use its best efforts to (A) effect the registration
under the Securities Act (including by means of a shelf registration pursuant to
Rule 415 under the Securities Act if so requested in such request and if the
Company is then eligible to use such a registration) of the Registrable Common
Stock which the Company has been so requested to register by the Initiating
Holders, and all other Registrable Common Stock which the Company has been
requested to register by any other Holder (together with the Initiating Holders,
the "Selling Holders") by written request given to the Company within tice by
the Company, all to the extent necessary to permit distribution in accordance
with the intended method of distribution set forth in the written request or
requests delivered by the Selling Holders, and (B) if requested by the Selling
Holders, obtain acceleration of the effective date of the registration statement
relating to such registration.
(b) Registration of Other Securities
Whenever the Company shall effect a registration pursuant to this Section
2.2, no securities (other than Registrable Common Stock) shall be included among
the securities covered by such registration (i) if, in connection with an
underwritten offering by any Selling Holders of Registrable Common Stock, the
managing underwriter of such offering shall have advised the Company and the
Selling Holders in writing that the inclusion of such other securities would
adversely affect such offering or (ii), if such offering is not an underwritten
offering, unless the Selling Holders of not less than 5% of the Registrable
Common Stock to be covered by such registration shall have consented (which
consent shall not be unreasonably withheld or delayed) in writing to the
inclusion of such other securities.
(c) Registration Statement Form
Registrations under this Section 2.2 shall be on such appropriate
registration form of the Commission as shall be selected by the Company and as
shall be reasonably acceptable to the Selling Holders. The Company agrees to
include in any such registration statement all information which, in the opinion
of counsel to the Selling Holders and counsel to the Company, is required to be
included.
(d) Expenses
The Company shall pay all Registration Expenses in connection with any
registration requested pursuant to this Section 2.2.
(e) Effective Registration Statement
A registration requested pursuant to this Section 2.2 shall not be deemed
to have been effected (including for purposes of paragraph (h) of this Section
2.2) (i) unless a registration statement with respect thereto has become
effective and has been kept continuously effective for a period of at least 120
days (or such shorter period which shall terminate when all the Registrable
Common Stock covered by such registration statement have been sold pursuant
thereto), (ii) if after it has become effective, such registration is interfered
with by any stop order, injunction or other order or requirement of the
Commission or other governmental agency or court for any reason not attributable
to the
<PAGE> 4
Selling Holders and has not thereafter become effective, or (iii) if the
conditions to closing specified in the underwriting agreement, if any, entered
into in connection with such registration are not satisfied for any reason not
attributable to the Selling Holders or waived.
(f) Selection of Underwriters
The underwriters of each underwritten offering of the Registrable Common
Stock to be registered shall be selected by the Selling Holders and shall be
reasonably satisfactory to the Company.
(g) Priority in Requested Registration
If the managing underwriter of any underwritten offering shall advise the
Company in writing (with a copy to each Selling Holder) that, in its opinion,
the number of shares of Registrable Common Stock requested to be included in
such registration exceeds the number of shares which can be sold in such
offering within a price range acceptable to the Selling Holders of Registrable
Common Stock, the Company will include in such registration that number of
shares of Registrable Common Stock which the Company is so advised can be sold
in such offering. The Registrable Common Stock requested to be included in such
registration shall be reduced pro rata among the Selling Holders requesting such
registration of Registrable Common Stock on the basis of the percentage of
Registrable Common Stock of such Selling Holders requesting such registration.
In connection with any such registration to which this Section 2.2(g) is
applicable, no securities other than Registrable Common Stock shall be covered
by such registration.
(h) Limitations on Registration on Request
Notwithstanding anything to the contrary contained herein, the registration
rights granted to the Holders in Section 2.2(a) are subject to the following
limitations: (i) the Holders shall be entitled to require the Company to, and
the Company shall be required to, effect no more than three registrations
pursuant to Section 2.2(a)(i) hereof and no more than four registrations
pursuant to Section 2.2(a)(ii) hereof, (ii) the Company shall not be required to
effect a registration pursuant to Section 2.2(a) if, with respect thereto, the
managing underwriter, the Commission, the Securities Act or the rules and
regulations thereunder, or the form on which the registration statement is to be
filed, would require the conduct of an audit other than the regular audit
conducted by the Company at the end of its fiscal year, but rather the filing
may be delayed until the completion of such regular audit (unless the Holders
agree to pay the expenses of the Company in connection with such an audit other
than the regular audit) and (iii) the Holders shall not be entitled to require
the Company to, and the Company shall not be required to, effect a registration
pursuant to Section 2.2(a) within three (3) months following the effective date
of another registration pursuant to Section 2.2(a).
(i) Postponement
The Company shall be entitled once in any 12-month period to postpone for a
reasonable period of time (but not exceeding 45 days) (the "Postponement
Period") the filing of any registration statement required to be prepared and
filed by it pursuant to this Section 2.2 if the Company determines, in its
reasonable judgment, that such registration and offering would materially
interfere with any material financing, corporate reorganization or other
material transaction involving the Company or any subsidiary, or would require
premature disclosure thereof, and promptly gives the Selling Holders written
notice of such determination, containing a general statement of the reasons for
such postponement and an approximation of the anticipated delay. If the Company
shall so postpone the filing of a registration statement, the Selling Holders of
not less than 50% of the shares of Registrable Common Stock to be registered
shall have the right to withdraw the request for registration in respect of the
Registrable Common Stock by giving written notice to the Company at any time
and, in the event of any such withdrawal, such request shall not be counted for
purposes of the requests for registration to which the Holders are entitled
pursuant to this Section 2.2.
2.3 Incidental Registration
(a) Right to Include Registrable Common Stock
If the Company at any time prior to the expiration of the Holders' right to
request the registration of Registrable Common Stock pursuant to Section 2.2(a)
hereof proposes to register any of its securities under the Securities Act by
registration on Form S-1, S-2 or S-3 or any successor or similar form(s) (except
registrations on such Form or similar form(s) solely for registration of
securities in connection with an employee stock option, stock purchase, stock
bonus or similar plan, pursuant to a dividend reinvestment plan, pursuant to a
merger, exchange, offer or transaction of the type specified in Rule 145(a)
under the Securities Act or pursuant to a "shelf" registration), whether or not
for sale for its
<PAGE> 5
own account, it will each such time give prompt written notice to the Holders of
its intention to do so and of the Holders' rights under this Section 2.3 and the
Holders shall be entitled to include, subject to the provisions of this
Agreement, Registrable Common Stock on the same terms and conditions (if any) as
apply to other comparable securities of the Company sold in connection with such
registration. Upon the written request of any Holder (a "Requesting Holder"),
specifying the maximum number of shares of Registrable Common Stock intended to
be disposed of by such Requesting Holder, made as promptly as practicable and in
any event within 15 days after the receipt of any such notice, the Company shall
use its best efforts to effect the registration under the Securities Act of all
Registrable Common Stock which the Company has been so requested to register by
the Requesting Holders; provided, however, that if, at any time after giving
written notice of its intention to register any securities and prior to the
effective date of the registration statement filed in connection with such
registration, the Company shall determine for any reason not to register or to
delay registration of such securities, the Company shall give written notice of
such determination and its reasons therefor to the Holders and (i) in the case
of a determination not to register, shall be relieved of its obligation under
this Section 2.3 to register any Registrable Common Stock in connection with
such registration (but not from any obligation of the Company to nnection
therewith), without prejudice, however, to the rights of the Holders to request
that such registration be effected as a registration under Section 2.2, and (ii)
in the case of a determination to delay registering, shall be permitted to delay
registering any Registrable Common Stock, for the same period as the delay in
registering such other securities. No registration effected under this Section
2.3 shall relieve the Company of its obligation to effect any registration upon
request under Section 2.2. The Company will pay all Registration Expenses in
connection with any registration of Registrable Common Stock requested pursuant
to this Section 2.3.
(b) Right to Withdraw
Any Requesting Holder shall have the right to withdraw its request for
inclusion of Registrable Common Stock in any registration statement pursuant to
this Section 2.3 at any time by giving written notice to the Company of its
request to withdraw.
(c) Priority in Incidental Registrations
If the managing underwriter of any underwritten offering shall inform the
Company by letter of its opinion that the number of shares of Registrable Common
Stock and Other Holder Registrable Common Stock when added to the number of
other securities to be offered in such registration, would materially adversely
affect such offering, then the Company shall include in such registration that
number of shares of Registrable Common Stock and Other Holder Registrable Common
Stock which the Company is so advised by the managing underwriter can be sold in
(or during the time of) such offering without materially adversely affecting
such offering in the following order of priority:
First: the holder or holders of securities (including the Company in the
case of a primary offering) originally requesting such registration shall be
entitled to participate in accordance with the relative priorities, if any, that
shall exist among them; and then
Second: the holder or holders of Registrable Common Stock shall be entitled
to participate in such offering, pro rata among themselves in accordance with
the number of shares of Registrable Common Stock which each such holder shall
have requested be registered; and then
Third: all other holders (including the Company, if such registration shall
have been originally requested by a person other than the Company) of securities
having the right to include shares of Common Stock in such registration shall be
entitled to participate pro rata in accordance with the number of shares
proposed to be registered by them.
(d) Plan of Distribution
Any participation by the Holders in a registration by the Company shall be
in accordance with the Company's plan of distribution.
2.4 Registration Procedures
If and whenever the Company is required to use its best efforts to effect
the registration of any Registrable Common Stock under the Securities Act as
provided in Sections 2.1, 2.2 and 2.3 hereof, the Company shall as expeditiously
as possible:
<PAGE> 6
(a) prepare and file with the Commission as soon as practicable the
requisite registration statement to effect such registration (and shall
include all financial statements required by the Commission to be filed
therewith) and thereafter use its best efforts to cause such registration
statement to become effective; provided, however, that before filing such
registration statement (including all exhibits) or any amendment or
supplement thereto or comparable statements under securities or blue sky
laws of any jurisdiction, the Company shall furnish such documents to each
Holder selling Registrable Common Stock covered by such registration
statement and each underwriter, if any, participating in the offering of
the Registrable Common Stock and their respective counsel, which documents
will be subject to the review and comments of each such Holder, each
underwriter and their respective counsel; and provided further, that (i) as
to registration pursuant to Section 2.1 or 2.2 hereof, the Company may
discontinue any registration of its securities which are not Registrable
Common Stock and (ii) as to registration pursuant to Section 2.3 hereof,
the Company may discontinue any registration of its securities, in each
case, at any time prior to the effective date of the registration statement
relating thereto;
(b) notify each Holder selling Registrable Common Stock covered by
such registration statement of the Commission's requests for amending or
supplementing the registration statement and the prospectus, and prepare
and file with the Commission such amendments and supplements to such
registration statement and the prospectus used in connection therewith as
may be necessary to keep such registration statement effective and to
comply with the provisions of the Securities Act with respect to the
disposition of all Registrable Common Stock covered by such registration
statement for such period as shall be required for the disposition of all
of such Registrable Common Stock in accordance with the intended method of
distribution thereof; provided that, except with respect to the Shelf
Registration and any other such registration statement filed pursuant to
Rule 415 under the Securities Act, such period need not exceed 120 days;
(c) furnish, without charge, to each Holder selling Registrable Common
Stock covered by such registration statement and each underwriter such
number of conformed copies of such registration statement and of each such
amendment and supplement thereto (in each case including all exhibits),
such number of copies of the prospectus contained in such registration
statement (including each preliminary prospectus and any summary
prospectus) and any other prospectus filed under Rule 424 under the
Securities Act, in conformity with the requirements of the Securities Act,
and such other documents, as such Holders and such underwriters may
reasonably request;
(d) use its best efforts (i) to register or qualify all Registrable
Common Stock and other securities covered by such registration statement
under such securities or blue sky laws of such States of the United States
of America where an exemption is not available and as any Holder or Holders
selling Registrable Common Stock covered by such registration statement or
any managing underwriter shall reasonably request, (ii) to keep such
registration or qualification in effect for so long as such registration
statement remains in effect, and (iii) to take any other action which may
be reasonably necessary or advisable to enable the Holders to consummate
the disposition in such jurisdictions of the securities to be sold by such
Holder or Holders; provided, however, that the Company shall not for any
purpose be required to execute a general consent to service of process or
to qualify to do business as a foreign corporation in any jurisdiction
where it is not so qualified;
(e) use its best efforts to cause all Registrable Common Stock covered
by such registration statement to be registered with or approved by such
other Federal or state governmental agencies or authorities as may be
necessary in the opinion of counsel to the Company and counsel to any
Holder or Holders selling Registrable Common Stock covered by such
registration statement to consummate the disposition of such Registrable
Common Stock;
(f) furnish to each Holder selling Registrable Common Stock covered by
such registration statement and each underwriter, if any, participating in
the offering of the securities covered by such registration statement, a
signed counterpart of (i) an opinion of counsel for the Company, and (ii) a
"comfort" letter signed by the independent public accountants who have
certified the Company's financial statements included or incorporated by
reference in such registration statement, covering substantially the same
matters with respect to such registration statement (and the prospectus
included therein) and, in the case of the accountants' comfort letter, with
respect to events subsequent to the date of such financial statements, as
are customarily covered in opinions of issuer's counsel and in accountants'
comfort letters delivered to the underwriters in underwritten public
offerings of securities (and dated the dates such opinions and comfort
letters are customarily dated) and, in the case of the legal opinion, such
other legal matters, and, in the case of the accountants' comfort letter,
such other financial matters, as such Holder or Holders, or the
underwriters, may reasonably request;
<PAGE> 7
(g) immediately notify the Holders selling Registrable Common Stock
covered by such registration statement and each managing underwriter, if
any, participating in the offering of the securities covered by such
registration statement (i) when such registration statement, any
pre-effective amendment, the prospectus or any prospectus supplement
related thereto or post-effective amendment to such registration statement
has been filed, and, with respect to such registration statement or any
post-effective amendment, when the same has become effective; (ii) of any
request by the Commission for amendments or supplements to such
registration statement or the prospectus related thereto or for additional
information; (iii) of the issuance by the Commission of any stop order
suspending the effectiveness of such registration statement or the
initiation of any proceedings for that purpose; (iv) of the receipt by the
Company of any notification with respect to the suspension of the
qualification of any of the Registrable Common Stock for sale under the
securities or blue sky laws of any jurisdiction or the initiation of any
proceeding for such purpose; and (v) at any time when a prospectus relating
thereto is required to be delivered under the Securities Act or, in the
case of the Shelf Registration, at any time during the Shelf Registration
Period, upon discovery that, or upon the happening of any event as a result
of which, the prospectus included in such registration statement, as then
in effect, includes an untrue statement of a material fact or omits to
state any material fact required to be stated therein or necessary to make
the statements therein not misleading, in the light of the circumstances
under which they were made, and in the case of this clause (v), at the
request of any Holder or Holders selling Registrable Common Stock covered
by such registration statement promptly prepare and furnish to such Holder
or Holders and each managing underwriter, if any, participating in the
offering of the Registrable Common Stock, a reasonable number of copies of
a supplement to or an amendment of such prospectus as may be necessary so
that, as thereafter delivered to the purchasers of such securities, such
prospectus shall not include an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make
the statements therein not misleading in the light of the circumstances
under which they were made.
(h) otherwise comply with all applicable rules and regulations of the
Commission, and make available to its security holders, as soon as
reasonably practicable, an earnings statement covering the period of at
least twelve months beginning with the first full calendar month after the
effective date of such registration statement, which earnings statement
shall satisfy the provisions of Section 11(a) of the Securities Act and
Rule 158 promulgated thereunder, and promptly furnish to the Holders a copy
of any amendment or supplement to such registration statement or
prospectus;
(i) cause to be maintained a transfer agent and registrar (which, in
each case, may be the Company) for the Common Stock from and after the date
of such registration;
(j) use its commercially reasonable efforts to cause all Registrable
Common Stock covered by such registration statement to be quoted on the
National Market System ("National Market System") of the National
Association of Securities Dealers, Inc. Automated Quotation System
("NASDAQ") within the meaning of Rule 11Aa2-1 of the Commission if the
quoting of such Registrable Common Stock is then permitted under NASDAQ
rules; or (ii) if no similar securities of the Company are then so quoted,
use its best efforts to (x) secure designation of all such Registrable
Common Stock as a NASDAQ National Market System security or (y) failing
that, cause all such Registrable Common Stock to be listed on a national
securities exchange or (z) failing that, to secure NASDAQ authorization for
such shares and, without limiting the generality of the foregoing, to
arrange for at least two market makers to register as such with respect to
such shares with the National Association of Securities Dealers, Inc.;
(k) deliver promptly to counsel to the Holders selling Registrable
Common Stock covered by such registration statement and each underwriter,
if any, participating in the offering of the Registrable Common Stock,
copies of all correspondence between the Commission and the Company, its
counsel or auditors and all memoranda relating to discussions with the
Commission or its staff with respect to such registration statement;
(l) use its best efforts to obtain the withdrawal of any order
suspending the effectiveness of the registration statement;
(m) provide a CUSIP number for all Registrable Common Stock, no later
than the effective date of the registration statement;
(n) make available its employees and personnel and otherwise provide
reasonable assistance to the underwriters (taking into account the needs of
the Company's businesses) in their marketing of Registrable Common Stock;
and
<PAGE> 8
(o) in the case of a Shelf Registration, upon the occurrence of any
event or the discovery of any facts, each as contemplated by Section
2.4(g)(v) hereof, use its best efforts to prepare a supplement or
post-effective amendment to the registration statement or the related
prospectus or any document incorporated therein by reference or file any
other required documents so that, thereafter, such prospectus will not
contain at the time of such delivery any untrue statement of a material
fact or omit to state a material fact necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
The Company may require the Holders selling Registrable Common Stock covered by
such registration statement to furnish the Company such information regarding
the Holders and the distribution of the Registrable Common Stock as the Company
may from time to time reasonably request in writing. In the event of a
registration effected pursuant to Section 2.1, 2.2(a) or 2.3(a) hereof, if a
Holder fails to provide such information and the failure by such Holder to
furnish such information would prevent or unreasonably delay the registration
statement relating to such registration from being declared effective by the
Commission, the Company may exclude such Holder's Registrable Common Stock from
such registration, which right of the Company shall, in the case of a
registration effected pursuant to Section 2.1 or 2.2(a) hereof, be subject to
the consent of the Holders of not less than 50% of the shares of Registrable
Common Stock to be included in such registration (other than such Holder's
Registrable Common Stock).
The Holders agree that upon receipt of any notice from the Company of the
happening of any event of the kind described in paragraph (g)(iii) or (v) of
this Section 2.4, each of the Holders will discontinue its disposition of
Registrable Common Stock pursuant to the registration statement relating to such
Registrable Common Stock until, in the case of paragraph (g)(v) of this Section
2.4, its receipt of the copies of the supplemented or amended prospectus
contemplated by paragraph (g)(v) of this Section 2.4 and, if so directed by the
Company, will deliver to the Company (at the Company's expense) all copies,
other than permanent file copies, then in its possession, of the prospectus
relating to such Registrable Common Stock current at the time of receipt of such
notice. If the disposition by the Holders of their securities is discontinued
pursuant to the foregoing sentence, the Company shall extend the period of
effectiveness of the registration statement by the number of days during the
period from and including the date of the giving of notice to and including the
date when the Holders shall have received copies of the supplemented or amended
prospectus contemplated by paragraph (g)(v) of this Section 2.4; and, if the
Company shall not so extend such period, the Holders' request pursuant to which
such registration statement was filed shall not be counted for purposes of the
requests for registration to which the Holders are entitled pursuant to Section
2.2 hereof.
2.5 Underwritten Offerings
(a) Requested Underwritten Offerings
If requested by the underwriters for any underwritten offering by the
Selling Holders pursuant to a registration requested under Section 2.1 or 2.2,
the Company shall enter into a customary underwriting agreement with such
underwriter or underwriters. Such underwriting agreement shall be reasonably
satisfactory in form and substance to the Selling Holders and shall contain such
representations and warranties by, and such other agreements on the part of, the
Company and such other terms as are generally prevailing in agreements of that
type, including, without limitation, such customary provisions relating to
indemnification and contribution by the Company. The Selling Holders shall be
parties to such underwriting agreement and may, at their option, require that
any or all of the representations and warranties by, and the other agreements on
the part of, the Company to and for the benefit of such underwriters shall also
be made to and for the benefit of the Selling Holders and that any or all of the
conditions precedent to the obligations of such underwriters under such
underwriting agreement be conditions precedent to the obligations of the Selling
Holders. No Selling Holder shall be required to make any representations or
warranties to or agreements with the Company or the underwriters other than
representations, warranties or agreements regarding such Selling Holder, its
ownership of and title to the Registrable Common Stock, and its intended method
of distribution; and any liability of any Selling Holder to any underwriter or
other Person under such underwriting agreement shall be limited to liability
arising from misstatements in or omissions from its representations and
warranties and shall be limited to an amount equal to the net proceeds that it
derives from such registration.
(b) Incidental Underwritten Offerings
In the case of a registration pursuant to Section 2.3 hereof, if the
Company shall have determined to enter into any underwriting agreements in
connection therewith, all of the Requesting Holders' Registrable Common Stock to
be included in such registration shall be subject to such underwriting
agreements. The Requesting Holders may, at their option, require that any or all
of the representations and warranties by, and the other agreements on the part
of, the Company to and for the benefit of such underwriters shall also be made
to and for the benefit of the Requesting Holders
<PAGE> 9
and that any or all of the conditions precedent to the obligations of such
underwriters under such underwriting agreement be conditions precedent to the
obligations of the Requesting Holders. No Requesting Holder shall be required to
make any representations or warranties to or agreements with the Company or the
underwriters other than representations, warranties or agreements regarding such
Requesting Holder, its ownership of and title to the Registrable Common Stock,
and its intended method of distribution; and any liability of any Requesting
Holder to any underwriter or other Person under such underwriting agreement
shall be limited to liability arising from misstatements in or omissions from
its representations and warranties and shall be limited to an amount equal to
the net proceeds that it derives from such registration.
2.6 Preparation; Reasonable Investigation
In connection with the preparation and filing of each registration
statement under the Securities Act pursuant to this Agreement, the Company will
give the participating Holders, their underwriters, if any, and their respective
counsel, accountants and other representatives and agents the opportunity to
participate in the preparation of such registration statement, each prospectus
included therein or filed with the Commission, and, to the extent practicable,
each amendment thereof or supplement thereto, and give each of them such access
to its books and records and such opportunities to discuss the business of the
Company with its officers and employees and the independent public accountants
who have certified its financial statements, and supply all other information
reasonably requested by each of them, as shall be necessary or appropriate, in
the opinion of the participating Holders' and such underwriters' respective
counsel, to conduct a reasonable investigation within the meaning of the
Securities Act.
2.7 Indemnification
(a) Indemnification by the Company
The Company agrees that in the event of any registration of any securities
of the Company under the Securities Act, the Company shall, and hereby does,
indemnify and hold harmless each Holder, its respective directors, officers,
partners, agents and affiliates and each other Person who participates as an
underwriter in the offering or sale of such securities and each other Person, if
any, who controls such Holder or any such underwriter within the meaning of the
Securities Act, against any losses, claims, damages, or liabilities, joint or
several, to which such Holder or any such director, officer, partner, agent or
affiliate or underwriter or controlling Person may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities, joint or several (or actions or proceedings, whether commenced or
threatened, in respect thereof), arise out of or are based upon (i) any untrue
statement or alleged untrue statement of any material fact contained in any
registration statement under which such securities were registered under the
Securities Act, any preliminary prospectus, final prospectus or summary
prospectus contained therein, or any amendment or supplement thereto, (ii) any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein in light of the
circumstances in which they were made not misleading, or (iii) any violation by
the Company of any federal, state or common law rule or regulation applicable to
the Company and relating to action required of or inaction by the Company in
connection with any such registration, and the Company shall reimburse such
Holder and each such director, officer, partner, agent or affiliate, underwriter
and controlling Person for any legal or any other expenses reasonably incurred
by them in connection with investigating or defending any such loss, claim,
liability, action or proceeding; provided that the Company shall not be liablet
that any such loss, claim, damage, liability (or action or proceeding in respect
thereof) or expense arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in such
registration statement, any such preliminary prospectus, final prospectus,
summary prospectus, amendment or supplement in reliance upon and in conformity
with written information furnished to the Company through an instrument duly
executed by or on behalf of the Holders or underwriter, as the case may be,
specifically stating that it is for use in the preparation thereof; and
provided, further, that the Company shall not be liable to any Person who
participates as an underwriter in the offering or sale of Registrable Common
Stock or any other Person, if any, who controls such underwriter within the
meaning of the Securities Act, in any such case to the extent that any such
loss, claim, damage, liability (or action or proceeding in respect thereof) or
expense arises out of such Person's failure to send or give a copy of the final
prospectus, as the same may be then supplemented or amended, to the Person
asserting an untrue statement or alleged untrue statement or omission or alleged
omission at or prior to the written confirmation of the sale of Registrable
Common Stock to such Person if such statement or omission was corrected in such
final prospectus. Such indemnity shall remain in full force regardless of any
investigation made by or on behalf of either Holder or any such director,
officer, partner, agent or affiliate or controlling Person and shall survive the
transfer of such securities by such Holder.
(b) Indemnification by the Holders
<PAGE> 10
As a condition to including any Registrable Common Stock in any
registration statement, the Company shall have received an undertaking
reasonably satisfactory to it from each Holder so including any Registrable
Common Stock to indemnify and hold harmless (in the same manner and to the same
extent as set forth in paragraph (a) of this Section 2.7) the Company, and each
director of the Company, each officer of the Company and each other Person, if
any, who controls the Company within the meaning of the Securities Act, with
respect to any statement or alleged statement in or omission or alleged omission
from such registration statement, any preliminary prospectus, final prospectus
or summary prospectus contained therein, or any amendment or supplement thereto,
but only to the extent such statement or alleged statement or omission or
alleged omission was made in reliance upon and in conformity with written
information furnished to the Company through an instrument duly executed by such
Holder specifically stating that it is for use in the preparation of such
registration statement, preliminary prospectus, final prospectus, summary
prospectus, amendment or supplement; provided, however, that the liability of
such indemnifying party under this Section 2.7(b) shall be limited to the amount
of net proceeds received by such indemnifying party in the offering giving rise
to such liability. Such indemnity shall remain in full force and effect,
regardless of any investigation made by or on behalf of the Company or any such
director, officer or controlling Person and shall survive the transfer of such
securities by such Holder.
(c) Notices of Claims, Etc.
Promptly after receipt by an indemnified party of notice of the
commencement of any action or proceeding involving a claim referred to in the
preceding subsections of this Section 2.7, such indemnified party shall, if a
claim in respect thereof is to be made against an indemnifying party, give
written notice to the latter of the commencement of such action or proceeding;
provided, however, that the failure of any indemnified party to give notice as
provided herein shall not relieve the indemnifying party of its obligations
under the preceding subsections of this Section 2.7, except to the extent that
the indemnifying party is actually prejudiced by such failure to give notice,
and shall not relieve the indemnifying party from any liability which it may
have to the indemnified party otherwise than under this Section 2.7. In case any
such action or proceeding is brought against an indemnified party, the
indemnifying party shall be entitled to participate therein and, unless in the
opinion of outside counsel to the indemnified party a conflict of interest
between such indemnified and indemnifying parties may exist in respect of such
claim, to assume the defense thereof, jointly with any other indemnifying party
similarly notified to the extent that it may wish, with counsel reasonably
satisfactory to such indemnified party; provided, however, that if the
defendants in any such action or proceeding include both the indemnified party
and the indemnifying party and if in the opinion of outside counsel to the
indemnified party there may be legal defenses available to such indemnified
party and/or other indemnified parties which are different from or in addition
to those available to the indemnifying party, the indemnified party or parties
shall have the right to select separate counsel to defend such action or
proceeding on behalf of such indemnified party or parties and the indemnifying
party shall be obligated to pay the fees and expenses of such separate counsel
or counsels. Afarty to such indemnified party of its election so to assume the
defense thereof and approval by the indemnified party of such counsel, the
indemnifying party shall not be liable to such indemnified party for any legal
expenses subsequently incurred by the latter in connection with the defense
thereof other than reasonable costs of investigation (unless the proviso in the
preceding sentence shall be applicable). No indemnifying party shall be liable
for any settlement of any action or proceeding effected without its written
consent which shall not be unreasonably withheld. No indemnifying party shall,
without the consent of the indemnified party, consent to entry of any judgment
or enter into any settlement which does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such indemnified party of a
release from all liability in respect to such claim or litigation.
(d) Contribution
If the indemnification provided for in this Section 2.7 shall for any
reason be held by a court to be unavailable to an indemnified party under
subsection (a) or (b) hereof in respect of any loss, claim, damage or liability,
or any action in respect thereof, then, in lieu of the amount paid or payable
under subsection (a) or (b) hereof, the indemnified party and the indemnifying
party under subsection (a) or (b) hereof shall contribute to the aggregate
losses, claims, damages and liabilities (including legal or other expenses
reasonably incurred in connection with investigating the same), (i) in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party on the one hand, and the indemnified party on the other, which resulted in
such loss, claim, damage or liability, or action in respect thereof, with
respect to the statements or omissions which resulted in such loss, claim,
damage or liability, or action in respect thereof, as well as any other relevant
equitable considerations, or (ii) if the allocation provided by clause (i) above
is not permitted by applicable law or if the allocation provided in this clause
(ii) provides a greater amount to the indemnified party than clause (i) above,
in such proportion as shall be appropriate to reflect not only the relative
fault but also the relative benefits received by the indemnifying party and the
indemnified party from the offering of the securities covered by such
registration statement as well as any other relevant equitable considerations.
The parties hereto agree that it
<PAGE> 11
would not be just and equitable if contributions pursuant to this Section 2.7(d)
were to be determined by pro rata allocation or by any other method of
allocation which does not take into account the equitable considerations
referred to in the preceding sentence of this Section 2.7(d). No Person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any Persoch fraudulent
misrepresentation. The Holders' obligations to contribute as provided in this
subsection (d) are several and not joint and shall be in proportion to the
relative value of their respective Registrable Common Stock covered by such
registration statement. In addition, no Person shall be obligated to contribute
hereunder any amounts in payment for any settlement of any action or claim
effected without such Person's consent, which consent shall not be unreasonably
withheld. Notwithstanding anything in this subsection (d) to the contrary, no
indemnifying party (other than the Company) shall be required to contribute any
amount in excess of the net proceeds received by such party from the sale of the
Registrable Common Stock in the offering to which the losses, claims, damages or
liabilities of the indemnified parties relate.
(e) Other Indemnification
Indemnification and contribution similar to that specified in the preceding
subsections of this Section 2.7 (with appropriate modifications) shall be given
by the Company and the Holders with respect to any required registration or
other qualification of securities under any federal, state or blue sky law or
regulation of any governmental authority other than the Securities Act. The
indemnification agreements contained in this Section 2.7 shall be in addition to
any other rights to indemnification or contribution which any indemnified party
may have pursuant to law or contract and shall remain operative and in full
force and effect regardless of any investigation made by or on behalf of any
indemnified party and shall survive the transfer of any of the Registrable
Common Stock by any of the Holders.
(f) Indemnification Payments
The indemnification and contribution required by this Section 2.7 shall be
made by periodic payments of the amount thereof during the course of the
investigation or defense, as and when bills are received or expense, loss,
damage or liability is incurred; provided, however, that such periodic payments
shall only be made upon delivery to the indemnifying party of an agreement by
the indemnified party to repay the amounts advanced to the extent it is
ultimately determined that the indemnified party is not entitled to
indemnification pursuant to this Section 2.7 or otherwise. The parties hereto
agree that for each of them such agreement shall be deemed to be contained
herein.
2.8 Limitation on Sale of Securities
If any registration of Registrable Common Stock or Other Holder Registrable
Common Stock shall be in connection with an underwritten public offering, each
of the Holders or the Other Holders, as the case may be, and the Company agrees
(x) not to effect any public sale or distribution of any issue of the same class
or series as the Registrable Common Stock or Other Holder Registrable Common
Stock being registered in an underwritten public offering (other than pursuant
to an employee stock option, stock purchase or similar plan, pursuant to a
dividend reinvestment plan, pursuant to a merger, exchange offer or a
transaction of the type specified in Rule 145(a) under the Securities Act), any
securities of the Company similar to any such issue or any securities of the
Company or of any security convertible into or exchangeable or exercisable for
any such issue of the Company during the 15 days prior to, and during the 45 day
period (or such longer period, not in excess of 90 days, as may be reasonably
requested by the underwriter of such offering) beginning on the effective date
of such registration statement (except as part of such registration) and (y)
that any agreement entered into after the date of this Agreement pursuant to
which the Company issues or agrees to issue any privately placed securities
shall contain a provision under which holders of such securities agree not to
effect any public sale or distribution of any such securities during the period
referred to in the foregoing clause (x), including any sale pursuant to Rule 144
under the Securities Act (except as part of such registration, if permitted).
2.9 No Required Sale
Nothing in this Agreement shall be deemed to create an independent
obligation on the part of any of the Holders to sell any Registrable Common
Stock pursuant to any effective registration statement.
3. Rule 144
The Company shall take all actions reasonably necessary to enable holders
of Registrable Common Stock to sell such securities without registration under
the Securities Act within the limitation of the exemptions provided by (a) Rule
144, or (b) any similar rule or regulation hereafter adopted by the Commission
including, without limiting the generality of the foregoing, filing on a timely
basis all reports required to be filed by the Exchange Act. Upon the request of
any
<PAGE> 12
Holder, the Company will deliver to such holder a written statement as to
whether it has complied with such requirements.
4. Amendments and Waivers
This Agreement may not be modified or amended, or any of the provisions
hereof waived, temporarily or permanently, except pursuant to the written
consent of the Holders of not less than 50% of the shares of Registrable Common
Stock and the Company.
5. Adjustments
In the event of any change in the capitalization of the Company as a result
of any stock split, stock dividend, reverse split, combination,
recapitalization, merger, consolidation, or otherwise, the provisions of this
Agreement shall be appropriately adjusted.
6. Notice
All notices and other communications hereunder shall be in writing and,
unless otherwise provided herein, shall be deemed to have been given when
received by the party to whom such notice is to be given at its address set
forth below, or such other address for the party as shall be specified by notice
given pursuant hereto:
(a) If to any Holder, the address of such Holder set forth on Annex A
attached hereto;
(b) If to the Company, to it at:
JPS Textile Group, Inc.
555 North Pleasantburg Drive, Suite 202
Greenville, South Carolina 29607
Attn: David H. Taylor
7. Assignment
This Agreement shall be binding upon and inure to the benefit of and be
enforceable by the parties hereto and their respective successors and permitted
assigns. This Agreement may not be assigned by the Company. Any Holder may, at
its election, at any time or from time to time, assign its rights under this
Agreement, in whole or in part, to any transferee of Registrable Common Stock.
8. Remedies
The parties hereto agree that money damages or any other remedy at law
would not be sufficient or adequate remedy for any breach or violation of, or a
default under, this Agreement by them and that, in addition to all other
remedies available to them, each of them shall be entitled to an injunction
restraining such breach, violation or default or threatened breach, violation or
default and to any other equitable relief, including, without limitation,
specific performance, without bond or other security being required. In any
action or proceeding brought to enforce any provision of this Agreement
(including the indemnification provisions thereof), the successful party shall
be entitled to recover reasonable attorneys' fees in addition to its costs and
expenses and any other available remedy.
9. No Inconsistent Agreements
The Company will not, on or after the date of this Agreement, enter into
any agreement with respect to its securities which is inconsistent with the
rights granted to the Holders in this Agreement or otherwise conflicts with the
provisions hereof, other than any customary lock-up agreement with the
underwriters in connection with any registration and offering by the Company of
its securities to the public (an "Offering") effected hereunder, pursuant to
which the Company shall agree not to register for sale, and the Company shall
agree not to sell or otherwise dispose of Common Stock or any securities
convertible into or exercisable or exchangeable for Common Stock, as applicable,
for a specified period following such Offering. The Company hereby represents
and warrants that the rights granted to the Holders hereunder do not in any way
conflict with and are not inconsistent with any other agreements to which the
Company is a party or by which it is bound. The Company further agrees that if
any other registration rights agreement entered into after the date of this
Agreement with respect to any of its securities contains terms which are more
favorable to, or less
<PAGE> 13
restrictive on, the other party thereto than the terms and conditions contained
in this Agreement are (insofar as they are applicable) to the Holders, then the
terms and conditions of this Agreement shall immediately be deemed to have been
amended without further action by the Company or the Holders so that the Holders
shall be entitled to the benefit of any such more favorable or less restrictive
terms or conditions.
10. Headings
Headings of the sections and paragraphs of this Agreement are for
convenience only and shall be given no substantive or interpretive effect
whatsoever.
11. Governing Law; Jurisdiction
(a) This Agreement shall be construed and enforced in accordance with and
governed by the laws of the State of New York, without giving effect to the
conflicts of law principles thereof.
(b) Each of the parties hereto irrevocably and unconditionally consents to
the jurisdiction of the federal courts and courts of the state of New York
situated in New York County, New York in respect of the interpretation and
enforcement of the provisions of this Agreement, and hereby agrees that service
of process in any such action, suit or proceeding against the other party with
respect to this Agreement may be made upon it in any manner permitted by the
laws of New York or the federal laws of the United States.
12. Counterparts
This Agreement may be executed in any number of counterparts, each of which
shall be deemed an original, but all such counterparts shall together constitute
one and the same instrument.
13. Invalidity of Provision
The invalidity or unenforceability of any provision of this Agreement in
any jurisdiction shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of this Agreement, including that provision, in any other
jurisdiction. If any restriction or provision of this Agreement is held
unreasonable, unlawful or unenforceable in any respect, such restriction or
provision shall be interpreted, revised or applied in a manner that renders it
lawful and enforceable to the fullest extent possible under law.
14. Further Assurances
Each party hereto shall do and perform or cause to be done and performed
all further acts and things and shall execute and deliver all other agreements,
certificates, instruments, and documents as any other party hereto reasonably
may request in order to carry out the intent and accomplish the purposes of this
Agreement and the consummation of the transactions contemplated hereby.
15. Entire Agreement; Effectiveness
This Agreement and the other writings referred to herein or delivered in
connection herewith contain the entire agreement among the parties with respect
to the subject matter hereof and supersede all prior and contemporaneous
arrangements or understandings with respect thereto.
<PAGE> 14
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date first above written.
JPS TEXTILE GROUP, INC.
By:/s/ David H. Taylor
------------------------------------
Name: David H. Taylor
Title: EVP-Finance & Secretary
JPS TEXTILE GROUP, INC., AS ATTORNEY IN
FACT FOR THE HOLDERS OF REGISTRABLE
COMMON STOCK
By:/s/ David H. Taylor
------------------------------------
Name: David H. Taylor
Title: EVP-Finance & Secretary
MAGTEN ASSET MANAGEMENT CORP., as agent
on behalf of those investment advisory
clients listed on Schedule I hereto
By:/s/ Robert Capozzi
------------------------------------
Name: Robert Capozzi
Title: Managing Director
TCW SHARED OPPORTUNITY FUND II, L.P.
By: TCW Investment Management Company,
its Investment Advisor
By: /s/ Mark L. Attanasio
------------------------------------
Name: Mark L. Attanasio
Title: Group Managing Director
CREDIT SUISSE FIRST BOSTON
By: /s/ Dixon Yee
------------------------------------
Dixon Yee
Vice President
<PAGE> 15
MERRILL LYNCH, PIERCE, FENNER & SMITH,
INCORPORATED
By:
------------------------------------
John Engelen
Managing Director
<PAGE> 16
SCHEDULE I
----------
H. Allen & Leslie Lurray
Neil Ambach - IRA
The Bakal Company Limited Partnership
Ellen P. Leary 1954 Trust
Anne K.S. Embry & Julie Kammerer
Katherine Hennenberger
Hughes Master Retirement Trust
Josh E. Fidler
Ellen's Trust U/W J.H. Pearlstone
L.A. Fire & Police Pension Systems - Fund 2525
Robert S. Lemle and Roni S. Kohen-Lemle
Levi Family Trust
Ocean Assets LLC
Lawrence M. Macks
Magten Offshore Fund Ltd.
Magten Partners, L.P.
Magten Group Trust
Martha Macks
Morton J. Macks
Charles J. Nabit Trust
Dorothy E. Nabit Trust
Nevy Exchange Service Command Retirement Trust
Peggy Meyerhoff Pearlstone Foundation
R.L. Pearlstone Personal
Richard L. Pearlstone 1954 Trust
Robert C. Sachs
Madelaine K. Sachs
H. Sandra Luray
Western Union Pension Trust
Westport Investment Group
<PAGE> 1
EXHIBIT 10.36
JPS TEXTILE GROUP, INC.
1997 INCENTIVE AND CAPITAL ACCUMULATION PLAN
1. Purpose. The JPS Textile Group, Inc. 1997 Incentive and Capital
Accumulation Plan (the "Plan") is intended to align the interests of the
Company's key employees and non-employee directors to those of its stockholders.
The Incentive Plan is also intended to provide incentives which will attract,
retain and motivate highly competent persons as key employees of JPS Textile
Group, Inc. (the "Company") and of any subsidiary corporation now existing or
hereafter formed or acquired, by providing them opportunities to acquire shares
of the common stock, par value $1.00 per share, of the Company ("Common Stock")
or to receive monetary payments based on the value of such shares pursuant to
the Benefits (as defined below) described herein.
2. Administration.
(a) The Plan will be administered by a committee of the Board of Directors
of the Company (the "Board") or a subcommittee of a committee of the Board
(which may be the Company's Compensation Committee), appointed by the Board from
among its members (the "Committee"), and shall be comprised solely of not less
than two members who shall be (i) "Non-Employee Directors" within the meaning of
Rule 16b-3(b)(3) (or any successor rule) promulgated under the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and (ii) unless otherwise
determined by the Board of Directors, "outside directors" within the meaning of
Treasury Regulation Section 1.162-27(e)(3) under Section 162(m) of the Internal
Revenue Code of 1986, as amended (the "Code"). The Committee is authorized,
subject to the provisions of the Plan, to establish such rules and regulations
as it deems necessary for the proper administration of the Plan and to make such
determinations and interpretations and to take such action in connection with
the Plan and any Benefits (as defined below) granted hereunder as it deems
necessary or advisable. All determinations and interpretations made by the
Committee shall be binding and conclusive on all participants and their legal
representatives. No member of the Board of Directors, no member of the Committee
and no employee of the Company shall be liable for any act or failure to act
hereunder, except in circumstances involving his or her bad faith, gross
negligence or willful misconduct, or for any act or failure to act hereunder by
any other member or employee or by any agent to whom duties in connection with
the administration of this Plan have been delegated. The Company shall indemnify
members of the Committee and any agent of the Committee who is an employee of
the Company against any and all liabilities or expenses to which they may be
subjected by reason of any act or failure to act with respect to their duties on
behalf of the Plan, except in circumstances involving such person's bad faith,
gross negligence or willful misconduct.
(b) The Committee may delegate to one or more of its members, or to one or
more agents, such administrative duties as it may deem advisable, and the
Committee, or any person to whom it has delegated duties as aforesaid, may
employ one or more persons to render advice with respect to any responsibility
the Committee or such person may have under the Plan. The Committee may employ
such legal or other counsel, consultants and agents as it may deem desirable for
the administration of the Plan and may rely upon any opinion or computation
received from any such counsel, consultant or agent. Expenses incurred by the
Committee in the engagement of such counsel, consultant or agent shall be paid
by the Company, or the subsidiary or affiliate whose employees or non-employee
directors have benefitted from the Plan, as determined by the Committee.
3. Participants. Participants will consist of such key employees and
non-employee directors of the Company and any subsidiary corporation of the
Company as the Committee in its sole discretion determines to be in a position
to
<PAGE> 2
impact the success and future growth and profitability of the Company and
whom the Committee may designate from time to time to receive Benefits under the
Plan. Designation of a participant in any year shall not require the Committee
to designate such person to receive a Benefit in any other year or, once
designated, to receive the same type or amount of Benefit as granted to the
participant in any other year. The Committee shall consider such factors as it
deems pertinent in selecting participants and in determining the type and amount
of their respective Benefits.
4. Type of Benefits; Vesting. Benefits under the Plan may be granted in any
one or a combination of (a) Stock Options, (b) Stock Appreciation Rights, (c)
Stock Awards, (d) Performance Awards, and (e) Stock Units (each as described
below, and collectively, the "Benefits"). Stock Awards, Performance Awards, and
Stock Units may, as determined by the Committee in its discretion, constitute
Performance-Based Awards, as described in Section 11 hereof. Benefits shall be
evidenced by agreements (which need not be identical) in such forms as the
Committee may from time to time approve (the "Agreements"); provided, however,
that in the event of any conflict between the provisions of the Plan and any
such agreements, the provisions of the Plan shall prevail.
To the extent not otherwise provided for in a participant's Agreement and
subject to provisions and limitations to the contrary contained herein, at the
Committee's discretion, Benefits may vest based upon the achievement of
performance-related goals, elapsed time or a combination of the achievement of
performance-related goals and elapsed time.
5. Common Stock Available Under the Plan. The aggregate number of shares of
Common Stock that may be subject to Benefits, including Stock Options, granted
under this Plan shall be 853,485 shares of Common Stock, which may be authorized
and unissued or treasury shares, subject to any adjustments made in accordance
with Section 12 hereof. The maximum number of shares of Common Stock with
respect to which Benefits may be granted or measured to any individual
participant under the Plan during the term of the Plan shall not exceed 853,485,
provided, however, that the maximum number of shares of Common Stock with
respect to which Stock Options and Stock Appreciation Rights may be granted to
an individual participant under the Plan during the term of the Plan shall not
exceed 325,000 (in each case, subject to adjustments made in accordance with
Section 12 hereof). Other than those shares of Common Stock subject to Benefits
that are cancelled or terminated as a result of the Committee's exercise of its
discretion with respect to Performance-Based Awards as provided for in Section
11 hereof, any shares of Common Stock subject to a Stock Option or Stock
Appreciation Right which for any reason is cancelled or terminated without
having been exercised, any shares subject to Stock Awards, Performance Awards or
Stock Units which are forfeited, any shares subject to Performance Awards
settled in cash or any shares delivered to the Company as part or full payment
for the exercise of a Stock Option or Stock Appreciation Right shall again be
available for Benefits under the Plan. The preceding sentence shall apply only
for purposes of determining the aggregate number of shares of Common Stock
subject to Benefits but shall not apply for purposes of determining the maximum
number of shares of Common Stock with respect to which Benefits (including the
maximum number of shares of Common Stock subject to Stock Options and Stock
Appreciation Rights) that may be granted to any individual participant under the
Plan.
6. Stock Options. Stock Options will consist of awards from the Company
that will enable the holder to purchase a specific number of shares of Common
Stock, at set terms and at a fixed purchase price. Stock Options may be
"incentive stock options" ("Incentive Stock Options"), within the meaning of
Section 422 of the Code, or Stock Options which do not constitute Incentive
Stock Options ("Nonqualified Stock Options"). The Committee will have the
authority to grant to any participant one or more Incentive Stock Options,
Nonqualified Stock Options, or both types of Stock Options (in each case with or
without Stock Appreciation Rights). Each Stock Option shall be subject to such
terms and conditions consistent with the Plan as the Committee may impose from
time to time, subject to the following limitations:
<PAGE> 3
(a) Exercise Price. Each Stock Option granted hereunder shall have
such per-share exercise price as the Committee may determine at the date of
grant; provided, however, subject to subsection (d) below, that the
per-share exercise price shall not be less than 100% of the Fair Market
Value (as defined below) of the Common Stock on the date the option is
granted.
(b) Payment of Exercise Price. The option exercise price may be paid
in cash or, in the discretion of the Committee determined at the date of
grant, by the delivery of shares of Common Stock of the Company then owned
by the participant, by delivering to the Company an executed promissory
note (or such other form of indebtedness) on such terms and conditions as
the Committee shall determine in its sole discretion at the date of grant,
or by a combination of these methods. In the discretion of the Committee
determined at the date of grant, payment may also be made by delivering a
properly executed exercise notice to the Company together with a copy of
irrevocable instructions to a broker to deliver promptly to the Company the
amount of sale or loan proceeds to pay the exercise price. To facilitate
the foregoing, the Company may enter into agreements for coordinated
procedures with one or more brokerage firms. The Committee may prescribe
any other method of paying the exercise price that it determines to be
consistent with applicable law and the purpose of the Plan, including,
without limitation, in lieu of the exercise of a Stock Option by delivery
of shares of Common Stock of the Company then owned by a participant,
providing the Company with a notarized statement attesting to the number of
shares owned, where, upon verification by the Company, the Company would
issue to the participant only the number of incremental shares to which the
participant is entitled upon exercise of the Stock Option. In determining
which methods a participant may utilize to pay the exercise price, the
Committee may consider such factors as it determines are appropriate.
(c) Exercise Period. Stock Options granted under the Plan shall be
exercisable at such time or times and subject to such terms and conditions
as shall be determined by the Committee; provided, however, that no Stock
Option shall be exercisable later than ten years after the date it is
granted. All Stock Options shall terminate at such earlier times and upon
such conditions or circumstances as the Committee shall in its discretion
set forth in such option agreement at the date of grant.
(d) Limitations on Incentive Stock Options. Incentive Stock Options
may be granted only to participants who are employees of the Company or any
subsidiary corporation of the Company at the date of grant. The aggregate
market value (determined as of the time the option is granted) of the
Common Stock with respect to which Incentive Stock Options are exercisable
for the first time by a participant during any calendar year (under all
option plans of the Company) shall not exceed $100,000. For purposes of the
preceding sentence, Incentive Stock Options will be taken into account in
the order in which they are granted. Incentive Stock Options may not be
granted to any participant who, at the time of grant, owns stock possessing
(after the application of the attribution rules of Section 424(d) of the
Code) more than 10% of the total combined voting power of all outstanding
classes of stock of the Company or any subsidiary corporation of the
Company, unless the option price is fixed at not less than 110% of the Fair
Market Value of the Common Stock on the date of grant and the exercise of
such option is prohibited by its terms after the expiration of five years
from the date of grant of such option. Notwithstanding anything to the
contrary contained herein, no Incentive Stock Option may be exercised later
than ten years after the date it is granted. In addition, no Incentive
Stock Option shall be issued to a participant in tandem with a Nonqualified
Stock Option.
7. Stock Appreciation Rights. The Committee may, in its discretion, grant
Stock Appreciation Rights to the holders of any Stock Options granted hereunder.
In addition, Stock Appreciation Rights may be granted independently of, and
without relation to, options. A Stock Appreciation Right means a right to
receive a payment, in cash, Common Stock or a combination thereof, in an amount
equal to the excess of (x) the Fair Market Value, or other specified valuation,
of a specified number of shares of Common Stock on the date the right is
exercised over (y) the Fair Market Value, or other specified valuation (which
shall be no less than the Fair Market Value), of such shares of Common
<PAGE> 4
Stock on the date the right is granted, all as determined by the Committee. Each
Stock Appreciation Right shall be subject to such terms and conditions as the
Committee shall impose from time to time.
8. Stock Awards. The Committee may, in its discretion, grant Stock Awards
(which may include mandatory payment of bonus incentive compensation in stock)
consisting of Common Stock issued or transferred to participants with or without
other payments therefor as additional compensation for services to the Company.
Stock Awards may be subject to such terms and conditions as the Committee
determines appropriate, including, without limitation, restrictions on the sale
or other disposition of such shares, the right of the Company to re-acquire such
shares for no consideration upon termination of the participant's employment or
directorship within specified periods, and may constitute Performance-Based
Awards, as described below. The Committee may require the participant to deliver
a duly signed stock power, endorsed in blank, relating to the Common Stock
covered by such an award. The Committee may also require that the stock
certificates evidencing such shares be held in custody or bear restrictive
legends until the restrictions thereon shall have lapsed. The Stock Award shall
specify whether the participant shall have, with respect to the shares of Common
Stock subject to a Stock Award, all of the rights of a holder of shares of
Common Stock of the Company, including the right to receive dividends and to
vote the shares. The participant may elect to defer, or the Committee may
require or permit the deferral of, the receipt of Stock Awards upon such terms
as the Committee deems appropriate.
9. Performance Awards.
(a) Performance Awards may be granted to participants at any time and from
time to time, as shall be determined by the Committee. Performance Awards may,
as determined by the Committee in its sole discretion, constitute
Performance-Based Awards. The Committee shall have complete discretion in
determining the number, amount and timing of awards granted to each participant.
Such Performance Awards may be in the form of shares of Common Stock or Stock
Units. Performance Awards may be awarded as short-term or long-term incentives.
With respect to those Performance Awards that are intended to constitute
Performance-Based Awards, the Committee shall set performance targets at its
discretion which, depending on the extent to which they are met, will determine
the number and/or value of Performance Awards that will be paid out to the
participants, and may attach to such Performance Awards one or more
restrictions. Performance targets may be based upon, without limitation,
Company-wide, divisional and/or individual performance.
(b) With respect to those Performance Awards that are not intended to
constitute Performance-Based Awards, the Committee shall have the authority at
any time to make adjustments to performance targets for any outstanding
Performance Awards which the Committee deems necessary or desirable unless at
the time of establishment of goals the Committee shall have precluded its
authority to make such adjustments.
(c) Payment of earned Performance Awards shall be made in accordance with
terms and conditions prescribed or authorized by the Committee. The participant
may elect to defer, or the Committee may require or permit the deferral of, the
receipt of Performance Awards upon such terms as the Committee deems
appropriate.
10. Stock Units.
(a) The Committee may, in its discretion, grant Stock Units to participants
hereunder. Stock Units may, as determined by the Committee in its sole
discretion, constitute Performance-Based Awards. The Committee shall determine
the criteria for the vesting of Stock Units. A Stock Unit granted by the
Committee shall provide payment in shares of Common Stock at such time as the
award agreement shall specify. Shares of Common Stock issued pursuant to this
Section 10 may be issued with or without other payments therefor as may be
required by applicable law or such
<PAGE> 5
other consideration as may be determined by the Committee. The Committee shall
determine whether a participant granted a Stock Unit shall be entitled to a
Dividend Equivalent Right (as defined below).
(b) Upon vesting of a Stock Unit, unless the Committee has determined to
defer payment with respect to such unit or a participant has elected to defer
payment under subsection (c) below, shares of Common Stock representing the
Stock Units shall be distributed to the participant unless the Committee
provides for the payment of the Stock Units in cash or partly in cash and partly
in shares of Common Stock equal to the value of the shares of Common Stock which
would otherwise be distributed to the participant.
(c) Prior to the year with respect to which a Stock Unit may vest, the
participant may elect not to receive Common Stock upon the vesting of such Stock
Unit and for the Company to continue to maintain the Stock Unit on its books of
account. In such event, the value of a Stock Unit shall be payable in shares of
Common Stock pursuant to the agreement of deferral.
(d) A "Stock Unit" means a notational account representing one share of
Common Stock. A "Dividend Equivalent Right" means the right to receive the
amount of any dividend paid on the share of Common Stock underlying a Stock
Unit, which shall be payable in cash or in the form of additional Stock Units.
11. Performance-Based Awards. Certain Benefits granted under the Plan may
be granted in a manner such that the Benefits qualify for the performance-based
compensation exemption of Section 162(m) of the Code ("Performance-Based
Awards"). As determined by the Committee in its sole discretion, either the
granting or vesting of such Performance-Based Awards are to be based upon one or
more of the following factors: net sales, pre-tax income before allocation of
corporate overhead and bonus, budget, earnings per share, net income, return on
stockholders' equity, return on assets, appreciation in and/or maintenance of
the price of the Common Stock or any other publicly-traded securities of the
Company, market share, gross profits, earnings before interest and taxes,
earnings before interest, taxes, depreciation and amortization, and comparisons
with various stock market indices, reductions in costs or any combination of the
foregoing. With respect to Performance-Based Awards, (i) the Committee shall
establish in writing (x) the objective performance-based goals applicable to a
given period and (y) the individual employees or class of employees to which
such performance-based goals apply no later than 90 days after the commencement
of such period (but in no event after 25% of such period has elapsed) and (ii)
no Performance-Based Awards shall be payable to or vest with respect to, as the
case may be, any participant for a given period until the Committee certifies in
writing that the objective performance goals (and any other material terms)
applicable to such period have been satisfied. With respect to any Benefits
intended to qualify as Performance-Based Awards, after establishment of a
performance goal, the Committee shall not revise such performance goal or
increase the amount of compensation payable thereunder (as determined in
accordance with Section 162(m) of the Code) upon the attainment of such
performance goal. Notwithstanding the preceding sentence, the Committee may
reduce or eliminate the number of shares of Common Stock or cash granted or the
number of shares of Common Stock vested upon the attainment of such performance
goal.
12. Adjustment Provisions; Change in Control.
(a) If there shall be any change in the Common Stock of the Company,
through merger, consolidation, reorganization, recapitalization, stock dividend,
stock split, reverse stock split, split up, spinoff, combination of shares,
exchange of shares, dividend in kind or other like change in capital structure
or distribution (other than normal cash dividends) to stockholders of the
Company, an adjustment shall be made to each outstanding Stock Option and Stock
Appreciation Right such that each such Stock Option and Stock Appreciation Right
shall thereafter be exercisable for such securities, cash and/or other property
as the holder of such Stock Option or Stock Appreciation Right would have had
immediately after such change or distribution had such Stock Option or Stock
Appreciation Right been exercised in full immediately prior to such change or
distribution, and such an adjustment shall be made successively each time any
<PAGE> 6
such change shall occur. In addition, in the event of any such change or
distribution, in order to prevent dilution or enlargement of participants'
rights under the Plan, the Committee will have authority to adjust, in an
equitable manner, the number and kind of shares that may be issued under the
Plan, the exercisability and vesting pensions of such Benefits, the number and
kind of shares subject to outstanding Benefits, the exercise price applicable to
outstanding Benefits, and the Fair Market Value of the Common Stock and other
value determinations applicable to outstanding Benefits. Appropriate adjustments
may also be made by the Committee in the terms of any Benefits under the Plan to
reflect such changes or distributions and to modify any other terms of
outstanding Benefits on an equitable basis, including modifications of
performance targets and changes in the length of performance periods. In
addition, other than with respect to Stock Options, Stock Appreciation Rights
and other awards intended to constitute Performance-Based Awards, the Committee
is authorized to make adjustments to the terms and conditions of, and the
criteria included in, Benefits in recognition of unusual or nonrecurring events
affecting the Company or the financial statements of the Company, or in response
to changes in applicable laws, regulations, or accounting principles.
Notwithstanding the foregoing, (i) any adjustment with respect to an Incentive
Stock Option shall comply with the rules of Section 424(a) of the Code, and (ii)
in no event shall any adjustment be made which would render any Incentive Stock
Option granted hereunder other than an incentive stock option for purposes of
Section 422 of the Code.
(b) In the event of a Change in Control (as defined below), the Committee,
in its discretion, may take such actions as it deems appropriate with respect to
outstanding Benefits, including, without limitation, accelerating the
exercisability or vesting of such Benefits.
The Committee, in its discretion, may determine that, upon the occurrence
of a Change in Control of the Company, each Stock Option and Stock Appreciation
Right outstanding hereunder shall terminate within a specified number of days
after notice to the holder, and such holder shall receive, with respect to each
share of Common Stock subject to such Stock Option or Stock Appreciation Right,
an amount equal to the excess of the Fair Market Value of such shares of Common
Stock immediately prior to the occurrence of such Change in Control over the
exercise price per share of such Stock Option or Stock Appreciation Right; such
amount to be payable in cash, in one or more kinds of property (including the
property, if any, payable in the transaction) or in a combination thereof, as
the Committee, in its discretion, shall determine.
For purposes of this Section 12(b), unless otherwise provided for in a
participant's Agreement, a "Change in Control" of the Company shall be deemed to
have occurred upon any of the following events:
(A) Any person or other entity (other than any of the Company's
subsidiaries), including any person as defined in Section 13(d)(3) of the
Exchange Act, becoming the beneficial owner, as defined in Rule 13d-3 of
the Exchange Act, directly or indirectly, of more than fifty percent (50%)
of the total combined voting power of all classes of capital stock of the
Company ordinarily entitled to vote for the election of directors of the
Company; or
(B) A change in the Board occurring with the result that the members
of the Board on the date of consummation of the confirmed Joint Plan of
Reorganization of the Company and its wholly owned subsidiary JPS Capital
Corp. under Chapter 11 of the Bankruptcy Code (the "Incumbent Directors")
no longer constitute a majority of such Board, provided that any person
becoming a director whose election or nomination for election was supported
by a majority of the Incumbent Directors shall be considered an Incumbent
Director for purposes hereof; or
(C) The sale of all or substantially all of the property or assets of
the Company (other than a sale to any of the Company's subsidiaries); or
(D) The consolidation or merger of the Company with another
corporation (other than with any of the Company's subsidiaries or in which
the Company is the surviving corporation), the consummation of which would
<PAGE> 7
result in the shareholders of the Company immediately before the occurrence
of the consolidation or merger owning, in the aggregate, less than 50% of
the voting stock of the surviving entity immediately following the
occurrence of such consolidation or merger.
13. Transferability. Each Benefit granted under the Plan to a participant
(other than a Benefit that is no longer subject to any restrictions, including
vesting, and that has been exercised or otherwise is wholly-owned by a
participant) shall not be transferable otherwise than by will or the laws of
descent and distribution, and shall be exercisable, during the participant's
lifetime, only by the participant. In the event of the death of a participant,
each Stock Option or Stock Appreciation Right theretofore granted to him or her
shall be exercisable during such period after his or her death as the Committee
shall in its discretion set forth in such option or right at the date of grant
and then only by the executor or administrator of the estate of the deceased
participant or the person or persons to whom the deceased participant's rights
under the Stock Option or Stock Appreciation Right shall pass by will or the
laws of descent and distribution. Notwithstanding the foregoing, at the
discretion of the Committee, an award of a Benefit other than an Incentive Stock
Option may permit the transferability of a Benefit by a participant solely to
the participant's spouse, siblings, parents, children and grandchildren or
trusts for the benefit of such persons.
14. Other Provisions. The award of any Benefit under the Plan may also be
subject to such other provisions (whether or not applicable to the Benefit
awarded to any other participant) as the Committee determines, at the date of
grant, appropriate, including, without limitation, for the installment purchase
of Common Stock under Stock Options, for the installment exercise of Stock
Appreciation Rights, to assist the participant in financing the acquisition of
Common Stock, for the forfeiture of, or restrictions on resale or other
disposition of, Common Stock acquired under any form of Benefit, for the
acceleration of exercisability or vesting of Benefits in the event of a change
in control of the Company, for the payment of the value of Benefits to
participants in the event of a change in control of the Company, or to comply
with federal and state securities laws, or understandings or conditions as to
the participant's employment or directorship in addition to those specifically
provided for under the Plan.
15. Fair Market Value. For purposes of this Plan and any Benefits awarded
hereunder, Fair Market Value shall be the closing price of the Company's Common
Stock on the date of calculation (or on the last preceding trading date if
Common Stock was not traded on such date) if the Company's Common Stock is
readily tradeable on a national securities exchange or other market system, and
if the Company's Common Stock is not readily tradeable, Fair Market Value shall
mean the amount determined in good faith by the Committee as the fair market
value of the Common Stock of the Company.
16. Withholding. All payments or distributions of Benefits made pursuant to
the Plan shall be net of any amounts required to be withheld pursuant to
applicable federal, state and local tax withholding requirements. If the Company
proposes or is required to distribute Common Stock pursuant to the Plan, it may
require the recipient to remit to it or to the corporation that employs such
recipient an amount sufficient to satisfy such tax withholding requirements
prior to the delivery of any certificates for such Common Stock. In lieu
thereof, the Company or the employing corporation shall have the right to
withhold the amount of such taxes from any other sums due or to become due from
such corporation to the recipient as the Committee shall prescribe. The
Committee may, in its discretion and subject to such rules as it may adopt
(including any as may be required to satisfy applicable tax and/or non-tax
regulatory requirements), permit an optionee or award or right holder to pay all
or a portion of the federal, state and local withholding taxes arising in
connection with any Benefit consisting of shares of Common Stock by electing to
have the Company withhold shares of Common Stock having a Fair Market Value
equal to the amount of tax to be withheld, such tax calculated at rates required
by statute or regulation.
17. Tenure. A participant's right, if any, to continue to serve the
Company as a director, officer, employee, or otherwise, shall not be enlarged or
otherwise affected by his or her designation as a participant under the Plan.
<PAGE> 8
18. Unfunded Plan. Participants shall have no right, title, or interest
whatsoever in or to any investments which the Company may make to aid it in
meeting its obligations under the Plan. Nothing contained in the Plan, and no
action taken pursuant to its provisions, shall create or be construed to create
a trust of any kind, or a fiduciary relationship between the Company and any
participant, beneficiary, legal representative or any other person. To the
extent that any person acquires a right to receive payments from the Company
under the Plan, such right shall be no greater than the right of an unsecured
general creditor of the Company. All payments to be made hereunder shall be paid
from the general funds of the Company and no special or separate fund shall be
established and no segregation of assets shall be made to assure payment of such
amounts except as expressly set forth in the Plan. The Plan is not intended to
be subject to the Employee Retirement Income Security Act of 1974, as amended.
19. No Fractional Shares. No fractional shares of Common Stock shall be
issued or delivered pursuant to the Plan or any Benefit. The Committee shall
determine whether cash, or Benefits, or other property shall be issued or paid
in lieu of fractional shares or whether such fractional shares or any rights
thereto shall be forfeited or otherwise eliminated.
20. Duration, Amendment and Termination. No Benefit shall be granted more
than ten years after the Effective Date; provided, however, that the terms and
conditions applicable to any Benefit granted prior to such date may thereafter
be amended or modified by mutual agreement between the Company and the
participant or such other persons as may then have an interest therein. The
Committee may amend the Plan from time to time or suspend or terminate the Plan
at any time. However, no action authorized by this Section 20 shall reduce the
amount of any existing Benefit or change the terms and conditions thereof
without the participant's consent. No amendment of the Plan shall, without
approval of the stockholders of the Company, (i) increase the total number of
shares which may be issued under the Plan or the maximum number of shares with
respect to Stock Options, Stock Appreciation Rights and other Benefits that may
be granted to any individual under the Plan or (ii) modify the requirements as
to eligibility for Benefits under the Plan; provided, however, that no amendment
may be made without approval of the stockholders of the Company if the amendment
will disqualify any Incentive Stock Options granted hereunder.
21. Governing Law. This Plan, Benefits granted hereunder and actions taken
in connection herewith shall be governed and construed in accordance with the
laws of the State of Delaware (regardless of the law that might otherwise govern
under applicable Delaware principles of conflict of laws).
22. Effective Date. (a) The Plan shall be effective on the date on which it
is adopted by the Board (the "Effective Date") without further corporate action
by the Board or any of its subsidiaries or the holders of Common Stock. The
Committee shall not grant any Benefits under the Plan until the date of
consummation of the confirmed Joint Plan of Reorganization of the Company and
its wholly owned subsidiary, JPS Capital Corp., under chapter 11 of the
Bankruptcy Code.
(b) This Plan shall terminate on the ten-year anniversary of the Effective
Date (unless sooner terminated by the Committee).
<PAGE> 1
EXHIBIT 10.37
- --------------------------------------------------------------------------------
JPS TEXTILE GROUP, INC.
AND
AMERICAN STOCK TRANSFER AND TRUST COMPANY
AS WARRANT AGENT
-----------------
WARRANTS TO PURCHASE UP TO 526,316 SHARES OF COMMON STOCK
-----------------
WARRANT AGREEMENT
DATED AS OF OCTOBER 9, 1997
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C> <C>
1. DEFINITIONS........................................................................................... 1
2. APPOINTMENT OF WARRANT AGENT.......................................................................... 3
2.1. Appointment..................................................................................... 3
3. REGISTRATION, FORM AND EXECUTION OF WARRANTS.......................................................... 3
3.1. Registration.................................................................................... 3
3.2. Form of Warrant................................................................................. 3
3.3. Countersignature of Warrants.................................................................... 4
4. EXERCISE OF WARRANTS.................................................................................. 4
4.1. Manner of Exercise.............................................................................. 4
4.2. Payment of Taxes................................................................................ 4
4.3. Fractional Shares............................................................................... 4
5. TRANSFER, DIVISION AND COMBINATION.................................................................... 5
5.1. Transfer........................................................................................ 5
5.2. Division and Combination........................................................................ 5
5.3. Maintenance of Books............................................................................ 5
6. ADJUSTMENTS........................................................................................... 5
6.1. Stock Dividends, Subdivisions and Combinations.................................................. 5
6.2. Reorganization, Reclassification, Merger or Consolidation....................................... 6
6.3. Certain Limitations............................................................................. 6
7. NOTICES TO WARRANT HOLDERS............................................................................ 6
7.1. Notice of Adjustments........................................................................... 6
7.2. Notice of Corporate Action...................................................................... 6
8. NO IMPAIRMENT......................................................................................... 7
9. RESERVATION AND AUTHORIZATION OF COMMON STOCK; REGISTRATION
WITH OR APPROVAL OF ANY GOVERNMENTAL AUTHORITY........................................................ 7
10. STOCK AND WARRANT TRANSFER BOOKS...................................................................... 7
11. LOSS OR MUTILATION.................................................................................... 8
12. OFFICE OF COMPANY..................................................................................... 8
13. REPURCHASE BY COMPANY OF WARRANTS..................................................................... 8
13.1 Option to Repurchase Warrants................................................................... 8
13.2 Payment of Repurchase Price..................................................................... 8
14. WARRANT AGENT......................................................................................... 8
14.1 Merger or Consolidation or Change of Name of Warrant Agent...................................... 8
14.2 Certain Terms and Conditions Concerning the Warrant Agent....................................... 9
14.3 Change of Warrant Agent......................................................................... 10
14.4 Disposition of Proceeds on Exercise of Warrants, Inspection of Warrant Agreement................ 11
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
PAGE
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<S> <C> <C>
15. MISCELLANEOUS......................................................................................... 11
15.1 Notice Generally................................................................................ 11
15.2 Successors and Assigns.......................................................................... 12
15.3 Amendment....................................................................................... 12
15.4 Third-Party Beneficiaries....................................................................... 12
15.5 Severability.................................................................................... 12
15.6 Headings........................................................................................ 12
15.7 Governing Law................................................................................... 12
15.8 Counterparts.................................................................................... 12
</TABLE>
EXHIBITS
Exhibit A--Form of Warrant Certificate
Exhibit B--Warrant Agent Fees
<PAGE> 4
THIS WARRANT AGREEMENT (the "Warrant Agreement"), dated as of October 9, 1997,
is made by and between JPS Textile Group, Inc., a Delaware corporation (the
"Company"), and American Stock Transfer and Trust Company, a New York
corporation, as warrant agent (the "Warrant Agent").
W I T N E S S E T H:
WHEREAS, the Company proposes to issue, to holders of allowed equity
interests in class 8, warrants, as hereinafter described (the "Warrants"), to
purchase up to an aggregate of 526,316 shares of its Common Stock pursuant to
Section III.D.8 of the Plan, as confirmed by the United States Bankruptcy Court
for the Southern District of New York (the "Court"), by order entered September
9, 1997, under title 11 of the United States Code; and
WHEREAS, the Company has requested the Warrant Agent to act on behalf of
the Company, and the Warrant Agent is willing so to act, in connection with the
issuance, division, transfer, exchange and exercise of Warrants;
NOW, THEREFORE, in consideration of the foregoing and for the purpose of
defining the terms and provisions of the Warrants and the respective rights and
obligations thereunder and hereunder of the Company, the Warrant Agent, and the
Holders, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged and affirmed, the Company and the
Warrant Agent hereby agree as follows:
1. Definitions
As used in this Warrant Agreement, the following terms have the respective
meanings set forth below:
"Additional Shares of Common Stock" shall mean all shares of Common Stock
issued by the Company after the Effective Date, other than Warrant Stock.
"Book Value" shall mean, in respect of any share of Common Stock on any
date herein specified, the consolidated book value of the Company as of the last
day of any month immediately preceding such date, divided by the number of Fully
Diluted Outstanding shares of Common Stock as determined in accordance with GAAP
as consistently applied by the Company in the preparation of its financial
statements.
"Business Day" shall mean any day that is not a Saturday or Sunday or a
day on which banks are required or permitted to be closed in the State of New
York.
"Common Stock" shall mean (except where the context otherwise indicates)
the Common Stock, $.01 par value per share, of the Company as constituted on the
Effective Date, and any capital stock into which such Common Stock may
thereafter be changed, and shall also include (1) capital stock of the Company
of any other class (regardless of how denominated) issued to the holders of
shares of Common Stock upon any reclassification thereof which is also not
preferred as to dividends or assets over any other class of stock of the Company
and which is not subject to redemption and (2) shares of common stock of any
successor or acquiring corporation received by or distributed to the holders of
Common Stock of the Company in the circumstances contemplated by Section 6.2.
"Company" shall have the meaning assigned to such term in the first
paragraph of this Warrant Agreement.
"Court" shall have the meaning assigned to such term in the recitals to
this Warrant Agreement.
<PAGE> 5
"Current Warrant Price" shall mean, in respect of a share of Common Stock
at any date herein specified, the price at which a share of Common Stock may be
purchased pursuant to this Warrant Agreement on such date. The initial Current
Warrant Price is $98.76, as specified in the second paragraph of the Warrant
Certificate.
"Daily Market Price" shall mean, in respect of any share of Common Stock
on any Trading Day, (1) the last sale price on such day on the principal stock
exchange on which such Common Stock is then listed or admitted to trading or (2)
if no sale takes place on such day on any such exchange, the average of the last
reported closing bid and asked prices on such day as officially quoted on any
such exchange. If the Common Stock is not then listed or admitted to trading on
any stock exchange, the Daily Market Price shall be the average of the last
reported closing bid and asked prices on such day in the over-the-counter
market, as furnished by the National Association of Securities Dealers Automatic
Quotation System or the National Quotation Bureau, Inc.; provided, that if
neither such corporation at the time is engaged in the business of reporting
such prices, the Daily Market Price shall be as furnished by any similar firm
then engaged in such business, or if there is no such firm, as furnished by any
member of the NASD selected mutually by the Majority Holders and the Company or,
if they cannot agree upon such selection, as selected by two such members of the
NASD, one of which shall be selected by the Majority Holders and one of which
shall be selected by the Company. If the Common Stock is not reported in the
over-the-counter market and no member of the NASD selected pursuant to the
preceding sentence will furnish the Daily Market Price, then the Daily Market
Price shall be the Book Value per share of Common Stock at such date.
"Effective Date" shall have the meaning set forth in the Plan.
"Expiration Date" shall mean October 9, 2000.
"Fully Diluted Outstanding" shall mean, when used with reference to Common
Stock, at any date as of which the number of shares thereof is to be determined,
all shares of Common Stock Outstanding at such date and all shares of Common
Stock issuable in respect of any Warrants and any other options or warrants to
purchase, or securities convertible into or exchangeable for, shares of Common
Stock outstanding on such date.
"GAAP" shall mean generally accepted accounting principles in the United
States of America as from time to time in effect.
"Holder" shall mean the Person in whose name a Warrant is registered in
the warrant register of the Company maintained by or on behalf of the Company
for such purpose.
"Majority Holders" shall mean the Holders of Warrants exercisable for in
excess of 50% of the aggregate number of shares of Common Stock then purchasable
upon exercise of all Warrants.
"NASD" shall mean the National Association of Securities Dealers, Inc., or
any successor corporation thereto.
"Other Property" shall have the meaning set forth in Section 6.2.
"Outstanding" shall mean, when used with reference to Common Stock, at any
date as of which the number of shares thereof is to be determined, all issued
shares of Common Stock, except shares then owned or held by or for the account
of the Company or any subsidiary thereof, and shall include all shares issuable
in respect of outstanding scrip or any certificates representing fractional
interests in shares of Common Stock.
"Person" shall mean any individual, sole proprietorship, partnership,
joint venture, trust, incorporated organization, association, corporation,
limited liability company, limited liability partnership, institution, public
benefit corporation, entity or government (whether federal, state, county, city,
municipal or otherwise, including, without limitation, any instrumentality,
division, agency, body or department thereof).
2
<PAGE> 6
"Plan" shall mean the Company's and JPS Capital Corp.'s Joint Plan of
Reorganization Under Chapter 11 of the United States Bankruptcy Code, as it may
be amended or modified.
"Pricing Period" shall have the meaning set forth in Section 13.1.
"Repurchase Price" shall have the meaning set forth in Section 13.1.
"Trading Day" shall mean any day on which the principal stock exchange on
which the Common Stock is listed or admitted to trading is open or, if the
Common Stock is not then listed or admitted to trading on any stock exchange,
any day on which the National Association of Securities Dealers Automatic
Quotation System or the National Quotation Bureau Inc. reports prices in respect
of securities or, if neither such corporation is then engaged in such business,
any day on which the member of the NASD selected as specified in the proviso set
forth in the definition of "Daily Market Price" furnishes prices for securities.
"Warrant Agent" shall have the meaning assigned to such term in the first
paragraph of this Warrant Agreement and shall include any successor Warrant
Agent hereunder.
"Warrant Agent's Principal Office" shall mean the principal office of the
Warrant Agent in New York City, New York (or such other office of the Warrant
Agent or any successor thereto hereunder acceptable to the Company as set forth
in a written notice provided to the Company and the Holders).
"Warrant Agreement" shall have the meaning assigned to such term in the
first paragraph of this Warrant Agreement.
"Warrant Price" shall mean an amount equal to (1) the number of shares of
Common Stock being purchased upon exercise of a Warrant pursuant to Section 4.1,
multiplied by (2) the Current Warrant Price as of the date of such exercise.
"Warrant Stock" shall mean the shares of Common Stock purchased by the
Holders of the Warrants upon the exercise thereof.
"Warrants" shall have the meaning assigned to such term in the recitals to
this Warrant Agreement, and shall include all warrants issued upon transfer,
division or combination of, or in substitution for, any thereof. All Warrants
shall at all times be identical as to terms and conditions and date, except as
to the number of shares of Common Stock for which they may be exercised.
2. Appointment of Warrant Agent
2.1. Appointment. The Company hereby appoints the Warrant Agent to act
as agent for the Company in accordance with the instructions set forth in this
Warrant Agreement, and the Warrant Agent hereby accepts such appointment.
3. Registration, Form and Execution of Warrants
3.1. Registration. All Warrants shall be numbered and shall be registered
in a warrant register maintained at the Warrant Agent's Principal Office by the
Warrant Agent as they are issued. The Company and the Warrant Agent shall be
entitled to treat a Holder as the owner in fact for all purposes whatsoever of
each Warrant registered in such Holder's name.
3
<PAGE> 7
3.2. Form of Warrant. The text of each Warrant and of the Election to
Purchase Form and Assignment Form shall be substantially as set forth in Exhibit
A attached hereto. Each Warrant shall be executed on behalf of the Company by
its President or one of its Vice Presidents, under its corporate seal reproduced
thereon or facsimile thereof attested by its Secretary or an Assistant
Secretary. The signature of any of such officers on the Warrants may be manual
or facsimile.
Warrants bearing the manual or facsimile signatures of individuals who
were at any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any one of them shall have ceased to
hold such offices prior to the delivery of such Warrants or did not hold such
offices on the date of this Warrant Agreement.
Warrants shall be dated as of the date of countersignature thereof by the
Warrant Agent either upon initial issuance or upon division, exchange,
substitution or transfer.
3.3. Countersignature of Warrants. Each Warrant shall be manually
countersigned by the Warrant Agent (or any successor to the Warrant Agent then
acting as warrant agent under this Warrant Agreement) and shall not be valid for
any purpose unless so countersigned. Warrants may be countersigned, however, by
the Warrant Agent (or by its successor as warrant agent hereunder) and may be
delivered by the Warrant Agent, notwithstanding that the persons whose manual
signatures appear thereon as proper officers of the Company shall have ceased to
be such officers at the time of such countersignature, issuance or delivery. The
Warrant Agent shall, upon written instructions of the President, a Vice
President, the Secretary, or an Assistant Secretary of the Company, countersign,
issue and deliver Warrants entitling the Holders thereof to purchase not more
than 526,316 shares of Common Stock (subject to adjustment as set forth herein)
and shall countersign and deliver Warrants as otherwise provided in this Warrant
Agreement.
4. Exercise of Warrants
4.1 Manner of Exercise. From and after the Effective Date and until 5:00
p.m., New York City time, on the Expiration Date, a Holder may exercise any of
its Warrants, on any Business Day, for all or any part of the number of shares
of Common Stock purchasable thereunder.
In order to exercise a Warrant, in whole or in part, a Holder shall
deliver to the Company at the Warrant Agent's Principal Office, (1) a written
notice of such Holder's election to exercise such Warrant, which notice shall
include the number of shares of Common Stock to be purchased, (2) payment of the
Warrant Price for the account of the Company and (3) such Warrant. Such notice
shall be substantially in the form of the Election to Purchase Form set forth on
the reverse side of the form of Warrant Certificate attached as Exhibit A
hereto, duly executed by such Holder or its agent or attorney. Upon receipt
thereof, the Warrant Agent shall, as promptly as practicable, and in any event
within five Business Days thereafter, deliver or cause to be delivered to such
Holder an executed certificate or certificates representing the aggregate number
of full shares of Common Stock issuable upon such exercise. The stock
certificate or certificates so delivered shall be, to the extent possible, in
such denomination or denominations as such Holder shall request in the notice
and shall be registered in the name of such Holder or such other name as shall
be designated in such notice. A Warrant shall be deemed to have been exercised
and such certificate or certificates shall be deemed to have been issued, and
such Holder or any other Person so designated to be named therein shall be
deemed to have become a holder of record of such shares for all purposes, as of
the date such notice, together with the check or checks and such Warrant, is
received by the Warrant Agent as described above and all taxes required to be
paid by such Holder, if any, pursuant to Section 4.2 prior to the issuance of
such shares have been paid. If any Warrant shall have been exercised in part,
the Warrant Agent shall, at the time of delivery of the certificate or
certificates representing Warrant Stock, deliver to the Holder a new Warrant
evidencing the rights of such Holder to purchase the unpurchased shares of
Common Stock called for by such Warrant, which new Warrant shall in all other
respects be identical with the Warrant
4
<PAGE> 8
exercised in part, or, at the request of such Holder, appropriate notation may
be made on such exercised Warrant and the same returned to such Holder.
Notwithstanding any provision herein to the contrary, the Warrant Agent shall
not be required to register shares in the name of any Person who acquired a
Warrant (or part thereof) or any Warrant Stock otherwise than in accordance with
such Warrant and this Warrant Agreement.
Payment of the Warrant Price shall be made at the option of the Holder by
certified or official bank check or any combination thereof, duly executed by
such Holder or by such Holder's attorney duly authorized in writing.
4.2. Payment of Taxes. All shares of Common Stock issuable upon the
exercise of any Warrant pursuant to the terms hereof shall be validly issued,
fully paid and nonassessable and without any preemptive rights. The Holder shall
pay all expenses in connection with, and all taxes and other governmental
charges that may be imposed with respect to, the issuance or delivery thereof.
4.3. Fractional Shares. The Company shall not be required to issue a
fractional share of Common Stock upon exercise of any Warrant. Whenever any
distribution of Warrants exercisable into fractional shares of Common Stock
would otherwise be called for, the actual distribution thereof will reflect a
rounding up to the next whole number of Common Stock.
5. Transfer, Division, and Combination
5.1 Transfer. Transfer of any Warrant and all rights hereunder, in whole
or in part, shall be registered in the warrant register of the Company to be
maintained for such purpose at the Warrant Agent's Principal Office, upon
surrender of such Warrant at the Warrant Agent's Principal Office, together with
a written assignment of such Warrant substantially in the form set forth on the
reverse side of the form of Warrant Certificate attached as Exhibit A hereto
duly executed by the Holder or its agent or attorney and payment of all funds
sufficient to pay any taxes payable upon the making of such transfer. Upon such
surrender and, if required, such payment, and subject to Section 9, the Company
shall execute and the Warrant Agent shall countersign and deliver a new Warrant
or Warrants in the name of the assignee or assignees and in the denomination
specified in such instrument of assignment, and shall issue to the assignor a
new Warrant evidencing the portion of such Warrant not so assigned, and the
surrendered Warrant shall promptly be cancelled. A Warrant, if properly
assigned, may be exercised by a new Holder for the purchase of shares of Common
Stock without having a new Warrant issued.
5.2. Division and Combination. Any Warrant may be divided or combined with
other Warrants upon presentation thereof at the Warrant Agent's Principal
Office, together with a written notice specifying the names and denominations in
which new Warrants are to be issued, signed by the Holder or its agent or
attorney. Subject to compliance with Section 5.1, as to any transfer which may
be involved in such division or combination, the Company shall execute and the
Warrant Agent shall countersign and deliver a new Warrant or Warrants in
exchange for the Warrant or Warrants to be divided or combined in accordance
with such notice.
5.3. Maintenance of Books. The Warrant Agent agrees to maintain, at the
Warrant Agent's Principal Office, the warrant register for the registration of
warrants and the registration of transfer of the Warrants.
6. Adjustments
The number of shares of Common Stock for which a Warrant is exercisable,
and the price at which such shares may be purchased upon exercise of a Warrant,
shall be subject to adjustment from time to time as set forth in this Section 6.
6.1. Stock Dividends, Subdivisions, and Combinations. If at any time the
Company shall:
5
<PAGE> 9
(a) take a record of the holders of its Common Stock for the purpose of
entitling them to receive a dividend payable in, or other distribution of,
Additional Shares of Common Stock,
(b) subdivide its outstanding shares of Common Stock into a larger number
of shares of Common Stock, or
(c) combine its outstanding shares of Common Stock into a smaller number
of shares of Common Stock,
then (i) the number of shares of Common Stock for which a Warrant is exercisable
immediately after the occurrence of any such event shall be adjusted to equal
the number of shares of Common Stock that a record holder of the same number of
shares of Common Stock for which a Warrant is exercisable immediately prior to
the occurrence of such event would own or be entitled to receive after the
happening of such event, and (ii) the Current Warrant Price shall be adjusted to
equal (A) the Current Warrant Price multiplied by the number of shares of Common
Stock for which a Warrant is exercisable immediately prior to the adjustment
divided by (B) the number of shares for which a Warrant is exercisable
immediately after such adjustment.
6.2. Reorganization, Reclassification, Merger or Consolidation. In case
the Company shall reorganize its capital, reclassify its capital stock,
consolidate or merge with or into another corporation (where the Company is not
the surviving corporation or where there is a change in or distribution with
respect to the Common Stock of the Company), and, pursuant to the terms of such
reorganization, reclassification, merger or consolidation, shares of common
stock of the successor or acquiring corporation, or any cash, shares of stock or
other securities or property of any nature whatsoever (including warrants or
other subscription or purchase rights) in addition to or in lieu of common stock
of the successor or acquiring corporation (" Other Property"), are to be
received by or distributed to the holders of Common Stock of the Company, then
each Holder shall have the right thereafter to receive, upon exercise of a
Warrant, the number of shares of common stock of the successor or acquiring
corporation or of the Company, if it is the surviving corporation, and Other
Property receivable upon or as a result of such reorganization,
reclassification, merger or consolidation by a holder of the number of shares of
Common Stock for which a Warrant is exercisable immediately prior to such event.
In case of any such reorganization, reclassification, merger or consolidation,
the successor or acquiring corporation (if other than the Company) shall
expressly assume the due and punctual observance and performance of each and
every covenant and condition of this Warrant Agreement and the Warrants to be
performed and observed by the Company and all the obligations and liabilities
hereunder, subject to such modifications as may be deemed appropriate (as
determined by resolution of the Board of Directors of the Company) in order to
provide for adjustments of shares of the Common Stock for which a Warrant is
exercisable which shall be as nearly equivalent as practicable to the
adjustments provided for in this Section 6. For purposes of this Section 6.2,
"common stock of the successor or acquiring corporation" shall include stock of
such corporation of any class which is not preferred as to dividends or assets
over any other class of stock of such corporation and which is not subject to
redemption and shall also include any evidences of indebtedness, shares of stock
or other securities which are convertible into or exchangeable for any such
stock, either immediately or upon the arrival of a specified date or the
happening of a specified event and any warrants or other rights to subscribe for
or purchase any such stock. The foregoing provisions of this Section 6.2 shall
similarly apply to successive reorganizations, reclassifications, mergers or
consolidations.
6.3. Certain Limitations. Notwithstanding anything herein to the contrary,
the Company agrees not to enter into any transaction which, by reason of any
adjustment hereunder, would cause the Current Warrant Price to be less than the
par value per share of Common Stock.
7. Notices to Warrant Holders
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<PAGE> 10
7.1. Notice of Adjustments. Whenever the number of shares of Common Stock
for which a Warrant is exercisable, or whenever the price at which a share of
such Common Stock may be purchased upon exercise of the Warrants, shall be
adjusted pursuant to Section 6, the Company shall forthwith prepare a
certificate to be executed by the chief financial officer of the Company setting
forth, in reasonable detail, the event requiring the adjustment and the method
by which such adjustment was calculated, specifying the number of shares of
Common Stock for which a Warrant is exercisable and describing the number and
kind of any other shares of stock or Other Property for which a Warrant is
exercisable, and any change in the purchase price or prices thereof, after
giving effect to such adjustment or change. The Company shall promptly cause a
signed copy of such certificate to be delivered to each Holder in accordance
with Section 15.1. The Company shall keep at its office or agency designated by
the Company pursuant to Section 12 copies of all such certificates and cause the
same to be available for inspection at said office during normal business hours
by any Holder or any prospective purchaser of a Warrant designated by a Holder
thereof.
7.2. Notice of Corporate Action. If at any time
(a) The Company shall take a record of the holders of its Common Stock for
the purpose of entitling them to receive a dividend (other than a cash dividend
payable out of earnings or earned surplus legally available for the payment of
dividends under the laws of the jurisdiction of incorporation of the Company) or
other distribution of Additional Shares of Common Stock, or
(b) there shall be any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the Company or any
consolidation or merger of the Company with, or any sale, transfer or other
disposition of all or substantially all the property, assets or business of the
Company to another corporation, or
(c) there shall be a voluntary or involuntary dissolution, liquidation or
winding up of the Company, then, in any one or more of such cases, the Company
shall give to each Holder (i) prompt written notice of the date on which a
record date shall be selected for such dividend, distribution or right or for
determining rights to vote in respect of any such reorganization,
reclassification, merger, consolidation, sale, transfer, disposition,
dissolution, liquidation or winding up, and (ii) in the case of any such
reorganization, reclassification, merger, consolidation, sale, transfer,
disposition, dissolution, liquidation or winding up, prior written notice of the
date when the same shall take place. Such notice in accordance with the
foregoing clause also shall specify (i) the date on which any such record is
taken for the purpose of such dividend, distribution or right, the date on which
the holders of Common Stock shall be entitled to any such dividend, distribution
or right, and the amount and character thereof, and (ii) the date and time on
which any such reorganization, reclassification, merger, consolidation, sale,
transfer, disposition, dissolution, liquidation or winding up takes place. Each
such written notice shall be sufficiently given if addressed to such Holder at
the last address of such Holder appearing on the books of the Company and
delivered in accordance with Section 15.1.
8. No Impairment
The Company shall not by any action, including, without limitation,
amending its certificate of incorporation or through any reorganization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms of this Warrant Agreement or any Warrant.
Without limiting the generality of the foregoing, the Company will (1) not
increase the par value of any shares of Common Stock receivable upon the
exercise of a Warrant above the amount payable therefor upon such exercise
immediately prior to such increase in par value and (2) take all such action as
may be necessary or appropriate in order that the Company may validly and
legally issue fully paid and nonassessable shares of Common Stock upon the
exercise of any Warrant.
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<PAGE> 11
9. Reservation and Authorization of Common Stock; Registration with or
Approval of any Governmental Authority
From and after the Effective Date, the Company shall at all times reserve
and keep available for issue upon the exercise of Warrants such number of its
authorized but unissued shares of Common Stock as will be sufficient to permit
the exercise in full of all outstanding Warrants. All shares of Common Stock
which shall be so issuable, when issued upon exercise of any Warrant and payment
therefor in accordance with the terms of this Warrant Agreement and such
Warrant, shall be duly and validly issued and fully paid and nonassessable, and
not subject to preemptive rights.
Before taking any action which would cause an adjustment reducing the
Current Warrant Price below the then par value, if any, of the shares of Common
Stock issuable upon exercise of the Warrants, the Company shall take any
corporate action which may be necessary in order that the Company may validly
and legally issue fully paid and nonassessable shares of such Common Stock at
such adjusted Current Warrant Price.
10. Stock and Warrant Transfer Books
The Company will not at any time, except upon dissolution, liquidation or
winding up of the Company, close its stock transfer books or Warrant transfer
books so as to result in preventing or delaying the exercise or transfer of any
Warrant.
11. Loss or Mutilation
Upon receipt by the Company and the Warrant Agent from any Holder of
evidence reasonably satisfactory to them of the ownership of and the loss,
theft, destruction or mutilation of such Holder's Warrant and indemnity
reasonably satisfactory to them, and in case of mutilation upon surrender and
cancellation thereof, the Company will execute and the Warrant Agent will
countersign and deliver in lieu hereof a new Warrant of like tenor to such
Holder; provided, in the case of mutilation, no indemnity shall be required if
such Warrant in identifiable form is surrendered to the Company or the Warrant
Agent for cancellation.
12. Office of Company
As long as any of the Warrants remain outstanding, the Company shall
maintain an office or agency (which may be the principal executive offices of
the Company) where the Warrants may be presented for exercise, registration of
transfer, division or combination as provided in this Warrant Agreement. The
Company shall initially maintain such an agency at the Warrant Agent's Principal
Offices.
13. Repurchase by Company of Warrants
13.1. Option to Repurchase Warrants. If the Daily Market Price for Common
Stock has been at least 140% of the Current Warrant Price on each of the 30
consecutive Trading Days ending on the third Business Day prior to the date on
which notice of the repurchase is given (the "Pricing Period"), the Company
shall have the right, upon prior written notice to any Holder to repurchase from
such Holder, from any source of funds legally available therefor, on the 10th
day following delivery of such notice (or, if such day is not a Business Day,
the next succeeding Business Day) and in the manner set forth in Section 13.2
below, each Warrant then held by such Holder for an amount equal to one dollar
($1.00) (the "Repurchase Price"); provided, however, that nothing
8
<PAGE> 12
herein shall preclude the exercise by such Holder of any portion of such Warrant
exercisable at any time prior to such repurchase.
13.2. Payment of Repurchase Price. On the date of any repurchase of
Warrants pursuant to this Section 13, each Holder shall assign to Company such
Holder's Warrant being repurchased, without any representation or warranty, by
the surrender of such Holder's Warrant to the Company at the Warrant Agent's
Principal Office against payment therefor of the Repurchase Price by check
issued by the Company.
14. Warrant Agent
14.1. Merger or Consolidation or Change of Name of Warrant Agent. Any
corporation into which the Warrant Agent may be merged or with which it may be
consolidated, or any corporation resulting from any merger or consolidation to
which the Warrant Agent shall be a party, or any corporation succeeding to the
corporate trust business of the Warrant Agent, shall be the successor to the
Warrant Agent hereunder without the execution or filing of any paper or any
further act on the part of any of the parties hereto; provided that such
corporation must be eligible for appointment as a successor Warrant Agent under
the provisions of Section 14.3 hereof. If at the time such successor to the
Warrant Agent shall succeed to the agency created by this Warrant Agreement any
of the Warrants shall have been countersigned but not delivered, any such
successor to the Warrant Agent may adopt the countersignature of the predecessor
Warrant Agent and deliver such Warrants so countersigned; and if at that time
any of the Warrants shall not have been countersigned, any successor to the
Warrant Agent may countersign such Warrants either in the name of the
predecessor Warrant Agent or in the name of the successor Warrant Agent; and in
all such cases Warrants shall have the full force provided in the Warrants and
in this Warrant Agreement. If at any time the name of the Warrant Agent shall be
changed and at such time any of the Warrants shall have been countersigned but
not delivered, the Warrant Agent may adopt the countersignatures under its prior
name and deliver such Warrants so countersigned; and if at that time any of the
Warrants shall not have been countersigned, the Warrant Agent may countersign
such Warrants either in its prior name or in its changed name; and in all such
cases such Warrants shall have the full force provided in the Warrants and in
this Warrant Agreement.
14.2. Certain Terms and Conditions Concerning the Warrant Agent. The
Warrant Agent undertakes the duties and obligations imposed by this Warrant
Agreement upon the following terms and conditions, by all of which the Company
and the Holders, by their acceptance of Warrants, shall be bound:
(a) Correctness of Statements. The statements contained herein and in
the Warrants shall be taken as statements of the Company and the Warrant Agent
assumes no responsibility for the correctness of any of the same except such as
describe the Warrant Agent or action taken by it. The Warrant Agent assumes no
responsibility with respect to the distribution of the Warrants except as herein
otherwise provided.
(b) Breach of Covenants. The Warrant Agent shall not be responsible for
any failure of the Company to comply with any of the covenants contained in this
Warrant Agreement or in the Warrants to be complied with specifically by the
Company.
(c) Performance of Duties. The Warrant Agent may execute and exercise
any of the rights or powers hereby vested in it or perform any duty hereunder
either itself or by or through its attorneys or agents (which shall not include
its employees) and shall not be responsible for the misconduct or negligence of
any agent appointed with due care.
(d) Reliance on Counsel. The Warrant Agent may consult at any time with
legal counsel satisfactory to it (who may be counsel for the Company) and the
Warrant Agent shall incur no liability or responsibility to the Company or to
any Holder in respect of any action taken, suffered or omitted by it hereunder
in good faith and in
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<PAGE> 13
accordance with the opinion or the advice of such counsel provided that such
counsel shall have been selected with due care.
(e) Proof of Actions Taken. Whenever in the performance of its duties
under this Warrant Agreement the Warrant Agent shall deem it necessary or
desirable that any fact or matter be proved or established by the Company prior
to taking or suffering any action hereunder, such fact or matter (unless other
evidence in respect thereof be herein specifically prescribed) may be deemed
conclusively to be proved and established by a certificate signed by the
President, a Vice President, the Secretary or an Assistant Secretary of the
Company and delivered to the Warrant Agent; and such certificate shall be full
authorization to the Warrant Agent for any action taken or suffered in good
faith by it under the provisions of this Warrant Agreement in reliance upon such
certificate.
(f) Compensation. The Company agrees to pay the Warrant Agent reasonable
compensation as set forth in the fee schedule attached hereto as Exhibit B for
all services rendered by the Warrant Agent in the performance of its duties
under this Warrant Agreement, to reimburse the Warrant Agent for all expenses,
taxes and governmental charges and other charges of any kind and nature incurred
by the Warrant Agent in the performance of its duties under this Warrant
Agreement, and to indemnify the Warrant Agent and save it harmless against any
and all liabilities, including judgments, costs and counsel fees, for anything
done or omitted by the Warrant Agent in the performance of its duties under this
Warrant Agreement except as a result of the Warrant Agent's negligence or bad
faith.
(g) Legal Proceedings. The Warrant Agent shall be under no obligation to
institute any action, suit or legal proceeding or to take any other action
likely to involve expense unless the Company or one or more Holders shall
furnish the Warrant Agent with reasonable security and indemnity for any costs
and expenses that may be incurred, but this provision shall not affect the power
of the Warrant Agent to take such action as the Warrant Agent may consider
proper, whether with or without any such security or indemnity. All rights of
action under this Warrant Agreement or under any of the Warrants may be enforced
by the Warrant Agent without the possession of any of the Warrants or the
production thereof at any trial or other proceeding relative thereto, and any
such action, suit or proceeding instituted by the Warrant Agent shall be brought
in its name as Warrant Agent, and any recovery of judgment shall be for the
ratable benefit of the Holders, as their respective rights or interests may
appear.
(h) Other Transactions in Securities of the Company. The Warrant Agent
and any stockholder, director, officer or employee of the Warrant Agent may buy,
sell or deal in any of the Warrants or other securities of the Company or become
pecuniarily interested in any transaction in which the Company may be
interested, or contract with or lend money to the Company or otherwise act as
fully and freely as though it were not Warrant Agent under this Warrant
Agreement. Nothing herein shall preclude the Warrant Agent from acting in any
other capacity for the Company or for any other legal entity.
(i) Liability of Warrant Agent. The Warrant Agent shall act hereunder
solely as agent, and its duties shall be determined solely by the provisions
hereof. The Warrant Agent shall not be liable for anything that it may do or
refrain from doing in connection with this Warrant Agreement except for its own
negligence or bad faith.
(j) Reliance on Documents. The Warrant Agent will not incur any
liability or responsibility to the Company or to any Holder for any action taken
in reliance on any notice, resolution, waiver, consent, order, certificate, or
other paper, document or instrument reasonably believed by it to be genuine and
to have been signed, sent or presented by the proper party or parties.
(k) Validity of Agreements. The Warrant Agent shall not be under any
responsibility in respect of the validity of this Warrant Agreement or the
execution and delivery hereof (except the due execution and delivery hereof by
the Warrant Agent) or in respect of the validity or execution of any Warrant
(except its countersignature and delivery thereof); nor shall the Warrant Agent
by any act hereunder be deemed to make any representation or
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<PAGE> 14
warranty as to the authorization or reservation of any Warrant Stock (or other
stock) to be issued pursuant to this Warrant Agreement or any Warrant, or as to
whether any Warrant Stock (or other stock) will, when issued, be validly issued,
fully paid and nonassessable, or as to the Warrant Price or the number or amount
of Warrant Stock or other securities or other property issued upon exercise of
any Warrant.
(l) Instructions from Company. The Warrant Agent is hereby authorized
and directed to accept instructions with respect to the performance of its
duties hereunder from the President, a Vice President, the Secretary or any
Assistant Secretary of the Company, and to apply to such officers for advice or
instructions in connection with its duties, and shall not be liable for any
action taken or suffered to be taken by it in good faith in accordance with
instructions of any such officer or officers.
14.3 Change of Warrant Agent. The Warrant Agent may resign and be
discharged from its duties under this Warrant Agreement by giving to the Company
30 days' advance notice in writing. The Warrant Agent may be removed by like
notice to the Warrant Agent from the Company. If the Warrant Agent shall resign
or be removed or shall otherwise become incapable of acting, the Company shall
appoint a successor to the Warrant Agent. If the Company shall fail to make such
appointment within a period of 30 days after such removal or after it has been
notified in writing of such resignation or incapacity by the resigning or
incapacitated Warrant Agent, then any Holder may apply to the Court for the
appointment of a successor to the Warrant Agent. Pending the appointment of the
successor warrant agent, the Company shall perform the duties of the Warrant
Agent. Any successor warrant agent, whether appointed by the Company or the
Court, shall be a bank or trust company, in good standing, incorporated under
the laws of the United States of America or any state thereof and having at the
time of its appointment as warrant agent a combined capital and surplus of at
least $50,000,000. After appointment, the successor warrant agent shall be
vested with the same powers, rights, duties and responsibilities as if it had
been originally named as Warrant Agent without further act or deed; but the
former Warrant Agent shall deliver and transfer to the successor warrant agent
any property at the time held by it hereunder, and execute and deliver any
further assurance, conveyance, act or deed necessary for the purpose. Failure to
file any notice provided for in this Section 14.3, however, or any defect
therein, shall not affect the legality or validity of the resignation or removal
of the Warrant Agent or the appointment of the successor warrant agent, as the
case may be. In the event of such resignation or removal, the successor warrant
agent shall mail, first class, to each Holder, written notice of such removal or
resignation and the name and address of such successor warrant agent.
14.4. Disposition of Proceeds on Exercise of Warrants; Inspection of
Warrant Agreement. The Warrant Agent shall account promptly to the Company with
respect to Warrants exercised and concurrently pay to the Company all
immediately available funds received by the Warrant Agent for the purchase of
the Warrant Stock through the exercise of such Warrants. The Warrant Agent
shall, upon request of the Company from time to time, deliver to the Company
such complete reports of registered ownership of the Warrants and such complete
records or transactions with respect to the Warrants and the shares of Common
Stock as the Company may request. The Warrant Agent shall also make available to
the Company for inspection by the Company's agents or employees, from time to
time as the Company may request, such original books of accounts and records
maintained by the Warrant Agent in connection with the issuance and exercise of
Warrants hereunder, such inspections to occur at the Warrant Agent's Principal
Office. The Warrant Agent shall keep copies of this Warrant Agreement and any
notices given or received hereunder available for inspection by the Company or
the Holders at the Warrant Agent's Principal Office. The Company shall supply
the Warrant Agent from time to time with such numbers of copies of this Warrant
Agreement as the Warrant Agent may request.
15. Miscellaneous
15.1. Notice Generally. Any notice, demand, request, consent, approval,
declaration, delivery or other communication hereunder to be made pursuant to
the provisions of this Warrant Agreement shall be sufficiently given or made if
in writing and either delivered in person with receipt acknowledged or sent by
registered or
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<PAGE> 15
certified mail, return receipt requested, postage prepaid or by telecopy and
confirmed by telecopy answerback, addressed as follows:
(a) If to any Holder or holder of Warrant Stock, at its last known
address appearing on the warrant register of the Company maintained for such
purpose.
(b) If to the Company at
JPS Textile Group, Inc.
555 North Pleasantburg Drive, Suite 202
Greenville, South Carolina 29607
Attention: David H. Taylor
Telecopy Number: (864) 271-9939
(c) If to the Warrant Agent at
American Stock Transfer and Trust Company
40 Wall Street
New York, New York 10005
Attention: Shareholder Services
Telecopy Number: (718) 236-2641
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration, delivery or other communication hereunder shall
be deemed to have been duly given or served on the date on which personally
delivered, with receipt acknowledged, telecopied and confirmed by telecopy
answerback or three Business Days after the same shall have been deposited in
the United States mail, whichever is earlier. Failure or delay in delivering
copies of any notice, demand, request, approval, declaration, delivery or other
communication to the Person designated above to receive a copy shall in no way
adversely affect the effectiveness of such notice, demand, request, approval,
declaration, delivery or other communication.
15.2. Successors and Assigns. All covenants and provisions of this
Warrant Agreement by or for the benefit of the Company or the Warrant Agent
shall bind and inure to the benefit of their respective successors and assigns
hereunder.
15.3. Amendment. This Warrant Agreement and the Warrants may only be
modified or amended or the provisions hereof and thereof waived with the written
consent of the Company, at least 90% of the holders of the then issued and
outstanding Common Stock, the Warrant Agent and the Majority Holders, provided
that no Warrant may be modified or amended to reduce the number of shares of
Common Stock for which such Warrant is exercisable or to increase the price at
which such shares may be purchased upon exercise of such Warrant (before giving
effect to any adjustment as provided herein and therein) without the prior
written consent of the Holder thereof.
15.4. Third-Party Beneficiaries. All covenants and provisions of this
Warrant Agreement shall inure to the benefit of each holder from time to time of
Common Stock.
15.5. Severability. Wherever possible, each provision of this Warrant
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Warrant Agreement shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such
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<PAGE> 16
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Warrant Agreement.
15.6. Headings. The headings used in this Warrant Agreement are for the
convenience of reference only and shall not, for any purpose, be deemed a part
of this Warrant Agreement.
15.7. Governing Law. This Warrant Agreement and the Warrants shall be
governed by the laws of the State of New York, without regard to the provisions
thereof relating to conflict of laws.
15.8. Counterparts. This Warrant Agreement may be executed in any number
of counterparts and each of such counterparts shall for all purposes be deemed
to be an original, and all such counterparts shall together constitute but one
and the same instrument.
IN WITNESS WHEREOF, each of the Company and the Warrant Agent has caused
this Warrant Agreement to be duly executed by its duly authorized officers as of
the date first above written.
JPS TEXTILE GROUP, INC.
By: /s/ David H. Taylor
------------------------------------
Name: David H. Taylor
Title: EVP-Finance & Secretary
AMERICAN STOCK TRANSFER AND TRUST
COMPANY, as Warrant Agent
By: /s/ Carolyn B. O'Neill
------------------------------------
Name: Carolyn B. O'Neill
Title: Vice President
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<PAGE> 17
EXHIBIT A
JPS TEXTILE GROUP, INC.
WARRANT TO PURCHASE COMMON STOCK, PAR VALUE $0.01 PER SHARE,
OF JPS TEXTILE GROUP, INC.
Warrant Certificate No.: Number of Warrants:
CUSIP No. 46624E116
SEE REVERSE FOR CERTAIN DEFINITIONS
Exercisable from and after October 9, 1997, until 5:00 p.m., New York City
time on October 9, 2000.
This Warrant Certificate certifies that , or registered assigns, is the
registered holder of the number of Warrants set forth above expiring at 5:00
p.m., New York City time, on October 9, 2000 or, if such date is not a business
day, the next succeeding business day (the "Warrants") to purchase Common Stock,
par value $0.01 per share (the "Common Stock"), of JPS Textile Group, Inc., a
Delaware corporation (the "Company"). The Common Stock issuable upon exercise of
Warrants is hereinafter referred to as the "Warrant Stock." Subject to the
immediately succeeding paragraph, each Warrant entitles the holder upon exercise
to purchase from the Company on or before 5:00 p.m., New York City time, on
October 9, 2000 or, if such date is not a business day, the next succeeding
business day, one share of Common Stock, subject to adjustment as set forth
herein and in the Warrant Agreement dated as of October 9, 1997 (the "Warrant
Agreement") by and between the Company and American Stock Transfer and Trust
Company, a New York corporation, as warrant agent (the "Warrant Agent"), in
whole or in part, at the initial purchase price of $98.76 per share, on and
subject to the terms and conditions set forth herein and in the Warrant
Agreement. Such purchase shall be payable in lawful money of the United States
of America by certified or official bank check or any combination thereof to the
order of the Warrant Agent for the account of the Company at the principal
office of the Warrant Agent, but only subject to the conditions set forth herein
and in the Warrant Agreement. The number of shares of Common Stock for which
each Warrant is exercisable, and the price at which such shares may be purchased
upon exercise of each Warrant, are subject to adjustment upon the occurrence of
certain events as set forth in the Warrant Agreement. Whenever the number of
shares of Common Stock for which a Warrant is exercisable, or the price at which
a share of such Common Stock may be purchased upon exercise of the Warrants, is
adjusted pursuant to the Warrant Agreement, the Company shall cause to be given
to each of the registered holders of the Warrants at such holders' addresses
appearing on the Warrant register written notice of such adjustment by first
class mail postage pre-paid.
No Warrant may be exercised before 9:00 a.m., New York City time, on
October 9, 1997 or after 5:00 p.m., New York City time, on October 9, 2000 or,
if such date is not a business day, the next succeeding business day, and to the
extent not exercised by such time such Warrants shall become void.
Reference is hereby made to the further provisions of this Warrant
Certificate set forth on the reverse side hereof and such further provisions
shall for all purposes have the same effect as though fully set forth at this
place.
This Warrant Certificate shall not be valid unless countersigned by the
Warrant Agent.
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<PAGE> 18
THIS WARRANT CERTIFICATE SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW
YORK, WITHOUT REGARD TO THE PROVISIONS THEREOF RELATING TO CONFLICT OF LAWS.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be
signed by its President and has caused its corporate seal to be affixed hereunto
or imprinted hereon.
Dated:
(SEAL)
Attest: JPS TEXTILE GROUP, INC.
By:
- ----------------------------- ------------------------------------
Name: Name:
Title: Secretary Title:
COUNTERSIGNED:
American Stock Transfer and Trust
Company, as Warrant Agent
By:
------------------------------------
Name:
Title:
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<PAGE> 19
[FORM OF REVERSE OF WARRANT CERTIFICATE]
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of up to 526,316 Warrants expiring at 5:00 p.m., New York City
time, on October 9, 2000 or, if such date is not a business day, the next
succeeding business day, entitling the holder on exercise to purchase shares of
Common Stock, par value $0.01 per share, of the Company, and are issued or to be
issued pursuant to the Warrant Agreement, which Warrant Agreement is hereby
incorporated by reference in and made a part of this instrument and is hereby
referred to for a description of the rights, limitation of rights, obligations,
duties and immunities thereunder of the Warrant Agent, the Company and the
Holders (the words "Holders" or "Holder" meaning the registered holders or
registered holder of the Warrants). A copy of the Warrant Agreement may be
obtained by the Holder hereof upon written request to the Company.
Warrants may be exercised at any time on and after 9:00 a.m., New York
City time, on October 9, 1997, and on or before 5:00 p.m., New York City time,
on October 9, 2000 or, if such date is not a business day, the next succeeding
business day. The Holder of Warrants evidenced by this Warrant Certificate may
exercise them by surrendering this Warrant Certificate, with the form of
election to purchase set forth hereon properly completed and executed, together
with payment of the purchase price by certified or official bank check or any
combination thereof to the order of the Warrant Agent for the account of the
Company and the other required documentation. In the event that upon any
exercise of Warrants evidenced hereby the number of Warrants exercised shall be
less than the total number of Warrants evidenced hereby, there shall be issued
to the Holder hereof or his assignee a new Warrant Certificate evidencing the
number of Warrants not exercised.
The Warrant Agreement provides that the number of shares of Common Stock
for which each Warrant is exercisable, and the price at which such shares may be
purchased upon exercise of each Warrant, are subject to adjustment upon the
occurrence of certain events as set forth in the Warrant Agreement. The Company
shall not be required to issue any fractional share of Common Stock upon the
exercise of any Warrant, but the Company shall round up or down to the nearest
share of Common Stock as provided in the Warrant Agreement.
Warrant Certificates, when surrendered at the office of the Warrant Agent
by the registered Holder thereof in person or by legal representative or
attorney duly authorized in writing, may be exchanged, in the manner and subject
to the limitations provided in the Warrant Agreement, but without payment of any
service charge, for another Warrant Certificate or Warrant Certificates of like
tenor evidencing in the aggregate a like number of Warrants.
Upon due presentation for registration of transfer of this Warrant
Certificate at the office of the Warrant Agent a new Warrant Certificate or
Warrant Certificates of like tenor and evidencing in the aggregate a like number
of Warrants shall be issued to the transferee in exchange for this Warrant
Certificate, subject to the limitations provided in the Warrant Agreement
without charge except for any tax imposed in connection therewith.
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<PAGE> 20
[ELECTION TO PURCHASE FORM]
[TO BE EXECUTED ONLY UPON EXERCISE OF WARRANT]
The undersigned registered owner of this Warrant irrevocably exercises
this Warrant for the purchase of Shares of Common Stock of JPS TEXTILE
GROUP, INC. and herewith makes payment therefor, all at the price and on the
terms and conditions specified in this Warrant and the Warrant Agreement and
requests that certificates for the shares of Common Stock hereby purchased (and
any securities or other property issuable upon such exercise) be issued in the
name of and delivered to whose address is and, if such shares of
Common Stock shall not include all of the shares of Common Stock issuable as
provided in this Warrant, that a new Warrant of like tenor and date for the
balance of the shares of Common Stock issuable hereunder be delivered to the
undersigned.
------------------------------------
(Name of Registered Owner)
------------------------------------
(Signature of Registered Owner)
------------------------------------
(Street Address)
------------------------------------
(City) (State)(Zip Code)
NOTICE: The signature on this election to purchase must correspond
with the name as written upon the face of the within Warrant
in every particular, without alteration or enlargement or any
change whatsoever.
17
<PAGE> 21
[ASSIGNMENT FORM]
FOR VALUE RECEIVED the undersigned registered owner of this Warrant
hereby sells, assigns and transfers unto the Assignee named below all of the
rights of the undersigned under this Warrant, with respect to the number of
shares of Common Stock set forth below:
NAME AND ADDRESS OF ASSIGNEE NO. OF SHARES OF COMMON
- ---------------------------- -----------------------
STOCK
- -----
and does hereby irrevocably constitute and appoint attorney-in-fact to
register such transfer on the books of JPS TEXTILE GROUP, INC. maintained for
the purpose, with full power of substitution in the premises.
Dated: Print Name:
----------------------------- -----------------------------
Signature:
------------------------------
Witness:
--------------------------------
NOTICE: THE SIGNATURE ON THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME
AS WRITTEN UPON THE FACE OF THE WITHIN WARRANT IN EVERY
PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE
WHATSOEVER.
18
<PAGE> 22
EXHIBIT B
AMERICAN STOCK TRANSFER AND TRUST COMPANY
AS WARRANT AGENT
SCHEDULE OF FEES
$375.00 per month
19
<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-01-1997
<PERIOD-END> NOV-01-1997
<CASH> 3,888
<SECURITIES> 0
<RECEIVABLES> 80,622
<ALLOWANCES> 1,053
<INVENTORY> 44,770
<CURRENT-ASSETS> 165,312
<PP&E> 105,235
<DEPRECIATION> 681
<TOTAL-ASSETS> 322,381
<CURRENT-LIABILITIES> 83,180
<BONDS> 94,891
0
0
<COMMON> 100
<OTHER-SE> 125,947
<TOTAL-LIABILITY-AND-EQUITY> 322,381
<SALES> 379,643
<TOTAL-REVENUES> 379,643
<CGS> 327,667
<TOTAL-COSTS> 327,667
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 32,164
<INCOME-PRETAX> (32,779)
<INCOME-TAX> (8,822)
<INCOME-CONTINUING> (23,957)
<DISCONTINUED> 0
<EXTRAORDINARY> 100,235
<CHANGES> 0
<NET-INCOME> 76,278
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
JPS Textile Group, Inc. implemented a Plan of Reorganization in Fiscal 1997.
Accordingly, the income statement of the Company was presented separately for
the Predecessor Company period from November 3, 1996 to October 9, 1997 and the
Reorganized Company period from October 10, 1997 to November 1, 1997. The
income statement data in this Schedule is for the Predecessor Company period.
</FN>
</TABLE>
